url stringlengths 56 59 | text stringlengths 3 913k | downloaded_timestamp stringclasses 1 value | created_timestamp stringlengths 10 10 |
|---|---|---|---|
https://www.courtlistener.com/api/rest/v3/opinions/8482724/ | NOTICE 2022 IL App (4th) 220511-U FILED
This Order was filed under November 9, 2022
Supreme Court Rule 23 and is NO. 4-22-0511 Carla Bender
not precedent except in the 4th District Appellate
limited circumstances allowed IN THE APPELLATE COURT Court, IL
under Rule 23(e)(1).
OF ILLINOIS
FOURTH DISTRICT
In re K.M., a Minor ) Appeal from the
) Circuit Court of
(The People of the State of Illinois, ) Jersey County
Petitioner-Appellee, ) No. 19JA32
v. )
Vernell M., ) Honorable
Respondent-Appellant). ) Allison Lorton,
) Judge Presiding.
JUSTICE STEIGMANN delivered the judgment of the court.
Justices Cavanagh and Zenoff concurred in the judgment.
ORDER
¶1 Held: The appellate court affirmed the judgment of the trial court terminating
respondent’s parental rights because the trial court’s fitness finding was not
against the manifest weight of the evidence.
¶2 Respondent, Vernell M., is the father of K.M. (born May 14, 2019). In May 2022,
the trial court found respondent was an unfit parent under the Adoption Act (see 750 ILCS
50/1(D) (West 2020)), and in June 2022, it determined that termination of respondent’s parental
rights would be in K.M.’s best interest. Respondent appeals, arguing that the trial court’s fitness
determination was against the manifest weight of the evidence. We disagree and affirm.
¶3 I. BACKGROUND
¶4 A. Procedural History
¶5 In May 2019, the State filed a petition for adjudication of wardship, alleging,
among other things, that K.M. was neglected in that her environment was injurious to her welfare
because K.M. and her mother, Julianna M., tested positive for methamphetamine at K.M.’s birth.
See 705 ILCS 405/2-3(1)(b) (West 2018). (Julianna is not involved in this appeal.) According to
the petition, K.M.’s father was unknown. Four days after the petition was filed, the trial court
conducted a shelter care hearing and placed temporary guardianship and custody of K.M. with
the guardianship administrator of the Department of Children and Family Services (DCFS).
¶6 In June 2019, following a hearing, the trial court adjudicated K.M. neglected. In
July 2019, the trial court conducted a dispositional hearing and found Julianna unfit and unable
for reasons other than financial circumstances alone to care for, protect, train, educate, supervise,
or discipline the minor. The court also made K.M. a ward of the court and placed custody and
guardianship of K.M. with the guardianship administrator of DCFS. (We note that in the
dispositional report, the existence of a putative father appears for the first time, without
identifying the individual by name. However, later in July 2019, after the entry of the
dispositional order, the trial court entered a written order for DNA testing of respondent to
determine if he was the biological father of K.M. In September 2019, the results of DNA testing
were filed with the trial court that showed respondent was indeed the biological father of K.M.)
¶7 B. The Petition for Termination of Parental Rights
¶8 In October 2020, the State filed a petition to terminate respondent’s parental
rights. The State alleged respondent was an unfit parent within the meaning of the Adoption Act
(750 ILCS 50/1 et seq. (West 2020)) due to his (1) failing to maintain a reasonable degree of
interest, concern, or responsibility as to K.M.’s welfare, (2) having been “convicted of
approximately [three] felonies *** and at least one of these convictions took place within five (5)
years of this petition,” (3) failing to make reasonable efforts to correct the conditions that were
the basis for the removal of the child from the parent within nine months after an adjudication of
-2-
neglect, and (4) failing to make reasonable progress toward the return of the child to the parent
during the nine-month period from June 11, 2019, to March 11, 2020. See id. §§ 1(D)(b), (i)(7),
(m)(i), (m)(ii).
¶9 In May 2022, the trial court conducted a hearing on the fitness portion of the
termination proceedings. At the beginning of the hearing, the court, at the State’s request and
without objection, took judicial notice of all orders previously entered, including the adjudicatory
and dispositional orders.
¶ 10 1. Lindsey Perdun
¶ 11 Lindsey Perdun testified that she worked for DCFS and was the caseworker in
this case since its beginning. Perdun stated that K.M. came into care “because the mother had
methamphetamine in her system and [K.M.] also had it in her meconium when it was tested.”
Perdun testified that DCFS notified respondent in September 2019 that DNA testing confirmed
he was K.M.’s father. Perdun then scheduled two appointments with respondent to (1) complete
an assessment and (2) communicate the service plan to him, but respondent “no-showed both of
those with me, *** so we never able to, *** get visits initiated, *** get the service get do an
assessment on him so I could get the services into the service plan for him.” In October 2019,
respondent was arrested and placed in the custody of the county jail. (The July 2021 permanency
hearing report states respondent was arrested for “four counts of manufacturing/delivery of
cocaine within the vicinity of a school/park.”)
¶ 12 In November 2019, Perdun met with respondent at the county jail and completed
the integrated assessment. She then updated the service plan to require respondent to
(1) complete substance abuse treatment, (2) complete parenting classes, and (3) attend visitations
with K.M. Respondent was then transferred to custody of the Department of Corrections (DOC).
-3-
Regarding visits with K.M., Perdun stated the following.
“He was in receiving in DOC up until *** he got went to DOC was ***
some point in time between January and March of 2020 when he transferred from
Madison County to the state. *** [A]nd then he was in receiving for about three
months after that, so he wasn’t eligible for visits with [K.M.] until then. Then
Covid started and there were no visits, so he really didn’t have any visits with
[K.M.] while in prison.”
¶ 13 Perdun testified that respondent completed parenting classes in December 2021 or
January 2022. Also, respondent had completed a substance abuse evaluation in March 2022 but
did not complete substance abuse treatment because he was “unsuccessfully discharged for not
following up on the recommendations of that evaluation.” Regarding visits with K.M. following
respondent’s release from prison in October 2021, Perdun stated “there’s been a couple missed
but for most part he’s been to [the] majority of the visits.”
¶ 14 While respondent was in prison, he completed the prison substance abuse
treatment program. DCFS and DOC then made recommendations for respondent to “follow up
with treatment once released.” However, respondent did not do so after being released from
prison.
¶ 15 2. Respondent
¶ 16 Respondent testified that he was employed full-time. Respondent testified that he
completed his first drug evaluation while in prison. Respondent testified that he was willing to
continue and finish any drug treatment that was recommended.
¶ 17 3. The Trial Court’s Decision
¶ 18 At the conclusion of the evidence, the trial court found respondent “ha[d] not
-4-
made significant progress towards reunification with [K.M.] since [his] release from [DOC].”
The court also entered a written order finding respondent unfit under section 1(D) of the
Adoption Act for “failure to make reasonable progress toward the return of [K.M.]” The court
noted that respondent (1) was informed in September 2019 that he was K.M.’s father,
(2) completed an initial assessment while in the county jail, and (3) was transferred to the
custody of DOC in January 2020. The court wrote that upon the filing of the petition to terminate
parental rights in October 2020, the court “stayed” the petition as to respondent and ordered
DCFS to tailor respondent’s service plan to the resources available to him in DOC.
¶ 19 The trial court acknowledged that respondent completed (1) a drug treatment
program while in custody of DOC and (2) parenting classes in January 2022. However,
following his release from prison (in October 2021), respondent was directed to complete a
substance abuse assessment and complete any recommended treatment. Although he completed
the assessment, he did not complete recommended treatment. Respondent also missed five
requested drug drops and attended only “occasional” in-person visits with K.M., having chosen
to live several hours away with his fiancée.
¶ 20 In June 2022 the trial court conducted the best interest portion of the termination
proceedings and found that termination of respondent’s parental rights was in K.M.’s best
interest. (We note that respondent does not challenge the court’s best interest finding on appeal.)
¶ 21 This appeal followed.
¶ 22 II. ANALYSIS
¶ 23 Respondent appeals, arguing that the trial court’s fitness determination was
against the manifest weight of the evidence. We disagree and affirm.
¶ 24 We first note that “[a] finding that any one allegation has been proven by clear
-5-
and convincing evidence is sufficient to sustain a parental unfitness finding on review.” In re
J.O., 2021 IL App (3d) 210248, ¶ 33, 195 N.E.3d 837. Accordingly, because we conclude that
respondent failed to make reasonable progress towards K.M.’s return during the nine-month
period of June 2019 to March 2020, we address only that ground for unfitness.
¶ 25 A. The Applicable Law and the Standard of Review
¶ 26 1. The Standard of Review
¶ 27 A determination of parental unfitness involves factual findings and credibility
determinations that the trial court is in the best position to make because “the trial court’s
opportunity to view and evaluate the parties *** is superior.” (Internal quotation marks omitted.)
In re M.I., 2016 IL 120232, ¶ 21, 77 N.E.3d 69. “A trial court’s finding of parental unfitness will
not be reversed unless it is against the manifest weight of the evidence.” In re Ta. T., 2021 IL
App (4th) 200658, ¶ 48, 187 N.E.3d 763. “A trial court’s decision is against the manifest weight
of the evidence only if the opposite conclusion is clearly apparent or the decision is
unreasonable, arbitrary, or not based on the evidence.” (Internal quotation marks omitted.) In re
N.B., 2019 IL App (2d) 180797, ¶ 30, 125 N.E.3d 444.
¶ 28 2. The Law Regarding Reasonable Progress
¶ 29 The State must prove unfitness as defined in section 1(D) of the Adoption Act
(750 ILCS 50/1(D) (West 2020)) by clear and convincing evidence. In re N.G., 2018 IL 121939,
¶ 28, 115 N.E.3d 102. Section 1(D)(m)(ii) of the Adoption Act defines an unfit person as a
parent who fails to make “reasonable progress toward the return of the child” during any
nine-month period following an adjudication of neglect or abuse. 750 ILCS 50/1(D)(m)(ii) (West
2020). The Illinois Supreme Court has held that “[t]he benchmark for measuring a parent’s
reasonable progress under section 1(D)(m) of the Adoption Act encompasses compliance with
-6-
the service plans and court’s directives in light of the condition that gave rise to the removal of
the child and other conditions which later become known that would prevent the court from
returning custody of the child to the parent.” In re K.P., 2020 IL App (3d) 190709, ¶ 36, 157
N.E.3d 493 (citing In re C.N., 196 Ill. 2d 181, 216-17, 752 N.E.2d 1030, 1050 (2001)).
¶ 30 Likewise, this court has defined “reasonable progress” as follows:
“ ‘Reasonable progress’ is an objective standard which exists when the court,
based on the evidence before it, can conclude that the progress being made by a
parent to comply with directives given for the return of the child is sufficiently
demonstrable and of such a quality that the court, in the near future, will be able
to order the child returned to parental custody. The court will be able to order the
child returned to parental custody in the near future because, at that point, the
parent will have fully complied with the directives previously given to the parent
in order to regain custody of the child.” (Emphases in original.) In re L.L.S., 218
Ill. App. 3d 444, 461, 577 N.E.2d 1375, 1387 (1991).
See also K.P., 2020 IL App (3d) 190709, ¶ 36; Ta. T., 2021 IL App (4th) 200658, ¶¶ 51, 55-57.
¶ 31 B. This Case
¶ 32 In the present case, the trial court found respondent unfit for failing to make
reasonable progress from June 2019 through March 2020. Respondent asserts that the trial court
erred by considering evidence that occurred after that nine-month period—namely, the time after
he was released from prison—when it determined respondent was unfit for failing to make
reasonable progress. He further asserts that he made substantial progress towards the return of
K.M. during and after incarceration. Accordingly, respondent argues the trial court’s finding was
against the manifest weight of the evidence. We disagree.
-7-
¶ 33 Although the trial court did discuss evidence from outside of the nine-month time
period, it also considered evidence from within the nine-month period in making its decision.
(We also note that respondent himself testified to matters outside the nine-month time period—
namely, on direct examination by his own counsel, respondent discussed counseling and drug
drops after he was released from prison.) The record demonstrates that in September 2019,
Perdun informed respondent that based on a DNA test, he was K.M.’s biological father.
Subsequently, Perdun made two appointments with respondent to discuss the terms of his service
plan, but he did not attend either of those appointments. Then in October 2019, respondent was
arrested and incarcerated. During that time, respondent did not have any visits with K.M. and did
not complete parenting classes as required by his service plan until he was released from DOC,
around December 2021.
¶ 34 We note that “[t]he mere fact of incarceration is not evidence of failure to make
reasonable progress. [Citation.] Nevertheless, incarceration can impede progress toward the goal
of reunification.” In re Nevaeh R., 2017 IL App (2d) 170229, ¶ 21, 83 N.E.3d 1196. “Time spent
in prison is included in the nine-month period during which reasonable progress must be made.”
Id. We also emphasize that reasonable progress is an objective standard that requires “that the
progress being made by a parent to comply with directives given for the return of the child is
sufficiently demonstrable and of such a quality that the court, in the near future, will be able to
order the child returned to parental custody.” (Emphasis in original.) L.L.S., 218 Ill. App. 3d at
461.
¶ 35 The record is clear that as of March 2020, respondent was nowhere near the return
of K.M. Respondent did not visit K.M. and had no relationship with the child. Although the
COVID-19 pandemic may have contributed to respondent’s failure to visit K.M., the Adoption
-8-
Act does not include exceptions for the pandemic. Further, respondent’s imprisonment was a
direct result of his actions, the fallout from which respondent is solely to blame. Because of his
actions, respondent did not form a relationship with his child. Instead, when respondent had the
opportunity to begin to be a father to K.M., he failed to attend the appointments with Perdun.
¶ 36 Moreover, the trial court expressed doubt that K.M. could be returned to
respondent even after respondent’s release from prison—in October 2021—let alone in the near
future from March 2020. The trial court wrote in its order that respondent would have “to make
undoubtedly incredible efforts to work on the relationship with his child and complete further
services” after being released from DOC to have K.M. returned. We note that the court’s
consideration of respondent’s progress after his release from prison afforded him additional
opportunity to reunite with his child, and he squandered that opportunity by failing to complete
recommended substance abuse treatment, missing drug drops, and visiting only occasionally
with K.M.
¶ 37 Given these facts, we conclude that the trial court’s fitness finding was not against
the manifest weight of the evidence and affirm the court’s judgment terminating respondent’s
parental rights.
¶ 38 III. CONCLUSION
¶ 39 For the reasons stated, we affirm the trial court’s judgment.
¶ 40 Affirmed.
-9- | 01-04-2023 | 11-09-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482723/ | NOTICE 2022 IL App (4th) 220473-U FILED
This Order was filed under November 9, 2022
Supreme Court Rule 23 and is NO. 4-22-0473 Carla Bender
not precedent except in the th
4 District Appellate
limited circumstances allowed Court, IL
under Rule 23(e)(1).
IN THE APPELLATE COURT
OF ILLINOIS
FOURTH DISTRICT
In re R.R., a Minor ) Appeal from the
) Circuit Court of
(The People of the State of Illinois, ) Adams County
Petitioner-Appellee, ) No. 19JA106
v. )
Camilla C., ) Honorable
Respondent-Appellant). ) Scott D. Larson,
) Judge Presiding.
JUSTICE TURNER delivered the judgment of the court.
Presiding Justice Knecht and Justice DeArmond concurred in the judgment.
ORDER
¶1 Held: Respondent was not prejudiced by any improperly admitted hearsay evidence and
was not denied effective assistance of counsel by counsel’s failure to object to the
hearsay evidence. Moreover, the circuit court’s findings respondent was unfit
and it was in the minor child’s best interests to terminate respondent’s parental
rights were not against the manifest weight of the evidence.
¶2 In January 2022, the State filed a motion for the termination of the parental rights
of respondent, Camilla C., as to her minor child, R.R. (born in September 2009), which the State
later supplemented. In May 2022, the Adams County circuit court found respondent unfit as
alleged in the termination motion. In a separate hearing on the same day, the court found it was
in R.R.’s best interests to terminate respondent’s parental rights.
¶3 Respondent appeals, asserting (1) the circuit court erred by taking judicial notice
of the entire court file and for admitting the client service plans without proper foundation,
(2) the court erred by finding respondent unfit, (3) respondent was denied the effective assistance
of counsel, and (4) the court erred by concluding it was in R.R.’s best interests to terminate
respondent’s parental rights. We affirm.
¶4 I. BACKGROUND
¶5 R.R.’s father is Reggie H., and he is not a party to this appeal. In December 2019,
the State filed a petition for the adjudication of wardship of R.R. The petition asserted R.R. was
a neglected minor for the following four reasons. First, on December 3, 2019, respondent
brought R.R. to Blessing Hospital for a psychiatric evaluation. Respondent failed to cooperate
with staff and left against advice with R.R. receiving no treatment. Second, R.R. had been
diagnosed with oppositional defiant disorder and attention-deficit/hyperactivity disorder. He
also had exhibited self-harm, such as head banging, in the past and was on medication for the
disorders. Third, on December 4, 2019, respondent failed to cooperate with an investigator from
the Department of Children and Family Services (DCFS) and threatened the investigator with a
metal shovel. Later that day, respondent was arrested for methamphetamine delivery in Adams
County case No. 19-CF-993. Fourth, on December 20, 2019, R.R. was out of control at school
and was engaging in head banging and self-harm. R.R. was taken to Blessing Hospital.
Respondent refused to cooperate with R.R.’s admission, which was medically necessary. After
an October 14, 2020, hearing, the circuit court concluded R.R. was neglected. On November 4,
2020, the court held the dispositional hearing. After hearing the evidence and the parties’
arguments, the court entered a written dispositional order (1) finding respondent unfit and unable
to care for R.R., (2) making R.R. a ward of the court, and (3) placing R.R.’s custody and
guardianship with DCFS.
¶6 Respondent appealed, asserting the circuit court erred by finding R.R. neglected.
This court affirmed the circuit court’s judgment. In re R.R., 2021 IL App (4th) 200563-U.
-2-
¶7 In January 2022, the State filed a motion to terminate respondent’s and Reggie
H.’s parental rights to R.R. As to respondent, the motion asserted respondent was unfit because
she failed to make (1) reasonable efforts to correct the conditions that were the basis for R.R.’s
removal during any nine-month period after the neglect adjudication (750 ILCS 50/1(D)(m)(i)
(West Supp. 2021)) and (2) reasonable progress toward R.R.’s return during any nine-month
period after the neglect adjudication (750 ILCS 50/1(D)(m)(ii) (West Supp. 2021)). Both counts
alleged the same three nine-month periods of October 14, 2020, to July 13, 2021; July 14, 2021,
to April 13, 2022; and “April 13, 2022 to January 13, 2023.”
¶8 On May 26, 2022, the circuit court commenced the fitness hearing. The State first
asked the court to take judicial notice of all the court records in this case, “including all court
orders, all written progress reports by service providers and all service plans previously filed
with the court.” The court took “judicial notice of its own records in the file.” The State then
offered State’s exhibit No. 1, R.R.’s birth certificate, which the court admitted without objection.
Next, the State offered a certified copy of respondent’s convictions for methamphetamine
delivery and intimidation in Adams County case No. 19-CF-993 (State’s exhibit No. 2). The
documents from case No. 19-CF-993 showed respondent committed the crimes in December
2019 and was sentenced to concurrent prison terms of four years for the crimes in November
2021. The court admitted the certified copy of the convictions. The State then presented the
testimony of Zoe Elder, a child welfare specialist with Chaddock, a service agency.
¶9 Elder testified Chaddock received this case from another agency in August 2021,
and at first, Elder just assisted Delaney McDonald with the case. Chaddock did receive a file
from the prior agency, which included a certificate showing respondent completed parenting
classes. Elder became the caseworker for R.R.’s case in October 2021. Elder created the
-3-
November 2021 service plan, which also evaluated the prior plan. Respondent received a rating
of unsatisfactory for parenting and well-being because the circuit court had suspended her
visitation with R.R. and respondent had recently been sentenced to the Department of
Corrections (DOC). Respondent also received an unsatisfactory rating for cooperation because
respondent did not cooperate with the prior caseworker and refused to provide documentation of
employment during the reporting period. Elder rated respondent unsatisfactory for mental health
because respondent had not completed a mental-health assessment or did not provide
documentation if she had done so. Last, respondent also received an unsatisfactory rating for
substance-free lifestyle because she did not provide documentation of participation in a
substance-abuse program and self-reported she had not been engaged in substance-abuse services
for the two months prior to the November 2021 evaluation. Respondent had completed two drug
drops, one in September 2021 and one in October 2021. Both of the drops were negative.
¶ 10 Elder further testified that, since respondent was incarcerated at the time of the
creation of the November 2021 service plan, respondent received an incarcerated parent task,
which required respondent to complete alcohol and drug treatment programs if they were
available to her, attend mental-health services, attend domestic-violence services, and follow her
court orders. Elder had not received any documentation respondent was participating in such
services. While respondent’s visitation with R.R. had been suspended since March 2021,
respondent was allowed to write R.R. letters. The letters were to be sent to Elder, who approved
them before giving them to R.R. Since respondent has been in DOC, respondent wrote R.R. two
to three times a month. Elder testified the letters have been very appropriate. Respondent did
receive one visit with R.R. to let R.R. know his brother passed away. Elder testified the visit
went well. However, Elder opined respondent had not made any progress towards the return
-4-
home of R.R.
¶ 11 Additionally, the State sought admission of the June 2021 service plan (State’s
exhibit No. 3) drafted by the previous agency and the November 2021 service plan (State’s
exhibit No. 4) drafted by Elder. Elder testified the service plans are made, evaluated, and
maintained in the regular course of her business. She also testified she believed the records were
accurate. Respondent’s counsel did not object to the admission of the two service plans, and the
circuit court admitted them.
¶ 12 Respondent did not present any evidence. After hearing the parties’ arguments,
the circuit court found the allegations of unfitness against respondent had been proven by clear
and convincing evidence for the nine-month periods set forth by the State. The court later
clarified it was only finding respondent unfit for the first two nine-month periods. The court also
found Reggie H. unfit. It then proceeded to the best-interests hearing.
¶ 13 Elder testified R.R. was currently 12 years old and had been in his foster mother’s
home for two years. R.R. had attention-deficient/hyperactivity disorder. His foster mother was a
licensed specialized foster parent, which meant she had special training and experience with
children who have special needs. Elder personally monitored R.R.’s placement three times a
month. R.R. was bonded with his foster mother and really enjoyed living with her. According to
Elder, R.R. seemed comfortable in the home. R.R.’s foster mother had been “cooperative” with
R.R.’s educational services, made sure R.R. received his prescribed medication, and assured R.R.
attended his medical appointments. R.R. has expressed he wanted to continue living with his
foster mother. The foster mother had signed a permanency commitment for R.R. and desired to
adopt him. In Elder’s opinion, R.R. being adopted by his foster mother was in R.R.’s best
interests.
-5-
¶ 14 After hearing the parties’ arguments, the circuit court found it was in R.R.’s best
interests to terminate respondent’s parental rights. It also concluded it was in R.R.’s best
interests to terminate Reggie H.’s parental rights. On May 26, 2022, the court entered a written
termination order. That same day, respondent filed a timely notice of appeal in sufficient
compliance with Illinois Supreme Court Rule 303 (eff. July 1, 2017). See Ill. S. Ct. R. 660(b)
(eff. Oct. 1, 2001) (providing the rules governing civil cases also govern appeals from final
judgments in all proceedings under the Juvenile Court Act of 1987 (Juvenile Court Act) (705
ILCS 405/1-1 et seq. (West 2020)), except for delinquency cases). Thus, this court has
jurisdiction of the appeal pursuant to Illinois Supreme Court Rule 307(a)(6) (eff. Nov. 1, 2017).
The circuit court appointed respondent counsel for her appeal.
On appeal, respondent’s counsel filed a motion to withdraw as counsel and a brief
in compliance with Anders v. California, 386 U.S. 738 (1967). See In re J.P., 2016 IL App (1st)
161518, ¶ 8, 65 N.E.3d 1009 (finding Anders applies when counsel seeks to withdraw from
representation on direct appeal from orders affecting parental rights under the Juvenile Court
Act). This court granted the motion to withdraw as counsel and directed the circuit court to
appoint respondent new counsel. In re R.R., No. 4-22-0473 (Sept. 2, 2022) (motion order).
Once the circuit court appointed respondent new counsel, this court instituted a new briefing
schedule. The new briefing schedule resulted in the reply brief being due after the 150-day
deadline established by Illinois Supreme Court Rule 311(a)(5) (eff. July 1, 2018), by which this
court is to issue its decision. That rule does have a good-cause exception, which we find
applicable in this case. Ill. S. Ct. R. 311(a)(5) (eff. July 1, 2018).
¶ 15 II. ANALYSIS
¶ 16 Under section 2-29(2) of the Juvenile Court Act (705 ILCS 405/2-29(2) (West
-6-
2020)), the involuntary termination of parental rights involves a two-step process. First, the
State must prove by clear and convincing evidence the parent is “unfit,” as that term is defined in
section 1(D) of the Adoption Act (750 ILCS 50/1(D) (West Supp. 2021)). In re Donald A.G.,
221 Ill. 2d 234, 244, 850 N.E.2d 172, 177 (2006). If the circuit court makes a finding of
unfitness, then the State must prove by a preponderance of the evidence it is in the minor child’s
best interests that parental rights be terminated. In re D.T., 212 Ill. 2d 347, 366, 818 N.E.2d
1214, 1228 (2004).
¶ 17 Since the circuit court has the best opportunity to observe the demeanor and
conduct of the parties and witnesses, it is in the best position to determine the credibility and
weight of the witnesses’ testimony. In re E.S., 324 Ill. App. 3d 661, 667, 756 N.E.2d 422, 427
(2001). Further, in matters involving minors, the circuit court receives broad discretion and great
deference. E.S., 324 Ill. App. 3d at 667, 756 N.E.2d at 427. Thus, a reviewing court will not
disturb a circuit court’s unfitness finding and best-interests determination unless they are
contrary to the manifest weight of the evidence. See In re Gwynne P., 215 Ill. 2d 340, 354, 830
N.E.2d 508, 516-17 (2005) (fitness finding); In re J.L., 236 Ill. 2d 329, 344, 924 N.E.2d 961, 970
(2010) (best-interests determination). A circuit court’s decision is against the manifest weight of
the evidence only where the opposite conclusion is clearly apparent. Gwynne P., 215 Ill. 2d at
354, 830 N.E.2d at 517.
¶ 18 A. Evidentiary Issues at the Fitness Hearing
¶ 19 In proceedings for the termination of parental rights, this court reviews a circuit
court’s admission or denial of evidence for an abuse of discretion. In re Daphnie E., 368 Ill.
App. 3d 1052, 1072, 859 N.E.2d 123, 141 (2006). An abuse of discretion occurs when the
circuit court’s ruling is arbitrary, fanciful, or unreasonable, or where no reasonable person would
-7-
take the view adopted by the circuit court. In re Ca. B., 2019 IL App (1st) 181024, ¶ 62, 143
N.E.3d 680.
¶ 20 1. Judicial Notice
¶ 21 Respondent first contends the circuit court erred when it took judicial notice of
the entire court file in this case. The State notes defendant has forfeited this matter by not raising
an objection at the hearing and in a posthearing motion. See In re N.T., 2015 IL App (1st)
142391, ¶ 41, 31 N.E.3d 254. However, the circuit court did not give respondent an opportunity
to respond to the request for judicial notice. We note the application of the forfeiture rule is less
rigid when the basis of the objection is the circuit court’s conduct. N.T., 2015 IL App (1st)
142391, ¶ 41. The State acknowledges taking judicial notice of the entire court file was
improper but asserts respondent was not prejudiced by the circuit court’s action.
¶ 22 In this case, the State asked the circuit court to take judicial notice of all the court
records in this case. The circuit court noted it was taking judicial notice of “all court orders, all
written progress reports by service providers and all service plans previously filed with the
court.” In ruling on the issue of unfitness, the circuit court noted it “had the opportunity to
review the file.”
¶ 23 In In re J.G., 298 Ill. App. 3d 617, 628-29, 699 N.E.2d 167, 175 (1998), this court
addressed judicial notice at the unfitness hearing in a termination of parental rights proceedings.
We began by recognizing judicial notice of certain facts was often necessary at such hearings.
J.G., 298 Ill. App. 3d at 628, 699 N.E.2d at 175. However, this court found the “wholesale
judicial notice of everything that took place prior to the unfitness hearing is unnecessary and
inappropriate.” J.G., 298 Ill. App. 3d at 629, 699 N.E.2d at 175. We noted the rules of evidence
in civil cases apply to adjudicatory hearings under the Juvenile Court Act (705 ILCS 405/2-18(1)
-8-
(West 1996)), with a limited exception for hearsay that is contained in section 2-18(4)(a) of the
Juvenile Court Act (705 ILCS 405/2-18(4)(a) (West 1996)). J.G., 298 Ill. App. 3d at 629, 699
N.E.2d at 175. Section 2-18(4)(a) provides for the admission of agency service plans if the
provision’s foundational requirements are satisfied. See In re Z.J., 2020 IL App (2d) 190824,
¶ 66, 168 N.E.3d 210. Additionally, this court concluded that, while the circuit court erred in
taking judicial notice of the entire court file, the respondent was not prejudiced by that error
because there was more than sufficient evidence of the respondent’s unfitness properly admitted
at the hearing to meet the State’s burden of clear and convincing evidence. J.G., 298 Ill. App. 3d
at 629, 699 N.E.2d at 176.
¶ 24 As in J.G., the circuit court erred by taking judicial notice of the entire court file
in this case. However, as explained later in our analysis, we find respondent was not prejudiced
by the error because the properly admitted evidence was sufficient to establish respondent’s
unfitness by clear and convincing evidence.
¶ 25 2. Service Plans
¶ 26 Respondent also contends the circuit court erred by admitting the June 2021 and
November 2021 service plans without a proper foundation. The State asserts respondent has
forfeited this issue by not objecting to the admission of the service plans. Unlike judicial notice,
respondent’s counsel was asked if he had an objection to the admission of the service plans, and
counsel did not object to any contents of the plans that apply to the nine-month periods alleged
by the State. Regardless, even if the foundation was not properly laid for the two service plans,
respondent was not prejudiced by the error because, as explained in the next section, the properly
admitted evidence was sufficient to establish respondent’s unfitness by clear and convincing
evidence.
-9-
¶ 27 B. Respondent’s Fitness
¶ 28 Respondent contends the State’s properly admitted evidence was insufficient to
prove her unfitness by clear and convincing evidence. The State disagrees.
¶ 29 In this case, the circuit court found respondent unfit on two grounds alleged in the
petition for two nine-month periods. One of the bases for the circuit court’s unfitness finding
was section 1(D)(m)(ii) of the Adoption Act (750 ILCS 50/1(D)(m)(ii) (West Supp. 2021)),
which provides a parent may be declared unfit if he or she fails “to make reasonable progress
toward the return of the child to the parent during any 9-month period following the adjudication
of neglected or abused minor under Section 2-3 of the Juvenile Court Act.” Illinois courts have
defined “reasonable progress” as “demonstrable movement toward the goal of reunification.”
(Internal quotation marks omitted.) In re Reiny S., 374 Ill. App. 3d 1036, 1046, 871 N.E.2d 835,
844 (2007). Moreover, they have explained reasonable progress as follows:
“ ‘[T]he benchmark for measuring a parent’s “progress toward the
return of the child” under section 1(D)(m) of the Adoption Act
encompasses the parent’s compliance with the service plans and
the court’s directives, in light of the condition which gave rise to
the removal of the child, and in light of other conditions which
later became known and which would prevent the court from
returning custody of the child to the parent.’ ” Reiny S., 374 Ill.
App. 3d at 1046, 871 N.E.2d at 844 (quoting In re C.N., 196 Ill. 2d
181, 216-17, 752 N.E.2d 1030, 1050 (2001)).
Additionally, this court has explained reasonable progress exists when a circuit court “can
conclude that *** the court, in the near future, will be able to order the child returned to parental
- 10 -
custody. The court will be able to order the child returned to parental custody in the near future
because, at that point, the parent will have fully complied with the directives previously given to
the parent in order to regain custody of the child.” (Emphases in original.) In re L.L.S., 218 Ill.
App. 3d 444, 461, 577 N.E.2d 1375, 1387 (1991). We have also emphasized “ ‘reasonable
progress’ is an ‘objective standard.’ ” In re F.P., 2014 IL App (4th) 140360, ¶ 88, 19 N.E.3d
227 (quoting L.L.S., 218 Ill. App. 3d at 461, 577 N.E.2d at 1387).
¶ 30 In determining a parent’s fitness based on reasonable progress, a court may only
consider evidence from the relevant time period. Reiny S., 374 Ill. App. 3d at 1046, 871 N.E.2d
at 844 (citing In re D.F., 208 Ill. 2d 223, 237-38, 802 N.E.2d 800, 809 (2003)). Courts are
limited to that period “because reliance upon evidence of any subsequent time period could
improperly allow a parent to circumvent her own unfitness because of a bureaucratic delay in
bringing her case to trial.” Reiny S., 374 Ill. App. 3d at 1046, 871 N.E.2d at 844. In this case,
the petition alleged three nine-month periods, but we will address the period of July 14, 2021, to
April 13, 2022. Additionally, our supreme court has held time spent in prison does not toll the
nine-month period. J.L., 236 Ill. 2d at 341, 924 N.E.2d at 968.
¶ 31 The properly admitted evidence showed respondent did not make substantial
progress towards R.R.’s return and she was never close to R.R. returning to her custody. The
circuit court’s March 17, 2021, docket entry stated, “Visits w/Mother are suspended.” The
State’s exhibit No. 2 showed respondent was sentenced to DOC on November 4, 2021. Elder,
the State’s sole witness, was either shadowing the caseworker or the caseworker in this case for
most of the relevant nine-month period (August 2021 to April 13, 2022). Elder testified
respondent had refused to provide proof of employment for the November 2021 evaluation.
Respondent’s incarceration then impeded her ability to maintain employment. Elder also
- 11 -
testified respondent never provided documentation of mental-health and substance-abuse
assessments. While respondent contends it was a lack of verification on the agency’s part,
respondent self-reported she was not attending mental-health services and Alcoholics
Anonymous meetings for the two months before the November 2021 evaluation. Moreover,
Elder testified respondent never provided her documentation respondent was obtaining any
services while in DOC. While respondent had completed a parenting class, had two negative
drug drops, and kept in contact with R.R. via letters during the relevant nine-month period,
respondent’s actions were not demonstrable movement toward the return of R.R.
¶ 32 Since we have upheld the circuit court’s determination respondent met the
statutory definition of an “unfit person” on the basis of respondent’s failure to make reasonable
progress (750 ILCS 50/1(D)(m)(ii) (West Supp. 2021)) during the nine-month period of July 14,
2021, to April 13, 2022, we do not address the other bases for the circuit court’s unfitness
finding. See In re Tiffany M., 353 Ill. App. 3d 883, 891, 819 N.E.2d 813, 820 (2004).
¶ 33 C. Ineffective Assistance of Counsel
¶ 34 Respondent contends she received ineffective assistance of counsel because
counsel failed to object to hearsay evidence and evidence that lacked foundation. The State
disagrees.
¶ 35 This court analyzes ineffective assistance of counsel claims under the standard set
forth in Strickland v. Washington, 466 U.S. 668 (1984). In re C.C., 368 Ill. App. 3d 744, 748,
859 N.E.2d 170, 173 (2006). To obtain reversal under Strickland, a defendant must prove (1) his
or her counsel’s performance failed to meet an objective standard of competence and
(2) counsel’s deficient performance resulted in prejudice to the defendant. People v. Evans, 186
Ill. 2d 83, 93, 708 N.E.2d 1158, 1163 (1999). With the deficiency prong, the defendant must
- 12 -
overcome the strong presumption the challenged action or inaction could have been the product
of sound trial strategy. Evans, 186 Ill. 2d at 93, 708 N.E.2d at 1163; C.C., 368 Ill. App. 3d at
747-48, 859 N.E.2d at 172. To satisfy the prejudice prong, the defendant must prove a
reasonable probability exists that, but for counsel’s unprofessional errors, the proceeding’s result
would have been different. Evans, 186 Ill. 2d at 93, 708 N.E.2d at 1163-64. The Strickland
Court noted a case should be decided on the ground of lack of sufficient prejudice rather than
counsel’s constitutionally deficient representation if it is easier to do so. Strickland, 466 U.S. at
697.
¶ 36 Here, respondent has failed to establish the prejudice prong. As we explained
with the evidentiary issues in this appeal, the properly admitted evidence was sufficient to prove
one ground of unfitness by clear and convincing evidence. Thus, we disagree with respondent
the circuit court’s unfitness finding would have been different if counsel had objected to the
hearsay evidence. Accordingly, we do not find respondent received ineffective assistance of
counsel.
¶ 37 D. R.R.’s Best Interests
¶ 38 Respondent also challenges the circuit court’s finding it was in R.R.’s best
interests to terminate her parental rights. The State disagrees and contends the court’s finding
was proper.
¶ 39 During the best-interests hearing, the circuit court focuses on “the child’s welfare
and whether termination would improve the child’s future financial, social and emotional
atmosphere.” In re D.M., 336 Ill. App. 3d 766, 772, 784 N.E.2d 304, 309 (2002). In doing so,
the court considers the factors set forth in section 1-3(4.05) of the Juvenile Court Act (705 ILCS
405/1-3(4.05) (West Supp. 2021)) in the context of the child’s age and developmental needs.
- 13 -
See In re T.A., 359 Ill. App. 3d 953, 959-60, 835 N.E.2d 908, 912-13 (2005). Those factors
include the following: the child’s physical safety and welfare; the development of the child’s
identity; the child’s family, cultural, and religious background and ties; the child’s sense of
attachments, including continuity of affection for the child, the child’s feelings of love, being
valued, security, and familiarity, and taking into account the least disruptive placement for the
child; the child’s own wishes and long-term goals; the child’s community ties, including church,
school, and friends; the child’s need for permanence, which includes the child’s need for stability
and continuity of relationships with parent figures, siblings, and other relatives; the uniqueness
of every family and each child; the risks attendant to entering and being in substitute care; and
the wishes of the persons available to care for the child. 705 ILCS 405/1-3(4.05) (West Supp.
2021).
¶ 40 We note a parent’s unfitness to have custody of his or her child does not
automatically result in the termination of the parent’s legal relationship with the child. In re
M.F., 326 Ill. App. 3d 1110, 1115, 762 N.E.2d 701, 706 (2002). As stated, the State must prove
by a preponderance of the evidence the termination of parental rights is in the minor child’s best
interests. See D.T., 212 Ill. 2d at 366, 818 N.E.2d at 1228. “Proof by a preponderance of the
evidence means that the fact at issue *** is rendered more likely than not.” People v. Houar,
365 Ill. App. 3d 682, 686, 850 N.E.2d 327, 331 (2006).
¶ 41 In this case, the evidence showed R.R. had lived with his foster mother for two
years. Since March 17, 2021, respondent and R.R. had only one visit, at which respondent
informed him of the death of his brother. R.R. was bonded with his foster mother, who met his
special needs. Elder testified that, while R.R. was a handful initially in the foster home, he had
become comfortable in the home and enjoyed living there. According to Elder, R.R.’s behaviors
- 14 -
had improved while living with his foster mother. The foster mother desired to provide R.R.
permanency through adoption, and R.R. wanted to continue living with his foster mother. While
the circuit court emphasized one factor, an overwhelming majority of the best-interests factors
favored the termination of respondent’s parental rights.
¶ 42 Accordingly, we find the circuit court’s conclusion it was in R.R.’s best interests
to terminate respondent’s parental rights was not against the manifest weight of the evidence.
¶ 43 III. CONCLUSION
¶ 44 For the reasons stated, we affirm the Adams County circuit court’s judgment.
¶ 45 Affirmed.
- 15 - | 01-04-2023 | 11-09-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482730/ | 11/09/2022
DA 21-0609
Case Number: DA 21-0609
IN THE SUPREME COURT OF THE STATE OF MONTANA
2022 MT 224
WELLS FARGO BANK, N.A.,
Plaintiff, Appellant,
and Cross-Appellee,
v.
ZINVEST, LLC,
Defendant, Appellee,
and Cross-Appellant.
APPEAL FROM: District Court of the Fourth Judicial District,
In and For the County of Missoula, Cause No. DV-20-796
Honorable John W. Larson, Presiding Judge
COUNSEL OF RECORD:
For Appellant:
Chandler P. Thompson, Akerman LLP, Salt Lake City, Utah
Taylor T. Haywood, Akerman LLP, Denver, Colorado
For Appellee:
W. Scott Green, Patten, Peterman, Bekkedahl & Green, PLLC, Billings,
Montana
Submitted on Briefs: October 5, 2022
Decided: November 9, 2022
Filed:
' 4,--6%--‘f
__________________________________________
Clerk
Justice Laurie McKinnon delivered the Opinion of the Court.
¶1 Wells Fargo Bank, N.A. appeals the orders of the Fourth Judicial District Court,
Missoula County, denying Wells Fargo’s motion for summary judgment, granting Zinvest,
LLC’s motion for summary judgment, and granting Zinvest’s motion for attorney fees. We
reverse.
¶2 We restate the issue on appeal as follows:
Whether Zinvest provided Wells Fargo proper notice the tax deeds may issue as
required by § 15-18-212, MCA?
FACTUAL AND PROCEDURAL BACKGROUND
¶3 Wells Fargo holds a Deed of Trust, recorded on June 15, 2004, against two parcels
of land assigned tax parcels 2281204 and 2281300 by the Missoula County treasurer. The
Deed of Trust identifies Wells Fargo Bank, N.A. as the lender and the lender’s address as
“P.O. Box 10304, Des Moines, IA 503060304.” The Deed of Trust further provides that
“[t]ax statements should be sent to: Wells Fargo Home Mortgage, P.O. Box 10304, Des
Moines, IA 503060304,” the same as the lender’s Iowa address. Finally, the Deed of Trust
identifies a “return to” address for Wells Fargo Home Mortgage of “3601 Minnesota
Dr. Suite 200, Bloomington, MN 55435.”
¶4 The taxes assessed against each parcel for the tax year 2014 were unpaid. On
July 15, 2015, the Missoula County treasurer conducted a tax lien sale for both parcels.
Missoula County purchased the tax liens and issued tax sale certificates to itself. In March
of 2016, the Missoula County treasurer executed a county treasurer’s certificate of tax sale
for both parcels and assigned the certificates to Zinvest. The tax sale certificates stated
2
“[a] tax deed shall be issued to the purchaser on or after the 15th day of July, 2017, after
notification has been duly given as required by law, unless the property is redeemed in the
manner as described by law.”
¶5 On June 1, 2018, Zinvest obtained two Litigation Guarantees from Stewart Title for
the tax parcels. The Litigation Guarantees indicated that they identified “[t]he current
interest holders claiming some right, title or interest by reason of the matters shown in
Part II of Schedule B,” and then provided in Schedule C “[t]he return addresses for mailing
after recording, if any, as shown on each and every document referred to in Part II of
Schedule B by specific recording information. . . .” In Part II of Schedule B, the Litigation
Guarantees identified the Deed of Trust, with Wells Fargo Bank, N.A. as the beneficiary.
In Schedule C, the Litigation Guarantees identified the mailing address for Wells Fargo
Bank, N.A. as “3601 Minnesota Dr, Suite 200, Bloomington, MN 55435,” the Deed of
Trust’s “return to” address in Minnesota. The Litigation Guarantees did not provide the
Deed of Trust’s designated Iowa address for the lender.
¶6 On June 15, 2018, Zinvest mailed notices that tax deeds may issue to Wells Fargo
Bank, N.A. at the Minnesota address provided in the Litigation Guarantees. The notices
were returned to Zinvest marked “return to sender – not deliverable as addressed – unable
to forward.” On June 15 and June 22, 2018, Zinvest published notices of the pending tax
deeds in the Missoulian. Zinvest then executed a “proof of notice” attesting it mailed
notices of the issuance of tax deeds to the “owners, current occupant and parties” pursuant
to § 15-18-212, MCA, via certified mail, return receipt requested. On August 31, 2018,
3
the Missoula County treasurer executed tax deeds conveying parcels 2281204 and 2281300
to Zinvest.
¶7 On July 17, 2020, Wells Fargo filed its Complaint alleging Zinvest failed to give
proper notice under § 15-18-212, MCA, and requesting the tax deeds issued to Zinvest be
declared void. Zinvest and Wells Fargo filed competing motions for summary judgment
contesting whether Zinvest complied with the requirements for notice and tax sale
certificates set forth in the tax deed statutes. On November 17, 2021, after a hearing on the
motions, the District Court granted Zinvest’s motion for summary judgment and denied
Wells Fargo’s. The District Court found that “the statutory requirements for tax lien
procedure were met and” there were no due process violations. The District Court
concluded that Zinvest provided proper notice to Wells Fargo because it relied on the
address listed in the Litigation Guarantees in compliance with § 15-18-212(4)(b), MCA,
and because it published timely notice. Finally, on November 22, 2021, Zinvest filed a
motion for allowance of attorney fees. On May 10, 2022, the District Court granted the
motion and awarded Zinvest attorney fees against Wells Fargo.1 Wells Fargo appeals the
District Court’s orders.
STANDARD OF REVIEW
¶8 We review a district court’s entry of summary judgment de novo. Hansen Tr. v.
Ward, 2015 MT 131, ¶ 15, 379 Mont. 161, 349 P.3d 500. If there are no genuine issues of
1
Because we reverse the District Court’s summary judgment orders and hold the tax deeds void,
we need not address the parties’ arguments regarding attorney fees.
4
material fact, we determine whether the district court correctly concluded that the moving
party is entitled to judgment as a matter of law. Zinvest, LLC v. Hudgins, 2014 MT 201,
¶ 11, 376 Mont. 72, 330 P.3d 1135. We review conclusions of law for correctness. Moran
v. Robbin, 261 Mont. 478, 482, 863 P.2d 395, 398 (1993). Additionally, a statutory
interpretation is a conclusion of law, which we review to determine whether the district
court’s interpretation of the law is correct. Zinvest, LLC, ¶ 11.
DISCUSSION
¶9 Whether Zinvest provided Wells Fargo proper notice the tax deeds may issue as
required by § 15-18-212, MCA?
¶10 Wells Fargo contends that the District Court erred in finding Zinvest obtained
proper Litigation Guarantees and provided Wells Fargo proper notice in compliance with
§ 15-18-212, MCA. Wells Fargo argues Zinvest incorrectly relied on the Litigation
Guarantees because they did not identify “the identities and addresses of the parties of
record” with an interest in the parcels. Section 15-18-212(4)(a)(iii), MCA. While the
Litigation Guarantees promised to identify “[t]he return addresses for mailing after
recording,” the “return to” address in the Deed of Trust was the incorrect mailing address
for Wells Fargo. Wells Fargo maintains that, as a result, the Litigation Guarantees did not
comply with the statutory requirements for a litigation guarantee. Further, Wells Fargo
maintains Zinvest failed to provide it adequate notice under § 15-18-212, MCA, when it
mailed the notices to the “return to” address rather than the lender’s address, resulting in
the notices being returned to Zinvest undelivered.
5
¶11 Finally, Wells Fargo contends Zinvest failed to comply with other requirements of
the tax sale procedures. As we conclude the tax deeds are invalid based on Zinvest’s failure
to provide notice, we do not address the parties’ additional arguments.
¶12 The right of “redemption generally is ‘a vested property right . . . of which the owner
cannot be legally deprived except and only . . . by the giving of notice.’” Tax Lien Servs.
v. Hall, 277 Mont. 126, 131, 919 P.2d 396, 399 (1996) (quoting Lowery v. Garfield County,
122 Mont. 571, 582, 208 P.2d 478, 484 (1949)). Because a property owner must know a
tax lien exists before redeeming it, “notice is of utmost importance in these proceedings.”
Hansen Tr., ¶ 27. Failing “to provide adequate notice in compliance with the statute
renders a tax deed void.” Hansen Tr., ¶ 27 (citations omitted). See also Isern v.
Summerfield, 1998 MT 45, ¶ 28, 287 Mont. 461, 956 P.2d 28 (“[I]f the legal requirements
with respect to the notice are not complied with, a county treasurer may not legally issue a
tax deed.”) (citations omitted).
¶13 Section 15-18-212, MCA, requires notice to be given when a tax deed will be issued
“unless the property tax lien is redeemed prior to the expiration date of the redemption
period.” § 15-18-212(1)(b), MCA. This notice must “be made by certified mail, return
receipt requested, to . . . each party . . . listed on a litigation guarantee, provided that the
guarantee . . . lists the identities and addresses of the parties of record that have an
interest . . . in the property designed to disclose all parties of record that would otherwise
be necessary to name in a quiet title action.” Section 15-18-212(4)(a)(iii), MCA. The
6
notice must be sent to “the address disclosed by the records in the office of the county clerk
and recorder or in the litigation guarantee.” Section 15-18-212(4)(b), MCA.
¶14 The District Court erred in finding Zinvest complied with the notice requirements
of § 15-18-212, MCA, by mailing notices to the address for Wells Fargo listed in the
Litigation Guarantees. A party may rely on the information disclosed in a litigation
guarantee provided the guarantee lists the addresses for the parties of record.
Section 15-18-212(4)(a)(iii), MCA. The Litigation Guarantees here, however, provided
the incorrect address for Wells Fargo Bank, N.A. The publicly recorded Deed of Trust
identifies Wells Fargo Bank, N.A. as the “lender” and the lender’s address as “P.O. Box
10304, Des Moines, IA 503060304.” Additionally, the document provides that “[a]ny
notice to lender shall be given by delivering it or by mailing it by first class mail to lender’s
address,” and requests that tax statements be sent to this same Iowa address. Wells Fargo’s
Deed of Trust clearly provided a known and identifiable address to send the notices that
tax deeds may issue, yet the Litigation Guarantees did not list this address. Instead, the
Litigation Guarantees listed Wells Fargo’s address as follows:
Wells Fargo Bank, N.A.
3601 Minnesota Dr, Suite 200
Bloomington, MN 55435
¶15 The Litigation Guarantees obtained this address from the “return to” block in the
Deed of Trust—which Wells Fargo asserts was merely the return address for mailing after
recording—listed as follows:
Return To:
7
Wells Fargo Home Mortgage
3601 Minnesota Dr. Suite 200
Bloomington, MN 55435
¶16 The Litigation Guarantees thus provided an incorrect address for notices to Wells
Fargo by listing the “return to” address rather than the explicitly designated lender’s
address. Additionally, the Litigation Guarantees used the “return to” address—which
belonged to Wells Fargo Home Mortgage—and misidentified it as belonging to Wells
Fargo Bank, N.A. By providing the incorrect address, the Litigation Guarantees did not
satisfy the statutory requirements of § 15-18-212, MCA, and Zinvest improperly relied on
them for purposes of providing notice to Wells Fargo.
¶17 Under § 15-18-212(b), MCA, Zinvest was required to mail Wells Fargo the notices
at “the address disclosed by the records in the office of the county clerk and recorder or in
the litigation guarantee.” Zinvest relied on the Litigation Guarantees and sent the notices
to the Minnesota address. Wells Fargo never received the notices. Instead, the notices
were returned marked “return to sender – not deliverable as addressed – unable to forward.”
Zinvest’s failure to mail Wells Fargo the notices at the Iowa address listed for it in the
recorded Deed of Trust violated § 15-18-212, MCA. Accordingly, Zinvest’s failure to give
the statutorily required notice that tax deeds may issue renders the tax deeds void.
¶18 Zinvest maintains it complied with the notice requirements in § 15-18-212, MCA,
because it sent the notices to Wells Fargo’s last known available address and also provided
constructive notice by publication. Zinvest contends, for the first time on appeal, that Wells
Fargo created uncertainty in the Deed of Trust surrounding the correct address for notice
8
because Wells Fargo Home Mortgage is the entity designated in both the “return to” block
and for mailing tax statements, and the same Iowa address is listed for both the mailing of
tax statements and for the lender’s address. Zinvest contends that because Wells Fargo
Home Mortgage and Wells Fargo Bank, N.A. appear to share the Iowa address, it was
reasonable to assume Wells Fargo’s last known address was the Minnesota “return to”
address provided for Wells Fargo Home Mortgage.
¶19 Zinvest attempts to create ambiguity in the Deed of Trust by overlooking the
document’s plain language. Certainly, the Deed of Trust identified Wells Fargo Home
Mortgage as the entity for receipt of tax statements and provided for this purpose the same
Iowa mailing address as listed for the lender. However, instead of mailing the notices to
the shared Iowa address, Zinvest used the Minnesota “return to” address. This address was
only connected to Wells Fargo Home Mortgage; it was never connected to Wells Fargo
Bank, N.A. Moreover, in concluding that the “return to” address was Wells Fargo’s last
known available address, Zinvest disregarded the lender’s address explicitly designated for
receipt of notices related to the document and instead selected an address clearly provided
for a different entity and for a different purpose. In these circumstances, it was not
reasonable for Zinvest to assume the Minnesota address was Wells Fargo’s last known
available address. Accordingly, Zinvest failed to provide the statutorily required notice
when it sent the notices to the incorrect address.
¶20 Zinvest also contends that after the mailed notices were returned undelivered, it
provided Wells Fargo constructive notice by publication when it ran two notices in the
9
Missoulian. However, “[c]onstructive notice by publication that property may be lost by a
tax deed is legally insufficient unless accompanied by personal service or notice mailed to
the property owner’s address contained in the county records.” Showell v. Brosten, 2008
MT 261, ¶ 19, 345 Mont. 108, 189 P.3d 1210 (holding “failure to strictly comply with the
notice requirements of § 15-18-212, MCA, renders [a] tax deed void”). In Showell, a
company neither mailed proper notice to a property owner nor published notice that a tax
deed might issue. We declined to address whether notice by publication was required after
the mailed notice was returned unclaimed because the failure to mail proper notice was
insufficient in itself for the tax deed to issue. We held that “it is clear from § 15-18-212(4),
MCA, that in every instance, notice must be mailed to each interested party.” Showell,
¶ 17. See also Moran, 261 Mont. at 483, 863 P.2d at 398 (“A tax deed issued without the
required proof of notice is void.”). Accordingly, Zinvest’s failure to mail notices that tax
deeds may issue to Wells Fargo violated § 15-18-212, MCA, and rendered the tax deeds
void.
CONCLUSION
¶21 The District Court’s order granting summary judgment to Zinvest is reversed; the
tax deeds issued to Zinvest are void; and the District Court’s order granting Zinvest
attorney fees is reversed.
/S/ LAURIE McKINNON
10
We Concur:
/S/ JAMES JEREMIAH SHEA
/S/ INGRID GUSTAFSON
/S/ DIRK M. SANDEFUR
/S/ JIM RICE
11 | 01-04-2023 | 11-09-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482728/ | NONPRECEDENTIAL DISPOSITION
To be cited only in accordance with FED. R. APP. P. 32.1
United States Court of Appeals
For the Seventh Circuit
Chicago, Illinois 60604
Submitted November 9, 2022*
Decided November 9, 2022
Before
FRANK H. EASTERBROOK, Circuit Judge
DAVID F. HAMILTON, Circuit Judge
THOMAS L. KIRSCH II, Circuit Judge
No. 22-1869
AARON LINDH, Appeal from the United States District
Plaintiff-Appellant, Court for the Eastern District of Wisconsin.
v. No. 21-C-801
TONIA MOON, William C. Griesbach,
Defendant-Appellee. Judge.
ORDER
Wisconsin prisoner Aaron Lindh appeals the dismissal of this suit under
42 U.S.C. § 1983, asserting that prison officials moved him from a single to a double cell
in retaliation for lawsuits and complaints he filed against correctional staff. As relevant
to this appeal, the district court dismissed his claims against most of the defendants
*We have agreed to decide the case without oral argument because the
appellant’s brief and the record adequately present the facts and legal arguments, and
oral argument would not significantly aid the court. FED. R. APP. P. 34(a)(2)(C).
No. 22-1869 Page 2
because no reasonable inference could be drawn from Lindh’s allegations that any of
them took steps that constituted retaliation. We affirm.
We recount the background as alleged in the complaint, accepting the allegations
as true and giving Lindh the benefit of reasonable inferences. Milchtein v. Milwaukee
Cty., 42 F.4th 814, 819 (7th Cir. 2022). Lindh has been incarcerated at Waupun
Correctional Institution since 1999, mostly in a single-occupancy cell. But since 2019, he
has been moved to a double-occupancy cell on three occasions—the third of which gave
rise to this lawsuit.
In spring 2021, Waupun underwent a reorganization that substantially reduced
the number of available single cells. The warden explained to the inmates that single
cells would be reassigned by priority, based on “medical, psychological, or security
concerns,” and then seniority (i.e., who had been housed in a single cell for the longest
time). Lindh thought he was near the top of the seniority list, but he was transferred to a
new cell hall and assigned a double cell. Lindh believes that the cell assignment was in
retaliation for previous complaints and lawsuits that he had filed against prison
officials. Lindh previously had filed two civil-rights lawsuits against Waupun staff
members: The first concerned another double-cell assignment after he had returned
from the high-security unit, and the second followed his denial of phone access after he
had exceeded his call quota. His dissatisfaction with these developments was the
subject of multiple grievances he filed.
He also filed grievances over his new housing placement—grievances that, he
maintains, led prison staff to retaliate against him further by refusing to move him to a
single cell. Lindh first wrote a letter to the warden and copied the security director,
highlighting his seniority and asserting that his transfer must have been in retaliation
for lawsuits and grievances. The security director replied that the inmates already had
received an explanation for the cell-assignment process; he emphasized that
“[r]etaliation I can assure you is not in this process.” Lindh also filed three grievances
over his cell assignment with Tonia Moon, the prison’s complaint examiner, but she
rejected each of them, explaining that his housing placement was an administrative
decision not subject to review. Later, Lindh sent another letter to the warden; in
response, the security director instructed Lindh to direct his concerns to the “movement
officer” who was responsible for housing assignments. A few weeks later, Lindh was
relocated to a single cell for quarantining before a medical procedure. Afterward, he
was permanently assigned to a single cell. His time in the double cell totaled about two
months.
No. 22-1869 Page 3
Lindh then sued various prison officials (Moon, the warden, and multiple
lieutenants and sergeants) for violating his First Amendment rights when they denied
him a single cell in retaliation for the lawsuits and grievances he filed against them.
The district court screened Lindh’s complaint, see 28 U.S.C. § 1915A(b), and
dismissed the claims against most of the defendants for failure to state a claim. With
regard to the claims against the warden and the security director, the court explained
that only alleged involvement of these defendants was telling Lindh to direct his cell-
assignment issue to the prison’s movement officer. As for the claims against the
remaining prison officials, the court could not infer from Lindh’s complaint that these
defendants were aware of his prior suits or grievances, such that their actions could
have been retaliatory. The court permitted Lindh to proceed on his claim against Moon,
concluding that his allegations that she refused to process and review his complaints
were “sufficient, but barely” to state a First Amendment claim.
The court later entered summary judgment for Moon on the basis of exhaustion.
The court found it undisputed that Lindh never filed a grievance raising the retaliation
claim against Moon at issue here.
On appeal, Lindh challenges only the substance of the district court’s screening
order. He argues that he adequately stated a retaliation claim by alleging a plausible
link between his protected speech and the prison officials’ acts.
The district court rightly dismissed Lindh’s claims against these defendants.
Even if we assume that Lindh’s prior lawsuits and grievances are protected activities,
see Holleman v. Zatecky, 951 F.3d 873, 878 (7th Cir. 2020); but see Herron v. Meyer, 820 F.3d
860, 864 (7th Cir. 2016) (questioning whether all grievances are protected speech),
Lindh’s threadbare allegations do not suggest how the warden and security director
were required to intervene in his particular cell assignment when it was not their job to
do so, see Burks v. Raemisch, 555 F.3d 592, 595 (7th Cir. 2009), or how the remaining
defendant prison officials would have known about his prior lawsuits and grievances,
let alone played a role in his cell placement based on their knowledge of such activity.
The allegations in the complaint were too barebones for us to see a plausible connection
between Lindh’s protected speech and any alleged overstepping by these defendants.
See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); Zimmerman v. Bornick, 25 F.4th 491, 492–93
(7th Cir. 2022).
No. 22-1869 Page 4
Lindh does not contest the court’s entry of summary judgment for Moon on
exhaustion grounds, so he has waived any challenge to it. See Bernard v. Sessions,
881 F.3d 1042, 1048 (7th Cir. 2018).
AFFIRMED | 01-04-2023 | 11-09-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482731/ | 11/09/2022
DA 20-0603
Case Number: DA 20-0603
IN THE SUPREME COURT OF THE STATE OF MONTANA
2022 MT 223
STATE OF MONTANA,
Plaintiff and Appellee,
v.
TRENTON MATTHEW LARSON,
Defendant and Appellant.
APPEAL FROM: District Court of the First Judicial District,
In and For the County of Lewis and Clark, Cause No. DDC 20-89
Honorable Ed McLean, Presiding Judge
COUNSEL OF RECORD:
For Appellant:
Chad Wright, Appellate Defender, Alexander H. Pyle, Assistant
Appellate Defender, Helena, Montana
For Appellee:
Austin Knudsen, Montana Attorney General, Roy Brown, Assistant
Attorney General, Helena, Montana
Leo J. Gallagher, Lewis and Clark County Attorney, Helena, Montana
Melissa Broch, Harris Law Office PLLC, Helena, Montana
Submitted on Briefs: July 13, 2022
Decided: November 9, 2022
Filed:
' ,-6A•-if
__________________________________________
Clerk
Justice Laurie McKinnon delivered the Opinion of the Court.
¶1 Trent Matthew Larson (Larson) was charged with possessing child pornography in
violation of § 45-5-625(1)(e), MCA. He entered into a plea agreement in the First Judicial
District Court, Lewis and Clark County, that reserved his right to appeal the denial of his
suppression motion.
¶2 We affirm and restate the issue as follows:
Did the District Court err when it failed to suppress evidence confiscated by a
manager of a group home, pursuant to the group home’s rules, who subsequently
turned the evidence over to police?
FACTUAL AND PROCEDURAL BACKGROUND
¶3 This case arises out of events occurring at an adult foster care group home in East
Helena where Larson lived. Larson has Asperger’s syndrome. His original placement in
the group home was arranged through his parole and probation officer pursuant to a
sentence for burglary. He lived at the group home for five years until he completed his
probationary term and then continued to live in the group home for another two years until
his electronic devices were confiscated and he was charged with the instant offense.
¶4 Connie Griffin Jacquez (Jacquez) was the owner and manager of the private group
home when Larson lived there. She is neither a law enforcement officer nor a state
employee. When Larson entered the group home, he was advised of the group home’s
rules. The rules were extensive and covered many aspects of a resident’s life, such as
maintenance of regular hygiene; no use of alcohol or drugs; and requirements that a
resident follow their treatment plan, abide by a 10 p.m. curfew, complete assigned chores,
2
and participate in household recreational activities. The rules specifically prohibited
certain activities as well. A resident could not possess pornographic material and the use
of an electronic device for such a purpose would subject the device to confiscation. The
rules relevant to these proceedings provided:
6. No pornographic material in the household, computers or movies allowed
in the home . . .
23. Client may not use any computer owned by AFCP.1 Usage of computers,
gaming systems, is up to the discretion of the AFCP and may be
confiscated/banned for violated of house/computer/internet rules at any time.
This also pertains to gaming systems and electronics.
24. AFCP may/will set allotted amounts of time for computer usage. AFCP
also may restrict any computer use in the home. Scheduled times for the use
of the computer is up to the discretion of the house provider.
The rules also provided for a “30-day eviction notice” or, in the case where a resident
continues to violate the rules after frequent warnings, “immediate eviction.” Jacquez
allowed, though not stated in the rules, a resident to have confiscated property back upon
leaving the group home permanently. Larson signed the rules in 2013, thus affirming that
he understood he was not allowed to view or possess pornography and that his electronics
would be confiscated if he did not comply. Every year thereafter, Larson read and signed
the rules indicating that he understood and agreed to them.
¶5 Unfortunately, Larson struggled to follow the rules of the group home. For instance,
he projected adult pornography in a common residential area, which led to complaints from
other residents. He was known to steal children’s and women’s undergarments.
1
AFCP stands for “Adult Foster Care Provider.”
3
Furthermore, he begun “propositioning” Jacquez’s grandchildren and other children in the
neighborhood. To prevent Larson from streaming pornography and engaging in
inappropriate behavior, Jacquez used internet screening technology to block pornography
from coming into the residence over the internet. Larson still found ways to avoid the
blocking technology and continued to view pornography on his phone and computer. As
a result, Jacquez confiscated his electronic devices.
¶6 At some point, Larson enrolled in school so Jacquez decided to give him another
chance with computers. Jacquez allowed him to access his computer for the purpose of
doing schoolwork only. However, Jacquez discovered that Larson was still using the
computer to view pornography. Further attempts by Jacquez to monitor Larson’s
electronics failed and Larson subsequently admitted to Jacquez that “he was having
thoughts of molesting children.” Consequently, Jacquez confiscated Larson’s computer
and the rest of his electronic devices and directed him to seek treatment in a sexual offender
treatment program. He agreed to attend treatment, and Jacquez accompanied him.
¶7 By now, Jacquez had confiscated numerous electronic devices from Larson—a
computer, three or more phones, external hard drives, and video streaming devices.
Notwithstanding, Larson continued to purchase new devices and tried to conceal them from
Jacquez. Jacquez continued to confiscate them and place them in a safe to prevent Larson
from accessing them.
¶8 Jacquez contacted the police on several occasions advising that she had confiscated
pornography from a resident. On the first occasion, police said they would respond but
4
never did. Two or three weeks later, a resident informed her that Larson had been hiding
a phone in a plastic bag in the back of the toilet. She confronted Larson about the phone
and saw it contained child pornography when he handed it over to her. Once Jacquez
confiscated the phone, she called the police again, but the police did not answer. Jacquez
then asked Larson to leave the group home permanently. Larson informed her that he was
already planning to move out and had contacted law enforcement for a civil standby so he
could get his electronics back.
¶9 When Larson contacted the police, Deputy Jordan Criske-Hall asked Larson why
he “didn’t just wait until the 30 days was up,” in which case, Jacquez would return his
electronics. Larson replied that “he would probably be arrested” if he answered Deputy
Criske-Hall’s question. The deputy continued to inquire, and Larson eventually disclosed
that he had child pornography on his devices. Deputy Criske-Hall responded to the group
home and informed Jacquez about this conversation. Jacquez told Deputy Criske-Hall that
she had already confiscated some of Larson’s electronics after she observed child
pornography on his computer and phone. Deputy Criske-Hall then asked Jacquez “to
gather up all of the electronics that [she] could find of his.” Jacquez testified that she gave
Deputy Criske-Hall Larson’s electronics that she had already confiscated, along with two
additional thumb drives she seized after Deputy Criske-Hall’s request. Jacquez testified at
the suppression hearing that the only items she believed she had “not confiscated from him
5
was like the thumb—some thumb drives[.]”2 Deputy Criske-Hall did not have a warrant
when Jacquez turned over Larson’s electronics.
¶10 After Deputy Criske-Hall confiscated and secured the electronic devices, a detective
from the Criminal Investigation Division applied for a search warrant. The search warrant
was granted on December 11, 2019. The search of the devices revealed “80 or more”
videos and pictures of child pornography involving infants, newborns, and preteen sex with
adult men. Moreover, a search of Larson’s computer yielded anime3 pictures of sex with
toddlers and young females, along with search terms such as “Toddler girls open vagina.”
Larson admitted to detectives that he had used the “Dark Web” to search and look at child
pornography, describing the websites he had visited.
¶11 The State charged Larson with possession of child pornography in violation
of § 45-5-625(1)(e), MCA. Larson moved to suppress any evidence derived from the
electronic devices, arguing that Jacquez became a state actor when she turned over his
electronic devices to police. Larson also maintained that Jacquez, as a third-party, lacked
authority to consent to the State seizing his devices without a warrant. The District Court
held a hearing and Jacquez testified, but Deputy Criske-Hall did not. The District Court
denied Larson’s motion, finding that Jacquez “was not acting at the instigation of law
2
Deputy Criske-Hall took possession of a camcorder, four cell phones, a tablet, a Kindle, a large
external hard drive, a laptop computer, and two thumb drives.
3
“Anime” is a style of “animation in Japan that is characterized by stark colorful graphics depicting
vibrant characters in action-filled plots often with fantastic or futuristic themes.” Anime, Merriam-
Webster’s Dictionary. (10th ed. 1993).
6
enforcement” and that “[s]he was acting to enforce the group home rules to which Larson
had consented.” The District Court concluded that Larson had “assumed the risk” that
Jacquez would see the child pornography on his electronics, confiscate the devices, and
turn the electronics over to law enforcement.
¶12 Larson entered into a plea agreement with the State, where the State agreed to
recommend a ten-year sentence to the Montana State Prison with all time suspended. The
District Court adopted the psychosexual evaluator’s recommendation and designated
Larson a Tier 2 sexual offender. Larson reserved his right to appeal the denial of his motion
to suppress.
STANDARD OF REVIEW
¶13 For the denial of a motion to suppress, this Court reviews findings of fact for clear
error and conclusions of law for correctness. State v. Pham, 2021 MT 270, ¶ 11, 406 Mont.
109, 497 P.3d 217. Findings of fact are clearly erroneous if they are not supported by
substantial evidence, the court misapprehends the effect of the evidence, or appellate
review of the record convinces the court that a mistake has been made. State v. Warclub,
2005 MT 149, ¶ 23, 327 Mont. 352, 114 P.3d 254.
DISCUSSION
¶14 Did the District Court err when it failed to suppress evidence confiscated by a
manager of a group home, pursuant to the group home’s rules, who subsequently turned
the evidence over to police?
¶15 Larson argues that Jacquez became a state actor once Deputy Criske-Hall asked her
to turn over Larson’s electronic devices and that her actions resulted in a warrantless and
7
unlawful seizure.4 Larson asserts that Jacquez did not gather up the electronics on her
“own accord,” but instead acted “as an arm of the police.” He contends that Jacquez
“performed the intrusive conduct to assist law enforcement” rather than for the purpose of
implementing her group home rules. Larson also argues that under the third-party consent
doctrine, Jacquez lacked authority to consent to a warrantless seizure by Deputy
Criske-Hall of Larson’s property. We turn first to Larson’s contention that Jacquez was a
state actor.
¶16 The Fourth Amendment to the United States Constitution and Article II, §§ 10 and
11 of the Montana Constitution protect citizens against unreasonable seizures. Katz v.
United States, 389 U.S. 347, 353, 88 S. Ct. 507, 512 (1967); State v. Staker, 2021 MT 151,
¶ 9, 404 Mont. 307, 489 P.3d 489. A seizure occurs when there has been “some meaningful
interference with an individual’s possessory interests” or “dominion and control” over an
individual’s property. United States v. Jacobsen, 466 U.S. 109, 120-21, 104 S. Ct. 1652,
1660 (1984); Horton v. California, 496 U.S. 128, 133, 110 S. Ct. 2301, 2305-06 (1990).
The purpose of §§ 10 and 11 of the Montana Constitution is “to protect the privacy and
security of individuals from unreasonable intrusion or interference.” State v. Hoover, 2017
MT 236, ¶ 14, 388 Mont. 533, 402 P.3d 1224. These protections only take effect when an
unlawful “search” or “seizure” has been established. State v. Funkhouser, 2020 MT 175,
¶ 16, 400 Mont. 373, 467 P.3d 574.
4
Larson does not challenge the scope of the subsequent search or the reasonableness of the time
law enforcement took to obtain a warrant after they took possession of the electronic devices.
8
¶17 The Fourth Amendment applies only to government action, and not that of a private
party. Burdeau v. McDowell, 256 U.S. 465, 475, 41 S. Ct. 574, 576 (1921); see also
Skinner v. Ry. Labor Executives’ Ass’n, 489 U.S. 602, 614, 109 S. Ct. 1402, 1411 (1989)
(holding that “the Fourth Amendment does not apply to a search or seizure, even an
arbitrary one, effected by a private party on his initiative. . .”). In Jacobsen, the United
States Supreme Court explained that “a search or seizure, even an unreasonable one,
effected by a private individual not acting as an agent of the Government or with the
participation or knowledge of any governmental official” does not violate the Fourth
Amendment. 466 U.S. at 114-15 (quoting Walter v. United States 447 U.S. 649, 662, 100
S. Ct. 2395, 2404 (1980)). Thus, when an individual reveals private information to another,
the person assumes the risk that the confidant may reveal the incriminating evidence to
government authorities, and if that occurs, the Fourth Amendment does not protect the
individual from governmental use of the evidence. Jacobsen, 466 U.S. at 115-18. In
contrast, when a private party acts as an “instrument” or “agent” of the State in effecting a
search or seizure, Fourth Amendment protections are implicated. Coolidge v. New
Hampshire, 403 U.S. 443, 489, 91 S. Ct. 2022, 2049 (1971).
¶18 Correspondingly, this Court has held that Article II, §§ 10 and 11 of the Montana
Constitution protect individuals from state action only. State v. Wolfe, 2020 MT 260, ¶ 6,
401 Mont. 511, 474 P.3d 318; State v. Malkuch, 2007 MT 60, ¶¶ 12-14, 336 Mont. 219,
154 P.3d 558; State v. Long, 216 Mont. 65, 67-71, 700 P.2d 153, 155-57 (1985). In Wolfe,
we held that a private person did not act as a state actor when officers suggested the victim
9
of a rape answer her cell phone on speakerphone when her perpetrator called her. The
victim was present with law enforcement and reporting the incident when Wolfe repeatedly
texted and called her. Wolfe, ¶ 4. We explained that “[l]ike other constitutional guarantees
of individual liberties, these provisions direct government action only.” Wolfe, ¶ 10. The
Fourth Amendment protections have as their origins and purpose an intent to restrain
sovereign authority and are not intended to be a restraint upon other non-governmental
actors. A private party acting “of her own accord,” therefore, does not effectuate an
unconstitutional and unreasonable search or seizure. Long, 216 Mont. at 71.
¶19 When analyzing whether a private person was acting as a state actor, this Court
determines “(1) whether the government knew of and acquiesced in the intrusive conduct,
and (2) whether the party performing the search intended to assist law enforcement efforts
or to further his own ends.” Malkuch, ¶ 14 (citing United States v. Miller, 688 F.2d 652,
657 (9th Cir. 1982); United States v. Walther, 652 F.2d 788, 791-91 (9th Cir. 1981)). In
Malkuch, we held that a private party’s search was not attributable to the State when the
police officer told the private party he “needed evidence” to support her allegations of
illegal drug activity and the private party subsequently searched the premises and seized
the drugs. Malkuch, ¶ 16. When a private party has a “legitimate, independent motivation”
to advance her own ends, “any dual motive to detect or prevent crime or assist police” does
not make them a government agent. United States v. Cleaveland, 38 F.3d 1092, 1094 (9th
Cir. 1994), as amended (Jan. 12, 1995).
10
¶20 Applying these principles here, we conclude Jacquez was not a state actor when she
gave law enforcement Larson’s electronic devices. First, the record establishes the
electronics had been confiscated before police became involved. There was no pending
criminal investigation; indeed, Jacquez made every effort to help Larson by allowing him
to stay in the group home and get into treatment despite Larson having committed
numerous violations. Deputy Criske-Hall was not involved until after the numerous
devices had already been confiscated and therefore could not have “acquiesced in
[Jacquez’s] intrusive conduct.” Malkuch, ¶ 14. Regarding the second Malkuch factor,
Jacquez never expressed any intent to assist law enforcement in the investigation. The
record shows that she had two motives for collecting Larson’s electronics: (1) to require
Larson to comply with her group home rules, and (2) to dispose of the contraband contained
in the devices. Further, Jacquez disclaimed involvement or interest in the investigation
when she stated that she “would have contacted the police again” and given the contraband
to the police so law enforcement could have “done whatever with it.” She wanted Larson’s
contraband out of her possession, and she disposed of it by handing it over to Deputy
Criske-Hall. Jacquez had an interest in confiscating all Larson’s electronics, including the
thumb drives, to rid the premises of pornographic contraband. Her interest in purging her
home of pornography coupled with Deputy Criske-Hall’s request for her to turn over all
Larson’s electronic devices did not make her a state actor. See Cleaveland, 38 F.3d at
1094.
11
¶21 We turn now to Larson’s argument that Jacquez did not have third-party authority
to consent to the seizure of his electronic devices by law enforcement. Although we have
already noted that the Supreme Court, in Jacobsen, established a person assumes the risk
that a confidant may reveal incriminating evidence to government authorities, we begin
with some basic principles surrounding third-party consent. “Warrantless seizures are per
se unreasonable subject to only a few carefully drawn exceptions.” State v. Elison, 2000
MT 288, ¶ 39, 302 Mont. 228, 14 P.3d 456. The State bears the burden of proving an
exception to the warrant requirement. State v. Goetz, 2008 MT 296, ¶ 40, 345 Mont. 421,
191 P.3d 489. Consent represents one of the narrowly drawn exceptions to the warrant
requirement. State v. Schwarz, 2006 MT 120, ¶ 14, 332 Mont. 243, 136 P.3d 989. For
third-party consent to be valid against the defendant, “the consenting party must have
actual authority” to consent to the government intrusion. State v. McLees, 2000 MT 6,
¶ 32, 298 Mont. 15, 994 P.2d 683. A third-party’s authority to consent to a search or seizure
must rest on “mutual use of the property by persons generally having joint access or control
for most purposes, so that it is reasonable to recognize that any of the co-inhabitants has
the right to permit the inspection in his own right and that others have assumed the risk that
one of their number might permit the common area to be searched.” McLees, ¶ 13 (quoting
United States v. Matlock, 415 U.S. 164, 171, 94 S. Ct. 988, 993 (1974)). “The Montana
Constitution requires that a court reviewing an issue of third-party consent determine—
without deference to the officer at the scene—whether the third-party had common
12
authority.” State v. Urziceanu, 2015 MT 58, ¶ 16, 378 Mont. 313, 344 P.3d 399 (citations
omitted).
¶22 Larson argues that Jacquez did not have authority as a third-party to consent to law
enforcement’s seizure of his devices. Larson contends that because the deputy had an
“objective indication” that Jacquez lacked common authority over the electronics, then
Jacquez could not have consented to the seizure. He further argues that the State failed to
satisfy its burden to establish that Jacquez had authority to consent because Deputy
Criske-Hall was not aware of the group home rules. Therefore, Larson asserts that the
group home rules cannot be used to establish that Jacquez, as a third-party, had authority
to consent to the seizure.5
¶23 By agreeing to the group home rules, Larson relinquished his right to the exclusive
possession of certain property which he used in violation of those rules. Larson, by signing
the rules, gave the group home manager joint access and control for the purpose of seizing
electronic devices when they contained pornographic material. Larson knew that Rules 6,
5
Larson contends that, although a resident in Jacquez’s group home, he still maintains his rights
and autonomy. He cites Admin. R. Mont. 37.100.101(2), (3)(o), which provides that “[r]esidents’
needs are to be addressed in a manner that supports and enables residents to maximize their ability
to function at the highest level of independence possible” and residents “have the right to . . . be
encouraged and assisted to exercise constitutional and legal rights . . .” See also § 50-5-1104(2)(i),
(l), MCA (stating that residents retain rights “to privacy in [their] room[s],” “to reasonable
safeguards for personal possessions” and to “have reasonable access to” their personal property).
Larson has not developed this argument on appeal by placing the rule and statute within the context
of the facts here. More particularly, however, the law relating to third-party consent, consent, and
state actors, does not vanish in the face of this authority. Residents do not have the right, by virtue
of the authority Larson cites, to possess pornography—a crime in itself—particularly when they
have consented to confiscation of electronic devices containing pornographic material as a
condition for residing in a group home.
13
23, and 24 prohibited him from possessing electronic devices containing pornography and
he consented to the confiscation or a third-party obtaining control over any device that
contained pornographic material. Therefore, Jacquez had the authority to control Larson’s
electronic devices as provided in the rules. By virtue of the house rules to which Larson
agreed, Larson himself consented to the house manager confiscating his property. By
giving the house manager authority to confiscate his electronic devices, Larson assumed
the risk that she would discover the child pornography on these devices and turn this
information over to the police. Here, Jacquez had the authority to turn over Larson’s
electronic devices to law enforcement.
¶24 Finally, Larson on appeal does not specifically distinguish the items taken by
Jacquez before and after police involvement. Larson does suggest the seizure was unlawful
because it “extend[ed] beyond” the items taken by Jacquez on her “own accord[.]”
Presumably, Larson is referring to the seizure of the two thumb drives, which Jacquez
confiscated after Deputy Criske-Hall asked her “to gather up all of [Larson’s] electronics.”
However, Larson did not make this argument before the District Court—either in his
motion to suppress, during the hearing, or in supplemental briefing the District Court
ordered. It is well-established that to properly preserve an issue or argument for appeal, a
party must raise it in the district court. State v. Rosling, 2008 MT 62, ¶ 76, 342 Mont. 1,
180 P.3d 1102. An issue or claim must be timely raised in the first instance in the trial
court because “it is fundamentally unfair to fault the trial court for failing to rule correctly
on an issue it was never given the opportunity to consider.” State v. West, 2008 MT 338,
14
¶ 16, 346 Mont. 244, 194 P.3d 683 (citations omitted). Accordingly, we decline to consider
whether Jacquez’s seizure of the thumb drives was unlawful.
CONCLUSION
¶25 The District Court did not err when it denied Larson’s Motion to Suppress. Jacquez
was acting as a private party when she confiscated, pursuant to rules of the group home,
Larson’s electronic devices containing pornography. Further, by virtue of the rules to
which Larson agreed, Larson consented to the group home manager confiscating his
electronic devices.
¶26 Affirmed.
/S/ LAURIE McKINNON
We Concur:
/S/ MIKE McGRATH
/S/ JAMES JEREMIAH SHEA
/S/ INGRID GUSTAFSON
/S/ JIM RICE
15 | 01-04-2023 | 11-09-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482643/ | Zi Kuo Zhang v Lau (2022 NY Slip Op 06287)
Zi Kuo Zhang v Lau
2022 NY Slip Op 06287
Decided on November 9, 2022
Appellate Division, Second Department
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and subject to revision before publication in the Official Reports.
Decided on November 9, 2022
SUPREME COURT OF THE STATE OF NEW YORK
Appellate Division, Second Judicial Department
ANGELA G. IANNACCI, J.P.
PAUL WOOTEN
DEBORAH A. DOWLING
LILLIAN WAN, JJ.
2019-09703
(Index No. 715727/18)
[*1]Zi Kuo Zhang, et al., respondents,
vJay Lau, et al., appellants, et al., defendants.
Winget, Spadafora & Schwartzberg, LLP, New York, NY (Anthony D. Green and Alexander A. Truitt of counsel), for appellants.
Xue & Associates, P.C., Glen Cove, NY (Benjamin B. Xue and Michael S. Romero of counsel), for respondents.
DECISION & ORDER
In an action, inter alia, to recover damages for legal malpractice and breach of fiduciary duty, the defendants Jay Lau and Lau & Associates, P.C., appeal from an order of the Supreme Court, Queens County (Leonard Livote, J.), entered July 12, 2019. The order denied those defendants' motion pursuant to CPLR 3211(a) to dismiss the complaint insofar as asserted against them.
ORDERED that the order is affirmed, with costs.
The plaintiffs commenced this action against the defendant Jay Lau and his law firm, the defendant Lau & Associates, P.C. (hereinafter together the Lau defendants), among others, asserting, as against the Lau defendants, causes of action to recover damages for legal malpractice and breach of fiduciary duty. The complaint alleged that the Lau defendants represented the plaintiffs in connection with the formation of Wong Real Estate Fund I, LLC (hereinafter WRE I), the receipt of investment funds to be held in escrow, and the disbursement of those funds.
According to the complaint, the purpose of WRE I was to purchase and develop certain property located on 41st Avenue in Flushing. However, the plaintiffs' funds held in the Lau defendants' escrow account were disbursed in connection with a different property, located on 77th Street in Elmhurst (hereinafter the 77th Street property), which was purchased by another client of the Lau defendants. The plaintiffs agreed to the disbursement but requested a security interest in the hotel on the 77th Street property. Neither WRE I nor the plaintiffs received any interest in the 77th Street property.
The Lau defendants moved pursuant to CPLR 3211(a) to dismiss the complaint insofar as asserted against them on the grounds, inter alia, that it failed to state a cause of action and that a defense was founded upon documentary evidence. The Supreme Court denied the motion, and the Lau defendants appeal.
The existence of an attorney-client relationship is an essential element of a cause of action to recover damages for legal malpractice (see Lindsay v Pasternack Tilker Ziegler Walsh [*2]Stanton & Romano LLP, 129 AD3d 790, 792). "An attorney-client relationship may exist in the absence of a retainer or fee" (Willoughby Rehabilitation & Health Care Ctr., LLC v Webster, 190 AD3d 887, 889). "In determining the existence of an attorney-client relationship, a court must look to the actions of the parties to ascertain the existence of such a relationship" (Wei Cheng Chang v Pi, 288 AD2d 378, 380). "[A] party's unilateral belief does not confer upon him or her the status of client. Rather, to establish an attorney-client relationship, there must be an explicit undertaking to perform a specific task" (Willoughby Rehabilitation & Health Care Ctr., LLC v Webster, 190 AD3d at 889; see Volpe v Canfield, 237 AD2d 282, 283).
Here, in an affidavit properly submitted to amplify the allegations in the complaint (see Leon v Martinez, 84 NY2d 83, 88), the plaintiff Jun Hong Zhang averred that Lau met with the individual plaintiffs to form WRE I and orally informed them that he was representing them, instructed them to wire funds to his escrow account, committed to certain conditions of disbursement of those funds, and advised that he would continue to represent them on matters related to the property to be acquired by WRE I. Contrary to the Lau defendants' contention, assuming these allegations to be true and affording the plaintiffs the benefit of every possible favorable inference (see J.P. Morgan Sec. Inc. v Vigilant Ins. Co., 21 NY3d 324, 334), they sufficiently alleged the existence of an attorney-client relationship (see Ripa v Petrosyants, 203 AD3d 770; Blank v Petrosyants, 203 AD3d 685; Mawere v Landau, 130 AD3d 986, 990).
Further, since legal malpractice actions are not subject to special pleading requirements, "a legal malpractice plaintiff need not, in order to assert a viable cause of action, specifically plead that the alleged malpractice fell within the agreed scope of the defendant's representation" (Shaya B. Pac., LLC v Wilson, Elser, Moskowitz, Edelman & Dicker, LLP, 38 AD3d 34, 39; see Fitzsimmons v Pryor Cashman LLP, 93 AD3d 497, 498). "Rather, a legal malpractice defendant seeking dismissal pursuant to CPLR 3211(a)(1) must tender documentary evidence conclusively establishing that the scope of its representation did not include matters relating to the alleged malpractice" (Shaya B. Pac., LLC v Wilson, Elser, Moskowitz, Edelman & Dicker, LLP, 38 AD3d at 39 [emphasis omitted]). Here, the Lau defendants failed to submit such documentary evidence.
Accordingly, the Supreme Court properly denied dismissal of the legal malpractice cause of action.
The Supreme Court also properly denied dismissal of the breach of fidiciary duty cause of action as duplicative of the legal malpractice cause of action. "An attorney holding funds in escrow owes a fiduciary duty to anyone with a beneficial interest in the trust" (Baquerizo v Monasterio, 90 AD3d 587, 587 [internal quotation marks omitted]; see Levit v Allstate Ins. Co., 308 AD2d 475, 477; Takayama v Schaefer, 240 AD2d 21, 25). An escrow agent has a duty not to deliver the escrow funds to anyone except upon strict compliance with the conditions imposed (see Sasidharan v Piverger, 145 AD3d 814, 815; Baquerizo v Monasterio, 90 AD3d at 587; Matter of Ginzburg, 89 AD3d 938, 941). Here, the complaint sufficiently pleaded the existence of an oral escrow agreement (see Gargano v Morey, 165 AD3d 889, 891), invoking fiduciary duties even in the absence of an attorney-client relationship. Therefore, as the court correctly determined, the breach of fiduciary duty cause of action was properly pleaded in the alternative, in the event that it is ultimately determined that no attorney-client relationship existed or that the Lau defendants' conduct related to the escrow funds was not within the scope of any such relationship.
Finally, contrary to the Lau defendants' contention, an exculpatory clause in the limited liability company agreement of WRE I did not conclusively establish a defense to the breach of fiduciary duty cause of action as a matter of law. Insofar as the exculpatory clause is applicable to the Lau defendants' actions taken in good faith as an escrow agent (cf. Baquerizo v Monasterio, 90 AD3d at 587), the complaint sufficiently alleges that the challenged disbursement was not made in good faith or was the result of the Lau defendants' gross negligence, and the documentary evidence did not conclusively defeat those allegations (see Elbayoumi v TD Bank, N.A., 185 AD3d 786, 789; Lenoci v Secure Alarm Installations, LLC, 97 AD3d 800, 801).
Accordingly, the Supreme Court properly denied the Lau defendants' motion pursuant to CPLR 3211(a) to dismiss the complaint insofar as asserted against them.
IANNACCI, J.P., WOOTEN, DOWLING and WAN, JJ., concur.
ENTER:
Maria T. Fasulo
Clerk of the Court | 01-04-2023 | 11-09-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482652/ | People v Yanez (2022 NY Slip Op 06273)
People v Yanez
2022 NY Slip Op 06273
Decided on November 9, 2022
Appellate Division, Second Department
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and subject to revision before publication in the Official Reports.
Decided on November 9, 2022
SUPREME COURT OF THE STATE OF NEW YORK
Appellate Division, Second Judicial Department
HECTOR D. LASALLE, P.J.
FRANCESCA E. CONNOLLY
ANGELA G. IANNACCI
PAUL WOOTEN, JJ.
2018-02867
(Ind. No. 1893/16)
[*1]The People of the State of New York, respondent,
vMarvin Yanez, appellant.
Marvin Yanez, Stormville, NY, appellant pro se.
Anne T. Donnelly, District Attorney, Mineola, NY (Tammy J. Smiley and Jason R. Richards of counsel), for respondent.
DECISION & ORDER
Application by the appellant for a writ of error coram nobis to vacate, on the ground of ineffective assistance of appellate counsel, a decision and order of this Court dated February 13, 2020 (People v Yanez, 180 AD3d 816), affirming a judgment of the Supreme Court, Nassau County, rendered January 25, 2018.
ORDERED that the application is denied.
The appellant has failed to establish that he was denied the effective assistance of appellate counsel (see Jones v Barnes, 463 US 745; People v Stultz, 2 NY3d 277).
LASALLE, P.J., CONNOLLY, IANNACCI and WOOTEN, JJ., concur.
ENTER:
Maria T. Fasulo
Clerk of the Court | 01-04-2023 | 11-09-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482633/ | USCA4 Appeal: 21-1689 Doc: 26 Filed: 11/08/2022 Pg: 1 of 2
UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 21-1689
FAUSTINO PEREZ-CRUZ,
Petitioner,
v.
MERRICK B. GARLAND, Attorney General,
Respondent.
On Petition for Review of an Order of the Board of Immigration Appeals.
Submitted: October 31, 2022 Decided: November 8, 2022
Before THACKER and HARRIS, Circuit Judges, and FLOYD, Senior Circuit Judge.
Petition denied by unpublished per curiam opinion.
ON BRIEF: Arnedo S. Valera, LAW OFFICES OF VALERA & ASSOCIATES P.C.,
Fairfax, Virginia, for Petitioner. Brian M. Boynton, Acting Assistant Attorney General,
Jennifer P. Levings, Assistant Director, James A. Hurley, Office of Immigration Litigation,
Civil Division, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C, for
Respondent.
Unpublished opinions are not binding precedent in this circuit.
USCA4 Appeal: 21-1689 Doc: 26 Filed: 11/08/2022 Pg: 2 of 2
PER CURIAM:
Faustino Perez-Cruz, a native and citizen of Mexico, petitions for review of an order
of the Board of Immigration Appeals (Board) dismissing his appeal from the Immigration
Judge’s denial of his applications for withholding of removal and protection under the
Convention Against Torture. We have thoroughly reviewed the record, including the
transcript of Perez-Cruz’s merits hearing and all supporting evidence. We conclude that
the record evidence does not compel a ruling contrary to any of the agency’s factual
findings, see 8 U.S.C. § 1252(b)(4)(B), and that substantial evidence supports the Board’s
decision, see Gomis v. Holder, 571 F.3d 353, 359 (4th Cir. 2009); Dankam v. Gonzales,
495 F.3d 113, 124 (4th Cir. 2007).
Accordingly, we deny the petition for review for the reasons stated by the Board.
See In re Perez-Cruz (B.I.A. May 20, 2021). We dispense with oral argument because the
facts and legal contentions are adequately presented in the materials before this court and
argument would not aid the decisional process.
PETITION DENIED
2 | 01-04-2023 | 11-09-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8488879/ | ORDER DENYING CONFIRMATION
R. J. SIDMAN, Bankruptcy Judge.
This matter is before the Court with respect to a second amended Chapter 13 plan now jointly proposed by Earl E. Brooks and Bernadine L. Brooks, husband and wife. This second amended plan was tendered in response to this Court’s order dated December 14, 1979 denying confirmation of a previously proposed Chapter 13 plan. The terms of this second amended plan call for the payment of $181.00 every week to the Chapter 13 trustee for the first forty (40) weeks of the plan then $150.00 a week for the remaining one hundred and sixteen (116) weeks of the plan, payment of priority claims and costs of administration in full, payment of secured claims in full, and the payment of a 10% dividend to unsecured creditors. Outside the terms of the plan the debtors propose to pay New Albany Federal Savings and Loan Association, Public Finance Company, both mortgagees on real estate owned by these debtors, Huntington National Bank on a 1973 Dodge automobile and a 1975 Vega Camper, and General Motors Acceptance Corporation on a 1977 Chevrolet wagon.
The Court hereby reaffirms its findings of fact contained in its December 14, 1979 order and supplements those findings with the following. Listed unsecured obligations on the schedule of Earl E. Brooks total $115,151.35. By far the largest such claim is that of Borg-Warner Corporation which is listed as being owed in the amount of $97,156.52. Borg-Warner has filed a claim in the actual amount of $96,711.32. GMAC has already been found to be an úndersecured claimant on a 1979 pick-up truck with the value of its secured claim set at $5,000.00 and its unsecured claim set at $2,675.36. Other noncontingent debt listed as owing by Earl E. Brooks are Self-Adhering Products for $800.97 and Dunn and Bradstreet for $758.80. Total unsecured obligations of Earl E. Brooks are over $100,-000. The clear provisions of § 109 of the Bankruptcy Code indicate that an individual with regular income can qualify as a Chapter 13 debtor only if, on the date of the filing of the petition, he owes noncontin-gent unsecured debts of less than $100,000. Earl E. Brooks does not qualify under the express statutory standard set forth in the Bankruptcy Code, and that failure bars confirmation of the jointly proposed plan.
