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https://www.courtlistener.com/api/rest/v3/opinions/8491672/ | MEMORANDUM AND ORDER ON DEFENDANT’S MOTION FOR SUMMARY JUDGMENT
ALAN H.W. SHIFF, Bankruptcy Judge.
The defendant, Teamsters Local 677 Health Services and Insurance Fund, moves for summary judgment based on the United States Supreme Court’s decision in District of Columbia v. Greater Washington Bd. of Trade, — U.S.-, 113 S.Ct. 580, 121 L.Ed.2d 513 (1992) invalidating Conn.Gen.Stat.Ann. § 31-284b (West Supp. 1993) which mandated the payment of insurance premiums on behalf of the plaintiff, Richard A. Parent, a chapter 13 debtor. Because I find that Parent’s claim is not derived from the invalidated statute, the Fund’s motion is denied.
BACKGROUND
Parent and his wife commenced this chapter 13 case on May 16, 1991. Parent has been employed by Northeast Transportation Co., Inc. (“Northeast”) since January 7, 1980 and is a member in good standing of the International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America, Local No. 677, of Waterbury, Connecticut (the “Union”). Northeast and the Union are parties to a collec*312tive bargaining agreement (the “Agreement”) covering the period from May 1, 1991, through April 30, 1994. See Exhibit _ “A ” to Affidavit of Richard A. Parent, February 4, 1993. The Agreement requires, inter alia, that Northeast make contributions to the Teamsters’ Local No. 677 Health Services and Insurance Plan (the “Plan”) on behalf of its Union employees. See Agreement, Article XXII, at pp. 32-34. The Plan provides for certain distributions to Union members from the defendant Teamsters Local 677 Health Services and Insurance Fund (the “Fund”), including the payment of specified medical and prescription drug expenses. The Plan is an employee welfare benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 (“ERISA”), see 29 U.S.C.A. § 1002(1) (West Supp.1993). As noted, infra pp. 314-15, the Plan provides that Parent is eligible for reimbursement of medical and prescription drug expense so long as Northeast makes the required contributions to the Plan.
On May 30, 1984, Parent was injured in a motor vehicle accident. Pursuant to the Fund’s requirements, Parent assigned his common law tort claim arising from the accident to the Fund. According to the Fund, Parent recovered a judgment on his claim but did not turn over the amount he collected, so the Fund sued him in the United States District Court for the District of Connecticut on February 9, 1988, and that case is pending. In this adversary proceeding, Parent alleges that the Fund violated the automatic stay, see 11 U.S.C.A. § 362(a) (West 1993), by setting off his post-petition medical and prescription drug expense against thq Fund’s alleged prepetition claim arising out of the May 30, 1984 accident. Parent seeks compensation, costs and punitive damages for that violation. See § 362(h).
In Greater Washington, decided December 14, 1992, the Supreme Court held that ERISA preempted a District of Columbia statute which required employers who provide health insurance for their employees to provide equivalent health insurance coverage for injured employees eligible for workers’ compensation benefits. See 29 U.S.C.A. § 1144(a) (West 1985). The Supreme Court granted certiorari in Greater Washington because a conflict had arisen between the Second Circuit’s R.R. Donnelley & Sons Co. v. Prevost, 915 F.2d 787 (2d Cir.1990), cert. denied, 499 U.S. -, 111 S.Ct. 1415, 113 L.Ed.2d 468 (1991) and the District of Columbia Circuit’s Greater Washington, 948 F.2d 1317 (D.C.Cir.1991). The Second Circuit held in Donnelley that Conn.Gen.Stat. § 31-284b 1 (which the Supreme Court stated was “substantially similar” to the District of Columbia statute, 113 S.Ct. at 583) was not preempted by ERISA.2
*313On the basis of its asserted right of setoff, the Fund stopped paying Parent’s medical expense on May 16, 1991, the petition date, and it stopped paying his prescription drug expense on June 10, 1991. During the period from May 16, 1991 through January 6, 1993, Parent received worker’s compensation benefits and in accordance with § 31b-284 Northeast made contributions to the Fund on Parent’s behalf in an amount sufficient to maintain Parent’s insurance coverage. Affidavit of Harry W. Filippone, January 6, 1993, at ¶¶ 3, 4. Parent argues that the Fund’s termination of payments while the Fund was receiving contributions was tantamount to an improper setoff in violation of the stay. In its instant motion, the Fund contends that Greater Washington eliminated its obligation to make those payments, so there was no setoff and no violation of the automatic stay. Thus, the issue presented by the Fund’s motion for summary judgment is whether Greater Washington compels that result.3
DISCUSSION
1.
Rule 56(c) Fed.R.Civ.P., made applicable by Rule 7056 Fed.R.Bankr.P., requires that summary judgment
shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.
In determining whether summary judgment is appropriate, “the judge’s function is not ... to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). The moving party bears the burden of showing that no material facts are in dispute, and all reasonable inferences are to be drawn and all ambiguities are to be resolved against the moving party. Donahue v. Windsor Locks Bd. of Fire Com’rs, 834 F.2d 54, 57 (2d Cir.1987). A party opposing a properly supported motion for summary judgment “must offer concrete evidence raising genuine disputes of material fact tending to show that [the opposing party’s] version of the events is more than fanciful ... or, alternatively, must show that the [moving party] is not entitled to summary judgment as a matter of law.” Johnson v. Carpenter Technology Corp., 723 F.Supp. 180, 182 (D.Conn. 1989) (citation omitted).
2.
Section 31-284b does not obligate the Fund to pay Parent’s claim.4 Rather, that section is part of Connecticut’s Workers’ Compensation Act and obligates employers to continue providing insurance coverage or making contributions to employee welfare plans under certain conditions. See Conn.Gen.Stat.Ann. §§ 31-275(9), (10), 31-284 (West Supp.1993); supra note 1. Therefore, it would appear that the invalidation of § 31-284b by Greater Washington does not affect the Fund’s obligations to Parent, unless the Fund sustains the burden of proving that *314the invalidation affected its contractual obligations to Parent under the Plan during the relevant period. For the reasons that follow, I find that the Fund has failed to sustain that burden.
The Fund’s obligations to Parent are governed by the Plan and that contract must be interpreted to effectuate the intent of the parties as determined from its language. In re Broad Assoc. Ltd. Partnership, 129 B.R. 328, 331 (Bankr.D.Conn. 1991). In construing a contract,
[t]he circumstances to be considered are those known to the parties when the [contract] was made_ [PJarties contract with reference to existing law, except when the contract discloses a contrary intention.... While it may be true that the parties could not foresee that the existing law might change, a court cannot import into the agreement a different provision nor can the construction of the agreement be changed to vary the express limitations of its terms.
Hatcho Corp. v. Della Pietra, 195 Conn. 18, 20-21, 485 A.2d 1285 (1985) (citations omitted). Performance by a party may be excused where the law intervenes to prohibit such performance,. Worthington v. Charter Oak Life Ins. Co., 41 Conn. 372, 407 (1874), or where “(1) [an] event [subsequent to contract formation] made the performance impracticable; (2) the nonoccurrence of the event was a basic assumption on which the contract was made; (3) the impracticability resulted without the fault of the party seeking to be excused; and (4) the party has not assumed a greater obligation than the law imposes.” Dills v. Town of Enfield, 210 Conn. 705, 717, 557 A.2d 517 (1989).
ERISA requires that administrators of employee benefit plans provide participants with a summary plan description which “shall be sufficiently accurate and comprehensive to reasonably apprise ... participants and beneficiaries of their rights and obligations under the plan,” and must describe “requirements respecting eligibility for participation and benefits ... [and] circumstances which may result in disqualification, ineligibility, or denial or loss of benefits.” 29 U.S.C.A. §§ 1021(a), 1022(a)(1), (b) (West 1985 & Supp.1993). Pursuant to those requirements, the Fund provided Parent with a Summary Plan Description (the “Summary”) with a letter dated May, 1991. See Exhibit “B” to Parent Affidavit.5 The Summary provides that the employee will
remain eligible as long as your employer makes the required contributions on your behalf for at least 32 hours per week without interruption or 150 hours in a calendar month.
Summary at p. 3.
The Summary also contains the following apparent reference to § 31-284b:
If you are disabled on the job and receive benefits under a Workers’ Compensation Law, your employer may be required by contract to make contributions to the Plan at the rate of not less than 32 hours per week up to a maximum of 12 months. Also, under Connecticut State Law, employers are required to make contributions as long as the employee is receiving or eligible to receive Workers’ Compen*315sation benefits.... Life Insurance and other medical benefits for charges incurred due to non-occupational accidental bodily injuries or illness will continue for yourself and your eligible dependents, as long as you are receiving Workers’ Compensation payments and contributions are paid to the Fund in a timely manner on your behalf by your employer.
Summary at pp. 3, 36.
The Plan thus insured that Parent would remain eligible to receive benefits as long as Northeast was making payments to the Fund, irrespective of why Northeast was making those payments. Rather than conditioning the Fund’s obligations on the continued vitality of § 31-284b, the Summary refers to that statute as relating solely to the employer’s obligation to pay the Fund. The Fund’s submissions support this construction. See Defendant’s Memorandum of Law in Support of Motion for Summary Judgment, January 28, 1993, at p. 3 (“The sole basis upon which the [Fund] provided such benefits in the past is that the Debtor’s employer made contributions to the defendant Fund on behalf of the Debtor.”); Affidavit of Corrine Mortagua, January 6, 1993, at 117 (“Since the basis of the Fund’s coverage of the Debtor is contributions received from the Debtor’s employer, the Fund has no obligation to provide insurance coverage for the Debtor at such times as no contributions are being made on his behalf”) (emphasis added).
The Fund’s obligation to pay Parent’s medical and prescription drug expense was not contingent on a statutory obligation of Northeast to continue making contributions to the Fund; rather, the sole condition for that duty was the uninterrupted continuation of Northeast’s contributions. As noted, see supra p. 313, Northeast made contributions during the entire period in question. I therefore conclude that the invalidation of § 31-284b by Greater Washington had no effect on the Fund’s contractual obligation to provide insurance benefits to Parent during the relevant period.
3.
Even if the Fund’s obligations to Parent depend in some measure on the continued vitality of § 31-284b, the Fund has not proven, as a matter of law, that the invalidation of that statute would operate retroactively to eliminate vested contractual rights Parent may have under the Plan. See James B. Beam Distilling Co. v. Georgia, — U.S. -, 111 S.Ct. 2439, 115 L.Ed.2d 481 (1991); Welch v. Cadre Capital, 946 F.2d 185 (2d Cir.1991). The Fund asserts, without citation of authority, that Greater Washington had the effect of voiding § 31-284b ab initio. Defendant’s Memorandum in Support of Motion for Summary Judgment, January 28, 1993, p. 5. Assuming that the rule of Greater Washington were applicable and had to be applied retroactively, the Fund still could not prevail on its summary judgment motion.6 Federal courts are afforded broad authority to fashion relief in a manner that recognizes equitable and reliance interests of the parties and of those “absent but similarly situated.” James B. Beam, supra, — U.S. at-, 111 S.Ct. at 2448; Lemon v. Kurtzman, 411 U.S. 192, 208-209, 93 S.Ct. 1463, 1473, 36 L.Ed.2d 151 (1973) (“[T]he propriety of the relief afforded appellants by the District Court, applying familiar equitable principles, must be measured against the totality of circumstances and in light of the general principle that, absent contrary direction, state officials and those with whom they deal are entitled to rely on a presumptively valid state statute_”). The record contains *316insufficient facts to permit this court to determine whether there exist equities or reliance interests entitled to this court’s protection. Accordingly, the Fund’s summary judgment motion must be denied.
ORDER
The Defendant’s Motion for Summary Judgment is denied and IT IS SO ORDERED.
. Conn.Gen.Stat.Ann. § 31-284b (West Supp. 1993), enacted in 1982, provides in relevant part:
(a) [A]ny employer who ... makes payments or contributions at the regular hourly or weekly rate for full-time employees to an employee welfare plan, shall provide to the employee equivalent ... welfare plan payments or contributions while the employee is eligible to receive or is receiving compensation pursuant to [Connecticut's Workers' Compensation Act]....
(c) In the case of an employee welfare plan, an employer may provide equivalent protection by making payments or contributions for such hours of contributions established by the trustees of the employee welfare plan as necessary to maintain continuation of such insurance coverage when the amount is less than the amount of regular hourly or weekly contributions for full-time employees.
. The plaintiff concedes that it is "widely assumed” that § 31-284b is preempted by ERISA based on Greater Washington. Plaintiff’s Memorandum of Law in Opposition to Defendant’s Motion for Summary Judgment, February 4, 1993, p. 2. On April 27, 1993, the Supreme Court of the State of Connecticut held that § 31— 284b was preempted by ERISA and reversed three decisions of Connecticut’s Workers’ Compensation Review Board. Frank A. Luis, et al. v. Frito-Lay, Inc., et al, No. S.C. 14536 (Conn., April 27, 1993). Significantly, the Frito-Lay cases involved disputes between employees and their employer, Frito-Lay, which argued on several grounds (including ERISA preemption of § 31-284b) that it was not obligated to continue making contributions to a Teamsters’ Union fund. The cases did not address the effect of the invalidation of § 31-284b on the Union fund’s obligation to provide insurance coverage while it was receiving contributions from Frito-Lay, nor the issue of whether Greater Washington should apply retroactively. See Frito-Lay, Inc., supra, Brief for Respondents-Appellants, *313April 2, 1992, Supplemental Brief of Respondents-Appellants, January 25, 1993.
. On January 6, 1993, Northeast notified the Fund that on the basis of Greater Washington it would no longer make contributions on Parent’s behalf. Affidavit of Corrine Mortagua, January 6, 1993, at ¶ 6. While Parent claims that he is entitled to the continuation of benefits beyond January 6, 1993 on several theories, see Plaintiff’s Memorandum of Law in Opposition to Defendant’s Motion for Summary Judgment, February 4, 1993, at p. 3, that issue is not properly before me in this matter.
. Indeed, in its memorandum filed in connection with the underlying adversary proceeding, the Fund argued that it terminated Parent's coverage under the Plan on November 27, 1987. Defendant’s Memorandum of Law, June 16, 1992, at p. 2. This argument must be premised on the Fund’s recognition that the Fund had no statutory obligation to maintain coverage while Parent was eligible to receive workers’ compensation benefits, as his eligibility for those benefits continued for most of the period from 1987 to the present. Filippone Affidavit at ¶ 3.
. A statement at the beginning of the Summary indicates that nothing in the Summary "is meant to interpret or extend or change in any way the provisions expressed in the Plan or insurance policies.” The statement also indicates that the trustees of the Fund have "broad authority to determine eligibility for benefits. ..." The Summary clearly states, however, that the insured is “eligible to receive the benefits presented in this booklet, in addition to any applicable benefits for which [the insured is] eligible as stated in the policies and the Rules and Regulations.” The Fund has not argued that the Summary does not accurately reflect the insurance contract between the Fund and Parent, nor has the Fund filed any other document defining that contract or indicating that the terms of that contract have changed in any way since the date of the Summary. ERISA requires that participants and beneficiaries be given written notice of plan modifications. 29 U.S.C.A. §§ 1022(a)(1), 1024(b)(1) (West 1985 & Supp.1993). See Heidgerd v. Olin Corp., 906 F.2d 903, 907 (2d Cir.1990) ("[T]he statute contemplates that the summary will be an employee’s primary source of information regarding employment benefits, and employees are entitled to rely on the descriptions contained in the summary.”). Accordingly, for purposes of the Fund’s motion for summary judgment, it is assumed that the Summary accurately reflects the terms of the Plan.
. The Court held in lames B. Beam that "it is error to refuse to apply a rule of federal law retroactively after the case announcing the rule has already done so.” — U.S. at-, 111 S.Ct. at 2446. The Court thus held that the rule announced in Bacchus Imports, Ltd. v. Dias, 468 U.S. 263, 104 S.Ct. 3049, 82 L.Ed.2d 200 (1984), that a Hawaii tax statute was unconstitutional, which rule was applied retroactively to the Bacchus parties, had to be applied retroactively in James G. Beam, which involved a Georgia statute similar to the invalidated Hawaii tax statute. Id. Greater Washington did not address the issue of retroactive application of the rule of law announced in that case. The respondent Greater Washington Board of Trade sought to enjoin the District of Columbia from enforcing the statute at issue, and thus was seeking only prospective relief. -U.S. at-, 113 S.Ct. at 582. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491673/ | MEMORANDUM OPINION
STEPHEN J. COVEY, Bankruptcy Judge.
This matter comes on to be heard upon the Cross-Motions for Summary Judgment filed by Donald P. Taylor (“Debtor”) and the United States of America ex rel. the Internal Revenue Service (“IRS”). Summary judgment is proper when there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Upon review of the briefs of the parties and the applicable law, the Court finds as follows.
UNDISPUTED FACTS
1. On February 11, 1985, the IRS sent a letter to Debtor regarding unpaid withholding taxes of Delta Cattle, Inc. Attached to the letter was Form 2751, Proposed Assessment of 100 Percent Penalty, which lists the date the 941 tax return was filed, the date the tax was assessed, the specific *544quarterly tax periods and the unpaid balance and penalty amount for each tax period. The penalty for the nine quarters listed totalled $117,162.26. Because the taxes had not been paid by the corporation, the IRS planned to assess a penalty against Debtor as a responsible person under 26 U.S.C. § 6672 for the total amount due. The letter directed Debtor to agree to the proposed assessment or to contact the IRS within ten days from receipt of the letter. If no response was received by the IRS within 30 days, the penalty would be assessed.
2.On March 8, 1985, Debtor sent a letter of protest to the IRS in response to its February 11, 1985 letter. In his letter, Debtor restated the specific quarterly tax periods and the respective amounts involved for each period. As grounds for his protest, Debtor argued that he was not a responsible person under § 6672 and therefore could not be assessed a penalty.
3.On March 11, 1985, the IRS mailed to Debtor Form 2749, Request for 100 Percent Penalty Assessment. This document identifies the assessment date as March 18, 1985 and lists the quarterly tax periods for which penalty assessments were due and the specific amount for each tax period as follows:
Period Ended Unpaid Balance Trust Fund Portion of Outstanding Balance
Dec. 31, 1981 $12,201.94 $ 12,301.94
March 31, 1982 27.875.86 17,244.04
June 30, 1982 24,837.43 17,767.94
Sept. 30, 1982 20.543.87 15,476.51
Dec. 31, 1982 14,457.21 13,403.86
June 30, 1983 1,405.00 644.04
Sept. 30, 1983 15,196.38 10,266.26
Dec. 31, 1983 . 25,276.49 16,678.37
March 31, 1984 16,783.48 13,596.26
Total $117,162.26
The form was signed and dated by a revenue officer but not by a SPI reviewer.
4.On March 18, 1985, the IRS made an assessment against Debtor pursuant to § 6672(a) for 100 percent penalty for failure to pay withholding taxes. The IRS’s penalty assessment is documented by Form 4340, entitled “Certificate of Assessments and Payments.” This document reflects that a penalty assessment was made against Debtor on March 18, 1985, as follows:
Explanation of Transactions Assessment 23C Date Period Ending
Penalty Assessment $117,161.16 03-18-85 12-31-81-
12-31-82,
06-30-83-
03-31-84
5.A tax lien filed in Tulsa County against Debtor reflects that Debtor has been assessed $117,162.26 by the IRS for the tax period ending March 31, 1984.
6. On September 24, 1990, Debtor filed for relief under Chapter 7 of the Bankruptcy Code.
7. On May 5, 1992, this Court held that Debtor was not a responsible person and *545therefore could not be held liable for the unpaid withholding taxes.
8. On March 16,1993, the United States District for the Northern District of Oklahoma reversed this Court and found that Debtor was a responsible person of Delta Cattle and that he had willfully failed to collect and pay over the employment taxes owed to the federal government.
9. On April 8, 1993, on a motion to alter or amend judgment filed by Debtor, the District Court entered an order remanding the matter to this Court to determine whether the IRS “properly assessed” Debt- or for the employment taxes at issue.
ISSUE
The issue before the Court at this time is whether Debtor, who has been held to be a responsible officer of Delta Cattle and who willfully failed to see that the corporation paid its employment taxes, has been properly assessed these taxes and is therefore liable for them.
ARGUMENT
Debtor’s principle argument is that the IRS’s penalty assessment under 26 U.S.C, § 6672(a) as evidenced by Form 4340 is invalid because it does not set forth the amounts due separately for each quarter. Debtor points out that under § 6671 and § 6665 of the Internal Revenue Code, penalties must be assessed in the same manner as taxes. It is agreed by the parties that withholding taxes must be assessed against a corporate taxpayer on a quarterly basis with the amount stated separately for each quarter. Debtor contends that by logical deduction a penalty attributable to an unpaid withholding tax must be assessed in the same manner. Debtor argues that the penalty in this case was not assessed in quarterly amounts but was assessed in one lump sum attributable to nine specific quarters. Therefore, Debtor argues he is not liable for the penalty but acknowledges that this is a very technical argument.1
In response, the IRS contends that while the underlying withholding tax against the corporation is by law reportable, payable and assessable on a quarterly basis, there is no such requirement with respect to the § 6672 penalty. Rather, § 6672 merely provides that a responsible party is liable for “a penalty equal to the total amount of the tax ... not accounted for and paid over.” [emphasis added]. The statute is not phrased in terms of quarterly periods but rather in terms of one penalty covering the total amount of all unpaid withholding taxes.
CONCLUSIONS OF LAW
Under the Internal Revenue Code, employers are required to withhold from the wages of employees income and social security taxes and to hold these taxes in trust for the IRS. 26 U.S.C. §§ 3102, 3402, 7501. Because the IRS is required to credit employees for the withheld taxes even if the employer fails to pay the taxes, the Code provides for imposition of 100 percent penalty against responsible persons of the corporation who willfully failed to see that the withholding taxes were paid. 26 U.S.C. § 6672.
Penalties incurred under § 6672 are to be assessed and collected in the same manner as taxes. 26 U.S.C. § 6671. However, the liability of one who is assessed a penalty under § 6672 is separate and distinct from the underlying liability of the employer for the withholding taxes. Howard v. United States, 711 F.2d 729 (5th Cir.1983); United States v. Pomponio, 635 F.2d 293 (4th Cir.1980); Datlof v. United States, 370 F.2d 655 (3rd Cir.1966), cert. denied, 387 U.S. 906, 87 S.Ct. 1688, 18 L.Ed.2d 624 (1967).
Section 6203 of the Internal Revenue Code, which pertains to the method of assessment of taxes, provides as follows:
The assessment shall be made by recording the liability of the taxpayer in the *546office of the Secretary in accordance with rules or regulations prescribed by the Secretary. Upon a request of the taxpayer, the Secretary shall furnish the taxpayer a copy of the record of assessment.
The Treasury regulation to § 6203 further explains the procedure for assessment as follows:
Method of assessment. — The district director and the director of the regional service center shall appoint one or more assessment officers. The district director shall also appoint assessment officers in a Service Center servicing his district. The assessment shall be made by an assessment officer signing the summary record of assessment. The summary record, through supporting records shall provide identification of the taxpayer, the character of the liability assessed, the taxable period if applicable, ‘and the amount of assessment. The amount of the assessment shall in the case of the tax shown on a return by the taxpayer, be the amount so shown, and in all other cases the amount of the assessment shall be the amount shown on the supporting list or record. The date of the assessment is the date the summary record is signed by an assessment officer. If the taxpayer requests a copy of the record of assessment, he shall be furnished a copy of the pertinent parts of the assessment which set forth the name of the taxpayer, the date of the assessment, the character of the liability assessed the taxable period, if applicable, and amounts assessed.
Treas.Reg. § 301.6203-1 (1967).
Ordinarily, the IRS makes assessments by having an assessment officer fill out and sign a “Summary Record of Assessment,” also known as a Form 23(c). In this case, the IRS did not provide the Court with an actual Form 23(c), but did submit a Form 4340, Certificates of Assessments and Payments.
Certificates of Assessments and Payments are routinely used to prove that a tax assessment has in fact been made and it is well settled that this form is accepted by courts as presumptive proof of a valid assessment. Long v. United States, 972 F.2d 1174 (10th Cir.1992); United States v. Chila, 871 F.2d 1015 (11th Cir.1989), cert. denied, 493 U.S. 975, 110 S.Ct. 498, 107 L.Ed.2d 501 (1989). Accordingly, once the Certificate is introduced, the taxpayer bears the burden to show that the information presented is incorrect. Fidelity Bank v. United States, 616 F.2d 1181 (10th Cir.1980).
The Treasury regulations state that the assessment must include the following:
1. Identification of the taxpayer;
2. Character of the liability assessed;
3. Taxable period, if applicable; and
4. Amount of assessment.
The Court finds that the Form 4340 complies with all of these requirements. The Certificate lists the total amount due and sets forth the relevant quarters for which the penalty is being assessed.
Debtor’s argument that the amount of the assessment must be listed separately for each quarter has been made and rejected by a number of courts. See Hartnett v. United States, 1992 WL 276647 (D.Kan.1992); Cutaiar v. United States, 1992 WL 198927 (E.D.Pa.1992); Ronsberg v. United States, 798 F.Supp. 582 (D.N.D.1992); McGinley v. United States, 71 A.F.T.R.2d 93-350, 1992 WL 437638 (W.D.Pa.1992). These cases hold that a responsible person is liable for the total amount of the tax as a penalty and that there is no time period applicable in assessing the penalty.
As stated by the Cutaiar Court:
The need for separate quarterly assessments pertains to the corporate 941 tax liabilities which are assessed according to specific taxable periods and are not relative to assessment of a responsible person penalty. Reg.Sec. 301.6203-1 provides that a valid assessment include the identity of the taxpayer, the character of the liability assessed, the taxable period, if applicable, and the amount of the assessment. Since an individual taxpayer has no taxable period with respect to a penalty such as the Section 6672 pen*547alty, the notice to taxpayer need not include any time period at all.
Cutaiar v. United States, 1992 WL 198927 at *6 (E.D.Pa.1992) (Emphasis added).
Finally, the majority of courts hold that mere technical errors will not invalidate an otherwise valid assessment where the taxpayer has not been misled as to the true facts. See Sage v. United States, 908 F.2d 18 (5th Cir.1990); Planned Investments, Inc., 881 F.2d 340 (6th Cir.1989); Sanderling, Inc. v. Internal Revenue, 571 F.2d 174 (3rd Cir.1978). In this case, Debtor had actual knowledge of the various tax quarters and the respective amounts due for each tax quarter and therefore was not misled as to the amount of the penalty or the periods involved.
A separate judgment order will be entered consistent with this Memorandum Opinion.
. Debtor also argued that the assessment was invalid because it was based on an unapproved and undated recommendation from a field collection agent. However, Debtor cited no authority for this contention nor was it urged at oral argument. Therefore, it is denied by the Court. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491676/ | MEMORANDUM OPINION ON MOTION TO VOID AND CANCEL NOTICES OF LIS PENDENS FILED BY CLINTON MANGES AND HELEN RUTH MANGES
RICHARD S. SCHMIDT, Bankruptcy Judge.
On this day came on for consideration the Motion of Manges Liquidating Trust to Void and Cancel Notices of Lis Pendens filed by Clinton Manges and Helen Ruth *724Manges. The Court, having heard the evidence and arguments of counsel, and having reviewed the pleadings and briefs on file herein, finds that the Motion should be granted and the Notices of Lis Pendens should be voided and canceled. In support of its ruling, the Court makes the following findings of fact and conclusions of law:
BACKGROUND
The Creditor Plan of Reorganization was confirmed by a “Corrected Order Confirming First Amended Creditor’s Plan of Reorganization of Seattle First National Bank and SeaFirst America Corporation”, effective May 31, 1991. The confirmed creditor plan created a liquidating trust to be administered by the Liquidating Trustee for the benefit of creditors. The creditor plan provided for the transfer of all property of the bankruptcy estates of Duval County Ranch Company, Man-Gas Transmission Co., and Clinton Manges (the “Manges Debtors”) to the Liquidating Trust for orderly disposition. Since confirmation of the plan, the Liquidating Trustee has been attempting to sell trust property.
On June 7, 1991, the Manges Debtors filed a Notice of Appeal concerning the confirmation of the creditor plan. The Manges Debtors sought a stay pending appeal from the Bankruptcy Court and the United States District Court seeking to stay the operation of the creditor plan in June of 1991. Both requests for stay were denied. Clinton Manges and Helen Manges thereafter filed lis pendens notices against property owned by the Liquidating Trust in Duval County, Webb County and Maverick County in the State of Texas. The Liquidating Trustee, in accordance with Article IV.2.1 of the Creditor Plan,1 requested by letter that Clinton Manges and Helen Manges execute cancellation of lis pendens notices. Clinton Manges and Helen Mang-es did not cooperate and therefore, in accordance with Article IV.2.1 of the Creditor Plan, cancellation of lis pendens notices were executed by Colin K. Kaufman and filed. Clinton Manges and Helen Manges then re-filed new notices of lis pendens in the same counties.
The District Court affirmed this Court’s order confirming the creditor plan by Order *725entered May 4, 1993. The Manges Debtors filed their Notice of Appeal to the Fifth Circuit concerning the District Court’s Order on May 12, 1993. The Manges Debtors sought a stay pending appeal from the District Court on May 14, 1993. The stay pending appeal request was immediately rejected by the District Court by Order entered May 14, 1993.
The Liquidating Trust has now filed its Motion to Void and Cancel the Notices of Lis Pendens in order that it may proceed with the provisions of the confirmed plan by selling property for the benefit of creditors. The Liquidating Trustee’s attempts to sell the property, however, have been frustrated by the actions of the Manges debtors in filing the lis pendens notices.
THE PROCEDURAL ISSUE
The Manges Debtors responded to the Motion to Void Lis Pendens and moved to dismiss the motion on the grounds that the relief requested by the Liquidating Trust may only be brought by adversary proceeding. The Fifth Circuit approved the avoidance of lis pendens requested by oral motion in Matter of Texas Extrusion Corporation, 844 F.2d 1142, 1151 (5th Cir.1988), cert. denied, 488 U.S. 926, 109 S.Ct. 311, 102 L.Ed.2d 330 (1988). The Fifth Circuit held that “[w]hen a lis pendens is not authorized under Texas law, the Court need not follow the procedures prescribed by Texas Property Code Annotated Section 12.008 to cancel it ... [and] no additional procedural requirements are mandated by Bankruptcy Rule 9014 for the cancellation of invalid lis pendens.” 844 F.2d at 1153. The Texas Extrusion case is controlling and this Court finds that the relief requested by the Liquidating Trust may, therefore, be granted by motion.
Even if the Court were to agree with the Manges Debtors’ argument, the Liquidating Trust also filed on May 20, 1993, its Original Complaint for Declaratory Relief, Emergency Application for Temporary Restraining Order and Injunctive Relief, and Request for Expedited Hearing. That Complaint was assigned Adversary Proceeding Number 93-2079-C. Count 1 of the Complaint, paragraph 24, page 9, requests that this Court “declare all past and future notices of lis pendens filed by or on behalf of the Manges debtors or Helen Manges concerning this bankruptcy case to be void and of no effect.” Even if not bound by the Texas Extrusion case, this Court could treat the pending motion in the main case as a Motion for Summary Judgment in Adversary Proceeding No. 93-2079-C. The argument of the Manges debtors must, therefore, fail.
THE SUBSTANTIVE ISSUES
Tex.Prop.Code Ann. § 12.007(a) provides for the filing of a lis pendens in appropriate situations as follows:
(a) After the plaintiff’s statement in an eminent domain proceeding is filed, or during the pendency of an action involving title to real property, the establishment of an interest in real property, or the enforcement of an encumbrance against real property, a party to the action who is seeking affirmative relief may file for record with the County Clerk of each county where a part of the property is located a notice that the action is pending.
In the Texas Extrusion case, the Fifth Circuit held that the action of a Bankruptcy Court in declaring a lis pendens void and canceling the lis pendens was appropriate. The Texas Extrusion case involved four related debtors whose largest secured creditor and the unsecured creditors committee filed and obtained confirmation of a Joint Creditors Plan of Reorganization. Like the Manges Debtors, the Debtors in the Texas Extrusion case appealed the Order Confirming the Plan and sought a stay pending appeal from the Bankruptcy Court and the District Court, both of which were denied. The debtors then appealed to the Fifth Circuit and sought an emergency stay pending appeal which was also denied. Due to concern about the debtors’ willingness to attend the closing provided for in the Plan, the creditors committee filed a Bankruptcy Rule 7070 motion in Bankruptcy Court. At the hearing on the Rule 7070 motion, “counsel for the Creditors’ Commit*726tee verbally moved that a lis pendens notice previously filed by [debtors’ counsel] on behalf of the debtors be canceled.”2 844 F.2d at 1151. Following the hearing, the Bankruptcy Court voided the notice of lis pendens. The debtors appealed and the District Court affirmed.
The Fifth Circuit held that “the filing of the lis pendens notice was not authorized by Texas Statute and thus of no effect.” 844 F.2d at 1152. The Court went on to note that an order confirming a plan of reorganization does not fall within the situations contemplated by the Texas Statute.
Texas cases interpreting § 12.007 provide this Court with guidance in its application. In Lane v. Fritz, 404 S.W.2d 110 (Tex.Civ.App.—Corpus Christi 1966, no writ), the 13th Court of Appeals held that § 12.007’s predecessor, Art. 6640, Vernon’s Ann.Civ.Stat., did not apply in a suit for damages for alienation of affection. The plaintiff in Lane, as part of her suit, sought a lien in her favor against all real property owned by the defendant to secure payment of the judgment she might recover. In connection with her request for a lien, she filed a notice of lis pendens against real property owned by the defendant. The 13th Court of Appeals held that the plaintiff’s suit for damages and the lis pendens notice filed as part of that suit did not fall within § 12.007. The Court went on to hold that “the term ‘to enforce any lien, charge or encumbrance’ as used in Art. 6640 [now § 12.007], is not applicable where such lien does not exist prior to rendition of judgment under some provision of a contract, statute or the constitution.” 404 S.W.2d at 112.
Section 12.007 was also found inapplicable in Helmsley-Spear of Texas, Inc. v. Blanton, 699 S.W.2d 643 (Tex.App.—Houston [14th Dist.] 1985, orig. proceeding). There, the plaintiffs brought suit for breach of lease and constructive eviction and sought money damages. The plaintiffs also asked the court to “impose a lien against the real property ... to protect the equitable title and rights of [the] plaintiffs.” 699 S.W.2d at 644. The Texas Court of Appeals held that the lien sought by the plaintiffs did not directly affect defendant’s real property and therefore, did not come within the provisions of § 12.007. 699 S.W.2d at 645.
Section 12.008 of the Texas Property Code provides for the cancellation of lis pendens and instructs on the proper procedures as follows:
(a) On the motion of a party or other person interested in the result of or in property affected by a proceeding in which a lis pendens has been recorded and after notice to each affected party, the court hearing the action may cancel the Ms pendens at any time during the proceeding, whether in term time or vacation, if the court determines that the party seeking affirmative relief can be adequately protected by the deposit of money in court or by the giving of an undertaking.
Texas Courts of Appeal have held, however, that when a Ms pendens does not come within the provisions of § 12.007, the party seeking to cancel it is not “required to comply with § 12.008 to nullify, remove or cancel the notice.” Helmsley-Spear of Texas, Inc. v. Blanton, 699 S.W.2d 643, 645 (Tex.App.—Houston [14th Dist.] 1985, orig. proceeding), citing Lane v. Fritz, 404 S.W.2d 110 (Tex.Civ.App.—Corpus Christi 1966, no writ).
Likewise, the facts of this case do not fit within § 12.007. Confirmation of a Chapter 11 Plan is not an action “involving title to real property, the establishment of an interest in real property, or the enforcement of an encumbrance against real property” as set forth in § 12.007. There is no dispute here that the real property belonged to the Manges Debtors on the date of filing. Upon filing, the property became property of the Bankruptcy estate, subject to the jurisdiction of this Court. The fact that the confirmed plan transfers the property to the liquidating trust does not bring *727this case under § 12.007. The Manges debtors are simply trying to circumvent the provisions of the Bankruptcy Code and the confirmed plan.
This Court further finds that the Manges Debtors are seeking to do by State statute what they were unsuccessful at accomplishing under Federal law. That is, the Manges Debtors unsuccessfully sought numerous stays pending appeal of the confirmation of the Creditor Plan. No doubt frustrated by their lack of success, the Manges Debtors have filed notices of lis pendens in an attempt to prevent the Liquidating Trust from transferring property pursuant to the confirmed plan. When there is an outright conflict between Federal and State law, or when compliance of both Federal and State laws are impossible, this Court is bound by Federal law. Louisiana Public Service Commission v. Federal Communications Commission, 476 U.S. 355, 368-69, 106 S.Ct. 1890, 1898, 90 L.Ed.2d 369 (1986). If the Court agreed with the position of the Manges Debtors, the conflict between Federal bankruptcy law and the State lis pendens provisions would be direct and irreconcilable. If a debtor could file a lis pendens notice to avoid enforcement of a confirmed plan of reorganization, the Bankruptcy Code would be emasculated. Almost all bankruptcies involve the transfer of title to real property. Orders of the Bankruptcy Court must have some finality. Moreover, the Bankruptcy Code requires swift resolution of issues. Accordingly, State law would have to yield. Matter of Brickyard, 735 F.2d 1154, 1158 (9th Cir.1984). This Court clearly has jurisdiction to enforce its own confirmation order and to prevent the Manges Debtors from hindering consummation of the Creditor Plan via State law procedures. The policy of the supremacy of Federal over State law would be controlling.
The lis pendens notices filed by the Manges Debtors can and must be canceled. A separate Order shall be entered herewith.
. Article IV.2.1 of the Creditor Plan, as amended by the Corrected Order Confirming First Amended Creditors’ Plan, provides as follows:
IV.2.1 Execution of documents to Effectuate the Creditor Plan. Within three days of the Confirmation Date, the Manges Debtors and Helen Ruth Manges shall execute the Manges Creditor Trust Agreement and Blanket Conveyance establishing the Manges Creditor Trust and transferring all Manges Debtor Estate property to the Manges Creditor Trust, thereby creating Trust Property. Clinton Manges shall retain all property listed as exempt in his schedules filed on about March 14, 1990. There shall be no homestead claim whatsoever in favor of anyone on the Duval County Ranch or on any of the estate or Trust Property. The Manges Creditor Trust Agreement and the Blanket Conveyance shall be substantially in the form as in Appendix 1 and 2, respectively. The Manges Debtors and Helen Ruth Manges shall be under a continuing obligation to execute, within three days of demand, all documents of any kind to assist in effectuation of the purposes and intent of the Creditor Plan. The Court may order any other person at any time to execute all documents of any kind pursuant to section 1142 to assist in effectuation of the purposes and intent of the Creditor Plan. Pursuant to this provision, by order confirming the Creditor Plan, the Court will order all signatories necessary to carry out the provisions of the Blanket Conveyance to execute the Blanket Conveyance within three days of the Confirmation Date. In the event that the Manges Debtors, Helen Ruth Manges or any other person under an obligation herein to execute documents has not executed documents by the specified deadline, then the Court appoints Colin K. Kaufman to execute documents in the stead of any of the Manges Debtors, Helen Ruth Manges, or any other necessary signatory and such signature by the above appointee shall have the same legal effect as if the Manges Debtors, Helen Ruth Manges, or any other necessary signatory had executed the documents. Further, pursuant to section 1142, the Court orders Colin K. Kaufman to execute documents pursuant to the above appointment within three days of written demand by the Proponents’ or the Liquidating Trustee’s attorneys. In the event of an appointee execution of a document, there shall be no recourse whatsoever against the appointee, the court, the Liquidating Trustee, or the Proponents, although there may be recourse against the persons for whom the signatures are being supplied. In the event of any legal or physical incapacity preventing Colin K. Kaufman from executing documents, the Court may appoint a substitute or successor appointee to execute documents pursuant to this article. The Creditor Plan also shall be as legally effective to transfer and protect title as the Blanket Conveyance and may be publicly recorded in stead of the Blanket Conveyance.
. Interestingly enough, counsel for the creditors committee who orally moved for cancellation of the lis pendens notice was a member of the same firm who now represents the Manges Debtors and opposes cancellation of the lis pen-dens notice by motion. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483942/ | Matter of Corcoran (2022 NY Slip Op 06437)
Matter of Corcoran
2022 NY Slip Op 06437
Decided on November 15, 2022
Appellate Division, First Department
Per Curiam
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 and Entered: November 15, 2022
SUPREME COURT, APPELLATE DIVISION
First Judicial Department
Dianne T. Renwick,J.P.,
Judith J. Gische
David Friedman
Anil C. Singh
Tanya R. Kennedy, JJ.
Motion No. 2022-03149 Case No. 2022-03413
[*1]In the Matter of Andrew R. Corcoran (Admitted as Andrew Ryan Corcoran), an Attorney and Counselor-at Law: Attorney Grievance Committee for the First Judicial Department, Petitioner, Andrew R. Corcoran, (OCA ATTY. REG. NO. 4400404), Respondent.
Disciplinary proceedings instituted by the Attorney Grievance Committee for the First Judicial Department. Respondent was admitted to the Bar of the State of New York at a Term of the Appellate Division of the Supreme Court for the First Judicial Department on March 20, 2006.
Jorge Dopico, Chief Attorney, Attorney Grievance Committee, New York
(Raymond Vallejo, of counsel), for petitioner.
Respondent pro se.
Per Curiam
Respondent Andrew R. Corcoran was admitted to the practice of law in the State of New York by the First Judicial Department on March 20, 2006, under the name Andrew Ryan Corcoran. At all times relevant to this proceeding, respondent maintained an office for the practice of law within the First Judicial Department.
The Attorney Grievance Committee (AGC) seeks an order, pursuant to Judiciary Law § 90 (2), the Rules for Attorney Disciplinary Matters (22 NYCRR) § 1240.13, and the doctrine of reciprocal discipline, finding that respondent has been disciplined by a foreign jurisdiction, directing him to demonstrate why this Court should not impose discipline based on the misconduct underlying his discipline in Maryland, and suspending him for a period of 18 months, or, in the alternative, sanctioning him as the Court deems appropriate.
Respondent was admitted to the practice of law in the District of Columbia in July 2009 and in Maryland in July 2018. In June 2021, the Attorney Grievance Commission of Maryland filed a petition for disciplinary or remedial action charging respondent with having violated several rules of the Maryland Attorneys' Rules of Professional Conduct and Maryland Rules governing attorney trust accounts.
In March 2022, prior to a hearing on the charges, Maryland Bar Counsel and respondent, then represented by counsel, submitted a joint petition for an indefinite suspension setting forth the facts establishing the misconduct, the rules violated and the agreed upon discipline of an 18-month suspension. Specifically, respondent stipulated that in or about April 2017, he was hired to work for a mortgage default services law firm. The mortgage default services law firm represented lenders and mortgage loan servicers in foreclosure and default proceedings in Maryland and the District of Columbia, acting as substitute trustee for lenders and mortgage loan servicers who had lawfully enacted foreclosure proceedings that were in default. The proceeds of those foreclosures would be transferred into its trust accounts to be paid to its clients.
When respondent was hired in 2017, he was not yet licensed in Maryland and his title was administrative office manager. Around that time, the firm opened a new Maryland IOLTA attorney trust account at a bank with respondent and the firm's then managing attorney as two of the three individuals with signatory authority on the account. After the managing attorney left in the fall of 2017, respondent assumed greater oversight of the firm's trust account, despite not being admitted in Maryland, and was the only attorney responsible for the account. At some point after the opening of the new trust account, respondent learned that the firm's client trust monies were generally not being held in trust by the firm, but were under the control of the firm's parent entity in a California-based bank. Respondent [*2]initially believed client funds were held in a trust account, but he did not have access or control over that account, and he later learned that it was not properly set up as a trust account.
Prior to respondent's employment, the firm collected proceeds belonging to its client from the sales of multiple foreclosed properties. The collected proceeds were substantial and constituted funds belonging in whole or in part to the client, which required deposit and maintenance in an attorney trust account. By the late summer of 2018, the client became concerned about the firm's untimeliness in processing and disbursing its funds. Around that time, respondent advised the client that checks representing certain proceeds had been mailed. While respondent was aware that the firm's Maryland IOLTA trust account did not have the funds to cover the checks, he negligently relied on false and/or misleading statements made to him by the principal owner of the firm's parent entity ("principal owner") that sufficient funds would be transferred to the account.
Respondent subsequently issued six checks, totaling $822,156.09, on the firm's Maryland IOLTA trust account at a time when he knew the account lacked sufficient funds to cover the checks. As before, respondent negligently relied on representations made by the principal owner that sufficient funds would be transferred to the account. The client was unable to successfully negotiate any of the checks it received from the firm as all of the checks were returned as either 'Not Sufficient Funds' or 'Stop Payment'.
Throughout his communications with the client's counsel, respondent negligently relied on representations made to him by the principal owner, concealed material information from the client, and obfuscated the status of the payments to the client.
Respondent admitted he violated the following charges: Rule 19-301.1 (competence), Rule 19-301.4 (communication), Rule 19-301.15 (safekeeping property), Rule 19-305.1 (responsibilities of partners, managers, and supervisory attorneys), Rule 19-305.3 (responsibilities regarding nonattorney assistants), and Rule 19-308.4 (a), (c) and (d) (misconduct) of the Maryland Attorneys' Rules of Professional Conduct, and Maryland Rules 19-407 (attorney trust account record-keeping) and Rule 19-410 (prohibited transactions).
The following mitigation was also agreed to by the parties: the absence of prior attorney discipline, or a dishonest or selfish motive; personal or emotional problems and timely good faith efforts to make restitution including respondent using his personal funds to pay the client amounts due; full and free disclosure to Bar Counsel and a cooperative attitude toward the disciplinary proceeding; respondent's inexperience in the practice of law as it pertained to managing attorney trust accounts; character or reputation evidence; remorse; and his unlikelihood of repeating the subject misconduct. As to the discipline to impose, the petition stated:
"An indefinite [*3]suspension with the right to petition for reinstatement in eighteen months is the appropriate sanction where an attorney improperly relies on another to manage an attorney trust account resulting in misappropriation of entrusted funds and then makes misrepresentations regarding the status of entrusted funds based on the attorney's failure to conduct adequate due diligence and mistaken reliance on statements of others. The instant case is serious as it involves repeated failure to ensure adequate funds were in the trust account at the time the Respondent made the representations."
In consenting to the above, respondent averred that he was aware of the effects to such discipline and gave his consent "freely and voluntarily, without coercion or duress."
By order entered March 9, 2022, the Court of Appeals of Maryland considered the joint petition of the parties and indefinitely suspended respondent from the practice of law effective April 15, 2022, with the right to petition for reinstatement after 18 months.
In a proceeding seeking reciprocal discipline pursuant to 22 NYCRR 1240.13, respondent may raise the following defenses: (1) a lack of notice or opportunity to be heard in the foreign jurisdiction constituting a deprivation of due process; (2) an infirmity of proof establishing the misconduct; or (3) that the misconduct for which the attorney was disciplined in the foreign jurisdiction does not constitute misconduct in this state. The AGC argues that none of the above defenses apply herein because respondent was afforded due process in that he was served with a petition of charges and, while represented by counsel, he freely entered into a joint petition for indefinite suspension wherein he admitted to the professional misconduct, rules violated and consented to the discipline imposed. The AGC also states that the conduct for which respondent was disciplined in Maryland would constitute misconduct in New York in violation of Rules of Professional Conduct (22 NYCRR 1200.0) rules 1.1(a) (competence), 1.4 (communication), 1.15 (safekeeping property and record keeping and maintaining escrow funds), 5.1 (responsibilities of partners, managers, and supervisory lawyers), 5.3 (lawyer's responsibility for conduct of nonlawyers), and 8.4 (misconduct).
As to sanction, the AGC asserts that the Court should give deference to the discipline imposed by the Maryland Court of Appeals since it does not materially deviate from precedent in this Court involving arguably comparable misconduct (Matter of Rys, 208 AD3d 83 [1st Dept 2022]; Matter of Tran, 173 AD3d 1 [1st Dept 2019]; Matter of Mertz, 171 AD3d 225 [1st Dept 2019]; Matter of Sishodia, 154 AD3d 123 [1st Dept 2017]).
Although respondent, pro se, has not submitted a formal response to this motion, in an August 1, 2022 email to AGC staff he accepted service of the within motion via email and advised that he "fully expected such a motion to be forthcoming. I do not intend to challenge the motion. Instead[*4], I merely want to get this process started, move on with the reciprocal suspension in compliance with the rules and then after 18 months petition for reinstatement."
Respondent did not raise any of the applicable defenses, nor do any of them apply herein where he was advised of the allegations against him, he was represented by counsel when he freely admitted to the misconduct and rules violated, and consented to the discipline imposed by the Court of Appeals of Maryland. Moreover, as a general rule in reciprocal disciplinary matters, this Court gives significant weight to the sanction imposed by the jurisdiction in which the charges were initially brought (Matter of Milara, 194 AD3d 108 [1st Dept 2021]; Matter of Peters, 127 AD3d 103 [1st Dept 2015]), and only in rare instances will this Court depart from its general rule (Matter of McHallam, 160 AD3d 89, 92 [1st Dept 2018]).
Accordingly, the motion for reciprocal discipline should be granted, and respondent is suspended from the practice of law for a period of 18 months and until further order of the Court.
All concur.
IT IS ORDERED that the Attorney Grievance Committee's motion for reciprocal discipline pursuant to 22 NYCRR 1240.13, predicated upon similar discipline imposed by the Court of Appeals of Maryland, is granted, and respondent Andrew R. Corcoran, admitted as Andrew Ryan Corcoran, is suspended from the practice of law in the State of New York for a period of 18 months, effective December 15, 2022, and until further order of this Court, and
IT IS FURTHER ORDERED that during the period of suspension and until further order of this Court, pursuant to Judiciary Law § 90, respondent Andrew R. Corcoran, admitted as Andrew Ryan Corcoran, is commanded to desist and refrain from (1) practicing law in any form, either as principal or as agent, clerk, or employee of another, (2) appearing as an attorney or counselor-at-law before any court, Judge, Justice, board, commission, or other public authority, (3) giving to another an opinion as to the law or its application or any advice in relation thereto, and (4) holding himself out in any way as an attorney and counselor-at-law; and
IT IS FURTHER ORDERED that respondent, Andrew R. Corcoran, admitted as Andrew Ryan Corcoran, shall comply with the rules governing the conduct of disbarred or suspended attorneys (see 22 NYCRR 1240.15); and,
IT IS FURTHER ORDERED that if respondent, Andrew R. Corcoran, admitted as Andrew Ryan Corcoran, has been issued a secure pass by the Office of Court Administration, it shall be returned forthwith to the issuing agency.
Entered: November 15, 2022 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483947/ | Ghodbane v 111 John Realty Corp. (2022 NY Slip Op 06429)
Ghodbane v 111 John Realty Corp.
2022 NY Slip Op 06429
Decided on November 15, 2022
Appellate Division, First 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 and Entered: November 15, 2022
Before: Gische, J.P., Kapnick, Kern, Gesmer, Higgitt, JJ.
Index No. 159695/14 Appeal No. 16639-16639A Case No. 2021-04186
[*1]Hassene Ghodbane, Plaintiff-Appellant-Respondent,
v111 John Realty Corp. et al., Defendants-Respondents, Gemstar Construction Corp., Defendant-Respondent-Appellant.
Elefterakis, Elefterakis & Panek, New York (Eileen Kaplan of counsel), for appellant-respondent.
McManus Ateshoglou Aiello & Apostolakos PLLC, New York (Michael Martens of counsel), for respondent-appellant.
Congdon, Flaherty, O'Callaghan, Fishlinger & Pavlides, Uniondale (Kathleen D. Foley of counsel), for respondents.
Orders, Supreme Court, New York County (Gerald Lebovits, J.), entered October 21, 2021 and January 6, 2022, which, to the extent appealed from, granted the motion of defendants 111 John Realty Corp. and Braun Management, Inc. (together, the John Realty defendants) for summary judgment dismissing the complaint as against them, and denied defendant Gemstar Construction Corp.'s motion for summary judgment dismissing the complaint and all cross claims as against it and for summary judgment in its favor on its cross claims against the John Realty defendants, unanimously modified, on the law, to dismiss the John Realty defendants' cross claims against Gemstar for common-law indemnification and contribution, and otherwise affirmed, without costs.
This personal injury action concerns a building owned by 111 John Realty Corp. and managed by Braun Management. 111 John Realty Corp. leased the premises to 7-Eleven, and after the lease was executed, the premises were damaged. As a result, 7-Eleven retained defendant Gemstar to perform renovation work at the store. After the renovations were completed and the store had opened for business, plaintiff, who was an employee of 7-Eleven, was injured when he slipped on a staircase leading to the basement of the premises. Plaintiff commenced this action against the John Realty defendants and Gemstar. Gemstar and the John Realty defendants then asserted cross claims against each other for common-law indemnification and contribution.
Gemstar failed to establish its entitlement to summary judgment dismissing the complaint as against it, as the record presents an issue of fact as to whether, during the renovation work on the premises, it launched a force or instrument of harm by negligently creating or exacerbating a hazardous condition on the staircase (see Espinal v Melville Snow Contrs., 98 NY2d 136, 139 [2002]; Almonte v Edgecombe Props. LLC, 194 AD3d 562, 562-563 [1st Dept 2021]).
By contrast, 111 John Realty Corp. established its entitlement to judgment by demonstrating that it was an out-of-possession landlords, and that its lease with 7-Eleven imposes no contractual obligation upon it to maintain or repair the premises (see Mollette v 111 John Realty Corp., 194 AD3d 614, 615 [1st Dept 2021]; Guilbe v Port Auth. of N.Y. & N.J., 154 AD3d 522, 522 [1st Dept 2017]). 111 John Realty Corp. also established its entitlement to judgment as a matter of law by submitting evidence that it did not create or have notice of the allegedly hazardous condition on the staircase (see Donkor v First Ghana Seventh-Day Adventist Church, 198 AD3d 477 [1st Dept 2021]). Moreover, plaintiff did not proffer any independent basis to hold Braun Management separately liable.
Because the claim against the John Realty defendants is dismissed, their cross claims against Gemstar for common-law indemnification and contribution must also be dismissed. In the absence of any liability against them on account of Gemstar, they cannot recover attorneys' [*2]fees in common-law indemnification (see generally McCarthy v Turner Constr. Inc., 17 NY3d 369, 374-375 [2011]). Indeed, on appeal, the John Realty defendants make no mention of their common-law indemnification or contribution cross claims, asking only that the dismissal of the complaint as against them be affirmed.
THIS CONSTITUTES THE DECISION AND ORDER
OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.
ENTERED: November 15, 2022 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483957/ | Bank of N.Y. Mellon v Nunez (2022 NY Slip Op 06418)
Bank of N.Y. Mellon v Nunez
2022 NY Slip Op 06418
Decided on November 15, 2022
Appellate Division, First 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 and Entered: November 15, 2022
Before: Gische, J.P., Kapnick, Kern, Gesmer, Higgitt, JJ.
Index No. 380670/07 Appeal No. 16640 Case No. 2022-00857
[*1]The Bank of New York Mellon, Formally Known as The Bank of New York, as Trustee for the Certificateholders CWABS, Inc. Asset-Backed Certificates, Series 2006-26, Plaintiff-Respondent,
vAlbania Nunez et al., Defendants, MAK Asset, Inc., Defendant-Appellant.
Fadullon Dizon Krul, LLP, Jericho (Alexander Krul of counsel), for appellant.
LOGS Legal Group LLP, Rochester (Austin T. Shufelt of counsel), for respondent.
Order, Supreme Court, Bronx County (Doris M. Gonzalez, J.), entered on or about November 18, 2019, which granted plaintiff's motion for summary judgment as against MAK Asset, Inc. as to all issues, except as to the issue of plaintiff's standing to commence this action, unanimously affirmed, without costs.
By order entered July 1, 2013, Supreme Court granted plaintiff's motion for a default judgment against defendant borrower Albania Nunez and the appointment of a referee to compute the amounts due plaintiff (see HF Mgt. Servs., LLC v Dependable Care, LLC, 198 AD3d 457, 458 [1st Dept 2021] ["It is well established that, by defaulting, a defendant admits all traversable allegations contained in the complaint, and thus concedes liability, although not damages"]). By order dated September 10, 2018, Supreme Court granted MAK leave to intervene; however, after a hearing, the court also found that Nunez had been properly served and denied her motion to vacate her default and dismiss this action. Thus, in the instant order appealed from, Supreme Court correctly found that Nunez was in default (see Adler v DLJ Mtge. Capital, Inc., 194 AD3d 633, 633 [1st Dept 2021]).
In taking title to the subject premises, MAK's intervention in this foreclosure action is premised only upon its "common-law right to redeem the mortgage prior to sale by tendering to the mortgagee the principal and interest due on the mortgage" (Polish Natl. Alliance of Brooklyn v White Eagle Hall Co., 98 AD2d 400, 405 [2d Dept 1983]). The arguments made challenging the court's finding of Nunez's default are unavailing.
THIS CONSTITUTES THE DECISION AND ORDER
OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.
ENTERED: November 15, 2022 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483948/ | Gabin v Greenwich House, Inc. (2022 NY Slip Op 06428)
Gabin v Greenwich House, Inc.
2022 NY Slip Op 06428
Decided on November 15, 2022
Appellate Division, First 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 and Entered: November 15, 2022
Before: Manzanet-Daniels, J.P., Webber, Mazzarelli, Friedman, Shulman, JJ.
Index No. 155015/21 Appeal No. 16651 Case No. 2022-00210
[*1]Sandra Gabin, Plaintiff-Appellant,
vGreenwich House, Inc., Defendant-Respondent.
The Seltzer Law Group P.C., New York (Steven Seltzer of counsel), for appellant.
Jackson Lewis P.C., White Plains (Rebecca McCloskey of counsel), for respondent.
Order, Supreme Court, New York County (Lynn R. Kotler, J.), entered on or about December 30, 2021, which, to the extent appealed from as limited by the briefs, granted defendant's motion to dismiss the complaint on the ground that plaintiff's employment discrimination action was untimely, unanimously reversed, on the law, without costs, and the motion denied.
The limitations period for claims of age discrimination under the State and City Human Rights Laws is three years (see CPLR 214[2]; Administrative Code of City of NY § 8-502[d]). An employment discrimination claim "accrues on the date that an adverse employment determination is made and communicated to the plaintiff" (Cordone v Wilens & Baker, P.C., 286 AD2d 597, 598 [1st Dept 2001]).
Plaintiff's action, asserting claims of age discrimination under the New York State Human Rights Law (Executive Law § 296[1][a]) and the New York City Human Rights Law (Administrative Code § 8-107), was timely commenced, as the three-year statute of limitations was tolled by her filing of a charge of discrimination with the Equal Employment Opportunity Commission (EEOC) (see Martinez-Tolentino v Buffalo State Coll., 277 AD2d 899 [4th Dept 2000]; see also DeNigris v New York City Health & Hosp. Corp., 861 F Supp 2d 185 [SD NY 2012]; Butler v New York Health & Racquet Club, 768 F Supp 2d 516, 536 [SD NY 2011]; Nixon v TWC Admin. LLC, 2017 WL 4712420 at *3-4, 2017 US Dist LEXIS 160175, *8-10 [SD NY, Sept. 27, 2017, No. 16-CV-6456 (AJN)]). The filing of an EEOC charge constitutes a simultaneous and automatic filing with the New York State Division of Human Rights (SDHR) due to a work-sharing agreement between the two agencies (see Butler, 768 F Supp 2d at 536).
Moreover, Administrative Code § 8-502(d) provides, "[u]pon the filing of a complaint with the city commission on human rights or the state division of human rights and during the pendency of such complaint and any court proceeding for review of the dismissal of such complaint, such three-year limitations shall be tolled." The interplay between the EEOC/SDHR work-sharing agreement and the tolling provision in § 8-502(d) "indicates that a charge filed with the EEOC would also toll the statute of limitations period for [City HRL] claims" (Nixon, 2017 WL 471420 at *3, 2017 US Dist LEXIS at *8).
In any event, the statute of limitations on plaintiff's Human Rights Law claims were tolled by Executive Order 202.8 (9 NYCRR 8.202.8) and the subsequent nine
orders issued by Governor Andrew Cuomo during the COVID-19 pandemic (see Murphy v Harris, __AD3d__, 2022 NY Slip Op 06086 [1st Dept 2022]; Brash v Richards, 195 AD3d 582 [2d Dept 2021]). Thus, plaintiff's action, commenced on May 22, 2021, was timely. THIS CONSTITUTES THE DECISION AND ORDER
OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.
ENTERED: November 15, 2022 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483952/ | Curry v Martin (2022 NY Slip Op 06422)
Curry v Martin
2022 NY Slip Op 06422
Decided on November 15, 2022
Appellate Division, First 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 and Entered: November 15, 2022
Before: Gische, J.P., Kapnick, Kern, Gesmer, Higgitt, JJ.
Index No. 31668/18E Appeal No. 16642 Case No. 2022-01543
[*1]Thornton Curry, as the Administrator of the Estate of Hannah Curry, Plaintiff-Respondent,
vLola Lee Martin, Defendant, Mrs. G's Services LLC, Defendant-Appellant.
Wilson Elser Moskowitz Edelman & Dicker LLP, New York (Judy C. Selmeci of counsel), for appellant.
Denlea & Carton LLP, White Plains (John L. Leifert of counsel), for respondent.
Order, Supreme Court, Bronx County (Andrew Cohen, J.), entered on or about October 4, 2021, which, to the extent appealed from as limited by the briefs, denied defendant Mrs. G's Services LLC's (Mrs. G's) motion for summary judgment dismissing the negligence cause of action against it, unanimously affirmed, without costs.
Plaintiff alleges that Mrs. G's, a home care agency, breached a duty of care to his mother, the decedent, through the actions of its employee, defendant Lola Lee Martin, who allegedly used rusty contaminated scissors, which had been used to cut the decedent's soiled diapers, to remove dead skin from the decedent's foot. Plaintiff further alleges that this act caused a wound that led to an infection and, ultimately, an above-the-knee amputation of the decedent's right leg.
There are triable issues of fact as whether Martin breached a duty of care to the decedent. Mrs. G's made a prima facie showing that Martin did not commit the alleged act, and therefore did not breach a duty of care, by submitting Martin's deposition testimony denying that she used the scissors to trim skin off the decedent's foot. In opposition, plaintiff raised an issue of fact by submitting his testimony that he noticed an odd "straight cut" on the decedent's right foot around the same time that he noticed the pair of scissors lying on the TV stand, as well as a report prepared by Mrs. G's and medical records documenting his complaints that Martin had trimmed the decedent's foot with rusty scissors. Thus, the record raises credibility issues that cannot be resolved on summary judgment (see Vega v Restani Constr. Corp., 18 NY3d 499, 505 [2002]).
There are also triable issues of fact as to whether the alleged negligent act proximately caused the decedent's injuries. On its motion, Mrs. G's submitted the affidavit of its expert, Dr. William Suggs, who opined that decedent's foot infection and subsequent amputation were the result of a blister that deteriorated into an ulcer, and that the injuries were "clinically unavoidable" in view of the decedent's preexisting medical conditions. However, plaintiff submitted the affidavit of her own expert, Dr. David A. Mayer, who otherwise opined that the infection was caused by fecal bacteria, not naturally occurring on common surfaces like other bacteria, and it was likely that
the same scissors used to cut the soiled diaper had been reused on plaintiff's foot. These conflicting expert affidavits raise issues of fact as to whether defendant's alleged negligence resulted in the amputation of plaintiff's leg, warranting denial of its motion.THIS CONSTITUTES THE DECISION AND ORDER
OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.
ENTERED: November 15, 2022 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483953/ | Cohen v Trump Org. LLC (2022 NY Slip Op 06421)
Cohen v Trump Org. LLC
2022 NY Slip Op 06421
Decided on November 15, 2022
Appellate Division, First 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 and Entered: November 15, 2022
Before: Acosta, P.J., Kapnick, Mazzarelli, González, Rodriguez, JJ.
Index No. 651377/19 Appeal No. 16609 Case No. 2021-04476
[*1]Michael D. Cohen, Plaintiff-Appellant,
vTrump Organization LLC, Defendant-Respondent.
Gilbert LLP, Washington, DC (Wellford Hunter Winstead of the bar of the District of Columbia, admitted pro hac vice, of counsel), for appellant.
Robert & Robert PLLC, Uniondale (Clifford S. Robert of counsel), for respondent.
Order, Supreme Court, New York County (Joel M. Cohen, J.), entered November 12, 2021, which granted defendant's motion for summary judgment dismissing the amended complaint with prejudice, unanimously modified, on the law, to deny the motion as to the first cause of action for breach of a contractual indemnification provision insofar as plaintiff seeks indemnification for outstanding legal fees incurred in connection with certain matters (i.e., the Special Counsel and Congressional hearings, New York State Attorney General, and Manhattan District Attorney proceedings, and the proceeding related to FBI search warrants), and otherwise affirmed, without costs.
Under section 7.2 of defendant's operating agreement, plaintiff, as a former employee, is entitled, subject to the limitations and conditions provided in the terms of this section and in the Limited Liability Company Law, to indemnification for attorneys' fees actually incurred in connection with any threatened, pending, or completed "Proceeding" (i.e., any "claim, action, suit or proceeding, whether civil, criminal, administrative, arbitrative or investigative"), as well as "any inquiry or investigation that could lead to a Proceeding," in which he was made a party, threatened to be made a party, or involved in "by reason of the fact" that he was an employee of defendant.
Plaintiff's claim for outstanding legal fees incurred in connection with the Special Counsel and Congressional hearings and New York State Attorney General and Manhattan District Attorney proceedings should not have been dismissed based on the finding that those fees were not, as a matter of law, incurred by reason of the fact that he had been an employee of defendant. The motion court strictly construed the indemnification provision and concluded that plaintiff did not become involved in the investigations by reason of the fact that he was an employee of the Trump Organization, since "the tether" from those investigations to the Trump Organization, as opposed to former President Trump, the Trump campaign, or other Trump ventures, is too tenuous to support indemnification under section 7.2. We find that, given the record evidence showing that the proceedings at issue concern, among other things, the activities of the Trump Organization, material issues of fact exist as to whether plaintiff has established the "nexus or causal connection" between the proceedings and his corporate capacity sufficient to give rise to the section 7.2 indemnification obligation for the fees incurred (Homestore, Inc. v Tafeen, 888 A2d 204, 213-214 [Del 2005]; see Crossroads ABL LLC v Canaras Capital Mgt., LLC, 105 AD3d 645 [1st Dept 2013]; Schlossberg v Schwartz, 43 Misc 3d 1224[A], 2014 NY Slip Op 50760[U], *13 [Sup Ct, Nassau County 2014]). The motion court correctly rejected defendant's other arguments for dismissing the claim for indemnification under section 7.2.
Likewise, claims for legal fees incurred in connection with the proceeding related [*2]to FBI search warrants used in the April 9, 2018, raids should not have been dismissed since there are issues of fact as to whether the fees were incurred in reviewing the materials for privilege and confidentiality concerns of the Trump Organization and its executives.
Issues of fact also preclude summary dismissal of the indemnification claim based on defendant's alleged oral agreements. Plaintiff claims that defendant made oral commitments to indemnify him for fees incurred in connection with the Special Counsel and Congressional proceedings, that the oral agreements involved a specific indemnification promise that was separate and distinct from the section 7.2 agreement to indemnify, that the oral agreements did not modify section 7.2, and thus they would apply regardless of the applicability of section 7.2.
The court correctly dismissed the remaining claims, including the cause of action for breach of the implied covenant of good faith and fair dealing.
THIS CONSTITUTES THE DECISION AND ORDER
OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.
ENTERED: November 15, 2022 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483950/ | Eshaghian v Eshaghian (2022 NY Slip Op 06426)
Eshaghian v Eshaghian
2022 NY Slip Op 06426
Decided on November 15, 2022
Appellate Division, First 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 and Entered: November 15, 2022
Before: Gische, J.P., Kapnick, Kern, Gesmer, Higgitt, JJ.
Index No. 654481/15 Appeal No. 16646-16646A Case No. 2021-03639, 2022-00244
[*1]David Eshaghian, Plaintiff-Appellant,
vMahrokh Eshaghian, Sued Herein as Marokh Eshaghian et al., Defendants-Respondents.
Davidoff Hutcher & Citron LLP, New York (Martin H. Samson of counsel), for appellant.
Markewich and Rosenstock LLP, New York (Lawrence M. Rosenstock of counsel), for respondents.
Judgment, Supreme Court, New York County (Melissa A. Crane, J.), entered October 4, 2021, in favor of defendants, pursuant to an order, same court and Justice, entered on or about September 17, 2021, which granted defendants executors' motion for $2,774,150.30 in prejudgment interest on a portion of the stipulated damages award on their breach of contract counterclaim, unanimously modified, on the law, to provide for prejudgment interest calculated from December 17, 2015 on the disputed revenue, i.e., 10% of the revenue distributed by York Avenue Associates of New York LLC (the operating LLC) to Yorktown 82nd Associates LLC (the holding LLC), distributed prior to that date, and from the date of the distribution on the disputed revenue distributed after that date, and otherwise affirmed, without costs. Appeal from the order unanimously dismissed, without costs, as subsumed in the appeal from the judgment.
By letter dated November 20, 2003, the parties agreed to various provisions that would be triggered upon a final determination on defendants' prospective claim that a side agreement between plaintiff and decedent was invalid or otherwise unenforceable. The letter agreement essentially provided that if defendants prevailed on their "invalidity claim," 10% of the revenue distributed by the operating LLC to the holding LLC would be automatically reallocated from plaintiff to decedent's estate. Defendants asserted their invalidity claim in Surrogate's Court and on December 17, 2015, the Surrogate issued a final determination in defendants' favor.
After the Surrogate issued the order, plaintiff commenced this related declaratory judgment action. Defendants answered and asserted counterclaims for a declaratory judgment and breach of contract. The breach of contract counterclaim was premised on plaintiff's refusal to comply with provisions of the parties' letter agreement that were triggered by a final determination on defendants' invalidity claim, including the reallocation of the disputed revenue. Supreme Court granted summary judgment on defendants' breach of contract counterclaim (Eshaghian v Eshaghian, 2016 WL 8928904 [Sup Ct, NY County 2016], affd 146 AD3d 529 [1st Dept 2017], lv dismissed 29 NY3d 980 [2017]).
Contrary to plaintiff's position, Supreme Court properly determined that defendants were entitled to recoup the disputed revenue as damages on their breach of contract counterclaim and thus, they were entitled to prejudgment interest on that revenue (see CPLR 5001). However, defendants' breach of contract cause of action accrued on December 17, 2015, when their invalidity claim was finally determined, triggering the relevant provisions of the letter agreement. Thus, prejudgment interest should be calculated from December 17, 2015, on the disputed revenue distributed prior to that date and from the date of the distribution on the disputed revenue distributed after that date (see CPLR 5001[b]; Brushton-Moira Cent. School Dist. v Thomas Assoc[*2]., 91 NY2d 256, 259, 262 [1998]).
We have considered the parties' remaining arguments and find them unpersuasive.
THIS CONSTITUTES THE DECISION AND ORDER
OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.
ENTERED: November 15, 2022 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483951/ | Drummond v 450 Partners LLC (2022 NY Slip Op 06425)
Drummond v 450 Partners LLC
2022 NY Slip Op 06425
Decided on November 15, 2022
Appellate Division, First 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 and Entered: November 15, 2022
Before: Manzanet-Daniels, J.P., Webber, Mazzarelli, Friedman, Shulman, JJ.
Index No. 24436/18E Appeal No. 16654 Case No. 2021-01096
[*1]Charles Drummond, Plaintiff-Respondent,
v450 Partners LLC et al., Defendants-Respondents, Associated Test & Balance Inc., Defendant-Appellant.
Shaub, Ahmuty, Citrin & Spratt, Lake Success (Jonathan Shaub of counsel), for appellant.
Burns & Harris, New York (Mariel Crippen of counsel), for Charles Drummond, respondent.
Wood Smith Henning & Berman LLP, New York (Cole R. Munson of counsel), for 450 Partners LLC, Brookfield Properties (USA II) LLC, Tishman Construction Corporation and Brookfield Properties Developer, LLC, respondents.
Order, Supreme Court, Bronx County (Alison Y. Tuitt, J.), entered March 24, 2021, which, to the extent appealed from as limited by the briefs, granted plaintiff's motion for partial summary judgment on the issue of liability against defendant Associated Test & Balance Inc. (AT&B), granted defendants 450 Partners LLC, Brookfield Properties (USAII) LLC f/k/a Brookfield Properties Management LLC, Tishman Construction Corporation, and Brookfield Properties Developer LLC's (Owner Defendants) motion for summary judgment on their cross claim for common-law indemnification against AT&B, and denied AT&B's motion for summary judgment dismissing the complaint and all cross claims as against it, unanimously affirmed, without costs.
The court correctly granted plaintiff's motion for partial summary judgment on the issue of liability and denied AT&B's motion for summary judgment dismissing the complaint. The record evidence, including surveillance footage capturing an AT&B employee placing the sheet of Masonite on the lobby floor shortly before plaintiff tripped and fell on it, established that AT&B left the premises "less safe" than before, and therefore launched a force or instrument of harm (see Church v Callanan Indus., 99 NY2d 104, 112 [2002]; Espinal v Melville Snow Contrs., 98 NY2d 136, 140 [2002]). AT&B's contention that it justifiably relied on the Owner Defendant's instructions to place the Masonite on the floor is unavailing (see Hartofil v McCourt & Trudden Funeral Home, Inc., 57 AD3d 943, 945 [2d Dept 2008]). The issue of plaintiff's comparative fault remains an issue for the factfinder at trial (see Rodriguez v City of New York, 31 NY3d 312 [2018]).
Absent evidence of active negligence on the Owner Defendants' part, or that they controlled AT&B's work, the court correctly granted them summary judgment on their cross claim for common-law indemnification against AT&B (see e.g. Tighe v Hennegan Constr. Co., Inc., 48 AD3d 201, 202 [1st Dept 2008]).
We have considered AT&B's remaining arguments and find them unavailing.THIS CONSTITUTES THE DECISION AND ORDER
OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.
ENTERED: November 15, 2022 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483949/ | Excel Sports Mgt., LLC v Eways (2022 NY Slip Op 06427)
Excel Sports Mgt., LLC v Eways
2022 NY Slip Op 06427
Decided on November 15, 2022
Appellate Division, First 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 and Entered: November 15, 2022
Before: Manzanet-Daniels, J.P., Webber, Mazzarelli, Friedman, Shulman, JJ.
Index No. 651043/22 Appeal No. 16666 Case No. 2022-01640
[*1]Excel Sports Management, LLC, Plaintiff-Appellant,
vEric Eways et al., Defendants-Respondents.
Sheppard, Mullin, Richter & Hampton LLP, New York (Jonathan Stoler of counsel), for appellant.
Clayman Rosenberg Kirshner & Linder, LLP, New York (James Valentino of counsel), for Eric Eways, respondent.
Winston & Strawn LLP, New York (Jeffrey L. Kessler of counsel), for Klutch Sports Group, LLC, respondent.
Appeal from order, Supreme Court, New York County (Robert Reed, J.), entered on or about April 13, 2022, which, to the extent appealed from as limited by the briefs, denied plaintiff's motion for a preliminary injunction against defendants, unanimously dismissed, without costs, as moot.
This case presents a situation where the party appealing from the order has already been granted the relief it is seeking, namely the enforcement of a noncompete agreement for the period of eight months following the employee's resignation. This Court previously issued an appellate injunction pending a determination of the appeal or October 15, 2022, whichever came first. Thus, the preliminary injunction initially sought and subsequently ordered by this Court has expired by its own terms, and plaintiff no longer remains aggrieved from the order to the extent it has been appealed from. As there is no longer a live controversy and the issues presented are academic, the appeal is dismissed as moot (Matter of Javier R. [Robert R.], 43 AD3d 1 [1st Dept 2007]).
THIS CONSTITUTES THE DECISION AND ORDER
OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.
ENTERED: November 15, 2022 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483954/ | Ceresa v City of New York (2022 NY Slip Op 06420)
Ceresa v City of New York
2022 NY Slip Op 06420
Decided on November 15, 2022
Appellate Division, First 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 and Entered: November 15, 2022
Before: Manzanet-Daniels, J.P., Webber, Mazzarelli, Friedman, Shulman, JJ.
Index No. 151950/18 Appeal No. 16655-16655A Case No. 2021-03685, 2021-04235
[*1]Michael Ceresa, Plaintiff-Respondent,
vThe City of New York, et al., Defendants-Respondents, Consolidated Edison Company of New York, Inc., Defendant, The Hallen Construction Co., Inc., Defendant-appellant.
