url stringlengths 56 59 | text stringlengths 3 913k | downloaded_timestamp stringclasses 1 value | created_timestamp stringlengths 10 10 |
|---|---|---|---|
https://www.courtlistener.com/api/rest/v3/opinions/8491404/ | DECISION AND ORDER ON APPLICATION OF DEBTOR’S COUNSEL FOR COMPENSATION AND REIMBURSEMENT
LEIF M. CLARK, Bankruptcy Judge.
CAME ON for hearing the application of Cox & Smith, Inc., counsel for the debtor in this chapter 7 case, for compensation and reimbursement, together with the objection filed by the chapter 7 trustee. Upon consideration thereof, the court finds and concludes that the application should be allowed in part and disallowed in part, as more fully set out herein.
FACTS
Office Products of America was one of the new genre of wholesale style office products retailers which have become popular in recent years. It began to have difficulties capitalizing after an initial period of aggressive expansion. Beginning in early 1991, the company began to seriously explore selling all or some of its stores. It consulted one of its law firms, Cox & Smith, regarding strategies for dealing with its debt. Eventually, the company decided that reorganization under chapter 11 was not a viable alternative, and so filed a chapter 7 liquidation case. Cox & Smith obtained a $25,000 retainer from the debtor immediately prior to filing, to cover the costs of bankruptcy representation.
Cox & Smith has now submitted a fee application for $31,745.52 in fees and expenses incurred in representing Office Products of America, Inc. (OPA) from April 24, 1991, through September 20, 1991. From May 14, 1991, through June 28, 1991, Cox & Smith was debtor’s counsel in OPA’s voluntary chapter 7 case. The firm has played a fairly active role throughout the case.
The chapter 7 Trustee objects to the Cox & Smith fee application because (1) the application includes charges for substantial amounts of prepetition work and for work done after debtor switched counsel, (2) the application includes charges for work bene-fitting the debtor’s management, not the estate, and (3) the application contains some ill-defined entries and duplicative services, in addition to some very high hourly charges.
After a hearing (at which the court raised additional issues with counsel), this matter was taken under advisement. Now before the court are the following issues:
1. May a firm be compensated from a chapter 7 estate for prepetition legal services beyond the mere preparation of the bankruptcy papers?
2. May the firm be compensated from the estate for postpetition services which, though beneficial, may not fit within the rubric of “actual, necessary” services to the estate?
3. May the firm be compensated for services which benefit only the debtor or the debtor’s officers, directors and/or shareholders?
4. Is this fee application sufficiently detailed to demonstrate the firm’s entitlement to compensation from the estate for services rendered?
5. Does the fee application include charges for duplicated services, for services for which compensation from the estate is not permitted, or for services at an unwarranted high rate?
*9696. Did the firm have a perfected security interest in the $25,000 retainer it received from the debtor prior to filing?
These issues are discussed in more detail below.
ANALYSIS
1. May Cox & Smith be compensated from the Chapter 7 estate for prepetition legal services which exceed mere preparation for a Chapter 7 case? May the firm be compensated from the estate for postpetition services which were beneficial to the estate? May the firm be compensated from the chapter 7 estate for services bene-fitting only the debtor or the debtor’s directors, officers, and/or shareholders?
The extent to which the chapter 7 estate is liable for legal services rendered the estate depends, in part, upon the capacity in which the law firm was hired. For example, if Cox & Smith had been employed by the trustee (debtor-in-possession), with court approval, the firm might have been entitled to compensation for the sorts of services enumerated in Section 327. 11 U.S.C. § 328(a). Here, however, Cox & Smith was employed by the debtor, not the trustee (debtor-in-possession). Although the debtor sought court approval to employ Cox & Smith, such approval was probably unnecessary because the hiring was outside the scope of Section 327 anyway. See 2 Collier on Bankruptcy 11327.07 (15th ed. 1991); see also In re Roberts, 46 B.R. 815, 822 (Bankr.D.Utah 1985), modified, 75 B.R. 402 (1987); In re Coastal Equities, Inc., 39 B.R. 304, 310 (Bankr.S.D.Cal.1984).
While nothing in the Bankruptcy Code forbids a chapter 7 debtor from hiring his own attorney, paying that attorney with funds from the chapter 7 estate is another matter. 11 U.S.C. § 330(a). It has been said that, as a general matter, a debtor’s counsel may be compensated from the estate “for analyzing the debtor’s financial condition; rendering advice and assistance to the debtor in determining whether or not to file bankruptcy; the actual preparation and filing of the petition [and required schedules, and statements]; and representing the debtor at the Section 341 meeting of creditors.” In re Olen, 15 B.R. 750, 752 (Bankr.E.D.Mich.1981); see also In re Leff, 88 B.R. 105, 109 (Bankr.N.D.Tex.1988); In re Riverview Fin. Servs., Inc., 67 B.R. 714, 715 (Bankr.E.D.Mich.1986); In re Rosen, 25 B.R. 81, 84 (Bankr.D.S.C.1982). While true so far as it goes, this oft-quoted statement obscures the slightly more complicated task posed when counsel seeks compensation for significant pre-petition and post-petition services out of a retainer held for that purpose. Section 330 permits payment as an expense of administration of “reasonable” compensation to the “debtor’s attorney” for “actual, necessary services” and reimbursement of said attorney’s “actual, necessary expenses.” 11 U.S.C. §§ 330(a), 503(b)(1)(A); In re Plunkett, 60 B.R. 290, 294 (Bankr.S.D.N.Y.1986); In re Howerton, 23 B.R. 58, 59 (Bankr.N.D.Tex.1982). Meanwhile, Section 329 permits a court to cancel any agreement for payment’for services rendered pre-petition in contemplation of or in connection with a bankruptcy case, to the extent the proposed compensation exceeds the reasonable value of those services. 11 U.S.C. § 329(a); Matter of Kroh Bros. Development Co., 120 B.R. 997, 1000 (W.D.Mo.1989); In re Leff, 88 B.R. 105, 108-09 (Bankr.N.D.Tex.1988);1 In re Smith, 48 B.R. 375, 382 (Bankr.C.D.Ill.1984); In re Swartout, 20 B.R. 102, 107 (Bankr.S.D.Ohio 1982); In re Olen, 15 B.R. 750, 754 (Bankr.E.D.Mich.1981).
*970In this case, the firm currently holds a pre-petition retainer of $25,000, contemplated to be applied to all fees to be incurred by the firm in connection with its bankruptcy filing. Some of those fees were incurred pre-petition, while some were incurred post-petition. The problem this poses for the court is that the firm’s services are subject to two different standards of review, depending on when they were incurred. Pre-petition services may be compensated to the extent that they are “reasonable” (§ 329), while post-petition services must meet the “actual, necessary” standard (§ 330). The distinction in terms is not without a difference, for courts have devised different tests for the application of these two statutes. We turn first to pre-petition services and the application of § 329(b).
A. Pre-petition services
Some of the charges for which recovery is sought are pre-petition charges, while some are post-petition. This significant watershed is especially relevant in this case, for the firm currently holds a retainer received shortly before the filing, which ostensibly “secures” fees incurred by the firm.
Section 329(a) requires that “[a]ny attorney representing a debtor in a case under [Title 11], or in connection with such a case, whether or not such attorney applies for compensation under [Title 11], ... file with the court a statement of the compensation paid or agreed to be paid, if such payment or agreement was made after one year before the date of the filing of the petition, for services rendered or to be rendered in contemplation of or in connection with the case by such attorney, and the source of such compensation.” The legislative history of § 329 indicates that the purpose of this section is to protect against the “serious potential for evasion of creditor protection provisions of the bankruptcy laws, and serious potential for overreaching by the debtor’s attorney which payments to a debtor’s attorney create.” In re Trinsey, 115 B.R. 828, 835 (Bankr.E.D.Pa.1990) (citing S.Rep. No. 989, 95th Cong., 2d Sess. 39 (1978), reprinted in U.S.Code Cong. & Admin.News 1978, 5787, 5825). Section 329(b)(1)(A) authorizes the court to cancel any such agreement or, to the extent excessive, order the return of any such payment to the estate, if the property transferred would have been property of the estate.
The general rule, in Texas and elsewhere, is that a retainer is held in trust, as property of the client, until applied to the bill of the attorney. This will mean that such retainers are, in the usual case, property of the bankruptcy estate. 11 U.S.C. § 541(a)(1); see In re Leff, 88 B.R. 105, 107 (Bankr.N.D.Tex.1988); In re Chapel Gate Apts. Ltd., 64 B.R. 569, 572 (Bankr. N.D.Tex.1986); see also In re Independent Sales Corp., 73 B.R. 772, 774-75 (Bankr.S.D.Iowa 1987); In re Kinderhaus, 58 B.R. 94, 97 (Bankr.D.Minn.1986); but see Stew art v. Law Offices of Dennis Olson, 93 B.R. 91, 94 (N.D.Tex.1988) (to the extent retainer stands for pre-petition services, it is not property of the estate, absent a disgorgement order under § 329(a)).
Section 329 is implemented by Bankruptcy Rule 2017(a), which states that “[o]n motion by any party in interest or on the court’s own initiative, the court after notice and a hearing may determine whether any payment of money or any transfer of property by the debtor, made directly or indirectly and in contemplation of the filing of a petition under the Code by or against the debtor, to an attorney for services rendered or to be rendered is excessive.” Rule 2017(a), Fed.R.Bankr.P. (1991) (emphasis added). Taken together, § 329 and Rule 2017 permit the court to “inquire into, examine, and if appropriate, set aside any prepetition transfer from a debtor to debt- or’s counsel if such transfer was made in connection with or in contemplation of the filing of the petition. The [c]ourt also has the power to inquire into, examine, and if appropriate, cancel any agreement entered by debtor and debtor’s counsel in contemplation of services to be rendered in connection with bankruptcy” Chapel Gate, 64 B.R. at 574.
Clearly, then, the court has the authority to review prepetition fees paid to *971debtor’s counsel, regardless of their source and regardless of the terms of any agreement pursuant to which such fees are paid. Chapel Gate, 64 B.R. at 572 (citing In re Furniture Corp., 34 B.R. 46 (Bankr. S.D.Fla.1983) for the same proposition). In fact, the source of the payments becomes relevant primarily for determining to whom the court may order a refund to be paid. Id. Thus, the court may order all or any part of the retainer to be returned to the estate, pursuant to § 329, regardless of the claim of the firm that the retainer stands as “security” for its unpaid fees. 11 U.S.C. § 329(a); In re Trinsey, 115 B.R. 828, 834 (Bankr.E.D.Pa.1990); In re Leff, 88 B.R. 105, 109 (Bankr.N.D.Tex.1988).
Section 329(b) permits disgorgement of any payment or proposed payment for pre-petition services to the extent the services are found “to exceed the reasonable value of such services.” 11 U.S.C. § 329(b). The test applied is slightly different than that imposed on post-petition services by debt- or’s counsel in § 330(a). Nonetheless, courts have often applied the § 330(a) test in § 329(a) cases, usually because a retainer is involved and because the debtor’s attorney intends the retainer to stand for services to be rendered to the debtor after the case is filed, e.g., for the defense of discharge and dischargeability litigation. See, e.g., In re Leff, 88 B.R. 105, 107 (Bankr.N.D.Tex.1988);
There are problems with the Leff approach, however. One is that it imposes upon prepetition services the same standard of compensation imposed on professionals who are working for the estate, even though such services are clearly not rendered for the estate’s benefit. The “look-back” period of one year makes such an approach hard to justify. Prior to bankruptcy, attorneys retained by a debtor are clearly retained to represent the interests of the debtor, not the estate and its beneficiaries, the creditors. Indeed, the standards of professional conduct of most states require an attorney to zealously represent the interests of his or her client. That will often mean that assisting the debtor in legitimate pre-bankruptcy planning, often inconsistent with the interests of creditors. If only services which are beneficial to the estate are permitted, attorneys who represent debtors in financial straits will find their duty to their client compromised by their ability to be paid.2
The language of the statute itself seems to anticipate this problem, couching the standard of review solely in terms of “reasonableness,” the self-same standard that standards of professional conduct in most states impose on attorneys. Giving a straightforward read to the statutory language of § 329(b) avoids the above-described conflict. Courts may fairly presume that Congress knew how to use similar terms of art to yield similar results. Had Congress desired to impose the same standard of review on prepetition legal services as it imposes on professionals retained by the estate, it could simply have used the same “actual, necessary” language as is employed in § 330(a). It did not do that and courts are obligated to give effect to the words Congress did use when it drafted § 329(b). Therefore, applying a “benefit to the estate” standard to prepetition services is not appropriate. Instead, we ask simply whether the compensation exceeds the reasonable value of those services. Thus, notwithstanding the fact that the retainer here in question is property of the bankruptcy estate, the fees for which it stands as security are tested under a more *972relaxed standard, i.e., reasonableness, than under the stricter approach applied in § 330(a).3
Applying that standard to the pre-petition services rendered the debtor in this case results in the allowance of a substantial portion (though not all) of those fees. All of the work performed was (as counsel readily acknowledged) in connection with the impending bankruptcy filing. Even though much of the work is not the sort of thing for which counsel could be compensated post-petition (such as work on SEC filings and investigation of tax liability to the various states in which OPA stores were located), the services do not appear to represent any “overreaching” on the part of the firm. Some services were excessive, in terms of the time spent on them relative to the billing rate of the professional performing those services. Too, some services were inadequately documented. Also, some services appear to have been rendered for the benefit not of the corporate debtor but for the benefit of its officers and directors, and do not therefore yield reasonable value to the corporate debtor. In the context of § 329, if the debtor is charged for services which benefit only the debtor’s principals, the charges for those services exceed the reasonable value of those services to the debtor, and should not be allowed.4
The court has ample authority to evaluate those services against the same “reasonableness” standard routinely applied to fees in bankruptcy cases (as well as in fee-shifting cases), and to make appropriate adjustments. In re Rheuban, 121 B.R. 368, 383 (Bankr.C.D.Cal.1990) rev’d, on other grounds, 124 B.R. 301 (C.D.Cal.1991); In re Yermakov, 718 F.2d 1465, 1471 (9th Cir.1983). Those adjustments are reflected in the fees actually allowed, as detailed in the appendix to this opinion.
B. Post-petition services
The chapter 7 estate is not obligated to compensate debtor’s counsel for any other services, unless counsel shows that the services were indeed actual, necessary services which benefitted the estate. Leff, 88 B.R. at 108-09; Plunkett, 60 B.R. at 294. The critical question becomes determining what services count as “necessary.”
Most cases discussing the award of fees in bankruptcy tend to speak in terms of whether the services “benefitted” the estate. See, e.g., In re Leff, supra; In re Taylor, 66 B.R. 390, 395 (Bankr.W.D.Pa.1986); In re Plunkett, supra; In re Rosen, 25 B.R. 81, 84 (D.S.C.1982). This approach tends, in the view of this court, to *973divert attention away from the proper inquiry, which is whether the services in question were even necessary in the context of the representation. See Matter of Ryan, 82 B.R. 929, 931-32 (N.D.Ill.1987).5 As a matter of logic, if services are not necessary, their benefit to the estate is irrelevant. If services are found to have been necessary, on the other hand, they should presumptively be beneficial, on the theory that the estate hardly needs professionals to be rendering services which yield no benefit to the estate.6
An excellent example of the subtle but important shift in emphasis that comes from focusing on necessity rather than benefit can be found in a recent case out of the Ninth Circuit, in which the court denied compensation to a trustee’s counsel for services which, though they generated “benefits” to the estate (e.g., a substantial claim was eliminated, taxes were “reduced,” and a partnership interest was challenged), were found to be unnecessary when a cost-benefit analysis was applied. In re Riverside-Linden Investment Co., 925 F.2d 320, 322 (9th Cir.1991); see also In re Mayes, 101 B.R. 494, (Bankr.W.D.Mich.1988) (spending $1,200 to collect asset worth $1,900 not allowed). By emphasizing “necessity,” professionals are encouraged to do what is necessary to wrap up a case in an efficient fashion, and discouraged from trying to confer benefits that are not really necessary (and often not really wanted).7 In so doing, those professionals are (hopefully) less tempted to engage in “churning.” See In re Riverside-Linden Investment Co., 99 B.R. 439, 443 (9th Cir. BAP 1989) (“when a cost benefit analysis indicates that the only parties who will likely benefit from an investigation of a claim are the trustee and his professionals, investigation is unwarranted”).
What services are necessary for a chapter 7 debtor’s counsel to perform in the context of estate administration? Under the Bankruptcy Act of 1898, most courts only allowed compensation to a chapter 7 debtor’s attorney for assisting the debtor in performing his legal duties, as opposed to exercising his legal privileges. 2 Collier on Bankruptcy 11330.04 (15th ed. 1991). The same standard has been held to apply under the Code. In re Taylor, 66 B.R. 390, 395 (Bankr.W.D.Pa.1986). Noted the Taylor court,
Bankruptcy Code section 521 and Bankruptcy Rule 4002 outline the duties of the debtor. Those duties include:
1) Filing of the debtor’s Schedules of assets and liabilities, list of creditors, and statement of financial affairs;
2) Filing a statement of intention to claim exemptions or reaffirm debts;
3) Cooperate [sic] with the Trustee, by delivering all property of the estate and all of the debtor’s records to the *974Trustee, to enable him to administer the estate;
4) Attend [sic] and submit [sic] to an examination (First Meeting of Creditors);
5) Attend [sic] any hearings on objections to discharge or dischargeability; and
6) Attend [sic] the discharge hearing.
Many courts have held that compensation from the estate is not allowable for services which are not directly beneficial to the estate, or are only for the benefit of the debtor.
Id. (citations omitted). If debtor’s counsel is performing tasks above and beyond those associated with the debtor’s duties in a chapter 7 case, the services are not “necessary” to the administration of the estate within the meaning of the statute and should therefore not be compensable.
In this case, that is hardly the end of analysis, for not all chapter 7 debtors are created equal. Some require more work than do others. Section 521(3) directs a debtor to cooperate with the trustee “as necessary to enable the trustee to perform the trustee’s duties ...” 11 U.S.C. § 521(3). In this case, the debtor’s duties in this regard were of necessity considerably broader, due to the nature of the business and the location of its principal assets. The trustee knew from the beginning that he needed to operate the debtor’s stores at least for a short period of time to realize the value of the assets. These operations demanded the assistance of the debtor, including working with the debtor’s prepetition lender, because only the debtor was sufficiently familiar with both legal and operational problems associated with running office products warehouse-style retail outlets located in eastern states over 1500 miles from the situs of the trustee. With inventory to account for, sales tax to take care of, and employee benefits to attend to (including making arrangements for withholding not only for federal income taxes but also state income taxes), there were many special duties imposed on this debtor not normally required of the usual debtor in chapter 7. Any actual, necessary legal services rendered to the debtor relative to its performing these important duties are compensable.
The fees ultimately awarded by this standard, as it turns out, will, in this case, at least exceed the usual sort of fee one might expect to be paid to a chapter 7 debtor’s attorney. The nature of the company represented justifies this cost, however. See In re Plunkett, 60 B.R. at 294. Firstly, the company was publicly held, necessitating the preparation of a shareholder list and making sure those persons were made aware of the filing. Secondly, the stores’ operations generated a large number of creditors, making the preparation of accurate and complete schedules a considerably more daunting task than it might normally be in the usual case. Thirdly, there was active interest in selling the stores as operating entities, making the need for continuity and active communication that much more important. And finally, an operating chapter 7 takes on some of the trappings of an operating chapter 11, so that the debtor, though not in possession, still has to be actively involved in working with the lender. Thus, the cost of this particular chapter 7 filing exceeded by a substantial margin what this court would normally expect to permit debtor’s counsel to recover, yet that cost, after considerable review, appears to be justified on the unique facts of this case.
What about fees generated for services which, though beyond the ken of the debtor’s duties, are urged to have been “beneficial” to the estate? Insofar as those services were not “necessary,” the question serves as its own answer. There is no other basis for recovery of these fees than that set out in § 330(a). Section 503(b)(4), for example, is not available as an alternative source for payment. 11 U.S.C. § 503(b)(4). That section permits a creditor ’s attorney or accountant to be paid out of the estate for services rendered to that creditor, to the extent those services fit the categories described in § 503(b)(3) (filing an involuntary petition, recovering property transferred or concealed by a debtor, helping to prosecute a criminal offense relating *975the case, otherwise making “a substantial contribution” in a case under chapter 9 or 11). Section 503(b)(1)(A) is also unavailable, as only the routine expenses associated with the administration of an estate, again subject to the “actual, necessary” standard are allowed under this section. F/S Airlease II, Inc. v. Simon, 844 F.2d 99, 108 (3rd Cir.1988). There is no room in § 503 for debtor’s counsel to qualify for compensation. In re Kahler, 84 B.R. 721, 723 (Bankr.D.Colo.1988); see also In re Plunkett, 60 B.R. at 294 (debtor’s counsel’s services in helping the trustee to work through “charges and countercharges made by the various parties ... were merely volunteered ... ”).
The foregoing analysis also demonstrates with certainty that Cox & Smith cannot be compensated by the estate for those post-petition services which benefited only the debtor or the debtor’s directors, officers, and/or shareholders. See In re Howerton, 23 B.R. at 59; see also In re Taylor, 66 B.R. at 395; In re Rosen, 25 B.R. at 86. “A chapter 7 debtor’s counsel must look to the debtor’s exempt property and post-petition earnings to be compensated for ... services” which “benefit the debtor personally but that do not benefit the estate.” Leff, 88 B.R. at 109.
Cox & Smith’s post-petition services relating to researching and determining individual tax liability worked solely to protect the individual interests of the debtor’s directors, officers, or shareholders. Outside of bankruptcy, such services might be compensable out of a corporation’s assets. In bankruptcy, though, these services were unnecessary and of no particular benefit to the chapter 7 estate, and so are not com-pensable.
A somewhat more difficult question is raised by the debtor’s decision to convert this case to one under chapter 11 shortly after the extraordinary results of the store sales were realized. It is certainly the debtor’s absolute right to convert its chapter 7 case to chapter 11. 11 U.S.C. § 706(a). “The policy of the provision is that the debtor should always be given the opportunity to repay his debts.” H.Rep. No. 595, 95th Cong., 1st Sess. 380 (1977), U.S.Code Cong. & Admin.News 1978, p. 6336. It stretches the notion of duty to convert this policy into a public duty for which the estate should be expected to pay, however.
The facts of this case demonstrate why this is so. The unsecured creditors of the estate did not benefit from the brief, ill-fated conversion of this case to chapter 11. The case was ultimately reconverted to chapter 7 at some considerable cost to those creditors. Under the debtor’s proposed chapter 11 business plan, the managers of OPA sought to use the newly-realized unencumbered sale funds to recapitalize their recently defunct company and start up new operations. Although this plan certainly had benefits for the debtor and its directors, officers, and/or shareholders, it offered little more to the unsecured creditors than the downside risk. Under the proposed plan, they would only have received stock of questionable value, foregoing the unencumbered cash from the sale. Not a single creditor supported the chapter 11, nor did the trustee. Nor, ultimately, did this court, which concluded that the proposal was simply too illusory to foist onto unsecured creditors. Obviously, then, not all conversions are beneficial to the estate, nor do all conversions necessarily further the public policy behind § 706(a).
In any event, the conversion of a chapter 7 case to a case under chapter 11 does not qualify as one of the duties which a debtor can be said to be obligated to discharge. The debtor suffers no penalty for failing to exercise the option, no matter how feasible a reorganization might be. Cf 11 U.S.C. § 707(b); In re Goodson, 130 B.R. 897, 903 (Bankr.N.D.Okla.1991) (ability to file and perform a chapter 13 plan may be grounds for dismissing a chapter 7 case for substantial abuse). The absolute right to convert a case to chapter 11, notwithstanding the public policy it evinces, is more properly characterized as a right or privilege available to the debtor. There is no basis for compensating debtor’s counsel for assisting *976a chapter 7 debtor in exercising a right or privilege, as opposed to discharging a duty.
2. Is the Cox & Smith fee application sufficiently detailed to demonstrate the firm’s entitlement to compensation from the estate for services rendered? Does the fee application include charges for duplicated services, for services for which compensation from the estate is not permitted, or for services at an unwarranted high rate?
In a fee application case, the burden of proof falls upon the applicant. Continental III. Nat’l Bank & Trust Co. v. Charles N. Wooten, Ltd. (In re Evangeline Ref. Co.), 890 F.2d 1312, 1326 (5th Cir.1989) (citing Hensley v. Eckerhart, 461 U.S. 424, 433-34, 103 S.Ct. 1933, 1939, 76 L.Ed.2d 40, 50-51 (1983) for the same proposition). In evaluating whether the applicant has met its burden of proof, the court must engage in the two-step analysis imposed by Section 330(a)(1). In re Temple Retirement Community, Inc., 97 B.R. 333, 338 (Bankr.W.D.Tex.1989). First, the court must decide whether the services rendered were necessary and appropriate. Id. Second, the court evaluates whether the compensation sought is reasonable. Id.
In order for the court to apply this two-step analysis, however, the fee application must provide “sufficient detail for the court to determine what work was done, by whom it was done, how long it took to do, whether there has been any duplication of effort, and what results were achieved.” Id. In fact, a primary objective of the fee application itself is to reveal sufficient information to enable the court to determine whether the services rendered were reasonable, actual, and necessary. In re Petti-bone Corp., 74 B.R. 293, 301 (Bankr. N.D.Ill.1987) (citing In re Jensen-Farley Pictures, Inc., 47 B.R. 557, 582 (Bankr.D.Utah 1985) for the same proposition). Moreover, Bankruptcy Rule 2016 requires “a detailed statement of (1) the services rendered, time expended and expenses incurred, and (2) the amounts requested.” (emphasis added). The standards set out in the case law are designed to aid the court in measuring the reasonableness of the services, and so apply with equal force to both pre-petition and post-petition services.
In particular, “services should be reported to the nearest tenth of an hour, and must not be lumped together.” Temple Retirement, 97 B.R. at 339. Each type of service should be listed separately, with its corresponding time allotment, so that the court can decide whether the time spent per task was reasonable. In re Wiedau’s, Inc., 78 B.R. 904, 908 (Bankr.S.D.Ill.1987); Pettibone, 74 B.R. at 302. Services which have been lumped together should not be compensated. Wiedau’s, 78 B.R. at 908; Pettibone, 74 B.R. at 302. If services are lumped together and include an item for which compensation is not permitted, the entire entry can be disallowed. In re Wabash Valley Power Ass’n, Inc., 69 B.R. 471, 479 (Bankr.S.D.Ind.1987); In re Four Star Terminals, Inc., 42 B.R. 419, 434 n. 11 (Bankr.D.Alaska 1984).
Lumping is only one example of how an entry can fail to meet the fee applicant’s burden of proof. Vague or general descriptions pose problems too. To illustrate, entries for phone calls are not compensable unless the purpose of the conversation, the length of the conversation, and names of the persons involved in the conversation are set out. Wiedau’s, 78 B.R. at 908; Pettibone, 74 B.R. at 301. An entry such as “Various calls with Mr. Klim-back and office regarding OPA” fails to indicate the function, substance, necessity, or benefit of the call with sufficient particularity to permit the court to evaluate whether or not the service is compensable. See Temple Retirement, 97 B.R. at 339.
Similarly, entries indicating a conference — whether intraoffice or otherwise — must include sufficient information to permit the court to evaluate the necessity of the service provided, the reasonableness of the time spent on the service, and the reasonableness of the fee charged for the service — including the need for a conference. See Wiedau’s, 78 B.R. at 908; Pettibone, 74 B.R. at 301. While intraoff-*977ice conferences are not prohibited, they must be justified. Temple Retirement, 97 B.R. at 339. Entries for intraoffice conferences, without any indication of why the conference is necessary or how it benefits the estate, are not compensable. See Petti-bone, 74 B.R. at 301. Even when an in-traoffice conference is justified, only one attorney may charge for it unless the necessity for each attorney’s participation is explained. Wiedau’s, 78 B.R. at 908.
Because Section 330 only permits compensation for necessary services, “a debtor’s estate should not bear the burden of a duplication of services, and such duplication should be avoided by counsel on their own initiative by exercise of good ‘billing judgment.’ ” Pettibone, 74 B.R. at 303. Wholly apart from the necessity issue, however, attorneys in general are expected not to bill their clients twice for the same service, as it is never reasonable for attorneys to be paid twice for the same item. The court will disallow charges for duplicated services. Id.
A. Does the Cox & Smith fee application include charges for duplicated services (i.e., services rendered by Gresham, Davis)?
Cox & Smith rendered some services after the case was converted to chapter 11 and Gresham, Davis became counsel for OPA, the debtor-in-possession. These services are primarily of two types and are largely compensable.
The first category of post-conversion services involves the necessary transfer of records, materials, and information from Cox & Smith to the new counsel—Gresham, Davis. The Texas Disciplinary Rules of Professional Conduct require a terminated lawyer to surrender papers and property to which the client is entitled (Rule 1.15(d)) and to avoid unreasonably increasing the costs or other burdens of the case or unreasonably delaying resolution of a matter (Rule 3.02). Inasmuch as Cox & Smith was required to cooperate in making OPA’s change of representation as efficient as possible, compensating Cox & Smith for services rendered to that end seems equitable.
The second category of post-conversion services involves preparation of the fee application for work completed prior to the conversion. In the Fifth Circuit, and elsewhere, reasonable compensation for preparation of a fee application is permissible. In re Braswell Motor Freight Lines, Inc., 630 F.2d 348, 351 (5th Cir.1980); Rose Pass Mines, Inc. v. Howard, 615 F.2d 1088, 1093 (5th Cir.1980); accord In re Nucorp Energy, Inc., 764 F.2d 655, 658-59 (9th Cir.1985); In re Chicago Lutheran Hosp. Ass’n, 89 B.R. 719, 736 (Bankr.N.D.Ill.1988); Pettibone, 74 B.R. at 304. In the instant case, however, there is some question regarding the sheer amount of time spent in preparing the fee application and the cost of the services rendered for that purpose.
B. Did the Cox & Smith fee application include charges for services which are not compensable?
The fee application included $506.00 in charges for deliveries made by R. Ayers, at the rate of $230.00 per hour. Some courts have held that professionals should not be compensated for overhead or clerical activities such as copying documents or delivering papers. See, e.g., In re Wabash Valley Power Ass’n, Inc., 69 B.R. 471, 478 (Bankr.S.D.Ind.1987); In re R & B. Institutional Sales, Inc., 65 B.R. 876, 884 (Bankr.W.D.Pa.1986). Other courts have held that “non-legal work performed by a lawyer which could have been performed by less costly non-legal employees should command a lesser rate.” E.g., Wiedau’s, 78 B.R. at 908-09; Pettibone, 74 B.R. at 303. Since delivery service is not a legal service, it is certainly not compensa-ble at the same rate as legal services. Moreover, $230 per hour is hardly reasonable compensation for the delivery of documents. Inasmuch as Section 330 only permits reasonable compensation for necessary professional services, this court would be justified in totally denying the $506.00 claim for delivery services as non-compensable overhead charges. At the *978very least, the rate of compensation should be reduced to a rate appropriate for delivery services, rather than for top-of-the-line legal services. This is the approach taken here.
C. Does the Cox & Smith fee application include services for which excessively high rates were charged?
As the previous example shows, some of the services on the Cox & Smith fee application are rather high priced. However, once the problematic entries are removed, the overall fees charged generally seem more reasonable. This confirms the truism that a high hourly rate coupled with efficiently rendered services can be less expensive overall than a low hourly rate coupled with indiscriminately rendered services. The hourly rates charged will not be disturbed in this application, though the total charged for a given service has been in some cases adjusted to reflect an appropriate reasonable value for the services rendered.
3. Does Cox & Smith have a perfected, secured claim for attorneys’ fees and expenses as a result of the $25,000 prepetition retainer it received from OPA?
Cox & Smith maintains that it has a security interest, in the amount of $25,000, for attorneys’ fees and expenses, and that their security interest is perfected by possession. The firm then argues that any fees disallowed by this court will still be recoverable out of the “collateral,” which secures those fees. There is some merit to this argument. In re Chapel Gate Apts. Ltd., 64 B.R. 569, 572 (Bankr.N.D.Tex.1986); see In re Yermakov, 718 F.2d 1465, 1472 (9th Cir.1983) (observing that fees not allowed as administrative expenses may still be allowed as general claims against the estate if earned prepetition). To the extent that the retainer secures services reviewable under § 329(a), the court is permitted to set aside the retainer, regardless of its standing as “security” for those services. 11 U.S.C. § 329(b). To the extent it secures post-petition services, it is available only to the extent those services are allowed by the estate, as the balance represents property of the estate. In re Leff 88 B.R. at 109; see also 11 U.S.C. §§ 506(a), (d) (collateral available to the extent of the allowed claim of the creditor claiming an interest in the collateral; lien is otherwise void).
Assuming Cox & Smith is a secured creditor by virtue of this retainer, the collateral will secure whatever is owed to the firm. However, it is up to this court to determine what is owed to the firm (at least with regard to services relating to the bankruptcy filing). This determination of course extends to services rendered post-petition, by virtue of § 330. It also reaches pre-petition services as well. 11 U.S.C. § 329(a).
CONCLUSION
The attached Appendix provides a summary of the fees which are allowable consistent with this decision. The total fees allowed is $17,753.00. The total expenses allowed to the firm is $767.77. The balance of the funds held by the firm as a retainer are to returned to the trustee, pursuant to 11 U.S.C. § 329(b).
So ORDERED.
[[Image here]]
*979[[Image here]]
*980[[Image here]]
*981[[Image here]]
*982[[Image here]]
. The Leff court applied a "benefit to the estate" approach to a retainer otherwise analyzed under § 329, essentially glossing over the difference in terminology between § 329 and § 330. The court apparently took this route by fixing first on the its conclusion that the retainer in question was still property of the estate. It then concluded that property of the estate could not be paid to an attorney for services which did not benefit the estate, despite the fact that § 329 says nothing more than that the fees not exceed "the reasonable value of ... such services.” The statute does not indicate whether the value is to be measured in terms of value to the estate or value to the debtor. The difference (especially for an individual chapter 7 debtor facing dis-chargeability litigation) is significant.
. The court acknowledges that the legislative history to § 329 indicates that the provision is intended to guard not only against overreaching to the detriment of the debtor but also to safeguard the interests of creditors. In re Trinsey, 115 B.R. 828, 835 (Bankr.E.D.Pa.1990) (citing S.Rep. No. 989, 95th Cong., 2d Sess. 39 (1978), reprinted, in U.S.Code Cong. & Admin.News 1978, 5787, 5825). Clearly, there are situations in which the activities of debtor’s counsel so egregiously violate creditor interests that disgorgement would be well-founded under the authority of this section. Nevertheless, that is a *972different question entirely from whether the efforts of debtor's counsel benefitted the estate.
. This conclusion does not open the "loophole" discussed by the court in Leff. In re Leff, supra; see Matter of Ryan, supra at 932-33. Debtors facing discharge or dischargeability problems may be tempted to pay their lawyers a significant sum in anticipation of post-bankruptcy litigation, and their lawyers will argue that, so long as the sum paid is reasonable relative to the litigation services, the money should not be vulnerable to a turnover under § 329(b). See, e.g., Stewart v. Law Offices of Dennis Olson, 93 B.R. 91, 92-93 (N.D.Tex.1988). In essence, creditors are forced under this scenario to finance the debtor’s defense of an action initiated for the benefit of those same creditors. As the Ryan court observed,
Allowing attorneys to collect fees from the bankruptcy estate for their defense of debtors against creditors’ dischargeability complaints ... would [enhance the debtors’ opportunity for a ‘fresh start’] ... at the cost of leaving less — perhaps far less — of the bankruptcy estate to be distributed among creditors.... We will not allow fees on these facts in the absence of any reason to believe that Congress intended to allow payment from the estate for services which only benefit the debt- or personally.
Ryan, 82 B.R. at 933. Indeed, the loophole is not available, for, to the extent the retainer in question serves for services yet to be rendered, it is clearly property of the estate, rendering it subject to the traditional inquiry regarding post-petition services to be rendered by debtor’s counsel. See Stewart v. Law Offices of Dennis Olson, supra at 95; Matter of Jones, 665 F.2d 60 (5th Cir.1982) (Act case); In re Lilliston, 127 B.R. 119, 121 (Bankr.D.Md.1991) (defense of nondischargeability action not compensable out of estate property); In re Cleveland, 80 B.R. 204, 205 (Bankr.S.D.Cal.1987) (same); see also discussion infra regarding post-petition services.
. This is not to say that corporations might not, absent bankruptcy, legitimately pay for such legal services. Rather, the standard of review imposed by § 329, while less stringent than § 330 (actual, necessary services which benefit the estate), still requires that the services benefit the debtor, rather than third parties.
. The district court in Ryan commented with regard to § 330(a):
On its face, this language invites a bankruptcy court to consider whether the attorney’s services were "necessary" and to pay fees out of the estate if they were. (This reading does raise the further question of to whom the services should be necessary — the debtor or the estate).
Id. That court acknowledged however the “near unanimous view” of decisions interpreting § 330(a) that debtors’ counsel should only recover fees “if their labors actually benefited the estate.” Id.
, Again, the Ryan court leaves open the question of whether necessity should be viewed from the vantage of the debtor or the estate. Ryan, 82 B.R. at 931. In the view of this court, that issue is easily resolved by looking to the structure of the Code itself, which authorizes professional fees to be paid out of the estate as an administrative expense, i.e., an expense associated with the administration of the estate. 11 U.S.C. § 503(a).
.If the professional fails to exercise judgment at the point when the services are rendered, she will still be expected to exercise "billing judgment" at the point when the fee application is being prepared before the application is presented to the court for review and approval. See In re Metro Transportation Co., 107 B.R. 50, 52 (E.D.Pa.1989) (”[t]he standard of ... § 330 that compensation he made for actual and necessary service, makes the exercise of such “billing judgment” a mandatory requirement in bankruptcy fee matters”); see also Hensley v. Eckerhart, 461 U.S. 424, 434, 103 S.Ct. 1933, 1939, 76 L.Ed.2d 40 (1983) (attorneys applying to a court for statutory fees should make good faith effort to exclude from the application fees which are excessive, redundant, or otherwise unnecessary). | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491405/ | MEMORANDUM OPINION AND ORDER ON DEBTORS’ MOTION TO AVOID LIEN OF COMMERCIAL CREDIT PLAN, INC.
WILLIAM H. BROWN, Bankruptcy Judge.
On September 20, 1991, the debtors filed their joint Chapter 7 petition for relief in *1007this Court. The debtors listed on Schedule A real property, located at 4532 Janice Drive, Memphis, Tennessee, owned as tenants by the entirety, with a value of $62,-000. The debtors also had two debts listed for Commercial Credit. One of those debts is not disputed here and is secured by a second mortgage on the debtors’ Janice Drive real estate, which is their homestead. The other Commercial Credit debt, which is disputed here, is listed on the debtors’ Schedule F of unsecured creditors; however, for that debt, Commercial Credit obtained a judgment against both debtors in the General Sessions Court for Shelby County, Tennessee, which judgment was recorded pre-bankruptcy in the Registrar’s Office for Shelby County, Tennessee, thus becoming a judgment lien against the debtors’ real estate in that county. The debtors have moved to avoid this judgment lien under 11 U.S.C. § 522(f)(1), and Commercial Credit opposes the debtors’ motion. The issue presented is core pursuant to 28 U.S.C. § 157(b)(2)(E), and this opinion constitutes findings of fact and conclusions of law in accordance with F.R.B.P. 7052.
SUMMARY OF FACTS
The motion and opposition thereto were presented to the Court upon uncontested facts and argument of counsel for the parties. As stated above, the debtors in their bankruptcy schedules reflected that the homestead property had a value of $62,000; however, in support of their motion to avoid the lien, the debtors presented an informal written appraisal by a realtor showing the property to have a present market value, based upon comparable sales, of $49,900. The creditor, at the hearing, presented an appraisal showing the property to have an indicated value, by the sales comparison approach, of $55,000. Counsel for the parties agreed that the first mortgage had a balance of $46,938.78, and that the second mortgage had a balance of $3,330.59. Based upon the creditor’s higher appraisal of $55,000 and the present mortgage balances, there is equity in the property of approximately $4,175.
The creditor’s joint judgment was recorded on December 5, 1990, and, as stated, became a judgment lien against both debtors’ interests in the real property located in Shelby County, Tennessee.
DISCUSSION AND CONCLUSIONS OF LAW
Under TENN.CODE ANN. § 26-2-301 the joint debtors are entitled to a $7,500 homestead exemption. The Court has recently issued an opinion discussing the Tennessee homestead exemption and Tennessee state law on tenancy by the entireties, In re Clarence Sylvester Dick, 136 B.R. 1000 (Bankr.W.D.Tenn.1991). In that opinion the Court had before it a different factual scenario, with a single debtor and a creditor that only had a judgment lien against the debtor, who was one of the tenants by entirety. In that opinion, the Court concluded that only the sole tenant/debtor’s survivorship interest became property of the estate, and that the sole debtor did not yet have a vested individual ownership in which to claim a homestead exemption under state law; therefore, that sole debtor did not have an exemption which was impaired by the judgment lien. As a result, that sole debtor could not avoid the judgment lien under § 522(f)(1) Id.
Here, both husband and wife are debtors in bankruptcy, and each is liable to this creditor on the judgment. The Court notes that when both tenants by entirety are liable to a creditor, under Tennessee law, such a joint creditor, outside of bankruptcy, may execute upon the tenancy property. See, e.g., In re Grosslight, 757 F.2d 773 (6th Cir.1985); In re Butcher, 63 B.R. 30 (Bankr.E.D.Tenn.1986); U.S. v. Ragsdale, 206 F.Supp. 613 (W.D.Tenn.1962). This judgment creditor, therefore, if there were sufficient equity in this en-tireties property, would be a secured creditor in the bankruptcy case. In contrast to the conclusions in the Court’s prior opinion, this judgment lien does impair the homestead exemption of these joint debtors.
In the present case, both tenants are debtors in bankruptcy and have claimed the $7,500 joint exemption in their homestead as provided for under TENN.CODE ANN. *1008§ 26-2-301. Under that state law, an individual debtor is entitled to a $5,000 exemption. There is, of course, less than $5,000 equity in the property over and above the two nonavoidable mortgages. It is a rather safe assumption that one of the tenants will survive the other; although, it is of course possible that both tenants would perish in a common disaster. Utilizing the reasonable assumption that one tenant will survive the other, at which point the fee simple interest will vest in the survivor, this Court concludes that this judgment lien does impair “an exemption to which [at least one of the debtors] would have been entitled,” when that tenant’s individual sur-vivorship interest vests. 11 U.S.C. § 522(f). In summary, a joint case, involving both tenants by entirety, does not present the same level of speculation and uncertainty over vesting as was presented in the Court’s earlier sole tenant opinion. It is reasonable to assume that one of the tenants by entirety will survive the other and it is logical to conclude that a judgment lien against both tenants does impair the homestead exemption to which one of those tenants is entitled.
Further, the Court concludes that the fact that, outside of bankruptcy, the joint obligation on the judgment lien submits the entirety interest to execution by the jointly owed creditor, leads to the conclusion that the judgment lien presently impairs the exemption. As observed above, in this case, the joint creditor, absent an avoidance of this judgment lien, would be a secured creditor that would be able to execute upon the entirety property. Here, the amount of equity is insufficient to satisfy even the minimal individual exemption of $5,000, much less a joint exemption of $7,500; therefore, this judgment lien does impair either and both of these joint debtors’ homestead exemption.
The judgment lien of Commercial Credit is avoided under 11 U.S.C. § 522(f)(1).
IT IS SO ORDERED. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491407/ | ORDER
GEORGE B. NIELSEN, Jr., Bankruptcy Judge.
Since the petition filing, debtors rejected a number of leases of convenience store properties and have abandoned, with Court approval, certain estate property.
*348Applications for administrative expense priority were filed by landlords of three of the rejected leases. The properties will be referenced as the “McCoy/Barbre Property” located in Tulsa, Oklahoma; the “Ma-tise Property” located in Tyler, Texas; and the “Calco Property” also located in Tulsa. Applicants seek administrative priority for costs to remediate environmental contamination associated with underground storage tanks. The expenses include removal of the tanks and cleanup of the surrounding soil.
I
Owners of the Matise Property have submitted a claim of $15,666.85 for removal of the underground storage tanks and contaminated soil. The Calco Property applicant submits expenses of $4,961.60 to comply with state and federal underground storage tank statutes. The McCoy/Barbre property submitted a claim of $6,700.00.
Before vacating the rejected leased premises, debtors allege the company ceased operating, emptied and capped underground storage tanks. Debtors’ papers further state the company locked the fuel pipes and secured all other lines, manways and equipment, except vent lines, which must be kept open by federal regulations.
Debtors’ objection to the administrative expense applications of the former landlords has been brought before the Court through a motion for summary judgment. In their papers, debtors argue that none of the landlords’ claims are for costs involving actual, necessary expenses for preserving the debtors’ estate. Therefore, the costs are not eligible for administrative expense priority. 11 U.S.C. § 503. The court in In re Dant & Russell, Inc., 853 F.2d 700, 708-09 (9th Cir.1988), held a landlord’s environmental cleanup costs caused by debtor’s pre-petition conduct are not entitled to administrative priority.
Here, debtors argue the applicants’ claims are identical to the claims asserted in Dant & Russell. All involve assertions of administrative priority by landlords of property leased before and during Chapter 11 for remediating environmental contamination. Additionally, costs of cleanup or tank removal are not costs preserving debtors’ estate. This Court previously entered orders approving the debtors’ rejection of leases. The Court has also authorized debtors to abandon items of inconsequential value located at these sites. Due to these orders, the debtors do not own, lease or operate either convenience stores on the sites in question or the tanks located at these facilities. Therefore any costs incurred in connection with the tanks are not costs of preserving the estate.
Debtors further argue that rejection of an executory contract or unexpired lease relates back to immediately before filing the bankruptcy. 11 U.S.C. § 365(g)(1). No lease effectively existed between the landlords and debtors after the petition date. Accordingly, prepetition leases never became property of the estate and any costs incurred to clean up contamination would not be actual, necessary costs of preserving estate property. The underground storage tanks are fixtures, debtors state, embedded in the soil and thus part of the leased property. Here the tanks can only be used while situated at the properties, due to federal regulation. Therefore, the tanks never became part of the debtors’ estate. If, in the alternative, the debtors actually owned the tanks, the Court’s prior order authorizing rejection of the leases extinguish any interests debtors had in the tanks. Any property rights passed to the landlords upon rejection. Even if the tanks are considered estate property, debtors argue they had the authority to divest the estate of these items by abandonment. The abandonment was requested since the tanks had no value to the estate. Abandonment transferred title and responsibility over the tanks to the landlords. Title to property abandoned by a debtor vests in any party holding a possessory interest in the abandoned property. Possession of land carries with it everything embedded in the soil. Therefore, the landlords became owners of the tanks following abandonment.
Furthermore, debtors argue, expenses incurred by the applicants did not preserve *349any property rights of the debtors. The tanks were removed and scrapped. No property was preserved for the benefit of the estate. The benefit, if any, from removal of the tanks inured to the landlords, not to debtors. To qualify as actual and necessary administrative expenses, expenditures must benefit the estate, rather than the creditor.
The landlords contend that under 28 U.S.C. § 959(b), debtors had a duty to obey all federal and state environmental regulations. Therefore, costs of compliance are actual and necessary costs of preserving the estate. However, debtors argue this Court has already determined § 959(b) does not apply in circumstances involving rejected, leased properties with environmental contamination. See April 5, 1991 Order and Decision on Environmental Objections to Lease Rejection, docket item 3643. Thus, due to prior order, § 959(b) provides no basis for awarding landlords an administrative priority.
Regardless, debtors insist they did follow § 959(b). Before vacating the premises, debtors contend they closed all underground storage tanks in accordance with federal regulations. State regulations are essentially identical to federal temporary closure requirements. Therefore, the tanks were in current compliance with federal and state law when debtors vacated the premises.
The landlords also contend removal costs were necessary to prevent the debtors’ prosecution for post-petition environmental violations. Debtors believe they were in full compliance with federal temporary closure regulations at the time they vacated the property. The tanks can lawfully remain in a temporary closure status for up to one year. Thereafter, the tanks could be put back in service, rather than removed.
Even if the tanks were not put back into service, any prosecution for failure to remove the tanks could not have been initiated for at least one year after debtors ceased operating the properties. The target of the prosecution could be either landlords or debtors. Under Texas law, all current and past owners and operators are jointly and severally liable for compliance with storage tank requirements. Property owners acted in their own interest when the tanks were removed.
Landlords have been awarded an administrative expense priority for costs of removing hazardous waste owned by a debt- or from the landlord’s property. Matter of Kent Holland Die Casting & Plating, 125 B.R. 493 (Bankr.W.D.Mich.1991). Kent Holland is distinguishable, debtors believe. Debtor in Kent Holland never rejected its lease, continued to operate the property post-petition and handled hazardous waste in a negligent manner. Supra at 496-98. By contrast, debtors here rejected their leases, ceased operations and secured the tanks in compliance with federal regulation. The debtor in Kent Holland was not permitted to abandon the contaminated drums. 125 B.R. at 501. Here, debtors point out, this Court already authorized debtors to abandon the premises. Additionally, claims of the landlords are subject to § 502(b)(6), which limits a lessor’s claim for damages resulting from a rejected lease. Under this section, a landlord’s claims for all damages, not just rent claims, resulting from a rejected lease are subject to a statutory cap.
The rights now asserted by the landlords arise from debtors’ termination of the respective leases. The obligation to remove the tanks only became applicable when debtors rejected the leases and ceased operating the premises. As long as the tanks were in operation, the requirement to remove the tanks would not be triggered. Since claims for removal costs only arose upon debtors’ termination of the leases, such claims are subject to the § 502(b)(6) statutory cap, it is argued.
Finally, granting an administrative expense priority would distort the system of priorities in the Code by allowing one set of creditors to be paid in full at the expense of others. Potentially many claims could be filed by similar landlords of rejected leases seeking administrative claims.
*350II
The unsecured creditors’ committee supports the debtors’ motion, arguing the landlords are not entitled to recover as administrative expense costs associated with removal of the tanks or remediation of the landlords’ own properties. To grant the applications, the committee believes, would fundamentally prejudice all unsecured creditors by creating a nonstatutory priority. The committee also argues that § 365(g) deems rejection of a lease as a prepetition breach. Therefore, consequential damages are treated as prepetition. Courts lack authority, it is argued, to create a priority for claims associated with cleanup costs if no statutory priority exists in §§ 503 and 507.
The committee asserts the landlords are indirectly requiring the debtors to cure defaults under rejected leases contrary to § 365(a). The landlords implicitly assert, upon rejection of the leases, the debtors breached their contractual obligations to remove the tanks and clean up and restore the sites. By seeking an administrative priority, the landlords are effectively requiring debtors to cure such defaults. Section 365(a), however, allows debtors to reject any unexpired leases without having to cure defaults. The committee, joined by the debenture holders’ committee, finally argues that the fundamental bankruptcy policy of equitable distribution among creditors dictates that no one claimant should receive preference over another unless such preference is clear under the statute.
Ill
The landlords argue that they have incurred expenses by complying with storage tank statutes on property leased by debtors. They believe such expenditures qualify as an administrative expense under § 503(b) of the Code. They suggest summary judgment should be denied due to a material issue of fact remaining unresolved: whether continued existence of the underground storage tanks created a danger to public health due to actual physical conditions at the site or by virtue of state or local laws. Applicants correctly suggest debtors made no effort to address the specific facts of each site. They further suggest an exception exists to the rule announced in Dant & Russell. Where public health, safety and welfare have been affected postpetition, administrative claims are appropriate. In re Wall Tube & Metal Products Co., 831 F.2d 118 (6th Cir.1987). Here, debtors have not shown they were in compliance with state rules and regulations in maintenance of the underground storage tanks. See 28 U.S.C. § 959(b).
Debtors reply that no evidence is necessary concerning whether the tanks pose a potential hazard to the public. Such a showing would be irrelevant to the question whether the landlords are entitled to an administrative priority. Dant & Russell, it is argued, held landlords are not entitled to priority without regard to the severity of the environmental conditions.
IY
Bankruptcy Rule 7056 incorporates Civil Rule 56, which permits summary judgment if the pleadings, discovery and admissions, together with affidavits, show there is no genuine issue of material fact and movant is entitled to judgment as a matter of law. A summary judgment mov-ant bears the initial responsibility of providing the court with the basis for its motion and identifying those portions of the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits which demonstrate the absence of a genuine issue of material fact. Celotex Corporation v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986).
Other than a citation to previous orders rejecting various leases, debtors did not comply with the Celotex mandate as well as Local District Rule ll(i )(1). Their papers fail to show: (1) when debtors vacated each of the leased premises, and (2) when debtors followed regulatory capping requirements.
Although this information may be contained in earlier pleadings, debtors fail to identify that portion of the record establishing these facts. Accordingly, the mo*351tion is denied without prejudice. Movants may subsequently supplement their position with the specific facts on which they rely in support of the motion. Such facts are to be set forth in serial fashion, not in narrative form. As to each fact, the statement shall refer to a specific portion of the record where the fact is found. See Local District Rule ll(i)(l), incorporated by Local Bankruptcy Rule 9033. Pursuant to the same Local District Rule, any parties resisting summary judgment must similarly set forth and document the specific facts they assert establish a genuine issue of material fact precluding summary judgment.
V
Additional factual development is important because bankruptcy should not be used as a broad brush to wipe away all environmental claims. More information is needed on the specifics of these claims to allow the Court to issue a narrow ruling. See, e.g., In re Dant & Russell, Inc., 951 F.2d 246, 248-50 (9th Cir.1991) (ruling, inter alia, on whether claimant was entitled to an administrative claim for environmental contamination.)
A recent Panel case adopted the “conduct” theory defining when environmental claims arise. In re Jensen, 127 B.R. 27, 32-33 (9th Cir. BAP 1991). Under this theory, a claim arises upon actual or threatened release of hazardous waste by debtor. Supra, Jensen thus establishes that the timing of a claim, in and of itself, can determine whether the debt is an unsecured obligation or one entitled to administrative priority. A claimant is entitled only to administrative priority for expenses incurred post-petition. See In re Christian Life Center, 821 F.2d 1370, 1373-74 (9th Cir.1987); Yermakov v. Fitzsimmons (In re Yermakov), 718 F.2d 1465, 1470 (9th Cir.1983). If the conduct occurred post-petition, debtors might be liable for an administrative expense. However, if it arose prepetition, then, as part of a rejected lease claim, it would be a prepetition debt. 11 U.S.C. § 365(g).
Finally, further factual development is important because damages for a post-petition tort become an administrative expense under § 503(b)(1)(A), In re Dennis Ponte, Inc., 61 B.R. 296, 298 (9th Cir. BAP 1986). If debtors were negligent in post-petition efforts to seal tanks, this may constitute an administrative claim.
ORDERED ACCORDINGLY. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491409/ | ORDER ON MOTIONS TO AVOID LIENS
ALEXANDER L. PASKAY, Chief Judge.
THE MATTERS under consideration are Second Amended Motions to Avoid the Judicial Liens of Blazer Financial Services, Inc., and Fidelity Deposit Company of Maryland. Both Motions were filed by John Michael Fitzpatrick (Debtor) pursuant to § 522(f)(1) of the Bankruptcy Code. In due course, the Motions were scheduled for hearing with notice to all parties of interest, and the Court having considered the Motions, together with the pertinent part of the record and argument of counsel, is satisfied that the Motions are not well taken and should be denied for the following reasons.
The Petition for Relief by this Debtor was filed on July 18, 1979, under I-VII of the Bankruptcy Act of 1898 (Act of 1898). In due course, the Debtor obtained a discharge on November 9, 1979, and the case was closed on November 21, 1979. On November 14, 1991, almost 12 years after the case was closed, the Debtor filed a *534Motion to reopen the closed case in order to file motions to avoid judicial liens. On November 18, 1991, this Court, pursuant to Section 350 of the Bankruptcy Code and Bankruptcy Rule 5010, granted the Motion and reopened the case for the limited purpose to permit the Debtor to file motions to avoid judicial liens. These are the Motions under consideration.
As noted earlier, this case was filed by the Debtor on July 18, 1979 pursuant to Chapters I-VII of the Bankruptcy Act of 1898. It is without dispute that by the enactment by Congress of Public Law 95-598, Bankruptcy Reform Act of 1978, (Reform Act), Section 401 of Title VI, the Bankruptcy Act of 1898 was repealed in toto. Also, by enacting Section 402 of the Reform Act, Congress provided that all cases commenced under the Act of 1898 and all matters and proceedings relating to cases filed under the Act of 1898 shall be conducted as if the Reform Act had not been enacted and the substantive rights of parties involved in connection with cases filed under the Act of 1898 should be unaffected by this legislation. The Debtor concedes, as it must, that this Chapter VII case is governed by the provisions of the Act of 1898 and not by any provisions of the Bankruptcy Code, including § 522(f)(1) of the Bankruptcy Code.
Notwithstanding, the Debtor in support of its motion, relies on some statements by the Third Circuit Court of Appeals in the case of In re Ashe, 712 F.2d 864 (3rd Cir.1983). Ashe involved four appeals, each considering the effect of § 522(f)(1), which permits a debtor to avoid a judicial lien to the extent it impairs an exemption to which the debtor would otherwise be entitled. The lien sought to be invalidated in Ashe became fixed on the property prior to the effective date of the Code, that is October 1, 1979.
A careful reading of Ashe leaves no doubt that it furnishes scant, if any, support for the Debtor’s contention or the Debtor’s Motions under consideration. First, as noted, Ashe was filed after the effective date of the Code and is governed by the Bankruptcy Code, unlike the case under consideration which was filed prior to the effective date of the Code and as such is clearly governed by the provisions of the Bankruptcy Act of 1898.
The Third Circuit in Ashe equated § 67(f) with the present § 522(f). Arriving at this conclusion, it relied on Chicago, Burlington and Quincy R.R. v. Hall, 229 U.S. 511, 33 S.Ct. 885, 57 L.Ed. 1306 (1913). In this case, the Supreme Court held that § 67(f), which invalidates judgment liens fixed on the property within four months of the commencement of a case, is invalid regardless of whether the property was property of the estate and remained as such, or whether the property was claimed under local law as exempt and allowed as exempt.
Section 67(f), unlike § 522(f)(1), had nothing to do with a debtor’s right to exemptions. As noted, while it is true that the Supreme Court in Hall held that the debtor may use § 67(f) of the Act of 1898 to invalidate judgment liens on properties which were claimed by the debtor and allowed as exempt under Nebraska law, it did not change the very basis for the application of § 67(f), which was based on the proposition that no creditors shall be permitted to obtain a preference over other creditors of the debtor in the same class within four months prior to the commencement of a case.
The liens involved in this particular case, unlike the liens involved in Ashe and the companion cases on appeal with Ashe, are not liens which were created and became fixed on the property of the Debtor within four months of the commencement of the bankruptcy case, which was clearly a requirement of § 67(f) of the Act of 1898 before a judicial lien could be invalidated. There is nothing in § 522(f) which even indirectly intimates that it has anything to do or has any inter-relationship to § 547 of the Bankruptcy Code, the only Section of the Code which deals with preferences. The statement by the Court in Ashe that with respect to avoidance of judicial liens, Congress in 1978 did nothing more than it did eighty years earlier, is a gross oversimplification of the purpose of the two Sections and simply lacks any support in *535the clear and unambiguous language of the two Sections. To contend that § 522(f)(1) is a preference-avoidance Section is a total misunderstanding of the Section and the very basis of the voiding powers granted to debtors which permit one and only one conclusion — that § 522(f)(1) has no application in this pre-Code case and the Debtor’s voiding power is governed by § 67 of the Bankruptcy Act of 1898. Thus, unless the Debtor is able to show that the liens in question became fixed to the property involved within four months prior to the commencement of this Chapter VII case filed under the Act of 1898, his right to avoid these liens cannot be sustained. This is so because the Act of 1898 had no provision which permitted a Debtor to avoid judicial liens based on the fact that the lien impaired an exemption to which the debtor is entitled.
Accordingly, it is
ORDERED, ADJUDGED AND DECREED that the Debtor’s Motion to Avoid the Judicial Lien of Blazer Financial Services, Inc., be, and the same is hereby, denied with prejudice. It is further
ORDERED, ADJUDGED AND DECREED that the Debtor’s Second Amended Motion to Avoid the Judicial Lien of Fidelity Deposit Company of Maryland be, and the same is hereby, denied with prejudice.
DONE AND ORDERED. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491410/ | FINDINGS OF FACT AND CONCLUSIONS OF LAW
GEORGE L. PROCTOR, Bankruptcy Judge.
Plaintiff, Valerie Hall Manuel, as trustee of the estate of Ocean Line of North Florida, filed a complaint against defendant Twenty Grand Marine Services, Inc.1 (“Twenty Grand”) seeking to avoid a transfer under 11 U.S.C.A. § 548(a)(2).2 A trial was held on October 23 and 28, 1991, and, upon the evidence presented, the Court enters the following Findings of Fact and Conclusions of Law:
FINDINGS OF FACT
Debtor’s business consisted of the transportation of cargo containers from Feman-dina Beach, Florida, to San Juan, Puerto Rico. Debtor chartered the barges to transport the cargo containers.
Debtor initially chartered two barges, the Ocean Carrier I and Ocean Carrier II, from Ocean Carrier Corporation (“Ocean Carrier”). Debtor subsequently terminated the Ocean Carrier agreement and, on March 1, 1990, chartered two larger barges (UMTB 331 and UMTB 340-3) from United Marine Tug & Barge, Inc. (“Unimar”).
The Ocean Carrier and Unimar barges were provided to Debtor without lashing gear which is used to secure the cargo containers. Instead, when it commenced operations in early 1988, Debtor purchased a stock of lashing equipment. The equipment was procured through Morton Chain Company and consisted primarily of equipment manufactured by Inter.
Debtor had a sufficient inventory of gear to equip the barges, plus a small inventory on the docks that had been removed for maintenance, but debtor did not maintain an ongoing inventory of such equipment.
In the summer of 1989, Debtor discussed a merger with Carolina Atlantic Transportation Services, Inc. (“CATS”). CATS was also in the cargo container transportation business, shipping out of Wilmington, North Carolina, to San Juan, Puerto Rico.
In early 1990 CATS moved its mainland port from Wilmington to Fernandina Beach, where it shared docking facilities with Ocean Line. The merger negotiations were never consummated.
CATS chartered its barges from defendant. Initially defendant furnished CATS with the barges CATS 252 and CATS 253. However, the Tidemar 50 and Tidemar 51 were substituted into service at various times.
*542Defendant provided the barges to CATS equipped with Peck and Hale lashing gear. Peck and Hale, like Inter, is a major manufacturer of lashing equipment. CATS was obligated to return or replace the gear upon termination of the charter agreement.
CATS redelivered the CATS 252 to defendant in July, 1989. The CATS 253 was redelivered in December, 1989, and the Tidemar 50 in January 1990. The Tidemar 51, the final barge under charter, was redelivered in late February, 1990, after CATS had ceased doing business. Of all the lashing gear provided with the barges, only three twist locks were returned upon redelivery of the four barges.
Believing that its gear had been improperly intermixed with that of debtor’s, defendant filed a complaint against the UMTB 331 in the United States District Court for the Middle District of Florida, Jacksonville Division, case number 90-302-Civ-J-12 (Honorable Howell W. Melton) on April 16, 1990. Pursuant to the complaint, the UMTB 331 was arrested in Fernandina on April 16, 1990.
Unable to post the necessary bond to release the barge, debtor agreed to settle the suit. Debtor delivered 1,888 twist locks, 916 turnbuckles, 275 long rods, 418 short rods, and $10,000.00 to defendant in return for the release of the barge and dismissal of the complaint.
The returned gear was collected from the arrested barge, the dock at Fernandina, and the storage shed on the dock. The transfer of the equipment occurred on April 19, 1990. The equipment retrieved represented approximately fifty percent of the gear being used by debtor in its operations at that time.
Upon receiving the equipment, defendant released the barge and dismissed the District Court complaint with prejudice. After her release from arrest, debtor continued to use the UMTB 331 in its operation.
Debtor filed a chapter 11 petition on May 19, 1990. The case was converted to chapter 7 on August 8, 1990.
CONCLUSIONS OF LAW
11 U.S.C. § 548 provides in relevant part:
(a) The trustee may avoid any transfer of an interest of the debtor in property, or any obligation incurred by the debtor, that was made or incurred on or within one year before the date of the filing of the petition, if the debtor voluntarily or involuntarily—
[[Image here]]
(2)(A) received less than a reasonably equivalent value in exchange for such transfer or obligation; and (B)(i) was insolvent on the date that such transfer was made or such obligation was incurred, or became insolvent as a result of such transfer or obligation;
(ii) was engaged in business or a transaction, or was about to engage in business or transaction, for which any property remaining with the debtor was an unreasonably small capital; or
(iii) intended to incur, or believed that the debtor would incur, debts that would be beyond the debtor’s ability to pay as such debts matured.
The trustee has the burden of proof on all issues in a fraudulent conveyance action. In re Rodriguez, 895 F.2d 725, 726 n. 1 (11th Cir.1990); In re Vurchio, 107 B.R. 363, 364 (Bankr.M.D.Fla.1989) (citing In re Damason Construction Corp., 101 B.R. 775, 777 (Bankr.M.D.Fla.1989)).
In order to prevail under § 548(a)(2) the trustee must prove the following:
1) that there was a transfer of an interest of the debtor in property,
2) that the transfer occurred within one year preceding the filing of the bankruptcy petition,
3) that the debtor received less than a reasonably equivalent value in exchange for this transfer, and
4) that the debtor was either insolvent on the date of the transfer, became insolvent as a result of the transfer, or was left with an unreasonably small capital after the fact.
In re Damason Construction Corp., 101 B.R. 775, 777 (Bankr.M.D.Fla.1989); In re *543Ear, Nose and Throat Surgeons, Inc., 49 B.R. 316 (Bankr.D.Mass.1985).
To succeed under the first element, the plaintiff must demonstrate that a transfer of debtor’s interest in the lashing gear occurred. Although a dispute existed as to the ownership rights, the debtor clearly had a possessory interest in the equipment. That interest was transferred on April 19, 1990, when defendant took possession of the gear in accordance with the settlement agreement. Therefore, the plaintiff has met the burden on the first factor.
The transfer occurred on April 19, 1990, and debtor filed a chapter 11 petition on May 19, 1990. Thus, the transfer was made within the year preceding the bankruptcy filing and the second element under § 548(a)(2) has been satisfied.
Next, the trustee has the burden of showing that debtor did not receive a reasonably equivalent value for the transfer of the equipment. Defendant contends that the release of the vessel and dismissal of the district court lawsuit constitute reasonably equivalent value.
The Bankruptcy Code does not define “reasonably equivalent value”; however, § 548(d)(2)(A) defines “value” to include “property, or satisfaction or securing of a present or antecedent debt of the debt- or....” In exchange for the lashing gear, debtor received “property” in the form of the release of the seized vessel and the dismissal of the pending lawsuit.
In addition, settlement of defendant’s maritime lien claim against the vessel constituted “satisfaction of a present debt” within the meaning of § 548(d)(2)(A). See, e.g., In re Wey, 78 B.R. 892, 896 (C.D.Ill.1987) (forfeiture of money in satisfaction of contract obligation constitutes satisfaction of a present debt for purposes of § 548(d)(2)(A)), aff'd, 854 F.2d 196 (7th Cir.1988).
In In re American Trading & Shipping, Inc., 24 B.R. 32 (Bankr.S.D.Fla.1982), the Court held that the release from maritime arrest of a vessel under charter to the debtor gave the debtor “a substantial interest in the [v]essel as lessee” and constituted value for purposes of § 548(a)(2). Id. at 36. This Court agrees with such ruling and is unable, under the evidence, to find that the value received by Ocean Line was less than a reasonably equivalent value for the lashing gear. To the contrary, given the impact of the arrest of the barge on debtor’s operation, it appears that the settlement provided reasonably equivalent value for debtor’s interest in the equipment. Consequently, plaintiff has failed to meet her burden on this element.
final factor under § 548(a)(2) concerns the solvency of the debtor at the time of the transfer. The debtor’s balance sheets two and one-half weeks prior to the transfer indicated assets of $4,026,438.47 and liabilities of $6,328,050.16. Having debts substantially in excess of assets less than three weeks before the transfer, it is logical to infer that the debtor was insol-insolat the time of the transfer. Thus, the plaintiff has satisfied the final element of § 548(a)(2).
CONCLUSION
Having proven that the transfer of the equipment was a transfer of debtor’s interest in property made within one year of filing bankruptcy and while debtor was insolvent, plaintiff satisfied three of the elements of § 548(a)(2). However, plaintiff failed to establish that the transfer was for less than reasonably equivalent value and, therefore, cannot prevail.
A separate Final Judgment in favor the defendant will be entered.
. Upon plaintiffs ore tenus motion at trial, Twenty Grand Offshore, Inc. was substituted for Twenty Grand Marine Service, Inc. as the proper defendant.
. The trustee’s amended complaint also asserts a claim under § 547. However, on defendant’s motion at trial, the Court dismissed the § 547 claim. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491411/ | OPINION
DAVID A. SCHOLL, Bankruptcy Judge.
A. INTRODUCTION
The issue upon which resolution of the instant “tempest in a teapot” turns is whether a “restoration fee” of $25 which must be paid to the Commonwealth of Pennsylvania Department of Transportation (“PENNDOT”) to obtain reinstatement of a Pennsylvania driver’s license, pursuant to 75 Pa.C.S. § 1960, is a pre-petition “debt” which is potentially dischargeable in the Debtors’ Chapter 13 bankruptcy ease. On the strength of the decision in Lugo v. Paulsen, 886 F.2d 602, 604-07 (3d Cir. 1989), we hold that the restoration fee is a “debt” and that therefore the Co-Plaintiff and Wife-Debtor in this proceeding, MICHELE GEIGER (“the Plaintiff”), cannot be deprived of her driver’s license on the basis of non-payment of such a fee in light of 11 U.S.C. § 525(a). However, assuming arguendo that the failure of the Defendants, PENNDOT and HOWARD YERUS-ALIM, Secretary of Transportation, to restore the Plaintiff’s driving privileges violated the automatic stay, collection of damages against PENNDOT is barred by the Eleventh Amendment and the inability of the Plaintiff to prove that the Defendants committed forbidden acts with fair warning of their illegality.
B. PROCEDURAL HISTORY
The Plaintiff and her husband, CHRISTOPHER GEIGER (collectively “the Debtors”), filed the joint Chapter 13 case underlying the instant proceeding on November 22, 1991. A confirmation hearing is scheduled on April 21, 1992.
The Debtors’ abject poverty is borne out by the fact that, allegedly due in large part to the Plaintiff’s loss of her driver’s license and consequently of her employment as a school bus driver, the Debtors were unable to pay even the modest $22.31 monthly sum required under their plan. On December 16, 1991, they moved to abate their plan payments until the Plaintiff regained her employment, which we allowed in part, requiring them to commence payments in May, 1992, irrespective of the Plaintiff’s employment status. See 11 U.S.C. § 1326(a)(1).
The instant adversary proceeding was commenced on December 20, 1991. Trial was scheduled on February 6, 1992. Our attempt to mediate a resolution in light of *589the fact that the dispute appeared to involve only $25 was unsuccessful, and a trial ensued on February 13, 1992. The parties’ interest beyond the small sum involved was further exemplified by their request, which we granted, to submit post-trial Briefs in support of their respective positions at one-week intervals thereafter.
C. FACTUAL HISTORY
On May 21, 1988, the Plaintiff was involved in a motor vehicle accident which ultimately resulted in a 1990 lawsuit against her and the entry of a default judgment in the amount of $4,656.57. On May 24, 1991, while employed by the School District of the City of Philadelphia as a bus driver, the Plaintiff received a letter from PENNDOT advising her that her driver’s operating privileges were suspended, effective June 28, 1991.
On July 30, 1991, PENNDOT sent her a further letter, indicating that her driving privileges would not be restored until she did the following:
1. Paid a $25 “restoration fee.” See 75 Pa.C.S. § 1960.
2. Provided proof that all motor vehicles registered in her name were insured; or if she claimed that no vehicles were registered in her name, supplied a notarized affidavit verifying same. See 75 Pa. C.S. § 1786.
3. Provided proof that the judgment against her had been satisfied or that payments were being made pursuant to an agreement with the judgment creditor. See 75 Pa.C.S. §§ 1772-75.
On December 11, 1991, apparently in light of her bankruptcy filing, PENNDOT sent a revised letter to the Plaintiff, which reiterated the first two requirements to restore her license, but omitted the third requirement.
The Plaintiff testified that the only motor vehicle which she owned was an inoperable 1979 Oldsmobile. Further, she stated that, on January 7, 1992, she executed an Affidavit stating that she did not own a motor vehicle and was submitting the registration and tags for the Oldsmobile which she did own to PENNDOT. Robert F. Sal-vin, Esquire (“Salvin”), a supervisor of the Temple Legal Aid Program, which is representing the Debtors, later testified that his office mailed the tag, registration, and affidavit with a covering letter to Timothy Wile, Esquire, PENNDOT’s Assistant Counsel (“Wile”), on January 7,1992. Copies of all of the items dispatched by mail from Salvin’s office were admitted into evidence.
Wile testified that neither he nor anyone else associated with PENNDOT ever received the letter of January 7, 1992, or its enclosures. Wile did state, however, that, despite the self-contradictory content of the Affidavit (it states that the Plaintiff did not own a vehicle, yet was sending materials relating to a vehicle which she stated that she did own), receipt of the enclosures would have been sufficient to satisfy the second of the three original criteria for the Plaintiff’s license restoration. Wile explained that PENNDOT accepts receipt of the registration and tags as proof of a vehicle owner’s inability to legally operate the vehicle, because proof of insurance would be necessary before the vehicle could be re-registered.
There is a presumption that a properly-directed letter placed in the mails has reached its destination. See, e.g., Hagner v. United States, 285 U.S. 427, 430, 52 S.Ct. 417, 418, 76 L.Ed. 861 (1932); Chrysler Motors Corp. v. Schneiderman, 940 F.2d 911, 913, 915 (3d Cir.1991); and In re Ryan, 54 B.R. 105, 106-07 (Bankr.E.D.Pa. 1985). Employing this presumption, we conclude that the Plaintiff did comply with the second requirement for restoration of her license, and we are prepared to enter, as part of our Order, a finding that this criterion has been satisfied, which should suffice for PENNDOT’s purposes. We note that, at trial, PENNDOT’s counsel ultimately agreed, in light of the testimony of the Plaintiff and Salvin, that PENNDOT would accept a new Affidavit from the Plaintiff as satisfaction of the second criterion for restoration of her license.
D. DISCUSSION
The only real issue remaining, at the close of trial, was whether the Plaintiff *590could recover her driving privileges prior to payment of the $25 restoration fee, which devolved into a dispute as to whether the said fee was or was not a “debt.” The Debtor argued that PENNDOT’s pre-petition demand for this sum classified it as a “debt.” PENNDOT, meanwhile, argued that it could not file a proof of claim for this sum because it was payable only upon the condition that the Plaintiff sought restoration of her license. Therefore, PENN-DOT contended that the fee was not really a “debt.”
This court must confess that it found resolution of this issue very elusive until it recalled the decision of the Court of Appeals in Lugo v. Paulsen, supra. In that case, 886 F.2d at 604-07, the Court addressed at length the issue of whether surcharges levied against New Jersey motorists found guilty of charges relating to driving under the influence of alcohol on future registrations or renewals of driving privileges were “debts.”
The Lugo court begins by noting that [t]he Bankruptcy Code defines “debt” as a “liability on a claim,” 11 U.S.C. § 101(11) (1982), and defines “claim” ... to allow the broadest possible interpretation of “claim,” as the Code “contemplates that all legal obligations of the debtor, no matter how remote or contingent, be able to be dealt with in bankruptcy” to permit the “broadest possible relief in the bankruptcy court.” H.R.Rep. No. 595, 95th Cong., 1st Sess. 309 (1977); S.Rep. No. 989, 95th Cong., 2d Sess. 21 (1978), U.S.Code Cong. & Admin.News, pp. 5787, 5807, 5963, 6266.
Id. at 605. An argument very similar to that made on February 13,1992, by PENN-DOT is then disposed of in the following passage:
Appellees also argue that the Plan surcharge is not a “debt” because it cannot be reduced to a money judgment and therefore does not constitute a “right to payment” under the definition of claim in 11 U.S.C. § 101(4)(A). We agree with the district court, however, that although New Jersey may not reduce surcharge obligations to a money judgment as the method to enforce its statutory scheme, “the threat of a suspended driver’s license provides appellees with ample means to enforce its right to payment.” \In re Lugo, ] 94 B.R. [335,] at 340 n. 4 [ (D.N.J.1989) ].
The Lugo court then considered the issue of whether the surcharge was a pre-petition “debt.” The court concluded that, since the right to payment arose when the debtor was convicted of driving under the influence of alcohol, the obligation was indeed a pre-petition debt. Id. at 607.
PENNDOT unsuccessfully strives to distinguish the New Jersey surcharge in question in Lugo from the restoration fee at issue in this case. It claims that its New Jersey counterpart treated the surcharge as a debt by revoking the debtor’s driving privileges if he failed to pay. This characterization is perhaps true, but it is difficult to see where this represents any distinction from the facts here. PENNDOT will not restore the Plaintiff’s license, the issue of her having a registered vehicle having been resolved, only because she has filed to pay the restoration fee. Also noted by PENN-DOT is the fact that ninety (90%) percent of the New Jersey surcharge proceeds were remitted to an association of insurers and only ten (10%) percent reflected administrative costs, while the entire instant restoration fee is purportedly devoted to administrative costs.
However, despite the relatively small sum in issue, there was no evidence presented by PENNDOT in the instant record regarding for what the restoration fee proceeds are utilized. Furthermore, we fail to see where the fact that a given portion of the fees are directed to administrative costs is relevant to the issue of whether a charge is a “debt.” We find no aspect of the Lugo decision to be dependent on this factor. Compare In re Colon, 102 B.R. 421, 427 (Bankr.E.D.Pa.1989), appeal dismissed sub nom. Szostek v. Hart, 123 B.R. 719 (E.D.Pa.) aff'd in part & appeal dismissed in part, 941 F.2d 242 (3d Cir.1991) (“Colon F’) (traffic fines are “debts,” non-payment of which cannot be *591utilized as a basis to withhold driving privileges).
Subsequent to the Lugo decision, the Supreme Court has issued two Opinions which, if anything, expand the principle that the terms “claim” and “debt” must be broadly construed. Johnson v. Home State Bank, — U.S.-, 111 S.Ct. 2150, 2153-56, 115 L.Ed.2d 66 (1991); and Pennsylvania Dep’t of Public Welfare v. Davenport, 495 U.S. 552, 110 S.Ct. 2126, 2130-31, 109 L.Ed.2d 588 (1990). We therefore believe that Lugo’s broad definition of the term “debt” is extremely well-supported.
Lugo was, however, a Chapter 7 case, and the Court of Appeals ultimately affirmed the decision of the district court that the surcharge “debts” were nondis-chargeable under 11 U.S.C. § 523(a)(9). 886 F.2d at 608-11. By way of contrast, there is no § 523(a)(9) issue in this matter, since the Plaintiff was not convicted of any crime, let alone any infraction due to intoxication while driving. Furthermore, the Debtor’s bankruptcy case is a Chapter 13 case, and the broad Chapter 13 discharge would, except for debts within the scope of 11 U.S.C. §§ 1328(a)(2) and 523(a)(9), result in a discharge of any debt created by the restoration fee. See In re Adams, 106 B.R. 811 (Bankr.D.N.J.1989); and In re Bill, 90 B.R. 651 (Bankr.D.N.J.1988) (New Jersey surcharges held dischargeable in Chapter 13 cases predating the 1990 amendment to § 1328(a)). Cf. Davenport, supra, 495 U.S. at 562, 110 S.Ct. at 2133 (restitution debt which was not dischargea-ble in a Chapter 7 case in light of 11 U.S.C. § 523(a)(7) was, prior to the 1990 amendment adding 11 U.S.C. § 1328(a)(3) to the Code, dischargeable in a Chapter 13 case).
It is perhaps pertinent to note, at this juncture, that it was established, in In re Johnson-Alien, 871 F.2d 421, 423, 428 (3d Cir.1989), aff'd sub nom. Davenport, supra, that the issue of dischargeability of obligations in a Chapter 13 case has been held to not generally be “ripe” until the debtor “has completed the Chapter 13 plan,” and is prepared to receive a discharge order. The confirmation hearing in this case has not yet been conducted. Therefore, discharge, which will occur only when all payments under a confirmed plan are completed, is far off. Consequently, we cannot determine whether the Plaintiff’s restoration fee, though clearly arising from a pre-petition judgment and hence apparently ultimately dischargeable, is in fact dischargeable at this time. Id. at 429.
However, determination of the issue of whether the Plaintiff’s restoration fee indebtedness can be discharged is not necessary to a resolution of the issue of whether PENNDOT can validly withhold the Debt- or’s driving privileges because the restoration fee is unpaid. The restoration fee charge is certainly dischargeu&fe and 11 U.S.C. § 525(a) provides that
a governmental unit may not deny, revoke, suspend, or refuse to renew a license, ... against, a person that is or has been a debtor under this title ... solely because such ... debtor is or has been a debtor under this title ..., or has not paid a debt that is dischargeable in the case under this title....
See Perez v. Campbell, 402 U.S. 637, 91 S.Ct. 1704, 29 L.Ed.2d 233 (1971); Smith v. PENNDOT, 66 B.R. 244, 245-46 (E.D.Pa. 1986); Henry v. Heyison, 4 B.R. 437, 441-42 (E.D.Pa.1980); and In re Patterson, 10 B.R. 860 (Bankr.E.D.Pa.1981).
The Debtor is therefore entitled to the greater part of the non-monetary relief which she seeks, i.e., a declaration that PENNDOT’s refusal to restore her license for any of the reasons set forth in its letter of December 11, 1991, is not permissible under the Bankruptcy Code. We will phrase the Order to grant declaratory relief rather than as a mandatory injunction directing PENNDOT to restore the license, because there could possibly be other grounds, not related to the matters at issue in this proceeding, on the basis of which PENNDOT could conceivably refuse to restore the Plaintiff’s driving privileges. Compare In re Nejberger, 934 F.2d 1300, 1303-04 (3d Cir.1991). However, no other grounds were recited at the trial or throughout this proceeding, and therefore it appears that the judicial effect of this *592decision should be immediate restoration of the Plaintiff’s driving privileges.
Both parties have argued at length about whether the Plaintiff’s driving privileges are “property of her estate” under 11 U.S.C. § 541, and whether 11 U.S.C. §§ 362(a)(1), (a)(2), (a)(3) or (a)(6) were violated by PENNDOT’s refusal to immediately restore the Plaintiff’s driving privileges. Having ruled that the Plaintiff is entitled to relief under 11 U.S.C. § 525(a), it is not necessary to reach these issues, except insofar as they relate to a possible claim of the Plaintiff for monetary damages under 11 U.S.C. § 362(h), or as compensation for PENNDOT’s potential contempt of court.1
However, it appears that claims for such damages could not be granted to the Plaintiff on other grounds. Firstly, we note that, in Hoffman v. Connecticut Dep’t. of Income Maintenance, 492 U.S. 96, 109 S.Ct. 2818, 106 L.Ed.2d 76 (1989), the Court appears to foreclose any imposition of monetary penalties against state governmental bodies or their subdivisions under 11 U.S.C. § 362(h) in light of the Eleventh Amendment. See id. at 109 n. 4, 109 S.Ct. at 2826 n. 4 (Hoffman dissenters conclude that the Eleventh Amendment precludes imposition of penalties under § 362(h) against state actors); and In re James, 120 B.R. 802, 816-17 (E.D.Pa.1990) {“James II”), rev’g in part & aff'g in part, 112 B.R. 687 (Bankr.E.D.Pa.1990) (“James /”); and rev’d on other grounds, 940 F.2d 46 (3d Cir.1991) {“James III”). Cf. United States v. Nordic Village, Inc., — U.S. -, 112 S.Ct. 1011, 117 L.Ed.2d 181 (1992) (11 U.S.C. § 106(c) does not waive federal immunity). The only potential basis for any imposition of monetary damages against the instant Defendants is, therefore, under this court’s contempt power. See In re Colon, 114 B.R. 890, 894-98 (Bankr.E.D.Pa.1990), appeal dismissed sub nom. Szostek v. Hart, 123 B.R. 719 (E.D.Pa.), aff'd in part & appeal dismissed in part, 941 F.2d 242 (3d Cir.1991).
However, to justify monetary damages for contempt, a party, particularly a governmental body, charged with contempt must be given a fair warning that the acts in issue are forbidden, and “any ambiguity in the law should be resolved in favor of the party charged with contempt.” United States v. Norton, 717 F.2d 767, 774 (3d Cir.1983). See also University Medical Center v. Sullivan, 122 B.R. 919, 931, 932 (E.D.Pa.1990), reaff'd on reconsideration, 125 B.R. 121, 125-28 (E.D.Pa.1991) (party acting in violation of even the directives of the same court in an earlier similar case was held not liable for sanctions because the law was unsettled.)
For two reasons, a finding of contempt is not warranted here. Firstly, crediting Wile’s testimony that PENNDOT never received the Debtor’s registration and tags by mail despite their dispatch, PENN-DOT had a separate, independent, and apparently justified basis to deny the Debt- or’s driving privileges through at least February 13, 1992.
Secondly, PENNDOT would appear to have had justification for concluding that its actions were exempt from the stay by the effect of 11 U.S.C. §§ 362(b)(4), (b)(5). We may have been inclined to hold that PENNDOT’s withholding of the Debt- or’s driving privileges were collection activities stayed by operations of 11 U.S.C. §§ 362(a)(3), (a)(6), irrespective of the presence of §§ 362(b)(4), (b)(5). The latter Code sections only provide an exception to actions under §§ 362(a)(1) and (a)(2), respectively. Collection activities, as opposed to actions necessary to enforce governmental health, safety, and police powers (such as removing unsafe drivers from the highways) appear to be stayed, even as to governmental bodies. See Colon I, supra, 102 B.R. at 427-28.
However, this line of reasoning was clouded considerably by the decision of the *593Court of Appeals in James III. The Court of Appeals there held that a forfeiture proceeding — involving, apparently, solely collection of money — was subject to § 362(b)(4). 940 F.2d at 50-51. The Court also did not seem particularly concerned that the James debtor relief upon §§ 362(a)(3), (a)(6), see In re James I, supra, 112 B.R. at 699-700, and that § 362(b)(4) does not apply to actions based upon §§ 362(a)(3), (a)(6). James III, 940 F.2d at 50-51.
Therefore, we conclude that the law in this area was too unsettled to support any order of contempt against the Defendants. Cf. Adams, supra, 106 B.R. at 832-33 (pre-Hoffman; court nevertheless decides that damages under § 362(h) or for contempt of court were inappropriate). We also note that the Plaintiff failed to quantify any damages to her as a result of the PENN-DOT’s actions.
It is therefore immaterial to the outcome of this controversy and unnecessary for us to reach the issue of whether the Plaintiffs driving privileges should in fact be classified as “property of her estate” such as would support a claim under 11 U.S.C. § 362(a)(3). We note that §§ 362(a)(2) and (a)(6) do not, by their terms, require acts against “property of the estate” to invoke their respective applications, but rather only require acts to collect claims against debtors. 11 U.S.C. § 362(a)(2) requires an enforcement action against the debtor or against property of the estate. PENN-DOT’s actions to collect its restoration fee which were taken directly against the Plaintiff, and therefore they appear to have been clearly within the scope of §§ 362(a)(1), (a)(2), (a)(6).
To the extent that it is relevant, we note that the courts in Adams, Colon, and Bill had little difficulty in concluding that a state’s withholding of driving privileges is a violation of the automatic stay, suggesting that these courts believed that such “privileges” were indeed property of the respective debtors’ estates. See also Nejberger, supra, 934 F.2d at 1301-03 (liquor license previously held by the debtor is property of its estate); and In re Drau-ghon Training Institute, Inc., 119 B.R. 921, 926 (Bankr.W.D.La.1990) (interest of training school in obtaining state certification is property of its estate). Despite PENNDOT’s urging that any citizen’s receipt of a driver’s license is a “privilege” as opposed to a “right,” it cannot be forgotten that the concept of “property of the estate” in bankruptcy, like the concept of a “claim” or “debt,” is extremely broad. See United States v. Whiting Pools, Inc., 462 U.S. 198, 204-05 n. 8,103 S.Ct. 2309, 2313-14 n. 8, 76 L.Ed.2d 515 (1983); and In re Shapiro, 124 B.R. 974, 980-82 (Bankr.E.D.Pa.1991). It would therefore appear to embrace “privileges” as well as “rights.” To the extent that it is necessary or relevant to do so, we would therefore be inclined to conclude that the Plaintiff’s driver’s license is property of her bankruptcy estate.
E. CONCLUSION
We will therefore grant the Plaintiff (but not her co-debtor husband, whose very join-der in this proceeding as a plaintiff has never been explained or justified) limited declaratory and injunctive relief under 11 U.S.C. § 525(a), i.e., a directive that the Defendants may not consider her failure to meet the financial responsibility requirement or her non-payment of the $25 restoration fee in determining whether to restore her driver’s license.
. In their Complaint, the Debtors also make reference to the Defendants’ alleged violation of 42 U.S.C. § 1983, which could trigger an award of attorneys’ fees under 42 U.S.C. § 1988. Since this claim was not mentioned at trial or in their post-trial Brief, we assume that the Debtors have abandoned any such claim. See Universe Tankships, Inc. v. United States, 528 F.2d 73, 74-76, 77 (3d Cir.1975); and In re Henderson, 134 B.R. 147, 155 (Bankr.E.D.Pa. 1991). | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491413/ | MEMORANDUM OPINION AND ORDER ON DEBTOR’S OBJECTION TO THE CLAIM OF THE INTERNAL REVENUE SERVICE
BERNICE BOUIE DONALD, Bankruptcy Judge.
This above-styled core proceeding1 came on for hearing August 20, 1991, on the debtor’s objection under F.R.B.P. 3007 to the proof of claim filed by the United States of America on behalf of the Internal Revenue Service (hereinafter “IRS”). The following shall constitute findings of fact and conclusions of law pursuant to F.R.B.P. 7052.
FINDINGS OF FACT
On September 27, 1989, the debtor, Shirley Zauss (hereafter “Mrs. Zauss”), filed a petition under Chapter 13 of the Bankruptcy Code. See 11 U.S.C. § 301. Subsequently, in accordance with F.R.B.P. 3002, the IRS filed a proof of claim for taxes presumptively owed by the debtor pursuant to the assessment of one hundred percent (100%) penalties against her, in accordance with Section 6672 of Title 26 of the United States Code.
These penalties were assessed against Mrs. Zauss as a result of her role in the operation of her husband’s business, Blue Fountain Pools, Incorporated, a Texas corporation engaged in the business of building swimming pools. Mr. Zauss was the president, secretary and sole shareholder of the corporation. Mrs. Zauss served as treasurer, and in 1985 became vice-president. The Zauss’ were also directors of the corporation. Until the corporation filed bankruptcy in late 1986, Mrs. Zauss was closely involved in various aspects of the daily operation of the business, including bookkeeping responsibilities. Moreover, Mrs. Zauss had check signing authority.
On April 23,1986, Delbra Buyers, a revenue officer with the Internal Revenue Service, contacted the corporation regarding delinquent employee withholding taxes for the third and fourth quarters of 1985, and the first and second quarters of 1986. Ms. Buyers took the statement of Mr. Zauss on April 24, 1986 and the statement of Mrs. Zauss on May 1, 1986. During the initial interview, Mrs. Zauss stated that her duties, included “bookkeeping, making financial decisions with her husband and performing any other services required in the office.”
Further, Mrs. Zauss explained that the reason the corporation did not pay the employment tax liabilities in question was because of bookkeeping error. Mrs. Zauss explained that she thought they had been paid. When asked what action was taken to see that the tax liabilities were paid, Mrs. Zauss stated that they took in a new bookkeeper to insure better bookkeeping, but that there was no money to pay the liability. Mrs. Zauss admitted that other *685obligations were paid while the tax liabilities were accruing.
The facts remain in dispute as to the exact time that Mrs. Zauss discovered that the taxes were in fact delinquent. Mrs. Zauss asserts that she first discovered the delinquencies when Ms. Buyers, the revenue officer, made a visit to the corporation in April, 1986. However, the government, based on the statement of Mrs. Zauss, asserts that Mrs. Zauss had knowledge of the tax delinquency in January, 1986.
ISSUE
The sole issue for judicial determination is whether, as a former bookkeeper and officer of her husband’s business, the debt- or should be held liable, as a responsible person under Section 6672(b) of the Internal Revenue Code, for delinquent withholding taxes arising out of the operation of the bankrupt business?
DISCUSSION
The Internal Revenue Code requires employers to withhold from their employees’ pay wages representing the employees’ personal income taxes and social security taxes.2 See also, Mazo v. United States, 591 F.2d 1151, 1152 (5th Cir.1979); Anderson v. United States, 561 F.2d 162, 165 (8th Cir.1977); Datlof v. United States, 252 F.Supp. 11 (E.D.Pa.1966); aff'd 370 F.2d 655 (3d Cir.1966), cert. denied, 387 U.S. 906, 87 S.Ct. 1688, 18 L.Ed.2d 624 (1967). The employer holds these funds in trust for the United States3, and are commonly referred to as “trust fund taxes”.
Each time a business meets its net payroll, it is presumed to have withheld the taxes required by law to be withheld. Bedford v. United States, 39 A.F.T.R.2d 1246 (E.D.Wis.1976). The withheld taxes constitute a special trust fund in favor of the United States. Employers are required to account for these withholdings periodically and pay them over to the government. Anderson v. United States, supra at 165; 26 U.S.C. § 7501. When net wages are paid to the employee, the taxes that were, or should have been, withheld are credited to the employee even if they were never remitted to the government. Mazo v. United States, supra at 1153; Garsky v. United States, 600 F.2d 86, 89 (7th Cir. 1979); Feist v. United States, 221 Ct.Cl. 531, 607 F.2d 954, 957 (1979); Newsome v. United States, 431 F.2d 742, 744 (5th Cir. 1970). If the employer fails to pay over the trust fund taxes, the Internal Revenue Service (hereafter “IRS”) may collect an equivalent amount directly from officers or employees of the employer who were responsible for collecting the tax. United States v. Energy Resources Co., 495 U.S. 545, 110 S.Ct. 2139, 109 L.Ed.2d 580 (1990).
Section 6672(a) of the Internal Revenue Code provides:
(a) General rule. — Any person required to collect, truthfully account for, and pay over any tax imposed by this title who willfully fails to collect such tax, or willfully attempts in any manner to evade or defeat any such tax or the payment thereof, shall, in addition to other penalties provided by law, be liable to a penalty equal to the total amount of the tax evaded, or not collected, or not accounted for and paid over. No penalty shall be imposed under section 6653 or part II of subchapter A of Chapter 68 for any offense to which this section is applicable.
Section 6672(a) was designed to assure compliance by the employer with its obligation to withhold and pay the sums withheld. This is accomplished by subjecting the employer’s officials responsible for the employer’s decisions regarding withholding and payments to civil and criminal penalties for the employer’s delinquency. Slodov v. United States, 436 U.S. 238, 247, 98 S.Ct. 1778, 1785, 56 L.Ed.2d 251 (1978).
Congress has provided by statute that if a corporate employer does not pay over to the government taxes it has withheld, or should have withheld, from the wages of its employees, any person or persons who were under a duty to collect the taxes, to account for the taxes or to pay over the *686taxes, and who acted willfully in respect of the failure to collect, to account for or to pay over the taxes is personally liable for their payment in the amount of the taxes not collected, not accounted for, or not paid over to the government when due as a one hundred percent (100%) penalty. See, 26 U.S.C. §§ 6671 and 6672 (“Sections 6671 and 6672”); Slodov v. United States, supra, quoting Section 6671; Bedford v. United States, supra at 1247; Liddon v. United States, 448 F.2d 509, 512 (5th Cir. 1971). The Statute imposes liability only upon (1) a responsible person, who has (2) willfully failed to collect, account for, or pay over the trust fund taxes. Thibodeau v. United States, 828 F.2d 1499, 1503 (11th Cir.1987).
A responsible person within the meaning of Section 6672 includes an officer or employee of a corporation who is under a duty to collect, account for, or pay over the withheld tax. Responsibility is a “matter of status, duty and authority, not knowledge.” Mazo v. United States, 591 F.2d 1151, 1156 (5th Cir.1979).
Section 6672 was designed to cut through the shield of organizational form and impose personal liability upon those actually responsible for an employer’s failure to withhold the taxes, for the employer’s failure to account for the taxes, or for the failure to pay over the tax. First American Bank and Trust Company v. United States, 43 A.F.T.R.2d 739, 742 (W.D.Okla.1979); Werner v. United States, 374 F.Supp. 558, 562 (D.Conn.1974), aff'd, 512 F.2d 1381 (2d Cir.1975); Koegel v. United States, 437 F.Supp. 176, 180 (S.D.N.Y.1977). Indicia of responsibility includes the holding of corporate funds, stock ownership, and the ability to hire and fire employees. It is undisputed that more than one person may be a responsible person of the corporation under Section 6672. Id., at 1503. Thibodeau v. United States, at 1503.
As earlier stated, to find liability under Section 6672, a two-fold test is applied. First, the person or persons against whom a tax is assessed must have the authority to direct or control the payment of corporate funds. Secondly, such responsible person or persons must have willfully failed to comply with the requirements of collecting, of accounting for or of paying over the taxes.
Nonetheless, mere office holding of and by itself does not render one responsible for the collection and paying over of employee withholding taxes. Bauer v. United States, 211 Ct.Cl. 276, 543 F.2d 142, 149 (1976). Furthermore, the mechanical duties of signing checks and preparing tax returns are not solely determinative of liability under Section 6672. Godfrey v. United States, 748 F.2d 1568, 1575 (Fed. Cir.1984).
However, in the case at hand, Mrs. Zauss was secretary and vice-president of Blue Fountain Pools, Inc. She had bookkeeping responsibilities up until 1985, and from all accounts, continuously had sufficient understanding and contacts with the day-to-day operations of the corporation. Though check signing authority and the preparation of tax returns are not determinative of Section 6672 liability, such acts can and in the case at hand, do weigh heavily in finding that Mrs. Zauss was an employee who had a duty and authority to collect, account for and pay over the withheld taxes.
In In re Fernandez, 130 B.R. 757 (Bkrtcy.W.D.Mich.1991), the debtors operated a construction company, Medina Construction, initially as a sole proprietorship, and subsequently as a corporation. The husband acted as president, wherein his duties included bidding prices on contracts, executing contracts, paying creditors and employees, and hiring and firing employees. The wife's role was more secretarial or clerical in nature. She was responsible for signing checks when her husband was not in the office, determining payroll and calculating withholding taxes.
Medina Construction had only one checking account when it operated as a sole proprietorship and as a corporation. The Debtors made nearly all payments necessary for the business through this account including paying employee wages. Both *687Debtors made withdrawals and deposits of corporate funds on this account.
During most of its existence, Medina Construction was a subcontractor for Mus-kegon Asphalt Paving Company (hereinafter “Muskegon Asphalt”). In order to pay its employee’s wages, Medina Construction sent certified wage forms to Mus-kegon Asphalt who then advanced a single cheek for the wages. Medina Construction deposited the check in the corporate checking account and then issued separate, individual checks to its employees for salaries.
Nearly from its inception, Medina Construction failed to remit its payroll taxes to the government. Both Debtors were aware of the delinquent taxes. Fernandez signed nearly all of Medina Construction’s payroll tax returns (Form 941). The company’s accountant taught the wife how to calculate withholding taxes and informed her of the procedure for paying the taxes. Yet, neither Debtor paid the taxes.
During the period the taxes were not being paid, the Debtors continued to sign and issue checks on behalf of Medina Construction to pay other creditors, including suppliers and employee wages. The Debtors continued to pay net payroll each week and neglected paying withholding taxes. The main reason the Debtors paid other creditors rather than the government was to continue the corporation’s business operations.
On August 11,1986, the I.R.S. assessed a 100 percent penalty against the Debtors in the amount of $37,108.50. In addition, the Debtors were assessed tax liabilities for failure to pay over federal income taxes.
The Fernandez Court relying on the 6th Circuit case of Gepkart v. U.S., 818 F.2d 469, amongst others, reasoned:
It is well established that the test for determining the responsibility of a person under Section 6672 is essentially a functional one, focusing upon the degree of influence and control which the person exercised over the financial affairs of the corporation and, specifically, disbursements of funds and the priority of payments to creditors. United States v. Davidson, 558 F.Supp. 1048, 1052 (W.D.Mich.1983). Section 6671(b) of the Internal Revenue Code ... defines the word “person” to include “an officer or employee of a corporation ... who as such officer or employee ... is under a duty to perform the act in respect of which the violation occurs.”
Among the specific facts which courts have relied upon in determining whether individuals were persons responsible for the payment of taxes withheld from the wages of employees are: (1) the duties of the officer as outlined by the corporate by-laws; (2) the ability of the individual to sign checks of the corporation; (3) the identity of the officers, directors, and shareholders of the corporation; (4) the identity of the individual who hired and fired employees; (5) the identity of the individuals who were in control of the financial affairs of the corporation. Braden v. United States, 318 F.Supp. 1189, 1194 (S.D.Ohio 1970), aff'd, 442 F.2d 342 (6th Cir.), cert. denied, 404 U.S. 912, 92 S.Ct. 229, 30 L.Ed.2d 185 (1971). 818 F.2d at 473.
Personal liability under section 6672 is based on an individual’s significant, as opposed to absolute, control of corporate finances. The responsibility is a matter of status, duty, and authority, and it is not essential for the person to have the final word on which creditors should have be paid. It is only essential for the individual to have significant control over disbursement of funds. Gephart, 818 F.2d at 473.
Thus, the court found that the Fernan-dezes were liable as responsible persons. Similarly, based on a test of substance and not form, the clear language of Section 6672 and considerable case law interpreting the term “responsible party”, the fair determination in this case, is that Mrs. Zauss falls within the category of individuals who were intended by the IRS to be held liable for the assessment of withholding taxes. This determination is a fair one, despite the fact that Mrs. Zauss did not have broad control and authority in the corporation.
Once it is established that the debt- or has the requisite responsibility or duty *688under the statute to collect, account for and pay over withheld taxes, the IRS must demonstrate that the failure to pay such tax was “willful”. It consistently has been held that the term “willfully” as used in Section 6672 does not have the same meaning as when used in the Internal Revenue Code to impose criminal liability. Datlof v. United States, 252 F.Supp. 11, 33 (E.D.Pa. 1966). Instead, it means a deliberate choice voluntarily, consciously and intentionally made to pay other creditors instead of the United States. Teel v. United States, 529 F.2d 903, 905 (9th Cir.1976). Indeed, the Sixth Circuit in Braden v. United States, 442 F.2d 342, 344 has interpreted willful to mean that where the responsible person:
... was aware of the fact that taxes were unpaid, and possessing the power and responsibility to pay them, failed to do so, then he is liable for the penalty of section 6672 notwithstanding his lack of malice or wrongful purpose.
Proof of bad motive, such as an intent to defraud or deprive the United States of the withheld taxes, is not required. Barnett v. United States, 594 F.2d 219 (9th Cir.1979) Bloom v. United States, 272 F.2d 215 (9th Cir.1959), cert, denied, 363 U.S. 803, 80 S.Ct. 1236, 4 L.Ed.2d 1146 (1960).
courts have held that the willfulness requirement is satisfied upon a showing that the person responsible for paying employment taxes acted with reck-reckdisregard as to whether or not the withheld taxes were to be remitted to the United States. Teel v. United States, 529 F.2d 903 (9th Cir.1976); Godfrey v. United States, 748 F.2d 1568 (Fed.Cir.1984). The Godfrey Court held that reckless disregard includes a failure to investigate or correct mismanagement after receiving notice of a withholding tax delinquency. The willful-willfulrequirement is also met if there is evidence that the responsible person had knowledge of payments to other creditors after he was aware of the failure to remit the withheld taxes. Mazo v. United States, 591 F.2d at 1157. Furthermore, the knowledge requirement is relaxed when dealing with corporate officers. The court in Johnson v. United States, 583 F.Supp. 127 (W.D.Ky.1984) held that a president of a corporation by the very nature of his corporate office should be aware of the failure to pay over withheld trust fund taxes.
payment of net wages in cir-cirwhere there are no available funds in excess of net wages from which to make withholding also constitutes a willful failure to collect and pay over under Sec-Sec6672. Sorenson v. United States, 521 F.2d 325, 328 (9th Cir.1975). In essence, this requires an employer to prefer the United States over his workers. In fact, based on section 6672, as written, there is no authority for an employer to prefer any creditors over the United States. Id., at 328-329.
As above-stated, Mrs. Zauss admitted in her statement to the Internal Revenue officer, that a new bookkeeper was hired to ensure better bookkeeping after the tax liabilities were discovered, but that the corporation was without funds to pay the liability. She also stated that other obligations were paid while the tax liabilities were outstanding. In light of the debtor’s knowledge and her position as a corporate officer, in addition to the fact that this was a closely-held corporation where information could be disseminated easily, the court finds that the willful element is satisfied.
further delineate the debtor’s lia-liait must be noted that a responsible person’s duty for purposes of section 6672 liability, is a continuing one which arises when the federal income and social security taxes are withheld from employees’ wages and ends when such funds are paid over to the United States. Newsome v. United States, 431 F.2d 742, 745. A mistaken belief on the part of the responsible person that the funds need not or cannot be paid does not render the failure to pay unwill-unwillTeel v. United States, 529 F.2d 903, 906 (9th Cir.1976).
Therefore, Mrs. Zauss’ liability does not end until the taxes are paid over to the Internal Revenue Service. Since this pay*689ment has not been made, Mrs. Zauss remains liable.
CONCLUSION
In conclusion, the court finds that the debtor is a responsible person within the meaning of Section 6672 of the Internal Revenue Code. The court also finds that the debtor willfully failed to collect, account for and pay over withheld taxes owed to the Internal Revenue Service. Therefore, the debtor is liable for the outstanding tax obligations and shall remain so until these taxes are paid.
Thus, in accordance with the court’s findings, the proof of claim of the Internal Revenue Service is allowed and the debt- or’s objection thereto is overruled.
IT IS SO ORDERED.
. 28 U.S.C. § 157(b)(2)(B).
. I.R.C. § 3102(a) (West 1989).
. I.R.C. § 3402(a) (West 1989). | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491414/ | ORDER ON MOTION TO DETERMINE GENERAL PARTNER OF ST. GEORGE ISLAND, LTD.
LEWIS M. KILLIAN, Jr., Bankruptcy Judge.
This matter is before the Court on the motion of Ronald A. Mowrey, Trustee for the bankruptcy estate of John R. Stocks, for the determination of the general partner of the debtor, St. George Island, Ltd. (“SGI”). Sharon Holding Company (“Sharon”), which claims to be the general partner, and Stocks Family Trust (“SFT”), holder of 98% interest of the partnership, have responded and requested that the Court either deny the motion or find that Sharon is the general partner of SGI. Having considered the portions of the partnership agreement that have been provided, the record of the case, the filed memorandum of law, and for the reasons set forth below, we find that John Stocks was not the general partner on the date of filing, Sharon became the general partner on either December 6, 1988 or December 19, 1988, and that the point became moot upon the conversion of the case from Chapter 11 to Chapter 7.
On July 10, 1987, SGI, a Florida limited partnership, filed for reorganization under Chapter 11 of Title 11, United States Code. At the time of the filing, John R. Stocks and Coastal Housing Corporation were the general partners of SGI. As general partners, Stocks and Coastal each held a 1% interest in the general partnership. The limited partners were the Stocks Family Trust and John Stocks. On December 6, 1988, the day prior to John Stocks filing his own personal bankruptcy, Stocks and Coastal both resigned as general partners. On the same day, Tod Warmack, as Trustee for SFT and pursuant to the partnership agreement, consented to the resignations and nominated, appointed, and elected Sharon as SGI’s general partner. Also on that day, Coastal assigned its 1% interest in SGI to Sharon. On June 13,1991, this case was converted from Chapter 11 to Chapter 7.
Mowrey contends that although Stocks resigned as general partner prior to the filing of his bankruptcy, the change of general partners did not take effect until December 19, 1988, the day the documents were filed with the Secretary of State. As such, the change of general partners was *863an unauthorized post-petition transfer, avoidable pursuant to 11 U.S.C. § 549.
Sharon and SFT cite to the partnership agreement and Florida Statute § 620.-124(1) and assert that Stocks ceased being the general partner immediately upon written notice to the limited partners, in this case, December 6, 1988.
At the inception of and incident to the partnership relationship each partner acquires certain property rights, which are:
(1) His rights in specific partnership property;
(2) His interest in the partnership; and
(3) His right to participate in the management.
Fla.Stat. § 620.675. A general partner of a limited partnership has the rights and powers and is subject to the restrictions of a partner in a partnership without limited partners. Fla.Stat. 620.125(1). In a limited partnership, the difference between a limited partner’s interest and a general partner’s interest is the right to manage the partnership. The issue before us is the entitlement of managing the partnership. The issues of the parties’ rights to specific partnership property or their interests in the partnership have not been contested.
The right to manage is a contractual right governed by the terms of the partnership agreement. See, In re Priestley, 93 B.R. 253, 258 (Bkrtcy.D.N.M.1988). The partnership agreement in this case provides that the general partner may resign only upon the written consent of all limited partners. Once the general partner withdraws as general partner, he becomes a limited partner with the same limited partnership interest as the general partner had.
On December 6, 1988, John Stocks resigned as general partner. On the same day, the limited partners consented to the resignation. The fact that the resignation and consent, along with the appointment of Sharon as the new general partner, were not recorded with the Secretary of State until December 19, 1988, has no bearing on the effective date of Stocks’ resignation. The date of recording is only pertinent to the issue of when Sharon became the general partner and is not relevant for determining who the general partner is today. Therefore, on the date of filing his personal bankruptcy, John Stocks was no longer the general partner of SGI, but was a limited partner holding a 1% interest in the partnership.
The Bankruptcy Code provides for relief for partnerships. 11 U.S.C. §§ 101(41), 109. The mere filing of bankruptcy does not dissolve the partnership. In re Corky Foods Corp., 85 B.R. 903 (Bkrtcy.S.D.Fla.1988). As long as the case stays in Chapter 11, general partner(s) are entitled to attempt to reorganize the partnership’s affairs. However, once the case is converted, the attempt to reorganize is through. The general partner is left without anything to reorganize and retains only its remaining interest in the partnership and its potential liability to the Chapter 7 trustee pursuant to Code § 723(a). The duty of winding up the partnership is left to the Chapter 7 trustee.
On June 13, 1991, this case was converted from Chapter 11 to Chapter 7. On the date of conversion, Sharon was general partner, entitled to manage the partnership. However, once the case was converted, Sharon was without a partnership that could be reorganized. Consequently, its right to participate in the management terminated. Without the right to manage the partnership, Sharon retains its interest in the partnership and its potential liability to the Chapter 7 trustee pursuant to Bankruptcy Code § 723(a).
As 1% limited partners, Mowrey, as trustee in Stocks’ bankruptcy case, and Sharon retain their interest in the partnership. They have the right to protect those interests during the pendency of the bankruptcy case. However, the authority and responsibility of winding down the partnership and disposing of partnership property lies solely with the Chapter 7 trustee, William Miller. Accordingly, it is
ORDERED AND ADJUDGED that Ronald A. Mowrey’s Motion to Determine General Partner of St. George Island, Ltd., is moot due to the fact that the partnership was effectively dissolved upon the conver*864sion of the case from Chapter 11 to Chapter 7.
DONE AND ORDERED. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491415/ | FINDINGS OF FACT AND CONCLUSIONS OF LAW
GEORGE L. PROCTOR, Bankruptcy Judge.
This proceeding came before the Court upon Motions for Summary Judgment filed by the plaintiff and the defendant. Hearings were held on November 27, 1991, and December 17, 1991. The Court enters the following Findings of Fact and Conclusions of Law:
Findings of Fact
For purposes of clarity an explanation of the relationship of the parties is in order. Defendant, Vicki Carwile, is the daughter of the debtor, Eugenia Mae Davis. Alma P. Davis was debtor’s mother and, thus, defendant’s grandmother.
On February 26, 1979, Alma P. Davis received a $102,000.00 promissory note and mortgage from Patrick D. and Suzanne E. Brackett to be paid in monthly installments of $750.00 at eight percent interest. The mortgage was secured by the following real property:
Lot Sixteen (16), Block Two Hundred Three (203), LAKESIDE PARK, according to plat thereof recorded in Plat Book 3, Page 11, of the current public records of Duval County, Florida.
Alma Davis assigned the mortgage and note to debtor on August 14, 1980, but reserved a life estate interest in the payments. She passed away on July 10, 1982, vesting the mortgage and right to receive the monthly payments in debtor.
On October 15,1985, debtor assigned her right to receive 120 of the monthly mortgage payments to Barco Investments for $47,000.00. Debtor retained a reversionary interest for the balance of the payments.
In late 1989, debtor met with an attorney regarding her financial difficulties. During the course of the discussions, debtor learned that her reversionary interest was an asset that could be reached by creditors.
On December 8, 1989, debtor irrevocably assigned her reversionary interest to defendant, her daughter, for the sum of $10.00. The assignment is recorded in the public records of Duval county, Florida, at volume 6806, page 176. At the time of the assignment, the principal balance left on the re-versionary interest was approximately $47,-000.00.