Further, there is the matter of the objections to confirmation filed by Robertson Heating Supply Co. and Borg-Warner Corporation. These objections have not been withdrawn in writing, although the objections were to the originally proposed Chapter 13 plan, and not to the plan in its present form. Both objections speak to the “best interest” test set forth in § 1325(a)(4) of the Bankruptcy Code.
Other aspects of this plan trouble the Court, even if the debtors could be considered as qualified debtors under Chapter 13. The schedules filed in this case list the ownership of ten motor vehicles by these debtors some of which are indicated to have only “junk value” but many of which have substantial value. The plans proposed by these debtors have never indicated anything other than retention of all these vehicles by these debtors. No need has been shown to this Court for the retention of these numerous motor vehicles, especially in light of the rather minimal dividend being offered to creditors in these cases. The debtors also propose to keep both parcels of real estate which they own and which carry a monthly payment obligation exceeding $880.00. While these factors alone may not be violative of the confirmation standards sets forth in § 1325 of the Bankruptcy Code, they do establish a reason for inquiry into the nature of this Chapter 13 plan and its effect upon creditors.
Based upon the foregoing findings, the Court hereby determines that confirmation of the second amended Chapter 13 plan filed herein should be, and the same is hereby, denied.
IT IS SO ORDERED. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8488880/ | MEMORANDUM DECISION AND CONCLUSIONS OF LAW
M. S. YOUNG, Bankruptcy Judge.
This matter is before the Court upon trustee’s complaint seeking permission to sell a motor vehicle purchased from the defendant by debtor at auction, free and clear of any claimed lien of defendant. The parties stipulated the facts as follows:
“1. That on April 4, 1979, Idaho Auto Auction entered into a contract to sell a 1969 Cadillac to Larry Shoemaker, at Boise, Idaho, wherein the parties agreed that title was retained in the seller until buyer paid the purchase price and buyer’s draft was honored (Exhibit “A”).
2. Pursuant to said contract to sell, Idaho Auto Auction retained the title to said vehicle (Exhibit “B”) and forwarded title and a sight draft signed by Larry Shoemaker (Exhibit “C”) to the Orchards Branch, Bank of Idaho, Lewiston, Idaho, with instructions that upon payment of said sight draft title was to be delivered and pass to Larry Shoemaker.
3. Larry Shoemaker took possession of the Cadillac pursuant to the contract to sell on April 4, 1979.
4. The sight draft was presented and dishonored on or about the 7th day of April, *5061979, and demand was then made by Idaho Auto Auction to Larry Shoemaker for the return of possession of the said vehicle.
5. Larry Shoemaker voluntarily went bankrupt on the 10th day of July, 1979.”
Trustee contends that under Section 28-2-401 Idaho Code, the defendant as a result of the transaction in question only retained a security interest in the vehicle which it failed to perfect against trustee in his position as a hypothetical lien creditor by reason of Section 70c of the Act. Defendant relies upon the Idaho Motor Vehicle Title Act Section 49-404, to assert that debtor did not receive title.
After an examination of the stipulated facts and further examination of the law I conclude that this case is controlled by Section 28-2-511 Idaho Code, which reads as follows:
“Tender of payment by buyer — Payment by check.—
(1) Unless otherwise agreed tender of payment is a condition to the seller’s duty to tender and complete any delivery.
(2) Tender of payment is sufficient when made by any means or in any manner current in the ordinary course of business unless the seller demands payment in legal tender and gives any extension of time reasonably necessary to procure it.
(3) Subject to the provisions of this act on the effect of an instrument on an obligation (section 28-3-802), payment by check is conditional and is defeated as between the parties by dishonor of the check on due presentment. [1967, ch. 161, § 2-511, p. 351.]”
Because a sight draft is equivalent to a check and because I am of the opinion that the sale in question is a cash sale instead of a credit sale, this section applies. It is generally construed by the authorities to be related to section 28-2-702 which allows an unpaid seller ten days within which to reclaim goods on demand after receipt, if the buyer is insolvent.
In the case at bar, the seller, according to the stipulation, did make demand for return of the goods within the ten day period after transfer of possession and after dishonor of the debtor’s sight draft. This is all that is necessary even though debtor herein apparently remained in possession of the motor vehicle for almost three months before he became a bankrupt. See Metropolitan Distributors v. Eastern Supply Co., 1 UCC Reporting Service 154. 21 Pa.D. & C.2d 128, 107 Pitts.Leg.J. 451.
In reaching this conclusion I realize that I have discussed a theory which was not briefed by counsel for the parties. If either party wishes to comment upon this ruling or submit further authorities thereon, I will give them ten days from the date hereof within which to do so. If no request is made for further consideration, I will enter an order directing trustee to turn over the motor vehicle in question, or its proceeds if it has been sold, to the defendant herein, less any costs of sale incurred by trustee. Counsel for defendant is requested to prepare a Judgment in accord with this decision at the end of ten days unless this matter is reconsidered at the request of either party. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8488881/ | FINDINGS AND CONCLUSIONS
THOMAS C. BRITTON, Bankruptcy Judge.
This amended adversary complaint seeks a modification of the automatic stay and a determination of non-dischargeability under 11 U.S.C. § 523(a)(4). (C.P. No. 6) The debtor has answered. (C.P. No. 8) The matter was tried before me on April 3, 1980. This order is a memorandum of decision under B.R. 752(a).
The facts are not disputed. The debtor was vice-president of an insurance company which is in receivership under the auspices of the Florida Department of Insurance. Plaintiff is the surety on a fidelity bond covering the employees of the insurance company, including the debtor. The Department of Insurance has recently filed suit against the plaintiff surety alleging that three officers of the insurance company, including the debtor, diverted and converted premium funds to their own purposes in an amount in excess of the plaintiff’s surety bond, $500,000. Recovery is sought from the plaintiff. The matter was removed to the District Court for the Northern District of Florida. Plaintiff has answered, denying liability, and has filed a third party complaint against each of the three officers, including the debtor, for indemnity for any loss adjudicated against it on account of the officers’ acts. It is estimated that this litigation will require at least a year in the District Court and may take much longer.
Plaintiff seeks leave, under 11 U.S.C. § 362(d)(1) and Interim Rule 4001, to proceed on its third party complaint against the debtor.
Plaintiff also seeks a declaration now that any money judgment it may receive on the third party complaint against the debt- or would be a non-dischargeable debt. This request is prompted, of course, by the fact that its claim against the debtor will be discharged in this bankruptcy unless the plaintiff acts now. 11 U.S.C. § 523(c). Interim Rule 4003 establishes a short interval for the plaintiff to seek such a determination. If it should wait until its liability, if any, is fixed, its claim against the debtor would have been discharged and the time for it to seek a determination of non-dis-chargeability would have long since expired.
It is plaintiff’s contention, and I agree, that there is no way that plaintiff could obtain a judgment against the debtor on its third party complaint without that judgment being res judicata as to all the issues necessary to make that claim non-dis-*508chargeable under 11 U.S.C. § 523(a)(4). That provision makes non-dischargeable any debt:
“ . . . for fraud or defalcation while acting in a fiduciary capacity, embezzlement, or larceny; . . . ”
Collier on Bankruptcy (15th ed.) ¶ 523.14.
The debtor argues that I should force the surety to litigate its claim against the debt- or now and thus concede its liability to the Department of Insurance. Alternatively, it suggests that I exercise this court’s discretionary jurisdiction under 28 U.S.C. § 1471 to transfer to this court the litigation now pending in the District Court, at least insofar as it relates to the debtor. The latter suggestion would have the tail wagging the dog and I elect to leave to litigation in the completely appropriate forum the parties have already selected. The debtor’s first suggestion is plainly inequitable and cannot be accepted, if there be any alternative.
The parties have located only one other case presenting a similar dilemma, In re Lebow, S.D.N.Y.1975, 397 F.Supp. 487, where former Bankruptcy Judge Herzog elected to continue indefinitely the trial of the complaint to determine dischargeability until the contingent liability was resolved in a pending State court action. His decision was affirmed in the District Court. The decision appears eminently sound.
That case, however, differed from ours in that the claimant there could recover judgment without necessarily adjudicating all issues essential to non-dischargeability. In our case, there is no need to defer a decision here, unless this court lacks the power to enter a declaratory judgment. I believe that 11 U.S.C. § 105(a) gives that option. Although the debtor suggests otherwise, the issue before me seems clearly suitable for declaratory determination even though there are obvious future contingencies that will determine whether the controversy between the surety and the debtor become real. 10 Wright & Miller, Federal Practice and Procedure: Civil § 2757 at page 759.
It follows that plaintiff is entitled to a judgment modifying the automatic stay to permit it to proceed to judgment on its pending third party complaint against the debtor and that any judgment it obtains will be, a fortiori, non-dischargeable under 11 U.S.C. § 523(a)(4). This court will retain jurisdiction only to clarify that judgment on either party’s motion, in the event that presently unforeseen developments in that litigation make this court’s declaration of non-dischargeability uncertain in its application.
As is required by B.R. 921(a) a separate judgment' will be entered in accordance with this order. Costs will be taxed on motion. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8488882/ | JUDGMENT ENTRY
RICHARD L. SPEER, Bankruptcy Judge.
This cause came on for trial on Complaint of Verlin D. Barth For Relief From Stay Of Execution. Present at the trial were Attorneys Jack H. Palmer, Erwin Clemens, William Scott O’Brien, and Kenneth L. Lather.
After testimony and exhibits were introduced, the Court makes the following findings of fact:
1. Plaintiff, Verlin D. Barth, is a Guarantor of certain obligations of Macare to Commercial Bank and Savings Company, Fostoria, Ohio, upon which is owed approximately Two Hundred Fifteen Thousand Dollars ($215,000.00). The Bank has begun foreclosure action upon Mr. Barth’s real estate to satisfy this obligation which has not been paid since September 1, 1979.
2. Mr. Barth is the alleged owner of the Coreco furnace used to melt materials for the extraction of aluminum. The Debtor-in-Possession alleges that Mr. Barth is only the security interest owner. Regardless of his interests in the furnace, Mr. Barth has obtained a loan on this furnace from the Commercial Bank and Savings Company.
8. The amount due the Commercial Bank on the loan for the furnace is approximately Eighty-Five Thousand Dollars ($85,000.00).
4. The total due the Commercial Bank for which Mr. Barth is either initially or ultimately responsible approximates Three Hundred Thousand Dollars ($300,-000.00).
5. Testimony from the Bank officers, while not experts, was not controverted, indicated that the land, building, and the furnace approximated between One Hundred to One Hundred Ten Thousand Dol*521lars in value. Plaintiff maintains that Mr. Barth is not being adequately protected by the continuance of the stay in this case, as Mr. Barth is having other of his property foreclosed upon to satisfy the requirement of the Bank for payment in full. While the Debtor-in-Possession has offered a payment schedule until confirmation of the plan, Mr. Barth and the Commercial Bank have refused to accept this schedule in light of the Bank’s demand for full payment immediately.
The legislative history of Section 361 of the Bankruptcy Code indicates “The interests of which the court may provide protection in the ways described in this section include equitable as well as legal interests.”
While it would appear upon its face that the payments offered by the Debtor-in-Possession exceed the monthly payments required on all the mortgages involving Ma-care, the Court feels that equitable interpretation of adequate protection would require that a creditor of the debtor-in-possession be not placed in a position whereby other property held by the creditor would be levied upon to satisfy a creditor’s guarantee of payment by the debtor-in-possession. The Bankruptcy Code does not require that a creditor take such payments that will ultimately result in a loss of other assets due to its having guaranteed a loan of a debtor-in-possession.
Accordingly, the Court finds that the value of the property is greatly inadequate to satisfy the obligations of creditors, Barth and the Commercial Bank, and that as such, to continue the stay against Mr. Barth would be a denial of adequate protection of his interests.
Therefore it is ORDERED, ADJUDGED and DECREED that the Complaint of the Plaintiff be, and it hereby is, granted and that the stay be lifted as to the Coreco furnace. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482716/ | IN THE SUPREME COURT OF PENNSYLVANIA
In the Matter of : No. 2909 Disciplinary Docket No. 3
:
CLARISSA THOMAS A/K/A CLARISSA : No. 112 DB 2022
THOMAS EDWARDS A/K/A CLARISSA :
T. EDWARDS : (District of Columbia Court of Appeals,
: No. 19-BG-659)
:
: Attorney Registration No. 58582
:
: (Out of State)
ORDER
PER CURIAM
AND NOW, this 8th day of November, 2022, having failed to respond to a Notice
and Order directing her to provide reasons against the imposition of reciprocal discipline,
Clarissa Thomas, a/k/a Clarissa Thomas Edwards, a/k/a Clarissa T. Edwards, is
suspended from the practice of law in the Commonwealth of Pennsylvania for a period of
two years. She shall also comply with all the provisions of Pa.R.D.E. 217. | 01-04-2023 | 11-09-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482645/ | Wilcox Dev. Corp. v Thyssenkrupp El. Corp. (2022 NY Slip Op 06285)
Wilcox Dev. Corp. v Thyssenkrupp El. Corp.
2022 NY Slip Op 06285
Decided on November 9, 2022
Appellate Division, Second Department
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and subject to revision before publication in the Official Reports.
Decided on November 9, 2022
SUPREME COURT OF THE STATE OF NEW YORK
Appellate Division, Second Judicial Department
BETSY BARROS, J.P.
JOSEPH A. ZAYAS
WILLIAM G. FORD
JANICE A. TAYLOR, JJ.
2021-03707
(Index No. 504889/19)
[*1]Wilcox Development Corp., appellant,
vThyssenkrupp Elevator Corporation, respondent.
Gartner + Bloom, P.C., New York, NY (Narriman Subrati of counsel), for appellant.
Kaufman Dolowich Voluck, LLP, White Plains, NY (Melissa C. Cartaya of counsel), for respondent.
DECISION & ORDER
In an action, inter alia, for contractual and common-law indemnification, the plaintiff appeals from an order of the Supreme Court, Kings County (Francois A. Rivera, J.), dated February 4, 2021. The order denied the plaintiff's motion to vacate so much of a prior order of the same court dated August 9, 2019, as stayed all proceedings in this action pending determination of an action entitled Caracciolo v SHS Ralph, LLC, pending in the Supreme Court, Kings County, under Index No. 512132/16.
ORDERED that the order dated February 4, 2021, is affirmed, with costs.
Under the circumstances of this case, and in light of the goals of avoiding inconsistent adjudications and preserving judicial resources, the Supreme Court providently exercised its discretion in denying the plaintiff's motion to vacate so much of a prior order of the same court dated August 9, 2019, as stayed all proceedings in this action pending determination of an action entitled Caracciolo v SHS Ralph, LLC, pending in the Supreme Court, Kings County, under Index No. 512132/16 (see CPLR 2201; Matter of Hersh, 198 AD3d 773, 775; Chaplin v National Grid, 171 AD3d 691, 692; HSBC Bank, USA v Despot, 130 AD3d 783, 784; Morreale v Morreale, 84 AD3d 1187, 1188).
BARROS, J.P., ZAYAS, FORD and TAYLOR, JJ., concur.
ENTER:
Maria T. Fasulo
Clerk of the Court | 01-04-2023 | 11-09-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482674/ | People v Bagley (2022 NY Slip Op 06255)
People v Bagley
2022 NY Slip Op 06255
Decided on November 9, 2022
Appellate Division, Second Department
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and subject to revision before publication in the Official Reports.
Decided on November 9, 2022
SUPREME COURT OF THE STATE OF NEW YORK
Appellate Division, Second Judicial Department
MARK C. DILLON, J.P.
LINDA CHRISTOPHER
LARA J. GENOVESI
HELEN VOUTSINAS, JJ.
2019-13043
[*1]The People of the State of New York, respondent,
vMichael Bagley, appellant. (S.C.I. No. 90211/19)
Patricia Pazner, New York, NY (Lynn W. L. Fahey of counsel), for appellant.
Michael E. McMahon, District Attorney, Staten Island, NY (Morrie I. Kleinbart and George D. Adames of counsel), for respondent.
DECISION & ORDER
Appeal by the defendant from a judgment of the Supreme Court, Richmond County (Marina Cora Mundy, J.), rendered October 16, 2019, convicting him of criminal possession of stolen property in the fourth degree and intimidating a victim or witness in the third degree, upon his plea of guilty, and imposing sentence. Assigned counsel has submitted a brief in accordance with Anders v California (386 US 738), in which she moves for leave to withdraw as counsel for the appellant.
ORDERED that the judgment is affirmed.
We are satisfied with the sufficiency of the brief filed by the defendant's assigned counsel pursuant to Anders v California (386 US 738), and, upon an independent review of the record, we conclude that there are no nonfrivolous issues which could be raised on appeal. Counsel's application for leave to withdraw as counsel is, therefore, granted (see id.; People v Paige, 54 AD2d 631; Matter of Giovanni S. [Jasmin A.], 89 AD3d 252; cf. People v Gonzalez, 47 NY2d 606).
DILLON, J.P., CHRISTOPHER, GENOVESI and VOUTSINAS, JJ., concur.
ENTER:
Maria T. Fasulo
Clerk of the Court | 01-04-2023 | 11-09-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482719/ | IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN RE P3 HEALTH GROUP ) Consol. C.A. No. 2021-0518-JTL
HOLDINGS, LLC )
ORDER GRANTING IN PART AND DENYING IN PART THE OFFICER
DEFENDANTS’ MOTION TO DISMISS COUNTS IX AND X
1. Hudson Vegas Investment SPV, LLC (“Hudson”) was a minority investor in
P3 Health Group Holdings, LLC (the “Company”). In this litigation, Hudson has asserted
various claims based on a transaction between the Company and a special purpose
acquisition company, commonly known as a SPAC.
2. The defendants filed a surfeit of motions to dismiss on various grounds,
including Rule 12(b)(6). The court has issued a decision addressing the breach of contract
claims that Hudson asserted. Dkt. 172 (the “Contract Opinion,” cited as “Op.”). This order
incorporates that decision by reference.
3. In Counts IX and X of its complaint, Hudson has asserted a claim for breach
of fiduciary duty against Kazarian, Abdou, Bacchus, Glisson, and Puathasnanon, in their
capacity as officers (the “Officer Defendants”), based on their conduct in connection with
the de-SPAC merger. Counts IX and X do not address Kazarian’s acceptance of the
opportunity to invest in Foresight II, which is the subject of Count VII. See Dkt. 175.
4. The LLC Agreement expressly preserves the fiduciary duties of the
Company’s officers. Ex. 1 § 5.6(d). The operative language states: “The Officers, in the
performance of their duties as such, shall owe to the Company and the Members duties of
the type owed by the officers of a corporation to such corporation and its stockholders
under the laws of the State of Delaware.” Id.
5. It is reasonably conceivable that the Officer Defendants breached their duty
of loyalty and acted in bad faith by withholding information from Hudson, providing
different sets of information to different members of the Board, and excluding the Hudson
Managers from the governance process.
a. The Delaware Supreme Court has held that corporate officers owe the
same fiduciary duties as corporate directors. See Gantler v. Stephens, 965 A.2d 695, 708–
09 (Del. 2009). Directors of a Delaware corporation owe two fiduciary duties—loyalty and
care. Stone ex rel. AmSouth Bancorporation v. Ritter, 911 A.2d 362, 370 (Del. 2006). At a
minimum, officers owe those duties. Gantler, 965 A.2d at 708–09.
b. The duty of loyalty includes a requirement to act in good faith, which
is “a subsidiary element, i.e., a condition, of the fundamental duty of loyalty.” Stone, 911
A.2d at 370 (cleaned up). “A failure to act in good faith may be shown, for instance, where
the fiduciary intentionally acts with a purpose other than that of advancing the best interests
of the corporation.” In re Walt Disney Co. Deriv. Litig. (Disney II), 906 A.2d 27, 67 (Del.
2006) (cleaned up).
c. Like directors, officers must “place the interests of the corporation and
shareholders that they serve before their own.” TVI Corp. v. Gallagher, 2013 WL 5809271,
at *25 (Del. Ch. Oct. 28, 2013). And like directors, officers have a duty to act “loyally by
trying to do their job for proper corporate purposes in good faith,” rather than disloyally by
in bad faith putting other interests, such as the self-interest of a superior, ahead of the
-2-
corporation’s best interest. Hampshire Gp., Ltd. v. Kuttner, 2010 WL 2739995, at *12 (Del.
Ch. July 12, 2010).
d. An officer’s duty of loyalty, however, has additional dimensions
beyond the directors’ duty of loyalty because officers act as agents for the entity. See
Lebanon Cnty. Empls.’ Ret. Fund v. AmerisourceBergen Corp., 2020 WL 132752, at *21
(Del. Ch. Jan. 13, 2020) (“Officers also are fiduciaries in their capacities as agents who
report to the board of directors.”), aff’d, 243 A.3d 417 (Del. 2020). “Under a particularly
well-developed body of fiduciary law, agents owe additional and more concrete duties to
their principal.” Metro Storage Int’l LLC v. Harron, 275 A.3d 810, 843–44 (Del. Ch. 2022).
e. “An agent owes the principal a duty to provide information to the
principal that the agent knows or has reason to know the principal would wish to have.”
Restatement (Third) of Agency § 1.01 (Am. L. Inst. 2006), Westlaw, (database updated
Oct. 2022). “That duty exists because a principal’s decisions may also be affected by
information about an agent and the agent’s conduct once the agent has been retained by the
principal.” Metro Storage, 275 A.3d at 851 (cleaned up). Officers, as agents, “owe a duty
to disclose relevant information if they have notice of facts which they should know may
affect the decisions of their principals as to their conduct.” Triton Constr. Co., Inc. v. E.
Shore Elec. Servs., Inc., 2009 WL 1387115, at *14 (Del. Ch. May 18, 2009), aff’d, 2010
WL 376924 (Del. Jan. 14, 2010) (ORDER). An officer of a Delaware entity has “the
responsibility to disclose to their superior officer or principal material information relevant
to the affairs of the agency entrusted to them.” Hampshire Gp., 2010 WL 2739995, at *13
(internal quotations omitted).
-3-
6. Hudson alleges that the Officer Defendants engaged in a knowing,
affirmative, and systematic campaign to sideline the Hudson Managers, exclude them from
communications, deprive them of information, and prevent them from participating in the
governance of the Company. As detailed in the Contract Opinion, the level of exclusion
was extreme and supports an inference of intentional breach. Op. at 70. Hudson has stated
a claim against the Officer Defendants for breach of fiduciary duty based on the exclusion
of the Hudson Managers.
7. Hudson also alleges that the Officer Defendants breached their fiduciary duty
by “failing to engage in an adequate auction or sales process.” AC ¶ 158. That
responsibility rested with the Board. It is possible to imagine situations in which officers
might have an obligation to undertake an adequate auction or sales process and fail to fulfill
it, but Hudson has not articulated a cognizable factual account that could support a claim
on which relief can be granted.
8. Hudson similarly alleges that the Officer Defendants breached their fiduciary
duty by “taking on expensive debt for P3 rather than permitting Hudson to fund a capital
raise.” Id. And Hudson alleges that the Officer Defendants breached their fiduciary duty
by “using P3’s resources to advance their own interests to the detriment of P3 and other
members of the Board.” Id. Both of those allegations sound bad, but I do not know what
Hudson is talking about. Once again, Hudson has not articulated a cognizable factual
account that could support claims on which relief can be granted.
-4-
9. Counts IX and X state claims on which relief can be granted, but only to the
extent acknowledged in this order. The motion to dismiss those counts is GRANTED IN
PART and DENIED IN PART in accordance with the rulings herein.
/s/ J. Travis Laster
Vice Chancellor Laster
November 7, 2022
-5- | 01-04-2023 | 11-09-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482720/ | IN THE COURT OF APPEALS OF THE STATE OF IDAHO
Docket No. 48833
STATE OF IDAHO, )
) Opinion Filed: November 9, 2022
Plaintiff-Respondent, )
) Melanie Gagnepain, Clerk
v. )
)
WILLIAM NORWOOD PARSONS, )
)
Defendant-Appellant. )
)
Appeal from the District Court of the Fourth Judicial District, State of Idaho, Ada
County. Hon. Samuel Hoagland, District Judge.
Judgment of conviction for three counts of lewd conduct with a minor under sixteen
and one count of disseminating material harmful to minors, affirmed.
Eric D. Fredericksen, State Appellate Public Defender; Elizabeth A. Allred, Deputy
Appellate Public Defender, Boise, for appellant. Elizabeth A. Allred argued.
Hon. Lawrence G. Wasden, Attorney General; Mark W. Olson, Deputy Attorney
General, Boise, for respondent. Mark W. Olson argued.
________________________________________________
HUSKEY, Judge
William Norwood Parsons appeals from his judgment of conviction for three felony counts
of lewd conduct with a minor under sixteen, Idaho Code § 18-1508, and one misdemeanor count
of disseminating material harmful to minors, I.C. § 18-1515. Parsons contends the district court
violated his Sixth Amendment rights under the Confrontation Clause by admitting video
recordings of the victim’s St. Luke’s Children at Risk Evaluation Services (CARES) interviews
when the victim did not testify at trial. Parsons also asserts the district court abused its discretion
by denying his motion for a continuance and by allowing hearsay testimony from the victim’s
mother. Finally, Parsons alleges that even if the errors were individually harmless, they amounted
to cumulative error. For the reasons set forth below, we affirm.
1
I.
FACTUAL AND PROCEDURAL BACKGROUND
K.B., who was five years old, disclosed to her mother that Parsons had sexually abused
her. The same day, K.B.’s mother took her to the emergency room and reported the disclosures to
hospital staff and law enforcement. On October 2, 2019, K.B. participated in an interview through
CARES; the interview was conducted by a licensed master social worker and forensic interviewer.
During the interview, K.B. disclosed multiple acts of sexual abuse Parsons committed against her.
Following the interview, K.B. underwent a psychological assessment and a physical examination.
A grand jury indicted Parsons on three counts of lewd conduct with a minor under sixteen
and one count of disseminating material harmful to minors. A week after the grand jury indictment
was filed, K.B. disclosed additional abuse to her mother, who immediately reported the disclosure
to law enforcement. Thereafter, on January 9, 2020, K.B. participated in a second CARES
interview.
The State filed a notice of intent to introduce a recording from the first CARES interview
at trial. The State argued the video was admissible pursuant to Idaho Rule of Evidence 803(4) as
a statement made for medical diagnosis or treatment, as well as I.R.E. 803(24), in the event K.B.
had difficulty remembering the incidents at issue or had difficulty while testifying. The State
indicated it anticipated K.B. would testify at trial but even if she was unable to testify, the Sixth
Amendment’s Confrontation Clause did not bar the admission of the video. Parsons filed an
objection, arguing that while he did not object to the admission of the CARES video to supplement
K.B.’s testimony, admitting the video if K.B. did not testify would violate Parsons’ right to
confront and cross-examine his accuser.
The parties agreed to submit the issue on the briefing, and the district court issued a
memorandum order overruling Parsons’ objection, finding that the purpose of the CARES
interview was not to establish or prove past events that were potentially relevant to a criminal
prosecution, but rather to provide medical care to K.B. Accordingly, the district court concluded
that K.B.’s statements made during the course of the CARES interview were non-testimonial and,
thus, did not violate Parsons’ rights under the Confrontation Clause. The district court also noted
that should Parsons have objections to specific portions of the CARES interview or record, he
should raise those objections at trial.
2
On February 25, 2021, the parties were informed that trial would commence on March 8
or March 9. That same day, Parsons’ counsel moved to continue the trial to investigate a claim
made by Parsons that K.B.’s father was “possibly a convicted juvenile sex offender.” In the
motion, counsel indicated that Parsons claimed to have disclosed this information early in the case
but counsel did not recall learning of the allegation until February 25, 2021. At the hearing on the
motion to continue, Parsons’ counsel acknowledged that he did not have any evidence in support
of the motion and stated, “I don’t even know for a fact that there’s anything that will come of this.”
The district court denied the motion, and the case proceeded to trial.
At trial, both the social worker who conducted both CARES interviews and K.B.’s mother
testified about K.B.’s disclosures; K.B. did not testify. Both of K.B.’s CARES interviews were
admitted without further objection and played for the jury. The jury found Parsons guilty of three
counts of lewd conduct with a minor under sixteen and one count of disseminating material
harmful to minors. Parsons timely appealed.
II.
ANALYSIS
Parsons asserts multiple errors on appeal. First, Parsons contends the district court violated
his Sixth Amendment right to confront the witnesses against him by admitting K.B.’s CARES
interviews when K.B. did not testify at trial. Second, Parsons asserts the district court abused its
discretion when it denied his motion to continue the jury trial. Third, Parsons asserts the district
court abused its discretion by allowing hearsay testimony from K.B.’s mother. Fourth, Parsons
contends that even if the above errors are individually harmless, they amount to cumulative error.
Parsons has failed to show the district court erred.
A. Admission of the CARES Interviews Did Not Violate the Confrontation Clause
Parsons asserts that K.B.’s CARES interviews were testimonial and, therefore, admitting
the videos of the interviews at trial when K.B. did not testify violated his Sixth Amendment right
to cross-examine his accuser. The State asserts K.B.’s interview statements were not testimonial
in nature and, thus, playing the video for the jury did not implicate the Sixth Amendment’s
Confrontation Clause.
The Confrontation Clause gives a criminal defendant the right to be confronted with the
witnesses against him or her. U.S. CONST. amend. VI; Crawford v. Washington, 541 U.S. 36, 42
(2004). The Confrontation Clause bars the admission of testimonial hearsay statements of a
3
witness unless the declarant is unavailable and the defendant has had a prior opportunity to cross-
examine the declarant. State v. Stanfield, 158 Idaho 327, 332, 347 P.3d 175, 180 (2015). The
Confrontation Clause “applies to ‘witnesses’ against the accused--in other words, those who ‘bear
testimony.’” Crawford, 541 U.S. at 51. Thus, “a statement cannot fall within the Confrontation
Clause unless its primary purpose was testimonial.” Ohio v. Clark, 576 U.S. 237, 245 (2015).
“Testimony” is “[a] solemn declaration or affirmation made for the purpose of establishing or
proving some fact.” Crawford, 541 U.S. at 51. Some statements fall within the “core class of
‘testimonial’ statements.” Included within that core class are: ex parte in-court testimony or its
functional equivalent, extrajudicial statements in formalized testimonial materials, or “statements
that were made under circumstances which would lead an objective witness reasonably to believe
that the statement would be available for use at a later trial.” Id. at 51-52.1
For statements that do not fit within a core class of testimonial statements, the United States
Supreme Court has adopted the “primary purpose” test to determine whether a statement is
testimonial. Clark, 576 U.S. at 243-44. Statements are testimonial when the circumstances
objectively indicate that the primary purpose of the interview is to establish or prove past events
potentially relevant to later criminal prosecution. Id. at 244. Pursuant to Clark, the question is
whether, in light of all the circumstances, viewed objectively, the primary purpose of the
conversation was to create an out-of-court substitute for trial testimony. Id. at 245.
Although he did not object to the admission of the second CARES interview at any point
prior to or during trial, on appeal, Parsons challenges the admission of both interviews. Generally,
issues not raised below may not be considered for the first time on appeal. State v. Fodge, 121
Idaho 192, 195, 824 P.2d 123, 126 (1992).
The State’s notice of intent to introduce the CARES video indicated that the State intended
to introduce only the first CARES interview. Similarly, Parsons’ pretrial objection to the State’s
use of the CARES interview referenced only the first CARES interview. At trial, Parsons did not
object when the State sought to introduce the second CARES interview:
STATE: I’ll hand you what’s been premarked as State’s Exhibit Eight. Do you
recognize State’s Eight?
WITNESS: Yes.
1
As noted in Clark and Crawford, we recognize that in-court testimony is “testimonial.”
While the Confrontation Clause may not exclude such testimony because of a prior opportunity to
cross-examine, such statements are still “testimonial.”
4
STATE: What is that?
WITNESS: This is [K.B.’s] second interview.
STATE: And that’s from January 9th of 2020?
WITNESS: Yes.
....
STATE: State moves to admit and publish State’s Exhibit Eight.
COURT: Any objection?
DEFENSE: No objection.
COURT: Without objection, then Exhibit Eight will be admitted and may be
published at your convenience.
During oral argument before this Court, Parsons acknowledged that he did not object to
the admission of the second CARES interview at trial, but Parsons argues the admissibility of the
second CARES video was addressed by the district court and, thus, the issue is preserved for
appeal. Parsons asserts the district court’s order denying Parsons’ pretrial objection to the
admission of the first CARES interview used the term “interviews” and that the use of the term
“interviews” referred to both the first and second CARES interviews. Thus, Parsons argues, the
district court implicitly ruled on the admissibility of both CARES interviews and, therefore, there
was no need to separately object to the admission of the second CARES interview at trial to
preserve the issue for appellate review.
While it is true that if an issue was argued to, or decided by, the district court it can form
the basis for review by this Court, State v. Jeske, 164 Idaho 862, 868, 436 P.3d 683, 689 (2019),
Parsons misconstrues the context of the district court’s order because the district court did not
address the admissibility of the second CARES interview. The district court’s use of the words
“interview” and “interviews” explicitly related to the interviews conducted on October 2, 2019,
which were the first CARES interview and K.B.’s psychological assessment, both of which were
recorded interviews. The district court described the first interview in detail and noted that after
K.B.’s interview with the social worker, K.B. underwent a psychological assessment which was
also recorded. The court explained: “The interviews were recorded, and Dr. Amy Barton watched
the interviews via closed circuit television to gather information to assist in her medical evaluation
of K.B.” The district court then stated: “On March 17, 2020, the State filed a notice of its intent
to introduce the CARES medical records and recorded interviews from October 2, 2019, pursuant
to Idaho Rules of Evidence 803(4) and 803(24).” (Emphasis added.) The order did not mention
the second CARES interview, which took place on January 9, 2020, either by date or by name.
Thus, the district court’s use of “interviews” was in reference to the video recordings of October 2,
5
2019, which were K.B.’s first CARES interview and subsequent psychological assessment, not the
second CARES interview.
Parsons did not argue to the trial court that the second CARES interview should not be
admitted and because the issue was not argued to the district court, the court did not rule on the
admissibility of the second CARES interview. Instead, the admissibility of the second CARES
interview was not raised until trial, when Parsons explicitly stated that he did not object to its
admission. As Parsons did not object to the admission of the second CARES interview before trial
and explicitly stated that he had no objection to its admission during trial, he has waived
consideration of whether the second CARES interview was improperly admitted.
As to the first CARES interview, Parsons argues K.B.’s statements “were testimonial in
nature as they were made for the primary purposes of criminal investigation and prosecution.”
Accordingly, to determine whether the interview is testimonial, we apply the primary purpose test
and analyze whether, in light of all the circumstances, viewed objectively, the primary purpose of
the first CARES interview was to create an out-of-court substitute for K.B.’s trial testimony.
Parsons asserts the Idaho Supreme Court’s decision in State v. Hooper, 145 Idaho 139, 176 P.3d
911 (2007) controls the outcome of this case. In Hooper, the Court held that a child victim’s
videotaped statements made during the course of an interview with a forensically-trained
interviewer at a sexual trauma abuse response center were testimonial under Crawford and Davis
v. Washington, 547 U.S. 813 (2006). Hooper, 145 Idaho at 145, 176 P.3d at 917. While the Court
recognized that the purpose of such interviews can be for medical treatment and forensic use, after
reviewing the circumstances surrounding the interview in Hooper, the Court held that “the primary
purpose of the interview was to establish or prove past events potentially relevant to later criminal
prosecution.” Id. at 145-46, 176 P.3d at 917-18. In other words, the Court determined that the
interview was geared toward gathering evidence, rather than providing medical treatment. Id. at
145, 176 P.3d at 917. The circumstances the Court considered included that prior to the interview,
a detective told Hooper that the type of information obtained during the interview would dictate
“what kind of action is done.” Id. The Court also found it significant that the detective observed
the interview, the interviewer consulted with the detective during the interview, the interviewer
asked questions “regarding the event in question” and the identity of the perpetrator, the victim
was not asked about her medical condition or any injuries, and the interview was conducted “after
a medical assessment and separately from the medical assessment.” Id. at 145-46, 176 P.3d at
6
917-18. The Court concluded: “The parties clearly anticipated that the videotaped statements
would provide a substitute for the child’s live testimony in court.” Id. at 146, 176 P.3d at 918.
Parsons argues Hooper controls the outcome of this case for several reasons. Specifically,
Parsons argues that “just like in Hooper”: (1) “the examination was arranged by police detectives”;
(2) the examination was “conducted by forensically trained personnel”; (3) the detective observed
the examination; (4) K.B. “was presented with a series of rules about telling the truth”; (5) “the
interviewer consulted with the detective during the interview”; (6) the interviewer did not ask K.B.
about any physical injuries; and (7) “there was no evidence presented that the detective observed
the medical portion of the exam.”2 We disagree that Hooper controls the outcome of this case.
First, as noted in Hooper, a “referral by police officers, in and of itself is not of great
significance, absent evidence of the purpose of the referral.” Id. at 145, 176 P.3d at 917.
“Similarly, the fact that an interviewer has forensic training does not, in and of itself, make the
statements ‘testimonial’ in nature.” Id. Thus, neither the police referral nor the forensic training
of the interviewer dictate the outcome of this case.
Second, the interview in Hooper was not used for medical treatment as the victim did not
receive a medical examination following the interview or as part of the interview. Here, the first
CARES interview informed with which medical services K.B. would be provided and K.B.’s
psychological and medical examination at the CARES facility were done immediately following
the first CARES interview and as part of the overall assessment at CARES. These circumstances
directly relate to evaluating the primary purpose of the interview. The CARES interview process
was described in State v. Christensen, 166 Idaho 373, 375, 458 P.3d 951, 953 (2020):
Once a child is referred [to CARES], the child is assessed in three ways: a forensic
interview, a psychosocial assessment, and a medical examination. The forensic
interview is performed first by a social worker who is part of the medical team. It
is a structured conversation with the child in hopes of maintaining detailed
information on something the child has experienced or witnessed. The forensic
interview adheres to the National Institute of Child Health and Human
Development (“NICHD”) guidelines designed to elicit disclosure from children in
a non-leading and neutral way. The psychosocial assessment, also performed by a
2
Parsons has also argued that because K.B. had been seen at an emergency room prior to
her CARES interview, the interview could not be for purposes of medical treatment or diagnosis.
We decline to hold that an initial visit to an emergency room negates any further interviews that
may inform or support additional medical examinations or treatment of victims. Indeed, there may
be many reasons for subsequent medical examinations or treatment visits that are dependent on
the disclosure of additional information.
7
social worker, is completed after the forensic interview. The psychosocial
assessment gathers information related to the child’s psychological well-being and
their social well-being. The last step in the assessment process is the medical
examination. The examination is a full head-to-toe medical examination that
commonly involves a detailed examination of the genitals and evaluation for
possible sexually transmitted diseases or infections. The medical examination is
informed by the forensic interview and psychosocial assessment to determine issues
the child may have, areas that may need extra focus, any clues about possible
physical symptoms and any ideas about possible infections or injuries.3
Additionally, Hooper was decided prior to the United States Supreme Court’s decision in
Clark and the Idaho Supreme Court decision in Christensen. Clark involved statements made by
a three-year-old student to a preschool teacher regarding alleged abuse by a guardian. Clark, 576
U.S. at 246. Although the Court declined to adopt a “categorical rule” excluding statements to
non-law enforcement personnel from the reach of the Confrontation Clause, the Court noted “such
statements are much less likely to be testimonial than statements made to law enforcement
officers.” Id. In applying the primary purpose test, the Court noted: “In the end, the question is
whether, in light of all the circumstances, viewed objectively, the ‘primary purpose’ of the
conversation was to ‘creat[e] an out-of-court substitute for trial testimony.’” Id. at 245. The Court
explained that there was an ongoing emergency in Clark, as the teachers needed to know whether
it was safe to release the child to his guardian; the teachers’ questions were meant to identify the
abuser in order to protect the child from future abuse; and the first objective of the teachers’
questioning was to protect the child. Id. at 247. The Court also found a child’s young age to be
significant, stating: “Statements by very young children will rarely, if ever, implicate the
Confrontation Clause.” Id. at 247-48. In concluding that the child’s statements were not
testimonial, the Court explained that it is extremely unlikely that a young child who is the victim
of sexual abuse would intend his statements to be a substitute for trial testimony and, instead,
“would simply want the abuse to end, would want to protect other victims, or would have no
discernible purpose at all.” Id. at 248.
3
The social worker in this case testified that she was originally trained in National Institute
of Child Health and Human Development (NICHD) Interview Guidelines. She further testified
that, as part of her advanced interview training, she was also trained in the Utah CJC Program
Child Interview Curriculum. The Utah Program was built off the NICHD Guidelines with the
consent of the creator of NICHD. The social worker testified that the Utah Program also is
conducted in a neutral environment using non-suggestive questioning. That noted, the Christensen
Court aptly described the CARES interview process consistent with the description of the process
provided by the social worker in this case.
8
When we look at the objective circumstances surrounding K.B.’s statements, the record
does not support an argument that K.B.’s statements during the first CARES interview would be
used as a substitute for K.B.’s trial testimony. K.B. was five years old when the first interview
occurred, and there is no indication that K.B. had any information or understanding about the
criminal justice process or that there would even be a trial because the interview preceded any case
filing. Moreover, the officer who observed the first CARES interview testified that she did not
meet with K.B. prior to the interview and that, to the officer’s knowledge, K.B. did not see the
officer before going into the interview and was not aware that the officer was observing the
interview.
Additionally, the context and nature of the interview was to make sure that K.B. was
physically safe and to provide information for a medical examination, as explained in more detail
below. K.B. was told prior to the interview that it had a medical purpose and that the social worker
worked with “nurses and doctors” and that it was her “job to help make sure that [children’s]
bodies are safe and healthy.” At one point, K.B. told the social worker that she was “the best
doctor ever!” Although the social worker corrected K.B., explaining that she was a social worker
but that she worked with nurses and doctors, K.B.’s perception of the interviewer and K.B.’s stated
belief that the social worker was a doctor reflect K.B.’s understanding of the purpose of the
interview, which was not to elicit statements as a substitute for trial testimony. In short, nothing
in the record supports a conclusion that K.B.’s statements during the CARES interview would be
a substitute for her trial testimony, particularly when trial proceedings had not commenced.
The Idaho Supreme Court has recently held that “while there is clearly a dual purpose to
CARES interviews, to both gather information and inform medical treatment, the information-
gathering purpose does not override the medical necessity of such interviews.” Christensen, 166
Idaho at 380, 458 P.3d at 958. The Court explained:
First, the forensic nature of the interview is not primarily designed to gather
evidence, though that is one of its byproducts; it is to help inform the medical
process that takes place with the child throughout their experience at CARES. The
interview assists and enlightens . . . as part of the process in helping children keep
their bodies safe and healthy, incorporating seeing a doctor after the interview is
completed. Second . . . the interviews are “forensic” in nature because they are
conducted under detailed guidelines designed, insofar as possible, to obtain
untainted information from the child, rather than from the interviewer through
leading questions.
Id.
9
The first CARES interview in this case is almost identical to that in Christensen. Like the
CARES interview in Christensen, the first CARES interview of K.B. was observed by medical
providers and was followed by a psychological assessment and a medical examination. Like in
Christensen, and as previously noted, the social worker explained to K.B. that the social worker
worked with nurses and doctors and it was her job to keep K.B.’s body safe and healthy.
Although the CARES interviews in Christensen were analyzed pursuant to I.R.E. 803(4)
rather than as part of a Confrontation Clause claim, Christensen informs our analysis because the
“standard rules of hearsay, designed to identify some statements as reliable, [are] relevant” to
determining the primary purpose of statements. Michigan v. Bryant, 562 U.S. 344, 358-59 (2011).
In Christensen, the Court determined that the forensic nature of CARES interviews does not
supplant their medical purpose. Christensen, 166 Idaho at 377-80, 458 P.3d 955-58. The Court
adopted the reasoning set forth in State v. Kay, 129 Idaho 507, 518, 927 P.2d 897, 908 (Ct. App.
1996) and concluded that statements made by the minor children during a CARES interview were
admissible pursuant to I.R.E. 803(4) because “the totality of the circumstances here establishes the
twins’ statements were made for the purpose of medical diagnosis or treatment.” Christensen, 166
Idaho at 377, 458 P.3d at 955.
After a lengthy analysis describing the nature of the CARES interview process and
analyzing multiple factors, the Court concluded:
Finally, and most importantly, even though CARES interviews serve a dual medical
and forensic purpose, A.M.O. and A.G.O.’s statements were admissible because
their statements remain inherently reliable; they are gleaned from a process
designed to aid and inform treatment and diagnosis of the child’s medical condition.
In these circumstances, the child would “still have the requisite motive for
providing the type of ‘sincere and reliable’ information that is important to that is
important to that [medical] diagnosis and treatment.”
Id. at 379, 458 P.3d at 957 (internal citation omitted).
The analysis and conclusion of Christensen make clear that the Court focused on the nature
of the CARES interviews in assessing whether the statements made during those interviews were
admissible as statements made for medical diagnosis or treatment. The inherent characteristics of
a CARES interview do not change regardless of whether the interview’s admissibility is analyzed
under a constitutional or an evidentiary rubric. As noted by the Court in Christensen, “the forensic
nature of the interview is not primarily designed to gather evidence, though that is one of its
10
byproducts; it is to help inform the medical process that takes place with the child throughout their
experience at CARES.” Id. at 380, 458 P.3d at 958.
Considering the Idaho Supreme Court’s holding and analysis in Christensen, that the
forensic nature of CARES interviews does not supplant their medical purpose, the United States
Supreme Court’s guidance in Clark that statements by very young children will rarely implicate
the Confrontation Clause, and the nature of K.B.’s first CARES interview, we conclude that the
primary purpose of the first CARES interview was not to create an out-of-court substitute for trial
testimony but rather to inform K.B.’s medical treatment. Accordingly, K.B.’s statements during
the first CARES interview were not testimonial and the admission of the first CARES interview
did not implicate the Sixth Amendment.
B. The District Court Did Not Abuse Its Discretion by Denying the Motion to Continue
Parsons argues the district court abused its discretion when it denied his request for a
continuance because denying the motion hindered his ability to prepare and present a defense. The
State asserts the district court acted within its discretion when it denied the motion, as the motion
was made less than two weeks before trial and contained no evidence in support of Parsons’
assertions.
The decision to grant a motion for a continuance rests within the sound discretion of the
trial court. State v. Ransom, 124 Idaho 703, 706, 864 P.2d 149, 152 (1993). When a trial court’s
discretionary decision is reviewed on appeal, the appellate court conducts a multi-tiered inquiry to
determine whether the lower court: (1) correctly perceived the issue as one of discretion; (2) acted
within the boundaries of such discretion; (3) acted consistently with any legal standards applicable
to the specific choices before it; and (4) reached its decision by an exercise of reason. State v.
Herrera, 164 Idaho 261, 270, 429 P.3d 149, 158 (2018). Generally, it has been held that unless an
appellant shows that his or her substantial rights have been prejudiced by reason of a denial of his
or her motion for a continuance, appellate courts can only conclude that there was no abuse of
discretion. State v. Cagle, 126 Idaho 794, 797, 891 P.2d 1054, 1057 (Ct. App. 1995). The bare
claim that additional investigation could have been conducted is not sufficient to demonstrate
unfair prejudice so as to support a motion for a continuance. State v. Tapia, 127 Idaho 249, 255,
899 P.2d 959, 965 (1995). Moreover,
[t]o qualify for a continuance based on late discovery, a party must not only show
that the late disclosure generally prejudiced the party, but they must also show that
11
a fair trial was denied because there is a reasonable probability that the result of the
proceedings would have been different had the additional time been granted.
State v. Ochoa, 169 Idaho 903, 916, 505 P.3d 689, 702 (2022).
Parsons’ motion to continue was based on an unsupported claim that K.B.’s father was
possibly a convicted juvenile sex-offender. Parsons’ trial counsel indicated that Parsons may have
disclosed this information early in the case but trial counsel did not remember Parsons telling him
about it. At the hearing on the motion to continue, trial counsel acknowledged that he did not
know if an investigation into the claim would reveal any useful information or even whether the
factual premise was true. On appeal, Parsons similarly acknowledges that he cannot say what an
investigation may have yielded, if anything, but that “had he been granted the time to investigate,
he may have been able to provide a different defense to the charges and present the jury with
admissible alternate perpetrator evidence.” (Emphasis added.) This conclusory assertion is
insufficient to show the requisite prejudice. As previously stated, bare claims of prejudice or
allegations that additional investigation could have been conducted are insufficient to show
prejudice arising from the denial of a motion to continue. Tapia, 127 Idaho at 255, 899 P.2d at
965. Moreover, given that K.B. repeatedly identified Parsons as the sole perpetrator, Parsons has
not shown a reasonable probability that the result of the proceedings would have been different
had additional time been granted to investigate Parsons’ claim of an alternate perpetrator. Because
Parsons has failed to demonstrate prejudice, we conclude that there was no abuse of discretion.
C. Any Error in Allowing K.B.’s Mother to Testify About an Out-of-Court Statement by
K.B. Was Harmless
Parsons argues the district court erred by allowing inadmissible hearsay testimony from
K.B.’s mother. The State asserts the challenged statement was not offered for the proof of the
matter asserted and therefore did not constitute hearsay.
Hearsay is defined as a statement, other than one made by the declarant while testifying at
the trial or hearing, offered in evidence to prove the truth of the matter asserted. I.R.E. 801(c);
State v. Gomez, 126 Idaho 700, 704, 889 P.2d 729, 733 (Ct. App. 1994). Hearsay is inadmissible
unless otherwise provided by an exception in the Idaho Rules of Evidence or other rules of the
Idaho Supreme Court. I.R.E. 802.
At trial, K.B.’s mother testified that, on one occasion, she gave K.B. a popsicle and K.B.
said, “Mom, look, it looks like a penis. It looks like [Parsons’] penis.” Parsons objected on hearsay
grounds, and the district court overruled his objection. On appeal, Parsons asserts that the
12
statement was inadmissible hearsay: it was an out-of-court statement made by K.B. for the truth
of the matter asserted--that K.B. had seen Parsons’ penis and was familiar with what it looked like.
The State asserts that the district court did not err in allowing the testimony because the statement
was not offered to prove that Parsons’ penis looked like a popsicle, but rather to show K.B’s
familiarity with penises, generally, and Parsons’ penis, specifically. The State contends that even
if the testimony was inadmissible hearsay, any error in its admission was harmless.
Error is not reversible unless it is prejudicial. State v. Stell, 162 Idaho 827, 830, 405 P.3d
612, 615 (Ct. App. 2017). Where a criminal defendant shows an error based on a
contemporaneously objected-to, nonconstitutional violation, the State then has the burden of
demonstrating to the appellate court beyond a reasonable doubt the error did not contribute to the
jury’s verdict. State v. Montgomery, 163 Idaho 40, 46, 408 P.3d 38, 44 (2017). Thus, we examine
whether the alleged error complained of in the present case was harmless. See id. Harmless error
is error unimportant in relation to everything else the jury considered on the issue in question, as
revealed in the record. State v. Garcia, 166 Idaho 661, 674, 462 P.3d 1125, 1138 (2020). This
standard requires weighing the probative force of the record as a whole while excluding the
erroneous evidence and at the same time comparing it against the probative force of the error. Id.
If the error’s effect is minimal compared to the probative force of the record establishing guilt
beyond a reasonable doubt without the error, then the error did not contribute to the verdict
rendered and is harmless. Id. The reviewing court must take into account what effect the error
had, or reasonably may have had, on the jury in the context of the total setting and in relation to
all else that happened, which necessarily includes the evidence presented. Kotteakos v. United
States, 328 U.S. 750, 764 (1946).
Assuming without deciding the statement was inadmissible hearsay, any error in allowing
the testimony was harmless. The only probative value of this evidence was to establish that K.B.
had seen Parsons’ penis. During her CARES interview, K.B. made numerous statements about
Parsons’ penis and drew a picture of it, which was admitted as State’s Exhibit Seven. That
evidence, as well as K.B.’s descriptions of Parsons’ sexual abuse she disclosed during the CARES
interviews, the testimony from the social worker regarding K.B.’s disclosures of abuse, and the
additional testimony from K.B.’s grandmother, shows that the probative force of the statement was
minimal. Given the strength of the evidence of Parsons’ guilt excluding the challenged testimony,
13
we are convinced beyond a reasonable doubt that the jury’s verdict would have remained the same
absent the admission of the popsicle testimony.
Parsons also contends that the cumulative error doctrine applies here, necessitating a
reversal of his conviction. Under the doctrine of cumulative error, a series of errors, harmless in
and of themselves, may in the aggregate show the absence of a fair trial. State v. Adamcik, 152
Idaho 445, 483, 272 P.3d 417, 455 (2012). However, a necessary predicate to the application of
the doctrine is a finding of more than one error. Id. Parsons has failed to demonstrate at least two
errors, a necessary predicate to the application of the cumulative error doctrine.
III.
CONCLUSION
The district court did not err in admitting the CARES interviews and denying the motion
for a continuance, and any error in allowing the challenged testimony from K.B.’s mother was
harmless. The cumulative error doctrine is inapplicable in this case because Parsons failed to show
two or more errors. Accordingly, Parsons’ judgment of conviction is affirmed.
Chief Judge LORELLO and Judge GRATTON CONCUR.
14 | 01-04-2023 | 11-09-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482717/ | UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
HELEN DIANE McCARTHY,
Plaintiff,
v. Case No. 21-mc-4 (GMH)
MICHAEL HEATH JOHNSON,
Defendant.
MEMORANDUM OPINION & ORDER
More than 30 years ago, a Utah federal court awarded Plaintiff Helen Diane McCarthy 1
(now deceased and represented here by her estate) a multi-million-dollar default judgment against
Defendant Michael Heath Johnson for violations of the Racketeer Influenced and Corrupt
Organization (“RICO”) Act, 18 U.S.C. § 1961 et seq. Defendant died in December 2020 and, in
January 2021, Plaintiff registered the Utah judgment in this District pursuant to 28 U.S.C. § 1963.
Since then, she has been seeking discovery through this Court to aid her in collecting that
judgment, which, with accrued post-judgment interest, is now worth more than five times its
original amount. Her most recent submission is an application for issuance of a letter of request
seeking documents and testimony from Gordon Oldham, an attorney located in Hong Kong, whom
Plaintiff alleges represents Defendant’s estate and ultimately owns the property where Defendant
was residing at the time of his death. 2 For the reasons that follow, the application is granted.
1
Plaintiff’s surname has also been spelled “McCarthey.” See, e.g., ECF No. 18-1 at 54, 86, 88, 97, 101. Here, because
the pleading originating this case spells the name “McCarthy,” see ECF No. 1, that is the spelling the Court uses.
2
The relevant docket entries for purposes of this Memorandum Opinion & Order are: (1) Plaintiff's Motion for
Issuance of Letters Rogatory (ECF No. 18), (2) Oldham's opposition (ECF No. 19). and (3) Plaintiff's reply (ECF No.
20). The page numbers cited herein are those assigned by the Court's CM/ECF system.
I. BACKGROUND
As the Court explained in an earlier opinion, “in 1987, Plaintiff filed a civil RICO case in
the United States District Court for the District of Utah against Defendant and others, claiming
they had bilked her out of hundreds of thousands of dollars” by convincing her, while “she was
suffering from mental illness and alcoholism, . . . to hand over control of her assets—including
significant stock holdings in the Salt Lake Tribune Corporation and equity in a home in Bel Air,
California—ostensibly to invest them.” McCarthy v. Johnson, No. 21-mc-4, 2022 WL 3038862,
at *1 (D.D.C. Aug. 2, 2022). Instead, however, Defendant and a confederate “fraudulently
converted hundreds of thousands of dollars of her estate to [Defendant’s] own use and to the use
of . . . independent enterprises that themselves were fueled by the profits derived from the fraud.”
Id. (alteration in original) (quoting ECF No. 3-1 at 13). Plaintiff was ultimately awarded a default
judgment of more than $6 million against Defendant in August 1990 (the “Utah Judgment”). See
id.; see also ECF NO. 18-1 at 86–90. The Utah federal court renewed that judgment multiple
times, and by the time that Defendant died in South Africa in December 2020, post-judgment
interest “had . . . increased the value of the judgment to nearly $30 million.” McCarthy, 2022 WL
3038862, at *1. When the judgment was most recently renewed, in December 2021, it was worth
$31,543,922.57, and its value continues to increase at a rate of $3,094.55 per day. See ECF No.
18-1 at 101–02 (Order dated Dec. 20, 2021, renewing the operative judgment and stating that, as
of December 15, 2021, the judgment was worth $31,543,922.57, and would accrue additional
interest at a rate of $3,094.55 per day).
In January 2021, Plaintiff registered the judgment in this Court pursuant to 28 U.S.C. §
1963. ECF No. 1. Thereafter, her counsel contacted Oldham seeking information about
Defendant, Oldham’s “former client.” ECF No. 18-1 at 104–05. She later purported to serve
2
Oldham, “individually and as the Senior Partner of Oldham, Li & Nie” (Oldham’s Hong Kong law
firm), with a subpoena under Rule 45 of the Federal Rules of Civil Procedure seeking information
about the assets of Defendant’s estate. ECF No. 3 at 103–128; see McCarthy. 2022 WL 3038862,
at *2, *5 n.10. “That process was less fruitful than Plaintiff had hoped,” and she therefore filed a
motion for examination under Rule 69(a)(2) of the Federal Rules of Civil Procedure and Local
Civil Rule 72.1(b)(6), requesting that this Court “‘examine’ Oldham ‘about [Defendant's] assets
available to satisfy’ the Utah Judgment” and further require him “to produce a number of
documents before any examination.” 3 Id. (quoting ECF No. 3-1 at 1). The Court denied that
motion, finding that it lacked personal jurisdiction over Oldham, “a nonparty foreign national
residing in a foreign country,” and therefore “lack[ed] the power necessary to haul [him] into court
thousands of miles from his residence” for examination. Id. at *5–6. The Court thus found that
“any discovery of Oldham must be accomplished, if at all, through the procedures set forth” in the
Hague Evidence Convention on the Taking of Evidence Abroad in Civil or Commercial Matters,
Mar. 18, 1970, 23 U.S.T. 2555 (the “Hague Evidence Convention”). Id. at *6. The Hague
Evidence Convention provides for three methods of taking evidence: “(1) by a Letter of Request
or letter rogatory from a U.S. judicial authority to the competent authority in the foreign state . . . ,
(2) by an American or foreign diplomatic or consular officer or agent after permission is obtained
from the foreign state, and (3) by a private commissioner duly appointed by the foreign state.” 4
3
Meanwhile, the Court granted a motion to issue a letter of request to Defendant’s alleged “financial and business
advisor and accountant” in South Africa. ECF No. 5 at 6; ECF No. 11.
4
The terms “letter rogatory” and “letter of request” are often used interchangeably, but, according to the Restatement
(Third) of Foreign Relations Law, “Letters rogatory addressed by courts of one state to courts of another state apart
from the Hague Evidence Convention are essentially the same as letters of request submitted pursuant to the
Convention; but execution of letters rogatory is voluntary or depends on bilateral agreement and ordinarily involves
diplomatic channels, while execution of letters of request is required by treaty and does not involve diplomatic
channels.” Restatement (Third) of Foreign Relations Law § 473 reporters’ note 1 (Am. L. Inst. 1987). The Court thus
used the term “letter of request” herein but does not change the language of other courts that have used the term “letter
rogatory.”
3
Id. at *5 (alteration in original) (quoting Tulip Computs. Int’l B.V. v. Dell Comput. Corp., 254 F.
Supp. 2d 469, 472 (D. Del. 2003)).
Not long thereafter, Plaintiff filed the motion for issuance of a letter of request currently
before the Court. The submission alleges that Oldham has confirmed to Plaintiff’s counsel that he
represents Defendant’s estate and that he ultimately owns the property where Plaintiff was living
at his death. ECF No. 18-1 at 7–8. More specifically, Plaintiff alleges that Holt Hill Farm, which
was Defendant’s “long-time home and place of death” is owned by a private South African
company known as Surrounded Property Development Pty Ltd. (“Surrounded Property
Development”), which is a wholly owned subsidiary of Resurface Investments Pty Ltd.
(“Resurface Investments”), also a private South African company. Id. at 10. Resurface
Investments is, in turn, a wholly owned subsidiary of a British Virgin Islands company called
Project Design International Ltd. (“Project Design”), which is owned by Oldham. 5 Id. at 11.
According to Plaintiff, Oldham was also the ultimate owner of the residence in which Plaintiff
lived prior moving to Holt Hill Farm. ECF No. 20 at 5–6. Further, Plaintiff alleges that Oldham
was Defendant’s “personal counsel throughout the RICO litigation” that resulted in the Utah
Judgment that Plaintiff seeks to enforce. 6 ECF No. 18 at 11. Oldham has not disputed any of
these facts.
Plaintiff seeks documents from Oldham, “individually, as Senior Partner of Oldham, Li &
5
Surrounded Property Development, Resurface Investments, and Project Design are referred to collectively herein as
“the Oldham Companies.”
6
It is not clear whether Plaintiff alleges that Oldham represented Defendant in that litigation—and the docket from
that case does not reflect such representation, see Docket, McCarthy v. Johnson, No. 87-cv-944 (D. Utah)—or rather
that Oldham served as an attorney for Defendant on other matters during that time, such as when Defendant instructed
Oldham’s firm in 1989 (while that litigation was ongoing) to transmit Defendant’s consent to the withdrawal of the
attorney representing him in the Utah RICO action, see ECF No. 20 at 1–2, 17–18. In any case, Oldham has not
disputed that he served as Defendant’s attorney and, indeed, has asserted to Plaintiff’s counsel that he represents
Defendant’s estate. See ECF No. 18-1 at 109–10.
4
Nie, and Owner of Project Design International Limited, a British Virgin Islands company, and its
South African subsidiary, Resurface Investments (Pty) Limited” regarding (1) Oldham’s control
or ownership of property used by Defendant; (2) the creation, ownership, and control of Project
Design; (3) financial accounts maintained by or for the benefit of Defendant; (4) monetary transfers
between Defendant’s financial accounts and Oldham’s; (5) Defendant’s assets and liabilities; (6)
sources of money used by or for the benefit of Defendant; (7) transfers of money to or from
Defendant; (8) loans from Oldham to Defendant; (9) financial instruments or contracts between
Oldham and Defendant; (10) financial transactions between Oldham and Defendant; (11)
Oldham’s strategies and actions to protect Defendant’s assets from enforcement of the Utah
Judgment; and (12) money taken from Plaintiff by Defendant. ECF No. 18-1 at 37–39. She also
seeks to depose Oldham on fourteen related topics: (1) identification of real and personal property
used by Defendant; (2) the creation, ownership, and control of the Oldham Companies; (3)
identification of financial accounts maintained by or for the benefit of Defendant; (4) any monetary
transfers between financial accounts maintained by Defendant and financial accounts maintained
by Oldham; (5) Defendant’s assets and liabilities; (6) any sources of money used by or for the
benefit of Defendant; (7) monetary transfers to or from Defendant’s financial accounts; (8) loans
made to Defendant by Oldham or the Oldham Companies to Defendant; (9) financial instruments
or contracts between Oldham or the Oldham Companies and Defendant; (10) financial transactions
between Oldham or the Oldham Companies and Defendant; (11) strategies and actions taken by
Oldham or the Oldham Companies to protect Defendant’s assets or income from collection
pursuant to the Utah Judgment; (12) any transfers of money taken by Defendant from Plaintiff to
Oldham or the Oldham Companies; (13) communications pertaining to any transfers of money
taken by Defendant from Plaintiff to Oldham or the Oldham Companies; and (14) money taken by
5
Defendant from Plaintiff that was utilized by or for the benefit of Defendant. Id. at 40–43.
Oldham opposes the application, arguing that this matter should not be in this Court
because the case “originated in Utah 30 years ago and has no connection to this jurisdiction.” ECF
No. 19 at 3. More specifically, he asserts that neither the targets of the discovery nor the parties
to this litigation have a connection to this District, “[n]o events related to the underlying suit or to
the enforcement of the judgment have ever taken place in this jurisdiction,” and no documents or
evidence was created here. Id. at 1–2. He thus contends that this Court lacks the power to issue
the requester letter rogatory. Id. at 4. He further maintains that the application should be denied
because he responded to Plaintiff’s informal requests for information and because Plaintiff has not
established that he is likely to have relevant evidence. Id. at 5–6.
II. LEGAL STANDARDS
The Hague Evidence Convention “allows judicial authorities in one signatory country to
obtain evidence located in another signatory country ‘for use in judicial proceedings, commenced
or contemplated.’” Tulip Computs., 254 F. Supp. 2d at 472 (quoting Hague Evidence Convention,
Art. 1. The Hague Evidence Convention “has never ceased to be applicable between Hong Kong
[Special Administrative Region] and the Contracting States to which it was applicable before Hong
Kong was restored to the People’s Republic of China.” Declaration/Reservation/Notification of
the Special Administrative Region of Hong Kong, https://www.hcch.net/en/instruments/
conventions/status-table/notifications/?csid=493&disp=resdn (last visited Nov. 9, 2022). The
United States is one of those Contracting States. See id. As noted, one of the methods that the
Hague Evidence Convention provides for taking evidence abroad is a letter of request from a U.S.
judicial authority to the competent authority in the foreign signatory state. See McCarthy, 2022
WL 3038862, at *5. “[L]etters rogatory are typically used when the party from whom discovery
6
is sought is ‘beyond the jurisdiction’ of the court and thus the party seeking the discovery is unable
to take advantage of the discovery devices provides for in Rules 26 to 37 and 45.” Lantheus Med.
Imaging, Inc. v. Zurich Am. Ins. Co., 841 F. Supp. 2d 769, 781 (S.D.N.Y. 2012).
“When weighing requests for international discovery—even requests pursuant to the
Hague [Evidence] Convention—courts should not overlook factors relevant to international
comity.” Jaguar Land Rover Ltd. v. DR. ING. H.C. F. Porsche AG, No. 21-mc-62, 2021 WL
3075698, at *1 (D.D.C. June 22, 2021). The Supreme Court has identified five factors that “are
relevant to any comity analysis”: (1) the importance of the information requested to the litigation,
(2) the specificity of the request, (3) whether the information originated in the United States, (4)
whether there are other available means of getting the information, and (5) whether and to what
extent noncompliance would undermine important interests of the United States or compliance
would undermine important interests of the state where the information is located. Societe
Nationale Industrielle Aerospatiale v. U.S. Dist. Ct. for the S. Dist. of Iowa, 482 U.S. 522, 544
n.28 (1987); see also Restatement (Third) of Foreign Relations Law § 442(1)(c) (Am. L. Inst.
1987) (same). Where the foreign state has agreed to the procedures of the Hague Evidence
Convention, the first three factors are the most important. See Jaguar Land Rover, 2021 WL
3075698, at *1 (citing Restatement (Third) of Foreign Relations Law § 473, reporter’s note 5 (Am.
L. Inst. 1987)); see also Arcelik A.S. v. E.I. DuPont de Nemours & Co., 856 F. App’x 392, 399 (3d
Cir. 2021) (“[S]ome of the international comity concerns noted by the Court [in Aerospatiale] are
lessened when only use of the Hague [Evidence] Convention is at issue because all the relevant
nations have consented to the treaty process.”). As part of the comity analysis, the Court must also
be satisfied that the proposed discovery “is relevant, not overbroad, and proportional to the needs
of the case.” Wight v. Blumen, No. 20-cv-81688, 2021 WL 8999538, at *2 (S.D. Fla. May 6,
7
2021); cf. Aerospatiale, 482 U.S. at 546 (noting that U.S. courts should protect foreign litigants
from unnecessary or unduly burdensome discovery and “improper uses of discovery requests”).
Although the party seeking the discovery bears the burden of persuading the court that proceeding
under the Hague Evidence Convention “is necessary and appropriate,” the “burden is not
great . . . since the ‘Convention procedures are available whenever they will facilitate the gathering
of evidence by the means authorized in the Convention.’” In re Baycol Prod. Litig., 348 F. Supp.
2d 1058, 1059 (D. Minn. 2004) (quoting Tulip Computs. 254 F.Supp.2d at 474).
III. DISCUSSION
As noted above, Oldham’s primary argument against issuance of the letter of request is that
the Court lacks the authority to do so because thus jurisdiction has no connection to the parties or
events in the underlying litigation, the targets of the discovery requests, or the information sought.
The Court therefore addresses that issue first, before engaging in the analysis of whether concerns
of international comity counsel in favor or against granting the motion.
A. The Court’s Authority
First, to the extent that Oldham argues that this Court has no authority to issue the letter of
request because it lacks personal jurisdiction over him, that argument is rejected out of hand.
“[I]ssuance of letters rogatory by its very nature does not require a U.S. court to have jurisdiction,
meaning coercive authority, over the non-party from whom discovery is sought.” Lantheus Med.
Imaging, 841 F. Supp. 2d at 782; see also id. (“The issuing court does not need jurisdiction over
the party from whom discovery is sought because it cannot compel compliance with
the letters rogatory. Instead, it makes a request of the foreign court, which maintains the authority
to enforce the letters rogatory or not.”); In re 3M Combat Arms Earplug Prods. Liability Litig.,
No. 19-md-2885, 2020 WL 5578428, at *7 n.6 (N.D. Fla. Feb. 18, 2020) (stating, “There is no
8
question that a party attempting to obtain discovery form a foreign nonparty must resort to the
Hague Evidence Convention’s discovery procedures (where available) if the Court does not have
personal jurisdiction over the nonparty,” and collecting cases); In re Chiquita Brands Int’l, Inc.,
Nos. 08-md-1916 et al., 2015 WL 12601043, at *8 (S.D. Fla. Apr. 7, 2015) (“[R]esort to the Hague
Evidence Convention [for issuance of letters of request] is particularly appropriate where, as here,
a litigant seeks to depose a foreign non-party who is not subject to the court’s in personam
jurisdiction.” (emphasis omitted)); Gap, Inc. v. Stone Int’l Trading, Inc., No. 93 Civ. 638, 1994
WL 38651, at *1 (S.D.N.Y. Feb. 4, 1994) (noting that the Hague Evidence Convention’s
procedures for discovery are, “in many cases[,] . . . the only means to request documents or
testimony from foreign non-parties over whom the court has no personal jurisdiction and who are
beyond the subpoena power of the court”).
However, Oldham appears to be making a different argument: that this Court is without
power to issue the requested letter of request because the matter should not have been brought
before this Court in the first place. See ECF No. 19 at 1 (“Counsel for Ms. McCarthy has never
attempted to explain why she is in this Court in the first place.”), 2 (“Ms. McCarthy has not cited,
and undersigned counsel is unaware of, any authority authorizing a party to register a 30+ year old
judgment in a court some 2,000 miles away from its origin and thereafter seek judicial assistance
from a federal Court with no knowledge of the underlying judgment by the issuance of a Letter
Rogatory to a judicial branch in Hong Kong and relating to entities in South Africa and the British
Virgin Islands.”). That argument requires a discussion of 28 U.S.C. § 1963, the statute under
which the Utah Judgment was registered in this Court.
Section 1963 provides:
A judgment in an action for the recovery of money or property entered in
any . . . district court . . . may be registered by filing a certified copy of the
9
judgment in any other district . . . when the judgment has become final by appeal
or expiration of the time for appeal or when ordered by the court that entered the
judgment for good cause shown. . . . A judgment so registered shall have the same
effect as a judgment of the district court of the district where registered and may be
enforced in like manner.
28 U.S.C. § 1963. A judgment registered in another district court “is the equivalent of a new
judgment” from the court in which it is registered. Condaire, Inc. v. Allied Piping, Inc., 286 F.3d
353, 357 (6th Cir. 2002); see also, e.g., In re Estate of Ferdinand E. Marcos Human Rights Litig.,
536 F.3d 980, 989 (9th Cir. 2008) (“[R]egistering a judgment under § 1963 is the functional
equivalent of obtaining a new judgment of the registration court.”). As such, it can be enforced as
a judgment of the registration court, and that court may utilize any of the tools generally allowed
to aid in enforcement of a judgment, including the tools of discovery. See, e.g., Condaire, 286
F.3d at 357–58. Thus, if the judgment was properly registered in this Court, Plaintiff is entitled to
seek, and this Court has the power to grant, her request for discovery under the Hague Evidence
Convention. See, e.g., id. at 357 (“Having determined that registration under § 1963 is the
equivalent of a new judgment, we recognize that the statute must imply similar inherent powers to
the registering court to enforce those judgments.”); Edgefield Holdings v. Gilbert, No. 17-mc-74,
2018 WL 1138516, at *8 (N.D. Tex. Mar. 2, 2018) (noting that post-judgment discovery is
available to a judgment creditor in the district where the judgment is registered); Warner Bros.
Int’l Television Distribution v. Golden Channels, No. 02-cv-9326, 2005 WL 8162980, at *3–6
(C.D. Cal. Mar. 14, 2005) (holding that the Hague Evidence Convention allows issuance of letters
of request to aid in the collection of a judgment).
Procedurally, “registration simply requires ‘filing a certified copy of the judgment.’” It is
“a process which does not require any party to appear in court and in which no judicial action is
taken.” Fidelity Nat’l Fin., Inc. v. Friedman, 935 F.3d 696, 701 (9th Cir. 2019) (quoting 28 U.S.C.
10
§ 1963); see also, e.g., Brown v. Brockett, No. 17-mc-2931, 2018 WL 3625341, at *2 (E.D.N.Y.
July 6, 2018) (“The registration process is straightforward. A party only needs a certified copy of
the original judgment” and to file it in the registration court.); 11 Charles Alan Wright, et al.,
Federal Practice and Procedure § 2787 (3d ed.) (“Registration is a ‘ministerial act’ in terms of the
actual mechanical process of registering.” (footnote omitted) (quoting Juneau Spruce Corp. v. Int’l
Longshoremen’s & Warehousemen’s Union, 128 F. Supp. 697, 699 (D. Haw. 1955))). Oldham
makes no argument that the registration of the Utah Judgment here did not comply with the
mechanical requirements of the statute and, indeed, the docket reflects that a certified copy of the
renewed (and enforceable) Utah Judgment was filed in this Court. 7 See ECF No. 1-1. Given that
the statute requires nothing more than that—and, more specifically, that it does not require judicial
evaluation in the registration court of the propriety of the registration of an enforceable judgment,
see Fidelity Nat’l Fin., 935 F.3d at 701—Oldham’s arguments that this Court has no power to
preside over proceedings or issue orders related to the enforcement of that judgment seem destined
to fail.
To be sure, “[w]hen an appeal is still pending, . . . leave to register the judgment outside
the issuing district requires ‘good cause shown’” to the issuing court. Chevron Corp. v. Republic
7
The Court notes that the judgment from the United States District Court for the District of Utah registered here dates
from December 2014. See ECF No. 1. It was registered in this Court in January 2021, within the eight-year statute
of limitations for a judgment under Utah law. See id.; see also Utah Code Ann. § 78B-2-311 (West 2022) (setting
eight-year statute of limitations for judgments). Because the judgment was registered while still enforceable in Utah,
the registered judgment is enforceable here until the District of Columbia statute of limitations runs. See Home Port
Rentals, 252 F.3d at 407 (“[W]hen a money judgment (1) is rendered in a federal district court located in one state,
and (2) is duly registered in a district court located in another state, (3) at a time when enforcement of that judgment
is not time-barred in either state, the applicable limitation law for purposes of enforcement of the registered judgment
in the registration district is that of the registration state[.]”); see also, e.g., Wells Fargo Equip. Fin., Inc. v. Asterbadi,
841 F.3d 237, 246 (4th Cir. 2016) (same). The District of Columbia has set a twelve-year limitations period for
judgments. See D.C. Code § 15-101 (2022). Thus, the registered judgment will be enforceable until January 2033.
See, e.g., Asterbadi, 841 F.3d at 246 (“[W]ith the registered judgment functioning as a new judgment, the limitations
period for enforcement runs from the date of registration. This is the conclusion that every court of appeals that has
construed § 1963 has reached.”). The Court notes too, although it is immaterial here, that Plaintiff renewed the
judgment in Utah yet again in December 2021. See ECF No. 18-1 at 101–02.
11
of Ecuador, 987 F. Supp. 2d 82, 84 (D.D.C. 2013). That generally entails the judgment creditor
establishing “an absence of assets [belonging to the judgment creditor] in the judgment forum,
coupled with the presence of substantial assets in the registration forum.” Non-Dairy Exposure
Dietary Task Force v. Tagros Chem. India, Ltd., 309 F.R.D. 66, 69 (D.D.C. 2015) (quoting
Cheminova A/S v. Griffin, LLC, 182 F.Supp.2d 68, 80 (D.D.C.2002)). However, no such showing
is required where, as here, the registered judgment is “final by appeal or expiration of the time for
appeal.” 28 U.S.C. § 1963. Rather, in this situation, Section 1963 allows registration of an
enforceable judgment “in any other district” without additional substantive requirements. 8 Id.
(emphasis added). Under the plain language of the statute, then, the registration was appropriate.
The Court therefore holds that the judgment registered in this District is enforceable by this
Court, notwithstanding the fact that the litigants in the underlying litigation have no demonstrated
connection to this jurisdiction.
B. International Comity
The Court therefore turns to what is often the heart of the matter in cases like these—
whether concerns of international comity counsel in favor of granting the request. Here, on
balance, they do.
8
The Ninth Circuit’s first decision in Fidelity National Financial, Inc., although addressing a different issue, is
instructive as to the breadth of the plain language of Section 1963. In that case, Fidelity, the judgment debtor,
registered a judgment from the Central District of California in the District of Arizona in order to try to collect on the
judgment. Fidelity Nat’l Fin., Inc. v. Friedman, 803 F.3d 999, 1003 (9th Cir. 2015). The judgment registered in the
District of Arizona expired under that state’s five-year statute of limitations and that court rebuffed Fidelity’s attempt
to renew the Arizona judgment or re-register the California judgment. Id. Fidelity then “got creative” and registered
the California judgment (which was still, apparently, enforceable) in the Western District of Washington and then
registered that Washington judgment in the District of Arizona. Id. Relying on the precept that “a registered judgment
has the ‘same effect’ as an original judgment and thus may itself be registered,” the Ninth Circuit rejected the judgment
debtors’ argument that the court’s reading of the statute led to an absurd result “because it enables a plaintiff to jump
from jurisdiction to jurisdiction in seeking to recover on its money judgment.” Id. at 1002–03. Rather, it held that the
only limitation that the statute places on the registration of judgments (that are final by appeal or by the expiration of
the time to appeal) is that they be valid monetary judgments as opposed to judgments for injunctive relief. Id. at
1003. Thus, the alleged end run around the Arizona statute of limitations was “irrelevant in view of the plain language
of § 1963.” Id.
12
1. The Importance of the Information to the Litigation
Here, the relevant litigation is the action in this Court to enforce the judgment. See, e.g.,
Wells Fargo Equip. Fin., Inc. v. Asterbadi, 841 F.3d 237, 244 (4th Cir. 2016) (“We thus construe
§ 1963 to provide for a new judgment in the district court where the judgment is registered, as if
the new judgment had been entered in the district after filing an action for a judgment on a
judgment. Accordingly, just as a new judgment obtained in an action on a previous judgment from
another district would be enforceable as any judgment entered in the district court, so too is
a registered judgment.” (emphasis omitted)); Home Port Rentals, Inc. v. Int’l Yachting Grp., Inc.,
252 F.3d 399, 405 (5th Cir. 2001) (“[W]hen a money judgment rendered in one federal district
court is registered in another federal district court at a time when the original judgment is
still enforceable under the laws of both states, registration truly is the equivalent of
a new judgment of the registration court for purposes of enforcement in the registration district.”
(emphasis omitted)); Stanford v. Utley, 341 F.2d 265, 268 (8th Cir. 1965) (Blackmun, J.)
(“[R]egistration provides, so far as enforcement is concerned, the equivalent of a new judgment of
the registration court.”). Plaintiff’s proposed discovery seeks information about the financial
relationship between Oldham and/or the Oldham Companies and Defendant to try to determine
whether Defendant had, or his estate has, assets available pay all or part of the judgment. The
information that Plaintiff seeks is not merely relevant to the collection of the judgment, it is the
focus of this enforcement action and—other than a bare reference, devoid of support, to a “fishing
expedition,” see ECF No. 19 at 4—Oldham does not appear to suggest otherwise.
Instead, Oldham seems to contend that that Plaintiff has not established a sufficient
connection between Defendant and him to justify requiring a response to the discovery requests.
See ECF No. 19 at 5–6. The Court disagrees. Plaintiff is seeking information relevant to
13
Defendant’s finances. Plaintiff has alleged—and Oldham has not disputed—that Defendant had a
professional relationship with Oldham that existed both when the underlying RICO litigation was
underway and after Defendant’s death over 30 years later, which included Oldham’s extension of
loans to Defendant and discussions about business dealings between them. See ECF No. 18-1 at
7, 10–11, 104–10; ECF No. 20 at 1–2, 13–14, 16. She has further alleged—and Oldham has not
disputed—that Defendant lived on premises owned by Oldham through a network of companies
for years prior to Defendant’s death. See id. The details of those arrangements are likely to be
significant to Defendant’s finances. More, Oldham has represented to Plaintiff’s counsel that he
represents Defendant’s estate. That fact, alone, establishes a connection sufficient to justify taking
discovery of Oldham. Indeed, even Oldham can hardly deny that if he, as representative of
Defendant’s estate, establishes either that the estate has or does not have assets, that would be a
crucial fact for Plaintiff’s enforcement efforts in this Court. The details of Defendant’s past
financial dealings with Oldham may also prove important to Plaintiff’s efforts to ascertain where
Defendant’s assets—if there are any—might be located.
The Court thus finds that the first factor weighs in favor of granting the motion.
2. Specificity of the Requests
The second factor also weighs in favor of granting the motion. Plaintiff seeks production
of a dozen categories of documents and a deposition on fourteen topics related to those categories.
The requests are tailored to discover the details of Defendant’s finances, specifically through his
financial dealings with Oldham and the identified Oldham Companies. As noted above, Plaintiff
has established a sufficient connection between Oldham and those three companies to justify the
inquiry sought. The Court acknowledges that the time period for which the information is
sought—from October 29, 1987, which is the date that Plaintiff’s civil RICO action was filed in
14
the District of Utah, to the present—is expansive. But Plaintiff has evidence that Oldham and/or
his firm acted as Defendant’s attorney near that time and that Defendant and Oldham had financial
dealings “on and off” over an extended period of time. See ECF No. 20 at 13–14, 16–18.
Crucially, Oldham has neither objected to the proposed time period nor suggested a more
targeted one. Furthermore, if the appropriate judicial authorities in Hong Kong find the requests
overbroad, they may narrow them. See, e.g., Lantheus Med. Imaging, 841 F. Supp. 2d at 794
(“[F]oreign courts charged with enforcing letters rogatory may limit enforcement of the discovery
device where appropriate.”); SEC v. Tourre, No. 10 Civ. 3229, 2011 WL 350286, at *1 (S.D.N.Y.
Jan. 31, 2011) (“Suffice it to say, we leave to the German authorities the decision whether to honor
all, some or none of these requests.”); Tulip Computs., 254 F. Supp. 2d at 475 (“If Dell’s document
requests are overly broad under the law of the Netherlands, as Tulip maintains, then the requests
will presumably be narrowed by the appropriate judicial authorities in the Netherlands before any
documents are produced. The Court is content that such officials will make the appropriate
determination under their own law.” (internal citation omitted)). In these circumstances, the Court
finds that the requests are sufficiently specific to counsel in favor of issuing the letter of request.
3. Origin of the Information
Plaintiff does not assert that the information she seeks originated in the United States. This
factor therefore weighs against granting the motion. See, e.g., Jaguar Land Rover, 2021 WL
3075698, at *2 (finding that the third factor weighed against issuing letters of request where the
information sought originated in Germany); Lantheus Med. Imaging, 841 F. Supp. 2d at 793 (same,
where information originated in Canada).
4. Alternative Means of Procuring Information
Where a court finds that the third factor weighs against issuing a letter of request, “the
15
origin of the information can be ‘counterbalance[d]’ by the inability to obtain the information
through an alternative means, thus favoring disclosure.” Lantheus Med. Imaging, 841 F. Supp. 2d
at 793 (alteration in original) (quoting Gucci Am., Inc. v. Curveal Fashion, No. 09 Civ. 8458, 2010
WL 808639, at *3 (S.D.N.Y. Mar. 8, 2010)); see also Arcelik, 856 F. App’x at 399 (“Although the
information originated abroad and the District Court suggested this weighed against issuing the
letters of request, this was overcome by the fact that there were no alternative means for DuPont
to obtain the information.”); Jaguar Land Rover, 2021 WL 3075698, at *2 (similar). Here, as the
Court found in its prior opinion, it lacks the authority to require Oldham to produce documents
and submit to an examination. McCarthy, 2022 WL 3038862, at *5. Rather, “in order to seek
discovery from Oldham—a nonparty foreign national residing in Hong Kong—Plaintiff was
required to resort to the procedures set forth in the Hague Evidence Convention.” Id. She has
done so now.
Oldham argues that he has already responded to Plaintiff’s “informal requests” for
information. ECF No. 19 at 5. However, Plaintiff explains that those requests were quite limited
and focused on learning the identity of the owner of the company of the residences in South Africa
where Defendant had lived prior to his death. ECF No. 20 at 5. Once Oldham confirmed that he
was the owner, his cooperation ceased. Id. at 6. To be sure, Oldham also asserted that Defendant
had no assets when he died. ECF No. 18-1 at 110. But Plaintiff should be able to test that assertion
in discovery. See, e.g., Lantheus Med. Imaging, 841 F. Supp. 2d at 793–94 (finding that this factor
weighed in favor of issuing letters of request even where the target had previously responded to
certain informal requests); see also Decl. of Anna St. John, ¶¶ 3–8, Lantheus Med. Imaging. Inc.
v. Zurich Am. Ins. Co., 841 F. Supp. 2d 769 (S.D.N.Y. 2012) (No. 10 Civ. 9371), ECF No. 39
(outlining the target’s responses to informal requests for information and its later failure to
16
cooperate with such requests).
Therefore, this factor weighs in favor of granting the motion.
5. National Interests
In connection with this last factor, the Court notes—although neither party did—that Hong
Kong has made an official declaration pursuant to Article 23 of the Hague evidence Convention
that it
will not execute the ‘Letters of Request issued for the purpose of obtaining pre-trial
discovery of documents’. The ‘Letters of Request issued for the purpose of
obtaining pre-trial discovery of documents’ for the purposes of the foregoing
Declaration include any Letter of Request which requires a person:
1) to state what documents relevant to the proceedings to which the Letter of
Request relates are, or have been, in his possession, custody or power; or
2) to produce any documents other than particular documents specified in the Letter
of Request as being documents appearing to the requested Court to be, or to be
likely to be, in his possession, custody or power.
Declaration/Reservation/Notification of the Special Administrative Region of Hong Kong,
https://www.hcch.net/en/instruments/conventions/status-table/notifications/?csid=493&disp=
Resdn (last visited Nov. 9, 2022). Many courts have noted that a reservation under Article 23—
which can be much broader than the one here, stating only that a contracting state “will not execute
Letters of Request issued for the purpose of obtaining pre-trial discovery of documents as known
in Common Law countries, see Aerospatiale, 482 U.S. at 522 n.21, without the limitations to that
sweeping statement added by Hong Kong—is not a “significant obstacle,” as it “applies only to
‘requests that lack sufficient specificity or that have not been reviewed for relevancy by the
requesting court,’” id. at 564–65 (Blackmun, J., concurring in part) (quoting Bernard H. Oxman,
The Choice Between Direct Discovery and Other Means of Obtaining Evidence Abroad: The
Impact of the Hague Evidence Convention, 37 U. Miami L. Rev. 733, 777 (1983)). See Metso
17
Minerals Inc. v. Powerscreen Int’l Dist. Ltd., No. 06-cv-1446, 2007 WL 1875560, at *2 (E.D.N.Y.
June 25, 2007) (same); Tulip Computs., 254 F. Supp. 2d at 474–75 (same). The Court has already
found the requests to be relevant and specific.
More, the interposition of that reservation merely underscores the fact that, “[w]hen a court
orders resort to the [Hague Evidence] Convention . . . it commits the issue of whether compliance
with the request would undermine important interests of the state where the information is located
to the courts or other authorities of that state.” Restatement (Third) of Foreign Relations Law §
473 reporter’s note 5. In light of that authority—which includes, as noted above, the power to
tailor the requests the receiving state will enforce—courts have declined to find that this factor
weighs against issuance of a letter of request under the Hague Evidence Convention. See, e.g.,
Jaguar Land Rover, 2021 WL 3075698, at *2 (declining to assess the fifth factor because the
question of subversion of the receiving state’s interests is left to that state’s authorities and granting
the request to issue letters rogatory); Tulip Computs., 254 F. Supp. 2d at 474–75 (granting a request
for issuance of letters rogatory in part because officials in the receiving country will decide whether
and how to enforce the discovery requests).
CONCLUSION
The Court’s analysis of issues of international comity militates in favor of issuing the
letter of request that Plaintiff seeks. Accordingly, Plaintiff’s motion for issuance of a letter of
request for international judicial assistance (ECF No. 18) is GRANTED. It is further
ORDERED that Plaintiff shall promptly arrange with the chambers of the undersigned
for execution of the letter of request and delivery of the executed letter to her counsel.
SO ORDERED. Digitally signed by G. Michael
Harvey
Date: 2022.11.09 16:05:26 -05'00'
Date: November 9, 2022 ___________________________________
G. Michael Harvey, United States Magistrate Judge
18 | 01-04-2023 | 11-09-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482726/ | NONPRECEDENTIAL DISPOSITION
To be cited only in accordance with FED. R. APP. P. 32.1
United States Court of Appeals
For the Seventh Circuit
Chicago, Illinois 60604
Submitted November 9, 2022 *
Decided November 9, 2022
Before
FRANK H. EASTERBROOK, Circuit Judge
DAVID F. HAMILTON, Circuit Judge
THOMAS L. KIRSCH II, Circuit Judge
No. 22-1455
BENJAMIN STIBBE, Appeal from the United States District
Plaintiff-Appellant, Court for the Eastern District of Wisconsin.
v. No. 20-CV-1075-JPS
TONY EVERS and KEVIN CARR, J. P. Stadtmueller,
Defendants-Appellees. Judge.
ORDER
Benjamin Stibbe, a Wisconsin prisoner, filed suit under 42 U.S.C. § 1983, asserting
that his classification as a “violent offender” based on a conviction for reckless homicide
violates his constitutional rights. The district court rejected his theory that the state
* The appellees were not served with process and are not participating in this
appeal. We have agreed to decide the case without oral argument because the brief and
record adequately present the facts and legal arguments, and oral argument would not
significantly aid the court. FED. R. APP. P. 34(a)(2)(C).
No. 22-1455 Page 2
statute and regulation classifying him this way are unconstitutionally vague and
dismissed the suit at screening. We agree with the court and therefore affirm.
Wisconsin categorizes its prisoners based on the offense of conviction. Stibbe was
convicted of first-degree reckless homicide by delivery of a controlled substance, WIS.
STAT. § 940.02, which is always a “violent offense” under WIS. STAT. § 301.048(2)(bm).
Because of this classification, Stibbe is ineligible for the intensive sanctions program, a
form of custody that is “more restrictive than ordinary probation” but less so than
imprisonment. WIS. STAT. § 301.048(1)(a). Further, Stibbe is ineligible to apply for prison
leave, WIS. ADMIN. CODE DOC § 326.04(3), because the Wisconsin Department of
Corrections excludes from that program any person convicted of a “violent” offense “in
which there is actual or threatened bodily harm,” id. § 326.03(11). Stibbe was given this
classification because his offense resulted in the death of another person.
Stibbe sued the Governor of Wisconsin and the Secretary of the Wisconsin
Department of Corrections, attacking the classification statute and DOC regulation as
unconstitutionally vague, in violation of his right of due process. He asserted that
reckless homicide should not be defined as a violent crime because drug dealing is
“consensual” and that his crime lacked two key elements of a violent crime: the intent
to cause harm and the use of physical force. His classification, he continued, was
irrational and based on “an incomplete and vague standard” because, rather than
defining “in words … what constitutes a violent crime,” the statute automatically
deems specific offenses “violent.” Stibbe alleged that this designation placed “social
stigma” on him beyond that inherent in his conviction, could deprive him of future
employment and educational opportunities, and barred his access to prison programs
such as “custody reduction” and “the earned release program.”
The district court screened Stibbe’s complaint under 28 U.S.C. § 1915A and
dismissed it for failure to state a claim. First, the court explained that intent was not
relevant to the categorization of “violent offense” under the statute and regulation: all
that matters is the offense of conviction. And if Stibbe meant to challenge the mens rea
element of the reckless-homicide statute, the court noted, any challenge was barred by
Heck v. Humphrey, 512 U.S. 477, 486–87 (1994). Next, the court ruled that the provisions
classifying Stibbe as a violent offender were not unconstitutionally vague: they
unambiguously state that a conviction for reckless homicide or for a crime resulting in
bodily harm will be classified as “violent.” After concluding that it would be futile to
amend the complaint, the court entered final judgment.
No. 22-1455 Page 3
On appeal, Stibbe primarily resists the notion that any part of his case implicates
Heck; he argues that the district court assumed he was challenging his conviction when
he was, in fact, asserting that “Wisconsin has classified [him], erroneously, as a violent
offender.” But the court addressed Stibbe’s challenge to his offender classification; its
limited discussion of Heck was directed at the allegation that his crime did not involve
violent intent. That issue, the court rightly concluded, could not be part of this suit.