Law Office of Eric Feldman, New York (Evy L. Kazansky of counsel), for appellant.
Krause & Glassmith, LLP, New York (Andrew Padover of counsel), for Michael Ceresa, respondent.
Newman Law Associates PLLC, New York (Gregory P. Bakos of counsel), for The City of New York, New York City Department of Transportation, Metropolitan Transportation Authority and Judlau Contracting, Inc., respondents.
Order, Supreme Court, New York County (J. Machelle Sweeting, J.), entered on or about July 23, 2021, which denied defendant The Hallen Construction Co. Inc.'s motion for summary judgment dismissing the complaint and all cross claims against it, unanimously affirmed, without costs. Order, same court and Justice, entered on or about October 18, 2021, which, upon reargument, adhered to its prior determination, unanimously affirmed, without costs.
The court properly denied Hallen's motion for summary judgment because there was an evidentiary basis to conclude that additional discovery was warranted (see DaSilva v Haks Engrs., Architects & Land Surveyors, P.C. 125 AD3d 480, 482 [1st Dept 2015]). Plaintiff and codefendants are entitled to discovery as to whether the work Hallen performed in the area was in fact on the opposite side of the street and at least 30 feet away from the pothole that caused the accident, as Hallen asserts (see Guzman v City of New York, 171 AD3d 653 [1st Dept 2019]). The street/sidewalk opening reports and permit are unclear on that issue. Moreover, the court granted Hallen leave to file a motion seeking the same relief following the completion of discovery.
Although the denial of a motion to reargue is not appealable as of right (see Lopez v Post Mgt. LLC, 68 AD3d 671 [1st Dept 2009]), here, the court addressed the merits of the parties' arguments, thereby, in effect, granting reargument and adhering to its prior decision, which is appealable as of right (see Lewis v Rutkovsky, 153 AD3d 450, 453 [1st Dept 2017]). The court properly adhered to its prior decision in that Hallen failed to show that it had overlooked or misapprehended facts or law in its prior decision (CPLR2221[d][2]).
THIS CONSTITUTES THE DECISION AND ORDER
OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.
ENTERED: November 15, 2022 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483943/ | Lis v Lancaster (2022 NY Slip Op 06435)
Lis v Lancaster
2022 NY Slip Op 06435
Decided on November 15, 2022
Appellate Division, First 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 and Entered: November 15, 2022
Before: Gische, J.P., Kapnick, Kern, Gesmer, Higgitt, JJ.
Index No. 650855/19 Appeal No. 16648 Case No. 2022-01450
[*1]Andrew Lis, Plaintiff-Appellant,
vJason Lancaster et al., Defendants-Respondents. Debbie Lancaster et al., Defendants.
Jason Lancaster et al., Third-Party Plaintiffs-Respondents,
vEnvironmental Supply Chain Alternative Planning Experts LLC, Formally Known as JAL Environmental Services Programs LLC, Third-Party Defendant-Appellant.
Pavia & Harcourt LLP, New York (Ihsan Dogramaci of counsel), for appellants.
White and Williams LLP, New York (Nicole A. Sullivan of counsel), for respondents.
Order, Supreme Court, New York County (Melissa Crane, J.), entered on or about March 18, 2022, which, to the extent appealed from, denied plaintiff's motion to reject the Referee's report insofar as it recommended limiting the scope of questioning for the reopened deposition of defendant Jason Lancaster, and granted the motion of Lancaster and defendants JAL Environmental Supply Chain Alternative Planning Experts LLC f/k/a JAL Environmental Services Programs Inc. and Gulf Premier Logistics LLC to confirm the report in its entirety, unanimously affirmed, without costs.
The court providently adopted the recommendations of the Special Referee to reopen Lancaster's deposition and to limit questioning to the discrepancy between Lancaster's initial deposition testimony that there had been a draft partnership agreement and defendants' disclosure of employment agreements and cryptocurrency records indicating that Lancaster had purchased Bitcoin through the Coinbase exchange (see Those Certain Underwriters at Lloyds, London v Occidental Gems, Inc., 11 NY3d 843, 845 [2008]). Under the circumstances of this case, the court providently exercised its discretion in setting reasonable terms and conditions on disclosure, consistent with the Commercial Division rules (see Merkos L'Inyonei Chinuch, Inc. v Sharf, 59 AD3d 408, 410 [2d Dept 2009]; Matter of DataSafe Inc. v American Express, 2 AD3d 224, 225 [1st Dept 2003]). Plaintiff failed to provide a basis for a wide-ranging inquiry into defendants' document retention practices or for inquiry concerning certain documents disclosed subsequent to Lancaster's first deposition (see McKay v Khabele, 46 AD3d 258 [1st Dept 2007]).
The court also providently adopted the Referee's recommendation that plaintiff's motion to compel defendants to provide a Jackson affidavit be denied. Defendants have
not alleged that requested documents are missing or otherwise unavailable (see e.g. Robinson v Highbridge House Ogden, LLC, 124 AD3d 472, 473 [1st Dept 2015]; Henderson-Jones v City of New York, 87 AD3d 498, 505 [1st Dept 2011]).THIS CONSTITUTES THE DECISION AND ORDER
OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.
ENTERED: November 15, 2022 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491762/ | MEMORANDUM OPINION AND ORDER
RICHARD L. SPEER, Bankruptcy Judge.
This cause comes before the Court upon Plaintiffs Complaint to Determine Discharg-ability and Defendant’s Answer. At the trial, the parties were afforded the opportunity to present evidence and arguments they wished the Court to consider in reaching its decision. The Court has reviewed the entire record in this case. Based upon that review, and for the following reasons, this Court finds that Defendant’s obligation of periodic payments to Plaintiff is intended as support. Pursuant to 11 U.S.C. § 523(a)(5), Defendant’s obligation of support is Nondischargeable.
FACTS
In 1981, Plaintiff obtained an associates degree in nursing and was subsequently trained as an emergency trauma nurse. On November 17, 1984, she married Defendant and for six years, worked as his office nurse. Plaintiff was occasionally paid a salary while working for Defendant; however, she was not aware of Defendant’s personal or business income. On January 24, 1991, Plaintiff and Defendant were divorced. Pursuant to the Judgment Entry of Divorce, Plaintiff agreed to vacate the marital residence valued by Defendant at approximately One Hundred Sixty Thousand and 00/100 Dollars ($160,-000.00) by March 15, 1991. Plaintiff was awarded Eight Thousand Forty and 00/100 Dollars ($8,040.00) to be paid upon return of the Jeep; various household goods and furnishings; spousal support and a dog, registered with the American Kennel Club. Defendant was awarded the marital residence; a time-share property in Las Vegas, Nevada; and his Cadillac Coupe de Ville. In September, 1991, Plaintiff married her present spouse, Robert Massengill.
During her marriage to Defendant, Plaintiff was tested for hearing loss. A hearing aid was recommended; however, Plaintiffs vanity precluded her from purchasing one. In March, 1991, Plaintiff was again tested for a hearing loss. At this time, she was unable to afford a hearing aid. From March, 1991 through June, 1991, Plaintiff was employed by a hospital. She quit this job in June, 1991 because of the anxiety associated with the affect of her hearing loss on patient care.
Defendant obtained his medical degree in 1978 and became board certified in 1982. Defendant maintained a medical practice in Port Clinton, Ohio which apparently relied heavily upon payment from Medicaid. Medicaid was slow in its reimbursement and consequently Defendant filed a petition under Chapter 7 of the Bankruptcy Code. According to Defendant’s schedules accompanying the petition, his net monthly income totalled Eight Thousand and 00/100 Dollars ($8,000.00). Defendant closed his Port Clinton practice and relocated to Millersburg, Ohio in August, 1992.
The parties negotiated settlement of all issues related to their divorce. The Judgment Entry of Divorce, signed by both parties and counsel, was journalized on January 24, 1991 and states in relevant part the following:
“1. Plaintiff is to receive from [sic] directly from Defendant, within thirty (30) days of the date of this agreement, the sum of Eight Thousand, Forty Dollars ($8,040.00) in full and complete payment of *798any and all arrearage on temporary spousal support as the parties have agreed that the arrearage shall be reduced to this sum. The parties agree that this payment satisfies any and all temporary support orders, and the Ottawa County Child Support Enforcement Agency is ordered to Amend its records accordingly.
5. Plaintiff is to return to Defendant the Jeep vehicle presently being leased through Tri-Motor Sales, Inc., within twenty-four (24) hours of receipt of the Eight Thousand, Forty Dollars ($8,040.00) payment referred to in Paragraph 1 or by March 15, 1991, whichever event occurs sooner.
15. Defendant agrees to pay to the Plaintiff, spousal support, plus appropriate poundage, through the Ottawa County Child Support Enforcement Agency, as follows: One Thousand, Eight Hundred Dollars ($1,800.00) per month for a period of twenty-one (21) months. Defendant further agrees to pay, as and for spousal support, the amount of One Thousand Dollars ($1,000.00) per month, plus poundage, through the Ottawa County Child Support Agency for a period of three (3) months following the twenty-one-month period referred to above. Said spousal support obligation shall terminate upon the death of Plaintiff. The foregoing is the complete spousal support obligation of the Defendant, and there are no other obligations of alimony or support of the Plaintiff and the Defendant to each other.”
Both parties admit that the negotiated settlement was one into which they entered so that the divorce could be expeditiously concluded. Plaintiff alleges that the Judgment Entry specifically states that Defendant pay her spousal support, which is not dischargea-ble. Plaintiff acknowledges that Defendant has paid her One Thousand Eight Hundred and 00/100 Dollars ($1,800.00) toward his support obligation. Plaintiff claims resultant indebtedness of Thirty Nine Thousand and 00/100 Dollars ($39,000.00) as spousal support; Two Hundred Fifty and 00/100 Dollars ($250.00) as attorney fees; and One Hundred Twenty and 00/100 Dollars ($120.00) as filing fee.
Defendant alleges that the Judgment Entry of Divorce does provide for periodic payments to Plaintiff which are designated as spousal support. He does not recall Plaintiffs hearing loss being the basis for negotiation of spousal support. Defendant opined that Plaintiff is capable of working even with a hearing loss. Therefore, he maintains an award of spousal support was not necessary for her continued support. He stated he signed the Separation Agreement understanding that it indicated a property settlement in lieu of spousal support, thereby making the debt dischargeable.
LAW
The controlling statute in this case is 11 U.S.C. § 523(a)(5) which reads as follows: § 523. Exceptions to discharge.
(a) A discharge under section 727, 1141, 1228(a), 1229(b), or 1328(b) of this title does not discharge an individual debtor from any debt—
(5) to a spouse, former spouse, or child of the debtor, for alimony to, maintenance for, or support of such spouse or child, in connection with a separation agreement, divorce decree or other order of a court of record, determination made in accordance with State or territorial law by a governmental unit, or property settlement agreement, but not to the extent that—
(A) such debt is assigned to another entity, voluntarily, by operation of law, or otherwise (other than debts assigned pursuant to section 402(a)(26) of the Social Security Act, or any such debt which has been assigned to the Federal Government or to a State or any political subdivision of such State); 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;
DISCUSSION
This Court must determine whether Defendant’s obligation is in the nature of spousal support or property settlement. As set *799forth in In re Calhoun, 715 F.2d 1103 (6th Cir.1983), the formula for determining whether support payments are in the nature of alimony or property settlement is:
1. Whether the intent of the state court or the parties was to create a support obligation?
2. Whether the support provision has the actual effect of providing necessary support?
3. Whether the amount of support is so excessive as to be unreasonable under traditional concepts of support? and
4. If the amount of support is unreasonable, how much of it should be characterized as nondisehargeable for purposes of federal bankruptcy law?
When making the determination under Calhoun, id, the court must look beyond the language of the decree to the intent of the parties and to the substance of the obligation. Shaver v. Shaver, 736 F.2d 1314 (9th Cir.1984) citing (In re Maitlen, 658 F.2d 466 (7 Cir.1981)). Irrespective of how it is labelled, a court may presume that a so-called property settlement is intended for support when the circumstances of the ease indicate that the recipient spouse needs support. In re Singer, 787 F.2d 1033 (6th Cir.1986) citing (Shaver v. Shaver, 736 F.2d 1314 (9th Cir.1984)). Typically, a property settlement is not affected by a change in the personal circumstances of the recipient spouse. In the Matter of Albin, 591 F.2d 94 (9th Cir.1979). Spousal support is generally subject to termination based upon a change in the circumstances of the parties. Support payments tend to mirror the recipient spouse’s need for support; are paid directly to the recipient spouse; and are generally paid over a substantial period of time. In the Matter of Albin, id, at 97.
In the present case, the state court intended to create an obligation of support. The Judgment Entry of Divorce includes a distinct apportionment of the parties’ personal and real property. The entry specifically earmarks Defendant’s obligation for Plaintiffs sustenance as “spousal support”, terminable upon her death. Since Plaintiff was displaced from her husband’s failed business, spousal support was ordered to sustain Plaintiff during her attempts at reentering the workforce. During the marriage, Plaintiff was not involved in the parties’ financial matters nor did she collect a regular paycheck. It is apparent that she relied upon Defendant for her financial support. Plaintiff moved from the marital residence in March, 1991 and needed an ongoing source of support for her sustenance. Each of these factors indicates that the award of spousal support was specifically for her sustenance and not included within the property settlement. Clearly the intent of these parties and the state court was to provide Plaintiff with support. The provision of spousal support had the actual effect of providing the necessary support for Plaintiff.
Although Defendant never raised the issue with respect to the reasonableness of his obligation for spousal support, the standard of living suggested by the testimony of the parties as well as the Judgment Entry of Divorce supports this Court’s conclusion that the award of spousal support is reasonable. Defendant was ordered to pay the sum of One Thousand Eight Hundred and 00/100 Dollars ($1,800.00) for period of twenty-one months. This amount was scheduled for reduction to One Thousand and 00/100 Dollars ($1,000.00) for the final three (3) months of the twenty-four (24) month obligation. These parties resided in a home valued at One Hundred Sixty Thousand and 00/100 Dollars ($160,000.00). They enjoyed a timeshare property in Las Vegas, Nevada. Plaintiff drove a leased Jeep while Defendant drove a Cadillac Coupe de Ville. Defendant’s statement of affairs shows that during the final year of his marriage to Plaintiff and at the time he filed his petition for bankruptcy, his net monthly income totalled Eight Thousand and 00/100 Dollars ($8,000.00). An award of spousal support totalling One Thousand Eight Hundred 00/100 Dollars ($1,800.00) per month for twenty-one (21) months and One Thousand and 00/100 Dollars ($1,000.00) per month for three (3) months is not excessive based upon the evidence regarding the parties’ income and lifestyle.
The terms of the Judgment Entry of Divorce are consistent with a support obli*800gation. The parties entered into settlement agreement with the intent to provide monetary support to Plaintiff and therefore the obligation is in the nature of a support obligation. Under 11 U.S.C. § 523(a)(5)(B), Defendant’s obligation for spousal support is nondischargeable.
This Court is without sufficient evidence to ascertain the sums due and owing pursuant to paragraph fifteen (15) on page 6 of the Judgment Entry of Divorce journalized on January 24,1991. Therefore, the parties are Ordered to submit this matter to the appropriate Ottawa County Support Enforcement Agency for computation of amounts remaining unpaid and due Plaintiff on Defendant’s obligation of spousal support.
In reaching the conclusion found herein, the Court has considered the demeanor of the witnesses, all of the evidence, exhibits and arguments of counsel, regardless of whether or not they are specifically referred to in this opinion.
Accordingly, it is
ORDERED that Defendant’s obligation for periodic payments to Plaintiff is deemed spousal support; and that pursuant to 11 U.S.C. § 523(a)(5)(B), Plaintiffs obligation of spousal support is NONDISCHARGEABLE.
It is FURTHER ORDERED that Plaintiff is granted a judgment against Defendant for the following: 1) Those sums found due and owing by the Ottawa County Support Enforcement Agency, all pursuant to paragraph 15 on page 6 of the Judgment Entry of Divorce journalized on January 24, 1991; 2) Attorney fees in the amount of Two Hundred and Fifty and 00/100 Dollars ($250.00); and 3) Filing fee in the amount of One Hundred Twenty and 00/100 Dollars ($120.00). | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491763/ | ORDER OF ABSTENTION
MARY D. SCOTT, Bankruptcy Judge.
THIS CAUSE is before the Court upon the., debtor’s Motion to Disallow Claim of Arkansas Department of Human Services, filed on June 8, 1993, which alleges that the debtor owes no debt to the Arkansas Department of Human Services (“DHS”). Hearing on this matter was held on November 9, 1993, after which the motion was taken under submission.
The essential facts of the case are not in dispute. However, the facts raise an issue of law creating the possibility of a conflict between two state courts. Accordingly, this Court does not believe it should properly be resolved by this Court. In the 1980’s debtor received food stamp overpayments in the amount of $1,816.00. A criminal prosecution was initiated after which the action was nolle prossed, October 16, 1986, based upon payment of restitution in the amount of $906.00. The debtor heard nothing further from the state agency, DHS, until 1990 when, after her Chapter 13 case was filed, the agency asserted a claim for the balance of the over-payments, in the amount of $910. Debtor asserts she does not owe the funds since the matter was resolved in the criminal courts by her payment of the restitution. DHS contends that there is yet a balance on the civil debt since it was not a party to the criminal action or its settlement.
Under section 1334(c)(1) of title 28, a court may abstain from hearing a proceeding arising under title 11 or arising in or related to a case under title 11 in the interest of justice, or in the interest of comity with state courts or respect for state law. In determining whether such discretionary abstention is appropriate, there are numerous factors courts analyze. See generally Continental Airlines v. Allen, 156 B.R. 441 (Bankr.D.Del.1993) (listing factors). Where, as here, the issue before the Court1 is one solely of state law, involving the effect of action taken by one state governmental agency, the prosecutor’s office, upon another state agency, DHS, the interests of comity indicate that the matter is better resolved in state court.2 The issue of whether the payment of *989restitution and resolution of the criminal action by one governmental unit precludes another governmental unit from collecting further on the debt is better decided by the appropriate state court. Accordingly, it is appropriate to abstain from hearing this dispute. Abstaining from this issue will give effect to the interest of comity and state law, and does not prejudice the estate or other creditors. See Matlock v. Lomas Mortgage USA, Inc., 154 B.R. 721 (Bankr.E.D.Ark. 1993) (Discretionary abstention was warranted for determination of issues regarding Arkansas statute not yet interpreted by Arkansas courts).
ORDERED that the Court abstains from the issues presented by the debtor’s Motion to Disallow Claim of Arkansas Department of Human Services, filed on June 8, 1993.
IT IS SO ORDERED.
. A bankruptcy court may raise abstention issues sua sponte. Scherer v. Carroll, 150 B.R. 549 (D.Vt.1993).
. The fact that the dispute arises in the context of an objection to claim does not preclude abstention. The plain language of the "interests of justice" provision in the abstention statute indicates it is not limited to state law claims, but permits courts to abstain from deciding federal law claims on the ground that interest of justice so requires. In re Apex Oil Co., 980 F.2d 1150 (8th Cir.1992). See In re Tucson Estates, Inc., 912 F.2d 1162 (9th Cir.1990) (issue of whether plaintiffs were entitled to judgment in state court *989is distinct from the status and enforceability of the claim in bankruptcy). | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491764/ | MEMORANDUM OPINION
JOHN T. FLANNAGAN, Bankruptcy Judge.
First National Bank of Smith Center, Kansas (“FNB” or the “Bank”), objects to debtors’ Notice of Completion of Plan and Request for Entry of Discharge Order. The briefs show that the parties agree that the discharge requested in this case and provided for in 11 U.S.C. § 1228(a) does not include a discharge for payments under 11 U.S.C. § 1222(b)(9). For the reasons set out below, the Bank’s objection is overruled; the debtors’ discharge is granted to the extent indicated; and the Bank’s claim to cross-collater-alization and for additional collateral at discharge is denied.
The debtors, Morris Dale Lyon and Dolores Rose Lyon, appear by their attorney, Steven L. Speth of Stinson, Lasswell & Wilson, Wichita, Kansas; First National Bank of Smith Center, Kansas, appears by its attorney, James L. Bush of Windscheffel & Bush, Chartered, Smith Center, Kansas. Edward J. Nazar, the Chapter 12 Standing Trustee, and Carol Park Wood, the United States Trustee, also appear.
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.
This case requires a comparison of notes held by FNB with the treatment of them given in the Chapter 12 plan and confirmation order.
The Notes
Before the debtors filed their Chapter 12 petition, the Bank held the following four notes secured by the stated collateral:
Note # 1 dated September 17,1985, was in the principal amount of $121,500.00 and was secured by equipment.
Note #2 is described in the Bank’s memorandum in support óf the objection to discharge as follows:
*1015[Although “each note had its own security”, the note dated March 31, 1987, and referred to throughout these proceedings as Note # 2, in the principal sum of $79,-500.00 was cross collateralized inasmuch as the note referred to the Security Agreement dated December 30, 1986. Under the terms of such notes and security agreements, the Bank had a perfected security interest in inventory, equipment, farm products, accounts and other rights to payment, general intangibles, government program payments, cattle, crops growing or to be grown, feed, grain products, silage, cane, alfalfa hay and milo. (Emphasis added.)
(Memorandum of The First National Bank of Smith Center, Kansas, In Support of Its Objection to Discharge filed April 3, 1990, at 2.)
Note #3 is described in the Bank’s memorandum in support of the objection to discharge as follows:
The promissory note dated January 14, 1987, and referred to throughout these proceedings as Note # 3, in the principal sum of $159,000.00 was secured under the terms of security agreements dated December 13, 1985, December 30, 1986 and January 14, 1987. Under the terms of such note and security agreements, The First National Bank of Smith Center, Kansas, had a perfected security interest in all inventory, equipment, farm products, accounts and other rights to payment, general intangibles, cattle, growing crops or crops to be planted, feed, seed, fertilizer, silage, alfalfa, hay and all other personal property owned by Debtors.
(Memorandum of The First National Bank of Smith Center, Kansas, In Support of Its Objection to Discharge filed April 3, 1990, at 2.)
Note # k dated September 17, 1985, in the principal amount of $190,000 was secured by real estate.
The Chapter 12 Plans
The debtors filed their voluntary petition for relief under Chapter 12 on August 18, 1987.
On August 24, 1987, they filed their Chapter 12 plan. They then filed their First Amended Chapter 12 Plan and their Second Amended Chapter 12 Plan on September 29, 1987, and November 10, 1987, respectively. All three of debtors’ proposed Chapter 12 plans provide at numbered paragraph 3:
Except as hereafter specified in the Plan, confirmation of this Plan shall vest in the Debtors title to all assets of the Debtors’ estate, free and clear of all liens and encumbrances.
The Bank filed a series of objections to confirmation of the debtors’ plans, one of which resulted in denial of confirmation of debtors’ plan.
This objection argued non-compliance with § 1225(a)(4), a Code provision commonly known as the “best interests of creditors test.” Under this confirmation standard, a Chapter 12 plan cannot be confirmed unless the property to be distributed to unsecured claims under the plan is at least as valuable as that property which the unsecured claims would receive if the estate were liquidated under Chapter 7 on the effective date of the plan.
The objection was presented to The Honorable John K. Pearson at a hearing on September 29, 1987. In a Memorandum of Decision filed October 21, 1987, he sustained the objection, holding:
The value as of the effective date of the Plan of the property which could be distributed on account of allowed unsecured claims is less than the amount which would be paid on account of such claims if the debtors were to be liquidated under Chapter 7 of Title 11. ■
(Memorandum of Decision filed October 21, 1987, at 5.)
On pages 4 and 5 of his Memorandum of Decision, Judge Pearson sets out his findings of value as follows:
i. Land equity (after deducting FLB and
FmHA debt) $ 74,516.00
ii. Equipment 102,900.00
iii. Cattle 199,125.00
iv. 1986 and 1987 Government payments 23,605.00
v. Growing crops (milo
and sunflowers) 14,225.00
vi. Wheat in storage 8,360.00
vii. Feed on hand 2,000.00
TOTAL $424,731.00
*1016
The Agreed Confirmation Order
Ultimately, the parties reached an accommodation and the Court entered an agreed Order of Confirmation on December 1, 1987. The Bank’s counsel signed the order, consenting for the Bank.
Paragraph 7 of the Confirmation Order addresses vesting of property, retention of liens, and unencumbered assets. It duplicates the plan provisions set out above:
That pursuant to the provisions of 11 U.S.C. Section 1227, this Order vests all of the property of the estate in the Debtor with the exception that any lien as determined for each allowed secured claim, of such secured creditor, shall be retained. That all other unsecured assets of the Debtor shall be free and clear of any claim or interest of any creditor provided for by the Plan.
(Order of Confirmation of Debtors’ Plan of Reorganization Under Chapter 12 filed December 1, 1987, at 10.)
The terms of the confirmation order, modified by additions of emphasis, deletions of irrelevant material, and insertions of paragraphing to aid the reader, are as follows:
CLASS III — The First National Bank of Smith Center—
The Debtors have four separate notes with this creditor, each having its own security with three being fully secured and one undersecured.
As a result of the Court’s decision filed October 21, 1987, the note to The First National Bank of Smith Center (FNB) on its equipment is fully secured. The indebtedness to the bank is $97,786.08 and will be paid over 7 years at an interest rate to be equal to one percent below the 52-week Treasury Bill rate....
The Debtors have two lines of credit with the bank.
The first is in the amount of $159,000 and is secured by the Debtors’ cattle.
The second is in the amount of $79,500 and is secured by the Debtors’ crops, cattle and 1987 government payments.
These two notes total $238,500 and the Debtors will pay the full value of this claim amortized over 10 years with interest to be set at the 52-week Treasury Bill rate, plus 3 percent.... The creditors will retain their lien in the Debtors’ crops, cattle and government payments, and the proceeds therefrom. The Debtors will be allowed to use the proceeds of this collateral to fund the Plan with the bank to receive a replacement lien in the crops, cattle and government payment of succeeding years, until paid in full.
The fourth note with the FNB brings the total debt to the bank to $547,958.33 with the West Half of the Northwest Quarter (W/2 NW/4) of Section Nine (9), Township Two (2) South, Range Fourteen (14) West of the Sixth P.M. being held as security on the fourth note. As the only unsecured or undersecured creditor, the FNB will have applied towards this note all of the Debtors’ equity and value of unsecured assets.
Said equity totals $120,000 which will be paid to the bank amortized over 30 years, which is the current payout on this particular note, with the interest rate to be set at the 52-week Treasury Bill rate, plus 3 percent.... The bank will retain its first mortgage position with respect to the referenced real property, its third mortgage position with respect to all other real property and the same security position it now has with respect to the Debtors’ other personal property.
The preceding paragraphs result in single annual payments to the FNB of $68,-492.31....
For all years during which the Debtors have any indebtedness at the First National Bank of Smith Center, the Debtors will provide, upon request of the bank, current financial statement, income tax returns for the previous year and will permit regular collateral inspections.
(Order of Confirmation of Debtors’ Plan of Reorganization Under Chapter 12 filed December 1, 1987, at 5-8.)
The Discharge Request and Objection
Time passed with debtors performing under the plan until January 16, 1990, when they filed their Notice of Completion of Plan *1017and Request for Entry of Discharge Order, The Notice of Completion sets out the following comparison of collateral values between the time of confirmation and discharge:
CONFIRMATION DISCHARGE
a. Land $509,260.00 $509,268.00
b. Machinery 102,900.00 55,700.00
c. Cattle 199,125.00 81,255.00
d. Government payments 28,605.00 11,750.00
e. Stored crops & feed 10,360.00 31,300.00
f. FLB stock 10,950.00 1,000.00
g. Athol Co-Op 6,400.00 15,780.00
h. Growing crops 14,225.00 18,100.00
i. Cash & receivables 4,500.00 37,342.00
Total Assets $881,333.00 $761,495.00
(Notice of Completion of Plan and Request for Entry of Discharge Order filed January 16, 1990, at 4.)
The Standing Trustee’s Statement was filed on February 22, 1990. Both the Trustee’s Statement and the Notice of Completion of Plan and Request for Entry of Discharge Order state that all plan payments, except those payments being made pursuant to 11 U.S.C. § 1222(b)(5) and/or (b)(9), have been made and distributed and that there are no further plan payments to be made.
The Bank filed an Objection to Discharge of the Debtors on February 7, 1990. Debtors responded with a memorandum setting out a Statement of Facts in numbered paragraphs. In its brief, the Bank agreed with paragraphs 1 through 3 of the debtors’ statement and had this to say in response to paragraph 4:
Bank concurs with Paragraph 4 of Debtors’ Statement of Facts, but further advises the Court that although “each note had its own security”, the note dated March 31, 1987, and referred to throughout these proceedings as Note #2, in the principal sum of $79,500.00 was cross collateralized inasmuch as the note referred to the Security Agreement dated December SO, 1986. Under the terms of such notes and security agreements, the Bank had a perfected security interest in inventory, equipment, farm products, accounts and other rights to payment, general intangibles, government program payments, cattle, crops growing or to be grown, feed, grain products, silage, cane, alfalfa hay and milo. The promissory note dated January 14, 1987, and referred to throughout these proceedings as Note #3, in the principal sum of $159,000.00 was secured under the terms of security agreements dated December 13, 1985, December SO, 1986 and January 14, 1987. Under the terms of such note and security agreements, The First National Bank of Smith Center, Kansas, had a perfected security interest in all inventory, equipment, farm products, accounts and other rights to payment, general intangibles, cattle, growing crops or crops to be planted, feed, seed, fertilizer, silage, alfalfa, hay and all other personal property owned by Debtors. (Emphasis added.)
(Memorandum of the First National Bank of Smith Center, Kansas, in Support of its Objection to Discharge filed April 3,1990, at 2.)
With this statement, the Bank complains that its pre-petition cross-collateralized position should be recognized under the confirmed plan. Another expression of the Bank’s position appears in its brief:
From the Security agreements attached to Bank’s claim, the obligations due and owing on Notes #2 (Exhibit B [attached to the Bank’s brief]) and # 3 (Exhibit C [attached to the Bank’s brief]) were undoubtedly cross-collateralized. Had there been a pre-petition liquidation of equipment, following satisfaction of obligations owing under Note # 1, secured only by equipment, excess revenues would be paid on Notes *1018# 2 or # 3. Likewise, if there had‘been a pre-petition liquidation of livestock or farm products, that [sic] any revenues exceeding balances owing on Note #2 could be applied to Note #3, and vice versa.
(Memorandum of the First National Bank of Smith Center, Kansas, in Support of its Objection to Discharge filed April 3, 1990, at 5-6.)
When the Bank uses the term “cross col-lateralized,” it refers to its rights under the pre-petition notes and security documents. Note # 1 is secured by equipment. Notes #2 and #3 both refer, inter alia, to a security agreement dated December 30, 1986. Under that security agreement, Notes # 2 and # 3 are secured by equipment, cattle, crops, farm products, accounts and contract rights. In addition, Note # 3’s security includes government payments. Note # 4 is secured only by real estate.
A comparison of the Bank’s collateral position under the agreed confirmation order with that under its pre-petition notes and security agreements reflects a change in collateral. In the confirmation order, Note # 1 is expressly secured only by equipment. In describing the collateral for Notes #2 and #3, the confirmation order leaves out the reference to the security agreement of December 30, 1986, found in the pre-petition notes. According to the confirmation order, these two notes are collateralized only by crops, cattle, and government payments. No mention is made in the confirmation order of equipment being collateral under either of these notes, although that was the ease under the pre-petition notes. Note # 4 is secured by real estate only.
Confirmation Law
Section 1222 of the Code spells out the permissible contents of a Chapter 12 plan. Subsection (b)(2) thereof allows the plan to “modify the rights of holders of secured claims.” However, the scope of this right to modify secured claims is limited by § 1225 which establishes the standards for confirmation of a plan. Under § 1225(a)(5), the court can confirm a plan that affects secured claims if the holder of such a claim accepts the plan or the debtor surrenders the property securing such claim to the secured claim holder. If neither of these conditions prevail, the court may still confirm a plan that modifies the rights of a secured claim holder if the plan provides that the secured claim holder will retain the lien securing his claim and that the debtor will distribute to the secured claim holder property having a value, at the effective date of the plan, not less than the allowed amount of the secured claim. Absent consent by the secured claim holder, this provision marks the outside limit of the plan’s ability to modify a secured claim as allowed by § 1222(b)(2).1
Section 1227 states that after confirmation, the plan provisions bind the Bank whether it has objected to, has accepted, or has rejected the plan. The provisions of § 1227(a) are repeated in the confirmed plan. Here, the Bank agreed to the confirmation order. For that reason and because the plan conforms to § 1225(a)(5)(B), the Bank is bound by the terms of the confirmed plan and the confirmation order.
The Plan Does Not Provide for Cross-Collateralization
The Bank argues that the language of the plan and the Order of Confirmation provide that the cross-collateralization in effect pre-petition under the notes should continue post-petition. The debtors’ Chapter 12 Plan, First Amended Chapter 12 Plan, and Second Amended Chapter 12 Plan each specifically set out that the debtors had “four separate notes with this creditor [First National Bank of Smith Center], each having its own security....” (Paragraph captioned “Class III”: Debtors’ Chapter 12 Plan Filed August 24, 1987, at 3; Debtors’ First Amended Chapter 12 Plan filed September 29,1987, at 4; Debt*1019ors’ Second Amended Chapter 12 Plan filed November 10, 1987, at 4.)
The order confirming the plan, which was agreed to by counsel for the Bank, provides that the $159,000.00 note, Note #2, is secured by the debtors’ cattle. The order also provides that the $79,500.00 note, Note # 3, is secured by the debtors’ crops, cattle, and 1987 government payments. The confirmation order combines the balance of Notes # 2 and # 3 and states that the total due under these two notes is $238,500.00. The confirmation order provides: “... [T]he Debtors will pay the full value of this claim [the total amount due under Notes # 2 and # 3] amortized over 10 years with interest ... which will result in payments on these two notes of $38,531.76 per annum, commencing December 30, 1987.” (Order of Confirmation of Debtors’ Plan of Reorganization Under Chapter 12 filed December 1, 1987, at 6-7.)
The Order of Confirmation also provides for specific annual payments on Note #1, the equipment note, for a period of seven years and on Note # 4, the real estate note, for a period of thirty years.
The Bank points specifically to a provision in the debtors’ plan providing that secured creditors would retain their pre-petition priority as evidence that cross-collateralization of its claims was granted by the plan. The entire text of the sentence upon which the Bank relies states: “The bank will retain its first mortgage position with respect to the referenced real property, its third mortgage position with respect to all other real property and the same security position it now has with respect to the Debtors’ other personal property.” (Debtors’ Second Amended Chapter 12 Plan filed November 10, 1987, at 6-7.)
The Court finds that the phrase “same security position” was not intended to grant the Bank a cross-collateralization of its claims. Taken in the context of the sentence in which it is used, this statement is intended to clarify that the Bank will continue to hold the same priority among the debtors’ other secured creditors as it had occupied prior to bankruptcy.
The plan provisions regarding the Bank’s claims, as contained in each of the three plans filed by the debtors, are devoid of any reference to a pre-petition eross-collateralization provision in any of the notes. The plan itself makes no specific statement granting or continuing a cross-collateralization provision. To hold that this phrase regarding retention of the Bank’s priority status among other creditors acts to create or continue a cross-collateralization provision would be inconsistent with the language of the Second Amended Plan and the Order of Confirmation.
The Confirmation Order Does Not Grant Cross-Collateralization
Next, the Bank argues that Judge Pearson’s order of October 21, 1987, sustaining the Bank’s objection to the debtors’ plan because the debtors failed to meet the “best interest of creditors” test indicates that the Bank’s claims were to be cross-collateralized.
The Bank cites the following portion of the order as showing that Judge Pearson intended that the Bank’s notes be cross-collateralized:
The value as of the effective date of the Plan of the property which could be distributed on account of allowed unsecured claims is less than the amount which would be paid on account of such claims if the debtors were to be liquidated under Chapter 7 of Title 11.
(Memorandum of Decision filed October 21, 1987, at 5.)
This finding does not support the Bank’s conclusion that Judge Pearson intended that the debtors grant the Bank cross-collaterali-zation. This finding merely reflects the statutory requirement found in 11 U.S.C. § 1225(a)(4) and indicates that the debtors’ proposed plan failed to meet this requirement. The language of this section certainly does not give unsecured creditors a lien in a debtor’s unencumbered, non-exempt assets and there is no reason to believe that Congress intended that unsecured creditors would receive such an extraordinary benefit.
The Second Amended Plan provides that the Bank, the only unsecured or underse-cured claimant in the ease, would be paid the entire liquidation value over a period of 30 years. The Order of Confirmation therefore *1020states, “As the only unsecured or underse-cured creditor, the FNB will have applied towards this note [the Bank’s undersecured note] all of the debtors’ equity and value of unsecured assets.” (Order of Confirmation of Debtors’ Plan of Reorganization Under Chapter 12 filed December 1, 1987, at 7.) The Bank suggests that this statement shows that the parties intended the Bank to be cross-collateralized.
However, the Court is unable to find any relationship between this statement and an intent by the parties that the Bank’s claims be cross-collateralized. The plan does not provide that the Bank, as an unsecured creditor, is entitled to receive a lien on the debtors’ unsecured, non-exempt assets, the value of which is being paid out under the liquidation test. Nor does the Code require a debtor to grant an unsecured creditor a lien on unencumbered, non-exempt assets. In fact, such a requirement would contradict the “fresh start” policy of the Code and in this case, if not in most cases, effectively prevent a successful reorganization.
The cross-collateralization argument surfaced for the first time in the Bank’s Memorandum in Support of Objection to Discharge filed on April 8, 1990. The Court finds it quite unpersuasive that the Bank intended to create or retain such a substantial right, yet let years go by without ever making the argument to the Court.
A Secured Creditor Is Not Entitled to Maintain Security Values
Finally, the Bank argues that a creditor who believes it is in a worse collateral position at the time of discharge than it was at the time of confirmation is entitled to additional security, including a cross-collater-alization of its claims. However, the Bank fails to provide the Court with any statute or case law to support this proposition.
The Court’s research has been unable to find any support for such a request. The secured status of a creditor at the time of discharge is irrelevant to a debtor’s entitlement to a discharge. Section 1228 sets out the procedure and criteria for discharge in a Chapter 12 case. Nowhere in that section or any other section of the Code is there any indication that a creditor may reevaluate its secured position at discharge and receive additional security upon its determination that it is in a less secure position than it was at confirmation. As with the Bank’s previous argument, this procedure would be contrary to the language and intent of the Code.
Conclusion
Accordingly, the Bank’s objection to the debtors’ request for discharge is overruled. Additionally, the Bank’s request for granting of a cross-collateralization of its security interest is denied. The debtors are directed to submit a proposed Discharge Order consistent with this opinion.
This opinion constitutes the findings of fact and conclusions of law required by Bankruptcy Rule 7052 and Rule 52(a) of the Federal Rules of Civil Procedure.
IT IS SO ORDERED.
. Actually, if the secured claim antedates the enactment of the Bankruptcy Code, there is another limit to the plan’s ability to modify the secured claim, a constitutional one. See Louisville Joint Stock Land Bank v. Radford, 295 U.S. 555, 55 S.Ct. 854, 79 L.Ed. 1593 (1935). But, in this case the notes show that all of the liens were created after 1978 so there is no vested rights problem. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491765/ | *132
MEMORANDUM OPINION
MANUEL D. LEAL, Chief Judge.
Debtor, Gerard Scot Johnson filed this adversary against his former wife Irene Arce-lus seeking this Court’s determination that the alimony obligations to his former wife as ordered by a state court in their final decree of divorce are dischargeable in bankruptcy.
A trial of the issues in Johnson’s complaint was held. After careful consideration of the pleadings, evidence, the credibility of the witnesses and applicable law, this Court rules that the alimony obligations set forth in the divorce decree are nondischargeable under § 523(a)(5). This Memorandum Opinion constitutes the Court’s Findings of Fact and Conclusions of Law regarding the Court’s ruling on this subject.
Johnson claims that his alimony obligations under the final divorce decree reflect a property division and are not in the nature of support, maintenance or alimony for Ms. Ar-celus. Arcelus disagrees and contends that Johnson’s obligations constitute alimony, mainténance and/or support under 11 U.S.C. § 523(a)(5) and are nondischargeable as debts in Johnson’s Chapter 7 bankruptcy. 11 U.S.C. § 523(a)(5) states in pertinent part:
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— ... (5) to a spouse, former spouse, or child of the debtor, for alimony to, maintenance for, or support of such spouse or child, in connection with a separation agreement, divorce decree or other order of a court of record ...
11 U.S.C. § 523(a)(5).
This Court has jurisdiction over this proceeding pursuant to 28 U.S.C. § 1334. This case is a core proceeding under 28 U.S.C. § 157(b)(2)®.
BACKGROUND
Johnson and Arcelus are both citizens of Mexico now living in the United States. They were married on December 8, 1979 in Mexico. The parties moved to the United States in 1982 so that Johnson could continue his medical education and also begin the practice of medicine. During their marriage, Arcelus received money from her father and used these funds to support Johnson, their daughter and herself. Johnson filed for divorce from his wife on November 30, 1989.
Prior to the entry of the Final Decree of Divorce, the parties entered into agreed temporary orders whereby Johnson agreed to pay Arcelus $3,000 per month.
In 1991, the state court signed the Final Decree of Divorce. Under the terms of the final decree, Johnson was to pay Arcelus $400,000 in contractual alimony for 10 years, payable in monthly installments of $1,500 for the first 18 months and $3,656.96 for the remaining period. Johnson and Arcelus *133agreed to the terms of the final decree and signed it. The final decree also provided that Johnson was to repay a debt owed to Texas State Bank, which was secured by two certificates of deposit. Between $85,000 and $90,000 of the $122,000 certificate belonged to Arcelus, with the balance belonging to her sister Maria Angeles de Fernandez. The certificate of deposit secured a note issued by the Texas State Bank. The credit line established by the note was used by both Johnson and Arcelus to pay their living expenses and also to pay the startup costs of Johnson’s medical practice.
The $400,000 of contractual alimony was agreed upon during a discussion between Arcelus and Johnson. Arcelus testified that in agreeing to this amount she took into account several factors including: the present age of her daughter, the length of time before her daughter attended college, her estimated monthly expenses, and the $85,000 to be released by Texas State Bank to Ms. Arcelus upon Johnson’s repayment of the debt to the Bank.
Johnson maintains that the $400,000 constituting contractual alimony in the Final Decree was intended to be repayment of the money which he claims was loaned by Arce-lus’ father to Arcelus during the course of the Areelus/Johnson marriage. Johnson contends that he promised his then spouse Ms. Arcelus that he would pay back double the $158,000 amount received from Ms. Arcelus’ father for a total of $816,000. According to Johnson, this amount plus interest and the time value of money yields the $400,000 agreed to as contractual alimony.
Ms. Arcelus disputes Johnson’s contention that the $400,000 constituting contractual alimony in the Final Decree is intended to be inpayment of the money obtained from her father. Arcelus claims that the $158,000 received from her father during her marriage to Mr. Johnson was a gift and not a loan.
DISCUSSION
Federal law rather than state law determines whether divorce related claims are “support obligations” or a “property settlement” in deciding whether an obligation is dischargeable in bankruptcy. In re Billingsley, 93 B.R. 476, 477 (Bankr.N.D.Tex.1987). The label placed on an obligation established in a divorce decree is not necessarily binding in bankruptcy court. Id. Additionally, the Bankruptcy Code requires the bankruptcy court to determine the true nature of the debt, regardless of the label placed on it by the parties agreement or the state court proceeding. Id. In doing so, the bankruptcy court may consider extrinsic evidence to determine the real nature of the underlying obligation in order to determine discharge-ability. Id.
The intent of the parties is a primary factor in determining whether an obligation in a final decree of divorce is for support and maintenance, or if it is a property division. Id. In evaluating intent, the bankruptcy court is concerned only with the intent of the parties at the time of their alimony/property division agreement. Matter of Davidson, 947 F.2d 1294, 1296 (5th Cir.1991). The relevant inquiry is the intent of the parties at the date of divorce, not their intent at the time of their marriage. Such a determination precludes any discussion of taking notice of the law of Mexico and the doctrine of Bienas Separados. Johnson urges that this Court take judicial notice of the Mexican legal doctrine of Bienas Separa-dos. An interpretation of this doctrine reveals that the properties of the parties are to be treated as “separate and not to be used for community needs.” The parties were married under the terms of this doctrine in Mexico. However, Bienas Separados relates to the intentions of the parties at the time of marriage and not to their intentions 10 years later at the time of divorce.
This court is concerned with the issue of whether the labelling of the settlement in the Final Decree as “alimony” by the state court was in name only. If so, this Court is deeply troubled by the assertion by one of the former spouses that Johnson and Arcelus would deliberately and intentionally lead a state court into signing a judgment incorporating a property settlement agreement which falsified the parties’ intentions in order to avoid the consequences of bankruptcy law.
*134The burden of proving nondischarge-ability of a debt is upon the person who asserts its exemption from discharge. Benich v. Benich, 811 F.2d 943, 945 (5th Cir.1987). The burden is upon Irene Arcelus to prove that this debt is nondischargeable and exempt as alimony. She must demonstrate .that the intent of the parties in signing the Final Decree is reflected in the plain language of the writing.
The following factors are usually considered in determining the intent of the parties in divorce situations:
1. Length of the marriage.
2. Whether there are minor children in the care of the creditor spouse.
3. The parties’ standard of living during the marriage.
4. Whether the creditor spouse demonstrated a need of support at the time of the divorce.
5. Financial resources of each spouse.
6. Manner of payment—over time or in a lump sum.
7. Whether payments were fashioned in • order to balance the disparate income of the parties.
8. The ages, health, work skills and educational level of the parties.
9. Terms of the divorce decree.
Id.
The marriage between the parties lasted for approximately 10 years. They have one minor daughter who is in the care and custody of the mother Irene Arcelus. The parties maintained a high standard of living during their marriage. Such a standard was sustained in part by the money Ms. Arcelus received from her father, and by Dr. Johnson’s salary. Further, Irene Arcelus demonstrated a need for support by giving' this Court a breakdown of both her daughter’s and her own needs. Ms. Arcelus also received temporary support from Dr. Johnson pursuant to an Agreed Temporary Order prior to the signing of the final divorce decree. The Agreed Temporary Order provided that Dr. Johnson pay Ms. Arcelus $3000 in spousal and child support. Generally, a family court orders temporary support to a spouse to ensure that family support obligations stay untouched pending the outcome of a divorce.
In the instant case, neither of the parties possessed any significant amount of joint property to divide. Although Arcelus does possess an inheritance from her father, she has no independent income of her own. Ar-celus is a housewife without a college degree or any marketable skills that would enable her to obtain gainful employment. On the other hand, Johnson is a pediatrician with a growing medical practice. Additionally, the payments agreed to by Arcelus and Johnson in the Final Decree of Divorce were not to be in lump sums. Rather, they were to be periodic with the $400,000 in contractual alimony payable in monthly installments over a period of ten years. Further, the terms of the Final Decree of Divorce unequivocally state that the sum of $400,000 is payable as alimony. Application of the listed factors strongly indicates that the payment agreed to by the parties in the final decree was intended to be alimony.
Additionally, there exists a presumption that the final decree and contracts signed by all of the parties mean what they say, and the instruments are strong evidence of what the parties intended. Consequently, the writing will be construed in such a manner as to reach a reasonable result consistent with the expressed intent of the parties. Temple-Eastex, Inc. v. Addison Bank, 672 S.W.2d 793, 798 (Tex.1984). Because the final decree expressly references debtor’s obligations to defendant as “alimony” the instrument will not be interpreted to the contrary unless the evidence obviously shows it to be a mere label not reflective of their true intentions and circumstances at the time of their divorce.
To interpret the Final Decree as contradictory to the spouse’s agreement would present a parol evidence problem to this Court.1 We will apply Texas law to determine this issue as there does not appear to exist a federal parol evidence rule. Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 *135S.Ct. 817, 82 L.Ed 1188 (1938). The existing parol evidence common law is a creation of state law. Under Texas law, the parol evidence rule bars the enforcement of prior or contemporaneous agreements introduced to vary, add to, or contradict terms of a fully integrated written instrument. Beijing Metals & Minerals v. American Business Ctr., 993 F.2d 1178 (5th Cir.1993). Johnson seeks to characterize the $400,000 award of contractual alimony in the Final Divorce Decree as the repayment of a debt. Such a characterization is in direct contradiction to the language embodied in the final divorce decree. Once the parties have reduced the agreement to writing they are presumed to have selected from [prior] negotiations only the promises or agreements for which they chose to be bound. Jack H. Brown & Co., Inc. v. Toys “R” Us, Inc., 906 F.2d 169 (5th Cir.1990).
Also, written agreements are presumed to be completely integrated. Beijing Metals & Minerals v. American Business Ctr., 993 F.2d 1178, 1183 (5th Cir.1993). For a court to determine that a written agreement is incomplete it must decide two things: (1) that the writing is facially incomplete and requires extrinsic evidence to clarify, explain or give meaning to its terms; and (2) that when viewed in light of the circumstances surrounding its execution, the writing does not appear to be the complete embodiment of the terms relating to the subject matter of the writing. Jack H. Brown & Co., Inc. v. Toys “R” Us, Inc., 906 F.2d 169 (5th Cir.1990). Again, parol evidence is admissible to give meaning to a document that is facially incomplete only insofar as the evidence does not contradict those terms of the writing that are complete and unambiguous. Id.
This Court does not find the language in the final divorce decree dealing with alimony so incomplete that extrinsic evidence is required to give it meaning. Neither does the section dealing with alimony in the Final Decree appear to be anything other than a complete embodiment of terms relating to that particular subject. This proposition that the section on alimony is complete on its face is further buttressed by the fact that the parties entered into two agreements, both of which are integrated in the final decree. The first agreement is evidenced in a separate section dealing with a property settlement, and the second agreement is the disputed section granting child support and alimony.
The parol evidence rule and the doctrine of integration exist so that parties may rely on the enforcement of agreements that have been reduced to writing. Id. at 176. It is true that Texas law recognizes a number of exceptions to the parol evidence rule. However, in the case at bar, Johnson’s evidence of his alleged intention to repay a debt and not pay alimony does not fall into any of the recognized exceptions. The alleged intent of Dr. Johnson is inconsistent with the clear and unambiguous language of the Final Decree.
At the trial, Dr. Johnson introduced evidence to contradict the express terms of the parties’ written contract. Dr. Johnson’s evidence was then contradicted by evidence introduced by his former wife. Taking into account the credibility of the witnesses, this Court cannot conclude that the written agreements approved by the state district court were not accurate nor reflective of the spouses’ intentions. Also, the evidence was supportive of the family’s then existing costs for maintenance. Because the family did not really have much community property to divide up, it is hard to see why the $400,000 clause in the separate maintenance and support contract should now be construed as a property division when the simultaneously executed property division contract omits it.
In reaching this determination the Court also takes into account the credibility of the parties, as well as the worth of their testimony weighed against the language of the dissolution agreement. Benich v. Benich, 811 F.2d 943 (5th Cir.1987). The Court has considered the extreme hostility and animosity existing on both sides, to wit: over $100,000 has been expended on expenses for litigation. Further, this lawsuit has already proceeded through family, state and federal bankruptcy courts and must be speedily resolved.
*136
ATTORNEY FEES
Ms. Arcelus’ counsel also seeks approximately $109,000.00 in attorney fees incurred in his representation of Ms. Arcelus in this bankruptcy proceeding. This Court denies recovery of attorney fees because they are not an obligation of the estate nor in the nature of family support or maintenance. There is no indication that the parties considered these fees to be part of support and maintenance when they executed the Final Decree of Divorce. Significantly, the divorce decree fails to provide for payment of reasonable attorneys’ fees and expenses incurred by a party in successfully prosecuting or defending a suit against the other party over the divorce decree’s terms. There is thus no contractual basis binding on debtor nor the estate for awarding attorney fees pursuant to the request of Ms. Arcelus’ counsel. The obligation appears to be a contractual one between Ms. Arcelus and her attorney.
CONCLUSION
The award to Ms. Arcelus in the Final Divorce Decree is in the nature of alimony, and not a property settlement. Therefore, the amount of alimony due Ms. Arcelus from Johnson is excepted from discharge pursuant to 11 U.S.C. § 523(a)(5) and is a nondis-chargeable debt.
. Neither party has raised a parol evidence problem to this Court. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491766/ | ORDER ON DEBTOR’S MOTIONS TO ASSUME LEASE WITH MARRIOTT RESTAURANTS AND MARRIOTT RESTAURANTS’ MOTION FOR RELIEF FROM STAY
ALEXANDER L. PASKAY, Chief Judge.
THIS IS a Chapter 11 case and the matters under consideration are a Motion to Assume certain non-residential sublease agreements (Subleases) between Marriott Family Restaurants, Inc. (Marriott) and Gande Restaurants, Inc. (Debtor), and an Amended Motion for Relief from Stay or for Adequate Protection filed by Marriott.
In its Motion to Assume the Subleases, the Debtor contends that assumption of the Subleases would be in the best interest of the estate and would help enable the Debtor to successfully reorganize its business. Marriott, on the other hand, contends that the Debtor should not be authorized to assume the Subleases, because (1) the Subleases between the Debtor and Marriott were terminated by Marriott pre-petition and therefore the Debtor’s interest under the Subleases are no longer property of the Debtor’s estate by virtue of § 541(b)(2) of the Bankruptcy Code; and in the alternative, (2) the Debtor cannot promptly cure the arrearages or provide adequate assurance of future performance as required by § 365(b)(1)(A) and (C). Marriott also seeks an order granting its Motion for Relief from Stay in order to enforce its rights under the defaulted Subleases according to law. The facts relevant to the resolution of these matters are as follows:
In the late 1980’s, the Walgreen Company (Walgreen) entered into several commercial leases with a variety of landlords in St. Pe-tersburg, Sarasota, and Naples, Florida, concerning the proposed operation of restaurants in those cities. These restaurants were to operated under the name “Wags.” On *346August 30, 1988, Walgreen assigned five of the leases to Marriott. In 1991 and 1992, Marriott entered into five separate Subleases with the Debtor. (Marriott’s Exhs. 2, 4, 12, 15, 18). The Debtor operated and apparently still operates five “Wag’s” restaurants under the Subleases.
In March 1993, the Debtor defaulted not only under the Subleases, but also on its obligation to make the payments required by four Promissory Notes executed in connection with the Subleases. On June 2, 1993, Marriott gave written notice to the Debtor of the defaults by the Debtor on each of the five Subleases and also on the Promissory Notes. (Marriott’s Exh. 19). The Notice of Default stated that should the Debtor fail to make full payment within 10 days of receipt of the Notice, Marriott “may, and hereby elects to terminate” each Sublease. Although the record reflects that the Notice had been sent to the Debtor’s former business address in Sarasota, the Debtor did receive actual notice of the default, albeit one week later. Be that as it may, it is without dispute that the Debtor did not cure the defaults within 10 days, the time fixed by the Notice. The fact of the matter is, none of the defaults either under the Subleases nor under the Promissory Notes were cured prior to the commencement of the Chapter 11 ease and not even as of this date. Prior to the commencement of the case, there were some negotiations between the Debtor and Marriott regarding the defaults, but the parties never agreed to a restructure of the Subleases, or to an extension of the payment schedule under the Subleases.
On July 29, 1993, the Debtor filed its Petition for Relief under Chapter 11 of the Bankruptcy Code. As of August 1, 1993, the Debtor owed Marriott $245,091.60 in past due rent under the Subleases, and $1,665,-398.29 in past due principal and interest under the related Promissory Notes.
On August 26, 1993, the Debtor filed its Motion to Assume the Subleases. In the Motion, the Debtor admits that it is in default on the Subleases but claims that it is prepared to pay all post-petition lease payments and $50,000 toward pre-petition defaults, and to treat the remaining pre-petition defaults as general unsecured claims to be dealt with in its Plan of Reorganization to be filed. The Debtor’s position is that the Subleases were not terminated and are therefore assumable. The Debtor contends, however, that even if the Subleases were terminated, the right to termination was waived by Marriott based on its negotiations with the Debt- or which took place after the Notice of Default was received, and therefore termination does not preclude the Debtor from assuming the Subleases.
In opposition, Marriott contends that the Debtor is not entitled to assume the Subleases because they were effectively terminated by Marriott pre-petition and therefore the Debtor’s interest under the Subleases was no longer property of the estate on the date of the commencement of the Chapter 11 case, by virtue of § 541(b)(2). In the alternative, Marriott contends that the Debtor has insufficient funds, is not able to, and has no intention to pay the arrearages and compensate Marriott for the pecuniary losses suffered by Marriott as a result of the default, and that the Debtor is not able to provide Marriott with adequate assurance of future performance under the Subleases, all of which are required by § 365(b)(1)(A), (B), and (C) as conditions precedent to the assumption of a non-residential lease.
The Debtor concedes, as it must, that it does not have the funds necessary to cure the defaults, but in an attempt to obtain the funds to pay post-petition lease payments, it is attempting to enter into post-petition financing with the approval of this Court. The proposed financing is contingent on Marriott’s consent to waive its right to immediate payment of all past due rent, to waive the payment for pecuniary losses resulting from the default, and to accept instead an unsecured claim for all past due rent and other pecuniary losses suffered by Marriott in excess of $50,000.00. Under the Debtor’s proposal, Marriott would waive over $100,000.00 of accrued interest on the accelerated Promissory Notes and agree to a principal reduction of $300,000.00.
A debtor’s right to assume an unexpired lease is governed by § 365 which provides that:
*347§ 365. Executory contracts and unexpired leases
(b)(1) If there has been a default in an executory contract or unexpired lease of the debtor, the trastee may not assume such contract or lease unless, at the time of assumption of such contract or lease, the trustee—
(A) cures, or provides adequate assurance that the trustee will promptly cure, such default;
(B) compensates, or provides adequate assurance that the trustee will promptly compensate, a party other than the debt- or to such contract or lease, for any actual pecuniary loss to such party resulting from such default; and
(C) provides adequate assurance of future performance under such contract or lease.
By virtue of an amendment to § 541 of the Bankruptcy Code in 1986, the interest of a debtor under a lease of non-residential real property that has terminated prior to the commencement of the case is no longer property of the estate, thus no longer assumable, pursuant to § 541(b)(2). Therefore, before one considers § 365(b), which governs a debtor’s right to assume a non-residential lease, it is necessary to determine whether or not the lease was still valid and enforceable under applicable local law at the commencement of the ease. Of course, the right of a lessor to terminate the lease is governed by the applicable provision of the lease itself. Paragraph 17 of the Subleases deals with this subject and provides as follows:
Default.
a. If (i) Subtenant defaults in the payment of any installment of rent, percentage rent, or additional rent due hereunder, ... and such default continues for ten (10) days after written notice thereof to Subtenant ... then in any of the above events, Sublandlord, at its election, may declare the term of this Sublease ended and, either with or without process of law, re-enter, expel, remove, and put out Subtenant and all persons occupying the Leased Premises under Subtenant, using such reasonable force as may be necessary in so doing, and repossess and enjoy the Leased Premises. Such reentry and repossession shall not work a forfeiture of the rents to be paid and the covenants to be performed by Subtenant during the full term of this Sublease. (Marriott Exh. 2, p. 11-12) (It should be noted that the default provisions are identical in all the Subleases under consideration.)
In the present instance it is without dispute that by March, 1993, the Debtor was in default on all five Subleases, having failed to make the rent payments required by the Subleases. It is equally without dispute that on June 2, 1993, Marriott gave a written notice of the defaults to the Debtor and granted the Debtor ten days to cure the defaults. While the Notice of Default was initially sent only to the Debtor’s former business address in Sarasota, it did reach the Debtor, albeit not until one week later. In addition to notifying the Debtor of the defaults, the Notice of Default also informed the Debtor that in the event the defaults are not cured within the ten days fixed by the Notice of Default, Marriott “may and hereby elects to terminate the Subleases.” It is without dispute that the Debtor did not make payments within the ten days nor by the time it filed its Petition for Relief on July 29, 1993. It is without dispute that as of August 15, 1993, the Debtor was indebted to Marriott for unpaid rent on the Subleases in the amount of $245,091.60 and $1,665,398.29 on the Promissory Notes it executed in connection with of the Subleases.
Based on the foregoing undisputed facts, one might conclude that the Subleases were effectively terminated prior to the commencement of the Chapter 11 case, thus the Debtor’s interest in the Subleases was no longer property of the Debtor’s estate, and consequently there remained nothing to assume. Admittedly, the Notice of Default was originally sent to the wrong address, but it is also true that the Debtor did receive the Notice, albeit one week later, and the Debtor had ample time to cure the default and pay all past due rent required by the Subleases, which it failed to do.
Next, at first blush, the Notice of Default appears to be somewhat ambiguous and may *348be construed to mean that Marriott “may” terminate the Subleases if the payments are not made, from which, in turn, one might infer that Marriott intends to take further action to terminate the Subleases. However, the Notice also states that the Marriott “hereby elects to terminate.” This Court is satisfied that the Subleases did not require any further action on the part of Marriott to terminate the Subleases, and the Subleases were effectively terminated upon the Debt- or’s failure to cure the default within the time fixed in the Notice. Thus, the Subleases were not property of the estate on the date of the commencement of the Chapter 11 case by virtue of § 541(b)(2), unless this record warrants the finding that Marriott waived its right to termination by not taking steps to enforce its right upon termination of the Subleases, more specifically, causing the eviction of the Debtor from the properties covered by the terminated Subleases.
There is some evidence in this record that there were discussions between Marriott and the Debtor even after the Notice of Default, most likely toward finding some mutually acceptable solution. However, it is clear that Marriott never agreed to waive the right to termination, restructure the Subleases, or grant a moratorium to the Debtor and extend the time within which the Debtor would be permitted to make up the delinquent rent payments.
This Court had occasion to consider the issue of waiver of the right of termination by the landlord in a commercial lease in Matter of Truffles of Sarasota, Inc., 30 B.R. 666 (Bankr.M.D.Fla.1983). In Truffles, the Debtor asserted as a defense to the landlord’s challenge of the Debtor’s right to assume a lease which was in default, that the landlord waived the right of termination by its conduct. It is well established that waiver involves the intentional and voluntary relinquishment of a known right or conduct from which waiver can be reasonably inferred. Fireman’s Fund Insurance Co. v. Vogel, 195 So.2d 20 (Fla. 2d DCA 1967). In addition, where waiver is sought to be established by conduct, “... the acts, conduct or circumstances relied upon to show waiver must make out a clear case.” Fireman’s Fund Insurance Co. v. Vogel, supra at 24; Gilman v. Butzloff, 155 Fla. 888, 22 So.2d 263 (1945). In the instant case, there is no credible evidence that Marriott ever made an affirmative representation to the Debtor that as a result of their negotiations the Notice of Default would be withdrawn or would be considered to be no longer operative. Just like in Truffles, supra, there is no evidence in this record which warrants the finding that Marriott waived its contractual rights, even if the Debtor believed that Marriott did, in fact, waive its rights by its conduct or by its failure to take affirmative steps to regain possession of the premises.
Assuming arguendo that Marriott did waive the defaults and its right to terminate the Subleases, it is clear from this record that this Debtor is unable to comply with the requirements of § 365(b), which sets forth the conditions precedent to assumption of a commercial lease which is in default. First, the Debtor doesn’t have the funds to promptly cure the rent arrearages. The Debtor’s offer to pay $50,000 toward pre-petition ar-rearages, which the Debtor doesn’t have unless he is authorized to borrow same, is woefully short to pay the delinquent rent which, as of August 1, 1993, was $245,091.60. Moreover, this amount does not include the rent accrued since the commencement of the Chapter 11 case. By virtue of § 365(d), the Debtor is supposed to perform all covenants in the lease sought to be assumed. In addition, there is no question that there is nothing in this record which would support that the Debtor is able to meet the last requirement for assumption, which is to provide adequate assurance of future performance under the Subleases. The Debtor’s proposal to obtain the funds necessary through post-petition financing is not less than a pipe dream and utterly lacks any realistic basis, first, because it would not provide sufficient funds to cure the default; and second, the post-petition financing is subject to the consent of Marriott to waive its right to immediate payment of all past due rent payments for the pecuniary losses suffered as a result the default, and most importantly, Marriott’s willingness to accept the balance of the unpaid rent merely as an unsecured claim and waive over $100,000.00 accrued interest. In light of the foregoing, there is no doubt that this Debtor has no right to assume the Subleases under consideration.
*349This leaves for consideration the Motion for Relief from Stay in which Marriott seeks authority to enforce its rights as a landlord and evict the Debtor from the premises. In light of the conclusion of this Court, it is evident that the Motion for Relief from Stay is well taken and should be granted with certain provisos.
Accordingly, it is
ORDERED, ADJUDGED AND DECREED that the Motion to Assume Lease Agreements filed by the Debtor is hereby denied. It is further
ORDERED, ADJUDGED AND DECREED that the Motion for Relief from Stay filed by Marriott is hereby granted with the proviso that the Debtor shall be given fourteen (14) days from the date of entry of this Order to surrender the premises in an orderly fashion, but may not seek an in per-sonam money judgment against the Debtor in a non-bankruptcy forum, if it elects to proceed to enforce its right as Sublessor under applicable local law. It is further
ORDERED, ADJUDGED AND DECREED that Marriott may file a proof of claim, if any, if so deemed to be advised within thirty (30) days from the date of entry of this Order.
DONE AND ORDERED. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491767/ | OPINION
KENNETH J. MEYERS, Bankruptcy Judge.
Prior to seeking relief under chapter 13 of the Bankruptcy Code, debtor operated a business known as Cultured Creams and, as such, was subject to the requirements of the Illinois Retailers’ Occupation Tax Act and the Illinois Use Tax Act.1 The Illinois Department of Revenue (the “IDR”) filed a priority claim in the amount of $15,585.00 for unpaid taxes for the period of July 1988 through October 1989. On its proof of claim, the IDR indicated that the “kind of tax” owed is “ROT/UT.” Debtor filed an objection to claim, contending that the taxes are dis-chargeable under sections 523(a) and 507(a)(7)(E) of the Bankruptcy Code and that the IDR’s claim is therefore not entitled to priority status. The IDR contends that the tax debt is nondischargeable and is entitled to priority under section 507(a)(7)(C).
A discharge under 11 U.S.C. § 727 does not discharge an individual debtor from tax debts “of the kind and for the periods specified in section ... 507(a)(7) ... whether or not a claim for such tax was filed or allowed.” 11 U.S.C. § 523(a)(1)(A). Among the taxes listed in section 507(a)(7) are “excise tax[es] on a transaction occurring before the date of the filing of the petition for which a return, if required, is last due ... after three years before the date of the filing of the petition.” 11 U.S.C. § 507(a)(7)(E). “Thus, excise taxes ... are dischargeable if they became due *532more than three years before the filing of the bankruptcy petition.” In re Groetken, 843 F.2d 1007, 1009 (7th Cir.1988). However, some taxes are not dischargeable regardless of how “stale” they become. Section 507(a)(7)(C) describes certain types of taxes that are to be given priority without any limitation upon the time when they became due. These taxes, which are never dis-chargeable, are those “required to be collected or withheld and for which the debtor is liable in whatever capacity.” 11 U.S.C. § 507(a)(7)(C). Subsection C includes the so-called “trust fund” taxes (income taxes an employer is required to withhold from employees’ pay and the employees’ share of social security taxes), as well as other taxes that a person is required to collect and hold on behalf of a governmental unit. In re Groetken, 843 F.2d at 1010.
Debtor asserts that the taxes in question are excise taxes that became due more than three years before the bankruptcy petition was filed and, as such, are dischargeable under sections 523(a)(1)(A) and 507(a)(7)(E). The IDR contends that debtor was required to collect the taxes under the Illinois Use Tax Act and that the taxes are, therefore, nondischargeable and entitled to priority under section 507(a)(7)(C), regardless of their age. Resolution of this issue requires a brief examination of the Illinois Retailers’ Occupation Tax Act and the Use Tax Act and the relationship of those Acts to the Bankruptcy Code.
The Occupation Tax Act imposes “a tax ... upon persons engaged in the business of selling at retail tangible personal property-” 35 ILCS 120/2. This tax is imposed directly on retailers “at the rate of 6.25% of gross receipts from sales of tangible personal property made in the course of business.” 35 ILCS 120/2-10. The Occupation Tax Act is complemented and reinforced by the Use Tax Act, which imposes a 6.25% tax “upon the privilege of using in this State tangible personal property purchased at retail from a retailer_” 35 ILCS 105/3. The tax applies to retail purchases made in Illinois as well as in other states. “The purpose of the Use Tax is to prevent the loss of tax revenues to the state and the concomitant loss in sales to Illinois retailers that could result from Illinois consumers buying tangible personal property outside of Illinois in order to avoid the ROT [Occupation Tax].” In re Cain, 145 B.R. 966, 968 (Bankr.S.D.Ill.1992).
The Occupation Tax and the Use Tax are not imposed cumulatively. As explained by the Seventh Circuit:
The Use Tax Act expressly relieves a retailer from remitting any Use Tax it collects if the retailer pays the Occupation Tax. Moreover, although the Occupation Tax Act does not contain a similar provision, the Illinois Court of Appeals has indicated that a retailer who pays the Use Tax does not have to pay the Occupation Tax. Therefore, although there are two taxes actuated by the same sale and purchase, only one of the two payments is remitted to the State, and the single payment satisfies both taxes.
In re Groetken, 843 F.2d at 1011 (citations omitted). However, “[i]f a retailer fails to pay the Occupation Tax the State has a claim under the Occupation Tax Act and a claim under the Use Tax Act.” Id. at 1014 (emphasis in original).
In the present case, the IDR has indicated on its proof of claim that the “kind of tax” owed is “ROT/UT,” meaning, of course, Retailers’ Occupation Tax and Use Tax. The certified assessments submitted by the IDR at the hearing on this matter likewise specify that the taxes owed are for “Occupation and Use Tax.” It is clear, therefore, that the IDR has elected to file its claim for unpaid taxes under both the Occupation Tax Act and the Use Tax Act. The question that remains is this: Are debtor’s tax obligations under those Acts nondischargeable and entitled to priority treatment pursuant to sections 523(a)(1)(A) and 507(a)(7)(C) of the Bankruptcy Code?
In Rosenow v. State of Ill., Dept. of Revenue, 715 F.2d 277 (7th Cir.1983), the Seventh Circuit expressly held that unpaid obligations under the Illinois Use Tax Act fall within section 507(a)(7)(C) and are nondischargeable regardless of when they became due. In response to debtors’ argument that the Use *533Tax is not a “traditional trust fund tax,” the Court explained:
[T]here are really two types of sales tax liabilities at issue: those which are owed personally by a debtor, for example, on purchases he himself has made, and those incurred by a retailer’s customers, which are collected by the retailer under the authority of the state and then owed by the retailer to the state. In relation to the latter, the retailer in fact appears to be holding for the benefit of the state taxes which his customers would otherwise owe — an obvious similarity to the income and social security taxes (“trust fund taxes”) which are unquestionably covered by Section C.
Id. at 280. The Court then concluded as follows:
1. If a tax falls within Section C, it is nondischargeable.
2. The Illinois Use Tax by its terms falls within Section C.
3. A retailer is relieved of the Use Tax obligation only if the Occupation Tax has been paid.
4. The debtors in this ease have not paid their Illinois Retailers’ Occupation Tax.
5. Therefore they remain liable for the Use Tax obligation (per 3, above).
6. Therefore the unpaid obligations under the Use Tax Act in this case are not dis-chargeable (per 1 and 2, above).
Id. at 282.
Applying that logic to the instant case, it is clear that debtor’s tax obligations are nondis-chargeable and that the IDR’s claim is a priority claim under section 507(a)(7)(C). Very simply, debtor has failed to pay the Retailers’ Occupation Tax and under the holding in Rosenow, is liable for the Use Tax, a nondischargeable debt entitled to priority status under 507(a)(7)(C). Thus, “[r]egardless of [debtor’s] characterization of the funds collected by [the IDR], the law is clear that the arrearage becomes an obligation under the Illinois Use Tax Act if the ROT is not paid. [The IDR], by merely asserting its rights under the Illinois Use Tax Act, can ensure that the debt is nondischargeable.” In re Cain, 145 B.R. at 968.2
Debtor also contends that because the IDR is barred by the state statute of limitations from bringing suit to collect the tax debt, it is therefore barred from recovering the debt in this bankruptcy proceeding. The Retailers’ Occupation Tax Act provides:
In case of failure to pay the tax, or any portion thereof ... the Department may bring suit to recover the amount of such tax ... provided that no such suit ... shall be instituted more than 2 years after the date any proceedings in court for review thereof have terminated or the time for the taking thereof has expired without such proceedings being instituted ... nor ... shall such suit be instituted more than 2 years after the date any return is filed with the Department in eases where the return constitutes the basis for the suit for unpaid tax....
35 ILCS 120/5.3 The IDR concedes that the statute of limitations for filing suit has expired but contends that other remedies are available for collecting the delinquent taxes, namely, the right of setoff and the right to *534impose an “administrative bank levy or wage deduction.”
Section 10.05 of the State Comptroller Act provides in pertinent part:
Whenever any person shall be entitled to a warrant or other payment from the treasury or other funds held by the State Treasurer, on any account, against whom there shall be any account or claim in favor of the State, then due and payable, the Comptroller, upon notification thereof, shall ascertain the amount due and payable to the State, as aforesaid, and draw a warrant on the treasury or on other funds held by the State Treasurer, stating the amount for which the party was entitled to a warrant or other payment, the amount deducted therefrom, and on what account, and directing the payment of the balance; which warrant or payment as so drawn shall be entered on the books of the Treasurer, and such balance only shall be paid.
15 ILCS 405/10.05. In La Pine Scientific Co. v. Lenckos, 95 Ill.App.3d 955, 51 Ill.Dec. 241, 420 N.E.2d 655 (1981), the IDR, citing section 10.05, argued that it should be allowed to set off unpaid tax assessments (issued under the Retailers’ Occupation Tax Act) against a taxpayer’s overpayment of income taxes, despite the fact that the statute of limitations for bringing suit to collect the unpaid assessments had expired. The court agreed, stating:
Statutes of limitation affect the remedy by limiting the period within which legal action may be brought or remedies may be enforced; they bar the right to sue for recovery but do not extinguish the debt which remains as before. It is clear that the assessments in question remain as debts owing to the State but are not enforceable by means of a lawsuit brought by the State. They had not been “extinguished” as the trial court found but were merely unenforceable in a court of law. As such, the assessments are still claims “then due and payable” for purposes of section 10.05 and were properly set off against plaintiffs tax overpayment.
Id., 51 Ill.Dec. at 244, 420 N.E.2d at 658 (citations omitted). See also Meyers v. Kissner, 217 Ill.App.3d 136, 160 Ill.Dec. 140, 576 N.E.2d 1094 (1991), rev’d on other grounds, 149 Ill.2d 1, 171 Ill.Dec. 484, 594 N.E.2d 336 (1992); American Acoustics, Etc. v. Dept. of Rev., 107 Ill.App.3d 616, 62 Ill.Dec. 892, 437 N.E.2d 419 (1982) (statutes of limitation are generally considered to affect only a party’s remedy and do not alter substantive rights).
In addition to the right of setoff, the IDR argues that it can collect the taxes owed by imposing a bank levy or wage deduction pursuant to section 5f of the Retailers’ Occupation Tax Act.4 That section provides in part:
In addition to any other remedy provided for by the laws of this State, if the tax imposed by this Act is not paid within the time required by this Act, the Department, or some person designated by it, may cause a demand to be made on the taxpayer for the payment of the tax. If the tax remains unpaid for 10 days after demand has been made and no proceedings have been taken for review, the Department may issue a warrant directed to the sheriff of any county of the State or to any State officer authorized to serve process, commanding the sheriff or other officer to levy upon property and rights to property ... of the taxpayer, without exemption, found within his or her jurisdiction, for the payment of the amount of unpaid tax with the added penalties, interest and the cost of executing the warrant.... Any officer or employee of the Department designated in writing by the Director is authorized to serve process under this Section to levy upon accounts or other intangible assets of a taxpayer held by a financial organiza-tion_ In addition to any other provisions of this Section, any officer or employee of the Department designated in writing by the Director, may levy upon the salary, wages, commissions and bonuses of any employee ... by serving notice of levy on the employer.
35 ILCS 120/5f. “No proceedings for a levy under this Section may be commenced more *535than 20 years after the latest date for filing of the notice of lien under Section 5b of this Act, without regard to whether such notice was actually filed.” Id.
Thus, while the IDR is barred by the statute of limitations from filing a civil lawsuit to collect the delinquent taxes, the taxes remain collectible under the specific statutory remedies set forth above. Accordingly, the IDR is entitled to pursue its claim in the instant bankruptcy proceeding.5 Debtor’s argument to the contrary simply has no merit.