Debtor contends that at the time her mother transferred the mortgage and note to her, the mother intended for the proceeds to be divided equally between debtor and defendant. Thus, she asserts that the transfer of her reversionary interest was not a true transfer but was only intended to memorialize the verbal family agreement.
In the year following the assignment, debtor was sued by a variety of financial institutions:
1. First Union Bank — final judgment for $2,224.28 entered on September 27, 1990;
2. Citibank — final judgment for $8,572.06 entered in February, 1991;
3. Barnett Bank — final judgment for $4,488.29 entered on August 30, 1990; and
4. Southeast Bank — sued for $3,705.07 on January 23, 1991, but no judgment ever entered.
Debtor filed a voluntary Chapter 7 petition on March 1, 1991.
When debtor transferred the reversion-ary interest in December of 1989, she was indebted to virtually all of the creditors that were later included in her bankruptcy schedules. In addition her assets were essentially the same as when the bankruptcy petition was filed in March of 1991, with two exceptions. Debtor sold her 1976 Corvette worth $4,300.00, and subject to a $2,000.00 lien, during such time and also *108dispossessed herself of some household furniture.
Conclusions of Law
This proceeding has come before the Court on competing motions for summary judgment. Rule 56(e) of the Federal Rules of Civil Procedure, as made applicable by Federal Rule of Bankruptcy Procedure 7056, requires that summary judgment only be entered if the pleading, depositions, and other evidence demonstrate 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 has reviewed the pleadings and depositions filed in this adversary proceeding and is satisfied that no genuine issue of material fact exists. Accordingly, a review of the law is necessary to determine which party is entitled to a judgment.
Trustee brought this suit pursuant to 11 U.S.C. § 544(b), which provides in pertinent part:
(b) The trustee may avoid any transfer of an interest of the debtor in property or any obligation incurred by the debtor that is voidable under applicable law by a creditor holding an unsecured claim that is allowable under section 502 of this title or that is not allowable only under section 502(e) of this title.
The applicable law that the trustee seeks to apply in this proceeding is Florida Statute ch. 726.105 which provides:
(1) A transfer made or obligation incurred by a debtor is fraudulent as to a creditor, whether the creditor’s claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation:
(a) With actual intent to hinder, delay, or defraud any creditor of the debtor; or
(b) Without receiving a reasonably equivalent value in exchange for the transfer or obligation, and the debtor:
1. Was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction; or
2. Intended to incur, or believed or reasonably should have believed that he would incur, debts beyond his ability to pay as they became due.
Pursuant to Fla.Stat. ch. 726.110, the statute of limitations for bringing an action under Fla.Stat. ch. 726.105 is four years. The transfer at issue in this proceeding occurred in December, 1989, less than four years before the filing of the complaint. However, defendant argues that the state statute of limitations is restricted by the one year time period for avoiding fraudulent transfers prescribed by 11 U.S.C. § 548.
Defendant’s reading of the statute is misguided. The one-year time period in § 548 is merely a restriction on the powers granted to the trustee under that section. It does not constitute a statute of limitations and has no bearing on the trustee’s powers under other sections. In re Bethune, 18 B.R. 418, 419 (Bankr.N.D.Ala.1982).
Under § 544(b) the trustee is given the power to avoid transfers which are avoidable under “applicable” law. Applicable law has consistently been held to include state law. In re Robbins, 91 B.R. 879, 883 (Bankr.W.D.Mo.1988); In re Hes-con Developers, Inc., 81 B.R. 26, 30 (Bankr.S.D.Cal.1987). “Since the bankruptcy court is applying the forum state’s substantive law of fraudulent conveyance in actions brought under Section 544(b), the bankruptcy court is required to apply the forum state’s statute of limitations governing fraudulent conveyances.” In re Josefik, 72 B.R. 393, 397 n. 4 (Bankr.N.D.Ill.1987); In re Bethune, 18 B.R. at 419. Accordingly, the four year state statute of limitations is appropriately applied to this proceeding and the complaint was timely filed.
Next the Court must assess the merits of state fraudulent conveyance claim. Subsection (2) of the statute outlines a number of factors to be considered in determining *109whether actual intent to hinder, delay or defraud creditors exists.
(2) In determining actual intent under paragraph (l)(a), consideration may be given, among other factors, to whether:
(a) The transfer or obligation was to an insider.
(b) The debtor retained possession or control of the property transferred after the transfer.
(c) The transfer or obligation was disclosed or concealed.
(d) Before the transfer was made or obligation was incurred, the debtor had been sued or threatened with suit.
(e) The transfer was of substantially all the debtor’s assets.
(f) The debtor absconded.
(g) The debtor removed or concealed assets.
(h) The value of the consideration received by the debtor was reasonably equivalent to the value of the asset transferred or the amount of the obligation incurred.
(i) The debtor was insolvent or became insolvent shortly after the transfer was made or the obligation was incurred.
(j) The transfer occurred shortly before or shortly after a substantial debt was incurred.
(k) The debtor transferred the essential assets of the business to a lienor who transferred the assets to an insider of the debtor.
Fla.Stat. ch. 726.105(2).
Examining the statutory factors, the Court finds that of the eleven factors, six work against the debtor, only four work in her favor, and one is not applicable. The following factors confirm that a fraudulent transfer was made:
1. The transfer was to debtor’s daughter, an insider.
2. When the transfer was made several lawsuits by various financial institutions were imminent.
3. The transfer was of substantially all of debtor’s assets. As indicated by her schedules, her remaining assets were insignificant compared to the value of the transferred reversionary interest.
4. The transfer removed debtor’s major asset from the reach of her creditors.
5. The ten dollar consideration debtor received was not reasonably equivalent value for the interest which had a $47,-000.00 principal balance remaining.
6. Unable to pay her bills as due, debtor was or became insolvent shortly after the transaction.
The debtor did not retain possession or control of the reversionary interest and the assignment, having been recorded in the public records, was not concealed. In addition, debtor did not abscond or incur a substantial debt near the time of the transfer. Thus, these four factors mitigate against finding that a fraudulent conveyance was made.
The last factor deals with assets of a business and, therefore, is not applicable to this case.
The evidence demonstrates that the transfer, to an insider, was of substantially all of debtor’s assets for only nominal value shortly before debtor became insolvent and while several lawsuits were on the horizon. The combination of these factors is sufficient ground to find, under Fla.Stat. ch. 726.105(l)(a), that a fraudulent convey1 anee has occurred. See In re Steele, 79 B.R. 503, 505 (Bankr.M.D.Fla.1987).
In addition, grounds for finding a fraudulent conveyance also exist under Fla.Stat. ch. 726.105(l)(b). Debtor, having been paid ten dollars for the reversionary interest worth approximately $47,000.00, clearly, did not receive reasonably equivalent value.
The evidence also indicates that debtor believed or reasonably should have believed that she would incur debts beyond her ability to pay as due. The schedules show that debtor had a net income of $860 a month, $2,768.05 in priority debt, and $32,588.59 in unsecured debt at the time the petition was filed. At the time of the transfer, debtor’s financial situation was substantially the same. Shortly before the transfer, debtor consulted with a bankruptcy attorney concerning her financial difficulties. The Court finds that debtor should have be*110lieved that her income and post-transfer assets would not be sufficient to pay her debts as they became due. Therefore, the transfer was a fraudulent conveyance under Fla.Stat. ch. 726.105(l)(b).
Finally, trustee seeks to have personal liability assessed against defendant for the avoided transfer pursuant to 11 U.S.C. § 550, which provides:
(a) Except as otherwise provided in this section, to the extent that a transfer is avoided under section 544, 545, 547, 548, 549, 553(b), or 724(a) of this title, the trustee may recover, for the benefit of the estate, the property transferred, or, if the court so orders, the value of such property, from—
(1) the initial transferee of such transfer or the entity for whose benefit such transfer was made; or
(2) any immediate or mediate transferee of such initial transferee.
In the case at bar, the trustee is entitled to recover the reversionary interest for the benefit of the estate because 1) the transfer to defendant is void under § 544(b) and 2) defendant was the initial transferee of the interest.
Conclusion
The transfer of the debtor’s reversionary interest to defendant was a fraudulent conveyance under Florida Statute ch. 726.105 and, therefore, avoidable by the trustee pursuant to § 544(b). The transfer having been avoided, § 550 permits the trustee to recover the interest from defendant because she was the initial transferee.
A separate summary final judgment in favor of plaintiff will be entered. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491416/ | MEMORANDUM AND ORDER DENYING MOTION TO CONSOLIDATE
A. JAY CRISTOL, Bankruptcy Judge.
THIS MATTER came before the Court on October 2,1991, at which time the Court heard oral argument on the motion by defendant Arab Banking Corporation (“ABC”) to consolidate for trial ABC’s counterclaim in this adversary proceeding (“Arab F’) with a pending claims objection matter between the Creditor Trustee and ABC (“Arab II”). The Creditor Trustee opposes ABC’s motion on the grounds that consolidation is unwarranted and would be highly prejudicial to the Estate.
For the reasons set forth below, ABC’s motion is hereby denied. Consolidation would improperly and unjustifiably reopen the record on the Arab I counterclaim, which has been closed for over five years now, and permit ABC another opportunity to retry that counterclaim, which would prejudice the Creditor Trustee.
Procedural Background
In order to understand this motion and the Court’s decision, certain procedural background is necessary.
The Debtor filed its petition for Chapter 11 reorganization on May 18, 1983. At the outset, this case was jointly administered with three other related Chapter 11 cases (i.e., the petitions filed by Alberto Duque, Colombian Coffee Co. and Domino Investments, Ltd.). Prior to the bar date, ABC filed and twice amended a proof of claim with a caption listing all four of the jointly administered cases. In August 1984, a reorganization plan was confirmed and the Creditor Trustee was appointed in this case, and thereafter this case was administered separately from the other three cases, each of which had its own trustee.
In June 1985, the late Honorable Thomas C. Britton, to whom this case was previously assigned, entered an order (the “Abating Order”) that in essence directed the Creditor Trustee first to pursue recoveries for the Estate and not to pursue objections to certain claims, including ABC’s, until cer*117tain events occurred. Order Abating Proceedings on Creditor Trustee’s Objections to Claims, dated June 3, 1985 (C.P. 1239). Judge Britton reasoned that as the Estate at that time had very little funds, it made no sense to litigate objections to general unsecured claims because it appeared that there might not be any distribution to such creditors. Judge Britton, therefore, instructed the Creditor Trustee to pursue collection efforts for the Estate first and then, if and when the Estate had sufficient funds to make a distribution to general unsecured creditors, the Creditor Trustee could litigate his objections to claims.
Among the Creditor Trustee’s collection efforts was the instant Arab I adversary proceeding that sought to recover from ABC preferential and fraudulent transfers. ABC asserted in this proceeding, over the Creditor Trustee’s opposition, an $11,000,-000 fraud counterclaim. The counterclaim was served on August 27, 1986, long after the claims bar date and the confirmation of the Debtor’s Plan of Reorganization. ABC insisted that the counterclaim be tried at the same time as the Creditor Trustee’s preference and fraudulent conveyance claims.
Judge Britton conducted a full trial on both the Creditor Trustee’s claims and ABC’s counterclaim in September 1986, and found with respect to the counterclaim:
“Defendant has ignored its counterclaim in its trial memorandum and its supplemental trial memorandum. I am not aware of any evidence in this record offered in support of the counterclaim. If it has not been abandoned by defendant, it has been rendered moot by the remaining decisions reached in this Order. The claims’ bar date in this bankruptcy case was January 16, 1984. This claim is barred, therefore, except as an offset against any recovery effected by the plaintiff against this defendant. Slaw Construction Corp. v. Hughes Foulkrod Construction Company (In re Slaw Construction Corp.), 17 B.R. 744, 748 (Bankr.E.D.Pa.1982). Defendant is entitled to no relief upon its counterclaim.”
Memorandum Decision dated September 19, 1986 (Adv. C.P. 31).
ABC took an appeal from this decision on the counterclaim, arguing that Judge Brit-ton’s findings of fact were clearly erroneous and that, therefore, Judge Britton had reached the wrong result. ABC, however, did not argue and has never argued that Judge Britton committed any errors in the conduct of the trial (e.g., any evidentiary errors) or that ABC was in any way precluded from or restricted in presenting its case or that it wanted or was entitled to a new trial. Arab solely sought reversal of Judge Britton’s findings and his ultimate conclusion — but not a new trial or the opportunity to introduce new evidence.
Neither the district court nor the Eleventh Circuit found any error in Judge Brit-ton’s handling of the counterclaim and the trial in Arab I; neither appellate court ordered a new trial on the counterclaim; and, in fact, neither granted Arab any relief on its appeal. All the Eleventh Circuit stated with respect to the counterclaim was contained in a single footnote:
“ABC also raised, in the bankruptcy court, a counterclaim against Chase & Sanborn in the amount of $11 million. The bankruptcy court, noting that there appeared to be no evidence supporting the claim, found it to be time-barred except as a possible offset to any recovery obtained by Chase & Sanborn. See Bkr. Ct.Op. at 13. Because the bankruptcy and district courts denied any recovery to Chase & Sanborn, neither court had occasion to discuss the counterclaim further. While ABC appears to have preserved the issue of the counterclaim on appeal before this Court, ABC has not explained the nature or basis of the claim before this Court, and we are not in a position to analyze its merits. We therefore leave any remaining issues involving the counterclaim to be resolved in the first instance by the bankruptcy court on remand.”
Nordberg v. Arab Banking Corp. (In re Chase & Sanborn Corp.), 904 F.2d 588, 593 n. 9 (11th Cir.1990). The Eleventh Circuit also reversed certain rulings the *118bankruptcy and district courts had made against the Creditor Trustee on his preference claims and remanded the case to this Court. Id. at 595-600.
While Arab I was pending on appeal, the conditions specified in the Abating Order were satisfied, and in May 1988, the Creditor Trustee brought objections to certain proofs of claim, including ABC’s, in accordance with the terms of the Abating Order. That contested claims objection matter is known as Arab II. The objections and claims litigated in Arab II involved ABC’s $5.3 million loan deficiency claim, $1.2 million constructive trust claim, $3.3 million fraud claim, and an attorneys’ fees claim in excess of $2 million. In an order dated June 22, 1988 (C.P. 1519), Judge Britton ruled on the Creditor Trustee’s objections. Judge Britton ruled in favor of the Creditor Trustee on the constructive trust and fraud claims and in favor of ABC on the loan deficiency claim and deferred decision on the attorneys’ fees claim. Order on Trustee’s Objections to Claim of Arab Banking Corporation, dated June 22, 1988 (C.P. 1519). Both parties appealed that order to the district court, which held that ABC should be allowed to amend its proof of claim, remanded the contested matter to this Court and directed that this Court conduct further proceedings on the objections to the proof of claim as amended. Memorandum Opinion, Case No. 88-1539-CIV-SCOTT (S.D.Fla. Oct. 18, 1990) (Scott, J.).
Thereafter, ABC made the instant motion to consolidate Arab I and Arab II for trial.
ABC Has No Right To Another Trial On The Counterclaim In Arab I
One of the Creditor Trustee’s primary objections to consolidation is that it would have the effect of allowing ABC to reopen the record on the counterclaim in Arab I, which has been closed for over five years, and there is no basis in law or fact for reopening the record. ABC offered no reasons in its briefs and at oral argument why the trial record in Arab I should be reopened. Nor is the Court aware of any basis for reopening the record or granting ABC a new trial on the counterclaim in Arab I. To the contrary, there are substantial reasons for not doing so.
ABC had a full and fair opportunity to try its counterclaim at the trial in 1986. ABC has never asserted any complaint about how that trial was conducted and has never claimed that Judge Britton did anything to restrict ABC’s proof in any respect. ABC, and ABC alone, freely chose to marshal the record it did on the counterclaim at the Arab I trial; any insufficiency in its proof is solely ABC’s responsibility. ABC voluntarily rested its case at the end of the Arab I trial. In the more than five years since the close of that trial, ABC has never asked to reopen the record or presented any ground for doing so. The Court is not aware of any such ground.
Nor has any court on appeal or otherwise ever ordered a new trial or the reopening of the record on the Arab I counterclaim. ABC did not even seek such relief or present any grounds justifying it in its appeal of Judge Britton’s decision on the counterclaim. It is certainly not entitled to that relief now. There is simply no reason to bestow on ABC the windfall of a new trial of its Arab I counterclaim.
ABC in support of its motion to consolidate argues that Judge Scott’s October 18, 1990 decision in Arab II contemplates that ABC may obtain a new trial in that contested matter. This argument, of course, says nothing about whether ABC has any right to a new trial in Arab I. Judge Scott’s October 18, 1990 decision was made in the Arab II appeal, was based on the facts, proceedings and record in that contested matter and relates only to Arab II. It has no bearing on whether ABC is entitled to a new trial or to reopen the record in Arab I.
ABC also argues that there are common issues in Arab I and Arab II and that consolidation will avoid two duplicative trials. This argument is also unpersuasive. As ABC has no right to another trial in Arab I, there will be at most only one trial (i.e., for Arab II).
Moreover, to the extent that there are common issues in Arab I and Arab II, the findings and conclusions made in Arab I *119will, under the doctrines of res judicata and collateral estoppel, bar the relitigation of these issues in Arab II. There is, therefore, no need to litigate any common issues more than once. Indeed, bringing Arab I to a prompt conclusion on its existing record will, under the principles of res judi-cata and collateral estoppel, narrow or eliminate issues in Arab II, thereby making any further proceedings in that contested matter more streamlined and manageable than would be the ease if the two proceedings were consolidated. See infra at 120.
Arab finally argues that consolidation is appropriate because when ABC first asserted its counterclaim in 1986, the Creditor Trustee initially objected on the grounds, among other reasons, that it was procedurally inappropriate to try Arab’s counterclaim in an adversary proceeding brought to recover preferences and fraudulent conveyances and that the counterclaim more properly should have been heard in a claims objection contested matter. Arab thus suggests that consolidation now will merely achieve what the Creditor Trustee initially wanted.
What Arab’s argument ignores, however, is everything that has happened since the Creditor Trustee’s initial objection in 1986, and in particular the September 1986 trial of the counterclaim that ABC insisted on and obtained. Having sought and obtained the benefit of that trial of its counterclaim, ABC cannot now walk away from it merely because ABC does’ not like the results it achieved. As ABC succeeded, over the Creditor Trustee’s objections, in having its counterclaim tried as part of the Arab I proceeding, it is now stuck with the consequences of the procedure it persuaded the Court to follow. See Teledyne Industries, Inc. v. N.L.R.B., 911 F.2d 1214, 1217-18 (6th Cir.1990); California Trucking Association v. Teamsters, 679 F.2d 1275, 1284 (9th Cir.1981), cert. denied, 459 U.S. 970, 103 S.Ct. 299, 74 L.Ed.2d 281 (1982). ABC cannot have it both ways: it insisted on and received an early trial in 1986 and cannot now disavow that trial and urge consolidation for the purpose of obtaining another trial when the results of the first trial prove not to its liking.
Consolidation Would Prejudice The Creditor Trustee
Consolidation should also be denied because it will prejudice the Creditor Trustee in several respects.
Consolidation would give ABC an unwarranted second crack at proving its counterclaim. Such an unjustifiable opportunity to improve its proof is unfair and prejudicial to the Creditor Trustee, as well as all the other claimants in this bankruptcy, none of whom have been given a second opportunity to prove their claims. In our system of justice, absent defects in the original proceedings, a party gets only one trial to prove its claims; the record cannot be reopened merely “to introduce evidence that was available at trial but was not proffered, to relitigate old issues, to advance new theories, or to secure a rehearing on the merits.” Fontenot v. Mesa Petroleum Co., 791 F.2d 1207, 1219 (5th Cir.1986); accord United States Gypsum Company v. Schiavo Brothers, Inc., 668 F.2d 172, 180 (3d Cir.1981), cert. denied, 456 U.S. 961, 102 S.Ct. 2038, 72 L.Ed.2d 485 (1982); McGregor Boulevard Church of Christ v. Walling, 428 F.2d 401, 405-06 (5th Cir.1970); Curtis v. Commissioner, 623 F.2d 1047, 1053-54 (5th Cir.1980); 9 C. Wright and A. Miller, Federal Practice and Procedure § 2582, at 722 (1971) (“A party who failed to prove his strongest ease is not entitled to a second opportunity by moving to amend a finding of fact and a conclusion of law.”).
There is also no reason to inflict on this Estate the costs and burdens of an unnecessary retrial in Arab I.
Additionally, this adversary proceeding was first tried over five years ago and concerns events that occurred over eight years ago. The evidence has grown stale. Allowing ABC to reopen the record at this late date to introduce additional evidence (all of which apparently was previously available to ABC) would prejudice the Creditor Trustee’s ability to respond to ABC’s additional proof. For example, the Court is *120informed by the Creditor Trustee that Cam-ilo Bautista, whose testimony was introduced at the first trial, is now living in South America and could not be subpoenaed or deposed by the Creditor Trustee as a rebuttal witness in response to the additional evidence ABC now wishes to introduce.
Consolidation will also prejudice the Creditor Trustee by needlessly delaying the otherwise imminent final resolution of the Arab I adversary proceeding. During the five years it has been litigated, Arab I has been fully tried and appealed through the Eleventh Circuit and little remains to be done to conclude it (see infra at 120). Conversely, Arab II is in an earlier stage of its proceedings, has not yet been appealed to or reviewed by the Eleventh Circuit and will probably require substantial further proceedings (not necessary for Arab I) before Arab II is concluded. Arab II also involves numerous issues and claims (e.g., a $1,200,000 constructive trust claim, a $2,000,000 claim for attorneys’ fees and a $5,300,000 loan deficiency claim) not presented in Arab I. In sum, there is no reason to delay the final resolution of Arab I by consolidating it with Arab II.
Further Proceedings In Arab I and Arab II Without Consolidation
The Creditor Trustee opposes consolidating Arab I and Arab II, and instead has proposed a procedure for resolving the counterclaim in Arab I, that will also narrow and simplify any further proceedings in Arab II.
The parties disagree on the significance of the findings of fact on the counterclaim made by Judge Britton at the end of the September 1986 trial in Arab I. The Creditor Trustee contends that those findings, and ABC’s failure on appeal to reverse them as clearly erroneous, are fatal to and dispositive of the counterclaim. ABC, conversely, argues that its counterclaim survives and further findings of fact are necessary to resolve it.* In addition, the Creditor Trustee also has certain potentially dispositive legal defenses to the counterclaim that have not yet been ruled upon by any court.
The Creditor Trustee therefore has suggested that the parties brief any remaining legal issues respecting the counterclaim and that each submit to the Court any proposed supplemental or additional findings of fact and conclusions of law, with appropriate citation to the existing Arab I record, that each believes is necessary or appropriate for resolving the counterclaim. (The Court is informed that the existing record on the counterclaim is not voluminous.) To the extent that any issues decided in this fashion are also present in Arab II, the Court’s decision in Arab I may also bind both parties in Arab II under the principles of res judicata and collateral es-toppel. Thus, to the extent there are any common issues in Arab I and Arab II the procedure described above may not only resolve Arab I, but may also simplify and narrow the issues in Arab II. The procedure proposed by the Creditor Trustee makes sense to the Court.
Accordingly, it is hereby
ORDERED that ABC’s motion to consolidate Arab I and Arab II is hereby denied; and it is further
ORDERED that within 30 days of receipt of this Order, the Creditor Trustee shall serve and file his memorandum of law and proposed findings (with appropriate citations to the existing record in Arab I) and conclusions respecting the counterclaim in Arab I, and within 30 days after service of the Creditor Trustee’s papers, ABC shall serve and file its memorandum of law responding to the Creditor Trustee’s papers and submitting its own proposed findings (with appropriate citations to the existing record in Arab I) and conclusions respecting the counterclaim, and within 30 days after service of ABC’s papers, the Creditor *121Trustee shall serve and file his reply papers, if any. Any trial in Arab II shall be held, if necessary, after the Court has disposed of the counterclaim in Arab I.
DONE and ORDERED.
Even if ABC’s position is correct, it still is not entitled to another trial. If ABC is correct about the status of the counterclaim, the most it is entitled to obtain is additional or supplemental findings and conclusions on the existing, closed factual record in Arab I. See e.g., Fontenot v. Mesa Petroleum Co., supra; United States Gypsum Company v. Schiavo Brothers, Inc., supra. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491417/ | MEMORANDUM DECISION
A. JAY CRISTOL, Bankruptcy Judge.
This matter came on to be heard before this Court on November 18, 1991 on the question of this Court’s jurisdiction. The Court’s opinion is set forth below.
This case involves the filing of a Petition for Relief Ancillary to Foreign Proceedings filed pursuant to Section 304 of the United States Bankruptcy Code. 11 U.S.C.A. § 304 (1991). Following a challenge to this Court’s jurisdiction made by an interested party, this Court has received briefs, affidavits, and heard argument on the threshold issue of jurisdiction to adjudicate the Petition.
Petitioners Kingscroft Insurance Company, Ltd. (“Kingscroft”), El Paso Insurance Company, Ltd. (“El Paso”), and Lime Street Insurance Company, Ltd. (“Lime Street”), are insurance companies incorporated under the laws of the United Kingdom, with their principal places of business in London, England. Petitioner Mutual Reinsurance Company, Ltd. (“Mutual”) is an insurance company incorporated under the laws of Bermuda, with its principal place of business in Hamilton, Bermuda. Petitioners have been in the business of providing excess commercial liability insurance in the United States through the London insurance markets.
The respective Boards of Directors of the Petitioners determined, because of potentially adverse information regarding the financial condition of the companies, to cease paying claims on March 19, 1990. Subsequently, on August 30, 1990, each of Petitioners filed a “winding-up petition” before the High Court of Justice in London, England, pursuant to the United Kingdom Insolvency Act 1986. In addition, on August 31, 1990, Mutual filed a winding-up petition before the Supreme Court of Bermuda in Hamilton, Bermuda, pursuant to the Bermudian Companies Act 1981. The affairs of Petitioners following the filing of the winding-up petitions are governed by the United Kingdom Insolvency Act 1986 and the Bermudian Companies Act 1981.
In connection with the filing of the winding-up petitions, Petitioners have stated their intent to seek to enter into arrangements with its creditors — known as “Schemes of Arrangement” — pursuant to Section 425 of the United Kingdom Companies Act 1985 and Section 99 of the Bermudian Companies Act 1981. Negotiations with creditors to develop acceptable Schemes of Arrangement are presently ongoing. When the Schemes are determined by the respective Boards, they will be submitted to all creditors for a vote, and finally to the High Court in London, for approval.
Petitioners have filed this action to enjoin the continuation of a lawsuit filed against them in the Circuit Court of the 17th Judicial Circuit in and for Broward County, Florida, Docket No. 85-24016 CD, captioned “JUSTIN BATES, a minor, by and through his mother and legal guardian, CYNTHIA BATES, and CYNTHIA BATES, Individually vs. EL PASO INSURANCE COMPANY, LTD., (f/k/a KING-SCROFT INSURANCE COMPANY, LTD.), LIME STREET INSURANCE COMPANY, LTD., (f/k/a LOUISVILLE INSURANCE COMPANY, LTD.) and MUTUAL REINSURANCE COMPANY, LTD., Defendants” (the “Underlying Action”). The Un*123derlying Action purports to state a cause of action for medical malpractice against several defendants, including physicians and health care providers, insured under indemnity policies to portions of which Petitioners had severally subscribed. On March 26,1990, the Plaintiffs entered into a settlement with the defendants insured in part by Petitioners for a total of $2,500,000. Petitioners did not object to the settlement at the time it was made, and have now stated that they could not consent to pay their respective pro-rata amounts of the settlement because they were insolvent and involved in foreign bankruptcy proceedings. Petitioners agree that the defendants insured by Petitioners (and Plaintiffs, if Plaintiffs can present a proper assignment of the insureds’ rights) have a liquidated claim against each of them, severally and not jointly, in the following amounts: Kingscroft for $198,000, El Paso for $101,-700, Lime Street for $90,000, and Mutual for $91,800.
In 1991, Plaintiff re-instituted the action in the Circuit Court, joining for the first time three of the Petitioners1 as defendants, to collect the total of $481,500 owing to the insured medical providers from Petitioners.
The Plaintiff in the Underlying Action has contested this Court’s jurisdiction to adjudicate the Petition for Relief, and Petitioners have maintained that this Court has proper jurisdiction to decide this matter. This Court decides that jurisdiction and venue are proper in this Court, and orders accordingly, as analyzed fully below.
Section 304 of the Bankruptcy Code
This petition is governed by express provisions of the United States Bankruptcy Code which envision the enforcement in the United States of foreign insolvency proceedings. Section 304 of the United States Bankruptcy Code was specifically enacted as part of the Bankruptcy Reform Act of 1978 “to address complex and increasingly important problems involving the legal effect the United States courts give to foreign bankruptcy proceedings,” and to foster international cooperation in the administration of bankrupt estates. See H.R.Rep. No. 95-595, 95th Cong., 1st Sess. 324-825 (1977); S.Rep. No. 95-989, 95th Cong., 2d Sess. 35 (1978), U.S.Code Cong. & Admin.News 1978, pp. 5787; In re Culmer, 25 B.R. 621 (Bankr.S.D.N.Y.1983); In re: Banco De Descuento, Debtor, 78 B.R. 337 (Bankr.S.D.Fla.1987). The doctrine of comity at the common law may also support relief similar to that contemplated in Section 304, see, e.g. Cornfeld v. Investors Overseas Services, Ltd., 471 F.Supp. 1255 (S.D.N.Y.1979), aff'd, 614 F.2d 1286 (2d Cir.1979), and Section 304 expressly contemplates considerations of comity, but this Court’s jurisdiction is founded on the statutory grant found in the Bankruptcy Code and related federal statutes.
Federal statute has granted original jurisdiction on cases arising under the Bankruptcy Code to federal district courts, 28 U.S.C.A. § 1334 (West 1991), and the federal district courts are authorized to refer all such cases to the bankruptcy courts in the district, 28 U.S.C.A. § 157 (West 1991). This case arises expressly under Section 304 of the Bankruptcy Code, see 11 U.S.C.A. § 304, so subject matter jurisdiction is proper in this Court.
Venue for cases arising under Section 304 is also prescribed by federal statute. Title 28, section 1410 provides:
(a) A case under section 304 of title 11 to enjoin the commencement or continuation of an action or proceeding in a State or Federal court, or the enforcement of a judgment, may be commenced only in the district court for the district where the State or Federal court sits in which is pending the action or proceeding against which the injunction is sought.
(b) A case under section 304 of title 11 to enjoin the enforcement of a lien *124against a property, or to require the turnover of property of an estate, may be commenced only in the district court for the district in which such property is found.
(c) A case under section 304 of title 11, other than a case specified in subsection (a) or (b) of this section, may be commenced only in the district court for the district in which is located the principal place of business in the United States, or the principal assets in the United States, of the estate that is the subject of such case.
28 U.S.C.A. § 1410 (West 1991). This action is agreed to have been brought to “enjoin the commencement or continuation of an action or proceeding” in a Florida State court located in this district. Therefore, venue is proper for this petition to enjoin the Underlying Action in a court in this district.
The Plaintiff in the Underlying Action has, however, raised additional issues with respect to Petitioners’ right to relief under Section 304, namely (1) whether the Petition has been filed by a proper “foreign representative,” and (2) whether Petitioners must prove the presence of assets within this district.
The “foreign representative” who must file a petition under Section 304 is defined as a “duly selected trustee, administrator, or other representative of an estate in a foreign proceeding.” 11 U.S.C.A. § 101(24) (West 1991). The Petition has been filed at the instance of the respective Boards of Directors of the Petitioners, under the direction of Mr. Roger P. Borley, a Director of each of them. Under United Kingdom and Bermuda law, the boards of directors of companies under pending winding-up petitions retain the authority to manage the companies.2 This arrangement may be analogized to the “Debtor in Possession” notion of U.S. bankruptcy law.
The precise administration of foreign insolvency proceedings must be expected to vary, and the situation under the United Kingdom Insolvency Act during a pending winding-up petition, pending final disposition of the case, appears “not repugnant to American laws and policies.” See In re: Banco De Descuento, Debtor, 78 B.R. 337 (S.D.Fla.1987). Given the broad definition of “foreign representative,” this Court finds that the Boards of Directors of Petitioners, through Mr. Borley, are proper representatives of the estates.
Having determined that the Petition has been filed by a proper representative, it must be determined that the foreign insolvency proceedings constitute proper “foreign proceedings.” “Foreign proceeding” is defined:
proceeding, whether judicial or administrative and whether or not under bankruptcy law, in a foreign country in which the debtor’s domicile, residence, principal place of business, or principal assets were located at the commencement of such proceeding, for the purpose of liquidating an estate, adjusting debts by composition, extension, or discharge, or effecting a reorganization.
11 U.S.C.A. § 101(23) (West 1991). Petitioners have availed themselves of the protections of the United Kingdom Insolvency Act 1986, the Bermudian Companies Act 1981 pending adoption of Schemes of Arrangement under the United Kingdom Companies Act 1985 and the Bermudian Companies Act 1981. The filing of winding-up petitions invokes certain interim bankruptcy protections for the Petitioners, pending either a final order of winding-up of the Petitioners’ affairs, or the dismissal of the petitions in favor of operation under properly-adopted “Schemes of Arrangement.” Sections 126 and 127 of the United Kingdom Insolvency Act 1986, for example, include provisions for seeking stay of litigation against the bankrupt, and for avoiding post-petition transfers of property closely analogous to provisions under the U.S. Bankruptcy Code. In fact, Petitioners cannot agree to pay the agreed settlement amounts precisely because Section 127 of the Insolvency Act 1986 prohibits any disposition of Petitioners’ property without *125court order, and no such order has been entered.
The current status of the pending winding-up petitions places the Petitioners in a situation similar to a Debtor under the Chapter 11 of the U.S. Bankruptcy Code prior to adoption of a plan or conversion to Chapter 7. A final winding-up may be roughly analogized to liquidation under Chapter 7 of the Bankruptcy Code; while operation under a Scheme of Arrangement may be analogized to adoption of a plan of reorganization under Chapter 11 of the Bankruptcy Code. Inspection of portions of the United Kingdom statutes presented by Petitioners, together with the affidavits of experts presented, lead to the conclusion that the systems of bankruptcy in the United Kingdom and Bermuda are similar to that in the United States for purposes of Section 304 analysis. The United Kingdom and Bermuda, as sister states in the common-law tradition out of which United States jurisprudence has grown, have legal' systems and general notions of justice similar to those in the United States.
Based on the allegations of the Petition, as supported by evidence presented to this Court in the form of affidavits and relevant foreign statutes, this Court finds that the proceedings before the High Court in London and the Supreme Court of Bermuda constitute proper “foreign proceedings” “for the purpose of liquidating an estate, adjusting debts by composition, extension, or discharge, or effecting a reorganization.” Therefore, the Petitions have been filed by a proper “foreign representative.”
The only remaining inquiry is whether the presence of assets in this district is a requirement for this Court to exercise its jurisdiction.3 Petitioners have asserted only the pendency of the Underlying Action, and not the presence of assets within this district, as the basis for their Petition.4 Because the jurisdiction of this Court is granted by statute, the first inquiry must be whether Section 304, which forms the basis for this Court’s jurisdiction, contemplates the hearing of an action not involving assets within the district in which the petition is filed. Section 304(b), which enumerates the relief able to be sought under that section, reads:
(b) Subject to the provisions of subsection (c) of this section, if a party in interest does not timely controvert the petition, or after trial, the court may—
(1)enjoin the commencement or continuation of—
(A) any action against—
(1) a debtor with respect to property involved in such foreign proceeding; or
(ii) such property; or
(B) the enforcement of any judgment against the debtor with respect to such property, or any act or the commencement or continuation of any judicial proceeding to create or enforce a lien against the property of such estate;
(2) order turnover of the property of such estate, or the proceeds of such property, to such foreign representative; or
(3) order other appropriate relief.
11 U.S.C.A. § 304 (1991). This case does not involve an order to turn over property under subsection (b)(2). This action involves either subsection (b)(1)(B), regarding a request to “enjoin the commencement or continuation of ... any act or the commencement or continuation of any judicial proceeding to create or enforce a lien against the property of” Petitioners’ estate; or subsection (b)(3), a request to order “other appropriate relief.” The Underlying Action is, by its nature, a continuation of a *126judicial proceeding to create a lien against the estates of Petitioners. That is, the entry of a judgment in favor of the Plaintiff in the Underlying Action would be the first step in creating and enforcing a judicial lien against the assets of Petitioners, wherever located. Because Petitioners have already admitted their liquidated several liabilities under the insurance policy, the sole remaining legal object of the Underlying Action is to establish judgments under which the Plaintiff could collect the admitted policy amounts by enforcement actions against assets of the Petitioners. Section 304 contemplates enjoining this type of lawsuit.
Finally, Section 304(b)(3) authorizes the entry of any other relief appropriate and necessary within the purposes of Section 304 to respect foreign insolvency proceedings. Clearly, the presence of assets is not made a prerequisite to exercise of this last, broad equitable power.
Enjoining any legal action against Petitioners is within the broad power of this Court under the clear intent of Section 304. (“[T]he Court is free to broadly mold appropriate relief in near blank check fashion.” In re Culmer, 25 B.R. 621 (Bankr.S.D.N.Y.1983).)
The cases cited to the Court which appear to include the presence of assets in the district in their jurisdictional analysis involved situations other than a simple request to enjoin the continuation of a lawsuit in the district. (See discussion in In re Metzeler, 78 B.R. 674 (Bankr.S.D.N.Y.1987)). If the petition requested this Court to marshall Petitioners’ assets, or to turn property over to foreign authorities, the analysis of the presence of assets would be appropriate; but this petition arises solely out of the pendency of the Underlying Action.
The petition may be viewed as an effort to obtain the same stay that would be automatic under Section 362 of the Bankruptcy Code, or that may be sought under Section 126(1) of the United Kingdom Insolvency Act 1986. Petitioners simply seek to avoid expending valuable resources to defend a collection action in the United States.
Indeed, to rule that jurisdiction is improper in this District in which no assets are present, as requested by the Plaintiff in the Underlying Action, would put Petitioners in the untenable position of being able to establish jurisdiction to stay the Underlying Action only in New York (where assets are present); while, pursuant to the venue provisions quoted above, being able to establish venue only in the Southern District of Florida. This Court will not so frustrate the purpose of Section 304, and finds jurisdiction for the Petition of King-scroft, El Paso, Lime Street, and Mutual proper in this Court.
The parties shall confer and recommend to the Court a schedule for the presentation of further evidence necessary for a final determination on the Petition for Relief Ancillary to Foreign Proceedings, and shall present such to the Court not later than 60 days from the date of this Order. The clerk of the Court shall thereafter proceed to schedule a status conference between the parties in interest for the scheduling of such further presentation of evidence.
Accordingly, it is
ORDERED that the Respondent Cynthia Bates’ Motion to Dismiss Petitioners Petition for Relief Ancillary to Foreign Proceedings is DENIED. It is
FURTHER ORDERED that the Motion of Petitioners to Dismiss “Answer, Affirmative Defenses and Counterclaim” of Cynthia Bates is GRANTED in part, and DENIED in part. The counterclaim is without merit in these proceedings and the motion is thereby GRANTED, in part, in that regard. With regard to the answer and affirmative defenses, the Petitioners’ motion is DENIED. This case shall proceed as a contested matter and the Court will conduct a final evidentiary hearing thereon.
DONE and ORDERED.
. The Plaintiff failed, presumably by error, to join Kingscroft. However, Kingscroft stands in a similar position as the other three Petitioners on the insurance policy under which the Plaintiff has sought relief. Kingscroft has joined in seeking relief under this Petition in anticipation of the Plaintiff’s amendment of pleadings in the Underlying Action, and to conserve its and the Court’s resources by obviating a later parallel filing on behalf of Kingscroft alone.
. Petitioners have submitted the sworn affidavits of United Kingdom counsel expert in bankruptcy matters, as well as of Mr. Borley, to this effect.
. Petitioners have not, by filing of their Petition, subjected themselves to general jurisdiction, but recognize that the Court may condition its relief on submission to jurisdiction for specified purposes. 11 U.S.C.A. § 306 (West 1991). In the Matter of Axona Int'l Credit & Commerce Ltd., 88 B.R. 597, 598 n. 1 (Bankr.S.D.N.Y.1988).
. Indeed, Petitioners have represented to this Court that Petitioners have no assets in the Southern District of Florida, and further that they hold assets in trust funds in the amounts of $1.5 million each (less than one half of one percent of Petitioners' total liabilities) in New York, currently being held in conservatorship under court order in New York by the New York Superintendent of Insurance. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492180/ | DECISION ON DEFENDANT-DEBTOR’S MOTION TO DISMISS THE ADVERSARY PROCEEDING FOR PLAINTIFF’S FAILURE TO SERVE THE SUMMONS AND COMPLAINT UPON THE DEBTOR
CONRAD B. DUBERSTEIN, Chief Judge.
Plaintiff Esterina Mazzone (“Plaintiff’) commenced an action under Bankruptcy Code section 727 objecting to the discharge of the debtor-defendant, James Osebach (“Debtor”). The Debtor has moved to dismiss this action pursuant to Rule 12 of the Federal Rules of Civil Procedure (hereinafter “Federal Rules”), made applicable to this proceeding by Rule 7012 of the Federal Rules of Bankruptcy Procedure (hereinafter “Bankruptcy Rules” or “Rules”), on the ground that the summons and complaint were not timely and properly served within statutorily prescribed parameters. After deliberation and consideration of the facts and issues raised herein, for the reasons hereinafter set forth, Debtor’s motion to dismiss the adversary proceeding is granted with prejudice.
FACTS
The Debtor commenced this case on July 20, 1994, by filing a voluntary petition in bankruptcy under chapter 7 of the Bankruptcy Code (“Code”). At the time of the filing, Plaintiff was, and still is, a judgment creditor of the Debtor listed in the Debtor’s schedules *94in the amount of $15,729.52.1 Plaintiff filed her complaint objecting to the Debtor’s discharge on October 31, 1994.2 As the Debtor asserts in his moving papers, however, and as the Plaintiff has failed to dispute, this complaint, along with its summons, were never properly served on the Debtor. Consequently, because Debtor never received notice of a pre-trial hearing, Plaintiffs unopposed argument was heard by this Court on January 19, 1995. As this Court was unaware of the Debtor’s lack of notice, Plaintiffs request to deny the Debtor his discharge was granted. Accordingly, the Plaintiff was directed to settle an order granting such relief.
Following receipt by Debtor’s attorney on March 9, 1995 of Plaintiffs notice of settlement of a proposed order denying the Debt- or’s discharge, dated February 13, 1995, the Debtor moved to dismiss the adversary proceeding claiming that Plaintiff had failed to secure personal jurisdiction over him.3 According to Debtor’s moving papers, Debtor was completely unaware of the adversary proceeding until his receipt of Plaintiffs notice of settlement of the proposed order on March 8, 1995. See Affidavit of Debtor James Osebach submitted in support of Debtor’s motion to dismiss. Debtor’s attorney did not receive a copy of said proposed order until March 9, 1995. Furthermore, there is no indication that Plaintiff ever attempted to serve the summons and complaint on the Debtor. A review of the case file shows that no affidavit of service of the summons and complaint was ever filed by Plaintiff.
DISCUSSION
Bankruptcy Rule 7004 which incorporates Federal Rules 4(a) and 4(j), specifically mandates that it is the responsibility of the Plaintiff or, if so represented, his attorney, to promptly serve the summons and complaint upon the defendant. Accordingly, when such service is not provided, an adversary proceeding may be dismissed. Federal Rule of Civil Procedure 4(j) reads as follows:
If a service of the summons and complaint is not made upon a defendant within 120 days after the filing of the complaint and the party on whose behalf such service was required cannot show good cause why such service was not made within that period, the action shall be dismissed as to that defendant without prejudice upon the court’s own initiative with notice to such party or upon motion....4
The question remaining then is, “what constitutes ‘good cause’?”
“The legislative history of Federal Rule 4(j) provides only one example of what constitutes good cause, i.e., defendants evasion of service.” Sears, Roebuck & Co. v. Reeves {In re Reeves), 127 B.R. 866, 867 (Bankr.S.D.Cal.1991) (citing Wei v. State of Hawaii, 763 F.2d 370 (9th Cir.1985)). Because “good cause” is not specifically defined in the Federal Rules of Civil Procedure, other courts have determined that its existence must be decided on a “case by case basis.” See Cartage Pacific, Inc. v. Waldner (In re Waldner), 183 B.R. 879, 882 (9th Cir. BAP1995) (citing Reeves at 868).5 Finally, it *95must also be made clear that in the determination of whether good cause exists, it is the Plaintiff who sustains the burden of proof. See Broitman v. Kirkland {In re Kirkland), 181 B.R. 568, 568 (D.Utah 1995) (holding that plaintiff has burden of proof to avoid dismissal for want of good cause).
At issue then is whether the Plaintiff in this proceeding had “good cause” in not serving the summons and complaint within the 120 day period. This Court finds that the Plaintiff has failed to show any reason why the summons and complaint were not served on the Debtor within the statutory time-frame. Moreover, at no time did the Plaintiff file an affidavit of service with this court nor were any papers submitted objecting to the Debtor’s motion to dismiss. Inasmuch as Plaintiff has failed to satisfy her burden of proof on the issue of improper service, the adversary proceeding is deemed dismissed.
Generally, dismissal of this case would be considered without prejudice, thereby allowing Plaintiff to refile her complaint. However, such is not the ease here as Plaintiff is now effectively time-barred from refiling due to the expiration of the relevant statute of limitations.6 According to Bankruptcy Rule 4004(a), “[i]n a chapter 7 liquidation case a complaint objecting to the Debtor’s discharge under section 727(a) of the Code shall be filed not later than 60 days following the first date set for the [§ 841] meeting of creditors....” In this case, the section 341 meeting was initially scheduled for September 8, 1994 thus making the last day to object, November 7, 1994. Although Plaintiff had initially filed her complaint within the 60 day period, any refiling done now would obviously be well outside the statutory limitation imposed by Rule 4004.
In Frasca v. United States, 921 F.2d 450 (2d Cir.1990), the Second Circuit Court of Appeals noted that the applicable statute of limitations is tolled during the 120 days in which a plaintiff must serve a summons and complaint; that applicable statute of limitations will govern, however, if the 120 days expires without service having been performed. Id. at 453. Should this occur, it is up to the plaintiff to refile before the termination of that statute of limitations period. If this period has also expired, however, the plaintiff is then time-barred. According to Frasca, “dismissal is proper even if it occurs after the expiration of the applicable statute of limitations period, and its effect is to bar the plaintiff’s claim.” Id. Furthermore, a number of eases have determined that a tolling of the statute of limitations is conditional on the completion of proper service. See, e.g., Reeves, at 869 (citing Linn & Lane Timber Co. v. United States, 236 U.S. 574, 35 S.Ct. 440, 59 L.Ed. 725 (1915)). Since Plaintiff has failed to satisfy this “condition,” the relevant 60 day statute of limitations has not been tolled. In effect, Plaintiffs aforementioned dismissal may be deemed to be “with prejudice” since Plaintiff is now time-barred from refiling the complaint.
CONCLUSIONS
1. The Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1334 and 28 U.S.C. § 157(b)(2)(J) and (b)(2)(0).
2. The Debtor-Defendants motion to dismiss the adversary proceeding is GRANTED WITH PREJUDICE.
SETTLE AN ORDER CONSISTENT WITH THIS OPINION.
. Debtor listed the Plaintiff in his schedules of liabilities as a creditor in the sum of $22,000. Plaintiff's complaint alleges that she is a judgment creditor of the Debtor in the sum of $15,-729.52.
. Plaintiff's objection to the discharge, grounded in § 727(a)(5) of the Code, was based on the Debtor's "failure to explain satisfactorily any loss of assets or deficiency of assets to meet the debtor's liabilities.” Complaint, V 6(a).
. Federal Rule 12(b)(2), made applicable to adversary proceedings through Bankruptcy Rule 7012, provides in pertinent part as follows: "Every defense, in law or fact, to a claim for relief in any pleading ..., shall be asserted in the responsive pleading if one is required, except that the following defenses may at the option of the pleader be made by motion: (2) lack of jurisdiction over the person.”
. In addition to the 120 day limit, Bankruptcy Rule 7004(f) also imposes an additional time constraint on the life of a summons. Upon issuance, a summons must be served within 10 days or else it is deemed invalid. If the summons is not timely served, a new one shall be issued by the Clerk of the Court.
. While courts have been hesitant to determine just what constitutes good cause, they have made it very clear as to what does not. In Broitman v. Kirkland (In re Kirkland), 181 B.R. 563 (D.Utah 1995), the court lists several excuses which have *95been deemed insufficient to satisfy "good cause.” These include: "ignorance of the rule, inadvertence, mistake of counsel, secretarial misdeeds, process servers’ failure to perform and mistaken belief ...” Id. at 568 (citing Cloyd v. Arthur Anderson & Co., 151 F.R.D. 407, 411 (D.C.Utah 1993)).
. “As a practical matter ... the dismissal may operate as a dismissal with prejudice when the action will thereafter be time-barred.” Cloyd v. Arthur Anderson & Co. (In re Cloyd), 151 F.R.D. 407, 412 (D.Utah 1993). | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492182/ | MEMORANDUM OPINION
JERRY A. BROWN, Bankruptcy Judge.
This matter came on for trial on June 19, 1995 on the trustee’s complaint seeking avoidance of a preferential transfer under 11 U.S.C. § 547(b). The court has considered the evidence, the memoranda, and the arguments of counsel and makes the following determinations.1
I. Facts
Defendant, First Tennessee Bank National Association (“First Tennessee”) is a prepetition judgment-creditor of the debtor, Carl M. Kaufinan, Jr. (“Kaufman”). To execute on its judgment, First Tennessee instituted garnishment proceedings against Kaufman’s employer, Kenneth Gordon of New Orleans, Ltd. (“Gordon”), in the 24th Judicial District Court for the Parish of Jefferson, State of Louisiana, Case No. 430-886“K”.
Pursuant to the garnishment, Gordon transferred the following sums to the Sheriff of Jefferson Parish (“Sheriffs Office”) for and on account of the debtor’s antecedent indebtedness to First Tennessee:
Date of Check Amount
May 27, 1994 $2,738.16
June 24, 1994 2,738.16
July 22; 1994 2,411.38
$7,887.70
(D.Ex. 1).
Harvey Hemstein (“Hemstein”), a representative of Gordon, testified that Gordon’s attorney advised Gordon to pay 25% of Kaufman’s disposable earnings to the Sheriffs Office. {See also P.Ex. 1). Following these instructions, Gordon deducted $684.54 from Kaufman’s paycheck each week, accumulated the funds, and sent checks to the Sheriffs Office each month. As a result, the check to the Sheriffs Office dated May 27,1994 in the amount of $2,738.16, included $684.54 that was actually withheld on May 6, 1994. {See D.Ex. 1). The May 6, 1994 withholding of $684.54 fell outside the 90 day preference period. Thus, Gordon withheld $7,203.16 from Kaufman’s wages during the preference period.
Hemstein further testified that Kaufman’s earnings were actually draws on his commissions. At the time of the withholdings Kaufman was “in the red” to Gordon, i.e., Gordon had advanced more money to him than he had earned from his commissions. Subsequently, Kaufman’s draws were lowered, he made a payment to pay back the amount that was “in the red”, and he currently fluctuates *170between “the red” and “the black”. It was Gordon’s practice to pay its salesmen in advance on a weekly basis.
The Sheriffs Office executed checks payable to First Tennessee that were cashed by First Tennessee as follows:
Date of Cheek Amount Date cashed
June 24, 1994 $2,573.87 July 11, 1994
June 24, 1994 3,217.34 July 11, 1994
June 24, 1994 2,573.87 July 11, 1994
July 22, 1994 2,573.87 August 12, 1994
Sept. 19, 1994 2,266.70 Sept. 19, 1994
$13,205.65
Kaufman filed his Chapter 7 bankruptcy petition on August 9, 1994. The trustee currently has only $6.70 available to pay all creditors in this case. Consequently, he has not yet disbursed any monies to creditors.
II. Analysis
A. In general.
The trustee contends that he is entitled to recover as preferential payments under 11 U.S.C. § 547(b) the $13,205.65 received by First Tennessee within the 90 days prior to the debtor’s bankruptcy filing. In the alternative, the trustee asserts he is entitled to recover the $7,887.70 paid by the debtor’s employer to the Sheriffs Office within the preference period.
First Tennessee argues that under Louisiana law, the seizure of all present and future wages takes place upon the service of the garnishment interrogatories. Consequently, none of the payments are preferential because service of the interrogatories took place before the 90 day preference period. Alternatively, First Tennessee argues that the trustee should only be entitled to the $7,203.16 withheld from Kaufman’s wages during the 90 day preference period. In Section 547(b), Congress broadly authorized bankruptcy trustees to “avoid any transfer of an interest of the debtor in property” if five conditions are satisfied and unless one of seven exceptions defined in Section 547(c) is applicable. 11 U.S.C. § 547(b); Union Bank v. Wolas, 502 U.S. 151, 155-56, 112 S.Ct. 527, 529-30, 116 L.Ed.2d 514 (1991). In brief, the five conditions of a preferential payment are that the payment must:
(1) benefit a creditor;
(2) be on account of an antecedent debt;
(3) be made while the debtor was insolvent;
(4) be within 90 days before the bankruptcy filing; and
(5) enable the creditor to receive a larger share of the estates than if the transfer had not been made.
11 U.S.C. § 547(b). The parties agree that all conditions except the fourth are met. None of the exceptions are present. Thus, the only issue is whether the transfers took place within 90 days of the bankruptcy filing.
The determination of what constitutes a transfer and when it is complete under Section 547(b) is a matter of federal law. Barnhill v. Johnson, 503 U.S. 393, 397, 112 S.Ct. 1386, 1389, 118 L.Ed.2d 39 (1992). The Code defines “transfer” to include “every mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with property or with an interest in property.” 11 U.S.C. § 101(54).
The terms “property” and “interest in property” are not defined in the Code. In the absence of any controlling federal law, interests in property are determined by state law. Barnhill, 503 U.S. at 398, 112 S.Ct. at 1389; Simpson v. Penner (In re Simpson), 36 F.3d 450, 452 (5th Cir.1994). Similarly, the perfection of a lien by garnishment is determined by the law of the state where the garnishment took place. In re Latham, 823 F.2d 108, 110 (5th Cir.1987). Therefore, this court must look to Louisiana law to determine the scope of First Tennessee’s interest in the garnished wages.
B. The trustee’s claim of entitlement to $13,205.65.
The only reported case in Louisiana analyzing the Louisiana Wage Garnishment Law2 in connection with a preference claim is In re Dunn, 56 B.R. 275 (Bankr.M.D.La. 1985). Dunn analyzed the Wage Garnishment Law and determined that the debtor retains some ownership interest in seized wages even after service of the garnishment. *171For example, certain support obligations are to be satisfied from wages, notwithstanding the garnishment. 56 B.R. at 276-77. Also, if the obligation underlying the garnishment is satisfied by collection from a co-obligor, seizure of other property, or discharge of the debt in bankruptcy, then the seizure terminates and the debtor regains full rights to his earnings. 56 B.R. at 276. As a result, Dunn concluded that under Louisiana law a garnishment constitutes only a privilege or a lien rather than a transfer of an ownership interest in the debtor’s wages. Dunn, 56 B.R. at 277.
The Dunn court recognized prior cases to the contrary, but pointed out that these other cases did not involve 11 U.S.C. § 547(e)(3) which provides:
For the purposes of this section, a transfer is not made until the debtor has acquired rights in the property transferred.
The court held that “[although a garnishment may be effected prior to the Preferential Transfer Period, the transfer does not occur until the wages are earned”. 56 B.R. at 277. Consequently, the wages received by the defendant under the garnishment effected prior to the preferential transfer period were preferential transfers to the extent that the wages were earned during the preferential transfer period.
First Tennessee does not attempt to distinguish the Dunn case, but cites several cases for the proposition that under Louisiana law the seizure takes place at the time the garnishee is served with the petition, citation, and interrogatories. For example, in the case of Sun Sales Co. v. Hodges, 256 La. 687, 237 So.2d 684, 686 (1970), the Louisiana Supreme Court stated:
Under Article 2411, LSA-C.C.P., the seizure becomes effective upon service of the petition, citation and interrogatories. In a wage garnishment, the seizure includes both accrued and future earnings. LSA-R.S. 13:3923; [citation omitted]. By virtue of the seizure, the garnishee becomes legal custodian of the wages and holds them subject to further orders of the court, [citations omitted].
Sun Sales Co., 237 So.2d at 686. The Sun Sales court recognized that the Louisiana Wage Garnishment Law brought future earnings within the grasp of wage seizures. Sun Sales, 237 So.2d at 687. This holding was followed in the case of Dunckelman Distributing Co. v. Hyde, 334 So.2d 236, 239-40 (La.App. 2nd Cir.1976), cert. denied, 338 So.2d 294 (La.1976).
Merely because Louisiana law provides that the seizure takes place upon service of the petition, citation, and garnishment interrogatories does not answer the question of the nature of First Tennessee’s property interest in the garnished wages. Dunn is the only case analyzing the nature of the property interest in garnished wages under Louisiana law in connection with a preferential transfer.
First Tennessee cites three federal eases holding that withholding wages within the 90 day period preceding bankruptcy, pursuant to a garnishment order entered before the preference period, did not constitute an avoidable preference. See In re Riddervold, 647 F.2d 342 (2nd Cir.1981); In re Conner, 733 F.2d 1560 (11th Cir.1984); In re Coppie, 728 F.2d 951 (7th Cir.1984), cert. denied, Gouveia v. Hammond Clinic, 469 U.S. 1105, 105 S.Ct. 777, 83 L.Ed.2d 772 (1985). These eases do not apply Louisiana law, and their reasoning has been questioned in several bankruptcy cases. See Taylor v. Mississippi Learning Inst., 151 B.R. 772, 777 (Bankr. N.D.Miss.1993), and cases cited therein; Dunn, 56 B.R. at 277-79. The major criticism is that neither Riddervold nor Conner discussed Section 547(e)(3), while Coppie misapplies the legislative history of Section 547(e)(3). See Dunn, 56 B.R. at 278.
Most bankruptcy courts have held that wages withheld within the 90 day preference period, pursuant to a writ of garnishment served prior to the preference period, are avoidable under Section 547(b). See Taylor, 151 B.R. at 777, and cases cited therein. These cases have held that under Section 547(e)(3), the debtor’s wages cannot be transferred until they have been earned, notwithstanding the time of the service of the writ of garnishment. Therefore, wages earned, withheld, and paid to the garnishing creditor within 90 days preceding bankruptcy can *172constitute avoidable preferences even if the writ of garnishment were served before the preference period began.
This court agrees with the majority view of the bankruptcy court cases. Seizure of a debtor’s wages pursuant to a garnishment in Louisiana results in a privilege or hen, rather than an ownership interest in the wages. Section 547(e)(3) defines when a transfer occurs. As quoted above, Section 547(e)(3) provides that a transfer is not made until the debtor has acquired rights in the property transferred. This court is required to apply the plain meaning of a statute except in the rare cases in which the literal application of a statute will produce a result demonstrably at odds with the intentions of its drafters. United States v. Ron Pair Enterprises, Inc., 489 U.S. 235, 109 S.Ct. 1026, 103 L.Ed.2d 290 (1989). This is not a case where a plain meaning interpretation would be at odds with the intentions of the drafters. A debtor cannot acquire rights to wages until the wages have been earned. Thus, a transfer cannot logically occur until the debtor has, in fact, earned the wages. This court agrees -with the Taylor decision that “a cognizable transfer occurs when the employer withholds the statutory non-exempt percentage from the debtor’s wages. No transfer can logically occur until the debtor has, in fact, earned the wages”. Taylor, 151 B.R. at 778.3
The trustee argues that the Barnhill v. Johnson, 503 U.S. 393, 112 S.Ct. 1386, holding that a transfer made by check is deemed to occur on the date the check is honored, applies in the present case. Under this view, the entire $13,205.65 would be an avoidable preference because First Tennessee cashed these amounts during the preference period, although only a portion of this amount was from wages earned during the preference period.
Bamhill did not involve a wage garnishment proceeding, but involved the payment of a “bona fide debt” by check. 503 U.S. at 395, 112 S.Ct. at 1388. The Supreme Court reasoned that a myriad of events might occur after delivery of the check that would result in the check being dishonored, i.e., the drawer could close the account, a third party could obtain a lien by garnishment or other proceedings, and the bank might mistakenly refuse to honor the check. 503 U.S. at 399; 112 S.Ct. at 1390. Thus, the Supreme court held that the transfer occurred on the date the check was honored. The Supreme Court recognized, however, that:
For the reasons given above, and in particular because the debtor in this case retained the ability to stop payment on the check, until the very last, we do not think that the transfer of funds in this case can be said to have ‘taken effect between the debtor and petitioner’ until the moment of honor, [emphasis added].
503 U.S. at 401; 112 S.Ct. at 1391.
In a wage garnishment situation the debt- or does not retain the ability to stop payment on the check until the very last. Instead, the seizing creditor has a lien on the wages. Once the wages have been withheld by the debtor’s employer pursuant to the garnishment, the debtor has no control over the funds. Consequently, the date of honor rule set forth in Barnhill is not applicable in a wage garnishment situation. The trustee’s argument that the entire $13,205.65 is avoidable cannot prevail.
C. First Tennessee’s claim that none of the amounts are voidable.
As discussed above, under the plain meaning of Section 547(e)(3), a transfer occurs in a wage garnishment when the wages have been earned and the employer withholds the statutory non-exempt percentage from the debt- or’s wages. Thus, even though First Tennessee obtained a lien on Kaufman’s wages upon *173the service of the garnishment proceedings, a transfer under Section 547(b) could not occur until Kaufman earned the wages. Because a portion of the wages were earned within the prefei’ence period, First Tennessee’s claim that none of the payments are preferential is without merit.
First Tennessee’s argument that it should be allowed to keep all of the seized funds as a matter of equity because it has spent years and thousands of dollars in collecting the amounts in several courts falls on deaf ears when made to a bankruptcy court charged with the duty of affording equal treatment to all creditors rather than rewarding the creditor who wins the race to the courthouse. More specifically, the underlying purpose of the preference action is to promote this equality of distribution to all of the creditors of the bankruptcy estate. Taylor, 151 B.R. at 778. As stated in Taylor:
If the date of the service of the writ of garnishment is to be the effective transfer date for all successive withholdings of the debtor’s wages, then as the withholdings are accumulated during the preference period, the garnishing creditor’s position, existing solely by virtue of the service of the writ of garnishment before the commencement of the preference period, is enhanced. This defeats the purpose of § 547(b).
Id. The Taylor court went on to discuss the subsequent advance rule and two exceptions to the preference action — the subsequent advance rule and the new value exception. The Taylor court concluded:
The garnishing creditor who has obtained the service of a writ of garnishment before the commencement of the preference period can easily be compared to the secured creditor who holds a pre-preference period lien on the debtor’s inventory. Surely if the consensually secured creditor has to provide new value to compensate for the enhancement of its secured position following the commencement of the preference period, a garnishing creditor would have to do the same thing. In the ease before the court, MGSLA provided nothing of value to the debtor during the preference period. Therefore, its secured position should not be improved by the with-holdings of the debtor’s wages within this period.
Id. at 778-79. The court agrees with the reasoning in Taylor, and finds that First Tennessee’s position should not be improved by wages withheld during the preference period because it provided nothing of value to the debtor during the preference period. Accordingly, First Tennessee’s argument in equity that is it entitled to retain the entire amount received must fail.
D. Avoidance of $7,887.70 or $7,208.16?
Having found that the trustee is entitled to avoid wages earned during the preference period, the court must determine whether the amount to be avoided should be $7,887.70, representing the sums transferred to the Sheriffs Office during the preference period, or $7,203.16, representing amounts withheld from Kaufman’s wages during the preference period.
Although Kaufman was employed as a salesman, and the earnings he received were actually advances on commissions, Hem-stein’s testimony that it was Gordon’s practice to make the weekly advances, and clear out any amounts in “the red” at a later date, convinces the court that for purposes of the preferential transfer action, the transfers took place at the time that Gordon withheld the funds from Kaufman’s checks. Accordingly, the trustee is entitled to avoid transfers to First Tennessee in the amount of $7,203.16.
Judgment will be entered in accordance with this memorandum opinion.
. This memorandum opinion constitutes the court’s findings of fact and conclusions of law in accordance with Bankruptcy Rule 7052. The court has jurisdiction over the matter under 28 U.S.C. § 1334. The matter is a core proceeding under 28 U.S.C. § 157(b)(2).
. La.R.S. 13:3921, et seq.
. In its memorandum, First Tennessee alluded to a decision rendered by the Honorable Thomas M. Brahney in the case of In re Joseph N. Edwards, Jr., 89-13504—B. The court has located the applicable adversary proceeding — Dengel v. Louisiana National Bank, 90-1156-B. The Louisiana National Bank case does not help First Tennessee's position because: (1) it did not involve garnishment of wages, and therefore Section 547(e)(3) did not apply; (2) an issue existed as to whether Section 547(b)(5) was met; and (3) Judge Brahney granted the defendant’s motion for summary judgment without written reasons. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492183/ | MEMORANDUM ON DEFENDANT’S MOTION FOR SUMMARY JUDGMENT
RICHARD S. STAIR, Jr., Chief Judge.
The debtor, David Lee Conner, initiated this adversary proceeding on January 24, 1995, seeking a determination that his federal tax obligations for 1986 through 1990 are not excepted from discharge under 11 *218U.S.C.A. § 523(a)(1) (West 1993 & Supp. 1995). The Defendant, Internal Revenue Service of the Department of the Treasury of the United States of America (IRS), filed its Answer on March 3, 1995, admitting that the debtor’s federal tax obligations for 1986 through 1988 are dischargeable, but averring that the 1989 and 1990 obligations should be excepted from discharge pursuant to 11 U.S.C.A. § 523(a)(1)(B) (West 1993) because the debtor failed to file his 1989 and 1990 tax returns.
The court presently has before it a Motion for Summary Judgment (Motion) filed by the Defendant on June 14, 1995, together with a supporting brief and appended exhibit consisting of a Certificate of Official Record and an original Certificate of Assessments and Payments with respect to David L. Conner for the tax years 1989 and 1990. Based on the argument that the debtor failed to file his tax returns or failed to file his returns prior to December 20, 1992,1 the IRS seeks summary judgment on the issue of whether the debtor’s 1989 and 1990 tax obligations, excluding penalties and interest on penalties,2 are excepted from discharge under § 523(a)(l)(B)(i) and (ii).3
The debtor filed his Response to Defendant’s Motion for Summary Judgment (Response) on June 27,1995, to which an Affidavit of Byron D. Bryant, the attorney who prepared the debtor’s 1986 through 1989 tax returns, and an Affidavit of the debtor are appended. The debtor, through his Response and a Joint Pretrial Statement filed by the parties on July 5, 1995, has conceded that his 1990 tax obligation, excepting penalties and interest on penalties, is nondis-chargeable; therefore, the Defendant’s Motion will be granted with respect to the debt- or’s 1990 federal income taxes and interest thereon. With regard to the 1989 tax obligation, the debtor asserts in his Response that he filed his 1989 federal tax return prior to December 20,1992. All further discussion in this Memorandum will be limited to the debtor’s 1989 taxes and interest thereon.
Pursuant to Fed.R.Civ.P. 56(c), made applicable to this adversary proceeding through Fed.R.Bankr.P. 7056, summary judgment is available only when a party is entitled to a judgment as a matter of law and when, after consideration of the evidence presented by the pleadings, affidavits, answers to interrogatories, and depositions in a light most favorable to the nonmoving party, there remain no genuine issues of material fact. The mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment. The factual dispute must be genuine. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Street v. J.C. Bradford & Co., 886 F.2d 1472 (6th Cir.1989).
The IRS argues that the debtor’s 1989 tax obligation, excluding penalties and interest on penalties, is excepted from discharge under Bankruptcy Code § 523(a)(1)(B)® and (ii), which provides:
A discharge under section 727 ... of this title does not discharge an individual debt- or from any debt—
(1) for a tax or a customs duty—
[[Image here]]
(B) with respect to which a return, if required—
(i) was not filed; or
*219(ii) was filed after the date on which such return was last due, under applicable law or under any extension, and after two years before the date of the filing of the petition....
11 U.S.C.A. § 523(a)(l)(B)(i), (ii) (West 1998). The Bankruptcy Code does not define the term “filed” as used in § 523; therefore, numerous courts rely on the Internal Revenue Code in determining when a tax return has been filed. See, e.g., Smith v. United States (In re Smith), 179 B.R. 66, 68 (Bankr. N.D.Ohio 1995).
Internal Revenue Code § 7502 provides in material part:
(a) General rule.—
(1) Date of delivery. — If any return, claim, statement, or other document required to be filed ... within a prescribed period or on or before a prescribed date under authority of any provision of the internal revenue laws is, after such period or such date, delivered by United States mail to the agency, officer, or office with which such return, claim, statement, or other document is required to be filed, ... the date of the United States postmark stamped on the cover in which such return, claim, statement, or other document ... is mailed shall be deemed to be the date of delivery....
[[Image here]]
(c) Registered and certified mailing.—
(1) Registered mail. — For purposes of this section, if any such return, claim, statement, or other document ... is sent by United States registered mail—
(A) such registration shall be prima facie evidence that the return, claim, statement, or other document was delivered to the agency, officer, or office to which addressed, and
(B) the date of registration shall be deemed the postmark date.
(2) Certified mail. — The Secretary is authorized to provide by regulations the extent to which the provisions of paragraph (1) of this subsection with respect to prima facie evidence of delivery and the postmark date shall apply to certified mail.
26 U.S.C.A. § 7502(a), (c) (West 1989).
With regard to Internal Revenue Code § 7502(a) and (c), this court has previously stated in an unpublished memorandum opinion:
In interpreting § 7502, the Sixth Circuit rejects “the judicially-created presumption that material properly mailed is deemed received,” and holds “that the only exceptions to the physical delivery rule for the filing of tax returns are contained in section 7502.” ... According to the Sixth Circuit, the first exception, that is, § 7502(a)(1), “applies only in cases where the document is actually received by the I.R.S. after the statutory period.” The second exception, § 7502(c), only applies when a document is sent by registered mail or certified mail.
In re Brown, Ch. 13 Case No. 94-30632, 1994 WL 871921, slip op. at 7-8 (Bankr.E.D.Tenn. Sept. 27, 1994) (citations omitted) (quoting Surowka v. United States, 909 F.2d 148, 150 (6th Cir.1990); Miller v. United States, 784 F.2d 728, 730 (6th Cir.1986)).
With regard to the first exception under § 7502, the Defendant relies on a Certificate of Assessments and Payments (Certificate) submitted with its Motion to conclusively support its contention that the debtor did not file his 1989 tax return prior to December 20, 1992, and that the IRS prepared a substitute return for the debtor which gave rise to the 1989 tax assessment. The Certificate evidences, among other things, that the IRS filed a substitute return for the debtor on April 15, 1990, and sent a “First Notice” and a “Tax Delinquent Notice” in 1994 regarding the debtor’s 1989 taxes, but makes no mention of the receipt or nonreceipt of a 1989 tax return from the debtor.4 The IRS has not *220introduced, by affidavit or otherwise, proof that after making a diligent search of IRS records it determined that it did not receive the debtor’s 1989 tax return. No evidence of a records search has been presented and a Certificate of Lack of Record has not been submitted to the court in support of the Motion.
The IRS has not sufficiently proven that it did not receive the debtor’s 1989 tax return for purposes of summary judgment. Therefore, the court will consider the debtor’s extrinsic evidence presented in opposition to the IRS’s summary judgment motion. Consideration of the debtor’s extrinsic evidence is not contrary to the Sixth Circuit’s decisions on this issue. The Sixth Circuit has only refused to allow a taxpayer to present extrinsic evidence other than a registered or certified mail receipt when the IRS has sufficiently proven that the documents in question were not received. Surowka, 909 F.2d at 149 (stating that the IRS records indicated “that the IRS did not receive a 1977 tax return ... and that the IRS sent four notices from 1978 to 1980 demanding that a tax return with payment be filed”); Miller, 784 F.2d at 729 (stating that the IRS presented “Certificates of Lack of Record signed by the custodian of federal tax forms and related documents for the Cincinnati Service Center of the I.R.S.”).
The debtor has submitted two affidavits to support his assertion that he filed his 1989 tax return prior to December 20, 1992. The first, an Affidavit of Byron D. Bryant, provides in material part that Mr. Bryant timely prepared the debtor’s 1989 joint tax return and amended tax return, and that it is his “practice to prepare the tax returns and turn the tax returns over to the client for filing with a properly addressed postage paid envelope for mailing.” Mr. Bryant also states through his Affidavit that he routinely advises his “clients to file their tax returns timely even if they cannot pay the tax at the time of filing.” A copy of the debtor’s 1989 Form 1040 and Form 1040X are appended to Mr. Bryant’s Affidavit. The debtor, through his Affidavit, states that immediately after picking up each return from Mr. Bryant’s office, he went directly to the post office adjacent to Mr. Bryant’s office and mailed it using the self-addressed, postage-paid envelope provided by Mr. Bryant’s office. A receipt evidencing payment on April 11, 1990, by the debtor of a $170.00 fee to Mr. Bryant for preparation of the amended return is appended to the debtor’s Affidavit.
For purposes of summary judgment, the IRS has not sufficiently proven that it did not receive the debtor’s 1989 tax return and the debtor has presented evidence contrary to such an assertion. The affidavits presented by the debtor are sufficient to raise a genuine issue of material fact regarding the debtor’s filing of his 1989 tax return. Until this factual dispute is resolved in accordance with Bankruptcy Code § 523(a)(1)(B) and Internal Revenue Code § 7502, the court cannot determine which party is entitled to judgment as a matter of law.
The Defendant’s Motion for Summary Judgment will be granted in part and denied in part. An appropriate order will be entered.
ORDER
For the reasons set forth in the Memorandum on Defendant’s Motion for Summary Judgment filed this date, the court directs that the Defendant’s Motion for Summary Judgment filed June 14, 1995, is granted in part and denied in part as follows:
1. To the extent the Defendant seeks to except from discharge the debtor’s 1990 tax obligation, excluding penalties and interest on penalties, its Motion for Summary Judgment is GRANTED and the debtor’s obligation with respect to these taxes is nondis-chargeable.
2. The Defendant’s Motion for Summary Judgment is in all other respects DENIED.
SO ORDERED.
. The parties have designated December 20, 1992, as the relevant date for purposes of applying § 523(a)(l)(B)(ii). The debtor filed his Chapter 7 bankruptcy petition on December 20, 1994. Therefore, the parties have agreed that if the debtor did not file his 1989 and 1990 tax returns prior to December 20, 1992, his 1989 and 1990 tax obligations, excluding penalties and interest on penalties, are excepted from discharge pursuant to § 523(a)(l)(B)(ii).
. The IRS concedes in its brief that the "penalties (and interest on the penalties) attributable to the 1989 and 1990 income taxes are dischargea-ble.” Br. in Supp. of Mot. for Summ.J. at 2 n. 1 (citing 11 U.S.C.A. § 523(a)(7)(B) (West 1993)).
.The Defendant asserts in its Answer that the debtor "did not file returns for these [1989 and 1990] years,” and the Defendant's Motion is based on § 523(a)(l)(B)(i). However, the Defendant’s brief filed in support of its Motion seeks to except from discharge the debtor’s 1989 and 1990 taxes and interest thereon under § 523(a)(l)(B)(i) and (ii). For purposes of this Memorandum, the court deems the Motion to be based on § 523(a)(l)(B)(i) and (ii).
. In its brief, the IRS relies on the presumption set forth by the Sixth Circuit that ''[c]ertificates of assessments and payments are generally regarded as being sufficient proof, in the absence of evidence to the contrary, of the adequacy and propriety of notices and assessments that have been made.” Gentry v. United States, 962 F.2d 555, 557 (6th Cir.1992). The “adequacy and propriety of notices and assessments” is not at issue in this adversary proceeding. Rather, the issue centers on the accuracy of the Certificate, which does not report the receipt of the debtor’s *2201989 tax return, and on the accuracy of the IRS's assertion that it did not receive the return. In effect, the IRS, by the information contained in the Certificate, asks the court to infer that the debtor did not file his 1989 tax return prior to December 20, 1992. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492184/ | MEMORANDUM OPINION AND ORDER ON MOTION OF FULLEN DOCK AND WAREHOUSE, INC. TO DISMISS CASE
WILLIAM H. BROWN, Bankruptcy Judge.
At issue in this core proceeding1 is whether a corporation whose corporate charter has been revoked administratively by the Tennessee Secretary of State has standing as a corporation to file a chapter 11 bankruptcy petition. Fullen Dock and Warehouse, Inc., the holder of a general unsecured claim against the debtor’s estate, has filed a motion to dismiss the debtor’s case contending that under Tennessee law the prepetition revocation of the debtor’s corporate charter renders the debtor ineligible to institute suit in the courts of Tennessee and, thus, ineligible to file a voluntary chapter 11 petition for relief. The debtor contests this motion and asserts that notwithstanding its corporate status, it has authority under state law to file for bankruptcy relief. The following constitutes findings of fact and conclusions of law in accordance with Fed.R.Bankjr.P. 7052.
It is undisputed that the debtor filed a voluntary petition for chapter 11 relief on July 10, 1995. It is further undisputed that the debtor’s corporate charter was revoked by the Tennessee Secretary of State on January 19,1994. The revocation resulted from the debtor’s “failure to file [and pay] a balance due on the previous year’s franchise and excise tax return.” Objection to Motion to Dismiss filed September 15,1995. The debt- or’s corporate charter has not been reinstated.
DISCUSSION
“Whether a dissolved corporation is eligible to be a debtor in bankruptcy is determined by reference to state law.” In re A Car Rental, Inc., 166 B.R. 869, 870 (Bankr.S.D.Texas 1993). In Tennessee, the creation, maintenance and authority of corporations are governed by statute. See Tenn. Code Annot. § 48-11-101, et seq.; Pizza Palace, Inc. v. Stiles (In re Stiles), 9 T.B.S.
*24010-7 (Bankr.W.D.Tenn.1990). Accordingly, “absent statutory authority to the contrary, a corporation whose charter has been revoked or corporate authority forfeited may not bring a new suit or maintain a pending one in the name of the corporation.” Id. at p. 4 (Emphasis in original). See also, Bland Co. v. Knox Concrete Products, Inc., 207 Tenn. 206, 338 S.W.2d 605, 607 (1960). Current statutoiy authority in Tennessee provides that “[dissolution of a corporation does not ... (5) [p]revent commencement of a proceeding by or against the corporation in its corporate name.” Tenn.Code Annot. § 48-24 — 105(b)(5). Therefore, assuming arguendo, that lack of standing to commence a cause of action in state court renders an entity ineligible for chapter 11 relief, this state statute provides authority to the contrary. Moreover, where, as in this case, the charter revocation results from the corporation’s failure to report or pay franchise or excise taxes, the charter may be reinstated “at any time after the date of revocation,” upon the filing of all reports and payment of all taxes due. Tenn.Code Annot. § 67-4-917(e). Cf. In re A Car Rental, Inc., 166 B.R. at 870 (Texas statute only allows reinstatement for a maximum of two years following revocation). Upon reinstatement of the corporate charter, the corporation’s “privileges and existence from the date of revocation” are validated under Tenn.Code Annot. § 67-4-917. Kerney v. Cobb, 658 S.W.2d 128, 131 (Tenn. Ct.App.1983). According to pertinent Tennessee case law, the object of the revocation statute is to assure revenue for the state. Loveday v. Cate, 854 S.W.2d 877, 879 (Tenn. Ct.App.1992). Consequently, “absent injury to the rights of third parties, reinstatement of [a] corporate charter validates otherwise legal transactions occurring in the interim between revocation and reinstatement of the charter.” Bailey v. Eagle Energy, Inc. (In re Butcher), 45 B.R. 736, 738 (Bankr. E.D.Tenn.1985).
In this chapter 11 case, it is the debt- or’s intention to propose and obtain confirmation of a plan of reorganization that provides for payment of the priority taxes due the state of Tennessee. Upon confirmation of such a plan, filing of delinquent returns, and payment of necessary taxes, reinstatement of the debtor’s corporate charter may be accomplished. As discussed above, such reinstatement would result in validation of the debtor’s corporate privileges and existence from the date of revocation.
From the above discussion, it may be concluded that under applicable state law, the debtor is eligible to maintain its chapter 11 petition and pursue a plan of reorganization. Accordingly, it is HEREBY ORDERED that the Motion to Dismiss filed by Fullen Dock and Warehouse, Inc. is denied.
SO ORDERED.
. 28 U.S.C. § 157(b)(2)(A). | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492185/ | OPINION
. WILLIAM V. ALTENBERGER, Chief Judge.
The issue before this Court arises out of three separate Chapter 11 cases which have not been consolidated. All three involved debtors engaged in farming operations. The first case is that of Kevin W. Emerick and Sherry Ann Emerick (EMERICKS). The other two cases are Simon Kenton Farms, Inc. (KENTON FARMS) and Kevin W. Em-erick Farms, Inc. (EMERICK FARMS). Kevin Emerick is the sole shareholder of EMERICK FARMS. Sherry Ann Emerick is the sole shareholder of KENTON FARMS. As part of the farming operations leases were entered into with the following landlords:
Landlord
Giertz Brothers (“Giertz”)
Hennenfent Trust (“Hennenfent”)
Ray and Mary Hippie (“Hippie”)
Estate of Ray Oaks, Deceased (“Oaks”)
Prudential Insurance Company of America (“Prudential”)
John Sauder and John J. Sauder Farms, Inc. (“Sauder”)
The Debtors also borrowed money from Ag Services of America, Inc. (AG SERVICES) and Firstar Bank Burlington, N.A. (FIRS-TAR), with FIRSTAR subrogating its lien against crops to AG SERVICES’ lien against crops.
After the Chapter ll’s were filed, the Debtors and the landlords filed this adversary proceeding against AG SERVICES and FIRSTAR to determine who had priority to the proceeds from the 1994 crop in the amount of $106,684.39, the landlords, or AG SERVICES and FIRSTAR. FIRSTAR filed a counterclaim against the landlords, attacking the landlords’ claim that their liens have priority. In response, HENNENFENT, HIPPLE, SAUDER, GIERTZ and OAKS filed motions for judgment on the pleading, and PRUDENTIAL filed a response and a motion for summary judgment. The Debtors also filed a motion for judgment on the pleadings.
The landlords assert three theories why their liens have priority. The first is based on the State of Illinois statute which provides for a landlords lien. It reads as follows:
§ 9-816. Lien upon crops. Every landlord shall have a lien upon the crops grown or growing upon the demised premises for the rent thereof, whether the same is payable wholly or in part in money or specific articles of property or products of the premises, or labor, and also for the faithful performance of the terms of the lease.
§ 9-317. Landlord’s right against sub-lessee. In all cases when the leased premises are sublet, or the lease is assigned, the landlord shall have the same right to enforce his or her lien against the sublessee or assignee, that the landlord has against the tenant to whom the premises were leased.
735 ILCS 5/9-316 and 5/9-317. FIRSTAR contends the landlords have no liens as they entered into cash leases with either EMER-ICKS or KENTON FARMS, that there is no evidence of an assignment or sublease to EMERICK FARMS, and the relationship between the EMERICKS and KENTON FARMS with EMERICK FARMS is unknown. Therefore the landlords may not assert liens pursuant to § 5/9-317. FIRS-TAR also contends that if the landlords’ liens did arise, the landlords waived them.
Sections 5/9-316 and § 5/9-317 are clear and unambiguous. Under § 5/9-316 a landlord is given a lien on crops, and under § 5/9-317 that lien is enforceable against a sublessee or assignee to the same extent it could be enforced against the original tenant. In the context of this case, the lien against the 1994 crops can be enforced against the EMERICKS and KENTON FARMS or EM-ERICK FARMS. If the EMERICKS and KENTON FARMS farmed the land, § 5/9-316 creates a lien on the crop ehforceable *279against them. If EMERICK FARMS farmed the land, § 5/9-317 allows the landlords to proceed against EMERICK FARMS to enforce the lien created by § 5/9-316.
While this Court could not find a decision of an Illinois court on point, the Court of Appeals of Iowa, in Knosby v. First Iowa State Bank, 390 N.W.2d 605 (1986), in deciding whether a landlord’s lien attached to PIK proceeds, stated:
One hundred years ago, the Iowa Supreme Court considered whether the statutory lien applied to a sub-tenant farming the land.
The lien attached to all crops grown upon the demised premises. It can make no difference that they were grown by a sub-tenant; for the question whether the lien attaches to them does not depend upon whether they were grown by the tenant, but upon whether they were grown upon the demised premises. The language of the provision is clear and explicit. There is no room for construction.
Houghton v. Bauer, 70 Iowa 314, 315, 30 N.W. 577 (1886).
The fact that there is no evidence of a written sublease or assignment is irrelevant. EMERICK FARMS farmed the land. It was a creation of the EMERICKS. Obviously it farmed the land pursuant to some form of sublet or assignment. FIRSTAR’s allegations and arguments raise no facts that would take the situation out from under the provisions of § 5/9-316 and § 5/9-317. It needs to do more than merely allege that a question of fact exists as to the relationship between EMERICKS and KENTON FARMS with EMERICK FARMS. It needs to show or allege a relationship which prevents the landlords from claiming their statutory lien.
In order to qualify for a government farm program, Kevin Emerick and each of the landlords signed a USDA-ASCS certification of cash lease which read as follows:
USDA — ASCS
CERTIFICATION OF CASH LEASE We, the undersigned, wish to participate in the 1994 Acreage Reduction Program(s) on Farm-.
We certify that the land is rented for the 1994 crop year for cash or equivalent, and the landowner(s) listed below receive(s) NO share of the crop, crop production or government payments that may be earned and/or proceeds derived from said production.
I understand that an incorrect or misleading statement will result in the possible loss of all 1994 program benefits for the farm.
Landowners Signature:
Operator Signature:
FIRSTAR contends these certificates waive the landlords’ lien.
A party will not be deemed to have waived or relinquished a right or remedy available to it under the law unless a clear and distinct manifestation of such an intent is found. American Natl. Bank & Trust Co. v. K-Mart Corp., 717 F.2d 394 (7th Cir.1983); In re Browning, 66 B.R. 79 (S.D.Ill.1986). The parties did not present any evidence or argument to guide the Court in determining the purpose of the certificates. It would appear that it is a certificate used to verify the existence of cash leases so that the government knows who is entitled to receive the benefits of the program.1 Nothing in the certificates waive the statutory lien given to insure the cash payments are made. In fact, another section of the regulations specifically refers to waivers of liens or encumbrances *280which must be obtained before products may be pledged as collateral in order to participate in a government loan program.2
As this Court finds for the landlords on the issue of the statutory lien, there is no need to consider the other two bases for the landlords’ claim of priority.
As FIRSTAR admits it subordinated its lien to that of AG SERVICES, the balance of the crop proceeds remaining after payment of the landlords should go to AG SERVICES.
This Opinion is to serve as Findings of Fact and Conclusions of Law pursuant to Rule 7052 of the Rules of Bankruptcy Procedure.
See written Order.
ORDER
For the reasons set forth in the Opinion entered this day, IT IS HEREBY ORDERED:
1. That as to the proceeds from the 1994 crop in the amount of $106,684.39, the Landlords have priority over Ag Services of America, Inc. and Firstar Bank Burlington, *281N.A., and that Ag Services has priority over Firstar.
2. That the 1994 crop proceeds shall be distributed as follows:
Landlord 1994 Rent Due
Prudential Insurance Company of America (“Prudential”) $ 38,000.00
Giertz Brothers (“Giertz”) 7,500.00
Hennenfent Trust 11,000.00 (“Hennenfent”)
Ray and Mary Hippie (“Hippie”) 8,500.00
Estate of Ray Oaks, 6,000.00 Deceased (“Oaks”)
John Sauder and John J. 10,000.00 Sauder Farms, Inc. (“Sauder”)
Ag Services of America, Inc. 25,684.39
TOTAL $106,684.39
. The Federal Regulations governing the Acreage Reduction Program support this conclusion as to the purpose of the certification of cash lease. 7 CFR 1413.8 defines the "Acreage reduction program” or (ARP) to mean
a land retirement system in which participating producers agree not to plant a specified number of acres for cotton, feed grains, rice and wheat in a program year in return for the right to obtain deficiency payments, price support loans, and other program benefits.
A "producer” is defined in 7 CFR § 1413.8 to mean
an individual, entity, or joint operation that shares in the risk of producing the crop, and is entitled to share in the crops available for marketing from the farm, or would have shared had the crops been produced.
7 CFR § 1413.106, governing division of payments, provides, in part:
*280(b)(1) For the 1994 and subsequent years, each producer’s share of the farm program payment for a crop shall be based on the following:
(i) Producers are required to provide a copy of their written lease to the county committee, and, in the absence of a written lease, must provide to the county committee the terms and conditions of any oral agreement or lease.
(ii) A lease will be considered a cash lease if the lessor receives only a sum certain cash payment, or a fixed quantity of the crop (for example, cash, pounds, or bushels per acre), according to paragraph (b)(3) of this section.
(iii) If a lease contains provisions that require the payment of rent on the basis of the amount of crop produced or the proceeds 'derived from the crop, or the interest such producer would have had if the crop had been produced, such agreement shall be considered to be share lease.
(iv) If a lease provides for both a cash payment and/or a share of the crop or production, the county committee will determine a normal cash lease amount by crop for the area. If the guaranteed production or cash lease payment is equal to or exceeds the normal cash lease established by the county committee for the area, then the lease shall be considered to be a cash lease.
(v) If the lease is determined to be a cash lease, the landlord is not eligible to receive disaster or deficiency payments in accordance with this part, or price support loans in accordance with part 1421 of this title, on such party of the crop.
(vi) If the cash guaranty is less than the normal cash guaranty for the area, the lease shall be determined to be a share lease.
(2)Deficiency payments shall be divided by one of the following rules:
(i) According to each producer’s share of the expected production of the planted program crop or the way the production would have been shared if such crop had been planted;
(ii) According to each producer’s share of planted crop or the way the crop would have been shared if the crop had been planted;
7 CFR § 1413.107 sets forth provisions relating to tenants and sharecroppers, and provides, in part:
(a) Program payments shall not be approved for the current year if it is determined that any of the conditions specified below exist:
(1) the landlord or operator has not given the tenants and sharecroppers on the farm an opportunity to participate in the program;
(3) There exists between the operator or landlord and any tenant or sharecropper, any lease, contract, agreement, or understanding required or unfairly exacted by the operator or landlord which was entered into in anticipation of participating in the program the effect of which is:
(i) To cause the tenant or sharecropper to pay to the landlord or operator any payments earned by the person under the program,
(ii) To change the status of any tenant or sharecropper so as to deprive the person of any payments or other right which such person would otherwise have had under the program,
(iii) To reduce the size of the tenant’s or sharecropper’s producer unit, or
(iv) To increase the rent to be paid by the tenant or decrease the share of the crop or its proceeds to be received by the sharecropper.
(4) The landlord or operator has adopted any other scheme or device for the purpose of depriving ny tenant or sharecropper of the payments to which such person would otherwise be entitled under the program. If any of such conditions occur or are discovered after payments have been made, all or any such part of the payments as the State committee may determine shall be refunded to CCC.
. 7CFR§ 1435.121(d) (1989) provides in part as follows:
Waivers of liens or encumbrances on the sugar pledged as loan security to the CCC must be obtained to protect fully the interest of the CCC. A lienholder, in lieu of waiving a prior lien on sugar, may execute with CCC a Lien-holder’s Subordination Agreement (Form CCC0864) in which the lienholder’s security interest is subordinated to the rights of the CCC.... | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492186/ | MEMORANDUM OF DECISION
1
JOHN T. FLANNAGAN, Bankruptcy Judge.
The dischargeability questions before the Court arise on cross motions for summary judgment.2 Both parties agree that no issue of material fact remains for determination and the questions are ripe for summary judgment.
Sherry and Steven Good were married on June 19,1976, and divorced on June 6, 1991.3 Sherry filed a petition for Chapter 7 relief on March 2, 1992.
Sherry’s Complaint to Determine Dis-chargeability of Debt, filed January 14, 1993, and amended January 21, 1993, prays that the Court find dischargeable a debt attributed to her in a contested divorce. Her theory is that the debt springs from a division of property, rather than from an oblir gation to pay maintenance. Steven Good’s answer contends that the debt referred to in Sherry’s complaint is nondischargeable maintenance under 11 U.S.C. § 523(a)(5)(B).
In addition, Steven’s answer includes a counterclaim asking the Court to determine that another debt imposed on Sherry by the divorce decree — a $11,500 judicial lien on a homestead awarded to Sherry — is also non-dischargeable maintenance.
The first question is the one raised by Sherry’s complaint. It involves Steven’s loan from the Higher Education Assistance Foundation. The divorce court divided the debt on this loan with the following comment:
As concerns the debt owed the Higher Education Assistance Foundation, the Court makes the following findings of fact. Both petitioner [Sherry Good] and respondent [Steven Good] bettered themselves during the marriage as regards their educational training and background. Petitioner obtained a degree in nursing and the costs for which were assumed primarily by the respondent. Similarly, respondent increased his educational training by finishing his degree in Human Resources and his training as a sheet metal journeyman. The debt in question was incurred to pay for respondent’s latest educational achievement. By their mutual efforts *339their [sic] parties have increased their respective income earning potential which is now essentially equivalent. While respondent attempts to attach particular significance to the respondent’s [sic] actions and their detrimental effects upon his “handyman” business, the Court is not persuade-dof [sic] such. The current differences in income are not representative of the parties [sic] history with regard to earning nor are they representative of the respondent’s ability to earn in the future based upon his education. The Court therefore divides the debt owed Higher Education Assistance Fund through the Household Bank as follows: Petitioner [Sherry Good] for and as maintenance to the respondent [Steven Good] shall pay $4,000.00 of the principle balance plus $2,013.08 of the interest charged by paying one-half of the monthly payments on said loan as set out in Respondent’s Exhibit “3”. The remainder of said debt shall be the responsibility of the respondent. No further maintenance awarded either party.4
(Emphasis added.)
Earlier in that part of the decree addressing child support, the court found: “Petitioner’s domestic gross income is $2,666.00; respondent’s domestic gross income is $1,308.50_”5 Although Sherry enjoyed the higher income, she failed to make the monthly maintenance payments as ordered, causing Steven Good to move the divorce court for an order reducing the maintenance obligation to a formal judgment. Accordingly, on February 25, 1992, the District Court of Miami County, Kansas, ruled: “The motion to reduce the maintenance order to judgment is sustained and the respondent [Steven Good] is granted a judgment against petitioner [Sherry Good] for maintenance in the amount of $6,013.08, together with 11% interest per annum from May 22, 1991.”6 (Emphasis added.)
Section 523(a)(5)(B) of the Bankruptcy Code controls this question. It reads in relevant part:
§ 523. Exceptions to discharge.
(a) A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from any debt—
[[Image here]]
(5) to a spouse, former spouse ... for alimony to, maintenance for, or support of such spouse ..., in connection with a separation agreement, divorce decree or other order of a court of record, ..., or property settlement agreement, but not to the extent that—
(A) ...; or
(B) such debt includes a liability designated as alimony, maintenance, or support, unless such liability is actually in the nature of alimony, maintenance, or support....
(Emphasis added.) Obviously, Congress has given bankruptcy courts some latitude in deciding whether a liability designated by a state court as alimony, maintenance or support is indeed such for purposes of discharge.
When the liability to be examined arises from an agreement of the parties, the bankruptcy court’s focus when deciding whether § 523(a)(5)(B) is satisfied must be on the intent of the parties. In re Yeates, 807 F.2d 874 (10th Cir.1986) (holding that in determining whether a debt is nondisehargeable support obligation, bankruptcy court must ascertain intention of parties at time they entered into stipulation or property settlement agreement).
*340When a divorcing husband and wife cannot agree on issues of property and maintenance, among other things, the divorce court makes decisions on the contested issues for them. When this is the case, a bankruptcy judge deciding the character of divorce debts must focus on the state judge’s intent as expressed in the decree. Unless the language in the decree is ambiguous on its face, the state court’s intent in awarding maintenance and in dividing debt obligations of divorcing parties should be determined within the four corners of the decree.7 Although a bankruptcy court’s conclusion about the true character of a debt may differ from that of the divorce court in determining whether an obligation is dischargeable under federal law, the bankruptcy judge should give the state court’s determination considerable deference. In re Goin, 808 F.2d 1391, 1392 (10th Cir.1987).
Although Sherry’s brief contends that the divorce decree is ambiguous, the Court does not agree. The divorce judge found that Sherry should pay “maintenance to the respondent” and that there should be “[n]o further maintenance awarded either party.”8 When Steven moved to reduce the language of the decree to formal judgment, the state court said, “[Respondent is granted a judgment against the petitioner for maintenance in the amount of $6,013.08-”9
Other language from, the decree, quoted earlier, acknowledges the parties’ mutual efforts to increase their “income earning potential” and notes that there were “current differences in income”10 of the parties, citing figures showing that Sherry earned twice as much as Steven. Contrary to debtor’s contentions, these references do not create ambiguity in the document. Rather, they make it plain upon the face of the decree that the judge intended an equalizing award of “maintenance” in favor of Steven. The more formal judgment entered later verifies this intent. Giving due deference to the plain language of the divorce court, the Court rules that the judgment for $6,013.08 denominated as maintenance is nondischargeable.
The second question is raised by Steven’s counterclaim. It involves the $11,500 judicial lien in his favor. In the divorce decree, the state court noted an agreement and ruled as follows:
The parties accumulated certain real estate during their marriage and it is stipulated and agreed that the respondent’s equitable share of his marital interest in said real estate equates $11,500.00. Respondent is granted a judicial lien against said real estate which is to be satisfied by the payment to respondent in the sum of $11,-500.00 within 90 days of the filing of this order.11
Sherry failed again to pay the debt to Steven, and in February 1992, the mortgage holder on the property initiated foreclosure proceedings. The foreclosure action resulted in the extinguishment of Steven’s judicial hen interest in the property. According to Steven’s brief, Sherry subsequently redeemed the property from the mortgagee. Sherry’s brief verifies this, but clarifies that she had to further encumber the property in order to redeem it.12
*341In Ms brief, Steven argues that because the $11,500 judicial lien was impressed upon real estate that was Ms prior homestead, the debt is nondischargeable, even though when the court created the debt and lien, it appeared to be dividing property, not granting maintenance. Under Kansas law, no precedent known to this Court supports defendant’s position that the division of marital homestead property is in the nature of “maintenance” simply because that property has a statutory and constitutional status as exempt. The division of marital property does not arise from an obligation of support. Instead, property division serves the purpose of insuring that each spouse receives an equitable portion of the parties’ assets accumulated during marriage.
Unfortunately for Steven, the lien rights in the homestead granted him by the divorce court were extingMshed by the mortgage foreclosure process. TMs event serves to emphasize that those rights were derived from a division of property rather than an award of maintenance. The Bankruptcy Code permits discharge of property debts imposed by a divorce decree. Therefore, the debt secured by the judicial lien is discharge-able.
Finally, Sherry suggests in her brief that Steven’s complaint was filed out of time, albeit she fails to mention that hers was also. This argument has no merit because Judge Franklin ruled on October 7, 1992, as reflected by the Clerk’s courtroom minute sheet of that date, that before a pending contempt motion could be addressed, the Court would deal with the dischargeability issue. TMs ruling permits the filing of the complaint and the counterclaim out of time.
The foregoing discussion shall constitute findings of fact and conclusions of law under Fed.R.Bankr.P. 7052 and Fed.R.Civ.P. 52(a).
IT IS SO ORDERED.
. Plaintiff/debtor Sherry Ruth Good appears by her attorney, Betsie R. Czeschin of Muller & Muller, Kansas City, Missouri. Defendant-creditor Steven M. Good appears by his attorney, Robert D. Berger of Overland Park, Kansas.
. The pleadings do not contest the core nature of the proceeding. The Court finds that this proceeding is core under 28 U.S.C. § 157; and that the Court has jurisdiction under 28 U.S.C. § 1334 and the general reference order of the District Court effective July 10, 1984 (D.Kan. Rule 705).
.Journal Entry and Decree of Divorce filed June 6, 1992, in In the Matter of the Marriage of Good, Case No. 90 D 275 in the District Court of Miami County, Kansas, Exhibit A attached to Defendant's Memorandum in Support of Defendant's Motion for Summary Judgment filed October 15, 1993, at 1.
. Journal Entry and Decree of Divorce filed on June 6, 1991, in In the Matter of the Marriage of Good, Case No. 90 D 275 in the District Court of Miami County, Kansas, Exhibit A attached to Defendant’s Memorandum in Support of Defendant's Motion for Summary Judgment filed October 15, 1993, at 4-5.
. Id. at 2.
.Journal Entry filed February 25, 1992, in In the Matter of the Marriage of Good, Case No. 90 DV 275 in the District Court of Miami County, Kansas, Exhibit B attached to Defendant’s Memorandum in Support of Defendant’s Motion for Summary Judgment filed October 15, 1993, at 1. The state court overruled Steven M. Good’s companion request to offset child support arrearage against existing judgments.
. Steven Good's memorandum in support of his motion for summary judgment has attached to it the affidavit of the divorce court judge, Richard M. Smith. This Court disregards the affidavit.
. Journal Entry and Decree of Divorce filed on June 6, 1991, in In the Matter of the Marriage of Good, Case No. 90 D 275 in the District Court of Miami County, Kansas, Exhibit A attached to Defendant’s Memorandum in Support of Defendant’s Motion for Summary Judgment filed October 15, 1993, at 5.
. Journal Entry filed February 25, 1992, in In the Matter of the Marriage of Good, Case No. 90 DV 275 in the District Court of Miami County, Kansas, Exhibit B attached to Defendant's Memorandum in Support of Defendant's Motion for Summary Judgment filed October 15, 1993, at 1.
. Journal Entry and Decree of Divorce filed on June 6, 1991, in In the Matter of the Marriage of Good, Case No. 90 D 275 in the District Court of Miami County, Kansas, Exhibit A attached to Defendant’s Memorandum in Support of Defendant's Motion for Summary Judgment filed October 15, 1993, at 5.
. Id. at 2-3.
. Absent some showing of collusion with the mortgagee, the fact that Sherry redeemed the property does not give rise to any equitable complaint by Steven. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492623/ | DECISION AND ORDER DENYING MO- ! TION FOR STAY VIOLATION BY THE SOCIAL SECURITY ADMINISTRATION
WILLIAM A CLARK,
This court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157 and 1334, and the standing General Order of Reference entered in this District. Motions to terminate, annul, or modify the automatic stay are core proceedings pursuant to 28 U.S.C. § 157(b)(2)(G).
This matter is before the court upon the Motion for Stay Violation of the Social Security Administration [Doc. #29-1] of Steve and Asisan Leann Baker (hereinafter the “Debtors”), the Response to Motion for Stay Violation of the Social Security Administration [Doc. #35-1] of the United States on behalf of the Social Security Administration, the Debtors’ Brief [Doe. #38-1], and the United States’ Brief and Response to Debtors’ Brief [Doc. # 40-1].
On March 1, 1996, the Debtors filed a petition for relief under Chapter 13 of the Bankruptcy Code, 11 U.S.C. §§ 101, et seq. The Debtors listed on Schedule I — Current Income of Individual Debtor(s), “Social Security for Minor Child — $450.00.” On March 25, 1996, the Social Security Administration filed a proof of claim for $561.94.
Joshua T. Wrigglesworth is the minor, disabled child of the Debtor, Asisan Leann Baker. The Debtor is the representative payee of the child and in that capacity she receives *490the child’s monthly supplemental security income payments. The amount of -these payments is based, in part, upon the income of the entire family. During a prior year, the Debtor failed to report additional income to the Social Security Administration which caused an overpayment of the supplemental security income payments. The subject matter of the Social Security Administration’s claim against the Debtors is the amount of this overpayment.
Since January of 1997, the Social Security Administration has been withholding $48.40 from each of the monthly supplemental security income payments in order to recover the overpayment previously made. As the overpayment was the result of the Debtor’s failure to report additional family income, the Social Security Administration also filed its claim against the Debtor, Asisan Leann Baker, in her capacity as the representative payee of the minor child. The Social Security Administration is not seeking a double recovery of the amount of the overpayment. The amounts withheld from the monthly supplemental security income payments reduce correspondingly the total claim against the Debtors.
CONCLUSIONS OF LAW
The Debtors assert that the supplemental security income payments are the property of the bankruptcy estate and the Social Security Administration’s act of withholding a set amount from each of the monthly payments is a violation of the automatic stay. The Social Security Administration counters that the payments are the property of the minor child and not subject to the provisions of the automatic stay.
Section 362 of the Bankruptcy Code provides that “[ejxcept as provided in subsection (b) of this section, a petition filed under section 301, 302, or 303 of this title, ... operates as a stay, applicable to all entities, of ... the enforcement, against the debtor or against property of the estate, of a judgment obtained before the commencement of the case under this title.” 11 U.S.C. § 362(a)(2).
The Sixth Circuit has previously addressed the issue of the automatic stay noting that Section 362(a) “facially stays proceedings against the debtor and fails to intimate, even tangentially, that the stay could be interpreted as including any defendant other than the debtor.” Lynch v. Johns-Manville Sales Corporation, 710 F.2d 1194, 1196 (6th Cir.1983). The legislative history of Section 362 discloses a congressional intent to stay proceedings against the debtor, and no other person. Id.
The supplemental security income payments being paid to the Debtors are not their property, nor do they become the property of the bankruptcy estate. The payments are being made to the Debtor, Asisan Leann Baker, only in her capacity as the representative payee of the minor child. They are to be used solely for his benefit and to provide for his needs, and any remainder is to be conserved or invested on his behalf. See 20 C.F.R. § 404.2045. The anti-alienation provisions of the Social Security Act clearly provide that no creditor of the Debtors can seek to attach these payments and the payments cannot be transferred to the Debtors’ bankruptcy estate. See 42 U.S.C. § 407(a). The payments belong to the child, Joshua T. Wrigglesworth, who is not a party to this bankruptcy proceeding and who is not afforded any of the protections of the automatic stay. The Debtors cannot rely upon the operation of the automatic stay to prevent the Social Security Administration from collecting the overpayment by withholding funds from the monthly supplemental securiincome payments.
The Debtors cite In re Hagel, 171 B.R. 686 (Bankr.D.Mont.1994) in support of their position that the supplemental security income payments are somehow property of the estate. In Hagel the court held that social security disability income should be considered in applying the disposable income test. Id. at 687-89. The social security disability income at issue there, however, was only for the debtor. Hagel did not involve social security income payments being paid to a debtor solely in her capacity as the representative of a disabled child. The Debtors reliance on Hagel is thus misplaced.
Debtors’ reference to this court’s earlier decision of Taylor v. General Motors Corp. *491(In re Taylor), Ch. 13 Case No. 3-91-03299, Adv. No. 3-91-0194 (Bankr.S.D.Ohio Mar. 25, 1993) is also inapplicable to the facts of the present case. In Taylor, the defendant, General Motors, was withholding funds from the debtor’s wages in an effort to collect an overpayment of disability payments made by a separate entity. The disability payments were for the debtor and no other party. General Motors was itself not a creditor of the debtor nor was it entitled to assert a claim against the debtor for the overpayment of the disability payments. As the wages were property of the bankruptcy estate, General Motor’s wage deductions were held to be a violation of the automatic stay. Id. at 10-11. The court’s holding was based on the fact that the disability payments and wages being paid to the debtor were property of the bankruptcy estate. Unlike in the present case with social security income payments being paid to a debtor solely in her capacity as the representative of a disabled child, the disability payments and wages in Taylor were solely the property of the debtor.
The action of the Social Security Administration is also not an attempt to recover a claim against the Debtors. The fact that the Social Security Administration is seeking to collect the overpayment by filing a claim against the Debtors does not in any way transform the child’s supplemental security income payments into property of the Debtors’ bankruptcy estate subject to the provisions of the automatic stay. The Social Security Administration is permitted to seek recovery of an overpayment from the representative payee. See 42 U.S.C. § 1383(b); Evelyn v. Schweiker, 685 F.2d 351, 352-53 (9th Cir.1982) (Overpayment recoverable from mother of disabled child as his representative payee). The court notes that there is no fundamental unfairness in its holding because each amount withheld from the monthly supplemental security income payments directly reduces the amount of the claim filed against the Debtors.
CONCLUSION
For the reasons stated above, it is the court’s holding that the supplemental security income payments are not property of the bankruptcy estate and that Administration’s act of withholding a set amount from each of the monthly payments the disabled child is not a violation of the automatic stay.
The Motion for Stay Violation of the Social Security Administration is DENIED.
IT IS SO ORDERED. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492226/ | 11/22/2022
IN THE SUPREME COURT OF THE STATE OF MONTANA Case Number: OP 22-0619
OP 22-0619
JOSEPH DENNY NEZPERCE,
NOV 2 2 2022
Bowen Greenwood
(-curt
Petitioner, CI cf
- .-•tote of .'...Aontana
v.
ORDER
JAMES SALMONSEN, Warden,
Montana State Prison,
Respondent.
Appearing as a self-represented Petitioner, Joseph Denny Nezperce asserts that the
Board of Pardons and Parole (Board) should have granted Nezperce parole and that the
Board violated his Due Process rights by its denial. Nezperce contends that his
incarceration is illegal because the Board's denial is "unusual and retaliatory due to the fact
[of the] filed grievances against MSP Policy regarding grooming and canteeen products
`MSP Policy No. 441" because Nezperce contends that Nezperce is a "Transwoman
within a male prison . . . ."1 Nezperce states that the Montana State Prison (MSP) and the
Departrnent of Corrections (DOC) do not have policies for transgender people. Nezperce
concludes that his/her civil rights under the Due Process clauses for the State and Federal
Constitutions as well as Montana's Human Rights Act have been violated. Nezperce
requests that this Court investigate the cause of the parole denial.
This Court does not conduct investigations. We have stated many times that the
Board has broad discretion and authority to reach its decisions. McDerrnott v. McDonald,
2001 MT 89, ¶11 19-20, 305 Mont. 166, 24 P.3d 200. "Under both Montana and federal
precedent, parole is a privilege and not a right." McDerrnott, ¶ 19. We point out that
Nezperce did not include a copy of the Board's decision.
Nezpercce does not provide in the instant Petition what pronouns he/she prefers to use.
We obtained a copy of the Board's case disposition. In April 2022, Nezperce had
an appearance before the Board for a parole hearing. The Board denied Nezperce parole
at that time because Nezperce did not have clear conduct. Pursuant to the Board's
administrative rules, lain offender in a secure facility must have 120 days free of major
disciplinary violations." Admin. R. M. 20.25.305(5) (2012). The Board continued the
parole hearing to October 2022, noting that the hearing was waived at that point. The cause
of Nezperce's denial was based upon the lack of clear conduct.
Turning to the other claims, Nezperce has not demonstrated illegal incarceration.
Section 46-22-101(1), MCA. The claims concerning discrimination, retaliation, and civil
or human rights violations cannot be reached through this remedy of a writ of habeas
corpus. See Gates v. Missoula Cnty. Comm'rs., 235 Mont. 261, 262, 766 P.2d 884, 884-85
(1988) (the writ of habeas corpus is not the remedy for constitutional claims concerning
conditions of confinernent). Nezperce mentioned submitting grievences about the canteen,
but it is not apparent whether Nezperce reported any allegations or complaints of
discrimination, harassment, or retaliation via DOC's Policy for grievances.
See DOC Policy No. 3.3.5 concerning Inmate/Staff Comrnunication Methods and
DOC Policy No. 3.3.3 for Offender Grievance Prograrn. "Grievances should provide
prison officials with fair notice of a problem and thus an opportunity to address the problem
before a lawsuit is filed." Diamond v. Owens, 131 F. Supp. 3d 1346, 1358 (M.D. Ga. 2015)
(citing Chandler v. Crosby, 379 F.3d 1278, 1287 (11th Cir. 2004)).
Nezperce has other available rernedies before coming to this Court. Nezperce
should utilize the grievance procedure under DOC Policy No. 3.3.3, which would assist
any allegations concerning custody and care under a 42 U.S.C. § 1983 claim. Nezperce
may seek relief by filing a complaint in the Powell County District Court where a record
is developed for this Court to review on appeal.
Nezperce has not demonstrated illegal incarceration. Therefore,
IT IS ORDERED that Nezperce's Petition for Writ of Habeas Corpus is DENIED
and DISMISSED.
2
The Clerk of the Supreme Court is directed to provide a copy of this Order to counsel
of record and to Joseph Denny Nezperce personally.
I', 04
DATED this Z-e----day of November, 2022.
i Justice
F
9 4 A4 22 1 4....
Justices
3 | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483784/ | Fourth Court of Appeals
San Antonio, Texas
November 10, 2022
No. 04-22-00630-CR
EX PARTE Juan Esteban VASQUEZ-BAUTISTA
From the County Court, Webb County, Texas
Trial Court No. 2022CRB000723L1
Honorable Leticia Martinez, Judge Presiding
ORDER
Appellant’s motion for extension of time to file his brief is GRANTED. Appellant’s brief
is due January 3, 2023. Further extensions of time will be disfavored.
_________________________________
Liza A. Rodriguez, Justice
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the said
court on this 10th day of November, 2022.
___________________________________
MICHAEL A. CRUZ, Clerk of Court | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483785/ | Fourth Court of Appeals
San Antonio, Texas
November 10, 2022
No. 04-22-00632-CR
EX PARTE Elliot Jerzain RAMOS-ESTRADA
From the County Court, Webb County, Texas
Trial Court No. 2022CRB000724L1
Honorable Leticia Martinez, Judge Presiding
ORDER
Appellant’s brief is currently due on November 17, 2022. On November 9, 2022,
appellant filed a motion requesting a 45-day extension of time to file his brief. We GRANT the
motion and ORDER appellant to file his brief by January 2, 2023. Further requests for
extensions of time will be disfavored.