As for whether Stibbe stated any claim for relief, we review the dismissal
de novo, Schillinger v. Kiley, 954 F.3d 990, 994 (7th Cir. 2020), and we agree with the
district court that he did not. First, to the extent that Stibbe’s argument about his
“erroneous” classification suggests that Wisconsin erred in applying its own statute and
code, his claim belongs in state court. See Thiele v. Bd. of Trustees of Ill. State Univ.,
35 F.4th 1064, 1066–67 (7th Cir. 2022). A state’s failure to follow, or erroneous
application of, its own laws does not implicate the federal right of due process and is
not actionable under § 1983. Davis v. Scherer, 468 U.S. 183, 194–96 (1984); Wells v. Caudill,
967 F.3d 598, 602 (7th Cir. 2020).
Nor did Stibbe state a plausible claim that classifying his crime as a violent
offense is unconstitutional because the state statute and regulation are void for
vagueness. A law is unconstitutionally vague if “it fails to give ordinary people fair
notice of the conduct it punishes, or [is] so standardless that it invites arbitrary
enforcement.” Johnson v. United States, 576 U.S. 591, 595 (2015). We will assume that the
Wisconsin violent-offense classifications somehow affect a protected liberty interest so
that the Due Process Clause would apply. See id.; Sandin v. Conner, 515 U.S. 472, 484
(1995) (discussing the liberty interests of prisoners). But we are not persuaded by
Stibbe’s contention that the provisions are void because they diverge from the “federal
ruling or definition of a violent crime.” We examine only whether the statute and
regulation “clearly define[]” the categories they create and therefore provide notice.
Grayned v. City of Rockford, 408 U.S. 104, 108 (1972). Here, neither provision is subject to
arbitrary or ad-hoc application. The statute expressly lists reckless homicide as a violent
offense. WIS. STAT. § 301.048(2)(bm). Nothing could be less vague. And the regulation
applies to offenses “in which there is” bodily harm, WIS. ADMIN. CODE DOC
§ 326.03(11); Stibbe’s crime has as an element the death of the victim. Stibbe’s argument
about his intent is not consistent with the regulation’s focus on the result of the offense,
which is what makes the regulation unambiguous.
Finally, Stibbe contends that the district court “should have requested [that he]
make the points more clearly” instead of dismissing his case. Generally, district courts
No. 22-1455 Page 4
should allow at least one opportunity to amend a complaint, but not when amendment
is clearly futile. Runnion ex rel. Runnion v. Girl Scouts, 786 F.3d 510, 519–20 (7th Cir.
2015). Here, the district court explained that amendment could not correct the defects of
the complaint, and we agree that amending the factual allegations could not affect
whether the Wisconsin provisions are impermissibly vague.
We have considered Stibbe’s other arguments, and none has merit.
AFFIRMED | 01-04-2023 | 11-09-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482725/ | NONPRECEDENTIAL DISPOSITION
To be cited only in accordance with FED. R. APP. P. 32.1
United States Court of Appeals
For the Seventh Circuit
Chicago, Illinois 60604
Submitted November 9, 2022*
Decided November 9, 2022
Before
FRANK H. EASTERBROOK, Circuit Judge
DAVID F. HAMILTON, Circuit Judge
THOMAS L. KIRSCH II, Circuit Judge
No. 22-1111
UNITED STATES OF AMERICA, Appeal from the United States District
Plaintiff-Appellee, Court for the Central District of Illinois.
v. No. 2:07-cr-20043-SLD
FREDDELL BRYANT, Sara Darrow,
Defendant-Appellant. Chief Judge.
ORDER
Freddell Bryant appeals the denial of his motion for a sentence reduction under
the First Step Act of 2018, arguing that the district court failed to determine his
eligibility or explain its reasoning. But the record adequately supports the district
court’s decision, so we affirm.
* We have agreed to decide the case without oral argument because the briefs and
record adequately present the facts and legal arguments, and oral argument would not
significantly aid the court. FED. R. APP. P. 34(a)(2)(C).
No. 22-1111 Page 2
In 2010, Bryant pleaded guilty to three counts related to his role in a conspiracy
to distribute large quantities of powder and crack cocaine. See 21 U.S.C. §§ 841(a)(1),
(b)(1)(A), (b)(1)(B); 18 U.S.C. § 924(c). In addition to his plea agreement, Bryant agreed—
in exchange for immunity—to cooperate fully with law enforcement by providing
information and testimony that was “complete and truthful.” The criminal convictions
carried a statutory sentence of life imprisonment, but the district court departed from
that minimum based on Bryant’s substantial assistance, 18 U.S.C. § 3553(e), and
sentenced him to 300 months in prison and ten years of supervised release.
While providing information to law enforcement, Bryant revealed his
participation in a 2007 triple murder related to drug trafficking. But after sentencing on
his drug-crimes convictions, Bryant refused to testify about the murders when called
before a grand jury. The government determined that he was in breach of his
cooperation agreement and later charged him with the murders. He was convicted and
sentenced to three consecutive life sentences. See generally United States v. Bryant,
750 F.3d 642 (7th Cir. 2014).
In April 2020, Bryant moved to reduce his drug-crimes sentence under the First
Step Act of 2018, Pub. L. No. 115-391, 132 Stat. 5194, which gives discretion to district
courts to reduce defendants’ sentences for crack-cocaine convictions that would have
been lowered after the Fair Sentencing Act of 2010, Pub. L. No. 111-220, 124 Stat. 2372.
Noting that his guidelines range would now be 360 months to life in prison, Bryant
requested a reduced sentence—240 months in prison and eight years of supervised
release—to reflect the downward departure that he received in 2010.
The probation office filed a First Step Act Computations worksheet assessing
sentencing options if the Fair Sentencing Act were applied. The office concurred with
Bryant that he was eligible for a reduction and that his amended sentence range would
be 360 months to life in prison.
The government opposed Bryant’s motion. It conceded that Bryant was eligible
for a reduction under circuit law but argued that the district court should deny Bryant’s
motion as a matter of discretion. Opposing any further reduction, the government
highlighted Bryant’s refusal to testify in accordance with his cooperation agreement, his
conviction for three murders, and his current sentence, which was already below the
newly calculated range.
No. 22-1111 Page 3
In a text order, the district court denied the motion: “Pursuant to the framework
in 18 U.S.C. § 3582(c)(1)(B) and § 404 of the First Step Act, after full review of the record,
careful consideration of all applicable sentencing factors, and exercising its discretion,
the Court declines to reduce the defendant’s sentence.”
Bryant argues that the district court procedurally erred by denying his motion
without first determining his eligibility or applicable sentencing range. He relies on our
decision in United States v. Corner, 967 F.3d 662, 665–67 (7th Cir. 2020), in which we
directed district courts first to determine an applicant’s eligibility and calculate the
applicable sentencing range, and only then decide whether to exercise their discretion
to reduce the sentence. Bryant contends that the district court’s text order “disqualified
[him] as ineligible.”
Bryant misapprehends the context behind the district court’s ruling. When the
court denied his motion, his eligibility for a reduced sentence was undisputed. The
probation office and the government both agreed with Bryant that he was eligible for a
reduction. (On its computational worksheet, the probation office checked a box
indicating that it “concur[red] with eligibility,” and the government conceded as much
in its response to Bryant’s motion.) The court justified its ruling by stating that it had
considered the “applicable sentencing factors” but declined to reduce his sentence in an
“exercis[e] [of] its discretion.” This, then, was not a case like Corner, in which the district
court erred by declining to consider modified statutory penalties before denying the
defendant’s motion. Id. at 664.
To the extent Bryant suggests that the court insufficiently explained its ruling, we
think that no more detailed explanation was needed. The record reflects that Bryant
failed to provide information as required by his cooperation agreement, that he was
convicted for three drug-related murders, and that his current sentence is shorter than it
would be if the Fair Sentencing Act were applied. See Chavez-Meza v. United States,
138 S. Ct. 1959, 1967 (2018).
AFFIRMED | 01-04-2023 | 11-09-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482732/ | 11/09/2022
DA 20-0341
Case Number: DA 20-0341
IN THE SUPREME COURT OF THE STATE OF MONTANA
2022 MT 225N
STATE OF MONTANA,
Plaintiff and Appellee,
v.
SAMUEL RICHARD BONKO,
Defendant and Appellant.
APPEAL FROM: District Court of the Twenty-Second Judicial District,
In and For the County of Big Horn, Cause No. DC 2019-47
Honorable Matthew Wald, Presiding Judge
COUNSEL OF RECORD:
For Appellant:
Chad Wright, Appellate Defender, Jeavon C. Lang, Assistant Appellate
Defender, Helena, Montana
For Appellee:
Austin Knudsen, Montana Attorney General, Brad Fjeldheim, Assistant
Attorney General, Helena, Montana
Gerald Ray Harris, Big Horn County Attorney, Randen Schoppe, Deputy
County Attorney, Hardin, Montana
Submitted on Briefs: August 31, 2022
Decided: November 9, 2022
Filed:
__________________________________________
Clerk
Justice James Jeremiah Shea delivered the Opinion of the Court.
¶1 Pursuant to Section I, Paragraph 3(c), Montana Supreme Court Internal Operating
Rules, this case is decided by memorandum opinion, shall not be cited and does not serve
as precedent. Its case title, cause number, and disposition shall be included in this Court’s
quarterly list of noncitable cases published in the Pacific Reporter and Montana Reports.
¶2 Samuel Richard Bonko appeals his convictions for felony criminal possession of
dangerous drugs and misdemeanor resisting arrest. Bonko contends the District Court
erred when it: (1) allowed the State to amend its Information; (2) allowed the State to call
additional witnesses that had not been previously identified; (3) admitted evidence over
Bonko’s objection to the chain of custody; and (4) denied Bonko’s motion to dismiss for
insufficient evidence as to the resisting arrest charge.1
¶3 On June 17, 2019, officers from the Big Horn County Sheriff’s Office went to a
truck stop to investigate a tip that Bonko was there and had an outstanding warrant for his
arrest. Deputy Ty Cruikshank arrived first and pulled his patrol vehicle in behind a truck
at one of the gas pumps. Deputy Cruikshank approached the person pumping gas at the
truck, Clayvin Herrera. Herrera advised Deputy Cruikshank that Bonko was inside the
truck. When Deputy Cruikshank knocked on the rear passenger window, Bonko moved
from the passenger seat towards the driver’s seat and began to struggle with Herrera.
1
At trial, Bonko moved for a directed verdict, which is properly treated as a motion to dismiss for
insufficient evidence pursuant to 46-16-403, MCA. State v. McWilliams, 2008 MT 59, ¶ 36, 341
Mont 517, 178 P.3d 121.
2
¶4 During this time, Big Horn County Sheriff’s Sergeant Michael Atkinson arrived and
parked his patrol vehicle in front of the truck. Bonko then put the truck in reverse and
backed up in the direction of Deputy Cruikshank who was now standing outside his vehicle.
Bonko then began to drive forward in an attempt to drive around Sergeant Atkinson’s
vehicle. The truck lurched forward then came to a stop. Sergeant Atkinson observed other
passengers inside the truck struggling with Bonko for control of the vehicle until one of
the passengers was able to turn off the engine.
¶5 Sergeant Atkinson and Deputy Cruikshank ordered Bonko to exit the truck multiple
times. When Bonko did not comply, they struggled to remove him from the truck. Deputy
Cruikshank warned Bonko he would tase him if he continued to refuse to comply with their
instructions to get out of the truck. Deputy Cruikshank eventually tased Bonko which
enabled the officers to remove him from the truck.
¶6 While searching Bonko incident to the arrest, Sergeant Atkinson found, among other
items, a bag containing a white crystal substance. The officers placed the seized items on
the truck while they completed Bonko’s arrest. Deputy Cruikshank then secured the items
seized from Bonko and transported Bonko to the jail. Deputy Cruikshank completed a
field test of the white substance which tested positive for methamphetamine. Deputy
Cruikshank weighed the bag with the substance at 0.39 grams. Deputy Cruikshank then
took the bag of white substance and placed it in the evidence locker.
3
¶7 The State charged Bonko with criminal possession of dangerous drugs and resisting
arrest.2 The State’s Information stated that the alleged offenses took place “on or about
June 18, 2019.” However, the State’s Motion to File an Information Direct as well as the
Affidavit of Probable Cause alleged that the crimes occurred on or about June 21, 2019,
which was the date on which the documents were filed. On the first day of trial, testimony
during the State’s case-in-chief clarified that the actual date of the alleged offenses was
June 17, 2019. Over Bonko’s objection, the District Court allowed the State to amend the
Information to change the offense date to June 17, 2019. In allowing the amendment, the
District Court noted that Bonko did not rely on the incorrect offense date for an alibi
defense and generally acknowledged his presence when and where the offenses occurred.
¶8 During trial, Bonko objected to the bag containing the white crystal substance and
the chain of custody log being introduced into evidence based on improper foundation and
chain of custody. Bonko argued that the State failed to establish chain of custody because
the State attempted to establish foundation and chain of custody exclusively through
Deputy Cruikshank, who testified that he did not know what happened to the evidence after
it was deposited in the evidence locker. The District Court sustained Bonko’s objection
but allowed the State to call three additional witnesses: the evidence technician for the Big
Horn County Sheriff’s Office; the officer who transported the items from the evidence
locker to the crime lab; and the forensic scientist who completed the chemical analysis
2
The State also charged Bonko with Criminal Possession of Drug Paraphernalia but conceded
Bonko’s motion to dismiss that charge at the conclusion of the State’s case-in-chief.
4
report. Bonko objected to these witnesses on the basis that they had not been identified
during discovery.
¶9 The District Court overruled Bonko’s objection, explaining that the testimony
merely related to establishing chain of custody and Bonko already knew that the contents
of the bag were placed in an evidence locker and later tested by a crime lab. The District
Court permitted Bonko an opportunity to interview the witnesses prior to their testimony.
After the witnesses’ testimony, the State moved to admit the bag and the chemical analysis
report. Bonko again objected, arguing that the State failed to establish chain of custody
because: (1) one of the arresting officers testified that, at some point during the arrest, the
bag was briefly placed on the back of the truck; (2) one of the arresting officers testified
that the bag looked similar to the bag he pulled out of Bonko’s pocket during the arrest;
and (3) a bystander could have theoretically tampered with the bag during Bonko’s arrest.
The District Court overruled Bonko’s objection.
¶10 At the conclusion of the State’s case-in-chief, Bonko moved to dismiss the charges
for insufficient evidence. The District Court denied Bonko’s motion. As to the criminal
possession of dangerous drugs charge, the District Court reiterated its prior ruling on the
chain of custody issue and held the evidence sufficient to sustain the charges. As to the
resisting arrest charge, the District Court held that, when viewing the evidence in the light
most favorable to the State, sufficient evidence existed upon which a rational trier of fact
could have found beyond a reasonable doubt that Bonko resisted arrest.
¶11 During deliberations, the jury submitted a question, asking in relevant part: “What
day of the week was June 17th?” The parties agreed the District Court should decline to
5
answer. The jury found Bonko guilty of possession of methamphetamine and resisting
arrest.
¶12 “We review a district court’s decision to permit an amendment to a criminal
complaint or information for an abuse of discretion.” State v. Hardground, 2019 MT 14,
¶ 7, 394 Mont. 104, 433 P.3d 711 (internal citation omitted). We review a district court’s
ruling regarding the adequacy of the foundation for the admission of evidence for an abuse
of discretion. State v. McCoy, 2012 MT 293, ¶ 11, 367 Mont. 357, 291 P.3d 568 (internal
citation omitted). “A district court’s ruling to allow testimony of witnesses is reviewed for
abuse of discretion.” State v. Bowen, 2015 MT 246, ¶ 20, 380 Mont. 433, 356 P.3d 449
(internal citation omitted). “A district court abuses its discretion when it acts arbitrarily
without the employment of conscientious judgment or exceeds the bounds of reason
resulting in substantial injustice.” Hardground, ¶ 7 (internal citation omitted).
¶13 “This Court reviews de novo a district court’s conclusion as to whether sufficient
evidence exists to support a jury’s verdict.” City of Bozeman v. Howard, 2021 MT 230,
¶ 10, 405 Mont. 321, 495 P.3d 72 (internal citation omitted). When doing so, “we view
the evidence in the light most favorable to the [State] to determine whether a rational trier
of fact could have found all the essential elements of the offense beyond a reasonable
doubt.” City of Bozeman, ¶ 10 (internal citation omitted).
¶14 Bonko contends that the District Court abused its discretion by allowing the State
to amend its Information. Although he concedes the amendment was as to form, he argues
that allowing the State to correct the offense date by one day prejudiced his substantive
rights because he relied on the date discrepancy in his defense, and “the jury was focused
6
and confused by the date, as indicated by the question to the court during deliberations” as
to what day of the week the alleged offenses occurred.
¶15 Section 46-11-205(3), MCA, provides:
The court may permit an information to be amended as to form at any time
before a verdict or finding is issued if no additional or different offense is
charged and if the substantial rights of the defendant are not prejudiced.
We have previously held that an amendment of the information as to the alleged dates of
the offenses was an amendment as to form that did not prejudice the defendant because the
same crimes were charged, the elements and proof required did not change, and the
defendant was informed of the charges against him. State v. Yecovenko, 2004 MT 196,
¶ 32, 322 Mont. 247, 95 P.3d 145.3
¶16 As in Yecovenko, the amendment to the Information alleged the same crimes, the
elements and proof required did not change, and Bonko was informed of the charges
against him. Bonko’s argument that he was relying on the date discrepancy in his defense
might have some merit if it were legal to possess methamphetamine and resist arrest in Big
Horn County on Tuesdays but not on Mondays. As it stands, his argument fails. The
District Court did not abuse its discretion by allowing the State to amend the Information.
¶17 Bonko claims that the District Court abused its discretion when it allowed the State
to call additional witnesses to establish foundation and chain of custody. The District Court
carefully considered Bonko’s objections to the witnesses and concluded Bonko did not
3
However, when proof of an element of the charged offense, or rebuttal by the defense, “requires
evidence of conduct on a specific date or dates,” the amendment may be considered one of
substance. Hardground, ¶ 17.
7
suffer undue prejudice or surprise because the testimony of the undisclosed witnesses
merely related to establishing chain of custody and Bonko already knew that the contents
of the bag were placed in an evidence locker and later tested by the crime lab. To mitigate
any potential prejudice, the District Court provided Bonko with a reasonable time and
opportunity to interview the witnesses prior to their testimony. The District Court did not
abuse its discretion in allowing the witnesses’ testimony.
¶18 Bonko contends the District Court abused its discretion when it admitted the bag of
white crystal powder because the State failed to establish the chain of custody. Bonko
argues that the State failed to demonstrate a continuing chain of possession because one of
the arresting officers testified that, at some point during the arrest, an officer briefly placed
the bag on the back of a truck within both reach and line of sight. Bonko also argues that
the State failed to demonstrate that there was no substantial change in the bag because an
arresting officer testified that the bag looked similar, and a bystander could have
theoretically tampered with the bag.
¶19 To admit evidence, the State must show (1) a continuous chain of possession and
(2) no substantial change in the evidence occurred while it was in the State’s possession.
McCoy, ¶ 13 (internal citation omitted). “The State does not need to show that it possessed
the evidence at all times . . . .” State v. Bowser, 2005 MT 279, ¶ 30, 329 Mont. 218, 123
P.3d 230 (internal citation omitted). The State does not need to show that it would be
impossible to tamper with evidence. McCoy, ¶ 13 (internal citation omitted). If the State
satisfies these two elements, the defendant must “show that the evidence has been tampered
with while in the State’s custody.” Bowser, ¶ 30 (internal citation omitted).
8
¶20 The State established through testimony a continuous chain of possession. Deputy
Cruikshank testified that he placed the evidence in the evidence locker. The evidence
technician testified that the evidence was immediately checked out for transport to the
crime lab. The officer who transported the evidence to the crime lab testified regarding
transport of the evidence. Finally, the crime lab technician testified that she tested the
contents of the bag, which tested positive for methamphetamine. Bonko presented no
credible argument of a substantial change to the evidence while in the State’s possession.
The District Court did not abuse its discretion by holding that the State adequately
established the evidentiary chain of custody.
¶21 Bonko contends the District Court erred when it denied his motion to dismiss for
insufficient evidence as to the resisting arrest charge because he did not use or threaten to
use physical force or violence and did not know that he was being arrested.
¶22 Section 45-7-301(1)(a), MCA, provides:
A person commits the offense of resisting arrest if the person knowingly
prevents or attempts to prevent a peace officer from effecting an arrest by:
(a) using or threatening to use physical force or violence against the peace
officer or another.
A person uses physical force against a peace officer when they forcefully resist the officer’s
effort to restrain them by failing to comply with directions, pulling away from the officer,
and making their body rigid and stiff. State v. Sutton, 2018 MT 143, ¶ 26, 391 Mont. 485,
419 P.3d 1201.
¶23 Bonko physically resisted the officers’ efforts to remove him from the truck to the
point where, after being warned, Deputy Cruikshank had to tase Bonko in order to get him
9
out of the truck. Bonko’s assertion that there was insufficient evidence for a rational trier
of fact to find he knowingly resisted arrest is not credible. As the District Court noted:
“[T]he officers were in marked patrol cars, there was a car on each side of the vehicle which
Mr. Bonko was in, the officers were in uniform, and clearly making clear directives to
[Bonko] to comply.” The officers’ directives to Bonko to get out of the truck and the
ensuing struggle lasted several minutes. Although Bonko claims he was unaware of the
warrant that was out for his arrest, he attempted to flee in the truck as soon as Deputy
Cruikshank approached. Viewing the evidence in a light most favorable to the State, a
rational trier of fact certainly could have found all the essential elements of resisting arrest
beyond a reasonable doubt. City of Bozeman, ¶ 10. The District Court did not err by
denying Bonko’s motion to dismiss for insufficient evidence.
¶24 We have determined to decide this case pursuant to Section I, Paragraph 3(c) of our
Internal Operating Rules, which provides for memorandum opinions. This appeal presents
no constitutional issues, no issues of first impression, and does not establish new precedent
or modify existing precedent. Bonko’s convictions for felony criminal possession of
dangerous drugs and misdemeanor resisting arrest are affirmed.
/S/ JAMES JEREMIAH SHEA
We Concur:
/S/ MIKE McGRATH
/S/ BETH BAKER
/S/ INGRID GUSTAFSON
/S/ DIRK M. SANDEFUR
10 | 01-04-2023 | 11-09-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482734/ | 11/09/2022
IN THE SUPREME COURT OF THE STATE OF MONTANA Case Number: DA 22-0286
No. DA 22-0286
STATE OF MONTANA,
Plaintiff and Appellee,
v.
DARRIN JOHNSON,
Defendant and Appellant.
GRANT OF EXTENSION
Upon consideration of Appellee’s motion for a 30-day extension of time,
and good cause appearing therefor, Appellee is granted an extension of time to
and including December 10, 2022, within which to prepare, serve, and file the
State’s response brief.
CL Electronically signed by:
Bowen Greenwood
Clerk of the Supreme Court
November 9 2022 | 01-04-2023 | 11-09-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482736/ | 11/09/2022
IN THE SUPREME COURT OF THE STATE OF MONTANA
No. DA 21-0325
STATE OF MONTANA,
Plaintiff and Appellee,
v.
AUSTIN ALLEN MILLARD,
Defendant and Appellant.
GRANT OF EXTENSION
Upon consideration of Appellee’s motion for a 30-day extension of time,
and good cause appearing therefor, Appellee is granted an extension of time to
and including December 11 2022, within which to prepare, file, and serve its
response brief.
BF Electronically signed by:
Bowen Greenwood
Clerk of the Supreme Court
November 9 2022 | 01-04-2023 | 11-09-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482737/ | ORIGINAL 11/09/2022
IN THE SUPREME COURT OF THE STATE OF MONTANA Case Number: PR 22-0005
PR 22-0005
IN RE THE MOTION OF DEVON T. MONGELUZZI FOR
ADMISSION TO THE BAR OF THE STATE OF ORDER
MONTANA
Devon T. Mongeluzzi has filed a motion for admission to the Bar of the State of
Montana pursuant to Rule V of the Rules for Admission, Admission on Motion. The Bar
Admissions Administrator of the State Bar of Montana has informed the Court that the
Commission on Character and Fitness has certified that Mongeluzzi has provided the
necessary documentation and has satisfied the requirements prerequisite to admission on
motion under Rule V. Therefore,
IT IS HEREBY ORDERED that upon payment of any application fees and
completion of any other processing requirements as set forth by the Bar Admissions
Administrator, Devon T. Mongeluzzi may be sworn in to the practice of law in the State of
Montana. Arrangements for swearing in may be made by contacting the office of the Clerk
of the Montana Supreme Court.
The Clerk is directed to provide copies of this order to Petitioner and to the State
Bar of Montana.
DATED this c r day of November, 2022.
Chief Justice
FILED
NOV 0 9 2022
Bowel, C , „30ci
< of wet Court
S.gste L. Mo, ana
(94 Al JUL.
Justices
2 | 01-04-2023 | 11-09-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482740/ | 11/09/2022
IN THE SUPREME COURT OF THE STATE OF MONTANA Case Number: DA 21-0519
DA 21-0519 FILLO
NOV 0 9 2022
STATE OF MONTANA, Bowen Freer • Jac'
C.- < of ' )rer Court
g:ate, C 1 Mor ,ans
Plaintiff and Appellee,
v. ORDER
THOMAS JEFF RICHARDSON,
Defendant and Appellant.
Counsel for Appellant Thomas Jeff Richardson filed a motion and brief asking to
be allowed to withdraw from this appeal on grounds that counsel has been unable to find
any nonfrivolous issues to raise on appeal, pursuant to § 46-8-103(2), MCA, and Anders v.
California, 386 U.S. 738, 87 S. Ct. 1396 (1967). This Court granted Richardson time to
respond, but no response was filed.
The Court has now independently examined the record pursuant to § 46-8-103(2),
MCA, and Anders. We conclude no arguments with potential legal merit can be raised
Richardson's appeal.
Therefore,
IT IS ORDERED that this appeal is DISMISSED.
The Clerk is directed to provide copies of this Order to all counsel of record and to
Richardson personally.
DATED this 1 —day of November, 2022.
Chief Justice
74
/1717
-
424 -44-14...
Justic/e
es
Justice Laurie McKinnon did not participate in this matter.
2 | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482742/ | Case: 21-50487 Document: 00516539505 Page: 1 Date Filed: 11/09/2022
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
FILED
November 9, 2022
No. 21-50487
Lyle W. Cayce
Clerk
United States of America,
Plaintiff—Appellee,
versus
Christopher Matthew Meredith,
Defendant—Appellant.
Appeal from the United States District Court
for the Western District of Texas
USDC No. 1:19-CR-39-1
Before Stewart, Willett, and Oldham, Circuit Judges.
Andrew S. Oldham, Circuit Judge:
The question presented is whether Christopher Meredith can appeal
a sentencing enhancement and restitution award in the face of an appeal
waiver. He cannot. We therefore dismiss the appeal.
I.
Christopher Meredith created a fake company, supplied it with fake
financials and fake contracts, and used the same to solicit more than $7
million from unwary investors. The Government indicted him. Meredith
Case: 21-50487 Document: 00516539505 Page: 2 Date Filed: 11/09/2022
No. 21-50487
sought a plea deal from the Government. The trial court granted several
continuances to facilitate the parties’ plea negotiations.
Eventually, Meredith pleaded guilty to one count of securities fraud,
in violation of 15 U.S.C. §§ 78j(b) and 77ff. The district court sentenced
Meredith to 168 months’ imprisonment and imposed approximately $6.8
million in restitution. In exchange for Meredith’s plea, the Government
agreed to dismiss five other counts, which carried a cumulative maximum of
100 years’ confinement.
As part of his agreement, Meredith waived his right to appeal.
Undeterred, Meredith filed a notice of appeal after sentencing. His attorney
moved to withdraw and filed a brief consistent with Anders v. California, 386
U.S. 738 (1967). After Meredith objected, his counsel withdrew the Anders
brief and litigated this action, arguing that (1) Meredith’s restitution
obligation exceeds the statutory maximum and (2) the district court erred in
computing Meredith’s criminal history score. Neither argument was
preserved below.
II.
The right to appeal is statutory, not constitutional. Abney v. United
States, 431 U.S. 651, 656 (1977). The right can be waived. See Garza v. Idaho,
139 S. Ct. 738, 742 (2019). Such waivers often stem from plea bargaining, and
plea agreements are construed like contracts. See Puckett v. United States, 556
U.S. 129, 137 (2009); United States v. Bond, 414 F.3d 542, 545 (5th Cir. 2005).
Accordingly, appeal waivers require dismissal if (1) the defendant’s waiver
was knowing and voluntary and (2) “the waiver applies to the circumstances
at hand, based on the plain language of the plea agreement.” United States v.
McKinney, 406 F.3d 744, 746 (5th Cir. 2005). We have applied this inquiry to
uphold appeal waivers in a variety of contexts, including challenges to
restitution, United States v. Keele, 755 F.3d 752, 756 (5th Cir. 2014), upward
2
Case: 21-50487 Document: 00516539505 Page: 3 Date Filed: 11/09/2022
No. 21-50487
variances, United States v. Jacobs, 635 F.3d 778, 783 (5th Cir. 2011), and
Guidelines enhancements, Bond, 414 F.3d at 543–46.
Here, Meredith waived his right to appeal “on any ground,” including
any right he might’ve had to challenge a “monetary penalty or obligation.”
Before his plea was accepted, Meredith testified that he read the agreement,
discussed it with his attorney, and understood it. Meredith also testified in
response to specific questioning that he understood he agreed to an appeal
waiver, to pay restitution, and to the district court’s determination of that
restitution. We find that his agreement was knowing and voluntary.
Nevertheless, Meredith says that he did not really waive his right to
appeal “on any ground” and did not really waive his right to appeal the
district court’s determination of any “monetary penalty or obligation.” How
so, you might wonder? Meredith points out that the plea agreement, like all
or virtually all such agreements executed by the Justice Department, carves
out the right to appeal if the district court’s sentence exceeds “the maximum
sentence authorized by statute.” This boilerplate language, Meredith
contends, authorizes an appeal whenever the defendant thinks the district
court erred in its restitution calculation.
We long ago rejected such an attempt to use the statutory-maximum
boilerplate as an appeal-authorizing escape hatch. See Bond, 414 F.3d at 545–
46. Rather, as in Bond, the statutory-maximum carveout authorizes an appeal
only when the district court exceeds “the upper limit of punishment that
Congress has legislatively specified for violations of a statute”—not when the
sentencing judge commits any error under the sentencing statute. Id. at 546
(quotation omitted). The relevant statutory maximum in Meredith’s case
provides: “The court may also order restitution in any criminal case to the
extent agreed to by the parties in a plea agreement.” 18 U.S.C. § 3663(a)(3)
3
Case: 21-50487 Document: 00516539505 Page: 4 Date Filed: 11/09/2022
No. 21-50487
(emphasis added). 1 And Meredith repeatedly agreed to an unspecified
amount of restitution, to be determined by the district court. In other words,
the maximum restitution was set by Meredith’s agreement, which in turn
authorized the district court to set the amount. See id. § 3664(e) (allowing
district courts to determine restitution amounts by preponderance of the
evidence). 2
Having waived his appeal rights, including his right to challenge “the
determination of any . . . monetary penalty or obligation,” and having agreed
to let the district court handle the arithmetic, Meredith cannot now complain
about how the numbers shook out. 3
1
Meredith suggests the district court’s restitution award depends on 18 U.S.C.
§ 3663A. That’s wrong because § 3663A does not apply to title 15 crimes like Meredith’s
securities fraud. See id. § 3663A(c)(1) (covered crimes). Rather, the statutory support for
restitution in this case is the more general restitution statute in § 3663 and its authorization
for restitution awards when parties agree to them. See id. § 3663(a)(3).
2
The cases cited in Meredith’s brief are not to the contrary. For example,
Meredith cites United States v. Chemical & Metal Industries, Inc., 677 F.3d 750 (5th Cir.
2012), for the proposition that a restitution order can be appealed, even when the defendant
waived the right to appeal any sentence not “in excess of the statutory maximum.” Id. at
752. Meredith’s precedents are vastly different from this case, however, because in none
of them did the party waive the right to appeal any “monetary penalty or obligation”
ordered by the district court, nor did any of them implicate 18 U.S.C. § 3663(a)(3)’s
authorization of a restitution award “to the extent agreed to by the parties in a plea
agreement.” See, e.g., Chem. & Metal Indus., 677 F.3d at 752 (noting the record contained
“no evidence” of loss, which constituted reversible error where the parties did not by
agreement authorize the district court to impose restitution in any amount). And in any
event, each of Meredith’s cases postdate Bond and hence cannot conflict with it. See
Gahagan v. U.S. Citizenship & Immigr. Servs., 911 F.3d 298, 302 (5th Cir. 2018) (rule of
orderliness).
3
Although we find that Meredith’s appeal waiver bars his restitution arguments,
he likely would fail to secure relief regardless. Meredith complains that the district court
insufficiently credited dividends paid by his Ponzi scheme against his restitution obligation,
but any further credit would necessarily demand that some of his victims go
4
Case: 21-50487 Document: 00516539505 Page: 5 Date Filed: 11/09/2022
No. 21-50487
Meredith also challenges the district court’s application of an
enhancement for committing an offense while under a “criminal justice
sentence” pursuant to U.S.S.G. § 4A1.1(d). But his waiver forecloses this
argument too. See Bond, 414 F.3d at 543–46; United States v. Smith, 404 F.
App’x 884, 887 (5th Cir. 2010) (per curiam) (“We enforce broad appellate
waivers and have declined to examine the correctness of applying a particular
guideline where the defendant has agreed to a general waiver of the right to
appeal the sentence.”).
DISMISSED.
uncompensated. Meredith also notes that victim affidavits describing losses sum to less
than the district court’s restitution order. But that’s unsurprising; only ~40 loss affidavits
were collected out of 126 victims. Meredith also questions whether the Government
sufficiently proves the amounts owed to each victim, but here the uncontroverted Pre-
Sentence Report included a detailed schedule of the amounts owing to each victim.
Meredith did not challenge any of these facts in the district court, so he cannot come close
to showing that the district court erred, see United States v. Harris, 702 F.3d 226, 230 (5th
Cir. 2012), much less that it plainly erred, see Puckett, 556 U.S. at 135.
5 | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482745/ | Case: 22-20064 Document: 00516539612 Page: 1 Date Filed: 11/09/2022
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
FILED
No. 22-20064 November 9, 2022
Summary Calendar Lyle W. Cayce
Clerk
Jacquelyn Carmona,
Plaintiff—Appellant,
versus
Louis DeJoy, Postmaster General; United States Postal
Service,
Defendants—Appellees.
Appeal from the United States District Court
for the Southern District of Texas
USDC No. 4:19-CV-4579
Before Davis, Duncan, and Engelhardt, Circuit Judges.
Per Curiam:*
Plaintiff-Appellant, Jacquelyn Carmona, challenges the dismissal of
her sex discrimination and failure-to-accommodate claims against her
employer, Defendants-Appellees the Postmaster General and the United
*
Pursuant to 5th Circuit Rule 47.5, the court has determined that this
opinion should not be published and is not precedent except under the limited
circumstances set forth in 5th Circuit Rule 47.5.4.
Case: 22-20064 Document: 00516539612 Page: 2 Date Filed: 11/09/2022
No. 22-20064
States Postal Service (“USPS”). Because Carmona has not presented
sufficient evidence to establish a prima facie case of discrimination or failure
to accommodate, we AFFIRM.
I. Background
Jacquelyn Carmona is a rural mail carrier for USPS. In 2017, Carmona
found out she was pregnant. She alleges that in December of that year, she
asked her USPS supervisors for an accommodation based on a letter from her
doctor stating that during the remainder of her pregnancy she could not lift
packages heavier than ten pounds or work more than eight hours a day
without a break. USPS denied her requested accommodation. Plaintiff was
subsequently placed on leave for the remainder of her pregnancy.
Carmona testified that from December through March she was on
paid leave as she used up her remaining annual and sick leave. But she
testified that her annual and sick leave “ran out shortly before [she]
delivered” her child, and thus part of her leave was unpaid. Carmona
returned to work twelve weeks after the birth of her child.
Carmona sued USPS, alleging that it violated Title VII of the Civil
Rights Act of 1964 and the Pregnancy Discrimination Act of 1978 by refusing
to accommodate her and instead placing her on leave. The district court
granted summary judgment in favor of defendants USPS on Carmona’s sex
discrimination claim and failure-to-accommodate claim. Plaintiff timely
appealed.
II. Discussion
We review a grant of summary judgment de novo. 1 Summary
judgment is proper “if the movant shows that there is no genuine dispute as
1
Kitchen v. BASF, 952 F.3d 247, 252 (5th Cir. 2020).
2
Case: 22-20064 Document: 00516539612 Page: 3 Date Filed: 11/09/2022
No. 22-20064
to any material fact and the movant is entitled to judgment as a matter of
law.” 2
Title VII makes it unlawful for an employer “to fail or refuse to hire
or to discharge any individual, or otherwise to discriminate against any
individual with respect to his compensation, terms, conditions, or privileges
of employment, because of such individual’s race, color, religion, sex, or
national origin.” 3 The Pregnancy Discrimination Act amended Title VII’s
definition of the term “because of sex” to include “because of or on the basis
of pregnancy, childbirth, or related medical conditions.” 4 The second clause
of the Pregnancy Discrimination Act requires that “women affected by
pregnancy, childbirth, or related medical conditions shall be treated the same
for all employment-related purposes . . . as other persons not so affected but
similar in their ability or inability to work.” 5
A. Sex Discrimination Claim
When, as is the case here, plaintiff relies on circumstantial evidence to
prove disparate treatment on the basis of sex, she must satisfy the McDonnell
Douglas’s burden-shifting framework. 6 Under this framework, plaintiff must
initially establish a prima facie case of discrimination with evidence that she
“(1) is a member of a protected group; (2) was qualified for the position at
issue; (3) was discharged or suffered some adverse employment action by the
employer; and (4) was replaced by someone outside [her] protected group or
2
Fed. R. Civ. P. 56(a).
3
42 U.S.C. § 2000e-2(a)(1).
4
42 U.S.C. § 2000e(k).
5
Id.
6
Young v. United Parcel Serv., Inc., 575 U.S. 206, 228-29 (2015).
3
Case: 22-20064 Document: 00516539612 Page: 4 Date Filed: 11/09/2022
No. 22-20064
was treated less favorably than other similarly situated employees outside the
protected group.” 7
In this case, the district court concluded that Carmona failed to
establish that she suffered from an adverse employment action when USPS
placed her on leave. We agree. An adverse employment decision refers to
“an employment decision that affects the terms and conditions of
employment,” 8 and in the context of discrimination claims, includes only
“ultimate employment decisions such as hiring, granting leave, discharging,
promoting, or compensating.” 9
Both parties agree that under this Court’s precedent in McCoy v. City
of Shreveport, 10 USPS’s decision to place Carmona on paid leave is not an
adverse employment action. 11 Plaintiff instead contends that she suffered an
adverse employment action because she had to use unpaid leave after
exhausting her accrued paid leave. But as with paid leave, this Court has
similarly held that being placed on temporary unpaid leave is not an ultimate
employment decision. 12 Because Carmona has failed to prove that USPS
7
Morris v. Town of Indep., 827 F.3d 396, 400 (5th Cir. 2016) (quoting Willis v. Cleco
Corp., 749 F.3d 314, 319-20 (5th Cir. 2014)).
8
Thompson v. City of Waco, 764 F.3d 500, 503 (5th Cir. 2014).
9
McCoy v. City of Shreveport, 492 F.3d 551, 559 (5th Cir. 2007) (citation omitted).
10
Id.
11
See id. at 559 (finding that the “district court properly held that placing [plaintiff]
on paid leave—whether administrative or sick—was not an adverse employment action”).
12
See Barricks v. Minyard Food Stores, Inc., No. 98-10147, 1999 WL 47042, *4 (5th
Cir. 1999) (unpublished) (holding that the “adverse action of which [plaintiff] complains
was that she was placed on an involuntary medical leave of absence” but that such leave
“was not an ‘ultimate employment decision’”); Clark v. Charter Commc’ns, L.L.C., 775 F.
App’x 764, 768 (5th Cir. 2019) (per curiam) (unpublished) (rejecting plaintiff’s argument
that being placed on unpaid leave was an adverse employment action). Unpublished
opinions issued in or after 1996 are “not controlling precedent” except in limited
4
Case: 22-20064 Document: 00516539612 Page: 5 Date Filed: 11/09/2022
No. 22-20064
took an adverse employment action against her, she “cannot make the
necessary prima facie case[] of discrimination.” 13
B. Failure-to-Accommodate Claim
A plaintiff alleging that the denial of an accommodation violates the
Pregnancy Discrimination Act can “make out a prima facie case by showing,
as in McDonnell Douglas, that she belongs to the protected class, that she
sought accommodation, that the employer did not accommodate her, and
that the employer did accommodate others ‘similar in their ability or inability
to work.’” 14 Here, the district court concluded that because plaintiff did not
present admissible evidence of similarly situated, non-pregnant comparators
who were treated more favorably, she was unable to carry her prima facie
burden.
We similarly find that plaintiff did not present sufficient evidence to
support the fourth element of her prima facie case that defendants
accommodated others “similar in their ability or inability to work.” 15
Carmona has not shown that defendants provided accommodations to other
USPS rural carriers who similarly were unable to work a full eight-hour day
and lift objects greater than ten pounds for the same duration as plaintiff. 16
circumstances, but they “may be persuasive authority.” Ballard v. Burton, 444 F.3d 391,
401 n.7 (5th Cir. 2006).
13
McCoy, 492 F.3d at 557.
14
Young, 575 U.S. at 229.
15
Id.
16
See id. at 224 (noting that for purposes of comparators the language of the statute
focuses on “nonpregnant persons with similar disabilities”); see also Townsend v. Town of
Brusly, 421 F. Supp. 3d 352, 363 (M.D. La. 2019) (“The sole basis for comparison under
Young is the similarity in the physical restrictions of the employee and need for similar
accommodations.”).
5
Case: 22-20064 Document: 00516539612 Page: 6 Date Filed: 11/09/2022
No. 22-20064
At most, plaintiff has shown that three of her co-workers were not disciplined
by USPS management for not completing their routes in certain instances,
and two co-workers received some unspecified “package assistance” with
“large packages.” Plaintiff provided no evidence that any of the above
employees requested the same accommodations as plaintiff or were in
“nearly identical circumstances” in terms of their inability to perform the
tasks of a rural mail carrier. 17
Accordingly, the district court did not err in finding that Carmona
failed to meet the fourth prong of her prima facie failure to accommodate
claim.
III. Conclusion
For the foregoing reasons and the reasons stated by the district court,
the judgment of the district court is AFFIRMED.
17
See Lee v. Kan. City S. Ry. Co., 574 F.3d 253, 260 (5th Cir. 2009); see also Santos
v. Wincor Nixdorf, Inc., 778 F. App’x 300, 304 (5th Cir. 2019) (per curiam) (unpublished)
(holding that plaintiff did not establish her prima facie case because she had “not shown
that any other Wincor employee was similarly unable to work in the office for the same
duration and at the same stage of his or her employment.”).
6 | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482746/ | Case: 20-70008 Document: 00516539180 Page: 1 Date Filed: 11/09/2022
United States Court of Appeals
for the Fifth Circuit
United States Court of Appeals
Fifth Circuit
No. 20-70008
FILED
Summary Calendar November 9, 2022
Lyle W. Cayce
Arturo Daniel Aranda, Clerk
Petitioner—Appellant,
versus
Bobby Lumpkin, Director, Texas Department of
Criminal Justice, Correctional Institutions Division,
Respondent—Appellee.
Appeal from the United States District Court
For the Southern District of Texas
USDC No. 6:89-CV-13
Before Haynes, Graves, and Engelhardt, Circuit Judges.
Per Curiam:*
Petitioner Arturo Aranda was convicted of the murder of a police
officer and sentenced to death. Following state court proceedings, Aranda
petitioned for a writ of habeas corpus in federal court, which the district court
*
Pursuant to 5th Circuit Rule 47.5, the court has determined that this
opinion should not be published and is not precedent except under the limited
circumstances set forth in 5th Circuit Rule 47.5.4.
Case: 20-70008 Document: 00516539180 Page: 2 Date Filed: 11/09/2022
No. 20-70008
denied. Aranda then sought a certificate of appealability on various issues
from this court. We granted the certificate of appealability on two issues:
(1) Aranda’s Miranda claim and (2) Aranda’s ineffective-assistance-of
counsel-claim. Having now considered those issues on the merits and having
held oral argument, we affirm the district court.
I
Early in the morning hours of July 31, 1976, brothers Arturo and Juan
Aranda were in the process of transporting a large quantity of marijuana from
Laredo to San Antonio, Texas. The brothers were stopped by Officers Pablo
Albidrez and Candelario Viera of the Laredo Police Department. A gunfight
erupted, and Officer Albidrez was shot through the chest and killed. The
Aranda brothers were apprehended and arrested near the scene.
During the gunfight, Arturo Aranda was hit in the shoulder and hand.
He was transported to a hospital, where a .38 caliber handgun was found
hidden in his pants. Ballistic testing later showed that this weapon could have
fired the bullet that killed Officer Albidrez, and no other recovered weapon
could have. Following a brief surgery, Aranda was transported to the Webb
County Jail, where he confessed to killing Officer Albidrez. He also signed a
written waiver of his Miranda rights. As relevant to this appeal, he argues his
waiver of his Miranda rights was not knowing and intelligent.
Both brothers were charged for the murder of Officer Albidrez. Juan
Aranda was tried first; he was found guilty and sentenced to life in prison.
Arturo Aranda was tried next, and a jury found him guilty. In the punishment
phase of the trial, the jury sentenced Aranda to death. Also relevant to this
appeal, Aranda now contends that his trial counsel was ineffective for failing
to investigate mitigating circumstances.
Arturo Aranda appealed, his conviction was affirmed, and the
Supreme Court denied certiorari. Aranda v. State, 736 S.W.2d 702 (Tex.
2
Case: 20-70008 Document: 00516539180 Page: 3 Date Filed: 11/09/2022
No. 20-70008
Crim. App. 1987) (en banc), cert. denied, 487 U.S. 1241 (1988). He filed a
state post-conviction application, which was denied. Aranda then sought
federal habeas relief. On April 20, 1989, Aranda filed his federal habeas
petition. Following briefing, the district court granted summary judgment in
favor of the State. Aranda moved for reconsideration, which the State
opposed.
For reasons which are unclear from the record, Aranda’s motion for
reconsideration was not ruled on for nearly three decades. Eventually, the
matter was reassigned, and the newly assigned district judge denied Aranda’s
motion. The district court declined to grant a certificate of appealability
(“COA”) as to any claims. On appeal, we granted a COA to consider two of
Aranda’s claims: (1) his Miranda claim and (2) his ineffective-assistance-of-
counsel claim, both of which we address now.
II
Because Aranda filed his initial federal habeas petition before the
enactment of the Antiterrorism and Effective Death Penalty Act (AEDPA),
his claims are governed by the law as it existed before AEDPA. Slack v.
McDaniel, 529 U.S. 473, 481 (2000). “Under pre-AEDPA standards of
review, this court will review the legal conclusions of the district court de
novo and the state court’s findings of fact for clear error.” Kunkle v. Dretke,
352 F.3d 980, 985 (5th Cir. 2003). “This court must accord a presumption
of correctness to all findings of fact if they are supported by the record.” Id.
However, “[t]he pre-AEDPA standards do not require a federal court to
defer to the state court’s legal conclusions.” Id.
III
We granted Aranda a COA on two claims: (1) a Miranda claim, and
(2) an ineffective-assistance-of-counsel claim. We examine each claim in
turn.
3
Case: 20-70008 Document: 00516539180 Page: 4 Date Filed: 11/09/2022
No. 20-70008
A. The Miranda Claim
Aranda argues that his waiver of his Miranda rights was not knowing-
and-voluntary, and therefore his confession was introduced in violation of his
Miranda rights. Specifically, he argues that his waiver could not have been
knowing-and-voluntary because (1) he “did not understand” the English-
language waiver form, (2) he had not recovered from surgery earlier in the
day to knowingly and intelligently understand the consequences of his
waiver, and (3) he did not know he was facing a capital murder charge.
Aranda’s Miranda violation claim falls flat. Aranda challenged his
confession before the trial court and was offered a full and fair hearing by the
court. Although that hearing focused primarily on the voluntariness of the
waiver, Aranda raised some of the same issues he does here, including his
purported difficulties speaking English and his condition after surgery at the
time of his interrogation. But the trial court rejected these arguments, saying
that it was “inclined to believe the peace officers and the District Attorney”
and that “the statement will be admissible on the trial of the merits.”
Although the trial court made few explicit findings of fact, its ruling (and
comment that it believed the prosecution’s witnesses rather than Aranda)
necessarily implies that it found both that Aranda was either explained the
form and his rights in Spanish or had sufficient grasp of English to waive his
rights, and that Aranda’s condition was not so poor after his surgery that he
was incapable of waiving his rights. See Townsend v. Sain, 372 U.S. 293, 314
(1963) (explaining that “if the state court has decided the merits of the claim
but has made no express findings,” a court may still “reconstruct the findings
of the state trier of fact, either because his view of the facts is plain from his
opinion or because of other indicia”). The findings necessarily implied in the
ruling are entitled to our deference. See 28 U.S.C. § 2254(d) (1988); see also
Wainwright v. Witt, 469 U.S. 412, 430–31 (1985) (explaining that a transcript
4
Case: 20-70008 Document: 00516539180 Page: 5 Date Filed: 11/09/2022
No. 20-70008
can satisfy the requirement of an “adequate written indicia” by a state court
entitled to deference under § 2254(d)).
Nor can we say that such findings were unreasonable. The record is
replete with evidence that Aranda had a working grasp of English and that he
was explained his rights in Spanish. And although Aranda emphasizes the
nature of his wounds at some length, there was significant testimony
indicating that by the time of his interrogation he had sufficiently recovered
and had a full understanding of the circumstances surrounding his
interrogation. Finally, because the hospital records only demonstrate that
Aranda was given pain medication around noon, reason dictates Aranda
would likely no longer be under the influence of the drug by the time of his
interrogation in the evening.
Finally, Aranda cites no authority for his proposition that a failure to
advise him that he faced the death penalty prior to his confession constitutes
a Miranda violation, and we decline to create such a novel rule here. Indeed,
at oral argument, Aranda conceded that Miranda does not require that prior
to issuing a waiver, the defendant be advised of the potential worst outcome.
And both the Supreme Court and this court have intimated that no such rule
exists. See Colorado v. Spring, 479 U.S. 564, 576 (1987) (“We have held that
a valid waiver does not require that an individual be informed of all
information ‘useful’ in making his decision or all information that might
affect his decision to confess.” (cleaned up)); Vanderbilt v. Collins, 994 F.2d
189, 197 (5th Cir. 1993) (explaining that “a knowing and voluntary waiver of
Miranda rights does not require that the defendant understand every possible
consequence of the decision to waive the right”). And as the State points
out, such a rule would prospectively bind prosecutors’ hands based on
representations made (or omitted) by investigators, who lack the discretion
to determine whether to seek the death penalty.
5
Case: 20-70008 Document: 00516539180 Page: 6 Date Filed: 11/09/2022
No. 20-70008
Moreover, the record indicates that Aranda was told that he was
suspected of the murder of a police officer. He was thus—at a minimum—
aware that he was suspected of a serious crime, and a reasonable individual,
regardless of education, would have understood that the penalty for such a
crime would be severe. In these circumstances, the failure to explain to
Aranda precisely the consequences he may face for the crime he is accused
of does not create a Miranda violation.
But even assuming that there was a Miranda violation, Aranda must
demonstrate that it resulted in “actual prejudice” and “had substantial and
injurious effect or influence in determining the jury’s verdict.” Brecht v.
Abrahamson, 507 U.S. 619, 637 (1993). Aranda fails to do so here, as the
record demonstrates that any purported Miranda error was harmless. The
State produced overwhelming evidence of Aranda’s guilt. This evidence
included the testimony of Officer Viera, who identified Petitioner in open
court. It included significant ballistic evidence that Arturo Aranda’s gun
killed Officer Albidrez. And it included the testimony of Aranda’s brother
Juan Aranda, who described the gunfight with the officers.
Perhaps recognizing the voluminous evidence against him, Aranda
strives to undermine the other evidence of his guilt. He first argues that
Officer Viera’s eyewitness account of the shooting should be completely
disregarded because the “immense stress” caused by the gunfight renders
Officer’s Viera’s account “inherently unreliable.” But Officer Viera’s
testimony was unequivocal. Officer Viera was able to offer a detailed
description of the events that unfolded on the morning of July 31, 1976.
Officer Viera’s testimony held up under cross-examination, and he was
adamant that Aranda shot first. And Viera identified Arturo Aranda in open
6
Case: 20-70008 Document: 00516539180 Page: 7 Date Filed: 11/09/2022
No. 20-70008
court. This eyewitness testimony cannot be discounted based on after-the-
fact speculation that stress renders it unreliable. 1
Aranda’s attempts to impugn the ballistics evidence against him are
also faulty. At trial, a ballistics expert testified that Aranda’s weapon could
have fired the bullet that killed Officer Albidrez, and no other recovered
weapon could have. Aranda first argues that there was “conflicting”
evidence as to who possessed a .38 caliber handgun—which was identified as
the murder weapon at trial—on the night of the shooting. But he points to
no such conflicting testimony in the record. Moreover, the .38 caliber
handgun was found on Aranda’s person at the hospital. 2 Aranda asks us to
disregard that evidence, too, with a conclusory argument that it is a “rather
incredible scenario.” But again, Aranda cites no evidence to draw that
testimony into doubt. Finally, Aranda contends that the firearm toolmark
evaluation used to analyze the gun found on Aranda’s person was “not
conclusive.” But Aranda still fails to direct us to any record evidence
demonstrating that the firearm toolmark evaluation was inconclusive. In
1
Indeed, the primary support Aranda musters to support this argument consists of
two nonbinding state-court cases. But these cases do not aid Aranda. In People v. Lerma,
47 N.E.3d 985, 993 (Il. 2016), the court listed stress as only one of several factors that can
influence the reliability of eyewitness testimony. Other factors included “the wearing of
partial disguises” and “cross-racial identification.” Id. And in State v. Guilbert, 49 A.3d
705, 722–23 (Conn. 2012), the court only allowed for expert testimony regarding the
unreliability of eyewitness testimony; it did not hold that all eyewitness testimony is
inherently unreliable.
2
That the handgun was found on Aranda’s person at the hospital as opposed to at
the scene of the crime is of no moment. As explained at oral argument, because the state
prioritized getting Aranda into the ambulance and to the hospital, no thorough search of
his person at the scene was conducted. Instead, the officers discovered Aranda laying on
his stomach and conducted a cursory pat down of his back and sides. Only at the hospital
did they conduct a more thorough search that revealed the location of the gun, Aranda’s
front waistband.
7
Case: 20-70008 Document: 00516539180 Page: 8 Date Filed: 11/09/2022
No. 20-70008
short, Aranda’s arguments regarding the ballistics evidence are conclusory,
speculative, and run against the weight of the record.
Finally, Aranda argues that his confession must have had a substantial
influence on the jury’s verdict because the prosecutor mentioned it in his
closing. But Aranda’s argument misses the mark, as the prosecutor actually
minimized the importance of Aranda’s confession in his closing argument.
First, the prosecutor gave his initial closing argument in which he did not
even mention the confession. Rather, it was Aranda’s attorney who focused
on the confession in his closing argument, in which he asked the jury to
disregard the confession as he argued it was involuntary. When the
prosecutor rose to rebut Aranda’s closing, he stated that “[w]e didn’t need
that statement of Arturo’s.” The prosecutor then only briefly addressed
Arturo’s confession later, as his discussion of the confession comprises only
about one page of eighteen pages of transcript of the prosecutor’s rebuttal.
Moreover, the prosecutor did not focus on the probative value of Aranda’s
confession; rather, he only briefly described why the confession was
voluntary. 3 When viewed in context, the prosecutor’s closing argument
makes clear how little the prosecution relied on the confession relative to
other evidence, including the ballistic evidence and witness testimony.
We remain cognizant that “confessions have profound impact on the
jury.” Bruton v. United States, 391 U.S. 123, 140 (1968) (White, J.,
dissenting). But the erroneous admission of a confession does not, in every
case, constitute harmful error. Our precedents illustrate as much. See Jones
v. Davis, 927 F.3d 365, 370–71 (5th Cir. 2019). Given the profuse amount of
evidence presented against Petitioner at trial, we are convinced that the
3
In addition, the court’s jury charge regarding Aranda’s confession directed the
jury to examine the confession, determine its voluntariness, and reject the confession if it
was not voluntary.
8
Case: 20-70008 Document: 00516539180 Page: 9 Date Filed: 11/09/2022
No. 20-70008
admission of the confession did not have “a substantial and injurious effect
or influence” in the context of the trial as a whole. Brecht, 507 U.S. at 637.
B. The Strickland Claim
Aranda also argues that he was denied effective assistance of counsel
in violation of the Sixth Amendment under Strickland v. Washington, 466
U.S. 668 (1984) and Wiggins v. Smith, 539 U.S. 510 (2003). Ineffective
assistance of counsel claims are reviewed under Strickland’s two-prong test.
First, Aranda must demonstrate that his counsel’s performance was
deficient. Strickland, 466 U.S. at 687. To establish deficient performance,
Aranda must show “that counsel’s representation fell below an objective
standard of reasonableness.” Id. at 688. This is an uphill battle, as we apply
a “strong presumption that counsel’s conduct falls within the wide range of
reasonable professional assistance.” Id. at 689. As to the second prong,
Aranda must demonstrate that that the deficient performance prejudiced the
defense. Id. at 687. In a death penalty case, “the question is whether there
was a reasonable probability that, absent the errors, the sentencer . . . would
have concluded that the balance of aggravating and mitigation circumstances
did not warrant death.” Id. at 695. “Prejudice exists when the likelihood of
a different result is ‘substantial, not just conceivable.’” Trottie v. Stephens,
720 F.3d 231, 241 (5th Cir. 2013) (quoting Harrington v. Richter, 526 U.S. 86,
112 (2011)). We are also mindful that “[s]urmounting Strickland’s high bar
is never an easy task.” Padilla v. Kentucky, 559 U.S. 356, 371 (2010).
Aranda argues that his trial counsel was deficient for failing to
adequately investigate evidence of mitigation to be used at the sentencing
stage, including evidence that Aranda had a difficult upbringing or a possible
9
Case: 20-70008 Document: 00516539180 Page: 10 Date Filed: 11/09/2022
No. 20-70008
brain injury. 4 When examining a failure to investigate, we are mindful that
the Supreme Court has emphasized that “strategic choices made after less
than complete investigation are reasonable precisely to the extent that
professional judgments support the limitations on the investigation.”
Wiggins, 539 U.S. at 521 (quoting Strickland, 466 U.S. at 690–91). And “we
continue to extend highly deferential treatment to counsel’s sentencing
strategy and tactical decisions.” Pape v. Thaler, 645 F.3d 281, 292 (5th Cir.
2011).
With respect to investigating Aranda’s personal background more
generally, Aranda fails to show that his trial attorney failed to conduct an
adequate investigation into Aranda’s past. Aranda argues that “had trial
counsel conducted any investigation, Mr. Aranda’s wife could have testified
that Mr. Aranda always treated her and their children well, and that Mr.
Aranda maintained that relationship with his children when he was
imprisoned.” Aranda also argues that had trial counsel learned about
Aranda’s employment history, he could have put forth evidence that would
“have further undermined, for example, the proposition that Aranda posed
any danger within structured environments.”
But the affidavit of Aranda’s trial attorney, Larry Dowling, contradicts
Aranda’s argument that his counsel failed to make an adequate investigation
into Aranda’s background. Rather, Dowling’s affidavit makes clear that he
4
At various points in his opening brief, Aranda seeks to make other arguments,
including that Aranda’s attorney was deficient for failing to “conduct voir dire in light of
hostility towards Mexican Americans in Victoria” and that counsel “made no effort to look
into the validity of [Aranda’s rape] conviction.” We did not grant a COA on these claims
and in fact explicitly denied a COA for many of these claims. See Aranda v. Lumpkin, No.
20-70008, 2021 WL 5627080 (5th Cir. Nov. 30, 2021). Accordingly, we will not consider
these claims, and limit out analysis to the single Strickland claim on which we granted a
COA.
10
Case: 20-70008 Document: 00516539180 Page: 11 Date Filed: 11/09/2022
No. 20-70008
had extensive familiarity with Aranda’s history and circumstances.
Dowling’s attested that he “knew that Mr. Aranda grew up in a poor family
of many children in the barrios of San Antonio.” Dowling also attested that
his investigation had revealed that “[t]here was substantial evidence,
notwithstanding his background, that Mr. Aranda was a nonviolent person,”
and that “there was available evidence that . . . [Aranda] demonstrated his
ability and willingness to be a peaceable and cooperative prisoner.” Although
Aranda points to two categories of evidence from his background that he
wishes his attorney had put forth at sentencing, the record as a whole,
especially in light of Dowling’s affidavit, does not evince a failure to
investigate Aranda’s background generally.
Indeed, the record reveals that Dowling in fact did do an investigation
into Aranda’s past circumstances, but he made the strategic choice not to put
forth this evidence “because [he] believed the jury would not be able to
consider such evidence as mitigating circumstances.” And, as the Texas law
stood at the time, he was correct. It would be another decade until the
Supreme Court clarified that Texas courts must allow jurors to express a
“reasoned moral response” to such evidence. See Penry v. Lynaugh, 492 U.S.
302 (1989). Aranda’s counsel was not constitutionally required to predict a
significant change in the law. Maryland v. Kulbicki, 577 U.S. 1, 4 (2015).
Indeed, we must be sure to consider a “context-dependent consideration of
the challenged conduct as seen from counsel’s perspective at the time,”
Wiggins, 539 U.S. at 523 (cleaned up), and make “every effort” to “eliminate
the distorting effects of hindsight.” Strickland, 446 U.S. at 689. Viewed
properly, Dowling’s decision not to introduce evidence of Aranda’s
background was a strategic choice which was “virtually unchallengeable.”
Strickland, 446 U.S. at 690. This claim therefore fails.
The record does, however, demonstrate one narrow area where
Dowling made a less-than-complete investigation: evidence of Aranda’s
11
Case: 20-70008 Document: 00516539180 Page: 12 Date Filed: 11/09/2022
No. 20-70008
head injury resulting from a police confrontation when he was sixteen.
Dowling states that he “did not conduct any extensive investigation of Mr.
Aranda’s background for the purpose of developing specific evidence of
disorders caused by his background.” This decision is a “strategic choice[]
made after less than complete investigation,” which is “reasonable precisely
to the extent that professional judgments support the limitations on the
investigation.” Wiggins, 539 U.S. at 528 (quoting Strickland, 466 U.S. at
690). We therefore must consider whether Dowling’s decision to forgo a
more complete investigation into Aranda’s head injury is supported by
professional judgment.
In his affidavit, Dowling explained his strategic decision to forgo an
investigation into any disorder that Aranda may have. Specifically, Dowling
was concerned that developing and presenting evidence of a disorder would
open the door for the State to use psychiatrists to show that the disorder
would make Aranda dangerous in the future, which was a consideration a
Texas jury must have considered in imposing the death penalty. Dowling
was also concerned that the risk of presenting evidence of a disorder was not
worthwhile without a mitigating instruction, unless it was so significant that
it could demonstrate that Aranda’s crime was not “deliberate”—a very high
bar. In sum, Dowling stated that “[i]n my opinion a responsible, competent
trial lawyer would not take the risk of presenting such evidence without the
assurance of a mitigation instruction.” He further attested that “[b]ecause
of the foregoing problems with developing and discovering evidence which
mitigates ‘blameworthiness’ and because of the failure of Texas courts to
instruct a jury on ‘mitigation,’ I would not, and in this case did not, develop
evidence as to neurological, psychological, psychiatric or sociological reasons
pertinent to the Defendant’s ability to control his own behavior.”
Dowling’s well-reasoned explanation for his decision to forgo an
investigation here is fatal to Aranda’s Strickland claim. Based on the law as
12
Case: 20-70008 Document: 00516539180 Page: 13 Date Filed: 11/09/2022
No. 20-70008
it stood at the time of Aranda’s sentencing, Aranda’s counsel was reasonable
to think that such evidence could well have backfired. These sentencing
strategies and tactical decisions are beyond the reach of a Strickland claim.
We note that this case is different in kind from Wiggins. To be sure,
in Wiggins, the Supreme Court held that an attorney rendered ineffective
assistance of counsel by failing to investigate and present mitigating evidence
of a capital defendant’s background at the sentencing stage. 539 U.S. at 524.
But the Court emphasized that counsel had not reasoned that a mitigation
case “would have been counterproductive.” Id. at 525. Here, because of the
unique death penalty sentencing scheme Texas had in place at the time of
Aranda’s sentencing—a factor not present in Wiggins—Aranda’s counsel
expressed a reasonable concern that any additional investigation into
Aranda’s mental disorder could lead to evidence that would be
counterproductive. In light of that serious concern, it was reasonable for
Dowling to forgo additional investigation into the issue, because as the
Wiggins court noted, “Strickland does not require counsel to investigate
every conceivable line of mitigating evidence no matter how unlikely the
effort would be to assist the defendant at sentencing.” Id. at 533.
Finally, Aranda argues that the district court made a legal error by
imposing too high of a standard for his Strickland claim. Aranda contends
that the district court required him to show that his trial counsel was “not
functioning as counsel,” rather than that his performance fell “below an
objective standard of reasonableness.” This argument is easily disposed of.
First, the “not functioning as counsel” language was pulled directly from
Strickland, which used that language to describe what constituted a deficient
performance. 466 U.S. at 687 (“[T]he defendant must show that counsel’s
performance was deficient. This requires showing that counsel made errors
so serious that counsel was not functioning as the ‘counsel’ guaranteed by
the Sixth Amendment.”). Indeed, we have repeated the exact language that
13
Case: 20-70008 Document: 00516539180 Page: 14 Date Filed: 11/09/2022
No. 20-70008
Aranda objects to, Brooks v. Kelly, 579 F.3d 521, 523 (5th Cir. 2009), and
affirmed district courts that also applied this standard. See Rabe v. Thaler,
649 F.3d 305, 307 (5th Cir. 2011) (affirming a district court’s finding that a
trial attorney did not make “errors so serious that he was not functioning as
counsel”). Second, a review of the trial judge’s order denying Aranda’s
Strickland claim makes clear he was applying the proper standard. The trial
court quoted Strickland at length, including the requirement that any
deficiency be judged by an “objective standard.” Third, even were there
some gap between performance which “below an objective standard of
reasonableness” and performance which demonstrated that an attorney was
“not functioning as counsel,” we are convinced that, for the reasons
discussed at length above, the performance of Aranda’s trial counsel did not
fall below an objective standard of reasonableness.
IV
For the foregoing reasons, we AFFIRM the district court’s denial of
habeas relief and an evidentiary hearing. 5
5
An evidentiary hearing would not prove beneficial where: (1) the parties have not
proffered any evidence that is disputed; (2) the evidence was appropriately presented
during the state-court proceedings’ and (3) Aranda has not identified any new evidence
that could be developed if he were granted an evidentiary hearing at this juncture.
14 | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482743/ | Case: 21-60964 Document: 00516539497 Page: 1 Date Filed: 11/09/2022
United States Court of Appeals
for the Fifth Circuit
United States Court of Appeals
Fifth Circuit
FILED
No. 21-60964
November 9, 2022
Summary Calendar
Lyle W. Cayce
Clerk
Teodoro Salgado Ramirez,
Petitioner,
versus
Merrick Garland, U.S. Attorney General,
Respondent.
Petition for Review of an Order of the
Board of Immigration Appeals
Agency No. A070 598 901
Before Smith, Dennis, and Southwick, Circuit Judges.
Per Curiam:*
Teodoro Salgado Ramirez, a native and citizen of Mexico, petitions
for review of a decision of the Board of Immigration Appeals (“BIA”)
dismissing his appeal and affirming the immigration judge’s (“IJ”) denial of
*
Pursuant to 5th Circuit Rule 47.5, the court has determined that this
opinion should not be published and is not precedent except under the limited
circumstances set forth in 5th Circuit Rule 47.5.4.
Case: 21-60964 Document: 00516539497 Page: 2 Date Filed: 11/09/2022
No. 21-60964
withholding of removal and protection under the Convention Against
Torture (“CAT”).
Salgado Ramirez argues the BIA erred in affirming the IJ’s finding that
he was ineligible for withholding of removal because he had failed to show the
requisite nexus between the harm he feared in Mexico and his family-based
particular social group (“PSG”). He also argues that the BIA erred in
affirming the IJ’s denial of CAT relief.
This court reviews the BIA’s decision and considers the IJ’s decision
only to the extent it influenced the BIA. Orellana-Monson v. Holder, 685 F.3d
511, 517 (5th Cir. 2012). The BIA’s factual findings are reviewed for
substantial evidence, and its legal conclusions are reviewed de novo. Id. at
517-18.
The Government argues that, given Salgado Ramirez’s prior
conviction for a controlled substance offense, this court lacks jurisdiction to
consider any of his factual challenges to the denial of withholding of removal.
See 8 U.S.C. § 1252(a)(2)(C). Salgado Ramirez maintains he has raised a
“valid question of law” regarding whether the BIA applied the wrong legal
standard to the nexus element of his claim for withholding of removal;
therefore, this court has jurisdiction over his petition under 8 U.S.C.
§ 1252(a)(2)(D).
First, he argues the legal standard for showing a nexus “is more
relaxed” for withholding of removal than it is for asylum, and that the BIA
erred in applying the more stringent “one central reason” standard. He
acknowledges, however, that this court has already rejected this argument in
Vazquez-Guerra v. Garland, 7 F.4th 265, 271 (5th Cir. 2021), cert. denied, 142
S. Ct. 1228 (2022).
2
Case: 21-60964 Document: 00516539497 Page: 3 Date Filed: 11/09/2022
No. 21-60964
Next, Salgado Ramirez argues that his credible testimony established
that his membership in a PSG consisting of his family was “one central
reason” for the persecution he fears in Mexico. This argument is a challenge
to the factual findings of the IJ and the BIA, which this court lacks jurisdiction
to consider under Section 1252(a)(2)(C) given Salgado Ramirez’s prior
controlled substance offense. See Pierre-Paul v. Barr, 930 F.3d 684, 694 (5th
Cir. 2019) (stating that nexus “is a factual question reviewed under the
substantial evidence standard”), abrogated on other grounds by Niz-Chavez v.
Garland, 141 S. Ct. 1474, 1479-80 (2021); Thuri v. Ashcroft, 380 F.3d 788, 791
(5th Cir. 2004) (same).
Finally, Salgado Ramirez argues the BIA erred in affirming the IJ’s
nexus analysis, because the IJ erroneously stated: “there’s nothing to show
that [Salgado Ramirez’s] uncle was killed for one of the five” statutorily
protected grounds. Because his claimed error raises a question of law, it is
reviewable despite his prior criminal conviction. See § 1252(a)(2)(D).
Nonetheless, a review of other portions of the IJ’s decision prior to the
incorrect statement reveals the IJ understood the necessity of a nexus and
simply found that none existed in Salgado Ramirez’s case. Therefore,
Salgado Ramirez’s claim of legal error fails. See Ontunez-Tursios v. Ashcroft,
303 F.3d 341, 350 (5th Cir. 2002).
Salgado Ramirez also argues that the BIA erred in adopting the IJ’s
denial of CAT protection. According to Salgado Ramirez, he faces a
likelihood of torture in Mexico given his credible testimony that his uncle was
killed by a Mexican police officer, as well as the country conditions evidence
showing the police in Mexico are corrupt and that government efforts to
address corruption have largely been ineffective.
The Supreme Court has held that Section 1252(a)(2)(C) does not bar
review of factual challenges to orders denying CAT protection. Nasrallah v.
3
Case: 21-60964 Document: 00516539497 Page: 4 Date Filed: 11/09/2022
No. 21-60964
Barr, 140 S. Ct. 1683, 1688 (2020). This court’s review, however, “is highly
deferential.” Id. at 1692.
Though the country conditions evidence describes instances of police
corruption and brutality, on balance, it does not compel the conclusion that
Salgado Ramirez would “more likely than not” be tortured if removed to
Mexico. See 8 C.F.R. § 1208.16(c)(2); see also Chen v. Gonzalez, 470 F.3d
1131, 1142-43 (5th Cir. 2006). Further, the BIA reasonably considered the
remoteness in time of his uncle’s murder and that Salgado Ramirez had never
been harmed or threatened in Mexico when it concluded he had not shown
eligibility for CAT relief. See Omagah v. Ashcroft, 288 F.3d 254, 258 (5th Cir.
2002).
The petition for review is DISMISSED in part and DENIED in
part.
4 | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482747/ | In The
Court of Appeals
Seventh District of Texas at Amarillo
No. 07-22-00329-CV
WESTCHESTER SURPLUS LINES INSURANCE COMPANY, ET AL., RELATORS
ORIGINAL PROCEEDING
November 8, 2022
ORDER ON MOTION FOR TEMPORARY RELIEF
Before QUINN, C.J., and PARKER, and DOSS, JJ.
Relators, 1 have filed a petition for writ of mandamus with this Court seeking an
order directing Respondent, the Honorable William Sowder, to vacate his November 1,
1 Relators allege to be the property insurers of real party in interest, Lubbock Independent School
District. According to a statement in the petition for mandamus, they are: “First Specialty Insurance
Corporation, now known as ‘Swiss Re Corporate Solutions Capacity Insurance Corporation,’ Colony
Insurance Company, Crum & Forster Specialty Insurance Company, Falls Lake Fire and Casualty
Insurance Company, Argonaut Management Services, Inc., Underwriters at Lloyd’s, London (Canopius
Syndicate 4444), Everest Indemnity Insurance Company, Landmark American Insurance Company,
Underwriters at Lloyd’s, London (Argo Syndicate 1200), Underwriters at Lloyd’s, London (Brit Syndicate
2987), Underwriters At Lloyd’s, London (Brit Syndicate 2988), Evanston Insurance Company, Arch
Specialty Insurance Company, Western World Insurance Company, Lexington Insurance Company, Mitsui
Sumitomo Insurance Company Of America, Scottsdale Insurance Company, and Westchester Surplus
Lines Insurance Company.”
First Specialty Insurance Corporation and Argonaut Management Services, Inc., are alleged to join
Relators’ Petition, subject to certain limitations. Everest Indemnity Insurance Company is allegedly named
improperly in this suit as “Everest Insurance Company.” For purposes of identity in addressing this motion,
2022 order denying their plea in abatement and enter an order granting their plea in
abatement. 2 Contemporaneous to the filing of their petition, Relators have filed a motion
to stay proceedings pending review of their petition.
An appellate court, pursuant to Rule 52.10(b) of the Texas Rules of Appellate
Procedure, may grant “any just relief” pending the disposition of an original petition
without notice. TEX. R. APP. P. 52.10(b). Just relief may include staying the enforcement
of an order for purposes of protecting the jurisdiction of the appellate court by maintaining
the status quo of the underlying proceeding while the court considers the merits of the
original proceeding. In re Kelleher, 999 S.W.2d 51, 52 (Tex. App.—Amarillo 1999, orig.
proceeding) (Rule 52.10 exists to afford court opportunity to address dispute
encompassed within petition for mandamus by maintaining status quo until it can address
that dispute).
Relators’ motion to stay all proceedings in trial court cause number DC-2022-CV-
0909 was filed November 4, 2022. To afford sufficient time for this Court to review the
merits of the petition for writ of mandamus, the motion to stay trial court proceedings is
granted. All trial court proceedings in trial court cause number DC-2022-CV-0909 are
stayed until further order of this Court.
Per Curiam
we define “Relators” as each of the foregoing entities. We express no opinion as to the sufficiency of the
limitations or names alleged by any party.
2 See TEX. INS. CODE ANN. § 542A.005 (providing procedure of abatement of action if a person
against whom an action to which Chapter 542A applies is pending did not receive a presuit notice complying
with Section 542A.003).
2 | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482748/ | COURT OF APPEALS
EIGHTH DISTRICT OF TEXAS
EL PASO, TEXAS
§
IN RE: YVONNE ROSALES, No. 08-21-00191-CV
§
Relator, AN ORIGINAL PROCEEDING
§
IN MANDAMUS
§
§
§
O R D E R
The Court GRANTS the Real Party in Interest, Patrick Crusius’ motion for extension of
time within which to file the response to writ of mandamus until December 10, 2022. NO
FURTHER MOTIONS FOR EXTENSION OF TIME TO FILE THE REAL PARTY IN
INTEREST, PATRICK CRUSIUS’ RESPONSE WILL BE CONSIDERED BY THIS COURT.
It is further ORDERED that the Hon. Felix Valenzuela, the Real Party in Interest’s
attorney, prepare the Real Party in Interest, Patrick Crusius’ response and forward the same to this
Court on or before December 10, 2022.
IT IS SO ORDERED this 9th day of November, 2022.
PER CURIAM
Before Rodriguez, C.J., Palafox, and Alley, JJ. | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482760/ | COURT OF APPEALS
EIGHTH DISTRICT OF TEXAS
EL PASO, TEXAS
§
CHRISTOPHER J. NELSON, Individually No. 08-21-00068-CV
and d/b/a EXCLUSIVE POOLS, §
Appeal from the
Appellant, §
125th Judicial District Court
v. §
of Harris County, Texas
BKM DEVELOPMENT, LP, §
(TC# 2015-38993)
Appellee. §
MEMORANDUM OPINION
This case arises from a pool remodel gone bad. Appellee BKM Development, LP (BKM)
sued Appellant Christopher J. Nelson and his company, Exclusive Pools, over renovation to
BKM’s swimming pool after local authorities closed the pool following a failed inspection. Based
on a bench trial, the trial court found for BKM and ordered Nelson to pay actual damages and
attorney’s fees. Nelson appeals the trial court’s judgment, arguing that the evidence is factually
insufficient to support: (1) Nelson’s material breach of the construction contract; and (2) the trial
court’s award of actual damages. For the following reasons, we affirm. 1
1
This case was transferred from our sister court in Houston (14th District), and we decide it in accordance with the
precedent of that court to the extent required by TEX.R.APP.P. 41.3.
I. BACKGROUND
A. Factual Background
BKM is a real-estate limited partnership that holds and manages commercial properties.
Adam Kliebert is its agent who had the authority to enter contracts on behalf of BKM. In May
2015, Kliebert hired Nelson and his company, Exclusive Pools, to renovate an existing pool at one
of BKM’s properties. The pool was located between a Montessori school operated by Kliebert’s
mother and a nightclub Kliebert owned and operated. The pool was used by the children at the
school during the summer. Kliebert wanted to remodel the pool so that it could also be used for
the nightclub. Kliebert’s vision was to construct a ledge to subdivide the existing pool into two
pools, one of which would be very shallow. Nelson, who told Kliebert that he was a professional
who had worked on thousands of pools, provided Kliebert with several price estimates for the pool
remodel.
The parties dispute which estimate the remodeling agreement was based on. According to
Kliebert, the initial estimate stated a total cost of $56,185 (Plaintiff’s Exhibit 4), but Kliebert and
Nelson negotiated for an ultimate contract price of $49,415 (Plaintiff’s Exhibit 5). BKM also
presented a third estimate from Nelson (Plaintiff’s Exhibit 6) that yielded a total contract price of
$51,685. As we explain below, this latter estimate formed the basis for the trial court’s award of
actual damages. Under all these estimates, Nelson would: (1) excavate dirt from the pool; (2)
reinstall rebar and a add a gunite sun shelf; (3) add new lighting, tile, coping, decking, and a
holding tank; (4) relocate pool equipment; (5) add new decking overlay and repair cracks on the
existing decking; and (6) resurface the pool with white marble plaster. The estimate also included
a payment schedule based on Nelson’s completion of specific tasks.
2
Problems arose during the construction process. BKM introduced a series of text messages
detailing repeated issues with the pool’s construction and operation, as well as Kliebert’s repeated
attempts to have Nelson rectify the issues. These text messages alluded to (1) the shallow end
improperly filling with water; (2) the lighting and coping not being completed; (3) the construction
falling behind schedule; (4) Nelson’s unapproved modifications of the contract’s provisions; and
(4) a crooked step in the pool. Kliebert also testified that the pool did not function properly as the
water level in one pool was too low while the other overflowed.
The pool remodel was never completed. Nelson testified that he stopped doing work on the
pool in late May 2015. In June, the City of Houston inspected the pool and ordered it shut because
it did not meet the City’s code requirements. The City issued an “Aquatic Facility Inspection
Report,” which required the pool to remain closed until Kliebert submitted plans for the pool
remodel, the plans were approved, and the pool passed inspection. Kliebert’s proposed plans were
ultimately rejected by the City. The parties also disagreed about whose responsibility it was to get
the permits for the pool remodel. Kliebert asserted that Nelson told him that he did not need permits
for the project because he was only remodeling the pool. Nelson, however, claimed that Kliebert
asked him not to acquire permits because Kliebert had an overall building permit that would cover
the pool remodel.
The parties also disputed what payments BKM made to Nelson. Kliebert testified that he
made all but the last two payments on the payment schedule. At one point in his testimony, he
made that claim while referring to Plaintiff’s Exhibit 5 (the $49,415 invoice) and at another point,
he repeated the claim while referring to Plaintiff’s Exhibit 6 (the $51,685 invoice). Kliebert
specifically recalled paying three of the invoices that Nelson provided, including the down
payment for the remodel, the gunite and light conduit, and tile and coping. Nelson acknowledged
3
that he received three checks from Kliebert, but claimed that he did not have a record of the total
amount that he received from Kliebert. At trial, neither party sought to admit copies of any actual
checks showing payments.
In June 2015, Nelson filed a mechanic’s and materialman’s lien against the property. By
this time, BKM was considering selling the property. BKM had to pay the amount of the lien
($8,183) to obtain a lien release to sell the property.
B. Procedural Background
BKM sued Nelson alleging breach of contract, breach of warranty, and violations of the
Texas Deceptive Trade Practices Act. It sought to recover the amount that it paid for the pool
remodel that was never completed, money lost because of the incomplete pool remodel, attorney’s
fees, court costs, and interest. At trial, Nelson argued that there was no evidence of an agreement
or contract between the parties. His other position was that BKM paid Nelson nothing and
consequently was not entitled to recover anything. Following a bench trial, the trial court rendered
judgment for BKM and awarded the company $38,763.75 in actual damages, attorney’s fees of
$19,250, along with interest, court costs, and conditional appellate attorney’s fees. Nelson filed a
request for findings of fact and conclusions of law and a notice of past due findings and
conclusions; no findings or conclusions are in our record. 2
On appeal, Nelson argues that the trial court’s judgment is not supported by factually
sufficient evidence. Specifically, Nelson argues that the trial court erred in deciding that Nelson
breached any contract with BKM because none of BKM’s complaints evidence a “material
breach.” Nelson further argues that the trial court’s actual damages award is unsupported by
2
Although Nelson points out that the trial court did not enter findings of fact or conclusions of law in response to his
request, he does not argue that the trial court erred by doing so.
4
factually sufficient evidence because BKM did not prove the applicable measure of damages and
failed to prove that the damages sought were reasonable.
II. STANDARD OF REVIEW
When the trial court does not make express findings of fact, we imply that the trial court
made all findings necessary to support its judgment, provided that: (1) the necessary findings are
raised by the pleadings and supported by the evidence; and (2) the decision can be sustained by
any reasonable theory consistent with the evidence and applicable law. See Worford v. Stamper,
801 S.W.2d 108, 109 (Tex. 1990). The trial court’s findings of fact, express or implied, are
reviewable for factual sufficiency by the same standards applied in reviewing the evidence
supporting a jury’s answer. Catalina v. Blasdel, 881 S.W.2d 295, 297 (Tex. 1994). Our standard
of review is clear: “When reviewing an assertion that the evidence is factually insufficient to
support a finding, a court of appeals sets aside the finding only if, after considering and weighing
all of the evidence in the record pertinent to that finding, it determines that the credible evidence
supporting the finding is so weak, or so contrary to the overwhelming weight of all the evidence,
that the answer should be set aside and a new trial ordered.” Crosstex N. Texas Pipeline, L.P. v.
Gardiner, 505 S.W.3d 580, 615 (Tex. 2016). Stated otherwise, a reviewing court should only
reverse a verdict if it is so against the great weight and preponderance of the evidence as to be
manifestly unjust, or if the result shocks the conscience or clearly demonstrates bias. Pool v. Ford
Motor Co., 715 S.W.2d 629, 635 (Tex. 1986). “Under a factual-sufficiency review, the reviewing
court must not substitute its judgment for that of the fact finder, who ‘is the sole judge of the
credibility of witnesses and the weight to be given to their testimony.’” Matter of Estate of Masters,
No. 08-20-00156-CV, 2022 WL 2827022, at *3 (Tex.App.--El Paso July 20, 2022, no pet.),
quoting Golden Eagle Archery, Inc. v. Jackson, 116 S.W.3d 757, 761 (Tex. 2003).
5
III. MATERIAL BREACH
A. Applicable Law
A breach of contract claim requires proof of four elements: (1) the existence of a valid
contract; (2) performance or tendered performance by the plaintiff; (3) breach of the contract by
the defendant; and (4) damages sustained by the plaintiff from the breach. Houle v. Casillas, 594
S.W.3d 524, 556 (Tex.App.--El Paso 2019, no pet.). When one party to a contract commits a
material breach of the contract, the other party is discharged or excused from further performance.
Mustang Pipeline Co., Inc. v. Driver Pipeline Co., Inc., 134 S.W.3d 195, 196 (Tex. 2004) (per
curiam). By contrast, a nonmaterial breach entitles the other party to sue for damages caused by
the breach but does not excuse future performance. Bartush-Schnitzius Foods Co. v. Cimco
Refrigeration, Inc., 518 S.W.3d 432, 436 (Tex. 2017). So, the question in cases like ours is often
which party breached the contract first, and whether the first breach was material. Mustang
Pipeline, 134 S.W.2d at 200. To answer the materiality questions, a trier considers these factors:
“(a) the extent to which the injured party will be deprived of the benefit which he reasonably
expected; (b) the extent to which the injured party can be adequately compensated for the part of
that benefit of which he will be deprived; (c) the extent to which the party failing to perform or to
offer to perform will suffer forfeiture; (d) the likelihood that the party failing to perform or to offer
to perform will cure his failure, taking account of the circumstances including any reasonable
assurances; (e) the extent to which the behavior of the party failing to perform or to offer to perform
comports with standards of good faith and fair dealing.” Id. at 199, citing Restatement (Second)
of Contracts § 241 (1981).
6
B. Analysis
The parties dispute who first committed a material breach. Nelson argues that there is
factually insufficient evidence that he materially breached the contract, which means BKM
breached first by failing to pay the full amount it owed under the contract. If true, that excused
Nelson’s full performance of his obligations. BKM counters that Nelson was the first party to
materially breach the contract by failing to ensure that the pool remodel resulted in a functioning
pool and failing to obtain proper construction permits from the City. We consider the evidence
against each Mustang Pipeline factor in turn.
1. BKM’s failure to receive the benefit under the contract
Nelson argues that BKM suffered only two deprivations caused by the lack of Nelson’s
full performance: (1) a two-week delay in completing the work and a five-day delay in submitting
plans for a permit; and (2) an additional $3,825.52 in costs for additional parts and work. Although
Nelson claims that the work would have been delayed by five days due to his failure to submit
work plans to the City, the record suggests that Nelson never submitted any plans to the City.
Kliebert was then required to submit his own plans. Nelson also told Kliebert that work permits
from the City were unnecessary, which along with a failed inspection, caused the City to shut down
construction and close the pool and render it useless either for the Montessori school or the
nightclub.
And while Nelson claims that BKM was only deprived of $3,825.52 in additional costs for
unanticipated parts and labor, an obvious third benefit that BKM was deprived of was the lack of
a functioning, usable pool. Kliebert testified that the pool constantly overflowed because the pool
lacked sufficient pumping. Half of the pool would then lack sufficient water and become unusable.
Along with Nelson’s failure to get proper permits, the deficient construction caused the City to
7
shut the pool down and forced BKM to purchase a $20,000 temporary pool for use by the
Montessori students.
In sum, the record contains evidence that Nelson’s substandard work caused the pool to
contain insufficient water for swimming and it failed inspection by the City. The pool was unusable
for its intended purpose. Because BKM failed to receive the benefit of the contract, this factor
favors Nelson’s material breach.
2. BKM’s compensation for the deprived benefit
Because Nelson did not adequately remodel the pool or acquire a work permit, the pool
was rendered unusable and was shut down by the City. This required BKM to hire others to draft
permit plans for the City and complete the pool remodel, and to purchase a temporary swimming
pool for the Montessori students. BKM eventually built another pool at a different location, which
cost around $100,000. Thus, this factor also weighs in BKM’s favor.
3. Nelson’s forfeiture
Nelson argues that he had started or completed most of the work associated with the
contract. Although we agree that Nelson started a significant portion of the work, as explained
above the evidence also shows that there were significant problems with the quality of the
construction.
4. Likelihood of Nelson’s curative measures
A series of text messages between Kliebert and Nelson showed that Kliebert tried to have
Nelson correct the deficiencies in the pool until at least June 8, 2015. At some point in June, Nelson
stopped coming to the worksite or performing any construction, and on July 15, 2015, he placed a
lien on BKM’s property. Nelson then accepted BKM’s payment of the lien amount in exchange
8
for releasing the lien. Thus, the record contains evidence that Nelson was unlikely to engage in
curative measures to remedy the issue with the pool.
5. Nelson’s good faith and fair dealing
The evidence shows that despite being paid thousands of dollars, Nelson failed to remodel
the pool in a manner that rendered it fit for its intended purpose, did not acquire proper permits for
the work, and eventually abandoned the project after repeated issues with construction arose.
Moreover, Nelson’s filing of a lien against BKM’s property when Kliebert stopped making
payments is evidence that Nelson did not intend to complete his obligations under the contract
despite his deficient performance. This factor favors BKM.
6. Substantial performance
Weaved into his argument, Nelson also contends that he substantially performed under the
contract, thereby excusing his breach. The “doctrine of substantial performance” is an equitable
doctrine adopted to allow a contractor who has substantially completed a construction contract to
sue on the contract rather than being relegated to a cause of action for quantum meruit. Turner v.
Ewing, 625 S.W.3d 510, 518 (Tex.App.--Houston [14th Dist.] 2020, pet. denied). “The doctrine
of substantial performance recognizes that the contractor has not completed construction, and
therefore is in breach of the contract” but “the owner cannot use the contractor’s failure to complete
the work as an excuse for non-payment.” Id. at 518. “In a substantial performance claim, the
contractor must prove three elements to prevail: its substantial performance, the amount unpaid
under the contract, and ‘the cost of remedying the defects due to his errors or omissions.’” Id.,
quoting Vance v. My Apartment Steak House of San Antonio, Inc., 677 S.W.2d 480, 483
(Tex. 1984).
9
But for much the same reasons already noted, the record does not support Nelson’s claim
of substantial performance. Instead, the evidence showed that the pool was practically unusable
for its intended purpose due to Nelson’s failure to properly remodel the pool. Kliebert testified that
the pool frequently overflowed, the lighting and other components were incorrectly installed, and
the pumps had to be repeatedly shut down. These issues were confirmed in text messages between
Kliebert and Nelson. The City shut down the pool indefinitely after Nelson failed to obtain permits
and the pool failed inspection. Because Nelson’s substandard performance significantly impaired
the purpose of the pool remodel, the doctrine of substantial performance does not apply to excuse
Nelson’s breach. See James Constr. Grp., LLC v. Westlake Chem. Corp., 650 S.W.3d 392, 406
(Tex. 2022) (recognizing that a party will not be excused from contractual duties if the party’s
performance severely impairs the purpose of underlying contract and causes prejudice to the
nonbreaching party).
In sum, the bulk of the Mustang Pipeline factors support a finding that Nelson first
committed material breaches of the contract by failing to adequately construct the pool or acquire
proper permits. Thus, factually sufficient evidence supports the trial court’s implied finding that
Nelson was the first party to have materially breached the contract. Nelson’s Issue One is
overruled.
IV. ACTUAL DAMAGES
Nelson also argues that the trial court’s actual damages award is not supported by factually
sufficient evidence. 3 In particular, Nelson contends that BKM failed to offer evidence establishing
3
We review a factual sufficiency challenge to an award of damages under the same test for any other factual
sufficiency question. See DeNucci v. Matthews, 463 S.W.3d 200, 214 (Tex.App.--Austin 2015, no pet.).
10
the cost of correcting the deficient work on the pool, or the difference in value between the work
performed and the worth of the work if it had complied with the terms of the contract.
BKM could have pursued three measures of damage for breach of contract: expectancy,
reliance, or restitution. Atrium Med. Ctr., LP v. Houston Red C LLC, 595 S.W.3d 188, 193
(Tex. 2020). “Expectancy damages award a contract plaintiff the benefit of its bargain; reliance
damages compensate the plaintiff for out-of-pocket expenses; and restitution damages restore to
the plaintiff a benefit that it had conferred on the defendant.” Id. The trial court appears to have
based the damages on an out-of-pocket measure, which is “the difference between the value the
buyer has paid and the value of what he has received.” Arthur Andersen & Co. v. Perry Equip.
Corp., 945 S.W.2d 812, 817 (Tex. 1997). That is, the trial court calculated the value of what BKM
received minus what it paid to Nelson.
BKM contends it received nothing of value as it never obtained a functional pool. And
absent approval from the City, the pool was closed and unusable. There is sufficient evidence that
BKM received nothing of value. The question we focus on is what BKM paid to Nelson. In closing
argument, BKM contended that its evidence demonstrated its payment of approximately $37,000
“and change” to Nelson under the contract. This was supported by Kliebert’s testimony that he
made all but the last two of the six payments on the payment schedule for Plaintiff’s Exhibit 5 (the
estimate and payment schedule for $49,415). The first four payments under Plaintiff’s Exhibit 5
total $37,061.25. But at a later point in Kliebert’s testimony, he referred to Plaintiff’s Exhibit 6 the
document that he paid from. The trial court awarded $38,763.75 which would exactly match the
first four payments from Plaintiff’s Exhibit 6 (the $51,685 estimate and payment schedule). 4 At
4
The first four payments on the payment schedule were broken down this way: (1) twenty percent on the first day of
work in the amount of $10,337; (2) fifteen percent upon completion of gunite and lighting in the amount of $7,752;
11
trial, Nelson acknowledged that Kliebert paid him three checks under the contract, but he did not
recall the total amount of the checks. Nelson also acknowledged that he received money from
BKM to release the lien for $8,183, but he still argued that the only evidence of BKM’s payment
was for $9,883, which was shown as being “Paid to Date” on an invoice.