Finally, debtor contends that even if the underlying tax is nondischargeable and entitled to priority treatment, the penalty assessed by the IDR is dischargeable. Debt- or is correct. Section 523(a)(7)(B) provides that penalties “imposed with respect to a transaction or event that occurred before three years before the date of the filing of the petition” are dischargeable. 11 U.S.C. § 523(a)(7)(B). Thus, “if the events giving-rise to the penalty occurred more than three years before the date of the petition, any noncompensatory tax penalty is dischargea-ble even if the tax is not.” Ginsberg, Bankruptcy: Text, Statutes, Rules § 11.06[k] (2d ed. 1991). See also In re Roberts, 129 B.R. 171, 172-73 (C.D.Ill.1991); In re Torres, 143 B.R. 183, 188 (Bankr.N.D.Ill.1992). In the present case, the proof of claim filed by the IDR includes a penalty in the amount of $1,017.00 that was assessed more than three years before the bankruptcy petition was filed. The penalty is therefore dischargea-ble.
Accordingly, for the reasons stated, debt- or’s objection to claim with respect to the underlying tax debt is OVERRULED. Debtor’s objection to claim with respect to the penalty on that tax debt is SUSTAINED.
. Specifically, debtor was engaged in the business of selling ice cream and, as a retailer, was required to pay and/or collect taxes for the sale of ice cream pursuant to the Retailers’ Occupation Tax Act and Use Tax Act.
. Debtor relies on In re Groetken for the proposition that the Retailers' Occupation Taxes are dischargeable. In that case, the Seventh Circuit held that the Illinois Occupation Tax is an excise tax falling under Section E and is dischargeable if it became due more than three years before the filing of the bankruptcy petition. In re Groetken, 843 F.2d at 1013-14. That case is clearly distinguishable from the instant case, however, in that the State had elected to proceed solely on its Occupation Tax claim. In discussing the differences between the Occupation Tax Act and the Use Tax Act, the Court noted, "The Occupation Tax is imposed directly on retailers. Retailers are not required to collect the tax. The Use Tax is imposed on purchasers. Retailers are required to collect this tax from purchasers on behalf of the State. These differences have critical significance under the Bankruptcy Code.” Id. at 1014. The Court then stated, "[W]e see no practical reason why the State does not always sue under both statutes.... Because the State's judgment was solely under the Occupation Tax Act and retailers are not required to collect the Occupation Tax, its judgment does not fall under the ‘trust fund' tax exemption from discharge.” Id. at 1015.
. The Use Tax Act incorporates, by reference, the statute of limitations set forth in the Retailers’ Occupation Tax Act. See 35 ILCS 105/12.
. Again, the Use Tax Act incorporates, by reference, section 5f of the Retailers’ Occupation Tax Act. See 35 ILCS 105/12.
. In this regard, it is important to note the Bankruptcy Code’s definition of "claim." A claim is defined as a "right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unma-tured, disputed, undisputed, legal, equitable, secured, or unsecured....” 11 U.S.C. § 101(5). | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491768/ | MEMORANDUM OPINION
ARTHUR B. BRISKMAN, Bankruptcy Judge.
This matter came before the Court on the complaint of the trustee, Robert H. Allen, to determine the validity, extent and priority of liens of the respective defendants. After receiving exhibits, stipulation of facts and arguments of counsel, the Court makes the following findings of fact and conclusions of law.
FINDINGS OF FACT
First Alabama Bank (First Alabama) was formerly known as Merchants National Bank (Merchants). On October 15, 1982, in the case of Merchants National Bank v. Peter V. Sintz, Case No. CV-81-001893, a judgment was entered in favor of Merchants in the amount of $218,505.76 plus costs. On November 19, 1982, Merchants recorded its judgment with the Judge of Probate for Mobile County, Alabama.
Both Peter V. Sintz and Julie G. Sintz (“the debtors”) are indebted to the United States of America (“the United States”) for unpaid taxes.1 The State of Alabama also has tax liens upon property of the estate that were recorded subsequent to the recording of Merchants’ judgment. AmSouth claims a mortgage on property in which debtor Peter V. Sintz owns a one-fourth interest. The claim asserted by AmSouth is undisputed.
The debtors filed a chapter 7 bankruptcy petition on October 20, 1992. As of October 20, 1992 First Alabama had not revived its October 15, 1982 judgment.
CONCLUSIONS OF LAW
The crux of the dispute is between the validity, extent and priority of the liens of First Alabama, the United States and the State of Alabama. The issue before the Court is whether the lien claimed by First Alabama that came into existence when Merchants recorded its certificate of judgment on November 19,1982 is still enforceable and, if so, its priority as to the tax liens asserted by the United States and the State of Alabama.
In accordance with Alabama Code § 6-9-210 (1977) Merchants’ judgment was recorded on November 19,1982. In pertinent part, Alabama Code § 6-9-211 (1977) provides:
Every judgment, a certificate of which has been filed as provided in section 6-9-210, shall be a lien in the county where filed on all property of the defendant which is subject to levy and sale under execution, and such lien shall continue for 10 years after date of such judgment ...
(emphasis added). The United States and First Alabama differ on the meaning of “the date of such judgment.” First Alabama contends “the date of such judgment” means the date the judgment is recorded. Therefore, according to First Alabama, it had until November 19, 1992 to revive its lien; and, since the debtors’ filed their bankruptcy petition on October 20, 1992, its lien is still valid.
First Alabama also relies on Rule 62, Alabama Rules of Civil Procedure and argues the thirty (30) day stay imposed by Rule 62 prohibited it from recording its judgment during the thirty (30) days after the judgment and, therefore, the ten years does not begin to run until the certificate of judgment is recorded. This argument is unpersuasive. In Kiker v. National Structures, Inc., 342 So.2d 746 (Ala.1977) the Alabama Supreme Court held that “recording a judgment is not the same as executing a judgment.” Kiker, 342 So.2d at 748. Moreover, in Johnson v. Haleyville Mobile Home Supply, 477 So.2d 328 (Ala.1985), the supreme court concluded Rule 62 only prevents enforcement of the *574judgment for thirty (30) days; it does not prevent recording of a certificate of judgment.
Contrarily, the United States contends that because the judgment was entered on October 15, 1982 and First Alabama failed to revive the judgment recorded on November 19, 1992 prior to or on October 15, 1992, First Alabama no longer has a valid lien. The Court concludes the date of entry, not the date of recordation, commences the ten year period in which the lien continues.
The decisions rendered on the issue and relied upon by both parties are not models of clarity. Section 6-9-211 tracts substantially similar language found in provisions of the 1923 and 1940 versions of the Alabama Code. In I. Trager Co. v. Mixon, 229 Ala. 371, 157 So. 80 (1934), the Alabama Supreme Court held a judgment lien continues for ten years after the date of recordation. In McClintock v. McEachin, 246 Ala. 412, 20 So.2d 711 (1945), the supreme court held that a judgment lien became dormant after ten (10) years from the date judgment was entered. See also, Second National Bank of Cincinatti, Ohio v. Allgood, 234 Ala. 654, 176 So. 363 (1937); First National Bank of Montgomery v. Powell, 229 Ala. 178, 155 So. 624 (1934).
Alabama Code § 6-9-192 (1977) requires a judgment creditor to revive its judgment within ten (10) years of its entry to have the lien created by § 6-9-211 remain enforceable.2 The filing of the certificate of judgment creates a lien which lasts for ten (10) years after “the date of such judgment.” § 6-9-211. The “date of such judgment” language, when viewed in pari materia with the relevant provisions in Title 6, Article 8, Code of Alabama 1975, is susceptible to only one interpretation: that “date of such judgment” means the date of entry. See e.g., Alabama Code § 6-9-190 (1977) (“A judgment cannot be revived after the lapse of 20 years from its entry.”)-, § 6-9-191 (“If 10 years have elapsed from the entry of the judgment without issue of execution ...”); and § 6-9-192 (“No execution shall issue on a judgment of the district or circuit court on which an execution has not been sued out within 10 years of its entry until the same has been revived ... ”). Thus, the lien is effective for ten years from its entry and the lien First Alabama acquired from Merchants expired on October 15, 1992 since no action was taken to revive the lien prior thereto. Consequently, First Alabama has an unsecured claim.
. The unpaid taxes are evinced by Notices of Federal Tax Lines filed with the Judge of Probate for Mobile County, Alabama on the following dates:
Period Date Recorded Amount
1985 9/10/86 $75,056.15
1986 3/20/88 $20,012.52
1987 11/02/90 $ 8,573.42
1988 11/02/90 $15,630.27
1989 11/02/90 $43,639.73
. Alabama Code § 6-9-192 provides:
No execution shall issue on a judgment of the district or circuit court on which an execution has not been sued out within 10 years of its entry until the same has been revived by appropriate motion or action under the Alabama Rules of Civil Procedure.
(emphasis added). | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491769/ | ORDER DENYING “MOTION OF DEFENDANT GENERAL PURPOSE STEEL, INC. TO ABSTAIN OR IN THE ALTERNATIVE TO STAY PROCEEDINGS PENDING REFERRAL TO INTERSTATE COMMERCE COMMISSION”
MICKEY DAN WILSON, Chief Judge.
Defendant General Purpose Steel, Inc. (“GPS”) moves for abstention from or stay of *879this adversary proceeding “Pending Referral to Interstate Commerce Commission.” Plaintiff Sunbelt Freight, Inc. (“Sunbelt”) objects. Upon consideration thereof, of statements of counsel made in open court, and of the record herein, the Court determines, concludes and orders as follows.
On May 6,1991, Sunbelt filed its voluntary petition for relief under 11 U.S.C. Chapter 11 in this Court. On September 3, 1992, Sunbelt’s plan of reorganization was confirmed. As Sunbelt observes, it is now “in the final stages of completion of [its] liquidating plan. The plan is substantially consummated, and other than the conclusion of [a] few remaining freight audit proceedings, the case is ready to close,” Sunbelt’s obj. p. 4.
The “few remaining freight audit proceedings” include the present lawsuit. On April 28, 1993, Sunbelt commenced this adversary proceeding by filing its “Complaint to Recover Motor Carrier Undercharges” against eight different defendants. By now, only one defendant remains, namely GPS.
The complaint alleges that Sunbelt “was ... a common motor carrier operating in interstate commerce ...;” that GPS “tendered freight to [Sunbelt] for transportation in interstate commerce ...;” that Sunbelt performed the services “subject to the ... tariff rates and rules” prescribed by the Interstate Commerce Commission (“ICC”); that Sunbelt “compared the commodities, weights, point of origin, destinations and declared value of each shipment to the applicable tariff rates and rules provisions that [Sunbelt] had filed with the ICC which were effective on the applicable dates of shipment” and billed GPS accordingly; and that GPS was billed for $3,354.19 and ha[s] refused to pay such sum ...,” complaint ¶¶3, 5, 6, 11. Sunbelt prayed for judgment against GPS for the total bill of $3,354.19 “with interest and costs,” complaint p. 5. GPS’ answer admits that “from time to time [GPS] engaged the services of [Sunbelt],” but denies that GPS owes Sunbelt “in any amount whatsoever,” answer ¶¶ 5, 6. GPS also asserts various “Affirmative Defenses,” including the following: that “[s]ome or all of the freight charges sought to be collected ... are unreasonable, and therefore unlawful under [§] 10701(a) of the Interstate Commerce Act,” aff. def. ¶ 4; that Sunbelt’s tariff rates do not conform to miscellaneous regulations and procedures of the ICC; that Sunbelt’s “common carrier tariffs are not applicable to such shipments” because Sunbelt was acting not as a “common carrier” but as a “motor contract carrier” or “property broker” or “shipper’s agent” or “surface freight forwarder,” id. ¶¶ 11, 12; and that GPS “is entitled to set off and/or recoup ... any mutual debts or claims it may have against [Sunbelt],” id. ¶ 16.
On August 3,1993, a scheduling conference was held. On August 5, 1993, a scheduling order was filed which set pre-trial conference for October 27, 1993 and trial for November 8, 1993.
On September 16, 1993, GPS filed its “Motion ... to Abstain or in the Alternative to Stay Proceedings Pending Referral to Interstate Commerce Commission” and a “Brief in Support ...” thereof. Appended to said “Brief in Support ...” was an “Affidavit of Morton Chatkin, Traffic Manager [of GPS],” which recited in pertinent part as follows:
In my opinion, the rates contained in the tariff now relied upon by the Trustee of Sunbelt are patently unreasonable.
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Also appended to my affidavit hereto are paid freight bills and/or rate sheets evidencing the rates and charges paid by my company for transportation services identical to those involved here. These documents buttress my conviction and assertion that the rates which Sunbelt now seeks to collect would be found reasonable by ... the [ICC],
affidavit p. 4. On October 12, 1993, Sunbelt filed its “... Objection ...” to GPS’ motion. The motion and objection came on for hearing on October 27, 1993. After hearing, the Court took the matter under advisement. Pre-trial conference scheduled for October 27,1993, and trial scheduled for November 8, 1993, were stricken.
A preliminary issue concerns how long it might take ICC to issue its ruling if this matter were referred. Other Courts have found that “the ICC has an impenetrable backlog of rate reasonableness cases, some of *880which have been pending before the agency for as many as eight years,” In re Roberts Carrier Corp., 157 B.R. 109, 116 (B.C., M.D.Tenn.1993). GPS informs the Court that ICC has promised to penetrate the “impenetrable backlog” and to dispose of all rate reasonableness eases within one year after their referral. Sunbelt points to the example of a case before the District Court of this District, namely Emporium Motor Freight v. Evans Box Manufacturing Corporation, Case No. CIV-91-C-461-E, which was referred to ICC in March 1992 and was ruled on by ICC in June 1993, fifteen months later. Sunbelt proposes that “[t]his is about the shortest length of time one can expect a case to be delayed if referred to the ICC,” Sunbelt’s obj. p. 5. For purposes of this opinion, this Court determines that referral to the ICC will require an additional delay of at least one year.
GPS states that “[t]his adversary proceeding is basically an action to collect accounts receivable, involving claims independent of bankruptcy law, and is not a core proceeding,” motion p. 2 ¶ 3. This Court can hear non-core proceedings, though its power to make final disposition thereof is limited, 28 U.S.C. § 157(a), (e).
But GPS does not ask this Court merely to acknowledge non-core limitations on finality of its decision. GPS asks this Court to either (1) “pursuant to 28 U.S.C. § 1334(c)(2) ... abstain from further proceedings,” or (2) “stay and suspend further proceedings herein, pending referral to the ICC ...,” motion p. 3 ¶¶5, 6. The reference to 28 U.S.C. § 1334(c)(2), so-called “mandatory abstention,” appears to be in error, since GPS in its brief argues only 28 U.S.C. § 1334(c)(1), so-called “discretionary abstention.”
Although GPS speaks of “referral” to the ICC, there is no procedure whereby a proceeding pending before a court can be “referred” (transferred or removed) to an administrative tribunal like the ICC, Reiter v. Cooper, 507 U.S. -, -n. 3, 113 S.Ct. 1213, 1220 n. 3, 122 L.Ed.2d 604, 617 n. 3 (1993) (hereinafter “Reiter v. Cooper”). GPS would have this Court abstain from or stay its own proceeding, so that the parties may commence a separate proceeding concerning the same issues before the ICC. This Court is asked, not to refer, but to defer, to the ICC.
GPS asks this Court to defer to the ICC for one reason. GPS asserts that its “affirmative defenses” listed above involve “issues over which the ICC ... has primary jurisdiction,” motion p. 3 ¶ 5.
49 U.S.C. § 10761(a) provides that a motor carrier subject to the Interstate Commerce Act (“ICA”) “may not charge or receive a different compensation for ... transportation or service than the rate specified in the tariff’ filed with the ICC, although this filed “rate ... [as well as any] classification, rule, or practice provided by a carrier ... must be reasonable.” Pursuant thereto, the U.S. Supreme Court has held that
Under the interstate commerce act, the rate of the carrier duly filed is the only lawful charge. Deviation from it is not permitted upon any pretext. Shippers and travelers are charged with notice of it, and they as well as the carrier must abide by it, unless it is found by the [ICC] to be unreasonable. Ignorance or misquotation of rates is not an excuse for paying or charging either less or more than the rate filed. This rule is undeniably strict and it obviously may work hardship in some cases, but it embodies the policy which has been adopted by Congress in the regulation of interstate commerce in order to prevent unjust discrimination,
Louisville & Nashville R.R. Co. v. Maxwell, 237 U.S. 94, 97, 35 S.Ct. 494, 495, 59 L.Ed. 853, 855 (1915). Three-quarters of a century later, the Supreme Court continues to insist that enforcement of the filed rate is
essential to preventing price discrimination and stabilizing rates ... This rigid approach [i]s deemed necessary to prevent carriers from intentionally “misquoting” rates to shippers as a means of offering them rebates or discounts,
Maislin Industries, U.S., Inc. v. Primary Steel, Inc., 497 U.S. 116, 126-127, 110 S.Ct. 2759, 2766, 111 L.Ed.2d 94, 108-109 (1990) (hereinafter “Maislin”). This rule of rigid adherence to the filed rate as the only lawful rate, notwithstanding occasional “harsh ef*881fects,” id., 497 U.S. p. 128, 110 S.Ct. p. 2766, 111 L.Ed.2d p. 109, is known as the “filed rate doctrine.”
Courts adhere strictly to the filed rate, precisely because carriers and shippers do not. Specially negotiated rates undercutting the filed rates and subverting the ICA’s regulatory scheme are commpn. So are lawsuits brought by carriers who decide post delicto that they should have charged the lawful rate.
The well-worn choreography for these eases involves a motor carrier’s action against a shipper to collect for undercharges; that is, to collect the difference between the higher rate which the carrier has filed with the [ICC] ... and the rate which the parties had negotiated,
Matter of Caravan Refrigerated Cargo, Inc., 864 F.2d 388, 388-89 (5th Circ.1989), cert. den. sub nom. Supreme Beef Processors, Inc. v. Yaquinto, 497 U.S. 1010, 110 S.Ct. 3254, 111 L.Ed.2d 763 (1990), abrogated on other grounds by Advance United Expressways, Inc. v. Eastman Kodak Company, 965 F.2d 1347 (5th Circ.1992), which in turn was overruled in part by Reiter v. Cooper, as acknowledged by Advance United Expressways, Inc. v. Eastman Kodak Company, 990 F.2d 184 (5th Circ.1993).
Shippers’ standard defenses against such ‘undercharge’ actions have been (1) that the carrier’s attempt to collect more than the agreed-upon rates is an ‘unreasonable practice’ proscribed by the [ICA], see § 10701(a), and (2) that the tariff rates were unlawful because they were unreasonably high, see ibid.,
Reiter v. Cooper, 507 U.S. p. -, 113 S.Ct. p. 1216, 122 L.Ed.2d p. 613. The first defense, that enforcement of the filed rate is itself an “unreasonable practice,” was an attempt to turn the ICA against itself. This perverse argument was rejected by the Supreme Court in Maislin, thus eliminating the first defense in undercharge cases. The second defense, that a filed rate is “unreasonable,” continues to appear in undercharge cases. With it there now appear other defenses, such as that the filed rate is inapplicable because the carrier which filed them is not a “common carrier” but a “motor contract carrier” or some other variety of carrier.
Determination of what is an “unreasonable rate” or “common carrier” clearly can be made by the ICC. Whether such determinations must be made by the ICC is a different question. No statute deprives courts of jurisdiction, or requires courts to defer to the ICC, in such matters. There does exist a conditional restraint which courts have imposed upon themselves, called the “doctrine of primary jurisdiction.”
The doctrine of primary jurisdiction, like the rule requiring exhaustion of administrative remedies, is concerned with promoting proper relationships between the courts and administrative agencies charged with particular regulatory duties. “Exhaustion” applies where a claim is cognizable in the first instance by an administrative agency alone; judicial interference is withheld until the administrative process has run its course. “Primary jurisdiction,” on the other hand, applies where a claim is originally cognizable in the courts, and comes into play whenever enforcement of the claim requires the resolution of issues which, under a regulatory scheme, have been placed within the special competence of an administrative body; in such a case the judicial process is suspended pending referral of such issues to the administrative body for its views.
No fixed formula exists for applying the doctrine of primary jurisdiction. In every case the question is whether the reasons for the existence of the doctrine are present and whether the purposes it serves will be aided by its application in the particular litigation. These reasons and purposes have often been given expression by this Court. In the earlier cases emphasis was laid on the desirable uniformity which would obtain if initially a specialized agency passed on certain types of administrative questions. More recently the expert and specialized knowledge of the agencies involved has been particularly stressed. The two factors are part of the same principle, “now firmly established, that in cases raising issues of fact not within the conventional experience of judges or cases requir*882ing the exercise of administrative discretion, agencies created by Congress for regulating the subject matter should not be passed over ... Uniformity and consistency in the regulation of business entrusted to a particular agency are secured, and the limited functions of review by the judiciary are more rationally exercised, by preliminary resort for ascertaining and interpreting the circumstances underlying legal issues to agencies that are better equipped than courts by specialization, by insight gained through experience, and by more flexible procedure,”
U.S. v. Western Pacific Railroad Company, 352 U.S. 59, 63-65, 77 S.Ct. 161, 164-66, 1 L.Ed.2d 126, 132 (1956) (hereinafter “Western Pacific”) quoting Far East Conference v. U.S., 342 U.S. 570, 574-575, 72 S.Ct. 492, 494-495, 96 L.Ed. 576, 582 (1952); and see Marshall v. El Paso Natural Gas Co., 874 F.2d 1373 (10th Circ.1989). It must be emphasized that the doctrine of primary jurisdiction is not “an abstraction to be called into operation at the whim of the pleadei’,” Western Pacific 352 U.S. p. 69, 77 S.Ct. p. 167, 1 L.Ed.2d p. 135. Rather, it is a pragmatic rule of judicial deference “based on the particular facts of each case,” id.
[A] ... court in its discretion should invoke primary jurisdiction and defer only if the benefits of obtaining the agency’s aid outweigh the need to resolve the litigation expeditiously. The ... court may consider many factors in striking this balance ...,
Gulf States Utilities Co. v. Alabama Power Co., 824 F.2d 1465, 1473 (5th Circ.1987) quoted with approval in Mical Communications, Inc. v. Sprint Telemedia, Inc., 1 F.3d 1031, 1038 (10th Cire.1993). It is even held that, to guard against unnecessary delay and expense, the doctrine of primary jurisdiction should be invoked “seldom,” Locust Cartage Co. v. Transamerican Freight Lines, Inc., 430 F.2d 334, 340 n. 5 (1st Circ.1970), cert. den. 400 U.S. 964, 91 S.Ct. 365, 27 L.Ed.2d 383 (1971), “reluctantly],” Mississippi Power & Light Co. v. United Gas Pipe Line Co., 532 F.2d 412, 419 (5th Circ.1976), cert. den. 429 U.S. 1094, 97 S.Ct. 1109, 51 L.Ed.2d 541 (1977), and “sparingly,” Red Lake Band of Chippewa Indians v. Barlow, 846 F.2d 474, 476 (8th Circ.1988) citing U.S. v. McDonnell Douglas Corp., 751 F.2d 220, 224 (8th Circ.1984).
According to GPS, the case of Reiter v. Cooper holds “in effect, that the ICC has primary jurisdiction over rate reasonableness type issues, and ... approve[s] the practice of ‘referring’ the issue of rate reasonableness and determination of unlawful rates to the ICC,” brief p. 8. This Court reads Reiter v. Cooper to hold nearly the opposite. Before analyzing the case itself, the Court discusses its legal context.
Before Reiter v. Cooper, the U.S. Supreme Court had never reached the issue of whether or to what extent the ICC has “primary jurisdiction” in cases involving issues of allegedly unreasonable rates. In Maislin, the District Court had “f[ound] the ... matters to be within the primary jurisdiction of the ICC ... [and] stayed the proceeding ... and referred the case to the [ICC],” 497 U.S. p. 122, 110 S.Ct. p. 2764, 111 L.Ed.2d p. 106. The Supreme Court was not asked to, and did not, review this part of the decision below. The Supreme Court noted that “[t]he issue of the reasonableness of the tariff rates is open for exploration on remand,” 497 U.S. p. 130 n. 10, 110 S.Ct. p. 2768 n. 10, 111 L.Ed.2d p. 110 n. 10, but made no comment on how such “exploration” might take place. Accordingly, the Court of Appeals for the Fourth Circuit determined as follows:
... [T]he question remains of whether the cases should be remanded for re-referral to the ICC. This question is one that the Supreme Court has not decided and on which there is no precedent in this circuit ... We believe that the Court’s decisions are correctly read as taking no position on whether re-referral to the ICC is required in such cases,
In re Carolina Motor Express, Inc., 949 F.2d 107, 110 (4th Circ.1991). This decision was appealed to the Supreme Court under the name of Reiter v. Cooper.
In 1986, Carolina Motor Express, Inc. (“Carolina”) filed bankruptcy. Langdon M. Cooper (“Cooper”) was appointed Trustee. Cooper sued some of Carolina’s former customers, including Peter C. Reiter and others (“Reiter”), to recover undercharges. Reiter *883asserted, among other things, that Carolina’s filed rates were “unreasonable;” and moved for referral of this issue to the ICC. The Bankruptcy Court denied Reiter’s motion and entered judgment for Cooper, In re Carolina Motor Express, Inc., 84 B.R. 979 (B.C., W.D.N.C.1988). The Bankruptcy Court held that the “filed rate doctrine” required judgment for Cooper absolutely regardless of anything else, so long as the filed rate had not previously been “found unlawful” by the ICC, 84 B.R. p. 989. The District Court reversed, referred the reasonable-rate question to the ICC, and apparently stayed other proceedings meanwhile. The Court of Appeals for the Fourth Circuit reversed the District Court, In re Carolina Motor Express, Inc., 949 F.2d 107 (4th Circ.1991). The 4th Circuit Court ruled as follows: the “filed rate” doctrine compelled judgment in favor of Cooper on his complaint to recover the official tariff charges, whether these official rates were “reasonable” or not; if Reiter wished to challenge the reasonableness of the filed rates, Reiter could do so, but only by separate action before the ICC; and if ICC agreed with him, then Reiter could seek “reparations from the carrier,” 949 F.2d p. 110. The 4th Circuit believed that such bifurcation of the case was a practical necessity: any other course would encourage “shippers routinely to contest the validity of the carrier’s rates in order to delay paying the carrier’s filed rate,” id. On appeal to the Supreme Court, it was the carrier (or rather its Trustee) who argued that the ICC had “primary jurisdiction” of the rate-reasonableness question. That is, the Trustee argued that the Bankruptcy and District Courts had exclusive jurisdiction of the Trustee’s complaint (which the ICC could not entertain), while the ICC had primary jurisdiction of Reiter’s defense (which the courts could not entertain), so that the 4th Circuit’s bifurcation of complaint and defense was the only possible procedure under the circumstances. The Supreme Court, per Mr. Justice Scalia, disagreed.
According to Justice Scalia, the dispute came to the Supreme Court in a rather confused state. The doctrine of primary jurisdiction had not been properly put before the Court at all, because “the result that [the Trustee] seek[s] would be produced, not by the doctrine of primary jurisdiction, but by the doctrine of exhaustion of administrative remedies,” Reiter v. Cooper, 507 U.S. p. -, 118 S.Ct. p. 1220, 122 L.Ed.2d p. 618. The Trustee’s proposition, that “the doctrine of primary jurisdiction requires [defendants] initially to present their unreasonable-rate claims to the ICC ... rather than to a court,” was “mistaken,” id. p. -, 113 S.Ct. p. 1219, 122 L.Ed.2d p. 617 (emphasis added). More important, Reiter’s defense was actually not a “defense” at all. “[A]n unreasonable-rate claim is technically a counterclaim rather than a defense,” id. p. -, 113 S.Ct. p. 1218, 122 L.Ed.2d p. 615. Such counterclaims were brought by the shipper against the carrier “for damages ... in the amount of the difference between the tariff rate and the rate determined to be reasonable,” id. p. -, 113 S.Ct. p. 1217, 122 L.Ed.2d p. 614. They merely happened to be asserted “defensively” in lawsuits of this type, in the nature of “ ‘set-offs and recoupments,’ ” id. Such a defensive counterclaim might, or might not, “be adjudicated separately from the plaintiffs claim to which it applies,” id. p. -, 113 S.Ct. p. 1218, 122 L.Ed.2d p. 615. The decision whether or not to bifurcate “is largely discretionary ... to be exercised in light of ‘judicial administrative interests as well as the equities involved,’ ” id. quoting Curtiss-Wright Corp. v. General Electric Co., 446 U.S. 1, 8, 100 S.Ct. 1460, 1464, 64 L.Ed.2d 1 (1980). In terms of modern procedure, it was a question of whether or not to enter separate final judgment under F.R.Civ.P. 54(b). In this case, “[njeither the Court of Appeals nor the District Court made the ‘express determination’ required under Rule 54(b) for entry of a separate judgment,” id. p.-, 113 S.Ct. p. 1221, 122 L.Ed.2d p. 619. Moreover, “the equities” in the matter, especially the effects of “bankruptcy ... [and] insolvency,” were unclear, id. Accordingly, the Supreme Court reversed and remanded, so that such issues might be taken up by the courts below.
As a court of appeal, the Supreme Court was apparently concerned mainly with ap-pealability — with implementing F.R.Civ.P. 54(b), in an exercise of accommodating the best interest of the parties in the particular case with “ ‘the historic federal policy against *884piecemeal appeals,’ ” Reiter v. Cooper, 507 U.S. p. -, 113 S.Ct. p. 1218, 122 L.Ed.2d p. 615, quoting Sears, Roebuck & Co. v. Mackey, 351 U.S. 427, 438, 76 S.Ct. 895, 901, 100 L.Ed. 1297, 1307 (1956). The Supreme Court did not clearly distinguish separate final judgment under F.R.Civ.P. 54(b) from primary jurisdiction — apparently because the Court saw the two rules as functionally similar, so that a clear distinction between them was unnecessary. Both rules are “largely discretionary,” id. Here is no commandment to concede primary jurisdiction to the ICC in all reasonable-rate cases, no matter what. Here instead is a directive to use discretion according to the equities. But in this particular instance, the Supreme Court rejected the Trustee’s argument that the ICC had primary jurisdiction, and reversed the Court of Appeals’ decision to bifurcate the case. This is why Reiter v. Cooper actually holds nearly the opposite of what GPS says it holds.
This Court must apply these principles to the matter at bar.
Since the ICC does not have exclusive initial jurisdiction of this matter, the doctrine of primary jurisdiction (and not exhaustion of administrative remedies) applies here. This Court must determine, according to “no fixed formula,” what disposition would best “promote] proper relationships between [this Bankruptcy Court] and [the ICC],” taking into account such factors as “desirable uniformity” “under a regulatory scheme,” “expert and specialized knowledge,” possible “issues of fact not within the conventional experience of judges” or “exercise of administrative discretion,” “the limited functions of review by the judiciary,” and “more flexible procedure,” U.S. v. Western Pacific Railroad Company, supra. It is a question of “reasons ... and ... purposes” as applied “in the particular litigation,” id. It is also a question of “equities,” especially those equities involving the effects of “bankruptcy ... [and] insolvency,” Reiter v. Cooper, 507 U.S. p. -, 113 S.Ct. p. 1217, 122 L.Ed.2d p. 614.
“Many courts have held that ‘[t]o justify referral to the ICC, the shipper must at least make a threshold showing that the filed rates are unreasonable,’” In re Roberts Carrier Corp., 157 B.R. p. 114 (quoting and citing cases). Here, GPS offers its own traffic manager’s opinion that Sunbelt’s filed rates are “patently unreasonable,” and copies of documents tending to show that GPS often pays rates lower than Sunbelt’s filed rates. The self-serving, conclusory, bald statement of opinion is the same as no evidence at all. The evidence of other rates is ambivalent — it may show that Sunbelt’s legal rates are too high, or it may show merely that GPS prefers to do business by taking advantage of illegal price wars among carriers. For purposes of this opinion, this Court determines that the evidence of other rates, though ambivalent, is sufficient to make a threshold showing that Sunbelt’s rates may be unreasonable. This is one factor which “justifies” deferral to the ICC. But it is not the only factor; and it does not compel deferral to the ICC. Other factors must still be considered.
At hearing, GPS conceded as much. GPS declared that, if this Court did refer the matter to ICC and ICC proved dilatory, this Court might then in its sound discretion take remedial action notwithstanding ICC’s “primary jurisdiction.” What is discretionary a year from now, is discretionary now. Of course, in exercising its discretion now, the Court must consider whether it is worthwhile to wait a year to see what ICC may do.
In most cases, it is worthwhile to wait on ICC. The average lawsuit in Federal District Court will take at least a year to go to judgment anyway; so little time is lost (and some may even be saved) by allowing ICC to spend a year or so “clearing the ground.” Further, the dispute arises in the course of ongoing business between the parties, and its resolution necessarily affects future regulation of interstate commerce. Under such circumstances, there is really no reason why a Federal court should not defer to the ICC. It is therefore not surprising that Federal courts have often conceded “primary jurisdiction” to the ICC.
But this is not the usual case. This is a bankruptcy ease in its last throes.
[Sunbelt] is in the final stages of completion of a liquidating plan. The plan is substantially consummated, and other than *885the conclusion of the few remaining freight audit proceedings, the case is ready to close ... Referral to the ICC will only cause substantial and unnecessary delay in closing the case without conferring any benefit to either party, the creditors of the Estate or the public. Referral would only add another rate case (a small one at that) to the ICC’s docket and cause added expense to both parties,
Sunbelt’s obj. p. 4. The ICC will be especially uninterested in this case because Sunbelt has already gone out of business.
A decision by this Court ... in this particular case ... will not impact or affect the regulation of the trucking industry nor bear upon [Sunbelt’s] non-existent operations. The ... fact-based determination in this proceeding is not susceptible of impacting the industry regulated by the ICC,
id. p. 3. The parties most interested in resolution of this proceeding (apart from the plaintiff and defendant themselves) are the creditors of Sunbelt, who have already been waiting for two years for such repayment of their claims as Sunbelt’s estate can give them.
Factors of time and laches play a part in determinations of primary jurisdiction, Mississippi Power & Light Co. v. United Gas Pipe Line Co., supra; In re Sharm Express, Inc., 127 B.R. 620, 625 (D.Minn.1991). In the matter now before this Court, GPS did not even move for referral to the ICC until after GPS had answered and this Court had issued its scheduling order setting trial for November 8, 1993. If GPS had not moved for referral to the ICC, this adversary proceeding would already have been tried by this Court on November 8, 1993. It is certain that ICC could not have made its ruling sooner than this Court could have brought the matter to trial — that is, between September 16, 1993 (when GPS filed its motion for referral) and November 8, 1993 (when this matter would have come on for trial before this Court). It is unlikely in the extreme that ICC can make its ruling sooner than this Court can bring the matter back to trial.
Indeed, it appears that referral of this matter to ICC would merely add to ICC’s burdens, slowing down ICC’s consideration of other rate-reasonableness eases involving “live” businesses which may be much more important to ICC’s effective administration. It is possible, or even likely, that this Court can best help ICC by disposing of this case without inflicting it on ICC.
Under such circumstances, it is not worthwhile to wait on ICC. Delay is not worth this Court’s while, Sunbelt’s while, the creditors’ while, or ICC’s while. It is not even worth GPS’ while, except insofar as long delay and repetitive litigation would put pressure on Sunbelt to settle in GPS’ favor. The latter is not a legitimate reason for referral to the ICC. A court should “refer a matter to the ICC when it believes the agency’s rate determination will assist in resolving the entire dispute,” Covey v. ConAgra, Inc., 763 F.Supp. 479, 482 (D.Colo.1991). Here, referral to the ICC would assist in not resolving the dispute.
The same considerations apply to the issue of whether Sunbelt was acting as a “common carrier.” However, even in the absence of special circumstances, other courts have held that “[t]he question whether this debtor was ... a ‘common carrier’ is a run-of-the-mill legal question” which is within the competence of courts and is not within the ICC’s primary jurisdiction, In re Roberts Carrier Corp., 157 B.R. pp. 111-113 (citing cases). This Court agrees.
All things considered, here “the benefits of obtaining the agency’s aid” are outweighed by “the need to resolve the litigation expeditiously,” Gulf States Utilities Co. v. Alabama Power Co., supra, quoted in Mical Communications, Inc. v. Spring Telemedia, Inc., supra. Therefore, this Court need not and should not defer to the ICC for its preliminary determination of any of the issues in this adversary proceeding. In other words, none of the issues in this adversary proceeding are within the ICC’s “primary jurisdiction.”
Accordingly, the “Motion of Defendant General Purpose Steel, Inc. to Abstain Or In the Alternative to Stay Proceedings Pending Referral to Interstate Commerce Commission” is hereby denied.
AND IT IS SO ORDERED. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491770/ | ORDER WITHDRAWING OPINION
LEIF M. CLARK, Bankruptcy Judge.
This court issued a decision in the foregoing adversary proceeding, denying the motion of the RTC to dismiss for lack of subject matter jurisdiction, and entering findings and conclusions in support of a judgment in favor of the plaintiff. The decision is published at 157 B.R. 297. Since the publication of that decision, the parties have entered into a global settlement, incident to which a plan of reorganization has now been confirmed. One aspect of the settlement was the request of the parties that this court withdraw the above-referenced decision, a request that this court granted, in the interests of furthering the settlement. Accordingly, it is the order of this court that the Decision and Order on Defendant’s Motion to Dismiss, or, in the Alternative, for Summary Judgment, be and the same is hereby vacated and withdrawn.
So ORDERED. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491771/ | MEMORANDUM OF OPINION AND ORDER
RANDOLPH BAXTER, Bankruptcy Judge.
I.
In this voluntary Chapter 7 proceeding, Brian A. Bash (the Trustee) seeks the recovery of certain preferential transfers made by The George Worthington Company (the Debtor) within the ninety-day period prior to bankruptcy petition filing. Defendant, American Tool Companies, Inc. (ATC) caused to be filed its motion for summary judgment. The issue to be resolved is whether the preferential transfers are avoidable and recoverable by the Debtor’s bankruptcy estate.
II.
The parties orally stipulated at the summary judgment motion hearing that the two payments made by the Debtor with two checks, were made preferentially pursuant to § 547(b) of the Code. Notwithstanding the stipulation, American Tool argued that the preferential payments it received from the Debtor are not avoidable, as an applicable exception to avoidance is available under § 547(c) of the Code.
Generally, where the six elements under § 547(b) have been sufficiently demonstrated by the moving party, the subject transfer is an avoidable preference and, consequently, is recoverable for the benefit of the Debtor’s estate pursuant to § 550 of the Code. The only exceptions to such recovery are found under § 547(c). Herein, American Tool alleges that provisions of § 547(c)(4) are applicable to the facts at bar and, effectively, render the preferential payments nonavoida-ble.
The exception set forth under § 547(c)(4) is commonly referred to as the “substantial new value” rule. Generally, it protects lenders who extend further credit to a financially distressed debtor after a previous debt has been repaid. In pertinent part, § 547(e)(4) provides:
The trustee may not avoid under this section a transfer to or for the benefit of a creditor, to the extent that, after such transfer, such creditor gave new value to or for the benefit of the debtors—
(A) not secured by an otherwise unavoidable security interest; and
(B) on account of which new value the debtor did not make an otherwise un*117avoidable transfer to or for the benefit of such creditor.
Notwithstanding the above-quoted language, the Bankruptcy Code does not allow all preferential payments made during the preference period to be netted out. Section 547(e)(4) excepts transfers from preference avoidance only to the extent that, after the transfer, the creditor gave new value on an unsecured basis to the debtor. See, Energy Co-op., Inc. v. Cities Serv. Co., 130 B.R. 781, 789-90 (N.D.Ill.1991).
In this matter, the subject transfer of an interest of the Debtor was made by two (2) checks. In order to determine the extent to which new value was given after the transfers by check, it first must be determined when the transfer occurs for purposes of § 547(c)(4). A majority of the appellate courts considering this issue hold that the transfer is made when the cheek is received by the creditor. See, Kroh Bros. Devel. Go. v. Continental Constr. Engineers, Inc., 930 F.2d 648, 650-51 (8th Cir.1991); In re Bellanca Aircraft Corp., 850 F.2d 1275, 1283-84 (8th Cir.1988); In re Fasano/Harriss Pie Co., 71 B.R. 287, 289 (W.D.Mich.1987); Leathers v. Prime Leather Finishes Co., 40 B.R. 248, 251 (D.Me.1984); Gold Coast Seed Co. v. Spokane Seed Co., 30 B.R. 551, 553 (B.A.P. 9th Cir.1983). See also, Epstein, et al., Bankruptcy, p. 343 (1993).
The (c)(4) exception applies on a payment-by-payment basis. Procedurally, the mechanics of (c)(4) are applied in the following manner1:
1. First, identify a payment (or other transfer) that is preferential under § 547(b);
2. Then, check to see if the avoidable amount of the preference can be reduced by the amount of later-advanced new value that qualifies under (c)(4);
3. Finally, test new value for qualification under (c)(4) by seeing, if under (c)(4)(A) and (B), it was accompanied by a payment (or other transfer, or was secured) which payment was itself unavoidable.
Applying those mechanics to the matter at hand, ATC received a check from the Debtor on December 12, 1990 in the amount of $4,965.00. On the same date, ATC received another check from the Debtor in the amount of $840.84. Undisputedly, both checks were for goods to be delivered by ATC to the Debtor. Subsequently, on December 14, 1990, ATC shipped goods to the Debtor valued at $9,609.73, with shipping terms of “F.O.B. destination”. On December 18, 1990, the Debtor received delivery of ATC’s goods at the Debtor’s Mentor, Ohio location. The Debtor initially filed its voluntary petition for relief under Chapter 11 of the Bankruptcy Code on February 4, 1991 but was subsequently converted to Chapter 7 proceedings on July 10, 1991. On June 29, 1993, the Trustee commenced this action to avoid both of the subject payments and recover them for the benefit of the Debtor’s estate.
The parties having stipulated that the transfers by check were made preferentially, the next step is to determine whether the avoidable amount of the preference can be reduced by the amount of later advanced new value pursuant to § 547(c)(4). The goods shipped by ATC on December 14,1990 to the Debtor were shipped subsequent to ATC receiving both checks from the Debtor and also were valued in an amount ($9,609.73) which was substantially greater than the amount of both checks.
Throughout the § 547(c) statutory exceptions to an otherwise voidable transfer, where the transferred interest is made by check, the transfer is generally deemed to have occurred when the check was actually delivered to the creditor if the check was paid in due course. See, In re Kroh Bros., 930 F.2d 648, 650-51 (8th Cir.1991), on remand, 131 B.R. 717 (Bankr.W.D.Mo.1991); In re Jolly N., Inc., 122 B.R. 897, 908-09 (Bankr.D.N.J.1991); In re Wingspread Corp., 120 B.R. 8, 11-13 (Bankr.S.D.N.Y.1990); In re Amarex, 88 B.R. 362, 365 (W.D.Okla.1988). For this rule to apply, the parties necessarily must intend to rely on the check as a cash transaction and not when the checks were postdated and were not treated *118as cash by the parties thereon. See, In re N.Y. City Shoes, Inc., 880 F.2d 679, 683-85 (3d Cir.1989); In re Bob Grissett Golf Shoppes, Inc., 78 B.R. 787, 791-92 (Bankr.E.D.Va.1987). It has not been demonstrated that this is a concern in the matter at bar.
In determining whether new value has been given where goods and/or services are provided by the creditor, the majority view is the new value is given when the services are actually rendered or when the goods are actually delivered, rather than when the creditor chooses to calculate the price of the goods or services or to bill for them. See, Jolly N., Inc., supra at 908; In re Camelot Motors Corp., 86 B.R. 520, 522 (Bankr.W.D.Mich.1988); In re Excel Enterprises, Inc., 83 B.R. 427, 431 (Bankr.W.D.La.1988). Adopting the majority view to the matter at hand, the goods delivered by ATC to the Debtor occurred subsequent to ATC’s receipt of both checks and constituted substantial new value beneficial to the Debtor.
This result is consistent with the rationale of the (e)(4) exception which rests on the premise that repayment of preferences should not be extracted from helpful creditors who, after the preferential payment, extended new unsecured credit to the debtor and who will suffer in bankruptcy as an unsecured creditor to the extent of that credit. This premise comports with the notion that the preference policy is designed to encourage creditors to work with a financially distressed debtor. Id.
The Trustee’s rebanee on the U.S. Supreme Court’s decision in Barnhill v. Johnson is misplaced in this matter. — U.S. -, 112 S.Ct. 1386, 118 L.Ed.2d 39 (1992). That case concerned itself with the time of transfer for purposes of § 547(b). Therein, the Supreme Court held that, for § 547(b) determinations, the time of transfer when transfer is made by check is the point in time when the drawee bank honors the check. For § 547(c)(4) purposes, however, when payment is made by check, the transfer occurs at the time of delivery, as § 547(c)’s exceptions focus on whether opt-out behavior is taking place, not on whether assets are being taken out of the reach of creditors.2
In other respects, provisions of § 547(e)(4)(A) and (B) do not adversely affect the extent of the new value given by ATC. Consequently, the “new value” exception of § 547(c)(4) is properly asserted by ATC, and there remains no genuine issue of material fact to warrant further attention by the Court. Accordingly, judgment for Defendant ATC is proper as a matter of law, (See Rule 56(c), Fed.R.Civ.P.) and ATC’s motion for summary judgment is hereby granted.
IT IS SO ORDERED.
JUDGMENT
At Cleveland, in said District, on this 10th day of January, 1994.
A Memorandum Of Opinion And Order having been rendered by the Court in these proceedings,
IT IS THEREFORE ORDERED, ADJUDGED AND DECREED that the motion of American Tool Companies, Inc. for summary judgment is granted.
. Warren and Westbrook, The Law Of Debtors And Creditors, p. 523 (1991).
. See, Baird, D.G., The Elements Of Bankruptcy, p. 180, F.N. No. 10 (1993). | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491772/ | ORDER DENYING MOTION FOR EXPENSES AND FEES
WILLIAM A. CLARK, Bankruptcy Judge.
This matter is before the court upon the defendant’s Motion For Expenses And Fees On Failure To Admit, the Memorandum of defendant and the Memo Contra by plaintiff/debtor.’
Defendant/creditor’s counsel relies upon Fed.R.Civ.P. 37(c) which reads as follows:
If a party fails to admit ... the truth of any matter as requested under Rule 36, and if the party requesting the admissions thereafter proves ... the truth of the matter, the requesting party may apply to the court for an order requiring the other party to pay the reasonable expenses incurred in making that proof, including reasonable attorney’s fees. The court shall make the order unless it finds that (1) the request was held objectionable pursuant to Rule 36(a), or (2) the admission sought was of no substantial importance, or (3) the party failing to admit had reasonable ground to believe that the party might prevail on the matter, or (4) there was other good reason for the failure to admit.
Defendant’s counsel had filed requests for admission which, after the initial objection, were resolved by plaintiff refusing to admit numbers 4, 5, 6 and 7.
Plaintiff continues to contend that such requests for admission were improper because the requests were for admission of mixed fact and law which were ultimate issues in the case, citing several cases from the decade 1960 dealing with requests for conclusions of law. Plaintiff further contends that the attorney fees are not warranted because the plaintiff had reasonable ground to believe he might prevail on the nondischargeability issues before the court.
The court has reviewed the three patent infringement cases cited by defendant in support of the granting of attorney fees for failure to admit requests for admission. Those cases are Chemical Engineering Corp. v. Essef Industries, Inc., 795 F.2d 1565 (Fed.Cir.1986); Campbell v. Spectrum Automation Co., 601 F.2d 246 (6th Cir.1979); New Idea Farm Equipment Corp. v. Sperry Corp., 916 F.2d 1561 (Fed.Cir.1990). In the Chemical Engineering case for patent infringement, fees were allowed where the plaintiff refused to admit the truth of the fact that a water test had been conducted with certain results. In the Campbell case the court allowed attorney fees where the plaintiff refused to admit he was not the inventor and had made prior sales of the alleged patented matter one year before the patent filing. In the New Idea Farm Equipment case the court allowed one-half of the fees where the plaintiff refused to admit that another entity had developed an attachment to a harvester to avoid running over crops before or at the same time as the alleged patent was filed.
*124In the instant ease, defendant requested plaintiff to admit that four of the plaintiffs obligations resulting from a divorce decree were in the nature of alimony, maintenance or support and, therefore, not dischargeable pursuant to Title 11 U.S.C. § 523(a)(5). Using the numbers as they appeared in the four requests for admission, the disputed requests for admission included the phrase “the obligation ... is in the nature of alimony, maintenance or support and is therefore not dis-chargeable pursuant to Title 11 U.S.C. § 523(a)(5)” in the following requests: (4) the obligation to pay $75.00 per week to defendant, (5) the obligation to pay on behalf of defendant 100% of the debts owed to J.C. Penney, Lake Jewelers and Discover Card, (6) the obligation to pay $400.00 to defendant for rent for an apartment for the defendant and minor child until the child is emancipated, and (7) the obligation that plaintiff continue to provide health insurance and uncovered extraordinary medical expenses for the wife for a period of eighteen months.
The cases cited by defendant do not support an award of attorney fees for the plaintiffs refusal to admit the ultimate facts of this adversary proceeding. The request required an admission of law and fact for which the law has only recently been clarified by the Sixth Circuit in the case of Fitzgerald v. Fitzgerald (In re John Paul Fitzgerald), 9 F.3d 517 (6th Cir.1993). In the cited patent infringement cases the law was not intertwined with the facts as the law is in nondis-chargeability matters in bankruptcy. The patent infringement eases dealt nearly exclusively with facts and little or no law mixed into the blend. The facts of those cases are very different from the instant case in which each of the requests for admission included an interpretation of case law on the issue of nondischargeability in bankruptcy law.
The law in nondischargeability issues under 11 U.S.C. § 523(a)(5) has only recently been clarified during 1993 by the Sixth Circuit Court of Appeals.
This court disagrees with plaintiffs counsel’s interpretation of Long v. Calhoun (In re Calhoun), 715 F.2d 1103 (6th Cir.1983), and its application to the issues of this case as noted in this court’s decision in Gibson v. Gibson (In re Gibson), 157 B.R. 366 (Bankr.S.D.Ohio 1993). The issues were not so clear, however, that one could have predicted with reasonable certainty the result in this case. Plaintiffs counsel’s refusal to admit what would have been the ultimate fact and law of the case was not unreasonable. More importantly, only the week before the trial of this proceeding clarification of the Calhoun doctrine occurred in the case of In re John Paul Fitzgerald, 9 F.3d 517 (6th Cir.1993). Further, the Fitzgerald case was decided two months after the denials of the requests for admission.
Within the provisions of Rule 37 of Fed. R.Civ.P. the court finds that plaintiffs refusal to admit the requests was based upon a reasonable legal ground and belief that plaintiff/debtor might prevail in this proceeding pursuant to the prevailing legal conclusions drawn from the Calhoun case at the time of the denial of the requests for admission.
For all of the above reasons, the court must deny the defendant’s motion for expenses and fees for plaintiffs failure to admit the requests for admission.
IT IS SO ORDERED. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491775/ | ORDER ON MOTION FOR RELIEF FROM ORDER TO PAY TRUSTEE
LEIF M. CLARK, Bankruptcy Judge.
CAME ON for consideration the motion of the Public School Retirement System of Missouri for relief from a “pay order” entered in this case.
Pay orders are routine practice in chapter 13 cases in this district, and are issued pursuant to 11 U.S.C. § 1325(c). PSRS maintains that it should not have to honor such an order because the source of income in this case is pension benefits from a state-mandated retirement plan. Missouri law provides that funds in the system and benefits accruing therefrom are inalienable and may not be assigned. Mo.Rev.Stat., §§ 169.090, 169.010, 169.130 (1986). PSRS argues that, under Patterson v. Shumate, — U.S. -, -, 112 S.Ct. 2242, 2246, 119 L.Ed.2d 519 (1992), the retirement fund and its benefits are not property of the estate because they are excluded under Section 541(c)(2), just as would be an ERISA retirement plan and its benefits. Therefore, concludes PSRS, the fund cannot be made the subject of a pay order under Section 1325(c).
Section 1325(e) provides that “[ajfter confirmation of a plan, the court may order any *491entity from whom the debtor receives income to pay all or any part of such income to the trustee.” 11 U.S.C. § 1325(c) (emphasis added). Section 1306(a)(2) includes as property of the estate “earnings from services performed by the debtor after the commencement of the case ...” 11 U.S.C. § 1306(a)(2). On its face, “income” encompasses far more than just “earnings for services performed by the debtor after the commencement of the ease.” The question raised by the language of these two statutory provisions is whether “income” is a generic term designed to reach all income received from whatever source, or whether it is sub rosa delimited by the definition of property of the estate found in Section 1306.
Judge Cosetti looked first to the plain language in In re Simmons, concluding that, “Nothing within the language of section 1325(c) of the Bankruptcy Code restricts the court’s attachment powers to income which meets the section 541 definition of property of the estate.” In re Simmons, 94 B.R. 74, 75 (Bankr.W.D.Pa.1988). However, both of the circuit courts that have addressed the question have assumed sub rosa that Section 1325(c) is coterminous with the expanded definition of property of the chapter 13 estate found in Section 1306. The Fourth Circuit rejected as “wooden” the trustee’s proferred interpretation of Section 1325(e) as simply an administrative provision: “Section 1325(b) [now (e) ] simply provides a means for bringing estate property realizable as future income of the debtor directly into the trustee’s control, but it does not purport to define the scope of estate property.” McLean v. Central States, S. & S. Areas Pension Fund, 762 F.2d 1204, 1209 (4th Cir.1985). The Second Circuit found that a pay order could reach a debtor’s pension benefits, but only because it also found that such benefits were not excluded by Section 541(c)(2). Regan v. Ross, 691 F.2d 81, 85 (2d Cir.1982). These two courts split on their interpretation of Section 541(c)(2), not on their interpretation of Section 1325(c). Now that the Supreme Court has resolved the latter question by Patterson v. Shumate, there is no substantive difference in their approach. Both see the reach of Section 1325(c) as coterminous with the definition of property of the estate.
Only Simmons appears to have actually held that the reach of Section 1325(c) exceeds the grasp of Section 1306, based largely on a “plain meaning” approach to the statute. The approach of the circuit courts appears to have been largely intuitive, for neither McLean nor Regan explain why they assume the reach of pay orders to be coterminous with the boundaries of property of the estate. In this court’s view, however, the circuit courts are indeed justified in relying on their intuitions.
A pay order is, first and foremost, a court order. It cannot be issued unless the court has the subject matter jurisdiction to do so. The party against whom such an order is directed is not otherwise a party to the proceeding. It is only by virtue of the debtor’s property interest in the fund in question that the court has the jurisdiction to enter an order binding on a third party. Congress has conferred broad and exclusive jurisdiction in the district court (and by extension the bankruptcy court) over property of a bankruptcy estate in Section 1334(d) of Title 28, and it is via that jurisdiction that a bankruptcy court is justified in issuing orders under Section 1325(e) to those who hold property of the estate, such as entities from whom a debtor is receiving income, to pay all or a portion of that income to the trustee. No other source of jurisdiction is available to support the validity of Section 1325(c).1
Thus, the only interpretation of Section 1325(c) that saves it from invalidity (for conferring a power beyond the subject matter of the courts to exercise in the first place) is one that limits its reach to the scope *492of property of the estate as found in Section 1306. The PSRS cannot be compelled to honor a pay order if the res in question lies outside the subject matter jurisdiction of this court. Of course, once the funds are paid over to the debtor, they become (at least conceivably) property of the estate, so it is legitimate for the trustee to consider the income realized by the debtor from this fund when she considers whether to recommend confirmation of the debtor’s plan. And similarly, the debtor is free to use these funds to fund her plan upon her receipt of them. But these are different issues from the one presented by PSRS. PSRS simply wants to be free of the onus of having to honor pay orders from bankruptcy courts. This court concludes they should be.
The motion for relief from order must be granted. The pay order is vacated.
So ORDERED.
. Section 1334(a) only gives the district court exclusive jurisdiction over the initiation of a bankruptcy case. 28 U.S.C. § 1334(a). Section 1334(b) gives the court nonexclusive jurisdiction over "civil proceedings” arising in or under or related to a case initiated under Title 11, but a pay order does not issue out of a "civil proceeding” to which the target of the order has been made a party. 28 U.S.C. § 1334(b). Only if trustees or debtors first initiated a "civil proceeding,” naming and serving the employer (or other entity) as a party thereto, could Section 1334(b) even conceivably be invoked. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491776/ | MEMORANDUM OPINION AND ORDER
ROBERT E. GINSBERG, Bankruptcy Judge.
This matter is before the court on the motion of the Defendants, Loi Tran and Biomedcare Corporation under Fed.R.Civ.P. 60(b), made applicable to adversary proceedings in bankruptcy cases by Fed.R.Bankr.P. 9024, to vacate a default judgment entered by this court in an adversary proceeding brought by the Trustee against the Defendants. For the reasons stated below, the court vacates the default judgment.1
FACTS
The Debtor, Controlled Release Technologies, Inc. (“CRT”), was in the business of developing and manufacturing biomedical products. Loi Tran (“Tran”) has been the Debtor’s president and chief executive officer since its inception in 1986. Among the Debt- or’s assets are four patents for a controlled release drug delivery system which the Debt- or manufactured and marketed under the trade name “Micros.” The Debtor obtained the patents largely as a result of Tran’s research efforts.
On February 27, 1990, an involuntary petition under Chapter 7 of the Bankruptcy Code was filed against the Debtor. After a number of hearings, the Debtor consented to the entry of an order for relief under Chapter 7 on April 5, 1990. The Debtor immediately exercised its right to convert the Chapter 7 case to one under Chapter 11. See 11 U.S.C. § 706(a). Subsequently, after, serious questions arose with respect to Tran’s man*521agement of the Debtor, his efforts to frustrate the bankruptcy case by moving the business and certain of its assets from Illinois to California, and possible material misrepresentations by Tran in his efforts to raise capital for the Debtor from public investors, the court ordered the United States Trustee to appoint a Chapter 11 trustee. On July 9, 1990, the United States Trustee appointed Andrew J. Maxwell as Chapter 11 trustee. The Trustee took over the Debtor’s assets and business in both Illinois and California to the exclusion of Tran, and Tran was denied access to the Debtor’s premises and property.
On August 1, 1990, Tran incorporated Biomedcare Corporation, a California corporation with Tran- as its sole shareholder and president. On the surface, at least, Biomed-care’s business appears to be remarkably similar to that of the Debtor.
The Trustee has filed two adversary complaints against Tran. The first of those complaints, alleging that Tran, after the order for relief was entered, converted a $10,640 check belonging to the Debtor, was filed on June 4, 1991.2 The first count of this complaint claimed that Tran fraudulently converted a check the Debtor had received from Lindvall Medical Marketing and that, soon after the order for relief was entered, Tran cashed the check and kept the proceeds. The Trustee’s second count sought $100,000 in punitive damages from Tran for the fraudulent conversion of the check.3
On July 19, 1991, the Trustee filed a second adversary complaint against Tran and the Biomedcare Corporation.4 That complaint contained five counts: (1) Count I sought a declaratory judgment that the patents, the “Micros” trade name and certain related technology, intellectual property, and trade secrets were outgrowths of the patents and thus were property of the Debtor’s estate; (2) Count II sought to enjoin the Defendants from using the patents and related property; (3) Count III sought an accounting and damages from the Defendants for their illegal use of the Debtor’s patents; (4) Count IV was an action for conversion of the patents against the Defendants; and (5) Count V was an action for breach of fiduciary duty against Tran. Pursuant to court order, preliminary pretrial statements were filed on October 7, 1991 and on October 8, 1991, the court held an initial pretrial conference on all aspects of both complaints. On January 26, 1993, the court entered summary judgment for the Trustee on Count I of this complaint, finding that the patents, trademarks, manufacturing and production sequence and processes were assets of the Debtor’s estate.
On March 23,1993, the court set a Rule 16 pretrial conference on the remaining counts in both complaints for April 19, 1993. The court directed each of the remaining Defendants in the adversary proceedings to file pretrial statements by April 17, 1993. Before the pretrial conference was convened, Defendants’ counsel, Weissberg and Associates, filed a motion to withdraw.
On April 2, 1993, at the hearing on Weiss-berg’s motion to withdraw, Barrie Yacher, on behalf of the firm, Lobin & Soren, Ltd., attempted to substitute his appearance for the Defendants’ counsel. That motion led to the following exchange:
YACHER: Your Honor, what my office asked that I say for the record is that we are getting into the case for the purpose of negotiation, and the client understands that that is what we were being hired for. If we can’t work it out at the pretrial, then we are going to ask for leave to withdraw because we are not getting into the case for the purpose of trying it.
THE COURT: Mr. Yacher, as far as I’m concerned, you are in the case. I know I have never heard of somebody getting in and saying I’ll get in for negotiation and if I can’t settle it I am out. So it’s clear in your mind, those are the terms and conditions under which you come in. *522If he [Tran] wants to hire a litigator, that’s his business. But until I let you out, you’re in.
YACHER: All right.
THE COURT: Okay?
YACHER: All right.
Having heard the court’s warning, the Lo-bin firm nevertheless substituted in for the Weissberg firm. Needless to say, neither the Weissberg nor Lobin firm filed the pretrial statements which were due on April 17, 1993 on behalf of the Defendants. At the April 19, 1993 pretrial conference, Marshall Lobin appeared on behalf of the Defendants. When the court inquired as to whether the Defendants would be filing pretrial statements in either adversary proceeding, Lobin stated that he was appearing only to discuss a possible settlement and was not there “to defend anything.” The failure of the Defendants to make an appropriate response to the court’s preliminary pretrial order and Lo-bin’s obvious lack of preparation for the conference, made the pretrial conference nugatory. As a result, the court was unable to schedule discovery and trial. It appeared to the court that the game of “musical lawyers” was a stalling tactic by the Defendants. Because of the Defendants’ actions to impede efficiency in the adversary process, the court determined that the most appropriate sanction to impose in this proceeding was default. The court hoped that such a sanction would convey the message to the Defendants’ various attorneys and the bankruptcy bar in the Northern District of Illinois that the court was serious about actively managing proceedings before it. Accordingly, on April 29 and April 30, 1993, the court entered default judgments against the Defendants.
On May 10, 1993, Weissberg & Associates substituted back in for Lobin as the attorneys for the Defendants, thereby confirming the court’s suspicions about the intent of the Defendants and their counsel. On May 18, 1993, the Defendants filed a motion to vacate the default judgments in both adversaries under Fed.R.Bankr.P. 9024 and Fed.R.Civ.P. 60(b). The Defendants claim their failure to file the requisite pretrial statements should be excused.
JURISDICTION AND PROCEDURE
This court has jurisdiction over this matter under 28 U.S.C. § 1334(b) as a matter arising under § 542 of the Bankruptcy Code. This is a core proceeding under 28 U.S.C. §§ 157(b)(2)(A) and (E) as a matter arising in the administration of the estate and a proceeding to recover property of the estate. This proceeding is before the court pursuant to Local Rule 2.33 of the United States District Court for the Northern District of Illinois automatically referring bankruptcy cases and proceedings to this court for hearing and determination.
DISCUSSION
Fed.R.Civ.P. 60(b) provides that a default judgment may be set aside if the defaulted party can show: (1) good cause for its default; (2) quick action to correct it; and (3) a meritorious defense to the plaintiffs complaint. U.S. v. DiMucci, 879 F.2d 1488, 1495 (7th Cir.1989). Under Rule 60(b), good cause can consist of mistake, inadvertence, surprise, or excusable neglect. Fed.R.Civ.P. 60(b). The Defendants take the position that their behavior and that of their attorneys should be considered “excusable neglect” for purposes of determining the propriety of Rule 60(b) relief.5 See Pioneer Inv. Servs. v. Brunswick Assocs., — U.S. -, -, 113 S.Ct. 1489, 1498, 123 L.Ed.2d 74 (1993).
If the only issue before the court was the question of whether the conduct of the Defendants and their counsel constitutes excusable neglect, there is no doubt that the result would favor the Trustee. The Defendants’ game of musical lawyers obviates any notion of excusable neglect. See Pioneer, — U.S. at -, 113 S.Ct. at 1498. The actions by the Defendant in terminating trial counsel and sending an attorney to a pretrial *523who was totally unfamiliar with the dispute before the court and whose only authority was to try to negotiate a settlement smacks of intentional delay of the litigation. Certainly the Defendants were able to frustrate the case management system found in Federal Rules of Civil Procedure 16. There is no suggestion of “neglect” by the Defendants or their counsel. In fact, all of their actions appear to be carefully considered and intentional.
However, the question of excusable neglect is not the only issue before the court. While this proceeding was pending, the Seventh Circuit issued its decision in Ball v. City of Chicago, 2 F.3d 752 (7th Cir.1993). That decision requires a trial court to carefully consider the propriety of default as, opposed to lesser sanctions, a remedy for misconduct such as is now before this court. In Ball, the Seventh Circuit established guidelines regarding-the proper procedure to be followed by a trial judge in determining whether to impose a sanction of dismissal for shortcomings in a party’s prosecution of the matter. The Seventh Circuit held: “[A] judge should not dismiss a case ... without due warning to the plaintiffs counsel” that dismissal is a possible sanction for failing to comply with a Rule 16 schedule set by the court. Id. at 755. The warning given to the attorney must be direct and explicit. Id. However, the court need only warn the attorneys who are fault; additional warnings to the client are not required. Id. at 756. A default judgment in bankruptcy and a dismissal for want of prosecution both have the similar effect of resolving a dispute without a determination of the merits. This court holds that the standards set forth in Ball apply in the instant motion.
Since Ball had not been issued when the instant default was entered, obviously the court did not follow the Ball requirements before entering a default judgment against the Defendants.6 The court did not adequately warn counsel that default was a possible sanction for failure to file pretrial statements. While the court did inform substitute counsel that he was responsible for all duties related to representing the Defendants in this case, the court did not explicitly state that Lobin was required to file a pretrial statement by April 17, 1993 and that failure to do so would result in a default judgment against the Defendants. See Ball, 2 F.3d at 755.
The court now states for the record that any further delay, neglect or other inappropriate conduct by either the Defendants or any attorneys for the Defendants will result in a default judgment being entered against the Defendants on all counts.
By playing “musical lawyers” in hiring, firing, and rehiring lawyers, the Defendants and their various attorneys delayed this case unnecessarily. In the instant matter, the attorney who appeared for the Defendants at the pretrial conference was utterly (and admittedly) unprepared. As a result, the pretrial was a waste of the trustee’s counsel’s and the court’s time. Another scheduling conference will have to be set. Further, the Defendants’ attorneys waited three weeks to file the instant motion even though then counsel of record knew of the defaults when they were entered. Thereafter, they were late in filing certain transcripts referred to in their pleadings that were necessary to complete the record. Their delay in filing the promised transcripts resulted in postponement of this court’s ruling on the motion to vacate.
The actions of Defendants and their lawyers has completely frustrated this court’s efforts to manage this proceeding efficiently. This court reserves ruling on the propriety of both the previous conduct of Defendants and their counsel and the future conduct of the Defendants and their counsel in this proceeding in terms of sanctions. See, e.g., Fed. R.Bankr.P. 7016, 7037; 28 U.S.C. § 1927. The Defendants and their attorneys have already been warned explicitly that future misconduct may also result in default.
*524
CONCLUSION
For the foregoing reasons, the Defendants’ motion to vacate the default judgment is granted. Accordingly, it is ordered that Count II of the Trustee’s adversary proceeding No. 91 A 583 is reinstated and that a pretrial conference is set for January 11, 1994 at 9:00 a.m.
. The Defendants have also moved to vacate the default judgment entered in a separate adversary proceeding initiated by the Trustee against Loi Tran, No. 91 A 583. The court, for the reasons stated in a separate opinion, has also vacated the default judgment in that proceeding.
. Adversary Case Number 91 A 583.
. Pretrial statements were filed on October 7, 1991 and an initial pretrial conference was held on October 8, 1991. On March 10, 1992, the court entered judgment for the Trustee on Count I in the amount of $10,760.
.Adversary Case Number 91 A 746.
. The Defendants also seem to argue that the court’s entry of a default judgment in the second adversary complaint granting the Trustee an injunction was improper as a matter of law, and thus should be vacated under Fed.R.Civ.P. 60(b). •It is clear, however, that alleged mistakes of law should be considered on timely appeal, not pursuant to Rule 60(b). See In re Roco Corp., 37 B.R. 770 (Bkrtcy.R.I.1984).
. The court assumes without deciding that Ball is to have retroactive effect. See e.g., Chevron Oil Co. v. Huson, 404 U.S. 97, 92 S.Ct. 349, 30 L.Ed.2d 296 (1971) (setting forth the three considerations recognized as properly hearing upon the issue of retroactivity). | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491777/ | PEDER K. ECKER, Bankruptcy Judge.
A jurisdictional challenge is made to Trade Finance Bank’s [hereinafter “Debtor’s”] eligi*559bility as a Chapter 7 debtor based on the following provision:
A person may be a debtor under chapter 7 of this title only if such person is not a domestic insurance company, bank, savings bank, cooperative bank, savings and loan association, building and loan association, homestead association, credit union, or industrial bank or similar institution which is an insured bank as defined in section 3(h) of the Federal Deposit Insurance Act (12 U.S.C. 1813(h))....
11 U.S.C. § 109(b)(2). The Court must determine if Debtor, a state-chartered “merchant bank,” is a “bank” under Section 109(b)(2). The issue is raised in a Motion to Dismiss of Defendants James Cope, Al Kur-tenbach, Rick 0. Johnson, Galen Hadley, Dale Clement, and Ted Muenster [hereinafter “Motion to Dismiss”] filed by Sioux Falls Attorney Vance R.C. Goldammer on behalf of these defendants [hereinafter “Movants”] and objected to by Aberdeen Attorney Robert M. Ronayne on behalf of Plaintiff A. Thomas Pokela, Interim Trustee [hereinafter “Interim Trustee”], and by Pro Se Defendant Arieh Gildor. Following an evidentiary hearing, the Court took the matter under advisement and issued a scheduling order for submitting written argument and authority. This letter decision constitutes Findings of Fact and Conclusions of Law pursuant to Bankruptcy Rule 7052.
BACKGROUND
Debtor filed a voluntary Chapter 11 bankruptcy petition March 13, 1989. The case was converted to a Chapter 7 liquidation proceeding August 29, 1989, and, on December 2, 1992, the Interim Trustee named the members of the board of directors of Debt- or’s corporation as defendants in a three-count adversary complaint requesting they be held jointly and severally liable for damages resulting from negligently operating the bank in a unsafe, unsound manner.1 The complaint is based on violations of state lending statutes, alleging defendants extended loans or credit exceeding more than 20% of Debtor’s capital stock and surplus and more than 10% of its undivided profits and granted insider loans or credit to the directors, executive officers, and/or significant shareholders which exceeded 50% of the capital stock and surplus.2 On April 22, 1993, the complaint was amended to add a fourth cause of action for breach of fiduciary duty, along with a prayer that the defendants be held jointly and severally liable for uncollectible loans made as a proximate result of their negligence. In total, the complaint requests damages of $3,418,518.89.
Following a pre-trial conference and extended period of discovery, the Motion to Dismiss was filed August 25, 1993, stating that, as a bank, Debtor is not eligible for bankruptcy relief. Debtor was chartered as a merchant bank pursuant to South Dakota’s “Banks and Banking” title (Title 51), a title which provides for Debtor’s regulation by the State Banking Commission and which sets forth a liquidation scheme in the event of Debtor’s insolvency.3 According to a “state classification test” adopted by the Eighth Circuit Court of Appeals in First AM. Bank & Trust Co. v. George, 540 F.2d 343 (8th Cir.1976), as the proper method of determining eligibility under Section 109(b)(2), Debtor satisfies the elements of this test, since Debt- or is:
1) extensively regulated by the state Division of Banking;
2) subject to express state statutory procedures for liquidation; and is
3) a business public or quasi-public in nature, since Debtor solicits customers from the general public and issues letters of credit into the stream of commerce throughout the United States and internationally.
Other details support the motion, like the fact that the South Dakota Division of Banking acknowledged Debtor’s status as a bank when it filed several documents in these *560bankruptcy proceedings4 and the fact that the Interina Trustee admitted Debtor was a bank in answer to interrogatories.5 In response to the filed objections, Movants assert Debtor’s classification as a bank is not affected by its inability to receive bank deposits: the South Dakota banking statutes, as they existed between 1986 and 1990,6 classify Debtor as a bank, which means Debtor is ineligible for bankruptcy relief under Section 109(b)(2) and the case should be dismissed.
On October 13, 1993, the Interim Trustee objected to the motion as improperly grounded in fact or in law, postulating Debtor is merely a hybrid bank, prohibited from engaging in actual “banking” activity. As a hybrid, Debtor was never authorized to receive bank deposits, therefore, Debtor cannot be deemed a bank for purposes of Section 109(b)(2). A synthesis of case authorities, including In re Cash Currency Exchange, Inc., 762 F.2d 542 (7th Cir.1985); First AM. Bank & Trust Co. v. George, 540 F.2d 343 (8th Cir.1976); Gamble v. Daniel, 39 F.2d 447 (8th Cir.1930); and In re Morris Plan Co. of Iowa, 62 B.R. 348 (Bankr.N.D.Iowa 1986), is offered to assert one central focus of the “state classification test”: an assessment of the entity’s actual operation, which leads to the touchstone of the test — whether the entity has the ability to accept deposits — fin-no matter how many other bank attributes may exist, the critical attribute, at least for purposes of Section 109(b)(2), is whether the entity may accept deposits. This fundamental ability is the distinguishing mark which separates entities permitted to seek bankruptcy protection and entities excluded from bankruptcy; and since Debtor was never endowed with this critical mark, Debtor is a bank for purposes of state law only; it is simply not the deposit-taking bank intended to be excluded by Section 109(b)(2).
The Interim Trustee also argues Movants misapply the “state classification test” by using the wrong elements. The three criteria cited by Movants are not elements, but, rather, the Eighth Circuit Court of Appeal’s own observations of common attributes shared by entities actually rendered ineligible for bankruptcy relief by virtue of the “state classification test.”7 The correct statement and application follows:
*5611. Is Debtor classified as a bank under state law? At first blush, perhaps, but, in reality, no. All entities created under South Dakota’s banking title are “banks,” but the real question is whether the entity is permitted to engage in “banking.” Here, Debtor was only authorized to perform nondeposit banking, therefore, it was a “bank,” but it was prohibited from engaging in “banking.”
2. What powers were granted to Debtor? As a merchant bank, Debtor was authorized to engage in nondeposit banking, i.e., to make loans or issue letters of credit. Debtor was never authorized to receive deposits, a clear indication Debt- or was not granted banking powers.
3. If Debtor is allowed to perform banking activities, is Debtor actually engaging in those activities? Debtor was specifically prohibited from engaging in “banking” — its performance powers were limited to “merchant banking.”
On November 10, 1993, Pro Se Defendant Arieh Gildor filed an objection to the Motion to Dismiss, echoing the Interim Trustee’s overall position:
• South Dakota’s liquidation statutes were designed with deposit-taking banks in mind, illustrated by the fact that the Federal Deposit Insurance Corporation [FDIC] may be appointed as receiver. This creates a practical problem since Debtor has no FDIC insurance or depositors, which means there is no public interest in using the state’s liquidation provisions;
• South Dakota defines banks as entities which are authorized to accept deposits. Since Debtor does not accept deposits, it is not a bank;
• South Dakota recognizes the validity of this Court’s jurisdiction since-the State Banking Division filed a motion with this Court to appoint a trustee;
• Admitting that Debtor is a bank for liability purposes pursuant to South Dakota’s lending statutes is not the same as admitting that it is a bank for eligibility purposes under the Bankruptcy Code;
• The State Banking Division formally suspended Debtor’s activities by letter dated August 30, 1989, therefore, any status it may have had as a bank terminated years ago; and
• Debtor has been in bankruptcy for quite some time, therefore, it is improper, at this point, to seek a ruling under Section 109(b)(2).
