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https://www.courtlistener.com/api/rest/v3/opinions/8490289/ | MEMORANDUM OPINION
ROBERT F. FUSSELL, Chief Judge.
Background
On August 29, 1985, the Court held a pre-trial conference regarding the objections to confirmation filed by A.L. Tenney, the trustee; Charles F. Curry; and Southern Investment Company and at the same time held a hearing regarding the counterclaim filed by debtor on September 25, 1985. In the counterclaim, as amended by his post-trial brief, the debtor alleges (1) that the contract of September 7, 1979, between debtor and Southern Investment Company (the “Contract”) is usurious and (2) that Southern Investment Company has waived its right to foreclose on the property subject to that Contract by reason of laches and the running of the statute of limitations. The issues raised by those two allegations in the counterclaim have been submitted to the Court for decision upon the parties’ post-trial briefs along with copies of the September 7, 1979 Contract, the Note executed in connection with the Contract, and the record of payment made by the debtor and Patricia Borum in regard to the indebtedness evidenced by the Note and Contract.1
Specific Findings of Fact
1. Debtor Abraham Borum, Jr., filed for relief under chapter 13 of title 11 of the United States Code on May 6, 1985.
*5182. The Debtor listed Southern Investment Company as a creditor based upon an indebtedness arising out of a Contract and Note between the parties dated September 7, 1979.
3. Under the September 7, 1979, Contract, Abraham Borum, Jr., and Patricia A. Borum, his wife, were to purchase from Southern Investment Company the following described property within Pulaski County, Arkansas:
The North 10 feet of Lot 16, all of Lot 17, and the South 10 feet of Lot 18, Block 35, Industrial Park Addition to the City of Little Rock, Arkansas, and subject to all rights-of-way and easements.
4. The purchase price under the contract of sale was $12,937.50 with credit thereon for the $237.50 in cash paid by the Borums on the date the Contract and Note were executed and another $200.00 in credit given for deposit and rent previously paid, leaving a balance owed of $12,500.00, as reflected by the Note.
5. The contract itself provides as follows:
If the buyer ... allows said monthly payment to become delinquent for more than thirty days, [Southern Investment Company] may, at its option, either declare the entire balance of the purchase price due and collectible or rescind this contract....
The failure, however, of [Southern Investment Company] to exercise any option herein given at the time of default shall not operate to bar or abridge its right to exercise such option upon any subsequent default of [the Borums].
6. Also, on September 7, 1979, the Bo-rums executed a Note evidencing the balance due of $12,500.00, bearing interest from date until paid at the rate of 10% per annum, payable in monthly installments of $110.00 each, beginning on October 15, 1979.
7. There is no provision in the Contract or Note for a charge to be assessed if a monthly payment is late.
8. The payment records submitted by debtor with his post-trial brief reflect that from the outset of the scheduled payments, the debtor was late with his payments and/or made monthly payments of less than $110.00, the sums required monthly under the Contract.
9. In fact, the debtor has been continuously behind in the payment of interest on the debt and has only on a few occasions made timely payments in sufficient amounts to reduce the principal.
10. The payments have reduced the principal to $12,252.90 as of the August 29, 1985 hearing.
11. In May, 1980, Southern Investment Company began to charge a “late charge” when a monthly installment payment was not made on time.
12. The “late charges” were one-time fixed dollar charges which were not assessed to the debtor if the debtor paid the installment on time.
13. Even after late charges were assessed, the debtor continued to make only intermittent payments, generally less than the $110.00 required per month by the Note and Contract.2
14. The schedules reflect that the last payment on the Note was made on March 4, 1985.
15. Southern Investment Company filed its proof of claim in June of 1985 along with its objection to the debtor’s proposed plan.
Issues
I. Has Southern Investment Company waived its right to foreclosure under the September 7, 1979 Contract and Note by reason of laches and the running of the statute of limitations?
*519II. Should the Contract and Note of September 7, 1979 between debtor and Southern Investment Company be declared usurious?
Additional Findings of Fact and Conclusions of Law
I. Waiver of Right to Foreclose
In deciding the issue of whether Southern Investment Company has waived its right to foreclose through laches and the running of the statute of limitations, the Court looks to the language of the Contract and the applicable laws in Arkansas. Ark.Stat.Ann. § 37-209 (1962 Repl.) provides:
Actions on promissory notes, and other instruments in writing, not under seal, shall be commenced within five (5) years after the cause of action shall accrue, and not after.
When recovery is sought on an obligation payable in installments as is the case here, the statute of limitations runs against each installment from the time it becomes due. Linke v. Kirk, 204 Ark. 393, 162 S.W.2d 39 (1942). In addition, “[p]art payment, before the bar attaches, forms a new point from which the statute will run.” Smith v. Grimsley, 215 Ark. 279, 220 S.W.2d 428 (1949), quoted in Johnson v. Gammill, 231 Ark. 1, 328 S.W.2d 127 (1959). The payment schedules submitted in this case reflect that the debtor has made partial payments in each year since the execution of the Note, with the most recent payment being made on March 4, 1985. Therefore, the statute of limitations will not run for actions on the Note until March 4, 1990, five years from the date of the last payment. Ark.Stat.Ann. § 37-209.
Further, since Southern Investment Company brought the action within the permissible time frame of the Contract and Note and within the statute of limitations relevant thereto, Southern Investment Company was not guilty of laches. Accord, Delta Oil Co. v. Catalani, 276 Ark. 66, 633 S.W.2d 1 (1982).
II. Usury
The debtor argues that the Note and Contract are usurious, presumably because Southern Investment Company assessed late charges when the debtor failed to pay the installments on time. The defense of usury is available to a debtor. In re Miller, 21 F.Supp. 644 (S.D.N.Y.1937). However, since usury is merely a statutory offense, federal courts faced with deciding whether a contract is usurious must look to the substantive laws of the state for the answer. Missouri, K&T Trust Co. v. Krumseig, 172 U.S. 351, 355, 358-59, 19 S.Ct. 179, 181, 43 L.Ed. 474 (1899); Speare v. Consolidated Assets Corp., 367 F.2d 208 (2nd Cir.1966). It is not disputed that Arkansas law is relevant to the Contract and Note now under consideration. Accordingly, the applicable state law for this case is found in the Arkansas Constitution:
All contracts for a greater rate of interest than ten percent per annum shall be void, as to principal and interest, and the General Assembly shall prohibit the same by law; but when no rate of interest is agreed upon, the rate shall be six percentum per annum.
Ark. Const. Art. 19, § 13.3
Neither the Contract nor the Note is usurious on its face since the rate of interest agreed upon therein is ten percent, the maximum allowed under Arkansas law at that time. Id. If an instrument is not usurious on its face, the burden of proving usury is on the borrower, the debtor herein. Dreyfus Co., Inc. v. Tim Wargo and Sons, Inc., 282 Ark. 468, 668 S.W.2d 957 (1984). It is also true that the debtor must prove that there was an intent to charge more than ten percent to constitute and prove usury. Textron, Inc. v. Whitener, 249 Ark. 57, 458 S.W.2d 367 (1970) (pre-Amendment 60). Furthermore, the intent *520to charge a usurious rate will never be presumed, imputed or inferred where the opposite result can fairly and reasonably be reached. Rhode v. Kremer, 280 Ark. 136, 655 S.W.2d 410 (1983). In addition, the debtor must meet his burden on the issue by clear and convincing evidence. Johnson v. Federal Nat’l Mortg. Ass’n, 271 Ark. 588, 609 S.W.2d 60 (1980).
In a 1980 case involving the question of usury, the Arkansas Supreme Court reasoned that, if “late charges” assessed are a mere cloak for charging more than ten percent interest, contract upon which those late charges were assessed is usurious. Bunn v. Weyerhaeuser Co., 268 Ark. 445, 598 S.W.2d 54 (1980). As the Arkansas Supreme Court stated in Bunn:
It does not matter whether the added charges are called a “penalty,” “late charge,” “service charge,” or some other name, we look to the facts of each case to determine whether the additional charges are a cloak for usury; and, if they are, the contract is void.
Id. at 450, 598 S.W.2d at 57.
Accordingly, if the “late charges” assessed here were a mere cloak for charging interest, this court would declare the Note and Contract usurious. However, the facts in Bunn are not analagous to those now before the Court. In Bunn, a 1.5% per month charge on the outstanding overdue balance of an open account, while labeled a “service charge” was found to be usurious because it was actually a charge for the use of money over time. Id. at 449, 598 S.W.2d at 56. The debtor in Bunn had no way of avoiding the monthly charge after his accounts were 60 days past due. Id. Those facts are not present in this case. Here, the “service charge” is a fixed onetime penalty of a set dollar amount which is assessed when the debtor fails to pay on time. The debtor has complete power to avoid the “late charge” merely by paying his monthly installment on time. A similar assessment for “late charges” was determined to be a legitimate penalty, not interest, by the Arkansas Supreme Court in Hayes v. First Nat’l Bank of Memphis, 256 Ark. 328, 507 S.W.2d 701 (1974) (cited as an example of legitimate late penalty in Bunn) (“a ‘late charge’ is in the nature of a penalty and does not render the transaction usurious”).
Therefore, after carefully considering the facts now before the Court, based upon Arkansas law and a review of the Arkansas cases interpreting what constitutes a legitimate penalty as opposed to an unlawful cloak for charging more than 10% interest, this Court determines that the debtor failed to prove by clear and convincing evidence either that Southern Investment Company intended to charge more than 10% interest, or that the “late charges” were, in fact, a cloak for charging more than 10% interest. The Court finds that “late charges” assessed were a legitimate penalty and that the Contract and Note should be, and hereby are, declared to be free from usury.
IT IS SO ORDERED.
A separate Order in accordance with this Memorandum Opinion is being entered this date.
. Southern Investment Company and Charles F. Curry may renew their requests for hearing on their objections to confirmation of the plan following entry of this Memorandum Opinion and Order. Further, since the August 9, 1985 pre-trial conference, Southern Investment Company has filed a motion to dismiss the debtor's counterclaim for failure of the debtor to submit the post-trial brief on the date he was ordered to file the brief by this Court. In effect, the debtor submitted the brief three days late. If Southern Investment Company plans to pursue that motion, it should request a hearing upon receipt of this Memorandum Opinion and Order. If not, the motion should be withdrawn in writing.
. Evidence regarding the exact amount paid to date on the indebtedness has not been presented at this time.
. Amendment No. 60 amending Article 19, § 13 was passed by the voters on November 2, 1982, changing the maximum lawful rate of interest on contracts entered into after the effective date of the Amendment. It is not applicable here. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8490290/ | ORDER ON MOTION TO DISMISS AND MOTION TO STRIKE A COMPLAINT IN INTERPLEADER
ALEXANDER L. PASKAY, Bankruptcy Judge.
THIS IS an adversary proceeding commenced by Bob Cooper, Inc., d/b/a BCI Utilities Contractor (BCI), a Debtor seeking relief under Chapter 11 of the Bankruptcy Code. The immediate matter under consideration is a Motion to Dismiss and a Motion to Strike Empire Pipe and Supply Company’s (Empire Pipe) Complaint in Interpleader, filed by BCI. In order to put the Motions in an understandable context, a brief recap of the procedural background of this controversy should be helpful.
The original Complaint was filed by BCI on October 3, 1984 and named the City of Venice, Empire Pipe and General Telephone Company of Florida (General Telephone) as Defendants. The Complaint consists of general allegations and four Counts.
In Count I, BCI seeks to recover $35,000 from General Telephone. This claim is based on the allegation of BCI that General Telephone is indebted to BCI for work performed by BCI on its contract with General Telephone for which it is yet to receive payment. BCI also seeks an accounting from General Telephone of all monies owed by General Telephone under its contract with BCI and a payment of same.
In Count II, BCI seeks an accounting from the City of Venice and payment due to BCI. The Complaint fails to allege the basis of the claim either in the general allegation or in Count II itself.
In Count III, BCI seeks an injunction against Empire Pipe, prohibiting it to pursue a state court action against BCI, General Telephone, and the City of Venice.
In Count IV, BCI seeks a declaration that the suit filed by it in the state court was a violation of the automatic stay imposed by § 362 of the Bankruptcy Code and to punish Empire for contempt.
Empire Pipe promptly attacked Counts III and IV of the Complaint on the ground that neither Count states a claim for which relief can be granted. In due course General Telephone and the City of Venice filed their respective answers to the Complaint. The City of Venice denied any need for accounting, having admitted that it is indebted to BCI in the amount claimed, i.e. $6,400.00, and it is willing to pay the same upon a proper order of the Court.
General Telephone filed a motion and sought an order restraining Empire Pipe from pursuing any claim against General Telephone and also filed an answer and a counterclaim. The counterclaim is in the nature of a statutory interpleader in which General Telephone admits that it holds $25,164.88; that these monies are claimed both by BCI and Empire Pipe; and that it is willing to deposit said sums in the Registry of the Court. General Telephone asserts no claim against the funds in its counterclaim but seeks an injunction against all parties to assert any further claims against General Telephone. General Telephone also filed a crossclaim against Empire Pipe. These pleadings by General Telephone were filed pursuant to an order entered by this Court which, while it denied General Telephone’s request for the injunc-tive relief sought in its motion, authorized General Telephone to file these pleadings.
In due course Empire Pipe filed its answer to the crossclaim and basically admitted all allegations set forth in General Telephone’s crossclaim. However, in addition to its answer, it also filed a pleading entitled “Complaint in Interpleader”. Although Empire Pipe was not authorized to file any further pleadings and its pleading in spite of its title is not really a Complaint for Interpleader, it is a claim asserted against the funds deposited in the Registry by General Telephone and a claim against the City of Venice, its Mayor and Councilmen.
*581This last claim is based on the contention that the Defendants negligently failed to require General Telephone to post a payment and performance bond as required by § 255.05 of Florida Statutes, therefore, so claims Empire Pipe, it is entitled to recover damages, attorney fees and costs. From these Defendants, Empire Pipe also seeks the imposition of an equitable lien on the funds deposited in the Registry by General Telephone and also on the funds still held by the City of Venice.
General Telephone filed its answer to the Interpleader of Empire Pipe and by way of an affirmative defense claims that the Complaint in Interpleader fails to state a claim for which relief can be granted. Of course, this is not an affirmative defense but a motion to dismiss and will be treated as such pursuant to F.R.C.P. § 8 and 12. General Telephone also filed a motion to strike Count I of the Complaint in Inter-pleader, on the basis that it was procedurally improper.
In addition, the City of Venice also filed a motion to dismiss Count II of the Complaint in Interpleader of Empire Pipe. Following suit, BCI also filed a motion to dismiss and strike Empire Pipe’s Complaint on the ground that it was procedurally improper and, in any event, it fails to state a claim for which relief can be granted. These are the motions under consideration and this is the procedural background of the controversy between BCI and the Defendants, City of Venice, General Telephone, and Empire Pipe. Fortunately, the underlying facts of this controversy are far less confusing and convoluted than the manner in which the controversy is presented and are as follows:
On September 8, 1983 General Telephone entered into an agreement with the City of Venice for the installation of a water main to be constructed on East Venice Avenue in the City of Venice, Florida. Prior to the execution of this contract, General Telephone entered into a contract with BCI for the installation of some additional telephone cable conduit at the same location. General Telephone did not furnish a payment and performance bond on its contract with the City of Venice nor did BCI on its contract with General Telephone for both jobs, i.e. on the cable installation for General Telephone or on the installation of the water main for the City of Venice on behalf of General Telephone.
Thus, on the telephone cable installation, General Telephone was the owner/contractor and BCI was the subcontractor and on the water main installation, the City of Venice was the owner, General Telephone was the contractor and BCI was the subcontractor. BCI had to furnish labor and material on both jobs and purchased some of the materials used on these two jobs from Empire Pipe on open account. There is no dispute that Empire Pipe did not obtain and does not claim to have a security interest in the contracts or accounts receivable of BCI.
In September, 1983, BCI commenced to install the water main under the Joint Trench Agreement (JTA) of General Telephone with the City of Venice but by December it became evident that work required at the U.S. 41 bypass crossing could not be performed in the manner required by JTA. Thereafter, BCI and the City of Venice entered into a separate agreement for some additional work needed to affect the installation of the water line at the U.S. 41 bypass crossing. It is without dispute that BCI used, in its performance of its direct contract with the City of Venice, material purchased from Empire Pipe.
The total balance due to BCI under the JTA less $3,215.50 was paid to BCI by General Telephone prior to the commencement of this adversary proceeding. General Telephone withheld that amount together with $25,164.88 owed to BCI on other projects in order to offset a $14,729.13 claim by General Telephone for the monies it had to expend to complete and correct the work of BCI under its contract with the City of Venice under the JTA contract. It is without dispute that BCI is indebted to Empire Pipe for material sold by it to BCI and used by BCI on the JTA contract in the amount of $6,100.41 and on BCI’s direct *582contract with the City of Venice in the amount of $7,892.07.
General Telephone deposited $25,164.88 in the Registry of this Court pursuant to an order entered on General Telephone’s Complaint for Interpleader on October 15, 1984. This sum does not include the sum of $3,215.50 withheld by General Telephone due to BCI under the JTA based on its claim of right of setoff as noted earlier. It is without dispute that the sum of $6,400.00 paid to BCI pursuant to this Court’s order of May 20, 1985 was for work done by BCI on its direct contract with the City of Venice and that sum is still subject to the claim of Empire Pipe in addition to its claim to the funds in the registry and the monies withheld by General Telephone.
These are the claims of Empire Pipe which are the crux of the matter under consideration. These claims, as noted earlier, are asserted by Empire Pipe in the form of its Complaint in Interpleader. This is the Complaint which is sought to be stricken by BCI as procedurally improper and to dismiss Empire’s claim asserted in the Complaint against BCI and against the funds owed to BCI by General Telephone and by the City of Venice.
Interpleader is an equitable remedy designed to permit a disinterested stakeholder to avoid a multiplicity of suits with consequent vexation, to eliminate the danger of being required to pay the same claim to two or more individuals as a result of different findings by separate courts, and to prevent a race to secure judgment by different plaintiffs. Whether the proceeding is by rule or statute, equitable principles control. Pacific Indemnity Co. v. Marceaux, 263 F.Supp. 892 (W.D.La.1966). Under Rule 22(1) of the Federal Rules of Civil Procedure, adopted by Bankruptcy Rule 7022, governing interpleaders, a defendant seeking interpleader must frame his pleading either as a crossclaim against a co-party defendant already in the lawsuit, or as a counterclaim asserting a claim for relief against the plaintiff. Grubbs v. General Electric Credit Corp., 405 U.S. 699, 92 S.Ct. 1344, 31 L.Ed.2d 612 (1972).
It is evident from the foregoing that the claim asserted by Empire in the form of a Complaint in Interpleader is procedurally improper. This is so because Empire is not holding monies to which conflicting claims are asserted. On the contrary, the funds deposited in the Registry of this Court were deposited by General Telephone, against which Empire Pipe is asserting its claims. There is no provision in the Federal Rules of Civil Procedure for filing a Complaint in Interpleader in a pending suit where there is already a proper interpleader filed by the proper party, i.e. the party against whom conflicting claims are asserted. Thus, the Complaint in Interpleader filed by Empire Pipe is subject to be stricken as procedurally improper and will be considered merely as a crdssclaim against General Telephone asserting a right to the funds superior to the rights of BCI.
This leads to the consideration of a more serious matter — the motion of BCI to dismiss Empire Pipe’s claim against the funds on the ground that it has no. claim for which the relief it seeks can be granted as a matter of law, therefore, it should be dismissed. The claim of Empire Pipe is based on the contention that the funds owed to BCI by General Telephone and by the City of Venice should be impressed by an equitable lien in its favor, thus, giving Empire Pipe a right superior to these funds to the claims of BCI.
It is without serious question that one who has performed services or furnished materials in the improvement of real property is not limited to proceeding under the mechanics’ lien law, but may proceed to establish an equitable lien ón the property in question. Crane Co. v. Fine, 221 So.2d 145 (Fla.1969). The same doctrine has been recognized in numerous Florida decisions, including Tucker v. Prevatt Builders, Inc., 116 So.2d 437 (Fla.App.1959); Armstrong v. Blackadar, 118 So.2d 854 (Fla.App.1960); and Union Trust Company of St. Petersburg v. Wittmann, 145 So.2d 540 (Fla.App.1962).
*583To establish an equitable lien, however, one must allege and prove his entitlement to such lien within certain principles recognized by the courts. Florida cases consistently support the proposition that an equitable lien arises from one of two sources: (1) a written contract which shows an intention to charge some particular property with a debt or obligation; or (2) is declared by a court of equity out of general consideration of. right and justice as applied to the relations of the parties and the circumstances of their dealings in the particular case. Jones v. Carpenter, 90 Fla. 407, 106 So. 127, (Fla.1925). In the instant case, there is no allegation that Empire Pipe had any written contract with General Telephone, therefore, any equitable lien theory must be supported on the second ground.
BCI contends that in order to state a cause of action, absent an allegation of a written contract, Empire Pipe must allege mistake, fraud, misrepresentation or other wrong doing and cites Hallmark Manufacturing, Inc. v. Lujack Construction Co., Inc., 372 So.2d 520 (Fla. 4th DCA 1979); Charter Development Corp. v. Eversole, 342 So.2d 143 (Fla. 1st DCA 1977); O.H. Thomason Builders’ Supplies, Inc. v. Goodwin, 152 So.2d 797 (Fla. 1st DCA 1963); and Gancedo Lumber Company, Inc. v. Flagship First National Bank of Miami Beach, 340 So.2d 486 (Fla. 3rd DCA 1976) in support of its contention.
The Court finds those cases to be distinguishable in that in each of the cases cited by BCI the frustrated subcontractor sought to foreclose an equitable lien on real property rather than upon unpaid funds as in the instant case. The Florida Supreme Court, in Merritt v. Unkefer, 223 So.2d 723 (Fla.1969), has clearly made the distinction between the requirements to establish an equitable lien on real property as opposed to a specified fund.
The Florida Supreme Court in Crane Co. v. Fine, supra, recognized an equitable lien on a contractors hold back fund, holding that a materialman whose materials were incorporated in the improvement under a subcontract and who remained unpaid at the time the party with whom he was in privity abandoned the contract had a right of a special nature in the funds due and owing on account of materials supplied by the materialmen to the improvement. That Court found that the “particular property” in which the plaintiff had “a right of a special nature” was the fund held by the general contractor due and owing to the subcontractor on account of materials supplied by the materialmen to the improvement. See also Peninsular Supply Co. v. C.B. Day Realty of Florida, Inc., 423 So.2d 500 (Fla. 3d DCA 1982); Combs v. St. Joe Papermakers Federal Credit Union, 383 So.2d 298 (Fla. 1st DCA 1980).
This Court is satisfied, therefore, that under Florida law Empire Pipe has stated a cause of action against the General Telephone fund and the City of Venice fund held by BCI and, therefore, the Complaint is not subject to dismissal.
Accordingly, it is
ORDERED, ADJUDGED AND DECREED that the Motion To Strike the Complaint in Interpleader filed by BCI, be, and the same is hereby, granted in part and denied in part and the Complaint shall be considered as a crossclaim against General Telephone asserting a right to the funds superior to the rights of BCI. It is further
ORDERED, ADJUDGED AND DECREED that the Motion To Dismiss the Complaint in Interpleader filed by BCI, be, and the same is hereby, denied with the proviso that this order shall not be construed to be a finding that an equitable lien is cognizable and enforceable under the Bankruptcy Code against a debtor-in-possession in a Chapter 11 case or against a trustee in a Chapter 7 case. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8490291/ | ORDER GRANTING SUMMARY JUDGMENT FOR BANK OF HAWAII
PENCE, District Judge.
Defendant Bank of Hawaii’s Motion for Summary Judgment and plaintiff Graulty’s Cross-Motion for Summary Judgment came on for hearing before this court on February 6, 1986. Richard Kanter appeared on behalf of plaintiff, and Thomas Cook and Steven Otaguro appeared on behalf of defendant Bank of Hawaii, and Wayson Wong appeared on behalf of Third-Party defendants Edwin Nova Thomas, and the Edwin Nova Thomas Living Revocable Trust. The court, having reviewed the motion and the memoranda in support thereof and in opposition thereto, having heard the oral arguments of counsel, and being fully advised as to the premises herein, finds as follows:
On July 25, 1980, Ronald R. Rewald (hereinafter referred to as “Rewald”) purchased a house at 5975 Kalanianiole Highway from Edwin Nova Thomas (hereinafter referred to as Thomas). The purchase price was $950,000, consisting of $50,000 in cash (including a $10,000 deposit), and $900,000 to be paid with monthly installments on an Agreement of Sale.
Rewald and Thomas opened an escrow account with the Bank of Hawaii. The Bank supplied the agreement of sale between Rewald and Thomas.
Payments were made to an escrow account from the funds of Bishop, Baldwin, Rewald, Dillingham and Wong (hereinafter referred to as “BBRDW”). An initial deposit of $10,000 and 34 checks of similar amounts were made payable to the Bank of Hawaii. All checks were drafted on BBRDW’s checking account. Eleven were drawn by Sue Wilson, secretary to Rewald. The rest were drawn by Rewald. The parties agree that the check payments all went into the escrow account. The terms of the escrow agreement required the Bank of Hawaii to place the escrowed funds into Thomas’ checking account pursuant to the terms and conditions of the agreement. The Bank of Hawaii had no other control over the payment into or disbursal of funds out of the escrow account.
The uncontradicted affidavit of Hazel Hoke, an employee of the Bank of Hawaii’s escrow department, states that no employee had any knowledge of any fraudulent activity by Rewald and that the Bank of Hawaii received no benefit from the transaction, aside from a nominal service fee of $25.00 per month.
The complaint alleges a violation by the Bank of Hawaii of Hawaii Rev.Stat. § 556-4 which is patterned after § 5 of the Uniform Fiduciaries Act (hereinafter re*672ferred to as the “UFA”). Under § 5 of the UFA, if a check is drawn in “any transaction known by the payee to be for the personal benefit of the fiduciary, the creditor or other payee is liable to the principal if the fiduciary in fact commits a breach of his obligation as fiduciary in drawing or delivering the instrument.”
In connection therewith, however, the court must also consider Hawaii Rev.Stat. § 556-8 which was patterned after § 9 of the UFA.
Hawaii Rev.Stat. § 556-8 states in relevant part:
If a fiduciary makes a deposit in a bank to his personal credit ... of checks drawn by him upon an account in the name of his principal if he is empowered to draw checks thereon ..., the bank receiving such deposit is not bound to inquire whether the fiduciary is committing thereby a breach of his obligation as fiduciary; and the bank is authorized to pay the amount of the deposit or any part thereof upon the personal check of the fiduciary without being liable to the principal....
The statute makes an exception for depository banks which take the check with actual knowledge of the breach or with knowledge of such facts that its actions amount to bad faith.
As pointed out in Johnson v. Citizens National Bank of Decatur, 30 Ill.App.3d 1066, 334 N.E.2d 295, 298 (1975):
Section 5 and section 9 are not at odds. Both cover this situation from different angles but are meant to be interpreted together. This is also indicated by the Commissioners’ Note.
“By the weight of authority a depository of fiduciary funds is not bound to inquire into the authority of the fiduciary to make the deposit even where the deposit is made in the personal account of the fiduciary.
And when the fiduciary makes withdrawals by checks the depository is not bound to inquire for what purpose the withdrawals are made, whether the checks are made payable to the fiduciary personally, or as fiduciary, or to third persons.”
******
Therefore, unless the facts as stipulated prove on the part of the Bank actual knowledge or knowledge of such facts that the Bank’s actions amount to bad faith, these two sections provide a defense.
Therefore, absent bad faith or actual knowledge by the payee that the principal’s funds are being used for the personal benefit of the fiduciary, the creditor or other payee is under no obligation to inquire even as to suspicious circumstances or the unusual check writing habits of the fiduciary. Hawaii Rev.Stat. 556-4; Sugarhouse Finance Co. v. Zions First National Bank, 21 Utah 2d 68, 440 P.2d 869 (1968); Johnson v. Citizens National Bank of Decatur, 334 N.E.2d at 300. Mere negligence is insufficient to establish liability. Trenton Trust Co. v. Western Surety Co., 599 S.W.2d 481, 490 (Mo.1980) (en banc).
Even if § 5 were given the interpretation claimed by the Trustee, nevertheless, to recover, the Trustee must show that the Bank of Hawaii knew that the transaction was for Rewald’s personal benefit, and that the Bank actually knew that the funds used were from BBRDW. Such knowledge must be actual, not constructive. The Trustee must show that a specific employee of the Bank had a present awareness that BBRDW funds were being used for Rewald’s personal benefit.
There is no duty by a bank to inquire where it receives no financial benefit from the transaction (unless the failure to inquire is a deliberate refusal to confirm the bank’s suspicions). Indeed, the plaintiff has been unable to cite any case placing liability upon a bank which has received no benefit from the transaction. See Southern Agency Co. v. Hampton Bank of St. Louis, 452 S.W.2d 100, 105 (Mo.1970) (court influenced by fact that there are no cases which hold that a bank is liable for a failure to inquire unless the bank is bene-fitting financially from the transaction).
The Trustee argues that the face of the checks informed the Bank that BBRDW funds were being used; that the Bank was aware that the house transaction was for Rewald’s personal benefit because the Bank drew up the papers relating to the escrow account. Additionally, several of the checks contained notations that the money was used for Rewald’s mortgage payments. While within the Bank of Hawaii’s personnel were those employees who may have had segments of information relative to Rewald’s breach of fiduciary duty, *673the Trustee fails, however, to show that any single employee of the Bank had knowledge of all of those facts. The Bank official who drew up the escrow papers was not the same employee who subsequently posted the checks. There was no commercial reason why any single employee should have knowledge of all facts. Therefore, the Bank — qua Bank — lacked actual knowledge or a present awareness that BBRDW funds were unlawfully being used for Rewald’s personal benefit.
The cases cited by the Trustee are clearly distinguishable. Wysowatcky v. Denver-Willys, Inc., 131 Colo. 266, 281 P.2d 165, 167 (1955) and Federal Mortgage Co. v. Simes, 210 Wis. 139, 245 N.W. 169 (1932) did not involve banks. In Maryland Casualty Co. v. Bank of Charlotte, 340 F.2d 550 (4th Cir.1965) and LaVecchia v. North Carolina Joint Stock Land Bank of Durham, 218 N.C. 35, 9 S.E.2d 489 (1940), the defendant bank was the financial beneficiary of the transaction. Here, the Bank was merely a conduit for the escrow funds. In Guaranty Bank & Trust Co. of Alexandria v. C & R Development Co., 260 La. 1176, 258 So.2d 543 (1972), the defendant bank was both the payee and the drawee bank, and had clear probable evidence of misappropriation. Here, the Bank was merely the depository of the escrow funds, and had no duty to inquire as to possible misappropriations. Therefore, the Bank lacks the requisite scienter necessary under Hawaii Rev.Stat. 556-4.
The Bank’s duty under its escrow account was merely to act as a depository of funds, a conduit through which money is held or transferred. The Bank received no significant financial benefit from the transaction. Thus, it is not to be held to the obligations imposed by § 5. See Wysowatcky, 281 P.2d at 167 (risk of dishonest fiduciary should not fall upon a bank which was a mere conduit to transmit funds); Southern Agency Co., 452 S.W.2d at 105.
The Bank contends by affidavit, and the Trustee does not dispute that the Bank had no actual knowledge of Rewald’s breach of his fiduciary duty. Therefore, the Bank is not liable.
Accordingly, IT IS HEREBY ORDERED that the Trustee’s Motion for Summary Judgment be DENIED, and the Bank of Hawaii’s Cross-motion for Summary Judgment be GRANTED. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482864/ | IN THE SUPREME COURT OF IOWA
No. 19–1760
Polk County No. AGCR329495
ORDER
CLERK OF SUPREME COURT
STATE OF IOWA,
Appellee,
vs.
PRINCE G. PAYE,
Appellant.
The court, May, J., taking no part, being evenly divided, declares this case
affirmed by operation of law. See Iowa Code § 602.4107 (2022).
NOV 10, 2022
The district court’s denial of Paye’s motion to suppress stands. Waterman,
Mansfield, and McDonald, JJ., would vacate the decision of the court of appeals
and affirm the judgment of the district court on the suppression issue;
Christensen, C.J., and Oxley and McDermott, JJ., would affirm the decision of
ELECTRONICALLY FILED
the court of appeals and reverse the judgment of the district court on that issue.
The decision of the court of appeals is vacated, and the judgment of the district
court is affirmed. See State v. Effler, 769 N.W.2d 880, 884 (Iowa 2009) (“[W]hen
the supreme court is equally divided . . . , the decision of the district court is
affirmed by operation of law.”).
1 of 3
Copies to:
Appellate Defender
Lucas Building
321 E. 12th Street
Des Moines, IA 50319
Melinda J. Nye
State Appellate Defenders Office
Fourth Floor Lucas Building
Des Moines, IA 50319
Criminal Appeals Division Iowa Attorney General
Hoover Building
1305 E. Walnut
Des Moines, IA 50319
Aaron James Rogers
Assistant Attorney General
Hoover State Office Building 2nd Floor
Des Moines, IA 50319
2 of 3
State of Iowa Courts
Case Number Case Title
19-1760 State v. Paye
So Ordered
Electronically signed on 2022-11-10 08:07:26
3 of 3 | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482847/ | United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
____________
No. 22-5199 September Term, 2022
1:22-cv-00949-UNA
Filed On: November 10, 2022
Joseph M. Evans,
Appellant
v.
Amy Helene Zubrensky,
Appellee
ON APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
BEFORE: Henderson, Wilkins, and Katsas, Circuit Judges
JUDGMENT
This appeal was considered on the record from the United States District Court
for the District of Columbia and on the brief and supplement filed by appellant. See
Fed. R. App. P. 34(a)(2); D.C. Cir. Rule 34(j). Upon consideration of the foregoing, and
the motion to appoint counsel, it is
ORDERED that the motion to appoint counsel be denied. In civil cases,
appellants are not entitled to appointment of counsel when they have not demonstrated
sufficient likelihood of success on the merits. It is
FURTHER ORDERED AND ADJUDGED that the district court’s order filed May
3, 2022, be affirmed. Appellant has shown no error in the district court’s dismissal of
the complaint because it sought monetary relief from a defendant who is immune from
such relief. See 28 U.S.C. § 1915(e)(2)(B)(iii). Appellant has offered no valid reasons
why the defendant would not be entitled to immunity from his claims in this case. See
Imbler v. Pachtman, 424 U.S. 409, 430 (1976) (prosecutors are entitled to immunity
from damages claims arising from conduct “intimately associated with the judicial phase
of the criminal process.”).
United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
____________
No. 22-5199 September Term, 2022
Pursuant to D.C. Circuit Rule 36, this disposition will not be published. The Clerk
is directed to withhold issuance of the mandate herein until seven days after resolution
of any timely petition for rehearing or petition for rehearing en banc. See Fed. R. App.
P. 41(b); D.C. Cir. Rule 41.
Per Curiam
Page 2 | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482881/ | Case: 22-2247 Document: 16 Page: 1 Filed: 11/10/2022
NOTE: This order is nonprecedential.
United States Court of Appeals
for the Federal Circuit
______________________
MICHAEL CORDARO,
Petitioner
v.
DEPARTMENT OF DEFENSE,
Respondent
______________________
2022-2247
______________________
Petition for review of the Merit Systems Protection
Board in No. NY-0432-18-0217-I-1.
______________________
ON MOTION
______________________
Before HUGHES, WALLACH, and STOLL, Circuit Judges.
PER CURIAM.
ORDER
Michael Cordaro petitions for review of a decision of the
Merit Systems Protection Board and moves for leave to pro-
ceed in forma pauperis. We determine that this matter
should be transferred to the United States District Court
for the Western District of New York.
Case: 22-2247 Document: 16 Page: 2 Filed: 11/10/2022
2 CORDARO v. DEFENSE
Mr. Cordaro’s mixed case (involving an alleged adverse
personnel action appealable to the Board based, at least in
part, on a claim of discrimination) has been before this
court once before. Previously, Mr. Cordaro filed petitions
for review from the same initial decision to the Board and
this court. We transferred the case to the Western District
of New York. Cordaro v. Dep’t of Def., No. 2019-2073 (Fed.
Cir. Aug. 16, 2019). * That court entered judgment against
Mr. Cordaro, and he has an appeal pending before the
United States Court of Appeals for the Second Circuit.
On August 25, 2022, the Board denied Mr. Cordaro’s
petition as barred on res judicata grounds in light of the
district court’s judgment. Mr. Cordaro now petitions this
court for review of the Board’s final decision. Mr. Cordaro’s
filings before this court indicate that he wishes to continue
to pursue his discrimination claim. See ECF No. 3; ECF
No. 4.
As we previously explained, only federal district courts
have jurisdiction to review a mixed case. See Perry v. Merit
Sys. Prot. Bd., 137 S. Ct. 1975, 1985 (2017); Williams v.
Dep't of the Army, 715 F.2d 1485, 1487 (Fed. Cir. 1983) (en
banc); 5 U.S.C. § 7702(a)(1); 29 C.F.R. § 1614.302(a); 5
C.F.R. § 1201.151. We therefore transfer this matter under
28 U.S.C. § 1631 to the Western District of New York.
Accordingly,
* Our transfer order noted that the then-pending pe-
tition before the Board did not impact the district court’s
jurisdiction. See 5 U.S.C. § 7702(e)(1)(B) (allowing an em-
ployee to file a civil action if “there is no judicially review-
able action” after “the 120th day following the filing of an
appeal with the Board under subsection (a)(1)”).
Case: 22-2247 Document: 16 Page: 3 Filed: 11/10/2022
CORDARO v. DEFENSE 3
IT IS ORDERED THAT:
Pursuant to 28 U.S.C. § 1631, this matter and all trans-
mittals are transferred to the United States District Court
for the Western District of New York.
FOR THE COURT
November 10, 2022 /s/ Peter R. Marksteiner
Date Peter R. Marksteiner
Clerk of Court | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482880/ | USCA11 Case: 21-14014 Date Filed: 11/10/2022 Page: 1 of 11
[DO NOT PUBLISH]
In the
United States Court of Appeals
For the Eleventh Circuit
____________________
No. 21-14014
Non-Argument Calendar
____________________
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
FRITZBERT JEAN, JR.,
a.k.a. Jean Fritzbert Jr.,
a.k.a. Jean Fritzbert,
Defendant-Appellant.
____________________
Appeal from the United States District Court
for the Southern District of Florida
USCA11 Case: 21-14014 Date Filed: 11/10/2022 Page: 2 of 11
2 Opinion of the Court 21-14014
D.C. Docket No. 1:20-cr-20230-JLK-2
____________________
Before ROSENBAUM, GRANT, and TJOFLAT, Circuit Judges.
PER CURIAM:
Fritzbert Jean, Jr. appeals his sentence of 96 months’ impris-
onment for possession of a firearm and ammunition by a convicted
felon, which was within the Guidelines range of 84 to 105 months’
imprisonment. Jean argues that his sentence was substantively un-
reasonable because his personal characteristics supported a sen-
tence below the Guidelines range and should have been considered
equally with the nature and circumstances of his offense. We agree
with the decision of the court below and accordingly affirm.
I.
On February 10, 2020, law enforcement officers patrolling
the Overtown neighborhood in Miami heard gunshots; as they
drove over to investigate, the officers saw a silver Pontiac Grand
Prix driving at a high speed in the opposite direction. Jean, who
had previously been convicted of multiple felonies, was driving the
Grand Prix and led the officers on a high-speed chase that lasted
roughly seven minutes and ended when Jean crashed into a utility
pole. Upon execution of a search warrant of the vehicle, the offic-
ers recovered two firearms, ammunition, and multiple spent cas-
ings. One of the recovered firearms had a large-capacity magazine
attached to it, and the other firearm had been reported stolen. At
approximately the same time the officers heard the gunshot, an
USCA11 Case: 21-14014 Date Filed: 11/10/2022 Page: 3 of 11
21-14014 Opinion of the Court 3
automated ShotSpotter sensor 1 notified law enforcement that 18
gunshots had just been fired at an apartment complex located two
blocks south of where the car chase began. Law enforcement of-
ficers found spent casings at the scene, and forensic analysis re-
vealed that these casings came from the two firearms found in the
car Jean was driving. The government concluded that there was
enough evidence to show that the weapons used in the shooting
were the same ones recovered from the vehicle Jean was driving
but not enough evidence to conclude that Jean and his passenger
shot the victim.
On November 17, 2020, Jean was indicted for possession of
a firearm and ammunition by a convicted felon, in violation of 18
U.S.C. §§ 922(g)(1), (2). Jean pled guilty to the charge on August
25, 2021. As part of the plea agreement, the government agreed to
recommend that Jean be sentenced at the low end of the Guidelines
range, provided that Jean not misrepresent any facts to the govern-
ment.
On September 27, 2021, a U.S. probation officer prepared a
presentence investigation report (PSI) that offered recommenda-
tions for Jean’s sentence based on the U.S. Sentencing Guidelines.
Pursuant to U.S.S.G. § 2K2.1(a)(4)(B)(i)(I), the probation officer cal-
culated a base offense level of 20 because Jean’s offense under 18
1 A ShotSpotter sensor is a strategically placed acoustic sensor that uses audio
pulse data, multilateration, and machine learning algorithms to calculate the
presence and location of gunshots.
USCA11 Case: 21-14014 Date Filed: 11/10/2022 Page: 4 of 11
4 Opinion of the Court 21-14014
U.S.C. § 922(g)(1) involved a semiautomatic firearm capable of ac-
cepting a large capacity magazine. He then made a series of in-
creases to Jean’s sentence based on the nature of his offense. The
probation officer increased the offense level by two because the of-
fense involved a stolen firearm. See U.S.S.G. § 2K2.1(b). The pro-
bation officer also applied a four-level increase pursuant to
U.S.S.G. § 2K2.1(b)(6)(B) because the firearm was used in connec-
tion with a felony offense and a two-level increase pursuant to
U.S.S.G. § 3C1.2 because Jean “recklessly created a substantial risk
of death or serious bodily injury to another person in the course of
fleeing from a law enforcement officer.” PSI ¶¶ 24, 27. Finally, he
applied a three-level decrease pursuant to U.S.S.G. § 3E1.1(a)–(b)
because Jean demonstrated acceptance of responsibility and timely
notified the government of his intention to plead guilty, yielding a
total offense level of 25.
The probation officer also applied a series of increases to
Jean’s sentence based on his criminal history. At age 19, Jean was
convicted of five separate residential burglaries, three of which in-
cluded grand theft and criminal mischief. For those crimes, Jean
was sentenced to 14 years of probation, 364 days’ imprisonment,
and a bootcamp program. When Jean failed to complete the
bootcamp program, his probation was revoked, and he was sen-
tenced to 48 months’ imprisonment. Between ages 23 and 30, he
was also convicted of giving false information to law enforcement,
grand theft of an auto, trespassing, possession of meth, and posses-
sion of cocaine. Outside of his convictions, Jean had been charged
USCA11 Case: 21-14014 Date Filed: 11/10/2022 Page: 5 of 11
21-14014 Opinion of the Court 5
with several violent offenses, including four instances of battery, an
aggravated assault with a deadly weapon, and an armed robbery.
The probation officer calculated a total of eight criminal history
points, which placed Jean in a criminal history category of IV.
Based on the total offense level of 25 and a criminal history
category of IV, the probation officer calculated a Guidelines range
of 84 to 105 months’ imprisonment.
Prior to his sentencing hearing, Jean filed a sentencing mem-
orandum with the U.S. District Court for the Southern District of
Florida. In his sentencing memorandum, Jean argued that the Dis-
trict Court is obligated to consider his family responsibilities. See
U.S.S.G. § 5H1.6. Jean stated that he was a caregiver to his fiancée
who remained disabled after a car accident. Jean also argued that
his substantial work history (described below) merits a below-
Guidelines sentence.
Jean’s sentencing hearing took place in the U.S. District
Court for the Southern District of Florida on November 3, 2021.
At the hearing, the government recommended a 96-month impris-
onment sentence—which was at the middle of the Guidelines
range. The government argued that Jean should receive a sentence
above the low end of the Guidelines range based on the serious and
violent nature of the offense. The government also pointed to
Jean’s lengthy criminal history as proof that his prior incarceration
did not deter him from committing crimes—and as proof that Jean
thus deserves a lengthier sentence. Finally, the government argued
that because many of Jean’s prior crimes—such as home invasions,
USCA11 Case: 21-14014 Date Filed: 11/10/2022 Page: 6 of 11
6 Opinion of the Court 21-14014
burglaries, and grand thefts of vehicles— were invasive and violent,
public safety concerns dictate that Jean receive a lengthier sentence
than the minimum recommended.
In response to the government, defense counsel set out sev-
eral personal factors that, in his view, warranted a below-Guide-
lines sentence for Jean. Defense counsel first argued that Jean had
aged out of his criminal conduct and was more mature now than
when his criminal history occurred. Defense counsel then asserted
that Jean’s obligations to his family warrant a sentence below the
Guidelines range, explaining that Jean has been the caregiver for
his fiancée, Tonya McCall, for the last seven years. He noted that
McCall was disabled from a car accident that had put her in a coma,
had three strokes since the accident, and needed Jean at home be-
cause life without him was very difficult. Defense counsel also ar-
gued that Jean’s consistent work history over the last few years jus-
tified a below-Guidelines sentence, noting that since 2015 Jean was
working as a landscaper, was a paid laborer, and had a job at a laun-
dromat. Finally, defense counsel argued that Jean deserved a sen-
tence below the Guidelines minimum because prison conditions
during the pandemic were more restrictive than under normal cir-
cumstances.
The District Court ultimately adopted the government’s
recommendation and sentenced Jean to 96 months in prison. The
court emphasized that the offense “[was] not mere possession of
the gun,” but also the discharge of 17 rounds that resulted in injury,
Jean’s acknowledgement that he possessed the gun and
USCA11 Case: 21-14014 Date Filed: 11/10/2022 Page: 7 of 11
21-14014 Opinion of the Court 7
ammunition, the spent cartridges linking Jean to a drive-by shoot-
ing found in the car he was driving, and the “tremendous chase
through the streets of downtown Miami,” where the driver hit sev-
eral other cars and put pedestrians at risk. Tr. Sentencing Hr’g 21–
22. The court explained that although Jean was very young when
he committed many of his prior offenses, they were very serious
crimes. The court also noted that even if it assumed that Jean had
matured and would refrain from committing crimes in the future,
that factor was not enough for the court to deviate downward from
the Guidelines range. The court commented that it was seriously
considering 105 months, the maximum of the range, but decided
against it because of the difficulties of the pandemic, the time Jean
had already been in custody, and the arguments made by defense
counsel.
On appeal, Jean argues that the 96-month sentence is sub-
stantively unreasonable for several reasons. First, Jean argues that
his work history and caregiving responsibilities supported a sen-
tence below the Guidelines range. Second, Jean makes the broader
point that a defendant’s personal characteristics should be consid-
ered equally with the nature and circumstances of the offense. Fi-
nally, Jean argues that his contributions of time and energy toward
his disabled fiancée are acts of charity that justify a lenient sentence
and that a court may consider hardships created by the defendant’s
confinement. We affirm the District Court’s sentence.
II.
USCA11 Case: 21-14014 Date Filed: 11/10/2022 Page: 8 of 11
8 Opinion of the Court 21-14014
When reviewing a sentence for substantive reasonableness,
we consider the totality of the circumstances under a deferential
abuse-of-discretion standard. Gall v. United States, 552 U.S. 38, 51,
128 S. Ct. 586, 597 (2007). The District Court abuses its discretion
when it “(1) fails to afford consideration to relevant factors that
were due significant weight, (2) gives significant weight to an im-
proper or irrelevant factor, or (3) commits a clear error of judgment
in considering the proper factors.” United States v. Irey, 612 F.3d
1160, 1189 (11th Cir. 2010) (en banc) (internal quotation marks
omitted). The factors that a District Court must consider when
determining a sentence are set out in 18 U.S.C. § 3553(a). Among
other things, a District Court must consider the nature of the of-
fense; the need for the sentence to serve goals such as reflecting the
nature of the crime, protecting the public, and deterring the de-
fendant from committing future crimes; and the sentence range es-
tablished for the offense. 18 U.S.C. § 3553(a)(1)–(2), (4). “[A] dis-
trict court commits a clear error of judgment when it considers the
proper factors but balances them unreasonably.” Irey, 612 F.3d at
1189.
To determine whether a District Court has balanced the rel-
evant factors unreasonably, we must make the sentencing calculus
itself and review each step the District Court took in determining
its sentence. Id. In doing so, we consider the “totality of the facts
and circumstances” present in the case. Id. But we have “under-
scored” that we must give “due deference” to the District Court to
consider and weigh the proper sentencing factors. United States v.
USCA11 Case: 21-14014 Date Filed: 11/10/2022 Page: 9 of 11
21-14014 Opinion of the Court 9
Shabazz, 887 F.3d 1204, 1224 (11th Cir. 2018) (quotation marks
omitted). The District Court does not have to weigh all the factors
equally and is given discretion to attach great weight to one factor
over another. United States v. Rosales-Bruno, 789 F.3d 1249, 1254
(11th Cir. 2015). Further, we ordinarily expect that a sentence
within the advisory Guidelines range is a reasonable one. United
States v. Cabezas-Montano, 949 F.3d 567, 611 (11th Cir. 2020). A
sentence that is well below the statutory maximum for the offense
also indicates the sentence is reasonable. Rosales-Bruno, 789 F.3d
at 1256-57. This Court will only set aside a District Court’s sen-
tence if, after giving “a full measure of deference to the sentencing
judge,” we determine the sentence is outside the range of reasona-
ble sentences dictated by the facts presented in the case. Irey, 612
F.3d at 1190–91.
Based on the facts in this case, we conclude that the District
Court did not abuse its discretion in sentencing Jean to 96 months
in prison. The District Court placed significant weight on the cir-
cumstances of the offense, which included the drive-by shooting
and the car chase, because they fully reflected the nature of Jean’s
conduct beyond his actual conviction for unlawful possession of a
firearm. The court also emphasized the defendant’s criminal his-
tory involving other very serious crimes. Additionally, the court
mentioned the need to protect the public from further crimes, the
need to reflect seriousness of the offense, and the need to deter oth-
ers. Pursuant to 18 U.S.C. § 3553(a), the District Court acted within
its discretion by considering these factors. The court
USCA11 Case: 21-14014 Date Filed: 11/10/2022 Page: 10 of 11
10 Opinion of the Court 21-14014
acknowledged Jean’s argument that he had matured and would not
reoffend because his most serious convictions were far in the past,
but it did not think this factor weighed heavily enough to cause a
deviation below the Guidelines range.
Although the court did not specifically address Jean’s work
history or role as a caregiver in its sentencing explanation, the court
said that its decision not to sentence Jean to the maximum of the
Guidelines range was based in part on the arguments made by de-
fense counsel, which highlighted these mitigating factors. The Dis-
trict Court did give some weight to those factors, but it determined
that Jean’s mitigating factors were not compelling enough to war-
rant a below-Guidelines sentence. Jean argues that the sentencing
court should have weighed his personal characteristics equally with
the nature and circumstances of his offense, but it was within the
court’s discretion to assign less weight to Jean’s personal character-
istics and more weight to the specific circumstances of the offense
and Jean’s criminal history. Rosales-Bruno, 789 F.3d at 1254.
The length of the sentence imposed by the District Court
also weighs against a finding of abuse of discretion. The 96-month
sentence imposed by the District Court was within the advisory
Guidelines range of 84 to 105 months and was 24 months below
the statutory maximum—both factors which weigh in favor of the
sentence being reasonable. Cabezas-Montano, 949 F.3d at 611;
Rosales-Bruno, 789 F.3d 1256–57. In contrast, the sentences that
this Court has held to be substantively unreasonable are ones that
fall far short of even the minimum recommended sentence for the
USCA11 Case: 21-14014 Date Filed: 11/10/2022 Page: 11 of 11
21-14014 Opinion of the Court 11
offense. See, e.g., United States v. Livesay, 587 F.3d 1274, 1278–79
(11th Cir. 2009) (holding that probation is a substantively unrea-
sonable sentence for a billion-dollar fraud offense); United States v.
Pugh, 515 F.3d 1179, 1194 (11th Cir. 2008) (vacating a sentence of
probation for receiving and distributing child pornography as sub-
stantively unreasonable).
Here, Jean has not shown that his sentence was substan-
tively unreasonable. The District Court considered Jean’s personal
characteristics, but it ultimately decided to give more weight to the
circumstances of his offense and his criminal history, which was
within the court’s discretion. Jean’s sentence was within the
Guidelines range and well below the statutory maximum, which
also supports the sentence’s reasonableness. The District Court did
not abuse its discretion in sentencing Jean to 96 months’ imprison-
ment, so the District Court’s sentence is accordingly
AFFIRMED. | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482856/ | Notice: This opinion is subject to formal revision before publication in the
Atlantic and Maryland Reporters. Users are requested to notify the Clerk of the
Court of any formal errors so that corrections may be made before the bound
volumes go to press.
DISTRICT OF COLUMBIA COURT OF APPEALS
No. 22-BG-671
IN RE MARSHALL L. WILLIAMS
DDN2021-D055
An Administratively Suspended Member of
the Bar of the District of Columbia Court of Appeals
Bar Registration No. 376298
BEFORE: Deahl and AliKhan, Associate Judges, and Washington, Senior Judge.
ORDER
(FILED— November 10, 2022)
On consideration of the certified copy of the order from the state of New
Jersey suspending respondent from the practice of law for two years and until further
order of that court; this court’s September 2, 2022, order suspending respondent
pending final disposition of this proceeding and directing him to show cause why
the functional equivalent reciprocal discipline of a two-year suspension with a
fitness requirement should not be imposed; and the statement of Disciplinary
Counsel; and it appearing that respondent has not filed a response or his D.C. Bar R.
XI, § 14(g) affidavit, it is
ORDERED that Marshall L. Williams is hereby suspended from the practice
of law in the District of Columbia for two years with reinstatement conditioned on a
showing of fitness. See In re Sibley, 990 A.2d 483, 487-88 (D.C. 2010) (explaining
that there is a rebuttable presumption in favor of imposition of identical discipline
and exceptions to this presumption should be rare); In re Fuller, 930 A.2d 194, 198
(D.C. 2007) (stating that a rebuttable presumption of identical reciprocal discipline
applies unless one of the exceptions is established). It is
No. 22-BG-671
FURTHER ORDERED that, for purposes of reinstatement, respondent’s
suspension will not begin to run until such time as he files an affidavit that fully
complies with the requirements of D.C. Bar R. XI, § 14(g).
PER CURIAM | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482873/ | 21-1951-cr
United States v. Ryan
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY
ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF
APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER
IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN
ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING TO A SUMMARY
ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second Circuit, held at
the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York,
on the 10th day of November, two thousand twenty-two.
PRESENT: REENA RAGGI,
JOSEPH F. BIANCO,
SARAH A. L. MERRIAM,
Circuit Judges.
_____________________________________
United States of America,
Appellee,
v. 21-1951-cr
Aysia Ryan,
Defendant-Appellant. *
_____________________________________
FOR APPELLEE: BRENDAN KEEFE, Assistant United States
Attorney (Sandra S. Glover, Assistant United
States Attorney, on the brief), for Vanessa
Roberts Avery, United States Attorney for the
District of Connecticut, New Haven, CT.
FOR DEFENDANT-APPELLANT: DEVIN MCLAUGHLIN, Langrock Sperry & Wool,
LLP, Middlebury, VT.
*
The Clerk of Court is respectfully directed to amend the caption as set forth above.
Appeal from a judgment of the United States District Court for the District of Connecticut
(Vanessa L. Bryant, J.).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND
DECREED that the July 30, 2021 judgment of the district court is AFFIRMED.
Defendant Aysia Ryan, who pleaded guilty to one count of conspiracy to transport and
possess stolen property, see 18 U.S.C. § 371, based on her participation in “grab-and-go” thefts
across New York and New England, appeals her 36-month prison sentence as procedurally and
substantively unreasonable given her 24–30 month advisory Sentencing Guidelines range. We
assume the parties’ familiarity with the underlying facts, the procedural history of the case, and
the issues on appeal, to which we refer only as necessary to explain our decision to affirm.
I. Procedural Reasonableness
Although the procedural reasonableness of a sentencing is typically reviewed for abuse of
discretion, we apply the still more deferential plain error standard to Ryan’s claims because she
did not raise them before the district court. See United States v. Williams, 998 F.3d 538, 540 (2d
Cir. 2021) (articulating standard). A district court commits procedural error if, among other
reasons, it “‘selects a sentence based on clearly erroneous facts, or fails adequately to explain the
chosen sentence[,]’” United States v. Singh, 877 F.3d 107, 115 (2d Cir. 2017) (quoting United
States v. Chu, 714 F.3d 742, 746 (2d Cir. 2013)), particularly one “‘deviat[ing] from the Guidelines
range.’” United States v. Cavera, 550 F.3d 180, 190 (2d Cir. 2008) (en banc) (quoting Gall v.
United States, 552 U.S. 38, 51 (2007)).
Ryan alleges that her sentence was procedurally unreasonable because the district court:
(1) relied on a clearly erroneous fact in imposing the sentence; (2) failed to provide reasonable
notice of a Guidelines departure as required under Federal Rule of Criminal Procedure 32(h); and
2
(3) punished her twice for the same conduct in imposing an above-Guidelines sentence. We
address each argument in turn and conclude that there was no plain procedural error.
A. Factual Findings Regarding Reckless Endangerment
Ryan argues that the district court increased her sentence based upon a clearly erroneous
factual finding that she drove the getaway car that dragged a store employee from the scene of the
August 27, 2020 theft. It is uncontroverted that Ryan was a passenger in the vehicle during that
theft. This does not manifest plain error because in applying a two-level enhancement for “reckless
endangerment during flight” under U.S.S.G. § 3C1.2 and in considering “the nature and
circumstances of the offense” under 18 U.S.C. § 3553(a)(1), the district court made clear that it
was referencing two offenses (a theft at one store and attempted theft at another) that occurred the
following day (on August 28), during which Ryan was the getaway driver, distinct from the
August 27 theft. Specifically, the district court relied upon the following undisputed facts: (1)
during the first August 28 theft in South Windsor, Ryan drove the getaway car and struck an
employee’s hand with the car’s side mirror; 1 and (2) in another attempted theft later that day in
Glastonbury, Ryan was again driving the getaway car when she hit a police car and another parked
car as she fled from the police. See App’x at 82, 109.
Ryan notes that, in a subsequent discussion of the dangerousness factor during its
explanation of the sentence, the district court stated that “[o]bviously, a person who drags another
person with a car or puts a car in gear when someone is standing in front of it, is a person from
1
At the sentencing, the victim of this incident explained that, as he went around the front of the getaway
car to attempt to retrieve the stolen merchandise from Ryan and her co-conspirators, the following occurred:
“I was looking at [Ryan] in her eyes, and she was looking at me, and put the car into drive. And I said to
myself, I better move and get away from the front of the car. And I stood to the side of the car. Had she
sped off and I’d be standing still in front of that car, I may not be here today talking about this.” App’x at
98–99. The Pre-Sentence Report (“PSR”) also indicated that after this incident, police following Ryan
when she began to swerve the vehicle in a residential area terminated their pursuit due to safety concerns.
3
whom the public needs to be protected.” Id. at 111. In light of the district court’s detailed
discussion of the two August 28 incidents and not the August 27 theft as support for the § 3C1.2
enhancement, we do not construe this statement as a finding that the defendant was the driver
(rather than a passenger) when the victim was dragged by the getaway car during that theft. Given
the content (including the use of the disjunctive) and context, this reference is more reasonably
understood to remark on the dangerous conduct of the conspiracy as a whole, which included
Ryan’s participation in the August 27 theft (even though she was not the driver on that occasion)
and her participation in the August 28 offenses (where she was the driver). In short, Ryan has
failed to show that there was a plain error related to the district court’s factual findings with respect
to her reckless conduct and its reliance on that conduct in determining the appropriate sentence.
B. Rule 32(h)
Ryan faults that the district court departed upward from her 24–30 month Sentencing
Guidelines range without providing the notice required by Federal Rule of Criminal Procedure
32(h). The argument fails because the district court’s 36-month sentence reflected a variance from
the Guidelines range which, unlike a departure, does not require Rule 32(h) notice. See Irizarry
v. United States, 553 U.S. 708, 714 (2008); see also United States v. Keller, 539 F.3d 97, 99 n.2
(2d Cir. 2008) (noting that terms “departure” and “variance” “are often used interchangeably” but
nonetheless are distinct).
We have repeatedly explained that a “departure . . . refers only to non-Guidelines sentences
imposed on the basis of factors within the framework set out in the Guidelines, whereas a variance
is a modification of the applicable Guidelines sentence that a District Court may find justified
under . . . sentencing factors extrinsic to the Guidelines—namely, those set forth in 18 U.S.C.
§ 3553(a).” United States v. Sealed Defendant One, 49 F.4th 690, 697 (2d Cir. 2022) (internal
4
quotation marks and citation omitted). Here, although the district court used the term “upward
departure” at one point during its explanation of the reasons for the above-Guidelines sentence,
App’x at 112, as in our recent decision in Sealed Defendant One, the record “makes clear that the
district court relied on the section 3553(a) factors in imposing an above-Guidelines sentence,”
rather than an upward departure under the Guidelines, 49 F.4th at 697.
After calculating the applicable Guidelines range the district court did not mention any
consideration of an enumerated ground for an upward departure under the Guidelines, nor were
any discussed by the parties. Instead, in determining the appropriate sentence, the district court
evaluated the Section 3553(a) factors. The district court considered: the “aggressive and violent”
nature of the offenses; “[t]he emotional, physical, and financial harm done to the victims”; Ryan’s
role as the driver on “two occasions”; “[h]er history and characteristics”; that she had “suffered no
meaningful consequence” for “an almost unfathomable number of prior convictions”; and the
sentence’s “specific and general deterrence” purposes. App’x at 109–11. On this record, the
district court’s passing reference to a “departure” on one occasion at the end of its detailed
discussion of the Section 3553(a) factors does not transform a clear variance from the applicable
Guidelines range based upon those factors into an unspecified upward departure that would require
notice under Rule 32(h). See, e.g., Keller, 539 F.3d at 100 (“While the record shows that the
District Court used both ‘departure’ and ‘non-[G]uideline[s] sentence’ to describe the sentence it
imposed, it is also clear from the record that the District Court relied on its power under §
3553(a)—and not on any Guidelines provision—as a basis [for its sentence].”); accord United
States v. Horne, 552 F. App’x 44, 45–46 (2d Cir. 2014); United States v. Brass, 527 F. App’x 70,
72 (2d Cir. 2013). Indeed, the district court confirmed in its written statement of reasons that the
above-Guidelines sentence was a variance by indicating that it had imposed a sentence otherwise
5
outside the sentencing guideline system (i.e., variance) and completing the specific section where
the district court delineates which Section 3553(a) factors supported the variance.
In sum, we are left with no doubt on this record that the district court’s above-Guidelines
sentence was based on the Section 3553(a) factors, rather than any upward departure within the
Guidelines system. Accordingly, as a variance, this sentence was not subject to Rule 32(h)’s notice
requirement.
C. Articulated Reasons for the Variance
Ryan further argues that the district judge erroneously increased her sentence above the
Guidelines range based on “the exact same conduct” used in applying the § 3C1.2 reckless
endangerment enhancement. Appellant’s Br. at 18.
We find this “impermissible double-counting” argument unpersuasive. Id. As long as the
district court sufficiently articulates its reasoning, it may deviate from the Guidelines range where
a sentencing enhancement “bears on the context in which the [conduct] occurred, [but] not on the
relative severity of [a defendant’s] conduct or its actual consequences.” Sealed Defendant One,
49 F.4th at 698; see also United States v. Sindima, 488 F.3d 81, 87 (2d Cir. 2007), superseded by
statute on other grounds as recognized in United States v. Smith, 949 F.3d 60, 64 (2d Cir. 2020)
(noting that district courts may “impose[] a non-Guidelines sentence based upon section 3553(a)
factors already accounted for in the Guidelines range”).
Here, the district court determined that an above-Guidelines sentence was warranted based
on Ryan’s reckless endangerment conduct during the thefts that the Guidelines enhancement did
not fully capture. Specifically, although the enhancement applies for reckless endangerment of
one person on a single occasion, the district court emphasized that here Ryan was “[t]he reckless
driver of a vehicle on two occasions where the life and the physical and emotional well-being of
6
other individuals were utterly disregarded . . . .” App’x at 109 (emphasis added). Moreover,
during those two incidents, Ryan’s conduct endangered individuals not only at the scene of the
crimes but also created further risk to others in her effort to avoid arrest by the police by weaving
through traffic and ramming both a police car and another parked car. Further, the reckless
endangerment enhancement applies even when there is no actual harm. But here the district court
found physical harm: following the South Windsor theft, Ryan put the car in gear with a store
employee standing in front of it and struck a victim’s hand as she pulled away. The district court
emphasized that Ryan specifically engaged in “aggressive and violent” conduct that “put the very
lives and well-being of the victims of these offenses, particularly those who were put in direct
physical threat and who were physically harmed[,] in potentially grave danger.” Id. at 109.
Thus, the district court adequately explained why Ryan’s reckless conduct was different
from an ordinary case covered by the Guidelines enhancement and did not procedurally err in
relying on that same conduct in imposing a sentence above the Guidelines range.
II. Substantive Reasonableness
It is well established that “when conducting substantive review, we take into account the
totality of the circumstances, giving due deference to the sentencing judge’s exercise of discretion,
and bearing in mind the institutional advantages of district courts.” Cavera, 550 F.3d at 190
(citing Rita v. United States, 551 U.S. 338, 354 (2007)). Therefore, we review the
substantive reasonableness of “all sentences—whether inside, just outside, or significantly
outside the Guidelines range—under a deferential abuse-of-discretion
standard.” Gall, 552 U.S. at 41. Under that standard, we find an abuse of discretion by the
sentencing court only when the sentence is “so shockingly high, shockingly low, or otherwise
unsupportable as a matter of law that allowing [it] to stand would damage the administration of
7
justice.” United States v. Broxmeyer, 699 F.3d 265, 289 (2d Cir. 2012) (internal quotation marks
and citation omitted).
Ryan’s 36-month sentence, which was six months above the high-end of a 24–30 month
Guidelines range, was not substantively unreasonable. Ryan was involved in 23 “grab-and go”
retail thefts, resulting in losses of over $40,000 attributable directly to her. As the district court
emphasized, Ryan’s conduct placed the lives and well-being of others in danger and it was
“imperative that the Court impose a sentence that reflects the seriousness of the dangerous offenses
she committed, offenses which were harmful, physically and emotionally and financially harmful
to other people.” App’x at 110. Moreover, Ryan had a lengthy criminal history and the district
court noted that the “leniency shown to the defendant in the past has been utterly disrespected and
treated as a ticket to break the law, a license to break the law.” Id. Thus, the district court explained
the need for the sentence to, inter alia, protect the public, as well as deter the defendant and others
from engaging in this type of criminal conduct. Given the factors identified by the district court,
36 months’ imprisonment was not “shockingly high,” Broxmeyer, 699 F.3d at 289 (internal
quotation marks omitted), but rather was “within the range of permissible decisions” based on the
facts presented at sentencing, United States v. Ingram, 721 F.3d 35, 37 (2d Cir. 2013) (internal
quotation marks and citation omitted). Accordingly, we conclude that the sentence was
substantively reasonable.
* * *
We have considered all of Ryan’s remaining arguments and find them to be without merit.
Accordingly, we AFFIRM the judgment of the district court.
FOR THE COURT:
Catherine O’Hagan Wolfe, Clerk of Court
8 | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482879/ | 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 10, 2022
Before
FRANK H. EASTERBROOK, Circuit Judge
DAVID F. HAMILTON, Circuit Judge
THOMAS L. KIRSCH II, Circuit Judge
No. 22-1558
UNITED STATES OF AMERICA, Appeal from the United States District
Plaintiff-Appellee, Court for the Northern District of
Illinois, Eastern Division.
v.
No. 1:17-cr-00517
ANDREW J. JOHNSTON,
Defendant-Appellant. Rebecca R. Pallmeyer,
Chief Judge.
ORDER
Andrew Johnston, a federal inmate convicted of attempted bank robbery,
appeals the denial of his motion for a new trial based on newly discovered evidence.
* 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. 22-1558 Page 2
Because the district court correctly concluded that the evidence would not have led to
Johnston’s acquittal, we affirm.
In 2017 a man walked into a bank in Hardwood Heights, Illinois, and told a teller
to “put [her] hands up” because “this is a robbery.” The man donned distinctive
clothing—a black hoodie, gloves with tape wrapped around the fingertips, a ski mask,
and a black hat bearing the word “security.” The exchange was seen by the bank’s
supervisor and a customer at the drive-through window. When the customer mouthed
that he was going to call 911, the robber fled. Soon after, in a nearby parking lot, the
customer saw the same man enter a car and speed away. The customer then called 911
and described to an operator the clothes the man was wearing, as well as the color,
make, model, and license plate of the man’s car.
Two miles from the bank an officer pulled over Johnston, who was driving a car
that largely matched the customer’s description. The only difference in the description
was a single entry on the license plate number. Johnston’s plate number was
“Q937444,” and the police officers had understood the reported plate number to read
“2937444.” Upon peering into the car, the officers saw on the back seat all the clothes
worn by the robber—the black hoodie, gloves with tape, ski mask, and black “security”
cap.
The government charged Johnston with attempted bank robbery. See 18 U.S.C.
§ 2113(a). He was convicted of that crime after a jury trial.
Johnston appealed, in part on grounds that the district court should have
excluded the evidence on his car’s back seat because the police lacked probable cause to
stop and arrest him. We affirmed, explaining that the customer’s description of the
robber’s vehicle supplied probable cause for the stop and arrest, and, in any event, the
clothing on the back seat was in plain view. See United States v. Johnston, 814 F. App’x
142, 146 (7th Cir. 2020). Based on that same argument, Johnston also sought relief under
28 U.S.C. § 2255.
Johnston later moved under Rule 33 of the Federal Rules of Criminal Procedure
for a new trial based on newly discovered evidence. Through a Freedom of Information
Act request, he had obtained a letter from the Federal Deposit Insurance Corporation
stating that it did not cover the bank for robbery liability. In Johnston’s view, this
statement proved that Congress could not criminalize bank robbery, thereby stripping
the district court of federal jurisdiction to hear his bank-robbery case. Johnston had also
No. 22-1558 Page 3
obtained a video captured by the dashboard camera of the car driven by the officer who
pulled him over. Johnston argued that the video proved that the police lacked probable
cause to stop him and then seize his clothing. According to Johnston, the video showed
that the officer had not been informed of the robber’s license-plate number when she
pulled him over, and that other officers did not see the “security” hat on his back seat.
The seized clothing, he asserted, should have been suppressed for lack of probable
cause.
The district court denied the motion. The court stated that Johnston’s recent
submissions did not cast doubt on probable cause for his arrest, let alone the validity of
his conviction or the court’s jurisdiction over this case. And, the court continued, his
motion was in essence a “disguised Section 2255 petition,” duplicative of one he had
already filed.
To prevail on a Rule 33 motion based on newly discovered evidence, Johnston
had to show, among other things, that the new evidence probably would have led to his
acquittal. See United States v. O'Malley, 833 F.3d 810, 813 (7th Cir. 2016). One way a
defendant can do so is by demonstrating that the newly discovered evidence would
have led to the suppression of other evidence that was necessary to his conviction.
See id. at 814 (citing United States v. Woods, 169 F.3d 1077, 1078 (7th Cir. 1999)).
On appeal Johnston again challenges the basis for federal jurisdiction,
maintaining that Congress lacks authority under the Commerce Clause to make bank
robbery a federal crime. We have repeatedly rejected this argument, see, e.g., United
States v. Watts, 256 F.3d 630, 633–44 (7th Cir. 2001), as we did in Johnston’s direct
appeal, see Johnston, 814 F. App’x at 145. Congress has the power to criminalize the
robbery of FDIC-insured banks, regardless of whether the FDIC insures those banks for
robbery, because the banks are “fundamental to the conduct of interstate commerce.”
Watts, 256 F.3d at 633; see also United States v. Hagler, 700 F.3d 1091, 1100 (7th Cir. 2012).
As for the merits of the court’s ruling, Johnston continues to argue that the
dashboard video shows that the officers lacked probable cause to stop him and seize the
“security” hat on his back seat. Had this evidence been suppressed, he insists, he would
have been acquitted.
The court acted well within its discretion to deny the motion. The video casts no
doubt on whether probable cause supported Johnston’s arrest. First, the video confirms
that the arresting officer knew that Johnston’s license-plate number matched the
No. 22-1558 Page 4
description of the robber’s. In the video, before the officer pulls Johnston over, a police
dispatcher is overheard saying, “that officer is behind that vehicle with the license plate
you guys gave out from your bank.” Because the customer had described a car of the
same make, color, and model, and a nearly identical license-plate number, the officer
had probable cause to stop Johnston. See Maniscalco v. Simon, 712 F.3d 1139, 1141, 1144
(7th Cir. 2013) (officers had probable cause to arrest a suspect when the suspect’s license
plate matched the victim’s report).
Second, the video supports that officers saw the “security” hat in plain view on
the back seat. In the video, an officer, upon being told by another officer to look for “a
black security hat,” peers through Johnston’s back window and replies, “it’s right here.”
Because the hat was in plain view and its incriminating character was immediately
apparent (given that the robber wore such a hat), the officers could lawfully seize it.
See United States v. Cherry, 920 F.3d 1126, 1137–38 (7th Cir. 2019).
We have considered Johnston’s other arguments, and none has merit.
AFFIRMED | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482877/ | 21-426-pr
Marmolejos v. United States
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY
ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF
APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER
IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN
ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING A SUMMARY
ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second Circuit,
held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of
New York, on the 10th day of November, two thousand twenty-two.
PRESENT:
REENA RAGGI,
JOSEPH F. BIANCO,
SARAH A. L. MERRIAM,
Circuit Judges.
___________________________________________
Thomas Marmolejos,
Petitioner-Appellant,
v. 21-426-pr
United States of America,
Respondent-Appellee.
___________________________________________
FOR PETITIONER-APPELLANT: Thomas Marmolejos, pro se, Otisville,
NY.
FOR RESPONDENT-APPELLEE: Kiersten A. Fletcher, David Abromowicz,
Assistant United States Attorneys, of
counsel, for Damian Williams, United
States Attorney for the Southern District
of New York, New York, NY.
Appeal from an order of the United States District Court for the Southern District of New
York (Denny Chin, J.).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND
DECREED that the January 15, 2021 order of the district court is AFFIRMED.
Petitioner Thomas Marmolejos, proceeding pro se, appeals the district court’s denial of his
28 U.S.C. § 2255 motion to vacate his convictions for firearm offenses under 18 U.S.C. § 924(c)
and (j) and the consecutive life and ten-year sentences imposed for those crimes.1 Marmolejos
was also convicted of Hobbs Act robbery conspiracy, conspiracy to commit murder-for-hire,
substantive murder-for-hire, and narcotics conspiracy, for some of which he is also serving life
sentences. The jury had been charged that the first three of those offenses were “crime[s] of
violence” under Section 924(c) and that the narcotics conspiracy was a “drug trafficking crime”
under Section 924(c). The jury was not asked, however, to indicate on the verdict sheet which of
those predicate offenses it had relied upon for the Section 924(c) and (j) firearm convictions.
A panel of this Court granted a certificate of appealability on the following issue: whether
Marmolejos’s Section 924(c) and (j) convictions are invalid when the trial record allowed for
conviction on at least one valid predicate offense and on offenses which are no longer valid
predicate offenses after the decision in United States v. Davis, 139 S. Ct. 2319 (2019). We assume
the parties’ familiarity with the underlying facts, the procedural history of the case, and the issues
1
Section 924(c)(1)(A) mandates a minimum sentence of ten years for discharging a firearm
“during and in relation to any crime of violence or drug trafficking crime.” 18 U.S.C. §
924(c)(1)(A). Section 924(j)(1) authorizes a life sentence for murder through the use of a firearm
in the course of a Section 924(c) offense. 18 U.S.C. § 924(j)(1).
2
on appeal, which we reference only as necessary to explain our decision to affirm.2
Under 28 U.S.C. § 2255, “[p]risoners may seek collateral review of a federal conviction or
sentence that was ‘imposed in violation of the Constitution or laws of the United States.’” Yick
Man Mui v. United States, 614 F.3d 50, 53 (2d Cir. 2010) (quoting 28 U.S.C. § 2255(a)). On
appeal from a denial of relief under Section 2255, we review findings of fact for clear error and
conclusions of law de novo. Savoca v. United States, 21 F.4th 225, 231–32 (2d Cir. 2021).
After Marmolejos’s sentencing, the Supreme Court held in Davis that a portion of Section
924(c)’s definition of a “crime of violence” was unconstitutionally vague. 139 S. Ct. at 2336. In
light of that decision, we have subsequently held that Hobbs Act robbery conspiracy and murder-
for-hire conspiracy are no longer valid “crime of violence” predicates for Section 924(c). See
United States v. Barrett, 937 F.3d 126, 127–28 (2d Cir. 2019); United States v. Pastore, 36 F.4th
423, 428–29 (2d Cir. 2022). Further, the government concedes that Marmolejos’s substantive
murder-for-hire conviction cannot serve as a valid Section 924(c) predicate because the jury was
not asked to find that the offense resulted in personal injury or death. Instead, the government
contends, as the district court held, that Marmolejos’s drug conspiracy conviction remains a valid
predicate for his Section 924(c) and (j) convictions. Although Marmolejos agrees that a narcotics
2
As a threshold matter, the Government argues that we should decline to reach the question
posed by the certificate of appealability for three independent reasons: (1) the Section 2255
motion is not cognizable because a favorable decision would not result in Marmolejos’s release
from confinement in light of the life sentences that he is serving on unchallenged counts of
conviction; (2) the Court should exercise its discretion not to reach the merits under the concurrent-
sentence and harmless-error doctrines because of the concurrent terms of life imprisonment on the
unchallenged counts; and (3) Marmolejos’s claim is procedurally defaulted because he failed to
challenge the constitutionality of his Section 924(c) and (j) convictions on direct appeal. We do
not reach those issues because, for the reasons set forth in this order, we affirm the denial of his
Section 2255 motion on the merits.
3
conspiracy offense can still serve as a valid Section 924(c) predicate, he argues that the trial record
does not provide a sufficient factual basis to conclude that his firearms convictions were based on
the narcotics conspiracy predicate, and thus, the jury may have relied on the invalid predicates for
those convictions. We disagree.
“A conviction based on a general verdict is subject to challenge if the jury was instructed
on alternative theories of guilt and may have relied on an invalid one.” Hedgpeth v. Pulido, 555
U.S. 57, 58 (2008). To prevail on this kind of challenge in a Section 2255 motion, however, the
defendant must show that he was “actually prejudiced” by the charging error because it had a
“‘substantial and injurious effect or influence in determining the jury’s verdict.’” Stone v. United
States, 37 F.4th 825, 829 (2d Cir. 2022) (quoting Pulido, 555 U.S. at 58). “[I]n the context of a §
924(c) conviction, where a jury’s finding of guilt is based on two [or more] predicates, only one
of which can lawfully sustain guilt, we will find the error harmless when the jury would have found
‘the essential elements of guilt on [an] alternative charged predicate that would sustain a lawful
conviction’ beyond a reasonable doubt.” Id. at 831 (quoting United States v. Laurent, 33 F.4th
63, 86 (2d Cir. 2022)). That is this case.
The trial evidence demonstrated that, in 1998, the Reyes heroin trafficking organization
hired Marmolejos and two others to murder two men who had allegedly stolen organization money,
drugs, and a beeper used to communicate with customers. Marmolejos drove the other two men
to the murder scene where Marmolejos’s associates shot and killed one of the targets and injured
the other. Other than Marmolejos’s acceptance of compensation for the murder, there was no
evidence of his further contact with the narcotics conspiracy. Accordingly, the only evidence of
Marmolejos’s involvement in the narcotics conspiracy for which he stands convicted completely
4
overlaps with the evidence of his involvement in the Hobbs Act robbery conspiracy, the conspiracy
to commit murder-for-hire, and the substantive murder-for-hire. Therefore, the evidence
supporting those convictions was inextricably intertwined with the evidence supporting the
narcotics conspiracy conviction. In these circumstances, the jury’s verdict on the firearms
offenses could not have been predicated on robbery and murder-for-hire without also being
predicated on the narcotics conspiracy. United States v. Capers, 20 F.4th 105, 125 (2d Cir. 2021)
(observing where valid and invalid predicates constitute “inextricably intertwined” offenses, such
as where “the sole theory presented at trial was that a co-conspirator fatally discharged a firearm
to rob drug dealers and to distribute any recovered narcotics,” a panel of this Court has upheld
Section 924(c) and (j) convictions (quoting United States v. Vasquez, 672 F. App’x 56, 61 (2d Cir.
2016) (summary order)). The jury’s guilty verdict on an additional count—murder during the
course of committing a drug offense in violation of 21 U.S.C. § 848(e)(1)(A)—reinforces this
conclusion, even though that conviction was later vacated on grounds related to drug quantity.
See United States v. Gomez, 210 F. Supp. 2d 465, 479 (S.D.N.Y. 2002).
We are thus confident that the jury would have reached the same verdict even if it had been
charged that the Section 924(c) offense could only be predicated on narcotics conspiracy. See
Stone, 37 F.4th at 831–32. Accordingly, the district court correctly denied the motion to vacate
the firearms convictions under Section 924(c) and (j).
* * *
We have considered all of Marmolejos’s remaining arguments and find them to be without
merit. Accordingly, we AFFIRM the January 15, 2021 order of the district court.
FOR THE COURT:
Catherine O’Hagan Wolfe, Clerk of Court
5 | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482874/ | 20-1518
Singh v. Garland
BIA
Hom, IJ
A205 935 314
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION
TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED
AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS
COURT=S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT
FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX
OR AN ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A
PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY
NOT REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals
for the Second Circuit, held at the Thurgood Marshall United
States Courthouse, 40 Foley Square, in the City of New York,
on the 10th day of November, two thousand twenty-two.
PRESENT:
DEBRA ANN LIVINGSTON,
Chief Judge,
WILLIAM J. NARDINI,
EUNICE C. LEE,
Circuit Judges.
_____________________________________
GURBRINDER SINGH,
Petitioner,
v. 20-1518
NAC
MERRICK B. GARLAND, UNITED
STATES ATTORNEY GENERAL,
Respondent.
_____________________________________
FOR PETITIONER: Sanjay Chaubey, Law Offices of
Sanjay Chaubey, New York, NY.
FOR RESPONDENT: Bryan Boynton, Acting Assistant
Attorney General; Russell J.E.
Verby, Senior Litigation Counsel;
John D. Williams, Trial Attorney,
Office of Immigration Litigation,
United States Department of
Justice, Washington, DC.
UPON DUE CONSIDERATION of this petition for review of a
Board of Immigration Appeals (“BIA”) decision, it is hereby
ORDERED, ADJUDGED, AND DECREED that the petition for review
is DENIED.
Petitioner Gurbrinder Singh, a native and citizen of
India, seeks review of an April 13, 2020 decision of the BIA
affirming a June 28, 2018 decision of an Immigration Judge
(“IJ”), denying his application for asylum, withholding of
removal, and relief under the Convention Against Torture
(“CAT”). In re Gurbrinder Singh, No. A205 935 314 (B.I.A.
Apr. 13, 2020), aff’g No. A205 935 314 (Immig. Ct. N.Y.C.
June 28, 2018). We assume the parties’ familiarity with the
underlying facts and procedural history.
We have reviewed both the BIA’s and IJ’s opinions. See
Yun-Zui Guan v. Gonzales, 432 F.3d 391, 394 (2d Cir. 2005).
Because Singh did not challenge the IJ’s denial of his asylum
claim as time barred before the BIA, and does not challenge
that finding before us, his asylum claim is unexhausted and
waived. See Karaj v. Gonzales, 462 F.3d 113, 119–20 (2d Cir.
2
2006) (exhaustion); Yueqing Zhang v. Gonzales, 426 F.3d 540,
541 n.1, 545 n.7 (2d Cir. 2005) (waiver of claims).
Accordingly, only the denial of withholding of removal and
CAT relief are before us. The applicable standards of review
are well established. See 8 U.S.C. § 1252(b)(4)(B) (“[T]he
administrative findings of fact are conclusive unless any
reasonable adjudicator would be compelled to conclude to the
contrary.”); Hong Fei Gao v. Sessions, 891 F.3d 67, 76 (2d
Cir. 2018) (holding that adverse credibility determinations
are reviewed under a substantial evidence standard); Paloka
v. Holder, 762 F.3d 191, 195 (2d Cir. 2014) (reviewing factual
findings for substantial evidence and questions of law de
novo).
I. Adverse Credibilty Determination
As an intial matter, Singh argues that the IJ’s
consideration of an arrest for selling alcohol to a minor
that he testified to at the hearing tainted the adverse
credibility determination. However, the IJ did not cite the
arrest as a reason for the adverse credibility finding.
Singh has otherwise abandoned any challenge to the adverse
credibility determination by failing to challenge the actual
3
findings underlying it. See Yueqing Zhang, 426 F.3d at 541
n.1, 545 n.7.
Nonetheless, substantial evidence supports the adverse
credibility determination. “Considering the totality of the
circumstances, and all relevant factors, a trier of fact may
base a credibility determination on . . . the consistency
between the applicant’s or witness’s written and oral
statements . . . , the internal consistency of each such
statement, [and] the consistency of such statements with
other evidence of record . . . without regard to whether an
inconsistency, inaccuracy, or falsehood goes to the heart of
the applicant’s claim, or any other relevant factor.”
8 U.S.C. § 1158(b)(1)(B)(iii). “We defer . . . to an IJ’s
credibility determination unless, from the totality of the
circumstances, it is plain that no reasonable fact-finder
could make such an adverse credibility ruling.” Xiu Xia Lin
v. Mukasey, 534 F.3d 162, 167 (2d Cir. 2008).
Singh alleged that he was assaulted and injured by
members of a rival political party. The IJ reasonably relied
on inconsistencies between Singh’s answers during his
credible fear interview and his hearing testimony about the
4
alleged assaults. See 8 U.S.C. § 1158(b)(1)(B)(iii). At
the interview, Singh stated that during the first incident 15
people attacked and “stabbed” him while he was hanging
posters, which left him with “[t]he normal injuries,
bruises.” Singh also stated that, during a second incident,
he was hanging posters and ran away before a crowd with
baseball bats could reach him. In contradiction to these
statements, Singh testified at his hearing that he did not
suffer any injuries during the first incident and that he was
severely beaten with baseball bats during the second
incident. He also testified that he sought medical attention
for a broken foot after the second incident but did not
mention that injury or treatment during the interview.
These discrepancies constitute substantial evidence for
the adverse credibility determination because they concern
the only allegations of past persecution. See Xian Tuan Ye
v. Dep’t of Homeland Sec., 446 F.3d 289, 295 (2d Cir. 2006)
(holding that a “material inconsistency” regarding alleged
past persecution was substantial evidence for an adverse
credibility determination (citation omitted)); see also Likai
Gao v. Barr, 968 F.3d 137, 145 n.8 (2d Cir. 2020) (“[E]ven a
5
single inconsistency might preclude an alien from showing
that an IJ was compelled to find him credible. Multiple
inconsistencies would so preclude even more forcefully.”);
Siewe v. Gonzales, 480 F.3d 160, 170 (2d Cir. 2007) (“[A]
single false document or a single instance of false testimony
may (if attributable to the petitioner) infect the balance of
the alien's uncorroborated or unauthenticated evidence.”).
Thus, Singh has failed to demonstrate that no reasonable fact-
finder could make an adverse credibility finding. The
adverse credibility determination was dispositive of Singh’s
claim for asylum as well as withholding of removal and CAT
relief because both forms of relief were based on the same
factual predicate. See Paul v. Gonzales, 444 F.3d 148, 156–
57 (2d Cir. 2006).
II. Alleged Bias and Due Process
At the hearing, the IJ asked Singh if he had ever been
arrested in the United States and Singh admitted that he had
been arrested for selling alcohol to a minor. Singh suggests
that this information affected the IJ’s decision and that the
BIA compounded the IJ’s misunderstanding of his criminal
record when it referred to his “convictions.”
6
To the extent Singh raises a due process claim, he has
not shown the requisite prejudice. ”To establish a violation
of due process, an alien must show that []he was denied a
full and fair opportunity to present h[is] claims or that the
IJ or BIA otherwise deprived h[im] of fundamental fairness.”
Burger v. Gonzales, 498 F.3d 131, 134 (2d Cir. 2007) (citation
and quotation marks omitted). “Parties claiming denial of
due process in immigration cases must, in order to prevail,
allege some cognizable prejudice fairly attributable to the
challenged process.” Garcia-Villeda v. Mukasey, 531 F.3d
141, 149 (2d Cir. 2008) (citation and quotation marks
omitted). Singh did not show prejudice here because neither
the IJ nor the BIA relied on his criminal history (actual or
mistaken) as part of the adverse credibility determination.
Singh’s argument that the IJ wrongly excluded his
documentary evidence that the charge was dismissed also
fails. The BIA considered the evidence he presented and
concluded it was not relevant to the adverse credibility
determination. Moreover, the IJ did not err in excluding
other evidence submitted to corroborate the asylum claim
because Singh submitted it on the day of the hearing in June
7
2018, well after the March 2017 deadline for evidence that
the IJ set in 2014. See Dedji v. Mukasey, 525 F.3d 187, 192
(2d Cir. 2008) (holding that “IJs are accorded wide latitude
in calendar management” (citation omitted)). Given that
Singh had more than two years to obtain and file evidence, he
has not shown that the IJ prevented him from presenting his
case. See id.
For the foregoing reasons, the petition for review is
DENIED. All pending motions and applications are DENIED and
stays VACATED.
FOR THE COURT:
Catherine O’Hagan Wolfe,
Clerk of Court
8 | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482870/ | 21-2565-cv
Local Union 97 v. NRG Energy, Inc.
1
2 UNITED STATES COURT OF APPEALS
3 FOR THE SECOND CIRCUIT
4 ____________________
5
6 August Term, 2021
7
8 (Argued: April 27, 2022 Decided: November 10, 2022)
9
10 Docket No. 21-2565-cv
11
12 ____________________
13
14 LOCAL UNION 97, INTERNATIONAL
15 BROTHERHOOD OF ELECTRICAL WORKERS,
16 AFL-CIO,
17
18 Plaintiff-Appellant,
19
20 v.
21
22 NRG ENERGY, INC.,
23
24 Defendant-Appellee.
25
26 ____________________
27
28 Before: POOLER, PÉREZ, Circuit Judges, and RAKOFF, 1 District Judge.
29
1Judge Jed S. Rakoff, United States District Court for the Southern District of
New York, sitting by designation.
1 Appeal from United States District Court for the Northern District of New
2 York (Gary L. Sharpe, J.) dismissing Local Union 97, International Brotherhood
3 of Electrical Workers, AFL-CIO’s (“Local Union 97”) complaint against NRG
4 Energy, Inc. Local Union 97 brought a complaint compelling arbitration based on
5 a dispute between NRG and Local Union 97 over retiree benefits. Because the
6 presumption of arbitrability applies to the parties’ collective bargaining
7 agreement, we reverse and remand for further proceedings consistent with this
8 opinion.
9 Reversed and remanded.
10 ____________________
11 KENNETH L. WAGNER, Blitman & King LLP,
12 Syracuse, NY, for Plaintiff-Appellant.
13
14 JOSEPH M. MCGUIRE, Shawe Rosenthal LLP,
15 Baltimore, MD, for Defendant-Appellee.
16
17 POOLER, Circuit Judge:
18 In 2003, NRG Energy, Inc., a leading energy company in the United States,
19 and Local Union 97, International Brotherhood of Electrical Workers, AFL-CIO
20 (“Local Union 97”), a union primarily of electrical workers, executed a
21 memorandum of agreement (“2003 MOA”) detailing a two-pronged approach to
2
1 providing retiree life insurance benefits. First, under the 2003 MOA, employees
2 hired before 2003 would be grandfathered into the existing retiree life insurance
3 benefit, and second, employees hired after 2003 would receive no retiree life
4 insurance benefit. The 2003-2007 collective bargaining agreement (“2003-2007
5 CBA”) between NRG and Local Union 97 included the second prong, but not the
6 first. The parties engaged in four subsequent CBAs covering the years 2007
7 through 2019 that all contained identical language regarding the life insurance
8 benefit.
9 However, in the 2019-2023 CBA, the retiree life insurance benefit was
10 amended to provide: “Effective November 1, 2019, the retiree life insurance
11 benefit for employees hired prior to [2003] will be a lump sum of $10,000.” App’x
12 at 49. Local Union 97 understood this to mean that all employees hired prior to
13 2003 but retiring after 2019 would only receive a $10,000 retiree life insurance
14 benefit, while retirees who had retired prior to November 1, 2019 when the new
15 CBA went into effect (“Pre-2019 Retirees”) 2 would continue to be grandfathered
2The district court termed the affected retirees the “Pre-2019 Retirees.” The
grievance includes former employees who retired in 2019 before the November 1,
2019 adoption of the new CBA, but for consistency, this opinion adopts the
district court’s nomenclature.
3
1 into the existing retiree life insurance benefit. To the union and the retirees’
2 surprise, NRG notified Pre-2019 Retirees that their life insurance benefit would
3 be changed to a lump sum of $10,000.
4 Local Union 97 then brought a complaint seeking to compel arbitration of
5 a grievance they submitted alleging that NRG violated the terms of the CBAs by
6 changing the life insurance benefit for the Pre-2019 Retirees to a lump sum of
7 $10,000. The district court held that: 1) the grievance is not arbitrable under the
8 2019-2023 CBA, 2) the 2003 MOA is not arbitrable, and 3) the grievance is not
9 arbitrable under any of the CBAs covering 2003-2019. See Local Union 97, Int’l
10 Bhd. of Elec. Workers, AFL-CIO v. NRG Energy, Inc., 561 F. Supp. 3d 322 (N.D.N.Y.
11 2021).
12 We disagree with the district court and hold that the grievance is arbitrable
13 under the 2019-2023 CBA because the broad arbitration provision creates a
14 presumption in favor of arbitrability that NRG failed to overcome. This
15 conclusion alone ends the analysis and requires reversal of the district court.
16 However, we also hold that the parties’ dispute was arbitrable under the Prior
17 CBAs because the 2003 MOA was a supplemental agreement which arguably
18 vested the life insurance benefit for life.
4
1 BACKGROUND
2 I. Factual Background
3 Local Union 97 is the collective bargaining agent for approximately thirty-
4 five NRG employees who work at NRG’s electric stations in New York. Id. at 325.
5 Since 1999, the parties have operated through consecutive CBAs covering these
6 employees. In 2003, while negotiating a new CBA, Local Union 97 and NRG
7 agreed to various retiree benefits for current and future employees, which they
8 set forth in a memorandum of agreement. The 2003 MOA states that “[c]urrent
9 employees will be grand fathered as to their participation in life insurance Plan A
10 or Plan B at retirement,” and “[e]mployees hired after September 30, 2003 will
11 not be provided with a life insurance benefit upon retirement.” App’x at 83.
12 In 2003, the parties entered into the 2003-2007 CBA which stated that
13 employees hired after 2003 would not be provided with a life insurance benefit
14 upon retirement (the “Life Insurance Provision”). Local Union 97 and NRG
15 executed four more CBAs from 2007 to 2019 all containing the same Life
16 Insurance Provision. In the current 2019-2023 CBA, the Life Insurance Provision
17 was amended and now states: “Effective November 1, 2019 the retiree life
18 insurance benefit for employees hired prior to September 30, 2003, will be a lump
5
1 sum of $10,000.” App’x at 49. This provision applies to NRG employees
2 employed under the 2019-2023 CBA who were hired prior to 2003 and retired
3 after 2019. It does not apply to retirees who were hired prior to 2003 and retired
4 before 2019—that is, the Pre-2019 Retirees. However, NRG notified the Pre-2019
5 Retirees that their life insurance benefits would also be changed to a lump sum of
6 $10,000. Because of that, a dispute arose between Local Union 97 and NRG
7 regarding retiree life insurance benefits.
8 The 2019-2023 CBA includes the following arbitration clause:
9 Should [Local Union 97] claim that a dispute or difference has arisen
10 between [NRG] and [Local Union 97] as to the meaning, application
11 or operation of any provision of this agreement, such dispute or
12 difference shall be presented within thirty (30) working days and
13 settled in the following manner, and there shall be no quitting or
14 suspension of work during or on account of such dispute or
15 difference.
16 App’x at 52.
17 On October 22, 2020, Local Union 97 submitted a grievance on behalf of
18 the Pre-2019 Retirees, alleging that NRG’s action violated the portions of the CBA
19 relating to life insurance. On October 28, 2020, NRG Labor Relations Director
20 Rich North emailed a letter to the union stating that retirees are not “employees”
21 of NRG, are not covered by the 2019-2023 CBA with Local Union 97, and that
6
1 NRG was not required to recognize Local Union 97 as representative of the
2 retirees. Subsequently, Local Union 97 obtained written authorization from 113
3 retirees to represent them “‘in any arbitration or other legal proceeding’
4 necessary to secure their contractually guaranteed life insurance benefits.” App’x
5 at 12. Local Union 97 filed a complaint on November 5, 2020 in district court
6 seeking to compel arbitration.
7 II. Procedural Background
8 NRG sought dismissal of the complaint on grounds that: 1) arbitration
9 cannot be compelled under the 2019-2023 CBA, 2) the presumption of
10 arbitrability does not apply, 3) the 2003 MOA is not incorporated by reference
11 into any of the CBAs between the parties, and 4) arbitration cannot be compelled
12 under the prior CBAs.
13 The district court agreed with NRG and dismissed the complaint. See Local
14 Union 97, 561 F. Supp. 3d at 327. The district court held that the Pre-2019 Retirees
15 cannot compel arbitration under the 2019-2023 CBA because the 2019-2023 CBA
16 Life Insurance Provision only concerns the retirement benefits of current
17 employees, not retirees.
7
1 The district court also held that Local Union 97 is not entitled to the
2 presumption of arbitrability in the present dispute because the 2019-2023 CBA
3 does not affect the Pre-2019 Retirees’ life insurance benefits and neither party
4 cites the 2019-2023 CBA as the basis for converting the Pre-2019 Retirees’ life
5 insurance benefits to a lump sum. Id. at 328-29.
6 The district court agreed with NRG that the 2003 MOA is not incorporated
7 into any of the CBAs between the parties, and thus, disputes arising out of the
8 2003 MOA are not subject to arbitration under the CBA’s arbitration clauses.
9 Lastly, the district court held that the life insurance benefits may not be
10 arbitrated under any of the prior CBAs. Id. at 333.
11 Local Union 97 appealed the district court’s decision.
12 DISCUSSION
13 “We review de novo the grant of a Rule 12(b)(6) motion to dismiss for
14 failure to state a claim, accepting all factual allegations as true and drawing all
15 reasonable inferences in favor of the plaintiff.” Montero v. City of Yonkers, 890 F.3d
16 386, 394 (2d Cir. 2018). Specifically, whether a district court “correctly
17 determined that [a] dispute is arbitrable is a matter we review de novo.” Coca-Cola
8
1 Bottling Co. of N.Y. v. Soft Drink & Brewery Workers Union, Local 812, 39 F.3d 408,
2 410 (2d Cir. 1994).
3 I. Legal Framework
4 A. Arbitrability
5 Because “a collective bargaining agreement is not an ordinary contract,”
6 John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 550 (1964), doubts about the
7 scope of an arbitration clause in a CBA “should be resolved in favor of
8 coverage,” United Steelworkers of Am. v. Warrior & Gulf Navigation Co., 363 U.S.
9 574, 583 (1960). This Court has provided a “roadmap for determining whether
10 particular disputes fall within the scope of an arbitration agreement.” Trs. of
11 Laundry, Dry Cleaning Workers & Allied Indus. Health Fund v. FDR Servs. Corp. of
12 N.Y., No. 17-cv-7145, 2019 WL 4081899, at *2 (S.D.N.Y. Aug. 28, 2019). First, the
13 court “should classify the particular clause as either broad or narrow.” JLM
14 Indus., Inc. v. Stolt-Nielsen SA, 387 F.3d 163, 172 (2d Cir. 2004). “Where the
15 arbitration clause is narrow, a collateral matter will generally be ruled beyond its
16 purview.” Louis Dreyfus Negoce S.A. v. Blystad Shipping & Trading Inc., 252 F.3d
17 218, 224 (2d Cir. 2001). But “[w]here the arbitration clause is broad, there arises a
18 presumption of arbitrability and arbitration of even a collateral matter will be
9
1 ordered if the claim alleged implicates issues of contract construction or the
2 parties’ rights and obligations under it.” Id. (internal quotation marks omitted).
3 When a contract contains an arbitration clause, “there is a presumption of
4 arbitrability in the sense that an order to arbitrate the particular grievance should
5 not be denied unless it may be said with positive assurance that the arbitration
6 clause is not susceptible of an interpretation that covers the asserted dispute.”
7 AT&T Techs., Inc. v. Commc’ns Workers of Am., 475 U.S. 643, 650 (1986) (internal
8 quotation marks and alterations omitted). “This presumption is particularly
9 applicable where . . . the arbitration clause is broad. Therefore, in the absence of
10 any express provision excluding a particular grievance from arbitration, . . . only
11 the most forceful evidence of a purpose to exclude the claim from arbitration will
12 suffice.” United Steel, Paper & Forestry, Rubber, Mfg., Energy, Allied Indus. & Serv.
13 Workers Local 4-5025 v. E.I. DuPont de Nemours & Co., 565 F.3d 99, 102 (2d Cir.
14 2009) (internal quotation marks, alterations, and citations omitted).
15 “Under a broad arbitration clause, a dispute arising under the contract is
16 arbitrable ‘whether “arguable” or not, indeed even if it appears to the court to be
17 frivolous.’” Coca-Cola, 39 F.3d at 410 (quoting AT&T Techs., Inc., 475 U.S. at 649-
18 50). In Coca-Cola, the Soft Drink and Brewery Workers Union alleged that Coca-
10
1 Cola violated its contract with the union by not providing route-salesman with
2 sufficient product to allow them to earn compensation in the form of
3 commissions and incentive bonuses. Id. at 409. The CBA between the parties
4 contained a broad arbitration clause, covering “all disputes” between the union
5 and Coca-Cola. Id. Coca-Cola argued that nothing in the CBA gave the union a
6 right to insist that the company assure any particular volume of product, or a
7 volume of product sufficient to enable the employees to earn extra
8 compensation. Id. at 410. We held that, under a broad arbitration clause, even
9 claims that appear “frivolous” are subject to arbitration. Id. at 410-11.
10 Recognizing that the union “press[ed] this principle to its limit” by arguing that
11 because Coca-Cola “agreed to a compensation provision that relates
12 commissions and bonuses to volume of product, the [u]nion may obtain
13 arbitration of any dispute it might have with the [c]ompany that affects the level
14 of product volume,” we still ordered arbitration because a grievance can be
15 regarded as non-arbitrable only if “it can be seen in advance that no award to the
16 [union] could receive judicial sanction.” Id. at 411 (quoting John Wiley & Sons,
17 Inc., 376 U.S. at 555); accord Emery Air Freight Corp., Local Union 295, 786 F.2d 93,
11
1 99 (2d Cir. 1986) (characterizing John Wiley & Sons’ requirement as calling for
2 only a “barely colorable” claim).
3 Our sister circuits hold that the presumption of arbitrability applies to
4 contractual disputes over retirees’ benefits “if the parties have contracted for
5 such benefits in their collective bargaining agreement and if there is nothing in
6 the agreement that specifically excludes the dispute from arbitration.” Cleveland
7 Elec. Illuminating Co. v. Utility Workers Union of Am., Local 270, 440 F.3d 809, 815-
8 16 (6th Cir. 2006) (rejecting the argument that retirees are not part of the
9 collective bargaining unit and that the grievance procedures do not apply to
10 them); see also United Steelworkers of Am., AFL-CIO v. Canron, Inc., 580 F.2d 77, 82
11 (3d Cir. 1978) (“[A]rbitration of this dispute may be compelled . . . regarding the
12 payment of premiums for medical and health insurance coverage of retired
13 employees.”); cf. Anderson v. Alpha Portland Indus., Inc., 752 F.2d 1293, 1296 (8th
14 Cir. 1985) (noting that a union would have standing to represent retirees’ rights
15 under a CBA if it chose to do so, and an employer could not refuse to arbitrate its
16 contractual obligations with the union).
12
1 B. Collateral Agreement
2 In order to determine whether a side agreement lacking its own arbitration
3 clause is arbitrable under the main agreement, a court should first classify the
4 arbitration clause as either broad or narrow. Louis Dreyfus Negoce S.A., 252 F.3d at
5 224. Where the arbitration clause is broad, “there arises a presumption of
6 arbitrability and arbitration of even a collateral matter will be ordered if the
7 claim alleged implicates issues of contract construction or the parties’ rights and
8 obligations under it.” Id. (internal quotation marks omitted). Generally,
9 “[w]hether such a side agreement was made, what it specified, whether it was
10 breached, and whether, under the circumstances of [the] case, breach of such a
11 side agreement gives rise to a remedy . . . are all matters for the arbitrators.”
12 Coca-Cola, 39 F.3d at 411. The party resisting arbitration bears the burden of
13 showing the collateral matter is not arbitrable. Prudential Lines, Inc. v. Exxon
14 Corp., 704 F.2d 59, 64 (2d Cir. 1983).
15 C. Arbitration Under Prior Agreements
16 “It is the general rule that an employee welfare benefit plan is not vested
17 and that an employer has the right to terminate or unilaterally to amend the plan
18 at any time.” Kelly v. Honeywell Int'l, Inc., 933 F.3d 173, 179 (2d Cir. 2019) (internal
13
1 quotation marks and alterations omitted). The employer may, however,
2 “contract[] to vest employee welfare benefits.” Schonholz v. Long Island Jewish
3 Med. Ctr., 87 F.3d 72, 77 (2d Cir. 1996). “[I]f an employer promises vested
4 benefits, that promise will be enforced.” Am. Fed’n of Grain Millers, AFL-CIO v.
5 Int'l Multifoods Corp., 116 F.3d 976, 980 (2d Cir. 1997).
6 A grievance that arises after the applicable contract expires can be said to
7 arise under that contract, but only “where it involves facts and occurrences that
8 arose before expiration, where an action taken after expiration infringes a right
9 that accrued or vested under the agreement, or where, under normal principles
10 of contract interpretation, the disputed contractual right survives expiration of
11 the remainder of the agreement.” Newspaper Guild/CWA of Albany v. Hearst Corp.,
12 645 F.3d 527, 530 (2d Cir. 2011).
13 The Supreme Court first considered whether a party to a CBA containing
14 an arbitration clause may be required to arbitrate a contractual dispute under
15 that CBA even though the dispute arose after termination of the CBA in Nolde
16 Bros. v. Local No. 358, Bakery & Confectionery Workers Union, 430 U.S. 243, 244
17 (1977). In Nolde, a union brought a complaint seeking to compel Nolde Brothers,
18 Inc. (“Nolde”) to arbitrate a severance pay issue. 430 U.S. at 247. Nolde argued
14
1 that the employees’ right to severance pay expired when the CBA between the
2 parties was terminated. Id. The Supreme Court disagreed, holding that “matters
3 and disputes arising out of the relation governed by contract” are subject to the
4 presumption in favor of arbitration even after the contract expires. Litton Fin.
5 Printing Div. v. NLRB, 501 U.S. 190, 204 (1991) (discussing Nolde, 430 U.S. at 255).
6 The Supreme Court stated: “[i]n short, where the dispute is over a provision of
7 the expired agreement, the presumptions favoring arbitrability must be negated
8 expressly or by clear implication.” Nolde, 430 U.S. at 255.
9 Then, in Litton, the Supreme Court addressed the arbitrability of a post-
10 expiration grievance involving seniority rights in the context of a layoff. 501 U.S.
11 at 209. The Court distinguished Nolde on the grounds that the layoff provision
12 was unlike the severance pay at issue in Nolde because severance pay constituted
13 a form of deferred compensation that created a right that vested or accrued
14 during the term of the agreement. Id. at 210.
15 In Newspaper Guild, this Court, applying the Nolde/Litton framework,
16 addressed the arbitrability of a dispute over the defendant’s contractual
17 obligation to pay dues to the union following expiration of the parties’ contract.
18 645 F.3d at 527-28. There, we considered “whether, under normal principles of
15
1 contract interpretation, the disputed contractual right survives expiration of the
2 remainder of the agreement.” Id. at 530 (internal quotation marks omitted). We
3 held that the union’s right to dues survives the expiration of the CBA because the
4 obligation remained “until revoked by the employee” and, indeed, was
5 “irrevocable in certain circumstances.” Id. at 531. We also noted that we did not
6 express a view as to the merits of the union’s grievance, only that there was a
7 sufficient basis to render the grievance arbitrable pursuant to the expired CBA.
8 Id. at 533 n.1.
9 II. Application
10 A. The Parties’ Dispute Is Arbitrable Under the 2019-2023 CBA
11 The district court correctly concluded that the arbitration clause in the
12 2019-2023 CBA is “broad.” Local Union 97, 561 F. Supp. 3d at 329. However, the
13 district court erred in holding that “the presumption of arbitrability does not
14 apply here.” Id. We hold that disputes between unions and employers regarding
15 retiree benefits are subject to arbitration where the collective bargaining
16 agreement includes a broad arbitration clause and terms regarding retiree life
17 benefits.
16
1 First, a presumption of arbitrability applies. The parties do not dispute that
2 the arbitration clause is broad. See Appellant’s Br. at 25; Appellee’s Br. at 23-24
3 (“NRG does not dispute that the 2019-2023 CBA is ‘broad.’”). But NRG relies on
4 Cup v. Ampco Pittsburgh Corp., 903 F.3d 58 (3d Cir. 2018) to argue that the
5 presumption does not apply. In Cup, the Third Circuit determined that a
6 contractual dispute regarding healthcare plans for retirees was not subject to
7 arbitration. Id. at 63-65. The court in Cup, however, did not even decide whether
8 the arbitration clause in the CBA at issue was “broad” or “narrow,” and
9 therefore did not consider, as an initial matter, whether the presumption in favor
10 of arbitration applied before analyzing the CBA. See Cup, 903 F.3d at 62-63.
11 Because we undertake a wholly different analysis here—in which we hold that
12 the arbitration clause at issue is broad and that a presumption in favor of
13 arbitration thus applies—the Third Circuit’s decision in Cup is not relevant to the
14 claims before us.
15 Second, NRG fails to overcome the presumption of arbitrability. Transit
16 Mix Concrete Corp. v. Local Union No. 282, Int’l Bhd. of Teamsters, 809 F.2d 963, 970
17 (2d Cir. 1987). The presumption should only be rejected if the arbitration clause
18 “is not susceptible of an interpretation that covers the asserted dispute,” AT&T
17
1 Techs., Inc., 475 U.S. at 650, to which “only the most forceful evidence of a
2 purpose to exclude the claim from arbitration will suffice.” United Steel, 565 F.3d
3 at 102 (internal quotation marks omitted).
4 There is no such evidence in this case. Here, the arbitration clause states
5 that, “[s]hould [Local Union 97] claim that a dispute or difference has arisen
6 between [NRG] and [Local Union 97] as to the meaning, application or operation
7 of any provision of this agreement,” then Local Union 97 may file a grievance.
8 App’x 52-53. If the grievance is not answered in an appropriate manner, Local
9 Union 97 may give notice of its intent to refer the dispute to arbitration. This is a
10 classic example of a broad clause. In fact, in a decision rendered prior to the
11 district court decision in this case, a different district court judge in the Northern
12 District of New York held that an identical arbitration clause involving Local
13 Union 97 was “particularly broad.” Local Union 97, Int'l Bhd. of Elec. Workers, AFL-
14 CIO v. Niagara Mohawk Power Corp., No. 20-cv-1249, 2021 WL 3771877, at *6
15 (N.D.N.Y. Aug. 25, 2021). 3
This case is pending on appeal before our Court. Local Union 97 v. Niagara
3
Mohawk, No. 21-2443.
18
1 In that case, Local Union 97 filed a motion to compel arbitration of a
2 grievance alleging that defendant Niagara Mohawk Power Corp. (“Niagara
3 Mohawk”) violated the CBA by subjecting retirees to a greater out-of-pocket
4 maximum spend for health insurance benefits compared to active employees. Id.
5 at *1. Similar to this case, Niagara Mohawk argued that the issue was not
6 arbitrable under the CBA because the union does not represent retirees. There,
7 the district court first determined that Local Union 97 had standing to bring the
8 dispute because it bargained to have this dispute settled by an arbitrator in the
9 CBA. Id. at *3. Next, the district court considered the language of the arbitration
10 clause which is identical to the one here: “[t]he arbitration clause applies
11 ‘[s]hould Local Union 97, IBEW claim that a dispute or difference has arisen
12 between the Company and Local Union 97, IBEW as to the meaning, application
13 or operation of any provision of this Agreement.’” Id. at *5 (alteration in original).
14 The district court held that the arbitration clause is broad in light of the
15 “expansiveness” of the clause’s language. Id.
16 Numerous district courts in our Circuit have interpreted similar clauses as
17 being broad. See Cheng v. HSBC Bank USA, N.A., 467 F. Supp. 3d 46, 51 (E.D.N.Y.
18 2020) (“Phrases like ‘any claim or controversy arising out of or relating to this
19
1 agreement’ or ‘all differences arising between the parties to this agreement as to
2 interpretation, application or performance’ are classic examples of broad
3 clauses.”); Keyes v. Ayco Co., L.P., No. 17-cv-955, 2018 WL 6674292, at *7 (N.D.N.Y.
4 Dec. 19, 2018) (finding a broad arbitration clause where “the parties mutually
5 agreed that they ‘shall’ arbitrate ‘any dispute, controversy or claim between the
6 Partner and the Firm . . . relating to or arising out of Partner’s employment with
7 the firm or otherwise concerning any rights, obligations or other aspects’ of her
8 employment” (alteration in original) (emphasis omitted)); Sheet Metal Workers’
9 Nat’l Pension Fund v. Maximum Metal Mfrs. Inc., No. 13-cv-7741, 2015 WL 4935116,
10 at *5 (S.D.N.Y. Aug. 18, 2015) (“The operative text here—embracing ‘any and
11 all . . . disputes . . . arising out of or relating to’—makes this a quintessentially
12 broad arbitration clause.” (alterations in original)).
13 Indeed, the language of the arbitration clause permits Local Union 97 to
14 arbitrate whenever the union merely claims there is a dispute or difference over
15 any provision of the CBA. App’x at 52 (“Should [Local Union 97] claim that a
16 dispute or difference has arisen between [NRG] and [Local Union 97] as to the
17 meaning, application or operation of any provision of this agreement . . .”). The
18 district court concluded, and NRG argues, that this arbitration clause does not
20
1 cover the dispute over the Life Insurance Provision because retirees are not
2 “employees” under the CBA. See Local Union 97, 561 F. Supp. 3d at 329 (“The
3 dispute before the court relates to the Pre-2019 Retirees’ life insurance benefits.”);
4 Appellee’s Br. at 10 (“The life insurance benefits provision in the 2019-23 CBA
5 applies only to ‘employees’—a term defined in Article VI as ‘an employee on the
6 active payroll who is not classed as probationary.’”). But this argument goes to
7 the merits of the dispute and concerns the interpretation of the CBA itself.
8 Whether Local Union 97 has a meritorious claim for relief or not is irrelevant,
9 here all that matters is whether Local Union 97 claims a dispute has arisen
10 between the parties relating to a provision of the CBA. Local Union 97 clearly
11 claims there is a dispute over the meaning of the CBA as it applies to retiree life
12 insurance benefits and that is enough, under the broad arbitration clause, to
13 invoke the presumption of arbitrability.
14 We “interpret collective-bargaining agreements . . . according to ordinary
15 principles of contract law, at least when those principles are not inconsistent with
16 federal labor policy.” Kelly, 933 F.3d at 179. Here, ordinary principles of contract
17 law require us to hold the parties to the strict language of the arbitration clause
21
1 which demands arbitration whenever Local Union 97 claims there is a dispute or
2 difference over any provisions.
3 Moreover, NRG fails to provide any contrary evidence of a purpose to
4 exclude retirees from arbitration, and indeed, NRG provides no evidence that the
5 parties did not intend to send contractual disputes to arbitration. NRG argues
6 only that retirees are not employees under the CBA. But this argument regarding
7 the definition of employees under the CBA again goes to the interpretation of the
8 CBA–an issue reserved exclusively for the arbitrator.
9 Without passing any judgment on the merits of the dispute, we conclude
10 the claim here is arbitrable, “even if it appears to the court to be frivolous.” Coca-
11 Cola, 39 F.3d at 410. Indeed, if we held doubts about the scope of the arbitration
12 clause, we are still bound to resolve them “in favor of coverage.” United
13 Steelworkers of Am., 363 U.S. at 583. Therefore, the district court erred in
14 concluding that the presumption of arbitrability did not apply. Because the
15 presumption applies and NRG fails to overcome it, we reverse the district court’s
16 decision.
22
1 B. The Parties’ Dispute Is Arbitrable Under the Prior CBAs and the 2003
2 MOA
3 The district court also incorrectly concluded that the dispute is not
4 arbitrable under either the prior CBAs or the 2003 MOA. See Local Union 970, 561
5 F. Supp. 3d at 332, 333. The district court found that the grievance could not have
6 arisen under any of the prior CBAs because there is no language in them
7 indicating that the Pre-2019 Retirees would receive lifetime life insurance
8 benefits. Id. at 333.
9 “A postexpiration grievance can be said to arise under the contract only
10 where it involves facts and occurrences that arose before expiration, where an
11 action taken after expiration infringes a right that accrued or vested under the
12 agreement, or where, under normal principles of contract interpretation, the
13 disputed contractual right survives expiration of the remainder of the
14 agreement.” Litton, 501 U.S. at 205-06.
15 Here, Local Union 97 argues that NRG’s termination of the
16 “grandfathered” retiree life insurance benefits is an action taken after expiration
17 of the prior CBAs that infringes upon a right to an accrued or vested benefit or
18 otherwise survives the expiration of the agreement. See Newspaper Guild, 645 F.3d
23
1 at 530. NRG responds that to demonstrate a lifetime right has vested, a plaintiff
2 “must identify specific written language that promises lifetime benefits.” Kelly,
3 933 F.3d at 180. And Local Union 97 counters that there is specific written
4 language promising lifetime benefits in the 2003 MOA: “Current employees will
5 be grand fathered as to their participation in life insurance Plan A or Plan B at
6 retirement.” App’x at 83; see also App’x at 9 ¶ 16. Local Union 97 further argues
7 the 2003 MOA supplemented the CBAs and is thus arbitrable under them, while
8 NRG argues the 2003 MOA is not incorporated by reference and therefore, even
9 if the 2003 MOA contained language promising lifetime benefits, it would not
10 apply here.
11 To resolve this dispute, we must first decide whether the 2003 MOA is a
12 supplemental agreement before considering whether there is specific written
13 language that promises lifetime benefits.
14 1. The 2003 MOA is a Supplemental Agreement
15 Local Union 97 argues that the 2003 MOA supplemented the CBAs and is
16 arbitrable under them. NRG argues that any disputes arising out of the 2003
17 MOA are not subject to arbitration because they are not incorporated by
18 reference. NRG also argues that the 2003 MOA does not contain an arbitration
24
1 clause and therefore the presumption in favor of arbitrability does not apply
2 here. The district court held that the 2003 MOA was not incorporated by
3 reference and does not supplement the Prior CBAs because the Life Insurance
4 Provision in the 2019-2023 CBA does not affect the life insurance benefits of the
5 Pre-2019 Retirees. Local Union 97, 561 F. Supp. 3d at 332.
6 The district court and NRG’s arguments regarding incorporation by
7 reference miss the mark. Here, we are solely focused on the issue of whether
8 Local Union 97’s claims are arbitrable or not. Under our precedents regarding
9 collateral agreements pursuant to a broad arbitration clause, whether the
10 collateral agreement “was made, what it specified, whether it was breached” and
11 whether breach of the agreement “gives rise to a remedy . . . are all matters for
12 the arbitrators.” Coca-Cola, 39 F.3d at 411.
13 In Coca-Cola, the union, in addition to the claims covered above, argued
14 that Coca-Cola had pledged, in a side agreement, to obtain product in the open
15 market on an interim basis, thereby providing the route salesman with an
16 opportunity to earn commissions and bonuses. Id. We held that pursuant to the
17 broad arbitration clause in the collective bargaining agreement, any dispute
18 regarding the making of the side agreement was simply a matter for the
25
1 arbitrator. Id. As discussed above, the arbitration clause here is particularly
2 broad. Therefore, any dispute claimed by Local Union 97, such as claims relating
3 to side agreements, is arbitrable unless there is “strong evidence” the parties did
4 not intend to cover the asserted dispute.
5 NRG argues that the fact that the 2003 MOA does not contain a separate
6 arbitration clause constitutes such “evidence.” Not so. In Coca-Cola, we permitted
7 a claim under a side agreement to proceed to arbitration where the main
8 collective bargaining agreement had a broad arbitration clause. Id. And in Louis
9 Dreyfus, we stated that the “presumption of arbitrability” associated with a broad
10 arbitration clause requires claims under a collateral agreement to “implicate []
11 issues of contract construction or the parties’ rights and obligations under it.” 252
12 F.3d at 228-29. There, we held that because the side agreements clearly
13 implicated two clauses of the main agreement, the collateral agreements were
14 “within the scope of the broad arbitration clause.” Id. at 229.
15 Here, the 2003 MOA addresses the subject of retiree benefits and was
16 executed in connection with the parties’ negotiation of the 2003-2007 CBA. That
17 CBA, and indeed the remaining CBAs until 2019, all contained a Supplemental
18 Understandings section that stated: “All Memorandums of Agreement between
26
1 the Company and the Local Union were continued with the understanding that
2 there may be requirements for modification due to the recommendations of the
3 agreed upon Subcommittees.” App’x at 166.
4 The district court concluded that the rights and obligations of the parties
5 are not implicated by the 2003 MOA because both parties acknowledge the 2019-
6 2023 CBA does not affect the Pre-2019 Retirees’ life insurance benefits referenced
7 in the 2003 MOA. Local Union 97, 561 F. Supp. 3d at 328. This statement by the
8 district court is perplexing at best, because NRG argues that the 2019-2023 CBA
9 does affect the Pre-2019 Retirees’ life insurance benefits: “NRG ultimately notified
10 the Pre-2019 Retirees that, effective January 1, 2021, their life insurance benefits
11 would also be changed to a lump sum of $10,000.” Id. at 326. Putting aside the
12 district court’s confusing language, we agree with Local Union 97 that the 2003
13 MOA was executed in connection with the parties’ negotiation of what
14 eventually became the 2003-2007 CBA, and, therefore, the 2003 MOA is an
15 arbitrable side agreement.
27
1 2. Local Union 97’s Argument that the Life Insurance Benefit Vested is
2 Plausible
3 Local Union 97 argues that because the 2003 MOA is a supplemental
4 agreement to the Prior CBAs and the 2003 MOA promises “grandfathered” life
5 insurance benefits for retirees, it is arbitrable under the broad arbitration
6 provisions of the collective bargaining agreements in effect from 2003 to 2019.
7 NRG responds that even if the parties incorporated the 2003 MOA into the 2003-
8 2019 CBAs, the “2003 MOA cannot be reasonably interpreted to create a promise
9 to vest lifetime life insurance benefits.” Appellee’s Br. at 16. We agree with Local
10 Union 97.
11 The 2003 MOA states that “[c]urrent employees will be grand fathered as
12 to their participation in life insurance Plan A or Plan B at retirement.” App’x at
13 83. NRG argues that the 2003 MOA’s use of the word grandfathered is
14 ambiguous and could have different meanings. It is true that other than the word
15 “grandfathered” there is no specific durational language indicating that the life
16 insurance benefit vests for life. See Kelly, 933 F.3d at 180 (“For example,
17 contractual language stating that retirees’ life insurance benefits will remain at a
18 stated level ‘for the remainder of their lives’ can reasonably be interpreted to
28
1 ‘creat[e] a promise to vest lifetime life insurance benefits.’” (quoting Devlin v.
2 Empire Blue Cross & Blue Shield, 274 F.3d 76, 85 (2d Cir. 2001) (alteration in
3 original)). Here, the argument in favor of arbitrability rests on the use of the
4 word “grandfathered” and the fact that the benefit conferred is life insurance
5 which only goes into effect at the end of the retiree’s lifetime.
6 However, this is enough evidence for Local Union 97 to get to arbitration.
7 “In this Circuit, to reach a trier of fact, an employee does not have to ‘point to
8 unambiguous language to support a claim. It is enough to point to written
9 language capable of reasonably being interpreted as creating a promise on the
10 part of the employer to vest the recipient’s benefits.” Devlin, 274 F.3d at 83
11 (alterations and italics omitted).
12 NRG’s arguments regarding the interpretation of “grandfathered” go to
13 the merits of the dispute. Local Union 97 acknowledges it may not succeed on
14 the merits, Appellant’s Br. at 22 n.5, but that we need not determine the merits to
15 find that the grievance is arbitrable. That is correct. For our purposes, we solely
16 need to determine whether Local Union 97 has raised an arguable claim that the
17 benefit was intended to be provided for life, and if so, “the presumptions
29
1 favoring arbitrability must be negated expressly or by clear implication.” Nolde,
2 430 U.S. at 255.
3 The district court did not adopt this approach, concluding instead that it
4 was necessary to determine whether the Pre-2019 Retirees have a vested lifetime
5 interest to “reach a conclusion as to whether they may seek arbitration under the
6 Litton test.” Local Union 97, 561 F. Supp. 3d at 332 n11. This was error. We are
7 only concerned with whether this matter is arbitrable. We do not express any
8 views as to the merits of Local Union 97’s life insurance benefits grievance; we
9 decide only that the parties’ dispute is arbitrable under the 2003 MOA and the
10 Prior CBAs based on Local Union 97 identifying “written language capable of
11 reasonably being interpreted as creating a promise on the part of the employer to
12 vest the recipient’s benefits.” Devlin, 274 F.3d at 83 (alterations and italics
13 omitted); see Newspaper Guild, 645 F.3d at 533 n.1 (“We express no view on the
14 merits of the Guild’s dues-checkoff grievance. We decide only that the parties’
15 dispute is arbitrable pursuant to the expired CBA.”); Nolde, 430 U.S. at 249 (“Of
16 course, in determining the arbitrability of the dispute, the merits of the
17 underlying claim . . . are not before us.”).
30
1 CONCLUSION
2 For the reasons given above, we vacate the district court’s September 21,
3 2021 order and remand for further proceedings consistent with this opinion.
31 | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482875/ | 22-869-cv
Pucilowski v. Spotify USA, Inc.
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY
ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF
APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER
IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN
ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING TO A SUMMARY
ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second Circuit, held at
the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York,
on the 10th day of November, two thousand twenty-two.
PRESENT:
REENA RAGGI,
JOSEPH F. BIANCO,
SARAH A. L. MERRIAM,
Circuit Judges.
_____________________________________
Valerie Pucilowski,
Plaintiff-Appellant,
v. 22-869-cv
Spotify USA, Inc.,
Defendant-Appellee.
_____________________________________
FOR PLAINTIFF-APPELLANT: DAVID S. SCHWARTZ, David S. Schwartz Law,
PLLC, New York, NY.
FOR DEFENDANT-APPELLEE: MICHAEL E. DELARCO (David J. Baron, on the
brief), Hogan Lovells US LLP, New York, NY
Appeal from the judgment and order of the United States District Court for the Southern
District of New York (Edgardo Ramos, J.).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND
DECREED that the judgment of the district court entered on March 22, 2022 is AFFIRMED.
Plaintiff Valerie Pucilowski, who sued defendant Spotify USA, Inc. (“Spotify”) for
terminating her employment in alleged violation of the Family and Medical Leave Act of 1993
(“FMLA”), Pub. L. No. 103-3, 107 Stat. 6 (codified in scattered sections of 5 and 29 U.S.C.), and
the New York City Human Rights Law (“NYCHRL”), N.Y.C. Admin. Code §§ 8-101 et seq.,
appeals from the dismissal of her claims under Rule 12(b)(6) of the Federal Rules of Civil
Procedure. Pucilowski argues that the district court erred in (1) concluding that her claims are
barred by the release provision of her separation agreement with Spotify and (2) denying her leave
to amend. We assume the parties’ familiarity with the underlying facts, the procedural history of
the case, and the issues on appeal, to which we refer only as necessary to explain our decision to
affirm.
DISCUSSION
We review de novo the grant of a motion to dismiss under Rule 12(b)(6), Nunes v. Cable
News Network, Inc., 31 F.4th 135, 140 (2d Cir. 2022), assuming the truth of facts alleged in the
complaint and drawing all inferences in the plaintiff’s favor, Biro v. Condé Nast, 807 F.3d 541,
544 (2d Cir. 2015). We may also consider documents attached to the complaint as exhibits,
incorporated by reference therein, or integral to the complaint. United States ex rel. Foreman v.
AECOM, 19 F.4th 85, 106 (2d Cir. 2021), cert. denied, 142 S. Ct. 2679 (2022). To survive
dismissal, the pleadings must contain “enough facts to state a claim to relief that is plausible on its
face,” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007), i.e. the pleaded facts allow the court
2
reasonably to infer that the defendant is liable for the misconduct alleged, see Ashcroft v. Iqbal,
556 U.S. 662, 678 (2009). In making that assessment, we “are not bound to accept as true a legal
conclusion couched as a factual allegation,” Twombly, 550 U.S. at 555 (quoting Papasan v. Allain,
478 U.S. 265, 286 (1986)), and “[t]hreadbare recitals of the elements of a cause of action,
supported by mere conclusory statements, do not suffice,” Iqbal, 556 U.S. at 678.
A. The Release
Pucilowski submits that the district court engaged in impermissible factfinding in
concluding that her release of federal discrimination claims was knowing and voluntary. We
disagree.
The parties agree that the factors relevant to this issue are set forth in Bormann v. AT & T
Communications, Inc., 875 F.2d 399, 403 (2d Cir. 1989). Pucilowski’s own pleading demonstrates
that these factors compel the conclusion that Pucilowski’s release of claims was knowing and
voluntary. First, the complaint alleges that Pucilowski’s work as a user researcher at Spotify
received high praise from coworkers and supervisors. This precludes any finding that she lacked
the education or business experience to understand the release. Second, Pucilowski was given
fourteen days to consider the agreement (but took only eleven days to sign it), was given seven
additional days to revoke the agreement once it was signed, and agreed to the agreement’s
statement that she had “consulted counsel or had the opportunity to consult counsel about this . . .
agreement.” App’x at 23. These circumstances preclude any finding that she was not given
sufficient time to knowingly and voluntarily release her claims. Third, the language of the release
provision demonstrates the requisite clarity, unambiguously stating that Pucilowski releases
Spotify “from any and all claims . . . including, without limitation, those arising out of or in any
way connected with [her] employment or . . . termination” and further specifically releases claims
under the FMLA and the NYCHRL. App’x at 22. Fourth, Pucilowski received two months’ salary
3
in exchange for executing the separation agreement, a benefit exceeding what she was entitled to
by law or contract. While Pucilowski was not represented by counsel in connection with the
signing of the separation agreement and is not alleged to have had any role in deciding the terms
of the agreement, under the totality of the circumstances pleaded by Pucilowski, we conclude, as
the district court did, that Pucilowski’s execution of the separation agreement can only be deemed
knowing and voluntary and, therefore, that the release is enforceable, precluding her claims. See,
e.g., Bormann, 875 F.2d at 403 n.1 (holding that releases were enforceable even though there was
no opportunity for plaintiffs to negotiate their terms).
In urging otherwise, Pucilowski faults the district court for ignoring the fact that she signed
the release on March 8, 2019 shortly after returning to work from a medical leave following a
November 2018 head injury suffered on the job. But as Pucilowski alleges, on February 7, 2019,
her physician stated in a letter that “her prognosis is quite good” and that “she could likely return”
to her “usual potential” in two weeks. App’x at 8. In these circumstances and in the absence of
any allegations that Pucilowski’s head injury was still adversely affecting her when she signed the
separation agreement a month after the physician letter, the district court was not required to accept
the complaint’s conclusory assertion that Pucilowski “lacked the requisite mental capacity to enter
into the agreement and/or understand the terms and obligations of the agreement due to her mental
health conditions.” App’x at 9; see Twombly, 550 U.S. at 555 (“[C]ourts ‘are not bound to accept
as true a legal conclusion couched as a factual allegation.’” (quoting Papasan, 478 U.S. at 286)).
As for Pucilowski’s claim of fraudulent inducement, Pucilowski concedes that she was
required to satisfy the heightened pleading standard for fraud under Federal Rule of Civil
Procedure 9(b). See Loreley Fin. (Jersey) No. 3 Ltd. v. Wells Fargo Sec., LLC, 797 F.3d 160, 171
(2d Cir. 2015). Like the district court, we conclude that Pucilowski’s pleadings do not come close
4
to meeting this standard. The complaint, inter alia, does not identify the individual at Spotify who
made the allegedly fraudulent statement, see Luce v. Edelstein, 802 F.2d 49, 54 (2d Cir. 1986);
Mills v. Polar Molecular Corp., 12 F.3d 1170, 1175 (2d Cir. 1993), nor does it allege how that
statement was false, see Luce, 802 F.2d at 54. On this record, Pucilowski’s conclusory repetition
of the elements of fraudulent inducement is insufficient to plausibly assert that her release of claims
was not knowing and voluntary. Accordingly, the district court correctly dismissed the FMLA
claims. 1
B. Repleading
Finally, on de novo review, we identify no error in the district court’s denial of leave to re-
plead as futile. In re Trib. Co. Fraudulent Conv. Litig., 10 F.4th 147, 159 (2d Cir. 2021), cert.
denied sub nom. Kirschner v. FitzSimons, 142 S. Ct. 1128 (2022). In opposing dismissal,
Pucilowski requested leave to amend in only two ways: to include allegations regarding (1) her
non-involvement in setting the terms of the separation agreement, and (2) her attempt to repudiate
the separation agreement in a January 11, 2021 letter offering the return money received under the
agreement. We conclude that these particular amendments would be futile because (1) the
Bormann factors overwhelmingly weigh in favor of the release’s enforcement, and (2) any alleged
1
On appeal, Pucilowski did not specifically challenge the dismissal of the NYCHRL claims and thus
appears to have abandoned those claims. See LoSacco v. City of Middletown, 71 F.3d 88, 92–93 (2d Cir.
1995). In any event, under New York law, the enforceability of the release is governed by ordinary
principles of contract law. See Albany Sav. Bank, FSB v. Halpin, 117 F.3d 669, 672 (2d Cir. 1997).
Therefore, “a release that is clear and unambiguous on its face and which is knowingly and voluntarily
entered into will be enforced.” Pampillonia v. RJR Nabisco, Inc., 138 F.3d 459, 463 (2d Cir. 1998). As
discussed above with respect to the federal claims, the unambiguous terms of the release also require
dismissal of the NYCHRL claims. See, e.g., New York City Sch. Constr. Auth. v. Koren-DiResta Constr.
Co., 671 N.Y.S.2d 738, 739 (App. Div. 1998) (“[P]laintiff’s conclusory allegations of fraudulent
inducement are insufficient to overcome the unambiguous language of the termination agreement and
particularly of its release.”); Blatt v. Manhattan Med. Grp., P.C., 519 N.Y.S.2d 973, 976 (App. Div. 1987)
(“The fact that [plaintiff] was in a severely depressed emotional state is scarcely sufficient indication that
he did not have either the necessary understanding to execute a contract or that he was unable to control his
behavior.”).
5
repudiation of the separation agreement in 2021 has no impact on the Bormann analysis.
Accordingly, because leave to amend these allegations would be futile, the district court did not
err in dismissing the claims with prejudice.
* * *
We have considered all of Pucilowski’s remaining arguments and find them to be without
merit. Accordingly, we AFFIRM the judgment of the district court.
FOR THE COURT:
Catherine O’Hagan Wolfe, Clerk of Court
6 | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482876/ | 20-3158
Nguyen v. Garland
BIA
Poczter, IJ
A201 525 075
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION
TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED
AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS
COURT=S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT
FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX
OR AN ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A
PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY
NOT REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals
for the Second Circuit, held at the Thurgood Marshall
United States Courthouse, 40 Foley Square, in the City of
New York, on the 10th day of November, two thousand twenty-
two.
PRESENT:
JON O. NEWMAN,
MICHAEL H. PARK,
STEVEN J. MENASHI,
Circuit Judges.
_____________________________________
THUONG VAN NGUYEN,
Petitioner,
v. 20-3158
NAC
MERRICK B. GARLAND, UNITED
STATES ATTORNEY GENERAL,
Respondent.
_____________________________________
FOR PETITIONER: Nicholas J. Mundy, Esq.,
Brooklyn, NY.
FOR RESPONDENT: Brian Boynton, Acting Assistant
Attorney General; John S. Hogan,
Assistant Director; Lindsay C.
Dunn, Trial Attorney, Office of
Immigration Litigation, United
States Department of Justice,
Washington, DC.
UPON DUE CONSIDERATION of this petition for review of a
Board of Immigration Appeals (“BIA”) decision, it is hereby
ORDERED, ADJUDGED, AND DECREED that the petition for review
is DENIED.
Petitioner Thuong Van Nguyen, a native and citizen of
Vietnam, seeks review of an August 18, 2020, decision of the
BIA affirming a September 24, 2019, decision of an Immigration
Judge (“IJ”) denying his motion to reopen and rescind his in
absentia removal order. In re Thuong Van Nguyen, No. A 201
525 075 (B.I.A. Aug. 18, 2020), aff’g No. A 201 525 075 (Immig.
Ct. N.Y. City Sept. 24, 2019). We assume the parties’
familiarity with the underlying facts and procedural history.
We have considered both the IJ’s and the BIA’s opinions
“for the sake of completeness.” Wangchuck v. Dep’t of
Homeland Sec., 448 F.3d 524, 528 (2d Cir. 2006). We review
the agency’s denial of a motion to rescind a removal order
entered in absentia and reopen proceedings for abuse of
discretion, which “may be found if the decision provides no
2
rational explanation, inexplicably departs from established
policies, is devoid of any reasoning, or contains only summary
or conclusory statements.” Alrefae v. Chertoff, 471 F.3d
353, 357 (2d Cir. 2006) (quotation marks omitted). The
agency did not abuse its discretion because Nguyen did not
rebut the presumption that he received notice of his hearing.
An in absentia order of removal may be rescinded upon a
motion “filed at any time if the alien demonstrates that the
alien did not receive notice.” 8 U.S.C. § 1229a(b)(5)(C)(ii);
8 C.F.R. § 1003.23(b)(4)(iii)(A)(2). There is no dispute
that Nguyen’s counsel received the hearing notice from the
immigration court. That notice was sufficient: “Any alien
who, after written notice . . . has been provided to the alien
or the alien’s counsel of record does not attend a proceeding
. . . shall be removed in absentia.” 8 U.S.C.
§ 1229a(b)(5)(A) (emphasis added). Nguyen did not rebut the
presumption of notice because it is undisputed that his
attorney of record received the notice. See Song Jin Wu v.
INS, 436 F.3d 157, 162 (2d Cir. 2006) (concluding that where
attorney received notice applicant could only move to rescind
based on exceptional circumstances, not lack of notice).
3
For the foregoing reasons, the petition for review is
DENIED. All pending motions and applications are DENIED and
stays VACATED.
FOR THE COURT:
Catherine O’Hagan Wolfe,
Clerk of Court
4 | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482878/ | 21-1988
Estevez v. Berkeley College
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION
TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS
GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S
LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH
THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN
ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY
CITING TO A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT
REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second Circuit,
held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the
City of New York, on the 10th day of November, two thousand twenty-two.
PRESENT:
JOHN M. WALKER, JR.,
RICHARD J. SULLIVAN,
Circuit Judges,
MARY KAY VYSKOCIL,
District Judge. *
______________________________________________________________________________________
JIMARZARETTE ESTEVEZ, DEANNA MANCINI,
DIANE MEKULI,
Plaintiffs-Appellants,
v. No. 21-1988
BERKELEY COLLEGE, JOEL MARTINEZ,
GRETCHEN ORSINI, DAVID BERTONE,
Defendants-Appellees.
______________________________________________________________________________________
* JudgeMary Kay Vyskocil, District Judge for the Southern District of New York, sitting by
designation.
For Plaintiffs-Appellants: STEPHEN BERGSTEIN, Bergstein &
Ullrich, New Paltz, NY (Daniela
Nanau, Law Office of Daniela Nanau,
P.C., Glendale, NY, on the brief).
For Defendants-Appellees: BRAN C. NOONAN, FordHarrison
LLP, New York, NY.
For Amicus Curiae LatinoJustice Rosalyn Richter, Arnold & Porter
PRLDEF, in support of Plaintiffs- Kaye Scholer LLP, New York, NY;
Appellees: Karen Otto, Arnold & Porter Kaye
Scholer LLP, Washington, DC;
Francisca D. Fajana, Nathalia A.
Varela, LatinoJustice PRLDEF, New
York, NY.
1 Appeal from a judgment of the United States District Court for the Southern
2 District of New York (Cathy Seibel, Judge).
3 UPON DUE CONSIDERATION, IT IS HEREBY ORDERED,
4 ADJUDGED, AND DECREED that the judgment of the district court is
5 AFFIRMED.
6 Plaintiffs-Appellants Jimarzarette Estevez, Deanna Mancini, and Diane
7 Mekuli (collectively, the “Employees”) appeal from the district court’s grant of
8 summary judgment in favor of Defendant-Appellee Berkeley College on the
9 Employees’ claims for gender-based discrimination under Title VII of the Civil
2
1 Rights Act of 1964, 42 U.S.C. § 2000e et seq., and the New York State Human Rights
2 Law ("NYSHRL”), N.Y. Exec. Law § 290 et seq., and in favor of Defendants-
3 Appellees Joel Martinez, Gretchen Orsini, and David Bertone on the Employees’
4 derivative NYSHRL aiding and abetting claims. Specifically, the Employees
5 challenge the district court’s determination that they failed to present sufficient
6 evidence to establish their underlying Title VII and NYSHRL hostile-
7 work-environment and retaliation claims against Berkeley College. 1 We review
8 the grant of summary judgment de novo, applying the same standards as the
9 district court. Garcia v. Hartford Police Dep’t, 706 F.3d 120, 126–27 (2d Cir. 2013).
10 We assume the parties’ familiarity with the underlying facts, procedural history,
11 and issues on appeal.
12 I. Hostile Work Environment
13 With respect to the Employees’ hostile-work-environment claims, we
14 conclude that the district court properly granted summary judgment in favor of
15 Berkeley College, for substantially the same reasons stated in that court’s thorough
1 The parties agree that, as applicable to this case, the standards for evaluating hostile-work-
environment and retaliation claims against Berkeley College are identical under Title VII and
NYSHRL. See Vasquez v. Empress Ambulance Serv., Inc., 835 F.3d 267, 271 n.3 (2d Cir. 2016); Rojas
v. Roman Cath. Diocese of Rochester, 660 F.3d 98, 107 n.10 (2d Cir. 2011).
3
1 and well-reasoned opinion and order. For hostile-work-environment claims, a
2 plaintiff must show (in relevant part) that a “reasonable person in the plaintiff’s
3 position, considering all the circumstances including the social context in which
4 particular behavior occurs and is experienced by its target,” would find the alleged
5 conduct sufficiently severe or pervasive as to alter the conditions of the plaintiff’s
6 employment and create an abusive working environment. Redd v. N.Y. Div. of
7 Parole, 678 F.3d 166, 176 (2d Cir. 2012) (internal quotation marks and alterations
8 omitted); see also Legg v. Ulster County, 979 F.3d 101, 114 (2d Cir. 2020). Even if we
9 assumed for the sake of argument that the conduct a reasonable person might
10 consider severe or pervasive can evolve over time, as amicus curiae suggests, see
11 Amicus Br. at 14–24, the conduct alleged here — primarily consisting of a female
12 co-worker staring and frequently making backhanded compliments about the
13 Employees’ clothes, bodies, and appearances, a male co-worker frequently
14 commenting that there was too much estrogen in the room, and a male supervisor
15 making a single comment arguably evidencing a bias against working
16 mothers — is not sufficiently severe or pervasive to support a hostile-work-
17 environment claim. See Redd, 678 F.3d at 176 (“Title VII ‘does not set forth a
18 general civility code for the American workplace.’” (quoting Burlington N. & Santa
4
1 Fe Ry. Co. v. White, 548 U.S. 53, 68 (2006))).
2 Furthermore, contrary to the Employees’ and amicus curiae’s contentions,
3 we do not find that the district court made any procedural errors. For starters, it
4 cannot be said that the district court failed to view the evidence contextually and
5 in the aggregate; ignored or discounted any material evidence; or improperly
6 made credibility determinations, resolved factual disputes, or weighed evidence.
7 More particularly, we find nothing improper in the district court’s remark that the
8 “schtick” of the co-worker who made the “too much estrogen” comments “was
9 unfunny and distasteful, but it is the sort of conduct ordinarily greeted with
10 eyerolls or snappy comebacks.” Estevez v. Berkeley College, No. 18-cv-10350 (CS),
11 2021 WL 3115452, at *16 (S.D.N.Y. July 19, 2021). In so stating, the district court
12 was merely conducting the legally required severe-or-pervasive inquiry and
13 explaining its rationale for why such conduct was too trivial to meaningfully
14 contribute to the Employees’ hostile-work-environment claim.
15 For these reasons, we affirm the district court’s dismissal of the Employees’
16 hostile-work-environment claims.
17 II. Retaliation
18 The district court also properly granted summary judgment to Berkeley
5
1 College on the Employees’ retaliation claims. The first two requirements of a
2 prima facie case for retaliation are (1) that a plaintiff engaged in protected
3 activities, meaning that she made complaints for which she had a good faith,
4 reasonable belief that she was opposing an unlawful, discriminatory employment
5 practice, and (2) that the plaintiff’s employer was aware of those protected
6 activities. See Agosto v. N.Y.C. Dep’t of Educ., 982 F.3d 86, 104 (2d Cir. 2020); Kelly
7 v. Howard I. Shapiro & Assocs. Consulting Eng’rs, P.C., 716 F.3d 10, 14–15 (2d Cir.
8 2013). Here, the Employees failed to sufficiently prove this second requirement,
9 again for the reasons thoroughly explained by the district court. The Employees
10 have offered no evidence that would permit a reasonable factfinder to infer that
11 Estevez’s Spring 2017 complaint to a supervisor and Mancini’s July 2017 email to
12 a human resources employee — the only instances of protected activities that the
13 Employees properly raised in their opposition to Berkeley College’s summary
14 judgment motion — were understood, or could reasonably have been understood,
15 in context as complaints of gender-based discrimination. See Kelly, 716 F.3d at 15–
16 17; see also Lenzi v. Systemax, Inc., 944 F.3d 97, 113 (2d Cir. 2019). For these reasons,
17 we affirm the district court’s dismissal of the Employees’ retaliation claims.
6
1 * * *
2 We have considered the Employees’ (and amicus curiae’s) remaining
3 arguments and find them to be meritless. Accordingly, we AFFIRM the
4 judgment of the district court.
5 FOR THE COURT:
6 Catherine O’Hagan Wolfe, Clerk of Court
7 | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489331/ | *651MEMORANDUM OPINION
MARK B. McPEELEY, Bankruptcy Judge.
This matter came before the Court at a hearing on confirmation of the debtors’ chapter 13 plan. Debtors’ plan as presented provides for two classes of unsecured claims. The first class is unsecured claims which were guaranteed by a co-signer, and the plan provides for 100% payment of these claims. The second class is all other unsecured claims (i.e., those not guaranteed by a co-signer), and the plan provides no payment on these claims. The Court took confirmation of this plan under advisement in order to determine if such classification among unsecured creditors is allowable under the Bankruptcy Code, 1.1 U.S.C. § 101, et seq.
Classification of unsecured claims is to be achieved in such a manner so as to avoid unfair discrimination against any designated class. 11 U.S.C. § 1322(b)(1). The reference to Bankruptcy Code §. 1122 in § 1322 adds the requirement that claims or interests in a particular class be substantially similar. 11 U.S.C. § 1122. These restrictions on classification have been analyzed elsewhere and interpreted as both allowing and disallowing a classification of unsecured claims as is before this Court.
The only case directly on point which allows a classification of unsecured claims with codebtors states that the requirement that all claims in a class be “substantially similar” does not extend to require that all “substantially similar” claims be placed in the same class. In re Kovich, 4 B.R. 403, 2 C.B.C.2d 203, 6 B.C.D. 482 (Bkrtcy.W.D.Mich.1980). This case also stands for the proposition that a classification is not unfairly discriminatory unless an unsecured creditor receives less than it would in a chapter 7 liquidation. If a debtor’s affairs are such that an unsecured creditor would receive nothing under chapter 7, then almost any treatment of that creditor, short of mere whim, is fair under chapter 13. Id.; Cf. In re Perskin, 9 B.R. 626, 4 C.B.C.2d 294, 7 B.C.D. 798 (Bkrtcy.N.D.Tex.1981); In re Hill, 4 B.R. 694, 2 C.B.C.2d 681, 6 B.C.D. 568 (Bkrtcy.D.Kan.1980).
The opposing view, that a classification based solely on the existence of a codebtor is not allowable, is best expressed by the decision of In re Iacovoni, 2 B.R. 256, 5 B.C.D. 1270 (Bkrtcy.C.D.Utah 1980). The Iacovoni court found that the existence of a codebtor does not change the nature of the debt or the debt’s position vis-a-vis the debtor’s assets. Id. at 260, 5 B.C.D. at 1272. This opinion points out that § 1322 requires that no class of unsecured creditors be discriminated against. Id. at 261, 5 B.C.D. at 1272. Judge Mabey, in Iacovoni, found a legislative intent to provide protection to unsecured chapter 13 creditors reflected by the direct tie between §§ 1322(b)(1) and 1122, Id., and ruled that that protection forbids different treatment of unsecured creditors based solely on the existence of a codebtor.
This line of reasoning has been adopted by other courts as being the correct interpretation of the Bankruptcy Code. In re Montano, 4 B.R. 535, 2 C.B.C.2d 431, 6 B.C.D. 487 (Bkrtcy.D.D.C.1980), upheld on appeal, 14 B.R. 21, 4 C.B.C.2d 1510, 7 B.C.D. 961 (Bkrtcy.D.D.C.1981); In re Barker, 7 B.R. 707 (Bkrtcy.W.D.Mo.1980). Cf. In re Gay, 3 B.R. 336, 6 B.C.D. 149 (Bkrtcy.D.Colo.1980); In re Martin’s Point Limited Partnership, 12 B.R. 721, 8 B.C.D. 40 (Bkrtcy.N.D.Ga.1981); In re Dziedzk, 9 B.R. 424, 4 C.B.C.2d 1, 7 B.C.D. 497 (Bkrtcy.S.D.Tex.1981); In re Case, 11 B.R. 843, 4 C.B.C.2d 978 (Bkrtcy.D.Utah 1981). This Court believes this to be the better-reasoned view. We are persuaded that to allow a classification of unsecured creditors solely on the basis of a codebtor would be unfair, unreasonable, and improper under the Bankruptcy Code.
Accordingly, we find that the debtors’ chapter 13 plan cannot be confirmed.
An appropriate order shall enter. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489332/ | DECISION
BURTON PERLMAN, Bankruptcy Judge.
KDI Corporation, debtor herein, filed for relief under Chapter XI of the United States Bankruptcy Act in December 1970. KDI’s Plan of Arrangement was thereafter confirmed in June 1973. On April 19, 1971, Ross M. Gwynn, claimant herein, filed a proof of claim for $30,878.66 which was assigned Claim No. 178. KDI filed an objection to that claim on June 25, 1971 stating that it was not truly or justly indebted to Gwynn for the amount he claimed. On July 23, 1973, a second proof of claim was filed on behalf of Gwynn by Howard Thompson, a patent attorney, pursuant to a power of attorney given him by Gwynn. It was assigned Claim No. 765. This proof of claim prayed for damages in an unspecified amount. The bankruptcy court made a determination supporting Gwynn’s claim on a consulting agreement, but as to the Reorganization Agreement directed that Gwynn liquidate his claim through litigation “in a proper forum” within one year. In an Opinion entered May 4, 1977 (which dealt primarily with an appeal from a Decision of Bankruptcy Judge Pellman regarding claims of Tim Themy (or breach of the Reorganization Agreement) Judge Porter reversed the action of the Bankruptcy Judge. In that Opinion he made reference to Claim No. 765 but did not take any substantive action with regard to it. He did (p. 24) hold that KDI was liable on the “employment contracts,” it being clear that this included Gwynn’s consulting agreement (p. 28). There Judge Porter said that KDI should on a rehearing be permitted to offer evidence with respect to mitigation.
Thereafter, KDI moved to dismiss proof of Claim No. 765 on grounds that it was not timely filed. We overruled that motion holding that Claim No. 765 must be regarded as an amendment of timely filed Claim No. 178. Debtor thereafter filed a counterclaim against the claim of Gwynn, which counterclaim was subsequently amended, alleging violations of the securities laws of the United States by Gwynn in the transaction between Chloroguard and KDI, both under Federal and California law. The counterclaim also included a count for rescission on account of fraud and deceit. Gwynn moved to dismiss the counterclaim. We denied the motion by Order entered October 27, 1978. Gwynn thereafter filed a third party complaint, essentially for indemnity, against Tim Themy.
KDI subsequently filed a motion for partial dismissal of Claim No. 765, insofar as it related to breach of the consulting agreement, it being the position of KDI that the maximum amount of damages regarding the consulting agreement was fixed at $30,-878.66 as set forth in the original Gwynn proof of Claim No. 178. We denied that motion by Order entered November 4,1980.
On November 23, 1981 KDI moved to disqualify counsel for Gwynn. After hearing, we overruled such motion by Order entered November 27, 1981. Trial of the issues presented by Gwynn’s claims and the counterclaim then ensued. We turn now to those issues.
At the beginning of our consideration we make reference to a device which is central to the present claim. The device is an electrolytic cell for the production of chlorine which may be referred to as a chlorinating cell. Within the cell a basic electrolytic process is carried on wherein free chlorine is produced by electrically decomposing a chloride salt in solution in water. Claimant and Tim Themy filed several patent applications upon which patents issued for improved structures and a method for carrying out this process. Such device provides an alternative to the conventional *655way that chlorine is introduced into, for example, swimming pool water. The conventional way is to dissolve chlorine containing chemicals in water. Upon solution the chemicals release chlorine into the water.
The story here begins in 1952 when The-my was working as a dealer selling chlorinating cells for another. By 1959 he had begun his own business making units comparable to those he had been selling as a dealer. He and Gwynn met in 1963 in San Francisco. They went into business together in Sacramento, California. What they were involved with was the development of an improved chlorinating cell. According to Gwynn, their work resulted in improved anode structures for use in their cells and also for method, upon which inventions patents were obtained. They made and sold their cells in the western states, California and Colorado particularly. Their operation was not particularly profitable. Gwynn and Themy made their living from it, but did not draw down extravagant amounts of compensation. A large number of warranty claims made by purchasers of their cells were indicative of problems that accompanied the product.
Themy and Gwynn were partners in the enterprise at first, using their own capital for the development of the company. In 1966 investors Setzer and Dodie entered the picture. The enterprise was incorporated under the name Chloro-Guard Electronics Inc. (hereafter “CG”.) Though he got somewhat less at first, Gwynn ultimately owned 40% of the stock in CG. Setzer put $220,000.00 into the business.
Sometime before January 1969, Gwynn initiated a contact with KDI. He testified that he had read an article in a national magazine about KDI and Cox, its then president. At this time KDI was an acquisition minded conglomerate with a major interest in swimming pools. Means for purifying swimming pool water by an electrical device for producing chlorine rather than by the conventional chemical method, was of interest to KDI.
Gwynn contacted KDI and on January 20, 1969 he and Themy came to Cincinnati where they met with Cox and Lyons of KDI on the subject of merger. These talks were serious, for they continued for several days, and Scalora, attorney for CG, came to Cincinnati from California to participate in them. An agreement was not, however, concluded at this time. On January 26, 1969, Gwynn and Themy went to Athens, where Themy proceeded to introduce Gwynn to people. This was Gwynn’s first exposure to Europe. Gwynn spent most of the rest of 1969 there. He returned to the U.S. at the beginning of March 1969. At this time, CG had discussions with another prospective merger candidate, Crescent General, but this transaction was scrapped on the advice of counsel. Gwynn then returned to Europe April 24, 1969, not returning until August, 1969.
An agreement was entered into between CG and KDI which was ratified by Gwynn on October 1, 1969. By this agreement, CG was merged into a new entity wholly owned by KDI known as KDI Chloro-Guard (hereafter “KDI-CG”.) CG stockholders surrendered their stock in CG and that corporation was dissolved. Gwynn became, not an employee of KDI-CG but, pursuant to written agreement, a consultant to it.
The transaction between CG and KDI was formalized in a document entitled Reorganization Agreement dated September 26,1969. An important fact is that prior to the time of the Reorganization Agreement, KDI acquired one of the CG cells and shipped it to the University of Colorado for testing prior to the merger. The record contains no report of the test results. We infer, however, from the fact that KDI proceeded with the acquisition that the results were positive.
KDI-CG acquired all of the assets and assumed most of the liabilities of CG in exchange for certain consideration flowing to the CG stockholders. Those stockholders received an initial payment, and were to receive in the future an interim “earnout” which would be based on the profits of the business, and a final earnout computed by *656multiplying net after-tax earnings of KDI-CG by 12. The agreement also provided for another payment in the event that the total contingent earnout exceeded $4,000,000.00. The relevant earnout provision is set out at p. 5, section 1(B)(2) of the Reorganization Agreement. All of the foregoing payments were to be in KDI stock.
Pursuant to the Reorganization Agreement, the initial payment of $400,000.00 in KDI stock to be paid to the CG stockholders was to be placed in escrow. Further, the Reorganization Agreement provided that the patents owned by Gwynn and Themy were assigned to CG, which reassigned them to KDI-CG. (Such patents have subsequently been assigned to Howard Thompson, Esq., Trustee, and nonexclusive royalty free licenses have been granted to Themy and Gwynn thereunder.)
In the consulting agreement between KDI-CG and Gwynn, Gwynn agreed to be available for, and to perform consulting services for, KDI-CG “at the places and times and as the corporation may from time to time request.” In return, KDI-CG became obligated to pay Gwynn an amount equal to 1% of aggregate revenues received and accrued by the corporation during the five-year period that the “earnout” was in effect, provided that the annual compensation was to be no less than $20,000 nor more than $35,000.00 per year. This compensation was payable in monthly installments at the minimum annual rate of $20,000.00 per year. The corporation was also obligated to reimburse Gwynn for his reasonable traveling and entertainment expenses. The consulting agreement provided for termination in the event of wrong-doing of Gwynn as consultant, but required that Gwynn be served by the company with notice of such wrong-doing and have the opportunity to cure any such default.
As we have seen, the closing of the acquisition of CG by KDI occurred October 31, 1969. At that time Gwynn was in Europe where he remained through the rest of 1969 and the first three quarters of 1970, except that he was in this country briefly at the end of March, 1970. During this visit he was in Cincinnati and Los Angeles. The record is bare of any requests by anyone at KDI-CG for Gwynn to perform any services. Yet it was the testimony of Gwynn that he sent progress reports to Kaestner at KDI, as well as Spink, in which he informed them of the medical and therapeutic experimental work he was doing on behalf of KDI-CG. Initially Gwynn was reporting to Cox and Kaestner, but later on in 1970, Thompson told him to report only to Kaest-ner and Thompson regarding his therapeutic experiments.