So while the evidence conflicts, the trial court as the fact finder based its finding on the
latter testimony of Kliebert, which it had a right to do. We conclude that the evidence is factually
sufficient to support the $38,763.75 damage finding.
Nelson’s Issue Two is overruled.
V. CONCLUSION
We affirm the judgment below.
JEFF ALLEY, Justice
November 8, 2022
Before Rodriguez, C.J., Palafox, and Alley, JJ.
(3) twenty percent upon completion of cantilever and tile in the amount of $10,337; and (4) twenty percent upon
completion of plaster in the amount of $10,337.
12 | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482756/ | COURT OF APPEALS
EIGHTH DISTRICT OF TEXAS
EL PASO, TEXAS
FAROOK W. TAHA, D. O., § No. 08-21-00227-CV
Appellant, § Appeal from the
v. § 448th Judicial District Court
STEPHANIE BLACKBURN, § of El Paso County, Texas
INDIVIDUALLY AND ON BEHALF OF
ALL WRONGFUL DEATH § (TC# 2021DCV1282)
BENEFICIARIES OF THE ESTATE OF
JOSE G. LAZALDE, DECEASED, §
Appellee. §
OPINION
This interlocutory appeal arises from a challenge to expert reports in a healthcare liability
claim. Appellee Stephanie Blackburn sued Appellant Farook W. Taha, D.O. and other defendants
for claimed negligence in medical care provided to Jose Lazalde, who died of complications from
an intestinal blockage. As required by Chapter 74 of the Texas Civil Practice and Remedies Code,
Blackburn served Dr. Taha with several expert witness reports supporting the claim. Dr. Taha
moved to dismiss Blackburn’s case against him, claiming the expert reports did not comply with
the requirements of Chapter 74 of the Texas Civil Practices and Remedies Code. 1 The trial court
denied the motion to dismiss, which Dr. Taha now appeals. For the following reasons, we affirm.
1
TEX.CIV.PRAC.& REM.CODE ANN. § 74.351 (requirements for expert reports in health care liability cases).
I. FACTUAL AND PROCEDURAL BACKGROUND
According to the expert reports in our record, on the evening of April 27, 2019, Lazalde
presented to the emergency department of The Hospitals of Providence East Campus (THOP)
complaining of abdominal pain that began the day before. Lazalde had a history of diverticulitis.
Dr. Taha, the attending emergency physician at THOP when Lazalde arrived, ordered a CT scan
of Lazalde’s abdomen and pelvis. Dr. Taha reviewed the results of the CT scan, which were
degraded by artifacts (distortion of the scan images) caused by Lazalde moving during the scan.
Nonetheless, Mark Brown, M.D., the radiologist reviewing the images, concluded they were
“suspicious for small bowel obstruction” (SBO) in the middle third of the small bowel. Dr. Taha
then consulted surgeon Bruce J. Applebaum, M.D., who concluded that Lazalde’s condition “[did]
not sound like obstruction” but was gastritis that did not require surgical intervention.
Approximately a half hour later, Dr. Applebaum told Dr. Taha that “if [there was] no vomiting or
pain and if [Lazalde was] passing gas, he can be discharged and . . . [can] come back for any
vomiting and fevers.” Dr. Taha diagnosed Lazalde with gastritis, treated him with Zofran and
morphine, provided him with educational materials for several conditions other than SBO, and
discharged him soon after. Dr. Taha was not involved in any further diagnosis or treatment of
Lazalde.
On April 29, 2019, Lazalde returned to THOP’s emergency department with worsening
abdominal pain. A second CT scan resulted in a diagnosis of SBO, and a general surgeon ordered
the placement of a nasogastric (NG) tube. However, the THOP nursing staff failed to place the NG
tube. Lazalde subsequently experienced an episode of emesis and aspiration, which ultimately led
to respiratory arrest and his death on May 1, 2019. Lazalde’s death certificate lists the cause of
death as aspiration pneumonitis.
2
Blackburn, individually and on behalf of Lazalde’s estate and wrongful-death beneficiaries
sued Dr. Taha, Dr. Applebaum, Dr. Brown, and THOP for negligence arising out of their
involvement in Lazalde’s diagnosis and treatment. After Dr. Taha answered, and pursuant to
Chapter 74, Blackburn timely served Dr. Taha with expert reports from Lisa Hoff, M.D., Todd D.
Eisner, M.D., and Richard Bays, R.N. 2 Dr. Taha objected to these reports on several grounds, but
the one relevant here is the contention that Dr. Hoff’s report was insufficient to explain how any
failure to meet the standard of care by Dr. Taha caused the injury sued on.
Following a hearing on Dr. Taha’s motion to dismiss, the trial court denied the motion by
written order. This appeal follows. See TEX.CIV.PRAC.& REM.CODE ANN. § 51.014 (permitting
interlocutory appeals from the denial of a section 74.351 motion). In his sole issue, Dr. Taha argues
that the trial court abused its discretion by denying his motion to dismiss because Blackburn’s
expert reports did not adequately explain how Dr. Taha’s alleged breach of the standard of care
caused Lazalde’s death.
II. DISCUSSION
A. Standard of Review and Applicable Law
We review a trial court’s ruling on a motion to dismiss under Chapter 74 for an abuse of
discretion. Abshire v. Christus Health S.E. Texas, 563 S.W.3d 219, 223 (Tex. 2018); Golucke v.
Lopez, No. 08-21-00030-CV, 2022 WL 4595003, at *3 (Tex.App.--El Paso Sept. 30, 2022, no
pet.h.). A trial court has no discretion in determining what the law is or in applying the law to the
2
Although there is some overlap between these reports over the actions of the involved parties, Dr. Hoff’s report
primarily concerns Dr. Taha, Dr. Eisner’s report primarily concerns Dr. Appelbaum, and Bays’ report primarily
concerns the THOP nursing staff. Blackburn later amended her petition to add another physician defendant and served
an additional expert report from Lennard A. Nadalo, M.D., who primarily addressed Dr. Brown’s actions. Dr. Taha
additionally objected to Dr. Nadalo’s report contending that he lacked qualifications and failed to identify the standard
of care.
3
facts, and it abuses its discretion if it acts in an arbitrary or unreasonable manner without reference
to any guiding rules or principles. Bowie Mem’l Hosp. v. Wright, 79 S.W.3d 48, 52 (Tex. 2002).
The Texas Medical Liability Act, found at Chapter 74 of the Civil Practice and Remedies
Code, requires health care liability claimants to serve an expert report upon each defendant against
whom a liability claim is asserted. TEX.CIV.PRAC.& REM.CODE ANN. § 74.351(a) (requiring such
report to be filed not later than 120 days from the filing of the defendant’s answer). If a plaintiff
timely furnishes an expert report, a defendant provider may file a motion challenging the report’s
adequacy. Id. A report is adequate if it represents “an objective good faith effort to comply with
the definition of an expert report . . . .” Id. § 74.351(l). That definition requires an expert report to
provide “a fair summary of the expert’s opinions as of the date of the report regarding applicable
standards of care, the manner in which the care rendered by the physician or health care provider
failed to meet the standards, and the causal relationship between that failure and the injury, harm,
or damages claimed.” Id. § 74.351(r)(6). “A court shall grant a motion challenging the adequacy
of an expert report only if it appears to the court, after hearing, that the report does not represent
an objective good faith effort to comply with the definition of an expert report in Subsection
(r)(6).” Id. § 74.351(l).
To meet the standard for a good-faith effort, a proffered report must provide information
on the three statutory elements — standard of care, breach, and causation. Golucke, 2022 WL
4595003, at *3, citing Am. Transitional Care Ctrs. of Texas, Inc. v. Palacios, 46 S.W.3d 873, 879
(Tex. 2001). Doing so meets two important purposes of the Act. First, the report must inform the
defendant of the specific conduct the plaintiff questions. Id. Second, the report must provide a
basis for the trial judge to determine whether the plaintiff’s claims have merit. Id. Although the
report need not marshal all the plaintiff’s proof, if the report does not meet these two purposes and
4
omits any of the statutory requirements, it does not constitute a good-faith effort. Id. Thus, a report
that merely states the expert’s conclusions about the standard of care, breach, and causation does
not fulfill its two purposes. Id. Rather, to constitute a good-faith effort, a report must explain the
basis of the expert’s statements and link his or her conclusions to the facts of the case. Id. In
determining whether the report constitutes a good-faith effort, the trial court is limited to the
information contained within the four corners of the report and may not draw inferences to supply
absent but necessary information. Id.
B. Dr. Hoff’s Report
Dr. Taha argues that Dr. Hoff’s report does not comply with section 74.351 because it does
not represent a good-faith effort to adequately explain the causal link between Dr. Taha’s actions
and Lazalde’s death. Dr. Taha contends the report essentially amounts to “no report” at all.
An expert’s report must explain the basis of the expert’s statements on causation and link
the expert’s conclusions to the facts. Wright, 79 S.W.3d at 52. “‘A causal relationship is established
by proof that the negligent act or omission was a substantial factor in bringing about the harm and
that absent said act or omission, the harm would not have occurred.’” Golucke, 2022 WL 4595003,
at *8, quoting Tenet Hosps., Ltd. v. De La Riva, 351 S.W.3d 398, 404 (Tex.App.--El Paso 2011,
no pet.). For causation, a court should consider two factors: (1) whether the expert established a
logical, complete chain between a negligent act and the plaintiff’s injury; and (2) whether the
report gave the trial court sufficient medical details to allow the court to decide whether the case
was frivolous. Id., citing Mendez-Martinez v. Carmona, 510 S.W.3d 600, 607 (Tex.App.--El Paso
2016, no pet.). Causation cannot be inferred but must be clearly stated. Id. An expert cannot simply
conclude that the breach caused the injury without giving a court any reasonable basis for
5
concluding that the lawsuit has merit, and the report must tie the expert’s conclusion to the facts.
Jelinek v. Casas, 328 S.W.3d 526, 539-40 (Tex. 2010).
Dr. Hoff stated in her report that she is a board-certified emergency physician who is
familiar with the applicable standard of care for the diagnosis and care of SBO. Dr. Hoff claimed
familiarity with the risk of aspiration pneumonitis from emesis and its prevention with nasogastric
decompression. In forming her opinions, Dr. Hoff reviewed Lazalde’s medical records from THOP
and his death certificate. Based on the first abdominal and pelvic CT scan, which “indicate[d]
suspicion for SBO,” Dr. Hoff concluded that Lazalde had an SBO when he first presented to the
emergency department on April 27, 2019, and that his condition continued after he was discharged.
Although Lazalde’s symptoms abated when he was treated with morphine and Zofran at the ER,
she contends this does not mean that Lazalde’s SBO was resolved or that the findings on the CT
scan were disproved.
Dr. Hoff stated that the standard of care applicable to Dr. Taha “included but was not
limited to diagnosing SBO, admission, and consultation with a surgeon.” Dr. Hoff stated that Dr.
Taha “breached the standard of care by failing to diagnose [SBO] and by discharging the patient
without the benefit of hospital admission for further evaluation and treatment.” “Had [Lazalde]
been admitted, the standard of care included monitoring and treatment with abdominal
decompression and bowel rest by a[n NG] tube.” “Nasogastric decompression improves patient
comfort, minimizes or prevents recurrent vomiting, and serves as a means to monitor the progress
or resolution of these conditions.” Dr. Hoff stated that in this case, “a material deterioration of the
patient’s condition is likely to result from discharge.” Because of the breach of the standard of
care, Lazalde’s diagnosis and treatment of his SBO was delayed, resulting in worsening symptoms
and increased risk of death from aspiration pneumonitis caused by emesis. Dr. Hoff concluded,
6
based on a reasonable medical probability, that if Dr. Taha had followed the standard of care and
properly diagnosed Lazalde with SBO and provided nasogastric decompression when Lazalde first
presented to the emergency room, Lazalde’s aspiration of emesis, respiratory arrest, and death
several days later would have been prevented.
Thus, according to Dr. Hoff’s report, the primary link between Dr. Taha’s actions and
Lazalde’s injuries was Dr. Taha’s alleged failure to timely diagnose and treat Lazalde’s SBO with
an NG tube when he first presented to the hospital on April 27 (or at least to admit Lazalde so that
his condition could be monitored). The report concludes that these failures led to a “delay in
diagnosis and treatment of SBO,” which carried the increased risk of worsening symptoms and
increased risk of aspiration pneumonitis caused by emesis.
Because causation is the only element of Dr. Hoff’s report that is challenged, we must
assume that the report adequately alleges a breach of the applicable standard of care. The alleged
breach includes the failure to diagnose SBO and to then treat it with nasogastric decompression
that “minimizes or prevents recurrent vomiting[.]” In turn, Dr. Hoff (and the other expert reports)
claim that when Lazalede later vomited, he aspirated the emesis, suffered respiratory arrest, and
died. We find that the report contains sufficient information to proffer a causal link between Dr.
Taha’s actions and Lazalde’s injuries. The report fulfills the twin purposes of section 74.351
because it contains enough information to inform Dr. Taha of the specific conduct questioned and
provides a sufficient basis for the trial court to conclude that Blackburn’s claims have merit. See
Golucke, 2022 WL 4595003, at *3. Thus, the trial court did not abuse its discretion by denying Dr.
Taha’s objections and motion to dismiss on this basis. See Miller v. JSC Lake Highlands
Operations, LP, 536 S.W.3d 510, 514-15 (Tex. 2017) (per curiam) (expert report stating that a
doctor’s failure to timely remove a foreign body from a patient’s body “can” be deadly, and when
7
read in context with the rest of the report, adequately explained how the breach of the standard of
care caused the patient’s death); Rittger v. Danos, 332 S.W.3d 550, 557-58 (Tex.App.--Houston
[1st Dist.] 2009, no pet.) (expert report sufficiently established causation where it linked a doctor’s
failure to promptly diagnose and admit the plaintiff to a delay in treatment that caused the
plaintiff’s injuries); Hoffman v. Samples, No. 10-17-00196-CV, 2017 WL 4413437, at *7
(Tex.App.--Waco Oct. 4, 2017, no pet.) (mem. op.) (expert report satisfied section 74.351’s good-
faith requirement on causation where the report adequately explained the link between a doctor’s
breach of the standard of care, which resulted in a delay in the patient’s diagnosis, to the patient’s
eventual injuries). 3
We address two arguments that Dr. Taha raises. First, he argues that Dr. Hoff’s report does
not represent a good-faith effort to establish causation because it does not explain how his alleged
breach of the standard of care was a “substantial factor” in causing Lazalde’s death. See Golucke,
2022 WL 4595003, at *8 (a causal relationship is established by proof that the negligent act or
omission was a “substantial factor” in bringing about the harm). Although the phrase “substantial
factor” does not appear in Dr. Hoff’s report, the Texas Supreme Court has stated that there are no
“magical words” that need to be stated to comply with the good-faith requirement. Jelinek, 328
S.W.3d at 540. Rather, the report must only “explain, to a reasonable degree, how and why the
breach caused the injury based on the facts presented.” Id. at 539-40. And for the above reasons,
we conclude that Dr. Hoff’s report sufficiently explained how Dr. Taha’s actions could be a
substantial factor in causing Lazalde’s death.
3
Because Hoff’s report alone satisfies the good-faith requirement to establish causation, we need not discuss whether
the other expert reports also satisfy that requirement.
8
Finally, Dr. Taha contends that this case mirrors Clapp v. Perez, where this Court found an
expert report conclusory on the causation issue. 394 S.W.3d 254, 261-62 (Tex.App.--El Paso 2012,
no pet.). There, the expert stated that the patient died because the two doctors—an anesthesiologist
and surgeon — failed to insert an NG tube before surgery. The report claimed “[p]lacing a[n NG]
tube prior to the emergency surgery would have emptied the stomach . . . of its contents and
prevented the aspiration that did eventually occur and led to aspiration pneumonia, prolonged
intubation with ARDS, multi-organ failure and then death of [the patient.]” Id. at 261. We found
the report deficient, first because it failed to distinguish which of the two doctors owed the standard
of care or breached it. Id. at 262. We also found the report’s causation opinion conclusory because
the expert:
[S]imply expressed his conclusion without stating the underlying facts necessary to
establish that the failure to place a[n NG] tube was a substantial factor in causing
[the patient’s] death, and that absent this failure, [the patient] would not have died.
In other words, [the expert] fail[ed] to explain the basis of his statements linking
his conclusions to the facts.
Id. But this case is distinguishable because Dr. Hoff did more to explain the chain of events leading
to Lazalde’s death. Her report also explained that the specific treatment (nasogastric
decompression) and monitoring Lazalde would have received had he been timely diagnosed and
admitted to the hospital would have prevented vomiting. She concluded that the lack of that
treatment and monitoring led to the symptoms of emesis, respiratory arrest, and aspiration
pneumonitis that caused Lazalde’s death. Thus, Dr. Taha’s reliance on Clapp is misplaced.
Dr. Taha’s Issue One is overruled.
III. CONCLUSION
The trial court’s order denying Dr. Taha’s objections and motion to dismiss is affirmed.
9
JEFF ALLEY, Justice
November 8, 2022
Before Rodriguez, C.J., Palafox, and Alley, JJ.
10 | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482749/ | COURT OF APPEALS
EIGHTH DISTRICT OF TEXAS
EL PASO, TEXAS
§
WILLIAM D. ABRAHAM, No. 08-22-00079-CV
§
Appellant, Appeal from the
§
v. 243rd District Court
§
RON ACTON, DEBBIE ACTON, AARK of El Paso County, Texas
INVESTMENTS LP, FEDERICO §
FERNANDEZ AND CAROL (TC# 2016DCV2081)
FERNANDEZ, §
Appellee. §
O R D E R
The Court GRANTS the Appellant’s fourth motion for extension of time within
which to file the brief until December 9, 2022. NO FURTHER MOTIONS FOR EXTENSION
OF TIME TO FILE THE APPELLANT’S BRIEF WILL BE CONSIDERED BY THIS COURT.
It is further ORDERED that the Hon. Stephen G. Peters, the Appellant’s attorney, prepare
the Appellant’s brief and forward the same to this Court on or before December 9, 2022.
IT IS SO ORDERED this 7th day of November, 2022.
PER CURIAM
Before Rodriguez, C.J., Palafox and Alley, JJ.
1 | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482750/ | COURT OF APPEALS
EIGHTH DISTRICT OF TEXAS
EL PASO, TEXAS
§ No. 08-21-00163-CV
IN THE INTEREST OF: § Appeal from the
N.R.S., § 112th Judicial District Court
A CHILD. § of Crockett County, Texas
§ (TC# 21-02-08131-CV)
MEMORANDUM OPINION
In this appeal, Appellant A.S. challenges the trial court’s entry of a final order adjudicating
the parent-child relationship between himself and his child N.R.S. 1 In his sole issue, Appellant
argues that the trial court lacked jurisdiction over the case because it entered a final order after
failing to hold a trial on the merits before the one-year automatic dismissal date mandated by the
Family Code. And for that reason, Appellant argues that the final order is void. We disagree and
affirm the trial court’s judgment.
I. FACTUAL AND PROCEDURAL BACKGROUND
Appellant and Mother are the biological parents of N.R.S. Mother, through another man,
D.B., had two other children (J.I.B. and E.J.B.). Based on allegations that the home where all three
1
To protect the identities of the parties involved, we refer to them solely by their initials or by a family-role descriptor.
children resided was “filthy”, that the children were in poor health, were not fed regularly, and that
the home environment exposed the children to narcotics and domestic abuse, the Texas
Department of Family and Protective Services (the Department) initiated proceedings to protect
the children. Specifically, on May 28, 2019, the Department filed an “Original Petition for
Protection of a Child, for Conservatorship, and for Termination in Suit Affecting the Parent-Child
Relationship,” seeking to terminate Appellant and Mother’s parental rights to N.R.S. On June 7,
2019, the trial court entered an agreed temporary order appointing the Department as temporary
managing conservator of N.R.S. and his siblings.
Based on the date of the Department’s appointment as temporary managing conservator
and pursuant to TEX.FAM.CODE ANN. § 263.306(a-1)(8), the trial court determined the “dismissal
date” of the case to be June 8, 2020. 2 On March 26, 2020, the trial court signed a written order
setting the trial for October 8, 2020. In the same order, the court extended the dismissal date to
December 5, 2020, having found that “extraordinary circumstances necessitate[d] the children
remaining in the temporary managing conservatorship of the Department” and that doing so was
in the children’s best interest. 3
The court later held a “Final Hearing” on December 3, 2020. At that hearing, D.B. (the
father of J.I.B. and E.J.B.) appeared but was unrepresented by counsel. Appellant was not present
at the hearing because he had not been served with notice of the suit. The trial court determined
that D.B. was indigent and appointed an attorney to represent him. The attorney for the Department
2
As we explain below, the trial court must commence the trial on the merits or grant an extension (as limited by the
statute) “on the first Monday after the first anniversary of the date the court rendered a temporary order appointing the
department as temporary managing conservator[.] TEX.FAM.CODE ANN. § 263.401(a). Otherwise, “the court’s
jurisdiction over the suit affecting the parent-child relationship filed by the department . . . is terminated and the suit
is automatically dismissed without a court order.” Id.
3
The extraordinary circumstances and best interest findings are specifically required as a predicate to an initial
extension of the date of dismissal (not to exceed 180 days). TEX.FAM.CODE ANN. § 263.401(b).
2
then stated that the case involving N.R.S. was “set for final and our dismissal is on [December]
5th, but we could do a COVID extension if you would prefer, Your Honor, and then we just set it
on February 11th to give [D.B.’s attorney] time to talk to his client.” Counsel for Mother and D.B.
agreed with this suggestion, and the court set both cases for January 7, 2021. The following
exchange ensued:
Department Attorney: [D.B.’s] case is set currently for February 11th for final trial,
do you want me to --
Trial Court: Let’s leave -- do both of them for the COVID so that we can have some
more time. 4
Then, on January 4, 2021, the trial court in Appellant’s case signed an “Order Retaining Suit on
Court’s Docket Pursuant To Supreme Court Emergency Order” that stated:
IT IS THEREFORE ORDERED, pursuant to the Supreme Court’s THIRD, and
TWENTY-NINTH EMERGENCY ORDERS REGARDING THE COVID-19
STATE OF DISASTER, that this suit is retained on the Court’s docket, that the
Department is retained as Temporary Managing Conservator of [N.R.S.], [J.I.B.]
AND [E.J.B.], and that the new dismissal date for this suit is May 10, 2021, unless
a trial on the merits has commenced by that date or the Supreme Court has further
extended its Emergency Order. The Court determines that this is hereby set for a
pre-trial hearing on January 7, 2021 at 10:00a.m. and trial will be set for
February 11, 2021 at 10:00 a.m.
Rendered in open court on December 3, 2020 and SIGNED 1/4/2021.
(emphasis in original). On February 11, 2021, the trial court commenced a bench trial and began
to receive evidence and testimony, and at the end of the day the court placed the case in recess
until May 6, 2021. The court also severed N.R.S.’s case from the original suit and made him the
subject of a separate cause number. Following these events, Appellant entered an appearance and
filed an answer through his appointed attorney ad litem on March 31, 2021.
4
The trial court referred to “both of them” because D.B. was involved in another case set that day, involving a different
child.
3
The trial court reconvened the bench trial on July 22, 2021 and August 23, 2021 during
which Appellant appeared and was represented by his attorney ad litem. At the end of the trial, the
court entered a “Final Order in Suit Affecting the Parent-Child Relationship” that appointed
N.R.S.’s great grandmother as permanent managing conservator of N.R.S. and named Appellant
and Mother as possessory conservators with limited rights of possession and access and the
obligation to pay child support. The court later entered an amended final order that confirmed these
dispositions. This appeal follows. In his sole issue, Appellant argues that the trial court lacked
subject-matter jurisdiction to enter the final order because the court failed to render a valid order
extending the dismissal date under TEX.FAM.CODE ANN. § 263.401, and because trial on the merits
did not commence before the dismissal date.
II. DISCUSSION
A. Applicable Law
Whether a trial court had jurisdiction to render an order is a question of law that we review
de novo. Gauci v. Gauci, 471 S.W.3d 899, 901 (Tex.App.--Houston [1st Dist.] 2015, no pet.). A
judgment is void when the court rendering judgment lacked jurisdiction over the parties or subject
matter, had no jurisdiction to enter the particular judgment, or had no capacity to act. In re D.S.,
602 S.W.3d 504, 512 (Tex. 2020). Jurisdiction is fundamental and may be raised at any time,
including on appeal. Tullos v. Eaton Corp., 695 S.W.2d 568, 568 (Tex. 1985) (per curiam).
The legal question before us turns on whether the trial court decided Appellant’s case
within the time parameters imposed by the legislature. The Texas Supreme Court has succinctly
outlined the legislatively mandated timetable:
The Texas Legislature enacted Texas Family Code section 263.401 to encourage
prompt resolution of suits in which the Department of Family and Protective
Services requests termination of the parent-child relationship or requests that the
Department be named conservator of a child. Section 263.401 does this by requiring
4
trial courts presiding over such suits to commence the trial on the merits within one
year after the initial temporary order. In extraordinary circumstances defined in
section 263.401(b), trial courts may extend that one-year deadline, or “dismissal
date” in the parlance of the statute. But if the trial court neither commences trial by
the dismissal date nor extends it in accordance with section 263.401(b), the statute
dictates a dire consequence: the trial court’s jurisdiction over the suit “is terminated
and the suit is automatically dismissed.”
Interest of G.X.H., 627 S.W.3d 288, 292 (Tex. 2021), quoting TEX.FAM.CODE ANN. § 263.401(a).
Section 263.401(a) provides that the trial court’s jurisdiction over the Department’s suit ends on
the first Monday following the first anniversary of the Department’s appointment as temporary
managing conservator. TEX.FAM.CODE ANN. § 263.401(a). The suit is dismissed by operation of
law if trial does not commence on or before that date. Id.
The statute, however, allows a trial court to extend the dismissal date. Under section
263.401(b),
Unless the court has commenced the trial on the merits, the court may not retain the
suit on the court’s docket after the time described by Subsection (a) unless the court
finds that extraordinary circumstances necessitate the child remaining in the
temporary managing conservatorship of the department and that continuing the
appointment of the department as temporary managing conservator is in the best
interest of the child.
Id. § 263.401(b). If the court makes those findings, the court
may retain the suit on the court’s docket for a period not to exceed 180 days after
the time described by Subsection (a). If the court retains the suit on the court’s
docket, the court shall render an order in which the court: (1) schedules the new
date on which the suit will be automatically dismissed if the trial on the merits has
not commenced, which date must be not later than the 180th day after the time
described by subsection (a); (2) makes further temporary orders for the safety and
welfare of the child as necessary to avoid further delay in resolving the suit; and (3)
sets the trial on the merits on a date not later than the date specified under
Subdivision (1).
Id. In sum, a trial court’s failure to timely extend the automatic dismissal date before that date
passes renders the court without jurisdiction and the case is automatically dismissed. Id.
5
§ 263.401(a); see G.X.H., 627 S.W.3d at 301 (stating that the “trial court’s failure to timely extend
the automatic dismissal date before that date passes . . . is jurisdictional”).
The procedure for a trial court’s extension of the deadlines in section 263.401 has been
altered by the Texas Supreme Court’s Emergency Orders on the COVID-19 pandemic. The court’s
First Emergency Order Regarding the COVID-19 State of Disaster, issued on March 13, 2020,
provides that all courts may “modify or suspend any and all deadlines and procedures, whether
prescribed by statute, rule or order, for a stated period ending no longer than 30 days after the
Governor’s state of disaster has been lifted.” First Emergency Order Regarding the COVID-19
State of Disaster, 596 S.W.3d 265 (Tex. 2020). The court subsequently clarified that the First
Emergency Order applies to the extension of the deadlines in section 263.401. Third Emergency
Order Regarding the COVID-19 State of Disaster, 596 S.W.3d 266, 267 (Tex. 2020). And on
September 18, 2020, the court issued the Twenty-Ninth Emergency Order, which was operative at
the time of the relevant events in this case. That order requires that “[s]ubject only to constitutional
limitations, all courts in Texas may in any case, civil or criminal—and must to avoid risk to court
staff, parties, attorneys, jurors, and the public—without a participant’s consent . . . extend the initial
dismissal date as calculated under section 263.401(a)[.]” Twenty-Ninth Emergency Order
Regarding the COVID-19 State of Disaster, 629 S.W.3d 863, 864 (Tex. 2020). But such an
extension of the initial dismissal date must comply with section 263.401(b) or (b-1)—those
sections requiring specific findings that the extension be based on (1) extraordinary circumstances,
and (2) in the best interest of the child. Id.; TEX.FAM.CODE ANN. § 263.401(b). A subsequent
extension, is subject to a different standard:
Subject only to constitutional limitations, all courts in Texas may in any case, civil
or criminal—and must to avoid risk to court staff, parties, attorneys, jurors, and the
public—without a participant’s consent . . . for any case previously retained on the
court’s docket pursuant to Section 263.401(b) or (b-1), or for any case whose
dismissal date was previously modified under an Emergency Order of this Court
6
related to COVID-19, extend the dismissal date for an additional period not to
exceed 180 days from the date of this Order to avoid risk to court staff, parties,
attorneys, jurors, and the public.
Twenty-Ninth Emergency Order Regarding the COVID-19 State of Disaster, 629 S.W.3d 863, 864
(Tex. 2020).
B. Analysis
Appellant argues that the trial court failed to: (1) either begin trial on the merits before the
automatic dismissal date; or (2) properly extend the dismissal date by entering a written order with
the requisite findings under section 263.401(b). Appellant argues in turn that because of these
failures, the court’s jurisdiction over the case had terminated by the time the final order was entered
and the order is therefore void. The Department responds that the Supreme Court’s Emergency
Orders pertaining to the COVID-19 pandemic permitted the trial court to extend the deadlines
prescribed in section 263.401, and that the court’s oral pronouncement at the December 3, 2020
hearing that it was extending the deadline was effective to extend the dismissal date.
Importantly, the trial court timely signed an initial written order on March 26, 2020, that
granted the first extension and contained the necessary findings to satisfy section 263.401(b)’s
requirements. After this order extended the automatic-dismissal date to December 5, 2020, the
court held a final hearing on December 3, 2020. At this hearing, counsel for the Department
requested a “COVID extension” and a new trial setting on February 11, 2021. The court advised
the clerk to set the case for a final hearing on January 7, 2021, and expressly stated, “Let’s leave -
- do both of them for the COVID so that we can have some more time.” The court subsequently
signed an order on January 4, 2021 stating that the order had been rendered in open court on
December 3, 2020, and extending the dismissal date to May 10, 2021. No party objected to the
trial court’s action. And the trial commenced on February 11, 2021, well before the extended
dismissal date.
7
This case tracks what occurred in Interest of J.-R.A.M., No. 10-20-00221-CV, 2020 WL
7866877 (Tex.App.--Waco Dec. 30, 2020, pet. denied) (mem. op.). There, the trial court set the
initial dismissal date as February 10, 2020. Before that date passed, the trial court entered an order
in compliance with section 263.401(b) that properly extended the dismissal date to August 8, 2020.
Id. at *1. The trial court then orally reset the trial without objection by any party to August 11,
2020, which was three days past the dismissal date. Id. No written order extending the court’s
jurisdiction beyond August 8, 2020 was signed. Id. One parent moved to dismiss the suit alleging
that the court lost jurisdiction by failing to commence trial before August 8, 2020. The trial court
declined, however, reasoning that it had extended its jurisdiction under the Supreme Court’s
Eighteenth and Twenty-Second Emergency Orders. Id. at *1-2.
On appeal, the appellant argued that the trial court lost jurisdiction over the case because
the trial court failed to enter a written order that set a new trial date and dismissal date in
compliance with section 263.401(b). Id. The Waco Court of Appeals disagreed and held that the
trial court properly extended the deadlines under section 263.401, even without a second written
order. Citing the then-operative Emergency Orders, the court reasoned:
While the emergency orders do expressly require compliance with Section
263.401(a) regarding an initial extension, they do not expressly require compliance
with an extension granted after the initial extension. We find that the trial court
extended the jurisdiction of the trial court as it was required to do pursuant to the
emergency orders (“all courts in Texas may . . . and must to avoid risk . . .”) to a
time when the trial court was able to safely conduct the hearing due to COVID-19.
The failure to enter a written order or to specifically set a dismissal date did not
affect the validity of the trial court’s extension such as to deprive it of jurisdiction.
An oral rendition of an extension is sufficient to comply with the Family Code.
Id. at *3 (emphasis in original, citations omitted).
The Austin court also recently addressed the same issue in A.N. v. Texas Dep’t of Family
and Protective Servs., No. 03-22-00099-CV, 2022 WL 3638211, at *1 (Tex.App.--Austin Aug.
23, 2022, no pet. h.) (mem. op.). There, the initial dismissal date under section 263.401 was May
8
17, 2021, and the trial court signed a valid order before that date extending the date to November
13, 2021. Id. On August 18, 2021, the Department moved for a second extension of the dismissal
date based on the then-operative Fortieth Emergency Order, and on October 8, 2021, the trial court
signed an order extending the dismissal date to February 1, 2022. Id. On that date, the presiding
judge extended the dismissal deadline to March 1, 2022 under the Emergency Order, and the
parties tried the case from February 15 to 18, 2022. Id. On appeal, the appellant argued that the
court’s judgment was void because the court lost jurisdiction when it failed to commence trial on
the merits before February 1, 2022, even though the second and third extensions were ordered
under the Emergency Order. Id. at *2.
The Austin court disagreed and held that the third extension was effective to extend the
dismissal deadline, recognizing that its holding tracked its own precedent and the prior Emergency
Orders that specified “an initial extension of the dismissal deadline must comply with the statutory
requirements of Section 263.401 but [do] not require such compliance for subsequent extensions
under the emergency orders.” Id., citing R.C.C. v. Texas Dep’t of Family and Protective Servs.,
No. 03-21-00687-CV, 2022 WL 2231306, at *9 (Tex.App.--Austin June 22, 2022, pet. struck)
(mem. op) (“[A]lthough the Eighteenth Emergency Order and subsequent orders required that the
extension of the initial dismissal date comply with Section 263.401, the orders did not require
compliance with Section 263.401 for additional extensions[.]”) (citations omitted).
We see no reason to deviate from the holdings of our sister courts. The trial court entered
a valid initial order extending the dismissal deadline that contained the requisite findings. The
reporter’s record of the December 3, 2020 hearing reflects the court’s intent to extend the dismissal
date under the Supreme Court’s Emergency Orders. A written order was later signed that
confirmed that fact. No party present at the hearing objected to the trial court’s extension of the
9
dismissal date. For these reasons, we conclude that the trial court properly extended the deadlines
under section 263.401. See id. at *2-3.
Appellant argues that although the January 4, 2021 written extension order stated that it
was rendered in open court on December 3, 2020, the lack of a written order rendered before the
automatic dismissal date the trial court’s oral extension ineffective. But the Supreme Court has
stated that although the extraordinary-circumstances and best-interest-of-the-child findings under
section 263.401(b) are best made in writing in written findings or in an order, they may, as is the
case here, also be made “orally on the record or in some other writing.” See G.X.H., 627 S.W.3d
at 299. Moreover, the court timely entered a written order containing the required findings. Thus,
we find this argument unpersuasive.
Appellant further argues that the trial court’s statement, “Let’s leave -- do both of them for
the COVID so that we can have some more time” did not constitute an adequate statement
rendering an extension because it was a “mere cognition” and a suggestion that the court should
extend the dismissal deadline and not a definitive statement that it would do so. Whether a
particular action constitutes a rendition of an order or judgment is a question of fact, and we look
primarily to the words used by the court to effect its rendition. Blackburn v. Blackburn, No. 02-
12-00369-CV, 2015 WL 2169505, at *6 (Tex.App.--Fort Worth May 7, 2015, no pet.) (mem. op.)
(citations omitted). When read in context with the Department’s attorney’s statement that the case
was “set currently for February 11th for final trial,” along with the court’s signing of an “Order
Retaining Suit On Court’s Docket Pursuant To Supreme Court Emergency Order” that stated that
the order had been rendered in open court on December 3, 2020 and signed on January 4, 2021,
the record sufficiently reflects the trial court’s intent to extend the dismissal date under the
Supreme Court’s Emergency Orders. See id. at *7 (a reviewing court may look to other actions
and statements by the trial court in determining whether the court intended to render judgment).
10
For these reasons, we reject Appellant’s argument that the trial court’s statement could not
constitute a pronouncement of an order extending the dismissal deadline.
Finally, Appellant argues that this case is analogous to In re J.R., where the Fort Worth
Court of Appeals held that a trial court’s jurisdiction terminated because it had not commenced a
trial on the merits or further extended the dismissal date by the time it entered the extension order.
622 S.W.3d 602, 605-06 (Tex.App.--Fort Worth 2021, orig. proceeding [mand. dism’d]). But
unlike J.R., the trial court here commenced trial and began to receive evidence and testimony well
before the first extended dismissal date. Id. at 606.; see also, A.N., 2022 WL 3638211, at *3 (stating
that In re J.R. is inapt in a case in which the trial court properly granted an initial extension of the
dismissal date under section 263.401(b) and later granted a subsequent extension under the Texas
Supreme Court’s Emergency Order).
Appellant’s Issue One is overruled.
III. CONCLUSION
The trial court’s judgment is affirmed.
JEFF ALLEY, Justice
November 9, 2022
Before Rodriguez, C.J., Palafox, and Alley, JJ.
11 | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482752/ | COURT OF APPEALS
EIGHTH DISTRICT OF TEXAS
EL PASO, TEXAS
ED SANCHEZ D/B/A DELUXE AUTO § No. 08-22-00220-CV
SERVICES,
§ Appeal from the
Appellant,
§ County Court at Law #2
V.
§ of Travis County, Texas
CEDRICK THOMAS,
§ (TC# C-1-CV-19-009616)
Appellee.
MEMORANDUM OPINION
This appeal is before the Court on its own motion to determine whether the appeal should
be dismissed for want of jurisdiction. Finding that Appellant did not timely file his notice of appeal,
we dismiss the appeal for want of jurisdiction.
A civil appeal is perfected when the notice of appeal is filed. TEX. R. APP. P. 26.1; Restrepo
v. First Nat’l Bank of Dona Ana County, N.M., 892 S.W.2d 237, 238 (Tex.App.—El Paso 1995,
no writ) (per curiam) (applying former TEX. R. APP. P. 40(a)(1)). The notice of appeal must be
filed within thirty days after the judgment is signed unless the appellant files a timely motion for
new trial. TEX. R. APP. P. 26.1. (a)(1). If such motion for new trial is filed, the notice of appeal
must be filed within ninety days after the judgment is signed. Id. To be timely, the motion for new
trial must be filed within thirty days after the judgment or other appealable order is signed. TEX.
R. CIV. P. 329b(a). Still, a notice of appeal is considered timely, if filed within fifteen days of the
due date and accompanied by a reasonable explanation for the failure to file on the date due.
Vergburgt v. Dorner, 959 S.W.2d 615, 617 (Tex. 1997).
Appellant filed a notice of appeal on September 30, 2022, attempting to appeal the trial
court’s final judgment rendered on June 6, 2022. The notice of appeal further stated that a motion
for new trial was filed on July 5, 2022. As a result, Appellant’s notice of appeal was due to be filed
on September 5, 2022. Yet, Appellant did not file it until September 30, 2022, more than fifteen
days late. A timely notice of appeal is essential to invoking this Court’s jurisdiction. See TEX. R.
APP. P. 25.1(b), 26.1.
On October 27, 2022, the Clerk of this Court sent Appellant a letter regarding the filing of
the notice of appeal because we were concerned it was not timely perfected. The letter gave notice
of our intent to dismiss for want of jurisdiction, within 10 days, unless grounds were shown for
the Court to continue the appeal. See TEX. R. APP. P. 10.5(b), 26.3(b), 42.3(a). To date, no response
has been filed or received responding to or otherwise providing grounds for continuing this appeal.
Accordingly, we find that Appellant failed to perfect his appeal because he filed the notice of
appeal outside of the applicable time limits. This appeal is dismissed for want of jurisdiction.
See TEX. R. APP. P. 26.1, 42.3(a), (c), 43.2(f).
GINA M. PALAFOX, Justice
November 9, 2022
Before Rodriguez, C.J., Palafox, and Alley, JJ.
2 | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482753/ | COURT OF APPEALS
EIGHTH DISTRICT OF TEXAS
EL PASO, TEXAS
ED SANCHEZ D/B/A DELUXE AUTO § No. 08-22-00220-CV
SERVICES,
§ Appeal from the
Appellant,
§ County Court at Law #2
V.
§ of Travis County, Texas
CEDRICK THOMAS,
§ (TC# C-1-CV-19-009616)
Appellee.
JUDGMENT
The Court has considered this cause on the record and concludes the appeal should be
dismissed for want of jurisdiction. We therefore dismiss the appeal for want of jurisdiction. We
further order Appellant pay all costs of this appeal, and this decision be certified below for
observance.
IT IS SO ORDERED THIS 9TH DAY OF NOVEMBER, 2022.
GINA M. PALAFOX, Justice
Before Rodriguez, C.J., Palafox, and Alley, JJ. | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482754/ | COURT OF APPEALS
EIGHTH DISTRICT OF TEXAS
EL PASO, TEXAS
JUAN MERCED KETCHUM, § No. 08-22-00114-CR
Appellant, § Appeal from the
v. § 441st Judicial District Court
THE STATE OF TEXAS, § of Midland County, Texas
Appellee. § (TC# CR56387)
MEMORANDUM OPINION
A jury convicted Appellant Juan Merced Ketchum of failure to comply with the
requirements for sex-offender registration and assessed a two years and six months prison
sentence. In his sole issue, Appellant argues that the trial court erred by assessing court costs and
attorney’s fees in the judgment because he was found to be indigent throughout the trial and there
was no evidence of a material change in his financial circumstances. For the reasons explained
below, we delete imposing the attorney’s fees from the judgment and affirm the judgment in all
other respects. 1
I. PROCEDURAL BACKGROUND
1
This case was transferred from our sister court in Eastland, and we decide it in accordance with the precedent of
that court to the extent required by TEX.R.APP.P. 41.3.
The State charged Appellant by indictment with failure to comply with the requirements
of sex-offender registration. See TEX.CODE CRIM.PROC.ANN. art. 62.102 (a),(b)(2). Appellant
subsequently completed an affidavit of indigence and the trial court appointed an attorney to
represent him. 2 Following a jury trial, the jury found Appellant guilty of the charged offense and
assessed punishment of two years and six months imprisonment. In its judgment, the trial court
ordered Appellant to pay “all court costs, fines, fees, assessments and restitution,” and the clerk
issued a bill of costs that included $290.00 in court costs and $6,940.00 in appointed attorney’s
fees. After Appellant filed a notice of appeal and a request for preparing the clerk’s record in forma
pauperis, the trial court appointed appellate counsel to represent Appellant and ordered the District
Clerk to prepare the clerk’s record in forma pauperis. This appeal follows.
II. DISCUSSION
In his sole issue, Appellant argues that the trial court erred by imposing attorney’s fees and
court costs because the trial court had found him indigent and there is no evidence of a material
change in his financial circumstances that would rebut the presumption of his continued indigence
throughout the trial. Because we reach different conclusions about the imposition of attorney’s
fees and court costs, we discuss the matters separately. 3
A. Attorney’s Fees
A challenge to the sufficiency of the evidence supporting an order directing a defendant to
reimburse the amount of court-appointed attorney’s fees is reviewable on direct appeal in a
2
Although an express order appointing Appellant’s trial counsel and finding Appellant indigent does not appear in
the appellate record, the trial court’s order to prepare the clerk’s record states that the court “ha[d] previously found
[Appellant] to be indigent and entitled to court appointed counsel.” The State does not contest that Appellant was
found indigent and had counsel appointed to represent him in the trial court.
3
Although the trial court also imposed $60.00 in sheriff’s fees, Appellant does not specifically argue that the court
erred by doing so. Thus, we only consider whether the court erred by imposing attorney’s fees and court costs.
2
criminal case. See Jimenez v. State, No. 08-21-00079-CR, 2022 WL 2826943, at *2-3 (Tex.App.-
-El Paso July 20, 2022, no pet.) (mem. op., not designated for publication), citing Armstrong v.
State, 340 S.W.3d 759, 767 (Tex.Crim.App. 2011). In conducting this review, we read the record
in the light most favorable to the judgment. See Mayer v. State, 309 S.W.3d 552, 557
(Tex.Crim.App. 2010).
When applicable, TEX.CODE CRIM.PROC.ANN. art. 1.051(c) and (d) require the
appointment of counsel for an indigent defendant. Jimenez, 2022 WL 2826943, at *2. Following
a conviction, a defendant may have to repay the cost of appointed counsel, but only as provided
by TEX.CODE CRIM.PROC.ANN. art. 26.05(g):
If the judge determines that a defendant has financial resources that enable the
defendant to offset in part or in whole the costs of the legal services provided to the
defendant in accordance with Article 1.051(c) or (d), including any expenses and
costs, the judge shall order the defendant to pay during the pendency of the charges
or, if convicted, as a reimbursement fee the amount that the judge finds the
defendant is able to pay. The defendant may not be ordered to pay an amount that
exceeds . . . the actual costs, including any expenses and costs, paid by the
county for the legal services provided by an appointed attorney.
Once a defendant has been found to be indigent, he is presumed indigent for the rest of the
proceedings unless there is a showing of a material change in his financial circumstances. Id. art.
26.04(p).
The trial court imposed $6,940.00 in attorney’s fees in its judgment. Appellant argues that
no evidence in the record shows that there was a material change in Appellant’s financial
circumstances after the court found Appellant indigent. The State concedes that because there has
been no showing of a material change in Appellant’s financial circumstances, the trial court could
not impose the assessment of attorney’s fees against Appellant. Because there is no evidence that
Appellant’s financial circumstances had materially changed when the trial court ordered him to
3
pay attorney’s fees, we conclude that the trial court erred by imposing attorney’s fees. See id. art.
26.04(p); Jimenez, 2022 WL 2826943, at *5.
This part of Appellant’s Issue One is sustained.
B. Court Costs
Appellant also challenges the trial court’s imposition of $290.00 in court costs. The
imposition of court costs is governed by TEX.CODE CRIM.PROC.ANN. art. 42.16: “If the punishment
is any other than a fine, the judgment shall specify it, and order it enforced by the proper process.
It shall also adjudge the costs against the defendant, and order the collection thereof as in other
cases.” Thus, upon the defendant’s conviction, the imposition of court costs is mandatory.
Martinez v. State, 507 S.W.3d 914, 916 (Tex.App.--Waco 2016, no pet.). The costs and fee
schedules are provided for in Chapter 102 of the Code of Criminal Procedure. See TEX.CODE
CRIM.PROC.ANN. art. 102.001-102.030. No cost can be imposed unless it is “expressly provided
by law.” Martinez, 507 S.W.3d at 916, quoting TEX.CODE CRIM.PROC.ANN. art. 103.002. Court
costs need not be proven at trial because they are not a part of the defendant’s guilt or the sentence
to be imposed. Id., citing Martin v. State, Nos. 14-14-00761-CR, 14-14-00762-CR, 2015 WL
8215342, at *1 (Tex.App.--Houston [14th Dist.] Dec. 8, 2015, no pet.) (mem. op., not designated
for publication). Rather, they are a “nonpunitive recoupment of the costs of judicial resources
expended in connection with the trial of the case.” Weir v. State, 278 S.W.3d 364, 365-66
(Tex.Crim.App. 2009) [Internal quotation marks omitted]. And because they are not part of the
sentence, “[c]ourt costs, as reflected in a certified bill of costs, need neither be orally pronounced
nor incorporated by reference in the judgment to be effective.” Armstrong, 340 S.W.3d at 766.
Our research has uncovered no authority precluding the imposition of court costs on
indigent defendants. Rather, appellate courts have upheld imposing court costs on indigent
4
defendants. See, e.g., Dority v. State, 631 S.W.3d 779, 793 (Tex.App.--Eastland 2021, no pet.)
(recognizing that mandatory court costs can be recovered from an indigent defendant); Allen v.
State, 426 S.W.3d 253, 259 (Tex.App.--Texarkana 2013, no pet.) (holding that a trial court can
order indigent defendant to pay mandatory court costs as long as payment is not demanded before
proceedings in the trial court have concluded, and collecting supporting cases); Williams v. State,
332 S.W.3d 694, 700 (Tex.App.--Amarillo 2011, pet. ref’d) (upholding imposing court costs on
an indigent defendant). And the Waco court of appeals has held that the imposition of mandatory
court costs on indigent defendants does not violate the constitutional right to equal protection.
Martinez, 507 S.W.3d at 917-18. Because nothing prohibits imposing court costs on an indigent
defendant, and because Appellant directs us to no statute or other authority prohibiting the
imposition of court costs on an indigent defendant, we conclude that the trial court did not err by
doing so.
This part of Appellant’s Issue One is overruled.
III. CONCLUSION
We modify the trial court’s judgment to delete the imposition of $6,940.00 in attorney’s
fees, and we affirm the judgment as modified.
JEFF ALLEY, Justice
November 8, 2022
Before Rodriguez, C.J., Palafox, and Alley, JJ.
(Do Not Publish)
5 | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482755/ | COURT OF APPEALS
EIGHTH DISTRICT OF TEXAS
EL PASO, TEXAS
JUAN MERCED KETCHUM, § No. 08-22-00114-CR
Appellant, § Appeal from the
v. § 441st Judicial District Court
THE STATE OF TEXAS, § of Midland County, Texas
Appellee. § (TC# CR56387)
JUDGMENT
The Court has considered this cause on the record and concludes the judgment of
conviction should be reformed to reflect the deletion of the imposition of $6,940.00 in attorney’s
fees. We therefore affirm the judgment of the trial court as reformed. This decision shall be
certified below for observance.
IT IS SO ORDERED THIS 8TH DAY OF NOVEMBER, 2022.
JEFF ALLEY, Justice
Before Rodriguez, C.J., Palafox, and Alley, JJ. | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8488883/ | OPINION
AMEL STARK, Bankruptcy Judge.
National Recreation Products, Inc., a Delaware corporation, (hereinafter designated as N.R.P.), filed a complaint in this Court for leave to foreclose on a second mortgage covering premises known as 71 Buchanan Road, Edison, New Jersey, which is the residence of the bankrupts, Joseph and Rhoda Sumner, to prove the extent and validity of its lien affecting the aforementioned realty, and to join the trustee in bankruptcy, Philip H. Shore, Esquire, as a defendant. The plaintiff, as assignee of a promissory note and the real property mortgage which secured it, contends that the bankrupts have defaulted on the mortgage and that it is entitled to foreclose in order to satisfy its outstanding obligation. The trustee counters by arguing that the plaintiff has not shown adequate proof of the continuing existence of the mortgage, that the plaintiff’s discharge of the co-signer’s mortgage without consideration or payment implied a desire to discharge the bankrupts’ mortgage also, and that the Bankruptcy Court has authority to set aside this mortgage under its powers as a court of equity.
The question presented here is whether this Court may properly cancel the mortgage as an exercise of its powers as an equity court.
*562FINDINGS OF FACT
1. Joseph Sumner and Rhoda Sumner, his wife, filed Voluntary Petitions in bankruptcy in accordance with Chapter III of the Bankruptcy Act (11 U.S.C. Chapter III, Sections 21-35) and Rule 103, Rules of Bankruptcy Procedure, on August 4, 1975. Philip H. Shore, Esquire, was appointed Trustee in Bankruptcy.
2. By stipulation of the parties, the Matter of Rhoda Sumner is being tried as a companion to the Matter of Joseph Sumner.
3. Samuel Small also filed a Voluntary Petition in bankruptcy in accordance with Chapter III of the Bankruptcy Act (11 U.S.C. Chapter III, Sections 21-35) and Rule 103, Rules of Bankruptcy Procedure. Although he is not a party in interest in the matter at bar, his personal financial status has been raised as an issue relating to Joseph Sumner.
4. Joseph Sumner and Samuel Small were both officers of Winport Manufacturing Company. Winport sought to purchase another firm, Sportswear Industries, and obtained a loan for $250,000 from First State Bank (hereinafter called Bank). Sumner and Small, together with their spouses, endorsed a promissory note dated June 12, 1972, to Bank for that amount.
5. To secure the note, Sumner and his wife, Rhoda, and Small and his wife, Elaine, executed and delivered to Bank, mortgages on their respective residences. These mortgages were recorded in the Middlesex County Clerk’s office on June 13, 1972. The mortgages were subsequently assigned by Bank to Plaintiff N.R.P. on January 10, 1972.
6. The parties have stipulated that in April, 1977,1 N.R.P. discharged its mortgage on the Smalls’ real property without any payment or consideration received for the cancellation. Testimony showed that Small asked for and received the cancellation. However, Sumner never requested a cancellation of the mortgage on the residence owned by his wife and him.
7. At the present time, N.R.P. has no record of demand for, or receipt of, payments from the Sumners on the mortgage.
8. On September 14, 1977, N.R.P. filed a complaint in this Court for leave to foreclose on the Sumners’ mortgage and to join the trustee as a party defendant.
9. Sumner testified that he first became aware that N.R.P. wished to be paid on February 28, 1974, when he and Mrs. Sumner were advised that they were in default.2 He also testified that he was, and is still, making payments on the first mortgage.
10. Hearing on the plaintiff’s complaints was originally scheduled for October 26, 1977, but was adjourned many times until it commenced on January 31,1980. The hearing was concluded on March 27, 1980. Counsel for each party was ordered to submit proposed statements of fact and conclusions of law, as well as briefs. Decision was reserved by this Court, pending receipt of the requested items.
11. Divergent statements and conclusions were submitted, but neither party complied with the Court’s request for briefs.
CONCLUSIONS OF LAW
As a general rule, the Bankruptcy Court possesses only the jurisdiction and powers expressly or by necessary implication conferred by statute. Chicago Bank of Commerce v. Carter, 61 F.2d 986, 988 (8th Cir. 1932); Jones v. Kansas City Garment Making Co., 1 F.2d 649 (8th Cir. 1924). Under section 60b of the Bankruptcy Act (11 U.S.C. § 96[b])3, for instance, the court *563may authorize, via the trustee in bankruptcy, the avoidance of a mortgage as a preference. In Swift v. Higgins, 72 F.2d 791 (9th Cir. 1934), a chattel mortgage was set aside as a voidable preference as against other claims because not promptly recorded as required under state law.
In New Jersey, courts are authorized to hold a mortgage unenforceable if it was not in compliance with statutory requirements. The Secondary Mortgage Loan Act, N.J.Stat.Ann. § 17:llA-34 et seq. was drafted in response to widespread complaints concerning the false or misleading advertising regarding availability of loans, their terms, and exaction of exorbitant rates of interest. Stubbs v. Security Consumer Discount, 161 N.J.Super. 129, 133, 390 A.2d 1224 (Law Div.1978). Section 29 (now section 58, set out below4) of the Secondary Mortgage Loan Act specifically provided that no obligation arising out of a secondary mortgage loan would be enforceable by the state courts unless conforming strictly to the statute. Oxford Consumer Discount Co. of North Philadelphia v. Stefanelli, 102 N.J.Super. 549, 246 A.2d 460 (App.Div.1968), modified, 104 N.J.Super. 512, 250 A.2d 593 (App.Div.1969), further modified, 55 N.J. 489, 262 A.2d 874, appeal dismissed, 400 U.S. 808, 91 S.Ct. 45, 27 L.Ed.2d 38 (1970), is probably the leading case in New Jersey which construes this provision. If a court finds a mortgage unenforceable, it may decide to entertain and grant requests to cancel the mortgage completely, absent collusion or fraudulent conduct by the mortgagor. HIMC Investment Co. v. Siciliano, 103 N.J.Super. 27, 39,40, 246 A.2d 502 (Law Div.1968). In Manzo Contracting Co., Inc. v. Warren Limestone Co., Inc., No. A-2774-72 (N.J.Super.Ct.App.Div. July 15, 1976), the court refused to enforce a mortgage which had been part of an illegal bidding arrangement. The equitable remedy of a mortgage foreclosure would not be available to parties who did not have clean hands, the court said. Id. at 20.
There is no specific provision within the Bankruptcy Act which would enable the Bankruptcy Court to set aside, or cancel, a mortgage, except in cases of fraudulent or preferential conduct. Instead, the trustee advocates reliance upon this Court’s equitable powers as outlined in section 2a of the Bankruptcy Act (11 U.S.C. § ll[a])5 and described in Pepper v. Litton, 308 U.S. 295, 304, 60 S.Ct. 238, 244, 84 L.Ed. 281 (1939) by the late Justice Douglas:
*564The bankruptcy courts have exercised these equitable powers in passing on a wide range of problems arising out of the administration of bankrupt estates. They have been invoked to the end that fraud will not prevail, that substance will not give way to form, that technical considerations will not prevent substantial justice from being done.
The Pepper decision has been widely cited. Most courts have applied it to situations where officers, directors, or insiders had asserted claims against bankrupt corporations, and there was questionably fraudulent conduct by the corporate creditors. In Re Mid-Town Produce Terminal, Inc., 599 F.2d 389 (10th Cir. 1979); Frasher v. Robinson, 458 F.2d 492 (9th Cir. 1972); Matter of Dade County Dairies, Inc., 474 F.Supp. 438 (S.D.Fla.1979).
Despite its importance and widespread use, the Pepper decision is not dis-positive of the issues here. General principles regarding equity which were articulated in Pepper are not necessarily applicable to the present facts. As already noted, cases invoking equitable doctrines arise primarily from fraudulent conduct, or where unfairness will result. The defendant has in no way shown that fraud existed here. Moreover, he has failed to demonstrate that injustice will result if the mortgage foreclosure occurs, for there has been no proof before the Court that N.R.P. does not have a validly executed and outstanding mortgage. The trustee’s argument centers around the plaintiff’s failure to produce the original mortgage, and the lack of record of the plaintiff of the mortgage on its books and records, and either demand for payment by the plaintiff, or receipt of payment from the bankrupt. However, it is well settled that proof of the recording of a mortgage creates a presumption of its delivery. Thorpe v. Floremoore Corp., 20 N.J. Super. 34, 37, 89 A.2d 275 (App.Div.1952). Exhibit P-6 was admitted into evidence; it was a certified copy of the mortgage agreement between the bankrupt and Bank, the initial mortgagee, recorded in the Middlesex County Clerk’s office. There has been no showing by the defendant of a previous discharge of the mortgage; therefore, it is presumptively effective and still in existence.
The remainder of the trustee’s contention, that because the Smalls’ mortgage was discharged without consideration, then the Sumners’ mortgage should also be can-celled, is not persuasive. It is not clear why the Smalls’ mortgage was cancelled, but the defendant has not shown that there was any fraud or bad faith on the part of either Small or the plaintiff in discharging the obligation, or certainly none which would imply a legal or equitable responsibility to cancel or discharge the Sumners’ mortgage.
There is nothing in the record of this case which convinces the Court of either the absence of a valid mortgage, or of the equitable requisites to set it aside by Court order. The plaintiff will be permitted to proceed with foreclosure on the premises known as 71 Buchanan Road, Edison, New Jersey, the real property mortgaged by Joseph and Rhoda Sumner to Bank and assigned to N.R.P., joining the trustee as a party defendant in such action.
It is so ORDERED. Let a judgment in conformity with this opinion be entered.
. The photocopy of the discharge of mortgage in this Court’s file is faint, and the date is difficult to read, but it appears to be April 25, 1977.
. According to other testimony and evidence, N.R.P. was not the holder of the mortgage and note until January 10, 1975 (Finding of Fact # 5, supra), and because it was not then a party to the agreement, it is unlikely that N.R.P. would have notified the Sumners of the default. Instead, it was probably the initial mortgagee, Bank, that made demand.
.Section 60b of the Bankruptcy Act provides: Any such preference may be avoided by the trustee if the creditor receiving it or to be benefited thereby or his agent acting with *563reference thereto has, at the time when the transfer is made, reasonable cause to believe that the debtor is insolvent. Where the preference is voidable, the trustee may recover the property or, if it has been converted, its value from any person who has received or converted such property, except a bona-fide purchaser from or lienor of the debtor’s transferee for a present fair equivalent value: Provided, however, That where such purchaser or lienor has given less than such value, he shall nevertheless have a lien upon such property, but only to the extent of the consideration actually given by him. Where a preference by way of lien or security title is voidable, the court may on due notice order such lien or title to be preserved for the benefit of the estate, in which event such lien or title shall pass to the trustee. For the purpose of any recovery or avoidance under this section, where plenary proceedings are necessary, any State court which would have had jurisdiction if bankruptcy had not intervened and any court of bankruptcy shall have concurrent jurisdiction.
. “Unenforceability of loan not in compliance with law”
Any obligation on the part of a borrower arising out of a secondary mortgage loan shall be void and unenforceable unless such secondary mortgage loan was executed in full compliance with the provisions of this act.
. Section 2a(15) of the Bankruptcy Act, in particular, states that:
The courts of the United States hereinbefore defined as courts of bankruptcy are hereby created courts of bankruptcy and are hereby invested, within their respective territorial limits as now established or as they may be hereafter changed, with such jurisdiction at law and in equity as will enable them to exercise original jurisdiction in proceedings under this title, in vacation, in chambers, and during their respective terms, as they are now or may be hereafter held, to—
Make such orders, issue such process, and enter such judgments, in addition to those specifically provided for, as may be necessary for the enforcement of the provisions of this title: Provided, however, That an injunction to restrain a court may be issued by the judge only; | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8488884/ | MEMORANDUM DECISION
PEDER K. ECKER, Bankruptcy Judge.
Roger D. Pieper, the state appointed Guardian of the Person and Estate of Darrell Wayne Pieper, filed on behalf of Darrell Wayne Pieper a Chapter XII Petition on September 8,1978. Darrell Wayne Pieper, Debtor, suffers from a drug and alcohol problem and is legally incompetent. With this in mind, the Court, throughout these proceedings, has attempted to protect the business interests of the Debtor.
Debtor has presented a proposed Plan of Arrangement to this Court. The issues dealt with in this decision revolve around the main question of whether this Court should confirm Debtor’s proposed Plan of Arrangement.
FACTS
Debtor’s proposed Plan of Arrangement divides the creditors into five classes, which are as follows:
“ARTICLE III.
DIVISION OF THE CREDITORS INTO CLASSES
The creditors of the Debtor shall consist of the following classes:
A. Class I — Northwestern National Bank of Sioux Falls, as Trustee of the Matie E. Peterson trust.
B. Class II — Dennis E. Severson, Dorothy M. Severson and Wayne 0. Chase.
*574C. Class III — Leon T. Richardson and Nancy K. Richardson.
D. Class IV — Dakota Home Services.
E. Class V — All of the remaining general unsecured creditors of Debtor.”
The real estate, dealt with by Debtor’s proposed Plan is the property commonly known as the DeLux Motel; located at 1712 West 12th Street, Sioux Falls, South Dakota. A Court appointed appraiser set the present reasonable fair market value of the commercial property at $142,000.00.
On May 3, 1972, the Class I Creditor, Northwestern National Bank of Sioux Falls as Trustee of the Matie E. Peterson trust, sold the DeLux Motel by Contract for Deed to the Class II Creditors, Dennis E. Sever-son, Dorothy M. Severson and Wayne O. Chase, for the sum of $105,000.00. The Class II Creditors agreed to pay $2,500.00 down and make a monthly payment of $675.00 until September 1, 1987, when the entire balance remaining would become due and payable.
The Class II Creditors, on May 15, 1974, sold the property by Contract for Deed to the Class III Creditors, Leon T. Richardson and Nancy K. Richardson, for the sum of $125,000.00. The Class III Creditors agreed to pay $5,000.00 down and make a monthly payment of $675.00 until September 1,1987, when the entire balance remaining would become due and payable.
On July 13, 1977, the Class III Creditors sold the property by Contract for Deed to Debtor for the sum of $180,000.00. Debtor agreed to pay $50,000.00 down and make a monthly payment of $1,150.00 until September 1,1987, when the entire balance remaining would become due and payable. All payments required by Debtor under the Contract for Deed are current and paid up to date.
Debtor’s proposed Plan of Arrangement further provides in Article I that all allowed priority claims and administration costs and expenses will be paid off in full in cash after confirmation of the Plan.
Debtor also proposes in Article V to sell the commercial property known as the De-Lux Motel to Dakota Land Corporation, hereinafter known as Buyer. Under the proposed Plan of Arrangement Buyer will assume the outstanding Contract for Deed between Debtor and the Class III Creditors, which has a present balance of about $126,-000.00. Buyer is to make the monthly payments due under the Contract for Deed to First Northwestern Trust of South Dakota, which will disburse the money to the vendees as provided for in the three Contracts for Deeds.
Further, Debtor’s Plan of Arrangement proposes in Article V that, in addition to any cash accumulated in the operation of the motel, Buyer would make a further cash deposit with First Northwestern Trust of South Dakota in a sum sufficient to:
(a) Pay the Clerk of Courts deposit fee of about $ 500.00
(b) Satisfy the Internal Revenue Service levy of about 4,500.00
(c) Satisfy the delinquent tax collector of Minnehaha County levy of about 700.00
(d) Satisfy the. Department of Revenue, State of South Dakota, sales tax delinquency of about 3,500.00
(e) Satisfy the Employment Security Department, Unemployment Tax Division, State of South Dakota of about 600.00
(f) Satisfy any other liens or encumbrances against the realty, if any.
(g) Pay all assessed and due personal and real estate taxes due Minnehaha County, South Dakota.
(h) Satisfy the expenses of administration of the Chapter XII estate of about 3,500.00
(i) Satisfy the Class IV creditor.
(j) Class V Creditors — Buyer would deposit a further additional cash sum sufficient to pay a five per cent cash dividend to Class V Creditors scheduled herein, or creditors of such class who filed Proofs of Claims which are allowed herein.
(k) Pay all costs and fees in connection with this real estate transaction.
Finally, the Debtor’s Plan of Arrangement proposes in Article II that the Court shall retain jurisdiction until the completion of the Plan.
The Class V Creditors, which are the remaining general creditors, accepted the Plan of Arrangement by a majority in numbers and amounts. Under Debtor’s Plan of *575Arrangement the Class V Creditors will receive more than they would in liquidation.
The Class I, II, and III Creditors rejected Debtor’s Plan of Arrangement. The Class II Creditors filed written Objections to the Confirmation of Debtor’s Plan and a Motion for modification of the Debtor’s Plan.
This Court held numerous hearings on whether Debtor’s Plan of Arrangement should be confirmed. At the hearings Counsel presented facts that may be of some importance.
Jerry and Pat Rohl are the owners of Dakota Land Corporation, Buyer. Buyer, incorporated in July of 1978, has as its officers, Jerry Rohl as President, Attorney Keith Strange as Vice President, and Pat Rohl as Secretary-Treasurer. There are no other employees. The Corporation’s business is to buy, maintain and rent realty. Presently Buyer is making the monthly payments on the Contract for Deed.
The officers of Buyer are also the officers of the Class IV Creditor, Dakota Home Services. The stockholders of Dakota Home Services are Eli Rohl, Gary Rohl and Roger Rohl. All the stockholders are minor children of Jerry Rohl. Jerry Rohl is the legal guardian of the children and, in effect, runs the business. Presently, Dakota Home Services has loans to Buyer in the amount of $30,000.00. Dakota Home Services also has $78,000.00 owing on other contracts.
Presently Pat Rohl manages and operates the realty subject to these proceedings. She handles all management, repairs, bookkeeping, etc. According to her the motel is in good physical condition. However, several creditors testified that the motel was run down.
ISSUES
As mentioned earlier, the main issue presented to this Bankruptcy Court for resolution is whether the Court should confirm Debtor’s Plan of Arrangement. In answering that question it is necessary for the Court to resolve the following six (6) sub-issues: (1) Whether a Chapter XII debtor may provide in his plan of arrangement for liquidation of all his assets; (2) Whether a secured creditor who rejects a debtor’s plan of arrangement is materially and adversely affected by a plan that provides that a party substituted for the debtor, and allowed to assume a Contract for Deed, will pay the secured creditor exactly what the secured creditor bargained for under the Contract for Deed; (3) Whether Debtor’s Plan of Arrangement provides adequate protection to any affected secured creditor so as to allow the Court to invoke the cram-down provisions of Section 461(11) of the Bankruptcy Act, 11 U.S.C. Section 861(11); (4) Whether Debtor proposed his Plan of Arrangement in good faith; (5) Whether Debtor’s Plan of Arrangement is in the best interests of the creditors; and (6) Whether Debtor’s Plan of Arrangement is feasible.
(1) LIQUIDATION OF ALL ASSETS BY CHAPTER XII DEBTOR
Creditors have raised the issue of whether a Chapter XII Debtor may provide in his plan of arrangement for liquidation of all of his assets. Under Debtor’s Plan of Arrangement Buyer would assume the Contract for Deed between Debtor and the Class III Creditors. As a result there is no real property remaining in the Debtor’s estate in which Debtor would have anything more than a nominal interest.
The Court recognizes that the purpose of Chapter XII was meant to allow a debtor to continue in possession and ownership of his assets while paying off his debts. But, in this particular case, where Debtor has an appointed guardian and is legally incompetent, such a proposal would not be feasible. Although Debtor’s Attorney has proposed a plan whereby Debtor will sell the DeLux Motel, Debtor’s priority and secured debts will all be paid.
This Court holds that a Chapter XII debt- or may provide in his plan of arrangement for the liquidation of all of his assets. In so holding the Court relies upon Section 461 of the Bankruptcy Act, 11 U.S.C. Section 861, which reads as follows:
*576“An arrangement—
(12) shall provide adequate means for the execution of the arrangement, which may include: the retention by the debtor of all or any part of his property; the sale or transfer of all or any part of his property in trust or to one or more corporations theretofore organized or thereafter to be organized; the sale of all or any part of his property, either subject to or free from any lien, at not less than a fair upset price and the distribution of all or any assets, or the proceeds derived from the sale thereof, among those having an interest therein; . . . (Emphasis Added.)
The provisions of Section 461(12) of the Bankruptcy Act clearly contemplate that indeed a debtor can provide in his plan of arrangement for liquidation of all of his assets. Counsel have not cited any case or statute that would indicate otherwise. Debtor in his Plan of Arrangement may provide for the sale of the DeLux Motel to Buyer.
(2) ARE THE SECURED CREDITORS MATERIALLY AND ADVERSELY AFFECTED
The second issue presented to this Court for resolution is whether a secured creditor who rejects a debtor’s plan of arrangement is materially and adversely affected by a plan that provides that a party substituted for the debtor, and allowed to assume a Contract for Deed, will pay the secured creditor exactly what .the secured creditor bargained for under the Contract for Deed.
Section 461(2) of the Bankruptcy Act, 11 U.S.C. Section 861(2) requires that:
“An arrangement—
(2) shall provide for the rights of all other creditors of a debtor who may be affected by the arrangement.”
In order to know when a creditor may be affected by an arrangement, reference must be made to Section 407 of the Bankruptcy Act, 11 U.S.C. Section 807, which reads as follows:
“Creditors or any class thereof shall be deemed to be ‘affected’ by an arrangement only if their or its interest shall be materially and adversely affected thereby.”
The effect of these two provisions, plus other applicable provisions of the Bankruptcy Act, is that a creditor who is not affected by an arrangement is not entitled to vote on the acceptance or rejection of the arrangement. On the other hand, Section 461(2) requires a debtor to provide adequate protection to all creditors who are “affected” and do not accept the arrangement.
This Court holds that the Class I, II, and III Creditors are not affected by Debtor’s Plan of Arrangement since the creditors are to receive under the contracts for deeds exactly what they bargained for, that is, installment payments for a fixed term of years at a fixed rate of interest with a balloon payment at a fixed determinable time, all in accord with sale terms previously established by each of them.
The Court further holds that the substitution of Buyer for Debtor, as the one who will be making the payments, does not materially and adversely affect the creditors. Rather, such a substitution meets the requirements of Section 406(1) and Section 461(1), which require a plan of arrangement to have as its primary purpose the alteration or modification of the rights of creditors who hold debts secured by real property or a chattel real of the debtor. Here, the primary purpose of Debtor’s Plan of Arrangement is to modify the Contract for Deed so as to allow Buyer to assume the Contract for Deed. The Court would note and point out to Counsel that there is no requirement under Section 406(1) or 461(1) of the Bankruptcy Act, that the modification or alteration of the creditor’s rights be material or adverse to that creditor’s interest.
The Creditors urged this Court to follow the rationale set out in Continental Insurance Co. v. Louisiana Oil Corp., 89 F.2d 333 (5 Cir. 1937). In Continental the debtor had filed a petition for a corporate reorganization under Bankruptcy Act Section 77B, 11 *577U.S.C. Section 207. The plan of reorganization provided that another corporation would: (1) acquire all the assets of the debtor; (2) assume and pay all debtor’s debts as they matured; (3) issue to the debtor’s preferred stockholders one share of the new corporation stock in exchange for two shares of debtor’s stock; and (4) pay debtor’s common stockholders ten cents per share.
In Continental, the Court addressed the question of whether the plan modified or altered the rights of creditors as required by Section 77B so as to allow the court to confirm the plan. The Court in Continental stated that:
“It is further contended that the plan is not within the bankruptcy power because it does not alter the rights of creditors but serves only to readjust stock ownerships. A plan which does not propose at all to change the position of creditors, if within the federal bankruptcy power, is not within section 77B. The first requisite of a plan as fixed by paragraph (b) is that it ‘shall include provisions modifying or altering the rights of creditors generally, or of any class of them, secured or unsecured, either through the issuance of new securities of any character or otherwise.’ 11 U.S.C.A. Section 207(b). We think the rights of all creditors are modified and altered here because, while they are to be paid in full as their debts mature, the court is not to pay them, but a new debtor, the Arkansas Fuel Oil Company, is to assume them. The substitution of a new debtor, although solvent, is a fundamental alteration of a creditor’s rights.” At 336.
Both Bankruptcy Act Section 77B and the newer Chapter XII proceedings require that an arrangement modify or alter the rights of creditors. This Bankruptcy Court agrees with the holding in Continental that substitution of another party for the debtor does modify or alter the rights of the creditors, as required by Section 77B or Section 461(1) and Section 406(1) of the Bankruptcy Act, in order that a plan of arrangement may be confirmed. However, this Court does not feel that the holding in Continental can be applied to the issue of whether such a substitution materially and adversely affects the creditors.
In Continental, by the very essence of the type of reorganization that was involved, all the creditors were materially and adversely affected. The Court’s statement in Continental that, “The substitution of a new debtor, although solvent, is a fundamental alteration of a creditor’s rights,” should not be taken out of context and made to stand for the proposition that substitution of a party for the debtor does materially and adversely affect a creditor.
Continental, decided in 1937, pre-dated the Chandler Act which substantially modified the Bankruptcy Act of 1898. Further, in the past forty (40) years numerous changes have occurred in the area of bankruptcy law. To hold that the unclear statement by the Court in Continental is controlling on the issue of whether the creditors are materially and adversely affected would be ludicrous. This Court will not apply the holding in Continental to the issue of whether the secured creditors are materially and adversely affected.
As mentioned earlier, this Court holds that the Class I, II, and III Creditors are not affected by Debtor’s Plan of Arrangement since they receive under the Contracts for Deeds exactly what they bargained for. Also, equity in this case justifies a' finding that substituting Buyer for Debtor does not materially and adversely affect the creditors.
Here, Debtor is legally incompetent and is represented in court by his guardian, Roger Pieper. If this Court did not allow the substitution and required Debtor to remain in possession and ownership, any proposed plan of arrangement would by necessity have to contemplate that all performance and business decisions would be made by the guardian. Thus, for all practical purposes, Roger Pieper would remain in command of the business and probably Pat Rohl would continue in managing the De-Lux Motel. In such a situation the creditors would only have the satisfaction of the *578check being signed by Roger Pieper as Guardian for Debtor.
(3) ADEQUATE PROTECTION
Even if this Court found that the Class I, II, and III Creditors were affected by Debtor’s Plan of Arrangement, this Court would hold that Debtor’s Plan of Arrangement provides adequate protection as set out in Section 461(11) of the Bankruptcy Act, 11 U.S.C. Section 861(11), which reads as follows:
“An arrangement-
ill) shall provide for any class of creditors which is affected by and does not accept the arrangement by the two-thirds majority in amount required under this chapter, adequate protection for the realization by them of the value of their debts against the property dealt with by the arrangement and affected by such debts, either, as provided in the arrangement or in the order confirming the arrangement, (a) by the transfer or sale, or by the retention by the debtor, of such property subject to such debts; or (b) by a sale of such property free of such debts, at not less than a fair upset price, and the transfer of such debts to the proceeds of such sale; or (c) by appraisal and payment in cash of the value of such debts; or (d) by such method as will, under and consistent with the circumstances of the particular case, equitably and fairly provide such protection.”
Section 461(11) is commonly called the cram-down provision of Chapter XII. If adequate protection is provided for, Section 468(1) of the Bankruptcy Act, 11 U.S.C. Section 868(1), provides that the plan can be confirmed without the secured creditor’s vote and over his objections. Norton, Real Property Arrangements, Part 24, Section 24-1, at page 80 (1977).
Here, the Class I, II, and III Creditors are adequately protected. Buyer is buying the DeLux Motel subject to their debts. If Buyer fails to make the payments and the plan fails, the secured creditors will have the right to foreclose on the property. Further, if the creditors feel that Buyer is letting the DeLux Motel deteriorate, they can always request a hearing.
This Bankruptcy Court holds that the Class I, II, and III Creditors are adequately protected under Debtor’s Plan of Arrangement and that this Court will invoke the cram-down provisions of Section 461(11) of the Bankruptcy Act and confirm the Plan of Arrangement if all the other requirements are met.
(4) GOOD FAITH
The next issue presented to this Court is whether Debtor proposed his Plan of Arrangement in good faith.
Section 472(4) of the Bankruptcy Act, 11 U.S.C. Section 872(4), requires that:
“The court shall confirm an arrangement if satisfied that—
(4) the proposal and its acceptance are in good faith and have not been made or procured by any means, promises, or acts forbidden by this title.”
The Court in In the Matter of Pickett, Gardner, Landers and Associates, 2 Bankr. Ct.Dec. 727 (N.D.Ga.), held at 730 that “the type of good faith meant in those decisions (referring to Sumida v. Yumen, 409 F.2d 654 (9th Cir. 1969) and In re Colonial Realty Investment Co., 516 F.2d 154 (1st Cir. 1975)), is equated to a consideration whether, after an adequate breathing period, the debtor can show that there is a reasonable chance for successful arrangement within a reasonable time.” 9 Collier on Bankruptcy, (14th Ed.), Section 9.07 at page 1145, explains that:
“The meaning of “good faith” as used in Section 472(4) is not defined in the Act. Whether or not the proposal of a plan is in good faith may be determined not only from conditions existing when the petition is filed but also from subsequent acts. . . . Broadly speaking, the basic inquiry should be whether or not under the circumstances of the case there has been an abuse of the provisions, purpose or spirit of Chapter XII in the proposal or acceptance of the plan.”
*579The facts in this case have already been set out extensively. On the basis of those facts the Court believes that Debtor acted in good faith in proposing his Plan of Arrangement. The Court further holds that Debtor does have a reasonable chance for a successful arrangement within a reasonable time.
(5) BEST INTERESTS OF THE CREDITORS
Section 472(2) of the Bankruptcy Act, 11 U.S.C. Section 872(2), requires a court to confirm an arrangement if satisfied that “it is for the best interests of creditors . . . .” The Class II Creditors filed written Objections to Confirmation of the Plan alleging that the plan is not in the best interests of the creditors since: (1) it allows a sister or related corporation to assume a contract for deed without the consent of the contract vendors and without the requirement of any downpayment; (2) there is no assurance that Buyer has the financial ability to perform the contract and if the Court does confirm the plan the Court should require a bond to insure that the contract vendors will be paid off; (3) there is no provision for a neutral third party of the bankruptcy court to inspect and insure proper management occurs; and (4) it provides for no more than a liquidation of his interests in the commercial property and thus is not a true Plan of Arrangement.
The first point raised by the creditors is inapplicable since the main purpose of a Chapter XII is to modify or alter the rights of creditors. Only “affected” creditors have the right to vote on the plan.
The second point raised by the creditors is dealt with under feasibility. The third point raised by the creditors is inapplicable since the Plan provides that the Court will retain jurisdiction. The fourth point has already been dealt with.
The test applied in determining whether a plan of arrangement is in the best interests of the creditors is a comparison between what the creditors would receive under the arrangement and what they would receive in liquidation. 9 Collier on Bankruptcy, (14th Ed.) Section 9.07 at page 1138. Under Debtor’s Plan of Arrangement the Class I, II, and III Creditors are to receive their contract bargain, the Class IV Creditor is to be paid off, and the Class V Creditors are to receive a five per cent (5%) payment. The five per cent (5%) payment to the remaining general unsecured creditors is more than they would receive in liquidation.
Therefore, this Bankruptcy Court holds that Debtor’s Plan of Arrangement is in the best interests of the creditors.
(6) FEASIBILITY
The final sub-issue presented to this Court is whether Debtor’s Plan of Arrangement is feasible. Section 472(2) of the Bankruptcy Act, 11 U.S.C. Section 872(2), requires a court to confirm an arrangement if satisfied that “it is . feasible.”
9 Collier on Bankruptcy, (14th Ed.) Section 9.07 at pages 1139 and 1140 explains that:
“The test of feasibility is derived from former Section 77B, and views the probability of actual performance of the provisions of the plan. Sincerity, honesty, and willingness are not sufficient to make the plan feasible, and neither are any visionary promises. The test is whether the things which are to be done after confirmation can be done as a practical matter under the facts. That necessarily depends on the varying facts of each particular case. It refers to the probability that the creditors will receive the amount of money provided for them pursuant to the plan, and not that there is probable prospect of the debtor’s future financial rehabilitation and continued business success. There should be considered the adequacy of the capital structure, the earning power of the property, economic conditions, the ability of the management, the probability of a continuation of the same management, and any other related matters which determine the prospects of sufficiently successful operation to enable *580performance of the provisions of the plan.” See In the Matter of Pickett, Gardner, Landers and Associates, 2 Bankr.Ct.Dec. 727 (N.D.Ga.1977).
In In re Triangle Inn Associates, 2 Bankr. Ct.Dec. 716, (E.D.Va.1977), the Court took a similar viewpoint on the issue of feasibility. The Court stated that:
“Neither the statutes nor any cases prescribe by any measure what ‘feasible’ is. Called a “word of art,” it is established upon the facts and in the discretion of the court.”
Creditors attempted but failed to prove that Buyer was in financial trouble. At a hearing on feasibility Creditors attempted to prove that Buyer was delinquent on its light and water bill. Further, Creditors brought to the Court’s attention that Dakota Home Services has made substantial loans in the amount of $30,000.00 to Buyer.
After carefully reviewing the evidence, this Bankruptcy Court holds that Debtor’s Plan of Arrangement is feasible since there is sufficient evidence that creditors are assured of receiving payment under Debtor’s Plan of Arrangement. In so holding, this Court finds Buyer is a viable and profitable corporation with experience in managing and running such enterprises as the DeLux Motel. The Court takes judicial note that during the months this matter has been in litigation Buyer has made the monthly payments required by the Contract for Deed. Further, this Court finds that the guarantee by Dakota Home Services assures that the creditors will receive payment under the Plan.
CONCLUSION
Based on the foregoing discussion, this Bankruptcy Court holds that Debtor’s Plan of Arrangement does comply with all the provisions and requirements of Chapter XII and should be confirmed. The Plan is hereby confirmed.
Counsel for Debtor shall submit an Order consistent with the foregoing. This Memorandum Decision will constitute the Findings of Fact and Conclusions of Law. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8488885/ | FINDINGS AND CONCLUSIONS
SIDNEY M. WEAVER, Bankruptcy Judge.
This is a matter concerning objections to the discharge of a natural person, pursuant to § 727 of the United States Bankruptcy Code. The Plaintiff is the duly qualified and acting Trustee of the Debtor and the Defendant is the Debtor. The Complaint upon which this matter was tried was brought on two grounds as follows:
A. That the Debtor concealed, destroyed, mutilated, falsified or failed to keep or preserve any recorded information including books, documents, records and papers from which the Debtor’s financial condition or business transactions might be ascertained and such act, or failure to act, is not justified under all the circumstances of the ease; and
B. The Debtor has failed to explain the loss of assets or deficiency of assets sufficient to meet the Debtor’s liabilities.
The Debtor answered generally denying these allegations. The facts are as follows:
This matter was commenced as an involuntary proceeding brought by various Creditors on November 26, 1979. Relief was ordered without objection on December 26, 1979.
The evidence discloses that the Debtor, HERMAN RESNICK, was engaged as a general merchandiser in the Opa Locka area for some twelve years prior to the commencement of this matter. The Debt- or’s personal income tax records for the years 1976, 1977 and 1978, disclose that the Debtor had approximate annual sales, resulting from this business, of $145,000.00 with the approximate cost of the merchandise sold being in the amount of $105,000.00. The Debtor’s average net income, after payment of other business expenses, was approximately $10,000.00 per year.
During the year 1979, the Debtor’s bank account, to which, he testified, all proceeds of sales were deposited, reflects the sales of $416,000.00. The cancelled checks disclose that the majority of the money deposited was paid to Creditors. In addition to the monies that were paid, there remained scheduled unpaid Creditors in the amount of $523,016.67.
From the foregoing, it is clear and conclusive that there is a dissipation of assets of approximately $500,000.00.
The Debtor has no records other than his invoices, bank statements and cancelled checks. There is no general ledger or other books and records available to show the disposition of this inventory.
In addition, when called to explain the disposition of this property by the Plaintiff, the Debtor replied that he cannot remember what took place during the last year of business. The Debtor appears to be disoriented due to his advancing years, various illnesses and the recent death of his wife. The Debtor has not been formally declared incompetent or unable to manage his affairs.
Although the Court has compassion for the Debtor, in regards to his personal problems, the overriding reality of what actually happened, in this matter, leads the Court to conclude that the Debtor should be denied a discharge.
The foregoing facts clearly show that the Debtor, a man of advancing years and in*604creasing disability, intentionally increased his inventory and purchases to the point where they were equal to the sum of $1,000,000.00 per year. During this time and with the same basic overhead that had been carried for many years prior thereto, the Debtor proceeded to “lose” some half a million dollars. A loss of this magnitude cannot be permitted to go unaccounted for nor unexplained. It appears to the Court that the Debtor practiced a fraudulent scheme and that the failure of the business known as FABULOUS HERMANS was an intentional and deliberate business failure. Accordingly, the Court concludes that under the facts of the entire case, the Debtor failed to preserve books and records of account, which finding is sufficient to sustain an objection to the discharge of the Debtor. A separate Judgment will be entered in accordance with these Findings and Conclusions. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8488886/ | FINDINGS OF FACT AND CONCLUSIONS OF LAW
SIDNEY M. WEAVER, Bankruptcy Judge.
This action pending before the Court arises from a suit brought by the trustee in bankruptcy, as plaintiff, to recover a fraudulent transfer under Section 548 of the Code; a preferential transfer under Section 547 of the Code or, in the alternative, a money judgment in the amount of the motor vehicle transfer.
The Court has a jurisdiction over the parties and the subject matter of the litigation. The pleadings consist of a complaint by the plaintiff and certification of service upon the defendant Viking Steel. The plaintiff appeared at trial and offered testimony and evidence in support of his position. The defendant failed to appear at trial and failed to offer any evidence in support of a position against that of the trustee in bankruptcy.
The bankrupt, Pool Masters, Inc., was engaged in the business of constructing swimming pools. The defendant, Viking Steel, was a materialman who supplied steel to the bankrupt for the construction of the *605pools. The bankrupt filed his voluntary petition under Chapter 7, of Title 11, United States Code, on January 23rd, 1980. Approximately sixty days prior to the filing of the afore described petition, the bankrupt transferred to the defendant, Viking Steel, a 1974 van. The parties apparently agreed that the transfer of this motor vehicle would be in payment of outstanding invoices totaling $1,700.00 and, in effect, agreed to a value of the van in said amount. At the time of the transfer of the van the bankrupt was insolvent.
The payment to the defendant, Viking Steel, was for an antecedent debt and enabled Viking Steel to receive a greater distribution then it normally would have received in the bankruptcy proceedings herein. Accordingly, the defendant, by establishing a value on the van of $1,700.00 and then receiving said van as payment on an antecedent debt, became the recipient of a preference under Section 547 of the Bankruptcy Code.
Accordingly the transfer made to the defendant is declared to be a preferential transfer under Section 547 of the Bankruptcy Code and is hereby declared null and void. The defendant is directed to transfer to the trustee in bankruptcy, for the benefit of all creditors, the sum of $1,700.00, for which judgment shall forthwith issue. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8488887/ | FINDINGS OF FACT, CONCLUSIONS OF LAW AND MEMORANDUM OPINION
ALEXANDER L. PASKAY, Bankruptcy Judge.
THE MATTER under consideration is the right of the Trustee of the estate to recover from the Defendant, John Allred, real estate commissions earned by the Trustee’s predecessor in interest, Fortiner Realty Company (Fortiner), the Bankrupt, who was a duly licensed real estate broker involved in the transaction on which the commission claim involved in this controversy is based. In order to put this controversy in the proper posture, a brief recitation of the previous proceedings of this adversary proceeding shall be in order.
On June 26, 1978, Sonia Uransky, the duly appointed and acting Trustee for the estate of Fortiner filed an adversary proceeding and sued John Allred (Allred), Billy D. Breeze (Breeze) and Marion Campbell Potts (Potts). The complaint set forth three counts.
In Count I, the Trustee sued Allred and sought to recover a reasonable sum to be determined by the Court as real estate commissions claimed to have been earned by Fortiner prior to the institution of the bankruptcy proceeding.
In Count II, the Trustee sued Breeze contending that a purported assignment of part of the commissions to Breeze by For-tiner was invalid and unenforceable because the commission agreement violated Chapter 475 of the Florida Statutes.
In Count III, the Trustee sued Potts and set forth identical claims and sought a declaration that any commissions claimed by Potts shall be unenforceable for the reasons set forth in Count II.
*681In due course, the Trustee filed a Motion for Partial Summary Judgment against Breeze and Potts who did not resist the motion. On January 1, 1979, this Court entered a Final Judgment against Breeze and Potts in which the Court declared that neither Defendant has any right to collect any of the commissions allegedly due and owing to the estate from Allred. This left for consideration the remaining controversy with Allred concerning the commissions mentioned earlier. The Trustee subsequently filed a Motion for Partial Summary Judgment contending that since there are no genuine issues of material facts and she in entitled to a judgment as a matter of law, judgment should be entered in her favor declaring the Commission Agreement null and void.
The Court heard argument of counsel for the respective parties and on November 21, 1979, entered a partial summary judgment in favor of the Trustee and against Allred. The partial Summary Judgment judgment determined that the commission agreement between Fortiner, Allred, Breeze and Potts executed on October 22, 1976, was null and void and unenforceable. The Summary Judgment further provided that the Trustee shall have an opportunity to establish, either by agreement with Allred or by evidence, the amount of commission due on a quantum meruit basis.
On December 10, 1979, Allred filed a Motion for Rehearing or in the alternative a Motion to Stay Pending Appeal. Both motions were directed to the Partial Summary Judgment entered on November 21, 1979 and both motions were subsequently heard and denied by this Court in due course.
Pursuant to the November 21,1979 order, an evidentiary hearing was scheduled for February 14, 1980, in order to permit the Trustee to establish the amount of the commission on a quantum meruit basis.
On February 14, 1980, Allred filed a Motion For Leave to File a Counterclaim. Although the proposed counterclaim was not attached to the motion, it appears that Allred now attempts to recover $15,000 which Allred already paid under the commission agreement which has been declared invalid by the Summary Judgment heretofore mentioned. The motion did not indicate from whom Allred desired to recover these monies. On February 14,1980, Allred also filed a Motion For Judgment on the Pleadings, contending that since this Court has already declared the commission agreement to be invalid, the Plaintiff cannot recover the commission from Allred on a quantum meruit basis.
In due course, the final evidentiary hearing was held before the undersigned. The motions just described were filed on the same date. Prior to receiving evidence on the claim of the Trustee based on quantum meruit, this Court heard argument of counsel for the respective parties on the motions and denied both without prejudice and then proceeded to receive evidence on the claim of the Trustee.
Before discussing the evidence presented in support of the claim of the Trustee based on quantum meruit, it is important to consider the two motions just mentioned, to wit: the Motion For Judgment On The Pleadings and the Motion For Leave to File a Counterclaim. This is so because if the Motion For Judgment On The Pleadings is granted, the claim of the Trustee based on quantum meruit is rendered moot and it would be unnecessary to consider the evidence presented in support of said claim. Although a ruling on the Motion For Leave to File a Counterclaim would not be disposi-tive of the Trustee’s claim, for reasons more fully stated below, it is proper to consider the motion also before the Trustee’s entitlement, if any, to recover the commission on a quantum meruit basis is considered.
In connection with the Motion For Judgment On The Pleadings it is the contention of Allred that the Summary Judgment entered on November 27, 1979 did not determine the Trustee’s right to recover the balance due on the commission from Allred on a quantum meruit basis, but merely declared that the commission agreement was invalid and unenforceable and it did nothing more than grant leave to the Trustee to seek a recovery on this theory if such claim *682is legally supportable. Accordingly, so argues Allred, since the Bankruptcy Rules permit a party to file a Motion For Judgment On The Pleadings at any time; B.R. 712c, this Court is duty bound to consider the motion and rule in favor of Allred, and award a judgment in his favor as a matter of law. The Trustee, of course, opposes this motion not only on the ground that it is untimely, but also on the ground that the November 27, 1979 order already established the Trustee’s right to recover on the theory of quantum meruit and this issue is no longer open for consideration.
Considering the Motion For Judgment On The Pleadings first, it is well to point out that B.R. 712(b) provides that F.R.C.P. Rules 12(b-h) apply in adversary proceedings in bankruptcy with some exceptions not applicable to the present controversy. F.R.C.P. Rule 12(c) provides that the motion for judgment on the pleadings may be filed “after the pleadings are closed, but within such time as not to delay the trial . . .” The motion under consideration was filed at the commencement of the trial or approximately three months after the entry of the order which granted leave to the Trustee to establish a claim on a quantum meruit basis. While this Court is satisfied that the Trustee’s right to recover was never fully litigated and the proceeding was concluded by the entry of a judgment on November 27, 1979, which focused solely on the validity and enforceability of the commission agreement and did not deal directly with any alternative theory of recovery since none was pled in the original complaint, the motion is, nevertheless, untimely and, therefore, is without merit and should be denied.