_________________________________
Rebeca C. Martinez, Chief Justice
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the said
court on this 10th day of November, 2022.
___________________________________
MICHAEL A. CRUZ, Clerk of Court | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/9350214/ | Matter of Westside Grocery & Deli, LLC v City of Syracuse (2022 NY Slip Op 07353)
Matter of Westside Grocery & Deli, LLC v City of Syracuse
2022 NY Slip Op 07353
Decided on December 23, 2022
Appellate Division, Fourth Department
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and subject to revision before publication in the Official Reports.
Decided on December 23, 2022
SUPREME COURT OF THE STATE OF NEW YORK
Appellate Division, Fourth Judicial Department
PRESENT: WHALEN, P.J., SMITH, LINDLEY, NEMOYER, AND WINSLOW, JJ.
819 TP 22-00508
[*1]IN THE MATTER OF WESTSIDE GROCERY & DELI, LLC, PETITIONER-PLAINTIFF,
vCITY OF SYRACUSE, AND KENTON BUCKNER, CHIEF OF POLICE OF THE CITY OF SYRACUSE, RESPONDENTS-DEFENDANTS.
ABRAHAM LAW PLLC, SYRACUSE (IMAN ABRAHAM OF COUNSEL), FOR PETITIONER-PLAINTIFF.
SUSAN KATZOFF, CORPORATION COUNSEL, SYRACUSE (DANIELLE R. SMITH OF COUNSEL), FOR RESPONDENTS-DEFENDANTS.
Proceeding pursuant to CPLR article 78 and declaratory judgment action (transferred to the Appellate Division of the Supreme Court in the Fourth Judicial Department by order of the Supreme Court, Onondaga County [Deborah H. Karalunas, J.], entered April 1, 2022) to review a determination of respondents-defendants. The determination found a public nuisance following a hearing.
It is hereby ORDERED that the order insofar as it transferred that part of the action/proceeding seeking declaratory relief is unanimously vacated without costs, the declaratory judgment action and CPLR article 78 proceeding are severed, the declaratory judgment action is remitted to Supreme Court, Onondaga County, for further proceedings, and the determination is confirmed without costs.
Memorandum: Petitioner-plaintiff (petitioner) commenced this hybrid CPLR article 78 proceeding and declaratory judgment action seeking, inter alia, to annul a determination, following a hearing, finding that a public nuisance existed on premises where it operated a grocery and convenience store, and imposing a $1,000 civil penalty on the premises' owner and ordering closure of the premises for a period of 12 months pursuant to the Syracuse Nuisance Abatement Ordinance (Revised General Ordinances of City of Syracuse [City Ordinance])
§ 45-4 (c) and (d). We confirm the determination.
Contrary to petitioner's contention, upon our review of the record, we conclude that there is substantial evidence to support the determination that a public nuisance as defined by City Ordinance
§ 45-2 existed on the premises based on the evidence that there were "violation[s]" of Penal Law and other provisions enumerated in the ordinance that resulted in six arrests, within a 24-month period, under the relevant provisions. The evidence further showed that the arrests were "predicated on events, circumstances or activities occurring on the premises" and that the "illegal activities . . . had a negative impact and seriously interfere[d] with the interest of the public in the quality of life" (City Ordinance § 45-2). The term "violation" in the context of City Ordinance § 45-2 means the existence of the prohibited conduct set out in the relevant Penal Law and other provisions identified in the ordinance, and does not require evidence that the arrests resulted in a criminal prosecution or conviction (see generally City of New York v Castro, 160 AD2d 651, 652 [1st Dept 1990]).
Contrary to petitioner's further contention, upon our review of the record, we conclude that there is substantial evidence to support the determination that closing the premises for a [*2]period of 12 months was necessary to abate the public nuisance (see City Ordinance
§ 45-4 [c]; Matter of J-Bon, LLC v City of Syracuse, 189 AD3d 2155, 2156 [4th Dept 2020]; see also Matter of Johnson v Police Dept. of City of N.Y., 178 AD2d 643, 643-644 [2d Dept 1991]). Petitioner's contention that the civil penalty was improperly imposed was not raised in its petition-complaint, and is thus not properly before us (see Matter of Town of Rye v New York State Bd. of Real Prop. Servs., 10 NY3d 793, 795 [2008]; J-Bon, LLC, 189 AD3d at 2156; see also Matter of Allocca v Kelly, 44 AD3d 308, 309 [1st Dept 2007]). In any event, petitioner lacks standing to challenge the civil penalty inasmuch as it was imposed on the owner of the premises, and petitioner has therefore not suffered an injury in fact (see generally New York State Assn. of Nurse Anesthetists v Novello, 2 NY3d 207, 211-212 [2004]).
With respect to petitioner's challenge to the constitutionality of City Ordinance § 45-2, we note that "[a] declaratory judgment action is the proper vehicle for [such a] challeng[e]" (Matter of Sibley v Watches, 194 AD3d 1385, 1388 [4th Dept 2021], appeal dismissed and lv denied 37 NY3d 1131 [2021], rearg denied 38 NY3d 1006 [2022] [internal quotation marks omitted]; see Matter of Nelson v Stander, 79 AD3d 1645, 1647 [4th Dept 2010]), and we do not "have jurisdiction to consider the declaratory judgment action as part of this otherwise properly transferred CPLR article 78 proceeding" (Matter of Cookhorne v Fischer, 104 AD3d 1197, 1197 [4th Dept 2013]). "The transfer of a declaratory judgment action to this Court is not authorized by CPLR 7804 (g)" (Matter of Blue v Zucker, 192 AD3d 1693, 1695 [4th Dept 2021]; see Matter of Applegate v Heath, 88 AD3d 699, 700 [2d Dept 2011]). We therefore vacate the order insofar as it transferred the declaratory judgment action, sever the declaratory judgment action and CPLR article 78 proceeding, and remit the declaratory judgment action to Supreme Court for further proceedings (see Cookhorne, 104 AD3d at 1197-1198). We have reviewed petitioner's remaining contentions and conclude that none warrants a different result.
Entered: December 23, 2022
Ann Dillon Flynn
Clerk of the Court | 01-04-2023 | 12-23-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/9350222/ | Matter of Ruben M. v State of New York (2022 NY Slip Op 07371)
Matter of Ruben M. v State of New York
2022 NY Slip Op 07371
Decided on December 23, 2022
Appellate Division, Fourth Department
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and subject to revision before publication in the Official Reports.
Decided on December 23, 2022
SUPREME COURT OF THE STATE OF NEW YORK
Appellate Division, Fourth Judicial Department
PRESENT: SMITH, J.P., PERADOTTO, CURRAN, WINSLOW, AND MONTOUR, JJ.
869 CA 21-01432
[*1]OF RUBEN M. FROM CENTRAL NEW YORK PSYCHIATRIC CENTER PURSUANT TO MENTAL HYGIENE LAW SECTION 10.09, PETITIONER-APPELLANT,
vSTATE OF NEW YORK, RESPONDENT-RESPONDENT.
ELIZABETH S. FORTINO, DIRECTOR, MENTAL HYGIENE LEGAL SERVICE, UTICA (BENJAMIN L. NELSON OF COUNSEL), FOR PETITIONER-APPELLANT.
LETITIA JAMES, ATTORNEY GENERAL, ALBANY (JONATHAN D. HITSOUS OF COUNSEL), FOR RESPONDENT-RESPONDENT.
Appeal from an order of the Supreme Court, Oneida County (Robert E. Antonacci, II, J.), entered September 2, 2021. The order, inter alia, continued the commitment of petitioner to a secure treatment facility.
It is hereby ORDERED that the order so appealed from is unanimously affirmed without costs.
Memorandum: Petitioner appeals from an order, entered after an annual review hearing held pursuant to Mental Hygiene Law § 10.09 (d), determining that he is a dangerous sex offender requiring confinement under section 10.03 (e) and directing that he continue to be confined to a secure treatment facility (see § 10.09 [h]).
We reject petitioner's contention that Supreme Court's determination is against the weight of the evidence. Pursuant to Mental Hygiene Law, a person is classified as a dangerous sex offender requiring confinement if that person "suffer[s] from a mental abnormality involving such a strong predisposition to commit sex offenses, and such inability to control behavior, that the person is likely to be a danger to others and to commit sex offenses if not confined to a secure treatment facility" (§ 10.03 [e]). The statute defines a mental abnormality as "a congenital or acquired condition, disease or disorder that affects the emotional, cognitive, or volitional capacity of a person in a manner that predisposes him or her to the commission of conduct constituting a sex offense and that results in that person having serious difficulty in controlling such conduct" (§ 10.03 [i]). Contrary to petitioner's contention, the fact that the expert witnesses each diagnosed petitioner with different disorders does not constitute an irreconcilable conflict that negated both diagnoses. Rather, a sex offender may suffer from multiple illnesses, not to be viewed in isolation, that work in tandem with one another to predispose the offender to commit a sex offense (see generally Matter of State of New York v David D., 206 AD3d 481, 485 [1st Dept 2022]). Moreover, where experts conflict as to a specific diagnosis, a question of fact is created to be resolved by the factfinder (see generally Matter of State of New York v Ted B., 174 AD3d 630, 632 [2d Dept 2019]; Matter of State of New York v David B., 156 AD3d 793, 793 [2d Dept 2017], lv denied 31 NY3d 904 [2018]). Any disagreement between the experts regarding petitioner's diagnoses was considered by the court, and the court's finding that petitioner suffers from a mental abnormality was consistent with a "fair interpretation of the evidence" (Matter of State of New York v Nervina, 120 AD3d 941, 943 [4th Dept 2014], affd 27 NY3d 718 [2016], cert denied — US &mdash, 137 S Ct 574 [2016]; see Matter of Brandon D. v State of New York, 195 AD3d 1478, 1479-1480 [4th Dept 2021]).
Similarly, the court's determination that petitioner is a dangerous sex offender requiring [*2]confinement is not against the weight of the evidence. Both expert witnesses opined that petitioner would have serious difficulty controlling future sexual misconduct due to his lack of engagement with treatment and his failure to acknowledge his sex crimes at all (see Matter of Charles B. v State of New York, 192 AD3d 1583, 1586 [4th Dept 2021], lv denied 37 NY3d 93 [2021]; see also Matter of Edward T. v State of New York, 185 AD3d 1423, 1425 [4th Dept 2020]). Indeed, petitioner did not believe that he should be considered a sex offender (see generally Matter of Akgun v State of New York, 148 AD3d 1613, 1614 [4th Dept 2017]). Rather, petitioner flatly denied any sexual problem and blamed his ex-wife for the brutal rape and torture she endured. Further, although petitioner has not demonstrated any overt sexual misconduct while confined, he has exhibited aggressive misbehavior that, although not of a sexual nature, is relevant to a determination with respect to his inability to control his behavior (see Matter of Clarence H. v State of New York, 195 AD3d 1532, 1534 [4th Dept 2021]). In addition, petitioner clearly indicated that he did not wish to be released to strict and intensive supervision and treatment and could not guarantee that he would comply with the terms and conditions that might be imposed.
Entered: December 23, 2022
Ann Dillon Flynn
Clerk of the Court | 01-04-2023 | 12-23-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/9350219/ | Matter of Torres v Torres (2022 NY Slip Op 07374)
Matter of Torres v Torres
2022 NY Slip Op 07374
Decided on December 23, 2022
Appellate Division, Fourth Department
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and subject to revision before publication in the Official Reports.
Decided on December 23, 2022
SUPREME COURT OF THE STATE OF NEW YORK
Appellate Division, Fourth Judicial Department
PRESENT: WHALEN, P.J., PERADOTTO, LINDLEY, WINSLOW, AND BANNISTER, JJ.
880 CAF 22-00159
[*1]IN THE MATTER OF SHANDA L. TORRES, PETITIONER-RESPONDENT,
vJOSE L. TORRES, RESPONDENT-APPELLANT.
TODD G. MONAHAN, LITTLE FALLS, FOR RESPONDENT-APPELLANT.
Appeal from an order of the Family Court, Jefferson County (Eugene R. Renzi, A.J.), entered November 10, 2021 in a proceeding pursuant to Family Court Act article 6. The order, inter alia, granted sole legal and primary physical custody of the subject child to petitioner.
It is hereby ORDERED that the order so appealed from is unanimously affirmed without costs.
Memorandum: In this proceeding pursuant to article 6 of the Family Court Act, respondent father appeals from an order awarding sole legal and primary physical custody of the subject child to petitioner mother, with visitation to the father. The father contends that Family Court's determination to award sole legal and primary physical custody to the mother is not supported by a sound and substantial basis in the record. We reject that contention and affirm.
Preliminarily, we note that, because this proceeding involves an initial determination with respect to custody of the child, we may consider the parties' informal custody arrangement, pursuant to which the parties had joint custody of the subject child with primary residence with the father, but the mother is not required to prove a change in circumstances in order to warrant modification of that arrangement (see Matter of DeNise v DeNise, 129 AD3d 1539, 1539-1540 [4th Dept 2015]; Matter of Thillman v Mayer, 85 AD3d 1624, 1625 [4th Dept 2011]).
"In making an initial custody determination, the court is 'required to consider the best interests of the child by reviewing such factors as maintaining stability for the child, . . . the home environment with each parent, each parent's past performance, relative fitness, ability to guide and provide for the child's overall well-being, and the willingness of each parent to foster a relationship with the other parent' " (Matter of Gilbert v Nunez-Merced, 181 AD3d 1210, 1210 [4th Dept 2020], lv denied 35 NY3d 910, 911 [2020]; see Matter of Athoe v Goodman, 170 AD3d 1532, 1533 [4th Dept 2019]).
Here, contrary to the father's contention, the court's determination to award sole legal and primary physical custody to the mother has a sound and substantial basis in the record (see Thillman, 85 AD3d at 1625). "The court's determination following a hearing that the best interests of the child would be served by such an award is entitled to great deference . . . , particularly in view of the hearing court's superior ability to evaluate the character and credibility of the witnesses . . . We will not disturb that determination inasmuch as the record establishes that it is the product of the court's careful weighing of [the] appropriate factors" (Matter of Timothy MYC v Wagner, 151 AD3d 1731, 1732 [4th Dept 2017] [internal quotation marks omitted]; see Thillman, 85 AD3d at 1625).
Entered: December 23, 2022
Ann Dillon Flynn
Clerk of the Court | 01-04-2023 | 12-23-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/9350213/ | Matter of Williams v Annucci (2022 NY Slip Op 07394)
Matter of Williams v Annucci
2022 NY Slip Op 07394
Decided on December 23, 2022
Appellate Division, Fourth Department
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and subject to revision before publication in the Official Reports.
Decided on December 23, 2022
SUPREME COURT OF THE STATE OF NEW YORK
Appellate Division, Fourth Judicial Department
PRESENT: WHALEN, P.J., PERADOTTO, LINDLEY, BANNISTER, AND MONTOUR, JJ.
955 TP 22-01030
[*1]IN THE MATTER OF ALBERT WILLIAMS, PETITIONER,
vANTHONY ANNUCCI, ACTING COMMISSIONER, NEW YORK STATE DEPARTMENT OF CORRECTIONS AND COMMUNITY SUPERVISION, RESPONDENT.
WYOMING COUNTY-ATTICA LEGAL AID BUREAU, WARSAW (LEAH R. NOWOTARSKI OF COUNSEL), FOR PETITIONER.
LETITIA JAMES, ATTORNEY GENERAL, ALBANY (KATE H. NEPVEU OF COUNSEL), FOR RESPONDENT.
Proceeding pursuant to CPLR article 78 (transferred to the Appellate Division of the Supreme Court in the Fourth Judicial Department by order of the Supreme Court, Wyoming County [Michael M. Mohun, A.J.], entered June 27, 2022) to review a determination of respondent. The determination found after a tier II hearing that petitioner had violated various inmate rules.
It is hereby ORDERED that said proceeding is unanimously dismissed without costs as moot (see Matter of Free v Coombe , 234 AD2d 996, 996 [4th Dept 1996]).
Entered: December 23, 2022
Ann Dillon Flynn
Clerk of the Court | 01-04-2023 | 12-23-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483788/ | Fourth Court of Appeals
San Antonio, Texas
November 10, 2022
No. 04-22-00453-CV
CITY OF LAREDO,
Appellant
v.
Fausto TORRES,
Appellee
From the 49th Judicial District Court, Webb County, Texas
Trial Court No. 2021-CVF-000333-D1
Honorable Joe Lopez, Judge Presiding
ORDER
On November 8, 2022, appellee filed a second unopposed motion requesting an extension
of time to file appellee’s brief. Appellee’s motion is GRANTED. Appellee’s brief is due no later
than November 28, 2022. Further requests for extension of time will be disfavored.
_________________________________
Lori I. Valenzuela, Justice
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the said
court on this 10th day of November, 2022.
___________________________________
MICHAEL A. CRUZ, Clerk of Court | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483790/ | Fourth Court of Appeals
San Antonio, Texas
JUDGMENT
No. 04-22-00308-CV
IN THE INTEREST OF M.A.C.
From the 285th Judicial District Court, Bexar County, Texas
Trial Court No. 2021EM503388
Honorable Nick Catoe Jr., Judge Presiding
BEFORE CHIEF JUSTICE MARTINEZ, JUSTICE RODRIGUEZ, AND JUSTICE
VALENZUELA
In accordance with this court’s opinion of this date, appellant’s brief is STRUCK, and this
appeal is DISMISSED. Costs of appeal are taxed against Appellant Guillermo Valverde III.
SIGNED November 9, 2022.
_________________________________
Liza A. Rodriguez, Justice | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483787/ | Fourth Court of Appeals
San Antonio, Texas
November 10, 2022
No. 04-22-00725-CV
David Gene BECKA,
Appellant
v.
The STATE of Texas,
Appellee
From the 144th Judicial District Court, Bexar County, Texas
Trial Court No. 2019CR1257
Honorable Andrew Wyatt Carruthers, Judge Presiding
ORDER
In our November 8, 2022 order, we advised Appellant that his notice of appeal was late,
but it was filed within fifteen days after the notice was due. See TEX. R. APP. P. 26.3. We
implied a motion for extension of time, see Verburgt v. Dorner, 959 S.W.2d 615, 617 (Tex.
1997), and we ordered Appellant to file a motion for extension of time that reasonably explains
the need for an extension. See TEX. R. APP. P. 26.3 (citing TEX. R. APP. P. 10.5(b)); In re E.K.C.,
486 S.W.3d 614, 616 (Tex. App.—San Antonio 2016, no pet.).
Appellant timely filed a response. Appellant’s motion for extension of time to file the
notice of appeal is GRANTED; the notice is deemed timely filed. See TEX. R. APP. P. 26.3;
Garcia v. Kastner Farms, Inc., 774 S.W.2d 668, 670 (Tex. 1989).
_________________________________
Patricia O. Alvarez, Justice
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the said
court on this 10th day of November, 2022.
___________________________________
MICHAEL A. CRUZ, Clerk of Court | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483847/ | Case: 22-2004 Document: 21 Page: 1 Filed: 11/15/2022
NOTE: This order is nonprecedential.
United States Court of Appeals
for the Federal Circuit
______________________
DARLENE PATRICE BENNETT,
Petitioner
v.
DEPARTMENT OF COMMERCE,
Respondent
______________________
2022-2004
______________________
Petition for review of the Merit Systems Protection
Board in No. DC-0752-21-0142-I-1.
______________________
Before HUGHES, WALLACH, and STOLL, Circuit Judges.
PER CURIAM.
ORDER
In response to this court’s August 29, 2022, show cause
order, the Department of Commerce urges transfer of this
mixed case to the United States District Court for the Dis-
trict of Maryland, noting Darlene Patrice Bennett “has
brought related claims alleging discrimination” in that
court. ECF No. 20 at 2. Ms. Bennett does not oppose trans-
fer to a court where this court “believe[s] the case should
be placed and has jurisdiction” and requests that if the
matter is transferred, it be transferred to the United States
Case: 22-2004 Document: 21 Page: 2 Filed: 11/15/2022
2 BENNETT v. COMMERCE
District Court for the District of Columbia or the United
States District Court for the District of Maryland. ECF No.
19 at 3.
Upon consideration thereof,
IT IS ORDERED THAT:
This petition and all its filings are transferred to the
United States District Court for the District of Maryland
pursuant to 28 U.S.C. § 1631.
FOR THE COURT
November 15, 2022 /s/ Peter R. Marksteiner
Date Peter R. Marksteiner
Clerk of Court | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483881/ | J-S31045-22
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
COMMONWEALTH OF PENNSYLVANIA : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
:
v. :
:
:
JOSHUA WILLIAMS :
:
Appellant : No. 1960 EDA 2021
Appeal from the PCRA Order Entered September 17, 2021
In the Court of Common Pleas of Philadelphia County Criminal Division at
No(s): CP-51-CR-0008410-2014
BEFORE: BOWES, J., NICHOLS, J., and STEVENS, P.J.E.*
MEMORANDUM BY STEVENS, P.J.E.: FILED NOVEMBER 15, 2022
Appellant, Joshua Williams, appeals from the order entered in the Court
of Common Pleas of Philadelphia County dismissing his first petition filed
pursuant to the Post Conviction Relief Act (“PCRA”), 42 Pa.C.S.A. 9541-9546,
after the court determined that Appellant failed to establish that plea counsel
caused him to enter an invalid guilty plea by failing to correct the trial court’s
misstatement of the potential sentence he faced on the charge of first-degree
murder. After careful review, we affirm.
At Appellant’s October 5, 2015, guilty plea hearing, the factual basis for
Appellant’s counseled plea was read into the record by the Commonwealth, as
follows:
On January 1, 2013, at 2:35 a.m., police responded to a
radio call of a shooting at 1650 Pratt Street in the city and county
____________________________________________
* Former Justice specially assigned to the Superior Court.
J-S31045-22
of Philadelphia. Upon arrival, they discovered Tyjuan Shields
suffering from a gunshot wound to the head. Shields was
pronounced dead by medics on scene.
The shooting resulted from an altercation between males
who were attending a house party at 1650 Pratt Street, and the
Appellant’s group, who were walking past the party after leaving
a party located at a residence one block away. Earlier that
evening, there was an altercation between the two groups at a
corner bar located near both parties. At that time, Abdal Ala Real
shot a gun. Real was associated with the group attending the
party at 1650 Pratt Street. No one was injured and incident
ended.
A short time later, an altercation occurred between two
women outside the Pratt Street party. People came out of 1650
Pratt to watch just as the Appellant and his friends were walking
by. Someone in the crowd yelled, “He has a gun”, and everyone
ran for cover. Three eyewitnesses, Timothy Scarborough, Rafie
Cooper, and Fred Preston were with Appellant. They observed
Appellant pull out a gun, run up the front steps to 1650 Pratt
Street, and fire three shots into the house that was filled with
people. The decedent was attempting to move some children to
safety when he was struck in the head with a bullet. Three fired
cartridge casings, two (2) bullets, and one (1) bullet jacket were
recovered from the scene. All ballistics evidence came from the
same weapon. No weapon was recovered.
N.T., 10/05/15, at 27-32.
At the hearing, Appellant entered a negotiated guilty plea to Third
Degree Murder, 18 Pa.C.S. § 2502(c), a felony of the first degree, and
Possession of an Instrument of Crime (PIC), 18 Pa.C.S. § 907, a misdemeanor
of the first degree. On the same day, the trial court imposed a sentence of
20 to 40 years’ incarceration.
Through newly retained counsel, Appellant filed a timely “Motion to
Withdraw Guilty Plea” in which he claimed plea counsel had pressured him to
-2-
J-S31045-22
enter an allegedly involuntary plea as part of a dispute over accumulating
attorney fees. On January 15, 2016, the trial court entered an order denying
Appellant’s motion.
Having filed no direct appeal, Appellant sought reinstatement of his
direct appeal rights nunc pro tunc through a timely PCRA petition prepared
and filed by new privately retained counsel, Appellant’s third counsel in the
relevant timeline.1 On February 6, 2018, the PCRA court, with the agreement
of the Commonwealth, granted the requested relief.
On direct appeal nunc pro tunc, Appellant claimed generally that both
the trial court and plea counsel unduly influenced him to enter an involuntary
guilty plea. In a concise, unpublished memorandum decision, a three-judge
panel of this Court affirmed judgment of sentence, finding, inter alia, Appellant
clearly had waived his particular challenge to the voluntariness of his plea
____________________________________________
1 Notably, as discussed infra, counsel’s PCRA petition did not include an
ineffectiveness claim alleging that plea counsel had contributed to Appellant’s
unintelligent and involuntary plea by failing to advise him at any point during
his representation that his first-degree murder sentencing exposure consisted
of a 35-year mandatory minimum and not, as the trial court misstated in its
oral colloquy, a mandatory life sentence. Such an IAC claim was both ripe for
consideration at this initial PCRA stage and presented what would have
appeared to be Appellant’s best opportunity for achieving withdrawal of his
guilty plea.
Instead, it was not until nearly three years later, at the evidentiary hearing
on this, Appellant’s second PCRA petition (deemed his first, as it followed his
unsuccessful direct appeal nunc pro tunc), that Appellant first alleged that plea
counsel ineffectively failed to advise him accurately about the applicable
mandatory minimum for first-degree murder.
-3-
J-S31045-22
because he had failed to raise it first with the trial court. Regarding Appellant’s
IAC claim, moreover, the panel held such a claim must await collateral attack
through a PCRA petition. See Commonwealth v. Williams, 761 EDA 2018,
unpublished memorandum, at *1 (Pa. Super. filed July 23, 2019).
On October 8, 2020, Appellant filed a timely PCRA petition raising
several claims of ineffective assistance of plea counsel, and counsel was
appointed. At the PCRA evidentiary hearing of August 17, 2021, Appellant
asserted a new claim not raised in either his petition or at any time previously,
namely, that plea counsel rendered ineffective assistance by failing to correct
the trial court when it twice advised Appellant during the oral colloquy that if
he elected to stand trial and the jury convicted him of first degree murder he
would receive a mandatory sentence of life imprisonment. In fact, because
Appellant was 17 years old at the time of the fatal shooting, the mandatory
minimum sentence of imprisonment for a first degree murder conviction would
have been 35 years, such that he would have been sentenced to 35 years to
life imprisonment. See 18 Pa.C.S. § 1102.1.
Plea counsel testified that he and Appellant discussed several times prior
to the guilty plea hearing that due to Appellant’s juvenile status at the time of
the crime he was subject to a reduced mandatory minimum sentence of 35
-4-
J-S31045-22
years to a maximum of life for first degree murder. N.T., 8/17/21, at 10.2 It
was counsel’s testimony that Appellant thus understood the possible penalties,
both the minimums and maximums, associated with going to trial, N.T. at 19,
20-21, and he affirmed that they revisited this topic each of the three times
the Commonwealth presented a plea offer over the course of many months.
N.T. at 21.
Plea counsel maintained he informed Appellant that each of the three
plea offers was less than the mandatory minimum that would be imposed
should Appellant be sentenced on a first degree murder conviction. N.T. at
22. Nevertheless, Appellant rejected plea offers of 25 to 50 years and 22 ½
to 50 years in the months leading up to the guilty plea hearing. N.T. at 11.
When plea counsel had conveyed the Commonwealth’s most recent offer of
20 to 40 years made about ten days before the hearing, Appellant, though
still reluctant to plead, accepted the offer. N.T. at 12. It was plea counsel’s
belief that Appellant viewed this offer as a sufficient downward departure from
the previous two offers, which counsel described as simply placing too much
time on Appellant. N.T. at 11.
For his part, plea counsel had considered the Commonwealth’s evidence
against Appellant to be “overwhelming,” N.T. at 11, so much so that he
____________________________________________
2 The judge who presided over both the plea hearing and the PCRA evidentiary
hearing acknowledged that she was not aware during the plea that Appellant
was a juvenile at the time of the shooting because he was 20 years old when
the plea hearing took place. N.T. at 19.
-5-
J-S31045-22
believed a trial “win” for the defense would have been a guilty verdict on the
charge of third degree murder as opposed to first degree murder. N.T. at 14.
Therefore, plea counsel regarded the negotiated plea offer of third degree
murder carrying a 20 to 40 year sentence to align with what he foresaw as
the best possible outcome of a trial. N.T. at 14.
When confronted with the notes of testimony from Appellant’s guilty
plea hearing, plea counsel admitted he had “no reason” for failing to interject
when the trial court twice misstated Appellant’s sentencing exposure for first
degree murder as a mandatory minimum of life imprisonment. N.T. at 15.
Yet, plea counsel also reiterated on cross-examination that he previously
explained to Appellant in their prior discussions that a 35-year minimum
sentence would apply in his case, although he also conveyed to Appellant that
serving out a life sentence was a possible outcome of receiving a 35 year to
life sentence. N.T. at 17. He likewise denied ever telling Appellant’s family
that Appellant faced mandatory life without parole by choosing to go to trial.
N.T. at 24.
Appellant took the stand and testified that he had met with plea counsel
only two or three times before he pleaded guilty. N.T. at 27. He denied that
plea counsel ever advised him of a 35 to life sentencing exposure for
committing first degree murder as a juvenile, N.T. at 27, and testified, instead
that plea counsel told him only that he faced life without parole if he went to
trial and was found guilty of first-degree murder. N.T. at 28.
-6-
J-S31045-22
He testified that he knew nothing about a juvenile sentencing exposure
at the time of his plea, and insisted that had he been properly advised, he
would have opted against a plea in favor of trying his case, N.T. at 27,
notwithstanding that his negotiated plea minimum sentence of 20 years was
15 years less than the 35-year mandatory minimum for first degree murder.
N.T. at 35-36.
On cross-examination, Appellant admitted that plea counsel and he
discussed his status as a juvenile at the time of the shooting and that plea
counsel knew he was 17 at the relevant time. N.T. at 29. The Commonwealth
also asked Appellant why he had not raised this ineffectiveness claim three
years earlier in either his post-sentence motion or his first counseled PCRA
petition. N.T. at 38. When Appellant offered a vague answer, the
Commonwealth asked if it was because he knew the claim lacked merit
because plea counsel had informed him of the 35-year minimum, and he
therefore knew of such a minimum but still decided to take the 20 to 40-year
plea offer because it represented the best alternative available to him. N.T.
at 38. On redirect, Appellant answered that first PCRA counsel, alone, decided
what issues to raise. N.T. at 40.
The trial court then addressed Appellant, first questioning him about his
testimony that neither of the two veteran criminal defense lawyers who
represented him during his guilty plea and post-sentence motion to withdraw
-7-
J-S31045-22
the plea, respectively, informed him that foregoing the negotiated plea would
increase his minimum sentencing exposure from 20 years to 35 years:
Trial Court: So, you are saying that [Plea Counsel] didn’t tell
you that first degree murder was 35 years to
life. He didn’t tell you that?
[Appellant]: No, he didn’t tell me that.
Trial Court: [Post-Sentence Motion Counsel], that lawyer,
when you went to withdraw your guilty plea,
[he] didn’t tell you that the sentence would be
35 years to life – if the judge let you withdraw
your plea, that you would be looking at 35
years, up to life? Thirty-five is the least you can
get. You can get 40, 50, 60, up to life. [Post-
Sentence Motion Counsel] didn’t say to you,
[‘]You know what, if you win this motion, the
least you are going to get is 35 years[’]? [Post-
Sentence Motion Counsel] didn’t tell you that?
[Appellant]: No, we never had a conversation like that, no,
no. He didn’t tell me that.
Trial Court: So you paid him money to file a petition to
withdraw your motion and he never discussed
what the outcome could be if the judge actually
granted your motion? He never told you that?
[Appellant]: No.
N.T. at 46-47.
At the conclusion of oral argument, the PCRA court addressed what it
viewed as Appellant’s lack of credible testimony that it was not until three
years after his guilty plea that he first learned that a 35 year mandatory
minimum for first degree murder applied to his case. Bearing on this
determination was the PCRA court’s skepticism about Appellant’s testimony
that neither plea counsel nor post-sentence motion counsel, both veteran
-8-
J-S31045-22
attorneys highly specialized in criminal law, advised him of the 35-year to life
sentence he would face if he went to trial. N.T. at 58-59.
Furthermore, the PCRA court found credible plea counsel’s testimony
that he had discussed with Appellant the potential of a 35-year to life sentence
on a guilty verdict for first degree murder should he elect to try his case.
Bolstering this finding, the PCRA court expanded, was Appellant’s own
testimony that plea counsel had told him that he was considered a juvenile at
the time he committed the shooting. Accordingly, by its Order of September
17, 2021, the PCRA court denied Appellant’s petition for relief. This appeal
followed.
Our review of an order denying a PCRA petition is well-settled: “We
must determine whether the PCRA court's ruling is supported by the record
and free of legal error.” Commonwealth v. Johnson, 179 A.3d 1153, 1156
(Pa. 2018) (citation omitted). Furthermore, “[t]he PCRA court's factual
findings and credibility determinations, when supported by the record, are
binding upon this Court. Commonwealth v. Small, 238 A.3d 1267, 1280
(Pa. 2020) (citation omitted).
Where a petitioner's claims raise allegations of prior
counsel's ineffectiveness,
Appellant must plead and prove by a preponderance of the
evidence that: (1) his underlying claim is of arguable merit; (2)
the particular course of conduct pursued by counsel did not have
some reasonable basis designed to effectuate his interests; and,
(3) but for counsel's ineffectiveness, there is a reasonable
-9-
J-S31045-22
probability that the outcome of the challenged proceeding would
have been different. Failure to satisfy any prong of the test will
result in rejection of the appellant's ineffective assistance of
counsel claim.
Johnson, 179 A.3d at 1158 (citations and quotation marks omitted).
In addition, this Court has provided that:
“The threshold inquiry in ineffectiveness claims is whether
the issue/argument/tactic which counsel has foregone and which
forms the basis for the assertion of ineffectiveness is of arguable
merit....” Commonwealth v. Pierce, 537 Pa. 514, 524, 645 A.2d
189, 194 (1994). “Counsel cannot be found ineffective for failing
to pursue a baseless or meritless claim.” Commonwealth v.
Poplawski, 852 A.2d 323, 327 (Pa. Super. 2004).
Once this threshold is met we apply the “reasonable basis”
test to determine whether counsel's chosen course was designed
to effectuate his client's interests. If we conclude that the
particular course chosen by counsel had some reasonable basis,
our inquiry ceases and counsel's assistance is deemed effective.
If we determine that there was no reasonable basis for counsel's
chosen course then the accused must demonstrate that
counsel's ineffectiveness worked to his prejudice.
Commonwealth v. Barbosa, 819 A.2d81, 83 (Pa. Super. 2003).
To the extent that Appellant claims that counsel's failure to interject
when the trial court misstated his sentencing exposure for first degree murder
constituted ineffective assistance that caused him to render an unknowing and
invalid guilty plea, we note the following:
“Allegations of ineffectiveness in connection with the entry of a
guilty plea will serve as a basis for relief only if
the ineffectiveness caused the defendant to enter an involuntary
or unknowing plea.” Commonwealth v. Moser, 921 A.2d 526,
531 (Pa. Super. 2007) (quoting Commonwealth v. Hickman,
799 A.2d 136, 141 (Pa. Super. 2002)). “Where the defendant
enters his plea on the advice of counsel, the voluntariness of
the plea depends on whether counsel's advice was within the
- 10 -
J-S31045-22
range of competence demanded of attorneys in criminal cases.”
Moser, supra.
The standard for post-sentence withdrawal of
guilty pleas dovetails with the arguable
merit/prejudice requirements for relief based on a
claim of ineffective assistance of plea counsel, ...
under which the defendant must show that counsel's
deficient stewardship resulted in a manifest injustice,
for example, by facilitating entry of an unknowing,
involuntary, or unintelligent plea. This standard is
equivalent to the “manifest injustice” standard
applicable to all post-sentence motions to withdraw a
guilty plea.
Commonwealth v. Morrison, 878 A.2d 102, 105 (Pa. Super.
2005) (en banc), appeal denied, 585 Pa. 688, 887 A.2d 1241
(2005) (internal citations omitted).
A valid guilty plea must be knowingly, voluntarily and intelligently
entered. Commonwealth v. Pollard, 832 A.2d 517, 522 (Pa.
Super. 2003). The Pennsylvania Rules of Criminal Procedure
mandate that pleas be taken in open court, and require the court
to conduct an on-the-record colloquy to ascertain whether a
defendant is aware of his rights and the consequences of
his plea. Commonwealth v. Hodges, 789 A.2d 764 (Pa. Super.
2002) (citing Pa.R.Crim.P. 590). Specifically, the court must
affirmatively demonstrate the defendant understands: (1) the
nature of the charges to which he is pleading guilty; (2) the factual
basis for the plea; (3) his right to trial by jury; (4) the
presumption of innocence; (5) the permissible ranges of
sentences and fines possible; and (6) that the court is not bound
by the terms of the agreement unless the court accepts the
agreement. Commonwealth v. G. Watson, 835 A.2d 786 (Pa.
Super. 2003). This Court will evaluate the adequacy of
the plea colloquy and the voluntariness of the resulting plea by
examining the totality of the circumstances surrounding the entry
of that plea. Commonwealth v. Muhammad, 794 A.2d 378,
383–84 (Pa. Super. 2002).
Commonwealth v. Kelley, 136 A.3d 1010, 1012–13 (Pa. Super 2016).
Our courts have required the withdrawal of guilty pleas under
circumstances where a defendant was understandably unaware of, or misled
- 11 -
J-S31045-22
about, what maximum sentence could apply should the defendant elect to
stand trial and be found guilty:
In Commonwealth v. Hodges, 789 A.2d 764 (Pa.Super. 2002),
a 16-year-old defendant was permitted to withdraw a negotiated
plea where he pled guilty to avoid the death penalty but was in
fact ineligible for the death penalty because of his age. Similarly,
in Commonwealth v. Lenhoff, 796 A.2d 338 (Pa.Super. 2002),
the defendant was permitted to withdraw a negotiated plea where,
although his sentence was in accord with the plea bargain, he was
told that he faced a 10-year maximum when it was actually less.
At the same time, we do not believe that every mistake in
computing the possible maximum or advising the defendant of the
possible maximum will amount to manifest injustice justifying the
withdrawal of a guilty plea; the mistake must be material to the
defendant's decision to plead guilty. This determination must be
fact- and case-specific. Certainly, if a defendant were to plead
guilty to avoid a death sentence when there is no possibility of a
death sentence, then this mistake would clearly be material. On
the other hand, suppose there were a robbery of five people
together with conspiracy and weapons charges, and the defendant
were told that he faced a maximum sentence of 70 to 140 years
rather than 65 to 130 years. If the plea negotiations resulted in
a sentence of 5 to 10 years, then this mistake would not be
material.
Barbosa, 819 A.2d at 83.
Appellant argues that guilty plea counsel rendered ineffective assistance
by failing to advise him during his oral plea colloquy that the trial court on two
occasions had incorrectly instructed him that he faced mandatory minimum
sentence of life imprisonment if he elected to go to trial and the jury returned
a verdict of guilty on the count of first degree murder. In fact, because
Appellant was 17 years old at the time of the shooting, the mandatory
minimum sentence for first degree murder applicable to him was 35 years’
imprisonment.
- 12 -
J-S31045-22
Prior to giving the advisements in question, the trial court had halted its
oral colloquy to address Appellant’s apparent distress over, and disagreement
with, plea counsel’s advice that he accept the Commonwealth’s negotiated
offer of 20 to 40 years’ incarceration in exchange for his plea of guilty to one
count of third degree murder:
Trial Court: The last ground on which you can file an appeal
is if you said later that your attorney was
ineffective in representing you. Are you
satisfied with the advice of your attorney?
[Appellant]: No.
Trial Court: Okay. So we have a problem. What’s going on?
Do you want to talk to him some more? Do you
want to –-
Let me be clear with you, Mr. Williams. You
have an excellent attorney. He’s going to give
you his advice. In the end, you have to decide
whether you take it or not. Do you understand
that?
[Appellant]: Yes.
Trial Court: So you might not be happy with what you’re
hearing him say, but I know he’s an excellent
attorney because he’s been around for years.
So I know that he’s ready. He’s prepared to do
your case. So, I mean, nobody can force you
into pleading guilty. You do what you want. We
have a jury panel next door. I’ll do a jury. It
doesn’t matter to me in the sense that this is
my job. I do it. Nobody’s trying to pressure you
into anything. You have to make the decision in
the end.
So if you want more time to speak to your
attorney, that’s fine. If you want me to put the
jury panel in here, that’s fine too. You have that
right. Do you understand that?
N.T., 10/5/15, at 14-15.
- 13 -
J-S31045-22
At this time, plea counsel reiterated that he had offered his
recommendation in favor of pleading after “reviewing everything there is to
see in the case[,]” and he maintained that Appellant made his decision to
plead after listening to both him and, “more importantly, I think, his brother
and his mother that that’s probably the best way to go.” N.T. at 16. Plea
counsel also assured the trial court that were Appellant to decide to go to trial,
he was prepared for that as well. N.T. at 16.
The trial court asked again if Appellant was satisfied that plea counsel
was prepared, ready to defend him at trial, and giving him good advice.
Appellant reiterated his earlier dissatisfaction, saying, “I said no.” N.T. at 17.
Nevertheless, prior to receiving any misstatement from the trial court about
the mandatory minimum sentence he would face for first-degree murder if he
elected a jury trial, he affirmed that he wished to continue with his guilty plea:
Trial Court: All right. What do you want to do? Do you want
to plead guilty?
[Appellant]: I’m [sic] plead guilty.
Trial Court: I can’t hear you.
[Appellant]: I said, yes, I’m going to plead guilty.
N.T. at 17 (emphasis added).
The trial court, however, explained that it needed to develop a record
clarifying why Appellant was not satisfied with plea counsel, so it cleared the
courtroom of everyone except Appellant, defense counsel, Appellant’s family,
and court staff and asked Appellant to specify his complaint about plea
counsel. Appellant answered,
- 14 -
J-S31045-22
[Appellant]: I’m unhappy that I was never told – I was told
today that I had to make a decision like this, to
take this plea deal. I was never told that I had
no chance of winning this case or I would have
a strong chance of losing or anything. I had to
make this decision, like, today.
N.T. at 18.
The trial court verified with Appellant that plea counsel had visited him
at prison to discuss his case and consider all offers, which began several
months earlier with an offer of 25 to 50 years’, then 22 ½ to 50, until,
eventually, the present offer of 20 to 40 years. Ten days prior to trial, plea
counsel visited Appellant at the Detention Center, where, he explained to the
court, they discussed the latest offer and Appellant’s chances for prevailing at
trial.
Plea Counsel: And I continued to communicate those
offers to my client and his family. A few
times when I was up at the prison, most
recently, when I got the number down to
20 to 40, I spoke to my client September
25th at the Detention Center where we
talked about the new offer and the
evidence and the difficulty with the case.
And when my client [asks] that there is no
chance to win the case, I told him that my
opinion was that he would not win the
case based on everything that I know
about the case and having tried several
hundred of these cases over the years. So
that’s how we left it on the 25th then. I
told him to continue to think about it.
I’ve been in touch with his family
throughout the last two weeks about this
issue, and then this morning we all spoke
- 15 -
J-S31045-22
in the booth again at length. Again, he’s
not thrilled with this decision.
The Court: Right.
Plea Counsel: But that’s where we are, from my
perspective on it.
N.T. at 18-19.
It was at this point in the colloquy that the trial court first issued
erroneous instructions advising Appellant he would receive a mandatory
sentence of life imprisonment if he elected to stand trial and a jury found him
guilty of first degree murder:
The Court: I mean, I think what you need to
understand here, you’re 20, that the
Commonwealth is probably going to go in
on first-degree murder.
Plea Counsel: Yes.
The Court: Is that what the issue is?
Plea Counsel: Yes. Yes.
The Court: I know it’s a shooting. I know somebody
was shot in the head.
Plea Counsel: Yes.
The Court: I mean, this is how much I know. New
Year’s Eve, you know, free for all.
[Appellant] shoots at person running into
house. Innocent person is hit in the head.
It’s called transferred intent. That’s what
I know. Nothing. I get the basics because
I don’t want to know anything before the
trial.
But what I do know from that is that the
Commonwealth will probably ask me to
charge on first-degree murder and then I
always charge on third-degree murder.
That’s what you’re pleading to, if you are,
and this is – if I kept on, if I continued
- 16 -
J-S31045-22
with your colloquy, what I’d be telling
you is that if you were to be found
guilty of first-degree murder the
sentence is life without parole. I
cannot change that. The judge has no
authority to change that.
The only person in the room who can get
you out from under first-degree murder, I
mean, aside from if the jury were to find
you not guilty of it, is the government.
The Commonwealth is the only
person in the room who is allowed to
make an agreement with you to plead
to a lesser offense and not serve life.
So that’s what you need to understand.
I’ve seen a lot of 20 year olds sit in that
seat, you know. I’m not telling you what
to do, because I’m in the middle. I am
not on either side. My job as a judge is to
be in the middle. I’m not for you. I’m not
against you. I’m not for or against them.
I know everybody thinks, like, the judge
works for the prosecutor. No. Not in
here.
But you’ve go to understand that I don’t –
I’m not pushy either. You do what you
want in my courtroom. I’m not one of
those telling you you’ve got to plea or
whatever. I’m here. You’re 20 years old.
I’ve seen 20 year olds saying,[‘]no,
I’m going to trial[’], get first-degree
murder, get life, then it’s done and
then they’re crying, walking out the
door.
Your attorney is really experienced. He
knows, but you’ve got to make your
choice.
So you know everything now. It’s not like
you didn’t know there was an offer at all,
because I knew.
N.T. at 20-22 (emphasis added)
- 17 -
J-S31045-22
The trial court reviewed with Appellant the ten-month long, court-
supervised, pretrial plea negotiations between plea counsel and the
Commonwealth, and it reminded Appellant that “your attorney was talking to
the DA, and he got them to lower the number. That is the best number you’re
going to get.” N.T. at 22. Plea counsel and the trial court also explained that
the Commonwealth indicated it would oppose defense counsel’s request for a
bench trial and, in so doing, had exercised its right to a jury trial. N.T. at 23.
With that, the trial court asked one last time if Appellant would prefer a
jury trial, and Appellant opted to plead guilty:
Trial Court: You can also have your right to a jury trial.
Do you want that?
[Appellant]: No.
Trial Court: Do you want to continue with the plea?
[Appellant]: Yeah.
Trial Court: Okay. I think we have a record.
N.T., 10/5/15, at 20-22, 23.
While this record shows that the trial court twice misstated that
Appellant faced a mandatory minimum sentence of life imprison if he went to
trial and were convicted of first degree murder, it also substantiates that prior
to receiving this erroneous information from the trial court, Appellant had
already indicated to the court that despite his displeasure with plea counsel
he was staying with his decision to plead guilty. Accordingly, Appellant has
failed to establish that a reasonable probability exists that but for plea
- 18 -
J-S31045-22
counsel’s failure to correct the trial court’s subsequent misstatements, he
would not have pleaded guilty.
Moreover, at the PCRA hearing, the PCRA court found credible plea
counsel’s assertion that he had told Appellant on multiple occasions when
discussing the Commonwealth’s several plea offers that a 35-year mandatory
minimum for juveniles would apply in his case. This finding was supported to
some degree by Appellant’s admission at the PCRA hearing that Appellant had
informed him during their discussions that he was a juvenile at the time of the
crime.
In contrast, the PCRA court deemed incredible Appellant’s contention
that he had never once been advised by either of the two highly experienced
criminal defense attorneys who represented him during the guilty plea phase
and post-trial motion phase, respectively, that he faced a 35-year mandatory
minimum rather than a life sentence. Instead, the trial court was of the
opinion that Appellant had made the sound and informed decision to take the
20 to 40-year plea sentence rather than face a mandatory minimum sentence
of 35 years to life associated with a guilty verdict.
We see no reason to disturb the credibility determinations of the court
in this instance where record evidence exists to support it. See Small, supra
(emphasizing we may not undo credibility determinations supported by
evidence). In arriving at this conclusion, we take guidance from this Court’s
decision in Barbosa, supra, in which this Court acknowledged the potential
for manifest injustice whenever there occurs during a plea court’s oral colloquy
- 19 -
J-S31045-22
a notable exaggeration of a defendant’s sentencing exposure. The chosen
remedy for such a misstatement in Barbosa, however, was to remand for a
PCRA evidentiary hearing, where a record could be developed from which the
PCRA court could then determine whether, inter alia, the defendant was
actually prejudiced by the misstatement. Id.
Here, unlike in Barbosa, we have the benefit of the PCRA evidentiary
hearing record, and from this record we conclude that Appellant has failed to
establish the prejudice prong of the ineffectiveness rubric. Accordingly, we
deem his appeal devoid of merit, and we affirm the order denying PCRA relief.
Order affirmed.
Judge Bowes joins the memorandum.
Judge Nichols concurs in the result.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 11/15/2022
- 20 - | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491503/ | ORDER ON FIRST APPLICATION FOR INTERIM ALLOWANCE OF COMPENSATION AND REIMBURSEMENT OF EXPENSES FOR MERRILL LYNCH & CO.
ALEXANDER L. PASKAY, Chief Judge.
THIS IS a yet-to-be confirmed Chapter 11 case involving Hillsborough Holdings Corporation (HHC) and its subsidiaries (the Debtors). The matter under consideration is the First Application of Merrill Lynch & Co. (Merrill Lynch) for Interim Allowance of Compensation for services rendered and costs incurred during the period of October 24, 1990 through September 20, 1991. The Application for allowance is submitted pursuant to an Order entered by this Court approving the employment of Merrill Lynch as investment bankers and financial advis-ors to the Debtors.
Merrill Lynch seeks compensation in the amount of $2,000,000 for services rendered by it during the relevant time period. In addition, Merrill Lynch seeks reimbursement for expenses in the amount of $38,-404.07. Unfortunately the Application under consideration fails to set forth any detailed time records, and provides only a narrative summary of the services rendered. Because of this, it is impossible to determine the amount of time spent by Merrill Lynch in rendering the services described in the Application.
As set forth in this Court’s Orders entered February 26, 1991, and October 7, 1991, on the Fee Applications of Bear Stearns, financial advisors to the Official Committee of Bondholders, this Court is satisfied that in the absence of detailed time records, it is almost impossible to determine the reasonable value of the services rendered. This Court has been unable to find any authority supporting the proposition that investment advisors are not subject to the mandate of F.R.B.P. 2016(a), which requires any entity seeking compensation to file an application setting forth a detailed statement of services rendered, time expended, and expenses incurred.
To the contrary, research reveals only cases requiring investment bankers to keep *1007detailed time records. See In re Gillett Holdings, Inc., 137 B.R. 475 (Bankr.D.Colo.1992) (Court noted that investment bankers must comply with standard bankruptcy fee practices and procedures, including the filing of detailed time records); In re Mortgage & Realty Trust, 123 B.R. 626 (Bankr.C.D.Calif.1991) (Court held that before investment advisors retained are entitled to compensation, they must keep time records for each professional who performed services in the case, and the application must include the date and description of the services performed and the amount of time spend in billing increments of tenths of an hour or less); In re Baldwin-United Corp., 79 B.R. 321 (Bankr.S.D.Ohio 1987) (Court disallowed fee enhancement requested by investment bankers for debtor in part because bankers did not document fee enhancement with timesheets.) While this Rule may not please the community of investment advisors, this Court is constrained to conclude that the Bankruptcy Rules, not the general policy or custom prevailing in the investment banking business, are controlling.
In light of the fact that this record is devoid of any record of the time spent, this Court is satisfied that it is appropriate to disapprove the Interim Fee Application in toto without prejudice to Merrill Lynch to either supplement the application to provide a detailed description of services rendered, or to renew the application at confirmation when this Court will be in a better position to determine whether Merrill Lynch’s services have produced a meaningful benefit to the estate. Of course, when considering any application by Merrill Lynch, the Court will evaluate not only the time actually spent, but also the results achieved.
This leaves for consideration the request for reimbursement and expenses sought by Merrill Lynch in the total amount of $38,404.07. These expenses are identified as follows:
Airfare $32,070.36
Taxi & Car Rental (out of town) 2,664.15 Lodging 2,303.70
Meals 1,365.86
This Court is satisfied that with the exception of the request for reimbursement of expenses for meals, the costs incurred are reasonable.
Based on the foregoing, it is ORDERED, ADJUDGED AND DECREED that the First Interim Fee Application of Merrill Lynch be, and the same is hereby disapproved without prejudice. It is further
ORDERED, ADJUDGED AND DECREED that the request for reimbursement of expenses is approved, and reasonable costs incurred during the relevant time period are hereby determined to be $37,038.21.
DONE AND ORDERED. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491506/ | DECISION
BURTON PERLMAN, Chief Judge.
The matter before the court is an adversary proceeding in which the plaintiff, Canadian Pacific Forest Products, Ltd. is a secured creditor seeking to avoid and recover alleged preferential and fraudulent transfers made by debtor, the Gibson Group, Inc. In its complaint, plaintiff names three defendants, J.D. Irving, Ltd. (“Irving”), Blum International, Inc. (“Blum”), and West Indies Pulp and Paper, Ltd. (“WIPP”). In the complaint reference is made to Lake Utopia Paper (“Lake Utopia”), a division of Irving. The complaint states that debtor was a broker for the sale of paper products, that Lake Utopia was one of its suppliers to which it was in arrears in its account, that Blum was a customer of debtor as was WIPP, and that pre-filing transactions occurred involving debtor and these three parties which should be set aside. Plaintiff says that in those transactions there was an issuance in favor of Lake Utopia of notes totaling $1,300,000 by Blum and a like transfer by WIPP in the amount of $1,700,000, and that as a consequence of those transfers, debtor’s indebtedness to Lake Utopia was reduced by $3,000,000. In the first Claim of the complaint, plaintiff says that the transfers from Blum and WIPP to Lake Utopia were preferential pursuant to § 547(b) and should be avoided. In the second Claim of the complaint, plaintiff alleges that the cancellation of accounts receivable owing to debtor from Blum in the amount of $1,300,-000 is a fraudulent transfer pursuant to § 548(a). The third Claim of the complaint makes a like allegation with respect to the cancellation of the indebtedness by WIPP to the debtor in the amount of $1,700,000. The fourth Claim of the complaint appears to be one based upon § 550 for the recovery of amounts transferred.
This court has jurisdiction of this matter pursuant to 28 U.S.C. § 1334(b) and the General Order of Reference entered in this District. This is a core proceeding arising under 28 U.S.C. § 157(b)(2)(A), (F) and (H).
In response to the adversary complaint, defendants each filed motions to dismiss for failure to state a claim pursuant to F.R.Civ.P. 12(b)(6) (made applicable in bankruptcy pursuant to B.R. 7012). We discuss, first, the motion by Irving. Irving asserts that plaintiff, an individual creditor, lacks standing pursuant to the Code and *113case law to bring this action. Irving argues that since debtor and the official creditors’ committee had decided not to pursue the avoidance and recovery action, plaintiff is foreclosed as a matter of law from bringing this action. Movant Irving and plaintiff have exhaustively briefed the issues of standing with extensive (and baffling) excursions into questions of benefit or harm, to unsecured creditors or the estate.
While in its complaint plaintiff asserts that it “has been authorized to prosecute this action” pursuant to an order of this court entered January 17, 1992, defendant Irving correctly points out that in connection with our ruling, we specifically reserved for consideration in the adversary proceeding itself, the question of the propriety of bringing the action in the first place by this creditor. It is now that question of standing which is before us on this motion to dismiss.
Both statutes, § 547 and § 548, confer upon the trustee (or the debtor-in-possession pursuant to §§ 1107(a) and 1108)), the power to avoid preferences and fraudulent conveyances. That designation is express. Upon an appropriate showing, however, notwithstanding the absence in the statute of authority for others to exercise the trustee’s power under discussion, a creditors’ committee has been authorized to pursue such actions, and even on occasion a single creditor, as is the case here. See e.g., In re Shelby Motel Group, Inc., 123 B.R. 98, 103 (N.D.Ala.1990) (individual creditor has implied right under § 1109 to initiate avoidance action). The authorities make it very clear, however, that before a creditor can exercise the trustee’s power, request must be made of the trustee, and more than declination by the trustee must be shown in order to justify the bringing of the action by the creditor. The putative plaintiff creditor must show that the inaction by the trustee was unjustified. See, e.g., In re Martin, 124 B.R. 69, 72 (N.D.Ill.1991); In re Prime Motor Inns, Inc., 135 B.R. 917, 920 n. 4 (Bankr.S.D.Fla.1992).
In the present instance, plaintiff offers no such showing. All that plaintiff has shown is that indeed request was made both of the debtor and of the creditors committee, and it is alleged that both refused to file the suit. Absolutely no showing is made as to the reason that these parties refused to initiate the litigation. Movant in its memorandum makes assertions of fact which are totally unsupported in the record as to the motivation of the trustee and the creditors’ committee for not acting, and so we disregard these assertions.
The unvarnished fact is as stated by plaintiff in its memorandum: “There is nothing properly in the record in this adversary proceeding or the Chapter 11 case proper to indicate the reason for Debtor’s and the Committee’s declining to commence the avoidance action.” Plaintiff’s Memorandum in Opposition to J.D. Irving’s Motion to Dismiss, at 2. This does not work in favor of the plaintiff; it works against it. It is the burden of the plaintiff to show that as a matter of fact the inaction by the debtor was unjustified. In re Martin, 124 B.R. at 72; In re Toledo Equipment Co., 35 B.R. 315, 320 (Bankr.N.D.Ohio 1983). Before plaintiff can do that, it is self-evident that it must offer evidence of the reason why the debtor and the creditors’ committee took no action. It is not sufficient to say, as plaintiff has, that its burden is met by a showing that the claim is valid.
Because plaintiff has failed to allege, and is not in a position to prove, that an action by the debtor and the creditors’ committee was unjustified, we will grant the motion to dismiss for lack of standing.
The separate motion by defendant WIPP also raises the standing issue and is likewise granted.
While the motion by Blum does not raise the standing issue, but argues that the complaint fails to state a claim against Blum, in view of our present decision it is not necessary for us to reach that issue.
JUDGMENT ON DECISION BY THE COURT ON MOTIONS TO DISMISS
Motions to dismiss by all three defendants having come on for consideration by *114the court, Honorable Burton Perlman, United States Bankruptcy Judge, presiding, and the issues having been duly considered and a decision having been rendered,
It is Ordered and Adjudged that said motions are granted and the complaint in this proceeding is dismissed. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491507/ | ORDER
JOHN L. PETERSON, Bankruptcy Judge.
In this adversary proceeding the Chapter 13 Debtor/Plaintiff seeks declaratory relief and an injunction against the Defendant state district court judge from enforcing a post-petition restitution condition of a deferred sentence imposed against the Debt- or in a criminal conviction for forgery. Af*250ter due notice, trial was held at Butte on June 23, 1992. Both sides appeared or were represented by counsel. Several exhibits, consisting of the information, complaint, and sentencing Order entered in case No. DC91-32 in the Montana Eighteenth Judicial District Court, Gallatin County, were entered into evidence. The parties also filed a stipulation of fact. No testimony was heard. At the close of trial the Court granted the parties time to file briefs. Those having now been filed, this Court deems this matter submitted and ripe for decision.
At issue is whether a post-petition restitution condition of Debtor’s deferred sentence for forgery is included under the Debtor’s Chapter 13 Plan based on a Proof of Claim filed by the forgery victim, and therefore subject to discharge under 11 U.S.C. § 1328(a). Also at issue is whether the Debtor is entitled to an injunction against the Defendant to prevent enforcement of the restitution. For the reasons set forth below, this Court holds that the restitution condition is not provided under the Plan, the Debtor has failed to make a sufficient showing in support of an injunction, and enters judgment for the Defendant dismissing the Complaint.
The facts are not in dispute. The Debtor filed a voluntary Chapter 13 Petition on August 14, 1990. In his Schedules Debtor listed Roger Koopman (Koopman) as an unsecured creditor in the sum of $40,797. The Debtor amended his schedules on February 11, 1991. On March 28, 1991, this Court entered an Order confirming the Debtor’s second Chapter 13 Plan over the good faith objection of Koopman. On the Chapter 13 Trustee’s motion, this Court entered an Order modifying the Plan on October 10, 1991. Despite the amendment and modification, nowhere in the Debtor’s Schedules or Plan is a restitution obligation listed as a claim or treated under the Plan.
On February 27, 1991, a Complaint was filed charging the Debtor with felony forgery under Mont.Code Ann. § 45-6-325 (1991), in the Montana Eighteenth Judicial District Court, Gallatin County, No. DC91-32, the Hon. Larry Moran (Defendant) presiding (“forgery charge”). On October 8, 1991, the Debtor pleaded guilty to the felony charge. The sentencing hearing took place on January 7, 1992, and the Defendant entered an Order deferring imposition of sentence for six (6) years with conditions on February 26,1992, (“forgery sentence”).
Among the conditions of the Debtor’s sentence is a requirement that the Debtor pay restitution in the amount of $41,297.01 to the clerk of the district court, together with costs of $270, for distribution to Koop-man and St. Paul Fire and Marine Insurance Company. On March 20, 1992, the Debtor filed this adversary proceeding seeking a declaration that the restitution condition is void and illegal, and further seeking an injunction against the Defendant’s enforcement of the restitution condition.
The Debtor argues that the restitution condition was disposed of under the Debtor’s confirmed Chapter 13 Plan through its treatment of Koopman’s unsecured claim, and that the restitution order is illegal under the Bankruptcy Code and the Supremacy Clause of the United States Constitution. Debtor cites Pennsylvania Department of Public Welfare v. Davenport, 495 U.S. 552, 110 S.Ct. 2126, 109 L.Ed.2d 588 (1990), and In re Hucke, 128 B.R. 675 (D.Or.1991) in support of his argument. The facts of those cases, however, differ from the facts of the instant case so as to render those holdings inapposite to the instant adversary proceeding.
In Davenport, the U.S. Supreme Court held that restitution obligations constitute debts under the Bankruptcy Code and are therefore dischargeable under Chapter 13. 495 U.S. at 564, 110 S.Ct. at 2133-34. The debtors in Davenport plead guilty to welfare fraud in September of 1986, and were ordered to pay restitution. Id. at 556, 110 S.Ct. at 2129. In May of 1987 the debtors filed for Chapter 13 protection and listed the restitution debt as an unsecured debt. The restitution debt, being provided for by the debtors’ Plan, was dischargeable under 11 U.S.C. § 1328(a) as it was then written. Id. at 564, 110 S.Ct. at 2133-34. Unlike the debtors in Davenport, the restitution condi*251tion of Debtor’s forgery sentence was not imposed until January of 1992 at the sentencing hearing, more than nine (9) months after the Debtor’s Plan was confirmed. Unlike Davenport, the Debtor’s restitution condition from the forgery sentence was not scheduled, as it was not imposed until more than a year after the chapter 13 petition was filed. This fact is fatal to the Debtor’s argument.
After Davenport, Congress amended the Bankruptcy Code to except criminal restitution from discharge under Chapter 13. P.L. 101-581, 104 Stat. 2865 (November 15, 1990) (adding 11 U.S.C. § 1328(a)(3)). In re Hucke, 128 B.R. 675, 679 (D.Or.1991). The parties agree that the new § 1328(a)(3) does not apply to bankruptcies which commenced before November 15, 1990. Therefore, a discharge under Chapter 13 discharges restitution debts provided for by a plan.
As in Davenport, the restitution debt in Hucke was provided for under the debtor’s plan. 128 B.R. at 676. The debtor in Hucke plead guilty to rape in May of 1990 and received a sentence including restitution. Id. The debtor filed a Chapter 13 petition and listed the restitution debt in his schedules. Id. When the debtor was jailed for probation revocation for failure to make restitution payments, the district court applied Davenport, held that the state violated the automatic stay, and voided the judgment revoking probation.
The facts of the instant case differ from the facts of Davenport and Hucke in one critical aspect. As noted above, those debtors listed their restitution debts in their schedules. The Debtor in the instant case did not. Indeed, he could not because the restitution condition was not imposed until more than sixteen (16) months after the petition was filed.
Under 11 U.S.C. § 521(1), the Debtor is required to file a list of creditors. “Creditor” is defined in 11 U.S.C. § 101(10)(A) as an entity that has a claim against the debt- or that arose at the time of or before the order for relief concerning the debtor. This definition includes, with certain exceptions, only holders of prepetition claims against the debtor. H.R.Rep. No. 595, 95th Cong., 1st Sess. 309-310 (1977), U.S.Code Cong. & Admin.News 1978, p. 5787. Any creditor whose claim is not scheduled must file a Proof of Claim within the time prescribed, or shall not be treated as a creditor with respect to such claim for the purposes of voting and distribution. F.R.B.P. 3003(c)(2).
The Defendant and the clerk of the Montana Eighteenth Judicial District were not among the creditors listed in the Schedules. The restitution condition was not imposed until well after the petition date, and well after the Debtor’s Plan was confirmed. Therefore, this Court finds that they were not “creditors” as defined by the Code. Therefore, they were not required to file a Proof of Claim. The restitution condition was a post-petition, not a pre-petition, debt.
Koopman’s claim was scheduled, a Proof of Claim was filed, and the claim was provided for by the Plan which was confirmed March 28, 1991, more than nine (9) months before the restitution was ordered as part of the forgery sentence. There is no dispute that Koopman’s claim is dischargeable under § 1328(a). Debtor states correctly, “[t]he creditor is therefore bound to receive the payments he is going to receive under the plan and cannot receive anything more.” The Debtor argues that the restitution condition of his deferred sentence is nothing more than a method of collection of an otherwise dischargeable debt.
Such a characterization of restitution as merely a debt collection tactic ignores the clearly stated policy behind restitution. Debtor voluntarily plead guilty to felony forgery of a sum exceeding $40,000. Debt- or argues that the restitution obligation is addressed by the treatment of Koopman’s claim in the Plan. The Court does not share Debtor’s contention that a restitution condition arising from a felony conviction for forgery involving over $40,000 is trivial enough to be provided for by implication through the scheduling of an ordinary creditor’s unsecured claim. A post-petition felony criminal conviction and restitution sentence is not disposed of so lightly by a Chapter 13 Plan confirmed nine (9) months *252earlier in a bankruptcy case of which the sentencing court received no notice and was not scheduled as a creditor. For the above reasons, this Court finds the restitution condition was not “provided for by the plan” under § 1328(a) and is therefore not subject to discharge.
Restitution is authorized as a condition of a deferred sentence in Mont.Code Ann. § 46-18-201(l)(a)(iv) (1991). The correctional policy of the state of Montana is found at Mont.Code Ann. § 46-18-101 (1991). The correctional policy is to protect society by preventing crime through punishment and rehabilitation of the convicted. Mont.Code Ann. § 46-18-101(2) (1991) (Emphasis added). The Montana Supreme Court has written, “[t]here is no question that Mont. Const. Art. II, Sec. 28, provides that ‘[l]aws for the punishment of crime shall be founded on the principles of prevention and reformation.’ ” State v. Stroud, 210 Mont. 58, 683 P.2d 459, 469 (Mont.1984). The Montana Supreme Court in Stroud rejected the defendant’s contention that his sentence would not deter either him or others from future wrongful conduct, or that his sentence would not lead to reformation, because the defendant failed to cite evidence or authority in support. Id.
Likewise, the Debtor in the instant case offered no evidence or authority that the restitution condition imposed by the Defendant was mere debt collection, and not based upon the policy of rehabilitation of the Debtor. Nevertheless, the Debtor seeks this Court’s intervention in state criminal proceedings to enjoin the Defendant, based upon 11 U.S.C. § 362, from further proceedings to enforce the restitution condition of the Debtor’s deferred sentence.
This Court has recognized that bankruptcy laws are not a haven for criminal offenders. In re Asay, 141 B.R. 201, 202 (Bankr.Mont.1992) (other citations omitted). This Court follows the “bad faith/abstention doctrine” from Younger v. Harris, 401 U.S. 37, 43-49, 91 S.Ct. 746, 750-53, 27 L.Ed.2d 669 (1971), which the Ninth Circuit applied in In re Heincy, 858 F.2d 548, 549 (9th Cir.1988), in determining whether to enjoin state criminal proceedings. Asay, 141 B.R. at 203. Under that standard, this Court grants such an injunction only under extraordinary circumstances, if the Debtor does not have an adequate remedy at law and will suffer immediate irreparable injury, that is, unless the injunction is necessary to preserve a federally protected right if denied equitable relief. Id., Heincy, 858 F.2d at 549.
Upon review of the record, this Court finds that the Debtor has failed to make a showing of extraordinary circumstances to justify an injunction under the bad faith/ Younger abstention standard. Debt- or plead guilty to forgery, and received a deferred sentence including restitution when he could have received a sentence of twenty (20) years and a fine of $50,000. Mont.Code Ann. § 45-6-325(4) (1991). Debtor failed to appeal his sentence to the Montana Supreme Court, and may not now assert lack of an adequate remedy at law from that waiver of appeal. The Debtor failed to show that he will suffer immediate irreparable injury. The restitution condition requires monthly payments of $573.57, not the entire $41,297.01 at one time.1 While such payments may not be possible under by the constraints of the Debtor’s Plan, Debtor failed to show that such condition is irreparable given the Code’s provisions for modification at 11 U.S.C. § 1329. Debtor failed to show that the injunction is necessary to preserve a federally protected right under the Bankruptcy Code, because, as explained above, the restitution condition was a post-petition debt, unscheduled, not provided under the Plan, and thus not dischargeable under § 1328(a), no matter which version of that statute was in effect.
*253In summary, the Debtor has failed to satisfy his burden of proof that the restitution debt is a debt provided for by the Plan, and failed to satisfy the burden for an injunction under the Younger /abstention doctrine. This Court will not interpose itself between the Montana criminal justice system and the Debtor solely because the Debtor prematurely filed his Chapter 13 petition before he was sentenced for felony forgery.
IT IS ORDERED a separate Judgment on the merits in favor of the Defendant shall be entered dismissing this adversary proceeding.
. Indeed, the Defendant concedes that Bearden v. Georgia, 461 U.S. 660, 103 S.Ct. 2064, 76 L.Ed.2d 221 (1983) affords Debtor protection against revocation of probation without a finding by the state trial court that the Defendant did not make a bona fide effort to pay restitution and that other forms of punishment are inadequate. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491508/ | MEMORANDUM OPINION
ALBERT E. RADCLIFFE, Bankruptcy Judge.
The plaintiff in this adversary proceeding is the trustee for Southern Oregon Mortgage, Inc. (SOMI) and Gold Key Properties, Inc. Defendants are Douglas County, Oregon and Anne. E. Schroeder, tax collector for Douglas County (tax collector). The complaint seeks an injunction to prevent the tax collector from executing a deed to Douglas County which would complete the tax foreclosure and transfer of certain real properties to Douglas County in satisfaction of delinquent real property taxes. The defendants have filed an answer containing counter-claims seeking a declaration of this court that the plaintiff and this bankruptcy estate have no interest in the real property in question and that, therefore, defendants should be granted, if necessary, relief from the automatic stay provided by 11 U.S.C. § 362.
The parties have submitted the case for trial on stipulated facts. The defendants had previously filed a motion for judgment on the pleadings and the plaintiff had filed a motion for summary judgment. The parties have agreed that their memoranda in support of and in opposition to those motions will be their trial briefs. The matter is now ripe for decision.
STIPULATED FACTS
On February 27, 1992, the parties filed their stipulated facts herein. The facts, as stipulated to by the parties, are as follows:
1. Plaintiff is the duly qualified and acting trustee in the above-entitled bankruptcy cases.
2. At all material times, defendant, Douglas County, was a political subdivision of the State of Oregon.
3. This adversary proceeding is one arising in the debtor’s Case No. 689-60581-R7 and Case No. 689-60578-R7, under Chapter 7, Title 11, now pending in this court. The court has jurisdiction of this adversary proceeding pursuant to 28 U.S.C. § 1334 and 11 U.S.C. §§ 105 and 362.
4. This adversary proceeding is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A).
5. At all material times, defendant, Anne E. Schroeder, was the tax collector for Douglas County.
6. Southern Oregon Mortgage, Inc., of which plaintiff is the bankruptcy trustee, is the beneficiary of a deed of trust from David Winter, dated August 22, 1986, and recorded on August 26, 1986, Douglas County Records, as Recorder’s No. 86-11039, securing a promissory note payable to Southern Oregon Mortgage, Inc., in the amount of $15,000.
7. Said deed of trust is on real property that is subject to real property taxes payable to Douglas County, as Tax Account No. 75350.00, and is described by taxing authorities as Tax Lot 3900, Township 30, Range 6, Section 24; the legal description is attached as Exhibit A to the Complaint. The real property taxes are delinquent since 1986.
8. Gold Key Properties is the legal owner of Lots 5 and 6, Block 3, Starburst Division, Douglas County, Oregon.
9. Said real properties are subject to Douglas County real property taxes, and have Tax Account Nos. 67825.00, and 67826.00 respectively; and are described as Parcel 800 and 900 respectively, of Township 28, Range 6, Section 21. Taxes are delinquent on both parcels since 1986.
10. Douglas County has instituted proceedings in Douglas County Circuit Court to foreclose the tax liens on the aforementioned real properties, in the Circuit Court Case No. L88-2866, Douglas County, et al v. Abbett, et al.
11. On December 21, 1988, a judgment and a decree was entered in said case foreclosing the subject properties, subject to rights of redemption. A copy of said de*571cree is attached as Exhibit B to the Complaint.
12. The two year right of redemption from the entry of the foreclosure decree has lapsed, and defendants intend to record a deed from defendant, Anne E. Schroeder, to defendant, Douglas County, pursuant to O.R.S. 312.200.
13. The bankruptcy estates will suffer great and irreparable injury and damage if the recording of the tax collector’s deed to Douglas County is not enjoined.
14. There is no adequate remedy at law for protecting the interests of the estates.
In addition, this court notes, by taking judicial notice of the records and files herein, that this case was commenced, as an involuntary Chapter 7 bankruptcy case, by the filing of a petition on February 27, 1989, an Order for Relief having been entered herein on July 14, 1989.
ISSUE
The issue presented in this case is whether or not the automatic stay provided for in 11 U.S.C. § 362(a) prevents the tax collector from giving her deed to Douglas County to complete the real property tax foreclosure of the real property described above.
The plaintiff argues that the automatic stay prevents the tax collector from executing and Douglas County from recording the deeds necessary to complete the tax foreclosure.
The defendants argue that since the two year statutory redemption period has lapsed, the properties are no longer property of the estate and there is nothing for this court or the automatic stay to preserve or protect. In other words, the execution and recordation of the deeds would not affect estate property.
DISCUSSION
11 U.S.C. § 362(a), the statute providing for an automatic stay in bankruptcy, provides in pertinent part as follows:
... a petition filed under ... this Title, ... operates as a stay, applicable to all entities of— ...
(2) the enforcement, against the debtor or against property of the estate, of a judgment obtained before the commencement of the case under this title;
(3) any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate; ...
Our discussion begins with a review of two important decisions in this district which have considered similar issues.
In In re Petersen, 42 B.R. 39 (Bankr.D.Or.1984), Judge Higdon (formerly Wil-hardt), of this court, considered the effect of the automatic stay upon a statutory period of redemption following a foreclosure sale in a mortgage foreclosure context. In Petersen, Home Federal Savings and Loan Association (Home Federal) sought relief from the automatic stay in the debtor’s Chapter 11 proceeding to, in essence, clear title to debtor’s property which it had foreclosed. Debtor had three pre-petition mortgages with Home Federal. On October 7,1982, Home Federal obtained decrees of foreclosure on all three of debt- or’s properties. On November 29, 1982, the sheriff, upon writs of execution, sold all three properties to Home Federal. On December 15, 1982, the Lane County Circuit Court entered an order, in each case, confirming the sales. Under Oregon Revised Statutes (O.R.S.) 23.560(1) the debtor had one year from November 29, 1982, the date of the sheriff’s sale, to redeem the properties 1. On February 1, 1983, the debtor filed his Chapter 11 petition. He never redeemed any of the properties as allowed in O.R.S. Chapter 23. After the redemption period ran, the sheriff issued its deed to Home Federal for each of the properties.
Judge Higdon agreed with Home Federal, that the automatic stay does not toll the running of the statutory period of redemption and granted Home Federal’s motion for relief.
From the date of the sale the judgment debtor has only bare legal title to the *572property sold. He must take further legal steps to reacquire full title. Section 362 stays only “acts” or “proceedings” of non-debtors. What the debtor needs to do to reacquire the property is irrelevant to this analysis. Under Oregon’s redemption procedure it is clear the purchaser need only wait for the fullness of time to be blessed with fee title. 42 Bankr. at 40.
Judge Higdon also noted that, during the statutory period of redemption, the debtor does not have any right to possession of the property.
In In re McCallen, 49 B.R. 948 (Bankr.D.Or.1985), Judge Perris, of this court, addressed the question of whether or not the automatic stay tolled the running of the time allowed to redeem property subject to strict foreclosure of a land sale contract. There, the debtors and the creditors, Welches, had entered into a land sale contract by which the debtors agreed to buy some land from the Welches. When the debtors failed to make the annual payment due November 1, 1982, the creditors commenced strict foreclosure proceedings. On July 25, 1983, the state court entered a stipulated interlocutory decree of strict foreclosure. Under the terms of the decree, the debtors had until December 31, 1983 to redeem; if they did not do so, the Welches could apply for a final decree of strict foreclosure. On December 30, 1983, debtors filed their Chapter 11 bankruptcy petition. Thereafter, the creditors filed a motion for relief from the automatic stay to complete the strict foreclosure of the contract.
In deciding the issue, Judge Perris compared the nature of the debtors’ interest during the redemption period in the context of strict foreclosure, with debtors’ rights following a sheriff’s sale in a mortgage foreclosure. She discussed at length, the opinion in Petersen. She denied the creditor’s motion and held that the automatic stay of 11 U.S.C. § 362(a) tolled the redemption period provided in the interlocutory decree of strict foreclosure.
Following a sheriff’s sale, a debtor whose interest is sold has a limited right of redemption which expires after the passage of time. A debtor whose interest is being foreclosed under the Oregon strict foreclosure procedure has a different interest during the Court established redemption period. The debtor retains equitable title and the right to possession. The debtor’s right to the property is terminated only after the vendor obtains a final decree of strict foreclosure from the State Court. The State Court has the authority under appropriate circumstances not to enter the final decree or to set aside a final decree it has entered. In short, despite the entry of the interlocutory decree of strict foreclosure, a debtor retains under Oregon law a real property interest which cannot be terminated without affirmative action.
Section 362(a) prevents the vendor from taking the positive legal step required to completely foreclose the vendee’s interest. 49 B.R. at 951.
Real property tax foreclosures are governed, in Oregon, by Oregon Revised Statutes, Chapter 312. The county institutes foreclosure proceedings, O.R.S. 312.050, and obtains a judgment and decree “... for the delinquent taxes and interest appearing to be due on the several parcels....” O.R.S. 312.090. The state court orders the property, against which the judgment and decree is entered, sold directly to the county for the amount of taxes and interest for which the property is liable. The certified copy of the judgment and decree constitutes the certificate of sale to the county. O.R.S. 312.100. From the date of the decree, there is a two year redemption period. O.R.S. 312.120. This section provides in pertinent part as follows:
(1) Except as provided in O.R.S. 312.122, all real properties sold to the county under O.R.S. 312.100, shall be held by the county for the period of two years from and after the date of the judgment and decree of foreclosure, unless sooner redeemed.
(2) During the two-year period any person having an interest in the property at the date of the judgment and decree of foreclosure ... may redeem the property *573by payment of the full amount applicable to the property under the judgment and decree ...
During the redemption period, the former owner is entitled to possession of the property. O.R.S. 312.180. Finally, O.R.S. 312.-200 provides as follows:
The properties not redeemed within the two-year period prescribed by O.R.S. 312.120 shall be deeded to the county by the tax collector. All rights of redemption, with respect to the real properties therein described, shall terminate on the execution of the deed to the county. No return or confirmation of the sale or deed to the county is required or necessary. (emphasis added)
It is this deed to Douglas- County, as described in O.R.S. 312.200, which the plaintiff seeks to enjoin. Plaintiff maintains that the deed provided for in O.R.S. 312.200 is the affirmative act which 11 U.S.C. § 362(a) prevents.
Admittedly, O.R.S. Chapter 312 can be read as having conflicting provisions as to whether the right of redemption expires, merely by the passage of time, or whether it is the deed to the county that terminates the redemption period. In contrast, See O.R.S. 312.120(2) providing that: “During the two-year period any person having an interest in the property at the date of the judgment ... may redeem ...;” with O.R.S. 312.200; “All rights of redemption ... shall terminate on the execution of the deed to the county_”
Thus, it is not clear as to whether the Oregon Legislature intended that the redemption period expires after two years or continues until the execution of the sheriff’s deed. In other words, what happens if there is some delay in the execution of the tax collector’s deed?
At least in dicta, the Oregon Supreme Court has answered this question. In Mallory v. Gruberman, et al, 185 Or. 82, 202 P.2d 281 (1948), the Oregon Supreme Court, interpreting the predecessor to this statute held:
[This statute] ... should be liberally construed in favor of those having an interest in the property sold on foreclosure, and, if any doubt exists as to what the legislature intended by the language used, such doubt should be resolved in their favor. Applying that rule of construction we are of the opinion that plaintiff’s right to redeem the property in question was not extinguished until the execution of the deed to the county. 185 Or. at 91. (parenthesis added)
Other Oregon cases are apparently in accord. See Bursell v. Brusco, 203 Or. 37, 275 P.2d 873 (1954); Otto & Harkson Realty Co. v. Josephine County, 207 Or. 199, 295 P.2d 875 (1956); Fenter v. General Accident Fire and Life Assurance Corp., 258 Or. 545, 484 P.2d 310 (1971).
Douglas County contends that the deed referred to in O.R.S. 312.200 is analogous to the conveyance provided from the sheriff in mortgage foreclosure cases, hence, the rationale of Petersen should control.
This court disagrees, the pertinent portions of the mortgage foreclosure statutes are set forth below:
O.R.S. 23.560(1) in part, provides:
The mortgagor or judgment debtor whose right and title were sold, ... may, at any time within 180 days after the date of sale, redeem the property; ...
O.R.S. 23.600 in part, provides:
If redemption is not made as prescribed in O.R.S. 23.520 to 23.590 ... the purchaser ... shall be entitled to a conveyance from the sheriff. If the judgment debtor redeems at any time before the time for redemption expires, the effect of the sale shall terminate and the judgment debtor shall be restored to the estate of the judgment debtor, (emphasis added)
It appears clear, as Judge Higdon concluded in Petersen, supra, that the period of redemption expires merely by the passage of time. After the time has expired, redemption would not be possible, even if the purchaser had not yet obtained the conveyance from the sheriff, since the statute merely provides that the purchaser is entitled to such a conveyance, presumably to quiet title. There is no language in the mortgage foreclosure statutes providing *574that the right of redemption expires upon such conveyance similar to the language found in O.R.S. 312.200. The period of redemption involved in this case more closely resembles the facts presented to the court in In re McCallen, supra, since here, the debtors retain, under Oregon law a real property interest which cannot be terminated without affirmative action, the execution of the tax collector’s deed to Douglas County.
Accordingly, the automatic stay provided in 11 U.S.C. § 362(a) prohibits Douglas County and the tax collector from taking an affirmative act to obtain possession of property of the estate or the enforcement against property of the estate of a judgment obtained before the bankruptcy, by executing and recording the tax collector’s deed to Douglas County. Thus, the bankruptcy estate retains an interest in the properties in question as the right of redemption does not expire until the execution of the deed.
CONCLUSION
Due to the foregoing, this court concludes that plaintiff is entitled to the relief sought in his complaint, enjoining defendants from executing and recording the deed from the tax collector to Douglas County and that plaintiff is entitled to a judgment for his costs and disbursements incurred herein.
Nothing contained in this opinion, or in any judgment or decree entered as a result, hereof, however, should prevent Douglas County from filing a motion for relief from stay if it so desires.
This opinion shall constitute the court’s findings of fact and conclusions of law pursuant to Bankruptcy Rule 7052; they shall not be separately stated.
. The period of redemption is now 180 days. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492210/ | 11/22/2022
-
IN THE SUPREME COURT OF THE STATE OF MONTANA
Case Number: DA 22-0629
DA 22-0629
2
BILLY BUDD SULLIVAN, rov 2 2 21'.?2
Plaintiff, C. '
o;
urt
HARRY RICHARDS,
Plaintiff and Appellant, ORDER
v.
ALICIA DORMAN and JASON FORTNEY,
Defendants and Appellees.
Harry Richards has filed a verified Petition for an Out-of-Time appeal of an October
4, 2022 decision issued in the Nineteenth Judicial District Court, Lincoln County,
concerning an easement dispute.' Richards states that the decision did not reach him in a
timely fashion due to various delays.
M. R. App. P. 4(6) allows this Court to grant an out-of-time appeal "[i]n the
infrequent harsh case and under extraordinary circumstances amounting to a gross
miscarriage of justice[1" Richards missed the thirty-day filing deadline by only three days
and is representing himself on appeal. The Court affords some latitude to self-represented
litigants and prefers to consider and decide cases on the merits, with both parties having an
opportunity to be heard. Under the circumstances, we conclude that Richards's appeal
should be allowed to proceed.
Finally, Richards included a certificate of service of his Petition on the opposing
parties, Alicia Dorman and Jason Fortney. We point out that the address provided is not
`Both Plaintiffs Billy Budd Sullivan and Harry Richards signed the Petition for an Out-of-
Time Appeal on November 4, 2022. The notary, however, attested only to Harry Richards's
signature. The Clerk of the Supreme Court amended the caption to reflect the parties.
complete because it is missing a post-office box number. The Court is unable to determine
whether they received a copy of Richards's Petition and other pleadings. We advise
Richards that proper service of all papers filed with this Court is required. M. R. App.
P. 10(2). Richards must serve a copy of his opening brief and reply brief to the opposing
parties by mail and with a complete mailing address on the certificate of service. Failure
to do so will result in the pleading being returned to Richards at his expense.
IT IS THEREFORE ORDERED that Richards's Petition for an Out-of-Time Appeal
is GRANTED.
The Clerk of the Supreme Court is directed to file Richards's accompanying Notice
of Appeal as of the date of this Order.
The Clerk is also directed to provide a copy of this Order to Alicia Dorman and
Jason Fortney, along with a copy of the Petition for Out-of-Time Appeal, Notice of Appeal,
and accompanying documents, and to provide a copy of this Order to Harry Richards and
to Billy Budd Sullivan.
`0-4
DATED this ZZ, day of November, 2022.
Chief Justice
Ju es
2 | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483792/ | Fourth Court of Appeals
San Antonio, Texas
MEMORANDUM OPINION
No. 04-22-00735-CR
IN RE Adrian James HILLARD Jr.
Original Proceeding 1
PER CURIAM
Sitting: Patricia O. Alvarez, Justice
Irene Rios, Justice
Lori I. Valenzuela, Justice
Delivered and Filed: November 9, 2022
PETITION FOR WRIT OF MANDAMUS DENIED
Relator Adrian James Hillard Jr. filed a petition for writ of habeas corpus in which he asks
this court to release him from custody. Relator is represented by trial counsel below; therefore, he
is not entitled to hybrid representation. Patrick v. State, 906 S.W.2d 481, 498 (Tex. Crim. App.
1995). The absence of a right to hybrid representation means Relator’s pro se habeas corpus
petition will be treated as presenting nothing for this court’s review. See id. Accordingly, relator’s
petition for writ of habeas corpus is denied. See TEX. R. APP. P. 52.8(a).
PER CURIAM
DO NOT PUBLISH
1
This proceeding arises out of Cause No. 2022-CR-2190, styled State of Texas vs. Adrian James Hillard, Jr., pending
in the 186th Judicial District Court, Bexar County, Texas, the Honorable Jefferson Moore presiding. | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483791/ | Fourth Court of Appeals
San Antonio, Texas
MEMORANDUM OPINION
No. 04-22-00726-CV
IN RE Maria GONZALEZ, Eliseo Gonzalez, Lucy Harvest, Scott Grice, Miriam Grice and
Democrats Abroad
Original Proceeding 1
PER CURIAM
Sitting: Rebeca C. Martinez, Chief Justice
Beth Watkins, Justice
Liza A. Rodriguez, Justice
Delivered and Filed: November 9, 2022
PETITION FOR WRIT OF MANDAMUS DENIED
On October 31, 2022, relators filed a petition for writ of mandamus containing a request
for immediate emergency relief. After considering the petition and this record, this court concludes
relators are not entitled to the relief sought. Accordingly, the petition for writ of mandamus is
denied. See TEX. R. APP. P. 52.8(a). Relators’ request for emergency relief is denied as moot.
PER CURIAM
1
This proceeding arises out of relators’ absentee ballot complaint against Bexar County Election Officials. See TEX.
ELEC. CODE ANN. § 273.061(a) (“[A] court of appeals may issue a writ of mandamus to compel the performance of
any duty imposed by law in connection with the holding of an election or a political party convention, regardless of
whether the person responsible for performing the duty is a public officer.”). | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483794/ | FILE COPY
Fourth Court of Appeals
San Antonio, Texas
November 9, 2022
No. 04-22-00429-CV
TEXAS FIRST RENTALS, LLC,
Appellant
v.
MONTAGE DEVELOPMENT CO., LLC and Derick Murway,
Appellees
From the 285th Judicial District Court, Bexar County, Texas
Trial Court No. 2022-CI-08101
Honorable Tina Torres, Judge Presiding
ORDER
Appellees’ brief was due on November 2, 2022. See TEX. R. APP. P. 38.6(b). After the
due date, Appellees filed an unopposed motion to extend the brief due date to December 2, 2022.
Appellees’ motion is GRANTED. Appellees’ brief is due on December 2, 2022.
_________________________________
Patricia O. Alvarez, Justice
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the said
court on this 9th day of November, 2022.
___________________________________
MICHAEL A. CRUZ, Clerk of Court | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483795/ | Fourth Court of Appeals
San Antonio, Texas
MEMORANDUM OPINION
No. 04-22-00584-CV
Raynelle MCCATHERN,
Appellant
v.
IVY APARTMENTS,
Appellee
From the County Court at Law No. 10, Bexar County, Texas
Trial Court No. 2022CV01871
Honorable David J. Rodriguez, Judge Presiding
PER CURIAM
Sitting: Irene Rios, Justice
Beth Watkins, Justice
Liza A. Rodriguez, Justice
Delivered and Filed: November 9, 2022
DISMISSED FOR LACK OF JURISDICTION
Appellant attempts to appeal the trial court’s judgment awarding possession of real
property to appellee Ivy Apartments in a forcible detainer action. The trial court signed the
judgment on July 13, 2022. The notice of appeal was due August 12, 2022. See TEX. R. APP.
P. 26.1. A motion for extension of time to file the notice of appeal was due on August 29, 2022.
See TEX. R. APP. P. 26.3. Appellant did not file a motion for extension of time to file her notice of
appeal. Appellant filed her notice of appeal on September 8, 2022. Thus, appellant’s notice of
appeal appeared to be untimely.
04-22-00584-CV
Therefore, on September 20, 2022, we ordered appellant to file a written response showing
cause why this appeal should not be dismissed for lack of jurisdiction. We cautioned appellant
that if she did not respond to our show cause order by October 20, 2022, we would dismiss this
appeal. To date, appellant has not responded to our order. Accordingly, we dismiss this appeal
for lack of jurisdiction. See TEX. R. APP. P. 42.3(a).
PER CURIAM
-2- | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483796/ | Fourth Court of Appeals
San Antonio, Texas
November 9, 2022
No. 04-22-00584-CV
Raynelle MCCATHERN,
Appellant
v.
IVY APARTMENTS,
Appellee
From the County Court at Law No. 10, Bexar County, Texas
Trial Court No. 2022CV01871
Honorable David J. Rodriguez, Judge Presiding
ORDER
In accordance with this court’s memorandum opinion of this date, this appeal is
DISMISSED FOR LACK OF JURISDICTION. We ORDER that no costs be assessed against
appellant in relation to this appeal.
It is so ORDERED on November 9, 2022.
_____________________________
Irene Rios, Justice
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the said
court on this 9th day of November, 2022.
_____________________________
Michael A. Cruz, Clerk of Court | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483797/ | Fourth Court of Appeals
San Antonio, Texas
JUDGMENT
No. 04-22-00337-CR
Luis DOMINGUEZ,
Appellant
v.
The STATE of Texas,
Appellee
From the County Court at Law No. 11, Bexar County, Texas
Trial Court No. 628896
Honorable Timothy Johnson, Judge Presiding
BEFORE JUSTICE CHAPA, JUSTICE RIOS, AND JUSTICE WATKINS
In accordance with this court’s opinion of this date, the motion to dismiss this appeal is
GRANTED, and this appeal is DISMISSED.
SIGNED November 9, 2022.
_________________________________
Luz Elena D. Chapa, Justice | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483807/ | FILE COPY
Fourth Court of Appeals
San Antonio, Texas
November 8, 2022
No. 04-22-00717-CV
Jose Richard GONZALEZ and Elda E. Gonzalez,
Appellants
v.
CITY OF PREMONT, TEXAS,
Appellee
From the 79th Judicial District Court, Jim Wells County, Texas
Trial Court No. 20-09-60606-CV
Honorable Richard C. Terrell, Judge Presiding
ORDER
The clerk’s record has been filed in this appeal. However, it does not contain the March
10, 2022 “Order Granting Defendant’s Motion for Discovery Sanctions” being appealed in this
case. Accordingly, we order the trial court clerk to file a supplemental clerk’s record containing
the March 10, 2022 “Order Granting Defendant’s Motion for Discovery Sanctions” from Cause
No. 20-09-60606-CV in this court on or before November 23, 2022. TEX. R. APP. P. 34.5(c)(1).
_________________________________
Luz Elena D. Chapa, Justice
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the said
court on this 8th day of November, 2022.
___________________________________
MICHAEL A. CRUZ, Clerk of Court | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483799/ | FILE COPY
Fourth Court of Appeals
San Antonio, Texas
November 9, 2022
No. 04-22-00270-CV
John P. BOERSCHIG,
Appellant/Cross-Appellee
v.
RIO GRANDE ELECTRIC COOPERATIVE, INC.,
Appellee/Cross-Appellant
From the 63rd Judicial District Court, Kinney County, Texas
Trial Court No. 4205
Honorable Roland Andrade, Judge Presiding
ORDER
Appellant’s and cross-appellant’s briefs are currently due on November 16, 2022. On
November 8, 2022, the parties filed a joint motion requesting an extension of time to file the
briefs until January 6, 2023, for a total extension of fifty-one days. After consideration, we
GRANT the motion and ORDER appellant and cross-appellant to file their briefs by January 6,
2023. Appellee’s and cross-appellee’s response briefs will be due thirty days after the filing of
the parties’ opening briefs, and any reply briefs will be due twenty days after the filing of the
appellee’s and cross-appellee’s briefs. See TEX. R. APP. P. 38.6(b), (c).
_________________________________
Beth Watkins, Justice
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the said
court on this 9th day of November, 2022.
___________________________________
MICHAEL A. CRUZ, Clerk of Court | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483818/ | COURT OF APPEALS OF VIRGINIA
Present: Judges Athey, Chaney and Raphael
UNPUBLISHED
Argued at Winchester, Virginia
DAO MINH LE
MEMORANDUM OPINION* BY
v. Record No. 0045-22-4 JUDGE CLIFFORD L. ATHEY, JR.
NOVEMBER 15, 2022
OANH NGUYEN LE
FROM THE CIRCUIT COURT OF ARLINGTON COUNTY
Judith L. Wheat, Judge
John L. Bauserman, Jr., for appellant.
Dusty Sparrow Reed (Sparrow Reed PLLC, on brief), for appellee.
Dao Minh Le (“father”) appeals from an order of the Circuit Court of Arlington County
(“circuit court”) holding that he owed Oanh Nguyen Le (“mother”) $89,363 in child support
arrearages and awarding mother $24,525.01 in attorney fees and costs. Father contends that the
circuit court erred when it failed to credit him for nonconforming child support payments made
between August 2015 and January 2018 and when it awarded mother her attorney fees and costs.
Father also contends that the circuit court erred when ruling that mother, who had been ordered to
pay child support to father, would have no further child support obligation after the parties’ child
(the “child”) turned eighteen years old. We disagree, and affirm the decision of the circuit court.
*
Pursuant to Code § 17.1-413, this opinion is not designated for publication.
I. BACKGROUND1
Father married mother on September 17, 2001, and one child was born during their
marriage.2 The parties separated after four years of marriage, and the Superior Court of Guam
entered a final decree for dissolution of marriage on December 22, 2005. That final decree
incorporated the parties’ marital settlement agreement (the “MSA”), under which mother was
awarded “full custody” of the child and was to care for the child “throughout the year,” while father
would “care for [the child] during the summer season as mutually agreed upon.” The MSA also
permitted the parties to modify its terms “by mutual consent” provided that such modification was
“in writing and executed with the same formality” as the MSA.
The MSA required father to pay mother $1,800 per month in child support beginning on
January 1, 2006, and continuing until the child “reaches the age of eighteen (18), marries, becomes
emancipated, becomes self-supporting, or dies, whichever occurs first.” The MSA also stated that
father’s child support payments “shall be increased annually consistent with the percentage of
increase in [his] salary from the previous year” and further required father to pay the entirety of
“all costs incident to providing each child with a private day school education through the
completion of the twelfth (12th) grade.” The MSA additionally provided in relevant part:
The parties agree that any costs, including but not limited to counsel
fees, court costs, investigation fees, and travel expense, incurred by a
party in the successful enforcement of the agreements, covenants, or
provisions of this Agreement, whether through litigation or other
action to compel compliance herewith, shall be borne by the
defaulting party. Any such costs incurred by a party in the successful
1
The record in this case was sealed. Nevertheless, the appeal necessitates unsealing
relevant portions of the record to resolve the issues father has raised. Evidence and factual
findings below that are necessary to address the assignments of error are included in this opinion.
Consequently, “[t]o the extent that this opinion mentions facts found in the sealed record, we
unseal only those specific facts, finding them relevant to the decision in this case. The remainder
of the previously sealed record remains sealed.” Levick v. MacDougall, 294 Va. 283, 288 n.1
(2017).
2
The child turned eighteen years old during the pendency of this case.
-2-
defense to any action for enforcement of any of the agreements,
covenants, or provisions of this Agreement shall be borne by the
party seeking to enforce compliance.
Without mother’s consent, father unilaterally reduced his child support payments beginning
in 2009. Mother emailed father about the reduction, and, on December 14, 2009, father responded
to her email by stating that she had “three options,” which were to either “transfer [the child] to
[him],” “sue [him] in court,” or “adjust monthly payments.” On June 7, 2011, mother emailed
father again claiming that he had reduced his child support payments without her consent and
requested that father fully pay his child support obligations. In August 2015, father was living in the
United Arab Emirates (“UAE”) and was employed as a senior commercial officer by the United
States government. With mother’s consent, the child began living with father to attend school and
continued to live with father until January 31, 2018. Father failed to pay child support while the
child was living with him.
During trial, both parties introduced evidence regarding their respective incomes and
estimated amount of child support arrearages owed. Mother stipulated that the child lived with
father between August 2015 and January 2018 with her consent but maintained that “[s]he was the
primary custodian at the time.” Father subsequently stipulated that mother “had a legal right to
remove the child without his consent” from his care on January 31, 2018, to “assert her primary
custody rights.” Father also admitted that the custody and child support provisions stemming from
their final divorce decree were not modified until August 30, 2019, and that mother was current on
her child support payments.
The circuit court found that there had been a material change in circumstances warranting
modification of the parties’ child support obligations. As a result, mother’s presumptive child
support obligation was changed to $759 per month. The circuit court also denied father’s request
for credit for nonconforming child support payments, holding that $89,363 in arrearages was owed
-3-
to mother. In doing so, the circuit court found that mother “did not relinquish custody of [the]
child” and that father “without consent, unilaterally stopped paying child support.” The circuit court
also awarded mother $24,525.01 in attorney fees and costs in accordance with the MSA and her fee
affidavit that she submitted after closing arguments.
The circuit court also denied father’s petition for a rule to show cause, stating:
No additional information has been provided to the [c]ourt that
[mother] is not current on any support payment. The minor child . . .
turns 18 on December 23, 2021, and [mother] will have no further
support obligation. Accordingly, the [c]ourt finds no basis to issue
the Rule requested by [father].
A final order was entered on December 9, 2021. This appeal followed.
II. ANALYSIS
A. Standard of Review
“The determination of child support is a matter of discretion for the circuit court, and
therefore we will not disturb its judgment on appeal unless plainly wrong or unsupported by the
evidence.” Da’mes v. Da’mes, 74 Va. App. 138, 144 (2022) (quoting Niblett v. Niblett, 65 Va. App.
616, 624 (2015)). “Whether a contract entitles the prevailing party to attorney fees is a question of
law that we review ‘de novo.’” Worsham v. Worsham, 74 Va. App. 151, 178 (2022) (quoting
Online Res. Corp. v. Lawlor, 285 Va. 40, 61 (2013)).
B. The End of Mother’s Support Obligation
Father contends that pursuant to Code § 20-124.2(C), the circuit court erred as a matter of
law when it held that mother’s duty to pay father child support terminated when the child turned
eighteen. However, since the juvenile and domestic relations district court (“JDR”), not the circuit
court, previously ordered the termination of the child support obligation when the child turned
eighteen, we do not address this assignment of error because the assigned error does not arise from a
final order of the circuit court in this case.
-4-
For example, in the section of the final order entitled “[Father’s] Motion for a Rule to
Show Cause is Denied,” the circuit court merely confirms that mother had “made all payments
ordered by the JDR Court” and based on the JDR order when “[t]he minor child . . . turns 18 on
December 23, 2021, [mother] will have no further support obligation.” “[A]ccordingly, the
[circuit c]ourt has no basis to issue the Rule requested by [father].” In this context, the circuit
court’s recitation from the JDR order that mother’s child support obligation would end when the
child turned eighteen was simply part of its rationale for denying father’s petition for rule to
show cause; the error assigned by the father did not arise from the appealable final order before
this Court. This interpretation is consistent with the father’s contemporaneous objection to the
final order in this case, alleging that the circuit court “materially erred by dismissing [his] rule to
show cause on the basis of [the child] turning 18, thereby mooting [his] rule on this basis.”
On appeal, father asks this Court to correct the circuit court’s “erroneous statement of
law” and “declare[,] should [the child] continue to live with [him] after he reaches the age of
18[,] that the [m]other’s duty to pay child support will continue.” The issue of when mother’s
child support obligation would end, however, was neither presented nor ruled on by the circuit
court. Accordingly, we do not consider father’s argument on appeal. See Masika v.
Commonwealth, 63 Va. App. 330, 333 (2014) (“The Court of Appeals will not consider an
argument on appeal which was not presented to the trial court.” (quoting Ohree v. Commonwealth,
26 Va. App. 299, 308 (1998))); see also Ohree, 26 Va. App. at 308 (declining to review an issue
under Rule 5A:18 “because the trial court never ruled” and thus “there is no ruling for us to review
on appeal”).
C. Credit for Nonconforming Child Support Payments
Father further argues that the circuit court erred by failing to credit him $54,000 for
nonconforming child support payments he alleges were made between August 2015 and January
-5-
2018, when the child lived with him because the parties had an “unequivocal, implied in fact
agreement . . . that the child would live with [him] indefinitely.” We disagree.
“Child support payments required under a valid court order become vested as they
accrue, and the court is without authority to make any change as to past due installments.”
Zedan v. Westheim, 60 Va. App. 556, 582 (2012) (quoting Commonwealth v. Skeens, 18
Va. App. 154, 158 (1994)). “However, although a court may not retroactively modify a child
support obligation, allowing a payor spouse credit for non-conforming support payments, in the
limited situations where permitted, is not a modification of the support order.” Id. (quoting
Skeens, 18 Va. App. at 158).
“This Court has established two exceptions to the statutory limitations on retroactive
modification of past due child support payments.” Jones v. Davis, 43 Va. App. 9, 14 (2004).
The first exception allows a credit for nonconforming child support payments when the
following two conditions are met: “(1) an agreement by the parties which modifies the terms or
method of payment; and (2) no adverse effect on the support award.” Zedan, 60 Va. App. at 582
(quoting Gallagher v. Gallagher, 35 Va. App. 470, 476 (2001) (en banc)). The second exception
allows a credit “where the custodial parent has agreed to relinquish custody on a permanent basis
to the other parent.” Id. at 582-83. Under this second exception, we held that enforcement of the
child support order would result in unjust enrichment and that “failure to enforce the letter of this
decree under these circumstances will not work to the detriment of the child.” Acree v. Acree, 2
Va. App. 151, 158 (1986). On appeal, father relies only upon the second, custody-based
exception allowing credit for nonconforming child support payments.
Notwithstanding that the circuit court found that mother “did not relinquish custody of
[the] child” and that father “without consent, unilaterally stopped paying child support,” father’s
arguments fail by his own admission that the alleged change in custody, however characterized,
-6-
was not permanent. As we held in Gallagher, the exception father relies on applies only where
there has been a “total ‘relinquish[ment of] custody on a permanent basis.’” See Gallagher, 35
Va. App. at 477 (quoting Acree, 2 Va. App. at 157). We explained that “[to] permit modification
of a decree by the parties in a case in which the change in custody is less than complete will
invite ‘continuous trouble and turmoil,’ the exact difficulties the rule prohibiting credit for
non-conforming payments is designed to avoid.” Id. (quoting Henderlite v. Henderlite, 3
Va. App. 539, 542 (1987)).
Father attempts to avoid our holding in Gallagher by asking the Court to “make a good
faith extension of existing law” because “a contrary result would result in the [m]other’s unjust
enrichment and shock the conscience of the average person.” In support of his request, father
claims that he “in good faith fully performed his support responsibility, assumed primary
physical custody of [the child], and provided fully for [the child’s] support.” Consistent with our
prior cases, we decline father’s request to extend the law based on claims of unjust enrichment.
See Jones, 43 Va. App. at 16 (holding that, although “mother would be unjustly enriched in the
absence of awarding credits to father . . . the absence of . . . an agreement is fatal to father’s
claim for credits against child support arrearages”); see also Gallagher, 35 Va. App. at 478
(concluding that “[m]other’s unjust enrichment is an unfortunate by-product of our decision but,
standing alone, does not compel a different result”).
As the absence of an agreement granting father permanent custody of the child is fatal to
his claim for credit for nonconforming child support payments, we do not address father’s
argument that the circuit court failed to weigh equitable factors in denying such credit. See
Butcher v. Commonwealth, 298 Va. 392, 396 (2020) (“As we have often said, ‘the doctrine of
judicial restraint dictates that we decide cases on the best and narrowest grounds available.’”
-7-
(quoting Commonwealth v. White, 293 Va. 411, 419 (2017))). Accordingly, we affirm the circuit
court’s judgment denying father’s request for credit for nonconforming child support payments.
D. Attorney Fees
Father contends that the circuit court erred by awarding mother attorney fees and costs when
she failed to present evidence in support thereof, namely her affidavit of attorney fees, during her
case in chief. Father cites no law or authority in support of his argument that a party must present
an attorney fee affidavit before closing argument.
“Rule 5A:20(e) requires an appellant’s opening brief to contain the standard of review and
the argument, including applicable principles of law and authorities, in support of each of his
assignments of error; unsupported assertions of error do not merit appellate consideration.” Winters
v. Winters, 73 Va. App. 581, 597 (2021). “An appellant’s failure to strictly adhere to the
requirements of Rule 5A:20(e) permits this Court to treat an issue as waived.” Id. In this case, we
find that father’s lack of authority in support of his argument is significant and treat his assignment
of error as waived. See Sfreddo v. Sfreddo, 59 Va. App. 471, 494 (2012) (“If the parties believed
that the circuit court erred, it was their duty to present that error to us with legal authority to support
their contention.” (quoting Fadness v. Fadness, 52 Va. App. 833, 851 (2008))).
E. Appellate Attorney Fees
Mother requests her attorney fees and costs incurred while defending this appeal. In this
case, the MSA provides as follows:
The parties agree that any costs, including but not limited to counsel
fees, court costs, investigation fees, and travel expense, incurred by a
party in the successful enforcement of the agreements, covenants, or
provisions of this Agreement, whether through litigation or other
action to compel compliance herewith, shall be borne by the
defaulting party. Any such costs incurred by a party in the successful
defense to any action for enforcement of any of the agreements,
covenants, or provisions of this Agreement shall be borne by the
party seeking to enforce compliance.
-8-
We find that wife prevailed on appeal in enforcing her rights to child support and attorney
fees under the MSA. Accordingly, we grant mother’s request for appellate attorney fees and costs,
and remand to the circuit court to set a reasonable award of attorney fees and costs incurred by
mother during this appeal. Rule 5A:30(b).
III. CONCLUSION
For the foregoing reasons, we affirm and remand this case to the circuit court for
determination and award of the appropriate amount of appellate attorney fees, which also should
include any additional attorney fees incurred at the remand hearing.
Affirmed and remanded.
-9- | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483820/ | COURT OF APPEALS OF VIRGINIA
Present: Judges Humphreys, Athey and Callins
PUBLISHED
Argued at Virginia Beach, Virginia
WILLIAM ADAM BOYD
OPINION BY
v. Record No. 0029-22-1 JUDGE CLIFFORD L. ATHEY, JR.
NOVEMBER 15, 2022
CONSTANCE WEISBERG
FROM THE CIRCUIT COURT OF THE CITY OF VIRGINIA BEACH
Stephen C. Mahan, Judge
Juli M. Porto (Blankingship & Keith, P.C., on briefs), for appellant.
Kevin E. Martingayle (Herbert V. Kelly; Bischoff Martingayle, P.C.;
Jones, Blechman, Woltz & Kelly, P.C., on brief), for appellee.
William Adam Boyd (“Boyd”) appeals from a jury verdict in the Circuit Court of the City
of Virginia Beach (“trial court”). Boyd assigns error to the trial court’s entry of judgment on the
jury’s verdict. He also assigns error to the trial court’s decision to award attorney fees against
him. Finally, he assigns error to the jury’s $350,000 damages award assessed against him.
Finding no error, we affirm the decision of the trial court.
I. BACKGROUND
In June 2011, Constance Weisberg (“Weisberg”) executed an Agent Agreement
(“Agreement”) with To Charge, LLC (“To Charge Virginia”). Pursuant to the terms of the
Agreement, Weisberg contracted to solicit potential purchasers of To Charge Virginia’s credit
card processing services. As consideration for the successful solicitation of an account, To
Charge Virginia agreed to pay Weisberg a monthly residual commission of “fifty percent (50%)
of the Gross Processing Revenue” for each account she successfully solicited while the account
remained active. Shortly after Weisberg began securing accounts on behalf of To Charge
Virginia, she received commission checks that she contended failed to accurately reflect the
proper amount of monthly commission earned pursuant to the Agreement.
First, by phone in 2011 and 2012, and then by email in 2013, Weisberg requested that
Boyd, who was the sole and managing member of To Charge Virginia, permit her to review the
residual reports detailing the activity on the accounts she had secured and the corresponding
commission due therefrom. Since her repeated requests by phone and email were unsuccessful,
in August of 2013, she met with Boyd to make her request in person. During that meeting, Boyd
denied her request to review the residual reports and refused to explain why she was not being
paid the proper amount of residual commission pursuant to the Agreement. Subsequently, by
letter dated September 25, 2013, Boyd sought to terminate the Agreement based on his allegation
that Weisberg had breached the Agreement by violating its confidentiality provisions.
As a result, by letter dated February 10, 2014, Weisberg, through counsel, notified To
Charge Virginia that she intended to file suit to recover the unpaid commission and further
demanded that Boyd produce the previously requested residual reports.1 Four days later, on
February 14, 2014, Boyd organized a Nevada limited liability company, ToCharge, LLC (“To
Charge Nevada”), which he also managed as the sole member. Later that same day, To Charge
Virginia transferred all its assets, contracts for services, independent contractor agreements,
customer accounts, and goodwill to To Charge Nevada for the sum of $10. Following the
transfer of all its assets, To Charge Virginia became insolvent.
Weisberg filed suit on May 27, 2014. Her final complaint2 included, in relevant part,
counts for fraudulent conveyance, voluntary conveyance, and breach of contract. For the
1
In response, To Charge Virginia sued Weisberg for violating confidentiality provisions
of the Agreement. However, that suit was dismissed with prejudice on June 3, 2021.
2
Weisberg amended her complaint several times.
-2-
fraudulent conveyance and voluntary conveyance claims, she sought “judgment against To
Charge Virginia, To Charge Nevada, Boyd, and VeriPay jointly and severally” in the amount of
up to $350,000, “together with her costs and expenses, including attorney fees pursuant to
Virginia Code § 55-82.1.” In her breach of contract claim, Weisberg alleged that she had also
been “damaged in the approximate amount of $150,000” and only sought “judgment against To
Charge Virginia in the amount of [$350,000].”3
Almost four years later during the pendency of the litigation, on February 13, 2018, Boyd
dissolved To Charge Nevada.4 Boyd then executed an Asset Purchase Agreement, dated March
30, 2018, that purported to sell all of To Charge Nevada’s assets, contracts for services,
independent contractor agreements, customer accounts, and goodwill to VeriPay, LLC
(“VeriPay”) for $10. However, VeriPay did not exist on the date of that transfer. Finally, on
June 14, 2018, Boyd apparently resurrected the previously dissolved To Charge Nevada and
renamed the business VeriPay.5
During the jury trial, Weisberg testified that To Charge Virginia breached their
Agreement and Boyd fraudulently conveyed all the assets of To Charge Virginia, to To Charge
Nevada, then to the renamed VeriPay to hide the assets of To Charge Virginia because of their
pending litigation. Weisberg originally sought to pierce the corporate veil, but later withdrew
that argument. At the conclusion of Weisberg’s case in chief, the corporate entities moved to
3
After discovery, it was determined that the gross amount paid to To Charge Virginia by
Weisberg’s account between June 2011 and December 2016 was $ 574,737.30. Her half would
have been $287,368.65. As she was only paid $34,922.77 during her employment, at trial she
sought $252,445.88.