It is clear from the record that Gwynn was out of the country during the period leading up to and including the shut-down of KDI-CG and could not testify in respect to the events leading up to that shut-down.
We move now to the time when KDI “mothballed” KDI-CG. This was done by Scheidler, general manager of KDI-CG, on September 15, 1970. (Scheidler became general manager of KDI-CG September 1, 1970, his superior at KDI then being Fried-rich. Spink had been general manager of KDI-CG prior to Scheidler. Spink left September 1, 1970, Friedrich then having terminated him.) Scheidler decided to mothball KDI-CG thirteen days after he took over, though it was not then decided permanently to shut the operation down. Schei-dler testified that the operation could have been started up again. Matthey, then president of KDI decided in October 1970 to make the shut-down permanent. A significant event which occurred during the period between the acquisition and the shut-down was the move of the KDI-CG operation from Sacramento to Cincinnati in about April 1970. The evidence was that during the ten month time of operation of KDI-CG KDI injected some $250,000.00 into KDI-CG, and the product was improved. Fred Pool had been a distributor for CG and continued as such under KDI — CG. He testified that the product was significantly improved during the time of operation under KDI-CG to eliminate cell leakage.
At about the time of the acquisition of CG by KDI, KDI began to experience financial difficulties which culminated in the *657Chapter XI filing. During 1970 it became necessary for debtor to contract its operations. The record does not make clear whether this was because of the general economic climate in 1970 or because of improvident financial practices by debtor in overextending its resources in its acquisition program. In any event, there came a time in mid-1970 when the expansion phase of debtor gave way to one of fiscal restraint. In this transition Walter Cox, the president of debtor, who had negotiated the merger with CG was supplanted by Louis Matthey. Even prior to the time that Mat-they was named president of the debtor, fiscal matters were brought under his control. That is, expenditures could not be made without his approval. He had theretofore been associated with a business consulting firm which had been retained to deal with the problems which had arisen in the operation of debtor. Matthey was dispatched by that firm to debtor to consider what medicine was necessary to correct the ills of debtor. One of his first actions was to meet with a bank consortium in Chicago for the purpose of securing a line of credit which the bankers had been unwilling to renew. He was successful in this effort.
This was a time of belt tightening at KDI. Upon arrival at KDI Matthey launched an inquiry into the various companies owned by debtor by colleagues brought with him from his consulting firm, for the purpose of determining which could be profit contributors, and which profit drains. As a result of this review, in October, 1970, Matthey reached the decision not to reactivate KDI-CG, it having been shut down, as we have seen, by Scheidler in mid-September. Clearly, the shut-down and decision not to reactivate were related to the financial trauma being experienced by KDI. The picture which emerges, then, is that in the course of dealing with its financial difficulties, KDI in mid-1970 to fall 1970 had to make choices as to where it would commit its funds, a situation with which it had not theretofore been faced. One of its subsidiaries was KDI-CG. The situation of KDI-CG at that time was that it was producing and selling a product whose market potential was unknown. In the light of this fact, it was simply unknown whether in the end the product would be commercially successful. In order fully to explore this question a further infusion of capital into KDI-CG by KDI would be necessary with no assurance that the market outcome would be positive. In the fall of 1970 KDI was no longer in a position to gamble with this subsidiary and it was therefore terminated.
The Reorganization Agreement
The present proceeding presents for decision the question of whether debtor breached the Reorganization Agreement. We have concluded that there was a breach. Having reached this conclusion, we must also then deal with the question of damages for the breach.
1. Breach of Contract.
The Reorganization Agreement with which we are here concerned, was entered into September 26, 1969 between KDI Corporation and CG as well as with Tim Themy and Ross Gwynn, each of whom owned 40% of the stock of CG.
The nature of the transaction which occurred by reason of the Reorganization Agreement was a sale of the assets of CG. Certain consideration for this transfer was provided in the Agreement. The transaction between CG and KDI was closed October 31, 1969. Upon that date KDI-CG assumed the operation of the business. Less than a year later, on September 15, 1970, KDI-GC was shut down. We are satisfied that the reason that this occurred was because the parent company, debtor herein, found itself in financial difficulties which compelled it to terminate operations which were not then profitable. We conclude that debtor in closing down KDI-CG was not motivated to do so because it had found its products to be commercially hopeless, as contended by debtor.
Claimant says that this termination of operations amounted to a breach of contract. There is no contract provision which expressly provides a period of time during *658which KDI-CG was obliged to operate. Such a provision may, however, be implied. Underlying every contract is an implied condition of good faith. As stated at 17 Am.Jur.2d 653:
Every contract implies good faith and fair dealing between the parties to it.
Good faith, consistent with the reasonable expectations of the selling parties in the Reorganization Agreement, required that KDI operate KDI-CG until it was established that the product was commercially hopeless. KDI did not comply with this obligation. It shut down the enterprise because of financial exigencies in its own affairs at a time when it was unknown what the ultimate commercial fate of the products of KDI-CG would be. This was a breach of the Reorganization Agreement.
Claimant as an alternative basis for liability points to Exhibit I which is a part of the Reorganization Agreement and is entitled “Management During the Formula Period and Related Matters”. Exhibit I provides that the acquired business “be managed in a manner consistent with good business practice.” Claimant contends that this contract provision was breached. In support of this position claimant sought to prove that there were certain deficiencies in the operation of KDI-CG which were not consistent with good business practice. Specifically, it is the position of claimant that KDI-CG should have modified the product of CG to incorporate a flow cut off switch into the mechanism; that is was not consistent with good business practice to sell the product of the enterprise without testing for leaks; that collection of accounts receivable was not done in a proper manner. Claimant has failed to persuade us in this effort.
The notion of installing a flow cut off switch was known to CG prior to the reorganization and yet, despite the fact that its incorporation into the structure was not formidable, its then management (which continued under KDI-CG) did not do so.
In this connection, we think it especially pertinent to note that the same section of the Reorganization Agreement, Exhibit I thereto, which called for “good business practice” also required that KDI “use its best efforts to preserve the key personnel” of CG. Pursuant to this, Themy continued in the management of KDI-CG after consummation of the sale. By his contract, then, claimant at least acquiesced in management decisions of KDI-CG.
As to quality control, there was evidence in the record, principally by the testimony of Pool, that after the accession of the merged entity KDI-CG, the product did improve. As to collection of accounts receivable, the record before us is far from persuasive that KDI-CG was remiss in pursuing them. Many complaints were made by customers, with warranty claims, and failures to pay, which bore on the collecti-bility of the accounts receivable of KDI-CG. We hold that claimant has failed to sustain its burden of proof that KDI-CG was not managed in a manner consistent with good business practice.
2. Damages for breach of Reorganization Agreement.
In his post trial memorandum, claimant asserts that proper damages for breach of the Reorganization Agreement would be an award to claimant of 1,210,847 shares of KDI stock and $493,810.00 on account of patent royalties.
The way in which these figures were derived was via the opinion testimony of two expert witnesses. Claimant had to proceed in this fashion because the shut-down removed any possibility for determining damages on the basis of actual experience. The witnesses called were Schamel and Ett-lich. What these experts did was to make an estimate on a year by year basis of the market potential for the sale of units. A percentage representing expected market penetration by KDI-CG based upon the expertise of the witness was then applied. Thus there was derived a volume sales figure for each year. There was then applied to the figures for the number of units sold the information which the expert witness had regarding net after tax dollars per unit. A definition of “net after tax” dollars *659which was purported to be found in the Reorganization Agreement was used. Thus a total of $1,214,000.00 was derived. The purpose of deriving this figure was to enable the claimant to make a further computation based upon provisions of the Reorganization Agreement under paragraph 1(B)(2) for Additional Consideration. This computation employed a KDI stock valuation as of August 31, 1974 of .9625 dollars per share to arrive at the aforementioned figure of 1,210,847 shares claimed to be due to Gwynn by reason of his 40% holding of the shares of the CG. With respect to patent royalties, claimant applied the contract royalty rate to sales of units derived in the manner mentioned above.
After serious and careful consideration we have concluded that the bases for damages for breach of the Reorganization Agreement advanced by claimant are unsound. They include a component for profits which might have been made in the field of municipal water purification. It was this about which Ettlich testified. We decline to make any award of damages for such a use of the cells. The evidence was clear that the primary interest of KDI in acquiring CG was in connection with its swimming pool business. Possible profits in the municipal water treatment field are entirely too speculative to provide a basis for damages.
Claimant’s expert Schamel did testify with regard to the swimming pool field. The Schamel opinion, however, is not valid for purposes of assessing damages, not because of inadequacy of the witness, but rather because of the assumptions upon which he based his opinions. Schamel was asked to determine what in his opinion should have been the capital contribution of KDI to KDI-CG in order that it comply with its contractual obligation of exercising good business practice. He testified that “about $475,000.00” would be required to get the product on the way to a successful commercialization. His testimony regarding profits assumed that a capital infusion in this magnitude had been made into KDI-CG.
We are unwilling to accept an opinion based on this premise. It is inequitable now to impose upon KDI an obligation respecting the amount of capital to be transferred to KDI-CG which could have been contracted for. By failing to contract for any specific amount, claimant agreed in effect that he would submit to the judgment of KDI in this respect, subject to the requirement of good faith. The undisputed fact is that KDI did inject some $250,000 into KDI-CG during the time of its operation. The evidence further is that the product was improved during this period. The evidence established that when Kaestner and Spink were in charge of KDI-CG, that is, until September 1, 1970 there was a positive commitment to the product. There is no evidence that in this respect KDI acted other than in good faith. That is all that claimant had a right to expect under the contract and we cannot award damages based upon ground rules for which the parties did not contract.
Further, the Schamel testimony was based upon the assumption of a failure to meet the contractual obligation that KDI-CG be managed in accordance with “good business practice”, an assumption which we have earlier stated was not proved.
Thus, we find ourselves in a dilemma. We have found a breach of contract by debtor in this case which should entitle claimant to damages. The measure of damages proposed by claimant, however, is fatally flawed for the reasons mentioned above. There is an obligation upon us to resolve the dilemma, and we do so in the exercise of our equitable power. In this effort the Schamel figures are useful. They may be taken to represent an idealized optimum for the products of KDI-CG. If we make reductions therein on account of the following factors together with the various considerations dealt with earlier in this Decision, we can arrive at an equitable result:
1. Compensatory damages should be based upon a five year period from the date of closing, that is, from October 30, 1969, because the contract provides for certain *660consequences during a Formula Period of five years in the Reorganization Agreement.
2. The definition in the Reorganization Agreement of “net after — tax earnings” (see JX 1, # 27, para. 2(b)(vi)) clearly was consistent with the natural import of those words. The Schamel figures employed by claimant in his memorandum should have been reduced, and 55% of those figures should have been taken, consistent with the testimony of Schamel.
3. It was by no means certain that ultimately the CG cell would have been commercially successful. The problem of a deposit on the electrodes in the cell during operation was inherent in the structure. Neither claimant nor anyone else was successful in devising a means which would automatically clear the electrodes of such deposit. Uncleared, the deposit was destructive of the cell. The invention in one of the patents of which claimant was coin-ventor, of reversing polarity during operation of the cell, did not solve the problem. The only way in which the deposit could reliably be dealt with was by a frequent acid wash of the electrodes. If the user was willing to undertake the frequent maintenance which this required, the cell would be good for an extended period. We are certain, however, that such a requirement for trouble free operation would limit the market for such cells, particularly in the swimming pool field. Many pool users would prefer the relative convenience of simply adding chemicals to the pool rather than undertaking the required cell maintenance, which, incidentally, required the user to handle an extremely corrosive substance, muriatic acid.
Employing the technique we have stated and applying the mentioned factors and considerations we conclude that an appropriate award of damages on this score is $100,000.00 on account of Additional Consideration and $20,000.00 on account of patent royalties.
The Consulting Agreement
In conjunction with the execution of the reorganization agreement, Gwynn and KDI-CG entered into a “Consulting Agreement” on October 31, 1969. (JX 1, # 17) The term of this agreement was to be five years, commencing November 1, 1969. Under the agreement, Gwynn was obligated:
“to be available for and perform, the consulting services specified herein at the places and times and as the Corporation may from time to time request.
* * * * * *
devote such time, attention and energies as shall be reasonably necessary to advise and consult with the employees and representatives of the Corporation regarding the business and products of the Corporation.”
The agreement further provided that:
“The Corporation may discharge Consultant and terminate this Agreement for Consultant’s dereliction, malfeasance or wrongful acts or for failure, neglect or refusal of Consultant to perform his duties and obligations hereunder; provided, however, that the Corporation shall not terminate this Agreement and discharge Consultant unless and until the Corporation shall first have served upon Consultant a written notice, specifying with particularity Consultant’s default hereunder and Consultant shall have failed, neglected or refused to correct or cure the stated default within ten (10) days after receipt of said notice.”
In exchange for Gwynn’s services, KDI-CG agreed to pay him a minimum annual salary of $20,000, payable in monthly installments. In addition to this base salary, Gwynn was entitled to receive as compensation 1% of aggregate revenues of KDI-CG during the five year term. The maximum annual salary, however, was set at $35,000. KDI-CG also agreed to reimburse Gwynn for his reasonable traveling and entertainment expenses.
Gwynn left the United States for Greece in October of 1969. It is undisputed that, while in Greece, Gwynn engaged extensive*661ly in medical research and application of the effluent produced by the chlorine generator. Among such activities, Gwynn administered injections of chlorozone to several people for treatment of various ailments such as multiple sclerosis, exzema and the common cold. (PX 167; Testimony of Gwynn) The nature and extent of Gwynn’s paramedical use of chlorozone is well-documented in a publication by Gwynn, entitled “Bioelectrolysis In Man”. (PX 23) Officials of KDI-CG were aware of Gwynn’s paramedical activities. There was no evidence that prior to September of 1970, any official of KDI-CG considered Gwynn’s paramedical activities to be in violation of the consulting agreement.
In a letter dated November 12, 1970, (JX 5) Matthey wrote to Gwynn the following:
“We have recently become aware of various of your activities in Greece which involve a paramedical use of a portion of the effluent emanating from the Chloro Guard unit. We have had no prior notice of such actions and consider same to be grossly improper and wrongful on your part as a consultant of KDI Chloro Guard Corporation.
Accordingly, this is to advise you that you are terminated, effective immediately, as a consultant of KDI Chloro Guard Corporation”.
The last payment that Gwynn received under the consulting agreement was for the month of September, 1970.
1. Liability for breach of Consulting Agreement.
The question of whether KDI is liable for breach of Gwynn’s consulting agreement is answered in large part by Judge Porter’s opinion in KDI v. Themy and KDI v. Gwynn, Civil No. C-1-77-115 (S.D.Ohio 1977) (unreported). That decision was rendered in the consolidated appeals by KDI of Bankruptcy Judge Pellman’s decision allowing Themy claim No. 425 and Gwynn claim No. 178. In that opinion Judge Porter found KDI to have wrongfully terminated Gwynn’s consulting agreement on the ground that KDI did not comply with the ten day notice provision set forth in the agreement. Id. at pp. 22, 24, 28. Under the doctrine of law of the case, we are bound by Judge Porter’s decision, see generally, IB Moore’s Federal Practice, ¶ 0.404[10], at pp. 571-77 (2d ed. 1982). In addition we will comment further in view of the evidence here presented to us.
KDI does not dispute Gwynn’s claim that it failed to give the ten day notice for termination required by the consulting agreement. Matthey’s letter to Gwynn simply informed Gwynn that his termination as a consultant was to have immediate effect. (JX 5.) In its memorandum of law, however, KDI appears to argue that Gwynn’s paramedical use of chlorozone gave rise to an emergency situation which entitled KDI to forego its obligation under the notice provision of the agreement. According to KDI, Gwynn’s conduct was so intolerable that it was necessary immediately to sever their relationship in order to avoid any potential liability that might arise from Gwynn’s activities. This argument is not persuasive.
As we have noted earlier, certain individuals of the KDI management were fully aware of Gwynn’s actions in the field of medical experimentation with chlorozone. Prior to Matthey’s letter, however, Gwynn had never been given any indication that his conduct might be considered a violation of the consulting agreement. If KDI had complied with the notice requirement, Gwynn would have had an opportunity to cure what KDI considered to be a default under the agreement. Failure on Gwynn’s part to cease performing the objectionable activities within the appropriate time period may have then justified his dismissal. Therefore, even if Gwynn’s conduct amounted to “malfeasance or wrongful acts” under the language of the consulting agreement, thereby giving rise to KDI’s right to discharge Gwynn, nevertheless he could not be summarily dismissed. KDI was bound to exercise its right of termination within the constraints set forth in the agreement with respect to which KDI freely contracted. The notice provision was a *662condition precedent to KDI’s exercise of the right to discharge Gwynn. The agreement simply did not provide for exceptions to the notice procedure, and we are unable to locate any authority to support KDI’s claim that extraordinary circumstances may obviate the need to comply with an established termination procedure. Moreover, the consulting agreement contains no definition of cause and we are not persuaded that the acts performed by Gwynn gave KDI-CG a basis for termination for cause.
2. Damages for breach of the Consulting Agreement.
While Judge Porter made a determination of the question of liability for breach of the consulting agreement, he directed to the bankruptcy court the issue of the amount of damages to be awarded to Gwynn, stating that, “KDI should be permitted to offer evidence with respect to mitigation, as well as evidence bearing on the validity of expenses and royalties claimed.” KDI v. Themy, supra, at p. 28. After due consideration, we hold that the circumstances of this case do not warrant the application of the doctrine of mitigation of damages.
The general rule of damages for breach of contract for personal services, when the contract has a definite term of duration, is the amount of compensation agreed upon for the remainder of the term, less the amount which the servant might have earned, or actually earned, through the exercise of reasonable diligence. Parker v. Twentieth Century-Fox Film Corp., 3 Cal.3d 176, 181, 89 Cal.Rptr. 737, 740, 474 P.2d 689, 692 (1970); KDI v. Themy, supra, at p. 25. If, however, the discharged employee could have performed the subsequent work as well as that which his former employee had required of him, then his subsequent earnings need not be applied in reduction of the damages sought. Wise v. Southern Pacific Co., 1 Cal.3d 600, 607, 83 Cal.Rptr. 202, 207, 463 P.2d 426, 431 (1970). See also 22 Am.Jur.2d, Damages, § 71, at p. 107.
The evidence adduced on this point is clear. Subsequent to the termination of the consulting agreement, Gwynn obtained employment with Trans World Airlines (TWA). His gross wages for the years 1972,1973 and 1974 were $856.12, $12,843.63 and $16,406.03, respectively. (DX 24) KDI contends that the damages sought by Gwynn for the breach should be reduced by these amounts.
Gwynn testified that his employment at TWA did not render him unable to perform consulting services which KDI might request. This testimony was not refuted. KDI urges, however, that because the consulting agreement required Gwynn “to be available for and perform .. . the consulting services specified herein at the places and times and as the Corporation may from time to time request”, Gwynn could have been required to perform services to such a great extent that he would not have been able to perform two jobs. This proposition is not valid in light of the realities of this case. Gwynn had performed consulting services for KDI-CG such as monitoring the installation of a drinking water facility on the Greek island of Zakynthos in May of 1970. (PX 153) He also performed services in connection with the Filtro company, a dealer of KDI Chloro-Guard units in Geneva, Switzerland. (PX 26A) The extent of these services, which were performed during the time that Gwynn devoted much attention to his medical research, convinces us that the consulting position was not full-time and could be performed in addition to his work for TWA. We therefore hold that Gwynn's earnings at TWA should not be applied in mitigation of the damages for KDI’s breach of the consulting agreement.
Under the consulting agreement, Gwynn was to be paid a minimum of $20,000 annually, payable in monthly installments of $1,666.67. He received the last payment from KDI for the month of September, 1970. Therefore, 49 months remained in the five year term of employment. Gwynn is entitled to damages under the consulting agreement in the amount of $81,666.67.
At this point we add that Gwynn is entitled also to recover the following amounts as set forth in Claim No. 178:
*663a) $6,858.92 as the balance due Gwynn as an “account receivable-officer”; and
b) $11,185.45 as consultant expenses.
The KDI Counterclaim
In its amended counterclaim, KDI alleges violations by claimant Gwynn of the securities laws of the United States and the State of California, and also includes a count for fraud and deceit on the part of Gwynn in connection with the events culminating in the Reorganization Agreement.
At the trial, the evidence put on by KDI in support of its amended counterclaim consisted of the testimony of Tim Themy, who testified at some length in support of the KDI allegations. KDI also called to testify as a corroborating witness Stanley Antel-man. KDI also offered several depositions by individuals purporting to support the testimony of Themy. We find for claimant on the issues raised by KDI. The amended counterclaim will be dismissed.
We will not dwell at any great length upon our grounds for so holding. Themy’s testimony dealt with matters such as his assertion that Gwynn was not in fact a co-inventor of the patents assigned to KDI-CG, but that Themy was the sole inventor; that there were misrepresentations as to the performance of CG units in the field and in the conduct of an inspection of an actual installation; that there was falsification in regard to sales figures, accounts receivable and inventory. All of these matters depended entirely upon oral testimony, chiefly that of Themy. At the hearing we reached an abiding conviction that it was not possible to conclude that Themy was telling the truth. He was clearly in the grip of strong emotion. The great hostility to Gwynn which he freely stated was sufficient to motivate a false or highly colored version of the facts.
Nor did the testimony of Antelman who spoke of events relating to an on site inspection of his home pool where a CG unit was in place, enhance the possibility of truth in the Themy testimony. We base this both upon our observation at the trial together with the fact that this witness was paid a fee for this testimony. In addition, reliance is an essential element of any fraud cause of action. In this case the fact is that KDI acquired a CG unit and sent it to the University of Colorado for testing, thereafter proceeding with the acquisition. This fact makes debtor’s case of reliance on purported misrepresentations by the principals of CG questionable. In addition, a post closing audit was conducted. This led to no significant action by KDI so far as this record discloses. Again, this fact works against a conclusion of reliance by KDI.
Manner of Payment
In KDI’s plan of arrangement, Article II divides unsecured debts into six classes. Class 3 consists of debts in excess of $1,000 and up to and including $10,000. Class 4 consists of debts in excess of $10,-000. Article VI consists of debts incurred after the filing of the petition and prior to the order of confirmation. The plan provides for payment to Article II, Class 3 creditors as follows: at the creditor’s option, either (a) by payment in cash of 50% of the debt up to a maximum of $5,000, or (b) by payment of the debt in full in the form of $100 (face value) convertible 4% subordinated debentures. Article II, Class 4 creditors are to be paid under the plan in debentures as described in “(b)” above. Article VI creditors are to be paid in full in cash before or within 30 days following the order of confirmation.
Gwynn admits (see Gwynn Memorandum, p. 39) that the following should be treated as Article II, class 3 or 4 claims: (1) account payable in the amount of $6,859.92 (presumably a Class 3 claim because it is less than $10,000); (2) expenses in the amount of $11,185.45 (presumably a Class 4 claim as it exceeds $10,000); and, (3) consulting salary in the amount of $5,000 through December 30, 1970 (class 3 claim).
As to the remaining claims for damages, for breach of the Reorganization and consulting agreements, Gwynn asserts that those components that “accrued” after De*664cember 30, 1970 (the date of the filing of the petition) are debts incurred during the pendency of the arrangement and therefore are Article VI claims which must be paid in full in cash. In support of his argument, Gwynn relies on Judge Porter’s opinion of October 11, 1977 and order of June 13,1980 in McIntyre v. KDI Corp., No. 7801 (proffered as PX 10), wherein Judge Porter stated that, “Class 4 of the Plan of Arrangement provided for trade creditors’ unsecured debts.” Order, at p. 2, citing In re KDI Corp., 477 F.2d 726, 736 (6th Cir. 1973) (“all of the debts in the first four classes under the plan are trade or commercial debts”). Gwynn states that, “Unliquidated claims by claimants selling their company to KDI Corporation are not provided for in Article II.”
KDI argues that all of the damages claimed by Gwynn are “trade or commercial” debts. KDI asserts that because the McIntyre decision dealt with a rescission suit, Judge Porter’s statement that, “nowhere in this record is there any statement that the then unliquidated claims of recission suit plaintiffs are provided for in the Plan”, is inapplicable to the present issue because Gwynn’s damages are based on breach of contract. KDI’s position is that all of the debts accrued prior to the filing on December 30, 1970 because KDI terminated Gwynn on November 12, 1970 and discontinued the operation of KDI-CG in September of 1970. Therefore, KDI contends that the damages are pre-filing commercial damages which are provided for in Article II of the plan. We conclude that on this issue KDI is correct.
Gwynn argues that his claims for salary, royalties and damages that “accrued” after the date of filing fall within the language of Article VI. Article VI, however, by its language includes only debts “incurred after the filing of the petition and prior to the order of confirmation . .. . ” (emphasis added). This article appears to be directed at administrative claims. The term “incurred” may only reasonably be construed as referring to the time at which the debts arose. In the present instance, Gwynn’s claims were incurred when he was wronged by KDI, i.e., when KDI wrongfully terminated the Reorganization and consulting agreements. The dichotomy proposed by Gwynn between pre-petition and post-petition claims is based on the premise that his claims accrued over a period of time — the salary claim is argued to have accrued over the five year term of the consulting agreement, and the royalty claim is based on the period from the closing of the reorganization agreement on October 31, 1969 until May of 1978 when Gwynn received from KDI a license of the surviving United States and Canadian patents. If, however, “incurred” is construed as it must be as meaning when the claims or liabilities arose, Gwynn’s argument must fail. The period over which Gwynn argues that the claims accrued must correctly be viewed merely as the time period for the calculation of damages based on pre-petition breaches.
It is further submitted that the McIntyre case does not support Gwynn. Gwynn relies on McIntyre for the proposition that, “Unliquidated claims by claimants selling their company to KDI Corporation are not provided for in Article II.”
The causes of action involved in McIntyre were based on securities act violations dealing with fraud in connection with proxy solicitation and sale of securities. Plaintiffs, who sold stock in the Verkamp Corporation to KDI in a merger transaction, sought rescission or damages, and were eventually awarded nearly $1.2 million in damages. In deciding whether such claims were dischargeable by KDI, Judge Porter held that they were not dischargeable because the claims were not provided for in the plan. McIntyre, supra, at p. 51. Elaborating further on this point, Judge Porter stated that the first four classes of Article II provided for trade creditors’ unsecured debts. Order, at p. 2.
In order to determine whether Judge Porter’s holding in McIntyre applies to Gwynn’s claims, it is appropriate to compare the underlying causes of action to determine whether Gwynn’s claims may be *665construed as “trade” or “commercial” debts. In McIntyre, the securities violations were based on fraudulent activity which was separate and distinct from KDI’s operation of its business qua business. Even though the claims arose in connection with the sale of the Verkamp Corporation to KDI, they were not the necessary result of actions taken by KDI in the course of regular business operations. On the other hand, Gwynn’s claims, although unliquidated, are based on a breach of contract by KDI. While his claims arose from the sale of Chloro-Guard to KDI, the underlying cause of action is based on alleged breaches committed by KDI in the course of the operation of its business and pursuant to business decisions. In this sense, therefore, the claims may be construed as trade or commercial debts within the scope of Article II, Class 3 or 4.
The foregoing constitutes our findings of fact and conclusions of law. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489333/ | OPINION
EMIL F. GOLDHABER, Bankruptcy Judge:
The issue at bench is whether the debtor is liable to the Commonwealth of Pennsylvania for sales and use tax where the debt- or was engaged in the business of selling soft pretzels from sidewalk booths and kiosks. We conclude that the sale of pretzels by the debtor falls within an exception to the sales and use tax, and we will, consequently disallow the Commonwealth’s claim.
*666The facts of the instant case are as follows: 1 Beginning in 1963, Twisteroo Soft Pretzel Bakeries, Inc. (“the debtor”) was engaged in the business of selling, at retail, soft pretzels from sidewalk booths or kiosks located at various shopping centers or discount store sites. In 1973, after examining the books and records of the debtor, the Commonwealth of Pennsylvania, Department of Revenue (“the Commonwealth”) assessed a six percent tax liability on the debtor for all of its pretzel sales. The Commonwealth made similar assessments during the following years, resulting in payments by the debtor of more than $52,-000.00 for the tax years prior to 1978.
On May 16, 1979, the debtor filed a petition for an arrangement under chapter XI of the Bankruptcy Act (“the Act”).2 The Commonwealth filed a proof of claim in those proceedings in the amount of $72,-657.75 for unpaid sales and use taxes as well as other corporate taxes. The debtor objected to that portion of the Commonwealth’s claim ($57,637.75) which represents unpaid sales and use tax because it asserts that it is exempt from that tax. A hearing was held on the debtor’s objection at which the Commonwealth failed to appear.
The sales and use tax in Pennsylvania is found in chapter 5 of Article II of the Tax Reform Code of 19713 and provides for a tax of six percent on the sale and use of various products and services.4 However, § 7204 of that statute excludes certain transactions and items from the sales and use tax. That section provides, in pertinent part:
§ 7204. Exclusions from tax
The tax imposed by section 202 shall not be imposed upon
(2) The sale at retail or use of food and beverages for human consumption including candy, gum and similar confections, *667except that this exclusion shall not a.pply with respect to—
(i) Soft drinks;
(ii) Malt and brewed beverages and spirituous and vinous liquors;
(iii) Food and beverages (except when purchased at, or from a school or church in the ordinary course of activities of such organization) when the purchase price of the total transaction is more than ten cents (10<p), when purchased (i) from persons engaged in the business of catering, or (ii) from persons engaged in the business of operating restaurants, cafes, lunch counters, private and social clubs, taverns, dining cars, hotels and other eating places. For the purpose of this subclause (iii), beverages shall not include malt and brewed beverages and spirituous and vinuous liquors, but shall include soft drinks, and the price of such soft drinks shall be considered together with the price of other beverages and food in determining whether the purchase price of the total transaction is more than ten cents (10$).5
In its objection to the Commonwealth’s claim, the debtor asserts that it is in the business of selling soft pretzels at retail but does not operate an “eating place” within the meaning of the above statute. Consequently, the debtor contends that its sales are excluded from the sales and use tax.
Initially, it is important to bear in mind the distinction between a tax exclusion and a tax exemption.6 Tax exemptions are items which the tax payer is entitled to excuse from the operation of a tax and, as such, are to be strictly construed against the tax payer.7 Tax exclusions, on the other hand, are items which were not intended to be taxed in the first place and, thus, to the extent there is any doubt about the meaning of the statutory language, exclusionary provisions are to be strictly construed against the taxing body.8 In fact, tax laws in general (with the exception of exemption clauses) are construed in favor of the tax payer and against imposition of the tax unless the legislative intent is clear and unambiguous.9
In interpreting the exclusionary provisions of the tax statute before us in this case, we are guided by two cases in which that statute was applied to similar facts. In the first case, Munsch Ltd. v. Pennsylvania Board of Finance and Revenue,10 the Court of Common Pleas of Dauphin County held that an owner and operator of food trucks was liable for the sales and use tax. In that case, food and various other items were loaded onto each of Munsch’s trucks which were then driven to various assigned stops. After the trucks were parked, customers would enter the trucks through the rear doors and help themselves to soup, sandwiches, coffee and other items. The operation was almost exclusively self-service, with no seating accommodations provided for customers and with all sales made for use and consumption off the premises. Munsch contended that the fact that the trucks did not contain tables, chairs or other facilities for the consumption of the food purchased from the trucks removed his business from liability for the sales and use tax by operation of § 7204 of the tax statute. After tracing the history of that statute, however, the court stated:
*668A review of the entire legislative history in this portion of the statute shows a definite legislative mandate to exempt the purchase of food and beverages only when purchased from a normal grocery store or supermarket. In any instance where the food is prepared, such as in the present case where submarines, barbecues, hamburgers, cheeseburgers and hot dogs, together with soups and beverages are sold, such an entity should be subject to tax. There are vendors which do not fit precisely under the heading of a grocery store or supermarket; however, it appears obvious that appellant does not operate such an establishment, but rather a mobile restaurant or lunch counter. The fact that appellant provides no tables, chairs or eating facilities does not remove it from taxation, and in light of the legislative history, such lack of eating facilities coupled with the type of business operation, mandates the imposition of the provisions of the taxing statute upon appellant.11
In the second case, Rossi v. Commonwealth,12 however, the Commonwealth Court of Pennsylvania held that the sale of baked pizza was not a sale from an eating place and, therefore, was not subject to the sales and use tax. In that case, Rossi provided no place on his immediate premises where his patrons could consume the pizza. Rather, Rossi would prepare the pizza on his premises and box it for take-out by customers. As a result, the court held that the retail sale of pizza, boxed and sealed for consumption off the premises, was not taxable under the Pennsylvania sales and use tax statute. With respect to the term “other eating places,” the court stated:
Unfortunately the Act does not define “other eating places.” The regulations applicable to section 203(u) of the Act, however, do provide some guidance. Regulation No. 204, Ruling No. 110, reads as follows:
“Other eating place: Any establishment or premises where food or beverages are prepared and sold, primarily for consumption on the premises, including, but not limited to a grill, vending machine, cafeteria, automat, soda fountain, refreshment stand, saloon, buffet, lunchroom, snack bar, employees’ cafeteria or lunchroom, hospital cafeteria, and any place required to be licensed by a state or local agency as a public eating or drinking place.” (Emphasis added.) Commerce Clearing House, Pennsylvania Tax Reporter, para. 60-102.25(d).13
The court went on to state:
This case is typical of the confusing maze in which a citizen often finds himself when dealing with a government bureaucracy. Some stores have two cash registers; one is used for taxable sales and the other for sales excluded under the Act. If a citizen purchases doughnuts to be consumed at a counter on the premises, the sale is taxable, but if a citizen purchases doughnuts which are packaged for consumption off the premises, the sale is not taxable. If a citizen orders a pint of ice cream in a dairy store which is packaged and taken home, the sale is not taxable. If an identical pint of ice cream is placed in a dish, the sale is taxable. Under the facts of this case, if a pizza is sold in its uncooked form, the Commonwealth agrees the sale is not taxable, the same as a pizza purchased from a frozen-food case in a supermarket. However, through the magic of bureaucratic interpretation, the identical piece of pizza, which is nontaxable in its uncooked form, becomes taxable when baked.
We have no difficulty with the tax liability of sales of prepared foods and beverages from trucks such as those involved in the Munsch case; nor do we have any difficulty with sales of food prepared for consumption at or near the place of preparation, e.g., the fast-food *669purveyors and ice milk product stands. We do have difficulty fitting Rossi’s Pizzeria into any of those categories where such sales are taxable. The Bureau saw fit to insert the words “primarily for consumption on the premises” as its interpretation of what “other eating places” are. The stipulation states that all of Rossi’s pizza is boxed and taped for “take out”, and that Rossi provides no place for consumption on the premises. The stipulation also states that there is no distinction between the making of a pie (apple or otherwise) at a bakery and the making of Rossi’s pizza, except for the different ingredients used. This is a close case. We are influenced by the Bureau’s regulation providing that if the food is prepared and sold primarily for consumption on the premises, the establishment is an “other eating place” and the sales are taxable.14
We likewise have difficulty with the instant case. However, we find that the debtor’s operations are more similar to those of the taxpayer in Rossi than to the operations of the taxpayer in Munsch. This is so because, although the food sold by the debtor is not packaged as it was in Rossi, the debtor does not sell a variety of items or operate “a mobile restaurant or lunch counter” as did the taxpayer in Munsch. Furthermore, while the debtor does not fit within the heading of a grocery store or supermarket, it also does not operate an establishment where food and beverages are prepared and sold primarily for consumption on the premises. Because this case is a close case and because, when interpreting exclusionary clauses in tax statutes, any doubt must be construed against the taxing body, we conclude that the debtor’s operations fit within the exclusion of § 7204 and are, therefore, not liable for the sales and use tax assessed against them. Consequently, we will disallow the Commonwealth’s claim to the extent it includes any claim for the sales and use tax.
. This opinion constitutes the findings of fact and conclusions of law required by Rule 752 of the Rules of Bankruptcy Procedure.
. While the Bankruptcy Act has been superseded by the Bankruptcy Code as of October 1, 1979, the provisions of the Act still govern petitions filed before that date. The Bankruptcy Reform Act of 1978, Pub.L.No.95-598, § 403, 92 Stat. 2683 (1978).
. Pa.Stat.Ann. tit. 72, §§ 7101 et seq. (Purdon).
. Section 7202 provides:
§ 7202. Imposition of tax.
(a) There is hereby Imposed upon each separate sale at retail of tangible personal property or services, as defined herein, within this Commonwealth a tax of six per cent of the purchase price, which tax shall be collected by the vendor from the purchaser, and shall be paid over to the Commonwealth as herein provided.
(b) There is hereby imposed upon the use, on and after the effective date of this article, within this Commonwealth of tangible personal property purchased at retail on or after the effective date of this article, and on those services described herein purchased at retail on and after the effective date of this article, a tax of six per cent of the purchase price, which tax shall be paid to the Commonwealth by the person who makes such use as herein provided, except that such tax shall not be paid to the Commonwealth by such person where he has paid the tax imposed by subsection (a) of this section or has paid the tax imposed by this subsection (b) to the vendor with respect to such use. The tax at the rate of six per cent imposed by this subsection shall not be deemed applicable where the tax has been incurred under the provisions of the “Tax Act of 1963 for Education.”1
(c) Notwithstanding any other provisions of this article, the tax with respect to nonresidential intrastate telephone service and intrastate telegraph service within the meaning of clause (m) of section 201 of this article2 shall, except for telegrame paid for in cash at telegraph offices, be computed at the rate of six per cent upon the total amount billed to customers periodically for such services, irrespective of whether such billing is based upon a flat rate or upon a message unit charge.
(d) Notwithstanding any other provisions of this article, the sale or use of food and beverages dispensed by means of coin operated vending machines shall be taxed at the rate of six per cent of the receipts collected from any such machine which dispenses food and beverages heretofore taxable.
1971, March 4, P.L. 6, No. 2, art. II, § 202. As amended 1971, Sept. 9, P.L. 437, No. 105, § I, imd. effective; 1978, Oct. 4, P.L. 987, No. 201, § 1, imd. effective.
Pa.Stat.Ann. tit. 72, § 7202 (Purdon).
Section 3403-1 et seq. of this title.
Section 7201 of this title.
. Id. at § 7204.
. See, e.g., Commonwealth v. Sitkin’s Junk Co., 412 Pa. 132, 194 A.2d 199 (1963).
. See, e.g., Equitable Gas Co. v. Commonwealth, 18 Pa.Commw. 418, 335 A.2d 892 (1975); Tyger & Karl Complete Water Systems Co., Inc. v. Commonwealth, 5 Pa.Commw. 154 (Pa.Commw.Ct.1972).
. Id.
. See, 1 Pa.Cons.Stat. § 1928(b). See also, Estate of Rose, 465 Pa. 53, 348 A.2d 113 (1975); Tax Review Board of Philadelphia v. Esso Std. Div., 424 Pa. 355, 227 A.2d 657, cert. denied, 389 U.S. 824, 88 S.Ct. 63, 19 L.Ed.2d 79 (1967); Panther Valley Tele. Co. v. Borough of Summit Hill, 376 Pa. 375, 102 A.2d 699 (1954); In re Girard Trust Co., 343 Pa. 434, 23 A.2d 454 (1942); Paper Products Co. v. Pittsburgh, 183 Pa.Super. 234, 130 A.2d 219 (Pa.Super.Ct.), aff'd, 391 Pa. 87, 137 A.2d 253 (1957).
. 91 Dauph. 82, 47 Pa. D. & C.2d 326 (C.P.Ct.Dauph.1968).
. 47 Pa.D. & C.2d at 331-32.
. 20 Pa.Commw. 517, 523, 342 A.2d 119, 128 (Pa.Commw.Ct.1975).
. 342 A.2d at 123 (footnote omitted).
. Id. 342 A.2d at 123-24 (footnote omitted). | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489334/ | MEMORANDUM AND ORDER ON MOTION OF CHARLES E. CROWELL FOR INDEMNIFICATION AND ENLARGEMENT OF TIME
CHARLES J. MARRO, Bankruptcy Judge.
The Motion of Charles E. Crowell for indemnification and enlargement of time filed in the Washington County Superior Court came on for hearing, after notice.
The Debtor instituted an action in the Washington Superior Court of the State of Vermont against Charles E. Crowell, et als., alleging that he mismanaged funds of the Debtor-Trust, made misrepresentations in sale of securities, diverted money and property willfully and intentionally, issued prospectuses and other written documents containing false and misleading statements, gave preferences to certain shareholders, wrongfully commingled Trust funds with those held by him in another capacity and failed to exercise the same degree of care, skill, loyalty and fiduciary towards the Debtor and its shareholders as is owed by a Director to his corporation under Vermont Business Corporation laws. This action for One Million Dollars damages has been transferred to the United States Bankruptcy Court.
Defendant, Charles E. Crowell, now seeks indemnification from the Debtor of any costs, expenses, or other liabilities incurred by him in the defense of this suit and for the payment of his expenses as they are incurred. Crowell’s claim for indemnification is based upon section 5.3 of the Declaration of Trust of the Vermont Real Estate Investment Trust, which reads in part as follows:
“5.3 Indemnification. The trust shall indemnify each of its trustees, officers, employees, and agents (including any person who serves at its request as director, officer, partner, trustee or the like of another organization in which it has any *743interest as a shareholder, creditor, or otherwise) against all liabilities and expenses, including amounts paid in satisfaction of judgments, in compromise, or as fines and penalties, and counsel fees reasonably incurred by him in connection with the defense or disposition of any action, suit, or other proceeding, whether civil or criminal, in which he may be involved or with which he may be threatened while acting as trustee or as an officer, employee, or agent of the trust or the trustee, as the case may be, or thereafter, by reason of his being or having been such a trustee, officer, employee, or agent except with respect to any matter as to which he shall have been adjudicated to have acted in bad faith with wilful misconduct, or reckless disregard of his duties, or not to have acted in good faith in the reasonable belief that his action was in the best interests of the trust; . .. The trustees may make advance payments in connection with indemnification under this paragraph 5.3, provided that the indemnified trustee, officer, employee, or agent shall have given a written undertaking to reimburse the trust in the event it is subsequently determined that he is not entitled to such indemnification.”
Crowell was one of the co-founders of the Vermont Real Estate Investment Trust and served as its president and as a trustee. He contends that his right to indemnification is to be viewed in the broadest of terms since the above recited provision of the Declaration of Trust was so drafted; that the mere institution of this action by VREIT activates its obligation as indemnitor under its duty to protect the defendant against his expenses for counsel fees reasonably incurred by him. He relies on 41 Am.Jur.2d § 31 at page 722 which reads as follows:
“Where, however, the contract is so expressed as to protect the obligee against any claim, suit, or demand, even the institution of a suit against the obligee has been held to entitle him to an action against his guarantor.”
The Debtor, on the other hand, argues that the language of section 5.3 of the Declaration of Trust does not provide for indemnification until there has been a clear adjudication of the actions of Crowell as a trustee and officer in the administration of the Trust and a determination by the Court that he does not fall within the exceptions excusing him from liability; i.e., acting in bad faith, with willful misconduct, or reckless disregard of his duties or not acting in good faith in the reasonable belief that his action was in the best interests of the Trust. It rationalizes that the requirement as to indemnification looks toward the future in that it expressly states that the Trust shall indemnify each of its trustees, officers, employees and agents against all liabilities and expenses including amounts paid. Therefore, it contends that until there has been a clear adjudication, the Trust is not obligated to indemnify any of the trustees or officers.
This Court agrees with the Debtor. The express language of the Trust indicates that indemnification is to be provided in the event that liability has been established and there has been an adjudication that the Defendant as trustee and an officer of the Trust does not come within the exception as to bad faith and willful misconduct recited under paragraph 5.3 of the Declaration of Trust. As pointed out by the Debtor, if indemnification were required upon institution of the suit, the provision at the end of the first paragraph of 5.3 giving the trustees the option of making advance payments in connection with indemnification would be meaningless. This option for advance payments tends to establish that indemnification is not required under paragraph 5.3 until liability is established.
The indemnification is “against all liabilities1 and expenses.” It has been held that a mere claim or demand against an indemnitee when no legal liability exists does not give rise to a right to indemnity under an agreement to indemnify against liability in the sense of accrued liability. 41 Am.Jur.2d § 31 at page 722 citing Louis*744ville & N. R. Co. v. Cullman Warehouse, 226 Ala. 493, 147 So. 421.
The action of the Debtor against the Defendant is in its initial stage. It is at the point of a mere allegation by the Debtor against the Defendant as trustee that he has mismanaged funds of the debtor Trust, made misrepresentations and engaged in other wrongful acts in the administration of the Trust. Until there has been a trial and an adjudication there can be no determination within the purview of paragraph 5.3 of the Trust as to whether the Defendant is entitled to indemnification. Further, VREIT as a debtor seeking relief under Chapter 11 of the Bankruptcy Code is under an obligation to take whatever action is necessary to realize every possible asset and, in furtherance thereof, to institute whatever suits are necessary to bring about this result. It would be inequitable to require it to furnish indemnification upon the institution of any action and would frustrate its efforts in carrying out its duty to liquidate assets for the benefit of the estate.
In sum, YREIT as the plaintiff in this case both on the basis of the language contained in paragraph 5.3 of the Declaration of Trust and on equitable principles should not be required to furnish indemnification to the Defendant at this time. It may be that after the issues in the suit have been determined that the Defendant may be entitled to indemnification and, if such is the case, the Defendant may then make the necessary application for determination by the Court.
The Debtor has argued in its Memorandum and the indemnification clause to Defendant Crowell is contrary to public policy. This is not a matter for consideration at this time but it may very well become an issue for consideration after the case is tried and further application is made by the Defendant for indemnification.
In his Reply Memorandum, Crowell suggests that if the Debtor is not required to indemnify him for his expenses and does not require the Debtor to escrow funds for reimbursement for expenses then, as an alternative, the Court should grant Crowell a priority equivalent to that of an administrative expense assuming a favorable outcome of the proceedings for Crowell. Since the Court feels that Crowell is not entitled to indemnification as of now the matter of allowing Crowell a priority equivalent to administrative expense should be held in abeyance until such time as there has been an adjudication of the liability issue. When this has occurred, Crowell may make a claim for the allowance of his expenses as an administrative expense and attempt to bring himself within the purview of § 507 of the Bankruptcy Code which recites the expenses and claims entitled to priority of payment.
Since Crowell did on April 5, 1982 file an Answer to the Debtor’s Complaint, that part of the Motion relating to enlargement of time to file an answer has become moot.
ORDER
Now, therefore, upon the foregoing,
IT IS ORDERED that the Motion of the Defendant, Charles E. Crowell, for indemnification is DENIED.
. Underscoring supplied. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489335/ | FINDINGS OF FACT AND CONCLUSIONS OF LAW
SIDNEY M. WEAVER, Bankruptcy Judge.
THIS CAUSE having come on to be heard upon an Adversary Proceeding pursuant to Part VII of the Interim Bankruptcy Rules seeking various equitable relief and damages, and the Court having determined through its Order on Pre-Trial Conference rendered April 27, 1982, that trial of this action should be bifurcated, with the Court first trying Count VI of the Plaintiffs’ Amended Complaint and Count VII of the Defendant’s Amended Counterclaim, to determine whether this Court should vacate or confirm the Arbitrator’s Award rendered in Case No: 80-22474-CA-20, In the Circuit Court of the 11th Judicial Circuit, In and For Dade County, Florida. This Court tried the issues raised by the aforesaid Counts commencing on April 29, 1982, and the Court, having heard the testimony and examined the evidence 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:
On or about January 11, 1980, the Plaintiffs’, Basil S. Yanakakis and Nancy B. Ya-nakakis, his wife (hereinafter referred to as “Yanakakis”) entered into a Contract for Purchase and Sale with Defendant, Pacre Corporation, the Debtor herein (hereinafter referred to as “Pacre”), pertaining to a luxury single family home located in the Cocoplum Section of Coral Gables, Florida. The Third Party Defendant, Royal Trust Bank (hereinafter referred to as “Royal Trust”) had issued a construction mortgage loan upon said property to Pacre which loan was convertible to a permanent mortgage to be assumed by Yanakakis.
The Third Party Defendant, Royal Trust, is not directly involved in the relief sought in the Counts which came on for trial but, because the issues to be determined herein bear on the remaining portions of this action participated in the presentation of evidence, examination of witnesses, and argument at trial.
After several delays in the completion and closing date of the property, a dispute developed between Pacre and Yanakakis as to the completion and closing of the property and, ultimately, Yanakakis filed a Complaint for specific performance and equitable relief in the Circuit Court of the 11th Judicial Circuit, In and For Dade County, Florida, Case No: 80-22474.
At that time, it became apparent that Royal Trust, through Mr. James Wilson, its *761Vice President, and the officer in charge of this loan, was becoming upset with the conduct of the parties and concerned for the completion of the property which might having bearing on its construction mortgage loan. Mr. Wilson thus summoned the parties to the Royal Trust Bank in January of 1981, for a meeting to attempt to resolve the various issues and with the apparent end of obtaining the completion of the property and closing of the purchase.
At the meeting, the clear weight of the testimony presented at trial establishes that the bank in one form or another threatened foreclosure of the property if the parties did not resolve their disputes. After some negotiation and discussion, arbitration was proposed as a means of resolving the dispute, with James Wilson of Royal Trust to act as the arbitrator.
The officers of Pacre contended, and their testimony was supported by their former counsel at the time of these occurrences that the tenor of the meeting was such that they were not left with a real choice but to agree to arbitration in view of the pressures being exerted by the bank.
Mr. Wilson, in agreeing to act as arbitrator, made it clear, on the basis of the testimony presented concerning the occurrences at this meeting, that his purpose in acting as arbitrator was to, in effect, adjust the debits and credits pursuant to the contract of the parties in order to accomplish the completion and closing of the property as expeditiously as possible. In this regard, the bank indicated it would take over the supervision of the completion of the property with the goal being to complete the construction and arbitrate as quickly as possible.
As a result of this meeting, the parties entered into a Stipulation for Arbitration in the aforesaid State Court Proceeding with “Mr. James Wilson to act as an arbitrator wjth respect to the interpretation, implementation, completion, and closing of the contract, together with the specifications and addenda pertaining thereto which were entered into between the parties.” The Stipulation was entered into on February 3, 1981. On February 6, 1981, Mr. Wilson, on behalf of the bank, filed a document entitled Re: Stipulation for Arbitration wherein it was pointed out that the bank had a financial interest in the subject property and further indicating that the bank agreed to allow Mr. Wilson to act as arbitrator “with respect to the interpretation, implementation, completion, and closing of the contract, together with the specifications and addenda pertaining thereto which were entered into between the parties.” Based thereon, the Circuit Court, on February 8, 1981, rendered its Order on Stipulation for Arbitration which provided in applicable part that:
“James Wilson be, and he is hereby appointed arbitrator to make findings, determinations and decisions with respect to all issues presented by this cause, including but not limited to, the interpretation, implementation, completion, and closing of the contract together with the specifications and addenda pertaining thereto which were entered into between the parties. All decisions of the arbitrator will be binding and final.”
After a delay of a number of months, in which the property was never completed to the point that a Certificate of Occupancy could be obtained, the arbitration hearing was finally conducted in two separate sessions held in October of 1981. The arbitrator’s decision was rendered on November 24, 1981.
At the hearings, the Yanakakis’s were represented by counsel. Pacre proceeded without benefit of counsel. To the point when the hearings were commenced, there had been no agreement as to procedural format for the arbitration hearings and no further agreement was reached as to the scope of the proceedings other than as set forth in the Stipulation and Order referenced above as well as the meeting at Royal Trust in January of 1981. In fact, the transcript of the arbitration hearings makes it clear that a discussion of the scope of the proceedings was held at the outset, with counsel for the Yanakakis’s pressing for damages and other elements of relief apart *762from the closing of the contract, and the representatives of Pacre objecting thereto. Ultimately, the arbitrator, Mr. Wilson, referred back to the Stipulation and Order as governing his decision and the hearings were commenced.
Based upon this brief outline of the facts, as well as the lengthy testimony at trial and numerous documents introduced into evidence, the Court must now determine whether the arbitrator’s decision rendered on November 24,1981, should be vacated or confirmed. The parties agree that this proceeding is governed by the provisions of the Florida Arbitration Code, as contained in Chapter 682 of the Florida Statutes. Florida Statutes § 682.13(1) sets forth quite specifically the grounds for vacating an arbitration award:
“(1) Upon application of a party, the court shall vacate an award when:
(a) The award was procured by corruption, fraud or other undue means.
(b) There was evident partiality by an arbitrator appointed as a neutral or corruption in any of the arbitrators or umpire or misconduct prejudicing the rights of any party.
(c) The arbitrators or the umpire in the course of his jurisdiction exceeded their powers.
(d) The arbitrators or the umpire in the course of his jurisdiction refused to postpone the hearing upon sufficient cause being shown therefor or refused to hear evidence material to the controversy or otherwise so conducted the hearing, contrary to the provisions of § 682.06, as to prejudice substantially the rights of a party.
(e) There was no agreement or provision for arbitration subject to this law, unless the matter was determined in proceedings under § 682.03 and unless the party participated in the arbitration hearing without raising the objection.”
As set forth herein, the Court finds that the arbitrator’s decision in the aforesaid Case No: 80-22474 should be vacated based upon Subsections (b) and (c) of Florida Statutes § 682.13(1).
It is abundently clear from the evidence and testimony of records that Mr. Wilson, the arbitrator, exceeded his powers in the course of his jurisdiction. The decision rendered and relief accorded is so far beyond the scope of the issues presented by the complaint which resulted in the Stipulation for Arbitration as to lead the Court to believe that the arbitrator did not have a clear concept of what he was empowered to decide. In fact, Mr. Wilson testified at trial that he had not even read the State Court Complaint prior to making his decision or hearing the evidence presented in the course of the arbitration hearings.
Almost paragraph by paragraph, the relief accorded in the decision exceeds the scope of his powers. From the Stipulation and Order, as well as the January, 1981 meeting, it is evident that the intent of the parties was to adjust debits and credits pursuant to the contract and provide for a closing after completion of the property. This based upon a contract which authorized as remedies for the seller’s default, either enforcement of the contract (i.e., specific performance) or return of deposit money. The arbitrator’s decision awards substantial damages to Yanakakis in the amount of Ninety Five Thousand Dollars ($95,000.00) over and above the return of deposit monies and, further, give Yanakakis the option to close on the property and receive credits of One Hundred Seventy Four Thousand Dollars ($174,000.00), or elect not to close and receive substantial damages. The award of the arbitrator further ordered Pacre to clear title to the property including various liens, and provided for a finding of contempt of court in the event that the monetary decisions and clearing of liens were not complied with by a specified date. The decision further decreed a judicial sale of the property in the event of a non-compliance.
In rendering these Findings and Conclusions, the Court fully understands that the relief to be accorded through an arbitration proceeding need not conform concisely to the relief which might be accorded in a court of law. However, based upon the *763testimony and evidence presented at trial and a review of the arbitrator’s decision in comparison with the intent of the parties, the Court cannot help but conclude that the decision violated the provisions of Florida Statutes § 682.13(l)(c).
Based upon the decision itself, as well as evidence presented at trial concerning the relationship between the arbitrator, James Wilson, and the purchasers, Yanakakis, there is evidence of partiality by the arbitrator or misconduct prejudicing the rights of a party so as to make the decision violative of Florida Statutes § 682.13(l)(b) as well. The bank was extremely interested in obtaining the financial business of Yanakakis, who are apparently very wealthy individuals and, in fact, during the course of the period leading up to the arbitration, commencing shortly after the decision to arbitrate, Yanakakis maintained deposits with Royal Trust in excess of Two Hundred Thousand Dollars ($200,000.00), with an additional Two Hundred Thousand Dollars ($200,000.00) being deposited during the period between the hearings and decision. Further, there were certain social meetings and luncheons apparently occurring wherein the bank had as its ultimate goal the solicitation of the business of Yanakakis.
In the case of Gaines Construction Co. v. Carol City Utilities, Inc., 164 So.2d 270 (3rd D.C.A.Fla.1964), it was held in construing the predecessor to Florida Statutes § 682.-13(l)(b) that arbitrators exercise judicial functions and, thus, are in fact judicial officers. Every safeguard possible should be utilized to insure the utmost fairness and impartiality of those charged with the determination of the rights of the parties. Thus, conduct showing bias or partiality amounts in law to misconduct which would warrant the setting aside of an arbitration award. The Court, citing Cassara v. Wofford, 55 So.2d 102 (Fla.1951). held that:
“Generally, to disqualify an arbitrator it need not be shown that bias influenced his judgment, but only that there was a circumstance tending to bias that judgment.”
The Court, in Gaines, supra, equated the position of the arbitrator to one of a juror, with a requirement that he be no less impartial.
The Court here can in no way other than circumstantially infer what effect the relationship between Yanakakis and Royal Trust may have had on the arbitrators decision. But based upon the degree to which that decision exceeds the scope of his powers as arbitrator, the Court must find that there was evident partiality and possible misconduct prejudicing the rights of Pacre. There is certainly enough of an appearance of impropriety here to determine that the neutrality of the arbitrator is in question, thus destroying his usefulness within the test set forth in Gaines. The Court acknowledges here that the relationship of the arbitrator to a party of financial interest in the litigation, Royal Trust, was disclosed. However, this disclosure, the Court finds, in no way limited the duty of the arbitrator to remain neutral and impartial.
Based upon the foregoing, the Court finds in favor of Pacre that the arbitrator’s decision of November 24, 1981, should be vacated pursuant to Florida Statutes § 682.13(l)(b) and (c). A Final Judgment will be entered in accordance with these Findings of Fact and Conclusions of Law. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489336/ | FINDINGS OF FACT AND CONCLUSIONS OF LAW
JON J. CHINEN, Bankruptcy Judge.
The above-entitled matter came on for trial on August 25, 1981 before the undersigned Judge. Philip D. Bogetto, Esq. appeared as attorney for Defendant Marcus H. Asch (hereinafter referred to as “Asch”), and Ethan D. B. Abbott, Esq. and Jerrold Y. Chun, Esq. appeared as attorneys for Plaintiff Airport Associates (hereinafter referred to as “Plaintiff”).
Based on the testimony of the witnesses, the documentary evidence, the pleadings and memoranda submitted by the parties, the Court hereby makes the following Findings of Fact and Conclusions of Law.
FINDINGS OF FACT
1. Plaintiff is and was at all times relevant hereto a Hawaii partnership, doing business in the City and County of Honolulu, State of Hawaii.
2. Defendant Asch is and was at all times relevant hereto a resident of the City and County of Honolulu, State of Hawaii.
*7813. Plaintiff is in a Chapter XII arrangement proceeding described in Bankruptcy No. 77-00339, initiated by the filing of an original petition on August 3, 1977.
4. Plaintiff and Asch entered into a Deposit, Receipt and Offer to Lease, dated November 1,1976, wherein Plaintiff agreed to allow Asch to substitute Hawaii Air-Gunnery, Inc. (hereinafter “Air-Gunnery”), in his place as tenant, if he would “personally guarantee the lease by executing Airport Center Standard Guaranty Agreement”.
5. Plaintiff, as landlord, and Air-Gunnery, as tenant, entered into a Commercial Lease Agreement, dated December 1, 1976 (hereinafter referred to as “Lease”), covering approximately 2,904.2 square feet of space located on the second floor of the Airport Center Building at 3409 Ualena Street for a term of five (5) years commencing January, 1977.
6. A Guaranty Agreement was signed by Asch on January 4,1977, and is attached to the Lease.
7. The executed Guaranty Agreement was drafted by and/or under the direction and control of Asch. It provides in paragraph 1 that “[t]he Guarantor guarantees payment of rent under the attached lease pursuant to the terms thereof.”
8. On or about December 3, 1980, the Court entered judgment in favor of the plaintiff and against the defendant Asch in the sum of $26,089.19, part of said judgment being rent the Court found due and owing under the terms of the lease guaranteed by the Defendant Asch, covering the period September 1979 through June 1980.
9. This second action was brought by the Plaintiff seeking additional rent from July 1980 through August 1981, the breakdown being the following:
July 1980 $2,139.80
August 1980 $2,139.80
September 1980 $2,139.80
October 1980 $2,139.80
November 1980 $1,340.34
December 1980 $1,340.34
January 1981 $1,340.34
February 1981 $1,340.34
March 1981 $1,483.11
April 1981 $1,483.11
May 1981 $1,483.11
June 1981 $1,483.11
July 1981 $ 711.00
August 1981 $ 711.00
Total: $21,275.00
10.Plaintiff claims that Air-Gunnery also owes the sum of $2,751.28 for additional rent due for excess operating costs, a breakdown being the following:
Additional rent from
1/1/80 through 10/31/80 $2,180.20
Additional rent from
11/1/80 through 2/28/81 571.80
Total: $2,751.28
11.The total principal amount claimed as due and owing to Plaintiff by Air-Gunnery is $24,026.28, as follows:
Monthly rent $21,275.00
Additional rent 2,751.28
Total: $24,026.28
12. Plaintiff made written demand in accordance with the aforementioned January 4,1980 Guaranty Agreement upon Asch for $24,026.28.
13. Plaintiff claims that pursuant to the Lease and the Guaranty Agreement, Asch owes Plaintiff the principal sum of $24,-026.28, plus attorneys’ fees and costs. Plaintiff claims 25% of $24,026.28, i.e., $6,006.57, as attorneys’ fees pursuant to the statutory rate as set forth in Hawaii Revised Statutes § 607-17. Plaintiff also seeks costs in the amount of $71.00 which breaks down as follows:
Bankruptcy Court $62.00
Sheriff’s Service Fee 9.00
Total: $71.00
14. On or about November 1, 1980, Plaintiff entered into a lease with DFI Financial, Inc. for a portion of the space formerly occupied by Air-Gunnery.
15. DFI Financial, Inc. leased 1,000 square feet of the 2904.2 square feet origi*782nally leased to Air-Gunnery. The term of the new lease was to terminate June 30, 1988, whereas the space occupied by Air-Gunnery, Inc. was to terminate in or about February 1982.
16. Air-Gunnery and Asch were not informed of this lease prior to the execution of the lease but were informed at a later date that such a lease had been entered into.
17. Plaintiff did not notify Air-Gunnery nor defendant Asch that it was cancelling its lease when it entered into the new lease with DFI Financial, Inc.
18. Plaintiff, through its President, Richard I. Blum, testified that certain accommodations were made to induce DFI Financial, Inc. to enter into the lease.
19. In or about July 1981, DFI Financial, Inc. leased an additional 806.32 square feet of the space formerly occupied by Air-Gunnery. Neither Air-Gunnery nor Asch were informed of this action.
20. Defendant Asch argues that, due to the extensive alterations previously made to the premises by the Plaintiff and because of special considerations given to DFI Financial, Inc. in order to induce them to enter into the lease, the lease was entered into for the benefit of the Plaintiff, and thus Plaintiff has accepted a surrender of Air-Gunnery’s lease, thereby relieving the defendant Asch from any continuing guaranty obligation under said lease.
21. Defendant Asch further argues that the lease entered into between Plaintiff and DFI Financial, Inc. is for a higher rental and for a term longer than that of the existing lease between Airport Associates and Air-Gunnery and there cannot be two leases on the same space without one lease being a sublease.
22. Plaintiff testified that there was no sublease in this matter and that a separate lease was entered into between Plaintiff and DFI Financial, Inc.
23. These Findings of Fact insofar as they are Conclusions of Law are incorporated in the Conclusions of Law as hereinafter stated.
CONCLUSIONS OF LAW
1. Where a lessee abandons leased property and the lessor takes possession and executes a new lease for said property, it does not necessarily mean that the lessor has accepted a surrender of the premises. The reletting of the premises indicates an intention of the lessor to either relet for the benefit of the lessee, in order to mitigate the damages for which lessee may be liable for breach of the lease, or to permit the lessee to surrender the premises and terminate the lease. Thus, the acceptance of a surrender is a matter of intention. Millison v. Clarke, 287 Md. 420, 413 A.2d 198, 201 (1980).
2. In the instant case, the facts when considered together, evidence the intention of Plaintiff to accept the surrender of the lease with Air-Gunnery.
3. Prior to leasing a portion of the premises to DFI Financial, Inc., extensive alterations were made by Plaintiff to the leased premises in order for the Air-Gunnery rifle range space to be more conducive to regular business offices. By itself, the remodeling or alteration by the lessor of the demised premises to accommodate the new lessee is not sufficient to find an acceptance of the surrender. Rather, it is one of a number of factors to be considered.
4. Plaintiff executed a lease with DFI Financial, Inc. for a portion of the premises for a period extending far beyond the lease with Air-Gunnery. While the original lease terminated in February 1982, the lease with DFI Financial, Inc. continues for a term ending June 30, 1988. The reletting beyond the original term is not conclusive of Plaintiffs intent to accept a surrender of the lease, but is an important factor in determining the intention of the lessor. Welcome v. Hess, 90 Cal. 507, 27 P. 369 (1891); C. H. Little & Co. v. Gay Apparel Corp., 108 F.Supp. 762 (S.D.N.Y.1952).
5. In Michigan LaFayette Bldg. Co. v. Continental Bank, 261 Mich. 256, 246 N.W. 53, 55 (1933), the court stated that “[O]rdi-narily, the execution of a new lease extend*783ing beyond the period of the abandoning lessee’s term would indicate acceptance of surrender of his lease”. Also, the Supreme Court of Pennsylvania in Rafferty v. Klein, 256 Pa. 481, 100 A. 945, 947 (1917), stated:
If, as averred, plaintiff took possession of the demised premises, and without notice to the principal or surety made a lease thereof to a new tenant, for a term of years extending far beyond the expiration of the original term, thus blending the unexpired term in the general lease, even at a less rate per month, he cannot, in our opinion, recover from the original lessee for loss of rent resulting subsequent to the beginning of the new term, which seems to have been April 1, 1913.
6. Another relevant fact to consider is that under the new lease with DFI Financial, Inc., the Plaintiff receives a higher rental amount for the premises. The evidence shows that DFI Financial, Inc. occupies approximately 62% of the original area of the premises but it pays base rent amounting to 72% of the original rent paid by Air-Gunnery.
7. The facts also indicate that Plaintiff did not inform Air-Gunnery or Asch of the new lease prior to the execution of the lease. Thus, the lessor did not announce its intention to continue to hold the lessee responsible and that the reletting of the premises was on lessee’s account.
8. When considered together, the actions of the lessor indicate an intent to accept a surrender of the original lease with Air-Gunnery, and not an attempt to mitigate damages on behalf of the lessee.
9. Thus, in the instant case, the Court finds an acceptance of the surrender of the original lease by the lessor as of November 1,1980, when the lessor executed a lease for a portion of the original lease extending beyond the term of the original lease and for a higher rental. Defendant Asch was thereby relieved from any continuing guaranty obligation under the original lease.
10. The Court finds that defendant Asch is liable to Plaintiff for the lease rent from July 1,1980 through October 31,1980. The amount of the additional rent due is as follows:
July 1980 $2,139.80
August 1980 2,139.80
September 1980 2,139.80
October 1980 2,139.80
Excess operating costs (July 1980— October 1980) ($218.02 X 4 months) 872.08
$9,431.28
11. The Court also finds that Plaintiff is entitled to attorneys’ fees in the amount of $2,357.82 ($9,431.28 X 25%) and costs of $71.00. Therefore, defendant Asch is liable to Plaintiff for a total amount of $11,860.10.
Let Judgment be entered accordingly. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489337/ | FINDINGS OF FACT AND CONCLUSIONS OF LAW
JON J. CHINEN, Bankruptcy Judge.
Kalfred K. F. Wong filed herein a Proof of Claim on June 18, 1981, which claim has been designated as Proof of Claim Number 76. On September 23, 1981, 765 Associates dba “Pirates Cove Restaurant” and dba “Funatei Restaurant”, Debtor above-named, filed herein an Objection To Allowance of Claim (Proof of Claim No. 76).
A trial on said matter was held on March 29 and 30, 1982, at which time Jeffrey M. Taylor appeared on behalf of Kalfred Wong and Patrick Y. Taomae represented the Debtor.
Based upon the records and files herein, the memoranda and arguments submitted by counsel, the testimony given by witnesses, and the exhibits admitted into evidence, and the Court being otherwise fully advised in the premises, the Court makes the following Findings of Fact and Conclusions of Law:
FINDINGS OF FACT
1. Kalfred K. F. Wong (“Wong”), Peter Moix (“Moix”) and Robert Munson (“Mun-son”) are and were at all times relevant hereto residents of the City and County of Honolulu, State of Hawaii.
2. Patrick M. Haskins (“Haskins”) was at all times relevant hereto a resident of the City and County of Honolulu, State of Hawaii.
3. 765 Associates is a limited partnership that was formed on or about November 22, 1978, with David D. Bergan (“Bergan”) as the general partner and Russell L. Jones (“Jones”) and Haskins as the limited partners. 765 Associates was created for the express purpose of investing in real estate and other properties and was initially located at 765 Kamehameha Highway, Pearl City, Hawaii. It subsequently became located at 2005 Kalia Road, Honolulu, Hawaii in early 1979.
4. In December of 1978, Haskins, Moix and Munson agreed to form a partnership for the purpose of purchasing, or at least obtaining an interest in, a restaurant known as Pirates Cove located in the Rainbow Bazaar of the Hilton Hawaiian Village.
5. As a result, at about that time, Moix approached Wong who was a former business associate and personal friend of Moix, in an effort to ascertain whether Wong was interested in becoming a limited partner of the proposed partnership.
6. Wong declined to become a limited partner of the proposed partnership, but instead agreed to make a loan to Moix, Munson, and Haskins in order for them to purchase, or at least obtain an interest in the Pirates Cove restaurant through the proposed partnership.
7. In January of 1979, Wong therefore obtained a loan from the Hickam Federal Credit Union in the amount of $50,000.00, which was in the form of a check made payable to Wong and which was secured by a second mortgage on his residence. Said amount of $50,000.00 was to be in turn loaned to Moix, Munson, and Haskins as aforementioned.
8. On or about January 18, 1979, Wong went to the office of Valhalla, Ltd., a Hawaii corporation wholly owned by Haskins and located at 765 Kamehameha Highway, Honolulu, Hawaii. At that time Wong *869turned over the amount of $50,000.00 to Haskins, Moix, and Munson, each of whom were present at that time, by endorsing the check issued to him by the Hickam Federal Credit Union. Although the identity of the endorsee of the check is not known, it is clear that 765 Associates was not the en-dorsee of the check.
9. Upon turning over said amount of $50,000.00 to Haskins, Moix, and Munson, Wong did not receive a receipt or other written documentation evidencing the loan, with the exception of a promissory note (hereinafter “Promissory Note”) dated January 18, 1979 at Honolulu, Hawaii, which was signed by Wong, as payee, and Has-kins, Moix, Munson, Mary H. Moix, and Francis A. Munson, as makers (hereinafter “Makers”), the latter two of which were the wives of Moix and Munson, respectively. Wong testified that he insisted that the wives also sign the promissory note because he wanted to proceed against the properties held as tenants by the entirety in the event of default.
10. At the time of the transaction on January 18, 1978, there was no mention at all that the $50,000.00 was being borrowed on behalf of 765 Associates.
11. Under the Promissory Note, the Makers promised to pay Wong equal installments of interest only in the amount of $875.00 on or about the first day of each month commencing February 1, 1979 and ending July 18,1980, with the principal sum of $50,000.00 due and payable at the termination of the Promissory Note or earlier at the option of the Makers, in which instance interest would be pro-rated accordingly.
12. Wong had no personal knowledge of what was done with the amount of $50,-000.00 which he turned over to Haskins, Moix, and Munson. There is some evidence that said amount of $50,000.00 was deposited into a 765 Associates checking account on or about January 19, 1979 through a check issued by Valhalla, Ltd. in the total amount of $155,000.00.
13. The proposed partnership among Moix, Munson, and Haskins was never formed. Instead, on February 5, 1979, through the filing of a Certificate of Amendment of Limited Partnership with the Department of Regulatory Agencies of the State of Hawaii, Haskins, Moix, and Munson, together with Michael T. Perry (“Perry”) were added as general partners of 765 Associates, while Bergan withdrew as a general partner and Haskins withdrew as a limited partner, thereof. At that time, 765 Associates had either already obtained or intended to obtain an interest in the Pirates Cove restaurant.
14. Subsequently, interest payments under the Promissory Note in the amount of $875.00 each were from time to time paid to or for the benefit of Wong by (1) Moix, Munson, and/or Haskins, (2) Valhalla, Ltd., and (3) 765 Associates and Pirates Cove, which said interest payments were made during the period from February of 1979 up to April or May of 1980.
15. For instance, Moix, Munson, and/or Haskins made periodic payments to Wong in the amount of $875.00. Further, Valhalla, Ltd. issued three (3) checks to the Hick-am Federal Credit Union on behalf of Wong in the amount of $875.00.each, which said checks were dated June 5, 1979, June 13, 1979, and August 1, 1979. Lastly, 765 Associates issued similar checks directly to Wong dated September 3, 1979, October 2, 1979, and December 1, 1979, the address on said checks being 765 Kamehameha Highway, while Pirates Cove issued similar checks dated November 9,1979, February 1, 1980 and February 29, 1980, Pirates Cove being the dba of 765 Associates and located at 2005 Kalia Road. During the period covering the issuance of the foregoing checks, Haskins simultaneously controlled the checking account of Valhalla, Ltd., 765 Associates, and Pirates Cove and often treated the same as one account or as his personal account.
16. On April 30, 1979, by Certificate of Amendment of Limited Partnership, Moix and Munson withdrew as general partners.
17. 765 Associates filed herein a Voluntary Petition Under Chapter 11 on February 1, 1980, and an Amended Voluntary *870Petition Under Chapter 11 on February 4, 1980. 765 Associates continued to operate its business and manage its property as a debtor-in-possession. It is noted that when 765 Associates filed its Schedule A-3 shortly thereafter, Wong was not listed thereon as an unsecured creditor of 765 Associates.
18. After Wong stopped receiving monthly interest payments of $875.00 from Pirates Cove in April or May of 1980, he consulted an attorney, Ronald G. S. Au, in an effort to seek repayment of the amount of $50,000.00 loaned by him to Haskins, Moix and Munson.
19. Consequently, on or about June 21, 1980, Wong, Moix, and Munson entered into an Agreement to Reimburse, wherein and whereby Moix and Munson agreed to pay to Wong the total of $50,875.00, which included the principal sum of $50,000.00 plus unpaid interest in the amount of $875.00, as follows:
$10,875.00 by June 26, 1980
$20,000.00 by August 1, 1980
$20,000.00 by September 1, 1980
Moix and Munson also agreed to pay all attorney’s fees and costs in these bankruptcy proceedings incurred by Wong.
19. In consideration thereof, Wong agreed to prosecute for collection the Promissory Note in these bankruptcy proceedings. Wong further agreed that if he did collect on the Promissory Note from 765 Associates and Haskins in these bankruptcy proceedings, he would turn over any funds so collected to Moix and Munson.
20. Moix and Munson did pay the total amount of $50,875.00 to Wong pursuant to and in compliance with the Agreement to Reimburse. However, Wong did nothing to prosecute for collection the Promissory Note as he had agreed as aforesaid. Instead, it was Haskins who subsequently sought to include Wong as an unsecured creditor of 765 Associates on Schedule A-3 theretofore filed by 765 Associates. In fact, Jeffrey M. Taylor (hereinafter “Taylor”), the then attorney for Moix and Munson, made inquiries of 765 Associates as to when Wong would be so listed as an unsecured creditor of 765 Associates.
21. Consequently, on September 29, 1980, 765 Associates filed herein an Application For Leave to Amend Schedule A-3, therein requesting, inter alia, that since 765 Associates inadvertently neglected to include Wong on Schedule A-3, Schedule A-3 be amended to include Wong as an unsecured creditor in the amount of $50,000.00. On the same date, the Court entered an Order Granting Leave to Amend Schedule A-3, therein granting 765 Associates leave to amend Schedule A-3 so as to include Wong on Schedule A-3 and further ordering that since Wong’s claim against 765 Associates was not listed as disputed, contingent, or unliquidated, Wong may, but need not, file a proof of claim in these proceedings. On September 29, 1980, Schedule A-3 was in fact amended to include Wong as an unsecured creditor of 765 Associates in the amount of $50,000.00, which said amendment was sworn to under oath by Haskins on behalf of 765 Associates.
22. On May 29, 1981, the Court entered an Order Approving Disclosure Statement, Combined with Notice Regarding Debtor’s Chapter 11 Plan of Reorganization, where it is stated that “June 15, 1981 is fixed as the last day for filing a proof of claim.... ”
23. On June 18, 1981, Wong filed herein a proof of claim through his attorney, Taylor, whom Wong retained in early 1981. Said proof of claim, which was designated as number 76, asserted therein a general unsecured claim against the Debtor in the amount of $50,000.00 for monies lent and was alleged to be based on the Promissory Note executed by Haskins, Moix, and Mun-son, and the wives of Moix and Munson.
24. On June 24, 1981, an Order was entered confirming Debtor’s plan of reorganization, which called for payments to unsecured creditors of thirty per cent (30%) of their claims.
25. Under the plan, the first payment of seven and a half per cent (71/2%) was to be made thirty (30) days after confirmation, and an additional seven and a half (71/2%) was to be paid every thirty (30) days there*871after until fully paid as provided under the plan. Thus, the first payment was due July 25, 1981 and the second payment was due August 25, 1981.
26. 765 Associates did not make any payment to Wong. Instead, it filed an Objection to Allowance of Claim (Proof of Claim No. 76) on September 23, 1981, objecting to the allowance of Wong’s claim against 765 Associates on the grounds that (1) the claim was not timely filed, (2) the Debtor was not liable for the satisfaction of the claim, and (3) the claim has been fully satisfied.
27. At the trial on March 29, 1982, the Court ruled that the proof of claim of Kalfred K. F. Wong was deemed filed since the Order of May 29, 1981 was ambiguous. Therefore, the issue before this Court is whether or not the Debtor is liable for the satisfaction of Proof of Claim Number 76.
28. To the extent that the foregoing Findings of Fact constitute Conclusions of Law, they shall be so considered.
CONCLUSIONS OF LAW
1. When Wong turned over his check of $50,000.00 to Moix, Munson and Haskins at the office of Valhalla, Ltd. on January 18, 1979, he received in return a promissory note signed by Moix, Munson and Haskins as makers and Wong as payee. Wong made the loan to Moix, Munson and Haskins because he was a personal friend of Moix.
2. After the initial note was received, Wong insisted that the wives of the makers also sign the note. Thus, at a subsequent date, Mrs. Moix and Mrs. Munson signed the note. Wong testified that he wanted the wives to sign because he wanted to proceed against the properties held as tenants by the entireties in the event of default. It is clear that when Wong accepted the note, he accepted the note as that of Moix, Munson and Haskins and not as a partnership obligation of 765 Associates.
3. At the time of the transaction on January 18,1979, the partnership 765 Associates was in existence. Haskins was then a limited partner of 765 Associates. Moix and Munson were not members of the partnership. Thus, none of the three had the authority to borrow on behalf of 765 Associates.
4. The evidence shows that Haskins owned Valhalla, Ltd. The evidence also shows that on February 5, 1979, Haskins, Moix and Munson, along with Perry, were added as general partners of 765 Associates. Bergan withdrew as general partner and Haskins withdrew as a limited partner. Then, on April 30, 1979, Moix and Munson withdrew as general partners of 765 Associates. The evidence further shows that Has-kins used the funds of Valhalla, Ltd., and 765 Associates as though they were his own.
5. After the execution of the promissory note, the first interest payments were made jointly by Moix, Munson and Haskins, even though 765 Associates was in existence. Then, several interest payments were made through the checks of Valhalla, Ltd. owned by Haskins. The checks were dated June 5, June 13 and August 1, 1979, all after Moix and Munson had withdrawn from 765 Associates. Then, thereafter, until the petition in bankruptcy of 765 Associates was filed on February 1, 1980, the checks to Wong were issued by 765 Associates and Pirates Cove, which was the dba of 765 Associates, both controlled by Haskins.
6. After the Petition had been filed and when Wong did not receive the interest payments pursuant to the promissory note, Wong sought the advise of counsel who recommended that Wong pursue the makers. As a result, Wong confronted Moix upon whom he had relied upon for payments.
7. The original schedule did not list Wong as an unsecured creditor. After Wong, Moix and Munson entered into the Agreement to Reimburse on June 21, 1980, Wong made no effort to collect on the promissory note to reimburse Moix and Munson. It was Haskins, one of the original co-makers of the note and Taylor, the then attorney for Moix and Munson, who sought to have Wong listed as an unsecured creditor. As a result, on September 29, 1980, Wong was listed as an unsecured cred*872itor with a claim of $50,000.00 by Haskins who is one of those personally liable on the promissory note.
8. The foregoing shows that Wong was not a creditor of 765 Associates but was a creditor of Moix, Munson and Haskins. Haskins listed Wong as a creditor of 765 Associates upon the insistence of Moix and Munson and Taylor and as a means to avoid personal liability on the promissory note.
9. It appears that the sum of $50,000.00 turned over to Moix, Munson, and Haskins by Wong could have been turned over to 765 Associates by a check of Valhalla, Ltd.
10. However, the note on which Wong relies for his Proof of Claim reflects the individual obligations of Moix, Munson, and Haskins, along with Mrs. Moix and Mrs. Munson. The note was never accepted by Wong on the credit of the partnership. Wong always looked to Moix, Munson and Haskins for payment of the note.
11. The transactions subsequent to the making and delivery of the note on January 18,1979 are not sufficient to make the note a partnership obligation. A new note from 765 Associates to Wong was never executed to replace the note of January 18, 1979. None of the general partners informed Wong that 765 Associates had assumed the obligation under the note. Haskins as the general partner of 765 Associates dba Pirates Cove, and being one of the obligors under the note, treated 765 Associates as his own and directed the Treasurer of 765 Associates or Pirates Cove to issue the checks to Wong.
12. In the case of Meyer v. Linch, 145 Neb. 1, 15 N.W.2d 317 (1944), a suit was brought against a partnership where it was alleged that one of the partners had borrowed money on a note which he had personally signed and wherein the partnership received the consideration from the note. The Court held that it was not sufficient to show that the consideration of the note was advanced to the partnership. The note must also be accepted by the payee on the credit of the partnership.
13. In the instant case, Wong accepted the note on the credit of Mr. and Mrs. Moix, Mr. and Mrs. Munson and Mr. Haskins. Wong did not accept the note on the credit of 765 Associates. Furthermore, it is not clear as to where the $50,000.00 from Wong ultimately went or for what purpose it was used.
14. Wong was paid by Moix and Munson who were two of the makers of the note. Being paid in full by the obligors of the note, Wong has no claim against 765 Associates, which was not a party to the note.
Let Judgment be entered accordingly. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489338/ | MEMORANDUM AND ORDER
ROBERT L. EISEN, Bankruptcy Judge.
This cause came to be heard on the plaintiff-debtor’s application for summary judgment as to liability and the defendant’s motion for entry of summary judgment in its favor. The court, being fully advised in the premises and having carefully considered the pleadings and memoranda, hereby denies the plaintiff-debtor’s application and grants the defendant’s motion for summary judgment.
The plaintiff-debtor (Toni’s) claims that the defendant (Bank) who is the lessor of the premises in which Toni’s store is located breached its covenant not to lease to a competitor of Toni’s in the same shopping center. The Bank contends that Toni’s lacks standing to sue for breach of covenant, that the Bank did not breach the covenant and that even if the Bank had breached the covenant, Toni’s acquiesced in such breach and has waived its right to assert the claim.
FINDINGS OF FACTS
1. On January 10, 1970 Antoinette Cer-one, d/b/a Toni’s Conversation Clothes, as lessee entered into a written lease agreement with the defendant Bank as lessor, for the premises located within the Tradewinds Shopping Center, Hanover Park, Illinois.
2. The lease agreement between the parties contained a covenant that the landlord Bank, so long as Toni’s was not in default, would not rent any space in the shopping center to a tenant whose principal business was a full line woman’s wear shop in Toni’s price range of medium to better.
3. The Lease Agreement was amended on June 14, 1971, November 3, 1972 and September 8,1978. All lease agreements as amended contained the restrictive covenant regarding competitors.
4. In December of 1975, Antoinette Cer-one, d/b/a Toni’s Conversation Clothes, incorporated her business as an Illinois Corporation under the corporate name Toni’s Conversation Clothes, Inc.
5. On September 1, 1976 under a sublease with Zayre, Inc., “Hit or Miss”, a discounter of woman’s apparel, opened a store in the Tradewinds Shopping Center. The sublease from Zayre, who had been a tenant in the shopping center since October 30, 1968 was not subject to approval from the lessor Bank. In fact, “Hit or Miss” was an affiliate of Zayre and Zayre’s lease in *896provision 17.2(c) specifically stated that Zayre could at any time during the term of the lease assign its interest in the lease or sublet the whole or any part of the demised premises for any purpose to any business organization affiliated with Zayre.
6. On September 3, 1976 and on numerous other occasions the plaintiff orally informed the Bank through its agent, Jay Heyman of Landau and Heyman, Inc. of its displeasure with the presence of “Hit or Miss” and contended that this was a direct violation of the restrictive covenant in its lease agreement.
7. On May 20, 1981 Toni’s filed a voluntary petition for reorganization under Chapter 11 of the United States Bankruptcy Code.
8. On August 6, 1981 the Bank filed an Application to Compel Adoption or Rejection of the Lease Agreement and on September 21, 1981 an order was entered by this court finding that Toni’s elected to adopt the lease as modified.
DISCUSSION
Section 56 of the Federal Rules of Civil Procedure provide the standards for when it is proper to render a summary judgment. Section 56(c) states that “the judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.”
This case presents an unusual situation. Toni’s presented a petition for summary judgment. The Bank both responded to that petition and filed its own motion for summary judgment. As a result, clearly both parties contend that there are no material issues of fact and this case is ripe for summary judgment in someone’s favor.
While Toni’s and the Bank’s recitation of the facts are not identical, no material controversy over them exists. Therefore, summary judgment is proper based on a resolution of the following law questions:
1. Whether or not Toni’s is a proper third party beneficiary under the lease to bring this action.
2. Whether or not the Bank is guilty of a breach of the lease’s restrictive covenant.
3. Whether or not if the Bank did breach its lease, did Toni’s nevertheless waive its right to bring this action due to lack of notice or unreasonable delay.
Proper Parties
It is not disputed by the parties that the lease entered into listed the tenant as Antoinette Cerone, d/b/a Toni’s Conversation Clothes. When Toni’s incorporated in 1975 the tenant’s name under the lease was not changed nor was it ever changed in subsequent leases. As a result, the Bank contends that Toni’s may not properly bring this action and only Antoinette Cerone herself could properly bring this action. The rule in Illinois is well established that where a person makes a promise to another, based upon valid consideration for the benefit of a third person, such third person may maintain an action on the contract. Joslyn v. Joslyn, 386 Ill. 387, 54 N.E.2d 475, Hartman v. Pistorius, 248 Ill. 568, 94 N.E. 131, Harts v. Emery, 184 Ill. 560, 56 N.E. 865. The test regarding third party beneficiaries is whether the benefit to the third person is direct to him or is but an incidental benefit to him arising from the contract. The beneficiary must be identified before he has an enforceable right but it is not necessary that he should be identified or identifiable at the time the contract is made. Avco Delta Corp. Canada Ltd. v. U. S., 484 F.2d 692 (C.A. 7 1973).
When the corporation Toni’s Conversation Clothes, Inc. was formed, the lease was not changed to so reflect that fact. The lease, however, clearly reflected at all times that it was made for the benefit of Toni’s Conversation Clothes. The Bank knew that Toni’s had incorporated and accepted rent checks from the corporation. Clearly, the intention of the parties as gleaned from the entire lease and surrounding circumstances must have been to have Toni’s directly benefit from that lease. *897Carson Pirie Scott & Co. v. Parrett, 346 Ill. 252, 178 N.E. 498 (1931). Therefore, Toni’s is a proper third party beneficiary to bring this action under the lease.
Breach of the Lease
Toni’s is contending that in late 1976 the woman’s wear shop “Hit or Miss” was allowed to lease space in the Tradewinds Shopping Center in violation of the restrictive covenant contained in Toni’s lease. Toni’s has submitted affidavits based on personal knowledge from Antoinette Cerone, president of Toni’s and Carol Reed, corporate officer of the company which operates “Hit or Miss”. These affidavits state clearly that Toni’s and “Hit or Miss” carry similar lines of merchandise. Further, the Bank has not contradicted Toni’s affidavits with their own affidavits or other relevant evidence as is required under § 56(e) of the Federal Rules of Civil Procedure. Adickes v. S. H. Kress and Co., 398 U.S. 160, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970), Morrison v. Walker, 404 F.2d 1046 (C.A. 9 1968). Therefore, there is no dispute as to the fact that “Hit or Miss” is a “tenant whose principal business is a full line of women’s wear shop in tenant’s price range of medium to better” as contemplated by the lease agreement.
The real issue here revolves around the fact that the Bank did not enter into the lease agreement with “Hit or Miss”. On September 1, 1976 “Hit or Miss” obtained a sublease in the Tradewinds Shopping Center from Zayre, Inc. Zayre had been a tenant in the center since October 30, 1968, prior to the time Toni’s became a tenant. The Zayre lease explicitly allowed Zayre at any time during the term of its lease to assign its interest in the lease or sublet all or any part of the demised premises for any purpose to any business organization affiliated with Zayre. “Hit or Miss” is an affiliate of Zayre and therefore the lessor Bank had no control or right of approval over the sublease to “Hit or Miss”.
As a result of the foregoing, Toni’s can maintain no breach action against the Bank. The lease agreement contemplated that the Bank would lease no premises to a competitor of Toni’s. The Bank here did not so lease any premises. “Hit or Miss” obtained its position as a sublessor from the tenant Zayre, Inc. Unless a lessor reserves the right to approve subleasing or assignments, the lessee is not prohibited from subletting or assigning its right under the lease. Edelman v. F. W. Woolworth & Co., 252 Ill.App. 142 (1929), Glanz v. Halperin, 251 Ill.App. 572 (1929). Here not only did the Bank have no reserved right to approve subletting, the lease with Zayre specifically allowed Zayre to so sublet.
Covenants not to compete as such do not run with the land. The restraint goes no further than the words extend it. Postal Telegraph—Cable Co. v. Western Union Telegraph Co., 51 Ill.App. 62 (1893). Here the lease prohibits the lessor Bank from leasing to a competitor of Toni’s. The Bank has not violated that lease provision. The allowing of “Hit or Miss” to open up a store in the Tradewinds Shopping Center was not under the direction, control or approval of the Bank.
Given the above, it is not necessary to and this court does not reach the merits on whether Toni’s waived its right to bring the breach of lease agreement action.
CONCLUSIONS OF LAW
It is well established in Illinois that where a person makes a promise to another based upon valid consideration and that promise is for the clear benefit of a third party, that third party may maintain an action on that lease or contract. Clearly the corporate debtor here was a third party beneficiary to the lease agreement at issue and a proper party to bring this action.
Second, it has long been recognized that a tenant may bring an action against his landlord for breach of covenant. However, restraints under covenants go no further than the words extend them. Here the lessor did not breach any part of the lease. The tenant Toni’s is complaining about is a sublessee of Zayre, Inc. The landlord had no control over that sublease agreement nor *898did it or could it have approved or disapproved of such agreement.
WHEREFORE, IT IS HEREBY ORDERED that the plaintiff-debtor’s application for summary judgment as to liability is denied and the defendant Bank’s motion for summary judgment in its favor is granted. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489339/ | OPINION
WILLIAM A. KING, Jr., Bankruptcy Judge.
This case reaches the Court on a complaint by the debtor to recover unpaid accounts receivable. Trial on the complaint was held on March 16, 1982. Several motions were made by the defendants at the hearing. The Court reserved decision on these motions and received the testimony in full. Upon review of the case, the Court will dismiss the complaint.1
Although the evidence introduced at trial was lengthy and confusing, the Court finds a valid assignment of the account existed. The debtor, therefore, was not a proper party-plaintiff. Upon introduction of certain testimony and exhibits, this fact was obvious. Disposition of the case, however, was not so simple. Counsel for the defense were unable to decide whether this motion should be one for summary judgment or dismissal. The Court will treat the motion as a motion to dismiss and dismiss the complaint.
It is uncontroverted by any party that an assignment of Delaware Fibre’s accounts receivable was made to Fidelity Bank. The issue arose at trial, however, as to whether the debtor was the proper party to collect these accounts. The testimony of the presi*922dent of the debtor showed that, since the inception of the corporation, Fidelity Bank had an assignment of all receivables. On the other hand, he testified that Delaware was contractually bound to collect these accounts.2 As a result, Delaware claims, despite the assignment, that it is the proper party to maintain this action.
The Court takes judicial notice that the Uniform Commercial Code, as adopted in Pennsylvania, allows parties to assign rights so long as the assignment does not materially alter the duty or increase the burden on the other party.3 The Court, furthermore, finds this assignment to have been proper under the law of Pennsylvania.
In the briefs submitted to the Court, however, none of the parties adequately addressed the assignment issue. All of the parties neglected to cite any authority in support of their respective positions. Milwaukee Motive Mfg. Co. did not even address the issue. Co-defendant, Electro-En-ergy Supply, Inc., strenuously urged the Court to treat the assignment as dispositive of the case. This assertion was entirely unsupported by any authority. As a result, the Court is forced to decide the case on the slight basis presented by the parties.
In spite of these glaring deficiencies, the Court finds that Delaware Fibre does not have an interest in these accounts. The invoices provided as evidence by both Delaware and Milwaukee are markedly different. The invoices submitted by the defendant contain the following notice of assignment:
This account has been assigned to and is payable only to
The Fidelity Bank
Accounts Receivable Secured Lending Unit
Broad and Walnut Sts.
Phila., PA 19109
To whom prompt notice must be given of any discrepancies, merchandise returns, claims for shortages, non-deliveries, etc.
All said invoices were received into evidence without objection.4 The plaintiff’s exhibits do not contain this notice of assignment.
The notice of assignment does not inform the defendants that the debtor retains any interest in the accounts. Unless an assignment is qualified, it is properly considered the transfer of the whole interest. Melnick v. Pa. Co. for Banking & Trusts, 180 Pa.Super. 441, 119 A.2d 825 (1956); In re Purman’s Estate, 358 Pa. 187, 56 A.2d 86 (1948). There is no evidence that the defendants were ever informed that Delaware retained an interest in these accounts. On this basis, the plaintiff’s case must fail.
The invoices serve as a final expression of the parties’ intent. The parties have reduced their understanding to a clear and unambiguous writing. The Court need look no further than the writing itself to give effect to that understanding. West Penn Admin. Inc. v. Pittsburgh National Bank, 289 Pa.Super. 460, 433 A.2d 896 (1981).5
Rule 17(a) of the Federal Rules of Civil Procedure6 provides that: “Every action shall be prosecuted in the name of the real party in interest.” In this case, the real party in interest is Fidelity Bank because the Court has found that the assignment was complete. Wilcox v. Regester, *923417 Pa. 475, 207 A.2d 817 (1965). The plaintiffs, therefore, urge the Court to immediately and summarily dismiss the complaint.
Rule 17(a), however, provides that:
No action shall be dismissed on the ground that it is not prosecuted in the name of the real party in interest until a reasonable time after objection for ratification of commencement of the action by, or joinder or substitution of, the real party in interest...
F.R.Civ.P. 17(a). If the Court would set an appropriate time for the joinder of Fidelity, the resulting adversary action would only be peripherally related to the underlying bankruptcy case. The defendants assert that this Court would not have jurisdiction over such a matter. In doing so, they blithely overlook certain provisions of the Bankruptcy Reform Act. Pursuant to Title 28 of the United States Code, the Bankruptcy Court has jurisdiction over ... “all civil proceedings arising under title 11 or arising in or related to cases under title 11.”7
If Fidelity were joined as a necessary party-plaintiff, however, the Court would abstain from hearing the action. The Court finds no reason to bring these defendants back into the Bankruptcy Court for this district, in order to allow them to defend a suit against a party not in bankruptcy. The Court would abstain from hearing the matter pursuant to the abstention power granted by the Bankruptcy Reform Act.8
In conclusion, in spite of the provisions of F.R.Civ.P. 17(a), the Court will dismiss the plaintiff’s complaint.
. This Opinion constitutes the findings of fact and conclusions of law required by Rule 752 of the Rules of Bankruptcy Procedure.
. Notes of Testimony, hearing held on March 16, 1982, at p. 16.
. See, 12A Pa.Stat.Ann. § 2-210 (Purdon), which provides in pertinent part:
(2) Unless otherwise agreed all rights of either seller or buyer can be assigned except where the assignment would materially change the duty of the other party, or increase materially the burden or risk imposed on him by his contract, or impair materially his chance of obtaining return performance. A right to damages for breach of the whole contract or a right arising out of the assign- or’s due performance of his entire obligation can be assigned despite agreement otherwise.
. Defendant’s Exhibits 1, 2 and 3. Notes of testimony at p. 65 and 69.
. See also, 12A Pa.Stat.Ann. § 2-202.
. Made applicable to Bankruptcy Court by Rule 717 of the Rules of Bankruptcy Procedure.
. 28 U.S.C. § 1471(b) and (c). Section 405(b) of the Bankruptcy Reform Act provides that these sections will be in effect from October 1, 1979 through March 31, 1984. 92 Stat. 2685.
. 28 U.S.C. § 1471(d) provides that:
(d) Subsection (b) or (c) of this section does not prevent a district court or a bankruptcy court, in the interest of justice, from abstaining from hearing a particular proceeding arising under title 11 or arising in or related to a case under title 11. Such abstention, or a decision not to abstain, is not reviewable by appeal or otherwise. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489340/ | OPINION
EMIL F. GOLDHABER, Bankruptcy Judge:
The issue before us springs from the defendant’s motion for summary judgment. The question is which statute of limitations is applicable to the instant complaint brought by the trustee against the defendant, the former president and sole shareholder of the bankrupt, to recover monies which the defendant allegedly wrongfully diverted from the bankrupt to his own use. We conclude that the appropriate statute of limitations is the six-year statute asserted by the trustee, rather than the two-year statute urged by the defendant. Accordingly, we conclude that the instant complaint is not barred by the statute of limitations and we will, therefore, deny the defendant’s motion for summary judgment.
The facts of the instant case are as follows: 1 On December 26, 1978, an involuntary petition in bankruptcy under the Bankruptcy Act (“the Act”)2 was filed against Pasco Tobacco Co., Inc. (“the bankrupt”) and, on January 5, 1979, an.order of adjudication was duly entered. On November 27, 1981, Fred Zimmerman, the trustee of the bankrupt’s estate, filed a complaint against William S. Rosenthal (“the defendant”) to recover certain funds of the bankrupt which the trustee alleged were wrongfully diverted by the defendant from May, 1977, through March, 1978. The defendant responded by filing a motion for summary judgment, asserting that the trustee’s complaint is barred by the statute of limitations, which the defendant asserted was two years. The trustee answered that motion by arguing that the appropriate statute of limitations for the instant complaint is a six-year statute.
Section lie of the Act provides in relevant part:
A receiver or trustee may, within two years subsequent to the date of adjudication or within such further period of time as Federal or State law may permit, institute proceedings in behalf of the estate upon any claim against which the period of limitation fixed by Federal or State law had not expired at the time of the filing of the petition in bankruptcy.3
The defendant argues that the pertinent state statute of limitations is that found in § 5524(3) of title 42 of the Pennsylvania Consolidated Statutes. That section provides, in relevant part:
The following actions and proceedings must be commenced within two years:
(3) An action for taking, detaining or injuring personal property, including actions for specific recovery thereof.4
The trustee contends, however, that the relevant statute of limitations is that contained in § 5527(6) of title 42 of the Pennsylvania Consolidated Statutes, which provides:
The following actions and proceedings must be commenced within six years:
*960
(6) Any civil action or proceeding which is neither subject to another limitation specified in this subchapter nor excluded from the application of a period of limitation by section 5531.5
On first impression it appears that the section cited by the defendant is applicable herein because the complaint filed by the trustee can be characterized as an action to recover personal property (the funds of the bankrupt) wrongfully taken by the defendant. However, on examination of the legislative history to title 42, we conclude that the applicable statute of limitations in the instant case is the six-year statute cited by the trustee. The Disposition Table and official notes to title 42 state that among the statutes which were recodified as § 5527(6) and given a six-year statute of limitations was § 41 of title 12 of the Pennsylvania Statutes. That section provided:
§ 41. Limitation of suits against stockholders and directors.
It is hereby declared to be the true intent and meaning of the statutes of limitation, that no suit, at law or in equity, shall be brought or maintained against any stockholder or director in any corporation or association, to charge him with any claim for materials or moneys for which said corporation or association could be sued, or with any neglect of duty as such stockholder or director, except within six years after the delivery of the materials or merchandise, or the lending to or deposit of money with said corporation or association, or the commission of such act of negligence by such stockholder or director.6
Prior to the recodification of § 41 in § 5527 of title 42, the Pennsylvania courts consistently applied the six-year statute of limitations of § 41 to suits against corporate stockholders and directors for their alleged misconduct, including the negligent diversion of corporate funds to their private use.7 We conclude that the instant complaint by the trustee against the defendant fits within the category of cases which were governed by § 41 of title 12 before its repeal. We further conclude that the Pennsylvania legislature has provided that those cases are to continue to have a six-year statute of limitations by recodifying § 41 of title 12 in § 5527(6) of title 42. Consequently, we conclude that the action by the trustee herein is not barred by the statute of limitations and we will, therefore, deny the defendant’s motion for summary judgment.
. 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 govern petitions filed before that date. The Bankruptcy Reform Act of 1978, Pub.L.No.95-598, § 403, 92 Stat. 2683 (1978).
. 11 U.S.C. § 29(e) (repealed 1978) (emphasis added). See, e.g., Feldman v. Philadelphia National Bank, 8 C.B.C. 528 (E.D.Pa.1976).
. 42 Pa.Cons.Stat. § 5524(3).
. 42 Pa.Cons.Stat. § 5527(6).
. Pa.Stat.Ann. tit. 12, § 41 (Purdon) (codified with differences in language at 42 Pa.Cons. Stat. § 5527(6).
. See, e.g., Johns v. Cheeseman, 457 Pa. 414, 322 A.2d 648 (1974); Ebbert v. Plymouth Oil Co., 338 Pa. 272, 13 A.2d 42 (1940). | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489342/ | MEMORANDUM AND ORDER ON MOTION TO ADD FRANK PHELPS AS AN UNSECURED CREDITOR
CHARLES J. MARRO, Bankruptcy Judge.
The Motion of Mary J. New to Amend Schedule A-3 by adding Frank Phelps as an unsecured creditor came on for continued hearing, after notice.
The Debtors, Frederick Samuel New and Mary J. New, filed their original Petition for Relief under Chapter 7 on March 17, 1981. Under Schedule A-3, Frank Phelps, RD # 1, Brandon, VT 05733, was listed as an unsecured creditor for rent and cattle, in the sum of $6,055.00. Notice of the bank*14ruptcy was mailed in due course and it was received by him.
The Debtors had a lease with Phelps for certain land which they used for the operation of their farm. Under this lease they were obligated to pay any taxes assessed against the property by the Town of Orwell. When they filed their Petition for Relief they were in the process of obtaining a divorce with debtor, Frederick Samuel New, represented by Chester S. Ketcham, Esquire, and debtor, Mary J. New, represented by Jeffrey T. Smith, Esquire. The Petition for Relief was actually prepared by Attorney Ketcham. The taxes for which the Debtors were responsible and payable to Frank Phelps, landlord, were actually listed under Schedule A-l as being owed to the Town of Orwell, Vermont. During the process of the preparation of the Petition and Schedules, Mary J. New reviewed them but she did not particularly notice that the taxes were listed as being owed to the Town of Orwell, Vermont. It was the intention of debtor, Mary J. New, that the obligation to Frank Phelps for taxes be discharged. The Debtors did, however, owe taxes to the Town of Orwell on property owned by them and not subject to the lease from Frank Phelps.
Sometime subsequent to the filing of the Petition for Relief the Debtors sold their Orwell property and it was agreed that money be held in escrow to cover taxes owed to Phelps under the lease pending the determination of whether they were actually dischargeable.
The original Bankruptcy Petition was processed, and the Debtors received their discharge and the case was closed on November 17, 1981. On March 18, 1982 the debtor, Mary J. New, filed a Petition to Reopen so that she could amend Schedule A-3 to include Frank Phelps as an unsecured creditor for the taxes due under the lease. The Application to Reopen was granted and the Motion to Amend was subsequently filed.
At the hearing Phelps through his attorney tried to introduce testimony that the Debtors had wrongfully sold cattle which was subject to a security interest in favor of Phelps prior to the filing of the Petition, apparently to establish fraud which would except the obligation to Phelps from the discharge. This evidence was excluded on the theory that it was not relevant to the Motion to Amend which was being considered by the Court.
Since Frank Phelps was mailed and received a notice of the bankruptcy he was then in a position to file a Complaint to Determine Dischargeability within the time fixed in the Order for the Meeting of Creditors. However, since he did not do so he was bound by the discharge which was subsequently granted.
It is true that the debt was listed in the schedules as being for rent and cattle and not taxes but this made no material difference since after receiving the notice he could have taken whatever action he thought necessary to protect his right as a creditor including objecting to the discharge.
The only effect of the amendment, if allowed, is to add another type of obligation; i.e., “Real estate taxes on land leased from Frank Phelps since the - day of _, 1970.”
The Court fails to see that there has been any prejudice to Phelps based on legal grounds.
ORDER
■ Now, therefore, upon the foregoing,
IT IS ORDERED that the Amendment to Schedule A-3 adding Frank Phelps as an unsecured creditor for real estate taxes is ALLOWED. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489343/ | ORDER
ROBERT L. EISEN, Bankruptcy Judge.
This matter came to be heard on the defendant’s, Allied Van Lines, Inc., motion requesting this court to abstain from exercising its jurisdiction regarding the debtor’s adversary complaint filed against defendant. The court having carefully considered the memoranda filed by the parties and being fully advised in the premises, does hereby deny defendant’s motion.
The defendant asserts in support of its motion that the debtor’s adversary complaint raises unsettled questions of state law that would more properly be dealt with in a state forum and that the time it would take for this cause to come to trial in a state forum would not be unreasonable nor cause harm to the debtor. The plaintiff-debtor alleges that under 28 U.S.C. 1471(d) it would not be in the interest of justice for the court to abstain and that abstention would cause considerable delay and ultimately harm the debtor.
FACTUAL BACKGROUND
In October of 1976 the defendant Allied instituted an action against the plaintiff-debtor, Federal Storage, in the U. S. District Court for the Northern District of Illinois seeking approximately $50,000 which amount Allied alleged Federal owed to it. Federal filed an answer to Allied’s complaint and a counterclaim against Allied alleging breach of its agency contract. On November 9, 1981 Judge McMillan dismissed Allied’s suit and Federal’s counterclaim for want of diversity jurisdiction. On December 18, 1981 Federal filed its volunr tary petition seeking relief under Chapter 11 of the Bankruptcy Code. Federal listed as its sole asset its claim against Allied. On December 31, 1981 Federal commenced this adversary proceeding against Allied seeking essentially the same relief it was seeking from Allied in its previously dismissed counterclaim.
DISCUSSION
28 U.S.C. 1471(b) confers upon bankruptcy courts original but not exclusive jurisdiction of all civil proceedings arising under title 11 or arising in or related to cases under title 11. Section 1471(d) authorizes the bankruptcy court to abstain from hearing particular proceedings when it would be in the interest of justice to do so.
In the present case, the defendant bases its request for abstention on an allegation that Federal’s claim involves unsettled questions of state law. Federal’s claims are for breach of contract and tortious interfer*16ence with contract. Neither of these claims involve unsettled questions of state law. The State of Illinois has long recognized actions for tortious interference with contract and has established very well defined standards on which to decide said cases. See Zamouski v. Gerrard, 1 Ill.App.3d 890, 275 N.E.2d 429 (1971), Belden Corp. v. Internorth, Inc., 90 Ill.App.3d 547, 45 Ill.Dec. 765, 413 N.E.2d 98 (1980), Swager v. Couri, 77 Ill.2d 173, 32 Ill.Dec. 540, 395 N.E.2d 921 (1979). Furthermore, Federal Courts in this District and Circuit have never hesitated to decide questions involving the tortious interference with contract. See Bailey v. Meister Brau, Inc., 535 F.2d 982 (CA 7 1976), Hannigan v. Sears, 410 F.2d 285 (CA 7 1969), Magnaflux v. Foerster, 223 F.Supp. 552 (N.D.Ill.1963) to name just a few.
The cause of action the defendant is asking the court to abstain from is the debtor’s only asset. The debtor has approximately $33,000.00 in priority liabilities and $294,-952.00 in non-priority liabilities. No extensive proceedings on this matter were ever held in the District Court and no past nor present pending state action on this claim exists. Given this situation the position taken by the U. S. Bankruptcy Court in Matter of Ebrights Refrigeration Equipment, Inc., 13 B.R. 546 (1981) is of consequence here:
The Criteria of whether the court should hear and resolve such matters should be such as to almost never countenance abstention unless based upon a determination that the results of the proceeding could not conceivably have any effect upon the estate being administered such as strictly in personam causes of action, like divorce.
Given that this cause of action is the debtor’s only asset the results of the proceedings will be vital to the administration of the debtor’s estate. Therefore, it would be in the interest of justice to refrain from abstention and resolve this matter as quickly and as efficiently as possible.
CONCLUSION
28 U.S.C. 1471(b) confers upon Bankruptcy courts original but not exclusive jurisdiction of all civil proceedings arising under title 11 or arising in or related to cases under title 11. § 1471(d) authorizes the bankruptcy court to abstain from hearing particular proceedings when it would be in the interest of justice to do so. Since no unresolved questions of state law are involved and this cause is the debtor’s only asset, it would not be in the interests of justice for this court to abstain.
WHEREFORE, IT IS HEREBY ORDERED that the motion of the defendant Allied Van Lines, Inc. requesting this court to abstain from exercising its jurisdiction is hereby denied. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489345/ | DECISION ON CONFIRMATION
BURTON PERLMAN, Bankruptcy Judge.
In this Chapter 13 proceeding, the debtors filed an amended plan on June 9, 1982 which is now before us for confirmation. A secured creditor, Reserve Savings and Loan Association (“Reserve”) had objected to confirmation. The parties by voluntary action resolved the objection, excepting only whether Reserve was entitled to include within its claim $795.00 in court costs, filing fees and attorney fees incurred by Reserve for the filing of its foreclosure proceeding in state court and costs in the present proceeding. Confirmation of the latest plan presented by debtors will be forthcoming after disposition of this question.
Payments to the Chapter 13 trustee under the proposed plan will be, depending upon resolution of the issue before us, $158.00 per month without the inclusion of the subject fees and costs, and $180.00 per month with the inclusion of such fees to the existing debt of $3614.44. Regular monthly mortgage payments are to be maintained outside the plan. The duration of the plan is estimated at 58 months.
Debtors’ petition lists Reserve, the holder of the real estate mortgage, in the amount of $30,069.45. An appraisal report of the *33subject property was submitted by the debtors which values the property at $28,-500.00. Since the report was not objected to by Reserve, we will treat it as determinative of the fair market value of the real estate.
The basis upon which Reserve asserts that it is entitled to include attorney’s fees, et cetera, within its cláim is that its contract so provides. Debtors’, on the other hand, contend that such expenses may not be included in the circumstances of the present case because of the statutory provision 11 U.S.C. § 506(b) and cases applying that provision, In Re Eastern Equipment Company, 11 B.R. 732 (Bkrtcy., S.D.W.Va., 1981) and In Re Sholos, 11 B.R. 782, (Bkrtcy., W.D.Pa., 1981). At the hearing we announced our holding that attorney’s fees for proceedings in this Court, which amount to $150.00, are in any case not allowable in view of the usual American rule regarding attorney’s fees. It will be understood, therefore, that the ensuing discussion relates to attorney’s fees and expenses in connection with proceedings in the state courts. As to these latter fees and expenses, we hold them not recoverable and not includable within Reserve’s claim. The basis for this holding is our interpretation of 11 U.S.C. § 506(b). The statute there provides:
“(b) To the extent that an allowed secured claim is secured by property the value of which, after any recovery under subsection (c) of this section, is greater than the amount of such claim, there shall be allowed to the holder of such claim, interest on such claim, and any reasonable fees, costs, or other charges provided under the agreement under which such claim arose.”
The uncontested facts in the case before us are that the value of the property is less than the amount of the claim. A longstanding principle of Bankruptcy law is embodied in section 506(b). Interest and other amounts to which the creditor may be entitled by reason of his agreement with his debtor may be recovered only to the extent that the value of the collateral provides a source for funding payment of these items. Since the requisite margin for payment of these amounts is not available upon a valuation of the collateral here involved, payment of the amounts sought by Reserve here cannot be allowed. See, In Re Eastern Equipment Co., 11 B.R. 732, 739-740 (Bkrtcy., S.D.W.Va., 1981); In Re Sholos, 11 B.R. 782, 784 (Bkrtcy., W.D.Pa., 1981).
The objection of debtors to the inclusion of the amount of $795.00 in the claim of Reserve is sustained. As a consequence, the plan presented by debtors providing for payments to the trustee in the amount of $158.00 per month is confirmed.
SO ORDERED. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8490292/ | FINDINGS OF FACT AND CONCLUSIONS OF LAW WITH RESPECT TO CLAIMS FOR ACCRUED SICK LEAVE
T. GLOVER ROBERTS, Bankruptcy Judge.
FINDINGS OF UNCONTESTED FACT
1. On September 24, 1983, Continental Air Lines, Inc. and Texas International Airlines, Inc. filed petitions for reorganization under Chapter 11 of the United States Bankruptcy Code, 11 U.S.C. § 1101, et seq. Upon filing the bankruptcy petition, Continental temporarily suspended all domestic service and on September 27, 1983, Continental began rebuilding the service by reinstating a limited portion of its domestic service, initially requiring fewer employees than immediately prior to bankruptcy.
2. The Debtors implemented new employment policies for each employee group which included changes in the way sick leave would be accumulated and paid. Generally, the new policies reduced the maximum amount of sick leave that could be accrued, and, in some cases, changed the rate at which sick leave would accrue each month. Employees in any group whose accrued hours exceeded the maximum had their accrued hours reduced to the new maximum, not to zero.
3. The Air Line Pilots Association (“ALPA”), the Union of Flight Attendants (“UFA”), the International Association of Machinists (“IAM”), and numerous union and non-union individuals have filed proofs of claims in this Court for millions of dollars in accrued sick leave pay. ALPA’s sick leave pay claim was withdrawn and treated as settled and dismissed with prejudice pursuant to this Court’s Order Relative To Claims, Controversies and Related *900Litigation dated October 31, 1985. UFA included its sick leave claim in its proof of claim for pre-petition wages and benefits filed on behalf of 2,665 flight attendants. These 2,665 flight attendants comprised all flight attendants on the pre-petition seniority list, including those subsequently terminated.
4. Debtors have sought summary judgment disallowing all accrued sick leave claims by or on behalf of terminated Continental employees on the grounds that neither the collective bargaining agreements between Debtors and UFA and IAM, nor the sick leave provisions of the pre-petition Corporate Policy Manual that applied to non-union employees and employees represented by the Transport Workers Union of America (“TWU”) created a right to payment for accrued but unused sick leave. Debtors have also sought, pursuant to 11 U.S.C. § 502(c), to have the accrued sick leave claims of terminated employees estimated to have zero value.
5. Debtors have requested that their motion, insofar as it applies to working Continental employees and to individuals who may return to work in the future, be held in abeyance. However, Debtors continue to press their motion with respect to individuals whose employment with Continental has been terminated. More specifically, Debtors have directed their motion at all employees who have been discharged, or who have resigned or retired from employment with Continental.
6. Neither the sick leave provisions of the collective bargaining agreements between Debtors and UFA or IAM, nor those of the pre-petition Corporate Policy Manual that applied to non-union employees and to employees represented by the TWU, created a right to payment for accrued but unused sick leave under any circumstances. No provision in either the collective bargaining agreements or the Corporate Policy Manual provide for payment for unused sick leave upon request or upon termination, resignation, retirement, furlough or other change of employment status. Rather, the collective bargaining agreements and the Corporate Policy Manual make clear that sick leave pay is a substitute for wages and is available only when an actual illness or injury causes an employee to be absent from work.
7. No employee of Continental subject to this motion has ever received a cash payment for the value of accrued but unused sick leave. It has never been the past practice of Continental to grant any cash payment for accrued but unused sick leave to any individual employee or to any member of an employee group with a currently pending sick leave claim.
8. Neither UFA, IAM, or TWU has ever filed a grievance or otherwise challenged Continental’s practice of not making cash payments for accrued but unused sick leave to employees upon request or upon termination, resignation, retirement, furlough or other change of employment status. Although individual Continental employees have occasionally filed grievances challenging Continental’s practice of not making such payments, such grievances have always been resolved with the union acknowledging that no such obligation exists.
9. UFA, IAM, TWU, the Official Union Labor and Pension Creditors Committee, the Non-Union Labor and Pension Creditors Committee, and various individual claimants have opposed Debtors’ motion upon the ground, generally, that the reduction of the maximum amount of sick leave that can be accrued diminished the value of that benefit to pre-petition employees who, at some point in their employment, might otherwise have been entitled to more sick leave than the new máximums would allow. However, since Debtors have requested that their motion be held in abeyance with respect to all working Continental employees and with respect to all individuals who may, in the future, return to work for Continental, these issues raised by these opposition arguments are, for the present, moot. TWU also challenges this Court’s jurisdiction to decide the allowability of sick leave claims. In addition, a group of non-union employee creditors filed a Cross-*901Motion For Partial Summary Judgment And Estimation Of Value Of Strike Leave Claims.
CONCLUSIONS OF LAW
1. TWU challenges the jurisdiction of this Court through its contention that any dispute concerning the status of accrued sick leave is required by the RLA to be submitted to a system board of adjustment. This contention is meritless because the bankruptcy courts have jurisdiction to decide all claims against an estate. 28 U.S.C. §§ 1334(a); 157(a), (b)(1), (b)(2)(B).
2. Bankruptcy courts also have discretion to resolve claims even if there exists another tribunal for such resolution. Zimmerman v. Continental Air Lines, 712 F.2d 55, 56 (3d Cir.1983), cert. denied, 464 U.S. 1068, 104 S.Ct. 699, 79 L.Ed.2d 165 (1984). TWU relies upon Matter of Gary Aircraft Corporation, 698 F.2d 775 (5th Cir.), cert. denied, 464 U.S. 820, 104 S.Ct. 82, 78 L.Ed.2d 92 (1983), asserting that Congress has committed authority to disallow claims of this type to a specialized tribunal, the system board of adjustment. However, Gary does not hold that bankruptcy courts have no jurisdiction over claims for which there exists another tribunal. Gary was decided on the basis of findings that deferral of a government contract claim to the Armed Services Board of Contract Appeal would not impair the satisfaction of other bankruptcy claims and that government contracts are extremely complex, technical and esoteric.
3. This issue involves bankruptcy claims administration. Submission of the sick leave claims at issue here to arbitration, through a system board of adjustment, could seriously impair the claims and interests of other creditors because resolution of such claims will directly affect the amount of funds available to other creditors. Further, there is nothing complex, technical or esoteric about the issue of whether the collective bargaining agreements or the Corporate Policy Manual provide for the payment of sick leave pay to employees in circumstances other than actual illness. Moreover, system boards of adjustment are not specialized tribunals, and there exists no special reason to defer to an arbitrator who would not necessarily be any more familiar with the particular contract language or past practice of the parties than would this Court. In these circumstances, deferral to arbitration is not required. See In re Amalgamated Foods, Inc., 41 B.R. 616 (Bankr.C.D.Cal.1984). Finally, unlike the situation in Gary, Continental does not have related claims against TWU which might require relitigation of the same issues in another forum. Consequently, the challenge to this Court’s jurisdiction to determine the allowability of accrued sick leave claims is rejected.
4. Even if this Court did not have jurisdiction to liquidate the accrued sick leave claims, it nevertheless has jurisdiction to estimate the value of sick leave claims. In deed, 11 U.S.C. § 502(c) requires the bankruptcy court to estimate the value of unliquidated claims where liquidation would unduly delay reorganization. Liquidation of these sick leave claims through arbitration would unduly delay Debtors’ reorganization. Furthermore, it has been held that courts may estimate the value of claims asserted on behalf of employees by the National Labor Relations Board (“NLRB”), without deferring to any NLRB administrative process which might otherwise apply. See In re Unit Parts Co., 9 B.R. 386 (W.D.Okl.1981).
5. UFA has, through its memorandum in opposition to Debtors’ motion, abandoned any claim for accrued sick leave pay which it may have asserted on behalf of flight attendants whose employment with Debtors has terminated. In any event, the undisputed meaning of the language of the UFA collective bargaining agreements, together with the undisputed past practice between the parties demonstrating that accrued sick leave pay has never been paid to terminated flight attendants, clearly indicates that terminated flight attendants are not entitled to accrued sick leave pay.
*9026. The IAM’s memorandum in opposition to Debtors’ motion appears to be consistent with Debtors’ position that the IAM contracts do not provide for payment of sick leave except for actual illness, and that sick leave pay is not payable upon termination, retirement, resignation or furlough. Thus, the IAM’s opposition established no issues of law or fact that would prevent disallowance of all claims for accrued but unused sick leave by terminated IAM-represented employees and, to the extent that the IAM itself has submitted a sick pay claim, on behalf of terminated IAM-represented employees.
7. No evidence has been proffered or argued to exist by or on behalf of TWU-represented employees to contradict Debtors’ position that sick leave pay has been available to TWU-represented employees only for absences due to illness, and has not been paid to employees upon furlough, retirement, resignation or termination. Thus, terminated TWU-represented employees are not entitled to accrued sick leave pay.
8. In its opposition on behalf of non-contract employees, the Non-Union Labor Committee argues that the Corporate Policy Manual is an enforceable contract. This Court need not reach that issue, however, because the Manual expressly states that payment for unused sick leave is not due upon termination of employment. Moreover, in the past, non-contract employees have not been paid for accrued but unused sick leave upon termination. Indeed, the Non-Union Labor Committee agrees with both of those points.
9. Nevertheless, a group of nonunion employee creditors argue that terminated employees are entitled to a payout for the value of accrued sick leave because they were not terminated, furloughed, or recalled in accordance with the provisions of the Corporate Policy Manual. Even assuming that such employees were improperly terminated under the Manual, and further assuming that such events gave rise to a cause of action, the terminated non-union employees would still not be entitled to sick leave pay because such a payout would not be a proper measure of damages. Their remedy would be a claim for loss of income occasioned by the improper termination or furlough. A payout of unused sick leave would not compensate them for any actual loss attributable to any failure to comply with the Manual’s procedures, but would give them a benefit not otherwise forthcoming. Thus, even if non-union employees were improperly terminated or furloughed, or not properly recalled under the provisions of the Manual, they are still not entitled to pay for accrued, unused sick leave as liquidated damages. For these reasons, the Non-Union Employee Creditors’ Cross-Motion For Partial Summary Judgment And Estimation Of Value Of Sick Leave Claims is without merit.
10. No affidavits or other admissible evidence have been offered to establish that there is a genuine dispute as to any material fact relating to any pending sick leave claim subject to Debtors’ motion. Because this Court is persuaded that Debtors are entitled to judgment as a matter of law, summary judgment is appropriate and will be granted with respect to sick leave pay claims by or on behalf of all terminated Continental employees. See Fed.R.Civ.P. 56(e). Debtors’ request that their motion be held in abeyance, insofar as it applies to employees who are presently working or will in the future return to work, is granted. The Non-Union Employee Creditors’ Cross-Motion For Partial Summary Judgment And Estimation Of Value Of Sick Leave Claims is denied.
11. For the foregoing reasons, the union and individual claims for accrued, but unused, sick leave pay due to terminated Continental employees will be disallowed.
These Findings Of Fact and Conclusions of Law are hereby incorporated in and made a part of the Order attached hereto. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8490293/ | DECISION AND ORDER GRANTING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
WILLIAM A. CLARK, District Judge.
This is a case arising under 28 U.S.C. § 1334(a) and having been referred to this Court is determined to be a core proceeding under 28 U.S.C. § 157(b)(2)(A). The plaintiff and debtor filed this action alleging the defendants violated the automatic stay when defendant repossessed the vehicle of the plaintiff. This matter is before the Court upon the motion of defendants for summary judgment and the memorandum of plaintiff in opposition to said motion. In support of the motion defendants request the Court to take judicial notice of the testimony given in hearings on the motion for contempt of court based upon the same facts as those supporting plaintiff’s original complaint. After careful consideration of the stipulations of facts by the parties at the prior hearings, pleadings, affidavit herein, statements supporting all motions in the case and the memoranda of counsel, the motion of defendants for summary judgment is granted. Testimony was presented at the hearing on December 10, 1985 where it was contended and undisputed that defendants repossessed the vehicle of Plaintiff-Debtor in California on October 25 or 26, 1985 a few days before debtor filed this Chapter 13 bankruptcy petition on November 1, 1985. Defendant, White Chevrolet, transported the vehicle from California to its Manchester, Kentucky auto dealership at a cost of $1388.89. The auto remained in the possession of defendant, White Chevrolet, until the Court granted defendants’ motion for relief from stay on January 22, 1986.
Fed.Rules Civ.Proc. 56(e) is made applicable to bankruptcy by Bankr.R. 7056. Said rule reads in part:
The judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.
The Court is constrained from taking judicial notice of testimony heretofore rendered and is limited to consideration of the pleadings, affidavit, statements and admissions in the case and proceedings files. The memorandum of defendant in opposition agrees that the defendant repossessed the 1982 Jeep vehicle on about October 25, 1985 and that plaintiff filed his Chapter 13 bankruptcy petition on November 1, 1985. Asserting that the process of repossessing the vehicle was not completed appears to be a contradiction in terms. Plaintiff admits that the repossession took place on October 25,1985 and yet contends the “process of repossessing” was not completed by November 1, 1985. The Court assumes plaintiff maintains that because the vehicle was transported from California to Kentucky that the “process of repossessing” was in progress when the bankruptcy petition was filed. The Court finds such argument to strain the meaning of repossession beyond ordinary understanding of the *75word. Webster’s New Collegiate Dictionary, defines “repossess” as follows:
(1) (a) to regain possession of
(b) to resume possession of in default of the payment of installments due.
(2) to restore to possession
The defendants, White Chevrolet, Inc. and First National Bank, are corporations which must act through employees and agents. Therefore, the taking of the vehicle from the possession of plaintiff by agents of the defendants completed the repossession. The transportation of the vehicle from Midway City, California to Manchester, Kentucky was not a process of change in possession. The repossession occurred when the defendant regained possession from the Plaintiff-Debtor.
Plaintiff-Debtor submits that his complaint is supported by the decision of this Court on November 19, 1985 in the case In the Matter of James and Margaret Gerkin, Case No. 3-85-00625, Adversary Proceeding No. 3-85-0119. In that case the facts were substantially different from the facts of the instant case. Defendant bank repossessed a vehicle on March 25, 1985 after the debtors had filed the Chapter 13 bankruptcy petition on March 21, 1985, for which action the Court found the bank in violation of 11 U.S.C. § 362(a) and (h). In the instant case the repossession was accomplished before the Chapter 13 bankruptcy was filed in Dayton, Ohio. Plaintiff did not offer adequate protection to defendant for defendant’s security interest in the vehicle before the hearing. Plaintiff paid nothing to defendants for the vehicle. Plaintiff owed the down payment, monthly payments and repossession expenses, so that defendants had a right to a substantial payment as protection of their security interest before releasing the vehicle to plaintiff.
A consideration of all of the pleadings, affidavit of Terry L. Rader, and memoran-da of the parties clearly establishes that the repossession was accomplished before the Chapter 13 bankruptcy was filed and there is no genuine issue as to any material fact. Therefore the defendant is entitled to a judgment as a matter of law.
Accordingly defendant’s Motion for Summary Judgment is GRANTED and the plaintiff’s complaint is DISMISSED.
IT IS ORDERED. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8490295/ | OPINION
EMIL F. GOLDHABER, Chief Judge:
On remand from the district court, the issue is whether we should deny the debtor a discharge of debts on the basis that (1) under 11 U.S.C. § 727(a)(5)1 of the Bankruptcy Code (“the Code”) the debtor failed to offer a satisfactory explanation for a missing truck, or (2) under § 727(a)(3) he failed to keep accurate records of his vehicle insurance policies. For the reasons expressed below, we conclude that the debtor should be denied a discharge under § 727(a)(3) for failure to keep accurate records of his vehicle insurance.
■The facts of this case are as follows:2 The debtor filed a petition for relief under chapter 7 of the Code. Until that time he had been in the businesses of auto body repair and towing. Over the years the debtor had purchased numerous trucks expressly for the purpose of towing. At the time of the filing of the petition the debtor owned four vehicles, two of which were trucks.
A creditor, Excelsior Truck Leasing Co., Inc. (“Excelsior”), filed the instant complaint, objecting to the debtor’s discharge on several bases. Due to the testimony we heard, we concluded that Excelsior had not established its case by clear and convincing evidence and, accordingly, we denied Excelsior’s complaint seeking to deny the debtor’s discharge.
Excelsior appealed our decision to the district court. That court held that Excelsior had established a prima facie case for a denial of discharge under § 727(a)(3) on the basis that the debtor failed to keep adequate business records of its vehicle insurance. Excelsior Truck Leasing Co., Inc. v. Bernat (In Re Bernat), 57 B.R. 1009 (1986). In the alternative, the court held *588that a prima facie case had also been established under § 727(a)(5), since the debtor failed to explain adequately the loss or theft of a truck, which was an asset of the estate, and remanded the case to us to deny the discharge unless the debtor could produce adequate insurance records of his vehicles and satisfactorily explain the loss of the truck.
After remand we held the requisite hearing to afford the debtor the opportunity to present his evidence. On the subject of adequately explaining under § 727(a)(5), the loss or theft of the truck, much desultory testimony was introduced. Since we predicate our denial of discharge on § 727(a)(3), rather than on § 727(a)(5), the need to unravel the testimony on the truck is precluded.
After much circumlocution by the debtor and counsel in trying to establish whether he maintained adequate insurance records on his vehicles, we pointedly asked the debtor, “Do you have any evidence of the insurance on the vehicles that you owned?” His response was, “With me now, sir, no.”
While it is true that the owner of a motor vehicle is under no duty to carry with him evidence of his vehicle insurance while not operating a vehicle, the debtor knew or should have known that one of the two issues for trial on remand would be whether he had insurance. Notwithstanding the fact that his discharge was dependent on the introduction of credible evidence on this point, none was advanced. In accordance with the decision in this matter by the district court, we must deny the debtor’s discharge under § 727(a)(3).
We will accordingly enter an order denying the debtor’s discharge.
. § 727. Discharge
(a) The court shall grant the debtor a discharge, unless—
******
(3) the debtor has 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, unless such act or failure to act was justified under all of the circumstances of the case;
******
(5) the debtor has failed to explain satisfactorily, before determination of denial of discharge under this paragraph, any loss of assets or deficiency of assets to meet the debt- or's liabilities;
******
11 U.S.C. § 727(a)(3) and (a)(5).
. 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/8490633/ | ORDER ON DEBTOR/DEFENDANT ROSE’S MOTION TO DISMISS
THOMAS E. BAYNES, Bankruptcy Judge.
THIS CAUSE came on to be heard upon the Motion to Dismiss filed by Debt- or/Defendant Rose (Debtor) in the above-captioned adversary proceeding. Debtor seeks the dismissal of the Amended Complaint to Determine Dischargeability of Debt under § 523(a)(6) filed by Plaintiff, Shelby Mutual Insurance Company (Shelby). The relevant facts for resolution of this matter are as follows:
On April 10, 1987, Debtor filed his Chapter 7 Voluntary Petition. The Schedules and mailing matrix in the general bankruptcy file list Shelby as a creditor as well as Shelby’s attorney, David R. Powers. Prior to the filing of the bankruptcy case, attorney Powers represented Shelby in state court proceedings against the Debtor. The state court proceedings culminated in the final judgment sought to be determined nondischargeable in the adversary proceeding herein.
On the date of the filing of the Chapter 7 Petition, Debtor’s attorney notified Shelby’s attorney, Herbert J. Baumann, Jr., that the Petition had been filed. On April 16,1987, this Court entered an order scheduling the Meeting of Creditors for May 15, 1987 and setting July 14, 1987 as the deadline for filing its Complaint under § 523 of the Bankruptcy Code. Notice of the Meeting of Creditors was mailed to Shelby at its Ohio address and Shelby’s state court counsel, David R. Powers. On May 29, 1987, Shelby filed its Proof of Claim in the amount of $75,042.62, which was signed by attorney Baumann. Thereafter, on August 19, 1987, Shelby filed this adversary proceeding seeking a determination that the judgment debt is nondischargeable pursuant to 11 U.S.C., § 523(a)(6). An Amended Complaint was filed on August 24, 1987.
In support of his Motion to Dismiss, Debtor maintains Shelby’s Complaint was untimely filed, thirty-six days after the deadline for filing a Complaint under § 523(c). Shelby’s response is that the delay in filing the Complaint was the result of Debtor's attorney’s failure to properly notify Shelby’s counsel of the Meeting of Creditors in accordance with Bankruptcy Rule 4007(c). Thus, the resolution of this matter requires a determination of whether the Debtor gave Shelby sufficient notice pursuant to Bankruptcy Rule 4007(c) to enable Shelby to timely file its Complaint under § 523(c).
Shelby relies on Matter of Pagan, 59 B.R. 394 (D.Puerto Rico 1986) for the proposition that formal notice is required in order for a creditor to be charged with notice of a proceeding. In Pagan, formal notice of the Chapter XI case was not mailed to the creditor’s correct address. However, the creditor did have actual knowledge that the case was pending. After the case was closed, the creditor sought to have the case reopened to assert a claim of fraud. The district court affirmed the bankruptcy court’s decision not to reopen the case. It found the creditor was given sufficient notice and delayed a substantial *69period of time before seeking to reopen the case to file its Complaint.
The case at bar is not one where a creditor has received no notice. Carlton Forge Works v. Senall (Matter of Senall), 64 B.R. 325 (Bankr.M.D.Fla.1986); Matter of Smith, 58 B.R. 46 (Bankr.M.D.Fla.1986). It is not one where the notice was sent to the wrong or an intentionally erroneous address. See Merrill Lynch, Pierce, Fenner and Smith, Inc. v. Tatum (In re Tatum), 60 B.R. 335 (Bankr.D.Colo.1986). It is not a case where the Debtor has somehow illegally, fraudulently, or by misrepresentation led the creditor to waive his right to file a complaint. This is a case where the present attorney of the Debtor was given notice at the time of the filing of the bankruptcy. The creditor and his previous state court counsel received notice. It is a case where the creditor filed a timely Proof of Claim. The Proof of Claim was signed by present counsel.
The only argument before the Court is whether the notice was insufficient whereby an Order for Relief was not specifically sent to present counsel. The Court finds Shelby Mutual Insurance Company did receive sufficient notice, as did all counsel. Shelby could have filed a motion for extension of time to file its complaint. Instead, it simply delayed filing its complaint until after the deadline set by the Court of July 14, 1987. See Carlton Forge Works v. Senall (In the Matter of Senall), 64 B.R. 325 (Bankr.M.D.Fla.1986); In Re Alton, 64 B.R. 221 (Bankr.M.D.Fla.1986); In re Betinsky, 58 B.R. 814 (Bankr.E.D.Pa.1986).
Accordingly, it is
ORDERED, ADJUDGED AND DECREED that the Motion to Dismiss filed by the Debtor be, and the same is hereby, granted. It is further
ORDERED, ADJUDGED AND DECREED that the Amended Complaint to Determine Dischargeability filed by Shelby Mutual Insurance Company be, and the same is hereby, dismissed with prejudice. It is further
ORDERED, ADJUDGED AND DECREED that this Court does not have the authority to extend the time for filing a Complaint to Determine Dischargeability after such time has expired. Bankruptcy Rule 4007(c). It is further
ORDERED, ADJUDGED AND DECREED that nothing in this Order shall prevent Shelby Mutual Insurance Company from filing any complaint other than one under Section 523(c) of the Bankruptcy Code. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8490634/ | MEMORANDUM OF DECISION
JAMES A. GOODMAN, Bankruptcy Judge.
This matter is before the Court on Debt- or’s complaint to determine the extent and validity of a lien claimed by Wetterau Portland, Inc. (“Wetterau”) against certain proceeds received by Debtor pursuant to a divorce judgment. A hearing was held on November 30, 1987, and both parties have *179had the opportunity to submit briefs. The Court finds the following facts:
Debtor purchased a mobile home in 1981, during which time she was married to but separated from Owen Young. Later in 1981 the couple reconciled and debtor’s mobile home was affixed to a foundation on real estate owned by Young in Dedham. Debtor and Young were divorced in 1984. The divorce judgment required Debtor to transfer her interest in the mobile home to Young in return for which Young was obligated to pay Debtor $28,000.00 plus 10% interest. Debtor filed her Chapter 11 petition on June 23, 1987. On October 1, 1987 Young paid Debtor’s estate $29,880 which was placed in escrow.
On December 19, 1983 Debtor signed a security agreement in connection with money advanced for use in her supermarket business granting Wetterau an interest in “tangible personal property” and “general intangibles.” Wetterau filed financing statements with the Maine Secretary of State and the Penobscot Registry of Deeds on January 3, 1984. Wetterau now claims that its interest attaches to the escrowed funds because they constitute proceeds of collateral subject to its lien.
After careful consideration of the security agreement this Court finds that the parties thereto intended that the collateral be limited to business assets. The agreement was signed by “Doris Young d/b/a Milli-nocket IGA Foodliner.” It recites that the money advanced was for “business purposes.” It refers solely to Debtor’s business premises and business-related assets and makes no mention of her personal property or residence. The agreement states that “the collateral has been and will be acquired for use in Debtor’s business” and that it will “be kept at Debtor’s place of business.” In fact there is no evidence whatsoever that a security interest in debt- or’s non-business property was contemplated. This Court therefore finds that Wetterau, by this agreement, acquired no security interest in Debtor’s non-business property and accordingly has no lien on the funds at issue.
Further, even if the security agreement did include Debtor’s mobile home as collateral, Wetterau failed to properly perfect its interest in that collateral. The financing statements fail to meet the requirement of Me.Rev.Stat.Ann. tit. 11, § 9-402(1) that “if the collateral is a mobile home ... the description of collateral shall include the location designated by the debt- or in the security agreement as the place at which the mobile home is, or is to be, located.” The financing statements also fail to meet the “fixture filing” requirements of Me.Rev.Stat.Ann. tit. 11, § 9-313(l)(b) and § 9-402(5) that a financing statement be filed in “the office where a mortgage on the real estate would be filed or recorded” and contain a description of the real estate. Accordingly, this Court finds that to the extent that the security agreement did give Wetterau an interest in Debtor’s mobile home, Wetterau failed to properly perfect that interest and as a result has no lien on the funds at issue.
This Court has jurisdiction over this proceeding pursuant to 28 U.S.C. § 157(b)(2)(E).
The foregoing shall constitute findings of fact and conclusions of law pursuant to Rule of Bankruptcy Procedure 7052.
ORDER
In accordance with a Memorandum of Decision dated February 11, 1988 it is;
ORDERED that the lien claimed by Wet-terau Portland, Inc. pursuant to a security agreement dated December 19, 1983 against the sum of $29,800 received by the estate from Owen Young is declared void. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8490940/ | MEMORANDUM DECISION
THOMAS C. BRITTON, Chief Judge.
The trustee seeks the avoidance of the debtor’s transfer of a yacht (the Motivation) to the defendant. The trustee alleges a fraudulent transfer under 11 U.S.C. § 548(a)(2) (constructive fraud) and § 548(a)(1) (actual fraud). At trial plaintiff abandoned Count III under Fla.Stat. § 726.101. The defendant transferee has answered. The matter was tried on June 6.
The trustee makes no effort to recover from Seymour Ravinsky, the debtor’s principal. Ravinsky is in this court as an involuntary debtor. Instead, the trustee pursues the defendant purchaser under § 550(a) as the initial transferee.
For the reasons summarized below, I now conclude that plaintiff has failed to carry its burden of proving the elements of either count, and the complaint must be dismissed with prejudice.
The critical facts are simple and essentially undisputed. The inferences and conclusions to be drawn from those facts are the battleground here.
On April 5, 1989 the Motivation was sold by the debtor corporation to the defendant in Nassau. The debtor’s principal and sole shareholder, Seymour Ravinsky, negotiated the terms of the sale directly with the defendant’s principal, Sam Hashman. The total sale price offered and accepted was $3,760,000. Defendant paid $1,117,906 in cash to the debtor, after adjustments for costs and deductions, including a $2,544,000 payment to a lienholder. On April 10, Ra-vinsky caused the debtor, Damo, to transfer the cash proceeds to his personal account. Business entities in which Ravinsky had substantial interests came under assignment in a Canadian bankruptcy proceeding on April 5, 1989. An involuntary petition was filed against Damo Corp. in this court on April 19, 1989.
Count I
Under § 548(a)(2), the trustee must prove (1) the transfer of an interest in the debtor’s property, (2) within a year before bankruptcy, (3) for which the debtor received less than a reasonably equivalent value, and (4) that the debtor was then or was thereby rendered insolvent.
Defendant disputes the third and fourth elements, and I agree.
Reasonably Equivalent Value
The sale price of the yacht was $3,760,-000. The trustee alleges that its value was not less than $4.4 million. (CP 1 116). The trustee’s evidence of value relies on a listed sale price for the Motivation in January 1989 of $5.5 million, the fact that prior offers of $4.5 million and $4 million were turned down, and that the yacht was insured for $4.5 million.
The trustee’s evidence is inconclusive and contradictory. One of the trustee’s witnesses, a marine surveyor, admitted that the amount paid by defendant was within the range of the reasonable value of the yacht. The trustee has failed to prove his third element.
Insolvency
The testimony of the trustee’s witness on the issue of Damo’s insolvency is unsupported by records of the debtor or any reliable documentation. This witness, *812Downey, who is an accountant in Canada, has not examined any books and records of the debtor. He relies on a purported $1.4 million liability of Damo to a related Ravin-sky-owned Canadian company, Guardall Warranty, to reach his conclusion that Damo’s liabilities exceeded its assets after the subject sale, even before the proceeds were transferred to Ravinsky.
Guardall and Damo were under the domination and control of Ravinsky. A loan of $1.4 million to Damo [for construction of the yacht] is reflected in Guardall’s records before Damo was incorporated. This anomalous circumstance is the only basis for the alleged debt and is acknowledged in the trustee’s memorandum (CP 76 at p. 8). I am unpersuaded that insolvency has been proved by:
“bookkeeping entries ... made by the senior financial officers of Guardall Warranty and Guardall Financial who were employed by Seymour Ravinsky.” Id.
The trustee has failed to prove his fourth element.
Count II
Alternatively, under § 548(a)(1), the trustee must prove that the transfer was made with “actual intent to hinder, delay or defraud” any creditor. The trustee has to prove actual intent on the part of the corporate transferor. He seeks to attribute intent by the individual, Ravinsky, to the corporation Damo. The question is whether the debtor had an actual intent through this transaction to delay or defraud creditors, and, if so whether the purchaser acted in good faith.
I recognize that this court may infer a fraudulent intent for the purpose of § 548(a)(1) where:
“the concurrence of facts which, while not direct evidence of actual intent, lead to the irresistible conclusion that the transferor's conduct was motivated by such intent.” 4 Collier on Bankruptcy ¶ 548.02[5] n. 46. (15th Ed.1989).
There is no question that the events surrounding this sale occurred. However, the trustee’s suspicion of a scheme, which was concluded by Ravinsky’s drawing the sale proceeds out of the corporation, is insufficient to impute intent to defraud, or to extend the smear of bad faith to the defendant.
I am unable to infer that the debtor had the intent now ascribed to it by the trustee’s counsel. I find that the trustee has failed to carry his burden of proving an actual intent to delay or defraud creditors.
Alternatively, I find that the defendant purchaser acted in good faith, free from any duty to inquire or discover Ravinsky’s intentions from the facts available to it at the time of sale. The trustee has failed to present sufficient evidence to impute any fraudulent intent or bad faith to the defendant.
Accordingly, Count II must be dismissed with prejudice.
§ 550(b)(1) Defense
Even if the trustee has carried his burden of proving an avoidable transfer, which he has not, he must also bring his claim within § 550 to effect recovery from the defendant. Each Count fails here for the additional ground that the defendant has proved its defense under § 550(b)(1).
The defendant’s knowledge of the debtor is limited to this transaction for the sale of the yacht. The defendant’s payment of reasonably equivalent value and its efforts to verify clear record title have been established by the evidence. In addition, there was no duty on the defendant to make further inquiry from the fact that an individual came on board the yacht to investigate without disclosure of his purpose, or then to be held accountable for the alleged scheme of Ravinsky.
The defendant purchased the yacht for value, in good faith, and without knowledge of the voidability of the transfer, if in fact it is avoidable. Therefore, the trustee would not be entitled to any recovery from defendant even if he had established the voidability of the transfer.
As is required by B.R. 9021, a separate judgment will be entered dismissing the *813Costs may be complaint with prejudice, taxed on motion.
DONE and ORDERED. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8490941/ | MEMORANDUM OPINION
WILLIAM T. BODOH, Bankruptcy Judge.
INTRODUCTION
Two issues are before the Court for resolution. The first involves the Proof of Claim filed by BANCOHIO and the second is the confirmation of a plan of reorganization of the Debtors.
GILLETTE ASSOCIATES, LTD., (“GILLETTE”) and CHARLES ERVIN STEIN (“STEIN”) (collectively “Debtors”) filed petitions for reorganization under Chapter 11 of Title 11 in 1987. When Debtors failed to file a plan within the exclusivity period, BANCOHIO NATIONAL BANK (“BANC-OHIO”) filed a plan providing for liquidation of Debtors. Debtors later filed a plan of reorganization. The Debtors’ Plan consists of the following writings:
1. First Amended Plan of Reorganization filed December 16, 1988.
2. Modification of Plan filed February 22, 1989.
3. Modification of Plan filed March 31, 1989.
BANCOHIO’s Plan is comprised of two (2) documents:
1. Second Amended Plan filed November 23, 1988.
2. Post-Balloting Modification of Second Amended Plan, filed February 23, 1989.
A joint confirmation hearing was held by the Court on February 24, 1989. Post-hearing memoranda have been submitted by both Plan proponents and THE OFFICIAL BOND HOLDERS COMMITTEE.
This is a core proceeding pursuant to 28 U.S.C. Sec. 157(b)(2)(A), (B), (K), and (L).
BACKGROUND
In October 1984, Trumbull County, Ohio, issued industrial revenue bonds to finance the acquisition of land and construction of a 100-bed intermediate nursing care nursing home facility located at 3310 Elm Road, NE, Warren, Ohio 44484 (“GILLETTE ASSOCIATES NURSING HOME PROJECT”, or “PROJECT”). TONN & BLANK, INC., was the prime contractor for the project. BANCOHIO is the indenture trustee for the holders of Two Million, Six Hundred Ten Thousand & 00/100 Dollars ($2,610,-000.00) of the Trumbull County, Ohio industrial development first mortgage revenue bonds, 13% percent, Series 1984 (“Bonds”).
GILLETTE is an Ohio limited partnership. STEIN is the sole general partner of GILLETTE. KENNETH R. EVERSOLE (“EVERSOLE”) was the sole limited part*868ner of GILLETTE, but his interests were purchased pre-Petition by STEIN.
A loan agreement was executed between Trumbull County and GILLETTE. GILLETTE also executed a promissory note, which was secured by an open-end mortgage and security agreement. A Trust Indenture was executed between Trumbull County and BANCOHIO pursuant to which, inter alia, Trumbull County assigned the loan agreement, note and open-end mortgage and security agreement to BANCOHIO for the benefit of the bond holders. The bond issue closed on October 31, 1984, and construction commenced.
Under the terms of the note and loan agreement, GILLETTE was obliged to make monthly payments to BANCOHIO for the benefit of the bond holders. Between October 1984 and October 1987, GILLETTE was only obliged to pay the interest accruing on outstanding bonds and was entitled to a credit for earnings on the bond monies held by BANCOHIO pursuant to the loan agreement and Trust Indenture. The Trust Indenture required BANCOHIO to deposit, from proceeds of bond sales, the sum of Two Hundred Ninety-Five Thousand & 00/100 Dollar ($295,000.00) into a Debt Service Reserve Fund. Funds in the Debt Service Reserve Fund were restricted to use “to prevent any default in the payment of principal, of interest, and premium, if any, on the bonds, if monies in the Bond Fund are insufficient to pay the same as they become due.” Trust Indenture, See. 4.04(b), p. 17-18. GILLETTE met its first interest payment, due on November 25, 1985, but failed to meet additional payments. BANCOHIO made withdrawals from the Debt Service Reserve Fund to pay interest due to bond holders on April 1, 1986 and October 1, 1986.1 The Trust Indenture provided for the replenishment of the Debt Service Reserve Fund in the following manner:
Pursuant to the Loan Agreement [Sec. 2.1(c)(1), p. 13] in the event that monies in the Debt Service Reserve Fund are used for any purpose authorized by this Indenture (other than payment at maturity), Debt Service Reserve deposits shall be made by depositing into the Debt Service Reserve Fund on the twenty-fifth day of each of the next succeeding twelve months after such withdrawal one-twelfth (V12) of the amount of such withdrawal (after allowance for investment earnings).
(Trust Indenture Sec. 4.04(b), p. 18). BANCOHIO notified GILLETTE of its default. GILLETTE failed to cure, and BANCOHIO exercised its option to accelerate future payments.
TONN & BLANK ceased construction activity in December, 1985. Mechanic’s liens were filed. Tonn and Blank’s lien was for Five Hundred Twenty-Two Thousand, Eight Hundred Forty-Three & 70/100 Dollars ($522,843.70). Ten subcontractors of Tonn & Blank filed liens total-ling Four Hundred Thirty Thousand, One Hundred Seventy-Four & 98/100 Dollars ($430,174.98). The nursing home was only partially completed and without patients.
On March 18, 1986, TONN & BLANK filed a complaint in The United States District Court for the Northern District of Ohio against GILLETTE, EVERSOLE, STEIN, BANCOHIO, and others, claiming liens on the project. (Tonn & Blank, Inc., v. Gillette Assoc., Case C86-1041-Y). BANCOHIO filed its Answer, Counterclaim and Crossclaims seeking, among other things:
1. A joint money judgment against GILLETTE and STEIN in the principal sum of Two Million, Six Hundred Ten Thousand Dollars ($2,610,000.00), plus interest; and
2. Foreclosure of the mortgage and sale of the project.
On April 10, 1987, the District Court entered summary judgment against STEIN, EVERSOLE and GILLETTE, jointly and severally, in favor of TONN & BLANK in the principal amount of Seven Hundred Thousand Dollars ($700,000.00). None of the parties appealed the judgment. On April 20, 1987, the District Court entered *869summary judgment in favor of BANC-OHIO against GILLETTE and STEIN, jointly, in the amount of Two Million, Five Hundred Forty-Five Thousand, One Hundred Seventy-One & 62/100 Dollars ($2,545,171.62), plus interest from August 15, 1986.
Shortly after commencement of the District Court suit, subcontractors of TONN & BLANK, filed suits in Trumbull County Court of Common Pleas. (Polivka Paving v. Tonn & Blank, Inc., Case 86-CV-398); Firefoe v. Tonn & Blank, Inc., Case 86-CV-1390).2
Among STEIN’s personal assets was a partnership interest in POST LAND COMPANY. The sum of One Million, One Hundred Fifty-Eight Thousand, Four Hundred Ninety-Five & 59/100 Dollars ($1,158,-495.59) was about to be disbursed to STEIN from POST LAND COMPANY from the sale of another nursing home facility. On May 5, 1987, the Trumbull County Court of Common Pleas issued a Charging Order in favor of BANCOHIO making STEIN’s interest in the POST LAND COMPANY subject to the judgment in favor of BANCOHIO.3 Subsequently, TONN & BLANK and CORTLAND SAYINGS & BANKING COMPANY, another creditor of STEIN, challenged BANC-OHIO’s attachment of STEIN’s partnership interest. The Common Pleas Court ordered that the POST LAND COMPANY monies be deposited with the Clerk of the Court until the priorities were determined. On June 5, 1987, the Common Pleas Court entered an Order directing that the entire amount of money deposited with the Court be disbursed to BANCOHIO. On June 10, 1987, TONN & BLANK filed a Notice of Appeal of the decision and a Motion for a stay of the judgment pending appeal. The Court of Appeals granted TONN & BLANK’S stay of the judgment pending appeal.4 On June 19, 1987, both GILLETTE and STEIN filed Chapter 11 Petitions in the United States Bankruptcy Court for the Northern District of Ohio. At the time of the Petition filings, Debtor had managed to complete construction of the project and had 17 patients.
After filing the Petitions for Reorganization under Chapter 11, STEIN sought Bankruptcy Court authority to use a portion of the POST LAND COMPANY funds on deposit with the Trumbull County Court to assist in Debtors’ reorganizational efforts. On June 23, 1987, we determined that BANCOHIO’s claim was adequately secured by the GILLETTE nursing home and ordered the POST LAND COMPANY funds transferred to a debtor-in-possession interest-bearing account at BANK ONE OF EASTERN OHIO, N.A. (“BANK ONE”). Further, the STEIN estate was authorized to loan up to Eighty Thousand & 00/100 Dollars ($80,000.00) of the POST LAND COMPANY funds to the GILLETTE estate for operating expenses of the nursing home. Subsequently, STEIN was also permitted to use portions of the POST LAND COMPANY funds for personal living expenses. After establishment of the BANK ONE account, additional POST LAND COMPANY funds amounting to approximately Two Hundred Fifty Thousand & 00/100 Dollars ($250,000.00) were deposited to the account.
In September 1987, GILLETTE and STEIN filed with this Court an Application to borrow money and compromise controversy. The Application proposed a settlement of the claim of TONN & BLANK, and included the releases of all subcontractor claims and liens against the GILLETTE project. On November 2, 1987, this Court approved the Application under the following conditions:
1. STEIN was authorized to lend to GILLETTE from the POST LAND COMPANY funds, and GILLETTE was authorized to borrow from STEIN, the sum of Five Hundred Ninety-Five Thousand & 00/100 Dollars ($595,000.00). STEIN was *870granted an administrative expense priority for this amount.
2. STEIN was directed to pay counsel for TONN & BLANK, as escrow agent, the sum of Five Hundred Ninety-Five Thousand & 00/100 Dollars ($595,000.00), which constituted full satisfaction of all claims between TONN & BLANK and the Debtors. (A mutual release was executed by both TONN & BLANK and the Debtors).
3. TONN & BLANK was required to release its liens on all property of the Debtors and cause the discharge of liens of all subcontractors of TONN & BLANK against the Debtors and indemnify the Debtors against any judgment or cause regarding any subcontractor lien which was not discharged.
4. Upon payment of the sum of Five Hundred Ninety-Five Thousand & 00/100 Dollars ($595,000.00), TONN & BLANK was required to assign to the Debtors all of its rights to all claims which are or may be owed or claimed to be owed to TONN & BLANK by STEIN, EVERSOLE and/or GILLETTE.
At the present time, construction of the project is complete. The nursing home is filled to capacity and has a waiting list of prospective patients. GILLETTE has accumulated at least Six Hundred Fifty Thousand & 00/100 Dollars ($650,000.00) over and above its operating costs.
THE PLANS
A. Plan of BancOhio. BANCOHIO’s “reorganization” plan is actually a plan to liquidate both GILLETTE and STEIN. Confirmation of the BANCOHIO Plan would approve a sale of the GILLETTE ASSOCIATES nursing home project to WARREN GENERAL HEALTH CARE PROPERTIES, an Ohio general partnership (“WARREN GENERAL”) for Three Million & 00/100 Dollars ($3,000,000.00).5 To implement the BANCOHIO Plan, the Court would require Debtors to deliver to WARREN GENERAL:
1. Full possession of the project land, buildings, and structures and fixtures with good and marketable title.
2. All tangible personal property used by Debtors in the operation of the project, including supplies and inventory, with good and marketable title.
3. Authority to operate under the Certificate of Need granted to Debtors by the State of Ohio Health Planning Development Agency.
4. Debtors’ consent to the transfer and surrender of Debtors’ Medicaid provider number to WARREN GENERAL.
5. Debtors’ consent to WARREN GENERAL (and/or its lessee) to operate under Debtors’ license to operate as a 100-bed intermediate care nursing home.
6. All other permits, licenses, franchises, consents, and other authorizations necessary for operation of the project.
7. Such service and maintenance and executory contracts as WARREN GENERAL may elect.
8. A guarantee that Debtors will be responsible for correcting any deficiencies resulting from a change of ownership inspection by the State of Ohio.
It is unclear whether applicable Ohio law requires the personal consent of the permit holder to insure continued validity of the assigned or transferred licenses and permits. That STEIN would voluntarily consent to his own involuntary liquidation is questionable. If he would not, the use of contempt powers to force those acts, espe-*871dally with the factual background here found, would seem at the very least to be harsh, Sec. 1142 notwithstanding. BANC-OHIO projected sources of funding for its Plan as follows:6
SOURCE AMOUNT
Net proceeds from sale of GILLETTE nursing home facility to WARREN GENERAL $ 390,000.007
Cash from GILLETTE operations after payment of post-Petition operating expenses 680,000.008
Remainder of STEIN’s POST LAND COMPANY funds 813,800.009
Sale of Horses owned by STEIN 49,000.00
Veres Judgment 155,000.00
TOTAL FUNDS AVAILABLE $2,087,800.0010
The BANCOHIO Plan projects disbursement of Two Million, Six Hundred Ten Thousand Dollars ($2,610,000.00) as bond principal and other disbursements of One Million, Nine Hundred Ninety-Six Thousand, Six & 97/100 Dollars ($1,996,006.97), plus an unknown amount to satisfy administrative expenses. The BANCOHIO Plan proposes to pay 100 percent (100%) on all claims, including the following amounts to itself:
1. Principal and interest owing to BANCOHIO as indenture trustee for the bond holders as of June 19, 1987 in the amount of Two Million, Eight Hundred Sixty-Three Thousand, Three Hundred Eighty-Six & 96/100 Dollars ($2,863,386.96).11
2. Post-Petition interest of Five Hundred Twenty-One Thousand, Five Hundred Five & 72/100 Dollars ($521,505.72) to bond holders.12
3. Fees and expenses of the indenture trustee as of June 19, 1987, totalling Thirty-Three Thousand, Seven Hundred Forty-Six & 33/100 Dollars ($33,746.33).13
4.Fees and expenses of the attorney for the indenture trustee as of June 19, 1987, of One Hundred Thousand, Eighty & 29/100 Dollars ($100,-080.29).14
5. Expenses incurred in United States District Court Case C86-1041-Y to-talling Thirty Thousand, Three Hundred Ninety-Seven & 28/100 Dollars ($30,397.28).15
6. A projected and estimated administrative claim of One Hundred Fifteen Thousand & 00/100 Dollars ($115,-000.00).16
B. Plan of Debtors. Debtors’ Plan also provides for a 100 percent payment to all allowed claims. Debtors set forth the source of funding for their Plan as follows: 17
*872Gillette- Cash accumulated from $ 650,000.0018 post-Petition earnings
Stein-Cash on hand at Bank One 744,000.0019
Cortland Savings & Banking Co. 275,000.0020
Stein Equity in Business Real Estate (Noble Romans & Long John Silvers) 200,000.00
Veres Judgment 155,000.00
$2,024,000.00
BANCOHIO concluded in its Post-Hearing Brief that Debtors would require One Million, Four Hundred Ninety-Nine Thousand, Two Hundred Seventy-Three & 46/100 Dollars ($1,499,273.46) at confirmation to implement its Plan. The Official Bond Holders Committee estimated the figure at One Million, Five Hundred Seventeen Thousand, Two Hundred Seventy-Three & 86/100 Dollars ($1,517,273.86) in its March 6,1989 Brief and One Million, Six Hundred Nineteen Thousand, Seven Hundred Eight Dollars ($1,619,708.00) in its March 16, 1989 Brief. Whether using Debtors’ figures, BANCOHIO’s figures, or the Bond Holder’s Committee’s figures, Debtors appear to have sufficient funds to implement their Plan.