The motion for leave to file a counterclaim is equally without merit for the following reasons:
As noted, the proposed counterclaim was not attached to the motion. It appears from the motion itself that Allred seeks to assert a claim for the recovery of a $15,000 commission already paid' by Allred, although not to the Trustee, but to Fortiner or possibly the co-defendants, Potts and Breeze, although this is not clear from the record. Be this as it may, it is evident that Allred has no enforceable claim against the estate for this sum and its claim if he has any, would be only a general unsecured claim in this proceeding upon showing that the monies were, in fact, received by For-tiner. In the alternative, Allred may have a claim against the co-defendants, Potts and Breeze which claims, of course, would not be cognizable counterclaims against the Trustee.
This leaves for consideration the remaining two questions: First, the Trustee’s right to recover under the theory of quantum meruit and second, the proper amount to be allowed if the theory advanced by the Trustee in support of its claim based on quantum meruit is found to be meritorious.
The historical background of the commission agreement declared to be invalid is fully recited in this Court’s Partial Summary Judgment entered on November 27,1979, and the same is hereby adopted by reference. It should be sufficient to state at this time that it is the Trustee’s contention that the fact that the commission agreement was declared to be unenforceable and invalid does not prevent recovery on a quantum meruit basis as a matter of law. Allred, of course, argues that the invalidity of the contract precludes recovery in quantum me-ruit.
The Court considered the briefs submitted by the parties and the authorities cited by counsel for the respective parties and is satisfied that the fact that the commission agreement was declared to be invalid does not automatically preclude and prevent recovery on a quantum meruit basis for the following reasons: The authorities cited by Allred to the contrary all involved commission agreements which were invalid and unenforceable because the services to which they related were performed by parties who were not authorized by law to act as selling agents and, therefore, the performance of such services was illegal and contrary to public policy. Paris v. Hilton, 352 So.2d 534 (Fla.App.1977); Bradley v. *683Banks, 260 So.2d 256 (Fla.App. 1972); Harris v. McKay, 176 So.2d 572 (Fla.App. 1965); Wegmann v. Mannino, 253 F.2d 627 (5th Cir. 1958).
In the instant case, Fortiner, Potts and Breeze were duly licensed broker and salespersons respectively and the services they rendered were legal and in full conformity with the applicable law. Had there been no provision for the direct payment of part of the commissions to the salespersons, Potts and Breeze, the commission agreement would have been proper and enforceable. In considering a contention that the illegality of a contract precludes a quantum meru-it recovery, the Supreme Court of New Mexico in Baca v. Padillo, 26 N.M. 223, 190 P. 730 (1920) held that:
“There is an obvious distinction bearing upon the right ... to recover upon a quantum meruit for services rendered pursuant to an illegal contract, between a ease where the contract is illegal because the services agreed to be rendered in performance thereof are illegal and a case where the contract is illegal only because of some improper provision relating to the mode of compensation . . the weight of authority seems to support the proposition that, if the services performed . . . are not themselves illegal, either intrinsically or by reason of the circumstances under which they are rendered, (one) may recover upon a quantum meruit for their reasonable value, notwithstanding that the contract is, for other reasons . . . illegal . . ”
Unlike the cases cited by Allred in which the services actually rendered were, in fact, illegal because the broker or the salesperson involved in the transaction was not duly licensed, the illegality in the instant case in no way relates to the rendering of the services, but rather to the mode of compensation. Thus, because the actual services rendered in the instant case were neither ma-lum in se nor malum prohibitum, this Court is satisfied that the Trustee is entitled to recover a reasonable fee on a quantum me-ruit basis in spite of the previous ruling by this Court that the original agreement which purported to govern the method of payment of the commission in connection with this particular transaction, was invalid and legally unenforceable as a matter of law.
This leaves for consideration the amount which should be awarded to the Trustee on a quantum meruit basis. The original commission agreement, as later amended, provided that the purchaser of the property and the Defendant Allred, who acquired all rights and liabilities of the original purchaser shall pay a 10% commission to the Bankrupt based on the purchase price of the land involved in the transaction. The agreement provided, however, that the commission shall be paid in 10 equal annual installments although the deferred portion carried a 7% annual interest rate. It is the Trustee’s contention that this rate of compensation is reasonable in this type of transaction and it is more than amply supported by evidence. The fact of the matter is, there was testimony before this Court indicating that this percentage may be even greater but, of course, always subject to negotiations between the parties. However, one would be totally amiss not to note and take into consideration the undisputed fact that this commission was to be paid over a period of 10 years. Considering the currently prevailing economic conditions and the general economic trend, it is clear that a lump sum awarded and paid today represents a much greater value than the same amount of money paid over the span of 10 years. Although the contention of Allred that he only agreed to pay this percentage of commission because of the provision for deferred payments in annual installments will not be accepted, in light of overwhelming testimony to the contrary, the currently prevailing annual rate of inflation which unfortunately does not seem to slow down, but on the contrary, is steadily increasing, cannot be ignored and should be considered in formulating the proper award. This is so because the Trustee should not be in a better position than her predecessor in interest would have been if *684no bankruptcy had intervened because the Trustee is asserting a right inherited from the Bankrupt and not a right of avoidance exclusively granted to the Trustee by the Bankruptcy Act itself. Thus, while this Court is satisfied that the 10% commission provided for by the agreement is reasonable and would be the proper basis to make an award on a quantum meruit basis, this award shall be reduced, either by agreement of the parties or by additional evidence, to its present value. Such stipulation, if one is filed, shall not preclude Allred to challenge by appeal the correctness of this Court’s determination that the Trustee is entitled to recover the commission on a quantum meruit basis.
In accordance with the foregoing, it is
ORDERED, ADJUDGED AND DECREED that the Trustee be, and the same hereby is, awarded a 10% commission on behalf of the estate for real estate broker services rendered by the Bankrupt to the Defendant, Allred, said commission to be reduced to its present value either by agreement of the parties or upon motion and hearing. It is further
ORDERED, ADJUDGED AND DECREED that the Motion for Judgment on the Pleadings filed by the Defendant Allred be, and the same hereby is, denied. It is further
ORDERED, ADJUDGED AND DECREED that the Motion for Leave to File a Counterclaim filed by the Defendant, Allred be, and the same hereby is, denied. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8488888/ | OPINION
WILLIAM A. KING, Jr., Bankruptcy Judge.
Presently before the court is a challenge to the sufficiency of the service of a motion objecting to confirmation of a proposed Chapter 13 plan. The challenge is based on the uncontested fact that service of the objection to confirmation was made only on the attorney of record for the debtors, Richard R. and Kathleen M. Thompson, (“Thompsons”) and not on the Thompsons themselves.
Counsel for creditor argued, inter alia, that Bankruptcy Rule 705, which permits service on the attorney of record rather than the parties themselves pursuant to Fed.R.Civ.P. 5, controls here rather than Bankruptcy Rule 704, but even if the service was defective, it was effective under Bankruptcy Rule 704(h).
Rule 5 of the Fed.R.Civ.P. which is made applicable to bankruptcy adversary proceedings by Bankruptcy Rule 705 clearly was designed to deal solely with pleadings and motions filed after proper service of the complaint was accomplished. See Advisory Committee’s Note. Because the matter at bar is neither an adversary proceeding nor a motion in which a complaint has been properly served, Rule 705 is clearly not applicable.
Rule 704(h) was' designed to cure superficial errors or defects in the papers served and not to supply proper service of process where none was made and thus, is not applicable here.
The present matter is governed by Bankruptcy Rules 914 and 704. Rule 914 reads as follows:
In a contested matter in a bankruptcy case not otherwise governed by these rules, relief shall be requested by motion, and reasonable notice and opportunity for hearing shall be afforded the party against whom relief is sought. No responsive pleading is required under this rule unless the court orders an answer to a motion. The motion shall be served in the manner provided for service of a summons, complaint, and notice by Rule 704.
Because Rule 704 clearly requires service on both the bankrupt, i. e., the debtor, and counsel of record of the debtor, the court is satisfied that service in the present instance was and is defective and that Rule 704(h) cannot cure the defect. See In re Bernarr MacFadden Foundation, Inc., 11 C.B.C. 29 (M.D.Fla.1976).
Accordingly, unless counsel for the creditor effectuates proper service of the objection on the Thompsons, the objection to the proposed Chapter 13 plan will be dismissed.
In order to expedite this matter and in fairness to the objecting party, counsel for the creditor will be allowed ten (10) days from the date of entry of this order to effectuate proper service. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8488890/ | ORDER ON APPLICATION FOR REIMBURSEMENT OF EXPENSES INCURRED
ALEXANDER L. PASKAY, Chief Bankruptcy Judge.
On June 30, 1978, this Court entered an Order Approving Account, Discharging Trustee and Closing Estate. Some ten (10) months later, and as a direct result of the efforts of Applicant (a post-petition credi*728tor) and his attorneys, this Court entered an Order on May 2, 1979 vacating and setting aside its original order and, pursuant to Bankruptcy Rule 515, reopening the estate.
As a proximate result of the efforts of Applicant and his attorneys, the estate was enhanced by more than $50,000, a consequence which would not have occurred but for such efforts. It is to be noted that Applicant, as a post-petition creditor, would not in any way personally benefit from such increase to the estate.
In the pursuit of his efforts and in order to accomplish the foregoing, Applicant, without prior leave of court, incurred and paid for expenses in the amount of $3,140.48, $3,000 of which was for attorney’s fees. Those expenses were documented by Applicant in his Application for Reimbursement of Expenses Incurred filed pursuant to Bankruptcy Rule 219.
Although the general rule prohibits such reimbursement in the absence of prior leave of court once a trustee or receiver is appointed and thereafter while the estate is being administered thereby, prior court approval has been waived in “special circumstances” where the receivers, trustees or their attorneys may have had a personal interest so opposed to those of the creditors that only the latter would be likely to question it. See In re New York Investors, Inc., 130 F.2d 90 (2 Cir. 1942) and In re Sapphire Steamship Lines, Inc., 509 F.2d 1242 (2 Cir. 1975).
A careful reading of the cases on this issue seems to clearly indicate that, central to the rationale of the general rule and as a prerequisite to its application, are (1) the existence of a trustee or receiver who was duty bound to perform the services as a part of the administration of the estate and (2) who was acting or could reasonably be expected to act for the benefit of the estate. Therefore, in the instant case, there are two reasons for applying the exception to the general rule:
The estate had been closed and was no longer being administered when the services were to be performed; the trustee and her attorney had long since been discharged and there was no longer a duty bound trustee in current bankruptcy proceedings in whom responsibility was centralized.
The services performed were necessitated by the fact that neither the Trustee nor counsel for the Trustee conducted a sufficiently thorough investigation as to the true value of the promissory note and the Trustee’s request to abandon the note or in the alternative, to sell the same for a grossly inadequate price, was a course of conduct which of course neither the Trustee nor her counsel would have questioned themselves. Therefore, the Court is satisfied that there are “special circumstances” which warrant a waiver of the prior approval requirement and that the salutory purpose of the general rule would not be served by its application in the instant case.
Accordingly, it is
ORDERED, ADJUDGED AND DECREED that the Application for Reimbursement of Expenses Incurred be, and the same hereby is, granted and that the Applicant be reimbursed from the estate, forthwith, in the amount of $3,140.48. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8488891/ | MEMORANDUM DECISION
PEDER K. ECKER, Bankruptcy Judge.
Ronald Gene Thorson filed a Chapter 18 Petition on April 15, 1980. On May 21, 1980, the First National Bank in Sioux Falls, Movant, filed a Motion to Compel Trustee to Prevent Fraudulent Transfer. Movant alleged that Debtor sold real property shortly before filing bankruptcy for a price considerably less than the fair and reasonable value of the property. Debtor’s Answer denied that the real property had been sold for less than a fair and reasonable value.
This Court held a hearing on this matter on June 26, 1980. At that hearing the Court and Counsel treated the Motion as a Complaint to Avoid a Fraudulent Transfer, Section 548. The Court allowed testimony to be introduced on the issue of whether Debtor sold the real property for fair market value. Based on the pleadings and evidence presented at the hearing, this Court makes the following findings of fact.
Movant’s witness, Ray Ordinachev, an experienced real estate broker, testified that in 1979 Debtor employed him to locate property where future restaurants could be located. Ordinachev located the subject commercial real property and Debtor purchased the same for a total cost of approximately $88,500.00. At the same time A. C. Precision Company purchased an adjoining lot for the price of $27,000.00. Although Debt- or paid the entire purchase price for the two lots, title was taken in both Debtor’s and Ordinachev’s names. Ordinachev later executed a quit claim deed to any interest he might have had in the property.
Later, Debtor developed financial and marital difficulties. Debtor, who was about to receive custody of his children, needed cash for his business and to purchase a home. Debtor approached A. C. Precision Company to sell this realty interest. A. C. Precision Company is a California corporation of which R. M. Yates, Debtor’s brother-in-law, is the substantial majority shareholder of the corporation. Yates retained counsel to handle the transaction. Counsel hired a realty firm to appraise the real property being offered for sale by Debtor. The realtor appraised the property at $70,-000.00. McDowell, in making that appraisal, admittedly relied upon other commercial real estate brokers’ opinions.
Based on the appraisal made by the realtor, Debtor sold the real property to A. C. Precision Company for $70,000.00. A. C. Precision Company paid Debtor $55,000.00 in cash and gave Debtor a promissory note for $15,000.00 at no interest. After A. C. Precision Company paid Debtor the $55,-000.00 in cash, Debtor spent $19,000.00 on the purchase of a new home, $21,000.00 on the purchase of life insurance, and applied the rest to attorney fees and his business.
Movant’s realtor expert testified that at the time of sale, market conditions were different than they were at time of acquisition. A slowdown in the economy along with rising interest rates had left the real estate market depressed. According to this witness, the market price of Debtor’s real property was between a high of $91,000.00 and a low of $70,000.00. He stated that although the property in his belief could have been sold for more, given time, the $70,000.00 was on the low side of the market value of the property.
After Debtor sold the property to A. C. Precision Company, Debtor assigned the A. C. Precision Company promissory note for $15,000.00 to R. M. Yates. According to a written agreement between Debtor and R. M. Yates, the consideration for the assignment was that R. M. Yates agreed not to initiate any legal proceeding against Debtor relating to a promissory note R. M. Yates had signed as a co-maker or guarantor in connection with a bank loan of Debtor.
It should be noted that Movant had no security interest in either the money that was used to purchase the property or the real property.
This Bankruptcy Court holds that the $70,000.00 price paid by A. C. Precision Company to Debtor for the subject real *748property was a proper fair market price. At the time Debtor sold the property, the market for real estate was in a depressed condition due to the economic slowdown and high interest rates. Further, Debtor needed money badly to purchase a home and for his business. Thus based on the appraisal and the testimony of Movant’s realty expert, A. C. Precision Company purchased the property from Debtor for a then adequate and fair consideration of $70,-000.00. Movant’s own witness, the realtor, testified that although on the low side, the price paid by A. C. Precision Company was still somewhere in the range of the market value of the property. Based on these facts the Court can only conclude that $70,000.00 purchase price represented a fair and reasonable market value for the property.
This Court makes no determination on the issue of whether the assignment of the note by Debtor to R. M. Yates, Debtor’s brother-in-law, was a fraudulent or preferential transfer. The pleadings did not present that issue to the Court and all the necessary parties to decide that issue were not before this Court.
Movant’s Motion to Compel Trustee to Prevent Fraudulent Transfer is denied. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482761/ | COURT OF APPEALS
EIGHTH DISTRICT OF TEXAS
EL PASO, TEXAS
§
CHRISTOPHER J. NELSON, Individually No. 08-21-00068-CV
and d/b/a EXCLUSIVE POOLS, §
Appeal from the
Appellant, §
125th Judicial District Court
v. §
of Harris County, Texas
BKM DEVELOPMENT, LP, §
(TC# 2015-38993)
Appellee. §
JUDGMENT
The Court has considered this cause on the record and concludes there was no error in the
judgment. We therefore affirm the judgment of the court below. We further order that Appellee
recover from Appellant and its sureties, if any, see TEX. R. APP. P. 43.5, for performance of the
judgment and all costs, both in this court and the court below, for which let execution issue. This
decision shall be certified below for observance.
IT IS SO ORDERED THIS 8TH DAY OF NOVEMBER, 2022.
JEFF ALLEY, Justice
Before Rodriguez, C.J., Palafox, and Alley, JJ. | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482764/ | COURT OF APPEALS
EIGHTH DISTRICT OF TEXAS
EL PASO, TEXAS
ALLEN FRICK, § No. 08-21-00176-CV
Appellant, § Appeal from the
v. § 85th Judicial District Court
JONATHAN JERGINS, § of Brazos County, Texas
Appellee. § (TC# 19-003364-CV-85)
JUDGMENT
The Court has considered this cause on the record and concludes there was no error in the
judgment. We therefore affirm the judgment of the court below. We further order that Appellee
recover from Appellant and its sureties, if any, see TEX.R.APP.P. 43.5, for performance of the
judgment and all costs of appeal, for which let execution issue. This decision shall be certified
below for observance.
IT IS SO ORDERED THIS 8TH DAY OF NOVEMBER, 2022.
JEFF ALLEY, Justice
Before Rodriguez, C.J., Palafox, and Alley, JJ.
Rodriguez, C.J., concurring | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482766/ | COURT OF APPEALS
EIGHTH DISTRICT OF TEXAS
EL PASO, TEXAS
ALEJANDRO HERNANDEZ, § No. 08-21-00158-CV
Appellant, § Appeal from the
v. § 34th Judicial District Court
VICTOR VAZQUEZ, § of El Paso County, Texas
Appellee. § (TC# 2017-DCV0755)
JUDGMENT
The Court has considered this cause on the record and concludes there was no error in the
judgment. We therefore affirm the judgment of the court below. We further order that Appellee
recover from Appellant and its sureties, if any, see TEX. R. APP. P. 43.5, for performance of the
judgment and all costs of appeal, for which let execution issue. This decision shall be certified
below for observance.
IT IS SO ORDERED THIS 8TH DAY OF NOVEMBER, 2022.
SANDEE MARION, Chief Justice (Ret.)
Before Rodriguez, C.J., Alley, J., and Marion, C.J. (Ret.) sitting by assignment | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482768/ | COURT OF APPEALS
EIGHTH DISTRICT OF TEXAS
EL PASO, TEXAS
EL PASO INDEPENDENT SCHOOL § No. 08-21-00222-CV
DISTRICT,
§ Appeal from the
Appellant,
§ 448th Judicial District Court
v.
§ of El Paso County, Texas
ANGELICA DE LA ROSA, JESUS
BENJAMIN BARRAZA, INDIVIDUALLY, § (TC# 2021DCV2414)
JOINTLY, AND ON BEHALF OF AND
NEXT OF KIN OF JESUS BARRAZA, A
MINOR CHILD,
Appellees.
JUDGMENT
The Court has considered this cause on the record and concludes there was error in the
judgment. We therefore reverse the judgment of the court below and render judgment dismissing
Appellees’ claims against El Paso Independent School District for lack of subject matter jurisdiction.
We further order that Appellant recover from Appellees cost of appeal, for which let execution
issue. This decision shall be certified below for observance.
IT IS SO ORDERED THIS 7TH DAY OF NOVEMBER 2022.
SANDEE B. MARION Chief Justice (Ret.)
Before Rodriguez, C.J., Alley, J., and Marion, C.J. (Ret.),
Marion, C.J. (Ret.) (Sitting by Assignment) | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482769/ | COURT OF APPEALS
EIGHTH DISTRICT OF TEXAS
EL PASO, TEXAS
RISE ABOVE STEEL COMPANY, LLC., § No. 08-21-00127-CV
Appellant, § Appeal from the
v. § 109th District Court
LIBERTY MUTUAL INSURANCE § of Winkler County, Texas
COMPANY,
§ (TC# DC18-17466)
Appellee.
§
OPINION
Appellant, Rise Above Steel Company (Rise Above), raises one issue on appeal— “Did
the trial court err in granting Liberty Mutual’s motion for summary judgment?” Appellee, Liberty
Mutual Insurance Company (Liberty Mutual), filed a hybrid motion for summary judgment,
seeking no-evidence summary judgment on Rise Above’s breach of contract and quantum meruit
claims and traditional summary judgment on the basis of improper pass-through claim. The trial
court granted summary judgment.
We agree with Rise Above and find the trial court erred in granting summary judgment.
We reverse and remand the case for proceedings consistent with this opinion.
FACTUAL AND PROCEDURAL BACKGROUND
Rise Above seeks funds it alleges are due in connection with the construction of two wet
sand storage buildings (the Atlas Project) in Winkler County. Rise Above is a construction
company that erects steel frameworks primarily for commercial buildings. Rise Above entered into
a subcontract agreement with Marquez Wrought Iron (Marquez), its general contractor, to provide
labor and equipment in the erection of columns, beams, wind braces, and wall panels in the
construction of the Atlas Project. When Marquez refused to pay the full amount due under the
subcontract, Rise Above filed suit against Marquez and Atlas Sand Company (Atlas Sand), the
project owner, and later filed an affidavit claiming a mechanic’s or materialman’s lien against the
Atlas Project under Chapter 53 of the Texas Property Code. Thereafter, Atlas Sand, as principal,
and Liberty Mutual, as surety, filed a bond to indemnify against the lien under Property Code
chapter 53.
In September 2019, Rise Above filed its live pleading, its First Amended Original Petition,
alleging breach of contract and quantum meruit claims against Marquez and a lien bond claim
against Liberty Mutual, dropping Atlas Sand from the suit. Liberty Mutual filed its Special
Exceptions and Original Answer, generally denying Rise Above’s allegations; raising the
affirmative defenses of estoppel, waiver, and failure to state a claim; and specially excepting to
Rise Above’s lien bond claim by asserting that (1) there is no cause of action against Liberty
Mutual because there is no privity of contract to permit Rise Above’s claim under the bond, and
(2) Rise Above cannot make claims for interest, attorney’s fees, and costs, due to a lack of standing
to make such claims. In January 2020, Liberty Mutual filed its First Amended Answer, again
asserting its general denial and affirmative defenses of estoppel, waiver, and failure to state a claim.
In this First Amended Answer, Liberty Mutual raised additional affirmative defenses, stating Rise
Above is barred from recovery on breach of contract because its contract was with Marquez, not
2
Atlas Sand, and from recovery on quantum meruit due to its written contract with Marquez. Liberty
Mutual also raised the affirmative defenses of unclean hands, offset, and standing for the first time
in this pleading. Liberty Mutual did not raise special exceptions in its First Amended Answer.
Liberty Mutual filed its hybrid traditional and no-evidence motion for summary judgment
in July 2020. The trial court granted summary judgment, without stating grounds, in October 2020.
STANDARD OF REVIEW
We review a trial court’s granting of summary judgment de novo. Herrera v. Resignato,
621 S.W.3d 835, 840 (Tex.App.—El Paso 2021, no pet.)(citing Merriman v. XTO Energy, Inc.,
407 S.W.3d 244, 248 (Tex. 2013)). When, as in this case, a trial court’s order granting summary
judgment does not specifically state the grounds for granting the motion, we must affirm the
judgment “if any of the grounds on which judgment is sought are meritorious.” Id. (citing Neely v.
Wilson, 418 S.W.3d 52, 60 (Tex. 2013)).
Liberty Mutual moved for summary judgment against all Rise Above’s claims on
traditional and no-evidence grounds. Summary judgment is appropriate on a traditional motion
when the movant shows no genuine issue of material fact exists and it is entitled to judgment as a
matter of law. Id. (citing TEX.R.CIV.P. 166a). In deciding whether a genuine issue precludes
summary judgment, we must treat all evidence favorable to the non-movant as true and indulge
every reasonable inference and resolve all doubts in its favor. Id. (citing Sw. Elec. Power Co. v.
Grant, 73 S.W.3d 211, 215 (Tex. 2002)). When a defendant conclusively negates at least one
element of the plaintiff’s cause of action or conclusively establishes all elements of an affirmative
defense, the defendant is entitled to summary judgment. Id. (citing SmithKline Beecham Corp. v.
Doe, 903 S.W.2d 347, 355 (Tex. 1995)). Once such a motion is filed, the non-movant bears the
burden of presenting evidence raising an issue of material fact as to each of the elements
3
challenged. Id. (citing Rodriguez v. Cemex, Inc., 579 S.W.3d 152, 160 (Tex.App.—El Paso 2019,
no pet.)). If a plaintiff fails to raise a genuine issue of material fact as to any challenged element,
the trial court must grant the motion. Herrera, 621 S.W. 3d at 841 (citing Stierwalt v. FFE Transp.
Servs., Inc., 499 S.W.3d 181, 194 (Tex.App.—El Paso 2016, no pet.)).
In a no-evidence motion, the movant claims the non-movant lacks any evidence on one or
more of the elements essential to its cause of action, and summary judgment is proper when the
non-movant fails to produce sufficient evidence to raise an issue of fact on each element challenged
on which it has the burden of proof. Id. at 841 (citing TEX.R.CIV.P. 166a(i) and Hamilton v. Wilson,
249 S.W.3d 425, 426 (Tex. 2008)(per curiam)). When the non-movant offers more than a scintilla
of probative evidence in support of the challenged element(s), a fact issue is presented. Id. (citing
King Ranch v. Chapman, 118 S.W.3d 742, 751 (Tex. 2003)).
“[A]ll theories in support of or in opposition to a motion for summary judgment must be
presented in writing to the trial court.” Border Demo. & Enviro., Inc. v. Pineda, 535 S.W.3d 140,
151 (Tex.App.—El Paso 2017, no pet.). We cannot affirm a summary judgment on a ground not
expressly presented in the motion for summary judgment. Id.
DISCUSSION
Traditional Motion for Summary Judgment
In its traditional motion, Liberty Mutual urged all Rise Above’s claims were barred under
Interstate Contracting Corp. v. City of Dallas because the general contractor was not involved in
the suit and claimed summary judgment was proper because Rise Above’s lack of a contract with
Atlas Sand prohibited it from asserting claims against Atlas Sand and Liberty Mutual. See
Interstate Contracting Corp. v. City of Dallas, 135 S.W.3d 605, 610 (Tex. 2004). Rise Above
4
argues in its first sub-issue the trial court erred in granting traditional summary judgment because
Interstate Contracting does not apply to this case. We agree with Rise Above.
Inapplicability of Interstate Contracting Corp. v. City of Dallas
The introduction to Liberty Mutual’s motion for summary judgment states it is a motion
on pass-through liability. Liberty Mutual argued Rise Above’s lack of privity of contract with
Atlas Sand bars any recovery by Rise Above against Liberty Mutual under a pass-through liability
theory.
As the basis for its traditional motion, Liberty Mutual relied on Interstate Contracting to
assert Rise Above’s claims are barred. Liberty Mutual argued Marquez, the general contractor, had
not agreed to take part in the suit, and the general contractor is an integral part of any pass-through
claim, a claim presented through a contractor who has a contractual relationship with both the
owner and the subcontractor. See Interstate Contracting, 135 S.W.3d at 610.
We do not disagree with Liberty Mutual’s interpretations of the holdings of Interstate
Contracting. See id. However, we question the applicability to the case at hand. Although Liberty
Mutual recognized in its summary judgment motion that no pass-through claim had been presented
by Rise Above, its traditional motion for summary judgment asserted Rise Above lacks standing
to assert a pass-through claim and its pass-through claim is improperly pleaded. Rise Above did
not have a pass-through breach of contract claim against Atlas Sands or Liberty Mutual when
Liberty Mutual’s motion was filed. 1 Rise Above’s breach of contract claim was filed against
Marquez. The claim against Liberty Mutual is a claim on a bond indemnifying a lien, and the Court
stated in Interstate Contracting, “our recognition of pass-through claims does not . . . affect the
1
Although Rise Above’s Original Petition alleged breach of contract and quantum meruit against Atlas Sand and
Marquez, its First Amended Original Petition dropped Atlas Sand as a defendant, added Liberty Mutual, and alleged
breach of contract against only Marquez.
5
procedures for . . . asserting claims on payment bonds . . . . [P]ass-through claims provide
protections not afforded by the lien and payment bond statutes, and our recognition of pass-through
claims does not disturb the existing statutory procedures and requirements.” Id. at 618-19.
Liberty Mutual’s traditional motion for summary judgment did not attempt to defeat Rise
Above’s lien bond claim or allege there is no genuine issue of material fact as to that claim. See
TEX.R.CIV.P. 166a(c). Liberty Mutual’s entire traditional motion for summary judgment is based
on a non-existent claim of pass-through liability. The trial court’s granting of summary judgment
under 166a(c) was error. We sustain Rise Above’s first sub-issue.
No-Evidence Motion for Summary Judgment
In its no-evidence motion, Liberty Mutual challenged Rise Above’s ability to produce
evidence on existence of a contract with Atlas Sand and services provided to Atlas Sand upon
which it could recover. Liberty Mutual contended Rise Above could produce no evidence it is
entitled to relief due to its lack of contract with Atlas Sand, and for that reason, summary judgment
for Atlas Sand and Liberty Mutual was proper.
In its second sub-issue, Rise Above urges the trial court erred in granting no-evidence
summary judgment because it was not required to prove elements of breach of contract or contract
damages. Rise Above asserts its claim against Liberty Mutual is on the bond to indemnify against
lien and privity of contract is not a requirement to recover under the lien statutes, Chapter 53 of
the Texas Property Code. In response, and different from its argument in the trial court, Liberty
Mutual argues that since Rise Above has no privity of contract with Atlas Sand, its claims must be
governed by Chapter 53 of the Texas Property Code.
At the time Liberty Mutual filed its motion for summary judgment, Rise Above had a live
indemnity bond claim against Liberty Mutual. Although Liberty Mutual now argues Rise Above
6
did not meet its obligations under the lien statutes, neither of its summary judgment arguments
addressed the lien claim. Again, we find Rise Above’s positions compelling.
Breach of Contract
Rise Above’s original petition alleged breach of contract against defendants Atlas Sand
and Marquez. After Rise Above filed its lien against the Atlas Project, prompting Liberty Mutual
to file its bond indemnifying the Atlas Project, Rise Above filed its amended petition, which no
longer included Atlas Sand as a defendant but added Liberty Mutual. Rise Above’s breach of
contract claim in its amended petition was stated against only Marquez.
Although Liberty Mutual urged a no-evidence motion against Rise Above on the issue of
breach of contract with Liberty Mutual, Rise Above had no burden of proving breach of contract
or contract damages against Atlas Sand at the summary judgment stage because it had no breach
of contract claim against Atlas Sand or it surety, Liberty Mutual. No-evidence summary judgment
cannot be properly granted when the element identified by the movant as entitling it to summary
judgment is not an element of the non-movant’s claim. Villarreal v. Wells Fargo Brokerage Servs.,
LLC, 315 S.W.3d 109, 127 (Tex.App.—Houston [1st Dist.] 2010, no pet.).
On appeal, Liberty Mutual argues because Rise Above had no contract with Atlas Sand,
it was required to comply with chapter 53 of the Texas Property Code.
Consideration under Property Code Chapter 53
For the first time on appeal, Liberty Mutual alleges under Property Code chapter 53 the
lien claimant has the burden of proving its lien claim is valid and would have been enforceable
against the owner’s property. In addition, Liberty Mutual also raises for the first time on appeal
the assertion that Rise Above’s affidavit for lien is fatally flawed, rendering its lien void, citing
Sections 53.052(a) and 53.054(a)(1) of the Property Code.
7
However, Liberty Mutual cannot raise the issue of defective lien for the first time on appeal.
See McConnell v. Southside Indep. Sch. Dist., 858 S.W.2d 337, 341 (Tex. 1993)(citing Roberts v.
Sw Tex. Methodist Hosp., 811 S.W.2d 141, 146 (Tex.App.—San Antonio 1991, writ denied)); see
also Jones v. Coppinger, 642 S.W. 3d 51, 63 (Tex.App.—El Paso Aug. 31, 2021, no pet.). Here,
Liberty Mutual’s motion for summary judgment focused entirely on pass-through claims, breach
of contract, and quantum meruit. It never objected to, or presented evidence contrary to, or put
Rise Above to its proof on the issue of validity of its lien through its motion.
Not only did Liberty Mutual fail to call the lien’s validity into question in it motion for
summary judgment, its exceptions to and affirmative defenses regarding the lien in its answer are
quite limited. Appellant’s First Amended Original Petition, in the Background Facts section,
stated, “Rise Above filed for record its lien affidavit with the county clerk of Winkler County,
Texas, and served a copy of it . . . . All obligations and conditions precedent to Rise Above’s right
to recovery heretofore required of Rise Above have been performed or have occurred.” In the
section titled “Lien Bond Claim,” Rise Above incorporated the language from the Background
Facts section and additionally pled, “Rise Above has met all the requirements for perfection of a
valid lien. Rise Above seeks to recover against the Liberty Mutual Bond . . . .” This language
sufficiently placed Liberty Mutual on notice of Rise Above’s claim on the lien bond and of Rise
Above’s performance or occurrence of all conditions precedent. See Wade & Sons, Inc. v.
American Standard, Inc., 127 S.W.3d 814, 825 (Tex.App.—San Antonio 2003, pet
denied)(holding the following language sufficient to place defendant on notice of suit on lien and
performance or occurrence of all conditions precedent: “[T]his is a suit to foreclose on a Bond to
Indemnify Against Lien and a suit on sworn account. All conditions precedent have been
performed or have occurred.”).
8
Because Rise Above pled all conditions precedent had been performed or had occurred,
then Liberty Mutual, if it chose to, could except to the lien and its perfection by specifically
denying which conditions precedent had not been performed or had not occurred. See id. Liberty
Mutual failed to assert Rise Above’s lien perfection was erroneous in any way, including any
allegation that the affidavit was insufficient. In the trial court, Liberty Mutual did not contradict
Rise Above’s pleading that all conditions precedent had been performed or had occurred. 2 Even
an answer specifically denying Rise Above had performed all conditions precedent would not have
been sufficient, as “Texas Rule of Civil Procedure 54 requires the opposing party to specifically
deny which conditions precedent have not been performed or have not occurred.” See id. at 826
(citing TEX.R.CIV.P. 54). “A defendant cannot generally deny that the plaintiff has not proved all
conditions precedent, but must specifically deny which conditions precedent have not been met.”
Id. By failing to specifically deny that Rise Above’s affidavit was faulty, Liberty Mutual waived
its right to complain of such failure on appeal. See id. (holding failure to specifically deny proper
notice of filing an affidavit under Texas Property Code chapter 53 waived the right to complain of
this failure on appeal).
2
To the extent that special exceptions were included in Liberty Mutual’s Original Answer, they were waived because
they were not included in the First Amended Answer. When a first amended answer contains no special exceptions,
nor adopts by reference the exceptions contained in the original answer, the amended answer is not sufficient to
preserve the exception contained in the original pleading. Pure Oil Co. v. Fowler, 302 S.W.2d 461, 465 (Tex.App.—
Dallas 1957, writ ref’d n.r.e.)(stating “without waiving any . . . objections heretofore filed in this cause, but still
insisting thereon” is insufficient to preserve special exception)(citing Tex.R.Civ.P. 58, 75); accord Roberts v. Nowlin,
9 S.W.2d 69, 69 (Tex.App.—Amarillo 1928, no writ)(“[F]rom the recitals in the amendment, it appears that the pleader
is endeavoring to rely upon the demurrer and exceptions set forth in the original answer. Of course, this cannot be
done, since the amendment must stand alone . . . .”)(citing Tex. Dist. & Cnty. Ct. R. 14, the predecessor to Tex.R.Civ.P.
65 per Texas Rules of Civil Procedure-Rules Effective September 1, 1941-:An Historical Project (October 5, 2022,
12:03 PM), https://www.stcl.edu/lib/TexasRulesProject/TRCPPartIIsec4A/rule 651941.htm). Further, the special
exceptions included in the original answer did not specifically deny which conditions precedent had not been
performed or had not occurred. See Wade & Sons, 127 S.W.3d at 826. They only raised the issue of privity of contract
and lack of standing to claim interest, attorney’s fees, and costs.
9
Rise Above had no burden of proving breach of contract or contract damages at the
summary judgment stage. Further, Liberty Mutual cannot raise the validity of the lien or affidavit
for the first time on appeal. The trial court erred in granting a no-evidence summary judgment for
Liberty Mutual on the issue of breach of contract with Atlas Sand. We sustain Rise Above’s second
sub-issue.
Quantum Meruit
Liberty Mutual also alleged in its no-evidence motion for summary judgment that Rise
Above had presented no evidence that it had provided valuable services to Atlas Sand. Liberty
Mutual alleged because of the agreement between Rise Above and Marquez, the services rendered
were performed for the benefit of Marquez, not Atlas Sand.
In response to Liberty Mutual’s motion for summary judgment, Rise Above stated its claim
against Liberty Mutual is on the bond; 3 that there is no requirement of a contract between the
subcontractor and the owner; and “if there is even a requirement of showing valuable services,” it
provided such services benefitting Atlas Sand. Rise Above reiterates these responses on appeal.
The elements of proving a claim for quantum meruit are: (1) the plaintiff rendered valuable
services or furnished materials; (2) for the defendant; (3) which were accepted by the defendant;
and (4) under circumstances in which the person sought to be charged was reasonably notified that
the plaintiff was expecting to be paid for those services or materials. Pearl Res. LLC v. Charger
3
Rise Above’s first amended petition, under its cause of action for quantum meruit, states it provided valuable services
and materials to Marquez on the Atlas Project. The amended petition further states, “[s]uch services and materials
were accepted, which they knew that Rise Above expected to be paid for such services and materials, and that Marquez
benefitted from such services and materials.” [Emphasis Added]. We believe it is likely Rise Above intended to
abandon its claim for quantum meruit against Atlas Sand when it amended its petition. However, the language of the
amended petition is not unequivocal, and Liberty Mutual has raised the point, so we will address it.
10
Servs., LLC, 622 S.W.3d 106, 120-21 (Tex.App.—El Paso 2020, pet. denied)(citing Hill v.
Shamoun & Norman, LLP, 544 S.W.3d 724, 732-33 (Tex. 2018)).
In the trial court, Rise Above presented evidence that it provided valuable services to Atlas
Sand. Accompanying its response to Liberty Mutual’s motion for summary judgment was the
declaration of Rowdy Johnson, owner and president of Rise Above, which states Rise Above
performed work both under the subcontract agreement with Marquez, with an amount due and
owing of $273,100.00, and extra work with reasonable value of $181,186.00 that was not part of
the subcontract agreement but was performed on the Atlas Project. Rise Above attached numerous
invoices and daily reports detailing work performed on the Atlas Project, detailing work done both
under the subcontracting agreement and extra work not included in the subcontracting agreement,
but all done on the Atlas Project. This evidence constitutes more than a scintilla of evidence that
Rise Above provided valuable services for Atlas Sand, and summary judgment on this issue was
inappropriate.
Liberty Mutual argues on appeal the quantum meruit claim is invalid because the lien is
invalid. We have already determined the validity of the lien cannot be raised for the first time on
appeal.
Liberty Mutual further argues Rise Above has no live pleadings against it for quantum
meruit and Rise Above’s pleadings judicially admit Rise Above’s quantum meruit claims are
against only Marquez. Both these arguments are also raised for the first time on appeal, so we
decline to address them. Border Demo., 535 S.W.3d at 151. Moreover, if Rise Above had no
quantum meruit claim against Liberty Mutual, a no-evidence summary judgment was improper on
this point. See Villarreal, 315 S.W.3d at 127.
11
Liberty Mutual argues a substantial portion of the damages Rise Above claims against the
lien are damages caused by Marquez’s delay and were not damages that could be attributed to
Liberty Mutual. Again, this issue was not raised in the summary judgment motion, and we will not
consider it for the first time on appeal. Border Demo., 535 S.W.3d at 151. The no-evidence motion
for summary judgment alleged no evidence of valuable services provided to Atlas Sand, and, as
stated above, Rise Above met their burden of providing evidence to support their point.
Finally, Liberty Mutual sought summary judgment on quantum meruit because the contract
between Rise Above and Marquez dictated the services rendered were for the benefit of Marquez,
not Atlas Sand. The express contract defense is an affirmative defense on which Liberty Mutual
has the burden of proof. See Christus Health v. Quality Infusion Care, Inc., 359 S.W.3d 719, 722
(Tex.App.—Houston [1st Dist.] 2011, no pet.). Rise Above did not have the burden of producing
evidence on this point, and granting no-evidence summary judgment on this basis was incorrect.
See TEX.R.CIV.P. 166a(i).
Rise Above produced sufficient evidence to create a fact issue on the elements of quantum
meruit challenged by Liberty Mutual. Liberty Mutual’s remaining arguments on quantum meruit
either cannot be raised for the first time on appeal or were claims on which it had the burden of
proof. Granting no-evidence summary judgment on Rise Above’s quantum meruit claim was in
error.
CONCLUSION
Having reviewed the record, we have determined that granting summary judgment on
either a traditional motion under Rule 166a(c) or a no-evidence motion under 166a(i) was
erroneous. For that reason, we reverse the granting of summary judgment on Rise Above’s claims
and remand the case for proceedings consistent with this opinion.
12
YVONNE T. RODRIGUEZ, Chief Justice
November 04, 2022
Before Rodriguez, C.J., Palafox, J, and Ferguson, Judge
Ferguson, Judge (Sitting by Assignment)
13 | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482771/ | COURT OF APPEALS
EIGHTH DISTRICT OF TEXAS
EL PASO, TEXAS
MARCUS LAKEITH HARRIS, § No. 08-21-00070-CR
Appellant, § Appeal from the
v. § 183rd Judicial District Court
THE STATE OF TEXAS, § of Harris County, Texas
Appellee. § (TC# 159318601010)
OPINION
The State charged Appellant, Marcus Harris, by indictment with aggravated assault on a
public servant. A jury convicted Appellant and assessed punishment at 10 years’ confinement,
suspended for 10 years of community supervision. In three issues, Appellant contends that a term
of his community supervision violates his due process, terminated his parental rights, and subjected
him to double jeopardy. 1 Because we conclude Appellant did not preserve his issues below, we
affirm.
Factual and Procedural Background
1
This case was transferred from the Fourteenth Court of Appeals pursuant to a docket equalization order issued by
the Supreme Court of Texas. See TEX.GOV’T CODE ANN. § 73.001. We follow the precedent of the Fourteenth Court
of Appeals to the extent it might conflict with our own. See TEX.R.APP.P. 41.3.
Appellant was charged and convicted of aggravated assault and aggravated assault on a
public servant after an altercation with his ex-wife. The two causes were tried together, but this
appeal is limited to Appellant’s aggravated assault on a public servant conviction. For the
conviction at issue, the trial court sentenced Appellant to 10 years of community supervision on
November 25, 2019. Condition No. 26 of Appellant’s community supervision requires him to have
no contact with his ex-wife or his minor child, A.H. Appellant signed a copy of his community
supervision conditions, which included Condition No. 26, on the same day the trial court
pronounced his sentence. Appellant did not object to the conditions during the punishment hearing.
Instead, he filed a “motion for new trial on punishment conditions and motion to modify conditions
of probation” challenging Condition No. 26 on the grounds of due process and notice, abridgment
of his parental rights, and double jeopardy. Appellant’s motion appears in the Clerk’s Record and
docket entry sheet, however, there is nothing in the record indicating that Appellant presented the
motion to the trial court.
Discussion
Appellant raises three issues for our review. All three issues raise different challenges to
Condition No. 26 of his community supervision. In his first issue, Appellant contends that he did
not receive notice of Condition No. 26, which he further contends is an abridgement of his
fundamental parental rights. In his second issue, Appellant contends that the trial court imposed
an unconstitutional sentence by terminating his parental rights with Condition No. 26. In his final
issue, Appellant contends that Condition No. 26 subjects him to double jeopardy because it is a
second punishment for his conviction of aggravated assault and unrelated to the conviction for
aggravated assault on a public servant, the conviction for which community supervision was
imposed. The State responds that Appellant’s complaints about Condition No. 26 are unpreserved.
2
To preserve a complaint about a condition of community supervision, the defendant must
object at trial. Speth v. State, 6 S.W.3d 530, 534 (Tex.Crim.App. 1999). An award of community
supervision is a contractual privilege and not a right. Norton v. State, 434 S.W.3d 767, 772
(Tex.App.—Houston [14th Dist.] 2014, no pet.). When a defendant enters the contractual
relationship without objection, he affirmatively waives any rights upon which the contract might
encroach. Id.
Appellant does not contend that he objected to the condition at trial. Instead, he contends
he did not receive notice of the conditions. A defendant may receive notice of the community
supervision conditions by oral pronouncement in court or by signing a written version of the
conditions following the punishment hearing. Speth, 6 S.W.3d at 534 n.9. The record shows that
Appellant signed the written version of his conditions on the day of his punishment hearing.
Accordingly, we conclude that Appellant had notice of his conditions, and because he did not
object at the trial to the imposition of Condition No. 26, he has not preserved his complaints for
appeal.
To the extent that Appellant raised his issues to the trial court in his motion for new trial,
we conclude they are likewise unpreserved. Although Appellant challenged his community
supervision terms in his motion for new trial, there is nothing in the record indicating the motion
was presented to the trial court. See TEX.R.APP.P. 21.6. A motion for new trial must be presented
to the trial court within ten days of being filed. Gardner v. State, 306 S.W.3d 274, 305
(Tex.Crim.App. 2009). Presentment must be apparent from the record and can be shown by
“judge’s signature or notation on the motion or proposed order, or an entry on the docket sheet
showing presentment or setting a hearing date.” Id. Here, Appellant’s motion contains an unsigned
proposed order, and the court’s docket sheet does not provide evidence of presentment.
3
Accordingly, we conclude, to the extent Appellant could raise any of his complaints in a motion
for new trial, he failed to timely present them.
CONCLUSION
Appellant’s issues are overruled, and the judgment of the trial court is affirmed.
SANDEE MARION, Chief Justice (Ret.)
November 4, 2022
Before Rodriguez, C.J. Alley, J and Marion C.J. (Ret.), sitting by assignment
(Do Not Publish)
4 | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482770/ | COURT OF APPEALS
EIGHTH DISTRICT OF TEXAS
EL PASO, TEXAS
RISE ABOVE STEEL COMPANY, LLC., § No. 08-21-00127-CV
Appellant, § Appeal from the
v. § 109th District Court
LIBERTY MUTUAL INSURANCE § of Winkler County, Texas
COMPANY,
§ (TC# DC18-17466)
Appellee.
§
JUDGMENT
The Court has considered this cause on the record and concludes there was error in the
judgment. We therefore reverse the judgment of the court below and remand the cause for further
proceedings in accordance with this Court’s opinion. We further order that Appellant recover from
Appellee all costs of this appeal, for which let execution issue. This decision shall be certified
below for observance.
IT IS SO ORDERED THIS 4TH DAY OF NOVEMBER, 2022.
YVONNE T. RODRIGUEZ, Chief Justice
Before Rodriguez, C.J., Palafox, J, and Ferguson, Judge
Ferguson, Judge (Sitting by Assignment) | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482758/ | COURT OF APPEALS
EIGHTH DISTRICT OF TEXAS
EL PASO, TEXAS
CHRISTOPHER W. LEVY, §
No. 08-22-00213-CV
Appellant, §
Appeal from the
v. §
261st District Court
JULIE J. OAKLEY, THOMAS G. §
KILGORE, LOUIS MASTRANGELO, of Travis County, Texas
SANJEEV KUMAR, and GRETCHEN §
VANCE, (TC# D-1-GN-22-002721)
§
Appellees.
§
MEMORANDUM OPINION
Appellant Christopher W. Levy has filed a motion for voluntary dismissal of this action.
See TEX.R.APP.P. 42.1(a)(1) (governing voluntary dismissals filed by appellants). The motion is
granted, and this appeal is dismissed.
JEFF ALLEY, Justice
November 8, 2022
Before Rodriguez, C.J., Palafox, and Alley, JJ. | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482751/ | COURT OF APPEALS
EIGHTH DISTRICT OF TEXAS
EL PASO, TEXAS
§ No. 08-21-00163-CV
IN THE INTEREST OF: § Appeal from the
N.R.S., § 112th Judicial District Court
A CHILD. § of Crockett County, Texas
§ (TC# 21-02-08131-CV)
JUDGMENT
The Court has considered this cause on the record and concludes there was no error in the
judgment. We therefore affirm the judgment of the court below.
It appearing to this Court that Appellant is indigent for purposes of appeal, this Court makes
no other order with respect thereto. This decision shall be certified below for observance.
IT IS SO ORDERED THIS 9TH DAY OF NOVEMBER, 2022.
JEFF ALLEY, Justice
Before Rodriguez, C.J., Palafox, and Alley, JJ. | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482765/ | COURT OF APPEALS
EIGHTH DISTRICT OF TEXAS
EL PASO, TEXAS
ALEJANDRO HERNANDEZ, § No. 08-21-00158-CV
Appellant, § Appeal from the
v. § 34th Judicial District Court
VICTOR VAZQUEZ, § of El Paso County, Texas
Appellee. § (TC# 2017-DCV0755)
OPINION
Appellant, a prospective home buyer, sued Appellee, the homeowner’s listing agent, for
failing to forward his offers to purchase to the homeowner. 1 The trial court granted no-evidence
summary judgment. Appellant urges summary judgment was improper. We affirm the trial court’s
judgment.
1
This is another in a long line of appeals arising out of Hernandez’s eviction. See Hernandez v. U.S. Bank Trust N.A.,
No. 08-16-00218-CV, 2016 WL 4801601 (Tex. App.—El Paso Sept. 14, 2016, no pet.) (mem. op.) (attempted appeal
of supersedeas order); Hernandez v. U.S. Bank Trust N.A., 527 S.W.3d 307 (Tex. App.—El Paso 2017, no pet.)
(opinion on motions regarding supersedeas); Hernandez v. U.S. Bank Trust NA, No. 08-16-00290-CV, 2017 WL
1953291 (Tex. App.—El Paso May 11, 2017, no pet.) (mem. op.) (appeal of judgment granting possession of the
property to U.S. Bank Trust); Hernandez v. Sommers, No. 08-18-00045-CV, 2018 WL 1940362 (Tex. App.—El Paso
Apr. 25, 2018, no pet.) (mem. op.) (resolving motions to dismiss for want of jurisdiction); Hernandez v. Hernandez,
547 S.W.3d 898 (Tex. App.—El Paso 2018, pet. denied) (appeal from order denying reentry alleging unlawful eviction
by new property owners); Hernandez v. Sommers, 587 S.W.3d 461 (Tex. App.—El Paso 2019, pet. denied) (constable
who executed valid writ of possession against tenants of foreclosed property was entitled to official immunity);
Hernandez v. Hernandez, 596 S.W.3d 403 (Tex. App.—El Paso 2020, no pet.) (appeal of bill of review claiming
tenant prevented from fully asserting his wrongful eviction claim in prior lawsuit); Hernandez v. Hernandez, 632
S.W.3d 92 (Tex. App.—El Paso 2020, no pet.) (appeal of summary judgment dismissing wrongful-removal claim);
Hernandez v. Vazquez, No. 08-18-00223-CV, 2020 WL 6867065 (Tex. App.—El Paso Nov. 23, 2020, no pet.) (mem.
op.) (dismissal for want of jurisdiction).
FACTUAL AND PROCEDURAL BACKGROUND
Appellant, Alejandro Hernandez, was renting a home that was foreclosed. After
discovering the home had been foreclosed, Hernandez made attempts to purchase the home
through the new owner’s listing agent, Victor Vazquez, Appellee. Hernandez claims he made
several verbal offers to purchase the home, but Vazquez never submitted the offers to the new
owner. Hernandez asserts Vazquez misrepresented to him that the offers had not been accepted
when, in fact, Vazquez had never forwarded them. Hernandez contends because of Appellee’s
failure to forward the offers, he was deprived of the opportunity to purchase the property, evicted,
and he incurred significant relocation expenses.
Hernandez sued for negligence, negligence per se, common-law fraud, negligent
misrepresentation, and exemplary damages. About a year later, Vazquez moved for no-evidence
summary judgment. After a hearing, the trial court granted Vazquez’s motion, stating “Victor
Vazquez’s No Evidence Summary Judgment is hereby GRANTED.”
In the summary judgment order, the trial court deferred ruling on Vazquez’s request for
attorney’s fees and Hernandez appealed. This court dismissed the appeal for lack of jurisdiction
because the trial court’s order was not final, having not resolved the claim for attorney’s fees. See
Hernandez v. Vazquez, No. 08-18-00223-CV, 2020 WL 6867065 (Tex. App.—El Paso Nov. 23,
2020, no pet.) (mem. op.). On remand, the trial court entered a final judgment disposing of the
attorney’s fees issue and incorporating the previous no-evidence summary judgment order.
Hernandez appeals from that final judgment.
STANDARD OF REVIEW
An appellate court reviews a trial court’s granting of summary judgment de novo. Herrera
v. Resignato, 621 S.W.3d 835, 840 (Tex. App.—El Paso 2021, no pet.) (citing Merriman v. XTO
Energy, Inc., 407 S.W.3d 244, 248 (Tex. 2013)).
2
Vazquez moved for summary judgment against all Hernandez’s claims on no-evidence
grounds. In a no-evidence motion, the movant claims the non-movant lacks any evidence on one
or more of the elements essential to its cause of action, and summary judgment is proper when the
non-movant fails to produce sufficient evidence to raise an issue of fact on each element challenged
on which it has the burden of proof. Herrera, 621 S.W.3d at 841 (citing TEX. R. CIV. P. 166a(i)
and Hamilton v. Wilson, 249 S.W.3d 425, 426 (Tex. 2008) (per curiam)). When the nonmovant
offers more than a scintilla of probative evidence in support of the challenged elements, a fact
issue is presented. Herrera, 621 S.W.3d at 841 (citing King Ranch v. Chapman, 118 S.W.3d 742,
751 (Tex. 2003)). A nonmovant is not required to present all their proof in response to a no-
evidence motion, but they must present countervailing evidence that raises a genuine issue of
material fact on the challenged elements. Herrera, 621 S.W.3d at 840 (citing Sw. Elec. Power Co.
v. Grant, 73 S.W.3d 211, 215 (Tex. 2002).
DISCUSSION
Hernandez, who is pro se, complains in one issue that the trial court abused its discretion
in granting a no-evidence summary judgment. Hernandez contends Vazquez improperly attached
evidence to his no-evidence motion, to which he objected, and he raises objections to that evidence
again on appeal. Because Vazquez styled his motion as a no-evidence motion and the court granted
a no-evidence summary judgment, we will review the trial court’s judgment as a no-evidence
determination, not considering Vazquez’s evidence unless it creates a fact question. See Binur v.
Jacobo, 135 S.W.3d 646, 651 (Tex. 2004).
Many of Hernandez’s arguments in response to the motion for summary judgment are that
the motion fails to specifically challenge the evidentiary support for an element of his claims,
alleging the motion in large part is conclusory and legally insufficient as a matter of law. He relies
on Callaghan Ranch, Ltd. v. Killam, 53 S.W.3d 1, 3 (Tex. App.—San Antonio 2000, pet. denied),
for the proposition that conclusory motions or general no-evidence challenges are legally
3
insufficient as a matter of law. Callaghan does make those statements, but it goes on to quote the
motion in question, which made a very broad allegation that the plaintiffs could not demonstrate
any evidence to support the declaratory judgment previously granted. Id. That motion did not state
the elements of the underlying causes of action of which there was no evidence. Id. at 4. The
Callaghan court found that motion to be insufficient as a matter of law. Id.
Although Rule 166a(i) provides the authority for filing a no-evidence motion for summary
judgment, it does not give a format practitioners should follow when drafting one. See
TEX. R. CIV. P. 166a(i). One of our sister courts has opined on the format of a proper no-evidence
motion.
A litigant may base a motion for summary judgment on the assertion that there is
no evidence of one or more essential elements of the opposing party’s claim or
defense. The movant need not present any summary judgment evidence to support
the ground. The specification of each element challenged and the good faith
assertion that there is no evidence to support that specified element is all that is
required to put the burden on the opposing party to produce summary judgment
evidence raising a genuine issue of material fact relevant to the challenged element.
TEX. R. CIV. P. 166a(i).
Welch v. Coca-Cola Enters., Inc., 36 S.W.3d 532, 537 (Tex. App.—Tyler 2000, pet. withdrawn).
Hernandez asks us to apply the Callaghan reasoning, which in that case was applied to the
analysis of a very broad, insufficient motion, to a very specific, detailed motion in the case at hand.
Unlike the motion in Callaghan, Vazquez’s motion lists the elements of every one of Hernandez’s
causes of action and alleges Hernandez cannot produce any evidence of any of those elements. In
addition, Vazquez’s motion gives supporting case law and references Hernandez’s factual
allegations. Vazquez’s motion meets the requirements of Rule 166a(i) as stated in Welch. The
Callaghan holding does not apply because Vazquez’s motion is not the conclusory, general
challenge that was present in Callaghan.
We hold Vazquez’s motion meets the requirements of Rule 166a(i).
4
With that in mind, we analyze Hernandez’s response to the summary judgment motion to
determine whether he has raised a fact issue as to any of his claims. See Herrera, 621 S.W.3d at
841.
Negligence
With respect to Hernandez’s negligence claim, Vazquez urged Hernandez could produce
no evidence that he owed a duty to Hernandez or that he breached that duty. In addressing the issue
of duty in his response, Hernandez presented his claim that a real estate agent owes a duty to “be
faithful and observant to trust placed in the agent and that the agent be scrupulous and meticulous
in performing the agent’s function in any real estate transaction involving any member of the
public, even if the agent has a principal agent relationship with another individual.” Hernandez
stated that he believes this duty arises from Chapter 531 of the Texas Administrative Code, the
section of the administrative code that provides regulations governing the Texas Real Estate
Commission. See 22 TEX. ADMIN. CODE pt. 23 ch. 531 (2017) (Texas Real Estate Comm’n, Canons
of Professional Ethics and Conduct). When questioned in his deposition about Vazquez’s duty to
him, 2 Hernandez admitted that Vazquez was never acting as his real estate agent in this transaction.
1F
Hernandez cited section 531.1, Fidelity, which reads in part:
A real estate broker or salesperson, while acting as an agent for another, is a
fiduciary. Special obligations are imposed when such fiduciary relationships are
created. They demand that the primary duty of the real estate agent is to represent
the interests of the agent’s client, and the agent’s position, in this respect, should be
clear to all parties concerned in a real estate transaction; that, however, the agent,
in performing duties to the client, shall treat other parties to a transaction fairly
(internal numbering omitted)[.]
22 TEX. ADMIN. CODE § 531.1 (2017) (Tex. Real Estate Comm’n, Canons of Pro. Ethics and
Conduct), repealed and recodified at § 531.2 by 47 Tex. Reg. 1185, 1185 (2022), adopted by 47
Tex. Reg. 3049, 3049 (2022) (effective May 25, 2022). Hernandez stated although a real estate
2
Hernandez attached his entire deposition transcript to his response to motion for summary judgment as exhibit 1.
5
agent may be acting as an agent for another person, “that does not mean that he can commit fraud
and negligence with . . . a person that’s making an offer to purchase real estate in a transaction.”
He stated: “[A]lthough there may not be an agent principal fiduciary duty, there is a fiduciary duty
to the public, a member of the public that is involved in a real estate transaction . . . with somebody
that he may be an agent for.”
In a similar case, a buyer sought to impose liability on a seller for failure to disclose certain
information during a sale. Flutobo, Inc. v. Holloway, 419 S.W.3d 622 (Tex. App.—Houston [14th
Dist.] 2013, pet. denied). The buyer alleged liability under two regulations under chapter 535, part
23, title 22 of the Texas Administrative Code, the same title and part Hernandez cites in his
response. One of the two regulations was in a subchapter entitled “General Provisions Relating to
the Requirements of Licensure,” and the other was in a subchapter entitled “Suspension and
Revocation of Licensure.” Id. at 633. The Flutobo court noted there was legally insufficient
evidence that the agent was acting as a salesperson in the transaction at issue, but went on to state,
[E]ven if these regulations could be interpreted to cover her acts . . . , the parties
have not cited and research has not revealed any cases addressing whether these
regulations provide legal standards that apply in claims by private plaintiffs seeking
monetary damages. . . . We decline to adopt the standards in these administrative
regulations for use in determining the civil liability of litigants in damage claims.
Id. As stated above, Hernandez admitted Vazquez was not acting as his agent in his attempts to
purchase the house. Hernandez has not produced, and we have not found cases imposing a duty
forming the basis of a negligence claim on a real estate agent under these regulations. We decline
to adopt the regulations found in the Canons of Professional Ethics and Conduct as the basis for a
negligence claim by a potential party to a real estate transaction against a real estate agent for the
other party to the transaction. Granting summary judgment on negligence was not error.
Negligence Per Se
Hernandez’s cause of action for negligence per se is also based on an alleged violation of
Section 531.1 of the Canons of Ethics. See 22 TEX. ADMIN. CODE § 531.1. Vazquez moved for
6
summary judgment on this claim, stating Hernandez cannot show he belongs to the class that the
statute or regulation is intended to protect. See Perry v. S.N., 973 S.W.2d 301, 305 (Tex. 1998)
(“The threshold questions in every negligence per se case are whether the plaintiff belongs to the
class that the statute was intended to protect and whether the plaintiff’s injury is of a type that the
statute was designed to prevent.”).
Hernandez did not respond to the negligence per se portion of the motion, and he did not
present any argument regarding negligence per se in his brief. Hernandez has waived any error
regarding the granting of summary judgment on his negligence per se claim. See Fred Loya Ins.
Agency, Inc. v. Cohen, 446 S.W.3d 913, 918 (Tex. App.—El Paso 2014, pet. denied) (citing
Merriman, 407 S.W.2d at 248).
Common-Law Fraud
As the basis for his fraud claim, Hernandez alleged Vazquez made a representation he
would forward the offer for the purchase of the subject property and that he did not in fact forward
the offer. Vazquez urged in his summary judgment motion Hernandez could not prove the making
of this statement constituted a cause of action for fraud, alleging specifically Hernandez could not
produce evidence of any of the elements of a common-law fraud claim as listed in Ernst & Young,
L.L.P. v. Pacific Mut. Life Ins. Co., 51 S.W.3d 573, 577 (Tex. 2001).
Hernandez responded by claiming Vazquez’s statement he had forwarded the offer and
later admission he had not forwarded the offer satisfies the element of the first element of his fraud
claim. Hernandez then argued the remainder of Vazquez’s no-evidence points on the elements of
fraud are general allegations that he had no evidence of the other elements of a fraud claim, and
he avers the motion is legally insufficient regarding common-law fraud. He cited Neurodiagnostic
Tex, L.L.C., v. Pierce, 506 S.W.3d 153, 177 (Tex. App.—Tyler 2016, no pet.), for the proposition
that a no-evidence motion that does not specifically challenge a particular element or is conclusory
7
is legally insufficient. On that basis, Hernandez offered no more proof on the remaining elements
of common-law fraud.
The relevant portion of Neurodiagnostic involved a no-evidence motion for breach of
fiduciary duty that the Tyler court deemed to be insufficient. That motion listed no elements of
breach of fiduciary duty and did not allege no evidence on any element of fiduciary duty at all;
instead, it made a general allegation that there was no evidence of breach of fiduciary duty. See
Neurodiagnostic, 506 S.W.3d at 177.
Hernandez confuses a no-evidence motion on no specific element of a claim with a no-
evidence motion on ALL elements of a claim. Vazquez urged Hernandez could not produce
evidence of any of the elements of his claim for fraud. Vazquez first listed each element of a fraud
claim with a case citation, then recited the factual basis of Hernandez’s claim from Hernandez’s
original complaint, then stated, listing each element, that Hernandez could not meet any of the
elements. Finally, Vazquez stated the evidence conclusively establishes the opposite. We disagree
with Hernandez and hold Vazquez’s no-evidence motion regarding fraud is legally sufficient.
Hernandez failed to produce any evidence to controvert Vazquez’s allegations that he had
no evidence to establish the last three elements of the fraud claim. The court did not err in granting
summary judgment on the issue of common-law fraud.
Negligent Misrepresentation
Hernandez’s claim of negligent misrepresentation is based on the following behavior of
Vazquez: failure to submit offers and counteroffers objectively and as quickly as possible,
misleading the owner as to the market value of the property, and misleading Hernandez as to
whether he submitted a bona fide offer to the owner.
As with the previous claim, Vazquez urged Hernandez cannot produce evidence on any of
the elements of negligent misrepresentation. Again, Vazquez listed all the elements, with a case
citation as a reference, and specifically stated that Hernandez failed to raise evidence as to any of
8
the elements. Then Vazquez specifically stated, with a separate statement for each, there is no
evidence that meets each element. Vazquez stated:
First, there is no evidence that Defendant Vazquez made any actionable
representation to Plaintiff in the course of the transaction at issue.
Second, there is no evidence that Defendant Vazquez supplied false information for
the guidance of Plaintiff or any other relevant person.
Third, there is no evidence that Defendant Vazquez failed to exercise reasonable
care or competence in obtaining or communicating any allegedly false information.
Fourth, there is no evidence that Plaintiff justifiably relied on any actionable
representation by Defendant Vazquez.
Fifth, there is no evidence that any actionable representation by Defendant Vazquez
proximately caused any of the Plaintiff’s alleged injuries.
For these elements, Vazquez cited Miller v. LandAmerica Lawyers Title of El Paso, 362
S.W.3d 842, 845 (Tex. App.—El Paso 2012, no pet.).
Hernandez addressed only justifiable reliance in his response. As to the remainder of the
elements, he again stated Vazquez’s motion is conclusory and legally insufficient. Again, he relied
on Neurodiagnostic, 506 S.W.3d at 177.
As with the previous claims, we conclude Vazquez’s motion sufficient. Hernandez’s
response was insufficient to raise any evidence on all the elements of the negligent
misrepresentation claim except justifiable reliance. Granting no-evidence summary judgment on
negligent misrepresentation was not error.
Exemplary Damages
Because we have decided Hernandez did not meet his burden of producing more than a
scintilla of evidence on any of his causes of action, we do not need to address his claim for
exemplary damages.
9
CONCLUSION
Hernandez did not preserve error as to his negligence per se claim. He did not present more
than a scintilla of evidence regarding at least one element of the remainder of his causes of action.
With no remaining viable causes of action, his claim for exemplary damages fails. The trial court
did not err in granting no-evidence summary judgment on all Hernandez’s claims. We affirm the
judgment of the trial court.
SANDEE MARION, Chief Justice (Ret.)
November 8, 2022
Before Rodriguez, C.J., Alley, J., and Marion, C.J., (Ret.) sitting by assignment
10 | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482783/ | Third District Court of Appeal
State of Florida
Opinion filed November 10, 2022.
Not final until disposition of timely filed motion for rehearing.
________________
No. 3D21-1552
Lower Tribunal No. 12-8046 CC
________________
The Responsive Auto Insurance Company,
Appellant,
vs.
Central Therapy Center, Inc.,
a/a/o Luis Relova,
Appellee.
An Appeal from the County Court for Miami-Dade County, Lawrence
D. King, Judge.
The Vaccaro Law Firm, P.A., and Charles L. Vaccaro (Davie), for
appellant.
David B. Pakula, P.A., and David B. Pakula (Pembroke Pines);
Corredor & Husseini, P.A., and Maria E. Corredor, for appellee.
Before FERNANDEZ, C.J., and LINDSEY, and LOBREE, JJ.
PER CURIAM.
Affirmed.
2 | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8488893/ | MEMORANDUM DECISION
FREDERICK A. JOHNSON, Bankruptcy Judge.
On December 4,1979, Circus Time, Inc., a Chapter 11 Debtor in Possession, filed a complaint with this Court seeking authority to sell assets free and clear of liens and encumbrances. Included among the assets were the six vehicles which are the subject of this proceeding.1
Grumman Credit Corp. objected to the sale. It argued that the vehicles were not property of the estate because they were owned by Grumman and leased to the Debt- or and, in the alternative, that if the leases were not true leases but leases intended for security, then Grumman was entitled to adequate protection. The Debtor in Possession took the position that the leases were not true leases but, rather, leases intended for security and that Grumman’s security interest in the vehicles was not properly perfected.
By Order dated December 24, 1979, and pursuant to Section 363(f) of the Code, this Court authorized the sale of the vehicles free and clear of liens with Grumman’s *5interest to attach to the proceeds of sale with the validity and perfection of Grumman’s interest to be later determined.
On April 24, 1980 a hearing was held on the issue of Grumman’s interest in the vehicles. At the hearing it was conceded that the leases were leases intended for security and in its brief Grumman conceded that the leases may be treated as security agreements. The value of each vehicle has been stipulated by the parties.
Of the six vehicles, three were registered in New Hampshire and three in Maine and certificates of title were issued by the appropriate State officer.2 In each certificate Grumman Credit Corp. is named as “owner” with no “lienholder.”
The Court concludes that Grumman’s interest in the vehicles is a security interest and that it has failed to perfect such security interest as required by the Uniform Motor Vehicle Certificate of Title and Anti-Theft Act as enacted by both Maine and New Hampshire.
DISCUSSION
The Uniform Motor Vehicle Certificate of Title and Anti-Theft Act has been adopted by both Maine and New Hampshire. 29 M.R.S.A. § 2350 et seq.; N.H.R.S.A. Ch. 269-A. The Maine and New Hampshire versions of the Act are identical in all respects pertinent here. For convenience we will work with the Maine Statute in this discussion.
It having been conceded that the leases dealing with the vehicles in question were “leases intended as security” the Title Act defines Grumman’s interest as a security interest.
‘Security interest’ means an interest in a vehicle reserved or created by agreement and which secures payment or performance of an obligation. The term includes the interest of a lessor under a lease intended as security. ... 29 M.R. S.A. § 2351.8.
Section 2402.2 provides the method for perfection of a security interest:
A security interest is perfected by the delivery to the Secretary of State of the manufacturer’s statement of origin or existing certificate of title, if any, an application for a certificate of title containing the name and address of the lienholder and the date of his security agreement and the required fee. .
The application for the certificate of title must contain:
A. The name, residence and mail address of the owner;
B. A description of the vehicle
C. The date of purchase . . and the names and addresses of any lienhold-ers in the order of their priority and the dates of their security agreements . 29 M.R.S.A. § 2364.1.
An “owner” is defined by Section 2351.5: OWNER. ‘Owner’, for certificate of title purposes, means a person, other than a lienholder, having the property in or title to a vehicle. The term includes a person entitled to the use and possession of a vehicle subject to a security interest in another person, but excludes a lessee under a lease not intended as security.
A “lienholder” means a person holding a security interest in a vehicle. 29 M.R.S.A. § 2351.3.
From the stipulated facts and the testimony it is clear that the “owner” of the vehicles, within the Section 2351 definition, is the Debtor, Circus Time, Inc. and that the “lienholder” is Grumman Credit Corp. The applications for certificates of title vary in some respects but, in each application, (and certificate) Grumman Credit Corporation is described as “owner” and in the space provided for “lienholders” the word “none” appears.
It is equally clear that Grumman has not complied with Section 2402 in perfecting its security interest. Section 2407 provides that the “method provided in this subchap-*6ter of perfecting and giving notice of security interests subject to this subchapter is exclusive.”
Grumman, in its excellent brief, devotes much effort to the argument that any technical deficiency in the certificates of title is not seriously misleading and that no party could be prejudiced thereby. It argues that the certificates, as issued, reflect the true nature of the agreement between the parties and constitute sufficient public notice to perfect Grumman’s security interest in the vehicles. In support of its position Grumman cites several cases decided under the Uniform Commercial Code and a 1978 case decided by this Court under the New Hampshire Certificate of Title Act.
Grumman’s argument misses the mark. In all but one the cases cited in support of its position the Court found that there was compliance or substantial compliance with the statutory procedure, a vital factor which is absent here.
In In re Cushman Bakery, 526 F.2d 23 (1975) the First Circuit Court of Appeals found “full compliance with the literal command of the Maine recording statutes.” at p. 28.
This Court, in In re Hill, BK-76-515 August 11, 1978, found that N.H.R.S.A. Ch. 269-A:21 dealing with perfection of security interests under the Title Act had been substantially complied with and that an incomplete name and address of the lienholder was a minor error, not seriously misleading.
In In re Reeco Electric Co., Inc. and In re Petersbuilt, Incorporated, (consolidated on appeal), 415 F.Supp. 238 (D.C.Me.1976); 19 UCC Rep. 947, the District Court found substantial compliance with UCC Section 9-402 (11 M.R.S.A. 9-402) and that minor errors in the names of the debtors were not seriously misleading.
Grumman gains no support from In re Bosson, 432 F.Supp. 1013 (D.C.Ct.1977), also cited in its brief. In that case the Court held that under the theory of “notice filing” the lienholder would prevail because “a reasonably diligent creditor would not have been misled, since an inquiry with the Motor Vehicles Department would reveal that Michael Bosson did not own the car.” The Court went on, however, to find that the appellant (Bank) never acquired a valid security interest in the automobiles in question and that its rights were subordinate to those of the trustee in bankruptcy.
The result in Bosson was “required by a fair analysis of the statutory scheme and of the relevant supplemental case law authorities . . . ”. That is our situation here. This Court has applied the doctrine of “substantial compliance” and the theory of “notice filing” to cases arising under the Certificate of Title Act. See In re Hill, supra. In this case it is probably true that a diligent interested party could learn the true relationship between Grumman and the Debtor in view of the statutory mandate that the Secretary of State “upon receiving an application for a first certificate of title, shall check the identification number of the vehicle . . . against the records of vehicles required to be maintained . 29 M.R.S.A. Section 2365. The Secretary of State is required to maintain a record of all certificates issued by him:
A. Under a distinctive title number assigned to the vehicle;
B. Under the identification number of the vehicle;
C. Alphabetically, under the name of the owner; and, ... by any other method he determines. 29 M.R.S.A. § 2366.2
No evidence was introduced to demonstrate what procedures are followed in response to an inquiry by an interested party regarding a particular vehicle and/or a particular “owner” or “lienholder”. But, for the purpose of this discussion we will assume that a diligent interested party could learn the true relationship between Grumman and the Debtor.
In my view, this is not dispositive of the issue. The Legislature has, by enacting 29 M.R.S.A. § 2364, wisely deemed it necessary that an application for a certificate of title contain the name, residence and mail address of the owner, all of which are completely missing from the applications in this *7proceeding. Also required and also missing in each application is the names and addresses of any lienholders in the order of their priority and the dates of their security agreements.3
Title 29 M.R.S.A. § 2350 advises:
This chapter shall be so interpreted and construed as to effectuate its general purpose to make uniform to the similar laws of other states.
Uniformity, in my view, will result only from substantial compliance with the statutory scheme. Substantial compliance is absent here. See Maine Federal Credit Union v. Atlantic Motors, 250 A.2d 497 (Me.1969), Absence of signature of secured party; also, In re Carlstrom, 3 UCC Rep. 766 (D.C.Me.1966); In re Benson, 3 UCC Rep. 272 (D.C.Conn.1966); In re Bassett, 5 UCC Rep. 279 (D.C.Conn.1967) Absence of date of security agreement.
Title 29 M.R.S.A. § 2402.1 provides:
Unless excepted by section 2401, a security interest in a vehicle of a type for which a certificate of title is issued4 is not valid against creditors of the owner or subsequent transferees or lienholders of the vehicle unless perfected as provided in this subchapter.
Section 544 of the Bankruptcy Code grants the bankruptcy trustee the rights and powers of a creditor holding a judicial lien. Section 1107 of the Code grants to a debtor in possession all of the rights and powers of a trustee.
The security interest of Grumman Credit Corporation is invalid against Circus Time, Inc., the Debtor in Possession.5 An appropriate order will be entered immediately.
. The vehicles are all 1978 Chevrolet vans purchased through Mirak Chevrolet, Inc., Arlington, Mass.
. The title certificate for one vehicle was not applied for or issued until after the filing of Debtor’s Voluntary Petition. Debtor has had use and possession of the vehicle since March of 1979. Debtor’s attack on this ground becomes moot in view of the Court’s decision.
. See 9 M.R.S.A. § 2351.5 for definition of “owner” for certificate of title purposes. “Lienholder” is defined by § 2351.3 and “security agreement” is defined by § 2351.7.
. “required” in the N.H. version 269-A:21. The Maine Act was amended in 1977 substituting “issued” for “required”.
. The Debtor in Possession has raised several other issues regarding the validity and perfection of Grumman’s security interest. Those issues were made moot by the Court’s decision. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8488894/ | OPINION
N. SANDERS SAULS, Bankruptcy Judge.
THIS CAUSE came on for hearing upon the Trustee’s application to determine the status of title to certain property. The undisputed facts are as follows: On or about May 9, 1978, the Collins purchased a 1978 Randall Craft Bass Boat, a 55 h.p. Johnson motor, and a boat trailer, and gave a note and security agreement to the Barnett Bank of Tallahassee. Approximately two (2) months later, the Collins sold the boat, motor and trailer to Mr. Branch, by oral agreement, whereby Mr. Branch agreed to assume and pay the debt to Barnett Bank. Delivery of the boat was made, and Mr. Branch has since made all payments on the boat. Apparently, the Bank was notified of and agreed to the sale and assumption of the loan.
The Bank held the certificate of title on the boat (the motor and trailer were not included) and had its lien recorded on the face thereof. A new certificate of title however, was never caused to be issued to transfer record title from the Collins to the name of Mr. Branch.
The Collins filed this case on October 24, 1979, and listed the debt to the Bank for the boat as a secured obligation. The boat was scheduled as property with no value.
The evidence presented here establishes that the Collins intended to and did sell the property to Mr. Branch almost a year and a half prior to their bankruptcy petition. Mr. *57Branch took delivery of the property and has made regular, periodic payments since then. The Court has concluded, therefore, that title passed to Mr. Branch at the time he took possession of the property in question.
The Trustee’s position is that Florida is a title certificate state with respect to motor vehicles (Chapter 319, Florida Statutes) and boats (Chapter 371, Florida Statutes) and hence no title can pass as against creditors or subsequent purchasers until a certificate of title has been duly issued in accordance with Florida law. Of course, absent any such specific statutory requirements the applicable section of Florida’s version of the Uniform Commercial Code (U.C.C.) would govern. Section 672.401, Fla.Stat. (1979) provides that title passes
“. . .at the time and place at which the seller completes his performance with reference to the physical delivery of the goods, despite any reservation of a security interest and even though a document of title is to be delivered at a different time or place.”
But, if some type of title certificate registration is required then a prior intended transaction may be invalid as against a trustee under § 541(a), United States Code, or voidable under § 544(a). Section 541(a) is the new statutory version of § 70(a) under the old Act and § 544(a) is the new counterpart of old § 70(c).
The parties have cited cases involving motor vehicles. Nash Miami Motors v. Bandel, 47 So.2d 701 (Fla.1950); Grimm v. Prudence Mutual Casualty, 243 So.2d 140 (Fla.1971); Motor Credit Corporation v. Woolverton, 99 So.2d 286 (Fla.1957); Fischer v. Bernard’s Surf, 217 So.2d 576 (Fla. 4th DCA 1969); Michaels v. Dillon, 191 So.2d 80 (Fla. 2d DCA 1966). These cases are not applicable for two reasons. First, the item here involved is a boat rather than a motor vehicle and the governing statutory provisions are not the same. Secondly, the cited cases do not directly address circumstances where the rights of intervening third parties are involved but merely stand broadly for the well established proposition that, as between the parties, or those claiming under their rights, passage of title occurs in accordance with the parties’ intent whether or not a new title has been issued.
When read together, Sections 319.22 and 319.27(2), Fla.Stat., (which apply to transfers or security interests in motor vehicles) are analogous to Section 695.01, Fla.Stat., which is the recording statute applicable to transfers or security interests in real property. Under this type of statutory scheme, creditors or subsequent purchasers are protected against prior transfers or conveyances as well as prior liens if such prior transfers or liens have not been recorded. Such prior transfers or liens are invalid against a trustee under § 544(a). With respect to § 541(a), however, the Trustee acquires only such interests, subject to such infirmities, as were possessed by the debtor. A prior transfer or conveyance or lien which is valid between the parties, likewise is binding on the trustee, and, under Florida law, recording is not a prerequisite itself to the validity of a transfer or lien. The effect of failure to record is to render a transaction or lien vulnerable to the intervening rights of creditors or subsequent purchasers.
The issue thus narrows down to the applicable statutory provisions regarding boats and the trustee’s rights as a creditor under § 544(a). Chapter 371, Fla.Stat., contains these provisions. Section 371.81 is a provision comparable to Section 319.27(2) and provides that no prior lien is valid against creditors or subsequent purchasers unless notice of such lien has been recorded. However, there is no provision comparable to the motor vehicle section (§ 319.22) which protects creditors or purchasers against pri- or transfers. As a result, the regulatory statutes with respect to boats protect creditors or subsequent purchasers only against prior liens and not prior conveyances.
Here, the matter involved was the prior transfer of a boat. Creditors are not protected from any failure to record or to cause the issuance of a certificate, hence the Trustee has no superior rights to the boat under § 544(a).
*58Accordingly, title to the motor and trailer, as well as the boat, having been transferred by the debtors to Mr. Branch in May of 1978, such items of personalty did not become property of the estate pursuant to § 541 and the Trustee, as aforestated, has no rights with respect thereto under § 544(a).
Order shall issue in accordance herewith. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8490148/ | ORDER ON DEFENDANT’S MOTIONS
THOMAS C. BRITTON, Bankruptcy Judge.
Defendant’s motion for an indefinite continuance of this proceeding scheduled to be tried on November 5 was filed on October 15. The motion is denied.
On the same day, defendant submitted ten interrogatories to the plaintiff to be answered within 30 days. This matter will be tried and decided within 18 days. Therefore, plaintiff may disregard the interrogatories and defendant may make these inquiries during the course of a deposition.
In view of movant’s allegations, a further comment is appropriate.
This complaint seeks the avoidance of five alleged preferential payments by check within 90 days before bankruptcy. The action is purely statutory and the circumstances pertinent to the several defenses available to the action lie peculiarly within the knowledge and control of the defendant. Service was made on September 26 not only on the defendant, but also on his present attorney. Counsel has furnished no good reason why defendant could not be ready for trial within the 40 days allocated in this instance.
The fact is brought to my attention that counsel elected to request a court file be sent to Palm Beach for his examination. The clerk received his request on Friday and had the file available for him Monday morning when she was told that he would be out of the office for seven days. The clerk’s handling of this courtesy service furnishes no excuse for counsel who could have sent someone to Miami to examine the file and return with the information within one day.
Counsel who plans a vacation should not accept employment to defend an action which he can defend only if trial is continued.
Counsel sees no reason for urgency in resolving this matter. In accordance with the requirements of bankruptcy rules, when the complaint was filed, a trial date was set and this court’s time was allocated for the trial of this matter. A continuance would waste the time allocated and would put an unnecessary burden on a future trial calendar allocated to other matters, including those not yet filed. For ten years this court and many other bankruptcy courts have routinely resolved actions like this one within 30 to 40 days after they were filed without any disadvantage to the *105litigants. Of the several thousand such actions so disposed, there has not been one in which, to my knowledge, any party has claimed to have been prejudiced by the promptness with which the matter was tried.
In every commercial transaction, time is a critical factor and delay always .hurts someone and usually benefits someone else. A constant criticism of courts is that they move too slowly. Bankruptcy courts were provided in large part for the express purpose of eliminating unnecessary delay in the resolution of commercial disputes. I know of no reason why that purpose cannot be achieved, but it cannot be achieved if this court grants nonessential continuances. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8490149/ | MEMORANDUM DECISION
THOMAS C. BRITTON, Bankruptcy Judge.
The trustee seeks judgment for $6,108 against Leonard Vono based upon the avoidance of a bulk sale pursuant to 11 U.S.C. § 544(b) and Florida Statutes Ch. 676. The matter was tried on October 15.
The debtor operated a retail jewelry business next door to the defendant. In August, 1984 the debtor sold substantially all of its inventory and some equipment to the defendant for $5,108 and $1,000 respectively. It is undisputed that the sale was not in compliance with the Uniform Commercial Code-Bulk Transfers, Fla.Stat. Ch. 676.
U.C.C. § 6-104(1), Fla.Stat. § 676.104(1) provides:
“Except as provided with respect to auction sales (S.676.108), a bulk transfer subject to this Chapter is ineffective against any creditor of the transferor
The defendant’s position is that failure to comply with this law raises only a rebut-table presumption of fraud which can be overcome by contrary evidence. I disagree.
I have not overlooked the case cited by defendant in support of its position. The court in Wasserburg v. Coastal Alu*127minum Products Construction Co., 167 So.2d 889, 890 (Fla.Dist.Ct.App.1964) reached its conclusion as to the effect of a purchaser’s failure to comply with the bulk sales law in reference to Fla.Stat. § 726.-04, which has since been repealed. In Merit Clothing Co. v. Lees, 218 So.2d 779, 781 (Fla.Dist.Ct.App.1969) the court drew specific attention to the repeal of Fla.Stat. §§ 726.01-726.06 and the adoption of the U.C.C. in Florida, effective January 1,1967. In Merit, as in Wasserburg, the former law governed the transaction. In Wasserburg, at 891, the distinction was clearly drawn between the presumption of fraud under the former law as it existed then in Florida and the law in other states where the effect of non-compliance with bulk transfer statutes raises a conclusive presumption of fraud:
“Non-compliance with these statutes, even in the face of a showing of good faith, makes the transaction void.”
The language in the current Florida statute that the non-complying bulk transfer is ineffective against any creditor of the transferor is conclusive. Therefore, it is not necessary to consider defendant’s version of the facts regarding its intention and the debtor’s purported emergency need for cash. A bulk sale transferee’s good faith is no defense and strict accountability for the transferred goods is imposed. Murdock v. Plymouth Enterprises, Inc. (In re Curtina International, Inc.), 23 B.R. 969, 980 (Bankr.S.D.N.Y.1982).
Under § 544(b), the trustee may avoid any transfer that is voidable under applicable state law by a creditor. Accordingly, this transfer in violation of Fla.Stat. § 676.104(1) is ineffective against the trustee. In re Rome Furniture Mart, Inc., 20 U.C.C.Rep. 1009, 1011 (N.D.Ga.1976).
The court in Murdock at 979 set forth the measure of damages:
“the transferee ... will be liable to the creditors to the extent of the fair value of the goods disposed of or converted by the transferee ... Section 550 of the Bankruptcy Code similarly allows the trustee to recover the value of the property transferred.”
It follows that the trustee is entitled to recover from the defendant the sum of $6,108 which is the fair value of the transferred goods. As is required by B.R. 9021(a), judgment will be entered in accordance with this memorandum decision. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482777/ | USCA11 Case: 21-14056 Date Filed: 11/10/2022 Page: 1 of 8
[DO NOT PUBLISH]
In the
United States Court of Appeals
For the Eleventh Circuit
____________________
No. 21-14056
Non-Argument Calendar
____________________
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
BRIAN KEITH MORROW,
Defendant-Appellant.
____________________
Appeal from the United States District Court
for the Southern District of Florida
D.C. Docket No. 1:21-cr-20057-CMA-1
____________________
USCA11 Case: 21-14056 Date Filed: 11/10/2022 Page: 2 of 8
2 Opinion of the Court 21-14056
Before ROSENBAUM, BRANCH, and GRANT, Circuit Judges.
PER CURIAM:
After a jury trial, Brian Morrow was convicted of one count
of knowingly using one or more unauthorized access devices with
intent to defraud, see 18 U.S.C. § 1029(a)(2), and sentenced to 41
months of imprisonment. The trial evidence showed that Morrow
used four debit cards issued in the names of others to withdraw
funds that were deposited from fraudulent unemployment claims.
At sentencing, the district court calculated an intended loss of
$284,739, using the maximum payable benefit amount for each of
the fifty-six fraudulent unemployment claims that had been config-
ured to send payments to the four debit cards. On appeal, Morrow
contends that the court’s loss determination was pure speculation
and that the amount was closer to $26,000. He also argues that his
sentence was unduly harsh because he was a first-time offender.
After careful review, we affirm.
I.
We review for clear error the district court’s determination
of the amount of loss attributable to a defendant. United States v.
Cavallo, 790 F.3d 1202, 1232 (11th Cir. 2015). To hold that a factual
finding is clearly erroneous, we must be convinced that the court
made a mistake. United States v. Chalker, 966 F.3d 1177, 1194 (11th
Cir. 2020). A loss finding based on a reasonable construction of the
USCA11 Case: 21-14056 Date Filed: 11/10/2022 Page: 3 of 8
21-14056 Opinion of the Court 3
evidence is not clearly erroneous. United States v. Almedina, 686
F.3d 1312, 1315 (11th Cir. 2012).
The guideline for fraud offenses, U.S.S.G. § 2B1.1, calls for
an increase in the offense level of up to 30 levels based on the extent
of loss. See U.S.S.G. § 2B1.1(b)(1). Loss is defined as “the greater
of actual loss or intended loss.” Id. § 2B1.1, cmt. n.3(A). Actual loss
is “the reasonably foreseeable pecuniary harm that resulted from
the offense.” Id., cmt. n.3(A)(i). Intended loss is “pecuniary harm
that the defendant purposely sought to inflict,” including “intended
pecuniary harm that would have been impossible or unlikely to oc-
cur.” Id., cmt. n.3(A)(ii). The guidelines do not require a precise
determination of loss, and the sentencing court may make a rea-
sonable estimate. Id., cmt. n.3(C).
When the loss amount is disputed, the government has the
burden of proving by a preponderance of the evidence the losses
attributable to the defendant. Cavallo, 790 F.3d at 1232. It must
meet that burden with reliable and specific evidence, which can in-
clude evidence at trial, undisputed statements in the presentence
investigation report, or evidence presented at sentencing. United
States v. Baldwin, 774 F.3d 711, 727 (11th Cir. 2014); United States
v. Bradley, 644 F.3d 1213, 1290 (11th Cir. 2011). While the district
court may make a reasonable estimate of loss, and may make infer-
ences based on circumstantial evidence, it “must not speculate con-
cerning the existence of a fact which would permit a more severe
sentence under the guidelines.” Bradley, 644 F.3d at 1290 (quota-
tion marks omitted).
USCA11 Case: 21-14056 Date Filed: 11/10/2022 Page: 4 of 8
4 Opinion of the Court 21-14056
Here, the district court did not clearly err in determining a
loss amount of $284,739 at sentencing, which triggered a 12-level
increase to the offense level. See U.S.S.G. § 2B1.1(b)(1)(G). The
evidence presented at trial and at sentencing established that Mor-
row used four debit cards issued in the names of victims of identity
theft to withdraw fraudulently obtained unemployment benefits.
The cards were used for a total of $26,000 in withdrawals or at-
tempted withdrawals. Surveillance footage recovered of the with-
drawals showed Morrow, and only Morrow, withdrawing a total
of about $2,000 using the four debit cards on various occasions at
ATMs between November 2018 and March 2019. A total of fifty-
six fraudulent unemployment claims were configured to funnel
benefits to the accounts connected to the four debit cards used by
Morrow. The maximum total amount payable by South Carolina
on the fifty-six claims was $284,739, according to the formula used
by the state to calculate unemployment benefits for each claim.
Viewed as a whole, these facts reasonably support the district
court’s finding that the intended loss of Morrow’s conduct was
more than $250,000.
Morrow’s arguments to the contrary miss the mark. The
district court properly used the maximum payable benefits for each
claim to measure intended loss in this case, even if Morrow re-
ceived much less than that amount. Indeed, we have explained
that “when a sentencing court is determining the proper punish-
ment for a defendant’s fraud, the court uses the reasonable
USCA11 Case: 21-14056 Date Filed: 11/10/2022 Page: 5 of 8
21-14056 Opinion of the Court 5
mathematical limit of his scheme, rather than his concrete result.”
United States v. Patterson, 595 F.3d 1324, 1328 (11th Cir. 2010).
Nor was the court limited to calculating one fraudulent
claim per debit card, as Morrow suggests, when the evidence es-
tablished that a total of fifty-six fraudulent claims were being fun-
neled to those four cards. That Morrow may not have known the
precise number of fraudulent claims attached to each card does not
prevent holding him accountable for those claims based on his
knowing use of the unauthorized debit cards with intent to de-
fraud. Cf. U.S.S.G. § 1B1.3, cmt. n.4(A) (“[A] defendant who trans-
ports a suitcase knowing that it contains a controlled substance . . .
is accountable for the controlled substance in the suitcase regard-
less of his knowledge or lack of knowledge of the actual type or
amount of that controlled substance.”).
Morrow also asserts that the government presented “no ev-
idence” to show how it arrived at the $284,739 figure and that the
amount was “pure speculation.” We disagree. Special Agent Will
Tippens of the Department of Labor’s Office of Inspector General
testified at the sentencing hearing about the calculation of the ap-
proximately $284,739 figure. He explained that South Carolina
pays unemployment benefits for a maximum of 20 weeks per year,
with weekly benefit maximums and minimums of $326 and $42,
respectively. So according to Tippens, the maximum payable ben-
efit for each claim is the product of the weekly benefit amount,
times 20 weeks, which is the total amount of money “that would
have been available had the State not stopped it.” Tippens further
USCA11 Case: 21-14056 Date Filed: 11/10/2022 Page: 6 of 8
6 Opinion of the Court 21-14056
stated that the formula used to derive the weekly benefit amount
is “certified by law” and based on prior wages, and that the state of
South Carolina provided the maximum benefit for each of the
claims based on that formula.1
While Tippens did not receive or review the state’s underly-
ing calculations, Morrow offers no reason to doubt that the state
accurately calculated the weekly benefits for each claim or that Tip-
pens accurately compiled those figures. Nor does Morrow take is-
sue with any specific aspect of Tippens’s testimony. So despite the
lack of precise calculations in the record, we cannot say that the
district court clearly made a mistake in concluding that sufficient
evidence supported a finding that the intended loss exceeded
$250,000. We therefore affirm the court’s loss determination.
II.
We review the substantive reasonableness of a sentence un-
der a deferential abuse-of-discretion standard, considering whether
the statutory factors in 18 U.S.C. § 3553(a) support the sentence
under the totality of the circumstances. United States v. Nagel, 835
F.3d 1371, 1376 (11th Cir. 2016); United States v. Gonzalez, 550
F.3d 1319, 1324 (11th Cir. 2008).