4
The evidence in the record shows that Boyd held the assets personally from February
13, 2018, to March 30, 2018.
5
To Charge Nevada and VeriPay seemingly never coexisted. Boyd’s testimony was
inconsistent regarding when VeriPay existed and how To Charge Nevada was “resurrected” after
being dissolved.
-3-
strike Weisberg’s breach of contract claim, and Boyd moved to strike the fraudulent conveyance
and voluntary conveyance claims. Counsel for all the defendants contended that Weisberg had
the burden of proving that she did not violate the Agreement and that she had not met that
burden. Boyd also contended that Weisberg was not a “creditor” as required under the
fraudulent or voluntary conveyance statutes. Finally, he argued that with respect to her various
claims for damages in general, Weisberg had not proved her damages to a reasonable degree of
certainty. The trial court denied the motions to strike. Following the conclusion of all the
evidence, the motions to strike were renewed but the trial court again denied the motion. The
trial court then reviewed the jury instructions and verdict form presented by the parties. Both
Weisberg and Boyd agreed to the following instructions and verdict form given by the trial court
prior to the closing statements:
Jury Instruction 27:
“Every assignment or transfer of property given with the intent to delay, hinder or
defraud creditors, as to such creditor is void. Such transfers are considered as a fraudulent
conveyance.”
Jury Instruction 30:
If you find that [Weisberg] proved badges of fraud, by clear and
convincing evidence, when the assets of [To Charge Virginia],
[were] assigned to [To Charge Nevada], a prima facia case of a
fraudulent conveyance has been made and [Weisberg] is entitled to
a presumption that the conveyance was in fact fraudulent. Unless
William Adam Boyd disproves the fraud, by clear and convincing
evidence, you shall find that the conveyance was fraudulent.
Verdict Form:
We, the jury, having found that the contract was breached, further
find that the transfer by William Adam Boyd of the assets of [To
Charge Virginia] to [To Charge Nevada] was made with the intent
to hinder, delay and defraud the plaintiff and assess damages
against William Adam Boyd in the sum of $______.
-4-
OR
We, the jury, find that the conveyance was not made with the
intent to
hinder, delay or defraud [Weisberg].
We, the jury, on the issues joined, find in favor of [Weisberg] on
the breach of contract claim and assess damages in the sum of
$______ against ______.6
OR
We, the jury, on the issues joined, find in favor of the defendants.
The jury instructions were read to the jury prior to closing arguments and provided in writing for
their consideration during deliberations. During closing argument, Weisberg’s counsel argued
that
[I]f you find that the evidence demonstrates that [the transfer] was
fraudulent and done with the intent to hinder, delay, and defraud
Ms. Weisberg, then you’re entitled to render a verdict against Mr.
Boyd personally because of his fraudulent acts, and you would be
entitled to put a number on the penalty that you will impose upon
Mr. Boyd for his actions. That number is clearly within your
province. I will only give you some guidance and tell you that the
complaint filed in this court seeks damages of $350,000 for what is
absolutely atrocious conduct committed to defraud Ms. Weisberg
from her commissions. I would just ask you not to exceed that
amount. You can award zero. You can award $350,000. You can
award anywhere in between. I think the $350,000 is more
appropriate given the aggravated circumstances in this case.
At no point during Weisberg’s closing argument did Boyd object to Weisberg’s argument either
as to form or substance. In fact, Boyd’s counsel specifically referenced the verdict form and
argued that the jury should not award damages against Boyd personally, stating, “[w]hen you get
to the jury room, you will see this verdict form. There will be two pages. I submit the second
page is irrelevant.”
6
As it was not entirely clear at trial which of Boyd’s limited liability companies were still
in existence, Weisberg asked the jury to award her damages jointly and severally against all three
companies.
-5-
After the closing arguments, the trial court briefly explained to the jury their task in
completing the verdict form by stating
If you find that [Weisberg] has established the fraudulent
conveyance as set forth in the instructions and in the verdict slip
here, then the amount of damages, if any, that you determine are
appropriate to award against [Boyd] for that fraudulent conveyance
would be filled in in that blank, and your foreperson would sign
and date it once again.
Boyd again failed to object to either the form or substance of the jury instructions or
potential damages outlined in the verdict form. After their deliberations, the jury found for
Weisberg and awarded damages by completing the verdict form as follows:
We, the jury, having found that the contract was breached, further
find that the transfer by William Adam Boyd of the assets of [To
Charge Virginia] to [To Charge Nevada] was made with the intent
to hinder, delay and defraud the plaintiff and assess damages
against William Adam Boyd in the sum of $350,000.
We, the jury, on the issues joined, find in favor of [Weisberg] on
the breach of contract claim and assess damages in the sum of
$225,445.88 against [To Charge Virginia], [To Charge Nevada],
and [VeriPay].
At Boyd’s request, the trial court polled the jury and each juror affirmed that the verdict
reflected in the completed verdict form was, in fact, their verdict. The trial court then asked
counsel, “before we discharge the jury, is there anything else that we need to address at this
time?” Both parties, through their counsel, replied that there was not. The trial court then
entered judgment on the verdict, the jury was released, and the trial concluded on June 17, 2021.
Not before August 31, 2021, when Boyd moved for judgment notwithstanding the verdict
and for reconsideration of the final judgment order, did Boyd raise any issue with the jury
instructions and verdict form. Following oral argument, the trial court denied both motions. On
September 2, 2021, Weisberg submitted an attorney fees affidavit to the trial court, and the final
order was entered on December 17, 2021. In the final order, the trial court ruled that in addition
-6-
to the monetary damages awarded by the jury against Boyd and his corporate entities, Weisberg
was also entitled to receive attorney fees in the amount of $149,041.90, jointly and severally,
from To Charge Virginia and Boyd pursuant to Code § 55.1-403. Boyd appealed from the final
order.7
I. ANALYSIS
A. Standard of Review
“[W]here the trial court has declined to . . . set aside a jury verdict,” this Court
“consider[s] whether the evidence presented, taken in the light most favorable to the plaintiff,
was sufficient to support the jury verdict in favor of the plaintiff.” Ferguson Enters., Inc. v. F.H.
Furr Plumbing, Heating & Air Conditioning, Inc., 297 Va. 539, 547-48 (2019) (first and second
alterations in original) (quoting Parson v. Miller, 296 Va. 509, 523-24 (2018)). “We will not set
aside a trial court’s judgment sustaining a jury verdict unless it is plainly wrong or without
evidence to support it.” Id. at 548 (quoting Parson, 296 Va. at 524).
We review an award of attorney fees for abuse of discretion. Lambert v. Sea Oats
Condo. Ass’n, Inc., 293 Va. 245, 252 (2017). To the extent awarding attorney fees raises issues
of statutory construction, we review them de novo. New Age Care, LLC v. Juran, 71 Va. App.
407, 421 (2020) (citing Bragg v. Bd. of Supervisors, 295 Va. 416, 423 (2018)).
B. The trial court did not err by denying Boyd’s motion for judgment
notwithstanding the verdict because Boyd expressly agreed to the jury
instructions and verdict form.
In his first assignment of error, Boyd argues that the jury’s verdict is plainly wrong
because his only involvement in the asset transfer between To Charge Virginia and To Charge
7
Boyd only appealed the judgments rendered against him personally. The limited
liability companies did not appeal. As such, the $252,445.88 awarded against To Charge
Virginia, To Charge Nevada, and VeriPay for the breach of contract claim is not before this
Court.
-7-
Nevada was as the limited liability companies’ corporate representative. Boyd claims that,
although he agreed to the jury instructions and verdict form, the trial court erred by not setting
aside the jury’s verdict since Weisberg previously withdrew her attempt to pierce the corporate
veil. We disagree.
“[I]nstructions given without objection become the law of the case and thereby bind the
parties in the trial court and . . . on [appellate] review.” Smith v. Commonwealth, 296 Va. 450,
461 (2018) (quoting Wintergreen Partners, Inc. v. McGuireWoods, LLP, 280 Va. 374, 379
(2010)). Even if a party makes a motion to set aside the verdict, “this does not save him from his
failure to object to the instructions which submitted the issues . . . to the jury.” Id. at 462
(quoting Spitzli v. Minson, 231 Va. 12, 19 (1986)).
Here, Boyd “expressly agreed to jury instructions that omitted the very legal principle on
which [he] seeks to rely on appeal.” Id. On appeal, he argues that the instructions improperly
imposed personal liability. However, he cannot contest the phrasing of the instructions and
verdict form after agreeing to them. “We have clearly stated that an agreed jury instruction
becomes the law of the case, even if it imposes ‘an inappropriate standard.’” Id. (quoting
Owens-Corning Fiberglas Corp. v. Watson, 243 Va. 128, 136 (1992)).
Boyd relies on Smith v. Combined Insurance Company of America, 202 Va. 758, 762
(1961), to support his contention that we must set aside the jury’s verdict. Such reliance is
misplaced. In that case, the Supreme Court held that “the [trial] court may reconsider the
instructions, although not objected to, and if they are found to be incorrect and calculated to
mislead the jury, may set aside the verdict.” Id. (emphasis added). Here, the trial court denied
Boyd’s post-trial motion, choosing not to reconsider the jury instructions previously agreed to by
the parties. Had the trial court exercised its discretion differently by finding the jury instructions
and verdict form to be both incorrect and calculated to mislead the jury, it may have been within
-8-
its discretion to set aside the verdict, but the trial court was not required to do so as argued by
Boyd on appeal.
Since jury instructions and verdict forms agreed to by both parties become the law of the
case, “we consider whether the evidence was sufficient to support [the judgment] based upon the
instructions given.” Smith, 296 Va. at 462. Instruction 27 provided the jury with the elements
necessary for finding a fraudulent conveyance. Instruction 30 detailed the burden of proof
necessary to establish a fraudulent conveyance. No jury instruction was submitted to the trial
court by Boyd or agreed upon by the parties that instructed the jury on the legal concepts Boyd
now argues on appeal. Instead, the agreed upon jury instructions and verdict form permitted the
assessment of damages against Boyd if the jury found that the elements of a fraudulent
conveyance contained in Instruction 27 were met based on the evidence adduced at trial. The
record also lacks any jury instruction submitted by Boyd on the limitations of personal liability
in cases involving limited liability companies. Instead, the agreed upon instructions coupled
with the agreed upon verdict form permitted the jury to impose personal liability on Boyd in this
case. Instruction 30 even included the statement that “[u]nless William Adam Boyd disproves the
fraud . . .” thereby signaling to the jury that Boyd could be held personally liable for the
fraudulent conveyance.
Here, there was more than enough evidence to support the jury’s verdict based on the
instructions and applicable verdict form. After Boyd contracted with Weisberg, he received a
letter notifying him that he and his first company (To Charge Virginia) were being sued by
Weisberg for breach of contract. Boyd then created a second company (To Charge Nevada), and
transferred all To Charge Virginia’s assets to this newly formed Nevada company. During the
pendency of the lawsuit, Boyd dissolved To Charge Nevada and later attempted to transfer its
assets to a third company (VeriPay) that did not even exist at the time of the conveyance. He
-9-
then somehow “resurrected” the dissolved To Charge Nevada and renamed it VeriPay. The
evidence of these multiple transactions is sufficient to support the finding by the jury that Boyd
transferred the assets of the limited liability companies he controlled with the intent to defraud
Weisberg.
We also disagree with Boyd’s contention that his argument should be considered under
Rule 5A:18’s ends of justice exception. “We observe the general rule that, when an issue has
been submitted to a jury under instructions given without objection, such assent constitutes a
waiver of any contention that the trial court erred in failing to rule as a matter of law on the
issue.” Holles v. Sunrise Terrace, Inc., 257 Va. 131, 137-38 (1999). The very fact that Boyd
“invited the error” by agreeing to the jury instructions and verdict form “renders Rule 5A:18’s
ends of justice exception inapplicable.” Alford v. Commonwealth, 56 Va. App. 706, 709 (2010).
“It can hardly be a ‘grave injustice’ . . . for a trial court to give an agreed upon jury instruction.”
Id. (quoting Brittle v. Commonwealth, 54 Va. App. 505, 513 (2009)). Even in cases where the
error is waived, as opposed to invited, “our Rule 5A:18 jurisprudence confirms that ‘[t]he ends
of justice exception . . . is narrow and is to be used sparingly.’” Brittle, 54 Va. App. at 512
(quoting Pearce v. Commonwealth, 53 Va. App. 113, 123 (2008)). This is particularly true here
as the “essential rights” implicated in the criminal context are not at issue in this case. See Rowe
v. Commonwealth, 277 Va. 495, 503 (2009) (“We have held that application of the ends of
justice exception is appropriate when the judgment of the trial court was error and application of
the exception is necessary to avoid a grave injustice or the denial of essential rights.”); Jimenez v.
Commonwealth, 241 Va. 244, 251 (1991) (holding that a grave injustice occurred because the
jury was not instructed properly on the elements of the crime and the Commonwealth failed to
prove the omitted element); Brittle, 54 Va. App. at 517 (“If the record contains affirmative
- 10 -
evidence of innocence, or a lack of a criminal offense, we can conclude that a manifest injustice
has occurred, and we can apply the ends of justice exception.”).
In this purely civil matter, Boyd expressly agreed to the jury instructions and verdict form
permitting the jury to impose the damages he now appeals. As a result of both his agreement to
the jury instructions and verdict form, as well as his failure to object until long after the jury was
released and the judgment was entered, the jury instructions and verdict form became the law of
this case. Therefore, his arguments are waived, and we see no reason to apply the ends of justice
exception to Rule 5A:18. Witt v. Merricks, 210 Va. 70, 72-73 (1969) (refusing to apply the ends
of justice exception even though the unobjected to jury instructions incorrectly stated the law).
Accordingly, the trial court did not err by denying Boyd’s motion for judgment notwithstanding
the verdict.
C. The trial court did not err by awarding Weisberg attorney fees against Boyd
because he was a “participant” in a fraudulent conveyance pursuant to
Code § 55.1-403.
In his second assignment of error, Boyd argues that because limited liability companies
are legal entities that are entirely distinct from the members who compose them, when he signed
the asset transfer documents as a managing member, he did not “participate” in the fraudulent
conveyance. We disagree.
“Upon a finding of fraudulent conveyance pursuant to § 55.1-400, the court may assess
sanctions, including such attorney fees, against all parties over which it has jurisdiction who,
with the intent to defraud and having knowledge of the judgment, participated in the
conveyance.” Code § 55.1-403. Title 55.1 does not define what it means to “participate” in a
fraudulent conveyance. “When, as here, a statute contains no express definition of a term, the
general rule of statutory construction is to infer the legislature’s intent from the plain meaning of
the language used.” Jones v. Von Moll, 295 Va. 497, 504 (2018) (quoting Hubbard v. Henrico
- 11 -
Ltd. P’ship, 255 Va. 335, 340 (1998)). “We must presume that the General Assembly chose,
with care, the words that appear in a statute, and must apply the statute in a manner faithful to
that choice.” Jones v. Commonwealth, 296 Va. 412, 415 (2018) (quoting Johnson v.
Commonwealth, 292 Va. 738, 742 (2016)).
Thus, we understand “participate” as meaning “to take part or share in something.”8
Notably, the statute gives the trial court authority to assess attorney fees against all parties who
participated in the conveyance. Contrary to Boyd’s argument, it does not specify in what
capacity the parties must participate. Since Boyd participated in the fraudulent conveyance
between To Charge Virginia and To Charge Nevada, whether he participated as the managing
member of To Charge LLC or in his personal capacity is irrelevant in this case. Since he
acknowledges participating, the trial court did not err by assessing attorney fees against him.
D. The trial court did not err by entering a final order consistent with the jury’s
verdict or denying Boyd’s motion to reconsider because Boyd did not object
to the verdict form.
In his third assignment of error, Boyd argues that the trial court erred in assessing
damages against him and that the evidence was insufficient to permit the jury to reasonably
estimate Weisberg’s damages. However, since Boyd failed to object before the jury rendered its
verdict, but instead agreed to the verdict form that permitted a damages award on the fraudulent
conveyance claim, we disagree.
“It is a well-established rule that under normal circumstances a trial court is under no
obligation to amend or correct an instruction that contains a misstatement of law.” Atkins v.
Commonwealth, 257 Va. 160, 178 (1999). “[T]he failure to object to the nature of the verdict
form[] at trial bar[s] consideration of that issue on appeal.” Powell v. Commonwealth, 261 Va.
8
Merriam-Webster, https://www.merriam-webster.com/dictionary/participate (last visited
Nov. 14, 2022).
- 12 -
512, 542 (2001). When a verdict form is not questioned until sometime after the jury is
discharged, the appellant cannot complain of the defect on appeal. Rakes v. Fulcher, 210 Va.
542, 549 (1970).
Here, Boyd did not move for summary judgment on the fraudulent conveyance claim. In
his motions to strike, he failed to argue that damages could not be awarded for a fraudulent
conveyance claim. And most importantly, Boyd agreed to both the jury instructions and verdict
form. He never objected during Weisberg’s closing argument requesting the damages award or
to the trial court’s explanation concerning the verdict form which permitted the jury to award
personal damages on the fraudulent conveyance claim. Boyd failed to even respond to
Weisberg’s statement in closing argument that the jury was “entitled to render a verdict against
Mr. Boyd personally because of his fraudulent acts” or that the jury “[could] award $350,000”
for Boyd’s “absolutely atrocious conduct.” Instead, in his own closing argument, Boyd
disregarded the second page of the verdict form which listed damages for the fraudulent
conveyance claim and advised the jury that this second page of the verdict form was “irrelevant.”
“Decisions regarding trial strategy often require rejection of other potential strategies.” Lenz v.
Warden of Sussex I State Prison, 267 Va. 318, 340 (2004). As advanced by Weisberg’s counsel
during oral argument before this Court, Boyd seemingly chose an “all or nothing” approach
which was within his province to decide. Had Boyd wanted to object to the phrasing of the
verdict form or the imposition of damages against him, he should not have agreed to the verdict
form. He also had the opportunity to raise the issue during closing arguments or before the jury
was released. The verdict form Boyd agreed to made it clear that if the jury found that Boyd
breached his contract with Weisberg and transferred assets with the intent to defraud her, the jury
was permitted to assess damages against Boyd.
- 13 -
Similar to his first assignment of error, Boyd raises these arguments for the first time on
appeal. For the same reasons as discussed previously, we find no reason to invoke the ends of
justice exception and the arguments are waived. Rule 5A:18; Banks v. Mario Indus. of Virginia,
Inc., 274 Va. 438, 451 (2007).
III. CONCLUSION
For the aforementioned reasons, we affirm the decision of the trial court.
Affirmed.
- 14 - | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483813/ | COURT OF APPEALS OF VIRGINIA
UNPUBLISHED
Present: Chief Judge Decker, Judges AtLee and Malveaux
Argued by videoconference
TREVELL MAURICE SAUL
MEMORANDUM OPINION* BY
v. Record No. 1433-20-2 JUDGE RICHARD Y. ATLEE, JR.
NOVEMBER 15, 2022
COMMONWEALTH OF VIRGINIA
FROM THE CIRCUIT COURT OF LANCASTER COUNTY
R. Michael McKenney, Judge1
Danny Zemel (The Krudys Law Firm, PLC, on briefs), for appellant.
Matthew P. Dullaghan, Senior Assistant Attorney General (Jason S.
Miyares, Attorney General, on brief), for appellee.
Following a bench trial, the trial court convicted appellant Trevell Maurice Saul for assault
and battery in violation of Code § 18.2-57. Saul argues that the trial court erred in allowing the
victim’s written statement to the police to be read into evidence. He also claims that the evidence
was insufficient to sustain the conviction. For the following reasons, we affirm the trial court’s
judgment.
I. BACKGROUND
“In accordance with familiar principles of appellate review, the facts will be stated in the
light most favorable to the Commonwealth, the prevailing party at trial.” Gerald v.
Commonwealth, 295 Va. 469, 472 (2018) (quoting Scott v. Commonwealth, 292 Va. 380, 381
(2016)). In doing so, we discard any of appellant’s conflicting evidence, and regard as true all
*
Pursuant to Code § 17.1-413, this opinion is not designated for publication.
1
Judge McKenney sentenced Saul and signed the final order. Judge Designate Harry T.
Taliaferro, III, presided over the trial and ruled on the issues now on appeal.
credible evidence favorable to the Commonwealth and all inferences that may reasonably be
drawn from that evidence. Id. at 473.
Brittany Levere contacted the Lancaster County Sheriff’s Office at 7:14 a.m. on July 21,
2020, following an incident involving Saul. Levere reported the incident and provided a written
statement to the responding officer, Deputy D.W. Ferrell.
Levere testified at trial that Saul came to her house on the morning of July 21, 2020,
before she left for work. Levere stated that she and Saul had a conversation but denied that
either of them became angry or yelled. After she thought Saul had left, Levere went to lock the
front door and encountered Saul in her living room. Levere claimed that Saul “grabbed” her and
they fell onto a chair and “were wrestling from there,” but she denied that Saul “attacked” her.
When Levere went to lock the door and encountered Saul, she was carrying pepper spray. She
did not use it, and she explained that it fell when Saul grabbed her. Levere did not recall Saul
yelling in her face or threatening her or her family; she also did not recall telling Deputy Ferrell
that Saul punched her repeatedly in the face and head. She acknowledged that she sustained
injuries, but she testified that her injuries were minor, consisting of scratches. Levere testified
she did not recall writing the statement she gave to Deputy Ferrell, but acknowledged it was
made in her handwriting. Levere also said that she did not include any false statements in the
written account she gave the police.
On cross-examination, Levere testified that she was “distraught” when she wrote the
statement and that she did so only to obtain a protective order against Saul. She claimed that she
did not intend to pursue criminal charges against Saul. She agreed that her emotions could have
affected her recollection of the incident. Levere testified that, after reflecting further on the
incident, she felt that the statement did not accurately represent what happened.
-2-
On redirect examination, the prosecutor asked whether Levere clearly remembered what
happened on July 21, 2020. Levere responded, “Not, like everything. Like, I honestly didn’t
remember writing anything.” The Commonwealth then moved to have Levere read her written
statement into the record as a past recollection recorded. Saul objected, asserting that the
accuracy of the statement was not adequately demonstrated. The trial court overruled the
objection and granted the Commonwealth’s motion. Levere then read her written statement, as
follows:
I was at my home in my bed when the subject came to my house at
5 a.m. He said we need to talk and woke me up about gossip that
was not true. He was high off of cocaine. So regardless of
whether you say anything wrong or not, he cannot comprehend.
He began yelling in my face and threatening me and my family.
He said he thinks I’m playing with him when I was just sitting
there getting straight for work. He acts like he was going outside.
I sat there, continued brushing my teeth. Then I proceeded up the
hall to lock my door. He was hiding in my living room. He
accused me of getting something to hurt him when I was just going
to lock the door behind him, that’s when he attacked me. I did not
even have the chance to defend myself. He snuck attacked me.
The chair broke is where he attacked me. He punched me in the
face repeatedly and in my head. I was assaulted by Trevell Saul.
When Levere spoke with Deputy Ferrell, she indicated that she wanted a protective
order.2 Deputy Ferrell took photographs of Levere, depicting scratches on her neck, lip, and
hand, and a photograph of a broken chair in her house. Levere acknowledged that the
photographs accurately depicted the injuries she sustained from Saul “grabbing [her] and falling
into the chair and wrestling on the ground.” Deputy Ferrell stated that Levere “wanted to write
the statement” she gave to the police.
2
The record before the Court does not reflect whether Levere ultimately obtained a
protective order against Saul.
-3-
II. ANALYSIS
A. Admission of the Written Statement
On appeal, Saul asserts that the trial court erred by allowing Levere to read into evidence
the written statement she made to the police. Saul argues that Levere’s written statement was
hearsay evidence and did not qualify for admission under the past recollection recorded
exception to the hearsay rule. We do not address the merits of the hearsay issue because we
conclude that any potential error in admitting the written statement was harmless.3
“[E]videntiary errors are subject to non-constitutional harmless error review.” Jones v.
Commonwealth, 71 Va. App. 70, 91 (2019). Code § 8.01-678 sets out the standard for
non-constitutional harmless error as follows:
When it plainly appears from the record and the evidence given at
the trial that the parties have had a fair trial on the merits and
substantial justice has been reached, no judgment shall be arrested
or reversed . . . [f]or any . . . defect, imperfection, or omission in
the record, or for any error committed on the trial.
“Error is harmless when we are able to conclude ‘with fair assurance, after pondering all that
happened without stripping the erroneous action from the whole, that the judgment was not
3
For a written statement to qualify as a “past recollection recorded,”
(1) the witness must have had firsthand knowledge of the event;
(2) the written statement must be an original memorandum made at
or near the time of the event, when the witness had a clear and
accurate memory of it; (3) the witness must lack a present
recollection of the event; and (4) the witness must vouch for the
accuracy of the written memorandum.
Abney v. Commonwealth, 51 Va. App. 337, 346-47 (2008). The Commonwealth argues that
Saul’s objection in the trial court related only to the fourth element, and therefore, he did not
preserve for appeal arguments relating to the other elements. While we question whether some
of Saul’s arguments were in fact preserved, we do not reach that issue because it is not the best
and narrowest ground on which to resolve the appeal. See Dietz v. Commonwealth, 294 Va. 123,
134 (2017) (noting that an appellate court decides cases “on the best and narrowest grounds
available” (quoting Commonwealth v. White, 293 Va. 411, 419 (2017))).
-4-
substantially swayed by the error.’” Schmuhl v. Commonwealth, 69 Va. App. 281, 308 (2018)
(quoting Clay v. Commonwealth, 262 Va. 253, 260 (2001)).
Saul contends that without the written statement, the intent element necessary for assault
and battery is not met, and thus it cannot be harmless error. We disagree. To sustain a
conviction for battery, the Commonwealth must prove that there is “an intention to do bodily
harm—either an actual intention or an intention imputed by law.” Parish v. Commonwealth, 56
Va. App. 324, 330 (2010) (quoting Adams v. Commonwealth, 33 Va. App. 463, 468 (2000)).
“The unlawful intent may be imputed if the touching is ‘“done in a rude, insolent, or angry
manner.”’” Id. at 331 (quoting Adams, 33 Va. App. at 469).
Independent of the written statement, however, Levere’s trial testimony is sufficient to
support a conviction for misdemeanor assault and battery. Despite denying that he yelled at or
threatened her, she felt the need, in her own home, to take pepper spray with her to lock the door
even after she thought he left. While refusing to characterize it as an attack, she admitted that
Saul “grabbed” her in a manner that caused them to fall into a chair, breaking it, and then they
wrestled on the ground. See Parish, 56 Va. App. at 331-32 (holding there was “ample evidence”
to prove assault and battery where a “visibly angry” defendant “grabbed” the victim’s shoulder
and forced her to face defendant). She suffered injuries during this scuffle. This testimony is
sufficient to demonstrate an unwanted touching done in a rude and insolent manner. Thus, any
potential error resulting from the admission of the written statement as a past recollection
recorded is harmless.
B. Sufficiency of the Evidence
Saul asserts that the trial court erred by finding the evidence was sufficient to convict him
of assault and battery. Saul claims that the trial court implicitly credited Levere’s written
-5-
statement while discrediting her trial testimony and that she could not simultaneously be both a
credible and non-credible witness.
“On review of the sufficiency of the evidence, ‘the judgment of the trial court is
presumed correct and will not be disturbed unless it is plainly wrong or without evidence to
support it.’” Ingram v. Commonwealth, 74 Va. App. 59, 76 (2021) (quoting Smith v.
Commonwealth, 296 Va. 450, 460 (2018)). “The question on appeal, is whether ‘any rational
trier of fact could have found the essential elements of the crime beyond a reasonable doubt.’”
Id. (quoting Yoder v. Commonwealth, 298 Va. 180, 182 (2019)). “If there is evidentiary support
for the conviction, ‘the reviewing court is not permitted to substitute its own judgment, even if its
opinion might differ from the conclusions reached by the finder of fact at the trial.’” Chavez v.
Commonwealth, 69 Va. App. 149, 161 (2018) (quoting Banks v. Commonwealth, 67 Va. App.
273, 288 (2017)).
“To sustain a conviction for assault, the Commonwealth must prove ‘an attempt or offer,
with force and violence, to do some bodily hurt to another.’” Parish, 56 Va. App. at 329
(quoting Adams, 33 Va. App. at 468). “To sustain a conviction for battery, the Commonwealth
must prove a ‘wil[l]ful or unlawful touching’ of another.” Id. at 330 (alteration in original)
(quoting Wood v. Commonwealth, 149 Va. 401, 404 (1927)). “One cannot be convicted of
assault and battery without an intention to do bodily harm—either an actual intention or an
intention imputed by law.” Id. (quoting Adams, 33 Va. App. at 468). “The unlawful intent may
be imputed if the touching ‘“is done in a rude, insolent, or angry manner.”’” Id. at 331 (quoting
Adams, 33 Va. App. at 469).
Levere testified that she thought Saul had left her house and was going to lock the door
when he grabbed her. When he did so, she fell onto a chair, and then the pair wrestled with each
other. Levere’s testimony suggests Saul took her by surprise. Levere suffered injuries during
-6-
the scuffle. This testimony was sufficient to sustain Saul’s conviction for battery because it
demonstrates an unwanted touching done in a rude and insolent manner. Id. Likewise, the
testimony that the force caused Levere to fall onto a chair and that Saul continued to wrestle with
her on the floor, causing injury to Levere, was sufficient to sustain a conviction for assault and
battery. See Kelley v. Commonwealth, 69 Va. App. 617, 629-30 (2019) (holding evidence
sufficient to prove battery where defendant grabbed the victim’s face and attempted to force a
kiss on her). Levere’s written statement was more explicit, asserting that Saul yelled and
threatened her during their conversation, then “attacked” her and punched her repeatedly in the
head.
Saul argues that the trial court erred by crediting Levere’s written statement over her trial
testimony. Although there were inconsistencies between the two accounts concerning the details
of the incident, at minimum both accounts establish that during a disagreement Saul “grabbed”
Levere, a scuffle followed, and Levere suffered visible, even if minor, injuries. “Testimony may
be contradictory or contain inconsistencies without rising to the level of being inherently
incredible as a matter of law.” Id. at 626. “Consequently, as Virginia law dictates, ‘[p]otential
inconsistencies in testimony are resolved by the fact finder,’ not the appellate court.” Id.
(alteration in original) (quoting Towler v. Commonwealth, 59 Va. App. 284, 292 (2011)); see
also Morrison v. Commonwealth, 37 Va. App. 273, 281 (2002) (“The fact finder is not required
to believe all parts of a witness’ testimony but may accept only some parts as believable and
reject other parts as implausible.”). “[T]here can be no relief” in this Court if a witness testifies
to facts “which, if true, are sufficient” to support the conviction “[i]f the trier of the facts” bases
its decision “upon that testimony.” Smith v. Commonwealth, 56 Va. App. 711, 718-19 (2010)
(quoting Swanson v. Commonwealth, 8 Va. App. 376, 379 (1989)). We find no error in this case
because the trial court was permitted to resolve the inconsistencies.
-7-
III. CONCLUSION
For the foregoing reasons, we find that the trial court did not err in allowing Levere’s
statement to be read into evidence and that the evidence was sufficient to prove Saul’s guilt
beyond a reasonable doubt, and we affirm his conviction.
Affirmed.
-8- | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483821/ | COURT OF APPEALS OF VIRGINIA
Present: Judges Fulton, Ortiz and Senior Judge Petty
PUBLISHED
Argued at Lexington, Virginia
MICHAEL CHARLES HOGLE
OPINION BY
v. Record No. 0027-22-3 JUDGE WILLIAM G. PETTY
NOVEMBER 15, 2022
COMMONWEALTH OF VIRGINIA
FROM THE CIRCUIT COURT OF AUGUSTA COUNTY
W. Chapman Goodwin, Judge
Jennifer T. Stanton, Senior Assistant Public Defender (Indigent
Defense Commission, on briefs), for appellant.
William K. Hamilton, Assistant Attorney General (Jason S. Miyares,
Attorney General, on brief), for appellee.
Following a bench trial, the trial court convicted Michael Charles Hogle for driving while
under the influence (DUI) in violation of Code § 18.2-266 and sentenced him to twelve months in
jail, all suspended. Hogle argues that the trial court erred in denying his motion to suppress the
evidence because the police obtained it in violation of Code § 46.2-646(E). He contends that
subsection (E) of Code § 46.2-646, which took effect in March 2021, applied retroactively and
rendered inadmissible the evidence the police seized in 2019. He further contends that the evidence
was insufficient to support his conviction. We affirm the judgment because we conclude that the
trial court did not err in denying the motion to suppress or finding the evidence sufficient to sustain
Hogle’s conviction.
BACKGROUND
“In accordance with familiar principles of appellate review, the facts will be stated in the
light most favorable to the Commonwealth, the prevailing party at trial.” Gerald v.
Commonwealth, 295 Va. 469, 472 (2018) (quoting Scott v. Commonwealth, 292 Va. 380, 381
(2016)). In doing so, we discard any of Hogle’s conflicting evidence, and regard as true all
credible evidence favorable to the Commonwealth and all inferences that may reasonably be
drawn from that evidence. Id. at 473.
On September 10, 2019 at 3:48 p.m., Virginia State Police Trooper Savannah Stagner
saw Hogle driving a car in Augusta County and noticed that the vehicle registration was expired.
After running Hogle’s license plate to confirm the expiration, she stopped Hogle for that reason
at 3:51 p.m.
Hogle, who was alone in the car, did not have his driver’s license, but he provided the
trooper with his social security number. Trooper Stagner noticed numerous orange prescription
drug bottles in the car, and smelled alcohol on Hogle’s breath. When the trooper asked how
much he had had to drink that day, Hogle said that he took “several” shots of tequila at “around
12:30” p.m. He said that he had not been feeling well for the last few days, had gone to work
that day but left early, and took the shots of tequila after he got home to help him sleep. Hogle
claimed he had consumed no more alcohol since then.
Trooper Stagner asked Hogle if he had any medical conditions. Hogle replied that he
took Adderall for depression and that he had been sick. Trooper Stagner administered a series of
field sobriety tests.1 When the trooper conducted the horizontal gaze nystagmus test, she
observed that Hogle’s eyes were bloodshot, that “he had equal pupil size and equal tracking and
that he did demonstrate a lack of smooth pursuit and distinct and sustained nystagmus at
maximum deviation.”2 After Trooper Stagner demonstrated the “walk-and-turn” test and
1
While referred to in the record as “tests,” in reality they are tasks that demonstrate
physical indications of intoxication.
2
The record does not indicate what a horizontal gaze nystagmus test entails or why the
trooper’s observations were relevant to the question of Hogel’s intoxication.
-2-
confirmed that Hogle understood the instructions, he swayed on the first few steps of the test,
stepped offline, missed heel to toe placement on steps three and four, and executed the turn
improperly by moving both feet. Finally, Trooper Stagner had Hogle perform the “one-leg
stand” test. Trooper Stagner testified that Hogle “really didn’t follow any of the instructions” for
the test. He failed to keep his raised foot below six inches, held the raised foot pointed rather
than parallel to the ground, and did not count as Trooper Stagner had instructed him. After
Hogle completed a preliminary breath test, the trooper arrested him at 4:04 p.m.
In a search of Hogle’s car, the police found empty fifty-milliliter bottles of Fireball
whisky. The empty liquor bottles and medication bottles were concentrated in the passenger side
floorboard and the center console of the vehicle. A glass smoking device and a container with
marijuana residue also were in the car. Hogle consented to a blood test, and a sample of his
blood was drawn at 4:53 p.m.
Dr. James Kuhlman, an expert in the field of forensic toxicology, tested Hogle’s blood
sample. Hogle’s blood contained a blood alcohol concentration (BAC) of 0.069%, an
amphetamine concentration of 0.19 milligram per liter, a THC concentration of 0.0036 milligram
per liter, and a THC carboxylic acid concentration of 0.025 milligram per liter. Kuhlman opined
that alcohol is a nervous system depressant that can slow a person’s reaction times and affect
coordination. Amphetamine, a drug that is often prescribed for people with attention deficit
disorder, is a stimulant that may help such patients focus. Kuhlman stated that “someone who
has been taking the drug for an extended period of time under a doctor’s prescription most likely
will develop tolerance” to associated side effects. Kuhlman explained that THC is the active
compound found in marijuana and can cause euphoria and diminished ability to concentrate or to
focus. THC “does not last very long in the body,” and “the THC level goes below the limits of
-3-
detection within four to six hours” of smoking marijuana. THC carboxylic acid is produced
when THC is metabolized in the body.
Kuhlman stated that most people eliminate a little less than one shot of alcohol from the
body per hour. Kuhlman explained that most of the absorption of alcohol occurs within the first
hour it is ingested. Thus, the level of alcohol “may or may not plateau” until two hours after
ingestion. Kuhlman further stated, “Once you reach the two-hour time period after the ingestion
of alcohol your body is eliminating the alcohol and it eliminates at a line[a]r rate that’s very
predictable[.]” Consequently, two hours after ingestion, the body enters an “elimination phase”
and eliminates alcohol at a rate of 0.1 to 0.25% per hour. Applying retrograde extrapolation,
Kuhlman opined that a BAC of 0.069 at 4:53 p.m., when Hogle’s blood sample was collected,
with the final drink consumed at 12:30 p.m., translated into a BAC range of 0.08 to 0.096% at
3:48 p.m., the time the trooper first saw Hogle driving. Kuhlman admitted that Adderall and
alcohol could possibly counteract the effects of the other substance.
Testifying on his own behalf, Hogle, a previously convicted felon, said that he was not
feeling well at the time of the stop. He had taken prescribed Adderall three times per day for the
past fifteen years. Hogle did not eat on the day Trooper Stagner stopped him because of nausea.
Code § 46.2-646(E), which took effect on March 1, 2021, provides that “[n]o
law-enforcement officer shall stop a motor vehicle due to an expired registration sticker prior to
the first day of the fourth month after the original expiration date.” See 2020 Va. Acts, Spec.
Sess. I., chs. 45, 51. The subsection further states, “No evidence discovered or obtained as the
result of a stop in violation of this subsection, including evidence discovered or obtained with the
operator’s consent, shall be admissible in any trial, hearing, or other proceeding.” See id.
The trial court conducted a pretrial hearing on Hogle’s motion to suppress the evidence
claiming that the search and seizure of his vehicle violated Code § 46.2-646(E). After initially
-4-
taking the matter under advisement, the trial court denied the motion to suppress, reasoning that
the amendment to Code § 46.2-646(E) contained both substantive and procedural elements and
could not practically be applied retroactively to Trooper Stagner’s actions, which occurred
before the effective date of the statutory amendment.
At the conclusion of the evidence, the trial court rejected Hogle’s argument that the
Commonwealth had failed to prove intoxication beyond a reasonable doubt. The trial court
considered the “overall picture” in the case, concluded that Hogle should not have been “driving
with those three drugs in his system,” and noted that his blood test occurred when the percentage
of alcohol in his blood was diminishing. Accordingly, the trial court found the evidence
sufficient to prove appellant was intoxicated when he was driving and convicted him of violating
Code § 18.2-266. Hogle appeals.
ANALYSIS
I.
Hogle contends that the trial court improperly applied statutory retroactivity principles
and, as a result, erroneously denied his motion to suppress the evidence.
“When challenging the denial of a motion to suppress on appeal, the defendant bears the
burden of establishing that reversible error occurred.” Street v. Commonwealth, 75 Va. App.
298, 303-04 (2022) (quoting Mason v. Commonwealth, 291 Va. 362, 367 (2016)). “Whether a
statute should be applied retroactively is . . . a question of law that an appellate court reviews de
novo.” Id. at 304.
Hogle argues that the amendment to Code § 46.2-646 in 2021 adding subsection (E) was
purely a change in procedure that applied retroactively. “The ‘usual rule’ regarding a new statute
is ‘that legislation is . . . prospective’ only.” Id. at 305 (quoting Martin v. Hadix, 527 U.S. 343,
357 (1999)). “The retroactivity of statutes is disfavored.” Id. (citing McCarthy v.
-5-
Commonwealth, 73 Va. App. 630, 647 (2021)). “A statute is retroactive only if the legislature
includes an express provision or other clear language indicating that it applies retroactively.” Id.
“In fact, ‘[e]very reasonable doubt is resolved against a retroactive operation of a statute, and
words of a statute ought not to have a retrospective operation unless they are so clear, strong[,]
and imperative that no other meaning can be annexed to them . . . .’” Id. (quoting Taylor v.
Commonwealth, 44 Va. App. 179, 185 (2004)).
This Court recently examined retroactivity principles in cases relating to changes in
Virginia law prohibiting a stop or seizure based solely upon the odor of marijuana. Like Code
§ 46.2-646(E), the statute under review in Street provided that any evidence obtained as a result
of such an illegal stop or seizure was inadmissible in court. See id.; Montgomery v.
Commonwealth, 75 Va. App. 182 (2022). In Montgomery, we found that Code § 18.2-250.1(F),
which has since been repealed, did not apply to a search that the police conducted before the
effective date of the subsection. 75 Va. App. at 200. Likewise, we concluded in Street that in
enacting Code § 4.1-1302(A), which contained the same legal principles as Code
§ 18.2-250.1(F), “the General Assembly provided clear instruction that the accompanying
exclusionary provision applies only prospectively.” 75 Va. App. at 310.
The addition of subsection (E) to Code § 46.2-646 did two things. First, Code
§ 46.2-464(E) prohibits law enforcement officers from stopping a motor vehicle for an expired
registration sticker under certain circumstances. Second, it provides an exclusionary remedy for
a violation of the seizure provision: “[n]o evidence discovered or obtained as a result of a stop in
violation of this subsection, including evidence discovered or obtained with the operator’s
consent, shall be admissible in any trial, hearing, or other proceeding.” Code § 46.2-646(E)
(emphasis added).
-6-
In this case, even if the stop of Hogle’s car based upon an expired registration would be
unlawful under the current Code § 46.2-646(E), that provision did not take effect until March 1,
2021. When Trooper Stagner stopped Hogle in September of 2019, the evidence discovered or
obtained was not “the result of a stop in violation of th[e] subsection” “because one cannot
violate a statute or break a rule that does not exist. Because the [subsection] was not in effect at
the time of the search, no law enforcement officer could have violated it.” Montgomery, 75
Va. App. at 196.
Just as we concluded in Montgomery, the illegal seizure prong of Code § 46.2-646(E) “is
not procedural as it is completely silent on the method of obtaining redress or the enforcement of
the right it creates; instead, the scope of the entire [subsection] is both substantive and
procedural.” Id. at 199. The seizure provision “created a statutory right to be free from” certain
police encounters with citizens “for which the evidentiary rule in turn provide[s] a remedy.” Id.
Thus, the seizure prohibition in Code § 46.2-646(E) “is a substantive change in the law and
cannot be applied retroactively to render” the stop of Hogle’s car illegal, because “the
evidentiary prong of the statute, though procedural, is only triggered by a . . . seizure that
violated the substantive portion of the statute.” Id.
The exclusionary provision of Code § 46.2-646(E) thus did not entitle Hogle to the
suppression of the evidence obtained and discovered as a result of the stop of his vehicle in 2019
because the subsection, by its express terms, did not apply retroactively to the time of the stop.
Accordingly, we do not disturb the trial court’s ruling on Hogle’s motion to suppress.
II.
Hogle also argues that the trial court erred in finding the evidence sufficient to sustain his
conviction for DUI. He contends that the evidence did not prove that the combined influence of
-7-
drugs and alcohol impaired his ability to drive. He further maintains that “the trial court used an
improper legal standard in determining [his] guilt.”
“On review of the sufficiency of the evidence, ‘the judgment of the trial court is
presumed correct and will not be disturbed unless it is plainly wrong or without evidence to
support it.’” Ingram v. Commonwealth, 74 Va. App. 59, 76 (2021) (quoting Smith v.
Commonwealth, 296 Va. 450, 460 (2018)). “The question on appeal, is whether ‘any rational
trier of fact could have found the essential elements of the crime beyond a reasonable doubt.’”
Id. (quoting Yoder v. Commonwealth, 298 Va. 180, 182 (2019)). “If there is evidentiary support
for the conviction, ‘the reviewing court is not permitted to substitute its own judgment, even if its
opinion might differ from the conclusions reached by the finder of fact at the trial.’” Chavez v.
Commonwealth, 69 Va. App. 149, 161 (2018) (quoting Banks v. Commonwealth, 67 Va. App.
273, 288 (2017)).
Under Code § 18.2-266, “[i]t shall be unlawful for any person to drive or operate any
motor vehicle . . . while such person is under the influence of alcohol[.]” The statute also
prohibits driving or operating a motor vehicle while “under the influence of any . . .
self-administered intoxicant or drug . . . , or any combination of such drugs, to a degree which
impairs [that person’s] ability to drive or operate” a motor vehicle safely. Id. Under Code
§ 18.2-269(A)(2), if a suspect’s blood test after an arrest for DUI reflects a BAC
in excess of 0.05 percent but less than 0.08 percent by weight by
volume . . . such facts shall not give rise to any presumption that
the accused was or was not under the influence of alcohol
intoxicants at the time of the alleged offense, but such facts may be
considered with other competent evidence in determining the guilt
or innocence of the accused[.]
(Emphasis added).
[T]he thrust of the statutory scheme is to prohibit drinking and
driving where the driver’s ability is impaired to operate safely a
motor vehicle. That degree of intoxication, or being “under the
-8-
influence of alcohol,” is established when any person has
consumed enough alcoholic beverages to “so affect his manner,
disposition, speech, muscular movement, general appearance or
behavior, as to be apparent to observation.”
Thurston v. City of Lynchburg, 15 Va. App. 475, 483 (1992) (quoting Gardner v.
Commonwealth, 195 Va. 949, 954 (1954)). In determining whether a defendant was under the
influence, a factfinder considers “all of the evidence of his condition at the time of the alleged
offense.” Leake v. Commonwealth, 27 Va. App. 101, 109 (1998) (quoting Brooks v. City of
Newport News, 224 Va. 311, 315 (1982)). This Court has found that “[a] defendant’s admission
that he consumed several alcoholic beverages, together with the testimony of the arresting officer
regarding the defendant’s appearance and lack of coordination, is sufficient to support a
conviction for driving under the influence of alcohol.” Lemond v. Commonwealth, 19 Va. App.
687, 694 (1995) (citing Wheeling v. City of Roanoke, 2 Va. App. 42, 44 (1986)).
Based upon the totality of evidence in this record, a rational finder of fact could have
found beyond a reasonable doubt that Hogle was operating his vehicle while under the influence
of alcohol or a combination of alcohol and drugs. Hogle’s BAC registered 0.069 slightly more
than an hour after the trooper saw him driving. Using retrograde extrapolation, Kuhlman opined
that Hogle’s BAC when he was driving was between 0.08 and 0.096. While Hogle’s BAC of
0.069 at 4:53 p.m. did not give rise to a presumption that he was under the influence of alcohol,
the trial court was entitled to consider the BAC along with other competent evidence. See Code
§ 18.2-269(A)(2). Hogle admitted consuming “several” shots of tequila earlier in the day, and
there were empty mini-bottles of liquor in his car. Trooper Stagner noted the odor of alcohol on
Hogle’s breath, his bloodshot eyes, his inability to perform the walk-and-turn test correctly, and
his failure to follow any of the instructions on the one-leg test.
-9-
In addition, Hogle’s blood contained a measurable level of THC, which can diminish the
ability to concentrate or focus and dissipates quickly in the body after smoking marijuana. A
container with marijuana residue and a smoking device were in Hogle’s car.
Considering all of these facts and circumstances, a reasonable finder of fact could
conclude that Hogle had consumed enough alcohol, or a combination of drugs and alcohol, to
“affect his manner, disposition, speech, muscular movement, general appearance or behavior.”
Thurston, 15 Va. App. at 483. Accordingly, we find that the trial court did not err in finding
Hogle guilty of DUI in violation of Code § 18.2-266.
Asserting that the trial court applied an improper legal standard, Hogle states that “[t]he
trial court’s determination of guilt in this case was that it did ‘not think he should be driving with
those three drugs in his system.’” After the trial court pronounced judgment, Hogle did not
object or assert that the court had applied an incorrect legal standard.
“No ruling of the trial court . . . will be considered as a basis for reversal unless an
objection was stated with reasonable certainty at the time of the ruling, except for good cause
shown or to enable this Court to attain the ends of justice.” Rule 5A:18. “The purpose of th[e]
contemporaneous objection requirement [in Rule 5A:18] is to allow the trial court a fair
opportunity to resolve the issue at trial, thereby preventing unnecessary appeals and retrials.”
Creamer v. Commonwealth, 64 Va. App. 185, 195 (2015). “Specificity and timeliness undergird
the contemporaneous-objection rule, animate its highly practical purpose, and allow the rule to
resonate with simplicity.” Bethea v. Commonwealth, 297 Va. 730, 743 (2019). “Not just any
objection will do. It must be both specific and timely—so that the trial judge would know the
particular point being made in time to do something about it.” Id. (quoting Dickerson v.
Commonwealth, 58 Va. App. 351, 356 (2011)). If a party fails to timely and specifically object,
he waives his argument on appeal. Arrington v. Commonwealth, 53 Va. App. 635, 641 (2009).
- 10 -
Hogle does not invoke the good cause or ends of justice exceptions to Rule 5A:18, and
the Court will not apply the exceptions sua sponte. Edwards v. Commonwealth, 41 Va. App.
752, 761 (2003) (en banc). Accordingly, Rule 5A:18 bars our consideration of this aspect of
Hogle’s argument on appeal.
CONCLUSION
For the foregoing reasons, we find that the trial court did not err in denying the motion to
suppress and finding that the evidence was sufficient to prove Hogle’s guilt beyond a reasonable
doubt. Accordingly, we affirm the judgment.
Affirmed.
- 11 - | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483816/ | COURT OF APPEALS OF VIRGINIA
Present: Judges Beales, Friedman and Callins
UNPUBLISHED
MARKEITH ANTONIO HUNTER
MEMORANDUM OPINION*
v. Record No. 0109-22-2 PER CURIAM
NOVEMBER 15, 2022
COMMONWEALTH OF VIRGINIA
FROM THE CIRCUIT COURT OF KING GEORGE COUNTY
Herbert M. Hewitt, Judge
(Markeith Antonio Hunter, on brief), pro se.
(Jason S. Miyares, Attorney General; Victoria Johnson, Assistant
Attorney General, on brief), for appellee. Appellee submitting on
brief.
Markeith Antonio Hunter challenges the trial court’s denial of his motion to vacate a 2017
conviction as void. Hunter asserts that he may challenge the validity of his conviction at any time
because, he says, it was procured by “extrinsic fraud.” After examining the briefs and record in this
case, the panel unanimously holds that oral argument is unnecessary because “the appeal is wholly
without merit.” Code § 17.1-403(ii)(a); Rule 5A:27(a). We affirm the trial court’s judgment.
BACKGROUND
In 2017, upon his written guilty plea, the trial court convicted Hunter of manufacturing
methamphetamine. In accordance with the plea agreement, the trial court sentenced Hunter to thirty
years of incarceration with twenty-two years and six months suspended. At the plea hearing, the
Commonwealth proffered that if the case had gone to trial, the evidence would have proved that
in 2016, Hunter’s brother reported to King George County Sheriff’s Detective Patterson that
*
Pursuant to Code § 17.1-413, this opinion is not designated for publication.
Hunter was “cooking meth” at their mother’s house, where Hunter then resided. Hunter’s
brother gave Detective Patterson an item to substantiate his claims, and Detective Patterson
stated that a field test indicated that the item was methamphetamine. Based on the brother’s
statements and the field test results, Detective Patterson obtained a search warrant for the
residence. When the police executed the warrant, they found “all the makings of a homemade
cook operation.” Thereafter, the police arrested Hunter and advised him of his rights under
Miranda v. Arizona, 384 U.S. 436 (1966). Hunter gave an hour-long statement to the police,
which the Commonwealth “characterize[d] as a confession.” Hunter “admitted to manufacturing
and cooking methamphetamine” and described in detail his “cooking process.” When given the
opportunity by the trial court, Hunter did not contest or supplement the Commonwealth’s
proffer.
In the written plea agreement, Hunter acknowledged that by pleading guilty he was
giving up “all objections to the admissibility of evidence, all objections to the legality of [his]
arrest, all objections to any search or seizure of property, and all objections to other errors in
bringing the charge or charges against” him. Before accepting Hunter’s guilty plea, the trial
court conducted a colloquy to ensure that Hunter was entering his plea freely and voluntarily.
Hunter confirmed that he had discussed the charge with his attorney, knew the maximum
punishment for the offense, and that he was entering his plea freely and voluntarily. The trial
court accepted Hunter’s plea and convicted him of the offense. Immediately thereafter, the trial
court asked Hunter “did you have any statements that you wanted to make before this agreed
sentence is announced?” Hunter responded, “No.”
On September 23, 2021, Hunter filed a pro se motion to vacate the 2017 judgment.
Hunter’s motion stated that he had contacted the King George County Sheriff’s Office in January
2021, and learned that “there is no official documentation form showing a test was conducted”
-2-
on the substance Hunter’s brother gave to Detective Patterson. Hunter alleged that the lack of
“official documentation” to prove that Detective Patterson conducted a field test of the substance
proves that Detective Patterson lied. Hunter argued that because Detective Patterson stated in
the search warrant affidavit that he had performed a field test which indicated the substance was
methamphetamine, the search warrant was issued in part on that allegedly false statement and
was therefore invalid. Hunter further reasoned that his guilty plea was therefore obtained by a
fraud on the court. Hunter also alleged that the prosecutor in his case falsely told his defense
attorney that the substance was field tested as methamphetamine and that Hunter had made an
hour-long confession.
Hunter asserted that the 2017 judgment against him had been procured by “extrinsic or
collateral” fraud and that under Code § 8.01-428,1 the trial court had jurisdiction to entertain his
motion. The trial court denied the motion, finding that “Virginia law does not permit a motion to
vacate that is filed in a trial court long after the court lost active jurisdiction over the criminal case to
serve as an all-purpose pleading for collateral review of criminal convictions.”
In addition to finding that it lacked jurisdiction to address Hunter’s motion, the trial court
also held that Hunter had the opportunity to raise all the issues he asserted in his motion to vacate
at trial, but instead chose to plead guilty and thus waived any objections to how the evidence
against him was obtained. Hunter now appeals to this Court.
ANALYSIS
Generally, a trial court retains jurisdiction to modify, vacate, or suspend final orders for
twenty-one days after the date of entry. Rule 1:1(a). “On its face, Rule 1:1 terminates a court’s
jurisdiction twenty-one days after entry of a final order.” Martinez v. Commonwealth, 71
“This section does not limit the power of the court to entertain at any time an
1
independent action to relieve a party from any judgment or proceeding, . . . or to set aside a
judgment or decree for fraud upon the court.” Code § 8.01-428(D).
-3-
Va. App. 318, 326-27 (2019). Clearly, more than twenty-one days had passed after Hunter’s
2017 sentencing order when he filed his motion to vacate.
Hunter alleges that the judgment against him was obtained by fraud. “Under settled legal
principles, a judgment is void ab initio only if it ‘has been procured by extrinsic or collateral
fraud or entered by a court that did not have jurisdiction over the subject matter or the parties.’”
Pigg v. Commonwealth, 17 Va. App. 756, 760 n.5 (1994) (en banc) (quoting Rook v. Rook, 233
Va. 92, 94-95 (1987)). “Otherwise a judgment is merely voidable and may be set aside only
(1) by motion to the trial court filed within twenty-one days of its entry, as outlined in Rule 1:1,
(2) on direct appeal, Rook, 233 Va. at 95, or (3) by bill of review.” Id. See Code § 8.01-623;
Blunt v. Lentz, 241 Va. 547, 550 (1991).
“Extrinsic fraud is fraud which occurs outside the judicial process and ‘consists of
conduct which prevents a fair submission of the controversy to the court.’” F.E. v. G.F.M., 35
Va. App. 648, 659-60 (2001) (en banc) (quoting Peet v. Peet, 16 Va. App. 323, 327 (1993)). “It
includes ‘purposely keeping [the unsuccessful party] in ignorance of the suit . . . . In all such
instances the unsuccessful party is really prevented, by the fraudulent contrivance of his
adversary, from having a trial . . . .’” Id. at 660 (quoting McClung v. Folks, 126 Va. 259, 270
(1919)). “[T]he judgment of a court, procured by extrinsic fraud, . . . is void and subject to
attack, direct or collateral, at any time.” T.S.G. v. B.A.S., 52 Va. App. 583, 589 n.3 (2008)
(quoting State Farm Mut. Auto. Ins. Co. v. Remley, 270 Va. 209, 218 (2005)).
In contrast, “a judgment obtained ‘by intrinsic fraud, i.e., by perjury, forged documents,
or other incidents of trial related to issues material to the judgment, is voidable by direct attack at
any time before the judgment becomes final . . . .” Id. (emphasis added) (quoting Remley, 270
Va. at 218). Where a court has jurisdiction over the person and the subject matter, “no error in
the exercise of such jurisdiction can make the judgment void, and . . . a judgment rendered by a
-4-
court of competent jurisdiction is not void merely because there are irregularities or errors of law
in connection therewith.” Robertson v. Commonwealth, 181 Va. 520, 536-37 (1943). “This is
true even if there is a fundamental error of law appearing upon the face of the record. Such a
judgment is, under proper circumstances, voidable,” but unless it is then voided, it is regarded as
valid. Id.
“The charge of fraud is one easily made, and the burden is upon the party alleging it to
establish its existence, not by doubtful and inconclusive evidence, but clearly and conclusively.
Fraud cannot be presumed.” Aviles v. Aviles, 14 Va. App. 360, 366 (1992) (quoting Redwood v.
Rogers, 105 Va. 155, 158 (1906)). The party alleging fraud “has the burden of proving ‘(1) a
false representation, (2) of a material fact, (3) made intentionally and knowingly, (4) with intent
to mislead, (5) reliance by the party misled, and (6) resulting damage to the party misled.’”
Batrouny v. Batrouny, 13 Va. App. 441, 443 (1991) (quoting Winn v. Aleda Constr. Co., 227 Va.
304, 308 (1984)). See also Jacobs v. Jacobs, 184 Va. 281, 285 (1945) (“[W]here fraud is relied
upon the burden of proof is upon the one alleging it, and that if it is not strictly and clearly
proven as alleged, by circumstantial or direct evidence, no relief will be granted.”).
Hunter’s allegations of fraud, even if true, demonstrate only intrinsic fraud, thus
rendering the verdict voidable rather than void ab initio. Over three years have passed since the
final judgment was entered, and the time to challenge a voidable judgment has long since
expired. For this reason, and because Hunter did not advance a claim that would prove the
judgment was void ab initio, the trial court properly concluded it lacked jurisdiction to consider
Hunter’s motion to vacate. “Virginia law does not permit a motion to vacate that is filed in a
trial court long after the court lost active jurisdiction over the criminal case to serve as an
all-purpose pleading for collateral review of criminal convictions.” Jones v. Commonwealth,
293 Va. 29, 53 (2017).
-5-
Consistent with the Supreme Court’s ruling in Jones, and as bound by Rule 1:1(a), the
trial court did not err in finding that it lacked jurisdiction to entertain Hunter’s motion to vacate,
which was filed long after Hunter’s conviction became final in the trial court. Accordingly, we
do not disturb the trial court’s decision.
CONCLUSION
For all of the foregoing reasons, we affirm the trial court’s judgment.
Affirmed.
-6- | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483812/ | IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Paula Canivan, :
Appellant :
: No. 98 C.D. 2020
v. :
: Submitted: October 29, 2021
Honesdale Borough Zoning Board :
and Honesdale Community Church, :
Inc. :
BEFORE: HONORABLE PATRICIA A. McCULLOUGH, Judge
HONORABLE MICHAEL H. WOJCIK, Judge
HONORABLE ELLEN CEISLER, Judge
OPINION NOT REPORTED
MEMORANDUM OPINION
BY JUDGE McCULLOUGH FILED: November 15, 2022
Paula Canivan (Canivan) appeals from the December 10, 2019 order of
the Court of Common Pleas of Wayne County (trial court), which affirmed the
December 7, 2018 decision of the Honesdale Borough Zoning Hearing Board
(ZHB)1 granting The Honesdale Community Church, Inc.’s (Church) request for
dimensional variances from the applicable maximum lot coverage, setback
requirements, and planting strip width requirement of the Honesdale Borough
Zoning Ordinance (Ordinance),2 thereby allowing the Church to expand the parking
lot on its property. After thorough consideration, we affirm.
1
This Court precluded the ZHB, which is listed as an appellee in the caption, from filing a
brief in this matter based on its failure to comply with this Court’s June 3, 2021 order directing it
to file a brief in 14 days.
2
Borough of Honesdale, Pa., Zoning Ordinance, as amended, §§ 210-1 – 210-44 (2000),
available at https://ecode360.com/12991884 (last visited November 10, 2022).
Background
The Church owns property located at 206 12th Street (Property), at the
corner of 12th and Church Streets in Honesdale Borough (Borough). Reproduced
Record (R.R.) at 13a, 16a, 18a; ZHB Decision, Finding of Fact (F.F.) ¶ 1. The
Property is located in the Borough’s R-5 Residential/Professional Zoning District
(R-5 District) and is improved with a church building and a parking lot. R.R. at 13a,
16a; ZHB Decision at 1. Churches and places of worship are allowed as special
exception uses in the R-5 District. Ordinance § 210-10(D). Notably, the Church
obtained a variance from the ZHB in 1998 for its current 14-space, on-site parking
lot. R.R. at 13a, 18a; ZHB Decision, F.F. ¶ 2 & Applicant Exhibit A-6 (1998
variance).3
On July 16, 2018, the Church submitted an application to the ZHB
requesting three dimensional variances so it could expand its on-site parking lot from
14 to 24 spaces. R.R. at 12a-16a. Specifically, the Church requested the following
variances from the Ordinance: (1) to extend the existing parking area to within 1
foot of the easterly boundary, where the Ordinance requires side and rear lot setbacks
of 10 feet; (2) to lessen the planting strip along the easterly and southerly boundaries
from the required 20 feet to 1 foot and 6 feet, respectively; and (3) to increase the
maximum lot coverage from the current 52% to 56%, where the Ordinance provides
a maximum lot coverage of 35%. Id. at 12a, 14a; see Ordinance §§ 210-10(F), 210-
19(I). The narrative submitted in support of the Church’s application explains, in
pertinent part:
3
Applicant Exhibit A-6 appears to be missing from the list of exhibits in the ZHB’s
decision. See ZHB Decision at 3-4. However, the ZHB admitted this exhibit into the record and
specifically mentioned the exhibit in its Findings of Fact. See ZHB Decision, F.F. ¶ 2; R.R. at 24a,
40a.
2
Since 1998[,] significant changes have occurred
to the [] Church, the Borough[,] and the neighborhood.
The [] Church’s congregation has grown, attendance at
services has increased, and the nature of modern life with
its emphasis on the automobile has increased the need for
parking. In addition, the Borough has had its traffic
patterns significantly altered with the result that Main
Street is one way south while Church Street is one way
north. Even more significant is the construction of the
General Richard J. Tallman [(Tallman)] bridge
crossing the Lackawaxen River at Church and [12th]
Streets.
These changes had an obvious impact on
available on-street parking for church activities. There
is no on-street parking on the easterly side of Church
Street north of Central Park, and very few spots on the
westerly side of Church Street. In addition, the
construction of the [Tallman] bridge has lessened the
availability of the on-street parking on [12th] Street[,]
which existed before it was constructed.
Existing off-street parking (14 spots) is provided on
the [] [P]roperty to the south of the church building
because of the variance granted by the [ZHB] in 1998.
However, due to the change in circumstances outlined
above[,] the [] Church finds it necessary to increase the
size of this parking lot by extending its boundaries in a
manner nearly identical to those permitted by the existing
variance. This will add [10] parking spaces[,] making the
off-street parking capacity of the lot 24 spaces.
R.R. at 13a (emphasis added).
The ZHB held a hearing on the Church’s application on October 25,
2018. Keith Larson, the Church’s President, testified first in support of the Church’s
application. He explained that the Church previously submitted a variance
application to the ZHB in which it sought to add 14 more parking spaces, for a total
of 28 spaces, but the plan was withdrawn after Canivan, one of the Church’s
3
neighbors, objected. R.R. at 46a-47a, 51a-52a, 54a; ZHB Decision, F.F. ¶ 3 &
Applicant Exhibit A-8 (prior plan for parking expansion). Larson confirmed that the
Church’s current parking lot expansion plan4 is drastically different than the
withdrawn plan due to the Church’s attempt to accommodate Canivan’s concerns by
eliminating the four parking spots along the border with Canivan’s property. R.R.
at 47a, 128a-30a, 151a. Larson then testified that the Church needs the “additional
off-street parking because the current parking is insufficient for the number of people
that show up on a Sunday morning.” R.R. at 48a; ZHB Decision, F.F. ¶ 5. In support
of this contention, Larson stated that he personally counted the number of cars that
showed up for the Church’s Sunday morning service each week from the last Sunday
in June 2018 through the week prior to the ZHB hearing. R.R. at 48a-49a, 57a. The
Church submitted into evidence a document outlining the number of cars Larson
counted each week, ranging from 15 to 27 in total, which exceeds the Church’s
current parking lot that has only 14 spaces. Id. at 49a-50a; ZHB Decision, Applicant
Exhibit A-9 (attendance for 2018 at Church). Larson explained that he only counted
cars parked outside of the Church’s parking lot if he was able to verify that the
individuals driving the cars attended the service. Id.
In response to a question about whether the Church was the only user
of the parking lot, Larson stated that the Church permits a nearby pharmacy to also
use the parking lot during business hours on weekdays. R.R. at 50a; ZHB Decision,
F.F. ¶ 6. Larson explained that the pharmacy gives the Church “a free will” quarterly
donation of $180 in exchange for pharmacy employees’ use of the lot. R.R. at 50a,
63a; ZHB Decision, F.F. ¶ 6. When asked what would happen if the pharmacy
stopped making the quarterly donation, Larson stated the Church would still allow
4
The current parking lot expansion plan and variance application were admitted into the
record as Applicant’s Exhibit A-10.
4
the pharmacy’s employees to use the lot. R.R. at 50a-51a. Larson indicated that
there was no contract between the Church and the pharmacy with respect to the
pharmacy’s donation and use of the lot. He also noted that it was up to the pharmacy
to determine whether it would increase the donation due to any increase in the
number of parking spaces. R.R. at 52a-53a; ZHB Decision, F.F. ¶ 6.
Larson noted on cross-examination that the Church’s parishioners have
to make use of other parking spots in the area when they attend Sunday services.
R.R. at 62a. While he could not provide the exact number of other parking spaces
available in the vicinity, Larson stated that church attendees are able to park on 12th
Street in front of the church building and in front of Canivan’s property, directly
across the street from the church building, in a grassy area along the riverbank, and
on Church Street about a block from the Church. Id. at 59a-62a. Larson also stated,
in response to opposing counsel’s questions about whether the geography of the
Property justified the expansion, that the Property is fairly level, with no hills or
differences in topography. R.R. at 66a. Larson stated that the Church could continue
to use the Property as a church and parking lot without the variances but stated it
would be “more difficult” because the construction of the Tallman bridge reduced
the number of on-street parking spaces in the area. Id. at 69a, 71a-72a. Larson
further stated that he had no data or indication that anyone could not attend the
Church’s services because they could not find parking. Id. at 75a. In addition to the
current need for parking spaces, Larson also testified that the Church was seeking
the 10 additional parking spaces “[t]o allow for church growth” in the future. Id. at
76a.
The Church also presented the testimony of Diane Spry, a Borough
resident who has been a member of the Church for over 65 years. R.R. at 84a. Spry
5
testified that she attends services every Sunday and observes both how many people
regularly attend the services and where they park. Id. at 85a-87a. Specifically, she
stated that the Church’s weekly attendance ranges from 25 to 35 people, 10 to 15 of
which on average are children, and could go as high as 50 depending on the time of
year and whether it is a holiday.5 Id. at 85a-86a, 105a-06a; ZHB Decision, F.F. ¶ 7.
Spry also explained that attendees drive to the Church and based on the number of
vehicles she has observed, she opined that the current parking lot is not sufficient to
accommodate attendees. R.R. at 86a-88a; ZHB Decision, F.F. ¶ 7. She noted that
those who do not get a space in the Church’s parking lot have to park on either side
of 12th Street, in the grassy area along 12th Street, or on Court Street, if spaces are
available. R.R. at 91a-92a.
Spry further testified on cross-examination that when the Tallman
bridge was constructed in 2011, the traffic patterns changed, as Church Street
became a one-way street. R.R. at 94a. According to Spry, 10 on-street parking
spaces were lost along 12th Street due to the construction of the Tallman bridge and
the installation of guardrails on either side thereof. Id. at 95a-97a. She stated that
both the construction of the bridge and the changed traffic pattern had an impact on
Church members’ parking. Id. at 96a. Spry acknowledged that some people do walk
to the Church, which would not require use of the parking lot. Id. at 108a.
Landscape architect Michael Wood, of Woodland Design Associates
Inc., also testified on behalf of the Church. Wood prepared the site plan6 that the
5
Spry later explained on cross-examination that the Church no longer keeps records of
individuals who are baptized members of the Church. She stated that, as of several years ago and
to the best of her knowledge, only approximately 19 or 20 people were baptized and considered
members of the Church; however, she noted, everyone who attends the Church is treated as or
considered to be a member. R.R. at 104a.
6
The revised parking expansion plan was submitted as Applicant Exhibit A-10. R.R. at
113a; ZHB Decision, Applicant Exhibit A-10 (revised parking expansion plan).
6
Church submitted along with its application, and he was also involved in the 1998
variance for the Church’s original parking lot. R.R. at 109a; ZHB Decision, F.F. ¶
8. Wood estimated that seven parking spaces in the grassy area along 12th Street
were lost due to construction of the Tallman bridge and that four additional on-street
parking spaces were lost sometime after 2005. R.R. at 110a-11a, 142a-44a. Wood
characterized the site plan he developed as “simply an extension of what the parking
lot was from 1998[,]” which is relevant because the ZHB already decided that a
parking lot could be placed in the area. Id. at 114a, 116a. He testified that the 1998
design plan also had to meet certain requirements regarding property lines and
setbacks, as well as proper engineering standards for the health, safety, and welfare
of the public. Id. at 116a-19a. He then stated that the current site plan is a
“comprehensive design” and that he “strove to meet all the requirements that we
possibly could, but we could not meet them all.” Id. at 120a. Wood explained
specifically that, because of “the unique conditions of the lot and the shapes and
sizes of the buildings,” he was unable to meet the Ordinance’s requirements for a
20-foot buffer and the maximum lot coverage. Id. at 124a; see also id. at 120a
(including narrowness of the lot and the area between the existing buildings).
Further, the plan had to accommodate “the traffic patterns that now exist with one-
way traffic on Church Street to one-way traffic on 12th [Street] and that people
would be able to get in and out safely[,]” and also “parking that is easier and more
negotiable for older citizens” and others who use the Church’s facility. Id. at 124a-
25a.
Wood assured that he took steps to achieve and minimize impacts to
the neighboring residential properties with respect to the 20-foot buffer and, in doing
7
so, took several photographs to aid him in his analysis. R.R. at 130a-32a.7 Wood
explained his photos as follows: the first photo (Applicant Exhibit A-13) showed
that the proposed expanded parking area is bounded on the south side by an adjoining
parking lot (R.R. at 132a-34a; ZHB Decision, F.F. ¶ 4); the second photo (Applicant
Exhibit A-14) looked directly east to another neighbor’s property, which has a fence
across the back of it along the border with the Church (R.R. at 134a-36a; ZHB
Decision, F.F. ¶ 4); and the third photo (Applicant Exhibit A-15) looked to the
northeast, which showed Canivan’s garage (R.R. at 136a). Wood stated that,
although Canivan’s garage blocks the view of the expanded parking area, that area
would nevertheless maintain a 10-foot distance from Canivan’s property. R.R at
136a.
Wood noted that many lots in the Borough’s R-5 District well exceed
the maximum 35% lot coverage, including the Church’s lot, which has 52% lot
coverage. Id. at 138a, 164a-67a. He explained that given the recent demolition of
the building and garage on the Property and the Church’s plan to return that area to
natural vegetation, the 10 additional parking spaces would only increase the
impervious lot coverage of the Property by 4%, from 52% to 56% lot coverage. R.R.
at 139a-41a; ZHB Decision, F.F. ¶ 9.
On cross-examination, Wood stated that the expanded parking area
could be seen from Canivan’s property, but Canivan’s garage is the closest to the
parking area and the buffer would be between the garage and the parking area. R.R.
at 152a-55a; ZHB Decision, F.F. ¶ 10; see also R.R. at 136a.
7
The photos were submitted into the record as Applicant Exhibits A-13, A-14, and A-15.
R.R. at 130a-31a; ZHB Decision, Applicant Exhibits A-13 (photo looking south showing
neighboring parking lot), A-14 (photo looking east showing privacy fence), & A-15 (photo looking
northeast at Canivan property garage).
8
Canivan’s daughter, Britta Bakos, testified8 first in opposition to the
Church’s application. Bakos stated that she currently lives part-time in the Borough
with her mother and part-time in New York City. R.R. at 172a. Bakos opposes the
Church’s application due to privacy, noise, and environmental issues, noting that if
more cars park in the Church’s parking lot, there will be more noxious fumes and
gasoline in their backyard. Id. at 173a. She testified that she can see the Church’s
proposed parking area from her mother’s home and that having the required 20-foot
planting strip as a buffer would help alleviate her privacy concerns. Id. at 175a-
76a. Bakos stated that she is familiar with the area and did not believe there was a
need for extra parking spaces on the Property, noting that there are approximately
six parking spots available on 12th Street, six to eight spots in the grassy area along
the river, and four additional spots north of the Tallman bridge. Id. at 176a-78a.
Further, Bakos has observed that there are still on-street parking spots available on
Sunday mornings. Id. at 178a-79a; see also ZHB Decision, F.F. ¶ 11. On cross-
examination, Bakos admitted that the on-street parking spaces on 12th Street and
Court Street are not always available on Sundays. R.R. at 182a-83a; ZHB Decision,
F.F. ¶ 12.
Canivan also testified in opposition to the Church’s application, stating
that she has owned and resided at 212 12th Street since 1947, which directly abuts
the Property.9 R.R. at 188a; ZHB Decision, F.F. ¶ 13. Canivan noted that she no
longer works and is therefore home most of the time to observe what goes on in her
neighborhood. R.R. at 189a; ZHB Decision, F.F. ¶ 13. With respect to parking on
8
Bakos provided a written statement that was read at the hearing and admitted into the
record as Exhibit I-1. R.R. at 180a-82a, 186a; ZHB Decision, F.F. ¶ 12.
9
Canivan also provided a written statement that was read at the hearing and admitted into
the record as Exhibit I-4. R.R. at 209a-13a; ZHB Decision, F.F. ¶ 15.
9
the street in the vicinity of the Church, she stated that during the week, 8 to 10 cars
park in the grassy area along the river, across from her home, and as many as 6 cars
park along 12th Street. R.R. at 189a-90a. However, on Sunday mornings, “there is
not much activity” and there are not many cars parked in the vicinity. Id. at 190a.
On several Sunday mornings, specifically October 14 and 21, 2018, Canivan took
pictures of the area around her home and the Church, and these pictures were
admitted into evidence. Id. at 190a-205a; ZHB Decision, F.F. ¶ 14 & Exhibits I-2
(photos individually labeled “a” through “r”), and I-3 (one photo).
In addition, Canivan testified that the Church’s Property slopes
downward, approximately two to three feet, to her driveway and garage. R.R. at
206a. It concerns Canivan that she would be able to see the area of the proposed
additional parking from her house, and she testified that there needs to be some kind
of screening – ideally a fence – between the proposed grassy area for children to
play and her property to ensure both privacy and the safety of the children. Id. at
207a-08a, 217a-18a. Finally, Canivan testified she is an avid gardener and enjoys
spending time outside, and the environmental impact of the Church adding more
parking spaces would add pollutants, encroach on her property, and “disrupt [her]
way of life.” Id. at 189a, 210a-11a. Specifically, she complained about the
pollutants from idling cars; the potential added motor oil, grease, and gasoline
dripping onto the parking lot; the heavy metals from car batteries; and the additional
“ice melt” that would be needed in winter. Id. at 211a. Canivan stated her belief
that the additional parking spaces are “both unnecessary, as we have seen from the
pictures, and unwanted.” R.R. at 212a; ZHB Decision, F.F. ¶ 15.
At its November 15, 2018 meeting, the ZHB unanimously voted to
grant the Church’s variance application “as proposed with the condition that the
10
[Church] provide screening along [] Canivan’s back property.” Original Record
(O.R.), Item No. 9, Decision on Honesdale Community Church, at 2; R.R. at 258a.
The ZHB formalized that vote through a written decision issued on December 7,
2018. R.R. at 17a-21a; Appellant’s Br., Appendix A. In that decision, the ZHB
made the above factual findings based on the testimony offered at the hearing and
other evidence entered into the record. The ZHB then made the following relevant
conclusions of law:
3. The proposed expansion of the Church parking lot is
needed to provide for the increased size of the
congregation, both currently and for the future, and is also
needed due to the reduction of the number of street
parking [spots] in the area after 2005.
4. The [v]ariances are necessary for the reasonable use of
the Property as a [c]hurch, and additional off-street
parking cannot be constructed on the Property in
conformance with the [] Ordinance.
5. This [ZHB] previously granted a variance in 1998 to
allow for the establishment of the existing parking lot,
recognizing the need to provide off-street parking for the
pre[]existing church.
6. The [v]ariances requested are the minimum variances
necessary to provide for additional parking and do not
have a substantial adverse impact on adjoining properties
or the community.
7. The concerns of . . . [Canivan] have been addressed by
the following condition: that the Church be required to
plant evergreen trees as a buffer along the boundary line
of the Church and the Canivan [p]roperty line . . . .
Id. at 20a; Appellant’s Br, Appendix A at A.4.
11
Canivan appealed the ZHB’s decision to the trial court, which did not
accept any additional evidence.10 R.R. at 5a-11a. On December 10, 2019, the trial
court issued an order, without an accompanying opinion, denying Canivan’s appeal
and finding in favor of the Church. O.R., Item No. 24; Appellant’s Br., Appendix
B. In doing so, the trial court
agree[d] that [the Church’s] witnesses and exhibits clearly
established that the necessary factual elements are present
to provide adequate grounds for granting the variance [sic]
under the standards set forth in the Ordinance. Thus, it is
evidence [sic] that the [ZHB] found substantial evidence[,]
and[,] therefore, the decision of the [ZHB] shall be
affirmed.
Id. at 1, n.1. Canivan then filed the instant appeal to this Court.11
Issues
Canivan argues that the trial court erred in affirming the ZHB’s decision
granting the Church’s variance application because the ZHB failed to conclude that
10
In her notice of land use appeal, Canivan requested that the trial court receive additional
testimony and evidence “due to the inadequate evidence and record presented” at the ZHB’s
hearing. R.R. at 11a. The trial court denied Canivan’s petition by order dated July 8, 2019. Id. at
260a.
11
Where a trial court takes no additional evidence on appeal from a decision of a zoning
board,
our scope of review is limited to determining whether the [zoning
b]oard committed an error of law or “a manifest abuse of
discretion.” Valley View Civic Association v. Zoning Board of
Adjustment, . . . 462 A.2d 637, 639 ([Pa. ]1983). A zoning board
abuses its discretion “only if its findings are not supported by
substantial evidence.” Id. at 640. Substantial evidence is “such
relevant evidence as a reasonable mind might accept as adequate to
support a conclusion.” Id.
Pequea Township v. Zoning Hearing Board of Pequea Township, 180 A.3d 500, 504 n.1 (Pa.
Cmwlth. 2018).
12
the Church did not satisfy each of the five criteria necessary for a variance. Canivan
further maintains that the ZHB’s findings do not support the conclusion that the
Church satisfied each of the five criteria for a variance and that there is not
substantial evidence of record to support each requirement here.
Discussion
Section 910.2(a) of the Pennsylvania Municipalities Planning Code
(MPC)12 provides that
[t]he board may grant a variance, provided that all of the
following findings are made where relevant in a given
case:
(1) That there are unique physical circumstances or
conditions, including irregularity, narrowness, or
shallowness of lot size or shape, or exceptional
topographical or other physical conditions peculiar to the
particular property and that the unnecessary hardship is
due to such conditions and not the circumstances or
conditions generally created by the provisions of the
zoning ordinance in the neighborhood or district in which
the property is located.
(2) That because of such physical circumstances or
conditions, there is no possibility that the property can be
developed in strict conformity with the provisions of the
zoning ordinance and that the authorization of a variance
is therefore necessary to enable the reasonable use of the
property.
(3) That such unnecessary hardship has not been created
by the appellant.
(4) That the variance, if authorized, will not alter the
essential character of the neighborhood or district in which
the property is located, nor substantially or permanently
12
Act of July 31, 1968, P.L. 805, as amended, 53 P.S. §§ 10101-11202. Section 910.2 was
added by the Act of December 21, 1988, P.L. 1329, 53 P.S. § 10910.2.
13
impair the appropriate use or development of adjacent
property, nor be detrimental to the public welfare.
(5) That the variance, if authorized, will represent the
minimum variance that will afford relief and will represent
the least modification possible of the regulation in issue.
53 P.S. § 10910.2(a).13 While a variance applicant must show that unnecessary
hardship will result if a variance is denied and that the proposed use will not be
contrary to the public interest, our Supreme Court has noted that the grant of a
dimensional variance is only a reasonable adjustment of the zoning regulations and
of lesser moment than the grant of a use variance:
When seeking a dimensional variance within a permitted
use, the [applicant] is asking only for a reasonable
adjustment of the zoning regulations in order to utilize the
property in a manner consistent with the applicable
regulations. Thus, the grant of a dimensional variance is
of lesser moment than the grant of a use variance, since
the latter involves a proposal to use the property in a
manner that is wholly outside the zoning regulation.
Hertzberg v. Zoning Board of Adjustment of City of Pittsburgh, 721 A.2d 43, 47 (Pa.
1998) (emphasis added). Therefore, applicants seeking a dimensional variance, as
opposed to a use variance, are subject to a more relaxed standard with respect to
establishing unnecessary hardship, under which
[c]ourts may consider multiple factors, including the
economic detriment to the applicant if the variance was
denied, the financial hardship created by any work
necessary to bring the building into strict compliance with
the zoning requirements[,] and the characteristics of the
surrounding neighborhood.” Hertzberg, 721 A.2d at 50.
Although Hertzberg eased the requirements for a variance,
13
Through its Ordinance, the Borough has expressly adopted the variance test set forth in
Section 910.2(a) of the MPC. See Ordinance § 210-41.
14
it did not remove them. Tidd v. Lower Saucon Township
Zoning Hearing Board, 118 A.3d 1 (Pa. Cmwlth. 2015).
Moreover, despite a more relaxed standard, it is still the
case that “[t]he burden on an applicant seeking a variance
is a heavy one, and the reasons for granting the variance
must be substantial, serious and compelling.” Singer v.
Philadelphia Zoning Board of Adjustment, 29 A.3d 144,
149 (Pa. Cmwlth. 2011).
Although Hertzberg sets forth a more relaxed standard for
a dimensional variance, it does not stand for the
proposition that “a variance must be granted from a
dimensional requirement that prevents or financially
burdens a property owner’s ability to employ his property
exactly as he wishes, so long as the use itself is permitted.”
Yeager v. Zoning Hearing Board of the City of Allentown,
779 A.2d 595, 598 (Pa. Cmwlth. 2001) (emphasis in
original)[.]
Pequea Township v. Zoning Hearing Board of Pequea Township, 180 A.3d 500, 507
(Pa. Cmwlth. 2018) (emphasis in original).
Here, the ZHB’s findings with respect to the criteria necessary for a
dimensional variance are supported by the record. We note at the outset that the
ZHB, “as fact-finder, is the sole judge of credibility.” Marshall v. City of
Philadelphia, 97 A.3d 323, 331 (Pa. 2014). While the ZHB here did not specifically
opine as to the credibility of the witnesses, it accurately described their testimony
and implicitly credited that of the Church’s witnesses, given its findings of fact and
conclusions of law.
In particular, the undisputed testimony of the Church’s witnesses
demonstrates that attendance at Sunday services is anywhere from 25 to 35 people,
or even more depending on the time of year. Larson’s testimony establishes that in
the weeks prior to the hearing, there were 15 to 27 cars in the area driven by Church
attendees. There are only 10 parking spaces in the lot. Further, the uncontested
15
testimony of Larson, Wood, and Spry establish the changing conditions in parking
within the Church’s immediate vicinity due to construction of the Tallman bridge,
specifically the significant loss of available on-street parking, being at least 10
spaces.
Wood further testified that he was unable to add the parking spaces the
Church needed to accommodate its congregation and still meet the Ordinance’s
requirements, in particular given the size and narrowness of the lot. R.R. at 119a-
20a, 124a. Wood explained specifically that, because of “the unique conditions of
the lot and the shapes and sizes of the buildings,” he was unable to meet the
Ordinance’s requirements for a 20-foot buffer and the maximum lot coverage. Id.
at 124a; see also id. at 120a (including narrowness of the lot and the area between
the existing buildings). Further, the plan had to accommodate “the traffic patterns
that now exist with one-way traffic on Church Street to one-way traffic on 12th
[Street] and that people would be able to get in and out safely[,]” and also “parking
that is easier and more negotiable for older citizens” and others who use the
Church’s facility. Id. at 124a-25a. This amounts to substantial evidence to support
the ZHB’s conclusion that the existing 14-space parking lot is not adequate to
support the Church’s current or growing congregation, and, in turn, that the
dimensional variances are necessary for the reasonable use of the Property.
In a case directly on point, Daley v. Zoning Hearing Board of Upper
Moreland Township, 770 A.2d 815 (Pa. Cmwlth. 2001), this Court upheld the zoning
hearing board’s grant of a dimensional variance to a church to allow a buffer zone
of 5 feet rather than 50 feet so that the church could add an additional 80 parking
spaces. We held that the church demonstrated that “the parking situation had
become a serious hardship to its congregation and had prevented it from reasonable
16
use of its property.” Id. at 820. We explained that “the [c]hurch did not create the
parking problem” and that “the parking situation had become a serious hardship to
its congregation.” Id. Since the time the church was originally constructed, “the
surrounding neighborhood [had] changed causing the parking problem and creating
unnecessary hardship for the church.” Id. As such, we held that the findings
regarding unnecessary hardship were supported by the testimony and that there was
no abuse of discretion in granting the dimensional variance. Id.
Here, just as in Daley, the Church did not create the parking problem,
the lack of parking has become a hardship to the Church and its members, and it is
prevented from reasonable use of its property without the addition of the parking
spaces. Specifically, the surrounding neighborhood has changed, causing the
hardship for the Church since 2005. The Tallman bridge construction caused the
loss of 10 on-street parking spaces; Church Street is now a one-way street; and
further, as testified by Wood, the uniqueness and shape of the lot was the reason
Wood could not meet the Ordinance’s 20-foot buffer requirements. According to
the undisputed evidence, this has caused a significant loss of the available on-street
parking now and for the future use of the Church. Further, in Daley, this Court under
the same circumstances granted a dimensional variance. As the ZHB found:
“the church needs to expand the parking lot because
they don’t have adequate off-street parking,”
“some attendees have expressed concern about
being able to find parking nearby” and,
“on-street parking spaces are not always available
on Sundays along 12th and Court Streets”
(ZHB Decision, F.F. ¶¶ 5, 7, 12) (emphasis added).
17
Based on these findings of fact, the ZHB concluded: “[t]he proposed
expansion of the Church parking lot is needed to provide for the increased size of
the congregation, both currently and for the future, and is also needed due to the
reduction of the number of street parking in the area after 2005.” ZHB Decision at
4 (emphasis added). The ZHB also concluded: “[t]he [v]ariances are necessary for
the reasonable use of the Property as a Church.” Id. (emphasis added).
Moreover, there is ample evidence to support the determinations that
the variances requested are the minimum variances necessary to provide for
additional parking and will not substantially impair Canivan’s use of her property or
be detrimental to the public welfare. As Larson testified, and the documents
submitted into evidence make clear, the Church withdrew its original application
and drastically changed its current plans to reduce the number of additional parking
spaces and accommodate Canivan’s concerns. R.R. at 46a-47a. The ZHB also
conditioned the approval of the variances upon the Church planting evergreen trees
as a buffer along the boundary line with Canivan’s property, thus alleviating her
general concern with being able to see the Church’s expanded parking lot from her
home. It bears noting that the current variances granted by the ZHB are not much
different than the variance previously granted to the Church in 1998. For example,
the current variances only increase the maximum lot coverage from 52% to 56%.
See R.R. at 139a-41a. Wood also testified as to the characteristics of the surrounding
neighborhood, in particular the number of other parking lots that exceed the 35% lot
coverage in the surrounding area. Id. at 138a, 164a-67a. Finally, Wood testified
that he designed the plan for the expansion of the Church’s parking lot in
consideration of not just the Ordinance but “proper engineering standards for [the]
health, safety, and welfare of the public.” Moreover, he noted the inability to create
18
additional parking in the current lot due to the narrowness of the lot and shape of the
buildings. R.R. at 116a-19a.
It is well established that “a zoning board’s findings are owed deference
particularly its determination that a variance applicant satisfied the criterion for
dimensional variances. This is particularly so in light of a zoning board’s ‘expertise
in and knowledge of local conditions.’” Tidd, 118 A.3d at 9 (quoting Marshall, 97
A.3d at 333).
Precedent also supports the granting of the dimensional variances here.
As in Daley, the Church clearly meets the criteria for a dimensional variance, even
exceeding the standard by meeting the higher standard for a use variance, showing
undue hardship by uniqueness of the lot and building. Zaruta v. Zoning Hearing
Board of City of Wilkes-Barre, 543 A.2d 1282, 1284 (Pa. Cmwlth. 1988). See also
Section 910.2(a) of the MPC, 53 P.S. § 10910.2(a) (requiring that an unnecessary
hardship must arise from physical circumstances, and not the circumstances or
conditions generally created by provisions of the zoning ordinance in the
neighborhood of the district where the property is located).
The ZHB’s findings are clearly supported by substantial evidence for
the granting of a dimensional variance. As such, we can find no error of law or abuse
of discretion.
Accordingly, we affirm the trial court’s order.
PATRICIA A. McCULLOUGH, Judge
19
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Paula Canivan, :
Appellant :
: No. 98 C.D. 2020
v. :
:
Honesdale Borough Zoning Board :
and Honesdale Community Church, :
Inc. :
ORDER
AND NOW, this 15th day of November, 2022, the order of the Court
of Common Pleas of Wayne County, dated December 10, 2019, is AFFIRMED.
__________________________________
PATRICIA A. McCULLOUGH, Judge | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483814/ | COURT OF APPEALS OF VIRGINIA
Present: Judges Humphreys, Athey and Callins
UNPUBLISHED
Argued at Virginia Beach, Virginia
SHAWN ANTOINE KEELING
MEMORANDUM OPINION* BY
v. Record No. 1362-21-1 JUDGE DOMINIQUE A. CALLINS
NOVEMBER 15, 2022
COMMONWEALTH OF VIRGINIA
FROM THE CIRCUIT COURT OF THE CITY OF CHESAPEAKE
John W. Brown, Judge
Samantha Offutt Thames, Senior Assistant Public Defender (Virginia
Indigent Defense Commission, on briefs), for appellant.
Suzanne Seidel Richmond, Assistant Attorney General (Jason S.
Miyares, Attorney General; Leah A. Darron, Senior Assistant
Attorney General, on brief), for appellee.
Shawn Antoine Keeling pleaded guilty to possessing more than one ounce, but not more
than five pounds of marijuana with intent to sell, give, or distribute marijuana, a Class 5 felony in
violation of Code § 18.2-248.1(a)(2). At the sentencing hearing that followed, Keeling moved to
withdraw his guilty plea. The trial court denied Keeling’s motion. Keeling argues on appeal that
the trial court erred in its denial of his motion to withdraw his guilty plea. We affirm the
judgment of the trial court.
BACKGROUND
The facts underlying Keeling’s conviction are memorialized in a jointly submitted
stipulation of facts. In December 2020, several Chesapeake Police officers “assisted” Newport
News Police officers in executing a search warrant at a residence in Chesapeake occupied by
*
Pursuant to Code § 17.1-413, this opinion is not designated for publication.
Keeling and co-defendant, his wife. Police found a total of 138.61 grams of marijuana “packaged in
multiple bags” in Keeling’s bedroom. A digital scale was on a table in the room, alongside multiple
empty sandwich bags “with the bottom corners removed.” Police also found two empty bags, each
containing “suspected marijuana residue.” The bags were labeled “Insane Premium Cannabis” and
“b[ore] small white stickers indicating 15 grams and 19.74% THC content.” Keeling asked one of
the officers, “how much ya’ll paying . . . [t]he snitches that got you [police] to the house[?]”
Analysis of Keeling’s cell phone revealed messages “indicative of marijuana distribution activities.”
The stipulation of facts included photographs from the search. The photographs depict
several plastic bags, each tied off, containing a “large amount of marijuana.” The plastic bags were
found in an unlocked SentrySafe in a bedroom closet. The stipulation also notes that an officer with
the Chesapeake Vice and Narcotics Division “would have testified that the evidence in this case is
inconsistent with the personal use of marijuana.”
Keeling was indicted for selling, giving, distributing, or possessing more than one ounce,
but not more than five pounds of marijuana with intent to sell, give, or distribute marijuana, a Class
5 felony under Code § 18.2-248.1(a)(2). On the date of trial, he pleaded guilty to the charge.
Before accepting the plea, the trial court conducted a thorough colloquy with him to ensure
it was freely and voluntarily entered. Keeling confirmed that he had discussed with his attorney the
charge, its elements, and any possible defenses. He also confirmed that after the discussion with his
attorney, he decided to plead guilty because he was “in fact guilty.” Keeling confirmed that he
understood that by pleading guilty he waived certain constitutional rights, including the right to
confront the witnesses against him. Keeling and the trial judge engaged in the following colloquy
regarding Keeling’s waiver of his right to confrontation:
THE COURT: . . . And because there will be no trial, the reason I
ask you if you understand this is because, because there will be no
trial, your attorney will not be able to cross-examine, or what they
call “confront,” the witnesses in this courtroom under oath. She
-2-
won’t be able to do that because there will be no trial, and that’s a
constitutional right that you have that you’re giving up, right? It’s
not going to happen.
[KEELING]: I might want to talk to my lawyer on that one.
THE COURT: Okay.
....
THE COURT: The right to confrontation. Your attorney could
cross-examine the witnesses if we had a trial, but we’re not having
a trial, so I’m telling you that’s not going to happen; do you
understand that? There will be no trial so—
[KEELING]: Yes, sir.
[DEFENSE COUNSEL]: So that means the officers won’t come
to court and take the stand and answer any questions. That’s what
the Judge is referring.
[KEELING]: Okay. Thank you.
[DEFENSE COUNSEL]: Okay. You’re welcome.
He also confirmed that he understood the trial court could sentence him to up to ten years’
incarceration. Keeling acknowledged that although he had discussed the discretionary sentencing
guidelines1 with his attorney he understood that the trial court did not have to impose a sentence
within that range. Keeling represented that he was “entirely satisfied” with his attorney and asked
the trial court to accept his plea. Keeling also agreed that the joint stipulation accurately
summarized the evidence that would be admitted at trial and confirmed he had signed it.2
1
The discretionary sentencing guidelines recommended between three and six months in
jail.
2
In response to the trial court’s question, “do you agree that if the case had come to trial,
that the Commonwealth could have called in the witnesses live and in person to testify to what is
written in this stipulation of facts,” Keeling responded, “Yes, sir.” Similarly, when the trial court
asked Keeling’s counsel whether she agreed “that the Commonwealth could have put on a case
in accordance with the contents of the stipulation of facts,” she responded, “Yes, Your Honor.”
-3-
Several Commonwealth witnesses were present at the time of Keeling’s plea, including
Chesapeake officers who aided in the execution of the search warrant. Based on Keeling’s plea and
the joint stipulation, the trial court found that there was “overwhelming evidence of guilt” and
convicted Keeling of possession of more than one ounce but not more than five pounds of
marijuana with the intent to distribute. The trial court then continued the matter for sentencing.
Before the sentencing hearing, the Commonwealth filed two supplemental discovery
responses under seal which were also served on Keeling’s trial counsel. The responses reported that
two Chesapeake Police officers who had been involved in Keeling’s case were no longer employed
by the Department. One had been terminated “after an Internal Affairs investigation,” which “did
not involve any cases on which he worked or in which he testified.” The other officer was
terminated because of “issues involving veracity,” not pertaining to “any criminal investigations he
conducted or was involved with.”
At the sentencing hearing, Keeling moved to withdraw his guilty plea based on the
Commonwealth’s supplemental discovery responses. Beyond the information provided in the
supplemental responses, he did not know the details of why the officers no longer worked for the
Department; nor did he know “what part they played” in his case. Keeling proffered that he learned
of the information in the discovery responses after entering his guilty plea and after learning that the
related charges against his wife had been nol prossed. His trial counsel admitted, “I can’t quite
remember off the top of my head the officer involved in this case, what happened with that officer,
and I’m not sure if it was another witness issue, but that’s why that case was nol[]prossed.” Keeling
stated that he proceeded with the guilty plea not knowing that the Commonwealth would eventually
nol pros his wife’s case, noting, “These were not known factors when he did enter into that guilty
plea.” The Commonwealth countered that Keeling had not presented a sufficient basis to withdraw
his plea and, when he pleaded guilty, the officers were “available for testimony.”
-4-
The trial court agreed with the Commonwealth and denied Keeling’s motion, finding that he
had failed to establish “any of [the] elements” needed to withdraw a guilty plea. The trial court
observed that the “people who were to testify were able to testify, and [Keeling] made a choice to
plea.” After more evidence and argument by counsel, the trial court sentenced Keeling to ten years’
incarceration with eight years and six months suspended.
ANALYSIS
“We review a trial court’s decision to deny a defendant’s motion to withdraw a guilty
plea prior to sentencing under an abuse of discretion standard.” Pritchett v. Commonwealth, 61
Va. App. 777, 785 (2013) (citing Parris v. Commonwealth, 189 Va. 321, 324 (1949)). “The
decision whether to allow a defendant to withdraw his plea ‘rests within the sound discretion of
the trial court and is to be determined by the facts and circumstances of each case.’” Spencer v.
Commonwealth, 68 Va. App. 183, 186 (2017) (quoting Parris, 189 Va. at 324). The trial court’s
ruling should be reversed “only upon ‘clear evidence that [the decision] was not judicially
sound.’” Id. (alteration in original) (quoting Jefferson v. Commonwealth, 27 Va. App. 477, 488
(1998)). This standard of review presupposes “that, for some decisions, conscientious jurists
could reach different conclusions based on exactly the same facts—yet still remain entirely
reasonable.” Thomas v. Commonwealth, 62 Va. App. 104, 111 (2013) (quoting Hamad v.
Hamad, 61 Va. App. 593, 607 (2013)).
I. The Parris Standard for Withdrawal of a Guilty Plea
The withdrawal of a guilty plea is governed by two separate standards depending on
when the motion is made. “A motion to withdraw a guilty plea made after sentencing is
governed by the ‘manifest injustice’ standard.” Brown v. Commonwealth, 297 Va. 295, 300
(2019); see also Code § 19.2-296. In contrast, motions made before a defendant is sentenced
should be granted if the plea was entered “by mistake or under a misconception of the nature of
-5-
the charge; through a misunderstanding as to its effect; through fear, fraud, or official
misrepresentation; was made involuntarily for any reason; or even where it was entered
inadvisedly, if any reasonable ground is offered for going to the jury.” Pritchett, 61 Va. App. at
786 (quoting Parris, 189 Va. at 325).
To satisfy the “more forgiving” pre-sentence standard, a defendant must meet two
requirements. Brown, 297 Va. at 299. The two requirements, known as the Parris standard,
originate in Parris v. Commonwealth, the progenitor of a line of jurisprudence on which this
Court draws when reviewing a trial court’s denial of a motion to withdraw a guilty plea. See
Williams v. Commonwealth, 59 Va. App. 238, 245 (2011) (affirming Parris as “the ‘seminal
statement’ of Virginia law governing ‘the denial by a trial court of a motion to withdraw a guilty
plea’” (quoting Justus v. Commonwealth, 274 Va. 143, 152 (2007))). First, a defendant has “the
burden of establishing that his motion is made in good faith.” Spencer, 68 Va. App. at 187
(citing Ramsey v. Commonwealth, 65 Va. App. 593, 600 (2015)). Yet establishing “good faith”
cannot by itself support a successful motion. Second, a defendant must also “proffer evidence of
a reasonable basis for contesting guilt.” Id. The proffered defense must be “substantive, and not
‘merely dilatory or formal.’” Justus, 274 Va. at 155-56; see also Ramsey, 65 Va. App. at 600-02.
“The first requirement protects the integrity of the judicial process by precluding defendants
from using a guilty plea as a subterfuge to manipulate the court. The second requirement defeats
motions to withdraw which would result in an essentially futile trial.” Cobbins v.
Commonwealth, 53 Va. App. 28, 34 (2008).
Together with the two requirements of the Parris standard, a trial court should consider
whether the Commonwealth would be prejudiced by granting a motion to withdraw a guilty plea.
Our Supreme Court has “specifically recognize[d] prejudice to the Commonwealth as a relevant
-6-
factor that should be considered . . . .” Small v. Commonwealth, 292 Va. 292, 298 (2016); see
also Pritchett, 61 Va. App. at 787; Hubbard v. Commonwealth, 60 Va. App. 200, 211 n.4 (2012).
II. Application of Requirements for Withdrawal of a Guilty Plea
We need not consider whether Keeling’s motion was made in good faith because,
assuming without deciding that it was, he failed to present any substantive evidence of a
reasonable basis for contesting guilt. Familiar and well-established principles of judicial
restraint relieve us from considering whether Keeling satisfied each prong of the Parris standard,
as it is possible to render a decision here on narrower, more restricted grounds. See
Commonwealth v. White, 293 Va. 411, 419 (2017) (instructing that this Court is governed by
“[t]he doctrine of judicial restraint,” which “dictates that we decide cases ‘on the best and
narrowest grounds available’” (alteration in original) (quoting Commonwealth v. Swann, 290 Va.
194, 196 (2015))); see also Butcher v. Commonwealth, 298 Va. 392, 396 (2020) (explaining that
“[t]he ‘best’ answer to a legal question is the one . . . with which the greatest number of jurists
would agree” and “[t]he ‘narrowest’ answer to a legal question is the one affecting the least
number of cases”).
Rather than offer evidence of a reasonable basis for contesting guilt, Keeling offers a
theory: that the supplemental discovery responses disclose potential evidence which may be used
to impeach the credibility of two of the Commonwealth’s witnesses. At the sentencing hearing,
Keeling argued that his motion to withdraw his guilty plea was “based on” his wife’s charges
being nol prossed following issues with the Commonwealth’s witnesses. Keeling now contends
that the Commonwealth’s nol pros of the charges against his wife “not only clearly indicates that
there are true issues with these officer’s [sic] credibility, but also calls into serious question
whether the Commonwealth could, in fact, still prove its case.” He also contends that by not
permitting him to withdraw his guilty plea and challenge the officers’ credibility through
-7-
investigative means and cross-examination, the trial court errantly denied Keeling the
opportunity to discover substantive evidence which might form a basis for contesting guilt. But
on a motion to withdraw a guilty plea, the defendant bears the burden of establishing a
reasonable basis for contesting guilt. “The role of the trial court is [only] to determine whether
the defendant has made a prima facie showing of a reasonable defense.” Hernandez v.
Commonwealth, 67 Va. App. 67, 79 (2016). Keeling does not argue that he made such prima
facie showing. Nor does he seek to reconcile whether the specific evidence adduced to support
his motion to withdraw the guilty plea could, in fact, be made a reasonable basis for contesting
guilt. Rather, his position on appeal rests on the premise that the ruling of the trial court denied
him the opportunity to develop such evidence.
“A reasonable defense sufficient to withdraw a guilty plea is ‘one based upon a
proposition of law . . . or one supported by credible [evidence].’” Spencer, 68 Va. App. at 188
(quoting Williams, 59 Va. App. at 249). The defense must be “sustained by proofs.” Williams,
59 Va. App. at 249 (quoting Justus, 274 Va. at 153). Accordingly, we have held that “a bare
challenge to the credibility of a victim or witness” is not a reasonable defense that would
“‘permit the withdrawal of a plea of guilty.’” Id. Even when “newly discovered impeachment
evidence is potentially exculpatory,” it is insufficient to satisfy the Parris standard. Thomason v.
Commonwealth, 69 Va. App. 89, 96 (2018). This is because whether evidence is exculpatory or
potentially exculpatory “is not the proper standard for setting aside a guilty plea.”3 Id.
It follows that the evidence marshaled by Keeling cannot serve as a reasonable basis for
contesting his guilt. Raising a credibility challenge does not equate to proffering a defense
sustained by proofs and thus is insufficient to justify withdrawing a guilty plea. Id. At his plea
3
There is no allegation that the Commonwealth breached its obligation to disclose
exculpatory evidence under Brady v. Maryland, 373 U.S. 83 (1963).
-8-
hearing, Keeling pleaded guilty and, in a colloquy with the trial court, confirmed that he did so
because he was in fact guilty. He also affirmed that he had not been made any offer or promise
in exchange for pleading guilty. Indeed, Keeling’s plea did not arise from a plea agreement with
the Commonwealth, nor did he seek to preserve a claim of innocence despite his plea.4 Although
the Commonwealth nol prossed his wife’s charges after the officers were terminated, Keeling
admitted that he did not know “what part [the officers] played” in his case, the details of why the
officers no longer worked for the Chesapeake Police Department, or even which officer
participated in his case. Keeling instead relied on speculative assertion to mount a credibility
challenge. Such speculation does not satisfy the Parris standard. See Booker v. Commonwealth,
61 Va. App. 323, 334-35 (2012) (holding that a defendant had not established a reasonable basis
for contesting guilt when he relied on assertions that were “superficial,” “lacked substance,” and
raised a “merely formal” defense). Indeed, on appeal Keeling admits to requiring further
investigation to understand how the issues with the Commonwealth’s witnesses will redound to
his case.
“If the trial court finds as a matter of law, that the defendant has no reasonable defense, it
may then deny the motion.” Hernandez, 67 Va. App. at 79. Here, the trial court determined that
the requisite “elements” needed to grant the motion to withdraw Keeling’s guilty plea could not
be found. Consequently, Keeling has failed to furnish “‘clear evidence’” that the trial court’s
conclusion is “‘not judicially sound.’” Spencer, 68 Va. App. at 186 (quoting Jefferson, 27
4
Had Keeling entered an Alford plea, thereby maintaining his innocence while
acknowledging the sufficiency of the evidence to convict him, this appeal may have presented
differently. See North Carolina v. Alford, 400 U.S. 25 (1970). Yet Keeling would still confront
the same requirement to establish good faith and to provide a reasonable basis for contesting
guilt. That is, the same Parris standard applies. See Cobbins, 53 Va. App. at 35-36 (applying
Parris to hold that a defendant entered Alford pleas for the purpose of subterfuge). But
Keeling’s plea of guilty because he was “in fact guilty” readily undercuts any argument that the
potential impeachment of an officer is a reasonable basis for contesting his guilt.
-9-
Va. App. at 488). Accordingly, the trial court did not err in finding that Keeling failed to meet
his burden to withdraw his guilty plea.
CONCLUSION
For the foregoing reasons, we affirm the judgment of the trial court.
Affirmed.
- 10 - | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483817/ | COURT OF APPEALS OF VIRGINIA
Present: Judges Athey, Chaney and Raphael
UNPUBLISHED
Argued at Winchester, Virginia
FATIMA ABDULQADER ABDULSAMAD
MEMORANDUM OPINION* BY
v. Record No. 0050-22-4 JUDGE CLIFFORD L. ATHEY, JR.
NOVEMBER 15, 2022
MOFID HUSSEIN DEAK
FROM THE CIRCUIT COURT OF FAIRFAX COUNTY
Michael F. Devine, Judge
Samuel A. Leven (The Baldwin Law Firm, LLC, on briefs), for
appellant.
Fred M. Rejali for appellee.
Fatima Abdulsamad (“wife”) appeals from a decree of divorce in the Circuit Court of
Fairfax County, (“trial court”), ending her marriage to Mofid Deak (“husband”). Wife argues
that the trial court erred in (1) failing to require husband to make payments to her pursuant to an
October 10, 2017 agreement (“Temporary Agreement”) between the parties; (2) failing to award
the wife any share of marital retirement funds paid to the husband after the date of their
separation; (3) failing to award wife spousal support consistent with the needs of the wife and the
husband’s ability to pay; (4) failing to reconsider the rulings referenced in the above assignments
of error; and (5) failing to award wife any portion of her attorney fees. For the reasons to follow,
we affirm the trial court.
*
Pursuant to Code § 17.1-413, this opinion is not designated for publication.
I. BACKGROUND
“When reviewing a trial court’s decision on appeal, we view the evidence in the light most
favorable to the prevailing party, granting it the benefit of any reasonable inferences.” Congdon v.
Congdon, 40 Va. App. 255, 258 (2003).
The parties married in October of 1983. On October 10, 2017, the parties executed a
written Temporary Agreement which, in part, required husband to pay wife $5,000 on October
10, 2017, and another $3,000 by December 31, 2017. The Temporary Agreement also required
wife to file 2016 federal and state income taxes jointly with husband in exchange for “[husband]
paying [wife] $1,750.00 per month starting November 1, 2017.” The Temporary Agreement
further stated that: “[t]he terms of this Agreement are temporary and [husband] and [wife] are
free to negotiate another agreement containing different terms at a later date[but] until that time,
neither [husband] nor [wife] can change this agreement without the other party’s express
consent, provided in writing.” The Temporary Agreement also provided that “[a]ny failure to
comply with the terms contained herein will constitute breach of contract” before stating
“[e]mphatically, the terms of this agreement are intended to serve as temporary relief and are to
be taken without prejudice.” Finally, the Temporary Agreement declared that it “[did] not and
should not represent an adequate level of spousal support for [wife].”
Husband made the initial lump sum payments required by the agreement but, at most,
thereafter, made only two of the required monthly payments. Husband also failed to make other
payments pursuant to the agreement as required by the Temporary Agreement when their marital
properties were rented.
On October 22, 2018, husband filed a complaint for divorce and requested service by
order of publication, alleging that he did not know the whereabouts of wife. Wife failed to
respond to the publication, and a final divorce decree was subsequently entered on March 18,
-2-
2019. Wife first learned of the entry of the divorce decree in July 2019 and immediately
petitioned the trial court to reopen the proceedings and set aside the final divorce decree. She
also moved for pendente lite support or, in the alternative, to enforce their Temporary
Agreement.
Wife’s motion for pendente lite support or enforcement of the Temporary Agreement was
resolved by the entry of a consent order on August 30, 2019. Wife’s motion to reopen the
divorce and set aside the final divorce decree was granted by a second consent order entered on
October 4, 2019. This consent order vacated the previous final divorce decree. The consent order
also required the husband to make a payment of $10,000 in attorney fees to wife’s counsel by
October 1, 2019, a payment to the wife of $6,000 by October 1, 2019, and a second payment to the
wife of $6,500 by November 1, 2019. The October 4, 2019 consent order also included a provision
that wife waived her right to receive retroactive pendente lite support and that “[o]ther than the issue
of attorneys’ fees incurred by the parties prior to entry of this order, it is without prejudice to any
other claims or positions that either party may make or take in this case.” On October 25, 2019,
wife filed her answer and a counterclaim for divorce, seeking, among other things, both pendente
lite and permanent spousal support.
At trial, wife alleged that the Temporary Agreement was a marital settlement agreement
that the trial court was required to “follow,” and she demanded that the trial court order husband
to pay $60,910 owed to her pursuant to the terms of the Temporary Agreement. Following a
three-day hearing, the trial court issued a letter opinion on the issues of divorce, equitable
distribution, and spousal support. In relevant part, the trial court found that “the intent of the
[p]arties was that the Temporary Agreement was in the nature of a pendente lite agreement, and
that the issue of spousal support would ultimately be decided by the [c]ircuit [c]ourt.” The trial
court then awarded wife lump sum spousal support in the amount of $18,500.
-3-
Wife filed a motion to reconsider on November 18, 2021. The trial court divorced the
parties by final order entered December 9, 2021. On December 10, 2021, the trial court issued
another letter opinion granting the motion to reconsider in part and denying it in part. After the
trial, both parties filed briefs requesting attorney fees. The trial court denied both parties’
request for attorney fees, holding that each party would be responsible for their own attorney
fees. Wife appealed therefrom.
II. ANALYSIS
A. Standard of Review
We review the trial court’s interpretation of a contract de novo. Plunkett v. Plunkett, 271
Va. 162, 166 (2006). “[A] circuit court’s ‘equitable distribution award will not be overturned
unless the [appellate court] finds an abuse of discretion, misapplication or wrongful application
of the equitable distribution statute, or lack of evidence to support the award.’” Sobol v. Sobol,
74 Va. App. 252, 272 (2020) (second alteration in original) (quoting Dixon v. Dixon, 71
Va. App. 709, 717-18 (2020)). Similarly, “[w]hen a court awards spousal support based upon
due consideration of the factors enumerated in Code § 20-107.1, as shown by the evidence, its
determination ‘will not be disturbed except for a clear abuse of discretion.’” Chaney v.