DISCUSSION
Chapter 11 is designed to accommodate confirmation of both consensual Plans and those which do not receive the acceptance of all the various classes. To qualify as confirmable, a plan must satisfy all the requirements of 11 U.S.C. Sec. 1129. That section provides two means by which a plan may be confirmed. The first requires satisfaction of all subsection (a) requirements, including (a)(8), which necessitates acceptance of the plan by all impaired classes of claims or interests. The second means, in addition to incorporating all requirements of subsection (a), except for (a)(8), requires the plan not unfairly discriminate, that it be fair and equitable with respect to each class of impaired claims or interests that has not accepted the plan, and that with respect to unsecured claims, no claims junior to unsecured creditors receive an interest in property under the Plan. 11 U.S.C. Sec. 1129(b).
Sec. 1129 lists twelve (12) prerequisites to the confirmation of a Chapter 11 plan. The first of these is that “the plan complies with the applicable provisions of this Chapter.” 11 U.S.C. Sec. 1129(a)(1). The drafters envisioned that “paragraph (1) requires that the plan comply with the applicable provisions of Chapter 11, such as Secs. 1122 and 1123, governing classification and contents of plan.” H.R.Rep. No. 595, 95th Cong., 1st Sess. 412 (1977), S.Rep. No. 989, 95th Cong., 2d Sess. 126 (1978), U.S. Code & Admin.News, 1978, pp. 5787, 5912, 6368; see also 5 Collier on Bankruptcy, para. 1129. — 02[1] (15th ed. 1987). Title 11 U.S.C. Sec. 1122 addresses classification of claims and provides, in pertinent part:
(a) ... A plan may place a claim or an interest in a particular class only if such claim or interest is substantially similar to the other claims or interests of such class.
Classification is a method of recognizing a difference in rights of creditors which calls for a difference in treatment. The focus of classification is the legal character of the claim as it relates to the assets of the debtor. J. P. Morgan & Co. v. Missouri Pacific Railroad, 85 F.2d 351, 352 (8th Cir.1936), cert. denied 299 U.S. 604, 57 S.Ct. 230, 81 L.Ed. 445 (1936).
Unlike the Debtors’ Plan, the BANCOHIO Plan lumps together the claims of the bond holders with the claims of the indenture trustee. Claims of the *873indenture trustee include entitlement to post-Petition interest, fees and expenses and advances, along with attorney’s fees. This classification is inconsistent with the requirements of 11 U.S.C. Sec. 1122(a). The claims of the bond holders are a matter of contract and are not subject to alteration by the Court. As the court stated in U.S. Truck Co., Inc., 42 B.R. 790, 796 (Bankr.E.D.Mich.1984):
Pre-petition claims arising out of ordinary contractual relationships are closed — they have occurred and the damages are measurable (or estimatable).
The language used by the U.S.Truck court aptly describes the claims of the bond holders here. However, the indenture trustee’s claims, even though arguably arising under the same contract, are not closed. They are what the U. S. Truck court termed “open ended” in character. The fees and expenses of the indenture trustee and its attorneys continue to accrue in these proceedings. Unlike the claims of the bondholders, the fees and expenses of the indenture trustee, both pre- and post-Petition, are subject to the review of this Court and are of a substantially different legal character than the claims of the bond holders. Perhaps the difference in the interests of the indenture trustee and of the bond holders in the assets of the Debtors is most evident when one considers the standard of review which the indenture trustee’s entitlement to the Debtors’ assets will be judged. The Court will consider the claim of the indenture trustee to attorney fees in light of the extent to which the services rendered were contemplated by contract and the extent to which they benefitted the Debtors’ estate. This standard of review is inappropriate with respect to the interests of the bond holders. Because the BANC-OHIO Plan contains a classification which is not internally homogeneous, the Plan is nonconfirmable for having failed to meet the requirements of 11 U.S.C. Sec. 1129(a)(1).
The remainder of this Opinion will deal mainly with an analysis of how the Debtors’ Plan meets the requirements for confirmation contained in 11 U.S.C. Sec. 1129. Since a reviewing court may disagree with our holding striking the BANCOHIO Plan on the basis of an improper classification, we consider the other reasons why the Debtors’ Plan is to be preferred to the BANCOHIO Plan. Thus, a reviewing court will have before it this Court’s reasoning on all aspects of confirmation.
11 U.S.C. Sec. 1129(a)(2) requires that the proponent of the Plan comply with the applicable provisions of Chapter 11. Both Plan proponents appear to comply with this requirement.
11 U.S.C. Sec. 1129(a)(3) requires that the Plan be proposed in good faith and not forbidden by law. Both parties here have complained of a lack of good faith on the part of the other. The term “good faith” is left undefined by the Code. However, in the context of a Chapter 11 reorganization, a plan is considered to be in good faith “if there is a reasonable likelihood that the plan will achieve a result consistent with the standards prescribed under the Code.” In re Toy & Sports Warehouse, Inc., 37 B.R. 141, 149 (Bankr.S.D.N.Y.1984); accord In re White, 41 B.R. 227, 229 (Bankr.M.D.Tenn.1984). BANCOHIO does not violate the good faith requirement solely because it has proposed a liquidation plan. There has been no evidence that BANCOHIO does not have a reasonable belief that the Debtors’ liquidation is in the Bank’s best interest. See 5 Collier on Bankruptcy, 1129.02[3] (15th ed. 1987). We find that both plans are proposed in good faith.
There appears to be no issue with respect to 11 U.S.C. Sec. 1129(a)(4), (5) and (6).21
*87411 U.S.C. Sec. 1129(a)(7) raises an issue for determination. It provides:
(7) With respect to each impaired class of claims or interests—
(A) Each holder of a claim or interest of such class—
(i) has accepted the plan; or
(ii) will receive or retain under the plan on account of such claim or interest property of a value, as of the effective date of the plan, that is not less than the amount that such holder would so receive or retain if the debtor were liquidated under chapter 7 of this title on such date.
There are three ways in which a plan can meet the requirements of Sec. 1129(a)(7):
(1) Under this section and Sec. 1126(f), all members of an unimpaired class are deemed to accept the plan; or
(2) All members of a class may affirmatively vote to accept the plan; or
(3) Each nonaccepting member of the class receives at least as much as would be received in a Chapter 7 liquidation of the Debtor.
In determining whether the Plans meet the specifications of Sec. 1129(a)(7), we examine the Plans from the perspective of each of these three requirements.
First, we must determine which classes are “unimpaired” under the Debtors’ Plan and may be deemed to have affirmatively accepted. Class A consists of administrative expenses entitled to priority pursuant to 11 U.S.C. Sec. 507(a). As this is a class required by statute to be paid in full on confirmation, the class is unimpaired. Class B-l consists of the allowed secured claim of BANCOHIO on behalf of the bond holders, excluding any portion of the claim provided for in Class B-2. Debt- or proposes to cure in full any default which occurred before or after the commencement of this case, without acceleration; to reinstate the maturity of such claims as they existed prior to default and to compensate the holders for damages incurred as a result of the default within ten (10) days of confirmation. Debtors allot that this arrangement will leave unaltered the legal, equitable and contractual rights to which the bond holders are entitled. THE OFFICIAL BOND HOLDERS COMMITTEE and BANCOHIO complain that the Debtors’ failure to provide for the complete replenishment of the Debt Service Reserve Fund results in leaving Class B-l impaired.
The concept of “impairment of a claim or interest under a debtor’s plan of reorganization” is defined in 11 U.S.C., Sec. 1124. This section provides that a claim is impaired under a plan of reorganization unless the plan (1) does not alter any of the claimants’ contractual rights; (2) cures any default; (3) reinstates the maturity of a claim to its pre-default status; and (4) compensates the claimants for damages incurred due to their reasonable reliance on a particular contractual provision or applicable law. The Trust Indenture and Loan Agreement require Debtors to begin repayment to the Debt Service Reserve Fund in the month following the month of default. The repayment is scheduled to take place over the course of a year in equal monthly installments. See Trust Indenture, Sec. 4.04(b) and Loan Agreement, Sec. 2.1(c)(1). Debtors propose to deposit a sum equal to one-twelfth (Vi2th) of the Two Hundred Sixty-Two Thousand Dollars ($262,000.00) required to bring the Debt Service Reserve Fund to its required balance of Two Hundred Ninety-Five Thousand Dollars ($295,-000.00) at confirmation and to pay the remainder due in eleven further installments.
In a widely followed opinion, In re Tad*875deo, 685 F.2d 24 (2d. Cir.1982),22 the Second Circuit established that the concept of curing defaults under Sec. 1124 necessarily includes the power not only to “deaccelerate” and reinstate the original terms of a debt, but also to restore the relative positions of the parties to their pre-default state. A default is an event in a debt- or/creditor relationship which triggers certain consequences — here, acceleration.
Curing a default commonly means taking care of the triggering event and returning to pre-default conditions. The consequences are, thus, nullified. This is the concept of 'cure’ used throughout the Bankruptcy Code.
Id. at 26-27. Although the creditors’ rights arising out of acceleration are, in fact, affected by cure and reinstatement, they are deemed unimpaired. See, e.g., In re Forest Hills Assoc., 40 B.R. 410, 414 (Bankr.S.D.N.Y.1984); In re Madison Hotel Assoc., 29 B.R. 1003, 1006 (Bankr.W.D.Wis.1983); In re Masnorth Corp., 28 B.R. 892, 894; In re Barrington Oaks General Partnership, 15 B.R. 952 (Bankr.D.Utah 1981).
It is, thus, clear that Code See. 1124(2) provides the debtor-in-distress with the statutory tools necessary to effect a total healing of the scars of contractual default by placing the parties into the same position as they were immediately before the default occurred. This healing is accomplished by paying the creditor whatever he would have received under the contract had the debtor not defaulted. The creditor is nevertheless rightfully categorized as unimpaired, for he is returned to the same position he was in immediately prior to the default and is thereby given the full benefit of his original bargain.
THE OFFICIAL BOND HOLDERS COMMITTEE and BANCOHIO next complain that the Debtors’ conveying of a second mortgage against the project assets to CORTLAND impairs the bond holders’ class. They opine that the Trust Indenture and Loan Agreement preclude a second mortgage on the property. However, these instruments do not preclude a second mortgage where the indenture trustee agrees to a second mortgage. 11 U.S.C. Sec. 1123(a)(5)(E) provides that “a plan shall provide adequate means for its execution, such as satisfaction or modification of any lien.” Collier explains that “the plan may propose such actions notwithstanding non-bankruptcy law or agreements.” 5 Collier, para. 1123.01[5] at 1123-10 (15th ed. 1987). 11 U.S.C. Sec. 1142 provides for plan implementation by directing the debt- or and any other necessary party to:
execute or deliver or to join in the execution or delivery of any instrument required to effect a transfer of property dealt with by a confirmed plan, and to perform any other act, ... that is necessary for the consummation of the plan.
Thus, it is permissible under the Code for the contract provision permitting a modification to be effectuated. The bond holders have little cause to complain where they are to receive full repayment of all sums due and owing. Permitting the second mortgage neither alters, diminishes, nor enhances rights under the contract. Under these circumstances, the second mortgage does not constitute an impairment.
THE OFFICIAL BOND HOLDERS COMMITTEE further argues that the seventh-year balloon payment to CORTLAND BANK serves to impair the interests of the bond holders. THE OFFICIAL BOND HOLDERS COMMITTEE could not describe in particular how this served as an impairment, and the Court declines to speculate.
Debtors’ Classes B-2, C, F, and G are proposed to be satisfied in full within forty-five (45) days of the effective date of the Plan or, in the event of an objection to a claim in one of these classes, payment is *876to be made within twenty (20) days of the allowance of such claim by final Order of the Court. These classes do not appear to be impaired and no objections have been made with respect to these classes. The remaining class, Class D, consists of STEIN. As an insider, STEIN’s acceptance is immaterial with respect to satisfying the requirements of Sec. 1129(a)(7).
Since we have determined there are no impaired classes under the provisions of Sec. 1129(a)(7), the Plan meets the requirements of Sec. 1129(a)(8), which requires that each class of claims or interests accept the plan or be found to be not impaired under the plan. Secs. 1129(a)(9) and (10) are not relevant to our discussion here.23
CLAIM OF BANCOHIO
A. Positions of the Parties. BANC-OHIO filed its Proof of Claim on September 28,1987. Debtors objected to the claim on December 7, 1988, on the following bases:
(1) The amount of the claim is in excess of that owed by debtors and a full and detailed accounting with respect to all credits and debits upon charges assessed against debtors has not been provided.
(2) Included in such claims are charges for penalties, service fees, and attorney fees which are excessive, not allowable as provided by applicable provisions of law, or the underlying contractual relationship between debtors and claimant.
BANCOHIO responded to the Objection on January 23, 1989. By Order of March 8, 1989, we directed the parties to submit whatever supplementation the parties deemed necessary on the issue of BANC-OHIO’s Proof of Claim prior to the close of business on March 14, 1989. Thereafter, the Court would consider the matter on the papers filed. Both parties made supplemental filings; Debtors filed a brief on March 14, 1989, and BANCOHIO responded to it on March 16, 1989.
In its January 23, 1989 response, BANC-OHIO clarified that it is relying upon Sec. 506(b) of the Bankruptcy Code to support its claim for pre-petition fees and expenses. Sec. 506(b) provides:
(b) To the extent that an allowed secured claim is secured by property, the value of which, after any recovery under subsection (c) of this section, is greater than the amount of such claim, there shall be allowed to the holder of such claim, interest on such claim, and any reasonable fees, costs, or charges provided for under the agreement under which such claim arose.
Sec. 2.1(C)(ii) of the Loan Agreement set forth the contractual terms under which GILLETTE might be obliged for fees and expenses, as follows:
(C) To the Trustee [BANCOHIO], the reasonable fees, charges and expenses of the trustee as Trustee, bond registrar, and paying agent, and of any other paying agent on the Bonds under the Indenture; all as provided in the *877Indenture, as and when the same become due; provided that the Company may, without creating a default hereunder, contest in good faith the necessity of any Extraordinary Services and Extraordinary Expenses as such terms are defined in the Indenture, and the reasonableness of any such fees, charges, or expenses.24
The open-end mortgage and security agreement provided for securing BANC-OHIO’s fees with the first mortgage.25 The loan agreement specifically provided that attorney’s fees and expenses incurred by BANCOHIO are “expenses” of the trustee.26
With respect to post-Petition fees and expenses, BANCOHIO asserts an entitlement to allowance of an administrative claim. BANCOHIO relies on Sec. 503(b)(3)(D) and Sec. 503(b)(4) in this regard.27 These provisions of Sec. 503 provide as follows:
(b) After notice and a hearing, there shall be allowed administrative expenses, other than claims allowed under Sec. 502(f) of this title, including— ******
(3) the actual, necessary expenses, other than compensation and reimbursement specified in paragraph (4) of this subsection, incurred by—
******
(D) a creditor, an indenture trustee, equity security holder, or a committee representing creditors or equity security holders other than a committee appointed under Sec. 1102 of this title, in making a substantial contribution in a case under chapter 9 or 11 of this title;
(4) reasonable compensation for professional services rendered by an attorney or an accountant of an entity whose expenses allowable under paragraph (3) of this subsection, based on the time, the *878nature, the extent, and the value of such services, and the cost of comparable services other than in a case under this title, and reimbursement for actual, necessary expenses incurred by such attorney or accountant.
B. Amounts Claimed by BANCOHIO. BANCOHIO set forth the “four basic components” to its claim.28
1. Principal and interest owing to the bond holders.
2. Unreimbursed advances totalling Eight Thousand, Nine Hundred Twenty-Nine & 25/100 Dollars ($8,929.25) made by BANCOHIO pursuant to October 3, 1986 Order of Judge Dowd.
3. The fees and expenses of BANC-OHIO for the services it has rendered in administering the bond issue and responding to the bond default.
4. The attorney’s fees and expenses incurred by BANCOHIO as a result of the bond default.
Each of these components is discussed separately below.
1. The portion of the claim seeking principal and interest owing to the bond holders is not in dispute. Debtors’ Plan provides for full payment of interest arrearag-es and for replenishment of the Debt Service Reserve Fund pursuant to the terms of the agreement between the parties. Accordingly, this portion of the claim is allowed.
2. The portion of the claim relating to unreimbursed advances made by BANC-OHIO, purportedly pursuant to an Order of Judge Dowd, is disallowed. The Proof of Claim set forth a lump-sum figure of Thirty Thousand, Three Hundred Ninety-Seven & 29/100 Dollars ($30,397.29). In response to Debtors’ objections seeking a detailed breakdown of the items paid, BANCOHIO reduced the amount due to Eight Thousand, Nine Hundred Twenty-Nine & 25/100 Dollars ($8,929.25). BANCOHIO explained, “[sjince the Proofs of Claim were filed, adjustments have been made for additional debits and credits.” 29 None of the exhibits submitted by BANCOHIO contains a list of the items which constitute the Thirty-Thousand, Three Hundred Ninety-Seven & 29/100 Dollars ($30,397.29), nor accounts for the “credits”, nor does any set out BANCOHIO’s authority to apply credits to the amount claimed. The claim fails for lack of proof.
3. The third component of the claim relates to fees and expenses incurred by BANCOHIO, other than attorneys’ fees and expenses. BANCOHIO contends, and the Court agrees, that its claim for pre-Petition fees and expenses is governed by 11 U.S.C. Sec. 506(b). We find that the estate has a value greater than the pre-Petition amounts claimed.30 Therefore, the Court may consider the pre-Petition fees and expenses based on their reasonableness in light of the contract between the parties. “Ordinary Services” and “Ordinary Expenses” total Ten Thousand, Three Hundred Sixty-Five & 57/100 Dollars ($10,-365.57). The charges are detailed in Exhibit 3 to BANCOHIO’s January 23, 1989 Response Brief and are not disputed. This portion of the claim is allowed as reasonable fees and expenses contemplated by the parties’ contract. The portion of the claim relating to Extraordinary Fees and Expenses is disallowed. The Trust Indenture specifies that:
If such Extraordinary Services or Extraordinary Expenses are occasioned by the neglect or misconduct of the Trustee, it shall not be entitled to compensation or reimbursement therefor.31
As BANCOHIO pointed out, ‘Allowance of reasonable fees and expenses pursuant to Sec. 506(b) is a matter of federal, not state, law.’32
*879The burden of proof to show entitlement to fees is always on the applicant. In re Lindberg Products, Inc., 50 B.R. 220, 221 (Bankr.N.D.Ill.1985); In re Harman Supermarket, Inc., 44 B.R. 918, 920 (Bankr.W.D.Va.1984); In re Horn & Hardart Baking Co., 30 B.R. 938, 939 (Bankr.E.D.Pa.1983). Since every dollar expended on legal fees results in a dollar less that is available for distribution to the creditors or for use by the debtor, this burden is not to be lightly regarded. In re Hotel Assoc. Inc., 15 B.R. 487, 488 (Bankr.E.D.Pa.1981). Here, Debtors raised serious allegations concerning misapplication of bond proceeds. Debtors alleged that BANCOHIO did not adhere to the procedures outlined in Item 4.4 of the Loan Agreement in making disbursements. Because of this breach, Debtors lacked sufficient funds to allow a timely completion of construction. Debtors particularly raised questions and requested substantiating documentation for the following disbursements:33
1. $52,762.60 on 10/31/84 to International Construction Company.
2. $50,000.00 on 01/14/85 to International Furnishings Corporation.
3. $125,000.00 on 01/23/85 to International Furnishings Corporation.
4. $27,950.00 on 04/22/85 to International Furnishings Corporation.
5. $38,536.66 on 05/29/85 to International Furnishings Corporation.
6. $15,806.00 on 07/23/85 to International Construction Corporation.
7. $31,688.00 on 07/11/85 to International Construction Corporation.
8. $35,000.00 on 08/22/85 to Health Resources Management Corporation.
9. $15,500.00 on 08/29/85 to Kenneth Eversole.
10. $30,000.00 on 09/25/85 to Kenneth Eversole.
In spite of the seriousness of these allegations, BANCOHIO provided no information to Debtors or the Court concerning the propriety of its disbursements, or the manner in which the disbursements were made. As discussed earlier, even when faced with what one would expect to be a simple matter of itemizing the advances it claimed to have made, BANCOHIO chose to rest on responding with a different figure, also with no verification. Patently, BANC-OHIO has failed to carry its burden to show entitlement to Extraordinary Fees and Extraordinary Expenses under its agreements with GILLETTE.
Even if we had found that the record supported a finding that the Bank met its burden of proof on the issue of neglect or misconduct in its disbursements, we would still be compelled to disallow the claim for Extraordinary Fees. Under Sec. 506(b), BANCOHIO is only entitled to those fees, costs, or other charges this Court deems “reasonable”. The only documentation concerning the fees is contained in Exhibit 3 to the January 23, 1989 Response Brief. That Exhibit contains insufficient information for the Court to make a determination as to the reasonableness of the charges. The Exhibit is devoid of information concerning the dates on which time was spent or the nature of the activity. The standards which this Court is obliged to follow, on the “reasonableness” issue were clearly set out in the cases which BANCOHIO itself cited to the Court.34 We can only guess why BANCOHIO did not supply the documentation required for a “reasonableness” determination and we decline to render judgments based on guesses.
4. The last component of BANCOHIO’s claim consists of its demand for pre-Petition attorney fees and expenses under 11 U.S.C. Sec. 506(b). Sec. 9.4 of the Loan Agreement (quoted infra at f. 25) provides that BANCOHIO is entitled to “reasonable” attorney’s fees and expenses incurred as a result of a default by GILLETTE. BANCOHIO’s burden under this Section appears to be less than its burden under Sec. 7.02 of the Trust Indenture. *880Sec. 9.4 contains no requirement that BANCOHIO demonstrate that it was not neglectful nor guilty of misconduct. Debtors chose not to submit evidence on this issue.35 Therefore, we proceed with an analysis of the reasonableness of the pre-Petition attorney fees and expenses. Even though BANCOHIO has maintained that its entitlement to pre-petition fees and expenses is governed by Sec. 506(b), and its entitlement to post-Petition fees and expenses is governed by Sec. 503(b)(3)(D) and Sec. 503(b)(4), BANCOHIO has not provided the Court with a document containing a breakdown of the amounts sought for pre-Petition fees and expenses and those sought for post-Petition expense fees and expenses. Rather, it is necessary to combine the Proof of Claim filed September 28, 1987, and the breakdowns of charges in the Response Brief filed January 23, 1989.36 The Proof of Claim provides lump-sum figures through June 19, 1987, which are presumably the pre-Petition figures. By subtracting these figures from figures contained in the January 23, 1989 Response Brief, purporting to be totals through December 31, 1988, we arrive at the post-Petition claim. The breakdown is as follows:
Fees and Expenses at 06/19/87 Fees and Expenses at Post-Petition 12/31/88 Claim
(Proof of Claim filed 09/28/87) (Brief Filed 01/23/89)
Attorney Fees 137,477.57 226,911.83 89,434.26.
BANCOHIO did not provide a breakdown of the hourly rates charged for those performing services. By dividing the total hours reported (1,922) into the total fees charged ($209,805.00), we determined the blended average rate to be $109.16 per hour for work performed by both professional and para-professional personnel. Based on the type of work performed, we conclude that an average hourly rate of $109.16 is reasonable. We have reviewed the detailed bills submitted by BANC-OHIO’s attorneys on a line-by-line basis. Appendix 1 contains the Court’s determination of hours disallowed and the Court’s reason for each such disallowance.37 In summary, a total of 979.1 hours were charged for services through June 19,1987. We have- disallowed 193.3 of these hours. The Court deducted as unreasonable all time which appeared to be charged for the attorneys within the law firm talking with one another where the need for multi-attor-ney conference is not shown or where the attorneys’ time charges for the same conference are differing. These are denoted on Appendix 1 as “interoffice communication.” Approximately one-half of the hours charged for paralegals was deducted, as an hourly rate of $109.16 is believed excessive for paralegal activity. Further, we have reduced the travel time charges, finding that $109.16 is excessive for travel. Deductions are made where it is impossible to determine whether the charge was reasonable from the description provided, or where two attorneys or more appeared to charge for identical work and no explanation of the need for two or more attorneys was provided.
*881Expenses charged through the time of the filing of the Petition appear to be in the neighborhood of $8,500.00. These expenses are disallowed in their entirety. BANCOHIO is represented by sophisticated counsel who cited the appropriate cases and standards to be applied by this Court.38 Well-settled case law indicates that a court cannot merely rubberstamp charges as reasonable where no indication of the amounts charged is provided. For example, we were not advised why outside professional services were needed, or what they were. We are unadvised concerning the necessity for delivery services and computer-assisted research. We do not know what court fees were paid, or where, or the amounts charged for copies, telecopies, or the rate of charges for telephone and travel. As we noted earlier, the burden is on the applicant. BANCOHIO has not carried its burden.
With respect to BANCOHIO’s claim to entitlement to administrative expenses under 11 U.S.C. Sec. 503, the claim is denied in its entirety. The burden of proving entitlement to an administrative expense is on the claimant and the standard of proof is a preponderance of the evidence. In re 1 Potato 2, Inc., 71 B.R. 615 at 618 (Bankr.D.Minn.1987) (citing Matter of Patch Graphics, 58 B.R. 743, 746 (Bankr.W.D.Wisc.1986). Section 503 requires a showing of a “substantial contribution” to the bankruptcy estate. BANCOHIO has made no such showing. We agree with the analysis and conclusions reached by the court in In re Rockwood Computer Corp., 61 B.R. 961 (Bankr.S.D.Ohio 1986). There, fees of the indenture trustee were disallowed because the court found that the indenture trustee did not make a “substantial contribution” as required under Sec. 503. The court stated:
... We do not believe that the ‘substantial contribution’ required by Sec. 503(b)(4) is to be found in connection with the performance of the normal tasks required of counsel representing the proponent of a Chapter 11 plan. The formulation of a disclosure statement and plan, of course, falls into this category. Where the disclosure statement and plan are presented by the debtor which is represented by an attorney appointed by the court pursuant to Sec. 330, that attorney is entitled to compensation for that work. Another attorney who contributes to these matters is merely performing an activity [which] amounts to the performance of some function or duty of the trustee, debtor-in-possession, or other officer of the estate, and compensation should not be awarded to such a claimant.
Here, both the Debtors and the bond holders are represented by counsel appointed by the Court pursuant to 11 U.S.C. Sec. 330. The Indenture Trustee did not seek appointment under Sec. 330. It has not and cannot demonstrate that its services were of a benefit to the Debtors’ estate or to the other creditors. Its opposition to use of the POST LAND COMPANY funds and to the compromise with TONN & BLANK increased both the Debtors’ and TONN & BLANK’S expenses. It appears the services were performed primarily for the benefit of BANCOHIO and did not make a substantial contribution in this case.
In addition to reasons already discussed, there are other reasons for preferring Debtor’s Plan over that proposed by BANCOHIO. Because some of these reasons also serve to support our conclusion that BANCOHIO did not make a substantial contribution to this case, we believe a brief articulation of these reasons is appropriate.
The Debtors’ Plan is consistent with the purpose of Chapter 11, which provides an alternative to liquidation. As the Supreme Court acknowledged in NLRB v. Bildisco and Bildisco, 465 U.S. 513, 104 S.Ct. 1188, 79 L.Ed.2d 482 (1984), the Bankruptcy Court is a court of equity, but in performing its equitable duties the Court must focus on the ultimate goal of Chapter 11. In the Supreme Court’s view,
*882The fundamental purpose of reorganization is to prevent a debtor from going into liquidation, with an attendant loss of jobs and possible misuse of economic resources. See H.R.Rep. No. 95-595, p. 220 (1977).
465 U.S. at 527-28, 104 S.Ct. at 1196-97 (1984). This view was reinforced in United States v. Whiting Pools, Inc., 462 U.S. 198 at 203, 103 S.Ct. 2309 at 2312-13, 76 L.Ed.2d 515, where the court stated:
... By permitting reorganization, Congress anticipated that the business would continue to provide jobs, to satisfy creditors’ claims, and to produce a return for its owners. H.R.Rep. No. 95-595, p. 220 (1977). Congress presumed that the assets of the debtor would be more valuable if used in a rehabilitated business than if ‘sold for scrap.’
A harmonizing view was expressed by the Sixth Circuit in Matter of Winshall Settlor’s Trust, 758 F.2d 1136, 1137 (6th Cir.1985). There, the court stated:
The purpose of Chapter 11 reorganization is to assist financially distressed business enterprises by providing them with breathing space in which to return to a viable state.
See also Vanston Bondholders Protective Committee v. Green, 329 U.S. 156, 67 S.Ct. 237, 91 L.Ed. 162 (1946); In re Nite Lite Inns, 17 B.R. 367 (Bankr.S.D.Cal.1982) (Liquidation plans should be secondary concerns unless debtor chooses such a course or the necessities of justice require it).
Debtors’ Plan is fair and equitable. It proposes to pay all creditors in full. BANCOHIO’s proposal to liquidate both GILLETTE and STEIN is not fair and equitable to these Debtors. Liquidation would deprive STEIN of the opportunity to recoup his investment of time, close to 1.4 million dollars in advances, and his lifetime savings and livelihood. Further, STEIN testified to the receipt of offers for the GILLETTE facility of 3.1 million, 3.2 million, 3.3 million, and 3.7 million dollars. WARREN GENERAL, the very buyer proposed in BANCOHIO’s liquidation plan, made an offer of 3.2 million dollars prior to the time the facility was in operation. Our Memorandum Opinion of November 2, 1987 found “[t]he 3.1 million dollar offer for the facility represents a minimum evaluation.” It is curious that now that the facility is completed, is filled to capacity and has a waiting list of patients, and is showing a profit, BANCOHIO would propose a plan to liquidate GILLETTE and surrender its Certificate of Need and licenses to WARREN GENERAL for a lower 3 million-dollar offer.
FEASIBILITY OF DEBTORS’ PLAN
11 U.S.C. Sec. 1129(a)(ll) provides:
Confirmation of the plan is not likely to be followed by the liquidation, or the need for further financial reorganization, of the debtor or any successor to the debtor under the plan, unless such liquidation or reorganization is proposed in the plan.
The standards to be utilized by courts examining the feasibility of plans are set forth in In re Cherry, 84 B.R. 134, 138 (Bankr.N.D.Ill.1988), thusly:
... When examining the feasibility of a business operation, the court should consider the adequacy of the capital structure, the earning power of the business, the economic conditions, the abilities of management, the continuity of the present management, and other matters which determine the prospects of the sufficiently successful business operation. In re Clarkson, 767 F.2d 417 (8th Cir. 1985). The plan must offer a reasonable prospect of success and [be] worka-ble_ ‘Success need not be guaranteed.’ In re Monnier Bros., 755 F.2d 1336, 1341 (8th Cir.1985) (quoting United Properties, Inc. v. Emporium Department Stores, Inc., 379 F2d. 55, 64 (8th Cir.1967).
See also In re U. S. Truck Co., Inc., 800 F.2d 581, 589 (6th Cir.1986); Federal Land Bank of Columbia v. Cheatham, 91 B.R. 377 (E.D.N.C.1988).
First, we find that the continuation of present management would benefit all parties in interest. Debtors’ problems stemmed from a lack of funds to complete construction, not from mismanagement of *883the facility. Once construction of the facility was complete, Debtors were able to begin operations and to maintain the operations in an exemplary fashion. Evidence of management’s ability is evident in Debtors’ payment of all operating expenses and accumulation of more than Six Hundred Fifty Thousand Dollars ($650,000.00) for distribution on pre-Petition debts. Based on the filings of the parties, the testimony adduced at hearing, and the monthly reports filed by Debtors, we find that the Debtors reasonably can be expected to have future net earnings and cash flow sufficient in amount to meet the restructured obligations.
Second, we find that Debtors’ proposed new capital structure, including the relationship of debt to equity, is sound.
For the foregoing reasons and on the authorities cited, the Debtors’ Plan is confirmed. An appropriate Order shall issue.
ORDER
For reasons set forth in the Court’s Memorandum Opinion entered of even date, the claim of BANCOHIO NATIONAL BANK for principal and interest owing to the bond holders through April 1, 1989, is allowed in full. The claim of BANCOHIO NATIONAL BANK for Ordinary Services and Expenses is allowed in the amount of Ten Thousand, Three Hundred Sixty-Five & 57/100 Dollars ($10,365.57). The claim of BANCOHIO NATIONAL BANK for pre-Petition attorney fees incurred as a result of the bond default is allowed in the amount of Eighty-Five Thousand, Seven Hundred Seventy-Seven & 93/100 Dollars ($85,777.93). The remainder of BANC-OHIO NATIONAL BANK’S Proof of Claim, and its claim for administrative expenses, is disallowed.
Debtors’ First Amended Plan of Reorganization, as modified, is confirmed. Debtors’ counsel shall prepare an appropriate Order and submit it to the Court within seven days of entry of this Order.
IT IS SO ORDERED.
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. The two payments totalled $353,562.00. The payments reduced the Debt Service Reserve Fund to approximately Thirty-Three Thousand & 00/100 Dollars ($33,000.00).
. Both cases were removed to this Court.
. Case Number JLD No. 56, Page 300, Trumbull County Court of Common Pleas.
.The appeals were removed to the Bankruptcy Court with consent of all parties on August 6, 1987.
. WARREN GENERAL is an Ohio general partnership formed by Warren General Health Care Enterprises, Inc., and Mr. Robert VanSickle. Warren General Health Care Enterprises, Inc., is an affiliate of Warren General Hospital. Mr. VanSickle is a principal of AMCARE HEALTH, INC., a creditor in these Chapter 11 proceedings. BANCOHIO’s Disclosure Statement represented that another company in which Mr. Van-Sickle has an interest, Vanesco, Inc., will, in all probability, manage the GILLETTE facility for WARREN GENERAL.
. 11/23/88 Disclosure Statement accompanying the Second Amended Combined Plan of Reorganization submitted by BANCOHIO.
. This sum is determined by subtracting the assumed bond debt from the total purchase price.
($3,000,000.00 - $2,610,000.00 = $390,000.00).
. Projected from August 31, 1988 through November 30, 1988 at $50,090.00 per month.
. Projected from March 31, 1988 to November 30, 1988; balance on March 31, 1988 was $782,-000.00; additional interest projected at 6.1 percent (6.1%) per annum.
. Any additional sums needed may be obtained, BANCOHIO explains, by liquidating STEIN's real estate interests. The Plan makes no acknowledgement of the approximately $33,-000.00 or accrued interest which BANCOHIO is holding in the Debt Service Reserve Fund.
. See Proof of Claim of BANCOHIO filed 09/28/87, p. 1.
. See 11/23/88 Disclosure Statement, p. 28 (amount to a projected closing date of 11/30/88).
. See Proof of Claim of BANCOHIO filed 09/28/87, p. 2.
. Id.
. Id.
. See Disclosure Statement of 11/23/89, p. 29; BANCOHIO has submitted to the Court a statement for professional fee charges through December 30, 1988, in the amount of $226,911.83. It is unclear what portion, if any, of these fees are included in the above-projected disbursements.
. Second Modification to Debtors’ First Amended Plan, filed 03/31/89.
. Cash is accumulating at the rate of some $50,000 per month over operating expenses.
. Stein is proposing to loan this sum to Gillette to be repaid on a monthly basis as funds are available. In the event Gillette defaults on a payment of its secured obligation to the bond holders or Cortland Savings & Banking Co., the monthly payment to Stein is to be suspended until the default is cured.
.Cortland has agreed to loan Debtors $525,-000.00 at 1114 percent interest per annum, secured by a second mortgage on the nursing home facility. The loan is' repayable on a monthly basis upon a 20-year amortization schedule with a seven-year balloon payment.
. 1129(a)(4), (5) and (6) provide:
(4) Any payment made or to be made by the proponent by the debtor, or by a person issuing securities or acquiring property under the plan, for services or for costs and expenses in or in connection with the case, or in connection with the plan and incident to the case, has been approved by, or is subject to the approval of, the court as reasonable;
(5)(A)(i) The proponent of the plan has disclosed the identity and affiliations of any individual proposed to serve, after confirmation of the plan, as a director, officer, or voting trustee of the debtor, an affiliate of the debtor *874participating in a joint plan with the debtor, or a successor to the debtor under the plan; and
(ii) the appointment to, or continuance in, such office of such individual, is consistent with the interests of creditors and equity security holders and with public policy; and
(B) the proponent of the plan has disclosed the identity of any insider that will be employed or retained by the reorganized debtor, and the nature of any compensation of such insider.
(6) Any governmental regulatory commission with jurisdiction, after confirmation of the plan, over the rates of the debtor has approved any rate change provided for in the plan, or such rate change is expressly conditioned on such approval.
. In re Centre Court Apartments, Ltd., 85 B.R. 651 (Bankr.N.D.Ga.1988); In re Entz-White Lumber & Supply, Inc., 850 F.2d 1338 (9th Cir.1988); In re Manville Forest Products Corp., 43 B.R. 293 (Bankr.S.D.N.Y.1984); In re Forest Hills Assoc., 40 B.R. 410 (Bankr.S.D.N.Y.1984); In re Masnorth Corp., 36 B.R. 335 (Bankr.N.D.Ga.1984); In re Rainbow Forest Apartments, 33 B.R. 576 (Bankr.N.D.Ga.1983); Valente v. Savings Bank of Rockville, 34 B.R. 362, 363; (D.Conn.1983).
. 11 U.S.C. Secs. 1129(a)(9) and (10) provide: (9) Except to the extent that the holder of a particular claim has agreed to a different treatment of such claim, the plan provides that—
(A) with respect to a claim of a kind specified in section 507(a)(1) or 507(a)(2) of this title, on the effective date of the plan, the holder of such claim will receive on account of such claim cash equal to the allowed amount of such claim;
(B) with respect to a class of claims of a kind specified in section 507(a)(3), 507(a)(4), 507(a)(5), or 507(a)(b) of this title, each holder of a claim of such class will receive—
(i) if such class has accepted the plan, deferred cash payments of a value, as of the effective date of the plan, equal to the allowed amount of such claim; or
(ii) if such class has not accepted the plan, cash on the effective date of the plan equal to the allowed amount of such claim; and
(C)with respect to a claim of a kind specified in section 507(a)(7) of this title, the holder of such claim will receive on account of such claim deferred cash payments, over a period not exceeding six years after the date of assessment of such claim, of a value, as of the effective date of the plan, equal to the allowed amount of such claim.
(10) If a class of claims is impaired under the plan, at least one class of claims that is impaired under the plan has accepted the plan, determined without including any acceptance of the plan by any insider.
. See also Sec. 6.04 at p. 24 and Sec. 7.02 at p. 28-29 of the Trust Indenture, providing:
Sec. 6.04. Payments to Trustee.
Pursuant to the provisions of the Loan Agreement, the Company has agreed to pay to the Trustee, continuing until the outstanding bond shall have been fully paid and discharged in accordance with the provisions of the Indenture, the reasonable fees, charges, and expenses of the Trustee, as trustee (for Ordinary and Extraordinary Services and Expenses), Bond Registrar and Paying Agent, as and when the same became due; provided, that the Company may, without creating a default thereunder, contest in good faith the necessity for any such Extraordinary Services and Extraordinary Expenses and the reasonableness of any such fees, charges, or expenses.
Sec. 7.02 Fees, Charges, and Expenses of Trustee.
Subject to the provisions of Sec. 6.04 hereof, the Trustee shall be entitled to payment and/or reimbursement for reasonable fees for its Ordinary Services rendered hereunder and all advances, counsel fees, and other Ordinary Expenses reasonably and necessarily made or incurred by the Trustee in connection with such Ordinary Services and, in the event that it should become necessary that the Trustee perform Extraordinary Services, it shall be entitled to reasonable extra compensation therefor, and to reimbursement for reasonable and necessary extraordinary expenses in connection therewith;
. Sec. 22 at page 10 of the Mortgage provides:
22. Security for Loan.
This Mortgage is intended to secure, as a first mortgage, the principal amount outstanding on the project bonds and premium, if any, and interest thereon and Additional Payments and other payments to be made under the Loan Agreement, the Note, the Indenture, or this Mortgage relating thereto.
See also Sec. 8.06 of the Trust Indenture, providing that BANCOHIO is to receive its fees and expenses ahead of other distributions. BANC-OHIO also asserts the following as security for its fees and expenses: (1) POST LAND COMPANY funds; (2) judgment lien against real estate holdings of STEIN; (3) assignment of judgment lien against Dr. Frank G. Veres.
. Sec. 9.4 of the Loan Agreement, at p. 44, provides:
Sec. 9.4. Agreement to Pay Attorneys' Fees and Expenses.
In the event the Company should default under any of the provisions of this Loan Agreement and the Issuer [Trumbull County] or the Trustee should employ attorneys or incur other expenses for the collection of Loan Payments or the enforcement of performance or observance of any obligation or agreement on the part of the Company contained in this Loan Agreement, the Company shall, on demand therefor, reimburse the reasonable fee of such attorneys, to the extent permitted by law, and such other expenses so incurred.
. See 01/23/89 Response of BANCOHIO, p. 9, ftnote 1.
. See January 23, 1989 Response Brief, p. 2.
. See January 23, 1989 Response, p. 4, and Exhibit 2 to that Response.
. See p. 882, infra, discussing valuation of GILLETTE facility.
. Sec. 7.02, p. 29, Trust Indenture.
. See January 23, 1989 Response Brief, p. 9, citing Unsecured Creditors Committee v. Walter E. Heller, 768 F.2d 580, 585 (4th Cir.1985); Joseph F. Sanson Investment Co. v. 268 Ltd., 789 F.2d 674, 675 (9th Cir.1986); Blackburn-Bliss *879Trust v. Hudson Shipbuilders, Inc., 794 F.2d 1051 (5th Cir.1986).
. Exhibit 2 to BANCOHIO’s Brief of March 16, 1989.
. See ftnote 31.
.See March 14, 1989 Brief of Debtors at p. 6, where the Debtors state,
Debtor has proposed and is prepared to pay the claim of the individual bond holders, with reservation of such rights against BANCOHIO as it may be entitled to assert by virtue of, and in the event that a correlation between the construction shortfall and the method by which BANCOHIO disbursed bond proceeds is found to exist.
. The breakdown of attorney’s charges was submitted as Exhibit 4 of BANCOHIO’s January 23, 1989 Response Brief. A copy is annexed here as "Appendix 1”.
. In making these determinations, we have generally applied the standards of 11 U.S.C. Sec. 330 and the common law which has evolved therefrom.
. See January 23, 1989 Response Brief, p. 9. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8490942/ | AMENDED MEMORANDUM OF DECISION ON CROSS-MOTIONS FOR SUMMARY JUDGMENT
ROBERT L. KRECHEVSKY, Chief Judge.
I.
In this core proceeding, Regency Architectural Metals Corp. (the debtor) seeks a determination of the validity, enforceability and priority of a lien claimed by Ment Brothers Iron Works Company, Inc. (Ment). Ment contends that a New York statutory restraining notice, served prepetition by it as a judgment creditor upon an account debtor of the debtor, entitles Ment to the receivable over the claim of. the debtor’s estate. Ment asserts that the restraining notice either “effectuated an involuntary transfer to it” of the receivable to “be set off against” the debtor’s obligation to Ment, or that the restraining notice prevented the receivable from becoming “property of the estate.” The parties have *18presented the matter to the court by way of a stipulation of facts and documents, memoranda of law and cross-motions for summary judgment. For reasons that follow, Ment’s arguments are determined .to be baseless.
II.
BACKGROUND
Ment, on November 5, 1986, obtained a money judgment for $42,050.00 against the debtor in the Supreme Court of New York. The judgment was based upon work performed by Ment as a sub-contractor of the debtor. On August 13, 1987, Ment’s attorneys, pursuant to New York Civil Practice Law and Rules (CPLR) § 5222, served a restraining notice on Jack Resnick and Sons, Inc. (Resnick), a contractor for whom the debtor had been a sub-contractor and who then owed the debtor $31,117.50 for services and materials. Resnick’s obligation to the debtor and the debtor’s obligation to Ment arose out of unrelated jobs. No further events took place prior to the filing by the debtor of a voluntary chapter 11 petition in this court on November 20, 1987. The court confirmed the debtor’s plan of reorganization on February 23, 1989. By agreement of the parties, Res-nick paid its account payable to the debt- or’s estate, with the funds placed in an escrow account pending this court’s determination of the party entitled to these monies.
III.
DISCUSSION
The central issue here is the effect of a CPLR § 5222 restraining notice. That section authorizes an attorney for a judgment creditor to serve a restraining notice upon any person, except the employer of a judgment debtor, who is indebted to or has property of the judgment debtor. The notice provides that the person served is forbidden from transferring such property or paying such debt “to any person other than the sheriff, except upon direction of the sheriff or pursuant to an order of the court, until the expiration of one year after the notice is served upon him, or until the judgment is satisfied or vacated, whichever event first occurs.” The operative provisions of § 5222, pertinent to the present proceeding, were clearly outlined and defined by the New York Court of Appeals in Aspen Industries v. Marine Midland Bank, 52 N.Y.2d 575, 439 N.Y.S.2d 316, 318-19, 421 N.E.2d 808 (1981):
[T]he restraining notice serves as a type of injunction prohibiting the transfer of the judgment debtor’s property. This notice may be served on either the judgment debtor himself or, as in the present case, upon a third party “garnishee” — a person who owes a debt to the judgment debtor or who is in possession of property in which the judgment debtor has an interest. When served upon a garnishee, the injunctive effect of the restraining notice continues for one year or until such time as the judgment is satisfied or vacated, whichever occurs first, and extends to property “then in and thereafter coming into the possession or custody” of the garnishee. In contrast with prior law, service of a CPLR 5222 restraining notice confers no priority upon the judgment creditor in the form of a lien on the judgment debtor’s property. Therefore a judgment creditor serving a restraining notice ordinarily is required to take further steps in enforcing his judgment, such as an execution or levy upon the judgment debtor’s property, in order to prevent the intervening rights of third parties from taking precedence over his claim against the judgment debtor. (Citations omitted).
In light of this clear statement of the operation of the restraining notice, New York bankruptcy courts have, without exception, held that all rights of a judgment creditor under a restraining notice are subject to and fall before the strong-arm powers of a bankruptcy trustee. Tompkins County Trust v. Sullivan (In re Sullivan), 31 B.R. 125, 127 (Bankr.N.D.N.Y. 1983) (“the Trustee’s strong arm’ rights under the Code are such that allow him to set aside the Trust Company’s restraining notice, since no lien exists on the subject *19proceeds, and use same for the benefit of the Debtor’s estate.”); Barr v. National Aircraft Services (In re Cosmopolitan Aviation), 34 B.R. 592, 597 (Bankr.E.D.N.Y.1983) (The service of a restraining notice creates no lien; the issuance of an execution is required to prevail against a bankruptcy trustee.); McMahon v. Nourse (In re McMahon), 70 B.R. 290, 293 (Bankr.N.D.N.Y.1987) (A restraining notice is voidable under the debtor’s paramount strong-arm powers, and the debtor is entitled to summary judgment in a proceeding seeking release of the restraining notice.); Cf. James Talcott Factors v. Blatter (In re Blatter), 16 B.R. 137 (Bankr.E.D.N.Y.1981) (where creditor issued restraining notice followed by delivery of an execution timely perfected, creditor obtains lien prior in right to trustee’s hypothetical lien); see also Siegel, Practice Commentaries, McKinney’s Cons. Laws of N.Y., Book 7B, CPLR 5222, C5222:8 (“the restraining notice, whatever its uses and advantages, gives the judgment creditor no lien on the defendant’s property, personal or real, and no special priority in a race with other judgment creditors. Practitioners who have overlooked this have seen their clients lose out to other judgment creditors who, though perhaps less diligent overall, none-' theless made use of a device which did obtain a priority.”)
Ment’s attempt during oral argument to distinguish Aspen Industries is unavailing, and the authorities which Ment primarily relied upon in its memorandum—Gibson v. Central Nat’l Bank of McKinney, 171 E.2d 398 (5th Cir.1948) and Allbrand Appliance & Television v. Merdav Trucking (In re Allbrand Appliance & Television), 16 B.R. 10 (Bankr.S.D.N.Y.1980)—are totally inapposite.
IV.
CONCLUSION
The powers of a trustee under § 544(a), the strong-arm clause, “are those which the state law would allow to a supposed or hypothetical creditor of the debtor who, as of the commencement of the case, had completed the legal (or equitable) processes for perfection of a lien upon all the property available for the satisfaction of his claim against the debtor.” L. King, 4 Collier On Bankruptcy ¶ 544.02 at 544-5 (15th ed. 1989). Consequently, the restraining notice issued by Ment on August 13, 1987 is avoidable by the debtor, and the funds held in the escrow account, representing the proceeds of the Resnick account receivable, are determined to belong to the debtor’s estate, free of any claim of Ment. The debtor’s motion for summary judgment is granted, and Ment’s motion for summary judgment is denied. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8490943/ | OPINION AND ORDER
LEIF M. CLARK, Bankruptcy Judge.
At San Antonio, Texas on the 25th day of August, 1987, came on for hearing the Sixth Amended Application of John C. Calhoun & Company (“Calhoun”) for Interim Compensation. After consideration of the evidence and of the arguments of counsel the Court finds that the Application should be approved in part and denied in part.
Calhoun has substantial experience in bankruptcy matters, being the accountant of choice for one of the more active local bankruptcy practitioners. The firm therefore also has considerable familiarity with the vagaries of compensation for professionals in bankruptcy. Notwithstanding that familiarity, Calhoun’s application is skimpy in its detail of services rendered.1 Only by extrapolation can billing rates be divined. Nowhere are the professionals rendering the services identified. “D. Palmer” for example might be a bookkeeper, a staff accountant, a manager, or partner. Without identification, the Court cannot tell whether Palmer’s billing rate is appropriate or whether the time Palmer *96spent on a given task is reasonable given his (or her) experience level.2
Even were the court to presume that the experience level of the professionals approximates their billing rate, and were the court to overlook the cursory descriptions of services performed relative to the time spent, the application runs into other problems. Too much time has been spent for relatively routine matters such as the preparation of monthly operating reports, and too many professionals are involved in rendering those services. Usually, at least two and often as many as four persons are charging the estate for the preparation of a single month’s operating report. This court will be quick to acknowledge that the current operating report requires some time to complete. However, the report was designed by an accountant and should not pose any peculiar difficulty for other accountants, especially those routinely retained in bankruptcy eases. By way of example, however, the February 1987 report required the services of two professionals, billing 13x/4 hours of professional time to the estate, at a cost of $579.75. The May 1987 report had three professionals billing the estate, running up a tab of $951.50. The Trustee has candidly admitted that this estate was a failure as a reorganization. It has proven to be a windfall for the accountants, however, who have thus far succeeded m convincing previous judges to approve $33,000 worth of fees. The fourteen months’ worth of operating reports filed for the period covered by this fee application will cost the estate approximately $9,300, or about $660 per report. It is difficult to conceive of this cost as a benefit to the estate, no matter how “informative” the monthly reports might have been. The futility of assessing these charges against the estate is underscored by the poor results achieved in the case.
It has been frequently observed that courts should be especially cautious in applying the “results achieved” standard when evaluating professional fees in bankruptcy, lest courts discourage zealous pursuit of bankruptcy goals by the persons most likely to achieve those aims by virtue of their experience in the area, especially in view of the high risk associated with working for bankruptcy estates. The standard is nonetheless a valid one in the present context. One of the services which Calhoun purported to offer the estate was denominated “management advisory services” in the Application. These services are different from accounting, though are a recognized service offered by certified public accountants, according to John Calhoun’s testimony. In essence, the accountant performing such services takes raw *97financial information, explains the results to his client, assists his client in tax planning, makes suggestions based on the data for changes in the company’s operations, suggests changes in the company’s buying characteristics, and finally helps the client to implement those changes deemed necessary. The accountant acts as a business consultant, intimately involved in the operation, experimenting with strategies for turning things around.
The estate is being billed $2,880 for such services performed primarily by Mr. Calhoun. If this Court is to take Mr. Calhoun at his word, then clearly he, perhaps more than anyone, had his finger on the pulse of the patient and was in the best position to evaluate the financial health of the debtor and its prospects for recovery. Calhoun also spent considerable time assisting the debtor in preparing a disclosure statement, lending further credence to the inference that Calhoun knew or should have known what was going on with this debtor. The evidence before the court is also clear that this company suffered “regular losses” and that the outcome of the reorganization effort was “lousy.” Given Calhoun’s intimate knowledge of the financial condition of the debtor, he had no business permitting his firm to continue running up monthly charges averaging in excess of $660 for the preparation of monthly operating reports.
The management advisory services are themselves a suspect charge. As helpful as they might have been (though the results achieved indicate to the contrary), they seem to have far exceeded the services which this Court could reasonably have anticipated the accountants would perform when first the Court authorized their retention. Had the estate felt it appropriate to retain a management consultant, an appropriate request could have been submitted to the Court. If the estate wished to expand the duties of its accountants, it could similarly have advised the Court. The problem is not that such services are beyond the ken of an accountant, for they evidently are not. Many attorneys are similarly qualified to act as business or management consultants. Court approval of an estate s retention of counsel qua counsel does not justify counsel’s later billing the estate for management consultant services. The fees are especially suspicious in this particular case, as Calhoun has been the debtor’s accountant since 1979. One strongly suspects that Calhoun never charged for similar “services” before the bankruptcy was filed, instead meeting with his client and friend regularly to go over how things were going and advising him to try this or abandon that course of action.
The billing rate of the accountant professionals offers one of the few bright lights in this otherwise gloomy application. John Calhoun, the senior accountant and owner of the firm, bills out his time at $80.00 an hour. His is the highest billing rate amongst all the professionals. Other rates range from $30.00 an hour through $65.00 an hour.
Time spent on preparation of the disclosure statement is more easily compensable, as the requirements of the Court for precise data and detail in disclosure statements makes accurate and complete accounting information essential. It appears that some of the time spent on this general area was devoted to tactics, options-testing, and experimentation, areas not typically associated with the usual “number-crunching” activities of accountants. The preparation of a disclosure statement, however, is one of the most critical activities engaged in by a debtor seeking to reorganize. Here he pulls together all of his resources — his consultants, his professionals, his principals — and calls upon their mutual and admixed skills to assemble his financial salvation. At the same time, the task is fraught with risk. While time and talent can be wasted here as easily as at any other point in a case, the very nature of a chapter 11 proceeding demands that the most effort be concentrated on this task. The Court is compelled to keep these considerations in mind when evaluating the time spent on preparation of plans and disclosure statements, and has done so in this ease. However, the Court also notes that Calhoun has been the debtor’s accountant since 1979, long before filing.
*98Based upon the foregoing, the Court finds that the fees for preparation of monthly operating reports will be allowed only to an average of $200.00 per month, for a total of $2,800.00. The management advisory fees will be disallowed in their entirety. The fees associated with preparation of the disclosure statement will be discounted by one-third. The balance of the fees requested will be allowed as an interim fee.
The Court notes that this proceeding has been converted to a chapter 7 case. As a result, these fees, incurred as they were during the chapter 11 case, are subordinate in priority to the chapter 7 case administration costs and expenses. The estate is excused from actually paying these fees at this time pending further orders of this Court. The allowance of these fees is an interim allowance and is without prejudice to further review and objection by the chapter 7 trustee preliminary to the entry of a final award. Insofar as fees have been disallowed in this application, however, they are disallowed' with prejudice.
It is therefore ORDERED, ADJUDGED, and DECREED that the Amended Sixth Application of John C. Calhoun & Associates for Interim Compensation be and the same is hereby allowed in the amount of $6,024.92. The balance requested is hereby disallowed with prejudice. It is further ORDERED that Trustee is excused from paying the interim fee here awarded pending further orders of this Court.
. Here is an example of a series of entries:
*96[[Image here]]
. Despite these deficiencies, the application still contains more detail than the typical application submitted by accountants that this Court has reviewed to date, an observation that serves less to exonerate Calhoun than to indict the rest of the accounting profession. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482893/ | Supreme Court of Florida
____________
No. SC21-1581
____________
IN RE: AMENDMENTS TO FLORIDA RULES OF CIVIL
PROCEDURE – UNIFORM GUIDELINES FOR TAXATION OF
COSTS.
November 10, 2022
PER CURIAM.
This matter is before the Court for consideration of proposed
amendments to the Florida Rules of Civil Procedure. We have
jurisdiction. See art. V, § 2(a), Fla. Const.
The Florida Rules of Civil Procedure Committee (Committee)
filed a report proposing amendments to Appendix II, Statewide
Uniform Guidelines for Taxation of Costs in Civil Actions
(Guidelines) of the civil procedure rules. See Fla. R. Gen. Prac. &
Jud. Admin. 2.140(b). The proposed amendments were
unanimously approved by the full committee and recommended by
The Florida Bar’s Board of Governors.
The statewide uniform guidelines for taxation of costs in civil
actions were first adopted by the Florida Conference of Circuit
Judges by administrative order signed by the Chief Justice in
October 1981. See In re Statewide Uniform Guidelines for Taxation
of Costs in Civil Actions, Administrative Order, 7 Fla. L. Weekly 517
(Fla. Oct. 28, 1981); see also Reeser v. Boats Unlimited, Inc., 432 So.
2d 1346, 1349 n.2 (Fla. 4th DCA 1983). The Court later replaced
the then-existing guidelines with revised guidelines proposed by the
Subcommittee on Revised Uniform Guidelines on Taxation of Costs
in Civil Actions, as proposed by the Committee in 2005. In re
Amends. to Unif. Guidelines for Tax’n of Costs, 915 So. 2d 612 (Fla.
2005).
The amendments to the current Guidelines are largely for
clarification purposes. Under the section designated “I. Litigation
Costs That Should Be Taxed,” we amend paragraph two of
subdivision A, “Depositions,” to include as a cost that should be
taxed “audiovisually recorded depositions.” Next, under subdivision
C, “Expert Witnesses,” “trial testimony” is changed to “court
testimony.” This will expand the Guidelines to testimony given in
-2-
court rather than only trial testimony. In addition, new subdivision
G, “Filing Fees and Service of Process Fees,” is added to section I.
Under the section designated “II. Litigation Costs That May Be
Taxed as Costs,” we amend subdivision A and related paragraphs to
include nonbinding arbitration fees and expenses in addition to
mediation. Lastly, new subdivision D is added to include testifying
expert witnesses as litigation costs that may be taxed as costs. This
subdivision includes three paragraphs, including (1) an expert’s
reasonable fee for “conducting examinations, investigations, tests,
and research and preparing reports”; (2) an expert’s reasonable fee
“for testimony at court-ordered nonbinding arbitration”; and (3) an
expert’s reasonable fee “for preparing for deposition, court-ordered
nonbinding arbitration, and/or court testimony.”
Accordingly, we amend Appendix II to the Florida Rules of Civil
Procedure as reflected in the appendix to this opinion. New
language is underscored; deleted language is stricken through. The
amendments to these rules shall become effective January 1, 2023,
at 12:01 a.m.
-3-
It is so ordered.
MUÑIZ, C.J., and CANADY, POLSTON, LABARGA, COURIEL,
GROSSHANS, and FRANCIS, JJ., concur.
THE FILING OF A MOTION FOR REHEARING SHALL NOT ALTER
THE EFFECTIVE DATE OF THESE AMENDMENTS.
Original Proceeding – Florida Rules of Civil Procedure
Landis V. Curry III, Chair, Civil Procedure Rules Committee,
Tampa, Florida, Jason P. Stearns, Past Chair, Civil Procedure Rules
Committee, Tampa, Florida, Joshua E. Doyle, Executive Director,
The Florida Bar, Tallahassee, Florida, and Heather Savage Telfer,
Bar Liaison, The Florida Bar, Tallahassee, Florida,
for Petitioner
-4-
APPENDIX
APPENDIX II
STATEWIDE UNIFORM GUIDELINES FOR TAXATION OF COSTS
IN CIVIL ACTIONS
Purpose and Application. [No Changes]
Burden of Proof. Under these guidelines, it is the burden of
the moving party to show that all requested costs were reasonably
necessary either to defend or prosecute the case at the time the
actionactivity precipitating the cost was undertaken.
I. Litigation Costs That Should Be Taxed.
A. Depositions.
1. [No changes]
2. The original and/or one copy of the electronic deposition,
including audiovisually recorded depositions, and the cost of
the services of a technician for electronic depositions used at
trial.
3. [No changes]
B. Documents and Exhibits. [No Changes]
C. Expert Witnesses.
1. A reasonable fee for deposition and/or trialcourt
testimony, and the costs of preparation of any court ordered
report.
D.-F. [No Changes]
G. Filing Fees and Service of Process Fees.
-5-
II. Litigation Costs That May Be Taxed as Costs.
A. Mediation/Nonbinding Arbitration Fees and
Expenses.
1. Costs of mediation, including and mediator fees.
2. Costs of court-ordered nonbinding arbitration, including
arbitrator fees.
B.-C. [No Changes]
D. Testifying Expert Witnesses.
1. A reasonable fee for conducting examinations,
investigations, tests, and research and preparing reports.
2. A reasonable fee for testimony at court-ordered
nonbinding arbitration.
3. A reasonable fee for preparing for deposition, court-
ordered nonbinding arbitration, and/or court testimony.
III. Litigation Costs That Should Not Be Taxed as Costs. [No
Changes]
-6- | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482884/ | NOTICE: NOT FOR OFFICIAL PUBLICATION.
UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL
AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.
IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE
FRANK LUYET, et al., Plaintiffs/Appellees,
v.
MARIPOSA LANDSCAPE ARIZONA, INC., et al., Defendants/Appellees.
and
STATE OF ARIZONA, Defendant/Appellant.
No. 1 CA-CV 21-0543
FILED 11-10-2022
Appeal from the Superior Court in Maricopa County
No. CV2017-014464
The Honorable Roger E. Brodman, Judge Retired
AFFIRMED
COUNSEL
Matthew P. Millea PLC, Scottsdale
By Matthew P. Millea
Co-Counsel for Plaintiffs/Appellees Frank Luyet and Jennifer Haggerty
Mark J. DePasquale PC, Phoenix
By Mark J. DePasquale
Co-Counsel for Plaintiffs/Appellees Frank Luyet and Jennifer Haggerty
LUYET, et al. v. MARIPOSA LANDSCAPE, et al.
Decision of the Court
Hinshaw & Culbertson LLP, Phoenix
By Randy Aoyama, Bradley L. Dunn, Megha Singh
Counsel for Defendant/Appellee Mariposa Landscape Arizona, Inc.
Arizona Attorney General’s Office, Phoenix
By G. Michael Tryon, Daniel P. Schaack, Rebecca Banes
Counsel for Defendant/Appellant State of Arizona
Wilenchik & Bartness PC, Phoenix
By Dennis I. Wilenchik, Barbara J. Stansil
Co-Counsel for Defendant/Appellee City of Peoria
City of Peoria, Peoria
By Melinda A. Bird
Co-Counsel for Defendant/Appellee City of Peoria
MEMORANDUM DECISION
Judge Angela K. Paton delivered the decision of the Court, in which
Presiding Judge Maria Elena Cruz and Judge Peter B. Swann joined.
P A T O N, Judge:
¶1 The State of Arizona appeals from the superior court’s order
granting a motion for a new trial. For the following reasons, we affirm.
FACTS AND PROCEDURAL HISTORY
¶2 In Peoria, a stretch of Grand Avenue/U.S. Route 60 passes
between an RV park and industrial buildings on its way northwest before
reaching downtown Peoria. This roadway has no streetlights or sidewalks
after it passes through a six-way intersection with North 75th Avenue and
Olive Avenue except for some foliage and gravel along the sides of the road.
No signs prohibit pedestrian traffic, and no fences keep pedestrians out. On
this road, a vehicle struck and killed Gavin Haggerty (“Gavin”), a few hours
before dawn in November 2016.
¶3 Gavin’s parents (Frank Luyet and Jennifer Haggerty,
collectively “the Luyets”) sued the State, the City of Peoria, and the street
maintenance provider for their alleged negligence in constructing and
maintaining this stretch of roadway. The Luyets argued that the roadway
2
LUYET, et al. v. MARIPOSA LANDSCAPE, et al.
Decision of the Court
was unreasonably dangerous for pedestrians, as it possessed neither the
safety features necessary to walk along its sides, nor warnings that
pedestrians should keep out.
¶4 The State has an affirmative defense to actions such as this
alleging negligent roadway design. See A.R.S. § 12-820.03(A). To prove the
affirmative defense, the State must establish that the road’s plan or design
was “prepared in conformance with generally accepted engineering or
design standards.” Id. Defendants must also prove that they gave the
public “a reasonably adequate warning of any unreasonably dangerous
hazards.” Id. Because a genuine issue of material fact existed as to whether
Defendants met this burden, Defendants moved to bifurcate the trial.
A.R.S. § 12-820.03(B).
¶5 The superior court granted the motion, ordering that “the
only issue [for the first trial] will be whether the [government defendants]
were negligent and whether the affirmative defense under A.R.S. § 12-
820.03 applies. The Court does not intend to address causation,
comparative fault or damages at the first trial.” Prior to trial, the Luyets
filed motions in limine, asking the court to preclude unfairly prejudicial or
irrelevant evidence—including Gavin’s state of intoxication and the issue
of causation. The superior court granted the Luyets’ motion, noting that
“[w]hether [Gavin] was intoxicated is not a relevant inquiry into whether
the design was negligent. The information is clearly more prejudicial than
probative.”
¶6 During its opening statement, the State said:
[W]hat this case is ultimately about, digging deep through all
the engineering guidelines, recommendations, references
manuals, what this case is really all about is whether the State
is responsible for people who stand in the street on Grand
Avenue at 4:40 a.m. in the morning in the dark in that
industrial area and get hit by oncoming traffic. What this case
is about is whether people should be expected to take
perfectly good care of themselves when there's no sidewalk in
an industrial area where there's clearly no lighting that
anyone looking at would be able to tell or whether the State
should be required to serve as a nanny state and protect
perfectly functional adults from themselves.
Counsel for the Luyets did not contemporaneously object to the State’s
opening statement.
3
LUYET, et al. v. MARIPOSA LANDSCAPE, et al.
Decision of the Court
¶7 After a three-day trial, the jury found the State was not
negligent by a 6-3 vote. After the verdict, the Luyets filed a motion for a
new trial under Arizona Rule of Civil Procedure 59, arguing the State
deliberately violated the court’s order in limine in its opening statement,
that the prejudicial effect of the violation was impossible to determine, and
that the violation was apparently successful in achieving its goal of a
defense verdict. See Leavy v. Parsell, 188 Ariz. 69, 73 (1997).
¶8 The superior court granted the motion. The court noted that
it was the State, not the Luyets, who requested the bifurcated trial. The
court reviewed its grant of the motion in limine and discussion of the
motion at the Final Trial Management Conference and found that the State
should have been aware that “causation and comparative fault were not at
issue at this mini-trial.” The court found that the State’s argument injected
at least five irrelevant issues into the trial:
1) that the accident occurred at 4:40 a.m. on a Saturday
morning; 2) that the decedent was standing in the street; 3)
that the decedent was a “functional” adult; 4) that the
decedent was hit by a driver going to work and 5) raising the
issue of the decedent’s comparative fault by suggesting the
decedent failed to take care of himself.
¶9 But the court also noted that the Luyets did not immediately
object to these statements or seek a curative instruction. The court noted
that it first sua sponte raised the issue of whether the opening statement
violated the order in limine at a subsequent bench conference but the Luyets
still did not propose a curative instruction or other remedy at that time.
¶10 Nonetheless, the court declined to apply the State’s requested
fundamental error standard of review, noting that in its estimation, “the
fundamental error analysis fails to account for sanctions arising from
intentional misconduct.” The court suggested that a denial of the motion
under these facts may “encourage attorneys to raise inadmissible and
improper evidence during [an] opening statement, forcing opposing
counsel to object.” The court granted the motion in a signed order. The
State timely appealed the order granting the new trial “and all rulings
leading to that order.”
DISCUSSION
I. The order granting a motion for a new trial is an appealable
order.
4
LUYET, et al. v. MARIPOSA LANDSCAPE, et al.
Decision of the Court
¶11 The Luyets argue that the order granting their Rule 59 motion
is not an appealable order. They note that statutes outlining appellate
jurisdiction have been interpreted “in favor of finality,” citing our decision
in Maria v. Najera, 222 Ariz. 306 (App. 2009), and some historical
construction of the statute. We have an independent duty to determine
whether we have jurisdiction over an appeal. Bridgeman v. Certa, 251 Ariz.
471, 473, ¶ 5 (App. 2021).
¶12 The State argues we have jurisdiction under the plain
language of A.R.S. § 12-2101(A)(5)(a), which provides that “[a]n appeal may
be taken . . . from an order . . . [g]ranting or refusing a new trial.” We agree.
We have previously granted review from motions denying or granting a
motion for new trial that either do not reference a final judgment or where
a final judgment has not been entered. See Wells v. Tanner Bros. Contracting
Co., 103 Ariz. 217, 219-220 (1968) (“It is quite clear that under [A.R.S. § 12-
2101] an order granting a new trial is substantively an appealable order.”).
¶13 The case law cited by the Luyets is also distinguishable. Maria
concerned an appeal from the denial of a motion for a new trial after the
entry of partial summary judgment against a plaintiff. 222 Ariz. at 307-08.
An appeal from the denial of a motion for a new trial, filed after a grant of
partial summary judgment without Rule 54(b) language, is not permissible
because the underlying summary judgment is not appealable without
finality language. See Brumett v. MGA Home Healthcare, L.L.C, 240 Ariz. 420,
430, n.10 (App. 2016); see also A.R.S. § 12-2101(A)(1). In other words, a
litigant cannot apply a coat of Rule 59 paint on an otherwise unappealable
interlocutory order to seek appellate review. But here, an order for a new
trial—coming after the completion of a jury trial—is an appealable
interlocutory order under the plain text of Section 12-2101(A)(5)(a). We
have jurisdiction.
II. The trial court did not abuse its discretion by granting the
Luyets’ motion for a new trial.
¶14 We review an order for a new trial under Rule 59 for an abuse
of discretion. Englert v. Carondelet Health Network, 199 Ariz. 21, 25, ¶ 5 (App.
2000); see also Grant v. Ariz. Pub. Serv. Co., 133 Ariz. 434, 451 (1982) (“The
granting or denial of a new trial on the grounds of misconduct of counsel is
a matter within the trial court’s discretion.”). “We generally review an
order granting a new trial more liberally than an order denying one.” Reyes
v. Town of Gilbert, 247 Ariz. 151, 157, ¶ 21 (App. 2019). Where a new trial is
justified by any ground cited in the order, we will affirm the order. Reeves
v. Markle, 119 Ariz. 159, 163 (1978). A new trial may be granted based on
5
LUYET, et al. v. MARIPOSA LANDSCAPE, et al.
Decision of the Court
the improper argument of counsel in violation of an order in limine. Ariz.
R. Civ. P. 59(a)(1)(A), (B); see also McRae v. Forren, 5 Ariz.App. 465, 468
(1967).
¶15 “[M]isconduct alone,” however, “will not warrant a new trial
. . . .” Leavy v. Parsell, 188 Ariz. 69, 73 (1997). The misconduct must
“materially affect[] the rights of the aggrieved party.” Id. at 72 (citing Grant
v. Ariz. Pub. Serv. Co., 133 Ariz. 434, 454 (1982)). Prejudice should be found
in a close case if:
(1) [T]he misconduct is significant, especially if the record
establishes knowing, deliberate violations of rules or court
orders that a litigant may confidently expect to be observed
by his or her adversary;
(2) [T]he misconduct is prejudicial in nature because it
involves essential and important issues, but the extent is
impossible to determine in a close case; and
(3) [T]he misconduct is apparently successful in achieving its
goals.
Leavy, 188 Ariz. at 73. Here, the superior court found all three prongs were
met. The court found that the State knowingly and deliberately violated
court orders meant to limit the scope of the trial to whether the State
negligently designed the roadway. Further, those orders were necessitated
by the State's request to bifurcate the trial. The court found the statements
were prejudicial and cited the closely divided verdict and jury’s short
deliberation as evidence of that prejudice. The court found the misconduct
to be successful because the State prevailed at trial.
A. The Luyets’ failure to contemporaneously object did not preclude
the court from ordering a new trial.
¶16 The objection presented in a motion in limine is preserved
when that motion is ruled upon. State v. Anthony, 218 Ariz. 439, 446 (2008).
This is true even if the motion is granted. State v. Coleman, 122 Ariz. 99, 100-
101 (1979) (holding it was unnecessary for defendant to renew objection
after motion in limine was granted); see also Liberatore v. Thompson, 157 Ariz.
612 (App. 1988) (upholding the grant of a motion for a new trial based on
the violation of an order in limine where counsel did not object until after
counsel’s arguments).
6
LUYET, et al. v. MARIPOSA LANDSCAPE, et al.
Decision of the Court
¶17 The State contends that the Luyets sat on their rights by failing
to object during the State’s opening statement and thereby waived any
argument to the superior court. We agree with both the State and the
superior court that it would have been a much better practice for the Luyets
to object immediately after the State’s attorney started his remarks in
violation of the order in limine. But the State has provided us with no
authority suggesting that, on this set of facts, the superior court abused its
discretion by granting a motion for a new trial based on the State’s violation
of the limine order. See Liberatore, 157 Ariz. at 619 (“We know of no rule,
nor would we adopt a rule, that a lawyer has insufficiently preserved an
objection to improper argument by embodying the objection in a successful
motion in limine in advance of argument.”).
¶18 As we said in Liberatore, there is a difference between waiving
an argument on appeal for failure to object and finding that the superior court
abused its discretion by ordering a new trial after making a finding of
misconduct. Compare id. at 619-20; with State v. Lichon, 163 Ariz. 186, 189
(App. 1989) (Defendant waived argument on appeal concerning violation
of order in limine by the State); Martinez v. Jordan, 27 Ariz. App. 254, 256
(1976) (Plaintiff waived similar argument on appeal).
¶19 The case law cited by the State stands for the proposition that
a party may waive an argument based on the violation of an order in limine.
See Lichon, 163 Ariz. at 189. But a rule that the superior court does not abuse
its discretion by denying such a motion does not necessitate that we find an
abuse of discretion where it grants such a motion. While such a party fails
to object at their hazard, we cannot say that a superior court abuses its
discretion in weighing the delay against the seriousness of the violation.
¶20 Here, the Luyets filed a motion in limine specifically seeking
to preclude evidence of Gavin’s intoxication at the time of the accident. It
also sought to preclude “evidence relevant only to causation, comparative
fault or damages,” in this first trial. The court granted the motion. The
superior court did not abuse its discretion by granting a new trial based on
the State’s violation of this order in limine, even where the Luyets failed to
contemporaneously object.
B. The superior court did not abuse its discretion by finding the State
violated the order in limine.
¶21 The State argues that it did not violate the court’s order in
limine. The State first points to portions of its opening statement that were
cited in the motion for a new trial and alleges they were relevant to the
7
LUYET, et al. v. MARIPOSA LANDSCAPE, et al.
Decision of the Court
State’s duty of care. We therefore must consider whether the State’s
argument was (1) relevant to the issues in the first trial and (2) whether it
violated the granted motion in limine.
¶22 In its order bifurcating the two trials, the court stated that:
If the trials are bifurcated, the only issue at the first trial will
be whether the governmental entities were negligent and
whether the affirmative defense under A.R.S. § 12-820.03
applies. The Court does not intend to address causation,
comparative fault or damages at the first trial. The Court does not
believe the issues of the governmental entities’ negligence
and the affirmative defense can be logically separated, so it
makes sense to try the issues at the same time . . . . Some of
the governmental entities’ conduct may, of course, still be
relevant at the second trial, because the governmental entities’
conduct may be relevant to a determination of comparative
fault.
(Emphasis added). Put another way, while the term negligence refers to the
four elements of a duty of care, the breach of that duty, causation of an
injury, and damages, the court was putting off the latter two elements for
the second trial. See Cal-Am Props. Inc. v. Edais Eng’g Inc., 253 Ariz. 78, 81,
¶ 5 (2022). The issue for the first trial was whether Defendants breached
their duty of care in designing this segment of roadway.
¶23 We next consider the language of the court in its minute entry
granting the motion in limine:
The motion is granted. Whether plaintiff’s decedent was
intoxicated is not a relevant inquiry into whether the design
was negligent. The information is clearly more prejudicial
than probative.
But while the order referred to the alleged intoxication, the granted motion
was broader, asking the court to exclude “evidence relevant only to
causation, comparative fault or damages” as irrelevant under Arizona Rule
of Evidence 401. The discussion in the motion included evidence that Gavin
was intoxicated at the time of the accident, but also included disputes over
where Gavin was located and whether he was moving at the time of the
accident. We do not read the court’s minute entry as only precluding the
intoxication evidence. The motion was granted as to all evidence relevant
to causation and comparative fault—not granted in part. The court stated
8
LUYET, et al. v. MARIPOSA LANDSCAPE, et al.
Decision of the Court
that the evidence was precluded for being irrelevant to “whether the design
was negligent.” (Emphasis added).
¶24 Finally, we turn to the discussion held at the Final Pretrial
Management Conference. There, the court stated that, in addition to
Gavin’s alleged intoxication having no relevance to the phase-one trial,
“[t]his [trial] regard[s] negligence and standard of care . . . [a]gain, looking
at it from the other side, the whole purpose of this statute is just to put this
[planning] decision into a vacuum.” The court noted that the identity of the
victim, his intoxicated state, and where the victim was going, were “not
relevant to the issue of negligent design.”
¶25 The superior court was correct in finding that its order in
limine had been violated. The order, by granting the motion in its entirety,
precluded evidence concerning anything other than the government
entities’ duty and breach in the first trial. As the court aptly summarized,
the State’s opening statement introduced as many as five issues precluded
under the order. The court’s comments on the record and written rulings
should have put the State on notice as to the boundaries of the trial, and, as
the superior court pointed out, at no point did the State request to clarify
the court’s rulings. The court did not abuse its discretion in making this
finding.
C. The superior court did not abuse its discretion by finding the
State’s improper argument prejudiced the Luyets.
¶26 We will affirm the grant of a motion for a new trial if evidence
in the record supports a finding of prejudice. Leavy, 188 Ariz. at 72 (quoting
Grant, 133 Ariz. at 456-57). We examine each three Leavy factors in turn.
1. The State’s misconduct was significant.
¶27 The first Leavy factor is whether the misconduct was
significant. As the superior court noted, it was the State who requested a
bifurcated trial. The State had ample opportunity to seek clarification of
orders in limine that limited the evidence at issue and knew or should have
known that causation and comparative fault were not at issue.
Consequently, violation of the minute entry was willful and knowing, i.e.,
significant. Id. at 73.
¶28 The State argues that because some of the five objectionable
statements could have been guessed at by the jury through evidence
introduced by both sides, the misconduct was not significant. We disagree.
9
LUYET, et al. v. MARIPOSA LANDSCAPE, et al.
Decision of the Court
¶29 Further, the examples of purported introduction of irrelevant
evidence by the Luyets the State provides are inapposite. The first example
the State gives is a stipulated statement read by the court, contending that
it too introduced irrelevant issues. But the statement read by the court, even
if it allowed the jurors to guess at irrelevant issues, on its own terms
highlighted what the focus of the trial was:
This case arises out of a collision between a pickup truck and
a pedestrian on November 19, 2016. Plaintiffs Frank Luyet
and Jennifer Haggerty claim that the State of Arizona
negligently designed Grand Avenue because no sidewalk
was constructed between 75th Avenue and 83rd Avenue on
Grand Avenue. Plaintiffs claim that the standard of care
required the State of Arizona to include a sidewalk as part
of the design. In the alternative if a sidewalk was not to be
constructed, the Plaintiffs claim that the State was negligent
for failing to post a No Pedestrian sign at the [end of] the
sidewalk at 75th Avenue.
The State of Arizona responds that Grand Avenue was
reasonably safe and conformed to the appropriate
engineering and design standards of care without a sidewalk.
The State also denies that any additional signage, barriers, or
lighting were necessary or appropriate or that an
unreasonably dangerous hazard existed at the time of the
collision that required some kind of warning to allow the
public to take suitable precautions.
This is not what the State did in its opening. Unlike the stipulated
statement, the State’s opening did not merely reinforce the premise that this
mini-trial was about the State’s obligation to conform to engineering and
design standards. The State’s opening statement discussed allegations that
were appropriate only in the context of comparative fault. Indeed, the State
told the jurors that the case was “really all about” issues relating to
comparative fault and causation that the superior court declared off limits,
rather than the issue of design.
¶30 The State points to testimony concerning the existence or
nonexistence of lighting and the use of shrubbery in landscaping. Again,
these are design features properly within the ambit of a trial on engineering
and design standards. The State also points to testimony that traffic
engineers expect pedestrians to “follow certain traffic laws” and not behave
recklessly. While this testimony might also have been useful in a
10
LUYET, et al. v. MARIPOSA LANDSCAPE, et al.
Decision of the Court
comparative fault context, we cannot say the superior court abused its
discretion in distinguishing between this testimony—which was also
relevant to design standards—and the State’s opening argument.
¶31 The State also argues that the Luyets’ discussion of the
objectionable opening in the Luyets’ closing renders the State’s error
harmless. As the Luyets point out, we have previously rejected this
argument. State v. Keeley, 178 Ariz. 233, 236 (App. 1994) (rejecting State’s
argument that Defendant’s attempt to address State’s improper
commentary on invocation of right to remain silent became harmless after
Defendant’s counsel asked a few questions “to try to minimize the
damage”). At closing, the Luyets’ counsel, after reminding the jury that
what “caused this collision” was not relevant, brought up the State’s
objectionable opening in an attempt to correct any misapprehension as to
the issue at trial. This was permissible.
2. The misconduct involved important issues because it
drew the jury’s attention to issues reserved for the
second trial.
¶32 The second Leavy factor is whether the “misconduct is
prejudicial in nature because it involves essential and important issues.”
188 Ariz. at 73. Focusing the jury on the State’s affirmative defense—that
the roadway was built in accordance with applicable standards of
engineering and design—was the purpose of bifurcating the trial. By
contrast, the State’s opening remarks invited the jury to weigh the
responsibility of a “functional adult” against the State’s duty. On this
record, we cannot say the superior court abused its discretion.
3. The misconduct was apparently successful in achieving
its goals.
¶33 The final Leavy factor is whether the misconduct “was
apparently successful.” 188 Ariz. at 73. In weighing this factor, the superior
court considered (1) that the State (who engaged in the purported
misconduct) won, (2) by a narrow margin (6-3), (3) after relatively little
deliberation. We further note that, as in Leavy, both sides produced a
significant amount of technical information for the jury to consider. The
State's narrow victory after a short deliberation despite the volume of
evidence to weigh supports a reasonable inference that the State succeeded
based on its misconduct. See Leavy, 188 Ariz. at 73; see also Kirby v. Rosell,
133 Ariz. 42, 45-46 (App. 1982) (rejecting argument that “proof of actual
prejudice” is required for court to grant motion for a new trial). Again, even
11
LUYET, et al. v. MARIPOSA LANDSCAPE, et al.
Decision of the Court
if we disagreed with the superior court, we cannot find an abuse of
discretion on this record. See Englert, 199 Ariz. at 25 (“We review an order
granting a new trial under a more liberal standard than an order denying
one.”) (citation omitted).
CONCLUSION
¶34 We affirm.
AMY M. WOOD • Clerk of the Court
FILED: AA
12 | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482886/ | Cite as 2022 Ark. 197
SUPREME COURT OF ARKANSAS
No. CR-22-172
Opinion Delivered: November 10, 2022
THOMAS HARTLEY APPEAL FROM THE BENTON
APPELLANT COUNTY CIRCUIT COURT
[NO. 04CR-20-1413]
V.
HONORABLE BRAD KARREN,
JUDGE
STATE OF ARKANSAS
APPELLEE AFFIRMED IN PART; REVERSED
AND REMANDED IN PART.
JOHN DAN KEMP, Chief Justice
Appellant Thomas Hartley appeals a Benton County Circuit Court order convicting
him of two counts of rape, sexual assault in the second degree, and sexually grooming a
child. He was sentenced to concurrent terms of life, life, twenty years, and six years,
respectively. For reversal, Hartley argues that (1) substantial evidence does not support his
convictions for rape and sexually grooming a child; (2) the circuit court abused its discretion
by excluding evidence that the victim, a minor child (“MC”), had previously been exposed
to pornography; and (3) the circuit court erred by assessing a cybercrime fee in this case.
We affirm in part and reverse and remand in part.
I. Facts
MC, who was eleven years old at the time of trial, testified that she knew Hartley
because he had been her mother’s boyfriend. MC explained that, “[s]ometimes [Hartley]
would touch [her] on [her] breasts and sometimes he would touch [her] down in [her]
vagina.” She recalled that sometimes he would make her take off her clothes and sometimes
they would be on. When he “tried to touch [her] part – [her] private part,” they were in
her mom’s bedroom. MC indicated that her “private part” is her vagina. She testified that
“[s]ometimes he would, um, make me sit on the bed and open my legs a lot[,] . . . [a]nd he
would sometimes rub his fingers on my private and try to put them inside of me.” When
asked if Hartley would try to touch her inside her body, MC replied yes. MC further
testified that “he would make me spread my legs and he would take two fingers and try to
put them in my vagina.” She stated that she felt pain, and she “tried to move away when
he tried to put it in there farther.”
When the deputy prosecutor asked MC if Hartley had ever used anything else, MC
responded that “[s]ometimes he tried to use his penis[,]” and “[h]e used a little pink vibrator
toy.” The following colloquy then occurred:
DEPUTY PROSECUTOR: Okay. And where -- how would he use that toy?
MC: He would make me hold it on my vagina.
DEPUTY PROSECUTOR: Would he touch that toy inside your body,
outside your body, or something else?
MC: Just there I can remember.
DEPUTY PROSECUTOR: Did that toy do anything?
MC: It would just start vibrating and it hurt when he
put it on me but that’s it.
MC also testified that Hartley would try to put his penis inside her, but “he couldn’t go
inside of me. I wasn’t ready.”
2
MC testified that when Hartley first started touching her, he said not to tell anyone.
He did not threaten anybody, but just told her “not to tell anybody.” MC also recalled that
Hartley would sometimes put “porn movies on the TV” while this was going on. MC
testified that the people in those movies were having sex. When asked how many times she
saw those kinds of movies, she responded, “Pretty much every time he would try and touch
me.”
Kacie Parrish, a sexual-assault nurse examiner (“SANE”) coordinator, examined MC
on July 11, 2019. Parrish testified that, on the medical report she completed for MC, she
had circled “pain,” and Parrish noted that MC had reported experiencing genital pain
“when she was touched,” as well as “burning.” Parrish had also written “[a]buse suspected”
in the exam-summary portion of the report. Additionally, Parrish testified that a penetration
of the labia majora, which is the “external part of the fold of the female genitalia,” would
“count as penetration because that is penetrating into the genital.” She agreed that it is
possible to penetrate the labia majora without penetrating other parts of the vagina.
On this evidence, the jury convicted Hartley of two counts of rape, sexual assault in
the second degree, and sexually grooming a child. He was sentenced to concurrent terms of
life for each count of rape, twenty years’ imprisonment for second-degree sexual assault, and
six years’ imprisonment for sexually grooming a child. Hartley filed a timely notice of appeal,
and this appeal followed.
3
II. Points on Appeal
A. Sufficiency of the Evidence
Hartley first challenges the sufficiency of the evidence supporting his convictions for
two counts of rape and one count of sexually grooming a child. 1 He argues that the State
failed to prove the penetration element for each rape count and failed to prove the intent
element of sexually grooming a child.
We treat a motion for directed verdict as a challenge to the sufficiency of the
evidence. McClendon v. State, 2019 Ark. 88, at 3, 570 S.W.3d 450, 452. In reviewing this
challenge, we view the evidence in a light most favorable to the State and consider only the
evidence that supports the conviction. Id., 570 S.W.3d at 452. We will affirm the verdict if
substantial evidence supports it. Id., 570 S.W.3d at 452. Substantial evidence is evidence of
sufficient force and character that it will, with reasonable certainty, compel a conclusion one
way or the other without resorting to speculation or conjecture. Id., 570 S.W.3d at 452. It
is the function of the jury, and not the reviewing court, to evaluate the credibility of
witnesses and to resolve any inconsistencies in the evidence. Breeden v. State, 2013 Ark. 145,
at 5, 427 S.W.3d 5, 8–9.
1. Two counts of rape
Hartley committed rape “if he engage[d] in sexual intercourse or deviate sexual
activity with another person . . . [w]ho was less than fourteen (14) years of age.” Ark. Code
Ann. § 5-14-103(a)(3)(A) (Repl. 2013). “‘Sexual intercourse’ means penetration, however
1
Hartley does not challenge the sufficiency of the evidence supporting his conviction
for sexual assault in the second degree.
4
slight, of the labia majora by a penis[.]” Ark. Code Ann. § 5-14-101(11) (Repl. 2013).
“‘Deviate sexual activity’ means any act of sexual gratification involving . . . [t]he
penetration, however slight, of the labia majora or anus of a person by any body member
or foreign instrument manipulated by another person.” Ark. Code Ann. § 5-14-101(1)(B)
(Repl. 2013).
A rape victim’s uncorroborated testimony describing penetration may constitute
substantial evidence to sustain a conviction of rape, even when the victim is a child. Breeden,
2013 Ark. 145, at 4, 427 S.W.3d at 8. The rape victim’s testimony need not be corroborated,
and scientific evidence is not required. Id. at 4–5, 427 S.W.3d at 8. Additionally, this court
has stated that penetration can be shown by circumstantial evidence, and if that evidence
gives rise to more than a mere suspicion, and the inference that might reasonably have been
deduced from it would leave little room for doubt, that is sufficient. Fernandez v. State, 2010
Ark. 148, at 4, 362 S.W.3d 905, 907.
Hartley argues that the State failed to prove the penetration element as to each count
of rape. The State asserted at trial that one count of rape was based on digital penetration
and one count was based on Hartley’s penetration of MC’s vagina with an object. On the
first count of rape, MC testified that Hartley “would make me spread my legs and he would
take two fingers and try to put them in my vagina.” She felt pain, so she “tried to move
away when he tried to put it in there farther.” The foregoing testimony by MC constitutes
substantial evidence of penetration on the first rape count. It is sufficient, absent any
corroboration, to sustain Hartley’s rape conviction. Breeden, 2013 Ark. 145, at 4–5, 427
S.W.3d at 8. We therefore hold that substantial evidence supports the first rape count.
5
On the second rape count, MC testified that Hartley would use a vibrator toy and
“would make [her] hold it on [her] vagina.” She explained that the toy “would just start
vibrating and it hurt when he put it on [her.]” Further, the SANE coordinator described
the labia majora as the outermost portion and “external part of the fold of the female vagina.”
Her testimony, combined with MC’s description of the object’s location on her vagina, the
fact that it was vibrating, and the pain that resulted gives rise to more than just suspicion and
leaves little room for doubt that Hartley penetrated MC’s labia majora with the object, even
if only slightly. See, e.g., Fernandez, 2010 Ark. 148, at 8, 362 S.W.3d at 909. Accordingly,
we hold that substantial evidence supports Hartley’s conviction on the second count of rape,
and we affirm it.
2. Sexually grooming a child
Hartley also argues that the State presented insufficient evidence of sexually grooming
a child because there was no proof that he showed pornography to MC with the purpose
to engage in sexual conduct with her. Instead, he claims that “the State’s evidence showed
that Hartley purportedly showed pornography to MC after having already engaged in sexual
behavior with her.”
Hartley committed sexually grooming a child if he “knowingly disseminate[d] to a
child thirteen (13) years of age or younger with or without consideration a visual or print
medium depicting sexually explicit conduct with the purpose to entice, induce, or groom
the child . . . to engage in the following with a person: (1) Sexual intercourse; (2) Sexually
explicit conduct; or (3) Deviate sexual activity.” Ark. Code Ann. § 5-27-307(b)(1)–(3)
(Repl. 2013). A criminal defendant’s intent or state of mind is seldom capable of proof by
6
direct evidence and must usually be inferred from the circumstances of the crime. Wright v.
State, 2022 Ark. 103, at 9, 644 S.W.3d 236, 241. Because intent cannot be proved by direct
evidence, jurors can draw upon their common knowledge and experience to infer it from
the circumstances. Id., 644 S.W.3d at 241.
Here, the State presented evidence, through MC’s testimony, that Hartley put
pornographic movies on the television “[p]retty much every time he would try and touch
[her].” MC’s testimony was clear that pornographic movies played while the acts were
occurring. Given this testimony, we conclude that the jury easily could have inferred from
these circumstances that Hartley played the pornographic movies for the purpose of
enticing, inducing, or grooming MC to engage in sexual intercourse or deviate sexual
behavior. Thus, we hold that substantial evidence supports Hartley’s conviction for sexually
grooming a child.
B. Exclusion of Evidence Under the Rape-Shield Statute
Next, Hartley challenges the circuit court’s denial of his motion to introduce prior
instances in which MC allegedly was exposed to pornography. In excluding the evidence,
the circuit court found that the fact that MC had allegedly been shown pornography by her
mother and father when she was five years old was “clearly an allegation of sexual abuse”
that was inadmissible pursuant to Arkansas’s rape-shield statute codified at Arkansas Code
Annotated section 16-42-101 (Supp. 2021). Hartley argues that the conduct at issue was not
“sexual conduct” as defined by section 16-42-101(a) and, therefore, the circuit court abused
its discretion in excluding the evidence pursuant to our rape-shield statute. The State
responds that the evidence was properly excluded pursuant to the rape-shield statute, and
7
that even if the rape-shield statute is inapplicable, it nonetheless was properly excluded
because it was not relevant.
Circuit courts have broad discretion in deciding evidentiary issues, and we will not
reverse a circuit court’s ruling on the admission of evidence absent an abuse of
discretion. Collins v. State, 2019 Ark. 110, at 5, 571 S.W.3d 469, 471–72. Abuse of
discretion is a high threshold that does not simply require error in the circuit court’s
decision, but requires that the circuit court act improvidently, thoughtlessly, or without due
consideration. Id., 571 S.W.3d at 472. Furthermore, we will not reverse unless the appellant
demonstrates that he was prejudiced by the evidentiary ruling. Id., 571 S.W.3d at 472.
Arkansas Code Annotated section 16-42-101 states in pertinent part,
(a) As used in this section, unless the context otherwise requires, “sexual conduct”
means deviate sexual activity, sexual contact, or sexual intercourse, as those terms are
defined by § 5-14-101.
(b) In a criminal prosecution under § 5-14-101 et seq., the Human Trafficking
Act of 2013, § 5-18-101 et seq., or § 5-26-202, or for criminal attempt to commit,
criminal solicitation to commit, or criminal conspiracy to commit an offense defined
in any of those sections, opinion evidence, reputation evidence, or evidence of
specific instances of the victim’s prior sexual conduct with the defendant or any other
person, evidence of a victim’s prior allegations of sexual conduct with the defendant
or any other person, evidence of a person’s prior sexual conduct when the person
was a victim of human trafficking, which allegations the victim asserts to be true, or
evidence offered by the defendant concerning prior allegations of sexual conduct by
the victim with the defendant or any other person if the victim denies making the
allegations is not admissible by the defendant, either through direct examination of
any defense witness or through cross-examination of the victim or other prosecution
witness, to attack the credibility of the victim, to prove consent or any other defense,
or for any other purpose.
“Sexual contact” is “[a]n act of sexual gratification involving the touching, directly or
through clothing, of the sex organs, buttocks, or anus of a person or the breast of a female”
8
or “urinating, defecating, or ejaculating on another person for the purpose of sexual
gratification[.]” Ark. Code Ann. § 5-14-101(12) (Supp. 2021).2
Here, in its order excluding the evidence, the circuit court found that
[t]he allegation that [MC] was shown pornography by her mother and father
occurred when [MC] was five years old. This was not a consensual choice made by
[MC], but is clearly an allegation of sexual abuse. Under A.C.A. § 16-42-101,
evidence or testimony of the alleged victim’s prior sexual abuse is inadmissible. The
Arkansas Supreme Court has held that evidence that a minor child was sexually
assaulted by another perpetrator two years prior to the alleged sexual assault at hand
was inadmissible. State v. Townsend, 366 Ark. 152 (2006). Here, the defendant also
wishes to introduce evidence that [MC] was shown pornography by a perpetrator
other than the defendant approximately two years before the defendant allegedly
abused her. Therefore, testimony that [MC] was sexually abused by her parents by
being shown pornography at five years old is inadmissible.
This court has held that a minor victim’s previous exposure to pornography does not
constitute “sexual conduct” pursuant to the rape-shield statute. Drymon v. State, 316 Ark.
799, 807–08, 875 S.W.2d 73, 77 (1994). Therefore, we conclude that the circuit court erred
in excluding this evidence pursuant to section 16-42-101.
We nevertheless see no abuse of discretion in the circuit court’s exclusion of the
evidence because it was irrelevant to the crimes with which Hartley had been charged.3
Relevant evidence is evidence having any tendency to make the existence of any fact that
2
The terms “deviate sexual activity” and “sexual intercourse” were previously
defined in this opinion.
3
The State asserted at the suppression hearing that the evidence at issue was irrelevant,
and the circuit court ruled from the bench that “[w]hether . . . [MC] viewed pornography
with [her mother and father] is not relevant to whether Thomas Hartley engaged in viewing
pornography with [MC].” In any event, this court will affirm the circuit court’s decision
when it reached the right result, even if it did so for the wrong reason. Barnett v. State, 2020
Ark. 181, at 3, 598 S.W.3d 835, 837.
9
is of consequence to the determination of the action more probable or less probable than it
would be without the evidence. Ark. R. Evid. 401. Irrelevant evidence is inadmissible. Ark.
R. Evid. 402.
MC’s alleged exposure to pornography by her parents when she was five years old is
irrelevant to the crimes for which Hartley was charged—rape, sexually grooming a child,
and sexual assault. Hartley asserts on appeal that the evidence “was relevant to show that
MC had actually been shown pornography by her parents rather than Hartley.” We disagree.
The fact that MC may have previously been exposed to pornography is irrelevant to the
fact, presented through MC’s undisputed testimony, that Hartley would put pornographic
movies on the television almost every time he tried to touch her. See, e.g., M.M. v. State,
350 Ark. 328, 333–34, 88 S.W.3d 406, 409–10 (2002). Thus, we hold that the circuit court
did not abuse its discretion in refusing to admit the evidence that MC allegedly had been
exposed to pornography by her parents when she was five years old, and we affirm on this
point.
C. Cybercrime Fee
Last, Hartley argues that the circuit court erred by assessing a $150 cybercrime fee
because the State failed to meet the requirements of Arkansas Code Annotated section 5-4-
706(b) (Supp. 2021), which states,
In addition to any other fee authorized or required by law, a circuit court shall
assess an additional fee of up to five hundred dollars ($500) for each applicable felony
conviction for an offense that the trier of fact finds:
(1) Involved the use of a computer, an electronic device, or the internet; and
10
(2) The investigation of which expended specialized law enforcement
personnel or materials designed to investigate offenses involving a computer,
an electronic device, or the internet.
The State concedes that it “failed to demonstrate that ‘specialized law enforcement
personnel or materials designed to investigate offenses involving a computer, an electronic
device, or the internet were utilized’ in the investigation of Hartley” (citing Ark. Code Ann.
§ 5-4-706(b)(2)). Given the State’s concession that it failed to meet the requirements of
section 5-4-706(b)(2), we hold that the assessment of a cybercrime fee was erroneous. We
therefore reverse and remand for entry of a corrected sentencing order in which Hartley is
not assessed a cybercrime fee.
III. Rule 4-3(a)
Because Hartley received two life sentences, this court, in compliance with Arkansas
Supreme Court Rule 4-3(a), has examined the record for all objections, motions, and
requests made by either party that were decided adversely to Hartley. No prejudicial error
has been found.
Affirmed in part; reversed and remanded in part.
WOMACK, J., concurs.
SHAWN A. WOMACK, Justice, concurring. I join the majority’s decision to affirm
Hartley’s convictions. I also agree with the majority’s conclusion that the circuit court
erroneously assessed a cybercrime fee. However, when this court confronts errors in
sentencing orders, we may affirm as modified instead of remanding. See Walden v. State, 2014
Ark. 193, at 11, 433 S.W.3d 864, 871. Because “[r]emanding is a needless waste of resources
11
for both parties, the trial court, the clerks and other employees,” I would affirm Hartley’s
sentence as modified. Smith v. State, 2022 Ark. 95, at 22 (Womack, J., concurring).
Lassiter & Cassinelli, by: Michael Kiel Kaiser, for appellant.
Leslie Rutledge, Att’y Gen., by: Joseph Karl Luebke, Ass’t Att’y Gen., for appellee.
12 | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482883/ | NOTICE: NOT FOR OFFICIAL PUBLICATION.
UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL
AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.
IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE
DUSTIN MATTHEWS, Plaintiff/Appellant,
v.
BRIDGE III AZ ONNIX LLC, et al., Defendants/Appellees.
No. 1 CA-CV 21-0700
FILED 11-10-2022
Appeal from the Superior Court in Maricopa County
No. CV2020-012682
The Honorable Bradley H. Astrowsky, Judge
AFFIRMED
COUNSEL
Dustin Matthews, Tempe
Plaintiff/Appellant
Lewis Brisbois Bisgaard & Smith LLP, Phoenix
By Gina M. Bartoszek and Mitchell J. Anderson
Co-Counsel for Defendants/Appellees
MEMORANDUM DECISION
Judge Paul J. McMurdie delivered the Court’s decision, in which Presiding
Judge Brian Y. Furuya and Judge Jennifer B. Campbell joined.
MATTHEWS v. BRIDGE III AZ ONNIX, et al.
Decision of the Court
M c M U R D I E, Judge:
¶1 Dustin Matthews appeals from the superior court’s orders
granting summary judgment for the defendants and denying his motion to
amend or alter the judgment. Because the superior court did not err, we
affirm.
FACTS AND PROCEDURAL BACKGROUND
¶2 Bridge III AZ Onnix, LLC and CDS-CO 1 Onnix, LLC
(collectively, “Bridge III”) owned and managed Onnix Apartments. Bridge
III had legal title to Onnix Apartments from June 2017 through October
2020. In July 2019, Matthews and Bridge III executed a lease agreement
governing Matthews’s tenancy at Onnix Apartments. The lease ran until
August 2020 and would automatically renew month-to-month unless either
party gave “written notice of termination or intent to move-out.”
¶3 In July 2020, Onnix Apartments sent Matthews an electronic
copy of a lease renewal agreement. Matthews asked to sign a physical copy
of the agreement, but the apartment complex had gone paperless and only
offered an electronic version. Matthews refused to sign electronically but
remained in his apartment without paying rent.
¶4 In September 2020, Bridge III brought an eviction action
against Matthews in justice court for failure to pay rent. Bridge III sought
possession of the premises and damages. Matthews argued he should not
be evicted because Bridge III breached their agreement and failed to give
him a physical copy of the lease renewal agreement. He pled affirmative
defenses, including the landlord’s failure to comply with the lease
agreement, violations of the Arizona Residential Landlord and Tenant Act,
breach of contract, breach of the duty of good faith, and fraud. Matthews
also counterclaimed, asserting Bridge III breached the lease agreement,
violated their good-faith obligation by misleading and deceiving tenants as
to the “right to conduct business electronically or by paper,” violated the
Arizona Residential Landlord and Tenant Act (A.R.S. § 33-1315) by
conducting business electronically and requiring Matthews to “waive or
forego rights or remedies,” and violated the Arizona Residential Landlord
and Tenant Act (A.R.S. § 33-1322(E)) and consumer protections (A.R.S.
§ 44-7051) by failing to give him a physical copy of the lease renewal
agreement. In the counterclaims, Matthews alleged damages in an amount
“to be determined.”
2
MATTHEWS v. BRIDGE III AZ ONNIX, et al.
Decision of the Court
¶5 Bridge III moved to dismiss Matthews’s counterclaims with
prejudice. That same day, the justice court held an eviction hearing. Because
Matthews did not adequately plead damages, the court struck his
counterclaims. The court noted Matthews could still respond to Bridge III’s
motion so the court could determine whether the counterclaims would be
dismissed with or without prejudice. Because Matthews did not offer “a
meritorious defense with regards [sic] to the nonpayment of rent,” and his
defense had no “basis . . . in fact or law,” the court found for Bridge III in
the eviction action. The justice court ruled Matthews materially breached
his lease and owed Bridge III over $2,000 in rent, utilities, and fees.
¶6 The next day, Matthews filed a notice of appeal to the superior
court. The record fails to show he perfected the appeal. The defendants
provided a link to Maricopa County’s civil docket showing no lower court
appeals cases under “Matthews” in 2020.
¶7 In October 2020, Matthews sued Bridge III, Bridge Property
Management, L.C., and Bridge Investment Group, LLC, alleging the same
violations he asserted in his answer and counterclaims to the eviction
action. Bridge III and Bridge Property Management moved for summary
judgment, arguing claim preclusion1 barred Matthews’s relief. Bridge
Investment Group moved for summary judgment stating Matthews’s
claims failed because Bridge Investment Group was not in contractual
privity with Matthews and did not qualify as a landlord. The defendants
asserted Matthews failed to allege damages.
¶8 In opposition to Bridge Investment Group’s motion for
summary judgment, Matthews offered evidence including 1) Bridge
Investment Group’s liability insurance policy, 2) emails from Bridge
Investment Group “pertaining to” Matthews’s tenancy, 3) Bridge
Investment Group’s website and LinkedIn profile, and 4) “[n]umerous
periodicals” about Bridge Investment Group’s involvement with the Onnix
property. Bridge Investment Group countered that Matthews failed to
sufficiently authenticate or establish a foundation for the emails, website
pages, and news articles. He failed to show that the email addresses,
website domains, or LinkedIn profile belonged to Bridge Investment
1 The parties refer to res judicata, but we use the term “claim
preclusion.” In re Gen. Adjudication of All Rts. to Use Water in Gila River Sys.
& Source, 212 Ariz. 64, 69, ¶ 14 (2006) (“We deal today with the issue of
claim preclusion, formerly referred to as res judicata.”); Peterson v. Newton,
232 Ariz. 593, 594, n.2 (App. 2013).
3
MATTHEWS v. BRIDGE III AZ ONNIX, et al.
Decision of the Court
Group. Bridge Investment Group disagreed with Matthews’s assertion that
the website articles were from a “newspaper or periodical” and thus
self-authenticating under Ariz. R. Evid. 902(6). Finally, Bridge Investment
Group argued Matthews’s evidence was irrelevant because Matthews did
not explain how these items established that Bridge Investment Group
owned, managed, controlled, or leased Onnix.
¶9 The superior court granted Bridge Investment Group’s
motion, finding no privity of contract or landlord-tenant relationship
existed between the parties. The court agreed Matthews’s proposed
evidence was “not relevant to the issue and/or . . . not properly
authenticated.” The court also granted Bridge III and Bridge Property
Management’s motion, finding claim preclusion barred Matthews’s claims.
The court also found Matthews failed to allege damages.
¶10 The court entered a final judgment against Matthews and
awarded the defendants attorney’s fees and costs. Matthews moved to
amend or alter the judgment under Ariz. R. Super. Ct. 59(d), but the court
found no good cause to grant relief and denied the motion.
¶11 Matthews appealed the superior court’s judgment and denial
of his motion to amend or alter the judgment. We have jurisdiction under
A.R.S. § 12-2101(A)(1).
DISCUSSION
¶12 On appeal, Matthews first contends the court erred by
granting the defendants’ motions for summary judgment. “In reviewing a
motion for summary judgment, we determine de novo whether any
genuine issues of material fact exist and whether the trial court properly
applied the law.” Caruthers v. Underhill, 230 Ariz. 513, 521, ¶ 26 (App. 2012).
The superior court “shall grant summary judgment if the moving party
shows that there is no genuine dispute as to any material fact and the
moving party is entitled to judgment as a matter of law.” Ariz. R. Civ. P.
56(a). We view the facts in the light most favorable to the party opposing
summary judgment. Caruthers, 230 Ariz. at 521, ¶ 26.
A. The Superior Court Did Not Err by Granting Bridge Investment
Group’s Summary Judgment Motion.
¶13 Matthews asserts the superior court improperly excluded
evidence of Bridge Investment Group’s ownership and management of
Onnix. He argues that had the court admitted his evidence, material factual
disputes would have precluded summary judgment.
4
MATTHEWS v. BRIDGE III AZ ONNIX, et al.
Decision of the Court
¶14 We generally affirm the superior court’s evidentiary rulings
in summary judgment proceedings absent an abuse of discretion or legal
error. Mohave Elec. Coop., Inc. v. Byers, 189 Ariz. 292, 301 (App. 1997).
Inadmissible evidence “may provide a ‘scintilla’ [of evidence] or create the
‘slightest doubt’ and still be insufficient to withstand a motion for summary
judgment.” Orme School v. Reeves, 166 Ariz. 301, 309 (1990).
¶15 Matthews sued Bridge Investment Group for breach of
contract, bad faith, violations of consumer protections, and violations of the
Arizona Residential Landlord and Tenant Act. “[P]rivity of contract must
exist before a party may seek to enforce a contract.” Kuehn v. Stanley, 208
Ariz. 124, 131, ¶ 25 (App. 2004). Similarly, the privity of contract must exist
to recover under a bad faith claim that “arises by virtue of a contractual
relationship.” See Rawlings v. Apodaca, 151 Ariz. 149, 153 (1986). Also, to be
subject to consumer protection claims, the defendant must be “a party to
the original transaction.” See Sullivan v. Pulte Home Corp., 231 Ariz. 53,
60–61, ¶¶ 36–38 (App. 2012), vacated in part on other grounds, 232 Ariz. 344
(2013). Finally, the Arizona Residential Landlord and Tenant Act governs
the obligations of “landlord and tenant.” A.R.S. § 33-1302(1). A “landlord”
is an “owner, lessor or sublessor” or a premises manager. A.R.S.
§ 33-1310(7). An “owner” has “the legal title to property or all or part of the
beneficial ownership and a right to present use and enjoyment of the
premises.” A.R.S. § 33-1310(9).
¶16 Matthews argues Bridge Investment Group’s liability
insurance policy should have been admitted under Arizona Rule of
Evidence 411 to prove it owned Onnix. Liability insurance evidence is not
admissible to prove the policyholder acted wrongfully. Ariz. R. Evid. 411.
“But the court may admit this evidence for another purpose, such as proving
. . . ownership.” Id. (emphasis added). Matthews asserts the defendants
“pretty much concede[d]” Bridge Investment Group owned Onnix by
producing their liability insurance policy covering “all premises [Bridge
Investment Group] own[s], rent[s], or occup[ies].” But the insurance policy
never mentions the Onnix property specifically. It does not show Bridge
Investment Group owned or had any interest in Onnix. Because the
evidence is not relevant to show Bridge Investment Group owned Onnix,
the superior court did not abuse its discretion by excluding the evidence.
¶17 Matthews also asserts the superior court should have
admitted the “emails, periodicals, and information from [Bridge
Investment Group’s] website” as evidence that Bridge Investment Group
managed or owned Onnix. He contends this evidence was “self
authenticating and admissible” under Arizona Rule of Evidence 902.
5
MATTHEWS v. BRIDGE III AZ ONNIX, et al.
Decision of the Court
¶18 Authentication is a “condition precedent to admissibility.”
State v. Lavers, 168 Ariz. 376, 386 (1991). For evidence to be authenticated,
“the proponent must produce evidence sufficient to support a finding that
the item is what the proponent claims it is.” Ariz. R. Evid. 901(a). The court
“must be satisfied that the record contains sufficient evidence to support a
jury finding that the offered evidence is what its proponent claims it to be.”
Lavers, 168 Ariz. at 386. “Printed material purporting to be a newspaper or
periodical” is self-authenticating. Ariz. R. Evid. 902(6).
¶19 Matthews does not dispute he failed to produce extrinsic
evidence authenticating the websites, articles, and emails. Rather,
Matthews argues the articles are self-authenticating as periodicals. Aside
from conclusory allegations, Matthews failed to show how articles he
offered from “onionprop.com,” “azbigmedia.com,” and
“rebusinessonline.com” are periodicals. Thus, the superior court did not
abuse its discretion by finding the websites, articles, and emails
inadmissible for lack of authentication.
¶20 Matthews failed to produce admissible evidence showing
contractual privity or a landlord-tenant relationship between Bridge
Investment Group and himself. There is no evidence suggesting Bridge
Investment Group owned, leased, or managed Onnix. Bridge III owned and
operated Onnix and had legal title to Onnix. The only parties to the lease
agreement were Matthews and Bridge III. Thus, there is no material factual
dispute that Bridge Investment Group and Matthews lacked a
landlord-tenant and contractual relationship. Without those relationships,
Matthews’s claims against Bridge Investment Group fail. See supra ¶ 15. As
a result, the superior court did not err by granting Bridge Investment
Group’s summary judgment motion.
B. The Superior Court Did Not Err by Granting Bridge III and Bridge
Property Management’s Summary Judgment Motion.
¶21 Matthews argues the superior court incorrectly granted
summary judgment under claim preclusion. We disagree and conclude that
Matthews’s proceedings in the justice court precluded his claims in the
superior court.
¶22 Under claim preclusion, a final judgment on the merits
precludes the parties, or those in privity to the parties, from re-litigating the
same claim. In re Gen. Adjudication of All Rts. to Use Water in Gila River Sys.
& Source, 212 Ariz. 64, 69, ¶ 14 (2006). Claim preclusion has three elements:
“(1) an identity of claims in the suit in which a judgment was entered and
6
MATTHEWS v. BRIDGE III AZ ONNIX, et al.
Decision of the Court
the current litigation, (2) a final judgment on the merits in the previous
litigation, and (3) identity or privity between parties in the two suits.” Id. at
69–70, ¶ 14.
¶23 Matthews does not dispute prongs (1) or (3) relating to Bridge
III and Bridge Property Management. Matthews asserts, instead, that “[r]es
judicata . . . does not apply in this case because there is no final judgment
as it pertains to the counterclaim.” He claims the eviction judgment was not
“final” because the justice court did not rule on the motion to dismiss the
counterclaims and the superior court did not dismiss his notice of appeal
from the justice court.
¶24 Matthews asserts his counterclaims were essentially
dismissed without prejudice, even though the court never made this ruling.
He points to Arizona Rule of Procedure for Eviction Actions 8(a), which
states that counterclaims filed without a statutory basis must be dismissed
without prejudice. But Matthews’s counterclaims had a statutory basis. In
an eviction action based on nonpayment of rent, “if the landlord is not in
compliance with the rental agreement . . . , the tenant may counterclaim for
any amount which he may recover under the rental agreement.” A.R.S.
§ 33-1365(A). This statute “permit[s] adjudication by counterclaim of
specified liabilities arising from the rental agreement or by statutes
regulating the landlord-tenant relationship.” Mead, Samuel & Co. v. Dyar,
127 Ariz. 565, 569 (App. 1980).
¶25 Matthews’s counterclaims arose from the lease agreement
and statutes governing landlord-tenant relations. He counterclaimed
breach of the lease agreement and bad faith and filed under the Arizona
Residential Landlord and Tenant Act provisions. His claim for consumer
protection violations arose from the rental agreement because Matthews
argued that Onnix could not compel him to conduct business electronically
under his rental agreement. Thus, Matthews’s counterclaims had a
statutory basis, the justice court had jurisdiction to consider them, see
Iverson v. Nava, 248 Ariz. 443, 449, ¶¶ 15–16 (App. 2020), and the
counterclaims were not dismissed without prejudice by law.
¶26 Matthews further argues the justice court judgment was not
final because the court never ruled on the defendants’ motion to dismiss
Matthews’s counterclaims with prejudice. But as the superior court stated,
when the justice court found for the defendants, the court “summarily
rejected his counterclaims.” As explained above, Matthews’s counterclaims
arose from his lease agreement. For Matthews to prevail on his
counterclaims, he would have had to show that the defendants breached
7
MATTHEWS v. BRIDGE III AZ ONNIX, et al.
Decision of the Court
their agreement. But the justice court found Matthews, not the defendants,
materially breached the lease agreement. The court also rejected
Matthews’s affirmative defenses, which closely resembled his
counterclaims. The court rejected the defendants’ alleged violations of the
lease agreement and the Arizona Residential Landlord and Tenant Act
because they had no “basis . . . in fact or law.” Thus, when the justice court
found Matthews materially breached his lease agreement, the justice court,
“in essence, disposed of” his counterclaims and “rendered the [justice]
court’s judgment ‘final.’” See Bothell v. Two Point Acres, Inc., 192 Ariz. 313,
316, ¶ 6 (App. 1998).
¶27 Next, Matthews argues the appeal filed in the justice court
was not dismissed, and thus the judgment was not final. Matthews offers
no evidence he properly appealed the eviction judgment to the superior
court. Rather, he argues the judgment is not final because there is no
evidence the superior court dismissed the appeal.
¶28 If an appeal is not “fully perfected, it shall be deemed
abandoned and shall be dismissed by order of the trial court with notice to
the appellant.” Ariz. R. Super. Ct. App. P. Civ. 9(b). Matthews had 60 days
from the notice of appeal’s deadline to file the required “appellant’s
memorandum.” Ariz. R. Super. Ct. App. P. Civ. 8(a). Although he timely
filed his notice of appeal in October 2020, he never filed the memorandum,
and the time has now passed for him to do so. Because Matthew failed to
perfect his appeal, he abandoned it, rendering the eviction judgment final.
See Ariz. R. Super. Ct. App. P. Civ. 9(b).
¶29 Claim preclusion bars Matthews from pursuing his claims
because the judgment was final, the claims here are the same as those raised
and denied by the justice court, and the parties from the eviction
proceedings are the same or in privity to the parties. In re Rts. to Use Water,
212 Ariz. at 69–70, ¶ 14.
¶30 We also agree with the superior court that Matthews did not
adequately plead damages in his complaint. As a result, the superior court
did not err by granting Bridge III and Bridge Property Management’s
summary judgment motion.
C. The Superior Court Did Not Err by Denying Matthews’s Motion
to Amend or Alter the Judgment.
¶31 On appeal, Matthews also contends the trial court erred by
denying his Rule 59(d) motion to amend or alter the court’s judgment.
8
MATTHEWS v. BRIDGE III AZ ONNIX, et al.
Decision of the Court
Because summary judgment was proper, the court did not abuse its
discretion by denying Matthews’s motion to amend or alter the judgment.
ATTORNEY’S FEES AND COSTS
¶32 Defendants request an award of attorney’s fees under A.R.S.
§§ 12-341 and 12-341.01. Per our discretion, we award reasonable attorney’s
fees to Defendants upon compliance with ARCAP 21. As the prevailing
parties, defendants are also entitled to recover taxable costs.
CONCLUSION
¶33 We affirm.
AMY M. WOOD • Clerk of the Court
FILED: AA
9 | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482890/ | Cite as 2022 Ark. 196
SUPREME COURT OF ARKANSAS
No. CV-22-43
Opinion Delivered: November 3, 2022
MID-SOUTH ADJUSTMENT CO.,
INC. APPEAL FROM THE PULASKI
APPELLANT COUNTY CIRCUIT COURT
[NO. 60CV-18-8245]
V.
HONORABLE TIMOTHY DAVIS
BRITTANY SMITH, ON BEHALF OF FOX, JUDGE
HERSELF AND ALL OTHERS
SIMILARLY SITUATED AFFIRMED.
APPELLEE
RHONDA K. WOOD, Associate Justice
Mid-South Adjustment Co., Inc., appeals the circuit court’s class-action certification
order. The class action alleges Mid-South violated provisions of the Arkansas Fair Debt
Collection Practices Act (Act) when attempting to collect debt on behalf of Jacksonville
Water Works. Mid-South alleges the class definition is unworkable because it requires
individualized inquiry into when each potential member made their last payment and when
the statute-of-limitations period expired. Mid-South also argues that the circuit court
erroneously found that a class action is a superior method for adjudication. Finally, Mid-
South claims that Brittany Smith is inadequate as class representative and that she did not
timely seek class certification. We affirm.
I. Background
Smith’s complaint alleges these facts. In March 2012, Smith leased a residence in
Jacksonville, Arkansas, and applied to Jacksonville Water Works for water service. About a
year later, Smith moved, and Jacksonville Water Works issued a final bill for $26.49. Because
Smith did not pay that bill, her account entered default.
Over four years later, in December 2017, Mid-South, a third-party debt-collection
agency, sent Smith a collection letter on behalf of Jacksonville Water Works for her
outstanding balance. Smith sued, alleging that Mid-South attempted to collect a debt that
was time-barred under the three-year statute-of-limitations period for unwritten contracts.
If true, Smith contended Mid-South’s notice violated several sections of the Act, including
its prohibition on “false, deceptive, or misleading representation or means in connection
with the collection of a debt” and “unfair or unconscionable means to collect or attempt to
collect a debt.” Ark. Code Ann. § 17-24-506(a), 507(a) (Repl. 2018). Later, Smith sought
class certification.
II. Law and Analysis
The circuit court certified the class action and defined the class as follows:
[A]ll individuals in Arkansas to whom Defendant sent a letter which (1)
identified Jacksonville Water Works as a Client; (ii) [sic] sought to collect a
debt on which the last payment was made more than three years prior to the
letter; and (iii) [sic] which was sent on or after December 2, 2017.
Mid-South filed this interlocutory appeal from the circuit court’s order granting class
certification. See Ark. R. App. P.–Civ. 2(a)(9).
2
Arkansas Rule of Civil Procedure 23 imposes six prerequisites for certification of a
class-action complaint: (1) numerosity; (2) commonality; (3) typicality; (4) adequacy; (5)
predominance; and (6) superiority. Ark. R. Civ. P. 23(b) (2021); Shelter Mut. Ins. Co. v.
Baggett, 2022 Ark. 149, 646 S.W.3d 106. Additionally, the class definition must be
“sufficiently definite” for a court to determine who falls inside the class. Id. The identity of
the class members must be ascertainable by reference to objective criteria. Teris, LLC v.
Golliher, 371 Ark. 369, 373, 266 S.W.3d 730, 733 (2007) (cleaned up). Circuit courts have
broad discretion over class certification, which we will not reverse absent an abuse of
discretion. Baggett, 2022 Ark. 149, at 3, 646 S.W.3d at 111.
A. Class Definition
Mid-South first challenges the class definition. It alleges the class definition requires
unworkable individual determinations. Mid-South claims that it is untenable to pull every
letter, cull those who may be within a three-year and possible five-year statute of limitations
period, and review the payment history of each potential class member. It also argues that
this information is retained by Jacksonville Water Works, a nonparty.
We have held that the class definition must identify class members by objective
criteria. C.J. Mahan Constr. Co. v. Betzner, 2021 Ark. 42. We have noted problems with a
class definition when it involved substantive merits-based issues or required complicated,
fact-based, or subjective inquiries. Baggett, 2022 Ark. 149, at 4, 646 S.W.3d at 111. For
example, in Ferguson v. Kroger Co., 343 Ark. 627, 633–34, 37 S.W.3d 590, 594 (2001), we
agreed with the circuit court that an inquiry that involved five criteria to determine each
class member’s intent was too complex and subjective. In contrast, in Baggett, we recently
3
affirmed class certification over the defendant’s argument that the class definition wasn’t
readily ascertainable because it required a review of each member’s insurance-claim file.
Baggett, 2022 Ark. 149, at 4, 646 S.W.3d at 111. We said, “[A] class member can be
determined by reviewing whether the requested payment and the received payment were
different.” Id. at 5, 646 S.W.3d at 112.
This class membership has objective criteria, and the dates are ascertainable. The
members must be individuals who are in Arkansas and that Mid-South sent a letter to, on
or after December 2, 2017, that identified Jacksonville Water Works as a client.
Additionally, these individuals must have made their last payment on the debt sought to be
collected more than three years before they received the letter.
Mid-South’s argument about the applicable statute-of-limitations period concerns
the merits and the eventual ruling on whether the debt involved a written contract. But that
issue, which is not before us, does not impair the objectiveness of the criteria. See The Money
Place, LLC v. Barnes, 349 Ark. 518, 78 S.W.3d 730 (2002). Finally, Mid-South’s argument
that Jacksonville Water Works controls the records implicates discovery and falls outside our
Rule 23 review. That is within the scope of the circuit court’s control.
B. Superiority1
Mid-South next argues that a class action is not a superior method to individual
lawsuits. Superiority is met if class certification is the more efficient way of handling the case
and is fair to both sides. ChartOne, Inc. v. Raglon, 373 Ark. 275, 283 S.W.3d 576 (2008).
1
Mid-South also asserts generally that the Rule 23 requirements of commonality and
predominance are not satisfied. However, these arguments are cursory, and we do not
4
Mid-South argues that a class action is not superior because class members may obtain
a greater recovery in individual actions. The Act sets up this recovery scheme: individual
plaintiffs may recover statutory damages not exceeding $1,000, but in class actions, the class,
as a group, is limited to damages of the lesser of $500,000 or 1 percent of the net worth of
Mid-South. Ark. Code Ann. § 17-24-512(a)(2)(A)–(B). According to Mid-South, the
maximum recovery for members, given the estimated class size and its submitted net worth,
would equal the nominal amount of ninety-two cents per person. But if those class members
proceed individually, they could recover up to $1,000. Mid-South argues that this nominal
potential recovery renders a class action inferior to individual litigation.
We reject this argument because the class members’ award is, at this stage, speculative.
We do not now know whether individual members would receive $1.00 or $1,000.00. The
proposed class size may change as any class member who wishes to proceed individually
could opt out of the class. And we do not know definitively Mid-South’s net worth.
Moreover, here, class-action adjudication is both fair and efficient. It would not be
cost effective or judicially efficient for each class member to file separate lawsuits, nor would
it be convenient for Mid-South to defend multiple claims under this Act. See Philip Morris
Cos., Inc. v. Miner, 2015 Ark. 73, at 14–15, 462 S.W.3d 313, 321. We therefore conclude
that the circuit court did not err in finding that the class action is the superior method.
address them on review. City of Greenbrier v. Roberts, 354 Ark. 591, 594, 127 S.W.3d 454,
456 (2003).
5
C. Class Representative
Mid-South also argues Brittany Smith is not an adequate class representative. Ark.
R. Civ. P. 23(a) requires “representative parties and their counsel [who] will fairly and
adequately protect the interests of the class.” A class representative must display a minimal
level of interest in the action, familiarity with practices challenged, and the ability to assist
in decision making as to the conduct of the litigation. Asbury Auto. Grp., Inc. v. Palasack,
366 Ark. 601, 237 S.W.3d 462 (2006).
Mid-South’s argument centers on Smith’s conduct at her deposition. It alleges Smith
lacks familiarity with the facts of the case because she initially testified that she thought she
was appearing in a different lawsuit and because she believed the lawsuit arose from a credit-
reporting law, not the Act. It adds that Smith was evasive and took frequent breaks during
the deposition.
Despite the foregoing, we affirm because the circuit court did not abuse its discretion.
At her deposition, when asked what her claims were in this lawsuit, Smith responded “that
the debt was too old to be collected.” And when asked about her role in the case, Smith
said, “I know I’m representing other people that have probably paid a [sic] old debt that
they no longer owed, or it was too old to collect on . . . .” In sum, Smith expressed that
she is familiar with the practices challenged and can assist counsel make litigation decisions.
Therefore, we also affirm on this point.
D. Timeliness
Finally, Mid-South argues that Smith failed to timely seek certification of a class.
Rule 23(b) requires “at an early practicable time after the commencement of an action
6
brought as a class action, the court shall determine by order whether it is to be so
maintained.” Ark. R. Civ. P. 23(b). Plaintiff filed her motion for class certification about
eighteen months after her amended complaint. We do not find this amount of time
unreasonable based on the progression of the action in the record. To the extent Mid-South
also argues on appeal that the circuit court failed to timely rule on the motion to certify the
class, that was not argued to the circuit court. As it was not preserved, we do not consider
it on appeal. C.J. Mahan Constr. Co., 2021 Ark. 42, at 8.
Affirmed.
Clarke Tucker Law, PLLC, by: Clarke Tucker, for appellant.
Corey D. McGaha PLLC, by: Corey D. McGaha; and Turner and Turner, P.A., by:
Todd M. Turner and Dan O. Turner, for appellee.
7 | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482889/ | Cite as 2022 Ark. 199
SUPREME COURT OF ARKANSAS
No. CV-22-32
Opinion Delivered: November 10, 2022
ALTICE USA, INC., D/B/A
SUDDENLINK COMMUNICATIONS APPEAL FROM THE CLARK
APPELLANT COUNTY CIRCUIT COURT
[NO. 10CV-21-29]
V.
HONORABLE BLAKE BATSON,
CITY OF GURDON, ARKANSAS EX JUDGE
REL. HONORABLE SHERRY KELLEY,
MAYOR, INDIVIDUALLY AND ON AFFIRMED IN PART AND
BEHALF OF A CLASS OF SIMILARLY DISMISSED IN PART.
SITUATED CITIES
APPELLEE
SHAWN A. WOMACK, Associate Justice
Altice USA, Inc., d/b/a/ Suddenlink Communications (Suddenlink), appeals the
circuit court’s certification of the city of Gurdon’s class-action lawsuit, which alleges that
Suddenlink unlawfully charged Gurdon and other Arkansas cities three fees for the cities’
use of Suddenlink’s services. Suddenlink also appeals the circuit court’s refusal to first address
Suddenlink’s pending motion to compel arbitration before certifying the class. We affirm
in part and dismiss in part.
I. Background
Suddenlink provides telephone, internet, and cable services to the city of Gurdon.
As part of providing these services, Suddenlink assesses a 911 fee, an Arkansas High-Cost
Fund Fee, and a franchise fee. Gurdon filed a class-action lawsuit against Suddenlink and
alleged the imposition of these three fees against the city was unlawful. Seven weeks later,
Gurdon filed a motion for class certification
In response to Gurdon’s complaint, Suddenlink filed two motions: (1) a motion to
compel individual, non-class arbitration and to dismiss, or stay, pending completion of
arbitration proceedings; and (2) an alternative motion to dismiss for failure to state a claim
or for a more definite statement. Without ruling on either of Suddenlink’s motions, the
circuit court granted Gurdon’s motion for class certification. The circuit court ordered that
the “class should be certified for the causes of action for breach of contract and unjust
enrichment” and defined the class as:
Arkansas Cities which have been charged or have paid Defendant’s fees
identified as 911 fee, Arkansas High Cost Fund fee or franchise fee or related
fees or charges from the five years immediately prior to the filing of this
lawsuit up through the date of the entry of judgment in this case.[1]
Suddenlink timely appealed the class certification, which is immediately appealable. Ark.
R. App. P.–Civ. 2(a)(9).
II. Discussion
A. Motion to Compel Arbitration
Suddenlink first argues that the circuit court abused its discretion by not considering
Suddenlink’s motion to compel arbitration before certifying the class. When a party files a
1
Gurdon did not specifically plead unjust enrichment or breach-of-contract claims.
However, Gurdon’s prayer for “necessary and proper further relief for the refund of fees
which Defendant has improperly collected,” is sufficiently broad to encompass both breach
of contract and unjust enrichment and is authorized by statute. See Ark. Code Ann. § 16-
111-108 (Repl. 2016) (“Further relief based on a declaratory judgment or decree may be
granted whenever necessary or proper.”).
2
motion to compel arbitration, the circuit court “shall stay any judicial proceeding that
involves a claim alleged to be subject to the arbitration until the court renders a final decision
. . . .” Ark. Code. Ann. § 16-108-207(f). Despite this requirement, the circuit court certified
the class before ruling on Suddenlink’s motion to compel arbitration. This issue, however,
is not currently appealable.
Only certain issues concerning arbitration are eligible for interlocutory appeal,
namely orders denying motions to compel arbitration. Ark. R. App. P.–Civ. 2(a)(12). Here,
the circuit court has not entered an order denying Suddenlink’s motion to compel
arbitration, and the absence of an order forecloses Suddenlink’s ability to appeal the matter.
See id. Unlike certain motions, see, e.g., Ark. R. Civ. P. 59(b), motions to compel arbitration
are not deemed denied after the passage of time. Ark. Code Ann. § 16-108-207; see also
Ark. R. App. P.–Civ. 4(b)(1). Furthermore, Suddenlink failed to seek an extraordinary writ
to force the circuit court to comply with section 16-108-207. Accordingly, we do not
presently have jurisdiction over this claim and dismiss this portion of the appeal. See
Hotels.com, L.P. v. Pine Bluff Advert. & Promotion Comm’n, 2021 Ark. 196, at 6, 632 S.W.3d
742, 746.
B. Class Certification
When reviewing an order granting class certification, we will reverse only if the
appellant can demonstrate the circuit court abused its discretion. Rivera-Ceren v. Presidential
Limousine & Auto Sales, Inc., 2021 Ark. 219, at 6, 635 S.W.3d 304, 308. We only consider
the evidence in the record to determine whether it supports the circuit court’s decision. Id.
It is immaterial whether the claims will succeed on the merits. Id.
3
There are six requirements for class-action certification: (1) numerosity, (2)
commonality, (3) typicality, (4) adequacy, (5) predominance, and (6) superiority. Ark. R.
Civ. P. 23(a), (b). If a plaintiff fails to satisfy any of the six factors, certification is
inappropriate. Valley v. Nat’l Zinc Processors, Inc., 364 Ark. 184, 189, 217 S.W.3d 832, 836
(2005). Although Suddenlink does not challenge the circuit court’s finding that the class is
sufficiently numerous, Suddenlink does contest the circuit court’s findings on the other five
requirements.
1. Commonality
Suddenlink first argues that the circuit court abused its discretion by finding that
Gurdon satisfied the commonality requirement. To maintain a class-action, a plaintiff must
establish there are questions of law or fact common to the class. Ark. R. Civ. P. 23(a)(2).
This only requires a single issue common to all members of the class. Faigin v. Diamante,
2012 Ark. 8, at 5, 386 S.W.3d 372, 376. Commonality is satisfied when the defendant’s
acts—independent of any action by the class members—establish a common question
relating to the entire class. Rosenow v. Alltel Corp., 2010 Ark. 26, at 6, 358 S.W.3d 879,
885.
In support of its contention that Gurdon failed to satisfy the commonality
requirement, Suddenlink argues that Gurdon did not identify a cause of action. But Gurdon
plainly identifies a cause of action in its complaint: “final declaratory relief, and necessary
and proper relief under Ark. Code Ann. § 16-111-108 for the refund of fees which
[Suddenlink] improperly collected.” In Hotels.com, L.P. v. Pine Bluff Advertising & Promotion
Commission, we held that a group of Arkansas advertising and promotion commissions had
4
a common claim when they sought a declaratory judgment that several online travel
companies failed to remit certain taxes. 2013 Ark. 392, at 14, 430 S.W.3d 56, 64. Gurdon’s
claim is no less sufficient to establish commonality. See id.
Gurdon seeks a declaratory judgment that:
(a) Gurdon and the Class are not subject to 911 fees under the provisions of
the Arkansas Public Safety Communications Act, Ark. Code Ann. § 12-
10-300, et seq.[;]
(b) Suddenlink has no basis to collect fees from Gurdon and the Class to apply
toward Defendant’s payment of any franchise fee[;]
(c) Suddenlink has no basis to collect fees from Gurdon to apply toward
Defendant’s obligation to make payments to the Arkansas High Cost
Fund;
(d) Gurdon and the Class may not use public funds to pay the fees described
in Paragraph 25 herein; and
(e) Gurdon and the Class are entitled to a refund of all such fees which have
been unlawfully exacted from them.
Gurdon also seeks relief under Arkansas Code Annotated section 16-111-108, which allows
a circuit court to award “[f]urther relief based on a declaratory judgment or decree . . .
whenever necessary or proper.” To satisfy the commonality requirement, Gurdon must
only establish that there are questions of law or fact common to the class, which it has done.
Ark. R. Civ. P. 23(a)(2). Therefore, the circuit court did not abuse its discretion in finding
that Gurdon satisfied the commonality requirement.
2. Predominance
Because the predominance requirement is closely related to the commonality
requirement, we generally address the two in tandem. Class certification is appropriate only
if “questions of law or fact common to the members of the class predominate over any
questions affecting only individual members.” Ark. R. Civ. P. 23(b). This requirement is
more stringent than the commonality requirement, and the plaintiff can satisfy the
5
predominance requirement “if the preliminary, common issues may be resolved before any
individual issues.” Philip Morris Cos., Inc. v. Miner, 2015 Ark. 73, at 6, 462 S.W.3d 313,
317.
Suddenlink argues that Gurdon’s failure to identify a cause of action means Gurdon
cannot satisfy the predominance requirement. However, as discussed above, Gurdon has
identified a cause of action common to the class. Once a court finds there are common
questions of law and fact, it must then determine whether the common question
predominates over any individual ones. Id.
Here, no individual issues exist. Gurdon and the putative class contend Suddenlink
unlawfully assessed three identical fees as part of its service charges. Even though the value
of the charges may vary between cities, Suddenlink systematically assesses these fees on its
monthly bills. Thus, the existence of one common claim among the class clearly
predominates, and the circuit court did not abuse its discretion in making this finding. See
Miner, 2015 Ark. 73, at 6, 462 S.W.3d at 317.
3. Typicality
Suddenlink next challenges the circuit court’s finding that Gurdon satisfied the
typicality requirement. The claims of the representative party must be typical of the claims
of the class. Ark. R. Civ. P. 23(a)(3). A plaintiff’s claim is typical if it arises from the same
course of conduct that gives rise to the claims of other class members and is based on the
same legal theory. Ark. Media, LLC v. Bobbitt, 2010 Ark. 76, at 8, 360 S.W.3d 129, 135.
When the complaint alleges that the defendant’s unlawful conduct affected both the plaintiff
6
and the putative class, the typicality requirement is usually met irrespective of varying fact
patterns that may underlie individual claims. Id.
Here, there is no variation between the class representative’s claims and the claims of
the rest of the class. Both the class representative and the putative class allege that Suddenlink
unlawfully collected three identical fees when charging the cities for its services. Because
the claims arise from the same course of conduct and are based on the same legal theory,
the circuit court did not abuse its discretion when it found Gurdon satisfies the typicality
requirement. See Bobbitt, 2010 Ark. 76, at 8, 360 S.W.3d at 135.
4. Adequacy
Before certifying a class, the circuit court must find that the class representative and
its counsel fairly and adequately protect the interests of the class. Ark. R. Civ. P. 23(a)(4).
We have interpreted the adequacy requirement to mean
(1) the representative counsel must be qualified, experienced, and generally
able to conduct the litigation; (2) there must be no evidence of collusion or
conflicting interest between the representative and the class; and (3) the
representative must display some minimal level of interest in the action,
familiarity with the practices challenged, and ability to assist in decision-
making as to the conduct of the litigation.
Infinity Healthcare Mgmt. of Ark., LLC v. Boyd, 2019 Ark. 346, at 11–12, 588 S.W.3d 22, 30.
The circuit court found that Gurdon would fairly and adequately represent the class, but
Suddenlink contends this was an abuse of discretion because there is insufficient evidence
to make this determination. Specifically, Suddenlink argues that the circuit court made no
findings and simply recited the adequacy factors to support the finding.
The record reveals that Gurdon’s attorneys are qualified and able to lead the class-
action because of their extensive experience in this practice area. Furthermore, the circuit
7
court found there was no evidence of collusion or conflicting interests between the class
representative and the class, and Suddenlink does not contend otherwise. Finding that the
class representative displayed some minimal level of interest, familiarity, and ability, the
circuit court noted that the mayor of Gurdon attended the class-certification hearing. The
record also reveals that Gurdon’s mayor is familiar with the class’s claims, as her office is
responsible for paying the city’s Suddenlink bill, and she is the mayor of a city whose
exclusive telephone, internet, and cable provider is Suddenlink. This establishes that the
class representative has more than a minimum level of interest in the litigation, and the
circuit court did not abuse its discretion when it concluded the class representative
adequately represented the interests of the class.
5. Superiority
Finally, Suddenlink argues that a class action is not the superior method to adjudicate
the class’s claims. To maintain a class action, it must be “superior to other available methods
for the fair and efficient adjudication of the controversy.” Ark. R. Civ. P. 23(b). As noted,
a common question predominates: does Suddenlink unlawfully charge Arkansas cities 911
fees, franchise fees, and Arkansas High-Cost Fund fees? If the court should answer this
question no, then Suddenlink is simultaneously relieved of liability to every single class
member. See Farmers Ins. Co. v. Snowden, 366 Ark. 138, 150, 233 S.W.3d 664, 672 (2006).
This is the quintessential example of efficiency. Indus. Welding Supplies of Hattiesburg, LLC
v. Pinson, 2019 Ark. 325, at 9, 587 S.W.3d 540, 547 (holding that “[c]onducting a trial on
the common issue in a representative fashion can achieve judicial efficiency”).
8
Moreover, the cities that make up the putative class are from across the state.
Resolving the claims in one action as opposed to multiple, widely dispersed trials is fair to
all parties. See Int’l Union of Elec., Radio & Mach. Workers v. Hudson, 295 Ark. 107, 117–18,
747 S.W.2d 81, 86–87 (1988) (noting that a single case, as opposed to splintered cases, is
fair to both the class and the defendant when determining liability). Considering this, the
circuit court did not abuse its discretion by concluding that a class action is the superior
method for adjudicating the cities’ claims against Suddenlink.
III. Conclusion
To recap, the arbitration issue is not appealable on an interlocutory basis because the
circuit court never entered an order denying Suddenlink’s motion to compel arbitration.
Therefore, we dismiss that portion of the appeal. In considering whether the circuit court
abused its discretion by certifying the class, we conclude it did not and affirm class
certification.
Affirmed in part and dismissed in part.
KEMP, C.J., and WOOD, J., concur.
RHONDA K. WOOD, Justice, concurring. I write separately because the
majority’s references to the lack of an order and Rule 2(a)(12) misstate why we should
dismiss the argument that the circuit court erred by certifying the class before ruling on the
motion to compel arbitration.
The appellant’s notice of appeal identifies Arkansas Rule of Appellate Procedure–
Civil 2(a)(9) as the basis for our jurisdiction. This is reaffirmed in the brief’s jurisdictional
statement. Rule 2(a)(9) allows a limited, interlocutory appeal from an order granting or
9
denying a motion to certify a class action. In reviewing these narrow appeals, we consider
only whether the requirements of Rule 23 have been met. 2 Other arguments fall outside
our review, such as appellant’s argument that the circuit court should have ruled first on the
motion to compel arbitration as required by Ark. Code Ann. § 16-108-207(f) (Repl. 2016).3
The majority implies the issue preventing our review is the absence of an order
denying arbitration under Rule 2(a)(12). But that’s wrong. And even so, such an order
would bring up a different issue and argument—namely, the merits of the arbitration
agreement. The argument on appeal falls outside our Rule 2(a)(9) review because it rests on
a statute that doesn’t relate to Rule 23 class certification. We should dismiss for that reason.
KEMP, C.J., joins.
Husch Blackwell LLP, by: Ginger Gooch; and McMillan, McCorkle & Curry, LLP, by: F.
Thomas Curry, for appellant.
Turner & Turner, PA, by: Todd Turner and Dan Turner; and Thrash Law Firm, P.A.,
by: Tom Thrash and Will Crowder, for appellee.
2
Philip Morris Cos., Inc. v. Miner, 2015 Ark. 73, at 3, 462 S.W.3d 313, 316.
3
See, e.g., SEECO, Inc. v. Stewmon, 2016 Ark. 435, at 8, 506 S.W.3d 828, 834;
Lenders Title Co. v. Chandler, 353 Ark. 339, 351, 107 S.W.3d 157, 164 (2003); Worth v. City
of Rogers, 351 Ark. 183, 195, 89 S.W.3d 875, 882 (2002); Ark. State Bd. of Educ. v. Magnolia
Sch. Dist. No. 14 of Columbia Cnty., 298 Ark. 603, 605, 769 S.W.2d 419, 420 (1989).
10 | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482885/ | NOTICE: NOT FOR OFFICIAL PUBLICATION.
UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL
AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.
IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE
JUSTIN K., MORGAN B., Appellants,
v.
DEPARTMENT OF CHILD SAFETY, L.K., Appellees.
No. 1 CA-JV 22-0137
FILED 11-10-2022
Appeal from the Superior Court in Maricopa County
No. JD39171
The Honorable Michael D. Gordon, Judge
SPECIAL ACTION JURISDICTION ACCEPTED IN PART AND
RELIEF DENIED;
AFFIRMED
COUNSEL
Robert D. Rosanelli Attorney at Law, Phoenix
By Robert D. Rosanelli
Counsel for Appellant Justin K.
Czop Law Firm, PLLC, Higley
By Steven Czop
Counsel for Appellant Morgan B.
Arizona Attorney General’s Office, Tucson
By Jennifer R. Blum
Counsel for Appellee Department of Child Safety
JUSTIN K., MORGAN B. v. DCS, L.K.
Decision of the Court
MEMORANDUM DECISION
Judge Cynthia J. Bailey delivered the decision of the Court, in which
Presiding Judge Samuel A. Thumma and Vice Chief Judge David B. Gass
joined.
B A I L E Y, Judge:
¶1 Justin K. (“Father”) appeals the termination of his parental
rights to L.K. (“the child”). He argues that the Department of Child Safety
(“DCS”) did not provide adequate reunification services. Father and
Morgan B. (“Mother”) both appeal the denial of her motion for change in
physical custody. For the following reasons, we accept special action
jurisdiction as to the custody motion, deny relief, and affirm.
FACTS AND PROCEDURAL HISTORY
¶2 Father and Mother are the child’s biological parents and were
both incarcerated when the child was born in March 2020. DCS filed a
dependency shortly after the child’s birth alleging Mother’s neglect due to
substance abuse, incarceration, failure to treat her mental health, and failure
to provide for the child’s basic needs. DCS alleged the child was dependent
as to Father based on the length of his incarceration and his failure to take
any steps to establish paternity or seek custody or parenting time with the
child.
¶3 When Mother pled no contest to the dependency allegations,
the court found the child dependent as to her in May 2020 and adopted a
family reunification case plan. Father contested the petition pending a
paternity test. Following the paternity test, the court found Father to be the
child’s biological father in February 2021.
¶4 At a May 2021 hearing, the court changed the case plan to
severance and adoption. In June 2021, DCS moved to terminate Mother and
Father’s parental rights. DCS asserted Mother was neglecting to provide
proper and effective parental care due to substance abuse and that the
length of Mother’s felony incarceration deprived the child of a normal
home. See Ariz. Rev. Stat. (“A.R.S.”) § 8-533(B)(3), (4). DCS also asserted
Father’s rights should be terminated due to the length of his felony
incarceration. See A.R.S. § 8-533(B)(4). These grounds were later amended
2
JUSTIN K., MORGAN B. v. DCS, L.K.
Decision of the Court
to allege fifteen-months’ time-in-care as to Mother. See A.R.S. § 8-
533(B)(8)(c).
¶5 The court held a termination adjudication in October 2021,
which Mother contested. Father pled no contest to the allegations in the
petition but requested that, if the court did not terminate Mother’s rights,
his rights not be terminated under the court’s best interests analysis.
¶6 While the matter was under advisement, and just after our
Supreme Court filed its decision in Jessie D. v. Dep’t of Child Safety, 251 Ariz.
574 (2021), Father moved to withdraw his no-contest plea and set a status
conference about visitation. Father’s counsel noted on information and
belief that DCS had made no effort to provide for visitation or to help Father
form a bond with the child despite Father requesting visitation by video
conference for that purpose.
¶7 Around the same time, Mother moved for a change in
physical custody. She noted that, even though DCS had conducted a home
study for the child’s placement with a paternal relative, DCS’s
representative testified that DCS did not plan to place the child with that
relative.
¶8 The court granted Father’s motion to withdraw his plea and
reopen evidence as it related to his rights. Further, the court granted DCS’s
December 2021 motion to order Father receive video visitation. The court
also granted Mother’s subsequent motion to reopen evidence as to her
rights based on her release from prison.
¶9 During a combined evidentiary hearing held over five days in
April 2022, DCS caseworkers testified that DCS sent Father letters as early
as April 2020, offering visitation and suggesting he send letters, pictures, or
gifts, and participate in services offered by the Arizona Department of
Corrections (“ADOC”). They testified that after Father requested visitation
in October 2021, DCS worked with ADOC to set up visitation, despite
periods when ADOC stopped responding.
¶10 The court denied Mother’s motion to change custody and
granted DCS’s motions to terminate parental rights in May 2022. The court
found DCS provided sufficient reunification efforts to both parents
including visitation with Father beginning in January 2022. The court
found DCS had proven the grounds of chronic substance abuse and fifteen-
months’ time-in-care as to Mother.
3
JUSTIN K., MORGAN B. v. DCS, L.K.
Decision of the Court
¶11 As to Father, the court found that the length of his felony
incarceration would preclude a normal home for the child. In particular,
the court found the child was born after Father was incarcerated, Father had
first requested visitation in October 2021, and therefore, the child had no
pre-existing attachment and bond to him. The court called the prospect of
Father creating and nurturing a bond while likely incarcerated until the
child turns seven “daunting” and noted that Father’s presence “will be
more of an intrusion and would detract from a normal home life,” given the
placement’s distance from Yuma, where Father was incarcerated.
¶12 After finding that termination was in the child’s best interests,
the court considered Mother’s motion to change the child’s placement to a
paternal cousin. The court weighed the testimony of DCS’s child
attachment expert about the disruption and damage of moving the child
from the only home the child had ever known. The court noted both the
current and Mother’s proposed placement were considered kinship and
that both ranked equally under A.R.S. § 8-514(B)(3). The court found
Mother’s proposed placement would not benefit the child more than the
current placement. The court also found that DCS had made adequate
efforts to find kinship placements and that though Mother’s proposed
placement was suitable, it came too late and would be unnecessarily
disruptive to the child.
¶13 Mother and Father timely appealed. We have jurisdiction
over Father’s appeal pursuant to Article 6, Section 9 of the Arizona
Constitution, A.R.S. §§ 8-235(A), 12-120.21(A)(1), and 12-2101(A)(1), as well
as Arizona Rule of Procedure for the Juvenile Court 601(b)(2)(F).
DISCUSSION
I. We accept special action jurisdiction over the issue of custody,
but the parents lack standing to challenge the child’s placement
on appeal.
¶14 We have an independent duty to determine our jurisdiction
over an appeal. Ruesga v. Kindred Nursing Ctrs., L.L.C., 215 Ariz. 589, 593,
¶ 8 (App. 2007). Mother does not challenge any of the termination grounds
on appeal; she argues only that the superior court erred by denying her
motion to move the child to her proposed placement. Mother
acknowledges that the proper mechanism for appealing an interlocutory
order for placement in an ongoing dependency is by special action. See
Jessicah C. v. Dep’t of Child Safety, 248 Ariz. 203, 207, ¶ 16 (App. 2020).
4
JUSTIN K., MORGAN B. v. DCS, L.K.
Decision of the Court
¶15 But Mother argues the practical effect of the superior court’s
decision to hold a combined termination adjudication together with her
motion for change of placement, and then to issue a decision on both
simultaneously, rendered the denial of her motion to change placement a
final appealable order. See Maricopa Cnty. Juv. Action No. JD-5312, 178 Ariz.
372, 374 (App. 1994); see also Ariz. R. P. Juv. Ct. (“ARJCP”) 601(b)(2)(F)
(noting “final orders include . . . an order granting or denying a petition or
motion for termination of parental rights.”).
¶16 We agree with Mother that the effect of combining the two
orders had the practical effect of ending the case. Still the denial of her
motion to change placement is unappealable. See Brionna J. v. Dep’t of Child
Safety, 247 Ariz. 346, 349-50, ¶ 10 (App. 2019). Instead, the exercise of our
special action jurisdiction is appropriate, even if the order denying her
motion is interlocutory and unappealable. See id. at 350-51, ¶ 14.
¶17 Even so, we hold that Mother lacks standing to appeal the
denial of her motion. The parents do not challenge either the termination
grounds found by the superior court or its best interests findings (which are
supported by the record) and as such waived those arguments. See Crystal
E. v. Dep’t of Child Safety, 241 Ariz. 576, 577, ¶ 1 (App. 2017) (by challenging
only the best interests findings, parents “abandon[] and waive[] any
challenge to the court’s finding of the statutory” grounds for termination).
Once grounds for termination have been proven and the court finds by a
preponderance of the evidence that termination is in the child’s best
interests, the biological parent loses all interest in the child’s post-severance
placement. Antonio M. v. Ariz. Dep’t of Econ. Sec., 222 Ariz. 369, 370, ¶ 2
(App. 2009). We find no merit in Mother’s argument that she has standing
because she moved to change the child’s placement before the superior
court severed her rights. In short, Mother simply lacks standing to
challenge the child’s placement at this point, and to the extent Father joins
this argument in his brief, he too lacks standing for the same reason. Id.
Accordingly we cannot (and do not) consider this argument on appeal.
II. DCS made reasonable efforts to facilitate visits between Father
and the child after Father belatedly requested them.
¶18 Father likewise fails to challenge – and waives any argument
as to – the statutory grounds or best interests findings. See Crystal E., 241
Ariz. at 577, ¶ 1. Father instead argues that DCS failed to prove it had
engaged in diligent efforts to reunify him with the child. DCS has a
constitutional obligation to undertake reasonable efforts to preserve the
family. Donald W. v. Dep’t of Child Safety, 247 Ariz. 9, 22, ¶ 46 (App. 2019)
5
JUSTIN K., MORGAN B. v. DCS, L.K.
Decision of the Court
(citing Marina P. v. Ariz. Dep’t of Econ. Sec., 214 Ariz. 326, 333, ¶ 37 (App.
2007)); see also Santosky v. Kramer, 455 U.S. 745, 753-54 (1982). Incarceration
alone does not render a parent unfit, and DCS must still provide services
“designed to address an incarcerated parent’s desire to maintain a parent-
child relationship,” while incarcerated. Jessie D., 251 Ariz. at 582, ¶ 21. But
this requirement arises only if “an incarcerated parent requests
reunification services, such as visitation.” Id.
¶19 Father argues that because he had virtual visits with the child
for only three months, DCS’s efforts were per se insufficient. But, as Father
admits, DCS offered visits at the outset of the case – soon after the child was
born in March 2020. Father first requested visits in October 2021, eight
months after genetic testing established his paternity. DCS’s obligation to
make reasonable efforts to provide services began when Father requested
them. See id. We therefore reject his argument that DCS should have
engaged in more strenuous efforts before he requested services.
¶20 Father also argues the three-month delay between requesting
and receiving services shows that DCS’s efforts were ineffectual. But the
record contains reasonable evidence that DCS diligently and repeatedly
contacted ADOC to facilitate visitation and eventually secured a court
order for video visits. To the extent Father invites us to reweigh the
evidence of DCS’s efforts on appeal, we decline to do so. Alma S. v. Dep’t of
Child Safety, 245 Ariz. 146, 151, ¶ 18 (2018). Father has shown no error.
¶21 Reasonable evidence supported the findings of the superior
court as to both parents and they have shown no error.
CONCLUSION
¶22 We accept special action jurisdiction in part, decline relief,
and affirm.
AMY M. WOOD • Clerk of the Court
FILED: AA
6 | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482892/ | Supreme Court of Florida
____________
No. SC21-933
____________
THE FLORIDA BAR,
Complainant,
vs.
ODIATOR ARUGU,
Respondent.
November 10, 2022
PER CURIAM.
We have for review a referee’s report recommending that
Respondent, Odiator Arugu, be found guilty of professional
misconduct in violation of the Rules Regulating The Florida Bar
(Bar Rules), and that he be suspended from the practice of law for
sixty days as a sanction for his misconduct. We have jurisdiction.
See art. V, § 15, Fla. Const. For the reasons discussed below, we
approve the referee’s findings of fact and recommendations as to
guilt, except as to Bar Rule 4-3.4(a), which we disapprove. We also
disapprove the referee’s recommended discipline and instead
suspend Arugu from the practice of law for ninety-one days.
BACKGROUND
Arugu represented George Rodriguez in his divorce
proceedings. Rodriguez’s father-in-law claimed that he owned a
50% undivided interest in the marital home. On May 13, 2020,
Arugu prepared and filed with the circuit court a Notice of
Production from Non-Party Freedom Mortgage Corporation
(Freedom), along with a proposed subpoena duces tecum. The
proposed subpoena listed seven sets of records Arugu wanted
Freedom to produce pertaining to Rodriguez’s wife and father-in-
law. After the ten-day period to serve an objection to the proposed
subpoena expired, 1 Arugu served a modified version of the
subpoena on Freedom, seeking the production of three additional
sets of records. Specifically, Arugu sought credit check reports and
mortgage loan applications for Rodriguez’s wife and father-in-law,
and any power of attorney executed by Rodriguez’s father-in-law. In
1. Under Florida Family Law Rule of Procedure 12.351(b)
(Production of Documents and Things Without Deposition)
(Procedure), a party may serve an objection to production under the
rule within ten days of service of the notice.
-2-
a January 4, 2021, sworn statement in the Bar disciplinary case,
Arugu explained that after the ten-day period to serve an objection
expired, when he was about to issue the subpoena, it occurred to
him that he did not request those records and decided to include
them in the subpoena.
On May 27, 2020, Arugu filed with the circuit court a copy of
the modified subpoena that he served on Freedom. Wade Luther,
who represented Rodriguez’s wife, emailed a letter to Arugu the
same day, objecting to the “materially and substantially different”
subpoena Arugu served on Freedom compared to the one he had
noticed two weeks earlier. Luther demanded that Arugu withdraw
the subpoena. Arugu responded to Luther’s email stating that the
modified subpoena was not materially and substantially different
than the noticed one, and he asked Luther for a clarification of the
rules and to support his position in respect to the subpoena. Arugu
did not contact Freedom to withdraw the modified subpoena, and
Freedom ultimately produced some records in response to the
subpoena.
-3-
In an order dated September 25, 2020, the circuit court later
found that Arugu had improperly sent a subpoena to Freedom that
was a different version of the one he provided notice of.
The referee found that because Arugu failed to provide notice
that he was seeking the additional records in the subpoena, he
failed to give interested parties who were served with the subpoena
an opportunity to object to the production of the additional records.
The referee recommends that Arugu be found guilty of
violating Bar Rules 3-4.3 (Misconduct and Minor Misconduct);
4-3.4(a) (a lawyer must not unlawfully obstruct another party’s
evidence or otherwise unlawfully alter, destroy, or conceal a
document or other material that the lawyer knows or reasonably
should know is relevant to a pending or a reasonably foreseeable
proceeding); 4-3.4(c) (a lawyer must not knowingly disobey an
obligation under the rules of a tribunal except for an open refusal
based on an assertion that no valid obligation exists); 4-3.4(d) (a
lawyer must not make a frivolous discovery request or intentionally
fail to comply with a legally proper discovery request by an opposing
party); 4-4.1(a) (in the course of representing a client, a lawyer must
not make a false statement of material fact or law to a third person);
-4-
4-8.4(c) (a lawyer shall not engage in conduct involving dishonesty,
fraud, deceit, or misrepresentation); and 4-8.4(d) (a lawyer shall not
engage in conduct in connection with the practice of law that is
prejudicial to the administration of justice).
The referee recommends that Arugu be suspended from the
practice of law for sixty days and that he be assessed the Bar’s
costs. Both Arugu and the Bar filed notices of intent to seek review
of the referee’s report. Arugu challenges the recommendation that
he be found guilty of violating Bar Rules 4-3.4, 4-4.1, and 4-8.4(c),
as well as the recommended sanction. The Bar challenges the
recommended sanction.