1 We note that the state plainly did not use the absolute maximum of $326 per
week for each claim, which would have resulted in a total loss of approxi-
mately $365,000.
USCA11 Case: 21-14056 Date Filed: 11/10/2022 Page: 7 of 8
21-14056 Opinion of the Court 7
The district court must impose “a sentence sufficient, but
not greater than necessary, to comply with the purposes” listed in
18 U.S.C. § 3553(a)(2), including the need to reflect the seriousness
of the crime, promote respect for the law, provide just punishment,
deter criminal conduct, and protect the public. 18 U.S.C.
§ 3553(a)(2)(A)–(C). The weight to be given the § 3553(a) factors is
generally committed to the court’s discretion, and “we will not re-
weigh the factors.” United States v. Johnson, 803 F.3d 610, 620
(11th Cir. 2015). Ordinarily, we will vacate a sentence only if the
party challenging it convinces us that, despite the “substantial def-
erence” afforded sentencing courts, the sentence lies outside the
range of reasonable sentences dictated by the facts of the case.
United States v. Irey, 612 F.3d 1160, 1190–91 (11th Cir. 2010) (en
banc); United States v. Rosales-Bruno, 789 F.3d 1249, 1256 (11th
Cir. 2015).
Here, Morrow’s sentence is substantively reasonable. The
district court imposed a sentence at the low end of the guideline
range of 41 to 51 months, and we ordinarily expect such a sentence
to be reasonable. United States v. Stanley, 739 F.3d 633, 656 (11th
Cir. 2014). Nothing in the record suggests that this case is an ex-
traordinary one where a low-end guideline sentence is unreasona-
ble. The court explained that, in imposing the 41-month sentence,
it had considered Morrow’s history and characteristics as set forth
in the PSR and the sentencing memoranda, the serious nature of
the offense conduct, and the need for the sentence to promote re-
spect for the law and to deter both Morrow and others. Thus, the
USCA11 Case: 21-14056 Date Filed: 11/10/2022 Page: 8 of 8
8 Opinion of the Court 21-14056
record shows that the court weighed Morrow’s lack of criminal his-
tory against the serious nature of the offense conduct and other
sentencing needs, and it found that a guideline sentence was appro-
priate. These balancing decisions were squarely within the district
court’s discretion, and Morrow has not shown that the court made
a clear error of judgment. See Irey, 612 F.3d at 1190–91; Johnson,
803 F.3d at 620. We affirm his sentence.
AFFIRMED. | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482782/ | Third District Court of Appeal
State of Florida
Opinion filed November 10, 2022.
Not final until disposition of timely filed motion for rehearing.
________________
No. 3D21-1968
Lower Tribunal No. 20-9490
________________
Yarelys Ibarra,
Appellant,
vs.
Ross Dress for Less, Inc., etc.,
Appellee.
An Appeal from the Circuit Court for Miami-Dade County, Charles K.
Johnson, Judge.
Best & Menendez, Virginia M. Best and Johanna M. Menendez, for
appellant.
Gaebe, Mullen, Antonelli & DiMatteo, Emily C. Smith and Miriam R.
Merlo, for appellee.
Before EMAS, GORDO and BOKOR, JJ.
GORDO, J.
Yarelys Ibarra appeals a trial court order granting final summary
judgment in favor of Ross Dress For Less, Inc. (“Ross”). We have
jurisdiction. Fla. R. App. P. 9.030(b)(1)(A). Because Ibarra fails to
demonstrate any genuine dispute of material fact, we affirm.
FACTUAL AND PROCEDURAL BACKGROUND
On November 9, 2019, Ibarra was shopping in a Ross store in Coral
Gables, Florida. At approximately 5:29PM, Ibarra was hit by Maria Rosario’s
shopping cart. Rosario was a Ross employee, who came into the store
before her shift to shop. At the time of the incident, she was wearing her
work clothes and employee badge but was not scheduled to start work until
6:00PM. Rosario clocked in for work at 5:58PM.
On May 1, 2020, Ibarra filed a complaint for damages against Ross
alleging it breached its duty of care under the doctrine of respondeat superior
when Rosario pushed the loaded shopping cart into her. Ross filed its
answer and affirmative defenses. Ibarra filed a reply. On April 29, 2021,
Ross filed a motion for summary judgment arguing it could not be held liable
as the record clearly showed Rosario was off duty at the time the incident
occurred.
In June 2021, Ibarra filed a response and memorandum in opposition
to the motion for summary judgment arguing there was a genuine dispute of
2
material fact over whether Rosario was acting as an employee of Ross when
the incident occurred because Rosario was wearing her work clothes and
badge and her shopping cart was full. The trial court held a hearing on the
motion on July 16, 2021. The trial court subsequently entered an order
granting Ross’ motion for summary judgment and final summary judgment
finding there was no genuine dispute that Rosario was not working as a Ross
employee when the incident occurred and therefore Ross was not liable for
Ibarra’s injuries under the doctrine of respondeat superior. This appeal
followed.
STANDARD OF REVIEW
“The standard of review on orders granting final summary judgment is
de novo.” Orozco v. McCormick 105, LLC, 276 So. 3d 932, 935 (Fla. 3d
DCA 2019). As the hearing on Ross’ motion for summary judgment was held
on July 16, 2021, the new summary judgment standard applies. See In re
Amends. to Fla. R. of Civ. P. 1.510, 317 So. 3d 72, 77 (Fla. 2021) (stating
the effective date of the new rule is May 1, 2021, and the amendments shall
“govern the adjudication of any summary judgment motion decided on or
after that date”).
3
LEGAL ANALYSIS
Summary judgment is appropriate where the “movant shows that there
is no genuine dispute as to any material fact and the movant is entitled to
judgment as a matter of law.” Fla. R. Civ. P. 1.510(a). Genuine disputes are
those in which “the evidence is such that a reasonable jury could return a
verdict for the nonmoving party.” In re Amends. to Fla. R. of Civ. P. 1.510,
309 So. 3d 192, 194 (Fla. 2020) (quoting Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 248 (1986)). “If the evidence is merely colorable, or is not
significantly probative, summary judgment may be granted.” Id. (quoting
Anderson, 477 U.S. at 249–50 (citations omitted)).
The doctrine of respondeat superior provides that “an employer cannot
be held liable for the tortious or criminal acts of an employee, unless the acts
were committed during the course of the employment and to further a
purpose or interest, however excessive or misguided, of the employer.”
Iglesia Cristiana La Casa Del Senor, Inc. v. L.M., 783 So. 2d 353, 356 (Fla.
3d DCA 2001). “An employee’s conduct is within the scope of his
employment, where (1) the conduct is of the kind he was employed to
perform, (2) the conduct occurs substantially within the time and space limits
authorized or required by the work to be performed, and (3) the conduct is
activated at least in part by a purpose to serve the master.” Id. (citing
4
Sussman v. Fla. E. Coast Props., Inc., 557 So. 2d 74, 75–76 (Fla. 3d DCA
1990)). Ibarra asserts the trial court improperly entered summary judgment
in Ross’ favor because there was a genuine dispute of material fact whether
Rosario was acting on behalf of Ross when the incident occurred.
The Florida Supreme Court has emphasized that one “of the principal
purposes of the summary judgment rule is to isolate and dispose of factually
unsupported claims or defenses.” In re Amends. to Fla. R. of Civ. P. 1.510,
309 So. 3d 192, 194 (Fla. 2020) (quoting Celotex Corp. v. Catrett, 477 U.S.
317, 327 (1986)). Under the new summary judgment rule, “[w]hen opposing
parties tell two different stories, one of which is blatantly contradicted by the
record, so that no reasonable jury could believe it, a court should not adopt
that version of the facts for purposes of ruling on a motion for summary
judgment.” Scott v. Harris, 550 U.S. 372, 380 (2007). As such, when
contesting a motion for summary judgment, an opposing party “must do more
than simply show that there is some metaphysical doubt as to the material
facts.” In re Amends. to Fla. R. of Civ. P. 1.510, 309 So. 3d at 193 (quoting
Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586
(1986)).
Here, Ibarra fails to demonstrate more than some metaphysical doubt
as to the material facts. Based on the record evidence produced through
5
depositions, testimony and affidavits no genuine dispute of material fact
exists that Rosario was not on duty or acting on Ross’ behalf when the
incident occurred. While Ibarra asserts several arguments to the contrary,
none are significantly probative or supported by the evidence. Accordingly,
based on the record evidence, we find the trial court properly awarded Ross
summary judgment.
Affirmed.
6 | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482778/ | USCA11 Case: 21-14490 Date Filed: 11/10/2022 Page: 1 of 12
[DO NOT PUBLISH]
In the
United States Court of Appeals
For the Eleventh Circuit
____________________
No. 21-14490
Non-Argument Calendar
____________________
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
THELRON DEBRAY COLEMAN,
Defendant-Appellant.
____________________
Appeal from the United States District Court
for the Middle District of Georgia
D.C. Docket No. 5:94-cr-00004-HL-CHW-1
____________________
USCA11 Case: 21-14490 Date Filed: 11/10/2022 Page: 2 of 12
2 Opinion of the Court 21-14490
Before NEWSOM, GRANT, and HULL, Circuit Judges.
PER CURIAM:
Thelron Debray Coleman, a federal prisoner serving a life
sentence for possessing a firearm as a felon, appeals the denial of
his motion for compassionate release under 18 U.S.C.
§ 3582(c)(1)(A). On appeal, Coleman argues that the district court
abused its discretion and erred by denying his motion because
(1) he had ongoing medical conditions that produced
complications in conjunction with the COVID-19 pandemic; (2) his
sentence produced an unwarranted sentencing disparity; (3) the
district court did not sufficiently analyze whether he was a danger
to the community; and (4) the district court was unclear as to
whether it was foreclosing all forms of relief or just foreclosing his
request for home confinement. After careful review, we affirm the
district court’s denial of Coleman’s motion for compassionate
release.
I. FACTS
We recount the facts underlying Coleman’s sentence and his
request for compassionate release.
A. Life Imprisonment Sentence
In February 1993, Coleman escaped from state custody
while serving a 20-year sentence for armed robbery, obstruction of
a police officer, and possession of a firearm by a convicted felon.
During his escape, Coleman stole a car that contained a firearm.
USCA11 Case: 21-14490 Date Filed: 11/10/2022 Page: 3 of 12
21-14490 Opinion of the Court 3
The police engaged in a high-speed chase but later ceased pursuit
when it became too dangerous. Coleman eventually abandoned
the initial car and stole a second car. The next day, the police
located Coleman and arrested him without incident.
In January 1994, a federal grand jury charged Coleman with
one count of possession of a firearm by a convicted felon. Later, a
superseding indictment added two counts of carjacking and two
counts of using a firearm during a carjacking.
Meanwhile, in May 1994, Coleman escaped from federal
custody. Coleman initially stole five cars: (1) a truck near the jail;
(2) a car from an elderly woman at a gas station; (3) a car from a
high school student; and (4) two cars from men who said Coleman
brandished a gun to further the thefts. At first, Coleman denied
having a gun but later admitted to using one. The police found and
pursued Coleman, causing him to wreck the fifth car. The police
continued pursuit on foot. One officer fired his weapon at
Coleman but missed. Coleman got away and stole a sixth car.
Eventually, the police apprehended him in Tennessee, and he was
returned to federal custody.
In June 1994, Coleman escaped again. This time, Coleman
stole a truck. Two days later, the police located him. Coleman led
the police on a high-speed chase before wrecking the vehicle and
attempting to flee on foot. Eventually, the police apprehended
Coleman and returned him to federal custody once again.
USCA11 Case: 21-14490 Date Filed: 11/10/2022 Page: 4 of 12
4 Opinion of the Court 21-14490
In April 1995, Coleman pleaded guilty to the first count in
exchange for dismissal of the remaining four counts. Coleman’s
initial advisory guidelines range was 235 to 293 months’
imprisonment.
Based on the events surrounding Coleman’s escapes, the
government asked for an upward departure. The district court
granted that request. Coleman’s new advisory guidelines range
was 360 months to life imprisonment. In August 1995, the district
court sentenced Coleman to life imprisonment without parole.
In March 1997, this Court affirmed Coleman’s conviction
and sentence. See United States v. Coleman, 111 F.3d 896 (11th
Cir. 1997) (unpublished table decision). Coleman’s post-conviction
motions to vacate his sentence were unsuccessful.
B. Motion for Compassionate Release
In April 2020, Coleman, proceeding pro se, moved for
compassionate release. The district court appointed him counsel.
In March 2021, with the assistance of counsel, Coleman filed
a memorandum in support of his motion for compassionate
release. Coleman argued that his underlying medical conditions—
hypertension, hyperlipidemia, kidney disease, and pre-diabetes—
substantially diminished his ability to provide self-care in prison.
Additionally, Coleman argued that (1) he was not a danger
to the community and (2) the § 3553(a) factors supported a
sentence reduction. Specifically, Coleman claimed he was not a
danger because he had not harmed anyone and had rehabilitated
USCA11 Case: 21-14490 Date Filed: 11/10/2022 Page: 5 of 12
21-14490 Opinion of the Court 5
himself in prison. He also claimed that his sentence was “vastly
disproportionate to a typical sentence” for felon in possession of a
firearm.
In response, the government opposed the motion. First, the
government conceded that Coleman had shown an extraordinary
and compelling reason to justify compassionate release.
Specifically, the government acknowledged that Coleman’s
chronic kidney disease placed him at an increased risk of severe
illness from COVID-19 and that “Coleman’s ability to provide
self-care against serious injury or death as a result of COVID-19
[was] substantially diminished, within the environment of a
correctional facility, by the chronic condition itself.”
However, the government urged the district court to deny
Coleman’s motion based on Coleman’s danger to the community
and the § 3553(a) factors. The government contended that
Coleman was a “clear danger to the community.” The
government explained that Coleman’s extensive criminal history
“demonstrate[d] his lack of respect for the law and unwillingness
or inability to be a law-abiding citizen.” It further noted that
imprisonment followed by parole or probation has not deterred
Coleman’s criminal behavior. Instead, Coleman’s criminal
conduct only further escalated, with him committing new felonies
and escaping custody three times.
As to the § 3553(a) factors, the government argued that the
seriousness of the underlying crime and Coleman’s criminal
history do not support a sentence reduction. The government
USCA11 Case: 21-14490 Date Filed: 11/10/2022 Page: 6 of 12
6 Opinion of the Court 21-14490
asked the district court to “respect the sentencing court’s careful
weighing of the § 3553(a) factors and preserve his sentence.”
C. District Court’s Order
In a December 2021 order, the district court denied
Coleman’s motion for compassionate release. The district court
explained that in reaching its decision, it had considered:
(1) Coleman’s medical records from the Bureau of Prisons; (2) the
information contained in the parties’ submissions; and (3) the
applicable factors in 18 U.S.C. § 3553(a)—specifically the nature and
circumstances of the offense and the need to avoid an unwarranted
sentencing disparity.
The district court found that the medical records from the
Bureau of Prisons confirmed: (1) Coleman was actively receiving
medical treatment for his four medical conditions and that
treatment was controlling his medical issues; and (2) Coleman was
able to perform daily tasks of self-care, such as caring for personal
hygiene and taking medication without assistance. The district
court also noted that in March 2021 Coleman (1) contracted
COVID-19 and recovered and (2) refused the COVID-19 vaccine.
Further, the district court noted that (1) the instant offense
happened while Coleman had escaped custody and involved an
additional offense of carjacking and (2) Coleman continued his
criminal behavior by escaping custody several more times and
committing violent crimes, such as carjackings.
USCA11 Case: 21-14490 Date Filed: 11/10/2022 Page: 7 of 12
21-14490 Opinion of the Court 7
The district court concluded that Coleman “ha[d] not
provided ‘extraordinary and compelling’ reasons to warrant the
[c]ourt ordering a compassionate release in this case.”
Alternatively, the district court “note[d] for the record that
[Coleman was] a danger to the community” and thus it “would not
order [Coleman’s] release even if ‘extraordinary and compelling’
reasons for grant[ing] a compassionate release were identified.”
Coleman appeals the district court’s denial of his motion for
compassionate release.
II. STANDARD OF REVIEW
We review an order denying compassionate release for
abuse of discretion. United States v. Harris, 989 F.3d 908, 911 (11th
Cir. 2021). “A district court abuses its discretion if it applies an
incorrect legal standard, follows improper procedures in making
the determination, or makes findings of fact that are clearly
erroneous.” Id. It also abuses its discretion by “commit[ting] a
clear error of judgment.” Id. at 912.
III. DISCUSSION
A. General Principles
A district court has no inherent authority to modify a
defendant’s sentence but may do so to the extent permitted by
statute or rule. United States v. Puentes, 803 F.3d 597, 605–06 (11th
Cir. 2015). Section 3582(c)(1)(A) authorizes a district court to
reduce a term of imprisonment “after considering the factors set
forth in section 3553(a)” if it finds that (1) “extraordinary and
USCA11 Case: 21-14490 Date Filed: 11/10/2022 Page: 8 of 12
8 Opinion of the Court 21-14490
compelling reasons warrant such a reduction” and (2) “such a
reduction is consistent with applicable policy statements issued by
the Sentencing Commission.” 18 U.S.C. § 3582(c)(1)(A)(i). 1
The applicable policy statement for § 3582(c)(1)(A) is found
in § 1B1.13 of the Sentencing Guidelines. See U.S.S.G. § 1B1.13.
Specifically, § 1B1.13 notes that a district court may reduce a
sentence if, after considering any applicable § 3553(a) factors, the
district court determines that three elements are met:
(1) extraordinary and compelling reasons warrant the reduction;
(2) the defendant is not a danger to the safety of others or to the
community, as provided in 18 U.S.C. § 3142(g); and (3) the
reduction is consistent with the policy statement within § 1B1.13.
Id.
As to the first element, this Court concluded that a district
court may not reduce a sentence unless a reduction would be
consistent with § 1B1.13’s definition of extraordinary and
compelling reasons. See United States v. Bryant, 996 F.3d 1243,
1252–62 (11th Cir. 2021), cert. denied, 142 S. Ct. 583 (2021). The
application notes to § 1B1.13 list these four categories of
“extraordinary and compelling reasons”: (A) the defendant’s
medical condition, (B) his age, (C) his family circumstances, and
(D) “Other Reasons.” U.S.S.G. § 1B1.13 cmt. n.1(A)–(D).
1 The statute also authorizes an age-based sentence reduction, which is not at
issue here. See 18 U.S.C. § 3582(c)(1)(A)(ii).
USCA11 Case: 21-14490 Date Filed: 11/10/2022 Page: 9 of 12
21-14490 Opinion of the Court 9
B. Analysis
The district court denied Coleman’s motion for
compassionate release for two reasons: (1) Coleman had failed to
show “extraordinary and compelling reasons” for his release; and
(2) alternatively, Coleman was a danger to the community. We
affirm both findings.
As to the first reason, Coleman argued that his diagnosed
medical conditions, coupled with the COVID-19 pandemic,
qualified as an extraordinary and compelling reason to grant him
compassionate release. For a defendant’s medical condition to
constitute an extraordinary and compelling reason, the defendant
must be currently suffering from either (i) a terminal illness or (ii) a
serious condition or impairment that substantially diminishes his
ability to provide self-care in prison and from which he is not
expected to recover. U.S.S.G. § 1B1.13 cmt. n.1(A).
Coleman did not contend that he had a medical condition
that was terminal. Instead, he argued that because of his medical
conditions, he was at a higher risk of more serious complications,
including death, if he were to contract COVID-19.
But as the district court noted, in March 2021 Coleman
(1) contracted COVID-19 and recovered and (2) refused the
COVID-19 vaccine. The district court further found Coleman was
able to perform daily tasks of self-care, such as caring for personal
hygiene and taking medication without assistance. In addition, the
district court reviewed Coleman’s medical records from the
USCA11 Case: 21-14490 Date Filed: 11/10/2022 Page: 10 of 12
10 Opinion of the Court 21-14490
Bureau of Prisons and said those records confirmed Coleman was
actively receiving medical treatment that was controlling his
conditions. In sum, Coleman failed to demonstrate that the district
court abused its discretion in concluding that he failed to show his
medical conditions qualified as an extraordinary and compelling
reason. See, e.g., United States v. Giron, 15 F.4th 1343, 1346–47
(11th Cir. 2021) (upholding the denial of compassionate release
where the movant suffered from high cholesterol, high blood
pressure, and coronary artery disease because those conditions
were manageable in prison and did not meet the categories in
U.S.S.G. § 1B1.13’s application note 1(A)).
To the extent Coleman argued that a potential future
contraction of COVID-19 alone is an extraordinary and compelling
reason, that argument lacks merit. Such an argument, at best, falls
within subsection (D)—the “catch all” provision of § 1B1.13’s
definition of “extraordinary and compelling reasons.” Subsection
(D) provides that a prisoner may be eligible for relief if, “[a]s
determined by the Director of the Bureau of Prisons, there exists in
the defendant’s case an extraordinary and compelling reason other
than, or in combination with, the reasons described in subsections
(A) through (C).” U.S.S.G. § 1B1.13 cmt. n.1(D) (emphasis added).
In Bryant, this Court concluded that this “catch all” provision does
not grant to district courts the discretion to develop other reasons
outside those listed in § 1B1.13 that might justify a reduction in a
defendant’s sentence. 996 F.3d at 1248, 1263, 1265. Instead, those
USCA11 Case: 21-14490 Date Filed: 11/10/2022 Page: 11 of 12
21-14490 Opinion of the Court 11
“other reasons” must be determined by the Director of the Bureau
of Prisons. Id. at 1264–65.
That Coleman has not shown an extraordinary and
compelling reason is enough, in and of itself, to foreclose a sentence
reduction under § 3582(c)(1)(A). See United States v. Tinker, 14
F.4th 1234, 1237–38 (11th Cir. 2021) (explaining that an
“extraordinary and compelling” circumstance is a necessary
condition for a sentence reduction under § 3582(c)(1)(A)).
Nonetheless, we discuss the district court’s alternative
finding as well. As noted above, § 1B1.13 requires that the district
court determine that the defendant is not a danger to the safety of
others or to the community, as provided in 18 U.S.C. § 3142(g), 2
for it to grant a motion for compassionate release. U.S.S.G.
§ 1B1.13(2).
We conclude the district court did not abuse its discretion in
finding that Coleman is a danger to the safety of the community.
2 Section 3142(g) lists several factors for the district court to consider in
determining whether a defendant is a danger to another person or the
community, including (1) the nature and circumstances of the offense charged,
including whether the offense involved a firearm; (2) the weight of the
evidence against the person; (3) the history and characteristics of the person,
including their criminal history and whether, at the time of the current offense
or arrest, the person was on probation, on parole, or on other release pending
trial, sentencing, appeal, or completion of sentence for an offense; and (4) the
nature and seriousness of the danger to any person or the community that
would be posed by the person’s release. 18 U.S.C. § 3142(g)(1)–(4).
USCA11 Case: 21-14490 Date Filed: 11/10/2022 Page: 12 of 12
12 Opinion of the Court 21-14490
The district court stressed Coleman’s firearm offense had occurred
while he “was in escape status” and involved a carjacking. The
district court also cited Coleman’s history of escapes and violent
criminal behavior, including multiple carjackings.
Coleman contends the district court failed to consider the
§ 3142(g) factors or provide sufficient reasoning to allow for
meaningful appellate review. Although the district court did not
explicitly reference § 3142(g), the district court clearly stated it had
“carefully and completely reviewed and considered the
information submitted in defense and government
motions/responses.” In the government’s response brief before
the district court, the government set out the § 3142(g) factors and
discussed in great detail how they demonstrated Coleman is a
danger to the safety of others and the community. Further, the
district court referred to facts that implicated at least two of the
§ 3142(g) factors, including the nature and circumstances of
Coleman’s charged offense and his history and characteristics.
Therefore, contrary to Coleman’s contention, the district court
adequately explained its reasoning and considered § 3142(g) in
reaching its conclusion about dangerousness.
IV. CONCLUSION
We affirm the district court’s denial of Coleman’s motion
for compassionate release.
AFFIRMED. | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482779/ | USCA11 Case: 22-11598 Date Filed: 11/10/2022 Page: 1 of 10
[DO NOT PUBLISH]
In the
United States Court of Appeals
For the Eleventh Circuit
____________________
No. 22-11598
Non-Argument Calendar
____________________
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
ALVIN CHRISTOPHER HAMILTON, JR.,
a.k.a. Bird,
Defendant-Appellant.
____________________
Appeal from the United States District Court
for the Southern District of Georgia
D.C. Docket No. 6:12-cr-00001-JRH-CLR-10
USCA11 Case: 22-11598 Date Filed: 11/10/2022 Page: 2 of 10
2 Opinion of the Court 22-11598
____________________
Before ROSENBAUM, GRANT, and ANDERSON, Circuit Judges.
PER CURIAM:
Alvin Hamilton, a federal prisoner proceeding pro se, ap-
peals the district court’s denial of his motion for a sentence reduc-
tion, which asserted that he was entitled to relief based on both
“extraordinary and compelling reasons” and a retroactive amend-
ment to the Sentencing Guidelines. See 18 U.S.C. § 3582(c)(1)(A),
(c)(2). After careful review, we affirm.
I.
In 2012, Hamilton pled guilty to and was convicted of con-
spiracy to distribute and possess with intent to distribute cocaine
hydrochloride and 28 grams or more of cocaine base. The district
court sentenced him under the career-offender guideline, U.S.S.G.
§ 4B1.1, finding that the conspiracy offense was a felony controlled-
substance offense and that he had at least two prior such convic-
tions. Based on the career-offender enhancement, Hamilton’s
guideline range was 188 to 235 months of imprisonment, and the
court sentenced him to 225 months.
In February 2022, Hamilton filed a motion for a sentence re-
duction on two grounds under § 3582(c) and also requested
USCA11 Case: 22-11598 Date Filed: 11/10/2022 Page: 3 of 10
22-11598 Opinion of the Court 3
appointment of counsel. 1 First, he argued that extraordinary and
compelling reasons qualified him for early release under
§ 3582(c)(1)(A). In his view, such reasons included post-sentencing
changes in the law which, he said, rendered his drug-conspiracy
conviction not a controlled-substance offense and meant he was no
longer a career offender. 2 He also claimed that a medical condi-
tion—low white blood-cell count—increased his risk of severe ill-
ness from Covid-19. And second, he contended that, because he
was no longer a career offender, relief was also available under
§ 3582(c)(2) based on Amendment 782.
The government opposed Hamilton’s motion. In the gov-
ernment’s view, Hamilton did not establish extraordinary and
compelling grounds for release, and early release was not war-
ranted under the 18 U.S.C. § 3553(a) sentencing factors. Hamilton
replied, making similar arguments as before.
1 Hamilton filed two other sentence-reduction motions, in 2014 and 2019,
which the district court denied. According to Hamilton, his 2014 motion
based on Amendment 782 was denied because he was a career offender, and
his 2019 motion based on § 404 of the First Step Act was denied because he
was sentenced after passage of the Fair Sentencing Act.
2 Notably, we recently reheard an appeal en banc presenting this issue. See
United States v. Dupree, No. 19-13776 (memorandum dated March 2, 2022).
Because we hold that the court here did not err in denying Hamilton’s motion,
even assuming he is correct about his career-offender status under current law,
the resolution of Dupree will not affect the outcome of this appeal.
USCA11 Case: 22-11598 Date Filed: 11/10/2022 Page: 4 of 10
4 Opinion of the Court 22-11598
The district court denied Hamilton relief. The court ex-
plained that Hamilton was required to show an extraordinary and
compelling reason for relief within the meaning of U.S.S.G.
§ 1B1.13, that his medical condition did not meet the policy state-
ment’s criteria, and that it was not authorized to grant compassion-
ate release based solely on a change in the law related to his career-
offender status. The court went on to determine that, even assum-
ing Hamilton was eligible, the § 3553(a) factors weighed against a
reduction. In support of that determination, the court cited Ham-
ilton’s “extensive criminal history” involving drug distribution, the
favorable sentence he originally received, and the more than six
years remaining on his sentence. Finally, the court found that any
challenge to his career-offender status was cognizable only on col-
lateral review under 28 U.S.C. § 2255. It denied as moot Hamil-
ton’s request for appointment of counsel. Hamilton now appeals.
II.
We review de novo a determination about a defendant’s el-
igibility for a § 3582(c) sentence reduction. United States v. Bryant,
996 F.3d 1243, 1251 (11th Cir. 2021). We review the denial of an
eligible prisoner’s § 3582(c) motion for an abuse of discretion. Id.;
United States v. Harris, 989 F.3d 908, 911 (11th Cir. 2021).
A.
Under § 3582(c)(1)(A), a district court may grant a defend-
ant’s request to reduce his prison term, after considering the
§ 3553(a) sentencing factors, if the reduction is supported by
USCA11 Case: 22-11598 Date Filed: 11/10/2022 Page: 5 of 10
22-11598 Opinion of the Court 5
“extraordinary and compelling reasons” and “consistent with appli-
cable policy statements” in the guidelines. 8 U.S.C.
§ 3582(c)(1)(A)(i). The applicable policy statement is found at
U.S.S.G. § 1B1.13. Bryant, 996 F.3d at 1262.
The failure to demonstrate an extraordinary and compelling
reason within the meaning of § 1B1.13 is alone sufficient to “fore-
close a sentence reduction.” United States v. Tinker, 14 F.4th 1234,
1237–38 (11th Cir. 2021). The commentary to § 1B1.13 outlines
medical, age, and family circumstances which may qualify as suffi-
ciently “extraordinary and compelling.” See U.S.S.G. § 1B1.13,
cmt. n.1(A)–(C). As relevant here, a non-terminal medical condi-
tion may be grounds for a sentence reduction if it substantially di-
minishes a prisoner’s ability to provide self-care in custody and the
prisoner is not expected to recover. Id., cmt. n.1(A). We have held
that “the confluence of [a prisoner’s] medical conditions and
COVID-19” did not constitute an extraordinary and compelling
reason warranting compassionate release where the prisoner’s
medical conditions did not meet § 1B1.13’s criteria. United States
v. Giron, 15 F.4th 1343, 1346–47 (11th Cir. 2021).
While the commentary also authorizes relief for “other rea-
sons,” U.S.S.G. § 1B1.13, cmt. n.1(D), such other reasons must be
determined by the Bureau of Prisons, not by the courts. See Bry-
ant, 996 F.3d at 1262–65. In other words, a district court lacks dis-
cretion to develop other reasons outside those listed in § 1B1.13.
Id. While Hamilton cites case law from other circuits that have
resolved this issue differently, we are bound by our prior precedent
USCA11 Case: 22-11598 Date Filed: 11/10/2022 Page: 6 of 10
6 Opinion of the Court 22-11598
binding district courts to the terms of § 1B1.13. See, e.g., United
States v. Vega-Castillo, 540 F.3d 1235, 1236 (11th Cir. 2008) (“[W]e
are bound to follow a prior binding precedent unless and until it is
overruled by this court en banc or by the Supreme Court.” (quota-
tion marks omitted)).
Here, the district court did not err in denying Hamilton’s re-
quest for a sentence reduction under § 3582(c)(1)(A). Hamilton has
not shown that his low white blood-cell count substantially dimin-
ishes his ability to provide self-care in custody within the meaning
of § 1B1.13. See U.S.S.G. § 1B1.13, cmt. n.1(A). The record reflects
that Hamilton’s condition is “manageable in prison, despite the ex-
istence of the COVID-19 pandemic.” Giron, 15 F.4th at 1346–47
(holding that a defendant’s high cholesterol, high blood pressure,
and coronary artery disease did not qualify him for early release
because they were “manageable in prison, despite the existence of
the COVID-19 pandemic”). He therefore has not established a
medical condition that meets the requirements of § 1B1.13.
Beyond his medical condition, Hamilton relies on post-sen-
tencing legal developments relating to his career-offender status.
But the district court properly declined to consider these matters
when determining whether Hamilton presented an extraordinary
and compelling reason for a sentence reduction. Because changes
in the law do not fall within any of the reasons that § 1B1.13 iden-
tifies as “extraordinary and compelling,” the district court correctly
concluded that it lacked the authority to grant a reduction based
on intervening legal changes. See Bryant, 996 F.3d at 1265.
USCA11 Case: 22-11598 Date Filed: 11/10/2022 Page: 7 of 10
22-11598 Opinion of the Court 7
Because Hamilton has not established an extraordinary and
compelling reason within the meaning of § 1B1.13, that alone is
sufficient to “foreclose a sentence reduction.” Tinker, 14 F.4th at
1237–38. As a result, we need not and do not consider whether the
district court abused its discretion by failing to consider his career-
offender status under current law or made other errors when eval-
uating the § 3553(a) factors. Any errors in that regard would be
harmless because, under our precedent, no reduction was author-
ized under § 3582(c)(1)(A).
The Supreme Court’s recent decision in Concepcion v.
United States, 142 S. Ct. 2389 (2022), does not change this analysis.
In Concepcion, the Court held that district courts may consider in-
tervening changes of law or fact when exercising their discretion to
reduce a sentence under § 404 of the First Step Act. Id. at 2404.
Even if we assume that courts likewise may consider intervening
changes of law or fact when evaluating the § 3553(a) factors for pur-
poses of exercising their discretion to reduce a sentence under
§ 3582(c)(1)(A), the result here is the same. As Concepcion itself
recognizes, Congress can “expressly cabin[] district courts’ discre-
tion by requiring courts to abide by the Sentencing Commission's
policy statements,” which it did in the case of both § 3582(c)(1)(A)
and § 3582(c)(2). Id. at 2401. And that additional limitation, we
held in Bryant, means that no reduction can be granted under
§ 3582(c)(1)(A) unless a defendant establishes an extraordinary and
compelling reason within the meaning of § 1B1.13. See Bryant, 996
F.3d at 1265.
USCA11 Case: 22-11598 Date Filed: 11/10/2022 Page: 8 of 10
8 Opinion of the Court 22-11598
Because Hamilton’s motion did not present grounds falling
within any of the reasons that § 1B1.13 identifies as “extraordinary
and compelling,” the district court properly denied his motion for
a sentence reduction under § 3582(c)(1)(A).
B.
Hamilton’s sentence-reduction motion also relied on
§ 3582(c)(2) and Amendment 782. Under § 3582(c)(2), a district
court may reduce a defendant’s prison term, after considering the
§ 3553(a) factors, if his sentencing range was lowered by a retroac-
tive amendment to the guidelines and “a reduction is consistent
with applicable policy statements” in the guidelines. 18 U.S.C.
§ 3582(c)(2).
Under the applicable policy statement, a defendant is not el-
igible for a sentence reduction if a retroactively applicable amend-
ment “does not have the effect of lowering the defendant’s applica-
ble guideline range.” U.S.S.G. § 1B1.10(a)(2)(B). So “[w]here a ret-
roactively applicable guideline amendment reduces a defendant’s
base offense level, but does not alter the sentencing range upon
which his or her sentence was based, § 3582(c)(2) does not author-
ize a reduction in sentence.” United States v. Moore, 541 F.3d 1323,
1330 (11th Cir. 2008). In other words, “a retroactive guideline
amendment does not trigger 18 U.S.C. § 3582(c)(2) when a sen-
tence was based on the career offender guideline and the amend-
ment does not alter the guideline range.” United States v. Tellis,
748 F.3d 1305, 1309 (11th Cir. 2014); United States v. Lawson, 686
F.3d 1317, 1321 (11th Cir. 2012).
USCA11 Case: 22-11598 Date Filed: 11/10/2022 Page: 9 of 10
22-11598 Opinion of the Court 9
Amendment 782 is a retroactive amendment that reduced
the base offense level for most drug offenses by two levels. See
U.S.S.G. § 1B1.10(d); U.S.S.G. App. C., Amend. 782. But Amend-
ment 782 did not make any changes to U.S.S.G. § 4B1.1, the career-
offender guideline. See U.S.S.G. App. C., Amend. 782.
Here, Hamilton’s sentence was based on the career-offender
guideline, which Amendment 782 did not alter, so he is not eligible
for a reduction in his sentence under § 3582(c)(2). See Tellis, 748
F.3d at 1309–10; Lawson, 686 F.3d at 1321. Although he also chal-
lenges the validity of his career-offender designation under current
law, his arguments on this point are outside the limited scope of a
§ 3582(c)(2) proceeding. See United States v. Bravo, 203 F.3d 778,
780–81 (11th Cir. 2000) (stating that in a § 3582(c)(2) proceeding
“only the amended guideline is changed. All other guideline appli-
cation decisions made during the original sentencing remain in-
tact.” (quotation marks omitted)); see also Dillon v. United States,
560 U.S. 817, 831 (2010) (holding that the alleged sentencing errors
that the defendant sought to correct were not affected by the appli-
cable guideline amendment and were therefore outside the scope
of the § 3582(c)(2) proceedings).
Because Hamilton was not eligible for a reduction under
§ 3582(c)(2), the district court lacked the discretion to grant relief.
III.
Finally, Hamilton moves for the appointment of counsel on
appeal, and he likewise requested appointment of counsel before
USCA11 Case: 22-11598 Date Filed: 11/10/2022 Page: 10 of 10
10 Opinion of the Court 22-11598
the district court. Because it does not appear that Hamilton could
establish eligibility for a sentence reduction under either
§ 3583(c)(1)(A) or (c)(2), even with the benefit of counsel, and he
has otherwise ably presented his arguments, we DENY his motion
for appointed counsel on appeal and affirm the denial of his motion
below.
AFFIRMED. | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8488907/ | OPINION
RICHARD W. HILL, Bankruptcy Judge.
This matter arises in the context of a petition for relief under Chapter 11 of the Bankruptcy Code filed by Kahr Brothers, Inc., a home builder and developer. Prior to filing, a group of homeowners commenced suit in the Superior Court of New Jersey, seeking relief for the alleged construction of inadequate and unsafe homes they had purchased in a development known as Orchard Estates, and named various defendants, including the State of New Jersey, Department of Community Affairs, Bureau of Construction Code Enforcement. The debtor removed the action to the Bankruptcy Court.1
By Count Thirteen of the Complaint, plaintiffs alleged that defendant, State of New Jersey, Department of Community Affairs, Bureau of Construction Code Enforcement2 negligently and willfully failed to enforce various building and construction code regulations and laws. The complaint *767specifically alleged that defendant was aware of the many code and safety deficiencies in the homes, yet failed to adequately insure that the builders complied with the regulations. Plaintiffs claim that as a result they have suffered financially and in the material enjoyment of their homes. By Count Sixteen, plaintiffs also charge that the above defendant, along with various corporate, government and individual defendants, did intentionally conspire to defraud plaintiffs, and deprive them of the full use and enjoyment of their homes by deceiving plaintiffs into paying for unsafe, unliveable, unmerchantable homes constructed in a flood area without proper drainage. In Count Seventeen, plaintiffs appear to charge that the above defendant willfully and recklessly failed to enforce the building laws equally and fairly, in violation of 42 U.S.C. Sections 1983,1985, 1986, the Fifth and Fourteenth Amendments to the United States Constitution and Article I, Sections I and V of the Constitution of the State of New Jersey, with the result that plaintiffs suffered monetarily and in the material enjoyment of their homes. In conjunction with all counts of the complaint plaintiffs seek judgment for damages, punitive damages, costs of suit, court costs, counsel fees and interest.
The State of New Jersey, Department of Community Affairs, Bureau of Construction Code Enforcement has moved before this Court to dismiss the complaint against said defendant for failure to state a claim upon which relief can be granted, on the ground that the State of New Jersey is immune from suit in federal court under the Eleventh Amendment of the United States Constitution, absent consent or waiver, and, alternatively, that the State of New Jersey is not a “person” for purposes of 42 U.S.C. Section 1983 of the Civil Rights Act, 42 U.S.C. Section 1981 et seq.
The Eleventh Amendment of the United States Constitution states:
“The Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State.”
U.S.Const. Amend. XI.
The Eleventh Amendment, as presently construed by the Courts, bars the exercise of federal jurisdiction over suits commenced by private parties in federal court against a state. Edelman v. Jordan, 415 U.S. 651, 94 S.Ct. 1347, 39 L.Ed.2d 662 (1974); Employees of the Dep’t of Public Health & Welfare v. Department of Public Health & Welfare, 411 U.S. 279, 93 S.Ct. 1614, 39 L.Ed.2d 251 (1973); Ford Motor Co. v. Department of Treasury, 323 U.S. 459, 65 S.Ct. 347, 89 L.Ed. 389 (1945). The Eleventh Amendment, by its terms, does not bar suits against a state by its own citizens. In Cohens v. Virginia, 19 U.S. (6 Wheat.) 264 (1821), 5 L.Ed. 257, Chief Justice Marshall construed the Eleventh Amendment literal ly, denying access to federal courts only when a state was sued by a citizen of another state. In Hans v. Louisiana, 134 U.S. 1, 10 S.Ct. 504, 33 L.Ed. 842 (1890), the United States Supreme Court held that a state could not be sued by its own citizens in federal court. In so doing, the Hans Court noted that “(i)t is inherent in the nature of sovereignty not to be amenable to the suit of an individual without its consent.” Id. at 13, 10 S.Ct. at 506. The Supreme Court has since interpreted Hans as expanding the scope of the Eleventh Amendment by incorporating principles of sovereign immunity, and has held that an unconsenting state is, likewise, immune from suits brought in federal court by its own citizens as well as citizens of foreign states. See Edelman v. Jordan, supra at 662-63, 94 S.Ct. at 1355; Department of Public Health & Welfare, supra at 280, 93 S.Ct. at 1615; Parden v. Terminal Ry., 377 U.S. 184, 186, 84 S.Ct. 1207, 1209, 12 L.Ed.2d 233 (1964); Great Northern Life Ins. Co. v. Read, 322 U.S. 47, 51, 64 S.Ct. 873, 875, 88 L.Ed. 1121 (1944); Duhne v. New Jersey, 251 U.S. 311, 313, 40 S.Ct. 154, 154, 64 L.Ed. 280 (1920).3
*768While the Eleventh Amendment does not bar suits in federal court against state officials for prospective injunctive relief, Edelman v. Jordan, supra; Ex parte Young, 209 U.S. 123, 28 S.Ct. 441, 52 L.Ed. 714 (1908), which may have an ancillary effect on the state treasury, see Quern v. Jordan, 440 U.S. 332, 99 S.Ct. 1139, 59 L.Ed.2d 358 (1979), “when the action is in essence one for recovery of money from the state, the state is the real, substantial party in interest and is entitled to invoke its sovereign immunity from suit.” Edelman v. Jordan, supra at 663, 94 S.Ct. at 1356; Ford Motor Co., supra at 464, 65 S.Ct. at 350.4 The decision in Edelman, thus, effectively barred retroactive monetary relief against a state for constitutional5 violations, absent a waiver of Eleventh Amendment immunity by the state. Edelman, supra at 673-77, 94 S.Ct. at 1360-62. See also Quern v. Jordan, supra. The Eleventh Amendment is, likewise, applicable to agencies which are arms or alter egos of the state. See Brennan v. University of Kansas, 451 F.2d 1287 (10th Cir. 1971).
Nor is Section 1983 to be viewed as a waiver of a state’s Eleventh Amendment immunity from suit in federal courts. Edelman v. Jordan, 415 U.S. at 675-76, 94 S.Ct. at 1361-62. 42 U.S.C. Section 1983 provides that a civil action may be brought by any “person,” who “under color” of state law, “subjects, or causes to be subjected, any citizen of the United States or any person within the jurisdiction thereof to the deprivation of any rights, privileges, or immunity secured by the Constitution and laws.”
In Edelman, a suit was brought under Section 1983 by the recipients of a public aid program to recover retroactive monetary and injunctive relief against state officials who allegedly monitored the federal-state program of Aid to the Aged, Blind, and Disabled (AABD) inconsistently with federal regulations and with the Fourteenth Amendment to the Constitution. In speaking of the Eleventh Amendment’s bar to a suit for money judgment against the state, the Court stated:
(I)t has not heretofore been suggested that (Section) 1983 was intended to create a waiver of a State’s Eleventh Amendment immunity merely because an action could be brought under that section against state officers, rather than against the State itself. Though a (Section) 1983 action may be instituted by public aid recipients ... a federal court’s remedial power, consistent with the Eleventh Amendment, is necessarily limited to *769prospective injunctive relief, Ex parte Young, supra, and may not include a retroactive award which requires the payment of funds from the state treasury, Ford Motor Co. v. Department of Treasury, supra.
Edelman, 415 U.S. at 675-77, 94 S.Ct. at 1362.
In addition to the Eleventh Amendment’s bar to suits brought by a citizen in federal court against a state under Section 1983, courts have construed the language of Section 1983 to limit its applicability. “Persons” amenable to suit under Section 1983 include state officials who violate a person’s constitutional rights. Ex parte Young, supra. The United States Supreme Court recently overruled Monroe v. Pape, 365 U.S. 167, 81 S.Ct. 473, 5 L.Ed.2d 492 (1961) and its rule of municipal immunity, to hold in Monell v. Department of Social Services, 436 U.S. 658, 98 S.Ct. 2018, 56 L.Ed.2d 611 (1978), that municipalities are “persons” subject to suit under Section 1983. Id. at 701, 98 S.Ct. at 2041. Despite the holding in Monell, the United States Supreme Court has yet to go further and hold that states are also “persons” within Section 1983.6 The Court in the recent case of Quern v. Jordan, 440 U.S. 332, 99 S.Ct. 1139, 59 L.Ed.2d 358 (1979), reaffirmed the Court’s position, albeit in dictum, that Section 1983 should not be construed to “override the traditional sovereign immunity of the states.” Id. at 341, 99 S.Ct. at 1145.7
Recent decisions of the United States Supreme Court have defined both the scope and possible limitations on the concept of states’ Eleventh Amendment immunity under Edelman. See Hutto v. Finney, 437 U.S. 678, 98 S.Ct. 2565, 57 L.Ed.2d 522 (1978); Fitzpatrick v. Bitzer, 427 U.S. 445, 96 S.Ct. 2666, 49 L.Ed.2d 614 (1976). Fitzpatrick v. Bitzer demonstrates the power of Congress to circumvent the states’ Eleventh Amendment immunity from suit in federal court. The Court in Fitzpatrick held that Congress could authorize a suit for money damages against state government, brought under the 1972 amendments to Title VII of the Civil Rights Act of 1964, legislation enacted pursuant to Section 5 of the Fourteenth Amendment. The Fitzpatrick court concluded that “the Eleventh Amendment, and the principle of state sovereignty which is embodies . . . are necessarily limited by the enforcement provisions of (Section) 5 of the Fourteenth Amendment.” Fitzpatrick, 427 U.S. at 456, 96 S.Ct. at 2671. In Hutto v. Finney, the Supreme Court upheld a federal court’s award of attorneys fees to a successful civil *770rights litigant under the Civil Rights Attorney’s Pees Award Act of 1976. The Court found that such a fee, paid from state funds, did not violate the Eleventh Amendment under the doctrine of either Ex parte Young, supra, or Edelman v. Jordan, supra, which grants the states immunity from retroactive monetary relief. Hutto, 437 U.S. at 690, 98 S.Ct. at 2573. The Hutto court emphasized Edelman’s distinction between retroactive and prospective relief, the latter, being where the cost of compliance was “ ‘ancillary’ to the prospective order enforcing federal law.” Id. The award of attorneys fees was not regarded by the Hutto court as retroactive relief in contravention of the Eleventh Amendment, but, rather, as a fine “ancillary to the federal court’s power to impose injunctive relief.”8 Id. at 691, 98 S.Ct. at 2574.
Plaintiffs have specifically named the State of New Jersey, Department of Community Affairs, Bureau of Construction Code Enforcement as defendant in this litigation in bankruptcy court. The Court has found that the Eleventh Amendment bars suit for retroactive monetary relief against a state in federal court. Furthermore, Section 1983 is not to be construed as a waiver of the state’s Eleventh Amendment immunity. In addition, regardless of the Eleventh Amendment bar, the Court finds that a state is not a person for purposes of Section 1983. This Court finds that the Section 1983 claim of Ronald and Joan DeLuca, et al., against the State of New Jersey, Department of Community Affairs, Bureau of Construction Code Enforcement should be dismissed as failing to state a claim upon which relief can be granted because the state is not a “person” pursuant to Section 1983. See Edelman v. Jordan, supra. To the extent that the monetary relief requested is not asked under Section 1983, those claims shall be remanded to state court, because the federal court lacks jurisdiction to adjudge money damages against the State or its agencies by reason of the Eleventh Amendment’s grant to the states of immunity from suit in federal court.9 See Edelman v. Jordan, supra; Ex parte Young, supra.
. Removal was effectuated pursuant to 28 U.S.C. Section 1478.
. The complaint also named, individually, as defendants, Ralph DeVino and Richard Vogel, officers of the Bureau of Construction Code Enforcement. A motion to dismiss as to these defendants was denied.
. Justice Brennan has taken a somewhat different view of the Eleventh Amendment than his colleagues on the Court. Justice Brennan takes the position of Chief Justice Marshall in *768Cohens, that the Eleventh Amendment bars only suits against a state by citizens of another state. See Employees of the Department of Public Health & Welfare v. Department of Public Health & Welfare, 411 U.S. 279, 298, 309-324, 93 S.Ct. 1614, 1624, 1630-1637, 36 L.Ed.2d 251 (1979) (Brennan, J., dissenting). In Justice Brennan’s view, Hans v. Louisiana, 134 U.S. 1, 10 S.Ct. 504, 33 L.Ed. 842 (1890), was not an Eleventh Amendment case, but one involving the ancient doctrine of sovereign immunity. Id. at 313, 93 S.Ct. at 1632. As Justice Brennan said in Employees:
“(E)xcept as the Eleventh Amendment may be read to create a jurisdictional bar against suits by citizens of another State or by aliens, the restriction on the exercise of the federal judicial power in suits against a State brought by individuals derives, not from anything in the Constitution, including Art(icle) III, but from traditional nonconstitutional principles of sovereign immunity.” 411 U.S. at 320, 93 S.Ct. at 1635.
. The enactment of the Eleventh Amendment in 1798 was an effort by Congress to overrule Chisolm v. Georgia, 2 U.S. (2 Dall.) 419, 1 L.Ed. 440 (1793), in which the United States Supreme Court held that a state could be sued in federal court by a citizen of another state. Congress sought to protect state treasuries from claims of individual citizens which would exacerbate the magnitude of state debts incurred during the Revolutionary and post-Revolutionary years. See Note, State Monetary Accountability For Civil Rights Violations: Reconciling The Eleventh And Fourteenth Amendments, 43 Albany L.Rev. 708, 708 (1979), (hereinafter State Monetary Accountability).
. Edelman was a Section 1983 case. The Court notes a decision by the United States Supreme Court, Maine v. Thiboutot, - U.S. -, 100 S.Ct. 2502, 65 L.Ed.2d 555 (1980), which apparently broadened the scope of relief under Section 1983, beyond violations of civil rights laws, to include purely statutory violations of federal law. id. — U.S. at -. 100 S.Ct. at 2503.
. The Court’s decision in Monell overruled Monroe v. Pape, 365 U.S. 167, 81 S.Ct. 473, 5 L.Ed.2d 492 (1961), insofar as Monroe made local governments totally immune from a Section 1983 suit. The Monell court’s finding of municipal liability under Section 1983 has called into question the liability of the state under Section 1983. “Given our holding in Monell, the essential premise of our Edelman holding . . would clearly appear to be no longer true.” Hutto v. Finney, 437 U.S. 678, 703, 98 S.Ct. 2565, 2580, 57 L.Ed.2d 522 (1978) (Brennan, J., concurring). Other commentators have noted that given the holding in Mo-nell, a finding that the state is a “person” within the meaning of Section 1983 logically follows. State Monetary Accountability, supra at 721. Furthermore, the Monell holding has seemingly cast doubt upon pre-Monell decisions wherein the basis for holding a state immune from suit under Section 1983 was that if a municipality was not a “person,” neither was a state. See Zuckerman v. Appellate Div., 421 F.2d 625 (2d Cir. 1970); Williford v. People, 352 F.2d 474, 476 (9th Cir. 1965). Nonetheless, lower federal courts have refused to recognize that the necessary implication of Monell is an overruling of prior Supreme Court cases holding that Section 1983 does not abrogate the states’ Eleventh Amendment sovereign immunity. See Skehan v. Board of Trustees, 590 F.2d 470, 488 (3d Cir. 1978); Bogard v. Cook, 586 F.2d 399, 410 (5th Cir. 1978).
. Justice Brennan, in a concurring opinion, noted that the Court’s holding in Quern that a state is not a “person” for purposes of 42 U.S.C. Section 1983 was “patently dicta,” the Court deciding “an issue unnecessary to its holding.” Quern v. Jordan, 440 U.S. 332, 350, 99 S.Ct. 1139, 1150, 59 L.Ed.2d 358 (1979). Brennan argued that Monell made it “surely at least an open question whether (Section) 1983 properly construed does not make the States liable for relief of all kinds, notwithstanding the Eleventh Amendment.” Id. at 351, 99 S.Ct. at 1151, quoting Hutto v. Finney, 437 U.S. 678, 703, 98 S.Ct. 2565, 2580, 57 L.Ed.2d 522 (1978) (Brennan, J., concurring).
. The Court has allowed awards for costs viewed an “ancillary” to prospective relief granted, and, therefore, not in violation of the Eleventh Amendment. In Milliken v. Bradley, 433 U.S. 267, 97 S.Ct. 2749, 53 L.Ed.2d 745 (1977), the United States Supreme Court affirmed an order requiring state officials to pay a substantial sum to help defray the cost of a school desegregation order. The Milliken Court found that such relief fitted “squarely” within the prospective compliance exception reaffirmed by Edelman as well as the rule of Ex parte Young that federal courts may enjoin state officials to conform their conduct to requirements of federal law, notwithstanding a “direct and substantial effect on the state treasury.” Milliken, 433 U.S. at 289, 97 S.Ct. at 2762. Milliken distinguished its award from one for “accrued monetary liability” forbidden by the Eleventh Amendment. Id. More recently, the Court in Quern v. Jordan, 440 U.S. 332 (1979), 99 S.Ct. 1139, 59 L.Ed.2d 358, upheld as consistent with the Eleventh Amendment an order requiring state officials to send notices to class members apprising them of available state administrative procedures by which they might determine entitlement to past welfare benefits, despite the fact that preparing and mailing notices would involve incidental administrative expense. Id. at 346-47, 99 S.Ct. at 1148-49. The Quern Court found that such “relief falls on the Ex parte Young side of the Eleventh Amendment line rather than the Edel-man side.” Id. at 347, 99 S.Ct. at 1148. The Court of Appeals had noted that “(t)he form of notice we envisage would not create a ‘liability’ against the state ... No federal judgment against the state would be created." Quern, 440 U.S. at 336, 99 S.Ct. at 1142, citing 563 F.2d 873; See also Parden v. Terminal Ry., 377 U.S. 184, 84 S.Ct. 1207, 12 L.Ed.2d 233 (1964).
. The enactment of the New Jersey Tort Claims Act, N.J.S.A. 59:1-1 et seq. does not change the result. The New Jersey Tort Claims Act is a limited waiver of the state’s sovereign immunity; by passage of the Act, the State of New Jersey did not waive its Eleventh Amendment immunity from suit in federal court. Ritchie v. Cahall, 386 F.Supp. 1207, 1209-10 (D.N.J.1974). | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8488908/ | MEMORANDUM DECISION
CONRAD K. CYR, Bankruptcy Judge.
The Androscoggin Savings Bank seeks a determination that certain debts are nondis-chargeable under Bankruptcy Code § 523(a)(2).
Between November 18, 1977 and August 27, 1979, three loans were granted to the defendant-debtor by the plaintiff. The first loan was made following the presentation of a loan application indicating that the debtor was employed by Bicknell Manufacturing Company, with a weekly net income of $285.00, and that he had other weekly income of $220.00 from Unalloy Steel Corporation. The application further states that the debtor had certain assets, including a 1977 Plymouth Volare valued at $5,000.00, out-of-state real estate worth $17,500.00 and life insurance having a cash surrender value of $12,000.00. The listed liabilities were $3,000.00 to Camden National Bank and a real estate mortgage of the Heritage Savings Bank in the amount of $32,500.00. Based on the information contained in the loan application and a credit check, the plaintiff loaned the debtor $4,905.00. At *49the date of bankruptcy the unpaid balance was $2,146.14, plus interest.
A second loan was made on August 17, 1978 following the submission of another loan application bearing essentially the same information as the earlier application, except that Unalloy Steel Corporation does not appear as a source of income, the Plymouth Volare was reduced in value and the $3,000.00 debt to Camden National Bank was not listed. The second loan was granted in the amount of $2,000.00 on the basis of the loan application, past experience with the debtor, and the debtor’s credit rating.
The third loan1 was granted on August 27, 1979 for the purpose of satisfying the balance due on the second note and to finance the purchase of a wood stove. The third loan application contained essentially the same information as appeared on the two previous applications, with the exception that Unalloy Steel Corporation was again listed as the source of an additional income of $953.00 per month, no value was attributed to the 1977 Plymouth Volare, and the values assigned to the debtor’s residence and out-of-state real estate were slightly increased. At bankruptcy, the balance due on the third loan was $2,000.00, plus interest.
Each of the loan applications was signed by the debtor. The first loan application was largely completed in the handwriting of the debtor. The debtor testified that the second and third loan applications were signed in blank, an assertion which was categorically denied by the plaintiff’s loan officer, who testified that the debtor signed the applications after the loan officer had completed each entry on the applications in the presence of, and after detailed consultation with, the debtor. The court finds that each loan application was either made or published by the debtor in order to reflect the debtor’s financial condition in a favorable light, as a means of inducing the plaintiff to grant the loans.
The debtor admitted giving plaintiff a personal financial statement, which, though unsigned, was given in response to a direct request by the plaintiff’s loan officer, after the second loan, in connection with a loan request which was refused in October of 1978. The financial statement was written entirely in the debtor’s own handwriting and was relied upon by the plaintiff in making the third loan. While the debtor states that he just happened to have this financial statement in his possession when he was asked for one by the loan officer, he at no time explained or suggested to the loan officer that there was anything tentative or mistaken about it. He submitted the financial statement with the knowledge and intent that the loan officer would rely upon it. There is no requirement that a statement in writing concerning the debt- or’s financial condition be signed, under Bankruptcy Code § 523(a)(2)(B), only that the debtor cause it to be made or published, with intent to deceive. Bankruptcy Code § 523(a)(2)(B)(iv).
The financial statement substantially inflated the defendant’s yearly income, by including Harper Tool Company as a source of $15,500.00 per year and Consolazio Tool Company as a source of $6,000.00 per year. In fact, the debtor had received $800.00 in 1977 and approximately $7,000.00 in 1978 from Harper Tool Company. He actually realized no income from Consolazio Tool Company, at any time. The financial statement listed a 1978 Grady White boat and motor as an asset having a present value of $9,500.00, but failed to show that the property was mortgaged to Damariscotta Savings Bank.
Each of the written statements used and published by the debtor in his dealings with the plaintiff contained materially false information respecting important matters affecting the debtor’s financial condition, matters upon which a prudent lender would and, in this instance, did, reasonably rely. The only real question is whether the debt- *50or intended to deceive the plaintiff by his use of these false statements.
The first and third loan applications state that the debtor was employed by Unalloy Steel Corporation making approximately $11,000.00 per year, when in fact as a commission salesman for Unalloy the debtor earned nothing whatever in either 1977 or 1979 and earned a mere $200.00 in 1978.
While the debtor suggests that his commission sales relationships with Unalloy Steel Company, Harper Tool Company and Consolazio Tool Company offered some potential for realizing the relatively large sums of money attributed to these sources in the various applications and the financial statement, at the time the debtor published the statements he had no such income, nor does the history of his relationship with any of these concerns warrant the cavalier optimism these statements reflect.
The listing of the 1977 Plymouth Volare as an asset, notwithstanding the fact that it was owned by Bicknell Manufacturing Company, the debtor’s employer, was an especially egregious misrepresentation. The debtor’s later oral representation to the loan officer that the 1977 Plymouth Volare belonged to the debtor’s wife and therefore could not be used as collateral to secure the third loan demonstrates an unmistakable intent to deceive the plaintiff.
The failure to disclose a substantial mortgage balance due on the out-of-state real estate, coupled with the fact that the property had been sold by the debtor some eight months before the third loan application was submitted, further demonstrates a readily discernible pattern of omissions, exaggerations, deceptions, and misrepresentations contaminating all three loan transactions.
The defendant contends that the bank treated the written documents lightly in its determination of credit worthiness. It is suggested that reduced weight was given to the loan applications because the loan officer knew that the amounts disclosed on the written applications were estimates and projections of anticipated income, that any inaccuracies were the result of incomplete questioning by the loan officer or misunderstandings on the part of the defendant, and that the bank was willing to lend to the debtor because of his prior record with the bank, the debtor’s credit rating, and the relationship which had developed between the loan officer and the defendant. But while the evidence would support a finding that the loans were extended in part by reason of the debtor’s credit rating and past record with the bank, the ultimate judgment as to whether the debtor could afford to borrow more money, without undue risk to the bank, was primarily based on an informed projection as to future income, as well as net worth. The false statements submitted by the debtor precipitated a misinformed judgment on the part of the plaintiff. The responsibility for the misinformation upon which the plaintiff’s judgment was made rests with the debtor.
The court concludes that the plaintiff reasonably relied upon the materially false statements contained in the documents submitted by the debtor with intent to deceive the plaintiff.
Accordingly, the debt due Androscoggin Savings Bank as a result of the combined unpaid balances on these loans, totalling $4,618.18, is held to be nondischargeable under Bankruptcy Code § 523(a)(2)(B). Judgment to enter forthwith, with interest.
. The testimony indicates that an oral loan application was rejected by the plaintiff in October of 1978. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8488909/ | MEMORANDUM OP DECISION
DAVID N. NAUGLE, Bankruptcy Judge.
On July 10, 1980, the above-captioned adversary proceeding came on regularly for trial, Arthur D. Cohen, Esq., of Ball, Hunt, Hart, Brown & Baerwitz, appearing for the plaintiff and cross-defendant International Canning Machinery, Ltd.; David Weinstein, Esq., of Danning, Gill, Gould & Joseph, appeared for the defendant and cross-complainant Leonard A. Goldman, Trustee in Bankruptcy of the Estate of Murrieta Hot Springs, a California corporation (hereinafter referred to as “the Trustee”).
An involuntary petition in bankruptcy was filed against Murrieta Hot Springs on March 3, 1978. Prior to trial, the then alleged bankrupt filed a petition for relief under Chapter XI of the Bankruptcy Act of 1898 on July 31, 1978. On April 10, 1979, the debtor was adjudicated a bankrupt.
Pursuant to the Bankruptcy Reform Act of 1978, Pub.L.95-598, title IV, § 403(a), this case is to be governed under the old Bankruptcy Act as if Public Law 95-598 had not been enacted.
The basic facts on which this adversary proceeding turns are undisputed; the following 16 are taken verbatim from the Stipulation of Facts filed June 12, 1980, by the parties:
1. Plaintiff, INTERNATIONAL CANNING MACHINERY, LTD., is a corporation duly authorized and existing under and by virtue of the laws of the State of Cali*75fornia, having its principal place of business in Wilmington, California.
2. On or about March 3, 1978, an Involuntary Petition in Bankruptcy was filed against MURRIETA HOT SPRINGS, a California corporation, and thereafter said Debtor was duly adjudicated a bankrupt.
3. Defendant, LEONARD A. GOLDMAN, has been, and now is, the duly appointed, qualified and acting Trustee in Bankruptcy of the estate of MURRIETA HOT SPRINGS, Bankrupt.
4. INTERNATIONAL CANNING MACHINERY, LTD., is in the business of selling fruit, juice and fish processing and canning machinery, including boilers used to process steam.
5. MURRIETA HOT SPRINGS, a resort, had relied upon two Dixon package-type fire tube boilers to produce hot water. Prior to September 15, 1975, however, it determined to redesign its hot water system so that the two boilers would no longer be needed.
6. On or about September 15, 1975, plaintiff purchased the two Dixon package-type fire tube boilers from MURRIETA HOT SPRINGS. Plaintiff paid MURRIE-TA HOT SPRINGS the sum of Ten Thousand Dollars ($10,000.00) for the two boilers.
7. The boilers plaintiff purchased from MURRIETA HOT SPRINGS are cigar-shaped. Each is 10 feet in diameter and approximately 20 feet long. Each weighs 18 to 20 tons. In addition to purchasing the boilers, plaintiff purchased certain related equipment attached to the boilers, including pumps which weigh 600 to 700 pounds each, motors, heavy duty 8-inch diameter piping and a large smoke stack.
8. The boilers are housed in a separate building on the MURRIETA HOT SPRINGS property. The boilers are too large to fit through the doors of the building. In order to remove the boilers from the building, part of the building must be demolished.
9. It is very expensive to move the boilers. Plaintiff maintains a storage yard in Wilmington, California. In addition to the expense of demolishing part of the boiler building, moving the boilers from MUR-RIETA HOT SPRINGS to Wilmington would require renting two low-bed semitrailers and trucks, hiring a crew of six, renting winches to raise the boilers from the subterranean floor level of the boiler room to the ground level outside, and renting a crane to load the boilers on the flatbed trucks. The estimated cost of moving the boilers to the plaintiff’s Wilmington yard is $10,000.00.
10. If moved to Wilmington, the boilers would remain outside and subject to the weather until a buyer could be found. If the boilers remained outside for longer than a short period of time, it would cost approximately $5,000.00 to recondition them.
11. When finally sold, the boilers would have to be reloaded on flat-bed trucks at plaintiff’s Wilmington yard. Again, a crane would be required.
12. In light of the above, plaintiff determined to leave the boilers at MURRIETA HOT SPRINGS until sold, and to sell them f. o. b. MURRIETA HOT SPRINGS. Accordingly, plaintiff asked MURRIETA HOT SPRINGS if the boilers could remain in MURRIETA HOT SPRINGS’ boiler building until a buyer could be found. MUR-RIETA HOT SPRINGS agreed that they could so long as the property was not needed for other purposes. MURRIETA HOT SPRINGS repeatedly assured the plaintiff that the property was not needed and that the boilers could remain in the boiler building. Plaintiff contracted to sell the boilers f. o. b. MURRIETA HOT SPRINGS, but when it tried to arrange to remove them from the boiler building, it was informed that the boilers were in the possession of the defendant and could not be taken.
13. The boilers are currently in the boiler building owned by defendant.
14. Upon receipt of the Ten Thousand Dollars ($10,000.00) payment for the boilers, MURRIETA HOT SPRINGS noted the sale of the boilers to plaintiff on its corporate books and records.
*7615. Apart from noting the sale on its corporate books and records, neither MUR-RIETA HOT SPRINGS nor plaintiff took any additional steps to provide notice to third parties that the boilers theretofore owned by MURRIETA HOT SPRINGS had been acquired by plaintiff.
16. On March 3, 1978, when an Involuntary Petition in Bankruptcy was filed against MURRIETA HOT SPRINGS, the MURRIETA HOT SPRINGS property consisted of approximately 2,500 acres, including a golf course. The approximate value of the MURRIETA HOT SPRINGS property at the time, including improvements and personal property situated thereon, excluding the two boilers sold to INTERNATIONAL CANNING MACHINERY, LTD., was in excess of one million dollars.
The following inferences drawn from the stipulated facts above are added as findings of fact:
17. The time between September 15, 1975, and March 3, 1978, exceeded a commercially reasonable time for the plaintiff to remove the boilers from the MURRIETA HOT SPRINGS real property.
18. There was no complete and unconditional delivery of the boilers to the plaintiff in view of the structural alterations necessary to permit removal of the boilers from the building in which they were housed.
19. Entry of the September 15, 1975, sales transaction in the book’s of MURRIE-TA HOT SPRINGS did not amount to actual change of possession.
20. There was no actual and open change of possession at or after September 15, 1975, and before March 3, 1978, sufficient to give notice to creditors and others of the transfer.
The rights of the parties to this dispute must be resolved under the substantive law of California, applied in the federal courts under the principles set forth in the diversity case of Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188, 114 A.L.R. 1487 (1938). It is the source of the right sued on and not the ground on which federal jurisdiction is founded which determines the governing law. See Maternally Yours v. Your Maternity Shop, 234 F.2d 538, 540-541 ftn. 1. (2d Cir. 1956).
The federal court is to be governed by the law of the state whether it “be declared by its legislature in a statute or by its highest court in a decision.” Erie R. Co. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 822, 82 L.Ed. 1188 (1938).
The California legislature has enacted a rule of law in the form of a “conclusive presumption” that a transfer of personal property not followed by immediate delivery and actual and continued change of possession is void as against one in the position of the Trustee. The statute (California Civil Code, § 3440) is quoted in part below:
Every transfer of personal property and every lien on personal property made by a person having at the time the possession or control of the property, and not accompanied by an immediate delivery followed by an actual and continued change of possession of the things transferred, is conclusively presumed fraudulent and void as against the transferor’s creditors while he remains in possession and the successors in interest of those creditors, and as against any person on whom the transferor’s estate devolves in trust for the benefit of others than the transferor and as against purchasers or encumbrancers in good faith subsequent to the transfer. .
There is no dispute that the Trustee’s powers under §§ 70c and 70e(l) of the Bankruptcy Act of 1898 qualify him as one of the persons for whom the benefits of California Civil Code, § 3440, apply.
The California Supreme Court has ruled on cases comparable to the one at bar. Sequeira v. Collins, 153 Cal. 426, 95 P. 876 (1908), deals with a purchase of 640,000 bricks (partially in kiln); although the decision goes against the purchaser, the court indicates in dicta that removal of ponderous, bulky personalty from the vendor’s land is not essential to an adequate delivery and change of possession. The Sequeira *77court relies on a prior case against a brick kiln purchaser, Woods v. Bugbey, 29 Cal. 466 (1866), decided under a predecessor statute (Laws 1850, p. 267, cited and quoted in part at 29 Cal. 466, 471-2 and 474).
Good faith and adequate consideration are not material and are not defenses. See Hepner v. Hepner, 32 Cal.App.2d 582, 585, 90 P.2d 321 (1939). However, § 3440 seems to be applied with some greater strictness in cases of dubious faith. See Wargin v. Wargin, 29 Cal.2d 843, 180 P.2d 349 (1947).
The time factor cannot be ignored in construing § 3440. It contains the word “immediately,” for which the California judicial construction is “within a reasonable time having due regard to the nature and circumstances of the case.” Integrated, Inc. v. Alec Fergusson Electrical Contractors, 250 Cal.App.2d 287, 295, 58 Cal.Rptr. 503, 508-509 (1967), citing Feeley v. Boyd, 143 Cal. 282, 76 P. 1029, 65 L.R.A. 943.
Although growing crops are not susceptible to manual delivery until harvested, possession of them must change immediately after harvesting or the creditor/trustee prevails. In Westcott v. Nixon, 132 Cal.App. 490, 23 P.2d 75 (1933), 100 tons of hay was sold in May while in the field. By October, all of the hay had been cut and was stored in the vendor’s barn, but the purchaser made no visible effort to take delivery or to exercise any control over it until February. Since there had been no open and unequivocal transfer of possession, the purchaser lost.
Both the nature of the purchaser’s possession and the flexible interpretation in each case are emphasized in the following quotation from McGaffey Canning Co. v. Bank of America, 109 Cal.App. 415, 435-436, 294 P. 45, 53 (1930):
There must be open, visible, unequivocal change of possession, manifested by such substantial outward signs as to make it evident to the world that the control of the owner has wholly ceased, and that another has acquired, and is openly exercising, the exclusive dominion over the property. Stevens v. Irwin, 15 Cal. 503, 506, 76 Am.Dec. 500; Cahoon v. Marshall, 25 Cal. 197, 201; Godchaux v. Mulford, 26 Cal. 316, 324, 85 Am.Dec. 178; Sequeira v. Collins, 153 Cal. 426, 431, 95 P. 876; Hassell v. Bunge, 167 Cal. 365, 366, 139 P. 800.
Actual change of possession means existing in act, and truly and absolutely carried out, as opposed to formal, potential, virtual, or theoretical change. Bunting v. Saltz, 84 Cal. 168, 170, 24 P. 167; Guthrie v. Carney, 19 Cal.App. 144, 150, 124 P. 1045. The proof required to show actual change of possession is not measured by any fixed set of rules. Dependence must be placed upon the facts and circumstances of each particular case; and usually the determination must rest upon the finding of the court or the jury after hearing the evidence adduced on both sides. Claudius v. Aguirre, 89 Cal. 501, 503, 26 P. 1077; Dubois v. Spinks, 114 Cal. 289, 293, 46 P. 95; Feeley v. Boyd, 143 Cal. 282, 285, 76 P. 1029, 65 L.R.A. 943; Jarvis v. Webber, 196 Cal. 86, 99, 236 P. 138; Bosbyshell v. Cline, 51 Cal.App. 109, 113, 196 P. 274; Gray v. Little, 97 Cal.App. 442, 449, 275 P. 870.
See also 2 Witkin, Summary of California Law, Sales, §§ 198-199, 8th ed., pp. 1233-1235.
Symbolic delivery and unobservable transfer of possession are insufficient. See Washington Lumber & Millwork Co. v. McGuire, 213 Cal. 13, 1 P.2d 437 (1931) [hand on truck]; Canal-Randolph Anaheim, Inc. v. Wilkoski, 103 Cal.App.3d 282, 163 Cal.Rptr. 30 (1980); Southern Cal. Collection Co. v. Napkie, 106 Cal.App.2d 565, 571, 235 P.2d 434; O’Connor v. O’Connor, Rice & Barnes, 44 Cal.App.2d 1, 5, 111 P.2d 656 (1941).
These cases and the one most favorable to the Trustee, Raddatz v. Hedgpeth, 223 Cal.App.2d 633, 35 Cal.Rptr. 855 (1963) [sawmill equipment] must be compared to the authorities tending to favor the plaintiff. The cases holding for purchasers can generally be distinguished because of time, open exercise of dominion, and other factors. *78Rosenthal v. Taylor, 87 Cal.App. 399, 262 P. 395 (1927), for example, involved a sale of pumps and other equipment which the purchaser promptly assembled and moved, some items being left on the seller’s property in a shed for convenience. In Shepherd v. Gamble, 95 Cal.App.2d 890, 214 P.2d 403 (1950), only a week went by between the purchase of a disabled ll/2-ton tractor and seizure by the levying officer of the vehicle on the seller’s land. Less than two months elapsed between a bank’s advancement of funds and removal of cabinets on which work continued in the bankruptcy case of In re Lundgren Wood Products, 198 F.Supp. 908 (N.D.Cal.1961), which may also be distinguishable as involving a validly recorded security interest.
The record here is devoid of steps by the purchaser to manifest its ownership and possession prior to the filing date. The vendor’s book entry was comparable to a receipt and not a sufficient delivery and outwardly visible change of possession. The elapsed time, about two and one-half years from sale date to filing of the involuntary petition, exceeded the limits of § 3440, even for the ponderous personalty involved. Under all the circumstances of this case, there was no adequate delivery and change of possession.
Thus follow my conclusions of law:
I. All findings of fact which contain conclusions of law are incorporated herein.
II. The Trustee’s powers under §§ 70c and 70e(l) of the Bankruptcy Act of 1898 qualify him as one for whom the benefits of § 3440 of the California Civil Code apply.
III. The transfer of the boilers to the plaintiff is void as against the Trustee.
IV. The Trustee’s title to the boilers is superior to the plaintiff’s.
Counsel for the Trustee shall prepare and lodge a proposed judgment in accordance with USDC Local Rule 7. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8488911/ | MEMORANDUM DECISION AND ORDER RE CLAIM NO. 4
GEORGE L. PROCTOR, Bankruptcy Judge.
Findings of Fact
Upon testimony adduced and evidence received, the Court makes the following findings of fact.
1. On June 21, 1978, debtor began to operate the business known as Blair Transportation Company.
2. As a result of a sale solicitation by Bob Ethridge, a Charter salesman, debtor placed an order for tires.
3. The tires were delivered and placed on trucks belonging to Blair and marked “Blair.”
4. Debtor did not intend to personally obligate himself for the tires.
5. Olsen Trucking, Inc., was incorporated on July 25, 1978.
6. Charter believed Olsen to be the purchaser of the tires and responsible for the obligation.
A. All invoices were made out to “Olsen Trucking” or “Olsen Transportation.”
B. Charter’s billing statements were sent to Olsen at the location where he regularly conducted business.
C. When debtor called Bob Ethridge to advise him that the bills should be sent to Blair, the Charter representative replied that they could not do business with Blair.
7. Debtor was aware or should have been aware of Charter’s belief that the purchases were made by Olsen Trucking, but he did not take adequate steps to correct Charter’s misimpression.
A. Debtor signed work orders made out to “Olsen Trucking.” The first such *256work order was signed on July 5, 1978.
B. The invoice of July 5, 1978, had a notation “new” in the “account number” section, as did fifty invoices from Charter to Olsen Trucking, giving debtor adequate notice that the account being serviced was not that of Blair.
C. One shipment of tires was paid for by a check imprinted “Olsen-General Account” that in no way would indicate that Olsen Trucking was a corporation.
8. Debtor’s actions in dealing with Charter were insufficient to overcome the general rule that a promoter is personally liable for debts incurred before the corporation is formed.
9. Charter’s alleged failure to mitigate damages was a course of conduct wholly consistent with its belief that Olsen and not Blair would be responsible for the tires.
Conclusions of Law
1. Charter is not barred from asserting a claim against this estate by virtue of its failure to utilize the UCC reclamation remedy, if such remedy was available.
2. The operation and sales agreement between Blair and Olsen does not affect the rights of third parties, to wit: Charter Tire, the instant claimant.
3. Debtor did not adequately purport to be acting as an agent of Blair in such a manner as to disclaim personal liability.
4. Debtor in dealing with Charter, acted as a promoter for a yet unformed corporation.
5. A promoter is personally liable for contracts he makes on behalf of a nonexistent corporation. Vodapich v. Collier County Developers, Inc., 319 So.2d 43 (Fla. 2d DCA 1975).
6. Debtor’s conduct did not bring him into the exception to the Promoter Liability Rule.
Discussion
What we have here are the unhappy consequences of a person seeking the protection of a corporation but failing to properly observe corporate formalities. It is evident from the record that, like many businessmen at the outset of a venture, the debtor was not concerned with the prospect of failure. He believed that the obligations would be paid from the profits of the business, and so failed to take those steps which would have insulated from him liability.
The legal issue is whether Charter contracted with Olsen, a corporation of Olsen, or with Blair. It boils down to a question of offer and acceptance. Perhaps as the result of the efforts of an overzealous salesman, Charter offered credit to Olsen Trucking. By signing the work orders from Charter, Olsen accepted that credit. Because there was no corporation in existence at the time the contract was made, Olsen is personally liable for those debts.
Wherefore, in view of the foregoing discussion, debtor’s objection to the claim of Charter Tire, Inc., is overruled, and the claim is allowed as filed.
ORDERED. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8488912/ | FINDINGS OF FACT AND CONCLUSIONS OF LAW
SIDNEY M. WEAVER, Bankruptcy Judge.
THIS CAUSE came on to be heard upon a Complaint for recovery of property filed herein by the Plaintiff and the Court having heard testimony and examined the evi*285dence presented; observed the candor and demeanor of the witnesses; considered the arguments of Counsel and being otherwise fully advised in the premises, does hereby make the following Findings of Fact and Conclusions of Law:
1. The Plaintiff instituted this action to recover possession of a gold bar given to representatives of the Debtor, 18TH AVENUE DEVELOPMENT CORP., prior to the institution of these reorganization proceedings. The gold bar was delivered to Debt- or’s representatives on May 19, 1979, at which time a receipt was given to the Plaintiff’s husband and to the Plaintiff. The husband is not a party to these proceedings by virtue of an assignment of his interest in the property to the Plaintiff.
2. The gold bar was delivered to Debt- or’s representatives in lieu of cash as part of a deposit for the purchase price of a residence to be erected at the development known as “The Village”. This deposit was given in conjunction with the execution of a purchase and sale agreement between 18TH AVENUE DEVELOPMENT CORP. and the Plaintiff and her husband.
3. At or about the time that the Deposit Receipt Agreement for the purchase of the residence was executed by the parties, the Plaintiff and her husband were unable to deposit the initial funds in cash. In lieu thereof, the Debtor agreed to accept a gold bar having a value agreed to between the Plaintiff and representatives of 18TH AVENUE DEVELOPMENT CORP. of the sum of $8,000.00. The Plaintiff was to bring in the balance of the initial deposit of $10,-000.00 within 45 days after receipt of the gold bar. This she did not do.
4. Contemporaneously with receipt of the gold bar, Mr. Leonard Schrieber, President of 18TH AVENUE DEVELOPMENT CORP., deposited cash to the account of 18TH AVENUE DEVELOPMENT CORP. in the sum of $8,000.00, the cash equivalent of the gold bar’s value at the time of its receipt. This sum was credited to the account of the Plaintiff herein. Debtor’s representatives thereafter requested the balance of the deposit, but none was received.
5.The Debtor acknowledges, as does the Trustee, that the Plaintiff herein is entitled to a claim against this estate in the sum of $8,000.00. In other proceedings pending in the reorganization case, this Court has adjudicated that the Plaintiff in this Adversary Proceeding is entitled to an equitable lien against the real property upon which the house was to be erected.
6. There is no evidence before the Court that the Trustee, at the time of the institution of this Complaint, was in possession of the gold bar. To the contrary, the uncontradicted testimony and evidence is that the Trustee is not now, nor has he ever been in possession of the gold bar. Further uncontradicted evidence is that at the time of the filing of the reorganization proceedings the Debtor was not in possession of the gold bar, but same was in possession of Mr. Schrieber’s daughter to whom Mr. Schrieber gave the gold bar to be held in trust for his grandchildren’s education.
7. The Court must therefore conclude that the Plaintiff is not entitled to recovery of possession of the gold bar from the Defendant/Trustee. The Plaintiff has the burden of establishing that the Debtor was in possession of the property at the inception of the reorganization proceedings and that possession thereof was transferred to the Trustee. This she has failed to do.
8. The Trustee is entitled to possession and is charged with the responsibility of obtaining possession of all property of the Debtor as of the date of filing the original petition initiating the reorganization proceedings. Since the Trustee was not in possession of the property at the time of the filing of this proceeding, nor was the Debt- or in possession of the property at the time of the initial reorganization petition, the Plaintiff is not entitled to relief against the Defendant/Trustee. See 11 U.S.C. § 541; Vol. 4 Collier on Bankruptcy, 15th Edition, ¶ 541.01 at et seq.
9. The Court can find no legal prohibition against a substitution of cash for the gold bar as it is obvious the Debtor *286could only use cash in its operations. The facts before me do not violate any provisions of 11 U.S.C. § 547 or § 548.
10. A Final Judgment will be entered in accordance with these Findings of Fact and Conclusions. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8488913/ | OPINION
EMIL F. GOLDHABER, Bankruptcy Judge:
The issue at bench is whether we should reconsider and amend our opinion and order of December 11,1979, in which we concluded that we did not have summary jurisdiction over the complaint filed by the debtor in possession seeking the recovery of funds allegedly misappropriated by the defendants from the debtor in possession. We conclude that no reason has been demonstrated why we should reconsider and amend that opinion and we will, therefore, deny the motion to reconsider and amend.
The facts of this case are as follows:1 On April 3, 1979, Haverford Place Associates, Ltd. (“Haverford”) filed a petition under Chapter XII of the Bankruptcy Act (“the Act”).2 On August 1,1979, Haverford filed an adversary complaint against Carl G. Wittig and Diamond State Realty Company, the former general partner and managing agent, respectively, of Haverford. The complaint alleged, in part, that the defendants had diverted to themselves money from the sale of limited partnership subscriptions and from rental income received by Haverford and sought to recover that money for the estate. The defendants moved to dismiss the complaint for lack of summary jurisdiction. In an opinion and *315order dated December 11,1979, we concluded that we lacked summary jurisdiction over the complaint and granted the defendants’ motion to dismiss; In re Haverford Place Associates, Ltd., 1 B.R. 451 (Bkrtcy.E.D.Pa.1979). Haverford subsequently filed a motion to reconsider and to amend that opinion and order. It is that motion which is presently before us.
Rule 59 of the Federal Rules of Civil Procedure, made applicable to this adversary proceeding by Rules 12-60(a), 752(b) and 923 of the Rules of Bankruptcy Procedure, provides that, in an action tried without a jury, a new trial on any or all of the issues may be granted “for any of the reasons for which rehearings have heretofore been granted in suits in equity in the courts of the United States.” Rehearings in such cases have traditionally been granted on one of three grounds: (1) manifest error of law, (2) manifest error of fact and (3) newly discovered evidence. See, e. g., Brown v. Wright, 588 F.2d 708 (9th Cir. 1978), citing 6A Moore’s Federal Practice ¶ 59.07 at 59-94.
In the instant case, Haverford does not contend that there is any newly discovered evidence in this case that would warrant a rehearing. Rather, Haverford asserts that it was error (either of law or of fact) for us to conclude that the complaint filed by it was not subject to our jurisdiction. Haverford argues, as it did at the time we made our decision, that its complaint is one to recover specific money of the debtor which is in the hands of third parties (the defendants) and is, therefore, within the summary jurisdiction of the bankruptcy court. However, as we stated in our prior decision, the bankruptcy court cannot obtain summary jurisdiction over a proceeding, which is ordinarily outside of that jurisdiction, merely because of the way that the complaint is worded. Since Haverford’s complaint herein is, in substance, a complaint to recover damages for fraud, misappropriation and breach of fiduciary duty, we do not have summary jurisdiction over it. See, e. g., In re Standard Gas and Electric Company, 119 F.2d 658 (3d Cir. 1941). Moreover, we cannot obtain jurisdiction over that complaint merely because it is phrased as a complaint to recover a specific fund of money belonging to the debtor. Consequently, finding no error of law or fact in our prior opinion and order in this case, we will deny the motion to reconsider and to amend that opinion and order.
. This opinion constitutes the findings of fact and conclusions of law required by Rule 752 of the Rules of Bankruptcy Procedure.
. Although the Bankruptcy Act has been superseded by the Bankruptcy Code as of October 1, 1979, the provisions of the Act still apply to petitions filed before that date. The Bankruptcy Reform Act of 1978, Pub.L.No. 95-598, § 403, 92 Stat. 2683 (1978). | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8488914/ | ORDER ON MOTION TO DISMISS
ALEXANDER L. PASKAY, Chief Bankruptcy Judge.
THE MATTER under consideration is the timeliness of a Notice of Appeal filed by Data Dynamics, Inc. (Data) in the above-captioned adversary proceeding. The Notice of Appeal is addressed to an order heretofore entered by this Court which denied Data’s Motion to Dismiss the complaint, a motion which challenged the summary jurisdiction of this Court and also sought a dismissal on the ground that the Trustee failed to join an indispensable party. The Order was entered on May 16, 1980. On May 27,1980, Data filed a Motion for Rehearing which motion alleged no new facts, but basically reargued the same matters previously urged by Data. On July 10, 1980, this Court entered an order and denied the Motion for Rehearing. On July 18, 1980, Data filed a Notice of Appeal. The timeliness of that Notice is the matter under consideration and is presented for the Court’s consideration on a Motion filed by the Trustee who seeks a dismissal of the Appeal on the ground that a Notice of Appeal was not filed within 10 days from May 16, 1980, that is, within 10 days from the date of the order which denied the Motion to Dismiss and, therefore, according to the Trustee, the Appeal is no longer timely.
The time to file an appeal is governed by Bankruptcy Rule 802, which provides as follows:
“Rule 802(a). Ten-Day Period.
The notice of appeal shall be filed with the referee within 10 days of the date of the entry of the judgment or order appealed from.
Rule 802(b). Effect of Motion on Time for Appeal.
The running of the time for filing a notice of appeal is terminated as to all parties by a timely motion filed with the referee by any party pursuant to the rules hereafter enumerated in this subdivision. The full time for appeal fixed by this rule commences to run and is to be computed from the entry of any of the following orders made upon a timely motion under such rules: (1) granting or denying a motion for judgment notw’th-*332standing the verdict under Rule 115(b)(4); (2) granting or denying a motion under Rule 752(b) to amend or make additional findings of fact, whether or not an alteration of the judgment would be required if the motion is granted; (3) granting or denying a motion under Rule 923 to alter or amend the judgment; or (4) denying a motion for a new trial under Rule 923.”
It is the contention of Data that the granting or denying of a Motion under Rule 923 to alter or amend a judgment tolled the time to file a Notice of Appeal, therefore, its appeal is timely. Bankruptcy Rule 923 adopts Rule 59 of the Fed.R.Civ.P. which deals with motions to alter or amend judgments granting 10 days to file such a motion after entry of the judgment. Since in this instance, Data filed its motion for rehearing within 10 days, the motion effectively stopped the running of time to file a Notice of Appeal according to Data. To further bolster its contention, realizing that the order sought to be appealed was not labeled as a judgment or a decree which is, of course, an indispensable element before either Rule 59 or Bankruptcy Rule 923 would apply, it contends that the term “judgment” is defined by the Fed.R.Civ.P. 54(a) as a decree and any order from which an appeal lies. (Emphasis supplied). Therefore, the fact that the appeal is challenging an order and not a judgment or a decree is without significance and is immaterial.
The difficulty with the proposition urged by counsel for Data stems from the very provision of Fed.R.Civ.P. 54(a) and as emphasized earlier, an order is to be within the meaning of the term “judgment or decree” must be an appealable order.
Under the Bankruptcy Act, one must make an initial distinction between “proceedings in Bankruptcy” i. e. those matters affecting or involving administrative aspects of the proceeding and “controversies arising in Bankruptcy proceedings”, i. e. “those matters which are not mere steps” in the ordinary administration of the bankrupt, but which present distinct and separate issues between the trustee and adverse claimants. In re Durensky, 519 F.2d 1024 (5th Cir. 1975).
With respect to “controversies arising in bankruptcy proceedings”, final orders are appealable as a matter of right, while non-final orders must fit within the provisions of 28 U.S.C. § 1292(b). See 2 Collier on Bankruptcy, ¶¶ 24.27 and 24.37.
With respect to the denial of the motion to dismiss a complaint for lack of summary jurisdiction, the cases of In re Durensky, supra and In re Photo Engraving Corp., 54 F.2d 628 (2d Cir. 1931) are controlling. In Durensky, supra the Court stated that the denial of a motion to dismiss for lack of jurisdiction is an interlocutory order which is not ordinarily appealable under the final judgment rule.
Perhaps more analogous to the case at bar, is In re Photo Engraving Corp., supra in which the Court stated that where the litigation was in the posture of a “controversy arising in a bankruptcy proceeding” an appeal from a final order was a matter of right. A determination of the existence of summary jurisdiction, however, without passing on the merits is a non-final order and is, therefore, not appealable. In Ben Hyman & Co., Inc. v. Fulton National Bank, 577 F.2d 966 (5th Cir. 1978) the Bankruptcy Court’s order was interlocutory in a “controversy arising in Bankruptcy proceedings”, therefore, the Court refused to hear the appeal. See also, In re Horton, 621 F.2d 968 (9th Cir. 1980); 9 Am.Jur.2d Bankruptcy, § 1691.
This leaves for consideration the remaining question whether the order denying a motion to dismiss for failure to join an indispensable party pursuant to Bankruptcy Rule 712(b)(7) is an appealable order. If the order is a final order, i. e. nothing remains for the Court to do, save to enforce by execution the judgment or what has been determined, then the order is appeala-ble as a matter of right. Parr v. United States, 351 U.S. 513, 76 S.Ct. 912, 100 L.Ed. 1377 (1955); See also 32 Am.Jur.2d Fed. Practice and Procedure, § 355. If, however, the order is non-final, it is appealable only *333if it falls within the four limited exceptions of Title 28 U.S.C. § 1292(a)(1) (injunctions); (a)(2) appointment or removal of receiver; (a)(3) admiralty and (a)(4) patent infringement, all of which are clearly inapplicable. There is, however, also the possibility of an appeal of a non-final order by virtue of Title 28, U.S.C. § 1292(b). That Section, however, requires that there be a substantial basis for difference of opinion among the courts; that an immediate appeal from the order may materially advance the ultimate termination of the litigation; and the judge shall so state in writing in his order that those grounds exist. This Court is satisfied that the prerequisites to filing an appeal pursuant to § 1292(b) were never utilized in this case and such an appeal cannot lie.
Ordinarily, rulings on the pleadings that do not terminate the action by entry of judgment for Plaintiff or Defendant are not final. Orders denying motions to dismiss are not final, and this general rule applies to motions based on the pleadings. The Second Circuit has recently stated that “it was not aware of any case permitting appellate review from an order denying a motion addressed to the pleadings.” Wright and Miller, 15 Federal Practice and Procedure, § 3914 citing Papilsky v. Berndt, 503 F.2d 554, 555 (2d Cir. 1974) cert. den. 419 U.S. 1048, 95 S.Ct. 624, 42 L.Ed.2d 643. This Court is in agreement with the Second Circuit and finds that in-roads made into the final judgment rule in some cases, i. e. Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 69 S.Ct. 1221, 93 L.Ed. 1528 (1949) not applicable to the case at bar.
Therefore, this Court is satisfied that the denial of the motion to dismiss for failure to join an indispensable party is presently unreviewable and must await a decision on the merits, because the order is a non-final order that does not fall within the ambit of Title 28 U.S.C. § 1292(a) or (b).
Accordingly, it is
ORDERED, ADJUDGED AND DECREED that the Trustee’s Motion to Dismiss the appeal be, and the same hereby is, granted. It is further
ORDERED, ADJUDGED AND DECREED that Data Dynamics be, and the same hereby is, directed to file its responsive pleading to the Trustee’s complaint within 15 days from the date of entry of this Order. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8488916/ | MEMORANDUM OPINION AND ORDER
RICHARD L. SPEER, Bankruptcy Judge.
This matter comes before the Court on a Complaint to sell filed by the Trustee and *408an Application For Determination Of Secured Status filed by Creditor, Dull Lumber Co. Both parties have agreed that the Court may rule based upon the pleadings and the exhibits.
The question to be resolved is whether or not the security interest of Dull Lumber Co. is perfected pursuant to the statutes of Ohio, whereby they would share in any proceeds of sale of the items by the Trustee. The items sought to be sold are miscellaneous construction equipment used by the Debtor in his business. Copies of the security instruments filed by the Dull Lumber Co. as exhibits with their answer indicate that while the promissory note in the amount of One Thousand Nine Hundred Fifty-Six Dollars and Fifty-Eight cents ($1,956.58) was signed by Charles A. Eberle, Jr., the financing statement reflects that the property was owned by Charles A. Eberle, Jr. d/b/a E & E Builders and the security agreement is signed Charles A. Eberle, Jr., E & E Builders. It would therefore appear that this Debtor was engaged in a construction business at the time the security instruments were signed.