DISCUSSION
An interpretation of Section 109(b)(2) requires the Court to first consider the statutory language, and, where it is plain, the sole function of the court is to enforce it by its terms. United States v. Ron Pair Enters., Inc., 489 U.S. 235, 241, 109 S.Ct. 1026, 1030, 103 L.Ed.2d 290 (1989). The language of Section 109(b)(2) makes certain financial institutions expressly ineligible for bankruptcy relief; namely, banks, savings banks, cooperative banks, savings and loan associations, credit unions, industrial banks, or any “similar institution” which is an insured bank. Merchant banks are not expressly named, but neither is “bank” defined. Despite the long historical development of banking, no satisfactory legal definition of a “bank” has evolved. Norton & Whitley, Banking Law Manual § 1.02, at 1-5 (1990). The definition of a “bank” is really a function of the legislature, but, even so, the problem has never been completely resolved, because there is no one prevailing federal or state statutory definition. For example, Articles 3 and 4 of the Uniform Commercial Code beg the question by defining a bank as “any person engaged in the business of banking.” And under many state banking codes, a bank is defined as an institution established under specific sections of these codes having specific statutory powers. Id. at § 1.02[3]. Not surprising, then, that courts have had difficulty providing a clear legal definition. For purposes of Section 109(b)(2), courts should not attempt to construe a federal common *562law definition of a bank but, rather, should rely on state law where the institution is incorporated to reach an appropriate definition. Matter of Estate of Medcare HMO, 998 F.2d 436, 440 (7th Cir.1993); First AM. Bank & Trust Co. v. George, 540 F.2d 343 (8th Cir.1976). Other reasons make this approach sound, including the fact the Bankruptcy Code was written “in the shadow of state law” and because these institutions have been excluded precisely because they are subject to state regulation, supporting the belief that the “interest in continuing state regulation into insolvency outweigh[s] any interest in uniformity,” despite the potentially inconsistent insolvency regimes that may result. Matter of Estate of Medcare HMO, 998 F.2d at 440—41; In re Peoples Bankshares, LTD, 68 B.R. 536, 540 (Bankr.N.D.Iowa 1986); In re Morris Plan Co. of Iowa, 62 B.R. at 355; S.Rep. No. 989, 95th Cong., 2d Sess. 31 (1978), reprinted in App. Vol. 3 Collier on Bankruptcy, Part V (15th ed. 1993). If state law classifies the entity as one that is specifically excluded from being a debtor under Section 109(b)(2), the inquiry generally ends. In re Cash Currency Exchange, Inc., 762 F.2d at 548. Under this approach, then, state law is “given predominating influence,” however, courts are cautioned not to frustrate the purpose or full effect of the Bankruptcy Code by blindly following state law “without regard to an assessment of the actual operation.” George, 540 F.2d at 346.
Other less-favored methods exist to help define the financial institutions excluded by Section 109(b)(2),8 but the Eighth Circuit Court of Appeals endorsed the “state classification test” some sixty years ago in Gamble v. Daniel, 39 F.2d 447 (8th Cir.1930). At that time, it was Section 4 of the Bankruptcy Act, 11 U.S.C. § 22, that existed, and it was “banking corporations” that were made expressly ineligible for bankruptcy relief. In Gamble, the court had to determine a Nebraska trust company’s bankruptcy eligibility, but, before it examined state law, the court fashioned its own definition of “banking corporation,” opining the ordinary meaning to be a business based primarily on the receipt of deposits, adding “banking has been a development, and the above was its status in 1910. Other businesses might, and did, and still do, deal in commercial paper, make loans or borrow money without anyone thinking of them as banks.” Id. at 450. And so, for purposes of eligibility under the old Bankruptcy Act, the court believed the critical attribute of a “banking corporation” was its ability to receive deposits, because, “strictly speaking,” that was its “most obvious purpose.” Id. Against this backdrop, the court turned to state law, but the exam covered more than just terminology — it also included powers actually granted. Id. at 451. While the trust company in Gamble had been granted most of the powers usually exercised by a bank, it did not have the ability to accept deposits, but, further, the court found it had amended its original charter to conform with Nebraska’s article entitled, “Trust Companies,” which was separate and apart from the article entitled, “Banks,” which, not insignificantly, created three classifications of banks, all of which contemplated the receipt of deposits. Id. Ultimately, the court held the trust company was eligible for bankruptcy, since it was not a banking corporation under the meaning of: 1) Nebraska’s state statutes; 2) the commonly accepted definition of “banking corporation” (as it was known in the early 1900s); and 3) Section 4 of the Bankruptcy Act. Id. at 452.
In 1976, some forty-six years later, the same court considered the bankruptcy eligibility of a North Dakota “bank & trust company.” The court still referred to the “most natural meaning” of a “banking corporation” as “a corporation empowered to do a banking business,” but, perhaps, realizing excluded categories are not as simply or obviously defined as they may appear on the surface, the court did not reiterate its previous posi*563tion that the ability to accept deposits would be the “critical” guiding factor. Instead, the court emphasized further guidance is “traditionally” found in state law in order to determine: 1) how the entity is classified by the state; 2) what powers are granted to the entity; and 3) what activities actually engaged in were within the range of lawfully conferred powers. George, 540 F.2d at 346. When the court looked at state law, including the definition of “bank” and the finite list of “banking” activities, it found that a substantial amount of those powers had been granted to the entity in question and that the entity’s principal business was actually that of receiving savings deposits, making loans, cashing checks, and issuing drafts and other bills of exchange — the very list of powers enumerated in the definition of banking activity. Id. at 347-49. After deciding North Dakota law rendered the “bank & trust company” ineligible for bankruptcy, the court observed several common factors among ineligible entities: “1) they are extensively regulated by well-organized departments of the states and of the United States; 2) they are subject to express statutory procedures for liquidation; and 3) the nature of their business is public or quasi-public and involves interests other than those of creditors.” Id. at 349.
The Eighth Circuit has provided a template or pattern for applying the “state classification test.” This pattern is an examination of state law. Although the power to receive deposits may be a critical factor in some states’ classification of banks, it may not be in others. The state’s classification will depend on its terminology, the actual powers granted to an entity, and the entity’s actual operation. The Court does not agree with the Interim Trustee that numerous cases, including In re Cash Currency Exchange, Inc., have ruled that an entity is not a bank under the “state classification test” unless it has the ability to receive deposits. The issue in that case was similar to the case at hand: whether community currency exchanges, which engaged in the businesses of cashing cheeks and money orders for a fee and selling or issuing money orders, were banks for purposes of bankruptcy eligibility under Section 109(b)(2). In re Cash Currency Exchange, Inc., 762 F.2d at 544. The Illinois Community Currency Exchange Act governed those entities and specifically exempted state and federal banks, which were subject to an entirely different set of provisions and had different activities; primarily, lending money, discounting notes, receiving deposits, and dealing in commercial exchange, none of which were performed by the currency exchanges. Id. at 548-49. In short, the currency exchanges did not engage in the banking business as it was defined and regulated by Illinois state law, therefore, they were eligible for bankruptcy. Id. at 550, 552. The result did not turn solely on the ability to accept deposits. The result was based on the state legislature’s definition as illustrated by the specific statutory powers granted to and exercised by the particular entity.
DECISION
In this case, Debtor’s classification is a clear reflection of how merchant banking laws were established in South Dakota: via the state banking commission’s desire to create a new class of bank called a “special purpose bank,” further described as “a bank that has the powers defined in SDCL 51-15-1(1) and (5)9 except that it cannot take deposits from the general public. ” Application of Trade Development Bank, 382 N.W.2d 47, 48 (S.D.1986). In July 1984, the banking commission noticed its intent to fulfill this desire by amending or adopting two of its administrative rules. Id. This was completed in October 1984, and, on November 29, 1984, an entity known as Trade Development Bank was approved as a “special *564purpose bank,” despite objection by the Independent Community Bankers Association of South Dakota, Inc., which made an appeal to the South Dakota Supreme Court. Id. at 49. The issue on appeal was whether the banking commission exceeded its authority by creating a new “special purpose bank” when it lacked the discretion to create or define banks. On February 19, 1986, the court ruled the commission did, indeed, overstep its authority. Id. at 51. The court found existing laws simply did not provide carte blanche authority “to create new categories of banks" (emphasis supplied), but hinted, “if a broader power is desired, it can be readily created by the Legislature.” Id. Three weeks later, the legislature followed the suggestion and passed an act to “clarify the authority of the banking commission and to declare an emergency” so that the banking commission would have the ability to define and charter merchant banks. Act of March 7, 1986, ch. 399, 1986 S.D. Laws 771 (merchant banks authorized). On November 5, 1986, Debtor was chartered as a merchant bank pursuant to newly amended S.D.C.L. § 51-15-1 and -16.10 In a relatively short period of time, the banking commission had achieved enough momentum to significantly change the state’s banking landscape. It is interesting to note the continuing truth in the statement, “banking has been a development.” In 1986, the status of banking included a new category of bank, one that was engaged in the business of nondeposit banking.11
Long before Trade Development Bank and the advent of merchant banks, however, South Dakota’s banking code had been developed to portray a broad definition of bank, so broad, in fact, that it could comfortably encompass a “merchant bank” without any alterations: “Bank” was still defined as “any corporation authorized under this title to engage in the business of banking ...,” and “banking” was still “the business of receiving deposits, discounting commercial paper, or buying and selling exchange, and any other activity authorized by this title, ” which would, obviously, include “merchant banking.” The actual powers formulating this new banking business did, however, require a separate amendment, and its activities were described as:
the business of nondeposit banking, financing the purchase, sale and manufacturing of goods and offering other services related to foreign trade including, but not limited to, issuing letters of credit collateralized by the proceeds of other letters of credit or by purchase orders; providing prompt remittance of payment service between the United States and other countries; providing foreign currencies and credit; providing credit on the basis of guarantees and credit insurance issued in connection with the sale of goods and commerce; providing credit by way of discounting or collateral-ized bills, drafts, acceptances and other assets. The banking commission may exempt merchant banks from any rule made unnecessary because of the absence of deposits or any other power.
S.D.C.L. § 51-15-1(15). The evidence presented to the Court, coupled with Debtor’s Amended Statement of Affairs, provides a sufficient basis for assessing Debtor’s actual operation as one engaged predominantly in the issuance of loans and letters of credit, as well as other nondeposit-taking services, all within the realm of its lawfully conferred powers. In sum, the statutory terminology, the specific powers granted, and the actual operation of Debtor as a merchant bank, the elements of the “state classification test,” *565clearly indicate South Dakota classifies Debt- or as a bank.
Classifying Debtor as a bank under state law means Debtor falls within the provisions of Section 109(b)(2) pending one final inquiry: may a state-classified bank still be eligible for bankruptcy in cases where the state never authorized the bank to receive deposits? In other words, does the language of Section 109(b)(2) contain a caveat that exempts a state-classified bank from ineligibility if it was never endowed with the ability to receive deposits? Obviously not. For purposes of Section 109(b)(2), bankruptcy eligibility rests on the state’s classification of the financial institution without further regard to any specific attributes. If a state’s banking classification does not hinge on the ability to accept deposits, then so be it. South Dakota is one of those states: its definition of “bank” arguably begs the question by stating a bank may be any corporation “engaged in the business of banking,” but the legislature has identified merchant banking as an authorized banking business. Debtor is classified as a bank under South Dakota law, and it is subject to the regulating and liquidating state law provisions.12 “It is difficult to imagine a more clear statement of congressional intent; the bankruptcy court shall not have jurisdiction over banks for purposes of liquidation or reorganization.” In re Peoples Bankshares, LTD., 68 B.R. at 540.
CONCLUSION
In 1986, the South Dakota legislature gave the state banking commission the ability to create a new class of state bank, known as a merchant bank. As originally intended, this new class of bank was empowered with non-deposit banking powers, such as financing the purchase, sale, and manufacturing of goods; offering services related to foreign trade, including the issuance of letters of credit; and providing credit by way of discounting or collateralized bills, drafts, acceptances, and other assets. As a merchant bank, Debtor received its banking charter pursuant to the state’s banking provisions, obtained a Certificate of Authority to engage in banking activity from the banking commission, and engaged, primarily, in the lawfully conferred activity of issuing letters of credit. Despite the fact Debtor was never authorized to accept deposits, Debtor remained subject to the statutory regulations and liquidation provisions provided by the state’s banking title, Title 51. In fact, the underlying complaint before the Court is premised solely on the state’s banking provisions which regulate lending practices. After applying a “state classification test” which considers the statutory terminology, the specific powers granted to Debtor, and an assessment of Debtor’s actual operation, the Court concludes South Dakota classifies Debtor as a bank, therefore, Debtor is also a bank under Section 109(b)(2) of the Bankruptcy Code, a provision which renders financial institutions, like banks, ineligible for bankruptcy relief, since they are already subject to a particular scheme of state regulation and liquidation. The Motion to Dismiss is granted. The Court will enter an appropriate order.
ORDER GRANTING MOTION TO DISMISS
In recognition of and in compliance with the letter decision entered this day regarding a Motion to Dismiss of Defendants James Cope, Al Kurtenbach, Rick O. Johnson, Galen Hadley, Dale Clement, and Ted Muenster which seeks to dismiss this adversary com*566plaint and all other < proceedings involving these defendants, it is hereby
ORDERED that the Motion to Dismiss is granted inasmuch as a “state classification test” applied in this case to consider both the statutory terminology and an assessment of Debtor’s actual operation indicates South Dakota classifies Debtor as a bank, therefore, Debtor is also a bank for purposes of 11 U.S.C. § 109(b)(2) and is ineligible to seek bankruptcy relief as a Chapter 7 debtor.
ORDER DISMISSING CHAPTER 7 BANKRUPTCY CASE
In recognition of and in compliance with the letter decision entered this day regarding a Motion to Dismiss of Defendants James Cope, Al Kurtenbach, Rick 0. Johnson, Galen Hadley, Dale Clement, and Ted Muenster which seeks to dismiss adversary complaint No, 92-4056 and all other proceedings involving these defendants, and the Court having found a “state classification test” applied in this case to consider the statutory terminology, the powers granted to Debtor, and an assessment of Debtor’s actual operation, indicates South Dakota classifies Debtor as a bank and, thus, a bank for purposes of 11 U.S.C. § 109(b)(2), a provision that renders Debtor ineligible to seek bankruptcy relief; it is hereby
ORDERED that the above-captioned case is dismissed.
.In addition to naming Movants and Pro Se Defendant Arieh Gildor, the complaint also names Sean O’Neill and Bonnie London as defendants.
. See S.D.C.L. § 51A-12-2; -12-7.
. See S.D.C.L. Ch. 51-27.
.Prior to Debtor’s conversion from Chapter 11 to Chapter 7 on August 29, 1989, the South Dakota Division of Banking filed a Motion to Appoint Trustee and a memorandum in support of the motion, stating:
Without an express exemption, the Debtor is subject to state statutory provisions regarding the suspension and liquidation of banks. These statutes are found in SDCL Chapter 51-27. Several of the provisions of this chapter address the condition of a bank’s insolvency, [citations omitted] Given the Debtor’s voluntary declaration of insolvency, represented by its filing of a petition before this Court, the necessity for the Division to make a formal finding of insolvency is abated. Certainly by its own admission of insolvency, the debtor has in essence triggered the application of certain suspension and liquidation state statutes applicable to it.
Recognizing that the nature of the business affairs of this Debtor are somewhat different than that of other banks governed by these statutes, the Division has elected to take an alternative form of action with regard to the Debtor's insolvency. Clearly, ... the Division possesses the authority to suspend all business activities of the Debtor. However, due to the nature of the Debtor’s business and the amount and types of liabilities that exist in the Debtor's estate, the Division has at this time elected to not exercise its right to suspend the activities of the Debtor and assume receivership in favor of a remedy under bankruptcy laws. It is the Division’s position that the claims of those parties in interest will be served by proceeding under the guidance of this Court.
Memorandum in Support at 2-3 (Apr. 10, 1989).
. On March 29, 1993, the Interim Trustee filed answers to interrogatories, including:
Interrogatory No. 15:
Do you claim that the debtor was a "bank” as that term is defined by S.D. Codified Laws Ann. 51A-1-2 and its predecessors during the time period from February 6, 1987, through August 31, 1989?
ANSWER:
Trade Finance Bank was a state chartered bank as that term is defined by S.D. Codified Laws Ann. 51A-1-2 and its predecessors during the time period from February 6, 1987, through August 31, 1989.
. Title 51 was revised in 1990 to repeal the merchant banking statutes.
. The Interim Trustee denies these common attributes are found in this case: 1) Debtor may have received a state charter, but it was only subject to state regulations; it was wholly unregulated by any federal entity; 2) Debtor may be subject to state liquidation statutes, but they are meaningless, since Debtor has no depositors that *561require the protection offered by liquidation; and 3) Debtor received its lending capital from a few associates and customers, therefore, its business is not public, or even quasi-public, in nature.
. A second test is the "independent classification test,” wherein the court looks to the language of the Bankruptcy Code itself and construes its provisions using techniques of statutory construction. In re Morris Plan Co. of Iowa, 62 B.R. at 356. A third test is the "alternative relief test,” which considers whether the policies behind Section 109(b)(2) would be better served by use of state or federal liquidation procedures. Matter of Estate of Medcare HMO, 998 F.2d at 439, citing In re Republic Trust & Savings Co., 59 B.R. 606, 614 (Bankr.N.D.Okla.1986).
. These are 1986 definitional provisions which still exist today (see 51A-1-2):
S.D.C.L. § 51-15-1(1): "Banking,” the business of receiving deposits, discounting commercial paper, or buying and selling exchange, and any other activity authorized by this title;
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S.D.C.L. § 51-15-1(5): "Bank,” any corporation authorized under this title to engage in the business of banking or in the combined business of a bank and trust company.
Application of Trade Development Bank, 382 N.W.2d 47, 48 n. 1 (S.D.1986).
. Once the bank charter was received, Debtor was required to obtain a certificate of authority from the director of banking before it could advertise, publish, or represent it was engaged in the business of banking. S.D.C.L. § 51-18-2. In compliance thereof, Debtor obtained its "Certificate of Authority” from the division of banking and finance on December 22, 1986 (Exhibit No. 1).
. Under the new amendments, the banking commission was authorized to charter merchant banks after considering several factors, such as the economic advantages offered to the state, the effect the applicant may have on resources or competition, as well as the convenience and benefit provided to the public in relation to potential adverse competitive effects. S.D.C.L. § 51 — 16— 15.1. If the application was approved, the merchant bank would remain subject to any conditions set forth by the banking commission and remain subject to the banking commission's overall continued authority.' Id.
. South Dakota’s liquidation provisions are quite extensive, including: voluntary liquidation; objections to liquidation; distribution of assets; the director of banking's authority to take possession of a liquidating bank; management and control powers granted to a director involved in liquidation; and the priority of claims in a liquidation proceeding. See Ch. 51-27. "The more comprehensive the liquidation scheme, the stronger the indication that the state sees a strong public interest in direct governmental supervision and control of the liquidation or dissolution of the institution.” In re Cash Currency Exchange, Inc., 762 F.2d at 551.
An objection based on practicality was made relative to the possible appointment of the F.D.I.C. as receiver. S.D.C.L. § 51-27-37 merely provides the director "may” appoint the F.D.I.C. “as receiver for a bank of which [the director] has taken possession and whose deposits are insured by such corporation_" Obviously, this does not apply here; the banking commission and director would handle this liquidation. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492263/ | ORDER DISMISSING CASE
CHARLES G. CASE, II, Bankruptcy Judge.
I. INTRODUCTION.
Before the Court is a Motion to Dismiss filed by creditor Robert C. Russoli (“Russo-li”). Russoli claims that the Debtors, Snellen M. Johnson and Suzanne Johnson (“Debtors”), do not meet the eligibility standards to file Chapter 13, as set forth in Section 109(e), because their unsecured debts exceed the statutory maximum of $250,000.1 Russoli argues that at least two unsecured claims, his own and that of Fritz Richard and Edwin J. MacDonald (“Macdonald”), each, independently, put Debtors over the $250,000 maximum. In addition, creditor Gerald Bisgrove has an unsecured claim of $79,000.
After a hearing held on September 7,1995, the Court entered a detailed order on the Motion to Dismiss on October 5, 1995. In that Order, the Court modified the automatic stay to allow a state court to rule on a pending motion for summary judgment regarding the Russoli’s claim against Debtor. Regarding the MacDonald and Bisgrove claims, the Court scheduled an evidentiary hearing for November 7, 1995 to determine whether each was contingent and/or unliqui-dated. At the November 7 hearing, the parties produced a stipulation dated November 6, 1994, wherein the Debtors stipulated that: (i) the Bisgrove claim was unsecured, non-contingent and liquidated in the amount of *185$79,789 on the petition date; and (ii) MacDonald’s claim against Debtors was liquidated and noncontingent on the petition date, but secured by property not owned by Debtors.
One day prior to the November 7 hearing, on November 6,1995, the state court granted summary judgment in favor of the Russoli’s and against Debtor and held:
The Court finds there is a liquidated amount being sought by the Plaintiff [Rus-soli], the $175,000 original investment plus interest from the date of the investment plus attorney’s fees and costs which Plaintiff seeks to have trebled.
The Court further finds that Defendants have failed to raise a genuine dispute as to material fact....
IT IS ORDERED granting Plaintiffs Motion for Partial Summary Judgment
Minute Entry, filed November 18,1995.
The parties requested additional time to brief the implication of the state court ruling; the parties filed simultaneous supplemental briefs on November 7, 1995 and Russoli filed a response to supplement on November 22, 1995. Thereafter the matter was deemed taken under advisement.
II. FACTS.
The facts are set forth in detail in the October 5, 1995 Order and are incorporated herein.
III. DISCUSSION.
A. The debt limits of Section 109.
Section 109(e) provides:
(e) Only an individual with regular income that owes, on the date of the filing of the petition, noncontingent, liquidated, unsecured debts of less than $250,000 and non-contingent, liquidated, secured debts of less than $750,000, or an individual with regular income and such individual’s spouse, except a stockbroker or a eommodity broker, that owe, on the date of the filing of the petition, noncontingent, liquidated, unsecured debts that aggregate less than $250,000 and non-contingent, liquidated, secured debts of less than $750,000 may be a debtor under chapter 13 of this title.
(emphasis added). Thus the question in this case is whether the Debtors owed on the date of the filing of their petition, noneontin-gent, liquidated, unsecured debts of less than $250,000.
An analysis of the relevant authority from the Ninth Circuit Bankruptcy Appellate Panel interpreting Section 109(e) is set forth in the October 5 Order and will not be repeated here. Because of the November 6 stipulation between the parties, the Court will take as true the debtor’s liability in the amount of approximately $79,789 on the Bisgrove claim. The summary judgment order from the state court on the Russoli claim establishes that the Bisgrove’s have a liquidated, noncontin-gent claim of at least $175,000, not including interest, attorney’s fees or treble damages.
The Debtors urge the Court to ignore the summary judgment because they intend to appeal. To ignore the summary judgment would be contrary to this Court’s October 5 Order wherein the Court explained that the state court could determine by summary judgment whether the Russoli claim was liquidated as of the petition date. The fact that the claim will be further disputed on appeal does not make it unliquidated or contingent.
The Court need go no further; the two claims combined, the Bisgrove claim and the Russoli claim, already exceed the statutory maximum of $250,000 for noncontingent, liquidated, unsecured claims.2 Accordingly, the Debtor does not qualify for relief under Chapter 13.
IV.CONCLUSION.
The Court has considered all the papers filed by the parties and the oral argument of counsel.
*186Therefore, IT IS ORDERED dismissing the Debtors’ petition.
. Unless otherwise provided herein, references to Sections are to sections of 11 U.S.C. § 101, et seg.
. The Court notes that, pursuant to the stipulation of the parties, the liquidated, noncontingent MacDonald claim in the amount of $502,623 was owed by the Debtors as of the petition date. Debtors argue that it should not be counted as an unsecured claim because it is secured by non-debtor property; the Russoli's argue otherwise. Because of the Court's ruling regarding the Bis-grove and Russoli claim, the Court need not decide whether the MacDonald claim should be considered secured for purposes of § 109(e). | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492264/ | ORDER
TOM R. CORNISH, United States Bankruptcy Judge.
On this 18th day of January, 1996, the Plaintiff’s Motion for Summary Judgment and Defendant’s Response came on for consideration. Both parties agree that there are no disputed facts. The only dispute is whether the debt is dischargeable.
After a review of the above-referenced pleadings, this Court does hereby enter the following findings and conclusions in conformity with Rule 7052, Fed.R.Bankr.P., in this core proceeding:
FINDINGS OF FACT
1. On or about November 26, 1986, the Debtor, Linda Sue Perryman (“Perryman”), was authorized as an agent of the Department of Wildlife Conservation (“Department”) to sell hunting and fishing licenses. Perryman acted as an authorized agent of the Department personally through her business known as the Sportsman’s Complex in Muskogee, Oklahoma.
2. Pursuant to a License Consignment Agreement, the Department agreed to consign hunting and fishing licenses to Perry-man. The License Consignment Agreement provided, in pertinent part, as follows:
2. The Authorized Agent agrees:
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(c) To assume all risk of loss from destruction of the consigned licenses from any cause whatsoever from the time of receiving possession of the same until sale and issuance or until returned to the Department at its Offices in the City of Oklahoma City.
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(f) To keep all the proceeds from the sale of the hunting and fishing licenses separate and apart from other monies, and available at all times to the Department.
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*198(o) A breach of the terms and conditions of this agreement or a violation of the rules and regulations of the Wildlife Conservation Commission, the Oklahoma Wildlife Conservation Code, or the Laws of the State of Oklahoma, by the Authorized Agent, shall immediately cancel and terminate the agreement, and the Authorized Agent shall be relieved of all authority as an Authorized Agent of the Department.
3. In 1992, Perryman requested 265 hunting and fishing licenses with a total consigned value of $3,525.00. Perryman failed to remit the $3,525.00 or to return the unsold licenses to the Department because a flood occurred in the Sportman’s Complex and destroyed the licenses.
4. On or about December 16, 1993, the Department issued and served a written Complaint against Perryman. Perryman was personally served by the Muskogee County Game Warden, Gary Wilcox.
5. On January 7, 1994, an administrative hearing was held before the Department pursuant to Okla.Stat.Ann. tit. 29, § 4-201(C)(4) (West 1991). Perryman did not appear personally; however, her husband, William Wayne Perryman, appeared and stipulated that Mrs. Perryman had proper notification of the hearing and requested that he attend on her behalf.
6. Mr. Perryman testified that Mrs. Per-ryman failed to remit the money due and owing to the Department because the licenses had been destroyed in the flood. Mr. Perryman cannot specify the date on which the flood occurred.
7. Mr. Perryman also stated that he and Mrs. Perryman continued to order new 1992 licenses from the Department after the original licenses were destroyed and used the new license revenue to pay for the destroyed licenses. Mr. Perryman further testified that the value of the destroyed licenses had not been included as part of the settlement with the Defendant’s insurance company after the flood had occurred.
8. The Department issued its Findings of Fact, Conclusions of Law and Final Order after the administrative hearing held on January 7, 1994. In its Order, the Department found that Mrs. Perryman had violated Okla. Stat.Ann. tit. 29, § 4-201(0(4) (West 1991) and breached the License Consignment Agreement. The Department immediately terminated the Agreement and relieved Mrs. Perryman of all authority as an authorized agent of the Department and entered Judgment against Perryman in the amount of $3,525.00.
9. On November 30, 1994, the Department made an Application with the District Court of Muskogee County for an order to have Perryman appear and answer as to her assets. On January 6,1995, the Department, through its legal representative, conducted a hearing on the Defendant’s assets but was unable to collect on the outstanding Judgment based upon the Defendant’s lack of recoverable assets.
10. On or about June 22,1995, the Perry-mans filed for Chapter 7 relief in this Court. On or about August 1, 1995, the Department filed its Complaint objecting to the dis-chargeability of the debt owed to it. The Department alleges that the debt is a nondis-chargeable tax pursuant to § 523(a)(1) of the Bankruptcy Code, or, alternatively, that the debt is nondischargeable pursuant to § 523(a)(4) of the Bankruptcy Code, which provides that an individual debtor is not discharged from a debt arising from fraud or defalcation while acting in a fiduciary capacity, embezzlement or larceny.
CONCLUSIONS OF LAW
A. Section 523(a)(1) of the Bankruptcy Code provides:
(a) A discharge ... does not discharge an individual debtor from any debt—
(1) for a tax or a customs duty—
(A) of the kind and for the periods specified in section 507(a)(2) or 507(a)(8) of this title, whether or not a claim for such tax was filed or allowed.
Section 507(a)(8)(C) when incorporated into § 523(a)(1) makes taxes required to be collected or withheld and for which the debtor is liable nondischargeable.
B. In Safeco Ins. Co. of America v. Norris (In re Norris), 107 B.R. 592, 598 (Bankr.*199E.D.Tenn.1989), the court held that a fee collected for hunting and fishing licenses was a pecuniary burden upon an individual for the support of the government and was therefore a tax. In Norris, the debtor failed to pay the state the fees he had collected from the sale of hunting and fishing licenses. Id. at 593. The Plaintiff was the surety. The court found that the Plaintiff was subro-gated to the state’s rights. Id. at 594. Thus, the court found that the debt was nondis-ehargeable. Id. at 599. However, the court noted that it saw a distinction between the issue before it and the issue of whether liability for failure to return unsold, unissued licenses was a tax debt.
C. What the court in Norris did not decide is precisely the issue before this Court: whether the liability for failure to remit the unsold, unissued hunting and fishing licenses is nondisehargeable as a tax debt pursuant to § 523(a)(1). Section 523(a)(1) incorporates § 507(a)(8), which is the section potentially applicable in this case. Section 507(a)(8) requires that the tax be “collected” or “withheld.”
The tax for hunting and fishing licenses cannot be “collected” or “withheld” until the licenses have been sold. Thus, there is no tax debt until the licenses are sold and the debt cannot be held nondisehargeable pursuant to § 523(a)(1).
D. Alternatively, the Department alleges that the debt is nondisehargeable pursuant to § 523(a)(4). Section 523(a)(4) provides:
(a) A discharge ... does not discharge an individual debtor from any debt—
* * * * * *
(4) for fraud or defalcation while acting in a fiduciary capacity, embezzlement, or larceny.
It has been stated that the scope of “fiduciary” under § 523(a)(4) is a question of federal law. Auto Owners Ins. Co. v. Littell (In re Littell), 109 B.R. 874, 878-9 (Bankr.N.D.Ind.1989). In order for there to be a fiduciary relationship, there must be a technical or expressed trust. Davis v. Aetna Acceptance Co., 293 U.S. 328, 333, 55 S.Ct. 151, 153-54, 79 L.Ed. 393 (1934). The court, in Littell, stated that a court should consult state law on the issue of whether a trust exists; however, the question ultimately is one of federal law. Littell at 880. The Plaintiff must show that the debtor was a trustee before the wrong occurred, without reference to the wrong and be independent of the wrong. Id. (citations omitted).
The Court has reviewed the state statutes regarding consignment of hunting and fishing licenses. There is no language in the statutes concerning a trust or a fiduciary relationship. In the Agreement, the only thing which can be viewed as imposing a trust-like duty would be the requirement to separate the funds from the sale of licenses. However, this is the only language which even implies a trust relationship. Neither the statute nor the Agreement sets forth a trust res. The Agreement refers to Perry-man as an agent, not as a fiduciary as we have in the collection of sales taxes which are collected by merchants. Considering all the circumstances, this Court finds that there was no fiduciary relationship created and thus, the debt is dischargeable.
IT IS THEREFORE ORDERED that the Plaintiffs Motion for Summary Judgment is denied. The debt owed to the Oklahoma Department of Wildlife Conservation is dis-chargeable. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492265/ | ORDER AWARDING INTERIM COMPENSATION
ARTHUR N. VOTOLATO, Bankruptcy Judge.*
Before the Court is the Application of Richard A. Lee, Esq., attorney for Trustee, for interim compensation in the amount of $11,985.50 for services rendered during the period March 1, 1995 through August 31, 1995, and for reimbursement of expenses of $634.24. Upon consideration of the Application and the Objection filed by the United States Trustee,1 it is ORDERED that:
(1) The request for 3.9 hours at the rate of $160 per hour for converting time entries from .25 hour to .10 hour increments is DENIED. The Applicant is aware that this Court follows the standard practice of requiring billing in .10 hour increments, see In re Corporacion de Servicios Medico-Hos-*275pitalarios de Fajardo, Inc., 155 B.R. 1 (Bankr.D.P.R.1993).2 In the circumstances, the estate should not be required to bear this expense, which is excessive in any event. Accordingly, compensation is ALLOWED in the amount of $11,361.50;
(2) With regard to the request for reimbursement of expenses, the Applicant charges $.25 per page for photocopying, and $.50 per page for facsimiles, with a $2 minimum for incoming or outgoing transmissions. These charges are not in compliance with the standards announced in In re Bank of New England Corp., 134 B.R. 450 (Bankr.D.Mass. 1991), aff'd, 142 B.R. 584 (D.Mass.1992), and which are followed routinely in the First Circuit. In re Almacs, Inc., 178 B.R. 598 (Bankr.D.R.I.1995).
In support of his facsimile charges the Applicant has provided Exhibit D to the Fee Application, wherein he includes the cost of the equipment (depreciated over 48 months), maintenance, toner, paper, local phone service, and an “operator” at $11.50 per hour, and arrives at a per page cost. We follow the eases holding that “[o]utgoing telecopies should be charged at the cost of long distance telephone rates [period], and incoming telecopies charged at the actual costs of paper, toner, or ink, etc.” In re CF & I Fabricators, Inc., 131 B.R. 474, 494 (Bankr.D.Utah 1991) (emphasis added); see also Bank of New England, 134 B.R. at 458; In re 321 South Main Street, L.P., 155 B.R. 41, 43 (Bankr.D.R.I.1993). The remaining expenses listed by the Applicant in Exhibit D constitute overhead, which are already included in the professional’s hourly rate. See Almacs, 178 B.R. at 606. Accordingly, the request for facsimile expenses is reduced by 75%. Finally, charges for photocopies are reduced to $.20 per page to conform to the still current standard in Almacs. See Id. at 607. For the foregoing reasons, the expense request of $634.24 is ALLOWED in the amount of $485.50.
Of the District of Rhode Island, sitting by designation.
. Lopez Alejandro & Co. also filed an objection to the application, but the reasons contained therein are not persuasive, nor do they form any of the basis for this ruling.
. Mr. Lee sought immediate review of that ruling, but the District Court dismissed the appeal, as interlocutory. See In re Corporacion de Servicios Medico-Hospitalarios de Fajardo, No. 93-1937CCC (D.P.R. Nov. 28, 1994). | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492267/ | OPINION AND ORDER
JOHN J. THOMAS, Bankruptcy Judge.
The application of Federal Rule of Bankruptcy Procedure 9011 has been seldom addressed by the Third Circuit. See In re Gioioso, 979 F.2d 956 (3rd Cir.1992); Landon v. Hunt, 977 F.2d 829 (3rd Cir.1992); Cinema Service Corp. v. Edbee Corp., 774 F.2d 584 (3rd Cir.1985). Not surprisingly, there is little instruction by the Third Circuit concerning the application of that rule to bankruptcy procedures. The United States Trustee (hereinafter “Trustee”) requests the court to apply Rule 9011 to a disclosure statement and plan presented by Pagnotti Enterprises, Inc. (hereinafter “PEI”) through its law firm, Rosenn, Jenkins & Greenwald, L.L.P.1
Federal Rule of Bankruptcy Procedure 9011 provides, in pertinent part, as follows:
*304(a) Signature. Every petition, pleading, motion and other paper served or filed in a case under the Code on behalf of a party represented by an attorney, except a list, schedule, or statement, or amendments thereto, shall be signed by at least one attorney of record in the attorney’s individual name, whose office address and telephone number shall be stated. A party who is not represented by an attorney shall sign all papers and state the party’s address and telephone number. The signature of an attorney or a party constitutes a certificate that the attorney or party has read the document; that to the best of the attorney’s or party’s knowledge, information, and belief formed after reasonable inquiry it is well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law; and that it is not interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation or administration of the case. If a document is not signed, it shall be stricken unless it is signed promptly after the omission is called to the attention of the person whose signature is required. 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, the represented party, or both, an appropriate sanction, which may include an order to pay to the other party or parties the amount of the reasonable expenses incurred because of the filing of the document, including a reasonable attorney’s fee.
The bankruptcy court in the case of In re Ligon, 50 B.R. 127 (Bkrtcy.M.D.Tenn.1985) addressed the purpose of a disclosure statement as follows:
The purpose of the disclosure statement is to provide sufficient information to enable a reasonable and typical investor to make an informed judgment about the plan. S.REP. NO. 989, 95th Cong., 2d Sess. 121, reprinted in 1978 U.S.CODE CONG. & AD .NEWS 5787, 5907. While the debtor cannot be expected to unerringly predict the future, the “information to be provided should be comprised of all those factors presently known to the plan proponent that bear upon the success or failure of the proposals contained in the plan.” In re Stanley Hotel, Inc., 13 B.R. 926, 8 BANKR.CT.DEC. (CRR) 35, 5 COLLIER BANKR.CAS.2d (MB) 64 (Bankr.D.Colo.1981). Conelusory allegations or opinions without supporting facts are generally not acceptable. In re Egan, 33 B.R. 672, 11 BANKR.CT.DEC. (CRR) 476 (Bankr.N.D.Ill.1983); In re East Redley Corp., 16 B.R. 429, 8 BANKR.CT.DEC. (CRR) 806 (Bankr.E.D.Pa.1982).
Knowledge of the debtor’s financial condition is essential before any informed decision concerning the merits of a plan can be made. A description of available assets and their value is a vital element of necessary disclosure. In re Metrocraft Publishing Services, Inc., 39 B.R. 567, 10 COLLIER BANKR.CAS.2d (MB) 1182 (Bankr.N.D.Ga.1984); See In re A.C. Williams Co., 25 B.R. 173, 9 BANKR.CT.DEC. (CRR) 1239 (Bankr.N.D.Ohio 1982). In re Ligon, supra at p. 130.
The Trustee, at the time of the hearing, conceded that every disclosure statement lacking adequate information for any interested party to make an informed decision would not necessarily result in a Rule 9011 violation. Nevertheless, the Trustee argues that the disclosure statement submitted by PEI, through its law firm, Rosenn, Jenkins & Greenwald, failed to include basic and vital information necessary for any creditor to make an informed judgment and that the inclusion of certain information and the omission of other information made the disclosure statement inaccurate and misleading. Further, the Trustee argues that PEI and its lawyers knew at the time of the drafting of the disclosure statement and plan of reorganization that they were both inherently flawed to the point where there would be no basis in law upon which the court could approve the disclosure statement and subsequently confirm the plan. The Trustee argues that PEI and Rosenn, Jenkins and Greenwald not only failed to investigate the assets and liabilities of this Debtor and to disclose those assets and liabilities in the disclosure statement, and to adequately re*305view the law, but also engaged in a purposeful deceit of the creditors of this estate.
After conceding that the Trustee would not automatically determine that a failure to include adequate information in the disclosure statement would necessitate a motion for sanctions, the Trustee indicated that that decision would have to be made on a ease by case basis. The Trustee, addressing some of the factors it believed weighed heavily on his decision to file the instant motion, stated that “[a] large factor that effected my decision to file sanctions was the posture of the case and — you know, what I perceive to be the antagonism of the parties and the different positions that were being taken by the parties in other matters that affected my conclusions regarding the purpose of the filing of the disclosure statement so, you know, it’s a number of factors and but I believe this is an egregious ease that ... touches on almost every well every part of Rule 9011.” Transcript dated February 1,1995 at p. 28.
In the In re Ligon case, supra, the court made the following observations about that particular case:
At the sanctions hearing it was made clear to this court that this is not a case where debtor’s counsel has signed and submitted a Chapter 11 disclosure statement which merely fails the statutory test for adequate information contained in 11 U.S.C. § 1125(a). Rather, this is a case where debtor’s counsel has exceeded the boundaries of appropriate advocacy by signing and filing documents with the bankruptcy court which he had to have known were materially false and misleading. This was hardly a complicated or difficult bankruptcy case. There were only a handfull of creditors and fewer than a half-dozen identifiable assets. Yet, essentially every available asset of the debt- or, though revealed to debtor’s counsel, was omitted or misrepresented in the disclosure statement. In re Ligon, supra at p. 130.
Further, the court wrote the following on page 133:
An inadequate disclosure statement will normally be dealt with by the objection and amendment process provided in Chapter 11. Good faith omissions and mistakes or reliance on a reasonable but erroneous interpretation of the law will not usually be a basis for invoking Rule 9011. Further, there may be situations where a lawyer has been misled or lied to by a debtor. In these instances, the lawyer should not fear sanctions where he has made reasonable and diligent inquiries. However, none of these justifications for inadequate disclosure apply here. This is a particularly egregious case. Where a lawyer has signed a disclosure statement which bears little resemblance to what he knows is the debtor’s true state of affairs, we will not hesitate in awarding sanctions. In re Ligon, supra at p. 133.
Basically, the Trustee’s position parrots the two above-quoted paragraphs from the In re Ligon court.
Early in the hearing, the court took the position that it would look to a Rule 9011 hearing and the burden on the United States Trustee’s office to prove a violation “[i]n a very strict fashion since I believe it is punitive and he [United States Trustee] will make his case rather strongly. Maybe I put that undue burden on you, but it’s a burden that I’m choosing to put on you.” Transcript dated February 1,1995 at pp. 15-16.
The court has thoroughly reviewed the evidence presented during the two (2) day hearing on this matter and cannot conclude that the Trustee should prevail on its motions for sanctions. Unlike the court in In re Ligon, this present bankruptcy case has devolved into a contest between the chapter eleven Trustee and the principal creditor of the estate (PEI), both of whom are fully knowledgeable about the case. Unlike the In re Ligon case, this bankruptcy is more complex than the average chapter eleven case with various litigation proceedings between PEI and other parties in interest, both in district court as well as bankruptcy court. There are significant assets and substantial debt.
Should PEI and its lawyers have submitted a disclosure statement containing much more information by way of a succinct listing of assets and their values? Perhaps. Could the disclosure statement have been the subject of better draftsmanship as a result of a more thorough investigation into the facts *306and a more concise analysis of the law concerning the approval of the disclosure statement and confirmation of the plan of reorganization? Undoubtedly. But is this a case, as where a creditor, together with its lawyer, acted in such an egregious manner to compel this court to impose sanctions because of the inadequacy of a disclosure statement? Certainly not.
As the In re Ligon court suggests, an inadequate disclosure statement will normally be dealt with by an objection and an amendment process provided in chapter eleven. The Trustee has certainly presented compelling argument as to why both the instant disclosure statement and plan of reorganization can be neither approved nor confirmed by this court. Notwithstanding this opinion, the Trustee’s motion has sent a signal, particularly to the law firm involved in this case, and to all those who practice in the Middle District of Pennsylvania, that they should take more care and time in their investigation, preparation of disclosure statements and plans, and the factual investigation and legal analysis that go hand in hand with that preparation before coming to this court seeking approval of disclosure statements and confirmation of plans of reorganization.
. We have earlier concluded that a lawyer can be required to sign a disclosure statement on behalf of his or her client. In re Beltrami, 178 B.R. 388 (Bkrtcy.M.D.Pa.1994). | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492268/ | OPINION AND ORDER
JOHN J. THOMAS, Bankruptcy Judge.
First Eastern Bank, N.A., now known as PNC Bank, (“Bank”), has filed a Motion for Relief against the Debtor seeking authority to pursue certain collateral of the Debtor including equipment and accounts receivables. The Debtor opposes relief from the automatic stay as does the Internal Revenue Service, a creditor of the estate that maintains that it has a security interest in receivables superior to the interests of the Bank.
The Debtor has also filed an objection to the proof of claim filed by the Bank.
Intervening in the relief motion is one, John Yarosz, who, as an officer of Varsity Sodding Service, Inc., was personally obligated to the IRS for the taxes. If the Bank succeeds in having a priority in the receivables over the IRS, this would apparently be to the detriment of Yarosz.
At the time of the trial on September 12, 1994, the parties entered into a stipulation that resolved some of the issues before the court. The IRS agreed to withdraw its objection to the motion for relief filed by the Bank and the IRS and the Bank agreed that the pre-petition account receivable in the total amount of Forty-Four Thousand One Hundred Four and 20/100 Dollars ($44,-104.20) was subject to a lien in favor of the IRS superior in position to the Bank’s lien.
There was a further stipulation read into the record which focused the issues to be decided by the court. The parties agreed that the Bank had a security interest in equipment and receivables based on certain documents executed by the Debtor. The Debtor admits that no post-petition payments have been made to the Bank with regard to the security agreements.
The issue in this ease turns on whether the Bank’s filed financing statements in Pennsylvania were sufficient to secure an interest in the Debtor’s equipment which was located out of state. The Bank maintains that these items of equipment were “mobile goods” under the provisions of 13 Pa.C.S.A. § 9103(e). If these goods are “mobile goods” as defined by the statute, then under the provisions of Section 9103(c), the filing in the jurisdiction of the Debtor’s “chief executive office” would be sufficient to perfect its security interest against the equipment. On the other hand, if the items are not “mobile goods”, then a secured party would lose its perfected status against third parties (such as a trustee in bankruptcy) if the refiling does not take place in the state of the location of the property within four (4) months after its removal to that jurisdiction.
John Yarosz and the Debtor maintain that the equipment was not mobile goods. The Bank maintains otherwise. It is admitted that the equipment was located in Maryland and New Jersey. It is admitted that the Bank’s financing statements are filed solely in Pennsylvania.
The equipment consists of various items identified in Yarosz’ Exhibit No. 1. They are generally described as items used in the landscaping business including backhoes, loaders, mulch spreader, trencher, landscape rakes, vibrator plow, hydro-seeders, etc. None of these items could be used over the roads. All of them would have to be “trail-ered” or chained onto a flat-bed trailer for movement from one area to another. While the equipment is used to move earth in landscaping operations, none of it is of a large-scale nature such as what exists with regard to excavation equipment.
*308Traditionally, the Debtor engaged in a residential landscaping business with its equipment primarily located in Luzerne County, Pennsylvania. Nevertheless, at some point, the Debtor became involved in projects that were outside of the Commonwealth of Pennsylvania and work was done in New York state, Maryland, New Jersey and Washington, D.C.
The equipment has been stipulated to be worth Eighty-Two Thousand Six Hundred Dollars ($82,600.00) and the debt to the Bank exceeds Five Hundred Thousand Dollars ($500,000.00).
There seems to be no dispute that the equipment has been located outside of the Commonwealth of Pennsylvania for a number of years prior to the Debtor’s bankruptcy on December 1, 1993, and the Bank made no filing in the states in which the equipment was located.
DISCUSSION
Section 9103 of the Pennsylvania Uniform Commercial Code (13 Pa.C.S.A. § 9103) indicates that the filing statement for “mobile” goods can be filed in the state where the chief executive office is located. In such instance, the financing statement need not be refiled in the jurisdiction where the collateral is situated.
To be under the umbrella of Section 9103(c), there are four (4) requirements for the goods in question, as follows:
(1) The goods must be mobile;
(2) The goods must be of a type normally used in more than one jurisdiction, “... such as motor vehicles, trailers, rolling stock, airplanes, shipping containers, road building and construction machinery and commercial harvesting machinery and the like ... ”;
(3) Goods cannot be covered by a certificate of title; and
(4) The goods must be either equipment of the Debtor or inventory leased or held for use by the Debtor.
“Of these, only the first two requirements pose much interpretive difficulty. Does the term ‘normally used’ refer to a particular debtor’s actual use of the collateral, or does it imply an objective standard of what can be normally used in more than one state? If the latter, should ‘normal’ be given a local or a national objective meaning?” 2 White and Summers, Uniform Commercial Code at p. (3rd ed. 1988).
Fortunately, our circuit has given us guidance on this question in making it clear that “... the test for mobile goods turns on the type of goods involved and not on their aetual use in or transportation between more than one jurisdiction.” In the Matter of Dennis Mitchell Industries, Inc., 419 F.2d 349, 358 (3rd Cir.1969).
We thus must discount any suggestion that the current location of the Debtor’s equipment in states other than Pennsylvania are of any value in arriving at our ultimate decision as to whether the equipment is in the classification of “mobile goods”.
Despite this guidance from the circuit, the bankruptcy court in In re Nardulli & Sons Co., Inc., 66 B.R. 871 (Bkrtcy.W.D.Pa.1986), rev’d on other grounds, 836 F.2d 184 (3rd Cir.1988) examining the applicability of this section to a Caterpillar dozer, two wheel loaders and a truck scale, noted that this type of equipment might very well be used for road building and construction and, thus, might qualify as “mobile goods” but, because they were actually used for strip-mining, the court concluded that the equipment was not “mobile goods” under Section 9103. Id. at p. 879. The reliance of the Nardulli court on the “actual use” of the equipment cannot be justified in light of the clearly contrary instructions given by the circuit court in In the Matter of Dennis Mitchell, supra. Moreover, the language of the UCC quite naturally lends itself to defining the normal use as focusing “... on the inherent qualities of the collateral and the uses to which such collateral would normally be put.”1
This court is quite comfortable in concluding that the items described in the case at bar come within the definition of mobile, i.e. “capable of moving or being moved”. Webster’s New Collegiate Dictionary (1979). The inherent characteristics of landscaping *309equipment suggest that its usefulness would be quite limited if it could not be located and relocated from site to site. Nevertheless, will the “normal use” of this equipment take it from state to state?2 This court concludes not. Those items set forth by example in Section 9103(c) as equipment normally used in more than one jurisdiction in one sense refer to goods which quite ordinarily would be located in several states over the course of a given week (motor vehicles, trailers, rolling stock, airplanes and shipping containers). In the other sense, the examples identify large pieces of equipment the investment in which would require its use over a large regional area including from one state to another (road building and construction machinery and commercial harvesting machinery). By way of illustration, both a lawn mower and a combine basically perform their function by cutting vegetation. Nevertheless, the very investment in owning a combine would require its use over the widest area possible including the various states. Such cannot be said about a lawn mower or a similar small item of equipment.
The earth moving equipment at issue before us was described by John Yarosz as follows:
“... there’s a definite difference between earth moving equipment and what we use. You could move, you know, if you were to dig a hole for a tree, you might dig a hole one and half feet by two feet, something like that. But you couldn’t do it to put an extensive pipe — you couldn’t install sewer pipe with it, so to speak. It — it’s really attuned to fine grading and you know light earth moving work.” Transcript dated September 12, 1994. at p. 32.
In short, the only witness that testified about the utility of the equipment hardly identified it as in the same league as “road building and construction machinery”. The mere fact that the items were located in different states is of no import. What is important is that “... the secured party is under a duty to keep himself informed of his debtor’s dealings with the collateral.” In the Matter of Dennis Mitchell Industries, Inc., supra at p. 358. The Debtor has met its burden of showing that the financing statements were not filed for these goods in the states where the goods were located and the Bank has failed in its burden of producing sufficient evidence that these items were “mobile goods normally used” in more than one jurisdiction. See In re Minnesota Utility Contracting, Inc., 110 B.R. 414 (D.Minn. 1990).
We conclude that the Bank no longer has a perfected security interest in the equipment nor in its proceeds.
Attached is our Order.
ORDER
The Bank having lost its perfected security interest in the equipment and in the proceeds therefrom (rents), the Bank’s Motion for Relief from the Automatic Stay is hereby denied and the Debtor’s Objection to the proof of claim is sustained to the extent that the proof of claim asserts a perfected security interest.
. The language cited was used in Konkel v. Golden Plains Credit Union, 778 P.2d 660 (Colo.1989) *309to describe the “normal use" test. The Konkel court provided further descriptions of the “intended use” test as well as the "actual use” test.
. The word “jurisdiction” in Section 9103 has been interpreted to mean different state jurisdictions. Ingersoll-Rand Financial Corp. v. Nunley, 11 B.R. 528, 531 (W.D.Va.1981). | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492269/ | OPINION AND ORDER DISMISSING CLAIMS, DROPPING DEFENDANTS AND DIRECTING DEBTOR TO SHOW CAUSE WHY OTHER DEFENDANTS SHOULD NOT BE DROPPED
WALTER J. KRASNIEWSKI, Bankruptcy Judge.
This matter is before the Court on William Cofrancesco’s (the “Debtor”) complaint which seeks to discharge certain of the Debtor’s student loan obligations as an “undue hardship” under 11 § 523(a)(8). The Court finds that the Debtor’s claims against defendants One Valley Bank, fka Farmers and Merchants Bank (“OVB”), Kent State University, National Direct Student Loans (“Kent/ NDSL”), and West Virginia University, National Direct Student Loans (“WVU/NDSL”) should be dismissed without prejudice. The Court further finds that OVB, Kent/NDSL and WVU/NDSL should be dropped from this adversary pursuant to Fed.R.Civ.P. 21, made applicable by Fed.R.Bankr.P. 7021, without prejudice to the Debtor’s right to refile adversary complaints against said defendants. Lastly, the Court finds that the Debtor should show cause within 30 days from the date of this order why all of the remaining defendants, except for Bank One, Akron (“BOA”) and the Ohio Student Loan Commission (“OSLO”), should not be dropped from this adversary.
FACTS
The Debtor obtained student loans from BOA on May 23,1984, June 17,1984, August 30, 1984, August 5, 1985, and May 22, 1986. OSLO guaranteed these loans.
The Debtor also obtained student loans from a number of other lenders. The Debtor *371obtained student loans from OVB on August 24, 1987, April, 28, 1988, October 12, 1989, October 25, 1989, August 27, 1990, and August 26, 1991. In addition, the Debtor obtained loans from Kent/NDSL during the period from 1983 through 1987. Moreover, the Debtor obtained loans from WVU/NDSL during the period from 1989 through 1990.
The Debtor’s complaint names as defendants numerous parties to whom the Debtor may be liable on his student loans “because [such defendants] have or may claim to have a claim against the [Debtor] as a Guarantor, Assignee/Assignor, Servicing Agent or Consolidation Lender on some or all of [the Debtor’s] student loan obligations”. See Complaint, at pp. 7-8, para. 11.
DISCUSSION
No just cause exists for permitting the joinder of OVB, Kent/NDSL or WVU/NDSL in this adversary. Jobin v. Smith (In re M & L Business Machine Co.), 132 B.R. 433, 435-36 (Bankr.D.Colo.1991).
In applying Fed.R.Civ.P. 20(a), made applicable by Fed.R.Bankr.P. 7020, the Court in In re M & L Business Machine Co. stated that:
[i]t is not proper to join multiple defendants in a case if the transactions forming the basis for the claims are not related. Michaels Building Co. v. Ameritrust Co., N.A, 848 F.2d 674 (6th Cir.1988). Joinder requires both the commonality of a particular transaction or occurrence and questions of law or fact. Intercon Research Associates, Ltd. v. Dresser Industries, Inc., 696 F.2d 53 (7th Cir.1982).
In re M & L Business Machine Co., 132 B.R. at 435.
The Debtor’s adversary complaint fails to set forth facts indicating any connection between the loans which the Debtor received from BOA and the loans which the Debtor received from OVB, Kenl/NDSL or WVU/ NDSL. See Michaels Bldg. Co. v. Ameritrust Co., N.A., 848 F.2d 674, 682 (6th Cir. 1988) (finding that district court properly dismissed bank from action alleging violations of RICO and Sherman Act where loan transaction involving bank did not arise from same transaction, occurrence, or series of transactions or occurrences involving other defendants); see also Abdullah v. Acands, Inc., 30 F.3d 264, 268 n. 5 (1st Cir.1994) (finding misjoinder, where plaintiffs complaint was “bereft of factual allegations indicating why 1000 plaintiffs and 93 defendants belonged] in the same action”); Nassau County Ass’n of Ins. Agents, Inc. v. Aetna Life & Casualty Co., 497 F.2d 1151, 1154 (2nd Cir.1974), cert. denied, 419 U.S. 968, 95 S.Ct. 232, 42 L.Ed.2d 184 (1974) (finding misjoinder in action involving 164 defendants where plaintiff failed to allege right to relief arising from same transaction or series of transactions). Furthermore, the factual allegations in the Debtor’s complaint fail to adequately set forth the manner in which the Debtor’s claims against the other defendants named in this adversary are related to the Debtor’s loan transactions with BOA.
In light of the foregoing, it is therefore
ORDERED that the Debtor’s claims against OVB, Kent/NDSL and WVU/NDSL be, and they hereby are, dismissed without prejudice. It is further
ORDERED that OVB, Kent/NDSL, and WVU/NDSL be, and they hereby are, dropped from this adversary proceeding without prejudice to the Debtor’s right to refile individual adversary proceedings against said defendants. It is further
ORDERED that the Debtor show cause within 30 days of the date of this Order why the remaining defendants, except for Bank One, Akron and the Ohio Student Loan Commission, should not be dropped from this adversary. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492270/ | MEMORANDUM
JOHN C. COOK, Bankruptcy Judge.
This case is before the court on the motion of Pollack and Adele Boyd (a) to determine whether a revocation of the debtor corporation’s Subehapter S tax status by its sole shareholder, Pollack Boyd, would violate the order of confirmation heretofore entered in this case and (b) to declare that any taxes incurred by reason of the sale of the debtor’s assets in this ease fall on the debtor corporation and not on Mr. Boyd. If the court permits Mr. Boyd to revoke the debtor’s Subehapter S status, and if a sale is not consummated within the time provided for in the current confirmed plan, movants ask that the debtor be allowed to resubmit its plan of reorganization for another vote by the creditors.
From a review of the record, it appears that the Bank of East Ridge, the major secured creditor in this ease, filed an “Emergency Motion to Appoint Trustee” on January 26, 1995, in response to Mr. Boyd’s postpetition revocation of the debtor’s Sub-chapter S tax status. The debtor, which was then a debtor in possession managed by Mr. Boyd, responded on February 6, 1995, the day set for the hearing of the bank’s emergency motion, and attempted to moot the bank’s demand for a trustee by promising to rescind the revocation of the debtor’s Subchapter S status, thus returning it to C corporation status. In its response to the emergency motion, the debtor argued that appointment of a trustee would be unnecessary because
the Debtor and Mr. Boyd, as sole shareholder of the Debtor, will take any and all *373necessary steps to rescind Mr. Boyd’s revocation of the Subchapter S election. Accordingly, the action upon which the Bank bases its Motion to Appoint Trustee is being remedied by Debtor and Mr. Boyd to serve the best interests of the creditors, thus rendering the Bank’s Motion unnecessary.
(Debtor’s Objection to Emergency Motion to Appoint Trustee, p. 2 (emphasis added)). The debtor summed up its opposition to the appointment of a trustee by saying, “In any event, however, the Debtor corporation and sole shareholder, Pollack Boyd, will take all necessary steps to rescind the revocation of the Subchapter S election, thus rendering such complaint moot.” Id. at 6 (emphasis added). As a result of these representations made both in writing and orally at the hearing in the presence of Mr. Boyd, who appeared as the debtor’s representative, the bank agreed not pursue its motion for the appointment of a trustee prior to the confirmation hearing in the case.
The case continued toward confirmation with two competing plans, one submitted by the bank, the other by the debtor. All interested parties proceeded with the understanding that the debtor was an S corporation. In the debtor’s Third Amendment to its Disclosure Statement which was signed by Mr. Boyd as debtor’s president, interested parties were assured by the debtor, in the context of discussing the bank’s competing plan, that it and Mr. Boyd had in fact “taken steps necessary to rescind the revocation of the Subchapter S status of the Debtor corporation.” (Third Amendment to Disclosure Statement Filed by Debtor, p. 29). The bank’s plan was confirmed, pursuant to which a sale of the debtor’s assets is imminent. Mr. Boyd now seeks a construction of the confirmation order that would allow him, at this late date, to do what he has already done once and then renounced.
The Internal Revenue Code allows the revocation of a Subchapter S election by consent of the majority stockholders. 26 U.S.C. § 1362(d)(1). The Bankruptcy Code, 11 U.S.C. § 1141(d)(1)(B), provides in relevant part that confirmation of a plan “terminates all rights and interests of equity security holders ... provided for by the plan.” It is questionable, therefore, whether Mr. Boyd still has the right or power, after confirmation, to take any action to affect the debtor’s tax status. However, even if he has such a postconfirmation power, he is estopped to exercise it by his agreement to restore the debtor’s tax status to that of a Subchapter S corporation in exchange for the bank’s agreement not to proceed with the motion to appoint a trustee. In order to moot one of the bank’s arguments in favor of a trustee, the debtor in possession, managed and represented by Mr. Boyd, received from Mr. Boyd his promise to rescind his revocation of Sub-chapter S status. Having thus promised to maintain the debtor’s Subchapter S status in exchange for an important procedural consideration, Mr. Boyd cannot be permitted to act in derogation of that promise now. See generally Apponi v. Sunshine Biscuits, Inc., 809 F.2d 1210, 1217 (6th Cir.), cert. denied, 484 U.S. 820, 108 S.Ct. 77, 98 L.Ed.2d 40 (1987); Restatement (Second) of Contracts § 90 cmt. b, illus. 2 (1979).
Like everyone else, Mr. Boyd is bound by the terms of the confirmed plan, terms which in this case assume the sale of assets of a Subehapter S corporation, as the debtor’s own final disclosure statement acknowledges. 11 U.S.C. § 1141(a). As has been pointed out, he is also estopped from attempting to revoke the Subchapter S election by his previous conduct and agreements in this case.
As for the motion to determine the debtor’s tax liability, the court finds that such matter is not ripe for adjudication. The debtor’s tax liability, to the extent it may be uncertain, is a matter between it and the Internal Revenue Service. At the present time there is before the court no controversy between the IRS and the debtor concerning the latter’s taxes or tax liability, and no legitimate purpose would be served by the court’s speculation on those matters. Of course, Mr. Boyd would not be entitled to an advisory opinion on his tax status by virtue of 11 U.S.C. § 505.
For the foregoing reasons, the motion to determine tax liability and to modify the plan *374will be denied and Pollack Boyd is estopped from taking any action to alter the debtor’s current tax status.1 An order will enter.
. At the conclusion of the confirmation hearing in this case, and upon the request of the bank, the court orally directed that Mr. Boyd not take any action to change the tax status of the debtor since he had previously rescinded the revocation of the Subchapter S election in settlement of the bank's motion to appoint trustee. Because the bank's plan was voted on by creditors and confirmed under the assumption that the debtor was and would remain a Subchapter S corporation, a fact disclosed to creditors in the debtor's Third Amendment to its Disclosure Statement, it is necessary to the consummation of the bank’s plan that Mr. Boyd not now change the tax status of the debtor and undo what he did in settling the motion for appointment of trustee. Under 11 U.S.C. § 1142(b), the court has the authority to order a necessary party to perform such acts as are necessary for the consummation of the plan. Since it is necessary to the consummation of the plan for Mr. Boyd to refrain from any attempt to change the tax status of the debtor, a directive from the court to Mr. Boyd that he not attempt to change the tax status of the debtor is appropriate. Although an oral directive was given to Mr. Boyd at the confirmation hearing, no written order was entered on this matter. Now that Mr. Boyd seeks clarification of the court's oral directive, it has become necessary to enter a memorandum and order addressing this subject. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483938/ | Matter of Mattis (2022 NY Slip Op 06438)
Matter of Mattis
2022 NY Slip Op 06438
Decided on November 15, 2022
Appellate Division, First Department
Per Curiam
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 and Entered: November 15, 2022
SUPREME COURT, APPELLATE DIVISION
First Judicial Department
Sallie Manzanet-Daniels,J.P.,
Cynthia S. Kern
Ellen Gesmer
Manuel J. Mendez
Martin Shulman, JJ.
Motion No. 2022-03298 Case No. 2022-03674
[*1]In the Matter of Colinford King Mattis, an Attorney and Counselor-at Law: Attorney Grievance Committee for the First Judicial Department, Petitioner, Colinford King Mattis, (OCA Atty. Reg. No. 5547898), Respondent.
Disciplinary proceedings instituted by the Attorney Grievance Committee for the First Judicial Department. Respondent was admitted to the Bar of the State of New York at a Term of the Appellate Division of the Supreme Court for the Second Judicial Department on January 31, 2018.
Jorge Dopico, Chief Attorney, Attorney Grievance Committee, New York (Denice Szkeley, Esq., of counsel), for petitioner.
Respondent pro se.
Per Curiam
Respondent Colinford King Mattis was admitted to practice law in the State of New York by the Second Judicial Department on January 31, 2018. At all times relevant herein, respondent maintained an office for the practice of law within the First Judicial Department.
On June 2, 2022, respondent entered a guilty plea to a superseding federal information which charged him and codefendant Urooj Rahman with conspiracy to commit arson and to make and possess an unregistered destructive device in violation of 18 USC §§ 371 and 844(i) and 26 USC §§ 5861(d) and 5861(f). His conviction was based on an incident in which he and Rahman made and possessed an improvised incendiary device, i.e., a Molotov cocktail, which was used to damage an unoccupied New York City police vehicle during a 2020 protest over the death of George Floyd.
By notice of motion dated August 12, 2022, the Attorney Grievance Committee (AGC) seeks an order striking respondent's name from the roll of attorneys pursuant to Judicial Law § 90(4)(a) and (b) and the Rules for Attorney Disciplinary Matters (22 NYCRR) § 1240.12, on the ground that respondent was convicted of a felony as defined by Judiciary Law § 90(4)(e) and has therefore been automatically disbarred. It should be noted that for purposes of automatic disbarment, a conviction occurs at the time of plea or verdict (see Matter of Conroy, 167 AD3d 44, 46 [1st Dept 2018]), not at sentencing.
Respondent was convicted on federal charges "essentially similar" to one or more felony offenses as defined under New York Law so as to result in his automatic disbarment (Judiciary Law § 90[4][a]). Respondent's federal conviction for conspiracy to maliciously damage or destroy, or attempt to damage or destroy by means of fire or an explosive, any building, vehicle, or other real or personal property used in interstate or foreign commerce in violation of 18 USC §§ 371 and 844(i) is "essentially similar," in language and elements, to conspiracy in the fourth degree, a class E felony in violation of Penal Law § 105.10(1), to commit arson in the third degree, a class C felony in violation of Penal law § 150.10(1). Indeed, in his plea agreement, he stipulated and agreed that his federal conviction was "essentially similar" to one or more felony offenses defined under New York law, including conspiracy to commit arson in the third degree, and that "even though the likely consequence of [his] guilty plea will be automatic disbarment from the practice of law in the State of New York," he nevertheless wished to plead guilty.
Accordingly, the AGC's motion to disbar should be granted and respondent's name stricken from the roll of attorneys in the State of New York, effective nunc pro tunc to June 2, 2022.
All concur.
IT IS ORDERED that the Attorney Grievance Committee's motion to strike the name of the respondent, Colinford King Mattis, from the [*2]roll of attorney's and counselors-at-law, pursuant to Judiciary Law § 90(4), is granted; and,
IT IS FURTHER ORDERED that pursuant to Judiciary Law § 90(4)(a) and (b) and 22 NYCRR 1240.12(c)(1), the respondent, Colinford King Mattis, is disbarred, effective nunc pro tunc to June 2, 2022, and his name is stricken from the roll of attorneys and counselors-at-law; and,
IT IS FURTHER ORDERED that the respondent, Colinford King Mattis, shall comply with the rules governing the conduct of disbarred or suspended attorneys (see 22 NYCRR 1240.15); and,
IT IS FURTHER ORDERED that pursuant to Judiciary Law § 90, the respondent, Colinford King Mattis, is commanded to desist and refrain from (1) practicing law in any form, either as principal or as agent, clerk, or employee of another, (2) appearing as an attorney or counselor-at-law before any court, Judge, Justice, board, commission, or other public authority, (3) giving to another an opinion as to the law or its application or any advice in relation thereto, and (4) holding himself out in any way as an attorney and counselor-at-law; and
IT IS FURTHER ORDERED that if the respondent, Colinford King Mattis, has been issued a secure pass by the Office of Court Administration, it shall be returned forthwith to the issuing agency.
Entered: November 15, 2022 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483959/ | 110 E. 138 Realty LLC v Rydan Realty, Inc. (2022 NY Slip Op 06450)
110 E. 138 Realty LLC v Rydan Realty, Inc.
2022 NY Slip Op 06450
Decided on November 15, 2022
Appellate Division, First 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 and Entered: November 15, 2022
Before: Manzanet-Daniels, J.P., Webber, Mazzarelli, Friedman, Shulman, JJ.
Index No. 24092/20E, 24427/20E Appeal No. 16657-16658 Case No. 2021-03509, 2022-01965
[*1]110 East 138 Realty LLC, Plaintiff-Respondent,
vRydan Realty, Inc., et al., Defendants-Appellants.
Rydan Realty, Inc., Plaintiff-Respondent,
v110 East 138 Realty LLC, Defendant-Appellant.
Abrams Fensterman, LLP, White Plains (Robert A. Spolzino of counsel), for appellants/respondent.
Slarskey LLC, New York (Evan Fried of counsel), for respondent/appellant.
Order, Supreme Court, Bronx County (Eddie J. McShan, J.), entered on or about May 21, 2021, which granted Rydan Realty, Inc.'s motion to dismiss the complaint as against it, unanimously affirmed, with costs. Order, same court and Justice, entered April 7, 2022, which, in an action by Rydan against 110 East 138 Realty LLC to retain a contract deposit as liquidated damages, granted Rydan's motion for summary judgment, unanimously affirmed, with costs.
In 2017, 110 East 138, as buyer, and Rydan, as seller, entered into a contract for the sale of a parcel of property. The contract stated that Rydan would deliver fee simple title to 110 East 138, subject to a list of exceptions in an attached Schedule B. 110 East 138 later learned that in 1983, New York State had appropriated a portion of the property (the 1983 appropriation). 110 East 138 sent Rydan a notice of termination, asserting that the 1983 appropriation prevented Rydan from being able to deliver marketable title. 110 East 138 then commenced this action, seeking damages for breach of contract, conversion, unjust enrichment, and fraud.
110 East 138's cause of action for breach of express warranty fails to state a claim because the parties agreed in their contract of sale that the provisions of any schedule to the contract would prevail over any inconsistent contract term (see Monaghan v Cole, 171 AD3d 558, 558-559 [1st Dept 2019]; CPS Operating Co. LLC v Pathmark Stores, Inc., 76 AD3d 1, 6 [1st Dept 2010], affd 18 NY3d 26 [2011]). The permitted exceptions of Schedule B contain several unambiguous disclosures of the 1983 appropriation — for example, an exception that includes the "covenant recorded at reel 1299, page 2083" (the 1995 covenant), which, in turn, specifically identifies the 1983 appropriation. The 1995 covenant also refers to a map that discloses the 1983 appropriation.
110 East 138's failure to terminate the agreement within the due diligence period specified in the parties' contract was fatal to its breach of express warranties claim, as 110 East 138 received the title report in or about November 2017 but did not serve its termination notice until May 12, 2020 (see Semerjian v Byer-White, 81 AD3d 919, 919 [2d Dept 2011]).
The fraud cause of action fails as duplicative of the contract claim, as it is based on the same facts that underlie the contract cause of action, is not collateral to the contract, and does not seek damages that would be unrecoverable under a contract measure of damages (Financial Structures Ltd. v UBS AG, 77 AD3d 417, 419 [1st Dept 2010]). The conversion claim was properly dismissed for the same reasons (see Cronos Group Ltd. v XComIP, LLC, 156 AD3d 54, 75 [1st Dept 2017]). The unjust enrichment cause of action is also barred, since the written sales contract governs the parties' dispute, and as a result, 110 East 138 cannot recover in quasi-contract (see Clark-Fitzpatrick, Inc. v Long Is. R.R. Co., 70 NY2d 382, 388 [1987]).
In its separate action against [*2]110 East 138 to retain the contract deposit as liquidated damages, Rydan established its entitlement to summary judgment, as collateral estoppel precluded 110 East 138 from raising arguments that Supreme Court rejected when it dismissed the complaint against Rydan in the first action (see Stewart Family LLC v Stewart, 184 AD3d 487, 491 [1st Dept 2020]). Contrary to 110 East 138's contention, the issues in both actions are, in fact, identical, and 110 East 138 had a full and fair opportunity to litigate them. Indeed, in both actions, 110 East 138 made the same arguments as to why it terminated the sale, and determining the propriety of that termination was necessary to support a finding in Rydan's favor in both actions; thus, the questions decided in the first action were central to the court's award of summary judgment in the second action (see id.). Furthermore, whether Rydan was entitled to retain the down payment was actually litigated and decided in the first action, when the court determined that 110 East 138 failed to terminate the agreement within the due diligence period, and for that reason, was not entitled to return of the down payment (see id.).
Finally, based on 110 East's failure to close the sale, the motion court properly awarded Rydan all the payments made under the contract and amendments to the contract (see Chateau D'If Corp. v City of New York, 219 AD2d 205, 208 [1st Dept 1996], lv denied 88 NY2d 811 [1996]). Under the contract, the term "down payment" included "[a]ll sums paid on account of the Purchase Price prior to Closing," and in the contract amendments, the parties agreed that adjournment payments were nonrefundable.
We have considered 110 East 138's remaining contentions and find them unavailing.THIS CONSTITUTES THE DECISION AND ORDER
OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.
ENTERED: November 15, 2022 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483895/ | ARMED SERVICES BOARD OF CONTRACT APPEALS
Appeal of - )
)
The Aulson Company, Inc. ) ASBCA No. 63246
)
Under Contract No. FA2835-19-D-0010, )
D.O. FA2835-21-F-0140 )
APPEARANCE FOR THE APPELLANT: Shaunna R. Jammal, Esq.
Counsel
APPEARANCES FOR THE GOVERNMENT: Jeffrey P. Hildebrant, Esq.
Deputy Chief Trial Attorney
Maj Ashley Ruhe, USAF
Maj Brian Shust, USAF
Trial Attorneys
ORDER OF DISMISSAL
The dispute has been settled. The appeal is dismissed with prejudice.
Dated: October 27, 2022
JOHN J. THRASHER
Administrative Judge
Chairman
Armed Services Board
of Contract Appeals
I certify that the foregoing is a true copy of the Order of Dismissal of the Armed
Services Board of Contract Appeals in ASBCA No. 63246, Appeal of The Aulson
Company, Inc., rendered in conformance with the Board’s Charter.
Dated: October 28, 2022
PAULLA K. GATES-LEWIS
Recorder, Armed Services
Board of Contract Appeals | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483911/ | Filed 11/15/22 P. v. Avent CA3
NOT TO BE PUBLISHED
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
THIRD APPELLATE DISTRICT
(Sacramento)
----
THE PEOPLE, C093581
Plaintiff and Respondent, (Super. Ct. No. 74800)
v.
RUFUS ADOLPHUS AVENT,
Defendant and Appellant.
Over 30 years ago, defendant Rufus Adolphus Avent pleaded guilty to second
degree murder and the trial court sentenced him to 15 years to life. Defendant filed a
petition for resentencing under Penal Code1 former section 1170.95 (now § 1172.6).2
The trial court denied the petition. Defendant contends the trial court erred in summarily
1 Undesignated statutory references are to the Penal Code.
2 Effective June 30, 2022, former section 1170.95 was recodified without substantive
change to section 1172.6. (Stats. 2022, ch. 58, § 10.) We will refer to section 1172.6
throughout this opinion.
1
denying his petition at the prima facie stage, as the record does not show as a matter of
law that he was ineligible for relief. The People agree. We will reverse and remand the
matter and direct the trial court to issue an order to show cause.
BACKGROUND 3
Ronald Davis was found in a field, killed by a gunshot to the head. Johnny
Taylor4 was the actual killer. Evidence was presented at the preliminary hearing that
after Frank Hale’s car had been set on fire and destroyed, Hale, defendant, Taylor, and
Steven Martin met at Hale’s apartment. Defendant and Taylor believed they knew who
was responsible for burning Hale’s car and made plans with Martin to go to that person’s
home. Later, they returned to Hale’s apartment with Davis. Davis’s head was covered.
Defendant, Taylor, and Martin left Hale’s apartment with Davis. When they returned,
Davis was not with them. Martin reported they had put Davis in the trunk of a car and
driven him to a field where Taylor shot him in the head.
Based on the evidence adduced at the preliminary hearing, defendant, Hale, and
Martin were held to answer on charges of the murder (§ 187, subd. (a)) and kidnapping
(§ 207) of Davis. As to the murder charge, it was further alleged that defendant and
Martin were armed with a firearm (§ 12022, subd. (a)) and that the murder was
committed during the commission of a kidnapping (§§ 207; 190.2, subd. (a)(17)).
3 A detailed recitation of the substantive facts underlying defendant’s conviction is not
necessary to our resolution of the claim on appeal. The parties detail those substantive
facts relying on the evidence presented at the preliminary hearing. We note, the record
before the trial court did not contain any admission or stipulation by defendant that the
evidence at the preliminary hearing established a factual basis for his guilty plea, and a
ruling holding a defendant to answer is not equivalent to a jury’s factual finding or a
defendant’s admission. Accordingly, we recite these facts for context only, and do not
rely on the preliminary hearing record as established fact.
4 It appears Taylor was prosecuted in separate proceedings.
2
A few days into jury trial, defendant pleaded guilty to second degree murder and
the remaining charges and enhancement allegations were dismissed on the People’s
motion. The trial court sentenced defendant to an indeterminate term of 15 years to life.