ANALYSIS
A. The Referee’s Recommendation as to Guilt
First, Arugu challenges the referee’s findings of fact and
recommendations of guilt as to Bar Rules 4-3.4, 4-4.1, and 4-8.4(c).
If a referee’s findings of fact are supported by competent,
substantial evidence in the record, this Court will not reweigh the
evidence and substitute its judgment for that of the referee. Fla.
Bar v. Gwynn, 94 So. 3d 425, 428 (Fla. 2012); see Fla. Bar v.
Barrett, 897 So. 2d 1269, 1275 (Fla. 2005). The referee’s factual
-5-
findings must be sufficient under the applicable rules to support
the recommendations regarding guilt. See Fla. Bar v. Shoureas, 913
So. 2d 554, 557-58 (Fla. 2005); Fla. Bar v. Spear, 887 So. 2d 1242,
1245 (Fla. 2004). The party challenging the referee’s finding of fact
and recommendations as to guilt has the burden to demonstrate
“that there is no evidence in the record to support those findings or
that the record evidence clearly contradicts the conclusions.” Fla.
Bar v. Germain, 957 So. 2d 613, 620 (Fla. 2007).
Bar Rule 4-3.4(a)
Under Bar Rule 4-3.4(a), a lawyer must not “unlawfully
obstruct another party’s access to evidence or otherwise unlawfully
alter, destroy, or conceal a document or other material that the
lawyer knows or reasonably should know is relevant to a pending or
a reasonably foreseeable proceeding; nor counsel or assist another
person to do any such act.” R. Regulating Fla. Bar 4-3.4(a). The
referee made no findings that Arugu obstructed others’ access to
evidence; unlawfully modified, destroyed, or concealed a document
or other material; or that he counseled or assisted another person
to do any such act. There are thus insufficient findings to support
the referee’s recommendation that Arugu be found guilty of violating
-6-
rule 4-3.4(a). See Shoureas, 913 So. 2d at 557-58. Accordingly, we
disapprove the referee’s recommendation of guilt as to Bar Rule
4-3.4(a).
Bar Rule 4-3.4(c)
Bar Rule 4-3.4(c) states that a lawyer must not “knowingly
disobey an obligation under the rules of a tribunal.” R. Regulating
Fla. Bar 4-3.4(c). Under Florida Family Law Rule of Procedure
12.351(a) (Production of Documents and Things Without
Deposition), a party may seek the production of documents and
things from a nonparty by issuance of a subpoena. The party
desiring the production must serve all other parties with notice of
the intent to serve the subpoena, and the proposed subpoena must
be attached to the notice. See Fla. Fam. L. R. P. 12.351(b). If no
objection is made, the issued subpoena must be “identical” to the
proposed subpoena attached to the notice. See Fla. Fam. L. R. P.
12.351(c). Here, the record clearly supports the referee’s finding,
and Arugu does not dispute, that the subpoena he served on
Freedom was different from the one he attached to his notice of
intent to serve the subpoena. Arugu explained that after the ten-
day period for objecting to the proposed subpoena expired, he
-7-
realized that he had failed to include certain records in the
proposed subpoena and decided to include them in the subpoena
he was about to serve on Freedom, nonetheless. We find that in
knowingly serving Freedom with a different subpoena than the one
attached to the notice served on the other parties, Arugu knowingly
flouted an obligation under the rules of a tribunal, in violation of
Bar Rule 4-3.4(c).
Bar Rule 4-3.4(d)
Bar Rule 4-3.4(d) states that a lawyer must not “in pretrial
procedure, make a frivolous discovery request or intentionally fail to
comply with a legally proper discovery request by an opposing
party.” R. Regulating Fla. Bar 4-3.4(d). In Florida Bar v. Broida,
574 So. 2d 83 (Fla. 1991), we found that the respondent, who
among other things filed a subpoena requesting records previously
requested and objected to, violated Bar Rule 4-3.4(d) and others.
Here, Arugu testified that he did not actually send the
modified subpoena to Freedom until after Luther advised him of his
objection. In fact, Luther requested that Arugu not serve the
modified subpoena if he had not yet done so, or that he contact
Freedom to advise it that the subpoena was withdrawn. Arugu
-8-
declined to do both. Arugu also could have filed an amended notice
of intent to serve subpoena, with the amended subpoena attached,
and waited ten additional days before he served the modified
subpoena. He chose not to. Arugu proceeded to serve the modified
subpoena despite the known objection and without advising
Freedom of the objection. We find that knowingly serving a
subpoena on Freedom seeking items for which he did not provide
proper notice to the other parties, and which he knew opposing
counsel objected to, without first having the court resolve the issue
constituted a frivolous discovery request. We find the record
supports the referee’s finding of fact and that such findings are
sufficient to support the recommendation that Arugu violated Bar
Rule 4.3.4(d).
Bar Rules 4-4.1 and 4-8.4(c)
Bar Rule 4-4.1 states that in the course of representing a
client, a lawyer shall not knowingly “make a false statement of
material fact or law to a third person.” R. Regulating Fla. Bar
4-4.1(a). Partially true but misleading statements as well as
omissions can constitute a misrepresentation, in violation of Bar
Rule 4-4.1. See R. Regulating Fla. Bar 4-4.1, cmt; Fla. Bar v. Scott,
-9-
39 So. 3d 309, 317 (Fla. 2010) (finding the respondent’s failure to
tell a third party about several pieces of information violated Bar
Rule 4-4.1(a) even though the withheld information “was public and
nonconfidential”). Similarly, Bar Rule 4-8.4(c) states that a lawyer
shall “not engage in conduct involving dishonesty, fraud, deceit, or
misrepresentation.” R. Regulating Fla. Bar 4-8.4(c).
Here, the evidence shows that after Arugu filed a copy of the
modified subpoena, Luther emailed Arugu, objecting to the
subpoena on grounds that it was materially and substantially
different from the version that Arugu had filed on May 13, 2020,
and requesting that Arugu not serve the modified subpoena, if he
had not done so, or that he contact Freedom to withdraw the
subpoena. Under Family Law Rule of Procedure 12.351(b), when a
party gives notice of a request for the production of records and
things and another party serves an objection to the production
within ten days of service of the notice, the records or things must
not be produced pending resolution of the objection. Instead,
however, Arugu proceeded to serve the modified subpoena despite
being aware of the objection. The modified subpoena was delivered
on June 4, 2020, less than ten days after Arugu filed a copy of the
- 10 -
modified subpoena with the circuit court. He failed to inform
Freedom of Luther’s objection, thereby misrepresenting to Freedom
that it was required to produce all records listed on the subpoena.
As a result, Freedom produced many of the requested documents.
Arugu argues he did not engage in intentional misconduct.
However, the intent element can be satisfied merely by showing that
the conduct was deliberate or knowing. See Fla. Bar v. Head, 27
So. 3d 1, 9 (Fla. 2010). Clearly, Arugu was aware that the modified
subpoena was substantially different from the one attached to his
notice. He was also aware of the objection to the modified
subpoena before he actually served the subpoena. Therefore, we
find that the record clearly supports a finding that Arugu knowingly
engaged in dishonest and deceitful conduct in violation of rules
4-4.1 and 4-8.4(c).
Accordingly, we approve the referee’s findings of fact and
recommendations of guilt, except as to Bar Rule 4-3.4(a), which we
disapprove.
- 11 -
B. Discipline
We now turn to the referee’s recommended discipline, a sixty-
day suspension. In reviewing a referee’s recommended discipline,
this Court’s scope of review is broader than that afforded to the
referee’s findings of fact because, ultimately, it is this Court’s
responsibility to order the appropriate sanction. See Fla. Bar v.
Picon, 205 So. 3d 759, 765 (Fla. 2016); Fla. Bar v. Anderson, 538
So. 2d 852, 854 (Fla. 1989); see also art. V, § 15, Fla. Const.
The referee recommended a sixty-day suspension, finding that
Arugu’s conduct was not as egregious as in other cases relied on by
the Bar, including Florida Bar v. Berthiaume, 78 So. 3d 503 (Fla.
2011). We agree with the referee that a suspension is the
appropriate sanction in this case. See Fla. Stds. Imposing Law.
Sancs. 6.2(b) (“Suspension is appropriate when a lawyer knowingly
violates a court order or rule and causes injury or potential injury
to client or a party or causes interference or potential interference
with a legal proceeding.”); 7.1(b) (“Suspension is appropriate when a
lawyer knowingly engages in conduct that is a violation of a duty
owed as a professional and causes injury or potential injury to a
client, the public, or the legal system.”). Arugu knowingly served
- 12 -
Freedom with a modified version of the subpoena that he had filed
with the circuit court, even after Luther advised him that he should
not do so. As a result, interested parties did not have the
opportunity to object to the production of the additional records,
which Freedom ultimately produced in response to the modified
subpoena. However, we disagree with the referee’s conclusion that
Arugu’s conduct was not sufficiently egregious to warrant a more
severe sanction.
In Berthiaume, the respondent was suspended for ninety-one
days for violating Bar Rules 4-8.4(c) and 4-8.4(d) after she served a
fraudulent subpoena on a bank, outside the context of litigation
and without legal authority, in an effort to conduct her own
personal investigation into a client’s private finances. 78 So. 3d at
511. We noted then that such dishonest conduct “demonstrates
the utmost disrespect for the court and is destructive to the legal
system as a whole.” Id. at 510.
While Arugu issued his subpoena in the context of an ongoing
litigation, his conduct is just as egregious as that at issue in
Berthiaume. Arugu served the modified subpoena on Freedom even
though opposing counsel advised him that doing so was improper
- 13 -
and asked him to not serve the modified subpoena. Arugu claims
he served the modified subpoena despite the objection because
opposing counsel did not give a basis for the objection. However,
Arugu, who was admitted to the Bar in 1995, could have conducted
his own research to determine whether he was in compliance with
the rules of procedure. Instead, he knowingly disregarded the
objection and served the subpoena on Freedom with no mention of
the objection. We conclude that Arugu’s dishonest behavior
warrants a ninety-one-day suspension; it demonstrates disrespect
for the court and is destructive to the legal system as a whole.
CONCLUSION
Accordingly, we approve the referee’s findings of fact and
recommendations as to guilt, except for the recommendation that
Arugu be found guilty of violating Bar Rule 4-3.4(a), which we
disapprove. We disapprove the referee’s recommended sanction
and instead suspend Arugu from the practice of law for ninety-one
days. The suspension will be effective thirty days from the filing of
this opinion so that Arugu can close out his practice and protect
the interests of existing clients. If Arugu notifies this Court in
writing that he is no longer practicing and does not need the thirty
- 14 -
days to protect existing clients, this Court will enter an order
making the suspension effective immediately. Arugu shall fully
comply with Rule Regulating The Florida Bar 3-5.1(h). Arugu shall
also fully comply with Rule Regulating The Florida Bar 3-6.1, if
applicable. In addition, Arugu shall accept no new business from
the date this opinion is filed until he is reinstated. Arugu is further
directed to comply with all other terms and conditions of the report.
Judgment is entered for The Florida Bar, 651 East Jefferson
Street, Tallahassee, Florida 32399-2300, for recovery of costs from
Odiator Arugu in the amount of $3,098.57, for which sum let
execution issue.
It is so ordered.
MUÑIZ, C.J., and CANADY, POLSTON, LABARGA, COURIEL, and
GROSSHANS, JJ., concur.
FRANCIS, J., did not participate.
THE FILING OF A MOTION FOR REHEARING SHALL NOT ALTER
THE EFFECTIVE DATE OF THIS SUSPENSION.
Original Proceeding – The Florida Bar
Joshua E. Doyle, Executive Director, The Florida Bar, Tallahassee,
Florida, Patricia Ann Toro Savitz, Staff Counsel, The Florida Bar,
Tallahassee, Florida, and Daniel James Quinn, Bar Counsel, The
Florida Bar, Orlando, Florida; and Tiffany A. Roddenberry, Kevin W.
Cox, and Kathryn Isted of Holland & Knight LLP, Tallahassee,
Florida,
- 15 -
for Complainant
Barry W. Rigby of Law Offices of Barry Rigby, P.A., Winter Park,
Florida,
for Respondent
- 16 - | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482895/ | IN THE SUPREME COURT OF THE STATE OF KANSAS
No. 124,493
STATE OF KANSAS,
Appellee,
v.
ROBERT LEE VERGE,
Appellant.
SYLLABUS BY THE COURT
1.
Neither the citizenship nor the heritage of a defendant constitutes a key ingredient
to a court's jurisdiction in criminal prosecutions.
2.
Kansas courts have jurisdiction to try, convict, and sentence individuals who
commit violations of Kansas criminal laws in the state of Kansas.
Appeal from Dickinson District Court; BENJAMIN J. SEXTON, judge. Opinion filed October 28,
2022. Affirmed.
Sam S. Kepfield, of Hutchinson, was on the brief for appellant.
Kristafer R. Ailslieger, deputy solicitor general, and Derek Schmidt, attorney general, were on the
brief for appellee.
1
The opinion of the court was delivered by
ROSEN, J.: Robert Lee Verge asks the courts to vacate his 1998 conviction of
capital murder and other charges. He asserts that Kansas state courts had no jurisdiction
to try or sentence him because he was not a citizen of Kansas or the United States and
was a resident of Missouri when he committed the crimes.
In 1997, Verge and another man murdered two people in Dickinson County,
Kansas, and committed other crimes at the victims' residence. After a jury convicted him,
the court sentenced Verge to a hard 40 life term and consecutive terms for the other
crimes. The conviction was affirmed in State v. Verge, 272 Kan. 501, 34 P.3d 449 (2001),
but this court remanded for resentencing of the non-capital crimes because the upward
departures violated his rights under Apprendi v. New Jersey, 530 U.S. 466, 120 S. Ct.
2348, 147 L. Ed. 2d 435 (2000), and State v. Gould, 271 Kan. 394, 23 P.3d 801 (2001).
Over the following years, Verge filed a variety of motions collaterally attacking
his conviction and sentence. All these challenges were either denied or dismissed.
On April 21, 2021, Verge filed the motion in the present case, captioned a Motion
to Set Aside and Correction of Illegal Sentence. He appears to allege that no Kansas
district court had jurisdiction to convict or sentence him because he was a "natural living
soul, Indigenous Native Moorish-American National" who resided in Missouri at the time
of the murders.
Following a hearing, at which Verge repeatedly demanded that the judge prove the
source of his jurisdiction over him, the court denied the motion. He took a timely appeal
to this court under K.S.A. 60-2101(b) and K.S.A. 2022 Supp. 22-3601.
2
Verge's arguments can be difficult to follow. He apparently argues that, as a
resident of Missouri at the time of the murders, he was not subject to the jurisdiction of
Kansas courts. He also contends he is not a citizen of the United States; he is instead a
"natural living soul, Indigenous Native Moorish-American National" and is therefore not
subject to the jurisdiction of any of the states or federal government. In addition, he
seems to argue he is a corporate entity in Missouri and therefore not subject to long-arm
diversity jurisdiction.
The existence of in personam jurisdiction is a question of law subject to de novo
review. See, e.g., Merriman v. Crompton Corp., 282 Kan. 433, 439, 146 P.3d 162 (2006).
We conclude Verge was properly subject to the jurisdiction of the trial and sentencing
court.
"All persons born or naturalized in the United States, and subject to the
jurisdiction thereof, are citizens of the United States and of the State wherein they
reside." U.S. Const. amend. XIV, § 1. Verge's birth certificate shows he was born in
Jackson County, Missouri, on March 11, 1974. Any person who is born in the United
States is a United States citizen, and it does not matter whether the person consented to
citizenship. See 8 U.S.C. § 1401(a) (2018).
Furthermore, one does not lose one's citizenship simply by renouncing it.
Americans cannot effectively renounce their citizenship by mail, through an agent, or
while residing in the United States because of the provisions of section 349(a)(5) of the
Immigration and Nationality Act. See 8 U.S.C. § 1481(a)(5) (2018). The Secretary of
State has developed a legally enforceable set of procedures for renouncing citizenship,
including an oath of renunciation and a form. See 22 C.F.R. § 50.50 (2022). Verge is
therefore a citizen of the United States.
3
In any event, whether Verge is a citizen of Kansas or of the United States or of
some other political entity does not affect the outcome of this case. The United States
Constitution states that a criminal trial is to take place in the state in which the crime was
committed. U.S. Const. amend. VI. Verge committed his crime in Kansas, and Kansas
courts therefore have jurisdiction to try, convict, and sentence him.
It is the duty of all residents of this country, both citizens and noncitizens of the
United States, to obey the laws of both the national and state governments. See, e.g.,
Carlisle v. United States, 83 U.S. (16 Wall.) 147, 148, 21 L. Ed. 426 (1872) (Aliens
domiciled in the United States "are bound to obey all the laws of the country, not
immediately relating to citizenship, during their residence in it, and are equally amenable
with citizens for any infraction of those laws."); United States v. James, 328 F.3d 953,
954 (7th Cir. 2003) ("Laws of the United States apply to all persons within its borders.");
Leonhard v. Eley, 151 F.2d 409, 410 (10th Cir. 1945) (alien residents must comply with
state and federal laws); United States v. White, 480 Fed. Appx. 193, 194 (4th Cir. 2012)
(unpublished opinion) ("Neither the citizenship nor the heritage of a defendant constitutes
a key ingredient to a . . . court's jurisdiction in criminal prosecutions . . . .")
This general principle applies to people purporting to have immunity from
complying with laws because of their Moorish-American identity. See, e.g., Caldwell v.
Wood, No. 3:07cv41, 2010 WL 5441670, at *17 (W.D.N.C. 2010) (unpublished opinion)
(petitioner's allegation that membership in the Moorish-American Nation entitled him to
ignore state laws was "ludicrous"); Bond v. N.C. Dept. of Corr., No. 3:14-CV-379-FDW,
2014 WL 5509057, at *1 (W.D.N.C. 2014) (unpublished opinion) ("courts have
repeatedly rejected arguments . . . by individuals who claim that they are not subject to
the laws of the . . . individual States by virtue of their 'Moorish American' citizenship");
Allah El v. District Attorney for Bronx County, No. 09 CV 8746(GBD), 2009 WL
3756331, at *1 (S.D.N.Y. 2009) (unpublished opinion) (person's "purported status as a
4
Moorish-American citizen does not enable him to violate state . . . laws without
consequence").
We agree with the conclusions of these other courts. Kansas courts had
jurisdiction to try and sentence Verge. The judgment of the district court is affirmed.
5 | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482887/ | Cite as 2022 Ark. 201
SUPREME COURT OF ARKANSAS
No. CR-22-114
Opinion Delivered: November 10, 2022
SHAWN CONE APPEAL FROM THE CRAIGHEAD
COUNTY CIRCUIT COURT
APPELLANT [NO. 16JCR-19-1622]
V. HONORABLE RANDY PHILHOURS,
JUDGE
STATE OF ARKANSAS
APPELLEE
AFFIRMED.
BARBARA W. WEBB, Justice
Shawn Cone appeals from a jury verdict in the Craighead County Circuit Court finding
him guilty of capital murder, abuse of a corpse, and theft of property for which he received
consecutive sentences in the Arkansas Department of Corrections of life without parole, twenty
years, and twelve years, respectively. He also was convicted of two counts of misdemeanor theft
of property, the victim’s cell phone and her 2016 Range Rover, for which he received one-year
sentences.
On appeal, Cone only challenges his felony convictions. He argues that the circuit court
(1) abused its discretion in violation of Arkansas Rules of Evidence 402 and 403 by admitting
into evidence a list of countries that do not have extradition treaties with the United States; (2)
erred in denying his motion to suppress evidence seized from his backpack because the warrant
was not supported by probable cause, the warrant was a “General Warrant,” and the court
erroneously relied on his warrantless search waiver; (3) abused its discretion by admitting into
1
evidence photos taken by the medical examiner; and (4) erred in denying his directed-verdict
motion on the charges of capital murder, abuse of a corpse, and theft of the victim’s credit cards.
Our jurisdiction is proper pursuant to Rule 1-2(a) of the Rules of the Supreme Court and Court
of Appeals of Arkansas. We affirm.
I. Synopsis
This case arises from the December 2, 2019 murder of Alissa Reynolds in her Jonesboro
residence, the subsequent abuse of her corpse, and postmortem use of her cell phone, credit
cards, and automobile. Ms. Reynolds’s live-in boyfriend, appellant Shawn G. Cone, a parolee,
was charged with these crimes. Facebook messages showed that Ms. Reynolds ended the
relationship on December 2.
The victim’s body was discovered by police while conducting a second welfare check on
December 8, 2019. Earlier in the day, police knocked on Ms. Reynolds’s door but left when
there was no answer. In the second welfare check later that evening, the officers approached the
door and were greeted by the stench of decomposing flesh. There was no sign of a forced entry,
and no one answered the door. Once police breached the door, Ms. Reynolds was found on a
chaise lounge, covered in layers of bedding. It was subsequently determined that Ms. Reynolds
was dressed in the same clothing that she had worn to work, and she was still wearing her work
ID badge. Blood and other bodily fluids had soaked the towels and a blanket left beneath the
chair.
Ms. Reynolds was last seen alive at work on December 2, 2019. Security cameras at her
place of employment showed her leaving the Axis manufacturing facility in Paragould at 5:03
p.m. She was dressed in jeans and a pink pull-over top.
2
The victim’s neighbor, Byron Holt, testified that he had a surveillance system set up at
his residence during the week of December 2 through December 8, 2019. Before Ms. Reynolds
returned home from work, Cone was recorded driving his Chevrolet Tahoe from the garage.
When Ms. Reynolds arrived home at 5:38 p.m., she parked her white 2016 Range Rover in the
garage. Cone arrived on foot ten minutes later. At 7:00 p.m., the Range Rover backed out of the
garage. A short time later, Cone arrived alone at the Elks Lodge in Jonesboro. Cone returned to
Ms. Reynolds’s residence at 9:59 p.m.
Cone was shown to have been driving Ms. Reynolds’s Range Rover and using her credit
cards and cell phone, beginning shortly after what was determined to be the time of her death.
On December 2, John Wood observed Cone driving Ms. Reynolds’s Range Rover to the Elks
Lodge, just after 7:00 p.m. Jeffery Powell testified that he saw Cone on December 6, at his
residence, driving the Range Rover that day. Daniel Neal testified that Cone purchased beer at
the Country Liquor Store using Ms. Reynolds’s credit card on December 2. The manager of a
Sprint store, Stevie Ivy, likewise testified that on December 6, Cone purchased a new cell phone,
using Ms. Reynolds’s credit card to cover the activation fee. On December 3 and 4, a call was
placed on Ms. Reynolds’s cell phone to her employer by a man who identified himself as Shawn,
and claimed she was too ill to go to work. Testifying in his own defense, Cone confirmed that
he had made these calls. He also had misled the victim’s family and friends about her not being
alive.
An autopsy revealed that Ms. Reynolds had been stabbed eighteen times and that she
had also sustained numerous “cuts” caused by slashing. The medical examiner opined that the
stab wounds were the cause of her death. It was determined that some of the wounds, particularly
3
the wounds on her hands, were defensive in nature. Additionally, the proximity of some of the
stab wounds indicated to the medical examiner that they were inflicted while Ms. Reynolds was
not moving because she was either unconscious or dead. According to the medical examiner,
the state of decomposition of Ms. Reynolds’s body indicated that she had been dead for more
than a few days, which was consistent with her having died on December 2. Cone’s DNA was
found under Ms. Reynolds’s fingernails.
On December 9, Cone was apprehended in Key West, Florida. Upon traveling to Florida,
Detective Brian Arnold retrieved Cone’s personal possessions, including a backpack, and
transported the items to Jonesboro. Detective Arnold obtained a series of warrants
encompassing the property in Cone’s possession when he was detained by Florida authorities.
The contents of the backpack included a printed list entitled “Countries with no extradition
treaty with US” with a handwritten “CUBA” added and circled. Cone unsuccessfully moved
prior to trial to suppress the contents of the backpack. Jonesboro Police Detective Keri Varner,
an expert in cell phone data extraction, testified that she recovered Google searches on a phone
used by Cone that queried about countries that do not have extradition treaties with the United
States.
Prior to leaving Jonesboro, Cone had visited with friends Donny and Gina Tilton and
told them that he was moving to Key West “because there was nothing left here for him.” He
showed the Tiltons a printed list of countries that have no extradition treaties with the United
States. Cone told Gina that he wanted to leave the country because he did not want to go back
to prison. According to Gina, she did not know the victim but asked Cone about his relationship
to her. She testified, “I actually asked if Alissa was his girlfriend, and he stated that, no, she was
4
not. She actually probably hated him. She was just a very good person that knew if she kicked
him out, he would be homeless, and so she had let him have a room in her house.”
Cone also met with Stephanie Fagaley, a former girlfriend. Cone likewise talked about
nonextradition treaty countries, including Cuba, the Maldives, and maybe Morocco. He said he
was going to Key West, which Fagaley assumed meant “he was going to Cuba.” Cone told her
he wanted to leave because he did not want to go back to prison.
When Cone testified in his defense, he admitted that he could be seen on the neighbor’s
December 2, 2019 recording, approaching the home on foot and entering through the garage
that evening. He also admitted that Ms. Reynolds was murdered that night but claimed he
returned home from running errands to find the back door kicked in and Reynolds “a bloody
mess.” According to Cone, he did not call the police because he “knew what the automatic
assumption was going to be.” Instead, he covered Ms. Reynolds’s body with blankets and pillows.
On cross-examination, Cone further admitted that he and Ms. Reynolds got into an argument
on the day of the murder. He acknowledged numerous Facebook messages on December 2,
including Ms. Reynolds’s message that she was “done with him.” Cone admitted that he was the
person seen in the neighbor’s recordings, coming and going from Ms. Reynolds’s home in the
days after her murder. He admitted that he continued to stay in her home after her death until
the police arrived to conduct the first welfare check on December 8, 2019. He testified, “[A]fter
that, I thought it’s either I’m leaving or I’m going to jail, so I hurriedly pack my things. I say
goodbye [to Ms. Reynolds and their dogs] and I leave.” He left his passport behind in a vehicle
in Jonesboro. Cone also admitted using Ms. Reynolds’s phone after her death to text and to
communicate with her friends and family, pretending to be her, as well as lying about Ms.
5
Reynolds’s being in a car wreck and hospitalized. He admitted calling Ms. Reynolds’s work
supervisor, Melissa Henson, on December 3 and 4, the days directly following the murder, to
report that Ms. Reynolds had the flu, and texting updates about her absence. He admitted that
leaving the country was a “possibility of a plan at first” or “still a possibility,” when he told the
Tiltons about it. Cone admitted using Ms. Reynolds’s Range Rover after her death, and he
parked and left it, heavily damaged, at the Memphis airport. He also admitted using Ms.
Reynolds’s credit cards after her death.
Although this case was made largely with circumstantial evidence, Cone was convicted as
charged.
II. Sufficiency of the Evidence
In accordance with our usual practice, before we take up Cone’s points on appeal
concerning evidentiary issues, we first consider Cone’s argument that the circuit court erred
when it denied his directed-verdict motion on the charges of capital murder, abuse of a corpse,
and theft of Ms. Reynolds’s credit cards. In pertinent part, at trial, Cone made the following
directed-verdict motions: As to count one, capital murder, Cone argued lack of any “direct
evidence that there has been any premeditated or deliberated purpose . . . or that he was the one
who stabbed the victim [and] [a]ny evidence that the State has put forth on Capital Murder has
been purely speculative in relation to the defendant.” As to abuse of a corpse, count two, Cone
argued that “the State has failed to meet its burden [as they have] only put on evidence allegedly
showing the defendant coming and going from the house [and] [a]t most, this amounts to failure
to report [and] [t]here has been no evidence of mistreating or concealing the corpse.” Without
making any additional substantive argument in support, Cone also moved for a directed verdict
6
on count five, theft of Ms. Reynolds’s credit cards. The circuit court denied all of these motions.
When we review the denial of a directed-verdict motion challenging the sufficiency of
the evidence, we view the evidence in the light most favorable to the verdict. Holly v. State, 2017
Ark. 201, 520 S.W.3d 677. That means we consider only the evidence that supports the verdict
and determine whether the verdict is supported by substantial evidence. Id. Substantial evidence
is evidence of sufficient certainty and precision to compel a conclusion one way or the other and
pass beyond mere suspicion or conjecture. Id. To be substantial, the circumstantial evidence
must exclude every reasonable hypothesis other than the accused’s guilt. Kellensworth v. State,
2021 Ark. 5, 614 S.W.3d 804. The question whether circumstantial evidence excludes every
hypothesis consistent with innocence is for the jury to decide. Id.
A. Capital Murder
On appeal, Cone argues that the State only presented circumstantial evidence, and the
mere fact that he was seen coming and going from Ms. Reynolds’s house; used her car, phone,
and debit card; and was arrested in Key West does not mean he was guilty of capital murder. He
asserts that he faced unrelated theft charges pending since May 2019, which was the reason he
contemplated leaving Jonesboro. Further, Cone noted Detective Arnold’s testimony that there
were other vehicles seen at Ms. Reynolds’s house that had not been investigated. Cone argued
that the jury verdict was the result of “surmise and conjecture,” and therefore, this court should
reverse the conviction. We are not persuaded.
A defendant commits capital murder, if, with the premeditated and deliberated purpose
of causing the death of another person, he causes the death of any person. Ark. Code Ann. § 5-
10-101(a)(4) (Supp. 2019). Premeditated and deliberated murder occurs when the killer’s
7
conscious object is to cause death, and he forms that intention before he acts and as a result of
a weighing of the consequences of his course of conduct. Brooks v. State, 2016 Ark. 305, at 6,
498 S.W.3d 292, 296. Premeditation may be formed in an instant and is rarely capable of proof
by direct evidence. Id. Thus, a jury may infer premeditation and deliberation from the
circumstantial evidence. Keesee v. State, 2022 Ark. 68, at 3, 641 S.W.3d 628, 633.
We hold that there is substantial evidence of both the identity of the perpetrator and the
culpable mental state. By Cone’s own admissions, he and Ms. Reynolds quarreled on the day of
the murder. Ms. Reynolds’s Facebook messages indicated that her relationship with Cone had
ended on December 2. However, Cone continued to live at her residence. Contrary to Cone’s
claims, Officer Jason Chester, who participated in the December 8 welfare check on Ms.
Reynolds’s home, reported no evidence of the door having been kicked in. Officer Chester’s
testimony was corroborated by bodycam footage admitted into evidence. Further, the autopsy
revealed that many of the wounds that Ms. Reynolds sustained were defensive wounds, and
Cone’s DNA was found under her fingernails. Additionally, Ms. Reynolds was wearing the
clothing that she wore to work, and surveillance video provided by Byron Holt placed Cone at
the residence–––and no one else–––shortly after Ms. Reynolds returned from work. Further,
evidence of Cone’s flight to Key West, his desire to flee the United States to a country with
which we do not have an extradition treaty, and Cone’s lying to Ms. Reynold’s employer and
family are evidence of Cone’s consciousness of guilt. Taken together, it provides substantial
evidence of Cone’s identity as the perpetrator.
Regarding the culpable-mental-state element, premeditation and deliberation, the
medical examiner testified that Ms. Reynolds had been stabbed eighteen times and had multiple
8
other cuts, including a cluster of eight repeated stab wounds to her chest, and a fatal wound to
her neck. The number of stab wounds indicates a prolonged struggle and repeated application
of deadly force. From the nature and the extent of the wounds alone, the jury could infer the
premeditation and deliberation necessary for a conviction of capital murder. See Fudge v. State,
341 Ark. 759, 767–68, 20 S.W.3d 315, 319–20 (2000).
B. Abuse of a Corpse
Cone argues that the identity of the perpetrator for the abuse-of-a-corpse count is not
substantial for the same reason that he challenges the identity element in the capital-murder
count. We likewise find this argument unpersuasive. The offense of “Abuse of a Corpse” is
codified under Arkansas Code Annotated section 5-60-101 as follows:
(a) A person commits abuse of a corpse if, except as authorized by law, he
or she knowingly:
(1) Disinters, removes, dissects, or mutilates a corpse; or
(2)(A) Physically mistreats or conceals a corpse in a manner offensive to a
person of reasonable sensibilities.
(B) A person who conceals a corpse in a manner offensive to a person of
reasonable sensibilities that results in the corpse remaining concealed is
continuing in a course of conduct under § 5-1-109(e)(1)(B).
(C)(i) As used in this section, “in a manner offensive to a person of
reasonable sensibilities” means in a manner that is outside the normal
practices of handling or disposing of a corpse.
(ii) “In a manner offensive to a person of reasonable sensibilities” includes
without limitation the dismembering, submerging, or burning of a corpse.
(b) Abuse of a corpse is a Class C felony.
The evidence adduced at trial indicates that Cone not only murdered the victim, but
9
also, he alone was present when her lifeless body was concealed. Cone himself confirmed that
he was the person captured on his neighbor’s surveillance camera, proving that Cone was the
only person with access to Reynolds’s body. Accordingly, the jury could conclude that he alone
had the motive and opportunity to conceal the victim in her residence by covering her with
bedding. Likewise, Cone’s decision to leave Ms. Reynolds on the chaise lounge, decomposing,
could reasonably be found by a jury to be a course of conduct that would be offensive to a person
of reasonable sensibilities. See id. Finally, there is no evidence that anyone else was present to
conceal Reynolds’s lifeless body while he continued to live at her residence.
C. Theft of Property
Cone was charged with three counts of theft of property arising from his use of Ms.
Reynolds’s Range Rover, cell phone, and credit cards. The counts involving the Range Rover
and cell phone were reduced to misdemeanors and are not covered by Cone’s appellate brief.
Regarding Ms. Reynolds’s credit cards, Cone argued that the State failed to prove that his use of
Ms. Reynolds’s credit cards was unauthorized because he lived with her. He contended that
unauthorized use was therefore purely speculative. In denying Cone’s directed-verdict motion,
the circuit court noted that in her Facebook messages,
Ms. Reynolds made it clear that she had broken up with Cone on the day of her death. For his
argument on appeal, Cone merely recites the argument he made to the circuit court.
The crime of “Theft of Property of a Credit or Debit Card” is codified at Arkansas Code
Annotated section 5-36-103(a)(1), which states in pertinent part that “[a] person commits theft
of property if he or she knowingly takes or exercises unauthorized control over or makes an
unauthorized transfer of an interest in the property of another person with the purpose of
10
depriving the owner of the property.” We hold that there is substantial evidence of unauthorized
use of the credit cards.
The evidence presented at trial was that Cone used Ms. Reynolds’s credit cards after her
demise. Further, Gina Tilton testified that Cone had stated that the victim “probably hated
him,” which, given its greatest probative force, provides a substantial basis for the jury to
conclude that Cone’s use of Ms. Reynolds’s credit cards was not permissive. Further, as the
circuit court noted, she had made it clear just prior to her death that she had broken up with
Cone. Evidence that Cone had used the cards after Ms. Reynolds’s death is substantial evidence
that he did not have her consent to use them.
III. Admission of the List of Countries Having No Extradition Treaties with the United States
Cone argues that the circuit court abused its discretion by admitting into evidence a list
of countries that do not have extradition treaties with the United States in violation of Arkansas
Rules of Evidence 402 and 403. The list was found in a backpack that Cone was carrying at the
time of his arrest. Cone moved in limine to exclude the list as not relevant and more prejudicial
than probative. The circuit court admitted the list subject to the State’s presenting admissible
testimony concerning what Cone told the Tiltons and Fagaley regarding his plans to flee the
country.
Cone argues that admission of the list was an abuse of discretion because there was no
evidence presented that he had any intention of going to Cuba, and that notion is purely
speculative. Arguing further, Cone asserts that the evidence showed that Cone was very open
about where he was going and that he had no intention of going to Cuba. He further notes that
he left his passport behind when he boarded his flight to Key West.
11
The State asserts that this issue is not preserved for our review. It argues that when a trial
court’s ruling is a qualified one, the defendant must renew his objection at trial,
contemporaneous with the alleged error, in order to preserve it. It contends that in the case
before us, the trial court conditioned admission of the list on the State’s representation of what
the trial testimony would be, and Cone did not raise a contemporaneous objection when Gina
Tilton was the first witness at trial to testify about the list. Cone did not object until after
Stephanie Fagaley’s testimony. Citing Ward v. State, 370 Ark. 398, 260 S.W.3d 292 (2007), the
State asserts that Gina Tilton’s testimony about the list bars review of Cone’s claim. We agree.
It is settled law under our preservation jurisprudence that when a conditional ruling is
made at trial based on the representation of what certain evidence will be, a contemporaneous
objection is required to preserve the issue for our review. Id. (citing Byrum v. State, 318 Ark. 87,
884 S.W.2d 248 (1994); Alexander v. State, 335 Ark. 131, 983 S.W.2d 110 (1998)). Accordingly,
this issue is not preserved for our review.
IV.Suppression of Evidence in Cone’s Backpack
Jonesboro Police Detective Brian Arnold testified during the hearing on Cone’s motion
to suppress the evidence contained in Cone’s backpack. Detective Arnold stated that when Cone
deplaned in Key West, he was arrested by deputies from the Monroe County Sheriff’s
Department. Cone was carrying a blue backpack as his carry-on luggage. The deputies did not
search the backpack but instead just seized it and held it in their evidence room.
Arnold prepared two warrants. The first was directed at the Monroe County Sheriff’s
Department, asking that the backpack be released to the Jonesboro police. The second was a
request to search the backpack once it was in the possession of the Jonesboro police. Detective
12
Arnold further testified that he was aware that Cone was on parole, and Cone had executed a
warrantless search waiver pursuant to Arkansas Code Annotated section 16-93-106.
At the hearing, Cone argued that the contents of the backpack should be suppressed,
claiming that the affidavit supporting the warrant was inadequate because it did not establish
probable cause to search. In disposing of Cone’s suppression motion, the circuit court found
the warrant to be sufficient:
The affidavit supporting the application for the warrant states that on
December the 8th officers were dispatched to the pertinent address for a welfare
check. Officers discovered a deceased body of a female victim, who was later
identified, inside that residence. She had multiple cuts on her body with blood
on her body and clothing. Shawn Cone could have sustained an injury during the
attack causing blood transfer to the victim. Detectives were able to develop Shawn
Cone as a suspect. Shawn Cone fled the area by flying to Key West where he was
arrested on 12-9-19 the very next day. He had a large suitcase and a blue backpack.
By the time this search warrant was sought, the officers knew that there were cell
phones, credit cards, debit cards, and the clothing he was wearing inside those,
the backpack and the suitcase. While it could have been more detailed, I think
the dates that they use are very pertinent. I think the statement that she had cuts
on her body and clothing and because he was a suspect he could have had blood
on his clothing plus the fact that they already knew because of its inventory by
the Monroe County Florida people. I think that makes the warrant sufficient. It’s
certainly good faith because the thing is for Judge Boling when he signed this,
first, was there any false information in the affidavit? No. Did the magistrate have
to give up his neutrality or did he manifest that neutrality? Seems to me like he
did. Substantial basis must be provided enough to establish probable cause. I
think that happened.
Cone argues that the circuit court erred in denying his motion to suppress evidence
seized from his backpack because the warrant was not supported by probable cause, the warrant
was a “General Warrant,” and it erroneously relied on his warrantless search waiver. We
disagree.
On review of a circuit court’s denial of a motion to suppress evidence, we conduct an
13
independent inquiry based on the totality of the circumstances, evaluating findings of historical
facts for clear error. Thomas v. State, 2020 Ark. 154, 598 S.W.3d 41. We give due weight to
inferences drawn by the circuit court, and we will reverse the circuit court only if the ruling is
clearly against the preponderance of the evidence. Id.
The particularity requirement of a search warrant is stated in Rule 13.2 of the Arkansas
Rules of Criminal Procedure:
(b) The warrant shall state, or describe with particularity:
(i) the identity of the issuing judicial officer and the date and place where
application for the warrant was made;
(ii) the judicial officer’s finding of reasonable cause for issuance of the warrant;
(iii) the identity of the person to be searched, and the location and designation of
the places to be searched;
(iv) the persons or things constituting the object of the search and authorized to
be seized; and
(v) the period of time, not to exceed five (5) days after execution of the warrant,
within which the warrant is to be returned to the issuing judicial officer.
(c) Except as hereafter provided, the search warrant shall provide that it be
executed between the hours of six a.m. and eight p.m., and within a reasonable
time, not to exceed sixty (60) days. Upon a finding by the issuing judicial officer
of reasonable cause to believe that:
(i) the place to be searched is difficult of speedy access; or
(ii) the objects to be seized are in danger of imminent removal; or
(iii) the warrant can only be safely or successfully executed at nighttime or under
circumstances the occurrence of which is difficult to predict with accuracy; the
issuing judicial officer may, by appropriate provision in the warrant, authorize its
execution at any time, day or night, and within a reasonable time not to exceed
sixty (60) days from the date of issuance.
14
(d) If the warrant authorizes the seizure of documents other than lottery tickets,
policy slips, and other nontestimonial documents used as instrumentalities of
crime, the warrant shall require that it be executed in accordance with the
provisions of Rule 13.5 and may, in the discretion of the issuing judicial officer,
direct that any files or other collections of documents, among which the
documents to be seized are reasonably believed to be located, shall be impounded
under appropriate protection where found.
Highly technical attacks on search warrants are not favored. Watson v. State, 291 Ark. 358, 724
S.W.2d 478 (1987). In Illinois v. Gates, 462 U.S. 213 (1983), the Supreme Court held that a
practical, common sense decision based on all the circumstances is sufficient if “there is a fair
probability that contraband or evidence of a crime will be found in a particular place.” Under
Gates, our duty as a reviewing court is simply to ensure that the magistrate issuing the warrant
had a substantial basis for concluding that probable cause existed. Id.
In the case before us, the object to be searched, Cone’s backpack, was described with
particularity. Further, the magistrate issuing the warrant was apprised of the nature of the
murder, so there was probable cause to believe that blood transference was in the contents of
the backpack that Cone was carrying during his flight to Key West. Further, it had been
determined that Cone was carrying the victim’s credit cards at the time of his arrest, so the
presence of other stolen property was likely to be in the backpack that Cone carried onto the
plane. Because we conclude that the warrant was sufficient to authorize the search of Cone’s
backpack, we need not consider his argument concerning the parolee search waiver.
V. Admission of the Autopsy Photos
Cone argues that the circuit court abused its discretion by admitting into evidence photos
taken by the medical examiner. Over Cone’s objection, the medical examiner relied on selected
photographs to assist in his testimony about Ms. Reynolds’s injuries and the abuse of her corpse.
15
An initial photograph was used to orient the jury to the upper half of Ms. Reynolds’s body,
where all the wounds were located. The other sixteen photographs demonstrated individual or
close clusters of wounds. One of the photographs depicted cuts to Ms. Reynolds’s hands and
forearms, which the medical examiner identified as “defensive-type wounds.” Another showed
eight stab wounds to Ms. Reynolds’s upper chest, as well as wounds to her neck and mouth. Due
to the proximity of the wounds, the medical examiner opined, Ms. Reynolds was stabbed
repeatedly while she could not move because she was being held down, was unconscious, or was
dead. Ms. Reynolds also had four stab wounds to her neck, and a photo depicted the damage to
her left jugular vein and left carotid artery, which was likely a fatal wound. The medical examiner
also testified about the decomposition shown in some photographs, including discolorations or
places in which the skin was slipping off with the epidermis coming away from the dermis, which
indicated that Ms. Reynolds had been dead for “more than a few days” prior to the examination
and was consistent with her death occurring on December 2, 2019.
Although the circuit court ordered the State to attempt to compromise with the defense
on a limited collection of photos, Cone objected to the admission of all autopsy photographs,
arguing that admitting them violates Arkansas Rule of Evidence 403, which provides that
“evidence may be excluded if its probative value is substantially outweighed by the danger of
unfair prejudice, confusion of the issues, or misleading the jury, or by considerations of undue
delay, waste of time, or needless presentation of cumulative evidence.” Cone notes that prior to
the medical examiner’s testimony, the circuit court gave the following warning to those watching
the trial:
I have been involved in trying criminal cases in one form of another since
16
1985. I’ve seen a lot of bad stuff personally, and I’ve seen a lot of worse pictures.
I’m led to believe these are going to be the worst ever. . . . If you don’t think you
can handle [the pictures], I understand, and I will allow you to get up and go and
come back as soon as the pictures are over.
Cone argues that in this particular case, the autopsy photographs were especially
gruesome and that they are extremely prejudicial and have no probative value. He urges this
court to find analogous Berry v. State, 290 Ark. 223, 718 S.W.2d 447 (1986), in which the Berry
court reversed a capital-murder conviction based on the admission of autopsy photos. We
disagree.
The admission of photographs is a matter left to the sound discretion of the circuit court.
Airsman v. State, 2014 Ark. 500, at 17, 451 S.W.3d 565, 575. When photographs are helpful to
explain testimony, they are ordinarily admissible, and even the most gruesome photographs may
be admissible if they assist the trier of fact. Id. at 17–18, 451 S.W.3d at 575.
The mere fact that a photograph is inflammatory or is cumulative is not, standing alone,
sufficient reason to exclude it. If a photograph serves no valid purpose and could be used only
to inflame the juror’s passion, it should be excluded; it is only when an inflammatory or
gruesome photograph is without any valid purpose that it should be excluded. Jones v. State, 336
Ark. 191, 984 S.W.2d 432 (1999).
Cone’s reliance on Berry, supra, is misplaced. In Berry, the prosecuting attorney
introduced nine graphic photographs of extensive injuries to the victim’s face––some taken to
emphasize those injuries––which were accepted by the circuit court without exception. Id. The
appellant objected that the photographs were not relevant in that the brutality of the murder,
the cause of death, and the perpetrator of the injuries were all admitted by the appellant, and it
17
was uncontradicted that the appellant never touched the victim. Id. The Berry court held that
any probative value of the photographs was outweighed by prejudice and that most were merely
cumulative. In the case before us, the photographs were carefully tied to the medical examiner’s
testimony. Furthermore, because Cone was charged with abuse of a corpse, the state of the Ms.
Reynolds’s body, postmortem, was extremely relevant. Accordingly, we hold that the circuit
court did not abuse its discretion in admitting the autopsy photos.
VI. Arkansas Supreme Court Rule 4-3(a) Review.
In compliance with Arkansas Supreme Court Rule 4-3(a), we have examined the record
for all objections, motions, and requests made by either party that the circuit court decided
adversely to the appellant. We have found no prejudicial error warranting reversal.
Affirmed.
Special Justice GREG MAGNESS joins.
BAKER, J., concurs.
WOMACK, J., not participating.
Erin W. Lewis, for appellant.
Leslie Rutledge, Att’y Gen., by: David L. Eanes, Jr., Ass’t Att’y Gen., for appellee.
18 | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482894/ | IN THE SUPREME COURT OF THE STATE OF KANSAS
No. 123,077
STATE OF KANSAS,
Appellee,
v.
RICHARD I. MOLER II,
Appellant.
SYLLABUS BY THE COURT
1.
If a statute's language is ambiguous, the court may turn to canons of statutory
construction, consult legislative history, or consider other background information to
establish the statute's meaning.
2.
When construing statutes, courts presume the Legislature does not intend to enact
useless or meaningless legislation.
3.
The rule of lenity is a canon of statutory construction applied when a criminal
statute is ambiguous to construe the uncertain language in the accused's favor.
4.
The language in K.S.A. 2021 Supp. 22-4907(a)(12) requiring a person subject to it
to register "any vehicle owned or operated by the offender, or any vehicle the offender
regularly drives, either for personal use or in the course of employment" is ambiguous, so
1
application of traditional canons of statutory construction is necessary to discern its
meaning.
5.
In a criminal prosecution, proof the defendant drove an unregistered vehicle of
unknown ownership only one time is insufficient to show a violation of K.S.A. 2021
Supp. 22-4907(a)(12)'s mandate to register any vehicle "owned or operated by the
offender, or any vehicle the offender regularly drives."
Review of the judgment of the Court of Appeals in an unpublished opinion filed December 30,
2021. Appeal from Sedgwick District Court; BRUCE C. BROWN, judge. Opinion filed November 10, 2022.
Judgment of the Court of Appeals affirming the district court is reversed. Judgment of the district court is
reversed.
Kasper Schirer, of Kansas Appellate Defender Office, argued the cause and was on the briefs for
appellant.
Lance J. Gillett, assistant district attorney, argued the cause, and Marc Bennett, district attorney,
and Derek Schmidt, attorney general, were with him on the brief for appellee.
The opinion of the court was delivered by
BILES, J.: The Kansas Offender Registration Act makes it a crime for a person
subject to its provisions to fail to register "any vehicle owned or operated by the offender,
or any vehicle the offender regularly drives, either for personal use or in the course of
employment." K.S.A. 2021 Supp. 22-4903(a) (criminalizing registered offender's
noncompliance with Act's provisions); K.S.A. 2021 Supp. 22-4907(a)(12) (automobile
registration requirement). The question here is whether that person can be convicted for
not registering another person's vehicle that was driven only once. The State argues the
statute covers one-time driving, but that view makes the remaining phrase "or any vehicle
2
the offender regularly drives" pointless, which is disfavored. See State v. Smith, 311 Kan.
109, 114, 456 P.3d 1004 (2020) (when construing statutes, courts "presume the
legislature does not intend to enact useless or meaningless legislation"). A Court of
Appeals panel divided on how to interpret the statute. State v. Moler, No. 123,077, 2021
WL 6140376 (Kan. App. 2021) (unpublished opinion). We granted review to resolve the
disagreement.
We hold the registration directive in K.S.A. 2021 Supp. 22-4907(a)(12) is
ambiguous, so we resort to traditional canons of statutory construction to decide its
meaning. And after doing that, it is apparent the State's "one-time driving" interpretation
conflicts with the legislative history and the rule of lenity that favors the accused when a
criminal statute is ambiguous. We reverse the two convictions at issue because the
evidence shows the offender only drove each vehicle one time.
FACTUAL AND PROCEDURAL BACKGROUND
The State charged Richard I. Moler II with two counts of violating KORA, K.S.A.
2021 Supp. 22-4901 et seq. At trial, the evidence showed police caught him on two
separate occasions driving two different unregistered vehicles.
For the first count, Valley Center police officer Erik Leiker testified he saw Moler
on March 13, 2019, driving a Chevrolet pickup. The officer arrested him for driving on a
suspended license. Leiker had not seen Moler in the truck before or after this incident.
For the second count, Valley Center police officer Erik Nygaard testified he saw Moler
on June 22, 2019, driving a Ford Focus. The officer arrested him for driving on a
suspended license. Nygaard also said he had not seen Moler driving the Focus before or
after this incident.
3
Seth Lenker, a Sedgwick County Sheriff's deputy, testified Moler registered on
March 29, 2019, and June 23, 2019, with the offender registration unit. Neither
registration contained any vehicle information. He also said Moler did not register the
truck or the Focus within three days of either police encounter. Similarly, Lena Castner,
another registration unit employee, testified her office's sign-in sheets for March and June
2019 did not show Moler in the office except for March 29 and June 23. She also said
Moler's registrations from March 29 and June 23 listed no vehicles.
Moler testified in his own defense. He admitted driving the Chevrolet truck in
March and being arrested for driving with a suspended license. He said he went to the
registration office twice to report this. He said he was asked if he owned a vehicle or
operated one regularly, answering "no" to both. He said he was told he was "fine," signed
the paperwork, paid the registration fee, and allowed to leave. He said he registered again
in June after being arrested again for driving on a suspended license. As with the prior
incident, he told the registration staff he did not own a vehicle or operate one regularly.
He said he was told he was "good," completed the paperwork, and allowed to go.
The district court instructed the jury that to convict Moler on each count it had to
find:
"1. The defendant had been convicted of a crime which requires registration
pursuant to the Kansas Offender Registration Act;
2. The defendant failed to provide all vehicle information of a vehicle
operated by the offender within 3 business days;
3. [The date the act occurred;]
4
4. The defendant was required to register as an offender in Sedgwick
County, Kansas."
The jury returned guilty verdicts on both counts. Before sentencing, Moler moved
for a judgment of acquittal, arguing: (1) insufficient evidence supported the convictions;
and (2) his registration obligation had expired before the violations occurred. He noted
the evidence "suggests only a single use of two different vehicles" and asserted the statute
does not impose a "duty to register a vehicle that is not regularly used by the offender."
He also claimed ineffective assistance of counsel because his attorney had advised him to
stipulate to a registration obligation even though his had expired in 2014.
The district court denied the motion. It ruled the statutory term "operate" did not
mean "regularly drive[n]" because the Legislature required registration for vehicles both
"operated" and "regularly drive[n]" and listed them in the alternative. The court also
rejected Moler's argument that his registration obligation had expired. It sentenced Moler
to 57 months' imprisonment on the first registration conviction and to a concurrent 31-
month prison term for the second. The court ordered both sentences to run "consecutive
to all other cases."
Moler appealed, claiming: (1) insufficient evidence supported his convictions
because KORA does not require registering a vehicle driven only one time; (2) no
evidence showed he was "convicted" of a crime requiring registration because he was
adjudicated as a juvenile offender; and (3) the district court erred by failing to decide
whether he was obligated to register at the time of the offenses, leaving open the
possibility his trial counsel was ineffective for recommending the stipulation.
5
A divided Court of Appeals panel affirmed. Moler, 2021 WL 6140376, at *11. On
the registration mandate, the majority reasoned:
"K.S.A. 2018 Supp. 22-4907(a)(12) separates 'any vehicle owned or operated by the
offender' and 'any vehicle the offender regularly drives' with the disjunctive 'or.' That 'or'
gives the option between a vehicle owned or operated and a vehicle regularly driven,
evidence that 'any vehicle the offender regularly drives' means something different than
'operate.' If 'operate' does not mean 'to drive regularly,' then it must mean something else.
As discussed, caselaw on K.S.A. 2020 Supp. 8-1567(a) [Kansas' DUI statute] and the
dictionary provide us an answer. Relying on the plain meaning of 'operate' in the context
of using a car, 'operate' simply means 'to drive' without any requirement as to the number
of times." Moler, 2021 WL 6140376, at *5.
Judge Thomas Malone disagreed, arguing "[t]he most reasonable interpretation" of
the KORA provision at issue "is that an offender must provide information for any
vehicle the offender owns or regularly drives." Moler, 2021 WL 6140376, at *12
(Malone, J., concurring in part and dissenting in part). He acknowledged his view made
the word "'operated' . . . redundant to the term 'owned,'" but thought there would be no
reason to include the term "regularly drives" if use of a vehicle only once required
registration. He pointed out either reading creates "some redundancy" but thought the
majority's view caused an entire clause to have no purpose. Moler, 2021 WL 6140376, at
*12.
Judge Malone continued by explaining the statute should be read in pari materia
and harmonized with KORA as much as possible. He noted an offender must register
lodging locations only if the offender stays seven days, so it does not make sense to
require an offender to report information about a vehicle borrowed once from a friend.
He also argued a one-time-use interpretation did not serve KORA's purpose of protecting
the public from a likely reoffender by "associate[ing] the vehicle with an offender even
6
though the offender may never drive it again." Moler, 2021 WL 6140376, at *12. Finally,
he said he did not consider the statute ambiguous, but even if it is, the rule of lenity
would apply to construe the registration mandate in an offender's favor. Moler, 2021 WL
6140376, at *12.
As to Moler's second and third arguments, the panel unanimously rejected them. It
held the stipulation adequately supported Moler's convictions, and that "[a]ny error in the
charging document or in the jury instructions referring to Moler's prior offense as a
conviction instead of an adjudication is harmless error because such error did not affect
the outcome of the case." Moler, 2021 WL 6140376, at *8. It also rejected the ineffective
assistance of counsel claim because the State showed it likely had the evidence to prove
Moler's registration obligation existed when the driving occurred. Moler, 2021 WL
6140376, at *11.
Moler petitioned for our court's review, contending: (1) the evidence did not
establish he "owned or operated . . . or regularly drives" the vehicles he failed to register,
noting the panel's statutory interpretation split; and (2) the evidence did not establish he
was an "offender" required to register. He did not seek review of the panel's ineffective
assistance of counsel holding, so that much is settled in the State's favor. See State v.
Neighbors, 299 Kan. 234, 241, 328 P.3d 1081 (2014); Supreme Court Rule 8.03(i)(1)
(2022 Kan. S. Ct. R. at 59).
We granted review. Jurisdiction is proper. See K.S.A. 20-3018(b) (providing for
petitions for review of Court of Appeals decisions); K.S.A. 60-2101(b) (Supreme Court
has jurisdiction to review Court of Appeals decisions upon petition for review).
7
STANDING
The State argued to the panel that Moler lacked standing to claim K.S.A. 2021
Supp. 22-4907(a)(12) cannot include single occasion driving because Moler did not prove
he only drove each vehicle one time. The panel unanimously rejected this contention,
pejoratively characterizing it as "circular and baseless." Moler, 2021 WL 6140376, at *3.
Among its reasons, the panel noted,
"Moler meets the basic requirements of standing—he suffered a personal and concrete
injury. Moler was convicted of two crimes and sentenced to serve 57 months in prison.
That is as cognizable and personal an injury as one can have." 2021 WL 6140376, at *3.
The State did not cross-petition for review of the panel's standing analysis, but
since standing implicates our jurisdiction to hear this matter, we mention it briefly to
dispose of it. We hold Moler has standing to challenge these convictions on sufficiency
grounds based on the statutory interpretation question presented. As the panel correctly
observed, "if 'operate' in K.S.A. 2018 Supp. 22-4907(a)(12) does require a vehicle to be
driven more than once, the State's assertion that Moler never proved he drove the vehicles
only one time each inverts the burden of proof in criminal trials." 2021 WL 6140376, at
*3.
INTERPRETATION OF K.S.A. 2021 SUPP. 22-4907(a)(12)
Moving to the merits, we must decide whether sufficient evidence proves Moler
"owned or operated . . . or . . . regularly dr[o]ve" the Chevrolet truck and the Ford Focus.
The path to deciding this requires interpreting KORA, which presents a question of law
over which we exercise unlimited review. State v. Betts, 316 Kan. 191, 197, 514 P.3d 341
(2022). When interpreting statutes, a court first attempts
8
"'to give effect to the intent of the legislature as expressed through the language of the
statutory scheme it enacted. When a statute is plain and unambiguous, the court must give
effect to express language, rather than determine what the law should or should not be.
Stated another way, when a statute is plain and unambiguous, the appellate courts will not
speculate as to the legislative intent behind it and will not read such a statute so as to add
something not readily found in the statute. Stated yet another way, a clear and
unambiguous statute must be given effect as written. If a statute is clear and
unambiguous, then there is no need to resort to statutory construction or employ any of
the canons that support such construction.' [Citation omitted.]" Betts, 316 Kan. at 198.
So starting with the express language, KORA instructs that a "[v]iolation of the
Kansas offender registration act is the failure by an offender . . . to comply with any and
all provisions of such act, including any and all duties set forth in K.S.A. 22-4905
through 22-4907, and amendments thereto." K.S.A. 2021 Supp. 22-4903(a). Here, the
State alleges Moler violated K.S.A. 2021 Supp. 22-4907(a)(12), which provides:
"[A] registration form shall include the following offender information:
....
(12) all vehicle information, including the license plate number, registration number and
any other identifier and description of any vehicle owned or operated by the offender, or
any vehicle the offender regularly drives, either for personal use or in the course of
employment, and information concerning the location or locations such vehicle or
vehicles are habitually parked or otherwise kept." (Emphasis added.)
Moler does not dispute that driving a vehicle constitutes its operation and
concedes the term "operated" can encompass either "regular, ongoing use" or a "one-time
use" in a different context. But he claims the term's placement within KORA suggests
9
multiple reasons to construe "operated" to mean regular, ongoing use. He argues: (1) a
word is known by its associates, and the terms "owned" and "regularly drives" with
which "operated" is associated, each contemplate continuing authority to drive a vehicle;
(2) construing "operated" to include one-time driving renders the "regularly drives"
clause superfluous; (3) requiring one-time driving registration conflicts with KORA's
purpose as shown by provisions like K.S.A. 2021 Supp. 22-4907(a)(6), which requires an
offender to register lodging locations where the offender stays for seven or more days,
and by KORA's general purpose of protecting the public; and (4) any lack of statutory
clarity should be resolved in his favor under the rule of lenity.
The State predictably disagrees. It finds the statute clear and contends the plain
meaning of "operated" requires registering even a vehicle used only once. It argues: (1)
Moler's interpretation renders "operated" superfluous; (2) registration for one-time use
does not make "regularly drives" meaningless because "owned" and "regularly drives"
refer to present and ongoing future operation, while "operated" refers to a single use and
applies to a vehicle operated in the past; and (3) while owned and regularly driven
vehicles will be disclosed at an offender's quarterly registration, a vehicle operated once
might not, so one-time vehicle operation triggers a "special instance of offender
registration" that might help future police investigations. The State rejects Moler's claim
of conflict with KORA's purpose based on the lodging provision, observing that KORA
requires registration of all locations a transient offender has stayed since the last report,
citing K.S.A. 2021 Supp. 22-4907(a)(6).
With these arguments in mind, we note KORA does not define "operated," so we
must resort to the general principle that ordinary words are presumed to carry their
ordinary, natural, common meanings. See State v. Sandoval, 308 Kan. 960, 963, 425 P.3d
365 (2018). And we acknowledge the word "operated" has a common meaning
encompassing driving a vehicle once. See Merriam-Webster's Collegiate Dictionary 869
10
(11th ed. 2020) (defining the transitive verb form of "operate" to mean to "bring about,
effect"; "to cause to function, work"; "to put or keep in operation"; or "to perform an
operation on"). And we similarly observe there is a less natural, although viable, usage of
"operation" in the context of a motor vehicle a person neither owns nor regularly drives
that can include "put[ing] or keep[ing]" that vehicle "in operation" by, for example,
registering and insuring a vehicle the registrant leases. See Merriam-Webster's Collegiate
Dictionary 869 (11th ed. 2020) (defining "operation" to include "the quality or state of
being functional or operative").
But in this context, common meaning alone does not supply enough certitude to
end this inquiry given the Legislature's confusing descriptor specifying that vehicles
"operated" by an offender as well as those "regularly" driven both require registration.
K.S.A. 2021 Supp. 22-4907(a)(12)'s sentence structure shows that "owned" and
"operated" both reside within a single clause separated by the disjunctive "or." And yet
another "or" separates this first "owned or operated" clause from the term "regularly
drives." Such a sentence permits a meaning that triggers registration if any of these three
conditions (owned, operated, or regularly driven) are satisfied. See State v. Wiegand, 275
Kan. 841, 845, 69 P.3d 627 (2003) ("[T]the use of the word 'or' . . . ordinarily means that
conditions stand on equal footing and compliance with any condition satisfies the
requirement.").
This wording leaves us with a criminal statute specifying conduct encompassed by
the term "regularly drives" that is also fully incorporated by the term "operated." And
either way, the search for definitive meaning leads to ignoring one or the other terms
enacted by the Legislature. See State v. Brown, 303 Kan. 995, 1006, 368 P.3d 1101
(2016) (Courts "do not interpret statutes in isolation. Rather, we attempt to harmonize all
the parts of an act to the greatest extent possible."). As Judge Malone observed, if the
word "operated" means using a vehicle only once, there is no reason to mention an
11
offender also registering a vehicle they "regularly drive[]."Moler, 2021 WL 6140376, at
*12. After all, a regularly driven vehicle is also operated, and the statute gives no textual
clue as to why having both terms serves any substantive purpose.
As written, this statutory provision frustrates the thoughtful judicial search for
objective meaning as to the scope of conduct the Legislature seeks to criminalize. Courts
"presume the legislature does not intend to enact useless or meaningless legislation."
Smith, 311 Kan. at 114. And the State's interpretative effort to cast a wider net effectively
neuters "regularly drives." By the same token, adopting Judge Malone's view, as he
concedes, results in surplus language as well by leaving "operated" without substantive
meaning.
Given the options, we conclude the better approach is to simply accept what is
obvious and consider K.S.A. 2021 Supp. 22-4907(a)(12) ambiguous, which triggers the
need for deeper statutory analysis. See State v. Arnett, 307 Kan. 648, 653, 413 P.3d 787
(2018) ("If the language of the statute is unclear or ambiguous," the court may turn "to
canons of statutory construction, consult legislative history, or consider other background
information to ascertain the statute's meaning."). This in turn leads us to two statutory
interpretation tools that are particularly helpful here—the legislative history and the rule
of lenity. See State v. Sandberg, 290 Kan. 980, 988, 235 P.3d 476 (2010) ("The rule of
lenity is a canon of statutory construction commonly applied in the criminal law
context."). Neither favors the State's one-time driving viewpoint.
Beginning with the legislative history, KORA nebulously required in 1996 that
offenders register their "drivers license and vehicle information." L. 1996, ch. 224, § 5. In
2007, the Legislature changed this to include "the registration number of each license
plate assigned to any motor vehicle normally operated by the offender." (Emphasis
added.) L. 2007, ch. 183, § 5. The statute's current form took shape in 2011, when the
12
Legislature replaced the 2007 language with a directive to provide the number "and any
other identifier and description of any vehicle owned or operated by the offender, or any
vehicle the offender regularly drives, either for personal use or in the course of
employment, and information concerning the location or locations such vehicle or
vehicles are habitually parked or otherwise kept." L. 2011, ch. 95, § 7. This, of course, is
the problematic language before us.
The 2011 revision accompanied broader changes proposed to bring KORA into
substantial compliance with the federal Adam Walsh Act and "resolve several issues,
concerns, and loopholes brought to the attention of" the Kansas Bureau of Investigation
and an Offender Registration Working Group comprised of representatives from various
stakeholders. These proposals were first part of 2011 House Bill 2322 and ultimately
enacted in 2011 House Substitute for Senate Bill 37. See L. 2011, ch. 95, § 7. And the
testimony supporting the current statutory language explained it required registration only
for vehicles the offender regularly drives with no mention of one-time driving. Minutes
of House Corrections and Juv. Justice Comm., March 3, 2011, Attachments 5-7
(testimony of Assistant Attorney General Kyle Smith, KBI Special Agent in Charge
David Hutchings, and KBI Public Service Administrator Nicole Dekat).
The proponents summarized K.S.A. 22-4907(a)(12)'s changes as follows:
"Amendments to K.S.A. 22-4907:
1) Require the signing of the registration form to be witnessed by the
registering officer.
2) Require additional fields to be collected on the registration form such
as aliases, all information regarding residences or other locations
where the offender is staying, all telephone numbers, license plate
13
number and description of any vehicle the offender regularly drives
and locations where the vehicle is parked, any professional licenses,
palm prints, and travel and immigration documents." (Emphasis
added.) Minutes, House Corrections and Juv. Justice Comm., March
3, 2011, Attachment 7, pp. 7-4 to 7-5 (testimony of Nicole Dekat).
The federal Adam Walsh Act that the 2011 KORA changes were to track, states
sex offenders must register "[t]he license plate number and a description of any vehicle
owned or operated by the sex offender." (Emphasis added.) 34 U.S.C. § 20914(a)(6)
(2018). But what does this mean? We are unaware of any federal caselaw applying this
provision, although the United States Attorney General published national guidelines for
"Sex Offender Registration and Notification." 73 Fed. Reg. 38030 (July 2, 2008); see also
34 U.S.C. § 20912(b) (2018) ("The Attorney General shall issue guidelines and
regulations to interpret and implement this subchapter."). The guidelines for 34 U.S.C. §
20914(a)(6) explain:
"Vehicle Information (§ 114(a)(6), (a)(7)): The registry must include '[t]he
license plate number and a description of any vehicle owned or operated by the sex
offender'. This includes, in addition to vehicles registered to the sex offender, any vehicle
that the sex offender regularly drives, either for personal use or in the course of
employment. A sex offender may not regularly use a particular vehicle or vehicles in the
course of employment, but may have access to a large number of vehicles for
employment purposes, such as using many vehicles from an employer's fleet in a delivery
job. In a case of this type, jurisdictions are not required to obtain information concerning
all such vehicles to satisfy SORNA's minimum informational requirements, but
jurisdictions are free to require such information if they are so inclined." (Emphasis
added.) 73 Fed. Reg. at 38057.
We conclude from this that the proponents of the 2011 changes to KORA, who
represented those amendments applied to vehicles an offender who "regularly drives" a
14
vehicle without mentioning one-time driving, understood their proposed changes could
satisfy federal law under the attorney general's published guidance as they had explained
them. And the statutory language enacted notably parrots both the federal statute and the
attorney general's guidance explaining what that language means, strongly suggesting the
Legislature did not intend anything different.
The State never mentions this legislative history. It simply argues "a literal
construction of KORA is required in order to achieve . . . its legislative purpose," citing
State v. Stoll, 312 Kan. 726, 480 P.3d 158 (2021). But Stoll does not support the State. In
that case, the act's literal construction "would achieve, not defeat, its legislative purpose"
so there was "no need to liberally construe it" as was argued. 312 Kan. at 731. The Stoll
court's rationale based its assessment on a particular problem in consideration of the act's
purposes and did not establish a general rule demanding "literal" construction as the State
contends now.
We must also consider the rule of lenity. Moler correctly asserts that when a
criminal statute is ambiguous on a matter, "the rule of lenity applies to mandate that the
statute be construed in favor of the accused." State v. Terrell, 315 Kan. 68, 73, 504 P.3d
405 (2022). This favors the more lenient construction criminalizing only an offender's
failure to register a vehicle owned by the offender, or which the offender normally,
habitually, or regularly operates.
Given that both the legislative history and a traditional application of the rule of
lenity point in one direction, we hold K.S.A. 2021 Supp. 22-4907(a)(12)'s mandate to
register any vehicle "owned or operated by the offender, or any vehicle the offender
regularly drives," does not require an offender to register a vehicle of unknown
ownership when the offender has driven it only one time. And this means the evidence
cannot support Moler's convictions. The State points to nothing in the trial record tending
15
to show Moler used either vehicle other than on the single occasions the testifying
officers described. Also absent is any evidence showing who owned either vehicle or to
whom they were registered. Any inference Moler drove either vehicle more than once
would rest just on speculation.
When the evidence is viewed in the light most favorable to the State, we hold a
rational fact-finder could not have found Moler "owned or operated" or "regularly drives"
either vehicle under K.S.A. 2021 Supp. 22-4907(a)(12) beyond a reasonable doubt. We
reverse the two convictions at issue. And given this result, we need not address his
remaining issue on appeal.
Judgment of the Court of Appeals affirming the district court is reversed.
Judgment of the district court is reversed.
16 | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482897/ | NOT DESIGNATED FOR PUBLICATION
No. 124,301
IN THE COURT OF APPEALS OF THE STATE OF KANSAS
STATE OF KANSAS,
Appellee,
v.
SHARRONE DONTREZ STEELE,
Appellant.
MEMORANDUM OPINION
Appeal from Sedgwick District Court; CHRISTOPHER M. MAGANA, judge. Opinion filed
November 10, 2022. Vacated and remanded with directions.
Jacob Nowak, of Kansas Appellate Defender Office, for appellant.
Matt J. Maloney, assistant district attorney, Marc Bennett, district attorney, and Derek Schmidt,
attorney general, for appellee.
Before ATCHESON, P.J., BRUNS, J., and PATRICK D. MCANANY, S.J.
PER CURIAM: Sharrone Dontrez Steele appeals from the denial of his motion to
correct illegal sentence. Steele originally filed a pro se motion alleging that his criminal
history score was inaccurate and that his trial counsel had provided ineffective assistance
of counsel by failing to assert an objection prior to sentencing. Subsequently, trial
counsel withdrew Steele's pro se motion and filed a revised motion to correct illegal
sentence in which he raised the issue regarding the accuracy of the criminal history score.
However, trial counsel failed to raise the issue regarding his alleged ineffective
representation of Steele in the revised motion.
1
On appeal, Steele contends that the district court should have inquired into trial
counsel's potential conflict of interest prior to ruling on the revised motion to correct
illegal sentence. We agree that under these circumstances, the district court should have
inquired regarding the potential conflict of interest. Thus, we vacate the order denying
Steele's motion to correct illegal sentence and remand this matter to the district court for
appointment of conflict-free counsel.
FACTS
On November 25, 2020, Steele pled guilty to one count of possession of
methamphetamine. The presentence investigation report (PSI) listed his criminal history
score as B. Because there were no objections to Steele's criminal history score asserted,
the district court found that Steele fell into the presumptive prison sentencing range of the
revised Kansas Sentencing Guidelines Act (KSGA), K.S.A. 2020 Supp. 21-6801 et seq.
Nevertheless, the district court granted Steele's motion for dispositional departure.
Consequently, the district court sentenced Steele to 12 months of probation with a 36-
month underlying prison sentence.
Less than two months later, Steele filed a pro se motion that was styled as a
motion to correct illegal sentence. In his pro se motion, Steele asserted—among other
things—that trial counsel was ineffective for failing to object to his criminal history score
prior to sentencing. Steele alleged that trial counsel should have objected because a 2017
criminal threat conviction should not have been included in his criminal history score
based on the Kansas Supreme Court's ruling in State v. Boettger, 310 Kan. 800, 450 P.3d
805 (2019), cert. denied 140 S. Ct. 1956 (2020).
On April 16, 2021, the district court noted on a motion minutes sheet that it had
been notified by trial counsel that Steele would be withdrawing his pro se motion and that
the attorney would be filing a revised motion. It is unclear from the record whether Steele
2
was present when trial counsel advised the district court that his pro se motion was being
withdrawn. In addition, we find nothing in the record to indicate that the district court
made inquiry into the alleged conflict between Steele and trial counsel.
Subsequently, trial counsel filed a revised motion to correct illegal sentence on
May 27, 2021. In the revised motion, trial counsel asserted that Steele's criminal history
score was incorrect and that his sentence was illegal under Boettger. However, trial
counsel did not mention Steele's assertion that he was ineffective for failing to object to
his client's criminal history score prior to sentencing. Likewise, trial counsel did not
mention Steele's allegation of a potential conflict of interest.
On July 2, 2021, the district court held a hearing on the revised motion to correct
illegal sentence. At the hearing, Steele appeared in person and with trial counsel. No
evidence was presented in support of the motion and trial counsel merely reiterated his
argument as set forth in the revised motion. At no point did trial counsel mention the
allegation that he was ineffective for failing to object to Steele's criminal history score
nor did he mention the potential conflict of interest. At the conclusion of the hearing, the
district court denied the revised motion to correct illegal sentence. In doing so, the district
court determined that Steele had "essentially" pled guilty to both intentional and reckless
criminal threat.
Thereafter, Steele filed a timely notice of appeal. On appeal, he is represented by
an attorney from the Kansas Appellate Defender Office. After the appeal was filed, the
Kansas Supreme Court indefinitely suspended Steele's trial counsel from the practice of
law. See In re Leon, 314 Kan. 419, 438, 499 P.3d 467 (2021). Furthermore, the State
notified this court of a change in Steele's custodial status in accordance with Supreme
Court Rule 2.042 (2022 Kan. S. Ct. R. at 18). Specifically, the State advised that the
district court revoked Steele's probation on January 21, 2022, and ordered him to serve
his underlying prison sentence.
3
ANALYSIS
The sole issue presented on appeal is whether Steele was denied the right to
conflict-free counsel to represent him on the allegations he set forth in his pro se motion
to correct illegal sentence. "The Sixth Amendment right to counsel includes the right to
conflict-free counsel and extends to postconviction proceedings in which the State is
represented by counsel." State v. Prado, 299 Kan. 1251, 1256, 329 P.3d 473 (2014).
Courts are given the responsibility to ensure that "a defendant's Sixth Amendment right to
counsel is honored." State v. Taylor, 266 Kan. 967, Syl. ¶ 5, 75 P.2d 1196 (1999). When
a district court becomes aware of a potential conflict of interest between a defendant and
their attorney, it is the court's duty to inquire further to make certain that the defendant's
right to counsel is not violated. State v. Vann, 280 Kan. 782, 789, 127 P.3d 307 (2006).
We review a district court's inquiry into potential conflicts of interest for an abuse
of discretion. State v. McDaniel, 306 Kan. 595, 606, 395 P.3d 429 (2017). A judicial
action constitutes an abuse of discretion only if (1) it is arbitrary, fanciful, or
unreasonable; (2) it is based on an error of law; or (3) it is based on an error of fact. State
v. Levy, 313 Kan. 232, 237, 485 P.3d 605 (2021). Significantly, when a district court is
aware of a potential conflict of interest, a failure to make an adequate inquiry constitutes
an abuse of discretion. State v. Marshall, 303 Kan. 438, 447, 362 P.3d 587 (2015).
Although a defendant does not have a constitutional right to be represented by
counsel on a motion to correct illegal sentence, there is a statutory right to representation
"[u]nless the motion and the files and records of the case conclusively show that the
defendant is entitled to no relief." K.S.A. 2021 Supp. 22-3504(a). If the district court
conducts a hearing on a motion to correct illegal sentence—as the district court did in this
case—then due process requires that the defendant be represented by effective counsel.
See State v. Redding, 310 Kan. 15, 22-23, 444 P.3d 989 (2019); State v. Pfannenstiel, 302
Kan. 747, 758, 357 P.3d 877 (2015).
4
In addition, the right to effective assistance of counsel demands representation that
is not impaired by conflicts of interest. McDaniel, 306 Kan. at 606. Counsel should be
free of any conflict that would diminish their advocacy for their client because of self-
interest or any other divided loyalties. State v. Sharkey, 299 Kan. 87, 96, 322 P.3d 325
(2014); State v. Toney, 39 Kan. App. 2d 1036, Syl. ¶ 3, 187 P.3d 138 (2008). As
indicated above, when a potential apparent conflict of interest is articulated, it triggers a
duty by the district court to inquire about the nature of the alleged conflict to eliminate
any prejudice to the defendant regardless of the remedy sought. McDaniel, 306 Kan. at
606; State v. Brown, 300 Kan. 565, 577-78, 331 P.3d 797 (2014). Moreover, when a
defendant files a pro se motion claiming ineffective assistance of counsel, conflict-free
counsel should be appointed by the district court to argue the motion. See Sharkey, 299
Kan. at 100-01.
Here, Steele filed a pro se motion asserting that the attorney who represented him
at the sentencing hearing was ineffective for failing to object to his criminal history score.
We recognize that such allegations are more often presented by way of a K.S.A. 60-1507
motion rather than by way of a motion to correct illegal sentence. A review of Steele's
pro se motion reveals that it had elements of both. Regardless, we find that the pro se
motion contained allegations of a potential conflict of interest by trial counsel that were
sufficient to trigger the district court's duty to inquire as well as its duty to appoint
conflict-free counsel.
The record—albeit sparse—reflects that before Steele's pro se motion could be
heard by the district court, the attorney who had been accused of being ineffective
withdrew the motion and replaced it with a revised motion that he prepared. For whatever
reason, the revised motion no longer contained an allegation of ineffective assistance of
counsel nor did it mention the potential conflict of interest. In addition, we can find
nothing in the record to indicate whether Steele voluntarily waived his assertion of a
conflict of interest nor does it appear that the district court inquired into the potential
5
conflict prior to allowing trial counsel to withdraw Steele's pro se motion. Likewise, we
cannot determine from the record when—or under what circumstances—Steele was
consulted about the decision to withdraw his pro se motion.
Although we take no position on the underlying issue of whether Steele's criminal
history score as set forth in the PSI was illegal, there appears to be a legitimate dispute
regarding this question. Unfortunately, the underlying records from the criminal threat
case are not included in the record on appeal in this case. So, it is impossible for us to
determine whether Steele pled to the intentional version of the criminal threat statute as
the State suggests.
As we mentioned in the previous section of this opinion, Steele's trial counsel has
been indefinitely suspended from the practice of law. Moreover, a formal disciplinary
action was pending against him at the time he withdrew Steele's pro se motion and
replaced it with a revised motion that no longer included a claim that his representation of
Steele was ineffective. Ultimately, the Kansas Supreme Court found that trial counsel had
committed multiple violations of the Kansas Rules of Professional Conduct (KRPC). In
addition to several other violations, our Supreme Court determined that trial counsel had
violated KRPC 1.1 (2021 Kan. S. Ct. R. 321) (competence) and KRPC 1.3 (2021 Kan. S.
Ct. R. 325) (diligence). In re Leon, 314 Kan. at 436. Even though it appears that trial
counsel's representation of Steele was not part of the disciplinary action, a reasonable
person might question his motive for withdrawing Steele's pro se motion and replacing it
with one that did not contain an allegation that his representation was ineffective while a
disciplinary action was pending against him.
It is important to recognize that had trial counsel objected to Steele's criminal
history score prior to sentencing, the State would have had the burden of showing that
Steele was convicted of intentional criminal threat rather than reckless criminal threat in
the prior case. K.S.A. 2021 Supp. 21-6814(c). By failing to object, the burden rested with
6
Steele. Consequently, we find that trial counsel's failure to object to Steele's criminal
history score to be significant and not harmless.
In summary, we vacate the district court's order denying Steele's motion to correct
illegal sentence. In addition, we remand this matter to the district court for appointment
of conflict-free counsel to represent Steele in a competent and effective manner. In
particular, the attorney who is appointed by the district court should exercise his or her
professional judgment after consulting with Steele to determine the appropriate relief to
be sought based on the allegations asserted.
Vacated and remanded with directions.
7 | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482911/ | RENDERED: NOVEMBER 10, 2022; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2021-CA-1444-MR
SAMANTHA M. KARSNER (NOW
PRARIO) APPELLANT
APPEAL FROM JEFFERSON CIRCUIT COURT
v. HONORABLE DERWIN L. WEBB, JUDGE
ACTION NO. 13-CI-502342
BRIAN CHRISTOPHER KARSNER
AND JUSTIN R. KEY APPELLEES
OPINION
VACATING AND REMANDING
** ** ** ** **
BEFORE: CLAYTON, CHIEF JUDGE; ACREE AND TAYLOR, JUDGES.
ACREE, JUDGE: Appellant, Samantha Karsner, appeals the Jefferson Family
Court’s September 3, 2021 order holding her in contempt of court and awarding
attorney fees to Appellee, Brian Karsner. After careful review, we conclude the
Jefferson Family Court abused its discretion by entering this order. Accordingly,
we vacate and remand for further proceedings consistent with this Opinion.
The parties had two children together but eventually separated.
Domestic abuse issues resulted in Appellant obtaining an Emergency Protective
Order (EPO) against Appellee. This was in response to several violent episodes.
Appellee was served with the EPO in July 2013 and had no subsequent contact
with his children until 2020. A Domestic Violence Order (DVO) was entered on
August 26, 2013. Appellant had sole custody of the children.
In 2020, Appellee moved the family court to modify the custody
arrangement. The court granted the motion and joint custody was ordered. As a
part of the order, the family court ordered visitation to Appellee on Saturdays from
noon to 4:00 p.m. every other weekend. Appellant opposed this visitation
schedule, believing Appellee needed to participate in reunification therapy first.
However, the family court did not require reunification therapy.
Appellant then filed a CR1 60.02 motion to vacate the joint custody
award based on her claim she lacked notice of the motion and, therefore, did not
respond or attend the hearing.2 The family court ordered the issues in the motion
to be mediated. Based on the record before us, the family court has not yet ruled.
1
Kentucky Rules of Civil Procedure.
2
Appellant, while she was not represented by counsel, appears to have failed to notify the court
clerk of her change of address. Once she learned of the order granting joint custody and
visitation, she obtained counsel who filed the motion pursuant to CR 60.02 noting the Appellee’s
$36,000 child support arrearage and history of violence and arguing Appellee’s motion for joint
custody “was based on lies, [was] procedurally improper, and [was] not supported by the law.”
(Appellant’s brief, p. 3.)
-2-
Although there was no written agreement, Appellee alleges that from
September 2020 until February 2021, Appellant agreed to informal visitation
beyond the four hours every other weekend granted. Appellee claims the
agreement equated roughly to alternating weekend visitation. According to
Appellee, Appellant stopped this voluntary extended visitation. This prompted
Appellee to move the family court for an order consistent with what he represented
had been the parties’ practice.
Over Appellant’s objection, on March 24, 2021, the family court
ordered Appellee unsupervised parenting time every other weekend starting at 6:00
p.m. Fridays until 6:00 p.m. Sundays.
When visitation did not occur consistently with this schedule,
Appellee filed a motion to hold Appellant in contempt and for an award of attorney
fees. A hearing on the motion took place on August 23, 2021.
Appellee testified that he moved for an order of contempt to ensure
consistency that his visitation would occur. On cross-examination, he confirmed
Appellant’s testimony that at the drop-off site, both children refused to get out of
the car and the visits did not occur. Both parties attempted to get the children to go
with Appellee but those attempts usually failed. At some point, the parties
successfully got the youngest child to spend the weekend with Appellee but, again,
testimony shows the older child refused. Eventually, the youngest child helped
-3-
convince the older child to visit with their father. The older child’s reluctance to
visit with her father was based on her recollections of an episode when Appellee
threw knives at Appellant.
Neither party cites to evidence in the record contradicting Appellant’s
testimony that she attempted to make the exchange of the children and actively
participated in attempting to have her children go with Appellee. Appellant
testified that she encouraged the children to have contact with Appellee but found
it difficult because they were afraid of him. She recounted one instance when she
had to pick up the children early from a visit because they were afraid.
Once the hearing concluded, the family court held Appellant in
contempt of court and ordered her to pay $1,976.50 in attorney fees. The only
finding in the order relating to the events at the exchange was as follows: “The
child(ren) are not entitled to refuse visitation simply because they ‘do not want to
go’ and [Appellant] is required to make the children available to [Appellee] at his
scheduled parenting time unless some other agreement has been made between the
parties.” This appeal follows.
When appellate courts review a family court’s decision to hold a party
in contempt, the standard of review is abuse of discretion. Lewis v. Lewis, 875
S.W.2d 862, 864 (Ky. 1993). When a court exercises its contempt powers, it has
“almost unlimited discretion in applying this power.” Smith v. City of Loyall, 702
-4-
S.W.2d 838, 839 (Ky. App. 1986). However, “[t]he test for abuse of discretion is
whether the trial judge’s decision was arbitrary, unreasonable, unfair, or
unsupported by sound legal principles.” Sexton v. Sexton, 125 S.W.3d 258, 272
(Ky. 2004) (footnote and citation omitted). Here, the family court’s order was
arbitrary and unreasonable.
The contempt alleged and which the family court concluded occurred
is a civil contempt which “occurs when a party fails to comply with a court order
for the benefit of the opposing party[.]” Smith, 702 S.W.2d at 839 (citing Tucker v.
Commonwealth, 299 Ky. 820, 187 S.W.2d 291 (1945)). Appellee claimed and the
family court found Appellant failed to follow the scheduling order that benefited
Appellee; consequently, the family court found Appellant in contempt.
It is clear from the record that Appellant did not willfully violate the
family court’s unsupervised parenting order so as to justify a contempt order. She
arrived with the children on time for Appellee’s scheduled unsupervised parenting
time and attempted to coax the children out of the car. Appellant also testified to
actively encouraging the children to spend time with their father. Appellee cited
no evidence in the record that contradicts Appellant’s testimony.
Furthermore, the implication of the family court’s finding is that the
children simply “do not want to go” visit their father, and that their resistance was
unfounded or unreasonable. Such an implication is not supported by the record.
-5-
The record indicates numerous violent incidents precipitated by Appellee and
remembered by the children, or at least the older child. It was not unreasonable for
the children to exhibit some degree of trepidation, even fear, of being with
Appellee without Appellant also present.
The family court held that Appellant must make the children available
for scheduled visits. The record to which this Court has been directed, and other
portions that we have examined, do not show a failure on her part to do so. A
finding that Appellant did not make the children available is not supported by the
record; therefore, it is unreasonable. Appellant cannot be held in contempt merely
because she did not utilize any and all means that would have been required to
forcibly bring about the exchange. The family court has other options to address
the children’s reluctance to visit with their father, such as the therapeutic visitation
previously considered.
Given the circumstances, Appellant took reasonable measures to get
her children out of the car and actively tried to comply with the literal language of
the scheduling order. In the end, Appellant complied with the spirit of the order.
Because she did, it is unreasonable for the family court to hold her in contempt.
Because we are reversing the contempt award, we must also reverse
the award of attorney fees. Pursuant to KRS3 403.240(4), a family court may
3
Kentucky Revised Statutes.
-6-
award attorney fees “if no reasonable cause is found for denial of visitation[.]”
Here, reasonable cause existed as to why Appellee’s visitations did not occur and
an award under KRS 403.240(4) is improper.
For the foregoing reasons, the Jefferson Family Court’s September 3,
2021 order is vacated and remanded.
ALL CONCUR.
BRIEFS FOR APPELLANT: BRIEF FOR APPELLEE:
Allison S. Russell Justin R. Key
Shanna R. Ballinger Caitlin P. Kidd
Louisville, Kentucky Prospect, Kentucky
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https://www.courtlistener.com/api/rest/v3/opinions/8482907/ | RENDERED: NOVEMBER 10, 2022; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2021-CA-1500-MR
ZANE GREER APPELLANT
APPEAL FROM GRAYSON CIRCUIT COURT
v. HONORABLE JOHN T. ALEXANDER, SPECIAL JUDGE
ACTION NO. 21-CI-00061
COMMONWEALTH OF KENTUCKY;
RICK HARDIN, IN HIS OFFICIAL CAPACITY; AND
CITY OF GLASGOW POLICE DEPARTMENT APPELLEES
OPINION
AFFIRMING
** ** ** ** **
BEFORE: LAMBERT, MAZE, AND TAYLOR, JUDGES.
MAZE, JUDGE: Zane Greer (Greer) appeals from an order of the Grayson Circuit
Court granting Rick Hardin’s (Hardin) motion to dismiss. Having reviewed the
record and the relevant law in this case, we find no error and therefore, we affirm.
Greer was formerly employed as a police officer by the City of
Glasgow Police Department. Following a shooting which injured another officer,
the Glasgow Police Chief ordered an internal investigation. The resulting report
contained the finding that “[i]t appeared that Officer Greer was untruthful/deceitful
during his interview with Internal Affairs Investigator according to interviews that
I had obtained during the internal investigation.” Greer subsequently left his
employment with the Glasgow Police Department and joined the Grayson County
Sheriff’s Department as a deputy.
However, upon learning of the existence of the statement contained in
the internal investigation report, Hardin placed Greer on a so-called “Brady list” of
officers with substantiated allegations of untruthfulness. He communicated that
information to the Grayson County Sheriff by letter dated February 21, 2021, in
which he stated that a copy of the “Glasgow Police Department’s Internal
Investigation report” would be included as supplemental discovery on “every case
that Deputy Zane Greer is associated with . . . .”
Greer filed his original petition for declaration of rights on March 1,
2021, naming the Commonwealth of Kentucky,1 “Rick Hardin, in his official
capacity as Commonwealth Attorney for Grayson County” and the City of
1
The Commonwealth of Kentucky was dismissed from the circuit court action by agreed order
entered March 19, 2021, on the grounds that it was redundant to name the Commonwealth where
Hardin was named in his official capacity as Commonwealth Attorney.
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Glasgow Police Department. On April 7, 2021, Greer was given the option to
resign or be terminated by the Grayson County Sheriff’s Office because Hardin
would no longer call him as a witness.
On April 20, 2021, Hardin moved the court to dismiss the declaration
of rights action on the grounds that Greer lacked standing, a declaration of rights
action is not the proper mechanism to seek relief, and the relief he seeks violates
the doctrine of separation of powers. On May 10, 2021, Greer moved the court for
leave to amend his petition to reflect his job loss. He also tendered his response,
arguing that the loss of employment granted him standing to pursue his claims.
Hardin filed his reply on May 28, 2021.
On August 13, 2021, the court entered its Order Granting Motion to
Dismiss. The court found that “Greer essentially asks the Court to manage and
direct the actions of an elected Commonwealth’s Attorney, who is an agent of the
executive branch.” As such, the court concluded that “the doctrine of separation of
powers precludes the relief requested.” This determination being dispositive, “the
Court states no position on the arguments regarding standing or the suitability of
this matter for declaratory judgment.” This appeal followed.
STANDARD OF REVIEW
When considering a motion to dismiss pursuant to CR2 12.02,
2
Kentucky Rules of Civil Procedure.
-3-
pleadings are to be construed in the light most favorable to the plaintiff. Mims v.
Western-Southern Agency, Inc., 226 S.W.3d 833, 835 (Ky. App. 2007). Simply
put, “the question is purely a matter of law.” James v. Wilson, 95 S.W.3d 875, 884
(Ky. App. 2002). On appeal, the trial court’s decision is reviewed de novo.
Revenue Cabinet v. Hubbard, 37 S.W.3d 717, 719 (Ky. 2000).
ANALYSIS
In Commonwealth, Cabinet for Health and Family Services,
Department for Medicaid Services v. Sexton By and Through Appalachian
Regional Healthcare, Inc., 566 S.W.3d 185, 192 (Ky. 2018), the Court held that,
“all Kentucky courts have the constitutional duty to ascertain the issue of
constitutional standing, acting on their own motion, to ensure that only justiciable
causes proceed in court, because the issue of constitutional standing is not
waivable.” The Court recognized that this is a jurisdictional issue since the circuit
court may determine only “justiciable causes,”3 holding that “if a circuit court
cannot maintain proper original jurisdiction over a case to decide its merits because
the case is nonjusticiable due to the plaintiff’s failure to satisfy the constitutional
standing requirement, the Court of Appeals and this Court are constitutionally
precluded from exercising appellate jurisdiction over that case to decide its
merits.” Id. at 196-97.
3
KY CONST. § 112 (5).
-4-
“[F]or a party to sue in Kentucky, the initiating party must have the
requisite constitutional standing to do so defined by three requirements: (1) injury,
(2) causation, and (3) redressability.” Id. at 196. Specifically, the Court held that
“[a] plaintiff must allege personal injury fairly traceable to the defendant’s
allegedly unlawful conduct and likely to be redressed by the requested relief.” Id.
(citing Allen v. Wright, 468 U.S. 737, 751, 104 S. Ct. 3315, 822 L. Ed. 2d 556
(1984), overruled on other grounds by Lexmark Intern., Inc. v. Static Control
Components, Inc., 572 U.S. 118, 134 S. Ct. 1377, 1386, 188 L. Ed. 2d 392 (2014)).
In his Amended Petition for Declaration of Rights, Greer asked:
1. That the determination that the Petitioner was
“untruthful/deceitful” in the Glasgow Police Department’s
Internal Investigation is declared invalid as not warranted
under the facts.
2. That the Petitioner has been denied due process of law under
the Fifth and Fourteenth Amendments of the U.S.
Constitution in that he has been denied the opportunity to
contest being placed on the “Brady list.”
3. That the Petitioner be entitled to a due process hearing
before this court to determine his status as a “Brady cop.”
4. That the Petitioner’s denial of due process of law under the
Fifth and Fourteenth Amendments of the U.S. Constitution
in placing him on the “Brady List” without the opportunity
to contest such placement has resulted in a deprivation of
property without due process of law, the loss of his job and
his income.
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The “injury” alleged by Greer to confer standing herein is the “loss of
his job and his income.” The identity of Greer’s employer is key to the issue of his
due process claim. As stated in Buckner v. City of Highland Park, 901 F.2d 491,
494 (6th Cir. 1990), “[t]he due process clause requires that, prior to termination, a
public employee, with a property interest in his or her public employment, be given
oral or written notice of the charges against him or her, an explanation of the
employer’s evidence and an opportunity to present his or her side of the story to
the employer. Loudermill v. Cleveland Bd. of Educ., 844 F.2d 304, 310 (6th Cir.
1988), on remand from, Loudermill, 470 U.S. 532, 105 S. Ct. 1487.” (Emphasis
added.) However, this Court has been presented with no authority requiring a non-
employer to afford due process protections to an individual in connection with lost
employment. Thus, as Hardin was not Greer’s employer, he did not perpetrate any
injury upon him by failing to provide notice and opportunity to be heard prior to
being placed on the “Brady list.”
Further, even if the Court accepted the “injury” element of the
standing analysis as a given, the issue of “causation” fails. The wrongful conduct
alleged by Greer is the finding that he was untruthful or deceitful in the Glasgow
Police Department’s internal investigation. However, Hardin took no part in the
investigation or the preparation of the report. Thus, he is unconnected to the
wrongdoing and too many steps are required to reason from the internal
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investigation and report from the Glasgow Police Department, through the Brady
determination and notification by Hardin, to Greer’s termination by the Grayson
County Sheriff’s Office. Kentucky Unemployment Insurance Commission v.
Nichols, 635 S.W.3d 46 (Ky. 2021).
However, it is the issue of “redressability” which most soundly
defeats Greer’s claim against Hardin. If the relief that Greer seeks were granted
and there were a determination that the findings of the Glasgow Police
Department’s investigation as to his truthfulness were erroneous, the original
report would continue to exist. It is the existence of the report that triggers
Hardin’s obligation to disclose his credibility issues to defense counsel under
Brady v. Maryland, 373 U.S. 83, 83 S. Ct. 1194, 10 L. Ed. 2d 215 (1963).
Even if the court granted the hearing sought by Greer to determine his
status as a “Brady cop” it would not result in an end to uncertainty as contemplated
in the declaratory judgment statute. Instead, the court would be forced into the
unenviable position of trying to determine whether the existence of the Glasgow
Police Department’s internal investigative report stating that he had been
“untruthful/deceitful” does or does not constitute impeachment evidence in each
and every case, including those that have not even been charged yet. As “specific
instances of conduct” may well be an appropriate area of inquiry for impeachment
-7-
purposes on cross-examination pursuant to KRE4 608(b), they may also be
appropriate for production as Brady material. U.S. v. Bagley, 473 U.S. 667, 767,
105 S. Ct. 3375, 3381, 87 L. Ed. 2d 481 (1985).
Greer has cited the Court to the case of Sandefur v. Dart, 979 F.3d
1145 (7th Cir. 2020). Sandefur was terminated from a county sheriff’s police
academy training program based upon inconsistent statements regarding his
medical status and eligibility for a handicapped placard. He filed suit for violation
of the Americans with Disabilities Act of 1990, 42 U.S.C.5 § 12122, and for due
process violations arising out of his placement on the sheriff’s office’s “Brady
list.”
The Court devoted a mere four paragraphs to Sandefur’s due process
claims. Although the Court conceded that he may have been deprived of a liberty
or property interest by such placement, the Court concluded that because he had
been given seven days in which to dispute his disqualification for promotion, he
simply failed to do so. In this case, the Glasgow Police Department has stated in
its Answer that Greer accepted the internal investigation report as well as the
discipline imposed by the Chief and, therefore, has waived any right to appeal the
finding.
4
Kentucky Rules of Evidence.
5
United States Code.
-8-
This Court finds the case of Roe v. Lynch, 997 F.3d 80 (1st Cir. 2021),
to be more germane to these facts. Roe, like Greer, was a police officer terminated
by the town based upon a letter sent to the police chief by Lynch, the prosecuting
attorney. She advised that, based upon allegations of misconduct by Roe and due
to her obligations under Brady, she had determined Roe to be lacking in credibility
and therefore would no longer prosecute cases in which he was involved. Roe
filed suit in state court alleging due process violations and seeking mandamus and
declaratory relief. The action was removed to federal court where it was then
dismissed on limitations grounds, without addressing Roe’s due process claims.
On appeal, the Court concluded that Roe had failed to state a due
process claim against Lynch and, therefore, dismissal was proper. The Court
found that Roe had failed to assert that he had been deprived of any liberty or
property interest, noting that “Roe does not have a protected liberty or property
interest in the prosecutor’s charging decisions, decisions regarding what materials
are disclosed to criminal defendants during discovery, or decisions as to who to
call to testify at trial.” 997 F.3d at 85. Although the Court conceded that “a public
employee may under certain circumstances have a protected property interest in
continued employment[,]” it held that “Lynch was not his employer and she did
not make the decision to terminate his employment – the Town Manager did.” Id.
-9-
Finally, there can be no redress for Greer in any forum without a
violation of the separation of powers doctrine. As noted in Legislative Research
Commission By and Through Prather v. Brown, 664 S.W.2d 907, 912 (Ky. 1984)
(citing Arnett v. Meredith, 275 Ky. 223, 121 S.W.2d 36, 38 (1938)), “the
separation of powers doctrine is fundamental to Kentucky’s tripartite system of
government and must be ‘strictly construed.’” Kentucky Constitution § 28
prohibits any one of the three branches of government from exercising “any power
belonging to either of the others[.]”
The enforcement of the criminal laws of this Commonwealth lies
within the “exclusive” mandate of the executive branch. Commonwealth ex rel.
Brown v. Stars Interactive Holdings (IOM) LTD., 617 S.W.3d 792, 801 (Ky.
2020). This function includes “the decision whether or not to prosecute, and what
charge to file or bring before a grand jury[.]” Flynt v. Commonwealth, 105 S.W.3d
415, 424 (Ky. 2003). The quantity and quality of evidence are significant factors
in a prosecutor’s decision to charge an offense. A prosecutor’s charging decision
should involve a consideration of whether his witness’s credibility may be
questioned at trial. It must, therefore, include a consideration of the existence of
Brady material. The judiciary is without authority to direct the Commonwealth
which offenses to charge. Hoskins v. Maricle, 150 S.W.3d 1, 20 (Ky. 2004).
Clearly, as recognized by the lower court, the judiciary is without the constitutional
-10-
authority to direct Hardin or any other Commonwealth Attorney to prosecute or
not prosecute his case in any certain manner.
CONCLUSION
Because Greer alleged no injury properly attributed to Hardin which
was “fairly traceable” to his action in placing Greer on his office’s “Brady list” that
can be redressed by the relief sought in Greer’s declaratory judgment action, this
Court finds that he lacked constitutional standing to bring the action against
Hardin.
Accordingly, the Grayson Circuit Court’s Order Granting Motion to
Dismiss is affirmed.
ALL CONCUR.
BRIEF FOR APPELLANT: BRIEF FOR APPELLEE RICK
HARDIN:
Thomas E. Clay
Louisville, Kentucky Brett R. Nolan
Alexander Magera
Frankfort, Kentucky
-11- | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482908/ | RENDERED: NOVEMBER 10, 2022; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2021-CA-1161-MR
TAMMARA LEA STRICKLETT APPELLANT
APPEAL FROM MASON CIRCUIT COURT
v. HONORABLE STOCKTON B. WOOD, JUDGE
ACTION NO. 20-CI-00144
KEVIN ROBERT STRICKLETT APPELLEE
AND
NO. 2021-CA-1359-MR
KEVIN ROBERT STRICKLETT CROSS-APPELLANT
CROSS-APPEAL FROM MASON CIRCUIT COURT
v. HONORABLE STOCKTON B. WOOD, JUDGE
ACTION NO. 20-CI-00144
TAMMARA LEA STRICKLETT CROSS-APPELLEE
OPINION
AFFIRMING IN PART, REVERSING IN PART, AND REMANDING
** ** ** ** **
BEFORE: ACREE, CETRULO, AND GOODWINE, JUDGES.
GOODWINE, JUDGE: Tammara Lea Stricklett (“Tammara”) appeals the August
30, 2021 order of the Mason Circuit Court awarding her maintenance. Her former
spouse, Kevin Robert Stricklett (“Kevin”), cross-appeals the same order. After
careful review, we affirm in part, reverse in part, and remand.
BACKGROUND
The parties were married in 1996 and separated in 2020. Tammara
petitioned for dissolution of the marriage and, after failing to reach a settlement,
the parties were referred to the domestic relations commissioner (“DRC”). After
an evidentiary hearing, the DRC made recommendations as to division of marital
property and debts. The trial court entered findings of fact, conclusions of law, and
a decree of dissolution adopting the DRC’s recommendations and reserving the
issue of maintenance. The matter was again referred to the DRC to determine
whether Tammara was entitled to maintenance and, if so, in what amount and for
what duration.
The DRC conducted an evidentiary hearing on the issue of
maintenance and recommended Tammara be awarded $615.00 per month in
maintenance until she reaches retirement age, sixty-five years old. Tammara
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objected to the DRC’s recommendation, arguing she was entitled to indefinite
maintenance in the amount of $2,000.00 per month. The trial court adopted in part
and modified in part the DRC’s recommendations, awarding Tammara
maintenance in the amount of $1,000.00 per month until she turns sixty-six years
old. The court reasoned that Tammara would then be able to support herself using
her social security and retirement income.
This appeal and cross-appeal followed. Additional facts will be
developed as needed in our analysis below.
STANDARD OF REVIEW
Determinations of whether to award maintenance, as well as the
amount and duration of the award, are within the sound discretion of the trial court.
See Powell v. Powell, 107 S.W.3d 222, 224 (Ky. 2003). We will not disturb a trial
court’s findings of fact unless they are clearly erroneous. CR1 52.01. Findings of
fact are not clearly erroneous if supported by substantial evidence. Moore v.
Asente, 110 S.W.3d 336, 354 (Ky. 2003) (footnote omitted). If factual findings are
supported by substantial evidence and KRS[2] 403.200 is correctly applied, we will
not disturb the trial court’s maintenance decision. See Maclean v. Middleton, 419
S.W.3d 755, 765 (Ky. App. 2014).
1
Kentucky Rules of Civil Procedure.
2
Kentucky Revised Statutes.
-3-
ANALYSIS
On appeal, Tammara argues the trial court erred by failing to award
her open-ended maintenance in the amount of $2,000.00 per month. On cross-
appeal, Kevin alleges the trial court abused its discretion in modifying the DRC’s
recommended maintenance award. Specifically, he raises the following issues: (1)
the trial court erroneously determined his income; (2) Tammara’s expenses
inappropriately include funds she provides to support the parties’ adult child; (3)
Tammara’s income is erroneously based on her voluntary underemployment; (4)
Tammara is not entitled to additional maintenance funds for retirement savings;
and (5) the trial court erred in awarding Tammara maintenance beyond the
retirement age. Kevin does not challenge the determination that Tammara is
entitled to maintenance, only the amount and duration thereof.
After a trial court decides the requesting party is entitled to
maintenance under KRS 403.200(1), the court must determine the amount and
duration of the award under KRS 403.200(2).
The maintenance order shall be in such amounts and for
such periods of time as the court deems just, and after
considering all relevant factors including:
(a) The financial resources of the party seeking
maintenance, including marital property
apportioned to him, and his ability to meet his
needs independently . . . [;]
-4-
(b) The time necessary to acquire sufficient education
or training to enable the party seeking maintenance
to find appropriate employment;
(c) The standard of living established during the
marriage;
(d) The duration of the marriage;
(e) The age, and the physical and emotional condition
of the spouse seeking maintenance; and
(f) The ability of the spouse from whom maintenance
is sought to meet his needs while meeting those of
the spouse seeking maintenance.
KRS 403.200(2).
Herein, the trial court adopted most of the DRC’s findings of fact.
Under KRS 403.200(2)(a), the DRC determined Tammara had financial resources,
including proceeds from the sale of the marital residence and income from her
employment as a certified nursing assistant (“CNA”) sufficient to cover all but
approximately $615.00 of her monthly expenses. Tammara’s expenses totaled
$3,282.00 per month. The DRC determined she could earn $2,047.14 per month
working full-time as a CNA and an additional $167.00 per month from oil and gas
leases. Tammara was also awarded half of the proceeds from the sale of the
marital residence, totaling $32,687.64, which the DRC determined she could use at
a rate of $454.00 per month to contribute to her expenses. Although the trial court
determined Tammara was “not earning much more than to eke out a living,” it did
-5-
not modify the DRC’s calculation of her income or expenses. Record (“R.”) at
282.
Next, the DRC determined KRS 403.200(2)(b) was inapplicable to
this matter because Tammara had been employed as a CNA throughout the
marriage and she was unlikely to seek additional education or retraining in the
future.
Regarding KRS 403.200(c), the DRC found the parties enjoyed a
“modest standard of living during the marriage.” R. at 254. This was evidenced
by the fact that their largest assets were the marital residence and retirement
accounts. Any expenses beyond necessary costs of living, such as vacations, were
charged to credit cards. The parties accrued $15,000.00 in credit card debt which
was paid from the sale of the marital residence. On this basis, the DRC determined
only Tammara’s “normal monthly household expenses” needed to be considered in
determining the amount and duration of the maintenance award.
The trial court modified the DRC’s findings because it determined the
parties lived above a modest standard of living because they were able to save
substantial funds for retirement. At the time of dissolution, Kevin’s retirement
account totaled $677,200.91. The DRC noted Tammara was awarded more than
$300,000.00 from his account and $2,300.00 from her retirement account. She will
also receive social security income upon retirement but did not testify to how much
-6-
she expected to receive each month. The trial court found, after dissolution, Kevin
would have the continued ability to save for retirement, but Tammara would not be
able to do so without additional funds.
The parties were married for twenty-four years. KRS 403.200(2)(d).
Tammara was fifty-nine years old at the time the DRC made
recommendations. There is no evidence that she suffers from any physical or
emotional condition which would prohibit her from working full-time and
providing for herself. KRS 403.200(2)(e).
The DRC determined, based on Kevin’s June 11, 2021 paystub, he
earns $4,707.65 per month in net income and has expenses of $3,820.00 per
month. This leaves him with $487.65 per month in excess income, which would
be insufficient to provide Tammara with the $615.00 per month in maintenance.
However, the DRC also found Kevin’s budgeted allowances for dining and
entertainment excessive. Kevin also routinely worked overtime, which would give
him additional income. Based on these facts, the DRC determined Kevin would be
able to meet his own needs while also paying $615.00 per month to Tammara in
maintenance.
The trial court modified the DRC’s findings by using Kevin’s 2019
and 2020 income to determine his ability to meet his needs while also meeting
Tammara’s needs. In 2020, Kevin’s net income was $7,107.00 per month, which
-7-
the court calculated by including the $750.00 and $225.00 per month he
contributed to his retirement and health savings accounts (“HSA”), respectively.
The trial court chose to exclude Kevin’s overtime income from its calculation.
Using $7,107.00 for Kevin’s income and $3,820.00 for his expenses, Kevin has an
excess of $3,287.00 per month in funds.
Based primarily on its calculation of Kevin’s net income using his
2020 earnings and its finding that Tammara would no longer be able to save for
retirement without additional funds, the trial court modified the DRC’s
recommendation of $615.00 in monthly maintenance until Tammara reaches sixty-
five years old to $1,000.00 per month in maintenance until she reaches sixty-six
years old.
First, we will consider the parties’ arguments regarding the amount of
the maintenance award. Kevin argues the trial court erred in its calculation of his
income. Weighing evidence is in the exclusive province of the trial court. Moore,
110 S.W.3d at 354 (footnote omitted). Kevin submitted both his recent paystubs
and evidence of his yearly income for 2019 and 2020. The DRC used a single
paystub to calculate Kevin’s income, but the trial court determined Kevin’s most
recent yearly earnings provided a more accurate depiction of his earnings. This is
not an abuse of discretion.
-8-
Relatedly, Kevin argues the trial court erred in including his HSA
contributions as income for purposes of calculating maintenance. Kevin elected to
make these contributions at the beginning of the year. He is not required to do so
by his employer. Kevin cites to no authority which indicates such contributions
should not be included as income when awarding maintenance. Therefore, we find
no abuse of discretion by the trial court.
Next, Kevin argues Tammara used her support for one of the parties’
adult children to inflate her expenses. While it is true that Tammara submitted a
budget which included $500.00 per month in funds used to support the child, the
DRC did not include this amount in its calculation of her expenses and the trial
court did not modify the DRC’s determination to include those expenses.
Furthermore, Kevin argues the DRC’s calculation of Tammara’s
income is based on her voluntary underemployment. The record refutes this
assertion. Both the DRC and the trial court found Tammara was capable of full-
time work and the DRC imputed her income using a forty-hour work week. The
trial court’s adoption of the DRC’s calculation of Tammara’s potential full-time
income was not an abuse of discretion.
Kevin argues Tammara is not entitled to additional maintenance funds
to allow her to save for retirement. He asserts he is not required to save for
retirement but only elects to do so. He further argues there is no guarantee
-9-
Tammara will save any additional funds from the maintenance award for
retirement. The trial court determined retirement savings was a significant factor
in the parties’ lifestyle prior to divorce under KRS 403.200(2)(c). It further
determined Tammara would have no ability to save based on her income if she
received only $615.00 per month in maintenance. On the other hand, based on the
trial court’s calculation of Kevin’s income, he would have $2,287.00 in excess
funds after his expenses and the $1,000.00 maintenance award which he could
choose to save for retirement. It is not an abuse of discretion for the trial court to
determine saving for retirement was a factor in the parties’ pre-dissolution lifestyle
under KRS 403.200(2)(c) and for the court to use this as the basis for awarding
Tammara additional maintenance funds.
Tammara argues she is entitled to $2,000.00 per month in
maintenance. She bases this argument on her history of part-time employment.
However, both the DRC and trial court determined she is capable of working full-
time as a CNA. This would require no additional training or education. Tammara
presents no evidence of any health condition under KRS 403.200(2)(e) which
would inhibit her from full-time employment in her current field. Tammara cannot
simply choose not to work full-time and then demand Kevin make up the
difference with additional maintenance.
-10-
Based on the parties’ respective incomes and expenses, as determined
by the DRC and trial court, as well as the trial court’s determination of the
importance of retirement savings under KRS 403.200(2)(c), the trial court’s award
of $1,000 per month to Tammara is not an abuse of discretion.
We turn now to the parties’ arguments regarding the duration of the
award. Kevin argues the trial court should not have extended the award past the
date on which Tammara reaches sixty-five years old. Here, like in Weldon v.
Weldon, 957 S.W.2d 283, 286 (Ky. App. 1997), the trial court abused its discretion
by awarding Tammara maintenance beyond retirement age. The court provides no
explanation for modifying the award from the DRC’s recommendation to grant
maintenance until Tammara reaches sixty-five years old. As noted by this Court in
Weldon, at the time the parties reach retirement, their incomes will be more equal
because Tammara was awarded approximately half, or more than $300,000.00, of
Kevin’s retirement fund. Id. Therefore, the decision to modify the DRC’s
recommendation as to the duration of the maintenance award was clearly
erroneous.
Furthermore, given Tammara’s ability to gain full-time employment
without any additional training or education, as well as her lack of any condition
impeding her ability to work, the trial court did not abuse its discretion by
declining to award her indefinite maintenance. The duration of a maintenance
-11-
award must directly correlate with the period during which the requesting spouse is
in need. Combs v. Combs, 622 S.W.2d 679, 680 (Ky. App. 1981). It is reasonable
to award maintenance until such time when Tammara reaches retirement age and
gains access, without penalty, to her portion of Kevin’s retirement fund, her own
retirement fund, and social security income.
CONCLUSION
Based on the foregoing, the order of the Mason Circuit Court is
affirmed in part and reversed in part. This matter is remanded to the trial court for
entry of an order awarding Tammara $1,000.00 per month in maintenance until she
reaches sixty-five years of age.
ALL CONCUR.
BRIEF FOR APPELLANT/CROSS- BRIEF FOR APPELLEE/CROSS-
APPELLEE: APPELLANT:
Jeffrey L. Schumacher Rebekah J. Rice
Maysville, Kentucky Maysville, Kentucky
-12- | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482899/ | NOT DESIGNATED FOR PUBLICATION
No. 124,865
IN THE COURT OF APPEALS OF THE STATE OF KANSAS
STATE OF KANSAS,
Appellee,
v.
GENE OCELOT,
Appellant.
MEMORANDUM OPINION
Appeal from Sedgwick District Court; DAVID L. DAHL, judge. Opinion filed November 10, 2022.
Affirmed.
Submitted by the parties for summary disposition under K.S.A. 2021 Supp. 21-6820(g) and (h).
Before ARNOLD-BURGER, C.J., GARDNER and CLINE, JJ.
PER CURIAM: Gene Ocelot appeals the district court's revocation of his probation.
We granted Ocelot's motion for summary disposition pursuant to Supreme Court Rule
7.041A (2022 Kan. S. Ct. R. at 48). The State filed a response but did not contest Ocelot's
motion. After reviewing the record, we affirm.
FACTUAL AND PROCEDURAL HISTORY
In June 2021, Ocelot pleaded guilty to one count of felony domestic battery
committed in June 2020. Accepting the parties' recommendations as defined in their plea
agreement, the district court imposed a 12-month jail sentence and ordered Ocelot to
serve 90 days in jail but granted Ocelot 12 months' probation following the 90-day term.
1
In December 2021, the State filed a warrant, alleging Ocelot violated the terms of
his probation by failing to obey the law and by committing a new offense—another
domestic battery. The State's warrant referenced the related police report of the incident
and relied on its factual account as support for the State's allegations.
Before proceeding to a hearing on the State's claim, the parties agreed that the
State would amend the crime alleged in its warrant to disorderly conduct. Ocelot agreed
to not deny the amended charge.
Ocelot waived his right to a probation violation hearing and did not contest the
State's allegations. The State requested revocation. Ocelot asked that his probation be
reinstated.
The district court ultimately revoked Ocelot's probation, finding that the
commission of a new offense while on probation was sufficient to revoke his probation.
The court also noted that not only did Ocelot commit this offense while on probation for
domestic battery—after having previously committed other similar crimes—but he also
had several pending cases for stalking and violation of a protective order with different
victims. The court ordered Ocelot to serve his previously imposed 12-month jail
sentence.
ANALYSIS
Ocelot timely appeals, arguing the district court abused its discretion by denying
his request for reinstatement and instead revoking his probation. Ocelot contends that
absent this violation, his actions while on probation show that he could successfully
complete probation, while also continuing to support his family, if given a second chance.
2
The State must establish that the probationer violated the terms of probation by a
preponderance of the evidence—or that the violation is more probably true than not true.
State v. Lloyd, 52 Kan. App. 2d 780, 782, 375 P.3d 1013 (2016). Appellate courts review
the district court's factual findings for substantial competent evidence. State v. Inkelaar,
38 Kan. App. 2d 312, 315, 164 P.3d 844 (2007). Here, Ocelot does not challenge the
court's finding that he violated his probation, in fact he agreed that he had.
Once a probation violation has been established, the district court has discretion to
revoke probation and impose the underlying sentence unless otherwise limited by statute.
State v. Tafolla, 315 Kan. 324, 328, 508 P.3d 351 (2022); see K.S.A. 2019 Supp. 22-
3716(b) and (c) (requiring graduated sanctions before revocation in some cases). Here the
district court did not have to impose an intermediate sanction before revoking Ocelot's
probation because Ocelot admitted that he committed a new felony or misdemeanor while
on probation. See K.S.A. 2019 Supp. 22-3716(b)(3)(B)(iii) and (c)(7)(C).
So next we turn to a review of the sanction imposed for violating probation.
Appellate courts review "the propriety of the sanction for a probation violation imposed
by the district court for an abuse of discretion." Tafolla, 315 Kan. at 328. A judicial
action constitutes an abuse of discretion if (1) it is arbitrary, fanciful, or unreasonable; (2)
it is based on an error of law; or (3) it is based on an error of fact. State v. Levy, 313 Kan.
232, 237, 485 P.3d 605 (2021).
Ocelot does not assert that the district court made an error of law or fact, so we
must review whether the court's decision was arbitrary, fanciful, or unreasonable,
meaning that no reasonable person in the court's position would have made the same
decision. See State v. Miles, 300 Kan. 1065, 1066, 337 P.3d 1291 (2014). Ocelot bears
the burden of establishing that the district court abused its discretion. State v. Crosby, 312
Kan. 630, 635, 479 P.3d 167 (2021).
3
Ocelot fails to meet his burden.
Before the district court Ocelot argued that his probation should not be revoked
because
1. This was his first probation violation in this case.
2. He had a job.
3. He was a part-time caregiver for his mother who has serious medical conditions.
4. He has other family members with serious medical conditions that he wanted to be
able to see.
5. He has four children that need him.
6. He would complete batterer's intervention, counseling, and obtain a mental health
evaluation if released.
The district court considered the reasons set forth by Ocelot. The judge noted that he
believed Ocelot to be genuinely repentant. But the district judge found that given Ocelot's
history of domestic battery, his conviction for disorderly conduct while on probation, and
the number of cases he had pending in various jurisdictions regarding similar conduct,
i.e., stalking and violation of protective orders, revocation was appropriate.
We do not engage in reweighing of evidence. See State v. Anderson, 291 Kan.
849, 855, 249 P.3d 425 (2011). We find a reasonable person could reach the same
conclusion as the district judge given the facts and circumstances presented to them.
Affirmed.
4 | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482905/ | NOT DESIGNATED FOR PUBLICATION
No. 124,838
IN THE COURT OF APPEALS OF THE STATE OF KANSAS
CLAYTON DEION WILMER,
Appellant,
v.
STATE OF KANSAS,
Appellee.
MEMORANDUM OPINION
Appeal from Leavenworth District Court; GERALD R. KUCKELMAN, judge. Opinion filed
November 4, 2022. Affirmed.
Joseph A. Desch, of Law Office of Joseph A. Desch, of Topeka, for appellant.
Christopher Lyon, assistant county attorney, Todd Thompson, county attorney, and Derek
Schmidt, attorney general, for appellee.
Before CLINE, P.J., ATCHESON and COBLE, JJ.
CLINE, J.: Clayton Deion Wilmer appeals the district court's denial of his K.S.A.
60-1507 motion because he claims the court erred by not appointing substitute counsel
before trial. Although this issue ordinarily cannot be raised in a K.S.A. 60-1507 motion,
Wilmer asserts that his counsel on direct appeal was ineffective for failing to mention it,
constituting an exceptional circumstance which allows our consideration of the issue.
We find the district court correctly denied Wilmer's motion because he failed to
establish his dissatisfaction with trial counsel was justified. And since he has not shown
1
appellate counsel was ineffective or that he was prejudiced by counsel's failure to raise
this issue on direct appeal, he is not entitled to relief under K.S.A. 60-1507.
FACTS
Wilmer shot a passenger in a vehicle driven by the mother of Wilmer's child,
while that child, who was only a few months old, was in the backseat. State v. Wilmer,
No. 117,080, 2018 WL 1127679, at *1 (Kan. App. 2018) (unpublished opinion). A jury
convicted Wilmer of aggravated assault, criminal discharge of a firearm at an occupied
vehicle, criminal possession of a firearm, and aggravated endangering of a child.
Motion to withdraw
About six months before trial, Wilmer was sentenced in an unrelated matter by the
same judge who later presided over Wilmer's jury trial. The attorney appointed to
represent Wilmer in the criminal case underlying this appeal, Debra Snider, was also
appointed to represent him in that matter. At the sentencing hearing, the district court
took up a motion to withdraw from Snider after she said Wilmer had requested new
counsel the day before. Snider told the court that her communications with Wilmer had
broken down to the point where neither of them believed it was in Wilmer's best interests
for her to continue to represent him. She did not know whether he wanted new counsel
for the unrelated matter, but he had requested new counsel in the case underlying this
appeal.
When the district court asked Wilmer if he wanted Snider to withdraw in the
unrelated matter, Wilmer said Snider could continue representing him in that matter if she
was willing. So the court proceeded with sentencing in the unrelated matter, taking up
arguments from Snider and the prosecutor about defense objections to Wilmer's criminal
history, Snider's departure motion, and Wilmer's sentencing requests.
2
After the district court pronounced Wilmer's sentence, it took up Snider's motion
to withdraw. Snider explained that she had relayed a plea offer to Wilmer the day before
at which point their communications had broken down. She repeated that Wilmer had
then asked to be assigned new counsel and said she joined in that request.
The district court denied the motion, noting Wilmer had been dissatisfied with
each of his three appointed trial attorneys, even filing his own motions despite being
represented by counsel. The court did not believe Wilmer would ever find an attorney
that would satisfy him. It then explained:
"Miss Snider is a very experienced attorney. She has been involved in a number
of trials with this Court and other jurisdictions, handling very serious cases similar to this
case here. I can't appoint lawyers to hold your hand, Mr. Wilmer, and just be there all the
time to talk with you and get you through this process. I can only provide an attorney
that's qualified and experienced in the nature–—to rise to the level of the nature of the
offense that you're charged with.
"I think Miss Snider has worked very hard on your case. I think the fact that you
may disagree with some things, if the–—but I don't know of any reasons she could not
perform well even if your relationship is strained, because I think it's going to be strained
with any lawyer that you have. So at this point, the motion to withdraw is denied."
Snider responded, "Judge, may I please note for the record that we are literally
unable to effectively communicate at this point?" The district judge responded that they
could use pen and paper to communicate suggestions and questions. Additionally, the
judge stated, "If I just keep appointing lawyers, we'll just keep dragging this out, which
does no one any good."
At that point, Wilmer complained about his lack of communication with Snider.
He said that he only saw Snider the day before or the day of a court appearance. He
claimed other inmates got letters twice a week from their attorneys, but none of his
3
appointed attorneys had done that. Then Snider expressed concern for her professional
reputation and potential issues involving her liability insurance if she continued to
represent Wilmer. Even so, Snider's motion to withdraw was denied.
Wilmer's direct appeal
After Wilmer was convicted, he appealed his sentence through different counsel.
A panel of this court vacated the aggravated assault conviction due to a jury instruction
error but affirmed the rest of the convictions. Wilmer, 2018 WL 1127679, at *1.
Wilmer's K.S.A. 60-1507 motion
Wilmer then filed a timely pro se motion for habeas corpus relief under K.S.A. 60-
1507. In his motion, Wilmer asserted several reasons why both his trial and appellate
counsel had provided ineffective representation. The district court appointed counsel for
Wilmer and granted Wilmer an evidentiary hearing. Before the hearing, Wilmer filed a
pro se supplement to his motion, alleging additional defects in trial counsel's
representation. And his appointed attorney filed a supplement as well, articulating even
more defects in representation, including the court's failure to adequately inquire into a
potential conflict of interest between Snider and Wilmer when Snider moved to
withdraw. This last issue is the only one Wilmer raises on appeal.
Both Snider and Wilmer testified at the evidentiary hearing on the various
complaints. As for her request to withdraw, Snider testified she made the request because
Wilmer sent a letter to the district court asking to have her removed and alleging she was
ineffective as counsel. She did not agree she was ineffective but asked to withdraw
because that is what Wilmer wanted. She noted, "[W]hen a client puts it in writing and
asks to have you removed, then I think it needs to be brought forward to the judge. . . .
4
And in order to try to give my client the best opportunity to have the—the representation
that he wanted, I asked to be allowed to withdraw."
Snider denied having problems communicating with Wilmer but acknowledged
they had differences of opinion on strategy. She testified she had adequate time to
communicate with him before trial, and probably met with him more often than she
normally met with clients in custody. Since she and Wilmer had frequent disagreements
on strategy, she said it took "more than an average amount of meeting and discussing to
try to come to a mutually agreeable strategy and direction going forward in the case."
After her motion to withdraw was denied, she could not recall Wilmer requesting her to
be removed again.
Snider felt she effectively represented Wilmer despite their communication issues.
She pointed out her successful trial results, including the district court's dismissal of the
aggravated assault charge against the child's mother after the close of evidence. And
despite aggravated assault not being a lesser included offense of attempted first-degree
murder, the jury was instructed on attempted voluntary manslaughter and aggravated
assault as lesser included offenses of attempted first-degree murder and convicted
Wilmer of the lesser offense of aggravated assault. Wilmer, 2018 WL 1127679, at *1.
Wilmer testified there was a lack of communication between Snider and him,
claiming they spoke only 5 or 10 minutes before any court hearing. Wilmer was not
satisfied with Snider's representation and believed their relationship was contentious. But
he admitted he was successful at trial, beating the attempted murder charge and having
another charge dismissed.
The district court denied Wilmer's motion, noting it was within the court's
discretion to determine whether Wilmer's dissatisfaction with his court appointed counsel
warranted the discharge of Snider's services and appointment of new counsel, and
5
Wilmer did not establish justifiable dissatisfaction. The court also determined Wilmer did
not establish trial and appellate counsel's representation was defective or that he had
suffered prejudice from that representation.
Wilmer appeals the district court's denial of his K.S.A. 60-1507 motion. But the
only issue he raises on appeal is the court's denial of Snider's motion to withdraw.
ANALYSIS
Generally, a habeas corpus proceeding may not replace a direct appeal to correct
mere trial errors. An exception exists, however, when constitutional rights are implicated,
and exceptional circumstances excuse the failure to raise the issue on direct appeal.
Supreme Court Rule 183(c)(3) (2022 Kan. S. Ct. R. at 243); State v. Barnes, 37 Kan.
App. 2d 136, Syl. ¶ 9, 149 P.3d 543 (2007).
Wilmer claims his appellate counsel was ineffective in failing to raise the district
court's refusal to appoint substitute counsel in his direct appeal. We have found such
ineffectiveness can rise to the level of exceptional circumstances, justifying consideration
of the issue under K.S.A. 60-1507. Cosby v. State, No. 109,880, 2014 WL 4435848, at *4
(Kan. App. 2014) (unpublished opinion).
To establish a claim of ineffective assistance of counsel, the movant must establish
counsel provided objectively deficient representation and the deficient representation
prejudiced the proponent's legal proceedings—whether those proceedings involved a
criminal trial or an appeal (the so-called "Strickland test"). See Strickland v. Washington,
466 U.S. 668, 688, 693, 104 S. Ct. 2052, 80 L. Ed. 2d 674 (1984); State v. Dinkel, 314
Kan. 146, 148, 495 P.3d 402 (2021) (trial counsel); Khalil-Alsalaami v. State, 313 Kan.
472, 526, 486 P.3d 1216 (2021) (appellate counsel). Wilmer bears the burden of
establishing both parts of the Strickland test. See Mundy v. State, 307 Kan. 280, 296, 408
6
P.3d 965 (2018). If Wilmer can establish that appellate counsel's failure to raise the issues
on his direct appeal constituted deficient representation and prejudiced his trial or direct
appeal, the merits of his claim are properly before this court, even if the claim should
have been raised in Wilmer's direct criminal proceedings.
"[T]he failure of appellate counsel to raise an issue on appeal is not, per se,
ineffective assistance of counsel." Jenkins v. State, 32 Kan. App. 2d 702, 704, 87 P.3d
983 (2004).
"In an appeal from a criminal conviction, appellate counsel should carefully
consider the issues, and those that are weak or without merit, as well as those which
could result in nothing more than harmless error, should not be included as issues on
appeal. Likewise, the fact that the defendant requests such an issue or issues to be raised
does not require appellate counsel to include them. Conscientious counsel should only
raise issues on appeal which, in the exercise of reasonable professional judgment, have
merit." Baker v. State, 243 Kan. 1, 10, 755 P.2d 493 (1988).
Thus, Wilmer's appellate counsel need only have raised meritorious issues. This
means if the district court did not err, or if the denial caused Wilmer no prejudice, then
the issue lacked merit and Wilmer's appellate counsel's representation was not deficient.
The district court did not err when failing to appoint substitute counsel.
As noted above, the standard of review for the merits of Wilmer's claim is abuse of
discretion. State v. McGee, 280 Kan. 890, 894, 126 P.3d 1110 (2006). And Wilmer bears
the burden of establishing it. State v. Hulett, 293 Kan. 312, 319, 263 P.3d 153 (2011). A
judicial action constitutes an abuse of discretion if (1) it is arbitrary, fanciful, or
unreasonable; (2) stems from an error of law; or (3) stems from an error of fact. State v.
Levy, 313 Kan. 232, 237, 485 P.3d 605 (2021).
7
Both the federal and Kansas Constitutions guarantee the right of criminal
defendants to have the assistance of counsel. State v. Brown, 300 Kan. 565, 574, 331 P.3d
797 (2014). Criminal defendants also have the right to effective assistance of counsel.
State v. Galaviz, 296 Kan. 168, 174, 291 P.3d 62 (2012). That is not to say, however, that
defendants have the right to choose which lawyer will be appointed to represent them.
Brown, 300 Kan. at 575.
If a defendant is unhappy with their appointed counsel and is seeking substitute
counsel, then they must show justifiable dissatisfaction:
"[T]o warrant substitute counsel, a defendant must show 'justifiable dissatisfaction' with
appointed counsel. Justifiable dissatisfaction includes a showing of a conflict of interest,
an irreconcilable conflict, or a complete breakdown in communications between counsel
and the defendant. But ultimately, '"[a]s long as the trial court has a reasonable basis for
believing the attorney-client relation has not deteriorated to a point where appointed
counsel can no longer give effective aid in the fair presentation of a defense, the court is
justified in refusing to appoint new counsel."' [Citations omitted.]" State v. Breitenbach,
313 Kan. 73, 90, 483 P.3d 448, cert. denied 142 S. Ct. 255 (2021).
And once a defendant has shown justifiable dissatisfaction, the district court must inquire
into the attorney-client relationship. Brown, 300 Kan. at 575.
Importantly, if "the defendant's dissatisfaction emanates from a complaint that
cannot be remedied or resolved by the appointment of new counsel . . . the defendant has
not shown the requisite justifiable dissatisfaction." Breitenbach, 313 Kan. at 90-91. In
other words, the substitute must not encounter the same problem as the first appointed
counsel. The focus of the justifiable dissatisfaction inquiry is the adequacy of counsel in
the adversarial process, not the accused's relationship with his or her attorney. State v.
Staten, 304 Kan. 957, 972, 377 P.3d 427 (2016).
8
In Wilmer's case, Snider was Wilmer's third appointed trial counsel before his
criminal trial. And he expressed discontent with each of them. This persistent disapproval
suggests Wilmer's complaint would not be remedied by appointment of a new attorney.
"[U]ltimately, as long as the trial court has a reasonable basis for believing the attorney-
client relation has not deteriorated to a point where appointed counsel can no longer give
effective aid in the fair presentation of a defense, the court is justified in refusing to
appoint new counsel." State v. Bryant, 285 Kan. 970, Syl. ¶ 14, 179 P.3d 1122 (2008).
Wilmer has alleged no trial error caused by his alleged communication issues with
Snider. In fact, he admits she was successful in her representation of him. As noted
above, Snider successfully moved for acquittal of the charge of aggravated assault against
the child's mother and the State withdrew the charge of aggravated battery of the
passenger as an alternative to attempted first-degree murder. The jury also convicted
Wilmer of a level 7 person felony instead of a level 1 person felony when it convicted
him of aggravated assault of the passenger instead of attempted first-degree murder.
Wilmer, 2018 WL 1127679, at *1; see K.S.A. 2021 Supp. 21-5412(e)(2); K.S.A. 2021
Supp. 21-5301(c)(1); K.S.A. 2021 Supp. 21-5402(a)(1), (b).
These successful outcomes evidence that Snider was able to effectively represent
Wilmer despite any claimed communication issues and that Wilmer suffered no prejudice
from her continued representation. Further, in the six months between Snider's motion
and trial, the record reveals no additional complaints from Wilmer about Snider's
representation. Nor could Snider remember Wilmer requesting her removal again.
As in Cosby, the district court found no merit in the complaint of a breakdown in
communication and believed instead that Snider could and was effectively representing
Wilmer despite their strained relationship. See 2014 WL 4435848, at *7. The district
court's finding that Wilmer was not justifiably dissatisfied with Snider was not arbitrary,
fanciful, or unreasonable, nor did it stem from a legal or factual error. As a result,
9
appellate counsel's failure to raise this issue on direct appeal was not defective
representation. The district court did not err in denying Wilmer's habeas corpus motion
on this issue.
Affirmed.
***
ATCHESON, J., concurring: I concur in the outcome we reach today affirming the
Leavenworth County District Court's denial of Defendant Clayton Deion Wilmer's habeas
corpus challenge to the jury verdicts finding him guilty of discharging a firearm into an
occupied vehicle and other crimes. Wilmer's quest for relief from the convictions under
K.S.A. 60-1507 fails not because the district court properly handled his pretrial motion
for appointment of a new lawyer—it didn't—but because he cannot show the result
ultimately compromised his defense at trial. Wilmer, therefore, is entitled to no relief in
this collateral attack on the convictions. In short, fortuity overtook the district court's
fumbling of the pretrial motion. And at this juncture, no harm equates to no foul.
Wilmer personally drafted the pretrial motion to replace Debra Snider as his court-
appointed lawyer. She was the third lawyer to represent him in this case and had been
appointed to represent him in another case in Leavenworth County that was then set for
sentencing. When a criminal defendant formally states he or she wants to replace an
appointed lawyer, the district court typically ought to conduct a preliminary inquiry to
determine if the request has a colorable basis. State v. Brown, 300 Kan. 565, 575, 331
P.3d 797 (2014). A defendant should be permitted a replacement lawyer for "'justifiable
dissatisfaction,'" entailing an actual conflict of interest on the part of his or her present
lawyer, an irreconcilable disagreement with the lawyer, or a complete breakdown in
communication. State v. Pfannenstiel, 302 Kan. 747, 759-60, 765, 357 P.3d 877 (2015).
10
We review a district court's denial of a motion for a new lawyer for abuse of
judicial discretion. 302 Kan. at 760-61. A district court exceeds that discretion if it rules
in a way no reasonable judicial officer would under the circumstances, if it ignores
controlling facts or relies on unproven factual representations, or if it acts outside the
legal framework appropriate to the issue. See State v. Darrah, 309 Kan. 1222, 1227, 442
P.3d 1049 (2019); State v. Ward, 292 Kan. 541, Syl. ¶ 3, 256 P.3d 801 (2011). The party
asserting an abuse of judicial discretion bears the burden of proving the point. State v.
Thomas, 307 Kan. 733, 739, 415 P.3d 430 (2018); Gannon v. State, 305 Kan. 850, 868,
390 P.3d 461 (2017).
Here, Wilmer sought to oust his third appointed lawyer. As the district court
correctly observed, criminal defendants sometimes make complaints about their
appointed lawyers as a device to delay the trial of their cases and, in so doing, to garner
some perceived tactical advantage. See Pfannenstiel, 302 Kan. at 764. The district court
imputed that sort of motive to Wilmer, especially since he had already gone through two
lawyers and simply asserted a generic complaint that Snider wasn't meeting or otherwise
communicating with him often enough about the upcoming trial. Moreover, Wilmer told
the district court he wanted Snider to continue representing him in the other case,
suggesting something other than a substantial dissatisfaction with Snider prompted his
request.
Nonetheless, at the hearing, Snider informed the district court that in her view her
professional relationship with Wilmer had so "broken down" they could no longer
"communicate effectively." For that reason, she asked the district court to appoint a
substitute lawyer for Wilmer. Without inquiring about the genesis of the collapse or
whether Snider considered the breakdown irreconcilable, the district court hastily denied
the lawyer's request and suggested she and Wilmer could communicate by writing notes
to each other. The response was perfunctory, simplistic, and inadequate.
11
The two issues presented to the district court at the hearing were different:
Wilmer asserted he and Snider were not talking often enough about the case; Snider told
the district court that when they did talk, they no longer interacted in a constructive way.
The district court failed to delve into Snider's contention at the hearing on the motion
and, thus, lacked a sufficient factual basis to deny her request out of hand. The district
court, therefore, abused its discretion and committed error. But that doesn't translate into
an error necessarily mandating relief for Wilmer now in a 60-1507 proceeding. The
district court's mistaken denial of a motion to appoint a new lawyer for a criminal
defendant may be excused as harmless, especially when the mistake entails a failure to
sufficiently inquire and the issue revolves around an ostensible breakdown in
communication. See United States v. Senke, 986 F.3d 300, 314-15 (3d Cir. 2021); United
States v. Horton, 693 F.3d 463, 467 (4th Cir. 2012).
In this 60-1507 proceeding, Wilmer argues that the lawyer handling the appeal of
the direct criminal case provided constitutionally inadequate representation by failing to
brief the district court's denial of the pretrial motion for appointment of substitute
counsel. To succeed, Wilmer must show both that his legal representation in the direct
appeal "fell below an objective standard of reasonableness" guaranteed by the right to
counsel in the Sixth Amendment to the United States Constitution and that absent the
substandard lawyering there is "a reasonable probability" the outcome in the criminal
case would have been different. Strickland v. Washington, 466 U.S. 668, 687-88, 694,
104 S. Ct. 2052, 80 L. Ed. 2d 674 (1984); State v. Phillips, 312 Kan. 643, 676, 479 P.3d
176 (2021).
A lawyer is not constitutionally required to raise every possible issue on direct
appeal in a criminal case and, rather, is expected to focus on those with some reasonable
chance of success, while discarding those with insufficient legal or factual support. See
Baker v. State, 243 Kan. 1, 9-10, 755 P.2d 493 (1988); Warren v. State, No. 123,547,
2022 WL 816313, at *3 (Kan. App. 2022) (unpublished opinion). Here, the record on
12
direct appeal would not have supported any substantive relief for Wilmer based on the
denial of the pretrial motion for a new lawyer, since the district court failed to sufficiently
inquire into Snider's stated concerns about the deteriorated communications. At best, the
remedy would have required a remand to the district court to conduct an expanded
hearing to flesh out those concerns. See State v. Moyer, 306 Kan. 342, 383-84, 410 P.3d
71 (2017). That inquiry may have established good grounds for denying Snider's request
to be replaced because of her eroding professional relationship with Wilmer. For
example, Snider ultimately may have attributed the breakdown to Wilmer's deliberate and
obstinate refusal to interact with her—a circumstance the district court could have viewed
as nothing more than an improper second front in Wilmer's own concerted effort to delay
the trial. Or Snider might have agreed that in response to some targeted questioning from
the district court she would have conceded she likely could repair the relationship
sufficiently to represent Wilmer adequately at trial. That sort of testimony would have
shown the district court reached the right result in denying the motion for a new lawyer,
albeit through an impermissibly truncated process.
But even if Snider were to testify that at the time of the hearing on the motion for a
new lawyer, she would have categorically told the district court her professional
relationship with Wilmer had been broken beyond repair, that would not itself warrant
reversing Wilmer's convictions and granting him a new trial. Wilmer would still have to
show that Snider's representation of him at trial was substantially compromised as a result
of the deteriorated lawyer-client relationship. That is, Wilmer would have to establish the
denial of the motion for a new lawyer resulted in a constitutionally inadequate trial.[*]
[*] The analysis would be different if a defendant sought to replace an appointed
lawyer laboring under an active conflict of interest and the district court declined to do
so. Depending on the nature of the conflict, a defendant might not have to show any
actual prejudice in his or her representation at trial or only that he or she might have
received a materially better defense absent the conflict. See State v. Moyer, 309 Kan. 268,
283-84, 434 P.3d 829 (2019); Fuller v. State, 303 Kan. 478, 487, 363 P.3d 373 (2015);
13
Sola-Morales v. State, No. 118,451, 2019 WL 6041443, at *6-7 (Kan. App. 2019)
(unpublished opinion). Here, Snider did not have a conflict of interest.
To that end, the lawyer handling Wilmer's direct appeal could have requested a
remand to the district court for a Van Cleave hearing to explore the breakdown in
communication and whether Snider had been constitutionally ineffective during the trial
as a result. See State v. Hilyard, 316 Kan. 326, 338, 515 P.3d 267 (2022); State v. Van
Cleave, 239 Kan. 117, 120-21, 716 P.2d 580 (1986). But that didn't happen. A successful
request for a Van Cleave hearing would have accelerated the review of Snider's
representation of Wilmer leading up to and during the trial. It would have replicated the
evidentiary hearing the district court did hold as part of Wilmer's 60-1507 proceeding.
See Brown v. State, No. 119,063, 2018 WL 6715411, at *8 n.1 (Kan. App. 2018)
(unpublished opinion) (Atcheson, J., concurring).
At the 60-1507 hearing, Snider testified that she capably defended Wilmer ahead
of and at the jury trial. And implicit in that testimony, Snider necessarily suggested she
was able to communicate sufficiently with Wilmer, although the two apparently
disagreed on certain strategic points. As outlined in the majority opinion, Snider achieved
an objectively beneficial result for Wilmer by securing a not guilty verdict on the
attempted murder charge—the most serious lodged against him—and dismissal of an
aggravated assault charge.
More to the point here, Wilmer offered no evidence that Snider failed to do
something a reasonable lawyer would have done or did something a reasonable lawyer
would not have in conducting the trial. Likewise, he did not show Snider refused to call
witnesses who would have advanced the defense or otherwise ignored particular
exculpatory evidence. In short, Wilmer could not establish that Snider's representation of
him fell below the constitutional standard required under Strickland. Nor could he show
that the ostensible breakdown in communication Snider referred to during the hearing on
14
his motion for a new lawyer caused demonstrable prejudice or diminution in the defense
Snider presented at trial—thereby falling well short of establishing the second
requirement for relief under Strickland. On appeal, Wilmer essentially argues that the
district court's error in ruling on the pretrial motion for a new lawyer in and of itself
requires reversal of his convictions, so the lawyer handling the direct appeal was
constitutionally inadequate for not raising the point. But, as I have explained, the premise
underlying the argument is faulty and incorrectly treats the district court's ruling on the
pretrial motion as a structural error requiring reversal without any showing of prejudice
when it is not. See Boldridge v. State, 289 Kan. 618, 627-28, 215 P.3d 585 (2009)
(outlining nature of structural error); State v. Reed, No. 120,613, 2021 WL 1228097, at
*4 (Kan. App. 2021) (unpublished opinion) ("A structural error requires the reversal of
any convictions regardless of demonstrable prejudice because it impermissibly corrupts
the proceedings in a way that defies review for harmlessness.").
In sum, Wilmer has not demonstrated that any purported deterioration in
communications with Snider deprived him of either a constitutionally fair trial or
constitutionally adequate legal representation up to and during the trial. Absent such a
showing, the district court's mistake in failing to inquire sufficiently into Snider's concern
voiced at the pretrial hearing that she and Wilmer had ceased communicating effectively
amounts to a harmless error that does not call into question the outcome of the direct
criminal case. On that basis, I concur in affirming the denial of Wilmer's 60-1507 motion
attacking his convictions.
15 | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482909/ | RENDERED: NOVEMBER 10, 2022; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2022-CA-0080-ME
ST. STEPHEN’S CEMETERY
ASSOCIATION; BARBARA
HOUSER; BRUCE D. ZIMMERMAN;
HERB ZIMMERMAN; MARK
HOLLAND; AND TONY BOSTIC APPELLANTS
APPEAL FROM JEFFERSON CIRCUIT COURT
v. HONORABLE ERIC J. HANER, JUDGE
ACTION NO. 17-CI-001663
TINA SEATON; CRYSTAL RAY;
KELLY BRYANT; PAMELA
WILKERSON; TINA CLARK; AND
CURRENTLY UNKNOWN,
UNDISCLOSED, UNLOCATED
PROSPECTIVE MEMBERS OF
THEIR CLASS APPELLEES
OPINION
AFFIRMING IN PART, VACATING IN PART, AND REMANDING
** ** ** ** **
BEFORE: CALDWELL, GOODWINE, AND MAZE, JUDGES.
CALDWELL, JUDGE: The Jefferson Circuit Court certified a class action, for
liability purposes only, in a case involving alleged misconduct by the St. Stephen’s
Cemetery Association (the Cemetery) and some of its former board members or
employees (collectively, Appellants). The only issue in this expedited appeal is
whether the trial court erred by certifying the class. After examining the relevant
law and having conducted oral arguments, we conclude the court did not abuse its
discretion by certifying the overall class but improperly certified four fail-safe
subclasses. Therefore, we affirm in part, vacate in part, and remand.
RELEVANT FACTUAL AND PROCEDURAL HISTORY
Given the extremely narrow issues before us, the relevant facts and
procedural history are straightforward. The operative second amended complaint
was filed by six plaintiffs in 2018. This complaint generally alleges Appellants
engaged in a pattern or practice of misconduct, such as not providing purchased
grave plots, burying bodies in incorrect locations, and placing the remains of
multiple persons in the same grave.
Later in 2018, plaintiffs filed a motion for class certification, for
liability purposes only. The motion asked the trial court to certify a class
consisting of “citizens of the United States of America who purchased and/or
whose family members purchased burial plots and services at St. Stephen’s
Cemetery from Defendants from 1992 to present.” Plaintiffs sought to have the
-2-
court also certify four subclasses, essentially containing: 1) persons whose loved
ones’ remains were lost or misplaced; 2) persons whose loved ones’ graves were
improperly maintained; 3) persons who did not receive headstones they purchased
from defendants; and 4) persons whose grave plots are occupied by the remains of
someone the purchaser did not authorize to be buried in that plot.
After a protracted delay,1 the trial court granted the motion for class
certification in 2022 and certified the following class and subclasses:
All individual citizens of the United States of America
who purchased and/or whose family members purchased
burial plots and services at St. Stephen’s Cemetery from
Defendants between January 1, 1992 and February 24,
2017. . . .
Subclass 1 – Lost and/or misplaced remains
All individual citizens of the United States of America
whose loved ones were buried or interred at St. Stephen’s
Cemetery between January 1, 1992 and February 24,
2017, and whose remains can no longer be located and/or
whose loved ones’ remains were exhumed without
knowledge or consent and/or those whose loved ones
have been buried in a single plot containing multiple
people.
Subclass 2 – Improper Maintenance of Graves
All individual citizens of the United States of America
whose loved ones were buried or interred at St. Stephen’s
Cemetery between January 1, 1992 and February 24,
1
The unfortunate delay in ruling on the motion for certification was caused by factors such as
the court conducting two oral arguments which were several months apart, the parties engaging
in mediation, and the retirement of the original circuit court judge.
-3-
2017, and whose remains were improperly interred or
improperly maintained, including, but not limited to,
improper maintenance of loved ones’ headstones and the
grounds surrounding their loved ones’ graves resulting in
property damage in violation of Kentucky law.
Subclass 3 – Failure to provide headstones
All individual citizens of the United States of America
who purchased, or whose loved ones purchased,
headstones from Defendants between January 1, 1992
and February 24, 2017, and who did not receive the
headstones they purchased.
Subclass 4 – Sale of previously sold or occupied
cemetery plots
All individual citizens of the United States of America
who have or whose loved ones purchased a grave plot
from Defendants between January 1, 1992 and February
24, 2017 that is currently occupied by someone other
than the purchaser, or the person the purchaser allowed to
be buried in the plot, or has been sold to someone else.
Appellants’ brief, Ex. A, p. 12-13. Appellants then filed this interlocutory,
expedited appeal. See CR2 23.06; Hensley v. Haynes Trucking, LLC, 549 S.W.3d
430, 436 (Ky. 2018).
ANALYSIS
A. Standards of Review
The scope of our certification review is narrow. Hensley, 549 S.W.3d
at 436. We may not “reach and conclusively determine a substantive issue that
2
Kentucky Rule of Civil Procedure.
-4-
reaches the merits of a case when simply reviewing the propriety of the trial
court’s class-action certification determination.” Id. at 442. Instead, “the only
question” we may properly address “is whether the trial court properly certified the
class . . . .” Id. at 436. Since the certification decision is fact-intensive, our review
is governed by the abuse of discretion standard, meaning that we may disturb the
certification decision only if it is “arbitrary, unreasonable, unfair, or unsupported
by sound legal principles.” Id. at 444 (citation omitted).
B. Requirements for Certification
To obtain class certification, a plaintiff must satisfy both CR 23.01
and 23.02. Manning v. Liberty Tire Services of Ohio, LLC, 577 S.W.3d 102, 110
(Ky. App. 2019). CR 23.01 provides class certification may be proper if:
(a) the class is so numerous that joinder of all members is
impracticable, (b) there are questions of law or fact
common to the class, (c) the claims or defenses of the
representative parties are typical of the claims or
defenses of the class, and (d) the representative parties
will fairly and adequately protect the interests of the
class.
Those four prongs are usually shortened to numerosity, commonality,
typicality, and adequacy of representation. Hensley, 549 S.W.3d at 442-43.
CR 23.02(c), the applicable subsection here, provides in relevant part
that a class action is proper if the four requirements of CR 23.01 have been
satisfied and “the court finds that the questions of law or fact common to the
-5-
members of the class predominate over any questions affecting only individual
members, and that a class action is superior to other available methods for the fair
and efficient adjudication of the controversy.”
Finally, since CR 23.01 and 23.02 are quite similar to their federal
counterparts, Kentucky courts often examine federal precedent when determining
certification issues. See, e.g., Nebraska All. Realty Company v. Brewer, 529
S.W.3d 307, 311 (Ky. App. 2017). As it pertains to this appeal, our Supreme
Court has adopted the holding of the United States Supreme Court that
“certification is proper only if the trial court is satisfied, after a rigorous
analysis, that the prerequisites of [the certification rules] have been satisfied.”
Hensley, 549 S.W.3d at 445 (quoting Wal-Mart Stores, Inc. v. Dukes, 564 U.S.
338, 350-51, 131 S. Ct. 2541, 2551, 180 L. Ed.2d 374 (2011)) (emphasis added by
Hensley). “Frequently that ‘rigorous analysis’ will entail some overlap with the
merits of the plaintiff’s underlying claim. That cannot be helped.” Dukes, 564
U.S. at 351, 131 S. Ct. at 2551. But courts have “no license to engage in free-
ranging merits inquiries at the certification stage. Merits questions may be
considered to the extent – but only to the extent – that they are relevant to
determining whether the . . . prerequisites for class certification are satisfied.”
Amgen Inc. v. Connecticut Retirement Plans and Tr. Funds, 568 U.S. 455, 466,
133 S. Ct. 1184, 1194-95, 185 L. Ed. 2d 308 (2013).
-6-
C. Fail-Safe Subclasses3
Before we may address other issues, we must resolve an antecedent
concern: did the trial court certify a fail-safe class? As we explained, defining a
class is an “essential prerequisite to maintaining a class action.” Manning, 577
S.W.3d at 110 (citations omitted). And the class definition “must be sufficiently
3
The parties did not specifically raise a fail-safe class argument in their briefs, but we explored
the issue at oral argument. Thus, it is proper to address it in this Opinion. See, e.g., Elk Horn
Coal Corp. v. Cheyenne Resources, Inc., 163 S.W.3d 408, 424 (Ky. 2005), overruled on other
grounds by Calloway Cnty. Sheriff’s Department v. Woodall, 607 S.W.3d 557 (Ky. 2020)
(“Finally we would note that this separation of powers issue was not raised in the lower courts,
but rather it was raised sua sponte by members of this Court during oral argument. The parties
addressed the issue and we have confined ourselves to the record. Thus we are not precluded by
any rule or constitutional provision from addressing this issue.”). Moreover, though “[t]his issue
was not raised on appeal” and we did not “go looking for it[,]” we inevitably “bump into it
squarely out of the gate” when reviewing the propriety of the class certification – i.e., the issue of
whether the trial court certified a fail-safe class “flows naturally under our appellate review of
the issue raised.” Barker v. Commonwealth, 341 S.W.3d 112, 114 (Ky. 2011). We will confine
our review to the record and applicable law. Priestley v. Priestley, 949 S.W.2d 594, 596 (Ky.
1997) (citations omitted) (holding that “[s]o long as an appellate court confines itself to the
record, no rule of court or constitutional provision prevents it from deciding an issue not
presented by the parties[.]”). And the fact that we are reviewing whether a class is fail-safe on
our own initiative is not novel as we have done so at least twice before (although in unpublished
decisions which we cite merely to show that our review here is not unusual). Hitachi Automotive
Systems Americas, Inc. v. Held, No. 2019-CA-001318-ME, 2020 WL 2510534, at *3 (Ky. App.
May 15, 2020); Sullivan University Systems, Inc. v. McCann, No. 2020-CA-000118-ME, 2020
WL 5587316, at *2 (Ky. App. Sep. 18, 2020).
Finally, because the parties did not explicitly raise this argument, our review proceeds
under the palpable error standard found in CR 61.02. Barker, 341 S.W.3d at 114 (reviewing
such an issue under the palpable error standard found in the Rules of Criminal Procedure);
Blackaby v. Barnes, 614 S.W.3d 897, 899 n.3 (Ky. 2021) (noting that the palpable error
standards contained in the criminal and civil rules are “identical”). An error is palpable if it is
“so serious that it would seriously affect the fairness to a party if left uncorrected.
Fundamentally, a palpable error determination turns on whether the court believes there is a
substantial possibility that the result would have been different without the error.” Hibdon v.
Hibdon, 247 S.W.3d 915, 918 (Ky. App. 2007) (internal quotation marks and citations omitted).
-7-
definite so that it is administratively feasible for the court to determine whether a
particular individual is a member of the proposed class.” Id. (citations omitted).
Fail-safe classes are improper because they “are not administratively feasible.
They inevitably require mini-trials to determine which individuals belong to the
class.” Bohannan v. Innovak International, Inc., 318 F.R.D. 525, 529 (M.D. Ala.
2016).
A fail-safe class is one which “cannot be defined until the case is
resolved on its merits. It bases its membership not on objective criteria, but on the
legal validity of each member’s claim. To determine class membership, the merits
of each individual claim must be examined.” Manning, 577 S.W.3d at 110
(internal quotation marks and citations omitted). In short, “[b]y its very nature, a
fail-safe class includes only those who are entitled to relief.” Id. at 110-11
(internal quotation marks and citation omitted). Or, as a federal court in
Pennsylvania succinctly noted, “[a] fail-safe class is one that defines its members
by the plaintiff’s liability – all individuals wronged by the defendant, in the classic
formulation.” Zarichny v. Complete Payment Recovery Services, Inc., 80 F. Supp.
3d 610, 624 (E.D. Pa. 2015). See also 1 William B. Rubenstein, Newberg and
Rubenstein on Class Actions § 3:6 (6th ed. 2022). One blatant example of a fail-
safe class occurred when a federal court in California was asked to certify classes
consisting of persons who purchased computer products which had been “falsely
-8-
advertised” by the defendant. Brazil v. Dell Inc., 585 F. Supp. 2d 1158, 1167
(N.D. Cal. 2008). The court held the classes were fail-safe because “[t]o determine
who should be a member of these classes, it would be necessary for the court to
reach a legal determination that Dell had falsely advertised.” Id. See also AT&T
Corp. v. Feltner, No. 2020-CA-1500-ME, 2021 WL 2753980, at *3-4 (Ky. App.
Jul. 2, 2021) (holding that a class was fail-safe when it was defined as “[a]ll real
property owners in the Commonwealth of Kentucky on whose real property
Defendants committed trespass, nuisance and/or negligent property damage”)
(cited only as an illustration).
Here, we have a unique situation in that the main class definition itself
is not fail-safe, but all four subclasses are.4 Specifically, the overall class contains,
with some exceptions not relevant here, “[a]ll individual citizens of the United
States of America[5] who purchased and/or whose family members purchased
4
A court has the ability to divide a class into subclasses, and each subclass is then “treated as a
class . . . .” CR 23.03(7). Therefore, we must scrutinize each subclass rigorously.
5
It is unclear why the class is limited only to citizens of the United States since the same alleged
wrongdoing could have been inflicted upon non-citizens. Similarly, the class broadly uses the
expansive term “loved ones,” not next of kin. Long ago, in a decision which has not been
overruled, Kentucky’s then-highest court held that:
A recovery may be had by the next of kin or the surviving
spouse for an unwarranted interference with the grave of a
deceased, or for the infliction of an injury to a corpse, if either be
done (a) maliciously, (b) or by gross negligence, (c) or wantonly,
i.e., with a reckless disregard of the rights of another, (d) or for an
unlawful or secret disinterment or displacement thereof, or (e) an
action of trespass quare clausum fregit may be maintained by the
-9-
burial plots and services at St. Stephen’s Cemetery from Defendants between
January 1, 1992 and February 24, 2017 . . . .” That definition does not premise
class membership on Appellants’ liability.
By contrast, membership in the four subclasses clearly is based upon
having been wronged by Appellants. Subclass one contains persons whose loved
ones’ remains cannot be located, were exhumed without consent, or are buried
with others in a single plot – i.e., having been wronged by Appellants, and not
simply persons whose loved ones should be buried in a known and marked plot, for
example.
The same conclusion holds true for subclass two, which consists of
persons whose loved ones’ remains “were improperly interred or improperly
maintained, including . . . improper maintenance of loved ones’ headstones and the
grounds surrounding their loved ones’ graves resulting in property damage in
violation of Kentucky law.” That subclass explicitly premises its membership
holder of the title, or the person in possession, of the lot on which a
grave is located, or (f) for the removal of a body from one grave to
another by those in authority and control of the cemetery or burial
ground, without notice, or an opportunity, to him who in law is
entitled to be present, if he desires, before its removal.