The proper Ohio Revised Code section which applies in this case is Section 1309.38 which basically states that a security interest given to a creditor by one engaged in business or by a business must be recorded in the Secretary of State’s Office in Columbus and the County Recorder’s Office in the county in which the place of business operates.
Since it appears from the Creditor’s own exhibits that neither the financing statement nor the security agreement were filed in Columbus at the Secretary of State’s Office, but only in the County Recorder’s Office, it would appear that Dull Lumber Company has failed to perfect its secured status as required by the Ohio statutes. See In re O’Brodo, 36 OO 2d 170 (1966).
Accordingly, it is therefore ORDERED, ADJUDGED AND DECREED that the Complaint of the Trustee to sell is granted and that the Application For Determination Of Secured Status is granted in that the Dull Lumber Company is hereby found not to be a secured creditor as to the miscellaneous construction equipment. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8488917/ | MEMORANDUM DECISION
RALPH R. MABEY, Bankruptcy Judge.
On January 4, 1978, Patio Springs, Inc. (Patio Springs or the bankrupt) filed a voluntary petition for relief under Chapter XI of the Bankruptcy Act. At the time of the filing, Patio Springs, owned approximately 12,000 acres of real property in Weber County, Utah. This property was encumbered by a first mortgage in favor of First Security Bank of Utah, N.A. (First Security Bank or the bank). Pursuant to orders of the Court on March 23, 1979 and July 13, 1979, the stay against First Security Bank was vacated and the bank was allowed first to obtain a judgment of foreclosure and then to foreclose. The real property in question was sold to the Bank at a foreclosure sale for approximately $6,100,000 on October 18, 1979 at 12 o’clock noon. As of that date, in accordance with Rule 69(f)(3) of the Utah Rules of Civil Procedure, the debtor’s six month period of redemption began to run. On April 17, 1980, the day before the expiration of the redemption period, pursuant to Rule ll-42(a)(2), Fed.R. Bankr.P., the Court adjudicated the debtor . a bankrupt and appointed William Thomas Thurman, Esq., as trustee. The trustee subsequently made application to the Court to sell the bankrupt’s equity of redemption, claiming that the bankrupt’s right to redeem was extended by the terms of Section 11(e) of the Bankruptcy Act, former 11 U.S.C. § 29(e), for an additional 60 days. Both sides have filed well-reasoned memo-randa addressing the issues, and the case is submitted to the Court for ruling.
Section 11(e) of the Bankruptcy Act, former 11 U.S.C. § 29(e), states:
*429Where, by any agreement, a period of limitation is fixed for instituting a suit or proceeding upon any claim, or for presenting or filing any claim, proof of claim, proof of loss, demand, notice, or the like, or where in any proceeding, judicial or otherwise, a period of limitation is fixed, either in such proceeding or by applicable Federal or State law, for taking any action, filing any claim or pleading, or doing any act, and where in any such case such period had not expired at the date of the filing of the petition in bankruptcy, the receiver or trustee of the bankrupt may, for the benefit of the estate, take any such action or do any such act, required of or permitted to the bankrupt, within a period of sixty days subsequent to the date of adjudication or within such further period as may be permitted by the agreement or in the proceeding or by applicable Federal or State law, as the case may be.
Where a debtor in a Chapter XI proceeding is later adjudicated a bankrupt, Section 378 of the Bankruptcy Act directs:
Upon the entry of an order directing that bankruptcy be proceeded with ... (2) in the case of a petition filed under section 322 of this Act, the proceeding shall be conducted, so far as possible, in the same manner and with like effect as if a voluntary petition for adjudication in bankruptcy had been filed and a decree of adjudication had been entered on the day when the petition under this chapter was filed ....
Rule 122, Fed.R.Bankr.P., further provides:
When an order is entered in a Chapter 10, 11, 12, or 13 case directing that the case continue as a bankruptcy case, the procedure shall be as follows:
(1) In all respects other than as provided in the following paragraphs, the case shall be deemed to have been commenced as of the date of the filing of the first petition initiating a case under the title and shall be conducted as far as possible as if no petition commencing a chapter case had been filed.
The interaction of these sections raises a question as to what constitutes the “date of adjudication” for the purpose of applying the 60 day period of limitation found in Section 11(e) of the Bankruptcy Act, 11 U.S.C. § 29(e). First Security Bank argues that by application of § 378(a)(2) of the Bankruptcy Act, and Rule 122, Fed.R. Bankr.P., the date of adjudication must be determined to be the date when the Chapter XI petition was originally filed, or on January 4, 1978. Therefore, the 60 day period of limitation for the trustee to act expired in March of 1978. The bankrupt, on the other hand, argues that since this cause of action arose in the course of the Chapter XI proceeding, the date of adjudication for purposes of applying section 11(e) is the actual date of adjudication, or April 17,1980. Under this reasoning, the present trustee would be entitled to exercise his rights under 11(e) through June 16, 1980.
The case of United States v. Paul Hardeman, Inc., 260 F.Supp. 723 (M.D.Fla.1966), presents a situation similar to the present case in that the court was concerned with interpreting the meaning of the “date of adjudication” for purposes of applying, § 11(e) to a cause of action which had-accrued to the debtor-in-possession during the pendency of the Chapter XI proceeding. The court was asked to apply the first part of § 11(e) of the Bankruptcy Act which sets a two year statute of limitation “subsequent to the date of adjudication” within which the trustee must commence a proceeding on any claim against which a federal or state statute of limitations had not expired at the time of the filing of the petition. The suit in Hardeman had been commenced subsequent to the one-year statute of limitations set by applicable federal law, was instituted more than two years from the date of the filing of the Chapter XI petition, but was filed within the years from the actual date of adjudication of the debtor. The court first differentiated between the debtor-in-possession and the trustee in bankruptcy, recognizing the separate and distinct nature of these parties and the estates under their control. It held, therefore, that
*430a chose of action accruing to the debtor in possession is not deemed to be accrued during the administration of the trustee in bankruptcy, so as to prevent the application of § 11(e) to the chose if it is unexpired at the date the debtor is adjudged bankrupt under Section 376(2).
Id. at 726. The court then proceeded to address the identical issue with which this Court is concerned and held that where a cause of action accrued during the Chapter XI proceeding to a debtor in possession, instead of prior to the filing of the Chapter XI petition,
in order to comply with Section 70(a)(5) when the chose of action accrued to the debtor in possession, the date ‘initiating a proceeding under this Act’ must be construed as the date the order is entered under Section 376(2) directing straight bankruptcy to proceed.
Id. at 727. Emphasizing again the separateness of the two estates involved, the court’s reasoning was based on the premise that the trustee had a right to inherit a chose of action accruing during the penden-cy of a Chapter XI proceeding with the “full benefit of Section 11(e).” Implicit in the court’s reasoning was recognition of the anomaly which would be created if Section 11(e) were interpreted otherwise, for if the “date of adjudication” was held to mean the date on which the petition in Chapter XI had been filed, the Section 11(e) statute of limitations would begin to run even before the case of action had accrued.
The Court finds the reasoning of the Hardeman case to be persuasive in the present context. Section 11(e) was obviously included in the Bankruptcy Act to allow the trustee time to assess his rights as successor to the debtor in possession so as to maximize the assets available upon liquidation to the creditors. See In re Thomas J. Grosso Investment, Inc., 457 F.2d 168 (9th Cir. 1972) (§ 11 creates a “grace period”). Although the provisions in Section 11(e) are available to the debtor-in-possession, the debtor-in-possession proceeds with a different end in mind, that of rejuvenating a financially plagued debtor, than does a trustee, who seeks to liquidate the assets of the debtor and to maximize returns to the debt- or’s creditors. In recognition of the differences between, and the separateness of these two estates, both Section 378(a)(2) of the Bankruptcy Act and Rule 122, Fed.R. Bankr.P., direct that upon adjudication, the proceeding should be conducted “as far as possible ” as if adjudication had been made on the date the Chapter XI proceeding was commenced. By terms of the Act, it is therefore realized that there are some situations where relation back to the date of the filing of the Chapter XI petition would not allow for proper application of other provisions in the Act. As aptly explained in Hardeman, the factual setting presented in this case is one of those situations. Where a cause of action accrues during the pend-ency of a Chapter XI proceeding, if the date of adjudication were mechanically determined to be the date of the filing of the original Chapter XI petition, Section 11(e) would often be wholly unavailable to the trustee in bankruptcy when the case was adjudicated. In the situation presented to the Court, the time limits set in Section 11(e) not only would have expired long before the trustee was ever appointed, but would have expired before the right at issue ever came into existence.
Therefore, in order to give meaning to the rights created in Section 11(e), the Court now holds that where a cause of action accrues to a debtor-in — possession, for purposes of applying Section 11(e) as concerns that right, the “date of adjudication” is the actual date of adjudication and does not relate back to when the Chapter proceeding was filed.
The cases cited by First Security Bank are not inconsistent with this proposition. Several address the application of Section 11(e) to actions accruing prior to the filing of the original Chapter XI petition. See Henkin v. Rockower Brothers, Inc., 259 F.Supp. 202 (S.D.N.Y.1966); Liman v. Bank of Nova Scotia, 337 F.Supp. 62 (S.D.N.Y.1971). As previously noted, this circumstance gives rise to different legal and equitable arguments from the one at hand. *431The reasoning of the cases of In re Ira Haupt & Co., 390 F.2d 251 (2nd Cir. 1968) (application of Section 378(a)(1)) and In re Setzler, 73 F.Supp. 314 (C.D.Cal.1947), are inapplicable to the question now before the Court in that they deal with different factual and legal situations.
The bankrupt urges the Court to acknowledge application of § 391 of the Bankruptcy Act which suspends “all statutes of limitation affecting claims provable under this chapter and the running of all periods of time prescribed by this title in respect to the commission of acts of bankruptcy, the recovery of preferences and the avoidance of liens” during the pendency of a Chapter XI proceeding. Having determined the date of adjudication to the actual date of adjudication in this case, it is unnecessary for the Court to determine whether this provision would apply to suspend the running of the equity of redemption.
By terms of Section 11(e) of the Bankruptcy Act, 11 U.S.C. § 29(e), the questions of whether the sixty day extension of time in which to act applies to an equity of redemption is left unanswered. Section 11(e) deals with the extension of two separate types of limitations. The first involves periods of limitation set by “agreement.” Where limitations from this source are concerned, Section 11(e) gives the trustee at least 60 days in which to act if such limitations were “for instituting a suit or proceeding upon any claim, or for presenting or filing any claim, proof of claim, proof of loss, demand, notice, or the like.” The second type of period of limitation are those set in “any proceeding, judicial or otherwise, ... either in such proceeding or by applicable Federal or State law.” The breadth of Section 11(e) expands as concerns these types of limitations. In periods of limitations arising from these sources, the trustee has at least 60 days in which to act if the limitations were fixed “for taking any action, filing any claim or pleading, or doing any act.” This distinction is well laid out in the opinion of Good Hope Refineries, Inc. v. Benavides, 602 F.2d 998, 5 B.C.D. 620 (1st Cir. 1979). In that case, the court held that the time period set for the payment of a delay rental or option contract, was not extended by Section 11(e). This period of limitation, the court reasoned, fell into the first category as being set by “agreement” which limits the application of Section 11(e) to limitations involving the “instituting of a suit or proceeding upon any claim, or for presenting or filing any claim, proof of claim, proof of loss, demand, notice, or the like.” The court held that a payment to extend or exercise an option was not akin to the kinds of limitations enumerated in this category as being subject to an extension of time, and therefore, this time period created by agreement was not extended. The court further noted, however, that the second category of types of limitations is much broader. Unlike the Good Hope Refineries case, a close scrutiny of the origin of the limitation placed upon an equity of redemption reveals that it fits into the second category of limitations. The time period set for an equity of redemption is a period set by “applicable ... State law” which begins to run only pursuant to a judicial “proceeding.” Thus, if this limitation is set for “taking any action, filing any claim or pleading, or doing any act,” and has “not expired at the date of the filing of the petition in bankruptcy, the receiver or trustee of the bankrupt may, for the benefit of the estate, take any such action or do any such act, required to or permitted to the bankrupt” within 60 days of the date of adjudication.
It is, first of all, essential to note that the equity of redemption, and its concomitant rights to exercise or transfer such, are property rights of the debtor to which the trustee succeeds. See Local Realty Co. v. Lindquist, 96 Utah 297, 85 P.2d 770, 775 (1938). As such is the case, the applicable provisions of Section 11(e) are broad enough to encompass the limitation placed on the exercise or transfer of this right. The almost open-ended articulation of Section 11(e) to extend periods of limitation for “taking any action, filing any claim or pleading, or doing any act” when such limitations are set in a “proceeding, judicial or otherwise,” whether fixed “in such proceeding or by *432applicable Federal or State law,” leaves ample room for the inclusion of a period of limitation, such as the one at hand. In fact, no persuasive argument has been made to defeat the application of the broad terms of Section 11(e) to this particular type of limitation. Reference to the legislative history of Section 11(e) former 11 U.S.C. § 29(e), provides no additional guidance on the intended breadth of the section. Therefore, the Court holds that consistent with the plain meaning of Section 11(e), the running of the equity of redemption held by the debtor is extended an additional 60 days from the date of adjudication, or until June 16, 1980.
This holding is not inconsistent with the case of Layton v. Layton, 105 Utah 1, 140 P.2d 759 (1943). In that case, the Utah Supreme Court held that the automatic stay initiated by the filing of a petition in bankruptcy does not stay the running of the equity of redemption without further action. The holding of the court probably represents a correct analysis of the breadth of the automatic stay provision. The Utah court, however, did not address the issue of the application of Section 11(e) and therefore provides no precedent contrary to the Court’s ruling today. In any case, interpretation of Section 11(e) is a federal question to be resolved by the bankruptcy court.
The bank has questioned whether the circumstances involved would qualify the debtor for an equitable extension of the redemption period under Utah state law. Such a determination is unnecessary to this proceeding. This Court is not concerned with the application of state law, but with the application of a specific provision of the bankruptcy law. Mollerup v. Storage Systems International, 569 P.2d 1122 (Utah 1979) (extensions of the equity of redemption granted by lower state court under Rule 6(b), U.R.C.P., reversed as not being based on “adequate cause”), is therefore inapplicable to this Court’s decision.
Arguments have been advanced on both sides concerning the equities which should be considered by the Court in its determination. In the Court’s view, the issues involved are ones of statutory interpretation providing no room to accommodate the types of equitable arguments made. The Court recognizes that the proceedings attendant to this particular bankruptcy case have been long and drawn out, and although the Court’s ruling today may seem harsh to a creditor who has long been standing in the wings, the equities are built into the statute itself: It dispenses strong medicine, but the potency of its medicine lasts but 60 days.
It follows from the foregoing that the deed issued by the Sheriff of Weber County to First Security Bank on or about April 18, 1980, is void and that the period during which the trustee may redeem the property extends until June 16, 1980 at 12 noon. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482784/ | Third District Court of Appeal
State of Florida
Opinion filed November 10, 2022.
Not final until disposition of timely filed motion for rehearing.
________________
No. 3D22-0165
Lower Tribunal No. 21-22821
________________
The Department of Off-Street Parking of the City of Miami,
Appellant,
vs.
Downtown 56, LLC,
Appellee.
An Appeal from a non-final order from the Circuit Court for Miami-
Dade County, Reemberto Diaz, Judge.
Victoria Méndez, City Attorney and Eric J. Eves, Assistant City
Attorney, for appellant.
Stok Kon + Braverman, and Robert A. Stok (Fort Lauderdale), for
appellee.
Before LOGUE, MILLER and BOKOR, JJ.
PER CURIAM.
Affirmed. Airbnb, Inc. v. Doe, 336 So. 3d 698, 705 (Fla. 2022)
(explaining that “because Airbnb's Terms of Service incorporate by
reference the AAA Rules that expressly delegate arbitrability
determinations to an arbitrator, the agreement clearly and unmistakably
evidences the parties’ intent to empower an arbitrator, rather than a court,
to resolve questions of arbitrability”); see also Seifert v. U.S. Home Corp.,
750 So. 2d 633, 636 (Fla. 1999) (recognizing three elements for courts to
consider when ruling on a motion to compel arbitration: 1) whether a valid
written agreement to arbitrate exists; 2) whether an arbitrable issue exists;
and 3) whether the right to arbitration has been waived).
2 | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482789/ | Third District Court of Appeal
State of Florida
Opinion filed November 10, 2022.
Not final until disposition of timely filed motion for rehearing.
________________
No. 3D21-1956
Lower Tribunal No. F13-13911
________________
Raishawn Robinson,
Appellant,
vs.
The State of Florida,
Appellee.
An Appeal from the Circuit Court for Miami-Dade County, Jose L.
Fernandez, Judge.
Carlos J. Martinez, Public Defender, and James Odell and Susan S.
Lerner, Assistant Public Defenders, for appellant.
Ashley Moody, Attorney General, and Sonia Perez, Assistant
Attorney General, for appellee.
Before FERNANDEZ, C.J., and MILLER, and LOBREE, JJ.
PER CURIAM.
Affirmed. | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482786/ | Third District Court of Appeal
State of Florida
Opinion filed November 10, 2022.
________________
No. 3D20-630
Lower Tribunal No. 18-37446
________________
Stephen Hess, et al.,
Appellants,
vs.
PMG-S2 Sunny Isles, LLC,
Appellee.
An Appeal from the Circuit Court for Miami-Dade County, William
Thomas, Judge.
Quintana Law Firm, and J. Luis Quintana; Schlesinger Law Group, and
Michael J. Schlesinger; Shutts & Bowen LLP, and Julissa Rodriguez, for
appellants.
Kluger, Kaplan, Silverman, Katzen & Levine, P.L., Josh M. Rubens and
Philippe Lieberman; Samson Appellate Law, and Daniel M. Samson, for
appellee.
Before FERNANDEZ, C.J., and SCALES and GORDO, JJ.
GORDO, J.
ON MOTION FOR REHEARING
We deny PMG-S2 Sunny Isles, LLC’s motion for clarification, rehearing
and rehearing en banc, but withdraw our previous opinion, and substitute the
following opinion in its stead.
INTRODUCTION
Stephen Hess, Clearwater Beach Company, LLC, Muse 1901, LLC,
Muse 2101, LLC and Muse 2201, LLC appeal a final judgment in favor of
PMG-S2 Sunny Isles, LLC. We have jurisdiction. Fla. R. App. P.
9.030(c)(1)(A). We affirm the trial court’s order awarding summary judgment
in PMG’s favor in all regards. We find, however, the trial court erred in not
allowing the Muse entities to amend their pleadings regarding calculation of
the return of the deposits and therefore remand with instructions to allow
amendment.
FACTUAL AND PROCEDURAL BACKGROUND
In 2014, Stephen Hess visited Muse, a condominium located in Miami-
Dade being developed by PMG, where he reviewed promotional materials
and floor plans for prospective units. Hess, and his company Clearwater,
subsequently entered into purchase agreements with PMG for the purchase
and sale of three pre-construction condominium units at Muse. Hess paid
PMG $6.1 million in deposits for the units.
2
The terms of the agreements barred assignment and amendment
without the consent of PMG and a signed written instrument. Per the
agreements, if Hess and Clearwater defaulted, PMG was entitled to
terminate the agreements and apply a specific damages clause to calculate
PMG’s damages. Four subsequent amendments to the agreements were
made, and three were sent to Hess and Clearwater. In the first, PMG agreed
Hess could assign its interest in the agreements to an affiliated domestic
corporate entity. The second detailed modifications regarding an institutional
mortgagee. The third only affected future purchasers and was not sent to
Hess or Clearwater and the fourth detailed changes to the property
management agreement and reflected the unit’s final square footage.
Neither Hess nor Clearwater sent any written notice to rescind the
agreements due to these amendments.
In May 2018, Hess and Clearwater assigned their “rights, title, interests
and obligations” under the agreements to Muse 1901, Muse 2101 and Muse
2201 (the “Muse entities”). 1 Notice of the assignments were sent to PMG.
Closing was scheduled for May 31, 2018, but the Muse entities failed to
timely close. In late June, PMG furnished the Muse entities with formal
written notice of default and terminated the agreements.
1
All three Muse entities are wholly owned by Hess.
3
In November 2018, Hess and Clearwater filed a complaint against
PMG for recission pursuant to sections 718.202 and 718.506, Florida
Statutes, breach of contract and declaratory judgment challenging the
enforceability of the default damages clause in the agreements. Following a
motion by PMG, the trial court dismissed the declaratory judgment action
without prejudice as the issue was not ripe because the units had not been
resold. 2 Hess and Clearwater then filed an amended complaint, including
the Muse entities as co-plaintiffs and reasserting the claims for recission and
breach of contract only. After initial discovery was conducted, both Hess and
PMG filed motions for summary judgment.
2
In granting the motion to dismiss the trial court stated:
THE COURT: What about the fact that it’s
premature? We’re not even there yet. And why
should I, in this instance, give you an advisory
opinion of how I think it should go assuming that
you’re not fully compensated pursuant to the
contract?
...
Why don’t we make that determination if we
determine that there is a breach? In other words, we
can litigate the case based upon the other three
allegations in the complaint. If the Court finds that
there is a breach, then we can litigate the issue of
whether or not when the breach occurred and
what damages you are entitled to.
(emphasis added).
4
In March 2020, rather than proceeding to trial, the trial court heard
argument in support of the cross-motions and granted PMG’s motion for
summary judgment finding Hess and Clearwater lacked standing and the
remaining claims were unsupported. Hess and the Muse entities
subsequently filed a motion for reconsideration of the entry of summary
judgment and requested to amend their complaint to reassert their previous
claim regarding the calculation of the deposits because they learned the
issue had recently ripened as PMG resold at least one of the units. The trial
court subsequently denied the motion for rehearing and motion to amend,
entering final judgment in PMG’s favor. This appeal followed.
LEGAL ANALYSIS
We review the entry of summary judgment de novo. See Volusia Cnty.
v. Aberdeen at Ormand Beach, L.P., 760 So. 2d 126, 130 (Fla. 2000).3 We
review for abuse of discretion a trial court’s denial of leave to amend a
pleading. See Jain v. Buchanan Ingersoll & Rooney PC, 322 So. 3d 1201,
1204 (Fla. 3d DCA 2021), reh’g denied (July 27, 2021). We affirm without
further discussion the trial court’s ruling that PMG was properly entitled to
3
“Where the trial court has adjudicated the summary judgment motion prior
to the new rule’s May 1, 2021, effective date (as the trial court did in this
case), we apply the pre-amendment rule in our review on appeal.” De Los
Angeles v. Winn-Dixie Stores, Inc., 326 So. 3d 811, 813 (Fla. 3d DCA 2021).
5
summary judgment as a matter of law on the issues raised. We reverse,
however, as the Muse entities should have been allowed to amend their
pleadings.
Florida Rule of Civil Procedure 1.190(a) requires courts to allow
amendment of pleadings which “shall be given freely when justice so
requires.” This Court has considered some exceptions to this rule, such as
abuse of the privilege to amend, futility of the proposed amendment and
prejudice to the opposing party. See Grove Isle Ass’n, Inc. v. Grove Isle
Assocs., LLLP, 137 So. 3d 1081, 1090 (Fla. 3d DCA 2014) (“A trial court
should give leave to amend a deficient complaint unless . . . the complaint
shows on its face that there is a deficiency which cannot be cured by
amendment.” (quoting Unitech Corp. v. Atl. Nat’l Bank of Miami, 472 So. 2d
817, 818 (Fla. 3d DCA 1985))); Annex Indus. Park, LLC v. City of Hialeah,
218 So. 3d 452, 453 (Fla. 3d DCA 2017) (“‘Leave to amend should not be
denied unless the privilege has been abused or the complaint is clearly not
amendable.’” (quoting Osborne v. Delta Maint. and Welding, Inc., 365 So. 2d
425, 427 (Fla. 2d DCA 1978))); Carib Ocean Shipping, Inc. v. Armas, 854
So. 2d 234, 236 (Fla. 3d DCA 2003) (noting “amendments may be denied
when there is a sufficient showing of prejudice to the opposing party”); Vella
v. Salaues, 290 So. 3d 946, 949 (Fla. 3d DCA 2019) (“‘[W]hile the policy in
6
Florida is to liberally allow amendments to pleadings where justice so
requires, a trial judge in the exercise of sound discretion may deny further
amendments [where the same materially varies from the relief initially
sought, or] where a case has progressed to a point that the liberality
ordinarily to be indulged has diminished.’” (quoting Alvarez v. DeAguirre, 395
So. 2d 213, 216 (Fla. 3d DCA 1981))).
Importantly, in Jain we found the trial court did not abuse its discretion
in denying a plaintiff’s motion to amend her pleadings after summary
judgment was entered in the defendant’s favor where the plaintiff conceded
“in her brief that she only sought leave to amend because she saw the
‘handwriting on the wall’” and the “proposed amendment would advance new
issues that contradict her prior unsuccessful theories.” Jain, 322 So. 3d at
1206. This Court determined “[a] party who opposes summary judgment will
not be permitted to alter the position of his or her previous pleadings,
admissions, affidavits, depositions or testimony in order to defeat a summary
judgment.” Id.
Here, the Muse entities moved to amend their pleadings after the entry
of summary judgment, but the purpose of their amendment was not to
advance a new issue or otherwise undermine the trial court’s summary
judgment liability determination. Rather, the amendment sought to have the
7
deposits distributed consistent with the terms of the default provision
following the trial court’s determination the purchase agreements were not
rescinded. The Muse entities’ motion to amend was consistent with the trial
court’s position at the hearing on the motion to dismiss, which stated that
entitlement to the deposits should be litigated after the issue of breach was
determined. 4
Under the specific facts of this case, where an initial complaint seeking
a judicial determination of the disposition of the deposits was filed, the trial
court dismissed the count as premature as the application of the default
provisions were uncertain and events transpired during the pendency of the
action adding Hess’s wholly owned Muse entities as parties and rendering
the default provisions ripe for enforcement, we conclude it was error not to
allow amendment by the Muse entities.
Affirmed in part, reversed in part, and remanded with instructions.
4
We note at oral argument Counsel for PMG contended all $6.1 million of
Hess’s deposits were necessarily forfeited because any arguments
regarding their return would be barred under the doctrine of res judicata. We
express no opinion as to this res judicata argument as it was not before us
and to do so would be advisory. The interests of justice, however, are
necessarily implicated here where a party argued all terms of a purchase
agreement are enforceable, but now seeks to evade the impact of some
provisions and obtain a windfall. Given that “any doubts should be resolved
in favor of the amendment,” the Muse entities should have been granted
leave to amend their complaint. Overnight Success Const., Inc. v. Pavarini
Const. Co., Inc., 955 So. 2d 658, 659 (Fla. 3d DCA 2007).
8 | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482800/ | Third District Court of Appeal
State of Florida
Opinion filed November 10, 2022.
Not final until disposition of timely filed motion for rehearing.
________________
No. 3D21-2249
Lower Tribunal No. 21-16912
________________
David C. Metalonis,
Appellant,
vs.
Boies Schiller Flexner LLP,
Appellee.
An Appeal from the Circuit Court for Miami-Dade County, William
Thomas, Judge.
Leto Law Firm, and Matthew P. Leto, and Charles P. Gourlis, for
appellant.
Boies Schiller Flexner LLP, and Andrew S. Brenner, James W. Lee,
Samantha Licata, and Michael C. Mikulic, for appellee.
Before EMAS, LINDSEY, and GORDO, JJ.
LINDSEY, J.
Appellant David Metalonis appeals from a final judgment confirming an
Arbitration Award in favor of Appellee Boies Schiller Flexner, LLP (the “Law
Firm”). The underlying Award found in favor of the Law Firm on its claim for
contingency fees against Metalonis, a former client. On appeal, Metalonis
argues the Arbitrator exceeded his authority. He did not. Because the
Arbitrator only addressed issues covered by the broad arbitration provision
and put squarely before him by the parties, and because he did not
impermissibly modify the parties’ Engagement Agreement, we affirm.
I. BACKGROUND
In February 2018, Metalonis hired the Law Firm to represent him in an
action alleging frustration of a business opportunity involving undeveloped
land near the Hard Rock Stadium. The parties signed an Engagement
Agreement in which Metalonis agreed to pay a contingency fee for any cash
or non-cash sum recovered. The parties also agreed that any dispute
“arising from or relating to the Engagement . . . shall be finally settled by
binding, confidential arbitration . . . .” 1
1
The arbitration provision clearly notified Metalonis, in bold text, that “[b]y
entering into agreements that require arbitration as the way to resolve
fee disputes, you give up (waive) your right to go to court to resolve
those disputes by a judge or jury.”
2
The Law Firm represented Metalonis in an action against Eastgroup
Properties, Inc. After over a year of litigation, Metalonis and Eastgroup
attended mediation and entered into a Settlement Agreement in which
Eastgroup agreed to pay Metalonis $2.45 million and transfer a two-acre
parcel of land to Metalonis, subject to certain conditions precedent. After
signing the Settlement Agreement, Metalonis instructed the Law Firm to
argue—in response to Eastgroup’s Motion to Enforce—that the Settlement
Agreement was unenforceable. The trial court ruled against Metalonis, and
the case was dismissed. Metalonis, through new counsel, appealed, and
this Court dismissed the appeal. See Metalonis v. Eastgroup Props., Inc.,
298 So. 3d 1215, 1216 (Fla. 3d DCA 2020) (holding that Metalonis’s
voluntary dismissal divested this Court of appellate jurisdiction).
Metalonis hired new counsel to assist with the transfer of the two-acre
parcel. Meanwhile, the Law Firm initiated arbitration to collect its
contingency fee, which Metalonis refused to pay. 2 Metalonis responded with
a legal malpractice Counterclaim (for approximately $30 million). Several
months after the Law Firm initiated arbitration, and nearly 18 months after
the Settlement Agreement, Metalonis complied with the necessary
2
The Law Firm initiated arbitration in July 2021, more than a year after the
Settlement Agreement was signed.
3
conditions precedent, and Eastgroup transferred the two-acre parcel. At the
time of settlement, Metalonis admitted the property was worth at least $2
million, 3 but Metalonis claims the property was only worth $50,000 when it
was finally transferred.
In March 2021, the Arbitrator presided over a five-day evidentiary
hearing. The parties collectively called eleven live witnesses, submitted 6
witness depositions, and introduced over 225 documents into evidence
(totaling over 6,500 pages). The Arbitrator ultimately issued a detailed 120-
page Arbitration Award, with hundreds of citations to the record.
In arbitration, the Law Firm sought a contingency fee based on both
the cash and non-cash sums Metalonis recovered (the $2.45 million and the
value of the two-acre parcel). With respect to the cash amount, Metalonis
argued the Law Firm could not recover because it engaged in legal
malpractice. In essence, Metalonis argued he was tricked into signing the
Settlement Agreement. The Arbitrator rejected this argument and dismissed
Metalonis’s malpractice Counterclaim with prejudice, concluding “that the
central tenets of Metalonis’s story, the very foundation for his malpractice
case, are not true. Metalonis appears to be the ultimate salesman, willing to
3
In support of his malpractice counterclaim, Metalonis argued the value of
the property was $32 million, with $30 million attributed to potential billboard
advertising rights.
4
tell whatever puffery he thinks will serve his immediate financial interests.”
Metalonis does not challenge the dismissal of his Counterclaim.
With respect to the contingency fee for the parcel of land, Metalonis
raised two arguments that are relevant here. First, Metalonis argued he did
not have to pay the Law Firm a contingency fee based on the value of the
two-acre parcel because the Engagement Agreement gave him the option of
giving the Law Firm an undivided interest in the property equal to the
applicable contingency percentage. 4 Second, Metalonis argued the parcel
should be valued at $50,000, which is the value he claimed the parcel had
when it was transferred to him.
Importantly, these arguments were put squarely before the Arbitrator,
and neither party argued the Arbitrator lacked authority to resolve these
issues. The Arbitrator ultimately rejected Metalonis’s arguments and
4
The relevant language is as follows:
If the Litigation is settled, in whole or in part, by the Client’s
receipt of anything of value other than cash, the Firm shall be
entitled to receive, at Client’ s option. (a) payment in cash of the
applicable contingent percentage set forth above . . . or (b) an
undivided interest in any property received by Client, equal to the
applicable contingent percentage above, plus payment of the
applicable contingent percentage of any cash received as a
result of settlement.
5
awarded a contingency fee to the Law Firm based on the value of the parcel
at the time of settlement, which it was undisputed was at least $2 million.
After issuance of the Final Arbitration Award, Metalonis still refused to
pay. Consequently, the Law Firm filed a Petition in the circuit court to confirm
the award. In response, Metalonis argued the Arbitrator exceeded his
authority. The circuit court granted the Law Firm’s Petition and entered final
judgment. Metalonis timely appealed.
II. ANALYSIS
On appeal, Metalonis maintains that the Arbitrator exceeded his
authority. The standard of review is de novo. See Nash v. Fla. Atl. Univ. Bd.
of Trustees, 213 So. 3d 363, 366 (Fla. 4th DCA 2017) (“Whether an arbitrator
exceeded his authority within the meaning of [the Florida Arbitration Code]
is an issue of law subject to de novo review.”); Gherardi v. Citigroup Glob.
Mkts. Inc., 975 F.3d 1232, 1236 (11th Cir. 2020).
Though our standard of review is de novo, the scope of our review is
“very limited, with a high degree of conclusiveness attaching to [the]
arbitration award.” Regalado v. Cabezas, 959 So. 2d 282, 284 (Fla. 3d DCA
2007), as modified on denial of reh’g (July 10, 2007) (quoting Marr v. Webb,
930 So.2d 734, 737 (Fla. 3d DCA 2006)); see also Gherardi, 975 F.3d at
1237 (“Judicial review of arbitration decisions is ‘among the narrowest known
6
to the law.’” (quoting Bamberger Rosenheim, Ltd. v. OA Dev., Inc., 862 F.3d
1284, 1286 (11th Cir. 2017))).
In support of his position, Metalonis advances three arguments. First,
he argues that the Federal Arbitration Act applies, not the Florida Arbitration
Code. Second, he argues the Arbitrator exceeded his authority by denying
Metalonis the option to provide the Law Firm with an undivided interest in the
property instead of a cash payment based on value. Third, Metalonis argues
the Arbitrator exceeded his authority by assigning the two-acre parcel its
value at the time of settlement as opposed to when it was transferred. We
are not persuaded by these arguments. Cf. Wiregrass Metal Trades Council
AFL-CIO v. Shaw Envtl. & Infrastructure, Inc., 837 F.3d 1083, 1085–86 (11th
Cir. 2016) (“A dispute involving the interpretation of a collective bargaining
agreement was submitted to an arbitrator, as both parties had agreed their
disputes would be. As usually happens, the losing party was not happy with
the loss. As too often happens, instead of accepting it and moving on, the
loser moved the [trial court] to set aside the arbitration award . . . .” (citation
omitted)).
A. The Florida Arbitration Code and the Federal Arbitration Act
The Arbitrator applied the Revised Florida Arbitration Code (the
“FAC”). Metalonis argues the Federal Arbitration Act (the “FAA”) should
7
apply instead. “In Florida, an arbitration clause in a contract involving
interstate commerce is subject to the Florida Arbitration Code (FAC), to the
extent the FAC is not in conflict with the FAA.” Shotts v. OP Winter Haven,
Inc., 86 So. 3d 456, 463–64 (Fla. 2011). Here, the underlying transaction
has to do with undeveloped land in Florida and does not, on its face, involve
interstate commerce. See Visiting Nurse Ass’n of Fla., Inc. v. Jupiter Med.
Ctr., Inc., 154 So. 3d 1115, 1125 (Fla. 2014) (“To determine if a transaction
involved interstate commerce, courts look to whether the transaction in fact
involved interstate commerce, even if the parties did not contemplate an
interstate commerce connection.”). Regardless, Metalonis has failed to
satisfy the heavy burden of showing that the Arbitration Award should be
vacated under either the FAC or the FAA.
Under the FAC, one of the specified grounds for vacating an arbitration
award is if “[a]n arbitrator exceeded the arbitrator’s powers[.]” § 682.13(1)(d),
Fla. Stat. (2022). Florida courts interpret this ground to be “jurisdictional in
nature and . . . in reference to the scope of authority given to an arbitrator in
the arbitration agreement.” See, e.g., Visiting Nurse, 154 So. 3d at 1137. 5
5
In Visiting Nurse, the Court interpreted an older version of Florida’s
Arbitration Code. However, the Court acknowledged the revised language
and concluded that the result would be the same under either version. Id. at
1137 n.15.
8
In other words, an arbitrator exceeds his or her power only when he or she
goes beyond the authority granted by the parties. Id.; Metro Dade
Firefighters, Int’l Ass’n of Fire Fighters, Local 1403 v. Miami-Dade County,
47 Fla. L. Weekly D1989 (Fla. 3d DCA Sept. 30, 2022); Soler v. Secondary
Holdings, Inc., 832 So. 2d 893 (Fla. 3d DCA 2002). Moreover, “[w]hether
the arbitrator’s decision was legally correct is irrelevant because ‘[a]n award
of arbitration may not be reversed on the ground that the arbitrator made an
error of law.’” Metro Dade Firefighters, 47 Fla. L. Weekly at D1991 (quoting
Schnurmacher Holding, Inc. v. Noriega, 542 So. 2d 1327, 1329 (Fla. 1989)).
Here, the Arbitrator clearly did not exceed his authority under the FAC
because the issues resolved in arbitration were covered by the broad
arbitration provision, which encompasses any dispute “arising from or
relating to the Engagement[.]” Further, the parties placed these issues
squarely before the Arbitrator. Indeed, neither party objected to the
Arbitrator’s authority to resolve the issues until Metalonis was displeased
with the Award. See id. (holding that the arbitrator did not exceed his power
because he decided only the issues submitted to arbitration); Vill. at Dolphin
Com. Ctr., LLC v. Constr. Serv. Sols., LLC, 143 So. 3d 942, 945 (Fla. 3d
DCA 2014) (holding that an arbitration panel did not exceed its power in
9
deciding an enforceability issue because the issue was submitted to the
panel).
Assuming, for the sake of argument, that the FAA applies, the outcome
is the same. See Visiting Nurse, 154 So. 3d 1115 (holding that an arbitration
panel did not exceed its power under the FAA or FAC). The relevant
provision in the FAA uses nearly the same language as its Florida
counterpart. Pursuant to 9 U.S.C. § 10(a)(4), an arbitration award may be
vacated “where the arbitrators exceeded their powers . . . .” As with the FAC,
this ground is jurisdictional and involves making sure the issues resolved in
arbitration fall within the scope of the arbitration agreement. See Gherardi,
975 F.3d at 1238 (“[I]n § 10(a)(4) cases, our review is quasi-jurisdictional: a
check to make sure that the arbitration agreement granted the arbitrator
authority to reach the issues it resolved.”).
In Oxford Health Plans LLC v. Sutter, 569 U.S. 564, 569 (2013), the
Supreme Court of the United States explained the “heavy burden” for
vacating an arbitration award pursuant to § 10(a)(4) as follows:
A party seeking relief under that provision bears a
heavy burden. “It is not enough . . . to show that the
[arbitrator] committed an error—or even a serious
error.” [Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp.,
559 U.S. 662, 671 (2010)]. Because the parties
“bargained for the arbitrator’s construction of their
agreement,” an arbitral decision “even arguably
construing or applying the contract” must stand,
10
regardless of a court’s view of its (de)merits. Eastern
Associated Coal Corp. v. Mine Workers, 531 U.S. 57,
62, 121 S.Ct. 462, 148 L.Ed.2d 354 (2000) (quoting
Steelworkers v. Enterprise Wheel & Car Corp., 363
U.S. 593, 599, 80 S.Ct. 1358, 4 L.Ed.2d 1424 (1960);
Paperworkers v. Misco, Inc., 484 U.S. 29, 38, 108
S.Ct. 364, 98 L.Ed.2d 286 (1987); internal quotation
marks omitted). Only if “the arbitrator act[s] outside
the scope of his contractually delegated authority”—
issuing an award that “simply reflect[s] [his] own
notions of [economic] justice” rather than “draw[ing]
its essence from the contract”—may a court overturn
his determination. Eastern Associated Coal, 531
U.S., at 62, 121 S.Ct. 462 (quoting Misco, 484 U.S.,
at 38, 108 S.Ct. 364). So the sole question for us is
whether the arbitrator (even arguably) interpreted the
parties’ contract, not whether he got its meaning right
or wrong.
(Alternations in original).
It is clear the Arbitrator acted within the scope of his contractually
delegated authority to resolve a dispute related to the Engagement
Agreement. Despite this, Metalonis focuses extensively on whether the
Arbitrator interpreted the Engagement Agreement. More specifically,
Metalonis argues the Arbitrator did not interpret the Agreement but instead
ignored the language of the Agreement and impermissibly modified it. This
inquiry requires us to consider “whether the arbitrator (even arguably)
interpreted the parties’ contract, not whether [he] got its meaning right or
wrong.” Gherardi, 975 F.3d at 1238 (quoting Wiregrass, 837 F.3d at 1088).
B. The Client’s Option
11
When a contingency fee is owed on anything of value other than cash
(such as the parcel of land), the Engagement Agreement provides that the
Law Firm is entitled to receive, at the Client’s option, a cash payment based
on value or an undivided interest in the property. See supra note 4.
Metalonis contends the Arbitrator did not interpret the Agreement because
he was not permitted to select the manner in which to compensate the Law
Firm. We disagree.
In its Award, the Arbitrator recognized that at no time prior to the Law
Firm bringing its claim, which was over one year after settlement, did
Metalonis elect any option; he simply refused to pay. Indeed, at the time of
the Award, “he still has not formally done so, apparently waiting to see how
the instant Arbitration resolved.” Though Metalonis did not formally select
an option, the Court found he elected to pay cash based on value by having
the Law Firm “commit to a value of that land for the purpose of computing its
potential contingency fee.” 6 Id. Consequently, the Arbitrator did not
impermissibly modify the parties’ Engagement Agreement. He considered
6
Indeed, the record shows that at various points in the arbitration
proceedings, Metalonis claimed if he lost, he would pay the fee award based
on the value of the property. It was not until the Arbitrator valued the property
at $2 million that Metalonis took a different position.
12
the evidence and determined that even though Metalonis did not formally
elect an option, he elected to pay cash by his actions.
C. Valuation of the Parcel
Metalonis also argues the Arbitrator exceeded his authority by
assigning value to the property at the time of settlement as opposed to when
the property was transferred. According to Metalonis, the Agreement
requires the property to be valued at the time it is received. However,
Metalonis ignores language in the Agreement that could support a valuation
at the time of settlement: “If the Litigation is settled, in whole or in part,
by the Client’s receipt of anything of value other than cash, the Firm shall be
entitled to receive, at Client’s option. (a) payment in cash of the applicable
contingent percentage set forth above of (i) the present value of any
noncash consideration . . . .” At most, the Engagement Agreement is
ambiguous as to whether the value of the property is to be calculated at the
time litigation was settled and Metalonis was awarded the parcel or at the
time it was finally transferred. 7 Accordingly, the Arbitrator did not modify the
Agreement; he arguably interpreted it.
III. CONCLUSION
7
The Award found that the delay of the transfer was solely Metalonis’s fault
and not the Law Firm’s.
13
“Everyone supposedly loves arbitration. At least until arbitration goes
badly.” Saturn Telecomms. Servs., Inc. v. Covad Commc’ns Co., 560 F.
Supp. 2d 1278, 1279 (S.D. Fla. 2008). This appeal is yet another instance
of a dissatisfied party attempting to “convert arbitration losses into court
victories.” See Wiregrass, 837 F.3d at 1092 (quoting B.L. Habert Int’l, LLC
v. Hercules Steel Co., 441 F.3d 905, 913 (11th Cir. 2006)). “The more cases
there are, like this one, in which the arbitrator is only the first stop along the
way, the less arbitration there will be. If arbitration is to be a meaningful
alternative to litigation, the parties must be able to trust that the arbitrator’s
decision will be honored sooner instead of later.” Id. (quoting B.L. Habert,
441 F.3d at 913). Because the Arbitrator did not exceed his authority, we
affirm.
Affirmed.
14 | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482796/ | Third District Court of Appeal
State of Florida
Opinion filed November 10, 2022.
Not final until disposition of timely filed motion for rehearing.
________________
No. 3D22-913
Lower Tribunal No. 20-15859
________________
Grove Isle Association, Inc.,
Appellant,
vs.
Jerry M. Lindzon,
Appellee.
An Appeal from a non-final order from the Circuit Court for Miami-Dade
County, David C. Miller, Judge.
Law Offices of Geoffrey B. Marks, and Geoffrey B. Marks, for appellant.
Halpern Rodriguez, LLP, and Priscilla S. Zaldivar and Marc A. Halpern,
for appellee.
Before EMAS, LINDSEY and GORDO, JJ.
EMAS, J.
INTRODUCTION
Grove Isle Association, Inc. (the Association), appeals a nonfinal order
granting Jerry M. Lindzon’s motion for leave to amend his complaint to assert
a claim for punitive damages. 1 Because Lindzon failed to satisfy the
requirements for establishing entitlement to assert a claim for punitive
damages against a corporation pursuant to section 768.72, Florida Statutes
(2022), the trial court erred in granting Lindzon’s motion to amend, and we
therefore reverse.
FACTUAL AND PROCEDURAL BACKGROUND
Lindzon owns a unit at Grove Isle Condominium. He alleges his unit
suffered severe water damage due to a failing roof assembly. After the
Association allegedly ignored his complaints about the failing roof, Lindzon
sued the Association for violation of the Declaration of Condominium and
under section 718.113(1) for failing to maintain the common elements at
Grove Isle.
1
Florida Rule of Appellate Procedure 9.130 authorizes interlocutory appeals
of certain enumerated nonfinal orders. In 2022, the Florida Supreme Court
amended that rule to add nonfinal orders that “grant or deny a motion for
leave to amend to assert a claim for punitive damages.” Fla. R. App. P.
9.130(a)(3)G. See In re Amendment to Florida Rule of Appellate Procedure
9.130, 345 So. 3d 725, 726 (Fla. 2022).
2
The roof was repaired during the pending litigation. However, when
Lindzon began to repair the damage to his own unit, his contractor
discovered exposed rebar. This discovery, and the parties’ attempt to
address the newly discovered damage, led to the underlying motion to
amend the complaint to assert a claim for punitive damages. In his amended
complaint, Lindzon added counts for negligence and fraudulent
misrepresentation, and sought punitive damages. He also described the
following sequence of events:
• The reroofing project began in March 2021, after the underlying lawsuit
was filed.
• In October 2021, the re-roofing project was completed, and Lindzon
hired a contractor to restore his unit.
• In November 2021, Lindzon’s contractor “discovered multiple areas on
the common element slab surrounding the Unit with exposed, rusted
rebar, spalling and cracked concrete.” Lindzon twice notified the
Association about specific areas of damage to the concrete slab, and
each time “the Association inspected the Unit.”
• “On January 31, 2022, the Association’s own contractor confirmed
that the work to be performed by the Association include[d] repairs to
3
rebar which require[d] input from a structural engineer and proper
permitting.”
• Rodriguez eventually advised Lindzon that work on the slab was set to
commence on February 7.
• Days before the work was set to commence, Lindzon requested a copy
of the scope of work and permit information. Upon receiving the
request, Rodriguez stated: “[i]t’s such a small job that I don’t think it’s
[permits] really necessary.”
• When Lindzon insisted on a copy of the scope of work and permit
information, Rodriguez canceled the work, stating that “he instructed
his contractor to proceed without a permit, and now that Lindzon
requested it, the repairs would be significantly delayed.” 2
In sum—and relevant to the asserted punitive damages claim—
Lindzon alleged: “In an effort to save money, the Association was not
intending to retain a structural engineer or pull the necessary permits to
2
The email from Rodriguez to Lindzon’s attorney (attached to the motion to
amend) specifically stated: “The contractor did not say that a permit is not
required. I am the one that told the contractor that in order to expedite this I
would not be requiring a permit. [] If you feel that a permit is necessary then
we will go ahead and start the process. This process wit[h] the current
backlog with the City of Miami due to Covid will delay this repair for a couple
of months while a permit is obtained . . . .”
4
perform the repairs to the slab contrary to the advice of the Association’s
own contractor.”
Attached to the motion to amend were the letters to the Association,
and the correspondence between the Association contractor and Rodriguez.
Following a hearing, the trial court granted Lindzon’s motion to amend,
concluding that “the proffered misrepresentation regarding the lack of need
for a building permit, the willful neglect to get a building permit in the face of
expert advice to do [so] evidences a willful and wanton disregard of the
Plaintiff[‘]s rights and safety.” This appeal followed.
STANDARD OF REVIEW
The parties agree that our standard of review is de novo. Tallahassee
Mem’l Healthcare, Inc. v. Dukes, 272 So. 3d 824 (Fla. 1st DCA 2019)
(reviewing de novo the trial court’s decision of whether a party should be
allowed to plead punitive damages); Est. of Williams ex rel. Williams v.
Tandem Health Care of Fla., Inc., 899 So. 2d 369, 376 (Fla. 1st DCA 2005).
See also E.R. Truck & Equip. Corp. v. Gomont, 300 So. 3d 1230 (Fla. 3d
DCA 2020) (Scales, J. concurring).
DISCUSSION AND ANALYSIS
The Association contends that (1) Lindzon “failed to meet the
requirements of alleging and proving entitlement to pleading a claim for
5
punitive damages against a corporation”; and (2) because the amended
complaint does not allege acts independent of its contractual and statutory
claims, amendment to the complaint was barred by the independent tort
doctrine. We agree with the Association’s first contention and reverse the
order granting leave to amend to assert a claim for punitive damages.3
“Under Florida law, the purpose of punitive damages is not to further
compensate the plaintiff, but to punish the defendant for its wrongful conduct
and to deter similar misconduct by it and other actors in the future.” Owens–
Corning Fiberglas Corp. v. Ballard, 749 So. 2d 483, 486 (Fla. 1999). See
also BDO Seidman, LLP v. Banco Espirito Santo Intern., 38 So. 3d 874, 876
(Fla. 3d DCA 2010) (“Punitive damages are a form of extraordinary relief for
acts and omissions so egregious as to jeopardize not only the particular
plaintiff in the lawsuit, but the public as a whole, such that a punishment—
3
As a result, we do not reach the merits of the second issue raised on appeal
by the Association. See Peebles v. Puig, 223 So. 3d 1065, 1069 (Fla. 3d
DCA 2017) (“When, as here, a contract has been breached, a tort action lies
only for acts independent of those acts establishing the contract's breach”)
(citing Ginsberg v. Lennar Fla. Holdings, Inc., 645 So. 2d 490, 494 (Fla. 3d
DCA 1994) (“It is well established that breach of contractual terms may not
form the basis for a claim in tort. Where damages sought in tort are the same
as those for breach of contract a plaintiff may not circumvent the contractual
relationship by bringing an action in tort”)); TRG Desert Inn Venture, Ltd. v.
Berezovsky, 194 So. 3d 516, 519 n.3 (Fla. 3d DCA 2016) (“Florida's
independent tort rule precludes the recovery of punitive damages for a
breach of contract claim unless the claimant has asserted a tort independent
of the alleged breach of contract.”)
6
not merely compensation—must be imposed to prevent similar conduct in
the future.”)
Florida courts have repeatedly described the substantial impact of
granting a motion for leave to amend to assert a claim for punitive damages.
See, e.g., TRG Desert Inn Venture, Ltd. v. Berezovsky, 194 So. 3d 516, 520
n.5 (Fla. 3d DCA 2016) (“From a practical perspective, the granting of a
motion for leave to amend a complaint to add a punitive damages claim can
be a ‘game changer’ in litigation.”) For instance, once a plaintiff is allowed
to proceed with his punitive damages claim, the defendant becomes subject
to financial discovery and, potentially, to uninsured losses. Id.; see also Est.
of Despain v. Avante Grp., Inc., 900 So. 2d 637, 641 (Fla. 5th DCA 2005)
(“[A]lthough section 768.72(1) is procedural in nature, it also provides a
substantive right to parties not to be subjected to a punitive damage claim
and attendant discovery of financial worth until the requisite showing under
the statute has been made to the trial court”.) For these reasons, “punitive
damages are reserved for truly culpable behavior and are intended to
express society's collective outrage.” KIS Grp., LLC v. Moquin, 263 So. 3d
63, 65-66 (Fla. 4th DCA 2019) (quotation omitted).
Section 768.72, Florida Statutes (2022), governs a plaintiff’s ability to
bring a punitive damages claim. It provides that “no claim for punitive
7
damages shall be permitted unless there is a reasonable showing by
evidence in the record or proffered by the claimant which would provide a
reasonable basis for recovery of such damages.” § 768.72(1), Fla. Stat. See
also Dukes, 272 So. 3d at 825 (“A defendant has a substantive legal right
not to be subject to punitive damages claims if there is no reasonable basis
for recovery.”) A trial court’s determination as to whether a plaintiff has made
a “reasonable showing” under section 768.72 for a recovery of punitive
damages, “is similar to determining whether a complaint states a cause of
action, or the record supports a summary judgment, both of which are
reviewed de novo.” Holmes v. Bridgestone/Firestone, Inc., 891 So. 2d 1188,
1191 (Fla. 4th DCA 2005). The statute further provides that a defendant can
be held liable for punitive damages only if the trier of fact finds, by clear and
convincing evidence, “that the defendant was personally guilty of intentional
misconduct or gross negligence.” § 768.72(2), Fla. Stat. The statute defines
those two terms:
(a) “Intentional misconduct” means that the defendant had actual
knowledge of the wrongfulness of the conduct and the high
probability that injury or damage to the claimant would result and,
despite that knowledge, intentionally pursued that course of
conduct, resulting in injury or damage.
(b) “Gross negligence” means that the defendant's conduct was
so reckless or wanting in care that it constituted a conscious
disregard or indifference to the life, safety, or rights of persons
exposed to such conduct.
8
§ 768.72(2)(a)-(b), Fla. Stat.
Here, Lindzon sues only the Association; Rodriguez is not a defendant
in the action. Coronado Condo. Ass'n, Inc. v. La Corte, 103 So. 3d 239, 240
n.1 (Fla. 3d DCA 2012) (“La Corte did not sue the individual property
managers or the contractor repairing the balconies; the Association is the
sole defendant.”) Therefore, in seeking punitive damages, Lindzon
necessarily intends to impute the property manager’s alleged intentional
misconduct or gross negligence to the Association. To impute an
employee’s negligence or misconduct to the employer under the punitive
damages statute, a plaintiff must establish the employee’s conduct meets
the criteria specified in subsection (2) above (i.e., that the employee was
“guilty of intentional misconduct or gross negligence”) and establish one of
the following:
(a) The employer, principal, corporation, or other legal entity
actively and knowingly participated in such conduct;
(b) The officers, directors, or managers of the employer,
principal, corporation, or other legal entity knowingly condoned,
ratified, or consented to such conduct; or
(c) The employer, principal, corporation, or other legal entity
engaged in conduct that constituted gross negligence and that
contributed to the loss, damages, or injury suffered by the
claimant.
§ 768.72(3)(a)-(c), Fla. Stat.
9
Lindzon’s amended complaint fails to satisfy any of the three
alternative requirements of subsection (3)(a)-(c). “A corporate employer, like
an individual employer, may be held liable for punitive damages based on
the legal theories of either direct or vicarious liability.” Est. of Despain, 900
So. 2d at 640. Here, the amended complaint does not specify whether
Lindzon’s claim for punitive damages was based on direct or vicarious
liability. And a review of the negligence and fraudulent misrepresentation
claims (for which punitive damages is sought) reveals no allegation of
wrongdoing by the Association. Instead, the amended complaint alleges
misconduct only by Rodriguez (while using the broad term “Association” to
characterize the “perpetrator” of such conduct). Additionally, the
correspondence Lindzon attached to the amended complaint shows that all
communications pertaining to the permit were between Lindzon’s counsel
and Rodriguez. There are no separate, independent allegations in the
complaint setting forth any actions taken by an Association officer, director
or managing member. 4 See, e.g., Fetlar, LLC v. Suarez, 230 So. 3d 97, 100
4
Ironically, the trial court indicated that its ruling (permitting the amendment
to assert punitive damages) was based in part on the fact that no building
permit was obtained even “in the face of expert advice to do so.” That “expert
advice” came from the Association’s contractor who, as described earlier,
took the position (contrary to Rodriguez) that a building permit was needed
before undertaking the repairs.
10
(Fla. 3d DCA 2017) (“The plaintiffs assume that the alleged misconduct of
the individual construction managers, superintendents, construction
workers—who were not, on the record before us, officers or managing
members of the limited liability companies—is, without more, misconduct of
the four corporate petitioner/defendants for purposes of section 768.72. But
that is contrary to the plain language of the statute”) (emphasis added); La
Corte, 103 So. 3d at 240-41 (holding that the third amended complaint failed
to comply with the procedural requirements of section 768.72: “There are
references in the third amended complaint to a single, unnamed ‘Association
board member,’ but those references do not allege the Association's active,
knowing participation in, or consent to, misconduct by the property
management or contractor's employees”) (emphasis added).
For these reasons, a vicarious liability theory suffers a similar fate. “In
order to hold a corporate employer vicariously liable for punitive damages
for the acts of its employees, the plaintiff must establish: (1) fault on the part
of the employee that rises to the level of willful and wanton misconduct and
(2) some fault on the part of the corporate employer that rises to the level of
at least ordinary negligence.” Est. of Despain, 900 So. 2d at 640-41
(emphasis added). As explained above, the absence of any allegations or
record evidence showing even simple negligence on the part of the
11
Association compels the conclusion that Lindzon has failed to meet the
heightened evidentiary standard for imposition of punitive damages on an
employer. Compare id. at 645 (finding a reasonable basis to assert a claim
for punitive damages based on vicarious liability: “As to the vicarious liability
of the corporate entities, the record evidence and proffer shows that the
facility was not adequately staffed, which contributed to the inability to
provide the decedent with proper care, and that numerous records regarding
the decedent's care were incomplete, missing, or had been fabricated, which
made assessment, treatment, and referrals of the decedent much more
difficult.”) 5
5
In light of our analysis (together with the fact that Rodriguez is not a named
defendant), we do not reach the question of whether the misconduct alleged
might provide a reasonable basis for asserting a punitive damages claim
against Rodriguez individually. See Valladares v. Bank of Am. Corp., 197
So. 3d 1 (Fla. 2016) (citing U.S. Concrete Pipe Co. v. Bould, 437 So. 2d
1061, 1064 (Fla.1983) (“Punitive damages cannot be assessed for mere
negligent conduct, but must be based on behavior which indicates a wanton
disregard for the rights of others”)); Owens–Corning Fiberglas Corp. v.
Ballard, 749 So. 2d 483, 486 (Fla.1999) (“The character of negligence
necessary to sustain an award of punitive damages must be of a gross and
flagrant character, evincing reckless disregard of human life, or of the safety
of persons exposed to its dangerous effects, or there is that entire want of
care which would raise the presumption of a conscious indifference to
consequences, or which shows wantonness or recklessness, or a grossly
careless disregard of the safety and welfare of the public, or that reckless
indifference to the rights of others which is equivalent to an intentional
violation of them”) (quotation omitted). See also Carraway v. Revell, 116 So.
2d 16, 18-19 (Fla. 1959) (“[T]he character of negligence necessary to sustain
12
CONCLUSION
Because Lindzon failed to satisfy the requirements for establishing
entitlement to assert a claim for punitive damages against a corporation
pursuant to section 768.72, Florida Statutes (2022), the trial court erred in
granting Lindzon’s motion to amend. We therefore reverse and remand for
further proceedings consistent with this opinion.
a conviction for manslaughter is the same as that required to sustain a
recovery for punitive damages . . . .”)
13 | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8488918/ | FINDINGS OF FACT AND CONCLUSIONS OF LAW
Re: MOTION TO DISMISS
RICHARD MEDNICK, Bankruptcy Judge.
The court has heard the oral arguments and has reviewed the Motion to Dismiss, memoranda in opposition, response thereto, and all memoranda of points and authorities filed herein, and makes the following findings of fact and conclusions of law.
FINDINGS OF FACT
1. On November 19, 1979, the FTC filed its objections to the debtor’s amended plan of arrangement alleging that South Park had engaged in certain unfair and deceptive acts and practices in the sale of land during its period of reorganization in violation of 15 U.S.C. § 45.
2. On November 29, 1979, South Park and the FTC stipulated in open court that the FTC’s objections would be withdrawn and brought as an adversary proceeding in exchange for the debtor’s waiver of any objection to the FTC’s standing to bring such adversary proceeding. On the same date, South Park’s amended plan of arrangement was confirmed.
3. The Order converting the FTC’s objections to the debtor’s plan of arrangement to an adversary proceeding was entered December 17, 1979.
4. The FTC filed its complaint on December 21, 1979, alleging that sales of land were induced by misrepresentations and omissions constituting unfair and deceptive acts and practices. The complaint seeks equitable relief including an order to correct misrepresentations and omissions, reformation of the contracts of sale, and refunds to purchasers of any excess purchase price.
5. The sales that are the subject of the FTC complaint occurred between March, 1976, and December, 1979, and were approved by the Bankruptcy Court at the time of each sale. As many as 1,300 sales were made during this period.
6. On January 23,1980, South Park filed its Motion to Dismiss pursuant to Bankruptcy Rule 712(b) for failure to state a claim upon which relief can be granted, and alleging, in addition, that the FTC has no standing to bring the adversary complaint in the Bankruptcy Court.
7. The FTC has authority to issue administrative complaints and hold hearings respecting unfair and deceptive practices (15 U.S.C. § 45(b)). It may issue cease and desist orders (15 U.S.C. § 45(c)), and recover civil penalties for violation of such orders in an action brought by the Attorney General (15 U.S.C. § 45(/)). The Commission itself may commence a civil action in a federal district court to recover a civil penalty for knowing violations of FTC rules (15 U.S.C. § 45(m)(l)(A)), file suit in a U. S. court for injunction (15 U.S.C. § 54(a)), and file suit in a federal or state court to redress injury to consumers resulting from the violation of industry-wide rules respecting unfair or deceptive acts or practices (15 U.S.C. § 57b).
8. The sales activities of which the FTC complains ceased prior to the date the FTC first entered these proceedings and prior to the Court’s approval of South Park’s amended Plan of Arrangement. By order of the Bankruptcy Court dated July 23, 1979, both the debtor and the trustee in possession were prohibited after July 18, 1979 from soliciting in any form or by any *481means the sale of lots and from advertising the sale in any form.
CONCLUSIONS OF LAW
1. A litigant has standing to state a claim when he can allege that he has suffered actual injury and has a personal stake in the outcome of the litigation. Gladstone Realtors v. Village of Bellwood, 441 U.S. 91, 99 S.Ct. 1601, 60 L.Ed.2d 66 (1979). Where a federal agency is the litigant, it must show that it has such an interest in the relief sought as entitles it to move in the matter. U. S. v. Mattson, 600 F.2d 1295 (9th Cir. 1979). Express statutory authority establishes such an interest.
2. There is no express provision of the FTC Act granting the FTC the authority to file a complaint in the Bankruptcy Court, nor does the complaint allege facts supporting express statutory authority to file an action against South Park in any court.
3. Where a debtor is in a Bankruptcy Court reorganization, the automatic stay imposed by Bankruptcy Rule 11-44 stays the FTC just as it stays the initiating of an action against the debtor by any other plaintiff. A request to lift the stay and proceed against the debtor must commence in the Bankruptcy Court.
4. If South Park were still operating in a reorganization and actively engaged in the sale of land, and if they were using allegedly unfair and deceptive practices, the FTC would have standing in this court to seek permission to issue a cease and desist order. The FTC would have standing here to seek an injunction to halt harmful sales practices, and where industry-wide rules respecting Unfair and deceptive sales practices were violated, the FTC could seek in this court redress for consumers including rescission and restitution.
5. The injury alleged in the FTC complaint does not support the doctrine of implied standing. That doctrine applies where national security is threatened, to protect the civil rights of persons where the acts complained of constitute a burden on interstate commerce, to enforce a pecuniary or property interest of the government, or to protect the public at large. U. S. v. Mattson, supra; U. S. v. Solomon, 563 F.2d 1121 (4th Cir. 1977).
6. If the FTC has express or implied standing in any court, it is in the Bankruptcy Court when the defendant is a debtor in reorganization and judgment may affect property of the estate. The Bankruptcy Court is the only proper forum in which to initiate an action against the debtor.
7. The relief sought here by the FTC results ultimately in some form of rescission, restitution, or reformation of contracts that have previously been approved by the court. Those who have a personal stake in the outcome are not themselves before the court, nor have they been identified. In effect, the FTC is bringing a class action to benefit a limited number of unknown parties, not the public at large. No provision of the FTC Act gives the FTC the authority to bring such an action nor does the doctrine of implied standing support their authority to do so.
8. The Bankruptcy Court cannot ignore allegations that sales conducted during South Park’s reorganization may have been induced by unfair or deceptive practices. Had the FTC’s allegations been brought to the attention of the court during its administration of the case and prior to cessation of advertising and solicitation of sales, the court would have had an affirmative duty to determine that no orders approving sales were a result of unfair or deceptive acts or practices.
9. The court has the inherent authority to investigate allegations and correct orders fraudulently induced. Such matters should be brought to the court’s attention and South Park consented to the FTC’s standing to do so on November 29, 1979, when it waived objection to the FTC’s standing to bring its objections to the plan of arrangement as an adversary proceeding after confirmation.
10. The complaint now fails to state a claim upon which relief can be granted since the allegations, as pled, do not support the relief sought and available.
*48211. If the FTC allegations can be more specifically pled and proved, the selling practices complained of would constitute a fraud not only on the individual purchasers, but on the court as well.
All findings of fact which are additionally or alternatively conclusions of law are deemed conclusions of law; all conclusions of law which are additionally or alternatively findings of fact are deemed findings of fact. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8488919/ | OPINION
MICHAEL R. HOGAN, Bankruptcy Judge.
On January 16, 1980, Deborah Kay Beaver filed a voluntary petition in bankruptcy.
Heritage Bank, a creditor of the debtor, alleges in this proceeding that a debt owing to it by the debtor is nondischargeable in accordance with the provisions of § 523(a)(2) A and B of the Bankruptcy Code, 11 U.S.C. § 523(a)(2) A and B.
On July 30, 1979, Heritage Bank loaned $4,660.37 to the defendant-debtor. Defendant executed a promissory note for that sum and also granted plaintiff a security interest in her automobile, the title to which was then held by General Motors Acceptance Corporation (GMAC). Defendant was to pay the existing balance on a loan from GMAC secured by her car and provide the title to the vehicle to plaintiff as security for the loan.
Defendant failed to pay off the loan to GMAC and did not provide plaintiff with title to the vehicle.
Defendant also has failed to pay any part of the sum owed to plaintiff on the promissory note. Plaintiff then declared the note to be in default and declared the full sum immediately due and payable.
On December 26, 1979, plaintiff filed an action against defendant for collection of the loan in the Circuit Court of the State of Oregon for Jackson County, Case No. 79-4075-L-2, which proceeding is now stayed pursuant to 11 U.S.C. § 362(a).
*525Plaintiff contends that defendant obtained the loan from plaintiff on a false pretense or by making a false representation in that defendant agreed to pay the existing balance on her loan from GMAC with the proceeds of the note and to provide plaintiff with the clear title to her vehicle as security for the loan, which she did not do.
Plaintiff further contends that because defendant stated on a credit application that she was employed by Delah Timber Products, when in fact she had been terminated, defendant obtained the loan through the use of a written statement respecting her financial condition that was materially false and which defendant executed with the intent to deceive, upon which plaintiff relied in extending credit.
On August 15, 1980, a trial was held in Medford, Oregon, the Honorable Michael R. Hogan presiding. At said trial, the following facts were established:
1) On July 27, 1979, defendant filled out and signed a consumer credit application for a loan from Heritage Bank on which she stated she was employed by Delah Timber Products and had been so employed for approximately one year.
2) Defendant’s intention in obtaining a loan from Heritage Bank was to refinance an automobile loan from GMAC and consolidate other existing debts. Defendant called GMAC and the other creditors to obtain loan balances and the figures she received from her creditors are the figures she placed on the Heritage Bank credit application.
3) On July 30, 1979, plaintiff loaned the sum of $4,660.37 to defendant for which defendant executed a promissory note payable to plaintiff in the sum of $4,660.37 plus interest thereon at the rate of 13% per annum from July 30, 1979 until paid. Defendant also granted to plaintiff a security interest in her car.
4) Defendant agreed to pay the balance of the existing debt to GMAC secured by her automobile with part of the proceeds of the note and to give to plaintiff the title to her car to secure the loan.
5) Defendant paid some creditors with the loan proceeds. She tendered a sum of money to GMAC, which was returned to her as insufficient to pay the balance of her existing loan. When GMAC returned the money to defendant, she pre-paid four or five payments to GMAC.
6) When defendant was unable to obtain the title to her car because she was $600.00 short, defendant called Heritage Bank and informed them. She was advised by plaintiff to get a lawyer.
7) Defendant did not pay the existing debt to GMAC and did not provide plaintiff with the title to her car.
8) Defendant has not paid any sums owing on the promissory note.
Plaintiff argues that defendant’s agreement to pay the balance on the GMAC loan and provide plaintiff with clear title to her vehicle as security for plaintiff’s loan, and her subsequent failure to do so constitutes false pretenses or a false representation.
However, in order to constitute the obtaining of money or property by false pretenses or false representations within the meaning of the Bankruptcy Code, the fraud by such means must occur at or prior to the time the money or property is obtained. Ruegsegger v. McCarley, 262 Or. 157, 496 P.2d 214 (1972).
In Conzelmann v. Northwest Poultry and Dairy, 190 Or. 332, 225 P.2d 757 (1950), the Oregon Supreme Court held:
“To amount to a fraudulent representation sufficient to constitute actionable fraud, the intention not to perform must exist at the time the promise to do something in the future is made, and such an intent formed later and carried into effect is insufficient.” 225 P.2d at p. 765
“A fraudulent intent not to perform a promise may not be inferred as existing at the time the promise is made from the mere fact of nonperformance. Other circumstances of a substantial character must be shown in addition to nonperformance before such inference of wrong*526ful intent may be drawn.” 225 P.2d at p. 765
The record reveals no fraud at or prior to the time the loan was made to defendant nor any bad faith in defendant’s agreement with plaintiff. There is no evidence that defendant’s promise was made with the intent not to perform. To the contrary, the evidence indicates that defendant made a good faith effort to obtain the title to her car for plaintiff. She tendered a sum of money to GMAC which she thought from prior phone calls to GMAC was sufficient to pay that loan in full but which was returned as insufficient to pay the loan in full. She then made four or five car payments in advance. When unable to obtain the title to her car, defendant attempted to make alternate arrangements with plaintiff to no avail. These facts do not support a finding of fraudulent intent on the part of defendant.
Plaintiff also contends that defendant’s statement on a credit application that she was employed by Delah Timber Products, when in fact, she had been terminated, bars discharge pursuant to 11 U.S.C. § 523(a)(2)B.
However, to bar discharge, the fraud involved must be the type involving moral turpitude or intentional wrong. In Re Taylor, 514 F.2d 1370 (9th Cir. 1975).
The main evidence presented at trial regarding defendant's termination date was defendant’s own testimony. Defendant testified that she was employed at Delah Timber in August, 1978. She injured her arm in September, 1978 and was off work for one week. She then worked for another month and a half. She returned to the doctor and was put on disability. Defendant returned to light work in mid-December and worked until January, 1979, at which time she was told there was no light duty available. Defendant received workman’s compensation until July, 1979, at which time she was released to work by the treating physician. Defendant testified that the promissory note to plaintiff was signed prior to her release to go back to work. She further testified that when released to work in July, 1979, she returned to Delah Timber and was told she had been terminated. She testified that she had no knowledge that she had been terminated at the time she filled out the credit application.
The only other evidence regarding defendant’s termination date was a termination slip introduced into evidence without foundation, which lists defendant’s termination date as January 24, 1979. However, there was no testimony to explain the context of or circumstances surrounding that termination slip. Defendant testified that she had never seen it before. It was undisputed by plaintiff that defendant received workman’s compensation benefits for several months after the date she last worked.
Therefore, there is considerable ambiguity as to when defendant was actually terminated. Assuming without deciding that defendant had been terminated at the time she filled out the credit application, there was no evidence that defendant was aware she had been terminated.
The creditor has the burden of proving that the debtor intentionally and purposefully attempted to deceive the creditor in obtaining a loan. In Re Taylor, supra. Plaintiff in the case at bar has failed to carry that burden.
Section 523(a)(2) of the Bankruptcy Code, 11 U.S.C. § 523(a)(2) provides in relevant part:
“Exceptions to Discharge:
(a) A discharge under section 727, 1141, or 1328(b) of this title does not discharge an individual debtor from any debt-
(2) for obtaining money, property, services, or an extension, renewal, or refinance of credit by-
(A) false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor’s or an insider’s financial condition; or
(B) use of a statement in writing-
(i) that is materially false;
(ii) respecting the debtor’s or an insider’s financial condition;
*527(iii) on which the creditor to whom the debtor is liable for obtaining such money, property, services, or credit reasonably relied; and
(iv) that the debtor caused to be made or published with intent to deceive.”
I find that plaintiff has failed to prove that defendant obtained money from plaintiff by making a false representation or through the use of a written statement respecting defendant’s financial condition on which plaintiff reasonably relied in extending credit that was materially false and that defendant executed with intent to deceive.
Accordingly, plaintiff’s claim against defendant is not excepted from defendant’s discharge in bankruptcy.
At the time of trial, the parties stipulated that the prevailing party is entitled to attorney’s fees. Therefore, defendant is allowed thirty days to submit an affidavit substantiating reasonable attorney’s fees. Plaintiff is allowed fifteen days to respond.
This opinion constitutes findings of fact and conclusions of law pursuant to Bankruptcy Rule 752. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8488920/ | *573ORDER DETERMINING DEBT OF THE JOHN SHILLITO COMPANY TO BE DISCHARGEABLE.
LEONARD C. GARTNER, Bankruptcy Judge.
The District Court for the Southern District of Ohio in In Re Day, 4 B.R. 750 at 756 (1980) comments upon the decision in Tinker v. Colwell, 193 U.S. 473, 24 S.Ct. 505, 48 L.Ed. 754 (1904):
“The Supreme Court has warned, however, that a willful and malicious injury does not follow as of course from every act of conversion ... ‘There may be a conversion which is innocent or technical, an unauthorized assumption of dominion without willfulness or malice’ ”.
Likewise, in Re Gregory A. Hadley, B-1-76-964, (S.D.O. March 22, 1977, J. Porter) and In Re Sussman, C-1-79-129, B-1-78-832 (S.D.O. J. Rubin, June 7, 1979) the District Court expressed its views on the subject of the meaning of “willful and malicious” as applied in the Bankruptcy Act to deny a discharge for the conversion or damage of the person or property of another. To the law as laid down in those cases, this Court is bound. Does it mantle the present proceeding so as to deny the bankrupt (now debtor under the present Bankruptcy Code) the relief he seeks.
Summarily, Hadley concerned itself with injury to the person of another; Day to the property of another; and Sussman with funds of another knowingly received by the bankrupt and converted to his own use.
The present situation concerns itself with property of the bankrupt duly encumbered by a security interest and sold by the bankrupt.
A review is in order for enlightenment. On August 2, 1977 the bankrupt, Dennis L. Christen, purchased a stereo set at Shillito’s and financed the transaction by means of a security agreement (Pltf. Ex. 2). The bankrupt, however, in testimony stated he was not aware of the merchandise being encumbered, that such did not enter his mind because he had an existing revolving account. He was unsure whether or not he received a copy of the security agreement.
What happened to Christen after the purchase is significant for it is the sale of the secured items that gives rise to the Shillito claim.
The bankrupt encountered marital difficulties which culminated in divorce with a bewildering effect on him. It was his responsibility to pay the debts of the couple. Not being able to perform in this respect with punctuality, he filed a Chapter XIII proceeding under the Bankruptcy Act.
Here, too, he encountered difficulty, and ultimately sold the stereo set to raise funds ($350.00) to pay into the Chapter XIII plan.
Was this malicious under the provision of the Bankruptcy Act § 17(a)(2) (11 U.S.C. § 35(a)(2)) so as to deny him relief from the debt.
First of all, as distinguished from Hadley, Sussman and Day, in the present situation the property was the property of Mr. Christen, subject only to an encumbrance. True, he violated the terms of his agreement with Shillito’s, but under the circumstances, was that automatic malice with respect to conversion of the property of another.
This Court cannot bring itself to that conclusion.
See also Davis v. Aetna Acceptance Co., 293 U.S. 328, 55 S.Ct. 151, 79 L.Ed. 393; Robertson v. Interstate Securities Company, 8 Cir., 435 F.2d 784; In Re McGinnis, 10 Cir., 586 F.2d 162, for a further discussion of the law.
The debt of Shillito’s is declared dis-chargeable. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8490150/ | OPINION
EMIL F. GOLDHABER, Chief Judge:
The point for decision is whether we should award attorneys’ fees to the debtors’ counsel and against the United States under the Equal Access to Justice Act due to an initial decision by the Department of Housing and Urban Development (“HUD”) refusing assignment of a mortgage on the debtors’ home in light of its later acquiescence to assignment. For the reasons set forth herein, we conclude that under this statute the debtors are not entitled to fees.
We summarize the facts of this controversy as follows:1 The debtors purchased in 1971 a parcel of realty for use as their family residence. In exchange for a purchase-money loan the debtors granted a mortgage in the property to an entity which ultimately assigned the mortgage to V.N.B. Mortgage Company. The twenty-five year mortgage was for the principal sum of $9,500.00 which bore interest at a rate of 7% per year. The monthly payments on the mortgage were $167.17.
The mortgage was insured under the provision of the National Housing Act of 1934. 12 U.S.C. § 1707, et seq., and federal regulations promulgated thereunder, 24 C.F.R. § 203.1 et seq. (1982). The mortgage is likewise subject to the assignment provisions of 12 U.S.C. § 1715u and 24 C.F.R. §§ 203.650 to 203.660 (1982).
The employment of the husband-debtor was terminated in November of 1982 through no fault of his own. While employed, his take-home pay was $989.00 per month but, after the termination of his employment, unemployment compensation was only $858.00, while the debtors’ monthly expenses, excluding the mortgage, totaled $782.00. During 1982, the wife-debt- or fell ill and incurred hospital bills of $29,000.00 although insurance covered only $13,000.00 of this amount. Based on these factors, in the early part of 1983 the debtors defaulted on the mortgage and requested that HUD accept assignment of the mortgage to avoid foreclosure. HUD declined, stating, in part:
The default was not caused by a circumstance or set of circumstances beyond your control which temporarily rendered you financially unable to cure the delinquency within a reasonable time or make full mortgage payments.
The default began in January, 1983. Even though earnings were curtailed, income was sufficient for the monthly mortgage payment. At the appeal conference, you presented no information which established that the default was beyond your control.
The debtors filed a petition for relief under chapter 7 of the Bankruptcy Code (“the Code”) in September of 1983, and the following month they filed a complaint against HUD and several other defendants seeking judicial review of HUD’s decision *209not to accept assignment of the mortgage. The government duly answered the complaint and the debtors then filed a motion for summary judgment. The government then reviewed the debtors’ circumstances, scrutinized its earlier decision refusing assignment of the mortgage and ultimately agreed to accept assignment of the mortgage. A stipulation resolving the merits of the suit was filed and we approved it. The debtors then filed a motion for an award under the Equal Access to Justice Act against HUD in the form of attorneys’ fees and costs incurred by bringing suit to compel HUD to accept assignment of the mortgage.
Under the National Housing Act of 1934, HUD insures mortgages of qualifying families who would otherwise be precluded from purchasing a home. On default the mortgagee may assign the mortgage to HUD to avoid foreclosure if, inter alia:
(5) The mortgagor’s default has been caused by circumstances beyond the mortgagor’s control which render the mortgagor unable to correct the delinquency within a reasonable time or make full mortgage payments.
(6) There is a reasonable prospect that the mortgagor will be able to resume full mortgage payments after a period of reduced or suspended payments not exceeding 36 months and will be able to pay the mortgage in full by its maturity date extended, if necessary, by up to ten years. .
24 C.F.R. § 203.650(a)(5) and (a)(6) (1982).
In 1980 Congress passed the Equal Access to Justice Act which states in pertinent part:
(d)(1)(A) Except as otherwise specifically provided by statute, a court shall award to a prevailing party other than the United States fees and other expenses, in addition to any costs awarded pursuant to subsection (a), incurred by that party in any civil action (other than cases sounding in tort) brought by or against the United States in any court having jurisdiction of that action, unless the court finds that the position of the United States was substantially justified or that special circumstances make an award unjust.
28 U.S.C. § 2412(d)(1)(A) (emphasis added). The United States Court of Appeals for the Third Circuit has quoted from the legislative history of the statute the test of whether a government action is substantially justified:
The test of whether or not a Government action is substantially justified is essentially one of reasonableness. Where the Government can show that its case had a reasonable basis both in law and fact, no award will be made. In this regard, the strong deterrents to contesting Government action require that the burden of proof rest with the Government. This allocation of the burden in fact, reflects a general tendency to place the burden of proof on the party who has readier access to and knowledge of the facts in question. The committee believes that it is far easier for the Government, which has control of the evidence, to prove the reasonableness of its action than it is for a private party to marshal the facts to prove that the Government was unreasonable.
National Resources Defense Council, Inc. v. U.S. Environmental Protection Agency, 703 F.2d 700, 707 (3d Cir.1983), quoting S.Rep. No. 253, 96th Cong., 1st Sess. 6; H.Rep. No. 1418, 96th Cong. 2nd Sess. 10-11, reprinted in 1980 U.S.Code Cong. & Admin.News 4953, 4989. The Assistant United States Attorney, representing the government’s interest in this court proceeding, asserts that its denial of acceptance of the assignment was justifiable prior to the filing of bankruptcy because the debtors would not be able to resume normal payments under the conditions set forth in 24 C.F.R. § 203.650(a)(6) (1982), since the debtors owed $16,000.00 in medical bills which were not covered by insurance. On the filing of bankruptcy, HUD foresaw the discharge of this liability and the concomitant vitiation of the alleged basis for denial of the assignment. The debtors contend that this position was not advanced by adminis*210trative officials at HUD when it denied the debtors relief. It is the debtors’ position that this refusal was predicated solely on 24 C.R.R. § 203.650(a)(5) (1982) in that HUD allegedly asserted that the unemployment compensation was sufficient for them to meet their mortgage payments, as well as their other expenses, and thus the default was not caused by circumstances beyond their control. The debtors posit that the government cannot advance one basis for its decision at the agency level and then add an additional basis for decision when the dispute is brought to court, and in support thereof cite Securities and Exchange Com. v. Chenery Corp., 318 U.S. 80, 63 S.Ct. 454, 87 L.Ed. 626 (1943).
In Chenery the Supreme Court held “that an administrative order cannot be upheld unless the grounds upon which the agency acted in exercising its powers were those upon which its actions can be sustained.” 318 U.S. at 95. The Supreme Court concluded that a challenged factual finding was predicated on an erroneous rule of law, and the Court therefore remanded the case to the Securities and Exchange Commission for further proceedings. Nonetheless, the Court also stated that it was “not disturbing] the settled rule that, in reviewing the decision of a lower court, it must be affirmed if the result is correct ‘although the lower court relied upon a wrong ground or gave a wrong reason.’ ” 318 U.S. at 88. On the basis of this latter quote and our purusal of the entire text of the Supreme Court’s opinion, we conclude that the debtors’ position is not supported by Chenery. The debtors offer no other authority which would preclude the government from advancing in this forum justifications for HUD’s actions which were not enunciated previously by that agency.
We conclude that the government was substantially justified for previously refusing to take assignment of the mortgage on the basis that the debtors could not pay the arrearages on the mortgage within a reasonable time due to the size of their medical debts. This conclusionn entails a denial of the request for fees and costs under the Equal Access to Justice Act and we will enter an order to that effect.
. This opinion constitutes the findings of fact and conclusions of law required by Bankruptcy Rule 7052. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8490152/ | MEMORANDUM OPINION
JAMES E. YACOS, Bankruptcy Judge.
This matter was tried before the court on the debtor’s objection to an unsecured claim in the amount $117,170.85 filed in this case by the defendant, Costello, Lo-masney, & DeNapoli, Inc. There is no question that the debtor was indebted to the defendant for consulting engineering services on its real estate project which totaled $96,032.85 in unpaid and overdue billings.
The dispute arises as to the legal effect of an oral agreement entered into by the parties in June of 1983 by which Costello agreed to forbear proceeding with litigation to collect its debt and the debtor agreed to the payment of interest on overdue balances at a rate of 1% over the prime banking rate during the applicable periods of non-payment.
The first issue raised by the debtor is the contention that there was no legally sufficient consideration to support its oral promise to pay interest on this debt. This argument is specious in that it is bottomed upon the proposition that the consideration was inadequate because there was no agreement on the part of the debtor to delay payment to a date certain nor any agreement for interim payments of interest until the project development in question was sold. The facts amply establish that the debtor had no possibility of paying the debt off immediately and the clear understanding was that the interest would run until full payment could be effectuated by a sale of the property by the debtor.
The second issue raised by the debtor has more substance. The debtor argues that even if enforceable the oral contract for the payment of interest must be limited to 10% per annum pursuant to New Hampshire RSA 336:1. This statute provides:
“Rate of interest — the annual rate of interest on judgments and in all business transactions in which interest is paid or secured, unless otherwise agreed upon in writing, shall equal 10 percent.”
The defendant seeks to take this case out of the statute by contending that it sent spread sheets showing the calculation of the interest under the oral agreement to *220the debtor on December 13, 1983 and January 3, 1984, using the interest rate of 1% above prime for the particular overdue periods, to which the debtor raised no objection prior to the filing of its Chapter 11 proceeding in August of 1984. Factually, the debtor disputes that these spread sheets were received as per the dates of the transmittal letters and states that both spread sheets were only received in July of 1984 shortly before the filing. For present purposes it is unnecessary to resolve this factual dispute because the court will assume that the spread sheets were in fact mailed and delivered in December of 1983 and January of 1984. The court will also assume, as the defendant contends, that the debtor in fact orally requested the second spread sheet — in order to have the data projected to a later date in calculating the balance due on the development project.
The fact remains that there is no evidence of any writing which was signed by the debtor or its agents consenting to an interest rate in excess of 10 percent with regard to this transaction. The statute in question has been construed by the New Hampshire Supreme Court strictly as requiring a writing signed by the debtor evidencing “agreement” to a higher interest rate. See D.W. Clark Road Equipment, Inc. v. Murray Walter, Inc., 124 N.H. 282, 469 A.2d 1326 (1983); Albee v. Wolfeboro R. Co., Inc., 126 N.H. 176, 489 A.2d 148 (1985). Mere submission of invoices or statements claiming a high rate of interest, without any objection raised by the debtor, will not suffice to take the case out of the statute. Obviously the legislature in New Hampshire deemed it important for public policy reasons to require that interest rates above 10 percent in such transactions be consented to in writing by the debtor before they would be enforceable. The Albee opinion points out that recent amendments to the statute in New Hampshire made this legislative intent even more clear.
In the present case there simply is no writing of any sort signed by the debtor evidencing any agreement to interest rates in excess of 10 percent. If any “piece of paper” had been signed by the debtor indirectly indicating consent to such interest rates, i.e., by reference to other documents or writings that could be incorporated by reference to the incomplete writing signed by the debtor, such fact arguably could take the case out of the statute. Here however the defendant is not able to even “get off the ground” on this tack. There simply is no writing evidencing consent to which the spread sheets and transmittal letters can be tied in this sense.
In its ultimate facts this case is essentially identical to the deciding facts in the New Hampshire cases cited and the decision must be the same. A separate judgment shall be entered allowing the claim in the amount of $96,032.85, together with interest at 10 percent up to the date of bankruptcy filing on August 28, 1984 for the applicable periods. The debtor shall circulate and then submit a form of judgment setting forth the total amount of the allowed claim, in accordance with this ruling of the court, within ten days. If defendant contests the total dollar amount to be set forth in the judgment a further hearing may be scheduled for that purpose only. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8490154/ | MEMORANDUM OF DECISION AND ORDER
MICKEY D. WILSON, Bankruptcy Judge.
This adversary proceeding is brought by Fred W. Woodson, trustee for the debtor estate and plaintiff, who objects to the claim of a perfected security interest in the debtor’s boat, boat motor and boat trailer by Bank of Oklahoma, Claremore,1 defendant. Plaintiff asserts that defendant does not have a valid security interest in debt- or’s boat, boat motor and boat trailer because defendant improperly sought perfection by filing a security agreement and financing statement listing the property as collateral in Rogers County, Oklahoma. Plaintiff claims that the proper method of perfection of a security interest in a boat, boat motor and boat trailer is by filing a lien entry form with the Oklahoma Tax Commission.
Plaintiff and defendant have filed a stipulation of facts which is summarized as follows:
1. The debtor and Willa Kim Coleman signed a promissory note for the sum of $12,569.63 and in exchange granted a security interest in certain collateral to defendant on June 13, 1983.
2. The debtor and Willa Kim Coleman granted a security interest in a 1971 boat, a 1963 75 horsepower boat motor, and a boat trailer to defendant on December 15, 1983, to replace the original collateral in which they had granted a security interest on June 13, 1983.
3. The defendant filed a financing statement with the County Clerk in Rogers County, Oklahoma, listing proper description of the boat, boat motor and boat trailer on December 21, 1983. Defendant did not deliver a lien entry form listing the boat, boat motor or boat trailer to the Oklahoma Tax Commission.
4. Debtor filed his petition in bankruptcy on April 12, 1984.
5. Defendant filed a proof of claim in debtor’s bankruptcy case, claiming a secured interest in and to the boat, boat motor and boat trailer pursuant to the promissory note, two security agreements, an agreement to exchange collateral, and a financing statement.
6. Plaintiff filed an adversary complaint claiming that defendant has no right, title or interest in and to the boat, boat motor or boat trailer and asking that defendant’s claim be allowed only as an unsecured claim for the sum of $7,740.60 on May 18, 1984.
7. Plaintiff and defendant submit the question of the proper method to perfect a security interest in debtor’s boat, boat motor and boat trailer to the Court for decision.
*265DISCUSSION
Boat and Boat Motor.
Plaintiff asserts that the boat and boat motor are a “vehicle” for which certificates of title are issued and that a security interest in this collateral must be perfected according to provisions set forth in the Certificate of Title Act, 47 O.S. § 23.2b(A)(l) (Supp.1984-1985), which states in pertinent part:
... a security interest ... in a vehicle as to which a certificate of title may be properly issued by the Tax Commission shall be perfected only when a lien entry form ... and the existing certificate of title, ... and manufacturer’s certificate of origin ... and the required fee are delivered to the Oklahoma Tax Commission or one of its motor license agents.
Defendant claims that this boat and boat motor are not “vehicles” in which a security interest must be perfected according to the Certificate of Title Act. Rather, defendant asserts that the boat and boat motor are personal property and that a security interest must be perfected pursuant to 12A O.S. § 9-302(3)(b) (Supp.1984-1985) which states in part that with few exceptions, “[a] financing statement must be filed to perfect all security interests ...”. The issue involved is thus the proper method of perfection of a security interest in a boat and boat motor; which necessarily involves the determination of whether or not a boat and boat motor are a “vehicle”.
In Oklahoma, a “vehicle” has been defined in three statutes. Both the Certificate of Title Act, 47 O.S. § 23.1 (Supp. 1984-1985) and the Motor Vehicle License and Registration Act, 47 O.S. § 22.1(36) (Supp.1984-1985), define “vehicle” as:
Every device, in, upon, or by which any person or property is or may be transported or drawn, except devices moved by human or animal power, when not used upon stationary rails or tracks.
In contrast, however, the Vehicle Excise Tax Act, 68 O.S. § 2101(b) (1966 and Supp. 1984-1985), defines “vehicle” as:
... every device in, upon, or by which any person or property is, or may be, transported or drawn, excepting devices moved by human or animal power, when not used upon fixed rails or tracks, or in the air or on water, (emphasis added)
The legislature’s failure to place further limitations on the definition of “vehicle” in the Certificate of Title Act and the Motor Vehicle License and Registration Act while doing so in the Vehicle Excise Tax Act may be significant. Thus, it is necessary to review basic principles of statutory construction. The cardinal rule of statutory construction is to ascertain legislative intent through the plain language of the statute; exceptions should not be read into a statute which were not made by the legislative body. Grand River Dam Authority v. State, 645 P.2d 1011, 1018 (Okla.1982). As stated by the plain language of the Certificate of Title Act and the Motor Vehicle License and Registration Act, a “vehicle” does not expressly exclude a device used on water, nor is it limited to a device used only on land. However, considerations other than the plain language of statutes are sometimes required. In Keck v. Oklahoma Tax Commission, 188 Okl. 257, 108 P.2d 162, 164 (1940), the court stated:
It frequently happens that the true intention of a legislative body is not expressed by the language employed in the statute, when literally construed. In such eases, the intent of such legislative body can only be effectuated by a departure from a literal interpretation of the language employed. Where such intention is plainly discernible from the provisions of the statute when considered as a whole, the real purpose and intent of the legislative body will prevail over the literal import of the words employed.
See also: C & C Tile and Carpet Company, Inc. v. Aday, 697 P.2d 175 (Okla.App.1985). The United States Supreme Court employed the principle of viewing a “vehicle” statute as a whole rather than restricting itself to plain language when it held that an airplane is not a “vehicle” even though the statute in question did not exclude aircraft. In McBoyle v. United *266States, 283 U.S. 25, 26, 51 S.Ct. 340, 341, 75 L.Ed. 816 (1931), the court stated:
The question is the meaning of the word ‘vehicle’ in the phrase “any other self-propelled vehicle not designed for running on rails.” No doubt etymologically it is possible to use the word to signify a conveyance working on land, water or air, and sometimes legislation extends the use in that direction, ... But in everyday speech ‘vehicle’ calls upon the picture of a thing moving on land.
* * M * * *
So here, the phrase under discussion calls up the popular picture. For after including automobile truck, automobile wagon and motor cycle, the words “any other self-propelled vehicle not designed for running on rails” still indicate that a vehicle in the popular sense, that is a vehicle running on land, is the theme.