In 2019, defendant filed a petition for resentencing. The petition alleged an
information had been filed that allowed the prosecution to proceed under a theory of
felony murder or murder under the natural and probable consequences doctrine; he pled
guilty to second degree murder in lieu of going to trial because he believed he could have
been convicted of murder under the felony-murder rule or the natural and probable
consequences doctrine; and he could not now be convicted of second degree murder
because of changes to sections 188 and 189. He filed an amended petition adding the
allegations that he was convicted under the felony-murder rule or natural and probable
consequences doctrine and could not now be convicted of murder because of the changes
to section 188; and there had been a prior determination he was not a major participant or
did not act with reckless indifference to human life under section 190.2, subdivision (d).
The trial court appointed counsel and received briefing from the parties. The trial
court reviewed the parties’ pleadings, the record of conviction, and the reporter’s
transcript of the preliminary hearing. The court noted that the underlying court file did
not contain a reporter’s transcript of the change of plea hearing reflecting defendant’s
guilty plea.
Without holding a hearing, the trial court denied the petition.
In reaching its conclusion, the court conducted an extensive review of the
preliminary hearing transcript, and concluded statements made by Taylor as to
defendant’s conduct at the scene of the murder would have been admissible against
defendant at trial as adoptive admissions (although the magistrate had excluded them).
The court also identified the then-diverging lines of cases on the prosecution’s burden of
proof. (People v. Lopez (H047254) opn. filed Oct. 30, 2020, review granted Feb. 11,
2021, S265974, vacated & trans. for reconsideration in light of Sen. Bill No. 775; People
3
v. Duke (B300430) opn. filed Sep. 28, 2020, review granted Jan. 13, 2021, S265309,
vacated & trans. for reconsideration in light of Sen. Bill No. 775.) Expressly relying on
Duke, the trial court analyzed the evidence under a substantial evidence standard ; that is,
did the evidence show beyond a reasonable doubt that defendant could still have been
convicted under the new law. Applying this standard, the trial court concluded there was
sufficient evidence for a jury to find defendant guilty of second degree murder based on
an express malice theory. Accordingly, the trial court found defendant ineligible for
relief and denied the petition.
Defendant timely appealed.5
DISCUSSION
Defendant contends the trial court erred in denying his petition for resentencing at
the prima facie stage because it reviewed the record using the substantial evidence
standard. The People agree.
Senate Bill No. 1437
Senate Bill No. 1437, effective January 1, 2019, was enacted to amend the felony-
murder rule and eliminate natural and probable consequences liability for first and second
degree murder. (Stats. 2018, ch. 1015, § 1, subd. (f); People v. Gentile (2020) 10 Cal.5th
830, 849.) To that end, Senate Bill No. 1437 amended sections 188 and 189 (murder).
As relevant here, section 188 now requires malice aforethought for a murder conviction
(§ 188, subd. (a)(3); Stats. 2018, ch. 1015, § 2) and section 189 limits felony-murder
liability to a person who was the actual killer, who assisted the actual killer with the
5 Defendant filed his notice of appeal in the trial court on February 1, 2021. Briefing
was delayed by the granting of numerous extensions of time for both parties and motions
to augment and supplement the record. The case was fully briefed on September 19,
2022.
4
intent to kill, or who was a major participant in the underlying felony and acted with
reckless indifference to human life. (§ 189, subd. (e); Stats. 2018, ch. 1015, § 3.)
Senate Bill No. 1437 also added former section 1170.95, allowing a defendant
who was convicted of murder under the former law to petition for resentencing.
(§ 1172.6; People v. Strong (2022) 13 Cal.5th 698, 708.) The petition must be filed “with
the court that sentenced the petitioner” and must include: (1) a declaration by the
petitioner that he or she is eligible for relief under the requirements set forth in the
statute; (2) the superior court case number and year of the petitioner’s conviction; and (3)
whether the petitioner requests the appointment of counsel. (§ 1172.6, subd. (b)(1).)
While this appeal was pending, the Legislature amended former section 1170.95
to, among other things, clarify the procedures, standard of inquiry, and burden of proof
governing the petition. (Stats. 2021, ch. 551, § 1, subds. (b), (c) & (d).) The Legislature
later renumbered the section to 1172.6, without substantive change. (Stats. 2022, ch. 58,
§ 10.) We agree with the parties these changes apply to defendant’s petition. (People v.
Porter (2022) 73 Cal.App.5th 644, 652.)
Where the petition complies with the requirements of section 1172.6, subdivision
(b)(1), the trial court must appoint counsel, if requested, and entertain briefing by the
parties. (§ 1172.6, subds. (b)(3), (c).) The trial court must hold a hearing to determine if
the petitioner has made a prima facie showing for relief. If a prima facie showing of
eligibility is made, the trial court must issue an order to show cause and hold an
evidentiary hearing to determine whether to vacate the conviction and recall the sentence.
(§ 1172.6, subds. (c), (d).) The burden shifts to the prosecution to prove beyond a
reasonable doubt that the petitioner is guilty of murder under the amended versions of
sections 188 and 189. (§ 1172.6, subd. (d)(3).) “A finding that there is substantial
evidence to support a conviction for murder . . . is insufficient to prove, beyond a
reasonable doubt, that the petitioner is ineligible for resentencing.” (Ibid.)
5
“[T]he ‘prima facie bar was intentionally and correctly set very low.’ ” (People v.
Lewis (2021) 11 Cal.5th 952, 972.) Although the trial court must accept the petitioner’s
allegations as true, the court may review the record of conviction, and if those records
contain facts refuting the allegations, the court may reject the petitioner’s factual
allegation. (Id. at p. 971.) But, at this preliminary stage, the trial court “should not
engage in ‘factfinding involving the weighing of evidence or the exercise of discretion.’ ”
(Id. at p. 972.) It is impermissible factfinding at the prima facie stage to summarily deny
a section 1172.6 petition for resentencing, relying on facts taken from the preliminary
hearing transcript that were not stipulated to or admitted. (People v. Davenport (2021)
71 Cal.App.5th 476, 481-482.)
The parties agree defendant’s petition was sufficient to establish a prima facie case
for relief and the record of conviction did not establish, as a matter of law, that defendant
was not entitled to relief. In addition, the parties agree the court engaged in
impermissible factfinding at the prima facie stage, by relying on evidence from the
preliminary hearing transcript and reviewing that evidence under the substantial evidence
standard. We agree with the parties these errors require us to reverse and remand the
matter to the trial court.
6
DISPOSITION
The trial court’s order denying defendant’s section 1172.6 petition is reversed and
the matter is remanded with directions for the trial court to issue an order to show cause.
/s/
EARL, J.
We concur:
/s/
ROBIE, Acting P. J.
/s/
HOCH, J.
7 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483979/ | 11/15/2022
IN THE SUPREME COURT OF THE STATE OF MONTANA Case Number: DA 21-0648
No. DA 21-0648
STATE OF MONTANA,
Plaintiff and Appellee,
v.
WILLIAM JEROME CARNES,
Defendant and Appellant.
ORDER
Upon consideration of Appellant’s motion for extension of time,
and good cause appearing,
IT IS HEREBY ORDERED that Appellant is granted an extension
of time to and including December 27, 2022, within which to prepare,
file, and serve Appellant’s opening brief on appeal.
Electronically signed by:
Mike McGrath
Chief Justice, Montana Supreme Court
November 15 2022 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483969/ | Case: 21-40756 Document: 00516545311 Page: 1 Date Filed: 11/15/2022
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
FILED
No. 21-40756 November 15, 2022
Summary Calendar Lyle W. Cayce
Clerk
United States of America,
Plaintiff—Appellee,
versus
Robert Loya, Jr.,
Defendant—Appellant.
Appeal from the United States District Court
for the Southern District of Texas
USDC No. 2:20-CR-832-1
Before Smith, Dennis, and Southwick, Circuit Judges.
Per Curiam:*
A jury convicted Robert Loya, Jr., of possession with intent to
distribute methamphetamine and possession of a firearm after a felony
conviction. The district court sentenced him to 360 months of imprisonment
and five years of supervised release. On appeal, Loya argues the evidence
*
Pursuant to 5th Circuit Rule 47.5, the court has determined that this
opinion should not be published and is not precedent except under the limited
circumstances set forth in 5th Circuit Rule 47.5.4.
Case: 21-40756 Document: 00516545311 Page: 2 Date Filed: 11/15/2022
No. 21-40756
was insufficient to support his convictions, the district court erred in
admitting evidence of his gang affiliation, and his sentence was substantively
unreasonable.
Because Loya moved for a judgment of acquittal at the close of the
Government’s case, which was also at the close of all evidence, we review his
challenge to the sufficiency of the evidence de novo. See United States v.
Jimenez-Elvirez, 862 F.3d 527, 533 (5th Cir. 2017). Under this standard, we
must determine whether a reasonable jury could have found that the evidence
established Loya’s guilt beyond a reasonable doubt. See United States v.
Barnes, 803 F.3d 209, 215 (5th Cir. 2015).
Loya argues that there is insufficient evidence demonstrating that he
knowingly possessed the firearms or the methamphetamine. The evidence
included an intercepted phone conversation in which he discussed a raid by
the Government and complained that the guns and other items had been
seized from the house. Additionally, law enforcement testified that the
bedroom containing the drugs and firearms also had receipts bearing Loya’s
name and had several work shirts from his business bearing his name. Also,
Loya was seen entering and exiting the home. Viewing this evidence in the
light most favorable to the Government, a reasonable jury could conclude
beyond a reasonable doubt that Loya knowingly possessed the firearms and
methamphetamine. See United States v. Masha, 990 F.3d 436, 444-45 (5th
Cir. 2021).
We review a district court’s evidentiary rulings for an abuse of
discretion, subject to harmless error review. United States v. Martinez, 921
F.3d 452, 481 (5th Cir. 2019). For an evidentiary ruling to constitute a
reversible error, the appellant must demonstrate the admission substantially
prejudiced his rights. United States v. Valas, 822 F.3d 228, 242 (5th Cir.
2016).
2
Case: 21-40756 Document: 00516545311 Page: 3 Date Filed: 11/15/2022
No. 21-40756
Loya argues that the district court abused its discretion by admitting
evidence of his affiliation with the Texas Mexican Mafia because it was not
an intrinsic part of his case and was unduly prejudicial. The district court,
however, instructed the jury that evidence regarding the Texas Mexican
Mafia was “admitted only for the purpose of providing background and
context” and that the jury was “not to consider or infer that [Loya] is more
likely to have committed the acts alleged in this indictment on this basis.”
The court further stated that this evidence “should play no role in your
deliberations.” Such limiting instructions minimize the danger of undue
prejudice. See id. at 241. For this reason, and in light of other substantial
evidence of guilt, any error in the admission of Loya’s gang affiliation was
harmless. See United States v. Lugo-Lopez, 833 F.3d 453, 461 (5th Cir. 2016).
We review the substantive reasonableness of a sentence for an abuse
of discretion. Gall v. United States, 552 U.S. 38, 51 (2007). Loya argues his
360-month sentence is substantively unreasonable. A within-guidelines
sentence is presumptively reasonable. See United States v. Cooks, 589 F.3d
173, 186 (5th Cir. 2009). While Loya contends that the district court failed
to consider mitigating factors, he has not demonstrated that the district court
failed to account for a factor that should have received significant weight,
gave significant weight to an improper factor, or clearly erred in balancing the
factors. See United States v. Naidoo, 995 F.3d 367, 382 (5th Cir. 2021). Thus,
Loya has failed to demonstrate his sentence is substantively unreasonable.
See Cooks, 589 F.3d at 186.
AFFIRMED.
3 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483972/ | UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
JARRELL RIMAIHI, et al., individually and
on behalf of all persons similarly situated,
Plaintiffs,
Civil Action No. 20-0930 (CKK)
v.
AVITECTURE, INC.,
Defendant.
MEMORANDUM OPINION AND ORDER
(November 15, 2022)
This labor dispute is before the Court on Defendant 1 Avitecture, Inc.’s (“Defendant” or
“Avitecture”) motion to dismiss. Plaintiffs, a putative class of electricians and contractors, argue
that Defendant, their employer, paid Plaintiffs less than they were due under their contract and
District of Columbia statute. Defendant essentially argues that Plaintiffs’ state-law claims are
preempted by federal statute or, alternatively, that the United States Department of Labor has
primary jurisdiction over this matter. Consistent with the vast majority of other courts to
confront the same arguments here, the Court concludes that Plaintiffs state a claim under state
law and that no federal law otherwise preempts Plaintiffs’ state-law claims. As such, and upon
consideration of the pleadings, 2 the relevant legal authorities, and the record for purposes of this
1
Plaintiffs have dismissed all claims against Rightech, Inc. ECF No. 27 at 1. As such, Avitecture
is the only remaining defendant.
2
The Court’s consideration has focused on the following documents:
• Plaintiffs’ Complaint, ECF No. 1 (“Compl.”);
• Defendant’s Memorandum of Points and Authorities in Support of Motion to Dismiss
Class and Collective Action Complaint, ECF No. 17-1 (“Mot.” or “Motion”);
• Plaintiffs’ Memorandum of Law in Opposition to Avitecture, Inc.’s Motion to Dismiss
Plaintiffs’ Class and Collective Action Complaint, ECF No. 23 (“Opp.”);
• Defendant’s Reply Memorandum to Plaintiffs’ Opposition to Motion to Dismiss, ECF
No. 26 (“Repl.”); and
• Amicus’ Proposed Brief of the Foundation for Fair Contracting Mid-Atlantic Region as
Amicus Curiae, ECF No. 25.
1
motion, the Court DENIES Avitecture’s [17] Motion to Dismiss Class and Collective Action
Complaint.
I. BACKGROUND
For the purposes of the motion before the Court, the Court accepts as true the well-
pleaded allegations in Plaintiffs’ complaint. The Court does “not accept as true, however, the
plaintiff’s legal conclusions or inferences that are unsupported by the facts alleged.” Ralls Corp.
v. Comm. on Foreign Inv. in U.S., 758 F.3d 296, 315 (D.C. Cir. 2014).
Since 2020, Plaintiffs, along with their putative class, were employed as technicians by
Defendant Rightech, Inc. (“Rightech”), a staffing agency, to perform certain electrical and
contracting work at the headquarters of the Transportation Security Agency in Springfield,
Virginia (“TSA Job”). Compl. ¶ 27. Additionally, in 2018, Rightech hired Plaintiff Rimaihi as a
“technician” to install speakers, wiring, and electrical equipment at the Federal Reserve Board
building at 20001 Constitution Avenue, NW, Washington, DC 20551 (“Federal Reserve Job”).
Id. ¶ 29.
Avitecture “is an electrical audio/visual contracting company which performs electrical
construction and installation work for governmental entities and private parties.” Id. ¶ 9. It
contracted with Rightech to perform the disputed work for the TSA and Federal Reserve Jobs.
Id. ¶¶ 11-14. According to Plaintiffs’ complaint, Avitecture regularly wins similar federal
contracts and regularly employs Rightech to staff and ultimately effect the work the federal and
District of Columbia governments pay Avitecture to perform. See id. ¶¶ 31, 51. Plaintiffs, on
behalf of themselves and their putative class, allege (partly legally and partly factually) that all
In an exercise of its discretion, the Court finds that holding oral argument in this action
would not be of assistance in rendering a decision. See LCvR 7(f).
2
contracts for such work make explicit or implicit reference to the Davis-Bacon Act, 40 U.S.C. §
3142 (“DBA”).
That law governs all public contracts with the federal or District of Columbia
governments relating to construction on public buildings or public works. Among other things,
the DBA empowers the Secretary of Labor to classify laborers and set minimum wages for those
laborers that “shall be based on the wages the Secretary [] determines to be prevailing” for each
class of laborer in a given market. Id. (a)-(b). Based upon those rates, the eventual labor
contract must then contain three stipulations:
(1) That the contractor will pay covered workers at least the prevailing rates as recited in
the advertised specifications, any contrary agreement between the contractor and his
workers notwithstanding
(2) That the contractor will publish post the wage scale at work; and . . .
(3) That there may be withheld from the contractor so much of accrued payments as the
contracting officer considers necessary to pay laborers and mechanics employed by
the contractor or any subcontractor on the work the difference between the wages
required by the contract to be paid laborers and mechanics on the work and the rates
of wages received by the laborers and mechanics and not refunded to the contractor or
subcontractors or their agents.
Garcia v. Skanska USA Bldg., Inc., 324 F. Supp. 3d 76, 78 (D.D.C. 2018) (capitalization altered)
(quoting 40 U.S.C. § 3142(c)) (DLF). Through this third mandatory stipulation, the DBA creates
a remedy for workers paid less than the wages guaranteed by the DBA.
The DBA, however, has no private cause of action. Id. at 79. Rather, “[d]isputes over
the proper classification of workers under a contract containing Davis-Bacon provisions must be
referred to the Secretary [of Labor] for determination.” Univs. Rsch. Ass’n v. Coutu, 450 U.S.
754, 761 (1981). In other words, disputes over the DBA’s applicability to a particular contract
and the wages due under the DBA (as applied to that contract) must first be presented to the
3
Department of Labor. See, e.g., Ibrahim v. Mid-Atl. Air of DC, LLC, 802 F. Supp. 3d 73, 76
(D.D.C. 2011).
Importantly, Plaintiffs do not bring a Davis-Bacon Act claim. Rather, Plaintiffs advance
two claims under District of Columbia state law. First, Plaintiffs mount a breach-of-contract
claim arising under District of Columbia law. Compl. at 20. As to this first claim, it appears that
Plaintiffs’ theory is either that the contracts’ wage provisions were amended by operation of state
law and/or that the plain meaning of the wage provisions are informed by the DBA as
background context. See id. ¶¶ 77-82. Second, Plaintiffs claim that Avitecture violated District
of Columbia law by failing to pay higher wages, specifically, the D.C. Wage Payment and
Collection Law (“Wage Law” or “DCWPCL”), D.C. Code § 32-1301 et seq. (West 2022).
Pursuant to the Wage Law, employers must pay their employees “all wages earned.” Id.
§ 32-1302. “Wages” are “all monetary compensation after lawful deductions, owed by an
employer, whether the amount owed is determined on a time, task, piece, commission, or other
basis of calculation.” Id. § 32-1301(3). “Wages” further include” all “remuneration promise or
owed . . . [p]ursuant to District or federal law,” as well as pursuant to “a contract for
employment, whether written or oral” or “a contract between an employer and another person or
entity.” Id. (3)(E) (emphasis added). “[R]emuneration promised by an employer to an employee
shall be presumed to be at least the amount required by federal law, including federal law
requiring the payment of prevailing wages, or by District law.” Id. § 32-1305 (emphasis added).
The Wage Law authorizes a private right of action. Id. § 32-1308; Garcia, 324 F. Supp. 3d at
80. Avitecture moves to dismiss only the Wage Law claim.
In moving to dismiss for failure to state a claim, Defendant argues only that the DBA
somehow prevents employees from maintaining an action for unpaid wages promised under state
4
law if those employees would otherwise be subject to the DBA. With Defendant’s motion fully
briefed, 3 the Court turns to that question’s resolution.
II. LEGAL STANDARD
Under Rule 12(b)(6), a party may move to dismiss a complaint on the grounds that it
“fail[s] to state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). “[A]
complaint [does not] suffice if it tenders ‘naked assertion[s]’ devoid of ‘further factual
enhancement.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly,
550 U.S. 544, 557 (2007)). Rather, a complaint must contain sufficient factual allegations that, if
accepted as true, “state a claim to relief that is plausible on its face.” Twombly, 550 U.S. at 570.
“A claim has facial plausibility when the plaintiff pleads factual content that allows the court to
draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556
U.S. at 678.
III. DISCUSSION
Without precisely using the word, Avitecture argues mainly that the DBA preempts
Plaintiffs’ state law claims. Defendant’s position is not without support. In Grochowski v.
Phoenix Const., 318 F.3d 80 (2d Cir. 2003), the United States Court of Appeals for the Second
Circuit held that the DBA’s bar on a private cause of action effectively preempts any state
“common law contract claim” predicated on a labor contract governed by the DBA. Id. at 86.
The Grochowski court offered scant explanation for why the lack of a cause of an action in a
federal statute ipso facto bars recovery under state law where a private cause of action is
3
The Court granted amicus Foundation for Fair Contracting Mid-Atlantic region to file a brief
in support of Plaintiffs. The Court also relies on this amicus brief in resolving the pending
Motion.
5
available. See Cox v. NAP Const. Co., Inc., 891 N.E.2d 271, 276 (N.Y. 2008). Facing such
limited justification for its holding, every other federal Court of Appeals to examine such a
question has concluded that Grochowski is, in fact, itself “really just an ‘end-run’ around well-
established preemption doctrine.” E.g., Wigod v. Wells Fargo Bank, N.A., 673 F.3d 547, 584 (7th
Cir. 2012); 4 cf. also Cox, 691 N.E2d at 276 (in rejecting Grochowski, “the default assumption,
absent a showing to the contrary, is that Congress intended neither to create a new federal right
of action nor to preempt existing state ones (emphasis added)). Most recently, Judge Dabney L.
Friedrich of this jurisdiction joined the great weight of authority rejecting Grochowski to hold
that the DBA does not preempt a Wage Act claim predicated on DBA worker-classification.
Garcia, 324 F. Supp. 3d at 84-85. Without any binding appellate authority on the question, and
after careful consideration of the parties briefing, the Court shall join Judge Friedrich in applying
the well-reasoned, majority approach.
Because Avitecture moves to dismiss a Wage Act claim, the Court begins with the text of
the statute. As noted above, the Wage Act empowers employees to recover unpaid wages due
either under (1) District of Columbia law or (2) federal law, including federal law requiring the
payment of prevailing wages. See D.C. Code § 32-1305 (West 2022). Defendant does not
appear to contest that the DBA is a federal law requiring the payment of prevailing wages, and a
4
Cf. also, e.g., Bukowski v. Wells Fargo Bank, N.A., 757 F. App’x 124, 129-30 (3d Cir. 2018)
(“[t]he absence of a private right of action from a federal statute provides no reason to dismiss a
claim under a state law just because it refers to or incorporates some element of federal law”);
Amaya v. Power Design, Inc., 833 F.3d 440, 445 (4th Cir. 2016) (same); Mik v. Fed. Home Loan
Mortg. Corp., 743 F.3d 149, 166 (6th Cir. 2014) (same); Frank Bros., Inc. v. Wis. Dep’t of
Transp., 409 F.3d 880, 885 (7th Cir. 2005) (“There is nothing in the statutory text [of the DBA]
which would lead us to conclude that it was the intention of Congress to expressly override either
complementary or inconsistent state laws.”); Trone Health Servs., Inc. v. Express Scripts Holding
Co., 974 F.3d 845, 851 & n.4 (8th Cir. 2020) (similar). The United States Court of Appeals for
the District of Columbia Circuit has yet to speak to this question.
6
plain reading of the DBA would seem to qualify it as a “federal law requiring the payment of
prevailing wages.” See 40 U.S.C. § 3142(b) (covered employees’ compensation “shall be based
on the wages the Secretary [] determines to be prevailing” (emphasis added)). Rather, Defendant
relies on two 2011 cases 5 analyzing the Wage Act and the DBA’s purported preemptive effect.
Mot. at 7. These cases lack persuasive value, however, because they construed an earlier version
of the Wage Act that did not include any language incorporating federal law as a basis for
recovery. Compare D.C. Code § 32-1305 (West 2022) with D.C. Code § 32-1305 (2001 Repl.)
(“Except as herein provided, no provision of this chapter shall in any way be contravened or set
aside by private agreement.”).
Having concluded that the Wage Act as it presently stands affords a private cause of
action for wages due under federal law, the Court must turn to the question of whether the DBA
nevertheless preempts such an application of the Wage Act. As the Garcia court explained,
“[t]here is a difference between the lack of a private right of action [in the DBA] and a
congressional intent to foreclose other, extant rights of action.” 324 F. Supp. 3d at 81. As to
preemption, the Court must begin with the presumption that “the historic police powers of the
States,” including the regulation of employment relations, are “not to be superseded by [federal
law] unless that was the clear and manifest purpose of Congress.” See Wyeth v. Levine, 555 U.S.
555, 565 (2009). Avitecture has pointed to no statutory text, or even any legislative history,
suggesting that Congress intended the DBA to supplant state law in any way. In fact, the text of
the DBA itself suggests that Congress did not intend to preempt, at the very least, any other
federal law. See 40 U.S.C. § 3142(c) (“In determining the overtime pay to which a laborer or
5
Johnson v. Prospect Waterproofing Co., 813 F. Supp. 2d 4 (D.D.C. 2011) and Ibrahim v. Mid-
Atl. Air of DC, LLC, 802 F. Supp. 2d 73 (D.D.C. 2011).
7
mechanic is entitled under any federal law, the regular or basic hourly rate of pay . . . is deemed
to be the rate computed under section 3141(2)(A) of this title.” (emphasis added)).
It would seem odd indeed for Congress to provide for employees of federal contractors to
have fewer avenues of recovery as against the private contractors themselves simply because
those contractors performed work for the federal or District of Columbia governments. “To find
otherwise would require adopting the novel presumption that where Congress provides [little]
remedy under federal law, state law may not afford one in its stead.” See Wigod, 673 F.3d at
581.
Avitecture also relies on the D.C. Circuit’s decision in Danielsen v. Burnside-Aviation
Training Ctr., Inc., 941 F.2d 1220 (1991). As Garcia concluded, “Danielsen does not resolve
this case.” 324 F. Supp. 3d at 84. In Danielsen, the D.C. Circuit concluded that employees
could not bring a Racketeer Influenced and Corrupt Organizations Act claim against their
employer for failing corruptly to pay prevailing rates under the Service Contract Act, which
lacks a private cause of action, because “the ingenious pleading of [an] action in RICO terms
rather than in straight SCA language cuts against the implication of the right of action rather than
in its favor.” 941 F.2d at 1228. In so holding, however, the D.C. Circuit confronted a vexing
problem not present here: parallel proceedings were pending before the Department of Labor.
Id. at 1226. Here, Plaintiffs have not attempted two bites at the same apple. They have chosen
to proceed under state law in federal district court on diversity jurisdiction, and they have not
chosen to proceed before the Department of Labor on a DBA claim. Because the DBA does not
preempt the application of state law for injury arising thereunder, there is no Danielsen problem
here.
8
Avitecture advances one last argument in an effort to distinguish this case from Garcia.
In Garcia, the parties did not dispute the classification of each plaintiff within the Department of
Labor’s classification and wage-setting determinations. 324 F. Supp. 3d at 84. Briefly in reply,
Avitecture states that it does dispute “whether Plaintiffs are ‘owed’ DBA prevailing wages (and
at what classification).” Repl. at 19. 6 What classification applies, however, is at most a mixed
question of fact and law which, Avitecture concedes, is inapplicable at the motion-to-dismiss
stage. Id. In disposing of such a question, it may be the case that the Department of Labor has
“primary jurisdiction” to determine the proper classification in the first instance, see Repl. at 10
n.4, but whether, for example, a stay is warranted to permit the Department of Labor to do so is a
question for another time. See Reiter v. Cooper, 507 U.S. 258, 268 (1993).
IV. CONCLUSION AND ORDER
For the foregoing reasons, it is hereby
ORDERED, that Avitecture’s [17] Motion to Dismiss Class and Collective Action
Complaint is DENIED.
SO ORDERED.
Dated: November 15, 2022
/s/
COLLEEN KOLLAR-KOTELLY
United States District Judge
6
Avitecture also insists that Plaintiffs must produce the contracts themselves to avoid dismissal.
Avitecture cites no authority for that proposition beyond the general principle that a plaintiff
must allege such facts as necessary to give Defendants notice of the conduct at issue, and the
Court is unaware of any authority requiring dismissal of a breach-of-contract claim where the
contract itself was not appended to the complaint.
9 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483980/ | 11/15/2022
IN THE SUPREME COURT OF THE STATE OF MONTANA Case Number: DA 21-0356
No. DA 21-0356
STATE OF MONTANA,
Plaintiff and Appellee,
v.
ROBERT MARTIN ARTHUN,
Defendant and Appellant.
GRANT OF EXTENSION
Upon consideration of Appellee’s motion for a 30-day extension of time,
and good cause appearing therefor, Appellee is granted an extension of time to
and including December 18, 2022, within which to prepare, serve, and file the
State’s response brief.
CL Electronically signed by:
Bowen Greenwood
Clerk of the Supreme Court
November 15 2022 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483984/ | 11/15/2022
IN THE SUPREME COURT OF THE STATE OF MONTANA Case Number: DA 22-0342
No. DA 22-0342
STATE OF MONTANA,
Plaintiff and Appellee,
v.
JEREMY CHRISTOPHER HOLMQUIST,
Defendant and Appellant.
ORDER
Upon consideration of Appellant’s motion for extension of time,
and good cause appearing,
IT IS HEREBY ORDERED that Appellant is granted an extension
of time to and including December 27, 2022, within which to prepare,
file, and serve Appellant’s opening brief on appeal.
Electronically signed by:
Mike McGrath
Chief Justice, Montana Supreme Court
November 15 2022 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483987/ | 11/15/2022
Case Number: DA 22-0373
IN THE SUPREME COURT OF THE STATE OF MONTANA
Supreme Court No. DA 22-0373
KAGECO ORCHARDS, LLC, a Montana Limited Liability Company,
Plaintiff/Appellant,
v.
MONTANA DEPARTMENT OF TRANSPORTATION, a Montana
Administrative Agency,
Defendant/Appellee.
ORDER
Pursuant to Rule 26(1), Mont. R. App. P., Defendant/Appellee is granted an
extension of time until December 23, 2022, to prepare, file, and serve its Answer
Brief.
cc: Bruce A. Fredrickson /Angel M. LeDuc
Christian T. Nygren / Hannah C. Woolsey / Bart LaMont
1 Electronically signed by:
Bowen Greenwood
Clerk of the Supreme Court
November 15 2022 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491803/ | MEMORANDUM OPINION
ROBERT A. MARK, Bankruptcy Judge.
The Debtor, Reuben Talbot Reinstein, (“Debtor”) was engaged prepetition in the business of options trading on the Chicago Board Options Exchange (“CBOE”). The primary non-exempt asset of the Debtor’s estate is his seat on the CBOE (the “Seat”). The issue before the Court is whether the proceeds of the sale of the Seat are subject to disposition in accordance with the rules of the CBOE.
The issue was framed by the Objection of Peteo Options, Co., Inc. (“Peteo”) filed August 24, 1993 and the Objection of the Chapter 7 Trustee filed August 23, 1993 (collectively, “Objections”) to the Claims Report filed by the CBOE on August 4, 1993. The Objections were argued on October 5, 1993. At the conclusion of the hearing, the Court announced its ruling overruling the Objections and approving the Claims Report. The Court’s October 13, 1993 Order Approving Claims Report incorporated by reference the findings and conclusions announced in the record. This Memorandum Opinion incorporates and supersedes the earlier findings and conclusions.1
FACTS
The Debtor filed his Chapter 7 petition on July 31, 1992. By Order entered December 30, 1992 (“Order”), the Court modified the automatic stay to permit the CBOE to continue with certain disciplinary action against the Debtor which had been commenced pre-petition and to dispose of the Seat in accordance with CBOE Rules. The Order required the CBOE to promptly sell the Seat and retain the proceeds pending distribution. The Order further required the CBOE to determine the priority of payment of claims against the proceeds in accordance with CBOE Rules. The Seat was sold by the CBOE for $255,500. The CBOE filed its *305Claims Report (the “Claims Report”) on August 4, 1993 detailing how the proceeds must be distributed in order to comply with CBOE Rules.
With respect to the pending disciplinary proceedings against the Debtor, the Order recognized that the Debtor had filed a settlement offer with the CBOE which called for payment of a $75,000 fine, censure, one-year bar from CBOE membership and a concurrent one-year bar from associating with any CBOE member. The Order lifted the stay to allow the CBOE to consider the settlement offer and, if the offer was rejected, to “assess any sanctions against the Debtor it deems appropriate.” Order at 3. Following entry of the Order, the CBOE accepted the Debt- or’s settlement offer.
Pursuant to the Order and in accordance with CBOE Rule 3.15, the CBOE accepted claims filed against the proceeds of the Debt- or’s Seat for a twenty (20) day period following the sale of the Seat. The only claims filed were by Petco for a CBOE arbitration award it received against the Debtor, and by Joel R. Bronstein (“Bronstein”) for reimbursement or contribution in the event that Bronstein paid the award to Petco. The CBOE held that the Bronstein claim did not qualify for priority status pursuant to CBOE Rule 3.15(c). The Petco claim, in the amount of $1,248,788.40, did qualify for such status but was subordinated to the CBOE’s claims in accordance with CBOE Rules. Therefore, the Claims Report provided for the payment of CBOE claims first, in the amount of $75,-000 for the disciplinary settlement plus $625 for unpaid dues, with the remainder of the proceeds, $179,875, to be paid to Petco. Both Petco and the Chapter 7 Trustee have filed Objections to the Claims Report.
DISCUSSION
Both of the Objections are founded on the same premise: that the priority treatment provided in the Claims Report for the CBOE fine violates section 726 of the Bankruptcy Code. Petco argues that the CBOE fine should be subordinated pursuant to § 726(a)(4),2 but that the provisions of the Claims Report should govern the distribution of the funds with respect to Petco’s claim. Application of Petco’s argument would result in Petco receiving virtually all of the proceeds from the sale of the Seat. The Trustee’s Objection takes Petco’s argument one step further and asserts that the CBOE’s claim is a lien on the proceeds of the sale of the Seat, and because the CBOE claim is a fine pursuant to § 726(a)(4), the Trustee may avoid the lien pursuant to § 724(a)3 for the benefit of the estate. The Court disagrees with both arguments and holds that the proceeds from the sale of the Seat should be distributed in accordance with the CBOE Rules.
The Debtor’s seat on the CBOE exists because of the CBOE Rules and it can only be sold and its proceeds disbursed in accordance with those rules. CBOE Rule 3.15 governs sales of exchange seats and payments of claims from the proceeds. CBOE Rule 3.15(a) provides that all sums due the CBOE from the member whose seat is sold, as determined by the CBOE, including fines and unpaid dues, are entitled to a first priority. Claims of other members of the CBOE, such as the claim by Petco, are entitled to a lower level of priority pursuant to CBOE Rule 3.15(c)(1). If a claim is contingent or the amount that ultimately will be due thereon cannot be immediately ascertained or determined in accordance with Rule 3.15(d), CBOE, in its sole discretion may reserve and retain for later distribution such amount as it may deem appropriate. According to the Claims Report, the CBOE determined not to set aside any funds for Bronstein’s claim.
When confronted with the application of similar rules of the San Francisco Stock Exchange Board as applied to the sale of a debtor’s seat, the Supreme Court applied the exchange priority rules and held:
A seat in this Board is not a matter of absolute purchase. Though we have said *306it is property, it is incumbered with conditions when purchased, without which it could not be obtained. It never was free from the conditions of [the Board’s priority rule], neither when [the debtor] bought, nor at any time before or since. That rule entered into and became an incident of the property when it was created, and remains a part of it into whose hands soever it may come.
Hyde v. Woods, 94 U.S. (4 Otto) 523, 525, 24 L.Ed. 264, 265 (1876).
Fifty years after its decision in Hyde v. Woods, the Supreme Court reiterated that when a member of a stock, commodities, or futures exchange files a bankruptcy petition, “[b]y operation of the Bankrupt Law the membership passes, subject to rules of the exchange,” to the debtor’s estate. Board of Trade of City of Chicago v. Johnson, 264 U.S. 1, 12, 44 S.Ct. 232, 235, 68 L.Ed. 533 (1924). A more recent bankruptcy court decision held more specifically that “a membership is property of the estate and can be sold only if claims under [exchange rules] are first satisfied from the proceeds of the sale.” In re Drexel Burnham Lambert Group, Inc., 120 B.R. 724, 736 (Bankr.S.D.N.Y.1990). The rationale for these holdings was explained in a Seventh Circuit decision which, although not a bankruptcy decision, reviewed the bankruptcy precedents and stated, “the Supreme Court has consistently held that the seller of an exchange seat has only an interest in property subject to the exchange rules, including exchange priority rules.... The rules of the exchange create the property and they govern its attributes.” Chicago Mercantile Exch. v. United States, 840 F.2d 1352, 1355-56 (7th Cir.1988) (emphasis in original). See also James J. Moylan, et al., Exchange Memberships: An Overview of the Issues Pertaining to the Property Rights of a Bankrupt Member and His Creditors, 9 J. of Futures Markets 461, 467 (1989).
The Chapter 7 Trustee’s objection is premised upon the notion that the CBOE’s first priority claim constitutes a lien on the proceeds of the sale of the Debtor’s seat. Although the Supreme Court’s Johnson decision found the analogy of a lien useful to describe such claims, the Court made clear, as did subsequent decisions, that claims against sale proceeds pursuant to exchange rules are not liens. Specifically, in Johnson, the Court noted that a claim to an exchange member’s seat proceeds is “a right in some respects similar to the typical lien of the common law,” but stated in the following sentence that the claim “differs” from a lien. Johnson, 264 U.S. at 11, 44 S.Ct. at 234. The Court underscored this point at the end of the opinion, when it stated: “The lien, if it can be called such, is inherent in the property in its creation.” Johnson, 264 U.S. at 15, 44 S.Ct. at 236.
The Seventh Circuit, citing Johnson, addressed and rejected the lien argument: “[The exchange] rule was an incident of the seat when [the debtor] bought the membership; it preexisted his interest and will survive so long as the seat exists. It is an incident of the property, not a lien on that property.” Chicago Mercantile Exch., 840 F.2d at 1357. Claims pursuant to CBOE Rules, therefore, are not liens but inalienable parts of the membership itself. In short, the claim of the CBOE is not a hen subject to avoidance by the Trustee under § 724(a).
CONCLUSION
Proceeds from the sale of Chapter 7 estate assets must normally be distributed in accordance with the priorities in § 726 of the Bankruptcy Code. Where the property consists of a seat on a securities exchange, the rules of the exchange control. The property comes into the estate subject to the exchange rules and therefore, the proceeds from a sale of the seat must be governed by the same rules. As applied in this case, the proceeds from the sale of the Debtor’s seat on the CBOE must be distributed as provided in the CBOE Claims Report. The Objections are overruled.
DONE and ORDERED.
. Neither objecting party pursued an appeal. The Court chose to issue this supplemental written opinion because of the relatively few published opinions addressing the issue.
. § 726(a)(4) subordinates to fourth priority, below unsecured claims, distributions "in payment of any allowed claim, whether secured or unsecured, for any fine, penalty or forfeiture ...”.
. § 724(a) provides that "[t]he trustee may avoid a lien that secures a claim of a kind specified in § 726(a)(4) of this title.” | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483985/ | 11/15/2022
IN THE SUPREME COURT OF THE STATE OF MONTANA Case Number: DA 22-0211
No. DA 22-0211
STATE OF MONTANA,
Plaintiff and Appellee,
v.
BRANDEN CONRAD MIESMER,
Defendant and Appellant.
ORDER
Upon consideration of Appellant’s motion for extension of time,
and good cause appearing,
IT IS HEREBY ORDERED that Appellant is granted an extension
of time to and including December 27, 2022, within which to prepare,
file, and serve Appellant’s opening brief on appeal.
Electronically signed by:
Mike McGrath
Chief Justice, Montana Supreme Court
November 15 2022 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/9350161/ | Robert Owen Lehman Found., Inc. v Israelitische Kultusgemeinde Wien (2022 NY Slip Op 07346)
Robert Owen Lehman Found., Inc. v Israelitische Kultusgemeinde Wien
2022 NY Slip Op 07346
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.
802 CA 22-00165
[*1]ROBERT OWEN LEHMAN FOUNDATION, INC., PLAINTIFF-APPELLANT,
vISRAELITISCHE KULTUSGEMEINDE WIEN, MICHAEL BAR, ROBERT RIEGER TRUST, JACOB BARAK, AS TRUSTEE OF THE ROBERT RIEGER TRUST, SUSAN ZIRKL MEMORIAL FOUNDATION TRUST, AND MICHAEL D. LISSNER, AS TRUSTEE OF THE SUSAN ZIRKL MEMORIAL FOUNDATION TRUST, DEFENDANTS-RESPONDENTS.
NIXON PEABODY LLP, ROCHESTER (THADDEUS J. STAUBER OF COUNSEL), FOR PLAINTIFF-APPELLANT.
DUNNINGTON BARTHOLOW & MILLER LLP, NEW YORK CITY (RAYMOND J. DOWD OF COUNSEL), FOR DEFENDANTS-RESPONDENTS MICHAEL BAR, ROBERT RIEGER TRUST, AND JACOB BARAK, AS TRUSTEE OF THE ROBERT RIEGER TRUST.
BAKER & HOSTETTER LLP, NEW YORK CITY (OREN J. WARSHAVSKY OF COUNSEL), FOR DEFENDANTS-RESPONDENTS SUSAN ZIRKL MEMORIAL FOUNDATION TRUST, AND MICHAEL D. LISSNER, AS TRUSTEE OF THE SUSAN ZIRKL MEMORIAL FOUNDATION TRUST.
Appeal from an order of the Supreme Court, Monroe County (J. Scott Odorisi, J.), entered January 5, 2022. The order, among other things, denied the motion of plaintiff for summary judgment.
It is hereby ORDERED that the order so appealed from is unanimously modified on the law by vacating those parts that determined that laches is not available to plaintiff as an affirmative defense against the counterclaim of defendants Michael Bar, Robert Rieger Trust, and Jacob Barak, as Trustee of the Robert Rieger Trust, and dismissed plaintiff's affirmative defense of laches as against those defendants, and reinstating that affirmative defense and as modified the order is affirmed without costs.
Memorandum: This litigation concerns a portrait made in 1917 by Austrian artist Egon Schiele of his wife, Edith. Art collector Robert Lehman, Sr., purchased that artwork in 1964 from an art gallery in London, England. Later that year, he gave the artwork to his son, Robert Owen Lehman (Robin), who, in 2016, gave the artwork to plaintiff, Robin's eponymous foundation. After plaintiff consigned the artwork to Christie's for auction, two groups asserted competing claims of ownership of the artwork, alleging that the artwork left the possession of its rightful owner during the Holocaust. Defendant Susan Zirkl Memorial Foundation Trust claims ownership of the artwork as an heir of Karl Maylander. Defendant Robert Rieger Trust and defendant Michael Bar claim ownership as heirs of Heinrich Rieger.
Plaintiff commenced this action seeking, inter alia, a declaration that it is the rightful owner of the artwork. Susan Zirkl Memorial Foundation Trust and defendant Michael D. Lissner, as Trustee of the Susan Zirkl Memorial Foundation Trust (collectively, Maylander defendants), answered and asserted counterclaims to reclaim the artwork. Robert Rieger Trust, Bar, and defendant Jacob Barak, as Trustee of the Robert Rieger Trust (collectively, Rieger defendants), likewise answered and asserted, inter alia, counterclaims to reclaim the artwork. [*2]Plaintiff replied to defendants' counterclaims, asserting among its affirmative defenses that the counterclaims were barred by the doctrine of laches.
Plaintiff thereafter moved for summary judgment on the amended complaint and dismissing defendants' counterclaims. The Maylander defendants cross-moved for summary judgment in their favor. In deciding the motion and cross motion, Supreme Court held that laches was not available to plaintiff as an affirmative defense against the claims of either group of defendants. The court therefore denied plaintiff's motion, granted the cross motion insofar as it sought dismissal of plaintiff's laches affirmative defense against the Maylander defendants and, inter alia, dismissed plaintiff's laches affirmative defense against the Rieger defendants. Plaintiff appeals, contending that the court improperly concluded that laches was not available as an affirmative defense and that, as a result, the court erred in granting the cross motion with respect to plaintiff's laches affirmative defense, dismissing plaintiff's laches affirmative defense against the Rieger defendants, and denying the motion.
As an initial matter, we agree with plaintiff that the Holocaust Expropriated Art Recovery Act of 2016 (Pub L 114-308, 130 US Stat 1524 [114th Cong, 2d Sess, Jan. 6, 2016]) does not preclude plaintiff from asserting a laches defense to defendants' claims (see Zuckerman v Metropolitan Museum of Art, 928 F3d 186, 196 [2d Cir 2019], cert denied — US &mdash, 140 S Ct 1269 [2020]). Contrary to plaintiff's further contention, however, we conclude that the court did not err in granting the cross motion insofar as it sought dismissal of plaintiff's laches affirmative defense to the Maylander defendants' counterclaims. The Maylander defendants met their initial burden on the cross motion of establishing that they did not have either actual or constructive knowledge of their claim of ownership of the artwork and thus did not unreasonably delay in pursuing that claim (see generally Matter of Sierra Club v Village of Painted Post, 134 AD3d 1475, 1476 [4th Dept 2015]). In opposition, plaintiff offered only speculation and conjecture with respect to the knowledge possessed by the Maylander defendants' predecessors as to their claim of ownership of the artwork, which is insufficient to raise a triable issue of fact (see Zetes v Stephens, 108 AD3d 1014, 1017 [4th Dept 2013]; Woods v Design Ctr., LLC, 42 AD3d 876, 877 [4th Dept 2007]; see generally Zuckerman v City of New York, 49 NY2d 557, 562 [1980]). Indeed, the record is devoid of evidence that the Maylander defendants' predecessors in interest "inexcusably slept on [their] rights so as to make a decree against [plaintiff] unfair" (Zuckerman, 928 F3d at 193).
The record in this case does not compel us to reach the same conclusion with respect to the Rieger defendants. Unlike the Maylander defendants, there is evidence in the record that the Rieger defendants' predecessors in interest had at least some knowledge about the collection of artwork stolen from their ancestor inasmuch as they made several restitution claims pertaining to it in the years following World War II. There is no evidence in the record, however, that the Rieger defendants' predecessors reached out to the London art gallery that exhibited and sold the subject artwork or, in the decades that followed, to either Robin or the publisher of a 1990 catalog of Schiele's work that included the subject artwork. Based on the foregoing, we conclude that triable issues of fact exist with respect to whether the Rieger defendants delayed in asserting their claim despite having the opportunity to do so (see Zuckerman, 928 F3d at 193-195; see generally Sierra Club, 134 AD3d at 1476). We therefore agree with plaintiff that the court erred in determining that laches is not available to it as a defense against the claims of the Rieger defendants and in dismissing plaintiff's affirmative defense of laches to the Rieger defendants' counterclaims, and we modify the order accordingly. Based on our conclusions herein, we reject plaintiff's further contention that the court erred in denying its motion with respect to the Rieger defendants.
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/9350250/ | Hospitality Concepts, LLC v Bernhardt (2022 NY Slip Op 07349)
Hospitality Concepts, LLC v Bernhardt
2022 NY Slip Op 07349
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.
807 CA 21-01570
[*1]HOSPITALITY CONCEPTS, LLC, PLAINTIFF-RESPONDENT,
vJAY BERNHARDT, BEDFORD FALLS ENTERPRISES, LLC, JGB PROPERTIES, LLC, DEFENDANTS-APPELLANTS, ET AL., DEFENDANT. (APPEAL NO. 1.)
D.J. & J.A. CIRANDO, PLLC, SYRACUSE (JOHN A. CIRANDO OF COUNSEL), FOR DEFENDANTS-APPELLANTS.
HINMAN, HOWARD & KATTELL, LLP, BINGHAMTON (JEFFREY A. JAKETIC OF COUNSEL), FOR PLAINTIFF-RESPONDENT.
Appeal from an order of the Supreme Court, Onondaga County (Deborah H. Karalunas, J.), entered August 13, 2021. The order granted in part the motion of plaintiff for summary judgment.
It is hereby ORDERED that said appeal is unanimously dismissed without costs.
Memorandum: Plaintiff commenced this action seeking payment for services that it provided to defendant Bedford Falls Enterprises, LLC (BFE), which owned The Gould Hotel (hotel) in Seneca Falls. BFE sold the hotel in August 2018; however, neither BFE nor defendant Jay Bernhardt, BFE's sole member, paid the amount owed to plaintiff. Subsequently, BFE transferred certain of its monetary assets to defendant JGB Properties, LLC (JGB Properties). Bernhardt was also the sole member of JGB Properties. Following its transfer of assets, BFE had insufficient funds with which to pay the amount owed to plaintiff. In a prior action, plaintiff obtained a judgment against BFE for the unpaid amount and interest, but BFE had dissolved by that time. Plaintiff commenced the instant action seeking, inter alia, to hold Bernhardt personally liable and to set aside the conveyance to JGB Properties as fraudulent pursuant to Debtor and Creditor Law former §§ 273 and 276. Plaintiff thereafter moved for summary judgment on, inter alia, the second cause of action in the amended complaint insofar as it is premised on those former sections, and on the first cause of action. In appeal No. 1, Bernhardt, BFE, and JGB Properties (collectively, defendants) appeal from an order that, inter alia, granted those parts of plaintiff's motion for summary judgment with respect to its second cause of action, insofar as asserted against defendants on the basis of former sections 273 and 276, and with respect to its first cause of action. In appeal No. 2, defendants appeal from a subsequent order that, inter alia, awarded attorneys' fees to plaintiff. In appeal No. 3, defendants appeal from a judgment awarding plaintiff damages, interest, costs, and attorneys' fees.
As an initial matter, we note that the appeals from the orders in appeal Nos. 1 and 2 must be dismissed inasmuch as those orders are subsumed in the final judgment in appeal No. 3. The appeal from the judgment brings up for review the propriety of the orders in appeal Nos. 1 and 2 (see generally CPLR 5501 [a] [1]; Matter of Aho, 39 NY2d 241, 248 [1976]).
With respect to appeal No. 3, we reject defendants' contention that Supreme Court erred in granting summary judgment to plaintiff with respect to its second cause of action insofar as asserted against defendants on the basis of Debtor and Creditor Law former §§ 273 and 276. Pursuant to former section 273 and as relevant on appeal, "[e]very conveyance made and every obligation incurred by a person who is or will be thereby rendered insolvent is fraudulent as to [*2]creditors without regard to [that person's] actual intent if the conveyance is made or the obligation is incurred without a fair consideration." Contrary to defendants' contention, plaintiff met its initial burden on the motion by establishing that BFE's conveyance to JGB Properties rendered BFE insolvent and was made without fair consideration, and defendants failed to raise an issue of fact in opposition (see generally Berner Trucking v Brown, 281 AD2d 924, 924-925 [4th Dept 2001]).
As to Debtor and Creditor Law former § 276, "[e]very conveyance made and every obligation incurred with actual intent . . . to hinder, delay, or defraud either present or future creditors, is fraudulent as to both present and future creditors." Because "[d]irect evidence of fraudulent intent is often elusive[,] . . . courts will consider badges of fraud which are circumstances that accompany fraudulent transfers so commonly that their presence gives rise to an inference of intent" (Dempster v Overview Equities, 4 AD3d 495, 498 [2d Dept 2004], lv denied 3 NY3d 612 [2004] [internal quotation marks omitted]; see A & M Global Mgt. Corp. v Northtown Urology Assoc., P.C., 115 AD3d 1283, 1288 [4th Dept 2014]). Upon review of the record, we conclude that plaintiff met its initial burden of establishing fraudulent intent, and that defendants failed to raise an issue of fact in opposition (see generally NPR, LLC v Met Fin Mgt., Inc., 63 AD3d 1128, 1129 [2d Dept 2009]). Based on this determination, we conclude that, contrary to defendants' further contention, the court properly awarded attorneys' fees to plaintiff (see former § 276-a; 5706 Fifth Ave., LLC v Louzieh, 108 AD3d 589, 590 [2d Dept 2013]).
We likewise reject defendants' contention that the court erred in granting plaintiff's motion with respect to its first cause of action, which sought to pierce the corporate veil and impose personal liability on Bernhardt. Based upon, among other things, Bernhardt's concessions in his answer and interrogatories regarding his involvement in BFE and JGB Properties, as well as the evidence of past financial practices between those entities, we conclude that the court properly determined that plaintiff is entitled to summary judgment on its cause of action based on Bernhardt's individual liability (see generally Cotter v Lasco, Inc., 196 AD3d 1041, 1042 [4th Dept 2021]; NPR, LLC, 63 AD3d at 1129-1130).
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/9350263/ | Daly v AJ Costello Group, LLC (2022 NY Slip Op 07399)
Daly v AJ Costello Group, LLC
2022 NY Slip Op 07399
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, BANNISTER, AND MONTOUR, JJ.
1011 CA 21-01367
[*1]WILLIAM DALY, PLAINTIFF-RESPONDENT,
vAJ COSTELLO GROUP, LLC, ET AL., DEFENDANTS, ANTHONY J. COSTELLO & SON DEVELOPMENT, LLC, AND ANTHONY J. COSTELLO & SON (JOSEPH) DEVELOPMENT, LLC, DEFENDANTS-APPELLANTS.
BOND, SCHOENECK & KING, PLLC, ROCHESTER (CURTIS A. JOHNSON OF COUNSEL), FOR DEFENDANTS-APPELLANTS.
UNDERBERG & KESSLER LLP, ROCHESTER (RYAN T. BIESENBACH OF COUNSEL), FOR PLAINTIFF-RESPONDENT.
Appeal from an order of the Supreme Court, Monroe County (J. Scott Odorisi, J.), entered July 27, 2021. The order granted the motion of plaintiff insofar as it sought summary judgment on liability against defendants Anthony J. Costello & Son Development, LLC, and Anthony J. Costello & Son (Joseph) Development, LLC.
It is hereby ORDERED that the order so appealed from is unanimously affirmed without costs for reasons stated in the decision at Supreme Court.
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/8483986/ | 11/15/2022
IN THE SUPREME COURT OF THE STATE OF MONTANA Case Number: DA 22-0382
No. DA 22-0382
IN THE MATTER OF:
R.Y.
Respondent and Appellant.
ORDER
Upon consideration of Appellant’s motion for extension of time,
and good cause appearing,
IT IS HEREBY ORDERED that Appellant is granted an extension
of time to and including December 27, 2022, within which to prepare,
file, and serve Appellant’s opening brief on appeal.
Electronically signed by:
Mike McGrath
Chief Justice, Montana Supreme Court
November 15 2022 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483973/ | Filed 11/15/22 P. v. Stout CA3
NOT TO BE PUBLISHED
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
THIRD APPELLATE DISTRICT
(Shasta)
----
THE PEOPLE, C095431
Plaintiff and Respondent, (Super. Ct. Nos. 16F2193,
16F2518, 16F4167)
v.
DOUGLAS JEREMIAH STOUT,
Defendant and Appellant.
In three separate Shasta County cases, defendant Douglas Jeremiah Stout pled no
contest to two offenses and a jury found him guilty of eight more offenses. The trial
court sentenced defendant to an aggregate term of 35 years two months in prison. After
this court reversed one conviction, struck an enhancement, and remanded for
resentencing, the trial court resentenced defendant to an aggregate term of 25 years four
months in prison, including the upper term of nine years for the principal offense, assault
1
with a firearm, and stayed the sentences for five other offenses pursuant to Penal Code
section 654.1
Defendant contends that amendments to sections 654, 1170, and 1170.1, which
took effect while his appeal was pending, apply retroactively to his case and require us to
vacate his sentence and remand for resentencing. The People agree. We will vacate
defendant’s sentence and remand for resentencing.
FACTUAL AND PROCEDURAL BACKGROUND
In case No. 16F2193, defendant pled no contest to receiving a stolen motor vehicle
with a prior felony and admitted a prior prison term. (§§ 496d, subd. (a), 666.5, 667.5,
former subd. (b).) In case No. 16F2518, defendant pled no contest to possessing a billy
club. (§ 22210.) In case No. 16F4167, the jury found defendant guilty of assault with a
semiautomatic firearm (§ 245, subd. (b)), attempted carjacking (§§ 215, subd. (a), 664),
attempted kidnapping (§§ 207, subd. (a), 664), two counts of possession of a firearm by a
felon (§ 29800, subd. (a)(1)), criminal threats (§ 422), armed criminal action (§ 25800),
and illegal possession of ammunition (§ 30305, subd. (a)). The jury also found true five
personal use of a firearm enhancements, three pursuant to section 12022.53, subdivision
(b) for specified felonies (§ 12022.53, subd. (a)(3), (5)), and two pursuant to section
12022.5, subdivision (a).
The trial court sentenced defendant to an aggregate term of 35 years two months
for all three cases, consisting of: (1) the upper term of nine years in prison for assault
with a semiautomatic weapon, plus a 10-year enhancement for personally using a firearm
during the offense; (2) consecutive terms of one year for receiving a stolen vehicle; (3) 10
months for attempted carjacking, plus three years four months for the attached firearm
enhancement; (4) eight months for each count of possession of a firearm by a felon; (5)
1 Undesignated statutory references are to the Penal Code.
2
eight months for armed criminal action; (6) five consecutive one-year enhancements for
prior prison terms (§ 667.5, former subd. (b)); and (7) two consecutive two-year
enhancements for committing the offenses in the third case while out on bail in the two
prior cases (§ 12022.1). The trial court imposed and stayed the execution of the
sentences for the other four offenses and two attached firearm enhancements pursuant to
section 654.
In a prior appeal, this court reversed one conviction for possession of a firearm by
a felon, struck one stayed firearm enhancement, and remanded for resentencing, directing
the trial court to stay the sentence for attempted carjacking and its firearm enhancement
pursuant to section 654 and to consider striking the 10-year firearm enhancement
pursuant to an intervening change in the law. (People v. Stout (2019) 38 Cal.App.5th
669, 676.)
On remand, the trial court confirmed the eight-month reduction for the reversed
conviction and the four-year two-month reduction for staying the sentence for attempted
carjacking. The trial court then struck the five one-year enhancements for prior prison
terms to conform with an intervening change to section 667.5, subdivision (b). The trial
court declined to strike the 10-year firearm enhancement because of the seriousness of
the crimes and the escalation of potential harm to the victim due to defendant’s use of the
firearm. The trial court did not consider any other changes to defendant’s sentence
because it believed it lacked the discretion to reconsider its prior sentencing decisions
except as instructed by this court’s opinion. Thus, the trial court pronounced a new
aggregate sentence of 25 years four months in prison.
Defendant timely appealed.
DISCUSSION
Defendant makes four arguments: (1) we must remand for the trial court to
exercise the new discretion granted by recent amendments to section 654; (2) the trial
court’s imposition of an upper term sentence and an upper term enhancement did not
3
satisfy the new requirements of sections 1170, subdivision (b)(2) and 1170.1, subdivision
(d)(2); (3) the trial court erroneously failed to update defendant’s custody credit at
resentencing; and (4) the trial court should correct an error in the abstract of judgment.
The People concede each of these four issues. We agree that the first issue requires
remand for a full resentencing, where the trial court can resolve the remaining issues.
Recent amendments to section 654, which took effect after the trial court
resentenced defendant, give trial courts discretion to select which one of multiple
applicable punishments to execute, regardless of the length of each potential term of
imprisonment. (§ 654, as amended by Stats. 2021, ch. 441, § 1.) “Previously, where . . .
section 654 applied, the sentencing court was required to impose the sentence that
‘provides for the longest potential term of imprisonment’ and stay execution of the other
term[s]. (Pen. Code, § 654, former subd. (a)[; see Stats. 1997, ch. 410, § 1].) As
amended by Assembly Bill [No.] 518, Penal Code section 654 now provides the trial
court with discretion to impose and execute the sentence of [any] term, which could
result in the trial court imposing and executing [a] shorter sentence rather than the
longe[st] sentence.” (People v. Mani (2022) 74 Cal.App.5th 343, 379.) These
amendments apply retroactively to defendant’s nonfinal sentence. (See ibid.)
At the time it resentenced defendant, section 654 required the trial court to impose
punishment for assault with a semiautomatic firearm, which provided for the longest
potential term of imprisonment, and stay other punishments based on the same acts. The
trial court followed this statutory dictate when it initially sentenced defendant and
believed it lacked discretion to reconsider this decision at resentencing, so we presume
the trial court was, properly, not exercising discretion not yet granted to it. (See People v.
Gutierrez (2014) 58 Cal.4th 1354, 1390 [“Absent evidence to the contrary, we presume
that the trial court knew and applied the governing law”].) Accordingly, applying the
amendments to section 654 retroactively, we conclude the trial court was “unaware of the
scope of its discretionary powers.” (Gutierrez, at p. 1391.) Thus, the appropriate remedy
4
is to remand for resentencing, unless the record clearly indicates the trial court would
have imposed the same sentence “ ‘even if it had been aware that it had such
discretion.’ ” (Ibid.) We see no such clear indication—nor have the parties identified
any—so we will remand for resentencing.
On remand, the trial court has the discretion to “revisit all prior sentencing
decisions” in light of changed circumstances and in accord with the law in effect at the
time of resentencing. (People v. Valenzuela (2019) 7 Cal.5th 415, 424-425; People v.
Walker (2021) 67 Cal.App.5th 198, 205-206.) “[I]n an attempt to avoid the recurrence of
error . . . , we discuss [the remaining] issues for the guidance of the parties and the trial
court on remand.” (People v. Wilson (1992) 3 Cal.4th 926, 930.)
As amended, section 1170, subdivision (b)(2) and section 1170.1, subdivision
(d)(2) provide that a sentencing court can only impose an upper term sentence or
enhancement if aggravating circumstances justify the upper term and “the facts
underlying those circumstances have been stipulated to by the defendant, or have been
found true beyond a reasonable doubt at trial by the jury or by the judge in a court trial.”
(§§ 1170, subd. (b)(2), 1170.1, subd. (d)(2), as amended by Stats. 2021, ch. 731, §§ 1.3 &
2; see also § 1170, subd. (b)(3).) As the parties agree, these amendments apply
retroactively to nonfinal convictions. (People v. Zabelle (2022) 80 Cal.App.5th 1098,
1109.) Accordingly, on remand, the trial court must comply with the requirements of
these amended statutes if imposing an upper term sentence or enhancement.
The parties likewise agree that the trial court failed to recalculate defendant’s
custody credit, as required at resentencing: “[W]hen a prison term already in progress is
modified as the result of an appellate sentence remand, the sentencing court must
recalculate and credit against the modified sentence all actual time the defendant has
already served, whether in jail or prison, and whether before or since he was originally
committed and delivered to prison custody.” (People v. Buckhalter (2001) 26 Cal.4th 20,
5
29; see § 2900.1.) On remand, the trial court should calculate defendant’s custody credit
up to the date of resentencing.
Lastly, in our prior appeal, we directed the trial court to correct a clerical error on
the abstract of judgment incorrectly listing the conviction for count 7 in case
No. 16F4167 as a violation of section 245, subdivision (b), assault with a semiautomatic
firearm. (People v. Stout (Aug. 12, 2019, C085360) [nonpub. portion].) Although count
7 of the information originally alleged assault with a semiautomatic firearm, the verdict
forms switched counts 6 and 7 from the information, so the jury found defendant guilty,
on count 7, of illegal possession of ammunition in violation of section 30305, subdivision
(a) and the trial court pronounced the sentence accordingly. The abstract of judgment
after resentencing still contained this clerical error. Upon resentencing, the trial court
should ensure this error does not persist.
DISPOSITION
Defendant’s sentence is vacated, and the case is remanded for resentencing.
/s/
BOULWARE EURIE, J.
We concur:
/s/
ROBIE, Acting P. J.
/s/
HULL, J.
6 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484002/ | [Cite as State v. Dale, 2022-Ohio-4074.]
COURT OF APPEALS
MUSKINGUM COUNTY, OHIO
FIFTH APPELLATE DISTRICT
STATE OF OHIO, : JUDGES:
: Hon. William B. Hoffman, P.J.
Plaintiff - Appellee : Hon. John W. Wise, J.
: Hon. Craig R. Baldwin, J.
-vs- :
:
THOMAS E. DALE : Case No. CT2022-0007
:
Defendant - Appellant : OPINION
CHARACTER OF PROCEEDING: Appeal from the Muskingum County
Court of Common Pleas, Case No.
CR2021-0448
JUDGMENT: Affirmed
DATE OF JUDGMENT: November 15, 2022
APPEARANCES:
For Plaintiff-Appellee For Defendant-Appellant
RONALD L. WELCH JAMES S. SWEENEY
Prosecuting Attorney James Sweeny Law, LLC
Muskingum County, Ohio 285 South Liberty Street
Powell, Ohio 43065
By: TAYLOR P. BENNINGTON
Assistant Prosecuting Attorney
Muskingum County, Ohio
27 North Fifth St., P.O. Box 189
Zanesville, Ohio 43701
Muskingum County, Case No. CT2022-0007 2
Baldwin, J.
{¶1} Appellant, Thomas E. Dale, appeals the sentence imposed upon him by the
Muskingum County Court of Common Pleas. Appellee is the State of Ohio.
STATEMENT OF THE FACTS AND THE CASE
{¶2} Dale terrorized three people visiting his home for a bonfire celebration and,
as a result, was charged with nineteen serious offenses. He plead guilty to four counts
for an aggregate prison term of twenty-one to twenty-six and one-half years, fourteen of
which are mandatory. He now contends the trial court’s failure to expressly state during
the sentencing hearing that it had considered the factors and requirements of R.C.
2929.11 and 2929.12 renders the sentence contrary to law and unsupported by the
record.
{¶3} Dale entered a plea of guilty, so the available facts are contained within the
transcripts for the change of plea and sentencing as well as the sentencing memorandum
offered by the State.
{¶4} Appellant hosted a bonfire gathering at his home and M.G., D.J. and M.G.’s
ten month old son, as well as Dale’s wife and brother attended. Some of the guests
consumed Xanax and bath salts. In the early morning hours of the following day, Dale
suspected that someone had stolen his drugs and he was furious. He snatched M.G. by
the hair and pulled her about the living room, finally letting her go after she plead with
him. She ran into the bedroom with her son, and Dale soon followed with a handgun and
forced her out.
Muskingum County, Case No. CT2022-0007 3
{¶5} Dale then forced M.G., at gun point, to take his penis in her mouth. Then
he directed his attention to D.J., ordering him to the floor, placing a gun to his head and
demanding that he tell him where the Xanax was hidden. He discharged the hand gun
into the floor beside D.J.
{¶6} Dale then forced M.G. and D.J. to undress and he inserted his fingers into
M.G.’s vagina, still searching for his Xanax. He compelled M.G. and D.J. to hold his gun,
claiming that would permit him to shoot them in self-defense. He began striking D.J. in
the face, knocked him to the ground and continued the assault by kicking him. After the
physical abuse, he warned the victims that he was a member of a biker gang and if they
told anyone, their family would be killed. He compelled M.G. to write her name and
address and her family’s name while making this threat.
{¶7} Dale was arrested and charged with nineteen separate offenses including,
kidnaping, rape, tampering with evidence, felonious assault, domestic violence, having a
weapon under a disability and intimidation. Sixteen of the charges were accompanied by
firearm specifications.
{¶8} He later entered a guilty plea to attempted kidnapping, a violation of R.C.
2923.02(A) and 2905.01(A)(2), a felony of the second degree; rape with a firearm
specification, in violation of R.C. 2907.02(A)(2) and 2941.145, a felony of the first degree;
felonious assault, in violation of 2903.11(A)(1), a felony of the second degree; and
domestic violence in violation of 2919.25(A), a felony of the fourth degree. Dale was
sentenced to an aggregate of 21 to 21.5 years, 14 of which were mandatory.
{¶9} Dale filed a timely appeal and submitted a single assignment of error:
Muskingum County, Case No. CT2022-0007 4
{¶10} “I. THE TRIAL COURT'S SENTENCE ON THE CHARGE OF RAPE WAS
NOT SUPPORTED BY THE RECORD AND WAS CONTRARY TO LAW.”
ANALYSIS
{¶11} Dale contends that the trial court's sentence on the charge of rape was not
supported by the record and was contrary to law. Dale was sentenced to an eleven-year
mandatory sentence for rape with an indefinite sentence of sixteen and one-half years,
with a three year mandatory consecutive sentence for the fire arm specification. Dale
argues that the trial court did not mention R.C. 2929.11 or 2929.12 during the sentencing
hearing, that the record does not support the trial court’s findings under those statutes
and that the court failed to consider those statues at sentencing. Dale does concede that
the trial court did confirm that it considered the requirements of R.C. 2929.11 and 2929.12
within its judgment entry imposing the sentence.
{¶12} This court has held that when the transcript of “the sentencing hearing is
silent as to whether the trial court considered the factors in R.C. 2929.11 and 2929.12” a
presumption arises “that a trial court considered the factors contained in R.C.
2929.12.” The statement in the sentencing entry that those factors were considered
provides support for the presumption. State v. Hannah, 5th Dist. Richland No. 15-CA-1,
2015-Ohio-4438, ¶ 13. Accord State v. Tenney, 11th Dist. Ashtabula No. 2009-A-0015,
2010-Ohio-6248, 2010 WL 5289110, ¶ 14. As this court explained in State v. Robinson,
5th Dist. Muskingum No. CT2012–0005, 2013–Ohio–2893, ¶ 19–20: “Where the record
lacks sufficient data to justify the sentence, the court may well abuse its discretion by
imposing that sentence without a suitable explanation. Where the record adequately
justifies the sentence imposed, the court need not recite its reasons.” The Supreme Court
Muskingum County, Case No. CT2022-0007 5
has made it clear that as long as the record demonstrates the factors were considered,
the sentence is not infirm. State v. Duktig, 8th Dist. Cuyahoga No. 79517, 2002-Ohio-
3770, ¶ 8. This court has confirmed that “consideration of the factors is presumed unless
the defendant affirmatively shows otherwise.” (Citations omitted.) State v. Crawford, 5th
Dist. Muskingum No. CT2021-0059, 2022-Ohio-3125, ¶ 18.
{¶13} Our review of the record supports a conclusion that the requisite factors
were considered. The state filed a sentencing memorandum that provided a complete
analysis of the factors listed in R.C. 2929.11 and 2929.12 as well as a summary of the
facts and Dale did nothing to rebut these facts but pointed to the lack of any prior serious
criminal behavior and laid the blame for his offenses on a reaction to unfamiliar illegal
drugs and the fact that the victims were allegedly guilty of stealing Dale’s illegal drugs.
The trial court received and reviewed the presentence investigation and, though that
document is not part of the record, the judge did note that the only offense listed was a
domestic violence from 2012.
{¶14} The court noted that Dale’s offenses were violent and affected four victims
and their families. He noted that the harm done to the victims was severe and warranted
serious consequences. The trial court made findings to support consecutive sentences
and reiterated that Dale shot at people, stripped them, stuck his hands into them and
traumatized them for an extended period of time.
{¶15} The findings on the record at the sentencing hearing and the confirmation
in the entry demonstrate compliance with the requirements of R.C. 2929.11 and 2929.12.
“The fact that R.C. 2929.11 and 2929.12 are not expressly referenced during a sentencing
hearing is immaterial when the trial court's sentencing entry cites to both statutes.” See
Muskingum County, Case No. CT2022-0007 6
State v. Hutchinson, 12th Dist. Butler No. CA2018-11-211, 2019-Ohio-2789, ¶ 12; State
v. Spencer, 12th Dist. Butler No. CA2018-10-202, 2019-Ohio-2160, ¶ 14-15.” State v.
Murphy, 12th Dist. Butler No. CA2021-05-048, 2021-Ohio-4541, ¶ 27. In this case, the
trial court noted that it “* * * has considered the record, all statements, any victim impact
statement, the plea recommendation in this matter, as well as the principles and purposes
of sentencing under Ohio Revised Code § 2929.11 and its balance of seriousness and
recidivism factors under Ohio Revised Code § 2929.12. (Entry, Dec. 22, 2021, p.
2). Dale’s complaint that the trial court did not reference the statutes during the
sentencing hearing and his conclusory statements that the record does not support the
sentence imposed do not rebut the presumption that the trial court considered the factors
listed in R.C. 2929.11 and 2929.12 and do not rise to the level of clear and convincing
evidence that sentence imposed was contrary to law.
{¶16} Dale’s assignment of error is overruled.
{¶17} The decision of the Muskingum County Court of Common Pleas is affirmed.
By: Baldwin, J.
Hoffman, P.J. and
Wise, John, J. concur. | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483999/ | [Cite as State v. Givens, 2022-Ohio-4067.]
IN THE COURT OF APPEALS OF OHIO
THIRD APPELLATE DISTRICT
HANCOCK COUNTY
STATE OF OHIO,
CASE NO. 5-21-33
PLAINTIFF-APPELLEE,
v.
RONALD H. GIVENS, JR., OPINION
DEFENDANT-APPELLANT.
STATE OF OHIO,
CASE NO. 5-21-34
PLAINTIFF-APPELLEE,
v.
RONALD H. GIVENS, JR., OPINION
DEFENDANT-APPELLANT.
Appeals from Hancock County Common Pleas Court
Trial Court Nos. 2021 CR 11 and 2021 CR 25
Judgments Affirmed
Date of Decision: November 14, 2022
APPEARANCES:
W. Alex Smith for Appellant
Phillip A. Riegle for Appellee
Case Nos. 5-21-33 and 5-21-34
WILLAMOWSKI, J.
{¶1} Defendant-appellant Ronald H. Givens, Jr. (“Givens”) appeals the
judgments of the Hancock County Court of Common Pleas, arguing that R.C.
2971.271 (“the Reagan Tokes Law”) is unconstitutional. For the reasons set forth
below, the judgments of the trial court are affirmed.
Facts and Procedural History
{¶2} On January 12, 2021, Givens was indicted on one count of aggravated
trafficking in drugs in violation of R.C. 2925.03(A), a felony of the second degree.
Doc. 1A. This charge became the basis of Case No. 21-CR-11. Doc. 1A. On
January 26, 2021, Givens was indicted on one count of aggravated trafficking in
drugs in violation of R.C. 2925.03(A), a felony of the first degree. Doc. 1B. This
charge became the basis of Case No. 21-CR-25. Doc. 1B. On October 1, 2021,
Givens pled guilty to both of the counts against him as charged. Doc. 46A, 51B.
The trial court then sentenced Givens, imposing an indefinite prison term pursuant
to the Reagan Tokes Law for the charge that formed the basis of Case No. 21-CR-
25. Doc. 49A, 54B. The trial court issued its judgment entries of sentencing on
October 15, 2021. Doc. 49A, 54B.
Assignment of Error
{¶3} Givens filed his notices of appeal on October 26, 2021. Doc. A55, B60.
On appeal, he raises the following assignment of error:
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Case Nos. 5-21-33 and 5-21-34
The defendant’s sentence is unconstitutional as it violates the
separation of powers doctrine of the United States and Ohio
Constitutions. It also violates the equal protection clause of the
same Constitutions.
Legal Standard
{¶4} “It is difficult to prove that a statute is unconstitutional.” State v.
Moore, 2017-Ohio-4358, 91 N.E.3d 1267, ¶ 9 (3d Dist.), quoting Arbino v. Johnson
& Johnson, 116 Ohio St.3d 468, 2007-Ohio-6948, 880 N.E.2d 420, ¶ 25.
All statutes have a strong presumption of constitutionality. * * *
Before a court may declare unconstitutional an enactment of the
legislative branch, ‘it must appear beyond a reasonable doubt
that the legislation and constitutional provisions are clearly
incompatible.’ [State v. Stoffer, 2d Dist. Montgomery No. 26268,
2015-Ohio-352, ¶ 8, quoting Arbino at ¶ 25], quoting State ex rel.
Dickman v. Defenbacher, 164 Ohio St. 142, 128 N.E.2d 59 (1955),
paragraph one of the syllabus.
Moore at ¶ 9. The party challenging the constitutionality of a law bears the burden
of establishing its unconstitutionality.” State v. Morrissey, 3d Dist. Hardin No. 6-
22-06, 2022-Ohio-3519, ¶ 19, quoting State v. Thompkins, 75 Ohio St.3d 558, 560,
1996-Ohio-264, 664 N.E.2d 926 (1996).
Legal Analysis
{¶5} In his sole assignment of error, Givens raises two main arguments.
First, he asserts that the Reagan Tokes Law runs afoul of the separation of powers
doctrine. However, in State v. Hacker, we considered and rejected this exact
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Case Nos. 5-21-33 and 5-21-34
argument. State v. Hacker, 2020-Ohio-5048, 161 N.E.3d 112, ¶ 22-23.1 See also
State v. Ferguson, 2d Dist. Montgomery No. 28644, 2020-Ohio-4153, ¶ 26-27; State
v. Hartline, 3d Dist. Logan Nos. 8-21-13, 8-21-14, 2022-Ohio-2997, ¶ 18. At this
juncture, we decline to revisit our prior decision. Thus, applying the holding in
Hacker to the case presently before this Court, we find Givens’s first argument to
be without merit.
{¶6} Second, Givens argues that the Reagan Tokes Law violates the Equal
Protection Clause because this provision only applies to inmates who have been
convicted of felonies of the first or second degrees but not inmates who have been
conviction of felonies of the third, fourth, or fifth degrees. Equal protection
guarantees require that all similarly situated individuals be
treated in a similar manner. State ex rel. Doersam v. Indus. Comm.