Louisville Cemetery Ass’n v. Downs, 241 Ky. 773, 45 S.W.2d 5, 6 (1931) (emphasis added)
(citations omitted). The parties do not address whether the class definition should use the more
precise term next of kin instead of loved ones, so we will not extend this already lengthy Opinion
by addressing the matter. But we caution the trial court on remand to ensure that any class
contains only persons who would potentially be entitled to recover from Appellants. If
necessary, the trial court may modify the class definition. Hensley, 549 S.W.3d at 450.
-10-
upon persons toward whom Appellees acted “improperly” and in “violation of
Kentucky law.” It is blatantly fail-safe as is but could be a viable sub-class without
those determiners.
As for subclass three, its membership consists of persons who did not
receive headstones which they, or their loved ones, purchased. In other words, to
join that subclass a person (or the person’s loved one) must not have received
bargained for goods and services from Appellants. The subclass is fail-safe.
Finally, subclass four is also fail-safe. Although the language
defining the subclass is imprecise at times, it consists of persons whose loved ones’
grave “is currently occupied by someone other than the purchaser, or the person
the purchaser allowed to be buried in the plot, or [the plot] has been sold to
someone else.” Again, a person must have been wronged by Appellants to be a
member of that subclass.
While this Court may understand the benefit of having sub-classes for
organizational purposes of a complex litigation, the subclasses must not be fail-
safe. These subclasses are fail-safe, a defect which is serious, obvious, and unfair
as to rise to the level of being palpable error. Hibdon, 247 S.W.3d at 918. We
decline to let such error go uncorrected. Because the main class is not fail-safe,
and each of the sub-classes would otherwise fit within the main class, the prudent
action at this interlocutory juncture is to direct the trial court to issue a new class
-11-
certification order which does not contain the fail-safe subclasses. See CR
23.03(3) (“An order that grants or denies class certification may be altered or
amended before final judgment.”).6
D. CR 23.01 Factors
1. Numerosity
CR 23.01(a) provides that a class action is permissible if “the class is
so numerous that joinder of all members is impracticable . . . .” That prong is
usually referred to simply as numerosity.
There is no requirement that a class have a particular baseline
membership number to satisfy the numerosity requirement. Manning, 577 S.W.3d
at 112. But a class representative must provide a “reasonable estimate of the
number of purported class members.” 35A C.J.S. Federal Civil Procedure § 89
(2022). See also Sowders v. Atkins, 646 S.W.2d 344, 346 (Ky. 1983). When
addressing numerosity, courts may consider factors like “the size of the class, the
ease of identifying its members and determining their addresses, facility of making
service on them, and their geographic dispersion.” Hensley, 549 S.W.3d at 443
(citation omitted). Of course, “impracticability,” as used in CR 23.01, “does not
mean impossibility. The class representative need show only that it is extremely
6
We express no opinion on whether the trial court should certify revised subclasses on remand.
-12-
difficult or inconvenient to join all members of the class.” Hensley, 549 S.W.3d at
443 (citation omitted).
Here, Appellees admit that it “is not possible to quantify the precise
number of Class Members” but the Cemetery’s records contain “the names of over
1,550 individuals who either purchased graves or were interred at the Cemetery”
during the covered time period. Appellees’ brief, p. 19. And Appellees have
presented an affidavit from an accountant opining that the Cemetery’s records
show sixty-seven “instances of a single grave having been attributed to more than
one person” and “approximately two-hundred seventy (270) separate, conflicting
entries for individuals . . . .” Appellees’ brief, Ex. 6, p. 3.
Appellants assert the class lacks numerosity since there are only a
handful of named plaintiffs.7 But Appellants cite only to CR 23.01 in the
numerosity section of their brief. In other words, Appellants cite to no authority
whatsoever holding that there must be a host of named class representatives in
order to satisfy the numerosity prong. Moreover, though there is no absolute
minimum number of class members, many courts have found “a class of 40 or
more members raises a presumption of impracticability of joinder based
on numbers alone.” 1 William B. Rubenstein, Newberg and Rubenstein on Class
7
The trial court granted summary judgment for Appellants on at least some claims of three of the
six named plaintiffs. However, those orders are interlocutory at this juncture and, in any event,
do not change our conclusions.
-13-
Actions § 3:12 (6th ed. 2022). See also 1 McLaughlin on Class Actions § 4:5 (18th
ed. 2021). Here, the accountant’s affidavit shows there are potentially many more
than forty class members. In sum, we discern no abuse of discretion in the trial
court’s numerosity conclusion.
2. Commonality
CR 23.01(b) provides in relevant part that a class action is permissible
if “there are questions of law or fact common to the class . . . .” That prong is
usually referred to simply as commonality. Appellants argue there is not
commonality because the putative class members’ claims are “highly
individualized” because there is not “one common answer” which “can be drawn
from one single finding on any of the allegations . . . .” Appellants’ brief, p. 18.
As the United States Supreme Court has held, commonality “is easy to
misread, since any competently crafted class complaint literally raises common
questions.” Dukes, 564 U.S. at 349, 131 S. Ct. at 2551 (internal quotation marks,
brackets, and citation omitted). Instead, “[c]ommonality requires the plaintiff to
demonstrate that the class members have suffered the same injury . . . .” Id. at 349-
50, 131 S. Ct. at 2551 (internal quotation marks and citation omitted). The claims
“must depend upon a common contention . . . of such a nature that it is capable of
classwide resolution – which means that determination of its truth or falsity will
-14-
resolve an issue that is central to the validity of each one of the claims in one
stroke.” Id. at 350, 131 S. Ct. at 2551.
Even one common question may be sufficient. Id. at 359, 131 S. Ct.
at 2556. And since the focus is on “whether the defendant’s conduct was common
as to all of the class members[,]” commonality may exist “even if some
individualized determinations may be necessary to completely resolve the claims
of each putative class member . . . .” Summit Medical Group, Inc. v. Coleman, 599
S.W.3d 445, 449-50 (Ky. App. 2019) (internal quotation marks and citations
omitted). In short, satisfying the commonality requirement “is not a herculean
task.” Nebraska All. Realty Company, 529 S.W.3d at 312.
Much of Appellants’ argument is based upon the perceived
differences between the four subclasses. However, we have already concluded that
the subclasses must be vacated, so any differences within or between them are
irrelevant.
Additionally, CR 23.01 “does not require that all questions of law or
fact be common.” Wiley v. Adkins, 48 S.W.3d 20, 23 (Ky. 2001) (emphasis
added). The trial court recognized there would be some individualized inquiries,
but nonetheless held that there were common questions of law or fact, such as
whether Appellants “fail[ed] to deliver the burial products and services that their
customers purchased.” Appellants’ brief, Ex. A, p. 9.
-15-
Appellants look too granularly at the issue instead of properly
focusing on the overarching allegations. For example, Appellants argue that
showing that one class member did not receive a purchased headstone would not
prove that other class members did not receive a purchased headstone. Perhaps so.
But the allegations are that Appellants had a practice of failing to provide, for
example, purchased headstones. Of course, like any class action, there are some
differences between each particular potential class member’s claim(s), but the
presence of some individualized aspects does not defeat commonality. See, e.g.,
32B AM. JUR. 2D Federal Courts § 1511 (2022) (footnotes and citations omitted)
(noting that “as long as all putative class members were subjected to the same
harmful conduct by the defendant, the commonality requirement for class
certification will endure many legal and factual differences among the putative
class members.”).
Here, as the trial court aptly noted, the core of defendants’ alleged
misconduct was common to all class members. In other words, showing that one
class member did not receive a purchased headstone may not prove that another
class member did not receive a purchased headstone. But Appellants claim
misconduct common to all class members, which is the lens through which
commonality is viewed. And the trial court certified a class as to liability only, so
-16-
the potentially individual damages is irrelevant, despite Appellants’ seeming
arguments to the contrary.8
Finally, although each case is factually distinguishable, at least two
other courts have certified classes in analogous situations. See, e.g., In re Tri-State
Crematory Litigation, 215 F.R.D. 660, 690 (N.D. Ga. 2003) (citation omitted)
(“Plaintiffs have listed numerous questions of law or fact common to the entire
class, including: (1) whether the Tri-State Defendants mishandled, or failed to
carry out the proper cremation of, remains delivered to them for cremation; (2) if
the Tri-State Defendants mishandled, or failed to carry out the proper cremation of,
remains delivered to them for cremation, over what time period did these acts take
place; (3) whether Funeral Home Defendants are directly liable for their own
action and inaction; (4) whether Funeral Home Defendants are vicariously liable
for the actions of the Tri-State Defendants; and (5) whether Funeral Home
Defendants have breached any contracts with Plaintiffs. The Court finds that
Plaintiffs have satisfied the minimal showing required to establish commonality of
the legal and factual questions raised in this action.”); Wofford v. M.J. Edwards &
Sons Funeral Home Inc., 528 S.W.3d 524, 529-30, 543 (Tenn. Ct. App. 2017)
8
Appellants strenuously challenged the propriety of certifying a class for liability purposes only
in the trial court. However, Appellants “concede that ‘liability-only’ class certification is
appropriate” if the requirements of CR 23.01 and 23.02 are satisfied. Appellants’ reply brief, p.
3. Thus, under these facts, we will merely assume that it was permissible to certify such a
liability-only class, provided the requirements of CR 23.01 and 23.02 were otherwise met.
-17-
(affirming a trial court’s rejection of an argument by a funeral home that claims
would require individualized proof in a case involving allegations that the
defendant had improperly disposed of remains, including – as here – allegedly
having buried multiple persons’ remains in the same grave, because “[t]he central
issue in this case moving forward is whether a funeral home has a duty beyond
dropping off human remains at the cemetery. This issue is common to all parties
in this case. The trial court found it better to proceed toward adjudicating that
question as a class action. Given that the alternative potentially is hundreds of
separate trials with contradictory results, we agree.”). In sum, given the relatively
low bar for satisfying the commonality prong, we discern no abuse of discretion in
the trial court’s conclusions.
3. Typicality
CR 23.01(c) provides in relevant part that a class action may be
proper if “the claims or defenses of the representative parties are typical of the
claims or defenses of the class . . . .” That prong is generally referred to simply as
“typicality.” As the similarities between the parties’ arguments regarding the two
prongs demonstrate, there often is significant overlap between the commonality
and typicality prongs. See, e.g., General Telephone Co. of Southwest v. Falcon,
457 U.S. 147, 157, 102 S. Ct. 2364, 2370, 72 L. Ed. 2d 740, n.13 (1982).
-18-
We have explained the intended difference between commonality and
typicality as follows: “Unlike commonality, which focuses on the group
characteristics such as the relationship of common facts and legal issues related to
the class as a whole, typicality examines the individual characteristics of the named
plaintiffs in relation to the class.” Manning, 577 S.W.3d at 114. Our Supreme
Court has instructed that “claims and defenses are considered typical if they arise
from the same event, practice, or course of conduct that gives rise to the claims of
other class members and if the claims of the representative are based on the same
legal theory.” Hensley, 549 S.W.3d at 443 (citation omitted).
Thus, the crux of the typicality prong is whether the claims “are all
based on the same legal theory . . . .” Id. at 448. Some courts have held that “a
liberal construction may be applied to find typicality as long as no express conflict
between the representative party and the class exists . . . .” Caruso v. Celsius
Insulation Resources, Inc., 101 F.R.D. 530, 534 (M.D. Pa. 1984).
Here, Appellants’ disagreement to the contrary notwithstanding,
Appellees’ claims are based on the same core legal theories. As the trial court
held, Appellees assert “each of them has suffered one or more of the different types
of injuries suffered by the members of their proposed class” and “as a whole, they
[Appellees] have suffered all of the same types of injuries suffered by members of
their proposed class.” Appellants’ brief, Ex. A, p. 10.
-19-
Thus, we do not agree with Appellants’ repeated insistence that the
Appellees’ claims are atypical because they present “truly a one-by-one, plot-by-
plot question . . . .” Appellants’ brief, p. 15. Again, for example, the fact that there
may be multiple persons in one grave does not inherently mean that other graves
contain multiple people. But that is not the requirement. Instead, the commonality
requirement asks simply whether Appellees’ claims are aligned with those of the
putative class members regarding core allegations and legal theories. They are.9
Moreover, Appellants have shown no express conflicts between the named
plaintiffs and the remainder of the putative class members.
In short, though we recognize that there are potentially some
individual aspects to each named and putative class member’s claims, we discern
no abuse of discretion in the trial court’s typicality determination.
9
For example, the accountant averred that, in his review, “the errors and discrepancies identified
in the official Cemetery records pertaining to the class Plaintiffs are common and typical of other
errors and discrepancies identified in the records and on-sight inspection.” Appellees’ brief, Ex.
6, p. 3. The expert similarly averred that the “official cemetery records exhibited a pattern of
incomplete, illegible and contradictory information” such that “[t]he discrepancies and
conflicting data contained in these official records are persistent across the period official records
were examined.” Id. at p. 3-4. Appellants argue the accountant’s affidavit is of no consequence
because improper recordkeeping is not actionable. And, standing alone, perhaps such
bookkeeping is not. But the affidavit highlights the allegations that the Cemetery’s records are
so consistently incorrect or inscrutable (i.e., common and typical) that it cannot be known with
requisite certainty who is buried in any individual plot, or how many remains may be buried in a
single plot. Whether those claims ultimately prove successful is beyond the scope of this
interlocutory appeal.
-20-
4. Adequacy of Representation
Finally, CR 23.01(d) provides in relevant part that a class action may
be proper if “the representative parties will fairly and adequately protect the
interests of the class.” Our review of this prong focuses on the adequacy of both
the named class representatives and counsel. Manning, 577 S.W.3d at 115.
As the United States Supreme Court explained, “[t]he adequacy
inquiry . . . serves to uncover conflicts of interest between named parties and the
class they seek to represent. A class representative must be part of the class and
possess the same interest and suffer the same injury as the class members.”
Amchem Products, Inc. v. Windsor, 521 U.S. 591, 625-26, 117 S. Ct. 2231, 2250-
51, 138 L. Ed. 2d 689 (1997) (internal quotation marks, brackets, and citations
omitted). See also Hensley, 549 S.W.3d at 443.
As we construe it, Appellants do not vigorously dispute the trial
court’s adequate representation conclusion. We thus will not belabor the point as
we discern no obvious abuse of discretion in the trial court’s conclusions.
E. CR 23.02 Requirements
Having addressed CR 23.01, we turn to CR 23.02, which provides in
relevant part:
An action may be maintained as a class action if the
prerequisites of Rule 23.01 are satisfied, and in addition:
....
-21-
(c) the court finds that the questions of law or fact
common to the members of the class predominate
over any questions affecting only individual
members, and that a class action is superior to
other available methods for the fair and efficient
adjudication of the controversy. The matters
pertinent to the findings include: (i) the interest of
members of the class in individually controlling
the prosecution or defense of separate actions; (ii)
the extent and nature of any litigation concerning
the controversy already commenced by or against
members of the class; (iii) the desirability or
undesirability of concentrating the litigation of the
claims in the particular forum; (iv) the difficulties
likely to be encountered in the management of a
class action.
“There are no bright line rules to determine whether common
questions predominate.” In re Select Comfort Corp. Securities Litigation, 202
F.R.D. 598, 610 (D. Minn. 2001). Instead, the issue must be analyzed in light of
the particular facts and circumstances of each case, id., which means “[t]here is
little uniform guidance on how to assess when common issues predominate over
individual ones.” Daye v. Community Financial Service Centers, LLC, 313 F.R.D.
147, 166 (D.N.M. 2016). See also 7AA Mary Kay Kane, Fed. Prac. & Proc. Civ.
§ 1778 (3d ed. 2022). Since the ultimate merits of the case are not before us, our
narrow focus is on whether Appellees have adequately shown
“that questions common to the class predominate, not that those questions will be
answered, on the merits, in favor of the class.” Amgen Inc., 568 U.S. at 459, 133
S. Ct. at 1191.
-22-
The United States Supreme Court has held that the core of the
predominance inquiry is whether the common issues “are more prevalent or
important than the non-common, aggregation-defeating, individual issues.” Tyson
Foods, Inc. v. Bouaphakeo, 577 U.S. 442, 453, 136 S. Ct. 1036, 1045, 194 L. Ed.
2d 124 (2016) (citation omitted). If there are dominant common issues, then the
predominance requirement is satisfied “even though other important matters will
have to be tried separately . . . .” Id. (citation omitted). In other words, “a case
need not present only common questions to merit certification, and the presence of
some individual questions does not destroy predominance . . . .” Daye, 313 F.R.D.
at 166.
Though they appear similar,10 the predominance test is not intended to
be a mere regurgitation of the commonality or typicality requirements. Instead, the
predominance test is “stricter” because it addresses “not just that common issues
exist,” but whether those common issues “are more prevalent than non-common
issues.” 2 William B. Rubenstein, Newberg and Rubenstein on Class Actions §
4:51 (6th ed. 2022). See also Amchem Products, Inc., 521 U.S. at 624, 117 S. Ct.
at 2250.
10
See, e.g., In re New Motor Vehicles Canadian Export Antitrust Litigation, 522 F.3d 6, 19 (1st
Cir. 2008); Kleen Products LLC v. International Paper, 306 F.R.D. 585, 592 (N.D. Ill. 2015).
-23-
The trial court found that there are predominant common questions of
law and fact, the resolution of which “would substantially advance the
determination of the claims of the members of [Appellees’] proposed class . . . .”
Appellants’ brief, Ex. A, p. 11. The court held that any individualized issues,
especially regarding damages, would be “relatively simple to resolve in a separate
trial after the trial on the common questions of law and fact.” Id. Finally, the court
concluded that a class action “is superior to other available methods for the fair and
efficient adjudication of the controversy” because it would be “an inefficient use of
judicial time and resources” to make “each individual plaintiff . . . present the same
proof concerning [Appellants’] alleged practices in separate trials” and some
persons would “refrain from pursuing litigation for purely economic reasons” if
required to present their claims in an individual case. Id. at 11-12.
In their briefs, Appellants do not vigorously contest many of those
conclusions, such as the efficiency of pursuing class action relief or the likelihood
that some persons with potentially meritorious claims would not individually
pursue them due to the inevitable individual litigation costs vis-à-vis the potentially
recoverable damages. Those findings are, essentially, a conclusion that a class
action is superior to other methods for resolving the claims at hand. We perceive
no abuse of discretion regarding those superiority, efficiency-based findings. See,
e.g., Wright v. Country Club of St. Albans, 269 S.W.3d 461, 467-68 (Mo. Ct. App.
-24-
2008) (citation omitted) (“Based on the facts before us, class action would be
superior to other methods of adjudication in that, in the absence of class action, the
potential expense of the litigation in relation to the relatively small recovery
amount for each plaintiff would prevent most, if not all, injured parties from
initiating a lawsuit. Judicial economy and efficiency dictate that all such possible
claims against Defendants be tried in one class action lawsuit, rather than
numerous lawsuits.”); Bobbitt v. Milberg LLP, 338 F.R.D. 607, 625 (internal
quotation marks and citations omitted) (D. Ariz. 2021) (“Where damages suffered
by each putative class member are not large, this factor weighs in favor of
certifying a class action. For example, class litigation is superior when a group
composed of consumers or small investors typically will be unable to pursue their
claims on an individual basis because the cost of doing so exceeds any recovery
they might secure. In addition, class litigation is superior when it will reduce costs
and conserve judicial resources.”).
However, Appellants do vigorously contest the trial court’s
conclusion that common issues predominate over individual ones. But Appellants’
arguments are largely a reiteration of their previously discussed arguments
regarding typicality and commonality.
We begin by noting that Appellants again refer to the individualized
damages which each class member may have suffered. Again, any differences
-25-
regarding damages among the class members is irrelevant since this is a liability-
only class. Moreover, though any broad legal principle may be subject to
exceptions, “the black letter rule is that individual damage calculations generally
do not defeat a finding that common issues predominate . . . .” 2 William B.
Rubenstein, Newberg and Rubenstein on Class Actions § 4:54 (6th ed. 2022).
The main issues here are Appellees’ allegations that Appellants
consistently failed in their duties, such as to provide bargained-for tombstones and
to reserve burial plots solely for the purchasers thereof, or their designees. The
Appellees have argued that Appellants had a pattern or practice of such alleged
misconduct, as highlighted by the accountant’s notation of incomplete,
indecipherable, or erroneous records. In other words, the core underlying facts for
each class member would be strikingly similar, and those main issues dominate
over any individualized ones. See, e.g., In re Tri-State Crematory Litigation, 215
F.R.D. at 696 (“The facts of this case are essentially identical for every Plaintiff:
Plaintiffs allege that each and every Plaintiff relied on a Funeral Home Defendant
to handle the cremation of Plaintiff’s loved one. Each and every Plaintiff claims
that a Funeral Home Defendant failed to perform that service in a manner that
conformed to the standard of care for the funeral home industry, and the Plaintiff
suffered emotional injury because the Funeral Home Defendant failed to perform
to the standard of care. The Court concludes that variations in conduct from one
-26-
Plaintiff to another do not predominate over the overwhelming common issues
related to Defendants’ conduct.”). Appellants have not shown that special,
individualized claims would predominate over those common, main issues.11
Consequently, when considering all the facts and circumstances of this case, we
discern no abuse of discretion in the trial court’s conclusion that Appellants
satisfied the requirements of CR 23.02.
F. Summation
The certification process in this case has been hard fought. All parties
have presented reasonable arguments in favor of their positions. Other jurists may
have reached different conclusions than did the trial court. But the question is not
what we, or another court, would conclude. The question is whether the trial
court’s decision was so ill-founded as to be an abuse of discretion. It is not.
As our Supreme Court explained, albeit in a factually different
context, “it is possible for a trial court to rule contrary to what an appellate court
would rule without abusing its discretion” and an appellate court “is powerless to
disturb such rulings.” Miller v. Eldridge, 146 S.W.3d 909, 917 (Ky. 2004). Under
that deferential standard, we must affirm the decision to certify a class even though
we recognize that the evidence may also have permitted different conclusions. The
11
Appellants essentially repeat their argument that Appellees’ claims cannot be resolved without
analyzing each and every grave. We disagree, for the same core reasons previously discussed.
-27-
trial court engaged in the requisite “rigorous analysis” and its conclusions are not
unsupported by sound legal principles. However, the decision to certify the fail-
safe subclasses is not supported by sound legal principles. Consequently, the
certification of the subclasses must be vacated, and the matter remanded with
instructions to issue a new certification order which does not contain fail-safe
subclasses.12
CONCLUSION
For the foregoing reasons, the Jefferson Circuit Court is affirmed as to
the decision to certify a liability-only class. The Jefferson Circuit Court’s
certification of the fail-safe subclasses is vacated. This case is remanded for entry
of a new order defining the class membership which does not contain fail-safe
provisions, after which the case shall proceed to resolution on the merits.
ALL CONCUR.
BRIEFS FOR APPELLANTS: BRIEF FOR APPELLEES:
David A. Shearer, Jr. Jasper Ward
Christopher T. Brann Alex C. Davis
Ft. Mitchell, Kentucky Mark K. Gray
Matthew L. White
Stephen A. Brooks
Louisville, Kentucky
12
We have considered all of the arguments in the parties’ briefs, but decline to address
arguments which are irrelevant, redundant, underdeveloped, or otherwise unnecessary for us to
consider in order to resolve the limited issues properly before us.
-28- | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482902/ | NOT DESIGNATED FOR PUBLICATION
Nos. 124,942
124,943
IN THE COURT OF APPEALS OF THE STATE OF KANSAS
L.S.,
Appellee,
v.
C.S. and E.S.,
Appellants.
MEMORANDUM OPINION
Appeal from Ford District Court; LAURA H. LEWIS, judge. Opinion filed November 10, 2022.
Reversed.
Van Z. Hampton, of Warrior Lawyers International, of Dodge City, for appellants.
Casey Johnson and Noah Hahs, of Kansas Legal Services, Inc., of Kansas City and Dodge City,
for appellee.
Before ARNOLD-BURGER, C.J., GREEN and MALONE, JJ.
PER CURIAM: The Ford County District Court granted L.S. and her daughter,
W.S., final protection from stalking (PFS) orders against each of L.S.'s parents, C.S. and
E.S., who are both residents of Alabama. After fleeing her parents' house in January
2021, L.S. moved across the country to Montana. Her parents filed legal actions in both
Alabama and Montana to gain custody of their granddaughter and to force their daughter
to return home. But L.S. and W.S. soon left Montana and moved to Dodge City. Once in
Kansas, L.S. filed PFS petitions against each of her parents, alleging they were engaging
in a continual course of conduct and abusing the legal system by trying to force her back
1
to Alabama. C.S. and E.S. filed limited appearances to argue that the district court lacked
personal jurisdiction over them because none of the alleged acts occurred in Kansas and
they had no contact with the state. The district court found it had personal jurisdiction
over the defendants and granted a final PFS order against each parent.
C.S. and E.S. appeal, challenging the district court's finding of personal
jurisdiction and the sufficiency of the evidence supporting the PFS orders. Finding the
district court lacked personal jurisdiction over the nonresident defendants under the
Kansas long-arm statute, K.S.A. 2021 Supp. 60-308, we reverse the district court's
judgment and vacate the final PFS orders as void for lack of personal jurisdiction.
FACTUAL AND PROCEDURAL BACKGROUND
L.S., born in 1992, and her daughter, W.S., born in 2014, lived with L.S.'s father
and mother, C.S. and E.S., in their home in Alabama. According to L.S., her parents—
specifically her father—believed that young unmarried women should live at home until
marriage and sabotaged her prior attempts to get a job and move out. On January 1, 2021,
L.S. took her daughter with only the belongings they could carry and left for the airport,
relocating to Stevensville, Montana. L.S. later explained that she fled Alabama because
she needed to "leave [her parents'] controlling environment."
Soon after L.S. and W.S. relocated to Montana, a petition alleging that W.S. was a
child in need of care was filed in Franklin County, Alabama. L.S. believed the action was
initiated by her parents, but the case was dismissed because she and W.S. were living in
Montana. Although the record is unclear, it appears that C.S. and E.S. also sought
custody of W.S. in Alabama around the same time.
E.S. allegedly called a local police department in Montana and requested they
perform a welfare check on L.S. and her daughter. E.S. called in another welfare check
2
shortly after the first. L.S. soon noticed that her mother was also logging into her email
accounts. Around this time, L.S. requested that her parents send her the items she had left
behind at their house—including her computer, iPhone, clothing, and social security
cards and birth certificates for W.S. and herself. Although L.S. provided her parents with
her Montana address so they could send the items, the parents did not do so.
Not long after L.S. provided her parents with her address, they filed for custody of
W.S. in Montana. But, in June 2021, before L.S. was served with the custody action, she
and W.S. moved to Kansas. L.S. explained that she took her daughter and left Montana
"because the housing economy and the job market . . . were not conducive to starting a
family," not because she was fleeing from her parents' attempts to obtain custody of W.S.
L.S. was later served in Kansas with the Montana custody action. In emails between the
attorneys in Montana, E.S.'s attorney advised that E.S. was likely to file a "new action . . .
in Kansas in the coming weeks." But C.S. and E.S. never followed through with filing a
lawsuit for custody of W.S. in Kansas.
On October 14, 2021, L.S. filed PFS petitions against C.S. and E.S. in the Ford
County District Court. In attachments to her petition, L.S. alleged that C.S. and E.S. had
kept her in a "controlling and mentally abusive environment," had tried to make her stay
in their house, had prevented her from maintaining employment, had filed two lawsuits
alleging that she was unfit to raise her daughter, and had tried to gain custody of W.S. in
Montana and Alabama. The petitions specifically requested an order restraining C.S. and
E.S. from "abusing, molesting or interfering with [her] privacy rights" and from
"following, harassing, telephoning, contacting or otherwise communicating with [her]."
C.S. and E.S. were served with the petitions in Alabama.
C.S. and E.S. filed identical, pro se notices of limited appearance and motions to
dismiss for lack of personal jurisdiction. In their motions, C.S. and E.S. noted that none
3
of the acts L.S. complained of had occurred in Kansas, that they had not been Kansas
residents for nearly 20 years, and that the Kansas court lacked personal jurisdiction.
On November 18, 2021, the district court held a joint hearing on the PFS petitions.
L.S. appeared in person and the defendants did not appear. The district court denied the
defendants' motions to dismiss, noting that although none of the acts outlined in L.S.'s
petition occurred in Kansas, the court still had personal jurisdiction over C.S. and E.S.
because they had been personally served. The district court heard testimony from L.S.,
under examination by the court, and she recounted the allegations in her petitions. The
district court allowed L.S. to amend her petitions so the requested relief covered W.S.
After reviewing the petitions and hearing the testimony, the district judge stated:
"I am going to find that this is a continuing series of events that it sounds to the Court it is
clear that it started outside of the state of Kansas, in the state of Alabama, continued into
the state of Montana, and that is course of conduct, specifically harassment, that
continues now that you're living in the state of Kansas. Therefore, I do believe that there
is sufficient clear and convincing evidence which is actually—the Court only has to find
a preponderance of the evidence, meaning it's more likely than not that this behavior has
occurred. However, I do believe that this behavior had occurred. However, I do believe
that there's an even higher burden that's been met. So I will grant you a protection from
stalking against both [C.S.] and [E.S.]."
The district court proceeded to collect personal information about C.S. and E.S. to
enter the final orders into the NCIC National Database. The district court then formally
announced its ruling, noting that it had personal and subject matter jurisdiction and that
although "some of these events occurred outside the state of Kansas," L.S.'s parents'
behavior was "ongoing and continuing" and L.S. had presented sufficient evidence to
support that her parents were "a credible threat to the physical safety" of L.S. and W.S.
4
C.S. and E.S. obtained Kansas counsel, who entered an appearance on their behalf,
and each filed a "Motion to Alter or Amend Judgment and to Dismiss Action." In the
motions, C.S. and E.S. attacked the district court's finding of personal jurisdiction, noting
that they had not been present in Kansas and that none of the alleged acts of harassment
took place in Kansas—all the conduct supporting the orders occurred in either Alabama
or Montana. C.S. and E.S. requested the district court to dismiss L.S.'s actions for lack of
jurisdiction.
The district court held a hearing on the motions on January 7, 2022. L.S. obtained
an attorney to represent her at the hearing. C.S. and E.S. argued that the district court had
erred in finding it had personal jurisdiction over them because they had committed no
acts inside Kansas and had not submitted to jurisdiction in Kansas. They also argued the
evidence at the first hearing was insufficient to support the PFS orders because any
actions they had taken had a legitimate purpose. L.S.'s attorney maintained that C.S. and
E.S. had established minimum contacts with Kansas sufficient to establish personal
jurisdiction. The district court denied the motions, finding it had personal jurisdiction
over C.S. and E.S. under K.S.A. 2021 Supp. 60-308(b)(1)(B) and (b)(1)(L). The court
explained that C.S. and E.S. had been personally served and had committed a "tortious
act in this state, i.e., intentionally—intentional infliction of emotional distress, tort of
outrage, breach of privacy, defamation, etc." C.S. and E.S. each timely appealed the
district court's judgment. This court consolidated the appeals.
PERSONAL JURISDICTION
C.S. and E.S. argue that the district court erroneously found that it had personal
jurisdiction over them because they did not avail themselves to the privilege of
conducting activities in Kansas and they did not invoke the benefits and protections of
Kansas laws. L.S. contends that her parents' harassing "course of conduct through family
members, their attorneys, and the past cases evidenced in Alabama and Montana" gave
5
the district court personal jurisdiction under K.S.A. 2021 Supp. 60-308(b)(1)(B) and
(b)(1)(L).
Appellate courts exercise unlimited review of jurisdictional issues because
whether jurisdiction exists is a question of law. Norris v. Kansas Employment Security
Bd. of Review, 303 Kan. 834, 837, 367 P.3d 1252 (2016). As the plaintiff/petitioner, L.S.
bears the burden of establishing the district court's jurisdiction over C.S. and E.S.
Merriman v. Crompton Corp., 282 Kan. 433, 439, 146 P.3d 162 (2006); Kluin v.
American Suzuki Motor Corp., 274 Kan. 888, 893, 56 P.3d 829 (2002).
Before turning to Kansas law on personal jurisdiction of courts over nonresident
defendants, we will briefly survey how other states have addressed whether personal
jurisdiction is required to enter a protective order against a nonresident defendant—even
though neither party has discussed decisions from other states in their briefing. Cases
from other states have reached conflicting conclusions. Several states have found that
personal jurisdiction is a prerequisite for a court to issue any protective order against a
nonresident defendant. See, e.g., Becker v. Johnson, 937 So. 2d 1128, 1131 (Fla. Dist. Ct.
App. 2006) (holding "[t]he 'constitutional touchstone remains whether the defendant
purposefully established "minimum contacts" in the forum State,'" and finding
nonresident husband's phone calls were insufficient contacts); T.L. v. W.L., 820 A.2d 506,
515-16 (Del. Fam. Ct. 2003) (holding nonresident husband lacked minimum contacts to
make it reasonable for him to appear and defend against his wife's request for a protective
order and noting that she could seek such an order in the state where the conduct
occurred).
On the other hand, at least one state—Iowa—has found that personal jurisdiction
over a nonresident defendant is unnecessary to issue a protective order on behalf of a
resident under the "status" exception to personal jurisdiction. Bartsch v. Bartsch, 636
N.W.2d 3, 6 (Iowa 2001) (upholding protective order over a nonresident because the
6
court's ruling did not purport to grant affirmative relief against the defendant husband,
but merely preserved the protected status accorded to his wife as a resident of the state).
But most states have drawn a distinction between temporary and final—or
prohibitive and affirmative—orders, finding that personal jurisdiction is not required to
enter temporary orders to protect the status of their resident, but it is required to enter a
final order that imposes obligations on the nonresident defendant and is accompanied by
collateral consequences, such as registration on national databases and the potential loss
of the constitutional right to a firearm. See Fox v. Fox, 197 Vt. 466, 106 A.3d 919 (2014);
Hemenway v. Hemenway, 159 N.H. 680, 992 A.2d 575 (2010); Caplan v. Donovan, 450
Mass. 463, 879 N.E.2d 117 (2008); Spencer v. Spencer, 191 S.W.3d 14 (Ky. Ct. App.
2006); Shah v. Shah, 184 N.J. 125, 875 A.2d 931 (2005).
The orders at issue in this case were final orders, accompanied by collateral
consequences for the nonresident defendants—C.S. and E.S. were placed on the NCIC
National Database. Thus, under the rationale of most jurisdictions that have addressed the
matter, the district court is required to have personal jurisdiction over the nonresident
defendant to enter final orders of protection from abuse or stalking.
Kansas long-arm statute
In Kansas, personal jurisdiction of courts over nonresident defendants is governed
by the Kansas long-arm statute, K.S.A. 2021 Supp. 60-308(b). We will set forth the part
of that statute at issue in this case:
"(b) Submitting to jurisdiction. (1) Any person, whether or not a citizen or
resident of this state, who in person or through an agent or instrumentality does any of the
following acts, thereby submits the person and, if an individual, the individual's
7
representative, to the jurisdiction of the courts of this state for any claim for relief arising
from the act:
....
(B) committing a tortious act in this state;
....
(L) having contact with this state which would support jurisdiction consistent
with the constitutions of the United States and of this state."
A two-step analysis is used when determining whether a Kansas court has personal
jurisdiction over a nonresident defendant. First, the court must determine whether
statutes—typically K.S.A. 2021 Supp. 60-308(b)—or caselaw provide a basis for the
exercise of jurisdiction over a particular defendant. If there is a basis for jurisdiction
under the long-arm statute, the court must next inquire if the exercise of personal
jurisdiction complies with the due process requirements of the Fourteenth Amendment to
the United States Constitution. Merriman, 282 Kan. at 440; Kluin, 274 Kan. at 894. That
said, depending on the statutory basis relied on, these steps are coterminous as Kansas'
long-arm statute permits the exercise of any jurisdiction consistent with the Kansas and
United States Constitutions. See K.S.A. 2021 Supp. 60-308(b)(1)(L).
"The Due Process Clause of the Fourteenth Amendment constrains a State's
authority to bind a nonresident defendant to a judgment of its courts." Walden v. Fiore,
571 U.S. 277, 283, 134 S. Ct. 1115, 188 L. Ed. 2d 12 (2014). Under the due process
analysis, a court must determine whether a defendant has minimum contacts with Kansas
so that they should reasonably anticipate being hauled into court in Kansas. If such
contacts exist, the remaining question is whether the exercise of personal jurisdiction
would offend traditional notions of "'fair play and substantial justice.'" Burger King Corp.
v. Rudzewicz, 471 U.S. 462, 476, 105 S. Ct. 2174, 85 L. Ed. 2d 528 (1985).
At the first hearing on L.S.'s PFS petitions, the district court stated, "[T]he fact that
[C.S. and E.S.] were personally served does give the Court personal jurisdiction over
8
both of them." The district court seemed to believe that any action filed under the
Protection from Stalking, Sexual Assault or Human Trafficking Act, K.S.A. 2021 Supp.
60-31a01 et seq., conveyed personal jurisdiction of the court over any defendant served
with process. But simply obtaining service of process over C.S. and E.S. cannot create
personal jurisdiction, especially when that service was not even carried out in this state.
There is no provision in K.S.A. 2021 Supp. 60-31a01 et seq. or in the Kansas long-arm
statute, K.S.A. 2021 Supp. 60-308, that grants a Kansas court personal jurisdiction over
out-of-state defendants simply by obtaining personal service of process against the
defendants.
At the hearing on the motion to alter or amend judgment, the district court found
two statutory bases for the exercise of personal jurisdiction over C.S. and E.S.: (1) under
K.S.A. 2021 Supp. 60-308(b)(1)(B) by their commission of a tortious act in the state and
(2) under K.S.A. 2021 Supp. 60-308(b)(1)(L) based on their minimum contacts with
Kansas. We will examine each of these provisions.
Committing a tortious act in this state
Even when accepting L.S.'s testimony and allegations as true and broadly
construing K.S.A. 2021 Supp. 60-308(b)(1)(B), the district court's finding that L.S.
presented a prima facie case of personal jurisdiction because C.S. and E.S. committed a
tortious act in Kansas is erroneous. The district court did not explain its finding in detail,
but it clarified that "the committing of the tortious act in this state, i.e., intentionally—
intentional infliction of emotional distress, tort of outrage, breach of privacy, defamation,
etc., would also place [C.S. and E.S.] in—under the Kansas long-arm statute."
Although L.S.'s allegations might be read as supporting a claim of abuse of
process in Montana or Alabama, L.S. did not specifically allege in her petitions that her
parents had committed any torts within the state. Essentially, L.S. requested the
9
protection from stalking orders to preemptively compel her parents not to use Kansas'
legal system in their attempts to gain custody of W.S.—none of their alleged conduct
occurred in or was aimed at Kansas.
"Under Kansas law, 'committing a tortious act in this state' is broadly construed
under the long-arm statute to include tortious acts performed outside the state which
cause injury in Kansas to a Kansas resident. It makes no difference whether the injury
was physical or economic." Midwest Manufacturing, Inc. v. Ausland, 47 Kan. App. 2d
221, Syl. ¶ 3, 273 P.3d 804 (2012). That said, this basis for personal jurisdiction does not
"replace the need to demonstrate minimum contacts that constitute purposeful availment,
that is conduct by the nonresident defendant that invoked the benefits and protections of
the state or was otherwise purposely directed toward a state resident." (Emphasis added.)
Aeroflex Wichita, Inc. v. Filardo, 294 Kan. 258, 282, 275 P.3d 869 (2012); see also Far
West Capital, Inc. v. Towne, 46 F.3d 1071, 1078 (10th Cir. 1995) ("[C]ourts finding
personal jurisdiction based upon an intentional tort analysis have not created a per se rule
that an allegation of an intentional tort creates personal jurisdiction. Instead, they have
emphasized that the defendant had additional contacts with the forum.").
If the district court's interpretation of K.S.A. 2021 Supp. 60-308(b)(1)(B) is
correct, then L.S. could move to Oklahoma, and then to Texas, and then to any other
state, and every new state she resided in would have personal jurisdiction over C.S. and
E.S. based on their commission of a tortious act. Construing the statutory provision this
broadly would render it meaningless.
C.S. and E.S. did not commit any tortious acts aimed at Kansas—all the conduct
alleged occurred in Montana or Alabama before L.S. moved to Kansas. While the district
court would likely have had jurisdiction over C.S. and E.S. if they had filed a custody
lawsuit in Kansas (thereby seeking the benefits and protections of this state), they did not
do so. The actions outlined in L.S.'s petition and her testimony did not include tortious
10
conduct aimed into this state. As a result, K.S.A. 2021 Supp. 60-308(b)(1)(B) did not
provide a basis for the district court to exercise jurisdiction over C.S. and E.S.
Minimum contacts with Kansas
Next, this court must consider whether C.S. and E.S. had sufficient contacts with
Kansas to exercise personal jurisdiction under K.S.A. 2021 Supp. 60-308(b)(1)(L). When
K.S.A. 2021 Supp. 60-308(b)(1)(L) is used as a basis for jurisdiction, the long-arm statute
inquiry and the constitutional due process inquiry merge. Thus, the question simply
becomes whether the exercise of jurisdiction comports with due process. As noted above,
due process requires a showing that "the nonresident defendant purposely established
minimum contacts with the forum state, thereby invoking the benefits and protections of
its laws." In re Hesston Corp., 254 Kan. 941, Syl. ¶ 3, 870 P.2d 17 (1994).
The United States Supreme Court has made clear that "'it is essential in each case
that there be some act by which the defendant purposefully avails itself of the privilege of
conducting activities within the forum State, thus invoking the benefits and protections of
its laws.'" Burger King Corp., 471 U.S. at 475. The relationship between a nonresident
defendant, the forum, and the defendant's suit-related conduct must manifest a substantial
connection with the state. Walden, 571 U.S. at 283-84; see also Merriman, 282 Kan. 433,
Syl. ¶ 18 ("The purposeful availment requirement ensures that a defendant will not be
haled into a jurisdiction solely as a result of random, fortuitous, or attenuated contacts.").
L.S. contends that the district court had jurisdiction over her parents because their
pattern of harassing conduct crossed state lines into Kansas. More specifically, L.S.
characterizes the following as her parents' contacts with Kansas: (1) E.S. contacting a
Kansas sheriff to carry out service of process for the Montana custody case; (2) the
service of process of that Montana case at L.S.'s residence in Kansas; (3) threatening to
file a custody case in Kansas by their attorney; and (4) contacting L.S. through family
11
members. The district court similarly characterized their contacts as "continuing even
after [L.S.] moved to Dodge City, including the contact with the sheriff, the service of
process on [L.S.] here in Kansas, threats of additional filings here in the state of Kansas
and ongoing contact that occurred through—at the behest of the—of [C.S. and E.S.]."
The district court's findings related to C.S.'s and E.S.'s "ongoing contact" with L.S.
and the state of Kansas are not supported by the record. As both L.S. and the district court
recognized, none of the conduct alleged in L.S.'s petition occurred in Kansas. And "[t]he
mere allegation of injury to a resident caused by an out-of-state defendant does not
necessarily establish minimum contacts." Ausland, 47 Kan. App. 2d at 227.
Instead, the minimum contacts analysis demands that courts make a case-by-case
analysis of whether a defendant "purposefully sought to obtain the benefits of the forum
state's laws." 47 Kan. App. 2d at 227. L.S. may have reasonably experienced trauma and
injury based on her parents' past behavior after her move to Kansas, but any injury that
she suffered was not caused by conduct that was aimed at this state. While it is true that
they accomplished service of process of the Montana case and were apparently
considering filing another such case in Kansas, there is no other evidence to suggest they
made any contact with L.S. while she was in Kansas. See Ausland, 47 Kan. App. 2d at
230 (holding that obtaining service over the plaintiff in a prior lawsuit was not a
substantial enough contact to create specific jurisdiction).
L.S. testified that her uncle contacted her to warn of her parents' intent to try to
gain custody of W.S.—this communication was not made on her parents' behalf and is
not attributable to them in the minimum contacts analysis. The only other contact was
through L.S.'s sister, who appears to have discussed their parents—but there was no
allegation that she did so at the behest of C.S. and E.S. Even if such an allegation had
been made, a single communication would not constitute minimum contacts sufficient for
a Kansas court to exercise jurisdiction. See Kearns v. New York Community Bank, No.
12
115,470, 2017 WL 1148418, at *7 (Kan. App. 2017) (unpublished opinion) ("'It is well-
established that phone calls and letters are not necessarily sufficient in themselves to
establish minimum contacts.'") (quoting Olsen v. Mapes, 139 Fed. Appx. 54, 57 [10th
Cir. 2005] [unpublished opinion]).
"'A case should not be dismissed for want of jurisdiction as being outside the
scope of the statute, unless by no reasonable construction of the language could it be said
to fall within the statute's terms.'" Aeroflex, 294 Kan. at 274. But the record simply does
not support that C.S. and E.S. established minimum contacts with Kansas. As the United
States Supreme Court has repeatedly emphasized, any minimum contacts analysis must
focus on "the defendant's contacts with the forum State itself, not the defendant's contacts
with persons who reside there." Walden, 571 U.S. at 285.
Here, the only contact that C.S. and E.S. had with L.S. that could be considered to
have occurred within Kansas was their attorney's representation to L.S.'s attorney that
they intended to file a custody lawsuit in Kansas if the Montana case was dismissed. C.S.
and E.S. had no direct contact with their daughter and granddaughter in Kansas, and their
only contact with the state was in acquiring service of process through the Ford County
Sheriff's Office for their Montana-based custody case. While there is no requirement that
a defendant be physically present in the forum state for the state to obtain personal
jurisdiction, C.S.'s and E.S.'s conduct and minute contact with Kansas cannot form the
necessary connection to allow jurisdiction over them.
In sum, we find the district court lacked personal jurisdiction over C.S. and E.S.
under K.S.A. 2021 Supp. 60-308(b)(1)(L). C.S. and E.S. did not have minimum contacts
with Kansas so that granting personal jurisdiction over them would be consistent with
fundamental notions of fair play and substantial justice. C.S. and E.S. did not avail
themselves of the privilege of conducting activities within Kansas, nor did they invoke
the benefits and protections of Kansas laws. As a result, we reverse the district court's
13
judgment and vacate the final PFS orders as void for lack of personal jurisdiction. We
need not address whether there was sufficient evidence to support the PFS orders.
Reversed.
14 | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482901/ | NOT DESIGNATED FOR PUBLICATION
No. 125,153
IN THE COURT OF APPEALS OF THE STATE OF KANSAS
RAY ANTHONY MILES,
Appellant,
v.
STATE OF KANSAS,
Appellee.
MEMORANDUM OPINION
Appeal from Shawnee District Court; MARY E. CHRISTOPHER, judge. Opinion filed November
10, 2022. Affirmed.
Ray Anthony Miles, appellant pro se.
Stephen O. Phillips, assistant attorney general, and Derek Schmidt, attorney general, for appellee.
Before ATCHESON, P.J., BRUNS, J., and PATRICK D. MCANANY, S.J.
PER CURIAM: This appeal arises out of the district court's dismissal of Ray
Anthony Miles' pro se petition against the State of Kansas alleging false imprisonment
and seeking to recover $5 billion in damages. After Miles filed a motion for default
judgment, the district court issued an order to show cause why his petition should not be
dismissed. Ultimately, the district court found that the entry of a default judgment against
the State would be inappropriate and dismissed Miles' petition under K.S.A. 60-212(b)(6)
for failure to state a claim. In addition, the district court found that it lacked subject
matter jurisdiction. Under the circumstances presented, we find that the district court
appropriately dismissed Miles' petition.
1
FACTS
Miles is incarcerated as a result of an incident that occurred at the WIBW-TV
studios in Topeka on May 23, 2012. Although he was acquitted of one charge, a Shawnee
County jury convicted him of three counts of aggravated battery, one count of battery,
one count of criminal threat, and one count criminal damage to property. The district
court subsequently sentenced Miles to consecutive sentences of 88 months in prison and
12 months in jail. On direct appeal, a panel of this court affirmed his convictions and
sentence. State v. Miles, No. 110,511, 2014 WL 7565767 (Kan. App. 2014) (unpublished
opinion) (Miles I). Thereafter, on April 21, 2016, the Kansas Supreme Court denied
review.
Over the past six years, Miles has unsuccessfully filed two pro se K.S.A. 60-1507
motions. In addition, he has filed several pro se civil lawsuits against governmental
entities in both State and federal court relating to his incarceration. Moreover, Miles has
been denied relief in each of these lawsuits. See Miles v. Shawnee County, No. 123,033,
2021 WL 841935 (Kan. App. 2021) (unpublished opinion) (Miles II); Miles v. Shawnee
County, No. 123,075, 2021 WL 762086 (Kan. App. 2021) (unpublished opinion) (Miles
III); Miles v. Shawnee County Dept. of Corrections, No. 124,026, 2022 WL 983270 (Kan.
App. 2022) (unpublished opinion) (Miles IV). See also Miles v. Kansas, 770 Fed. Appx.
432 (10th Cir. 2019) (unpublished opinion) (dismissing appeal from Miles v. Kansas, No.
18-3168-SAC, 2019 WL 9595699 [D. Kan. 2019] [unpublished opinion]).
On September 27, 2021, Miles filed the pro se petition that is the subject of this
appeal in the Shawnee County District Court. In the petition, he alleged that he was
falsely imprisoned by the State of Kansas. In addition to filing several other motions,
Miles filed a motion for default judgment on November 16, 2021. After reviewing the
motion for default, the district court issued an order to show cause as to why the petition
should not be dismissed under K.S.A. 60-212(b)(1) and (b)(6). In its order to show cause,
2
the district court explained that in order for Miles to succeed on a false imprisonment
claim, he would have to show that his underlying conviction had either been reversed or
declared invalid.
On December 30, 2021, the district court entered a memorandum decision and
order dismissing Miles' petition. In doing so, the district court determined that Miles had
failed to allege an essential element to state a false imprisonment claim. In particular, the
district court found that Miles failed to allege he was imprisoned without legal excuse.
The district court futher found that amending his petition would be futile. Accordingly,
the district court concluded—among other things—that Miles' petition failed to state a
claim upon which relief could be granted.
ANALYSIS
On appeal, Miles contends that the district court erred in dismissing his petition
seeking damages from the State of Kansas for false imprisonment. Our review of the
district court's granting of a motion to dismiss is unlimited. Platt v. Kansas State
University, 305 Kan. 122, 126, 379 P.3d 362 (2016). "When the district court has granted
a motion to dismiss, this court must assume the truth of the facts alleged by the plaintiff,
along with any inferences that can reasonably be drawn from those facts." Hale v. Brown,
287 Kan. 320, 322, 197 P.3d 438 (2008). However, we not required to accept conclusory
or contradictory allegations. Gatlin v. Hartley, Nicholson, Hartley & Arnett, P.A., 29
Kan. App. 2d 318, 319, 26 P.3d 1284 (2001) (quoting Grindsted Products, Inc. v. Kansas
Corporation Comm'n, 262 Kan. 294, 303, 937 P.2d 1 [1997]).
Based on our review of the record, we find that it was appropriate for the district
court to deny Miles' request for a default judgment against the State. K.S.A. 2021 Supp.
60-255(c) provides: "A default judgment may be entered against the state, its officers or
its agencies only if the claimant establishes a claim or right to relief by evidence that
3
satisfies the court." As a result, we find that the district court properly issued an order to
show cause to determine whether Miles' petition stated a claim upon which relief could
be granted before ruling on the motion for default judgment. We also find that the district
court properly determined that Miles had failed to state a claim upon which relief could
be granted and appropriately dismissed his petition under K.S.A. 2021 Supp. 60-
212(b)(6).
In a civil action for false imprisonment, the plaintiff must show that the defendant
restrained his or her personal freedom "without legal excuse" by words, acts, threats, or
personal violence which caused the plaintiff to be fearful of leaving. Mader v. Custom
Wood Products, No. 123,124, 2021 WL 3439243, at *4 (Kan. App. 2021) (unpublished
opinion); see also Thompson v. General Finance Co., 205 Kan. 76, 88, 468 P.2d 269
(1970) (To establish a claim for false imprisonment, it is necessary to show "that the
individual be restrained of his liberty without any sufficient legal cause therefor, and by
words or acts which the one being restrained fears to disregard." [Emphasis added.]); PIK
Civ. 4th 127.20 (False imprisonment "is the restraint of the personal freedom of an
individual without legal excuse by any words, acts, threats, or personal violence that
under the circumstances the one being restrained fears to disregard." [Emphasis added.]).
In his petition, Miles failed to allege that he was being held without legal cause or
excuse. Likewise, Miles fails to allege that his convictions and sentence had been
reversed, that it has been declared invalid, or that it has otherwise been set aside.
Consequently, Miles did not allege the essential elements of a false imprisonment claim,
and we conclude that the district court did not err in dismissing Miles' petition under
K.S.A. 2021 Supp. 60-212(b)(6) for failure to state a claim upon which relief may be
granted.
We also find that the district court's dismissal of Miles' petition is consistent with
the United States Supreme Court's decision in Heck v. Humphrey, 512 U.S. 477, 114 S.
4
Ct. 2364, 129 L. Ed. 2d 383 (1994). In Heck, the Supreme Court addressed a similar issue
in the context of a 42 U.S.C. § 1983 action and found that a valid claim for
unconstitutional imprisonment cannot be stated unless the conviction or sentence has
been reversed, expunged, declared invalid by an appropriate state court, or undermined
by a federal court's grant of habeas relief. 512 U.S. at 486-87. Significantly, the United
States Court of Appeals for the Tenth Circuit relied on Heck in dismissing Miles' appeal
in one of his other lawsuits arising out of his incarceration. Specifically, the court found
that "Miles' conviction and sentence have not been reversed, expunged, declared invalid
by an appropriate state court, or undermined by a federal court's grant of habeas relief.
Heck thus bars [his] damages action, rendering the appeal frivolous." Miles, 770 Fed.
Appx. at 433.
We now turn to Miles' contention that the district court committed judicial
misconduct. In particular, he argues that the district court failed to timely rule on various
motions in violation of Kanas Supreme Court Rule 166(a) (2022 Kan. S. Ct. R. at 234).
We exercise unlimited review over judicial misconduct claims, considering the particular
facts and circumstances surrounding the allegation. State v. Boothby, 310 Kan. 619, 624,
448 P.3d 416 (2019).
Rule 166(a) requires that a district court should "issue a ruling on a civil motion no
later than 30 days after the motion's final submission . . . ." (2022 Kan. S. Ct. R. at 234.)
Although the record reflects that Miles filed several motions while this action was
pending in the district court, we cannot tell from the record on appeal when or if the State
was served with these motions. See Friedman v. Kansas State Bd. of Healing Arts, 296
Kan. 636, 644, 294 P.3d 287 (2013) ("When facts are necessary to an argument, the
record must supply those facts and a party relying on those facts must provide an
appellate court with a specific citation to the point in the record where the fact can be
verified."). As a result, we cannot determine when Miles' motions were deemed to be
finally submitted to the district court for ruling.
5
Nevertheless, even if Miles had come forward with an adequate record to show
that the district court failed to meet the 30-day deadline set forth in Rule 166(a), this
would not rise to the level of judicial misconduct. Rule 166(c) provides that if the district
court fails to meet the deadline, then it is to file a report with the judicial administrator
that explains why the deadline was not met. Hence, we find that the rule is intended to
regulate the internal administration of Kansas Judicial Branch and noncompliance does
not equate to judicial misconduct.
In summary, we conclude that the district court did not err in dismissing Miles'
petition under K.S.A. 2021 Supp. 60-212(b)(6) for failure to state a claim of false
imprisonment on which relief can be granted. However, we note that the district court's
memorandum decision and order is silent on whether the dismissal was with or without
prejudice. Based on our review of Miles' short petition, we see no insurmountable legal
bar to the claim as it appears on the face of the petition. In that circumstance, a dismissal
for failure to state a claim under K.S.A. 2021 Supp. 60-212(b)(6) typically would be
without prejudice. As a result, we construe the dismissal to be without prejudice and
affirm on that basis. In light of this decision, it is unnecessary for us to reach the other
arguments presented by the parties in their briefs.
Affirmed.
6 | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482910/ | RENDERED: JULY 29, 2022; 10:00 A.M.
NOT TO BE PUBLISHED
MODIFIED: NOVEMBER 10, 2022; 10:00 A.M.
Commonwealth of Kentucky
Court of Appeals
NO. 2021-CA-0117-MR
SPA RENTALS, LLC; KATHLEEN A.
IVERSEN; AND WALTER P.
IVERSEN APPELLANTS
APPEAL FROM PULASKI CIRCUIT COURT
v. HONORABLE TERESA KAY WHITAKER, JUDGE
ACTION NO. 19-CI-00379
SOMERSET-PULASKI COUNTY
AIRPORT BOARD APPELLEE
AND
NO. 2021-CA-0152-MR
SOMERSET-PULASKI COUNTY
AIRPORT BOARD CROSS-APPELLANT
CROSS-APPEAL FROM PULASKI CIRCUIT COURT
v. HONORABLE TERESA KAY WHITAKER, JUDGE
ACTION NO. 19-CI-00379
SPA RENTALS, LLC; KATHLEEN A.
IVERSEN; AND WALTER P.
IVERSEN CROSS-APPELLEES
OPINION
AFFIRMING
** ** ** ** **
BEFORE: CALDWELL, MCNEILL, AND TAYLOR, JUDGES.
CALDWELL, JUDGE: SPA Rentals, LLC (hereinafter “SPA”) and Kathleen and
Walter Iversen (hereinafter “Iversen”) appeal from the Pulaski Circuit Court order
granting summary judgment in favor of the Somersert-Pulaski County Airport
Board (hereinafter the “Board”), and a later order granting attorney’s fees to the
Board. The Board cross-appeals. Having reviewed the proceedings below, the
briefs of the parties and the applicable law, we affirm.
RELEVANT FACTS AND PROCEDURE
The Board operates the Lake Cumberland Regional Airport located in
Somerset, Kentucky. SPA is a foreign limited liability company organized in Ohio
and is now engaged in the business of rehabilitating and selling aircraft, but
performed maintenance services for customers of the airport at the time the
contractual arrangement commenced between it and the Board. Walter Iversen is
the sole member of SPA.
-2-
In 2009, the Board and SPA executed two year-long lease agreements
wherein each of which SPA leased two hangars.1 The parties also executed a
LFBO.2 The leases were renewable on a yearly basis unless one of the parties
tendered written notice of the intention not to renew. The leases provided for the
Board to collect any expenses related to the collection of any monies due under the
leases, including reasonable attorney’s fees, but did not provide for any
prejudgment interest. The operator agreement stated that renewal of the contract
would not be “arbitrarily denied” if all of the “required qualifications” were met.
The leases renewed on a yearly basis until 2012, when the Board sent
SPA a letter announcing its intention not to renew the leases or the operator
agreement at their expiration at the end of the year. The Board had determined that
the airport needed to lease the hangars to an entity which would provide
maintenance services to patrons of the airport. Since the first agreements had been
entered, SPA had ceased providing such services and had transitioned to
1
The rental amount for Hangar B-3 was $400 per month and for Hangar B-4 was $600. The
limited fixed-base operator (“LFBO”) fee was an additional $100 a month, so the total that SPA
owed the Board each month was $1,100.
2
“A fixed-base operator fuels, services, and hangars airplanes in much the same way that a
service station provides similar services for automobiles. American Eagle Ins. Co. v. Thompson,
85 F.3d 327, 328 (8th Cir. 1996); City of Pompano Beach v. F.A.A., 774 F.2d 1529, 1533 n.5
(11th Cir. 1985).” Abou-Sakher v. Humphreys Cty., 955 S.W.2d 65, 67 n.1 (Tenn. Ct. App.
1997).
-3-
purchasing and refurbishing airplanes for sale in the hangars it had leased.3 The
Board also sent some lease modifications, should SPA want to execute new lease
contracts with the new terms. The parties could not come to an accord on the
modifications, and on January 1, 2013, SPA became a holdover tenant at the
expiration of the last lease term.
In March of 2013, SPA filed a formal complaint with the Federal
Aviation Administration (“FAA”) alleging the Board had discriminated against
SPA by offering the operator agreement and the hangars to another entity. During
the pendency of the litigation, SPA unilaterally reduced the amount of monthly
rent it paid after the expiration of the leases and agreement to a total of only $500 a
month – less than half what it had paid under the lease and the operator agreement.
The Board did not acknowledge the validity of the lesser amount but did accept the
monthly tender.
3
At the end of 2011, the Board notified SPA of its intent to let
SPA’s lease and LFBO agreements expire. The Board also
determined that there was an unmet need for maintenance services
at the Airport, so it solicited bids from third-party maintenance
service providers. SPA did not bid, but two bidders emerged.
These bidders demanded certain incentives should the Board
decide to engage their services. The Board picked Somerset,
executing a lease and an LFBO agreement with it on March 24,
2012. Under those agreements, the Board agreed to pay up to
$8,000 of the cost of Somerset’s public liability insurance, forgo
receiving rent payments, and charge only a $1 LFBO fee.
SPA Rental, LLC v. Somerset-Pulaski Cty. Airport Bd., 884 F.3d 600, 602 (6th Cir. 2018).
-4-
The FAA ruled in favor of the Board and the Sixth Circuit affirmed
that ruling in March of 2018. Id. At the conclusion of the litigation begun by
SPA, and after a stay imposed by a court handling the Iversens’ bankruptcy
petition was lifted, the Board sent SPA a letter requesting they vacate the hangars
within sixty (60) days and pay all past due rent. SPA did not vacate or remit any
funds to the Board, so the Board met and authorized the Airport Manager to seek
recovery of possession of the hangars. A forcible detainer action was filed in
Pulaski District Court, naming both SPA and Mr. Iversen4 in June of 2018.
When no decision was ever entered by the district court, another
forcible detainer action was filed by the Board in January of 2019. The parties
negotiated an agreed judgment wherein SPA would vacate the hangars by February
25, 2019. SPA did vacate the hangars on or before February 25, 2019.
The Board met again and determined to begin legal proceedings to
recover past due rents and costs, including attorney’s fees. The underlying matter
was filed.
In February of 2020, the Pulaski Circuit Court granted summary
judgment in favor of the Board and awarded $50,695.65, representing past due rent
in the amount of $40,400 and 8% interest in the amount of $10,295.65, to be set off
4
All rental payments, whether under the lease or during the holdover term, had always been paid
from Mr. and Mrs. Iversen’s personal checking account.
-5-
by $1,318.26 that SPA had paid in maintenance costs during the holdover term
where such maintenance should have been provided by the Board. Additionally,
the court found that the corporate veil should be pierced, and Mr. Iversen found
personally liable on the judgment, but specifically found Mrs. Iversen should not
be liable.5 Finally, the court granted the Board “reasonable attorney’s fees” to be
determined separately.
In December of 2020, another order was entered by the Pulaski
Circuit Court addressing attorney’s fees in favor of the Board in the amount of
$26,200. This order incorporated the prior order and was made final and
appealable. SPA and Iversen filed this appeal and the Board cross-appealed on the
question of whether the trial court erred in not granting it attorney’s fees
appurtenant to the forcible detainer action because no bill of costs was timely filed
during the forcible detainer litigation.6 Having reviewed the record below, the
briefs of the parties, and the applicable law, we affirm both orders.
5
Neither party appeals the court’s determination that Mrs. Iversen is not liable because she is not
a member of the LLC.
6
Kentucky Rules of Civil Procedure (hereinafter “CR”) 54.04. See Brett v. Media Gen.
Operations, Inc., 326 S.W.3d 452, 460 (Ky. App. 2010).
-6-
STANDARD OF REVIEW
When reviewing whether a trial court has properly considered a
motion for summary judgment, the appellate court reviews the record de novo to
ensure it supports the trial court’s conclusion that there is “no genuine issue as to
any material fact and that the moving party is entitled to a judgment as a matter of
law.” CR 56.03.7 “Because summary judgment does not require findings of fact
but only an examination of the record to determine whether material issues of fact
exist, we generally review the grant of summary judgment without deference to
either the trial court’s assessment of the record or its legal conclusions.” Hammons
v. Hammons, 327 S.W.3d 444, 448 (Ky. 2010) (citing Malone v. Kentucky Farm
Bureau Mut. Ins. Co., 287 S.W.3d 656, 658 (Ky. 2009)).
Whether and in what amount to grant attorney’s fees to a litigant is a
matter up to the discretion of the trial court and will be reviewed on appeal for an
abuse of that discretion. Banker v. Univ. of Louisville Athletic Ass’n, Inc., 466
S.W.3d 456, 465 (Ky. 2015).
ANALYSIS
At the outset, we first address SPA and Iversen’s contention that the
Board had no authority to file the suit seeking damages for breach of the lease
agreements. SPA and Iversen simply allege that the Board was not properly
7
Kentucky Rule of Civil Procedure.
-7-
constituted so as to have the authority to vote to allow the manager to bring the
suit, but wholly fail to provide any argument as to how the Board was infirm.
Rather, all citations to the record provided support the trial court’s
conclusion that the Board had a proper quorum when it voted in 2018 to authorize
the manager to bring suit to recover possession of the hangars and any rents due
from MSI, the name under which SPA was conducting business. Further, as cited
by the trial court, in 2019 the Board authorized the manager to seek possession and
monies due from the Iversens specifically.8 Again, SPA and Iversen point to no
particular infirmity which would call into question the legitimacy of the Board’s
actions. The trial court’s determination that there was no issue of material fact to
question that a properly constituted Board granted the management of the airport
the authority to seek possession of the hangars and past due and owing rents is,
therefore, affirmed.
SPA and Iversen do not contest that rent was owed to the Board for
the hangars, they question only the amount of the rent the trial court assessed for
the monthly rentals during the holdover term. Upon the expiration of the written
lease and the onset of the litigation, SPA and Iversen unilaterally began paying an
8
The monthly payments for rent and the operator’s license had always been remitted from an
account not in the name of the LLC, but a personal checking account in the name of Mr. and
Mrs. Iversen. Such represents Mrs. Iversen’s sole connection and reason for her inclusion as a
defendant in the suit below.
-8-
amount less than half the rentals due under the lease. SPA and Iversen argue that
the amount they paid was a proper amount, but give no explanation for why they
had executed a lease for years prior which required them to pay twice that “proper
amount.” It is inconceivable that SPA and Iversen negotiated a lease for an
improper amount when, based on that assertion, they apparently readily
determined, after the expiry of the lease, a “proper amount.”
The custom of the parties, as evidenced by the lease, is a reasonable
calculus of the proper amount of the monthly rent for the hangars. Further, the act
of the Board in accepting the reduced monthly payments during the holdover term
did not act to establish a new proper amount of rent, as SPA and Iversen suggest.
The amount of past rent awarded by the trial court is affirmed. See Cass v. Home
Tobacco Warehouse Co., 311 Ky. 95, 98-99, 223 S.W.2d 569, 571 (1949) (“Where
the lease is thus renewed by holding over under this statute, it is presumed that the
terms of the original lease are carried over into the extension provided by the
statute.”).
Mr. Iversen challenges the trial court’s determination that SPA
operated only as his alter ego, leading the court to determine that the corporate veil
should be pierced and Iversen held personally liable for the amount of the
-9-
judgment.9 Generally, the members of a limited-liability company (“LLC”) or
those in leadership positions of a corporation are not liable for the amounts owed
by the entity with which they are involved. However, equity sometimes requires
that a court find that the entity is but a hollow shell intended only to shield its
principles from personal liability and not a separate entity.
Piercing the corporate veil makes the corporation’s debt
“enforceable against those who have exercised dominion
over the corporation to the point that it has no real
separate existence.”
Tavadia v. Mitchell, 564 S.W.3d 322, 328 (Ky. App. 2018) (citing Inter-Tel Techs.,
Inc. v. Linn Station Properties, LLC, infra).
In Kentucky, there are three disparate avenues to piercing the veil.
Kentucky jurisprudence recognizes three basic “theories”
to “pierce the corporate veil” and hold the shareholders
of a corporation responsible for corporate liabilities. As
described in White v. Winchester Land Development
Corp., 584 S.W.2d 56, 61 (Ky. App. 1979), the theories
are “labeled (1) the instrumentality theory; (2) the alter
ego theory; and (3) the equity formulation.”
Daniels v. CDB Bell, LLC, 300 S.W.3d 204, 211-12 (Ky. App. 2009). The
doctrine is also applicable to LLCs. Turner v. Andrew, 413 S.W.3d 272, 277 (Ky.
2013).
9
The trial court determined Mrs. Iversen had no connection to SPA and was dismissed by the
trial court. This determination goes unchallenged on appeal.
-10-
The trial court held that SPA acted as Mr. Iversen’s “alter ego.” The
test to determine if one is operating an entity simply as an alter ego was articulated
in Inter-Tel Technologies, Inc. v. Linn Station Properties, LLC:
This formulation involves two elements: “(1) that the
corporation is not only influenced by the owners, but also
that there is such unity of ownership and interest that
their separateness has ceased; and (2) that the facts are
such that an adherence to normal attributes, viz,
treatment as a separate entity, of separate corporate
existence would sanction a fraud or promote injustice.”
360 S.W.3d 152, 161 (Ky. 2012) (citing White, 584 S.W.2d at 61-62, overruled on
other grounds by Inter-Tel, 360 S.W.3d at 165).
In so finding, the court applied the factors as listed in Bear Inc. v.
Smith, 303 S.W.3d 137, 148 (Ky. App. 2010). No one factor is dispositive, and not
all factors must be present for a finding that the entity is acting as the alter ego of
the individual. The enumerated factors should simply be utilized as guideposts for
a court in analyzing the facts presented.
Courts have identified several factors bearing on this first
relationship such as (1) whether the corporation is
inadequately capitalized, (2) whether the owners observe
corporate formalities, (3) whether the corporation issues
stock or pays dividends, (4) whether it operates without a
profit, (5) whether there is a commingling of corporate
and personal assets, (6) whether the owners use corporate
assets as their own, or in general deal with the
corporation at arms[’] length, (7) whether there are non-
functioning officers or directors, (8) whether the
corporation is insolvent at the time of the transaction, (9)
whether corporate records have been maintained, and
-11-
(10) whether others pay or guarantee debts of the
corporation. No single factor is dispositive.
Id. (citation omitted).
Of these factors, courts have been encouraged to give the most
emphasis to inadequate capitalization, a failure to observe formalities, and
disregard of any distinction between the parent and the subsidiary, as well as a
paramount control by the parent over the decisions of the subsidiary and its day-to-
day operations. See Inter-Tel, 360 S.W.3d at 164.
The trial court noted that SPA apparently held no assets as all rental
payments were consistently made to the Board on checks drawn from a personal
checking account of the Iversens. Noting that the most proper time to adjudge
whether an entity is adequately capitalized is at its formation, the court noted that
there was no suggestion made by SPA that it was ever adequately capitalized and
the fact of the consistent payments from the personal account provided more than
adequate support for the conclusion that SPA was not properly capitalized to
operate as an entity separate from Iversen. See id. at 167; 1 WILLIAM M.
FLETCHER, CYCLOPEDIA OF LAW OF PRIVATE CORPORATIONS § 31 (2021).
The trial court held that SPA appeared to be insolvent and completely
without assets. SPA argued that it was adequately financed through loans from
Iversen, but as the court noted, such only actually buttresses the conclusion that
Iversen operated SPA as his alter ego. No company records were provided to
-12-
establish any formality of operations – no minutes from meetings, or any other
documentation. Lastly, Iversen admitted to paying all liabilities of SPA. Iversen
was the operator of the business, and it is not alleged by Iversen that the concern
had any other employee besides him, so he, of course, dictated day-to-day
operations of the enterprise.
We do not disagree with the trial court’s analysis and determination.
Mr. Iversen operated SPA not at arm’s length, but as if there was no separation
between him and the entity. We hold that filing one form with the Secretary of
State’s office on a yearly basis is simply not sufficient, alone, to support a finding
that one has separated himself from an entity of which he is the sole member such
as to shield one from personal liability. As the court below noted, allowing Iversen
to house his personal aircraft in the hangar leased by SPA and then avoid any
payment of rent due would lead to unjust enrichment, another requirement before
the veil shall be pierced.
Iversen argues consistently that there is nothing to support the
determinations of the trial court as to the Bear factors. But one cannot simply rely
upon the summary proceeding of a motion for judgment, and then argue that no
evidence exists to support the Movant’s position. Rather, the non-moving party
must proffer something. “[A] party opposing a . . . summary judgment motion
cannot defeat it without presenting at least some affirmative evidence showing that
-13-
there is a genuine issue of material fact for trial.” Steelvest, Inc. v. Scansteel Serv.
Ctr., Inc., 807 S.W.2d 476, 482 (Ky. 1991).
Further, Iversen argues that there was no suggestion that SPA
intended to defraud the Board at any time. This argument suggests that such is
necessary before a finding can be made that Iversen was simply employing SPA as
his alter ego. However, the law contains no such requirement. The Board does not
argue, and does not have to argue, that Iversen intended to defraud the Board when
the rental contracts were executed or when monthly rents were paid. There is
simply no requirement that the intent to defraud be present. Rather, there must be
a finding of fraud or injustice. It is the latter which the trial court found exists
here; the court found that it would be unjust to allow Iversen to escape liability for
the rentals due under the lease. This is particularly true when his own personal
aircraft was lodged in the hangar for which rent is still due and owing, especially
considering all rents had been paid from his personal account for the entirety.
The court noted that SPA had followed the particular requirements of
the statutes in filing annual reports, but noted the very minimal nature of the
requirements to remain in good standing as an LLC. Next, the court noted the
absence of any suggestion that any proceeds had ever been distributed to the sole
member, Iversen, remarking it would be difficult for an entity without a bank
-14-
account to pay out any distributions. Plus, the court noted, the entity had only ever
reported a loss on tax returns and never any income or profit.
There was a clear commingling of assets, the court noted, as Iversen
paid the debts of SPA from a personal bank account. The court noted it was not
possible for Iversen to use the assets of the entity as his own as the entity had no
assets. We would add that it is not consistent with acting at arm’s length when a
member of an LLC pays debts of the LLC from his personal account without even
a nod to transferring funds to an account in the name of the entity. Whether such
would be sufficient to establish an LLC as a distinct entity is not relevant here, but
failing to even engage in such clearly indicates that Iversen did not keep a clear
separation between himself as an individual and SPA as a separate entity. Further,
if the veil were not pierced in such circumstances, it would allow one to pick and
choose which obligations to satisfy without consequence; if the member could not
be held personally responsible for the entity’s debts, then any debt the member
chose not to pay would be unrecoverable. Such is unjust.
Turning to the amount of the award in favor of the Board, Iversen
complains that the amount the award was reduced was insufficient as the amount
was only for materials Iversen purchased to make repairs to the hangars during the
holdover term and there was no amount included to compensate him for the labor
he expended in making the repairs. In so arguing, Iversen acknowledges that he
-15-
did not adduce any proof of a proper amount of recompense to the trial court. No
evidence of any such costs was ever provided by Iversen nor was any specific
claim for labor costs made in either the answer and counterclaim, the motion to
dismiss, or the response to the motion for summary judgment. The amount the
trial court recompensed Iversen for the repairs by reducing the award to the Board
is affirmed.
Finally, as to the first order, Iversen complains of the grant of
prejudgment interest to the Board. The rate of prejudgment interest can be a term
negotiated between parties to a contract in the event litigation occurs, but such was
not done in this case as there is no provision for prejudgment interest in the leases.
When the parties do not stipulate by contract, the statutory rate of 8% can be
applied by the court. KRS10 360.010(1). Iversen could have negotiated a lesser
interest rate when negotiating the leases; however, he failed to do so.11 The
10
Kentucky Revised Statutes.
11
(2) Any party or parties to a contract or obligation described in
subsection (1) of this section, and any party or parties who may
assume or guarantee the contract or obligation, shall be bound,
subject to KRS 371.190, for the rate of interest as is expressed in
the contract, obligation, assumption, or guaranty, and no law of
this state prescribing or limiting interest rates shall apply to the
agreement or to any charges which pertain thereto or in connection
therewith.
KRS 360.010.
-16-
provision of a statutory rate of interest by a trial court cannot be an abuse of
discretion.12 The first order of the Pulaski Circuit Court is affirmed.
The second order of the trial court granted attorney’s fees to the Board
but granted an amount less than the Board sought. In its order, the court subtracted
any amount of attorney’s fees representing hours billed for the two forcible
detainer actions but granted fees for the hours billed towards the underlying
collection litigation. Iversen argues that the trial court’s order as to the attorney’s
fees it did allow are improper, as the negotiated leases which provided for
attorney’s fees had expired. The Board appeals the denial of attorney’s fees for the
forcible detainer actions. We affirm the trial court on both awards.
The Board argues that Iversen waived the opportunity to complain
about the award of any attorney’s fees when he did not contest the Board’s
argument that it was entitled to attorney’s fees in the Board’s motion for summary
judgment, wholly failing to address the issue in the response filed. Further, the
Board notes that Iversen did not raise the issue of the grant of attorney’s fees when
he filed a motion to amend, alter, or vacate following the entry of the first
12
“The trial court may award prejudgment interest at any rate up to 8%, or it may choose to
award no prejudgment interest at all, but it may not exceed the legal rate of 8%. Thus, in
awarding prejudgment interest at the rate of 12% per annum, the trial court has abused it[s]
discretion.” Fields v. Fields, 58 S.W.3d 464, 467 (Ky. 2001).
-17-
judgment, which granted attorney’s fees in an amount to be determined at a later
time.
We agree that Iversen waived any argument with the determination
that attorney’s fees would be awarded when he did not raise the issue until after the
entry of the second order establishing the amount.13 Thus, we will only consider
whether the amount of attorney’s fees awarded was proper. See Fischer v. Fischer,
348 S.W.3d 582, 588-89 (Ky. 2011), abrogated by Nami Res. Co., L.L.C. v. Asher
Land & Min., Ltd., 554 S.W.3d 323 (Ky. 2018) (“If the specific ground
complained of on appeal is not given at the trial court, then the movant has failed
to preserve his thinking should the trial court rule against him, and there will be no
record to establish that the court did not rely on other grounds that might suffice.”).
In the second order, the court determined the requested amount of
$99,322.14 in attorney’s fees was not reasonable and was excessive, especially
considering that counsel obtained a judgment in the amount of only $50,695.65 for
the client. The court calculated a reasonable amount of attorney’s fees to be
$26,200. In reaching that figure, the court calculated a reasonable hourly rate for
the area to be $200 per hour and, after reviewing invoices from the Board’s
counsel, the court determined one hundred and thirty-one (131) hours of time was
13
In any event, the provisions of the expired lease, including for the payment of attorney’s fees,
remained in force during the holdover tenancy. See Cass v. Home Tobacco Warehouse Co.,
supra.
-18-
an appropriate amount of time to have spent on the collection case, subtracting any
fees for either of the two forcible detainer actions. Further, the court’s order found
Iversen to be personally liable for the amount of attorney’s fees as the prior order
had found him to be the alter ego of SPA.
The court determined the Board was not entitled to attorney’s fees for
the first forcible detainer because it had been procedurally infirm, one of the
reasons it was never reduced to judgment. The court held that the Board was not
entitled to attorney’s fees for the second forcible detainer action because the Board
did not request attorney’s fees or file a bill of costs within ten (10) days of the
entry of the judgment granting the Board possession of the hangars.
“Reasonableness of an attorney fee must encompass the time
involved, the task assigned, and the degree of difficulty of the work under the
circumstances. Reasonableness of attorney’s fee is for the trial court to determine,
subject only to the abuse of discretion.” Dingus v. FADA Serv. Co., 856 S.W.2d
45, 50 (Ky. App. 1993).
We do not find any of these determinations to be an abuse of
discretion. We affirm the second order of the Pulaski Circuit Court, awarding
attorney’s fees to the Board in the amount of $26,200 and finding Mr. Iversen to be
personally liable for the award.
-19-
CONCLUSION
We affirm the orders of the Pulaski Circuit Court. The trial court
properly entered summary judgment in favor of the Board. We find support for the
amount of damages awarded and affirm the grant of prejudgment interest in the
statutory amount. Further, the finding that Mr. Iversen be personally liable is
affirmed as he was operating the LLC as a mere alter ego. Finally, we affirm the
amount of the attorney’s fees awarded and owed by Iversen personally, finding that
they were not an abuse of discretion.
ALL CONCUR.
BRIEFS FOR BRIEF FOR APPELLEE/CROSS-
APPELLANTS/CROSS- APPELLANT:
APPELLEES:
T. Morgan Ward, Jr.
Winter R. Huff Bethany A. Breetz
Somerset, Kentucky Louisville, Kentucky
Cassandra L. Welch
Covington, Kentucky
-20- | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482898/ | NOT DESIGNATED FOR PUBLICATION
No. 124,150
IN THE COURT OF APPEALS OF THE STATE OF KANSAS
STATE OF KANSAS,
Appellee,
v.
SAMANTHA RUSH,
Appellant.
MEMORANDUM OPINION
Appeal from Geary District Court; RYAN W. ROSAUER, judge. Opinion filed November 10, 2022.
Affirmed.
Randall L. Hodgkinson, of Kansas Appellate Defender Office, for appellant.
Tony Cruz, assistant county attorney, and Derek Schmidt, attorney general, for appellee.
Before ARNOLD-BURGER, C.J., GREEN and MALONE, JJ.
PER CURIAM: Samantha Rush appeals her conviction following a jury trial of one
count of possession of amphetamine. Rush claims the district court erred in failing to
suppress evidence seized during the search of her vehicle and in failing to suppress her
statements to law enforcement. She also claims the district court erred when it used a jury
instruction stating the jury "should find the defendant guilty" rather than "may find the
defendant guilty." Finding no error, we affirm the district court's judgment.
1
FACTUAL AND PROCEDURAL BACKGROUND
On November 22, 2019, at about 2:45 a.m., Geary County Sherriff's Deputy Corrie
Shoemake saw a vehicle traveling at about 30 or 35 miles per hour westbound on I-70.
The minimum speed limit on this portion of I-70 is 40 miles per hour. Shoemake believed
the slow speed at the late hour could be an indicator of impairment, so he turned on the
camera in his car to record the vehicle's movement. Shoemake followed the vehicle as it
exited the interstate onto East Flint Hills Boulevard. After about a half mile, the car
pulled to the roadside and turned on its hazard lights. Shoemake pulled behind the car and
turned on his emergency lights.
Shoemake approached the driver's side of the vehicle and spoke to Rush, who was
driving the car. The passenger was later identified as Alicia Campbell. Shoemake asked
what was going on, and Rush responded that she was having a problem with her car.
Shoemake explained that he was following her because she was driving below the
minimum speed limit on the interstate. Rush said she tried, but could not, drive faster.
Rush explained that she hit a bump the day before which damaged her wheel well. She
stated that she pulled over because her car started to sound worse in the damaged area.
Shoemake told Rush he would try to look at the problem and walked around the
back of the car to the front passenger side. Shoemake observed that the front wheel well
was touching the tire. Shoemake asked Campbell to roll the window down so he could
speak to Rush. Shoemake spoke to Rush across the passenger and notified her that the
front wheel well was pressed against her tire. Rush exited the car, with Shoemake's
permission, and walked to the passenger side to look at the damage. Rush asked
Shoemake if he knew how to fix the wheel well and he responded that he did not have the
right tool. As they were speaking about the damage to the vehicle, Officer Shoemake
"detected the odor of marijuana coming from the vehicle."
2
Shoemake asked Rush for her driver's license, and she responded that she lost it
but that she did have a license to drive. Shoemake then briefly inspected the interior of
Rush's vehicle with his flashlight. The questioning proceeded as follows:
"[OFFICER SHOEMAKE:] Do you have anything illegal in the car at all?
"[RUSH:] No.
"[OFFICER SHOEMAKE:] No? Did someone smoke marijuana in there a little
while ago?
"[RUSH:] No.
"[OFFICER SHOEMAKE:] No? Any reason I'm smelling anything?
"[RUSH:] I mean not unless it's my cigarette.
"[OFFICER SHOEMAKE:] No. Did you smoke in there a little while—just be
honest with me. Did someone smoke in there a little while ago?
"[CAMPBELL]: I was earlier.
"[OFFICER SHOEMAKE:] You were earlier? Ok. Alright ma'am. Do me a
favor, just sit tight. I appreciate your honesty ok. (to Rush) Did you smoke a little while
ago? Ma'am your eyes are glossy, really glossy. That's why I'm asking.
"[RUSH:] I mean I'm tired.
"[OFFICER SHOEMAKE:] You're tired? Ok. I got you. Listen, I just want the
honest truth, ok? I understand. I'm not going to issue a citation. The reason I went behind
you was because it's not typical and it's not safe for someone to be driving that slow on
the interstate. Ok?
"[RUSH:] Yes, sir.
"[OFFICER SHOEMAKE (to Campbell):] Is there anything in the car at all,
miss?
"[CAMPBELL:] I have something on me."
Campbell then opened her wallet, pulled out white tissue paper containing
marijuana, and handed it to Shoemake. He then told the women to "sit tight," thanked
Campbell for her honesty, and requested her driver's license. Campbell asked if she was
going to go to jail, and Shoemake stated that "honesty goes a long way."
3
Shoemake returned to his patrol car to call another officer to the scene. When the
second officer arrived, Shoemake explained that he planned to search the vehicle because
Campbell handed him about one gram of marijuana. He stated he was not going to charge
Campbell due to her honesty and the small amount of marijuana.
Shoemake then returned to Rush's vehicle and explained that he could smell
marijuana, her friend gave him marijuana, and those facts gave him probable cause to
search her vehicle. He asked Rush if he was going to find anything else in the vehicle and
stated that honesty goes a long way. Rush admitted that her friend had more marijuana in
the driver's door in a clear bag. Shoemake asked if Rush wanted to sit in his patrol car
because of the cold or stay outside. He explained that she was detained but not under
arrest. Rush stated that she would rather sit in the patrol car.
Officer Shoemake then searched Rush's car and found the marijuana in the driver's
side door, as Rush had mentioned. In the console between the front seats, Shoemake
found a clear plastic bag containing pills. The bag was labeled "Adderall." Shoemake
continued to search the backseat and moved on to the front passenger seat where
Campbell had been sitting. He opened a cupholder ashtray and found raw tobacco and a
couple expended marijuana blunts. Shoemake then found a "pretty big sized blunt" in the
passenger side door and "some marijuana."
After completing his search, Shoemake went back to his patrol car to speak to
Rush. Shoemake notified Rush that he would ask her some questions but would read her
Miranda rights first. See Miranda v. Arizona, 348 U.S. 436, 86 S. Ct. 1602, 16 L. Ed. 2d
694 (1966). Shoemake then read Rush's Miranda rights aloud and she orally confirmed
she understood them. The following exchange took place:
"[OFFICER SHOEMAKE:] Do you wish to speak to me?
"[RUSH:] What happens if I don't speak to you? I go to jail?
4
"[OFFICER SHOEMAKE:] What's that? No. I can't tell you if you don't talk to
me you're going to go to jail, ma'am. That's not how this works. I can't coerce you and
say 'hey if you don't talk to me I'm going to take you to jail.' Before I can ask you any
questions about what I found in that car, I have to read you your rights. So you're already
in detention, ok. You're being detained. You're not under arrest at this moment in time.
But before I can ask you any questions, I gotta read you your rights and I gotta make sure
that you understand them and I need a verbal yes or no whether you'd like to speak with
me or not.
"[RUSH:] So what happens if I don't speak to you?
"[OFFICER SHOEMAKE:] I can't answer that, ma'am. I just want to ask you
some questions. If you don't want to that's your right. Ok? Does that make sense?
"[RUSH:] Yes, sir. I'll answer your questions."
Shoemake asked about the marijuana found in the driver's side door and the blunt.
Rush stated all the marijuana belonged to Campbell. Shoemake asked if there was
anything else she wanted to tell him about what he found in the car. Rush stated that
Shoemake probably found some pills that she was holding for a friend. Rush then
admitted that she had taken "maybe two" of the pills without a prescription.
After speaking with Rush, Shoemake went to the other patrol vehicle where
Campbell was sitting and read her Miranda rights to her. Campbell stated she would
speak to Shoemake and admitted that the marijuana found in the driver's side door was
hers. Campbell did not seem to be aware of the large blunt that Shoemake had found in
the passenger side door. Campbell denied having any pills in Rush's car.
On December 4, 2019, the State charged Rush with one count of possession of
amphetamine. Several months later, Rush moved to suppress the evidence. She argued
that Shoemake's reasonable suspicion of illegal activity dissipated after he confirmed the
reason for her slow speed, and any further investigation was unlawful requiring
suppression of the evidence. In response, the State argued that Rush's initial encounter
with Shoemake was either voluntary or a valid traffic stop based on her slow speed on the
5
interstate. The State argued that Shoemake obtained new and independent reasonable
suspicion to detain Rush when he smelled the marijuana coming from the car, and he had
probable cause to search the vehicle when Campbell handed him marijuana.
At the hearing on the motion to suppress, Shoemake testified that while he was
discussing the damaged wheel well with Rush and Campbell, he smelled the odor of
burnt marijuana—giving him reason to inquire further about illicit substances. Rush
testified that she did not feel free to leave—and was detained—when Shoemake said he
would walk around her vehicle to see the damage to her front passenger wheel well. Rush
testified that she did not feel free to leave because "normally, when you see police lights
behind your vehicle, that means you're in some kind of trouble."
The district court denied Rush's motion to suppress, finding that Rush voluntarily
pulled to the roadside, and in any event, Shoemake had grounds to stop Rush's vehicle
because of the minimum speed violation. The district court found that Shoemake smelled
marijuana while he was discussing the wheel damage with Rush, giving Shoemake
independent reasonable suspicion to detain Rush. The district court found there was no
unlawful seizure and thus no unlawful search.
Right before trial, the district court held a Jackson v. Denno hearing to address the
voluntariness of Rush's statements to Shoemake. See Jackson v. Denno, 378 U.S. 368, 84
S. Ct. 1774, 12 L. Ed. 2d 908 (1964). After hearing testimony from Shoemake and Rush,
the district court found that Rush's statements were voluntarily made and could be
admitted at trial. More specifically, the district court found that (1) Rush made statements
about the pills after she had received the Miranda warnings, (2) it was typical for a
suspect to sit in the back of a patrol car during this type of questioning, (3) Shoemake
never threatened Rush or told her she would go to jail if she refused to speak to him, and
(4) Shoemake reiterated her right to remain silent.
6
The district court held a jury trial on March 8-9, 2021. Rush made a standing
objection to the introduction of the evidence and her statements at the trial. The State
called Shoemake and a Kansas Bureau of Investigation chemist who testified that the
pills found in Rush's vehicle tested positive for amphetamine. Rush did not testify or
present any witnesses. She argued to the jury that the pills belonged to her friend. Rush
objected to the district court's reasonable doubt instruction, arguing that the phrase that
the jury "should find the defendant guilty" should be changed to "may find the defendant
guilty." The jury found Rush guilty as charged.
On May 26, 2021, the district court sentenced Rush to 11 months' imprisonment
but granted probation. Rush timely appealed the district court's judgment. On appeal,
Rush argues that the district court erred in (1) denying her motion to suppress evidence
obtained in the search of her vehicle, (2) admitting statements she made to Shoemake
after she received her Miranda rights, and (3) denying her requested jury instruction.
DID THE DISTRICT COURT ERR IN DENYING RUSH'S MOTION TO
SUPPRESS EVIDENCE OBTAINED DURING THE SEARCH OF HER VEHICLE?
Rush first claims the district court erred in denying her motion to suppress
evidence recovered from the search of her vehicle because it was obtained as the result of
an unlawful search and seizure. She argues that her encounter with Shoemake
transitioned from "a possibly justifiable encounter to an illegal investigation that led to an
unlawful search." Rush argues that after verifying the damage to her tire, Shoemake
extended the encounter without legal justification by requesting her driver's license and
using his flashlight to look inside her vehicle.
The State responds that the initial encounter between Rush and Shoemake was
voluntary. The State contends that during the voluntary encounter, Shoemake legally
acquired reasonable suspicion to seize Rush and probable cause to search her vehicle.
7
Alternatively, the State argues that Shoemake had reasonable suspicion to detain Rush in
a valid traffic stop, and during that stop he properly acquired probable cause to search her
vehicle for illegal substances.
The district court relied mainly on Shoemake's body camera footage to determine
whether Rush's detention and the search of her vehicle was lawful. Because the body
camera footage is an accurate depiction of the events, and the parties do not dispute its
contents, this case does not present a significant factual dispute about the interaction
between Rush and Shoemake. When the material facts supporting a district court's
decision on a motion to suppress evidence are not in dispute, the ultimate question of
whether to suppress is a question of law over which an appellate court has unlimited
review. State v. Hanke, 307 Kan. 823, 827, 415 P.3d 966 (2018).
Each person has a right to be secure in their person and property against
unreasonable searches and seizures under the Fourth Amendment to the United States
Constitution and section 15 of the Kansas Constitution Bill of Rights. Whether a seizure
has occurred depends on the type of interaction between the citizen and law enforcement.
There are generally four types of encounters between citizens and police: (1) voluntary
or consensual encounters, (2) investigatory detentions, (3) public safety stops, and (4)
arrests. State v. Guein, 309 Kan. 1245, 1253, 444 P.3d 340 (2019). A consensual
encounter with law enforcement is not a seizure; the other three types of interactions are
seizures. State v. Reiss, 299 Kan. 291, 297, 326 P.3d 367 (2014).
When an analysis of a motion to suppress requires examination of the search and
the seizure, determining the legality of the seizure is the first step because the illegality of
the detention can taint a subsequent consent and search. State v. Thompson, 284 Kan.
763, 772, 166 P.3d 1015 (2007). This court must analyze the distinct interactions to
determine whether and when Rush was seized so that her Fourth Amendment rights were
triggered. Here, the distinct interactions are (1) the initial interaction between Rush and
8
Shoemake when he approached her vehicle; and (2) the interaction between the parties
after Shoemake inspected the damaged vehicle and smelled the marijuana.
The initial interaction between Shoemake and Rush was a voluntary encounter.
We must first determine whether the initial interaction between Rush and
Shoemake was voluntary or an investigatory detention. The district court found that the
initial interaction between Shoemake and Rush was voluntary. Rush now argues that
even though she at first stopped of her own volition, "at the point that the officer exerted
authority over her, the interaction ceased being a voluntary encounter." She argues
Shoemake exerted authority over her when he activated his emergency lights and notified
her that he intended to pull her over. The State argues that the initial encounter was
consensual because a reasonable person in Rush's position would not believe they were
being detained. Alternatively, the State argues that Shoemake had reasonable suspicion to
conduct a traffic stop due to Rush's slow speed, and he obtained probable cause to search
the vehicle during that stop.
Voluntary encounters are not considered seizures and do not trigger protections of
the Fourth Amendment. On the other hand, a seizure occurs where there is an application
of physical force or a show of authority which, in view of all the circumstances, would
communicate to a reasonable person that they are not free to leave and the person does in
fact submit to that show of authority. State v. Morris, 276 Kan. 11, 19, 72 P.3d 570
(2003). "[I]nvestigatory detentions are constitutionally permissible if an objective officer
would have a reasonable and articulable suspicion that the detainee committed, is about
to commit, or is committing a crime." Hanke, 307 Kan. at 828. Investigatory detentions
"'must be temporary and last no longer than is necessary to effectuate the purpose of the
stop.'" State v. Doelz, 309 Kan. 133, 139, 432 P.3d 669 (2019).
9
In determining the voluntariness of the encounter, Kansas courts review whether,
under the totality of the circumstances, a reasonable person would have felt free to
disregard the officer's questions, decline the officer's request, or otherwise terminate the
encounter. State v. Cleverly, 305 Kan. 598, 606, 385 P.3d 512 (2016). A voluntary
encounter is not transformed into a seizure simply because an individual responds to
questions or provides identification when approached and questioned by an officer. State
v. Williams, 297 Kan. 370, 376, 300 P.3d 1072 (2013). The court may consider several
factors in evaluating whether an encounter is voluntary; no single factor is dispositive.
Reiss, 299 Kan. at 298-99. And the presence of reasonable suspicion to conduct a traffic
stop does not inherently dispose of the possibility that the interaction was voluntary. See
State v. Baacke, 261 Kan. 422, 438, 932 P.2d 396 (1997) (finding a voluntary interaction
where an officer approached a vehicle's occupants who were illegally parked).
If the interaction here was voluntary, then the State need not prove that Shoemake
possessed a reasonable suspicion that Rush had committed, was about to commit, or was
committing a crime. See State v. Andrade-Reyes, 309 Kan. 1048, 1053, 442 P.3d 111
(2019). While not dispositive, the Kansas Supreme Court has set out "factors that tend to
establish a voluntary encounter, including 'knowledge of the right to refuse, a clear
communication that the driver is free to terminate the encounter or refuse to answer
questions, return of the driver's license and other documents, and a physical
disengagement before further questioning.'" 309 Kan. at 1054.
Shoemake parked behind Rush and activated his emergency lights. When
Shoemake approached and spoke to Rush, he asked, "What's going on tonight?" Rush
responded that she was having car trouble. Shoemake explained that he had been
following her because she was driving below the minimum speed limit, but he never told
her that he intended to pull her over for that reason. When Rush explained the issue with
her wheel well, Shoemake stated, "Alright let me look at this side over here," and walked
around Rush's vehicle to inspect it. Shoemake did not ask for Rush's identification or
10
make any demands of her until several minutes into their interaction. After looking at the
damage to her car, Shoemake spoke to Rush through the passenger side window. She
asked him if she could get out to look at the damage, and he responded affirmatively.
Shoemake's activation of his emergency lights and Rush's request to exit her
vehicle are the only factors that could weigh in favor of finding the initial interaction was
a seizure. But an officer's activation of their emergency lights is not definitive evidence
of a seizure. Rather, use of emergency lights may signify different meanings under
different circumstances. Thompson, 284 Kan. at 808. Here, the interaction occurred at
about 3 a.m. on an exit road just off the interstate highway. It would be reasonable for an
officer to activate his emergency lights along this type of road late at night to ensure other
drivers of the officer's presence on the roadside. See 284 Kan. at 809. As for Rush's
request to exit her vehicle, that is evidence of her subjective state of mind and not
objective evidence to support a seizure. See 284 Kan. at 809 (explaining a citizen's
subjective state of mind is irrelevant in determining the nature of an encounter).
We find that the initial interaction between Shoemake and Rush was a voluntary
encounter. Rush pulled over without Shoemake activating his emergency lights, he did
not immediately request Rush's driver's license or insurance information, and he did not
disclose any intent to pull her over. Rather, their interaction focused on the damage to
Rush's car until Shoemake smelled the odor of burnt marijuana.
But even if the initial contact had been a seizure, we agree with the State that
Shoemake had reasonable suspicion sufficient to stop Rush to conduct an investigatory
detention. Shoemake observed Rush committing a traffic infraction by driving below the
mandatory minimum speed on the interstate. This conduct violates K.S.A. 8-1561(b). A
traffic violation is a valid reason to carry out a traffic stop. State v. Marx, 289 Kan. 657,
662, 215 P.3d 601 (2009). Thus, Shoemake had reasonable suspicion to approach and
detain the vehicle's occupants to investigate the traffic infraction.
11
Shoemake gained independent reasonable suspicion to detain Rush when he smelled the
marijuana while discussing the damaged wheel well with Rush and Campbell.
Rush argues that even if the initial encounter were consensual, Shoemake did not
have reasonable suspicion to request her driver's license or inspect the vehicle's interior
with his flashlight. The State responds that Shoemake smelled the odor of burnt
marijuana before he requested Rush's driver's license. As a result, the State argues that
Shoemake could extend the encounter to ask about suspected illegal activity.
As stated above, our Supreme Court has held that "investigatory detentions are
constitutionally permissible if an objective officer would have a reasonable and
articulable suspicion that the detainee committed, is about to commit, or is committing a
crime." Hanke, 307 Kan. at 828. The reasonable suspicion must be present before the
officer requests a motorist's license and documentation. See Reiss, 299 Kan. at 303.
Throughout his testimony at the suppression hearing, Shoemake stated that he
smelled the odor of burnt marijuana while discussing the damaged vehicle with Rush and
Campbell. Shoemake then asked Rush for her driver's license, and she responded that she
had lost it. Shoemake's request for Rush's driver's license was valid because he had
detected the odor of burnt marijuana, providing him with reasonable suspicion to conduct
an investigatory detention of Rush. Although Shoemake said nothing to Rush about
smelling the marijuana until after he asked for her driver's license, his testimony makes it
clear that he smelled marijuana while discussing the damaged wheel well with Rush,
which led to his additional questioning. When Shoemake asked if there was anything
illegal in the car, Campbell responded affirmatively, pulled out a white tissue paper
containing marijuana, and handed it to Shoemake. At that point, Shoemake had probable
cause to search the vehicle, and Rush does not argue otherwise. The vehicle search led to
the discovery of the amphetamine pills. Based on the record, Shoemake legally seized the
evidence, and the district court did not err in denying Rush's motion to suppress.
12
DID THE DISTRICT COURT ERR IN ALLOWING RUSH'S
STATEMENTS TO SHOEMAKE TO BE ADMITTED INTO EVIDENCE?
Rush next challenges the district court's admission of her statements at trial. She
argues that Shoemake used an unconstitutional two-step interrogation technique to obtain
her inculpatory statements. More specifically, Rush argues that during the first step of the
technique, Shoemake brought her to the front of his patrol vehicle, subjected her to a
custodial interrogation, and obtained admissions that Campbell had more marijuana in the
vehicle without first reading Rush her rights under Miranda. Rush argues that the second
step occurred after the search while she was in the backseat of Shoemake's patrol car and
Shoemaker advised her of her rights under Miranda, and then questioned her about the
contraband he found in her car. Rush argues that the illegal first step tainted the
statements she made in the second step and rendered the statements involuntary.
The State argues that the district court correctly found the interrogation in front of
Shoemake's patrol vehicle was noncustodial and thus did not trigger Rush's rights under
Miranda. The State also argues that Rush voluntarily, knowingly, and intelligently
waived her Miranda rights in her second interview with Shoemake, as she never testified
that she was confused about her rights during the Jackson v. Denno or other hearings.
Thus, the State argues that Rush's statements to Shoemake were admissible.
The Fifth Amendment to the United States Constitution guarantees individuals the
right against self-incrimination. State v. Salary, 301 Kan. 586, 604, 343 P.3d 1165
(2015). In order to protect this right and to safeguard against impermissibly coercive
interrogations, government agents are required to inform a person in custody of the right
to remain silent and the right to the appointment of counsel before conducting an
interrogation. Miranda, 384 U.S. at 444-45. But law enforcement officers need not
administer Miranda warnings to everyone whom they question. State v. Jones, 283 Kan.
13
186, 192, 151 P.3d 22 (2007). Thus, the first inquiry the court must address is whether
the individual was in custody when questioned.
Second, assuming the person was in custody, the court must determine whether the
individual voluntarily waived their rights under Miranda. The voluntariness of a waiver
of a defendant's Miranda rights is a question of law that appellate courts decide de novo
based on the totality of the circumstances. State v. Parker, 311 Kan. 255, 257-58, 459
P.3d 793 (2020). The appellate court does not reweigh evidence, pass on the credibility of
witnesses, or resolve conflicts in the evidence in determining whether a Miranda waiver
was voluntary. State v. Vonachen, 312 Kan. 451, 463-64, 476 P.3d 774 (2020).
Rush argues that Shoemake subjected her to a two-step interrogation that confused
her, leading her to waive her Miranda rights involuntarily, unknowingly, and
unintelligently. A two-step interrogation occurs when an officer elicits inculpatory
admonitions from a citizen, then advises them of their Miranda rights and subjects the
citizen to more questioning. In that circumstance, this court must determine whether the
two-step questioning coerced the citizen into confessing. See Missouri v. Seibert, 542
U.S. 600, 614-17, 124 S. Ct. 2601, 159 L. Ed. 2d 643 (2004) (police may not use pre-
Miranda incriminating statements to elicit post-Miranda statements). As we said before,
the district court relied mainly on Shoemake's body camera footage to decide whether
Rush voluntarily waived her Miranda rights, so the material facts are not disputed.
Rush was not in custody when Shoemake questioned her before the vehicle search.
Rush argues that the first step of the unconstitutional two-step questioning
occurred in front of Shoemake's patrol vehicle right before he searched Rush's vehicle.
The court must first determine whether this questioning was an investigatory
interrogation or a custodial interrogation triggering Miranda.
14
"'A custodial interrogation is defined as questioning initiated by law enforcement officers
after a person has been taken into custody or otherwise deprived of his or her freedom in
any significant way.' A custodial interrogation is distinguished from an investigatory
interrogation, which occurs as a routine part of the fact-finding process before the
investigation reaches the accusatory stage. [Citation omitted.]" State v. Regelman, 309
Kan. 52, 59, 430 P.3d 946 (2018).
The Miranda Court "made it clear that its decision was intended to apply to in-
custody interrogations, and the decision generally was not intended to apply to on-the-
scene police questioning of a suspect in the fact-finding process." State v. Hutchens, No.
119,661, 2020 WL 1329181, at *7 (Kan. App. 2020) (unpublished opinion). Factors the
court considers when deciding whether an interrogation is investigative or custodial
include: (1) the place and time of the interrogation; (2) the duration of the interrogation;
(3) the number of law enforcement officers present; (4) the conduct of the officer or
officers and the person being questioned; (5) the presence or absence of actual physical
restraint or its functional equivalent, such as drawn firearms or a stationed guard; (6)
whether the person is being questioned as a suspect or a witness; (7) whether police
escorted the person being questioned to the interrogation location or the person arrived
under the person's own power; and (8) the result of the interrogation, for instance,
whether the person was allowed to leave, was detained further, or was arrested after the
interrogation. No one factor outweighs another, and the factors do not bear equal weight.
A court must analyze every situation on its own facts. Regelman, 309 Kan. at 59.
Rush was being questioned as part of an investigatory detention—and was not in
custody—when speaking to Shoemake in front of the patrol vehicle. She was detained,
but not under arrest, during the search of her vehicle because Shoemake had reasonable
suspicion that she may be committing a crime. "In the case of a traffic stop, a person is
only under arrest if he or she is physically restrained or deprived of his or her freedom in
a significant way for the purpose of answering for a crime." State v. Goff, 44 Kan. App.
2d 536, 542, 239 P.3d 467 (2010) (after finding marijuana in the vehicle, the officer
15
continued the investigatory detention when he questioned the driver about marijuana in a
locker). Although Shoemake asked Rush to come with him to speak in front of his patrol
car, it was necessary and reasonable for Rush to exit her vehicle during the search. This
was not a significant deprivation of freedom consistent with a custodial interrogation but
was instead "a routine part of the fact-finding process before the investigation reaches the
accusatory stage." Regelman, 309 Kan. at 59.
Shoemake had no information in his initial questioning of Rush to believe that she
possessed any illegal substances. Although he told Rush several times that her eyes were
bloodshot as though she had smoked marijuana, she did not admit to this or provide any
information that she had marijuana. Rather, she admitted only that her passenger had
marijuana in the vehicle. Rush made no statements about the amphetamine pills she was
ultimately charged with illegally possessing.
Rush was not subjected to an illegal custodial interrogation while in front of the
patrol vehicle. Instead, she faced an investigatory interrogation which did not trigger
Miranda warnings. Thus, there was nothing illegal about Shoemake's initial questioning
of Rush that could have tainted the voluntariness of Rush's Miranda waiver when
Shoemake later questioned her in the backseat of the patrol vehicle. Rush did not make
any incriminating statements about possessing or having control over the amphetamine
pills until after Shoemake read Rush her Miranda rights and she responded that she
understood them. As a result, the district court did not err in finding that Rush's
statements to Shoemake were admissible at trial.
DID THE DISTRICT COURT ERR IN INSTRUCTING THE JURY?
Finally, Rush claims the district court erred in denying her request to change the
term "should" to "may" in the reasonable doubt instruction approved in PIK Crim. 4th
51.010 (2020 Supp.). Rush argues that the last sentence in the instruction should read: "If
16
you have no reasonable doubt as to the truth of each of the claims required to be proved
by the State, you may find the defendant guilty." (Emphasis added.) Rush argues that
"should" is an imperative term which directs the jury verdict, rather than leaving room for
the jury to exercise its power of decision.
When analyzing jury instruction issues, appellate courts follow a three-step
process: (1) determining whether the appellate court can or should review the issue, in
other words, whether there is a lack of appellate jurisdiction or a failure to preserve the
issue for appeal; (2) considering the merits of the claim to determine whether error
occurred; and (3) assessing whether the error requires reversal. State v. Holley, 313 Kan.
249, 253, 485 P.3d 614 (2021). At the second step, appellate courts consider whether the
instruction was legally and factually appropriate, using an unlimited standard of review
of the entire record. 313 Kan. at 254.
Rush objected to the jury instruction given by the district court, so she preserved
the issue. But as Rush acknowledges, the jury instruction at issue has been upheld by the
Kansas Supreme Court. State v. Kornelson, 311 Kan. 711, 721-22, 466 P.3d 892 (2020);
State v. Galloway, 311 Kan. 238, 252, 459 P.3d 195 (2020). Thus, the jury instruction is
legally appropriate. The Court of Appeals is duty-bound to follow Kansas Supreme Court
precedent unless there is some indication that our Supreme Court is departing from its
previous position. State v. Rodriguez, 305 Kan. 1139, 1144, 390 P.3d 903 (2017). We
have no indication our Supreme Court is departing from its recent decisions in Kornelson
and Galloway. Thus, Rush's claimed jury instruction issue fails.
Affirmed.
17 | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482913/ | RENDERED: NOVEMBER 10, 2022; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2021-CA-0358-MR
MARGARET SPRINGFIELD AND
DANIEL SPRINGFIELD APPELLANTS
APPEAL FROM WEBSTER CIRCUIT COURT
v. HONORABLE C. RENE’ WILLIAMS, JUDGE
ACTION NO. 13-CI-00254
THOMAS D. SPRINGFIELD AND
EDWARD SPRINGFIELD APPELLEES
OPINION
AFFIRMING
** ** ** ** **
BEFORE: ACREE, JONES, AND MAZE, JUDGES.
MAZE, JUDGE: Margaret Springfield (Margaret) and Daniel Springfield (Daniel)
appeal from a summary judgment order of the Webster Circuit Court which
terminated Margaret’s life estate and dismissed her claims for intentional infliction
of emotional distress and damage to real property. They also appeal from an order
of partition and sale of the property. We agree with the trial court that, as a matter
of law, Margaret’s actions amount to voluntary waste of the property and that the
Appellees, Thomas Springfield (Thomas) and Edward Springfield (Edward), were
entitled to termination of her life estate. We further conclude that Margaret and
Daniel did not timely object to Thomas and Edward’s motion for partition and sale
of the property. Lastly, we conclude that trial court properly granted summary
judgment on Margaret’s cross claims. Hence, we affirm.
On September 5, 2006, Mary Springfield (Mary) executed a deed
conveying a joint life estate for real property located at 298 Springfield Road in
Dixon, Kentucky to her son James Springfield (James) and his wife, Margaret,
with the remainder to the devisees under her Last Will and Testament. The Deed
is recorded in Deed Book 266, Page 70 in the Webster County Court Clerk’s
Office. Subsequently, Mary died and her will was filed on November 11, 2010. In
pertinent part, Mary’s will devised one-third equal shares in the real property to her
sons James, Edward, and Thomas.
James died intestate on January 20, 2012, leaving as heirs at law his
wife Margaret (1/2), and children Daniel Springfield (1/4) and Mary Ruth Harris
(Mary Ruth) (1/4).1 The parties agree that the remainder fee simple interest in the
1
As discussed above, Mary’s deed granted a joint life estate to James and Margaret, with the
remainder interest to be devised upon the expiration of the life estate among the heirs under
Mary’s will. The complaint, answer, and cross claim indicate that Margaret was the sole
-2-
real property is currently held by Thomas (1/3 interest), Edward (1/3 interest),
Margaret (1/6 interest), Daniel (1/12 interest), and Mary Ruth (1/12 interest).
Margaret continued to hold the remaining life interest under the conveyance from
Mary.
On October 28, 2013, Thomas and Edward filed the current action
against Margaret, Daniel, and Mary Ruth. They alleged that the defendants were
committing waste on the property by failing to pay insurance and property taxes
and by allowing the premises to fall into disrepair. Thomas and Edward sought
termination of the life estate and damages caused by the waste. Margaret and
Daniel filed an answer and Margaret asserted cross claims alleging damages to the
residence and for intentional infliction of emotional distress. Mary Ruth did not
file a responsive pleading and has not participated in this action.
The parties conducted discovery on the respective claims in 2014, but
no substantive matters appear in the record until May 2019, when the trial court
dismissed the action for lack of prosecution. CR2 77.02. In October 2019, Thomas
and Edward moved to reinstate the matter on the court’s active docket. After the
trial court reinstated the action, Thomas and Edward filed a motion for summary
successor to an undivided interest in the life estate upon James’ death. It appears that Daniel and
Mary Ruth were included as defendants below based on their interests as remainder
beneficiaries, and not on any potential interests in the life estate.
2
Kentucky Rules of Civil Procedure.
-3-
judgment, seeking termination of the life estate and dismissal of the cross claims.
Margaret and Daniel filed a response opposing summary judgment. While they
admitted to a failure to pay property taxes and maintain insurance, they argued that
any waste was merely permissive and not grounds for forfeiture of the life estate.
Margaret also argued that there were genuine issues of material fact on their cross
claim for intentional infliction of emotional distress.
On May 19, 2020, the trial court entered an order granting the motion
for summary judgment. The court found that Margaret committed waste by failing
to pay property taxes and maintain insurance. The court further noted that a
foreclosure action had been filed against the property. In addition, Thomas had
paid $3,000.00 to forestall the foreclosure, and he also entered into an agreement
with the Webster County Attorney to pay the back taxes on the property. Under
the circumstances, the trial court concluded that Thomas and Edward were entitled
to terminate Margaret’s life estate under KRS3 381.350. The court separately
found that Margaret failed to allege facts sufficient to establish her claims for
damage to the property or intentional infliction of emotional distress.
Following entry of the summary judgment, Thomas and Edward filed
a motion for partition of the property, which the trial court granted on January 7,
3
Kentucky Revised Statutes.
-4-
2021. The court entered an amended order on February 26, 2021, to include
finality language. On March 15, 2021, the trial court entered an order referring the
case to the Master Commissioner for judicial sale of the property. Margaret and
Daniel filed their notice of appeal shortly thereafter.4
Margaret argues that summary judgment was not appropriate on
Thomas and Edward’s action to terminate the life estate or on the cross claims.
She further argues that the trial court erred in granting partition of the property. As
an initial matter, Thomas and Edward argue that the summary judgment matters
are not properly raised on appeal because Margaret did not appeal from the May
19, 2020, order. However, that order did not conclusively adjudicate all issues
raised in this action and the trial court did not designate it as final and appealable.
CR 54.02. These issues did not become final and appealable until the trial court
entered its February 26, 2021, order. Therefore, the issues relating to the summary
judgment order are properly before this Court.
“The proper function of summary judgment is to terminate litigation
when, as a matter of law, it appears that it would be impossible for the respondent
to produce evidence at the trial warranting a judgment in his favor.” Steelvest, Inc.
4
The notice of appeal names only Margaret and Daniel as Appellants. As noted above, Daniel
does not claim an interest in the life estate, and he does not assert any damages arising from the
cross claims. Rather, Daniel’s only claim on appeal concerns the order of partition.
-5-
v. Scansteel Service Center, Inc., 807 S.W.2d 476, 480 (Ky. 1991). Summary
judgment is appropriate “if the pleadings, depositions, answers to interrogatories,
stipulations, and admissions on file, together with the affidavits, if any, show that
there is no genuine issue as to any material fact and that the moving party is
entitled to a judgment as a matter of law.” CR 56.03. The record must be viewed
in a light most favorable to the party opposing the motion for summary judgment
and all doubts are to be resolved in his favor. Steelvest, 807 S.W.2d at 480. The
trial court must examine the evidence, not to decide any issue of fact, but to
discover if a real issue exists. Id. Since a summary judgment involves no fact-
finding, this Court’s review is de novo, in the sense that we owe no deference to
the conclusions of the trial court. Scifres v. Kraft, 916 S.W.2d 779, 781 (Ky. App.
1996).
As noted above, Thomas and Edward filed this action to terminate the
life estate pursuant to KRS 381.350, which provides as follows:
If any tenant for life or years commits waste during his
estate or term, of anything belonging to the tenement so
held, without special written permission to do so, he shall
be subject to an action of waste, shall lose the thing
wasted, and pay treble the amount at which the waste is
assessed.
In Hammons v. Hammons, 327 S.W.3d 444, 451 (Ky. 2010), the
Kentucky Supreme Court summarized the rights and duties of a life tenant as
follows:
-6-
A life estate is a freehold interest in property that
continues during the life of the life tenant, who may be
the property owner or some other person. English v.
Carter, 300 Ky. 580, 189 S.W.2d 839, 840 (1945). The
life tenant has the same interest in the property the
remainderman will have in it after it comes into his
possession, except the life tenant may not commit waste.
Id.; see also Adams v. Adams, 371 S.W.2d 637, 638 (Ky.
1963); Smith v. Harris, 276 Ky. 529, 124 S.W.2d 786,
788 (1939). In general, a life tenant owns the property
during the life estate and is entitled to the full use and
enjoyment of the property, including the income and
profits, though she may not consume any part of the
corpus. Taylor v. Yeager, 261 S.W.2d 638, 639 (Ky.
1953); English, 189 S.W.2d at 840 (“Free enjoyment is
the very essence of a life estate.”). Absent a showing of
danger of loss or waste, life tenants are not required to
give security for the protection of the remaindermen.
Crutcher v. Elliston’s Ex’rs, 299 Ky. 613, 186 S.W.2d
644, 646 (1945); Buckman’s Trustee v. Ohio Valley Trust
Co., 288 Ky. 114, 155 S.W.2d 749, 750 (1941).
The parties agree that a life tenant has the duty to maintain and
manage the estate for the benefit of the remaindermen. Adams, supra at 638. To
that end, the life tenant is bound to pay taxes, maintain insurance, and make repairs
and improvements, and cannot charge them against the remaindermen. Id.
Margaret concedes that she failed to pay taxes and maintain insurance on the
property, and that she has been unable to keep up the property. But to the extent
that these actions constitute waste, Margaret argues that it is merely permissive
waste and not voluntary waste.
-7-
Margaret points to a line of cases holding that statutes on the subject
of waste relate only to voluntary waste, and do not authorize relief in cases
involving permissive waste. Collins v. Sec. Tr. Co., 206 Ky. 30, 266 S.W. 910,
910 (1924) (citing Smith v. Mattingly, 96 Ky. 228, 28 S.W. 503, 503 (1894);
Prescott v. Grimes, 143 Ky. 191, 136 S.W. 206 (1911); and Fisher’s Ex’r v.
Haney, 180 Ky. 257, 202 S.W. 495 (1918)). The distinction is that voluntary waste
consists of the willful commission of some destructive act, whereas permissive
waste consists of an omission, such as the failure to keep the land or tenements in
proper repair. Smith, 28 S.W. at 503. See also Cont’l Fuel Co. v. Haden, 182 Ky.
8, 206 S.W. 8, 11 (1918). Consequently, Margaret admits that she may be required
to pay damages to the remaindermen, but she argues that her failure to pay taxes
and maintain insurance on the property is not a basis to terminate the life estate.
She further argues that there is no evidence the remaindermen have been injured by
their failure to maintain insurance on the property.
In rejecting this argument, the trial court found that Margaret had not
only neglected her duty to pay property taxes, but this failure also resulted in a
foreclosure action filed against the property. In addition, the trial court pointed out
that Margaret has never maintained insurance on the property, placing it at
“seriously high risk of complete loss[.]” Finally, the court pointed out that
-8-
Margaret continues to engage in this pattern which places the property at a risk of
complete loss, and she lacks sufficient resources to pay damages.
First, we must point out that the older cases cited by Margaret were
based on the jurisdictional division between legal and equitable remedies. Collins,
266 S.W. at 910. Equity practice, in general, is now merged with law, or the
statutory provisions. Seeger v. Lanham, 542 S.W.3d 286, 295 (Ky. 2018) (citing
Bell v. Commonwealth, 423 S.W.3d 742, 748 (Ky. 2014)). Since “[l]aw trumps
equity[,]” Bell, 423 S.W.3d at 748, we question whether there remains a basis to
distinguish between the legal remedies afforded for voluntary waste under KRS
381.350 and the equitable remedies afforded for permissive waste.
In any event, we agree with the trial court that Margaret’s admitted
actions have exceeded the scope of permissive waste and constitute voluntary
waste. As a matter of law, the trial court correctly found that these actions warrant
termination of her life estate under KRS 381.350. Therefore, the trial court
properly granted summary judgment on this issue.
Margaret and Daniel separately argue that the trial court erred in
granting Thomas and Edward’s motion for partition. They point out that Thomas
and Edward did not request partition as a remedy in their original complaint and
they did not seek to file an amended complaint. We note, however, that Margaret
and Daniel did not object to the motion for partition, nor do they allege that they
-9-
lacked notice of the claim or an opportunity to respond. Furthermore, a trial court
has broad discretion to allow amendment of pleadings to conform to the evidence.
CR 15.01. In the absence of adequate preservation of this issue or an allegation of
prejudice, we decline to address the issue further.
Finally, Margaret contends that the trial court erred by dismissing
their claims for intentional infliction of emotional distress and damage to the
property. In order to recover for intentional infliction of emotional distress, also
known as outrage, a plaintiff must prove: (1) the wrongdoer’s conduct was
intentional or reckless; (2) conduct so outrageous and intolerable in that it offends
against the generally accepted standards of decency and morality; (3) a causal
connection between the wrongdoer’s conduct and the emotional distress; and (4)
that the emotional distress was severe. Burgess v. Taylor, 44 S.W.3d 806, 811
(Ky. App. 2001). See also Craft v. Rice, 671 S.W.2d 247, 249 (Ky. 1984).
Furthermore, it is well established that an action for outrage will not lie for “petty
insults, unkind words and minor indignities”; the action only lies for conduct
which is truly “outrageous and intolerable.” Kroger Co. v. Willgruber, 920 S.W.2d
61, 65 (Ky. 1996). Finally, the tort of outrage is intended as a “gap-filler,”
providing redress for extreme emotional distress where traditional common law
actions do not. Where an actor’s conduct amounts to the commission of one of the
traditional torts for which recovery for emotional distress is allowed and the
-10-
conduct was not intended only to cause extreme emotional distress in the victim,
the tort of outrage will not lie. Recovery for emotional distress in those instances
must be had under the appropriate traditional common law action. Banks v.
Fritsch, 39 S.W.3d 474, 481 (Ky. App. 2001).
A party opposing a motion for summary judgment cannot rely merely
on the unsupported allegations of his pleadings but is required to present “some
affirmative evidence showing that there is a genuine issue of material fact for
trial.” Godman v. City of Fort Wright, 234 S.W.3d 362, 370 (Ky. App. 2007)
(quoting Steelvest, 807 S.W.2d at 482). Margaret generally alleged that Edward
threatened her with harm and caused damage to the property in an effort to force
her to leave. But in her deposition of February 19, 2014, Margaret did not identify
any specific conduct which would rise to the level of outrage or offend generally
accepted standards of decency and morality. She asserts merely that Edward
complained about the condition of the house and property. And while Margaret
alleged that Edward’s daughter threatened to shoot her, she made no such
allegations against Thomas or Edward. Thus, we agree with the trial court that
Margaret failed to establish a claim for intentional infliction of emotional distress.
Likewise, Margaret has not presented any affirmative evidence that
either Thomas or Edward caused damage to the property. She alleges that Edward
removed carpeting and flooring from the house. However, she admits that both
-11-
were old and damaged. Furthermore, she did not introduce any estimates or
receipts showing the value of any of these alleged damages. In the absence of any
such evidence, Margaret failed to show an actionable claim for damage to the
property. Thus, the trial court properly granted summary judgment on this claim.
Since other matters remain pending, the trial court retains jurisdiction to address
any remaining issues of damages and allocation of the sale proceeds.
Accordingly, we affirm the May 19, 2020, summary judgment and the
February 26, 2021, order of partition entered by the Webster Circuit Court.
ALL CONCUR.
BRIEFS FOR APPELLANTS: BRIEF FOR APPELLEES:
Wm. Clint Prow Lora Lee Robey
Providence, Kentucky Russellville, Kentucky
-12- | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482903/ | NOT DESIGNATED FOR PUBLICATION
No. 124,396
IN THE COURT OF APPEALS OF THE STATE OF KANSAS
RHEUBEN JOHNSON,
Appellant,
v.
DAN SCHNURR, Warden, et al.,
Appellees.
MEMORANDUM OPINION
Appeal from Reno District Court; JOSEPH L. MCCARVILLE III, judge. Opinion filed November
10, 2022. Affirmed.
Shannon S. Crane, of Crane Law, of Hutchinson, for appellant.
Jon D. Graves, legal counsel, of Kansas Department of Corrections, for appellees.
Before HURST, P.J., BRUNS and GARDNER, JJ.
PER CURIAM: Rheuben Johnson appeals the dismissal of his K.S.A. 60-1501
petition for a writ of habeas corpus related to a disciplinary report and hearing arising
from his written correspondence to his ex-wife. Johnson argues that the petition should
not have been dismissed because his disciplinary hearing did not comply with procedural
due process and the prison policy prohibiting contact with his ex-wife violates his First
Amendment rights. As Johnson has failed to show a violation of his due process rights or
any error below, this court affirms the district court's dismissal of his petition.
1
FACTUAL AND PROCEDURAL BACKGROUND
In 2012, Johnson solicited three persons to murder his ex-wife on multiple
occasions. The State charged Johnson with three counts of solicitation to commit murder
in the first degree, and the jury convicted him of two of the counts. The district court
sentenced Johnson to a controlling term of 132 months in prison. State v. Johnson, No.
110,837, 2017 WL 4558235, at *1-4 (Kan. App. 2017) (unpublished opinion).
During Johnson's imprisonment, his ex-wife filed a combined pleading for a
private child in need of care (CINC) proceeding and a motion to terminate Johnson's
parental rights. In re R.J., No. 122,230, 2021 WL 137346, at *1 (Kan. App. 2021)
(unpublished opinion). The records of that proceeding are not included in the record on
appeal of this case, but there is evidence Johnson received notice of the proceedings;
however, there is no evidence indicating whether he received the CINC petition directly
from his ex-wife or from his ex-wife's attorney.
Johnson responded to the CINC petition with a pro se "counter-petition" to
terminate his ex-wife's parental rights, alleging she was an unfit parent. In an apparent
attempt to ensure compliance with service requirements, Johnson not only mailed the
document to the district court and his ex-wife's attorney, but also sent a copy directly to
his ex-wife, the child's grandparents, and Johnson's own attorney. Johnson's ex-wife
alleged she received Johnson's "counter-petition" in the mail on August 31, 2019, and
thereafter she contacted the Department of Corrections Office of Victim Services to
report her receipt of the pleading. The Hutchinson Correctional Facility (HCF)—where
Johnson was incarcerated—issued a disciplinary report against Johnson for a violation of
Internal Management Policy and Procedure (IMPP) 21-106, I.A. The policy provided that
"[t]he offender shall be informed upon entry to the Reception and Diagnostic Unit at
EDCF and TCF that he/she is not to initiate contact with the victim[s] in his/her case. The
2
victim must initiate the process for contact with the offender." The prison scheduled a
disciplinary hearing for September 25, 2019, and notified Johnson of the hearing.
In preparation for his defense, Johnson requested that the prison produce a copy of
the envelope and document he allegedly sent his ex-wife, but the prison denied the
request. Johnson also filed multiple motions to dismiss the disciplinary action.
At the disciplinary hearing, after Johnson's disciplinary report was read into the
record, he entered a plea of not guilty. Johnson admitted sending the document to his ex-
wife but claimed he was never informed that he could not contact her and argued that he
was serving a legal document in the CINC proceeding. The hearing officer contacted a
unit team member who informed the hearing officer that Johnson's journal entry of
sentencing prohibited him from contacting the victim "in any way." It is not clear from
the record if the unit team member's testimony was formally presented at the hearing or
merely informally communicated to the hearing officer.
The hearing officer found Johnson guilty of violating K.A.R. 44-12-1002 and
IMPP 21-106 by a preponderance of the evidence. The hearing officer made no findings
regarding the content of Johnson's "counter-petition" or Johnson's intent in sending the
document to his ex-wife. After finding a violation—apparently based solely on the
contact between Johnson and his ex-wife—the hearing officer imposed a 20-day
restriction-of-privileges sanction and a $5 fine. Johnson exhausted his administrative
appeals, and the prison authorities affirmed the hearing officer's decision at every level.
On November 27, 2019, Johnson filed his K.S.A. 60-1501 petition for habeas
corpus relief, raising multiple claims related to his disciplinary report, hearing, and
sanctions. Several months later, the prison responded and moved to dismiss Johnson's
petition. The district court held a nonevidentiary hearing before dismissing Johnson's
petition.
3
The district court reasoned that Johnson did not need to mail his responsive
pleading directly to his ex-wife:
"The question is, you know, did Mr. Johnson, if he files a response in the CINC
case is he, does he need to serve the victim in his underlying criminal case? No, he does
not. He can file the pleading with the court, serve the appropriate attorneys who are
representative of the parties in that case and he chose not to do that. He chose to I think
perhaps being a little bit too cute by a half think well, I can also serve my ex-wife so I'm
going to take advantage of that since we got a court case going, and I'm saying no, he
should not have done that. He was convicted for doing that and that is a legitimate
conviction on his D.R. I've read through the IMPP 21-206 I think it is, 21-106 and that
doesn't provide him any relief, and he basically admitted the allegations in the DR so
there is some evidence. He was not denied due process so I find that his petition needs to
fail. The petition is dismissed."
In a subsequent journal entry, the court summarized its ruling from the bench and
addressed Johnson's due process argument. The court concluded that the hearing officer
did not violate the minimal due process standards by failing to rule on Johnson's motions
to dismiss. The court noted that the prison provided Johnson with adequate notice of the
hearing, the record did not reveal that Johnson wanted to present evidence, and the record
did not reveal bias on the part of the hearing officer. Johnson appeals the district court's
dismissal of his petition.
DISCUSSION
Although Johnson raised several issues in his pro se habeas corpus petition below,
on appeal he narrows those arguments and this court's review is further narrowed by
applicable law. See State v. Davis, 313 Kan. 244, 248, 485 P.3d 174 (2021) (holding that
issues raised in the district court but not briefed on appeal are waived and abandoned).
"Disciplinary decisions concerning inmates in the custody of the State are generally not
4
subject to judicial review." May v. Cline, 304 Kan. 671, 674, 372 P.3d 1242 (2016).
However, Johnson can seek review of an alleged constitutional violation. 304 Kan. at
674. Here, Johnson claims the prison violated his constitutional due process rights during
his disciplinary hearing and that the HCF policy prohibiting his contact with his victim
infringed upon his free speech rights under the First Amendment to the United States
Constitution.
Johnson fails to show the prison violated his First Amendment rights.
Johnson alleges, without explanation, that the prison violated his First Amendment
rights by disciplining him for sending "legal mail to his ex-wife." Johnson does not
explain how the type of mail implicates his First Amendment rights or any other
constitutional protections. He further fails to explain whether he is making a facial or as-
applied First Amendment challenge to the constitutionality of IMPP 21-106.
Johnson relies on cases analyzing prison policies that permit staff to open mail
marked as legal correspondence addressed to an inmate outside the inmate's presence.
Those cases are not analogous and provide little, if any, insight. The mail at issue in this
case was outgoing, not incoming, and the record does not demonstrate that it was opened
or read by the prison staff. Instead, the document was brought to the prison's attention
when Johnson's ex-wife complained about it.
Johnson fails to make a successful facial First Amendment challenge
demonstrating the policy is unconstitutional under any circumstances. See State v. Ryce,
303 Kan. 899, Syl. ¶ 4, 368 P.3d 342 (2016). An inmate has greater First Amendment
protection in the contents of outgoing mail than incoming mail because the prison's
security interests are more seriously implicated by incoming mail. However, the First
Amendment protection afforded to an inmate's outgoing mail is not unlimited.
Thornburgh v. Abbott, 490 U.S. 401, 413, 109 S. Ct. 1874, 104 L. Ed. 2d 459 (1989).
5
Once incarcerated, an inmate loses liberties and privileges that are considered
incompatible with incarceration. "[F]reedom of association is among the rights least
compatible with incarceration." Overton v. Bazzetta, 539 U.S. 126, 131, 123 S. Ct. 2162,
156 L. Ed. 2d 162 (2003). Restrictions on an inmate's First Amendment associational
rights in outgoing mail have been upheld when the restrictions relate to legitimate
penological interests and the inmate has alternative means to exercise the asserted right.
Overton, 539 U.S. at 132 (citing Turner v. Safley, 482 U.S. 78, 89, 107 S. Ct. 2254, 96 L.
Ed. 2d 64 [1987]); Thornburgh, 490 U.S. at 414 (overruling prior standard for outgoing
mail in favor of the Turner reasonableness standard).
Similar to the policy at issue here, federal courts have upheld prohibitions against
inmates contacting persons who have requested no contact from an inmate. Samford v.
Dretke, 562 F.3d 674, 680 (5th Cir. 2009) ("Prisons have a legitimate interest in
protecting crime victims and their families from the unwanted communications of
prisoners when a victim requests that the prison prevent such communication."); Berdella
v. Delo, 972 F.2d 204, 209 (8th Cir. 1992) ("[T]he government's interest in protecting the
public from harassment by inmates would justify prohibiting an inmate from sending
mail to persons who have affirmatively requested that mail not be received from an
inmate."). The policy at issue in this case—IMPP 21-106—prohibits an inmate from
contacting a victim of the inmate's crime unless the victim initiates contact first.
While Johnson vaguely implies that the application of this policy to legal
communication somehow violates the First Amendment, he fails to cite any legal
authority supporting that contention or make any argument in support of this implied
assertion. Thus, Johnson has failed to show how this policy is facially unconstitutional.
Johnson's brief could be liberally construed as making an as-applied First
Amendment challenge to the policy, contending that the policy applied to his legal mail
in this situation violated his First Amendment rights. In his habeas corpus petition,
6
Johnson raised an argument that IMPP 21-106 violated his First Amendment rights
because it did not exempt contact for legal purposes, such as filing for divorce. In his
appellate brief, however, Johnson merely states that the policy at issue "prohibits inmates,
particularly Johnson, from sending legal mail to those he needs to serve a pleading," and
fails to cite any legal authority supporting this argument. In fact, Johnson fails to develop
this argument in any manner, including factually, and he further fails to explain why his
argument is sound despite the lack of supporting authority.
Johnson fails to support his conclusory allegation of a First Amendment violation
with authority or argument. Johnson's bare First Amendment challenge, whether facial or
as applied, is therefore abandoned and waived. See e.g., State v. Gallegos, 313 Kan. 262,
277, 485 P.3d 622 (2021); State v. Meggerson, 312 Kan. 238, 246, 474 P.3d 761 (2020)
(finding that the court may treat arguments without supporting authority as waived or
abandoned); Kansas Supreme Court Rule 6.02(a)(5) (2022 Kan. S. Ct. R. at 36).
Johnson fails to show that his due process rights were violated in the disciplinary
hearing.
When a prisoner claims a due process violation, they must first establish that state
action has implicated a protected liberty or property interest. Hogue v. Bruce, 279 Kan.
848, 850-51, 113 P.3d 234 (2005). This court has held, and the prison concedes, that a
monetary fine imposed as a disciplinary sanction implicates a prisoner's due process
rights. Sauls v. McKune, 45 Kan. App. 2d 915, 920, 260 P.3d 95 (2011); Washington v.
Roberts, 37 Kan. App. 2d 237, 240, 152 P.3d 660 (2007) ("[T]he extraction of a fine
implicates the Due Process Clause of the Fourteenth Amendment to the United States
Constitution even when only a small amount has been taken from an inmate's account.").
Therefore, this court finds that the prison's imposition of a monetary fine implicated
Johnson's protected property interest, and he was therefore entitled to due process in his
disciplinary hearing.
7
While Johnson is entitled to some level of due process before imposition of
disciplinary sanctions, the procedural protections afforded to prison inmates is not as
extensive as the procedural protections afforded to criminal defendants. Superintendent v.
Hill, 472 U.S. 445, 455-56, 105 S. Ct. 2768, 86 L. Ed. 2d 356 (1985); Norwood v.
Roberts, 53 Kan. App. 2d 772, 772-73, 393 P.3d 169 (2017). In the prison disciplinary
context, constitutional due process requirements "are satisfied if some evidence supports
the decision by the prison disciplinary board . . . ." Sammons v. Simmons, 267 Kan. 155,
Syl. ¶ 3, 976 P.2d 505 (1999).
Johnson appears to argue that the procedures of the disciplinary hearing, and the
HCF's failure to produce certain evidence, violated his due process rights. With regard to
the evidence, Johnson alleges that he was unable to prepare a defense because, despite his
request, he was not provided a copy of the letter or envelope he mailed to his ex-wife.
Johnson does not explain, however, how this evidence could have helped his defense or
changed the outcome of the hearing.
Although inmates' rights are limited in prison disciplinary proceedings, they are
entitled to the opportunity to call witnesses and present documentary evidence when
doing so is not "unduly hazardous to institutional safety or correctional goals." Wolff v.
McDonnell, 418 U.S. 539, 566, 94 S. Ct. 2963, 41 L. Ed. 2d 935 (1974); see also K.A.R.
44-13-101(c) (entitling inmates, under specified parameters, to testify, call witnesses,
present documentary evidence, and cross-examine witnesses). If the prison held the
envelope and petition as evidence against Johnson, he was entitled to copies. See K.A.R.
44-13-101(c)(5). Unlike a request for witnesses, the administrative regulations do not
require a specific procedure for requesting documents. See K.A.R. 44-13-306 (outlining
the procedure for requesting witnesses). The record contains no explanation of why HCF
refused to provide Johnson with the envelope or letter—or even a copy—and neither
were introduced by the prison authorities at the hearing or included in the record on
appeal. However, Johnson did not deny their existence or content.
8
Johnson was charged with wrongfully contacting the victim of his crime of
conviction—his ex-wife—in violation of prison rules. Johnson never denied that he sent
the letter and envelope to his ex-wife. Because he sent the letter and envelope, he knew
the content of both, but nevertheless fails to identify a viable defense that he was
prevented from asserting at the hearing because he lacked access to the letter and
envelope. Although he argues that the letter constituted legal correspondence, he fails to
explain how his lack of access to the letter and envelope inhibited his ability to make that
argument.
Johnson also contends that the prison violated his procedural due process rights in
the method and manner of conducting his hearing. Due process requires prison officials
to provide: written notice of the charges to enable the inmate to prepare a defense, an
impartial hearing, the opportunity for the inmate to call witnesses and present
documentary evidence, and a written statement of the hearing officer on the facts and
reasons for the decision. Washington, 37 Kan. App. 2d at 241 (citing Wolff v. McDonnell,
418 U.S. 539, 553-56, 94 S. Ct. 2963, 41 L. Ed. 2d 935 [1974]; Hogue, 279 Kan. at 851).
Johnson received notice that he was charged with violating IMPP 21-106 11 days
before his hearing. He does not challenge the impartiality of the hearing officer, but
rather alleges that the hearing officer violated his due process rights by waking him and
conducting the hearing just outside his cell before Johnson was dressed. Johnson cites no
authority to support his conclusory assertion that the manner in which the hearing officer
conducted his disciplinary hearing violated his due process rights. His argument merely
consists of a restatement of the allegations within his habeas corpus petition and a bare
conclusion that he was unable to present a defense.
Even assuming that the manner in which the disciplinary hearing was conducted or
the HCF's failure to provide Johnson with the envelope and letter—or some combination
of the two—somehow violated Johnson's due process rights, those violations would be
9
harmless. See State v. Lloyd, 308 Kan. 735, 740, 423 P.3d 517 (2018) (due process
violation held harmless when court able to declare beyond a reasonable doubt that
violation had little, if any, likelihood of changing the outcome of the disciplinary
hearing). Johnson was charged with violating IMPP 21-106 by contacting his victim via
letter, and he did not deny that contact. The hearing officer provided a written statement
of the evidence and reasons for his decision. The location and timing of the hearing had
no impact on the outcome. Moreover, Johnson has not explained how access to the
envelope or letter would have aided his defense.
CONCLUSION
In his habeas corpus petition to the district court, Johnson asserted a battery of
allegations of wrongdoing. On appeal, however, he has abandoned most of those claims.
Instead, he argues only that the prison violated his constitutional due process and First
Amendment rights. Neither of these arguments are well developed or supported by
applicable legal authority. Moreover, the due process rights guaranteed an inmate in a
disciplinary hearing are limited, and the prison afforded Johnson those limited procedural
guarantees.
Affirmed.
10 | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482912/ | RENDERED: NOVEMBER 10, 2022; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2021-CA-0648-MR
NICHOLAS WILBURN APPELLANT
APPEAL FROM BOYLE CIRCUIT COURT
v. HONORABLE DARREN W. PECKLER, JUDGE
ACTION NO. 20-CR-00182
COMMONWEALTH OF KENTUCKY APPELLEE
AND
NO. 2021-CA-0649-MR
NICHOLAS WILBURN APPELLANT
APPEAL FROM BOYLE CIRCUIT COURT
v. HONORABLE DARREN W. PECKLER, JUDGE
ACTION NO. 20-CR-00363
COMMONWEALTH OF KENTUCKY APPELLEE
OPINION
AFFIRMING
** ** ** ** **
BEFORE: COMBS, LAMBERT, AND MAZE, JUDGES.
MAZE, JUDGE: Appellant Nicholas Wilburn appeals from the judgments of the
Boyle Circuit Court sentencing him to a total of four years’ imprisonment in
accordance with the Commonwealth’s recommendations. For the reasons set forth
below, his sentences are affirmed.
I. BACKGROUND
On March 4, 2021, pursuant to an agreement with the
Commonwealth, Wilburn entered a plea of guilty in Indictment No. 20-CR-00182,
to trafficking in a controlled substance first degree, first offense, possession of
drug paraphernalia, and theft by unlawful taking under $500. The Commonwealth
recommended a sentence of three years.
Also on that date, Wilburn entered a plea of guilty in Indictment No.
20-CR-00363, to possession of a controlled substance, first degree, fleeing or
evading, second degree, giving a police officer false identifying information, and
resisting arrest, for all of which the Commonwealth recommended a sentence of
one year. The two cases were to run consecutive to one another for a total of four
years to serve and were then scheduled for final sentencing on May 4, 2021.
-2-
Although the Department of Probation and Parole did not recommend
that Wilburn be probated, he filed motions in both cases asking the trial court to
grant probation. He reminded the court that it had granted him a medical furlough
on September 3, 2020, to enable him to participate in the drug treatment program
offered at Isaiah House. He had been active in the program since that time and was
set to graduate in August 2021. In the 243 days that he had been enrolled, he had
no “issues.”
At the sentencing hearing, the court reviewed Wilburn’s Presentence
Investigation Report (PSI) and his criminal history, specifically noting that the
felonies with which he was charged were his fifth and sixth felony offenses.1 The
court then heard the arguments of Wilburn’s counsel in support of his motions for
probation. At the conclusion of those arguments, the court adopted the sentencing
recommendations of the Commonwealth. Although Wilburn’s counsel argued that
he had never been given the opportunity to attempt probation, the court’s review of
his history reflected that in 2007 he had been granted deferred prosecution or some
form of unsupervised probation. While acknowledging Wilburn’s achievements,
the court stated that, “his law abidingness has been because he is technically in
custody in a rehab program at this time.” Further, the court pointed out that the
1
Indeed, the court later confirmed that Wilburn was on bond for his fifth felony at the time the
sixth was committed.
-3-
officers of Probation and Parole “have some concerns about his sincerity.” Having
made these statements and imposed its sentences on the record, the court thereafter
entered written judgments on Form AOC-445 in each case, which provided that:
Having given due consideration to the PSI prepared by
the Division of Probation and Parole, and to the nature
and circumstances of the crime, as well as the history,
character and condition of Defendant, and any matters
presented to the Court by the Defendant . . . the Court
finds . . . imprisonment is necessary for protection of the
public because . . . probation, probation with an
alternative sentencing plan, or conditional discharge
would unduly depreciate the seriousness of Defendant’s
crime[.]
On appeal, Wilburn argues that the trial court abused its discretion by
failing to consider other appropriate factors as set forth in KRS2 532.007(3)(a) and
(b).
II. STANDARD OF REVIEW
Although the entry of a guilty plea operates to waive most appealable
issues, some issues do survive for appellate review; among these are “sentencing
issues.” Windsor v. Commonwealth, 250 S.W.3d 306, 307 (Ky. 2008). Such
issues include those which are made in contravention of applicable law or without
full consideration of all permissible sentencing options. Therefore, they may be
2
Kentucky Revised Statutes.
-4-
raised on appeal even where the defendant has entered an open plea. Grigsby v.
Commonwealth, 302 S.W.3d 52, 54 (Ky. 2010).
Since the decision as to whether to grant probation lies in the
discretion of the trial court, our review is for an abuse of that discretion. Such an
abuse is found where “the trial judge’s decision was arbitrary, unreasonable,
unfair, or unsupported by sound legal principles.” Arnett v. Commonwealth, 366
S.W.3d 486, 489 (Ky. App. 2011).
III. ANALYSIS
“When a sentencing court fails to consider probation or some other
applicable sentencing option provided by statute, the defendant has not received
the consideration directed by our legislature for punishment of that defendant’s
particular crime or crimes.” Hayes v. Commonwealth, 627 S.W.3d 857, 862-863
(Ky. 2021). KRS 533.010(2) requires a sentencing court to consider probation as
an alternative to imprisonment as to any non-violent offender upon assessment of
“the defendant’s risk and needs assessment, nature and circumstances of the crime,
and the history, character, and condition of the defendant . . . .” Further, the court
“shall” grant probation
unless the court is of the opinion that imprisonment is
necessary for protection of the public because:
(a) There is substantial risk that during a period of
probation or conditional discharge the
defendant will commit another crime;
-5-
(b) The defendant is in need of correctional
treatment that can be provided most effectively
by his commitment to a correctional institution;
or
(c) A disposition under this chapter will unduly
depreciate the seriousness of the defendant’s
crime.
However, Wilburn argues that the trial court was also required to
consider the factors set forth in KRS 532.007. That statute is titled
“Commonwealth’s sentencing policy[.]” It codifies the general objectives of
sentencing, holding “offenders accountable while reducing recidivism and criminal
behavior and improving outcomes for those offenders who are sentenced[.]” KRS
532.007(1). The General Assembly’s pronouncements of public policy are
controlling upon the courts. Bryant v. Louisville Metro Housing Authority, 568
S.W.3d 839 (Ky. 2019).
KRS 532.007(3) provides that judges “shall” consider:
(a) Beginning July 1, 2013, the results of a defendant’s
risk and needs assessment included in the presentence
investigation; and
(b) The likely impact of a potential sentence on the
reduction of the defendant’s potential future criminal
behavior[.]
In Howard v. Commonwealth, 496 S.W.3d 471, 475 (Ky. 2016), the
Court found that although a sentencing court must “consider the contents of the
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written Pre-Sentencing Investigation (PSI) Report, and it must also consider the
effect of a sentence on a defendant’s potential future criminal behavior[,]” no
abuse of discretion occurred where the trial court “observed the proper sentencing
procedures.” Id. at 476 (footnote omitted). In finding that Howard’s sentencing
had been conducted in accordance with proper “procedures,” the Court noted that
the trial court considered the PSI, the sentencing memoranda provided by the
defendant and the Commonwealth, and his criminal history, which included prior
convictions for the same charges.
In the case sub judice, the court clearly considered the factors required
by KRS 533.010, as its judgments set forth those factors virtually verbatim.
However, the court also made statements on the record, which leave no doubt that
all statutory factors, including those of KRS 533.007, were considered. The court
referred specifically to the recommendations of Probation and Parole, which
included treatment and vocational training. However, it also noted Probation and
Parole’s doubts about Wilburn’s “sincerity.” Most troubling to the court appeared
to be Wilburn’s criminal history, a previous failure of some form of probation, and
the fact that he had committed a sixth felony while out on bond for a fifth. While
the court made no specific findings in this regard, it appears that this accumulation
of offenses is clearly relevant to the issue of Wilburn’s future criminal conduct.
These “oral findings” are also significant to this Court’s determination that the trial
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court considered all the statutorily appropriate factors. Commonwealth v. Gilmore,
587 S.W.3d 627, 630 (Ky. 2019).
IV. CONCLUSION
Accordingly, we affirm the judgments and sentences of the Boyle
Circuit Court.
ALL CONCUR.
BRIEF FOR APPELLANT: BRIEF FOR APPELLEE:
Erin Hoffman Yang Daniel Cameron
Frankfort, Kentucky Attorney General of Kentucky
Christina L. Romano
Assistant Attorney General
Frankfort, Kentucky
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https://www.courtlistener.com/api/rest/v3/opinions/8482922/ | RENDERED: NOVEMBER 10, 2022; 10:00 A.M.
TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2021-CA-1495-WC
DREISBACH WHOLESALE
FLORISTS, INC. APPELLANT
PETITION FOR REVIEW OF A DECISION
v. OF THE WORKERS’ COMPENSATION BOARD
ACTION NO. WC-17-94806
DONALD LEITNER; HONORABLE
DOUGLAS GOTT, CHIEF
ADMINISTRATIVE LAW JUDGE;
AND WORKERS’ COMPENSATION APPELLEES
BOARD
OPINION
REVERSING
** ** ** ** **
BEFORE: CLAYTON, CHIEF JUDGE; ACREE AND TAYLOR, JUDGES.
ACREE, JUDGE: Appellant, Dreisbach Wholesale Florists, Inc. (Dreisbach)
appeals the Workers’ Compensation Board’s (Board) November 19, 2021 opinion
reversing the Administrative Law Judge’s (ALJ) denial of Appellee Donald
Leitner’s motion to reopen his workers’ compensation award. The Board
determined Leitner made a prima facie showing of mistake pursuant to KRS1
342.125(1)(c) as to claimed injuries to his neck. Finding error, we reverse.
BACKGROUND
Leitner worked as a delivery driver for Dreisbach. While making a
delivery on February 6, 2017, another vehicle crossed the center line and collided
head-on with Leitner’s delivery van. Leitner rode in an ambulance to the
University of Louisville Hospital following the accident. He complained of pain in
his neck, right shoulder, left knee, left ribs, and back. Hospital staff instructed him
to follow up with his primary care physician.
Beginning the next day, February 7, 2017, Leitner made his first of
several visits to BaptistWorx, a medical practice group in Louisville. BaptistWorx
placed Leitner on work restrictions and referred him to Dr. Kuiper, an orthopedic
specialist, for his left knee pathology. Dr. Kuiper operated on Leitner’s left knee
and prescribed physical therapy. Dr. Kuiper ultimately returned Leitner to work
with no restrictions but observed Leitner had some residual pain in his knee.
Leitner filed an application for resolution of an injury claim on
October 26, 2017. With his application, Leitner included a required medical
history form wherein he stated he received treatment for his neck at University of
Louisville Hospital, BaptistWorx, and Louisville Orthopedic Center. In a
1
Kentucky Revised Statutes.
-2-
December 18, 2017 deposition, Leitner testified he saw his primary care physician
for neck pain after the accident. He also testified to ongoing neck pain which
prevented him from turning his head to the right.
Dr. David Waespe performed an independent medical evaluation of
Leitner on December 30, 2017. He assessed Leitner as having one percent whole
person impairment for his right shoulder injury, four percent for his left knee, and
two percent for continued pain that limited his daily activities and ability to work.
Overall, Dr. Waespe assessed Leitner as having seven percent whole person
impairment and assigned Leitner work restrictions. He did not think Leitner could
return to the sort of job he was performing previously due to his left knee and right
shoulder impingement. He also observed that Leitner’s neck was tender to the
touch; however, despite his examination, Dr. Waespe did not find any impairment
of Leitner’s neck.
Dr. Gregory Gleis performed an independent medical evaluation of
Leitner on February 7, 2018 and determined he had a four percent whole person
impairment. Dr. Gleis determined that, although Leitner had subjective pain, there
was no objective medical evidence of a residual injury. He determined Leitner’s
left knee had no deficiency in function, despite previous knee surgery. Leitner
informed Dr. Gleis his neck pain was his primary concern, and that Leitner was
previously referred to a specialist for degenerative disk disease, cervical radiculitis,
-3-
and neck pain. Dr. Gleis also reviewed a CT scan that revealed problems with
Leitner’s cervical vertebrae. Despite this, Dr. Gleis found no permanent worsening
of a neck injury or condition and therefore did not recommend surgery on Leitner’s
neck; however, he did note in his report Leitner had constant right neck pain.
Leitner’s injury claim was litigated at a final hearing. He testified to
left knee soreness, to pain in his left lower extremity, and to constant right neck
and shoulder pain.
ALJ Neal determined in his June 11, 2018 opinion and order that
Leitner was only entitled to compensation for his medical expenses arising from
injury sustained to his left knee and right shoulder. Though he acknowledged
Leitner had ongoing neck pain and that Dr. Gleis found Leitner’s neck conditions
had not permanently worsened, he reached no conclusion in his order regarding
Leitner’s neck. There was no appeal to the full Board.
Leitner continued to have shoulder pain. Leitner underwent a cervical
decompression and fusion operation on October 22, 2018, which was unsuccessful
in resolving his pain. However, Leitner received another decompression procedure
on his neck in July 2020, which relieved his shoulder pain. Leitner then obtained
an expert opinion from Dr. Nazar, who opined that Dr. Waespe incorrectly
determined Leitner had no impairment in his neck. In his report, Dr. Nazar stated
his belief that Leitner’s right shoulder pain was likely misdiagnosed, and that
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Leitner’s shoulder pain was likely pain resulting from his neck maladies. Dr.
Nazar assessed a 29 percent whole person impairment for Leitner’s neck and
recommended permanent restrictions.
In April 2021, Leitner then filed his motion to reopen his workers’
compensation claim. He argued that (1) he did not receive adequate consideration
of his alleged neck injury from the original ALJ and (2) newly discovered evidence
supported reopening. Leitner included Dr. Nazar’s report in support of his motion.
ALJ Gott denied Leitner’s motion in an order dated June 21, 2021.
Therein, he determined Leitner could not reopen his claim on the basis of a neck
injury that was “alleged, but not proven, awarded, or appealed.” The ALJ held
Leitner had not met his burden of proving his neck injury when originally seeking
compensation for his injuries, and therefore was not entitled to “another bite at the
apple[.]” And, the ALJ determined Dr. Nazar’s report did not constitute newly
discovered evidence, reasoning that just because the report was generated after his
claim for his neck injury was denied does not mean the report’s findings could not
have been discovered by the exercise of due diligence prior to the hearing.
Leitner then filed both a petition for reconsideration and a motion to
amend his motion to reopen. He sought to amend his motion and reopen his claim
on the basis of (1) mistake and (2) a change of condition. ALJ Gott rejected both
the petition and the motion on July 23, 2021. The ALJ determined Dr. Nazar’s
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report provided an insufficient basis to reopen Leitner’s claim. Though Dr. Nazar
believed Leitner’s shoulder pain was attributable to a neck injury, the ALJ noted
Leitner had listed neck injury in his original injury claim and that Dr. Gleis already
evaluated Leitner’s neck. The ALJ also determined Dr. Nazar’s report did not
support reopening for a change in condition. Because the June 11, 2018 order
found Leitner was not entitled to compensation for any neck injury, any worsening
of a neck injury could not support reopening his claim.
However, the Board issued an order on November 19, 2021, affirming
in part and reversing in part the order denying Leitner’s motion to reopen, and
remanded the matter to ALJ Gott with instructions to sustain Leitner’s motion.
The Board determined Leitner’s motion was not barred by res judicata because he
had made a prima facie showing of mistake as to the finding that he had not
sustained a compensable neck injury.
Dreisbach now appeals the Board’s order, arguing the Board erred in
determining Leitner’s motion was not barred by res judicata on the basis of
mistake.
STANDARD OF REVIEW
KRS 342.285 designates the ALJ as the finder of fact in workers’
compensation actions. KRS 342.285(2). “[A]s the fact-finder, the ALJ, not this
Court and not the Board, has sole discretion to determine the quality, character,
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and substance of the evidence.” Abbott Lab’ys v. Smith, 205 S.W.3d 249, 253 (Ky.
App. 2006) (citing Whittaker v. Rowland, 998 S.W.2d 479, 481 (Ky. 1999)). “Not
only does the ALJ weigh the evidence, but the ALJ may also choose to believe or
to disbelieve any part of the evidence, regardless of its source.” Id. (citing
Whittaker, 998 S.W.2d at 481).
“The [B]oard shall not substitute its judgment for that of the [ALJ] as
to the weight of evidence on questions of fact[.]” KRS 342.285(2). Because the
ALJ may disregard some evidence while believing other evidence, the Board may
not disturb the ALJ’s decisions if conflicting evidence underlies the ALJ’s
findings; when the Board reviews ALJs’ decisions, it is tasked with deciding
“whether the evidence is sufficient to support a particular finding made by the
ALJ, or whether such evidence as there was before the ALJ should be viewed as
uncontradicted and compelling a different result.” Western Baptist Hosp. v. Kelly,
827 S.W.2d 685, 687 (Ky. 1992). The Board’s review is limited to determining
whether the ALJ acted within his or her powers, whether the result was procured
by fraud, whether the result conforms with KRS Chapter 342, whether the result
“is clearly erroneous on the basis of the reliable, probative, and material evidence
contained in the whole record[,]” and whether the result “is arbitrary or capricious
or characterized by abuse of discretion or clearly unwarranted exercise of
discretion.” KRS 342.285(2)(a)-(e).
-7-
“The scope of review by the Court of Appeals shall include all matters
subject to review by the [B]oard and also errors of law arising before the [B]oard
and made reviewable by the rules of the Supreme Court for review of decisions of
an administrative agency.” KRS 342.290. “When reviewing one of the Board’s
decisions, [the appellate] Court will only reverse the Board’s decision when it has
overlooked or misconstrued controlling law or so flagrantly erred in evaluating the
evidence that it has caused gross injustice.” Abbott Lab’ys, 205 S.W.3d at 253
(citing Western Baptist, 827 S.W.2d at 687-88).
ANALYSIS
“The doctrine of res judicata (also known as the doctrine of the
finality of judgments) is basic to our legal system and stands for the principle that
once the rights of the parties have been finally determined, litigation should end.”
Slone v. R & S Mining, Inc., 74 S.W.3d 259, 261 (Ky. 2002). But, res judicata is
not ironclad, and KRS 342.125 permits reopening final workers’ compensation
awards on grounds of fraud, newly discovered evidence which could not have been
discovered upon the exercise of due diligence, mistake, or change of disability.
KRS 342.125(1)(a)-(d). “Reopening is the remedy for addressing certain changes
that occur or situations that come to light after benefits are awarded.” Dingo Coal
Co. v. Tolliver, 129 S.W.3d 367, 370 (Ky. 2004).
-8-
In its petition, Dreisbach contends the Board abused its discretion in
reversing ALJ Gott’s order denying Leitner’s motion to reopen his award and
believes ALJ Gott’s opinion overruling Leitner’s motion should be reinstated.
Dreisbach notes that ALJ Neal considered conflicting evidence regarding Leitner’s
neck injury and found lacking the evidence presented in support of a compensable
neck injury, but finding the evidence to the contrary conclusive of the issue. It
therefore argues the Board failed to defer to ALJ Neal in his role as finder of fact
by reopening the case to allow presentation of evidence discoverable before the
hearing ALJ Neal conducted. We agree.