Karabaic-Chaney, 71 Va. App. 431, 435 (2020) (quoting Dodge v. Dodge, 2 Va. App. 238, 246
(1986)).
“We review a trial court’s denial of a motion to reconsider for an abuse of discretion.”
Winston v. Commonwealth, 268 Va. 564, 620 (2004). Likewise, “an award of attorney’s fees and
costs is a matter for the trial court’s sound discretion after considering the circumstances and
equities of the entire case.” Stark v. Dinarany, 73 Va. App. 733, 755 (2021) (quoting Jones v.
Gates, 68 Va. App. 100, 105 (2017)). “Such decision ‘is reviewable on appeal only for an abuse
of discretion.’” Id. (quoting Graves v. Graves, 4 Va. App. 326, 333 (1987)).
-4-
B. Temporary Agreement
Wife argues that the trial court erred as a matter of law when it refused to require
husband to pay wife pursuant to the Temporary Agreement; she argues that the Temporary
Agreement is a marital settlement agreement pursuant to Code § 20-109(C) which requires the
trial court to adopt its terms when awarding spousal support. Assuming without deciding that the
Temporary Agreement is a marital settlement agreement within the contemplation of Code
§ 20-109(C), based upon her own theory, wife waived her right to retroactive pendente lite
spousal support by consent order, which precludes the recovery she now seeks on appeal.
It is axiomatic that “[w]hen the terms in a contract are clear and unambiguous, the
contract is construed according to its plain meaning.” City of Chesapeake v. States Self-Insurers
Risk Retention Group, Inc., 271 Va. 574, 578 (2006). The Temporary Agreement is, as its title
indicates, temporary. It states: “[t]he terms of this Agreement are temporary,” and
“[e]mphatically, the terms of this agreement are intended to serve as temporary relief.” The
Temporary Agreement distributed no marital property, directed husband to make certain
payments to wife, provided for temporary management of real estate, and required wife to jointly
file 2016 income taxes with husband. Because there is no permanent distribution of property or
permanent support award contemplated in the Temporary Agreement, the trial court cannot make
permanent property distributions or award permanent spousal support by simply following the
terms in the Temporary Agreement.
Moreover, any spousal support award solely based upon enforcing the terms of the
Temporary Agreement would only result in a retroactive pendente lite spousal support award
based on wife’s theory that the temporary agreement is the marital settlement agreement. Since
wife waived any right to retroactive pendente lite spousal support in the consent order entered on
-5-
October 4, 2019, the trial court is therefore precluded from enforcing the terms of the temporary
agreement as it relates to spousal support based upon wife’s own theory.
We find no merit in wife’s argument that Code § 20-109(C) prohibited the trial court
from entering a final decree that she claims was inconsistent with the monthly payments required
under the Temporary Agreement. To be sure, that code section provides that when “a stipulation
or contract signed by the party to whom such relief might otherwise be awarded is filed before
entry of a final decree, no decree or order directing the payment of support and maintenance for
the spouse . . . shall be entered except in accordance with that stipulation or contract.” Code
§ 20-109(C). But we specifically held in Newman v. Newman, 42 Va. App. 557 (2004) (en
banc), that an agreement “embodied in a consent decree signed by counsel on behalf of their
respective clients . . . qualifies as a stipulation or contact under Code § 20-109(C).” Id. at 562.
Here, the consent order in which wife waived her right to retractive pendente lite support was
signed by counsel for both parties, as well as by wife herself. So the trial court did not err in
holding wife to that waiver.
For those reasons, we find no error in the trial court’s refusal to award either pendente lite
or permanent spousal support pursuant to the terms of the Temporary Agreement.
C. Equitable Distribution
Wife argues that the trial court erred in failing to award her a marital share of husband’s
Thrift Savings Plan as well as her marital share of pension payments received by husband after
the date of their separation. Since we are unable to evaluate this assignment of error without a
transcript of the trial proceedings, we decline to do so.
“The burden is upon the appellant to provide [the appellate court] with a record which
substantiates the claim of error. In the absence [of a sufficient record], we will not consider the
point.” Robinson v. Robinson, 50 Va. App. 189, 197 (2007) (second alteration in original)
-6-
(quoting Jenkins v. Winchester Dep’t of Soc. Servs., 12 Va. App. 1178, 1185 (1991) (citation
omitted)); see also Rule 5A:8(b)(4)(ii).
Here, wife failed to timely file either a transcript of the proceedings or a statement of
facts in support of this assignment of error. A transcript or statement of facts is indispensable to
our evaluation of the second assignment of error; without a transcript or statement of facts we
must decline to do so.
D. Spousal Support
Wife next contends that the trial court abused its discretion by awarding spousal support
inconsistent with its own findings. Once again, no transcript of the proceedings or statement of
facts was timely filed in this appeal. Since we find that a transcript of the proceedings is
indispensable in evaluating whether the trial court abused its discretion in its award of spousal
support, we decline to do so.
Again “the burden is upon the appellant to provide [the appellate court] with a record
which substantiates the claim of error. In the absence [of a sufficient record], we will not
consider the point.” Id.; see also Rule 5A:8(b)(4)(ii).
Here, wife contends that the trial court abused its discretion in awarding spousal support
and cites a portion of the trial transcript to demonstrate that she preserved the alleged error.
Since she failed to timely file the transcript she references, this Court is unable to evaluate
whether the assignment of error was preserved pursuant to Rule 5A:18 because the trial
transcript is not a part of the record in this case. In addition, any testimony related to the spousal
support award from which error is assigned would invariably be contained in the trial transcript
as well. Since the transcript is indispensable for our evaluation of whether the alleged error was
preserved as well as the merits of the alleged error, we decline to consider wife’s third
assignment of error as well.
-7-
E. Motion to Reconsider
On appeal wife makes no specific argument attempting to demonstrate how the trial court
may have abused its discretion by denying the motion for reconsideration beyond issues
previously raised in her assignments of error I-III. Since wife fails to articulate any additional
facts or argument in support of this assignment of error, we refrain from addressing wife’s fourth
assignment of error.
F. Attorney Fees
Wife contends that in Thomas v. Thomas, 217 Va. 502 (1976), the Supreme Court
recognized a strong presumption in favor of awarding attorney fees in divorce cases when
spousal support is awarded and the payor spouse has the ability to pay. She extrapolates that a
presumption in support of awarding attorney fees existed here, and therefore the trial court
abused its discretion by not awarding her attorney fees under this presumption. We disagree.
This Court clarified that “[w]e do not believe that the court in Thomas intended to adopt a
rule that whenever a wife is granted support, the trial court must automatically award attorney’s
fees.” Artis v. Artis, 4 Va. App. 132, 138 (1987). And “[w]e read Thomas . . . to say that the
relative financial abilities and support issues should be considered as factors in weighing the
equities. However, these factors are not exclusively determinative of whether an award should
or should not be made.” Cirrito v. Cirrito, 44 Va. App. 287, 300 (2004).
In Artis, we noted specifically the facts present when the Supreme Court found an award
of attorney fees appropriate in Thomas. There, the husband earned $28,000 a year and the wife
earned only $1,546 per year. We noted that the facts were different in Artis since the wife was
“employed, making a reasonable salary, and had a number of assets, including her residence,
cash in the bank, and an automobile.” 4 Va. App. at 138. In Artis we found no abuse of
discretion in the trial court’s denial of wife’s request for attorney fees. Id.
-8-
Here, wife was awarded substantial assets from equitable distribution and spousal
support. For example, she was awarded the right to receive half the proceeds of the sale of a
marital property valued by the trial court at $1,500,000. She was also awarded sole ownership of
an apartment the trial court valued at $250,000. Further, the trial court left undisturbed her
ownership interest in two other properties. She was also awarded half of husband’s retirement
assets. Therefore, this is not a situation like Thomas in which the disparity between the parties’
economic situations was so great that failure to award wife attorney fees was inequitable.
Reviewing the record overall, we find that the trial court did not abuse its discretion in denying
wife’s motion for attorney fees given the unique facts present in this case. Hence, we affirm the
trial court’s decision denying wife attorney fees.
III. CONCLUSION
In conclusion, the trial court did not err as a matter of law when it refused to require the
husband to pay wife pursuant to the terms of the Temporary Agreement. We also find that the
transcript of the trial in this case is indispensable in deciding assignments of error II, III, and IV,
and we therefore decline to address those assignments of error. Finally, we affirm the trial
court’s denial of reimbursement of wife’s attorney fees and deny the parties’ requests for
appellate attorney fees.
Affirmed.
-9- | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483848/ | 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
SAMANTHA TRAPP, Plaintiff/Appellee,
v.
BENJAMIN FLYNN, Defendant/Appellant.
No. 1 CA-CV 22-0125
FILED 11-15-2022
Appeal from the Superior Court in Maricopa County
No. CV 2021-019095
The Honorable Mary Collins Cronin, Judge Pro Tempore
AFFIRMED
COUNSEL
Alexander R. Alpad, Phoenix
Co-Counsel for Defendant/Appellant
Bernabe Rice Law PLLC, Gilbert
By Nicole E. Bernabe,
Co-Counsel for Defendant/Appellant
Grand Canyon Law Group LLC, Mesa
By Angela C. Poliquin. Ryan H. McPhie
Counsel for Plaintiff/Appellee
TRAPP V. FLYNN
Decision of the Court
MEMORANDUM DECISION
Judge Michael J. Brown delivered the decision of the Court, in which
Presiding Judge Jennifer M. Perkins and Judge James B. Morse Jr. joined.
B R O W N, Judge:
¶1 Benjamin Flynn (“Flynn”) appeals the superior court’s
injunction against harassment (“IAH”) issued in favor of Samantha Trapp
(“Trapp”) and her 15-year-old daughter. Because Flynn has not shown the
court abused its discretion, we affirm.
BACKGROUND
¶2 Samantha Trapp is a roommate and friend of Flynn’s ex-wife.
Flynn and his ex-wife share custody of their two daughters, ages 10 and 7.
In September 2021, Flynn reported to law enforcement that sexual abuse
was possibly occurring between his 7-year-old daughter and Trapp’s
daughter. Flynn had learned that they would often take showers together
and sometimes sleep in the same bed. After conducting interviews, police
officers did not discern any evidence of inappropriate touching. Flynn later
filed a report with the Arizona Department of Child Safety (“DCS”) based
on the same concern.
¶3 On December 12, 2021, Flynn sent four text messages to
Trapp, telling her to stop “talking badly” about him in front of his
daughters and accusing her of “emotional abuse.” He also told Flynn he
was uncomfortable with her and her daughter being around his children,
and he threatened to contact the police again. In his text messages and a
subsequent voicemail, Flynn insisted that Trapp confirm to him she read
his text messages.
¶4 The next morning, Flynn left another voicemail asking Trapp
to confirm both receipt of his text messages and her plan to abide by his
requests. He also said that if he did not hear back from her, he would
contact Trapp’s father to have him call her to confirm receipt of the
messages. Later, Flynn sent a text message to Trapp stating he had called
her father; Flynn again asked her for confirmation. That same day, Flynn
called the police for a welfare check on his children and reported his ex-
wife for custodial interference, claiming she was not allowing phone calls
2
TRAPP V. FLYNN
Decision of the Court
between Flynn and his daughters. Flynn then sent another text message
telling Trapp that DCS had opened a case, that she needed to “keep the hell
away from my kids” and that he would have both Trapp and her daughter
“prosecuted to the fullest extent of the law.”
¶5 On December 16, 2021, Trapp filed an IAH petition based on
the police and DCS reports as well as the communications she received on
December 12 and 13. The superior court issued the IAH, ordering Flynn
not to have any contact with Trapp or her daughter except through
attorneys, legal process, or court hearings. After being served with the
IAH, Flynn sent two emails to his ex-wife that included statements about
Trapp and her daughter, questioning Trapp’s intellect and calling her
daughter a sexual predator. He also told his ex-wife that if Trapp did not
drop the injunction, Trapp would be “prosecuted to the fullest extent of the
law.”
¶6 Flynn contested the IAH and requested a hearing, which was
held on January 10, 2022. After receiving exhibits and hearing testimony
from both parties, the court upheld the IAH, finding that one of the text
messages Flynn sent on December 12 was abusive and that each of the
communications he made contained “some sort of threat.” The court also
expressed its concerns about the two emails Flynn sent after he was served
with the injunction. The court concluded that Trapp and her daughter were
harassed by Flynn and that his communications served “no legitimate or
lawful purpose.” Flynn timely appealed and we have jurisdiction under
A.R.S. § 12-2101(A)(5)(b).
DISCUSSION
¶7 We review a court’s order granting an IAH for an abuse of
discretion, LaFaro v. Cahill, 203 Ariz. 482, 485, ¶ 10 (App. 2002), which may
occur if the court commits an error of law while reaching a discretionary
conclusion or when the record lacks competent evidence to support the
order, Mahar v. Acuna, 230 Ariz. 530, 534, ¶ 14 (App. 2012). We view the
evidence in the light most favorable to upholding the court’s ruling, id. at
530, ¶ 2, and we do not reweigh the evidence, Clark v. Kreamer, 243 Ariz.
272, 276, ¶ 14 (App. 2017).
¶8 A court may issue an IAH if it finds there is “reasonable
evidence of harassment . . . by the defendant during the year preceding the
filing of the petition or that good cause exists to believe that great or
irreparable harm would result” if the IAH is not granted. A.R.S. § 12-
3
TRAPP V. FLYNN
Decision of the Court
1809(E). “Harassment” is defined as “[a] series of acts over any period of
time that is directed at a specific person and that would cause a reasonable
person to be seriously alarmed, annoyed or harassed and the conduct in
fact seriously alarms, annoys or harasses the person and serves no
legitimate purpose.” A.R.S. § 12-1809(T)(1)(a).
¶9 Flynn argues the text messages and voicemails he sent to
Trapp were not a series of acts sufficient for harassment, but instead
“attempts to deliver a single message.” A minimum of two incidents
constitutes a “series of acts.” LaFaro, 203 Ariz. at 486, ¶ 14. Flynn sent
multiple text messages and left two voicemails over the two-day period in
December. These were multiple acts, regardless of the similarity in content
of the messages, and therefore qualify as a “series of acts” under § 12-
1809(T)(1)(a).
¶10 Flynn also contends his communications to Trapp served a
legitimate purpose because they addressed “some issues that are
happening in her house.” It is within a trial court’s discretion to determine
if certain communications “had no legitimate purpose.” See A.R.S. § 12-
1809(T)(1)(a); Grant v. Ariz. Pub. Serv. Co., 133 Ariz. 434, 455 (1982)
(recognizing that appellate courts will not reverse “discretionary factual
findings unless the record clearly establishes that the trial court was
incorrect”). In the text messages sent on December 12, Flynn accused Trapp
and her daughter of emotionally abusing his daughters and he threatened
to report Trapp and her daughter to the police. He also disparaged Trapp’s
parenting and belittled her intellect. The subsequent voicemails and text
messages repeatedly asked for confirmation that Trapp received his
messages and that she would abide by his requests. The court acted within
its discretion in deciding that these communications were seriously
annoying or harassing and had no legitimate purpose.
¶11 Flynn contends he should have been permitted to testify
about his custody dispute with his ex-wife to prove the legitimate purpose
behind his communications to Trapp. And by motion on appeal, he asks us
to take judicial notice of temporary orders that were issued by the family
court on December 22, 2021, several days after the preliminary IAH was
granted. But Flynn does not point to any specific testimony he would have
offered at the hearing. Further, he was able to generally inform the court of
an ongoing “custody battle” between he and his ex-wife. Even so, Flynn’s
messages make it plain what his purposes were: (1) he wanted Trapp to
stop speaking negatively about him in front of his children, (2) he thought
that some of the interactions between Trapp’s child and his daughter were
4
TRAPP V. FLYNN
Decision of the Court
inappropriate, (3) he was considering additional reporting to police, and (4)
he needed to know Trapp had read the messages. Because Flynn has not
shown how information from the custody dispute would have been
different from these purposes, the court did not abuse its discretion in
declining to allow testimony on that topic. Thus, we deny Flynn’s motion
to take judicial notice.
¶12 Flynn argues that protecting children is a legitimate purpose
and that through his communications with Trapp, he was trying to protect
his children from a perceived threat. Although Flynn’s reasons for
communicating with Trapp may have initially served that purpose, it does
not mean later messages served legitimate purposes. Instead, each
communication must be viewed in context, and it was the superior court’s
role to decide whether Trapp’s repeated messages no longer served
legitimate purposes and became harassing or seriously annoying. Though
Flynn’s initial expression of concern about his daughters’ wellbeing may
have been legitimate, the cumulation of messages, escalation to frenzied
texts and calls, and reaching out to other people to contact Trapp went well
beyond the initial legitimate purpose. See Trotter v. Paiano, 1 CA-CV 19-
0109, 1 CA-CV 19-0110, 2020 WL 639195, at *1, 3, ¶ 15 (Ariz. App. Feb. 11,
2020) (mem. decision) (noting that appellants cited “no legal authority to
support the proposition that some legitimate communication may inoculate
conduct that would otherwise constitute harassment”). Viewing all the
communications in context, the record supports the court’s determination
that they were seriously annoying, harassing, and served no legitimate
purpose.
¶13 Flynn contends his statements about pursuing legal action
did not constitute harassment and were not “threats” because “[a]ccess to
the courts is a fundamental right.” Madison v. Groseth, 230 Ariz. 8, 14, ¶ 17
(App. 2012). The court’s description of some of Flynn’s communications as
threats does not mean the court found that the comments were unlawful or
that Flynn was precluded from pursuing legal action. Regardless, whether
a defendant has committed harassment is evaluated based on the language
of § 12-1809(T)(1)(a). Thus, a threat may or may not fall within the scope of
the statute depending on the circumstances of each case. Here, the court
acted within its discretion in deciding that Flynn’s communications as a
whole were annoying or harassing and without a legitimate purpose.
¶14 Flynn also argues the superior court improperly relied on the
emails he sent to his ex-wife. The court admitted the emails for “the limited
purpose that it is addressing Ms. Trapp and her daughter and what he
5
TRAPP V. FLYNN
Decision of the Court
intends to do.” Even assuming the court abused its discretion, the error
was harmless. See Ariz. R. Civ. P. 61 “Unless justice requires otherwise, an
error . . . is not grounds for . . . disturbing a judgment or order.”); see also
Ariz. R. Prot. Order P. 2 (stating that the Arizona Rules of Civil Procedure
apply to protective orders when not inconsistent with the rules). From the
other evidence presented at the hearing―text messages, voicemails, and
testimony―the court could reasonably conclude that Trapp was seriously
annoyed or alarmed at the accusations of abuse, threats of legal action, and
repeated communications requesting confirmation of receipt of those
messages.
¶15 Flynn further contends the court erred by stating from the
bench that Flynn is not permitted to communicate about Trapp or her
daughter with his ex-wife. To the extent that statement “is binding without
being included in the formal order,” Flynn asserts the court erred because
§ 12-1809(T)(1)(a) does not authorize limiting communications with third
parties. If the court sought to impose additional restrictions beyond what
is covered by the IAH, the court arguably erred. But any error is harmless
because the limitations of Flynn’s communications are established by the
IAH, not a court’s statements from the bench.
¶16 Finally, to the extent Flynn asserts that the court improperly
considered a video, he provides no evidence to support the assertion.
Exhibit 30, admitted in evidence, is a flash drive containing audio
recordings of the two voicemails. On appeal, Flynn’s counsel discovered
that the exhibit also includes a video. Nothing in the record shows the
parties or the superior court intended that Exhibit 30 would include the
video recording and we have not considered it.
CONCLUSION
¶17 We affirm the injunction against harassment.
AMY M. WOOD • Clerk of the Court
FILED: AA
6 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483804/ | FILE COPY
Fourth Court of Appeals
San Antonio, Texas
November 8, 2022
No. 04-22-00551-CV
THE CITY OF CASTLE HILLS,
Appellant
v.
Jenifer Ashley Andrea ROBINSON, et al,
Appellees
From the 37th Judicial District Court, Bexar County, Texas
Trial Court No. 2017-CI-22569
Honorable Angelica Jimenez, Judge Presiding
ORDER
Appellees have filed a “Motion for Involuntary Dismissal,” and appellant has opposed
the motion. We order the motion and opposition carried with the appeal.
_________________________________
Luz Elena D. Chapa, Justice
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the said
court on this 8th day of November, 2022.
___________________________________
MICHAEL A. CRUZ, Clerk of Court | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/9350237/ | Matter of Bowers Dev., LLC v Oneida County Indus. Dev. Agency (2022 NY Slip Op 07327)
Matter of Bowers Dev., LLC v Oneida County Indus. Dev. Agency
2022 NY Slip Op 07327
Decided on December 23, 2022
Appellate Division, Fourth Department
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and subject to revision before publication in the Official Reports.
Decided on December 23, 2022
SUPREME COURT OF THE STATE OF NEW YORK
Appellate Division, Fourth Judicial Department
PRESENT: WHALEN, P.J., NEMOYER, CURRAN, BANNISTER, AND MONTOUR, JJ.
764 OP 22-00744
[*1]IN THE MATTER OF BOWERS DEVELOPMENT, LLC, AND ROME PLUMBING & HEATING SUPPLY CO., INC., PETITIONERS,
vONEIDA COUNTY INDUSTRIAL DEVELOPMENT AGENCY AND CENTRAL UTICA BUILDING, LLC, RESPONDENTS.
FOGEL & BROWN, P.C., SYRACUSE (MICHAEL A. FOGEL OF COUNSEL), FOR PETITIONERS.
PAUL J. GOLDMAN, ALBANY, FOR RESPONDENT ONEIDA COUNTY INDUSTRIAL DEVELOPMENT AGENCY.
COHEN COMPAGNI BECKMAN APPLER & KNOLL, PLLC, SYRACUSE (LAURA L. SPRING OF COUNSEL), FOR RESPONDENT CENTRAL UTICA BUILDING, LLC.
Proceeding pursuant to Eminent Domain Procedure Law § 207 (initiated in the Appellate Division of the Supreme Court in the Fourth Judicial Department) to annul the determination of respondent Oneida County Industrial Development Agency to condemn certain real property.
It is hereby ORDERED that the determination is annulled on the law without costs and the petition is granted.
Memorandum: Petitioners commenced this original proceeding pursuant to EDPL 207 seeking to annul the determination of respondent Oneida County Industrial Development Agency (OCIDA) to condemn certain real property by eminent domain. Pursuant to EDPL 207 (C), this Court "shall either confirm or reject the condemnor's determination and findings." Our scope of review is limited to "whether (1) the proceeding was constitutionally sound; (2) the condemnor had the requisite authority; (3) its determination complied with [the State Environmental Quality Review Act (SEQRA)] and EDPL article 2; and (4) the acquisition will serve a public use" (Matter of City of New York [Grand Lafayette Props. LLC], 6 NY3d 540, 546 [2006]; see EDPL 207 [C]; Matter of Syracuse Univ. v Project Orange Assoc. Servs. Corp., 71 AD3d 1432, 1433 [4th Dept 2010], appeal dismissed and lv denied 14 NY3d 924 [2010]).
We agree with petitioners that OCIDA lacked the requisite authority to acquire the subject property. As an industrial development agency, OCIDA's statutory purposes are, inter alia, to "promote, develop, encourage and assist in the acquiring . . . [of] . . . commercial . . . facilities" (General Municipal Law § 858). OCIDA's powers of eminent domain are restricted by General Municipal Law § 858 (4), which provides, in relevant part, that an industrial development agency shall have the power "[t]o acquire by purchase, grant, lease, gift, pursuant to the provisions of the eminent domain procedure law, or otherwise and to use, real property . . . therein necessary for its corporate purposes." The purposes enumerated in the statute do not include projects related to hospital or healthcare-related facilities (see § 858). While OCIDA's determination and findings indicate that the subject property was to be acquired for use as a surface parking lot, the record establishes that, contrary to respondents' assertion, the primary purpose of the acquisition was not a commercial purpose. Rather, the property was to be acquired because it was a necessary component of a larger hospital and healthcare facility project. We therefore annul the determination and grant the petition (see Syracuse Univ., 71 AD3d at 1435; see generally Schulman v People, 10 NY2d 249, 255-256 [1961]; Peasley v Reid, [*2]57 AD2d 998, 999 [3d Dept 1977]).
In light of our determination, petitioners' remaining contentions are academic (see Matter of Hargett v Town of Ticonderoga, 35 AD3d 1122, 1124 [3d Dept 2006], lv denied 8 NY3d 810 [2007]).
All concur except Curran, J., who dissents and votes to confirm the determination and dismiss the petition in the following memorandum: I respectfully dissent from the majority's conclusion that respondent Oneida County Industrial Development Agency (OCIDA) lacked the requisite statutory authority to acquire the subject property via eminent domain pursuant to its broad purposes as set forth in General Municipal Law § 858 because I conclude that OCIDA's determination that construction of a surface parking lot on the subject property constitutes a "commercial facility" is neither irrational nor unreasonable. Inasmuch as I agree with respondents that acquisition of the subject property serves a public purpose (see generally Matter of Truett v Oneida County, 200 AD3d 1721, 1722 [4th Dept 2021], lv denied 38 NY3d 907 [2022]), and further agree that petitioners' remaining contentions are without merit, I would confirm the determination and dismiss the petition.
I.
Following an extensive review process that concluded in 2015, the Mohawk Valley Hospital System (MVHS) began the process of consolidating its healthcare services for Oneida, Herkimer, and Madison counties into an integrated healthcare campus to be located in a blighted section of the downtown area of the City of Utica. In 2017, MVHS received a $300 million grant from the New York State Department of Health to situate the integrated healthcare campus at the downtown location. The central feature of the new campus will be Wynn Hospital, which has received its certificate of need and is currently under construction. Since its inception, MVHS's plan for the healthcare campus has included a private medical office building (MOB) to be located on Columbia Street behind Wynn Hospital. Also from its inception, the plan envisioned surface level parking to be located adjacent to the MOB. MVHS owns three of the four parcels along Columbia Street that would be leased to the MOB operator both for the MOB itself as well as for the adjacent surface level parking.
MVHS ultimately elected to have respondent Central Utica Building, LLC (CUB), a for-profit company founded by private physicians, own and operate the MOB. CUB's MOB would, in addition to servicing its own patients on a for-profit basis, provide outpatient services deemed valuable to MVHS for its integrated heathcare campus. CUB has specific occupancy plans for the MOB, including approximately 20,000 square feet dedicated to a group of cardiologist physicians, and 18,000 square feet for the purpose of operating "a[] [Public Health Law a]rticle 28 licensed, Medicare certified multi-specialty ambulatory surgery center with six operating rooms." CUB has secured financing for its MOB proposal.
The fourth parcel along Columbia Street—i.e., the subject property—is owned by petitioner Rome Plumbing & Heating Supply Co., Inc. The subject property is an approximately one-acre piece of real property that has, for years, been slated to be part of the surface level parking area located immediately adjacent to the MOB. Petitioner Bowers Development, LLC (Bowers) purports to be the contract vendee for the subject property. Bowers allegedly plans to construct its own MOB on the one-acre parcel, despite not having identified any physician group willing to service it, and not having any arrangement with MVHS or any ability to use the adjacent parcels owned by MVHS for parking.
Meanwhile, CUB submitted an application with OCIDA for financial assistance on the MOB project. It also requested that OCIDA take the subject property through the exercise of its eminent domain power under General Municipal Law § 858 (4). Before deciding whether to invoke its eminent domain powers to acquire the subject property, OCIDA conducted a public hearing during which Bowers agreed with CUB that a MOB located near the hospital would benefit downtown Utica, address urban blight, and enhance patient care. During the review process, one of petitioners' main objections was that OCIDA lacked the requisite statutory authority under General Municipal Law § 858 to use its eminent domain power because that statute "provides the current list of projects for which industrial development agencies have authority," and that list "does not include hospital or health-related projects." Further, inasmuch [*3]as "[t]he proposed CUB project is a hospital or health-related project . . . , the CUB project is not a type of project [for] which OCIDA has jurisdiction or authority." In its determination and findings, OCIDA expressly rejected those contentions and concluded that taking the subject property was within its power because it was for a "commercial facility"—i.e., the surface parking lot—noting, inter alia, that its determination of what constitutes a commercial project is entitled to judicial deference so long as it is reasonable (see Matter of Nearpass v Seneca County Indus. Dev. Agency, 152 AD3d 1192, 1193 [4th Dept 2017]). Thereafter, petitioners commenced this original proceeding pursuant to EDPL 207 seeking to annul OCIDA's determination to condemn the subject property via eminent domain.
II.
In a proceeding brought pursuant to EDPL 207, "[t]he scope of our review is necessarily narrow since [the] exercise of the eminent domain power is a legislative function" (Matter of West 41st St. Realty v New York State Urban Dev. Corp., 298 AD2d 1, 6 [1st Dept 2002], appeal dismissed 98 NY2d 727 [2002], cert denied 537 US 1191 [2003]; see Kaskel v Impellitteri, 306 NY 73, 80 [1953], rearg denied and mot to amend remittitur granted 306 NY 609 [1953], cert denied 347 US 934 [1954]; Matter of New York City Hous. Auth. v Muller, 270 NY 333, 339 [1936]). As a result, this Court's review is limited to "whether (1) the proceeding was constitutionally sound; (2) the condemnor had the requisite authority; (3) its determination complied with SEQRA and EDPL article 2; and (4) the acquisition will serve a public use" (Matter of City of New York [Grand Lafayette Props. LLC], 6 NY3d 540, 546 [2006]; see EDPL 207 [C]). As noted above, the issue in dispute here is whether OCIDA had the requisite statutory authority to use its eminent domain power to take the subject property.
It is "well established that an [industrial development agency] is 'authorized by statute to exercise the State's eminent domain powers' " (Sun Co. v City of Syracuse Indus. Dev. Agency, 209 AD2d 34, 41 [4th Dept 1995], appeal dismissed 86 NY2d 776 [1995]; see generally General Municipal Law § 858 [4]). Thus, there is no dispute that OCIDA has the statutory authority to acquire the subject property. The particular point upon which the majority and I disagree is whether OCIDA has exercised that statutory power "for its corporate purposes" (General Municipal Law § 858 [4]).
The power of eminent domain—i.e., "[t]he right to take private property for public use"—"is an inherent and unlimited attribute of sovereignty whose exercise may be governed by the [l]egislature within constitutional limitations and by the [l]egislature within its power delegated to municipalities" (Matter of Mazzone, 281 NY 139, 146-147 [1939], rearg denied 281 NY 671 [1939]). Thus, in the context of an eminent domain proceeding such as this one, the courts have recognized "the structural limitations upon our review of what is essentially a legislative prerogative" (Matter of Goldstein v New York State Urban Dev. Corp., 13 NY3d 511, 526 [2009], rearg denied 14 NY3d 756 [2010]). Consistent with that limited scope of review, there also is a "longstanding policy of deference to legislative judgments in this field" (Kelo v City of New London, 545 US 469, 480 [2005]; see Matter of Kaur v New York State Urban Dev. Corp., 15 NY3d 235, 262 [2010]). A reasonable difference in opinion between the judiciary and the agency lawfully exercising the State's eminent domain power is an insufficient predicate for the courts to supplant the agency's essentially legislative determination (see Goldstein, 13 NY3d at 526). Ultimately, "a court may only substitute its own judgment for that of the legislative body authorizing the project when such judgment is irrational or baseless" (Kaur, 15 NY3d at 254).
To that end, "[t]he burden is on the party challenging the condemnation to establish that the determination was without foundation and baseless" (Matter of Butler v Onondaga County Legislature, 39 AD3d 1271, 1271 [4th Dept 2007] [internal quotation marks omitted]; see Matter of GM Components Holdings, LLC v Town of Lockport Indus. Dev. Agency, 112 AD3d 1351, 1352 [4th Dept 2013], appeal dismissed 22 NY3d 1165 [2014], lv denied 23 NY3d 905 [2014]). "If an adequate basis for a determination is shown and the objector cannot show that the determination was without foundation, the agency's determination should be confirmed" (Matter of Waldo's, Inc. v Village of Johnson City, 74 NY2d 718, 720 [1989] [internal quotation marks omitted]; see Butler, 39 AD3d at 1271-1272).
Here, the sole basis upon which the majority rests its decision to annul OCIDA's determination—and thereby intervenes into what is effectively the legislative process—is its [*4]conclusion that, as a matter of law, General Municipal Law § 858 does not authorize OCIDA to acquire the subject property via eminent domain. The majority grounds that conclusion on its determination that OCIDA's " 'corporate purposes' " do not include "projects related to hospital or healthcare-related facilities." It further concludes, in summary fashion and without any elaboration, that OCIDA's use of eminent domain here "was not [for] a commercial purpose." The majority's conclusion on that latter issue, however, gives no deference to OCIDA's express determination that it was exercising its lawful eminent domain power in furtherance of its express corporate purpose to "promote, develop, encourage and assist in the acquiring, constructing, reconstructing, improving, maintaining, equipping and furnishing," inter alia, "commercial" facilities, and "thereby advance the job opportunities, health, general prosperity and economic welfare of the people of the [S]tate of New York" (General Municipal Law
§ 858). Nowhere does the majority conclude that OCIDA's determination was irrational or that it lacked any foundation or basis (see Kaur, 15 NY3d at 254; Waldo's, Inc., 74 NY2d at 720-721; Butler, 39 AD3d at 1271-1272). Thus, by failing to address OCIDA's expressly stated basis for concluding that it had the statutory authority to exercise its eminent domain power—i.e., that it was done in furtherance of a commercial purpose—the majority has not only failed to afford OCIDA any deference with respect to its legislative determination (see Goldstein, 13 NY3d at 526), it has entirely supplanted OCIDA by improperly making its own de novo determination of that question as a matter of law (see Kaur, 15 NY3d at 254; Matter of Jackson v New York State Urban Dev. Corp., 67 NY2d 400, 418 [1986]). In essence, the majority's conclusion makes it appear as though a legislative body—here, OCIDA—played no role at all in the exercise of the State's eminent domain power.III.
In addition to the deference we generally accord legislative determinations made by agencies in the exercise of the eminent domain power, I note that this Court also follows established precedent requiring us to defer to an agency's interpretation of a broad ambiguous statutory term, provided that the agency's interpretation of that ambiguous term is not irrational or unreasonable (see Nearpass, 152 AD3d at 1193; Matter of Iskalo 5000 Main LLC v Town of Amherst Indus. Dev. Agency, 147 AD3d 1414, 1416 [4th Dept 2017], lv denied 29 NY3d 919 [2017]). Here, OCIDA expressly relied upon Nearpass in determining that it had the statutory authority to acquire the subject property because it was acting in furtherance of a "commercial" purpose—i.e. the same term involved in Nearpass. In my view, pursuant to Nearpass, we must defer to OCIDA's reasonable interpretation of the word "commercial" contained in General Municipal Law § 858, which OCIDA concluded gave it the power to condemn the subject property via eminent domain for the purpose of constructing the surface parking lot.
In Nearpass, the Seneca County Industrial Development Agency (SCIDA) granted tax abatement relief to a resort and casino. In the ensuing CPLR article 78 proceeding, the petitioners contested SCIDA's determination that the resort and casino served, inter alia, a "commercial" purpose within the definition of a "project" under General Municipal Law § 854 (4) (Nearpass, 152 AD3d at 1192-1193). On appeal, this Court rejected the petitioners' contentions and affirmed the dismissal of the petition. Specifically, we held that "the broad statutory term[] 'commercial' . . . [is] ambiguous insofar as [it is] susceptible to conflicting interpretations" (id. at 1193). Thus, "SCIDA's interpretation [was] entitled to great deference, and must be upheld as long as it [was] reasonable" (id. [internal quotation marks omitted]). On that question, we concluded that SCIDA's interpretation that the project was commercial or recreational was not "irrational or unreasonable" (id. [internal quotation marks omitted]).
In my view, we should come to a similar conclusion here—the term "commercial" contained in General Municipal Law § 858 is just as broad and ambiguous as it is in section 854, and therefore OCIDA's interpretation of that term as encompassing the creation of the surface parking lot was reasonable. Thus, giving deference to OCIDA's interpretation of the relevant statute, we should conclude that it did not lack the requisite statutory authority to condemn the subject property via eminent domain. More specifically, there can be little doubt that the general purposes upon which an industrial development agency may exercise its "express powers" (Matter of Madison County Indus. Dev. Agency v State of N.Y. Auths. Budget Off., 151 AD3d 1532, 1534 [3d Dept 2017], affd 33 NY3d 131 [2019]; see General Municipal Law § 858) are set forth in broad terms. Indeed, this Court, as well as the Third Department, have expressly referred to those purposes as being broad in nature (see Matter of Town of Minerva v Essex County Indus. [*5]Dev. Agency, 173 AD2d 1054, 1056 [3d Dept 1991]; Matter of Grossman v Herkimer County Indus. Dev. Agency, 60 AD2d 172, 178 [4th Dept 1977]; see also Matter of Kaufmann's Carousel v City of Syracuse Indus. Dev. Agency, 301 AD2d 292, 300 [4th Dept 2002], lv denied 99 NY2d 508 [2003]). Thus, recognizing that the purposes contained in General Municipal Law § 858 are set forth in broad terms, I conclude that OCIDA's determination that acquisition of the subject property for the purpose of constructing a surface parking lot was in furtherance of a "commercial" purpose "is supported by a rational basis" and is "not 'irrational or unreasonable' " (Iskalo 5000 Main LLC, 147 AD3d at 1415-1416; see Nearpass, 152 AD3d at 1193). Indeed, I note that we are required to afford "statutes providing for improvements inuring to the public benefit" a liberal construction (McKinney's Cons Laws of NY, Book 1, Statutes § 342), and therefore we should not constrict General Municipal Law § 858 either by finding that the purpose here was not among its expressly included ones or that it was excluded by implication.
Here, the majority fails to address Nearpass and ignores its obvious application to the resolution of this appeal. Although this case and Nearpass arise out of slightly different contexts—i.e., interpreting different provisions of the General Municipal Law—they both ultimately involve the same question of statutory interpretation in the context of administrative decision-making. As noted, they also both involve the same broad and ambiguous statutory term—i.e., the word "commercial." It would be one thing if the majority acknowledged Nearpass and explained why, despite that case's central holding, OCIDA's determination that the project here was "commercial"—i.e., its interpretation of General Municipal Law § 858—was irrational or unreasonable. Although I would disagree with that bottom-line conclusion, at least the majority would have afforded OCIDA the deference required of its statutory interpretation of a broad ambiguous term, in the context of an eminent domain proceeding, where deference is already accorded to the overarching legislative determinations being made.
Furthermore, unlike the majority, I conclude that the absence of any express reference to hospitals or healthcare facilities among the purposes listed in General Municipal Law § 858 is ultimately irrelevant to whether OCIDA has the power to condemn the subject property in furtherance of a commercial purpose. The part of section 858 describing an industrial development agency's broad purposes lists certain types of projects, but does so using the word "including." In other words, the list of project types contained in that paragraph is not exclusive. Thus, it makes no difference that neither a hospital nor a healthcare-related facility is expressly listed in the purposes paragraph.
In any event, as OCIDA correctly contends, the MOB that would be serviced by the subject property for the development of a surface parking lot is neither a "hospital" nor a "health-related facility" as those terms are generally understood (see Public Health Law § 2994-a [18]; 10 NYCRR 700.2 [a] [4], [5]). Thus, the majority's generic reference to an undefined "healthcare-related facilit[y]" adds nothing to the exclusion it reads into General Municipal Law § 858. It appears that, in its essence, the majority's conclusion stands for the proposition that, if a proposed parking lot is part of a hospital's or heathcare-related facility's campus, however tangentially, an industrial development agency may not utilize its eminent domain power to acquire property for that purpose because a "hospital" or "health-related facility" is either not among the broadly defined purposes in section 858 or is somehow excluded from them. I know of no principle of statutory construction, or any precedent, that supports such a conclusion and I respectfully decline to follow it.
Entered: December 23, 2022
Ann Dillon Flynn
Clerk of the Court | 01-04-2023 | 12-23-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/9350226/ | Matter of Nowlan v Cunningham (2022 NY Slip Op 07339)
Matter of Nowlan v Cunningham
2022 NY Slip Op 07339
Decided on December 23, 2022
Appellate Division, Fourth Department
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and subject to revision before publication in the Official Reports.
Decided on December 23, 2022
SUPREME COURT OF THE STATE OF NEW YORK
Appellate Division, Fourth Judicial Department
PRESENT: LINDLEY, J.P., NEMOYER, WINSLOW, BANNISTER, AND MONTOUR, JJ.
784 CAF 21-01374
[*1]IN THE MATTER OF PAMELA S. NOWLAN AND BRIAN L. NOWLAN, PETITIONERS-RESPONDENTS,
vBRITTANY M. CUNNINGHAM AND JAMES C. PIERCE, RESPONDENTS-APPELLANTS. BRITTANY M. CUNNINGHAM, PETITIONER-APPELLANT,
PAMELA S. NOWLAN AND BRIAN L. NOWLAN, RESPONDENTS-RESPONDENTS.
MARK A. SCHLECHTER, ITHACA, FOR RESPONDENT-PETITIONER-APPELLANT AND RESPONDENT-APPELLANT.
GARY MULDOON, ROCHESTER, ATTORNEY FOR THE CHILD.
Appeals from an order of the Family Court, Steuben County (Patrick F. McAllister, A.J.), entered August 26, 2021 in a proceeding pursuant to Family Court Act article 6. The order, among other things, granted in part the petition of petitioners-respondents and modified a prior visitation order.
It is hereby ORDERED that the order so appealed from is unanimously affirmed without costs.
Memorandum: In this proceeding pursuant to article 6 of the Family Court Act, respondent-petitioner mother and respondent father (parents) each appeal from an order that, inter alia, modified a prior order of visitation by increasing the visitation allowed to petitioners-respondents, the paternal grandparents of the subject child (grandparents). We affirm.
The parents contend that the grandparents failed to establish a change of circumstances warranting an inquiry into the best interests of the child. Initially, we note that the mother waived that contention inasmuch as she alleged in her own cross petition that there had been such a change in circumstances (see Matter of Rice v Wightman, 167 AD3d 1529, 1530 [4th Dept 2018], lv denied 33 NY3d 903 [2019]; Matter of Biernbaum v Burdick, 162 AD3d 1664, 1665 [4th Dept 2018]; see generally Matter of Tinucci v Voltra, 158 AD3d 1075, 1076 [4th Dept 2018]). In any event, we conclude that "the continued deterioration of the parties' relationship is a significant change in circumstances warranting an inquiry into whether a modification of visitation is in the child's best interests" (Matter of Vaccaro v Vaccaro, 178 AD3d 1410, 1411 [4th Dept 2019] [internal quotation marks omitted]; see Matter of Noble v Gigon, 165 AD3d 1640, 1640 [4th Dept 2018], lv denied 33 NY3d 902 [2019]).
The parents contend that there is not a sound and substantial basis in the record to support Family Court's determination that modification of the parties' visitation arrangement was in the child's best interests (see generally Tinucci, 158 AD3d at 1076). We reject that contention. Although the court did not specify the factors it relied on in conducting its best interests analysis (see Matter of Howell v Lovell, 103 AD3d 1229, 1231 [4th Dept 2013]), "[o]ur authority in determinations of custody [and visitation] is as broad as that of Family Court . . . and where, as [*2]here, the record is sufficient for this Court to make a best interests determination
. . . , we will do so in the interests of judicial economy and the well-being of the child" (Matter of Bryan K.B. v Destiny S.B., 43 AD3d 1448, 1450 [4th Dept 2007]; see Howell, 103 AD3d at 1231). Among the factors for the court to consider are "whether the alleged change implicates the 'fitness' of one of the parties . . . , the nature and quality of the relationships between the child and the parties . . . and the existence of a prior agreement" (Matter of Wilson v McGlinchey, 2 NY3d 375, 381 [2004]).
Here, after reviewing the appropriate factors, we conclude that the totality of the circumstances supports the determination that it is in the best interests of the child to increase the grandparents' visitation (see id.). Among other things, and despite some animosity between the parties, the record supports the determination that the grandparents have had a loving and close relationship with the child since her birth (see generally Matter of Danial R.B. v Ledyard M., 35 AD3d 1232, 1232-1233 [4th Dept 2006]).
We have considered the parents' remaining contentions and conclude that none warrants modification or reversal of the order.
Entered: December 23, 2022
Ann Dillon Flynn
Clerk of the Court | 01-04-2023 | 12-23-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/9350354/ | NUMBER 13-21-00262-CV
COURT OF APPEALS
THIRTEENTH DISTRICT OF TEXAS
CORPUS CHRISTI – EDINBURG
ARAN & FRANKLIN
ENGINEERING, INC., Appellant,
v.
CHRIS ZODY D/B/A NEW
MILLENIUM CONSTRUCTION GROUP, Appellee.
On appeal from the 36th District Court
of Aransas County, Texas.
MEMORANDUM OPINION
Before Chief Justice Contreras and Justices Benavides and Longoria
Memorandum Opinion by Justice Longoria
This is an interlocutory appeal from the trial court’s denial of a motion to dismiss
with prejudice under Chapter 150 of the Texas Civil Practice and Remedies Code. See
TEX. CIV. PRAC. & REM. CODE ANN. § 150.002(f) (authorizing an immediate interlocutory
appeal of an order denying a motion for dismissal under § 150.002). In its sole issue,
appellant Aran & Franklin Engineering, Inc. (Aran & Franklin) argues it is entitled to
dismissal of the claims asserted by appellee Chris Zody d/b/a New Millennium
Construction Group (New Millennium). Aran & Franklin argues that New Millennium failed
to file a certificate of merit in compliance with Chapter 150 of the Texas Civil Practices
and Remedies Code in support of its claims, and that the trial court erred in denying its
motion to dismiss. See id. § 150.002(e). We reverse and remand.
I. BACKGROUND & PROCEDURAL HISTORY
New Millennium contracted with Hidden Oaks Association, Inc. (Hidden Oaks) as
the general contractor on a roofing project. New Millennium hired Goliath Building
Services, Inc. (Goliath) to repair the roof and obtain a Texas Windstorm Insurance
Association (TWIA) certificate, known as the WPI 8 certification. Subsequently, New
Millennium entered into a subcontract in which Aran & Franklin agreed to serve as
appointed qualified inspectors (AQI) for the project.
In its third-party petition, New Millennium alleges that as the AQI, Aran & Franklin
“improperly and negligently informed [New Millennium] that the inspection of Goliath’s
work was satisfactory, that the WPI 8 certification would be issued, and that it was
appropriate for New Millennium to pay Goliath for its work.” New Millennium argues that
it paid Goliath only in light of Aran & Franklin’s representations regarding Goliath’s work;
however, the WPI 8 certification was not issued. Because the WPI 8 certification was not
issued, Hidden Oaks filed suit against New Millennium alleging negligence, breach of
warranty, breach of contract, and intentional misrepresentations. New Millennium, in turn,
2
brought its third-party claim against Aran & Franklin for contribution, negligence,
intentional and/or negligent misrepresentation, indemnity, breach of contract, breach of
express warranty, and breach of implied warranty.
Aran & Franklin filed a motion to dismiss New Millennium’s third-party claims with
prejudice, arguing that New Millennium was required to file a certificate of merit pursuant
to Chapter 150 of the Texas Practice and Remedies Code. See id. § 150.002. New
Millennium filed a response asserting that no certificate of merit was necessary because
Aran & Franklin “did not perform any professional engineering services”; rather, New
Millennium contended Aran & Franklin served as AQI. To its response, New Millennium
attached a verification signed by one of its attorneys, the affidavit of Rolando R. Rubiano,
a professional engineer, and various sections of the insurance code. Aran & Franklin filed
a reply along with its objections to New Millennium’s attached verification and Rubiano’s
affidavit.
The trial court denied the motion to dismiss. In its order, the trial court sustained
Aran & Franklin’s objections to the verification relating to the attorney’s personal
knowledge of any factual matters, but it overruled the remainder of the objections,
including those relating to Rubiano’s affidavit. This interlocutory appeal followed.
II. ANALYSIS
In a single issue on appeal, Aran & Franklin argues that the trial court abused its
discretion by denying its motion to dismiss because New Millennium was required to file
a certificate of merit pursuant to Chapter 150. See id.
3
A. Standard of Review & Applicable Law
“We review a trial court’s order on a motion to dismiss for failure to file a certificate
of merit in accordance with [Texas] Civil Practice & Remedies Code [§] 150.002 for an
abuse of discretion.” TRW Eng’rs, Inc. v. Hussion St. Bldgs., LLC, 608 S.W.3d 317, 319
(Tex. App.—Houston [1st Dist.] 2020, no pet.); see Pedernal Energy, LLC v. Bruington
Eng’g, Ltd., 536 S.W.3d 487, 493–95 (Tex. 2017) (discussing trial court’s discretion to
grant dismissal with or without prejudice). “A court abuses its discretion if it fails to analyze
or apply the law correctly,” TRW Eng’rs, 608 S.W.3d at 319, and when it makes decisions
in an arbitrary or unreasonable manner, without reference to guiding rules or principles.
Pedernal Energy, 536 S.W.3d at 492.
When resolution of an appellate issue requires interpretation of a statute, we
engage in a de novo review. See id. at 491. Our goal in construing a statute is to determine
and give effect to the Legislature’s intent. Id. (citing Tex. Mut. Ins. v. Ruttiger, 381 S.W.3d
430, 452 (Tex. 2012)). “We look to and rely on the plain meaning of a statute’s words as
expressing legislative intent unless a different meaning is supplied, is apparent from the
context, or the plain meaning of the words leads to absurd or nonsensical results.” Id.;
Crosstex Energy Servs., L.P. v. Pro Plus, Inc., 430 S.W.3d 384, 389–90 (Tex. 2014). “We
also take statutes as we find them and refrain from rewriting text chosen by the
Legislature.” Pedernal Energy, 536 S.W.3d at 492.
B. Applicability of Chapter 150
Section 150.002 of the Texas Civil Practice and Remedies Code requires a sworn
“certificate of merit” to accompany any lawsuit “for damages arising out of the provision
4
of professional services by a licensed or registered professional.”. TEX. CIV. PRAC. & REM.
CODE ANN. § 150.002. The term “licensed or registered professional” includes a “licensed
professional engineer” and “any firm in which such licensed or registered professional
practices.” Id. § 150.001(1-c). Subsection 150.002(e) entitles the defendant to dismissal
if the certificate is not timely filed. Id. § 150.002(e); see also LaLonde v. Gosnell, 593
S.W.3d 212, 221 (Tex. 2019). “To determine whether and how § 150.002 applies, we
consider the live pleadings when the trial court ruled on the motion to dismiss.” Jennings,
Hackler & Partners, Inc. v. N. Tex. Mun. Water Dist., 471 S.W.3d 577, 581 (Tex. App.—
Dallas 2015, pet. denied); see TDIndustries, Inc. v. Rivera, 339 S.W.3d 749, 753 (Tex.
App.—Houston [1st Dist.] 2011, no pet.).
Section 150.002 does not state that the specific acts underlying the claim must
themselves constitute the provision of professional services in order for the certificate of
merit requirement to apply. Instead, the suit must be “for damages arising out of the
provision of professional services.” TEX. CIV. PRAC. & REM. CODE ANN. § 150.002(a)
(emphasis added); see also TDIndustries, 339 S.W.3d at 754 (holding claim arises out of
the provision of professional services if claim implicates the professional’s education,
training, and experience in applying special knowledge or judgment). To determine
whether a cause of action against an engineering firm is “for damages arising out of the
provision of professional services,” we compare the allegations in the petition to the
definition of the practice of engineering in § 1001.003 of the Texas Occupations Code.
See TEX. CIV. PRAC. & REM. CODE ANN. § 150.001(3); CBM Eng’rs, Inc. v. Tellepsen
Builders, L.P., 403 S.W.3d 339, 343 (Tex. App.—Houston [1st Dist.] 2013, pet. denied);
5
see also TEX. OCC. CODE ANN. § 1001.003. The “practice of engineering” is defined by the
Texas Occupations Code as:
the performance of or an offer or attempt to perform any public or private
service or creative work, the adequate performance of which requires
engineering education, training, and experience in applying special
knowledge or judgment of the mathematical, physical, or engineering
sciences to that service or creative work.
TEX. OCC. CODE ANN. § 1001.003(b). Chapter 150 adopts this definition. TEX. CIV. PRAC.
& REM. CODE ANN. § 150.001(3) (defining “practice of engineering” as the meaning
assigned in TEX. OCC. CODE ANN. § 1001.003)).
1. Practice of Engineering
The question before this Court, as posed by Aran & Franklin, is whether Aran &
Franklin was providing professional services and operating in an engineering capacity in
performing its role as AQI for the roofing project.
New Millennium argues that Aran & Franklin was merely operating as an AQI
relating to inspections of “ongoing improvements,” and as such, the work performed was
not within the purview of engineering services. We are not bound by the labels that the
plaintiff uses in formulating its pleadings. Carter & Burgess, Inc. v. Sardari, 355 S.W.3d
804, 810 (Tex. App.—Houston [1st Dist.] 2011, no pet.) (first citing Cap. One v. Carter &
Burgess, Inc., 344 S.W.3d 477, 482 (Tex. App.—Fort Worth 2011, no pet.); and then citing
UOP, L.L.C. v. Kozak, No. 01–08–00896–CV, 2010 WL 2026037, at *6 (Tex. App.—
Houston [1st Dist.] May 20, 2010, no pet.)). Rather, we look to the substance of New
Millennium’s pleadings to determine if its claims against Aran & Franklin arise out of the
practice of engineering. See TEX. OCC. CODE ANN. § 1001.003(b).
6
New Millennium alleges that Aran & Franklin agreed to serve as an AQI for the
project and as such, its responsibilities under applicable regulations included:
(3) Inspection. The appointed qualified inspector or a designated
representative of the appointed qualified inspector must inspect for
compliance with the applicable windstorm building code each ongoing
improvement during each major construction phase, including the
foundation stage; rough framing stage; final framing stage, including
attachment of component and cladding items and installation of windborne
debris protection; and installation of mechanical equipment. The appointed
qualified inspector’s designated representatives may assist in conducting
inspections, but the appointed qualified inspector must closely monitor and
provide direct supervision of any designated representative assisting with
the inspection process.
28 TEX. ADMIN. CODE § 5.4621(3). In its third-party petition, New Millennium alleges that:
Aran & Franklin failed to comply with one or more of its obligations [as AQI]
under Rule § 5.4621, including but not limited to it failing to act with
reasonable care and competence required of it as an [AQI], failure to inspect
the work being performed for compliance with the applicable windstorm
building code during each major stage of the work/improvements, and/or
failing to closely monitor and provide direct supervisions to any designated
representative assisting with the inspection process.
The Texas Administrative Code states that an AQI is “[a]n engineer licensed by
the Texas Board of Professional Engineers and appointed by [the Texas Department of
Insurance] as a qualified inspector under Insurance Code §[ ]2210.254(a)(2).” Id.
§ 5.4601(2) (emphasis added).
New Millennium, in its response to Aran & Franklin’s motion to dismiss and in its
appellate briefing, contends that “inspections of ‘[o]ngoing [i]mprovements’ are not the
provision of professional engineering services for the simple fact that, under the Texas
Insurance Code and the Texas Administrative Code, non-engineers are also qualified to
do such inspections.” New Millennium cites § 2210.254 of the Texas Insurance Code to
7
support its contention that non-engineers are able to act in the capacity for which Aran &
Franklin was hired on the roofing project. See TEX. INS. CODE ANN. § 2210.254. Section
2210.254 states:
(a) For purposes of this chapter, a “qualified inspector” includes:
(1) a person determined by the department to be qualified
because of training or experience to perform building
inspections;
(2) a licensed professional engineer; and
(3) an inspector who:
(A) is certified by the International Code Council, the
Building Officials and Code Administrators
International, Inc., the International Conference of
Building Officials, or the Southern Building Code
Congress International, Inc.;
(B) has certifications as a buildings inspector and coastal
construction inspector; and
(C) complies with other requirements specified by
commissioner rule.
(b) A windstorm inspection may be performed only by a qualified
inspector.
(c) Before performing building inspections, a qualified inspector must be
approved and appointed or employed by the department.
(d) The department may charge a reasonable fee for the filing of
applications by and determining the qualifications of persons for
appointment as qualified inspectors.
(e) The department may establish an annual renewal period for persons
appointed as qualified inspectors.
Id.
8
However, New Millennium filed a cause of action against Aran & Franklin for
damages arising out of Aran & Franklin’s failure “to comply with one or more of its
obligations under Rule [sic] § 5.4621,” including inspection of the project “for compliance
with the applicable windstorm building code during each major stage of the
work/improvements.” See 28 TEX. ADMIN. CODE § 5.4621(3).
The Texas Occupations Code states that the practice of engineering includes:
a service, design, analysis, or other work performed for a public or private
entity in connection with a utility, structure, building, machine, equipment,
process, system, work, project, or industrial or consumer product or
equipment of a mechanical, electrical, electronic, chemical, hydraulic,
pneumatic, geotechnical, or thermal nature[.]
TEX. OCC. CODE ANN. § 1001.003(c)(10). Here, according to its petition, New Millennium
hired Aran & Franklin to inspect and analyze Goliath’s work on the roof of the building for
compliance with applicable windstorm building code. Comparing New Millennium’s
allegations to the definition of the practice of engineering, we hold that the allegations
arise out of Aran & Franklin’s provision of professional services as New Millennium
alleges Aran & Franklin failed to properly inspect a building or structure for compliance in
order to receive a WPI 8 certificate.
Furthermore, New Millennium’s allegations specifically call into question Aran &
Franklin’s compliance with § 5.4621 of the Texas Administrative Code, which, by its own
definition, requires an engineer to perform the work of an AQI. See id. § 5.4601(2)
(definining an AQI as “[a]n engineer licensed by the Texas Board of Professional
Engineers and appointed by TDI as a qualified inspector under Insurance Code
§ 2210.254(a)(2)” (emphasis added)). Regardless of whether a non-engineer could
9
perform the inspections as New Millennium argues, it is clear that the claims New
Millennium raised against Aran & Franklin arose out of engineering services.
As such, we conclude that New Millennium’s allegations “ar[ose] out of” Aran &
Franklin’s practice of engineering. See TEX. CIV. PRAC. & REM. CODE ANN. § 150.001(3);
TEX. OCC. CODE ANN. § 1001.003; 28 TEX. ADMIN. CODE § 5.4601(2); CBM Eng’rs, Inc.,
403 S.W.3d at 343; see also Jordan & Assocs. v. Wells, No. 01-14-00992-CV, 2015 WL
4591786, at *2 (Tex. App.—Houston [1st Dist.] July 30, 2015, no pet.) (mem. op.). We
reject New Millennium’s argument and hold that the certificate of merit requirement
applied in this case. Accordingly, we sustain Aran & Franklin’s sole issue.
Having determined that Chapter 150 requires dismissal of New Millennium’s claims
against Aran & Franklin, we are faced with the issue of whether the dismissal should be
with or without prejudice. See TEX. CIV. PRAC. & REM. CODE ANN. § 150.002(e) (stating
that “dismissal may be with prejudice”). “The Texas Supreme Court has characterized the
granting of dismissal with prejudice as being ‘discretionary,’ stating that in exercising its
discretion in this regard, the trial court must be guided by the ‘broader purposes of the
statute.’” Cimarron Eng’g, LLC v. Miramar Petroleum, Inc., No. 13-14-00163-CV, 2014
WL 2937012, at *5 (Tex. App.—Corpus Christi–Edinburg June 26, 2014, no pet.) (mem.
op.) (citing CTL/Thompson Tex., LLC v. Starwood Homeowner’s Ass’n, Inc., 390 S.W.3d
299, 301 (Tex. 2013) (per curiam)). The Supreme Court has explained that “dismissal
[with prejudice] is a sanction . . . to deter meritless claims and bring them quickly to an
end.” Id.
10
Here, because the trial court denied Aran & Franklin’s motion to dismiss, it did not
decide the prejudice issue. Accordingly, we believe it is appropriate to remand the case
to the trial court for a determination of whether the dismissal of New Millennium’s claims
should be with or without prejudice. See CTL/Thompson Tex., LLC, 390 S.W.3d at 301
(declining to decide in first instance whether dismissal of plaintiff’s suit for failure to file
adequate certificate of merit should be with or without prejudice); Sharp Eng’g v. Luis,
321 S.W.3d 748, 752–53 (Tex. App.—Houston [14th Dist.] 2010, no pet.) (same); see
also Cimarron Eng’g, LLC, 2014 WL 2937012, at *5.
III. CONCLUSION
We reverse the trial court’s order denying Aran & Franklin’s motion to dismiss and
remand the case to the trial court with instructions for the trial court to enter an order
dismissing New Millennium’s claims against Aran & Franklin, to determine whether the
dismissal should be with or without prejudice, and for any further proceedings consistent
with this memorandum opinion.
NORA L. LONGORIA
Justice
Delivered and filed on the
22nd day of December, 2022.
11 | 01-04-2023 | 12-26-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/9350223/ | Matter of Roots v Annucci (2022 NY Slip Op 07391)
Matter of Roots v Annucci
2022 NY Slip Op 07391
Decided on December 23, 2022
Appellate Division, Fourth Department
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and subject to revision before publication in the Official Reports.
Decided on December 23, 2022
SUPREME COURT OF THE STATE OF NEW YORK
Appellate Division, Fourth Judicial Department
PRESENT: PERADOTTO, J.P., LINDLEY, CURRAN, BANNISTER, AND MONTOUR, JJ.
932 TP 22-00945
[*1]IN THE MATTER OF WILLIE ROOTS, PETITIONER,
vANTHONY ANNUCCI, ACTING COMMISSIONER, NEW YORK STATE DEPARTMENT OF CORRECTIONS AND COMMUNITY SUPERVISION, RESPONDENT.
WYOMING COUNTY-ATTICA LEGAL AID BUREAU, WARSAW (MICHAEL MANUSIA OF COUNSEL), FOR PETITIONER.
LETITIA JAMES, ATTORNEY GENERAL, ALBANY (CHRIS LIBERATI-CONANT OF COUNSEL), FOR RESPONDENT.
Proceeding pursuant to CPLR article 78 (transferred to the Appellate Division of the Supreme Court in the Fourth Judicial Department by order of the Supreme Court, Wyoming County [Michael M. Mohun, A.J.], entered June 20, 2022) to review a determination of respondent. The determination found after a tier III hearing that petitioner had violated an inmate rule.
It is hereby ORDERED that said proceeding is unanimously dismissed without costs as moot (see Matter of Free v Coombe , 234 AD2d 996, 996 [4th Dept 1996]).
Entered: December 23, 2022
Ann Dillon Flynn
Clerk of the Court | 01-04-2023 | 12-23-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/9350401/ | COURT OF APPEALS FOR THE
FIRST DISTRICT OF TEXAS AT HOUSTON
ORDER
Appellate case name: Jaimel Demetrius Smith v. The State of Texas
Appellate case number: 01-22-00365-CR
Trial court case number: 1765558
Trial court: 208th District Court of Harris County
Appellant’s court-appointed counsel filed a brief concluding that the above-
referenced appeal is frivolous. See Anders v. California, 386 U.S. 738 (1967). Appellant,
acting pro se, has filed a motion requesting access to a copy of the appellate record for use
in preparing a response to appointed counsel’s brief. See Kelly v. State, 436 S.W.3d 313,
315, 318–20 (Tex. Crim. App. 2014).
We grant the motion and order the trial court clerk, no later than 10 days from the
date of this order, to provide a copy of the record, including the clerk’s record, the
reporter’s record, and any supplemental records, to the appellant. The trial court clerk shall
further certify to this Court, within 15 days of the date of this order, the date upon which
delivery of the record to the appellant is made. Finally, appellant’s response to his
appointed counsel’s brief shall be filed within 45 days of the date of this order.
It is so ORDERED.
Judge’s signature: ___/s/ Peter Kelly_______
Acting individually Acting for the Court
Date: ___December 20, 2022___ | 01-04-2023 | 12-26-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483808/ | FILE COPY
Fourth Court of Appeals
San Antonio, Texas
November 8, 2022
No. 04-22-00600-CR
EX PARTE Rafael Alfaro LEIJA,
From the County Court, Kinney County, Texas
Trial Court No. 10469CR
Honorable Tully Shahan, Judge Presiding
ORDER
On October 11, 2022, we ordered the trial court to prepare and file a certification of
appellant’s right to appeal. See TEX. R. APP. P. 25.2(a)(2). We also ordered the County and
District Clerk of Kinney County to file a supplemental clerk’s record containing the trial court’s
certification by October 31, 2022. On October 31, 2022, the County and District Clerk of Kinney
County filed a notification of late record stating that his office had not yet received the trial
court’s certification. On November 7, 2022, the County and District Clerk of Kinney County
filed a supplemental clerk’s record containing the trial court’s certification. The notification of
late record is therefore DENIED AS MOOT.
Our records show that the appellate record is now complete. Appellant’s brief is therefore
due by November 28, 2022. See TEX. R. APP. P. 38.6(a).
_________________________________
Beth Watkins, Justice
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the said
court on this 8th day of November, 2022.
___________________________________
MICHAEL A. CRUZ, Clerk of Court | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483809/ | FILE COPY
Fourth Court of Appeals
San Antonio, Texas
November 8, 2022
No. 04-22-00725-CV
David Gene BECKA,
Appellant
v.
The STATE of Texas,
Appellee
From the 144th Judicial District Court, Bexar County, Texas
Trial Court No. 2019CR1257
Honorable Andrew Wyatt Carruthers, Judge Presiding
ORDER
On October 4, 2022, the magistrate judge signed an order for extended outpatient mental
health services for Appellant David Gene Becka.
Under the Health and Safety Code, Appellant’s notice of appeal was due within ten days
after the order was signed. See TEX. HEALTH & SAFETY CODE ANN. § 574.070(b); In re J.A., 53
S.W.3d 869, 871 (Tex. App.—Dallas 2001, no pet.). Thus, Appellant’s notice of appeal was due
on October 14, 2022. See TEX. HEALTH & SAFETY CODE ANN. § 574.070(b).
On October 28, 2022, Appellant filed a notice of appeal; the notice of appeal was late.
See id. However, Appellant’s notice of appeal was filed within fifteen days after the deadline for
filing the notice of appeal. See TEX. R. APP. P. 26.3. We will imply a motion for extension of
time. See Verburgt v. Dorner, 959 S.W.2d 615 (Tex. 1997) (“[A] motion for extension of time is
necessarily implied when an appellant acting in good faith files a [notice of appeal] beyond the
time allowed by Rule [26.1], but within the fifteen-day period in which the appellant would be
entitled to move to extend the filing deadline under Rule [26.3].”).
We ORDER Appellant to file a motion for extension of time that reasonably explains the
need for an extension within TEN DAYS of the date of this order. See TEX. R. APP. P. 26.3
(citing TEX. R. APP. P. 10.5(b)); In re E.K.C., 486 S.W.3d 614, 616 (Tex. App.—San Antonio
2016, no pet.). If Appellant fails to file a motion as ordered, we will dismiss this appeal for want
of jurisdiction without further notice. See TEX. R. APP. P. 42.3(a), (c).
FILE COPY
_________________________________
Patricia O. Alvarez, Justice
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the said
court on this 8th day of November, 2022.
___________________________________
MICHAEL A. CRUZ, Clerk of Court | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483789/ | Fourth Court of Appeals
San Antonio, Texas
MEMORANDUM OPINION
No. 04-22-00308-CV
IN THE INTEREST OF M.A.C.
From the 285th Judicial District Court, Bexar County, Texas
Trial Court No. 2021EM503388
Honorable Nick Catoe Jr., Judge Presiding
PER CURIAM
Sitting: Rebeca C. Martinez, Chief Justice
Liza A. Rodriguez, Justice
Lori I. Valenzuela, Justice
Delivered and Filed: November 9, 2022
DISMISSED
Appellant Guillermo Valverde III filed a notice of appeal, stating that he desired to appeal
from all portions of the trial court’s Order Establishing the Parent-Child Relationship “including
monthly payments, medical support, and retroactive child support.” On August 30, 2022, he filed
his appellant’s brief. On August 31, 2022, we issued an order stating that his brief violated Texas
Rule of Appellate Procedure 38 in that it did not (1) identify the parties and counsel; (2) include a
table of contents; (3) include an index of authorities; (4) include a statement of the case; (5) include
a brief statement of the issues presented; (6) include record references in the statement of facts; (7)
include a summary of the argument; or (8) include a conclusion stating the nature of the relief
sought. See TEX. R. APP. P. 38.1. We explained that while substantial compliance with Rule 38 is
sufficient, we could order a party to amend, supplement, or redraw a brief if it flagrantly violates
04-22-00308-CV
Rule 38. See TEX. R. APP. P. 38.9(a). In our order, we concluded that the formal defects described
above constitute flagrant violations of Rule 38.
Therefore, we ordered Appellant Guillermo Valverde III to file an amended brief on or
before September 20, 2022. We explained that if the amended brief did not correct the violations,
we would strike the brief and prohibit appellant from filing another. See TEX. R. APP. P. 38.9(a);
see also id. 42.3(c) (allowing dismissal of appellant’s appeal if appellant fails to comply with a
requirement of the Texas Rules of Appellate Procedure or an order of this court). Appellant has
not filed an amended appellant’s brief or otherwise responded to our order. We therefore strike
Appellant’s brief and dismiss this appeal. See TEX. R. APP. P. 38.9(a); 42.3(c).
PER CURIAM
-2- | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483798/ | Fourth Court of Appeals
San Antonio, Texas
MEMORANDUM OPINION
No. 04-22-00337-CR
Luis DOMINGUEZ,
Appellant
v.
The STATE of Texas,
Appellee
From the County Court at Law No. 11, Bexar County, Texas
Trial Court No. 628896
Honorable Timothy Johnson, Judge Presiding
PER CURIAM
Sitting: Luz Elena D. Chapa, Justice
Irene Rios Justice
Beth Watkins, Justice
Delivered and Filed: November 9, 2022
MOTION TO DISMISS GRANTED; APPEAL DISMISSED
On October 27, 2022, appellant filed a motion to dismiss this appeal. The motion is signed
by both appellant and his attorney in accordance with Texas Rule of Appellate Procedure 42.2(a).
See TEX. R. APP. P. 42.2(a). After consideration, we grant the motion and dismiss this appeal. See
id.
PER CURIAM
Do Not Publish | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491553/ | ORDER DENYING MOTION TO SET ASIDE ORDER
MARY D. SCOTT, Bankruptcy Judge.
THIS CAUSE is before the Court upon the debtor’s Motion to Set Aside Order and Dismiss Case, filed on July 8, 1992. The debtor requests that the Order of June 25, 1992, entered on June 26,1992, be set aside on the grounds that it received no notice of the proceedings resulting in the Order. The trustee filed a response to the motion on July 27,1992. The secured creditor R.S. Martin, Jr., responded on July 20, 1992. Both responding parties object to the Court setting aside the Order of June 26, 1992.
This proceeding is governed by Rule 9025, Federal Rules of Bankruptcy Procedure, which incorporates Rule 60, Federal Rules of Civil Procedure which permits relief from orders or judgments upon a showing of any “reason justifying relief from the operation of the judgment. Fed.R.Civ. Proc. 60(b)(6).
The notice of the trustee’s intent did not initiate a contested matter within the meaning of Rule 9014 such that service requirements of Rule 7004 were not invoked. Instead, the service of the notice is governed by Rules 2002 and 6007 which provide for notice to interested persons upon the proposed disposition of estate assets. The issue for the Court is whether the debtor was properly served notice of the trustee’s intent to license the patent. If proper service was effected by the trustee, then the motion will be denied, whether or not the debtor actually received the notice. Proper service and actual receipt are not identical concepts.
The Involuntary Chapter 7 Petition in Bankruptcy was filed on September 21, 1990. The Order for Relief was entered on November 29, 1990. The attorney of record on the bankruptcy schedules is: Marc Honey, Honey & Honey, P.O. Box 636, Prescott, AR 71857.
On May 19, 1992, the Chapter 7 trustee filed with the Court a Notice of Trustee’s Intent to License Patent. The notice indicated that the trustee intended to enter into an agreement with PFT, Inc. for the purpose of licensing a patent to a bendable permanent wave rod apparatus. A copy of the proposed agreement was appended to the notice. On that same date, the trustee filed an Affidavit of Mailing which certified that all creditors had been served with copies of the Notice and its exhibit. The mailing matrix of persons served with the Notice was appended to the Affidavit, which matrix included the following address:
Marc Honey P.O. Box 636 Prescott, AR 71857-0636
Neither H.E.R. Manufacturing nor its agent was specially listed on the matrix. Both H.E.R. Manufacturing and its attorney, Marc Honey, assert that they never received the Notice of Trustee’s Intent to License Patent. On this basis they request that the Order permitting the trustee to license the patent be set aside and the involuntary chapter 7 bankruptcy case be dismissed.
Charles L. Honey is the managing partner of Honey & Honey, a firm comprised of Charles Honey and his son, Marc Honey. Charles Honey testified1 that he reviews every piece of mail that comes into their office located at P.O. Box 636, Prescott, Arkansas. If he is not in the office, the mail “waits for his return.” Honey testified that he never received the Notice of the Trustee’s Intent to License Patent, although the office received all other mail relating to this case. Based upon the de*813meanor and statements of the witness, the Court does not find Honey credible.2 It is unlikely that he received all other mail directed to his firm, but did not receive this one item of mail. Further, the agent of the debtor had knowledge of the proposed license as evidenced by her conversation with the trustee. At or about the time the notice was mailed, the trustee and the agent had a conversation wherein the agent expressed knowledge of the specific terms of the license contract. See In re CLC Corporation, 110 B.R. 335 (Bankr.M.D.Tenn.1990) (sale of estate property will not be invalidated for noncompliance with notice formalities if objecting party had actual notice of sale.) The Court finds that the trustee in fact served the debtor with the Notice of Trustee’s Intent to License Patent, by serving the debtor’s attorney, Marc Honey, at his record address. In addition, the agent of the debtor had actual knowledge of the intent to license the patent.
ORDERED that the Motion to Set Aside Order and Dismiss Case, filed on July 8, 1992, by the debtor, is DENIED.
IT IS SO ORDERED.
. Marc Honey was on vacation during the approximate time the notice should have been received at the firm.
. This Court is not the first fact-finder to determine that Charles Honey is not credible. See Honey v. United States, 963 F.2d 1083, 1086 ns. 1, 2 (8th Cir.1992) (petition for cert. filed Sept. 9, 1992); In re Jackson, 60 B.R. 593 (Bankr.W.D.Ark.1986) (Fussell, J.); c.f. In re Lavender, 48 B.R. 393 (Bankr.W.D.Ark.1984) (Mixon, J.). The debtor’s agent, while testifying, asserted that her attorney lied to her regarding other matters. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483801/ | Fourth Court of Appeals
San Antonio, Texas
MEMORANDUM OPINION
No. 04-22-00250-CV
EX PARTE T.T.
From the 379th Judicial District Court, Bexar County, Texas
Trial Court No. 2021W0607
Honorable Ron Rangel, Judge Presiding
Opinion by: Luz Elena D. Chapa, Justice
Sitting: Luz Elena D. Chapa, Justice
Irene Rios, Justice
Liza A. Rodriguez, Justice
Delivered and Filed: November 9, 2022
MOTION TO DISMISS GRANTED; DISMISSED
On April 21, 2022, the State of Texas filed a notice of restricted appeal challenging an
“Order Granting Expunction” signed on December 3, 2021. After we formally set this case for
submission on the parties’ briefs, the State filed a motion seeking to dismiss its restricted appeal.
The State also requested expedited issuance of the mandate.
After consideration, we grant the motion and dismiss the restricted appeal. See TEX. R.
APP. P. 42.1(a)(1). Because the motion does not disclose an agreement regarding the assessment
of costs, we order all costs assessed against the State. See id. R. 42.1(d) (absent agreement of the
parties, costs are taxed against appellant). We further order the clerk of the court to immediately
issue the mandate. See id. R. 18.1(c).
Luz Elena D. Chapa, Justice | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483777/ | Fourth Court of Appeals
San Antonio, Texas
November 14, 2022
No. 04-22-00598-CR
EX PARTE Jesus Alfredo GARCIA CASTILLO
From the County Court, Kinney County, Texas
Trial Court No. 10574CR
Honorable Tully Shahan, Judge Presiding
ORDER
On September 28, 2022, the trial court clerk filed the clerk’s record in this appeal;
however, the filed clerk’s record did not comply with Texas Rule of Appellate Procedure
34.5(a), which lists the documents the trial court clerk must include in the clerk’s record. See
TEX. R. APP. P. 34.5. Specifically, the clerk’s record was missing two items: (1) the trial court’s
order signed on August 17, 2022 and (2) the trial court’s certification of the defendant’s right to
appeal under Texas Rule of Appellate Procedure 25.2. On October 11, 2022, we ordered the
Kinney County Clerk to prepare a supplemental clerk’s record containing the missing items and
to file it by October 31, 2022. On that day, the Kinney County Clerk filed a notification of late
record stating he has “not received the trial court certification from the attorney to date.”
Rule 25.2 provides in a criminal appeal where the defendant is the appellant, “[t]he trial
court shall enter a certification of the defendant’s right of appeal each time it enters a judgment
of guilt or other appealable order.” Id. R. 25.2(a)(2). Rule 25.2 further provides, “If the
defendant is the appellant, the record must include the trial court’s certification of the
defendant’s right of appeal under Rule 25.2(a)(2),” and cautions “[t]he appeal must be dismissed
if a certification that shows the defendant has the right of appeal has not been made part of the
record under these rules.” Id. R. 25.2(d).
Accordingly, we order the trial court to enter a certification of the defendant’s right of
appeal and forward it to the trial court clerk for inclusion in the clerk’s record by November 29,
2022. We further order the Kinney County Clerk to prepare a supplemental clerk’s record
containing the trial court’s certification and to file it by December 14, 2022. See id. 34.5(c)(2).
The Kinney County Clerk is further reminded the supplemental clerk’s record should contain the
trial court’s order signed on August 17, 2022. See id.
_________________________________
Luz Elena D. Chapa, Justice
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the said
court on this 14th day of November, 2022.
_________________________________
Michael A. Cruz,
Clerk of Court | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483786/ | Fourth Court of Appeals
San Antonio, Texas
November 10, 2022
No. 04-22-00725-CV
David Gene BECKA,
Appellant
v.
The STATE of Texas,
Appellee
From the 144th Judicial District Court, Bexar County, Texas
Trial Court No. 2019CR1257
Honorable Andrew Wyatt Carruthers, Judge Presiding
ORDER
In this accelerated appeal, the notice of appeal was filed in the trial court on October 28,
2022, and the reporter’s record was initially due on November 7, 2022. See TEX. R. APP. P.
35.1(b).
However, the original notice of appeal was not sent to the court reporter responsible for
preparing the record, contra TEX. CIV. PRAC. & REM. CODE ANN. § 51.017(a); TEX. R. APP.
P. 25.1(e), and no docketing statement was filed, contra TEX. R. APP. P. 32.1.
On November 9, 2022, court reporter Roxanne F. Pena filed a first motion for extension
of time to file the reporter’s record. She requested a sixty-day extension of time to file the
record. She notes that the “priority status [for this record] is behind three other records.”
By statute, this appeal must be given priority over all other appeals. See TEX. HEALTH &
SAFETY CODE ANN. § 574.070 (“The court of appeals and supreme court shall give an appeal
under this section preference over all other cases and shall advance the appeal on the docket.”
(emphasis added)).
We ORDER Roxanne F. Pena to give this record the highest priority status in the order of
preparing records. See id.
The reporter’s record is due on November 17, 2022. See TEX. R. APP. P. 35.3(c)
(limiting an extension in an accelerated appeal to ten days).
_________________________________
Patricia O. Alvarez, Justice
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the said
court on this 10th day of November, 2022.
___________________________________
MICHAEL A. CRUZ, Clerk of Court | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483774/ | Fourth Court of Appeals
San Antonio, Texas
November 14, 2022
No. 04-22-00194-CV
Jerry A. GUZZETTA,
Appellant
v.
BRIMHALL LQ, LLC d/b/a La Quinta Hotel,
Appellee
From the 285th Judicial District Court, Bexar County, Texas
Trial Court No. 2012-CI-14775
Honorable John D. Gabriel Jr., Judge Presiding
ORDER
Appellant has requested eight additional days to file his opening brief. See TEX. R. APP.
P. 38.6(d).
Appellant’s motion is granted. The brief is due on November 18, 2022. See id.
_________________________________
Patricia O. Alvarez, Justice
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the said
court on this 14th day of November, 2022.
___________________________________
Michael A. Cruz,
Clerk of Court | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483832/ | TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
JUDGMENT RENDERED NOVEMBER 15, 2022
NO. 03-19-00266-CV
Appellants, Glenn Hegar, Comptroller of Public Accounts of the State of Texas, the Office
of the Comptroller of Public Accounts of the State of Texas, and Ken Paxton, Attorney
General of the State of Texas// Cross-Appellant, Duncan Burch, Inc., Appellant
v.
Appellee, Duncan Burch, Inc.// Cross-Appellees, Glenn Hegar, Comptroller of Public
Accounts of the State of Texas, the Office of the Comptroller of Public Accounts of the
State of Texas, and Ken Paxton, Attorney General of the State of Texas, Appellee
APPEAL FROM THE 261ST DISTRICT COURT OF TRAVIS COUNTY
BEFORE CHIEF JUSTICE BYRNE, JUSTICES KELLY AND SMITH
DISMISSED ON JOINT MOTION TO DISMISS APPEAL
OPINION BY CHIEF JUSTICE BYRNE
This is an appeal from the order signed by the trial court on April 22, 2019. Parties have filed a
joint motion to dismiss the appeal, and having considered the motion the Court agrees that the
motion should be granted. Therefore, the Court grants the motion and dismisses the appeal.
Both parties shall bear all costs relating to this appeal, both in this Court and in the court below. | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483833/ | TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
JUDGMENT RENDERED NOVEMBER 15, 2022
NO. 03-18-00277-CV
Glenn Hegar, Comptroller of Public Accounts of the State of Texas, Appellant
v.
Duncan Burch, Inc., Appellee
APPEAL FROM THE 345TH DISTRICT COURT OF TRAVIS COUNTY
BEFORE CHIEF JUSTICE BYRNE, JUSTICES TRIANA AND KELLY
DISMISSED ON JOINT MOTION TO DISMISS APPEAL
OPINION BY CHIEF JUSTICE BYRNE
This is an appeal from the order signed by the trial court on April 6, 2018. Parties have filed a
joint motion to dismiss the appeal, and having considered the motion the Court agrees that the
motion should be granted. Therefore, the Court grants the motion and dismisses the appeal.
Both parties shall bear all costs relating to this appeal, both in this Court and in the court below. | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483835/ | FILED
Nov 10, 2022
02:48 PM(CT)
TENNESSEE COURT OF
WORKERS' COMPENSATION
CLAIMS
TENNESSEE BUREAU OF WORKERS’ COMPENSATION
IN THE COURT OF WORKERS’ COMPENSATION CLAIMS
AT NASHVILLE
John Stevens, ) Docket No. 2022-06-1224
Employee, )
v. )
Hunter Residential Services, LLC, d/b/a ) State File No. 39931-2022
The Surfin Plumbers, )
Employer, )
And )
Federated Mut. Ins. Co., ) Judge Kenneth M. Switzer
Carrier. )
ORDER ON EXPEDITED HEARING
The Court held an expedited hearing on November 10, 2022, where the parties
announced several stipulations:
◼ Hunter Residential accepts the claim. It shall promptly contact Dr. Cornelius’s
office to schedule the recommended MRI and will continue to authorize all
reasonable, necessary and work-related treatment until Mr. Stevens attains
maximum medical improvement. It shall also pay for any past treatment where a
balance remains.
◼ Hunter Residential previously paid Mr. Stevens temporary disability benefits
totaling $6,625.34 (after a child support lien) from June 3 through August 19. His
weekly compensation rate is $703.14. Hunter Residential shall resume paying
temporary disability benefits at that rate. It will pay Mr. Stevens a lump-sum as
compensation from August 20 through the present; then regular weekly payments
shall begin until Mr. Stevens reaches maximum medical improvement or returns to
work at full pay.
◼ Hunter Residential is exploring the possibility of work within Mr. Stevens’s
restrictions. If it is able to offer him a position within his limitations, he might be
eligible for temporary partial disability benefits during the time he is still treating.
1
Mr. Stevens, who represents himself, expressed his understanding and agreement of
the above.
In addition, Hunter Residential and Federated Mutual Insurance Company dispute
whether coverage was in place on the alleged date of injury. Federated filed a lawsuit in
Chancery Court seeking a declaratory judgment on this issue.
The Court sets a status hearing on February 6, 2023, at 10:15 a.m. Central Time.
You must call (615) 532-9552 or (866) 943-0025 to participate.
If issues arise before the next hearing regarding benefits or discovery, any party may
file a motion. Please contact the staff attorney, Jane Salem, at 615-770-1709 or
jane.f.salem@tn.gov, if the parties reach a settlement of all issues before the next hearing.
IT IS ORDERED.
Entered November 10, 2022.
________________________________________
JUDGE KENNETH M. SWITZER
Court of Workers’ Compensation Claims
2
CERTIFICATE OF SERVICE
I certify that a copy of this Order was sent as indicated on November 10, 2022.
Name Certified Regular Email Sent to
Mail mail
John Stevens, X X 25 Upton Heights
employee Lebanon TN 37087
Stevensjohn333@icloud.com
Patrick Parker, X pparker@pparkerlaw.com
Abigail Strader, astrader@pparkerlaw.com
employer’s attorneys
Brett Burrow, X bburrow@burrowlee.com
Carrigan Hicks, tbrasher@burrowlee.com
employer’s attorneys chicks@burrowlee.com
_______________________________________
Penny Shrum, Clerk
WC.CourtClerk@tn.gov
3 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483828/ | IN THE NEBRASKA COURT OF APPEALS
MEMORANDUM OPINION AND JUDGMENT ON APPEAL
(Memorandum Web Opinion)
GONZALES V. WAL-MART STORES
NOTICE: THIS OPINION IS NOT DESIGNATED FOR PERMANENT PUBLICATION
AND MAY NOT BE CITED EXCEPT AS PROVIDED BY NEB. CT. R. APP. P. § 2-102(E).
DIANA GONZALES, APPELLANT,
V.
WAL-MART STORES, INC., APPELLEE.
Filed November 15, 2022. No. A-22-142.
Appeal from the District Court for Dawson County: JAMES E. DOYLE IV, Judge. Affirmed.
Jon Rehm, of Rehm, Bennett, Moore & Rehm, P.C., L.L.O., for appellant.
Dwyer Arce, of Kutak Rock, L.L.P., and Philip M. Kelly, of Douglas Kelly Law Firm, for
appellee.
MOORE, RIEDMANN, and BISHOP, Judges.
MOORE, Judge.
INTRODUCTION
Diana Gonzales filed an action against Wal-Mart Stores, Inc. (Wal-Mart), in the district
court for Dawson County, as a result of her slipping on liquid and falling inside of a Wal-Mart
store in Lexington, Nebraska. The district court sustained Wal-Mart’s motion for summary
judgment, and Gonzales appeals. Upon our review of the record, we conclude that there is no
genuine issue of material fact as to whether Wal-Mart had actual or constructive knowledge of the
wet floor on the premises. As such, we affirm.
STATEMENT OF FACTS
On July 9, 2016, at approximately 11:30 p.m., Gonzales slipped and fell on the floor of
Wal-Mart near the checkout area. After Gonzales’ fall, a streak of yellow liquid was located
-1-
nearby. Both Gonzales and Wal-Mart agree that the liquid was likely some variety of spilled
Gatorade.
Gonzales subsequently filed a complaint against Wal-Mart, alleging that she sustained
personal injuries as a result of the fall. She asserted that Wal-Mart’s negligence was the cause of
her injuries, in that Wal-Mart failed to both warn of a hazardous condition and maintain a safe
premises. Gonzales sought a judgment against Wal-Mart for medical expenses, general damages,
and costs.
Wal-Mart moved for summary judgment. At the hearing on the summary judgment motion,
Wal-Mart argued that there was no evidence to establish that Wal-Mart either created the condition
of the wet floor or knew, or should have known, of that condition prior to Gonzales’ fall. The
evidence Wal-Mart submitted in support of its motion included video surveillance footage of
Gonzales’ fall; Gonzales’ deposition testimony; the deposition testimony of Gonzales’ daughter,
Diana Mercado; and affidavits from two employees of Wal-Mart’s Lexington store. In opposition
to the motion for summary judgment, Gonzales offered a Wal-Mart incident report, which had
been filled out by Mercado immediately after Gonzales’ fall.
In her deposition, Gonzales testified that on the day of the fall, she went to Wal-Mart with
Mercado. She estimated she had only been in the store for 3 or 4 minutes before she proceeded to
the front of the store and fell. During her fall, one of Gonzales’ sandals was broken and she landed
on the right side of her body. Gonzales felt instant pain on her right side, which has persisted
intermittently since her fall.
Gonzales did not recall seeing anything on the floor of the store prior to her fall. Gonzales
was unable to say what she slipped on, how much liquid was on the ground, or how the liquid
came to be on the ground. She stated that “[t]he only thing I know is that I slipped on something
and I fell.” When asked if she had knowledge that Wal-Mart was aware of the liquid on the floor
prior to her fall, Gonzales responded, “I think they didn’t [know].”
Mercado helped Gonzales up and together they walked to a bench inside the store. Once
on the bench, a cashier with whom Gonzales was familiar, approached Gonzales to check on her
condition. Gonzales denied the cashier’s offer to call an ambulance.
In Mercado’s deposition, she testified that she did not recall seeing anything on the floor
prior to Gonzales’ fall. Only after Gonzales’ fall did Mercado see the liquid, which was in a
“squiggly line,” approximately 2 feet long. Mercado did not see cart marks or footprints through
the liquid. Mercado had no knowledge of how the liquid came to be on the ground or how long it
had been there prior to Gonzales’ fall.
Mercado further testified that the cashier saw Gonzales fall and instructed Gonzales and
Mercado to wait on the bench while the cashier went to find the store’s manager. Mercado met
with the store manager and reported both the liquid on the floor and Gonzales’ fall to him. Mercado
also filled out the Wal-Mart incident report form on behalf of Gonzales. The incident report form
reflects that Gonzales slipped on liquid while walking in the checkout section of the store and fell.
Only after the fall did Gonzales look at the floor and notice “bright yellow liquid leaving a trail
along the section.”
The surveillance video depicting Gonzales’ fall captures the checkout area, which includes
a large aisle dividing the shelves of merchandise from the checkout registers. At the front of the
registers are short drink coolers. The Wal-Mart cashiers stand at the center of the registers,
-2-
approximately 30 feet from customers walking down the aisle of the checkout area. The video also
demonstrates in the hour prior to the fall, dozens of customers walked through the aisle of the
checkout area. No one appeared to notice any liquid on the floor and no one else slipped on the
floor.
After Gonzales’ fall in the center of the checkout area aisle, the surveillance video depicts
Mercado helping Gonzales rise and the two women examining the spot on the floor where
Gonzales fell. Ten minutes after Gonzales’ fall, Wal-Mart employees can be seen cleaning the
area.
Two Wal-Mart employees from the Lexington store provided an affidavit regarding the
circumstances of Gonzales’ fall. Richard Larson, the shift manager, spoke with Gonzales on the
store bench shortly after her fall. In his affidavit, Larson stated that Wal-Mart employees are not
permitted to consume beverages on the sales floor. Larson had seen instances where liquid had
been spilled on the floor of the store by customers who open and drink beverages prior to
purchasing them. Based on the information provided by Gonzales, he assumed that the liquid likely
came from a customer who opened a bottle of Gatorade to drink some before proceeding to the
checkout registers. Larson did not see any cart marks or a trail of footprints away from the location
of the spill. Larson also stated that the employee who cleaned the floor following Gonzales’ fall
did not complete a statement and died prior to Wal-Mart’s motion for summary judgment.
Doug Ferreyra, the manager of the Lexington Wal-Mart store, provided further information
regarding the training of Wal-Mart employees. He indicated in his affidavit that all employees are
trained to look for any moisture on the floor and to guard or mark any spills that are awaiting
cleanup as soon as the employee becomes aware of the condition. Employees also routinely
conduct “safety sweeps” to assess any dangerous conditions, including spills. Ferreyra stated that
no customers reported any moisture on the floor near the checkout area on July 9, 2016, prior to
Gonzales’ fall.
On February 7, 2022, the district court entered an order granting summary judgment in
favor of Wal-Mart. The court determined that there was no evidence that Wal-Mart created the
condition of the wet floor or that its employees knew or should have known of the condition.
Further, the court determined that the inferences presented by Gonzales, that the cashier could
have seen the liquid had she looked and that the yellow color of the liquid put Wal-Mart employees
on notice, were based upon guess or speculation and did not create a material issue of fact.
Gonzales appeals.
ASSIGNMENTS OF ERROR
Gonzales assigns, consolidated and restated, that the district court erred in granting
Wal-Mart’s motion for summary judgment after concluding that there was no issue of material fact
as to whether Wal-Mart had actual or constructive knowledge of the wet floor on the premises.
STANDARD OF REVIEW
An appellate court affirms a lower court’s grant of summary judgment if the pleadings and
admitted evidence show that there is no genuine issue as to any material facts or as to the ultimate
inferences that may be drawn from the facts and that the moving party is entitled to judgment as a
matter of law. Sundermann v. Hy-Vee, 306 Neb. 749, 947 N.W.2d 492 (2020). In reviewing a
-3-
summary judgment, an appellate court views the evidence in the light most favorable to the party
against whom the judgment was granted and gives that party the benefit of all reasonable
inferences deducible from the evidence. Id.
ANALYSIS
In premises liability cases, an owner or occupier is subject to liability for injury to a lawful
visitor resulting from a condition on the owner or occupier’s premises if the lawful visitor proves
(1) that the owner or occupier either created the condition, knew of the condition, or by exercise
of reasonable care would have discovered the condition; (2) that the owner or occupier should have
realized the condition involved an unreasonable risk of harm to the lawful visitor; (3) that the
owner or occupier should have expected that the visitor either would not discover or realize the
danger or would fail to protect himself or herself against the danger; (4) that the owner or occupier
failed to use reasonable care to protect the visitor against the danger; and (5) that the condition was
a proximate cause of damage to the visitor. Edwards v. Hy-Vee, 294 Neb. 237, 883 N.W.2d 40
(2016).
Gonzales asserts that the district court erred in finding as a matter of law that Wal-Mart did
not have actual or constructive knowledge of the condition of the floor prior to her slip and fall.
Gonzales asserts that a genuine issue of material fact exists as to whether Wal-Mart employees
knew or should have known that there was “moisture on [the store’s] floor in a highly trafficked
area.” Brief for appellant at 1.
While Gonzales assigns that Wal-Mart had actual knowledge of the liquid on the floor of
the store, she does not argue this issue in her brief. An alleged error must be both specifically
assigned and specifically argued in the brief of the party asserting the error to be considered by an
appellate court. Wichman v. Hy-Vee, 30 Neb. App. 415, 969 N.W.2d 688 (2021). Because
Gonzales has not done so, we do not address this issue and turn next to whether Wal-Mart had
constructive knowledge.
Constructive knowledge is generally defined as knowledge that one using reasonable care
or diligence should have. Edwards v. Hy-Vee, supra. In order for a defendant to have constructive
notice of a condition, the condition must be visible and apparent and it must exist for a sufficient
length of time prior to an accident to permit a defendant or the defendant’s employees to discover
and remedy it. Id. In the absence of evidence to support an inference of the possessor’s actual or
constructive knowledge of the hazardous condition, the Nebraska Supreme Court has refused to
allow the jury to speculate as to the possessor’s negligence. Id. Inferences based upon guess or
speculation do not create material issues of fact for purposes of a summary judgment. Id.
There is no evidence to support an inference that Wal-Mart had constructive knowledge of
the liquid on the floor. Gonzales specifically testified that she did not know how long the liquid
had been on the floor prior to her fall and the affidavits of the Wal-Mart employees indicated that
no employee or other customer had reported any liquid being on the floor. There were no footprints
or cart marks going through the liquid, which suggests that the liquid was not on the floor for very
long prior to Gonzales’ fall. Evidence offered by Wal-Mart indicates that employees are not
allowed to consume beverages on the sales floor and that the liquid likely came from a customer
who opened a bottle of Gatorade before proceeding to the checkout registers.
-4-
Gonzales relies upon the case of Schade v. County of Cheyenne, 254 Neb. 228, 575 N.W.2d
622 (1998) for her argument that the conflicting inferences in this case should have prevented entry
of summary judgment. We find the cases to be distinguishable. In Schade, the Supreme Court of
Nebraska affirmed this court’s reversal of a grant of summary judgment, concluding that the
slip-and-fall case presented conflicting inferences regarding the defendant’s constructive
knowledge of water on the floor. Based on the testimony of the plaintiff, a maintenance worker,
and witnesses of the fall, the Court concluded that a fact finder could have inferred either that the
water on the ground existed at the same time the maintenance worker was in the area of the fall
and he should have discovered and remedied a condition he characterized as easy to spot; or the
water accumulated between the time the maintenance worker left the area and the time the plaintiff
slipped and fell. Because the record disclosed a genuine issue of material fact as to whether the
county had constructive knowledge of water accumulation, summary judgment was inappropriate.
There are two key differences between Schade and the case at issue. Firstly, in Schade, the
maintenance worker testified that he was in the area of the accident 2 to 15 minutes before the
accident. Both the plaintiff and witnesses also testified to seeing the maintenance worker in the
area shortly before the slip and fall. While Gonzales argues that a Wal-Mart cashier was in the area
of her fall, Mercado testified only that the cashier told Gonzales that “she kind of saw . . . when
[Gonzales] was falling.” Gonzales presented no evidence indicating that the cashier saw or could
have seen the liquid from her place at the checkout stand prior to the fall. The surveillance video
depicts the cashier standing over 20 feet away from Gonzales prior to her fall. And secondly, the
maintenance worker in Schade was in the area of the liquid shortly before the plaintiff’s fall and
testified that the water on the ground would have been easy to spot. Here, there is no evidence that
any Wal-Mart employee was near the liquid on the floor shortly before Gonzales’ fall or stated
that the liquid streak would have been easy to see. Further, Gonzales’ contentions that the streak
of yellow liquid was easy to see and could have been discovered by the cashier had she looked,
are undermined by the fact that both Gonzales and Mercado did not notice the liquid prior to
Gonzales slipping and falling.
We also find Gonzales’ reliance upon Ermel v. SMA Enters., 30 Neb. App. 754, 973
N.W.2d 364 (2022) to be misplaced. In that case, constructive knowledge by the defendant of the
allegedly dangerous condition was not at issue; rather, the question revolved around whether the
allegedly dangerous condition created an unreasonable risk of harm and whether the plaintiff
should have anticipated the harm.
Inferences based upon guess or speculation do not create material issues of fact for
purposes of summary judgment. Edwards v. Hy-Vee, 294 Neb. 237, 883 N.W.2d 40 (2016). There
is simply no way to know whether the spill existed for a sufficient length of time prior to Gonzales’
fall to have permitted Wal-Mart’s employees, even with their training, to discover the condition.
Because there is no evidence or reasonable inference that Wal-Mart knew or should have known
of the liquid on the floor, Wal-Mart was entitled to judgment as a matter of law.
CONCLUSION
We conclude that the district court did not err in granting Wal-Mart’s motion for summary
judgment. Its decision is therefore affirmed.
AFFIRMED.
-5- | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483834/ | TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
NO. 03-18-00277-CV
Glenn Hegar, Comptroller of Public Accounts of the State of Texas, Appellant
v.
Duncan Burch, Inc., Appellee
FROM THE 345TH DISTRICT COURT OF TRAVIS COUNTY
NO. D-1-GN-17-005165, THE HONORABLE KARIN CRUMP, JUDGE PRESIDING
MEMORANDUM OPINION
This appeal was stayed as discussed by memorandum opinion on May 14, 2019,
after Duncan Burch, Inc. filed for bankruptcy protection. See 11 U.S.C. § 362; Tex. R. App. P.
8.2. The parties have filed joint motions to reinstate and to dismiss this appeal. See Tex. R.
App. P. 8.3(a). We grant the joint motions and reinstate and dismiss this appeal pursuant to the
parties’ agreement. Id. R. 42.1(a)(2).
__________________________________________
Darlene Byrne, Chief Justice
Before Chief Justice Byrne, Justices Triana and Kelly
Dismissed on Joint Motion
Filed: November 15, 2022 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483876/ | J-A23029-22
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
IN THE INTEREST OF: J.J.N., A : IN THE SUPERIOR COURT OF
MINOR : PENNSYLVANIA
:
:
APPEAL OF: J.K.N., JR., FATHER :
:
:
:
: No. 603 MDA 2022
Appeal from the Decree Entered March 25, 2022
In the Court of Common Pleas of York County Orphans' Court at No(s):
2022-0030a
IN THE INTEREST OF: J.J.N., A : IN THE SUPERIOR COURT OF
MINOR : PENNSYLVANIA
:
:
APPEAL OF: J.K.N., JR., FATHER :
:
:
:
: No. 604 MDA 2022
Appeal from the Decree Entered March 25, 2022
In the Court of Common Pleas of York County Orphans' Court at No(s):
2022-0031A
BEFORE: BOWES, J., McCAFFERY, J., and STEVENS, P.J.E.*
MEMORANDUM BY BOWES, J.: FILED: NOVEMBER 15, 2022
____________________________________________
* Former Justice specially assigned to the Superior Court.
J-A23029-22
J.K.N., Jr. (“Father”) appeals from the March 25, 2022 decrees that
terminated involuntarily his parental rights to two of his children: Jai.J.N.,
born in March 2019, and Ja.J.N., born in October 2020.1 We affirm.
We provide the following background. In December 2020, Mother was
living with Jai.J.N. and Ja.J.N. in a domestic violence shelter in Ohio.
Cuyahoga County Child Protective Services (“CCCPS”) received a referral on
December 10, 2020, after two-month-old Ja.J.N. presented to the hospital
with a non-accidental and unexplained parietal skull fracture. Due to this
injury and a concern for domestic violence between Mother and Father, CCCPS
attempted to implement a safety plan. However, that plan never came to
fruition because Mother relocated to York County, Pennsylvania without
notifying CCCPS.
Shortly thereafter, on December 18, 2020, the York County Office of
Children, Youth and Families (“CYF”) received a referral for the family. CYF
conducted a home visit on December 19, 2020. Father was not present as he
was evading the police. CYF confirmed the skull fracture and determined that
Mother was unemployed and unable to provide stable housing. Attempts at a
safety plan were unsuccessful, so CYF filed an application for emergency
____________________________________________
1 Father is also appealing a separate decree terminating his parental rights to
a third child, Je.J.N., born in October 2021, at docket 744 MDA 2022. Since
all three children have the same initials, we included enough additional letters
from their first names for ease of identification within this memorandum. All
three children share the same mother, D.K. (“Mother”). The orphans’ court
also terminated Mother’s parental rights to the children, but she has not
appealed.
-2-
J-A23029-22
protective custody and the children were placed into kinship care.2 In January
2021, the children were adjudicated dependent. Father was not present at
the adjudicatory hearing but was aware of their placement into kinship care
as it was reported that he had visited the children there. Since Father’s
whereabouts were unknown, his only goal was to contact CYF “to discuss the
expectations regarding services and supervised visitation if he wishes to be
involved with his children[.]” CYF Exhibit 1 (Family Service Plan, 2/22/21, at
9); see also id. (Family Service Plan, 8/3/21); id. (Family Service Plan,
1/24/22).
The orphans’ court issued permanency and status review orders in May,
September, and October of 2021, finding in all of them that Father had not
had any contact with the children or CYF, still had outstanding warrants, and
had not made any progress towards alleviating the issues that led to the
original placement. On January 27, 2022, the police searched the home where
Mother and Father were then living. As a result, the Commonwealth filed
multiple drug charges against Mother and Father.
Father’s first contact with CYF was when he appeared at the next status
review hearing, which was held on February 7, 2022. At that time, Father
indicated that he was living with Mother and that he wanted to work towards
____________________________________________
2 Jai.J.N. and Ja.J.N. are no longer in kinship care. From kinship care, they
were placed into a foster home together. On November 21 or 22, 2021,
Jai.J.N. and Ja.J.N. joined Je.J.N. at the foster home where they currently
reside. The current foster family is a pre-adoptive resource for all three
children.
-3-
J-A23029-22
reunification. The court ordered him to obtain housing and employment,
follow through with the criminal process, contact CYF to develop goals and
services, and have regular visitation with the children. Upon contacting CYF,
the agency advised Father that his goals were to contact and cooperate with
CYF, maintain stable income and housing, cooperate with an in-home team
for parenting and budgeting, attend visitation with the children consistently,
participate in domestic violence treatment, and resolve his criminal charges.
On February 9, 2022, CYF filed petitions to terminate the parental rights
of Father as to Jai.J.N. and Ja.J.N. pursuant to 23 Pa.C.S. § 2511(a)(1), (2),
(4), (5), and (8).3 The orphans’ court held a hearing on these petitions on
March 25, 2022.4 CYF presented the testimony of CYF caseworker Samuel
Richard and K.L., the current foster mother. Father testified on his own behalf.
Mr. Richard indicated that Father had made no progress on his goals
and had not provided any documentation of employment. As Father had only
made contact with CYF approximately one month before the termination
hearing, Mr. Richard noted that besides attempting to initiate visitation, no
services had yet been provided to Father. Mr. Richard additionally reported
____________________________________________
3 CYF also filed petitions to terminate Father’s rights to Je.J.N. and Mother’s
parental rights to all three children. Following the hearing, the orphans’ court
denied those initial petitions as to Je.J.N.
4 At the hearing, Laura L. Smith, Esquire, represented all three children as
guardian ad litem (“GAL”) and legal counsel. We note with displeasure that
Attorney Smith did not file a brief with this Court on behalf of the children.
-4-
J-A23029-22
that Father had not had any supervised visitation with the Jai.J.N. or Ja.J.N.
during the life of the case.
At the time of the hearing, Father was incarcerated. He did not allege
that his absence rendered him unaware of his children’s placement into care.
Instead, he claimed to have had contact with the children during their partially
supervised visitation with Mother in May and June of 2021. He acknowledged
that he had not seen Jai.J.N. or Ja.J.N. since Mother’s visits reverted to fully
supervised in July 2021. Outside these unsanctioned visits, there is no
evidence of contact between Father and Jai.J.N. or Ja.J.N. since the original
placement.
At the conclusion of the hearing, the orphans’ court issued decrees
terminating Father’s parental rights as to Jai.J.N. and Ja.J.N. pursuant to
§ 2511(a)(1). Father filed timely notices of appeal and concise statements
pursuant to Pa.R.A.P. 1925(a)(2). The orphans’ court filed responsive Rule
1925(a) opinions.5 This Court consolidated the appeals sua sponte.6
Father presents the following question for our consideration: “Did the
Lower Court abuse its discretion and err as a matter of law in finding that the
Agency met its burden to terminate Father’s parental rights under 23
Pa.C.S.A. Section 2511(a)(1), (2), (5), (8) and 2511(b)?” Father’s brief at 5.
____________________________________________
5 Since the opinions are substantially the same, we will cite solely to the
opinion for Jai.J.N. but apply it to both children.
6 Father sought to consolidate these cases with the appeal regarding Je.J.N.
This Court denied that motion.
-5-
J-A23029-22
We begin with our standard of review for matters involving
involuntary termination of parental rights:
The standard of review in termination of parental rights cases
requires appellate courts to accept the findings of fact and
credibility determinations of the trial court if they are supported
by the record. If the factual findings are supported, appellate
courts review to determine if the trial court made an error of law
or abused its discretion. A decision may be reversed for an abuse
of discretion only upon demonstration of manifest
unreasonableness, partiality, prejudice, bias, or ill-will. The trial
court’s decision, however, should not be reversed merely because
the record would support a different result. We have previously
emphasized [the appellate court’s] deference to trial courts that
often have first-hand observations of the parties spanning
multiple hearings.
In re T.S.M., 71 A.3d 251, 267 (Pa. 2013) (cleaned up). “The trial court is
free to believe all, part, or none of the evidence presented and is likewise free
to make all credibility determinations and resolve conflicts in the
evidence.” In re M.G. & J.G., 855 A.2d 68, 73-74 (Pa.Super. 2004) (citation
omitted). “[I]f competent evidence supports the trial court’s findings, we will
affirm even if the record could also support the opposite result.” In re
Adoption of T.B.B., 835 A.2d 387, 394 (Pa.Super. 2003) (citation omitted).
Termination of parental rights is governed by § 2511 of the Adoption
Act and requires a bifurcated analysis of the grounds for termination followed
by the needs and welfare of the child.
Our case law has made clear that under [§] 2511, the court must
engage in a bifurcated process prior to terminating parental rights.
Initially, the focus is on the conduct of the parent. The party
seeking termination must prove by clear and convincing evidence
that the parent’s conduct satisfies the statutory grounds
for termination delineated in [§] 2511(a). Only if the court
-6-
J-A23029-22
determines that the parent’s conduct warrants termination of his
or her parental rights does the court engage in the second part of
the analysis pursuant to [§] 2511(b): determination of the needs
and welfare of the child under the standard of best interests of the
child. One major aspect of the needs and welfare analysis
concerns the nature and status of the emotional bond between
parent and child, with close attention paid to the effect on the child
of permanently severing any such bond.
In re L.M., 923 A.2d 505, 511 (Pa.Super. 2007) (citations omitted).
Father argues that CYF failed to establish by clear and convincing
evidence the statutory grounds for termination of his parental rights pursuant
to 23 Pa.C.S. § 2511(a)(1), (2), (5), (8), and (b). See Father’s brief at 13.
We have defined clear and convincing evidence as that which is so “clear,
direct, weighty and convincing as to enable the trier of fact to come to a clear
conviction, without hesitance, of the truth of the precise facts in issue.” In re
C.S., 761 A.2d 1197, 1201 (Pa.Super. 2000) (en banc) (cleaned up).
Termination is proper when the moving party proves grounds for
termination under any subsection of § 2511(a), as well as § 2511(b). T.B.B.,
supra at 395. To affirm, we need only agree with the trial court as to any
one subsection of § 2511(a), as well as § 2511(b). See In re B.L.W., 843
A.2d 380, 384 (Pa.Super. 2004) (en banc).
Here, the orphans’ court only made findings as to § 2511(a)(1) and (b).
Therefore, that is where we focus our analysis. These subsections provide as
follows:
(a) General rule.--The rights of a parent in regard to a child may
be terminated after a petition filed on any of the following
grounds:
-7-
J-A23029-22
(1) The parent by conduct continuing for a period of at least
six months immediately preceding the filing of the petition
either has evidenced a settled purpose of relinquishing
parental claim to a child or has refused or failed to perform
parental duties.
....
(b) Other considerations.--The court in terminating the rights
of a parent shall give primary consideration to the developmental,
physical and emotional needs and welfare of the child. The rights
of a parent shall not be terminated solely on the basis of
environmental factors such as inadequate housing, furnishings,
income, clothing and medical care if found to be beyond the
control of the parent. With respect to any petition filed pursuant
to subsection (a)(1), (6) or (8), the court shall not consider any
efforts by the parent to remedy the conditions described therein
which are first initiated subsequent to the giving of notice of the
filing of the petition.
23 Pa.C.S. § 2511.
Our Supreme Court set forth the proper inquiry under § 2511(a)(1) as
follows:
Once the evidence establishes a failure to perform parental duties
or a settled purpose of relinquishing parental rights, the court
must engage in three lines of inquiry: (1) the parent’s explanation
for his or her conduct; (2) the post-abandonment contact between
parent and child; and (3) consideration of the effect
of termination of parental rights on the child pursuant to Section
2511(b).
In re Adoption of Charles E.D.M., 708 A.2d 88, 92 (Pa. 1998) (citation
omitted). As it relates to timing, this Court further explained,
the trial court must consider the whole history of a given case and
not mechanically apply the six-month statutory provision. The
court must examine the individual circumstances of each case and
consider all explanations offered by the parent facing termination
of his or her parental rights, to determine if the evidence, in light
-8-
J-A23029-22
of the totality of the circumstances, clearly warrants the
involuntary termination.
In re B., N.M., 856 A.2d 847, 855 (Pa.Super. 2004) (citations omitted).
Critically, though, the court is prohibited from considering any efforts made
by a parent to remedy conditions after the filing of the termination petition.
23 Pa.C.S. § 2511(b).
The orphans’ court found that Father had not presented any credible
evidence that he had made any efforts to perform parental duties in the six
months leading up to the filing of the petition. Orphans’ Court Opinion
(Jai.J.N.), 4/25/22, at 2. Specifically,
Father acknowledged not having any contact with his children, the
agency or the court due to being “on the run” from outstanding
warrants. The child[ren] remain[ in foster care]. Father failed to
pay any support for the child[ren] over the life of the underlying
dependency action. He failed to attend medical appointments or
early intervention therapies . . .. He had not even inquired about
the care and welfare of the child[ren] until February, 2022. All
parental duties are being performed by the foster parents to whom
the children look to as their mother and father.
Id. (footnote omitted); see also N.T., 3/25/22, at 93 (“The fact that the
children were in placement and [Father] failed to make any efforts to maintain
regular and ongoing contact we find is a settled purpose to relinquish his
parental rights.”).
Father argues that termination under § 2511(a)(1) is improper because
he was present during some of Mother’s partially supervised visits in “May
and/or June of 2021” and he provided gifts to the children. See Father’s brief
at 16. He contends that there were no established goals for him to comply
-9-
J-A23029-22
with and that he had begun to address his criminal issues, drug and alcohol
concerns, mental health concerns, and employment after he contacted CYF in
February 2022. Id. at 16-17.