(1989), 45 Ohio St.3d 115, 119, 543 N.E.2d 1169, 1173. In other
words, laws are to operate equally upon persons who are
identified in the same class.
State ex rel. Patterson v. Indus. Comm., 77 Ohio St.3d 201, 204, 1996-Ohio-263,
672 N.E.2d 1008, 1010 (1996). In an equal protection challenge,
[i]f a statute does not implicate a fundamental right or a suspect
classification, courts employ a ‘rational basis’ standard of review,
and a statute will not violate equal-protection principles if it is
rationally related to a legitimate government interest.
1
We are aware that the Ohio Supreme Court has accepted an appeal from State v. Hacker, supra, with oral
arguments scheduled to be heard on January 11, 2023. State v. Hacker, 161 Ohio St.3d 1449, 2021-Ohio-
534, 163 N.E.3d 585.
-4-
Case Nos. 5-21-33 and 5-21-34
State v. Mole, 2013-Ohio-3131, 994 N.E.2d 482, ¶ 10 (8th Dist.). See also State v.
Batista, 151 Ohio St.3d 584, 2017-Ohio-8304, 91 N.E.3d 724, ¶ 22. In his brief,
Givens does not argue that the Reagan Tokes Law implicates a suspect classification
or a fundamental right. See State v. Edwards, 1st Dist. Hamilton No. C-200101,
2022-Ohio-3408, ¶ 18. Thus, we will apply the rational basis test in this appeal.
{¶7} In State v. Guyton, the First District Court of Appeals considered a case
in which the appellant argued that inmates who were convicted of felonies of the
first and second degree were treated differently from those convicted of felonies of
the third, fourth, and fifth degrees under the provisions of the Reagan Tokes Law.
State v. Guyton, 1st Dist. Hamilton No. C-190657, 2022-Ohio-2962, ¶ 58.2 The
First District found that the appellant’s
primary Equal Protection Clause argument collapse[d] because
he [could not] * * * demonstrate that similarly situat[ed]
individuals [were] * * * treated disparately with respect to a
fundamental right. At issue is simply a state sentencing scheme.
The legislature has enacted an indeterminate sentencing structure
for certain serious felony offenders that does not apply to less
serious felony offenders.
Id. at ¶ 65. The First District then applied the rational basis test and concluded that
[t]he legislature undoubtedly has a goal of rehabilitating
offenders so that when those offenders are released they do not
create ‘an unsafe condition for an unsuspecting public.’ See [State
v.] Delvallie, 2022-Ohio-470, 185 N.E.3d 536, [(8th Dist.)] ¶ 1. The
legislature’s ‘incentive-laden approach’ that involves the ODRC
in release decisions bears a logical and reasonable relationship to
the state’s goal.
2
We are aware that State v. Guyton was appealed to the Ohio Supreme Court on September 2, 2022.
-5-
Case Nos. 5-21-33 and 5-21-34
***
The legislature’s focus on Ohio’s most serious felony offenders is
not surprising considering the significant resources that are
required to administer the indeterminate sentencing scheme.
Moreover, the legislature’s connection between recidivism upon
release and an offender’s placement in restrictive housing,
security risk classification, and dangerous, antisocial conduct
while in prison makes logical sense. The state has a great interest
in the success of the Reagan Tokes Law, which departs from a
‘purely punitive prison policy,’ and the use of the prison-rule-
infraction system as a model and vehicle to attain that goal passes
constitutional muster under a rational-basis standard of review.
Id. at ¶ 66, 68. See State v. O’Neal, 1st Dist. Hamilton No. C-190736, 2022-Ohio-
3017, ¶ (holding in an equal protection challenge that the indefinite sentencing
scheme in the Reagan Tokes Law “is rationally related to the state’s goal in reducing
recidivism for serious offenders by incentivizing good conduct in prison as observed
by those overseeing the prisons.”).
{¶8} In substance, the equal protection argument raised in Guyton is the same
as the one raised by Givens herein. In fact, the appellant in Guyton appears to have
raised a far more extensive equal protection challenge. Guyton, supra, at ¶ 62. By
contrast, Givens has not even cited to any legal authority in support of this argument
in his brief. See App.R. 16(A)(7). Thus, finding the First District’s reasoning to be
persuasive, we apply the logic of Guyton to the case presently before us and
conclude that Givens has failed to demonstrate that the Reagan Tokes Law violates
his right to equal protection. Guyton, supra, at ¶ 66, 68. See also State v. Ratliff,
-6-
Case Nos. 5-21-33 and 5-21-34
2022-Ohio-1372, 190 N.E.3d 684, ¶ 62 (5th Dist.) (holding in an equal protection
challenge against the Reagan Tokes Law that “[i]t is axiomatic that the entire Ohio
penal system is based upon classifying and treating each felony degree
differently”),3 quoting State v. Hodgkin, 12th Dist. Warren No. CA2020-08-048,
2021-Ohio-1353, fn. 2. Thus, Givens’s second argument is without merit.
Conclusion
{¶9} Since Givens had not carried the burden of establishing that the Reagan
Tokes Law is unconstitutional in either of his two arguments, his sole assignment
of error is overruled. Having found no error prejudicial to the appellant in the
particulars assigned and argued, the judgments of the Hancock County Court of
Common Pleas are affirmed.
Judgments Affirmed
ZIMMERMAN, P.J. and SHAW, J., concur.
/hls
3
We are aware that the Ohio Supreme Court has accepted an appeal from State v. Ratliff, supra. See State v.
Ratliff, 167 Ohio St.3d 1481, 2022-Ohio-2765, 192 N.E.3d 516.
-7- | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483997/ | [Cite as State v. West, 2022-Ohio-4069.]
IN THE COURT OF APPEALS OF OHIO
THIRD APPELLATE DISTRICT
SENECA COUNTY
STATE OF OHIO,
PLAINTIFF-APPELLEE, CASE NO. 13-22-07
v.
ALYSSA D. WEST, OPINION
DEFENDANT-APPELLANT.
Appeal from Seneca County Common Pleas Court
Trial Court No. 21 CR 0140
Judgment Affirmed
Date of Decision: November 14, 2022
APPEARANCES:
James J. Whitfield for Appellant
Angela M. Boes for Appellee
Case No. 13-22-07
ZIMMERMAN, P.J.
{¶1} Defendant-appellant, Alyssa D. West (“West”), appeals the April 22,
2022 judgment entry of sentence of the Seneca County Court of Common Pleas.
For the reasons that follow, we affirm.
{¶2} On August 26, 2021, the Seneca County Grand Jury indicted West on
Count One of felonious assault in violation of R.C. 2903.11(A)(2), (D)(1)(a), a
second-degree felony, and Count Two of tampering with evidence in violation of
R.C. 2921.12(A)(1), (B), a third-degree felony. On August 30, 2021, West appeared
for arraignment and entered pleas of not guilty to the counts alleged in the
indictment.
{¶3} On March 15, 2022, West withdrew her pleas of not guilty and entered
guilty pleas, under a negotiated-plea agreement, to the counts alleged in the
indictment. In exchange for her change of pleas, the State agreed to a sentencing
recommendation. The trial court accepted West’s guilty pleas, found her guilty, and
ordered a pre-sentence investigation.
{¶4} On April 21, 2022, the trial court sentenced West to a minimum term
of four years in prison to a maximum term of six years in prison on Count One and
to 18 months in prison on Count Two. (Doc. Nos. 48-49).1 The trial court ordered
West to serve the prison terms concurrently. The trial court further ordered that
1
The trial court filed its judgment entry of sentence on April 22, 2022. (Doc. Nos. 48-49).
-2-
Case No. 13-22-07
West pay the costs of prosecution and $4,619.90 in restitution. Importantly, the trial
court ordered West to begin making payments toward her restitution within 30 days
from the date of the judgment entry of sentence and to pay the costs of prosecution
within one year.
{¶5} On May 13, 2022, West filed her notice of appeal. She raises two
assignments of error for our review, which we will discuss together.
Assignment of Error No. I
The Sentence Imposed By the Trial Court is Inconsistent With the
Principles and Purposes of Sentencing Under the Ohio Revised
Code and Therefore is Contrary to Law.
Assignment of Error No. II
The Trial Court Erred by Assessing Restitution and Costs
Without Conducting an Ability to Pay Hearing.
{¶6} In her first assignment of error, West argues the record does not support
the trial court’s sentence. Specifically, West contends that her sentence is contrary
to law because the trial court failed to consider the purposes and principles of felony
sentencing when imposing her sentence. In her second assignment of error, West
argues that it was error for the trial court to impose the costs of prosecution and
restitution without considering her ability to pay.
Standard of Review
{¶7} Under R.C. 2953.08(G)(2), an appellate court will reverse a sentence
“only if it determines by clear and convincing evidence that the record does not
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Case No. 13-22-07
support the trial court’s findings under relevant statutes or that the sentence is
otherwise contrary to law.” State v. Marcum, 146 Ohio St.3d 516, 2016-Ohio-1002,
¶ 1. Clear and convincing evidence is that “‘which will produce in the mind of the
trier of facts a firm belief or conviction as to the facts sought to be established.’” Id.
at ¶ 22, quoting Cross v. Ledford, 161 Ohio St. 469 (1954), paragraph three of the
syllabus.
{¶8} Furthermore, we review the imposition of costs and restitution under
R.C. 2953.08(G)(2). State v. Jordan, 6th Dist. Lucas No. L-19-1165, 2021-Ohio-
333, ¶ 7 (asserting that “‘the proper standard of review for analyzing the imposition
of restitution as part of a felony sentence is whether the sentence complies with R.C.
2953.08(G)(2)(b)’”), quoting State v. Young, 6th Dist. Lucas No. L-19-1189, 2020-
Ohio-4943, ¶ 11; State v. Long, 11th Dist. Geauga No. 2020-G-0260, 2021-Ohio-
1059, ¶ 15 (“Since the enactment of H.B. 86, however, we review felony sentences,
which include restitution orders, pursuant to R.C. 2953.08(G)(2).”), citing State v.
Ciresi, 11th Dist. Geauga No, 2020-G-0249, 2020-Ohio-5305, ¶ 5 (overruling
previous cases holding that restitution orders are reviewed for an abuse of
discretion) and State v. Mazzola, 11th Dist. Trumbull No. 2018-T-0029, 2019-Ohio-
845, ¶ 19, fn. 1.
-4-
Case No. 13-22-07
Analysis
{¶9} First, we will address West’s argument challenging the prison sentence
imposed by the trial court for her felonious-assault and tampering-with-evidence
convictions.
{¶10} “It is well-established that the statutes governing felony sentencing no
longer require the trial court to make certain findings before imposing a maximum
sentence.” State v. Maggette, 3d Dist. Seneca No. 13-16-06, 2016-Ohio-5554, ¶ 29,
citing State v. Dixon, 2d Dist. Clark No. 2015-CA-67, 2016-Ohio-2882, ¶ 14
(“Unlike consecutive sentences, the trial court was not required to make any
particular ‘findings’ to justify maximum prison sentences.”) and State v. Hinton, 8th
Dist. Cuyahoga No. 102710, 2015-Ohio-4907, ¶ 9 (“The law no longer requires the
trial court to make certain findings before imposing a maximum sentence.”).
Rather, “‘trial courts have full discretion to impose any sentence within the statutory
range.’” State v. Smith, 3d Dist. Seneca No. 13-15-17, 2015-Ohio-4225, ¶ 10,
quoting State v. Noble, 3d Dist. Logan No. 8-14-06, 2014-Ohio-5485, ¶ 9, citing
State v. Saldana, 3d Dist. Putnam No. 12-12-09, 2013-Ohio-1122, ¶ 20.
{¶11} In this case, as a second-degree felony, felonious assault carries a non-
mandatory, indefinite sanction of two-years to eight-years of imprisonment. R.C.
2903.11(A)(2), (D)(1)(a), 2929.14(A)(2)(a), and 2929.144(B)(1). See also R.C.
2929.13(F). Further, as a third-degree felony, tampering with evidence carries a
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Case No. 13-22-07
non-mandatory, definite sanction of 9-months to 36-months imprisonment. R.C.
2921.12(A)(1), (B), and 2929.14(3)(a). See also R.C. 2929.13(F).
{¶12} “[A] sentence imposed within the statutory range is ‘presumptively
valid’ if the [trial] court considered applicable sentencing factors.” Maggette at ¶
31, quoting State v. Collier, 8th Dist. Cuyahoga No. 95572, 2011-Ohio-2791, ¶ 15.
Because the trial court sentenced West to a minimum term of four years in prison to
a maximum term of six years in prison as to her felonious-assault conviction, the
trial court’s sentence as to that conviction is within the statutory range and is
appropriately calculated. Likewise, because the trial court sentenced West to 18
months in prison as to her tampering-with-evidence conviction, the trial court’s
sentence as to that conviction falls within the statutory range.
{¶13} R.C. 2929.11 provides, in in pertinent part, that the
overriding purposes of felony sentencing are to protect the public
from future crime by the offender and others, to punish the offender,
and to promote the effective rehabilitation of the offender using the
minimum sanctions that the court determines accomplish those
purposes without imposing an unnecessary burden on state or local
government resources.
R.C. 2929.11(A). “In advancing these purposes, sentencing courts are instructed
to ‘consider the need for incapacitating the offender, deterring the offender and
others from future crime, rehabilitating the offender, and making restitution to the
victim of the offense, the public, or both.’” Smith, 2015-Ohio-4225, at ¶ 10,
quoting R.C. 2929.11(A). “Meanwhile, R.C. 2929.11(B) states that felony
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Case No. 13-22-07
sentences must be ‘commensurate with and not demeaning to the seriousness of the
offender’s conduct and its impact upon the victim’ and also be consistent with
sentences imposed in similar cases.” Id., quoting R.C. 2929.11(B). “In accordance
with these principles, the trial court must consider the factors set forth in R.C.
2929.12(B)-(E) relating to the seriousness of the offender’s conduct and the
likelihood of the offender’s recidivism.” Id., citing R.C. 2929.12(A). “‘A
sentencing court has broad discretion to determine the relative weight to assign the
sentencing factors in R.C. 2929.12.” Id. at ¶ 15, quoting State v. Brimacombe, 195
Ohio App.3d 524, 2011-Ohio-5032, ¶ 18 (6th Dist.), citing State v. Arnett, 88 Ohio
St.3d 208, 215 (2000).
{¶14} “Although the trial court must consider the purposes and principles of
felony sentencing set forth in R.C. 2929.11 and the sentencing factors listed in R.C.
2929.12, the sentencing court is not required to ‘state on the record that it considered
the statutory criteria or discuss[ed] them.’” Maggette at ¶ 32, quoting State v.
Polick, 101 Ohio App.3d 428, 431 (4th Dist.1995). “A trial court’s statement that
it considered the required statutory factors, without more, is sufficient to fulfill its
obligations under the sentencing statutes.” Id., citing State v. Abrams, 8th Dist.
Cuyahoga No. 103786, 2016-Ohio-4570, citing State v. Payne, 114 Ohio St.3d 502,
2007-Ohio-4642, ¶ 18.
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Case No. 13-22-07
{¶15} At West’s sentencing hearing and in its sentencing entry, the trial court
considered the R.C. 2929.11 and 2929.12 factors. (Apr. 21, 2022 Tr. at 89); (Doc.
Nos. 48-49). Nevertheless, West contends that the trial court abused its discretion
by imposing a four-year prison sentence because “many of the recidivism and
seriousness of the crime factors that the statute provides to guide the courts lend
themselves to the notion that Ms. West does not require a minimum of four years to
effectuate the purposes of sentencing.” (Appellant’s Brief at 4). Specifically, West
contends that her sentence is contrary to law because it “is clearly more of a
hindrance than a promotion of rehabilitation” and because it is “excessive in terms
of punishment and to the extent that it was necessary to protect the public from
future crime.” (Id. at 5).
{¶16} West’s argument is without merit. Importantly, the Supreme Court of
Ohio recently directed Ohio’s courts of appeal that R.C. 2953.08(G)(2)(a) “clearly
does not provide a basis for an appellate court to modify or vacate a sentence if it
concludes that the record does not support the sentence under R.C. 2929.11 and R.C.
2929.12 because * * * R.C. 2929.11 and R.C. 2929.12 are not among the statutes
listed in the provision.” State v. Jones, 163 Ohio St.3d 242, 2020-Ohio-6729, ¶ 31.
As a result, this court may not modify or vacate a felony sentence based on a finding
by clear and convincing evidence that the record does not support the trial court’s
findings under R.C. 2929.11 or 2929.12. State v. Reed, 3d Dist. Union No. 14-20-
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Case No. 13-22-07
16, 2021-Ohio-1623, ¶ 19, citing Jones at ¶ 32-39. Consequently, “‘when reviewing
felony sentences that are imposed solely after considering the factors in R.C.
2929.11 and R.C. 2929.12, we shall no longer analyze whether those sentences are
unsupported by the record. We simply must determine whether those sentences are
contrary to law.’” Id., quoting State v. Dorsey, 2d Dist. Montgomery No. 28747,
2021-Ohio-76, ¶ 18.
{¶17} Thus, when imposing a felony sentence, “it is ‘[t]he trial court [that]
determines the weight afforded to any particular statutory factors, mitigating
grounds, or other relevant circumstances.’” State v. McKennelly, 12th Dist. Butler
No. CA2017-04-055, 2017-Ohio-9092, ¶ 15, quoting State v. Steger, 12th Dist.
Butler No. CA2016-03-059, 2016-Ohio-7908, ¶ 18, citing State v. Stubbs, 10th Dist.
Franklin No. 13AP-810, 2014-Ohio-3696, ¶ 16. “The fact that the trial court chose
to weigh various sentencing factors differently than how appellant would have
weighed them does not mean the trial court erred in imposing appellant’s sentence.”
Id.
{¶18} In this case, the trial court concluded that a four-year prison term is
consistent with the purposes and principles of felony sentencing and “that the
shortest prison term will demean the seriousness of [West’s] conduct and will not
adequately protect the public from future crime by [West] or others.” (Doc. Nos.
48-49). (See also Apr. 21, 2022 Tr. at 91). Specifically, after weighing the
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Case No. 13-22-07
seriousness and recidivism factors, the trial court determined that West’s conduct is
more serious than conduct normally constituting felonious assault and tampering
with evidence.
{¶19} In particular, assessing the seriousness of West’s conduct, the trial
court found that the victim suffered serious physical harm as a result of the offense
and that West’s relationship with the victim facilitated the offense. (Apr. 21, 2022
Tr. at 91); (Doc. Nos. 48-49). See R.C. 2929.12(B)(2), (6). Applying the factors
under R.C. 2929.12(C)—indicating that West’s conduct is less serious than conduct
normally constituting the offense—the trial court found that none of the factors
under R.C. 2929.12(C) applied in this case.
{¶20} Assessing whether West was likely to commit future crimes, the trial
found none of the factors under R.C. 2929.12(D) applicable to this case. However,
applying the factors under R.C. 2929.12(E)—indicating that West is not likely to
commit future crimes—the trial court found that West has no prior criminal record
(as an adult or juvenile) and that she shows genuine remorse for the offense. (Apr.
21, 2022 Tr. at 90). See R.C. 2929.12(E)(1), (2), (3), (5).
{¶21} Thus, based on our review of the record, we conclude the trial court
did not abuse its discretion by imposing a minimum term of four years in prison
even though West would have weighed the R.C. 2929.12 factors differently.
Therefore, because her sentence is within the sentencing range and the trial court
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Case No. 13-22-07
considered the purposes and principles of felony sentencing set forth under R.C.
2929.11 and 2929.12, West’s sentence is not contrary to law.
{¶22} West further argues that the trial court erred by ordering that she pay
restitution and the costs of prosecution without considering her ability to pay the
ordered amount. Specifically, West does not contest the amount of restitution or the
costs ordered by the trial court; rather, West disputes the trial court’s order that she
begin making payments toward the restitution order within 30 days from the date of
its judgment entry of sentence and the trial court’s order that she pay the costs of
prosecution within one year of its judgment entry of sentence in consideration of
her incarceration.
{¶23} However, as an initial matter, West failed to object to the trial court’s
order that she pay restitution and the costs of prosecution. The failure to object to a
trial court’s order to pay the costs of prosecution and the failure to object to a trial
court’s award of restitution waives all but plain error on review. State v. Wilkins,
3d Dist. Shelby No. 17-13-13, 2014-Ohio-983, ¶ 8; State v. Bricker, 6th Dist. Fulton
No. F-21-013, 2022-Ohio-3494, ¶ 26. “To recognize plain error, we must find
obvious error affecting such substantial rights that the error was outcome-
determinative.” State v. Henslee, 5th Dist. Muskingum No. CT2017-0009, 2017-
Ohio-5786, ¶ 13, citing State v. Noling, 98 Ohio St.3d 44, 2002-Ohio-7044, ¶ 62.
See also Crim.R. 52(B). “‘Plain error is to be used ‘with the utmost caution, under
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Case No. 13-22-07
exceptional circumstances and only to prevent a manifest miscarriage of justice.”’”
Wilkins at ¶ 8, quoting State v. Stewart, 3d Dist. Wyandot No. 16-08-11, 2008-Ohio-
5823, ¶ 7, quoting State v. Barnes, 94 Ohio St.3d 21, 27 (2002).
{¶24} “In the context of sentencing, outcome-determinative means an error
that resulted in a sentence which is contrary to law.” Henslee at ¶ 13, citing State v.
Amos, 140 Ohio St.3d 238, 2014-Ohio-3160, ¶ 23 (Lanzinger, J., concurring in part
and dissenting in part). See also Wilkins at ¶ 8 (“‘[I]mposition of a sentence not
authorized by statute constitutes plain error.’”), quoting Stewart at ¶ 7.
{¶25} “R.C. 2929.18(A)(1) authorizes a trial court to impose restitution as
part of a sentence in order to compensate a victim for economic loss.” State v.
Lalain, 136 Ohio St.3d 248, 2013-Ohio-3093, ¶ 20. However, before imposing
restitution, “R.C. 2929.19(B)(5) requires a trial court to ‘consider the offender’s
present and future ability to pay the amount of the sanction’ before imposing a
financial sanction, such as restitution, under R.C. 2929.18.” Wilkins at ¶ 17, quoting
R.C. 2929.19(B)(5), and citing State v. Parker, 183 Ohio App.3d 431, 2009-Ohio-
3667, ¶ 13 (3d Dist.). “‘The trial court is not required to hold a hearing on ability
to pay, nor are there any specific factors to consider or findings to make.’” Id.,
quoting Parker at ¶ 13. “‘The court must merely consider the offender’s ability to
pay.’” Id., quoting Parker at ¶ 13. “‘Furthermore, “a trial court need not explicitly
state in its judgment entry that it considered a defendant’s ability to pay a financial
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Case No. 13-22-07
sanction. Rather, [appellate] courts look to the totality of the record to see if the
requirement has been satisfied.”’” Id., quoting State v. Crish, 3d Dist. Allen No. 1-
08-13, 2008-Ohio-5196, ¶ 50, quoting State v. Smith, 4th Dist. Ross No. 06CA2893,
2007-Ohio-1884, ¶ 42.
{¶26} “‘“If the record shows that the court considered a presentence
investigation report that provides pertinent information about the offender’s
financial situation and his ability to pay the financial sanction, it has met its
obligation under R.C. 2929.19(B)(5).”’” Id. at ¶ 18, quoting State v. Bulstrom, 4th
Dist. Athens No. 12CA19, 2013-Ohio-3582, ¶ 15, quoting State v. Petrie, 4th Dist.
Meigs No. 12CA4, 2013-Ohio-887, ¶ 5. See also Crish at ¶ 50 (“When the trial
court considers information in the [PSI] relating to the defendant’s age, health,
education, and employment history, that is sufficient to comply with R.C.
2929.19(B)[(5)].”); State v. Troglin, 3d Dist. Union No. 14-06-57, 2007-Ohio-4368,
¶ 38 (offering that R.C. 2929.19(B)(5) is “satisfied where a trial court considered a
PSI, which typically contains pertinent financial information”).
{¶27} Even though “[t]he trial court did not explicitly state at the sentencing
hearing or in its judgment entry that it considered [West’s] ability to pay a financial
sanction,” the trial court met its obligation under R.C. 2929.19(B)(5). Wilkins at ¶
23. See also State v. Abrams, 12th Dist. Clermont No. CA2017-03-018, 2017-Ohio-
8536, ¶ 28. Importantly, the trial court stated that it not only carefully reviewed the
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Case No. 13-22-07
PSI (which is 27 pages in length) but also considered the PSI when imposing West’s
sentence. Accord State v. Bey, 6th Dist. Lucas No. L-17-1288, 2019-Ohio-423, ¶
45 (“Prior to ordering restitution, the trial court stated that it had ‘carefully
reviewed’ appellant’s PSI.”). In addition to the PSI, the trial court stated that it
reviewed “the record, the oral statements made, * * * and the various statements
made” at the sentencing hearing. (Apr. 21, 2022 Tr. at 88).
{¶28} In particular, the PSI contains information reflecting West’s age,
health, education, and employment status. Accord Wilkins at ¶ 21. Specifically, the
PSI states that West is 21 years old; that she is in “[g]ood” physical health; that she
has completed 105 credit hours toward an associate’s degree at Owens Community
College and is enrolled (but has not started classes) at the University of Cincinnati;
and that she was employed at the time of the offense.
{¶29} Consequently, “[b]y considering that information, the trial court
satisfied its obligation under R.C. 2929.19(B)(5) to consider [West’s] present and
future ability to pay the amount of restitution ordered by the trial court.” Wilkins at
¶ 23, citing Crish, 2008-Ohio-5196, at ¶ 50. Therefore, the trial court’s order of
restitution in this case is not contrary to law.
{¶30} Furthermore, it was not plain error to order West to pay the costs of
prosecution. That is, the trial court’s order that West pay the costs of prosecution is
not contrary to law. “‘R.C. 2947.23 requires a trial court to assess costs against all
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Case No. 13-22-07
criminal defendants, even if the defendant is indigent.”’ State v. McWay, 3d Dist.
Allen No. 1-19-65, 2020-Ohio-719, ¶ 7, quoting State v. Clinton, 153 Ohio St.3d
422, 2017-Ohio-9423, ¶ 239. See also State v. Taylor, 163 Ohio St.3d 508, 2020-
Ohio-6786, ¶ 35 (affirming that “the General Assembly has specifically required
courts to include financial sanctions, fines, and court costs as a part of the
defendant’s sentence”). Importantly, “[t]he costs of prosecution are mandatory,
pursuant to R.C. 2947.23(A)(1), and trial courts are obligated to impose the costs of
prosecution irrespective of a defendant’s ability to pay.” Bricker, 2022-Ohio-
3494,at ¶ 25. Therefore, because “the costs of prosecution are mandatory and there
is no requirement for the trial court to consider [West’s] ability to pay”, it was not
plain error for the trial court to order West to pay the costs of prosecution. Bricker
at ¶ 27. Accord State v. Stapleton, 3d Dist. Allen No. 1-19-66, 2020-Ohio-852, ¶ 6.
{¶31} Nevertheless, West challenges that trial court’s order that she begin
making payments toward the restitution order within 30 days from the date of its
judgment entry of sentence and the trial court’s order that she pay the costs of
prosecution within one year of its judgment entry of sentence in consideration of
her incarceration. However, that issue is not properly before this court. Pertinently,
R.C. 2947.23(C) gives a trial court continuing jurisdiction to ‘waive, suspend, or
modify the payment of the costs of prosecution * * * at the time of sentencing or at
any time thereafter.’” Taylor at ¶ 7, quoting R.C. 2947.23(C). “So, while the court
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Case No. 13-22-07
must impose costs, it may also waive, suspend, or modify them.” Id. Imperatively,
such action by the trial court requires an affirmative act by the defendant, and, at
this point in time, West has made no such motion to the court. See State v. Hanford,
8th Dist. Cuyahoga No. 106220, 2018-Ohio-1309, ¶ 17 (noting that a trial court “has
the discretion to waive court costs if the defendant makes a motion to waive costs”).
Consequently, her argument is not ripe for review.
{¶32} For these reasons, West’s assignments of error are overruled.
{¶33} Having found no error prejudicial to the appellant herein in the
particulars assigned and argued, we affirm the judgment of the trial court.
Judgment Affirmed
SHAW and WILLAMOWSKI, J.J., concur.
/jlr
-16- | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483989/ | NOT RECOMMENDED FOR PUBLICATION
File Name: 22a0458n.06
Case No. 21-5143
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
FILED
Nov 15, 2022
)
UNITED STATES OF AMERICA, DEBORAH S. HUNT, Clerk
)
Plaintiff-Appellee, )
) ON APPEAL FROM THE UNITED
v. ) STATES DISTRICT COURT FOR
) THE EASTERN DISTRICT OF
BAAKI ABDUL MAJEED, ) KENTUCKY
Defendant-Appellant. )
) OPINION
Before: McKEAGUE, THAPAR, and READLER, Circuit Judges.
THAPAR, Circuit Judge. For his involvement in a scheme to prey on the elderly, a jury
convicted Baaki Abdul Majeed of conspiracy to commit wire fraud, conspiracy to commit money
laundering, and five counts of substantive money laundering. We affirm.
I.
In March 2017, an elderly Kentucky woman met a man on Facebook calling himself
“James Nehmer.” But Nehmer was a false identity: In reality, the woman was communicating
with a scammer whose goal was to convince her to send him money. Nehmer sent the woman
photos of a U.S. Army soldier whose uniform nameplate read “James.” The scammer pretended
these were photos of himself.
Nehmer feigned romantic interest, making the woman believe they were in love. Then
Nehmer told the woman he had purchased “precious metals and gemstones” in Africa. R. 238, Pg.
Case No. 21-5143, United States v. Majeed
ID 1381–82. Nehmer convinced the woman he would come join her in the United States, sell the
treasure in New York for millions of dollars, and use the proceeds to fund their new life together.
But first Nehmer needed help: Nehmer asked the woman to send money so he could pay taxes
and fees to transport his treasure to the United States.
The scam was a success. Over a six-month period, Nehmer convinced the woman to send
him $757,000. Throughout that period, Nehmer brought in others to assist with the scheme. In
April 2017, Nehmer persuaded the woman to wire him $150,000, but her bank blocked the
transaction. So Nehmer told the woman to send the money to his associates: Baaki Abdul Majeed
and Majeed’s cousin, Kahad Wuupini.
Majeed never spoke directly with Nehmer or the victim—instead, Wuupini kept Majeed
informed. But Majeed accepted direct transfers from the victim in his own name and on behalf of
the business he created for this purpose, All Green Global.
In total, Majeed received $389,000 from the victim, usually in the form of cashier’s checks.
Majeed, in turn, wired some of those funds to individuals in Ghana. He also bought luxury cars to
send to Ghana, sent checks to Wuupini, moved funds between his business and personal accounts,
and withdrew thousands of dollars in cash.
Wuupini and Majeed regularly discussed these transactions, with Wuupini often
forwarding Majeed screenshots of his correspondence with a co-conspirator whom Majeed and
Wuupini called “the Boy.” The Boy was either the individual posing as Nehmer or someone close
to that person. In one conversation, Wuupini and the Boy referred to the victim as a “mugu” who
could “pay up to a million dollars.” R. 239, Pg. ID 1445. The word “mugu” is a slang term used
in Ghana to describe “the victim” of a “scam,” or a “fool” who “has been duped” by scammers.
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Case No. 21-5143, United States v. Majeed
R. 240, Pg. ID 1706, 1741. When Wuupini forwarded that conversation, Majeed responded with
excitement at the prospect of collecting a million dollars.
In other instances, the conspirators discussed controlling the victim and covering their
tracks. In one conversation, Wuupini told the Boy he hoped the victim was “under control.” R.
239, Pg. ID 1440. Wuupini forwarded that conversation to Majeed. Majeed responded “[o]kay
good.” R. 239, Pg. ID 1441. Later, Majeed and Wuupini discussed breaking up large sums into
piecemeal transactions to avoid scrutiny from the bank. In another instance, after the victim
expressed concerns about “problems” with the transactions, Wuupini instructed the Boy to “tell
[the victim] any story you think she would believe.” R. 239, Pg. ID 1454. Again, Wuupini
forwarded this conversation to Majeed.
Majeed, Wuupini, and a third co-conspirator named Thomas Inkoom were arrested in 2019.
The government never proved who was posing as Nehmer—that individual remained an
unindicted coconspirator. But Wuupini and Inkoom both pled guilty, received prison sentences,
and were ordered to pay restitution. Majeed maintained his innocence. After a four-day trial, a
jury convicted Majeed of conspiracy to commit wire fraud under 18 U.S.C. § 1349, conspiracy to
commit money laundering under 18 U.S.C. § 1956(h), and five counts of substantive money
laundering under 18 U.S.C. § 1957. The court then sentenced Majeed to 72 months’ imprisonment
followed by 3 years’ supervised release and ordered him to pay $757,000 in restitution.
II.
Majeed raises three issues on appeal. None provides a basis to disturb the judgment below.
First, Majeed challenges the sufficiency of the evidence supporting his convictions. To
convict Majeed on any charge, the government had to prove that Majeed knew of the fraud. See
-3-
Case No. 21-5143, United States v. Majeed
United States v. Sadler, 24 F.4th 515, 542 (6th Cir. 2022). Knowledge can “be inferred from
surrounding circumstances,” and the government didn’t have to prove Majeed “knew each detail
of the conspiracy.” United States v. Christian, 786 F.2d 203, 211 (6th Cir. 1986) (cleaned up).
Because the jury convicted Majeed, we view the evidence in the light most favorable to the
government. United States v. Conrad, 507 F.3d 424, 432 (6th Cir. 2007).
There was sufficient evidence for the jury to conclude Majeed knew he was involved in a
fraudulent scam. For one, Majeed received a total of $389,000 from the victim, and when those
funds came in, Majeed and Wuupini strategized to avoid scrutiny from the bank—suggesting
Majeed knew their transactions were not legitimate. For another, Majeed’s responses to the
forwarded conversations between Wuupini and the Boy support the inference that Majeed knew
he was involved in defrauding the victim.
Majeed offers an innocent explanation for his actions: He was merely helping Wuupini
ship luxury cars to Ghana, a legitimate business venture. But it “is well settled that when a
defendant offers an innocent explanation for the incriminating facts proved by the government, the
jury is free to disbelieve it.” United States v. Schreane, 331 F.3d 548, 562 (6th Cir. 2003) (cleaned
up). And here, that’s precisely what the jury did. Given the ample evidence from which the jury
could infer Majeed’s knowledge of the fraud scheme, Majeed’s alternative explanation provides
no reason to disturb his convictions.
Second, Majeed argues that the district court abused its discretion by admitting an email
he sent to himself five years before the charged conduct. The email contained two photos of the
same U.S. Army soldier Nehmer posed as in 2017. The court determined the email was relevant
to establish Majeed’s prior knowledge of the scam.
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Case No. 21-5143, United States v. Majeed
Federal Rule of Evidence 403 “provides a balancing test for excluding relevant evidence.”
United States v. Clark, 24 F.4th 565, 579 (6th Cir. 2022). As applicable here, a district court “may
exclude relevant evidence if its probative value is substantially outweighed by a danger
of . . . unfair prejudice” or “misleading the jury.” Fed. R. Evid. 403. This test “is strongly
weighted toward admission.” United States v. Asher, 910 F.3d 854, 860 (6th Cir. 2018).
The district court reasonably determined the email was probative of Majeed’s awareness
of the scheme. True, Majeed sent the email to himself five years before the conspiracy in this case.
But trial testimony showed that photographs of this particular U.S. Army soldier had been
“circulated in connection with fraud schemes for some period of time.” R. 239, Pg. ID 1409-10.
The fact that Majeed had previously emailed himself photographs of this soldier refuted his claim
that he didn’t know the nature of the scheme.
It was well within the district court’s discretion to conclude the email’s probative value
was not substantially outweighed by any risk of unfair prejudice or misleading the jury. Majeed
argues the email was unfairly prejudicial because there was no other evidence he knew about the
scam. Not so. There was ample evidence from which the jury could draw that inference, such as
the text conversations with Wuupini. Additionally, Majeed contends the email misled the jury
because no evidence suggests the two specific photos attached to his email were ever sent to the
victim. But the government never suggested these specific photos were used in the instant scam:
Instead, the government presented the email only to “prov[e] that [Majeed] was aware of this
person [the soldier], this identity, and the possibility of this scam.” R. 239, Pg. ID 1401.
Majeed also argues that even if the email were admissible, the court should have provided
a limiting instruction under Rule 403. But while Majeed’s trial attorney requested a limiting
instruction under Rule 404(b)—which restricts the admission of evidence of “other crime[s]”—he
-5-
Case No. 21-5143, United States v. Majeed
never requested a limiting instruction under Rule 403. So it’s Majeed’s burden to show the district
court plainly erred by failing to give that instruction. That means he must show “(1) error (2) that
was obvious or clear, (3) that affected defendant's substantial rights and (4) that affected the
fairness, integrity, or public reputation of the judicial proceedings.” United States v. Ferguson,
681 F.3d 826, 831 (6th Cir. 2012) (citation omitted). Majeed hasn’t even attempted to make that
showing here.
And even if Majeed had demonstrated error, any such error would be harmless. The
government presented plenty of other evidence besides the 2012 email to demonstrate Majeed’s
knowledge of the scheme. So neither the court’s decision to admit the email, nor its alleged failure
to give a limiting instruction under Rule 403, would’ve “materially affected the verdict.” United
States v. Clay, 667 F.3d 689, 700 (6th Cir. 2012) (citation omitted); see also Fed. R. Crim. P. 52(a).
Third, Majeed argues that through intimidation, the government improperly prevented him
from testifying on his own behalf. Specifically, he points to the prosecutor’s statement that she
intended to cross-examine Majeed about a prior encounter with Homeland Security. Because
Majeed didn’t make this “specific objection” below, we again review for plain error. United States
v. Bostic, 371 F.3d 865, 871 (6th Cir. 2004). And just as before, Majeed identifies no error by the
district court, let alone a plain one.
For one thing, the prosecutor’s statement was permissible. As the prosecutor explained,
Majeed’s testimony about the customs stop would be “relevant to his truthfulness.” R. 239, Pg.
ID 1400–01. Although the prosecutor’s statement might’ve persuaded Majeed not to testify, that
statement hardly “preclude[d] him from making a free and voluntary choice whether or not to
testify.” Webb v. Texas, 409 U.S. 95, 98 (1972).
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Case No. 21-5143, United States v. Majeed
For another, even if we assume the prosecutor’s statement was improper, Majeed points to
no error by the district court that warrants our correction on plain-error review: Following the
prosecutor’s statement, the district court engaged in a lengthy colloquy with Majeed to ensure his
decision not to testify was “free and unhampered.” See United States v. Thomas, 488 F.2d 334,
336 (6th Cir. 1973). It’s Majeed’s burden to identify an error so obvious that the district court
should have corrected it sua sponte. See United States v. Chavez, 951 F.3d 349, 357 (6th Cir.
2020) (quoting United States v. Frady, 456 U.S. 152, 163 (1982)). He hasn’t made that showing
here.
* * *
We affirm.
-7- | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483988/ | RECOMMENDED FOR PUBLICATION
Pursuant to Sixth Circuit I.O.P. 32.1(b)
File Name: 22a0239p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
┐
UNITED STATES OF AMERICA,
│
Plaintiff-Appellee, │
> Nos. 21-6094/6229
│
v. │
│
LEONEL RUIZ-LOPEZ, │
Defendant-Appellant. │
┘
Appeal from the United States District Court for the Western District of Tennessee at Memphis.
No. 2:21-cr-20012—Jon Phipps McCalla, District Judge.
Decided and Filed: November 15, 2022
Before: SILER, McKEAGUE, and LARSEN, Circuit Judges.
_________________
COUNSEL
ON BRIEF: Robert L. Thomas, OFFICE OF THE FEDERAL PUBLIC DEFENDER,
Memphis, Tennessee, for Appellant. Scott P. Smith, Kevin G. Ritz, UNITED STATES
ATTORNEY’S OFFICE, Memphis, Tennessee, for Appellee.
_________________
OPINION
_________________
LARSEN, Circuit Judge. Leonel Ruiz-Lopez brought his new pistol into a gas station in
Memphis, Tennessee. While showing the gun to his acquaintances who worked there, he pointed
the gun at one of them. When he lowered the gun to return it to his pocket, he hit the trigger and
the gun discharged. The bullet ricocheted off the floor and struck an employee in the leg. Ruiz-
Lopez pleaded guilty to being an undocumented alien in possession of a firearm. The district
court sentenced him to twenty-one months’ imprisonment and ordered him to pay restitution to
Nos. 21-6094/6229 United States v. Ruiz-Lopez Page 2
cover the employee’s medical bills. Ruiz-Lopez appeals his sentence and the order of restitution.
We AFFIRM.
I.
Leonel Ruiz-Lopez was a frequent customer at an Exxon gas station in Memphis and was
friendly with the station employees, including Abdel Hamid.1 One day in February, Ruiz-Lopez
made his regular stop at the gas station, carrying his new pistol in his pocket. As he entered, he
made a playful grab for Hamid’s hip-holstered firearm. According to Hamid’s testimony,
another employee then asked Ruiz-Lopez whether he had a new gun. Ruiz-Lopez responded by
pulling his pistol out of his pocket and pointing it at Hamid’s face. As Ruiz-Lopez lowered the
gun to put it back in his pocket, he hit the trigger, discharging the weapon. The bullet ricocheted
off the floor and struck Hamid’s leg. A surveillance camera captured this encounter, and
although Ruiz-Lopez’s body obscures his movements with the gun, the district court found
Hamid’s testimony about the events credible. Hamid was taken to the hospital and treated for his
injury.
A grand jury indicted Ruiz-Lopez for possessing a firearm as an undocumented alien in
violation of 18 U.S.C. § 922(g)(5), and Ruiz-Lopez pleaded guilty. At sentencing, the parties
disagreed over a proposed four-level sentencing enhancement for “possess[ing] a[] firearm . . . in
connection with another felony offense.” U.S.S.G. § 2K2.1(b)(6)(B). The government asserted
that Ruiz-Lopez had committed reckless endangerment with a firearm, a felony under Tennessee
law. Ruiz-Lopez contended that his behavior may have been negligent but wasn’t reckless. He
also argued that the video and Hamid’s testimony did not align, suggesting he never pointed the
gun at Hamid’s face. The court denied Ruiz-Lopez’s objection, finding that he had recklessly
endangered others with a firearm when he wielded a loaded gun in gas station.
The parties also disputed whether Ruiz-Lopez should be required to pay restitution to
Hamid. Ruiz-Lopez argued that Hamid’s injuries were not a direct or proximate result of his
1
The record occasionally refers to Hamid as “Abdelhamid Abdelhamid.” We use the name and spelling
reflected in the sentencing hearing transcript.
Nos. 21-6094/6229 United States v. Ruiz-Lopez Page 3
illegal possession of a firearm. But the district court disagreed and ordered Ruiz-Lopez to pay
Hamid $4,689.64 in restitution.
Ruiz-Lopez timely appeals.
II.
On appeal, Ruiz-Lopez challenges the district court’s application of the guidelines
enhancement under § 2K2.1(b)(6)(B) and its imposition of restitution.
The Sentencing Enhancement. Whether the district court properly calculated Ruiz-
Lopez’s guidelines range is a question of procedural reasonableness. United States v. Parrish,
915 F.3d 1043, 1047 (6th Cir. 2019). We review such claims for an abuse of discretion, asking
whether the district court relied on clearly erroneous factual findings or applied incorrect legal
standards. United States v. Fowler, 819 F.3d 298, 303 (6th Cir. 2016). Factual findings based on
credibility demand great deference to the district court because “only the trial judge can be aware
of the variations in demeanor and tone of voice that bear so heavily on the listener’s
understanding of and belief in what is said.” Anderson v. City of Bessemer City, 470 U.S. 564,
575 (1985).
Section 2K2.1(b)(6)(B) authorizes a four-level enhancement if a defendant “used or
possessed any firearm or ammunition in connection with another felony offense.” Any “federal,
state, or local offense” punishable by confinement exceeding one year counts, “regardless of
whether a criminal charge was brought, or a conviction obtained.” U.S.S.G. § 2K2.1 cmt. 14(C).
The district court applied the enhancement, concluding that Ruiz-Lopez committed reckless
endangerment with a deadly weapon, a felony under Tennessee law. Ruiz-Lopez lodges two
objections to the enhancement, one legal and one factual.
Under Tennessee law, a person commits reckless endangerment with a deadly weapon
when he “recklessly engages in conduct that places or may place another person in imminent
danger of death or serious bodily injury.” Tenn. Code Ann. § 39-13-103(a), (b)(2).
Recklessness means “consciously disregard[ing] a substantial and unjustifiable risk,” and must
amount to “a gross deviation from the standard of care that an ordinary person would exercise
Nos. 21-6094/6229 United States v. Ruiz-Lopez Page 4
under all the circumstances as viewed from the accused person’s standpoint.” Id. § 39-11-
106(a)(34).
Ruiz-Lopez argues that merely firing a gun does not constitute reckless endangerment.
But the cases he offers dealt with firing a gun when no one was around. See United State v.
Mukes, 980 F.3d 526, 534 (6th Cir. 2020); State v. Fox, 947 S.W.2d 865, 866 (Tenn. Crim. App.
1996). Tennessee courts have recognized repeatedly that pointing a loaded gun at another person
constitutes reckless endangerment. State v. Bengtson, No. E1999-01190-CCA-R3-CD, 2000 WL
1456926, at *3–4 (Tenn. Crim. App. Oct. 2, 2000); State v. Spraggins, No. W2009-01073-CCA-
R3-CD, 2010 WL 1839303, at *6 (Tenn. Crim. App. May 7, 2010); see also State v. Patterson,
No. W2011-02101-CCA-R3-CD, 2012 WL 6206287, at *4 (Tenn. Crim. App. Dec. 11, 2012)
(reversing reckless endangerment conviction when evidence established defendant pointed an
unloaded gun at the victim). Ruiz-Lopez’s legal argument fails.
Ruiz-Lopez next challenges the district court’s factual finding that he pointed the loaded
gun at Hamid’s head before it went off. That finding was not clearly erroneous. At the
sentencing hearing, Hamid testified that Ruiz-Lopez removed his gun from his pocket, pointed it
at Hamid, and then “hit the trigger” while attempting to return the gun to his pocket. The bullet
then lodged in Hamid’s leg. Testimony by Homeland Security Special Agent David Gilliam
supports Hamid’s recollection of the events. Specifically, Agent Gilliam’s testimony identified
the conditions that were necessary for the gun to fire in the manner that it did: the gun must have
been loaded, the safety must have been off, and the trigger must have been pulled. The district
court found Hamid and Gilliam’s testimony credible, and we must give significant deference to
that finding. United States v. Wooten, 689 F.3d 570, 573 n.1 (6th Cir. 2012). When a witness’s
testimony is coherent, facially plausible, and not contradicted by extrinsic evidence, a judge’s
decision to credit that witness “can virtually never be clear error.” Anderson, 470 U.S. at 575.
Ruiz-Lopez objects that the video evidence does not support the conclusion that he
pointed the gun at Hamid’s face. We see no conflict between Hamid’s testimony and the video.
To the contrary, Hamid’s testimony aligns with and supplements the events that the video
captured. The video shows Ruiz-Lopez entering the gas station and making a playful grab for
Hamid’s holstered gun. It then shows some movement on his right side, which is obscured by
Nos. 21-6094/6229 United States v. Ruiz-Lopez Page 5
his body. Hamid’s testimony, which the district court found credible, filled in the gaps the video
failed to capture. The district court did not clearly err when it found that Ruiz-Lopez pointed a
loaded firearm at Hamid’s face prior to its discharge, and, accordingly, committed no error by
applying the § 2K2.1(b)(6)(B) enhancement.
Restitution. We turn to Ruiz-Lopez’s challenge to the restitution order. “We review the
propriety of ordering restitution de novo and the amount of restitution ordered for abuse of
discretion.” United States v. Sizemore, 850 F.3d 821, 824 (6th Cir. 2017) (quoting United States
v. Bearden, 274 F.3d 1031, 1040 (6th Cir. 2001)). Courts may, and sometimes must, award
restitution to a victim when sentencing a defendant for a federal crime. 18 U.S.C.
§ 3663(a)(1)(A) (discretionary restitution statute); 18 U.S.C. § 3663A(a)(1) (mandatory
restitution statute). A court is not required to state which statute it is ordering restitution under,
and here the district court did not. United States v. Owens, 426 F.3d 800, 809 (6th Cir. 2005).
The parties agree, however, that the discretionary Victim and Witness Protection Act (VWPA),
18 U.S.C. § 3663, governs this case.
The VWPA permits courts to order restitution to any victim of an offense codified in
Title 18 of the U.S. Code. 18 U.S.C. § 3663(a)(1)(A). The statute defines a “victim” as “a
person directly and proximately harmed as a result of the commission of an offense.”2 Id.
§ 3663(a)(2). The district court rightly concluded that Hamid was entitled to restitution under
this statute.3
“The requirement that the victim be ‘directly and proximately harmed’ encompasses the
traditional ‘but for’ and proximate cause analyses.” In re McNulty, 597 F.3d 344, 350 (6th Cir.
2010) (quoting In re Rendon Galvis, 564 F.3d 170, 175 (2d Cir. 2009)). Both conditions are met
2
The Mandatory Victims Restitution Act (MVRA) defines “victim” identically. Compare 18 U.S.C.
§ 3663(a)(2) (VWPA) with 18 U.S.C. § 3663A(a)(2) (MVRA). The Crime Victims’ Rights Act (CVRA) also uses
the same definition of victim. See 18 U.S.C. § 3771(e)(2)(A). Because of the identical statutory definitions, we
analyze cases interpreting the relevant language from the VWPA, MVRA, and CVRA interchangeably.
3
To the extent that Ruiz-Lopez challenges the amount of restitution, we find the district court did not abuse
its discretion in ordering $4,689.64 in restitution. The information underlying the amount of restitution, Hamid’s
testimony and copies of Hamid’s medical bills, provided “sufficient indicia of reliability” to support the award’s
“probable accuracy.” United States v. Sawyer, 825 F.3d 287, 295 (6th Cir. 2016) (quoting United States v. Jackson–
Randolph, 282 F.3d 369, 386 (6th Cir. 2002)).
Nos. 21-6094/6229 United States v. Ruiz-Lopez Page 6
here. But for Ruiz-Lopez’s unlawful possession, the firearm would not have been in the gas
station that day, and it would not have discharged, causing injury to Hamid’s leg. Ruiz-Lopez’s
conduct in possessing the weapon was also the direct and proximate cause of Hamid’s injury.
The link between Ruiz-Lopez’s actions and Hamid’s injury cannot be described as “‘too remote,’
‘purely contingent’ or ‘indirect.’” United States v. Evers, 669 F.3d 645, 659 (6th Cir. 2012)
(quoting Hemi Group, LLC, v. City of New York, 559 U.S. 1, 9 (2010) (plurality opinion)). And
the risk of injury was also entirely foreseeable. The district court determined that Ruiz-Lopez
possessed the gun in a reckless fashion: having “taken steps to make it capable of discharging a
bullet,” including removing the safety, Ruiz-Lopez “pointed the firearm at the face or head of the
victim;” then “as he lower[ed] it, he presse[d] on the trigger and discharge[d] the firearm,”
injuring Hamid. Not only was the risk of injury foreseeable, the district court concluded that
Ruiz-Lopez had “consciously disregard[ed] a substantial and unjustifiable risk that precisely
what happened [would] occur.” The restitution order was proper because Hamid was a victim
who was “directly and proximately harmed as a result of [Ruiz-Lopez’s] commission” of the
offense. 18 U.S.C. § 3663(a)(2).
Ruiz-Lopez protests this conclusion. He points to Hughey v. United States, which held
“that the loss caused by the conduct underlying the offense of conviction establishes the outer
limits of a restitution order.” 495 U.S. 411, 420 (1990). As Ruiz-Lopez sees it, the restitution
order here exceeds that boundary because he was convicted of mere unlawful possession of a
firearm, but it was his reckless handling and resulting discharge of the gun that directly and
proximately caused Hamid’s injury. Because the manner of possession is not an element of the
alien-in-possession offense, he argues that Hamid was not a victim of his crime. We disagree.
The plain language of the statute authorizes restitution to persons “directly and proximately
harmed as a result of the commission of an offense,” 18 U.S.C. § 3663(a)(2) (emphasis added).
And, although the prosecutor was not required to prove recklessness to obtain a conviction, Ruiz-
Lopez’s particular act of possession— his “commission of” the possession offense— directly and
proximately caused Hamid’s harm. See United States v. Chalupnik, 514 F.3d 748, 753 (8th Cir.
2008) (“the word ‘commission’ reflects an intent to include the defendant’s total conduct in
committing the offense”). We are not the first court to conclude that the amended restitution
statutes permit district courts to award restitution based on facts not strictly required to secure a
Nos. 21-6094/6229 United States v. Ruiz-Lopez Page 7
conviction. See United States v. Washington, 434 F.3d 1265, 1268 (11th Cir. 2006) (“Although
flight is not an element of bank robbery,” restitution for the harm caused by fleeing bank robber
was proper because it “directly and proximately result[ed] from the robbery.”); accord United
States v. Reichow, 416 F.3d 802, 804–05 (8th Cir. 2005); United States v. Donaby, 349 F.3d
1046, 1053 (7th Cir. 2003); United States v. McDougal, 368 F. App’x 648, 654 (6th Cir. 2010);
see also United States v. Sawyer, 825 F.3d 287, 297 (6th Cir. 2016) (noting that the Apprendi
rule does not apply to restitution awards).
Ruiz-Lopez overreads Hughey by suggesting otherwise. In Hughey, the defendant
pleaded guilty to a single count of unauthorized use of a credit card issued to a man named
Hershey Godfrey. 495 U.S. at 413–14. But the district court awarded restitution based not only
on Hughey’s fraudulent use of Godfrey’s card, but of his “alleged theft and use of 21 cards from
various MBank cardholders.” Id. at 414. The Supreme Court reversed, concluding that
“Congress intended restitution to be tied to the loss caused by the offense of conviction,” not to
“conduct unrelated to the offense of conviction,” that might yet be “attributable to the
defendant.” Id. at 418. In other words, “Hughey required a causal link between the offense of
conviction and the harm for which restitution is ordered.” Washington, 434 F.3d at 1269. That
link is present here. Ruiz-Lopez’s particular act of possession “directly and proximately” caused
Hamid’s harm.
Ruiz-Lopez points us to decisions from other circuits that have read Hughey more
narrowly. In United States v. Reed, for example, the Ninth Circuit restated Hughey’s holding
this way: “restitution may only be imposed for conduct that constitutes an element of the
offense.” 80 F.3d 1419, 1423 (9th Cir. 1996) (emphasis added). Some other courts have
followed suit. See United States v. Penn, 969 F.3d 450, 458 (5th Cir. 2020) (denying restitution
because “[t]he specific conduct underlying the elements of the felon-in-possession offense does
not include use of a firearm or flight from police”); United States v. Davis, 714 F.3d 809, 814
(4th Cir. 2013) (denying restitution to homeowner from whom defendant burgled a gun because
the offense of conviction—possession of a stolen firearm—does not require proof of theft, “only
knowledge of a theft”). We disagree with this “elements-only” approach. No “elements-only”
language appears in Hughey. And, importantly, no such language appears in the VWPA, which
Nos. 21-6094/6229 United States v. Ruiz-Lopez Page 8
was amended after the Hughey decision to authorize restitution for any “victim” “directly and
proximately harmed as a result of the commission of an offense.” 18 U.S.C. § 3663(a)(2).
See Donaby, 349 F.3d at 1054 (“The text of the VWPA, the MVRA, and the Hughey opinion . . .
do not limit restitution to the elements of the offense.”).
Next, Ruiz-Lopez points us toward our own precedent, arguing that United States v.
Clark, 957 F.2d 248 (6th Cir. 1992) ties our hands to the elements-only approach. But Clark,
like Hughey, interpreted an earlier version of the statute that didn’t define “victim.” See Pub. L.
101-647, § 2509, 104 Stat. 4789, 18 U.S.C. § 3663 (1990). And, in any event, nothing in Clark
is inconsistent with our holding today. Clark was convicted of stealing two vehicles from the
FBI during a sting operation. Clark, 957 F.2d at 253. The district court ordered restitution not
only for the two FBI vehicles but also for vehicles Clark had stolen from others during the sting.
Id. at 252. We reversed. Because Hughey limits restitution to “the loss caused by the conduct
underlying the offense of conviction,” the defendant could be made to pay restitution only for the
charged thefts of the two FBI vehicles, not for stealing other cars. Id. at 253. In other words,
Clark, like Hughey, stands for the proposition that restitution is limited to losses flowing from
the offense of conviction. The district court’s restitution award in this case respects both that
limit and the text of the amended VWPA. Ruiz-Lopez was ordered to pay restitution to Hamid,
who was “directly and proximately harmed as a result of the commission of” Ruiz-Lopez’s
offense. 18 U.S.C. § 3663(a)(2).
***
We AFFIRM. | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483990/ | NOT RECOMMENDED FOR PUBLICATION
File Name: 22a0457n.06
No. 22-1069
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT FILED
Nov 15, 2022
) DEBORAH S. HUNT, Clerk
NAYONN GRAY,
)
Plaintiff-Appellant, )
) ON APPEAL FROM THE UNITED
v. ) STATES DISTRICT COURT FOR
) THE EASTERN DISTRICT OF
AUTOZONERS, LLC, a foreign profit ) MICHIGAN
corporation; NICHOLAS ISLES, )
Defendants-Appellees. ) OPINION
)
Before: GIBBONS, GRIFFIN, and STRANCH, Circuit Judges.
PER CURIAM. Mr. Nayonn Gray, an African American man, alleges that he was
discriminated against when AutoZone assistant store manager Nicholas Isles refused to provide a
fourth exchange of a battery that was covered by a one-year warranty. Gray filed a complaint
against both Gray and AutoZoners, LLC, alleging racial discrimination under state and federal
law, and negligent supervision and intentional infliction of emotional distress in violation of
Michigan common law. The district court granted Defendants’ motion for summary judgment in
full. Gray now appeals the district court’s judgment as to his discrimination and intentional
infliction of emotional distress claims.
For the reasons below, we AFFIRM.
I. BACKGROUND
On May 9, 2020, Gray purchased a 75-VL Valucraft battery from an AutoZone location in
Lincoln Park, Michigan. The battery was protected by a one-year warranty that excluded damage
No. 22-1069, Gray v. AutoZoners, LLC, et al.
caused by “misuse, abuse, other faulty parts, improper installation or off-road, commercial or
marine use,” and did not specify the number of exchanges that a customer could request. Between
May and July, Gray returned to the store three times to request new batteries under the warranty
exchange policy. Each time, he received a new battery.
On Gray’s July 22 visit to exchange the battery for the third time, Gray was helped by
AutoZone employee Darlene Garcia, who is biracial and part African-American. Garcia tested
Gray’s battery, found that it held a charge, and advised Gray that she would not exchange the
battery because it was not defective. In response, Gray “immediately” accused Garcia of refusing
to exchange the battery because of his race; Garcia also heard Gray say that she “had a mouth on
[her],” and call her “a Mexican b****.” Another store employee who overheard the commotion
stepped in and granted Gray’s warranty exchange, providing him with a new battery.
On August 7, Gray returned to the store with his friend, Demetrius Stone, to request a
fourth warranty exchange. Gray approached Garcia for assistance, but Garcia “did not wish to
assist [Gray]” because she did not want to be harassed or “baselessly accused of race
discrimination again.” Garcia asked Isles to assist Gray instead. Isles was aware of Garcia’s
negative experience with Gray and agreed to assist Gray in her place.
After reviewing Gray’s warranty history of three exchanges in three months, Isles
explained that he would not grant an additional warranty exchange because he thought that the
history of exchanges indicated either that the battery was functional but not performing because
Gray had a different problem with his vehicle, or that the battery was defective because Gray
misused it. Isles suggested that Gray might instead have a problem with his vehicle’s alternator,
or that he might have installed an “aftermarket sound system[]” that the battery could not support.
In his deposition, Isles explained that he thought that Gray might have installed an aftermarket
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No. 22-1069, Gray v. AutoZoners, LLC, et al.
sound system because it was “pretty common” for the store’s customer base to do so. When asked
to describe the customer base, Gray characterized it as working class and largely “[B]lack and
Hispanic.”
Isles then offered to try to charge Gray’s battery and honor the warranty with a new battery
if it did not function, but Gray did not want “any type of service other than the requested
exchange.” Gray then accused Isles of discriminating against him because of his race and
AutoZone of discriminatory business practices. Isles placed the battery on the charger, and circular
argument ensued over the course of two or three hours.
Gray alleges that at some point during the argument, Isles accused Gray of using the battery
to make methamphetamines. Isles “vehemently” contests this allegation, arguing that it was in
fact either Gray or Stone who accused Isles of making meth. After this comment, Gray left the
store briefly, then returned and pulled out his phone to record his conversation with Isles, saying
that he wanted Isles on video saying that he could not return the battery. Isles responded by telling
Gray his name while pointing at his nametag, then stating: “Put me on Facebook, the white power
oppressor, man.”
Although Isles and another employee testified that the battery was fully charged when they
returned it to Gray, Gray maintains that it still did not work in his car. Gray came back the next
day, returned the battery, and bought a different type of battery and an alternator.
As part of an AutoZone investigation, Isles acknowledged that he was frustrated during his
interaction with Gray, that he “should have been calmer,” and that his recorded statement “was
combative,” but he denied that it expressed racial animus. Isles instead explained that his comment
was a “deeply sarcastic” reaction to Gray’s accusations of racism, not an admission of racism.
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No. 22-1069, Gray v. AutoZoners, LLC, et al.
Gray’s operative complaint against Defendants Isles and AutoZone alleges four claims:
(1) denial of equal rights, in violation of 42 U.S.C. § 1981; (2) denial of public accommodation,
in violation of Michigan’s Elliott-Larsen Civil Rights Act (ELCRA), Mich. Comp. Laws
§ 37.2101, et seq.; (3) negligent supervision under Michigan common law; and (4) intentional
infliction of emotional distress (IIED) under Michigan common law. Defendants separately
moved for summary judgment. The district court granted the motions in full, holding that Gray:
failed to establish a claim under § 1981 or the ELCRA; abandoned his negligent supervision claim;
and failed to establish extreme and outrageous conduct or severe emotional distress sufficient to
establish an IIED claim. Gray appeals the grant of summary judgment only as to his § 1981 claim,
ELCRA claim, and intentional infliction of emotional distress claim.
For the reasons below, we affirm the district court’s judgment in full.
II. STANDARD OF REVIEW
This court reviews a district court’s grant of summary judgment de novo, drawing all
reasonable inferences in favor of the nonmoving party. Hamad v. Woodcrest Condo. Ass’n, 328
F.3d 224, 234 (6th Cir. 2003). Summary judgment is proper “if the movant shows that there is no
genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.”
Fed. R. Civ. P. 56(a). A material fact is one “that might affect the outcome of the suit,” and a
genuine dispute exists “if the evidence is such that a reasonable jury could return a verdict for the
nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). “At the summary
judgment stage, the moving party bears the initial burden of identifying those parts of the record
which demonstrate the absence of any genuine issue of material fact.” Johnson v. Ford Motor Co.,
13 F.4th 493, 502 (6th Cir. 2021) (quoting White v. Baxter Healthcare Corp., 533 F.3d 381, 389-
90 (6th Cir. 2008)). Once the moving party has met its burden, the burden shifts to the non-moving
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No. 22-1069, Gray v. AutoZoners, LLC, et al.
party to demonstrate “specific facts showing that there is a genuine issue for trial,” although the
evidence need not be in a form that would be admissible at trial. Celotex Corp. v. Catrett, 477
U.S. 317, 324 (1986) (quoting Fed. R. Civ. P. 56(e) (1967) (amended 2010)).
III. ANALYSIS
A. Discrimination Claims: 42 U.S.C. § 1981 and Elliott-Larsen Civil Rights Act
“Section 1981 prohibits intentional race discrimination in the making and enforcing of
contracts with both public and private actors.” Christian v. Wal-Mart Stores, Inc., 252 F.3d 867-
68 (6th Cir. 2001). The statute specifically protects against discrimination in “the making,
performance, modification, and termination of contracts, and the enjoyment of all benefits,
privileges, terms, and conditions of the contractual relationship.” 42 U.S.C. § 1981(b). To prevail
on a § 1981 claim, a plaintiff must establish: (1) that “he belongs to an identifiable class of persons
who are subject to discrimination based on their race;” (2) that “the defendant intended to
discriminate against him based on his race;” and (3) that “the defendant’s discriminatory conduct
abridged his right to contract.” Amini v. Oberlin Coll., 440 F.3d 350, 358 (6th Cir. 2006).
Similarly, Michigan’s ELCRA provides that, except when permitted by law, a person shall not
“[d]eny an individual the full and equal enjoyment of the goods, services, facilities, privileges,
advantages, or accommodations of a place of public accommodation or public service because of
religion, race, color, national origin, age, sex, or marital status.” Mich. Comp. Laws § 37.2302(a).
This case turns on whether Gray can establish that Defendants intended to discriminate
against him. Under both statutes, this element can be established either by direct evidence or
circumstantial evidence. Amini v. Oberlin Coll., 440 F.3d at 358; In re Rodriguez, 487 F.3d 1001,
1007 (6th Cir. 2007) (citing DeBrow v. Century 21 Great Lakes, Inc., 620 N.W.2d 836, 838 (Mich.
2001) (per curiam)). When a plaintiff seeks to prove intentional discrimination through
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No. 22-1069, Gray v. AutoZoners, LLC, et al.
circumstantial evidence, courts generally evaluate § 1981 and ELCRA discrimination claims under
the same standard as Title VII of the Civil Rights Act of 1964. See Noble v. Brinker Int’l, Inc.,
391 F.3d 715, 720 (6th Cir. 2004) (1981 claims); Perry v. McGinnis, 209 F.3d 597, 602 n.3 (6th
Cir. 2000) (ELCRA claims). But unlike Title VII, § 1981 and the ELCRA both require plaintiff
to establish that race is a “but-for” cause of the injury. See Comcast Corp. v. Nat’l Ass’n of Afr.
Am.-Owned Media, 140 S. Ct. 1009, 1013 (2020); Hecht v Nat’l Heritage Acads., Inc., 886 N.W.2d
135, 146 (Mich. 2016).
1. Direct Evidence
Direct evidence is evidence that, if believed, requires the conclusion that unlawful
discrimination was the but-for cause of an adverse action. Amini, 440 F.3d 350, 359. “In other
words: ‘Direct evidence is evidence that proves the existence of a fact without requiring any
inferences.’” Scheick v. Tecumseh Pub. Schs., 766 F.3d 523, 530 (6th Cir. 2014) (quoting Rowan
v. Lockheed Martin Energy Sys., Inc., 360 F.3d 544, 548 (6th Cir. 2004)). Racially insensitive
statements constitute direct evidence of discrimination “only if they have some connection” to the
adverse action alleged. Griffin v. Finkbeiner, 689 F.3d 584, 595 (6th Cir. 2012).
Gray argues that Isles’s “white power oppressor” statement is direct evidence of racially
discriminatory intent, relying on our decisions finding direct evidence of discrimination based on
use of racial epithets and explicit expressions of discriminatory motivation. See DiCarlo v. Potter,
358 F.3d 408, 417 (6th Cir. 2004), overruled on other grounds by Gross v. FBL Fin. Servs., Inc.,
557 U.S. 167 (2009) (finding direct evidence of discrimination where the defendant called the
plaintiff a slur for Italian-Americans three weeks before terminating him from his job); Scheick,
766 F.3d at 531-32 (finding direct evidence that age discrimination was the but-for reason for
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No. 22-1069, Gray v. AutoZoners, LLC, et al.
termination where a board member told an employee that the board wanted “someone younger”
instead).
Unlike Dicarlo, however, Isles did not use racial epithets, which Gray admitted in
deposition testimony. And before Isles made the “white power oppressor” comment, he had
already stated that he would deny an exchange because the battery was either misused or not
defective and was therefore not covered by the warranty. Where statements are unconnected to
action in a particular contract, they are not direct evidence of discriminatory intent with respect to
that contract. See Spokojny v. Hampton, 589 F. App’x 774, 778 (6th Cir. 2014) (City officials’
statements in favor of awarding city contracts to minority-run businesses were not direct evidence
of discrimination against a white attorney because they were unconnected to his contract).
Isles’s comments were neither directly expressive of racial animus nor directly tied to Isles’
decision to deny the warranty exchange. Accordingly, Gray fails to establish a discrimination
claim based on direct evidence.
2. Circumstantial Evidence
To establish a § 1981 race discrimination claim relying on circumstantial evidence, a
plaintiff must meet the burden-shifting standard of proof for Title VII cases established in
McDonnell Douglas Corp. v. Green, 411 U.S. 792 (1973). Christian, 252 F.3d at 868. McDonnell
Douglas requires a plaintiff to “first establish a prima facie claim of discrimination.” Id. If Gray
can establish a prima facie case, the burden then shifts to the Defendants to produce a legitimate,
non-discriminatory reason for the adverse treatment. Id. If the Defendants satisfy this burden, the
presumption of discrimination disappears, and Gray must establish that the nondiscriminatory
reason proffered by the Defendants is a pretext for discrimination. Id. Throughout this framework,
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No. 22-1069, Gray v. AutoZoners, LLC, et al.
Gray bears the ultimate burden of proving by a preponderance of the evidence that he suffered
illegal discrimination. Id.
To establish a prima facie case of discrimination in a commercial establishment, plaintiffs
must show that: (1) they are a member of a protected class; (2) they made themselves “available
to receive and pay for services ordinarily provided by the defendant to all members of the public
in the manner in which they are ordinarily provided; and” (3) they “did not enjoy the privileges
and benefits of the contract[] . . . under factual circumstances which rationally support an inference
of unlawful discrimination.” Id. at 871 (quoting Callwood v. Dave & Buster’s, Inc., 98 F.Supp.2d
694, 705 (D.Md. 2000)). It is undisputed that Gray meets the first two prongs of the three-part
prima facie test. The pertinent question is whether Gray “did not enjoy the privileges and benefits”
of the warranty contract, under circumstances that rationally support an inference of unlawful
discrimination. A plaintiff can fulfill this element either by establishing (a) that he was deprived
of services while similarly situated persons outside the protected class were not deprived of those
services, or (b) that he received services in a “markedly hostile manner” that “a reasonable person
would find objectively discriminatory.” Id. at 872.
To prevail on a similarly situated person theory, a plaintiff must identify a comparator
person “of a different race, who was similarly situated to him, but who was treated better” by a
defendant. Smith v. City of Toledo, 13 F.4th 508, 515 (6th Cir. 2021). Alternatively, a “markedly
hostile” treatment theory “account[s] for situations in the commercial establishment context in
which a plaintiff cannot identify other similarly situated persons,” and considers factors including
whether service is so contrary to the establishment’s financial interests, so far outside of widely
acceptable business norms, and so arbitrary on its face that it supports a rational inference of
discrimination. Christian, 252 F.3d at 871.
-8-
No. 22-1069, Gray v. AutoZoners, LLC, et al.
Gray argues that he can establish discriminatory intent under either the “similarly situated”
or the “markedly hostile treatment” standards. But both arguments raise contested claims that are
better resolved in the “pretext” stage of the McDonnell Douglas test. For the purposes of this
analysis only, therefore, we presume Gray’s prima facie case based on circumstantial evidence.
Thus, the burden shifts to the defendant to produce a legitimate, nondiscriminatory reason
for their actions. Christian, 252 F.3d at 879. Defendants assert that Gray was denied a
fourth battery exchange based on AutoZone’s warranty policy. This satisfies their burden.
The presumption of discrimination therefore disappears, and the burden shifts back to Gray to
prove by a preponderance of the evidence that the Defendants’ stated reasons are a pretext for
racial discrimination. Christian, 252 F.3d at 879. He may establish pretext by showing that
Defendants’ stated reasons have no basis in fact, are not the actual reasons, or are insufficient to
explain their actions. Id.
Gray argues that Defendants’ stated reason for denying the exchange has no basis in fact.1
He contends that: Defendants’ explanation conflicts with the warranty policy, which does not limit
the number of exchanges during the warranty period; customers “including white customers”
frequently required multiple warranty exchanges in short time periods; there were “many
occasions” when customers requested exchanges; and, store employees generally made exchanges
even when batteries tested as functional. Gray also argues that a reasonable jury could infer an
unlawful motive from the “white power oppressor” comment and Gray’s alleged statements about
drugs and aftermarket sound systems.
1
Gray also argues on appeal that Defendants’ stated reason is insufficient to explain Defendants’ actions. But Gray
did not present that argument before the district court. He therefore cannot raise it now. See Bormuth v. Cnty. of
Jackson, 870 F.3d 494, 501 (6th Cir. 2017) (en banc).
-9-
No. 22-1069, Gray v. AutoZoners, LLC, et al.
The record includes general testimony that customers could receive more than one
exchange under the warranty, and that there was a gray area in which customers could insist on
receiving a new battery even though the battery was functional. But no record evidence shows
that any employee granted a customer of any race a fourth battery exchange within a three month
period, particularly when the current battery tested functional and could hold a charge. And
regardless of any informal policy generally allowing exchanges, the written policy guarantees
replacement of only non-functional batteries, and its plain language excludes damage caused by
misuse or abuse. Here, Isles reasonably concluded from the repeated exchanges in Gray’s warranty
history that either the battery was not the issue and something else was wrong with Gray’s car, or
that the battery was repeatedly failing because of misuse. Further, Isles’s decision to deny the
warranty exchange was in AutoZone’s financial interests: AutoZone loses money on a battery that
is returned under a warranty because exchanged batteries cannot be resold as new even if they are
not defective.
In sum, Defendants have pointed to evidence that the written policy excluded exchanges
of functional batteries or batteries damaged by misuse; that Isles had a reasonable basis for his
belief that there was something else wrong with Gray’s car or that the battery had been misused;
that the battery tested functional; and that it was in AutoZone’s financial interest not to allow a
fourth exchange of the battery. This evidence provides a factual basis for Isles’s denial of the
exchange.
Some of Isles’s comments, if true, suggest troubling stereotypes about African Americans.
But even viewing the record in the light most favorable to Gray, a reasonable jury could not find
that Defendants’ proffered reason for the warranty denial was not based in fact. At most, a
reasonable jury could conclude only that Isles would have refused to provide Gray a fourth battery
-10-
No. 22-1069, Gray v. AutoZoners, LLC, et al.
regardless of any such stereotypes. This is insufficient to establish that race discrimination was
the “but-for” cause of Isles’s denial of the warranty exchange. The district court properly granted
Defendants summary judgment with respect to Gray’s racial discrimination claims under § 1981
and the ELCRA.
B. Intentional Infliction of Emotional Distress Claim
To establish a claim of intentional infliction of emotional distress under Michigan law, a
plaintiff must prove: (1) extreme and outrageous conduct; (2) intent or recklessness; (3) causation;
and (4) severe emotional distress. Roberts v. Auto-Owners Ins. Co., 374 N.W.2d 905, 908 (Mich.
1985). Conduct is extreme and outrageous where it is “so outrageous in character, and so extreme
in degree, as to go beyond all possible bounds of decency, and to be regarded as atrocious and
utterly intolerable in a civilized community.” Graham v. Ford, 604 N.W.2d 713, 716 (Mich. Ct.
App. 1999). “[L]iability clearly does not extend to mere insults, indignities, threats, annoyances,
petty oppressions, or other trivialities.” Roberts, 374 N.W.2d at 909 (quoting Restatement
(Second) of Torts § 46 (1965)). Gray has established that Isles’s comment was unprofessional and
inappropriate. Based on the analysis of Isles’s comments above, however, this evidence falls short
of “extreme and outrageous” conduct that is utterly intolerable in society.
Even if Gray had established extreme and outrageous conduct, moreover, the law only
intervenes when the distress inflicted is so severe that no reasonable person could be expected to
endure it. Id. at 911. Being upset or angry is insufficient—more than usual outrage is required
when a claim is based on emotional injury. Gray testified that he felt embarrassed and degraded,
and that he purchased various books to “get [his] mind off of” the incident. But Gray has not
sought psychiatric treatment or counseling and admits that he did not know what “white power
oppressor” meant at the time of the comment. The impact that Gray alleges is markedly less acute
-11-
No. 22-1069, Gray v. AutoZoners, LLC, et al.
than distress that “no reasonable person could be expected to endure.” Gray has failed to establish
that he is experiencing “severe emotional distress” sufficient to make out a claim for intentional
infliction of emotional distress under Michigan law. The district court did not err in granting
Defendants’ motion for summary judgment as to Gray’s intentional infliction of emotional distress
claim.