When an ALJ considers extensive, but conflicting, evidence regarding
a workers’ compensation claim in making his ruling upon a final hearing, a
subsequent medical opinion that could have been obtained prior to the close of
evidence will not justify reopening the case on the ground of “mistake” as
contemplated by KRS 342.125(1)(c); res judicata still prevents reopening of an
already final award. Russellville Warehousing v. Bassham, 237 S.W.3d 197, 202-
03 (Ky. 2007). In other words, “the purpose of the ‘mistake’ provision is not to
give the losing party an opportunity to ‘bring up reinforcements’ and relitigate the
claim but rather to correct a decision that was the product of a misconception
concerning the worker’s actual condition.” Slone, 74 S.W.3d at 262 (quoting
Messer v. Drees, 382 S.W.2d 209, 213 (Ky. 1964)).
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In Russellville Warehousing v. Bassham, a workers’ compensation
claimant was exposed to manganese dust for approximately seven years during his
employment, which caused his health to deteriorate until he was unable to feed
himself or move on his own. 237 S.W.3d at 198. When ruling on the claimant’s
application for benefits, the ALJ heard testimony from multiple doctors who had
reached differing conclusions regarding what caused the claimant’s condition –
including diagnoses of Parkinson’s disease, progressive ataxia resulting from acute
manganese toxicity, and viral or prion diseases. Id. at 198-200. The ALJ
determined the claimant suffered from a neurological disease resulting from
occupational hazards posed by manganese exposure and awarded total disability.
Id. at 200. The claimant then died, and an autopsy confirmed manganese
poisoning as cause of death. Id. However, the employer’s expert concluded “the
autopsy data did not support a diagnosis of manganese toxicity and that pathologic
examination indicated that Bassham appeared to have suffered from a slow virus.”
Id. at 201. On that basis, the employer moved to reopen the ALJ’s decision and
revoke all awards on the basis of newly discovered evidence or mistake. Id.
The Court in Bassham explained that “‘newly discovered evidence’ is
a legal term of art. It refers to evidence that existed but that had not been
discovered and with the exercise of due diligence could not have been discovered
at the time a matter was decided.” Id. The evidence offered in this case for
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reopening does not satisfy that definition because Dr. Nazar’s report could have
been generated before the hearing. Dr. Nazar’s report, as the Court in Bassham
would denominate it, is “post-award evidence that the finding was mistaken” but
such evidence “did not show a ‘mistake’ within the meaning of KRS 342.125.” Id.
at 203. The mistake provision of KRS 342.125(1)(c) “is not an invitation to retry a
litigated claim and that litigation must end when a decision becomes final unless
extraordinary circumstances exist[,]” said the Kentucky Supreme Court when it
affirmed the ALJ’s refusal to reopen the award. 237 S.W.3d at 202.
The Court further explained that, because the cause of Bassham’s
disability was “hotly contested” initially and because the parties offered extensive,
but conflicting, evidence of the cause of his disability – including extensive
evidence of prion or other disease – the ALJ did not err in finding there had been
no prima facie showing of mistake sufficient to reopen the award. Id. As in
Bassham, Leitner’s neck injury was a hotly contested issue before ALJ Neal, with
conflicting evidence presented for and against compensation. Leitner complained
of neck pain to multiple doctors, and the ALJ considered the findings and
testimony of those doctors. Dr. Waespe found no impairment in Leitner’s neck.
Dr. Gleis also made this finding, despite a scan which showed some degree of
malady in Leitner’s cervical spine. The ALJ also considered the fact Leitner
complained of neck pain to his primary care physician after the accident, and
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Leitner experienced pain when turning his head to the right. The ALJ considered
these and other conflicting findings regarding Leitner’s neck, but ultimately found
Dr. Gleis’ and Dr. Waespe’s conclusions to be more convincing. The ALJ – not
the Board – is tasked with assigning weight to evidence, and the Board therefore
misapplied controlling law by assuming the ALJ’s role.
Subsequent medical findings are insufficient to disturb an ALJ’s
findings regarding conflicting evidence, and thus Dr. Nazar’s report did not
provide a basis to usurp ALJ Neal in his role as fact finder. The Board misapplied
controlling law in reaching the opposite conclusion.
Dr. Nazar’s report does not suddenly make evidence of Leitner’s
claimed neck injury uncontradicted, and therefore the Board erred in determining
the ALJ was compelled to reach a different result than he did. Our review reveals
the Board misapplied controlling law by substituting its factual findings for those
of the ALJ; the ALJ is empowered to believe or disbelieve evidence, not the Board.
Res judicata saves Dreisbach from relitigating an issue already known and
considered by the ALJ and, therefore, we must reverse the Board’s order.
CONCLUSION
For the foregoing reasons, we reverse the Board’s November 19, 2021
opinion requiring the ALJ to reopen Leitner’s award.
ALL CONCUR.
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BRIEF FOR APPELLANT: BRIEF FOR APPELLEE:
Joel W. Aubrey Paul A. Brizendine
Michelle Enoch Jeffersonville, Indiana
Louisville, Kentucky
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https://www.courtlistener.com/api/rest/v3/opinions/8482925/ | RENDERED: NOVEMBER 10, 2022; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2021-CA-1136-MR
CHRISTOPHER C. BABCOCK, DMD,
MD; SAMUEL V. STEELE, JR.; AND
UNNAMED JOHN DOES APPELLANTS
APPEAL FROM JEFFERSON CIRCUIT COURT
v. HONORABLE MARY M. SHAW, JUDGE
ACTION NO. 17-CI-004907
RENEE ESTRIDGE; JAMIE
WARREN, DMD, MD; AND
KENTUCKIANA ORAL &
MAXILLOFACIAL SURGERY
ASSOCIATES, PSC APPELLEES
OPINION
AFFIRMING
** ** ** ** **
BEFORE: CETRULO, COMBS, AND GOODWINE, JUDGES.
COMBS, JUDGE: Christopher C. Babcock, DMD, MD, and Samuel V. Steele, Jr.,
appeal an order of the Jefferson Circuit Court granting judgment to Jamie Warren,
DMD, MD; Renee Estridge; and Kentuckiana Oral and Maxillofacial Surgery
Associates, PSC (KOMSA). The judgment consisted of attorneys’ fees in the
amount of $52,527.07; other costs incurred in collection of a debt in the amount of
$1,959.41; and $86,553.42 -- the remainder of principal owed. After our review,
we affirm.
This is the parties’ second appearance before us. Litigation began
when Warren, Estridge, and KOMSA filed a civil action against Babcock and
Steele in September 2017, alleging defamation, identity theft, and other causes of
action. On May 16, 2018, the parties negotiated a settlement whereby Babcock
and Steele would (inter alia) pay a sum of money to Warren, Estridge, and
KOMSA in exchange for dismissal of the claims against them. However, litigation
resumed when Babcock and Steele resisted and challenged enforcement of the
agreement.
On August 10, 2018, the Jefferson Circuit Court ordered the terms of
the negotiated settlement to be enforced. The court incorporated the terms of the
settlement agreement into a final judgment entered on December 7, 2018.
Babcock and Steele filed a motion to alter, amend, or vacate and a motion
requesting the court to set the terms of a supersedeas bond. By order entered on
March 15, 2019, the court denied the motion to alter, amend, or vacate. It set the
supersedeas bond at $500,000.00, “which includes the Final Judgment amount to
be paid [by Babcock and Steele], [fees incurred by Warren, Estridge, and
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KOMSA], costs, post-judgment interest of 12% per agreement . . . .” Babcock and
Steele appealed.
In an opinion rendered on September 18, 2020, we affirmed the circuit
court’s judgment. Babcock v. Estridge, No. 2019-CA-000544-MR, 2020 WL
5587369 (Ky. App. Sep. 18, 2020). We held that the court was not manifestly
unjust to conclude that the parties entered into a binding settlement on May 16,
2018. We observed that the unqualified acceptance by Babcock and Steele of a
counteroffer to resolve the litigation among them (as proposed by Warren,
Estridge, and KOMSA) provided a sufficient basis to conclude that the parties had
achieved a meeting of the minds; that the unequivocal actions of Babcock and
Steele following acceptance of the counteroffer confirmed their agreement; that the
detrimental reliance of Warren, Estridge, and KOMSA upon the acceptance of
their counteroffer further supported the order of the circuit court; and that
enforcement of the agreement was not manifestly unjust.
Finally, we specifically addressed the issue of post-judgment interest.
We determined that the trial court was authorized by the provisions of KRS1
360.040(3) to impose post-judgment interest and, separately, that the parties “had
agreed to such interest in their agreement.” Babcock, 2020 WL 5587369. We
denied the petition for rehearing filed by Babcock and Steele, and, by order entered
1
Kentucky Revised Statutes.
-3-
on March 17, 2021, the Supreme Court of Kentucky denied their motion for
discretionary review.
Once our opinion was final, the Jefferson Circuit Court granted the
motion of Warren, Estridge, and KOMSA to enforce the supersedeas bond in
partial satisfaction of the judgment. Subsequently, the Jefferson Circuit Court
granted the motion of Warren, Estridge, and KOMSA for attorneys’ fees in the
amount of $52, 527.07; costs in the amount of $1,959.41; and the remaining
outstanding principal balance of $86,553.42 “which continues to accrue interest at
the rate of 12% since release of the supersedeas bond on June 17, 2021.” This
second appeal followed.
On appeal, Babcock and Steele contend that the order of the Jefferson
Circuit Court should be reversed because Warren, Estridge, and KOMSA are not
entitled to recover attorneys’ fees, costs, or interest at the rate of 12%.
The interpretation and construction of a contract is a matter of law for
the court to decide. Cinelli v. Ward, 997 S.W.2d 474 (Ky. App. 1998). We review
questions of law de novo without deferring to the conclusions of the circuit
court. Id.
The terms of the parties’ May 16, 2018, settlement agreement provide,
in part, that Babcock and Steele will pay to Warren, Estridge, and KOMSA a sum
of money -- 55% to be paid immediately; 22% to be paid on or before November
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16, 2018; and 22% to be paid on or before May 16, 2019. It provides further that
an agreed judgment will be entered “in the event of payment default in the amount
of unpaid settlement amount, accelerated and due immediately, with interest from
date of settlement agreement until paid in full at the rate of 12% per annum, plus
attorneys’ fees and costs of collection.”
Babcock and Steele immediately refused to honor the terms of the
agreement. Warren, Estridge, and KOMSA turned once again to the circuit court.
The Jefferson Circuit Court ordered the terms of the negotiated settlement to be
enforced, and we affirmed that decision. Nevertheless, Babcock and Steele
continue to argue on appeal that there was never a meeting of the minds and that
the parties never actually entered into a settlement agreement. They also contend
that they were deprived of due process through the first appeal process. Since
neither of these issues is subject to our present review, we decline to discuss them
further.
Additionally, Babcock and Steele contend that the court’s subsequent
order awarding attorneys’ fees, costs, and interest at 12% is erroneous. They claim
that attorneys’ fees and costs of collection are payable under the terms of the
agreement only upon a default and are limited to those amounts incurred “in the
collection of the unpaid portions of the agreed settlement, not the attorneys’ fees
-5-
and costs.” (Internal quotation marks omitted.) Underlying their argument is their
assertion that they never defaulted on the terms of the May 16, 2018, agreement.
Babcock and Steele reason that the appellate proceedings
“forestall[ed] the alleged ‘default.’” We disagree. Under the terms of the May 16,
2018, settlement, Babcock and Steele agreed to pay a stated sum to Warren,
Estridge, and KOMSA on a specific installment schedule. They failed to make the
initial payment, and under the clear terms of the agreement, payment of the entire
debt was accelerated. Taking Warren, Estridge, and KOMSA back to court to
enforce the terms of the settlement agreement did not, therefore, “forestall” their
default. Recourse to the tribunal was their logical course of action.
Finally, Babcock and Steele argue that the attorneys’ fees incurred by
Warren, Estridge, and KOMSA
in their attempt to convince the various Courts that there
had been an actual “agreed upon” settlement cannot be
considered fees incurred in an effort to collect the agreed
sums because the debt did not become “final” until the
[Supreme Court of Kentucky denied the motion for
discretionary review] thus immediately triggering the
payment of the supersedeas bond.
Again, we disagree.
The parties’ May 16, 2018, agreement was immediately enforceable.
Its provisions did not spring into existence only when our opinion of September
18, 2020, became final. The agreement provides that the entire outstanding
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balance will come due immediately upon default. The agreement provides for no
grace period; but it unequivocally provides an acceleration clause. Babcock and
Steele specifically agreed that interest of 12% per annum would accrue from the
date of the settlement agreement until paid in full and that they would pay the
attorneys’ fees and costs of collection incurred by Warren, Estridge, and KOMSA.
KRS 411.195 provides that:
Any provisions in a writing which create a debt, or create
a lien on real property, requiring the debtor, obligor,
lienor or mortgagor to pay reasonable attorney fees
incurred by the creditor, obligee or lienholder in the
event of default, shall be enforceable, provided, however,
such fees shall only be allowed to the extent actually paid
or agreed to be paid, and shall not be allowed to a
salaried employee of such creditor, obligor or lienholder.
Babcock and Steele argue that “the time and funds spent by [Warren,
Estridge, and KOMSA] in the prosecution of, and subsequently the defense of their
alleged Settlement Agreement had actually nothing directly to do with
‘collection’” of the debt. We disagree. Every phase of the litigation following the
default has been an attempt to collect the funds that Babcock and Steele agreed to
pay in settlement of the legal action against them. Consequently, according to the
plain language of the parties’ agreement and the provisions of KRS 411.195,
Warren, Estridge, and KOMSA are entitled to the award of attorneys’ fees and
costs incurred as the result of the default. This amount includes all legal fees
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incurred to defend against the claims of Babcock and Steele and to enforce the
terms of the parties’ settlement agreement.
The remaining contentions are meritless. The order of the Jefferson
Circuit Court is affirmed.
ALL CONCUR.
BRIEFS FOR APPELLANT BRIEF FOR APPELLEES:
CHRISTOPHER C. BABCOCK,
DMD, MD: Matthew Cory Williams
Jennifer M. Stinnett
J. Fox DeMoisey Leigh V. Graves
Louisville, Kentucky Louisville, Kentucky
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https://www.courtlistener.com/api/rest/v3/opinions/8482916/ | RENDERED: NOVEMBER 10, 2022; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2021-CA-1425-MR
JEREMY CARAWAY APPELLANT
APPEAL FROM HARLAN CIRCUIT COURT
v. HONORABLE KENT HENDRICKSON, JUDGE
ACTION NO. 11-CR-00182
COMMONWEALTH OF KENTUCKY APPELLEE
OPINION
AFFIRMING
** ** ** ** **
BEFORE: ACREE, CETRULO, AND GOODWINE, JUDGES.
CETRULO, JUDGE: In this criminal post-conviction action, Appellant Jeremy
Caraway (“Caraway”), pro se, appeals from the Harlan Circuit Court order denying
his motion for relief pursuant to Kentucky Rule of Civil Procedure (“CR”) 60.02.
For the reasons set forth below, we affirm.
I. BRIEF HISTORY
In May 2011, Caraway was the pastor at Loyall Church of God in
Loyall, Kentucky. At that time, Sherry1 was a thirteen-year-old parishioner.
Members of Sherry’s family discovered inappropriate text messages on her cell
phone from Caraway, and her family contacted law enforcement. In July 2011, the
Harlan County Grand Jury indicted Caraway on nine counts involving allegations
of sexual misconduct. After a jury trial, one acquittal, varying dismissals, and
numerous appeals,2 only two counts survived: Caraway remains convicted of
Count III (sodomy in the second degree) and Count V (sexual abuse in the first
degree). He received a sentence of five years’ imprisonment on each count, served
consecutively, for a total sentence of 10 years. In May 2021, Caraway filed a
motion to vacate his judgment pursuant to CR 60.02 (d), (e), and (f).3 The trial
court denied the motion; Caraway appealed.
1
“Sherry” is the pseudonym given to the minor during the direct appeal. Caraway v.
Commonwealth, 459 S.W.3d 849, 850 (Ky. 2015).
2
Before a May 2013 trial, the court dismissed one count. At the close of evidence, the
prosecutor agreed not to pursue three other counts. Then, a jury found Caraway guilty of four
counts but acquitted him of one. Caraway’s direct appeal was unsuccessful, and the Kentucky
Supreme Court affirmed his conviction. Caraway, 459 S.W.3d 849. Caraway’s motion to
vacate pursuant to Kentucky Rule of Criminal Procedure (“RCr”) 11.42 resulted in this Court
vacating and remanding two counts. Caraway v. Commonwealth, No. 2016-CA-001386-MR,
2017 WL 4464333 (Ky. App. Oct. 6, 2017). The trial court dismissed those two counts. This
appeal addresses Counts III and V.
3
Caraway also listed CR 60.03 in the header of the “Supplement To Be Added to the Civil
Complaint of Void Judgment And Motion to Vacate Sentence,” but he made no legal argument
relating to that rule. As a result, the trial court did not address CR 60.03, nor shall we.
-2-
II. STANDARD OF REVIEW
CR 60.02 motions are applicable to criminal cases pursuant to RCr
13.04, and criminal defendants may use this rule to present additional issues not
specifically available through direct appeals. Gross v. Commonwealth, 648
S.W.2d 853, 856 (Ky. 1983). We review the denial of a CR 60.02 motion under an
abuse of discretion standard. White v. Commonwealth, 32 S.W.3d 83, 86 (Ky.
App. 2000) (citation omitted). “The test for abuse of discretion is whether the trial
judge’s decision was arbitrary, unreasonable, unfair, or unsupported by sound legal
principles.” Commonwealth v. English, 993 S.W.2d 941, 945 (Ky. 1999) (citations
omitted). Absent a “flagrant miscarriage of justice[,]” we will affirm the trial
court. Gross, 648 S.W.2d at 858.
III. ANALYSIS
Caraway presented a convoluted argument to the trial court, but he
essentially argued that the court should vacate his sentence because the charges
were based upon events that were separate and distinct from those events presented
to the grand jury for his indictment. Specifically, Caraway argued the grand jury
indictment was based upon sexual conduct that allegedly took place inside a room
at the church in Loyall, Kentucky, but the trial testimony and jury instructions
indicated that the illicit contact took place ten miles from the church in Cawood,
Kentucky. Additionally, he argued that his trial and appellate attorneys were
-3-
ineffective for failing to challenge jury instructions and venue. Caraway sought
relief under CR 60.02, which states:
On motion a court may, upon such terms as are just,
relieve a party or his legal representative from its final
judgment, order, or proceeding upon the following
grounds: . . . (d) fraud affecting the proceedings, other
than perjury or falsified evidence; (e) the judgment is
void, or has been satisfied, released, or discharged, or a
prior judgment upon which it is based has been reversed
or otherwise vacated, or it is no longer equitable that the
judgment should have prospective application; or (f) any
other reason of an extraordinary nature justifying relief.
In its order denying the CR 60.02 motion, the trial court found that (1)
the indictment met the requirements of RCr 6.10; (2) the varying locations
presented to the grand jury and at trial – Loyall and Cawood – are both in Harlan
County and therefore did not present a jurisdictional conflict for the trial court; and
(3) the CR 60.02 motion was untimely. On appeal, Caraway presents much of the
same argument that he presented to the trial court – essentially challenging the
validity of the indictment – but he fails to understand, apply, or properly defend the
procedural structure he is attempting to implement.4 While pro se litigants are
sometimes held to less stringent standards than lawyers in drafting formal
pleadings, Haines v. Kerner, 404 U.S. 519, 521, 92 S. Ct. 594, 596, 30 L. Ed. 2d
4
Caraway also includes a preservation argument based on his misinterpretation of the rules of
appellate procedure; under CR 76.12, the appellant must preserve an argument for appeal, but
the appellee does not need to preserve a counter argument.
-4-
652 (1972), Caraway’s appeal fails mightily to meet the requirements of a CR
60.02 motion.
First, Caraway brought this CR 60.02 motion under subsections (d),
(e), and (f), which require that the “motion shall be made within a reasonable
time[.]” CR 60.02. What constitutes a reasonable time is a matter left to the
discretion of the trial court. Gross, 648 S.W.2d at 858. Here, a final judgment was
entered against Caraway in 2013; Caraway filed the present motion in 2021. The
trial court found that Caraway waived his right to challenge the indictment by
failing to raise the issue sooner. We agree. Eight years does not constitute a
“reasonable time” under CR 60.02 (d), (e), and (f), especially considering Caraway
could have had access to the grand jury indictment during discovery and heard
Sherry’s testimony during the 2013 trial. See Graves v. Commonwealth, 283
S.W.3d 252 (Ky. App. 2009), where a seven-year delay between sentence and
motion for relief from judgment of conviction was unreasonable. See also Reyna
v. Commonwealth, 217 S.W.3d 274, (Ky. App. 2007), where a defendant’s motion
to vacate judgment of conviction on grounds of extraordinary circumstances that
he was not informed of deportation consequences of his guilty plea, four years
after he entered his guilty plea, was untimely. Caraway attempted to explain his
delay by stating that he did not receive the grand jury proceedings until June 2019.
However, we find that argument unpersuasive – even confusing – because he also
-5-
argues that he relied on that grand jury evidence to his detriment; he stated when
Sherry testified at trial – as to the “new” location of the illicit actions – he was
“blindsided” and “unprepared.” If he did not receive the grand jury specifics until
2019, how did he rely on them to his detriment in 2013? Additionally, if Caraway
was “blindsided” at trial by the change in location, he should have raised the issue
at that time. “[A]t any time while the case is pending, the court may hear a claim
that the indictment or information fails to invoke the court’s jurisdiction or to state
an offense[.]” RCr 8.18(1)(b) (emphasis added). See also Thomas v.
Commonwealth, 931 S.W.2d 446, 450 (Ky. 1996) (“As [appellant’s] indictment
gave the court jurisdiction and charged an offense, he has waived any defects in
his indictment by not bringing those defects to the attention of the trial judge.”).
Further, “[t]he structure provided in Kentucky for attacking the final
judgment of a trial court in a criminal case is not haphazard and overlapping, but is
organized and complete.” Gross, 648 S.W.2d at 856. A CR 60.02 motion may be
used to present additional claims not specifically available through direct appeals
or RCr 11.42 motions. Gross, 648 S.W.2d at 856. On direct appeal, Caraway
challenged juror selection, the admissibility of additional character evidence, and
credit for time served. Caraway, 459 S.W. 3d 849. Then, Caraway appealed,
through a motion pursuant to RCr 11.42, ineffectiveness of counsel as it related to
jury instructions, jurisdiction, and venue. Caraway, 2017 WL 4464333. For an
-6-
additional appeal to be successful under CR 60.02, Caraway needed to demonstrate
why he is entitled to special, extraordinary relief. CR 60.02. Also, he “must
affirmatively allege facts which, if true, justify vacating the judgment and further
allege special circumstances that justify CR 60.02 relief.” McQueen v.
Commonwealth, 948 S.W.2d 415, 416 (Ky. 1997) (citing Gross, 648 S.W.2d at
856). Here, Caraway has not come close to this standard. Therefore, he does not
get another bite at that appellate apple.
Finally, the trial court should be afforded deference under the abuse of
discretion standard of review, and we discern no such abuse. See Brown v.
Commonwealth, 932 S.W.2d 359, 362 (Ky. 1996) (citation omitted).
IV. CONCLUSION
For the foregoing reasons, we AFFIRM the order of the Harlan Circuit
Court denying relief under CR 60.02.
ALL CONCUR.
BRIEFS FOR APPELLANT: BRIEF FOR APPELLEE:
Jeremy Caraway, pro se Daniel Cameron
West Liberty, Kentucky Attorney General of Kentucky
Perry T. Ryan
Assistant Attorney General
Frankfort, Kentucky
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https://www.courtlistener.com/api/rest/v3/opinions/8482927/ | RENDERED: NOVEMBER 10, 2022; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2021-CA-0999-MR
CEMEX, INC. APPELLANT
APPEAL FROM JOHNSON CIRCUIT COURT
v. HONORABLE JOHN DAVID PRESTON, JUDGE
ACTION NO. 21-CI-00022
COUNTY CONCRETE LLC DBA
TRI COUNTY CONCRETE APPELLEE
OPINION
REVERSING
** ** ** ** **
BEFORE: DIXON, LAMBERT, AND L. THOMPSON, JUDGES.
DIXON, JUDGE: Cemex, Inc. (Cemex) appeals from the order dismissing its
complaint and the order denying it relief from that judgment entered by the
Johnson Circuit Court on July 20, 2021, and August 20, 2021, respectively.
Following a careful review of the record, briefs, and law, we reverse.
BACKGROUND FACTS AND PROCEDURAL HISTORY
Cemex sued “County Concrete LLC dba Tri County Concrete”
alleging that County Concrete LLC (County Concrete) transacts business as Tri
County Concrete (Tri County). Cemex further claimed that County Concrete –
using the name Tri County – owed it $46,193.64 for goods and/or services sold and
delivered between November 1, 2019, and April 3, 2020, as documented by the
statement and invoices attached to its complaint. While those documents named
Tri County, the address listed was used by both Tri County and County Concrete.
Thirty days after it was served, County Concrete answered the
complaint and admitted it transacts business as Tri County. However, a few
months later, County Concrete moved the trial court to amend its answer to reflect
that it did not transact business as Tri County. County Concrete simultaneously
moved the court to dismiss the complaint claiming it has no ownership interest in
or association with Tri County. County Concrete attached information from the
Kentucky Secretary of State to its motion to dismiss showing “Tri County
Concrete, Inc.” is an inactive Kentucky corporation with a different registered
agent than County Concrete – David Bowling rather than Jeffrey Lance
-2-
Bowling1—although both registered agents used the same address.2
County Concrete noticed both of its motions to be heard eight days
after the motions were electronically filed with copies of same mailed to Cemex.
Cemex was absent from the hearing on those motions, and the trial court granted
both. The court found as a matter of fact that County Concrete and Tri County are
separate and distinct. The court concluded as a matter of law that County Concrete
was not liable for the damages due to lack of privity of contract3 between the
parties, and Cemex’s complaint was dismissed with prejudice.
Cemex moved the trial court for relief from its order of dismissal
pursuant to CR4 60.02. Cemex’s counsel asserted that he did not receive copies of
either County Concrete’s motion to amend its answer or its motion to dismiss the
complaint. He further asserted that he was out of the office at the time caring for
his ailing mother, who ultimately passed away the day prior to the hearing.
Cemex’s counsel also claimed that he did not see the electronic filing notice of
1
Cemex contends that Jeffrey is David’s son and used the same business name, address, and
account when conducting business with Cemex.
2
According to the Kentucky Secretary of State website containing information about business
filings, Tri County Concrete, Inc.’s last annual report was filed May 18, 2016; County Concrete
was organized on September 30, 2016; and Tri County Concrete, Inc., was dissolved on
November 2, 2016. The transactions at issue in this case occurred after November 1, 2019.
3
No discovery has been conducted, and no contract is in the record.
4
Kentucky Rules of Civil Procedure.
-3-
either motion until after the order dismissing the complaint was entered. Cemex
argued it was entitled to relief due to mistake and/or excusable neglect due to its
lack of notice prior to the hearing, or for any other extraordinary reason justifying
relief – namely, the trial court erred in granting the motion to dismiss by not taking
the allegations in the complaint as true and made findings of fact rather than
deciding purely as a matter of law. The trial court denied Cemex’s motion.
Cemex appealed the final judgment and later amended its notice of
appeal to include the trial court’s denial of its CR 60.02 motion. A prior panel of
our Court directed Cemex to show cause why its appeal should not be dismissed as
untimely. That panel found sufficient cause shown but limited the issues on appeal
to those concerning the order denying Cemex relief under CR 60.02.
STANDARD OF REVIEW
This Court reviews orders on CR 60.02 motions for abuse of
discretion. White v. Commonwealth, 32 S.W.3d 83, 86 (Ky. App. 2000) (citation
omitted). “The test for abuse of discretion is whether the trial judge’s decision was
arbitrary, unreasonable, unfair, or unsupported by sound legal principles.” Foley v.
Commonwealth, 425 S.W.3d 880, 886 (Ky. 2014) (citation omitted).
ANALYSIS
On appeal, Cemex first argues that its CR 60.02 motion should have
been granted under subsection “(a)” for “mistake, inadvertence, surprise or
-4-
excusable neglect” since Cemex was unaware a motion to amend the answer and a
motion to dismiss the complaint were filed until after they were granted. However,
it is well-established that “[n]egligence of an attorney is imputable to the client and
is not a ground for relief under . . . CR 60.02(a) or (f).” Vanhook v. Stanford-
Lincoln Cnty. Rescue Squad, Inc., 678 S.W.2d 797, 799 (Ky. App. 1984).
Accordingly, the trial court did not abuse its discretion in denying Cemex’s
motion.
Cemex next argues the trial court abused its discretion by denying it
relief under CR 60.02(f) because its claims should have survived the motion to
dismiss. We agree. Concerning failure to state a claim upon which relief can be
granted, Kentucky’s highest court has observed:
A motion to dismiss for failure to state a claim upon
which relief may be granted “admits as true the material
facts of the complaint.” So a court should not grant such
a motion “unless it appears the pleading party would not
be entitled to relief under any set of facts which could be
proved. . . .” Accordingly, “the pleadings should be
liberally construed in the light most favorable to the
plaintiff, all allegations being taken as true.” This
exacting standard of review eliminates any need by the
trial court to make findings of fact; “rather, the question
is purely a matter of law. Stated another way, the court
must ask if the facts alleged in the complaint can be
proved, would the plaintiff be entitled to relief?”
Fox v. Grayson, 317 S.W.3d 1, 7 (Ky. 2010) (footnotes omitted).
-5-
Even though no analysis was included in the court’s order denying
Cemex CR 60.02 relief, it is clear from the final judgment that the court
impermissibly disregarded material facts alleged in the complaint and engaged in
fact-finding. The allegations contained in Cemex’s complaint were sufficient to
survive a motion to dismiss. The trial court erred by granting the motion to
dismiss and abused its discretion by denying the motion for relief from that
judgment. Thus, we must reverse the trial court’s order denying Cemex relief from
the judgment dismissing its complaint.
CONCLUSION
Therefore, and for the foregoing reasons, the order of the Johnson
Circuit Court is REVERSED.
ALL CONCUR.
BRIEF FOR APPELLANT: BRIEF FOR APPELLEE:
Ernest V. Thomas, III James Brandon May
Cincinnati, Ohio Paintsville, Kentucky
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https://www.courtlistener.com/api/rest/v3/opinions/8482926/ | RENDERED: NOVEMBER 10, 2022; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2022-CA-0026-MR
CHRISTINA FAULKNER YATES APPELLANT
APPEAL FROM LIVINGSTON CIRCUIT COURT
v. HONORABLE CLARENCE A. WOODALL, III, JUDGE
ACTION NO. 20-CR-00049
COMMONWEALTH OF KENTUCKY APPELLEE
OPINION
VACATING AND REMANDING
** ** ** ** **
BEFORE: ACREE, MCNEILL, AND L. THOMPSON, JUDGES.
THOMPSON, L., JUDGE: Christina Faulkner Yates appeals from an oral order of
the trial court which denied her motion to withdraw her guilty plea. We find that
the court erred; therefore, we vacate her conviction and remand for further
proceedings.
FACTS AND PROCEDURAL HISTORY
In June of 2020, Appellant was indicted on multiple counts of crimes
related to sexual abuse. On September 24, 2021, Appellant entered a guilty plea on
the charges and a plea colloquy was performed. The colloquy was standard and no
major issues arose. The court accepted the plea and found it was entered
voluntarily.
The sentencing hearing was held on November 17, 2021. At the
beginning of the hearing, counsel for Appellant indicated that Appellant wanted to
withdraw her guilty plea. Counsel requested a one-month continuance and for new
counsel to be appointed in order to file the guilty plea withdraw motion. The court
then questioned Appellant about why she wanted to withdraw her plea. Appellant
stated that she was unhappy with the agreement because she was not present when
the alleged crimes were committed and that she did not believe she was guilty.
She also stated that she tried to convey this to defense counsel prior to entering the
guilty plea, but that counsel did not understand what she was trying to convey.1
The Commonwealth objected to a continuance and argued that
sufficient grounds had not been set forth to allow Appellant to withdraw her guilty
plea. At this point defense counsel stated:
Your honor, I do understand the Commonwealth’s point
that sufficient grounds have not been laid.
1
It is unclear what Appellant meant by this statement because the trial court interrupted her.
-2-
Unfortunately, I’m not in the position to be able to put
that forth because I do believe that I am in a situation
where new counsel does need to be appointed for her in
order to put forth those grounds in regard to her plea, in
withdrawing her plea. So, I am asking just for one
month. We can have somebody here next month to have
already filed that motion to withdraw the plea and be
prepared for the hearing.
The trial court declined to grant a continuance or appoint new counsel. The court
denied the motion to withdraw the guilty plea and continued with the sentencing.
Appellant was sentenced in accordance with the plea agreement. This appeal
followed.
ANALYSIS
Under the terms of Kentucky Rules of Criminal
Procedure (RCr) 8.10, a criminal defendant who has
pleaded guilty may withdraw the plea under certain
conditions. “If the plea was involuntary, the motion to
withdraw it must be granted. However, if it was
voluntary, the trial court may, within its discretion, either
grant or deny the motion.” Rigdon v. Commonwealth,
144 S.W.3d 283, 288 (Ky. App. 2004) (internal citations
omitted). The trial court’s determination on whether the
plea was voluntarily entered is reviewed under the clearly
erroneous standard. Id. A decision that is supported by
substantial evidence is not clearly erroneous. Id. If,
however, the trial court determines that the guilty plea
was entered voluntarily, then it may grant or deny the
motion to withdraw the plea at its discretion. This
decision is reviewed under the abuse of discretion
standard. Id. A trial court abuses its discretion when it
renders a decision that is arbitrary, unreasonable, unfair,
or unsupported by legal principles. Id.
-3-
The test for determining the validity of a guilty
plea is whether the plea represents a voluntary and
intelligent choice among the alternative courses of action
open to the defendant. Sparks v. Commonwealth, 721
S.W.2d 726, 727 (Ky. App. 1986) (citing North Carolina
v. Alford, 400 U.S. 25, 91 S. Ct. 160, 164, 27 L. Ed. 2d
162 (1970)). There must be an affirmative showing in
the record that the plea was intelligently and voluntarily
made. Id. (citing Boykin v. Alabama, 395 U.S. 238, 242,
89 S. Ct. 1709, 1711, 23 L. Ed. 2d 274 (1969)).
It is well accepted that “[a] criminal defendant has
a right to be represented by counsel that extends beyond
the actual trial to every critical stage of the proceedings.”
Stone v. Commonwealth, 217 S.W.3d 233, 237 (Ky.
2007). “[A] motion to withdraw a guilty plea made
before entry of the final judgment of conviction and
sentence is a ‘critical stage’ of the criminal proceedings
to which the right to counsel attaches.” Commonwealth
v. Tigue, 459 S.W.3d 372, 384 (Ky. 2015). “[P]rejudice
may be presumed, and a per se Sixth Amendment
violation may thus be found, when there has been a
complete denial of counsel . . . at a critical stage of the
criminal proceeding . . . or when counsel is burdened by
an actual conflict of interest[.]” Id. at 385 (internal
citations and quotation marks omitted).
Sturgill v. Commonwealth, 533 S.W.3d 204, 208 (Ky. App. 2017).
Appellant argues on appeal that the trial court erred in not appointing
new counsel and holding a hearing on her motion to withdraw. We agree that the
trial court erred in denying Appellant new counsel.2
The decision to seek to withdraw a guilty plea is not
merely trial strategy, and cannot be made by counsel. If
2
We make no decision regarding the need for a hearing. That will be determined by the trial
court on remand.
-4-
a defendant has entered a guilty plea and, before entry of
final judgment, desires to seek to withdraw that plea,
whether because it was allegedly entered in error, under
duress, or other reason, he is entitled to the assistance of
counsel in making such a request.
Tigue, 459 S.W.3d at 386.
As stated above, a defendant is entitled to representation during a
motion to withdraw a guilty plea. Sturgill, supra. Here, we believe Appellant was
denied counsel at this stage of the proceedings because defense counsel did not
participate in the motion. Appellant’s counsel filed no motion to withdraw the
plea, made no arguments regarding the oral motion, and did not question Appellant
regarding her reasons for wanting to withdraw her plea. Defense counsel clearly
believed new counsel was required; therefore, we believe it was appropriate and
proper for her not to participate fully in the motion.
In the previously cited cases of Sturgill and Tigue, a defendant moved
to withdraw a guilty plea. In both of these cases, defense counsel refused to
participate in the motion to withdraw a guilty plea. In Tigue, defense counsel did
not file a motion to withdraw the guilty plea as requested by the defendant. After
the defendant made an oral motion to withdraw during his sentencing hearing,
defense counsel did not ask any questions of the defendant, make any arguments
supporting the motion to withdraw, or otherwise participate in the motion on the
defendant’s behalf. Tigue, 459 S.W.3d at 386.
-5-
In Sturgill, defense counsel made an oral motion to withdraw a guilty
plea at the sentencing hearing, but indicated the motion was against his advice.
Counsel also indicated that he would wish to withdraw from further representation
should the motion be granted. Finally, while defense counsel did ask the defendant
questions during the hearing, they were aimed at trying to persuade the defendant
to accept the deal and not in support of his motion to withdraw the plea. Sturgill,
533 S.W.3d at 210.
In both Tigue and Sturgill, the defendants were denied counsel during
their motions to withdraw the guilty pleas because counsel did not advocate on
their behalf or otherwise meaningfully participate. A similar situation has occurred
here, although in a different manner. Defense counsel in this case believed she
was not able to argue the motion to withdraw on Appellant’s behalf and moved for
new counsel. In other words, defense counsel believed she was ethically
prohibited from participating. While she did not refuse to participate like the
attorneys in Tigue and Sturgill, the outcome is still the same and Appellant was
denied counsel.
Further supporting our conclusion is the case of Zapata v.
Commonwealth, 516 S.W.3d 799 (Ky. 2017). In Zapata, a defendant moved to
withdraw a guilty plea and indicated he entered the plea due to the ineffective
assistance of counsel. He also alleged the plea was not voluntarily entered.
-6-
Defense counsel declined to participate in the motion before the trial court due to
the ineffective assistance of counsel allegations. Defense counsel, citing Tigue,
stated that the defendant was entitled to counsel, but that she could not participate.
The Kentucky Supreme Court held that because defense counsel refused to assist
the defendant in his motion to withdraw his guilty plea, he was denied the
assistance of counsel. Id. at 802.
In the case at hand, trial counsel brought Appellant’s motion before
the court, but declined to participate in any other manner as she believed it would
be improper. She did not question Appellant and did not make any arguments in
Appellant’s favor. In fact, she twice asked for new counsel to be appointed for
Appellant in order to fully litigate the issue. Appellant was denied counsel at this
stage by the trial court’s refusal to appoint new counsel, and this was a violation of
Appellant’s Sixth Amendment rights and prejudicial. Sturgill, 533 S.W.3d at 208.
In addition, there is some suggestion that there may be a conflict of
interest in this case that prohibited Appellant’s trial counsel from proceeding.
Appellant stated that she tried to tell her counsel that she was not happy with the
plea agreement prior to pleading guilty, however, there was some
miscommunication. As stated above, this issue was not explored because the trial
court interrupted her testimony and defense counsel asked no follow-up questions.
This, along with defense counsel’s insistence that new counsel be appointed
-7-
suggests that Appellant and her counsel might have had conflicting interests. This
too would require new counsel pursuant to Tigue and Sturgill.
CONCLUSION
Based on the foregoing, we vacate Appellant’s conviction and remand
for further proceedings. We do not vacate Appellant’s guilty plea. On remand,
Appellant may again move to withdraw her guilty plea and must be given new
counsel to do so. The proceedings should then proceed as they normally would. In
other words, we “rewind this matter to the point in time when [Appellant] had
already entered [her] plea but before [she] was sentenced.” Tigue, 459 S.W.3d at
390.
ALL CONCUR.
BRIEFS FOR APPELLANT: BRIEF FOR APPELLEE:
Steven J. Buck Daniel Cameron
Frankfort, Kentucky Attorney General of Kentucky
Stephanie L. McKeehan
Assistant Attorney General
Frankfort, Kentucky
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https://www.courtlistener.com/api/rest/v3/opinions/8482914/ | RENDERED: NOVEMBER 10, 2022; 10:00 A.M.
TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2021-CA-1038-MR
KACY LEE SIGRIST APPELLANT
APPEAL FROM CALLOWAY CIRCUIT COURT
v. HONORABLE JAMES T. JAMESON, JUDGE
ACTION NO. 19-CR-00180
COMMONWEALTH OF KENTUCKY APPELLEE
OPINION
AFFIRMING IN PART AND
REVERSING AND VACATING IN PART
** ** ** ** **
BEFORE: CLAYTON, CHIEF JUDGE; ACREE AND TAYLOR, JUDGES.
CLAYTON, CHIEF JUDGE: Kacy Lee Sigrist appeals from a Calloway Circuit
Court judgment after a jury found him guilty of one count of first-degree
possession of a controlled substance, one count of first-degree promoting
contraband, and one count of being a first-degree persistent felony offender (“PFO
I”). Having reviewed the record and applicable law, we reverse the conviction for
possession of methamphetamine and vacate the three-year sentence for that charge.
The judgment is affirmed in all other respects.
FACTUAL AND PROCEDURAL BACKGROUND
Sigrist’s convictions stem from an incident which occurred while he
was incarcerated at the Calloway County Jail. Sigrist was housed in a cell with
seven other inmates. At around 3:20 a.m., three deputy jailers, Josh Lovett, Slade
McCuiston, and Brandy Cashion, entered the cell to conduct a search for
contraband. Most of the inmates were awake, playing cards or chess, watching
TV, or talking. The deputies ordered the men to stand up and be escorted out of
the cell before the search. One of the inmates, who apparently did not hear the
deputies’ orders because he was wearing earplugs, went into the bathroom. He
was handcuffed by McCuiston, who decided to take him to the booking room for a
more thorough search. Deputy Cashion, a female, was not permitted to pat down
the remaining inmates so Deputy Lovett had to perform this task by himself. After
Lovett had patted down two of the men, Deputy Cashion left to change places with
a male deputy who could come down and assist him. Meanwhile, Lovett was left
alone with the five remaining men. He directed them to go from the hallway
immediately outside the cell through a door into the main hallway. The first
inmate to walk through the doorway was Joseph Ben Hendrick. Deputy Lovett
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testified that Hendrick did not drop anything. Sigrist was the second of the men to
go through. Lovett testified that as Sigrist walked past him through the doorway,
he removed a small object resembling a note from his waistband, dropped it on the
floor, threw his hands in the air and said, “This is bulls**t. Why are we being
searched?” Sigrist also kicked his feet in an apparent attempt to move the object.
Lovett did not immediately retrieve the object because he was the only deputy in
the area and the object did not appear to be dangerous. Deputy McCuiston
eventually picked up the object. It was a piece of lined white note paper wrapped
around a clear plastic bag containing methamphetamine. The note paper had a
commissary list handwritten on it. Deputy McCuiston testified that the
handwriting resembled Sigrist’s.
The defense claimed that the inmate Hendrick, who walked through
the doorway immediately before Sigrist, dropped the contraband. Because
Hendrick had been incarcerated at the jail for only four days before the search,
whereas Sigrist had been an inmate there for months, the defense argued it was far
more likely that Hendrick would have possessed the contraband.
A key piece of evidence at trial was the video surveillance tape of the
hallway immediately outside the cell and the doorway into the hall beyond.
Defense investigator Cary Grey analyzed the video with computer assistance and
created enlarged still photographs showing the area during the period the inmates
-3-
were being removed from the cell hallway and the object was dropped. The
photographs showed a small dark spot on the hallway floor after Hendrick passed
through the doorway. The defense argued that this object was actually the note
containing the methamphetamine.
The jury convicted Sigrist of first-degree possession of a controlled
substance, first-degree promoting contraband, and PFO I. He received sentences
of three years for the possession charge and five years for the promoting charge,
enhanced to ten years by the PFO I. In accordance with the recommendation of the
jury, the trial court ordered the sentences to be run consecutively for a total of
thirteen years. This appeal followed. Additional facts will be set forth below as
necessary.
ANALYSIS
1. Whether the convictions for first-degree possession and first-degree
promoting contraband violated the prohibition against double jeopardy
Sigrist argues that his convictions for first-degree possession of a
controlled substance and first-degree promoting contraband violate the prohibition
against double jeopardy because both charges were predicated on the same
quantity of methamphetamine recovered from the jail floor. “When a single course
of conduct of a defendant may establish the commission of more than one (1)
offense, he may be prosecuted for each such offense. He may not, however, be
convicted of more than one (1) offense when: . . . [o]ne offense is included in the
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other[.]” Kentucky Revised Statutes (KRS) 505.020(1)(a). “An offense is so
included when: . . . [i]t is established by proof of the same or less than all the facts
required to establish the commission of the offense charged[.]” KRS
505.020(2)(a). The possession of a controlled substance count required the proof
of no additional facts beyond those required to prove the charge of promoting
contraband.
The Commonwealth has conceded that Sigrist’s argument is correct in
light of clear precedent, most recently set forth in Collins v. Commonwealth, 640
S.W.3d 55 (Ky. App. 2021), discretionary review denied (Mar. 16, 2022). In
Collins, the Court held that the appellant’s convictions for first-degree promoting
contraband and first-degree possession of a controlled substance violated double
jeopardy “because both crimes did not require proof of an additional fact that the
other did not.” Id. at 59 (citing Stewart v. Commonwealth, 306 S.W.3d 502, 505
(Ky. 2010) (“Possession of a controlled substance does not require proof of an
additional fact that promoting contraband does.”)).
“[T]he remedy for this type of statutory double jeopardy violation is
to vacate the lesser conviction, and only allow sentencing on the greater
conviction.” Collins, 640 S.W.3d at 59 (quoting Taylor v. Commonwealth, 611
S.W.3d 730, 739-40 (Ky. 2020)).
-5-
In light of the statute and controlling precedent, as well as the
Commonwealth’s concession, Sigrist’s conviction on the lesser charge of
possession of a controlled substance must be reversed and the three-year sentence
which he received for that charge must be vacated.
2. Whether the trial court improperly assumed the role of the prosecutor in
questioning witnesses
Next, Sigrist argues that the trial court improperly assumed the role of
the prosecutor when it questioned two witnesses. This alleged error is unpreserved
and Sigrist requests palpable error review pursuant to Kentucky Rules of Criminal
Procedure (RCr) 10.26. “Under RCr 10.26, an unpreserved error may generally be
noticed on appeal if the error is ‘palpable’ and if it ‘affects the substantial rights of
a party.’” Martin v. Commonwealth, 409 S.W.3d 340, 344 (Ky. 2013). An error is
palpable when it is “easily perceptible, plain, obvious and readily noticeable.”
Brewer v. Commonwealth, 206 S.W.3d 343, 349 (Ky. 2006) (citation omitted).
“Even then, relief is appropriate only ‘upon a determination that manifest injustice
resulted from the error.’” Martin, 409 S.W.3d at 344 (quoting RCr 10.26).
“[W]hat it really boils down to is that if upon a consideration of the whole case this
court does not believe there is a substantial possibility that the result would have
been any different, the irregularity will be held nonprejudicial.” Schoenbachler v.
Commonwealth, 95 S.W.3d 830, 836 (Ky. 2003) (citation omitted).
-6-
As we have already outlined, Sigrist’s defense was that his fellow
inmate, Hendrick, dropped the note containing the methamphetamine. Cary Gray’s
photographs showed that there was nothing on the outer hallway floor before
Hendrick entered the doorway. Two seconds later, after Hendrick had walked
through the door, an object appeared on the floor under his heel. Later, after all the
men had passed through the doorway, the photographs showed the object had
disappeared.
Following Gray’s testimony, the Commonwealth recalled Deputy
Lovett to testify in rebuttal. Lovett repeated his earlier testimony that Hendrick did
not drop anything. He agreed that a small black dot appeared on Gray’s still photo
of the floor and had disappeared in her next photo. He described the dot as
shadowy grey to black, whereas the note containing the methamphetamine was
white. He also testified that the object in the photo was not “anywhere near”
where the note was recovered. He testified that the dark spot was to the right of
the hallway whereas the note was found to the left. He opined that the black spot
was probably a smudge or some trash. He testified that he had no doubt he saw
Sigrist drop the note.
The trial judge then proceeded to question Lovett. He held up the
photograph of the hallway to the jury and asked Lovett to clarify where he saw
“whatever it was,” referring to the dark spot which the defense argued was dropped
-7-
by Hendrick, and then pointed to the area where the note was found, “a few feet
from there.”
During the penalty phase of the trial, the trial judge questioned a
probation and parole officer, Shannon Farley, who testified about the penalty
ranges for the charged offenses, parole eligibility, and how the length of a sentence
may be reduced by presentence credit, meritorious good time, statutory good time,
and program completion credit. The judge inquired, “[I]f someone is sentenced to
a year, and they serve that year out, how much time will they serve, close?” The
officer replied that it would be a question for offender records. The judge
continued, “Yeah, worst case scenario, say no credits, none of that, what is a one-
year serve out?” The officer replied that “the colloquial wisdom is that nine
months kills an institutional year.” The judge then remarked to the prosecutor, “I
didn’t remember if you covered it or not, and I thought that was important for
everybody to know.” The prosecutor agreed and directed some follow-up
questions to Farley, stating, “If you get a year on a felony sentence, nine months
usually is what you serve,” to which the officer agreed. The prosecutor then asked,
“So if someone receives say a five- or ten-year sentence, even if they don’t make
parole and serve out, they’re not going to serve the full ten years, are they?” The
officer replied, “No.” “They’re going to get some credit off their sentence?”
“Yes.”
-8-
A trial court is permitted to interrogate witnesses under Kentucky
Rules of Evidence (KRE) 614(b). This power is to be used “sparingly and always
with sensitivity to the potential for unfairness to the litigants.” Terry v.
Commonwealth, 153 S.W.3d 794, 802 (Ky. 2005), superseded by statute on other
grounds as recognized by Gaither v. Commonwealth, 521 S.W.3d 199 (Ky. 2017)
(quoting KRE 614(b) Drafters’ Commentary (1989)). The judge cannot “by the
form of his question or his manner indicate to the jury his opinion as to the
credibility of the witness being interrogated or the guilt or innocence of the
accused.” Terry, 153 S.W.3d at 802 (citation omitted). “[A] judge should not
express his opinion about the veracity of a witness through the nature of his
questioning, especially through leading questions.” Id. at 802-03 (citation
omitted). And “a trial judge cannot ask questions that place him in the role of a
prosecutor rather than an arbiter.” Id. at 803 (internal quotation marks and citation
omitted).
Three factors determine whether a trial judge has good reason to inject
himself into the trial:
First, in a lengthy, complex trial, judicial intervention is
often necessary for clarification. Second, if the attorneys
in a case are unprepared or obstreperous or if the facts are
becoming muddled and neither side is succeeding at
attempts to clear them up, judicial intervention may be
necessary for clarification. Third, if a witness is
difficult, if a witness’ testimony is unbelievable and
counsel fails to adequately probe, or if the witness
-9-
becomes inadvertently confused, judicial intervention
may be needed.
Id. (quoting United States v. Slone, 833 F.2d 595, 597 (6th Cir. 1987)).
In the first instance, when the trial judge questioned Deputy Lovett
about the defense photographs, he was seeking to clarify where the two objects at
issue were located in the hallway. In his direct testimony, Lovett had indicated on
the video screen the location where the note landed, and he testified that it was on
the right side looking down the hallway from the angle indicated by the
Commonwealth. The video record of the trial does not show where Lovett is
pointing. The trial court’s questions appear directed to clearing up any confusion
that may have been caused by viewing the scene from the different angles recorded
by the surveillance cameras. In that regard, the trial court’s questions were
justified.
On the other hand, the trial court’s references to “whatever it was” to
describe the object which the defense claimed to be the note are more problematic,
as the term could imply the trial court had decided that the dark spot was not the
note containing the contraband. In that sense, the trial court’s questions veered
from those of an impartial arbiter. But “[a] palpable error must be so grave in
nature that if it were uncorrected, it would seriously affect the fairness of the
proceedings.” Brewer, 206 S.W.3d at 349. The jury was required to resolve a
well-defined factual dispute based on the video surveillance footage and the
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testimony of Lovett and Gray. In light of the evidence in the record, it is unlikely
that the trial court’s choice of words in questioning Lovett would have affected the
jury’s decision regarding which of the objects was the methamphetamine and by
whom it was dropped. The allegedly improper questioning does not rise to the
level of reversible, palpable error.
In the penalty phase, the trial court’s questioning of the probation and
parole officer informed the jury that the defendant would not in reality serve the
full sentence the jury chose to impose. The judge’s questions did not serve to
clarify the officer’s testimony because a defendant would serve nine months of a
one-year sentence only if the defendant received statutory good time credit, which
is not automatic. See KRS 197.045(1). “The use of incorrect, or false, testimony
by the prosecution is a violation of due process when the testimony is material.”
Robinson v. Commonwealth, 181 S.W.3d 30, 38 (Ky. 2005), as modified on denial
of reh’g (Jan. 19, 2006). “When the prosecution knows or should have known that
the testimony is false, the test for materiality is whether there is any reasonable
likelihood that the false testimony could have affected the judgment of the jury.”
Id. (internal quotation marks and citation omitted).
Under the PFO statute, Sigrist would serve a minimum sentence of ten
years on the charge of promoting contraband, regardless of the underlying sentence
imposed by the jury. KRS 532.080(6)(b) provides that “[i]f the offense for which
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he presently stands convicted is a Class C or Class D felony, a persistent felony
offender in the first degree shall be sentenced to an indeterminate term of
imprisonment, the maximum of which shall not be less than ten (10) years nor
more than twenty (20) years.” The jury imposed the lowest possible sentence for a
PFO I convicted of a Class D felony. Any error in Farley’s testimony was not
material.
To find reversible, palpable error, “an appellate court must consider
whether on the whole case there is a substantial possibility that the result would
have been any different.” Commonwealth v. McIntosh, 646 S.W.2d 43, 45 (Ky.
1983). The testimony elicited by the trial court’s questions did not create a
“substantial possibility that the result [of the sentencing phase] would have been
any different[.]” Schoenbachler, 95 S.W.3d at 836.
The trial court’s questioning of Lovett and Farley did not constitute
palpable error.
3. Whether the trial court abused its discretion in allowing Deputy Lovett to
testify that Sigrist acted as other inmates do when disposing of contraband
As outlined above, Deputy Lovett testified that when Sigrist passed
through the doorway he removed something from his waistband, dropped it on the
floor, threw his hands up and said, “This is bulls**t. Why are we being searched?”
and kicked his feet. The jail surveillance video, which does not have any audio,
shows Sigrist making a hand gesture as he walks through the door.
-12-
On direct examination, the Commonwealth attorney asked Lovett why
he believed Sigrist threw up his hands. He replied that it was to distract him.
Defense counsel objected. The Commonwealth attorney asked Lovett whether, in
his experience of numerous cell searches, inmates will attempt to distract the
guards. The defense objected again. The trial court ruled that the question was
leading and sustained the objection. The defense further objected on the grounds
that Lovett was trying to establish what Sigrist did by comparing him to other
inmates. The trial court stated that the subject was fine.
The Commonwealth then asked Lovett whether he had encountered
inmates in the past who attempted to distract deputy jailers when getting rid of
contraband. Lovett replied that he had. The Commonwealth attorney then asked
what some of the things were that they did to distract. Lovett testified that “they
will talk off subject, they will make erratic movements to get you to focus on
something other than what they are doing. They will act erratic, they will, let’s say
[during] the booking process where most contraband is dropped, they’ll scream,
they’ll holler, they’ll be very discreet and try to drop it out of anything that is on
their possession. Turning their back to you, anything is in motion to try to get rid
of what they have.” When the Commonwealth attorney asked, “So you’ve had
inmates make unnecessary hand movements to try and create a distraction?”
Lovett replied, “Yes, yes. In multiple situations.”
-13-
“We review a trial court’s rulings on evidentiary issues for an abuse of
discretion. The test for abuse of discretion is whether the court’s decision was
arbitrary, unreasonable, unfair, or unsupported by sound legal principles.” Carson
v. Commonwealth, 621 S.W.3d 443, 446 (Ky. 2021) (citations omitted).
Under KRE 701, a lay or non-expert witness “may provide opinion
testimony only if their opinion is (1) based on their perception; (2) helpful to a
clear understanding of the witness’ testimony or the determination of a fact at
issue; and (3) not based on scientific, technical, or specialized knowledge.”
Carson, 621 S.W.3d at 446. Specifically in regard to law enforcement officers, the
Kentucky Supreme Court has stated they “may provide lay opinion testimony as to
their experience-based interpretations of certain facts which they personally
observed.” Id. at 447. Thus, the Supreme Court “has permitted law enforcement
officers to testify as to their interpretation of drug-sniffing dogs behavior; that a
juice bottle appeared to be a homemade silencer; and that a suspect appeared
intoxicated due to his performance on a field sobriety test. But when the subject
matter of the officer’s opinion is either not based on personal knowledge or based
on specialized knowledge, the trial court must first qualify the officer as an
expert.” Id. (footnotes and citations omitted).
Lovett’s testimony falls squarely within this type of lay testimony, as
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it was an experience-based interpretation of facts he had personally observed and
was not based on scientific or specialized knowledge.
Sigrist nonetheless argues that Lovett’s testimony violated his due
process right to a fair trial, in reliance on Johnson v. Commonwealth, 885 S.W.2d
951 (Ky. 1994). In that case, the defendant was accused of driving a coal truck
through a red light, killing another driver. During his examination of the
defendant, the prosecutor observed that “[s]ome people, who drive these coal
trucks make it a practice to run red lights[,]” and then asked, “Isn’t it a fact that
that’s what you were doing on that particular day?” Id. at 953. This question was
held impermissible under KRE 404(b), for if a defendant cannot be accused of
acting in conformity with his prior bad acts, he also cannot be accused of acting in
conformity with a class of people to whom he belongs. Id. Sigrist’s case is
distinguishable, however, because the deputy was testifying based on his personal
experience and observation of inmates, from which he concluded that Sigrist was
trying to distract him. In Johnson, the Commonwealth attorney in effect testified
about the alleged practice of coal trucks running red lights, with no evidentiary
foundation whatsoever, and then accused the defendant of engaging in this
practice.
-15-
The trial court did not abuse its discretion in allowing Lovett to testify
about his personal observation of inmate behavior and to draw conclusions about
Sigrist’s actions based on those personal experiences.
4. Whether the trial court erred in allowing Deputy McCuiston to testify that
Sigrist’s handwriting matched that on the note enclosing the
methamphetamine
This issue is preserved by objection and will be reviewed for an abuse
of discretion. Deputy McCuiston testified that the methamphetamine was wrapped
in what appeared to be a handwritten commissary shopping list and that he was
familiar with Sigrist’s handwriting. The defense objected on the grounds that the
witness was not qualified to identify the handwriting. The trial court sent the jury
out and told the prosecution it needed to lay a foundation. McCuiston thereafter
testified, outside the presence of the jury, that he was familiar with Sigrist’s
handwriting because Sigrist had sent him several handwritten notes during his time
in jail. The Commonwealth attorney gave McCuiston two letters Sigrist had
written to him about the case at bar. McCuiston stated that they were signed by
Sigrist and appeared to be in his handwriting. He testified that he was not a
handwriting expert and had no training on handwriting identification. The trial
court examined the two letters and observed that the handwriting was not even
consistent between the two. Ultimately the parties agreed that one of the letters
-16-
would be introduced into evidence, with some irrelevant comments redacted. The
jury was called back to the courtroom.
McCuiston testified that Sigrist had been an inmate for several
months, that he had received twelve letters directly from Sigrist and many more
letters from him indirectly. He testified that he recognized the handwriting in the
letter and that it was consistent with Sigrist’s handwriting. The defense stated that
it was not objecting to the admission of the letter but wanted an admonition.
McCuiston was shown a photograph of the commissary shopping list that was
wrapped around the methamphetamine and testified that the handwriting was
consistent with the letter and with other notes of Sigrist’s he had seen in the past.
He said it appeared to be Sigrist’s handwriting. The trial court gave the jury the
following admonition:
I’d just like to remind you that the jury itself must alone
decide the credibility of the evidence, its weight, its
value, and its sufficiency. The deputy with regard to the
identity of the handwriting is testifying as a lay witness,
not an expert, so for you to take as you see fit.
In his closing arguments, the Commonwealth attorney stated that
“McCuiston’s familiar with what his [Sigrist’s] handwriting looks like and he
testified that the handwriting on the note the methamphetamine was wrapped up in
and that Deputy Lovett watched Kacy Sigrist drop is Kacy Sigrist’s handwriting.
He recognizes it was his handwriting.”
-17-
Under KRE 701, “Kentucky caselaw has . . . recognized the propriety
of admitting such lay witness testimony [about handwriting] when the lay witness
is very familiar with the signatory’s handwriting, and the testimony would be
helpful to the jury.” Roach v. Commonwealth, 313 S.W.3d 101, 107 (Ky. 2010).
In Hampton v. Commonwealth, 133 S.W.3d 438 (Ky. 2004), for example, a bank
manager was allowed to testify, based on her personal observation, that a signature
on a loan document did not resemble the signature of the victim on his driver’s
license. Id. at 440-41. In Roach, a police detective was permitted to opine that the
signatures on certain checks were likely the victim’s. Roach, 313 S.W.3d at 107.
In these cases, testimony that handwriting on two documents purportedly by the
same person was dissimilar was allowed, but the witnesses did not directly opine
that the documents were forged.
Sigrist argues that the Commonwealth went farther in his case because
McCuiston testified that the writing on the letter he received from Sigrist was
consistent with the note. If a witness may testify that handwriting on documents is
dissimilar, a witness may also certainly be permitted to testify that the handwriting
on two documents is similar. Sigrist urges us to reconsider allowing lay witnesses
to make handwriting comparisons at all, but we are bound by the precedent set
forth by the Kentucky Supreme Court. “[A]s an intermediate appellate court, this
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Court is bound by established precedents of the Kentucky Supreme Court. SCR[1]
1.030(8)(a). The Court of Appeals cannot overrule the established precedent set by
the Supreme Court or its predecessor court.” Smith v. Vilvarajah, 57 S.W.3d 839,
841 (Ky. App. 2000).
The admission of McCuiston’s testimony was not an abuse of
discretion, particularly in light of the trial court’s admonition to the jury that he
was not a handwriting expert.
5. Whether the prosecutor should have been disqualified because he
previously represented Sigrist in one of the convictions underlying the PFO
charge
This allegation of error is partially preserved by Sigrist’s pro se verbal
request for the prosecutor to be removed. To the extent it is unpreserved, Sigrist
requests palpable error review. At a pre-trial hearing, Sigrist requested the
removal of the prosecutor James Burkeen from his case, stating that he believed
Burkeen had a conflict of interest because he had represented him in another case.
Sigrist accused Burkeen of being unethical and “shooting him down.” Sigrist’s
counsel stated that she did not believe it was a conflict of interest and told Sigrist
that such a conflict would exist only if Burkeen “knows such personal knowledge
of your past record . . . he does bring up your past record, but that’s what
1
Rules of the Supreme Court.
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prosecutors do. He’s bringing up what you’ve been charged with and what you’ve
been convicted of in the past which is not unethical for him to do.”
The trial court denied the motion to remove Burkeen, stating, “He is
in the same status ethically as I would be. If this was a case that I had represented
you on, then I couldn’t be the judge on it. If this was a case Mr. Burkeen had
represented you on, he could not be the prosecutor on it. But these are new cases.
So, unless he has some sort of information that he would only have because he was
your lawyer about these particular cases . . . his job is to prosecute you and put you
in jail. Now that’s why you have a neutral party in the judge, okay? Somebody
who can sort out the difference between the defendant and the prosecutor.”
Burkeen represented Sigrist in one of the two prior cases which were
used to support the charge of PFO I. The case involved an Alford 2 plea of guilty to
theft by unlawful taking. The final judgment, which was entered into evidence as
an exhibit for the Commonwealth, states in part that Sigrist appeared in open court
on June 2, 2008, with his attorney, James Burkeen, to enter the plea. This
document was made available to the jury in its deliberations during the penalty
phase.
Sigrist argues that it would have been highly prejudicial for the jury to
discover that the prosecutor on the case they were hearing had actually represented
2
North Carolina v. Alford, 400 U.S. 25, 91 S. Ct. 160, 27 L. Ed. 2d 162 (1970).
-20-
him in the past and was now using that conviction to send him to prison for a
lengthy sentence. He contends that it is entirely possible for the jury to conclude
that Burkeen knew Sigrist was a particularly bad individual from his prior
representation of him and that this explained why he was now “throwing the book”
at him.
A prosecuting attorney is required to disqualify himself “in any
proceeding in which he . . . [h]as served in private practice or government service,
other than as a prosecuting attorney, as a lawyer or rendered a legal opinion in the
matter in controversy[.]” KRS 15.733. The issue is whether a prosecutor should
be disqualified if, like Burkeen, he served as the defense attorney in the conviction
used to support the current PFO charge. In Brown v. Commonwealth, 892 S.W.2d
289 (Ky. 1995), the defendant Brown was represented by attorney John Stewart in
entering an Alford plea to several charges. The conviction was reversed on appeal
and Brown was retried. A special prosecutor was appointed for those retrial
proceedings because, in the meantime, Stewart had gone to work at the
prosecutor’s office. Brown was convicted in the retrial. That conviction was
subsequently used to support a charge of PFO in subsequent proceedings. Brown
sought to disqualify the entire Jefferson County Commonwealth Attorney’s office.
The Kentucky Supreme Court held that “[t]he disqualification upon retrial was
proper as appellant’s former counsel, Mr. Stewart, had become associated with the
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Commonwealth’s Attorney’s office between the time of appeal and retrial.” Id. at
291. “In the present case, however, there was no personal and substantial
relationship between Stewart’s representation during appellant’s first case and the
trial of this case. Stewart had no connection with the conviction used for
enhancement in this case. Not only is there no substantive need for
disqualification, this case presents no appearance of impropriety.” Id. Sigrist
argues that by contrast, there was a direct connection between Burkeen, and the
conviction used for the enhancement in this case, in that Burkeen directly
represented him in those proceedings.
The Commonwealth argues that the trial court did not abuse its
discretion in refusing to disqualify Burkeen in reliance on Cole v. Commonwealth,
553 S.W.2d 468 (Ky. 1977), which states as a general principle that “[a]
prosecuting attorney is disqualified from acting in a criminal case only if he has
previously represented or been consulted professionally by the accused with
respect to the same offense charged or in matters so closely interwoven as to be in
effect a part thereof.” Id. at 472. In Cole, the prosecutor had represented the
defendant many years before. The Kentucky Supreme Court held that he did not
have to be disqualified because he “acquired no confidential information when he
defended Cole 29 years previous to this trial which he could have used in the case
at bar. The existence of the prior conviction of Cole for the habitual criminal
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offense was established by the testimony of the clerk of the Logan Circuit Court.
It was a matter of public record. Thus, there was no conflict of interest so as to
disqualify the Commonwealth’s Attorney.” Id.
There is no allegation here that Burkeen had information about Sigrist
that he could use against him at trial. The issue is whether Burkeen’s name
appearing on the judgment underlying the PFO charge could have improperly
influenced the jury during the penalty phase. If it influenced the jury to
recommend his sentences to run consecutively rather than concurrently, any
prejudice has been erased because the conviction for possession has been reversed
and that sentence vacated. The sentence for the other charge was enhanced by the
PFO I to ten years, the lowest possible sentence. Therefore, even if any prejudice
resulted from Burkeen’s name appearing on the judgment, it had no effect on the
final sentence and certainly did not rise to the level of palpable error.
6. Whether the trial court erred in allowing Sigrist to appear in an orange
jumpsuit and ankle shackles during the penalty phase of the trial
After the jury returned its verdict finding Sigrist guilty of charges of
possession of contraband and promoting contraband, the trial court ordered him to
be taken into custody, based on its stated fear that Sigrist might commit a new
crime, get high, or flee because he was facing a lengthy sentence. The next day, at
the commencement of the penalty phase of the trial, Sigrist arrived in court dressed
in an orange jail jumpsuit with his hands and feet shackled. Defense counsel
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requested that he be unchained. The trial court stated that it would prefer him to be
unchained, at least at the hands. Sigrist’s hands were unchained, but he wore the
jumpsuit and had his feet shackled throughout the penalty phase. To the extent the
issue is unpreserved, Sigrist requests palpable error review.
“Except for good cause shown the judge shall not permit the
defendant to be seen by the jury in shackles or other devices for physical restraint.”
RCr 8.28(5). And, “a trial court that compels a criminal defendant to appear before
the jury in prison clothing threatens the defendant’s fundamental right to a fair
trial.” Deal v. Commonwealth, 607 S.W.3d 652, 658 (Ky. 2020) (citing Estelle v.
Williams, 425 U.S. 501, 504-05, 96 S. Ct. 1691, 1693, 48 L. Ed. 2d 126 (1976)).
The jury was aware that Sigrist had been imprisoned in the past. The
crime for which he was being tried occurred while Sigrist was incarcerated and a
key piece of evidence at trial was the video surveillance tape of the jail, in which
Sigrist appeared in prison garb. The jury had already found Sigrist guilty of two
charges when he appeared in prison garb and the ankle shackles at the penalty
phase. Although we recognize that a defendant is entitled to due process
protections throughout the trial, Barbour v. Commonwealth, 204 S.W.3d 606, 610-
11 (Ky. 2006), any material prejudice stemming from his appearance at the penalty
phase is difficult to discern and does not rise to the level of manifest injustice
necessitating reversal.
-24-
CONCLUSION
Sigrist’s conviction for possession of contraband in the first degree is
reversed and the three-year sentence imposed for that charge is vacated. The
remainder of the Calloway Circuit Court’s judgment and sentence are affirmed in
full.
ALL CONCUR.
BRIEFS FOR APPELLANT: BRIEF FOR APPELLEE:
Emily Holt Rhorer Daniel Cameron
Frankfort, Kentucky Attorney General of Kentucky
Christopher Henry
Assistant Attorney General
Frankfort, Kentucky
-25- | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482918/ | RENDERED: NOVEMBER 10, 2022; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2021-CA-0663-MR
JAMES JAVONTE CRITE APPELLANT
APPEAL FROM DAVIESS CIRCUIT COURT
v. HONORABLE JAY A. WETHINGTON, JUDGE
ACTION NO. 19-CR-01077
COMMONWEALTH OF KENTUCKY APPELLEE
OPINION
AFFIRMING
** ** ** ** **
BEFORE: DIXON, LAMBERT, AND MCNEILL, JUDGES.
DIXON, JUDGE: James Javonte Crite1 appeals the Daviess Circuit Court order,
entered October 8, 2020, denying his motion to suppress evidence. After careful
review of the record, briefs, and law, we affirm.
1
Crite is also known as Jayleo Lawrence, and the record refers to him by his former and present
legal names interchangeably. We will use Crite, the name listed in Appellant’s motion for
belated appeal, in this Opinion.
BACKGROUND FACTS AND PROCEDURAL HISTORY
Crite rented an apartment that was part of a fourplex building owned
and managed by Century Property Management (Century). On July 9, 2019,
Crite’s brother contacted Century to notify them that Crite, who was schizophrenic,
had ceased taking his medication and was being taken to the hospital. Crite’s
brother further reported that Crite’s apartment was damaged – wires had been
ripped from appliances, and the AC and electric were nonfunctional – and
requested repairs be made during Crite’s absence.
On that same day, an agent for Century inspected Crite’s apartment to
contemplate repairs and assess whether the damage constituted a fire hazard. The
agent observed that wiring had been pulled from the hot water heater and the
HVAC unit; the thermostat had been removed from the wall; the main breaker was
off, but another breaker had been pried from the fuse box; the apartment was
generally a wreck; it was hot inside due to the ambient temperature of 100 degrees;
and a handgun was present on the coffee table. The agent reported her
observations to Century’s property manager but did not alert emergency services or
other tenants of the fourplex.
The following day, after engaging the services of an electrician, the
property manager contacted the Owensboro Police Department to request that
officers meet them at Crite’s apartment. In the recorded call to dispatch, the
-2-
property manager detailed the damage to the apartment and stated that she wanted
to make sure the building was safe for other tenants. She further explained that
officer assistance was requested because she did not feel safe given Crite’s
untreated schizophrenia, the uncertainty as to his present location after Crite was
not admitted to the hospital, the damage to the apartment, the presence of a
firearm, and because she had recently learned that Crite may be a felon. No efforts
were made to contact Crite.
In response, Officers Nevitt and Matthews were dispatched to Crite’s
apartment. Both officers were advised prior to their arrival that Crite had an
outstanding capias warrant. Additionally, Officer Matthews knew of Crite’s status
as a felon, though he could not remember whether he learned of it before or after
he arrived on the scene. Nevertheless, both officers denied that their presence was
in furtherance of a criminal investigation or the execution of the warrant.
After arriving at the apartment and receiving no response to their
knocks, the officers informed the property manager that they had no reason to enter
the apartment. The property manager persisted in her request that they enter to
ensure it was safe, and after she unlocked the door, the officers entered to “clear”
the apartment for threats. While “clearing” the apartment, the officers observed
the handgun, the buttstock of what they recognized as a rifle sticking out of a
couch, and ammunition on the floor. Thereafter, Crite arrived at the building
-3-
parking lot where he was arrested on the outstanding warrant. Ultimately, the
officers confirmed Crite was a felon and seized the rifle and magazine. The
handgun was determined to be a pellet gun.
Following his indictment for possession of a firearm by a convicted
felon,2 Crite moved to suppress the evidence observed by the officers in his
apartment. After conducting an evidentiary hearing, the trial court determined the
officers’ presence was lawful and the rifle was in plain view and; thus, the motion
was denied. Crite then entered a conditional guilty plea pursuant to RCr3 8.09, and
this appeal followed. Additional facts will be introduced as they become relevant.
STANDARD OF REVIEW
“The Fourth Amendment to the U.S. Constitution and Section 10 of
the Kentucky Constitution[4] protect citizens from unreasonable searches and
seizures by the government.” Milam v. Commonwealth, 483 S.W.3d 347, 349 (Ky.
2015) (citing Payton v. New York, 445 U.S. 573, 586, 100 S. Ct. 1371, 63 L. E. 2d
639 (1980)). “It is fundamental that all searches without a warrant are
unreasonable unless it can be shown that they come within one of the exceptions to
2
Kentucky Revised Statutes (KRS) 527.040, a class D felony.
3
Kentucky Rules of Criminal Procedure.
4
Kentucky courts have consistently interpreted Section 10 of the Kentucky Constitution to be
consistent in both rights and remedies with the federal Fourth Amendment. Parker v.
Commonwealth, 440 S.W.3d 381, 387 (Ky. 2014) (citing Dunn v. Commonwealth, 360 S.W.3d
751, 758 (Ky. 2012); Williams v. Commonwealth, 364 S.W.3d 65, 68 (Ky. 2011)).
-4-
the rule[.]” Cook v. Commonwealth, 826 S.W.2d 329, 331 (Ky. 1992). The
Commonwealth bears the burden of demonstrating the applicability of a
recognized exception. Gallman v. Commonwealth, 578 S.W.2d 47, 48 (Ky. 1979).
Evidence seized as a result of an unreasonable search is subject to suppression.
See Warick v. Commonwealth, 592 S.W.3d 276, 280-81 (Ky. 2019).
Our review of a pretrial motion to suppress is twofold. “First, we
review the trial court’s findings of fact under a clearly erroneous standard. Under
this standard, the trial court’s findings of fact will be conclusive if they are
supported by substantial evidence.” Whitlow v. Commonwealth, 575 S.W.3d 663,
668 (Ky. 2019) (quoting Simpson v. Commonwealth, 474 S.W.3d 544, 547 (Ky.
2015) (internal quotation marks omitted)). Second, we review de novo “the trial
court’s application of the law to the facts to determine whether its decision is
correct as a matter of law.” Id. (citation omitted). Substantial evidence is
“evidence of substance and relevant consequence having the fitness to induce
conviction in the minds of reasonable men.” Owens-Corning Fiberglas Corp. v.
Golightly, 976 S.W.2d 409, 414 (Ky. 1998). In assessing the evidence, we give
due regard to the trial court’s judgments on the credibility of the testifying officer
and the reasonableness of their inferences. Commonwealth v. Whitmore, 92
S.W.3d 76, 79 (Ky. 2002).
-5-
ANALYSIS
Plain view is an exception to the Fourth Amendment’s warrant
requirement, and it “applies when the object seized is plainly visible, the officer is
lawfully in a position to view the object, and the incriminating nature of the object
is immediately apparent.” Kerr v. Commonwealth, 400 S.W.3d 250, 266 (Ky.
2013) (citing Horton v. California, 496 U.S. 128, 136-37, 110 S. Ct. 2301, 110 L.
Ed. 2d 112 (1990)). Pertaining to the second requirement, Crite asserts the court
erred in determining that the landlord had the authority to both enter the apartment
herself and permit entry by police.
Our review begins with the trial court’s determination that the
landlord’s entry without notice or consent was authorized by the emergency arising
from the damage to the apartment’s electrical system. Pursuant to KRS 383.615(2)
and the lease agreement, the landlord is authorized to enter Crite’s apartment
without his prior consent in the case of an emergency. As noted by the parties, the
term “emergency” is not defined by either the statute or the lease; however, it is a
basic tenet of both statutory interpretation and contract law that undefined terms
should be accorded their plain meaning. Commonwealth v. McBride, 281 S.W.3d
799, 806 (Ky. 2009); Larkins v. Miller, 239 S.W.3d 112, 113 (Ky. App. 2007).
Defining an emergency as “[a] sudden and serious event or an
unforeseen change in circumstances that calls for immediate action to avert,
-6-
control, or remedy harm[,]” Crite contends the evidence belies the court’s finding.
Emergency, BLACK’S LAW DICTIONARY 712 (7th ed. 1999). In support, Crite notes
it was established that Century knew from its assessment the day prior that the
main breaker was off, there were no flames or smoke, and the fuse box panel was
cool to the touch. Additionally, Crite states that Century’s decision not to alert the
fire department, 911, or other tenants of any risk, and its approximate 24-hour
delay in retaining an electrician, demonstrates that Century did not consider the
matter emergent. Consequently, Crite insists that Century was required to give
him two days’ notice, pursuant to KRS 383.615(3), and Century’s failure to do so
rendered its entry unauthorized.
Conversely, the Commonwealth argues that substantial evidence
supports the court’s finding that the lease authorized Century’s entry, and we
agree.5 Accepting Crite’s proposed definition, there is no credible claim that the
destruction of the apartment’s electrical system was not an unforeseeable event.
Further we are convinced that, despite the fact the damage had not presently
resulted in a fire, given the apparent risk of harm to both property and life arising
from pulled wires and a damaged fuse box, Century’s immediate access to assess
and ameliorate the risk was justified. Finally, we cannot agree that the possible 24-
5
The Commonwealth disputes the applicability of KRS 383.615, but since the lease contains a
substantively similar provision, we do not reach this issue.
-7-
hour delay in retaining an electrician, which is less than the notice period Crite
maintains should apply, is of such duration as to preclude the court’s finding.
Thus, we find no error.
Next, Crite challenges Century’s authority to permit police to enter
and search his apartment.
We begin, as the parties and the trial court did, by acknowledging that
it has long been held that a landlord is not authorized to consent to a warrantless
search of a tenant’s residence. Chapman v. United States, 365 U.S. 610, 81 S. Ct.
776, 5 L. Ed. 2d 828 (1961) (concluding that tenant’s Fourth Amendment rights
were violated, the Supreme Court rejected the claim that police entered leased
premises in furtherance of landlord’s common law right to view waste where
evidence demonstrated the landlord reported suspected criminal activity and
consented to search for the purposes of seeking proof); Hall v. Commonwealth,
438 S.W.3d 387 (Ky. App. 2014) (evidence suppressed after landlord unlocked
tenant’s door for police who were investigating possible drug trafficking).
However, this matter is distinguishable where the trial court found that the officers’
actions were not in pursuit of a criminal investigation. As Kentucky law has not
addressed this issue, Crite renews his argument that this Court should follow the
analysis of United States v. Williams, 354 F.3d 497 (6th Cir. 2003).
-8-
In Williams, the landlord became concerned that one of her four rental
properties had a water leak after receiving the combined utility bill. Id. at 500.
She and a niece entered the residence at issue 15 days later and noted the lights did
not work, there were sparse furnishings, leaves were all over the floor, and there
was an odd smell, but they did not find a leak in their limited search of the kitchen.
Id. The niece reported their observations and their suspicion of drug activity to the
Drug Enforcement Agency (DEA), and that afternoon two DEA agents met them at
the residence. Id. at 500. The agents initially declined the landlord’s request to
inspect the property for the possible water leak, but despite having no reason to
believe anyone was in the residence, an agent eventually accompanied her inside
and inspected the residence since she was afraid to proceed alone. Id. at 500-01.
The agent then discovered marijuana plants. Id. at 501. On appeal, the Sixth
Circuit Court held that the agent’s entry was not justified by any exception to the
Fourth Amendment’s warrant requirement. Id. at 510.
Herein, the trial court concluded that Williams was inapposite given
the credible emergency at issue. In reaching this conclusion, the trial court
contrasted the Williams landlord’s two-week delay with Century’s prompt action,
the speculative water leak with the certain electrical damage, the report of
suspected drug activity with a request for protection while undertaking necessary
repairs, and the minimal risk of merely exacerbated property damage with the
-9-
possibility of loss of property and life. Additionally, the trial court found
compelling the officers’ testimony that their sole purpose was to alleviate
Century’s cited safety concerns, their acknowledgement that they had no
independent basis to enter, and their claim that they did so only after Century
insisted. We are mindful that credibility determinations are solely within the
province of the trial court. Lewis v. Bledsoe Surface Mining Co., 798 S.W.2d 459
(Ky. 1990) (citations omitted).
Ultimately, the trial court’s determination turns on its finding that,
unlike the arguably pretextual safety claim advanced by the landlord in Williams,
the facts at issue were more akin to those in People v. Plane, 274 Cal.App.2d 1
(Cal. App. 1969). Therein, Plane, a tenant in an eight-unit building, was arrested
directly outside his apartment, and despite the option to return inside, he closed the
door leaving the lights on and his pet unattended. Id. at 2-3. There had previously
been a fire in the building, and knowing that the lights were on in Plane’s
apartment, the landlord suspected that his gas stove might also be lit. Id. at 3.
Fearful for the safety of the building and its tenants, the landlord decided to
investigate and, due to his constrained relationship with Plane, requested an officer
act as a witness. Id. An officer responded to Plane’s apartment the next day where
the landlord opened the door and requested the officer follow him inside. Id.
Inside, the officer observed marijuana plants in plain sight. Id.
-10-
Like the case at bar, Plane sought to suppress the evidence arguing
that the landlord was without authority to enter the apartment himself or to invite
the officer inside. Id. The Plane court disagreed, finding the landlord had a
credible safety concern for the building and its tenants, it was reasonable the
landlord would want an officer present given the difficult relationship with Plane,
and the landlord was not acting as an agent of the officer. Id. at 3-4. Having
determined the officer’s presence was lawful, the Plane court held he did not have
to blind himself to what was in plain sight simply because it was disconnected
from the purpose of his presence. Id. at 4. Accordingly, based on the totality of
the circumstances, the court concluded the officer’s actions were reasonable under
the Fourth Amendment. Id. at 4-5.
Applying Plane, the trial court found it was reasonable for the officers
to accompany Century in its legitimate entry of the apartment given Crite’s
untreated schizophrenia, the significant damage to the apartment, the presence of a
firearm, and because Crite’s location was unknown. While Crite disagrees, citing
the lack of evidence that he had ever been violent or a credible basis to believe that
he was even in the apartment, the trial court’s findings are supported by the
evidence.
As Crite notes, “the very core of [the Fourth Amendment] is the right
of a man to retreat into his own home and there be free from unreasonable
-11-
governmental intrusion.” Caniglia v. Strom, __ U.S. __, 141 S. Ct. 1596, 1599,
209 L. Ed. 2d 604 (2021) (quoting Florida v. Jardines, 569 U.S. 1, 6, 133 S. Ct.
1409, 185 L. Ed. 2d 495 (2013) (internal quotation marks and citations omitted)).
The protections of the Fourth Amendment do not prohibit all unwelcome
intrusions, merely the unreasonable ones. Id. Because we agree that the officers,
like the electrician, were merely facilitating Century’s legitimate interest in
entering Crite’s apartment, we conclude that the trial court did not err in
determining, under the totality of the circumstances, their entry into the apartment
was reasonable under the Fourth Amendment.
We turn now to Crite’s second claim, that the court erred by implicitly
creating a community caretaker exception, which he asserts is in contravention of
the Supreme Court’s holding that the exception does not extend to permit
warrantless entry into the home. Caniglia, 141 S. Ct. at 1600. The
Commonwealth denies that the court applied this exception and further argues that
Caniglia is not applicable since it was decided after Crite was sentenced. Because
we agree with the Commonwealth that the court did not apply a blanket
community caretaker exception, we do not reach the merits of either party’s
argument.
-12-
CONCLUSION
Therefore, and for the foregoing reasons, the order of the Daviess
Circuit Court is AFFIRMED.
ALL CONCUR.
BRIEFS FOR APPELLANT: BRIEF FOR APPELLEE:
Kathleen K. Schmidt Daniel Cameron
Frankfort, Kentucky Attorney General of Kentucky
Christina L. Romano
Assistant Attorney General
Frankfort, Kentucky
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https://www.courtlistener.com/api/rest/v3/opinions/8482921/ | RENDERED: NOVEMBER 10, 2022; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2022-CA-0007-MR
HEATHER PARLETTE APPELLANT
APPEAL FROM KENTON CIRCUIT COURT
v. HONORABLE GREGORY M. BARTLETT, JUDGE
ACTION NO. 19-CI-01452
C-9, INC. DBA BRIGHT FUTURE
CHILD ENRICHMENT CENTER APPELLEE
OPINION
AFFIRMING
** ** ** ** **
BEFORE: CETRULO, COMBS, AND GOODWINE, JUDGES.
COMBS, JUDGE: This case involves a claim of wrongful discharge from
employment. Heather Parlette (Appellant) appeals an order of the Kenton Circuit
Court granting summary judgment to the Appellee, her former employer, C-9, Inc.,
d/b/a Bright Future Child Enrichment Center (Bright Future). The circuit court
concluded that Parlette could not show that she was unlawfully discharged from
her employment and that, therefore, Bright Future was entitled to judgment as a
matter of law. After our review of the record, we affirm.
Bright Future is a licensed child daycare facility serving children from
infancy to the age of 10 years. During the period relevant to these proceedings,
Kayla Bunch was the director of the facility. Parlette’s three children were
enrolled at Bright Future when she began working there part-time in 2014.
Parlette’s son, D.H., was born in September 2014. When she returned to work
following maternity leave, Parlette also registered D.H. for childcare at Bright
Future.
In 2018, Parlette began working full-time for Bright Future. She
worked in the facility’s kitchen and transported students to area schools in its
passenger van. The cost of D.H.’s attendance was paid through the Child Care
Assistance Program (CCAP) administered by Kentucky’s Cabinet for Health and
Family Services.
D.H. suffers with sensory processing difficulties. This set of
challenges is not recognized as a neurological condition and does not constitute an
independent medical diagnosis or mental disorder in medical manuals. In order to
help manage D.H.’s behavior, Bunch guided Parlette to First Steps, Kentucky’s
early intervention system serving children with developmental delays, and to
-2-
NorthKey Community Care. As a result of these efforts, therapists came to Bright
Future to work with D.H. once a week.
On February 28, 2019, according to Parlette, a fellow employee
approached her and stated that another employee had “body slam[med] my son to
the ground as he was walking away from her.” The employee who had allegedly
assaulted D.H. was immediately terminated from her employment at Bright Future.
Kayla Bunch, also Parlette’s supervisor as well as director of the facility, discussed
the components of a “preventative plan” that Bright Future established for D.H.
and described the steps taken to prevent “the situation from ever escalating or
coming again.” Pursuant to the plan, an employee caring for D.H. who became
overwhelmed by his behavior could call for relief for a brief period. Bright Future
made a timely report of this incident to state licensing authorities.
Another incident at Bright Future involving D.H. occurred just a few
months later in the early morning of May 20, 2019. Parlette explained it as
follows:
I was doing my rounds and getting counts and making
sure everyone had what they had needed for the morning.
And I heard the teacher in the four-year-old room
scream, “I will drive you across this classroom,” her door
opened, and my son being put outside of it.
According to Parlette, the teacher “had her hands on [D.H.] and was scooting him
with her body to get him to go out of the room.” She described the teacher as
-3-
acting “in a very aggressive and angry manner.” D.H. was crying. Since Kayla
Bunch was not immediately available, Parlette took D.H. with her in the passenger
van while she delivered other children to school.
Parlette finished her transport duties and returned to talk with Bunch.
The teacher involved in the incident also attended the meeting along with another
employee. Parlette remembers that the meeting “got very ugly and words were
exchanged where things were said that sensory processes isn’t real and that it’s a
made-up illness.” Following the meeting, the teacher involved chose to leave her
position with Bright Future. Bright Future reported the incident to state authorities
before the close of business on May 20, 2019.
According to Parlette, Bunch explained to her that “we were short-
staffed so we would either have to have me in the classroom or [D.H.] would not
be able to attend because she wasn’t able to get a second teacher in the classroom
to make sure everyone was safe at all times.” Parlette was aware of the daycare’s
disciplinary policy, which required the removal of children whose behavior could
not be adequately managed by staff. However, she was also aware that she could
not continue to receive benefits through CCAP if she were to provide care to her
own child at the facility.
Later in the day, Parlette sent a text to Bunch explaining that
“Daycare Assistance” needs written proof that “I was sent home.” Parlette asked if
-4-
Bunch would prepare a statement indicating that “I am not able to come back to
work until you have a second teacher for that classroom . . . .”
Parlette did not report to work the following morning, May 21, 2019.
When asked whether she checked in with Bright Future, Parlette testified as
follows:
I talked with [Bunch] every single day, yes.
....
I don’t remember which day she said which thing, but we
had spoke multiple times and she reiterated herself letting
me know that I wasn’t able to come back, she didn’t have
the staffing under control yet. She was still looking to
hire.
Counsel asked specifically:
When you were told by [Bunch] that they didn’t have
anybody to take care of [D.H.] at that point because of
staffing shortages because he was going to require
somebody by himself, I guess, did she tell you not to
come to work or just not to bring [D.H.]?
Parlette answered:
She didn’t say either of those things. She wrote a letter
that I requested for daycare assistance that they had
needed of the incident because the incident also had to be
reported through them as well.
Parlette did not report to work on May 22, 2019. Instead, she
collected her belongings from her workspace and the written documentation she
sought from Bunch. Bunch’s written statement contained the following language:
-5-
This letter is to inform you that due to staffing shortages
[D.H.] is not allowed to return to the center until there are
2 teachers in his classroom. Due to this [Parlette] has
taken time off work because he [sic] has no one else to
keep [D.H.].
Parlette never returned to work at Bright Future. Nor did she ever ask to re-enroll
D.H.
On July 2, 2019, Parlette filed a complaint with the Kentucky
Commission on Human Rights. On August 16, 2019, she filed this civil action
against Bright Future asserting claims for wrongful discharge. Parlette alleged that
her employment was effectively terminated on May 20, 2019, because of: her
son’s disability; her refusal to violate regulations governing her receipt of CCAP
funds; and/or her decision to report the abuse perpetrated against her son by Bright
Future staff.
Bright Future answered the complaint and denied the allegations.
When discovery was complete, Bright Future filed its motion for summary
judgment. Bright Future argued that Parlette had not been discharged from
employment; instead, she quit. It also contended that she had not been unlawfully
discriminated against because she does not suffer with any disability and that she
could not be characterized as a “whistleblower” for a number of reasons, including
the undisputed fact that the facility complied immediately with reporting
requirements.
-6-
In response, Parlette contended that genuine issues of material fact
precluded summary judgment. She argued that a reasonable jury could infer from
the evidence that Bright Future discharged Parlette on several alternate grounds:
because she reported the abuse her son sustained at the facility; because she
refused to violate regulations governing her receipt of state-sponsored childcare
assistance benefits; or because it sought to injure D.H. further.
From the record, the court concluded that there were no genuine
issues of material fact. It determined that Parlette left her employment voluntarily.
The circuit court granted summary judgment to Bright Future on November 29,
2021. This appeal followed.
On appeal, Parlette argues that the trial court erred by concluding that
Bright Future was entitled to judgment as a matter of law. We disagree.
Summary judgment is properly granted where:
the pleadings, depositions, answers to interrogatories,
stipulations, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to
any material fact and that the moving party is entitled to a
judgment as a matter of law.
CR1 56.03. Because summary judgment involves only questions of law and not the
resolution of disputed material facts, we do not defer to the trial court’s decision.
Goldsmith v. Allied Building Components, Inc., 833 S.W.2d 378 (Ky. 1992).
1
Kentucky Rules of Civil Procedure.
-7-
Instead, we review the decision de novo. Cumberland Valley Contrs., Inc. v. Bell
County Coal Corp., 238 S.W.3d 644 (Ky. 2007).
The viability of Parlette’s causes of action plainly depends upon proof
that Bright Future discharged her from employment. In order to establish a cause
of action for wrongful discharge, she must show either that the termination was
contrary to public policy evinced by a constitutional or statutory provision -- or
that the discharge resulted directly from the employee’s refusal to violate the law
during the course of his employment. Greissman v. Rawlings and Associates,
PLLC, 571 S.W.3d 561 (Ky. App. 2019). To establish a prima facie case
of unlawful discharge under Kentucky’s Civil Rights Act, KRS2 344.010 et seq.,
Parlette must establish that she suffers a disability within the meaning of the
provisions of KRS 344.010(4) and that she was discharged despite the fact that she
was qualified to perform the essential functions of her job. See, e.g., Board of
Regents of Northern Kentucky University v. Weickgenannt, 485 S.W.3d 299 (Ky.
2016).
This appeal can be resolved on the basis that Parlette failed to present
evidence indicating that Bright Future terminated her employment. In her
deposition, Bunch testified that she did not tell Parlette that she was not allowed to
return to work. She never told her that she was fired or that she was expected to
2
Kentucky Revised Statutes.
-8-
work in D.H.’s classroom. Bunch indicated that she anticipated that Parlette would
return to her regular duties, but she never saw her after May 22, 2019, when
Parlette collected her things from her workspace in the daycare’s kitchen.
In his deposition, Bright Future’s corporate representative explained
that the facility would not have permitted Parlette to work in D.H.’s room or even
to sit in to monitor his behavior. The corporate representative testified that Bunch
was not authorized to offer either option and that the women appeared to be
brainstorming for ideas to keep D.H. enrolled in daycare. He also indicated that
the written statement that Bunch prepared upon Parlette’s request was
unauthorized and incorrect. He explained that D.H. was removed from the daycare
because of his behavioral issues -- not because there was a staff shortage. He
observed that D.H. had no medical or psychological conditions.
Finally, when asked specifically whether anyone from Bright Future
told her that she was being discharged from her employment, Parlette testified, “I
do not recall those words being used.” Instead, she reported that Bright Future
explained to her that the facility “did not have anyone in the room to be able to
provide the care for [D.H.].”
Parlette was aware of the daycare’s disciplinary policy requiring the
dismissal of children whose behavior could not be adequately managed by staff.
When she was asked whether she might have continued to work at Bright Future if
-9-
she had simply enrolled D.H. in another daycare facility, she said, “No, I don’t
believe so. . . . Because that was the second time my child has been injured there
and it was a lot for me to be able to walk in the building.”
There is no evidence to show that Parlette was ever discharged from
her employment. Instead, all evidence indicates that Parlette voluntarily resigned
her position. Consequently, Bright Future was entitled to judgment as a matter of
law.
Therefore, we affirm the summary judgment of the Kenton Circuit
Court.
ALL CONCUR.
BRIEFS FOR APPELLANT: BRIEF FOR APPELLEE:
W. Kash Stilz, Jr. Thomas L. Rouse
Covington, Kentucky Ft. Mitchell, Kentucky
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https://www.courtlistener.com/api/rest/v3/opinions/8482929/ | RENDERED: NOVEMBER 10, 2022; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2021-CA-0753-MR
AMY LYNN GOODWIN APPELLANT
APPEAL FROM TRIGG CIRCUIT COURT
v. HONORABLE CLARENCE A. WOODALL, III, JUDGE
ACTION NO. 20-CI-00073
WILLIAM ELLIS GOODWIN APPELLEE
OPINION
AFFIRMING
** ** ** ** **
BEFORE: ACREE, MCNEILL, AND L. THOMPSON, JUDGES.
ACREE, JUDGE: Appellant Amy Goodwine (Amy) appeals the Trigg Circuit
Court’s May 10, 2021 findings of fact, conclusions of law, and order requiring
William Goodwin (Bill) to pay Amy $1,500.00 per month in maintenance for five
years following the parties’ divorce. Amy contests (a) the amount and duration of
the maintenance award, (b) Bill not being required to continue listing Amy as a
beneficiary to life insurance, and (c) Bill not being required to pay Amy’s
attorney’s fees pursuant to the dissolution. Finding no error, we affirm.
BACKGROUND
Amy and Bill were married on July 4, 1997. They have one child
together (Daughter), who was born September 21, 2006. Amy and Bill separated
in March of 2020. Bill filed a petition for dissolution of marriage on April 21,
2020. The trial court conducted a final evidentiary hearing on February 18, 2021
and entered an interlocutory decree of dissolution on March 15, 2021. Their
marriage lasted 23 years and eight months.
Bill was 52 years old at the time of the final hearing. He enlisted in
the Army a few months before he married Amy, beginning his military service on
February 14, 1997. He served as a helicopter pilot for the Army for the vast
majority of the marriage, until his retirement on March 31, 2019. In April 2019,
Bill obtained employment with Lockheed Martin as a test pilot, where he began to
earn substantially more than he did during his time in the Army. Bill earns a gross
salary of $116,622.00 at Lockheed Martin. Additionally, Bill receives a gross
monthly payment of $2,132.96 in VA benefits, and gross monthly military
retirement pay in the amount of $4,151.00.
Amy was 54 years old at the time of the final hearing. Amy works at
Heritage Christian Academy (HCA), a private school in Hopkinsville, Kentucky,
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where she is a middle school physical education teacher. She also earns income by
coaching gymnastics in Clarksville, Tennessee, and judging gymnastics meets.
Between teaching, coaching gymnastics, and judging meets, Amy earns an average
of $29,767.00 in gross annual pay.
Bill was deployed approximately seventy-five percent of the time
while in the military, and Amy was primarily responsible for Daughter’s care and
for maintaining their residence. Daughter attends HCA. Because Amy works at
HCA, Daughter’s tuition is reduced by fifty percent. Amy and Daughter continue
to live in the marital residence.
At the outset of the February 18, 2021 evidentiary hearing, the parties
agreed to joint custody of Daughter, with Amy as the primary residential parent.
Bill agreed to pay Amy $1,000.00 monthly in child support until Daughter’s
emancipation in May 2025. Each agreed to pay half of Daughter’s HCA tuition
and costs arising from Daughter’s extracurricular activities.
After allocating non-marital property to each party, the trial court
determined that Amy’s and Bill’s total marital estate was worth $1,122,197.77.
After the trial court divided the marital property, Bill’s total marital award was
$522,848.77, and Amy’s total marital award was $599,349.00. The trial court
awarded Amy the residence, requiring that she assume the mortgage. Among other
property, Amy’s award included a bank account worth $35,993.16. The trial court
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ordered Amy to pay Bill $38,250.00 within ninety days of its final order to balance
the marital awards. Amy took out a loan against the equity in the residence to
obtain cash for this payment.
Because Amy and Bill were married for 98.25 percent of Bill’s
military service, the trial court awarded Amy 49.125 percent of Bill’s monthly
retirement pay. Amy receives a gross monthly payment of $2,039.18 from Bill’s
military retirement.
The trial court determined Bill receives a gross monthly income of
$13,963.30 from all sources, and a net income of $11,057.52. After expenses of
$4,516.00, Bill has a monthly discretionary income of approximately $8,760.00.
Amy receives a gross monthly income of $5,133.29 from all sources. She receives
a net income of $4,894.03, including pay from employment, child support
payments from Bill, and her portion of Bill’s monthly military retirement.
Across the marriage dissolution process, Amy submitted three charts
that itemized her expenses. Her first chart claimed total monthly expenses of
$7,210.00, the second chart claimed $7,486.00 in expenses, and the third chart
claimed $7,801.00. However, the trial court found Amy’s reasonable monthly
expenses to total $5,193.00, leaving her with an average net monthly disposable
income of $62.00. While the trial court accepted some of Amy’s claimed expense
categories, it reduced many others.
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Based on the length of the marriage, the trial court found it would not
be reasonable for Amy to live minimally and that she lacked sufficient property –
marital or otherwise – to provide for her reasonable needs. Accordingly, it
awarded her $1,500.00 in maintenance payments for a period of sixty months.
Maintenance will terminate if Amy dies, or if Amy remarries or cohabitates with
another adult to whom she is not related by blood or marriage. Conversely, the
maintenance award does not terminate if Bill dies, and would continue to be paid
out of his estate for the remainder of the sixty-month term in the event of his death.
The trial court also determined that neither party is required to keep
the other as a beneficiary under any life insurance policy. Bill owned two life
insurance policies at the time of the hearing. The first provides a death benefit of
$400,000.00 and the second policy provides $200,000.00. Bill purchased the
second policy as an alternative to the Army’s Survivors Benefit Plan (SBP), which
Bill opted out of upon his retirement from the military.
The trial court also denied Amy’s request for attorney’s fees. It
determined that Amy and Bill should be required to pay their own legal fees based
on their respective financial resources. This appeal followed.
STANDARD OF REVIEW
“In all actions tried upon the facts without a jury[,]” including actions
for dissolution of marriage, “[f]indings of fact[] shall not be set aside unless clearly
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erroneous, and due regard shall be given to the opportunity of the trial court to
judge the credibility of the witnesses.” CR1 52.01. A factual finding is clearly
erroneous if it is “manifestly against the weight of evidence.” Wells v. Wells, 412
S.W.2d 568, 571 (Ky. App. 1967) (citation omitted). Conversely, a factual finding
is not clearly erroneous if substantial evidence supports it. Hunter v. Hunter, 127
S.W.3d 656, 659 (Ky. App. 2003) (citing Owens-Corning Fiberglas Corp. v.
Golightly, 976 S.W.2d 409 (Ky. 1998)). “Substantial evidence is evidence, when
taken alone or in light of all the evidence, which has sufficient probative value to
induce conviction in the mind of a reasonable person.” Id. (citing Golightly, 976
S.W.2d at 414).
While factual findings are reviewed for clear error, trial courts are
afforded a wide range of discretion when awarding maintenance in divorce actions.
Age v. Age, 340 S.W.3d 88, 94-95 (Ky. App. 2011). Thus, a trial court’s
maintenance award is reviewed for abuse of discretion. Id. “The test for abuse of
discretion is whether the trial judge’s decision was arbitrary, unreasonable, unfair,
or unsupported by sound legal principles.” Commonwealth v. English, 993 S.W.2d
941, 945 (Ky. 1999).
1
Kentucky Rules of Civil Procedure.
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ANALYSIS
Amy argues the trial court erred in three ways. First, the trial court
abused its discretion in awarding her a monthly maintenance payment of only
$1,500.00 for a period of sixty months. Second, the trial court abused its discretion
when it declined to direct Bill to designate Amy as the beneficiary of $250,000.00
in life insurance benefits. Third, the trial court abused its discretion by declining to
award Amy reasonable attorney’s fees. Because none of these decisions by the
trial court was arbitrary, unreasonable, unfair, or unsupported by sound legal
principles, we disagree and affirm the trial court’s determinations.
Maintenance Award
KRS2 403.200(1) empowers trial courts to award maintenance to
either spouse only if two elements are met. A court may award maintenance if the
spouse seeking it both “[l]acks sufficient property, including marital property
apportioned to [her], to provide for [her] reasonable needs” and will be unable “to
support h[er]self through appropriate employment or is the custodian of a child
whose condition or circumstances make it appropriate that the custodian not be
required to seek employment outside the home.” KRS 403.200(1)(a)-(b). The trial
court agreed with Amy that she was entitled to maintenance because she is unable
2
Kentucky Revised Statutes.
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to provide for her reasonable needs through her property or through appropriate
employment.
However, Amy argues the trial court’s maintenance award was
insufficient in both amount and duration. KRS 403.200(2) provides trial courts’
maintenance orders “shall be in such amounts and for such periods of time as the
court deems just,” and provides a non-exhaustive list of six factors for trial courts
to consider:
(a) The financial resources of the party seeking
maintenance, including marital property apportioned to
him, and his ability to meet his needs independently,
including the extent to which a provision for support of a
child living with the party includes a sum for that party as
custodian;
(b) The time necessary to acquire sufficient education or
training to enable the party seeking maintenance to find
appropriate employment;
(c) The standard of living established during the marriage;
(d) The duration of the marriage;
(e) The age, and the physical and emotional condition of
the spouse seeking maintenance; and
(f) The ability of the spouse from whom maintenance is
sought to meet his needs while meeting those of the spouse
seeking maintenance.
KRS 403.200(2).
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Amy asserts her circumstances are like those in Powell v. Powell, 107
S.W.3d 222 (Ky. 2003). In Powell, the dependent spouse was awarded $3,000.00
per month in maintenance for a duration of three years following the termination of
an eighteen-year marriage. 107 S.W.3d at 223. The Supreme Court applied the six
KRS 403.200(2) factors to determine the trial court had abused its discretion in
determining the amount and duration of maintenance. Id. at 223-25. Though the
purpose of KRS 403.200 is to “enable the unemployable spouse to acquire the
skills necessary to support himself or herself in the current workforce so that he or
she does not rely upon the maintenance of the working spouse indefinitely[,]”
maintenance may be awarded for a longer duration or a greater amount “‘in
situations where the marriage was long term, the dependent spouse is near
retirement age, the discrepancy in incomes is great, or the prospects for self-
sufficiency appears dismal[.]’” Id. at 224 (quoting Clark v. Clark, 782 S.W.2d 56,
61 (Ky. App. 1990)).
Though the wife in Powell was the primary earner while the husband
completed his residency and internships during medical school, the husband’s
neurosurgery practice afforded them “a fairly luxurious lifestyle” during the later
years of the marriage. Id. at 225. While the wife, who held a master’s degree in
nursing, could increase her earning potential to $45,000.00 per year after
completion of 150 hours of continuing education and could bolster that income by
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investing the $360,000.00 property settlement award “at a reasonable rate of
return[,]” the Supreme Court noted that the wife would receive no equity from the
sale of the marital home and therefore would be required to spend a portion of the
property award on obtaining a new residence. Id. Even if the wife increased her
earning potential to $45,000.00 per year, this was “still less than [husband] earns in
one month.” Id. The wife had been out of the workforce since 1987, primarily to
raise their child. Id. at 224. The wife was around fifty years old at the time of the
divorce, and “suffered from back injuries that could limit her ability to work as a
nurse in a traditional setting.” Id.
Amy’s circumstances are distinguishable from those of the spouse in
Powell. While Amy and the spouse in Powell are about the same age, Amy has not
been absent from the workforce and currently holds full time employment; Amy’s
prospects for self-sufficiency do not appear dismal as did the prospects for the
spouse in Powell. The trial court awarded Amy all marital equity in the residence,
which she has plenty of time to liquidate before the expiration of the maintenance
period, should she so choose. Though Bill does earn considerably more than Amy,
the disparity is not nearly as stark as the disparity between the parties’ incomes in
Powell. Amy suffers from no injury which would prevent her from working. And,
as Amy stated, though she and Bill were able to do what they enjoyed, they did not
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live extravagantly. In sum, Amy has ample resources in her marital award to
enable her to soon support herself without reliance on maintenance from Bill.
Amy takes issue with the trial court’s assessment of her expenses;
Amy argues the trial court arbitrarily reduced several categories of claimed
monthly expenses and the trial court awarded her insufficient maintenance as a
result. Upon review of each of Amy’s claimed category of expenses, we determine
the trial court did not abuse its discretion in making these adjustments. For
instance, Amy argues the trial court arbitrarily reduced her claimed monthly
mortgage expense from $1,650.00 per month to $1,000.00. However, Bill
submitted proof to the trial court that the mortgage on the residence could be
refinanced from fifteen years to thirty years and that monthly payments – including
taxes and insurance – could thereby be reduced to approximately $1,000.00 per
month. Amy also has the option of selling the home.
Nor did the trial court abuse its discretion in making other reductions
to Amy’s expenses. As Bill notes in his brief, Amy did not provide receipts or
other proof to the trial court to justify several categories of expenses. For example,
expenses for which Amy failed to provide evidentiary support include clothing,
dining out, gifts, and groceries. The trial court’s determinations regarding these
expense estimates are not, on their face, arbitrary or capricious and Amy has
directed this Court to no evidence that contradicts that conclusion.
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While the trial court did not accept the amounts Amy claimed for
several categories in her later expense charts, it did grant her the amounts claimed
on her initial chart. For instance, her first two charts listed a monthly phone
expense of $205.00, which was increased to $305.00 on her third chart; the trial
court determined this expense to be $205.00 per month because she did not provide
support for the increase between the second and third chart. The trial court found
Amy had $150.00 per month in vehicle maintenance expenses, though her first,
second, and third charts list $100.00, $200.00, and $300.00, respectively; though
Amy had recently had vehicle trouble, she provided no proof that these expenses
would be ongoing. The trial court did not abuse its discretion by reducing Amy’s
expenses in these categories and others where the trial court granted her amounts
claimed on her initial charts but not the increased amounts claimed on subsequent
charts, especially in light of Amy’s failure to provide proof supporting increases.
The trial court listed $250.00 for Amy’s charitable expenses, which is
a reduction from $576.00. While Amy and Bill were married, the two gave
$500.00 to their church each month, as well as $76.00 per month to Compassion
International, an international charity that partners with their church. However, the
trial court determined that this was an expenditure that the parties made as a couple
or family and that Amy could continue to make proportional monthly donations
using her discretionary income. This calculation does not constitute an abuse of
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discretion. Across each expense category, the trial court properly considered the
factors provided by KRS 403.200(2) and did not abuse its discretion in making the
reductions which Amy contests.
Life Insurance
Amy argues the trial court abused its discretion by not requiring Bill
to keep her as a beneficiary to one or both of his life insurance policies. We
disagree. The trial court determined that the maintenance obligation would not
terminate if Bill dies, and therefore Bill’s estate would be required to pay
maintenance to Amy. And, though Amy would no longer receive her portion of
Bill’s military retirement benefits if Bill were to die, there is nothing preventing
Amy from obtaining a life insurance policy herself to avoid the risk of losing that
source of income. Accordingly, the trial court did not abuse its discretion in this
regard.
Attorney’s Fees
Finally, we conclude the trial court did not abuse its discretion by not
requiring Bill to pay Amy’s attorney’s fees. KRS 403.220 provides that a trial
court may order a party to a divorce proceeding to pay a reasonable amount for
attorney’s fees “after considering the financial resources of both parties[.]” “While
financial disparity is no longer a threshold requirement which must be met in order
for a trial court to award attorney’s fees, we note that the financial disparity is still
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a viable factor for trial courts to consider in following the statute and looking at the
parties’ total financial picture.” Smith v. McGill, 556 S.W.3d 552, 556 (Ky. 2018).
In its order, the trial court declined to award Amy attorney’s fees
based on the “substantial resources” available to her. These resources include a
bank account worth $35,993.16 and two vehicles with no associated debts, in
addition to $1,562.00 in total monthly discretionary income following her
maintenance award. Because Amy has an approximate balance of $8,825.00
remaining for her legal bills, it was not arbitrary or otherwise an abuse of
discretion to require the parties to pay their own attorney’s fees.
CONCLUSION
For the foregoing reasons, we affirm the Trigg Circuit Court’s May
10, 2021 findings of fact, conclusions of law, and order.
ALL CONCUR.
BRIEFS FOR APPELLANT: BRIEF FOR APPELLEE:
Julia T. Crenshaw James E. Bruce, Jr.
Hopkinsville, Kentucky Hopkinsville, Kentucky
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NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2021-CA-0686-MR
JACOB FULKERSON APPELLANT
APPEAL FROM NELSON CIRCUIT COURT
v. HONORABLE CHARLES C. SIMMS, III, JUDGE
ACTION NO. 19-CR-00341
COMMONWEALTH OF KENTUCKY APPELLEE
OPINION
AFFIRMING
** ** ** ** **
BEFORE: CLAYTON, CHIEF JUDGE; COMBS AND DIXON, JUDGES.
DIXON, JUDGE: Jacob Fulkerson appeals the order of the Nelson Circuit Court,
entered June 7, 2021, denying his motion for disposition as a juvenile and
sentencing him as a youthful offender to five years’ imprisonment. After careful
review of the record, briefs, and law, we affirm.
PROCEDURAL HISTORY
In May 2019, Fulkerson was arrested and charged with the murder of
Chris Metzger,1 a capital offense, among other lesser charges. Because Fulkerson
was 15 years old, the proceedings against him began in juvenile court. However,
in August 2019, after a hearing wherein the juvenile court determined Fulkerson
was charged with a capital offense and a firearm had been used in the commission
of that offense, the case was transferred to circuit court for youthful offender
proceedings in accordance with KRS 635.020(2) and (4) (2019).2 On May 4, 2021,
Fulkerson pled guilty to a reduced charge of reckless homicide,3 a Class D felony.
The plea agreement and Fulkerson’s plea colloquy were silent as to the factual
predicate underlying the conviction.
After entry of the plea, Fulkerson motioned the court for disposition
as a juvenile. Fulkerson argued that, because he was convicted of only a Class D
felony and there was no evidence in the record of his use of a firearm, he no longer
qualified for transfer, and thus, he was exempt from sentencing as a youthful
offender pursuant to KRS 640.040(4). Citing a statement in the presentence
investigation report that “a witness . . . saw the defendant shoot the victim in the
1
Kentucky Revised Statutes (KRS) 507.020.
2
Effective June 29, 2021, after Fulkerson was sentenced, KRS 635.020 and KRS 640.010 were
amended modifying the transfer procedure for felonies involving the use of a firearm.
3
KRS 507.050.
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chest[,]” the circuit court denied the motion and sentenced Fulkerson in accordance
with the plea offer to five years to serve. This appeal followed.
ANALYSIS
Generally, when a child commits an offense that would be a crime if
committed by an adult, the act is considered a public offense. See KRS
600.020(51). Public offenses are adjudicated by the juvenile session of the district
court or the family division of the circuit court. KRS 610.010. The dispositional
alternatives for public offenses are significantly more lenient than the sentencing
ranges for criminal convictions. See KRS 635.060 and 532.060. Additionally, an
adjudication for a public offense does not impose the same collateral consequences
as a criminal conviction. KRS 635.040.
As an exception to this general rule, youthful offenders are children
who, due to their age and the nature of their offenses, are prosecuted and sentenced
as if they were adults. Chipman v. Commonwealth, 313 S.W.3d 95, 97 (Ky. 2010);
see also KRS 600.020(72), 635.020(4), and 640.030. Kentucky courts have
recognized that “the legislature set a high bar for children to be deemed youthful
offenders.” Chipman, 313 S.W.3d at 97.
Thus, under the statutory scheme, KRS 635.010-.120 &
640.010-.120, two steps are required before a child will
be sentenced as a youthful offender. First, the child must
qualify for transfer to circuit court and prosecution as a
youthful offender by falling under one of the youthful
offender provisions in KRS 635.020(2)-(7). Then, upon
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conviction in the circuit court, the child may be
sentenced as a youthful offender only if he is not
“exempt” under KRS 640.040(4). This means that the
child’s ultimate conviction must continue to qualify him
as a youthful offender under one of the provisions in
KRS 635.020(2)-(7). See Canter v. Commonwealth, 843
S.W.2d 330, 331-32 (Ky. 1992). As a result, to be
properly sentenced as an adult, a child must qualify as a
youthful offender both for prosecution and for
sentencing. Id.
Id.
Fulkerson does not challenge the district court’s order transferring the
matter; rather, the issue is whether he still qualified as a youthful offender at
sentencing. Since Fulkerson pled guilty to a Class D felony and did not expressly
waive his right to juvenile disposition, KRS 635.020(4) is the only viable basis for
his sentence. KRS 635.020(4) states that “[i]f a child charged with a felony in
which a firearm, whether functional or not, was used in the commission of the
offense had attained the age of fourteen (14) years at the time of the commission of
the alleged offense,” the child shall be transferred for trial as an adult, and if
convicted, subject to the same penalties. When, like here, “the use of a firearm is
not self-evident from the conviction, it must appear somewhere from the record.”
Chipman, 313 S.W.3d at 99.
Because both his plea agreement and the colloquy were silent as to
any facts, Fulkerson argues the court committed reversible error in sentencing him
as a youthful offender. Disagreeing that the record contains no evidence, the
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Commonwealth refers this Court to (1) testimony from the transfer hearing before
the district court and (2) the indictment, which the Commonwealth asserts
explicitly stated that a pistol was used to kill Metzger.
We reject the Commonwealth’s latter claim for multiple reasons.
First, because Fulkerson pled guilty to an amended charge, the indictment is
irrelevant to this matter. Second, the Commonwealth’s claim is not supported by
the record. Count 1 of the indictment merely reads that Fulkerson “committed the
offense of Wanton Murder by wantonly engaging in conduct which created a grave
risk of death to Christopher Metzger and thereby causing [his] death[,]” and makes
no mention of a pistol or, much less, Fulkerson’s use thereof. Third, and most
importantly, the indictment is not evidence. Tot v. United States, 319 U.S. 463,
466-67, 63 S. Ct. 1241, 1244, 87 L. Ed. 1519 (1943); see also RCr4 9.56(1).5
Consequently, we turn to the Commonwealth’s contention that
testimonial evidence6 from Detective (Det.) Smith and Andrew Nalley provided
4
Kentucky Rules of Criminal Procedure.
5
The circuit court’s reliance upon the presentence investigation report, which simply quoted the
underlying juvenile petition, is likewise erroneous. Notwithstanding this fact, our review is not
complete as “it is well-settled that an appellate court may affirm a lower court for any reason
supported by the record.” McCloud v. Commonwealth, 286 S.W.3d 780, 786 n.19 (Ky. 2009)
(citing Kentucky Farm Bureau Mut. Ins. Co. v. Gray, 814 S.W.2d 928, 930 (Ky. App. 1991)).
6
We note that in its appellee brief, the Commonwealth also offered statements made by
Fulkerson and an alleged witness; however, because the former was suppressed and the latter
was never admitted as evidence, neither was properly before the court. Accordingly, we have
wholly disregarded these references.
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during the transfer hearing supports the circuit court’s decision. Det. Smith
testified as to a statement from Kaylea Lowe who was present at the apartment
where the incident occurred. Per Det. Smith, Fulkerson told Lowe he shot
Metzger, explaining that he and Metzger had been playing with the gun, Metzger
grabbed the gun, and it went off. Nalley, who was also present at the scene,
testified that Fulkerson and Metzger were engaged in a disagreement about
marijuana when he saw Metzger hand the gun grip first with the barrel pointed at
his own chest to Fulkerson. Nalley looked away, and two seconds later he heard a
gunshot.
In reply, Fulkerson concedes he was in possession of, or armed with, a
firearm and that the firearm ultimately discharged killing Metzger. Nevertheless,
citing Chipman, he disputes that the evidence establishes his use of the firearm as
opposed to an accidental shooting.
In Chipman, the only evidence7 offered to support youthful offender
sentencing under the use of a firearm provision was Chipman’s agreement during
the plea colloquy that “one of the [adults] accompanying her was carrying a .25
caliber pistol[.]” 313 S.W.3d 95 at 100 (internal quotation marks omitted). In
concluding the evidence was insufficient, the court stressed that the “use of a
7
The Commonwealth also relied upon statements to the circuit court about its theory of the case,
but Chipman was clear that this was not evidence. 313 S.W.3d at 100-01.
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firearm” requires more than mere possession, and more importantly, the child must
personally use or be complicit in the firearm’s use, which Chipman was not. Id. at
100-01.
The facts herein are readily distinguishable from Chipman, and this
case is more akin to Brown v. Commonwealth, No. 2010-CA-002293-MR, 2012
WL 876748 (Ky. App. Mar. 16, 2012).8 Like Fulkerson, after being transferred for
youthful offender proceedings and entering a plea of guilty, Brown argued the
evidence did not demonstrate that he used a firearm within the meaning of KRS
635.020(4) during his commission of first-degree wanton endangerment, and he
motioned for disposition as a juvenile. Brown, 2012 WL 876748 at *1-2. This
Court affirmed Brown’s sentence as a youthful offender holding that evidence
Brown had possessed a loaded handgun which discharged during his struggle with
police constituted “use” of a firearm. Id. at *2.
Here, Fulkerson pled guilty to reckless homicide, an offense
predicated on a state of mind less culpable than the wanton conduct9 at issue in
8
Pursuant to Kentucky Rules of Civil Procedure (CR) 76.28(4)(c), an unpublished opinion
rendered after January 1, 2003, may be cited for consideration where there is no published
authority that would adequately address the issue at bar.
9
Reckless homicide merely requires that Fulkerson failed to perceive a substantial and
unjustifiable risk, which a reasonable person would have observed, that his actions would result
in Metzger’s death. See KRS 501.020(4). In contrast, wanton murder necessitates that
Fulkerson knew his actions created a risk of Metzger’s death and consciously disregarded it. See
Id. at (3).
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Brown; yet, the evidence similarly demonstrates that Fulkerson, a juvenile actively
using alcohol and marijuana, possessed a loaded firearm and was playing with said
firearm when it discharged causing Metzger’s death. Under these facts, we have
no difficulty concluding Fulkerson used a firearm within the meaning of KRS
635.020(4), and thus, the court did not err in sentencing Fulkerson as a youthful
offender.
CONCLUSION
Therefore, and for the foregoing reasons, the order of the Nelson
Circuit Court is AFFIRMED.
ALL CONCUR.
BRIEFS FOR APPELLANT: BRIEF FOR APPELLEE:
Laura A. Karem Daniel Cameron
Frankfort, Kentucky Attorney General of Kentucky
Robert Baldridge
Assistant Attorney General
Frankfort, Kentucky
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NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2021-CA-0868-MR
JEFFREY SMITH APPELLANT
APPEAL FROM CARTER CIRCUIT COURT
v. HONORABLE JENIFFER BARKER NEICE, JUDGE
ACTION NO. 20-CI-00181
LORI SMITH APPELLEE
AND
NO. 2021-CA-0906-MR
LORI SMITH CROSS-APPELLANT
CROSS-APPEAL FROM CARTER CIRCUIT COURT
v. HONORABLE JENIFFER BARKER NEICE, JUDGE
ACTION NO. 20-CI-00181
JEFFREY SMITH CROSS-APPELLEE
OPINION
AFFIRMING
** ** ** ** **
BEFORE: JONES, MAZE, AND MCNEILL, JUDGES.
MCNEILL, JUDGE: Jeffrey Smith (“Jeffrey”) appeals from a Carter Circuit Court
judgment which held various debts incurred during his marriage to appellee/cross-
appellant Lori Smith (“Lori”) to be his nonmarital debt. Lori cross-appeals from
the same judgment, arguing she was entitled to maintenance. Finding no error, we
affirm.
Jeffrey and Lori divorced on November 25, 2020, after being married
for forty years. Following the entry of the decree of dissolution of marriage, the
family court held a hearing to determine division of marital property, allocation of
debts, and maintenance. Lori testified that she is disabled and receives $1,200.00
in social security benefits each month and that her monthly expenses are
$1,765.00.
Jeffrey’s disclosure statement listed his monthly income as $3,200.00
but he testified that he was currently unemployed. He had most recently worked as
a plumber and expected to return to work soon. He also admitted to receiving a
$4,000.00 payroll protection loan for his business, Smith Construction, but claimed
he was not doing work for the company. Jeffrey claimed monthly expenses of
-2-
$4,287.82 but the testimony revealed, and the trial court found, his monthly
expenses to be $2,918.00.
During their marriage, the parties owned and operated several
businesses, including a daycare, a grocery, and a hardware store (“Smith
Hardware”). By the time of the divorce, all three businesses (or their assets) had
been sold and the parties were heavily in debt, almost all of it associated with
Smith Hardware. Lori primarily worked at the daycare until it was sold to pay off
the debts of the grocery. At that point, Lori began working at Smith Hardware
with Jeffrey, although the level of her involvement was disputed.
Lori testified that for the first eight years at Smith Hardware she
worked behind the counter and answered the phones. However, for the last two
years she was not involved at all and had no knowledge of the store’s debts.
Jeffrey claimed that Lori was responsible for managing the store’s finances and
purchasing inventory and was fully aware of the debts it incurred. The total debt
associated with Smith Hardware was approximately $192,000.00, including a
$12,697.00 judgment lien owed to First National Bank for a loan used to purchase
a forklift for the store.
Following the hearing, the trial court entered findings of fact,
conclusions of law, and a judgment, finding that the debts associated with Smith
Hardware were Jeffrey’s nonmarital debt because Jeffrey had not met his burden of
-3-
showing the debts were marital. The court also declined to award maintenance to
Lori, finding that Jeffrey did not have the ability to pay maintenance based upon
his substantial debt. Jeffrey appealed and Lori cross-appealed.
Turning first to Jeffrey’s appeal, he argues the trial court erred in
ruling the judgment lien was nonmarital debt. We review issues pertaining to the
assignment of debts incurred during the marriage under an abuse of discretion
standard. Neidlinger v. Neidlinger, 52 S.W.3d 513, 523 (Ky. 2001), overruled on
other grounds by Smith v. McGill, 556 S.W.3d 552 (Ky. 2018). The test for abuse
of discretion is whether the trial court’s decision was “arbitrary, unreasonable,
unfair, or unsupported by sound legal principles.” Artrip v. Noe, 311 S.W.3d 229,
232 (Ky. 2010).
As an initial matter, we must address the deficiency of Jeffrey’s
appellate brief. His argument section fails to make “reference to the record
showing whether the issue was properly preserved for review and, if so, in what
manner” as required by CR1 76.12(4)(c)(v). We require a statement of
preservation:
so that we, the reviewing Court, can be confident the
issue was properly presented to the trial court and
therefore, is appropriate for our consideration. It also has
a bearing on whether we employ the recognized standard
of review, or in the case of an unpreserved error, whether
1
Kentucky Rules of Civil Procedure.
-4-
palpable error review is being requested and may be
granted.
Oakley v. Oakley, 391 S.W.3d 377, 380 (Ky. App. 2012).
“Our options when an appellate advocate fails to abide by the rules
are: (1) to ignore the deficiency and proceed with the review; (2) to strike the brief
or its offending portions, CR 76.12(8)(a); or (3) to review the issues raised in the
brief for manifest injustice only[.]” Hallis v. Hallis, 328 S.W.3d 694, 696 (Ky.
App. 2010) (citing Elwell v. Stone, 799 S.W.2d 46, 47 (Ky. App. 1990)). Because
the record is small, and we have been able to determine Jeffrey’s argument was
properly preserved, we will ignore the deficiency and proceed with the review.
“Questions of whether . . . debt is marital or nonmarital are left to the
sound discretion of the trial court[.]” Rice v. Rice, 336 S.W.3d 66, 68 (Ky. 2011).
Factors a trial court may consider when determining how to assign a debt include:
(1) Was the debt incurred for the purchase of marital
property? (2) Was the debt necessary to maintain and
support the family? (3) What was the extent and
participation of each party in incurring or benefitting
from the debt? and (4) What are the economic
circumstances of the parties after divorce to allow for
payment of the debt?
Id. at 69 (citing Neidlinger, 52 S.W.3d at 523). “The burden of proving that a debt
is marital is upon the party that incurred it and now claims it is marital.” Id. at 68
(citation omitted).
-5-
The trial court considered these factors and determined Jeffrey had not
met his burden in proving the debts associated with Smith Hardware, including the
judgment lien, were marital. It found that the debts were not incurred for the
purchase of marital property, but business property and that Jeffrey had presented
no evidence that the debts were necessary to maintain or support the family. It
further found that Lori had not participated in incurring the debts, crediting her
testimony to the same. It noted that Jeffrey presented no evidence contradicting
Lori’s claim, or evidence that she personally benefited from the debts. Finally, the
court found that neither party could afford to pay the debts, considering the amount
of debt compared to the parties’ incomes.
Jeffrey argues the trial court abused its discretion in finding the
judgment lien nonmarital. Specifically, he cites the trial court’s finding that the
debts were incurred for the purchase of business property and argues that since the
hardware store was the couple’s primary source of income, any debt incurred for
the business would “presumably . . . ultimately support them and purchase marital
property.” However, it was Jeffrey’s burden to prove that the debts were incurred
to support or maintain the family or purchase marital property.
Here, there is no evidence the debt associated with the judgment lien
was necessary to maintain and support the family. Jeffrey testified that the debt
was for the purchase of a forklift but while conceivably understandable, there was
-6-
no testimony as to whether the forklift was necessary to the operation of the
hardware store, much less how the forklift was necessary to the maintenance and
support of the family. In addition to concluding that there was no evidence
incurring the debt was necessary to maintain or support the family, the trial court
found the debt was incurred to purchase business, not marital property, and that
Jeffrey, not Lori, had incurred the debt. We cannot say the trial court abused its
discretion in determining the judgment lien was Jeffrey’s nonmarital debt.
As to Lori’s cross-appeal, she argues the trial court erred by not
awarding her maintenance. We disagree. “The decision of whether to award
maintenance is within the trial court’s discretion and we may disturb that ruling
only if the trial court abused its discretion or made its ruling based on clearly
erroneous findings of fact.” Smith v. Smith, 235 S.W.3d 1, 17 (Ky. App. 2006)
(citing Powell v. Powell, 107 S.W.3d 222, 224 (Ky. 2003)). Maintenance is
governed by KRS2 403.200, which provides that maintenance may be awarded
only if the court finds that the party seeking maintenance: “(a) Lacks sufficient
property, including marital property apportioned to him, to provide for his
reasonable needs; and (b) Is unable to support himself through appropriate
employment . . . .”
2
Kentucky Revised Statutes.
-7-
Here, the trial court found that Lori did not have sufficient property to
provide for her reasonable needs and that she was unable to support herself through
appropriate employment because of her disability. However, it further found that
Jeffrey lacked the ability to pay maintenance because of his substantial business
debt and therefore declined to award maintenance. Lori argues the trial court
should not have considered Jeffrey’s business debts in determining whether to
award maintenance because Jeffrey testified that he was considering bankruptcy.
While Jeffrey did testify that he had considered bankruptcy and
believed that bankruptcy might be the parties’ best option, he also stated that he
had never been able to bring himself to file for bankruptcy in the past, and Lori has
not alleged Jeffrey has filed for bankruptcy as of the time of the appeal. In
awarding maintenance, “[t]he ability of the spouse from whom maintenance is
sought to meet his needs while meeting those of the spouse seeking maintenance”
is an important factor to be considered by the court. KRS 403.200(2)(f).
Here, the trial court determined that Jeffrey’s expenses exceeded his
income due to his substantial business debt. The court found Jeffrey’s monthly
income to be $3,200.00 and reasonable monthly expenses to be $2,918.00. The
$192,000.00 of debt associated with Smith Hardware was allocated to Jeffrey. The
trial court properly considered Jeffrey’s ability to meet his own needs when
awarding maintenance. In making its decision, the trial court acknowledged other
-8-
KRS 403.200(2) factors, including the substantial length of and decent standard of
living during the marriage, but noted the parties were “deeply in debt and appear to
have lived well beyond their means.” Thus, the trial court placed higher weight on
this factor relative to the others. Considering the amount of the debt and Jeffrey’s
financial resources, we cannot say the trial court abused its discretion in
prioritizing this factor and declining to award maintenance.
Based upon the foregoing, the judgment of the Carter Circuit Court is
affirmed.
ALL CONCUR.
BRIEFS FOR APPELLANT/CROSS- BRIEF FOR APPELLEE/CROSS-
APPELLEE: APPELLANT:
Derrick E. Willis MaLenda S. Haynes
Grayson, Kentucky Grayson, Kentucky
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https://www.courtlistener.com/api/rest/v3/opinions/8482915/ | RENDERED: NOVEMBER 10, 2022; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2021-CA-1357-MR
JOLEAN FUGATE APPELLANT
APPEAL FROM LETCHER CIRCUIT COURT
v. HONORABLE JAMES W. CRAFT, II, JUDGE
ACTION NO. 19-CI-00288
WALMART INC. AND KEVIN RICE APPELLEES
OPINION
AFFIRMING
** ** ** ** **
BEFORE: ACREE, CETRULO, AND GOODWINE, JUDGES.
GOODWINE, JUDGE: Jolean Fugate (“Fugate”) appeals from the Letcher Circuit
Court’s order granting summary judgment in favor of Walmart Inc. (“Walmart”)
and Kevin Rice (“Rice”). Based on our review, finding no error, we affirm.
On October 18, 2019, Fugate filed a personal injury complaint against
Walmart and Rice alleging their negligence created a dangerous condition in the
store. On Thanksgiving Day, November 22, 2018, Fugate was standing in the
checkout line with her daughter and eight-year-old grandson. Fugate’s grandson
said he needed to use the bathroom, so Fugate walked him toward the bathroom
while her daughter remained in the checkout line. The store was crowded, and
although there were multiple paths to the bathroom, Fugate attempted to walk
through a two-and-a-half-foot gap between a square post and a shelving unit. A
red fire extinguisher was attached to the post, which was in her line of sight.
Fugate steered her grandson through the gap. As she attempted to
walk through the gap, Fugate believes she tapped the fire extinguisher with her
shoulder before it fell. The fire extinguisher struck the back of her leg and then
landed on the floor.
In her deposition, Fugate testified the fire extinguisher was secured to
the post, and she did not know how it was secured to the post on the date of her
injury. She did not provide any evidence of whether the mechanism securing the
fire extinguisher to the post was defective, nor did she observe any problem with
the support post to which the extinguisher was attached. Fugate did not disclose
any expert witness or depose any Walmart employees.
Walmart and Rice moved for summary judgment. The circuit court
held several hearings and took the matter under submission. Both parties
submitted memorandum orders as requested.
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On September 21, 2021, the circuit court granted summary judgment
finding Fugate’s claim lacked any genuine issue of material fact. Fugate could not
prove breach because she had no evidence that a dangerous condition existed on
Walmart’s premises, and she could not prove causation because she had no proof
any act or omission of Walmart caused her accident.
Fugate filed two motions to set aside the judgment. Walmart and Rice
responded, and the circuit court held a hearing. The circuit court denied the
motions. This appeal followed.
On appeal, Fugate argues the circuit court erred in granting Walmart
and Rice’s motion for summary judgment because she established genuine issues
of material fact under the (1) traditional negligence standard or (2) burden-shifting
approach in Lanier v. Wal-Mart Stores, Inc., 99 S.W.3d 431 (Ky. 2003).
“Appellate review of a summary judgment involves only legal
questions and a determination of whether a disputed material issue of fact exists.
So, we operate under a de novo standard of review[.]” Adams v. Sietsema, 533
S.W.3d 172, 177 (Ky. 2017) (quoting Shelton v. Ky. Easter Seals Soc’y, Inc., 413
S.W.3d 901, 905 (Ky. 2013)).
First, Fugate argues she established genuine issues of material fact to
survive summary judgment under the traditional negligence standard. “The
elements of a negligence claim are (1) a legally-cognizable duty, (2) a breach of
-3-
that duty, (3) causation linking the breach to an injury, and (4) damages.” Patton
v. Bickford, 529 S.W.3d 717, 729 (Ky. 2016) (citation omitted).
In this case, the circuit court held Fugate failed to prove breach and
causation. Breach requires proof of any “unsafe . . . condition causing her fall.”
Phelps v. Bluegrass Hosp. Management, LLC, 630 S.W.3d 623, 629 (Ky. 2021).
In Phelps, the plaintiff alleged a restaurant breached its duty of care owed to her
when “she slipped on a waxy substance constituting a hazard, but she produced no
evidence to establish the existence of any such hazardous condition.” Id. The
plaintiff “offered no tangible proof of a waxy substance and no expert testimony to
establish [the restaurant’s] breach of any duty. Her case relies entirely on
conjecture.” Id. Our Supreme Court held the plaintiff failed to prove the
restaurant breached any duty owed to her. Id.
Here, Fugate fails to establish Walmart breached any duty owed to
her. Fugate alleges the fire extinguisher was not properly secured to the post.
However, it did not fall until she bumped it with her shoulder. She observed no
defect with the fire extinguisher, how it was secured to the post, or the post itself.
The fire extinguisher was bright red and was not hidden from her view. Fugate
presented no other evidence or testimony to prove any unsafe condition causing
her fall. Her claim is speculative. “[T]he party opposing summary judgment
-4-
cannot rely on their own claims or arguments without offering significant
evidence.” Id. (citation omitted).
Likewise, Fugate failed to prove causation. “Causation consists of
two distinct components: ‘but-for’ causation, also referred to as causation in fact,
and proximate causation.” Patton, 529 S.W.3d at 730. First, “[b]ut-for causation
requires the existence of a direct, distinct, and identifiable nexus between the
defendant’s breach of duty (negligence) and the plaintiff’s damages such that the
event would not have occurred ‘but for’ the defendant’s negligent or wrongful
conduct in breach of a duty.” Id. Second, “[pr]roximate causation captures the
notion that, although conduct in breach of an established duty may be an actual
but-for cause of the plaintiffs[’] damages, it is nevertheless too attenuated from the
damages in time, place, or foreseeability to reasonably impose liability upon the
defendant.” Id. at 731.
In Klinglesmith v. Estate of Pottinger, 445 S.W.3d 565 (Ky. App.
2014), the plaintiff fell over the corner of the defendant’s front porch landing and
injured her shoulder. Id. at 566. The plaintiff alleged the concrete floor of the
porch was uneven and cracked. Id. The circuit court granted summary judgment
because the plaintiff offered no proof of causation. The plaintiff “testified in her
deposition that she is not sure what caused her to fall, and that she did not observe
any defect to the porch, but that there must have been something wrong with it
-5-
since she fell.” Id. at 568. The circuit court found the plaintiff only presented her
own arguments as proof and failed to establish “the condition of the porch was a
substantial factor in causing her injury.” Id.
Here, Fugate failed to present any evidence beyond her own opinion
that Walmart’s alleged negligence caused her injury. Although Fugate argues the
fire extinguisher was not properly secured to the post, she did not depose any
Walmart employee or expert witness to prove Walmart’s acts or omissions were a
substantial factor in causing her injury. The only factor Fugate knows caused the
fire extinguisher to fall was her shoulder bumping into it. Thus, the circuit court
correctly granted summary judgment.
Second, Fugate argues she established genuine issues of material fact
to survive summary judgment under the burden-shifting approach to negligence
claims. In Lanier, 99 S.W.3d at 437, the Supreme Court of Kentucky adopted a
burden-shifting approach for proving negligence in premises liability cases. The
burden-shifting approach “impose[s] a rebuttable presumption that shifts the
burden of proving the absence of negligence, i.e., the exercise of reasonable care,
to the party who invited the injured customer to its business premises.” Id. Under
this approach, the plaintiff retains the initial burden of proving:
(1) he or she had an encounter with a foreign substance
or other dangerous condition on the business premises;
(2) the encounter was a substantial factor in causing the
accident and the customer’s injuries; and (3) by reason of
-6-
the presence of the substance or condition, the business
premises were not in a reasonably safe condition for the
use of business invitees. Such proof creates a rebuttable
presumption sufficient to avoid a summary judgment or
directed verdict, and “shifts the burden of proving the
absence of negligence, i.e., the exercise of reasonable
care, to the party who invited the injured customer to its
business premises.”
Bartley v. Educational Training Systems, Inc., 134 S.W.3d 612, 616 (Ky. 2004).
Fugate failed to meet her initial burden of proof for the burden to shift
to Walmart to prove the absence of negligence. Above, we held Fugate failed to
prove there was a dangerous condition on Walmart’s premises. She also failed to
prove the falling fire extinguisher was caused by anything but her own conduct.
Further, she failed to prove the alleged dangerous condition rendered Walmart’s
premises unsafe for the use of business invitees. As such, the circuit court properly
granted summary judgment.
For the foregoing reasons, we affirm the judgment of the Letcher
Circuit Court.
ALL CONCUR.
BRIEF FOR APPELLANT: BRIEF FOR APPELLEES:
Michael A. Johnson Thomas E. Stevens
Justin W. Noble Louisville, Kentucky
Hazard, Kentucky
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https://www.courtlistener.com/api/rest/v3/opinions/8482924/ | RENDERED: NOVEMBER 10, 2022; 10:00 A.M.
TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2021-CA-1120-MR
COURIER-JOURNAL, INC. APPELLANT
APPEAL FROM JEFFERSON CIRCUIT COURT
v. HONORABLE ANGELA MCCORMICK BISIG, JUDGE
ACTION NO. 20-CI-005707
SHIVELY POLICE DEPARTMENT APPELLEE
OPINION
VACATING AND REMANDING
** ** ** ** **
BEFORE: CLAYTON, CHIEF JUDGE; CALDWELL AND K. THOMPSON,
JUDGES.
THOMPSON, K., JUDGE: The Courier-Journal, Inc. appeals from the partial
denial of its motion for summary judgment and partial grant of summary judgment
to the Shively Police Department (the SPD) by the Jefferson Circuit Court
regarding the failure of the SPD to make disclosures pursuant to the Open Records
Act (the ORA) on the basis that it would cause harm to an ongoing criminal
investigation. As the anticipated harms for denying the disclosure may have lapsed
during the pendency of case, and the other grounds for denying the release of the
records do not permit the wholesale withholding of these records, we vacate and
remand for further proceedings.
FACTUAL AND PROCEDURAL BACKGROUND
Late in the evening on July 27, 2020, the SPD received a report of a
possible domestic violence incident between a man and a woman near a light-
colored Nissan pickup truck parked outside of a closed restaurant in the 4400 block
of Dixie Highway. Two SPD officers, Christopher Nelson and Thomas
Breitmeyer, responded to the report, one in an unmarked vehicle and one in an
SPD patrol car.
When the officers’ vehicles approached the truck, the driver drove
away at a high rate of speed traveling north on Dixie Highway; the officers
pursued. About a mile later, the truck crossed into the southbound lanes but
continued to drive north. The truck ran a red light and struck a car traveling
eastbound on Crums Lane, injuring the occupants and ultimately killing three of
them. The truck then struck a second vehicle, causing minor injuries. The two
occupants of the truck took off on foot, with the seventeen-year-old passenger
(juvenile) quickly apprehended.
-2-
On July 28, 2020, the SPD issued a press release stating that the
officers pursued the truck because they believed the female victim mentioned in
the domestic violence report may have been in the truck and in need of assistance.
On July 29, 2020, an SPD spokesperson confirmed there were no active internal
affairs investigations into the incident as the officers had properly followed police
policies in pursuing the truck.
The man believed to be the driver of the truck, Guy L. Brison, Jr., was
arrested on July 31, 2020.
The Courier-Journal submitted an open records request for the SPD’s
vehicle pursuit policies, which the SPD posted online. This apparently raised
concerns with the Courier-Journal staff about whether the SPD officers had
properly complied with the SPD’s vehicle pursuit policies and prompted further
open record requests that are at issue in this appeal.
On August 10, 2020, the Courier-Journal submitted an open records
request relating to the incident seeking the following: (1) Computer Aided
Dispatch (CAD) reports for services calls; (2) 911 calls; (3) audio communication
between dispatch, the responding officers, and any other officers or supervisory
personnel; (4) dashcam and bodycam footage; and (5) incident or accident reports.1
1
These were requested via five separate emails sent on the same day, but the parties have treated
this as one multipart request.
-3-
Thirty-six minutes later, the SPD denied the request for these records, explaining
its reasoning in full as follows: “As there is an active criminal case regarding this
incident, all of the above request are denied under the following exclusion rule:
[Kentucky Revised Statutes (KRS)] 61.878 subsection (1)(h)[.]”2
In late August 2020, Brison was indicted on multiple counts,
including three counts of murder and nine counts of wanton endangerment.3
On October 5, 2020, the Courier-Journal chose to file a complaint
with the circuit court seeking an injunction ordering the immediate disclosure of
the requested records, and an award of reasonable attorney fees, costs, and
statutory penalties. The Courier-Journal argued the SPD’s response failed to show
a concrete risk of harm to the SPD, failed to provide an adequate basis for
withholding the records, and failed to disclose non-exempt responsive records.
The SPD answered on October 31, 2020, raising three grounds to
justify withholding the records from disclosure, its original ground and two new
grounds: (1) pursuant to KRS 61.878(1)(h), it stated that “the investigation is still
2
We have omitted the spaces given to separate paragraphs in this quotation and the quotation to
the full text of KRS 61.878(1)(h).
3
This is according to the unofficial CourtNet record in Commonwealth v. Brison, No. 20-CR-
001392, which states that the indictment was filed in the Jefferson Circuit Court on August 25,
2020, and Brison was arraigned on September 18, 2020. The parties have not discussed when
Brison was indicted, but the SPD has confirmed he is in custody and is currently awaiting trial.
We do not know if any charges were sought against juvenile or if there was even a basis for
seeking any.
-4-
ongoing, there has been no trial, no conviction and no sentence, the requested
records have been presented to the Commonwealth’s Attorney, and the exemption
for production of SPD records . . . should remain intact until [the] enforcement
action is completed or a decision is made to take no action”; (2) pursuant to KRS
61.878(1)(a), it stated “the release of any dashcam or bodycam footage depicting
the scene of a fatal accident would certainly and clearly constitute an unwarranted
invasion of personal privacy particularly to the family members of the deceased
victims”; and (3) pursuant to KRS 61.878(1)(l) which exempts records from
disclosure if there is another statutory basis to withhold them, here KRS 17.150(2),
which the SPD claimed “clearly prevent[s] any early release of the requested
records prior to the completion of prosecution of the case” noting “a showing of
concrete harm . . . to the agency in the prospective action . . . is not necessary or
required under [this] exemption[.]”
All three grounds were supported by an affidavit from Shively Chief
of Police, Colonel Kevin Higdon (Chief Higdon), which stated in relevant part:
4. That the SPD now submits that the requested records
were collected and compiled by the SPD as necessary
evidence required for the prosecution of this case, and
which records have been presented to the
Commonwealth’s Attorney [thus qualifying for
exemption under KRS 61.878(1)(h) due to an “active
criminal case regarding the incident”]. The requested
records which are being withheld are a part of the
evidence that will be used for the Commonwealth[ʼ]s
Attorney to make a decision whether or not further
-5-
prosecutorial action will be taken . . . following a
criminal investigation.
5. That the release of these records poses a concrete risk
of harm to the SPD and Commonwealth’s Attorney in the
prospective action and may hinder the agency’s
investigation.
6. That any 911 calls place[d] to SPD relating to the
incident would contain information from a caller who
would likely be interviewed by SPD in its investigation,
and an early release of a 911 call could compromise a
witness and recollection of what transpired during the
incident and would have a negative impact on the
veracity of witness statements relating to this incident
and will ultimately taint the grand jury pool if an
indictment is sought by the Commonwealth’s Attorney.
7. That, likewise, an early release of the audio
recordings, CAD reports, dashcam bodycam footage and
incident accident reports would harm the agency by
compromising witness recollections and statements and
tainting the grand jury in this prospective law
enforcement action and even more so if a witness or
potential grand juror is exposed to a release of only a
portion of the evidence withheld thus tainting and
compromising their impartiality in this prospective law
enforcement action.
8. That, in addition to KRS 61.878(1)(h), a release of the
dashcam bodycam footage reflecting footage of a fatal
accident would fall within the privacy exemption stated
in KRS 61.878(1)(a) where public disclosure of
information of a personal nature would constitute a
clearly unwarranted invasion of privacy.
9. That the requested records should be exempted
pursuant to KRS 61.878(1)(l) as public records or
information the disclosure of which is prohibited or
-6-
restricted or otherwise made confidential by enactment of
the General Assembly . . . .
10. That, together with KRS 61.878(1)(l), KRS
17.150(2) prevents release of the requested records:
Intelligence and investigative reports maintained by
criminal justice agencies are subject to public inspection
if prosecution is completed or a determination not to
prosecute has been made.
11. That the requested records should be exempted
pursuant to KRS 61.878(1)(h) posing a concrete risk of
harm to the agency upon early release, KRS 61.878(1)(a)
as a matter of personal privacy concerning the dashcam
bodycam footage and as a whole pursuant to KRS
61.878(1)(l) and 17.150(2) until prosecution is completed
or a determination not to prosecute has been made.
In June 2021, the parties filed cross-motions for summary judgment.
On September 3, 2021, the circuit court granted the SPD’s motion for summary
judgment regarding the August 10, 2020, open records requests (thereby also
denying the Courier-Journal’s motion for summary judgment in its favor on this
issue).4
The circuit court found that the SPD met its burden of demonstrating
that the records requested by the Courier-Journal fall within the law enforcement
4
During a hearing regarding these cross-motions, the Courier-Journal noted the SPD denied the
Courier-Journal’s later July 20, 2021, open records request. It does not appear that the denial of
this later open records request was properly before the circuit court, but nonetheless it issued a
ruling in the Courier-Journal’s favor regarding this matter but declined to award sanctions for a
willful violation. This portion of the ruling is why the motions for summary judgment were each
granted in part and denied in part. We do not discuss this portion of the ruling further as the SPD
complied with the circuit court’s order and the SPD did not file a cross-appeal regarding the
portion of its motion for summary judgment which was denied.
-7-
agency records exemption set forth in KRS 61.878(1)(h) based on Chief Higdon’s
affidavit which articulated factual bases for why release of the records would pose
a concrete risk of harm to law enforcement actions and satisfied its burden.
Because it found this exemption applied, the circuit court declined to consider the
other two exemptions the SPD relied upon.
On appeal the Courier-Journal argues that the SPD failed to meet its
burden of proving that the records it withheld were exempt from disclosure under
the ORA under the three grounds raised, seeks a determination that SPD
committed a willful violation of the ORA by entirely withholding these records,
and requests that we remand for the circuit court to determine the appropriate
amount of attorney fees, costs, and statutory penalties to award.
STANDARD OF REVIEW AND GENERAL
REQUIREMENTS OF THE OPEN RECORDS ACT
When an agency denies an ORA request, the requester may properly
file an original action pursuant to KRS 61.882 with the circuit court seeking relief.
City of Fort Thomas v. Cincinnati Enquirer, 406 S.W.3d 842, 848 (Ky. 2013). The
circuit court’s review is de novo. Louisville/Jefferson Cnty. Metro Government v.
Courier-Journal, Inc., 605 S.W.3d 72, 76 (Ky. App. 2019). While the Attorney
General’s opinions are highly persuasive, our review of questions of law and
statutory interpretation is de novo. Id. at 78.
-8-
KRS 61.878(1) provides that specific types of records are excluded
from disclosure under the ORA. However, KRS 61.878(4) then provides: “If any
public record contains material which is not excepted under this section, the public
agency shall separate the excepted and make the nonexcepted material available
for examination.” (Emphasis added.)
Where the custodian of requested records believes
that those records are not subject to disclosure, the
provisions of KRS 61.880(1) direct as follows:
An agency response denying, in whole or in part,
inspection of any record shall include a statement
of the specific exception authorizing the
withholding of the record and a brief explanation
of how the exception applies to the record
withheld. (Emphasis added.)
The language of the statute directing agency action
is exact. It requires the custodian of records to provide
particular and detailed information in response to a
request for documents.
Edmondson v. Alig, 926 S.W.2d 856, 858 (Ky. App. 1996).
“[T]he [Open Records] Act requires that all exceptions to
production . . . must be strictly construed[, with] the burden of establishing that an
exception applies rest[ing] upon the agency resisting disclosure[.]” Courier-
Journal, 605 S.W.3d at 76. See KRS 61.871; Hardin Cnty. Sch. v. Foster, 40
S.W.3d 865, 868 (Ky. 2001). Therefore, “[f]or each document [the record
custodian] claims can be properly withheld from production pursuant to the ORA,
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the [record custodian] ha[s] the burden to prove that the document fits within an
exception by identifying the specific ORA exception and explaining how it
applies.” University of Kentucky v. Kernel Press, Inc., 620 S.W.3d 43, 55 (Ky.
2021). “The agency’s explanation must be detailed enough to permit the court to
assess its claim and the opposing party to challenge it.” Kentucky New Era, Inc. v.
City of Hopkinsville, 415 S.W.3d 76, 81 (Ky. 2013).
“Competing interests are at the core of every ORA case and judicial
resolution – the eventual balancing of those interests within the parameters laid out
by the legislature – is only achieved when the public agency complies fully with its
statutory obligations and [Kentucky Supreme Court] precedent.” Kernel Press,
Inc., 620 S.W.3d at 53.
ISSUES ON APPEAL
I. Does KRS 61.878(1)(h) Justify Withholding the SPD Records on the
Basis that their Release Would Harm the Prospective Law
Enforcement Action?
The Courier-Journal argues that the SPD could not adopt a blanket
exemption for its records pursuant to KRS 61.878(1)(h) and instead had to show a
concrete risk of harm to the ongoing investigation/prosecution but failed to do this
when it summarily denied the Courier-Journal’s open records request. While the
Courier-Journal acknowledges that after it filed its complaint the SPD
-10-
supplemented its denial based on KRS 61.878(1)(h) with an affidavit from Chief
Higdon, the Courier-Journal argues:
Chief Higdon’s affidavit contains no facts. It is replete
with rote recitals of statutory language and vague
assertions of potential harm that could be caused by
release of the requested records that are so generic they
could be applied to any law enforcement investigation. It
adds nothing of substance to SPD’s initial denial.
The Courier-Journal argues that Chief Higdon speculates about potential harm and
“does not even assert there are witnesses left to be interviewed whose recollections
could be ‘compromised’” and the SPD “cannot credibly contend now – more than
a year and a half after the chase – that there are witnesses it hasn’t gotten around to
interviewing.” The Courier-Journal argues that the SPD’s denial is an improper
“blanket exemption for police files” which the Kentucky Supreme Court has
repeatedly condemned and is at odds with the ORA’s demand that its exceptions be
“strictly construed.” The Courier-Journal requests that the SPD be compelled “to
produce the records immediately.”
KRS 61.878(1)(h) excludes certain records of law enforcement
agencies from disclosure as follows:
Records of law enforcement agencies or agencies
involved in administrative adjudication that were
compiled in the process of detecting and investigating
statutory or regulatory violations if the disclosure of the
information would harm the agency by revealing the
identity of informants not otherwise known or by
premature release of information to be used in a
-11-
prospective law enforcement action or administrative
adjudication. Unless exempted by other provisions of
KRS 61.870 to 61.884, public records exempted under
this provision shall be open after enforcement action is
completed or a decision is made to take no action;
however, records or information compiled and
maintained by county attorneys or Commonwealth’s
attorneys pertaining to criminal investigations or criminal
litigation shall be exempted from the provisions of KRS
61.870 to 61.884 and shall remain exempted after
enforcement action, including litigation, is completed or
a decision is made to take no action. The exemptions
provided by this subsection shall not be used by the
custodian of the records to delay or impede the exercise
of rights granted by KRS 61.870 to 61.884[.]
(Emphasis added.)
When an agency declines to make a disclosure under the law
enforcement “prospective action” prong under KRS 61.878(1)(h): “the agency
must show (1) that the records to be withheld were compiled for law enforcement
purposes; (2) that a law enforcement action is prospective; and (3) that premature
release of the records would harm the agency in some articulable way.” City of
Fort Thomas, 406 S.W.3d at 850 (footnote omitted).
We are mindful that an asserted presumption of harm by law
enforcement “– a presumption in effect of non-disclosure – would turn on its head
the [ORA’s] basic presumption of openness.” Id.
It would also, by creating a blanket exemption for police
files regardless of their contents, run totally counter to
the General Assembly’s directive that the exemptions
from disclosure be “strictly construed.” KRS 61.871.
-12-
Blanket exemptions are also contrary to KRS 61.878(4),
which provides that “[i]f any public record contains
material which is not excepted under this section [KRS
61.878], the public agency shall separate the excepted
and make the unexcepted material available for
examination.”
Id. See Kernel Press, Inc., 620 S.W.3d at 55-56 (unequivocally stating that an
“initial, single-paragraph assertion of a blanket exemption to disclosure of the
entire [investigative file] was wholly insufficient” and “[t]he boilerplate paragraph
– this but if not this then that – used for every withheld document was wholly
unacceptable.”).
Therefore, in City of Fort Thomas, the Court held:
the law enforcement exemption is appropriately invoked
only when the agency can articulate a factual basis for
applying it, only, that is, when, because of the record’s
content, its release poses a concrete risk of harm to the
agency in the prospective action. A concrete risk, by
definition, must be something more than a hypothetical
or speculative concern.
406 S.W.3d at 851. However, the Court further explained:
Our holding does not mean that the agency is
obliged in all cases to justify non-disclosure on a line-by-
line or document-by-document basis. At least with
respect to voluminous ORA requests, such as the
newspaper’s request in this case, it is enough if the
agency identifies the particular kinds of records it holds
and explains how the release of each assertedly exempt
category would harm the agency in a prospective
enforcement action. Cf. Lesher, 945 N.Y.S.2d 214, 968
N.E.2d at 457 (“The agency must identify the generic
kinds of documents for which the exemption is claimed,
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and the generic risks posed by disclosure of these
categories of documents. Put slightly differently, the
agency must still fulfill its burden under Public Officers
Law § 89(4)(b) to articulate a factual basis for the
exemption.”). Our holding does mean, of course, that
even if the agency adopts this generic approach it must
itself identify and review its responsive records, release
any that are not exempt, and assign the remainder to
meaningful categories. A category is meaningful if it
“allows the court to trace a rational link between the
nature of the document and the alleged likely [harm to
the agency].” Bevis v. Department of State, 801 F.2d
1386, 1389 (D.C. Cir. 1986).
Id. (emphasis added) (footnote omitted). “[T]he court must hold the agency to its
burden of proof by insisting that the agency make a sufficient factual showing – by
affidavit; by oral testimony; or, if necessary to preserve the exemption, by in
camera production – to justify the exemption.” Id. at 852.
We note that the original denial of the records by the SPD was a
blanket denial that categorically declared these records off limits due to the
pending criminal investigation, citing KRS 61.878(1)(h) and not providing any
further explanation. We have no difficulty in declaring that this original denial
was improper. As was the case in Edmondson, 926 S.W.2d at 858, the “limited
and perfunctory response” by the record custodian through a one-line rejection of
an open records request with a reference to a statutory exemption did not “even
remotely compl[y] with the requirements of the Act – much less . . . amount[] to
substantial compliance.”
-14-
However, after the Courier-Journal filed its action with the circuit
court, the SPD’s answer and accompanying affidavit by Chief Higdon provided a
more nuanced explanation that considered the records individually (although not in
great detail) when applying this exception to disclosure in paragraphs six and
seven of Chief Higdon’s affidavit.
Pursuant to the three-part test provided in City of Fort Thomas,
requirements one and two were clearly satisfied by this later justification in that the
SPD established the requested records were compiled for law enforcement
purposes and being used for a prospective law enforcement action as the
prosecution of Brison is ongoing. 406 S.W.3d at 850. However, the third
requirement, “that premature release of the records would harm the agency in some
articulable way[,]” requires additional analysis. Id.
We are troubled by the SPD making such general allegations of
potential harm which would seem to apply in any criminal investigation in which
witnesses are involved. If the General Assembly wished to categorically ban
disclosure of all investigatory evidence as potentially harmful to a witness or to a
witness’s recollection, it could have done so. Additionally, there may be ways to
limit rather than wholly exclude the release of the records sought so as to address
any reasonable concerns. For example, to address a fear that witnesses could be
compromised, measures may be taken to protect their anonymity, such as
-15-
eliminating personal identifiers, blurring portions of video that show their faces,
and possibly altering their voices. See generally New York Lawyers for Public
Interest v. New York City Police Department, 64 Misc.3d 671, 682-684, 103
N.Y.S.3d 275, 283-85 (Sup. Ct. 2019) (requiring the release of police body-worn
camera footage of a police shooting of an emotionally disturbed individual with
redactions to blur the faces of the witnesses but declining to redact audio given the
circumstances).