The Oklahoma Certificate of Title Act and the Oklahoma Motor Vehicle License and Registration Act taken as a whole, apply to vehicles which move on land. Specifically mentioned in these statutes as “vehicles” are ambulances, automobiles, trucks, buses, motorcycles, recreational vehicles, station wagons and vans. No “vehicle” mentioned in either act moves anywhere but upon the land. The intent of the legislature is more clearly set forth in 47 O.S. § 22.10 (Supp.1984-1985) which states that registration and license fees and mileage taxes imposed upon “vehicles”:
... shall be for the purpose of reimbursing the state, counties and cities for the use of the public highways and for the maintenance and upkeep of the public highways of the state, ... Such registration fees ... shall apply to every person operating any vehicle upon, over, along, or across any public highway of this state, (emphasis added)
By giving due consideration to the intent and purpose of provisions concerning “vehicles”, the Court concludes that only those vehicles designed for use or used on public highways were intended to be covered by the Certificate of Title Act and the Motor Vehicle License and Registration Act. A security interest in such “vehicles” is perfected by delivery of lien entry form, certificate of title, manufacturer’s certificate of origin, and the required fee to the Oklahoma Tax Commission, 47 O.S. § 23.-2b(A)(l) (Supp.1984-1985).
In contrast to the definition of “vehicle” in the Oklahoma Certificate of Title Act and the Motor Vehicle License and Registration Act, a “vessel” and “motorboat” are more narrowly defined. In 63 O.S. § 802(1) (1984), “vessel” means:
... every description of watercraft, other than a seaplane on the water, used or capable of being used as a means of transportation on water, (emphasis added)
In 63 O.S. § 802(2) (1984), “motorboat” is defined to mean:
... any vessel propelled by machinery, whether or not such machinery is the principal source of propulsion ...
These definitions fit the boat and boat motor at issue in this proceeding. However, the method of perfection of a security interest in a “vessel” or “motorboat” is not specifically set forth in 63 O.S. § 801 et seq (1984). In absence of a specific statute, applicable laws concerning perfection of a security interest for this classification of property will govern. A review of other jurisdictions demonstrates that a security interest in boat and boat motors is generally perfected by filing a financing statement unless specific statutes concerning boats and boat motors indicate otherwise. See Payment Plans, Inc. v. Strell, 717 F.2d 25 (2d Cir.1983); Cohen v. Spinelli (In re Simonelli), 33 B.R. 777 (Bankr.M.D.Fla.1983); In re Moslander, 23 B.R. 407 (Bankr.C.D.Ill.1982); Freehling v. Merchants National Bank and Trust Company (In re Unger), 28 U.C.C.Rep.Serv. (Callaghan) 1173 (Bankr.S.D.Fla.1980).
Accordingly, the Court specifically finds that the proper method of perfection of a security interest in the boat and boat *267motor is by filing a financing statement in the office of the proper county clerk.2
Boat Trailer
A review of Oklahoma law indicates that trailers are classified by their type and their use. A trailer has been generally defined in the Motor Vehicle License and Registration Act, 47 O.S. § 22.1(30) (Supp. 1984-1985), to mean:
... every vehicle without motor power designed for carrying human beings or property and for being drawn by motor vehicle and constructed so that no part of its weight rests upon the towing vehicle.
Trailers can be further refined by type; as pole trailer, semi-trailer and travel trailer, 47 O.S. § 22.1 (24, 26, 31) (Supp.1984-1985). The boat trailer at issue is without motor power, designed to carry a boat, drawn by a motor vehicle, constructed so that no part of its weight rests upon the towing vehicle and cannot be further refined as any other type of trailer for purposes of the Motor Vehicle License and Registration Act. Trailers are further distinguished by their use. Trailers used for commercial or industrial purposes are required to be licensed and registered pursuant to 47 O.S. § 22.5k (Supp.1984-1985). Traditionally, trailers used for personal purposes by the owner have not been required to be licensed and registered. The boat trailer in question was not licensed nor registered and was used for the debtor’s purposes.
The method for perfection of a security interest in a trailer is not determined by whether the Oklahoma Tax Commission requires a license or registration. Rather, the method for perfection of a security interest in a trailer is determined by the type and the use to which the trailer is put. A license and registration simply provide the means by which a certificate of title can be issued and upon which a security interest can be noted. In Chief Freight Lines v. Strick Finance Company (In re Chief Freight Lines Company), 37 B.R. 436 (Bankr.N.D.Okla.1984), this Court held that the proper method of perfection of security interest in highway trailers used by the trucking company in their business was by delivery of a lien entry form to the Oklahoma Tax Commission pursuant to the Certificate of Title Act. In Stainer v. Bank of Tulsa (In re Haning), 35 B.R. 242 (Bankr.N.D.Okla.1983), this Court held that a security interest in a trailer which could be further defined as a travel trailer suitable for human occupancy must be perfected by filing a lien entry form pursuant to the Certificate of Title Act. In Chase Manhattan Bank v. Ramco Well Service, Inc. (In re Ramco Equipment, Ltd.) 32 B.R. 525 (Bankr.W.D.Okla.1983), Bankruptcy Judge Richard Bohanon held that a security interest in trailers used by a debtor-in-possession in the course of business must be perfected by filing a lien entry form pursuant to the Certificate of Title Act.
The boat trailer at issue was not used in business and cannot be further defined as a travel trailer. Further, this particular boat trailer was not required to be nor was it licensed or registered with a Certificate of Title issued.3 The legislature clearly did not intend to require that a lien be noted upon a nonexistant certificate of title. As a result, the only available method to perfect a security interest in this boat trailer is by filing a financing statement pursuant to 12A O.S. § 9-401 (Supp.1984-1985).
Accordingly, the Court specifically finds that the proper method of perfection of a *268security interest in an unlicensed and unregistered boat trailer used for personal purposes is by filing a financing statement in the office of the proper county clerk.
This memorandum of decision and order shall constitute the findings of fact and conclusions of law pursuant to Bankruptcy Rule 7052.
AND IT IS SO ORDERED.
. Bank of Oklahoma, Claremore, was formerly known as First Bank in Claremore.
. To find that a security interest in the boat and boat motor must be perfected in any other manner would affect the entire system of perfection and upset the status of security interests held by banks which have sought perfection through filing a financing statement. Further, the Boat and Motor Section of the Motor Vehicle Division of the Oklahoma Tax Commission will not accept lien entry forms for boats and boat motors.
. It should be noted that a security interests in any trailer which is not required to be registered and licensed but is, at the option of a party, registered and licensed pursuant to 47 O.S. § 22.6c (Supp.1984-1985) is perfected by filing a financing statement in accordance with 12A O.S. § 9-401 et seq. (Supp.1984-1985). | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8490622/ | *1008ORDER
JOHN L. PETERSON, Bankruptcy Judge.
The Debtor has filed a Chapter 7 bankruptcy petition and seeks to file the petition in forma pauperis without payment of the filing fee.
Section 28 U.S.C. 1930 provides:
“Notwithstanding Section 1915 of this title, the parties commencing a case under Title 11 shall pay to the clerk of the district court or the clerk of the bankruptcy court, if one has been certified pursuant to section 156(b) of this title, the following filing fees:
(1) For a case commenced under chapter 7 or 13 of Title 11, $90.
(2) For a case commenced under Chapter 9 of Title 11, $300.
(3) For a case commenced under Chapter 11 of Title 11 that does not concern a railroad, as defined in Section 101 of Title 11, $500.
(4) For a case commenced under Chapter 11 of Title 11 concerning a railroad, as so defined, $1000.
(5) For a case commenced under Chapter 12 of Title 11, $200.
* * * * * *
An individual commencing a voluntary case or a joint case under Title 11 may pay such fee in installments. * * * a
Rule 1006, Bankruptcy Rules, provides on filing fees:
(a) General Requirement. Every petition shall be accompanied by the prescribed filing fee except as provided in subdivision (b) of this rule.
(b) Payment of Filing Fees in Installments.
(1) Application for Permission to Pay Filing Fee in Installments. A voluntary petition by an individual shall be accepted for filing if accompanied by the debtor’s signed application stating that the debtor is unable to pay the filing fee except in installments. The application shall state the proposed terms of the installment payments and that the applicant has neither paid any money nor transferred any property to an attorney for services in connection with the case.
(2) Action on Application. Prior to the meeting of creditors, the court may order the filing fee paid to the clerk or grant leave to pay in installments and fix the number, amount and dates of payments. The number of installments shall not exceed four, and the final installment shall be payable not later than 120 days after filing the petition. For cause shown, the court may extend the time of any installment, provided the last installment is paid not later than 180 days after filing the petition.
As noted above, 28 U.S.C. 1930 specifically excludes the application of 28 U.S.C. 1915, which allows an action to be filed in Federal court in forma pauperis. Thus a debtor filing a chapter proceeding under Title 11, must pay the required filing fee. In re Palestino, 4 B.R. 721, 722-723 (Bankr.M.Fla.1980), holds:
“This Court further finds that 28 U.S.C. § 1915 applies in all bankruptcy proceedings except the filing of an original bankruptcy petition. While 28 U.S.C. § 1915, by its terms, appears to apply in all federal court proceedings, including bankruptcy, it is specifically made inapplicable to the original filing fee for a bankruptcy petition. 28 U.S.C. § 1930(a).
28 U.S.C. § 1930(b) makes no mention of the applicability or inapplicability of 28 U.S.C. § 1915. It appears that Congress intended the absolute requirement for payment of fees to apply only where specifically designated. Weakland v. Avco Financial Services, Inc., 4 B.R. 114 at 115 (Bankr.Del.1980).”
The Debtor must pay the filing fee in full or by installments.
IT IS ORDERED the motion of the Debt- or for leave to file a Chapter 7 proceeding without payment of a filing fee of $90.00 is denied. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8490623/ | ORDER
MARY D. SCOTT, Bankruptcy Judge.
Now before the Court is a Motion to Dismiss the Complaint in this adversary proceeding for failure to state a claim upon which relief can be granted.
The Plaintiff filed this Complaint pursuant to 11 U.S.C. §§ 523(a)(4) and (6) objecting to dischargeability of its debt by this debtor. Debtor moved to dismiss for failure to state a claim upon which relief can be granted. The Motion to Dismiss is based on Federal Rules of Civil Procedure 12(b)(6) made applicable to this adversary proceeding by Bankruptcy Rule 7012.
Plaintiff’s first claim is based on 11 U.S.C. § 523(a)(4) which excepts from discharge any debts of an individual “for fraud or defalcation while acting in a fiduciary capacity, embezzlement, or larceny ...” Plaintiff’s second claim is based on 11 U.S.C. § 523(a)(6) which excepts from *83discharge any debts of an individual “for willful and malicious injury by the debtor to another entity or to the property of another entity ...”
In support of these claims, Plaintiff pleads the following:
a) that Plaintiff leased to Computer Systems of Northwest Arkansas, Inc. certain computer equipment in 1984;
b) that Plaintiff relied on the representation of the debtor that the equipment would be used solely for floor display;
c) that debtor, in order to induce Plaintiff to extend credit to Computer Systems of Northwest Arkansas, Inc., executed a guaranty whereby he personally and unconditionally guaranteed the obligation of Computer Systems of Northwest Arkansas, Inc.;
d) that Plaintiff perfected a security in-. terest in the equipment;
e) that the equipment was sold in December of 1984 to a third party, but Plaintiff was not informed until October of 1985;
f) that debtor intentionally and knowingly misrepresented the purpose for the purchase of the equipment knowing Plaintiff would rely on this misrepresentation and suffer damages;
g) that the actions of the debtor constitute fraud and misrepresentation;
h) that the action of the debtor in selling the equipment to a third party constitutes conversion and a willful and malicious injury to the property of the Plaintiff.
Bankruptcy Rule 7008 adopted Federal Rule of Civil Procedure 8 which states allegations in a complaint should be made in short, plain and concise statements, which will provide a party with notice of the claims asserted. In re Hart, 461 F.Supp. 328 (E.D.Ark.1978). Bankruptcy Rule 7009, which adopted Federal Rules of Civil Procedure 9, requires that any fraud allegation must be pled with particularity. In re Kerr, 58 B.R. 171 (Bkrptcy.E.D.Ark.1985). Reading Rule 9 in conjunction with Rule 8, Plaintiffs Complaint, then, must provide a short and simple description of the factual basis to support an allegation of fraud. In re Tanner’s Transfer and Storage of Virginia, 30 B.R. 22 (Bkrptcy.E.D.Va.1983). Additionally, in order to survive debtor’s Motion to Dismiss, under § 523(a)(4), Plaintiffs claim of fraud must also sufficiently allege that the debt- or committed the fraud while acting in a fiduciary capacity. Ragsdale v. Haller, 780 F.2d 794, 796 (9th Cir.1986).
Plaintiffs Complaint fails to indicate how any type of fiduciary relationship exists. The Complaint merely indicates that there was some form of debtor/creditor relationship between the parties resulting from the lease of computer equipment. Since a debtor/creditor relationship, without more will not establish a fiduciary/beneficiary relationship under § 523(a)(4), Plaintiffs first cause of action does not state a claim upon which relief can be granted.
The Plaintiffs second cause of action under § 523(a)(6), in the Court’s opinion, does give the debtor fair notice of Plaintiff’s claim that the debtor converted proceeds from the sale of secured collateral in violation of Plaintiff’s security agreement. While the allegations are sketchy, they are sufficient to withstand debtor’s Rule 12(b)(6) Motion. The phrase “willful and malicious” as it appears in § 523(a)(6) requires an intentional act by the debtor “which necessarily produces harm and is without just cause or excuse.” In re Cecchini, 780 F.2d 1440, 1443 (9th Cir.1986). Proof of specific intent to injure is not necessary. Id. When a debtor intentionally and knowingly sells collateral without the knowledge or consent of the secured creditor, the sale has been held to constitute a willful and malicious act. In re Linklater, 48 B.R. 916, 920 (Bkrptcy.Nev.1985). Debtor’s Motion to Dismiss the Plaintiff’s second cause of action is therefore denied.
The Court is mindful that the Plaintiff’s Complaint is sketchy and does appear to contradict itself in paragraphs 5 and 8 with regard to who or what sold the subject computer equipment. The Court does feel, however, that this confusion, which can be cleared up by amendment to the original *84Complaint, is not of the type which would prevent the debtor from being on notice as to the claim against him he will be required to defend.
Accordingly, for the foregoing reasons, it is hereby
ORDERED that the Motion to Dismiss as to Plaintiff’s first claim based on 11 U.S.C. § 523(a)(4) be and hereby is granted for failure to state a claim upon which relief can be granted. It is further
ORDERED that the Motion to Dismiss as to Plaintiff’s second claim based on 11 U.S.C. § 523(a) be and hereby is denied. It is further
ORDERED that the Defendant shall answer the Complaint or otherwise plead to any amended complaint within twenty (20) days from the date the amended complaint is filed.
IT IS SO ORDERED. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8490624/ | FINDINGS OF FACT AND CONCLUSIONS OF LAW REGARDING CLAIM NO. 1 CASE NO. 84-289-BK-J-GP FILED BY JAMES G. ABOUR-EZK
GEORGE L. PROCTOR, Bankruptcy Judge.
Claimant, James G. Abourezk, filed a proof of claim in the amount of $210,000 in the Chapter 11 case of The Charter Company (“TCC”). TCC objected to this claim on the ground that the claim amount was limited to $56,383.32 pursuant to 11 U.S.C. § 502(b)(7).
At the trial, the parties stipulated that the depositions filed were deemed part of the trial record, and the Court heard the testimony of claimant and Richard H. Holtz. The Court accepted certain portions of this testimony pending the resolution of TCC’s objection to the admission of parol evidence. The Court, having considered the evidence and the argument of counsel, makes the following findings of fact and conclusions of law.
Findings of Fact
1. Claimant filed proof of claim, number 1, in the amount of $210,000 in the Chapter 11 case of TCC, Case No. 84-289-BK-J-GP (the “Claim”).
2. The Claim is based upon a consulting agreement between claimant and TCC dated July 1, 1981 (the “Consulting Agreement”), a copy of which is attached as Exhibit A.
3. TCC filed an objection to the Claim on the ground that the claim amount was limited to $56,383.32 pursuant to 11 U.S.C. § 502(b)(7).
4. The Consulting Agreement required claimant (i) to be available to provide consulting services to TCC, upon request, regarding transactions with the governments of Middle Eastern nations or involving the petroleum business in the Middle East, and (ii) to refrain from providing such services to any party with an adverse interest to TCC.
5. Under the Consulting Agreement, TCC was required to pay claimant $150,000 for the first year and $70,000 per year for five years thereafter beginning July 1, 1982. Although TCC paid for the services through June 30, 1984, TCC did not make the payments due on July 1, 1984, and thereafter.
6. In accordance with his obligations under the Consulting Agreement, claimant did refrain from representing any interest adverse to TCC and held himself in readiness to perform services for TCC under the Consulting Agreement.
7. The Court finds that the terms of the Consulting Agreement are unambiguous and that no material term was omitted from the Consulting Agreement by the parties. Further, the Court finds that the claimant, an experienced attorney, read and understood the terms of the Consulting Agreement at the time of its execution.
8. TCC filed its. petition for reorganization with this Court on April 20, 1984 (the “Petition Date”).
9. The services under the Consulting Agreement were terminated on August 3, 1984, when this Court entered an order *146approving the rejection of the Consulting Agreement.
10. Because claimant was paid under the Consulting Agreement through June 30, 1984, the net amount due under the Consulting Agreement for one year following the Petition Date was $56,383.32.
Conclusions of Law
1. The legal issues in this contested matter are governed by the applicable provisions of the Bankruptcy Code and the laws of the State of New York.
2. Title 11, U.S.C., § 502(b)(7) limits recovery on claims for damages arising from the termination of employment contracts to one year’s compensation, without acceleration, from the earlier of the date of the petition or the date services under the employment contract were terminated.1
3. An agreement is an “employment contract," within the purview of 11 U.S.C. § 502(b)(7), if it establishes the terms and conditions of an employment relationship. In re N & T Associates, Inc., 78 B.R. 285 (Bankr.D.Nev.1987); In re Aero-Auto Company, Inc., 33 B.R. 107 (Bankr.E.D.Va.1983); See also, In re Gee & Missler Services, Inc., 62 B.R. 841, 843-44 (Bankr.E.D.Mich.1986). No actual services need be performed under such an agreement to qualify as an employment contract. In re Modern Textile, Inc., 28 B.R. 181 (Bankr.E.D.Mo.1983).
4. The Consulting Agreement in this case is an “employment contract” under 11 U.S.C. § 502(b)(7) because it establishes an employment relationship between TCC and claimant. Specifically, the Consulting Agreement has the essential attributes of an employment contract in that (i) the title of the agreement, “Consulting Agreement and Retainer,” delineates an employment relationship, (ii) under the agreement TCC retained claimant’s personal services to act as a consultant in matters involving Middle Eastern business and political affairs, (iii) the agreement precluded him from providing services during the term of the agreement to any other party adverse to TCC in a litigation context, (iv) the Consulting Agreement was not assignable by either party, and (v) the employment relationship was terminated upon TCC’s rejection of the Consulting Agreement.
5. Claimant argues that the Consulting Agreement is not an employment contract because it is not definite as to the amount of additional compensation claimant was to receive in the event his services were used by TCC. However, the terms of the Consulting Agreement plainly state that, to earn his annual $70,000 payments, he was required to be available to perform services for TCC and to refrain from providing such services to any party with an adverse interest to TCC. Merely because the parties agreed to negotiate claimant’s fee for additional services if requested by TCC, does not alter the fact that the Consulting Agreement created an employment relationship between TCC and claimant.
6. At trial, claimant introduced parol evidence, subject to TCC’s objection, in an attempt to show that, contrary to the plain terms of the Consulting Agreement, TCC never really intended to use his services and that the Consulting Agreement was merely intended by the parties to be, in effect, a promissory note from TCC.
7. Under New York law, the parol evidence rule provides that the clear and unambiguous terms of a written instrument cannot be contradicted or varied by prior or contemporaneous extrinsic oral or written evidence. Happy Dack Trading Co., Ltd., v. Agro Industries, Inc., 602 F.Supp. 986, 991 (S.D.N.Y.1984); Barclays Bank of New York v. Goldman, 517 F.Supp. 403, 411 (S.D.N.Y.1981) and the cases cited therein; In re Rosner, 48 B.R. 538, 555-56 (Bankr.E.D.N.Y.1985); Higgs v. deMaziroff 189 N.E. 555, 263 N.Y. 473 (1934); See also, In re Aero-Auto Company, supra at 108. An agreement which appears complete on its face is integrated as a matter of law regardless of the presence of a *147formal merger clause. Happy Dack, supra; Battery Steamship Corp. v. Refineria Panama, S.A., 513 F.2d 735, 738 n. 3 (2nd Cir.1975).
8. For the reasons stated above, the Court finds that the terms of the Consulting Agreement are unambiguous and that no material term was omitted from the Consulting Agreement. Accordingly, because claimant failed to demonstrate any sufficient basis to permit the introduction of parol evidence, the Court sustains the objection of TCC and will disregard the parol evidence proffered by claimant at the trial.
9. This conclusion is not determinative, however, for even if parol evidence were allowed to vary the terms of an unambiguous written agreement, the evidence presented at the hearing was insufficient to lead to the conclusion that the Consulting Agreement was anything but an employment contract. Even if claimant had entered into the Consulting Agreement in connection with the settlement of litigation involving TCC, he plainly agreed (i) to make his services available to TCC in connection with Middle Eastern business and political affairs, and (ii) to refrain from rendering services, in a litigation context, to any party adverse to TCC. Thus, even if TCC was not inclined to use claimant’s services at the time the Consulting Agreement was signed, it nevertheless negotiated and obtained (i) the right to use his personal services for the term of the Consulting Agreement, and (ii) the right to preclude claimant from providing such services to any party in litigation against TCC.
10. Moreover, the Court finds testimony of claimant regarding the intent of the parties to be unpersuasive. Specifically, claimant, as an experienced attorney, was aware that other types of legal documents, such as a promissory note, would have made TCC’s payment obligations unconditional. However, his attorneys prepared and reviewed the Consulting Agreement with him before he signed it, and, as he admitted at trial, claimant read and understood the terms and conditions of the Consulting Agreement at the time he signed it. Indeed, in a letter to TCC over two years later, claimant described the Consulting Agreement as “an agreement ... to retain me as a consultant over a period of five years.”
11. For these reasons, the amount to be allowed for a claim arising from the termination of the Consulting Agreement is limited to one year’s compensation from the Petition Date pursuant to 11 U.S.C. § 502(b)(7). This Claim will be allowed in the amount of $56,383.32, which represents one year’s compensation due under the Consulting Agreement from the Petition Date.
12. A final order will be entered in accordance with these Findings of Fact and Conclusions of Law.
*148EXHIBIT A
CONSULTING agreement and retainer
This Agreement made as of the first day of July, 1981 by and between The Charter Company, a corporation organized and existing under the laws of the State of Florida ("Charter"), and James G. Abourezk, P. C. a professional corporation organized and existing under the laws of the Oistrict of Columbia ("Abourezk").
niüíiíllü:
WHEREAS, certain corporations which are now subsidiaries or affiliates of Charter had, prior to Charter's acquisition of an interest in them, employed Mr. James G. Abourezk in his capacity as a member of Abourezk, Shack & Mendenhall, P. C., and
WHEREAS, Charter wishes to be able to call upon Mr. James G. Abourezk in his capacity as a member of James G. Abourezk, P. C. as a consultant from time to time upon the terms and conditions set forth below and
WHEREAS, Charter wishes to protect itself from Abourezk's representing, in a litigation context, other parties adverse to Charter.
NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements hereinafter contained, and for other good and valuable consideration, the parties hereto agree with each other as follows:
1. For a period commencing on July 1, 1981 and ending on July 1 , 1987, Charter hereby retains-Abourezk and Abourezk agrees to act as a consultant to Charter from time to time as my be requested by the executive officers or the Board of Directors of Charter, upon such financial terms and other conditions as may be mutually agreed to in writing by Abourezk and Charter with respect to each instance in which Abourezk is called upon to act as a consultant, in particular in the following fields:
A. Transactions with the governments of Middle Eastern nations or any subdivisions or controlled corporations thereof, and
8. Other transactions having to do with the conduct of any aspect of the petroleum business in the Middle East.
2. During the period of engagement commencing on July 1, 1981 and for the purpose of ensuring that Abourezk will hold himself in *149readiness to perform the consulting services in pa.¿graph 1 above on a year-to-year basis until July 1» 1987, Charter will make the followjftg' payments to Abourezk:
A. Simultaneously with the execution and delivery of this agreement. Charter will pay to Abourezk the sum of SISO,000.00 by cashier's or certified check, and
B. On each of the next succeeding five anniversary dates of this agreement, i.e., July 1, 1982, July 1, 1983, July 1, 1984, July 1, 1985 and July 1, 1986, Charter will pay to Abourezk the sum of $70,000.00. Said payments are to be made to Abourezk at 2029 Connecticut Avenue, N. W., Washington, O. C. 20008. If any of such payments are not made by Charter on or before such dates. Charter shall pay to Abourezk interest on the unpaid amount computed from the due date until payment in full at a rate per annum equal to the rate in effect from time to time in New York, New York for prime commercial loans of 90-day maturities by Chemical 8ank. In addition, Charter shall reimburse Abourezk for any and all reasonable attorneys' fees and costs incurred by Abourezk to collect any payment not made by Charter when due or interest thereon (as hereinabove provided); provided, however, that if any person, firm or corporation shall assert any right, title or Interest in or to any such payment and Charter has, on or before the date such payment is due, deposited the amount of payment in a special escrow account, then Charter shall not be required to reimburse Abourezk for any attorneys' fees or costs nor to pay any interest on the payment other than that actually earned on the amount deposited in escrow.
3. This agreement shall not be assignable by Charter without the written consent of Abourezk or by Abourezk without the written .consent of Charter, and any purported assignment by either party of its.rights or obligations under this agreement shall be null and void; provided, however, that if Charter shall merge with or consolidate Into another corporation or transfer substantially all of Its business or assets to any other person, firm or corporation this agreement may be assigned by Charter to the person, firm or corporation to which such business or assets are transferred, and that if Abourezk shall transfer all of its business to any other firm or corporation, this agreement may be assigned by Abourezk to the firm or corporation to which such business is transferred.
4. This agreement shall be governed by and construed In accordance with the laws of the State of New York.
5. This agreement supersedes any and all previous consulting or retainer arrangements between the parties hereto or their precedessors in interest, and there shall be no cancellation, modification, amendment or *150alteration hereof unless in writing and signed by the duly authorized representatives of each of the parties.
IN WITNESS WHEREOF, the parties hereto have duly executed this agreement as of the day and year first above written.
THE CHARTER COMPANY
[[Image here]]
ATTEST:
[[Image here]]
CORPORATE SEAL
JAMES 6. A80UREZK, P. C.
[[Image here]]
. The version of § 502(b)(7) considered by the Court was the version applicable on the Petition Date. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8490625/ | ORDER DENYING DEBTOR’S MOTION FOR PRELIMINARY INJUNCTION
GEORGE L. PROCTOR, Bankruptcy Judge.
THIS CAUSE came before the Court on the debtor’s complaint and motion for preliminary injunction in the above-referenced adversary proceeding. A hearing was conducted on January 4, 1988. Lionel Silber-man, Esquire was present on behalf of the debtor-plaintiff. William Knight Zewadski, Esquire and Roberta A. Colton, Esquire were present on behalf of Bracton Corporation. Defendant, William D. Gorman was not present or represented at the hearing.
The debtor seeks a preliminary injunction to prevent the scheduled foreclosure sale of its principal asset, the Sheraton Twin Towers Hotel. The sale was scheduled and advertised for 11:00 a.m. on January 4, 1988.
In support of its request for injunctive relief, the debtor has introduced evidence of a proposal to purchase the hotel by Roberto Ongpin. Although Ongpin did not appear, his attorney testified that Ongpin is interested in purchasing the hotel for $36 million, and has deposited $1 million to his attorneys’ trust account, as a showing of good faith. Ongpin has not signed a contract with the debtor and has made no deposit which would be forfeited to the debtor in the event that the contract is not signed. Indeed, Ongpin has not yet viewed the property, and the evidence indicates that he has nothing more than an interest in the property.
Bracton and the Debtor entered into a settlement agreement in their state court foreclosure case on September 1, 1987. Pursuant to the agreement, the hotel would be sold on January 4, 1988 if the debtor could not redeem the property pursuant to the terms of the agreement. The settlement was noticed to all creditors and interested parties in the debtor’s bankrupcy case and no objections to the settlement were filed with the court with the allowable time for objections.
Pursuant to the settlement, a final judgment of foreclosure was entered by the Orange County Circuit Court on October 5, 1987, in the amount of $52,372,080.35. Interest is accruing on this judgment at a rate of 12 percent, at a per diem rate of approximately $17,218.
To compensate Bracton for the delay of its foreclosure sale, the debtor has offered to pay Bracton $4,000 per day. However, the Debtor admits that it has failed to make the adequate protection payments ordered by this Court since October 23, 1987 and does not intend to make the January adequate protection payment. The total unpaid adequate protection payments owed to Bracton is $412,000.
The standards for evaluating a preliminary injunction include 1) a determination of the likelihood that the plaintiff will prevail on the merits of its complaint; 2) a balancing of the harms of issuing the in-junctive relief; and 3) consideration of the public interest. See Provincetown Boston Airlines, Inc. v. Miller (In re Provincetown Boston Airline, Inc.), 52 B.R. 620, 624-25 (Bankr.M.D.Fla.1985).
The Court first observes that the public interest is not of significant concern in this evaluation. This essentially is a private matter between the parties to the settlement agreement.
With respect to the merits of the complaint, the Court finds that the Debtor is not likely to prevail in the merits. The *152Debtor has no contract and no earnest money. Moreover, the $4,000 per day offered to Bracton is inadequate in light of the fact that the per diem interest of the foreclosure judgment is more than four times that amount. The Debtor has also stipulated and contracted to set January 4, 1988 as the cutoff date.
In balancing the relative harms of an injunction, the Court finds that the harm to Bracton outweighs the harm to the Debtor. This bankruptcy has been pending since September 11, 1986, and the Debtor has been given every opportunity to do something with the hotel property. Bracton on the other hand has not received its Court ordered adequate protection payments and the Debtor’s present offer is inadequate in view of the loss to Bracton.
In light of the foregoing, it is hereby,
ORDERED:
1. The debtor's motion/complaint for preliminary injunction is denied.
2. The foreclosure sale scheduled for January 4, 1988 at 11:00 a.m. may proceed pursuant to the Stipulation of Settlement noticed to creditors on September 4, 1987, and the Final Judgment of Foreclosure entered by the Orange County Circuit Court on October 5, 1987, may be completed in accordance with Florida law. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8490626/ | OPINION
DAVID W. HOUSTON, III, Bankruptcy Judge.
This cause came on for hearing as a result of the third amended complaint filed by the plaintiff, Jacob C. Pongetti, Trustee for the Estate of the Wellington Construction Corporation, hereinafter referred to as plaintiff or trustee; an answer and counterclaim having been filed by the defendant, Merchants and Farmers Bank, hereinafter referred to as defendant or bank; all parties being represented before the Court by their respective attorneys of record; and the Court having heard and considered same, hereby finds as follows, to-wit:
I.
The Court has jurisdiction of the subject matter of and the parties to this proceeding pursuant to 28 U.S.C. § 1334 and 28 U.S.C. § 157. This is a core proceeding as defined in 28 U.S.C. § 157(b)(2)(F) and (H).
II.
The trustee’s third amended complaint attempts to recover, for the benefit of the bankruptcy estate, five transactions or transfers as fraudulent conveyances or voidable preferences. These five transfers are identified as follows, to-wit:
1. The execution of a deed of trust, dated June 23, 1981, encumbering the Columbus Canterbury Apartments.
2. The execution of a deed of trust, dated June 23, 1981, encumbering a lot located on Fifth Street North, Columbus, Mississippi.
3. The setoff of four bank accounts, maintained by Wellington Construction Corporation at the defendant bank, on November 16, 1981, totaling the sum of $589.97.
*4264. The setoff of a certificate of deposit, owned by Wellington Construction Corporation, on November 16, 1981, in the sum of $17,947.43.
5. The execution of a deed of trust, dated November 16, 1981, encumbering the Starkville Canterbury Apartments.
By virtue of a partial judgment, dated December 22, 1986, and entered December 23, 1986, the Court decided that the transactions involving the Columbus Canterbury Apartments and the lot located on Fifth Street North, Columbus, Mississippi (transactions No. 1 and No. 2 hereinabove), were not recoverable by the trustee as fraudulent conveyances or preferential transfers. The aforesaid partial judgment is incorporated herein by reference.
As to the Columbus Canterbury Apartments, the Court found that this property was not actually owned by Wellington Construction Corporation, hereinafter referred to as Wellington, but rather by several individuals. The Court also found that there was no insider relationship between Wellington and the defendant bank as that term is defined in 11 U.S.C. § 101(28)(B). Both of the transactions occurred beyond the ninety day preference period as set forth in 11 U.S.C. § 547(b)(4)(A), and absent the “insider” relationship, neither transaction could be set aside as a preferential transfer. The Court also found that neither of these transactions could be set aside as fraudulent conveyances in that the Bankruptcy Code specifically permits the securing of an antecedent debt. Note the interaction of 11 U.S.C. § 548(a)(2)(A) and 11 U.S.C. § 548(d)(2)(A). There was no evidence whatsoever that the transactions were undertaken with an actual intent to hinder, delay, or defraud anyone as contemplated in 11 U.S.C. § 548(a)(1). Therefore, the trustee’s third amended complaint was dismissed as to these two transactions, all as set forth in the aforementioned partial judgment.
III.
The deed of trust, dated November 16, 1981, encumbering the Starkville Canterbury Apartments, as noted in transaction No. 5 hereinabove, was subsequently foreclosed. Prior to the hearing, there was a dispute between the plaintiff trustee and the defendant bank as to the value realized by the bank from the foreclosure sale. As set forth in paragraph 9(1) of the pre-trial order, entered in this proceeding, the bank contended that it received $15,779.40 from the foreclosure, while the trustee contended that the bank received $26,041.00. At the hearing, it became apparent that the trustee had not taken into account certain costs and expenses related to the foreclosure. Following a deduction of that portion of the costs related to the bank’s interest in the collateral, the bank’s initial calculation was found to be correct, i.e., $15,-779.40.
On the final day of the hearing, the bank introduced appraisal testimony, without objection, to the effect that it actually received nothing as a result of the foreclosure sale. In closing argument, counsel for the bank explained to the Court that the 12 units of the apartment complex, pledged to the defendant bank, could be separately identified, rather than being considered only as a percentage of the total 82 units in the complex. The 12 units were encumbered by a deed of trust in favor of First Federal Savings and Loan Association of Columbus, securing an original indebtedness of $240,000.00, which was superior to the lien of the defendant bank. Through an affidavit, which was not admitted into evidence at the hearing, the bank now contends that First Federal received the sum of $231,829.27 from the foreclosure sale. Further, if a proration of the foreclosure costs were added to this sum in the amount of $9,989.57, (12/82nds of $68,262.08, the total foreclosure costs), the appraised value of the property, in the sum of $240,000.00, was exceeded by the total payment to the first lien holder and the prorated foreclosure costs. ($231,829.27 plus $9,989.57) As such, the defendant bank takes the position that it received nothing from the foreclosure sale.
The defendant initially calculated its proceeds received from the sale on Exhibit *427D-16, which is summarized as follows, to-wit:
$15,779.40 RECEIVED BY BANK ON
10-29-82 PROM SALE OF 12 UNITS OF 82
UNITS OF STARKVILLE CANTERBURY APARTMENTS
Net Sales Price: (Following the deduction of $68,262.08 as foreclosure cost) $107,826.01
Divided by 82 total units equals 1,314.95 per unit
Times 12 units collateralized to defendant bank equals $ 15,779.40
The hearing must be conducted in conformity with the pretrial order, which was executed by both parties, and entered by the Court. Throughout the pretrial order, the defendant bank contended that it had received the sum of $15,799.40 as a result of the Starkville Canterbury Apartments foreclosure. See the defendant’s statement of facts, paragraph 7, page 6; the contested issues of fact, paragraph 9(1), page 12; and defendant’s Exhibit D-16, paragraph 11(B), page 19. The provisions of the pretrial order cannot be amended at this time to accommodate the theory, which arose practically as an afterthought, that the bank received nothing as a result of the foreclosure. Therefore, for purposes of this opinion, the Court is constrained to consider that the defendant bank received the sum Of $15,799.40 as foreclosure proceeds. The trustee had little opportunity to comprehend, much less to rebut, this lately developed theory.
IV.
The setoff of the bank accounts, the setoff of the certificate of deposit, and the execution of the Starkville Canterbury Apartments deed of trust, all occurred within the ninety day preference period prior to the filing of the petition in bankruptcy. The involuntary petition was filed on February 4, 1982, so the ninety day preference period commenced on November 6, 1981. At this point, the Court is concerned only with whether these three transactions might be avoided by the trustee pursuant to 11 U.S.C. § 547(b), as preferential transfers. These three transactions are not fraudulent conveyances, as contemplated under 11 U.S.C. § 548(a)(1) or (2), for the same reasons that were stated herein-above when transactions No. 1 and No. 2 were discussed. For reference purposes, the text of 11 U.S.C. § 547(b) is set forth as follows:
(b) Except as provided in subsection (c) of this section, the trustee may avoid any transfer of an interest of the debtor in property—
(1) to or for the benefit of a creditor;
(2) for or on account of an antecedent debt owed by the debtor before such transfer was made;
(3) made while the debtor was insolvent;
(4) made—
(A) on or within 90 days before the date of the filing of the petition; or
(B) between ninety days and one year before the date of the filing of the petition, if such creditor at the time of such transfer was an insider;
(5) that enables such creditor to receive more than such creditor would receive if—
(A) the case were a case under chapter 7 of this title;
(B) the transfer had not been made; and
(C) such creditor received payment of such debt to the extent provided by the provisions of this title.
(All further references in this opinion to United States Code sections shall be considered as Title 11, United States Code, unless specifically noted otherwise.)
V.
The next area of inquiry that will be addressed is whether or not Wellington was insolvent when the three transfers occurred. As set forth in § 547(f), the debtor is presumed to have been insolvent on or within the ninety days immediately proceeding the date of the filing of the bankruptcy petition. This is a rebuttable presumption, however, that exists in favor of the trustee, which can be overcome by the presentation of credible evidence. In an effort to overcome the presumption in this case, the defendant bank offered the testimony of Charles Bland and William K. Blair, both former officers of Wellington, *428who stated that in their opinion Wellington was not insolvent on November 16, 1981. These conclusory statements were not supported by any financial statements or records. The Court has no remote idea as to the value of assets owned by Wellington at the time of the transfers. However, the substantial amount of debt owed by Wellington, as well as the significant overdrafts that occurred periodically in the Wellington bank accounts were clearly proven by the evidence. The Court is, therefore, of the opinion that the presumption of insolvency was not successfully rebutted by the generalized “in court” statements of Bland and Blair.
VI.
The three transfers, made on November 16, 1981, were only parts of a comprehensive settlement agreement entered into by and between Wellington Construction Corporation, Bland Construction Company, Inc., Charles B. Bland, Jr., and W.K. Blair, referred to therein as borrowers, with the defendant bank. See, Exhibit P-27. The “bottom line” of the settlement agreement provided for the execution of a master promissory note in favor of the bank in the total sum of $397,542.19. See, Exhibit D-10. There were two advances made under this note. The first, in the sum of $249,054.19, was advanced on November 16, 1981 (Exhibit D-ll(a)), and according to the post-trial memorandum filed by counsel for the defendant bank, was applied as follows, to-wit:
Overdrafts of Bland Construction Company bank accounts $175,082.27
Interest payments on Wellington Note Nos.
7167, 9094, 9096, and 9115 (Exhibits D-l,
P-15, P-16, and D-7, respectively) 28,223.98
Attorneys fees and bond premium in Bank's suit against Wellington (Exhibit D-9) as approved in Settlement Agreement (Exhibit P-27) 34,500.00
Interest on note from four individuals, Note No. 9095 (Exhibit P-14) 11.247.94
$249,054.19
The second advance, in the sum of $47,-610.00, occurred on November 24, 1981, and was apparently credited to offset overdrafts in the Bland Construction Company accounts, although no proof was offered to verify this assumption. See, Exhibit D-12(a). This second advance was the amount actually disbursed on a contingent line item in the settlement agreement that had been established to cover disputed uncollected checks. The total contingent sum was initially set at $148,488.00 and represented the difference in the master promissory note and the initial $249,054.19 advance ($397,542.19 - $249,054.19 = $148,-488.00). As noted hereinabove, from the two advances Wellington received the benefit, as the bank contends, of $28,223.98, representing interest payments on four Wellington notes, and $34,500.00, representing the attorney’s fees and bond premium incurred as a result of the bank’s suit against Wellington and several others. These two figures total the sum of $62,-723.98. The bank contends that since this amount exceeds the value of transfers Nos. 3, 4, and 5, that the trustee may not avoid these transfers inasmuch as they were made as a contemporaneous exchange for new value given to the debtor, Wellington, as contemplated under § 547(c)(1). The bank also contends that since the subsequent advance on November 24, 1981, in the sum of $47,610.00, exceeds the value of the three transfers, that the “net result” rule of § 547(c)(4) precludes avoidance of the transfers by the trustee because the defendant later advanced “new value to or for the benefit of the debtor”, which can be offset against any claimed preferences. Before addressing these two defenses, the Court must first address the remaining provisions of § 547(b).
It has already been established that the presumption of insolvency was not overcome by the defendant’s proof and that the transfers occurred on or within ninety days before the date of the filing of the bankruptcy petition. There is no question that the transfers involved interests of the debt- or in property, transferred to or for the benefit of a creditor. As set forth earlier, the funds advanced, in the total sum of $62,723.98, allegedly attributable to the benefit of Wellington, were applied to interest that had accrued on four Wellington notes, as well as the attorney’s fees and bond premium that-were incurred by the *429bank in prosecuting the lawsuit against Wellington and others. The Court does not feel that the entire amount of attorney’s fees and bond premium should be assessed exclusively against Wellington, but fortunately, the resolution of this ancillary issue is not necessary to decide the ultimate issues in this case. Regardless of the fact that Wellington executed a new master note in the sum of $397,542.19 on November 16, 1981, and at the same time permitted the setoff of its bank accounts and the certificate of deposit, in addition to pledging its interest in the Starkville Canterbury Apartments, the actual note proceeds allocated to Wellington were applied to antecedent debts, i.e., the previous interest accruals, the attorney’s fees, and the bond premium. Consequently, the transfers were for or on account of antecedent debts owed by the debtor before such transfers occurred, which satisfies element (2) of § 547(b).
Transfers to pay on or secure antecedent debts, made within the ninety day preference period, obviously permit the creditor, the defendant bank, in this case to receive more than said bank would receive if the case were a Chapter 7 liquidation proceeding.
Therefore, all the requisite elements of § 547(b) have been established by the evidence presented.
VII.
The final questions to be resolved concern whether the trustee is prohibited from avoiding the three transfers because of the “contemporaneous exchange” rule set forth in § 547(c)(1), or the exception to avoidance found in § 547(c)(4).
The “contemporaneous exchange” exception to preference avoidance, which will be considered first, provides, inter alia, that the trustee may not avoid a transfer “to the extent that: such transfer was intended by the debtor and the creditor to or for whose benefit such transfer was made to be a contemporaneous exchange for new value given to the debtor, and; in fact was a substantially contemporaneous exchange.” As set forth hereinabove, although Wellington executed a new note, on November 16,1981, the proceeds were allocated exclusively to antecedent debts. Succinctly stated, there was simply no new value given to the debtor Wellington. All three of the transfers were applied to obligations that Wellington already owed to the bank, and as such, the “contemporaneous exchange” rule cannot be utilized by the defendant to preclude the trustee’s avoidance action.
The implementation of the settlement agreement has the same effect as if Wellington, within the ninety day preference period, renewed a previously unsecured debt through the execution of a renewal promissory note, and secured this renewal note with previously unencumbered collateral. This presents a classic preference case.
§ 547(c)(4) states, inter alia, that a trustee may not avoid a transfer “to or for the benefit of a creditor, to the extent that, after such transfer, such creditor gave new value to or for the benefit of the debtor ...” In its post-trial memorandum, the defendant bank attempts to invoke what it labels as the “net result” rule regarding the $47,610.00 advanced on November 24, 1981. Since this advance exceeds the total amount of the three transfers, i.e., $34,-316.80, the bank states that this advance should be offset against the transfers as a “washout”.
Actually, there is no “net result” rule found in § 547(c)(4), but rather a “subsequent advance” rule. See, In Re American International Airways, Inc., 56 B.R. 551 (Bankr.E.D.Pa.1986); Leathers v. Prime Leather Finishes Co., 40 B.R. 248 (D.Me.1984); Matter of Isis Foods, Inc., 39 B.R. 645 (W.D.Mo.1984); In re Wadsworth Bldg. Components, Inc., 711 F.2d 122 (9th Cir.1983); and Matter of Bishop, 17 B.R. 180 (Bankr.N.D.Ga.1982). § 547(c)(4) should not be confused with the “netting” effect of § 547(c)(5), which applies exclusively to inventory, receivables, or the proceeds thereof. See, Matter of Missionary Baptist Foundation, Inc., 796 F.2d 752 (5th Cir.1986). Regardless, because of the facts of this case, the mechanical applica*430tion of a “net result” rule as opposed to a “subsequent advance” rule is immaterial.
The burden of proof to establish an exception to the trustee’s avoidance powers lies upon the affected creditor. The defendant bank candidly admits that there was no proof whatsoever concerning the application of the $47,610.00 advance, but continues by stating that even if these funds were advanced to cover overdrafts in the Bland Construction Company bank accounts, maintained at the defendant bank, that the so called “net result” rule still applies inasmuch as Wellington could be considered as receiving some indirect benefit. The Court can simply not accept this argument. There was no proof of any description that the defendant bank gave new value to or for the benefit of Wellington, and as such, § 547(c)(4) cannot be utilized as an effective defense by the bank in this case.
VIII.
In view of the fact that the defendant bank has failed to establish any exception under § 547(c), to the trustee’s avoidance powers granted under § 547(b), as well as, that all of the tests of § 547(b) have been met regarding the setoff of the bank accounts, the setoff of the certificate of deposit, and the execution of the deed of trust encumbering the Starkville Canterbury Apartments, the trustee may avoid these three transfers as preferences in the total sum of $34,316.80. Since the values of the three transfers are liquidated amounts, the trustee shall be awarded judgment against the defendant, Merchants and Farmers Bank, in the sum of $34,316.80, with interest to accrue from and after the date of the order awarding said judgment according to law.
An order will be entered consistent with this opinion. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8490627/ | MEMORANDUM DECISION RE: OBJECTION TO PROOF OF CLAIM FOR DAVIDSON
JON J. CHINEN, Bankruptcy Judge.
On January 4, 1988, a hearing was held on the objections to the Proofs of Claim filed by Hugh Loring McCormick and Ha*545rold Davidson & Associates, Inc., two appraisers. Present were Wayne I. McClas-key, Esq., attorney for Bettie J. Lane, a creditor (“Creditor Lane”), who filed the objections, Cuyler Shaw, Esq., attorney for Howard Thomas Lane, Sr., (“Debtor”), Eric T. Kawatani, Esq. and Kenneth Hoo, Esq. attorneys for Harold Davidson & Associates, Inc. (“Davidson”) and Curtis Ching, Esq., attorney for Hugh Loring McCormick (“McCormick”).
This Memorandum Decision deals with the objection to the claim of Davidson.
Lane contends that Davidson did not properly appraise the property, that it provided conflicting appraisal testimony, that the amounts billed and paid are conflicting and that Davidson’s services did not benefit Debtor’s estate. Creditor Lane thus contends that Davidson is not entitled to the amount requested.
Based upon arguments of counsel, the records in the file, and being fully apprised in the premises, the Court renders this Memorandum Decision.
FINDINGS OF FACT
1. On or about November 1981, Professor Peter Mylnaryk, an M.A.I., was contacted by Davidson to perform appraisal and valuation services for Debtor and Howard T. Lane Company, a California Corporation (“Lane Company”), with regard to the assets and real properties held by said corporation.
2. Professor Mylnaryk did perform the appraisal services requested and his research, data, and opinions were used in the Multiple Property Appraisals dated May 27, 1982 prepared by Davidson for Lane’s attorney, Daren Johnson (“Johnson”).
3. In addition to performing appraisal services for Lane and of the Lane Company, Prof. Mylnaryk provided extensive and detailed consultation to Lane and Johnson with regard to the following:
a.Providing critiques of some 32 previous appraisals of the subject properties for which the Professor did not do the original appraisal work;
b. Providing evaluations and critiques of the testimonies of and aiding in the preparation of examination of other real estate and business valuation expert witnesses after each day of trial in the lawsuit between Creditor Lane and Debtor in Orange County Superior Court, State of California;
c. Providing expert testimony on behalf of Lane with regard to the valuation of the various properties owned by Lane and/or Lane Company;
d. Providing day by day assistance to Johnson and Lane in their trial preparation prior to and during the afore-described trial;
4. During the course of his performance of the appraisal work, the Professor was directed by Johnson to value a certain Citrus Property, referred also as the Sunkist Property, situated at Port Hueneme, County of Ventura, State of California, according to a comparable sales approach utilizing only comparable sales which occurred prior to the date of valuation.
5. Creditor Lane contends that Prof. Mylnaryk did not properly appraise the property in dispute, because he used only comparable sales which occurred prior to the date of valuation. However, the California Evidence Code cited by Creditor Lane provides that an appraiser may use comparable sales “before or after the date of valuation.” There is no mandate that the appraiser use both comparable sales before and after the date of appraisal. It is optional. And it should be noted that the Professor was directed to use only comparable sales prior to the date of valuation.
6. Creditor Lane also contends that Davidson had provided conflicting appraisal, that in 1976 it appraised the Sunkist Property at $3,000,000.00 but that in 1982, through Prof. Mylnaryk, it appraised the property at $750,000.00. However, Davidson explained as follows: that the 1976 appraisal was based upon the land residual theory, with the assumption that the highest and best use of the property was for a hotel use; and (2) that the later appraisal was based on a comparable sales method, with the Professor determining that it was *546not probable that the property could be rezoned from industrial use to hotel use.
7. With reference to the objection to the billing, Davidson’s explanation of its billings is as follows:
a. Davidson contends that it has performed various appraisal services for Debt- or since 1980. Davidson had three separate billing accounts for Lane which were paid through Johnson of the law firm of LaFollette, Johnson, Shroeter & DeHaas which represented Lane.
b. The first of the accounts was for an appraisal of the so-called “Sunkist Property” situate at Port Hueneme, California. This account was billed and paid for in 1981 for the sum of $5,500.00. The second account was for the review and critique of 32 previously done appraisals of various properties. This account was billed twice for the sum of $6,978.00 and $3,250.00 and paid for in 1981. None of these accounts are outstanding and Davidson’s present claim does not arise from these accounts.
c. Davidson’s present claim arises from the third account established in 1982 for multiple property valuations including the valuation of Lane’s California corporation, Howard T. Lane Company. The appraisal services rendered included substantial and constant litigation support and preparation for the benefit of Lane and Johnson in that certain lawsuit by Bettie J. Lane against Lane in the Orange County Superior Court, California. The total amount billed in this third account was the sum of $73,685.00 and the total amount paid on said account is the sum of $48,515.00, leaving an outstanding balance of $25,170.00. This balance is the subject of the present dispute.
8. Finally, with reference to Creditor Lane’s objection that the Professor’s services did not benefit Debtor’s estate, Davidson points to attorney Johnson’s affidavit where he states that, because of the Professor’s testimony, the jury rejected the testimony of Creditor Lane’s expert that the property was valued at $7,000,000.00 and awarded Creditor Lane $2,077,000.00, instead of a larger sum.
CONCLUSIONS OF LAW
1. Filing of a Proof of Claim is prima facie evidence of the claim. Bankruptcy Rules 3001. The burden is then on the one opposing the Proof of Claim to come forward to rebut the presumption, at which time, the proponent must then go forward with his evidence.
2. Appraisal is not an exact science. It is a matter of opinion based upon the education and training of the appraiser. In re Mikole Developers, 14 B.R. 524 (Bkrtcy.E. D.Pa.1981); In re Development, Inc., 36 B.R. 998 (Bankr. HI 1984). Thus, two qualified expert appraisers, using the same method of appraisal, may arrive at extreme ends in appraising the same parcel of land. Appraiser A may appraise Whiteacre at $100,000.00; Appraiser B may appraise it at $500,000.00. Thus, it is the trier of facts who must determine which testimony is more reliable. It cannot be said that A is absolutely correct or that B is absolutely wrong.
3. It was not erroneous for Prof. Mylnaryk to use only comparables sales which had occurred before the appraisal date. The California Code clearly stated that the use of the comparable sales which occurred after the appraisal date was discretionary. It was the trier of fact to determine the weight to be given to the Professor's testimony, in light of the fact that he had not relied upon comparable sales which occurred after the date of appraisal.
4. In addition, it must be noted that the Professor was under instructions of Debt- or’s counsel to use only comparable sales that occurred before the date of valuation. To punish an appraiser because he had followed instructions of his client’s counsel is not appropriate.
5. The Court finds that the explanation of the billing is satisfactory. Applicant is applying only for services rendered in 1982, not 1981. And the remaining balance claimed by Davidson is $25,170.00.
6. The $3,000,000.00 appraisal by Davidson in 1976 was based on the assumption that the highest and best use of the proper*547ty being appraised was as a hotel use. This property was then zoned for industrial use. And, in 1982, Prof. Mylnaryk determined that it was not probable that the property could be rezoned from industrial use to hotel use. Thus, he appraised the property for industrial use and, based upon the comparable approach, arrived at a value of $750,000.00.
7. Creditor Lane’s appraiser estimated the value of the property at $7,000,000.00. However, the jury awarded her $2,075,-000.00. It can only be concluded that the jury did give some weight to Prof. Mylna-ryk’s estimate of value. Thus, in reducing Creditor Lane’s claim, the Professor’s testimony was of benefit to Debtor’s estate.
8. An appraiser’s fee is not based upon the outcome of the litigation. If the appraiser has performed his duties according to the recommendation of the American Institute of Real Estate Appraisers, he has done a proper job and should be compensated. The Professor has properly performed his duties.
9. An appraiser, like an attorney and other professionals, must submit adequate time sheets to justify the fees requested. In the instant case, Davidson merely submitted the number of hours Prof. Mylnaryk had spent on behalf of Debtor. The services were rendered pre-petition and it was not known to the Prof. Mylnaryk that his fees would be ultimately paid by Debtor’s estate. Thus, he may not have retained detailed time sheets. However, the Court is still entitled to know how he spent his billable hours. Were they for conferences? If so, with whom? How much time was spent on testifying? How much time was spent as a consultant in the courtroom or on other matters? These are some of the questions that he must answer.
The Court will grant Davidson 21 days from the date of this Order to submit a proper time sheet. Otherwise, the Court will rule without the said time sheet.
So Ordered. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8490628/ | MEMORANDUM DENYING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT
DONAL D. SULLIVAN, Bankruptcy Judge.
The defendant filed a motion for summary judgment on the grounds that the alleged preferential transfer to the defend*552ant occurred outside of the 90 day period in 11 U.S.C. § 547(b)(4)(A). The motion should be denied for the following reasons.
This case is a chapter 11 proceeding which began by the filing of an involuntary petition under chapter 7. The defendant asserted that computation of the 90 day preference period should start from the date when the debtor filed a voluntary chapter 11 petition rather than from the earlier date of the filing of the involuntary petition under chapter 7 by creditors. Creditors filed their involuntary petition on April 24, 1986. The debtor filed a chapter 11 petition with schedules on May 14, 1986 and paid the additional filing fee required to convert a chapter 7 case to chapter 11.
The triggering event for computation of the preference period is the “date of the filing of the petition,” not the entry of an order for relief. 11 U.S.C. § 547(b)(4)(A). “Petition” is defined as a “petition filed under Sections 301, 302, 303 or 304 of this title as the case may be commencing a case under this title.” 11 U.S.C. § 101(36).
Where the parties convert a pending case from one relief chapter to another, 11 U.S. C. § 348(a) provides, with some exceptions, that the date of filing of the petition shall not change. Finally, 11 U.S.C. § 706 gives the debtor the right to convert from chapter 7 to chapter 11 “at any time” so long as there has been no prior conversion. See Advisory Note to 1987 Amendment to Rule 1017(d).
The defendant’s arguments which fundamentally are based upon the concept that the debtor is a party to two “cases” and that the preference action was brought in the later case are flawed. First of all, there is only a difference in semantics between a petition for relief under chapter 11 and a motion to convert to chapter 11. In substance, they are the same and as evidenced by the debtor’s payment of a reduced fee for conversion, the debtor intended to convert. Secondly, given the express intention of 11 U.S.C. § 348(a) that the date of the filing of a petition not change as a result of a change in relief, it is clear that the word “case” as used in the definition of petition in 11 U.S.C. § 101(36) is used in a general sense as including any of the relief chapters mentioned. Thirdly, there is no express requirement in 11 U.S.C. § 547(b) that an order of adjudication ever be entered on the specific petition initiating the case under the Code. The intent of 11 U.S.C. § 348(a) should not be defeated by administrative ritual or lack thereof. If such a requirement must be read into the preference statute, the defect can be easily cured by the entry of an order of adjudication at this time. The defendant never had standing to object to such an order under Bankr. R. 1011(a) and should have none now. A formal order of consolidation could also be entered blessing what has already occurred if there is any doubt as to the debtor-in-possession’s right to proceed.
Finally, the obvious purpose of 11 U.S.C. § 348(a) in the foregoing respect is to prevent the debtor from validating preferences by manipulating the filing date of the petition. It goes without saying that, for the same reason, the recipient of a preference should not be allowed the benefit of an opportunity denied to the debtor.
The cases cited by the parties are not on point. The Code contemplates the super-session of the first case by the second case, not the co-existence of two cases. Where supersession occurs, 11 U.S.C. § 348 retains the earlier filing date. Bankr.R. 1015(a) applies where the supersession principles do not apply and should not be interpreted in a manner to defeat Section 348(a) of the Code.
For the foregoing reason, defendant’s motion for summary judgment should be denied. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8490629/ | FINDINGS OF FACT, CONCLUSIONS OF LAW AND ORDER ON MOTION FOR SUMMARY JUDGMENT
BARBARA J. SELLERS, Bankruptcy Judge.
This matter is before the Court upon plaintiff Bernell R. Mace’s Motion for Summary Judgment and a Cross-Motion for Summary Judgment filed by defendant Larry Ray Mace. Appended to each party’s respective motion is a memorandum in support. In response to the defendant’s cross-motion, the plaintiff filed a reply memorandum. It appears to the Court upon examination, that the defendant’s motion is actually only in the nature of opposition to the plaintiff’s motion and is not a request for separate affirmative relief. Accordingly, only the plaintiff’s motion is the subject of this ruling.
The jurisdiction of this Court in this adversary proceeding is premised upon 28 U.S.C. § 1334(b) and upon the General Order of Reference entered in this district. This matter is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(I).
FINDINGS OF FACT
On April 16, 1984, the defendant filed a voluntary petition under Chapter 7 of the Bankruptcy Code. Among his listed creditors was Bernell R. Mace, his ex-spouse, who claimed amounts owed under their divorce decree. Bernell Mace subsequently filed this complaint in the defendant’s bankruptcy case seeking a determination that certain debts arising from that divorce decree are nondischargeable.
Count I of the complaint alleges that thirty percent of all monthly pension payments for the defendant’s services in the United States Navy (“Military Retirement Funds”) is owed to the plaintiff as alimony and, therefore, is nondischargeable under 11 U.S.C. § 523(a)(5). Count II of the complaint alleges that her portion of the Military Retirement Funds which was previously unpaid (the “Arrearages”) is also nondis-ehargeable under principles of conversion. The defendant denied the nondischargeable nature of the thirty percent of the Military Retirement Funds and the Arrearages and further counterclaimed for monies withheld and paid to the plaintiff subsequent to the date of the defendant’s bankruptcy filing.
The relevant facts are not in dispute. The plaintiff and the defendant were married for twelve years. On June 5,1975, the Superior Court of California, County of Orange, entered an interlocutory judgment dissolving that marriage and awarding custody of the parties’ minor child to the plaintiff. That judgment further provided that:
[Defendant] shall pay to [plaintiff], as and for spousal support, the sum of $175.00 per month, commencing February 1, 1975, and continuing on the first day of each month thereafter to and including January 1, 1977; commencing February 1, 1977 [defendant] shall pay to [plaintiff], as and for spousal support the sum of $1.00 per year for a period of three years, at which time spousal support shall absolutely terminate; provided, however, spousal support shall terminate upon either party’s death, [plaintiff’s] remarriage, or further order of court.
The state court further found that the defendant expected to complete a twenty (20) year period of service in the United States Navy on or about May 26,1975, and that he would be eligible to retire under the United States Military Act on that same date. Accordingly, the state court expressly reserved jurisdiction to determine if a community property interest existed in the Military Retirement Funds, and if such interest did exist, to divide the resulting community property interests. On August 11, 1975, the state court entered its final judg*866ment formally terminating the parties’ marriage.
Two months later, on October 2, 1975, the state court entered its order addressing the respective rights of the parties in the Military Retirement Funds. The pertinent provisions of the order upon which the present dispute is based states as follows:
That the military retirement pension standing in the name of [Defendant] vested during the marriage of [Defendant] and [Plaintiff]; that 60% thereof constitutes the community property of the parties; that [Plaintiff] is awarded a 30% interest in said military retirement pension of [Defendant] based on 20 years of service.
[[Image here]]
[Defendant] is ordered to remit to [Plaintiff] 30% of each pension check, based on 20 years of service, when received by [Defendant] from the United States Government.
[[Image here]]
[Defendant] is ordered to designate [Plaintiff] as a 30% beneficiary of any rights which may accrue under said pension by virtue of the death of the [Defendant].
The defendant retired from the Navy on or about April 1, 1977. Since his retirement, he has made no direct remittances to the plaintiff of her thirty percent interest in the Military Retirement Funds. By order dated January 28, 1983, the California state court directed the Navy Finance Center to withhold thirty percent of the defendant’s net retirement paycheck and to pay such amount directly to the plaintiff each month. The Navy Finance Center was further ordered to withhold an additional $150.00 each month from the remaining portion of each check until the Arrear-ages were satisfied. The Navy Finance Center did not commence such payments until September 30, 1983, and, the actual amount of the unpaid Arrearages sought to be discharged by the defendant is $18,-102.43, as referenced by the parties’ stipulated amendment to the complaint.
To prevail upon a motion for summary judgment, the movant must show that no genuine issue exists as to any material fact and that the movant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). All evidence and inferences therefrom must also be construed in favor of the party opposing the motion for summary judgment. Smith v. Hudson, 600 F.2d 60 (6th Cir.1979), cert. denied, 444 U.S. 986, 100 S.Ct. 495, 62 L.Ed.2d 415.
THE § 523(a)(5) CAUSE OF ACTION
In her motion seeking summary judgment, the plaintiff argues that the defendant’s continuing obligation to pay thirty percent of each month’s Military Retirement Funds is nondischargeable pursuant to 11 U.S.C. 523(a)(5). For reasons set forth below, however, the Court finds, as a matter of law, that the defendant’s obligation relating to the Military Retirement Funds is not a debt which arose in the nature of support.
Section 523(a)(5) states that a discharge under 11 U.S.C. § 727 does not discharge an individual debtor from any debt:
[T]o a spouse, former spouse, or child of the debtor, for alimony to, maintenance for, or support of such spouse or child, in connection with a separation agreement, divorce decree, or other order of a court of record or property settlement agreement, but not to the extent that:
sjc * * * * Jfr
(B) such debt includes a liability designated as alimony, maintenance, or support, unless such liability is actually in the nature of alimony, maintenance or support[.]
The Court of Appeals for the Sixth Circuit has clearly stated the standard to be applied to determine whether an obligation arising from a divorce decree is dis-chargeable under § 523(a)(5). The factors to be considered are whether the state court or the parties intended the obligation to be for support, whether the obligation has the effect of providing support necessary for daily needs, and lastly, whether the obligation was reasonable in light of traditional concepts of support and the party’s resources at the time of the award and *867prospectively. Long v. Calhoun, 715 F.2d 1103 (6th Cir.1983). If the first factor is not met, the analysis ends and the debt is dischargeable. Calhoun, 715 F.2d at 1109.
In the present case, the Court finds that the plaintiffs entitlement to her thirty percent interest in the Military Retirement Funds was not intended by the state court to be in the nature of support. Rather, the plaintiffs interest, according to the Superi- or Court of California, is an ownership interest which vested in her during the marriage. The state court found that sixty percent of the pension represented community property. This was based upon the plaintiffs twelve year marriage to the defendant during his twenty years of military service. The remaining eight years of the defendant’s twenty years of military service entitled him to sole ownership of forty percent of the Military Retirement Funds.
The Supreme Court of California did not finally decide the issue of spouses’ rights to non-vested pension funds until a few months after the parties’ divorce. However, spouses’ rights to vested pension funds had been clearly established before the Maces’ divorce in 1975 in that the Supreme Court of California had held that both the employee and the non-employee own a property interest in a vested pension fund which is the community property of the parties. Phillipson v. Board of Administration, 3 Cal.3d 32, 89 Cal.Rptr. 61, 473 P.2d 765 (1970).
Both employee and non-employee own community property rights in the pension fund that are of equal stature; such rights are equally subject to the power of the divorce court. Because the employee participates in the pension program, he does not thereby strip his spouse of vested community property rights in that fund. Phillipson, 3 Cal.3d at 50, 89 Cal.Rptr. 61, 473 P.2d 765.
In 1974, the Supreme Court of California again addressed the issue of spouses’ rights to pension funds, in particular, military pension funds, and held that “federal military pay is properly the subject of California community property law.” In re Fithian, 10 Cal.3d 592, 111 Cal.Rptr. 369, 517 P.2d 449, (1974), cert. denied, 419 U.S. 825, 95 S.Ct. 41, 42 L.Ed.2d 48; see generally Cal. Property Rights § 4800 (West 1983).
In the present case both parties had vested interests in the Military Retirement Funds. Order of the Superior Court of California, County of Orange, Case No. D-87525 (October 2, 1975) (unreported). That order was not appealed and, therefore, was unaffected by the United States Supreme Court’s ruling in McCarty v. McCarty, 453 U.S. 210, 101 S.Ct. 2728, 69 L.Ed.2d 589 (1981). Based upon the California state court’s final order and the relevant California state law, this Court finds that the award to plaintiff of a share of the Military Retirement Funds was not intended to be in the nature of support. Therefore, neither the ongoing obligation to remit thirty percent of the Military Retirement Funds nor the obligation for the Ar-rearages are excepted from discharge by the provisions of 11 U.S.C. § 523(a)(5).
THE § 523(a)(6) CAUSE OF ACTION
The plaintiff’s alternative claim for relief is based upon 11 U.S.C. § 523(a)(6). Plaintiff alleges that the Arrearages were her property which the defendant converted, and that such conversion was willful and malicious, thereby causing injury to her property which is nondischargeable pursuant to 11 U.S.C. § 523(a)(6).
The plaintiff correctly states that willful and malicious injury as provided in § 523(a)(6) includes willful and malicious conversion of another’s property. Grand Piano and Furniture Co. v. Hodges, (In re Hodges), 4 B.R. 513 (Bankr.W.D.Va.1980); In re McCloud, 7 B.R. 819, (Bankr.M.D.Tenn.1980). The plaintiff must therefore show that the defendant converted her property under the applicable state law, and that such conversion was with willful and malicious intent.
Conversion is defined as “any act of dominion wrongfully exerted over another’s personal property in denial of or inconsistent with his right therein.” Hartford Financial Corporation v. Burns, 96 Cal.App.3d 591, 158, Cal.Rptr. 169 (1979). See generally 18 Ohio Jur.3d 481 § 1 (1980). *868There has been no challenge to the plaintiff’s assertion that the defendant received the plaintiff’s interest in the Military Retirement Funds and refused to pay the plaintiff the share awarded to her by an order of the Superior Court of California. Because the defendant kept the plaintiff’s property, he clearly converted her share of the Military Retirement Funds. Fidelity & Deposit Co. v. Citizens Bank 72 Ohio App. 432, 52 N.E.2d 549 (1943); Dakota Gardens Apartment v. Pudwill, 75 Cal.App.3d 346, 142 Cal.Rptr. 126 (1977). To be excepted from discharge pursuant to 11 U.S. C. § 523(a)(6), however, the Court also must find that the defendant’s conversion of the plaintiff’s funds was with willful and malicious intent.
The Court of Appeals for the Sixth Circuit recently addressed the issue of the interpretation of “willful and malicious” intent as required by 11 U.S.C. § 523(a)(6). Perkins v. Scharffe, 817 F.2d 392 (6th Cir.1987), cert denied, — U.S.-, 108 S.Ct. 156, 98 L.Ed.2d 112. The Perkins Court defines “willful” as “... deliberate or intentional, a deliberate and intentional act which necessary leads to injury.” Perkins, 817 F.2d at 394 (quoting 3 Collier on Bankruptcy 523-11 (15th ed. 1986)). The Court notes that this is a lenient standard which does not require a showing of intent to cause injury. Perkins, 817 F.2d at 393. The plaintiff, therefore, is not required to show that the defendant kept the Military Retirement Funds with the intent to injure her, but only that he intended to keep such funds and that his action necessarily caused her injury.
Based on the Sixth Circuit’s standard, the Court finds that the defendant’s act of withholding the Military Retirement Funds was a deliberate act. Construing the facts in favor of the defendant as the party opposing the motion for summary judgment, the Court also finds that the plaintiff has shown injury by the defendant’s actions.
In referring to 11 U.S.C. § 523(a)(6), the Court of Appeals for the Sixth Circuit held that:
[a] injury to an entity or property may be a malicious injury within this provision if it was wrongful and without just cause or excessive, even in the absence of personal hatred, spite, or ill-will. Perkins, 817 F.2d at 394 (quoting 3 Collier on Bankruptcy 523-11 (15th ed. 1986)).
The defendant’s failure to remit the Military Retirement Funds to the plaintiff was wrongful as such failure was in violation of an order of the Superior Court of California. The defendant failed to assert any reason for his action in opposition to the plaintiff’s motion and, therefore, the Court also finds that his failure to remit was without just cause. Accordingly, the debt- or’s obligation for the Arrearages is excepted from discharge by the provisions of 11 U.S.C. § 523(a)(6).
THE ONGOING MONTHLY PAYMENTS
The Court finds further that the defendant’s obligation to pay thirty percent of any ongoing monthly payments he receives from the Military Retirement Funds is not affected by his bankruptcy or his discharge. Because the plaintiff is the owner of thirty percent of the Military Retirement Funds, the defendant is obligated to turn over those funds to the plaintiff. It is not the defendant who is liable to the plaintiff for the ongoing payments, but rather, it is the United States who must pay plaintiff her share. Manners v. Manners (In re Manners), 62 B.R. 656 (Bankr.D.Mont.1986). The defendant is merely a conduit through which the United States remits to plaintiff her share. But, to the extent the defendant actually receives the plaintiff’s share and fails to pay her thirty percent of each monthly check, a debt is created and defendant may then be civilly liable for conversion of the plaintiff’s funds. Thomas v. Lyles (In re Thomas), 47 B.R. 27 (Bankr.S.D.Cal.1984). Accordingly, the debtor’s obligation to turn over to the plaintiff her share of each month’s Military Retirement Funds is unaffected by his bankruptcy.
Based upon the foregoing, the plaintiff’s motion for summary judgment is granted pursuant to 11 U.S.C. § 523(a)(6), and the *869defendant’s obligation to pay the Arrearag-es is not discharged. The plaintiffs motion is DENIED, however, insofar as it seeks judgment pursuant to 11 U.S.C. § 523(a)(5). The defendant’s obligation to turn over to the plaintiff her share of the Military Retirement Funds is not affected by the defendant’s bankruptcy.
This Court’s finding that the plaintiff’s share of the Military Retirement Funds is not the property of the defendant further moots the defendant’s Counterclaim alleging a violation of the automatic stay for pension funds paid to the plaintiff by the Navy Financial Center after April 16,1984. Because the Court has sustained the plaintiff’s motion pursuant to § 523(a)(6), the Court need not address the plaintiff’s allegations based upon 11 U.S.C. § 523(a)(4).
IT IS SO ORDERED. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482792/ | Third District Court of Appeal
State of Florida
Opinion filed November 10, 2022.
Not final until disposition of timely filed motion for rehearing.
________________
No. 3D22-1078
Lower Tribunal No. F95-36588
________________
Keith Soanes,
Appellant,
vs.
The State of Florida,
Appellee.
An appeal under Florida Rule of Appellate Procedure 9.141(b)(2) from
the Circuit Court for Miami-Dade County, Thomas J. Rebull, Judge.
Keith Soanes, in proper person.
Ashley Moody, Attorney General, for appellee.
Before FERNANDEZ, C.J., and EMAS, and MILLER, JJ.
PER CURIAM.
Affirmed. | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482793/ | Third District Court of Appeal
State of Florida
Opinion filed November 10, 2022.
Not final until disposition of timely filed motion for rehearing.
________________
No. 3D22-494
Lower Tribunal No. 18-36132
________________
Judith Elaine Marsie-Hazen,
Appellant,
vs.
City of Miami Gardens,
Appellee.
An Appeal from the Circuit Court for Miami-Dade County, Mark
Blumstein, Judge.
Remer & Georges-Pierre, PLLC, and Peter M. Hoogerwoerd, for
appellant.
Lydecker, LLP and Forrest L. Andrews, for appellee.
Before FERNANDEZ, C.J., and HENDON, and LOBREE, JJ.
PER CURIAM.
Affirmed. | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489004/ | ORDER ON MOTIONS TO TAX COSTS AND FOR ATTORNEYS’ FEES
THOMAS C. BRITTON, Bankruptcy Judge.
Judgment on January 21, in this adversary proceeding awarded $10,000 to the plaintiff against the defendant trustee. (C.P. No. 25) Plaintiff has moved to recover its costs in the amount of $1,208.16, (C.P. No. 227), and has moved for the recovery of its attorneys’ fees in the amount of $10,393 (C.P. Nos. 28, 30, 32). The parties were heard on March 23.
Plaintiff, of course, recognizes the “American Rule” that a litigant cannot ordinarily recover his counsel fees. It does not contend that it is entitled to recover its fees under a contractual commitment, nor that the circumstances of this case bring it within either a statute or the express provisions of a Rule which authorizes the assessment of attorneys’ fees. Instead, plaintiff invokes the inherent power of all courts to assess attorneys’ fees:
“... when the losing party has acted in bad faith, vexatiously, wantonly, or for oppressive reasons . . . Bad faith may be found, not only in the actions that led to the lawsuit, but also in the conduct of the litigation.” Roadway Express Inc. v. Piper, 447 U.S. 752, 766, 100 S.Ct. 2455, 2464, 65 L.Ed.2d 488, 1980; Alyeska Pipeline Co. v. Wilderness Society, 421 U.S. 240, 258, 95 S.Ct. 1612, 1622, 44 L.Ed.2d 141 (1975).
It is plaintiff’s position that when it took the depositions of three persons in this case on December 15, 1980, the trustee should have capitulated and paid the amount claimed by the plaintiff. Plaintiff argues that when the trustee filed an answer (C.P. No. 13) denying certain allegations and thereafter asserted an “affirmative defense” (C.P. No. 14), the trustee exhibited such bad faith as to warrant the assessment against the trustee of all fees incurred by the plaintiff after the depositions were taken.
The basis for plaintiff’s lawsuit was that the debtor had received $10,000 from the plaintiff bank by mistake as the result of an erroneous, duplicate electronic transfer initiated by a correspondent bank in Pennsylvania. At trial, the trustee, through counsel, immediately acknowledged that she had no alternative evidence to offer to contradict the evidence gathered by the plaintiff. That evidence established a sequence of events that fully documented the erroneous transfer.
The trustee’s only concern was that the initiating Pennsylvania bank had not been joined as a party and the trustee feared possible double exposure to that potential claimant of these same funds. This concern constituted the “affirmative defense” asserted by the trustee. I concluded the defense to be without merit, because the Pennsylvania bank’s remedy lay against the plaintiff, not the trustee, in the unlikely event that plaintiff failed to account fully to its correspondent for the recovery it would make from the trustee.
Plaintiff was not significantly delayed by the trustee. Judgment was received 54 days after the complaint was filed and the Christmas holidays fell within that interval.
As has been noted, a court should show greater caution in the exercise of its inherent powers than is called for in the exercise of powers expressly authorized by the legislative process:
*182“Because inherent powers are shielded from direct democratic controls, they must be exercised with restraint and discretion.” Roadway Express, Inc. v. Piper, supra, 447 U.S., at 764, 100 S.Ct. at 2463.
The circumstances here do not evince any bad faith on the part of either the trustee or her counsel at all. The defendant trustee acted in this instance on the written recommendation of her counsel. There is no basis to find that she acted in bad faith in any respect. Nor can I infer bad faith on her counsel’s part merely because his defense was ephemeral. We must not forget that he represented a trustee. In this day of increasing sensitivity to malpractice claims, it is reasonable to advise that a claim like this one be resisted in order that its payment be directed by the court rather than be authorized voluntarily by a fiduciary. The trustee did not file this action. She merely refused to stipulate to an adverse judgment. I am not suggesting here that the court’s inherent power to assess attorneys’ fees can never be asserted against a trustee for asserting a nebulous defense, but it would surely require an unusual case.
In view of the foregoing conclusion, there is no occasion to discuss the amount of the fee sought in this instance.
Plaintiff has conceded that the last five items in its motion to tax costs (C.P. No. 27) do not fall within the scope of 28 U.S.C. § 1920, but would be recoverable only under the exercise of this court’s inherent power. The remaining costs $575.19 are not opposed.
It follows, therefore, that plaintiff’s motion for attorneys’ fees is denied and its motion for costs is granted in the amount of $575.19. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489005/ | ORDER GRANTING CONDITIONAL STAY OF ORDER DIRECTING INVESTIGATION BY U. S. TRUSTEE
CONRAD K. CYR, Bankruptcy Judge.
On the “Motion for Stay of Order Directing Investigation by United States Trustee,” filed in behalf of the United States Trustee on March 9,1981, and on the objection thereto orally communicated to the chief deputy clerk of the bankruptcy court on March 11, 1981; it appearing that the appeal by the United States Trustee from the order of this court entered on February 19, 1981 presents a serious question of law; that denial of the requested stay pending appeal may alter the status quo, risking irreparable harm to appellant; and that a balancing of the hardships and equities favors issuance of a stay conditioned on and coextensive with the diligent prosecution by appellant of an expedited appeal in accordance with the First Circuit Rules Governing Appeals from Bankruptcy Judges to Appellate Panels and Court of Appeals; it appearing that, pending appeal and absent further action by the court, the membership of the creditors’ committee would remain unchanged and that the serious challenges presently made to the representativeness of two members of the creditors’ committee would remain unresolved, risking irreparable harm to interests of holders of allowed unsecured claims and to the reorganization effort; and it appearing that a balancing of the hardships and equities involved warrants the issuance of a conditional stay, provided that the representativeness of the creditors’ committee is adequately assured pending appeal; and it further appearing, on the basis of the present record, that serious question has been raised as to the representativeness of Marvin Weiner and Nicholas Diamond as members of the committee of unsecured creditors; it is
ORDERED, that Marvin Weiner and Nicholas Diamond be and they are hereby removed from the chapter 11 committee of unsecured creditors pending further order of this court; and it is further
ORDERED, that the order of this court entered February 19, 1981 be stayed pending the diligent prosecution by the appellant of an expedited appeal of said order in accordance with the First Circuit Rules Governing Appeals from Bankruptcy Judges to Appellate Panels and Court of Appeals. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489007/ | MEMORANDUM OPINION
DAVID L. CRAWFORD, Bankruptcy Judge.
This is a controversy over a copyright in a drawing of a skunk. The case was originally filed in District Court, and was subsequently removed to this Court after the defendant, Group Ten Press, filed a Chapter 11 proceeding.
Group Ten Press is a company engaged in the manufacture of greeting cards. In late 1977, it decided that the company logo — a drawing of a skunk — needed refinement. The company president discussed the problem with a teacher at a local commercial art school and said that all Group Ten could afford to pay for a new logo was a $25.00 *470savings bond or the cash equivalent. The teacher told his students to draw a skunk, and plaintiff’s drawing was the winning entry. In January, 1978, plaintiff accepted the cash, and understood at the time that the drawing would be used for letterhead, interoffice memos, order forms, and similar uses. Later that year, another student told plaintiff she had seen his drawing on greeting cards at a store. He went to the store, examined the cards, and ascertained that this was the case. Plaintiff asked the company president about the use of the skunk on greeting cards, but, according to plaintiff’s own testimony, the subject of ownership of the drawing never came up. In late spring or early summer of 1978, plaintiff went to work for Group Ten Press. During his employment, plaintiff assisted in refining the skunk drawing, developing a baby skunk based on the first skunk drawing, packaging greeting cards on which the skunk drawing was printed for shipment, and drawing a comic strip featuring the skunk.
Plaintiff states he felt during this entire period that the skunk was his property. However, plaintiff never communicated this belief to anyone at Group Ten Press until relatively late in his employment there, when he put his personal copyright on a comic strip featuring the skunk. When told to remove his name and substitute “Group Ten Press” as the copyright holder, plaintiff did so. Plaintiff left Group Ten Press in November, 1978, registered the skunk as copyrighted by John P. Emarine, and generally began to express his claims to the drawing in unmistakable terms.
The company president testified that he believed Group Ten Press had purchased all rights to the skunk by payment of the cash equivalent of a $25.00 savings bond although there was never a written assignment of those rights by plaintiff. Had he believed otherwise, Group Ten would not have used the drawing. He testified that plaintiff had never said or done anything to challenge this belief until late in 1978, and this testimony is corroborated by plaintiff’s own testimony. In addition, the president testified that the use of the drawing on letterhead, invoices, and order forms which plaintiff admits he did authorize, involved the distribution of thousands of copies of the drawing to customers, sales representatives and the like and that none of these copies had a notice of copyright affixed to them.
An initial question is which law is applicable. Congress enacted a new Copyright Act, effective January 1, 1978, which preempts all other state and federal copyright law. While I do not believe the resolution of this question alters the disposition of this case, I conclude that the new Act is controlling since the first publication which could give rise to a cause of action occurred after January 1, 1978. 17 U.S.C. § 301(b)(2); Strout Realty, Inc. v. Country 22 Real Estate Corp., 493 F.Supp. 997 (W.D. Mo.1980); Bromhall v. Rorvik, 478 F.Supp. 361 (E.D.Pa.1979).
Under the prior law, it was well-established that a general publication of copyrightable materials without registration or notice of copyright affixed to the material would lead to abandonment or forfeiture of the copyright and dedication of the work to the public domain. White v. Kimmel, 193 F.2d 744 (9th Cir. 1952). Publication for a limited purpose would not lead to abandonment, provided the owner of the copyright attempted to retain some control over who received copies of the work, and the uses to which the copies were put. Continental Casualty Co. v. Beardsley, 253 F.2d 702 (2d Cir. 1958), cert. denied, 358 U.S. 816, 58 S.Ct. 25, 3 L.Ed.2d 58 (1958). These principles have been thoroughly discussed by other courts and will not be analyzed in detail here. See, e. g., Burke v. National Broadcasting Co., Inc., 598 F.2d 688 (1st Cir. 1979).
As was the case under prior law, the new Act does not mention forfeiture or abandonment of a copyright. However, both are presumably still possible. Otherwise, the registration provisions and the provisions requiring the affixing of a notice of copyright to each copy of a work and providing for correction in cases of omission *471of the notice would be meaningless. See 17 U.S.C. §§ 401, 402, 410 through 412. Certainly, authorized publication which violates the requirements of the Act would remove the work from the Act’s protection; and, as the Act preempts the field, the work is effectively in the public domain for want of a remedy for wrongful publication. Thus, I conclude that a work which is generally published without notice of copyright affixed to it enters the public domain. Prior case law on the subject remains applicable except where it is inconsistent with the new Act.
General publication without consent of the owner of the work will not lead to forfeiture of the owner’s copyright. Ferris v. Frohman, 223 U.S. 424, 437, 32 S.Ct. 263, 267, 56 L.Ed. 492 (1912). Plaintiff relies on this principle to assert that unauthorized publication of greeting cards bearing his drawing infringed on his copyright. However, I find that the uses which the plaintiff did authorize led to a general publication of the drawing by defendant without notice of copyright and a forfeiture of the copyright. Thus, the skunk is now in the public domain and may be copied by anyone, including plaintiff, except insofar as its use infringes on the defendant’s trademark registration.
Given this conclusion, it is not necessary to consider defendant’s argument that plaintiff is estopped from asserting ownership of the copyright. It is clear that the doctrine of estoppel may be applicable in copyright cases. Florablelle Flowers, Inc. v. Joseph Markovits, Inc., 296 F.Supp. 304, 307 (S.D.N.Y.1968); see also Hampton v. Paramount Pictures Corp., 279 F.2d 100, 104 (9th Cir. 1960). Were I to rule on this issue, I would find that plaintiff’s conduct justifies an application of that doctrine, in that plaintiff made no comment concerning and even assisted in the increasing expansion of the use of the drawing for almost a year before he informed defendants of his claims of ownership.
A separate judgment is entered in accordance with the foregoing. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489008/ | JUDGMENT
L. CHANDLER WATSON, Jr., Bankruptcy Judge.
The above-styled adversary proceeding was commenced on November 18, 1980, by the filing of a complaint which requested that the Court not grant the defendant a discharge in this bankruptcy case and that the Court determine that the debt owed by the defendant to the plaintiff is not dis-chargeable in this bankruptcy case. The defendant filed an answer on November 28, 1980, which denied all allegations of the complaint. On December 11, 1980, the plaintiff amended the complaint by adding a request that the Court grant leave to the plaintiff to proceed to enforce and collect the debt through further legal actions. Also, on December 11, 1980, the plaintiff filed a motion for the Court to enter a summary judgment in favor of the plaintiff and against the defendant. At a pre-trial conference on December 16, 1980, only the defendant’s attorney, plaintiff’s attorney, and the trustee appeared before the Court, and the defendant’s attorney waived a ten-day notice of a hearing on the plaintiff’s motion for summary judgment, and both parties waived the right to argue and file briefs on the motion for summary judgment.
STATEMENT OF FACTS
On December 1, 1980, the plaintiff filed with the Court a copy of a Request for Admission of Facts which was served upon the defendant’s attorney, and on December 19, 1980, the defendant admitted all the facts stated in the plaintiff’s Request for Admission of Facts; therefore, the Court adopts the facts set out in said Request for the purpose of ruling on the plaintiff’s motion for summary judgment.
CONCLUSIONS BY THE COURT ON THE REQUEST THAT THE DEBTOR BE DENIED A DISCHARGE IN THIS CASE
The plaintiff seeks, under 11 U.S.C. § 727, to have the Court deny the debtor a discharge. The grounds for denial of a discharge are found in Subsection (a) of said Section 727. The complaint does not specify any particular grounds upon which the discharge might be denied; therefore, the Court must compare the facts alleged and admitted to the various grounds found in 11 U.S.C. § 727(a)(l-10).
The plaintiff does not allege that the debtor is not an individual, and in fact, the debtor is an individual; therefore, paragraph (1) does not state a ground for denial of a discharge, and the plaintiff does not allege that the debtor did any of the acts listed under paragraphs (3), (6), or (7) of said Section 727(a); therefore, they do not state grounds for denial of the debtor’s discharge in this case.
The plaintiff does not allege that the debtor has been given a previous discharge or that the Court has approved a written waiver of discharge by the debtor; therefore, paragraphs (8), (9), and (10) do not state proper grounds for denial of the debt- or’s discharge in this case.
The allegation by the plaintiff of wrongful conversion by the debtor of the *543truck of another entity, insured by the plaintiff against such loss, is not sufficient to deny a discharge to the debtor under paragraph (2) of said Section 727(a). None of the actions of the debtor relating to the wrongful conversion took place within one year before the date of the filing of the petition or after the filing of a petition; therefore, 11 U.S.C. § 727(a)(2) does not state a proper ground for denial of the debtor’s discharge in this case.
The allegations by the plaintiff that, in connection with a garnishment proceeding in state court, the debtor, as president of Battle House Enterprises, Inc., swore that he was an employee of said corporation and said corporation would withhold the sum sought by the garnishment from his wages and that no amounts were withheld by said corporation are not sufficient to deny the debtor a discharge under paragraph (4) of said Section 727(a). To constitute a proper ground for denial of a discharge to the debtor, “a false oath or account” must be made in, or in connection with, the case. This sworn statement was made in connection with a state court action and not in this bankruptcy case. If this sworn statement were made in connection with this bankruptcy case, the burden of proof would be on the plaintiff to prove the facts essential to its objection.1 The plaintiff did not prove that the debtor knowingly and fraudulently made a false oath, and no intent to defraud can reasonably be inferred from the mere fact that the corporation failed to do what the debtor said the corporation intended to do.
The allegation by the plaintiff that the debtor never gave an explanation of the loss or deficiency of the funds that said corporation was supposed to be withholding from the debtor’s pay on the garnishment is not sufficient to deny the debtor a discharge under paragraph (5) of said Section 727(a). As previously noted, the burden of proof is upon the plaintiff to prove the essential facts when objection is made to a debtor’s discharge. There is no proof that the debtor was ever called upon to give an explanation of the loss of, or deficiency in, these assets, and it was not proved that there were ever any assets of the debtor to lose or in which a deficiency existed. It is not proved that the debtor ever received any salary, wages, or compensation from said corporation after the time the garnishment was issued.
Therefore, after considering the facts alleged and admitted, it is the conclusion of the Court that the plaintiff’s request for relief under 11 U.S.C. § 727 is due to be denied.
CONCLUSIONS BY THE COURT ON THE REQUEST THAT THE DEBT BE DECLARED NONDISCHARGEABLE
The complaint filed by the plaintiff also seeks to have the Court determine that the debt was not dischargeable in bankruptcy, pursuant to 11 U.S.C. § 523(c). Having determined that the debtor must be granted a discharge, the Court may now consider this second question.
Section 523(c) does not state the types of debts which may be adjudged not dis-chargeable in a bankruptcy case. The types of nondischargeable debts are listed only in Subsection 523(a)(l-9). Subsection 523(c) refers to paragraphs (2), (4), and (6) of Subsection 523(a) and to none other. Thus, it must be inferred from the complaint that it is only upon these three paragraphs of Subsection 523(a) that the plaintiff relies.
Paragraph (2) of Subsection 523(a) describes a debt which arises because of false pretenses, fraudulent representations, or fraud in the obtaining of money, property, services or credit. There is no allegation or proof that the vehicle was obtained by the debtor through fraud or falsehood, and paragraph (2) is not established as an exception to the debtor’s discharge. The plaintiff did not allege or prove a fiduciary relationship which is the basis for a debt for fraud or defalcation to be adjudged nondis-chargeable under paragraph (4) of Subsection 523(a). But paragraph (4) also excepts *544from a discharge a debt due to embezzlement or larceny.
The allegation and proof here are that the vehicle in question had been stolen but not that it was stolen by the debtor. Taking the allegations and proof together, we find: (1) the vehicle belonged to one Louis Gandy at the time that the debtor converted it to his own use; (2) the debtor admitted to a criminal charge that he knew that the vehicle had been stolen when he transported it from Louisiana to Alabama and disposed of it; (3) that plaintiff had insured the owner of the vehicle against loss of the vehicle; and (4) the plaintiff obtained a judgment in the sum of $5,000 against the debtor, for his conversion of the vehicle. No embezzlement or larceny of the vehicle is alleged or proved as far as concerns the debtor. To establish an embezzlement, the plaintiff would have had to show that the debtor acquired lawful possession of the vehicle and breached the conditions of his possession by wrongfully converting the vehicle to his own use.2 As stated, no larceny by the debtor was shown.
Paragraph (6) of Subsection 523(a) excepts a debt “for willful and malicious injury by the debtor to another entity or to the property of another entity”. The injury is not required, by the terms of this paragraph, to be directed against the creditor or the creditor’s property but includes any entity or the property of any entity, other than the debtor.
Any conversion will not constitute a “willful and malicious injury” to another entity or the property of another entity; although, it must be concluded that most any conversion of property would be injurious to the owner. The circumstances of this case also show that the injury was willful and malicious in that the debtor admitted that he knew that the vehicle was stolen when he took it from Louisiana to Alabama, where he disposed of it. The owner’s prudence in having insurance on the vehicle does not relieve the debtor from the legal consequences resulting from his misconduct. The plaintiff’s judgment against the debtor shows that it has become subrogated to the owner’s claim against the debtor, by paying the owner for his loss3. This obligation must be adjudged excepted from the debtor’s discharge.
The plaintiff already has a money judgment against the debtor (and even one against a garnishee), and none may appropriately be rendered here.
JUDGMENT
Wherefore, it is the order and judgment of the United States Bankruptcy Court for the Northern District of Alabama that the debtor, Benny Ross Dillman, be granted a discharge under the provisions of Section 727, Title 11, United States Code, that the debt owed by the debtor to Northland Insurance Company, Inc., upon a judgment in its favor and against the debtor for the sum of $5,000 and costs, rendered by the District Court of Calhoun County, Alabama, on December 7, 1977, is adjudged to be nondis-chargeable in this bankruptcy case and unaffected by the discharge to be granted in this case to said debtor, that the plaintiff or its successors or assigns may pursue collection of said debt from the debtor and said garnishee or either, that the stay provided by Section 362, Title 11, United States Code, is lifted to this extent, and that a copy hereof be sent through the United States mails to each of the following (which shall be sufficient service and notice hereof): counsel of record, the debtor, the trustee, and the United States trustee.
. Bankruptcy Rule 407.
. Black, Law Dictionary 468 (5th ed. 1979).
. Adams v. Queen Insurance Company of America, 264 Ala. 572, 88 So.2d 331 (1956). | 01-04-2023 | 11-22-2022 |
Subsets and Splits
No community queries yet
The top public SQL queries from the community will appear here once available.