IV. CONCLUSION
Even presuming that Gray sets forth a prima facie case of discrimination, he has failed to
establish that Defendants’ proffered reason for the warranty denial was pretext for race
discrimination. Gray has also failed to establish extreme and outrageous conduct and severe
emotional distress that could support a claim for intentional infliction of emotional distress. We
therefore AFFIRM the district court’s decision granting summary judgment.
-12- | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483994/ | Filed 11/15/22 P. v. Jimenez CA4/1
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.
COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
THE PEOPLE, D080844
Plaintiff and Respondent,
v. (Super. Ct. No. FVA018285)
VICTOR MANUEL JIMENEZ,
Defendant and Appellant.
APPEAL from an order of the Superior Court of San Bernardino
County, Mary E. Fuller, Judge. (Retired Judge of the San Bernardino Sup.
Ct. assigned by the Chief Justice pursuant to art. VI, § 6 of the Cal. Const.)
Affirmed.
Mark D. Johnson, under appointment by the Court of Appeal, for
Defendant and Appellant.
No appearance for Plaintiff and Respondent.
In 2007, Victor Manuel Jimenez was convicted of first degree murder
(Pen. Code,1 § 187, subd. (a)). The jury also found Jimenez used a deadly
1 All further statutory references are to the Penal Code.
weapon in the commission of the offense. The court sentenced Jimenez to an
indeterminate term of 26 years to life.
Jimenez appealed and this court affirmed the judgment in an
unpublished opinion. (People v. Jimenez (Oct. 6, 2009, D055122).)
In 2022, Jimenez filed a petition for resentencing under section 1170.95
(now renumbered 1172.6).
The court appointed counsel for Jimenez, received briefing, reviewed
the record of conviction and held a hearing. At the hearing the court said:
“It is the Petitioner’s responsibility to present sufficient
information in his petition to show that he could not be
presently convicted of murder or attempted murder because
of the changes in the law. [¶] The Court, while I cannot
make any factual determinations as to the underlying facts
of the case, based on the court’s record, the Information
that was filed, and the jury instructions that were given,
The Court finds that the petitioner has not met his
requirements under 1170.95. [¶] And I will deny the
request for an order to show cause hearing.”
The court denied the petition for resentencing without issuing an order
to show cause.
Jimenez filed a timely notice of appeal.
Appellate counsel has filed a brief pursuant to People v. Wende (1979)
25 Cal.3d 436 (Wende) indicating counsel has not been able to identify any
arguable issues for reversal on appeal. Counsel asks the court to review the
facts for error as mandated by Wende.2 We offered Jimenez the opportunity
to file his own brief on appeal, but he has not responded. The facts of the
2 Counsel represents that he has examined the record of conviction and
there were no jury instructions on aiding and abetting, felony murder or
liability based on the natural and probable consequences theory.
2
underlying offense are set forth in our prior opinion; we will not repeat them
here.
DISCUSSION
As we have noted, appellate counsel has filed a Wende brief and asks
the court to review the record for error. To assist the court in its review, and
in compliance with Anders v. California (1967) 386 U.S. 738 (Anders), counsel
has identified the possible issue that was considered in evaluating the
potential merits of this case: Whether the trial court erred in denying the
petition for resentencing without issuing an order to show cause.
We have reviewed the entire record as required by Wende and Anders.
We have not discovered any arguable issues for reversal on appeal.
Competent counsel has represented Jimenez on this appeal.
DISPOSITION
The order denying Jimenez’s petition for resentencing under
section 1172.6 is affirmed.
HUFFMAN, Acting P. J.
WE CONCUR:
AARON, J.
DO, J.
3 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483993/ | Filed 11/15/22 P. v. Tatum CA2/2
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions
not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion
has not been certified for publication or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION TWO
THE PEOPLE, B314563
Plaintiff and Respondent, (Los Angeles County
Super. Ct. No. NA110863)
v.
DARRELL TATUM,
Defendant and Appellant.
APPEAL from a judgment of the Superior Court of
Los Angeles County. Chet L. Taylor, Judge. Affirmed in part,
vacated in part, and remanded with directions.
Janet Uson, under appointment by the Court of Appeal, for
Defendant and Appellant.
Rob Bonta, Attorney General, Lance E. Winters, Chief
Assistant Attorney General, Susan Sullivan Pithey, Assistant
Attorney General, Scott A. Taryle and Rene Judkiewicz, Deputy
Attorneys General, for Plaintiff and Respondent.
______________________________
Defendant and appellant Darrell Tatum appeals from his
conviction on seven counts of second degree robbery (Pen. Code,
§ 211),1 one count of attempted second degree robbery (§§ 211,
664), one count of unlawful possession of a firearm by a convicted
felon (§ 29800, subd. (a)(1)), and one count of unlawful possession
of ammunition (§ 30305, subd. (a)(1)). Six of the second degree
robbery counts included allegations that appellant had personally
used a firearm while committing the offense (§ 12022.5, subd.
(a)). The trial court sentenced appellant to an aggregate term of
29 years 6 months in prison, including 15 years 4 months for the
firearm enhancements.2
Appellant raises a plethora of arguments against his
conviction and subsequent sentence. We reject all but one of
these arguments, namely, that appellant is eligible for
resentencing pursuant to recently enacted section 1170,
subdivision (b). Accordingly, we vacate the defendant’s sentence
and remand this matter to the trial court for resentencing
proceedings consistent with this opinion.
1 All further statutory references are to the Penal Code
unless otherwise indicated.
2 At the sentencing hearing, the trial court incorrectly
totaled appellant’s discrete sentences. The abstract of judgment
sets forth the correct aggregate judgment.
2
FACTUAL AND PROCEDURAL BACKGROUND
I. The Robberies
In January 2019, appellant was charged with committing
or attempting numerous robberies (charged as counts 1-6 and 11-
12), most of which took place at retail stores throughout the Long
Beach area.
Three of those robberies are relevant to this appeal. The
first (charged as count 6) took place at a Cricket Wireless store
(the Cricket Wireless robbery). The robber posed as a customer,
brandished a handgun at a pregnant employee, and yelled for her
to open the registers. He then emptied the registers and left the
store. A police officer who responded to the scene watched
surveillance video and spoke with the victim, who reported that
the robber was a 50-year-old Black man using a silver handgun.
The victim later identified the robber as appellant, picking
his photograph from a six-photograph lineup. She said that
appellant was “[t]he only guy that looked familiar,” and that she
“noticed his eyes.” Upon seeing his picture, she definitively
stated, “[h]e’s the guy that came in the store.”
The second robbery (charged as count 11) occurred at a
Subway sandwich store (the Subway robbery). Officer Kevin
Menjivar responded to the scene, where he met with the victim,
an employee, and a witness, a customer. They described the
victim as a 35- or 45-year-old Black man wearing, among other
things, a black baseball cap. This robbery was also captured on
surveillance video, which Officer Menjivar reviewed. He noted
that the suspect wore a black cap, consistent with the victim and
witness’ observations.
3
Officer Menjivar left the site of the Subway robbery when
received a report of the third robbery (charged as count 12),
which had just taken place at an ATM roughly five minutes away
(the ATM robbery). The victim said that the robber had attacked
him near to the ATM. When he retreated to his car in an attempt
to get away, the robber pursued him, grabbed hold of his pants,
and tried to yank them off. The robber succeeded in grabbing
victim’s money clip, with which he then absconded.
A witness gave Officer Menjivar the first four digits of the
license plate number on the car the robber left in, a Volkswagen.
A police detective later ran the partial license plate number and
identified appellant as the owner of the car, a 2011 Volkswagen
Jetta.
The witness also pointed out a black baseball cap that the
robber had dropped on the ground next to the victim’s car.
Officer Menjivar took the cap into evidence, where it was later
swabbed for DNA. Subsequent testing found that 94 percent of
the DNA collected from the hat was consistent with appellant’s
DNA.
II. Search Warrant and Motion to Suppress Evidence
On December 13, 2018, Detective Brian Greene obtained a
search warrant to search a residence on Cherry Avenue in Long
Beach (the Cherry house) and two cars.
The statement of probable cause attached to the warrant
described six recent robberies in detail, including the Cricket
Wireless robbery. It also referenced a report written by Detective
Jacqueline Parkhill, one of Detective Greene’s colleagues,
detailing the similarities between the robberies, and a
conversation Detective Greene had with Detective Erik Perkett
at the Las Vegas Police Department. Detective Perkett
4
forwarded information about appellant, who was suspected of a
series of similar robberies committed in Las Vegas, and told
Detective Greene that an arrest warrant filed for appellant in
Las Vegas was attached to appellant’s car.3
Elsewhere, the warrant request described the Cherry house
and the cars to be searched, including appellant’s car. Appellant
had registered the car in his name, giving his address as the
Cherry house.
Upon searching the Cherry house, police officers recovered
a loaded semi-automatic shotgun, ammunition, and various
pieces of clothing that matched eyewitness descriptions of how
the suspect had dressed at various robberies.
III. Bench Trial, Motion to Suppress, and Conviction
Appellant represented himself at a bench trial. In
December 2019, appellant filed a motion to suppress evidence
(§ 1538.5), arguing, among other things, that the search warrant
was insufficient. At the hearing, after soliciting additional
argument from appellant, the trial court determined that the
affidavit was facially sufficient and that the execution of the
search warrant was valid.
After the trial, the trial court convicted appellant of seven
counts of second degree robbery (§ 211 [counts 1-3, 5-6, 11-12]);
one count of attempted second degree robbery (§§ 211, 664
[count 4]); one count of unlawful possession of a firearm by a
felon (§ 29800, subd. (a)(1) [count 7]), and one count of unlawful
possession of ammunition (§ 30305, subd. (a)(1) [count 8]).
3 Appellant was arrested on the Las Vegas warrant on
December 13, 2018, the same day the Cherry house search
warrant issued.
5
At the sentencing hearing, the trial court sentenced
appellant to an aggregate term of 29 years 6 months. The court
selected count 1 as the base term, imposing a five-year sentence
for the robbery charge (upper term, § 213, subd. (a)(2)) and a 10-
year sentence for the firearm enhancement (upper term,
§ 12022.5, subd. (a)). For counts 2 and 12, including the ATM
robbery, the court sentenced appellant to one year each (one-third
of the middle term, § 213, subd. (a)(2)). It issued the same
sentence for counts 3, 5, 6, and 11, along with a 16-month
sentence on each count for the firearm use allegations (one-third
of the middle term, § 12022.5, subd. (a)). On count 4, the trial
court sentenced appellant to six months (one-third of the middle
term, § 664) with an additional 16-month sentence for the
firearm enhancement. On count 8, the court sentenced appellant
to eight months (one-third of the statutory term, § 30305, subd.
(a)(2)). On count 7, it sentenced appellant to eight months (one-
third of the middle term, § 29800, subd. (a)(1)). Lastly, it
sentenced defendant to an additional eight months for his
admitted prior convictions.
Additionally, the trial court ordered appellant to pay a $300
restitution fee, a stayed $300 parole revocation restitution fine,
and an additional $70 in security and facilities assessment fees
on each conviction.
Appellant timely appealed.
DISCUSSION
On appeal, appellant argues that (1) the trial court
wrongfully denied his motion to suppress evidence obtained by a
deficient search warrant; (2) two of his seven robbery convictions
are supported by insufficient evidence; (3) the firearm sentencing
enhancements must be struck because the court failed to make
6
specific findings as to any of the firearm allegations; (4) he is
eligible for resentencing pursuant to section 1170, subdivision (b);
and (5) apparent typographical errors in the abstract of judgment
and minute order must be corrected. We will address each of
these arguments in turn.
I. Motion to Suppress Evidence
A. Applicable Law
A search warrant may only issue on a showing of probable
cause. (§§ 1525, 1527.) Probable cause exists when the affidavit
supporting the warrant states facts showing “a fair probability
that contraband or evidence of a crime will be found in a
particular place.” (Illinois v. Gates (1983) 462 U.S. 213, 238–239
(Gates).) Accordingly, a warrant must establish a nexus between
the suspected criminal activities and the property to be searched.
(See People v. Hernandez (1994) 30 Cal.App.4th 919, 924.)
“A defendant may move . . . to suppress as evidence any
tangible or intangible thing obtained as a result of a search or
seizure” if the search or seizure “without a warrant was
unreasonable” or where there was an absence of “probable cause
for the issuance of the warrant.” (§ 1538.5.) However, warrants
are presumed valid and it is the defendant’s burden to show
otherwise. (People v. Amador (2000) 24 Cal.4th 387, 393.) “A
defendant claiming that the warrant or supporting affidavit is
inaccurate or incomplete bears the burden of alleging and then
proving the errors or omissions. [Citations.]” (Ibid., [citing,
Franks v. Delaware (1978) 438 U.S. 154, 171–172]; see also
People v. Garcia (2003) 111 Cal.App.4th 715, 720.)
7
“Our review of issues related to the suppression of evidence
seized by the police is governed by federal constitutional
standards.” (People v. Lenart (2004) 32 Cal.4th 1107, 1118; see
Cal. Const., art. I, § 28, subd. (d).) “In reviewing a trial court’s
ruling on a motion to suppress evidence, we defer to that court’s
factual findings, express or implied, if they are supported by
substantial evidence. [Citation.] We exercise our independent
judgment in determining whether, on the facts presented, the
search or seizure was reasonable under the Fourth Amendment.
[Citation.]” (People v. Lenart, supra, at p. 1119.)
B. Analysis
Appellant argues that the trial court erred in denying his
motion to suppress evidence because the warrant purporting to
authorize the search of the Cherry house was deficient in that it
failed to establish any nexus between his alleged criminal
activities and the house itself. However, the information
contained in the search warrant contains more than enough
information to connect the robberies to the Cherry house.
The 10-page warrant, titled “SEARCH WARRANT and
AFFIDAVIT,” contains a detailed description of six robberies,
including details about the personal property allegedly worn,
carried, or taken by the suspect. It then establishes multiple
links between the robberies and appellant. It recounts how, upon
receiving a tip from the Las Vegas Police Department, Detective
Greene looked at photographs of appellant and determined that
he fit the description of the suspect given by victims and/or
witnesses at each of the six robberies. Detective Greene then
states that the victims of two robberies positively identified
appellant as the suspect out of a six-photograph lineup. The
victim of an additional robbery could not definitively make an
8
identification, but said that “she leaned more towards”
identifying appellant as the suspect over the five other men
included in the photographic lineup. Lastly, the warrant
establishes a nexus between appellant and the Cherry house,
stating that appellant registered the car in his name, listing the
Cherry house as his address. On appeal, appellant argues that
his car registration cannot have established a nexus between him
and the Cherry house because the statement of probable cause
submitted by Detective Greene did not contain any information
about the registration. But our review of the search warrant’s
sufficiency is not constrained to the statement of probable cause.
Rather, “in reviewing the sufficiency of the facts upon which the
magistrate or judge based his or her probable cause
determination, we consider only the facts that appear within the
“‘four corners of the warrant affidavit.’ [Citation.]” (People v.
Clark (2014) 230 Cal.App.4th 490, 497.) Appellant’s proposition
that we should consider only those facts that appear within the
four corners of one section of the warrant affidavit is unsupported
by any legal authority (Benach v. County of Los Angeles (2007)
149 Cal.App.4th 836, 852 (Benach) [“An appellant must provide
. . . legal authority to support his contentions”]), and contrary to
established constitutional law (Bailey v. Superior Court (1992)
11 Cal.App.4th 1107, 1111 [“Courts should not invalidate search
or arrest warrants by imposing hypertechnical requirements
rather than a commonsense approach to probable cause”].)
Appellant also argues that the warrant improperly
“referred to” hearsay statements made by Detectives Parkhill and
Perkett without establishing their credibility, in contravention of
the Supreme Court’s opinion in Gates. In that case, the court
held that trial courts must assess the “‘veracity’” and “‘basis of
9
knowledge’” of persons supplying hearsay information that forms
the basis of probable cause for a search warrant. (Gates, supra,
462 U.S. at pp. 238–239.)
Here, appellant specifically objects to the inclusion of
Detective Parkhill’s report theorizing that the robberies were
committed by a single perpetrator, and to Detective Perkett’s
belief that the Long Beach robberies were connected to an earlier
series of Las Vegas robberies. Neither of these statements form
the basis of probable cause for this search warrant, which, as laid
out above, was established by Detective Greene’s comparison of
appellant’s photo to witness descriptions of a suspected robber,
and by appellant’s subsequent identification by some of the
victims. In fact, Detective Parkhill’s report and Detective
Perkett’s opinion could be wholly excised from the warrant
without affecting the facts establishing probable cause.
Once again, appellant does not provide any legal authority
for the proposition that a search warrant is facially deficient if
the attesting officer does not provide a foundation establishing
the credibility of every piece of information he encounters in
developing a theory of probable cause. (Benach, supra,
149 Cal.App.4th at p. 852; see also Gates, supra, 462 U.S. at
p. 230 [emphasizing that a search warrant’s validity turns not on
rigid tests of reliability, but on “the commonsense, practical
question whether there is ‘probable cause’ to believe that
contraband or evidence is located in a particular place”].)
Ultimately, because the warrant established probable cause
that a search of the Cherry house would yield evidence related to
the robberies, we conclude that the trial court did not err in
denying appellant’s motion to suppress evidence.
10
II. Sufficiency of the Evidence
A. Applicable Law and Standard of Review
“‘When reviewing a challenge to the sufficiency of the
evidence, we ask “‘whether, after viewing the evidence in the
light most favorable to the prosecution, any rational trier of fact
could have found the essential elements of the crime beyond a
reasonable doubt.’” [Citation.] Because the sufficiency of the
evidence is ultimately a legal question, we must examine the
record independently for “‘substantial evidence—that is, evidence
which is reasonable, credible, and of solid value’” that would
support a finding beyond a reasonable doubt. [Citation.] In
doing so, we ‘view the evidence in the light most favorable to the
. . . verdict and presume the existence of every fact that the
[finder of fact] could reasonably have deduced from that
evidence.’ [Citation.] ‘We must also “accept logical inferences
that the [finder of fact] might have drawn from the
circumstantial evidence.”’ [Citation.] We do not . . . reconsider
the weight to be given any particular item of evidence.” (People v.
Navarro (2021) 12 Cal.5th 285, 302; People v. Brooks (2017)
3 Cal.5th 1, 57.)
B. Analysis
Appellant contends that the evidence was insufficient to
convict on two of the seven robbery charges. Specifically, he
argues that he was not adequately identified as the perpetrator
in either the Cricket Wireless robbery or the Subway robbery.
Appellant’s connection to the Cricket Wireless robbery was
supported by ample evidence, including the responding officer’s
testimony; surveillance video of the incident; and a positive
identification from the victim of the robbery, who both gave a
description of the robber that matched appellant’s description
11
and picked appellant’s photograph out of a six-photograph lineup,
definitively stating that appellant was “the guy [who] came in
here,” and noting that she recognized his eyes. This evidence is
plainly sufficient to support a conviction. (See, e.g., People v.
Sullivan (2007) 151 Cal.App.4th 524, 564 [sufficient evidence to
convict defendant where, among other things, defendant’s
appearance is consistent with both security footage of the crime
and witness descriptions]; People v. Helton (1984) 162 Cal.App.3d
1141, 1145 [positive identification of perpetrator by the victim is
sufficient evidence to support conviction].)
Similar evidence supports appellant’s implication in the
Subway robbery. Again, the trial court was presented with
testimony from the responding officer and surveillance video of
the robbery. The court viewed the video twice during the trial.
Additionally, a hat consistent with that worn by the perpetrator
of the Subway robbery was recovered from the site of the ATM
robbery. The two robberies happened on the same night, and the
site of the ATM robbery lay just five minutes away from the
Subway robbery. A DNA test submitted into evidence found that
appellant’s DNA matched 94 percent of the DNA recovered from
the band of the hat. This also constitutes substantial evidence
supporting conviction. (See, e.g., People v. Turner (2020)
10 Cal.5th 786, 810 [statistical evidence regarding probability
that DNA matches the defendant provides substantial evidence
in support of guilty verdicts].)
Appellant raises a number of complaints against the
convictions: neither victim provided an in-court identification, no
witness described the robber as wearing distinctive clothing, a
lack of any description of the weapon used in the Subway
robbery, and conflicting evidence about the color of the firearm
12
used in the Cricket Wireless robbery. However, under our
deferential standard of review, if the record contains “substantial
evidence from which a reasonable trier of fact could have found
the essential elements of the crime proved beyond a reasonable
doubt[,] ‘the possibility that the trier of fact might reasonably
have reached a different conclusion does not warrant reversal.’”
(People v. Taylor (2004) 119 Cal.App.4th 628, 639.)
III. Firearm Sentencing Enhancements
We next consider appellant’s contention that the trial court
wrongly imposed prison terms for multiple firearm sentencing
enhancements, as it failed to expressly find whether the firearm
use allegations were true.
A. Applicable Law
“Punishment for a firearm-use enhancement may be
imposed only if the trier of fact finds the enhancement allegation
to be true.” (People v. Chambers (2002) 104 Cal.App.4th 1047,
1049 (Chambers).) For a sentence to be imposed for a firearm use
allegation “the existence of any fact required . . . shall be alleged
in the [information or indictment] and either admitted by the
defendant in open court or found to be true by the trier of fact.”
(§ 12022.53, subd. (j); see also People v. Jackson (1987)
193 Cal.App.3d 393, 404 [pursuant to § 1167, trial courts are
required to make a finding on a sentencing enhancement at the
time of trial].)
However, a trial court sitting as a finder of fact may make
implied true findings on sentence enhancement allegations by
imposing sentence enhancements consistent with the charged
allegations, as long as those enhancements do not contradict the
court’s pronouncements at trial. In Chambers, the trial court was
silent as to its finding on the charged firearm enhancement in its
13
oral findings following a bench trial, and did not include a finding
on the enhancement in the minute order setting forth its
findings. (Chambers, supra, 104 Cal.App.4th at p. 1049.)
Nevertheless, at sentencing the trial court imposed a sentence on
the firearm enhancement. (Ibid.) On appeal, the Chambers court
affirmed the sentence, determining that the trial court’s ultimate
sentence supported an implied true finding on the firearm
enhancement allegations. (Id. at p. 1051)
The Chambers court cited our Supreme Court’s application
of the same logic when evaluating analogous implied sentence
enhancements issued for the defendant’s prior felony convictions.
(Chambers, supra, 104 Cal.App.4th at p. 1050 [citing, People v.
Clair (1992) 2 Cal.4th 629, 691, fn. 17 [“At sentencing, the court
impliedly—but sufficiently—rendered a finding of true as to the
allegation when it imposed an enhancement expressly for the
underlying prior conviction”].)
B. Analysis
The facts of this case are all but identical to those in
Chambers. The trial court failed to expressly find whether any of
the firearm use allegations were true at the conclusion of
appellant’s bench trial, simply stating that “all the counts in this
case were proved beyond a reasonable doubt.” The firearm use
allegations were not mentioned until appellant’s sentencing
hearing, when the trial court went on to impose sentence
enhancements on six of the firearm use allegations made against
appellant. Accordingly, we will find that the trial court made
implied true findings on those firearm allegations for which it
imposed sentence enhancements.
14
Appellant urges us to turn away from Chambers and
instead follow other cases—most of which were decided before
Chambers or Clair—and find that the trial court’s failure to make
express findings entitles appellant to the inference “that the
omission was an act of leniency,” such that “the silence operates
as a finding that the enhancement allegation was not true.”
(People v. Anthony (1986) 185 Cal.App.3d 1114, 1125.) There
being so little daylight between appellant’s case and Chambers,
we are not persuaded to follow this line of older and less similar
case law.
IV. Resentencing
Alternately, appellant argues (and the People concede) that
he is entitled to resentencing on the firearm enhancements
pursuant to recent sentencing reform law. We agree.
A. Applicable Law
On January 1, 2022, while this appeal was pending, several
amendments to the Penal Code regarding sentencing took effect.
As relevant here, Senate Bill No. 567 amended section 1170,
subdivision (b) in two ways: First, it makes the middle term the
presumptive term except when circumstances in aggravation
justify imposition of the upper term and “the facts underlying
those circumstances have been stipulated to by the defendant, or
have been found true beyond a reasonable doubt at trial by the
jury or by the judge in a court trial.” (§ 1170, subd. (b)(1) & (2),
as amended by Sen. Bill No. 567 (2021–2022 Reg. Sess.); Stats.
2021, ch. 731, § 1.3, eff. Jan. 1, 2022.) Second, if any of certain
specified circumstances was “a contributing factor in the
commission of the offense,” the court must impose the lower term
unless the court finds aggravating circumstances outweigh the
mitigating circumstances such that imposition of the lower term
15
would be contrary to the interests of justice. (§ 1170, subd. (b)(6),
added by Sen. Bill No. 567.)
B. Analysis
We agree with the parties that appellant, whose judgment
is not yet final, is entitled to retroactive application of the
ameliorative changes to section 1170 that took effect pursuant to
Senate Bill No. 567 on January 1, 2022. (People v. Flores (2022)
73 Cal.App.5th 1032, 1039 [“The People correctly concede the
amended version of section 1170, subdivision (b) that became
effective on January 1, 2022, applies retroactively in this case as
an ameliorative change in the law applicable to all nonfinal
convictions on appeal”].)
Appellant’s upper term sentence on his base term sentence
is inconsistent with the amendments to section 1170, subdivision
(b) because there is no indication in the record that the
aggravating circumstances were proved to the court beyond a
reasonable doubt, admitted by appellant, or were circumstances
relating to appellant’s prior convictions based on a certified
record of convictions. (§ 1170, subd. (b)(1), (2) & (3).) In addition,
based on the newly added provisions in section 1170, subdivision
(b)(6), appellant’s counsel may be able to argue different factors
in mitigation that would require imposition of the lower term, not
just on the base term enhancement but on each subsequent
firearm sentencing enhancement.
Remand is therefore appropriate in this case to permit the
trial court to resentence appellant in accordance with Senate Bill
No. 567’s amendments to section 1170. (People v. Jones (2022)
79 Cal.App.5th 37, 45 (Jones).)
16
On remand, the trial court must fully resentence appellant
on all counts in accordance with the full resentencing rule
described by our Supreme Court in People v. Buycks (2018)
5 Cal.5th 857 (Buycks). The full resentencing rule directs that
“when part of a sentence is stricken on review, on remand for
resentencing ‘a full resentencing as to all counts is appropriate,
so the trial court can exercise its sentencing discretion in light of
the changed circumstances.’” (Buycks, supra, at p. 893.) “As
more commonly applied, the full resentencing rule allows a court
to revisit all prior sentencing decisions when resentencing a
defendant.” (People v. Valenzuela (2019) 7 Cal.5th 415, 424–425
(Valenzuela); Buycks, at p. 893.) This includes “revisiting such
decisions as the selection of a principal term, whether to stay a
sentence, whether to impose an upper, middle, or lower term, and
whether to impose concurrent or consecutive sentences.” (Jones,
supra, 79 Cal.App.5th at p. 46; Valenzuela, supra, at p. 425.)
V. Corrections
Finally, appellant points out a number of apparent
typographical errors made in the recording of the sentence and
related fees orally imposed by the trial court. However, because
we vacate appellant’s sentence and remand for resentencing, any
errors in the now-inoperative original sentencing documents are
rendered moot. (People v. Rojas (2015) 237 Cal.App.4th 1298,
1301–1302 [appellant’s contention of sentencing errors mooted
when the matter is remanded for resentencing].)
DISPOSITION
The implied true findings on the firearm enhancements
(§ 12022.5, subd. (a)) are vacated. The sentence is vacated, and
the case is remanded. On remand, the trial court will resentence
appellant in accordance with section 1170, subdivision (b), as
17
amended by Senate Bill No. 567, and with the full resentencing
rule as set forth in Buycks, supra, 5 Cal.5th 857. After
resentencing, the clerk of the court shall prepare an amended
abstract of judgment to reflect the new sentence and forward a
certified copy of the amended abstract of judgment to the
Department of Corrections and Rehabilitation. In all other
respects, the judgment is affirmed.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS.
_____________________, J.
ASHMANN-GERST
We concur:
________________________, P. J.
LUI
________________________, J.
CHAVEZ
18 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483998/ | [Cite as State v. Ohler, 2022-Ohio-4066.]
IN THE COURT OF APPEALS OF OHIO
THIRD APPELLATE DISTRICT
CRAWFORD COUNTY
STATE OF OHIO,
CASE NO. 3-22-23
PLAINTIFF-APPELLEE,
v.
WENDY OHLER, OPINION
DEFENDANT-APPELLANT.
Appeal from Crawford County Common Pleas Court
Trial Court No. 22-CR-0026
Judgment Affirmed
Date of Decision: November 14, 2022
APPEARANCES:
Edwin M. Bibler for Appellant
Daniel J. Stanley for Appellee
Case No. 3-22-23
WILLAMOWSKI, J.
{¶1} Defendant-appellant Wendy Ohler (“Ohler”) brings this appeal from
the judgment of the Common Pleas Court of Crawford County convicting her of one
count of aggravated possession of drugs and sentencing her to nine months in prison.
Ohler claims on appeal that 1) her plea was not knowingly, intelligently, and
voluntarily made and 2) the trial court should have imposed community control.
For the reasons set forth below, the judgment of the trial court is affirmed.
{¶2} On January 18, 2022, the Crawford County Grand Jury indicted Ohler
on one count of aggravated possession of drugs in violation of R.C. 2925.11(A),
(C)(1)(a), a felony of the fifth degree. Doc. 1. Ohler entered a plea of not guilty.
Doc. 5. Ohler was released from custody on the condition that she not possess or
use any drug of abuse and that she enter into drug treatment. Doc. 4. Later, the
terms of bond were altered to include weekly drug testing. Doc. 13. On April 6,
2022, Ohler changed her plea to guilty. Doc. 15. The trial court accepted the guilty
plea and entered a finding of guilt. Doc. 15. On April 11, 2022, the State filed a
motion to revoke Ohler’s bond on the grounds that she had been discharged from
her treatment program for abusing her medications and breaking her behavior
contract. Doc. 16. The trial court then revoked her bond. Doc. 17.
{¶3} On April 14, 2022, the trial court granted bond for a second time to
Ohler. Doc. 20. The new bond terms included weekly drug screens and required
Ohler to enter treatment at Day One. Doc. 20. On May 4, 2022, the State filed
-2-
Case No. 3-22-23
another motion to revoke Ohler’s bond after she was terminated from her treatment
program for testing positive for methamphetamines. Doc. 21. The motion indicated
that Ohler had admitted to smoking methamphetamine at the treatment facility.
Doc. 21.
{¶4} The trial court held a sentencing hearing on May 11, 2022. Doc. 22.
At that time, the trial court sentenced Ohler to nine months in prison. Doc. 22.
Ohler appeals from this judgment and raises the following assignments of error on
appeal.
First Assignment of Error
[Ohler’s] plea was not made knowingly, intelligently, or
voluntarily.
Second Assignment of Error
The trial court erred by sentencing [Ohler] to nine (9) months in
prison when [Ohler] was amenable to community control
sanctions and was seeking treatment for drug addiction.
Guilty Plea
{¶5} Ohler claims in her first assignment of error that her guilty plea was not
knowingly, intelligently, or voluntarily entered. “All guilty pleas must be made
knowingly, voluntarily, and intelligently.” State v. Moll, 3d Dist. Defiance Nos. 4-
14-17 and 4-14-18, 2015-Ohio-926, ¶ 9.
In felony cases the court may refuse to accept a plea of guilty or
a plea of no contest, and shall not accept a plea of guilty or no
contest without first addressing the defendant personally and
doing all of the following:
-3-
Case No. 3-22-23
(a) Determining that the defendant is making the plea voluntarily,
with understanding of the nature of the charges and of the
maximum penalty involved, and if applicable, that the defendant
is not eligible for probation or for the imposition of community
control sanctions at the sentencing hearing.
(b) Informing the defendant of and determining that the
defendant understands the effect of the plea of guilty or no
contest, and that the court, upon acceptance of the plea, may
proceed with judgment and sentence.
(c) Informing the defendant and determining that the defendant
understands that by the plea the defendant is waiving the rights
to jury trial, to confront witnesses against him or her, to have
compulsory process for obtaining witnesses in the defendant's
favor, and to require the state to prove the defendant's guilt
beyond a reasonable doubt at a trial at which the defendant
cannot be compelled to testify against himself or herself.
Crim.R. 11(C)(2). “In addition to these constitutional rights, the trial court must
determine that the defendant understands the nature of the charge, the maximum
penalty involved, and the effect of the plea.” State v. Montgomery, 148 Ohio St.3d
347, 2016-Ohio-5487, ¶ 41, 71 N.E.3d 180.
{¶6} Ohler argues that her plea was not knowingly, intelligently, or
voluntarily given because she entered her plea with the understanding that she
would have 60-90 days to complete treatment before being sentenced and she was
sentenced 35 days after entering her plea of guilty. At the change of plea hearing,
the following dialogue occurred.
The Court: * * * It looks like the parties have agreed to a plea
agreement. It’s a little tricky. The parties are basically gonna
[sic] agree to open sentencing. However, we’re gonna [sic] set this
-4-
Case No. 3-22-23
for a sentencing date 60, 90 days down the road. The State is has
[sic] basically indicated to the defense that assuming that the
Defendant complies with all treatment, and has no positive drug
screens, that they would then at that sentencing argue – not argue
– recommend community control. In any event, that there’s a
positive drug screen, any other type of bond violation, which
would include missing court, or the Defendant is not completing
her counseling, the State would have the right then to recommend
whatever sentence they believe that’s appropriate, and that can
include a prison sentence up to 12 months. Is that correct,
counsel?
Ms. Higgins: That’s correct.
The Court: Is that your understancing?
Mr. Motter: Yes, Your Honor. For the record, Your Honor, my
client has been involved with the Lighthouse Behavioral Health
Solutions since March of this year. Her program is expected to
go through March of 2023. And the program seems to be fairly
strict in that they will not let her out without an employee or a
healthcare worker with her during the time.
The Court: All right. Well, I think the plan here is that basically
the State, I think, was planning on recommending prison in this
case. But they will give the Defendant a chance to basically prove
to the State that she’s doing well –
Mr. Motter: yes, sir.
The Court: -- and then obviously after her plea, if it is a
community control violation, I think everybody understands that,
you know, continued negative drug screens and continued
treatment will be required.
So, Miss Ohler, do you understand what the agreement is here?
The Defendant: I do.
The Court: Basically it’s an open sentencing. As of now, the State
– there’s no recommendation. But the State is verbally saying on
-5-
Case No. 3-22-23
the record, has agreed now to put it on the record, that as long as
you don’t test positive for drugs, obey all conditions of bond, make
sure that you continue with your counseling, that they will
recommend community control for you. And then at that day
we’d address all the terms and conditions of community control.
Now, in the event that you would violate your bond in any way,
test positive for a drug screen, or stop doing counseling, the State
would be free to recommend a prison sentence from 6 to 12
months. Do you understand that?
The Defendant: Yes, sir.
Tr. 3-5. The trial court made it very clear that if she tested positive for drugs or
violated any other term of her bond, the State would ask for prison time. Ohler
stated that she understood the terms of the plea agreement. Ohler violated the terms
of her bond five days later. Ohler was then given a second chance to comply at a
new program. Twenty days after that, she had violated the terms of her bond and
admitted to using drugs while in the treatment facility. Ohler knew at the time she
entered her plea what the consequences would be if she violated the terms of the
agreement. She told the court she understood what was required of her and was
given multiple chances to succeed. Thus, she cannot now claim that she did not
know what would happen if she violated the agreement or that the State did not give
her the time to complete the treatment. Based upon Ohler’s own statements in
response to the trial court’s questions, the plea was knowingly, intelligently, and
voluntarily entered. The first assignment of error is overruled.
-6-
Case No. 3-22-23
Sentence
{¶7} Ohler claims in her second assignment of error that the trial court erred
by sentencing her to prison rather than community control. Ohler argues that based
upon R.C. 2929.11 and 2929.12, community control was the appropriate sentence.
Our standard of review in this matter is whether the sentence was clearly and
convincingly contrary to law. State v. Marcum, 146 Ohio St.3d 516, 2016-Ohio-
1002, ¶ 10, 59 N.E.3d 1231 and R.C. 2953.08(G)(2). The Supreme Court of Ohio
has further limited the review of the sentence imposed by an appellate court by
holding that R.C. 2953.08(G)(2)(b) “does not provide a basis for an appellate court
to modify or vacate a sentence based on its view that the sentence is not supported
by the record under R.C. 2929.11 and 2929.12.” State v. Jones, 163 Ohio St.3d 242,
2020-Ohio-6729, ¶ 39, 169 N.E.3d 649. A trial court has full discretion to impose
any sentence within the statutory range. State v. Johnson, 3d Dist. Allen No. 1-20-
49, 2021-Ohio-1768, 173 N.E.3d 94. When reviewing felony sentences that are
imposed solely after applying R.C. 2929.11 and R.C. 2929.12, this Court shall no
longer analyze whether those sentences are unsupported by the record. Our task is
simply to determine whether those sentences are contrary to law. State v. Criswell,
3d Dist. Marion No. 9-21-40, 2022-Ohio-2450, ¶ 13.
{¶8} This Court has no authority under R.C. 2953.08(G)(2) to reverse the
sentence on the grounds that the record does not support the trial court’s application
of R.C. 2929.11 and 2929.12. The trial court considered the statutory factors set
-7-
Case No. 3-22-23
forth in R.C. 2929.12 and considered the overriding purposes of felony sentencing
set forth in R.C. 2929.11. The sentence imposed was within the statutory range of
sentences. Thus, the sentence imposed was not contrary to law. The second
assignment of error is overruled.
{¶9} Having found no error prejudicial to the appellant in the particulars
assigned and argued, the judgment of the Common Pleas Court of Crawford County
is affirmed.
Judgment Affirmed
MILLER and SHAW, J.J., concur.
/hls
-8- | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483996/ | [Cite as State v. Wyne, 2022-Ohio-4068.]
IN THE COURT OF APPEALS OF OHIO
THIRD APPELLATE DISTRICT
LOGAN COUNTY
STATE OF OHIO,
PLAINTIFF-APPELLEE, CASE NO. 8-22-06
v.
SEAN S. WYNE, OPINION
DEFENDANT-APPELLANT.
STATE OF OHIO,
PLAINTIFF-APPELLEE, CASE NO. 8-22-07
v.
SEAN S. WYNE, OPINION
DEFENDANT-APPELLANT.
Appeals from Logan County Common Pleas Court
Trial Court Nos. CR 18 06 0180 and CR 21 08 0228
Appeal Dismissed in Case No. 8-22-06 and
Judgment Affirmed in Case No. 8-22-07
Date of Decision: November 14, 2022
APPEARANCES:
Eric J. Allen for Appellant
Stacia L. Rapp for Appellee
Case Nos. 8-22-06, 8-22-07
MILLER, J.
{¶1} Defendant-appellant, Sean S. Wyne, appeals the January 6, 2022
judgments of sentence of the Logan County Court of Common Pleas. For the
reasons that follow, we affirm the appeal in case number 8-22-07 and dismiss the
appeal in case number 8-22-06.
{¶2} This appeal involves three, separate, unrelated criminal cases. The first
of the cases, case number CR 18 06 0180, arises from a December 27, 2017 incident
where Wyne’s roommate found him unresponsive after ingesting fentanyl. On June
12, 2018, the Logan County Grand Jury indicted Wyne on two counts: Count One
of aggravated possession of drugs in violation of R.C. 2925.11(A), (C)(1)(a), a fifth-
degree felony and Count Two of inducing panic in violation of R.C. 2917.31(A)(3),
(C)(3), a fourth-degree felony. At his arraignment on June 29, 2018, Wyne pled not
guilty to the charges.
{¶3} On November 1, 2018, Wyne filed a motion requesting intervention in
lieu of conviction. Following a hearing held on February 7, 2019, the trial court
granted Wyne’s request. Pursuant to the agreement, Wyne withdrew his not guilty
pleas and entered pleas of guilty to the counts in the indictment.
{¶4} However, Wyne violated the terms and conditions of his intervention in
lieu of conviction.1 Consequently, on September 9, 2020, Wyne’s intervention in
1
The record indicates that while Wyne’s motion requesting intervention in lieu of conviction was pending in
case number CR 18 06 0180, he was indicted in Logan County case number CR 18 12 0371 on four counts
-2-
Case Nos. 8-22-06, 8-22-07
lieu of conviction was terminated, and the trial court found Wyne guilty of the
counts in the indictment. The trial court sentenced Wyne to community control
sanctions and reserved a prison term of 12 months for Count One and 18 months for
Count Two, to be served concurrently, in the event that Wyne violated the terms of
his community control.
{¶5} On July 1, 2021, the State filed a motion requesting the trial court to
issue an order requiring Wyne to show cause why his community control should not
be revoked following violations of its terms and conditions. On December 9, 2021,
Wyne entered an admission acknowledging the violation of his community control.
{¶6} On June 26, 2021, Wyne engaged in a physical altercation with his
fiancée, B.L. During the incident, Wyne reportedly struck her multiple times in her
face, arms, and neck. On August 10, 2021, the Logan County Grand Jury indicted
Wyne on a single count of domestic violence in Logan County case number CR 21
08 0228 in violation of R.C. 2919.25(A), (D)(4), a third-degree felony. At the
arraignment on August 13, 2021, Wyne entered a plea of not guilty.
{¶7} On December 9, 2021, pursuant to a plea agreement, Wyne withdrew
his not guilty plea and entered a guilty plea to the count in the indictment. In
of domestic violence in violation of R.C. 2919.25, fourth-degree felonies, and one count of disrupting public
services in violation of R.C. 2909.04, a fourth-degree felony. Pursuant to a plea agreement, Wyne was
convicted of three charges of domestic violence. Although he was initially sentenced to community control
sanctions, on December 9, 2021, Wyne entered an admission acknowledging the violation of his community
control. On January 6, 2022, he was sentenced to 54 months in prison for the violation of his community
control in this case.
-3-
Case Nos. 8-22-06, 8-22-07
exchange, the State agreed to recommend community control sanctions. The trial
court accepted Wyne’s plea and found him guilty as charged.
{¶8} At a sentencing hearing held on January 6, 2022, the trial court
sentenced Wyne on the three pending cases. With respect to case number CR 18 06
0180, the trial court sentenced Wyne to 12 months in prison on the fourth-degree
felony aggravated-possession-of-drugs charge. In case number CR 18 12 0371, the
trial court sentenced Wyne to an aggregate term of 54 months in prison for the three
fourth-degree felony domestic violence charges. With respect to case number CR
21 08 0228, the trial court sentenced Wyne to 24 months in prison for the third-
degree domestic violence charge to be served consecutively to the sentence imposed
in case number CR 18 12 0371.
{¶9} On February 7, 2022, Wyne filed his notice of appeal in case numbers
CR 18 06 0180 and CR 21 08 0228. 2
Assignment of Error
The trial court erred by failing to following the joint
recommendation of the parties.
{¶10} In his sole assignment of error, Wyne argues that the trial court erred
by failing to follow the parties’ joint-sentence recommendation.
2
Wyne did not file a notice of appeal with respect to Logan County case number CR 18 12 0371.
-4-
Case Nos. 8-22-06, 8-22-07
{¶11} However, before we can consider the merits of Wyne’s assignment of
error, we must address a jurisdictional matter. Appellate courts have jurisdiction to
review the final judgments of trial courts in their district. Section 3(B)(2), Article
IV, Ohio Constitution; R.C. 2505.02; see also App.R. 4(A). In the absence of a final
appealable order, this court lacks appellate subject-matter jurisdiction. State v.
Galloway, 3d Dist. Henry No. 7-21-07, 2022-Ohio-1135, ¶ 8. Accordingly, if the
parties do not raise a jurisdictional issue, we must raise it sua sponte. State v.
Dearmond, 3d Dist. Logan No. 8-21-43, 2022-Ohio-2324, ¶ 6, citing Davison v.
Rini, 115 Ohio App.3d 688 (4th Dist.1996).
{¶12} “When valid, a judgment of conviction is a final order under R.C.
2502.02(B).” State v. White, 156 Ohio St.3d 536, 2019-Ohio-1215, ¶ 13, citing
State v. Jackson, 151 Ohio St.3d 239, 2017-Ohio-7469, ¶ 11. “Crim.R. 32(C) sets
forth what must be contained in a judgment of conviction for it to be valid; it
provides that ‘[a] judgment of conviction shall set forth the fact of conviction and
the sentence” and that “[t]he judge shall sign the judgment and the clerk shall enter
it on the journal.’” White at ¶ 13. The Supreme Court of Ohio has held that “[a]
judgment of conviction is a final order subject to appeal under R.C. 2505.02 when
the judgment entry sets forth (1) the fact of the conviction, (2) the sentence, (3) the
judge’s signature, and (4) the time stamp indicating the entry upon the journal by
the clerk.” State v. Lester, 130 Ohio St.3d 303, 2011-Ohio-5204, ¶ 14. A sentencing
-5-
Case Nos. 8-22-06, 8-22-07
entry that does not contain these elements is not final and appealable. State v. Baker,
119 Ohio St.3d 197, 2008-Ohio-3330, syllabus.
{¶13} Our review of the record in case number CR 18 06 0180 reveals that
on September 9, 2020, the trial court terminated Wyne’s intervention in lieu of
conviction in that case. At that time, the trial court found Wyne guilty of aggravated
possession of drugs in Count One and inducing panic in Count Two. (Case No. CR
18 06 0180, Doc. No. 85). The trial court imposed community control sanctions,
but reserved a prison term of 12 months for Count One and 18 months for Count
Two to be served concurrently to each other in the event that Wyne violated the
terms of his community control. (Id.).
{¶14} On January 6, 2022, when the trial court sentenced Wyne for violating
the terms of his community control in case number CR 18 06 0180, the trial court
imposed a sentence for Count One, aggravated possession of drugs, but did not
address Count Two, inducing panic.3 “[T]rial courts have ‘a mandatory duty “to deal
with each and every charge prosecuted against the defendant[,]”’ and lack the
3
Additionally, our review of the record reveals an inconsistency with respect to the trial court’s sentence for
Count One, aggravated possession of drugs. At the sentencing hearing, the trial court stated, “In CR 18-06-
0180, you are sentenced to 18 months to be served concurrently with [the sentence in Logan County case
number] CR 18-12-0371.” (Emphasis added.) (Jan. 6, 2022 Tr. at 12). However, the sentencing entry states
that in case number CR 18 06 0180, Wyne is sentenced to 12 months in prison with respect to Count One,
aggravated possession of drugs. (Case No. CR 18 06 0180, Doc. No. 115). We note that contrary to what
was stated at the sentencing hearing, the trial court’s journal entry is consistent with the hearing held on
September 9, 2020, where the trial court imposed community control sanctions but reserved a prison term of
12 months for Count One, aggravated possession of drugs, and 18 months for Count Two, inducing panic.
(Case No. CR 18 06 0180, Doc. No. 85). Further, as a fifth-degree felony, the statutory range for Wyne’s
aggravated-possession-of-drugs conviction is limited to a sentence of 6 to 12 months in prison. R.C.
2929.14(A)(5). It appears the trial court corrected itself, as to this issue, when preparing the sentencing entry.
-6-
Case Nos. 8-22-06, 8-22-07
authority ‘to refuse to impose sentence altogether.’” State v. Jackson, 9th Dist.
Summit No. 28625, 2018-Ohio-19, ¶ 12, quoting State v. Ford, 9th Dist. Summit
No. 23269, 2006-Ohio-6961, ¶ 6, quoting State v. Hayes, 9th Dist. Lorain No.
99CA007416, 2000 WL 670672, *1 (May 24, 2000). “[T]he failure of an entry to
dispose of a court’s ruling on each prosecuted charge renders the order of the court
interlocutory.” State v. Whetstone, 5th Dist. Licking No. 2009-CA-00111, 2010-
Ohio-1835, ¶ 6, citing State v. Lewis, 9th Dist. Lorain No. 08CA09379, ¶ 4.
{¶15} Accordingly, because the trial court did not impose a sentence for
Count Two, inducing panic, in case number CR 18 06 0180, the judgment entry
does not set forth a complete sentence and thus, is not a final appealable order.
Dearmond, 2022-Ohio-2324, at ¶ 10. Thus, appellate case number 8-22-06, Wyne’s
appeal from the trial court’s judgment in case number CR 18 06 0180 is dismissed.
{¶16} However, the sentencing entry in case number CR 21 08 0228, which
corresponds to appellate case number 8-22-07, is a final appealable order.
Accordingly, we address the merits of Wyne’s assignment of error with respect to
that case.
{¶17} “Under R.C. 2953.08(G)(2), an appellate court will reverse a sentence
‘only if it determines by clear and convincing evidence that the record does not
support the trial court’s findings under relevant statutes or that the sentence is
otherwise contrary to law.’” State v. Nienberg, 3d Dist. Putnam Nos. 12-16-15 and
-7-
Case Nos. 8-22-06, 8-22-07
12-16-16, 2017-Ohio-2920, ¶ 8, quoting State v. Marcum, 146 Ohio St.3d 516,
2016-Ohio-1002, ¶ 1. “Clear and convincing evidence is that ‘“which will produce
in the mind of the trier of facts a firm belief or conviction as to the facts sought to
be established.”’” Id., quoting Marcum at ¶ 22, quoting Cross v. Ledford, 161 Ohio
St. 469 (1954), paragraph three of the syllabus.
{¶18} “‘Trial courts have full discretion to impose any sentence within the
statutory range.’” State v. Smith, 3d Dist. Seneca No. 13-15-17, 2015-Ohio-4225, ¶
9, quoting State v. Noble, 3d Dist. Logan No. 8-14-06, 2014-Ohio-5485, ¶ 9, citing
State v. Saldana, 3d Dist. Putnam No. 12-12-09, 2013-Ohio-1122, ¶ 20. A sentence
imposed within the statutory range is generally valid so long as the trial court
considered the applicable statutory policies that apply to every felony sentencing,
including those contained in R.C. 2929.11, and the sentencing factors of 2929.12.
See State v. Watts, 3d Dist. Auglaize No. 2-20-10, 2020-Ohio-5572, ¶ 10, 14; State
v. Maggette, 3d Dist. Seneca No. 13-16-06, 2016-Ohio-5554, ¶ 31.
{¶19} R.C. 2929.11 provides, in pertinent part, that the “overriding purposes
of felony sentencing are to protect the public from future crime by the offender and
others, to punish the offender, and to promote the effective rehabilitation of the
offender using the minimum sanctions that the court determines accomplish those
purposes without imposing an unnecessary burden on state or local government
resources.” R.C. 2929.11(A). To achieve the overriding purposes of felony
-8-
Case Nos. 8-22-06, 8-22-07
sentencing, R.C. 2929.11 directs courts to “consider the need for incapacitating the
offender, deterring the offender and others from future crime, rehabilitating the
offender, and making restitution to the victim of the offense, the public, or both.”
Id. In addition, R.C. 2929.11(B) instructs that a sentence imposed for a felony “shall
be reasonably calculated to achieve the three overriding purposes of felony
sentencing * * *, commensurate with and not demeaning to the seriousness of the
offender’s conduct and its impact upon the victim, and consistent with sentences
imposed for similar crimes committed by similar offenders.”
{¶20} “In accordance with these principles, the trial court must consider the
factors set forth in R.C. 2929.12(B)-(E) relating to the seriousness of the offender’s
conduct and the likelihood of the offender’s recidivism.” Smith at ¶ 10, citing R.C.
2929.12(A). In addition, the trial court must consider “the factors set forth in [R.C.
2929.12(F)] pertaining to the offender’s service in the armed forces of the United
States.” R.C. 2929.12(A). “‘A sentencing court has broad discretion to determine
the relative weight to assign the sentencing factors in R.C. 2929.12.’” Smith at ¶
15, quoting State v. Brimacombe, 195 Ohio App.3d 524, 2011-Ohio-5032, ¶ 18 (6th
Dist.), citing State v. Arnett, 88 Ohio St.3d 208, 215 (2000).
{¶21} In case number CR 21 08 0228, Wyne was sentenced for one count of
domestic violence in violation of R.C. 2919.25(A), (D)(4), a third-degree felony.
For third-degree felony domestic violence, “the prison term shall be a definite term
-9-
Case Nos. 8-22-06, 8-22-07
of nine, twelve, eighteen, twenty-four, or thirty-six months.” R.C.
2929.14(A)(3)(b). The trial court sentenced Wyne to 24 months in prison, which is
within the statutory range.
{¶22} Furthermore, the record reflects that the trial court considered R.C.
2929.11 and 2929.12 when it sentenced Wyne. At the sentencing hearing, the trial
court specifically stated that it “considered the purposes and principles of sentencing
as set forth in Ohio Revised Code Section 2929.11 and Ohio Revised Code Section
2929.12.” (Jan. 6, 2022 Tr. at 10). The trial court then specifically referenced the
principles of felony sentencing contained in R.C. 2929.11, and discussed the
applicable R.C. 2929.12 factors. (Id. at 10-11). Additionally, in the judgment entry
of sentence, the trial court indicated it considered “the purposes and principals of
sentencing under R.C. 2929.11, and the need for deterrence, incapacitation,
rehabilitation, and restitution.” (Case No. CR 21 08 0228, Doc. No. 38). “A trial
court’s statement that it considered the required statutory factors * * * is sufficient
to fulfill its obligations under the sentencing statutes.” Maggette, 2016-Ohio-5554,
at ¶ 32, citing State v. Abrams, 8th Dist. Cuyahoga No. 103786, 2016-Ohio-4570,
citing State v. Payne, 114 Ohio St.3d 502, 2007-Ohio-4642, ¶ 18. Therefore,
because Wyne’s sentence is within the statutory range and the record supports that
the trial court fulfilled its obligation of considering R.C. 2929.11 and 2929.12, his
sentence is valid. See Watts, 2020-Ohio-5572, at ¶ 14.
-10-
Case Nos. 8-22-06, 8-22-07
{¶23} Nevertheless, Wyne summarily argues that the trial court erred by
declining to follow the parties’ joint-sentence recommendation seeking imposition
of community control sanctions. However, “[t]rial courts ‘are not bound by a jointly
recommended sentence.’” State v. Graham, 3d Dist. Auglaize No. 2-19-11, 2020-
Ohio-1063, ¶ 12, quoting State v. Underwood, 124 Ohio St.3d 365, 2010-Ohio-1, ¶
28. As outlined above, Wyne’s sentence is within in the statutory range and it is
clear that the trial court considered R.C. 2929.11 and 2929.12 when fashioning his
sentence. Hence, Wyne’s sentence is not clearly and convincingly contrary to law,
and it must therefore be affirmed. See State v. Slife, 3d Dist. Auglaize No. 2-20-17,
2021-Ohio-644, ¶ 17.
{¶24} Wyne’s assignment of error is overruled. Having found no error
prejudicial to the appellant here in the particulars assigned and argued, we affirm
the judgment of the Logan County Court of Common Pleas in case number CR 21
08 0228, appellate case number 8-22-07. The appeal in case number CR 18 06 0180,
appellate case number 8-22-06, is dismissed.
Appeal Dismissed in Case No. 8-22-06 and
Judgment Affirmed in Case No. 8-22-07
ZIMMERMAN, P.J. and WILLAMOWSKI, J., concur.
/jlr
-11- | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484000/ | [Cite as State v. Day, 2022-Ohio-4064.]
IN THE COURT OF APPEALS OF OHIO
THIRD APPELLATE DISTRICT
ALLEN COUNTY
STATE OF OHIO,
PLAINTIFF-APPELLEE, CASE NO. 1-22-32
v.
DAREN K. DAY, OPINION
DEFENDANT-APPELLANT.
Appeal from Allen County Common Pleas Court
Trial Court No. CR2021 0416
Judgment Affirmed
Date of Decision: November 14, 2022
APPEARANCES:
F. Stephen Chamberlain for Appellant
Jana E. Emerick for Appellee
Case No. 1-22-32
MILLER, J.
{¶1} Defendant-appellant, Daren K. Day, appeals the April 21, 2022
judgment of sentence of the Allen County Court of Common Pleas. For the reasons
that follow, we affirm.
Facts and Procedural History
{¶2} On January 13, 2022, the Allen County Grand Jury indicted Day on
three counts: Counts One and Two of grand theft of a motor vehicle in violation of
R.C. 2913.02(A)(1), (B)(5), fourth-degree felonies; and Count Three of robbery in
violation of R.C. 2911.02(A)(2), (B), a second-degree felony. Count Three also
included a repeat violent offender (“RVO”) specification pursuant to R.C.
2941.149(A). On January 19, 2022, Day entered a written plea of not guilty.
{¶3} Pursuant to a negotiated plea agreement, on March 3, 2022, Day entered
guilty pleas to all counts in the indictment. In exchange, the State agreed to
recommend dismissal of the RVO specification associated with Count Three. The
trial court accepted Day’s guilty plea and found him guilty of Counts One, Two,
and Three. The following day, the trial court filed its judgment entry of conviction.
{¶4} At a sentencing hearing held on April 21, 2022, the trial court
determined Counts Two and Three merged for sentencing. The State elected for
Day to be sentenced on Count Three. The defense objected to the imposition of an
indefinite prison sentence for Count Three under the Reagan Tokes Law on the
-2-
Case No. 1-22-32
grounds of unconstitutionality. The trial court overruled the motion and sentenced
Day to 12 months in prison on Count One and an indefinite term of 3 years to 4 ½
years in prison on Count Three to be served concurrently with the prison term
imposed on Count One. The trial court filed its judgment entry of sentence the same
day.
{¶5} On May 19, 2022, Day filed his notice of appeal. He raises three
assignments of error for our review.
Assignment of Error No. I
The Reagan Tokes Law, 132 GA Senate Bill 201 is
unconstitutional because it violates the separation-of-powers
doctrine.
Assignment of Error No. II
The Reagan Tokes Law, 132 GA Senate Bill 201 is
unconstitutional because it violates right to due process.
Assignment of Error No. III
The Reagan Tokes Law, 132 GA Senate Bill 201 is
unconstitutional because it violates the constitutional right to a
jury trial.
{¶6} In the three assignments of error, which we will address together, Day
contends that the indefinite sentence of incarceration imposed on Count Three
pursuant to the Reagan Tokes Law is unconstitutional as it violates the separation-
of-powers doctrine and violates his constitutional rights to due process and to a trial
by jury.
-3-
Case No. 1-22-32
{¶7} As this Court has noted in State v. Ball, 3d Dist. Allen No. 1-21-16,
2022-Ohio-1549, challenges to the Reagan Tokes Law do not present a matter of
first impression to this Court. Ball at ¶ 59. “Since the indefinite sentencing
provisions of the Reagan Tokes Law went into effect in March 2019, we have
repeatedly been asked to address the constitutionality of these provisions. We have
invariably concluded that the indefinite sentencing provisions of the Reagan Tokes
Law do not facially violate the separation-of-powers doctrine or infringe on
defendants’ due process rights.” Id. citing e.g. State v. Crawford, 3d Dist. Henry
No. 7-20-05, 2021-Ohio-547, ¶ 10-11; State v. Hacker, 3d Dist. Logan No. 8-20-01,
2020-Ohio-5048, ¶ 22; State v. Wolfe, 3d Dist. Union No. 14-21-16, 2022-Ohio-96,
¶ 21. Further, for the reasons stated in Ball, the remaining constitutional issue under
Reagan Tokes related to a jury trial is also unavailing. Id. at ¶ 61-63.
{¶8} Thus, on the basis of Ball and our prior precedent, this Court finds no
merit to Day’s contentions. The three assignments of error are overruled.
{¶9} Having found no error prejudicial to the appellant herein in the
particulars assigned and argued, we affirm the judgment of the Allen County Court
of Common Pleas.
Judgment Affirmed
ZIMMERMAN, P.J. and SHAW, J., concur.
/jlr
-4- | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484001/ | [Cite as State v. Brown, 2022-Ohio-4065.]
IN THE COURT OF APPEALS OF OHIO
THIRD APPELLATE DISTRICT
ALLEN COUNTY
STATE OF OHIO,
PLAINTIFF-APPELLEE, CASE NO. 1-22-36
v.
JONATHAN J. BROWN, OPINION
DEFENDANT-APPELLANT.
Appeal from Allen County Common Pleas Court
Trial Court No. CR2021 0237
Judgment Affirmed
Date of Decision: November 14, 2022
APPEARANCES:
F. Stephen Chamberlain for Appellant
Jana E. Emerick for Appellee
Case No. 1-22-36
MILLER, J.
{¶1} Defendant-appellant, Jonathan J. Brown, appeals the May 9, 2022
judgment of sentence of the Allen County Court of Common Pleas. For the reasons
that follow, we affirm.
Facts and Procedural History
{¶2} On August 12, 2021, the Allen County Grand Jury indicted Brown on
a single count of aggravated arson in violation of R.C. 2909.02(A)(1), (B)(2), a first-
degree felony. On August 18, 2021, Brown entered a written plea of not guilty.
{¶3} On April 1, 2022, pursuant to a negotiated agreement, the trial court
amended the charge in the indictment to attempted aggravated arson in violation of
R.C. 2923.02 and R.C. 2909.02(A)(1), a second-degree felony. Brown entered a
guilty plea to the amended charge. The trial court accepted Brown’s guilty plea and
found him guilty of Count One, as amended. The trial court filed its judgment entry
of conviction that same day.
{¶4} At a sentencing hearing held on May 9, 2022, the trial court overruled
a defense motion objecting to the imposition of an indefinite prison sentence under
the Reagan Tokes Law on the grounds of unconstitutionality. The trial court then
sentenced Brown to an indefinite term of two to three years in prison. The trial court
filed its judgment entry of sentence that same day.
-2-
Case No. 1-22-36
{¶5} On May 31, 2022, Brown filed his notice of appeal. He raises three
assignments of error for our review.
Assignment of Error No. I
The Reagan Tokes Law, 132 GA Senate Bill 201 is
unconstitutional because it violates the separation-of-powers
doctrine.
Assignment of Error No. II
The Reagan Tokes Law, 132 GA Senate Bill 201 is
unconstitutional because it violates right to due process.
Assignment of Error No. III
The Reagan Tokes Law, 132 GA Senate Bill 201 is
unconstitutional because it violates the constitutional right to a
jury trial.
{¶6} In the three assignments of error, which we will address together,
Brown contends that the indefinite sentence of incarceration imposed pursuant to
the Reagan Tokes Law is unconstitutional as it violates the separation-of-powers
doctrine and violates his constitutional rights to due process and to a trial by jury.
{¶7} As this Court has noted in State v. Ball, 3d Dist. Allen No. 1-21-16,
2022-Ohio-1549, challenges to the Reagan Tokes Law do not present a matter of
first impression to this Court. Ball at ¶ 59. “Since the indefinite sentencing
provisions of the Reagan Tokes Law went into effect in March 2019, we have
repeatedly been asked to address the constitutionality of these provisions. We have
invariably concluded that the indefinite sentencing provisions of the Reagan Tokes
-3-
Case No. 1-22-36
Law do not facially violate the separation-of-powers doctrine or infringe on
defendants’ due process rights.” Id. citing e.g. State v. Crawford, 3d Dist. Henry
No. 7-20-05, 2021-Ohio-547, ¶ 10-11; State v. Hacker, 3d Dist. Logan No. 8-20-01,
2020-Ohio-5048, ¶ 22; State v. Wolfe, 3d Dist. Union No. 14-21-16, 2022-Ohio-96,
¶ 21. Further, for the reasons stated in Ball, the remaining constitutional issue under
Reagan Tokes related to a jury trial is also unavailing. Id. at ¶ 61-63.
{¶8} Thus, on the basis of Ball and our prior precedent, this Court finds no
merit to Brown’s contentions. The three assignments of error are overruled.
{¶9} Having found no error prejudicial to the appellant herein in the
particulars assigned and argued, we affirm the judgment of the Allen County Court
of Common Pleas.
Judgment Affirmed
ZIMMERMAN, P.J. and SHAW, J., concur.
/jlr
-4- | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484003/ | [Cite as State v. Brown, 2022-Ohio-4073.]
IN THE COURT OF APPEALS OF OHIO
TENTH APPELLATE DISTRICT
State of Ohio, : No. 22AP-38
(C.P.C. No. 19CR-5961)
Plaintiff-Appellee, :
v. No. 22AP-39
: (C.P.C. No. 19CR-5834)
Jackie L. Brown, : No. 22AP-40
(C.P.C. No. 19CR-4241)
Defendant-Appellant. :
No. 22AP-41
: (C.P.C. No. 18CR-3872)
: &
: No. 22AP-42
(C.P.C. No. 17CR-6212)
:
(REGULAR CALENDAR)
:
D E C I S I O N
Rendered on November 15, 2022
On brief: G. Gary Tyack, Prosecuting Attorney, and
Paula M. Sawyers. Argued: Paula M. Sawyers.
On brief: Yeura R. Venters, Public Defender, and Leon J.
Sinoff. Argued: Leon J. Sinoff.
APPEALS from the Franklin County Court of Common Pleas
SADLER, J.
{¶ 1} Defendant-appellant, Jackie L. Brown, appeals from judgments of
conviction, pursuant to guilty pleas, and sentences imposed by the Franklin County Court
of Common Pleas. For the following reasons, we affirm.
Nos. 22AP-38, 22AP-39, 22AP-40, 22AP-41 & 22AP-42 2
I. FACTS AND PROCEDURAL HISTORY
{¶ 2} Brown's appeals, which this court consolidated sua sponte, arise from
judgments and sentences in five criminal cases; we begin by briefly outlining the charges
against Brown in each case.
{¶ 3} On November 15, 2017, Brown was indicted in Franklin C.P. No. 17CR-6212,
on one count of escape, a second-degree felony in violation of R.C. 2921.34. The state
alleged Brown was confined at a community-based correctional facility because of a prior
felony conviction and purposely failed to return to the facility after being granted leave.
{¶ 4} The following year, on August 9, 2018, Brown was indicted in Franklin C.P.
No. 18CR-3872 on one count of improperly handling a firearm in a motor vehicle, a fourth-
degree felony in violation of R.C. 2923.16; one count of having a weapon while under
disability, a third-degree felony in violation of R.C. 2923.13, with a firearm specification;
and one count of tampering with evidence, a third-degree felony in violation of
R.C. 2921.12, with a firearm specification. The state alleged Brown came "into contact with
the Columbus Police Department" while in possession of an operable, loaded firearm,
which he was prohibited from having "due to multiple prior offense of violence
convictions." (Apr. 28, 2021 Tr. at 12.)
{¶ 5} A year later, on August 27, 2019, Brown was indicted in Franklin C.P. No.
19CR-4241 on two counts of failure to appear after having been released on recognizance,
both fourth-degree felony offenses in violation of R.C. 2937.99. The state alleged Brown
was set for trial in Case No. 17CR-6212 on August 12, 2019 and failed to return to court after
a lunch break.
{¶ 6} Later that same year, on November 8, 2019, Brown was indicted in Franklin
C.P. No. 19CR-5834 on one count of grand theft of a motor vehicle, a fourth-degree felony
in violation of R.C. 2913.02; one count of burglary, a second-degree felony in violation of
R.C. 2911.12; and one count of theft, a fifth-degree felony in violation of R.C. 2913.02. In
that case, the state alleged Brown trespassed by force into an occupied structure with the
intent to commit theft, and also knowingly deprived the victim of her motor vehicle.
{¶ 7} Finally, on November 15, 2019, Brown was indicted in Franklin C.P. No.
19CR-5961 on one count of possession of heroin, a third-degree felony in violation of R.C.
2925.11, with a money-forfeiture specification, and two counts of possession of a fentanyl-
Nos. 22AP-38, 22AP-39, 22AP-40, 22AP-41 & 22AP-42 3
related compound, fourth-degree felonies in violation of R.C. 2925.11, each with a money-
forfeiture specification. The state alleged Brown was found in possession of a substance
that was later tested and confirmed to be heroin, and in possession of money related to
drugs.
{¶ 8} Brown ultimately entered into a plea agreement on April 28, 2021, providing
that he would plead guilty to certain charges in each of the five cases. He pleaded guilty in
Case No. 17CR-6212 to one count of escape, a second-degree felony. In Case No. 18CR-
3872, he pleaded guilty to one count of having a weapon while under disability, a third-
degree felony, with a firearm specification. He pleaded guilty in Case No. 19CR-4241 to one
count of failure to appear, a fourth-degree felony. In Case No. 19CR-5834, Brown pleaded
guilty to burglary as third-degree felony, a lesser included offense of the second-degree
felony burglary charge in the indictment. Lastly, in Case No. 19CR-5961, Brown pleaded
guilty to one count of possession of heroin, a third-degree felony, with a money-forfeiture
specification.
{¶ 9} Under the plea agreement, there was a joint recommendation that Brown be
released on house arrest pending sentencing. There was also a joint recommendation that
a total 15-year term of imprisonment be imposed if Brown violated the conditions of house
arrest or failed to appear for sentencing. The plea agreement did not include a joint
recommendation as to the appropriate sentence if Brown complied with the conditions of
house arrest. As part of the plea agreement, Brown waived his right to withdraw his guilty
pleas under Crim.R. 32.1.
{¶ 10} Near the beginning of the plea hearing, the trial court explained the potential
consequences of failing to comply with the conditions of house arrest:
THE COURT: Part of the deal, as I understand it informally
from the lawyers and I believe is reflected in these papers, is
that we'll give you house arrest this summer to take care of
some family arrangements, and then have your sentencing in
September. Do you understand that dire consequences will
follow if you don't show up this September?
THE DEFENDANT: Yes, sir.
THE COURT: Do you understand that if you get caught doing
any crimes away from the house this summer, it would not only
violate your bond in any existing case, but you could get
indicted for yet more cases if you go out and get drugs and get
Nos. 22AP-38, 22AP-39, 22AP-40, 22AP-41 & 22AP-42 4
caught, or you go out and have an auto accident that it's your
fault because you're out drinking and driving, or you do
something else this summer? This isn't a free pass on anything
while you're on house arrest. Do you understand that?
The Defendant: Yes, sir.
(Apr. 28, 2021 Tr. at 4-5.)
{¶ 11} The trial court further explained the difference between the potential
maximum and minimum sentences Brown would face at sentencing:
THE COURT: Now, there is not a guarantee about what your
sentence is going to be. It's my understanding that if we add up
all these cases, that you could get something in the range of 21
years in prison, but that the minimum that I have to send you
to, the last I heard, four years and a quarter, four years and
three months.
[THE PROSECUTOR]: I agree, Your Honor. Thank you.
THE COURT: Mr. Brown, when you come in in September, you
can't say, "You know, Judge, you're a great guy. How about
probation for all this stuff?" If you enter these pleas, I've got to
send you to prison because that's required on some of these
pleas that you're contemplating making here this afternoon.
The question is, [i]f you come in, you've behaved yourself, do I
go over four years and three months? Or do I give you the
minimum? Or something close to the minimum? The state is
going to argue for more time than the minimum.
But part of what you really got the opportunity to do yourself is
to show us this summer that you'll behave yourself, you'll honor
the house arrest rules, you'll be squeaky clean, no drugs, no
guns, no nothing, and you'll show up in September. That's
going to keep the sentence on the lower end rather than
pushing it up toward 21 years. Do you understand that?
THE DEFENDANT: Yes, sir.
THE COURT: But there's no promise today from me about
what the sentence is going to be, because I'm going to get more
information over the summer about you and whether you
honor this deal. It's very much up in the air, if you enter these
pleas, what the final number is going to be, all right?
THE DEFENDANT: Yes, sir.
(Apr. 28, 2021 Tr. at 7-9). The trial court then reviewed the details of each guilty plea,
including the minimum penalties and the rights waived by pleading guilty, individually with
Brown.
Nos. 22AP-38, 22AP-39, 22AP-40, 22AP-41 & 22AP-42 5
{¶ 12} The trial court ordered Brown to be released on house arrest, with a
sentencing hearing scheduled for September 16, 2021. Under the order, Brown was only
permitted to leave home for emergency medical reasons, consultation with his attorney, or
to travel to court. The court also ordered a pre-sentence investigation ("PSI"). Near the
end of the plea hearing, the trial court reiterated the importance of complying with the
conditions of house arrest:
One of the things I'm trying to say, Mr. Brown -- and I'm tired
and I'm sorry -- if you have any questions about what your
obligations are this summer, call [defense counsel]. Don't
hesitate. You're not bothering him. And if he has some issue
that he thinks I need to make a decision about, he'll call the
prosecutor and they'll come and see me and we'll try and work
through it. But please don't just guess about what you're
supposed to do on house arrest and then make a mistake and
then we have issues in the fall about whether you get that 15
years, okay?
(Apr. 28, 2021 Tr. at 39.) Brown responded affirmatively to the trial court's admonition.
{¶ 13} On July 12, 2021, the trial court noted on the docket that Brown had failed to
comply with the conditions of house arrest, including making unauthorized movements on
multiple days without providing documentation to verify those movements were for
authorized purposes. Then on July 14, 2021, the trial court issued a capias directing that
Brown be taken into custody for failure to comply with the court's order. The court also
issued an order requiring Brown to show cause before September 13, 2021, to establish why
judgment should not be entered against him on his recognizance bond; notice of that order
sent by regular mail to the house arrest address was returned as undeliverable. The trial
court withdrew the PSI due to Brown's failure to comply. Brown was arrested on
December 9, 2021. On December 13, 2021, the trial court entered an order scheduling a
sentencing hearing for January 13, 2022. The following day the trial court scheduled
another hearing for December 15, 2021 ("the December 15th hearing").
{¶ 14} At the December 15th hearing, Brown's counsel conceded Brown had violated
the conditions of house arrest but asserted some of the violations were for purposes of
medical treatment and that Brown had been hospitalized four or five times. Brown alleged
he provided documents to the probation department to prove that he left home to obtain
medical treatment, but the probation department reported to the court that it had not
Nos. 22AP-38, 22AP-39, 22AP-40, 22AP-41 & 22AP-42 6
received any documents. Brown's counsel requested a "reasonable continuance" so he
could obtain documents from Brown's friend to prove the medical treatment. (Dec. 15,
2021 Tr. at 6.) The trial court denied the continuance request and proceeded with
sentencing.
{¶ 15} Brown's trial counsel then asserted Brown also violated the conditions of
house arrest due to safety issues involving himself and his daughter. Because there was an
unidentified individual in the courtroom, Brown's counsel requested the trial court clear
the courtroom of non-essential personnel so Brown could freely discuss the matter with the
court. The trial court denied the request, concluding Brown failed to demonstrate a
sufficient need to close the courtroom to the public. Notwithstanding the trial court's
refusal to close the courtroom, Brown explained that he and his daughter were threatened
because he had made a proffer of information related to another criminal matter. Brown
claimed he entered the plea agreements so he could ensure his daughter's safety and
indicated some of his house arrest violations were related to obtaining secure housing for
himself and his daughter.
{¶ 16} Brown's trial counsel requested the court sentence Brown to something less
than the joint recommendation, while the state urged the trial court to apply the joint
recommendation. The trial court noted it had not been advised of any risks to Brown's
safety while he was on house arrest. The court found Brown failed to comply with the
conditions of house arrest and that no PSI had been prepared. Despite Brown's
noncompliance with the house arrest conditions, the trial court concluded it was necessary
to deviate downward from the jointly recommended sentence. The court imposed 6 years
of imprisonment in Case No. 17CR-6212, 36 months of imprisonment in Case No. 18CR-
3872, 12 months of imprisonment in Case No. 19CR-4241, 12 months of imprisonment in
Case No. 19CR-5834, and 12 months of imprisonment in Case No. 19CR-5961, with all
sentences imposed consecutively, for a total term of 12 years of imprisonment. Brown
timely appealed from the judgment entries in each of the five cases.
II. ASSIGNMENTS OF ERROR
{¶ 17} Brown assigns the following as trial court error:
[1.] The Trial Court Abused Its Discretion in Denying
Defendant's Request for a Reasonable Continuance of
Nos. 22AP-38, 22AP-39, 22AP-40, 22AP-41 & 22AP-42 7
Defendant's Sentencing, Violating Mr. Brown's Constitutional
Rights to Due Process of Law at his Sentencing.
[2.] The Trial Court Abused Its Discretion in Failing to
Conduct a Hearing on Defendant's Request to Clear the
Courtroom at Sentencing, Violating Mr. Brown's Rights to
Due Process, a Full Allocution, and a Meaningful Mitigation.
[3.] The Sentencing Proceeding Violated Mr. Brown's Rights
to Due Process of Law By Cumulative Error, Resulting in a
Fundamentally Unfair Sentencing Proceeding.