To address the fear that a witness’s recollection may be tainted,
recorded statements of such witnesses could be taken early in the investigatory
process. Witnesses who could be called to testify in any criminal prosecution
could be asked to avoid press coverage surrounding the release of the records
sought.
The onus in avoiding the feared harm should not prevent the release of
records when the SPD itself can eliminate much of that harm through its own
proactive actions and by judicious release of as much of the requested records as
possible. The SPD should be acting in furtherance of the purposes of the ORA by
striving to release as much information as possible, rather than stymie its purposes
by trying to avoid releasing any information.
The SPD, through Chief Higdon’s affidavit, generally stated that it
was problematic to allow the release of the 911 calls, audio recordings, CAD
-16-
reports, dashcam bodycam footage, and incident accident reports because of two
general concerns about an early release of this information: (1) it could
compromise witness recollections and have a negative impact on the veracity of
witness statements relating to this incident; and (2) it could taint the grand jury
pool if an indictment is sought. The SPD stated that the release of only a portion
of the information would have even more of a negative impact to a potential
witness or grand juror “tainting and compromising their impartiality in this
prospective law enforcement action.”
We are troubled that other than giving one paragraph to 911 calls and
one paragraph to every other kind of record sought, paragraphs six and seven of the
affidavit generally complain of the same kinds of potential general harms pursuant
to KRS 61.878(1)(h) for each type of record. There was no examination by Chief
Higdon of how the risks might vary depending upon the type of record sought or
whether some redacted records could be released.
This was not a case where the requester seeks a voluminous
investigatory file in its entirety, but a targeted, specific request for five types of
records regarding one event over a short period of time; thus, it would not be
onerous for each type of record to be examined individually. CAD reports and
incident accident reports do not necessarily carry the same risk of tainting witness
recollections as dashcam and bodycam footage might. We further note that Chief
-17-
Higdon did not even address any risk to be derived from the “audio communication
between dispatch, the responding officers, and any other officers or supervisory
personnel” if such records do in fact exist, a matter not clarified his affidavit.5
But even more troublesome than these generalized claimed harms
supposedly applying equally to all of the records sought is that they all relate to the
danger posed by release of the information at the time the Courier-Journal
originally sought the information and constitute only reasons for a temporary
exemption. These reasons did not necessarily still exist at the time of the civil
court action, at the time the motion for summary judgment was filed by the SPD or
granted, or during the pendency of this appeal. While the criminal investigation
may still be ongoing, the particular dangers from disclosure to that investigation
which the SPD identified through Chief Higdon’s affidavit may no longer be
present and might not have been present even at the time he signed his affidavit.
As we have mentioned earlier, Brison was indicted in August 2020,
long before the Courier-Journal filed the circuit court action. The Courier-Journal
opines that any potential concern linked to compromising witnesses’ testimony or
their veracity should be alleviated by now if they have been interviewed, as should
have occurred in the interim. However, the Courier-Journal, while hinting that the
5
We believe based on the SPD’s representations during oral argument that such records do exist,
which makes the failure to address them glaringly problematic.
-18-
SPD should now release records in light of likely developments in the meantime,
has not articulated a basis for an ongoing duty to disclose information as conditions
change. When asked about this during oral argument, the Courier-Journal
suggested that the fact that the burden to justify the withholding of records remains
on the SPD during the course of the litigation pursuant to KRS 61.882(3) requires
disclosures be made should conditions change over the course of the litigation.
The SPD, in contrast, insists there is no continuing duty to disclose should
conditions change after the initial denial.
We conclude there is an ongoing duty to disclose records, at least
while ORA litigation regarding these records is pending and the excuse given by
the agency is, by its nature, temporary. We believe it to be both appropriate and
necessary for the circuit court (either at the behest of the Courier-Journal or sua
sponte) to request clarification of ongoing conditions and to review the evidence in
camera to determine whether the SPD’s justifications continue to require the
withholding of these records.
This interpretation is bolstered by federal courts’ interpretation of a
similar provision exempting disclosure under the Freedom of Information Act
(FOIA) known as Exemption 7(A).6 “To fit within Exemption 7(A), the
6
5 United States Code (U.S.C.) § 552(b)(7) exempts from disclosure “records or information
compiled for law enforcement purposes, but only to the extent that the production of such law
-19-
government must show that (1) a law enforcement proceeding is pending or
prospective and (2) release of the information could reasonably be expected to
cause some articulable harm.” Manna v. U.S. Dep’t of Justice, 51 F.3d 1158, 1164
(3d Cir. 1995). See Citizens for Responsibility and Ethics in Washington v. U.S.
Dep’t of Justice, 746 F.3d 1082, 1096 (D.C. Cir. 2014) (CREW) (providing the
same basic criteria worded differently).
“Exemption 7(A) is temporal in nature.” Id. at 1097. See N.L.R.B. v.
Robbins Tire & Rubber Co., 437 U.S. 214, 230, 98 S.Ct. 2311, 2321, 57 L.Ed.2d
159 (1978) (explaining that Congress’s “amendment of Exemption 7 was to make
clear that the Exemption did not endlessly protect material simply because it was in
an investigatory file.”). When applying Exemption 7(A), the withholding of
information must still be valid at the time of the Court’s decision. Therefore, to
justify the withholding of information because of a prospective law enforcement
proceeding: “The proceeding must remain pending at the time of our decision, not
only at the time of the initial FOIA request. Thus, reliance on Exemption 7(A)
may become outdated when the proceeding at issue comes to a close.” CREW, 746
F.3d at 1097 (citation omitted).
enforcement records or information” meets one of six grounds, including (A) “could reasonably
be expected to interfere with enforcement proceedings[.]”
-20-
Similarly, we believe if the risk of harm associated with the disclosure
of information while the investigation is pending is temporal in nature, disclosure
must be made as soon as that reason is no longer valid. The conditions which the
SPD claim justify its withholding of these records appear to us to be time-limited
to a period before the completion of Brison’s prosecution, despite its assertion to
the contrary.7 Certainly, if the SPD is allowed to provide a more specific
explanation of the reasons for its denial after-the-fact in response to the civil
litigation, such response should not be allowed to rely on past conditions that have
already lapsed.
It appears that by the time Chief Higdon’s affidavit was filed, Brison
had already been indicted. Therefore, as the Courier-Journal noted during oral
argument, any concern regarding the impact that public disclosure of records might
have on the grand jury process was no longer valid and no longer justified a refusal
to disclose the records.
7
During oral argument, the SPD insisted that it had properly withheld the records the Courier-
Journal requested in their entirety because the investigation has not concluded. The SPD
indicated that Brison’s current trial date is scheduled for January 17, 2023, and it would not be
appropriate to disclose anything until his prosecution is concluded. When asked whether other
records could be disclosed, such as radio traffic, the SPD insisted that no portion of what the
Courier-Journal requested is “vanilla” and able to be disclosed sooner, with disclosure of radio
traffic being inappropriate because it listed personal information, including information related to
a juvenile. However, concerns regarding personal information other than that the dashcam and
bodycam footage showed a fatal accident were not raised before the circuit court.
-21-
Additionally, by now the harms feared regarding potential impacts on
witness statements may have fully dissipated. We anticipate that the 911 caller has
been interviewed and other witnesses’ statements have been gathered, thus
negating concerns about the public disclosure of records possibly compromising
their recollections. Such statements should have been gathered by this time in the
normal course of events.
However, during oral argument the SPD refused to clarify whether
witnesses have been interviewed as that is a “matter of confidentiality.” The SPD
stated it has witnesses it does not want to disclose. The Courier-Journal pointed
out in its rebuttal that the SPD never asserted that any of the potential witnesses
were confidential informants and noted that Brison would have received reciprocal
discovery identifying potential witnesses by now, thus negating harm.
We note the investigatory process cannot be delayed for the purpose
of thwarting the SPD’s duty to disclose records pursuant to the ORA. See Fioretti
v. Maryland State Bd. of Dental Examiners, 716 A.2d 258, 271 (Md. 1998)
(interpreting its similar Public Information Act as not permitting public agencies to
avoid disclosure by failing to conclude investigations). However, without any
discovery in the record which would clarify the stage of the investigation, it is
impossible for us to know for sure.
-22-
If concrete harms are no longer present, the agency must make the
disclosures. Citizens seeking access to records should not have to file repeated
requests for the same information, hoping to catch an agency at the moment the
agency decides the reason for its previous denial has lapsed. We conclude there is
an ongoing duty to disclose during the pendency of an ORA action once conditions
change negating the reasons for a prior denial. Such a pending action by its very
existence alerts the agency that the party seeking that information continues to
demand its release. This of course would not apply where the denial is not
temporal in nature.
Given the SPD’s refusal to produce any portion of the requested
records in redacted form, and failure to explain with specificity how the release of
these particular records would harm the pending investigation now, it is virtually
impossible for any court to review whether the records needed to be withheld.
Essentially, the SPD is asking the Courier-Journal, the circuit court, and our Court
to assume its judgment on these issues is correct.
We believe that an in camera review could have appropriately
clarified whether the actual records which existed were likely to cause the kinds of
harms named. However, on the record before us, we cannot definitively say that
the SPD violated the ORA. We believe it is appropriate to vacate the summary
judgment on this issue and remand for further proceedings in light of our ruling
-23-
that SPD must justify that withholding the records is still necessary based on the
specific concerns it raised earlier. This is not an opportunity for SPD to raise new
concerns.
We strongly suggest that on remand, the circuit court conduct an in
camera review of the complete records as would be the best way to sort out
whether some of the records with redactions must now be disclosed. Alternatively,
if after further proceedings the circuit court does not want to engage in an in
camera review, it could potentially determine that the SPD has not met its burden
in establishing that the records must be withheld and order them released in toto.
II. Does KRS 61.878(1)(a) Justify the Withholding of the SPD
Dashcam/Bodycam Footage of the Fatal Accident on the Basis that
their Release would Violate the Privacy Rights of the Deceased
Individuals or their Families?
We next consider whether the SPD properly withheld the entirety of
the dashcam and bodycam footage pursuant to KRS 61.878(1)(a) privacy
exemption because it contains footage of a fatal accident. The Courier-Journal
argues that the SPD’s invocation of the personal privacy exemption was deficient
because it failed to engage in a comparative weighing of the relevant interests
within the context of the accident, and instead engaged in wholesale withholding of
the footage rather than redacting portions which depict a deceased individual. It
argues that the public has a “compelling interest in learning if SPD officers
followed department policy when they chose to pursue a fleeing vehicle in a chase
-24-
that ended in the deaths of three innocent Louisvillians, including a 9-month-old
infant.” The Courier-Journal notes that while KRS 61.168(4)(g) generally gives an
agency discretion “not to disclose body-worn camera records containing video or
audio footage that . . . [i]ncludes the body of a deceased individual[,]” that
discretion does not exist under KRS 61.168(5)(b) “[i]f the recording contains video
or audio footage that . . . [d]epicts an incident which leads to the detention or arrest
of an individual[.]”
To determine whether KRS 61.878(1)(a), applies to prevent
disclosure, we must apply a two-part test:
First, we must determine whether the information sought
is of a personal nature. Second, we must examine
whether the public disclosure of this information would
constitute a “clearly unwarranted invasion of personal
privacy.” We do this by weighing the privacy interests of
the persons involved against the public’s interest in
disclosure.
Cape Publications, Inc. v. University of Louisville Foundation, Inc., 260 S.W.3d
818, 821 (Ky. 2008).
Turning to the first prong of our inquiry, we must
take into account “the nature of the information which is
the subject of the requested disclosure; whether it is the
type of information about which the public would have
little or no legitimate interest but which would likely
cause serious personal embarrassment or humiliation.”
Palmer v. Driggers, 60 S.W.3d 591, 598 (Ky. App.
2001). We consider not only the privacy interests of the
parties to the Open Records request, but also of persons
who would be substantially affected by the disclosure.
-25-
Beckham v. Board of Educ. of Jefferson County, 873
S.W.2d 575, 578 (Ky. 1994). We look for an indication
that the information “touches upon the personal features
of private lives.” Zink v. Dep’t of Workers’ Claims, 902
S.W.2d 825, 828 (Ky. App. 1994).
Id. at 821-22.
What is immediately evident is that most of the content of these
recordings is not personal in nature, nor has the SPD claimed that they are. While
we have no difficulty in concluding that depictions of dead bodies are of a personal
nature, this cannot justify withholding the portions of the videos that are not
personal in nature. As explained in Kernel Press, Inc., 620 S.W.3d at 60, when
privacy concerns can be resolved through careful redaction, they should be. See,
e.g., Kentucky New Era, Inc., 415 S.W.3d at 85 (allowing for release of police
arrest and incident reports with appropriate redactions); Department of Revenue v.
Eifler, 436 S.W.3d 530, 533 (Ky. App. 2013) (requiring production of tax returns
after redaction of private information); Cape Publications v. City of Louisville, 147
S.W.3d 731, 735-36 (Ky. App. 2003) (concluding it was proper to release police
reports with appropriate redactions). Therefore, if the depictions of dead bodies
qualify for non-disclosure under the ORA, this problem can be solved through
blurring portions of this footage.
As to the fatal accident and depiction of dead bodies, the second
prong requires that we consider whether disclosure of this information would
-26-
constitute a clearly unwarranted invasion of personal privacy after we have
weighed the privacy interest in nondisclosure against the general rule against the
general rule of inspection and the underlying policy of openness for the public
good. Cape Publications, Inc., 260 S.W.3d at 822. As explained in Kentucky New
Era, Inc., 415 S.W.3d at 86, the Kentucky Supreme Court has held that “where the
disclosure of certain information sheds significant light on an agency’s conduct,
. . . the citizen’s privacy interest must yield.”
The Courier-Journal’s arguments about why this video should be
disclosed provide reasons as to why the depiction of the fatal accident should be
released as it will shed light on whether the SPD followed its departmental policy
in engaging in this particular chase. In oral argument, the Courier-Journal
emphasized that the chase and accident took place on public streets where
expectations of privacy are generally lower. Therefore, it believes the interest in
public disclosure should trump privacy concerns.
In contrast, the Courier-Journal’s arguments do not provide any basis
for believing that the actual depiction of the dead bodies will likewise elucidate the
public interest concern at issue. We do recognize, however, that the depiction of
the dead bodies may perhaps shed light on the consequences of the officers’
actions or on their conduct as first responders to the scene of a devastating
accident.
-27-
We have no trouble concluding that the dashcam and bodycam
footage of the pursuit and accident cannot be withheld in full because they contain
footage of the fatal accident. The privacy exemption is not nearly so broad under
the circumstances as to prohibit all disclosure of the footage made of the chase and
collisions.
As to the depictions of dead bodies, showing those do not necessarily
violate a right to privacy. In Sellers v. Henry, 329 S.W.2d 214, 215 (Ky. 1959),
the parents of a deceased child sued the photographer, a police officer who took the
photo, for publishing it; the photo depicted the mangled body of their deceased
child who was killed in an automobile accident. The Court explained that “the
question of whether the publication in the instant case was in the public interest,
such as to excuse an invasion of privacy, must depend upon the nature and purpose
of the publication[,]” with “the question of whether the publication of such a
photograph . . . is in the public interest is one of law[.]” Id. at 216. The Court
noted that while this was a question of law, it naturally depended upon the specific
facts: the context of how the photograph of the deceased child was published,
including to whom, and whether the identity of the deceased child was revealed.
Id.
We consider persuasive a long line of Attorney General opinions
which conclude that as to open records decisions, a deceased person does not have
-28-
any personal property right in the depictions of that person’s body as such rights
terminate upon the person’s death and any limited privacy interest that the
deceased person’s relatives may have in such a depiction will generally give way
to the public interest in favor of disclosure and, in any event, cannot be asserted by
the holding agency in the absence of those relatives coming forward to oppose the
release of such depictions. See In re: Kathy Harris/Kentucky State Police, Ky.
OAG 17-009, 2017 WL 366170 (Jan. 18, 2017) (unpublished); In re: Racquel
Hatfield/Justice and Public Safety Cabinet, Ky. OAG 14-090, 2014 WL 1800792
(May 1, 2014) (unpublished). Compare with National Archives and Records
Admin. v. Favish, 541 U.S. 157, 170, 124 S.Ct. 1570, 1579, 158 L.Ed.2d 319
(2004) (thoroughly considering whether photos depicting the body of Vince Foster
Jr. after his suicide had to be released under the FOIA where his relatives
vehemently opposed their release as it would subject them to harassment and
trauma, and ultimately “hold[ing] that FOIA recognizes surviving family
members’ right to personal privacy with respect to their close relative’s death-
scene images”).
As there is no intimation that the relatives of the deceased persons
depicted in the bodycam or dashcam footage have objected to this release, there is
no privacy basis for refusing to release this information to the Courier-Journal at
this juncture. However, recognizing that such relatives may have an interest, if the
-29-
SPD wishes pursue a limited argument that releasing unblurred footage of the
deceased persons is prohibited based on privacy interests their relatives may have,
it must seek out the input of such relatives, which can then be presented in the form
of affidavits, with personal identifiers omitted for the other party and an unredacted
form submitted under seal to the circuit court.8 Whether it will be appropriate for
the Courier-Journal to publish such depictions to the general public if the families
do not object (or if the circuit court does not find their objections sufficient to
overcome the public interest in the release of these records) is a matter that is not
before us.
We do note, although this issue was not raised by the SPD prior to
oral argument, that there may be other privacy interests that merit limited redaction
of the dashcam bodycam footage and other records as the circuit court may
determine, such as to protect juveniles. See, e.g., Kentucky New Era, Inc., 415
S.W.3d at 85 (recognizing that juvenile perpetrators, juvenile victims, and juvenile
witnesses are entitled to privacy protections beyond those available to adults). An
in camera review will likely be needed for the circuit court to determine which
redactions would be appropriate to address such concerns.
8
It is unclear at this juncture whether the Courier-Journal would insist upon having access to
unredacted copies of the dashcam and bodycam footage or would be satisfied with versions
containing targeted redactions.
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III. Does KRS 61.878(1)(1), which Allows Withholding of Records as
Otherwise Prohibited from Disclosure, Allow KRS 17.150(2) to Be
Interpreted as Prohibiting the Release of All Records Until the
Prosecution is Completed?
Finally, the Courier-Journal argues that KRS 17.150(2) does not
control pending investigations over KRS 61.878(1)(h), but instead applies to
explain what must be released after an investigation has concluded or a
prosecutorial decision made. Therefore, it argues that KRS 17.150(2) cannot be
used to justify withholding the records as being otherwise prohibited from
disclosure under KRS 61.878(1)(l). While the Courier-Journal acknowledges that
some recent Attorney General opinions have interpreted KRS 17.150(2) similarly
to how the SPD has, it notes that these are not controlling and argues for their
rejection.
The SPD argues for the application of KRS 17.150(2) as under the
rules of statutory construction it should govern over KRS 61.878(1)(h) as it is more
specific as it is limited to “intelligence and investigative reports” of “criminal
justice agencies” and it believes the Courier-Journal is incorrect that it only applies
after an investigation concludes. As it mentioned in its answer and argument
below, as well as during oral argument, the SPD would rather rely on KRS
17.150(2) than KRS 61.878(1)(h) because KRS 17.150(2) does not require any
showing of concrete harm to prohibit disclosure. By relying on KRS 17.150(2)
over KRS 61.878(1)(h), it thus relies on the former essentially swallowing up the
-31-
limitations contained in the KRS 61.878(1)(h) exemption. The SPD relies on
opinions from the Office of the Attorney General to support its interpretation that it
could properly withhold the 911 calls, police dispatch radio traffic, the
dashcam/bodycam footage, the CAD reports, and the incident reports.
KRS 61.878(1)(l) provides an exclusion from the ORA of: “Public
records or information the disclosure of which is prohibited or restricted or
otherwise made confidential by enactment of the General Assembly[.]”
KRS 17.150(2) provides as follows:
Intelligence and investigative reports maintained by
criminal justice agencies are subject to public inspection
if prosecution is completed or a determination not to
prosecute has been made. However, portions of the
records may be withheld from inspection if the inspection
would disclose:
(a) The name or identity of any confidential informant or
information which may lead to the identity of any
confidential informant;
(b) Information of a personal nature, the disclosure of
which will not tend to advance a wholesome public
interest or a legitimate private interest;
(c) Information which may endanger the life or physical
safety of law enforcement personnel; or
(d) Information contained in the records to be used in a
prospective law enforcement action.
(Emphasis added.)
-32-
The Courier-Journal and the SPD submitted competing circuit court
decisions which they argue support their respective positions regarding the
interpretation to be given to KRS 17.150(2). While we have reviewed how these
arguments were addressed therein, these decisions are not entitled to any weight.
Although the Office of the Attorney General has applied KRS 17.150(2) broadly to
restrict all access to information which law enforcement has which may pertain to
a prospective law enforcement action, such opinions are not controlling, and we
disagree with such an interpretation based on the statutory language. Instead,
given the paucity of relevant and applicable controlling authority interpreting KRS
17.150(2), we decide this issue in accordance with our own interpretation of its
relevant statutory language.
We first observe that by its terms, KRS 17.150(2) provides for the
complete disclosure of intelligence and investigative reports maintained by
criminal justice agencies after a prosecution is complete, subject to four specific
exemptions. Therefore, KRS 17.150(2) should only apply if the conditions set out
in its prefatory language are met. There is no reaching the exceptions where a
determination to prosecute has been made and the prosecution is not yet
completed. Accordingly, we do not believe that KRS 17.150(2) applies at all at
this juncture as the prosecution of Brison is not complete.
-33-
A consideration of KRS 17.150(2)(d) does not alter our view. KRS
17.150(2) provides for a general duty to disclose after “prosecution is completed or
a determination not to prosecute has been made[,]” with KRS 17.150(2)(d)
providing an exemption for the disclosure of “[i]nformation contained in the
records to be used in a prospective law enforcement action.” We read KRS
17.150(2)(d) as referring to a separate prosecution from the one that has been
completed or abandoned in KRS 17.150(2). If KRS 17.150(2)(d) applies, then
KRS 61.878(1)(h) applies.
Additionally, “intelligence and investigative reports” is a narrower
category by its terms than the “records” at issue under KRS 61.878(1)(h), a fact
that even the Office of the Attorney General has recognized. See In re: The
Times-Tribune/Whitley County E-911 Center, Ky. OAG 09-227, 2009 WL
5734657, *2 (Dec. 30, 2009) (unpublished) (explaining that in a previous Office of
the Attorney General opinion, “we determined . . . that 911 calls, even if they are
maintained by a criminal justice agency, ‘cannot properly be characterized as
intelligence or investigative reports’ and therefore KRS 17.150(2) ‘is facially
inapplicable’ to them”). We would also question whether dashcam and bodycam
footage and audio communication between dispatch and officers would fit under
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the category of “intelligence and investigative reports.”9 So even if KRS 17.150(2)
somehow applied, it would not justify the complete withholding of all of the
records by itself.
As we have concluded that KRS 17.150(2) does not apply to justify
the withholding of records at this juncture, it provides no justification for the
SPD’s withholding of the records.
IV. May the Courier-Journal be Awarded Attorney Fees, Costs, and
Statutory Penalties Upon Remand?
The Courier-Journal requests that the SPD’s withholding of records be
deemed willful and that it be awarded attorney fees, costs, and statutory penalties
upon remand as it requested in its complaint. The SPD argues that even if it should
have disclosed the records, its action in withholding the records cannot be willful
as it properly relied upon Attorney General opinions stating that it did not have to
make any disclosure pursuant to KRS 17.150(2).
KRS 61.882(5) provides:
Any person who prevails against any agency in any
action in the courts regarding a violation of KRS 61.870
to 61.884 may, upon a finding that the records were
willfully withheld in violation of KRS 61.870 to 61.884,
be awarded costs, including reasonable attorney’s fees,
9
The phrase “intelligence and investigative reports” is potentially ambiguous as to its scope.
While “investigative reports” is straightforward, “intelligence” might stand on its own, in which
case it would be a broad category, or might be interpreted more narrowly to just pertain to
“intelligence reports.” While we do not decide this issue, for the sake of our analysis we
interpret it broadly.
-35-
incurred in connection with the legal action. If such
person prevails in part, the court may in its discretion
award him costs or an appropriate portion thereof. In
addition, it shall be within the discretion of the court to
award the person an amount not to exceed twenty-five
dollars ($25) for each day that he was denied the right to
inspect or copy said public record. Attorney’s fees,
costs, and awards under this subsection shall be paid by
the agency that the court determines is responsible for the
violation.
Because we are vacating and remanding, a full discussion of whether
the SPD’s actions were willful and, if so, whether the Courier-Journal would be
entitled to any potential award would be premature. However, we disagree with
the SPD that its actions could never be considered willful.
The Kentucky Supreme Court has interpreted KRS 61.882(5) “to
mean that the inspection right exists and fully vests when a person first seeks and is
denied public records which are statutorily subject to the Open Records Act.”
Utility Management Group, LLC v. Pike Cnty. Fiscal Court, 531 S.W.3d 3, 12 (Ky.
2017). Therefore, the maximum twenty-five dollars a day award for the denial of
access to public records allows for the imposition of statutory penalties beginning
as soon as the records are denied.
As explained in Section I, supra, the original denial of the records by
the SPD with just a citation to KRS 61.878(1)(h) was an improper blanket denial.
If the circuit court determines that any of the requested records should have been
disclosed between August 10, 2020, and October 31, 2020, the period between the
-36-
initial denial and the more detailed denial, it can properly evaluate whether the
failure to disclose these records without any explanation during this time span was
a willful denial, and if so, whether this willful denial justifies an award. A later
explanation cannot retroactively justify the denial.
As to the withholding of records after the filing of Chief Higdon’s
affidavit on October 31, 2020, willfulness will need to be evaluated considering the
explanations given therein. The withholding of records pursuant to KRS
61.878(1)(h) could be willful depending upon the factual determinations the circuit
court will make on remand regarding the propriety of withholding these records
then and the need to continue withholding these records as conditions changed. As
to SPD’s reliance on KRS 61.878(1)(a), as explained in Section II, supra, the
privacy exception cannot justify withholding the dashcam and bodycam footage as
a whole.
The SPD’s argument that its denial cannot be willful because it relied
upon Attorney General interpretations applying KRS 17.150(2) to justify the denial
of records when a prosecution is not complete is overly simplistic and assumes too
much. As explained in Section III, supra, not all the requested records constituted
“intelligence and investigative reports.” Therefore, even if reliance on the Office
of the Attorney General opinions were to be considered reasonable (and thus
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negate willfulness), such reliance cannot immunize the SPD in withholding all the
records.
CONCLUSION
Accordingly, we vacate the portion of the Jefferson Circuit Court’s
order granting in part summary judgment to the Shively Police Department and
denying in part the Courier-Journal’s motion for summary judgment that is being
appealed, and remand for further proceedings regarding the release of records
requested on August 10, 2020.
The circuit court may require the parties to brief and provide proof to
address the following: Given that City of Fort Thomas, 406 S.W.3d at 850-51,
specifies that withholding records pursuant to KRS 61.878(1)(h) cannot be justified
unless the “premature release of the records would harm the agency in some
articulable way[,]” with the agency demonstrating a “concrete risk of harm[,]”
explain whether the reasons supplied by the SPD in Chief Higdon’s affidavit in
paragraphs six and seven justified the withholding records at the time of the SPD’s
answer, whether those reasons had already expired by that time, or whether they
have expired since then. If you believe any of the reasons have expired, explain
when that occurred and why; to the extent any of the reasons continue, explain
what records can properly be released now and what types of redactions would be
warranted to limit potential harm. If the reasons have not expired, explain with
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specificity why they have continuing validity now and how the release of those
records even in redacted form would demonstrate an articulable concrete risk of
harm to the agency’s investigation.
The circuit court has a duty to consider, as explained in Cape
Publications, Inc., 260 S.W.3d at 821, “the privacy interests . . . of persons who
would be substantially affected by the disclosure.” Therefore, to the extent that the
circuit court resolves that KRS 61.878(1)(h) does not prohibit the release of the
requested records, the circuit may request that the parties propose what portions of
the records need to be redacted to address privacy concerns. As to the dashcam
and bodycam footage, the circuit court is directed to permit the SPD the
opportunity to provide proof that the family of the deceased victims desire privacy
as to the depictions of their deceased relatives. It will then be up to the circuit
court to decide if the KRS 61.878(1)(a) exemption applies, and if so, what
redactions are needed.
To facilitate the resolution of all of these issues, we strongly
recommend that the circuit court conduct an in camera review of all of the relevant
records at issue in unreacted form as it will be difficult if not impossible to sort out
these issues without knowing what the records contain.
Depending upon the circuit court’s ultimate ruling on remand, it may
decide whether the withholding of records was willful for any period of time and,
-39-
if so, whether attorney fees, costs, and statutory penalties are appropriate and
warranted.
ALL CONCUR.
BRIEFS FOR APPELLANT: BRIEF AND ORAL ARGUMENT
FOR APPELLEE:
Jon L. Fleischaker
Michael P. Abate Finn Robert Cato
William R. Adams Louisville, Kentucky
Louisville, Kentucky
ORAL ARGUMENT FOR
APPELLANT:
Michael P. Abate
Louisville, Kentucky
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https://www.courtlistener.com/api/rest/v3/opinions/8482919/ | RENDERED: NOVEMBER 10, 2022; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2020-CA-1162-MR
JAMES CLAYTON BAILEY APPELLANT
APPEAL FROM MARSHALL CIRCUIT COURT
v. HONORABLE JAMES T. JAMESON, JUDGE
ACTION NO. 17-CR-00181
COMMONWEALTH OF KENTUCKY APPELLEE
OPINION
AFFIRMING
** ** ** ** **
BEFORE: CETRULO, LAMBERT, AND TAYLOR, JUDGES.
TAYLOR, JUDGE: James Clayton Bailey brings this appeal from a June 22,
2020, Order Subsequent to Bench Trial, setting out findings of fact and
conclusions of law, and a subsequent August 14, 2020, judgment, sentence, and
order of probation rendered by the Marshall Circuit Court. We affirm.
Background
On July 2, 2017, Bailey was driving east on U.S. Highway 68 in
Marshall County, Kentucky. Bailey was driving a pickup truck pulling a trailer
loaded with a golf cart. Deputy Chris Greenfield, of the Marshall County Sheriff’s
Office, observed Bailey weaving in and out of his lane and initiated a traffic stop.
Bailey denied having ingested any alcohol or medication that day. Rather, Bailey
claimed his weaving was due to the trailer being improperly loaded. Deputy
Greenfield indicated he did not detect any problem with the trailer. Deputy
Greenfield did, however, notice that Bailey’s speech was slurred, his eyes were
bloodshot, and his pupils were dilated. Bailey also failed all three field sobriety
tests administered by Deputy Greenfield. Bailey was arrested and subsequently
agreed to submit to a blood test. Bailey was transported to the Marshall County
Hospital where a blood test was administered. The laboratory report revealed that
Bailey had the following medications in his blood: diazepam, trazodone,
oxycodone, and hydrocodone. It is uncontroverted that Bailey had a valid
prescription for each of the medications detected in his system.
Bailey was subsequently indicted upon driving a motor vehicle under
the influence, fourth offense (DUI – Fourth) (Kentucky Revised Statutes (KRS)
189A.010) and possession of a controlled substance in the second degree (KRS
218A.1416). The matter proceeded to a bench trial on December 11, 2019. After
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the Commonwealth presented its evidence, Bailey made a motion for a directed
verdict. Bailey argued that the Commonwealth failed to present expert testimony
regarding whether the prescription medications found in Bailey’s blood impaired
his ability to drive a motor vehicle. The trial court denied the motion. At the
conclusion of the Commonwealth’s proof, Bailey renewed his original motion for a
directed verdict. Bailey additionally argued that he was entitled to a directed
verdict of acquittal as the expert’s testimony that Bailey was involuntarily
intoxicated was unrebutted.
By Order Subsequent to Bench Trial entered June 22, 2020, the trial
court concluded that the Commonwealth had presented sufficient evidence that
Bailey had operated a motor vehicle while under the influence of a substance that
impaired his ability to drive (KRS 189A.010(1)(c)). The trial court further
believed that Bailey had not adequately proven the affirmative defense of
involuntary intoxication. Therefore, the court found Bailey guilty of DUI-Fourth.
The trial court further found Bailey not guilty of possession of a controlled
substance. By a judgment entered August 14, 2020, Bailey was sentenced to a
five-year term of imprisonment with a mandatory sentence of 120 days, to be
-3-
served by home incarceration, with the balance of the sentence probated for a
period of three years.1 This appeal follows.
ISSUES
Bailey asserts the trial court committed reversible error by denying his
motion for directed verdict and finding him guilty of DUI-Fourth, arguing there
was insufficient evidence presented to establish the elements thereof. More
specifically, Bailey believes that expert testimony was necessary to prove that the
prescription medications present in Bailey’s blood were the cause of his driving
impairment.
Additionally, Bailey contends that the trial court erred by concluding
that he failed to establish the affirmative defense of involuntary intoxication. More
particularly, Bailey asserts that the Commonwealth failed to rebut the testimony of
Bailey’s expert, Dr. George Nichols, who testified that in his opinion Bailey was
involuntarily intoxicated due to liver disease.
STANDARD OF REVIEW
At trial, Bailey moved for a directed verdict at the close of the
Commonwealth’s proof. However a directed verdict motion is clearly improper in
an action tried by the court without a jury. Brown v. Shelton, 156 S.W.3d 319, 320
1
The form upon which the judgment was entered on August 14, 2020, was styled “Judgment and
Sentence on Plea of Guilty.” There was no guilty plea entered in the case and the form appears
to have been utilized for sentencing purposes only.
-4-
(Ky. App. 2004). Rather the appropriate procedural mechanism was a motion to
dismiss in accordance with Kentucky Rules of Civil Procedure (CR) 41.02(2).2
R.S. v. Commonwealth, 423 S.W.3d 178, 184 (Ky. 2014).
Accordingly, since the trial court conducted a bench trial, the court
should have treated Bailey’s motion as a motion to dismiss under CR 41.02(2)
which reads:
In an action tried by the court without a jury, after the
plaintiff has completed the presentation of his evidence,
the defendant, without waiving his right to offer evidence
in the event the motion is not granted, may move for a
dismissal on the ground that upon the facts and the law
the plaintiff has shown no right to relief. The court as
trier of the facts may then determine them and render
judgment against the plaintiff or may decline to render
any judgment until the close of all the evidence. . . .
Under this rule, “[t]he trial court ‘must weigh and evaluate the
evidence’ rather than, with regard to directed verdict, ‘indulge every inference in
the [Commonwealth’s] favor.’” R.S., 423 S.W.3d at 184 (citations omitted). A
trial court’s ruling under CR 41.02(2) is reviewed for an abuse of discretion. Id. at
184 (citing Jaroszewski v. Flege, 297 S.W.3d 24, 31 (Ky. 2009)). The test for
abuse of discretion is whether the trial judge’s decision was arbitrary,
2
The Kentucky Rules of Civil Procedure are applicable to criminal cases as provided in
Kentucky Rules of Criminal Procedure 13.04.
-5-
unreasonable, unfair, or unsupported by sound legal principles. Commonwealth v.
English, 993 S.W.2d 941, 945 (Ky. 1999).
Finally, if the trial court rules on the merits in favor of defendant,
factual findings must be made on the record pursuant to CR 52.01. R.S., 423
S.W.3d at 184. These findings will not then be set aside unless clearly erroneous.
Id. at 188. As fact finder, the trial court alone assesses the credibility of witnesses
and the weight of the evidence presented. Id. at 187; see also Moore v. Asente, 110
S.W.3d 336, 354 (Ky. 2003).
Analysis
We begin our analysis by reviewing the elements necessary to prove
Bailey was operating a motor vehicle while under the influence of a substance that
impaired his ability to drive. Those elements are set forth in KRS 189A.010(1)(c),
which provides:
(1) A person shall not operate or be in physical control of
a motor vehicle anywhere in this state:
....
(c) While under the influence of any other substance
or combination of substances which impairs one’s
driving ability[.]
Simply put, to establish a violation of KRS 189A.010(1)(c), the
Commonwealth must prove that a defendant was operating a motor vehicle while
under the influence of a substance that impaired his ability to do so. Kidd v.
-6-
Commonwealth, 146 S.W.3d 400, 403 (Ky. App. 2004). And, it is well-established
that where a police officer “has observed a defendant’s appearance and behavior
[the officer] is competent to express an opinion as to his degree of intoxication and
as to his ability to operate a motor vehicle safely.” Id. at 403 (citing Hayden v.
Commonwealth, 766 S.W.2d 956, 957 (Ky. App. 1989)).
In the case sub judice, the Commonwealth called Deputy Greenfield
to testify regarding his observations of Bailey. Deputy Greenfield testified that he
first observed Bailey’s vehicle swerving in and out of his lane of traffic. Upon
contact with Bailey, Greenfield noticed that Bailey’s speech was slurred, his eyes
were bloodshot, and his pupils were dilated. These factors, when combined with
Bailey’s inability to perform the basic physical tasks of the three field sobriety
tests, were sufficient to establish that Bailey was under the influence of a substance
that impaired his ability to drive a motor vehicle. See Kidd, 146 S.W.3d at 403.
As such, we reject Bailey’s contention that the lack of expert testimony prevented
the Commonwealth from proving that Bailey was guilty of driving under the
influence of a substance that impaired his driving. Rather, the Commonwealth’s
evidence, through Greenfield’s testimony, was more than sufficient to establish
Bailey’s impairment beyond a reasonable doubt.
As concerns Bailey’s argument of involuntary intoxication, we note as
a general rule, intoxication does not constitute a defense to a criminal charge;
-7-
however, there are a few exceptions. See King v. Commonwealth, 513 S.W.3d
919, 923 (Ky. 2017). Relevant herein, is the exception set forth in KRS
501.080(2), which provides that involuntary intoxication is a defense to a criminal
charge only if such condition “[i]s not voluntarily produced and deprives the
defendant of substantial capacity either to appreciate the criminality of his conduct
or to conform his conduct to the requirements of the law.” KRS 501.080(2). In
other words, as noted in the Commentary to KRS 501.080, involuntary intoxication
can excuse criminal conduct only if it would be excused under the insanity
provisions as resulting from a mental disease or defect.
In the case sub judice, Dr. Nichols testified that Bailey had liver
disease caused by liver cancer and chronic Hepatitis C. Dr. Nichols also stated that
Bailey’s liver disease caused an increase in the ammonia levels in Bailey’s system.
And, Dr. Nichols further testified that the increased ammonia levels affected the
way Bailey metabolized his medications. According to Dr. Nichols, the inability
of Bailey’s liver to properly metabolize his prescription medications led to Bailey’s
involuntary intoxication or impairment on July 2, 2017. However, Dr. Nichols
also conceded that the prescription medications in Bailey’s blood could have been
the sole cause of the impairment Deputy Greenfield observed. Considering such
testimony, we believe there was substantial evidence presented to support the trial
-8-
court’s finding that Bailey was not involuntarily intoxicated and based on our
review of the record and applicable law, these findings were not clearly erroneous.
In conclusion, the trial court did not abuse its discretion in denying
Bailey’s motion for directed verdict nor did the trial court err in finding that Bailey
was not involuntarily intoxicated.
For the foregoing reasons, the Order Subsequent to Bench Trial and
judgment entered by the Marshall Circuit Court are affirmed.
ALL CONCUR.
BRIEF FOR APPELLANT: BRIEF FOR APPELLEE:
Richard L. Walter Daniel Cameron
Jeremy Ian Smith Attorney General of Kentucky
Paducah, Kentucky Frankfort, Kentucky
Robert Baldridge
Assistant Attorney General
Frankfort, Kentucky
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https://www.courtlistener.com/api/rest/v3/opinions/8482939/ | RENDERED: NOVEMBER 4, 2022; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2020-CA-0078-MR
EDIEL GIJON-CRUZ APPELLANT
APPEAL FROM BOURBON CIRCUIT COURT
v. HONORABLE JEREMY MATTOX, JUDGE
ACTION NO. 10-CR-00050
COMMONWEALTH OF KENTUCKY APPELLEE
OPINION
AFFIRMING
** ** ** ** **
BEFORE: DIXON, MCNEILL, AND K. THOMPSON, JUDGES.
THOMPSON, K., JUDGE: Ediel Gijon-Cruz, pro se, appeals from an order of the
Bourbon Circuit Court denying his motion to vacate, set aside, or correct sentence
pursuant to Kentucky Rules of Criminal Procedure (RCr) 11.42. Because each of
Cruz’s claims are refuted by the record before us, we affirm.
On May 13, 2010, Cruz was indicted on two counts of complicity to
kidnapping (victim death) and two counts of complicity to murder. Cruz confessed
to his role in the planning and execution of the kidnappings to police officers but
denied any role in the murders. The Commonwealth filed notice it would seek the
death penalty against Cruz.
A year later, on May 12, 2011, Cruz entered into a plea agreement
with the Commonwealth. In exchange for his testimony against a co-defendant,
the Commonwealth agreed to dismiss the two counts of complicity to murder.
Cruz agreed to twenty years’ incarceration on each of the complicity to kidnapping
charges, to be served concurrently.
Cruz’s sentencing was delayed until April 12, 2012, as his co-
defendant’s case proceeded to trial. The trial court ultimately imposed sentencing
pursuant to the terms of the plea agreement.
In August 2012, Cruz began filing a series of pro se letters and
motions requesting the record of his case. On October 31, 2014, Cruz filed what
was entitled “Motion to Withdraw a Coerced Guilty Plea.” On December 4, 2014,
Cruz filed a motion pursuant to RCr 11.42. He broadly asserted that he did not
understand the charges against him at the time and that his attorney coerced him
into not going to trial under fear of receiving the death penalty. The trial court held
an evidentiary hearing on August 4, 2015. For reasons that are not clear from the
record before us, the trial court did not immediately enter an order. Rather, the
case languished until 2019, when Cruz sought relief from this Court in the form of
-2-
a writ of mandamus, demanding the trial court rule on the now five-year-old
motion. The writ was granted by this Court, and the trial court entered what it
entitled a “comprehensive order” denying relief to Cruz on December 2, 2019. On
January 10, 2020, the trial court entered an “amended comprehensive order to
correct typographical/autocorrect error.” The order was substantively the same as
the previous order and denied relief to Cruz. This appeal followed.
Cruz appeals only the denial of his motion pursuant to RCr 11.42. He
makes three arguments on appeal. First, he contends he received ineffective
assistance of counsel because counsel did not use a Spanish interpreter during any
meetings with Cruz, including when discussing the terms and implications of the
plea agreement. Second, he argues counsel failed to investigate and prepare his
case. Finally, Cruz asserts counsel failed to discuss “collateral consequences” of
entering a guilty plea pursuant to Padilla v. Kentucky, 559 U.S. 356, 130 S.Ct.
1473, 176 L.Ed.2d 284 (2010). We interpret this argument to mean counsel failed
to inform Cruz, who is a Mexican citizen, that he would be deported after serving
his sentence. Each of Cruz’s claims are refuted by the record.
When a guilty plea has been entered and the movant collaterally
attacks the judgment via a motion pursuant to RCr 11.42, it must be established
(1) that counsel made errors so serious that counsel’s
performance fell outside the wide range of professionally
competent assistance; and (2) that the deficient
performance so seriously affected the outcome of the
-3-
plea process that, but for the errors of counsel, there is a
reasonable probability that the defendant would not have
pleaded guilty, but would have insisted on going to trial.
Bronk v. Commonwealth, 58 S.W.3d 482, 486-87 (Ky. 2001). Further, “the trial
court must evaluate whether errors by trial counsel significantly influenced the
defendant’s decision to plead guilty in a manner which gives the trial court reason
to doubt the voluntariness and validity of the plea.” Id. at 487.
Our analysis begins with the voluntariness of Cruz’s plea. The
voluntariness of the plea is determined from the “totality of the circumstances.”
Rodriguez v. Commonwealth, 87 S.W.3d 8, 10-11 (Ky. 2002). “Evaluating the
totality of the circumstances surrounding the guilty plea is an inherently factual
inquiry which requires consideration of the accused’s demeanor, background and
experience, and whether the record reveals that the plea was voluntarily made.”
Fegan v. Commonwealth, 566 S.W.3d 234, 237 (Ky.App. 2018) (internal quotation
marks and citation omitted). Accordingly, we must “juxtapose the presumption of
voluntariness inherent in a proper plea colloquy with a Strickland v. Washington[,
466 U.S. 668, 104 S.Ct. 2052, 80 L.Ed.2d 674 (1984),] inquiry into the
performance of counsel.” Bronk, 58 S.W.3d at 486.
The trial court conducted a plea colloquy pursuant to Boykin v.
Alabama, 395 U.S. 238, 89 S.Ct. 1709, 23 L.Ed.2d 274 (1969). Cruz was alert and
engaged during the plea colloquy. A Spanish interpreter was used throughout the
-4-
entirety of the plea as Cruz’s primary language is Spanish. First, defense counsel
testified he had explained the nature of the charges to Cruz, the possible penalties,
possible defenses, and the constitutional rights he would be waiving by entering a
guilty plea. The trial court then turned to Cruz. Through the interpreter, Cruz
testified he understood the nature of the charges against him, the range of penalties,
and possible defenses. He also testified he understood he was giving up the right
to a jury trial, the right to cross-examine the Commonwealth’s witnesses and to
call his own witnesses, the right to not incriminate himself, and the right to appeal.
Cruz admitted he committed the crimes as read by the trial court; specifically that
he “encouraged others and aided in planning and execution of the abduction of two
people[.]” The following exchange also occurred:
COURT: Has anyone threatened you, forced you, or
coerced you in any way to pleading guilty here today?
CRUZ: No.[1]
COURT: Are you doing this of your own free will and
because you believe it’s in your best interest to do so?
CRUZ: Yes.
COURT: Do you have any difficulty – obviously you’re
here with an interpreter today – it’s my understanding –
do you speak English?
CRUZ: A little. Some.
1
Cruz’s responses were in Spanish and translated to English by the interpreter.
-5-
COURT: But you do need the assistance of an
interpreter, is that correct?
CRUZ: Yes.
COURT: And have you had the opportunity to have an
interpreter with you or someone who can understand
what your attorney is talking about when you talk to him
about this case?
CRUZ: Yes.
DEFENSE COUNSEL: Sometimes we do, judge, and
sometimes we do not. I know you’re getting ready to go
over the form. I went over the form with him in English
and we had the interpreter come in afterward and he
didn’t have any additional questions.
COURT: Okay.
DEFENSE COUNSEL: I just want to make it clear for
the record – he does – it is my belief that he does
understand what’s contained in the documents.
COURT: Mr. Cruz, I guess what I really want to know
is, do you believe at any point during the course of this
proceeding or these proceedings, that you didn’t have an
opportunity to understand what was going on because of
not having someone interpret information for you?
CRUZ: Yes, I understood everything well.
COURT: Okay. Your speaking Spanish has not been a
barrier to you understanding what’s going on here today,
is that correct?
CRUZ: Yes.
-6-
COURT: I’m going to show you this motion to enter a
guilty plea. It’s in English. Have you seen that
document before?
CRUZ: Yes.
COURT: And did someone go over that document with
you?
CRUZ: Yes, he did.
COURT: And did you have an opportunity to talk with
your attorney with an interpreter or at least have an
interpreter go over it with you as well, or have a chance
to ask an interpreter questions as to any concerns . . .
might be about this document?
CRUZ: No, I didn’t have any questions.
COURT: You’re satisfied that you understand
everything in this document?
CRUZ: Yes.
COURT: Okay, on the back in the middle it looks like it
has your signature. Is that your signature?
CRUZ: Yes.
COURT: Did anybody force you to sign that?
CRUZ: No.
....
COURT: Are you completely satisfied with the services
of your attorney in this case?
CRUZ: Yes.
-7-
COURT: Do you think [your attorney] has done
everything he should to represent you in this matter?
CRUZ: Yes.
COURT: How do you plead then – I’ll remind you that
you’re under oath – how do you plead to two counts of
complicity to kidnapping where the victims resulted in
death?
CRUZ: Guilty.
COURT: Are you pleading guilty because you’re truly
guilty and for no other reason?
CRUZ: Yes.
“Solemn declarations in open court carry a strong presumption of
verity.” Edmonds v. Commonwealth, 189 S.W.3d 558, 569 (Ky. 2006). In
addition to the testimony by Cruz during the plea colloquy, cross-examination by
the Commonwealth at the evidentiary hearing on Cruz’s RCr 11.42 motion
revealed Cruz had met with the Commonwealth’s Attorney and investigators
regarding testimony against his co-defendant without the use of an interpreter.
Accordingly, Cruz’s first argument must fail.
Next, Cruz makes broad, conclusory statements that defense counsel
failed to properly investigate the case prior to entry of his guilty plea. This is also
refuted by the record before us, including the above-cited testimony given by Cruz
regarding counsel’s performance, preparation, and discussion of possible defenses.
Now, Cruz attempts to argue counsel failed to, for example, request a competency
-8-
hearing which, he asserts “is common practice given the Commonwealth’s
intention to seek the death penalty as potential consequence.” Cruz provides no
basis in law or fact for this assertion. RCr 8.06 states:
If upon arraignment or during the proceedings there are
reasonable grounds to believe that the defendant lacks the
capacity to appreciate the nature and consequences of the
proceedings against him or her, or to participate
rationally in his or her defense, all proceedings shall be
postponed until the issue of incapacity is determined as
provided by [Kentucky Revised Statute] 504.100.
At the evidentiary hearing, Cruz testified he spoke to defense counsel
about the plea agreement. His testimony indicated he clearly understood the offer
made by the Commonwealth and in fact instructed counsel to try to renegotiate a
better deal. In other words, Cruz’s testimony revealed he was an active participant
in negotiating his defense. There is nothing in the record to suggest defense
counsel should have sought a competency evaluation for Cruz.
Cruz also asserts that counsel’s failure to investigate and prepare the
case was ineffective assistance because Cruz “consistently maintained his
innocence.” This is again refuted by the record before us. Cruz confessed to his
role in the kidnappings. Consistent with his confession, counsel was able to
negotiate a plea agreement wherein the Commonwealth dropped both counts of
complicity to murder and the death penalty was taken off the table as a possible
-9-
penalty. There is also no indication that counsel was unprepared. 2 Cruz’s second
argument must also fail.
Turning to Cruz’s third argument, we note the Supreme Court of the
United States has ruled that counsel must inform their client whether a guilty plea
carries a risk of deportation. Padilla, 559 U.S. at 374, 130 S.Ct. at 1486. Cruz’s
claim that counsel failed to inform him of the consequence of deportation is also
refuted by the record. At the sentencing hearing on April 10, 2012, counsel
informed the trial court that Cruz was aware he had to serve 85% of his sentence
until immigration officials take him into custody. Cruz was present with a Spanish
interpreter. He did not refute counsel’s statement or ask for clarification.
Finally, we note the following exchange occurred on cross-
examination at the evidentiary hearing:
COMMONWEALTH: What do you think happens if
you win this? What is your understanding? Do you
think you’re gonna go free? You’ve been told you’re
gonna go free? Go back to Mexico?
CRUZ: All I’m asking for is a lower charge, that’s all.
2
Cruz states that counsel said, “I will wing it” and points to this as evidence that counsel was
unprepared to try his case. This comment was taken out of context. It is unclear that counsel
was even speaking about this defendant or this case as this comment was made as part of a
conversation between counsel and the Commonwealth’s Attorney at the bench while waiting for
Cruz to enter. While the audio quality is poor, the conversation appears to have pertained to a
different defendant named Chad who had new charges.
-10-
We agree with the trial court that Cruz’s guilty plea was knowingly,
voluntarily, and intelligently entered. He had multiple opportunities to alert the
trial court if he did not understand the proceedings due to a language barrier, or
any other reason, and did not. In fact, he testified he fully understood the
proceedings. His testimony at the evidentiary hearing on the RCr 11.42 motion
that he was simply “asking for [] a lower charge, that’s all” indicates Cruz regrets
making the plea agreement. Although Cruz is not appealing his motion to
withdraw his guilty plea, we nevertheless point out that hindsight or a change of
heart is not grounds for withdrawal of a guilty plea. See Commonwealth v.
Pridham, 394 S.W.3d 867, 885 (Ky. 2012). Nor is it proper grounds to collaterally
attack the judgment pursuant to RCr 11.42. Moreover, Cruz’s regret after the fact
is unrelated to counsel’s assistance in negotiating and entering the guilty plea. We
cannot say counsel made errors so serious his performance fell outside the wide
range of professionally competent assistance. Nor can we say Cruz was prejudiced
in any way by counsel’s performance. Bronk, 58 S.W.3d at 486-87.
For the foregoing reasons, the order of the Bourbon Circuit Court is
affirmed.
ALL CONCUR.
-11-
BRIEF FOR APPELLANT: BRIEF FOR APPELLEE:
Ediel Gijon-Cruz, pro se Daniel Cameron
Sandy Hook, Kentucky Attorney General of Kentucky
Christopher C. Bailey
Assistant Attorney General
Frankfort, Kentucky
-12- | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482935/ | RENDERED: NOVEMBER 4, 2022; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2021-CA-0230-MR
KAENJANT L. SMITH APPELLANT
APPEAL FROM LAUREL CIRCUIT COURT
v. HONORABLE MICHAEL O. CAPERTON, JUDGE
ACTION NO. 19-CR-00018
COMMONWEALTH OF KENTUCKY APPELLEE
OPINION
VACATING AND REMANDING
** ** ** ** **
BEFORE: ACREE, JONES, AND K. THOMPSON, JUDGES.
THOMPSON, K., JUDGE: Kaenjant L. Smith appeals from the Laurel Circuit
Court’s order revoking her probation and imposing sentence, arguing the
Commonwealth failed to comply with the requirements of Kentucky Revised
Statutes (KRS) 439.3106. We vacate and remand as the circuit court made
insufficient factual findings to support the revocation.
On March 2, 2018, Smith was pulled over by the Laurel County
Sheriff’s Department while driving a 2012 Chevrolet Equinox which had
previously been reported stolen by Linda Vanhook. On January 18, 2019, Smith
was indicted for: (1) receiving stolen property of $500 or more, but less than
$10,000; (2) not having her license in her possession; (3) operating a motor vehicle
with an expired operator’s license; and (4) being a persistent felony offender in the
second degree (PFO-2) based on being convicted of facilitation to manufacture
methamphetamine and sentenced to five years of incarceration on January 4, 2013.
Smith entered into a plea agreement and on September 17, 2019, the
judgment and sentence on plea of guilty was imposed in accordance with the
Commonwealth’s recommendation. The circuit court sentenced Smith on count
one to five years of incarceration, enhanced to ten pursuant to count four for being
a PFO-2, to be probated for ten years, dismissed counts two and three, and ordered
restitution be paid to compensate Vanhook for damage to her vehicle.1
On February 3, 2020, the Commonwealth filed a motion to revoke
probation, the body of which stated in two sentences that it was requesting
1
It appears Smith’s probation was set at ten years pursuant to KRS 533.020(4), as this length of
time was deemed necessary for Smith to complete paying $5,700 of restitution to Vanhook. The
payment schedule required Smith to make an initial payment of $500 and then $200 per month.
-2-
revocation because Smith failed to abide by the terms of her probation by failing to
make restitution payments as ordered.
On May 21, 2020, a Probation and Parole Officer filed an affidavit
requesting that Smith’s sentence of probation be revoked and that a warrant be
issued for her arrest. The officer stated that Smith violated her probation as
follows:
Absconding – Kaenjant Smith failed to report as
instructed on 03/12/2020, and now on 04/09/2020 or any
date thereafter. This Officer has called the last phone #
given by Ms. Smith trying to get up with her only to
discover that all phone #’s have been disconnected. Also
this Officer was unable to do a home visit due to the
Covid-19 virus, but has had contact with Ms. Smith[’s]
family and discovered that she was not living at the last
address reported to her officer. This Officer has checked
JusticXchange and called the local hospital. Subject is
not incarcerated or hospitalized at this time, and all
efforts to locate her have been exhausted.
On January 13, 2021, the circuit court held Smith’s probation
revocation hearing via Zoom. Smith’s counsel stipulated to the violation of
probation, acknowledged the serious nature of absconding from probation, and
requested that Smith be given a six-month sanction of incarceration and continued
on probation, with the understanding being that this was her final opportunity and
if she violated again, her probation would be revoked. Smith’s counsel noted that
Smith had a three-month-old child.
-3-
The Commonwealth opposed any graduated sanctions, indicating that
Smith had made no efforts to comply with the conditions of her probation in
absconding for the previous eleven months until her arrest a month prior, made no
effort to pay restitution, and “did nothing” with the opportunity that probation
afforded her.
There was some discussion of Smith having a three-month-old child,
and whether this child was conceived while she was absconding. There was also
discussion about Smith’s prior criminal history, including that: she had not been
arrested for anything while on probation; she was a PFO-2 with that prior felony
being facilitation to manufacture methamphetamine; and she was probated on her
previous felony but then revoked and served her sentence. The circuit court
observed that Smith had already been revoked on her prior felony and knew what
jail was like.
Smith testified and asked for another chance, explaining that she
needed to get back to her child. She stated that the last time she reported for
probation was in February 2020. She acknowledged “I absconded . . . I was
pregnant and I was scared. I was terrified.” She also stated that she had “no
excuse” for absconding.
The circuit court ruled from the bench as follows:
Well, we have a prior probation violation. I mean I . . . I
really don’t see what we’re learning here. I don’t really
-4-
see that she can learn. The defendant stipulates a
violation. The court does in fact find a violation. There
is a current PFO and a prior probation violation which we
violated back in 2011. Impose sentence, thank you.
The written judgment and sentence of imprisonment was entered on
January 15, 2021. The circuit court’s findings in full were:
1. Defendant was probated by order of this Court upon
conditions set out in said Order of Probation.
2. Defendant has willfully and without excuse violated
the conditions of said probation as stated in the
Affidavit of Tip Smith as follows:
a. The Defendant absconded from Probation and
Parole.
3. Defendant was duly and properly served with notice
of this hearing.
Smith argues on appeal that the circuit court: (1) failed to make
findings required by KRS 439.3106(1); (2) failed to consider graduated sanctions
under KRS 439.3106(2); and (3) abused its discretion by revoking her probation.
We review the circuit court’s decision to revoke probation for abuse
of discretion. Commonwealth v. Andrews, 448 S.W.3d 773, 780 (Ky. 2014);
Helms v. Commonwealth, 475 S.W.3d 637, 644 (Ky.App. 2015). “[W]e will not
hold a trial court to have abused its discretion unless its decision cannot be located
within the range of permissible decisions allowed by a correct application of the
-5-
facts to the law.” McClure v. Commonwealth, 457 S.W.3d 728, 730 (Ky.App.
2015).
KRS 439.3106 provides in relevant part as follows:
(1) Supervised individuals shall be subject to:
(a) Violation revocation proceedings and possible
incarceration for failure to comply with the
conditions of supervision when such failure
constitutes a significant risk to prior victims of the
supervised individual or the community at large,
and cannot be appropriately managed in the
community; or
(b) Sanctions other than revocation and incarceration
as appropriate to the severity of the violation
behavior, the risk of future criminal behavior by
the offender, and the need for, and availability of,
interventions which may assist the offender to
remain compliant and crime-free in the
community.
“KRS 439.3106(1) requires trial courts to consider whether a
probationer’s failure to abide by a condition of supervision constitutes a significant
risk to prior victims or the community at large, and whether the probationer cannot
be managed in the community before probation may be revoked.” Andrews, 448
S.W.3d at 780.
For purposes of review, rather than speculate on
whether the court considered KRS 439.3106(1), we
require courts to make specific findings of fact, either
written or oral, addressing the statutory criteria. A
requirement that the court make these express findings on
the record not only helps ensure reviewability of the
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court decision, but it also helps ensure that the court’s
decision was reliable. Findings are a prerequisite to any
unfavorable decision and are a minimal requirement of
due process of law.
Lainhart v. Commonwealth, 534 S.W.3d 234, 238 (Ky.App. 2017) (internal
quotation marks and citations omitted). We note that “conclusory statements on
the preprinted forms, related to the criteria in KRS 439.3106(1)” are “not sufficient
to meet the mandatory statutory findings necessary to revoke a defendant’s
probation.” Walker v. Commonwealth, 588 S.W.3d 453, 459 (Ky.App. 2019). See
Helms, 475 S.W.3d at 645 (explaining “[i]f the penal reforms brought about by HB
[House Bill] 463 are to mean anything, perfunctorily reciting the statutory
language in KRS 439.3106 is not enough.”).
In reviewing the circuit court’s decision to revoke Smith’s probation,
we must consider and answer two intertwined questions: “Whether the evidence of
record supported the requisite findings that [the probationer] was a significant risk
to, and unmanageable within, [her] community; and whether the trial court, in fact,
made those requisite findings.” McClure, 457 S.W.3d at 732.
Smith’s first argument is that the circuit court failed to make findings
required by KRS 439.3106(1). Smith argues the requisite findings are absent from
both the circuit court’s oral and written findings, noting “[n]ot once during the
January 13, 2021 hearing are the words ‘risk,’ ‘danger,’ or ‘community’ ever
-7-
uttered by the government or the trial court” and “[t]he trial court’s written order is
devoid of any statutory findings as well.”2
The Commonwealth generally argues that the circuit court made
sufficient oral findings because:
Whether a person can be rehabilitated in a community
setting is synonymous with whether that person can be
managed in the community. And whether a person is
likely to reoffend if not in custody is synonymous with
whether that person is a significant risk to the
community. In essence, the trial judge found that Smith
had a bad record for both.
The Commonwealth also argues that the circuit court made a finding to the effect
that Smith’s failure to abide by a condition poses a significant risk to prior victims
or the community at large because “[a] probationer cannot be managed in the
community when she cannot be supervised. Smith posed a risk to the community
and could not be effectively managed there.”
We agree that absconding is a serious probation violation and that
such a violation could be sufficient to establish that Smith was a significant risk to,
and unmanageable within, her community. See Compise v. Commonwealth, 597
2
Smith admits that this argument was not specifically preserved for appeal and requests palpable
error review. As noted in Walker, 588 S.W.3d at 459, the failure of a court to make any findings,
either written or oral, as to whether the probationer’s violation constituted a significant risk to
prior victims or the community at large and that the probationer could not be appropriately
managed in the community, if true, would satisfy the palpable error standard of review.
-8-
S.W.3d 175, 182 (Ky.App. 2020) (noting that “a defendant who will not cooperate
with the conditions of her supervision may indeed constitute a significant risk to
the community at large and be unmanageable in the community.”).
However, after reviewing the circuit court’s oral and written findings,
we conclude that the circuit court failed to make such findings. Rather than
making perfunctory findings echoing the statutory language, it made no findings
addressing the necessary criteria in KRS 439.3106(1) at all. The circuit court did
not specifically find Smith to be any risk, let alone a significant risk, to either
Vanhook or the community as a whole. See Compise, 597 S.W.3d at 182 (vacating
revocation of Compise’s pretrial diversion because “[t]he circuit court never made
a finding that Compise was a significant risk. While the circuit court may have
intended to make such a finding, it was never articulated.”). While Smith did
abscond, there was no evidence that she committed any new crimes while on
probation, which could militate against such a finding.
Similarly, although this is a closer issue, the circuit court never found
that Smith could not be managed in the community. While certainly the circuit
court’s comments about Smith’s failure to learn could imply that she could not be
managed in the community, graduated sanctions could perhaps have provided a
means of teaching Smith to follow the requirements of probation.
-9-
While perhaps the circuit court might think that Smith could not
handle ordinary probation, pursuant to KRS 446.010(20), a “graduated sanction”
can include “electronic monitoring; . . . and short-term or intermittent
incarceration[.]” Perhaps options such as these would have been effective,
especially if combined with an order empowering probation and parole to be able
to use graduated sanctions with Smith as guided by 501 Kentucky Administrative
Regulations (KAR) 6:250.3
Although the Commonwealth would like us to “squint” at the oral
findings and find them to satisfy the requirements of KRS 439.3106(1) as implied
in what the circuit court did say, this requires inferences upon inferences.
However, as noted in Lainhart, 534 S.W.3d at 238, express findings are needed for
us to engage in proper review. Therefore, we must vacate and remand for an
appropriate decision.
As we have already determined that the circuit court did not make
appropriate factual findings and the revocation must be vacated, we need not
address Smith’s second and third arguments. We do so to clarify that these
3
While absconding cannot be addressed through graduated sanctions, a failure to report and
other minor violations can be. Compare 501 KAR 6:250 Section 2, which deems absconding to
be a “[v]iolation[] which shall be returned to the releasing authority[,]” with Section 4 which
provides that failing to report is a minor violation. Perhaps if Smith faced consequences for
minor violations, such correction might prevent more serious violations.
-10-
claimed errors in and of themselves would not require that Smith’s probation
revocation be vacated, had sufficient factual findings been made.
Smith’s second argument is that the circuit court erred by failing to
consider graduated sanctions. Smith argues that despite her argument for a six-
month sanction, the circuit court determined that because Smith agreed to a ten-
year sentence in her plea agreement that this should be her punishment.
This argument is not well taken. Having reviewed the probation
revocation hearing, it is apparent that the circuit court was concerned that Smith
had not learned anything about the consequences that would follow from failing to
abide by the conditions of probation and that was why her probation needed to be
revoked, rather than based upon the sentence that had previously been imposed. It
is well established in Andrews, 448 S.W.3d at 780-81, that circuit courts retain
discretion to decline to impose graduated sanctions. Additionally, as noted in
McClure, 457 S.W.3d at 732, “[n]othing in the statute or in the Supreme Court’s
interpretation of it requires the trial court to impose lesser sanctions prior to
revoking probation.” We do not think that the circuit court failed to consider
imposing a graduated sanction but instead disagreed that a six-month sanction
would be appropriate here.
Smith’s third argument is that the circuit court abused its discretion by
revoking Smith’s probation, raising several potential problems. Smith argues that
-11-
the circuit court’s “decision was arbitrary because Smith’s probation was revoked
for a common violation and, seemingly, her criminal history.” Smith argues that it
was not clear in the probation revocation hearing that Smith only had one prior
felony conviction and not two, and that her criminal history cannot be a basis for
revocation as it was known at the time she was placed on probation. Smith also
raises concerns that “it does appear that the trial court considered Smith’s
pregnancy negatively and insinuated that she should not have gotten pregnant and
had a child. Any decision by the trial court wherein a woman’s pregnancy is
considered negatively is inherently arbitrary and fundamentally unfair.” Finally,
Smith argues there was insufficient evidence to revoke based solely upon her
stipulation and the Commonwealth’s failure to call any witnesses and failure to
claim Smith was a danger or risk to the community.
We note that Andrews, 448 S.W.3d at 780, authorizes circuit courts to
consider a probationer’s past criminal history, opining that while such “criminal
history could not be the sole basis for his revocation, it was appropriately
considered when assessing the risk posed by his continued probation.” We are
confident that the circuit court considered more than just Smith’s prior criminal
history in deciding to revoke her probation. Based on our review of the probation
revocation hearing, we do not believe that there was any confusion as to what
Smith’s prior criminal history was, only whether she had previously served
-12-
probation on her prior charge, with this confusion being remedied during the
exchanges between defense counsel, the circuit court, and the Commonwealth.
While Smith’s pregnancy was discussed, we do not believe that it impacted the
circuit court’s ultimate decision. We believe that Smith’s stipulation when
combined with the affidavit from Probation and Parole provided a sufficient basis
for revocation if appropriate findings had been made, at least as to the charge for
absconding. While it is unclear whether Smith’s stipulation of violation was
intended to cover a violation for failure to pay restitution or not, there was no
evidence as to such a violation and we note that an inability to pay restitution could
offer a defense to that violation. See Compise, 597 S.W.3d at 181.
Accordingly, we vacate the judgment and sentence removing Smith
from probation and remand for the Laurel Circuit Court to make findings as to
whether the violation of Smith’s probation for absconding constituted a significant
risk to her prior victims or the community at large and whether Smith cannot be
appropriately managed in the community pursuant to KRS 439.3106(1) or whether
alternative sanctions were appropriate under KRS 439.3106(2).
ALL CONCUR.
-13-
BRIEF FOR APPELLANT: BRIEF FOR APPELLEE:
Kelly Kirby Ridings Daniel Cameron
London, Kentucky Attorney General of Kentucky
Perry T. Ryan
Assistant Attorney General
Frankfort, Kentucky
-14- | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482931/ | RENDERED: NOVEMBER 4, 2022; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2021-CA-0661-MR
TOMA WASHINGTON APPELLANT
APPEAL FROM FRANKLIN CIRCUIT COURT
v. HONORABLE THOMAS D. WINGATE, JUDGE
ACTION NO. 16-CR-00413
COMMONWEALTH OF KENTUCKY APPELLEE
OPINION
AFFIRMING
** ** ** ** **
BEFORE: CLAYTON, CHIEF JUDGE; ACREE AND TAYLOR, JUDGES.
CLAYTON, CHIEF JUDGE: Toma1 Washington entered an Alford2 plea of guilty
to manslaughter in the first degree and possession of a handgun by a convicted
1
We will refer to the appellant by his first name in order to avoid confusion with other
individuals mentioned in this Opinion who share the same last name.
2
A plea pursuant to North Carolina v. Alford, 400 U.S. 25, 91 S. Ct. 160, 27 L. Ed. 2d 162
(1970), “permits a conviction without requiring an admission of guilt and while permitting a
felon. He thereafter moved to set aside his conviction pursuant to Kentucky Rules
of Criminal Procedure (RCr) 11.42 and Kentucky Rules of Civil Procedure (CR)
60.02, alleging discovery violations by the Commonwealth and ineffective
assistance of counsel. The Franklin Circuit Court denied his motion in a series of
orders, entered on March 1, 2021, April 9, 2021, and May 17, 2021, from which
Toma now appeals. Having reviewed the record and applicable law, we affirm.
FACTUAL AND PROCEDURAL BACKGROUND
On December 13, 2016, Jaleesa Robinson, Toma’s girlfriend and the
mother of one of his children, was shot and killed. Toma had spent the earlier part
of that day with his wife, Whitney. According to Whitney, he was drinking and
using marijuana. Toma, Whitney, and their child were driving around Frankfort
when he and Whitney got into an argument. Whitney claimed Toma pulled out a
pistol, stuck it in her side, and pulled the trigger, but the gun did not discharge.
Whitney drove Toma to the home of his relative, Brennan Washington, and
dropped him off there.
Toma and Brennan drove to the west side of Frankfort to get some
liquor. On the return trip, Toma called Jaleesa to meet them at Brennan’s. When
they returned to Brennan’s home, Jaleesa was parked in the driveway. Toma got
protestation of innocence.” Wilfong v. Commonwealth, 175 S.W.3d 84, 103 (Ky. App. 2004).
“The entry of a guilty plea under the Alford doctrine carries the same consequences as a standard
plea of guilty.” Id. at 102.
-2-
into the passenger seat of Jaleesa’s SUV and Brennan sat in the back seat behind
Jaleesa. According to Brennan, Jaleesa was looking at Toma’s phone and
unblocking herself on Facebook. Toma pointed his pistol at Jaleesa and fired.
Brennan jumped out and ran to his house. He saw Jaleesa get out of her vehicle,
get back in, and drive away. He did not realize she had been shot.
Jaleesa drove herself to a nearby convenience store, where she called
911 to report she had been shot. The dispatcher asked her twice who had shot her
and both times she replied, “I don’t know.” Jaleesa did not identify the shooter to
the police officer or to the fire and EMS workers who arrived at the scene. Jaleesa
was taken to the hospital where she later died.
The day after the shooting, Toma went to the police station where he
was arrested. He told the detective who interviewed him that he had no reason to
shoot Jaleesa. He admitted that his infidelity had caused a conflict between
Whitney and Jaleesa, and he claimed that the week before, Whitney had chased
him and Jaleesa with a gun.
On December 20, 2016, Toma was indicted for murder, being a
convicted felon in possession of a handgun, and two counts of being a persistent
felony offender in the first degree (PFO I). He was separately indicted for first-
degree wanton endangerment for the incident in which he pointed a gun at Whitney
and pulled the trigger. Toma retained private counsel.
-3-
On January 4, 2017, the trial court entered a discovery order requiring
the Commonwealth to provide the defense with the materials set forth in RCr
7.24(1) and (2) and any exculpatory evidence known to the Commonwealth. The
order also required the Commonwealth to produce witness statements within ten
days of trial, in compliance with RCr 7.26, which requires the production of such
statements to be made at least forty-eight hours before trial.
The Commonwealth filed hundreds of documents on February 14,
2017. A dispute thereafter arose regarding whether the Commonwealth had
provided full discovery. On July 11, 2017, the defense filed a motion to compel
discovery, informing the trial court that it had received discoverable police reports
only after a meeting with a police detective and that the defense did not believe it
had received all discovery as ordered by the court, including police reports,
interviews with witnesses, and exculpatory evidence. The trial court conducted a
hearing and then ordered an in camera review of portions of the Commonwealth’s
file to determine whether any additional materials should be disclosed to the
defense.
After its review, the trial court entered an order on August 22, 2017,
finding the documents at issue were properly excluded from production under RCr
7.24(2). The trial court’s order stated that the Commonwealth divided the
documents into five separate groups. Of the five groups, three were previously
-4-
provided to the defense in the Commonwealth’s initial discovery production, “the
only caveat being that the officers’ mental impressions and memoranda prepared in
anticipation of trial are not discoverable.” The two remaining groups consisted of
witness statements and memoranda generated by the police in their investigations,
which the trial court ruled were excluded by RCr 7.24(2). The order reiterated that
statements of witnesses were not to be provided to the defendant until ten days
before trial, as provided in its initial discovery order. The trial court sealed the
documents it had reviewed and placed them in the record in accordance with RCr
7.24(8).
Toma’s trial was scheduled for January 22, 2018. On December 21,
2017, the Commonwealth provided recordings of interviews conducted with
seventeen individuals and on January 8, 2018, the Commonwealth provided
recordings of interviews with Whitney Washington and Brennan Washington.
On January 10, 2018, Toma filed a motion to continue his trial date,
informing the court that settlement negotiations were occurring between the
parties. The motion also stated that defense counsel had just received twenty
DVDs of witness statements from the Commonwealth, including the statements of
two critical witnesses, and needed more time to find and interview witnesses and to
conduct a forensic evaluation of the evidence. The motion requested an additional
sixty days to investigate and prepare for trial. At a hearing on January 12, 2018,
-5-
defense counsel informed the court that plea negotiations were ongoing. The trial
court took the motion for a continuance under advisement.
On January 16, 2018, the Commonwealth made an offer to amend the
murder charge to manslaughter in the first degree, to keep the charge of possession
of a handgun by a convicted felon, to dismiss the two counts of PFO I, and to
dismiss the separate wanton endangerment case involving Whitney. The
Commonwealth offered to recommend a total sentence of nineteen years’
imprisonment.
On January 18, 2018, following a properly conducted Boykin3
colloquy, Toma entered an Alford plea in accordance with the terms of the plea
agreement and was sentenced to eleven years for the first-degree manslaughter
charge and eight years for convicted felon in possession of a handgun, to be run
consecutively.
On January 17, 2021, Toma filed a motion to set aside his conviction
pursuant to both RCr 11.42 and CR 60.02 as well as Sections 11 and 14 of the
Kentucky Constitution, and the Fifth, Sixth, and Fourteenth Amendments to the
United States Constitution. He alleged that the Commonwealth had committed
discovery violations and failed to turn over exculpatory and impeachment
materials as required under Brady v. Maryland, 373 U.S. 83, 83 S. Ct. 1194, 10 L.
3
Boykin v. Alabama, 395 U.S. 238, 28 S. Ct. 1709, 23 L. Ed. 2d 274 (1969).
-6-
Ed. 2d 215 (1963). He raised a claim of ineffective assistance of counsel, based on
a failure to investigate, and also sought to disqualify the Commonwealth attorney
and the trial judge from presiding over the post-conviction proceedings; and to
inspect the previously sealed documents and make them part of the post-conviction
record.
On March 1, 2021, the trial court entered a lengthy opinion and order,
denying the motion with the exception of reserving some documents for further
investigation in an evidentiary hearing. Toma filed a motion to enlarge and
continue the evidentiary hearing. The trial court denied the motion and held the
evidentiary hearing on April 14, 2021, within the parameters originally delineated
in its March 1, 2021 order. Detective Scott Morgan and Detective Josh Baker, who
investigated Jaleesa’s murder, both testified. The trial court entered a
supplemental order on May 17, 2021, denying the motion to set aside conviction.
This appeal by Toma followed. Further facts will be set forth below as necessary.
ANALYSIS
I. CR 60.02 Claims
The basis of Toma’s claims for relief under CR 60.02 is that the
Commonwealth withheld evidence in violation of RCr 7.24 and Brady, supra. CR
60.02 states:
On motion a court may, upon such terms as are just,
relieve a party or his legal representative from its final
-7-
judgment, order, or proceeding upon the following
grounds: (a) mistake, inadvertence, surprise or excusable
neglect; (b) newly discovered evidence which by due
diligence could not have been discovered in time to move
for a new trial under Rule 59.02; (c) perjury or falsified
evidence; (d) fraud affecting the proceedings, other than
perjury or falsified evidence; (e) the judgment is void, or
has been satisfied, released, or discharged, or a prior
judgment upon which it is based has been reversed or
otherwise vacated, or it is no longer equitable that the
judgment should have prospective application; or (f) any
other reason of an extraordinary nature justifying relief.
The motion shall be made within a reasonable time, and
on grounds (a), (b), and (c) not more than one year after
the judgment, order, or proceeding was entered or taken.
A motion under this rule does not affect the finality of a
judgment or suspend its operation.
To the extent that Toma’s arguments are founded on claims of newly
discovered evidence under section (b) of the Rule, they are time-barred by the
terms of the Rule itself because he filed his CR 60.02 motion almost three years
after the entry of the final judgment. Toma concedes that his claim is founded on
newly discovered evidence but argues that it is of an extraordinary nature and thus
within the purview of CR 60.02(f). He contends that due to the Commonwealth’s
failure to disclose the police department’s documents, his only avenue for
discovery of these materials was by an open records request after the finality of the
case. Two years elapsed between the entry of the final judgment and Toma’s open
records request. Toma does not account for the lengthy delay in seeking the
records or explain why he was unable to file his motion within a year of his
-8-
conviction. “[S]ubsection (f) was not intended to provide a means for evading the
strictures of the other subsections.” Alliant Hospitals, Inc. v. Benham, 105 S.W.3d
473, 479 (Ky. App. 2003). “CR 60.02(f) is a catch-all provision that encompasses
those grounds . . . that are not otherwise set forth in the rule.” Commonwealth v.
Spaulding, 991 S.W.2d 651, 655 (Ky. 1999).
Although the trial court held that the CR 60.02 motion was untimely
under section (b), it nonetheless addressed the substance of Toma’s allegations
under section (f). We will do likewise, in accordance with Foley v.
Commonwealth, 425 S.W.3d 880, 885 (Ky. 2014), which addressed the appellant’s
arguments on the merits despite having “grave doubts” that he had met the
standard for equitable tolling of the deadline for CR 60.02 relief.
“[I]n order for newly discovered evidence to support a motion for new
trial it must be of such decisive value or force that it would, with reasonable
certainty, have changed the verdict or that it would probably change the result if a
new trial should be granted.” Id. at 886 (internal quotation marks and citation
omitted).
We review the denial of a CR 60.02 motion for an abuse of discretion.
Partin v. Commonwealth, 337 S.W.3d 639, 640 (Ky. App. 2010), overruled on
other grounds by Chestnut v. Commonwealth, 250 S.W.3d 288 (Ky. 2008). The
test for abuse of discretion is whether the trial court’s decision was “arbitrary,
-9-
unreasonable, unfair, or unsupported by sound legal principles.” Commonwealth v.
English, 993 S.W.2d 941, 945 (Ky. 1999) (citations omitted). Absent a “flagrant
miscarriage of justice[,]” we will affirm the trial court. Gross v. Commonwealth,
648 S.W.2d 853, 858 (Ky. 1983).
Toma argues that the trial court abused its discretion in finding what
he claims are “official police reports” to be memoranda or investigative documents
that did not need to be disclosed under RCr 7.24(2). RCr 7.24(2) provides:
On motion of a defendant the court may order the
attorney for the Commonwealth to permit the defendant
to inspect and copy or photograph books, papers,
documents, data and data compilations or tangible
objects, or copies or portions thereof, that are in the
possession, custody or control of the Commonwealth,
upon a showing that the items sought may be material to
the preparation of the defense and that the request is
reasonable. This provision authorizes pretrial discovery
and inspection of official police reports, but not of
memoranda, or other documents made by police officers
and agents of the Commonwealth in connection with the
investigation or prosecution of the case, or of statements
made to them by witnesses or by prospective witnesses
(other than the defendant).
Toma argues that the Commonwealth violated RCr 7.24(2) by
withholding fifty-eight official police reports from its discovery responses, on the
pretext that they were internal memoranda. He contends that they were labeled
“reports” pursuant to departmental policy, titled “reports” in the header of each
document, and were in the same format as other reports which were disclosed. The
-10-
trial court conducted an in camera review of these portions of the
Commonwealth’s file, and found that the documents in question, whatever their
designation, were witness statements and memoranda which are specifically
excluded by RCr 7.24(2).
One of these undisclosed reports, drafted by Detective Scott Morgan,
revealed the identity of a potential eyewitness to the shooting, Thomas Wideman.
The document at issue states that Detective Morgan learned from the
Commonwealth attorney that Brennan Washington had recently provided
information that an individual named “Biscuit” was a possible witness to the
shooting and that Biscuit was identified as Thomas Wideman. Two detectives
tried unsuccessfully to contact Wideman at different addresses.
The trial court found that the document was not an official police
report requiring disclosure, in reliance on Detective Morgan’s testimony that the
template he used to compose the document was the standard form used by the
police department at the time to document any occurrence. His intent in drafting
the document was to memorialize what had occurred in order to turn the
information over to the prosecution and he described the document as work
product prepared in the investigation of the case. The trial court found his
testimony to be credible and observed that Morgan, as the author of the document,
was in the best position to testify about his intent in creating it.
-11-
The trial court further found that Toma was not prejudiced by the
Commonwealth’s failure to produce the document. Wideman was not a confirmed
witness and the police department had not been able to contact him. The trial court
also discounted Toma’s argument that Wideman’s testimony could have been used
to impeach Brennan’s testimony, as it was unlikely that Brennan would have
provided the prosecutor with information regarding a possible witness who would
undermine Brennan’s version of what had occurred.
Another document which was not disclosed contained information
provided by Toni Cremeans, who informed the police that an individual named
“Beanie” might have witnessed the shooting. Detective Josh Baker testified that
the police had been unable to locate Beanie.
Documents regarding the police investigation and interviews with
Mary Taylor and Kassie Jones were also not disclosed. The document pertaining
to Mary Taylor states that she contacted Detective Morgan on December 16, 2016,
identifying herself as being part of the Washington family. She told Morgan that
she had been conducting her own investigation of the shooting and “felt like” there
was a reasonable doubt that Toma Washington was responsible. She was not in
town at the time of the shooting and stated that she did not have any direct
knowledge of the shooting. She stated that she believed the detectives should
-12-
speak with DJ Washington who lives with Brennan Washington and that the
shooting had something to do with all parties being part of the drug trade.
The document regarding Kassie Jones indicates that Detective Morgan
interviewed her on December 27, 2016. He asked her if she knew Toma
Washington. She replied that the last time she had any contact with him was
approximately two weeks prior to the shooting. She stated she knew the victim
and had heard on the street that a girl named “Whitney” was responsible for the
shooting. Detective Morgan asked her if she knew “Marky Mark.” She replied
that he was a male with one leg who lives on Meagher Avenue next to an alley and
that she had not been inside his residence since around October 2016. Jones also
stated that, several days before Christmas, she gave a ride to a black girl with short
hair in her early twenties named Risha. Risha was intoxicated and spoke about the
shooting. Risha said that Marky Mark knows what happened and hid “them” out.
She said that Marky Mark knows “where everything is at.” Jones stated that Risha
is not from Frankfort and does not know Jaleesa or Toma. Jones told the detective
she dropped Risha at Marky Mark’s residence.
Toma argues that the information in these documents could have been
used by the defense to conduct further investigation into potential witnesses to the
shooting. But the value of this evidence is speculative. The statements of these
witnesses consist largely of hearsay, relating what they had heard from others
-13-
about what may have occurred at the shooting or about who may have witnessed it.
Mere speculation or conjecture cannot be the basis of CR 60.02(f) relief. Foley,
425 S.W.3d at 887-88 (citation omitted). In any event, Toma received the actual
and complete witness statements upon which these police documents were based
and was therefore fully aware of what these witnesses had told the police.
In sum, Toma’s allegations regarding these documents do not meet
the high standard necessary to merit relief under CR 60.02(f). Rule 60.02(f) “may
be invoked only under the most unusual circumstances . . . and relief should not be
granted . . . unless the new evidence, if presented originally, would have, with
reasonable certainty, changed the result.” Brown v. Commonwealth, 932 S.W.2d
359, 362 (Ky. 1996). Toma had access to the information in these documents in
the form of the actual witness statements, and he does not explain what additional
information the police documents contain that would, with reasonable certainty,
have caused him to reject the plea offer and procced to trial.
Toma also argues that the Commonwealth withheld evidence in
violation of his due process rights under Brady v. Maryland, supra. In Brady, the
Supreme Court held that “the suppression by the prosecution of evidence favorable
to an accused upon request violates due process where the evidence is material
either to guilt or to punishment, irrespective of the good faith or bad faith of the
prosecution.” Brady, 373 U.S. 83, 87, 83 S. Ct. at 1196-97. To rise to the level of
-14-
a Brady violation, “[t]he evidence at issue must be favorable to the accused, either
because it is exculpatory, or because it is impeaching; . . . [the] evidence must have
been suppressed by the State, either willfully or inadvertently; and prejudice must
have ensued.” Goben v. Commonwealth, 503 S.W.3d 890, 914 n.21 (Ky. 2016)
(quoting Strickler v. Greene, 527 U.S. 263, 281-82, 119 S. Ct. 1936, 1948, 144 L.
Ed. 2d 286 (1999)).
In the context of guilty plea proceedings, the Supreme Court held that
Brady does not apply to the disclosure of material impeachment evidence. See
United States v. Ruiz, 536 U.S. 622, 633, 122 S. Ct. 2450, 2457, 153 L. Ed. 2d 586
(2002) (“[T]he Constitution does not require the Government to disclose material
impeachment evidence prior to entering a plea agreement with a criminal
defendant.”). The Supreme Court has not decided if Brady applies to material
exculpatory evidence. We need not address the issue here, however, because even
if Brady does apply, Toma’s claims do not rise to the level of meriting CR 60.02(f)
relief.
The evidence at issue consists of photographs of text messages
between Whitney and Brennan Washington which they exchanged on the evening
of the day Jaleesa was shot. Brennan initiated the contact, telling Whitney he
heard a female was shot. Whitney told him it was Jaleesa. The following
exchange took place:
-15-
Brennan: WHAAAAAT
Whitney: I tried to tell you.
Brennan: Wtf. Is she ok.
Whitney: Idk someone told me she got airlifted out I’m
not sure if its true
Brennan: Dam it was on the news
Brennan: Girl did u shoot that girl
Whitney: Shut the f***ck up Oh u wanna play your role
huh
Brennan: Lol. Naw a mf just tried to say u did . . . .
N***a I know u wasn’t even around
Whitney: Toma did that s**t n I know it . . . He pulled it
out n pulled the trigger in front of Joey right before we
pulled up. I told you he was the one
Brennan: S**t. I’m glad you got away from that n***a.
I’m glad you and the kids are okay
Whitney: Me too
In its March 1, 2021 order, the trial court found that the photographs
of these Facebook messages taken from the screen of Whitney’s phone were
disclosed to the defense on a disc as part of the February 13, 2017 discovery.
Toma argues that the trial court’s finding was erroneous, based on the Franklin
Circuit Court clerk’s affidavit stating that typically the circuit clerk is only
provided with a photocopy of the disc provided to defense counsel and therefore
-16-
the actual disc was not in the court record. Toma argues that the trial court could
not therefore have reviewed the disc to make sure the photographs were on it.
In its order of April 9, 2021, the trial court held that even if the photos
were not included on the disc, the Facebook messages were not withheld from the
defense because they were contained in a recorded interview of Whitney
Washington which was provided to the defense as part of the January 8, 2018,
discovery response. In the interviews, conducted by the police on December 13
and 15, 2016, Whitney recalled her Facebook exchange with Brennan and
recounted it to the police. We have reviewed the recording of the interview and
Whitney summarized and then read aloud from the phone the full exchange with
Brennan. This claim is therefore without merit because the evidence was disclosed
to Toma.
Toma argues that he was entitled to an evidentiary hearing on his CR
60.02 motion. “Before the movant is entitled to an evidentiary hearing, he must
affirmatively allege facts which, if true, justify vacating the judgment and further
allege special circumstances that justify CR 60.02 relief.” Gross, 648 S.W.2d at
856. Toma’s allegations do not rise to the level of meriting an evidentiary hearing.
II. RCr 11.42 Claim
Toma also argues that his defense counsel was ineffective for failing
to conduct a meaningful investigation of witnesses and that he was entitled to an
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evidentiary hearing on this claim. When a defendant claims that “he was unable to
intelligently weigh his legal alternatives in deciding to plead guilty because of
ineffective assistance of counsel, he must demonstrate the following”:
(1) that counsel made errors so serious that counsel’s
performance fell outside the wide range of professionally
competent assistance; and (2) that the deficient
performance so seriously affected the outcome of the
plea process that, but for the errors of counsel, there is a
reasonable probability that the defendant would not have
pleaded guilty, but would have insisted on going to trial.
Rigdon v. Commonwealth, 144 S.W.3d 283, 288 (Ky. App. 2004).
The Commonwealth produced numerous witness statements to the
defense on December 20, 2017, and January 8, 2018, in compliance with the
deadline in the trial court’s discovery order. The trial was scheduled to take place
on January 22, 2018. At the hearing on the motion for a continuance, defense
counsel told the court he could not effectively try a murder case on the scheduled
date. He explained that ten of the witness statements were from people of whom
he had never heard and that he could not assure his client he had followed down
the trail of all the evidence if he did not have time to investigate. The trial court
stated it would issue an order on the continuance motion the following Monday.
Before the trial court issued its ruling, defense counsel advised Toma to accept the
Commonwealth’s plea offer.
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Toma argues that his attorney’s advice constituted ineffective
assistance of counsel because, by counsel’s own admission to the trial court, the
investigation into the case was incomplete. Toma contends that, if the
investigation had been completed and he fully understood the evidence in his case,
a decision to reject the plea offer would have been rational under the circumstances
and he would have insisted on going to trial. Toma does not explain with any
specificity what evidence would have persuaded him to change his mind and go to
trial. He alludes to Kassie Jones’s statement that she heard a girl named Whitney
was responsible for the shooting and that Marky Mark knew what happened. But
Toma and his attorney knew that Whitney had a motive to kill the victim and
defense counsel interviewed both Brennan and Whitney shortly after the shooting.
The allegation that Marky Mark knew what happened is completely unsupported.
“Advising a client to plead guilty is not, in and of itself, evidence of
any degree of ineffective assistance of counsel.” Rigdon, 144 S.W.3d at 288. The
record shows that Toma’s attorney pursued his defense with vigor. He obtained an
investigator and funding for a forensic examiner. He filed numerous motions
related to discovery. His motion seeking a continuance does not undermine the
wisdom of his decision to advise Toma to accept the plea offer. Toma was facing a
murder charge as well as two charges of PFO I. His counsel had to weigh the
benefit of accepting the Commonwealth’s favorable plea offer against going
-19-
forward to trial based on the hope that some of the witness statements might yield a
credible witness who could exonerate Toma or a credible alternate perpetrator of
the crime. Under the circumstances, his recommendation to Toma to accept the
plea offer was well-founded.
An evidentiary hearing is only required “if there is a material issue of
fact that cannot be conclusively resolved, i.e., conclusively proved or disproved, by
an examination of the record.” Fraser v. Commonwealth, 59 S.W.3d 448, 452
(Ky. 2001) (citations omitted). There is no material issue of fact that needs to be
resolved here and therefore an evidentiary record was not required.
CONCLUSION
For the foregoing reasons, the Franklin Circuit Court’s orders denying
Toma’s motion to set aside his conviction are affirmed.
ALL CONCUR.
BRIEFS FOR APPELLANT: BRIEF FOR APPELLEE:
Whitney N. Wallace Daniel Cameron
Christine N. Madjar Attorney General of Kentucky
Frankfort, Kentucky
Bryan D. Morrow
Assistant Attorney General
Frankfort, Kentucky
-20- | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8482934/ | RENDERED: NOVEMBER 4, 2022; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2021-CA-1224-MR
MARK A. WOODS APPELLANT
APPEAL FROM JEFFERSON CIRCUIT COURT
v. HONORABLE BRIAN C. EDWARDS, JUDGE
ACTION NO. 18-CI-002199
COMMUNITY MEDICAL
ASSOCIATES, INC. D/B/A NORTON
SURGICAL ASSOCIATES AND
ALEXANDRA C. MAKI, M.D. APPELLEES
OPINION
AFFIRMING
** ** ** ** **
BEFORE: CALDWELL, GOODWINE, AND JONES, JUDGES.
CALDWELL, JUDGE: Mark Woods appeals from orders of the Jefferson Circuit
Court granting summary judgment in favor of Community Medical Associates,
Inc. d/b/a Norton Surgical Associates (“Norton”), and Alexandra Maki, M.D. in
this medical negligence case.1 Upon careful review, we affirm.
FACTUAL AND PROCEDURAL BACKGROUND
Woods was scheduled to undergo a laparoscopic appendectomy on
April 18, 2017, performed by Dr. Maki. Upon inserting the surgical instrument
into Woods’ abdomen, Dr. Maki noticed an unusual amount of blood. She
removed the instrument, made an incision, and identified the source of the
bleeding. It is undisputed that there was injury to Woods’ iliac artery and gonad
vessel during the procedure. A vascular surgeon was brought in to assist Dr. Maki
in repair of the vessels. After repair of the vessels, Dr. Maki completed the
appendectomy. Woods filed a complaint in the Jefferson Circuit Court, alleging
that, due to Dr. Maki’s negligence in injuring his gonad vessel, he has experienced
erectile dysfunction since the date of the procedure.2
This case remained on the circuit court’s docket for over three years.
During that time, Woods propounded discovery upon Norton and Dr. Maki, but did
not take any depositions. The circuit court imposed a deadline for the parties to
1
The Jefferson Circuit Court entered an order granting summary judgment to Norton and Dr.
Maki on May 4, 2021. The circuit court subsequently entered an order denying Woods’ motion
to alter, amend, or vacate that order on September 17, 2021.
2
Woods’ wife also filed a loss of consortium claim. However, it was dismissed upon motion of
Norton and Dr. Maki because she was not married to Woods at the time he underwent the
appendectomy. She did not appeal and is not a party to this appeal.
-2-
identify expert witnesses prior to trial. Woods failed to meet the deadline. Shortly
thereafter, Norton and Dr. Maki filed a motion for summary judgment, claiming
Woods could not prove his claims without expert testimony. After briefing, the
circuit court granted the motion for summary judgment. This appeal followed.
On appeal, Woods argues the operative reports of Dr. Maki and the
vascular surgeon, combined with discovery responses – which he characterizes as
judicial admissions – demonstrate medical negligence. He also claims the judicial
admissions demonstrate a lack of informed consent. Woods argues he does not
need an expert witness because res ipsa loquitur applies and the circuit court erred
in granting summary judgment to the appellees. We disagree.
STANDARD OF REVIEW
When a circuit court grants a motion for summary judgment, the
standard of review for the appellate court is de novo because only legal issues are
involved. Hallahan v. The Courier-Journal, 138 S.W.3d 699, 705 (Ky. App.
2004). We must consider the evidence of record in the light most favorable to the
non-movant (i.e., Woods) and determine whether the circuit court correctly found
there was no genuine issue as to any material fact and that the moving party was
entitled to judgment as a matter of law. Scifres v. Kraft, 916 S.W.2d 779, 780 (Ky.
App. 1996).
-3-
Summary judgment is appropriate where “the pleadings, depositions,
answers to interrogatories, stipulations, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to any material fact and
that the moving party is entitled to a judgment as a matter of law.” Kentucky Rule
of Civil Procedure (CR) 56.03. The movants bear the initial burden of
demonstrating that there is no genuine issue of material fact in dispute. The party
opposing the motion then has the burden to present “at least some affirmative
evidence showing that there is a genuine issue of material fact for trial.” Steelvest
Inc. v. Scansteel Service Center, Inc., 807 S.W.2d 476, 482 (Ky. 1991). A party
responding to a properly supported summary judgment motion cannot merely rest
on the allegations in his pleadings. Continental Casualty Co. v. Belknap Hardware
& Manufacturing Co., 281 S.W.2d 914 (Ky. 1955).
ANALYSIS
Except in very limited circumstances, the plaintiff in a medical
negligence case
is required to present expert testimony that establishes (1)
the standard of skill expected of a reasonably competent
medical practitioner and (2) that the alleged negligence
proximately caused the injury. See [Meador v. Arnold,
94 S.W.2d 626, 631 (Ky. 1936)]; Johnson v. Vaughn,
370 S.W.2d 591, 596-97 (Ky. 1963); and Reams v.
Stutler, 642 S.W.2d 586, 588 (Ky. 1982).
The opinion of the expert must be based “on
reasonable medical probability and not speculation or
-4-
possibility.” Sakler v. Anesthesiology Associates, P.S.C.,
50 S.W.3d 210, 213 (Ky. App. 2001). To survive a
motion for summary judgment in a medical malpractice
case in which a medical expert is required, the plaintiff
must produce expert evidence or summary judgment is
proper. See Turner v. Reynolds, 559 S.W.2d 740, 741-42
(Ky. App. 1977).
Kentucky consistently recognizes two exceptions
to the expert witness rule in medical malpractices cases.
See Perkins v. Hausladen, 828 S.W.2d 652, 655 (Ky.
1992). Both exceptions involve the application of the res
ipsa loquitur doctrine and permit the inference of
negligence even in the absence of expert testimony. See
id. at 654. One exception involves a situation in which
“ʻany layman is competent to pass judgment and
conclude from common experience that such things do
not happen if there has been proper skill and care’;
illustrated by cases where the surgeon leaves a foreign
object in the body or removes or injures an inappropriate
part of the anatomy. The second occurs when ‘medical
experts may provide a sufficient foundation for res ipsa
loquitur on more complex matters.’” Id. at 655 (quoting
Prosser and Keeton on Torts, Sec. 39 (5th ed. 1984)). An
example of the second exception would be the case in
which the defendant doctor makes admissions of a
technical character from which one could infer that he or
she acted negligently. See id.
Andrew v. Begley, 203 S.W.3d 165, 170-71 (Ky. App. 2006).
Woods argues the facts of this case do not require expert testimony.
For example, Woods points to photographic exhibits and operative reports
submitted to the circuit court and contends they indicate “that [Dr. Maki] placed
the trocar in the lower abdomen directly above the iliac artery. Intent to remove
the appendix on the other side of the stomach, the right side of the abdomen where
-5-
the [appendix] is located. Obviously not a good location to insert the trocar.”3
(Emphasis in original.) This begs the question – obvious to whom? Woods
appears to be arguing that, under this set of facts, “any layman is competent to pass
judgment and conclude from common experience that such things do not happen if
there has been proper skill and care[.]” Andrew, 203 S.W.3d at 170. We are
unpersuaded. Without expert testimony, the jury would not know if Dr. Maki’s
actions were standard procedure for a laparoscopic appendectomy, or whether she
breached the duty of care by inserting the trocar where she did.
Woods additionally characterizes the discovery responses of Dr. Maki
as judicial admissions. A judicial admission “may be defined to be a formal act
done in the course of judicial proceedings which waives or dispenses with the
necessity of producing evidence by the opponent and bars the party himself from
disputing it; and, as a natural consequence, allows the judge to direct the jury to
accept the admission as conclusive of the disputed fact.” Sutherland v. Davis, 151
S.W.2d 1021, 1024 (Ky. 1941). We again disagree. Although Dr. Maki admitted
an injury occurred to the left iliac artery and left gonad vessel in her answers to
interrogatories, at no point does Dr. Maki admit she deviated from the standard of
care. We reiterate that only expert testimony could provide evidence of negligence
in light of Dr. Maki’s operative notes and discovery responses. The average
3
See page 3 of Appellant’s brief.
-6-
person does not know if Dr. Maki’s attempt to enter Woods’ abdomen on the left
side was standard procedure or negligence. Nor does the average person possess
the anatomical and surgical knowledge to decipher the operative notes of Dr. Maki
and the vascular surgeon who assisted her. Stated differently, there are no facts or
circumstances from which negligence can be inferred without expert testimony.
The case at bar is not analogous to a situation in which a surgeon left a foreign
object in the body or removed the incorrect limb. See Andrew, 203 S.W.3d at 170.
We agree with the reasoning of the appellees that, should Woods’ argument
prevail, any physician describing an injury in a medical record later produced
during discovery would be effectively making a legal admission of liability. This
would, for all practical purposes, replace negligence with strict liability.4 Woods’
argument must fail.
We are similarly unpersuaded by Woods’ assertion that expert
testimony is not needed regarding his claim of lack of informed consent. Woods
claims he was not informed of the possibility an artery or vein could be lacerated
during the procedure, nor that he could end up experiencing erectile dysfunction as
4
“Strict liability is a judicial doctrine which relieves a plaintiff from proving specific acts of
negligence and protects him from certain defenses.” Carmical v. Bullock, 251 S.W.3d 324, 326
(Ky. App. 2007) (internal quotations marks omitted).
-7-
a result of the appendectomy. We first turn to Kentucky’s informed consent
statute, KRS5 304.40-320, which states, in relevant part
[i]n any action brought for treating, examining, or
operating on a claimant wherein the claimant’s informed
consent is an element, the claimant’s informed consent
shall be deemed to have been given where:
(1) The action of the health care provider in
obtaining the consent of the patient or
another person authorized to give consent
for the patient was in accordance with the
accepted standard of medical or dental
practice among members of the profession
with similar training and experience; and
(2) A reasonable individual, from the
information provided by the health care
provider under the circumstances, would
have a general understanding of the
procedure and medically or dentally
acceptable alternative procedures or
treatments and substantial risks and hazards
inherent in the proposed treatment or
procedures which are recognized among
other health care providers who perform
similar treatments or procedures[.]
We begin by noting we find it particularly problematic that Woods
relies on caselaw that has been overruled to support the arguments he makes
regarding informed consent. The cases relied on by Woods are Sargent v. Shaffer,
467 S.W.3d 198 (Ky. 2015); and Argotte v. Harrington, 521 S.W.3d 550 (Ky.
5
Kentucky Revised Statute.
-8-
2017). Both Sargent and Argotte ruled that expert testimony was not always
necessary to demonstrate that a risk associated with a particular procedure was or
was not “substantial” as provided in KRS 304.40-320(2). However, in overruling
those cases, the Kentucky Supreme Court stated,
[i]ndeed, determining whether a particular risk is
substantial is not only a matter best addressed by the
medical community and therefore an element requiring
expert testimony, but that is what a plain reading of KRS
304.40-320(2) requires, i.e., “substantial risks and
hazards inherent in the proposed treatment or procedures
which are recognized among other health care providers
who perform similar treatments or procedures.” To the
extent that Sargent and Argotte suggest that the
substantiality of a risk is a jury question that does not
depend on medical evidence those holdings are
overruled.
University Medical Center, Inc. v. Shwab, 628 S.W.3d 112, 129 (Ky. 2021).6
Accordingly, under Shwab, expert testimony is required to understand
whether the injuries suffered by Woods (i.e., injury to the iliac artery and gonad
vessel) would qualify as “inherent” or “substantial” to a laparoscopic
appendectomy, and of which he should have been informed. This requirement of
Shwab is fatal to Woods’ argument regarding informed consent.
KRS 304.40-320(1) also requires expert testimony on its face. There
is simply no other way of knowing whether, in obtaining consent, a healthcare
6
Notably, the plaintiff in Sargent did in fact have an expert testify that the defendant doctor’s
explanation of the risks involved did not satisfy the standard for accepted medical practice.
-9-
provider acted “in accordance with the accepted standard of medical or dental
practice among members of the profession with similar training and experience[,]”
other than hearing from an expert in the field. The Kentucky Supreme Court also
addressed this in Shwab:
KRS 304.40-320 was enacted as part of a tort-reform
effort and was produced by the Governor’s Hospitals and
Physicians Professional Liability Insurance Advisory
Committee in 1975. In the Committee’s Majority
Report, they describe the statute (Section 13 of their
proposal and eventually Section 4 of Senate Bill 248 in
the 1976 Session of the General Assembly) as follows:
This section will legislatively require that
“informed consent” cases be proven by
expert testimony relating to accepted
standards of practice of the profession in
providing information, and further require
that an objective standard be applied in
determining whether that information would
likely have resulted in any different decision
by the plaintiff. The purpose of this section
is to eliminate the possibility of (1) a jury’s
speculating after the fact that the health care
provider should have told the plaintiff of a
given risk even though accepted
professional standards would not require
such advance information, and (2) a
plaintiff’s testifying that had he known of an
unforeseeable or unlikely injury he would
not have consented to the recommended
health care.
Shwab, 628 S.W.3d at 130 (emphasis added).
-10-
Woods contends the informed consent form he signed was “bare
boned” and “deficient.”7 However, without expert testimony, there is no way of
knowing whether the form used by Dr. Maki and Norton and signed by Woods fell
within the accepted standard of practice in the medical profession in terms of the
information it contained on its face.
Finally, Woods’ argument that res ipsa loquitur is applicable is simply
a repackaging of his previous arguments. The Kentucky Supreme Court has
defined res ipsa loquitur in medical negligence cases. To wit,
the term means nothing more than whether the facts and
circumstances are such that negligence can be inferred,
even in the absence of expert testimony. As Prosser
explains, res ipsa loquitur is a “Latin phrase, which
means nothing more than the thing speaks for itself,” and
is simply “[o]ne type of circumstantial evidence.”
Prosser and Keeton on Torts, Sec. 39 (5th ed. 1984).
Speaking to how the doctrine applies to the “question of
duty . . . in cases of medical malpractice,” Prosser
advises that “ordinarily” negligence cannot be inferred
simply from an “undesirable result”; expert testimony is
needed. Id. at 256.
Perkins, 828 S.W.2d at 654-55.
This Court has previously identified that any exceptions to having an
expert in a medical negligence case lie within the doctrine of res ipsa loquitur (i.e.,
when “any layman is competent to pass judgment and conclude from common
7
See page 7 of Appellant’s brief.
-11-
experience that such things do not happen if there has been proper skill and care”
or when “medical experts may provide a sufficient foundation for res ipsa loquitur
on more complex matters.” Andrew, 203 S.W.3d at 170). Accordingly, we decline
to further address this argument.
CONCLUSION
For the foregoing reasons, the order of the Jefferson Circuit Court is
affirmed.
ALL CONCUR.
BRIEFS AND ORAL ARGUMENT BRIEF FOR APPELLEES
FOR APPELLANT: ALEXANDRA C. MAKI, M.D. AND
COMMUNITY MEDICAL
Stephen P. Imhoff ASSOCIATES D/B/A NORTON
Louisville, Kentucky SURGICAL ASSOCIATES:
David B. Gazak
Robert J. Shilts
Louisville, Kentucky
ORAL ARGUMENT FOR
APPELLEES:
David B. Gazak
Louisville, Kentucky
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NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2021-CA-0668-MR
RITA R. WHITE AND MARGARET
SUE PARIS APPELLANTS
APPEAL FROM JEFFERSON CIRCUIT COURT
v. HONORABLE DEANA C. MCDONALD, JUDGE
ACTION NO. 19-CI-503731
TIARA M. FOWLER AND PHILLIP
FOWLER APPELLEES
OPINION
AFFIRMING
** ** ** ** **
BEFORE: DIXON, LAMBERT, AND MCNEILL, JUDGES.
DIXON, JUDGE: Rita R. White and Margaret Sue Paris appeal the Jefferson
Family Court’s order, entered March 23, 2021, denying them de facto custodian
status. After careful review of the briefs, record, and law, we affirm.
BACKGROUND FACTS AND PROCEDURAL HISTORY
Tiara and Phillip Fowler are the parents of J.F. and T.F., who are
minor children. On December 16, 2019, White and Paris, the children’s maternal
grandmother and great-grandmother, respectively, filed a petition seeking custody,
parenting time, and/or visitation. A hearing was held on February 19, 2021.
Thereafter, on March 23, 2021, the court entered an order finding that White and
Paris had not satisfied their burden of proof to be designated de facto custodians
pursuant to KRS1 403.270(1). After their subsequent motion to alter, amend, or
vacate the court’s order pursuant to CR2 59.05 was denied, White and Paris timely
brought this appeal.
STANDARD OF REVIEW
We review a court’s findings of fact under the clearly erroneous
standard and will only reverse if the findings are not supported by substantial
evidence. CR 52.01; Black Motor Co. v. Greene, 385 S.W.2d 954, 956 (Ky. 1964).
We review the court’s legal conclusions de novo. Nash v. Campbell County Fiscal
Court, 345 S.W.3d 811, 816 (Ky. 2011).
1
Kentucky Revised Statutes.
2
Kentucky Rules of Civil Procedure.
-2-
ANALYSIS
As an initial matter, we will address whether the parties’ respective
briefs should be stricken. The Fowlers argue in their joint appellee brief that White
and Paris’s appellant brief should be stricken for failure to comply with CR
76.12(4)(v). CR 76.12(4)(v) requires that appellants begin their argument with “a
statement with reference to the record showing whether the issue was properly
preserved for review and, if so, in what manner.” White and Paris’s preservation
statement does not include the required reference to the record.
White and Paris, in turn, filed a motion seeking to strike the Fowlers’
appellee brief for their recitation of evidence that had been stricken by the court.
Without conceding error, the Fowlers assert the court should ignore the alleged
deficiency or, in the alternative, they request that the court strike only those
offending portions, which amounts to the first four sentences on page four in their
counterstatement of the case.
When a party fails to abide by the rules of civil procedure, we are
permitted to ignore the deficiency, strike the brief in whole or part, or review the
issues raised for manifest injustice. CR 76.12(8); Elwell v. Stone, 799 S.W.2d 46,
47 (Ky. App. 1990). Given the important nature of child custody cases, we are not
inclined to strike either brief in its entirety; however, by separate order we GRANT
-3-
IN PART White and Paris’s motion to strike and will disregard those portions of
the Fowlers’ brief referencing disqualified evidence from Kevin Strange.
We turn now to the merits of the appeal. KRS 403.270 (2018)3
provides in pertinent part:
(1)(a) As used in this chapter and KRS 405.020, . . . “de
facto custodian” means a person who has been shown by
clear and convincing evidence to have been the primary
caregiver for, and financial supporter of, a child who has
resided with the person for a period of six (6) months or
more if the child is under three (3) years of age and for a
period of one (1) year or more if the child is three (3)
years of age or older[.]
(b) . . . Once a court determines that a person meets the
definition of de facto custodian, the court shall give the
person the same standing in custody matters that is given
to each parent under this section[.]
White and Paris raise various challenges to the court’s findings of
fact regarding the care and support of the children and assert the court erred in
denying them de facto custodian status. Resolution of these issues requires us to
review the evidence; however, because White and Paris did not file a designation,
the record on appeal does not contain the video proceedings from the relevant
hearing. As the appellants, it is incumbent on White and Paris to ensure that this
Court receives a complete record. Gambrel v. Gambrel, 501 S.W.3d 900, 902 (Ky.
App. 2016) (citing Steel Techs., Inc. v. Congleton, 234 S.W.3d 920, 926 (Ky.
3
The statute was amended in 2021 after these proceedings commenced.
-4-
2007), abrogated on other grounds by Osborne v. Keeney, 399 S.W.3d 1 (Ky.
2012)). When the record is incomplete, we must assume the missing contents
support the trial court’s decision. Smith v. Smith, 450 S.W.3d 729, 732 (Ky. App.
2014); Commonwealth v. Thompson, 697 S.W.2d 143, 145 (Ky. 1985).
Accordingly, absent the video proceedings, we are required to conclude that the
court did not err.
Next, White and Paris state the court erred in concluding that KRS
403.270 does not allow them to jointly qualify for de facto custodian status.
However, White and Paris concede that the court did not expressly rule on this
issue and admit the denial of de facto custodian status was predicated on the
court’s finding they jointly did not satisfy their burden of proof when Tiara Fowler
consistently cared for and financially supported her children. Because we have
determined the court’s findings must be affirmed, this claim is consequently moot.
Finally, White and Paris argue the court applied an erroneous burden
of proof. In support, they cite the court’s statement that “[w]hile not specifically
stated in the statute, it is presumed that parents fill the roles of primary caregiver
and financial supporter. Thus, [White and Paris] have the burden of rebutting that
presumption.” White and Paris maintain that the court’s statement is not supported
by the law, demonstrates bias, and deprived them of a fair hearing. We disagree.
-5-
While we do not endorse the court’s summation of the law, contrary
to White and Paris’s contention, it is not without support. In applying KRS
403.270, our courts have consistently recognized that parents have a superior,
constitutionally protected right to the care, custody, and control of their children.
Brumfield v. Stinson, 368 S.W.3d 116, 118 (Ky. App. 2012); see also Stanley v.
Illinois, 405 U.S. 645, 651, 92 S. Ct. 1208, 1212-13, 31 L. Ed. 551 (1972).
Attendant with these rights, we have recognized that the common law “imposes a
duty of responsibility on parents for the care, nurture[,] and upbringing of their
children.” Smothers v. Baptist Hospital East, 468 S.W.3d 878, 883 (Ky. App.
2015). We have also held that before a purported de facto custodian is afforded the
same standing as a parent, “the court must determine that the biological parent has
abdicated the role of primary caregiver and financial supporter of the child for the
required period of time. In other words, one must literally stand in the place of the
natural parent to qualify as a de facto custodian.” Brumfield, 368 S.W.3d at 118
(internal quotation marks and citations omitted). As the court’s statement is
consistent with these principles, we find no error.
Further, we do not perceive that the standard articulated by the court
constitutes prejudice or bias as White and Paris’s burden of proof remains
unchanged. Moreover, as the court cited and applied the correct standard in the
-6-
underlying order on appeal, the challenged language only appearing in the order
denying CR 59.05 relief, we conclude any error was harmless. CR 61.01.
CONCLUSION
Therefore, and for the forgoing reasons, the order of the Jefferson
Family Court is AFFIRMED.
ALL CONCUR.
BRIEFS FOR APPELLANTS: BRIEF FOR APPELLEES:
Dean H. Sutton Allison S. Russell
Louisville, Kentucky Louisville, Kentucky
John H. Helmers, Jr.
Louisville, Kentucky
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https://www.courtlistener.com/api/rest/v3/opinions/8482944/ | RENDERED: NOVEMBER 4, 2022; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2021-CA-0618-MR
CHARLES “SKEE” BAUER APPELLANT
APPEAL FROM OLDHAM CIRCUIT COURT
v. HONORABLE JERRY CROSBY, II, JUDGE
ACTION NO. 17-CI-00771
ROGER BAUER, BOTH
INDIVIDUALLY AND ON BEHALF
OF THE CHARLES F. BAUER
REALTY PARTNERSHIP, LLLP APPELLEE
OPINION
AFFIRMING
** ** ** ** **
BEFORE: CETRULO, LAMBERT, AND MCNEILL, JUDGES.
LAMBERT, JUDGE: Charles “Skee” Bauer appeals the Oldham Circuit Court
orders concerning the arbitration award pertaining to Roger Bauer’s claims against
Skee over the family trust. We affirm.
Skee and Roger are half-brothers, both sons of Charles F. Bauer, Sr.
The family trust was created in 2007, while Charles was still living, and the three
men comprised equal one/third ownership. Prior to December 2012, the principal
property owned by the partnership consisted of several establishments in Louisville
on Brownsboro Road (namely, at 3608 to 3624). In that month, what had been
Doll’s Market (a grocery store of many decades in that location) sold for over $2.5
million. The monies realized were placed in the trust, and the partnership retained
ownership of the adjoining properties. Skee brokered the deal and managed all the
business relating to the trust.
Charles Sr. passed away in February 2013. It was not until the
following year that Roger began asking Skee to see the financial statements for the
partnership. When none was forthcoming in spite of repeated requests, Roger
(individually and on behalf of the trust) filed suit against Skee in 2017 in Oldham
Circuit Court. In February 2019, Skee moved to compel arbitration pursuant to the
partnership agreement. An order staying the action was entered, and a three-day
arbitration hearing was held. The arbitration award was entered on August 13,
2020. A further hearing was held on October 30, 2020, on Skee’s petition to
vacate or modify the award. The matter then moved to circuit court for review.
The circuit court affirmed the arbitrator’s decision on January 22, 2021. Skee filed
a post-judgment motion pursuant to Kentucky Rules of Civil Procedure (CR)
59.05. The motion was denied on April 21, 2021, after which Skee filed his notice
of appeal.
-2-
The crux of this appeal turns on whether the parties effectively agreed
that the circuit court could review the arbitrator’s award for errors of law. Skee
insists that he and Roger agreed to this, with circuit court approval, and that
subsequent orders entered by the circuit court denied Skee of this agreed-upon
right. We find no such error and affirm.
Skee specifically points to this language in the arbitrator’s findings of
fact and conclusions of law: “the parties have requested that findings be made so
that they may challenge any legal conclusions they believe to be incorrect in the
Oldham County Circuit Court.” The emphasis here should be on whether such a
review took place and is permitted by law.
Kentucky Revised Statutes (KRS) 417.160 and 417.170 provide the
framework for arbitration review. KRS 417.160 (“Vacating an award”)
enumerates the following bases which allow an award to be vacated, namely:
(1) Upon application of a party, the court shall vacate an
award where:
(a) The award was procured by corruption,
fraud or other undue means;
(b) There was evident partiality by an
arbitrator appointed as a neutral or
corruption in any of the arbitrators or
misconduct prejudicing the rights of any
party;
(c) The arbitrators exceeded their powers;
-3-
(d) The arbitrators refused to postpone the
hearing upon sufficient cause being
shown therefor or refused to hear evidence
material to the controversy or otherwise so
conducted the hearing, contrary to the
provisions of KRS 417.090, as to prejudice
substantially the rights of a party; or
(e) There was no arbitration agreement and
the issue was not adversely determined in
proceedings under KRS 417.060 and the
party did not participate in the arbitration
hearing without raising the objection; but the
fact that the relief was such that it could not
or would not be granted by a court is not
ground for vacating or refusing to confirm
the award.
And KRS 417.170 (“Modification or correction of award”) provides
the following guidance:
(1) Upon application made within ninety (90) days after
delivery of a copy of the award to the applicant, the court
shall modify or correct the award where:
(a) There was an evident miscalculation of
figures or an evident mistake in the
description of any person, thing or property
referred to in the award;
(b) The arbitrators have awarded upon a
matter not submitted to them and the
award may be corrected without affecting
the merits of the decision upon the issues
submitted; or
(c) The award is imperfect in a matter of
form, not affecting the merits of the
controversy.
-4-
The Kentucky Supreme Court recently visited this issue in the case of
Don Booth of Breland Group v. K&D Builders, Inc., 626 S.W.3d 601 (Ky. 2021),
where it reiterated that KRS 417.160 delineates the limited bases for vacating an
arbitrator’s award. The Court reiterated the following standard of review:
Generally, courts may not review an arbitrator’s award.
Taylor v. Fitz Coal Co. Inc., 618 S.W.2d 432, 432 (Ky.
1981). Kentucky’s Uniform Arbitration Act, KRS
Chapter 417, strictly circumscribes when a court review
of an arbitration decision is appropriate. 3D Enters.
Contracting Corp. v. Lexington-Fayette Urb. Cty. Gov’t,
134 S.W.3d 558, 562 (Ky. 2004). An arbitration award
may not be set aside for mere errors of law or fact, Smith
v. Hillerich & Bradsby Co., 253 S.W.2d 629, 630 (Ky.
1952), and “an arbitrator’s resolution of factual disputes
and his application of the law are not subject to review by
the courts.” Conagra Poultry Co. v. Grissom Transp.,
Inc., 186 S.W.3d 243, 245 (Ky. App. 2006) (citation
omitted).
626 S.W.3d at 606-07 (footnotes omitted).
It matters not what the parties agreed to do: They cannot rewrite the
laws passed by the General Assembly and interpreted by the courts. Conagra
Poultry Co., 186 S.W.3d at 245 (citing to 3D Enterprises, supra).
Furthermore, the parties did receive meaningful review from the
circuit court on two occasions after the arbitrator’s decision.
Skee received the full benefit of the arbitration process and circuit
court review. His dissatisfaction lays with the arbitrator’s findings of fact, which
he concedes are not reviewable, rather than the conclusions of law. It was Skee
-5-
who sought to enforce the arbitration clause in the partnership agreement (and
rightly so) after Roger brought suit in the circuit court. Skee does nothing to
convince us that the arbitration process here was statutorily unsound. Nor are his
allegations of arbitrator partiality persuasive. The three-day hearing was
comprehensive, and neither party was hindered in the presentation of evidence or
testimony. The fact that Skee was disappointed with the outcome does not provide
the legal grounds necessary to vacate the arbitration award or the circuit court’s
orders affirming same. See Meers v. Semonin Realtors, 525 S.W.3d 545 (Ky. App.
2017).
Accordingly, the orders of the Oldham Circuit Court are affirmed.
ALL CONCUR.
BRIEFS FOR APPELLANT: BRIEF FOR APPELLEE:
J. Gregory Joyner Kenneth A. Bohnert
Louisville, Kentucky Maureen P. Taylor
Louisville, Kentucky
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NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2021-CA-1165-MR
CHARLES STINSON APPELLANT
APPEAL FROM RUSSELL CIRCUIT COURT
v. HONORABLE VERNON MINIARD, JR., JUDGE
ACTION NO. 15-CI-00144
MARTY DYKES, LLC APPELLEE
OPINION
AFFIRMING
** ** ** ** **
BEFORE: CLAYTON, CHIEF JUDGE; JONES AND L. THOMPSON,
JUDGES.
CLAYTON, CHIEF JUDGE: Marty Dykes, LLC (“Dykes”) sued Charles Stinson
(“Stinson”) to recover amounts Dykes claimed that Stinson owed for services
rendered hauling cattle. Stinson appealed the Russell Circuit Court’s order
denying his motion to set aside a prior order deeming Dykes’s request for
admissions as admitted, granting summary judgment in favor of Dykes, and
entering a judgment in favor of Dykes for $79,175.48. Finding no error, we affirm.
FACTUAL AND PROCEDURAL BACKGROUND
Dykes is a Kentucky corporation that hauls livestock for dealers,
producers, and brokers throughout the United States. Dykes shipped cattle for
Stinson on numerous occasions, and Dykes alleged that it had billed Stinson a total
of $164,223.23 over approximately fifty (50) invoices. Dykes further alleged that
while Stinson had paid $85,047.75 of the outstanding balance, he had failed to pay
the remaining balance of $79,175.48, interest at a rate of 12%, and attorney’s fees.
Therefore, Dykes filed a complaint in Russell Circuit Court on May 1,
2015, seeking to recover such an amount. Stinson filed a pro se letter with the
circuit court on May 14, 2015, stating that he had never done business with Dykes.
Between 2015 and 2020 Dykes filed numerous motions for summary
judgment, with Stinson represented by counsel at certain times during the litigation
and proceeding pro se at other times. The parties’ attempts at mediation were
unsuccessful, and the circuit court ultimately set a trial date for March 25, 2020.
The circuit court canceled the trial date in March, however, when the circuit court
entered an agreed order stating that Stinson had requested his attorney’s
withdrawal.
On October 26, 2020, Dykes served Stinson with a request for
admissions under Kentucky Rule of Civil Procedure (“CR”) 36.01. Dykes also
filed such requests with the circuit court clerk. In the request, Dykes asked that
-2-
Stinson “[a]dmit or deny that [Stinson] failed to pay for invoices 46, 47, 48, 49,
and 1 that total $79,175.48 to [Dykes] and that you owe [Dykes] $79,175.48.”
Stinson failed to file any response to the request for admissions.
Thereafter, Dykes filed a motion for summary judgment on July 8,
2021, arguing that Stinson’s lack of response to the request should be deemed
admissions to the statements contained in the request. The circuit court heard
Dykes’s motion for summary judgment on July 19, 2021. At the hearing, Stinson
appeared pro se, despite the circuit court warning him of the potential
consequences of doing so numerous times.
At the hearing, Stinson told the court that he had never received the
request for admissions. However, Stinson did acknowledge that he had received
Dykes’s motion for summary judgment, which referenced the request for
admissions. At the hearing’s conclusion, the circuit court granted Stinson ten (10)
additional days to either file a response to the pending motion for summary
judgment or to obtain an attorney to file a response. The court specifically told
Stinson that if the court did not receive a response from Stinson, or Stinson’s
counsel, within such period, then the court would rule on the motion for summary
judgment after the expiration of the ten (10) days. The circuit court also
memorialized its instructions to Stinson in an order entered on July 19, 2021,
-3-
stating, “Charles Stinson shall, on or before July 29, 2021 file, or retain an attorney
to file, a response to [Dykes’s] pending motion for Summary Judgment.”
Two days later, on July 21, 2021, Stinson’s current counsel filed an
entry of appearance in the case. However, neither Stinson nor his counsel filed a
response to the motion for summary judgment by July 29, 2021, as ordered by the
circuit court.
Thus, on August 3, 2021, the Russell Circuit Court entered findings of
fact, conclusions of law, and judgment granting summary judgment in favor of
Dykes. In doing so, the circuit court deemed Stinson’s lack of response to be
admissions to the request and incorporated such admissions into its findings of
fact. The circuit court also found that Dykes and Stinson had a business
relationship, which was memorialized by the invoices generated by Dykes and
Stinson’s partial payments to Dykes. Thus, the circuit court found that no genuine
issues of material fact remained to be determined.
Stinson filed a motion to set aside the judgment on August 12, 2021,
arguing that the court’s order gave Stinson a ten (10)-day period to either file a pro
se response or hire an attorney, not retain an attorney to file a response within the
period stated in the circuit court’s order. The circuit court denied Stinson’s motion
on September 13, 2021, and this appeal followed.
-4-
ANALYSIS
a. Standard of Review
This appeal arises from the circuit court’s grant of summary judgment
in Dykes’s favor. In such matters, the appellate court “determine[s] whether the
record supports the trial court’s conclusion that there is no genuine issue as to any
material fact and the moving party is entitled to judgment as a matter of law.”
Foreman v. Auto Club Property-Casualty Insurance Company, 617 S.W.3d 345,
349 (Ky. 2021) (internal quotation marks and footnote omitted). Summary
judgment “expedite[s] the disposition of cases and avoid[s] unnecessary trials
when no genuine issues of material fact are raised[.]” Steelvest, Inc. v. Scansteel
Service Center, Inc., 807 S.W.2d 476, 480 (Ky. 1991) (citations omitted). It is
appropriate to terminate litigation when it appears impossible for the non-moving
party to produce evidence at trial warranting a judgment in its favor as a matter of
law. Paintsville Hosp. Co. v. Rose, 683 S.W.2d 255, 256 (Ky. 1985) (citation
omitted). While one must view the record in the light most favorable to the non-
moving party, “a party opposing a properly supported summary judgment motion
cannot defeat it without presenting at least some affirmative evidence that there is a
genuine issue of material fact for trial.” Steelvest, 807 S.W.2d at 482 (citations
omitted). An appellate court’s review of a trial court’s decision regarding
-5-
summary judgment is de novo. Baker v. Weinberg, 266 S.W.3d 827, 831 (Ky.
App. 2008) (citation omitted).
An appellate court’s review of a trial court’s rulings on evidentiary
issues and discovery disputes is whether the court abused its discretion. Goodyear
Tire and Rubber Co. v. Thompson, 11 S.W.3d 575, 577 (Ky. 2000). “The test for
abuse of discretion is whether the trial judge’s decision was arbitrary,
unreasonable, unfair, or unsupported by sound legal principles.” Commonwealth v.
English, 993 S.W.2d 941, 945 (Ky. 1999).
b. Discussion
CR 36.01 details the procedures involved in a request for admissions
from one party in a case to another party. Pursuant to CR 36.01, “[a] party may
serve upon any other party a written request for the admission . . . of the truth of
any matters . . . that relate to statements or opinions of fact or of the application of
law to fact[.]” Further, “[t]he matter is admitted unless, within 30 days after
service of the request, . . . the party to whom the request is directed serves upon the
party requesting the admission a written answer or objection addressed to the
matter[.]” Id. Additionally, CR 36.02 provides that “[a]ny matter admitted under
Rule 36 is conclusively established unless the court on motion permits withdrawal
or amendment of the admission.”
-6-
On appeal, Stinson claims that he never received Dykes’s request for
admissions, and thus the circuit court erred in considering the request for
admissions and Stinson’s lack of response thereto. Dykes further argues that the
circuit court erred in deeming Stinson’s failure to respond to Dykes’s request as an
admission. We disagree with both of Stinson’s claims.
In this case, Dykes sent the request for admissions in October 2020,
with the Certificate of Service stating that Dykes mailed a copy to Stinson at his
home address. Moreover, Dykes did not move for summary judgment based on
Stinson’s lack of response to the request for admissions until nearly nine months
later, in July 2021. Further, Stinson stated that he did receive Dykes’s motion for
summary judgment, which thoroughly discussed the request for admissions.
Additionally, Stinson was in court on July 19, 2021, and heard counsel’s
arguments concerning the request for admissions promulgated nine months prior.
Further, the circuit court granted Stinson ten (10) additional days to
either file a response to the request for admissions and summary judgment or to
retain an attorney to do so. The circuit court specifically told Stinson that if the
court did not receive a response from either Stinson or his counsel within those ten
(10) days, then the court would rule on the summary judgment motion after the
expiration of the ten days. The circuit court also entered an order on July 19, 2021,
stating the applicable time period.
-7-
Moreover, Stinson’s current counsel filed an entry of appearance in
the case on July 21, 2021. At that time, the circuit court record clearly contained a
copy of the request for admissions filed by Dykes with the Russell Circuit Clerk
nine months prior. The record did not have any responses to Dykes’s request for
admissions. Further, the circuit court record contained the motion for summary
judgment pending before the court referencing the request for admissions.
Additionally, the circuit court record contained the circuit court’s order entered on
July 19, 2021, which stated that Stinson or an attorney retained by Stinson had ten
days to file a response. Finally, Stinson was warned in open court that he or his
counsel must file a response within ten days, or the circuit court would rule on the
motion for summary judgment.
Stinson conceded in his brief that he never responded to Dykes’s
request for admissions. Further, counsel for Stinson never moved the court for
withdrawal or amendment of the admissions as allowed by CR 36.02. Thus, under
CR 36.01 and 36.02, Stinson, by failing to respond to the request for admissions,
was deemed to have admitted that he failed to pay for specific invoices that totaled
$79,175.48 and that he owed Dykes $79,175.48. See Manus, Inc. v. Terry
Maxedon Hauling Inc., 191 S.W.3d 4 (Ky. App. 2006). Based on the foregoing,
the trial court did not abuse its discretion in considering Stinson’s lack of response
to the request for admissions or deeming the request for admissions as admitted.
-8-
Stinson further argues that the case was not ripe for summary
judgment, as disputed facts remained regarding whether the freight for the cattle
was to be paid by the purchasers of the cattle. However, the circuit court based its
decision on several portions of the record, not solely on the deemed admissions.
Based on Marty Dykes’s affidavit, the circuit court noted that it was undisputed
that on multiple occasions, Stinson had contacted Dykes and arranged for Dykes to
haul cattle for him to locations throughout the western United States. Additionally,
based on affidavits, deposition testimony, and invoices, the circuit court noted that
it was undisputed that Stinson and Dykes had entered into a business arrangement
whereby Dykes would haul cattle for Stinson. Finally, the circuit court indicated
that Stinson had failed to rebut Dykes’s proof. We agree that the evidence and the
deemed admissions eliminated any factual issues, and the circuit court’s grant of
summary judgment in favor of Dykes was appropriate.
CONCLUSION
Based on the foregoing, we affirm the Russell Circuit Court.
ALL CONCUR.
BRIEFS FOR APPELLANT: BRIEF FOR APPELLEE:
Joel R. Smith Derrick G. Helm
Jamestown, Kentucky Jamestown, Kentucky
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https://www.courtlistener.com/api/rest/v3/opinions/8482941/ | RENDERED: NOVEMBER 4, 2022; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2020-CA-1023-MR
COMMONWEALTH OF KENTUCKY,
JUSTICE CABINET, DEPARTMENT
OF CORRECTIONS APPELLANT
APPEAL FROM OLDHAM CIRCUIT COURT
v. HONORABLE KAREN A. CONRAD, JUDGE
ACTION NO. 20-CI-00123
NORA PERKINSON; CORRECT
CARE SOLUTIONS, LLC; AND
WELLPATH, LLC APPELLEES
OPINION
AFFIRMING
** ** ** ** **
BEFORE: ACREE, DIXON, AND K. THOMPSON, JUDGES.
THOMPSON, K., JUDGE: The Commonwealth of Kentucky, Justice Cabinet,
Department of Corrections (the DOC) filed an interlocutory appeal to challenge the
Oldham Circuit Court’s decision allowing Nora Perkinson’s Kentucky Civil Rights
Act (KCRA) retaliation claims made pursuant to Kentucky Revised Statutes (KRS)
344.280 to proceed against it. The DOC argues there is no valid waiver of its
sovereign immunity because any waiver of its sovereign immunity is limited, it is
not waived for claims that are not within the scope of the KCRA, the KCRA only
applies to claims against employers and, thus, excludes the DOC from its scope
because the DOC is not Perkinson’s employer. We disagree and affirm because
sovereign immunity was generally waived for purposes of KCRA and we cannot
appropriately address the DOC’s substantive issue as to whether non-employers
can be liable under KRS 344.280 in this interlocutory appeal.
In 2020, Perkinson filed a complaint against Correct Care Solutions,
LLC/Wellpath LLC (CCS/Wellpath)1 and the DOC. She alleged that while
working at the Kentucky State Reformatory (KSR) for CCS/Wellpath which
contracted to providing medical services for the DOC, she was subjected to sexual
harassment by two DOC employees (Michael Williams and John Grevious),
CCS/Wellpath allowed this sexual harassment to continue, and the DOC conspired
with CCS/Wellpath to create a hostile and retaliatory work environment.
Perkinson argued that CCS/Wellpath and the DOC was aware that there was a
pervasive sexual harassment and hostile work environment at KSR perpetrated by
Williams and Grevious, Perkinson was sexually harassed and assaulted by both
1
Based on Perkinson’s allegations her employer essentially changed names but remained the
same entity. As resolution of this issue and or which entity did what is irrelevant for purposes of
this appeal, we refer to them jointly.
-2-
Grievous and Williams, and when Perkinson reported the sexual harassment,
sexual assaults, and a hostile work environment, she was retaliated against. She
specifically alleged: (Count I) CCS/Wellpath and the DOC violated KRS 344.040
by subjecting her to sexual harassment and a hostile work environment, explaining
that the DOC acted as her joint employer with CCS/Wellpath; (Count II)
CCS/Wellpath and the DOC violated KRS 344.280 by subjecting her to retaliation
and discrimination for reporting the workplace harassment and hostile work
environment; and (Count III) CCS/Wellpath and the DOC violated KRS 344.280
by conspiring with each other to violate the KCRA.
The DOC filed a motion to dismiss pursuant to the Kentucky Rules of
Civil Procedure (CR) 12.02(a) for lack of subject matter jurisdiction and 12.02(f)
failure to state a claim upon which relief can be granted as Perkinson is not its
employee, the employment provisions of the KCRA only extend to employees, and
“sovereign immunity bars her claims because the General Assembly has not
waived immunity for discrimination claims by non-employees.” Although the
DOC substantively discussed why it believed dismissal would be appropriate as to
all three counts based on the facts of the case, its argument regarding sovereign
immunity was very limited.
The circuit court determined that the DOC’s motion to dismiss was
well taken as to Count I because the DOC was not Perkinson’s joint employer with
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CCS/Wellpath. The circuit court explained that Perkinson “failed to plead any
facts that demonstrate that DOC had any control over her day to day employment,
her compensation, benefits, the ability to hire, fire or discipline her or affect any
essential terms and conditions of her employment.” However, the circuit court
agreed that Perkinson’s retaliation and conspiracy claims under Counts II and III
could proceed because Perkinson was correct that pursuant to KRS 344.280 a
“person” was prohibited from retaliating against her for opposing a practice
declared unlawful under KCRA and could also be liable for conspiracy to violate
KCRA whether or not the DOC was her employer.
The DOC filed an interlocutory appeal on its sovereign immunity
issue.2 Perkinson filed a motion to dismiss this appeal as being an invalid
interlocutory appeal as the DOC sought to receive premature review of a
substantive legal issue and Department of Corrections v. Furr, 23 S.W.3d 615 (Ky.
2000), conclusively established waiver of the DOC’s sovereign immunity. The
motion was passed to the merits panel. We deny this motion to dismiss via
separate order as moot.
“[A]n order denying a substantial claim of absolute immunity is
immediately appealable even in the absence of a final judgment.” Breathitt Cnty.
2
Given the procedural posture of this case, we are limited to resolving this issue and Perkinson
could not cross-appeal the dismissal of Count I.
-4-
Bd. of Educ. v. Prater, 292 S.W.3d 883, 887 (Ky. 2009). See Baker v. Fields, 543
S.W.3d 575, 577-78 (Ky. 2018). As immunity is a legal question, we review de
novo the circuit court’s decision to deny immunity to the DOC. Kentucky Heritage
Land Conservation Fund Board v. Louisville Gas and Electric Company, 648
S.W.3d 76, 82 (Ky.App. 2022).
The DOC argues that it had sovereign immunity because it is not
Perkinson’s employer and, therefore, cannot be subject to any liability pursuant to
KRS 344.280, relying heavily on Steilberg v. C2 Facilities Solution, LLC, 275
S.W.3d 732 (Ky.App. 2008), to justify its position that Perkinson has no recourse
under the KCRA because she is not the DOC’s employee. The DOC generally set
out its argument as follows, in its brief headings:
I. The KCRA, at most, waives sovereign immunity
for claims within its scope.
II. Perkinson’s claims fall outside the scope of the
KCRA – and thus outside its immunity waiver –
because its protections extend only to employees.
A. The circuit court erred because it ignored
Steilberg, which is binding precedent that
requires an employment relationship for
liability under KRS 344.280.
B. Steilberg correctly applied KRS 344.280,
because the statute requires an employment
relationship.
-5-
C. Because KRS 344.280 claims may only be
brought by employees, Perkinon’s [sic] claims
against the Department fail as a matter of law.
III. The Department has presented a substantial – and
correct – claim of immunity.
The DOC argues that because it is not Perkinson’s employer, it must
be immune from suit under the general language of Steilberg, 275 S.W.3d at 735,
that “the Kentucky Civil Rights Act protects an employee against unlawful
discrimination[,]” and the fact that retaliation claims in Steilberg were dismissed
along with discrimination claims once it was determined that C2 was not
Steilberg’s employer.
The DOC states that the waiver of immunity found in Furr is
insufficient as “[t]his ignores that the KCRA, like many immunity-waiving
statutes, contains at most a limited waiver.” The DOC argues that based on such a
limited waiver, while Perkinson “has nominally invoked the KCRA, . . . her claims
are not the type for which the Commonwealth has waived its immunity” because
“KRS 344.280 does not waive immunity for claims against a non-employer state
agency.”
Perkinson generally opposes the DOC’s position because she argues
that sovereign immunity for the DOC was ruled to be waived under the KCRA in
Furr and argues that the clear language of KRS 344.280 allows non-employers to
be liable for retaliation.
-6-
First, we consider the import of Furr. We disagree with the DOC
about the scope of Furr. In Furr, the Kentucky Supreme Court stated at the outset
“we address the single issue of whether the Commonwealth of Kentucky has
waived sovereign immunity for claims brought under the Kentucky Civil Rights
Act. KRS Chapter 344. We hold that it has[.]” Furr, 23 S.W.3d at 616. This
opinion contained no limitations as to the scope of this waiver; it said nothing
about the waiver as to the Commonwealth being limited to when the
Commonwealth is acting as an employer, although the case was about a claim
hinging upon the DOC being the employer.
The Kentucky Supreme Court declared there was an overwhelming
implication of waiver of sovereign immunity based on the reasoning of the Court
of Appeals below:
KRS 344.030(2) defines “employer” in pertinent part as
“a person who has eight (8) or more employees within
the state . . . .” KRS 344.010(1) defines “person” as used
in KRS Chapter 344 to include “the state, any of its
political or civil subdivisions or agencies.” (Emphasis
added). The very definition of “person” as adopted by
our General Assembly specifically names the state as an
employer for purposes of KRS Chapter 344, thus
effecting a waiver of sovereign immunity by
“overwhelming implication.”
Id. at 617. It also found further support for its holding in the language of the
KCRA, explaining as follows:
One of the purposes of KRS Chapter 344 is:
-7-
To safeguard all individuals within the state from
discrimination . . .; thereby to protect their interest
in personal dignity and freedom from humiliation,
to make available to the state their full productive
capacities, to secure the states against domestic
strife and unrest which would menace its
democratic institutions, to preserve the public
safety, health, and general welfare, and to further
the interest, rights, and privileges of individuals
within the state.
KRS 344.020(1)(b) (emphasis added).
These words contain a solemn and hard won promise to
all the people of the Commonwealth. The promise was
made by the Commonwealth to its citizens through the
General Assembly. What hollow words indeed if the
safeguard against discrimination does not include the
right to be free from of acts of discrimination committed
by the Commonwealth itself, or in its name.
Id.
The Kentucky Supreme Court also rejected the DOC’s “argument that
the General Assembly did not intend to waive sovereign immunity because the
remedy provision of KRS 344.450 provides for neither an express cause of action
against the Commonwealth nor an ‘implied’ cause of action against the
Commonwealth.” Furr, 23 S.W.3d at 617. The Court stated unequivocally “[this]
argument does not withstand scrutiny.” Id. It explained that because KRS 344.450
was silent concerning against whom a cause of action may be brought, that “we are
directed to the particular acts that constitute a violation of the chapter in order to
-8-
determine against whom a cause of action may be brought.” Furr, 23 S.W.3d at
618. It then again analyzed the definition of an employer including a person which
is defined to include the state and concluded: “Thus, by overwhelming
implication, KRS 344.450 provides a cause of action against the Commonwealth
for violations of the Kentucky Civil Rights Act. This is as it should be.” Furr, 23
S.W.3d at 618.
Furr provides for a broad waiver of immunity when it is alleged that
the Commonwealth has violated the KCRA. KRS 344.280 is part of the KCRA.
Additionally, the language of KRS 344.280 is broad and not limited to liability for
employers. It begins: “It shall be an unlawful practice for a person, or for two (2)
or more persons to conspire: (1) To retaliate or discriminate in any manner against
a person because he has opposed a practice declared unlawful by this chapter[.]”
The DOC is included in the definition of person, CCS/Wellpath also qualifies as a
person, and both can be liable if they conspired to retaliate against Perkinson.
Therefore, the DOC’s actions could facially qualify for a violation under this
provision.
Although the DOC heavily relies on Steilberg to support its position,
it does not address immunity at all. Steilberg addressed whether an independent
contractor could be considered an employee and, thus, bring a KCRA unlawful
discrimination claim, with all parties agreeing that “the correct resolution of the
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motion for summary judgment turns upon whether Steilberg can be regarded as
C2’s employee.” Steilberg, 275 S.W.3d at 735.
It appears that Steilberg did not raise any issue as to whether the
retaliation claims could survive such a decision. She may have assumed that if C2
was not her employer, there could be no unlawful practice to which any retaliation
claim could attach. That is not necessarily true. See Palmer v. International Ass’n
of Machinists and Aerospace Workers, AFL-CIO, 882 S.W.2d 117, 120-21 (Ky.
1994) (affirming that the entities were not one employer and thus did not have the
requisite number of employees to qualify as an employer under the KCRA but
reversing and remanding on the issue of whether there was no cause of action for
unlawful retaliation against two individuals pursuant to KRS 344.280). We do not
consider the absence of an explanation as to why the retaliation claim was also
dismissed to mean, by implication, that retaliation claims cannot be sought against
non-employers.
No further analysis is needed to confirm that Perkinson is not barred
from proceeding with her retaliation claims against the DOC, and it would be
inappropriate for us to substantively analyze this immunity issue further as
explained in Baker.
Baker provides:
A court can only address the issues presented in the
interlocutory appeal itself, nothing more. Otherwise,
-10-
interlocutory appeals would be used as vehicles for
bypassing the structured appellate process. Specifically,
this means, and we hold, that an appellate court
reviewing an interlocutory appeal of a trial court’s
determination of a defendant’s immunity from suit is
limited to the specific issue of whether immunity was
properly denied, nothing more.
543 S.W.3d at 578 (emphasis added).
The DOC goes much further in its appeal than limiting itself to
whether its sovereign immunity was waived. Instead, it seeks an answer to a
substantive legal issue, whether a non-employer can be liable for retaliation.
While this question is an interesting legal issue,3 it is not an immunity issue.
3
The Sixth Circuit has squarely addressed this issue, explaining KRS 344.280 “forbids
retaliation” by “a person[]” and “plainly permits the imposition of liability on individuals.”
Morris v. Oldham Cnty. Fiscal Court, 201 F.3d 784, 794 (6th Cir. 2000). However, our Courts
have not unequivocally done the same. Palmer reversed the Court of Appeals’ holding that there
was no civil remedy on a retaliation claim against two individuals but did not specifically discuss
any argument about whether non-employers could be liable for retaliation. Instead, it examined
the Court of Appeals’ determination that because KRS 344.990 makes a willful violation of KRS
344.280 a misdemeanor, a civil recovery was precluded; it rejected that reasoning because KRS
344.450 provided for a civil recovery. Palmer, 882 S.W.2d at 120. It is unclear whether anyone
argued that non-employers could not be liable for retaliation. While two Justices would have
affirmed the grant of summary judgment in the two individuals’ favor, they did not provide any
explanation of their reasoning. Id. at 121 (Stephens, C.J., and Spain, J., concurring in part). In
Brooks v. Lexington-Fayette Urban County Housing Authority, 132 S.W.3d 790, 808 (Ky. 2004),
the majority opinion discussed individual liability for retaliation and noted the employee made “a
persuasive argument . . . that individuals can be held liable for unlawful retaliation under KRS
344.280[,]” referencing Morris, but determined the issue was moot as the Court was reinstating
the judgment against Brooks’ employer finding the Housing Authority liable and so she could
not get additional relief. Justices Keller and Stumbo would have allowed for joint and several
liability against the individuals. Id. at 812-13 (Keller, J. concurring).
-11-
Accordingly, we affirm the Oldham Circuit Court decision to deny the
DOC’s motion to dismiss the counts relating to retaliation as the DOC is not
immune from suit under the KCRA.
ALL CONCUR.
BRIEF FOR APPELLANT: BRIEF FOR APPELLEE:
Shawn D. Chapman Joe F. Childers
Edward A. Baylous II Bethany N. Baxter
Frankfort, Kentucky Lexington, Kentucky
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https://www.courtlistener.com/api/rest/v3/opinions/8482930/ | RENDERED: NOVEMBER 4, 2022; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2021-CA-0229-MR
WILLIAM JAMES LEWIS APPELLANT
APPEAL FROM FAYETTE CIRCUIT COURT
v. HONORABLE ERNESTO M. SCORSONE, JUDGE
ACTION NO. 17-CR-00447
COMMONWEALTH OF KENTUCKY APPELLEE
OPINION
AFFIRMING
** ** ** ** **
BEFORE: JONES, LAMBERT, AND K. THOMPSON, JUDGES.
THOMPSON, K., JUDGE: William James Lewis appeals from the Fayette Circuit
Court’s order revoking his probation on the basis that the circuit court made
insufficient findings pursuant to Kentucky Revised Statutes (KRS) 439.3106(1).
As the findings were sufficient, and Lewis was repeatedly provided with graduated
sanctions but refused to alter his behavior, we affirm.
In November 2016, police received a tip that Lewis was sending and
receiving child pornography on Facebook and executed a search warrant which
confirmed his possession and distribution of such images. On May 1, 2017, Lewis
was indicted on ten counts of possession or viewing of a matter portraying a sexual
performance by a minor and ten counts of distribution of a matter portraying a
sexual performance by a minor. These were all Class D felonies.
On December 1, 2017, pursuant to a plea agreement in exchange for a
recommendation that the ten counts of distribution of a matter portraying a sexual
performance by a minor be dismissed, Lewis agreed to plead to the ten counts of
possession or viewing of a matter portraying a sexual performance by a minor,
with one year to serve on each count, with the Commonwealth recommending that
counts one through eight run consecutive and counts nine and ten run concurrent.
The circuit court ordered that Lewis have a comprehensive sex offender pre-
sentence evaluation. Lewis requested alternative sentencing, submitting an
alternative sentencing plan to the court.
On February 7, 2018, Lewis’s final judgment and sentence of
probation was entered. The circuit court sentenced Lewis in accordance with the
Commonwealth’s recommendation, to a total of eight years, but suspended
imposition of his sentence, instead placing Lewis on probation for five years. The
conditions of probation included that he:
-2-
1. Maintain good behavior, refrain from violating the
law in any respect and comply with the rules and
regulations of the Division of Probation and Parole.
The Defendant is to report and follow direction[s] of
her [sic] probation officer and permit home visits;
2. Waive confidentiality and consent to release to the
probation officer and the court all records, reports,
tests and information from all programs ordered or
selected by the court or the probation officer;
3. The defendant will consent to any search of her [sic]
person or of places or property under her [sic] control
when requested by the probation officer or police
officer;
...
6. Continue to participate in sex offender treatment
program [SOTP] and follow any after care
recommendations;
7. The Defendant shall have no unsupervised contact
with underage children unless it is supervised and
approved by Probation and Parole;
...
9. Comply with Probation and Parole’s conditions for
sex offenders;
10. Register as a sex offender with Probation and Parole
within 14 days from the date of sentencing (defendant
required to sign form);
11. Follow all Probation and Parole’s restrictions
regarding the use of computers, internet, access, chat
rooms, social media and search of all computer
hardware/software[.]
-3-
Probation and Parole’s supplemental conditions of supervision for sex
offenders (supplemental conditions) included the following conditions:1
I shall attend, participate, and successfully complete a
Sexual Offender Treatment Program. I shall be required
to submit, at my own expense, to random polygraph
examinations as part of a sex offender treatment program.
I shall not possess any sexually arousing materials
including but not limited to:
a. Videos, magazines, books, games
b. Sexual devices or aids
c. Any material that depicts partial or complete nudity or
sexually explicit language[.]
I shall not engage in any activity by computer or
telephone, including any visual or written,
correspondence which is sexually arousing.
I shall have no contact with anyone under the age of
eighteen (18), unless it is specifically authorized by my
Probation and Parole Officer and treatment provider, if I
am in Sexual Offender Treatment. ‘Contact’ means face-
to-face, telephonic, any correspondence including
electronic, written, and visual, or any indirect contact via
third parties.
1
Unfortunately, these supplemental conditions were never provided in full in the record.
Instead, they were quoted in various violation of supervision reports. Sometimes these reports
provided a number for these supplemental conditions; sometimes they did not. Accordingly, we
simply list the supplemental conditions which Lewis was accused of violating in an order of our
choosing without any numbers. We note that it is likely that there were additional conditions
that we have omitted with which Lewis complied.
-4-
Probation and Parole’s computer use agreement for sexual offenders
(computer use agreement) included the following conditions:2
By signing below, the above named offender indicates
(s)he understands (s)he has the right to refuse consent to
the items contained herein and that the offender agrees as
follows: computer access to the Internet may pose
significant risk of re-offense if not properly managed and
the undersigned offender specifically agrees to be fully
compliant with the following conditions:
Offender must agree to and submit to electronic device
monitoring through Probation and Parole’s contracted
electronic device monitoring company at his own
expense to engage in the following activities:
Web browsing, Email, Producing web content (e.g.
YouTube, podcasting or blogging,) internet related
telephone communications, file sharing by any method
(including but not limited to Peer to Peer, attachments to
emails, iTunes.) The offender has no expectations of
privacy regarding computer use, or information stored on
the computer if monitoring software is installed and
understands and agrees that information gathered by said
monitoring software may be used against him/her in
subsequent administrative or legal proceeding, court
actions regarding his/her computer use, and conditions of
release.
Offender will provide the Supervising Officer/Designee
with a current list of all cell phones, electronic devices,
and related equipment used by the offender, including
back-up systems. Offender will keep this list current.
2
As with the supplemental conditions, we do not have a complete list of these and simply list
those computer use agreement conditions which were quoted in various violation of supervision
reports.
-5-
Offender agrees that (s)he shall be prohibited from
possessing or viewing certain materials related to, or part
of, the grooming cycle for his/her crime. Such materials
include, but are not limited to, the following:
A. Images of your victim.
B. Stories or images relating to your crime or similar
crimes.
C. Images, which depict individuals similar to your
victims (e.g. children)
D. Stories written about or for individuals similar to your
victim.
E. Materials focused on the culture of your victim (e.g.
children’s shows or websites).
Later in 2018, the first violation of supervision report (report) was
filed, in what would become a series of reports: (1) August 22, 2018; (2) February
5, 2019; (3) May 23, 2019; (4) May 30, 2019; (5) November 8, 2019; (6) June 29,
2020; and (7) October 30, 2020. These reports led to five probation revocation
hearings with orders ultimately determining as follows: (1) March 11, 2019 order
resulted in probation modification; (2) August 19, 2019 order resulted in no action
taken; (3) December 20, 2019 order resulted in probation modification; (4) August
21, 2020 order resulted in no action taken; and (5) January 14, 2021 order
terminating Lewis’s probation.
In a report dated August 22, 2018, Probation and Parole reported that
Lewis violated two supplemental conditions as follows:
-6-
Through the software monitoring system that Mr. Lewis
has for his smart phone, a check was completed and
revealed that Mr. Lewis had sent text messages relating
to sexually explicit messages. Mr. Lewis also had an
image of his boyfriend[’]s penis on his phone . . . .
Mr. Lewis had engaged in sexually explicit text messages
with his boyfriend, that depicted both nudity and written
language about engaging in sexual acts.
The report indicated that the circuit court advised that Lewis should be given a
verbal warning “given that the violations were related with his fiancé[,]” but noted
that if he “continues to violate the supplemental conditions of supervision for sex
offenders, along with the computer use agreement for sex offenders then
revocation will be requested.”
In a Kentucky sexual offender registry notice of non-compliance,
dated August 29, 2018, it was indicated that Lewis failed to complete and return
the address verification form. However, in an update to this notice dated
September 13, 2018, it was noted that Lewis had now updated his address and was
“deemed to be in ‘Compliance’ as required by law.”
In the report dated February 5, 2019, the probation officer indicated
that Lewis had committed three violations of the terms of his probation. Two of
these violations related to the requirements that Lewis complete and not be
terminated from a SOTP. The probation officer indicated Lewis was terminated
from his SOTP “for multiple reasons including having high-risk pre-offense
-7-
behavior and failing to purchase a treatment manual” and for “violating their
conditions of treatment contract.”
The other violation involved the computer use agreement with the
officer explaining a routine phone check with the software monitoring system led
to the discovery of improper materials on Lewis’s phone:
Mr. Lewis had searched for photos on Google of
prepubescent boys with their shirts off. Mr. Lewis had
multiple searches of young boys with their shirts off
smiling. It should be noted that this is considered high-
risk behavior as the boys found on Mr. Lewis[’s] phone
were the same age related towards the victim of his
crime.
The probation officer additionally noted “Mr. Lewis also verbally admitted to
searching ‘boys peeing’ on his cell phone.”
The affidavit by Lewis’s probation officer dated February 7, 2019,
confirmed these charges. The officer sought revocation of Lewis’s probation.
The probation violation hearing was held on March 7, 2019. During a
bench conference, the circuit court expressed that its biggest concern was that
Lewis kept remaining untreated, that this was a much bigger concern than him
reoffending on a device. The circuit court announced in open court as follows:
I don’t think there is any dispute that he did violate the
rules of the program. . . . I accept that stipulation. . . .
You need to understand that you have got to complete
this program. . . . Because even if I put you in the
penitentiary you won’t get out until you finish this
program. . . . So you have got to appreciate the fact that
-8-
you have got to complete this program. . . . I can’t stress
enough that you have got to complete this program . . . or
else you’ll be sitting in jail for a long, long time.
In the written order modifying probation entered on March 11, 2019,
the circuit court stated that Lewis stipulated to violating the terms of his probation.
The circuit court found that Lewis violated the conditions of his probation but that
he should remain on probation on modified terms, adding the additional terms:
1: Serve 60 days with credit.
2: Report to Probation Parole when released.
3: Must Complete Sex Offender Program.
4: Probation and Parole is given Discretionary
Detention.
In a report dated May 23, 2019, the probation officer noted that since
Lewis was continued on probation as modified “Lewis has continued to violate the
conditions set forth by the Court and remains a high risk of reoffending and a
danger to the community while he remains out of custody untreated.” The officer
explained that Lewis was not yet eligible for re-referral to the Kentucky SOTP for
another 120 days, and so on May 8, 2019, the officer instructed Lewis to enter and
complete a private SOTP until he could possibly reenter the state one. The officer
explained that on May 21, 2019, the officer received notice that Lewis would not
be accepted into the only private program in Lexington “due to leaving several
-9-
threatening and angry messages for the treatment provider” resulting in a new
violation for failure to complete a SOTP.
The officer noted another violation as the monitoring software on
Lewis’s phone revealed he viewed “boys gymnastics” on YouTube, bringing up
several videos of prepubescent male children performing gymnastics and went on
to watch a video which showed several young male children without shirts
performing gymnastic stunts.
The officer explained that a home visit on May 21, 2019, showed
Lewis violated the computer use agreement by failing to provide a current list of
his devices as a computer without the monitoring software installed was located
during a home visit, and determined to have been used for the “viewing of porn,”
contained “saved pictures of a naked man and a young boy urinating,” and was
used for viewing several “Facebook photos of young prepubescent male children
without shirts.” The officer gave Lewis the benefit of the doubt that he was not the
one who viewed these pictures as Lewis and his boyfriend both claimed it was the
boyfriend’s computer (although Lewis had admitted to using it) but explained that
this computer would need to be monitored and Lewis would be held accountable
for anything viewed on the device after this point.
-10-
The probation officer requested a verbal or written warning for these
new violations and discretionary detention with supervisor approval. Discretionary
detention of fourteen days was approved.
In a report dated May 30, 2019, the probation officer reiterated the
violations from the week before and noted a new violation for failing to comply
with the requirement for downloading the monitoring software onto the computer,
explaining that although Lewis received instructions as to how to download this
software on May 22, 2019 and was instructed to have it downloaded by May 24,
2019, as of a check on May 30, 2019, Lewis had yet to install the monitoring
software, “and therefore continues to have access to an unmonitored device that
multiple violations have already been discovered by this officer. This poses a
serious threat to the community as Mr. Lewis has access to communicate with
minors without this officer’s knowledge.”
In an affidavit signed on May 30, 2019, Lewis’s probation officer
confirmed these charges and requested that Lewis’s probation be revoked.
Lewis’s probation revocation hearing was held on June 20, 2019. At
that time, it was discussed that the monitoring software had not yet been installed
on Lewis’s boyfriend’s computer. The circuit court continued the hearing for two
weeks to allow an opportunity for the software to be installed.