This Court has long recognized that a parent is required to make diligent
efforts towards the reasonably prompt assumption of full parental
responsibilities. In re A.L.D. 797 A.2d 326, 337 (Pa.Super. 2002). In this
vein, “[a] parent’s vow to cooperate, after a long period of uncooperativeness
regarding the necessity or availability of services, may properly be rejected as
untimely or disingenuous.” Id. at 340 (citation omitted). As it relates
to § 2511(a)(1), “[a] parent is required to exert a sincere and genuine effort
to maintain a parent-child relationship; the parent must use all available
resources to preserve the parental relationship and must exercise ‘reasonable
firmness’ in resisting obstacles placed in the path of maintaining the parent-
child relationship.” In re C.M.S., 832 A.2d 457, 462 (Pa.Super. 2003)
(citation omitted). “This court has repeatedly recognized that parental rights
are not preserved by waiting for a more suitable or convenient time to perform
one’s parental responsibilities while others provide the child with his or her
immediate physical and emotional needs.” Id. (cleaned up).
Even if Father was present during some of Mother’s partially supervised
visits in May or June of 2021, those preceded the relevant six-month period
for § 2511(a) analysis. Moreover, his eleventh-hour attempt to initiate
services after avoiding CYF for over one year is woefully insufficient to
overcome his absence from the children’s lives and non-compliance with the
- 10 -
J-A23029-22
sole service requirement of contacting CYF so that CYF could determine what
services were necessary for Father to reunite with Jai.J.N. and Ja.J.N. The
record supports the conclusion of the orphans’ court that Father failed to
assume parental duties for Jai.J.N. and Ja.J.N. for at least six months prior to
the filing of the termination petition. He prioritized avoiding his legal troubles
over being a parent to Jai.J.N. and Ja.J.N. In doing so, he demonstrated his
desire to relinquish his parental claim to the children and refused and failed
to perform any parental duties. Accordingly, the orphans’ court did not err in
terminating his parental rights as to Jai.J.N. and J.N. pursuant to
§ 2511(a)(1).
Finally, we consider whether the orphans’ court committed an error of
law or abuse of discretion pursuant to § 2511(b). As explained
above, § 2511(b) focuses on the needs and welfare of the child, which
includes an analysis of any emotional bond that the children may have with
Father and the effect of severing that bond. L.M., supra at 511. The key
questions when conducting this analysis are whether the bond is necessary
and beneficial and whether severance of the bond will cause the child extreme
emotional consequences. In re Adoption of J.N.M., 177 A.3d 937, 944
(Pa.Super. 2018) (quoting In re E.M., 620 A.2d 481, 484–85 (Pa. 1993)). It
is important to recognize that the existence of a bond, while significant, is only
one of many factors courts should consider when addressing § 2511(b). In
re Adoption of C.D.R., 111 A.3d 1212, 1219 (Pa.Super. 2015) (quoting In
re N.A.M., 33 A.3d 95, 103 (Pa.Super. 2011)). Other factors include “the
- 11 -
J-A23029-22
safety needs of the child, and . . . the intangibles, such as the love, comfort,
security, and stability the child might have with the foster parent.” Id.
Father “acknowledge[s] that there has been little evidence of the
relationship and bond between Father and the children. It was Father’s hope
that once he began addressing his issues, which he began to do, this would
change.” Father’s brief at 23.
As a general matter, Pennsylvania does not require the orphans’ court
to enlist a formal bonding evaluation or base its needs and welfare analysis
upon expert testimony. In re Z.P., 994 A.2d 1108, 1121 (Pa.Super. 2011).
“Common sense dictates that courts considering termination must also
consider whether the children are in a pre-adoptive home and whether they
have a bond with their foster parents.” In re T.S.M., supra, at 268. In
weighing the bond considerations pursuant to § 2511(b), “courts must keep
the ticking clock of childhood ever in mind.” Id. at 269. “Children are young
for a scant number of years, and we have an obligation to see to their healthy
development quickly. When courts fail . . . the result, all too often, is
catastrophically maladjusted children.” Id. A court cannot “toll the well-being
and permanency” of a child indefinitely in the hope that a parent “will summon
the ability to handle the responsibilities of parenting.” In re C.L.G., 956 A.2d
999, 1007 (Pa.Super. 2008) (en banc) (citation omitted).
In relation to § 2511(b), the trial court concluded that there would be
“no adverse [e]ffect] on the child[ren] to terminate Father’s parental rights”
- 12 -
J-A23029-22
because there was “no evidence of a bond” between Father and Jai.J.N. or
Ja.J.N. and it was in their best interest “to become free for adoption[.]”
Orphans’ Court Opinion (Jai.J.N.), 4/25/22, at 3. At the hearing, the orphans’
court explained further, as follows:
Although [F]ather believes that [Jai.J.N.] would recognize him as
his father, there is no evidence that he would or has any
recognition.
Again, given the age of the children and the lack of contact
by [F]ather within the six-month period, the [c]ourt finds that all
intangibles, such as love, comfort, security, and stability, have
been met wholly by others.
Father has not during the period of time necessary
addressed the developmental, physical, emotional needs and
welfare of the children, and, therefore, we do find that
[s]ubsection 2511(b) is fulfilled.
We note that the [c]ourt is unable to consider evidence by
a parent to remedy conditions that are initiated subsequent to
giving notice of the filing of the petition.
N.T., 3/25/22, at 95.
As noted, K.L. and her husband are a pre-adoptive resource for Jai.J.N.
and Ja.J.N. Since coming into their care, Jai.J.N. has entered Early
Intervention for behavioral issues and has made progress. Id. at 55-56.
Father has not been involved with those Early Intervention services, nor has
he attended any medical appointments for either child. Id. at 56.
At the termination hearing, Mr. Richard testified that “due to lack of
contact with the father, I guess I can’t make an assessment” as to whether
Jai.J.N. or Ja.J.N. views him as a parental figure. Id. at 24-25. However,
- 13 -
J-A23029-22
Jai.J.N. refers to the foster parents as “[s]ome variation of mommy and
daddy.” Id. at 25; see also id. at 60. Moreover, K.L. testified that Jai.J.N.
has not inquired about Father. Id. at 60. Regarding Ja.J.N., who was pre-
verbal at the time of the hearing, K.L. stated that he calls the foster father
“dada.” Id. at 60. Father has not had any contact with the foster parents
regarding the children. Id. at 63-64.
As to the effects of termination on the children, Mr. Richard testified that
there may be some confusion for Jai.J.N. in the short-term, but “there would
not be a long-term negative effect” on the children. Id. at 32.
The certified record demonstrates that Jai.J.N. and Ja.J.N. are best
served by terminating the parental rights of Father in anticipation of adoption
by K.L. and her husband. There is no evidence of a bond between Father and
the children and, as noted, Father has not performed parental duties during
any significant period of time in the young children’s lives. Rather, it is the
foster parents who have provided a stable, loving environment that satisfies
each child’s developmental, physical, and emotional needs and welfare.
Moreover, the record bears out that each child has formed a healthy bond with
the foster parents. As such, the record supports the assessment of the
orphans’ court that termination is in the best interests of Jai.J.N. and Ja.J.N.
Based on the foregoing, we affirm the decrees terminating Father’s
parental rights.
Decrees affirmed.
- 14 -
J-A23029-22
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 11/15/2022
- 15 - | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483874/ | 2022 IL App (3d) 210524
Opinion filed November 15, 2022
____________________________________________________________________________
IN THE
APPELLATE COURT OF ILLINOIS
THIRD DISTRICT
2022
THE PEOPLE OF THE STATE OF ) Appeal from the Circuit Court
ILLINOIS, ) of the 14th Judicial Circuit,
) Henry County, Illinois.
Plaintiff-Appellant, )
) Appeal No. 3-21-0524
v. ) Circuit Nos. 20-CL-27 and
) 20-TR-3348
RYAN SHAVAR DON REDMOND, )
) The Honorable Daniel P. Dalton,
Defendant-Appellee. ) Judge, Presiding.
____________________________________________________________________________
JUSTICE McDADE delivered the judgment of the court, with opinion.
Justices Daugherity and Hettel concurred in the judgment and opinion.
____________________________________________________________________________
OPINION
¶1 Following a traffic stop and subsequent search of his vehicle, the defendant, Ryan Shavar
Don Redmond, was charged with unlawful possession of cannabis (720 ILCS 550/4(a) (West
2020)). He filed a motion to suppress evidence, alleging that the officer who stopped him lacked
probable cause to search his vehicle. After a hearing, the circuit court granted the motion, and the
State appealed. On appeal, the State argues that the circuit court erred when it found that the odor
of burnt cannabis emitting from a vehicle was insufficient to support a probable cause
determination. We affirm.
¶2 I. BACKGROUND
¶3 On the night of September 15, 2020, Illinois State Police officer Hayden Combs was in
his parked squad car around mile marker 19 on Interstate 80 in Henry County when he observed
a silver Kia sport utility vehicle with an improperly secured license plate traveling three miles
per hour above the speed limit. Combs effectuated a traffic stop of the vehicle, which was being
driven by Redmond. Redmond pulled over immediately, and he did not make any furtive
movements.
¶4 Combs approached the passenger side of the vehicle, and Redmond rolled down the
window. Combs testified that he smelled a strong odor of burnt cannabis emanating from the
vehicle. He did not see anything in the vehicle that was lit or emitting the odor. When Combs
asked about the odor, Redmond stated that he had not smoked cannabis in the vehicle.
¶5 Combs also asked Redmond for his license and registration, which he was unable to
provide. Combs then asked Redmond to step out of the vehicle, and Redmond complied. He
could not recall whether he smelled the odor of burnt cannabis on Redmond’s person. Combs
also admitted that Redmond did not exhibit any signs of impairment.
¶6 Combs led Redmond to the front of the squad car and conducted a pat-down search.
Combs also read Redmond his Miranda rights (see Miranda v. Arizona, 384 U.S. 436 (1966)),
told him he was not free to leave, and then asked him numerous questions, including about the
nature of his trip. Redmond said he was coming from Des Moines, Iowa, where he had been
staying with a girlfriend due to COVID, and headed to Chicago, Illinois, where he lived. Combs
testified that he construed Redmond’s comment that he was “staying” in Des Moines as a
statement that he was “living” there. Combs further claimed that Redmond did not give a straight
answer on his address or the purpose of his trip.
2
¶7 Combs was able to retrieve Redmond’s driver’s license information, which revealed a
valid Illinois license with a Chicago address. Further, Redmond told Combs that the vehicle had
been rented for him by a friend in Des Moines because he did not have a debit card to be able to
rent it himself.
¶8 Combs stated that “a large portion” of his decision to search the vehicle was based on the
smell of burnt cannabis. He also stated that, based on his training and experience, “I-80 is a
known drug corridor across the United States” and “Des Moines, Iowa is a hub of criminal
activity and so is Chicago, Illinois.” He admitted that he thought he had probable cause to search
the vehicle based solely on the smell of burnt cannabis. He also stated that the smell of burnt
cannabis caused him to suspect a violation of the statute prohibiting the smoking of cannabis in a
vehicle. He was also concerned that there may have been improperly packaged cannabis or an
unlawful amount of it in the vehicle.
¶9 Combs found a plastic bag containing approximately one gram of cannabis in the center
console of Redmond’s vehicle. Redmond was given a citation for a misdemeanor violation of
section 4(a) of the Cannabis Control Act (720 ILCS 550/4(a) (West 2020)).
¶ 10 On June 29, 2021, Redmond filed a motion to suppress the cannabis, which alleged that
the mere odor of burnt cannabis did not provide Combs with probable cause to conduct a search
of the vehicle Redmond was driving. The circuit court held a hearing on Redmond’s motion on
August 4, 2021, at which only Combs testified. At the close of the hearing, the court took the
matter under advisement.
¶ 11 On November 10, 2021, the circuit court issued a written order granting Redmond’s
motion to suppress. The court characterized the issue as “whether the smell of burnt cannabis is
sufficient to provide probable cause to search the defendant’s vehicle.” The court found that the
3
legalization of cannabis in Illinois rendered older case law distinguishable and emphasized that
Combs did not observe any indicators to suggest Redmond had recently used cannabis. The court
also dismissed Combs’s other comments about the circumstances, finding Combs’s claims that
Interstate 80 was a “trafficking corridor” and that Redmond’s answers to certain questions
indicated that he was engaged in illegal activity were unpersuasive. Lastly, the court concluded:
“If the court were to find that the smell of cannabis (whether it be raw or
burnt) is, standing alone, probable cause to search a vehicle, it would
create an untenable situation. A person could exercise his statutory right to
possess and consume cannabis only to give up his rights under the Fourth
Amendment with no evidence that he possessed or consumed cannabis
illegally. This court declines to impose that choice upon the defendant or
any other similarly situated individual. Accordingly, this court finds the
search of Mr. Redmond’s vehicle to be in violation of his Fourth
Amendment rights. The motion to suppress is allowed.”
¶ 12 The State appealed.
¶ 13 II. ANALYSIS
¶ 14 On appeal, the State argues that the circuit court erred when it found that the odor of
burnt cannabis, emitting from a vehicle, could not support a probable cause determination.
¶ 15 When reviewing a circuit court’s decision on a motion to suppress evidence, we employ a
two-part standard of review. People v. Hill, 2020 IL 124595, ¶ 14. First, we accord great
deference to the circuit court’s factual findings and reverse them only if they are against the
manifest weight of the evidence. Id. Second, we review de novo the circuit court’s ultimate legal
conclusion on the motion to suppress. Id. We also note that when the facts are uncontroverted, as
4
they are in this case, our review is de novo. People v. Stribling, 2022 IL App (3d) 210098, ¶ 9
(citing People v. Krueger, 175 Ill. 2d 60, 64 (1996)).
¶ 16 In part, the fourth amendment protects citizens from unreasonable searches. U.S. Const.,
amend. IV. Warrantless searches are presumed to be unreasonable except in limited
circumstances. Stribling, 2022 IL App (3d) 210098, ¶ 10. Under the automobile exception to the
warrant requirement, “a warrantless search of a vehicle is not per se unreasonable as the transient
nature of vehicles renders it unfeasible to secure a warrant before the vehicle leaves the
jurisdiction, with the potential evidence of a crime or contraband in tow.” Id. The warrantless
search of a vehicle is permitted when the officer has probable cause to conduct the search. Id.
“Probable cause exists where the facts and circumstances known to the officer at the time would
warrant a reasonable person to believe there is a reasonable probability that the automobile
contains contraband or evidence of criminal activity.” Id. The circumstances are examined
through the viewpoint of an objectively reasonable officer, who is allowed to rely on his or her
training and experience. Hill, 2020 IL 124595, ¶ 23.
¶ 17 It is important to recognize that “[p]robable cause deals with probabilities, not
certainties.” Id. ¶ 24. An officer need not rule out innocent explanations for facts he or she deems
suspicious. Id. Rather, probable cause “requires only that the facts available to the officer—
including the plausibility of an innocent explanation—would warrant a reasonable man to
believe there is a reasonable probability ‘that certain items may be contraband or stolen property
or useful as evidence of a crime.’ ” Id. (quoting Texas v. Brown, 460 U.S. 730, 742 (1983)).
¶ 18 Here, the State argues in part that case law still requires a holding that the odor of burnt
cannabis is sufficient to support a probable cause finding. This contention ignores the impact of
subsequent changes in the underlying law. The legislature can change the law as it sees fit,
5
subject to constitutional requirements. Cf. Fure v. Sherman Hospital, 64 Ill. App. 3d 259, 267
(1978). Legislative action can moderate, or even totally negate, the impact, the applicability, and
the pertinence of prevailing case law. There have been such changes in the law regarding
cannabis possession and use in Illinois. Cases such as People v. Stout, 106 Ill. 2d 77, 87 (1985)
(holding that the odor of burnt cannabis without other corroborating evidence was sufficient to
establish probable cause to search a vehicle), interpreted the law when all cannabis possession
was illegal. With the changes brought about by the Cannabis Regulation and Tax Act (410 ILCS
705/1-1 et seq. (West 2020)), those cases are no longer applicable. See Stribling, 2022 IL App
(3d) 210098, ¶ 29 (holding that “the supreme court’s holding in Stout is no longer applicable to
postlegalization fact patterns”).
¶ 19 In Stribling, a different panel of this court recently addressed the exact issue presented by
this appeal. In that thorough and well-reasoned decision, the Stribling court first examined the
history of cannabis regulation in Illinois. Id. ¶¶ 14-24. In part, the Stribling court noted that when
all cannabis was illegal, our supreme court held in Stout that “when a trained and experienced
police officer detects the odor of cannabis emanating from a defendant’s vehicle, the odor alone
provided sufficient enough probable cause to search the vehicle under the automobile
exception.” Id. ¶ 15 (citing Stout, 106 Ill. 2d at 88). Next, it was noted that the possession of
medical cannabis was partially allowed by the legislature in 2013 with the enactment of the
Compassionate Use of Medical Cannabis Pilot Program Act (410 ILCS 130/1 et seq. (West
2014)). Stribling, 2022 IL App (3d) 210098, ¶ 17. Subsequently, our supreme court decided Hill,
which held, inter alia, that even after the change to the law regarding medical cannabis, the odor
of raw cannabis could still contribute to the probable cause determination when other
6
corroborating factors were also present. Id. ¶ 21. It was also noted that in Hill, the corroborating
factors were that
“(1) [the officer’s] training and experience indicated that the passengers in
the car were hiding contraband or retrieving a weapon when the defendant
delayed pulling over and (2) [the officer] ‘saw a loose “bud” in the back
seat and smelled a strong odor of cannabis, which, together, indicate[d]
that cannabis was in the car and, likely, not properly contained.’ ” Id. ¶ 20
(quoting Hill, 2020 IL 124595, ¶ 35).
¶ 20 The Stribling court then summarized the major change to the law regarding cannabis
possession that took effect on January 1, 2020:
“Since Hill, Illinois became the eleventh state to legalize marijuana
for adult, recreational use. As of January 1, 2020, under the Cannabis
Regulation and Tax Act (410 ILCS 705/1-1 et seq. (West 2020)), an
Illinois resident 21 years of age or older may possess up to and including
30 grams of cannabis, up to 500 milligrams of tetrahydrocannabinol
(THC) in a cannabis-infused product, and 5 grams of cannabis
concentrate. Id. § 10-10. Possession of more than these quantities and
delivery of any amount remains illegal and subject to the penalties
previously set. 720 ILCS 550/4(a), (b) (West 2020). Cannabis may not be
possessed in a vehicle unless it is in a ‘reasonably secured, sealed
container and reasonably inaccessible while the vehicle is moving.’ 410
ILCS 705/10-35(a)(2)(D) (West 2020). Moreover, a person may not use
cannabis while in a vehicle (id. § 10-35(a)(3)(D)) or drive a vehicle if the
7
person has, within two hours of driving or being in actual physical control
of a vehicle, a THC concentration in their blood or urine of either 5
nanograms or more of delta-9-THC per milliliter of whole blood or 10
nanograms or more of delta-9-THC per milliliter of other bodily substance
(id. § 10-35(a)(5); 625 ILCS 5/11-501(a)(7) (West 2020); 625 ILCS 5/11-
501.2(a) (West 2020)). The cannabis concentration limitations on driving
do not apply if the person is a licensed patient under the Compassionate
Use of Medical Cannabis Program Act. 625 ILCS 5/11-501(a)(7) (West
2020). In that case, the licensed patient may not drive a vehicle if impaired
by the use of cannabis. Id.” Id. ¶ 23.
¶ 21 Next, the Stribling court examined the question of whether the enactment of the Cannabis
Regulation and Tax Act had changed the probable cause determination for cannabis. Id. ¶ 24.
That question was answered in the affirmative and resulted in a holding that “the smell of the
burnt cannabis, without any corroborating factors, is not enough to establish probable cause to
search the vehicle.” Id. ¶ 29. That holding was fully consistent with the supreme court’s decision
in Hill.
¶ 22 As was the case in Stribling, there are no corroborating factors in this case to provide
Combs with probable cause to search Redmond’s vehicle. Here, Combs merely smelled a strong
odor of burnt cannabis emanating from inside the vehicle driven by Redmond, leading him to
suspect that Redmond had smoked cannabis inside the vehicle. Redmond did not delay pulling
over or make any furtive movements, he rolled down the window when Combs came to the
passenger side of the vehicle, and Combs did not observe any cannabis or related drug
8
paraphernalia in the vehicle, smoke in the vehicle, or signs of impairment in Redmond. 1
Redmond also told Combs that he had not smoked cannabis in the vehicle. Further, there was no
odor of raw cannabis nor any other factor indicative of improperly packaged cannabis or an
unlawful amount of it in the vehicle, despite Combs’s claim that he was concerned about such
matters.
¶ 23 Additionally, neither Redmond’s driving of a vehicle on Interstate 80 nor the fact that the
vehicle was rented provided any rational support for Combs’s suspicions. While Combs claimed
Interstate 80 was a “known drug corridor,” Combs acted on a suspicion of Redmond having
smoked cannabis in a vehicle, not that he was a drug courier. Further, it is not reasonable to
assume that all persons driving or riding in vehicles—including rented vehicles—traveling on
such a major interstate highway are involved in narcotics-related activities. Combs’s claim, if
taken to its logical conclusion, would essentially subject every vehicle traveling on Interstate 80
to a search for narcotics. The United States and Illinois Constitutions do not give the police such
unfettered and unreasonable access to the innocent activities of citizens or the unknown contents
of people’s vehicles.
¶ 24 Further, like the Interstate 80 “drug corridor” analysis, Combs’s general belief that both
Des Moines and Chicago were “hubs” of criminal activity provided no corroboration that
Redmond was acting criminally in this case. Again, Combs’s claim, taken to its logical
conclusion, would essentially subject every resident of Des Moines and Chicago driving on
Interstate 80 to vehicle searches based on some vague notion of them possibly engaging in
1
We also note that the traffic violations for which Combs stopped Redmond—driving three miles
per hour over the speed limit and an improperly secured license plate—were not indicative of impairment.
See Stribling, 2022 IL App (3d) 210098, ¶ 28.
9
criminal activity. It is simply not reasonable to assume that any or all residents of Des Moines
and Chicago are criminals.
¶ 25 Lastly, Redmond’s answers to Combs’s questions provided no corroboration of his
suspicions in this case. Combs clearly misconstrued at least the answers Redmond provided
regarding residency. Redmond told Combs he lived in Chicago but had been staying with a
girlfriend in Des Moines due to COVID. Combs—and only Combs—decided this meant
Redmond “lived” in Des Moines. Even if that construction had been correct, it is unclear why it
would be suspicious. Moreover, any suspicion should have been quickly dispelled when Combs
determined that Redmond in fact had a valid Illinois driver’s license that listed a Chicago
address.
¶ 26 As was the case in Stribling, no evidence existed in this case to lead a reasonable officer
to conclude that there was a reasonable probability that Redmond’s vehicle contained contraband
or evidence of criminal activity giving rise to probable cause to search. See id. ¶ 28. Under the
circumstances of this case, we hold that the circuit court did not err when it granted Redmond’s
motion to suppress.
¶ 27 III. CONCLUSION
¶ 28 The judgment of the circuit court of Henry County is affirmed.
¶ 29 Affirmed.
10
People v. Redmond, 2022 IL App (3d) 210524
Decision Under Review: Appeal from the Circuit Court of Henry County, Nos. 20-CL-
27, 20-TR-3348; the Hon. Daniel P. Dalton, Judge, presiding.
Attorneys Catherine Runty, State’s Attorney, of Cambridge (Patrick
for Delfino, Thomas D. Arado, and Nicholas A. Atwood, of State’s
Appellant: Attorneys Appellate Prosecutor’s Office, of counsel), for the
People.
Attorneys Bruce L. Carmen, of Carmen Law Office, PC, of Cambridge, for
for appellee.
Appellee:
11 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483870/ | IN THE SUPREME COURT OF THE STATE OF DELAWARE
JALEN SOTO, §
§ No. 263, 2022
Defendant Below, §
Appellant, §
§ Court Below–Superior Court
v. § of the State of Delaware
§
STATE OF DELAWARE, §
§ Cr. ID Nos. 1512000932B (K)
Appellee. § 1604007771 (K)
§
Submitted: September 13, 2022
Decided: November 14, 2022
Before SEITZ, Chief Justice; VALIHURA and VAUGHN, Justices.
ORDER
After consideration of the appellant’s opening brief, the State’s motion to
affirm, and the record below, it appears to the Court that:
(1) Jalen Soto filed this appeal from a Superior Court order sentencing him
for a violation of probation (“VOP”). The State has filed a motion to affirm the
judgment below on the ground that it is manifest on the face of Soto’s opening brief
that his appeal is without merit. We agree and affirm.
(2) On February 15, 2017, Soto resolved two cases by pleading guilty to
one count of possession of ammunition by a person prohibited (PABPP) and one
count of second-degree conspiracy. The Superior Court immediately sentenced Soto
in accordance with the plea agreement as follows: (i) for PABPP, to fifteen years of
Level V incarceration, suspended after two years for one year of Level III probation;
and (ii) for second-degree conspiracy, to two years of Level V incarceration,
suspended for one year of Level III probation. Soto did not appeal his convictions
or sentence.
(3) On May 29, 2018, the Superior Court found Soto in violation of the
terms of his probation and resentenced Soto for PABPP to thirteen years of
incarceration, suspended for six months of Level IV (work release) supervision
followed by one year of Level III probation. For second-degree conspiracy, the
Superior Court reimposed its sentence of two years of incarceration, suspended for
one year of Level III probation. On November 18, 2019, the Superior Court again
found Soto in violation of the terms of his probation and resentenced him as follows:
(i) for PABPP, to twelve years and eleven months of incarceration, suspended after
thirty days followed by decreasing levels of supervision; and (ii) for second-degree
conspiracy, to two years of incarceration, suspended for eighteen months of Level
III probation.
(4) On July 21, 2021, the Superior Court found Soto in violation of the
terms of his probation for a third time and resentenced him as follows: (i) for PABPP,
to twelve years and ten months of incarceration, suspended after Soto’s successful
completion of a Level V program (to be chosen by the Department of Correction)
followed by decreasing levels of supervision; and (ii) for second-degree conspiracy,
2
to two years of incarceration, suspended for one year of Level III probation. Soto
did not appeal, but he did file two motions for sentence modification or review. The
Superior Court denied both motions, finding that Soto’s sentence remained
appropriate for the reasons stated at the violation of probation (VOP) hearing.
(5) In June 2022, Soto’s probation officer filed a VOP report, alleging that
Soto had violated the terms of his probation by violating a no-contact order put in
place by the Family Court that prohibited Soto from contacting his two children and
the children’s mother. At the July 1, 2022 VOP hearing, Soto, through counsel,
admitted the violation. The Superior Court then re-sentenced Soto as follows: (i) for
PABPP, to twelve years and four months of incarceration, suspended after one
year—to be served without benefit of good-time credit or early release under 11 Del.
C. § 4204(k)—followed by decreasing levels of supervision; and (ii) for second-
degree conspiracy, to two years of incarceration, suspended for one year of Level III
probation. This appeal followed.
(6) On his opening brief on appeal, Soto argues that the Superior Court
failed to credit him with the time he served on his sentence between July 29, 2021,
and July 1, 2022. Soto’s claim is unavailing.
(7) Probation is an “act of grace,” and the Superior Court has broad
discretion when deciding whether to revoke a defendant’s probation.1 Once a
1
Kurzmann v. State, 903 A.2d 702, 716 (Del. 2006).
3
defendant has admitted that he has violated the terms of his probation—as Soto did
here—the Superior Court may impose any period of incarceration up to and
including the balance of Level V time remaining on the original sentence.2 The
Superior Court credited Soto with six months of Level V time in its July 1, 2022
sentence. Soto does not claim, and the record does not reflect, that Soto remained
incarcerated at Level V supervision until July 1, 2022. To the contrary, the record
reflects that Soto was released to Level IV supervision (work-release) in December
2021.3 Soto is not entitled to credit for time served at the work-release center.4
NOW, THEREFORE, IT IS HEREBY ORDERED that the motion to affirm
be GRANTED and the judgment of the Superior Court be AFFIRMED.
BY THE COURT:
/s/ Karen L. Valihura
Justice
2
11 Del. C. § 4334(c); Pavulak v. State, 880 A.2d 1044, 1046 (Del. 2005).
3
State’s Mot. to Affirm, Exhibit N.
4
Johnson v. State, 1997 WL 70827, at *1 (Del. Feb. 12, 1997) (rejecting the defendant’s argument
that he should have been credited with the time he served at Level IV work release).
4 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491556/ | MEMORANDUM OPINION AND ORDER
BENJAMIN E. FRANKLIN, Chief Judge.
This matter comes on before the Court pursuant to the January 8, 1992 hearing on Lynda J. Liebner’s (hereinafter “defendant”) motion for summary judgment. The motion arises out of the debtor/plaintiff’s complaint to determine dischargeability of a debt pursuant to 11 U.S.C. § 523(a)(5). The debtor/plaintiff, Victor William Kearns, Jr. (hereinafter “debtor”) appeared pro se. Defendant appeared by and through her attorney, James Orr. The trustee, Carl R. Clark, appeared pro se. There were no other appearances.
FINDINGS OF FACT
Based upon the pleadings and the record, this Court finds as follows:
1. That debtor and defendant were divorced pursuant to a Decree of Divorce entered on October 30, 1975 (hereinafter the “Decree”).
2. That the parties entered into a separation agreement on September 9, 1975 (hereinafter the “Separation Agreement”), and the Decree approves and incorporates the Separation Agreement.
3. That the Separation Agreement provides in relevant part:
I. CHILDREN
2. Support. That husband shall pay to wife as and for the support and mainte*848nance of the parties’ children the sum of $150.00 per child per month; that the said payments shall cease as to any given child upon the subject child first experiencing one of the following contingencies: (1) death, (2) marriage, (3) becoming self-supporting, (4) ceasing to live with wife, or (5) age 18, provided however, that the child support for Kelly Williams shall in any event continue until September 30, 1985.
II. ALIMONY
That husband shall pay to wife as and for the support and maintenance of wife the sum of $300.00 per month; that the said amount shall be increased by the same amount as the decrease in child support on the next subsequent month to the reduction of child support as scheduled in paragraph 1.2. above; provided however, that on October 1, 1980, the alimony payment shall be reduced to $350.00 notwithstanding any of the above provisions to the contrary, and provided further, that the alimony shall terminate on September 30, 1985; that upon the death or remarriage of wife, the payments shall terminate irrespective of the time of the occurrence relative to the above schedule.
4. That on December 7, 1984, the District Court of Johnson County, Kansas Civil Court Department filed a Journal Entry which determined the amount of debtor’s arrearage for child support and alimony. The Journal Entry calculates the judgment which accrued against the debtor for alimony and child support through August of 1984. The Journal Entry calculates the total amount accumulated as $43,950, then credits the amount with payments made by the debtor, leaving the total amount due for child support and alimony at $35,950.
5. That an Order Nunc Pro Tunc was entered on March 27, 1985, correcting certain clerical errors in the Journal Entry of December 7, 1984. Among the corrections made, the Order Nunc Pro Tunc provides that the total amount due for child support and alimony is $41,900, rather than $35,950 as provided in the original Journal Entry. The Journal Entry and Order Nunc Pro Tunc were affirmed by the Kansas Court of Appeals.
6. That on May 22, 1991, the debtor filed for relief under Chapter 7 of Title 11, United States Code.
7. That on June 24, 1991, debtor filed this Complaint to Determine Dischargeability. The Complaint prays for an order of the Court determining that all debts listed on the schedules filed by debtor owed to defendant which may be characterized as past-due child support and/or alimony, be discharged.
8. That on September 26, 1991, defendant filed a proof of claim in debtor’s bankruptcy case.
9. That on November 20, 1991, defendant filed a motion for summary judgment. The motion came up for hearing on January 8, 1991, at which time the Court took the matter under advisement.
CONCLUSIONS OF LAW
Rule 56 of the Federal Rules of Civil Procedure governs summary judgments, and is made applicable to bankruptcy adversary proceedings by Fed. R.Bankr.P. 7056. Rule 56 provides that the court must grant summary judgment if the pleadings, depositions, answers to interrogatories, and admissions on file together with the affidavits show that there is no genuine issue of any material fact and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Fed. R.Bankr.P. 7056. “In determining whether any genuine issues of material fact exist, the record must be construed liberally in favor of the party opposing the summary judgment.” McKibben v. Chubb, 840 F.2d 1525, 1528 (10th Cir.1988) (citations omitted). However, conclusive allegations by the party opposing summary judgment are not sufficient to establish an issue of fact and defeat the motion. Id.
Pursuant to 11 U.S.C. § 523(a)(5), a debt to a spouse, former spouse, or child of the debtor, for alimony to, maintenance for, or support of such spouse or child, in connec*849tion with a separation agreement, divorce decree or other order of a court of record, is nondischargeable. “Generally, the determination of whether an obligation arising out of a divorce settlement is support is a matter of federal law, not state law.” In re Goin, 808 F.2d 1391, 1392 (10th Cir.1987) (citations omitted). Although state court decisions are to be regarded with deference, a bankruptcy court must look beyond the language of the decree to the intent of the parties and to the substance of the obligation. Id.
The Court finds that the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits show that there is no genuine issue as to any material fact. See Rule 56(c) F.R.Civ.P. The Tenth Circuit has identified four factors which are pertinent to the bankruptcy court’s determination of whether the debt is support: (1) if the agreement fails to provide explicitly for spousal support, the court may presume that the property settlement is intended for support if it appears under the circumstances that the spouse needs support; (2) when there are minor children and an imbalance of income, the payments are likely to be in the nature of support; (3) support or maintenance is indicated when the payments are made directly to the recipient and are paid in installments over a substantial period of time; and (4) an obligation that terminates on remarriage or death is indicative of an agreement for support. In re Goin, 808 F.2d at 1392-93.
In light of the pertinent factors established by the Tenth Circuit, debtor has failed to set forth specific facts showing that there is a genuine issue for trial. See Rule 56(e) F.R.Civ.P. The first factor deals with making a presumption that the property settlement is intended for support when the agreement fails to provide explicitly for spousal support. In the present case, the debt in question was explicitly denominated as support and maintenance. Likewise, the debtor has not set forth specific facts showing that there is an issue with regard to the presence of minor children or an imbalance of income. With regard to the third and fourth factors, in the present case the obligations in question required payments to be made directly to the recipient in installments over a substantial period of time, and payments were to be terminated upon the remarriage or death of the wife. The Court finds that the obligations in question are in the nature of alimony and support, and are nondischargeable pursuant to 11 U.S.C. § 523(a)(5).
The Court recognizes that the factors set forth in Goin are not the exclusive test for determining the nature of an obligation, and that the factors are not a bar to the consideration of other evidence which is clearly relevant to the ultimate issue of the parties’ intent. See In re Goodnight, 102 B.R. 799, 801-02 (D.Kan.1989). However, the debtor’s only argument which he asserts to show that the parties intended the obligation to be a property settlement instead of support is misplaced. Debtor points to the fact that the Separation Agreement provides for defendant to receive real property which contained $41,500 in equity, while debtor received real property containing $141,500 in equity. Debtor then references the portion of the Separation Agreement which provides for an “alimony judgment” in defendant’s favor in .the amount of $100,000. The Separation Agreement, which was incorporated by reference in the Divorce Decree, states in pertinent part:
4. Alimony Judgment. That husband shall give to wife an alimony judgment in the amount of $100,000.00, which alimony judgment wife shall not attempt to execute upon or in any way collect so long as husband makes regular payments when due upon the debts he has assumed under the provisions of this agreement; further, wife shall immediately forgive, release and satisfy the entire alimony judgment without any further consideration whatsoever upon husband showing due proof to wife that the said debts have been paid.
Clearly, defendant’s claim in the present case is in no way related to the “alimony judgment” set forth in the Separation Agreement. Defendant’s claim is based on *850the state court judgment for back child support and maintenance, which was clearly calculated by the state court based upon the monthly payments debtor failed to make as required under the provisions of the Separation Agreement which are set forth above.
The debtor is not disputing any facts which are relevant to a determination of whether the debt in question is in the nature of alimony or support. Rather, the debtor asserts that genuine issues for trial exist due to the following facts: debtor was not represented by counsel during the divorce proceedings; debtor was severely depressed during execution of the Separation Agreement; the divorce was uncontested; and the Decree did not recite (even though it incorporated) the essential terms of the Separation Agreement. The Court finds that the issues raised by debtor are irrelevant to a determination of discharge-ability pursuant to 11 U.S.C. § 523(a)(5).
Debtor’s Complaint prays for an order of this Court determining that all debts listed on the schedules which may be characterized as past-due child support and/or alimony “be dischargeable under the federal bankruptcy laws and the fair principles established in Long v. Calhoun, 715 F.2d 1103 (6th Cir.1983), espoused and known as the ‘Calhoun Doctrine,’ with a view towards the present financial circumstances of the plaintiff/debtor and a just resolution of the issue raised.” The debtor then devotes many pages of his briefs and affidavits urging this Court to adopt the ‘Calhoun Doctrine.’ Debtor asserts that issues remain with regard to the “changed circumstances” of the parties.
However, the Tenth Circuit has already resolved this issue. In Sylvester v. Sylvester, 865 F.2d 1164, 1166 (10th Cir.1989), the Tenth Circuit Court of Appeals states that Calhoun “... is a minority approach which we decline to follow.” The Court in Sylvester goes on to state that a “requirement that the former spouse’s present need for support or changed circumstances be analyzed in determining dischargeability finds no support in either the language or the legislative history of § 523(a)(5).” Id. “[S]uch an inquiry would put federal courts in the position of modifying state matrimonial decrees ... [w]e decline to make such an intrusion into the area of domestic relations absent a clearer congressional mandate to do so.” Id.
Debtor also argues that defendant’s disclaimer of her interest in certain real property owned by the debtor amounted to an assignment under § 523(a)(5)(A). Section 523(a)(5)(A) provides that a debt for alimony, maintenance or support is not non-dischargeable to the extent that “such debt is assigned to another entity, voluntarily, by operation of law, or otherwise_” Debtor has cited no authority for the proposition that a spouse’s disclaimer of an interest in real property, which interest arose due to his/her alimony/child support judgment, is tantamount to an assignment of the debt for alimony, maintenance or support. This Court is unaware of any authority for this interpretation of § 523(a)(5)(A), and finds that debtor’s argument is without merit. Debtor also argues that the terms of the Separation Agreement have been altered either through oral agreements between the parties or through defendant’s waiver or disclaimer. Not only has debtor already tried these very issues in state court, but the Court finds that the reasoning set forth in Sylvester would likewise apply to the issues debtor is raising to show that various factors have altered the parties original agreement. As with the Calhoun doctrine, “such an inquiry would put federal courts in the position of modifying state matrimonial decrees.”
The Court finds that the debts resulting from the obligations denominated support and alimony pursuant to the provisions of the Separation Agreement which are set out in the Court’s FINDINGS OF FACT are nondischargeable pursuant to 11 U.S.C. § 523(a)(5). Although the debtor’s Complaint was filed prior to the filing of defendant’s proof of claim in the present case, the debtor has raised several arguments in his subsequent pleadings that go to the question of the validity of defendant’s proof of claim. For example, debtor argues that defendant’s judgment in state court should be credited due to a forced sale of debtor’s property. Debtor also disputes the calculation of the amounts currently due.
*851The Court is deciding the dischargeability of the debt in question, not the validity of defendant’s proof of claim. The Bankruptcy Code provides a procedure to dispute the validity of a claim. Section 523 has no bearing on whether a claim is allowable, it only determines whether a claim is dischargeable. The issue of whether defendant’s claim should be allowed as filed is not presently before the Court and the Court is not ruling on debtor’s arguments which dispute the validity of defendant’s claim. The issue of whether defendant’s claim should be allowed must be litigated under the Code provisions applicable to objections to claims.
IT IS THEREFORE, BY THE COURT, ORDERED That the debts arising from obligations denominated as alimony and support in the Separation Agreement be and the same are hereby declared nondis-chargeable.
IT IS FURTHER, BY THE COURT, ORDERED That defendant’s motion for summary judgment be and the same is hereby GRANTED.
This Memorandum shall constitute my findings of fact and conclusions of law under Rule 7052 of the Federal Rules of Bankruptcy Procedure and Rule 52(a) of the Federal Rules of Civil Procedure. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491557/ | ORDER ON MOTION FOR AN ORDER REOPENING THE RECORD TO MAKE ADDITIONAL FINDINGS OF FACT AND TO AMEND THE ORDER ON MOTION FOR SUMMARY JUDGMENT
ALEXANDER L. PASKAY, Chief Judge.
THESE ARE non-consolidated Chapter 11 cases involving Hillsborough Holdings Corporation (now known as Walter Industries) and its 32 wholly-owned subsidiaries collectively referred to as Debtors. The matter under consideration is a Motion for an Order Reopening the Record to Make Additional Findings of Fact and to Amend the Order on Motion for Summary Judgment. In order to put the Motion in an easily understandable context a brief recap of the procedural history of this adversary proceeding should be helpful.
On January 2, 1990, the Debtors instituted this adversary proceeding by filing a two Count Complaint naming, inter alia, Celotex Corporation (Celotex) and numerous other defendants collectively referred to as Asbestos Claimants. In Count I, the Debtors sought declaratory relief, specifically an order declaring that the Asbestos Claimants are not entitled to pierce the corporate veil of Celotex and in turn hold Jim Walter Corporation (JWC), a non-debt- or, the predecessor of Hillsborough Holdings Corporation and the former parent of the 32 wholly-owned subsidiaries involved in these Chapter 11 cases, liable to the claims of the Asbestos Claimants asserted against Celotex.
In Count II, the Debtors sought a declaration that the leveraged buy out (LBO) which transferred the ownership of all subsidiaries from JWC to HHC, a newly-created entity which ultimately became the parent of all subsidiaries of JWC except Celo-tex, cannot be set aside as a fraudulent transfer.
The parties promptly embarked on extensive discovery when Celotex filed its own Chapter 11 case, which, of course, immediately brought any further action vis-a-vis Celotex to a screeching halt by virtue of the imposition of the automatic stay pursuant to § 362(a) of the Bankruptcy Code. The Debtors, having been confident that they will prevail on the veil piercing issue as a matter of law based on the undisputed facts, sought and obtained a modification of the automatic stay from the Celotex Court for the limited purpose of filing a Motion for Summary Judgment related to the veil piercing issue.
In due course, the Debtors filed their Motion which was heard, argued, and briefed extensively. On August 26, 1992, this Court issued its Memorandum Opinion and denied the Motion. In its Order, this Court did find several facts to be without dispute but denied the Motion because this Court was satisfied that the inference which might be drawn from these undisputed facts would not permit the resolution of the issue in favor of the Debtors as a matter of law by a summary judgment. In its opinion, this Court specifically pointed out areas which required the full treatment by trial relating to the veil piercing issue only. These were: 1) the precise manner of the operation of the cash management system; 2) the record-keeping of the inter-corporate transactions between JWC and its subsidiaries, specifically with Celotex; and most importantly, 3) the extent of the control exercised by JWC over the affairs of Celotex, especially the extent of JWC’s involvement in the decision-making process of the divestiture program of Celotex.
Specifically, this Court held that it is important to determine, and therefore, it is necessary to receive evidence on the issue of whether or not the sales by Celotex of its divisions were done for legitimate business purposes or whether they were done *1014solely for the purpose of denuding Celotex of assets in order to keep those assets out of the reach of the Asbestos Claimants and to funnel the proceeds of these sales to JWC. In addition, this Court also found that it is essential to the resolution of the veil piercing issue to resolve whether or not the transfer of funds derived from the divestiture of Celotex’s assets and those made in connection with the cash management system were, in fact, repayment of bona fide loans, loans which were properly documented, or nothing more than a return of equity to JWC.
The present Motion filed by the Debtors is based on F.R.B.P. 7052(b) and 7056(d). In their Motion, the Debtors seek an Order: 1) finding that the facts recited in the August 26 Order on pages 5 through 13 are without dispute, and 2) reopening the record to take additional evidence pursuant to F.R.B.P. 9017 and Fed.R.Civ.Pro. 43(e). This part of the Motion is based on the proposition that additional evidence would enable this Court to make additional findings and amend the August 26 Order and grant the Debtors’ Motion for Summary Judgment.
Concerning the Motion in which the Debtors seek an order finding that the facts set forth on pages 5 through 13 are without dispute, this Court is satisfied that to state additional findings is not warranted and it is clearly unneeded and not necessary. This is so because to the extent the facts recited on those pages were facts, as distinguished from contentions, this Court has already determined that those facts are indeed without dispute. It is equally true, however, that there might very well be other facts which are relevant to the issue of piercing the corporate veil of Celotex, for instance, facts tending to show (1) whether or not the disposition of assets of Celotex was based on a valid economic basis and fully justified by the prevailing market conditions and, (2) whether or not the utilization of the proceeds in fact was not repayment of valid obligations and resulted in rendering Celotex insolvent and without sufficient assets to respond to the claims of the Asbestos Claimants. For the reasons stated, this Court is satisfied that there is no valid reason to amend the order concerning the facts that have already been found to be without dispute which are recited on pages 5 to 13 of the August 26, 1992 Order.
This leaves for consideration the Motion to the extent it is based on Fed. R.Civ.Pro. 43(e). This Rule in relevant part provides as follows:
Rule 43. Taking of Testimony
(e) evidence on Motions, when a motion is based on facts not appearing of record the court may hear the matter on affidavits presented by the respective parties, but the court may direct that the matter be heard wholly or partly on oral testimony or deposition.
This Court is not oblivious to the authorities that indicate that it is appropriate to receive testimony in conjunction with the Motion For Summary Judgment pursuant to Fed.R.Civ.Pro. 43(e). Argus, Inc. v. Eastman Kodak Co., 612 F.Supp. 904, 908 (S.D.N.Y.1985) aff'd, 801 F.2d 38 (2d Cir.1986), cert. denied, 479 U.S. 1088, 107 S.Ct. 1295, 94 L.Ed.2d 151 (1987). However, the difficulty with the proposition urged by the Debtors is evident when one considers the plain language of the Rule itself. It appears at first blush that Fed.R.Civ.Pro. 43 is not incorporated in Part VII of the F.R.B.P. and therefore, is not applicable to an adversary proceeding. It is clear that F.R.B.P. 9017 makes Rule 43 applicable to proceedings in cases filed under the Code, and, by implication, would also apply to adversary proceedings. However, even though this Rule is arguably applicable to adversary proceedings, the plain language of the Rule indicates without any doubt that it is not applicable to Motions For Summary Judgment. This is so because the Rule provides that if the Motion is based on facts which are not part of the record it may be appropriate to hear the matter on affidavits or the court may direct that the matter be heard by oral testimony and on depositions.
In the present instance, the Debtors’ Motion was solely based on facts as *1015they appear from the record which, according to the Debtors, are without dispute. To introduce new facts by deposition or live testimony in order to supplement the record in a Motion For Summary Judgment will be, in fact, a new motion based on a different record if additional affidavits and depositions are submitted for consideration and, to the extent this Court is willing to receive live testimony, this would be contrary to the very purpose of the Summary Judgment Rule which was designed to eliminate the need for trial if the controversy could be resolved on the cold record without testimony of witnesses. Thus, it is evident that even if Fed.R.Civ.Pro. 43(e) applies to proceedings in bankruptcy, it is not applicable in the present instance. In sum, this Court is satisfied that the request of the Debtors to reopen the record in order to receive live testimony is without merit and should be denied.
One last comment is in Order. As noted earlier, Celotex is itself a Debtor involved in a Chapter 11 case, and the automatic stay in that Chapter 11 case was modified only to the limited extent to permit the Debtors to file and to argue the Motion For Summary Judgment. Since this Court concluded that this controversy, i.e., the veil piercing issue, cannot be resolved by summary judgment, Celotex is not in a position to proceed any further in this adversary proceeding unless the Debtors or other parties of interest, including the Asbestos Claimants, obtain further modification of the adversary proceeding from the Judge in charge of the Chapter 11 case of Celo-tex.
Accordingly, it is
ORDERED, ADJUDGED AND DECREED that the Motion For An Order Reopening The Record To Make Additional Findings Of Fact And To Amend the Order On Motion for Summary Judgment is hereby denied.
DONE AND ORDERED. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491559/ | MEMORANDUM OF DECISION
ALFRED C. HAGAN, Chief Judge.
U.S. Bancorp (“Bank”) renews its motion for relief from the Section 362 automatic stay for cause based on lack of adequate protection, under the provisions of 11 U.S.C. § 362(d)(1).
Briefly restating the pertinent facts, the property is the Bonner Mall located in Bonner County, Idaho. The mall constitutes the paramount asset in this chapter ll reorganization attempt. A previous order allowing the Bank relief from the automatic stay is now on appeal; however, even though a portion of the proceedings have been stayed pending the appeal, the Bank is entitled to consideration of its motion. If the Bank is not now adequately protected, the amount necessary to afford the Bank such adequate protection should be determined.1
The Bank is presently receiving all rents from the mall tenants. In the previous stay relief proceedings a finding was entered valuing the mall at $3.2 million. This, and other relevant findings of the previous hearings on the subject, will be considered in the resolution of the present adequate protection issue.
The central issues thus are whether the rents are sufficient to cover the expenses and necessary capital improvements accruing to the mall, and whether the mall is depreciating, and if so, the amount of the depreciation. If a shortfall of rent versus expenses occurs, or if the property is depreciating, such amounts would thus determine the necessary adequate protection to be furnished by the debtor to the Bank.
The Bank contends its projected budget for the remainder of 1992, and for 1993, indicates a potential shortfall. Two facts form the primary basis of the Bank’s contention the property is depreciating. The Bonner County Assessor, for the 1992 assessment, has reduced the value of the mall some $630,000.00 from the 1991 assessed value; and the debtor is taking a depreciation factor as a deduction each year on its income tax return.
In contrast, the debtor’s proposed budgets forecast a surplus of rents over expenses. The debtor presented evidence that the mall is not depreciating, through either economic or functional obsolescence, and that the reason for the reduced value was the fact the assessor determines value each year based primarily on the occupancy of the mall and the resulting accruing rent factor. In addition to these contentions, *52the debtor offers to establish a reserve fund of $50,000.00 upon which the Bank could draw in the event a shortfall of rentals with which to pay expenses occurs, and would not object to affording the Bank a $10,000.00 per month adequate protection payment beginning in February of 1993 payable out of the rental income.
The debtor has the burden of proof in showing the existence of adequate protection. 11 U.S.C. § 362(g)(2). The debtor has satisfied this burden as far as the expense issue is concerned. No shortfall has yet occurred, considering even the extensive repairs made to portions of the roof of the mall. The analysis of Thomas H. Richardson and other witnesses of the debtor, including Mark Absec and Orville Barnes, concerning the projected income and expenses of the mall indicates a shortfall is not probable.
The debtor has further shown, through expert testimony, the lack of any economic obsolescence or depreciation.2 It appears the annual valuation done by the assessor’s office is, indeed, highly dependent upon the occupancy factor since such greatly influences the income factor upon which county assessors usually depend for their valuation of commercial property. The fact the debtor includes an annual depreciation factor for the mall in its income tax returns is further not conclusive the mall is actually depreciating, nor at what rate such depreciation might be occurring. The Bank has introduced no independent evidence on the depreciation issue, but argues for a finding the mall is depreciating at the rate of $630,-000.00 per year based on the assessor’s reduction in value, which position is not realistic.
Based on the testimony of debtor’s witnesses, it is found the mall is not declining in value despite the lower value established by the Bonner County Assessor and the fact the debtor includes a depreciation factor in its annual tax returns. Neither fact is conclusive on the issue. While such facts are evidence of reduction in value, the positive evidence afforded by the testimony of the debtor’s witnesses leads to the finding of no reduction at the present time.
It is thus concluded the Bank is adequately protected. The debtor will be required, however, to establish the $50,000.00 shortfall fund as offered. The order denying the motion for stay relief based on lack of adequate protection will be denied without prejudice to the Bank. A separate order will be entered.
Dated this 8th day of October, 1992.
. Under the definition in 11 U.S.C. § 361(1) and (2), adequate protection is necessary to the extent the section 362 stay "... results in a decrease in the value of such entity’s interest in such property.”
. Sometimes called “external" obsolescence, as opposed to functional obsolescence. See, e.g., In re Park Avenue Partners Limited Partnership, 95 B.R. 605, 611 (Bankr.E.D.Wis.1988). | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491560/ | FINDING
HAROLD F. WHITE, Bankruptcy Judge.
This matter came on for trial on July 15, 1991 on the Second Amended and Supplemental Complaint filed by the debtor, Fred F. Somma, M.D., and his non-debtor spouse, Sara Jane Somma, against the United States of America, Internal Revenue Service, the United States Attorney and Harold Corzin, the Chapter 7 Trustee of the Bankruptcy Estate (“the Trustee”).
BACKGROUND AND FINDINGS
1. Beginning in the late 1970’s, the debtor, Fred F. Somma, M.D., began receiving money by alleged loans from the “Fred F. Somma and Associates, Inc. Amended *134and Restated Pension Trust” (“the Pension Plan”) and the Fred F. Somma & Assoc. Inc. Profit Sharing Plan” (“the Profit Sharing Plan”). Both of these plans were maintained by Fred F. Somma & Assoc., Inc. (“the Company”). Debtor was the sole stockholder of the Company, one of the participants in both plans, and the Trustee of both of the plans.
2. Debtor never repaid any interest or principal on these alleged loans, nor did the plans, which were administered by Thompson Plan Administration Company, ever institute an action to recover the money.
3. In 1984, the I.R.S. audited the Pension Plan. The I.R.S. determined that the money which was allegedly loaned should be treated as distributions to debtor. As a result of this audit, the debtor was required to amend his 1981 and 1982 individual income tax returns to include $122,000 in income for 1981 and $10,000 in income for 1982.
4. In 1985, the I.R.S. further audited the Pension Plan and the Profit Sharing Plan and required debtor to further amend his 1981 and 1982 individual income tax returns to include $43,852.44 in income for 1981 and $97,000 in income for 1982. Since the I.R.S. audits only went back to 1981, they did not include ten alleged loans which occurred between 1978 and 1980 by which the debtor received a total of $183,000 from the Pension Plan, evidenced by notes, as follows: (Note, $13,000, dated October 10, 1978; Note, $5,000, dated November 11, 1978; Note, $60,000, dated January 18, 1980; Note, $45,000, dated July 7, 1980; Note, $5,000, dated August 9, 1980; Note, $6,000, dated August 18, 1980; Note, $10,-000, dated September 18, 1980; Note, $6,000, dated November 10, 1980; Note, $9,000, dated November 25, 1980; and Note, $24,000, dated November 28, 1980).
5. On May 31, 1985, debtor filed a petition in bankruptcy with this court (Case No. 585-648). Neither the debts involving the Pension. Plan, nor debtor’s interest in the Pension Plan, were included in debtor’s schedules.
6. On November 7, 1985, the U.S. Bankruptcy Court entered an order discharging debtor. There were no objections to debt- or’s discharge, nor have there been any actions to determine the dischargeability of the debts represented by the ten notes.
7. During 1986 the Pension Plan was terminated and its assets were transferred ' into the Profit Sharing Plan. The ten notes were never repaid and remained on the books of the Profit Sharing Plan. The first of the notes became payable in 1986, and the last of the notes became payable in 1988. The $183,000 was never included in debtors’ gross income. The Company continues to carry the notes as “loans” on its books and records, along with the debtor’s vested interest in the plans.
8. On April 20, 1990, debtor and his non-debtor spouse filed this adversary proceeding requesting that the court render a declaratory judgment determining the amount of pre-petition taxes, penalties and interest, and requiring the Trustee to pay those sums to the I.R.S.
9. On December 14, 1990, the I.R.S. sent an examination report (“the report”) to the debtor. The report proposed the assessment of a total of $150,875 in taxes and penalties, beginning in 1986 through 1989, against debtor on the money evidenced by the ten notes, as constituting prohibited transactions pursuant to Title 26 U.S.C. § 4975(c). (See Docket No. 49.) No notice of deficiency under Title 26 U.S.C. § 6212 has been mailed with respect to these taxes and penalties, and no assessment has been made. The report is a “proposed adjustment” not a final determination of the IRS. The IRS has not filed a proof of claim or request for payment for these taxes and penalties.
10. On February 14, 1991, debtor filed a protest letter with the I.R.S. in response to the report. The debtor took this administrative action under the Internal Revenue Code in order to protest the proposed adjustment to his taxes. (See Transcript of Proceedings filed August 8, 1991, Docket No. 51.)
11. On March 1, 1991, plaintiffs filed their Second Amended and Supplemental Complaint including an additional fifth *135count concerning the taxes and penalties assessed on the money evidenced by the ten notes. In that count, the plaintiffs request that this court render a declaratory judgment determining whether their liability for the post-petition taxes and penalties is barred by debtor’s discharge; whether the assessment is barred by the doctrines of estoppel and/or waiver; and whether the taxes and penalties should be collected, if at all, from the estate rather than from the debtor. (See Count Five of the Second Amended and Supplemental Complaint and Exhibit “H” attached to the complaint.)
12. On July 15,1991, the debtor and the United States of America appeared in a trial before this court and settled the first four counts of the complaint in a Joint Stipulation of Facts filed July 15, 1991. Among other things, the parties stipulated that debtor owed $1,620.36 as a pre-petition claim based upon an assessment pursuant to Title 26 U.S.C. § 6672 in connection with the Company and that debtor owed $1,037.99 arising from the pre-petition interest on his 1982 personal federal income tax liability. However, the IRS moved to dismiss the plaintiffs’ fifth count, arguing that this court lacked jurisdiction over the matters involved in that count. The court took the motion under advisement.
13. On October 24, 1991, based on the July 15, 1991 Joint Stipulation of Facts, this court ordered that the trustee pay the IRS $1,620.36 constituting the assessment in connection with the Company and $1,037.99 constituting the pre-petition interest accrued on the debtor’s 1982 personal federal income tax liability.
14. The following proofs of claim have been filed either by, or on behalf of, the IRS: On August 28, 1985, the IRS filed a proof of claim in the amount of $29,349.69 in respect to the debtor’s 1981 federal income year; on November 8, 1985, the debt- or filed a proof of claim on behalf of the IRS in the amount of $106,000 in respect to the debtor’s 1981 and 1982 federal income tax years; on August 20, 1986, the debtor filed a proof of claim on behalf of the IRS for an “unknown” amount for taxes which are owed by Fred F. Somma & Assoc., Inc.; and on August 27, 1990, the IRS filed a proof of claim in the amount of $34,749.01 in respect to the debtor’s 1982 federal income tax year and an assessment made under 26 U.S.C. § 6672 in connection with Fred F. Somma & Associates, Inc.
15.On May 31, 1985, there was a deficiency in tax due in respect to the debtor’s 1982 federal income tax year in the amount of $17,919.00, plus interest in the amount of $8,085.42. The following payments or credits were made towards the debtor’s 1982 federal income tax liability since May 31, 1985: $2,842.51 on April 15, 1987; $262.26 on July’ 3, 1989; $200 on July 23, 1989; and $21,661.66 on July 5, 1990. As of July 15, 1991, the balance due on the Internal Revenue Service’s claim against the debtor’s estate for 1982 federal income taxes is $0.00 for taxes and $1,037.99 for pre-petition interest.
ISSUES
Does this court have jurisdiction over the fifth count of the plaintiffs’ complaint? Were the ten notes discharged on November 7, 1985 when the court entered debtor’s discharge?
CONCLUSIONS OF LAW
As a result of the parties’ Joint Stipulation of Facts and this court’s order of October 24, 1991 settling the first four counts of the complaint, the only issues remaining for this court are found in the fifth count.
The IRS argues that the alleged loans were prohibited transactions and fall within the purview of Title 26 U.S.C. § 4975 and that debtor is liable pursuant to Title U.S.C. § 6651(a) for failure to file a Form 5330 Return of Excise Taxes Related to Employee Benefit Plans. The plaintiffs argue that the ten notes represented bona fide “loans” which were discharged in bankruptcy on November 7, 1985 and that the IRS is thus prohibited from imposing taxes and penalties based upon discharged debts. The IRS argues that this matter involves taxes and penalties which arose “post-petition” thus depriving this court of jurisdiction. The IRS further argues that the ten alleged loans were in fact never *136discharged because debtor failed to list them in his schedules.
The linchpin of both the plaintiffs’ and the IRS’s arguments is the discharge-ability of these ten alleged loans. The court clearly has jurisdiction over matters of dischargeability pursuant to Title 28 U.S.C. § 157(b)(2)(I). Pursuant to Title 11 U.S.C. § 523(a)(3)(A), a debt is discharged unless it was not listed or scheduled and the creditor has had no notice or actual knowledge of the case in order to file a timely proof of claim. Debtor failed to include these ten alleged loans in his schedules; however, it cannot be said that the IRS had no notice of the bankruptcy. The IRS has had both actual and constructive notice of the bankruptcy. The IRS has filed, or has had filed on its behalf, at least four proofs of claim in this case. (Finding No. 14) The IRS had knowledge of the plans, has conducted audits of the plans, has assessed deficiencies in the plans going back to 1981 and has required debtor to amend his income tax returns to reflect the same. (Findings Nos. 3, 4 and 15) Considering the IRS’s knowledge of both this bankruptcy and the debtor’s other deficiencies relating to the plans, this court concludes that the IRS was put on notice that there may have been further deficiencies related to the plans. However, the IRS apparently waited until 1990 to conduct a further audit of the plans (going back to 1978), and has not claimed an inability to discover the alleged taxes at an earlier date. The IRS has never filed a proof of claim in this case with regard to this alleged excise tax, nor has it filed a nondis-chargeability complaint in these proceedings. (Findings Nos. 6 and 9) The IRS has not alleged any fraud or false representations which would make these alleged loans nondischargeable pursuant to other provisions in Title 11 U.S.C. § 523. (See Title 11 U.S.C. § 523(a)(2)(A).) Nor was there anything in the testimony to suggest fraud or false representations. (See Transcript of Proceedings filed August 8, 1991, Docket No. 51.) Therefore, the court concludes that if these 10 alleged loans were in fact bona fide loans as the debtor contends, then they would have been discharged in debtor’s bankruptcy proceedings provided that the debtor has complied with other relevant provisions of the Federal Bankruptcy Code.
However, the IRS also claims that the discharge is irrelevant and that the alleged excise tax did not accrue until debtor failed to repay the notes when they became due starting in 1986, thus making the excise tax post-petition and outside of this court’s jurisdiction.
After a careful consideration of the matter, the court concludes that the pivotal issue in this case, determinable with reference to Title 26 U.S.C. § 4975, is whether or not the ten transactions were in fact “loans” as the debtor claims or whether they were actually a distribution to a “disqualified person.” If they were distributions to a “disqualified person”, they should have been reported as income and were taxable at the time of withdrawal. However, this is a tax question which was set forth in the IRS’s examination report. (See Plaintiff’s Exhibit A.) On February 14, 1991, the debtor protested the proposed assessment. (See Plaintiff’s Exhibit E.) Therefore, there is currently a factual determination to be made as to whether or not these ten transactions were actually loans or whether they were in fact distributions to income. It is apparent to this court that this a tax question which should be decided through the IRS’s administrative procedures and/or the United States Tax Courts which have the expertise to decide these matters.
Therefore, for these reasons, the court sustains the IRS’s motion that this court does not have jurisdiction to make a determination pursuant to Title 26 U.S.C. § 4975. However, this court retains the jurisdiction to determine the dischargeability of any tax debts of debtor resulting from the tax court’s determination in this matter. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491561/ | OPINION
VOLINN, Bankruptcy Judge:
OVERVIEW
On March 8, 1990, Debtor, Willie Tyler, obtained a default judgment substantially reducing a secured claim filed by Appellant, Commonwealth Mortgage Company of America (CMC) in August 1987. In May 1991, CMC moved successfully to reopen the case. Thereafter, alleging fraud by Tyler, CMC moved the court to reconsider the 1990 ruling and award sanctions against the debtor.. In July 1991, the court denied the motion in its entirety and awarded attorney’s fees to the debtor. CMC appeals. We affirm.
BACKGROUND
Willie Tyler filed the first of two petitions under Chapter 13 in January 1985 and listed CMC as one of his creditors. The bankruptcy court dismissed the case in February 1987. On June 3, 1987, Tyler filed a second Chapter 13 petition. On August 31 of the same year, CMC filed a $24,864.70 proof of claim as a secured creditor.
As evidenced by the record, some confusion existed between Tyler and CMC regarding post-petition payments to the creditor. On November 23, 1987, Max Cline, Tyler’s counsel, wrote to CMC at its Portland, Oregon address, listed on the proof of claim, stating that he was re-submitting his client’s November payment which had been returned by CMC, noting that Tyler had made preceding payments for July, August, September and October. There was no response.
*210The record is silent regarding what may have transpired between the parties during the subsequent two years. On September 14, 1989, Lucinda Anderson, from the offices of Max Cline, wrote to CMC at the Portland address to request a complete accounting on Tyler’s loan since inception. On September 25, 1989, a CMC bankruptcy analyst acknowledged receipt of the letter by a reply indicating that the debtor would have to pay a $75.00 charge to obtain a complete accounting. Because the September 25 letter specified a Houston, Texas mailing address, on October 10, 1989, Anderson sent a $75.00 check on behalf of Debtor to CMC in Houston. On November 30, 1989, Anderson notified the CMC bankruptcy analyst by letter that she had yet to receive the accounting. On December 19, 1989, the analyst sent a copy of a November 1, 1989 letter with a ledger showing an accounting since the filing of Tyler’s second Chapter 13 petition.1 The record does not show any further communication between Anderson and CMC.
On January 25, 1990, the debtor, through his counsel, Anderson, filed and served an objection to CMC’s claim. Because CMC listed the Portland, Oregon address on the proof of claim and had not indicated to the court or any party in interest that notice should be sent elsewhere, CMC was served at the Portland address in conformity with Local Rule 740-72 of the Northern District of California. Tyler notified CMC that (a) it had thirty days to request a hearing on the objection and (b) if it did not respond, the debtor would move for a default judgment. CMC did not respond. On March 8, 1990, Tyler filed a request for and obtained, without a hearing, a default judgment which disallowed $13,285.93 of CMC’s claim, leaving a net allowed claim of $11,-598.77.
Counsel for Appellant indicates that one Maximilian Hopkins, who represented himself as counsel for the debtor, had contacted CMC in late 1990 to indicate that he now represented Tyler. Counsel for CMC states that several letters passed between him and Hopkins, and between Hopkins and CMC, over the next two months. The record shows that on January 3, 1991, CMC’s counsel forwarded a pre-petition accounting of the Tyler loan to Hopkins. The accounting reflects three kinds of transactions: (1) payments made by Tyler and their application to an appropriate time period under the contract with CMC; (2) the assessment of late charges; and (3) the movement of monies into and out of a “Suspense Account.” The accounting provides no information regarding the balance on the account at any time. Apparently, after receiving the accounting, Hopkins had no further contact with Appellant.
Four and one-half months later, on May 24, Appellant moved (1) to re-open the Chapter 13, (2) to reconsider the disallowance of its claim, (3) to revoke the discharge of the claim, and (4) for sanctions *211against the debtor. Although it made oblique reference to Rule 60(b)(1), (3), and (6) of the Federal Rules of Civil Procedure,3 CMC’s motion rested entirely upon a fraud argument as the basis for the relief sought.
According to Appellant, the debtor had actual notice of CMC’s change of address. Tyler thus fraudulently obtained a default judgment by sending the notice of objection to the Portland address, thereby ensuring that CMC would not receive the notice soon enough to respond with a timely request for a hearing.
The court granted the motion to re-open on June 17, 1991. On July 5, 1991, the debtor filed an opposition to the motion for reconsideration. CMC contends that it did not receive the opposition until July 9. At the July 11, 1991 hearing, the court, with the two accountings before it, concluded that: (1) Tyler’s compliance with Local Rule 740-7 provided a basis for denying the motion to reconsider; (2) whatever delay that occurred between Tyler’s sending of the notice of objection and a response by CMC was due to the failure of the latter’s Portland office to forward the notice to Houston; (3) the motion to reconsider was untimely under the one year requirement of Rule 60(b)(1), (2) or (3); (4) because the debtor had complied with Local Rule 740-7 and sent the notice of objection to the address on the proof of claim, CMC had not established a case of fraud; (5) CMC had failed to establish any other basis for invoking Rule 60(b); and (6) CMC’s motion was based on neither a reasonable investigation into the law nor on sound factual grounds or allegations, and thus violated Federal Rule of Bankruptcy Procedure 9011.4 Appellant’s counsel having acknowledged that he had neither briefed nor been aware of Local Rule 740-7, the court, in its oral ruling, denied CMC’s motion, awarded sanctions, and ordered the debt- or’s counsel to submit time sheets. On October 5, 1991, the debtor’s counsel served and filed the proposed order and time sheets.
The court entered the order on October 10, 1991. The order specified, inter alia, that as set forth in the July 11 oral ruling, the amount indicated on the time sheets would constitute the award unless CMC’s counsel submitted an objection within twenty days. Appellant filed an objection to the proposed order on October 15 and an opposition to the time sheets on October 25. CMC failed, however, to request a hearing on its opposition to the amount of attorney’s fees, but chose instead to file a notice of appeal of the October 10 order.
ISSUES PRESENTED
This appeal presents a question of whether the trial court erred in (1) denying Appellant’s motion to reconsider the debtor’s default judgment and (2) awarding sanctions to the debtor.
STANDARD OF REVIEW
An appellate court reviews the denial of a motion to reconsider for abuse of discretion. Partington v. Gedan, 961 F.2d *212852, 858 (9th Cir.1992). A grant of sanctions is subject to the same standard of review. U.S. ex rel. Robinson Rancheria Citizens Council v. Borneo, Inc., 971 F.2d 244, 248 (9th Cir.1992).
DISCUSSION
Appellant’s twelve issues or assertions of error may be condensed to the following: the bankruptcy court erred in (1) denying the motion to reconsider because (a) it was not timely filed and (b) the debtor complied with Local Rule 740-7 and such compliance, in light of Appellant’s non-response and failure to address the rule in its motion, was conclusive; (2) finding no evidence or suggestion of fraud by the debtor; (3) denying sanctions against the debtor; (4) finding that Appellant’s motion was based on neither sound factual ground nor allegations and awarding sanctions in the amount on the time sheets submitted by the debt- or’s counsel against Appellant; and (5) ruling that Local Rule 740-7(b) does not apply in contested matters, thus allowing consideration of the debtor’s late filed response to the motion.
Appellant presents an intricate procedural argument for overturning the bankruptcy court’s decision. CMC’s own procedural shortcomings, however, are at odds with the argument. As the trial court determined, Tyler’s compliance with Local Rule 740-7 was appropriate and warrants denial of Appellant’s motion for reconsideration and revocation of the debtor’s discharge. The debtor complied with the requirements of Local Rule 740-7(c), including sending notice of the objection to CMC’s claim to the Portland address listed on the proof of claim.
CMC neglected to notify the bankruptcy court of a change of address, assuming there was such a change. Appellant did not give the debtor or his counsel reason to believe that the company had no offices in Portland or that it could receive notice only in Houston. Despite CMC’s assertion that it did not receive notice of the debtor’s objection until after the thirty day period had expired, the record shows that previous mailings sent from the debtor’s counsel to CMC at the Portland address reached the creditor’s Houston office promptly. But in the case of this particular objection, CMC failed to respond to the debtor’s objection to the claim within the thirty day period specified in the local rule. In any event, CMC’s counsel admitted that he was unaware of Local Rule 740-7 when he prepared the motion for reconsideration. Thus the record is replete with various incidents of Appellant’s non-responsiveness to communications or court rules without fault on the part of the debtor.
As to the fraud, Appellant contends that there was no basis to conclude that it did not occur. However, Anderson’s declaration in opposition recounts in some detail the results of her personal investigation of the amount owing based on the debtor’s records and her efforts to obtain relevant information from Appellant. The amount recommended for allowance was the result of such investigation. On the record before us, there is no evidence of overreaching or fraud.
Appellant contends that the court incorrectly stated that Local Rule 740-7’s time line for a response to a motion was inapplicable. Assuming the court was incorrect in this respect, the record does not show that the court relied on the response; nor does Appellant point out specifically how it was prejudiced.
Invoking Bankruptcy Rule 90245, Appellant argues that the trial court erred in ruling that the motion for reconsideration, filed approximately fourteen months after the entry of the default judgment, was untimely. Were this a non-bankruptcy case, the one year time limitation of Rule 60(b) would constrain the trial court to deny a motion filed fourteen months after the entry of a default judgment. Bankruptcy Rule 9024, however, removes that *213constraint as to a judgment disallowing a claim. Appellant could have raised the Rule 9024 issue at the July 11, 1991 hearing, but neglected to do so. Ninth Circuit courts typically decline to consider such issues except when either: (1) review is necessary to prevent a miscarriage of. justice; (2) the law governing the matter has changed during the pendency of the appeal; or (3) the issue is one of law and either the record has been fully developed or the issue does not depend on the factual record. United States v. Reyes-Alvarado, 963 F.2d 1184, 1189 (9th Cir.1992).
Here, of the three exceptions only the miscarriage of justice argument would apply. While the case was decided on procedural grounds, Appellant has produced little on the record to indicate that this ground applies. Only the two accountings sent by CMC to Anderson and Hopkins present the possibility of an injustice. The accounting sent to Hopkins, however, does not qualify because it is unclear. It provides no explanation, for example, for why every late charge assessed is not a multiple of $50.62, the amount labeled as “LATE CHARGE” in the heading on the first page of the document. Nowhere does the document indicate an account balance. Finally, this allegedly complete accounting was followed by the filing of Tyler’s second Chapter 13 petition. The same ambiguities plague the post-petition accounting which CMC supplied in response to Anderson’s request. Despite CMC’s vehement assertions that Tyler obtained his default judgment through fraud, the record does not provide any basis for concluding that the trial court’s decision visited an injustice upon Appellant.
Appellant for the first time fashions an excusable neglect argument as justification for a reconsideration. Application of the standard for reconsideration of arguments first presented on appeal precludes CMC from presenting this issue since it was not raised at the trial court.
Appellant’s counsel’s actions and the record before us warranted the trial court’s granting sanctions. Bankruptcy Rule 9011, fn. 3 supra, makes clear that the trial court, on its own initiative, may impose sanctions to include a reasonable attorney’s fee. The trial court found that the record shows no basis for Appellant’s fraud argument. Appellant’s newly raised excusable neglect contention further supports the court’s conclusion that the motion for reconsideration was not sufficiently well grounded. Finally, counsel’s admission of ignorance regarding Local Rule 740-7 fits squarely the behavior which Rule 9011 seeks to deter. The trial court’s October 10, 1991 order indicates that Appellant had twenty days from the filing of the debtor’s counsel’s time sheets to file an objection. CMC filed a Response to Debt- or’s Fee Itemization within the twenty day period, but failed to request a hearing on the matter. Instead, Appellant chose to file a notice of appeal of the October 10 order. Appellant misapprehends the sanctions provision in that order. As a conditional provision, the award of sanctions would materialize as a specific dollar amount only after Appellant had the opportunity to object. Consequently, because Appellant’s notice of appeal applies to the conditional award and not to the dollar amount, the Panel need not entertain an argument regarding the appropriateness of the actual amount awarded. Further, we must conclude that the trial court committed no abuse of discretion in declining to reconsider the denial of Appellant’s motion for sanctions against the debtor.
CONCLUSION
Appellant’s procedural errors have necessitated this appeal. Regardless, Appellant argues that the trial court abused its discretion by failing to overlook those errors in ruling on a motion for reconsideration. The record fails to disclose any basis for the Panel to conclude that there was such abuse. Accordingly, we AFFIRM.
. The debtor filed his first Chapter 13 petition on January 2, 1985. This was dismissed on February 26, 1987. He filed his second Chapter 13 petition on June 3, 1987.
. Local Rule 740-7, headlined Contested Matters, provides:
(b) Response to Contested Matters. Unless otherwise ordered for good cause shown, no responsive pleading to ... an objection to a claim is required. In all other contested matters, a responsive pleading or statement of no opposition is required. The responsive pleading or statement of no opposition shall be served and filed no less than 14 days before the date of the hearing....
(c) Default Order Without Hearing.
(i) A party in interest may file, without setting a hearing:
(A) An objection to a claim ...
(ii) The objection ... shall indicate that:
(A) The claimant ... must file and serve a request for hearing within thirty days of mailing of the notice;
(B) If there is not timely request for a hearing, the court may enter an order granting the requested relief by default....
(iii)To obtain relief by default, the moving party shall file with the clerk and serve upon the claimant ... a request for entry of order by default. A copy of the ... shall be attached to the request. The request shall contain declarations as to the date and place of mailing of the pleading, the address to which mailed and the lack of response. If the claimant ... has filed a claim, all pleadings shall be mailed to the address on the claim.
[emphasis added]
(iv)Upon filing of an appropriate request for entry of order by default, the court may grant the requested relief.
. Rule 60(b) provides, in pertinent part:
On motion and upon such terms as are just, the court may relieve a part or a party’s legal representative from a final judgment, order, or proceeding for the following reasons: (1) mistake, inadvertence, surprise, or excusable neglect; (2) newly discovered evidence which by due diligence could not have been discovered in time to move for a new trial under Rule 59(b); (3) fraud (whether heretofore denominated intrinsic or extrinsic), misrepresentation, or other misconduct of an adverse party; ... or (6) any other reason justifying relief from the operation of the judgment. The motion shall be made within a reasonable time, and for reasons (1), (2), and (3) not more than one year after the judgment, order, or proceeding was entered or taken.
Although CMC’s motion refers to Rule 60(b)(1), (3), and (6), Appellant states incorrectly in its brief that it brought the motion under Rule 60(b)(1), (2), and (3).
. Rule 9011(a) provides, in pertinent part:
The signature of an attorney ... constitutes a certificate that the attorney ... has read the document; that to the best of the attorney’s ... knowledge, information, and belief formed after reasonable inquiry it is well-grounded in fact.... If a document is signed in violation of this rule, the court on motion or on its own initiative, shall impose on the person who signed it ... an appropriate sanction, which may include ... a reasonable attorney's fee.
. Rule 9024 provides:
Rule 60 Fed.R.Civ.Proc. applies in cases under the [Bankruptcy] Code except that (1) a motion ... for the reconsideration of an order allowing or disallowing a claim against the estate entered without a contest is not subject to the one year limitation prescribed in Rule 60(b).... | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491562/ | MEMORANDUM REGARDING REMAINING PARTIAL SUMMARY JUDGMENT MOTIONS
DONALD MacDONALD IV, Bankruptcy Judge.
Chugach Alaska Corporation (“Chu-gach”) has filed an objection to the claims filed by the Internal Revenue Service (“IRS”) in this case, and has moved for a determination of its tax liability. The parties have previously resolved, by stipulation, a significant portion of the tax dispute. By order dated May 4, 1992, this court entered partial summary judgment on the issues of carryback of net operating losses (“NOLS”) and “spring back” of excess assigned income. The parties subsequently briefed two remaining issues pertaining to Chugach’s 1987 tax year. Those issues are:
*2151. Whether the imposition of alternative minimum tax (“AMT”) and environmental tax on Chugach for the 1987 tax year denies Chugach the benefit or use of its tax losses and credits, in violation of the “special legislation” contained in § 1804(e)(5) of the Tax Reform Act of 1986, Pub.L. No. 99-514; and
2. Whether Chugach may deduct costs incurred in connection with Native child custody matters pursuant to the Indian Child Welfare Act (25 U.S.C. § 1901 et seq.) as ordinary and necessary expenses of its trade or business.
I find for the IRS on both issues.
Imposition of AMT and Environmental Taxes
Chugach contends it is not liable for AMT or environmental taxes in connection with its 1987 tax year because to apply these taxes to Chugach would deny it the benefit or use of its NOLS, in violation of the special legislation enacted in 1986, which provided in part:
[N]o provision of the Internal Revenue Code of 1986 (including sections 269 and 482) or principle of law shall apply to deny the benefit or use of losses incurred or credits earned by a [Native] corporation. ...
Tax Reform Act of 1986, Pub.L. No. 99-514, § 1804(e)(5). The history of this special legislation is discussed in this court’s memorandum dated May 4,1992. As noted there, the special legislation was enacted at a time when Congress was tightening restrictions on the sale of corporate losses and tax credits through the use of consolidated returns. The special legislation was an exception to these new restrictions which permitted Native corporations to sell their NOLS and investment tax credits (“ITCS”) to profitable corporations, for a limited time, through the use of consolidated returns.
Chugach sold its NOLS and ITCS to profitable corporations in 1986 and 1987, and filed consolidated returns for those tax years. As a result of the stipulated settlement between the parties as to the valuation of Chugach assets which formed the basis of the claimed losses, Chugaeh’s revised 1987 losses were insufficient to offset all of the assigned income from the profitable corporations. This court has previously determined that Chugach may carryback its 1990 losses to its 1987 tax year to offset excess 1987 income, with any excess assigned income remaining after such offset returning to the profitable corporations.
When Chugach filed its initial return for 1987, it included liability for AMT and environmental taxes. Chugach subsequently filed an amended return deleting this liability, claiming the special legislation exempted it from these taxes. Although Chugach admits Native corporations are not exempt from those taxes for all purposes, Chugach contends the AMT and environmental tax rules are “provisions of the Internal Revenue Code” which cannot be applied against it under the special legislation. Chugach advances two theories.
First, Chugach contends imposition of these taxes denies it the benefit of its NOLS, because the taxes result directly from Chugach’s sale of the NOLS to profitable corporations, and the IRS is limiting the benefit conferred by the special legislation by imposing AMT and environmental taxes. In other words, if Chugach had not entered into the tax transactions with the profitable corporations, Chugach would have had substantial losses for the tax year, and no AMT or environmental tax would have been due.
Second, Chugach contends imposition of these taxes denies it the use of its NOLS, in contravention of the special legislation, because in the computation of alternative minimum taxable income, on which the AMT is based, a taxpayer may only offset 90% of his current year taxable income against NOLS. 26 U.S.C. § 56(d). Chu-gach contends it should be permitted to retain sufficient excess assigned income from the profitable corporations so that it may use 100% of its NOLS in computation of the AMT or, alternatively, that it should be permitted to use 100% of its NOLS in computing AMT in spite of the 90% limitation contained in § 56(d).
Chugach’s position on the AMT controversy constitutes a classic “out of context” *216reading of the 1986 Act. As recently noted in King v. St. Vincent’s Hosp., — U.S. -,-, 112 S.Ct. 570, 574, 116 L.Ed.2d 578 (1991):
In so concluding we do nothing more, of course, than follow the cardinal rule that a statute is to be read as a whole, see Massachusetts v. Morash, 490 U.S. 107, 115, 109 S.Ct. 1668, 1673, 104 L.Ed.2d 98 (1989), since the meaning of statutory language, plain or not, depends on context. See, e.g., Shell Oil Co. v. Iowa Dept. of Revenue, 488 U.S. 19, 26, 109 S.Ct. 278, 282, 102 L.Ed.2d 186 (1988). “Words are not pebbles in alien juxtaposition; they have only a communal existence; and not only does the meaning of each interpenetrate the other, but all in their aggregate take their purport from the setting in which they are used_” NLRB v. Federbush Co., 121 F.2d 954, 957 (CA2 1941) (L. Hand, J.) (quoted in Shell Oil, supra, 488 U.S. at 25, n. 6, 109 S.Ct. at 281, n. 6).
Chugach ignores the fact that the expansive language of the 1986 Act was only to be applied to use of NOLS through consolidated returns. Chugach is certainly entitled to the full use or benefit of such losses in conjunction with consolidated returns. Chugach has received the full benefit of the losses by offsetting 100% of assigned income for the full amount of the losses. Once it has received the benefit or use of the losses, however, it is not immune from AMT or environmental taxes.
Chugach recognizes that well established doctrines of statutory construction require provisions of a statute be construed in a manner that harmonizes all of its provisions. Weinberger v. Hynson, Westcott & Dunning, Inc., 412 U.S. 609, 631-32, 93 S.Ct. 2469, 2484, 37 L.Ed.2d 207 (1973); Pyramid Lake Paiute Tribe v. U.S. Dept. of Navy, 898 F.2d 1410, 1416-17, n. 15 (9th Cir.1990); Adams v. Howerton, 673 F.2d 1036, 1040 (9th Cir.1982), cert. denied, 458 U.S. 1111, 102 S.Ct. 3494, 73 L.Ed.2d 1373 (1982). Chugach seeks to ignore that rule in this instance.
As noted in this court’s prior memorandum of May 4,1992, Congress tightened the reins on the sale of NOLS and ITCS for use of consolidated tax returns in 1984. Deficit Reduction Act of 1984, Pub.L. No. 98-369. 26 U.S.C. § 1501 allows an “affiliated group” of corporations the privilege of filing consolidated returns. Congress limited the definition of “affiliated group” in the 1984 Act. It provided in part:
SEC. 60. AFFILIATED GROUP DEFINED.
(a) IN GENERAL. — Subsection (a) of section 1504 (defining affiliated group) is amended to read as follows:
“(a) AFFILIATED GROUP DEFINED. — For purposes of this subtitle—
“(1) IN GENERAL. — The term ‘affiliated group’ means—
“(A) 1 or more chains of includible corporations connected through stock ownership with a common parent corporation which is an includible corporation, but only if—
“(B)(i) the common parent owns directly stock meeting the requirements of paragraph (2) in at least 1 of the other includible corporations, and
“(ii) stock meeting the requirements of paragraph (2) in each of the includible corporations (except the common parent) is owned directly by 1 or more of the other includible corporations.
“(2) 80-PERCENT VOTING AND VALUE TEST. — The ownership of stock of any corporation meets the requirements of this paragraph if it—
“(A) possesses at least 80 percent of the total voting power of the stock of such corporation, and
“(B) has a value equal to at least 80 percent of the total value of the stock of such corporation.
“(3) 5 YEARS MUST ELAPSE BEFORE RECONSOLIDATION.—
“(A) IN GENERAL. -If-
“(i) a corporation is included (or required to be included) in a consolidated return filed by an affiliated group for a taxable year which includes any period after December 31, 1984, and
“(ii) such corporation ceases to be a member of such group in a taxable *217year beginning after December 31, 1984,
with respect to periods after such cessation, such corporation (and any successor of such corporation) may not be included in any consolidated return filed by the affiliated group (or by another affiliated group with the same common parent or a successor of such common parent) before the 61st month beginning after its first taxable year in which it ceased to be a member of such affiliated group.”
By limiting the definition, corporations ability to file consolidated tax returns were necessarily diminished. In the face of Congressional action to limit the use of consolidated returns, Chugach won a reprieve from the stringent consolidated return requirements. Congress provided in part:
(5) NATIVE CORPORATIONS. — The amendments made by subsection (a) shall not apply to any Native Corporation established under the Alaska Native Claims Settlement Act (43 U.S.C. § 1601 et seq.) during any taxable year beginning before 1992 or any part thereof in which such Corporation is subject to the provisions of Section 7(h)(1) of such Act (43 U.S.C. § 1606(h)(1).
Deficit Reduction Act of 1984, Pub.L. No. 98-369, § 60(b)(5). Later in 1986, this exemption in regard to consolidated returns was expanded to include the “no provision shall apply to deny the benefit or use of losses incurred” language Chugach relies upon. This new language clarified Chu-gach’s original exemption from the “affiliated group” definition dealing with consolidated returns. It did not in any way grant Chugach an exemption from AMT. Chu-gach attempts to bootstrap itself from an exempt position on the filing of consolidated returns and full use of losses to total exemption from AMT and other taxes. Only by taking the language of the 1986 Act totally out of context can such an unusual construction occur. This result is simply not in harmony with the language or the plain meaning of the statute.
Moreover, the special legislation was enacted as part of the Tax Reform Act of 1986, Pub.L. No. 99-514, which also significantly revised the alternative minimum tax provisions in the Internal Revenue Code [Pub.L. No. 99-514, Title VII, § 701(a)]. Chugach claims that the alternative minimum tax net operating loss deduction, as defined in 26 U.S.C. § 56(d), is inapplicable to it on account of the special legislation. Yet, § 56(a)(4) of the Code makes the alternative tax net operating loss deduction defined in § 56(d) applicable to all taxpayers. Further, as noted by Chugach (Debtor’s Brief Regarding Remaining Issues for Determination of Debtor’s Federal Income Tax Liability, Docket No. 1883, p. 7), Congress enacted special AMT provisions applicable to Native corporations as part of this legislation. See 26 U.S.C. § 56(f)(2)(G), which provisions were stricken in 1990 by Pub.L. No. 101-508, § 11801(a)(3). These special AMT provisions pertained to cost recovery and depletion attributable to property whose basis is determined under § 21(c) of ANCSA and to deductions for § 7(i) and § 7(j) payments made pursuant to ANCSA. Why would Congress adopt such provisions if Native corporations were exempt from AMT?
Congress clearly could have excluded Native corporations from the alternative minimum tax altogether. It chose not to do so. Imposition of the AMT on Chugach is consistent with both the special legislation and the AMT provisions of the Internal Revenue Code, and does not deny Chugach the benefit or use of its NOLS. Indeed, Chugach has received tens of millions of dollars through the sale of such NOLS. Just as the IRS cannot selectively apply § 172 to Chugach to preclude carryback of NOLS, Chugach cannot claim exemption from certain Code provisions in order to obtain the best tax advantage for itself. The special legislation has exempted neither Chugach nor the IRS from consistent application of the Internal Revenue Code.
I find that imposition of AMT on Chu-gach does not deny Chugach the benefit or use of its tax losses and credits, or violate the “special legislation” contained in § 1804(e)(5) of the Tax Reform Act of 1986, Pub.L. No. 99-514. By the same analysis, *218Chugach is also liable for environmental tax pursuant to 26 U.S.C. § 59A.
Deductibility of Child Custody Legal Fees as Business Expense
Chugach contends it may deduct as a business expense legal fees and costs it incurred in connection with its participation in a child custody proceeding involving two Native minor children. In that proceeding the State of Alaska favored transferring the two children to a relative in the southeastern United States, rather than leaving them with their mother in Alaska. Chu-gach became involved at the request of Mount Marathon Native Association and intervened in the custody proceeding pursuant to the Indian Child Welfare Act (“ICWA”), 25 U.S.C. § 1901 et seq. The purpose of the ICWA is stated in § 1902:
The Congress hereby declares that it is the policy of this Nation to protect the best interests of Indian children and to promote the stability and security of Indian tribes and families by the establishment of minimum Federal standards for the removal of Indian children from their families and the placement of such children in foster or adoptive homes which will reflect the unique values of Indian culture, and by providing for assistance to Indian tribes in the operation of child and family service programs.
Section 1911 of the ICWA grants an Indian child’s tribe a right to intervene in state court custody proceedings affecting that child. Section 1915 indicates a preference for placing Indian children within their own tribe or other Indian tribes unless there is good cause to do otherwise.
Chugach says its primary purpose for becoming involved in the custody proceeding was “to compel the State of Alaska to recognize the applicability of ICWA and the importance of Native interests in decisions regarding custody of Native children from the Chugach region.” (Debtor’s Brief Regarding Remaining Issues for Determination of Debtor’s Federal Income Tax Liability, Docket No. 1883, p. 17). Chugach contends it may deduct the legal fees and expenses incurred in the custody proceedings as an ordinary and necessary expense of its trade or business under 26 U.S.C. § 162.
26 U.S.C. § 162(a) provides in part: “[OJrdinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business ...” are deductible. “[A]n income tax deduction is a matter of legislative grace and that the burden of clearly showing the right to the claim deduction is on the taxpayer.” Interstate Transit Lines v. Commissioner, 319 U.S. 590, 593, 63 S.Ct. 1279, 1281, 87 L.Ed. 1607 (1943); Deputy v. du Pont, 308 U.S. 488, 493, 60 S.Ct. 363, 366, 84 L.Ed. 416 (1940); New Colonial Ice Co., Inc. v. Helvering, 292 U.S. 435, 440, 54 S.Ct. 788, 790, 78 L.Ed. 1348 (1934). Deductions are strictly construed and allowed only “as there is a clear provision therefore.” New Colonial Ice Co., Inc. v. Helvering, 292 U.S. at 440, 54 S.Ct. at 790; Deputy v. du Pont, 308 U.S. at 493, 60 S.Ct. at 366. The tests for deductibility under § 162 are set forth in C.I.R. v. Lincoln Savings and Loan Association, 403 U.S. 345, 352, 91 S.Ct. 1893, 1898, 29 L.Ed.2d 519 (1971).
To qualify as an allowable deduction under § 162(a) ... an item must (1) be “paid or incurred during the taxable year,” (2) be for “carrying on any trade or business,” (3) be an “expense”, (4) be a “necessary” expense, and (5) be an “ordinary” expense.
Chugach fails these tests. While the fees were paid or incurred in the preceding taxable years and carried over to 1987, they had nothing to do with any Chugach trade or business. In the past Chugach has managed land and participated in mineral, timber and commercial fishing ventures. There is simply no nexus between Chugach’s business ventures and the fees relating to a custody dispute. While the fees were certainly an expense, they were neither necessary nor ordinary. To be necessary, the fees must be needed for some business activity. Payment of the fees *219were unneeded for any Chugach business purpose. The business of Chugach can certainly be conducted without intervening in custody disputes. Moreover, payment of the fees was anything but ordinary. Businesses do not ordinarily intervene in custody proceedings between private litigants. Chugach has failed to demonstrate that its expenses commonly or frequently occurred. Its position is similar to those taken by parties in United States v. Gilmore, 372 U.g. 39, 83 S.Ct. 623, 9 L.Ed.2d 570 (1963) and United States v. Patrick, 372 U.S. 53, 83 S.Ct. 618, 9 L.Ed.2d 580 (1963). There husbands attempted to deduct attorney’s fees for their personal divorce proceedings under a statutory predecessor of 26 U.S.C. § 162. In each instance, the Supreme Court found that the attorney’s fees were not deductible as business expenses.
Similarly here, Chugach may not deduct the child custody fees as a business expense. While the motives of the corporation are certainly benign, the fees cannot be characterized as reasonable and necessary business expenses. Moreover, the proceedings did not originate in any action against Chugach. Chugach had a right but no duty to intervene. The character of the proceedings are distinctly non-business. Therefore, Chugach’s deduction of attorney’s fees must be disallowed.
Conclusion
Chugach must pay AMT and environmental taxes. Chugach cannot deduct attorney’s fees for child custody proceedings. An order consistent with this memorandum will be entered. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483841/ | United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued October 13, 2022 Decided November 15, 2022
No. 21-1162
OHIO NUCLEAR-FREE NETWORK AND BEYOND NUCLEAR,
PETITIONERS
v.
U.S. NUCLEAR REGULATORY COMMISSION AND UNITED
STATES OF AMERICA,
RESPONDENTS
AMERICAN CENTRIFUGE OPERATING, LLC,
INTERVENOR
On Petition for Review of an Order
of the Nuclear Regulatory Commission
Terry J. Lodge argued the cause for petitioners. With him
on the briefs was Wallace L. Taylor.
Eric V. Michel, Senior Attorney, U.S. Nuclear Regulatory
Commission, argued the cause for respondents. With him on
the brief were Todd Kim, Assistant Attorney General, U.S.
Department of Justice, Justin D. Heminger, Attorney, and
Andrew P. Averback, Solicitor, U.S. Nuclear Regulatory
Commission.
2
Brad Fagg argued the cause for intervenor American
Centrifuge Operating, LLC in support of respondent.
Before: SRINIVASAN, Chief Judge, HENDERSON, Circuit
Judge, and EDWARDS, Senior Circuit Judge.
Opinion for the Court filed by Circuit Judge HENDERSON.
KAREN LECRAFT HENDERSON, Circuit Judge: Ohio
Nuclear-Free Network (Ohio Nuclear) and Beyond Nuclear
petition for review of a decision of the Nuclear Regulatory
Commission (NRC, Commission), issuing an amended
materials license to American Centrifuge Operating, LLC
(American Centrifuge). The amended license authorizes
American Centrifuge to produce high-assay, low-enriched
uranium (HALEU) at a facility near Piketon, Ohio pursuant to
a demonstration program with the U.S. Department of Energy
(DOE). The petitioners contend, inter alia, that the NRC issued
the amended license without first preparing an Environmental
Impact Statement (EIS), which they assert was required by the
National Environmental Policy Act (NEPA), 42 U.S.C.
§ 4332(C). Under the Hobbs Act, 28 U.S.C. § 2344, however,
we lack jurisdiction to consider their petition because they
failed to become parties to the NRC proceedings below.
Accordingly, we dismiss their petition for review.
I.
The Atomic Energy Act (AEA), 42 U.S.C § 2011 et seq.,
authorizes the NRC to issue materials licenses for the handling
of special nuclear material like enriched uranium—a substance
enhanced in the uranium-235 isotope and used to fuel
America’s nuclear power plants, see id. §§ 2073(a), 2077(a),
2014(aa); Nuclear Info. & Res. Serv. v. NRC, 509 F.3d 562, 565
(D.C. Cir. 2007). Pursuant to this authority, the NRC issued a
3
30-year materials license to U.S. Enrichment Corp. in 2007.
The license authorized U.S. Enrichment Corp. to construct,
operate and decommission the American Centrifuge Plant, a
uranium-enrichment facility located on a DOE reservation near
Piketon, Ohio. It further authorized uranium enrichment of up
to ten per cent uranium-235 at the American Centrifuge Plant.
NEPA requires all federal agencies to document the
environmental impacts of certain proposed federal actions,
including the issuance of a license to construct or operate a
uranium-enrichment facility. See 42 U.S.C. § 4332(C). To
meet its NEPA obligations, the NRC promulgated 10 C.F.R.
Part 51, which specifies two forms of the environmental
documentation that NEPA ordinarily requires: an EIS or an
environmental assessment (EA). See Nat. Res. Def. Council v.
NRC, 823 F.3d 641, 643 (D.C. Cir. 2016). An EIS is required
for any proposed “major Federal action[] significantly
affecting the quality of the human environment,” 42 U.S.C.
§ 4332(C); 10 C.F.R. § 51.20(a)(1), or for any proposed action
for which the Congress or the Commission has categorically
required an EIS, see 42 U.S.C. § 2243(a)(1); 10 C.F.R.
§ 51.20(a)(2), (b). An EA, by contrast, is required for any
proposed federal action that does not require an EIS and is not
otherwise categorically excluded from environmental review.
10 C.F.R. § 51.21; see Myersville Citizens for a Rural Cmty.,
Inc. v. FERC, 783 F.3d 1301, 1322 (D.C. Cir. 2015). Because
an EIS is categorically required for the initial licensing of a
uranium-enrichment facility, see 42 U.S.C. § 2243(a)(1);
10 C.F.R. § 51.20(b)(7), the NRC prepared one that addressed
the environmental consequences of U.S. Enrichment Corp.’s
proposed licensing of the American Centrifuge Plant before
issuing the license in 2007.
Despite receiving the license, U.S. Enrichment Corp.
never constructed the American Centrifuge Plant or put it into
4
operation and later transferred the license to its wholly owned
subsidiary, American Centrifuge. In 2019, American
Centrifuge entered a three-year contract with the DOE to
demonstrate its ability to produce uranium enriched between
five and twenty per cent, commonly known as high-assay, low-
enriched uranium (HALEU). See 42 U.S.C. § 16281(d)(4).
Under the demonstration program, American Centrifuge would
produce and provide to the DOE up to 600 kilograms of
HALEU enriched at 19.75 per cent. The DOE wanted both to
determine whether HALEU could be produced using existing
technology and to assess HALEU’s potential for research and
development activities.
American Centrifuge then sought an amendment to its
materials license to authorize the production of HALEU for the
DOE demonstration program. It requested NRC authorization
to produce and possess 19.75 per cent enriched uranium, with
an upper limit of twenty-five per cent enrichment to account
for minor variations in the enrichment process. With the
amendment request, American Centrifuge also submitted an
environmental report to assist the NRC in its independent
review of the proposed amendment under NEPA, see 10 C.F.R.
§§ 51.14, 51.45, as well as several other documents related to
the NRC’s safety and security review of the proposed
amendment, see 10 C.F.R. Parts 73–74. The NRC posted a
notice of the amendment request on its website in accordance
with its regulations, apprising any interested persons of the
proposed amendment. See 10 C.F.R. § 2.105(a).
The AEA and its regulations set forth the procedures by
which an interested “person” may intervene in a licensing
proceeding like the one at issue here. “In any proceeding . . .
for the granting, suspending, revoking, or amending of any
license or construction permit,” a “person whose interest may
be affected by the proceeding” may request a hearing and
5
thereby be admitted “as a party” to the proceeding. 42 U.S.C.
§ 2239(a)(1)(A). The hearing request must specify the
“contentions” such person “seeks to have litigated in the
hearing” and must be submitted within sixty days after the
NRC publishes notice of the proposed action on its website or
sixty days after the hearing requestor receives actual notice of
the proposed action, whichever is later. See 10 C.F.R.
§ 2.309(a), (b)(4). The Commission will grant a timely hearing
request or petition for leave to intervene if the requestor has
standing to intervene and proposes at least one “admissible”
contention for adjudication. Id. § 2.309(a); see also id.
§ 2.105(e)(2).
Petitioners Ohio Nuclear and Beyond Nuclear could have
submitted a hearing request pursuant to 10 C.F.R. § 2.309 but
they did not. Rather, on March 30, 2021, they emailed a letter
to the NRC staff arguing that the proposed license amendment
violated federal law and asking the NRC, in reviewing the
proposal, to prepare an EIS and consider certain potential
environmental consequences. The petitioners’ letter did not
request a hearing or seek permission to intervene in the
licensing proceedings, nor did the petitioners submit anything
further to the NRC.
In June 2021, the NRC completed an EA of the proposed
license amendment and awarded American Centrifuge the
amended license. The EA found that the proposal would have
“no significant environmental impact,” see EA/FONSI Public
Notice, 86 Fed. Reg. 31,539 (June 14, 2021) (App. 338),
thereby rendering an EIS unnecessary, see 42 U.S.C.
§ 4332(C); 10 C.F.R. § 51.20(a)(1); Myersville Citizens,
783 F.3d at 1322. In granting the license, the NRC authorized
American Centrifuge to possess twenty-five per cent enriched
uranium but forbade it from extracting uranium enriched above
twenty per cent. American Centrifuge has yet to produce
6
HALEU for the DOE demonstration program and in fact
extended its contract with the DOE for an additional six
months, through the end of November 2022.
Ohio Nuclear and Beyond Nuclear now challenge before
us the NRC’s authorization of the demonstration program.
They filed a timely petition for review of the NRC’s final order
awarding American Centrifuge the amended license, arguing
that the NRC violated NEPA by failing to prepare an EIS and
by failing to address the environmental concerns raised in their
letter to the NRC staff. The NRC moved to dismiss the petition
for lack of jurisdiction and American Centrifuge intervened on
behalf of the NRC.
II.
Ohio Nuclear and Beyond Nuclear cite the Hobbs Act,
28 U.S.C. § 2344, as the basis for our jurisdiction. The Hobbs
Act confers on this Court jurisdiction to review “all final
orders” of the NRC that are “made reviewable by section 2239
of title 42.” 28 U.S.C. § 2342(4). Section 2239, in turn, makes
“subject to judicial review . . . [a]ny final order entered in any
proceeding” under the AEA, 42 U.S.C. ch. 23, “for the
granting, suspending, revoking, or amending of any license.”
42 U.S.C. § 2239(b)(1), (a). But under the Hobbs Act, our
jurisdiction “is invoked” only if a “party aggrieved by the final
order” files a timely petition for review. 28 U.S.C. § 2344. The
“party aggrieved” requirement, we have explained, demands
“that petitioners have been parties to the underlying agency
proceedings” in order to invoke our jurisdiction to review their
petition. ACA Int’l v. FCC, 885 F.3d 687, 711 (D.C. Cir. 2018);
see also Alaska v. FERC, 980 F.2d 761, 763 (D.C. Cir. 1992)
(“We have routinely interpreted this phrase to allow petitions
by parties who were intervenors before the Commission and
who would suffer injury-in-fact from its final disposition.”).
7
When “intervention in agency adjudication or rulemaking is
prerequisite to participation therein, standing to seek judicial
review of the outcome will be denied to those who did not
seek—or who sought but were denied—leave to intervene.”
Water Transp. Ass’n v. ICC, 819 F.2d 1189, 1192 (D.C. Cir.
1987). Because neither petitioner properly intervened in the
underlying NRC proceeding, they are not “part[ies] aggrieved”
by the agency order and, accordingly, we lack jurisdiction to
review their petition.
Although the “degree of participation necessary to achieve
party status varies according to the formality with which the
proceeding was conducted,” Water Transp. Ass’n, 819 F.2d at
1192, the AEA and its regulations address the manner in which
interested persons may become parties to the precise sort of
proceeding at issue. “In any proceeding under” the AEA for the
“amending of any license,” “the Commission shall grant a
hearing upon the request of any person whose interest may be
affected by the proceeding[] and shall admit [the] person as a
party to such proceeding.” 42 U.S.C. § 2239(a)(1)(A). To
request a hearing, a person “who desires to participate as a
party” must file a written request specifying the contentions it
intends to raise at the hearing. 10 C.F.R. § 2.309(a); see also
id. § 2.309(f) (describing the admissibility standards applicable
to contentions). The Commission “will grant the request” if the
interested person raises “at least one admissible contention that
meets the requirements of paragraph (f)” and “has standing
under the provisions of paragraph (d).” Id. § 2.309(a); see also
id. § 2.309(d). If the request is denied, the Commission’s
regulations permit the interested person to immediately appeal
that denial. Id. § 2.311(c); see Nat. Res. Def. Council, 823 F.3d
at 643–44.
Invocation of the “the appropriate and available
administrative procedure” described above, we have held, “is
8
the statutorily prescribed prerequisite for this court’s
jurisdiction to entertain [a] petition [to] review” a final NRC
order described in 42 U.S.C. § 2239. Gage v. U.S. Atomic
Energy Comm’n, 479 F.2d 1214, 1217 (D.C. Cir. 1973); see
also Nat. Res. Def. Council, 823 F.3d at 643 (“To challenge the
[NRC’s] grant of a license renewal . . . a party must have
successfully intervened in the proceeding by submitting
adequate contentions under 10 C.F.R. § 2.309.”). But the
petitioners failed to request a hearing or submit contentions
related to the amended license. Instead, they emailed a letter—
which made no mention of a hearing—to the NRC staff. The
“informal[] present[ation of] views” to the NRC by the
petitioners, who “were neither unaware of the proposed
[amendment] nor strangers to the [NRC] staff,” is insufficient
to satisfy the Hobbs Act’s “party aggrieved” requirement.
Gage, 479 F.2d at 1217 n.11.
That the petitioners raise NEPA objections to the NRC’s
issuance of the amended license does not change our thinking.
NEPA does not give the petitioners an independent cause of
action, Theodore Roosevelt Conservation P’ship v. Salazar,
616 F.3d 497, 507 (D.C. Cir. 2010), so they rely on the Hobbs
Act and the AEA to challenge the license amendment. They are
thus obliged to comply with the hearing procedures set out
therein. NEPA “does not, by its own terms or its intent, alter
the Commission’s hearing procedures.” Nat. Res. Def. Council,
823 F.3d at 652 (quoting Beyond Nuclear v. NRC, 704 F.3d 12,
18–19 (1st Cir. 2013)). Any person seeking to intervene in “any
proceeding” under the AEA “for the . . . amending of any
license”—including those who object to the agency’s discharge
of its NEPA duties—must request a hearing or otherwise
intervene in the proceeding as required by the AEA and its
regulations. 42 U.S.C. § 2239(a)(1)(A); see 10 C.F.R. § 2.309.
Indeed, the NRC’s regulations expressly permit interested
persons to raise NEPA contentions in their request for a
9
hearing. 10 C.F.R. § 2.309(f)(2) (“On issues arising under
[NEPA], participants shall file contentions based on the
applicant’s environmental report.”); see also Union of
Concerned Scientists v. NRC, 920 F.2d 50, 56–57 (D.C. Cir.
1990).
Because the petitioners failed to properly intervene in the
manner required by 42 U.S.C. § 2339 and the NRC’s AEA
regulations, they were not parties to the licensing amendment
proceeding they now ask us to review. Accordingly, under the
Hobbs Act, 28 U.S.C. § 2344, we dismiss their petition for
review for lack of jurisdiction.
It is so ordered. | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483836/ | 20-963
Ventura-De Argueta v. Garland
BIA
Christensen, IJ
A089 101 676
A202 080 325/326
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 15th day of November, two thousand twenty-two.
PRESENT:
JON O. NEWMAN,
WILLIAM J. NARDINI,
BETH ROBINSON,
Circuit Judges.
_____________________________________
YOLANDA VENTURA-DE ARGUETA, AKA
YOLANDA ELIZABETH VENTURA-LUNA,
AKA YOLANDA LUNA VENTURA, AKA
JUANA ELIZABETH VENTURA GUEBARA,
SIFREDO RAMOS-VENTURA, DILAN
ARGUETA-VENTURA,
Petitioners,
v. No. 20-963
MERRICK B. GARLAND, UNITED STATES
ATTORNEY GENERAL,
Respondent.
_____________________________________
For Petitioners: KAI W. DE GRAAF, Esq., Ada, MI.
For Respondent: KEVIN J. CONWAY, Trial Attorney (Jennifer B. Dickey,
Acting Assistant Attorney General; Paul Fiorino,
Senior Litigation Counsel, on the brief), for 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.
Petitioners Yolanda Ventura-De Argueta (Ventura), Sifredo Ramos-Ventura, and Dilan
Argueta-Ventura, natives and citizens of El Salvador, seek review of a March 6, 2020, decision of
the BIA affirming an April 12, 2018, decision of an Immigration Judge (IJ) denying asylum,
withholding of removal, and relief under the Convention Against Torture (CAT). In re Yolanda
Ventura-De Argueta, Sifredo Ramos-Ventura, Dilan Argueta-Ventura, Nos. A089 101 676, A202
080 325/326 (B.I.A. Mar. 6, 2020), aff’g Nos. A089 101 676, A202 080 325/326 (Immig. Ct. N.Y.
City Apr. 12, 2018). We assume the parties’ familiarity with the case.
“Where the BIA adopts the decision of the IJ and merely supplements the IJ’s decision, . . .
we review the decision of the IJ as supplemented by the BIA.” Yan Chen v. Gonzales, 417 F.3d
268, 271 (2d Cir. 2005). We review the agency’s factual findings for substantial evidence and
questions of law de novo. See 8 U.S.C. § 1252(b)(4)(B); Yanqin Weng v. Holder, 562 F.3d 510,
513 (2d Cir. 2009).1
1
We note that in general, we lack jurisdiction over petitions, such as Ventura’s, seeking review of the BIA’s
decision to deny withholding of removal following reinstatement of a prior order of removal when the petition is filed
more than thirty days from the reinstatement decision. See Bhaktibhai-Patel v. Garland, 32 F.4th 180, 183–84 (2d
Cir. 2022). In this case, however, the agency consolidated Ventura’s case with those of her sons, in which it did
enter final orders of removal that we have jurisdiction to review, raising the question of whether—in light of the
consolidation—we have jurisdiction to review all claims, including Ventura’s, or only the claims over which we would
2
Ventura testified that she was raped in El Salvador in 1997 and that she fears the rapist
wants to kill her because his daughter died while he was imprisoned; she also asserts that gang
members attacked her eldest son, who is not a party to this petition, and threatened the rest of the
family because that son refused to join the gang. We hold that the agency did not err in finding
that Petitioners failed to establish their eligibility for the relief they each seek: withholding of
removal and protection under the CAT for Ventura; and asylum, withholding of removal, and
protection under the CAT for her sons.2
* * *
To demonstrate eligibility for asylum, an applicant must show that she has a well-founded
fear of persecution in her country of nationality, and that “at least one central reason for” the
persecution will be her “race, religion, nationality, membership in a particular social group, or
political opinion.” 8 U.S.C. § 1158(b)(1)(B)(i); see also id. §§ 1101(a)(42), 1231(b)(3)(A). An
applicant who “ha[s] suffered past persecution . . . on account of” a protected ground is entitled to
a rebuttable presumption of future persecution. 8 C.F.R. § 1208.16(b)(1)(i). Obtaining
withholding of removal, however, requires the heightened showing that the applicant’s “life or
freedom would be threatened in the proposed country of removal on account of race, religion,
nationality, membership in a particular social group, or political opinion.” 8 C.F.R. § 1208.16(b).
Here, the agency reasonably found that Ventura’s rape did not constitute past persecution
on account of a protected ground because she did not show that her rapist’s motivation was
ordinarily have jurisdiction if the agency had not consolidated the cases. We need not decide this question, however,
because when “the jurisdictional constraint[] [is] imposed by statute, not the Constitution,” as it is here, we may
“assume hypothetical jurisdiction” and dispose of the case on the merits. Butcher v. Wendt, 975 F.3d 236, 242 (2d
Cir. 2020) (citation omitted). Because the “jurisdictional issue[] [is] complex and the substance of the claim is
plainly without merit,” we exercise hypothetical jurisdiction to deny the petition for review with respect to Ventura.
Id. at 242–43.
2
Ventura is not eligible for asylum because she is subject to a reinstated removal order. See Herrera-
Molina v. Holder, 597 F.3d 128, 138–39 (2d Cir. 2010).
3
anything other than criminal. See Paloka v. Holder, 762 F.3d 191, 196–97 (2d Cir. 2014)
(“Whether the requisite nexus exists depends on the views and motives of the persecutor.”)
(quotation marks omitted); Ucelo-Gomez v. Mukasey, 509 F.3d 70, 73 (2d Cir. 2007) (“When the
harm visited upon members of a group is attributable to the incentives presented to ordinary
criminals rather than to persecution, the scales are tipped away from considering those people a
‘particular social group.’”). Ventura did not provide any evidence to support her belief that her
rapist was involved in the targeting of her eldest son for gang recruitment.
The agency’s conclusion that Petitioners did not establish that gang members targeted them
on account of their political opinion or membership in a cognizable social group is also supported
by substantial evidence. According to Petitioners, the gang members attacked Ventura’s eldest
son and threatened Ventura on account of her son’s refusal to join the gang rather than their family
membership or their ideological opposition to the gang. Once again, this conduct is “ordinary
criminal[ity]” rather than persecution based on a protected characteristic. Ucelo-Gomez, 509
F.3d at 73; see also Zelaya-Moreno v. Wilkinson, 989 F.3d 190, 203 (2d Cir. 2021) (concluding
that opposition to gangs does not constitute a political opinion absent evidence of a “disagreement
with the policies they seek to impose []or any ideology they espouse”). Substantial evidence also
supports the IJ’s determination that the record does not support a finding that the unnerving
incident where a driver on the road cut Ventura off established the gang’s desire to specifically
target her.
Because Petitioners failed to establish a well-founded fear or likelihood of future
persecution on account of a protected ground, the agency correctly adjudicated them ineligible for
asylum or withholding of removal. See 8 U.S.C. §§ 1158(b)(1)(B)(i), 1231(b)(3)(A); 8 C.F.R.
§ 1208.16(b)(1)(i), (2).
4
Unlike asylum and withholding of removal, protection under the CAT does not require a
nexus to a protected ground. See 8 C.F.R. §§ 1208.16(c), 1208.17(a). Nevertheless, applicants
for CAT relief have the added burden of showing that they would “more likely than not” be
tortured by or with the acquiescence of government officials. 8 C.F.R. §§ 1208.16(c),
1208.18(a).
The agency reasonably concluded that Ventura did not establish that government officials
would acquiesce in any future torture by her rapist, as they had successfully prosecuted him for
raping her in 1997. See 8 C.F.R. § 1208.18(a)(7); Khouzam v. Ashcroft, 361 F.3d 161, 171 (2d
Cir. 2004) (discussing the acquiescence requirement). The agency also reasonably concluded
that Petitioners failed to show that gang members would likely torture them given that Ramos-
Ventura and Argueta-Ventura were not previously personally targeted for gang recruitment.
There is also no merit to Petitioners’ claim that the IJ violated their due process rights by
depriving them of an opportunity to present their expert witness’s testimony. “To establish a
violation of due process, an alien must show that she was denied a full and fair opportunity to
present her claims or that the IJ or BIA otherwise deprived her of fundamental fairness.” Burger
v. Gonzales, 498 F.3d 131, 134 (2d Cir. 2007) (quotation marks omitted). At the end of direct
examination, Petitioners’ attorney called their expert witness via telephone to convey, on the
advice of the IJ, that they might not need his testimony but that they would not know until the end
of cross-examination. After cross-examination, the IJ attempted to call the expert three times,
but he did not answer the phone, and as a result he did not testify. This record does not establish
that the IJ deprived Petitioners the opportunity to present their witness’s testimony. See id.
5
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
6 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483843/ | Case: 21-1826 Document: 54 Page: 1 Filed: 11/15/2022
United States Court of Appeals
for the Federal Circuit
______________________
VLSI TECHNOLOGY LLC,
Appellant
v.
INTEL CORPORATION,
Appellee
______________________
2021-1826, 2021-1827, 2021-1828
______________________
Appeals from the United States Patent and Trademark
Office, Patent Trial and Appeal Board in Nos. IPR2019-
01198, IPR2019-01199, IPR2019-01200.
______________________
Decided: November 15, 2022
______________________
NATHAN NOBU LOWENSTEIN, Lowenstein & Weather-
wax LLP, Santa Monica, CA, argued for appellant. Also
represented by KENNETH J. WEATHERWAX.
S. CALVIN WALDEN, Wilmer Cutler Pickering Hale and
Dorr LLP, New York, NY, argued for appellee. Also repre-
sented by JEFFREY ANDREW DENNHARDT; MARK
CHRISTOPHER FLEMING, JOHN V. HOBGOOD, STEPHANIE LIN,
Boston, MA; RONALD GREGORY ISRAELSEN, Washington,
DC.
______________________
Case: 21-1826 Document: 54 Page: 2 Filed: 11/15/2022
2 VLSI TECHNOLOGY LLC v. INTEL CORPORATION
Before CHEN, BRYSON, and HUGHES, Circuit Judges.
BRYSON, Circuit Judge.
Appellee Intel Corporation filed three petitions for in-
ter partes review (“IPR”) of U.S. Patent No. 7,247,552 (“the
’552 patent”), which is owned by appellant VLSI Technol-
ogy LLC. The Patent Trial and Appeal Board instituted
the IPR proceedings, and in a combined Final Written De-
cision, the Board found all of the challenged claims of the
’552 patent to be unpatentable. For the reasons set forth
below, we affirm in part, reverse in part, and remand.
I
A
The ’552 patent is directed to “[a] technique for allevi-
ating the problems of defects caused by stress applied to
bond pads” of an integrated circuit. ’552 patent, Abstract.
An integrated circuit, sometimes referred to as a “chip”
or “die,” contains numerous electronic circuits that are in-
tegrated on a flat piece of semiconductor called a “sub-
strate.” The specification of the ’552 patent discloses an
integrated circuit that includes several metal “interconnect
layers” positioned above the substrate and frequently sur-
rounded by “dielectric” or insulating material. See id. at
col. 3, ll. 1–10 & Fig. 1. The integrated circuits described
in the ’552 patent also include one or more “bond pads” that
sit above the interconnect layers and are used to attach the
chip to another electronic component, such as a computer
motherboard. See id. at col. 3, ll. 22–25.
When a chip is attached to another electronic compo-
nent, forces are exerted on the chip’s bond pad. Id. at Ab-
stract & col. 5, ll. 53–57. Those forces can result in damage
to the interconnect layers and to the dielectric material
that surrounds those layers. See id. at Abstract & col. 1, ll.
39–42. As such, dedicated support structures made of
metal layers and vias are connected to and provide support
Case: 21-1826 Document: 54 Page: 3 Filed: 11/15/2022
VLSI TECHNOLOGY LLC v. INTEL CORPORATION 3
for the bond pad. See id. at col. 1, ll. 53–61. In the prior
art, these metal support layers were linked to the bond pad,
and thus were not “functionally independent,” i.e., they
could not be “used for wiring or interconnects unrelated to
the pad.” Id. at col. 1, ll. 58–64.
The ’552 patent discloses improvements to the struc-
tures of an integrated circuit that reduce the potential for
damage to the interconnect layers and dielectric material
when the chip is attached to another electronic component
while also “permit[ing] each of the interconnect layers un-
derlying [the pad] to be functionally independent in the cir-
cuit if desired.” See id. at col. 3, line 64 through col. 4, line
7. Specifically, the ’552 patent discloses that only “a pre-
determined minimum amount of metal or a minimum den-
sity” is needed to “adequately support” the bond pad. See
id. at col. 3, line 64 through col. 4, line 4. If the function-
ally independent interconnect layers underneath the pad
are insufficient to reach a predetermined minimum den-
sity, “dummy metal lines”—i.e., metal lines that do not
serve any electrical purpose—may be added to increase the
metal density of the interconnect layers. See id. at col. 4,
ll. 13–56; see also id. at Fig. 3.
Claim 1 is the only independent apparatus claim of the
’552 patent and is representative of the claimed invention.
It recites as follows:
1. An integrated circuit, comprising:
a substrate having active circuitry;
a bond pad over the substrate;
a force region at least under the bond pad char-
acterized by being susceptible to defects due to
stress applied to the bond pad;
a stack of interconnect layers, wherein each in-
terconnect layer has a portion in the force region;
and
Case: 21-1826 Document: 54 Page: 4 Filed: 11/15/2022
4 VLSI TECHNOLOGY LLC v. INTEL CORPORATION
a plurality of interlayer dielectrics separating
the interconnect layers of the stack of interconnect
layers and having at least one via for interconnect-
ing two of the interconnect layers of the stack of in-
terconnect layers;
wherein at least one interconnect layer of the
stack of interconnect layers comprises a functional
metal line underlying the bond pad that is not elec-
trically connected to the bond pad and is used for
wiring or interconnect to the active circuitry, the at
least one interconnect layer of the stack of inter-
connect layers further comprising dummy metal
lines in the portion that is in the force region to ob-
tain a predetermined metal density in the portion
that is in the force region.
’552 patent, claim 1. Claim 2 depends from claim 1, and
claim 11 is a method claim generally similar to claim 1.
Claim 20 also plays a role in this appeal. It recites as
follows:
20. A method of making an integrated circuit hav-
ing a plurality of bond pads, comprising:
developing a circuit design of the integrated
circuit;
developing a layout of the integrated circuit ac-
cording to the circuit design, wherein the layout
comprises a plurality of metal-containing intercon-
nect layers that extend under a first bond pad of
the plurality of bond pads, at least a portion of the
plurality of metal-containing interconnect layers
underlying the first bond pad and not electrically
connected to the bond pad as a result of being used
for electrical interconnection not directly connected
to the bond pad;
Case: 21-1826 Document: 54 Page: 5 Filed: 11/15/2022
VLSI TECHNOLOGY LLC v. INTEL CORPORATION 5
modifying the layout by adding dummy metal
lines to the plurality of metal-containing intercon-
nect layers to achieve a metal density of at least
forty percent for each of the plurality of metal-con-
taining interconnect layers; and
forming the integrated circuit comprising the
dummy metal lines.
’552 patent, claim 20.
B
In 2018, VLSI brought suit in the United States Dis-
trict Court for the District of Delaware, charging Intel with
infringing the ’552 patent. The district court subsequently
conducted a claim construction hearing. In the course of
the hearing, the court construed the term “force region,”
which appears in independent claims 1 and 11 of the ’552
patent. Citing a passage from the ’552 patent, the district
court construed “force region” to mean a “region within the
integrated circuit in which forces are exerted on the inter-
connect structure when a die attach is performed.” J.A.
6017, 6356; see also ’552 patent, col. 3, ll. 49–52.
In June 2019, after the district court action was filed
but before the claim construction proceedings in that ac-
tion, Intel filed its petitions for IPR, challenging the valid-
ity of claims 1, 2, 11, and 20 of the ’552 patent. In the
petition directed to claims 1 and 2, Intel proposed a con-
struction of “force region” that was consistent with the
claim construction that Intel subsequently offered to the
district court and that the district court adopted, i.e., a “re-
gion within the integrated circuit in which forces are ex-
erted on the interconnect structure when a die attach is
performed.” J.A. 6588–89.
VLSI did not oppose Intel’s proposed construction be-
fore the Board. It soon became evident, however, that al-
though the parties purported to agree on the construction
to be given to the term “force region,” their agreement was
Case: 21-1826 Document: 54 Page: 6 Filed: 11/15/2022
6 VLSI TECHNOLOGY LLC v. INTEL CORPORATION
merely apparent, because they disagreed as to the meaning
of the term “die attach.”
Intel argued that the term “die attach” refers to any
method of attaching the chip to another electronic compo-
nent, and that the term “die attach” therefore includes at-
tachment by a method known as wire bonding. J.A. 6594
(Petition in IPR2019-1198); J.A. 6789–93 (Petitioner’s Re-
ply to Patent Owner’s Preliminary Response); J.A. 7063–
70 (Petitioner’s Reply); J.A. 7286–87 (Oral Hearing before
the Board). VLSI, on the other hand, argued that the term
“die attach” refers to a method of attachment known as “flip
chip” bonding, and does not include wire bonding. See J.A.
6720–29 (Patent Owner’s Preliminary Response); J.A.
7005–14 (Patent Owner’s Response); J.A. 7100–05 (Patent
Owner’s Sur-Reply to Petitioner’s Reply to the Patent
Owner’s Response); see also J.A. 7299–7300 (Oral Hearing
before the Board in which counsel for Intel noted that alt-
hough the parties agreed on the construction of “force re-
gion,” they disagreed on the meaning of the term “die
attach”).
Applying its proposed restrictive definition of “die at-
tach,” VLSI distinguished Intel’s principal prior art refer-
ence for the “force region” limitation, U.S. Patent
Publication No. 2004/0150112 (“Oda”). That reference dis-
closes attaching a chip to another component using wire
bonding. Based on its contention that the term “die attach”
does not encompass attachment by wire bonding, VLSI ar-
gued that Oda does not disclose a “force region” within the
meaning of the claims of the ’552 patent as construed by
the district court.
In its Institution Decisions, the Board stated that
“based on the current record,” it disagreed with VLSI that
the method of performing a “die attach” cannot include the
method of wire bonding. J.A. 6846, 20006. The Board
pointed out that Intel had provided argument and evidence
that wire bonding is a type of die attach, and that Oda
Case: 21-1826 Document: 54 Page: 7 Filed: 11/15/2022
VLSI TECHNOLOGY LLC v. INTEL CORPORATION 7
therefore disclosed a “force region” under Intel’s claim con-
struction, i.e., a region within the integrated circuit in
which forces are exerted on the interconnect structure
when a die attach is performed. J.A. 6846–47, 20006–07.
In addition, the Board noted that Intel asserted that the
“force region” includes regions directly under the bond pad,
and that VLSI’s proposed construction during the district
court proceeding also included regions directly under the
bond pad. J.A. 6845, 20005–06. The Board then stated
that a construction of “force region” that includes regions
at least under the bond pad “is consistent with the plain
language of claim[s] 1” and 11. See J.A. 6845, 20005.
In its Final Written Decision, unlike in the Institution
Decisions, the Board did not resolve the parties’ dispute re-
garding the meaning of the term “die attach.” Instead, the
Board construed the term “force region” as “including at
least the area directly under the bond pad.” Intel Corp. v.
VLSI Tech. LLC, Nos. IPR2019-01198, IPR2019-01199,
IPR2019-01200, 2021 WL 388740, at *6 (P.T.A.B. Feb. 3,
2021). The Board also found that the ’552 patent specifica-
tion made clear in several places that the term “force re-
gion” was not limited to flip chip bonding, but could include
wire bonding as well. Id. at *7. Based on that finding, the
Board concluded that Oda disclosed the “force region” ele-
ment of claims 1, 2, and 11, and that those claims were un-
patentable for obviousness. Id. at *12–13.
With respect to claim 20 of the ’552 patent, the parties
disagreed over the construction of the limitation providing
that the “metal-containing interconnect layers” are “used
for electrical interconnection not directly connected to the
bond pad.” VLSI argued that the phrase requires a connec-
tion to active circuitry or the capability to carry electricity.
Id. at *8. Intel argued that the claim does not require that
the interconnection actually carry electricity. See id. The
Board sided with Intel; it found that “[c]laim 20 does not
recite ‘active circuitry’” and declined “to import [that] limi-
tation into claim 20.” Id. at *9. The Board therefore
Case: 21-1826 Document: 54 Page: 8 Filed: 11/15/2022
8 VLSI TECHNOLOGY LLC v. INTEL CORPORATION
construed the phrase to encompass interconnect layers
that are “electrically connected to each other but not elec-
trically connected to the bond pad.” Id. at *10.
Intel relied principally upon U.S. Patent No. 7,102,223
(“Kanaoka”) as teaching the “used for electrical intercon-
nection” limitation in claim 20 as construed by the Board.
Figure 45 of Kanaoka discloses a die that has a series of
interconnect layers, some of which are connected to each
other by vertical metal structures called “vias.” J.A. 7655;
see also Appellee’s Br. 6–7. Because the interconnect layers
disclosed in Kanaoka were electrically connected to one an-
other but not to the bond pad, the Board found that Ka-
naoka disclosed the “used for electrical interconnection”
limitation of claim 20. Intel, 2021 WL 388740, at *28.
Based on its analysis, the Board concluded that all the
challenged claims (claims 1, 2, 11, and 20) of the ’552 pa-
tent were unpatentable. Id. at *29. VLSI appealed.
II
VLSI raises two principal issues on appeal. First, VLSI
argues that the Board erred in its treatment of the “force
region” limitation of claims 1, 2, and 11. Second, VLSI ar-
gues that the Board erred in construing the phrase “used
for electrical interconnection” in claim 20 to encompass a
metallic structure that is not connected to active circuitry.
We affirm with respect to the first issue, and we reverse
and remand with respect to the second.
A
1
With regard to the “force region” limitation, VLSI ar-
gues that the Board erred in declining to adopt the con-
struction of “force region” that was proposed by Intel and
adopted by the district court. Specifically, VLSI argues
that the Board failed to acknowledge and give appropriate
weight to the district court’s claim construction. VLSI
Case: 21-1826 Document: 54 Page: 9 Filed: 11/15/2022
VLSI TECHNOLOGY LLC v. INTEL CORPORATION 9
bases its argument principally on the Patent and Trade-
mark Office procedures that require the Board to “con-
sider” prior claim construction determinations by a district
court and give such prior constructions appropriate weight.
See 37 C.F.R. § 42.100(b); see also Power Integrations, Inc.
v. Lee, 797 F.3d 1318, 1326–27 (Fed. Cir. 2015); Patent
Trial and Appeal Board, Consolidated Trial Practice Guide
46–47 (Nov. 2019); Changes to the Claim Construction
Standard for Interpreting Claims in Trial Proceedings Be-
fore the Patent Trial and Appeal Board, 83 Fed. Reg.
51,340, 51,354 (Oct. 11, 2018).
We reject VLSI’s argument regarding the asserted reg-
ulatory violation for several reasons. First, while it is true
that the Board did not specifically mention the district
court’s claim construction in its Final Written Decision, the
Board was clearly well aware of that construction, as the
district court’s construction was the subject of repeated and
extensive discussion in the briefing and in the oral hearing
before the Board. See J.A. 6720 (Patent Owner’s Prelimi-
nary Response); J.A. 6954, 7001 (Patent Owner’s Re-
sponse); J.A. 7099–7100 (Patent Owner’s Sur-reply); J.A.
7328, 7333–35 (Oral Hearing).
Second, the Board did not reject the district court’s con-
struction. Instead, in light of the arguments made by the
parties before the Board, it was clear that the apparent
agreement as to the district court’s construction concealed
a fundamental disagreement between the parties as to the
proper construction of “force region.” The Board recognized
that simply adopting Intel’s proposed construction would
not resolve the true dispute between the parties, which
turned on whether the term “force region,” as used in the
’552 patent, was limited to flip chip bonding or covered wire
bonding as well. See J.A. 6838, 6846–47. Although the dis-
trict court defined the term “force region” with reference to
“die attach” processes, the district court did not decide—
and was not asked to decide—whether the term “die at-
tach,” as used in the patent, included wire bonding or was
Case: 21-1826 Document: 54 Page: 10 Filed: 11/15/2022
10 VLSI TECHNOLOGY LLC v. INTEL CORPORATION
limited to flip chip bonding. See generally VLSI Tech. LLC
v. Intel Corp., No. 18-cv-966, Dkt. No. 228 (D. Del. Aug. 19,
2019) (Joint Claim Construction Brief). Thus, the Board
addressed an argument not made to the district court, and
it reached a conclusion not at odds with the conclusion
reached by the district court. See Consolidated Trial Prac-
tice Guide 47 (noting that the “facts and circumstances of
each case will be analyzed as appropriate”).
Finally, we conclude that the Board’s treatment of the
term “force region” was not erroneous, for the reasons we
address below. Because the parties’ positions before the
Board made it clear that the Board needed to go beyond the
district court’s claim construction in order to resolve the
parties’ dispute, it was unnecessary for the Board to advert
to the district court’s claim construction. Therefore, even
if it might have been useful for the Board to begin by ex-
pressly acknowledging the district court’s claim construc-
tion, the Board was not required to do so, and any failure
to do so was at most harmless error.
2
As to the merits of the Board’s claim construction, we
conclude that the Board’s claim construction of “force re-
gion” and its application of that construction to the Oda
reference were not inconsistent with the proper construc-
tion of “force region.”
Both Intel and the district court relied on a passage
from column 3 of the ’552 patent as providing support for
Intel’s proposed construction of the term “force region.”
That passage explains that “[t]he force region 64 is a region
within the integrated circuit 10 in which forces are exerted
on the interconnect structure when a die attach is per-
formed.” ’552 patent, col. 3, ll. 49–52. Like the Board, we
conclude that the passage in column 3 is directed to the
embodiment disclosed in Figures 1 and 2 of the ’552 patent.
See Intel, 2021 WL 388740, at *7. Thus, even if the term
“die attach,” as used in the ’552 patent, were construed to
Case: 21-1826 Document: 54 Page: 11 Filed: 11/15/2022
VLSI TECHNOLOGY LLC v. INTEL CORPORATION 11
include only flip chip bonding, that would not affect the
construction of the term “force region.” As we have repeat-
edly cautioned, claims should not be limited “to preferred
embodiments or specific examples in the specification.” Te-
leflex, Inc. v. Ficosa N. Am. Corp., 299 F.3d 1313, 1328
(Fed. Cir. 2002) (quoting Comark Commc’ns, Inc. v. Harris
Corp., 156 F.3d 1182, 1186 (Fed. Cir. 1998)). It was there-
fore unnecessary for the Board to determine whether the
term “die attach,” as used in column 3 of the ’552 patent,
excludes wire bonding.
Even if the term “die attach,” as used in column 3 of the
’552 patent, is understood to refer to flip chip bonding in
particular and not to other forms of attachment such as
wire bonding, other portions of the specification make clear
that the invention is not limited to flip chip bonding. The
specification specifically calls out wire bonding mecha-
nisms, stating that examples of an interconnect pad within
the scope of the invention “include, but are not limited to,
a wire bond pad, a probe pad, a flip-chip bump pad, a test
point or other packaging or test pad structures that may
require underlying structural support.” ’552 patent, col. 2,
ll. 42–45.
In addition, as the Board noted, other language in the
specification indicates that the claimed “force region” is not
limited to attachment processes that use flip chip bonding.
See Intel, 2021 WL 388740, at *7. For example, with re-
spect to another embodiment of the invention, the specifi-
cation states that “[i]n another form the force region is a
region in which the interconnect layers . . . are susceptible
to stress from the bond pad due to assembly or other pro-
cesses.” ’552 patent, col. 6, ll. 25–29 (emphasis added).
Likewise, the specification elsewhere states that a force re-
gion “is identified around and under the bond pad charac-
terized by being susceptible to defects due to contacts to the
bond pad.” Id. at col 5, ll. 55–57. Based on those portions
of the specification, the Board found that the Oda reference
reads on the “force region” limitation.
Case: 21-1826 Document: 54 Page: 12 Filed: 11/15/2022
12 VLSI TECHNOLOGY LLC v. INTEL CORPORATION
We conclude that the correct construction of the term
“force region” is the definition provided in column 6 of the
’552 patent. That is, “force region” is construed to mean “a
region in which the interconnect layers are susceptible to
stress from the bond pad due to assembly or other pro-
cesses.” See ’552 patent, col. 6, ll. 25–29. Under that con-
struction, stresses on the interconnect layers resulting
from any assembly process, including wire bonding, would
fall within the scope of the term “force region.” The Board’s
treatment of that limitation is not inconsistent with our
construction. In fact, the Board relied on the same lan-
guage from column 6 of the ’552 patent in concluding that
the Oda reference discloses the “force region” of claim 1.
Intel, 2021 WL 388740, at *13.
The Board was able to resolve the case by construing
the term “force region” to include at least the area directly
under the bond pad and by not limiting the term to situa-
tions in which the flip chip bonding method is used. That
construction is not inconsistent with our construction. The
Board therefore properly found that the Oda reference, in
combination with other references cited to the Board, made
claims 1, 2, and 11 unpatentable.
3
VLSI raises two other challenges to the Board’s con-
struction of the term “force region.” First, it contends that
defining “force region” to mean a region at least directly
under the bond pad is legally flawed because the definition
restates a requirement that is already in the claims, which
refer in the case of claim 1 to a “force region at least under
the bond pad” and in the case of claim 11 to “a force region
at least under the first bond pad of the plurality of bond
pads.” That construction, according to VLSI, would violate
the principle that construing claims to include features of
the term that are already recited in the claims “would
make those expressly recited features redundant,” and that
Case: 21-1826 Document: 54 Page: 13 Filed: 11/15/2022
VLSI TECHNOLOGY LLC v. INTEL CORPORATION 13
“[i]deally” such constructions should be avoided. Apple,
Inc. v. Ameranth, 842 F.3d 1229, 1237 (Fed. Cir. 2016).
While a construction that introduces redundancy into
a claim is disfavored, it is not foreclosed. See SimpleAir,
Inc. v. Sony Ericsson Mobile Commc’ns AB, 820 F.3d 419,
429 (Fed. Cir. 2016). That is particularly true where, as in
this case, intrinsic evidence makes it clear that the “redun-
dant” construction is correct. To be sure, the claim lan-
guage in question could have been drafted more precisely.
But the meaning of the claim limitation referring to the
force region is clear: The claim identifies a region that is
“at least under the bond pad” and is “characterized by be-
ing susceptible to defects due [to] stress applied to the bond
pad,” and it refers to that region as the “force region.”
Thus, the “force region” limitation is best understood as
containing a definition of the force region, just as would be
the case if the language of the limitation had read “a region,
referred to as a force region, at least under the bond
pad . . .” or “a force region, i.e., a region at least under the
bond pad . . . .” As such, that language from the claims is
best viewed not as redundant, but merely as clumsily
drafted.
VLSI’s second argument is that when the parties to an
IPR proceeding agree to a particular construction of a claim
term, the Board is bound by that construction, regardless
of whether the construction to which the parties agree is
actually the proper construction of that term. See Oral Ar-
gument at 14:22–22:04; see also Appellant’s Reply Br. 12–
14. In support of its argument regarding that prohibition,
VLSI cites the Supreme Court’s decision in SAS Institute
v. Iancu, 138 S. Ct. 1348 (2018), and our decisions in Kon-
inklijke Philips N.V. v. Google LLC, 948 F.3d 1330 (Fed.
Cir. 2020), and In re Magnum Oil Tools International, Ltd.,
829 F.3d 1364 (Fed. Cir. 2016).
We disagree with VLSI’s reading of those cases. In
SAS, the Court held that the petition “guide[s] the life of
Case: 21-1826 Document: 54 Page: 14 Filed: 11/15/2022
14 VLSI TECHNOLOGY LLC v. INTEL CORPORATION
the litigation” in an IPR proceeding. SAS, 138 S. Ct. at
1356. In Koninklijke, we reaffirmed the principle that “it
is the petition, not the Board’s discretion, that defines the
metes and bounds of an [IPR].” Koninklijke, 948 F.3d at
1336. And in Magnum Oil, we held that “the Board must
base its decision on arguments that were advanced by a
party, and to which the opposing party was given a chance
to respond.” Magnum Oil, 829 F.3d at 1381. Each of those
cases stands for the proposition that the petition defines
the scope of the IPR proceeding and that the Board must
base its decision on arguments that were advanced by a
party and to which the opposing party was given a chance
to respond. None of those cases prohibits the Board from
construing claims in accordance with its own analysis. To
the contrary, we have held that the Board is not limited to
the claim constructions proffered by the parties, but may
adopt its own claim construction of a disputed claim term.
See, e.g., WesternGeco LLC v. ION Geophysical Corp., 889
F.3d 1308, 1328–29 (Fed. Cir. 2018); Uniloc 2017 LLC v.
Facebook Inc., 989 F.3d 1018, 1032–33 (Fed. Cir. 2021).
Although the parties may have agreed to apply the lan-
guage of the district court’s construction of “force region,”
this was not a case in which the parties actually agreed on
the proper claim construction. As we explained above, it is
true that Intel proposed to construe “force region” as “a re-
gion within the integrated circuit in which forces are ex-
erted on the interconnect structure when a die attach is
performed,” and that VLSI did not oppose that construc-
tion. But the parties’ purported agreement concealed a
fundamental disagreement about the meaning of that con-
struction. Because of the parties’ very different under-
standings of the meaning of the term “die attach,” it was
clear in the Board proceedings that there was no real
agreement on the proper claim construction. In that
Case: 21-1826 Document: 54 Page: 15 Filed: 11/15/2022
VLSI TECHNOLOGY LLC v. INTEL CORPORATION 15
situation, it was proper for the Board to adopt its own con-
struction of a disputed claim term. 1
For the foregoing reasons, we conclude that the Board’s
analysis of the “force region” limitation was not erroneous.
Because VLSI raises no other challenges to the Board’s de-
cision that claims 1, 2, and 11 are unpatentable, 2 we affirm
the Board’s decision with respect to those claims.
B
VLSI next argues that the Board erred in construing
the phrase “used for electrical interconnection not directly
connected to the bond pad,” which appears in claim 20 of
the ’552 patent. The Board held that this phrase encom-
passes interconnect layers that are “electrically connected
to each other but not electrically connected to the bond pad”
or to any other active circuitry. Id. at *10. VLSI argues
that the Board should have construed the phrase to require
1 In its reply brief, VLSI argues that judicial estoppel
and waiver preclude Intel from advocating for the Board’s
claim construction. Given that the proceedings before the
Board revealed that the parties disagreed as to the mean-
ing of the term “die attach,” it was appropriate for the
Board to adopt, and Intel to advocate for, a construction
that captured the essence of Intel’s position, i.e., that the
term “force region” referred to a region at least under the
bond pad that was susceptible to defects due to stress ap-
plied to the bond pad, regardless of the type of bonding that
was responsible for causing that stress.
2 We note that VLSI has expressly waived any due
process challenge to the Board’s construction of “force re-
gion.” See Oral Argument at 18:47–18:53. In particular,
VLSI has not suggested that it lacked notice of the Board’s
construction of that term or an opportunity to contest that
construction.
Case: 21-1826 Document: 54 Page: 16 Filed: 11/15/2022
16 VLSI TECHNOLOGY LLC v. INTEL CORPORATION
that the interconnect layers be connected to active circuitry
or have the capability to carry electricity.
VLSI argues that under its proposed construction, the
Kanaoka reference does not disclose the “used for electrical
interconnection” limitation of claim 20, because the metal-
lic layers are connected by the vias only to one another;
they do not carry electricity and are not electrically con-
nected to any other components.
We agree with VLSI that the Board’s construction of
the phrase “used for electrical interconnection not directly
connected to the bond pad” was too broad. Two aspects of
the claims make this point clear. First, the use of the words
“being used for” in the claim imply that some sort of actual
use of the metal interconnect layers to carry electricity is
required. Second, the recitation of “dummy metal lines”
elsewhere in claim 20 implies that the claimed “metal-con-
taining interconnect layers” are capable of carrying elec-
tricity; otherwise, there would be no distinction between
the dummy metal lines and the rest of the interconnect
layer.
The file history of the ’552 patent provides further sup-
port for that conclusion. The phrase “used for electrical in-
terconnection not directly connected to the bond pad” was
added to claim 20 during prosecution of the ’552 patent.
The underlined language below was added to claim 20 at
that time:
20. A method of making an integrated circuit hav-
ing a plurality of bond pads, comprising:
developing a circuit design of the integrated
circuit;
developing a layout of the integrated circuit ac-
cording to the circuit design, wherein the layout
comprises a plurality of metal-containing intercon-
nect layers that extend under a first bond pad of
the plurality of bond pads, at least a portion of the
Case: 21-1826 Document: 54 Page: 17 Filed: 11/15/2022
VLSI TECHNOLOGY LLC v. INTEL CORPORATION 17
plurality of metal-containing interconnect layers
underlying the first bond pad and not electrically
connected to the first bond pad as a result of being
used for electrical interconnection not directly con-
nected to the bond pad;
modifying the layout by adding dummy metal
lines to the plurality of metal-containing intercon-
nect layers to achieve a metal density of at least
forty percent for each of the plurality of metal-con-
taining interconnect layers; and
forming the integrated circuit comprising the
dummy metal lines.
J.A. 272–73 (emphasis added). The Board observed that
the amendment to claim 20 appeared to address what “the
metal interconnect layers could not be attached to (i.e., the
bond pad), rather than limiting what [they] must be con-
nected to.” Intel, 2021 WL 388740, at *9.
The problem with that observation is that it does not
explain the addition of the phrase “as a result of being used
for electrical interconnection not directly to the bond pad.”
That phrase could be eliminated from the inventor’s pro-
posed amendment and the claim would still require that
the interconnect layers not be electrically connected to the
bond pad. Presumably, that phrase was meant to serve
some purpose and should be construed to have some inde-
pendent meaning. See Merck & Co. v. Teva Pharms. USA,
Inc., 395 F.3d 1364, 1372 (Fed. Cir. 2005) (“A claim con-
struction that gives meaning to all the terms of the claim
is preferred over one that does not do so.”). Indeed, the ap-
plicant argued in the context of claim 1 that “none of the
area under the [prior art] bond pad may be used for wiring
or interconnect[ion] unrelated to the pad,” J.A. 8176, and
argued that claim 20 was allowable for the same reason,
Case: 21-1826 Document: 54 Page: 18 Filed: 11/15/2022
18 VLSI TECHNOLOGY LLC v. INTEL CORPORATION
J.A. 8178. 3 In context, that independent meaning of “as a
result of being used for electrical interconnection not di-
rectly to the bond pad” would seem to require that the in-
terconnect layers be used for conducting electricity to
components other than the bond pad.
In support of the Board’s construction, Intel points out
that VLSI’s expert admitted that two interconnect layers
can be “electrically connected” even if they do not carry
electricity and even if they are not connected to any struc-
ture other than each other. See J.A. 8555–56. The problem
with that argument is that the claim does not use the words
“electrically connected.” Instead, it recites the phrase “be-
ing used for electrical interconnection.” And, as noted, the
words “being used for” imply that the interconnect layers
are at least capable of carrying electricity.
We therefore adopt VLSI’s proposed construction of
“used for electrical interconnection.” That is, the phrase
requires the interconnect layers to be capable of carrying
electricity or be connected to active circuitry. The Board’s
construction of that phrase must therefore be reversed. We
remand the patentability determination of claim 20 to the
Board to assess Intel‘s obviousness arguments regarding
that claim in light of our construction of the “used for elec-
trical interconnection” limitation.
III
In summary, the Board’s treatment of the term “force
region” was not erroneous, and its decision that claims 1,
2, and 11 are unpatentable is therefore affirmed. Because
the Board erred in construing the phrase “used for electri-
cal interconnection,” we reverse the Board’s construction of
3 Claim 1 was amended, in part, to recite: “a func-
tional metal line underlying the bond pad that is not elec-
trically connected to the bond pad and is used for wiring or
interconnect to active circuitry.” J.A. 8171.
Case: 21-1826 Document: 54 Page: 19 Filed: 11/15/2022
VLSI TECHNOLOGY LLC v. INTEL CORPORATION 19
that phrase and remand for further proceedings regarding
claim 20.
No costs.
AFFIRMED-IN-PART, REVERSED-IN-PART, AND
REMANDED | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483844/ | Case: 21-2270 Document: 59 Page: 1 Filed: 11/15/2022
NOTE: This disposition is nonprecedential.
United States Court of Appeals
for the Federal Circuit
______________________
PHARMACYCLICS LLC, JANSSEN BIOTECH, INC.,
Plaintiffs-Appellees
v.
ALVOGEN, INC., NATCO PHARMA LIMITED,
Defendants-Appellants
______________________
2021-2270
______________________
Appeal from the United States District Court for the
District of Delaware in No. 1:19-cv-00434-CFC-CJB, Chief
Judge Colm F. Connolly.
______________________
Decided: November 15, 2022
______________________
CHRISTOPHER NEIL SIPES, Covington & Burling LLP,
Washington, DC, argued for all plaintiffs-appellees. Plain-
tiff-appellee Pharmacyclics LLC also represented by ERICA
NICOLE ANDERSEN, BRIANNE BHARKHDA.
IRENA ROYZMAN, Kramer Levin Naftalis & Frankel
LLP, New York, NY, for plaintiff-appellee Janssen Biotech,
Inc. Also represented by CHRISTINE WILLGOOS; HANNAH
YUNKYUNG LEE, DANIEL DAVID WILLIAMS, Redwood Shores,
CA.
Case: 21-2270 Document: 59 Page: 2 Filed: 11/15/2022
2 PHARMACYCLICS LLC v. ALVOGEN, INC.
SIEGMUND Y. GUTMAN, Proskauer Rose LLP, Los Ange-
les, CA, argued for defendants-appellants. Also repre-
sented by DAVID M. HANNA; JOHN E. ROBERTS, Boston, MA.
______________________
Before CHEN, BRYSON, and HUGHES, Circuit Judges.
BRYSON, Circuit Judge.
Appellees Pharmacyclics LLC and Janssen Biotech,
Inc., (collectively, “Pharmacyclics”) own several patents re-
lated to the compound ibrutinib, which is the active ingre-
dient in Pharmacyclics’ branded drug Imbruvica. Ibrutinib
is one of a genus of compounds, known as “BTK inhibitors,”
that block the protein Bruton’s tyrosine kinase (“BTK”).
Imbruvica is used to treat a cancer of the immune system
known as mantle cell lymphoma (“MCL”), including the
“relapsed” or “refractory” type of MCL (“R/R MCL”). 1
In November 2018, appellants Alvogen, Inc., and Natco
Pharma Limited (collectively, “Alvogen”) filed an abbrevi-
ated new drug application (“ANDA”) to market a generic
version of Imbruvica. Pursuant to procedures set forth in
the Hatch-Waxman Act, Pharmacyclics then brought this
lawsuit charging Alvogen with infringement of a number
of Pharmacyclics’ patents relating to ibrutinib. The district
court held a bench trial and determined that all of the as-
serted claims were infringed and not invalid. We affirm.
I
A
Pharmacyclics originally asserted dozens of claims
across 17 patents, but by the time of trial, it had reduced
the number of asserted claims to five: claim 10 of U.S.
1 R/R MCL is MCL that occurs in patients who have
already received at least one prior therapy for MCL.
Case: 21-2270 Document: 59 Page: 3 Filed: 11/15/2022
PHARMACYCLICS LLC v. ALVOGEN, INC. 3
Patent No. 8,008,309 (“the ’309 patent”), claim 2 of U.S. Pa-
tent No. 8,754,090 (“the ’090 patent”), claim 5 of U.S. Pa-
tent No. 9,725,455 (“the ’455 patent”), and claims 30 and
37 of U.S. Patent No. 9,655,857 (“the ’857 patent”).
Claim 10 of the ’309 patent recites the ibrutinib com-
pound:
10. The compound of claim 1 [which claims a genus
of BTK inhibitor compounds] having the formula 1-
((R)-3-(4-amino-3-(4-phenoxyphenyl)-1H-pyra-
zolo[3,4-d]pyrimidin-1-yl)piperidin-1-yl)prop-2-en-
1-one.
’309 patent, claim 10.
Claim 2 of the ’090 patent, which depends from claim 1
of that patent, recites a method of treating MCL using ib-
rutinib at an oral dose of about 560 mg:
1. A method for treating mantle cell lymphoma in
an individual who has already received at least one
prior therapy for mantle cell lymphoma comprising
administering to the individual once per day be-
tween about 420 mg to about 840 mg of an oral dose
of an inhibitor of Bruton’s tyrosine kinase (Btk)
having the structure:
Case: 21-2270 Document: 59 Page: 4 Filed: 11/15/2022
4 PHARMACYCLICS LLC v. ALVOGEN, INC.
2. The method of claim 1, wherein the once per
day oral dose is about 560 mg.
’090 patent, claims 1–2.
Claim 5 of the ’455 patent, which depends from claim 1
of that patent, recites a crystalline form of ibrutinib:
1. A crystalline form A of [ibrutinib] that has an
X-ray powder diffraction (XRPD) pattern compris-
ing 2-Theta peaks at 5.7±0.1º, 18.9±0.1º, and
21.3±0.1º.
5. The crystalline form of claim 1, wherein the X-
ray powder diffraction (XRPD) pattern further
comprises 2-Theta peaks at 13.6±0.1º, 16.1±0.1º,
and 21.6±0.1º.
’455 patent, claims 1, 5.
Claims 30 and 37 of the ’857 patent recite tablet formu-
lations for ibrutinib:
30. The high-load solid tablet formulation of claim
1 [which recites a genus tablet formulation for ib-
rutinib], consisting essentially of:
a) about 70% w/w of ibrutinib,
b) about 14% w/w of lactose monohydrate,
c) about 5% w/w of microcrystalline cellu-
lose,
d) about 2% w/w of polyvinylpyrrolidone,
e) about 7% w/w of croscarmellose sodium,
f) about 1% w/w of sodium lauryl sulfate,
g) about 0.5% w/w of colloidal silicon diox-
ide, and
h) about 0.5% w/w of magnesium stearate.
37. The solid tablet formation of claim 27 [which
recites a genus tablet formulation for ibrutinib in
an amount of about 70 mg to about 840 mg] consist-
ing essentially of
Case: 21-2270 Document: 59 Page: 5 Filed: 11/15/2022
PHARMACYCLICS LLC v. ALVOGEN, INC. 5
a) about 69% w/w to about 71% w/w of ib-
rutinib,
b) about 13% w/w to about 15% w/w of lac-
tose monohydrate,
c) about 2% w/w to about 5% w/w of micro-
crystalline cellulose,
d) about 1% w/w to about 3% w/w of polyvi-
nylpyrrolidone,
e) about 6% w/w to about 8% w/w of croscar-
mellose sodium,
f) about 1% w/w to about 4% w/w of sodium
lauryl sulfate,
g) about 0.4% w/w to about 0.6% w/w of col-
loidal silicon dioxide, and
h) about 0.4% w/w to about 0.6% w/w of
magnesium stearate.
’857 patent, claims 30, 37.
B
At trial, Alvogen stipulated that it infringed the as-
serted claims of the ’309, ’090, and ’455 patents, and the
district court found that Alvogen infringed the asserted
claims of the ’857 patent. Pharmacyclics LLC v. Alvogen
Pine Brook LLC, 556 F. Supp. 3d 377, 385–86 (D. Del.
2021). Alvogen alleged that each of the asserted claims is
invalid, based on various theories. The district court re-
jected each of those theories and held that none of the
claims had been proved invalid by clear and convincing ev-
idence. See id. at 424.
1
Alvogen argued that claim 10 of the ’309 patent (the
compound claim) was anticipated by an article referred to
as “Pan.” The parties did not dispute that the Pan article
describes ibrutinib, but Pharmacyclics argued that the in-
vention of claim 10 of the ’309 patent pre-dated the publi-
cation of Pan. Id. at 390.
Case: 21-2270 Document: 59 Page: 6 Filed: 11/15/2022
6 PHARMACYCLICS LLC v. ALVOGEN, INC.
The Pan article was published on December 12, 2006,
and the application for the ’309 patent was filed on Decem-
ber 28, 2006. Id. However, Pharmacyclics argued that the
date of invention of claim 10 was the date that one of two
provisional patent applications was filed: either September
22, 2006, or October 6, 2006. 2 Id. Alvogen argued that the
provisional applications did not establish priority because
they did not satisfy the written description and enablement
requirements of 35 U.S.C. § 112 with respect to the ibru-
tinib compound. Id. at 390–91. Therefore, Alvogen argued,
the Pan article anticipated claim 10 of the ’309 patent. Id.
The provisional applications disclosed ibrutinib and
noted that the synthesis of ibrutinib “was accomplished us-
ing a procedure analogous to that described for” another
compound, referred to as “[C]ompound 4.” See J.A. 18001–
02. The procedure described for Compound 4 begins with
another compound, “[I]ntermediate 2.” J.A. 16611, 18001.
Alvogen argued that because the provisional applications
did not disclose how to synthesize Intermediate 2, Com-
pound 4 (and, by extension, ibrutinib) had not been ena-
bled. Pharmacyclics, 556 F. Supp. 3d at 393.
The district court found that “the disclosure of the
structure of Intermediate 2 in the Compound 4 Scheme
would have enabled a skilled artisan to synthesize Inter-
mediate 2.” Id. at 394. The court based that finding on two
considerations. First, the court observed that “[t]he provi-
sional applications have a bracketed citation to the World
Intellectual Property Organization patent WO 2001019829
[“WO ’829”] immediately after they mention Intermediate
2.” Id. at 393. The court found that “[a]n artisan of ordi-
nary skill would have understood that the inventors cited
[WO ’829] to explain how to synthesize Intermediate 2.” Id.
2 Those applications are U.S. Provisional Patent Ap-
plication Nos. 60/826,720 and 60/828,590.
Case: 21-2270 Document: 59 Page: 7 Filed: 11/15/2022
PHARMACYCLICS LLC v. ALVOGEN, INC. 7
Second, and in the alternative, the district court found
that “an artisan of ordinary skill could also have synthe-
sized Intermediate 2 without the teachings of [WO ’829]
based on the structure of Intermediate 2 disclosed in the
diagram of the Compound 4 Scheme.” Id. In so finding,
the court relied on testimony from Pharmacyclics’ expert,
Dr. Paul Reider, who testified that “his undergraduate stu-
dents—whose abilities would fall below that of [an artisan
of ordinary skill]—would have been able to synthesize In-
termediate 2 . . . by working backwards from its structure
to known starting compounds.” Id. at 393–94.
Based on those findings, the district court concluded
that the provisional applications contained adequate writ-
ten description support for and sufficiently enabled claim
10 of the ’309 patent. Id. at 398. Accordingly, the court
concluded that claim 10 of the ’309 patent was entitled to
an invention date of September 22, 2006, and was not an-
ticipated by the Pan article. Id.
2
Alvogen argued that claim 2 of the ’090 patent (the
method-of-treatment claim) was not adequately described
or enabled, was obvious in view of four prior art references,
and was invalid for obviousness-type double patenting. Id.
at 398.
As for written description, the district court found that
“ibrutinib is the only BTK inhibitor identified by name in
the Summary of the Invention and is the only BTK [inhib-
itor] identified for the treatment of R/R MCL.” Id. at 401.
For those reasons, the court found that a skilled artisan
would have recognized ibrutinib as “the inventor’s pre-
ferred BTK inhibitor for treating R/R MCL.” Id. The court
then referred to “Example 13” in the written description,
which discloses a protocol for a Phase II clinical trial in-
volving the use of BTK inhibitors at a dose of 560 mg per
day to treat R/R MCL. Id. (citing ’090 patent, col. 141, line
58, through col. 142, line 27). The court found that
Case: 21-2270 Document: 59 Page: 8 Filed: 11/15/2022
8 PHARMACYCLICS LLC v. ALVOGEN, INC.
“[a]lthough Example 13 does not explicitly identify a spe-
cific BTK inhibitor to use,” a skilled artisan “would under-
stand to use the inventor’s preferred BTK inhibitor (i.e.,
ibrutinib) in the Phase II protocol described in Example
13.” Id. The court therefore concluded that Alvogen had
not shown that claim 2 of the ’090 patent was not ade-
quately described. Id. at 407.
Alvogen’s arguments on enablement largely mirrored
its arguments on written description. The district court
concluded that claim 2 had been enabled because “an arti-
san of ordinary skill would be able to follow the protocol of
Example 13 using ibrutinib and thus practice the method
described in claim 2.” Id. at 406.
On the issue of obviousness, Alvogen proposed a com-
bination of four prior art references: U.S. Patent Publica-
tion No. 2008/0076921 (“the ’921 publication”); U.S. Patent
No. 8,952,015 (“the ’015 patent”); an article referred to as
“Pollyea”; and a December 2009 press release. Id. at 401–
02. Alvogen also sought to rely on another reference, “Ad-
vani,” but the district court determined that Advani could
not be considered part of Alvogen’s obviousness combina-
tion and would instead be treated as background art. Id.
at 402–03 n.7.
The ’015 patent discloses ibrutinib by its chemical
name, and it also discloses dozens of other compounds ei-
ther by name or by structure. 3 ’015 patent, col. 4, ll. 1–26;
id. at col. 36, line 30 through col. 51, line 37. The written
description of the ’015 patent discloses a general dose range
of “0.02–5000 mg per day” or “about 1–1500 mg per day” to
3 As the district court observed, the ’921 publication
and the ’015 patent “share essentially the same written de-
scription and differ only in their claims.” Pharmacyclics,
556 F. Supp. 3d at 401. Allusions to the ’015 patent in this
opinion therefore apply to both references.
Case: 21-2270 Document: 59 Page: 9 Filed: 11/15/2022
PHARMACYCLICS LLC v. ALVOGEN, INC. 9
treat a variety of conditions. Id. at col. 84, ll. 31–34. It
adds that a “therapeutically effective amount[] may be de-
termined by routine experimentation, including but not
limited to a dose escalation clinical trial.” Id. at col. 21, ll.
49–52. The ’015 patent, however, does not specifically dis-
close using ibrutinib to treat R/R MCL. Pharmacyclics, 556
F. Supp. 3d at 401.
The Pollyea article reported the interim results of a
Phase I dose escalation study of ibrutinib. The article dis-
closed dosing based on the patient’s weight rather than us-
ing a fixed dose of about 560 mg per day. J.A. 16671. It
further disclosed that none of the seven patients involved
in the trial had exhibited complete or partial responses to
treatment. See J.A. 16672. The December 2009 press re-
lease disclosed subsequent interim results for the Pollyea
study and reported that two patients who suffered from
had R/R MCL exhibited a partial response to the treat-
ment. See J.A. 15041, 16451.
The district court found that a skilled artisan would not
have been motivated to combine Alvogen’s references to
treat R/R MCL with a once-daily dose of about 560 mg of
ibrutinib, for three reasons. First, the district court found
that a skilled artisan would not have interpreted the re-
sults of the study disclosed in Pollyea “as showing that ib-
rutinib could be used as a treatment for R/R MCL,” given
the “unpredictable nature of oncology” and that only two
R/R MCL patients in the study had exhibited any response
to the treatment. Pharmacyclics, 556 F. Supp. 3d at 403.
Second, the court found that none of the references, alone
or in combination, would have motivated a skilled artisan
to use a once-daily dose of about 560 mg. Id. That was
because “[t]he only references that mention R/R
MCL . . . disclose a weight-based dosing regimen,” and the
evidence did not suggest that conventional methods of de-
termining an effective dose “would lead to a dose of about
560 mg.” Id. Third, the court found that “safety concerns
Case: 21-2270 Document: 59 Page: 10 Filed: 11/15/2022
10 PHARMACYCLICS LLC v. ALVOGEN, INC.
about ibrutinib would have discouraged an artisan of ordi-
nary skill from treating R/R MCL with ibrutinib.” Id.
For similar reasons, the district court found that a
skilled artisan would not have had a reasonable expecta-
tion of success in treating R/R MCL with a daily dose of
about 560 mg of ibrutinib. Id. at 404. The court also found
that six secondary considerations favored nonobviousness:
a long-felt but unmet need, the failure of others, skepti-
cism, unexpected results, praise, and commercial success.
Id. at 404–06. The court therefore concluded that claim 2
of the ’090 patent would not have been obvious because of
the lack of a motivation to combine the references, the lack
of a reasonable expectation of success, and the secondary
considerations of nonobviousness. Id. at 407.
On the issue of obviousness-type double patenting, Al-
vogen argued that it was entitled to a presumption of obvi-
ousness because claim 20 of the ’015 patent recites the
administration of a “therapeutically effective amount” of
ibrutinib, which the specification of that patent identified
as falling within the range of 1 mg to 1500 mg. Id. at 407.
The dosage recited in claim 2 of the ’090 patent, about 560
mg, would fall within that range. Id.
The district court rejected Alvogen’s presumption-of-
obviousness argument for four reasons. First, the court
noted that there were other differences, besides the dosage
amount, between claim 20 of the ’015 patent and claim 2 of
the ’090 patent. Id. at 408 (citing Tris Pharma, Inc. v. Ac-
tavis Labs. FL, Inc., 503 F. Supp. 3d 183, 203 (D. Del.
2020)). Second, the court pointed out that the breadth of
the ranges in the written description of the ’015 patent
weighed against applying the presumption of obviousness.
Id. Third, the court restated its earlier finding that “rou-
tine experimentation would not have resulted in a dose
amount of 560 mg.” Id. at 409. And fourth, the court found
that the evidence presented by Pharmacyclics at trial
“would have rebutted any presumption of obviousness.” Id.
Case: 21-2270 Document: 59 Page: 11 Filed: 11/15/2022
PHARMACYCLICS LLC v. ALVOGEN, INC. 11
3
Alvogen argued that claim 5 of the ’455 patent (the
crystalline form claim) was inherently anticipated by the
clinical study disclosed in the Pollyea article and another
reference, “Fowler,” which disclosed updated results for the
same study. Id. at 413. Alvogen also argued that the claim
was obvious in view of a combination of four references. Id.
at 412.
The written description of the ’455 patent indicates
that ibrutinib exists in multiple crystalline forms and in an
amorphous form. ’455 patent, col. 10, ll. 17–50. Claim 5 of
the ’455 patent recites one of those forms, “Form A,” which
is “the most stable form of ibrutinib currently known.”
Pharmacyclics, 556 F. Supp. 3d at 410.
On the issue of inherent anticipation, the study dis-
closed in the Pollyea and Fowler references used a BTK in-
hibitor known as PCI-32765. J.A. 16466, 16671. The
district court found that PCI-32765 refers to ibrutinib gen-
erally, and not to any specific form of ibrutinib. Pharma-
cyclics, 556 F. Supp. 3d at 410. But the evidence presented
at trial showed that every lot of PCI-32765 used in the
study was Form A of ibrutinib. See Appellants’ Br. 34–35.
The district court concluded that Alvogen had not
proved that the study disclosed in Pollyea and Fowler
“could only be conducted with crystalline Form A of ibru-
tinib.” Pharmacyclics, 556 F. Supp. 3d at 414. The court
added that “a skilled artisan, reviewing Pollyea or Fowler,
would not have necessarily recognized that Pollyea’s or
Fowler’s authors used crystalline Form A for their reported
clinical study.” Id. (citing Endo Pharms. Sols., Inc. v. Cus-
topharm Inc., 894 F.3d 1374, 1382 (Fed. Cir. 2018))
(cleaned up). Accordingly, the court determined that claim
5 of the ’455 patent was not inherently anticipated by the
study disclosed in Pollyea and Fowler. See id.
Case: 21-2270 Document: 59 Page: 12 Filed: 11/15/2022
12 PHARMACYCLICS LLC v. ALVOGEN, INC.
On the issue of obviousness, Alvogen argued that claim
5 of the ’455 patent would have been obvious in view of the
following four references: an article referred to as “Ho-
nigberg”; U.S. Patent No. 7,514,444 (“the ’444 patent”); and
two general references addressing polymorphism, “Miller”
and “Bauer.” 4 Id. at 410–11.
The Honigberg reference discloses the chemical struc-
ture of ibrutinib and notes that ibrutinib had “shown prom-
ising clinical activity” as a “potent, selective and
irreversible [BTK] inhibitor.” J.A. 16472. Similarly, the
’444 patent discloses the chemical name and structure of
ibrutinib, along with other compounds, as well as a method
for synthesizing ibrutinib. ’444 patent, col. 4, ll. 4–6; id. at
col. 97, ll. 1–35. The patent further states that the dis-
closed compounds “may be in various forms,” including
crystalline forms, but does not assert that any crystalline
forms of ibrutinib actually exist. Id. at col. 60, ll. 38–49.
The Miller and Bauer references are general references
on polymorphism. Neither mentions ibrutinib or teaches
how to make a crystalline form of ibrutinib. See generally
J.A. 17837–93 (Miller); J.A. 17401–09 (Bauer). Miller
“gives a general introduction to crystal forms, crystal sta-
bility, crystallization, and polymorph screening.” Pharma-
cyclics, 556 F. Supp. 3d at 411. Bauer teaches that
“crystalline solids are usually highly stable” but that the
polymorphs of a particular drug that will form under cer-
tain conditions “cannot be predicted.” Id. (citing J.A.
17402).
The district court found that a skilled artisan “would
have been motivated to develop a crystalline form of
4 “Polymorphism” refers to a compound having more
than one crystalline form. Pharmacyclics, 556 F. Supp. 3d
at 409. The crystalline forms of such a compound are re-
ferred to as “polymorphs.” Id.
Case: 21-2270 Document: 59 Page: 13 Filed: 11/15/2022
PHARMACYCLICS LLC v. ALVOGEN, INC. 13
ibrutinib” based on the four references identified by Al-
vogen, but that none of those references “would have moti-
vated an artisan to develop a crystalline form of ibrutinib
with the claimed 2-Theta peaks,” i.e., Form A. Id. at 412.
That was because none of the references disclosed such a
crystalline form or “suggested that [Form A] would be more
desirable than any other crystalline form.” Id.
The district court similarly found that a skilled artisan
“could not reasonably have expected to make a crystalline
form of ibrutinib with the six claimed 2-Theta peaks.” Id.
The court based that finding on the fact that “discovering
new crystalline forms is challenging and unpredictable,”
and that the prior art did not teach which of “numerous
variables in the crystallization process” would have been
“key to crystallizing ibrutinib.” Id. The court also found
that two secondary considerations weighed in favor of non-
obviousness: unexpected benefits and copying. Id. at 412–
13.
In view of its findings regarding the motivation to com-
bine, the reasonable expectation of success, and the second-
ary considerations, the court concluded that claim 5 of the
’455 patent would not have been obvious. Id. at 414.
4
Alvogen argued that claims 30 and 37 of the ’857 patent
(the tablet formulation claims) were invalid for lack of ad-
equate written description and obviousness. Id.
The district court observed that the written description
of the ’857 patent “recites verbatim the formulations
claimed in claims 30 and 37.” Id. at 415 (citing ’857 patent,
col. 43, line 47 through col. 44, line 6). Second, the court
noted that the specification discloses an ibrutinib tablet
formulation, BK21A, which satisfies the limitations of
claims 30 and 37. Id. at 416 (citing ’857 patent at Table
1F). Third, the court noted that the specification describes
experiments conducted using the BK21A formulation at
Case: 21-2270 Document: 59 Page: 14 Filed: 11/15/2022
14 PHARMACYCLICS LLC v. ALVOGEN, INC.
doses of 140 mg and 560 mg. Id. (citing ’857 patent at Ta-
bles 7, 8). In view of those disclosures, the court found that
a skilled artisan could have scaled the formulations dis-
closed in the ’857 patent “to make a tablet with the full
range of claimed ibrutinib amounts.” Id. Accordingly, the
court concluded that claims 30 and 37 were not invalid for
lack of adequate written description. Id. at 424.
On the issue of obviousness, the district court con-
cluded that claims 30 and 37 would not have been obvious
in view of Alvogen’s proposed combination of references.
Id. at 423–24. That ruling is not at issue in this appeal.
II
Alvogen challenges several of the district court’s deter-
minations. First, Alvogen argues that the court erred in
rejecting Alvogen’s written description and obviousness
challenges to claim 2 of the ’090 patent. Second, Alvogen
argues that the court erred in concluding that claim 5 of
the ’455 patent was neither inherently anticipated nor ob-
vious. Third, Alvogen argues that the court erred in reject-
ing Alvogen’s written description challenges to claims 30
and 37 of the ’857 patent. Fourth, Alvogen argues that the
court erred in concluding that claim 10 of the ’309 patent
was not anticipated by the Pan reference. We reject each
of Alvogen’s arguments.
On appeal from a bench trial, we review the district
court’s legal conclusions de novo and the district court’s fac-
tual findings for clear error. UCB, Inc. v. Watson Lab’ys
Inc., 927 F.3d 1272, 1286 (Fed. Cir. 2019). The clear error
standard requires courts to affirm the finding below unless
we have a “definite and firm conviction that a mistake has
been made.” Biogen Int’l GMBH v. Mylan Pharms. Inc., 18
F.4th 1333, 1341 (Fed. Cir. 2021) (citation omitted). Antic-
ipation and written description are issues of fact. Id.; UCB,
927 F.3d at 1286. We review the legal conclusion of obvi-
ousness de novo and any underlying factual findings for
clear error. UCB, 927 F.3d at 1286.
Case: 21-2270 Document: 59 Page: 15 Filed: 11/15/2022
PHARMACYCLICS LLC v. ALVOGEN, INC. 15
A
Alvogen first argues that the district court erred in de-
termining that claim 2 of the ’090 patent contained ade-
quate written description support, was enabled, and would
not have been obvious.
1
The specification of the ’090 patent discloses two clini-
cal trial protocols relating to treating R/R MCL with a BTK
inhibitor. One protocol, “Example 7,” discloses treating
R/R MCL using a genus of BTK inhibitors dosed based on
a patient’s weight. ’090 patent, col. 133, ll. 42–55. The
other, “Example 13,” discloses treating R/R MCL using a
broader genus of BTK inhibitors at a dose of 560 mg per
day. Id. at col. 141, line 58 through col. 142, line 7. The
summary of the invention section of the ’090 patent further
discloses treating R/R MCL with ibrutinib. Id. at col. 4, ll.
59–67. Alvogen argues that the district court “cherry-
pick[ed]” those aspects of the specification in finding that
there was written description support for claim 2. Appel-
lants’ Br. 16.
The written description requirement is satisfied if the
specification conveys with reasonable clarity to those
skilled in the art that the inventor was in possession of the
claimed invention. Biogen, 18 F.4th at 1341–42. When a
specification discloses its subject matter in terms of a broad
genus, we have required that the specification “provide suf-
ficient ‘blaze marks’ to guide a reader through the forest of
disclosed possibilities” toward the claimed invention. No-
vozymes A/S v. DuPont Nutrition Biosciences APS, 723
F.3d 1336, 1346 (Fed. Cir. 2013) (quoting In re Ruschig, 379
F.2d 990, 994–95 (C.C.P.A. 1967)).
Alvogen argues that the specification of the ’090 patent
did not contain sufficient blaze marks, because a skilled ar-
tisan would not have understood ibrutinib to be the inven-
tor’s preferred BTK inhibitor. As the district court
Case: 21-2270 Document: 59 Page: 16 Filed: 11/15/2022
16 PHARMACYCLICS LLC v. ALVOGEN, INC.
observed, however, “ibrutinib is the only BTK inhibitor
identified by name in the Summary of the Invention and is
the only BTK [inhibitor] identified for the treatment of R/R
MCL” in the ’090 patent. Pharmacyclics, 556 F. Supp. 3d
at 401. In view of those disclosures, we hold that it was not
clearly erroneous for the district court to find that the ’090
patent demonstrated that ibrutinib was the inventor’s pre-
ferred BTK inhibitor.
Alvogen also argues that the protocol disclosed in Ex-
ample 13, which describes treating R/R MCL with a genus
of BTK inhibitors at a dose of 560 mg per day, does not de-
scribe the full claimed scope of “about 560 mg.” That argu-
ment is unpersuasive in view of the fact that the summary
of the invention explicitly discloses one possible dosage of
ibrutinib to be “about 560 mg/day.” ’090 patent, col. 5, ll.
8–11.
This case is unlike our recent decision in Biogen, in
which we upheld a district court’s ruling that a method-of-
treatment claim lacked adequate written description sup-
port. Biogen, 18 F.4th at 1342–45. In that case, the
claimed dosage of 480 mg was “listed only once in the entire
specification,” and it appeared “at the end of one range
among a series of ranges.” Id. at 1343. By contrast, the
dosage of “about 560 mg/day” recited in claim 2 of the ’090
patent is expressly recited by itself (rather than as part of
a range) in the specification, and a 560 mg daily dose ap-
pears again in the specification’s discussion of Example 13.
Moreover, our standard of review is significant; in Biogen,
we held that the district court did not clearly err when it
found that the claim lacked written description support. 18
F.4th at 1346. In this case, the court found the opposite:
that claim 2 was adequately described by the specification.
Viewing the written description of the ’090 patent in its
entirety, we hold that the district court did not clearly err
in finding that claim 2 of the ’090 was adequately sup-
ported by the written description.
Case: 21-2270 Document: 59 Page: 17 Filed: 11/15/2022
PHARMACYCLICS LLC v. ALVOGEN, INC. 17
2
Alvogen’s argument on the issue of enablement is sim-
ilar to its argument on written description. Specifically,
Alvogen argues that the specification does not teach a
skilled artisan how to practice claim 2 without undue ex-
perimentation.
The crux of Alvogen’s argument is that Example 13 dis-
closes a dose of exactly 560 mg per day, rather than the full
claimed scope of “about” 560 mg per day. However, the
summary of the invention explicitly discloses a dose of
“about 560 mg/day.” ’090 patent, col. 5, ll. 8–11. With re-
spect to enablement, the district court concluded that a
skilled artisan “would be able to follow the protocol of Ex-
ample 13 using ibrutinib and thus practice the method de-
scribed in claim 2.” Pharmacyclics, 556 F. Supp. 3d at 406.
We discern no error in that conclusion.
3
As to the obviousness of claim 2 of the ’090 patent, Al-
vogen first challenges the district court’s finding that a
skilled artisan would not have been motivated to treat R/R
MCL with ibrutinib. Alvogen argues that “when claim 20
of the ’015 patent discloses treating MCL with ibrutinib,”
it necessarily discloses the treatment of R/R MCL. Appel-
lant’s Br. 23. That argument runs headlong into the dis-
trict court’s factual finding that “a disclosure of treating
MCL with a drug” would not be interpreted by a skilled ar-
tisan “as evidence that the drug would be effective at treat-
ing R/R MCL.” Pharmacyclics, 556 F. Supp. 3d at 403 n.8.
Alvogen also argues that the district court improperly
discounted the disclosure in the December 2009 press re-
lease that two R/R MCL patients had exhibited a partial
response to ibrutinib. But given the small sample size, we
are not persuaded that the district court clearly erred in
finding that a skilled artisan “would not interpret th[o]se
results as showing that ibrutinib could be used as a
Case: 21-2270 Document: 59 Page: 18 Filed: 11/15/2022
18 PHARMACYCLICS LLC v. ALVOGEN, INC.
treatment for R/R MCL,” particularly in view of the fact
that “less than five percent of oncology drugs that enter a
Phase I trial ultimately receive FDA approval.” Id. at 403. 5
Alvogen also argues that the district court failed to
properly account for the admission in the ’015 patent that
a “therapeutically effective amount” of ibrutinib could be
determined using “routine experimentation.” See ’015 pa-
tent, col. 21, ll. 49–52. The district court found, however,
that a “typical 3+3 dose escalation study . . . would have
reached the [maximum tolerated dose] as the dosage,”
which for ibrutinib is “above 560 mg.” Pharmacyclics, 556
F. Supp. 3d at 403. The district court further found that
“[t]o reach the claimed dose of about 560 mg, an artisan
would need to conduct a study using pharmacodynamic
endpoints,” which Alvogen’s combination of references did
not disclose. Id. Although Alvogen suggests that “other
routine methods could achieve the same claimed dose,” it
offers no evidence of what such a routine method would be.
See Appellants’ Br. 28. We discern no error in the district
court’s findings on that issue, and we therefore hold that
the district court did not clearly err in determining that the
prior art would not have motivated a skilled artisan to use
a dose of about 560 mg per day.
5 Relatedly, Alvogen argues that the district court
erred by failing to require a demonstration of efficacy for
purposes of written description and enablement but “im-
posing an efficacy requirement for obviousness.” Appel-
lants’ Br. 27. The court imposed no such requirement for
obviousness. Alvogen argued to the district court that a
skilled artisan would be motivated to combine Pollyea and
the press release with the ’015 patent because the data
from the Pollyea study “show[ed] that ibrutinib is effica-
cious in treating R/R MCL.” J.A. 12350. The court merely
rejected that argument, and it did not err in doing so.
Case: 21-2270 Document: 59 Page: 19 Filed: 11/15/2022
PHARMACYCLICS LLC v. ALVOGEN, INC. 19
Further as to the motivation to combine, Alvogen ar-
gues that the district court erred in relying on the testi-
mony of Dr. Reider regarding safety concerns involving
ibrutinib. According to Alvogen, Dr. Reider’s testimony fo-
cuses on safety concerns as of 2006, whereas the obvious-
ness of claim 2 should be measured from 2010. Alvogen
ignores that the district court also relied on testimony from
another expert, Dr. Simon Rule, in finding that “[a]n arti-
san of ordinary skill would not have considered irreversible
BTK inhibitors or molecules with a Michael acceptor
[which were considered to be dangerous] to be promising
drug classes in June 2010.” Id. at 399 (citing J.A. 15002,
15050). Alvogen’s only evidence that a skilled artisan
would have considered ibrutinib to be safe as of 2010 is the
set of references relating to the clinical trial described in
Pollyea. See Appellants’ Br. 28–29. We do not find that
those references demonstrate that the district court clearly
erred in finding that safety concerns weighed against a mo-
tivation to combine.
Alvogen next argues that the district court erred in not
applying the presumption of obviousness that Alvogen ar-
gues was created by claim 20 of the ’015 patent. We reject
that argument for two reasons.
First, a presumption of obviousness may be invoked
“when the only difference from the prior art is a difference
in the range or value of a particular variable.” In re Kumar,
418 F.3d 1361, 1366 (Fed. Cir. 2005). In this case, however,
there are additional differences between the prior art and
claim 2 of the ’090 patent. For example, the district court
found that the prior art did not disclose that ibrutinib was
effective at treating R/R MCL in particular. Pharmacy-
clics, 556 F. Supp. 3d at 403 & n.8. That finding was not
clearly erroneous.
Second, the district court found that Pharmacyclics
nevertheless “would have rebutted any presumption of
Case: 21-2270 Document: 59 Page: 20 Filed: 11/15/2022
20 PHARMACYCLICS LLC v. ALVOGEN, INC.
obviousness.” Id. at 409. Alvogen has not persuaded us
that the court clearly erred in making that finding.
Regarding the secondary considerations cited by the
district court, we need not reach that issue because the
court’s findings regarding the motivation to combine and
reasonable expectation of success are “fatal to Alvogen’s ob-
viousness theory.” Id. at 407. We hold that the court did
not err in concluding that claim 2 of the ’090 patent would
not have been obvious, and we therefore affirm the court’s
judgment with respect to that claim.
B
Alvogen next argues that the district court erred in de-
termining that claim 5 of the ’455 patent was not inher-
ently anticipated and would not have been obvious.
1
In Alvogen’s view, the fact that Form A was the only
form of ibrutinib actually used in the clinical study dis-
closed in Pollyea and Fowler was sufficient to inherently
anticipate claim 5 of the ’455 patent, even if another form
of ibrutinib could have been used in the clinical study.
In support of its argument, Alvogen relies upon our de-
cision in Abbott Laboratories v. Geneva Pharmaceuticals,
Inc., 182 F.3d 1315 (Fed. Cir. 1999). In that case, we held
that the sale of a compound, which was later determined to
be in the same form as that recited in the asserted claim,
triggered the on-sale bar even though “at the time of the
sales, the parties to the . . . transactions did not know the
identity of the particular crystalline form with which they
were dealing.” Id. at 1317–18. As the Abbott court noted,
however, the key question with respect to the on-sale bar
is what the product that was sold actually embodied. See
id. at 1319. Once it became clear that the sold product con-
tained the same components that were listed in the claims,
that was enough to support a finding of invalidity. See id.
When determining whether a claim is inherently
Case: 21-2270 Document: 59 Page: 21 Filed: 11/15/2022
PHARMACYCLICS LLC v. ALVOGEN, INC. 21
anticipated by a prior art publication, however, the ques-
tion is different: The question is what is “necessarily” in-
herent in the anticipating reference. Schering Corp. v.
Geneva Pharms., 339 F.3d 1373, 1377 (Fed. Cir. 2003).
Our decision in Endo Pharmaceuticals, a case on which
the district court relied, is closely analogous to this case.
In Endo, the defendant relied on prior art publications that
reported on a clinical study for testosterone therapy deliv-
ered by injection. Endo, 894 F.3d at 1376. The claim at
issue required a specific “vehicle formulation” for the injec-
tion, and it was later revealed that the vehicle formulation
used in the clinical study was the same as that recited in
the claim. Id. at 1381. The Endo court noted that there
was no evidence “that only one vehicle formulation—the
claimed vehicle formulation” could be used to achieve the
results of the clinical study disclosed in the publications.
The court therefore found no error in the trial court’s find-
ing that the claimed vehicle formulation was not inherent
in the prior art. Id. at 1381–83.
In this case, the district court likewise found no evi-
dence that only Form A could have been used to achieve the
results of the clinical study disclosed in Pollyea and Fowler.
To the contrary, the court found that “a Phase I dose esca-
lation study could be performed with amorphous ibrutinib
or one of its metastable polymorphs,” and therefore that
“Form A was not necessarily present in Pollyea or Fowler.”
Pharmacyclics, 556 F. Supp. at 414. The court’s findings
on that score were not clearly erroneous, and in light of
Endo, those findings dictate rejection of Alvogen’s inherent
anticipation argument.
2
On the issue of obviousness, the district court found
that a skilled artisan would not have been motivated to
combine Honigberg, the ’444 patent, Miller, and Bauer to
make Form A of ibrutinib, and would not have had a rea-
sonable expectation of success in doing so. Alvogen
Case: 21-2270 Document: 59 Page: 22 Filed: 11/15/2022
22 PHARMACYCLICS LLC v. ALVOGEN, INC.
challenges those findings as well as the court’s findings re-
garding the secondary considerations of nonobviousness.
Neither party disputes the district court’s finding that
“an artisan of ordinary skill would have been motivated to
develop a crystalline form of ibrutinib.” See id. at 412. Al-
vogen argues, however, that the court should have found
that a skilled artisan would have been motivated to develop
the most stable form of ibrutinib, which is now known to be
Form A, and that the skilled artisan would have had a rea-
sonable expectation of successfully developing Form A.
In support of those arguments, Alvogen cites the expert
opinion of Dr. Jennifer Swift, who testified that a skilled
artisan would have inevitably developed Form A upon per-
forming a routine polymorph screen. J.A. 14166. Alvogen
adds that the Miller reference “demonstrates that a [skilled
artisan] would have designed a routine polymorph screen
to discover the most stable form as soon as possible in the
screen.” Appellants’ Br. 44 (citing J.A. 17862).
Relying on contrary testimony, the district court found
that “[d]iscovering new crystalline forms is challenging and
unpredictable.” Pharmacyclics, 556 F. Supp. 3d at 410.
For example, Dr. Allan Myerson, Pharmacyclics’ expert,
testified that a skilled artisan would not “have been able to
predict in advance whether a new compound would form
polymorphs,” and that polymorphs can be discovered out-
side the context of a polymorph screen. J.A. 15326–27. Dr.
Myerson added that “we also can’t predict in advance the
physical properties that a crystalline form will have.” J.A.
15418. Dr. John Steed, the expert for one of Alvogen’s co-
defendants, testified similarly. See J.A. 14325–28. In view
of the testimony of Drs. Myerson and Steed, the district
court’s finding of no reasonable expectation of success can-
not be deemed clearly erroneous.
We disagree with Alvogen’s contention that the district
court’s findings required a skilled artisan to “predict[]”
what conditions would result in the production of Form A
Case: 21-2270 Document: 59 Page: 23 Filed: 11/15/2022
PHARMACYCLICS LLC v. ALVOGEN, INC. 23
of ibrutinib. Appellants’ Br. 47. Rather, the court found
that, given the lack of teaching in the art regarding crys-
talline forms of ibrutinib and the expert testimony that pol-
ymorph screening can produce unpredictable results, a
skilled artisan would not have reasonably expected success
in producing Form A of ibrutinib. That finding was not
clearly erroneous. See Grunenthal GMBH v. Alkem Lab’ys
Ltd., 919 F.3d 1333, 1344 (Fed. Cir. 2019) (upholding a dis-
trict court’s finding that a skilled artisan would not have
expected success in producing a particular crystalline form
of a compound when a skilled artisan would not have had
“reason to know[] how the multiple variables involved in
conducting a polymorph screen would affect the recrystal-
lization” of the compound).
Because we hold that the district court did not err in
finding that a skilled artisan would not have been moti-
vated to combine the prior art to create Form A and would
not have had a reasonable expectation of success in doing
so, we need not reach Alvogen’s arguments regarding the
secondary considerations of nonobviousness. We affirm the
district court’s determination that claim 5 of the ’455 pa-
tent is neither inherently anticipated nor obvious.
C
Alvogen next argues that the district court erred in
finding that claims 30 and 37 of the ’857 patent were ade-
quately supported by the written description.
Alvogen points to BK21A, a formulation that is dis-
closed in the specification and that embodiesis one species
of the ranges recited in claims 30 and 37. See ’857 patent,
col. 89, ll. 43–54. Alvogen argues that possession of that
one species is not sufficient to demonstrate possession of
the broader ranges recited in claims 30 and 37.
The problem for Alvogen, however, is that the precise
ranges recited in the claims are found in formulations dis-
closed in the specification. Id. at col. 43, line 64, through
Case: 21-2270 Document: 59 Page: 24 Filed: 11/15/2022
24 PHARMACYCLICS LLC v. ALVOGEN, INC.
col. 44, line 6 (claim 30); id. at col. 43, ll. 47–63 (claim 37).
The specification also discloses that the dosage of ibrutinib
can range from “about 35 mg to about 840 mg per tablet.”
Id. at col. 45, ll. 32–34. Because the written description
describes the ingredient amounts “by their respective
weight concentrations,” and because the written descrip-
tion describes experiments conducted using BK21A at two
different doses of ibrutinib, the district court found that the
written description “would have conveyed to [a skilled ar-
tisan] that the inventor had possession of the claimed sub-
ject matter.” Pharmacyclics, 556 F. Supp. 3d at 416. That
finding is not clearly erroneous, and we therefore affirm
the district court’s judgment with respect to claims 30 and
37 of the ’857 patent. 6
D
Alvogen’s final challenge is to the district court’s find-
ing that the Pan reference did not anticipate claim 10 of
the ’309 patent. Alvogen argues that a skilled artisan could
not have synthesized Intermediate 2 without undue exper-
imentation, and that the court failed to apply the proper
legal standard for incorporation of a document by refer-
ence.
On the first point, Alvogen argues that it was error for
the district court to rely upon the testimony of Dr. Reider
in finding that the provisional applications enabled
6 We reject Alvogen’s argument that the district
court “read into the specification [the] supposed knowledge
of a [skilled artisan]” that the amounts disclosed with re-
spect to BK21A could be scaled. Appellants’ Br. 55. The
use of weight concentrations in describing BK21A and in
claims 30 and 37, along with the use of two different doses
of the BK21A tablet, are sufficient to convey that the tablet
formulation can be scaled without importing any extrane-
ous knowledge of a skilled artisan.
Case: 21-2270 Document: 59 Page: 25 Filed: 11/15/2022
PHARMACYCLICS LLC v. ALVOGEN, INC. 25
Intermediate 2. Specifically, Alvogen argues that Dr.
Reider’s testimony that his undergraduate students could
synthesize intermediate 2 did not establish that they could
do so “without undue experimentation.” Appellants’ Br.
60–62. Alvogen also points to our holding in Genentech,
Inc. v. Novo Nordisk A/S that “the specification, not the
knowledge of one skilled in the art, . . . must supply the
novel aspects of an invention in order to constitute ade-
quate enablement.” 108 F.3d 1361, 1366 (Fed. Cir. 1997).
We hold that it was not error for the district court to
rely on the testimony of Dr. Reider. Although Dr. Reider
did not explicitly state that his students could have synthe-
sized ibrutinib without undue experimentation, his testi-
mony clearly conveyed that was the case. See J.A. 15108–
10. Moreover, it is clear that Intermediate 2 was not novel
because it was disclosed in the WO ’829 publication. Phar-
macyclics, 556 F. Supp. 3d at 398. The district court there-
fore did not run afoul of our holding in Genentech, because
Intermediate 2 was not a “novel aspect[]” of claim 10 of the
’309 patent. See Genentech, 108 F.3d at 1366.
On the second point, Alvogen argues that the district
court erred in determining that the provisional applica-
tions had incorporated the WO ’829 publication by refer-
ence. That argument is not dispositive, because the court
properly found that “a skilled artisan could have synthe-
sized Intermediate 2 and thus ibrutinib” without reference
to WO ’829. Pharmacyclics, 556 F. Supp. 3d at 397–98. In
any event, formal incorporation by reference is not neces-
sary if the material being incorporated is background art.
See, e.g., Falko-Gunter Falkner v. Inglis, 448 F.3d 1357,
1365 (Fed. Cir. 2006) (holding that information readily ac-
cessible in journals need not be incorporated by reference
in order to enable the patent claims at issue). Accordingly,
we find Alvogen’s argument as to incorporation by refer-
ence to be unpersuasive. We therefore affirm the district
court’s ruling that claim 10 of the ’309 patent is not antici-
pated by the Pan article.
Case: 21-2270 Document: 59 Page: 26 Filed: 11/15/2022
26 PHARMACYCLICS LLC v. ALVOGEN, INC.
*****
Finding no reversible error in any of the rulings of the
district court challenged on appeal, we uphold the judg-
ment of the district court.
AFFIRMED | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483840/ | 21-2537
Doe v. SEC
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 15th day of November, two thousand twenty-two.
PRESENT: Jon O. Newman,
Guido Calabresi,
Steven J. Menashi,
Circuit Judges.
____________________________________________
JOHN DOE,
Petitioner,
v. No. 21-2537
SECURITIES AND EXCHANGE COMMISSION,
Respondent.
____________________________________________
For Petitioner: EZRA SPILKE, Law Offices of Ezra Spilke,
Brooklyn, NY.
For Respondent: EZEKIEL L. HILL, Attorney (Dan M.
Berkovitz, General Counsel, Michael A.
Conley, Solicitor, Stephen G. Yoder and
Emily T. Parise, Senior Litigation Counsel,
on the brief), Securities and Exchange
Commission, Washington, DC.
On Petition for Review of an Order of the Securities and Exchange
Commission.
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED,
ADJUDGED, AND DECREED that the petition is DENIED.
John Doe petitions for review of an order of the Securities and Exchange
Commission (“SEC”) denying him a whistleblower award. We assume the parties’
familiarity with the underlying facts and procedural history.
In general, federal law directs the SEC to pay a monetary award to a
whistleblower when that whistleblower “voluntarily provided original
information to the Commission that led to the successful enforcement” of “any
judicial or administrative action brought by the Commission under the securities
2
laws that results in monetary sanctions exceeding $1,000,000.” 15 U.S.C.
§ 78u-6(a)(1), (b)(1). But the SEC may not make an award “to any whistleblower
who is convicted of a criminal violation related to the judicial or administrative
action for which the whistleblower otherwise could receive an award.” 15 U.S.C.
§ 78u-6(c)(2)(B).
John Doe is a whistleblower. He provided information to the SEC that
assisted in a successful agency enforcement action with respect to an international
bribery scheme (the “Covered Action”). After the SEC posted a notice on its
website about the Covered Action, Doe timely filed an application for a
whistleblower award pursuant to 15 U.S.C. § 78u-6(b)(1) in connection with both
the Covered Action and a related action (the “Related Action”). By that point,
however, Doe himself had pleaded guilty to bribery charges. A court had accepted
Doe’s guilty plea but had not yet sentenced him. Because of the accepted guilty
plea, the SEC determined that Doe had been “convicted of a criminal violation
related to” the bribery scheme that was at issue in the Covered Action and the
Related Action. 15 U.S.C. § 78u-6(c)(2)(B). The SEC issued a preliminary
determination recommending the denial of Doe’s award application. Doe
contested the preliminary determination, and a few months later the SEC issued
3
its final order denying a whistleblower award to Doe.
The “determination … whether … to make [a whistleblower] award[]” is at
“the discretion of the Commission.” 15 U.S.C. § 78u-6(f). We review the
determination of the SEC as to whether to make a whistleblower award for abuse
of discretion and—to the extent the agency makes findings of fact—for substantial
evidence. See id. (noting that a court “shall review the determination” of the SEC
“in accordance” with 5 U.S.C. § 706); see also Kilgour v. SEC, 942 F.3d 113, 120 (2d
Cir. 2019) (“We review the Commission’s whistleblower award determinations in
accordance with section 706 of the Administrative Procedure Act.”) (internal
quotation marks and alteration omitted).
Doe challenges the SEC’s interpretation of two key terms in 15 U.S.C.
§ 78u-6(2)(B): “convicted” and “related to.” He argues that he was not “convicted”
and that his criminal conduct was not “related to” the bribery scheme at issue in
the Covered and Related Actions. He additionally argues that the SEC did not
adequately explain its reasoning in denying the whistleblower award. We
disagree. Doe forfeited his challenge to the SEC’s interpretation of “convicted,”
which in any event lacks merit, and the SEC properly interpreted and applied the
“related to” provision of the statute. The agency adequately explained its
4
reasoning and supported its findings with substantial evidence. We deny Doe’s
petition for review.
I
Doe argues that he was not “convicted” under 15 U.S.C. § 78u-6(c)(2)(B). In
Doe’s telling, the fact that he has not yet been sentenced—even though a court has
accepted his guilty plea—means that he has not been “convicted.” But Doe did not
raise this issue before the agency and therefore we need not address Doe’s
argument about the meaning of “convicted.” But even if we were to excuse the
forfeiture, Doe’s argument would fail.
A
SEC regulations provide that when a claimant contests the agency’s
preliminary determination about a whistleblower award, the claimant must “set[]
forth the grounds for [his] objection to either the denial of an award or the
proposed amount of an award.” 17 C.F.R. § 240.21F-10(e). When Doe contested the
SEC’s preliminary determination in this case, he did not argue that he was not
“convicted” under the applicable statute. Doe’s failure to comply with the
administrative process for raising the argument before the agency prevents him
5
from raising it for the first time on appeal. Xiao Ji Chen v. USDOJ, 471 F.3d 315, 320
n.1 (2d Cir. 2006).
Doe resists this conclusion. He notes that in a footnote in its final order, the
SEC described its interpretation of the term “convicted” despite Doe’s failure to
challenge that interpretation when he contested the preliminary determination.
Doe points to Ye v. Department of Homeland Security, in which we excused an alien’s
failure to raise a claim before the Board of Immigration Appeals (“BIA”) because
the BIA addressed the merits of the claim. 446 F.3d 289, 296-97 (2d Cir. 2006). Yet
here, unlike in Ye, the agency did not address an argument the petitioner failed to
raise. Instead, the SEC simply noted its longstanding interpretation of the term
“convicted” as it addressed Doe’s argument that his conviction was not “related
to” the Covered and Related Actions. J. App’x 393 n.15 (quoting In the Matter of
Gregory Bartko, Release No. 71666, 2014 WL 896758, at *8 (Mar. 7, 2014), aff’d in part,
rev’d in part on other grounds, Bartko v. SEC, 845 F.3d 1217 (D.C. Cir. 2017)). Doe was
on notice from the preliminary determination that the agency believed his
accepted guilty plea disqualified him from the whistleblower award. Having
failed to contest before the agency its determination that one is “convicted” when
he has pleaded guilty, Doe is not entitled to raise the issue for the first time on a
6
petition for review. Xiao Ji Chen, 471 at 320 n.1.
B
Even if Doe had not forfeited his argument about the term “convicted,” the
argument would fail. The agency did not err in adhering to its view that “there is
no reason for ascribing a different meaning to the word ‘convicted’ in the
Exchange Act to the meaning given to that term in the Advisers Act.” Gregory
Bartko, 2014 WL 896758, at *8 (alteration omitted). Doe contends that a person may
be considered “convicted” only after a sentence is imposed, but that is not correct.
See, e.g., United States v. Adkins, 743 F.3d 176, 188 (7th Cir. 2014) (describing
defendants who are “convicted but not yet sentenced”); United States v. White, 620
F.3d 401, 414 (4th Cir. 2010) (noting that a defendant is “tried and convicted, and
then sentenced”); United States v. Montoya, No. CR-89-409, 1990 WL 252179, at *1
(E.D.N.Y. Dec. 17, 1990) (noting that a defendant “was tried before this court,
convicted, and then sentenced”).
II
Doe also argues that the bribery charges to which he pleaded guilty were
not “related to” the Covered and Related Actions. He additionally argues that the
agency did not support its finding of such a relationship with substantial evidence.
7
We disagree.
A
A whistleblower is ineligible under 15 U.S.C. § 78u-6(c)(2)(B) for an award
from the SEC if he was “convicted of a criminal violation related to the judicial or
administrative action for which the whistleblower otherwise could receive an
award.” Id. (emphasis added). The SEC and Doe understand the term “related to”
differently. The SEC interprets the term to mean that “the conduct underlying the
criminal conviction must be connected to or stand in some relation to the Covered
Action.” J. App’x 394. Doe suggests that the term requires the whistleblower to
have been “a part of the conduct underlying the … enforcement action” and to
have known about the conduct during its occurrence. Petitioner’s Br. 30.
We agree with the SEC. In Morales v. Trans World Airlines, Inc., the Supreme
Court said the ordinary meaning of the term “relating to” is “a broad one.” 504
U.S. 374, 383 (1992). The Court explained that this meaning is “to stand in some
relation; to have bearing or concern; to pertain; refer; to bring into association with
or connection with.” Id. (quoting Black’s Law Dictionary 1158 (5th ed. 1979)); see
also Celotex Corp. v. Edwards, 514 U.S. 300, 307-08 (1995) (explaining that the term
“related to” in a jurisdiction-conferring statute “suggests a grant of some
8
breadth”). Our court has also noted that “[t]he term ‘related to’ is typically defined
more broadly” than a term such as “arising out of.” Coregis Ins. Co. v. Am. Health
Found., 241 F.3d 123, 128 (2d Cir. 2001).
The ordinary meaning of “related to” encompasses the connection between
Doe’s bribery charges and the bribery scheme underlying the Covered and Related
Actions. Doe pleaded guilty to facilitating bribery payments that came from the
same principal briber, targeted government officials in the same country, and
sought benefits in the same industry as the scheme charged in the Covered and
Related Actions. The SEC did not abuse its discretion when it determined that
Doe’s criminal conduct was “related to” the Covered and Related Actions.
B
We will set aside an agency’s action if its findings are “unsupported by
substantial evidence.” 5 U.S.C. § 706. In other words, “we require that they be
supported by more than a scintilla of evidence, which may be less than a
preponderance.” Kilgour, 942 F.3d at 120 (internal quotation marks omitted). This
“threshold for … evidentiary sufficiency is not high.” Biestek v. Berryhill, 139 S. Ct.
1148, 1154 (2019).
The SEC’s findings are supported by substantial evidence. The criminal
9
information and Doe’s guilty plea establish Doe’s participation in a bribery scheme
that involved the same central figure as the scheme underlying the Covered and
Related Actions. A declaration from an SEC attorney that supported the SEC’s
denial of the award was based on information provided by a government attorney
who had been involved in the Justice Department’s investigation that resulted in
the Related Action.
III
Finally, Doe insists that the SEC failed to articulate its reasoning in its final
order, thereby denying meaningful appellate review. We again disagree.
Doe’s inadequate-reasoning argument relies on his other arguments about
the definitions of “convicted” and “related to,” and he criticizes the declarations
of SEC attorneys as “conclusory and unreasoned.” Petitioner’s Br. 38-40. We think
the SEC adequately articulated its reasoning with respect to its statutory
interpretation, and the agency lawyers’ declarations—furnished to Doe on his
request—reflected a considered analysis of Doe’s conduct and its relationship to
the Covered and Related Actions. The SEC’s articulation of its reasoning did not
prevent Doe from obtaining meaningful appellate review.
10
* * *
We have considered the petitioner’s remaining arguments, which we
conclude are without merit. For the foregoing reasons, we DENY the petition for
review.
FOR THE COURT:
Catherine O’Hagan Wolfe, Clerk of Court
11 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483838/ | 22-622-cv; 22-692-cv
Roberts v. Bassett; Jacobson v. Bassett
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 15th day of November, two thousand twenty-two.
PRESENT: JOSÉ A. CABRANES,
GERARD E. LYNCH,
BETH ROBINSON,
Circuit Judges.
JONATHAN ROBERTS and CHARLES VAVRUSKA,
Plaintiffs-Appellants, 22-622-cv
v.
MARY T. BASSETT, in her official capacity as
Commissioner, New York State Department of
Health, DEPARTMENT OF HEALTH AND MENTAL
HYGIENE OF THE CITY OF NEW YORK,
Defendants-Appellees.
FOR PLAINTIFFS-APPELLANTS: WENCONG FA (Caleb R. Trotter,
Anastasia Boden, on the brief), Pacific Legal
Foundation, Sacramento, CA.
FOR DEFENDANTS-APPELLEES: ANDREA W. TRENTO, Assistant Solicitor
General (Barbara D. Underwood, Solicitor
General, Ester Murdukhayeva, Deputy
Solicitor General, on the brief), for Letitia
1
James, New York State Attorney General,
New York, NY.
DIANA LAWLESS, of Counsel (Richard
Dearing, MacKenzie Fillow, of Counsel,
on the brief), for Hon. Sylvia O. Hinds-
Radix, Corporation Counsel of the City of
New York, New York, NY.
WILLIAM A. JACOBSON, on behalf of himself and
others similarly situated,
Plaintiff-Appellant, 22-692-cv
v.
MARY T. BASSETT, in her official capacity as Acting
Commissioner of the New York Department of
Health,
Defendant-Appellee.
FOR PLAINTIFF-APPELLANT: JEFFREY M. HARRIS (J. Michael Connolly,
on the brief), Consovoy McCarthy PLLC,
Arlington, VA; Jonathan F. Mitchell,
Mitchell Law PLLC, Austin, TX.
FOR DEFENDANTS-APPELLEES: BEEZLY J. KIERNAN, Assistant Solicitor
General (Barbara D. Underwood, Solicitor
General, Jeffrey W. Lang, Deputy Solicitor
General, on the brief), for Letitia James, New
York State Attorney General, Albany, NY.
Appeals from a March 15, 2022 order of the United States District Court for the Eastern
District of New York (Nicholas G. Garaufis, Judge) and an April 1, 2022 judgment of the United
States District Court for the Northern District of New York (Mae A. D’Agostino, Judge).
UPON DUE CONSIDERATION WHEREOF, IT IS HEREBY ORDERED,
ADJUDGED, AND DECREED that the judgment and order of the District Courts be and
hereby are AFFIRMED.
Plaintiffs Jonathan Roberts and Charles Vavruska sued the Commissioner of the New York
State Department of Health (“State Defendant”) and the New York City Department of Health and
Mental Hygiene (“City Defendant”), alleging that Defendants’ guidance on how to prioritize patients
2
eligible for specified new COVID-19 treatments violates the Fourteenth Amendment. Plaintiff
William A. Jacobson alleges the same of State Defendant’s guidance and, further, that it violates
Title VI of the Civil Rights Act of 1964, 42 U.S.C. § 2000d and Title I of the Affordable Care Act,
42 U.S.C. § 18116. The District Courts dismissed both cases for lack of standing. Plaintiffs appeal.
We assume the parties’ familiarity with the underlying facts, the procedural history of the cases, and
the issues on appeal.
I. Background
In late 2021, the U.S. Food and Drug Administration (“FDA”) authorized several new
COVID-19 treatments for high-risk patients: a monoclonal antibody product, Sotrovimab, and two
antiviral therapies, Paxlovid and Molnupiravir. These medications, the latter two of which must be
taken within five days of symptom onset, were initially and briefly in short supply.
Soon after the FDA’s authorizations, State Defendant published “guidance” instructing
health-care providers on how to prioritize patients eligible for the new treatments during the supply
shortage. It directed providers to assign patients to one of five descending risk groups depending on
their vaccination status, age, and risk factors for severe COVID-19. Generally, patients with more
risk factors were to be placed in a higher priority risk group and to receive priority within their
respective risk groups. The guidance noted that “[n]on-white race or Hispanic/Latino ethnicity
should be considered a risk factor.” 22-692 J.A. 29–31. City Defendant issued and distributed to
75,000 email addresses an “advisory” instructing providers to follow State Defendant’s guidance
while a supply shortage persisted. Plaintiffs, who are white and not of Hispanic/Latino ethnicity, did
not contract COVID-19 while the shortage continued and the guidance remained operative.
Plaintiffs allege three injuries. First, they allege that the guidance denies them equal access to
the new COVID-19 treatments. Second, they contend that it increases their risk of severe illness.
Third, Plaintiff Jacobson argues that it harms him emotionally because the denial of automatic
eligibility for treatment due to his race and ethnicity causes him heightened concern. Each alleged
injury requires its own standing analysis, and we address each in turn.
II. Alleged Denial of Equal Access to Treatment
To establish constitutional standing, a plaintiff must demonstrate an (1) injury in fact that is
(a) concrete and particularized and (b) actual or imminent, (2) fairly traceable to the challenged
action of the defendant, and (3) likely to be redressed by a favorable decision. See Lujan v. Defs. of
Wildlife, 504 U.S. 555, 560–61 (1992). We review de novo a district court’s decision to grant a motion
to dismiss for lack of standing. See Chabad Lubavitch of Litchfield Cnty., Inc. v. Litchfield Historic Dist.
Comm’n, 768 F.3d 183, 191 (2d Cir. 2014). And “we ‘accept [ ] all well-pleaded allegations in the
complaint as true [and] draw [ ] all reasonable inferences in the plaintiff’s favor.’” Id. (quoting Bigio v.
CocaCola Co., 675 F.3d 163, 169 (2d Cir. 2012)).
3
Upon review of the records, we conclude that Plaintiffs lack standing based on their alleged
denial of equal access to treatment because they have not demonstrated an imminent injury in fact.
When the government “erects a barrier . . . mak[ing] it more difficult for members of one group to
obtain a benefit than [another],” the “injury in fact . . . is the denial of equal treatment resulting from
the imposition of the barrier, not the ultimate inability to obtain the benefit.” Ne. Fla. Chapter of
Associated Gen. Contractors of Am. v. City of Jacksonville, 508 U.S. 656, 666 (1993). We have identified
three elements necessary for standing under Northeastern Florida Chapter: “that (1) there exists a
reasonable likelihood that the plaintiff is in the disadvantaged group, (2) there exists a government-
erected barrier, and (3) the barrier causes members of one group to be treated differently from
members of the other group.” Comer v. Cisneros, 37 F.3d 775, 793 (2d Cir. 1994).
We assume arguendo that Plaintiffs have met their burden under Comer. But satisfying Comer
does not mean Plaintiffs have demonstrated all that is required to establish an injury in fact. Comer
helps define the contours of an injury in fact in the equal protection context. It does not, however,
eliminate the requirement that the injury be “actual or imminent, not conjectural or hypothetical.”
Lujan, 504 U.S. at 560 (quoting Whitmore v. Arkansas, 495 U.S. 149, 155 (1990)); see also MGM Resorts
Int’l Glob. Gaming Dev., LLC v. Malloy, 861 F.3d 40, 47 (2d Cir. 2017).
Plaintiffs fail to satisfy the requirement that an injury in fact be actual or imminent. They
suffered no actual injury because a provider neither delayed nor denied their COVID-19 treatment
because of the guidance, which operated during the supply shortage. Their alleged denial of equal
access to treatment, then, must be imminent. Imminent injuries cannot be “too speculative.” Lujan,
504 U.S. at 564 n.2. And although “[a]n allegation of future injury may suffice if the threatened
injury is ‘certainly impending,’ or there is a ‘substantial risk’ that the harm will occur,” Susan B.
Anthony List v. Driehaus, 573 U.S. 149, 158 (2014) (quoting Clapper v. Amnesty Int’l USA, 568 U.S. 398,
414 & n.5 (2013)), “a highly attenuated chain of possibilities[ ] does not satisfy the requirement that
[a] threatened injury must be certainly impending,” Clapper, 568 U.S. at 410.
A highly attenuated chain of possibilities is precisely what we have here. Plaintiffs must (1)
test positive for COVID-19 (2) while there is a shortage of treatments specified by the guidance, (3)
experience mild to moderate symptoms, (4) seek treatment, (5) within the appropriate time of
symptom onset, (6) from a health-care provider (7) who adheres to the guidance and (8) resultingly
declines or delays a specified treatment (9) because of Plaintiffs’ race or ethnicity. The alleged injury
in fact is not impending let alone “certainly impending,” especially given the undisputed widespread
availability of the specified treatments. Clapper, 568 U.S. at 410. Plaintiffs therefore lack standing to
challenge the guidance they allege denies them equal access to treatment.
III. Alleged Increased Risk of Suffering Severe Illness
Plaintiffs also fail to demonstrate an injury in fact based on their alleged increased risk of
severe COVID-19 because of the guidance. Plaintiffs rely primarily on Baur v. Veneman, which held
4
that “exposure to an enhanced risk of disease transmission may qualify as injury-in-fact in consumer
food and drug safety suits.” 352 F.3d 625, 628 (2d Cir. 2003). We assume arguendo that Baur extends
beyond such suits. 1
The Baur plaintiffs faced an actual, increased risk of mad cow disease because they were
exposed to potentially unsafe meat in the food supply. 352 F.3d at 640. Here, Plaintiffs would face
an actual, increased risk of severe COVID-19 only once a provider denied or delayed treatment
because of the guidance. No provider delayed or denied treatment, so the alleged Baur injury, if one
exists, must be imminent.
An imminent Baur injury may arise when a plaintiff is imminently exposed to “a sufficiently
serious [enhanced] risk of medical harm.” Id. at 641. But to be imminently exposed to an enhanced
risk of severe COVID-19, the attenuated chain of events listed above must occur. Because Plaintiffs
cannot rely on an attenuated chain of possibilities to demonstrate an injury in fact, they again fail to
establish standing.
IV. Plaintiff Jacobson’s Alleged Emotional Injury
Plaintiff Jacobson further fails to establish standing based on his alleged emotional harm
because it is not traceable to the guidance. To establish standing, “there must be a causal connection
between the injury and the conduct complained of—the injury has to be ‘fairly . . . trace[able] to the
challenged action of the defendant, and not . . . th[e] result [of] the independent action of some third
party not before the court.’” Lujan, 504 U.S. at 560 (quoting Simon v. E. Ky. Welfare Rts. Org., 426 U.S.
26, 41–42 (1976)). Jacobson alleges that he experiences heightened daily concern because he is not
automatically eligible for treatment solely because of his race and ethnicity. But the reason Jacobson,
as a white, non-Hispanic/Latino man, lacks automatic eligibility for treatment is that the FDA—as
informed by the Centers for Disease Control and Prevention—does not consider him a high-risk
patient. In other words, it is the FDA’s authorization, not State Defendant’s guidance, that precludes
his automatic eligibility on the basis of race and ethnicity. Absent traceability, Jacobson’s alleged
emotional injury is insufficient to establish standing.
1
Like Baur, these cases involve probabilistic harm in a public health context. We have
demonstrated a willingness to extend Baur to a non-consumer food and drug safety suit, but only in
a non-precedential order. See United States v. Evseroff, 528 Fed. App’x 75, 77 (2d Cir. 2013) (summary
order). Yet the cases before us do not present a “tight connection between the type of injury . . .
allege[d] and the fundamental goals of the statutes” sued under—a factor that reinforced the Baur
Court’s conclusion that the plaintiff had alleged a cognizable injury. 352 F.3d at 635. For that reason,
Baur does not determine the outcome here, even if that case extends beyond the food-and-drug
context. Accordingly, we need not address the scope of the Baur holding here.
5
CONCLUSION
We hold that Plaintiffs fail to establish standing to challenge State and City Defendants’
December 2021 guidance on how to prioritize patients for specified COVID-19 treatments during a
supply shortage. They fail to demonstrate an imminent injury in fact regarding their alleged denial of
equal treatment and increased risk of severe illness. And Plaintiff Jacobson fails to demonstrate that
his alleged emotional injury is traceable to the challenged guidance.
In reaching our conclusion, we emphasize that we have not considered the merits of
Plaintiffs’ appeals. 2
In sum, we have reviewed all of the arguments raised by Plaintiffs Roberts, Vavruska, and
Jacobson on appeal and find them to be without merit. For the foregoing reasons, we AFFIRM the
March 15, 2022 order of the U.S. District Court for the Eastern District of New York and the April
1, 2022 judgment of the U.S. District Court for the Northern District of New York.
FOR THE COURT:
Catherine O’Hagan Wolfe, Clerk of Court
2
Judge Cabranes joins the judgment of the Court in full, but takes this opportunity to state
his personal view: government “guidance” effectively directing health-care providers to prioritize the
treatment of patients based on race or ethnicity may indeed present portentous legal issues if
challenged by plaintiffs with standing.
6 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491565/ | AMENDED MEMORANDUM, OPINION AND ORDER
ROBERT E. GINSBERG, Bankruptcy Judge.
This matter is before the court in connection with an adversary proceeding brought by the Debtor, Cathie Arnold, against First Credit Corporation and Budget Construction Company and a cross claim brought by First Credit against Budget and one of its officers, Donald Schneider, to determine the extent of a lien of First Credit on buildings owned by the Debtor and for other relief. At present, there are three motions before the court: (1) the motion of Budget to strike the complaint and for judgment on the pleadings; (2) the motion of First Credit for summary judgment on all remaining counts affecting it;1 and (3) the motion of Budget and Mr. Schneider to dismiss Count II of First Credit’s cross claim against them. For the reasons stat*437ed below, this court grants First Credit’s motion for summary judgment on all remaining counts affecting it, but does not reach the merits of Budget’s motion to strike and for judgment on the pleadings or the motion of Budget and Mr. Schneider to dismiss Count II of First Credit’s cross claim.
FACTS
The Debtor is the owner of two small apartment buildings on the same plot in Chicago. Combined, the two buildings contain five apartments. The Debtor lives in one apartment and rents out the remaining four.
In early 1990, the Debtor decided to make various repairs and improvements to the buildings. The Debtor contracted with Budget for it to do those repairs and improvements. The Debtor financed the work by agreeing to an installment contract that, inter alia, granted Budget a first mortgage on the buildings. On January 30, 1990, the contract was signed by the Debtor and by Mr. Donald Schneider, Vice President of Budget, who had arranged the financing.
Between February 9, 1990 and February 22, 1990, Budget worked on the Debtor’s buildings for a total of 175.5 hours. According to Budget, only 7.5 hours of those hours were spent working on the Debtor’s residence. At several points during the construction, the Debtor complained to Budget about the quality of the work Budget was doing on her buildings.
Despite those complaints, upon the completion of the construction, Budget sought and received from the Debtor the following signed statement (the “completion certificate”):
By signing this certificate, you certify that:
The Contractor has completed the work he or she agreed to do to your satisfaction. You confirm that you have no defenses or offsets to, or which might impair, the Retail Installment Obligation. ...
In large bold letters, the statement continued:
DON’T SIGN THIS CERTIFICATE UNLESS THE CONTRACTOR HAS FINISHED THE IMPROVEMENTS HE OR SHE AGREED TO MAKE TO YOUR SATISFACTION.
On February 22, 1990, Budget sold the installment contract and mortgage to First Credit. First Credit expressly relied on the completion certificate signed by the Debtor in making the decision to purchase the installment obligation and mortgage. Furthermore, First Credit personally contacted the Debtor, who assured it that she was satisfied with Budget’s performance and had no defenses which might impair the installment contract.
After the assignment, the Debtor experienced financial difficulties and stopped making the payments due under the installment contract to First Credit. On February 19, 1991, First Credit obtained a default judgment of foreclosure on the contract against the Debtor in the Circuit Court of Cook County, Illinois. On June 10, 1991, the Debtor filed a petition under Chapter 13 of the Bankruptcy Code.
Shortly after filing her Chapter 13 petition, the Debtor filed the instant adversary complaint against Budget and First Credit seeking to determine the extent of First Credit’s lien against her real property. In reality, the Debtor seeks to have the installment contract rescinded, thus voiding any lien First Credit might have, and seeks a refund of all the money she paid under the contract. The Debtor argues that Budget is liable for breach of contract, breach of warranty, failure to comply with the Truth-in-Lending Act Notice to Cancel provision, and fraud under both the Illinois Consumer Fraud and Deceptive Business Practices Act and the common law. Furthermore, the Debtor claims that First Credit is not a holder in due course and thus is subject to all claims and defenses to the contract she has against Budget.
Subsequently, First Credit filed a cross claim against Budget and Mr. Schneider, alleging that Budget was liable to it for any loss it suffered pursuant to the Debt- *438or’s complaint on the basis of contractual indemnity, and that Budget and Mr. Schneider were liable to it for any loss suffered pursuant to the Debtor’s complaint under a common law fraud theory.
In response to the Debtor’s complaint, Budget filed a motion to strike and for judgment on the pleadings, and First Credit filed a motion for summary judgment. In addition, Budget and Mr. Schneider filed a motion to dismiss Count II (common law fraud) of the cross claim brought against them by First Credit.
JURISDICTION AND PROCEDURE
As to First Credit’s motion for summary judgment, this court has jurisdiction under 28 U.S.C. § 1334(b) as a matter arising under § 506 of the Bankruptcy Code. This is a core proceeding under 28 U.S.C. §§ 157(b)(2)(B) and (K) as a matter involving the validity, priority and allowability of a lien and is before the court pursuant to Local Rule 2.33 of the United States District Court for the Northern District of Illinois referring bankruptcy cases and proceedings to this court for hearing and determination.
As to Budget’s motion to strike and for judgment on the pleadings, this court has jurisdiction under 28 U.S.C. § 1334(c) as a matter related to a bankruptcy case. However, the parties have failed to comply with Fed.R.Bankr.Pro. 7008 and 7012, and thus the court is unable to make the requisite 28 U.S.C. § 157(c) determination as to whether this proceeding is core or noncore. Furthermore, if this proceeding is in fact non-core, this court has not been informed if both Budget and the Debtor have consented to this court’s determination of the non-core proceeding.
Finally, there are serious constitutional questions as to whether this court has pendent jurisdiction to enter any dispositive ruling with respect to the cross claim between First Credit on the one hand and Budget and Mr. Schneider on the other.
DISCUSSION
I. First Credit’s Motion For Summary Judgment
Under Fed.R.Civ.P. 56(c), made applicable to this proceeding by Fed. R.Bankr.P. 7056, summary judgment is proper if the pleadings, depositions, answers to interrogatories, and the 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 judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). In deciding a Rule 56(c) motion, the court must view all reasonable inferences from the underlying facts in a light most favorable to the nonmoving party. Marine Bank, Nat. Ass’n v. Meat Counter, Inc., 826 F.2d 1577, 1579 (7th Cir.1987).
First Credit argues that, as a matter of law, the Debtor should be estopped from asserting any defénses based on the installment contract, since the Debtor orally and in writing represented that she had no defenses against Budget which might impair the installment contract, and thus that First Credit should be granted summary judgment.2 This court agrees.
*439Under Illinois law, an obligor maybe estopped from asserting defenses to an instrument against a holder of that instrument if: (1) the obligor made misrepresentations that induced reliance by the holder; (2) the obligor had either actual or implied knowledge that the representations were false when made; (3) the obligor intended or should have expected the holder to rely on the misrepresentation; (4) the holder in fact relied on the misrepresentation without knowledge of or without reasonable means of knowing the true facts; and (5) the holder would be prejudiced if the obli-gor is allowed to deny the contract. Dressner Industries, Inc. v. Pyrrhus, A. G., 936 F.2d 921, 930 (7th Cir.1991); UIDC Management, Inc. v. Sears, Roebuck and Company, 167 Ill.App.3d 81, 85, 117 Ill.Dec. 813, 816, 520 N.E.2d 1164, 1167 (1st Dist. 1988).
Here, there is no genuine issue of material fact, and First Credit has clearly proven all of the elements of estoppel. First, both parties agree that the Debtor made misrepresentations which induced reliance. In the face of her complaints to Budget about the quality of its work (and in light of her current position), the Debt- or’s oral and written representations to First Credit expressly stating that she had no defenses against Budget which might impair the installment obligation were misrepresentations. See First Credit’s Statement of Undisputed Material Facts at 3. First Credit clearly relied on those misrepresentations in purchasing Budget’s claim against the Debtor. See Debtor’s Response to First Credit’s Motion for Summary Judgment at 14.
Second, it is clear that the Debtor knew that the representations she made to First Credit were untrue. She knew that she had complained to Budget about the quality of its work. See Debtor’s Response to First Credit’s Motion for Summary Judgment at 4. Thus, the Debtor had actual knowledge that the oral and written statements she made to First Credit were false.
Third, the Debtor should have expected First Credit to rely on her misrepresentations. The completion certificate contained a clause which, in large bold letters, expressly warned the Debtor not to sign unless Budget had completed the improvements to her satisfaction. In the face of such a clause, it was clearly reasonable for First Credit to rely on the Debtor’s statements that she was satisfied with Budget’s performance and had no defenses to the installment contract. See Farmers & Merchants Bank v. Davis, 151 Ill.App.3d 929, 939, 104 Ill.Dec. 850, 855-56, 503 N.E.2d 565, 570-71, appeal denied, 115 Ill.2d 540, 110 Ill.Dec. 455, 511 N.E.2d 427 (1987) (reasonable reliance sufficient to satisfy this element of estoppel); Meier v. Aetna Life and Casualty Standard Fire Insurance Co., 149 Ill.App.3d 932, 938, 103 Ill.Dec. 25, 28, 500 N.E.2d 1096, 1099 (1986) (same).
Fourth, First Credit in fact relied on the misrepresentations without knowledge of or without reasonable means of knowing that the Debtor had defenses to the installment contract. It is clear that the Debtor did in fact rely on her misrepresentations in purchasing the assignment. See Debt- or’s Response to First Credit’s Motion for Summary Judgment at 14.
The Debtor argues that First Credit had the time and the means to investigate whether Budget had failed to adequately perform the installment contract in any way, and was obligated to do so before purchasing the Debtor’s loan from Budget. The court disagrees. The whole purpose of a satisfaction clause is to prevent assignees of these types of contracts from having to investigate whether the obligor has any defenses. Requiring such an investigation in every case would greatly increase the transactions costs of these assignments. If transactions costs of these assignments increase, two things could happen: (1) the costs could be passed on to the borrower; or (2) these assignments could become cost-prohibitive, in which case debtors may find financing unavailable, since contractors of*440ten agree to finance construction costs only because they can readily sell the installment contracts to more permanent lenders.3 Because the vast majority of people must finance extensive repairs such as those done in this case, requiring an investigation of the type the Debtor seeks to impose on the purchaser of the loan would have a deleterious effect on the vast majority of people, in terms of both cost and availability of financing. Use of and reliance on a satisfaction clause to circumvent these investigations seems to the court a sensible and efficient way to keep this type of financing inexpensive and available. Thus, the court finds First Credit’s use of and reliance on the satisfaction clause imminently reasonable.