-11-
In a special supervision report (special report) dated June 21, 2019,
the probation officer indicated that the officer received a text message on a number
only available to offenders on that officer’s case load which stated it was from one
of Lewis’s friends and the message used foul and threatening language due to the
officer’s request that Lewis remain in custody. The officer indicated:
This officer is not requesting that this message be used to
violate Mr. Lewis’[s] Probation but to be used as
evidence that should Mr. Lewis be let out before he can
be re-assessed for treatment he will continue to violate
due to those he associates with. Should Mr. Lewis
continue to violate then he will more than likely not be
able to re-enter KY SOTP.
In the hearing held on July 3, 2019, it was represented that the non-
compliant desktop computer was removed from the residence and that Lewis
would be eligible to apply to be accepted back into the state run SOTP as of
August 5, 2019. The circuit court ordered that the application be submitted on that
date and set a new hearing for August 8, 2019.
In an order entered on July 18, 2019, granting Lewis’s release, the
circuit court set forth that Lewis would be released on August 5, 2019, and
required that he immediately report to Probation and Parole for a new sex offender
treatment evaluation. At the August 8, 2019 hearing, the circuit court was
informed that Lewis had been accepted back into Kentucky SOTP. On August 19,
-12-
2019, an order indicated that no action on the probation revocation would be taken
at that time.
In a report dated November 8, 2019, new violations involved Lewis’s
improper use of Facebook by posting pictures of a shirtless underage male, thereby
violating the supplemental conditions against possessing sexually arousing
materials and having no contact with anyone under eighteen, and for being
terminated from the KY SOTP. The officer recommended revocation, explaining:
“Mr. Lewis poses a serious threat to the community as he remains untreated and
has exhausted all forms of treatment with Probation and Parole. This officer
respectfully recommends revocation so Mr. Lewis can enter and complete SOTP in
the institution.”
In an affidavit signed on November 12, 2019, the officer explained:
On October 30, 2019, this officer received a community
complaint that Mr. Lewis was using Facebook to
communicate with minors and posting photos of male
minors without their shirts. A check of Mr. Lewis’[s]
public Facebook profile depicted posts made earlier in
the week of a male minor without his shirt on. That one
particular post was made several times in one day . . . .
When confronted about his use on Facebook, Mr. Lewis
claimed the photos were of a friend who asked him to
post them. Mr. Lewis stated he posted the partial nude
photos of the underage male as a favor. Due to Mr.
Lewis stating the underage male had asked Mr. Lewis to
post the photos indicates that Mr. Lewis was in contact
with a minor.
-13-
The officer also indicated that Lewis was terminated for the second
time from the KY SOTP on October 31, 2019, and would not be eligible to be
accepted back into the program. The officer indicated that Lewis was terminated
due to:
“violation(s) of provision(s) of Treatment Contract” and
“Refusal to change unhealthy preoffense behavior(s).” It
was noted in the termination letter that “Mr. Lewis has
demonstrated a repeated, consistent pattern of extreme
high-risk pre-offense behavior that substantially increases
his chances for re-offense.”
On December 19, 2019, at the probation revocation hearing, counsel
told the circuit court that Lewis was accepted into a private SOTP program, and
that Lewis understood this would be his final chance. The circuit court explained
to Lewis:
I don’t know if you realize the significance of you not
cooperating with these programs, okay? Because you
might think you could go back to the penitentiary and get
out quickly. You cannot. This thing is going to take you
a long time to do it within the institution.
After explaining that Lewis would get a sanction and be required to do the SOTP
the circuit court explained further: “And sir, this is your last chance and after that
you are going to the penitentiary and you will not get out anytime soon because
these programs you can only do at the very end of your sentence.”
On December 20, 2019, an order modifying probation was entered.
The circuit court noted that Lewis stipulated to violating the terms of his probation
-14-
and found that Lewis violated the terms of his probation but should remain on
probation on modified terms: “1: Serve 90 days with credit. Defendant shall enter
and complete treatment on direction of Probation and Parole.”
In yet another report dated June 29, 2020, the probation officer
explained that Lewis was currently in violation of his supplemental conditions by
possessing sexually arousing materials, including sexual devices or aids, as
follows:
After receiving a community complaint from Mr.
Lewis’[s] significant other claims Mr. Lewis was using
drugs and had access to an unmonitored device, a home
visit was conducted on 06/26/2020. During the home
visit a search was conducted in an attempt to locate the
reported unmonitored device. During the search, several
sexual devices/aids were found throughout Mr. Lewis’[s]
belongings. Some of these devices depicted complete
nudity as well.
The report indicated that Lewis admitted guilt to this violation and accepted the
consequence of serving twenty days of discretionary detention as a graduated
sanction.
A revocation hearing was held on August 14, 2020, via Zoom. The
probation officer testified and noted that Lewis admitted to his violation, was given
a graduated sanction, and had served it. The officer expressed concern that
Lewis’s SOTP counselor was not holding him accountable for missing sessions
and payments.
-15-
The circuit court again lectured to Lewis about the importance of
completing the SOTP program, stating, “Mr. Lewis, there is something wrong with
you ‘cause you don’t seem to understand that you have got to do this program.”
After Lewis indicated that he was working with his counselor on the payment
issue, the circuit court again explained:
You will have a problem if you’re not complying with
the rules. I’ll say this again to you, sir. You’re not
getting out from doing the program successfully because
if, one more slip up and you’re going to jail. Because
I’m not going to put up with it anymore.
On August 21, 2020, an order was entered indicating that no action
would be taken at that time.
In a special report dated September 16, 2020, Lewis’s probation
officer reported problems regarding Lewis’s treatment by the private SOTP located
in Frankfort, Kentucky, which he began attending in January of 2020. The officer
indicated a belief that this program failed to comply with 501 Kentucky
Administrative Regulations (KAR) 6:220 Section 2(4)(c)3 by failing to make a
good faith effort to obtain Lewis’s previous mental health records despite being
told by the officer to have Lewis sign a release of information to allow the program
to access his prior SOTP treatment history. The officer indicated a belief that this
program also failed to comply with 501 KAR 6:220 Section 2(5)(e) and (5)(f) by
3
The probation officer listed 501 KAR 6:220 Section 2(2)(c) which appears to be a typo.
-16-
failing to notify the officer if the offender fails to attend or fails to make a good
faith effort to participate in the program, and provide monthly progress reports to
the officer, as despite Lewis’s enrollment in January, the private SOTP program
had only submitted one progress report (dated August 28, 2020) for the entire year;
while this progress report stated that Lewis had missed classes, it did not state how
many or when, or how Lewis was held accountable for these absences.
In consequence, the officer indicated that on September 2, 2020,
Lewis was directed to contact a private clinician in Somerset, Kentucky, no later
than September 4, 2020. However, “[t]his officer was notified that Mr. Lewis did
not make contact with the listed number for the clinician until September 15,
2020.”
In a report dated October 30, 2020, the probation officer recounted:
A home visit was conducted on October 28, 2020 in
response to a community complaint that Mr. Lewis and
his boyfriend James Grimes had been using drugs and
making threats against another parole officer. Upon
entering the home Mr. Lewis and his boyfriend James
Grimes were detained due to the threatening and
harassing nature of the complaints and threats received
by another officer at probation and parole. It was
apparent that there were multiple smart devices in the
apartment due to a smart phone being found in the living
room and multiple phone chargers throughout the home.
A search was conducted by Probation and Parole officers
with assistance from the Lexington Police Department.
The following items were found in the apartment: (14)
.38 spl, (10) 9mm, (2) .380 acp, (2) .22 lr, (1) .25 acp, (1)
.45 acp, (1) .32 s&w, Black Motorola Razor cell phone,
-17-
Black Lenovo smart tablet, Narcan, 1 baby diaper, 3 sex
lubes, 4 plastic penises, black brass knuckles, 1 small
piece of weed, 1 white visa debit card belonging to Mark
Grimes. Mr. Lewis was arrested for probation
violations[.]
The officer requested revocation of Lewis’s probation indicating Lewis: (1)
violated the computer use agreement by not providing any information regarding
the possession of a smart tablet; (2) violated the supplemental conditions of not
possessing sexually arousing materials by having a tablet that “contained
hundred[s] of nude images and videos. Along with an extensive search history of
various pornography[;]” (3) violated the supplemental conditions of not possessing
sexually arousing materials by having possession of several sexual lubricants along
with four small plastic penises; (4) violated the conditions of probation by being
terminated from a SOTP; and (5) violated the conditions of probation by
possessing the marijuana. The officer indicated that “Mr. Lewis cannot be
effectively supervised in the community and is unwilling to successfully complete
Sex Offender Therapy as required. This is the fifth termination from a Sex
Offender Therapy Program for Mr. Lewis.”
In an affidavit signed on November 2, 2020, Lewis’s probation and
parole officer indicated that as to the SOTP termination “Mr. Lewis had cancelled
three separate appointments to begin SOTP with this counselor [Samantha Baker].
Ms. Baker stated that Mr. Lewis would not be accepted into their private SOTP
-18-
and had he been accepted these current violations [which the officer informed
Baker about] were serious enough for termination from the program.”
On December 9, 2020, the circuit court held its final revocation
hearing for Lewis via Zoom, which ended up being continued until December 16,
2020, as Lewis’s counsel was not familiar with the report. The probation officer
testified that he took over the case because threats had been made by others against
the prior officer and a day after he received the case a complaint was called in
indicating that there were drugs and weapons in the apartment. He testified
consistently with the report about what was discovered in the apartment, including
the rounds of ammunition, indicating those were sitting out on a shelf in the
kitchen/dining room area, and that the debit card belonged to the person who had
made the report. The officer testified that the baby diaper was located in the only
apartment bed.
The officer explained that as to the SOTP, Lewis had three separate
appointments and kept canceling, and that given that and Lewis’s violations that
the program would not accept him. The officer acknowledged that Lewis stated he
had transportation problems.
Lewis called his boyfriend to testify, but due to connection issues with
Zoom, the boyfriend was not able to testify; Lewis was allowed to make a proffer
about what the boyfriend would testify. Counsel indicated that the boyfriend
-19-
would testify that Lewis made every effort to attend the SOTP program in
Somerset, the ammunition and tablet belonged to a third party that was staying
with them, the sex toys and condoms belonged to the boyfriend and were used with
Lewis in their consensual relationship, and that Lewis could maybe live in
Louisville with his aunt. Counsel also indicated that he had spoken to the
counselor of the Frankfort SOTP and that Lewis could go back to that program as
she had not kicked him out of that program.4 The circuit court indicated that it
would accept the proffered testimony as if the boyfriend had testified.
The circuit court announced:
Enough is enough with Mr. Lewis. I have bent over
backwards, backwards for this gentleman to just get his
act together and just finish one of these programs. That’s
all I wanted. I didn’t want to send him to the
penitentiary, but he keeps messing it up. I, you know, I
can’t continue him on probation. It’d make, it’d make a
mockery of the system after this he’s, he’s not able to
finish this sex offender program, you know, and I leave
him on probation, it’s too much [counsel]. I’m revoking
him.
I’m revoking you Mr. Lewis. No more chances. You’re
going to have to serve your time. I’m sorry, but you just
will not do what I’ve asked you to do.
4
This was the program that the probation officer removed Lewis from attending as the program
failed to report monthly on Lewis’s progress and apparently had no consequences for him when
he missed sessions.
-20-
Lewis interjected that he never got the proper address for the SOTP in
Somerset, and he drove around for an hour looking for it. He indicated he would
be willing to return to the Frankfort SOTP.
The circuit court indicated, “I’ve had little tabs for every hiccup on
your case and yours takes the cake. I’ve bent over backwards for ya. It’s the end
of the road man. I’m sorry.”
The order revoking probation was filed on January 14, 2021. The
order indicated that Lewis stipulated to violating the terms of his probation. The
circuit court then found that “the Defendant has violated the terms of his probation.
The Defendant’s failure to abide by a condition of supervision constitutes a
significant risk to the community and the Defendant cannot be managed in the
community.”
Lewis argues that the circuit court did not make the necessary factual
findings to revoke his probation, the KRS 439.3106(1) factors were not analyzed,
and the evidence does not support revocation. We strongly disagree.
We review the circuit court’s decision to revoke probation for abuse
of discretion. Commonwealth v. Andrews, 448 S.W.3d 773, 780 (Ky. 2014);
Helms v. Commonwealth, 475 S.W.3d 637, 644 (Ky.App. 2015). “[W]e will not
hold a trial court to have abused its discretion unless its decision cannot be located
within the range of permissible decisions allowed by a correct application of the
-21-
facts to the law.” McClure v. Commonwealth, 457 S.W.3d 728, 730 (Ky.App.
2015).
KRS 439.3106 provides in relevant part as follows:
(1) Supervised individuals shall be subject to:
(a) Violation revocation proceedings and possible
incarceration for failure to comply with the
conditions of supervision when such failure
constitutes a significant risk to prior victims of the
supervised individual or the community at large,
and cannot be appropriately managed in the
community; or
(b) Sanctions other than revocation and incarceration
as appropriate to the severity of the violation
behavior, the risk of future criminal behavior by
the offender, and the need for, and availability of,
interventions which may assist the offender to
remain compliant and crime-free in the
community.
“KRS 439.3106(1) requires trial courts to consider whether a
probationer’s failure to abide by a condition of supervision constitutes a significant
risk to prior victims or the community at large, and whether the probationer cannot
be managed in the community before probation may be revoked.” Andrews, 448
S.W.3d at 780.
For purposes of review, rather than speculate on
whether the court considered KRS 439.3106(1), we
require courts to make specific findings of fact, either
written or oral, addressing the statutory criteria. A
requirement that the court make these express findings on
the record not only helps ensure reviewability of the
-22-
court decision, but it also helps ensure that the court’s
decision was reliable. Findings are a prerequisite to any
unfavorable decision and are a minimal requirement of
due process of law.
Lainhart v. Commonwealth, 534 S.W.3d 234, 238 (Ky.App. 2017) (internal
quotation marks and citations omitted). We note that “conclusory statements on
the preprinted forms, related to the criteria in KRS 439.3106(1)” are “not sufficient
to meet the mandatory statutory findings necessary to revoke a defendant’s
probation.” Walker v. Commonwealth, 588 S.W.3d 453, 459 (Ky.App. 2019). See
Helms, 475 S.W.3d at 645 (explaining “[i]f the penal reforms brought about by HB
[House Bill] 463 are to mean anything, perfunctorily reciting the statutory
language in KRS 439.3106 is not enough.”).
In reviewing the circuit court’s decision to revoke Lewis’s probation,
we must consider and answer two intertwined questions: “Whether the evidence of
record supported the requisite findings that [the probationer] was a significant risk
to, and unmanageable within, his community; and whether the trial court, in fact,
made those requisite findings.” McClure, 457 S.W.3d at 732.
Having thoroughly reviewed all the prior violations, the prior
revocation hearings, and the circuit court repeatedly emphasizing to Lewis that he
needed to complete an SOTP program, along with the repeated discussion about
how Lewis was a risk to the community because he kept committing violations and
-23-
was not getting the appropriate treatment, we are confident that the outcome was
correct and amply supported.
Lewis repeatedly admitted to his past violations, both to his probation
officer and the circuit court.5 Lewis had attempted to complete a SOTP five
different times and had problems each time, resulting in his removal from two
programs for violating their terms and not being accepted into two other programs
due to his actions of acting out, not attending, and continuing to engage in
inappropriate behavior. While Lewis’s removal from the Frankfort program may
not have been his fault, even regarding this program, he was not regularly
attending. At best, the proffered evidence indicated that his boyfriend thought
Lewis was trying to attend the Somerset SOTP, but did not contravene that Lewis
failed to attend at all.
The circuit court told Lewis again and again that he needed to
complete the SOTP or he would have to do it in prison. The circuit court
repeatedly applied graduated sanctions to try to manage Lewis in the community
safely. We commend the circuit court for attempting to apply graduated sanctions
in the way that we believe the General Assembly intended in enacting House Bill
5
While Lewis did not formally admit to the last probation violation, any finding that he did was
harmless as there was overwhelming evidence to conclude that he had violated the terms of his
probation over and over and over again.
-24-
463. 2011 Ky. Acts ch. 2, § 59 (HB 463) (eff. Jun. 8, 2011). As noted in Andrews,
448 S.W.3d at 776, “[w]ith the enactment of HB 463, the legislature adopted a
sentencing policy intended to ‘maintain public safety and hold offenders
accountable while reducing recidivism and criminal behavior and improving
outcomes for those offenders who are sentenced.’ KRS 532.007(1).”
However, each time after Lewis served a sanction and was released,
he failed to complete a SOTP and repeated to commit violations. There was no
evidence that if Lewis was continued on probation that his intractable behavior
would change, and he would start to conform his behavior to the rules. Even
during his final probation revocation hearing, Lewis kept making excuses. Even if
the circuit court accepted that Lewis could not find the Somerset SOTP location
the first time, this did not explain why he repeatedly canceled appointments.
In reviewing the hearings, the circuit court’s repeated pronouncements
and its oral findings, and the written order, it is evident that the circuit court made
a finding that because Lewis could not complete a SOTP, despite every chance he
had been given and the imposition of repeated graduated sanctions, that this was a
violation of his probation, that his failure to comply with the condition that he
complete a SOTP constituted a significant risk to the community, and that the only
way Lewis could possibly complete a SOTP was to do it while incarcerated. While
graduated sanctions ought to be attempted, there is no requirement that the circuit
-25-
court repeat trying what has already failed until a defendant has served out his
probation.
Ultimately, under KRS 439.3106 circuit courts retain the discretion to
determine when probation ought to be revoked. Andrews, 448 S.W.3d at 777.
Whatever personal problems Lewis had, he was given ample opportunities to work
them out yet continued down the same road. Although it may have failed with
Lewis, we are confident that the circuit court did everything it could to try to
correct Lewis’s actions in the community but that it also acted appropriately when
it became apparent that this was no longer possible.
Accordingly, we affirm the Fayette Circuit Court’s order revoking
Lewis’s probation.
ALL CONCUR.
BRIEFS FOR APPELLANT: BRIEF FOR APPELLEE:
Aaron Reed Baker Daniel Cameron
Frankfort, Kentucky Attorney General of Kentucky
Thomas A. Van de Rostyne
Assistant Attorney General
Frankfort, Kentucky
-26- | 01-04-2023 | 11-10-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489365/ | FINDINGS OF FACT, CONCLUSIONS OF LAW, AND FINAL JUDGMENT DENYING ALL PLAINTIFF’S CLAIMS FOR RELIEF EXCEPT DIRECTING AN ACCOUNTING FOR ALL PROFITS GAINED BY F. RANDOLPH VESTAL ENTERPRISES, INC. THROUGH USE OF A CERTAIN TELEVISION FILM
DENNIS J. STEWART, Bankruptcy Judge.
This is an action sounding in breach of contract, unjust enrichment, and violation of corporate fiduciary duties brought by a chapter 11 debtor-in-possession against former officers and employees of the debtor-in-possession and the corporation alleged to have been newly formed by them. After an ample pretrial discovery period and the allotting of time for filing documents in accordance with a pretrial order which had been issued by the court, the matter came on for hearing on April 5 and 6, 1982, in Little Rock, Arkansas. Thereupon, the plaintiff appeared by counsel, Gregory Hopkins, Esquire, and Joe Polk, Esquire, and the defendants likewise appeared personally and by counsel, Overton S. Anderson, Esquire, and Joe Kilpatrick, Esquire. The evidence which was then adduced warrants the following findings of fact.
*529FINDINGS OF FACT
Prior to the date of the inception of these chapter 11 proceedings, the debtor-in-possession, Telesport, Inc., was a subsidiary of the J. T. Lloyd Company, a wholesale distributor of sporting goods. The J. T. Lloyd Company was itself a subject of chapter 11 proceedings, remaining a debtor-in-possession under a plan of reorganization which was confirmed in October of 1980. Under that plan, creditors of the J. T. Lloyd Company were made shareholders and their representatives became the Board of Directors of J. T. Lloyd Company. One of the creditor-shareholders who became a director was Landell Bowman.
The debtor in these chapter 11 proceedings, Telesport, Inc., was under the general management of Frank Randolph Vestal, who was also a vice president of the J. T. Lloyd Company. Its principal functions were to produce television programs on the subject of fishing, which featured the defendants, William G. Dance and Roland V. R. Martin. Sponsors of these programs would frequently pay for their sponsorship by granting sporting goods manufactured by them in specie to Telesport, Inc., which would be then distributed by the J. T. Lloyd Company.
In the summer of 1981, both J. T. Lloyd Company and Telesport, Inc., had financial problems. These problems resulted in the resignation of Turner Lloyd as the chief executive officer of the J. T. Lloyd Company and the impasse in the hegemony of Telesport, Inc., which gave rise to the action at bar.
After the resignation of Turner Lloyd as the chief executive officer of the J. T. Lloyd Company, Landell Bowman became the chairman of the Board of Directors of the J. T. Lloyd Company. The defendant, Frank Randolph Vestal, became president of the J. T. Lloyd Company and of Telesport, Inc. Mr. Bowman, with the support and backing of a powerful secured creditor of J. T. Lloyd Company, began to assert a greater right to manage the Telesport operations. This was opposed by Mr. Vestal, who conceived of the Telesport operation as one which had had its genesis and development and full culmination under his personal direction. As the struggle for power in the Telesport operation grew more intense, the Board of Directors proposed, as a compromise, that Mr. Bowman and Mr. Vestal should serve as co-chief executive officers of the Telesport corporation for a period of 90 days, at the end of which the above mentioned secured creditor would select either Bowman or Vestal as the permanent chief executive officer.
In this same time frame, the evidence demonstrates that Frank Randolph Vestal began to make at least contingent plans for the formation of another corporation in the event that the co-chief executiveship of Mr. Bowman became a reality. Some conversations were held with at least one of the employees of the Telesport corporation concerning the possibility of forming another corporation subsequent to any resignation which Mr. Vestal might feel forced to submit.1 Sometime before resignation, he held a meeting of corporate employees in which he stated that he held the key to the future of the operation and that it should therefore continue to operate under his leadership and control. There is some evidence to the effect that he went so far as to assert that he had the power to destroy Telesport if he were replaced as its chief executive.2 And, according to the evidence of record, his statements were to the effect that the future endeavors of Telesport would be foredoomed without his control and leadership. *530There is no evidence of any probative weight that he elaborated at that time on the reasons for his conclusion to this effect.
Mr. Vestal found the suggestion that Mr. Bowman serve as a co-chief executive particularly repugnant for several reasons. Admittedly, he did not like Mr. Bowman. Further, Mr. Bowman was from a distant city, Los Angeles, California, and his acting in a managerial capacity dictated that he travel frequently back and forth at company expense. And, in the meantime, Mr. Bowman was to be able to exercise some remote control of the operations from Los Angeles. Admittedly, he viewed the suggestion of the Board of Directors in this regard as a 90-day notice of termination and stated to the Board that, if it were given effect, he would resign all his positions with the Lloyd complex of corporations. Subsequently, on July 7, 1981, at 10:00 a. m., when Mr. Bowman appeared on the premises for the ostensible purpose of participating in the management and control of Telesport, Inc., Mr. Vestal submitted his resignation, effective forthwith.
As of the date of this resignation, there is little doubt in the evidence that Telesport was insolvent and was unable to pay its debts as they fell due. According to the testimony of Landell Bowman, he had arranged for the infusion of some $125,000.00 in capital into the Telesport corporation by means of a loan and also had some $600,-000.00 in “product” on hand — the television programs and the like or the merchandise which could be sold for valúe — which could have been liquidated to sustain the operations for at least a limited time in the future. According to the testimony which was adduced by the defendants, the proposed infusion of cash by this means would not have been sufficient to restore Teles-port to an operable solvent status for some great period of time.3
The other defendants — Dance, Martin, and J. B. Edwards, — quickly followed suit in resigning. The Dance and Martin resignations took place on July 10, 1981, effective 31 days in the future. Their respective letters of resignation cited, in part, the financial incapabilities of Telesport to sustain its operations. According to the testimony of both Dance and Martin, they did not discuss the possibility of forming a new corporation with Frank Randolph Vestal, or any agent of his, prior to the time when they learned of his resignation. When they learned of Mr. Vestal’s resignation, however, they made quickly their respective decisions to resign. They stated that this in part was based upon their personal friendships with Mr. Vestal and in part upon the fact that all the sponsors and prospective sponsors, substantially, were friends of Mr. Vestal and were not likely to continue business with Telesport after his resignation from it.
In this respect, there is really no evidence which directly contradicts the testimony of the defendants in this regard, except the testimony of one former employee to the effect that he participated in and overheard some conversations respecting the possibilities of forming a new corporation and the making of some possibility or contingent plans in the event that this became necessary.
Shortly after his resignation from Teles-port, Inc., Frank Randolph Vestal formed the corporation entitled Frank Randolph Vestal Enterprises, Inc., doing business as Cinesport, Inc. Its business was to be essentially the same as that of Telesport, Inc., had been. Other employees of Telesport quickly became employees of Cinesport. As noted above, the other defendants, Edwards, Dance and Martin, followed Vestal’s lead in resigning from Telesport (with the aid of resignation letters drawn up by Vestal’s counsel) and in enlisting as employees of Cinesport.
The contracts of the plaintiff with Dance and Martin had a non-competition clause in *531each of them, under the terms of which, if the employees were to “break” the contract, they were to “refrain directly or indirectly from participating in any similar activities in which (they were) participating while associated with Telesport, i.e., television shows, film production of any type” for a period of two years in the case of the defendant Dance and for a period of one year in the case of the defendant Martin. Among the grounds for termination of the employment contracts of Dance and Martin was inability of the corporation to perform its contracts. See paragraph V of the contracts to the following effect:
“It is recognized by all parties hereto that the successful performance of this contract by each is dependent upon ... the financial capabilities of Telesport. Should (Telesport) become unable to perform, it is agreed that this contract may be terminated by either party without penalty upon giving to the other party hereto written notice of the reasons mentioned above for such termination thirty days prior to the date of termination.”
Before the expiration of this 30-day period, in late July or early August, 1981, the defendants attended an industry meeting or exposition in Florida. The evidence shows that, during this time, the defendants had some discussions involving the planning for the formation of a new corporation and that, further, they solicited some new sponsors for their planned productions of the programs of Dance and Martin, including sponsors who currently had contracts with the debtor corporation. The evidence does not affirmatively show which of the old sponsors were the subject of any blandishments in this regard nor which of them resulted in the signing of contracts with the new corporation which was being formed by Frank Randolph Vestal.
But ostensibly as the result of the soliciting undertaken by the defendants at the Florida sports show, the agreements of August 10-11, 1981, were entered into by Frank Randolph Vestal’s new corporation, Cinesport, Inc., with several sponsors, at least some of whom in the past had been sponsors for the Dance and Martin shows which were produced by Telesport, Inc. On this critical issue, however, the proof which has been adduced by the plaintiff is quite imperfect. It has largely consisted of repeated but general allusions to the fact that several of Telesport’s former sponsors now became the current sponsors of the Dance and Martin shows. It was never sufficiently stated or shown that, as to any or all of the sponsors who signed sponsorship contracts with Cinesport during this period of time, they had existing contractural relationships with Telesport, Inc., which were tortiously interfered with. This court cannot speculate concerning this crucial defect in the evidence beyond noting that it followed upon the above-noted failure and refusal of the parties to comply with the court’s pretrial order.4 Some pains were taken to demonstrate that the forms in which Cinesport cast its contracts with its new sponsors were in all essential respects the same as those which had previously been used by Telesport. But the evidence also shows without contradiction that the form used was one commonly used throughout the industry.
While Cinesport, Inc., was still a struggling infant corporation, it found a need to create some revenue by using a recording of a television program which had been created and initially recorded by Telesport, Inc. The evidence shows that the reel of film came to be in the possession of Cinesport in the following manner: While he was still an officer of Telesport, Frank Randolph Vestal had a conversation with one of the sponsors of Telesport’s television productions, Charles Spence, the president of Strike King Lure Company. This conversation appears to have taken place while Turner Lloyd was still the president of J. T. Lloyd Company and before Mr. Vestal was *532to give serious consideration to resigning as a corporate officer of Telesport. Mr. Spence conveyed to Mr. Vestal a desire to have the film for the purpose of advertising some of Strike King’s products. It was Vestal’s initial decision to donate the film to Spence as a gift. According to the testimony of Vestal and Spence, this initial decision was overruled by Mr. Lloyd, who held that some charge must be made for use of the film. The testimony of Vestal is at odds with that of Spence on the consideration paid; one version is $2,000.00; the other $1,500.00. Without any written agreement or other ceremony, a copy of the film was then turned over to Spence. Then later, when the newly-created Cinesport was desperate for revenue, and the situation was made known to Spence, he donated the film to Cinesport which then ran the film on television and gained revenues which are not disclosed by the evidence.
As noted above, the evidence which was adduced in the hearing of this action leaves no doubt of the continual insolvency of Tel-esport throughout the period of time encompassing the events here in issue. The plaintiff contends, however, that, if it had had the ability and opportunity to produce the Dance and Martin shows for the ensuing year, some $900,000.00 in profit might reasonably have been expected.5
CONCLUSIONS OF LAW
The plaintiff asserts on the basis of the foregoing facts that the defendants have violated their duties to it and therefore must be required to pay to plaintiff damages, chiefly for the $900,000.00 which it is argued that Telesport could have expected to profit had the Dance and Martin contracts not been terminated. The defendant, Vestal, as a corporate officer, stood in the position of a fiduciary to the debtor corporation.6 In such position, he owed it to the corporation to accord it his undivided loyalty.7 Hence, while he was still a corporate officer, he was bound by his position and the duties thereby incumbent upon him not to act contrary to the corporate interest. This duty, according to the weight of authority, did not attach after the effective date of his resignation as a corporate officer, so that, after his resignation, he could expect to engage in lawful enterprises which were in competition with Telesport, Inc.8 He might, even while still an officer of the debtor corporation, make plans, quite possibly in concert with others, to form or join a competing enterprise after the effective date of his resignation.9 He might not, however, then act contrary to the interests of the corporation while still an officer of it. Thus, it would have been improper, and inconsistent with his duty as a corporate officer, to make use of his position while *533still serving as an officer of the corporation for the future benefit of a competing organization.10 The key words in this melange of duties are “good faith.”11
In applying these standards to the acts and conduct of the defendant, Frank Randolph Vestal, according to the above findings of fact, it must be observed that there is no evidence that any of Vestal’s activities prior to the date of his submitting his resignation had any adverse effect upon the debtor corporation or that they were anything but efficient. There is no indication that any of Vestal’s activities constituted or contributed to mismanagement of the corporation or had any cause-and-effect relationship to the insolvency of the debtor corporation. There is evidence to the effect that he discussed with certain employees of the corporation the possibility of setting up a new and competing corporation in the future. But, with the one exception which is covered below, there is no evidence that he actually used confidential information which he had gained in his capacity as a corporate officer to benefit this future competitor of the debtor corporation.12 And, in the course of his struggle for ultimate control of the debtor corporation, there is evidence that he made reference to his power to “destroy” the debtor corporation. But there is no evidence that he intended to accomplish destruction by any proscribed means by the use of any confidential information gained by him by virtue of his corporate office.
Under these principles, the resignation of the defendant, Frank Randolph Vestal, from Telesport cannot be considered, in itself, as a breach of any loyalty or fiduciary duty which he owed as a corporate officer. The law does not prohibit the resignation of a corporate officer which is not otherwise prohibited by explicit contractual provision.
If other employees of the corporation follow his lead in resigning, he is liable under the governing principles to his former corporation if he made use of his position as an officer of the former corporation to recruit the other employees in bad faith for his new corporation.13 The evidence does not show, however, that Mr. Vestal had made up his mind to resign until the actual moment of his resignation. He had previously determined the conditions under which he would resign and had made them known. But the prior indecision in this matter tends to disprove any prior intent to work any harm to Telesport, Inc., a corporation for which Mr. Vestal might well, according to his indecision, be working for in the future.
In fact, the evidence which has been adduced in the action shows, without any contradiction in this respect, that Mr. Vestal had been a loyal, hard-working and effective officer and employee of Telesport, Inc. The services of Dance and Martin had been obtained and retained in large part because of their personal friendship and respect for him. The sponsors, also, were in large part personal friends of Mr. Vestal. But, despite Mr. Vestal’s qualities and his hard work and efficiency, the fortunes of Telesport had dropped to the point of insolvency in July, 1981. There is no evidence which indicates that Mr. Vestal was in any sense responsible for Telesport’s decline in fortunes. In fact, the evidence tends to show that any success which had been enjoyed by Teles-port was almost solely due to the efforts and abilities of Mr. Vestal.
Nevertheless, the organ which represented the stockholders, the board of directors, seemingly oblivious of this crucial merit, proposed to divest Vestal of at least a vital *534portion of the managing control of Teles-port by forcing him to share it with one who was essentially an outsider, unschooled and inexperienced in the business which was conducted by Telesport, whose travel expenses alone promised to be an additional burden for the already-insolvent corporation. These conditions were intolerable to Mr. Vestal and he made known his resolve to resign if they were in fact imposed.
In imposing the conditions in the face of Vestal’s known position respecting them, it seems to the court that the board of directors took the risk that Vestal would resign. Further, they either knew or should have known of Vestal’s respected position with the key employees, Dance and Martin, and with the various sponsors and they either knew or should have known of Teles-port’s insolvency. Under these circumstances, the law does not hold that a board of directors can constructively terminate a corporate officer by violating reasonable conditions imposed by him on the continuation of his employment and then successfully sue him to recover some or all of the profits of any competing enterprise entered into by him.14
Doubtless, although the evidence does not show it directly, Vestal, Edwards, Dance and Martin discussed the possibility of resigning and forming another, competing corporation and perhaps even made contingent plans as to how and on what schedule they should proceed to attain their goals in this regard. But there is no evidence, direct, indirect, or circumstantial, that any confidential information was used or misused in the process, or any trade secrets, or that any violation of corporate loyalty took place before July 7,1981. Indeed, inasmuch as the evidence clearly shows that Vestal and the other defendants were uncertain until that date as to whether they would resign, it seems unlikely that they would have wanted to do any harm to Telesport prior to July 7, 1981.
In its posttrial brief, the plaintiff cites authority which, it is claimed, makes the confluence of resignations at or about the same time proof of an earlier conspiracy which was violative of the conspirators’ duty of loyalty to the corporation.15 But the evidentiary inference to be drawn is permissive, not mandatory. And those decisions differ from the case at bar in which, as noted above, the evidence shows that the unequivocal intent to resign did not exist prior to July 7, 1981.
There is no question but that, thereafter, the defendants commenced to work together to put together a competing business. This, however, was after all of them had resigned from Telesport. The plaintiff cites the decision of the Arkansas Supreme Court in Raines v. Toney, 228 Ark. 1170, 313 S.W.2d 802 (1958), for the proposition that the duty of corporate loyalty survives the corporate officer’s resignation. But that was a case in which contractual provisions gave rise to the principle. Further, the survival of the duty of loyalty must, in light of other authority which with near unanimity permits post-resignation competition with the corporation,16 this rule must be held to be restricted to the proposition that confidential information or other restricted information garnered in a fiduciary capacity as an officer cannot later be employed to the detriment of the corporation. There is no evidence of that in this action.
*535In this case, there was no contractual provision which retained the loyalty of Vestal or Edwards after their resignations or forbad them from entering into or forming competing enterprises.
As noted above, the only non-competition clause existing was contained in the employment contracts of the defendants Dance and Martin and it was effective only if those employees “broke” the employment contract. If they resigned for incapability of the corporation to perform its obligations to them, they did not “break” the contracts. The evidence shows that Telesport, especially without Vestal, was incapable of producing the Dance and Martin shows when it was insolvent and the proposals of Mr. Bowman to obtain a $125,000.00 loan and sell existing “product” was insufficient to defray operations in the foreseeable future.
There is no evidence, therefore, that the defendants’ mere solicitation of sponsorship contracts at the Florida industry meeting in late July, 1981 involved any actionable offense against the debtor corporation. If it were lawful for the defendants to compete with Telesport, then this activity is necessarily permissible. The solicitation of sponsors in the course of the industry meeting in Florida is contended to have involved the misuse of the defendants’ former positions with Telesport in several particulars. One is that the contracts made with the sponsors were in substantially the same form as those which were used by Telesport. As noted above, however, the form was one common to the industry and there is no evidence that the defendants purloined Telesport’s forms for this purpose. It is shown that the defendants solicited some of the same sponsors who had been sponsors of the Dance and Martin programs by Telesport, Inc. It is further shown that, as the result of the solicitation conducted in Florida, and perhaps elsewhere, several sponsorship contracts were signed with Cin-esport promptly after the Dance and Martin resignations became effective. But there is no showing in the evidence either that the sponsors which were then signed by Cines-port were those which had been Telesport’s sponsors nor that any of them had still-existing contracts with Telesport. Had this latter showing been made, a viable claim of tortious interference with contractual relations may have been made out.
As it is, however, according to the above considerations and authorities, no case of bad faith is in any respect made as to the resignations of the defendants and their subsequent activities in competition with Telesport. In respect of all the defendants, there was sufficient cause for the resignations and the competition which followed thereupon does not appear from the evidence adduced to have used any trade secrets or confidential information or any abuse of their prior respective positions with Telesport, Inc.
The decision may perhaps be different if the defendants had bolted from a viable and solvent corporation, and deserted its stockholders for no good reason, and entered into competition with it. But, in this case, the corporation was insolvent through no demonstrated fault of the defendants and there was reason for their respective resignations and the competition then entered into is not shown generally to have been unfair or illegal competition.17
In one limited respect, however, the defendants did use the property of Telesport to gain profits for the new corporation *536known as Cinesport. This was in using the television film acquired from Strike King Lure Company. Under the facts found above, the court cannot torture from the absence of evidence of any written agreement any transfer of “exclusive right” to use of the film to Strike King Lure Company. This is especially so when Telesport, Inc. kept a copy of the reel, ostensibly for its own use. This circumstance prevents the court from finding that the transfer to Strike King was for anything but the transferee’s own limited use, and that Telesport otherwise retained its property rights in the film. Its appropriation by the new corporation makes it liable to plaintiff for the profits yielded from its showings.
It is therefore, for the foregoing reasons,
ADJUDGED that plaintiff’s complaint for relief be, and it is hereby, denied in all respects except the following. It is further
ADJUDGED that, within 20 days of the date of this judgment, the defendant Frank Randolph Vestal, Inc., d/b/a Cinesport, Inc., account to plaintiff for any and all profits which it derived from any showings of the above.
ON MOTION TO ALTER OR AMEND JUDGMENT OR FOR A NEW TRIAL
This court formerly issued its written findings of fact, conclusions of law and final judgment denying in part and granting in part the plaintiff’s prayer for relief. The plaintiff now moves to alter or amend that judgment or for a new trial on a multitude of grounds.
The greatest number of assertions of error is comprised of contentions that the court failed to make certain findings which were warranted by the evidence adduced. The findings which are now urged upon the court by the plaintiff are of facts which are immaterial to resolution of the issues in this action and which, even if all were made the subject of explicit findings, would not change the result in this action.1 They are therefore of no consequence and these asserted grounds for alteration or amendment of the judgment, or for a new trial, must accordingly be denied.
It is asserted by the plaintiff that the court erroneously made the fact of the plaintiff’s insolvency determinative of the issue of whether the defendants, or any of *537them, violated their fiduciary duties to it.2 The law, it is said, provides for liability regardless of the fact of insolvency.3 The governing law, however, provides that, while a court need not regard insolvency as the sole or determinative factor on the corporate loyalty question, it may nevertheless, as this court did, give consideration to the fact of insolvency in making the determination.4
Finally, it is asserted that this court erred in finding that plaintiff failed to show that it had any contracts still in force and effect with any of the sponsors at the time Cinesport, Inc., made its contracts with them.5 In this regard, the bare and unexplained documentary evidence (originally said, at the time of its offer by the plaintiff, to be relevant only to show the expropriation of the form of the agreements by the defendants6) is said to show that a contract between plaintiff and the sponsor Daiwa was in effect at the time a new contract was entered into between the defendant Cinesport and the same sponsor.7 But there is no contract among the documentary evidence deposited with the court purporting to show that Daiwa had an ongoing contract with Telesport in August, 1981. There is only a contract evidencing Cinesport’s agreement with Daiwa effective in late 1981. But even if defendants’ factual contention in this regard were correct, the mere submission in evidence of the contract, without more, is insufficient to establish the right to relief now claimed by the plaintiff. There was no evidence that the plaintiff’s contract had not earlier been ter*538minated.8 Further, there was no evidence that the plaintiff suffered any damage or injury by reason of any contractual interference by the defendants. And it is rudimentary that a party must prove damages as an element of the case indispensable to recovery.9 The other allegations of error are frivolous.
It is therefore, for the foregoing reasons,
ORDERED, that the plaintiff’s motion to alter or amend judgment or for a new trial be, and it is hereby, denied.
. The testimony, rendered by a former employee of Telesport, Inc., was in fact not directly contradicted in any material sense, but it is also sketchy and uninformative in respect of evidencing any bad faith conspiracy to violate any fiduciary responsibility to the plaintiff corporation.
. It is maintained by the defendants that this statement, if made, was made on July 6, 1981, only a day before Vestal’s resignation. The testimony of the plaintiffs witness, Wilma Al-letag, is uncertain as to the time when she heard Mr. Vestal make the statement, variously stating that the statement was made in late June or early July of 1981 or “a day or two” before his resignation.
. This testimony is, in substance, uncontradict-ed insofar as it maintains that the “product” could not be sold in total for a considerable period of time and that the $125,000.00 loan which Mr. Bowman states he had arranged would not have been sufficient to restore Teles-port to operating condition.
. If the provisions of the pretrial order had been complied with in respect of the summarizing of voluminous documents and other required pretrial findings, it would have required some reflection upon the elements of the claims and their outlining in terms of the available proof.
. Mr. Bowman’s testimony in this regard is not contradicted in essential part by the other evidence of record. ■
. In contemplation of law generally, there is no dissent from the proposition that “[t]he relationship of officers and directors to a corporation is a fiduciary one imposing upon them the duty to exercise their powers as officers and directors solely for the benefit of the corporation and its stockholders.” Canion v. Texas Cycle Supply, Inc., 537 S.W.2d 510, 513 (Tex. Civ.App. 1976). See also, to the same general effect, Raines v. Toney, 228 Ark. 1170, 313 S.W.2d 802 (1958).
. [A]n officer’s and director’s duty of loyalty to the corporation is unyielding in its demand ...” Canion v. Texas Cycle Supply, Inc., note 6, supra, at 513.
. See, e.g., Motorola, Inc. v. Fairchild Camera and Instrument Corp., 366 F.Supp. 1173, pp. 1181, 1182 (D.Ariz.1973) (See decisions there cited permitting post resignation competition and planning therefor with other employees prior to resignation); E. W. Bliss Co. v. Struthers-Dunn, Inc., 408 F.2d 1108, 1113, (8th Cir. 1969) (Corporate officers “were entitled to resign . . . for a good reason, a bad reason, or no reason at all, and are entitled to pursue their chosen field of endeavor in direct competition with [the corporation] so long as there is no breach of a confidential relationship with [it].”).
.See Metal Lubricants Co. v. Engineered Lubricants Co., 411 F.2d 426, 429 (8th Cir. 1969) (“The law recognizes that employees may agree among themselves to compete with their employer upon termination of their employment ... They may plan and prepare for their competing enterprise while still employed . . . without the necessity of revealing the plans to the employer.”)
. See note 7, supra.
. “It is necessary that there be a balancing of the equities between [the fiduciary duty and the right to resign and compete], for if the former is carried to its extreme it will deprive a man of his rights to make a living; while conversely, the latter right, if unchecked, would probably make a mockery of the fiduciary concept, with its concomitants of loyalty and fair play." National Rejectors, Inc. v. Trieman, 409 S.W.2d 1, 39 (Mo. 1966) (Emphasis added).
. See note 8, supra.
. Only “conspiratorial” actions in this respect are deemed to effront the fiduciary concept. See op. cit. supra note 11, at 34.
. This is especially so in view of the “rule of reason” and the need for “balancing of the equities,” see note 11, supra, which must attend the determination of this controversy.
. See the plaintiff’s pretrial brief, where it is observed that, in Frederick Chusid & Co. v. Marshall Leeman & Co., 279 F.Supp. 913, 919 (S.D.N.Y.1968), “the court held that the fact that within 3 months after the Defendant corporation had been incorporated, 5 Chusid employees had ‘transferred their allegiance’ to the Defendant corporation and at least 2 other Chusid employees discussed the possibility of working for the Defendant pointed strongly in the direction that the Defendants were actively soliciting Chusid’s employees.” But the question is one of permissible inferences. Under the circumstances of this case, in which the evidence shows that the defendants did not decide to resign until shortly before their resignations, it is permissible to infer that there was not the bad faith or conspiracy which implied disloyalty to the corporation.
.See note 9, supra.
. Ordinarily, under the apothegmatic principles which govern the conduct of corporate fiduciaries, “[a] corporation’s financial inability to take advantage of a corporate opportunity is one of the defenses which may be asserted in a suit involving an alleged appropriation of a corporate opportunity.” Canion v. Texas Cycle Supply, Inc., 537 S.W.2d 510, 513 (Tex.Civ. App.1976). The plaintiff, in its posttrial brief, insists that the fact of insolvency is “not controlling.” But, even if not always controlling, it is controlling under the facts of this case when other factors, including the defendants’ preeminent positions in the functioning of the corporation, show the corporation incapable of operations if they were relegated to subordinate positions. Cf. Coupounas v. Morad, 380 So.2d 800 (Ala. 1980). And, under these circumstances, it is immaterial and not evidence of bad faith that Vestal, after resignation, offered to purchase Telesport for a nominal sum.
. Defendants assert that the court failed specifically to find that there were certain pre-resig-nation and post-resignation activities and plans made by the defendants. Thus, it is noted that the court did not explicity find that “Dance and Martin met with Vestal and Edwards in Little Rock on July 8th and 9th, 1981, to discuss circumstances surrounding the resignations of Vestal and the other Telesport employees to inquire whether Vestal could produce the Dance and Martin television shows”; that “Dance and Martin, while in Little Rock on July 8th and 9th, did not attempt to contact anyone at Telesport or the J. T. Lloyd Company to hear the plaintiffs side of the story regarding the resignations, even though Dance submitted an expense voucher to Telesport for the trip which carried the notation of ‘L. R. meeting with Vestal and sponsor’ that “[t]he Court’s findings of fact set out that Dance’s and Martin’s resignation letters were written by Vestal’s counsel, but failed to set out that Vestal’s counsel (Gary Gibbs) was also general counsel for both of the Plaintiff corporations”; that “Dance and Martin discussed employment relationships with Vestal and Vestal Enterprises in late July and tentatively agreed on a contract at the Atlanta Fishing Tackle Show (August 4 through 8, 1981), which was prior to the August 10th effective date of Dance’s and Martin’s resignation”; and that “Dance and Martin attended the Atlanta Fishing Tackle show and talked to previous sponsors in the presence of Vestal and Edwards and on behalf of Vestal Enterprises.” The making of these findings would not change the result arrived at by the court in the challenged judgment. The court, in that judgment, found that planning for the formation of a new corporation took place in July and August, 1981; that, in August 1981, contracts of sponsors were solicited by the defendants; and that all this took place prior to the effective date of the Dance and Martin resignations. But, without more, the court previously found, these findings do not entitle the plaintiff to relief. “The law recognizes that employees may agree among themselves to compete with their employer upon termination of their employment ... They may plan and prepare for their competing enterprise while still employed ... without the necessity of revealing the plans to the employer.” Metal Lubricants Co. v. Engineered Lubricants Co., 411 F.2d 426, 429 (8th Cir. 1969). Further, as is noted in the challenged judgment and in note 5, infra, the solicitation of sponsors in Florida did not result in any measurable damages to the plaintiff.
. The plaintiff asserts in its postjudgment motion that “the Court suggests] in its opinion that Telesport’s insolvency excused the actions of the Defendants.” The court did not hold, however, that insolvency was a complete defense, but only that it was one fact to consider in a case such as that at bar. See note 17 to the memorandum of judgment. This view of the law is supported even by the case authorities cited and relied upon by defendants. Irving Trust Co. v. Deutsch, 73 F.2d 121, 124 (2d Cir. 1934). (“In support of the proposition that the prohibition against corporate officers acting on their own behalf is removed if the corporation is itself financially unable to enter into the transaction, the appellees cite Hannerty v. Standard Theater Co., 109 Mo. 297, 19 S.W. 82; Grand Amusement Co. v. Palladium Amusement Co., 315 Mo. 907, 287 S.W. 438; Jasper v. Appalachian Gas Co., 152 Ky. 68, 153 S.W. 50, Ann.Cas. 1915B 192. However, in the two latter cases the corporation was in fact insolvent ... [T]he facts ... tend to show the wisdom of a rigid rule forbidding the directors of a solvent corporation to take over for their own profit a corporate contract on the plea of the corporation’s financial inability to perform.” [Emphasis added.]); Paradas v. City Vending Co., 232 Md. 457, 194 A.2d 298 (1963) (Insolvency does not, without more, excuse the corporate officer’s usurping a corporate opportunity when the insolvency may be reversed in the future.)
. See note 2, supra.
. See note 2, supra.
. In its postjudgment motion, the plaintiff contends that “[t]he Court’s findings of fact erroneously reflect that Telesport had no existing contractual relationships or legitimate business expectancies with any of the sponsors which the Defendants solicited. The Plaintiff introduced substantial evidence both in the form of testimony and in the form of signed contracts from the 1980 and 1981 Telesport seasons showing that Vestal Enterprises had at least 12 sponsor contracts with previous Telesport sponsors. Of these sponsor contracts, Teles-port had a valid contract in force with one sponsor (Daiwa) at the time Vestal Enterprises entered into its contract and Telesport further had legitimate expectations of entering into contractual relationships with the other 11 sponsors in the absence of the activities engaged in by the Defendants”. The fact that a valid contract was in force is sought to be shown only by the face of the contract which was allegedly offered in evidence for the sole announced purpose of evidencing the form of the contract. As a matter of fact, as noted in the text of this memorandum, there is no such contract in evidence. But even if there were, it would be insufficient to serve as proof of the existence of a contract which was interfered with by defendants, absent other evidence that the contract had not been terminated and was still in effect. Further, even if there were evidence to that effect, there is absolutely no showing in the evidence of any injury or damages.
. This failure to discern the appropriate issue, as the court has previously noted, may well have derived from the parties’ ignoring the court’s pretrial order which was disregarded, in part, to delineate the issues for trial.
. See note 5, supra.
. Nor is there any other affirmative evidence of any direct interference with existing contractual relationships.
. “[I]n an action for damages, in excess of nominal damages, for breach of a contract, [a party] must show a compensable injury to the plaintiff resulting from the alleged breach of the pleaded contract.” 22 Am.Jur.2d sec. 270, p. 365 (1965). | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489366/ | CLIVE W. BARE, Bankruptcy Judge.
The matter before the court is the motion of the defendant ITT to dismiss the Amended Complaints of the plaintiffs (R. I. Greene & Associates, Inc., Joe Powell & Associates, Inc., Engineered Machinery Sales, Inc. and James A. Rankin & Associates, Inc.). In ruling on the motion of the defendant ITT, the court is required to accept the allegations of the Amended Complaints as true. United States v. New Wrinkle, 342 U.S. 371, 72 S.Ct. 350, 96 L.Ed. 417 (1952).
The original complaints were filed in the U.S. District Court for the Eastern District of Tennessee. Applications for removal to this court were filed on May 22, 1981, and the cases were duly removed pursuant to the provisions of 28 U.S.C.A. § 1478(a) (Supp.1982). The defendant ITT also filed *590a third-party complaint against Nesbitt Corporation, formerly known as Environmental Technologies Corporation (ETC), on or about May 22, 1981.
After some discovery and a series of motions, the Amended Complaints were filed on January 14, 1982.1 In reply thereto, the defendant ITT elected to file Motions to Dismiss, which were filed on February 16, 1982.
According to the allegations of the plaintiffs’ Amended Complaints, ITT, through an unincorporated division known as ITT-Nesbitt, was engaged in the manufacture and sale of custom-built air-conditioning, heating, and ventilating equipment during the period between 1963 and July of 1979. Manufacturing sites were located in Philadelphia, Pennsylvania, and Jackson, Tennessee. The administrative offices for ITT-Nesbitt were in Philadelphia until the latter part of 1977 and early 1978, when a portion of the administrative offices were transferred to Jackson, Tennessee. All of the manufacturing of ITT-Nesbitt products occurred in Jackson after early 1978.
The products of ITT-Nesbitt were marketed through a network of approximately 60 manufacturers’ sales representatives, each of whom was assigned an exclusive territory in which to solicit orders for ITT-Nesbitt products. These representatives agreed not to sell products which might be deemed to be competitive with the products of ITT-Nesbitt, unless written permission to do so was obtained from ITT. ITT-Nesbitt did not utilize any other type of sales force and there were no middlemen such as distributors, wholesalers, or dealers.
ITT also appointed qualified repair service contractors to perform start-up services, first-year warranty services, and other warranty services. Authorization for the performance of services by the appointed service contractors was to be obtained through the issuance of purchase orders. These service contractors were required to maintain the necessary equipment for testing and to stock certain parts recommended by ITT.
The agreement between ITT and the manufacturers’ sales representatives is evidenced by a document entitled “Sales Representative Contract.” Each of the plaintiffs is a party to one of the Sales Representative Contracts. The material terms of these agreements provide that:
(1) The sales representative is given an exclusive territory in which to solicit orders.
(2) The sales representative may solicit orders for products which are complementary and noncompetitive with Nesbitt products, but the representative may not solicit orders for products either directly or indirectly competitive with Nesbitt products.
(3) The sales representative has no authority to accept any order on behalf of Nesbitt.
(4) The sales representative agrees to “actively and diligently” promote the sale of the Nesbitt products.
(5) Nesbitt reserved the right to accept or reject any orders solicited by the sales representative.
(6) All payments were to be made directly to Nesbitt. The sales representative was to be compensated by commissions payable for purchase orders accepted in writing by Nesbitt.
(7) The agreement was to be effective until termination by mutual agreement or by either party upon 30 days written notice to the other party.
(8) The agreement could not be assigned or transferred without the prior written consent of ITT.
The plaintiffs allege that they actively and diligently promoted the ITT-Nesbitt products pursuant to the aforesaid sales representative agreements.
The plaintiffs also entered into agreements with ITT to act as qualified repair service contractors with regard to ITT-Nes-bitt products. These agreements were also nonassignable by the plaintiffs and could be terminated on the same terms as the Sales Representative Contracts.
*591The plaintiffs further allege that ITT-Nesbitt had been profitable until 1976, but that the division incurred substantial losses in 1976 and that the losses continued thereafter. ITT sent James E. Hall, one of its employees, to Jackson, Tennessee, to be general manager of ITT-Nesbitt and to prepare ITT-Nesbitt either for divestiture or a shutdown and liquidation. ITT began to solicit prospective purchasers for ITT-Nes-bitt sometime during 1978. Certain standards were formulated for prospective purchasers due to ITT’s awareness of the financial requirements for assuming its liabilities and sustaining the operation of ITT-Nesbitt.
As of May 1, 1979, ITT had not sold the ITT-Nesbitt division, but James E. Hall persuaded the senior management of ITT that a decision to liquidate should be deferred. ITT’s analysis of its options indicated that liquidation would result in a much greater financial loss than divestiture.
The plaintiffs allege that ITT knew that James E. Hall was providing false information designed to mislead prospective purchasers of the Nesbitt Division during the period between March of 1979 and July of 1979.
Foster McCarl, Jr. advised ITT that he was interested in forming a corporation for the purpose of acquiring ITT-Nesbitt. A Tennessee corporation known as Environmental Technologies Corporation (ETC) was in fact formed on July 5,1979, and, on July 9, 1979, ETC purchased the assets of ITT-Nesbitt, including the agreements, contracts, leases, and licenses of ITT-Nesbitt. ITT did not investigate or ascertain the financial capability of ETC to perform the agreements of ITT-Nesbitt or bear the costs of performing warranty work or perform the obligations to be assumed by ETC. ITT either knew or should have known that ETC did not have adequate financial resources to perform the agreements between ITT and ETC. (ETC executed two separate promissory notes in the respective amounts of $1.8 million and $4.4 million and paid $500,000.00 in cash for the purchase of Nes-bitt. The cash payment was possible because ITT deeded the Philadelphia property of ITT-Nesbitt to a partnership composed of Foster McCarl, Jr. and Bennard Benson, who were the only subscribers for the shares of the authorized capital stock of ETC. The conveyance enabled the grantees to mortgage the property and obtain the funds necessary for the cash payment.)
It is further alleged by the plaintiffs that the contract between ETC and ITT, at the insistence of ITT, was “consummated under a veil of secrecy and deception.” The contract purportedly allowed ETC to use ITT-Nesbitt’s forms and other indicia of ownership for a specific period and prohibited any notice of the conveyance to other parties to contracts with ITT without the prior written consent of ITT.
Prior to the sale of Nesbitt to ETC, ITT reduced the assets of ITT-Nesbitt by accelerating the collection of accounts receivable and disposing of assets. After July 9,1979, ITT acknowledged its misrepresentation of the assets of ITT-Nesbitt to ETC, which resulted from the aforesaid acceleration and disposition of assets, by modifying the terms of the notes given by ETC for the purchase of Nesbitt.
Plaintiffs allege that ITT knew that it had not adequately and properly advised ETC of the financial condition of ITT-Nes-bitt and that ITT knowingly and deliberately failed to disclose this financial condition and potential for liability.
It is also alleged that ITT was in control of ETC’s Jackson operation subsequent to the July 9, 1979 sale date by virtue of the presence and activities of James E. Hall, former general manager of ITT-Nesbitt, and Frank Rasehilla, comptroller of ITT-Nesbitt, since these parties controlled all information and decisions relating to the operations and finances of ETC. Plaintiffs allege that Hall and Rasehilla remained on the ITT payroll after the divestiture date. It is also alleged that ETC operated under the name of the Nesbitt Corporation for 10 months after divestiture and that ETC used purchase order forms and other forms previously used by ITT for ITT-Nesbitt transactions.
*592Plaintiffs allege that ITT deliberately and knowingly sold ITT-Nesbitt to ETC, concomitantly realizing that ETC could not fund the requirements and obligations assumed by ETC because this was the “most advantageous economic decision for ITT, whether or not ETC was successful.”
ITT knew that the marketing system which it had established was essential for the continuation of Nesbitt’s operations. ITT also knew that the plaintiffs had engaged in substantial presale activity for the purpose of selling ITT-Nesbitt’s products.
Plaintiffs were still acting as sales representatives and service contractors for ITT-Nesbitt at the time of the conveyance of Nesbitt by ITT to ETC. Plaintiffs had prepaid equipment orders with ITT-Nesbitt on the date of the sale to ETC which ITT was obligated to fill. Plaintiffs were also obligated to their customers to supply goods ordered from ITT-Nesbitt but not yet manufactured by ITT-Nesbitt.
ITT made no effort to terminate plaintiffs’ services as sales representatives or service contractors at the time of the sale to ETC. No effort was made to secure a release or discharge of ITT from its contractual liability to the plaintiffs, and no notice was given to the plaintiffs prior or subsequent to the sale that ITT-Nesbitt would be sold and that ITT would no longer be connected with or responsible for the Nesbitt Division.
ETC, now known as Nesbitt Corporation, filed a Chapter 11 bankruptcy petition on May 13, 1980, in the Western District of Pennsylvania. Plaintiffs were holders of unsecured claims against Nesbitt when this petition was filed. In recognition of its “responsibility and liability to ETC, Foster McCarl, Jr. and the creditors of ETC,” ITT entered into an agreement with the Nesbitt Corporation and Foster McCarl, Jr. This agreement provided in part for:
(a)The release by ITT of its security interest against equipment of the debtor so as to create a fund for the purpose of funding an agreement which would in effect extinguish the liability of ITT to creditors who accepted the plan.
(b) ITT, ETC, and Foster McCarl, Jr. would release any claim that any one party might have against either of the other parties.
(c) ITT would satisfy any liability incurred by Foster McCarl, Jr. as a result of his involvement in ETC’s purchase of ITT-Nesbitt.
The plaintiffs allege numerous causes of action against ITT. The majority of these causes are related to particular instances, preceding and subsequent to the divestiture sale, in which the plaintiffs allege that ITT has either failed to timely deliver equipment for which orders were accepted or that ITT failed to furnish satisfactory equipment for orders which were accepted. A few of the causes of action concern the plaintiffs’ attempt to recover sales commissions which are allegedly due the plaintiffs. Another cause of action is related to the plaintiffs’ claim that they are entitled to payment for warranty work performed pursuant to the repair service contracts.
Six causes of action outline the plaintiffs’ theories entitling them to relief from the defendant ITT. These are the causes of action which are the quintessence of the Amended Complaints. This memorandum is limited to a consideration of these six causes of action, which may be generally described as follows:
(1) Breach of Contract
(2) Fraudulent Conveyance
(3) Fraudulent Concealment or Breach of a Fiduciary Duty
(4) Conspiracy in Connection with the Chapter 11 Plan of Nesbitt
(5) Conspiracy in Connection with the sale of Nesbitt by ITT to ETC
(6) Estoppel.
Preliminarily, the court notes that motions to dismiss are ordinarily disfavored, rarely granted and that any doubt is resolved in favor of nondismissal. Williams v. Gorton, 529 F.2d 668 (9th Cir. 1976), aff’d 566 F.2d 1186 (9th Cir. 1977); Madison v. Purdy, 410 F.2d 99 (5th Cir. 1969); Land*593mark Tower Assoc. v. First Nat’l Bank of Chicago, 439 F.Supp. 195 (S.D.Fla.1977). Also, it is to be remembered that the allegations of the plaintiffs are accepted as true when the court rules on a motion to dismiss.
(1) Breach of Contract
The plaintiffs allege that ITT intended that the Sales Representative Contracts and Repair Service Contract Agreements between ITT and plaintiffs would be part of the conveyance by ITT to ETC and that the rights and duties of ITT thereunder were assigned and delegated to ETC as a result of the conveyance. The plaintiffs state that their assent to either release or discharge ITT from its contractual obligations was never sought by ITT and that ITT is still bound by the contractual obligations with respect to post-divestiture breaches of the contractual duties owed under the Sales Representative Contracts and the Repair Service Contractor Agreements. Plaintiffs further allege that they have performed according to the terms of the two aforementioned contracts and that they have incurred considerable expense in obtaining replacement equipment and correcting defects in equipment actually delivered by Nesbitt.
It is the plaintiffs’ position that the “assignment of a bilateral contract includes both an assignment of rights and a delegation of duties.” See Wiiliston on Contracts, Third Edition Section 418. Consequently, plaintiffs believe that ITT was not relieved of its duties to them by virtue of its divestiture of Nesbitt. Plaintiffs further believe that ITT is therefore liable for any breach of contract committed by ETC, since ITT never terminated its contracts with the plaintiffs or otherwise obtained a release from its obligations thereunder. Plaintiffs cite Contemporary Mission, Inc. v. Famous Music Corp., 557 F.2d 918 (2d Cir. 1977), and Edward Petry & Co. v. Greater Huntington Radio Corp., 245 F.Supp. 963 (S.D.W.Va. 1965), in support of this position.
The defendant ITT takes the position that it has no liability to the plaintiffs for any breach which occurred subsequent to the divestiture on July 9,1979. ITT argues that it had the right to accept or reject purchase orders prior to the execution of the Sales Representative Contracts and that these contracts did not affect, alter, or create that right. Therefore, the right was not assigned to ETC and no duty arose on ITT’s part to pay commissions on any post July 9, 1979 orders accepted by ETC and not by ITT. The defendant ITT also argues that it was under no duty to accept any order, as evidenced by the explicit provisions of the Sales Representative Contract and that ITT had no liability to plaintiffs unless orders were accepted in writing by ITT and that no orders were so accepted by ITT after divestiture.
ITT also asserts that the plaintiffs have failed to cite any term of the sales representative contract which was breached by ITT. Furthermore, ITT states that the plaintiffs dealt with ETC after July 9,1979, and that plaintiffs must look to ETC for recovery of any damages for defaults occurring subsequent to that date.
The instant case is patently distinguishable on a factual basis from the case of Edward Petry & Co. v. Greater Huntington Radio Corp., 245 F.Supp. 963 (S.D.W.Va. 1965), which involved a representative agreement, between Petry and Greater Huntington, similar to those between the plaintiffs herein and ITT. Greater Huntington sold its assets to Cowles Broadcasting Company approximately one year after the date of its exclusive representative agreement with Petry. Cowles accepted and paid for Petry’s services for a period of 3V2 years before giving notice to Petry that its services would no longer be required. Petry filed suit against Greater Huntington after receiving the aforementioned notice from Cowles. A jury found that Cowles did not acquire the agreement between Petry and Greater Huntington when Cowles purchased the assets of Greater Huntington. The plaintiffs in the pending cases have alleged that ITT did assign the Sales Representative Contracts to ETC. More importantly, however, Petry was apparently paid for its services, because Petry’s grievance *594concerned the termination of its services and its rights to commissions from the prospective sale of advertising time. The grievances of the plaintiffs herein relate to orders purportedly accepted by either ITT or ETC for which the plaintiffs allege either that: (1) plaintiffs are entitled to commissions which have not been paid; or (2) defective equipment was delivered to the buyer; or (3) equipment was untimely delivered.
The court does believe, however, that the following language from Judge Christie’s opinion in Petry is apposite in determining whether or not to grant the motions to dismiss.
[W]e must first look to the status of the contractual obligations existing between them before Greater Huntington sold out to Cowles. So viewed, there can be no doubt that had the transaction with Cowles not taken place, Greater Huntington’s obligation to carry out the contract would have continued. This being so, Greater Huntington could not unilaterally assign and transfer to another its side of the contract and thereby relieve itself of its obligations thereunder.
Petry, 245 F.Supp. at 967.
ITT neither terminated the agreements, which it could easily have done, nor was any attempt made by ITT to reach an agreement or novation whereby ITT’s contractual obligations would have ceased.
Contemporary Mission involved two separate contracts known as the “VIRGIN agreement” and the “Crunch agreement.” Under the terms of the former agreement, Famous Music Corp. was obligated to pay royalties to Contemporary in exchange for the master tape recording of VIRGIN, a rock opera, and the exclusive right to manufacture and sell recordings of VIRGIN. The so-called VIRGIN agreement contained a nonassignability provision in favor of plaintiff Contemporary which was breached by the defendant Famous Music Corp. when Famous’ record division was sold to ABC Records, Inc. The contracts between the plaintiffs herein and ITT also contain a nonassignability term, but that term is operative in favor of ITT. However, the Crunch agreement, a distribution contract between Contemporary and Famous Music Corp. dealing with compositions other than VIRGIN, included a nonassignability provision in favor of the defendant Famous Music Corp. ABC Records, Inc. failed to perform Famous’ obligations under the Crunch agreement after it purchased Famous’ record division. The Second Circuit Court of Appeals affirmed a jury verdict that Famous was liable for the breach of both agreements. The court of appeals noted that the following jury charge of the trial court was correct: “[Ajfter the assignment of the contract (Crunch agreement) by Famous to ABC, Famous remained liable for any obligation that was not fulfilled by ABC.” Contemporary Mission at 924.
The court is not prepared to conclude that ITT, as a matter of law, had no contractual duty to the plaintiffs subsequent to the divestiture sale of Nesbitt.
(2) Fraudulent Conveyance
Plaintiffs contend that they were creditors of ITT on the date of the conveyance of Nesbitt by ITT to ETC and that the conveyance “was made with the actual intent by ITT to hinder, delay or defraud ITT’s creditors.” Plaintiffs further contend that ITT knew or should have known that ETC did not have either the financial resources or the financial ability to assume ITT-Nesbitt’s obligations. Plaintiffs also contend that they were injured and prejudiced by the fact that ETC was “unable to fulfill the contractual obligations and unable to pay the debts incurred by ITT as a result of ITT’s ownership and management” of ITT-Nesbitt. Plaintiffs believe that the July 9,1979, conveyance by ITT to ETC is voidable pursuant to T.C.A. § 66-3-308 (former T.C.A. § 64-315) and that T.C.A. § 66-3-313 (Application of general law) is also apposite.
The defendant ITT insists that the plaintiffs are not creditors of ITT with respect to post-divestiture transactions and that the statute does not create a cause of action. ITT believes that the plaintiffs must estab*595lish a cause of action independent of the Fraudulent Conveyance Act. ITT also contends that the plaintiffs were not prejudiced by the sale of Nesbitt to ETC. See, United States v. Kerr, 470 F.Supp. 278 (E.D.Tenn.1978). (The defendant ITT cites Kerr to support the proposition that the conveyance should not be set aside since ITT has retained assets more than sufficient to satisfy the plaintiffs’ demands.)
Accepting the allegations of the Amended Complaints as true, the plaintiffs were creditors of ITT on the date of the divestiture sale. The plaintiffs allege expressly that the sale of ITT-Nesbitt to ETC was transacted by ITT with the actual intent to hinder, delay, or defraud ITT’s creditors, including plaintiffs. Since the plaintiffs were creditors on the date of the divestiture sale, they are entitled to maintain their cause of action against ITT on the basis of the alleged fraudulent conveyance.
(3) Fraudulent Concealment
The plaintiffs allege that, considering all of the circumstances, particularly the business relationship between them and ITT and ITT’s superior knowledge of the facts, there was a duty on the part of ITT to disclose the proposed sale of Nesbitt. Plaintiffs cite Melchiorre v. California Canners & Growers, 394 F.2d 413 (4th Cir. 1968), and Smyth Sales v. Petroleum Heat & Power Co., 128 F.2d 697 (3d Cir. 1942), in support of this contention.
The plaintiffs also allege that ITT “falsely and fraudulently concealed” the intention to sell Nesbitt to ETC from the plaintiffs and that ETC was assuming all of ITT’s obligations connected with ITT-Nesbitt. The plaintiffs state that they would not have continued to do business and engaged in the presale activity which they did if they had known of ITT’s plan to sell Nes-bitt to ETC. Plaintiffs admit that they eventually learned of the conveyance, but they insist that they continued to do business with ETC because of their contractual commitments to other parties. The plaintiffs also note that they were not in a position to ascertain the financial condition of ETC.
ITT argues that the plaintiffs are sophisticated businessmen and that there was no fiduciary duty owed to them by ITT. ITT has also argued that there was no duty to disclose to plaintiffs their intention to sell Nesbitt because to have done so may have been a violation of § 10(b)(5) of the Securities and Exchange Act. Furthermore, ITT asserts that the plaintiffs had actual and constructive notice of the sale. This assertion is disputed, but the court must accept the allegations of the plaintiff as true in ruling on a motion to dismiss.
The court believes that the plaintiffs are entitled to present evidence concerning the overall business relationship between the plaintiffs and ITT and the facts related to divestiture to determine whether or not there was a duty of an equitable or good faith nature on the part of ITT apart from the written agreements and whether or not there was a fraudulent concealment of the facts by ITT. A “design of dealing” between the parties to an agreement may require a reasonable fair advance notice of an intention to terminate an agreement. Melchiorre, supra.
(4) Conspiracy in Connection with the Chapter 11 Plan of Nesbitt
The plaintiffs allege that ITT conspired with either some or all of the Nesbitt shareholders and with Nesbitt to formulate a Chapter 11 plan funded by ITT whereby ITT would, in effect, buy its liability to creditors. The plaintiffs also allege that ITT, Nesbitt, and Foster McCarl, Jr. have executed mutual releases in furtherance of the conspiracy and that ITT agreed to hold McCarl harmless from any personal liability on his part related to the debts of Nesbitt. The plaintiffs contend that as a result of the plan and the mutual releases they are unable to collect the full amount owed to them.
ITT insists that the matter is res judicata because the plaintiffs participated in the Nesbitt bankruptcy. Furthermore, ITT notes that the plaintiffs have not sought *596revocation of the confirmed Chapter 11 plan within the 180-day limitation period prescribed in 11 U.S.C.A. § 1144. ITT also argues that the provisions of the confirmed plan are binding in this case, by virtue of the provisions of 11 U.S.C.A. § 1141(a) and that any attack upon the plan as confirmed by the Pennsylvania bankruptcy court must be brought in that court. Finally, ITT insists that plaintiffs should be barred by the doctrine of laches since ITT has given up its security status in order to fund the plan and compromise claims and has given up rights which it could never regain.
The plaintiffs argue that they may be prohibited from pursuing relief from Nes-bitt by virtue of the confirmed plan but that ITT was not the debtor in the Chapter 11 proceeding and that they are not prohibited from pursuing the conspiracy claim against ITT in a forum other than the court which confirmed the Chapter 11 plan.
The court is also not prepared to disallow the cause of action which the parties have described as a collateral attack on the Chapter 11 Nesbitt bankruptcy proceeding. The plaintiffs are seeking recovery from ITT, not from Nesbitt. Also, although a challenge to the confirmation of a Chapter 11 plan on the basis of fraud should ordinarily follow the procedures outlined in the bankruptcy laws, those laws do not provide an exclusive remedy. Bizzell v. Hemingway, 548 F.2d 505 (4th Cir. 1977).
(5) Conspiracy in Connection with the Sale of Nesbitt by ITT to ETC
Plaintiffs allege that ITT conspired with some or all of the principal stockholders of ETC for ITT to convey Nesbitt to ETC, which had been formed for the purpose of acquiring Nesbitt and absorbing current and future losses of ITT-Nesbitt. Plaintiffs further allege that ITT knew the importance of the marketing system which ITT had established for ITT-Nesbitt and that it was essential that the marketing system be perpetuated. Plaintiffs also allege that ETC used purchase order forms and other forms previously used by ITT subsequent to divestiture thereby misrepresenting to plaintiffs that ITT still owned Nesbitt. It is plaintiffs’ assertion that ITT acted with the intent that plaintiffs would be induced to continue solicitation of orders so that ITT might profit by having ETC absorb certain losses of ITT-Nesbitt.
ITT insists that plaintiffs have no cause of action for conspiracy because they failed to allege the elements of a conspiracy and because they had actual and constructive knowledge of the sale to ETC. Thus, they could not have been misled by the continued use of the forms by ETC which ITT-Nesbitt had previously used. ITT also takes the position that the plaintiffs have not sustained any actual damage as a result of the alleged conspiracy.
The plaintiffs will be allowed to pursue their cause of action for the alleged conspiracy in connection with the sale of Nesbitt to ETC. The plaintiffs make very serious allegations regarding agreements between ITT and unnamed shareholders of ETC. If these allegations are deemed to be true, plaintiff is entitled to pursue this cause of action.
(6) Estoppel
The plaintiffs assert that they were initially induced to enter into the sales representative contracts and the repair service contracts, in part, due to the “general business reputation and financial status” of ITT. Plaintiffs allege that, by virtue of their business relationship with the defendant and the duration thereof, plaintiffs had confidence in the financial stability of ITT and that plaintiffs completely relied upon ITT for information relative to ITT-Nesbitt that might affect their services as sales representatives and repair service contractors. Plaintiffs reiterate their belief that this business relationship created a duty on the part of ITT to notify the plaintiffs of the proposed sale of Nesbitt.
Plaintiffs further allege that: (1) ITT knew that plaintiffs were engaged in pre-sale activities and that without advance notice that plaintiffs would be forced to do business with the successor of ITT-Nesbitt; *597(2) plaintiffs had no knowledge of the proposed sale to ETC; (3) plaintiffs would not have continued soliciting orders either prior to or after July 9, 1979, if they had known of the sale of Nesbitt to ETC.
The plaintiffs restate their allegations regarding the concealment of the sale of Nes-bitt to ETC based on the continued use by ETC of forms which had previously been used by ITT-Nesbitt. Plaintiffs also restate their allegations that they were contractually obligated to third parties to supply products manufactured by Nesbitt when they learned of the sale to ETC and that they were compelled to deal with ETC.
ITT argues that estoppel cannot be employed to create a cause of action and that the plaintiffs have admitted the correctness of that legal principle in their brief. ITT also notes that the contracts between the plaintiffs and ITT did not require ITT to inform the plaintiffs of the proposed sale of Nesbitt. ITT asserts that, in fact, plaintiffs should be estopped since they had knowledge of the sale shortly after July 9,1979, if not before, and of the bankruptcy proceeding.
The plaintiffs will not be allowed to pursue a cause of action based on their estoppel argument. The plaintiffs themselves have acknowledged in their own brief that “es-toppel cannot be used to create a right.” Brief for the Plaintiffs in Opposition to the Motion to Dismiss of Defendant International Telephone and Telegraph Corporation at 52.
The cause of action based on estoppel is dismissed but plaintiffs may proceed on the remaining causes of action.
IT IS SO ORDERED.
. The amended complaints filed on June 30, 1982, are not under consideration herein. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489367/ | MEMORANDUM
DAVID L. CRAWFORD, Bankruptcy Judge.
In this adversary proceeding, Ronald and Diane Evans, plaintiffs, seek damages for alleged violations by the defendant of the automatic stay of 11 U.S.C. § 362 which, they allege, occurred following their filing of a petition under Chapter 13 with this Court.
Defendant is a pawnbroker, engaged in that business in the city of Omaha, Nebraska. Ronald Evans had, on a number of occasions, pawned items with the defendant. Many of the facts relevant to this litigation are set forth as “uncontroverted facts” in the Order on Pretrial Conference as follows: the parties agree
a. That the Plaintiff Ronald Evans pawned the below-listed property to the Defendant for the following amounts:
Date Property Amount
3/4/81 Gibson bass guitar $150.00 with case
3/9/81 Television, gun and 150.00 Gibson bass guitar
6/8/81 Mamaya camera with 4 100.00 additional lenses and other camera equipment
b. That the Plaintiffs made payments to the Defendant as follows:
Gibson bass guitar:
Date Amount
7/3/81 $15.00
8/8/81 15.00
9/12/81 15.00
Television, gun and Gibson bass guitar:
Date Amount
7/6/81 $15.00
8/8/81 15.00
9/8/81 15.00
c. That the Plaintiffs made no payments on the Mamaya camera with 4 additional lenses and other camera equipment.
d. That on October 7, 1981, Plaintiffs filed a Petition for Voluntary Bankruptcy pursuant to Chapter 13 of the United States Bankruptcy Code, listing the Defendant as a secured creditor on Schedule A, page 4, of said Petition.
e. That the Defendant sold the following property on the dates indicated below:
Item Date Sold
Mamaya camera with 4 additional lenses and other camera equipment 10/20/81
Television 11/4/81
Gun 11/17/81
Gibson bass guitar with case 11/19/81
Gibson bass guitar 12/7/81
f. That the Defendant is engaged in the operation of a pawnbroker’s business as defined in Section 69-201 Neb.Rev. Stat. (1981 Supp.).
A central issue to be resolved is whether Ronald Evans retained an interest in the property which he pawned during the four-month period immediately following the transaction. Plaintiff takes the position that he did and defendant disputes this, alleging that the transaction was a sale and that title vested in the defendant subject only to the plaintiff’s right of repurchase.
Section 69-209 of the Nebraska Statutes (as amended) effective August 30, 1981, provides:
“It shall be unlawful for any pawnbroker to sell any goods purchased or received as described in § 69-201, during the period of four months from the date of purchasing or receiving such goods.”
The foregoing statutory prohibition together with the testimony before me that clearly suggests that the plaintiff had the right to obtain possession of the goods pawned during the four-month period by paying the money advanced to him plus interest is sufficient for me to conclude that the plaintiff retained a sufficient legal or equitable interest in the goods pawned to make them part of the estate created by 11 U.S.C. § 541 of the Bankruptcy Code. In other words, irrespective of title, the debtor *610retained a sufficient interest in them to bring them subject to the automatic stay of § 362.
A disputed fact is whether the defendant had notice of the filing of the petition for relief under Chapter 13. The evidence submitted by the defendant would suggest that it had no actual knowledge. I find that issue to be irrelevant to our inquiry because 11 U.S.C. § 362(a), which becomes operative immediately upon the filing of the petition, applies to “all entitles” and is not conditioned upon actual knowledge.
In general, I find the transaction between the parties to be one in which the plaintiff, during the four months immediately following the pawn, had the right to reacquire possession of the items by paying to the defendant the amount advanced by the defendant plus the monthly interest rate which accrued each month during the four-month period. If the defendant during the four-month period paid one month’s interest, that payment would extend the four-month period by one month. I reject the suggestion in the evidence offered by plaintiff that a payment during the four-month period of one month’s interest would automatically extend the reacquisition period by an additional four months.
Given the foregoing, it would appear that as of October 4, 1981, the plaintiff, having made only three monthly interest payments and the October 4, 1981, date being prior to the filing of the Chapter 13 petition, lost the right to reacquire possession of the Gibson bass guitar and case which he pawned on March 4, 1981.
As to the television, gun and Gibson bass guitar pawned on March 9, 1981, the plaintiff had made three payments, all within the period of time necessary to extend the reacquisition period by three months. That reacquisition period thus was extended to October 9,1981, two days after the filing of the Chapter 13 petition. Given that, the defendant was stayed from dealing adversely to the plaintiff’s rights in those items.
Similarly, the camera and lenses and other equipment which were pawped on June 8, 1981, had a reacquisition period of four months from that date or October 8, 1981. This was one day after the filing of the Chapter 13 petition, and any acts by the defendant which might be adverse to plaintiff’s interest were stayed by the provisions of § 362.
Having concluded that the defendant acted improperly with regard to the items pawned March 9, 1981, and June 8, 1981, but not with regard to the items pawned March 4, 1981, I turn attention to the issue of the plaintiff’s damages. The evidence offered as to the value of the items of which the defendant disposed is less than satisfactory. In addition, the plaintiff’s damages would be diminished by the amount the plaintiff would necessarily have to pay to the defendant to reacquire possession of the items. That would include not only the amount advanced by the defendant to the plaintiff but interest which had accrued. Nevertheless, the evidence is sufficient for me to conclude that the value of the items improperly sold by the defendant was in excess of the amount of the reacquisition cost to the plaintiff plus interest. I fix that amount at $300.00.
In view of the premise of this litigation, which is violation of the automatic stay of 11 U.S.C. § 362, (See In re Aaron Ferer & Sons Co., 5 B.C.D. 324 (D.Neb.1977)), and given the nature of this case, I fix the amount of the attorney’s fees to be $500.00.
A separate judgment is entered in accordance with the foregoing. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489368/ | MEMORANDUM
GEORGE C. PAINE, II, Bankruptcy Judge.
This adversary proceeding was initiated by the plaintiff Sino-American Economic Development Corporation’s (hereinafter “Sino-American”) complaint seeking relief from the automatic stay imposed by 11 U.S.C. § 362.1 Sino-American requests this relief in order to repossess five pieces of machine tools which Sino-American delivered to the debtor Piad, Inc. prior to the filing of the involuntary Chapter 7 bankruptcy petition against the debtor. The defendant First American National Bank (hereinafter “First American”), a second creditor of the debtor, opposes Sino-Ameri-can’s complaint, essentially contending that Sino-American’s delivery of the machine tools constituted a consignment which was not perfected in accordance with state law. First American asserts that its perfected security interest in the debtor’s inventory is superior to Sino-American’s unperfected interest and thus Sino-American cannot be granted relief from the stay. Upon consideration of the evidence presented at the hearing of this matter, stipulations, exhibits, briefs of the parties and the entire record, this court concludes that the plaintiff’s complaint for relief from the stay should be denied.
The following shall constitute findings of fact and conclusions of law pursuant to Rule 752 of the Federal Rules of Bankruptcy Procedure.
The debtor Piad, Inc. is engaged in the welding business. In late 1981, the debtor began negotiations with Sino-American to become Sino-American’s distributor of Chinese manufactured machine tools in the southeastern region of the United States. On December 10, 1981, Louis Chao, chairman of Sino-American, gave the debtor written authorization to pick up five pieces of machine tools which were to be used as samples in accordance with the proposed agreement between Sino-American and the debtor. The letter sent to the debtor spe*615cifically stated that the tools in question were owned by Sino-American. On December 14,1981, Neal Sullivan, president of the debtor, responded that he was very excited about the possibility of acting as distributor for Sino-American and outlined one of the potential responsibilities of the debtor as the demonstration of Sino-American’s equipment to prospective customers and dealers.
At the hearing of this matter, Dr. Rawls, executive vice-president of Sino-American, testified that Sino-American delivered these tools for the debtor’s evaluation and specifically asked the debtor not to use the equipment. Rawls further testified that the debtor was obligated to return these tools to Sino-American should the debtor fail to purchase them.
Under these circumstances, this court can only conclude that the Sino-American’s delivery of the tools to the debtor constituted a “sale or return” as defined by § 47-2-326 of the Tennessee Code. Section 47-2-326 provides in pertinent part:
“Sale on approval and sale or return— Consignment sales and rights of creditors —(1) Unless otherwise agreed, if delivered goods may be returned by the buyer even though they conform to the contract, the transaction is:
(a) a ‘sale on approval’ if the goods are delivered primarily for use, and
(b) a ‘sale or return’ if the goods are delivered primarily for resale.
(2) Except as provided in subsection (3), goods held on approval are not subject to the claims of the buyer’s creditors until acceptance; goods held on sale or return are subject to such claims while in the buyer’s possession.
(3) Where goods are delivered to a person for sale and such person maintains a place of business at which he deals in goods of the kind involved, under a name other than a name of the person making delivery, then with respect to claims of creditors of the person conducting the business the goods are deemed to be on sale or return. The provisions of this subsection are applicable even though an agreement purports to reserve title to the person making delivery until payment or resale or uses such words as ‘on consignment’ or ‘on memorandum.’ However, this subsection is not applicable if the person making delivery:
(a) complies with an applicable law providing for a consignor’s interest or the like to be evidenced by a sign, or
(b) establishes that the person conducting the business is generally known by his creditors to be substantially engaged in selling the goods of others, or
(c) complies with the filing provisions of the chapter on Secured Transactions (chapter 9 of this title).”
Tenn.Code Ann. § 47-2-326 <1979).
The provisions of § 47-2-326 encompass any commercial transaction in which delivered goods may be returned to the seller by the buyer. See Financeamerica Corporation v. Morris (In the Matter of K.L.P., Inc.), 7 B.R. 256, 257 (Bkrtcy.N.D. Ga.1980). And, unless the commercial transaction is found to be a “sale on approval,” the seller is required to comply with the notoriety provisions outlined in § 47-2-326 in order to protect his interest in the delivered goods against claims of the potential buyer’s creditors. Professor Shanker, a leading commentator on commercial law, has aptly explained the situations in which a deliverer of goods would have to comply with these notoriety provisions:
“The first situation is called ‘the sale or return’ situation. It arises where the seller delivers the goods to a buyer primarily for the purpose of permitting the buyer to resell them to his customers. But, even though this is the prime purpose for the delivery, nonetheless, the buyer has the privilege of returning the goods to the seller despite the fact that they completely conformed to the contract for sale.
The second situation contemplated by 2-326 arises where ever goods are delivered to a person for sale; and that person maintains a place of business in which he deals in goods of that kind under a name other than the name of the person mak*616ing the delivery. Notice, this second situation may be a broader one than the first ‘sale or return’ situation. The first situation apparently arises where there is established a buyer-seller relationship, but, notwithstanding, the buyer has the right to return the goods to the seller. In the second situation the right to return the goods may not be critical. It may not be necessary even to establish that the person receiving the goods was buying them. Rather, the precise conditions which bring one within the second situation are these: (1) were the goods delivered to a person for sale; (2) did that person do business in goods of that kind; and (3) did he do so in a name other than the name of the person who delivered the goods. If these three elements are present, then apparently you are within the second situation contemplated by 2-326, and must comply with the notoriety requirements.”
Shanker, 40 J. of the Nat’l Conf. of Ref. in Bankr. 37, 38 (1966), quoted in Buchanan v. Mobile Home Guaranty Corporation (In re International Mobile Homes of Johnson City, Inc.), 14 U.C.C.Rep.Serv. 1150, 1155 (Bankr.E.D.Tenn.1974).
The present case falls within the “sale or return” category. The representative for Sino-American testified that the tools in question were not to be used by the debtor but were instead delivered as samples of the equipment which the debtor would be selling should it accept the distributorship agreement with Sino-American. The representative further stated that SinoAmerican expected to be paid for the tools if they were not returned to Sino-American. These facts clearly establish a “sale or return” transaction and, therefore, SinoAmerican was required to comply with the notoriety requirements set forth in § 47-2-326. The evidence is undisputed that SinoAmerican did not comply with these provisions. Sino-American is thus an unsecured creditor of the debtor and not entitled to relief from the stay. Such a finding comports with the primary purpose of § 47-2-326 to “subordinate secret consignment seller claims to claims made by creditors of consignment buyers.” Financeamerica Corporation v. Morris (In the Matter of KLP, Inc.), 7 B.R. at 258. See also Newhall v. Haines, 31 U.C.C.Rep.Serv. 1291, 1294 (D.Mont.1981); Tenn.Code Ann. § 47-2-326 comment 2 (1979); 1 U.C.C.Serv. (M.B.) § 4A.05[2], at 4A-76 to 4A-77 (1982).
The court will accordingly enter an order denying the plaintiff’s complaint for relief from the stay.
IT IS, THEREFORE, SO ORDERED.
. 11 U.S.C.A. § 362(d) (West 1979) governs petitions for relief from the automatic stay. Section 362(d) provides as follows:
“(d) On request of a party in interest and after notice and a hearing, the court shall grant relief from the stay provided under subsection (a) of this section, such as by terminating, annulling, modifying, or conditioning such stay—
(1) for cause, including the lack of adequate protection of an interest in property of such party in interest; or
(2) with respect to a stay of an act against property if—
(A) the debtor does not have an equity in such property; and
(B) such property is not necessary to an effective reorganization.” | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489369/ | OPINION
WILLIAM A. KING, Jr., Bankruptcy Judge.
This case reaches the Court upon several hearings on the issue of the appointment of *662a trustee in this Chapter 11 case. The initial hearing was held on July 22, 1982. The Court immediately appointed James J. O’Connell, Esquire, as Trustee, pending a final hearing on the matter. On August 3, 1982, the final hearing was held in conjunction with a complaint for relief from the automatic stay. After consideration of the testimony elicited at these hearings, the Court finds that the case must be dismissed with prejudice.1
The Chapter 11 petition was filed on June 23, 1982. The filing of this petition had the effect of preventing a landlord’s distraint sale scheduled for June 25th. It is uncontested that the landlord has not received a rental payment since December of 1981. The Court concludes that this factor alone constitutes gross mismanagement of the corporation of such a magnitude that the appointment of a trustee to control the assets and operation of the debtor was necessary.2 Thus, the trustee was appointed on July 22, 1982 and has been continued in office. Evidence bearing on issues other than the appointment of a trustee was brought to light at both of these hearings. Counsel for the parties stipulated that the entire record developed on the issue of the appointment of a trustee be incorporated into the record of the adversary proceeding.
In opposing the appointment of a trustee, counsel for the debtor presented testimony from Joseph P. Smith. This individual was running the business and; furthermore, he claimed to be the sole stockholder of the debtor corporation. Mr. Smith testified that the debtor maintained no bank or checking accounts, nor kept any regular books and records. Other testimony was elicited from Mr. Smith, however, the Court will give no weight to his testimony except insofar as it contains admissions of mismanaging the affairs of the debtor. The Court finds this witness to be devoid of credibility.
The party moving for the appointment of a trustee was Louis Vagnoni. He was both the landlord and a secured creditor of JP Enterprises on June 23, 1982. At a special shareholders’ meeting on June 25,1982, Mr. Vagnoni became sole owner, officer and director of the corporation. This transaction is somewhat complicated and bears full explanation.
In November of 1981, Sirolli-Vitelli, Inc. ^ sold the business known as the Ivy Garden Restaurant at 7150 Silverwood Street, Philadelphia, to JP Enterprises, Inc. Sirolli-Vi-telli assigned all its rights to Louis Vagnoni. A security agreement was executed between JP Enterprises and Mr. Vagnoni. All of the fixtures and the liquor license served as collateral for payment of the purchase price. In addition, Mr. Vagnoni owned the real estate at 7150 Silverwood Street. As additional collateral, all of the stock of JP Enterprises was assigned to Mr. Vagnoni. The assignment was exercisable at his option. In return, Vagnoni granted the debtor a sizeable purchase money loan. All of these documents were executed by Frank Tavella, the president and sole shareholder of JP Enterprises. Finally, Mr. Tav-ella gave Mr. Vagnoni his resignation as president of JP Enterprises with the understanding that this could be exercised upon default of the debtor.
JP Enterprises did not pay any rent nor any payments under the security agreement after November 1981. Thus, in June, the landlord scheduled a distraint sale which was stayed by the filing of the bankruptcy petition. Mr. Vagnoni also scheduled a special shareholders’ meeting for June 25th. This meeting was not stayed by § 362 of the Bankruptcy Code. At this meeting, the assignment of the stock of JP Enterprises was accepted by Mr. Vagnoni who thereby became sole shareholder of JP Enterprises. The resignation of Frank Tavella as director and president of the corporation was also submitted and accepted. Mr. Vagnoni elected himself as sole director and president of the corporation.
*663On the basis of the evidence presented, the Court finds that neither Joseph Smith nor Frank Tavella retained any interest or office in the corporation after June 25, 1982. As current president and sole shareholder of JP Enterprises, Mr. Vagnoni has no desire to proceed under Chapter 11. He has filed a motion to have the case dismissed. From the evidence elicited at the hearings of July 22nd and August 3rd, it is obvious that only Frank Tavella had authority to file the original petition. The Chapter 11 petition, however, was filed by Joseph Smith. No evidence of his authority to file this petition was ever filed as required by Interim Local Rule 1007(a)(3). Nor was a list of the ten (10) largest creditors ever filed as required by Interim Local Rule 1007(a)(1). Furthermore, the petition was not accompanied by a completed unsworn declaration under penalty of perjury as required by Bankruptcy Rule 109. This petition should never have been accepted for filing by the Clerk of the United States Bankruptcy Court for the Eastern District of Pennsylvania.
The cumulative effect of these factors will cause the Court to enter an order dismissing the case. The trustee will be directed to turn possession over to the sole director and officer of the corporation, Louis Vagnoni upon the filing of an agreement between the trustee and Mr. Vagnoni regarding the disposition of the trustee’s costs and expenses pursuant to 11 U.S.C. § 506. If such an agreement cannot be reached, the trustee will be directed to file an appropriate application for compensation and request the Clerk of the United States Bankruptcy Court for the Eastern District of Pennsylvania to set the matter for hearing.
. This Opinion constitutes the findings of fact and conclusions of law required by Rule 752 of the Rules of Bankruptcy Procedure.
. 11 U.S.C. § 1104(a)(1). | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489370/ | MEMORANDUM
DAVID L. CRAWFORD, Bankruptcy Judge.
At issue before me is the amount of exemptions the debtor may claim in two annuity policies under Nebraska Revised Statute § 44-371 as that statute was amended *697by L.B. 940 of the 1980 Legislature, effective April 17, 1980.
In her Chapter 7 petition, the debtor claimed as exempt $3,500 in each of two annuity policies which she owned for a total exemption of $7,000. The trustee of this bankruptcy estate objected, claiming that the debtor was entitled to a maximum of only $5,000 exemption in the policies. Differently stated, the issue is whether the debtor is entitled to an exemption up to $5,000 in each policy owned or a maximum aggregate exemption of $5,000 from all policies.
Nebraska Revised Statute § 44-371 as amended provides:
“Not to exceed $5,000 in money, avails, cash values and all and every benefit accruing under any annuity contract or under any policy or certificate of life insurance payable to a beneficiary other than the estate of the insured, and under any accident or health insurance policy, heretofore or hereafter issued, shall be exempt from attachment, garnishment, or other legal or equitable process, and from all claims of creditors of the insured, and of the beneficiary if related to the insured by blood or marriage, in the absence of a written agreement or assignment to the contrary.”
Prior to the amendment of § 44-371, that statutory provision exempted all insurance benefits described in the statute without limitation. The legislative history of the amendment to § 44-371 discloses that the change was brought about by the Nebraska Legislature’s reaction to the enactment of the Bankruptcy Code which provided, at 11 U.S.C. § 522(d)(8), that the debtor could exempt:
“The debtor’s aggregate interest, not to exceed in value $4,000 less any amount of property of the estate transferred in the manner specified in § 542(d) of this Title, in any accrued dividend or interest under, or loan value of, any unmatured life insurance contract owned by the debtor under which the insured is the debtor or an individual of whom the debtor is a dependent.”
The Bankruptcy Code, as enacted effective October 1, 1979, provided a number of items of exempt property but permitted a state to elect not to have those exemptions apply to debtors involved in debtor-relief proceedings. See § 11 U.S.C. 522(b)(1). The Nebraska legislature availed itself of this opportunity through passage of the amendment to § 44-371.
Reference to the legislative history of § 44-371 does not specifically decide the issue here involved. However, it seems a fair inference from the legislative history that the Nebraska legislature was concerned with the unlimited insurance exemption then existing under Nebraska law. It also seems probable that the legislature’s response was guided by the statutory exemption contained in the Bankruptcy Code at 11 U.S.C. § 522(d)(8). Because this latter statutory provision specifically provides for an aggregate of $4,000 exemption and because the Nebraska legislature was concerned with the unlimited exemption under its exemption laws, I conclude that the intent of the Nebraska legislature was to make exempt under § 44-371 a total of $5,000 and not $5,000 in each policy which a debtor owned. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489373/ | PACTS
ELLIS W. KERR, Bankruptcy Judge.
This adversary proceeding comes before the Court upon the Trustee’s complaint to recover an alleged preferential transfer to the Defendant, Associates Financial Services Corporation. The parties have submitted the matter to the Court on the basis of “Stipulations of Fact” and memoranda of law.
The Stipulations provide the following basic facts:
1. On January 21, 1981 the Debtor (not a party to this adversary proceeding) filed a voluntary petition pursuant to Chapter 7 of the Bankruptcy Code;
2. On December 19, 1980 Debtor’s automobile was damaged. At the time of the casualty, Defendant, Associates Financial Services Corporation, had as security for a loan made by it to the Debtor, a valid security interest in the Debtor’s automobile;
3. At the time Debtor’s motor vehicle was damaged, it was insured by Nationwide Insurance Company. Subsequently, the Debtor and an adjustor for Nationwide Insurance Company agreed that the Debtor’s motor vehicle was “a total loss” and that the value of the loss was $350.00. Said insurance policy was obtained by the debtor and not by the Defendant, Associates Financial Services Corporation. However, the Defendant was named in the policy as a payee under a loss payable clause;
4. On approximately January 13, 1981 Nationwide Insurance Company sent a check in the amount of $350.00 to the Debtor. The check, however, listed only the Debtor as a payee;
5. The Debtor received the check on approximately January 15,1981 and endorsed the check, payable to Defendant, Associates Financial Services Corporation, on January 19,1981. At that time Defendant released the lien it had on Debtor’s automobile.
CONCLUSIONS OF LAW
Apparently, the Plaintiff-Trustee is taking the position that the Defendant did not *739have a security interest in the insurance proceeds and should therefore be treated as a creditor with an unsecured claim. The Trustee states in his brief that—
“Clearly by the undisputed facts the check in question was payable to the debtor and he in turn transferred it to defendant. It is not relevant whether the check should or could have been made to defendant under the terms of the insurance policy because at most the insurance company would have a cause of action against the debtor for money paid under a mistake of fact or law.”
We do not agree with the Trustee’s contention.
The relevant Ohio law in this matter is O.R.C. 1309.25 (U.C.C. 9-306), which reads in part as follows:
“PROCEEDS DEFINED; SECURED PARTY’S RIGHTS ON DISPOSITION OF COLLATERAL”
(A) “Proceeds” includes whatever is received upon the sale, exchange, collection, or other disposition of collateral or proceeds. Insurance payable by reason of loss or damage to the collateral is proceeds, except to the extent that it is payable to a person other than a party to the security agreement. Moneys, checks, deposit accounts, and the like are “cash proceeds.” All other proceeds are “non-cash proceeds.”
(B) Except where sections 1309.01 to 1309.50 of the Revised Code otherwise provide, a security interest continues in collateral notwithstanding sale, exchange, or other disposition thereof unless the disposition was authorized by the secured party in the security agreement or otherwise, and also continues in any identifiable proceeds including collections received by the debtor.
(C) The security interest in proceeds is a continuously perfected security interest if the interest in the original collateral was perfected but It ceases to be a perfected security interest and becomes unperfect-ed ten days after receipt of the proceeds by the debtor unless :
(1)a filed financing statement covers the original collateral and the proceeds are collateral in which a security interest may be perfected by filing in the office or offices where the financing statement has been filed and, if the proceeds are acquired with cash proceeds, the description of the collateral in the financing statement indicates the types of property constituting the proceeds; or
(2) a filed financing statement covers the original collateral and the proceeds are identifiable cash proceeds; or
(3) the security interest in the proceeds is perfected before the expiration of the ten day period. Except as provided in this section, a security interest in proceeds can be perfected only by the methods or under the circumstances permitted in sections 1309.01 to 1309.50 of the Revised Code for original collateral of the same type. (Emphasis Supplied)
The second sentence of division (A) of the statute, regarding insurance proceeds, was added to the Official Uniform Commercial Code in 1972 and later adopted by the Ohio legislature. The intent of this statutory addition was to overrule cases which had held proceeds of insurance on collateral not to be “proceeds” of the collateral. The statute also treats a filed claim to be original collateral as constituting automatically a filing as to proceeds for at least a 10 day period. (See Draftsmen’s Statement of Reasons for 1972 Changes in Official Text, U.C.C. Art. 9, p. 125)
The facts of the instant case fall squarely within the statute. The insurance proceeds were paid by reason of loss or damage to the collateral and were therefore “Proceeds” under O.R.C. 1309.25 (U.C.C. 9-306). The fact that the check was made payable to the Debtor instead of the Defendant, does not disqualify the check as proceeds, because the check was made payable to a party to the security agreement as required by the statute. The Debtor endorsed the check over to the Defendant within 10 days of its receipt, prior to the expiration of the defendant’s automatic *740perfection in the proceeds. It is therefore unnecessary to examine the subdivisions of division (C) of the statute regarding methods of perfecting a security interest in proceeds once the 10 day period has terminated. At all relevant times, then, Defendant maintained a continuously perfected security interest in the proceeds of the collateral pursuant to O.R.C. 1309.25 (U.C.C. 9-306).
As a result of Defendant’s perfected security interest in the insurance proceeds, the transfer which the Trustee seeks to avoid does not fulfill the fifth element of a preferential transfer under 11 U.S.C. § 547, i.e. the transfer did not enable the creditor to receive more than he would have received under the distributive provisions of Chapter 7 of the Bankruptcy Code. [Accord: In re Booher, 5 B.R. 254 (Bankr.S.D. Ohio 1980) ] The Defendant, being secured, received the same amount as it would have under the provisions of Chapter 7 of the Bankruptcy Code and is therefore entitled to retain the payment of $350.00.
These conclusions require judgment in favor of the defendant. Entry of Judgment will be set forth in a separate document as required by Rule 921 Rules of Bankruptcy Procedure. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489374/ | ORDER
LAWRENCE FISHER, Bankruptcy Judge.
This matter coming on to be heard upon the Trustee’s Amended Complaint for money judgment and approval of a sale of property, and the Defendant’s Answer thereto, and the parties appearing by their respective attorneys, and
The Defendant averring in open Court that there are no issues of material fact to be resolved, and Defendant requesting in open Court that the Complaint be disposed of based on the legal Memoranda submitted, this Court therefore deeming the matter to have been presented upon Cross-Motions for Summary Judgment, and
The Court having examined the pleadings filed in this matter and having received and examined the Memoranda of Law submitted by the parties in support of their respective positions, and having heard the arguments of counsel, and the Court being fully advised in the premises;
The Court Finds:
1. On February 29, 1980 an involuntary bankruptcy petition was filed against Stephen J. Klemen, Jr., Debtor, under chapter 7 of the Bankruptcy Code.
2. On December 15, 1980 Frank 0. Wet-more II, Trustee for the estate of Stephen J. Klemen, Jr., filed an Application with this Court for leave to sell a tract of real property referred to as the Bentonville Hog Farm.
3. In said Application, the Trustee indicated that he had received an offer from Mose-Ark Enterprises, Inc. for the purchase of the Bentonville Hog Farm for the sum of $135,000.00 cash. The Trustee further stated that in his opinion $135,000.00 is the reasonable value of the Bentonville Hog Farm. The Trustee’s Application requested that the Court enter an order authorizing and directing the Trustee inter alia to: 1) serve notice upon the parties and publish notice as the Court deems appropriate for date of hearing upon this Application and the sale of the Bentonville Hog Farm; 2) convey to Mose-Ark Enterprises, Inc. or such higher bidder as may be the successful bidder thereon, the Bentonville Hog Farm and equipment thereon for payment in cash of the bid price.
4. Pursuant to Court order, the Benton-ville Hog Farm was offered for sale at public auction in open court on January 12, 1981, but there were no bidders. Accordingly, on January 19, 1981 this Court ordered that “the sale of the Bentonville County Hog Farm to Mose-Ark Enterprises, Inc. for $135,000.00 is hereby approved.” The Court further ordered “that the Trustee be, and he is hereby authorized and directed to accept the offer of Mose-Ark Enterprises, Inc.”
5. On September 10, 1981, Frank O. Wetmore II, Trustee, filed a Complaint against Mose-Ark Enterprises, Inc. On September 11, 1981, the Trustee filed an Amended Complaint, wherein he alleges that he has stood prepared to close the Bentonville Hog Farm transaction, but Mose-Ark Enterprises, Inc. has failed and neglected to close said transaction. The *759Trustee requests alternative relief: 1) that judgment be entered in favor of the Trustee and against Mose-Ark Enterprises, Inc. in the amount of $129,500.00 (the difference between $135,000.00 and the $5,500.00 earnest money deposited by Mose-Ark Enterprises, Inc. and held by the Trustee); or 2) that the Court approve a sale of the property to another in mitigation of damages and enter judgment in favor of the Trustee and against Mose-Ark Enterprises, Inc. in the amount of any deficiency.
6. This Court approved the sale of the Bentonville Hog Farm to James W. Strat-ton for the sum of $110,000.00. Accordingly, the Trustee’s request for a deficiency judgment against Mose-Ark Enterprises, Inc. is the only remaining issue to be resolved by this Court.
The Court Concludes and Further Finds:
1. On October 29,1981, Mose-Ark Enterprises, Inc. made a written offer to purchase the Bentonville Hog Farm for $125,-000.00 cash at closing (Exhibit 1 to the Trustee’s Complaint). The writing consists of a form document entitled “Real Estate Contract (Offer and Acceptance).” Paragraph 9 of the document states that the closing date is to be “on or about 90 days from acceptance.” Paragraph 15 states that the offer expires if not accepted within 10 days. The document was signed by Eldon Mosler, President of Mose-Ark Enterprises, Inc. The document also provides for the signature of the seller, but has never been signed by the seller. In addition, at the bottom of the document is an unnumbered statement stating as follows:
“This is a legally binding contract when signed by both buyer and seller. If not understood seek legal advice.”
By letter dated November 12,1980, Mose-Ark Enterprises, Inc. amended its Offer to $135,000.00 cash at closing. By letter dated January 12, 1981, Mose-Ark Enterprises, Inc. deposited $4,500.00 as additional earnest money.
2. Mose-Ark Enterprises, Inc. contends that it is not obligated to close pursuant to the terms of the written offer. In this respect, Mose-Ark Enterprises, Inc. states that the document sought to be enforced does not satisfy the Statute of Frauds nor the document’s own requirements for enforceability.
Mose-Ark Enterprises, Inc. notes that Illinois courts have held that the Statute of Frauds requires that the writing contain the name of the seller. The October 29, 1980 document does not contain the name of the seller. However, the letter dated January 12, 1981 from the President of Mose-Ark Enterprises, Inc. to Frank O. Wetmore II is an amendment to the original offer and does contain the name of the seller. Accordingly, the Statute of Frauds’ requirement is satisfied. Thompson v. Wiegand, 9 Ill.2d 63, 66, 136 N.E.2d 781, 783 (1956); Crum v. Krol, 99 Ill.App.3d 651, 654, 54 Ill.Dec. 864, 867, 425 N.E.2d 1081, 1084 (1981).
Mose-Ark Enterprises, Inc. further contends that despite any Statute of Frauds deficiencies, the Trustee’s failure to sign the document constitutes a failure to accept the offer to purchase and renders the alleged contract unenforceable. Mose-Ark Enterprises, Inc. argues that the terms of the offer require that the offer only be accepted by writing. Mose-Ark Enterprises, Inc. relies on the statement at the bottom of the document which states:
“This is a legally binding contract when signed by both buyer and seller. If not understood seek legal advice.”
This Court does not read the aforesaid provision as prescribing that acceptance be by signature only. Its purpose, rather, is to alert the unwary and legally unsophisticated.
Since the offer does not require a particular manner of acceptance, the offer could have been accepted by conduct indicating assent to the offer. 12 Ill.L. & Prac. § 38 at 210 (1955). See, e.g., Plummer v. Pennsylvania Railroad, 37 F.2d 874 (7th Cir. 1929); Arduini v. Board of Education, 93 Ill.App.3d 925, 49 Ill.Dec. 460, 418 N.E.2d 104 (1981). “Though assent must be manifested in order to be legally effective, it *760need not be expressed in words .... The modern law rightly construes both acts and words as having the meaning which a reasonable person present would put upon them in view of the surrounding circumstances.” 1 Williston, Contracts § 22A (3d ed. 1957). In the case sub judice, it was contemplated by the offeror that acceptance of the offer would involve efforts by the Trustee to obtain Court approval by filing an Application requesting the Court to enter an Order authorizing and directing the Trustee to accept the offer and convey the property. The Trustee did in fact file such an Application with the Court. Further, Mose-Ark Enterprises, Inc. had notice of that fact and also could reasonably have expected that if no higher offers were received the Trustee would be ordered to convey the property to Mose-Ark Enterprises, Inc. Notwithstanding, Mose-Ark Enterprises, Inc. did not indicate any intention to withdraw their offer. To the contrary, on January 12, 1982, the date for hearing on the Application and sale, Mose-Ark Enterprises, Inc. deposited an additional $4,500.00 as earnest money. In view of all of the circumstances, this Court finds that the offer of Mose-Ark Enterprises, Inc. for $135,-000.00 cash was accepted by the Trustee.
Finally, Mose-Ark Enterprises, Inc. maintains that no enforceable contract exists because of the provision in paragraph 15 of the subject document. Paragraph 15 states that the offer expires if not accepted within 10 days. The offer is dated October 29, 1980 and the Trustee’s Application was not filed until December 15, 1980. These facts, however, are not dispositive.
Provisions of a contract may be waived by subsequent acts of the parties. In the case sub judice, Mose-Ark Enterprises, Inc.’s actions with regard to the subject transaction constituted a waiver of the 10-day provision in paragraph 15. On November 12, 1980, more than ten days after the original offer, Mose-Ark Enterprises, Inc. “amend[ed] their offer of October 29, 1980 to raise the offering price to $135,000.00 cash at closing, all other provisions to remain the same.” They did not, as would have been more appropriate and consistent with paragraph 15, make a new offer. Moreover, on January 12, 1981, approximately 2 months after the November 12, 1980 amended offer, Mose-Ark Enterprises, Inc. again indicated a waiver of paragraph 15. It treated the October 29,1980 offer, as amended by the November 12, 1980 offer, as being in full force and effect. The letter stated as follows:
“I am enclosing Ch. # 3201 in the amount of $4,500.00 as additional earnest money on agreements to purchase the Benton Co. Hog Farm in the amount of $135,000.00 due to close on or before April 12, 1981.”
This Court concludes that a validly enforceable contract between the Trustee and Mose-Ark Enterprises, Inc. existed for the sale of the Bentonville Hog Farm in the amount of $135,000.00 cash.
3. Mose-Ark Enterprises, Inc. contends that if the Court concludes that an enforceable contract exists, the Trustee’s damages are limited to retention of the $5,500.00 earnest money deposit. Mose-Ark Enterprises, Inc. notes paragraph 5 of the contract which provides as follows:
5. EARNEST MONEY: Buyer herewith tenders a check for $1,000.00 as earnest money, which shall apply on purchase price or closing costs if this offer is accepted. The sum shall be deposited by Agent and if offer is not accepted or if title requirements are not fulfilled, it shall be promptly refunded to Buyer. If, after acceptance, Buyer fails to fulfill his obligations, the earnest money shall become liquidated damages. WHICH FACT SHALL NOT PRECLUDE SELLER OR AGENT FROM ASSERTING OTHER LEGAL RIGHTS WHICH THEY MAY HAVE BECAUSE OF SUCH BREACH.
The Trustee, however, maintains that he is entitled to damages in the amount of $25,000.00 ($135,000.00 minus the $110,000.00 received upon sale to the next highest bidder). He argues that his recovery is not limited to the $5,500.00 because the contract provides for liquidated damages at the option of the seller.
*761There are indeed instances in which contracts have provided for optional liquidated damage provisions and courts have upheld the optional nature of these provisions. The Trustee in his Memorandum cites two such cases. Gryb v. Benson, 84 Ill.App.3d 710, 40 Ill.Dec. 423, 406 N.E.2d 124 (1980); Sampson v. McAdoo, 47 Md.App. 602, 425 A.2d 1 (1981). Neither of these cases, however, involve contracts containing the same or similar wording as the instant liquidated damage provision. Each of the cited cases clearly and explicitly expresses that the forfeiture of the earnest money is at the option of the seller. Paragraph 5 of the subject contract clearly states that “the earnest money shall become liquidated damages” (emphasis added). Blacks Law Dictionary 353 (5th ed. 1979) defines liquidated damages as “the amount of damages [that] has been expressly stipulated by the parties to a ... contract as the amount of damages to be recovered by either party for a breach of the agreement by the other.” The concluding statement in paragraph 5 provides that the seller is not precluded from “asserting other legal rights which they may have because of such breach” (emphasis added). “Other legal rights” must logically and consistently be read to refer to rights of a kind and character other than the right to damages, the amount of damages having been stipulated to in the contract. Had the parties intended that the $5,500.00 earnest money be retained as liquidated damages only at the option of the seller, they could have so stated. Instead, they stated that “the earnest money shall become liquidated damages.”
4. On January 11,1982, this Court held a hearing on the Applications for payment of a real estate commission to George Frelk, Realtor, and Eldon Mosler, Realtor and President of Mose-Ark Enterprises, Inc. regarding the sale of the Bentonville Hog Farm.
This Court ordered that a single commission be allowed in the amount of $5,500.00 to George Frelk and Eldon Mosler. The Court ordered that the Trustee pay George Frelk his expenses from the $5,500.00 commission along with one-half of the balance of the commission. The Court further ordered that the remaining balance of the commission be retained by the Trustee pending resolution of the adversary proceeding.
On March 17, 1982 this Court entered an Order allowing George Frelk expenses in the sum of $2,476.79, and directing that the Trustee disburse said sum and the additional sum of $1,511.60 as commission to George Frelk.
The adversary proceeding having been resolved, and the Trustee’s recovery against Mose-Ark Enterprises, Inc. having been limited to retention of the earnest money, it is now proper that the Trustee disburse to Eldon Mosler his share of the commission allowed in connection with the sale of the Bentonville Hog Farm, that being the sum of $1,511.60.
IT IS THEREFORE ORDERED, ADJUDGED AND DECREED that the Motion of the Trustee, Frank O. Wetmore II, for Summary Judgment be, and the same is hereby granted in part and denied in part.
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that the Motion of Defendant, Mose-Ark Enterprises, Inc., for Summary Judgment be, and the same is hereby granted in part and denied in part.
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that a valid enforceable contract for the sale of the Ben-tonville Hog Farm existed between the Trustee, Frank O. Wetmore II, and Mose-Ark Enterprises, Inc. for the sum of $135,-000.00 cash at closing, and that Mose-Ark Enterprises, Inc. breached that contract.
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that the Trustee’s, Frank O. Wetmore II, damages are limited to retention of the $5,500.00 earnest money deposit.
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that the Trustee, Frank O. Wetmore II, disburse to Eldon Mosler, President of Mose-Ark Enterprises, Inc., the sum of $1,511.60 as a commission allowed in connection with the sale of the Bentonville Hog Farm. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489375/ | *774MEMORANDUM OPINION AND ORDER
WILLIAM B. LEFFLER, Bankruptcy Judge.
In this Chapter 13 proceeding the mortgage holder seeks to compel the wage earner to defer the vesting of her residence in herself and instead to have the residence vest in National Mortgage Company, by virtue of 11 U.S.C. § 1322(b)(9), until either 1) dismissal of the case1; 2) vacation by the Court of the automatic stay; 3) discharge of the plan; or 4) granting of a motion by the debtor to sell the property. The Court finds that § 1322(b)(9) may not be used by a creditor to compel vesting in it of property which should vest in the debtor by virtue of 11 U.S.C. § 1327(b).
Under § 1322:
The plan may—
(9) provide for the vesting of property of the estate, on confirmation of the plan or at a later time, in the debtor or in any other entity;
11 U.S.C. § 1322(b)(9) (emphasis added). The language “may” is discretionary, as opposed to the mandatory “shall” found in § 1322(a). For this reason alone, a creditor should not be allowed to force a debtor, whose plan meets all mandatory Chapter 13 requirements, to defer vesting of property in herself or to vest property in a creditor.
Not only does the clear language of § 1322(b)(9) itself compel this conclusion, but any contrary result would contravene the fresh start policy embodied in the Code. By deferring the vesting of a debtor’s residence in the debtor under § 1327 or by vesting the residence in the creditor, the creditor raises a substantial roadblock in the debtor’s path to a fresh start. As noted in Matter of Brock, 6 B.R. 105, 6 B.C.D. 1065 (Bkrtcy.N.D.Ill.1980), Congress was wise to provide in § 1327 that confirmation of the plan would vest property of the estate in the debtor so that, “(a) debtor may carry out his duties under a confirmed plan without fear of having a creditor pull out (its security) from under him.... ” 6 BCD at 1066. Collier observes that § 1327’s vesting of property in the debtor upon confirmation unless terms of the plan provide otherwise “implements a major theme of Chapter 13 by preserving to the debtor ownership, as well as possession of all property ....” 5 Collier on Bankruptcy. Para. 1327.01(2) (15th ed. 1982). Collier likewise comments that the purpose of § 1327(b) should be construed against § 1322(b)(8)’s allowance of payment of a claim from property and § 1322(b)(9)’s allowance of vesting of property in an entity other than the debtor, so as to promote flexibility in wage earner plans:
by permitting the debtor to propose a plan to satisfy all or part of one or more claims by vesting property of the debtor or property of the estate in a creditor. Section 1327(b) in no way restricts the freedom of the debtor to include a provision in the plan vesting property of the estate, including exempt property, in an entity other than the debtor.
Id. (emphasis added). Thus § 1322(b)(9) is present in Chapter 13 as an aid to facilitating the debtor’s proposal of an effective plan providing a debtor with a fresh start. Section 1322(b)(9) may not be used by a creditor as a sword of Damocles to hang over a debtor’s head during the long duration of a wage earner plan.
It is therefore
ORDERED by the Court that the motion of National Mortgage Company to defer vesting of property is denied.
ENTER this 9th day of July, 1982.
. The Court observes that should the case be dismissed, by virtue of 11 U.S.C. § 349(b)(3), the residence would be automatically, revested in the debtor. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489376/ | ORDER
WALTER J. KRASNIEWSKI, Bankruptcy Judge.
This matter is before the Court on the question of Defendant’s right to a trial by jury on the issues raised by the pleadings herein. The Court concludes that whatever right, if any, Defendant had to a trial by jury was waived by virtue of its failure to timely assert the same and, therefore, the demand for jury trial should be stricken from Defendant’s answer.
This matter was initiated by the Trustee’s complaint of December 4, 1981 to set aside an assertedly preferential transfer from Debtor to Defendant. Alternatively, the Trustee asserted that the same circumstances constituting the alleged preferential transfer stated a cause of action in conversion. Defendant filed an answer to the complaint on January 25, 1982 and then, with leave of Court, filed an amended answer and counterclaim on April 20, 1982. The Trustee then filed a reply to the Defendant’s April 20, Amended Answer and Counterclaim on May 4,1982. To this point in time the Defendant, in either pleadings or orally at pre-trial conference, had failed to assert any right to jury trial.
On May 7, 1982 the Trustee sent to the Court correspondence citing the need to file an amended complaint to correct the erroneous designation of the Defendant’s name *779in the original complaint from “Austin Power Equipment” to the “S. K. Austin Company”. An “Amended Complaint” was subsequently filed on May 10, 1982 in which, in addition to changing Defendant’s corporate name to correct the deficiency previously noted, the Trustee altered the content of the factual allegations supporting the complaint without changing the nature of the causes of action asserted. No leave to amend the original complaint was ever formally sought nor granted as required by the second sentence of Rule 15(a) Fed. R. Civ. P.
On June 1, 1982 Defendant filed an “Answer to Amended Complaint, Counterclaim and Jury Demand Endorsed Thereon” to the Trustee’s May 10,1982 “Amended Complaint”. The Trustee then filed a reply to the counterclaim asserted in Defendant’s June 1, 1982 pleading.
Due to the complexity of the issues raised by Defendant’s jury demand, on June 18, 1982, the Court ordered Defendant to file a brief in support of its jury demand by June 25, 1982 directing its’ attention to both the timeliness of the jury demand under Interim Rule 9001 and the substantive right to a jury trial, if any, which exists under 28 U.S.C. Section 1480(a). Despite the granting of an extension to July 13, 1982 in which Defendant might file a brief in support of its’ jury demand, nothing had been received by the Court as of July 19, 1982. Trial is this matter is scheduled for July 22, 1982.
The procedural question of the timeliness of the jury demand to one side, the question of Defendant’s substantive right to a jury trial under 28 U.S.C. Section 1480(a) raises a variety of difficult questions both to the extent of the right granted and the mode of its determination. See e.g., Hadar Leasing International Co. v. D.H. Overmeyer Telecasting Co., 18 B.R. 107 (Bkrtcy N.D. Ohio 1982); Belfance v. Sizzler Family Steake Houses, 16 B.R. 445 (Bkrtcy. N.D. Ohio 1982); In re Newman, 14 B.R. 1014, 8 B.C.D. 328 (Bkrtcy. S.D. N.Y. 1981); Wood v. Otis, 13 B.R. 279,4 C.B.C.2d 1333 (Bkrtcy. N.D. Ga. 1981); Pinson v. Reynolds (In re Trust Financial Group of Texas, Inc.), 11 B.R. 67, 7 B.C.D. 896 (Bkrtcy. S.D. Tex. 1981). Further uncertainty to this already confused area was recently added by the decision of the United States Supreme Court in Northern Pipeline Construction Co. v. Marathon Pipe Line Co., - U.S. -, -, 102 S.Ct. 2858, 2880, 73 L.Ed.2d 598 (1982), concluding that the broad grant of jurisdiction to the bankruptcy courts contained in Section 241(a) of the Bankruptcy Reform Act of 1978, of which 28 U.S.C. Section 1480 is a part, is unconstitutional but staying the effect of its’ judgment until October 4, 1982. These difficult questions are avoided, however, by this Court’s determination that whatever right to a jury trial Defendant had was waived by Defendant’s failure to timely assert the same pursuant to Interim Rule 9001(a).
Interim Rule 9001 provides in relevant part that:
(a) Demand. Any party may demand a trial by jury by serving upon the other parties a demand therefor in writing at any time after the commencement of the case or proceeding and not later than 10 days after the service of the last pleading directed to such issue. The demand may be indorsed on a pleading of the party.
(c) Waiver. The failure of a party to serve a demand as required by this rule and to file it as required by Rule 509 constitutes a waiver by him of trial by jury, a [sic] demand for trial by jury made as herein provided may not be withdrawn without the consent of the parties.
Defendant was required then to serve a written demand upon Plaintiff “not later than 10 days after the service of the last pleading directed to such issue”. This, it failed to do.
Defendant demands a jury trial on all issues raised by its answer and counterclaim. The last pleading directed to these issues could only be the Trustee’s May 4, 1982 reply to the counterclaim asserted in Defendant’s amended answer filed with leave of court on April 20, 1982. This would permit the parties ten days from *780May 4, 1982, plus 3 days for mailing, see Rule 6(e) Fed. R. Civ. P., making Defendant’s jury demand untimely if served later than May 17, 1982. In the present case, Defendant’s jury demand was filed by virtue of its endorsement on Defendant’s “Answer to Amended Complaint, Counterclaim and Jury Demand Endorsed Thereon” filed June 1, 1982, clearly beyond the May 17, 1982 deadline. Pursuant to Interim Rule 9001(c) this constituted a waiver by Defendant of any right it had to trial by jury.
The pleadings filed in this case subsequent to May 4, 1982 cannot be held to extend the May 17,1982 deadline previously established. More specifically, the Trustee’s May 10, 1982 “Amended Complaint”, not filed as of right or with leave of Court pursuant to Rule 15(a) Fed. R. Civ. P., the June 1, 1982 “Answer to Amended Complaint, Counterclaim and Jury Demand Endorsed Thereon” filed by Defendant, and the Trustee’s June 4, 1982 “Answer to Counter-Claim”, more properly denominated a “reply”, see Rule 7(a) Fed. R. Civ. P., raised no new issues which could revive whatever right to a jury trial Defendant had previously waived on the issues already framed by the pleadings filed on or before May 4, 1982. See generally 9 C. Wright & A. Miller, Federal Practice and Procedure Section 2320 (1971) (Construing Rule 38 Fed. R. Civ. P. from which Interim Rule 9001 is adapted). The Trustee’s May 10, 1982 amended complaint, and the pleadings filed subsequent thereto, although varying in some minor particulars from the original pleadings filed on or before May 4, 1982, failed to raise any new issues. They thus cannot extend the previously determined May 17, 1982 deadline. Id.
Finally, neither Rule 9001 nor any of the other provisions of the bankruptcy rules permits the Court to grant Defendant relief from waiver as does Rule 39(b) Fed. R. Civ. P. Furthermore, even if the Court did have some discretion to grant relief, under the circumstances of this case, considering the timeing of the motion, and the effect a jury trial would have on the Court’s docket and the orderly administration of justice, see Malbon v. Pennsylvania Millers Mutual Insurance Co., 636 F.2d 936, 940 n. 11 (4th Cir. 1980), the Court, in the exercise of its sound discretion, is not persuaded that relief from waiver is appropriate.
For the foregoing reasons, it is hereby,
ORDERED that Defendant’s jury demand be stricken from its “Answer to Amended Complaint, and Jury Demand Endorsed Thereon” and that this case be tried to the Court without a jury. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489377/ | MEMORANDUM DECISION
THOMAS C. BRITTON, Bankruptcy Judge.
Plaintiff, a judgment creditor of the debtor, seeks relief from the automatic stay under 11 U.S.C. § 362(d). (C.P. No. 1). The debtor defendant has answered and asserted as a counterclaim its rights under 11 U.S.C. § 544. (C.P. No. 3). The matter was tried on July 29, 1982.
The essential facts are not in dispute. A consent judgment was entered in favor of plaintiff and against the debtor in North Carolina on May 29, 1980 in the amount of $210,000. Plaintiff perfected the judgment and obtained a lien on all the real property of the debtor in Mecklenburg County, North Carolina. A substitute judgment in the amount of $587,000 was prepared contemporaneously and placed in escrow to become effective in the event of default by the debtor under the terms of the consent judgment.
The debtor paid $141,500 in installments. On April 5, 1982 the debtor did not pay the amount due as a weekly installment and continued to be delinquent in payments. It is not disputed that the debtor has by its default breached the agreement and that plaintiff now has a valid judgment against the debtor in the amount of $587,000. The debtor filed a petition under chapter 11 on May 18, 1982.
Plaintiff seeks relief from the automatic stay in order to record its substitute judgment in Mecklenburg County, North Carolina. If plaintiff is permitted to perfect its judgment it will be secured to the full amount of the judgment, less the amount paid by the debtor to date, $68,500. The North Carolina property, which secures the judgment, is no longer property of this estate. It was conveyed May 1981. The present owner is not a party here.
The debtor-in-possession argues that §§ 1107(a) and 544(a) give it the rights and benefits of a judgment creditor with a perfected lien as of the date of bankruptcy against all of its own property and that plaintiff’s failure to perfect its larger lien before bankruptcy should preclude it being permitted to perfect that lien now. 4 Collier on Bankruptcy (15th ed.) § 544.03[1] n. 25.
The debtor does not persuade me.
To begin with, § 544 has no apparent application to this case since the hypothetical lien it provides does attach only to the debtor’s property and the property involved here was not the debtor’s property on the date of bankruptcy. There is, therefore, no practical or equitable purpose to be served by preventing perfection of this lien.
Secondly, and independently of the foregoing consideration, this particular lien would not be avoidable under § 544 in any event. Plaintiff’s judgment of May 29, 1980 for $210,000 was duly perfected. That judgment unmistakeably and unambiguously provided that failure of the debtor to comply with a specified schedule of payments would escalate the judgment to its original amount, $587,000.
“Plaintiff’s counsel may docket the substitute judgment upon default and thereupon proceed with all collection rights provided by law.”
The purpose of statutes requiring recor-dation is to protect innocent creditors from secret liens. An innocent creditor examining the record here on the date of bankruptcy would have been explicitly warned that plaintiff’s lien would escalate on default. On inquiry, he would have learned that default had in fact occurred before bankruptcy. If plaintiff’s consent judgment for the escalated amount is now recorded, no creditor may complain of surprise under the recordation statute. Section 544, which gives the debtor no better position than that of an innocent creditor, has no application here.
To now permit the plaintiff to record the accelerated judgment is analogous to per*801mitting a mortgage to accelerate a defaulted loan and to proceed with foreclosure. It is entirely appropriate to permit this plaintiff to do so under § 362(d)(2) where, as here, the debtor has no equity in the property and the property is not necessary to reorganization.
As is required by B.R. 921(a), a separate judgment will be entered modifying the automatic stay to permit plaintiff to record a substitute judgment against the debtor’s former property in accordance with the terms of the May 29,1980 judgment and to proceed with enforcement of that substitute judgment against the property pledged as collateral for that judgment. The amount owed, after giving credit for the sums paid, is $445,000, together with any interest, fees or costs provided by the substitute judgment. Because the present owner of the property is not a party to this action, this judgment does not preclude any defense that any party may have to enforcement of the substitute judgment. Costs will be taxed on motion. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489378/ | MEMORANDUM OPINION AND ORDER
RICHARD L. SPEER, Bankruptcy Judge.
This cause came before the Court upon the claim of Mr. Burchett, the Debtor’s ex-husband, to one-half of the proceeds of the sale of real estate at 220 East Dean Road, Temperance, Michigan. Both parties agreed to submit the issue to the Court upon Memoranda.
FACTS
The Court finds the following facts:
1.) Debtor, Mary Ann Burchett, and her husband William T. Burchett, Sr., terminated their marriage by Judgment of Divorce entered in the Circuit Court for the County of Monroe, Michigan on August 8, 1980.
2.) Both parties entered into a property settlement agreement on May 28, 1980. This property settlement agreement was incorporated by reference into the August 8, 1980 Judgment of Divorce.
3.) During the pendency of the divorce proceeding, the marital home was sold by land contract to Charles and Patricia Rem-ley. The Judgment of Divorce ordered the appointment of an escrow agent to dispurse the funds derived from the sale of this real property. The proceeds of sale were to be applied to the marital debts of the parties, including federal and state income tax liens. The balance of monies was then to be divided equally between Mr. and Mrs. Burchett.
4.) The Debtor, Mary Ann Burchett, filed her voluntary petition in Bankruptcy on May 28, 1981 in the United States Bankruptcy Court for the Northern District of Ohio, Western Division. The Debtor included in her schedules, the debts of the marriage.
The issue presented to the Court is whether the proceeds of the sale should be distributed pursuant to the directives of the Domestic Relations Court of Monroe County, Michigan, or whether the intervening Bankruptcy requires the Trustee to attach the Debtor’s one-half interest in the proceeds and distribute by order of priority under the Bankruptcy Code.
LAW
The pertinent parts of the property settlement agreement of May 28, 1982, which was incorporated by reference into the Judgment of Divorce are as follows:
“1. THE PARTIES HERETO MUTUALLY AGREE:
.... (d) that the appointment of Thomas W. Pruden, as escrow agent, in those certain Agreements between the parties hereto, being dated April 7, 1980, is hereby extended until all funds due under the Land Contract referred to in said Agreements, have been collected by the said *820agent, and he shall continue to make the disbursements authorized thereunder, and, upon collection of the full monies due under said Land Contract, is hereby directed and authorized to distribute therefrom the funds necessary to pay the marital debts of the parties, as hereinafter specifically set forth, and the respective attorney fees incurred by the parties, and to further make final distribution of the balance of the said proceeds, equally, share and share alike, between the parties hereto.
The said Thomas W. Pruden is hereby specifically authorized to make payments of the following specific debts of the parties hereafter set forth, to-wit: Monroe County Teacher’s Credit Union, Midland Guardian, Woolco, J.C. Penney, Visa (Ohio Citizens), Montgomery Ward, Visa (Security Bank), General Telephone (2 bills), Consumers Power, Westside Fuel, Sunoco and Internal Revenue Service and State Income Tax 1978 — 1979 taxes only.
That the said escrow agent is further authorized to pay from any sums held in escrow by him, subject to the release by Charles Remley et ux, any sums necessary to update, and preserve, the parties interest in and to 19 acres, more or less, of real estate of the parties situate in Columbiana County, Ohio... . ”
Mr. Burchett believes the terms of the divorce judgment should control and that all the proceeds of the real estate should be used primarily to satisfy the creditors of the marriage, more specifically set forth in the Property Settlement Agreement, and secondly that the balance should then be equally divided between the parties.
Although unclear, it appears that the Debtor, Mary Ann Burchett believes the proceeds should be initially divided between the parties, however she asserts that her one-half share should be given to the Trustee to distribute pursuant to the priorities of the Bankruptcy Code.
The intervention of the Bankruptcy case is here, as throughout the Bankruptcy Courts, playing havoc with Domestic Relations judgments. The legislative history of the Bankruptcy Code is quite clear in stating that federal bankruptcy law is controlling where dischargeability issues interact with alimony and property settlement determinations. The Bankruptcy Court is not required to accept as determinative those statements in the divorce or similar decree that particular debts are in the nature of alimony or property settlement. Rather the Court will look to the intent of the parties in determining whether specific debts are in the nature of support or a property settlement. In re Warner, 5 B.R. 434 (Bkrtcy. D.C.D. Utah 1980); In re Sturgell, 7 B.R. 59 (Bkrtcy. S.D. Ohio 1980); In re Diers, 7 B.R. 18 (Bkrtcy. S.D. Ohio 1980). Furthermore, each case must be decided upon its own merits after a review of the respective facts and surrounding circumstances. In re Brace, 13 B.R. 551 (Bkrtcy. N.D. Ohio 1981); In re Hoover, 14 B.R. 592 (Bkrtcy. N.D. Ohio 1981).
Upon a review of the property settlement agreement, it appears that both parties agreed that the distribution of funds was to be made by the escrow agent. Any change made in this distribution would have to be upon mutual consent of the parties. Further, there was a specific provision waiving any alimony payments. The intent of the parties appears clear.
It is impracticable for this Court to order the trustee to distribute one-half of the proceeds to the creditors of this Debtor (most of which are the creditors on the marital debts), and allow the escrow agent to distribute the other half to those same creditors. The pragmatic solution to the problem is to let the prior judgment command the distribution, such distribution being mutually agreed upon by the parties here. Judicial economy dictates that in this particular case the net proceeds should be paid to Mr. Pruden as escrow agent, to be distributed to those creditors specified in the Judgment of Divorce and Property Settlement Agreement. Thereafter, the balance shall be equally divided with the Debt- or’s share to be paid directly to Mr. Philip Joelson, Trustee in Bankruptcy. At that point the Trustee can distribute the available funds to the remaining creditors of the Debtor, and the Debtor shall receive her discharge.
*821For the foregoing reasons, it is
ORDERED that the proceeds from the sale of the real estate located at 220 East Dean Road, Temperance, Michigan, shall be paid to Thomas W. Pruden, Escrow Agent to be distributed by him according to the terms of the Property Settlement Agreement dated May 28, 1980.
It is FURTHER ORDERED that any monies remaining after payment of those debts shall be equally divided and the Debt- or’s one-half interest shall be sent to Philip R. Joelson, Trustee in Bankruptcy to be distributed to any remaining creditors.
It is FURTHER ORDERED that Mr. Pruden shall make an accounting to this Court of the amount of distributions made, and the parties to whom they are made.
In so reaching these conclusions, the Court has considered all the evidence presented whether or not referred to specifically in the Opinion above.
It is FURTHER ORDERED that service of this Order shall be made by the Deputy Clerk of this Court mailing copies of same to all parties in interest and counsel of record. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489379/ | MEMORANDUM OPINION
JOHN FLOWERS, Bankruptcy Judge.
The Debtor in this Chapter XI proceeding filed an objection to the claim asserted by Ernestine Hyder for contribution in the payment of a judgment against both parties. Hyder has filed a motion for summary judgment. All material fact issues are either stipulated by the parties or resolved by a state court judgment. Only determinations of law remain.
In 1977 a Texas state court judgment was rendered against the Debtor and Hyder as joint intentional tort-feasors for conspiracy to deprive a real estate broker of his commission and against the Debtor for tortious interference with a contract. See Boyles v. Thompson, 585 S.W.2d 821 (Tex. Civ. App. —Ft. Worth 1979, no writ hist.) Hyder paid the full amount of the judgment into the registry of the trial court before Debtor filed his bankruptcy petition and she now asserts a right of contribution against Debt- or for his pro-rata share.
Hyder bases her claim for contribution on Vernon’s Ann. Civ. St. Art. 2212 which provides, in pertinent part,
“Any person against whom, with one or more others, a judgment is rendered in any suit on an action arising out of, or based on tort, except in causes wherein the right of contribution or of indemnity, .. . between the defendants is given by statute or exists under the common law, shall, upon payment of said judgment, have a right of action against his co-defendant or co-defendants and may recover from each a sum equal to the proportion of all of the defendants named in said judgment rendered to the whole amount of said judgment.”
Debtor alleges that the exception to Art. 2212 applies because if he had paid the judgment, he would have been entitled to indemnity against Hyder under the common law. Indemnity is distinct from contribution in that contribution spreads financial liability among the tortfeasors; each is responsible for his pro rata share of the plaintiff’s damages while indemnity shifts the financial liability entirely from one tort-feasor to another. The common law provided for indemnification of one tortfeasor when the tortfeasors were not in pari delic-to. Tort indemnity is based on a concept of primary and secondary liability and is granted when co-tortfeasors are liable for the injuries of a third party but one tort-feasor has breached a duty which he owed both to his co-tortfeasor and the injured party while the other tortfeasor is blameless. Classic examples include: an employer who is vicariously liable for acts of his employee is entitled to indemnity from that employee, Wheeler v. Glazer, 137 Tex. 341, 153 S.W.2d 449 (1941); a landowner liable for a dangerous condition on his land created by his co-tortfeasor is entitled to indemnity from that co-tortfeasor if the landowner is unaware of the condition, Y.M.C.A. v. Jasse, 183 S.W. 867 (Tex. Civ. App.—Galveston 1912, writ ref’d.); and a retailer who sells a defective product is entitled to indemnity from the manufacturer, Champion Mobile Homes v. Rasmussen, 553 S.W.2d 237 (Tex. Civ. App.—Tyler 1977 writ ref’d. n.r.e.) All of the examples involve negligent tortfeasors rather than intentional tortfeasors. As co-conspirators, Hyder and Boyles are intentional tortfeasors and there is no common law right of indemnity among intentional tortfeasors. Webb v. Hardy, 269 S.W. 243 (Tex. Civ. App.—Ft. Worth 1924) modified 282 S.W. 210 (Tex.Comm. of Appeals 1926) opinion adopted; Ladd v. Ney, 36 Tex. Civ. App. 201, 81 S.W. 1007 ( — Austin 1904, no writ hist.).1
Next the Debtor contends that Art. 2212 does not allow contribution among intentional tortfeasors — specifically those guilty *853of conspiracy and fraud. The issue is to what extent Art. 2212 changes the common law doctrine concerning contribution among joint tortfeasors. Legal scholars trace the beginning of the common law doctrine to Merryweather v. Nixon, 8 T.R. 186 (1799) wherein an intentional tortfeasor was denied contribution from his co-tortfeasor. As the common law developed, the rule was applied to unintentional tortfeasors also. W. Prosser, Law of Torts (4th ed. 1971). The justification of the doctrine traditionally given by courts is that tortfeasors are wrong-doers and undeserving of the aid of the courts to achieve a proportionate distribution of the common burden. Some courts have also stated that the social policy of deterring wrong-doers is better accomplished if each tortfeasor is fully responsible for the damage caused. Texas originally followed the common law rule. See Ladd v. Ney, supra.
Today, most jurisdictions have relaxed the common law rule by statute or judicial determination. Those jurisdictions changing the rule judicially now allow contribution in favor of unintentional tortfeasors. See Best v. Yerkes, 247 Iowa 800, 77 N.W.2d 23 (1956) and Prosser, supra. Jurisdictions changing the rule by statute have changed the common law in a variety of ways as discussed below.
Clearly in Texas, Art. 2212 changes the common law at least to the extent of allowing contribution among unintentional tort-feasors. Petco Corp. v. Plummer, 392 S.W.2d 163 (Tex. Civ. App.—Dallas 1965, writ ref’d. n.r.e.). The effect of Art. 2212 on intentional tortfeasors is as yet unresolved. Dicta in two Texas cases lead to opposite conclusions concerning the effect of the statute. In Tomerlin v. Krause, 278 S.W. 501 (Tex. Civ. App. — Austin 1925, writ dism’d.), the court stated that a tortfeasor guilty of fraud is not entitled to contribution from a joint tortfeasor. The court cited no authority for its statement and the Tomerlin decision was reached on other grounds. In Kerr v. Dorchester, 93 S.W.2d 758 (Tex. Civ. App.—San Antonio 1936, writ dism’d.), the court stated that there was no reason fraudulent defendants should not exact contribution from each other. The case was remanded to determine whether the fraudulent inducement claims were valid.
Since there is no clear Texas authority, I have examined the judicial construction of statutes of other states containing broad provisions similar to those of Texas Art. 2212.2 The authorities are divided.
In Fisher v. Diehl, 156 Pa.Super 476, 40 A.2d 912 (1945), a negligence case, the court states that the Pennsylvania Supreme Court judicially altered the common law to allow contribution among tortfeasors when there was no intentional violation of the law and this holding was later codified by 12 P.S. § 2081. Missouri and Minnesota also limit by judicial construction their broadly worded statutes to unintentional tortfeasors. Porter v. Crawford & Co., 611 S.W.2d 265 (Mo. Ct. App. 1980), and Hendrickson v. Minn. Power and Light Co., 258 Minn. 368, 104 N.W.2d 843 (1960). West Virginia allows contribution among joint tortfeasors except where the action is malum in se. Haynes v. City of Nitro, 240 S.E.2d 544 (Sup. Ct. of Appls. of W. Va. 1977).
Two jurisdictions have decisions indicating but not directly holding that their statutes allow contribution among intentional tortfeasors. In Hunt v. Chrysler Corp., 68 *854Mich.App. 744, 244 N.W.2d 16 (1976), the court construed the Michigan release of joint-tortfeasors provisions, enacted in conjunction with the contribution statutes, as extending to intentional tortfeasors. In Shultz v. Young, 205 Ark. 533, 169 S.W.2d 648 (1943), the court allowed apportionment of damages between two tortfeasors charged with assault. The apportionment provisions are part of the Arkansas contribution statute.
Federal courts have stated that the Delaware, Rhode Island, and Maryland statutes permit contribution among intentional tort-feasors. See McLean v. Alexander, 449 F.Supp. 1251 (D. Del. 1978) rev’d. on other grounds 599 F.2d 1190 (3rd Cir. 1979); Testa v. Winquist, 451 F.Supp. 388 (D.R.I. 1978); and Webster Motor Car Co. v. Zell Motor Car Co., 234 F.2d 616 (4th Cir. 1956).
The court in Primoff v. Duell, 85 Misc.2d 1047, 381 N.Y.S.2d 947 (1976) states that nothing in the New York statute bars contribution among intentional tortfeasors. See also New York Practice commentary 1401:3. In Judson v. Peoples Bank and Trust Co. of Westfield, 17 N.J. 67, 110 A.2d 24 (1954), the court found that New Jersey Code 2A-53A-2 allows contribution among intentional tortfeasors who fraudulently conspired to oust plaintiff from control of a corporation. The court notes this is a substantial change from the common law.
I am persuaded by the conclusions of the New York and New Jersey courts. The Texas statute is broadly worded to allow contribution in favor of any tortfeasor. Absent a clear mandate by the Texas legislature or Texas courts to limit the provisions to unintentional tortfeasors, I will construe the statute literally. Also, from a policy standpoint, this result is sensible. The common law rule has been justified as deterring wrong-doers, but allowing one tortfeasor to go scott-free while penalizing a joint tortfeasor does little to deter the wrong-doer who pays nothing. Further, it seems questionable that the majority of those who conspire, commit fraud, and inflict other wrongs intentionally are deterred by a rule they probably never consider and indeed do not know until long after the intentional wrong is committed. When contribution among intentional tort-feasors is allowed, all wrong-doers are punished to some extent for their actions. Allowing contribution in no way prejudices the injured party who remains free to seek full satisfaction from any one of the tort-feasors. Contribution only effects the rights of the wrong-doers among themselves.
Debtor’s other objections can be summarily dismissed. He asserts the state court resolved only the broker’s rights against Hyder and himself, not the rights of Hyder and himself inter se, and that the judgment became a nullity upon its payment. He claims another hearing is necessary to determine the issue of common liability in which the equities of the parties would be weighed. Debtor relies on Travelers Insurance Co. v. U.S., 283 F.Supp. 14 (D. Ct. S.D. Tex. 1968) and Greenspan v. Green, 255 S.W.2d 917 (Tex. Civ. App.—Dallas, 1953 writ ref’d n.r.e.). In the Travelers case, plaintiff and one tortfeasor reached a settlement in which the United States did not participate. The first tortfeasor then asserted a right to contribution or indemnity against the United States as a co-tortfeasor. A trial was necessary to determine whether the United States was a tortfeasor at all. In the case at bar, the state court has determined Debtor’s liability as a tort-feasor. Weighing the equities of the parties is unnecessary since Art. 2212 is not a comparative statute; all joint tortfeasors contribute on a pro-rata basis regardless of the equities. Although the state court judgment may now be a nullity, payment of that judgment created the rights given the payor by the statute in question. Greenspan, supra.
Debtor asserts the appellate decision affirming the trial court was rendered after Debtor’s Chapter XI proceedings began and that the broker could not have enforced the judgment against the Debtor. I do not believe this precludes Hyder, upon paying the judgment, from asserting a claim in Debtor’s bankruptcy case for contribution. *855If the judgment had not been paid Thompson, the broker, could have filed a proof of claim in the bankruptcy case.
Debtor contends Hyder has no right to contribution since Vernon’s Ann. Civ. St. Art. 2212a requires all claims for contribution between defendants in the primary suit must be resolved in the primary suit. Article 2212a applies only to negligent co-tortfeasors and is inapplicable here. Texas courts allow tortfeasors claiming contribution under Art. 2212 to assert their right after the primary suit. Greenspan, supra.
Finally Debtor claims Hyder’s action is barred by the statute of limitations. It is unnecessary to decide whether the two or four year statute of limitations applies because Hyder paid the judgment in 1979 and asserted her claim a year later.
I find Ernestine Hyder’s claim should be allowed for one-half of the judgment paid by her plus interest. See Poenisch v. Quarnstrom, 386 S.W.2d 594 (Tex. Civ. App.—San Antonio 1965, writ ref’d. n.r.e.). Hy-der’s motion for summary judgment will be granted.
. See also W. Prosser, Law of Torts, (4th ed. 1971). There is no indemnity in favor of intentional or reckless tortfeasors.
. My consideration does not include the statutes patterned after the 1955 Uniform Contribution among Tortfeasors Act which specifically provides that there is no right of contribution in favor of intentional tortfeasors. See Oklahoma Title 12 § 832. This is the position taken in the Restatement (second) of Torts § 886(A)(3) (1979). Also excluded are state statutes which do not allow contribution when the tortious acts involve moral turpitude (see Georgia Code 105-2012) and those which specifically provide a right of contribution among negligent tort-feasors (see Montana Code 27-1-703). The provisions of these statutes are not similar to the Texas Statute. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489380/ | MEMORANDUM DECISION
L. WARDEN HANEL, Bankruptcy Judge.
This matter is before the Court for trial on plaintiff, Seattle-First National Bank’s complaint to lift stay pursuant to 11 U.S.C. § 362 and defendant, Drum Corps Association of Spokane, by the trustee, counter claim for turn over of funds pursuant to 11 U.S.C. § 542 and preferential transfer pursuant to 11 U.S.C. § 547.
FACTS
On May 11, 1981, the Debtor, DRUM CORPS ASSOCIATION OF SPOKANE, filed a Voluntary Petition for Relief under Chapter 7 of the Code. Scheduled among the assets of the Estate were a number of bank accounts at SEATTLE-FIRST NATIONAL BANK in Spokane, Washington, which contained the sum of $739.02 at the time of filing. In addition, the bank had removed $3,771.00 from two of the DRUM CORPS accounts which it was holding under a Writ of Garnishment served on April 20, 1981. WINSTON & CASHATT, as attorneys for garnishee, answered the Writ of Garnishment on April 24,1981, acknowledging that the bank was holding $3,771.00 of the Debtor’s funds for the Plaintiff of the Writ, GARTH BENHAM. An Order to pay out of the Court said funds was entered on May 11, 1981, but was subsequently stayed by the Debtor’s filing of a Bankruptcy Petition on the same day. The $3,771.00 was subsequently returned by the bank to the Debtor’s accounts after an Order Releasing Garnishment was entered on June 17, 1981, at the request of the Trustee. The bank now claims a right to setoff the current balance of $4,334.97 in the various DRUM CORPS ASSOCIATION accounts against the indebtedness of $28,529.56, plus interest and late charges, owed by the Debtor to the bank.
On February 25, 1981, and March 19, 1981, within ninety days of bankruptcy, DRUM CORPS ASSOCIATION issued Check Nos. 1035 and 1039 in the amount of $700.00 each to SEATTLE-FIRST NATIONAL BANK as payments on the above indebtedness, which was secured by a security interest in musical instruments and business equipment. These items were subsequently abandoned to the bank, which will realize approximately $6,000.00 upon sale of the collateral.
ISSUES
There are two issues which the Court must decide. First is the $3,771.00 that was *931subject to the Writ of Garnishment subject to setoff pursuant to 11 U.S.C. § 553 by the bank or is it property of the debtor’s estate and subject to turn over by the trustee pursuant to 11 U.S.C. § 542. Second, were check Nos. 1035 and 1039 in the amount of $700.00 each received by plaintiff within ninety days of debtor’s filing its petition in bankruptcy preferential in nature and subject to recovery by the trustee pursuant to 11 U.S.C. § 547.
DISCUSSION
As to the first issue at hand the pertinent code sections and state law are as follows:
R.C.W. 7.33.140 Effect of service of writ From and after the service of such writ of garnishment, it shall not be lawful, except as directed by the court, for the garnishee to pay any debt owing to the defendant at the time of such service, or to deliver, sell or transfer, or recognize any sale or transfer of, any personal property or effects belonging to the defendant in the garnishee’s possession or under his control at the time of such service; and any such payment, delivery, sale or transfer shall be void and of no effect as to so much of said debt, personal property or effects, shares, or interest as may be necessary to satisfy the plaintiff’s demand: Provided, however, That in case the garnishee is a bank, banking association, mutual savings bank or savings and loan association maintaining branch offices, service must be made as provided for in RCW 7.33.130, and shall only be effective to attach the accounts, credits, or other personal property of the defendant in that particular branch upon which service is made and to which the writ is directed: Provided further, That this section shall have no effect as to any portion of a debt which is exempt from garnishment: And Provided further, That garnishee shall incur no liability for releasing funds or property in excess of the amount stated in the writ of garnishment where garnishee shall continue to hold an amount equal to the amount stated in the writ of garnishment.
11 U.S.C. § 553. Setoff
(a) Except as otherwise provided in this section and in sections 362 and 363 of this title, this title does not affect any right of a creditor to offset a mutual debt owing by such creditor to the debtor that arose before the commencement of the case under this title against a claim of such creditor against the debtor that arose before the commencement of the case, except to the extent that—
(1) the claim of such creditor against the debtor is disallowed other than under section 502(b)(3) of this title:
(2) such claim was transferred, by an entity other than the debtor, to such creditor—
(A) after the commencement of the case; or
(B)(i) after 90 days before the debt of the filing of the petition; and
(ii) while the debtor was insolvent; or
(3) the debt owed to the debtor by such creditor was incurred by such creditor—
(A) after 90 days before the date of the filing of the petition:
(B) while the debtor was insolvent: and
(C) for the purpose of obtaining a right of setoff against the debtor.
(b)(1) Except with respect to a setoff of a kind described in section 362(b)(6) or 365(h)(1) of this title, if a creditor offsets a mutual debt owing to the debtor-against a claim against the debtor on or within 90 days before the date of the filing of the petition, then the trustee may recover from such creditor the amount so offset to the extent that any insufficiency on the date of such setoff is less than the insufficiency on the later of—
(A) 90 days before the date of the filing of the petition; and
' (B) the first date during the 90 days immediately preceding the date of the filing of the petition on which there is an insufficiency.
*932(2)In this subsection, “insufficiency” means amount, if any, by which a claim against the debtor exceeds a mutual debt owing to the debtor by the holder of such claim.
(c) For the purposes of this section, the debtor is presumed to have been insolvent on and during the 90 days immediately preceding the date of the filing of the petition.
11 U.S.C. § 541. Property of the estate,
(a)The commencement of a case under section 301, 302, or 303 of this title creates an estate. Such estate is comprised of all the following property, wherever located:
(1) Except as provided in subsections
(b)and (c)(2) of this section, all legal or equitable interests of the debtor in property as of the commencement of the case.
(2) All interests of the debtor and the debtor’s spouse in community property as of the commence of the case that is—
(A) under the sole, equal, or joint management and control of the debtor; or
(B) liable for an allowable claim against the debtor, or for both an allowable claim against the debtor and an allowable claim against the debtor’s spouse, to the extent that such interest is so liable.
(3) Any interest in property that the trustee recovers under section 543, 550, 553, or 723 of this title.
(4) Any interest in property preserved for the benefit of or ordered transferred to the estate under section 510(c) or 551 of this title.
(5) An interest in property that would have been property of the estate if such interest had been an interest of the debtor on the date of the filing of the petition, and that the debtor acquires or becomes entitled to acquire within 180 days after such date—
(A) by bequest, devise, or inheritance;
(B) as a result of a property settlement agreement with debtor’s spouse, or of an interlocutory or final divorce decree; or
(C) as beneficiary of a life insurance policy or of a death benefit plan.
(6) Proceeds, product, offspring, rents, and profits of or from property of the estate, except such as are earnings from services performed by an individual debtor after the commencement of the case.
(7) Any interest in property that the estate acquires after commencement of the case.
(b) Property of the state does not include any power that the debtor may only exercise solely for the benefit of an entity other than the debtor.
(c)(1) Except as provided in paragraph (2) of this subsection, an interest of the debtor in property becomes property of the estate under subsection (a)(1), (a)(2), or (a)(5) of this section notwithstanding any provision—
(A) that restricts or conditions transfer of such interest by the debtor; or
(B) that is conditioned on the insolvency or financial condition of the debtor, on the commencement of a case under this title, or on the appointment of or the taking possession by a trustee in a case under this title or a custodian, and that effects or gives an option to effect a forfeiture, modification, or termination of the debtor’s interest in property.
(2) A restriction on the transfer of a beneficial interest of the debtor in a trust that is enforceable under applicable non-bankruptcy law is enforceable in a case under this title.
(d) Property in which the debtor holds, as of the commencement of the case, only legal title and not an equitable interest, such as a mortgage secured by real property, or an interest in such a mortgage, sold by the debtor but as to which the debtor retains legal title to service or supervise the servicing of such mortgage or interest, becomes property of the es*933tate under subsection (a) of this section only to the extent of the debtor’s legal title to such property, but not to the extent of any equitable interest in such property that the debtor does not hold, (e) The estate shall have the benefit of any defense available to the debtor as against an entity other than the estate, including statutes of limitation, statutes of frauds, usury, and other personal defenses. A waiver of any such defense by the debtor after the commencement of the case does not bind the estate.
11 U.S.C. § 542. Turnover of property to the estate.
(a) Except as provided in subsection (c) or (d) of this section, an entity, other than a custodian, in possession, custody, or control, during the case, of property that the trustee may use sell, or lease under section 363 of this title, or that the debtor may exempt under section 522 of this title, shall deliver to the trustee, and account for, such property or the value of such property, unless such property is of inconsequential value or benefit to the estate.
(b) Except as provided in subsection (c) or (d) of this section, an entity that owes a debt that is property of the estate and that is matured, payable on demand, or payable on order, shall pay such debt to, or on the order of, the trustee, except to the extent that such debt may be offset under section 553 of this title against a claim against the debtor.
(c) Except as provided in section 362(a)(7) of this title, an entity that has neither actual notice nor actual knowledge of the commencement of the case concerning the debtor may transfer property of the estate, or pay a debt owing to the debtor, in good faith and other than in the manner specified in subsection (d) of this section, to an entity other than the trustee, with the same effect as to the entity making such transfer or payment as if the case under this title concerning the debtor had not been commenced.
(d) A life insurance company may transfer property of the estate or property of the debtor to such company in good faith, with the same effect with respect to such company as if the case under this title concerning the debtor had not been commenced, if such transfer is to pay a premium or to carry out a nonforfeiture insurance option, and is required to be made automatically, under life insurance contract with such company that was entered into before the date of the filing of the petition and that is property of the estate.
(3) Subject to any applicable privilege, after notice and a hearing, the Court may order an attorney, accountant, or other person that holds recorded information, including books, documents, records, and papers, relating to the debtor’s property or financial affairs, to disclose such recorded information to the trustee.
When the plaintiff was served with the writ of garnishment it answered said writ pursuant to R.C.W. 7.33.150. It is the Court’s finding that plaintiff should have within its answer asserted its ownership or right to setoff of said funds, American Fidelity Fire Ins. Co. v. Paste-Ups, Unlimited, Inc., 368 F.Supp. 219 (1974), or intervened in the action claiming an interest in said funds. Zesbaugh, Inc. v. General Steel Fabricating, Inc. (1980) 26 Wash.App. 929, 614 P.2d 699, (reversed on other grounds, 95 Wash.2d 600, 627 P.2d 1321). Since plaintiff did neither and held said funds for the garnishee plaintiff those funds were no longer being held in the ordinary course of business by the bank and therefore, not subject to setoff pursuant to 11 U.S.C. § 553(a) because of lack of mutuality, nor did the facts fit within exceptions in § 553, when the debtor filed its petition in bankruptcy. Since the order to pay out was stayed the debtor still possessed an interest in those funds and said funds became property of the estate pursuant to 11 U.S.C. § 541(a) and the trustee had a right to turnover of said funds pursuant to 11 U.S.C. § 542.
The second issue concerns the question of whether the two checks Nos. 1035 and 1039 in the amount of $700.00 each received by *934the bank within 90 days of the debtor’s filing its petition constitutes a voidable preference pursuant to 11 U.S.C. § 547. The Court at the time of the hearing .orally ruled that said payments were not voidable and could not be recovered by the trustee.
In light of the foregoing which the Court adopts as its Findings of Fact and Conclusions of Law pursuant to Federal Rules of Bankruptcy Procedure 752 it is:
ORDERED that plaintiff Seattle-First’s complaint for setoff is hereby denied, that defendant trustee’s counterclaim for turnover of property is granted and avoidance of preferential transfer is hereby denied.
FURTHER ORDERED that counsel for the trustee submit an Order in conformity with the foregoing. | 01-04-2023 | 11-22-2022 |
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