Finally, it is obvious (and both parties agree) that First Credit would be prejudiced if the Debtor is allowed to assert any defenses to the contract against First Credit.
Thus, there is no genuine issue of material fact as to any of the elements of estop-pel in this case: First Credit has clearly proved that the Debtor should be estopped from asserting any defenses against it. First Credit is entitled to judgment as a matter of law.4 Thus, First Credit’s motion for summary judgment is granted.5
II. Budget's Motion to Strike and for Judgment on the Pleadings
Since this court is unable to determine the threshold issue of jurisdiction, this court expresses no opinion on the merits of Budget’s motion to strike and for judgment on the pleadings. Rather, this court orders Budget and the Debtor to submit briefs on the jurisdictional issues previously posed in this opinion.
III. The Motion of Budget and Mr. Schneider to Dismiss Count II of First Credit’s Cross Claim
As this court has previously stated, this court has serious constitutional doubts about whether it has pendent jurisdiction over First Credit’s cross claim and the motion to dismiss Count II of that cross claim. See, generally, In re Pettibone Corp., 135 B.R. 847 (Bankr.N.D.Ill.1992). As a practical matter, however, the jurisdictional issue need not be decided. Obviously, if First Credit is not liable to the Debtor, First Credit has no cause of action against Budget or Mr. Schneider, since it has not been injured. This court thus expects that First Credit will voluntarily withdraw its cross claim.
CONCLUSION
For the reasons stated above, the court grants First Credit’s motion for summary judgment on all remaining counts affecting it. In connection with Budget’s motion to strike and for judgment on the pleadings, the court orders the Debtor and Budget to submit briefs on the jurisdictional issues *441previously posed in this opinion. The Debt- or is to comply with Fed.R.Bank.P. 7008(a) on or before October 14, 1992, and, should she choose to do so, submit a brief in support of her position on that date. Budget is to comply with Fed.R.Bankr.P. 7012(b) on or before October 21, 1992, and may submit a brief in support of its position on or before such date. The court takes no immediate action with respect to First Credit’s cross claim.6 This motion is set for status and possible ruling on November 18, 1992.
. Initially, the Debtor sought relief on eight counts. In her brief in response to First Credit’s motion for summary judgment, she conceded that summary judgment should be granted as to First Credit as to Counts III, IV and V (all of which related to violations of the Truth-In-Lending Act). Thus, the only remaining counts in the Debtor's complaints affecting First Credit are Counts I, II, VI, VII and VIII. *439ment on the merits of an action absent an express finding pursuant to Illinois Supreme Court Rule 304(a). Chapman, 132 B.R. at 148. Since the state court made no such finding in this case, First Credit’s state court foreclosure judgment was not a final judgment. Thus, the Debtor is not barred by res judicata from bringing this cause of action.
. First Credit also claims that this court must give full faith and credit to the state court judgment of foreclosure awarded to First Credit, and therefore must bar the Debtor’s action against it.
The res judicata doctrine serves the interests of judicial economy and finality by barring both parties to a judgment and their privies from relitigating the same causes of action. Crop-Maker Soil Services, Inc. v. Fairmount State Bank, 881 F.2d 436, 438 (7th Cir.1989). Under this principle, all claims and defenses that could have been raised in the prior litigation are foreclosed. Matter of Chapman, 132 B.R. 132, 144 (Bankr.N.D.Ill.1991). A federal court must give the same full faith and credit to a prior state court decision that that decision would receive in the courts of the state in which it was rendered. Migra v. Warren City School District Board of Education, 465 U.S. 75, 85, 104 S.Ct. 892, 898, 79 L.Ed.2d 56 (1984). Res judicata applies if: (1) a final judgment on the merits was entered in the prior action; (2) there is identity of the parties or their privies in the two suits; and (3) there is identity of the causes of action in the two suits. La Preferida v. Cerveceria Modelo, 914 F.2d 900, 907 (7th Cir.1990).
Under this test, res judicata clearly does not apply in this case. Under Illinois law, a state court foreclosure judgment is not a final judg-
. Indeed, it appears that, in this case, Budget would not, indeed could not, have agreed to perform under an installment contract had it not been reasonably sure it could locate an assignee to purchase the installment contract.
. First Credit claims that the Debtor may not assert any personal defenses against First Credit, since First Credit is a holder in due course protected against all personal defenses. See Ill. Rev.Stat. 26 ¶ 3-302. An argument can be made, however, that First Credit is estopped from claiming the protection of holder in due course status because of a provision in the contact which states:
ANY HOLDER OF THIS CONSUMER CREDIT CONTRACT IS SUBJECT TO ALL CLAIMS AND DEFENSES WHICH THE DEBTOR COULD ASSERT AGAINST THE SELLER OF GOODS OR SERVICES OBTAINED PURSUANT THEREON OR WITH THE PROCEEDS HEREOF. RECOVERY HEREUNDER BY THE DEBTOR SHALL NOT EXCEED AMOUNTS PAID BY THE DEBTOR HEREUNDER.
(emphasis in original).
Because the court rules that the Debtor is estopped from asserting any defenses to the contract against First Credit, the court need not decide whether First Credit is protected against the Debtor’s personal defenses as a holder in due course.
.In her response brief, the Debtor raised several bases of defense to the installment contract that First Credit argues were not pled in the complaint and thus should be stricken. Under the liberalized pleading rules now in effect, see 2A James W. Moore, MOORE’S FEDERAL PRACTICE, ¶ 56.02[3] at 8-8.1-9 (2d ed. 1991), these bases of defense were properly pled. However, they are wholly irrelevant.
. Subsequent to this court’s decision, First Credit, while stating for the record that it believed it was injured by Budget, voluntarily withdrew its cross claim. The voluntary dismissal was without prejudice. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491567/ | ORDER
JAMES G. MIXON, Bankruptcy Judge.
On December 31, 1990, James Stephens Rhodes and Sarah Rhodes (debtors) filed a voluntary petition for relief under the provisions of chapter 7 of the United States Bankruptcy Code. John T. Lee, Esq., was appointed trustee. On August 8, 1991, the debtors filed a motion to cite the Internal Revenue Service for contempt for violating the automatic stay provisions of 11 U.S.C. § 362. A hearing was held on March 12, 1992.
Among the assets listed in the debtors’ schedules was the debtors’ homestead located in Washington County, Arkansas. The debtors claimed their homestead as exempt property pursuant to the state exemption permitted by 11 U.S.C. § 522. No objection was filed to the debtors’ claim of exemption.
The Internal Revenue Service (IRS) had a prepetition tax claim against the debtors in the sum of $14,345.26. Michael Wells (Wells), an agent for the IRS, was assigned the responsibility of collecting the debtors’ account for the IRS. Wells stated that he contacted Mr. Rhodes in January 1991 to collect the taxes. Wells testified that Mr. Rhodes told him that he (Rhodes) had filed bankruptcy, but Mr. Rhodes could not furnish a bankruptcy case number to Wells. Wells contacted the Little Rock office and was informed that a computer search revealed no bankruptcy filing by Mr. Rhodes.
On April 18, 1991, after efforts to meet with Mr. Rhodes and to collect the taxes proved fruitless, Wells, filed a Notice of Federal Tax Lien in the deed records of Washington County, Arkansas. As a result of this filing, the tax lien attached to the debtors’ homestead. See 26 U.S.C. § 6321. On May 1, 1991, Wells met with Mr. Rhodes and was able to ascertain that Rhodes had filed bankruptcy. Wells stated that he informed Mr. Rhodes that all future communications would have to be with IRS’s Special Procedure Branch in the Little Rock office.
In June 1991, the debtors entered into a contract with Barbara Ann Junkin for the *494sale of the debtors’ homestead. During the closing preparations, the debtors became aware of the existence of the federal tax lien on their homestead. The debtors negotiated with the IRS for a release of the tax lien. The negotiations resulted in the debtors’ agreeing to deliver two tax refund checks totaling $3,571.11 to the IRS and also agreeing to pay the IRS $7,632.62 from the equity realized from the sale of the homestead.
The IRS concedes that a violation of the stay occurred; however, the IRS argues that the violation was not willful and, therefore, sanctions would be inappropriate. The debtors argue that there was substantial evidence of willfulness on the part of the IRS and that they should be awarded damages.
DISCUSSION
11 U.S.C. § 541 defines property of the estate as “all legal or equitable interests of the debtor in property as of the commencement of the case.” 11 U.S.C. § 541(a)(1). Under the Bankruptcy Code, exempt property is property of the estate until such time as it is conveyed or abandoned pursuant to court order. 11 U.S.C. § 541; 4 Collier on Bankruptcy ¶ 541.-02[3] (15th ed. 1989). Exempt property is automatically abandoned when a case is closed. 11 U.S.C. § 554(c).
The automatic stay prohibiting acts against property of the estate terminates when property is no longer property of the estate. 11 U.S.C. § 362(c)(1). The automatic stay prohibiting acts against the debtor to collect a prepetition claim continues until the earliest of “the time the case is closed; [or] ... the time a discharge is granted or denied.” 11 U.S.C. § 362(c)(2)(A) and (C).
The debtors have not obtained a discharge and the case has never been closed. Therefore, 11 U.S.C. § 362 clearly prohibited the imposition of the tax lien on the debtors’ homestead. Wells filed the tax lien without actual knowledge of the existence of the bankruptcy case. An act done in violation of the stay is void, but if the act is not willful, the violator is not subject to sanctions. See Goichman v. Bloom (In re Bloom), 875 F.2d 224 (9th Cir.1989).
By the first of May, the IRS was aware of the bankruptcy case, yet the IRS did nothing to correct the improper recording of the tax lien. Failure to correct an act done in violation of the stay has been held to be an act of contempt. Abrams v. Southwest Leasing and Rental, Inc. (In re Abrams), 127 B.R. 239, 241-42 (Bankr.9th Cir.1991) citing Knaus v. Concordia Lumber Co., Inc. (In re Knaus), 889 F.2d 773 (8th Cir.1989). In addition, the IRS insisted on the payment of its prepetition claim as a condition for release of the improperly imposed tax lien by coercing the debtors to convey two tax refund checks and $7,632.62 to the IRS. The refund checks were property of the estate, and, the debtors’ conveyance of these checks to the IRS subjected the debtors to liability to the chapter 7 trustee under 11 U.S.C. § 549. The IRS offered no explanation for why it chose to ignore the automatic stay.
Therefore, the IRS is found to be in willful contempt of the automatic stay. As sanctions for violating the automatic stay, the IRS is ordered to satisfy the balance of any unpaid portion of its claim filed in this case. Proof of satisfaction of the tax claim shall be in writing and shall be forwarded to counsel within ten (10) days of the effective date of this order. The IRS is also ordered to release any encumbrance on any of the debtors’ property that is based on the debtors’ prepetition tax liability.
The bankruptcy clerk shall forthwith serve a copy of this order Of contempt on the Internal Revenue Service. This order of contempt shall become effective as a final order ten days after service of the order on the IRS unless, within the ten-day period, the IRS serves and files with the bankruptcy clerk an objection to this order as provided by Federal Rule of Bankruptcy Procedure 9033(b). If an objection is filed, this order shall be subject to review by the *495district court pursuant to Federal Rule Bankruptcy Procedure 9033. of
IT IS SO ORDERED. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491568/ | *585MEMORANDUM OPINION
STEPHEN J. COVEY, Chief Judge.
This matter comes before the Court upon the Stipulated Facts and briefs filed by the parties. The sole issue before the Court is whether punitive damages awarded by a state court in addition to actual damages are nondischargeable under Section 523(a)(9) of the Bankruptcy Code, where the actual damages were caused by a Debt- or who was operating a motor vehicle while intoxicated from alcohol.
FACTS
In August 1989, Leslie R. Sellers (“Plaintiff”), filed a state court action against Willis Boyd Friend (“Debtor”) for personal injuries caused by Debtor’s unlawful operation of a motor vehicle while intoxicated. On January 17, 1992, following a jury trial, the state court entered judgment against Debtor in the amount of $110,000.00 in actual damages and $10,000.00 in punitive damages. The $110,000.00 in actual damages plus interest has been paid by various insurance companies. Debtor has not paid any of the $10,000.00 punitive damage award.
On March 23, 1992, Debtor and his wife filed for relief under Chapter 7 of the Bankruptcy Code. The Plaintiff thereafter commenced this adversary proceeding to determine the dischargeability of the $10,-000.00 punitive damage award under § 523(a)(9).
CONCLUSIONS OF LAW
Section 523(a)(9) provides as follows:
(a) a discharge under section 727 ... of this title does not discharge an individual debtor from any debt—
(9) for death or personal injury caused by the debtor’s operation of a motor vehicle if such operation was unlawful because the debtor was intoxicated from using alcohol, a drug, or another substanee[.]
(Emphasis added).
Plaintiff argues that § 523(a)(9) excepts from discharge all damages, including those that are punitive in nature, arising from a debtor’s unlawful operation of vehicle while intoxicated. On the other hand, Debtor contends that § 523(a)(9) limits the nondischargeability of a debt to compensation for actual damages only. Debtor points out that punitive damages are awarded to punish and deter future conduct, not to compensate for injuries sustained.
When interpreting the Bankruptcy Code, this Court begins with the statutory language itself. United States v. Ron Pair Enterprises, Inc., 489 U.S. 235, 109 S.Ct. 1026, 103 L.Ed.2d 290 (1989). The plain language of § 523(a)(9) provides for the nondischargeability of any debt for personal injury caused by a debtor’s operation of a motor vehicle while legally intoxicated. As an exception to discharge, § 523(a)(9) should be read no more broadly than that which is necessary to give effect to the plain meaning of its terms. Thus, only debts for personal injury are excepted from discharge under § 523(a)(9).
Punitive damages do not constitute a debt for personal injury. They are not intended to compensate for injuries sustained. Rather, punitive damages are damages awarded over and above actual damages in order to punish a wrongdoer for outrageous conduct. In Oklahoma, punitive damages may be awarded in addition to actual damages where a defendant has been guilty of “conduct evincing a wanton or reckless disregard for the rights of an-other_” 23 O.S.1992 § 9 A. They are awarded for the benefit of society rather than for the benefit of the litigating parties. Slocum v. Phillips Petroleum Co., 678 P.2d 716 (Okl.1983). Because punitive damages do not represent compensation for personal injury, they do not fall within the scope of § 523(a)(9).1
*586This Court is aware of decisions holding that punitive damages are nondischargeable in an effort to uphold the social policy behind such damages, i.e. to deter and punish egregious conduct.2 This Court agrees with the public policy behind the awarding of punitive damages but holds that if such damages are to be excepted from, discharge, it should be expressly provided for in § 523. There is no provision in § 523 which provides for the nondischargeability of punitive damages except § 523(a)(7). That section provides that certain penalties and fines owed to a governmental unit are excepted from discharge. This clearly demonstrates that when Congress wanted to make penalties nondischargeable, they knew how to do it.
Exceptions to discharge should be narrowly construed so as to carry out the fresh start policy of the Bankruptcy Code.3 Exceptions not provided for by the Code should not be provided by the Court. As was aptly put by the Court in In re Robinson, 776 F.2d 30, 38 (2nd Cir.1985), “it is inappropriate for a court, based on its own view as to the relative importance of [a] policy, to create judicial exceptions to the clear language of the statute that are warranted neither by that language nor by the legislative history.”
Therefore, the Court finds that the $10,-000.00 punitive damage award owed by Debtor to Plaintiff is not excepted from discharge under § 523(a)(9). A separate Order consistent with this Memorandum Opinion shall be entered.
. For cases holding that punitive damages are dischargeable under other sections of § 523, see In re Alwan Brothers Co., 105 B.R. 886 (Bankr. C.D.Ill.1989); In re Ellwanger, 105 B.R. 551 (9th Cir. BAP 1989); In re Perry, 59 B.R. 947 (Bankr.E.D.Pa.1986)
. See In re Manley, 135 B.R. 137 (Bankr.N.D.Okl.1992); In re Dahlstrom, 129 B.R. 240 (Bankr.D.Utah 1991) and cases cited therein.
. See In re Shervin, 112 B.R. 724 (Bankr.E.D.Pa.1990); In re Schmiel, 94 B.R. 373 (Bankr.E.D.Pa.1988); In re Claussen, 118 B.R. 1009 (Bankr.D.S.D.1990); In re Fisackerly, 114 B.R. 145 (Bankr.W.D.Tenn.1990); In re Grier, 124 B.R. 229 (Bankr.W.D.Tex.1991); In re Murray, 116 B.R. 473 (Bankr.E.D.Va. 1990); In re Blackwell, 115 B.R. 86 (Bankr.W.D.Va.1990); In re Wisniewski, 109 B.R. 926 (Bankr.E.D.Wis.1990); In re Pruitt, 107 B.R. 764 (Bankr.D.Wyo.1989). | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491571/ | OPINION
KENNETH J. MEYERS, Bankruptcy Judge.
At issue in this case is whether a dissolved corporation, of which the debtors were shareholders, validly conveyed its real estate following dissolution or whether, as the trustee contends, the property passed to the debtors as owners of the defunct corporation’s assets so as to become part of *932their bankruptcy estates.1 The trustee has filed a complaint for ejectment and declaratory relief, asserting that because the debtors’ corporation had been involuntarily dissolved at the time of its purported conveyances of real estate, the conveyances were invalid and the debtors hold title to the property as shareholders of the dissolved corporation. Intra Illinois, Inc., and Intra USA, Inc., (“Intra”),2 which purchased the property from the dissolved Iowa corporation, assert that the conveyances were authorized under an Iowa statute governing the “winding up” of corporations. Intra contends, therefore, that it acquired good title to the real estate in question and that the trustee’s complaint should be denied.
The facts are undisputed. Debtors Richard and Robert Morris are brothers who, along with their father, owned 100% of the stock of F.C. Morris & Sons, Inc. (“Morris, Inc.”), a corporation organized under Iowa law. From the time of its incorporation in 1966 until 1973, Morris, Inc. conducted a farming operation in Iowa. In 1973, the corporation registered to do business in Illinois and purchased approximately 3,000 acres of land in Hamilton County, Illinois. Morris, Inc. thereafter farmed this land with the debtors serving as officers of the corporation.3
On November 21, 1977, Morris, Inc. was involuntarily dissolved by the Iowa Secretary of State for failure to pay its annual fee or file its annual report. The debtors were unaware of this fact, and the corporation did not wind up its affairs as contemplated by Iowa statute. Instead, Morris, Inc. continued to operate its farming business as a corporation.
On December 5, 1978, the debtors as officers of Morris, Inc. executed a mortgage on the farm to John Hancock Mutual Life Insurance Company (“Hancock”) to secure a $3 million loan to the corporation. Subsequently, in December 1979, the corporation sold three separate parcels of land totaling approximately 800 acres to individuals not involved in this litigation.
On February 10, 1981, Morris, Inc. conveyed 1,990 acres of the remaining land to an Illinois land trust, whose beneficiary was Intra Illinois, Inc. The warranty deed from Morris, Inc. identified the grantor as “a corporation duly organized and existing under and by virtue of the laws of the State of Iowa.” Morris, Inc. used a portion of the proceeds from this sale to pay operating expenses and debts of the corporation. The rest of the proceeds were used by debtors Richard and Robert Morris to invest in oil and gas wells, in alcohol fuels, and in other business enterprises unrelated to Morris, Inc.
Morris, Inc. continued to farm the land sold to Intra pursuant to a 10-year farm lease entered into on November 14, 1980.4 However, it subsequently defaulted on payment of the rent due under the lease, and, in June 1982, Intra served a distraint warrant on Morris, Inc., seizing all the farm equipment of Morris, Inc. and all grain stored on the farm. In September 1982, Morris, Inc. conducted a public auction of its farm equipment and personal property in order to settle Intra’s suit for rent and for damages resulting from Morris, Inc.’s improper farming under the lease. On October 22, 1982, part of the proceeds from the sale of equipment were paid to the Internal Revenue Service to satisfy a tax lien against Morris, Inc. and the balance *933was paid to Intra. Intra also received all the proceeds from sale of the grain seized from Morris, Inc.
On October 22, 1982, Morris, Inc. conveyed the remaining portion of the original farm — approximately 200 acres — to an Illinois land trust for the benefit of Intra USA, Inc. The deed, executed by the debtors as officers of the corporation, also re-conveyed the 1,990 acres that had been previously conveyed in trust to Intra Illinois, Inc. Morris, Inc. never again engaged in farming after June 22, 1982. On December 1, 1982, Morris, Inc.’s certificate to do business in Illinois was revoked by the Illinois Secretary of State.
The conveyances to Intra in February 1981 and October 1982 left the Hancock mortgage of record. Intra did not expressly assume the mortgage but made direct payments to Hancock on the mortgage from 1981 to 1985. In July 1986, Intra defaulted on the mortgage payments, and Hancock filed foreclosure proceedings in state court against both Morris, Inc. and Intra.
In September 1986, Intra filed a motion to dismiss the foreclosure action, asserting that the Hancock mortgage was invalid because Morris, Inc. had been legally dissolved at the time of execution of the mortgage. Prior to this time, neither Hancock nor the debtors knew that Morris, Inc. had been dissolved. At the time of the conveyances to Intra in February 1981 and October 1982, Intra, too, was unaware that Morris, Inc. had been dissolved.
On October 26, 1989, while the mortgage foreclosure proceeding was pending, the debtors filed their separate Chapter 7 petitions in bankruptcy. In their schedules, both debtors claimed an interest in the assets of the defunct corporation, Morris, Inc. The trustee of the debtors’ estates brought the present adversary proceedings seeking possession of the property and authority to sell it for the benefit of creditors. The trustee subsequently filed a motion for summary judgment. Intra, Hancock, and all remaining defendants have stipulated that no triable issue of fact remains and that summary judgment is appropriate.5
The trustee’s complaint, alleging that Morris, Inc. lacked capacity as a dissolved corporation to execute either the mortgage to Hancock or the deeds to Intra, raises separate issues of validity of the mortgage and ownership of the property.6 While these issues are related to the extent they concern the ability of the dissolved corporation to act, the Court has no jurisdiction to determine validity of the mortgage if the real estate was effectively conveyed to In-tra and is not property of the debtors’ bankruptcy estates.7 The Court must, therefore, determine whether Morris, Inc. validly conveyed its real estate following dissolution so that no title or interest remained in the debtors as shareholders of the dissolved corporation.
Intra contends that the conveyances were valid even though Morris, Inc. was dissolved in 1977 prior to the conveyances in 1981 and 1982. Intra asserts that the corporation retained the legal capacity to convey real estate under § 102 of the Iowa Business Corporations Act, in effect at the time of the conveyances, which provided that a dissolved corporation “may continue to act for the purpose of conveying title to *934its property, real and personal, and otherwise winding up its affairs.” Iowa Code § 496A.102 (1981).8 Intra contends that this provision, which contains no limitation as to time, must be read according to its plain terms as authorizing the conveyances to Intra despite Morris, Inc.’s status as a dissolved corporation.9
The trustee responds that Iowa Code § 496A.102 is inapplicable to this factual situation in which the officers of the dissolved corporation were unaware of its dissolution and continued the business of the corporation without winding up its affairs. While aligning themselves with the trustee, defendants First National Bank of Wayne City (“Bank”) and the Morris children,10 raise an additional argument that § 496A.102 is inapplicable on conflict of laws grounds. The Bank and the Morris children assert that it is inappropriate to apply Iowa law in this action involving Illinois real estate. Rather, they contend, the Court should apply Illinois law — the law of the situs — in determining the capacity of Morris, Inc. to convey good title to the real estate.
I.
Because of the unique nature of land and a state’s interest in controlling the use and possession of its land, the validity and effect of a conveyance of land and the nature of the interest conveyed are generally determined by the situs court’s own local law. See Eugene F. Scoles and Peter Hay, Conflict of Laws, § 19.1, 19.2 (2d ed. 1992); Restatement (Second) of Conflict of Laws, § 223 (1971) (hereinafter “Restatement 2d of Conflicts”). Thus, issues of the formal validity of instruments conveying title as well as questions concerning delivery and effectiveness of deeds are governed by the law of the situs. In addition, the situs court would usually apply its own local law to determine capacity of the transferor to make a valid conveyance. See Restatement 2d of Conflicts, § 223, cmt. c, at 12-13. However, in determining the capacity of a foreign corporation as transferor, the situs court might apply the local law of the state of incorporation because that state’s interest in regulating the corporation’s existence and powers is so great as to outweigh the values of certainty and convenience that would be served by application of its own law. Id.
Looking to the situs court here, there appears to be no Illinois case that addresses the issue of which state’s law should be applied to determine the capacity of a dissolved foreign corporation to convey Illinois real estate.11 Illinois courts have, however, recognized the applicability of another state’s “winding up” provision in the context of determining a dissolved foreign corporation’s capacity to sue or be sued. See Eau Claire Canning Co. v. Western Brokerage Co., 213 Ill. 561, 73 N.E. 430 (1905); Perry v. Western Motor Car Co., 279 Ill.App. 195 (1935); Forcite Powder Co. v. Herdien, 162 Ill.App. 425 (1911). The rationale for this rule is that all corporations derive their life and right to transact business from the state in which they are incorporated. While the manner of doing business in a foreign jurisdiction may be controlled by the statutes of that jurisdiction, the corporation’s organization, the *935manner of its dissolution, and its resulting obligations are subject to the control of the state which gave it birth. Thus, under the rule of comity existing between the various states, the rights granted by the state creating the corporation will be recognized insofar as they deal with its corporate life and existence. Perry, 279 Ill.App. at 202-OS; see Restatement 2d of Conflicts, § 299, cmt. e, at 295-96.
By this reasoning, the law of the state of incorporation would be applied in determining a dissolved foreign corporation’s capacity to convey real estate if that state’s law were not against the public policy of Illinois. See Eau Claire Canning Co., 213 Ill. at 578. In the present case, both Illinois and Iowa have “winding up” statutes that continue a corporation’s existence following dissolution for the purpose of disposing of property.12 It is the policy of such provisions to aid in the orderly distribution of corporate assets by validating the transfer of corporate property during this time. Id. at 577-78 (quoting St. Louis and Sandoval Coal and Mining Co. v. Sandoval Coal and Mining Co., 111 Ill. 32, 39 (1884)); Bishop v. Schield, 293 F.Supp. 94, 96 (N.D.Iowa 1968). The Iowa statute at issue, § 496A.102, differs from Illinois law in that it continues corporate existence indefinitely to convey a dissolved corporation’s property, while Illinois case law holds that corporate property passes automatically to the shareholders at the end of the statutory winding up period.13 See Shute v. Chambers, 142 Ill.App.3d 948, 97 Ill.Dec. 92, 95-96, 492 N.E.2d 528, 531-32 (1986). However, the fact that Iowa provides a longer time for the corporation to dispose of assets following dissolution does not make its statute repugnant to the laws of Illinois, as both states’ statutes serve to facilitate the transfer of title from the defunct corporation. Cf. Perry v. Western Motor Car Co., 279 Ill.App. at 203 (holding that Ohio statute containing no time limit for dissolved corporation to sue or be sued was in harmony with policy of Illinois statute, which limited the time period to two years).
Because the Illinois and Iowa provisions have a similar purpose of extending corporate existence for the conveyance of property, it is appropriate to look to Iowa law to determine the capacity of Morris, Inc. to convey property following dissolution. The Court finds no merit in the Morris children’s argument that application of Iowa Code § 496A.102 is prohibited by the Illinois foreign corporations statute, which provides that a foreign corporation shall enjoy no greater rights and privileges than those enjoyed by domestic corporations. See Ill.Rev.Stat., ch. 32, par. 157.103 (1981) (now Ill.Rev.Stat., ch. 32, par. 13.10 (1991)). This statute restricts the type of business activity a foreign corporation may engage in and is not relevant to a foreign corporation’s right to wind up its affairs pursuant to the law of its state of incorporation. Perry, 279 Ill.App. at 202; see Forcite Powder Co. v. Herdien, 162 Ill.App. at 426-27.14
The Court is likewise not persuaded that the practical consequences of applying another state’s law to determine the powers *936of a dissolved foreign corporation require that Illinois law be applied. The Morris children and the Bank assert that an Illinois title searcher, upon discovering a dissolved foreign corporation in a chain of title, would be inconvenienced by having to research another state’s law to determine the corporation’s legal capacity to convey property. They also contend that it would promote consistency in Illinois real estate law if Illinois winding up provisions were applicable to both domestic and foreign corporations. As discussed above, considerations of convenience and certainty are outweighed by the incorporating state’s greater interest in regulating corporations created under its law, as the powers of each corporation are determined by the charter of the corporation and the laws of the state under which the charter was granted. See Clinton v. Coppedge, 2 F.Supp. 935, 939 (N.D.Okla.1933). In the present case, Iowa has a strong interest in having corporate property liquidated in a uniform manner rather than in a piecemeal fashion depending on the law of the state in which the property is located. Accordingly, the Court must look to Iowa law to determine the capacity of the debtors’ dissolved Iowa corporation to convey its real estate to In-tra following dissolution.15
II.
Iowa Code § 496A.102, upon which Intra relies, provides in its first paragraph for survival of remedies in and against a dissolved Iowa corporation during the winding up period:
The dissolution of a corporation ... shall not take away or impair any remedy available to or against such corporation, ... for any right or claim existing, or any liability incurred, prior to such dissolution ..., if action or other proceeding thereon is commenced within two years after the date of such dissolution. ...
Iowa Code § 496A.102 (1981).
This survival provision, derived from § 98 of the Model Business Corporation Act,16 abrogates the common law rule that a corporation’s existence terminates on dissolution and continues corporate powers for the limited purpose of winding up. 19 Am.Jur.2d Corporations, § 2840, at 625 (2d ed. 1986). Generally, at the end of such a statutory period, dissolution of the corporation would become operative for all purposes, and the corporation would be without power to convey property or take other action. Id. at 626.
The Iowa legislature, however, supplemented the Model Act provision with a nonuniform amendment, found in the second paragraph of § 496A.102:
A corporation which has been dissolved ... may nevertheless continue to act for the purpose of conveying title to its property, real and personal, and otherwise winding up its affairs.
Iowa Code § 496A.102 (1981) (emphasis added). Unlike the survival of remedies provision preceding it, this, paragraph imposes no time limit on the extension of corporate existence to convey property following dissolution.
Intra contends that this latter paragraph grants a dissolved corporation a power to convey property that is separate from the power to “otherwise wind up its affairs.” *937Because winding up normally includes the conveying of property, Intra reasons, the legislature’s separate recitation of this power created a power to convey property that extends beyond the winding up phase and validates any conveyance by a dissolved corporation. Intra asserts, therefore, that the conveyances from Morris, Inc. in 1981 and 1982 were valid regardless of whether they were part of the winding up of the dissolved corporation. Intra adds that even if the statute were construed to require conveyances to be part of winding up, the subject property was effectively conveyed to Intra in 1982 when Morris, Inc. liquidated its business and discontinued farming.
The trustee maintains that the power to convey property under § 496A.102 is limited to conveyances that are part of the winding up process. He contends that the conveyances to Intra in 1981 and 1982 could not have been for the purpose of winding up because, at the time of the conveyances, no one was aware the corporation had been dissolved. The trustee notes that Morris, Inc. continued to carry on business after the 1981 conveyance to Intra and that it discontinued farming and sold its remaining assets in 1982 only upon being forced to do so by Intra. Since, the trustee contends, these conveyances were made without the requisite knowledge and intent to wind up, they were not authorized under the second paragraph of § 496A.102 and were ineffective to transfer title to Intra.
In interpreting this state law provision, the Court must look to decisions of the Iowa state courts and, in the absence of any definitive ruling by these courts, may consider “analogous decisions, considered dicta, scholarly works, and any other reliable data” tending to show how the highest state court would decide the issue at hand. Michelin Tires (Canada), Ltd. v. First Nat’l Bank of Boston, 666 F.2d 673, 682 (1st Cir.1981) (quoting McKenna v. Ortho Pharmaceutical Corp., 622 F.2d 657, 663 (3d Cir.1980), cert. denied, 449 U.S. 976, 101 S.Ct. 387, 66 L.Ed.2d 237 (1980). An examination of Iowa case law reveals no authoritative construction of the second paragraph of § 496A.102. The Iowa supreme court referred to this provision in another context, finding that the “otherwise winding up its affairs” language was not intended to extend the time for bringing suits against dissolved corporations beyond the specific two-year period set forth in the first paragraph of § 496A.102. State v. Bi-States Construction Co., Inc., 269 N.W.2d 455, 457 (Iowa 1978). The Bi-States court expressly agreed with the reasoning of Bishop v. Schield Bantam Co., 293 F.Supp. 94, 96 (N.D.Iowa 1968), where the court stated in dicta:
A more rational justification for the inclusion of the last paragraph of the Iowa statute would be the facilitation of the transfer of title to both real and personal property in the event that such problems were discovered years after dissolution.
The Bishop court cited a law review article written by Clarence Cosson, a principal draftsman of the business corporations act of Iowa Code c. 496A. See Cosson, The Iowa Business Corporation Act, 45 Iowa L.Rev. 12 (1959). In his article, Cosson compared the new act to Iowa’s previously existing act, Iowa Code c. 491,17 as well as to the Model Act. Cosson explained that the second paragraph of § 102, not found in the Model Act, is
essentially a section of the old law [Iowa Code § 491.56 (1958) ] preserved and amplified to facilitate, as far as possible, the transfer of merchantable title in cases in which it might be discovered years after the expiration of corporate existence that the corporation had failed to convey all its property.
45 Iowa L.Rev. at 25; see also Note, Suits By and Against Dissolved Corporations, *93848 Iowa L.Rev. 1006, 1017 (1963) (hereinafter “Note").
Because the second paragraph of § 496A. 102 was intended to preserve former § 491.56, it is appropriate to examine this provision, as well as relevant case law, to discern the meaning of § 496A. 102. Iowa Code § 491.56, referred to by Cosson, was derived from an earlier Iowa statute providing that dissolved corporations “may nevertheless continue to act for the purpose of winding up their concerns, but for no other purpose.” Iowa Code § 1171 (1860) (revision). The last phrase “but for no other purpose” was later deleted with no change in meaning. Iowa Code § 1080 (1873) (revision); see Note, 48 Iowa L.Rev. at 1013-1014. The 1873 provision was renumbered and eventually became Iowa Code § 491.56. Under this statute, a dissolved Iowa corporation retained title to its property for the purpose of winding up its affairs. See Note, 48 Iowa L.Rev. at 1014; M.H. McCarthy Co. v. Central Lumber & Coal Co., 204 Iowa 207, 215 N.W. 250 (1927) (finding, under statute, that dissolved corporation continued in existence to extent necessary to hold and dispose of property in winding up its affairs); State v. Fogerty, 105 Iowa 32, 74 N.W. 754, 755 (1898) (holding that title to property remained in defunct corporation for the purpose of winding up its affairs).
Under § 491.56, continuation of corporate existence for winding up applied only in cases of voluntary dissolution or dissolution by expiration of a term. In § 496A.102, this provision was expanded to include corporations that have been involuntarily dissolved as well. See Note, 48 Iowa L.Rev. at 1014. Further, addition of the second paragraph of § 496A. 102 made explicit the power to convey property that was implicit in the “winding up their concerns” language of § 491.56. There is no indication, however, that the drafters meant to alter existing law by granting the dissolved corporation a power to convey that is separate from the winding up process. Rather, it is more reasonable to assume they sought to ensure that the corporation’s ability to convey property in winding up would not be affected by expiration of the two-year period provided in the first paragraph. Thus, under the second paragraph of § 496A.102, the corporation has continued existence after the two year period to convey property in the complete elimination of corporate business, and the power to convey is limited to that purpose.
Intra contends that this construction of § 496A. 102 renders the power to convey superfluous because conveyance of corporate property is authorized by the last phrase allowing the corporation to “otherwise [wind] up its affairs.” Intra asserts that if this power were intended as part of winding up, the statute would have read instead: “may wind up its affairs, including the conveying of real and personal property.”
The Court agrees that the second paragraph of § 496A.102 could have been more clearly drafted. However, the statute’s delineation of the power to convey does not indicate this power was to be separate from the winding up process. The phrase “and otherwise winding up its affairs,” rather than rendering the power to convey superfluous, refers back to that power while including “other” aspects of winding up. The second paragraph makes clear that, of all the things involved in winding up— paying debts, disposing of property, bringing and defending suits, distributing assets — the dissolved corporation may take action, other than bringing and defending suits, to completely wind up its affairs after the two year period has passed.
This construction of § 496A.102 as granting a qualified power to convey is in accord with other provisions of Iowa Code c. 496A pertaining to corporate dissolution. Section 496A.91, governing involuntary dissolution, provides that upon entry by the secretary of state of an order of dissolution, “the existence of a corporation shall cease, except for the purpose of suits, other proceedings and appropriate corporate action ... and the corporation shall proceed to liquidate its business and affairs....” Iowa Code § 496A.91 (1981). Section 496A. 130 further provides that upon issuance of a certificate of cancellation,
*939the corporate existence of the corporation shall terminate, ... and the corporation shall cease to carry on its business, except insofar as may be necessary for the winding up thereof or for securing reinstatement_ Unless the corporation is reinstated, the corporation shall proceed to liquidate its business and affairs ....
Iowa Code § 496A.130 (1981).
These sections show that after dissolution, the corporation’s power to act is limited to either winding up or seeking reinstatement. The corporation has no power to continue its business or to convey property in the course of doing business. Because the corporation lacks authority to do business, it follows that the power to convey in the second paragraph of § 496A. 102 must be for the purpose of winding up. The statutory context of this paragraph, therefore, as well as its language and history, show that the dissolved corporation’s power to convey property under the second paragraph of § 496A.102 extends only to conveyances that are part of winding up the corporate affairs.
Having made this determination, the Court must decide whether the conveyances to Intra in 1981 and 1982 were part of the winding up of Morris, Inc. so as to be authorized under the second paragraph of § 496A. 102. The trustee asserts that the conveyances did not constitute winding up since the debtors, as corporate officers, did not know the corporation had been dissolved. The trustee argues that knowledge and intent are inherent in the concept of “purpose” as used in the statute and contends that winding up entails knowledge that a corporation has been dissolved.
While it is unusual for a dissolved corporation’s affairs to be wound up without its officers knowing the corporation has been dissolved, section § 496A.102 requires only that conveyances be made with the intent or purpose of winding up the corporation’s business, not with knowledge that the corporation has been dissolved. “Winding up” is a process separate from the formal dissolution of a corporation and takes place when the corporation ceases to be a going concern and begins to dispose of assets with which its business was carried on, paying debts and distributing any remaining assets to shareholders. See Lynch v. State Board of Assessment and Review, 228 Iowa 1000, 291 N.W. 161, 163 (1940); Jacob Mertens, Jr., Law of Federal Income Taxation, § 42.05 (West 1992) (hereinafter “Mertens”). A corporation’s business may be wound up without the corporation being dissolved under state law. Mertens, § 42.16; see Beidenkopf v. Des Moines Life Ins. Co., 160 Iowa 629, 142 N.W. 434, 441 (1913). Thus, knowledge that a corporation has been dissolved is not an essential element of winding up the corporation, and the conveyances to Intra were not invalid merely because the debtors were unaware of the dissolution of Morris, Inc.
The Court finds distinguishable the cases cited by the trustee as indicating that deeds by a dissolved corporation are invalid when not explicitly executed by corporate officers to show the fact of dissolution. See New Hampshire Fire Insurance Co. v. Virgil and Frank’s Locker Service, Inc., 302 F.2d 780 (8th Cir.1962); Cloverfields Improvement Ass’n, Inc. v. Seabreeze Properties, Inc., 32 Md.App. 421, 362 A.2d 675 (1976). The statutes at issue in those cases terminated all corporate rights and existence upon dissolution and provided for the winding up of a dissolved corporation by its directors and officers as trustees. By contrast, the Iowa statutes here extend the corporation’s existence for the purpose of winding up and expressly provide for liquidation of corporate business and affairs by the corporation. Iowa Code §§ 496A.91, 496A.102, 496A.130.
Whether the conveyances of corporate property in this case were valid as part of winding up is ultimately a question of fact, as there can be no definitive rule concerning what constitutes “winding up.” Lynch; Mertens at § 42.07. A dissolved corporation may act only in winding up and must cease carrying on its business. See Iowa Code § 496A.130. Therefore, actions that will prevent the corporation from continuance of the purposes for which it *940was organized are deemed to be part of the winding up process. Lynch; cf. Kratky v. Andrews, 224 Minn. 386, 28 N.W.2d 624, 628 (1947) (holding that assignment of real estate contract to dissolved corporation which had been organized for buying and selling real estate was invalid upon facts showing that corporation was engaged in business for which it was incorporated).
The Court finds that the conveyance of 2,000 acres to Intra in 1981 was not part of winding up the business of the dissolved corporation, Morris, Inc. This sale did not serve to conclude the business of the corporation but was, rather, an effort to reorganize the debt of Morris, Inc. so that it could continue farming as a lessee of Intra. The length of the ten-year farm lease itself shows that the corporation had no intention of winding up its affairs. Indeed, Morris, Inc. carried on its farming business following the conveyance as it had before. While some of the proceeds of the sale were used to pay corporate creditors, the remaining amount was appropriated by the debtors for investment in new enterprises without regard to winding up the corporation’s business. The 1981 conveyance to Intra, therefore, was not part of winding up the business of Morris, Inc. and was invalid as an unauthorized conveyance by a dissolved corporation.
When, however, Morris, Inc. conveyed its remaining land to Intra in October 1982 and reconveyed the 2,000 acre farm, the corporation disposed of the means of carrying on its business and completely ceased farming operations. Assets of the corporation — farm equipment and stored grain — were sold to pay creditors Intra and the Internal Revenue Service. While these actions were taken at the behest of Intra, they were nevertheless done with the intent to liquidate Morris, Inc. and settle its affairs. The conveyances in 1982, unlike the 1981 conveyance, did not serve to carry on the corporation’s business and thus must be deemed part of the winding up of Morris, Inc. As such, they were valid under the second paragraph of § 496A.102, which allows a dissolved corporation to convey real property in winding up its affairs.
The trustee objects that Morris, Inc.’s actions in late 1982, although in the nature of winding up, were invalid because Morris, Inc. did not wind up its affairs properly. He observes that Morris, Inc. never adopted a formal plan of winding up and failed to pay creditors of the corporation. In addition, certain assets that were titled in the corporation were never conveyed. The trustee asserts that the second paragraph of § 496A.102 was intended to facilitate transfer of assets omitted from the normal winding process and should not be applied in this fact situation to relieve Intra of the consequences of taking property from a dissolved corporation without verifying its corporate status.
While it is unlikely the drafters of the Iowa statute envisioned the precise factual situation here, they provided a mechanism in the second paragraph of § 496A. 102 to avoid title problems arising from the conveyance of assets by a dissolved corporation. So long as the conveyances to Intra were for the purpose of winding up the corporation’s business, they came within the language of the statute and must be approved. The Iowa statutes, moreover, do not require a formal resolution or plan of winding up, but merely call for the dissolved corporation to cease its business and begin the liquidation process. See Iowa Code §§ 496A.91, 496A.130. The conveyances to Intra in 1982 served to further the winding up of Morris, Inc. and were not invalid simply because the winding up process was never completed.18
For the reasons stated, the Court finds that Morris, Inc. validly conveyed its real estate to Intra in 1982 and the debtors, as *941shareholders of the dissolved corporation, have no interest that became property of their bankruptcy estates. Accordingly, the Court grants summary judgment for defendants Intra and Hancock as to Count I (ejectment), Count III (declaratory judgment concerning validity of conveyances to Intra), and Count IV (authority to sell real estate) of the Trustee’s complaint. Count II concerning validity of Hancock’s mortgage is dismissed for lack of subject matter jurisdiction.
. The Court previously ordered that the debtors' separate bankruptcy cases be administered jointly. The Court further found that consolidation of the present adversary proceedings was appropriate due to the identity of issues and parties. See Karnes v. F.C. Morris, Inc., Adv. Nos. 90-0055, 90-0056, slip op. 3-4 (Bankr.S.D.Ill. June 13, 1990).
. Intra Illinois, Inc. and Intra USA, Inc. are related entities and will be referred to collectively as “Intra” except to the extent the context requires otherwise.
. The debtors’ father, F.C. Morris, died in 1973, and the debtors subsequently acquired all the stock of Morris, Inc. Robert Morris became president of the corporation and Richard Morris remained as secretary/treasurer. In December 1976, the debtors transferred approximately 9% of the stock to two trusts for the benefit of their children.
. At trial, counsel noted that the lease was actually entered into before the conveyance was effected, presumably due to a delay in closing the sale to Intra.
. The defendants, while stipulating that "the case is ready to submit to the Court on cross motions for summary judgment,” have filed no such motions. In the absence of a cross-motion, the Court may grant summary judgment either sua sponte or by treating the nonmovant’s opposition as a cross-motion if, as in this case, the parties had notice that summary judgment was contemplated and had opportunity to respond. See Celotex Corp. v. Catrett, 477 U.S. 317, 326, 106 S.Ct. 2548, 2554, 91 L.Ed.2d 265 (1986); Cool Fuel v. Connett, 685 F.2d 309, 312 (9th Cir.1982).
. Specifically, the trustee’s four-count complaint seeks ejectment (Count I), a declaratory judgment that the Hancock mortgage is void (Count II), a declaratory judgment that the trustee’s rights in the property are superior to both Intra and Hancock (Count III), and an order to sell the real estate (Count IV).
. The bankruptcy court's jurisdiction to determine validity of liens in an adversary proceeding is limited to liens on property of the estate. See 28 U.S.C. § 157(2)(K); In re Holland Industries, Inc., 103 B.R. 461, 465 (Bankr.S.D.N.Y.1989).
. Iowa Code c. 496A was repealed in 1989 when the Iowa legislature enacted the New Iowa Business Corporation Act (Iowa Code c. 490). The provision here at issue was not included in the new Act.
. Defendant Hancock, although opposing Intra on the issue of validity of the mortgage, joins with Intra in arguing that Morris, Inc. conveyed good title to the real estate so that it does not constitute property of the bankruptcy estates.
. The debtors’ children are joined as defendants in the trustee's action both individually and as beneficiaries of the Richard C. Morris Children’s Trust and the Robert E. Morris Children’s Trust, which hold approximately 9% of the stock of Morris, Inc. Like the trustee, the Morris children and the Bank, a judgment creditor of the debtors, seek a determination that Morris, Inc. failed to convey its real estate to Intra following dissolution.
. The cases cited by the Morris children do not involve corporate entities and thus are inapplicable to the issue of choice of law to determine capacity of a corporate transferor. See Aurora Gasoline Co. v. Coyle, 174 F.Supp. 331 (E.D.Ill. 1959); Post v. First National Bank, 138 Ill. 559, 28 N.E. 978 (1891).
. Winding up statutes in effect at the time of the conveyances to Intra — Ill.Rev.Stat., ch. 32, par. 157.79 (1981) and Iowa Code § 496A.130 (1981) — provided for the liquidation of assets of a dissolved corporation. In addition, the provision here at issue, Iowa Code § 496A.102, allowed a dissolved corporation to convey property. Current statutes — Ill.Rev.Stat., ch. 32, par. 12.30 (1991) and Iowa Code § 490.1405 <1991)— likewise provide for continued corporate existence to convey property.
. The Illinois survival of remedies statute previously limited this period to two years. Ill.Rev. Stat., ch. 32, par. 157.94 (1981).. It has since been extended to five years. Ill.Rev.Stat., ch. 32, par. 12.80 (1991).
. In a case cited by the Morris children, Kessler Distributing Co. v. Neill, 317 N.W.2d 519 (Iowa App.1982), the court held that a state could not, pursuant to a certificate of authority issued to a foreign corporation, continue the corporation's existence after revocation of its charter and so grant greater rights to the foreign corporation than those enjoyed by domestic corporations. This case stands for the proposition that the powers of a dissolved corporation are governed by the law of the state that created it, as this Court has concluded. Kessler, 317 N.W.2d at 521.
. In a previous opinion, the Court relied on Illinois law in finding that the debtors acquired an interest in homestead property titled in Morris, Inc. upon dissolution of the corporation. In re Morris, 115 B.R. 626 (Bankr.S.D.Ill.1990). The parties in that case raised no issue concerning the appropriate state law to be applied in determining the effect of corporate dissolution on title to the property. The Court notes that under Iowa law, the debtors as shareholders of the dissolved corporation had a sufficient interest in assets of the corporation to be entitled to their claimed homestead exemption. See In re Culver’s Estate, 145 Iowa 1, 123 N.W. 743, 745 (1909) (stating general rule that property of dissolved corporation remaining after payment of debts belongs, in equity, to corporation’s shareholders, even though legal title remains in corporation); see also 16A W. Fletcher, Cyclopedia of the Law of Private Corporations § 8134, at 411 (rev. perm. ed. 1988).
. See ABA-ALI Model Bus. Corp. Act § 98 (1953). Except for addition of the second paragraph, § 496A.102 varies only slightly from the Model Act. See Note, Suits By and Against Dissolved Corporations, 48 Iowa L.Rev. 1006, 1015-16 (1963).
. Iowa Code c. 491 was not repealed when c. 496A was enacted. Iowa thereafter had two separate corporation chapters, requiring a corporation to elect under which of the two chapters it would be incorporated. See Note, Suits By and Against Dissolved Corporations, 48 Iowa L.Rev. 1006, 1013 (1963); Adam v. Mt. Pleasant Bank & Trust Co., 355 N.W.2d 868, 873 (Iowa 1984). The articles of incorporation of Morris, Inc. show that it was incorporated under Iowa Code c. 496A.
. The Court notes that in cases such as this where the dissolved corporation fails to "proceed promptly" with liquidation, the Iowa statutes provide for liquidation by a court of equity to ensure that creditors are paid and assets transferred from the corporation. See Iowa Code §§ 496A.91, 496A.130 (stating that "the district court in a suit in equity [has] ... power to liquidate the assets and business of [a dissolved] corporation ... in a suit by a shareholder or creditor ... when such corporation fails to proceed promptly with ... liquidation-’’). | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491572/ | MEMORANDUM OPINION
ROBERT F. FUSSELL, Chief Judge.
Pending before the Court is the defendant’s Motion to Dismiss the plaintiffs June 3, 1992 Complaint for Recovery of Asset for failure to state a claim. The complaint seeks a turnover of property pursuant to 11 U.S.C. §§ 542 and 105. The Court held a hearing on the defendant’s motion to dismiss on October 26, 1992.
I. Jurisdiction
The Court has jurisdiction over this pending matter pursuant to 28 U.S.C. § 1334. Further the above proceeding is a core proceeding within 28 U.S.C. § 157(b)(2). The following Memorandum Opinion constitutes findings of fact and conclusions of law in accordance with Bankruptcy Rule 7052.
II. Findings of Fact
At the October 26, 1992 hearing, the parties agreed to offer as evidence the June 3, 1992 complaint. The complaint states in relevant part:
COMPLAINT FOR RECOVERY OF ASSET
John M. Jewell, as Disbursing Agent for Castle Industries, Inc., Castle Industries of Arkansas, Inc., Castle Home Sales, Inc. (“Consolidated Debtors”) and Housing Financial Services, Inc. (hereinafter the Consolidated Debtors and Housing Financial Services, Inc. will be collectively referred to as “Debtors”), pursuant to 11 U.S.C. §§ 105 and 542, and Federal Rule of Bankruptcy Procedure 7001, for its Complaint for Recovery of Asset states:
1. This Court has jurisdiction over this matter pursuant to 28 U.S.C. § 157.
2. On September 9, 1986, the Debtors filed their respective Chapter 11 petitions in the Bankruptcy Court (the “Court”). On October 8, 1986, the Court ordered the administrative consolidation of the Debtors’ Chapter 11 cases. On April 20, 1987, the Court ordered the substantive consolidation of the Consolidated Debtors’ estates.
3. On October 15, 1987, the Debtors filed their Amended Joint Plain of Arrangement and Reorganization (the “Plan”) under Chapter 11 of the Bankruptcy Code (the “Code”). On November 23, 1987, the Plan was confirmed by the Court.
4. Pursuant to Article IX of the Plan, a disbursing agent was to be appointed to collect certain assets to which the Debtors’ estate was entitled. Such assets were to be placed in the Creditor Payment Fund (the “Fund”), also established by the Plan, and invested as set forth in the Plan. Further, distributions from the Fund were to be made on a pro-rata basis to those creditors who held Class M Claims under the Plan (the “Class M Claimants”). On February 10, 1988, an Order was entered appointing John M. Jewell as Disbursing Agent under the Debtors’ Plan (the “Disbursing Agent”).
5. Since his appointment, the Disbursing Agent has collected numerous assets which have been placed in the Fund. At present, the Fund includes the following assets which are available for distribution to Class M Claimants:
Accounts:
a. First Commercial Bank
Investment Account # 0290289
Balance $95,304.06
(as of 5-6-92 statement)
b. First Commercial Bank
Checking Account # 0290297
Balance $362.25
(as of 5-6-92 statement)
Certificates of Deposit
a. One National Bank
CD #52754
Maturity Date 6-3-92
Principal Amount — $101,413.16
b. Union National Bank
CD # 0839159
Weekly Maturity
Principal Amount — $97,601.61
c. Twin City Bank
CD #94824
Maturity Date 6-13-92
Principal Amount — $56,950.00
*9436. Under the terms of the Plan, the Debtors’ Chapter 11 cases shall not be closed except upon a motion of the Disbursing Agent. The Disbursing Agent, however, is unable to close these cases until all available assets have been recovered and placed in the Fund and a final disbursement of such assets has been made to the Class M Claimants.
7. At present, there is only one asset which the Disbursing Agent is entitled to recover which has not yet been recovered. This asset is a certificate of deposit held by Eagle Bank & Trust Company in the amount of $82,546.56 (the “GECC Certificate”). Under the terms of the Plan, however, the GECC Certificate has been pledged to General Electric Capital Corporation (“GECC”), formerly General Electric Credit Corporation, to secure the payment by the Debtors of certain bonds issued in favor GECC under the terms of the Plan (the “Bonds”). The obligations of the Debtors to pay such Bonds are presently being met by Forrest Capital Corporation (“FCC”) which assumed such obligations following confirmation of the Plan. FCC is presently in the business of servicing mortgage loan portfolios and is making such bond payments from fees collected in connection with its mortgage loan servicing business.
8. In addition to the GECC Certificate, the Bonds are also secured by the revenues generated from certain retail installment contracts (the “Contracts”) as payments are made under such Contracts for the purchase of mobile homes. Such revenues are collected by FCC and paid directly to GECC.
9. At present, the outstanding principal owed to GECC by the Debtors is $1,982,806.16. Additionally, the remaining amount of monies due and owing under the Contracts is $1,680,807.50.
10. By comparing the amount owed under the Contracts against the outstanding principal amount of the Bonds, GECC holds security worth approximately eighty-five percent (85%) of the remaining principal owed on the Bonds. With the addition of the GECC Certificate as collateral, the value of GECC’s security only increases to approximately eighty-nine percent (89%). Additionally, following the payment of the amount due and owing on the Contracts, FCC will continue to collect funds from other sources associated with its business so that it may continue to meet the debt service on the Bonds.
11. The Disbursing Agent has attempted to negotiate with GECC for the turnover of the GECC Certificate for a significant period of time. Additionally, the Debtors have avoided making a partial distribution from the Fund to Class M Claimants in hopes of recovering all available assets so that a one-time distribution can be made, thereby reducing the expenses incurred by the Fund. GECC has refused to turn over the GECC Certificate.
12. This Chapter 11 proceeding has continued for a period in excess of five and one-half years. The only remaining obstacle to closing this Chapter 11 proceeding is the recovery of all available assets to which the Disbursing Agent is entitled and a final pro-rata disbursement of such assets to Class M Claimants. Following the recovery of the GECC Certificate by the Disbursing Agent, such a final distribution can be made to Class M Claimants. The Disbursing Agent has determined each Class M Claimant and the amount of each claim and is prepared to make a final disbursement.
13. Under § 105 of the Code, the Court may issue any order necessary or appropriate to carry out the provisions of the Code. Considering the consequences that will result if GECC is allowed to hold the GECC Certificate until the Bonds are paid in full, as opposed to the consequences that will result if the GECC Certificate is released to the Disbursing Agent, the equities weigh in favor of the release of the certificate. Specifically, if the Court allows GECC to retain the GECC Certificate until the Bonds are paid off, the GECC Certificate may not be available for recovery until as late as the year 2000 when the final *944Bonds mature. Such a result would cause the continued administration of this case for approximately eight more years, including the continued accrual of fees and expenses incurred in connection with the administration of the Fund. Additionally, the Disbursing Agent would be forced to make two distributions to the Class M Claimants, thereby incurring additional expenses and reducing the amount of funds available for distribution.
14. The benefit of an immediate recovery of the GECC Certificate is that it would allow the Disbursing Agent to make a one-time, final disbursement to Class M Claimants and, subsequent to such disbursement, move to close the Debtors’ Chapter 11 proceedings. Additionally, there is no significant detriment to GECC in turning over the GECC Certificate. As noted, the GECC Certificate only represents a four percent (4%) increase in the available security for the payment of the Bonds and, therefore, does not materially affect the status of GECC’s secured position; GECC remains undersecured with or without the GECC Certificate as security. Additionally, all bond payments required to be made under the Plan have been made in a timely fashion thus far and, in fact, many of the Contracts have been prepaid and the revenues received therefrom applied immediately to GECC. Such prepayments have resulted in an accelerated reduction in the principal amount of bonded indebtedness owed to GECC.
15. Based upon the foregoing, the lien of GECC on the GECC Certificate should be extinguished and GECC should be forced to turnover to the Disbursing Agent the GECC Certificate under § 542 of the Code. A turnover of the GECC Certificate to the Disbursing Agent would allow for a more effective administration of the Debtors’ estate and would provide a substantial benefit to, and is in the best interest of, the Class M Claimants and the Debtors’ estate as a whole.
Wherefore, John M. Jewell, as Disbursing Agent for the Debtors, prays that this Court order General Electric Capital Corporation to turn over the GECC Certificate so that it may be deposited into the Creditor Payment Fund, and a final, pro-rata distribution can be made to Class M Claimants, and for such other and further relief as the Court deems just and proper.
III. Position of the Parties
In its motion the defendant argues that the complaint should be dismissed pursuant to Bankruptcy Rule 7012 for failure to state a claim upon which relief can be granted.1 The defendant asserts that the complaint fails to state a claim because the complaint (1) is seeking an amendment of the debtors’ confirmed Amended Joint Plan (the Plan); (2) is asking for the plaintiff to modify the Plan when the plaintiff is specifically denied the power to modify in Article XX of the Plan; (3) is seeking to have the plaintiff set aside the acts of the debtors when the plaintiff is specifically denied such power in the Plan; (4) bases its claim upon 11 U.S.C. § 105 of the Code which does not permit a taking of a portion of an undersecured creditor’s bargained for collateral; and (5) is seeking to breach the confirmed Plan which is a contract between the parties.2
The plaintiff asserts that he has stated a valid claim for relief based on his request for the turnover of the $82,546.56 certificate of deposit which currently secures the payment by the debtors of certain bonds issued in favor of the defendant (the GECC *945Certificate). The plaintiff bases his claim for relief upon 11 U.S.C. § 542 and the principles of equity contained in 11 U.S.C. § 105. It is the plaintiffs theory that the Court can exercise its equitable authority to extinguish the lien of the defendant against the GECC Certificate and force the turnover of a valuable asset for distribution to creditors. It is the plaintiffs position that the turnover of the GECC Certificate would greatly benefit the estate with little harm being caused to the defendant as the turnover of the GECC Certificate would only lower the defendant’s underse-cured status from 89% to that of being undersecured 85%.
IV. Conclusions of Law
11 U.S.C. § 542 of the Code states in relevant part:
(a)Except as provided in subsection (c) or (d)3 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.
11 U.S.C. § 542 (footnote added).
11 U.S.C. § 105 of the Code states in relevant part:
(a) The court may issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of this title.
11 U.S.C. § 105.
In deciding a motion to dismiss, the Court must take all of the allegations of the complaint as true. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957). A cause should not be dismissed “unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.” Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 1686, 40 L.Ed.2d -90 (1974). See also Wright v. Anthony, 733 F.2d 575, 577 (8th Cir.1984). However, dismissal is proper when a complaint clearly shows a plaintiff cannot recover under any circumstances. Bramlet v. Wilson, 495 F.2d 714, 716 (8th Cir.1974).
The pending complaint as asserted does not state a claim. The complaint is, in reality, seeking to substantially modify the debtors’ confirmed Plan by rewriting the terms agreed to by the parties. The complaint on its face seeks to extinguish the defendant’s lien on the GECC Certificate. This is a substantial modification of the confirmed Plan. The Code provisions for such modification are set forth in 11 U.S.C. § 1127(b) and (c).
11 U.S.C. § 1127 of the Code states in relevant part:
(b) The proponent of a plan or the reorganized debtor may modify such plan at any time after confirmation of such plan and before substantial consummation of such plan, but may not modify such plan so that such plan as modified fails to meet the requirements of sections 1122 and 1123 of this title. Such plan as modified under this subsection becomes the plan only if circumstances warrant such modification and the court, after notice and a hearing, confirms such plan as modified, under section 1129 of this title.
(c) The proponent of a modification shall comply with section 1125 of this title with respect to the plan as modified.
Substantial modification of a plan is controlled by 11 U.S.C. § 1127 and cannot be negated by 11 U.S.C. § 105(a). See In re Stevenson, 138 B.R. 964, 966-67 (Bankr.Idaho 1992). The Court holds that the plaintiff can not circumvent via 11 U.S.C. §§ 542 and 105 the procedure set forth in 11 U.S.C. § 1127 for the modification of a confirmed plan. Therefore the complaint, in its present form, fails to state a claim for which relief can be granted.
V. Conclusion
Based on the above reasoning, the Court holds that the complaint does not state a ; claim upon which relief may be granted.
*946The defendant’s motion to dismiss is granted.
. Bankruptcy Rule 7012 makes Federal Rule of Civil Procedure 12(b)(6) applicable to bankruptcy adversary proceedings.
. The defendant attached to its motion to dismiss a copy of the defendant’s confirmed Plan. The Plan states that the asset, at issue, would be pledged as collateral to the defendant based on a compromise and settlement between the parties. The Plan also states that a disbursing agent would be appointed, and sets forth the duties and limitations of this disbursing agent. The Plan states that the disbursing agent would not have the power to take any action to set aside or reexamine any acts of the debtors in the period of time between the petition date and consummation date.
. These subsections are not applicable here. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491573/ | OPINION
WILLIAM H. GINDIN, Chief Judge.
PROCEDURAL BACKGROUND
The Chapter 11 Official Committee of Unsecured Creditors (hereinafter “committee”) commenced the within adversary proceeding seeking to avoid certain payments made by debtor to the United States Department of Labor (hereinafter “Department”) as preferential transfers, in violation of 11 U.S.C. § 547. The committee filed a motion for summary judgment in accordance with F.R.B.P. 7056. The Department filed a cross-motion to dismiss and for summary judgment on grounds that the payments made were not “to or for the benefit” of the United States. Based on the following findings of fact and conclusions of law, the Department’s motion for summary judgment is granted.
The matter was argued before the court on May 4, 1992, and an oral opinion was delivered. At the request of counsel, this opinion constitutes the written supplement to that oral opinion.
FACTS
The facts are not disputed. Dairy Stores, Inc. t/a Krauszer’s (hereinafter “Debtor”) was a New Jersey corporation operating a chain of convenience stores throughout northern and central New Jersey. Debtor operated approximately 160 stores and employed managers and clerks at each of them.
In 1981, the United States Department of Labor, Wage and Hour Division conducted an investigation of the Debtor’s wage records and determined that it had violated the minimum wage and overtime provisions of the Fair Labor Standards Act.1 The Department filed a series of law suits, pursuant to 29 U.S.C. § 217 seeking back wages owed to 34,228 past and present employees for the period from April 14, 1979 until December 31, 1987. In 1987, after five years of litigation, the parties negotiated a consent order in the United States District Court for the District of *8New Jersey in which it was stipulated that Debtor owed a total of $4,400,000 in back wages. Debtor was restrained from further violations of the Act and from withholding the compensation due its employees. It was ordered to pay the back wages by way of the following installments: $2,000,000 due November 1, 1987; $1,250,-0Ó0 due January 1, 1990; $1,150,000 due January 1, 1991. The wages were to be paid directly to the Department, which in turn undertook to disburse the monies to the employees based upon the hours they had worked.
Debtor paid the first installment as called for in November of 1987. Thereafter, and over the following two years, the debtor began experiencing severe financial difficulties, and by late 1989 it became clear that the debtor would not be in a position to make the January, 1990 payment. In December of 1989, debtor commenced negotiations with the Department and debtor’s lending institutions, seeking a modification of the original payment schedule. The court which had approved the settlement agreement entered an Amendment of Order on January 1, 1990 providing for monthly payments of $25,000 from January 25, 1990 to April 25, 1990 and $50,000 payments from May 25, 1990 to December 25,1990. The balance was made due and payable on January 1, 1991.
In accordance with the Amendment of Order, the debtor made seven payments to the Department in 1991. Debtor was unable to work through its financial difficulties, however, and on September 4, 1990, Debtor filed the within Chapter 11 bankruptcy petition. In response, the Department filed a proof of claim for the balance due under the original consent order and under the Amendment of Order.
The committee brought this adversary proceeding seeking to recover the sum of $100,000 from the Department, constituting the last two installment payments made by debtor. The committee argues that these payments were preferential and may therefore be recovered from the Department under 11 U.S.C. §§ 547 and 550.
This opinion resolves cross motions for summary judgment made by the Department and by the committee.
JURISDICTION
This court has jurisdiction pursuant to 28 U.S.C. §§ 1334(b) and 157(b)(1). This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(B), (E), and (F).
DISCUSSION
Motions for summary judgment are governed by the Federal Rules of Bankruptcy Procedure 7056, which refers to the Federal Rules of Civil Procedure 56. That rule provides that if the court finds “that there is no genuine issue as to any material fact” and “the moving party is entitled to a judgment as a matter of law”, the court is empowered to enter such judgment. While it has been held that summary judgment is a “drastic remedy” and should be granted “cautiously”2 when the test is met, the rule should be followed. Matsushita Electrical Industrial Co. v. Zenith Radio Corporation, 475 U.S. 574, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). The instant case, demonstrating no genuine issue as to a material fact, is one in which the rule should be implemented.
A “preference” is defined by Congress at 11 U.S.C. § 547.3 Congress has authorized the recovery of property exchanged in a preferential transfer at 11 U.S.C. § 550.4
Clearly, the two $50,000.00 transfers were violative of 11 U.S.C. §§ 547(b)(2), (3), *9and (4). They were made on account of an antecedent debt owed before the transfer was made, while the debtor was insolvent, and within 90 days of the petition date. None of this is disputed. Rather, the matter at issue here is whether or not the antecedent debt was owed “to or for the benefit of” the Department and, if so, whether or not recovery of the transfers may be had from the Department as the initial transferee.
*8(1) to or for the benefit of a creditor;
*9The committee argues that the Department was the creditor to or for whom the payments were made. The uncontro-verted facts show that the Department acted strictly on behalf of the employees who were ultimately entitled to the payment of back wages. The consent order entered in the original litigation required debtor to supply the Department with the names and addresses of every employee entitled to the unpaid wages. With this information available to it, the Department then acted to facilitate payment to those individuals. The Department did not assert any individual right to the monies and was at all times obligated to turn them over to the actual employees as the rightful recipients. The indebtedness was due to the employees who had performed services, and not to the Department. In fact, the debtor remained liable to the employees until such time as they were fully paid by the Department.
A preferential transfer is a payment on account of an antecedent debt and cannot exist in the absence of an extension of credit. In re Timber Line, Ltd., 59 B.R. 728, 781 (Bankr.S.D.N.Y.1986). Since the original “credit” had not been extended by the Department, the Department cannot have been a creditor of debtor for the purposes of the transfer to the Department. Therefore, the transfer cannot have been a preference as to the Department.
The Committee next argues that recovery of the payments may nevertheless be had from the Department as an initial transferee. It is true that 11 U.S.C. § 550 permits the recovery of the preference from an initial transferee. Where that initial transferee is, in fact a “mere conduit of funds”, the liability will not be extended to it. In In re Fabric Buys of Jericho, Inc., 33 B.R. 334 (Bankr.S.D.N.Y.1983), Judge Galgay held that a law firm which had received funds into its escrow account was not an entity contemplated by the drafters of the code as one which should be compelled to disgorge such funds. See also, In re Black & Geddes, Inc., 59 B.R. 873 (Bankr.S.D.N.Y.1986).
The committee urges that in an analogous case, In re Fonda Group, Inc., 108 B.R. 956 (Bankr.D.N.J.1989) rejects the “mere conduit” theory. In that case a travel agent set up a separate account for monies received from the sale of airline tickets. The travel agent then gave a third party the right to withdraw from the fund to pay for the tickets. The third party withdrew the funds to pay the issuer of the tickets whether or not the customer had paid the debtor. The debtor in possession sued the issuer for the return of the funds paid within the preference period. Judge Moore rejected the claim of “mere conduit” as a factual finding and held the issuer liable for receipt of a preferential transfer. In the matter before this court, no funds were dealt with other than as funds received from the debtor and paid out to the employees.
In the instant case, the Department acted as an agent of the several employees, enforcing their rights under the Fair Labor Standards Act. It did so for what can best be described as ministerial purposes, thus avoiding the burden which would have been occasioned if each and every one of the employees had been required to bring a separate suit for recovery. Under the statute, 29 U.S.C. § 216, the Department also acted as agent for the Debtor by disbursing the monies on the debtor’s behalf, also for administrative purposes. In any case, the Department itself enjoyed no benefit from receipt of the monies. It acted merely as custodian of the funds and administrator of the payments. Therefore, the Department was not an “initial transferee” within the meaning of 11 U.S.C. § 550.
*10As indicated by Judge Abram in Black & Geddes, supra, it may not be inequitable to allow recovery of a transfer from a receiver, who is not an “initial transferee” within the meaning of § 550, if it is shown that the transfer was preferential as to the receiver’s principal, and if the receiver remains in possession and control of the property at the time the recovery is sought. Thus, if the Department were currently in possession of the funds, a recovery might be had from the Department on the grounds that those funds would be recoverable from the ultimate recipients. These are not the facts of this case, however. Here, all monies received by the Department were promptly disbursed.
CONCLUSION
The committee’s motion for summary judgment is denied; the Department’s cross-motion for summary judgment, holding the Department free from liability for the preferential transfer, is granted.
IT IS SO ORDERED.
. 29 U.S.C. § 201 et seq.
. Hollinger v. Wagner Mining Equipment Company, 667 F.2d 402, 405 (3rd Cir.1981).
. (b) Except as provided in subsection (c) of this section, the trustee may avoid any transfer of an interest of the debtor in property—
(2) for or on account of an antecedent debt owed by the debtor before the transfer was made;
(3) made while the debtor was insolvent;
(4)made—
(A) on or within 90 days before the date of the filing of the petition;
. (a) Except as otherwise provided in this section, to the extent that a transfer is avoided under section 544, 545, 547, 548, 549, or 724(a) of this title, the trustee may recover, for the benefit of the estate, the property transferred, or, if the court so orders, the value of such property, from—
*9(1) the initial transferee of such transfer or the entity for whose benefit such transfer was made; or
(2) any immediate or mediate transferee of such initial transferee. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491576/ | ORDER ON OBJECTION TO ALLOWANCE OF A CLAIM FILED BY ATTORNEY’S TITLE INSURANCE FUND AND MOTION FOR RECONSIDERATION OF ORDER REGARDING ATTORNEY’S TITLE’S MOTION TO FILE UNSECURED CLAIM
ALEXANDER L. PASKAY, Chief Judge.
THIS IS a confirmed Chapter 11 case and the matter under consideration is an Objection filed by Sun Bank, N.A. To Allowance Of A Claim filed by Attorney’s Title Insurance Fund (Attorney’s Title). The Objection to this claim is based on the contention that the claim is time barred. The Objection was filed on August 27, 1992, two months after the Order confirming the Plan was entered. Also under consideration is a Motion for Reconsideration filed by Attorney’s Title regarding this Court’s Order Denying the Motion for Reconsideration of Order Denying Attorney’s Title’s Motion for Leave to File an Unsecured Claim. In order to put the controversy in *345the proper posture, a brief recitation of the procedural background of this Chapter 11 case should be helpful.
The Petition for Relief under Chapter 11 of the Bankruptcy Code was filed by Richard and Dolores Maguire (Debtors) on March 25, 1991. On April 25, 1991, Financial Federal Savings & Loan (Financial Federal) filed a Proof of Claim in the amount of $134,506.76. The claim was filed as a secured claim. At no time did Financial Federal amend the claim indicating that it intended to assert an unsecured claim by bifurcating the claim into secured and unsecured portions. Neither did Financial Federal seek to value the collateral pursuant to § 506 of the Bankruptcy Code.
On September 2, 1992, Financial Federal filed a Notice of Filing of Transfer of a Claim pursuant to F.R.B.P. 3001(e)(2). The Debtors filed their first Amended Disclosure Statement on February 28, 1992, and their first amended Plan of Reorganization on the same date. On March 17, 1992, this Court entered an Order and approved the Disclosure Statement as amended and fixed April 22, 1992 as the bar date to file claims and to cast ballots, and May 4, 1992 as the bar date to file objections to. confirmation. The Order scheduled a hearing on confirmation for May 12, 1992. The matrix filed with the Clerk of the Court certified that the notice of the bar date to creditors was sent to Financial Federal, and also to counsel for the transferee of the claim, Attorney’s Title, in care of John D. Goldsmith, Esq. (Goldsmith).
The Amended Plan filed by the Debtors which was sent to creditors made no provision whatsoever for the payment of a secured claim filed by Financial Federal. It appears that on August 19,1992, this Court heard oral argument by counsel for Attorney’s Title seeking to overturn the Order of Confirmation of the Plan and sought leave to file an unsecured Proof of Claim and to reopen voting on the Plan. The transcript, which is part of the record, reveals that thé Order entered by this Court accompanied by a matrix was mailed to all parties whose name appeared on the matrix including Attorney’s Title, c/o Goldsmith. The matrix in this Chapter 11 case leaves no doubt that Goldsmith received the Notice filed on March 5, 1992 cancelling the March 17, 1992 hearing on Motion to Dismiss or to Convert. Equally, Goldsmith was mailed a copy of the Order approving the Disclosure Statement and fixing the respective bar dates. Nevertheless, Goldsmith still did not seek a determination of the status of the claim acquired from Financial Federal, the claim which was filed only as a secured claim. The unsecured creditors, in reliance on a prospective distribution to unsecured creditors, voted for the Plan and based on their acceptance, the Plan has been confirmed.
This is the procedural background against which Attorney’s Title now seeks to upset the confirmed Plan by obtaining permission to file an unsecured claim in the amount of $191,288.30. The claim is based on an alleged misrepresentation of the Debtors’ assignment of a mortgage. First, it is clear that the claim sought to be recognized by Attorney’s Title is merely derivative, a claim acquired by Attorney’s Title from Financial Federal by assignment. Since Financial Federal’s claim was filed as a secured claim, and Financial Federal never sought valuation of its collateral, if it had any, and its claim was not filed as a bifurcated claim, all Attorney’s Title acquired was the secured claim of Financial Federal. It is elementary that the assignor gives to an assignee no more nor less than the assignor had and the assignment certainly did not change the character of the claim filed by Financial Federal.
Next, there is hardly any question that if the Motion of Attorney’s Title is granted, this Court will be compelled to unwind the entire confirmation process and the vested rights of the unsecured creditors who supported the Plan will be materially impacted. This is so because if the $200,000.00 claim of Attorney’s Title is recognized and is permitted to share in the distribution of funds, the distribution to unsecured creditors who timely filed their claims will be radically reduced. It is highly unlikely that the unsecured creditors who timely filed their claims would have voted for the Debtors’ Plan had they known that a $200,000 *346claim was included in a class of unsecured creditors and was to be paid under the Plan.
Moreover, there is no question that Attorney’s Title is guilty of laches and it would be patently unfair to dismantle or destroy the confirmation process now for the benefit of Attorney’s Title and start anew. Even though Attorney’s Title basically has an unsecured claim, it is way too late to file one at this late stage of this Chapter 11 case. For the reasons stated, the Objection of Sun Bank is well taken and the Motion of Attorney’s Title for Reconsideration regarding its Motion for Leave to File an Unsecured Claim should be denied.
Accordingly, it is
ORDERED, ADJUDGED AND DECREED that the Objection by Sun Bank to the Allowance of a Claim by Attorney’s Title is sustained, and the claim of Attorney’s Title is disallowed. It is further
ORDERED, ADJUDGED AND DECREED that the Motion for Reconsideration is hereby denied.
DONE AND ORDERED. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491577/ | ORDER ON RENEWED MOTION FOR SANCTIONS
ALEXANDER L. PASKAY, Chief Judge.
THIS IS a reopened Chapter 7 case. The matter under consideration is a Renewed Motion For Sanctions filed by Richard Brewer (Debtor) against Tamula Clarice Brewer (Ms. Brewer), the Debtor’s former wife, and her counsel of record, Stephen F. Baker (Baker). The Motion under consideration is based on the contention that Baker *347and his client willfully and knowingly violated the permanent injunction granted to the Debtor when he received his general bankruptcy discharge. The Motion involves a unique factual scenario which presents complex issues, none of which is susceptible to easy resolution. The relevant facts which are without dispute and agreed upon can be summarized as follows:
Prior to the commencement of this Chapter 7 case, Ms. Baker filed a petition for dissolution of marriage in the Circuit Court for the Tenth Judicial Circuit in and for Polk County, Florida. On January 7, 1988, the Circuit Court entered a Final Judgment which in pertinent part provided as follows:
7. Wife’s interest in the marital home, located at Route 1, Box 265B, Davenport, Polk County, Florida is awarded to Husband. Husband shall pay to Wife within six (6) months of the date of this order one-half (V2) of the equity in the home as of December 2, 1987, or the sum of ten thousand dollars ($10,000.00) as lump sum alimony, whichever is greater amount. Upon payment of these monies, Wife will quit claim her interest in the marital home to Husband.
It is without dispute that the Debtor did not pay Ms. Brewer the $10,000 described as lump sum alimony required by the final decree.
On November 16, 1989, the Circuit Court which dissolved the marriage entered an Order based on the Debtor’s failure to pay the $10,000 to Ms. Brewer, and granted a lien securing an obligation of $25,000 against the Debtor’s interest in the former marital residence, full ownership of which, as noted earlier, was granted to the Debt- or. Paragraph 8 of the Order further provided that unless the sums specified by the Order were paid by the Debtor within ten days, the marital home shall be sold by the Clerk to satisfy the lien granted to Ms. Brewer. It is without dispute that the Debtor did not pay the $25,000 awarded by the Circuit Court to Ms. Brewer. For this reason, the Court ordered the property to be sold on the 13th day of December, 1989 at public auction to the highest bidder. In order to prevent the loss of the property, the Debtor filed his voluntary Petition of Relief on December 12, 1989, one day before the scheduled sale. On February 6, 1990, the Debtor filed the Motion and sought entry of an Order declaring the property to be his homestead, and on March 22, 1990, commenced the adversary proceeding against his former wife and sought determination of the validity and priority of the lien, awarded by the Circuit Court to Ms. Brewer. The adversary proceeding was dismissed on February 2,1991. On April 27, 1990, the Debtor filed the Motion and sought to avoid the lien granted to Ms. Brewer on the former marital home by the Order entered on November 16, 1989. The Motion was heard in due course, and on July 20, 1990, this Court entered an Order and ruled that based on the definition of a judicial lien as defined by § 101(36) of the Bankruptcy Code, the lien in question was created with a judicial fiat and therefore, was subject to the avoiding power of a debtor granted by § 522(f)(1) of the Bankruptcy Code. 117 B.R. 712. The decision of this Court was based on the case of In re Sanderfoot, 899 F.2d 598 (7th Cir.1990), in which case the Seventh Circuit concluded that when a divorce court ordered the Debtor to pay his ex-spouse the sum in excess of $29,000, that to secure this obligation the non-debt- or spouse was awarded a lien against the former residence, the lien created by the judgment was a judicial lien, thus, subject to avoidance pursuant to § 522(f)(1) of the Bankruptcy Code. The Sanderfoot Court relied on the case of Maus v. Maus, 837 F.2d 935 (10th Cir.1988), in which the Court of Appeals held that a lien created by a divorce decree was a judicial lien for purposes of the avoidance provisions of § 522(f)(1).
While it is true that the Supreme Court reviewed the 7th Circuit decision in San-derfoot, supra, and reversed the 7th Circuit, for reasons stated below the reversal has no relevance to the precise issue before this Court. In due course, the Debtor received his discharge and a Final Decree was entered on February 8, 1991, and the Chapter 7 ease was closed.
*348On June 1, 1992, Ms. Brewer filed a suit in the Circuit Court for Polk County, Florida, against the Debtor. In her suit rather than seek to enforce the lien granted to her by the Circuit Court, she sought a decree partitioning the former marital home which was awarded by the divorce court to the Debtor.
On September 9, 1992, the Debtor filed a Motion and sought an Order to reopen the closed case. On September 9, 1992 this Court granted the Motion and reopened the Chapter 7 case of the Debtor for the limited purpose of permitting the Debtor to institute whatever action appeared to be appropriate to protect his rights flowing from his general discharge against any action of his former wife which he perceived to be a threat and violation of the protection granted to him by § 524(a)(2) of the Bankruptcy Code.
On August 25, 1992, the Debtor filed his original Motion For Sanctions. In its Motion the Debtor contended that Ms. Brewer violated the permanent injunction included in the Debtor’s discharge by filing a partition action in the Circuit Court in Polk County and in conjunction with that lawsuit, she filed a lis pendens which, according to the counsel for the Debtor, was a violation not only of the permanent injunction pursuant to 11 U.S.C. § 524(a)(2) but also sanctionable pursuant to F.R.B.P. 9011.
First, concerning the request of the Debtor for sanctions pursuant to F.R.B.P. 9011, this Court is unable to find any submission in this case which was signed by either Ms. Brewer or her counsel and who by their signatures violated the certification requirement of F.R.B.P. 9011, which, of course, is a condition precedent for the imposition of sanctions under this Rule.
This leaves for consideration the question whether the suit by Ms. Brewer in which she seeks partition of the former marital property is a violation of the permanent injunction granted by the Debtor’s discharge, and thus warrants the finding that she and her attorney are guilty of civil contempt.
The resolution of this question is not without difficulty. If Ms. Brewer’s suit is viewed solely as an in rem action against the Debtor’s homestead which was claimed and allowed as exempt, her action clearly has no impact on the Debtor’s right flowing from the general discharge. On the other hand, if her suit is viewed as an indirect attempt to collect a discharged debt, that certainly could be a violation of the permanent injunction granted by § 524 of the Bankruptcy Code.
As noted earlier, this Court determined the lien imposed by the Circuit Court on the marital home was a voidable judicial lien pursuant to § 522(f)(1). This ruling is still the law of the case. Thus, the fact that the Supreme Court reversed the 7 th Circuit is of no consequence. This is so because Ms. Brewer expressly disavowed that she is seeking to foreclose her lien, but she simply seeks only to assert her co-ownership right in the subject property through her suit for partition.
Of course, her right to partition the former marital home depends 'on the interpretation of the Final Decree which dissolved the marriage and calls into play the applicability or Fla.Stat. § 55.141. Since none of these issues have any relevance at this time to the pre-petition debts which were rendered unenforceable by the discharge granted to the Debtor, her suit for partition was not a clear, intentional attempt to collect a discharged debt. Thus, there is no basis to find her or her counsel guilty of civil contempt for violation of the permanent injunction granted by § 524(a)(2) of the Bankruptcy Code.
Accordingly, it is
ORDERED, ADJUDGED AND DECREED that the Renewed Motion For Sanctions is hereby denied.
DONE AND ORDERED. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491579/ | ORDER SUSTAINING OBJECTION TO FINAL REPORT
MARY D. SCOTT, Bankruptcy Judge.
This cause is before the Court upon two motions filed by the creditor, the Cadle Company II, Inc., a Motion for Extension of Time to File Claim, filed on October 13, 1992, and an Objection to Final Report and Account of Trustee, filed on September 13, 1992. The Cadle Company II, Inc. (“Cadle Company”) objects to the' final report of the trustee on the grounds that it does not provide for payment of its unsecured claim, notice of which was given to the trustee by letter on May 4, 1988. The trustee and another creditor, River Valley Savings Bank, F.S.B., (“the Bank”) assert that the letter of May 4, 1988, is not a claim. Further, they object to any extension of time to file a proof of claim.
This Court need not address whether an extension of time to file a formal proof of claim is necessary because the letter of May 4,1988, constitutes a proof of claim such that the objection to the accounting must be sustained and a distribution made to the Cadle Company. In order for a document, formal or informal, to constitute a claim, the creditor must demonstrate “an assertion of a claim against the estate and an intention by the claimant to *571share in its assets.” In re Donovan Wire & Iron Co., 822 F.2d 38, 39 (8th Cir.1987). The claim need not be filed with the court to be valid. In re Haugen Construction Services, Inc., 876 F.2d 681, 682 (8th Cir. 1989). Haugen is directly on point. Like the claim in Haugen, the creditor explicitly stated the nature and amount of its claim and its desire to pursue that claim, stating, “This company is the owner of an unsecured note purchased from the Federal Deposit Insurance Corporation in liquidation of the American Bank of Alma, Wisconsin.” The letter continued to list the principal and accrued interest. The letter appended the supporting documents supporting the claim.
The Bank asserts that the Cadle Company did not intend to submit a claim by means of this particular letter. Drawing from the language in the letter requesting information regarding filing a formal proof of claim, the Bank argues that the letter is not a claim, formal or informal. The Bank misconstrues the language in Donovan and Haugen. Donovan requires that the document demonstrate “an intention to share in the assets” of the estate. Donovan, 822 F.2d at 39. Haugen expands on this tenet by finding that the letter evidenced “its desire to pursue that claim.” The Haugen court also indicated that participation throughout the bankruptcy proceeding could indicate an intent to share in the assets such that the letter asserted a claim. Haugen did not require, as the Bank appears to assert, that the language of the letter itself expressly state that the letter itself was in fact a claim.
The intent described in Donovan and Haugen is an intent to share in the assets of the estate. The evidence at trial clearly indicated that the Cadle Company intended to share in the assets. The May 4, 1988, letter indicates the intention to share in the assets by its statement, “This company is the owner of an unsecured note.” The requisite intent is further demonstrated by its complaint that it did not receive a particular form with which to file a formal proof of claim and the request for information on filing a formal claim. The testimony of the Cadle Company demonstrated that it followed the conduct of these bankruptcy proceedings, reading and following the directions in the notices it received from the Bankruptcy Court and trustee’s office. Indeed, once it received the trustee’s accounting, it promptly filed an objection on the grounds that the trustee made no provision for payment of Cadle’s share of the assets of the estate. Since the letter of May 4, 1988, constitutes a proof of claim which is entitled to share in the assets of the estate according to law, it is
ORDERED that the Objection to Final Report and Account of Trustee, filed on September 14,1992, by The Cadle Company II, Inc., is SUSTAINED. An informal claim having been submitted, it is
FURTHER ORDERED that the Motion for Extension of Time to File Claim, filed on October 13, 1992, is GRANTED. The Cadle Company II, Inc., may file a formal amended Proof of Claim within fifteen (15) days of entry of this Order.
IT IS SO ORDERED. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491580/ | MEMORANDUM OF DECISION
ALFRED C. HAGAN, Chief Judge.
The complaint in this adversary proceeding is brought by Ed L. Christensen, the debtor in this Chapter 11 case (“debtor”), against Edith M. Lazelle individually, Edith M. Lazelle as the personal representative of the estate of Delbert Lazelle, and the Lazelle Family Limited Partnership (collectively, “defendants”).
Defendants have moved to dismiss the complaint, or in the alternative for summary judgment against the debtor, on the basis of the res judicata effect of a stipulated dismissal with prejudice of a prior action between the parties. The complaint of the debtor in this adversary proceeding is entitled “Complaint Objecting to Allowance of Claim and for Recovery of Money”. From the contents of the complaint, it would appear defendants have filed a claim in the plaintiff/debtor’s chapter 11 case that the plaintiff argues should be disallowed. According to the complaint, “[sjaid claim is based on a Lease Agreement with Option to Purchase entered into as of October 1, 1984, as amended in an Amendment of Agreement entered into on September 27, 1989, wherein the above-named defendant was the lessor and the above-named plaintiff was the lessee.” The complaint continues to recite legal and factual contentions why the defendants’ claim should be denied.
The prayer of the complaint asks “that the defendant’s claim be disallowed in its entirety and that the court enter judgment for the plaintiff against the defendant in the amount of $18,025.64 plus interest from December 12, 1990, plus a reasonable attorney’s fee.” The prayer for the money judgment is based on the contention, as contained in the complaint, that “plaintiff is entitled to reimbursement from the defendant of the amount by which the said payments made by the plaintiff exceed the said fair rental value of the property in the amount of $18,025.64.”
The defendants have answered and have counterclaimed against the plaintiff. The counterclaim prays for payment to the defendants of the “full amount of [defendants’] claim in the total sum of Forty-Seven Thousand Seven Hundred Sixty-Five Dollars and Ninety-Seven Cents ($47,-765.97)” and for attorney’s fees.
Defendants base their res judicata argument on the following facts. As already mentioned above, the basis of the claims between the parties is a Lease Agreement with Option to Purchase (“Original Agreement”) entered into as of October 1, 1984 between the debtor as lessee, and defendants as lessors. The defendants filed a state court action against the debtor, apparently in 1988. (The full record of the state court action is not part of the record here.) In his answer to the state court action, the debtor filed a counterclaim that included substantially similar allegations to those made in the current complaint, and *603requesting judgment in the amount payments by the debtor exceeded the fair rental value of the property.
On September 27, 1989, the debtor and defendants entered into an amendment of the Original Agreement (“Amendment of Agreement”). As part of the consideration for this amendment, defendants agreed to dismiss with prejudice any and all claims against debtor in that action, while debtor agreed to dismiss with prejudice any and all claims against the defendants. A stipulated dismissal of these claims was entered by Judge John Bengtson in the state court action on January 22, 1990.
Defendants now move to dismiss the plaintiff’s complaint or in the alternative for summary judgment in their behalf. The motions are based upon the pleadings and documents contained in a state court action in the District Court of the Second Judicial District, in and for the County of Latah. These documents include an answer and counterclaim filed in that particular case, an amendment of agreement filed in that case, a stipulation for dismissal with prejudice, and an order signed by Judge Bengtson terminating the state court action, entered January 22, 1990.
LEGAL STANDARDS
Because defendants have referenced matters outside the pleadings, including portions of the record in the state court case, the motion to dismiss will be denied and the matter will be treated as a motion for summary judgment. Fed.R.Bankr.P. 7012(b); Fed.R.Civ.P. 12(b).
A motion for summary judgment is governed by Rule 56 of the Federal Rules of Civil Procedure, made applicable here by Fed.R.Bankr.P. 7056. Summary judgment should be granted “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 summary judgment as a matter of law.” Fed.R.Civ.P. 56(c). The evidence is construed in the light most favorable to the nonmoving party, and the moving party bears the burden to show the absence of any genuine issue of material fact. Hopkins v. Andaya, 958 F.2d 881, 884 (9th Cir.1992).
DISCUSSION
This adversary proceeding is based solely in the question of whether, under state law, the agreement between the parties constitutes a lease or a disguised security interest. As a consequence, this Court must give the same claim preclusion effect to a state court judgment as would be given that judgment by the courts of that state.1
The Supreme Court of Idaho has recently considered the scope of claim preclusion, or res judicata, under state law. Diamond v. Farmers Group, Inc., 119 Idaho 146, 804 P.2d 319 (1990). In that case, the court summarized claim preclusion as follows: “[A] valid and final judgment rendered in an action extinguishes all claims arising out of the same transaction or series of transactions out of which the cause of action arose.” Diamond, supra, 804 P.2d at 323.
Debtor argues that, because there was no trial on the merits, the state court judgment is not entitled to preclusive effect. The fact there was no trial does not preclude the application of res judicata to this case; the doctrine is applicable to a stipulated dismissal with prejudice as if the parties had proceeded to trial on the matter. Kawai Farms, Inc. v. Longstreet, 121 Idaho 610, 826 P.2d 1322, 1325-26 (1992) (effect of agreement between parties was same as I.R.C.P. 41(a)(1) stipulated dismissal, and entitled to res judicata effect). The absence of a final decision on the merits does, however, prevent the application *604of issue preclusion (sometimes called collateral estoppel). Koski, supra, 144 B.R. at 487-88 (one element of collateral estoppel is final judgment on the merits).
The debtor contends there is no claim preclusion effect to the state court dismissal because the parties entered into an Amendment of Agreement to the Original Agreement as part of the consideration for the stipulated dismissal. Because this action involves consideration of the effect of the Original Agreement as modified by the Amendment of Agreement, the debtor argues, the state court dismissal dealing solely with the Original Agreement is not applicable.
This position is correct. The judgment of the state court only extinguished those claims arising out of the same transaction or series of transactions out of which the state court action arose. See Diamond, supra, 804 P.2d at 323. The state court action arose out of the original agreement. The action before this Court, by contrast, involves the relationship between the parties as established by both the original agreement and the amendment of agreement. Because the terms of the relationship between the parties have been substantially altered over those memorialized in the original agreement, this action does not arise out of the same transaction or series of transactions that led to the state court dismissal. Consequently, claim preclusion is not applicable to the current action, and defendants are not entitled to judgment as a matter of law.
Accordingly, it is
ORDERED that the defendants’ motions to dismiss, or in the alternative for summary judgment, are denied.
. 28 U.S.C. § 1738; Migra v. Warren City School Dist. Bd. of Education, 465 U.S. 75, 80-81, 104 S.Ct. 892, 895-896, 79 L.Ed.2d 56 (1984) (concluding claim preclusion of state court action prevented subsequent section 1983 claim); Hoffman Construction Co. of Oregon v. Active Erectors and Installers, Inc., 969 F.2d 796, 799 (9th Cir.1992). See Koski v. Seattle First Nat’l Bank (In re Koski), 144 B.R. 486, 487 & n, 2 (Bankr.D.Idaho 1992) (issue preclusion effect of state court judgment) (citing cases). | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491582/ | MEMORANDUM AND ORDER ON LIABILITY FOR A PREFERENTIAL TRANSFER
ALAN H.W. SHIFF, Bankruptcy Judge.
The chapter 7 trustee commenced this adversary proceeding to set aside a preferential transfer to the White Mountain Construction Company and its general partners, James and Peter Bette, and to recover the value of the property transferred. For the reasons that follow, Peter Bette is jointly liable for the value of the property transferred.
BACKGROUND
Prior to June 1988, James Bette and Peter Bette were construction contractors doing business as White Mountain Construction Company. At that time, the chapter 7 debtor, Winthrop E. Baum, doing business as WEB Construction Company, was indebted to White Mountain in the amount of $204,487.47. In June 1988, James Bette and Peter Bette were hired by WEB Construction. On December 8, 1988, WEB Construction transferred equipment valued at $55,000 to White Mountain in a transaction arranged by James Bette. Subsequently, the equipment was sold, but it is uncertain what became of the proceeds.
On December 20, 1988, Baum commenced a case under chapter 11 of the Bankruptcy Code, which was converted to a case under chapter 7 on July 19, 1989. On February 16, 1990, the chapter 7 trustee commenced the instant adversary proceeding against James Bette, Peter Bette, and White Mountain, seeking to avoid the December 8, 1988 transfer (“the Transfer”) as preferential and to recover the value of the property transferred. See Code §§ 547(b) and 550(a). On October 31, 1990, a default judgment entered against James Bette,1 and on February 12, 1992, summary *725judgment entered against White Mountain.2
DISCUSSION
Peter Bette concedes that if White Mountain existed on December 8, 1988, the Transfer would be a preference as to White Mountain, under § 547(b), and White Mountain would be liable to the bankruptcy estate for the value of the property transferred. See § 550(a). He further concedes that if White Mountain is liable to the estate, he is liable also. He contends, however, that White Mountain was not in existence on that date because it had been dissolved.
Peter Bette’s argument is unavailing. In determining the status of a partnership, courts must look to state law. See e.g., Ryan v. Brophy, 755 F.Supp. 595, 597 (S.D.N.Y.1991) (New York state law governs the liability of partners). Under Connecticut law: “[o]n dissolution the partnership is not terminated, but continues until the winding up of partnership affairs is completed.” Conn.Gen.Stat. § 34-68.
(1) After dissolution a partner can bind the partnership ... (a) By any act appropriate for winding up partnership affairs or completing the transactions unfinished at dissolution.
Conn.Gen.Stat. § 34-73.
A dissolved partnership is not bound by the act of a partner “where the partner has no authority to wind up partnership affairs.” Conn.Gen.Stat. § 34-73(3)(c). Assuming arguendo that the dissolution of White Mountain occurred prior to December 8, 1988,3 White Mountain would still have existed for the purposes of winding up its affairs.
There was no allegation that James Bette wrongfully dissolved the partnership or that there was an agreement limiting his authority, thus James Bette had the authority to wind up the affairs of White Mountain. See Conn.Gen.Stat. § 34-75 (“Unless otherwise agreed the partners who have not wrongfully dissolved the partnership ... [have] the right to wind up the partnership affairs.”).
The question evolves: was the Transfer “appropriate for winding up” the affairs of White Mountain? I conclude that it was. In reaching that conclusion I recognize that Connecticut has adopted the Uniform Partnership Act (the “UPA”). See ConmGen. Stat. §§ 34-39 to 34-82. The UPA is to be construed in such a way as to “make uniform the law of those states which enact it,” Conn.Gen.Stat. § 34-42, and courts which have construed the same provision of the UPA as Conn.Gen.Stat. § 34-73(1) have reached similar conclusions.
Courts have given wide latitude in construing what is “appropriate for winding up the affairs” of a dissolved partnership. In Majer v. Schmidt, 169 A.2d 501, 564 N.Y.S.2d 722 (N.Y.App.Div.1991), a partner’s conversion of a client’s funds to satisfy a dissolved partnership’s liability was appropriate for winding up the affairs of the partnership. The execution of waivers, which gave the consent of a dissolved partnership to the extension of the statute of limitations for the assessment of valid excise taxes owed by the partnership, was appropriate for winding up that partnership’s affairs. Adelman v. U.S., 304 F.Supp. 599, 601-602, aff'd, 440 F.2d 991 (9th Cir.1971). The court reasoned that the dissolution of a partnership revokes the power of partners to create new contracts but does not affect their authority to settle or wind up existing partnership concerns and affairs. Id. at 602. The prosecution of an antitrust action in the name of a dissolved partnership also was held to be appropriate for winding up the affairs of a *726partnership. Leh v. General Petroleum Corp., 165 F.Supp. 933, 937 (C.D.Cal.1958).
The Transfer resulted in the partial payment of a debt owed to White Mountain and was “appropriate for winding up” White Mountain’s affairs. Moreover, it was a preferential transfer and White Mountain is liable to the estate for $55,-000.00, the value of the property transferred. See §§ 547(b) and 550(a)(1). As noted, supra p. 725, Peter Bette has conceded that his liability is derived from the liability of White Mountain, but, rather than liability being imposed under § 550(a), he is jointly liable to the estate under Connecticut law as a partner of White Mountain. See Conn.Gen.Stat. § 34-53 (“All partners are liable ... (b) jointly for all ... debts and obligations of the partnership”).
ORDER
For the foregoing reasons, Peter Bette is liable to this bankruptcy estate for $55,000, and IT IS SO ORDERED.
. Default entered against James Bette pursuant to Rule 37(b)(2)(C) Fed.R.Civ.P., made applicable by Rule 7037 Fed.R.Bankr.P., because he *725failed to respond to interrogatories and did not attend a deposition.
. A motion for summary judgment against White Mountain was uncontested. The issue of Peter Bette’s liability was expressly reserved for trial.
. The evidence strongly suggests that White Mountain was not dissolved prior to December 8, 1988, but that issue need not be reached. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491583/ | ORDER ON DEFENDANT’S MOTION FOR SUMMARY JUDGMENT
ALEXANDER L. PASKAY, Chief Judge.
THIS is a Chapter 7 liquidation case and the matter under consideration is Count III of the Amended Complaint filed by Harold W. Just, et. al. (Plaintiffs) séeking a determination that debts due and owing by James A. Marks (Debtor) are not discharge-able pursuant to § 523(a)(4) of the Bankruptcy Code. The Debtor has filed a Motion for Summary Judgment. The undisputed facts as they appear in the record, and as established at the duly noticed hearing are as follows:
The Debtor is a former resident of Wisconsin. From 1985 through 1988, the Debt- or acted as the general partner of Appleton Building Associates (ABA), a Wisconsin limited partnership. The Plaintiffs were limited partners in ABA, which was formed to facilitate and finance the development of certain real estate located in Appleton, Wisconsin. As a part of this partnership, the Debtor and the Plaintiffs executed a Limited Partnership Agreement on June 5, 1985, *960which set forth the terms of the Partnership.
Prior to the commencement of this bankruptcy case, the Plaintiffs sued the Debtor in the United States District Court for the Eastern District of Wisconsin. In their suit, the Plaintiffs sought to recover damages suffered as a result of the Debtor’s alleged mismanagement of the affairs of the partnership, defalcation, and diversion of partnership funds. A Final Judgment By Default was entered on behalf of the Plaintiffs and against the Debtor awarding in excess of $3 million to the Plaintiffs, plus interest, attorney’s fees and costs.
After the Debtor moved to Florida, he filed a Petition for Relief under Chapter 7 of the Bankruptcy Code, properly listing the Plaintiffs as creditors on his schedules. In due course, the Plaintiffs filed a Complaint seeking a determination that the debt owed to them, represented by the Final Judgment entered by the District Court in Wisconsin, is a nondischargeable debt pursuant to § 523(a)(4) of the Bankruptcy Code. An Amended Complaint included additional theories of recovery based on the originally alleged facts, none of which are relevant to the Motion under consideration.
As noted earlier, the matter under consideration is a Motion for Summary Judgment filed by the Debtor, who contends that he owed no fiduciary duty to the Plaintiffs and therefore, pursuant to § 523(a)(4), he is entitled to judgment in his favor as a matter of law, determining the debt represented by the judgment entered in the court in Wisconsin is a dischargeable obligation. In turn, it is the Plaintiffs’ contention that the partnership agreement did create a fiduciary relationship between the Debtor and the Plaintiffs which, according to the Plaintiffs, the Debtor breached.
Summary Judgment is appropriate when there are no genuine issues of material fact, and when one party is entitled to judgment as a matter of law. Fed.R.Civ. Pro. 56 as adopted by F.R.B.P. 7056.
The Partnership Agreement in Paragraph (e) on Pages 12 and 13 deals with the general partner’s, that is the Debtor’s, right to be indemnified by the limited partners under certain conditions. It provides an exception that the right of indemnification will not cover acts or omissions performed or omitted fraudulently, in bad faith or with gross negligence or willful misconduct. On Page 13, the same paragraph provides that this exception applies and does not release the General Partner, i.e. the Debtor, from its fiduciary responsibility to the partnership. There is nothing in the Partnership Agreement which actually creates a fiduciary relationship by defining precisely the duties of the General Partner vis-a-vis the limited partners and it deals with the subject only in the context of indemnification right of the Debtor.
It is clear that ordinary commercial relationships such as those of a principal/agent are generally not within the term of “fiduciary” as used in Section 523(a)(4). As stated by the Fifth Circuit in the case of Matter of Angelle, 610 F.2d 1335 (5th Cir. 1980), the relationship must be created by contract and cannot arise as a result of the alleged wrongdoing. From this it follows that before a fiduciary relationship is found to exist it must be in existence before the occurrence of the act from which the debt arose. Thus, one charged must be a fiduciary before the wrong and not as a result of the wrongdoing. See also, In re Sawyer, 112 B.R. 386 (D.Colo.1990). Notwithstanding, it is generally established in this State that a partnership is a confidential relationship just like that of a client and attorney or a trustee. Thus, like other fiduciaries, partners have a legal obligation to observe good faith and integrity in their dealings with one another with respect to the partnership business, and the relationship between partners is fundamentally one of mutual trust and confidence. West v. Chasten, 12 Fla. 315 (1868); Meckler v. Weiss, 80 So.2d 608 (1955). For instance, it was held that a managing partner breached his fiduciary duty under a written partnership agreement concerning a real estate project. Slingerland v. Hurley, 388 So.2d 587, (Fla. 4th DCA 1980) dismissed without opinion, 394 So.2d 1152 (Fla.1980).
*961In this partnership agreement the only position which deals with the general partners' rights and duties is the general partner’s right to be indemnified under certain specified conditions. Thus, it is unclear and it cannot be determined from this record that this particular partnership was created to be a partnership in which the general partner was deemed to be a fiduciary vis-a-vis the limited partners.
Based on the foregoing this Court is satisfied that it would be inappropriate to resolve this issue by summary judgment and it is clear that the precise relationship of the parties is subject to disputed facts which are material to the resolution of this controversy. For this reason, this Court is satisfied that while at first blush the resolution of this controversy might be appropriate for a summary disposition, it is fact intensive and the Motion should be denied.
Accordingly, it is
ORDERED, ADJUDGED AND DECREED that the Debtor’s Motion for Summary Judgment is hereby denied and a Final Evidentiary Hearing in this matter shall be held before the undersigned at Barnett Plaza, 2000 Main Street, Suite 302, Ft. Myers, Florida on November 5, 1992, at 8:30 a.m.
DONE AND ORDERED. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491585/ | FINDINGS OF FACTS AND CONCLUSIONS OF LAW
GEORGE L. PROCTOR, Bankruptcy Judge.
This case came before the Court upon Debtor Donald C. Freigo’s Motion for Sanctions against the City of Daytona Beach (“City”) for violation of 11 U.S.C. § 362(a). A hearing on the motion was held on August 5, 1992, and upon the evidence presented, the Court enters the following Findings of Fact and Conclusions of Law:
Findings of Fact
Debtor was employed by the City as a police officer and sustained a work related injury in August of 1984. Due to that injury, debtor received workers’ compensation payments until September of 1988.
*226The City adopted a Disability and Pension Plan in December, 1974. Section 6 of the plan provides for a reduction in payments due injured employees for lump sum workers’ compensation awards.
On August 19, 1988, debtor and the City signed and filed a Joint Petition and Stipulation for Release of All Liability in the workers’ compensation case brought by debtor against the City. The Joint Stipulation was approved by the State of Florida Deputy Commissioner in the compensation case on August 31, 1988.
On August 10, 1988, counsel for the City sent a letter to the attorney then representing the debtor requesting that the Joint Stipulation be binding on the parties notwithstanding the pending decision of the Florida Supreme Court in a similar case. Debtor signed the letter, agreeing that the settlement would be binding.
Debtor filed a petition under chapter 7 of the Bankruptcy Code on August 31, 1991. At that time, debtor had been receiving workers’ compensation benefits, from which the City had been off-setting his disability payments. The City continued to off-set such amounts post-petition.
As of the date of the hearing, the City had deducted a total of $5,500.00 post-petition ($500.00 a month for eleven months).
The City was scheduled as an unsecured, non-priority creditor holding a $20,000.00 claim and received notice of the bankruptcy filing. No adversary proceeding has been filed by either party to determine the dis-chargeability of the debt.
Debtor testified that he incurred $500.00 in attorney’s fees prosecuting this Motion for Sanctions.
The issue before the Court is whether the City’s off-set of disability payments against workers’ compensation benefits is a willful violation of the automatic stay under § 362(h).
Conclusions of Law
The filing of a bankruptcy petition operates as a stay that applies to all entities regarding
(6) any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case under this title;
(7) the setoff of any debt owing to the debtor that arose before the commencement of the case under this title against any claim against the debtor; ....
11 U.S.C. § 362(a)(6) and (7).
Protecting the debtor from the harassment of collection efforts, the automatic stay facilitates an orderly liquidation or reorganization of the debtor’s property. Accordingly, it is one of the most integral provisions found in the Bankruptcy Code. See, H.R.Rep. No. 95-595, 95th Cong., 1st Sess. 174-75 (1977); S.Rep. No. 95-989, 95th Cong., 2nd Sess. 49-50 (1978), U.S.Code Cong. & Admin.News 1978, pp. 5787, 5835-36, 6134-36.
Section 362(h) provides an individual with recourse when injured by a willful violation of the automatic stay. The section reads in relevant part:
(h) An individual injured by any willful violation of a stay provided by this section shall recover actual damages, including costs and attorneys’ fees, and, in appropriate circumstances, may recover punitive damages.
Thus, where a “willful” violation has occurred, compensatory damages are mandatory. In re Kilby, 100 B.R. 579, 581 (Bankr.M.D.Fla.1989).
In order to qualify as “willful” the conduct need only have been deliberate, a specific intent to violate a court order is not a prerequisite for a § 362(h) violation. Id.; In re Wagner, 74 B.R. 898 (Bankr.E.D.Pa. 1987).
The City argues that Ordinance No. 74-362 authorized the deductions from debtor’s disability payments. The ordinance reads in relevant part:
SECTION 6. Service Connected Total and Permanent Disability Pension.
Upon his retirement on account of permanent total disability, any member whose permanent total disability has arisen as a result of an illness, disease or personal injury arising out of and in the *227course of his actual performance of duty in the employ of the city, and who is in receipt of workmen’s compensation benefits on account of such illness, disease or personal injury, shall be placed on pension by the board. The amount of such pension shall be determined as in section 5.5 of the pension funds, based upon thirty (30) years of service credits. All payments of pension benefits shall be reduced by the amount of workmen’s compensation benefits received and for the statutory period during which such compensation benefits are or would be payable. In the event compensation benefits are paid in a lump sum, the board will determine the period for which such compensation benefits were payable and appropriately reduce the pension benefit payments during such period. At the expiration of the statutory period for which workmen’s compensation payments were payable, the pension benefits shall be increased accordingly.
However, the City’s argument must fail based on the Florida Supreme Court case of Barragan v. Miami, 545 So.2d 252 (Fla. 1989), clarified, reh’g denied, 545 So.2d 252 (Fla.1989). The Barragan case also involved a police officer disabled during the line of duty whose disability benefits were reduced by the amount of his workers’ compensation benefits pursuant to a city ordinance. The Court held that Fla.Stat. ch. 440 “preempted local regulation on the subject of workers’ compensation.” Id. at 254. Thus, the Court concluded that Fla. Stat. ch. 440.211 precluded an employer from deducting workers’ compensation awards from pension benefits due an employee, except to the extent that the aggregate sum of the two benefits exceeded the employee’s average monthly income.
The only factual distinction between the instant case and Barragan is that the debt- or’s workers’ compensation benefits were paid as a lump sum settlement. This Court finds that such distinction should not change the result reached by the Florida Supreme Court. In essence, the City is treating the debtor as if he receives regular monthly worker’s compensation benefits that are then offset against the disability benefits. This is the conduct which was expressly prohibited in the Barragan case.
The City then argues that Barragan should not apply because debtor waived the right to its protection in the August, 1988, letter. The Florida statute clearly states that no waiver by an employee of his right to workers’ compensation benefits will be valid. Fla.Stat. ch. 440.21(2). Thus, the purported waiver by the debtor was not valid.
The City also claims that the reduction was done as a recoupment, rather than an offset; therefore, the automatic stay does not apply. Recoupment has generally been permitted in bankruptcy cases where the debtor and the creditor have claims against each other which arise out of the same contract. Lee v. Schweiker, 739 F.2d 870, 875 (3d Cir.1984). The fact that the parties involved are the same and that the claims arise out of similar circumstances, does not necessitate a finding that the claims arise out of the same transaction. Id.
Generally, the cases holding that a right of recoupment exists deal with claims arising out of the same contract which provides for such recoupment. Visiting Nurse Assn. v. Sullivan, 121 B.R. 114 (Bankr.M.D.Fla.1990); In re Hiler, 99 B.R. 238 (Bankr.D.N.J. (1989). In the instant case, the workers’ compensation benefits and the disability benefits both flow from the same injury, but the right to such benefits arises from independent sources. Accordingly, the claims do not arise from the *228same transaction and no right of recoupment exists.
The deductions by the City were termed as an offset in the August 10, 1988, letter from the City’s counsel to debtor’s counsel. Since the right to the two benefits arise from different transactions, the claims are being offset against one another, rather than recouped. Section 362(a)(7) stays any act to offset a pre-petition debt of the debtor. Therefore, by offsetting the workers’ compensation benefits against the disability payments, the City violated the automatic stay.
The actions by the City were done deliberately and in violation of the automatic stay. As a direct consequence, Debtor was deprived of eleven months of workers’ compensation benefits at $500.00 a month for total damages of $5,500.00 and is entitled to an award of sanctions for such amount. In addition, the Court finds that $500.00 represents reasonable compensation for debtor’s attorney in pursuing this motion. Accordingly, debtor shall recover $6,000.00 for damages and fees.
A separate order will be entered in accordance with these Findings of Fact and Conclusions of Law.
. FiaStat. ch. 440.21 provides:
(1) No agreement by an employee to pay any portion of premium paid by his employer to a carrier or to contribute to a benefit fund or department maintained by such employer for the purpose of providing compensation or medical services and supplies as required by this chapter shall be valid, and any employer who makes a deduction for such purpose from the pay of any employee entitled to the benefits of this chapter shall be guilty of a misdemeanor of the second degree, punishable as provided in s. 775.083.
(2) No agreement by an employee to waive his right to compensation under this chapter shall be valid. | 01-04-2023 | 11-22-2022 |
Subsets and Splits
No community queries yet
The top public SQL queries from the community will appear here once available.