III. LEGAL ANALYSIS
A. Denial of continuance request
{¶ 18} Brown argues in his first assignment of error that the trial court abused its
discretion by denying the request for a continuance of the sentencing hearing. Brown's trial
counsel requested the continuance to try to obtain documents establishing that some of
Brown's house arrest violations were for medical treatment.
1. Standard of review
{¶ 19} " 'The grant or denial of a continuance is a matter which is entrusted to the
broad, sound discretion of the trial judge.' " Columbus v. Catudal, 10th Dist. No. 18AP-
229, 2019-Ohio-1137, ¶ 10, quoting State v. Unger, 67 Ohio St.2d 65, 67 (1981). See also
Ungar v. Sarafite, 376 U.S. 575, 589 (1964) ("The matter of continuance is traditionally
within the discretion of the trial judge, and it is not every denial of a request for more time
that violates due process even if the party fails to offer evidence or is compelled to defend
without counsel."). " 'An appellate court must not reverse the denial of a continuance unless
there has been an abuse of discretion.' " Catudal at ¶ 10, quoting Unger at 67. An abuse of
discretion occurs when a decision is unreasonable, arbitrary, or unconscionable. State v.
Angel, 10th Dist. No. 19AP-771, 2021-Ohio-4322, ¶ 68, citing Blakemore v. Blakemore, 5
Ohio St.3d 217, 219 (1983). There " 'are no mechanical tests for deciding when a denial of
a continuance is so arbitrary as to violate due process' " and the determination must be
made based on the circumstances of each case. Catudal at ¶ 10, quoting Unger at 589.
{¶ 20} In Unger, the Supreme Court of Ohio adopted a balancing test that weighs
the potential prejudice to a defendant resulting from denial of a continuance against
"concerns such as a court's right to control its own docket and the public's interest in the
prompt and efficient dispatch of justice." Unger at 67. The court outlined multiple factors
Nos. 22AP-38, 22AP-39, 22AP-40, 22AP-41 & 22AP-42 8
to be considered when ruling on a motion for continuance, including: (1) the length of the
delay requested, (2) whether other continuances have been requested and received, (3) the
inconvenience to litigants, witnesses, opposing counsel and the court, (4) whether the
requested delay is for legitimate reasons or whether it is dilatory, purposeful, or contrived,
(5) whether the defendant contributed to the circumstance giving rise to the request, and
(6) other relevant factors, depending on the circumstances of each case. Id. at 67-68.
{¶ 21} The trial court did not expressly address the Unger factors in denying
Brown's continuance request. Brown argues the decision is therefore entitled to reduced
deference. In support of this argument Brown cites decisions from the Fourth and Eleventh
District Courts of Appeals suggesting that failure to analyze the Unger factors may
constitute an abuse of discretion. Those two cases, Rice v. Lewis, 4th Dist. No. 09CA3307,
2010-Ohio-1077, and DeFranco v. DeFranco, 11th Dist. No. 2000-L-147 (Sept. 14, 2001),
both involved circumstances where denial of the requested continuance effectively forced
the requesting party to proceed without legal counsel. Denial of Brown's continuance
request in this case did not have the same effect. Additionally, in prior cases we have noted
a trial court's failure to expressly consider the Unger factors without finding it to be a per
se abuse of discretion. See Roncone v. Bialkowski, 10th Dist. No. 06AP-1181, 2007-Ohio-
3326, ¶ 14 (noting that nothing in the record indicated the magistrate engaged in any
consideration of the Unger factors, but not reversing on that basis).
2. Analysis of the Unger factors
{¶ 22} Brown argues the Unger factors weighed strongly in favor of granting his
continuance request, asserting five factors weighed in his favor and only one (the fifth
factor) was neutral. Based on our analysis of the Unger factors, we disagree.
{¶ 23} The first Unger factor is the length of the delay requested. Brown's trial
counsel requested a "reasonable continuance" so that he could "at least try to gather [the
medical] documents." (Dec. 15, 2021 Tr. at 6.) Brown's trial counsel indicated he would
not be able to get the documents in "the next couple of hours," because Brown did not have
them, but claimed one of Brown's friends had the documents. (Dec. 15, 2021 Tr. at 6.) On
appeal, Brown argues his trial counsel sought a brief continuance "numbered in days, not
months." (Appellant's Brief at 22.) We note, however, that Brown's trial counsel also
advised the court he had requested copies of the medical documents while Brown was still
Nos. 22AP-38, 22AP-39, 22AP-40, 22AP-41 & 22AP-42 9
on house arrest and had not received them. This indicates Brown's trial counsel may not
have been able to obtain the documents as quickly as Brown now suggests. Based on the
open-ended nature of the continuance request, combined with the fact that Brown
previously failed to provide the trial court or his counsel with the documents, we conclude
the first Unger factor was, at best, neutral.
{¶ 24} The second Unger factor is whether other continuances had been requested
and received. Brown claims this factor weighed in his favor because it was his first
continuance request. The state asserts that more than 20 continuances had been granted
during the pendency of the five criminal cases; while some were due to COVID-19
restrictions and others were by joint motion, at least 10 continuances were on Brown's sole
motion. In response, Brown claims the earlier continuances occurred during the
"negotiation phase" of the cases and that this was his first continuance request related to
sentencing. (Appellant's Reply Brief at 5.) Brown fails to cite any court decisions adopting
such a bifurcated approach when analyzing whether prior continuances have been granted.
Because Brown had requested and received many prior continuances, the second Unger
factor weighed against granting Brown's request.
{¶ 25} The third Unger factor is the inconvenience to litigants, witnesses, opposing
counsel, and the court resulting from a continuance. Brown argues a continuance would
not have caused any inconvenience, asserting no witnesses were present to speak at
sentencing and that opposing counsel and the court could easily be present for sentencing
in the future. As the trial court noted, however, the original case had been pending on its
docket since 2017, and Brown's additional offenses in the intervening years added to the
court's docket. It is unclear whether there would have been any inconvenience to the state
because the trial court denied the continuance request without asking the prosecutor to
respond. The trial court and the state were present and ready to proceed with sentencing
at the December 15th hearing. Under these circumstances, the third Unger factor was
neutral.
{¶ 26} The fourth Unger factor is whether the requested delay is for legitimate
reasons or is dilatory, purposeful, or contrived. Brown argues his trial counsel had a good-
faith belief that there were medical records that would explain some of the house arrest
violations, and that those records could be obtained if a continuance was granted. He
Nos. 22AP-38, 22AP-39, 22AP-40, 22AP-41 & 22AP-42 10
further argues he received no benefit from delaying the sentencing hearing because he was
incarcerated. The state asserts the continuance request was merely an attempt to delay
sentencing, claiming the medical documentation was not relevant because it would not
excuse all of Brown's house arrest violations. Because Brown was incarcerated awaiting
sentencing and because the purported medical documentation might have justified at least
some of his house arrest violations, there was a legitimate reason for him to seek the
continuance. Therefore, the fourth Unger factor weighed in favor of granting the
continuance.
{¶ 27} The fifth Unger factor is whether the defendant contributed to the
circumstance giving rise to the continuance request. Brown argues he did not contribute to
the need for a continuance because he was incarcerated and lacked access to his medical
records. However, Brown could have provided documentation of his medical treatment to
his counsel, or the trial court, at any point prior to his arrest in December 2021. As noted
above, Brown's trial counsel indicated he had previously requested copies of the relevant
documents and had not received them. Accordingly, the fifth Unger factor weighed against
granting the continuance request.
{¶ 28} Finally, the sixth Unger factor incorporates any other relevant factors,
depending on the unique facts of the case. Brown argues the trial court should have
considered the substantial difference between the potential minimum sentence and the
joint recommendation if he violated the house arrest conditions. Brown further argues the
court should have considered the brief time between his arrest on December 9, 2021, and
the December 15th hearing, and that the court was acting earlier than the scheduled
sentencing date. Regarding the difference between the potential sentences, Brown
admitted that not all his house arrest violations were for medical treatment; therefore, even
if the continuance had been granted and Brown had presented medical records to excuse
some of the violations, the jointly recommended sentence would have remained a possible
punishment. For that same reason, had the trial court waited until January 13, 2022 to
conduct a sentencing hearing, Brown would not have been able to excuse all his house arrest
violations. Because Brown would have been subject to the jointly recommended sentence
even if the continuance had been granted, the sixth Unger factor weighed against granting
the continuance.
Nos. 22AP-38, 22AP-39, 22AP-40, 22AP-41 & 22AP-42 11
{¶ 29} The balance of the Unger factors weighed against granting the continuance
request, with three factors weighing against the request, two being neutral, and only one
weighing in Brown's favor. Brown argues this court has found abuse of discretion in denial
of a continuance request when the Unger factors weighed modestly in favor of the party
seeking the continuance, citing Peters v. Wendy's Internatl., Inc., 10th Dist. No. 03AP-657,
2004-Ohio-1012. Peters involved an appeal to the common pleas court from a denial of an
administrative motion for recognition of additional conditions under a worker's
compensation claim. Peters at ¶ 3. While the appeal was pending, the appellant was
involuntarily committed to a psychiatric ward. Id. at ¶ 7. Her counsel sought a continuance
of at least 90 days for the merits hearing on the administrative appeal so the appellant could
attend the hearing after her involuntary confinement ended, but the common pleas court
denied the request. Id. at ¶ 17. On appeal from the common pleas court, we concluded the
length of the continuance requested was not unreasonable. Id. Based on that and the other
Unger factors, we held that the common pleas court abused its discretion by denying the
continuance request. Id. at ¶ 20.
{¶ 30} Brown argues that because he sought a shorter continuance and faced a
potential lengthy prison term, his case presents a more obvious abuse of discretion than
Peters. Contrary to Brown's argument, Peters is distinguishable from the present case. The
involuntary commitment in Peters prevented the movant from attending the hearing on
the merits of her appeal or assisting her attorney in preparing her case. Id. at ¶ 17.1 By
contrast, in this case Brown had ample opportunity to provide medical documentation to
his trial counsel before being arrested in December 2021. Additionally, as explained above,
several of the Unger factors weighed against granting Brown's continuance request or were
neutral. Therefore, our conclusion that the trial court abused its discretion in Peters does
not dictate a similar result in this appeal.
{¶ 31} Ultimately, Brown fails to demonstrate that he was prejudiced by denial of
his continuance request. Unger at 67; see also State v. Myers, 154 Ohio St.3d 405, 2018-
Ohio-1903, ¶ 92 ("[T]he defendant must show how the denial of a continuance prejudiced
1We further note that the opposing party in Peters did not oppose the continuance request. Peters at ¶ 17. In
the present case, the trial judge denied Brown's continuance request without seeking a response from the state
but based on the other positions taken by the state at Brown's sentencing hearing it appears likely the state
would have opposed the request.
Nos. 22AP-38, 22AP-39, 22AP-40, 22AP-41 & 22AP-42 12
him."); State v. Jones, 10th Dist. No. 15AP-596, 2016-Ohio-4766, ¶ 16 ("Appellant fails to
identify any prejudice resulting from the trial court's denial of his motion for
continuance."). The parties agreed to a joint recommendation of 15 years of imprisonment
if Brown violated the house arrest conditions. As explained above, at the December 15th
hearing Brown admitted that not all his house arrest violations were for medical treatment.
Therefore, even if the continuance had been granted and Brown had provided medical
documentation, there still would have been unexcused violations and he would have been
eligible for the jointly recommended sentence. The trial court had been very clear with
Brown at the plea hearing about the penalties he would face if he violated the house arrest
conditions. Despite Brown's admitted non-medical house arrest violations, however, the
trial court deviated downward from the joint recommendation and sentenced Brown to 12
years of imprisonment. That sentence was less than the jointly recommended 15-year term
and substantially less than the potential maximum term of 21 years. Under these
circumstances, Brown cannot establish that he was prejudiced by the denial of his
continuance request.
{¶ 32} Accordingly, we overrule Brown's first assignment of error.
B. Failure to conduct a hearing on request to close the courtroom
{¶ 33} In his second assignment of error, Brown argues the trial court abused its
discretion by failing to conduct a hearing on his request to close the courtroom to non-
essential personnel. Brown's trial counsel claimed that Brown's safety concerns were a
"perhaps greater reason" for Brown's noncompliance with the house arrest conditions than
his medical issues. (Dec. 15, 2021 Tr. at 8.) Those safety concerns arose from Brown having
provided information regarding an unrelated criminal matter. Brown's counsel observed
that there was an unknown individual in the courtroom and asked the court to close the
proceedings to non-essential personnel so Brown could freely discuss the safety concerns
with the trial court. The trial court summarily denied the request, concluding Brown failed
to make a sufficient showing of necessity to justify closing the courtroom to the public.
{¶ 34} The right to a public trial is guaranteed by the Sixth Amendment to the United
States Constitution and Section 10, Article I of the Ohio Constitution. State v. Long, 10th
Dist. No. 16AP-708, 2017-Ohio-9322, ¶ 15. " 'The public's right to attend criminal trials is
also implicit within the guarantees of the First Amendment.' " Id., quoting State v. Sowell,
Nos. 22AP-38, 22AP-39, 22AP-40, 22AP-41 & 22AP-42 13
10th Dist. No. 06AP-443, 2008-Ohio-3285, ¶ 32. See also E.W. Scripps Co. v. Fulton, 100
Ohio App. 157, 170-80 (8th Dist.1955) (Hurd, J., concurring) (discussing history of "open
court" concept under the Ohio Constitution and common law). The Supreme Court of the
United States has set forth a four-part test for the closure of a criminal hearing: (1) the party
seeking closure must advance an overriding interest that is likely to be prejudiced, (2) the
closure must be no broader than necessary to protect that interest, (3) the trial court must
consider reasonable alternatives to closing the proceeding, and (4) the trial court must
make adequate findings to support the closure. State v. Bethel, 110 Ohio St.3d 416, 2006-
Ohio-4853, ¶ 82, citing Waller v. Georgia, 467 U.S. 39, 48 (1984). We review a trial court's
decision on a motion to close the courtroom for abuse of discretion. See Long at ¶ 22 ("[W]e
find, under these facts, the trial court abused its discretion by closing the courtroom to the
public."). Therefore, we will only reverse the trial court's decision if it was unreasonable,
arbitrary, or unconscionable. Angel at ¶ 68.
{¶ 35} Brown asserts the trial court erred by failing to conduct a hearing on his
request to close the courtroom but also concedes that a "whole separate hearing" was not
required. (Appellant's Reply Brief at 9.) Rather, Brown argues the trial court "need[ed] to
provide some forum for defense counsel to explain the basis for the request to close the
courtroom." (Appellant's Reply Brief at 9.) In this case, Brown's trial counsel had an
opportunity to explain, in broad terms, why Brown wanted the courtroom closed. The trial
court clearly understood the reason for the request but noted "[w]e're here to sentence Mr.
Brown for his crimes, not what he witnessed or didn't witness or might have heard about
on the street." (Dec. 15, 2021 Tr. at 10.) Therefore, the trial court did not abuse its
discretion by failing to conduct a separate hearing on the request.
{¶ 36} Brown further argues that denial of his request to close the courtroom
infringed his right to allocution and prevented him from presenting all mitigating evidence.
With respect to allocution, Crim.R. 32(A)(1) provides that at the time of imposing sentence
the trial court must afford counsel an opportunity to speak on behalf of the defendant and
ask the defendant personally if he wishes to make a statement on his own behalf. "The
requirement of allocution is fulfilled when the court's conduct clearly shows the defendant
and his counsel each had a right to make a statement before sentence is imposed." State v.
Joseph, 10th Dist. No. 13AP-752, 2014-Ohio-2733, ¶ 19. "[T]he purpose of allocution is 'to
Nos. 22AP-38, 22AP-39, 22AP-40, 22AP-41 & 22AP-42 14
permit the defendant to speak on his own behalf or present any information in mitigation
of punishment.' " State v. Beasley, 153 Ohio St.3d 497, 2018-Ohio-493, ¶ 204, quoting
State v. Reynolds, 80 Ohio St.3d 670, 684 (1998). "A trial court does not err by limiting a
defendant's presentence statement to those issues that bear upon the sentence and may
have mitigative weight." Id. In this case, the trial court afforded both Brown and his trial
counsel the opportunity to address the court before the sentence was imposed; therefore,
Brown's right to allocution was not infringed.
{¶ 37} Although Brown argues the trial court's ruling hindered his ability to present
mitigating evidence, he also claims on appeal that the basics of the matters he wished to
discuss with the trial court are "plain from the record." (Appellant's Brief at 40.) Brown
explained to the trial court that he had proffered information related to another criminal
case and that his proffer became public knowledge, resulting in threats to himself and his
daughter. Brown claimed he had been "going from hotel to hotel until we got all our stuff
in storage" because of the threats. (Dec. 15, 2021 Tr. at 13.) Brown then claimed he would
not have signed the plea agreement if not for the threats to his daughter. Thus, the record
reflects that Brown was able to inform the trial court about the safety issues that he claimed
led him to violate the house arrest conditions. There is nothing in the record suggesting
Brown was not able to provide all relevant information to the trial court. Further, there was
no proffer at the trial level or on appeal of any additional information Brown would have
provided if the court had granted his request to close the courtroom. Because Brown
informed the court about his safety concerns despite the denial of his request to close the
courtroom, he fails to demonstrate that he was prejudiced by the denial of that request.
{¶ 38} Accordingly, we overrule Brown's second assignment of error.
C. Cumulative error
{¶ 39} In his third assignment of error, Brown asserts cumulative errors at the
sentencing hearing resulted in a fundamentally unfair proceeding. "Although errors at trial
singularly 'may not rise to the level of prejudicial error, a conviction will be reversed where
the cumulative effect of the errors deprives a defendant of the constitutional right to a fair
trial." State v. Ferrell, 10th Dist. No. 19AP-816, 2020-Ohio-6879, ¶ 42, quoting State v.
DeMarco, 31 Ohio St.3d 191 (1987), paragraph two of the syllabus. Cumulative error cannot
be established "simply by combining [an appellant's] unsuccessful claims together." Id.
Nos. 22AP-38, 22AP-39, 22AP-40, 22AP-41 & 22AP-42 15
See also State v. Graham, 164 Ohio St.3d 187, 2020-Ohio-6700, ¶ 170 ("Each assertion of
ineffective assistance of counsel going to cumulative error depends on the merits of each
individual claim; when none of the individual claims of ineffective assistance of counsel
have merit, cumulative error cannot be established simply by joining those meritless claims
together.").
{¶ 40} Brown alleges the trial court committed five errors that resulted in an unfair
sentencing process: (1) denial of his continuance request, (2) denial of his request to close
the courtroom, (3) failure to inquire into the voluntariness of his plea after he referred to
pressure and threats, (4) failure to reorder a PSI, and (5) conducting the sentencing hearing
earlier than scheduled.
{¶ 41} As discussed above, we conclude the trial court did not err by denying
Brown's continuance request or his request to close the courtroom. Because those claims
are meritless, they cannot contribute to a finding of cumulative error.
{¶ 42} Brown asserts the trial court erred by failing to inquire into the voluntariness
of his pleas when he made statements at the sentencing hearing referring to threats and
pressure. At the sentencing hearing, Brown claimed that "[t]hey threatened my daughter
* * * [t]hat is what even made me sign." (Dec. 15, 2021 Tr. at 12.) Brown further declared
"I would have never signed it, but the pressure, they knew that I was going to sign, because
I kept telling them I need to get out." (Dec. 15, 2021 Tr. at 14.) Brown argues on appeal
that these statements should have led the trial court to re-examine the voluntariness of his
guilty pleas.
{¶ 43} Generally, we have held that a defendant's after-the-fact, self-serving claim
that a plea was not voluntary is insufficient to overcome the presumption that the plea was
voluntary, when nothing else in the record supports the defendant's claim. See State v.
Lopez, 10th Dist. No. 16AP-478, 2017-Ohio-4048, ¶ 26, quoting State v. Honaker, 10th
Dist. No. 04AP-146, 2004-Ohio-6256, ¶ 9, quoting State v. Laster, 2d Dist. No. 19387,
2003-Ohio-1564 (" ' "[W]here nothing in the record supports a defendant's claim that his
plea was not knowingly and voluntarily made other than his own self-serving affidavit or
statement, the record is insufficient to overcome the presumption that the plea was
voluntary." ' "). Here, Brown did not directly request that the court re-examine the
voluntariness of the plea. The trial court thoroughly reviewed the plea agreements with
Nos. 22AP-38, 22AP-39, 22AP-40, 22AP-41 & 22AP-42 16
Brown at the plea hearing and explained the consequences of pleading guilty to each charge.
Brown did not make any comments at the plea hearing suggesting his pleas were
involuntary. At one point during the plea hearing Brown requested additional time to
confer with counsel and the trial court granted a recess so they could confer. Brown also
expressly refuted that he was subject to any pressure at the plea hearing:
THE COURT: As things stand right now, Mr. Brown, is
anybody pressuring you, including the people in the back of the
courtroom that are friends of yours, I guess? Anybody twisting
your arm directly or indirectly to plead these cases out?
THE DEFENDANT: No, sir.
(Apr. 28, 2021 Tr. at 26.)
{¶ 44} Moreover, at the sentencing hearing, Brown did not claim he was innocent;
rather, he alluded to external pressures that motivated him to enter the plea agreements.
Under these circumstances, Brown's vague, self-serving claims at the sentencing hearing
did not require the trial court inquire further. See State v. Darks, 10th Dist. No. 05AP-982,
2006-Ohio-3144, ¶ 18 ("When a defendant protests innocence after a guilty plea has been
accepted, a trial court is not required to inquire into a defendant's reasons for pleading
guilty despite the assertions of innocence."); see also State v. Asher, 1st Dist. No. C-180163,
2019-Ohio-1317, ¶ 7 ("Once a defendant has pled guilty and that plea has been accepted in
accordance with Crim.R. 11, courts are not required to probe into a defendant's reasons for
pleading guilty, despite a later claim of innocence."); State v. Reeves, 8th Dist. No. 100560,
2014-Ohio-3497, ¶ 13 ("[W]hen a defendant makes claims of innocence after a guilty plea
has been accepted, a trial court has no duty to inquire into a defendant's reasons for
pleading guilty.").
{¶ 45} Brown also claims the trial court erred by not re-ordering a PSI and by
conducting the sentencing earlier than originally scheduled. Brown argues it was arbitrary
and unreasonable to proceed with sentencing at the December 15th hearing because the
court had previously entered an order scheduling sentencing for January 13, 2022, and
because the order setting the December 15th hearing did not indicate it would be a
sentencing hearing.
{¶ 46} "Generally, an appellate court will not consider any error which could have
been raised in the trial court but [was not called] to the trial court's attention at a time when
Nos. 22AP-38, 22AP-39, 22AP-40, 22AP-41 & 22AP-42 17
such error could have been avoided or corrected by the trial court." State v. Wilkins, 10th
Dist. No. 18AP-797, 2020-Ohio-3428, ¶ 72. See also Goldfuss v. Davidson, 79 Ohio St.3d
116, 121 (1997) ("[W]e have long recognized, in civil as well as criminal cases, that failure to
timely advise a trial court of possible error, by objection or otherwise, results in a waiver of
the issue for purposes of appeal."). In this case, Brown failed to request a PSI or object to
proceeding with sentencing at the December 15th hearing. He claims that denial of his
continuance request "was a clear signal to defense counsel that additional motions for a
continuance were futile acts." (Appellant's Reply Brief at 18.) However, the December 15th
hearing began with a discussion of jail time credit, which was a clear indication that the trial
court was contemplating sentencing issues—yet Brown's trial counsel failed to request a PSI
or object to proceeding with sentencing at that point, before the continuance request was
denied. Notably, Brown's trial counsel failed to call the court's attention to the order
scheduling a sentencing hearing for January 13, 2022, or request that the court defer
sentencing until that scheduled date. Thus, Brown failed to request a PSI or object to
proceeding with sentencing at a time when the trial court could have addressed those
issues.
{¶ 47} None of the individual claims of error asserted in Brown's third assignment
of error have merit; therefore, he cannot demonstrate cumulative error by combining these
meritless claims. Accordingly, we overrule Brown's third assignment of error.
IV. CONCLUSION
{¶ 48} For the foregoing reasons, we overrule Brown's three assignments of error
and affirm the judgments of the Franklin County Court of Common Pleas.
Judgments affirmed.
BEATTY BLUNT and McGRATH, JJ., concur.
_____________ | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491804/ | MEMORANDUM OPINION
ROBERT A. MARK, Bankruptcy Judge.
THIS CAUSE came before the Court on the Trustee’s Renewed Motion for Partial Summary Judgment on a Complaint for turnover of property to the estate pursuant to 11 U.S.C. § 542. The basis for the complaint, originally filed by Cascade International, Inc. (“Cascade”) as debtor in possession on February 4, 1992,1 was that the defendant, Lawrence Moses (“Moses”), while a director of Cascade, realized profits from “short-swing” trades in Cascade stock, which pursuant to § 16(b) of the Securities Exchange Act inure to and are the property of Cascade.2
Moses’ answer to the Complaint invoked the Fifth Amendment privilege against self-incrimination, which Moses requested to be *323considered a general denial, and alleged as an affirmative defense, inter alia, that the complaint was barred by the doctrine of in pari delicto.3 Moses also filed a counterclaim against Cascade and other parties, alleging a massive fraud on the part of Cascade, Victor Ineendy (President, CEO and chairman of the board of Cascade), and others, with the known purpose to induce Moses to serve as a director and to be used as an “unwitting conduit” in a fraudulent scheme to distribute counterfeit stock.4 On March 6, 1992, Moses filed a motion to withdraw the reference of this adversary proceeding to the United States District Court and to consolidate the proceeding with other actions pending in that court.
On April 22, 1993, Cascade filed a motion for partial final summary judgment on the issue of liability, without seeking a determination of damages. After hearing argument on May 25, 1993, this Court reserved ruling for sixty days to allow the District Court additional time to consider the motion to withdraw reference. The District Court did not rule and the Trustee renewed the motion for summary judgment on July 29, 1993. The renewed motion was heard on September 23, 1993.
Cascade was, at all relevant times, a publicly owned corporation whose stock was regularly traded on a national stock exchange. Moses does not contest that he was a member of the Board of Directors of Cascade and a statutory insider under § 16(b), and was also the beneficial owner of PAL Leasing Company. Moses also does not contest that individually and through PAL Leasing Company, he made numerous purchases and sales of Cascade common stock between January 1991 and October 1991, as described in Form 4’s filed by Moses with the Securities and Exchange Commission.5 This Court has already ruled that the stocks traded by Moses were “equity securities” within the meaning of § 16(b), regardless of whether they were unauthorized or “counterfeit.”
The only remaining issue that would preclude summary judgment is whether the defense of in pari delicto raised by Moses may bar the Trustee’s recovery on behalf of Cascade. The parties have submitted extensive memoranda of law on this issue. After full consideration of the arguments briefed and addressed at hearing, and review of the relevant statutes and cases, the Court finds that: 1) in pari delicto is a potential defense to an action under § 16(b); 2) to establish the defense, the defendant must prove that the plaintiff had substantially equal responsibility for the wrongful activity, and that preclusion of the suit would not mitigate the effectiveness and purpose of the securities laws and their underlying policies; 3) there is no evidence in the record to suggest that Cascade bears substantially equal responsibility for Moses’ short-swing trades in violation of § 16(b), thus falling to establish the factual predicate for in pari delicto; and 4) even if such facts existed, precluding this action would significantly mitigate the effectiveness of § 16(b)’s prohibition against short-swing trading and undermine that section’s policies. Thus, there is no genuine issue as to any material fact, and the Trustee is entitled to partial summary judgment on liability on its complaint for turnover of property to the estate.6
*324
DISCUSSION
I.
The first matter for determination is whether the defense of in pari delicto (hereafter, “IPD”) is available at all in an action under § 16(b) of the Securities Exchange Act. Section 16(b) imposes strict liability on statutory insiders who realize a profit from short-swing trades in the stock of the company of which they are an insider. Determining the applicability of IPD to § 16(b) requires interpretation of the Supreme Court’s decision in Pinter v. Dahl, 486 U.S. 622, 108 S.Ct. 2063, 100 L.Ed.2d 658 (1988). In Pinter, the court ruled that the IPD defense does apply, within a circumscribed scope, to an action under § 12(l) of the Securities Act for rescission of the purchase of unregistered securities. Id. at 635, 108 S.Ct. at 2072.
The Supreme Court held in Pinter that the applicability of the IPD defense to a § 12(l) action is determined by applying the test described in Bateman Eichler, Hill Richards, Inc. v. Berner, 472 U.S. 299, 105 S.Ct. 2622, 86 L.Ed.2d 215 (1985). Pinter, 486 U.S. at 635-86, 108 S.Ct. at 2072. Bateman Eichler provides that IPD is available “only where (1) as a direct result of his own actions, the plaintiff bears at least substantially equal responsibility for the violations he seeks to redress, and (2) preclusion of suit would not significantly interfere with the effective enforcement of the securities laws and protection of the investing public.” Bateman Eichler, 472 U.S. at 310-311, 105 S.Ct. at 2629.
Although Pinter did not specifically hold that the IPD defense was also applicable to an action under § 16(b), the clear effect of its language and reasoning is to make the defense at least potentially available in any private action under the Securities Act or Securities Exchange Act, including § 16(b): “Thus, we conclude that Bateman Eichler provides the appropriate test for allowance of the in pari delicto defense in a private action under any of the federal securities laws.” Pinter, 486 U.S. at 635, 108 S.Ct. at 2072 (emphasis added). Thus, the two-prong Bateman Eichler test governs whether the defense of in pari delicto is available to Moses in the instant action under § 16(b).7 The viability of Moses’ IPD defense depends on whether he can meet the criteria required by Bateman Eichler.
II.
The first prong of the Bateman Eichler test provides that “a defendant cannot escape liability unless, as a direct result of the plaintiffs own actions, the plaintiff bears at least substantially equal responsibility for the underlying illegality.” Pinter, 486 U.S. at 635-36, 108 S.Ct. at 2072. The Pinter decision further clarifies that “the plaintiff must be an active, voluntary participant in the unlawful activity that is the subject of the suit.” Id. at 636, 108 S.Ct. at 2072.
Moses argues that genuine issues of material fact exist as to whether Cascade is “substantially equally responsible” for the transactions at issue. The basis for Moses’ assertion is: 1) that Cascade has admitted, by its response to Moses’ counterclaim, that Victor Incendy, through Cascade, carried on a massive fraud that included the issuance and distribution of counterfeit stock certificates; 2) that Cascade’s interim chairman and general counsel, Aaron Karp, made similar admissions in a letter to shareholders in December 1991; 3) that the Bankruptcy Examiner’s reports also conclude that Incendy and Cascade engaged in a scheme involving fraudulent stock certificates in order to allow the reporting of materially overstated earnings and income; and 4) that Moses has obtained a default on his counterclaims against Incendy and others alleging securities violations and common law fraud. Moses concludes that on the basis of these facts and admissions, a juiy could find that Cascade was an active, voluntary participant in the unlawful activity that is the subject of this suit.
*325The facts and admissions relied upon by Moses may establish that Cascade, Incendy and others made fraudulent misrepresentations or issued and distributed unauthorized stock certificates. They have no bearing, however, on whether Cascade was an active, voluntary participant in the unlawful activity that is the subject of the present action— namely, Moses’ realization of profits on short-swing trades in Cascade stock. The only relevant activities for the purpose of a § 16(b) action are the purchase and sale of Cascade securities by a statutory insider during a six month period. Moses has come forward with nothing that implicates Cascade in these actions.
The Supreme Court’s application of the “substantially equal responsibility” test bears out Moses’ failure on the threshold factual requirements. In Pinter, the plaintiff Dahl had invested in oil and gas leases with defendant Pinter. Dahl also informed other investors of the venture, who invested funds and completed subscription agreement forms prepared by Pinter which indicated that the interests were being sold without benefit of registration with the Securities and Exchange Commission. Pinter, 486 U.S. at 625-26, 108 S.Ct. at 2067.
When the venture failed, Dahl and the other investors sued for rescission of the sales under § 12© of the Securities Act for unlawful sale of unregistered securities. In defense, Pinter alleged that Dahl was in pari delicto, because Dahl’s actions were a “preeminent factor in the violations he seeks to redress.” Id. at 640, fn. 15, 108 S.Ct. at 2075, fn. 15. The Supreme Court found that the first prong of the test for IPD would be established if the plaintiff were “equally responsible for the actions that render the sale of the unregistered securities illegal — the issuer’s failure to register the securities before offering them for sale, or his failure to conduct the sale in such a manner as to meet the registration exemption provisions.” Id. at 636, 108 S.Ct. at 2073. Factors to consider included the extent to which the plaintiff and defendant cooperated in the scheme to distribute unregistered securities, and whether the plaintiff induced the issuer not to register. Id. at 637, 108 S.Ct. at 2073. On the record before it, the Court could not determine whether Pinter had met the factual threshold for the first prong.
In Bateman Eichler, investors sued corporate insiders and broker-dealers under § 10(b) of the Securities Exchange Act and SEC Rule 10b-5, alleging that the investors were fraudulently induced into purchasing securities by misrepresentations that the sellers conveyed material non-public information to them. Bateman Eichler, 472 U.S. at 301, 105 S.Ct. at 2624. The defendants argued that the tippees, by voluntarily choosing to trade on inside information, were equally responsible for any violation of the securities laws. Id. at 312, 105 S.Ct. at 2630. The Supreme Court found that the in pari delicto defense did not apply since the relative culpability of tipper and tippee is not substantially equal: 1) a tippee’s conduct does not violate § 10(b) and Rule 10b-5 unless the tippee also owes a duty of disclosure, which arises only derivatively from an insider’s duty; and 2) a tippee’s conduct usually only amounts to a fraud against other individual shareholders, while an insider tipper breaches a fiduciary duty to the issuer, and also commits a fraud against the tippee.
Moses has placed nothing in the record to show that Cascade initiated, induced, or was responsible for Moses’ transactions in Cascade stock during the periods alleged in the Complaint, much less that Cascade bears substantially equal responsibility.8 In short, the in pari delicto defense is unsupported by any facts to satisfy the first prong of the Bateman Eichler test. Since the defense fails, the Trustee is entitled to partial summary judgment.9
*326III.
Even if there were facts linking Cascade to Moses’ § 16(b) violations, denial of the IPD defense would nonetheless be mandated by the second prong of the Bateman Eichler test. The second prong requires that preclusion of the suit would not substantially interfere with effective enforcement of the securities laws and the protection of the investing public nor “offend the underlying statutory policies.” Pinter, 486 U.S. at 637-38, 108 S.Ct. at 2073; Bateman Eichler, 472 U.S. at 311, 105 S.Ct. at 2629.
The stated statutory purpose of § 16(b) is to prevent “the unfair use of information which may have been obtained [by an insider] ... irrespective of any intention” on the part of the insider. 15 U.S.C. § 78p(b). The underlying statutory policies embodied in § 16(b) were described recently by the Supreme Court in Gollust v. Mendell, 501 U.S. 115, 111 S.Ct. 2173, 115 L.Ed.2d 109 (1991): the statute is an “important part of Congress’ plan ... to ‘insure the maintenance of fair and honest markets,’ ” for which purpose “Congress enacted a ‘flat rule ... taking the profits out of a class of transactions in which the possibility of abuse was believed to be great.’” Id., 501 U.S. at 121, 111 S.Ct. at 2178, 115 L.Ed.2d at 118 (citations omitted). Section 16(b) is a remedial statute designed to ensure and maintain a “prophylactic standard of behavior” by imposing strict liability for an entire class of transactions, regardless of intent. Synalloy v. Gray, 816 F.Supp. 963 (D.Del.1993).
In applying the second prong of Bateman Eichler, this Court is mindful of the Supreme Court’s guidelines in Pinter that “public policy implications be carefully considered before the [IPD] defense is allowed ... [which] ensures that the broad judge-made law does not undermine the congressional policy favoring private suits as an important mode of enforcing federal securities statutes.” Pinter, 486 U.S. at 633, 108 S.Ct. at 2071 (citations omitted). Here, a private suit is the only mode of enforcing § 16(b)’s prohibition against short-swing profits.
The circumstances in which IPD could be a valid defense to a § 16(b) action are very narrowly circumscribed by the purpose and policy of that section and the fact that an action on behalf of the corporation is the only means of enforcing its provisions.10 From similar reasoning, decisions prior to Pinter almost universally found that equitable defenses are not available in a § 16(b) action. See, e.g., Texas Int’l Airlines, Inc. v. National Airlines, Inc., 714 F.2d 533 (5th Cir.1983); Magida v. Continental Can Co., 231 F.2d 843 (2d Cir.), cert. denied, 351 U.S. 972, 76 S.Ct. 1031, 100 L.Ed. 1490 (1956).11
Allowing Moses to avoid liability through an IPD defense would be inappropriate and contrary to the policy of § 16(b) and the securities laws in general. Although Cascade may have engaged in extensive fraudulent activities, including the issuance of unauthorized (and ultimately worthless) stock certificates, § 16(b) serves a much narrower purpose — to prevent insiders from profiting on short-swing trades in the stock of the company of which they are an insider. This Court can find no statutory purpose or policy served by allowing Moses to retain profits from trades of Cascade’s stock, rather than returning those profits to Cascade as commanded by statute.
Moses argues that, due to the limited funds in Cascade’s coffers and the fact that Cascade is in bankruptcy, any monies recovered from him on behalf of Cascade will go to creditors of Cascade rather than shareholders, and that the purpose of § 16(b) therefore will not be served. This argument fails *327to explain why Moses should thereby be entitled to a windfall from his profits, and does not alter this Court’s analysis. He also argues that, because he is a defendant in several shareholders’ class actions for securities law violations, requiring turnover to the estate will result in recovery from “the same source and for essentially the same wrong.” This argument also is without merit. No other action in which Moses is named seeks recovery on behalf of Cascade for profits realized in contravention of § 16(b). Any liability Moses may have for other securities law violations is separate from his legal obligation to turn over any short-swing profits to Cascade under § 16(b).
Thus, the Court finds that even if there were sufficient facts to establish that Cascade was in pari delicto as to Moses’ trades, precluding suit on behalf of Cascade would substantially interfere with effective enforcement of § 16(b) and would undermine its underlying policy to take the profit out of short-swing transactions by insiders. As such, under the second prong of the Bate-man Bidder test, the defense must fail.
CONCLUSION
Although the defense of in pari delicto potentially is available to a defendant in an action under § 16(b) of the Securities Exchange Act, Moses has presented no facts that would prove that Cascade bears substantially equal responsibility for the unlawful activities that give rise to this action. Moreover, allowing Moses to preclude recovery by the Trustee due to misconduct by Cascade would significantly mitigate the effectiveness of § 16(b)’s prohibition against insider profits from short-swing transactions. Thus, there is no genuine issue of material fact and the Trustee is entitled to partial judgment as a matter of law establishing liability on its complaint for turnover of property to the estate.
. The Trustee was substituted as party for Cascade nunc pro tunc to February 7, 1992 by this Court's order of June 21, 1993.
. Section 16(b) of the Securities Exchange Act, codified at 15 U.S.C. § 78p(b), provides in relevant part:
For the purpose of preventing the unfair use of information which may have been obtained by such beneficial owner, director, or officer by reason of his relationship to the issuer, any profit realized by him from any purchase and sale, or any sale and purchase, of any equity security of such issuer ... within any period of less than six months ... shall inure to and be recoverable by the issuer, irrespective of any intention on the part of such beneficial owner, director, or’ officer in entering into such transaction of holding the security purchased or of not repurchasing the security sold for a period exceeding six months. Suit to recover such profit may be instituted at law or in equity in any court of competent jurisdiction by the issuer, or by the owner of any security of the issuer in the name and in behalf of the issuer if the issuer shall fail or refuse to bring such suit within sixty days after request or shall fail diligently to prosecute the same thereafter....
. “The equitable defense of in pari delicto, which literally means 'in equal fault,' is rooted in the common-law notion that a plaintiff's recovery may be barred by his own wrongful conduct." Pinter v. Dahl, 486 U.S. 622, 632, 108 S.Ct. 2063, 2070, 100 L.Ed.2d 658 (1988).
. The possibility of far-reaching fraud and other securities violations on the part of Cascade, In-eendy and others presently is the subject of a plethora of lawsuits pending in the United States District Court for the Southern District of Florida. Moses has been named or expects to be named as a defendant in many of these actions. Victor Ineendy and John Sirmans (Cascade's vice president) also were named as defendants in a criminal indictment in New York for conduct related to Cascade.
. The motion for summary judgment is only addressed to the issue of liability. Accordingly, the measure of damages (i.e., the profits realized by Moses from these transactions) is not a subject of this opinion.
. On February 24, 1994, the Court announced its ruling on the record together with its findings and conclusions. An order in accordance with the findings and conclusions was entered on March 9, 1994. This Memorandum Opinion incorporates and supersedes the findings announced on the record.
. Pinter rejected the argument that IPD is not available in a strict liability action, in that a § 12(Z) cause of action for rescission of the purchase of an unregistered security also creates strict liability. See, Pinter, 486 U.S. at 633-34, 108 S.Ct. at 2071: “We feel that the ... notion that the in pari delicto defense should not be allowed in actions involving strict liability offenses is without support in history or logic.”
. The Supreme Court in Pinter remarked that mere knowledge of a violation (in this case, Cascade's likely knowledge of Moses' transactions) is insufficient to establish substantially equal responsibility for the purpose of IPD. See Pinter, 486 U.S. at 636, 108 S.Ct. at 2072.
. Pursuant to Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986), this Court shall enter summary judgment if the non-moving party has failed to make a sufficient showing on an essential element of his case with respect to which he has the burden of proof.
. Conceivably, allowing the defense in all circumstances would permit an insider who controls the issuing corporation to manufacture his own IPD defense, allowing him to retain short-swing profits and rendering § 16(b) a nullity.
. These cases did not specifically discuss IPD, and their holdings may be called into doubt by Pinter's determination that IPD potentially applies to any private action under the securities laws. Even so, their reasoning still has some bearing on the analysis of the policies underlying § 16(b) under the second prong of the Bateman Eichler test. At least one District Court case, decided subsequent to Pinter, has suggested that equitable defenses to a § 16(b) action based on waiver, release or estoppel are insufficient "as a matter of law," although the case does not directly address Pinter or IPD. See Synalloy v. Gray, 816 F.Supp. 963, 969 (D.Del.1993). | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491805/ | OPINION AND ORDER DISMISSING CASE WITH PREJUDICE
WALTER J. KRASNIEWSKI, Bankruptcy Judge.
This matter is before the Court upon Virgil and Diane Hildreth’s (the “Debtors”) “Notice Of Dismissal” which this Court has treated as a motion to dismiss the Debtors’ chapter 12 case under 11 U.S.C. § 1208(b) and the objections of Fahey Banking Company (“Fa-hey”) thereto. Fahey has also moved that the Court sanction the Hildreths and their counsel Charles Ewing (“Ewing”), ‘Void Unauthorized Lien of Charles Ewing”, order “Denial and Disgorgement of Attorney Fees” from Ewing, and order an “Examination of Debtors’ Transactions with Ewing”. The Court finds that the Debtors’ chapter 12 case should be dismissed and, further, that the Debtors should be prohibited from filing a petition under title 11 for 180 days for failure to appear before the court in proper prosecution of their bankruptcy case. The Court further finds that Fahey’s motion for sanctions against Ewing and the Debtors is not well taken and should be denied. Lastly, the Court finds that Fahey’s motions to void lien, disqualify Ewing as Debtors’ counsel, deny Ewing’s fees and order disgorgement of funds, and to order an examination of the Debtors’ transactions with Ewing should be dismissed as moot.
FACTS
In deciding this motion, the Court takes judicial notice of the Debtors’ bankruptcy schedules and of the June 8, 1993 hearing at which the Court dismissed the Debtors’ prior chapter 11 case. See Job v. Calder (In re Calder), 907 F.2d 953, 955, n. 2 (10th Cir.1990) (per curiam) (judicial notice of contents of statement of affairs and bankruptcy schedules proper); In re Dooley, 116 B.R. 573, 576 (Bankr.S.D.Ohio 1990) (court may properly consider record of prior adversary proceeding in deciding motion).
The Debtors’ filed a bankruptcy petition under chapter 11 of title 11 on July 15, 1992 (the “First Petition”). The Court dismissed the First Petition at a hearing on June 8, 1993 because of the Debtors’ unreasonable delay which was prejudicial to creditors under § 1112(b)(3) (the “Chapter 11 Hearing”).
Subsequently on August 2, 1993, the Debtors filed the instant petition under chapter 12 (“the Second Petition”). The Court ordered that a confirmation hearing be held on December 22, 1993 for the Debtors’ plan of reorganization (the “Order”). See Order dated November 9, 1993. The Order also required the Debtors to file a memorandum in support of confirmation (the “Memorandum”) on or before 5 days prior to December 22, 1993.
The Debtors faded to file the Memorandum as required by the Order. Furthermore, on the date set for the confirmation hearing Ewing informed the Court that the Debtors would not be appearing at the confirmation hearing as they were voluntarily dismissing their chapter 12 case. On December 27, 1993, the Debtors filed a “Notice of Dismissal” with the Court.
As the Court previously noted at the Chapter 11 Hearing, the Debtors’ continual failure to assign any value on their bankruptcy schedules to a remainder interest in 140 acres of land which they hold subject to the *431interest of a 93 year-old life tenant is unjustifiable (the “Remainder Interest”).
The Debtors have consistently failed to provide information as to the value of crops including corn, beans, and wheat (the “Crops”) despite Mr. Hildreth’s testimony at the Chapter 11 Hearing that he was able to estimate these values.
Moreover, as in the bankruptcy schedules filed with the First Petition, the Debtors have failed to provide any data as to the regular income and expenses from their farm business. See Schedule I; Schedule J. Again, the Debtors have failed to provide financial projections. See Schedule J.
DISCUSSION
Applicable statutes:
Section 349 provides that:
[ujnless the court, for cause, orders otherwise, the dismissal of a ease under this title does not bar the discharge, in a later ease under this title, of debts that were dischargeable in the case dismissed; nor does the dismissal of a case under this title prejudice the debtor with regard to the filing of a subsequent petition under this title except as provided in section 109(f) of this title.
Section 109(g) provides that:
Notwithstanding any other provision of this section, no individual or family farmer may be a debtor under this title who has been a debtor in a case pending under this title at any time in the preceding 180 days if—
(1) the case was dismissed by the court for willful failure of the debtor to abide by orders of the court, or to appear before the court in proper prosecution of the case[.]
Section 1208 directs a bankruptcy court to dismiss a case under chapter 12 “[o]n request of the debtor at any time”. 11 U.S.C. § 1208(b). Nonetheless, the Debtors’ “Notice of Dismissal” misapprehends the nature of a dismissal under § 1208(b). This statutory provision is not self-executing upon the Debtors’ notice to the Court. See Graven v. Fink (In re Graven), 936 F.2d 378, 385 (8th Cir.1991) (noting that “[njothing in subsection (b) requires that a court act immediately upon a debtor’s request for a voluntary dismissal”) (citation omitted).
In dismissing a bankruptcy case, § 349 permits a court “for cause” to bar the discharge of debts that were dischargeable in the bankruptcy case or to limit a debtor’s filing of a subsequent petition pursuant to § 109(g). See 11 U.S.C. § 349(a); see also Frieouf v. United States (In re Frieouf), 938 F.2d 1099, 1102 n. 3 (10th Cir.1991) cert. denied Frieouf v. United States, — U.S. -, 112 S.Ct. 1161, 117 L.Ed.2d 408 (1992) (stating that “[s]ection 109(f) was redesignat-ed section 109(g) by the Bankruptcy Judges, United States Trustees and Family Farmer Act of 1986, Pub.L. No. 99-554. A conforming amendment to section 349(a) was inadvertently not enacted”.).
Dismissal Under § 109(g)(1)
The Court finds that the Debtors’ actions warrant dismissal under § 109(g)(1).
“[R]epeated misconduct supports an inference of willfulness”. In re King, 126 B.R. 777, 780 (Bankr.N.D.Ill.1991) (citation omitted); see also In re Miller, 143 B.R. 815, 818 (Bankr.W.D.Pa.1992) (observing that “[a] finding of willfulness ... requires a showing that debtors had notice of their responsibility and intentionally disregarded it or demonstrated ‘plain indifference’”).
The Court placed the Debtors squarely on notice at the Chapter 11 Hearing that the information provided in their bankruptcy schedules did not satisfy their fiduciary duties to creditors or to this Court. Notwithstanding this admonition, the Debtors failed to assign any value to the Remainder Interest or the Crops in their bankruptcy schedules filed with the Second Petition. Significantly, the Debtors have again failed to provide this Court or their creditors with bankruptcy schedules which reflect their farm income or expenses. The Debtors have also failed to provide projected income and expenses figures in their chapter 12 bankruptcy schedules, just as they failed to provide such figures in their chapter 11 schedules. The Debtors’ repeated failure to provide crucial financial data demonstrates a *432“plain indifference” to their obligations under the Bankruptcy Code.
The Debtors’ failure to comply with their financial reporting obligations along with the Debtors’ failure to file the Memorandum represents both a willful failure to abide by orders of court and a willful failure to appear before the Court in proper prosecution of this bankruptcy case under § 109(g)(1). See In re Neill, 158 B.R. 93 (Bankr.N.D.Ohio 1993) (failure to submit court-ordered affidavit, attempt to mislead court as to amount of mortgage arrearages and evidence of bad faith warranted prohibition on filing petition for 180 days); In re Berryhill, 127 B.R. 427 (Bankr.N.D.Ind.1991) (failure to timely file operating reports, plan, disclosure statement, and tax return warranted dismissal under § 109(g)(1)); see also In re Walton, 116 B.R. 536 (Bankr.N.D.Ohio 1990) (prohibition on refiling petition for two years warranted in light of debtor’s bad faith); c.f. In re Pappalardo, 109 B.R. 622 (Bankr.S.D.N.Y.1990) (debtors’ recklessness indifference in failing to attend § 341 meeting which was scheduled in prior bankruptcy and failure to make any payments under prior proposed chapter 13 plan represented willful failure to abide by court orders and thus debtors’ were barred from filing petition for 180 days).
The Court farther views the Debtors’ failure to appear for the confirmation hearing as a willful failure to appear before the Court in proper prosecution of this bankruptcy case.
Sanctions Under Bankruptcy Rule 9011
Lastly, the Court finds that Fahey’s motion for sanctions against the Debtors and Ewing is not well taken and should be denied. Dismissal of the Debtors’ bankruptcy case is, indeed, a harsh sanction. Moreover, Fahey has not persuaded the Court that an award of monetary sanctions against Ewing is warranted.
In light of the foregoing, it is therefore
ORDERED that Virgil and Diane Hil-dreth’s motion to dismiss their chapter 12 case be, and it hereby is, granted. It is further
ORDERED that Virgil and Diane Hildreth shall not file, and the Clerk of Court shall not accept from Virgil and Diane Hildreth for filing, another petition for relief under the Bankruptcy Code for 180 days from the date of this opinion and order. It is further
ORDERED that Fahey’s motion for sanctions against Virgil Hildreth, Diane Hildreth, and Charles Ewing be, and it hereby is, denied. It is further
ORDERED that Fahey’s motions to ‘Void Unauthorized Lien of Charles Ewing”, to “Disqualify [Ewing] as Debtors’ Counsel”, for “Denial and Disgorgement of Attorney Fees” and “For Examination of Debtors’ Transactions with Ewing” be, and they hereby are, dismissed as moot. It is further
ORDERED that notice of the dismissal of this chapter 12 case shall be mailed to all creditors and parties in interest. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491806/ | FINDINGS OF FACT AND CONCLUSIONS OF LAW
GEORGE L. PROCTOR, Bankruptcy Judge.
This case came before the Court for confirmation of debtor’s chapter 12 plan on December 9, 1993. Farm Credit of North Florida, ACA (“association”) objects to confirmation of the plan. Upon the evidence presented, the Court enters these findings of fact and conclusions of law:
Findings of Fact
The association is a member-owned agricultural credit cooperative association which provides credit and credit-related services to eligible borrowers. The association is part of the farm credit system established by the Farm Credit Act (“FCA”) 12 U.S.C. § 2001 et seq.
Debtor is a dairy farmer who qualifies as a family farmer under the bankruptcy code. Debtor received a loan from the association in the amount of $320,000.00 on December 7, 1988. The loan is secured by debtor’s cattle, milk, contract rights, interests in the association and any proceeds of the security. The outstanding balance of the loan as of November 22, 1993, was $11,446.67.
On November 18, 1983, the association loaned debtor $48,000.00 secured by a mortgage on debtor’s principal residence which is not located on the dairy farm. The outstanding balance of this loan as of November 22, 1993, was $36,056.22.
Pursuant to the FCA and the association’s bylaws, debtor was required to purchase stock in the association at the time he received the livestock and mortgage loans. Debtor was required to purchase $1,545.00 of Class B stock in conjunction with the mortgage loan and $1,000.00 worth of Class C stock in conjunction with the livestock loan. Debtor also holds $24,082.11 of allocated capital surplus of the association.
Debtor filed his chapter 12 petition on October 27, 1993. On the same day debtor filed his first proposed chapter 12 plan which proposes to pay $10,000.00 over sixty months in full satisfaction of the debt owed the association. The association objected to debtor’s proposed plan on numerous grounds, including the failure of the plan to account for the home mortgage loan obligation.
Debtor filed a modified plan on December 2,1993. The modified plan proposes setoff of the value of the Class A and Class B capital stock and allocated surplus against the balance of the livestock loan in full satisfaction *520of that debt. The plan also proposes applying the remaining stock and allocated surplus to the balance of home mortgage loan. Debtor proposes to pay the remainder of the mortgage over sixty months through the plan.
The association filed an objection to debt- or’s modified plan. At the confirmation hearing, all issues as to confirmation were resolved except the association’s objection to confirmation based upon the proposed setoff.
Conclusions of Law
The association argues that debtor may not setoff the value of his stock and equity interests in the association without violating the FCA and, because the forced retirement of stock and payment of allocated surplus violates the FCA, it also violates § 1225(a)(3) of the code which requires a chapter 12 plan be proposed in good faith and not by any means forbidden by law. 11 U.S.C. § 1225(a)(3). The association argues that pursuant to the FCA and the bylaws of the association only the association’s board of directors possess the discretion to retire stock and, consequently, debtor does not have the right to force retirement of stock.
Conversely, debtor points to 11 U.S.C. § 1222(b)(2) which allows a chapter 12 debtor to modify the rights of its secured creditors, and 11 U.S.C. § 1222(b)(8) which provides a debtor with the option of selling or distributing property of the estate among those having an interest in the property. Debtor argues that the FCA does not limit these rights.
Given the apparently conflicting statutory schemes of the FCA and the bankruptcy code, the question the Court must answer is whether the statutes truly conflict and cannot be reconciled or whether the acts may be reconciled. If the acts may be reconciled the Court must determine how they coexist and whether a chapter 12 debtor may offset the amount of stock and equity interests in the association held against the obligations owed the association.
Case Law
The Ninth Circuit bankruptcy appellate panel in In re Davenport, 153 B.R. 551 (9th Cir. BAP 1993) and the district court for the Southern District of Ohio in In re Shannon, 100 B.R. 913 (S.D.Ohio 1989) have held that the FCA and chapter 12 conflict cannot be reconciled because the FCA prohibits the forced retirement of stock while the bankruptcy code allows setoff. Both courts applied the maxim of statutory construction that the more specific statute controls over the more general regardless of priority of enactment and reached opposite results. The Davenport court held that the bankruptcy code is more specific and controls over the FCA, and the bankruptcy code allows a debt- or to setoff farm credit stock. The Shannon court held that the FCA is the more specific act and prohibits setoff even in bankruptcy. Other courts that have addressed this issue have held that the acts are reconcilable, but again, the case law supports both a finding that setoff is allowable and that it is not. In In re Massengill, 100 B.R. 276 (E.D.N.C.1988) the Court found that the FCA and the code could be reconciled. The court then held that excepting farm credit stock and equity interests from the’ application of § 1222(b)(2) would not inhibit a debtor’s ability to restructure his obligations, because the debtor would be free to alter all other terms of his secured obligations. Thus the congressional intent underlying chapter 12 would be fulfilled while the congressional intent to stabilize the capital structure of the farm credit system would be protected by prohibiting surrender of farm credit stock and equity interests. The Massengill court reversed the bankruptcy court’s allowance of setoff and concluded that a chapter 12 debtor could not setoff the amount of farm credit stock and equity interests against the amount owed the farm credit association.
The majority of courts have held that the code and the FCA are reconcilable and have allowed chapter 12 debtors to offset their farm credit stock and equity interests to decrease the amount of debt owed to a farm credit association. See, In re Neff, 89 B.R. 672 (Bankr.S.D.Ohio 1988); In re Cansler, 99 B.R. 758 (W.D.Ky.1989); In re Wright, 103 *521B.R. 905 (Bankr.M.D.Tenn.1989); In re Arthur, 86 B.R. 98 (Bankr.W.D.Mich.1988); In re Ivy, 86 B.R. 623 (Bankr.W.D.Mo.1988). These courts have held that the FCA applies in the ordinary course of business to control the financial relationships of the institutions within the farm credit system and the individual borrower’s relationships within that system, but in the unusual case of the chapter 12 the ordinary course rules of the FCA do not limit the broad powers given the chapter 12 debtor to restructure his debt.
Reconciliation
This Court agrees with the majority view that the bankruptcy code, and specifically chapter 12, may be reconciled with the FCA. In interpreting the two statutory schemes, the Court applies the rules of interpretation announced by the Supreme Court in Morton v. Marcari, 417 U.S. 535, 94 S.Ct. 2474, 41 L.Ed.2d 290 (1974). In Morton the Court held that courts are “[n]ot at liberty to pick and choose among congressional enactments and when statutes are capable of coexistence, it is the duty of the courts, absent a clearly expressed congressional intention to the contrary, to regard each as effective.” Id. at 551, 94 S.Ct. at 2483. Thus courts must interpret statutes to avoid conflict and give effect to congressional intent. Id. In determining whether statutes may coexist, the Court must first look to the problem the statute was intended to remedy to ascertain the purpose behind the enactments. Id. at 550, 94 S.Ct. at 2482.
Congress enacted chapter 12 to give small family farmers an opportunity to reorganize their secured debt, allowing them to keep their land and way of life. H.R.Rep. No. 958, 99th Cong., 2nd Sess. 48-51 (1986) reprinted in 1986 U.S.Code Cong. & Admin.News 5227, 5249-52. Chapter 12 was enacted in 1986 as temporary pilot legislation with a sunset provision of 1993 which has recently been extended to 1998. Id.; 103 P.L. 65, 1993 H.R. 416, 107 Stat. 311. The act is limited in its application; applying only to small family farmers with farm related debt of $1.5 million or less. Id.; 11 U.S.C. § 101(18). In order to facilitate restructuring of debts Congress gave the chapter 12 debtor broad powers to alter his obligations. H.R.Rep. No. 958, 99th Cong., 2nd Sess. 48-51 (1986) reprinted in 1986 U.S.Code Cong. & Admin.News 5227, 5249-52; Davenport, 153 B.R. 551 (Bankr. 9th Cir.1992).
The FCA, on the other hand, creates an entire system for providing agricultural credit. The FCA established the banks and associations of the Farm Credit System and the federal agency to supervise the system. H.R.Rep. No. 1287, 96th Cong., 2d Sess. 15-17 (1980) reprinted in 1980 U.S.Code Cong. & Admin.News 7095, 7098-7101. The stated purpose of the FCA is to continue to improve the income and well-being of American farmers and ranchers by furnishing sound, adequate, and constructive credit and to encourage farmer and rancher borrower participation in the management of a permanent system of credit for agriculture. 12 U.S.C. § 2001(a); 12 U.S.C. § 2001(b).
Given the different purposes behind the enactment of the FCA and chapter 12, a crisis in the small family farming sector of the economy and providing credit for the entire agricultural and rural economy, the Court finds that the statutes are reconcilable. The Court also hold that reconciliation of the statutes leads to the conclusion that a chapter 12 debtor may offset an amount equal to the stock and equity interests held against the debt owed the association.
Setoff
Congress failed to address in either the FCA or in chapter 12 whether the FCA limits a chapter 12 debtor’s ability to alter his obligations. The statutes do not refer to one another, thus Congress has not evidenced an intention that the FCA apply in bankruptcy or that FCA is an exception to bankruptcy. Nor does the legislative history aid in answering this question. See, In re Neff, 89 B.R. 672 (noting that the Court did not find any reference to chapter 12 in FCA or in its legislative history).
The closest the legislation comes to addressing bankruptcy is in 12 U.S.C. § 2202a and § 2202b which allows a farm credit association to retire stock for application against the balance of a distressed loan if setoff is more cost effective than foreclosing the loan. *522In enacting these sections in 1987, Congress received testimony from the president and chief executive officer of the St. Paul Farm Credit Bank. The president described that bank’s experience with restructuring loans and concluded that by restructuring, “We have increased borrower motivation to pay, bought additional time and have evidence that chapter 12 bankruptcy fillings are significantly lower in our four states than in neighboring states.” H.R.Rep. No. 295(1), 100th Cong., 1st Sess., 63 (1987), reprinted in 1987 U.S.Code Cong. & Admin.News 2723, 2734. This is the only reference to chapter 12 in the legislative history found by the Court.
If any inference is to be drawn from this, it may support the proposition that the FCA does not apply to limit a chapter 12 debtor’s options in restructuring debt, because the testimony indicates that bankruptcy is an alternative to restructuring through the FCA rather than interpreting the FCA as the exclusive method for restructuring farm credit debt. However, the Court is mindful of the Supreme Court’s admonishment in NLRB v. Bildisco & Bildisco, 465 U.S. 513, 524-525, 104 S.Ct. 1188, 1194-1196, 79 L.Ed.2d 482 (1984) that no inference may be drawn from a reference to a judicial standard in legislative history without some affirmative indication from Congress that one standard is being adopted over another.
In Bildisco, the Supreme Court found that the failure of Congress to expressly except a collective bargaining agreement from the ex-ecutory contract provisions of the code, while making other specific exceptions, indicated that Congress intended § 365 apply to collective bargaining agreements. The Supreme Court recognized that when Congress intends to make an exception to the code it does so expressly. For example, Congress overruled Bildisco by enacting 11 U.S.C. § 1113 which excepts collective bargaining agreements from acceptance or rejection pursuant to § 365. Similarly, Congress has expressly forbidden lien stripping in chapter 13 for home mortgages with the enactment of § 1322(b)(2). Nobelman v. American Savings Bank, — U.S. -, 113 S.Ct. 2106, 124 L.Ed.2d 228 (1993).
Applying this principle in this case, if the FCA is to limit a debtor’s ability to restructure debt through chapter 12, Congress must make an express and precise pronouncement that it intends to so limit a debtor’s options. In re Neff, 89 B.R. 672 (Bankr.S.D.Ohio 1988); In re Cansler, 99 B.R. 758 (W.D.Ky.1989). Congress has failed to make such a statement. Congress has not created a bankruptcy exception in the FCA nor has Congress created any exceptions to § 1222(b)(8). Without an express exception to chapter 12 for the FCA, the Court will not infer one. Accordingly, the Court holds that in the ordinary course of business the FCA prevents borrowers from retiring their stock; however, in the extraordinary circumstances of a chapter 12 case, the FCA does not prevent debtors from altering their obligations by setting off the value of stock and equity participation of the association against the outstanding amounts owed the association.
In addition, this Court agrees with the court in Davenport that there is no reason to draw a distinction between a debt owed to a farm credit association and any other obligation which is subject to a chapter 12 debt- or’s powers. A chapter 12 debtor has the ability to surrender collateral in satisfaction of a secured obligation, and there is no reason to draw a distinction between the ability to surrender farm credit collateral and the ability to surrender other collateral. 11 U'.S.C. § 1225(a)(5)(C). Facilitating the debtor’s “fresh start” by allowing the debtor flexibility in altering and reorganizing obligations is the essence of bankruptcy. Bankruptcy changes the usual rules, and the FCA has not been excepted from the code.
Value
The association argues that the amount debtor may setoff against the outstanding loan balance must be discounted to fair value pursuant to 12 U.S.C. § 2162. However, § 2162 first requires the association to retire stock at par value and then allows the association to discount stock retired out of turn “at a rate determined by the institution” to reach its present value. 12 *523U.S.C. § 2162(a), 12 U.S.C. § 1262(d)(4)(A), 12 U.S.C. § 2162(d)(4)(C).
The Fourth Circuit addressed the value of stock in the forced retirement situation in In re FCX, Inc., 853 F.2d 1149 (1988), cert. denied, Universal Cooperative, Inc. v. FCA, Inc., 489 U.S. 1011, 109 S.Ct. 1118, 103 L.Ed.2d 181 (1989). In FCX a chapter 11 ease, the Fourth Circuit affirmed the bankruptcy court’s determination that the debtor was entitled to credit the face amount of stock and equity interests in a farm credit association against the obligation owed the association. The Fourth Circuit reasoned that if the creditor chose to redeem the stock today it would be valued at face value, but if the creditor chose to wait to redeem the stock then the value would be discounted and the stock would be valued at something less than face value. Because the exclusive authority to retire or not retire the stock resides in the association and causes this fluctuation, the Court determined that the creditor should bear the risk of loss resulting from a decision to wait to retire the stock.
Like the FCX court, this Court is persuaded that debtor is entitled to credit for the face amount of his class A and class B stock and allocated surplus because the association is likewise entitled to receive that benefit upon exercise of its discretion to retire the stock and equity. Under § 2162, and in the case of a distressed loan under § 2002, the association has the authority to retire stock and equity interests at face value. Thus the Court holds that debtor should receive credit for the face value of the stock and equity interests.
The association argues that the different types of stock and equity interests held by debtor require different treatment because they are subject to certain retirement schedules and treatment under the FCA. Because the FCA provides the association with the discretion to set the discount rate and the ability to redeem stock, the Court is convinced that the different types of stock and equity interests do not change the foregoing analysis.
Lien Retention and Good Faith
The association argues that allowing setoff of the stock and equity interests violates 11 U.S.C. § 1225 because it fails to retain its lien and fails to receive value equal to the amount of its secured claim. The association also challenges debtor’s proposed plan based on a lack of good faith as evidenced by the alleged violation of the FCA and debtor’s modification to this plan proposing setoff.
Both arguments lack merit. Section 1225(a)(5) provides a chapter 12 debtor with three options in dealing with his secured creditors. One of these options is the surrender of the property. The association would have the Court construe § 1225(a)(5)(A) as an exclusive remedy which it is not. Section 1225(a)(5)(C) allows the court to confirm a plan, where the debtor proposes surrender of collateral in satisfaction of the secured portion of a claim. Thus debtor’s proposed setoff does not violate § 1225(a)(5) and the association’s argument lacks merit.
A debtor’s good faith is determined by examining the totality of the circumstances in each case. In re Kitchens, 702 F.2d 885 (11th Cir.1983). The Court does not find any indication of a lack of good faith on the part of the debtor and specifically finds that bad faith cannot be prefaced on debtor’s use of § 1225(a)(5)(C). Taking advantage of the options provided in the code does not indicate bad faith. See, In re Sar-Manco, Inc., 70 B.R. 132 (good faith requires the court to refuse to condone abuse of process). If using the options provided by the code to restructure debt did indicate bad faith, then some provisions of the code would be unusable and invalid and this could not be the intent of the drafters of the code.
Conclusion
The Court holds that the Farm Credit Act and the Bankruptcy Code, specifically chapter 12 of the code, are reconcilable. The provisions of the Farm Credit Act which allow redemption of stock only on the exercise of discretion of the association do not act to limit a chapter 12 debtor’s ability, pursuant to § 1222(b)(2), to alter his obligations to the association. Accordingly, debtor may setoff the face amount of his class A and class B stock and allocated surplus in the amount of $26,627.11 against the amount owed on the livestock loan and the home mortgage loan. Debtor’s setoff does not vio*524late the provisions of § 1225(a)(5) or § 1222(a)(3).
The Court will enter a separate order confirming debtor’s plan in accordance with these findings of fact and conclusions of law.
ORDER OVERRULING OBJECTION TO CONFIRMATION AND ORDER CONFIRMING PLAN
Upon Findings of Fact and Conclusions of Law separately entered, it is
ORDERED
1. The objection of Farm Credit Association of North Florida to confirmation of debt- or’s chapter 12 plan as amended December 1, 1993, is overruled.
2. Chapter 12 plan, as amended December 1, 1993, is confirmed. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491807/ | MEMORANDUM DENYING THE DEBTORS’ MOTION TO DETERMINE TAX LIABILITY AND OBJECTION TO CLAIM OF THE INTERNAL REVENUE SERVICE
George C. Paine, II, Chief Judge.
I. INTRODUCTION:
This matter comes before the court on the debtors’ Motion to Determine Tax Liability and Objection to Claim of the Internal Revenue Service. In their objection, the debtors sought an order disallowing the proof of claim filed by the IRS for tax years 1982, 1983, and 1984. As grounds, the debtors argued first that the statute of limitations for assessment of income tax liability had expired pursuant to 26 U.S.C. § 6501(a) of the Internal Revenue Code. On this issue, the court finds against the debtors and applies the fraud exception of I.R.C. § 6501(c)(1) allowing the IRS to assess a tax deficiency “at any time.”
Alternatively, the debtors sought a rede-termination of their joint federal income tax liability for years 1982, 1983, and 1984. The debtors claimed certain deductions on their tax returns for these years that were disallowed by the IRS. Regarding this issue, the court also finds against the debtors and concludes that the claimed deductions are included as gross income and not deductible as *622ordinary and necessary trade or business expenses.
Although the debtors styled this matter as a motion, it is more properly a contested matter in the nature of an objection to the allowance of a proof of claim filed by the IRS. On November 17, 1993, the court heard testimony in the trial of this matter. The following constitute findings of fact and conclusions of law. Fed.R.Bankr.P. 7052.
II. DISCUSSION:
A. The Statute of Limitations Issue:
The court first addresses the issue of whether the tax assessments of the IRS are barred by the statute of limitations under I.R.C. § 6501(a). I.R.C. § 6501(a) sets forth the general statute of limitations in a tax deficiency case. It provides that “any tax imposed by this title shall be assessed within 3 years after the return was filed.” I.R.C. § 6501(a).
According to the Stipulation of Facts, the debtors’ tax returns were filed as follows:
(1) The 1982 return was filed on January 30, 1985,
(2) The 1983 return was filed on April 24, 1985,
(3) The 1984 return was filed on January 22, 1986.
On October 9, 1991, the IRS issued a statutory Notice of Deficiency to the debtors, asserting a deficiency for 1982, .1983, and 1984 and proposing additional assessments of income tax, penalties, and interest for each of these years.
Being outside the three year statutory period, the assessments for 1982, 1983, and 1984 are barred by I.R.C. § 6501(a). There are, however, several exceptions to this three year limitations period. One such exception, found in I.R.C. § 6501(c)(1), is the fraud exception. The IRS can assert a deficiency “at any time” if the taxpayer filed “a false or fraudulent return with the intent to evade tax.” I.R.C. § 6501(e)(1).
The court agrees with the debtors that, in order to apply the fraud exception, the IRS has the burden of establishing by clear and convincing evidence that the debtors “intentionally designed to evade a tax believed to be owing.” Moore v. Commissioner, 619 F.2d 619, 619 (6th Cir.1980). This burden of proof may be shown by circumstantial evidence. Id.
At trial, the IRS relied primarily on the Stipulation of Facts as circumstantial evidence of Roberson, Sr.’s fraudulent intent to evade tax. The debtors, on the other hand, argued that Roberson, Sr.’s involvement in the life insurance premium rebating scheme was “an attempt to maximize income and not an attempt to evade taxes.” Reply Brief of Debtor at 2. According to the debtors, the inferences drawn from the Stipulation of Facts were not sufficient to prove fraud with intent to evade taxes by clear and convincing evidence.
The court, however, finds the debtors’ argument unconvincing. Based on the evidence presented at trial, including the Stipulation of Facts, the court concludes that the IRS has met its burden of proof. While Roberson, Sr. clearly was engaged in a scheme to maximize income, the court found convincing evidence that he also intended to evade taxes on part of this income.
The debtor, Frank Roberson, Sr. and his son, Frank Roberson, Jr., engaged in a life insurance premium rebate scheme in which life insurance policies were sold to various charitable and non-charitable insureds. On these sales, Roberson, Jr. was the listed selling agent, and Roberson, Sr. was the district manager. The life insurance company for which the policies were sold paid commissions on the sales in the names of both Roberson, Sr. and his son. The insurance companies paying commissions issued forms W-2 or 1099, reporting commission income paid to Roberson, Sr. and to his son for the years at issue.
Commission checks paid both in Roberson Sr.’s name and in his son’s name were deposited into Roberson, Sr.’s insurance brokerage business account. Roberson, Sr. used these funds to operate his insurance brokerage business. He wrote checks out of his business account to pay various business expenses, such as contract labor payments to *623his secretary and son and interest payments to pay an $18,000 loan.
Roberson, Sr. properly reported commission income showing up in his name on forms W-2 or 1099. However, significant commissions paid in his son’s name and deposited into Roberson Sr.’s business account were not properly reported on anyone’s tax returns. When the IRS approached Roberson Sr.’s son for failing to report this commission income, showing up in the son’s name on forms W-2 or 1099, Roberson, Sr. accepted full responsibility and criminal liability for the failure to report this income.
Based on this evidence, the court concludes that the unreported commission income at issue was gross income to Roberson, Sr. I.R.C. § 61(a)(1) broadly defines gross income as “all income from whatever source derived, including ... commissions.” Roberson, Sr. realized all the benefits from this unreported commission income by using it to operate his insurance brokerage business. When the IRS questioned him as to whose income this was, he accepted full responsibility for failing to report it. He thereafter plead guilty to filing a false tax return for 1982.- Clearly, this unreported commission income was gross income to Roberson, Sr., which he failed to report on his income tax returns.
Being a sophisticated business person who was running a sophisticated premium rebate scheme, the court is unconvinced by Roberson Sr.’s testimony that he thought he had reported all his taxable gross income for the years at issue. He was aware of the presence of this unreported income in his business account. He deposited this income into his business account himself. His failure to report this income was more than a mere oversight. The court finds sufficient circumstantial evidence to establish that Roberson, Sr. “intentionally designed to evade a tax believed to be owing.” See Moore, 619 F.2d at 619.
Accordingly, the fraud exception to the statute of limitations on assessments applies, and the IRS is not barred from assessing the debtors for the deficiencies at issue. Having upheld application of the fraud exception, the court need not reach the issue of the collateral estoppel effect of Roberson Sr.’s guilty plea to filing a false tax return for 1982. B. The Exclusion and Deductibility Issues:
The second issue before the court involves whether the debtors should be taxed on amounts Roberson, Sr. applied to purchase life insurance policies for his clients. Roberson, Sr. offered to sell life insurance policies to insureds at a discount from normal premium rates. Roberson discounted these policies by paying all or part of the first year premiums with his own funds, ultimately out of commission income paid to him or his son.
The debtors argued that the rebated life insurance premiums should be excluded from gross income as cost of goods sold under I.R.C. § 61(a)(1). In the alternative, the debtors contended that the rebated premiums were deductible as ordinary and necessary trade or business expenses under I.R.C. § 162(a).
On the issue of whether rebated life insurance premiums are to be excluded from gross income as cost of goods sold, the court applies the holding of Alex v. Commissioner, 628 F.2d 1222 (9th Cir.1980), as argued by the IRS. In Alex, Judge Choy affirmed a decision from the United States Tax Court that a life insurance agent was not entitled to exclude from gross income as cost of goods sold rebated premiums paid to insured clients. Id. at 1224-25.
In arguing for the exclusion of the rebated premiums from gross income, the debtors relied primarily on Judge Choy’s contemporaneous Ninth Circuit decision in Max Sobel Wholesale Liquors v. Commissioner, 630 F.2d 670 (9th Cir.1980). In Max Sobel, Judge Choy held that, under the doctrine of Pittsburgh Milk Co. v. Commissioner, 26 T.C. 707, 1956 WL 699 (1956), a seller’s payment of cash or extra merchandise to a customer as an added consideration for a sale is a price adjustment and is excluded from gross income under I.R.C. § 61(a)(1). Id. at 671-72.
In the Alex case, however, when faced with a life insurance agent rebating premiums to the insured, Judge Choy rejected the price adjustment theory that he applied in Max Sobel. Alex, 628 F.2d at 1224-25. Judge *624Choy stated that the price adjustment theory “applies only in the two-cornered situation where a seller effects a price adjustment by making a payment to a customer.” Id. at 1224. As the court pointed out, this situation is three-cornered because the price adjustment was made by the insurance agent and not by the actual seller of the insurance policy, i.e. the insurance company. Id. Since “no price was adjusted by any seller,” the agent’s rebate of premiums did not qualify as exclusions from gross income under the Max Sobel or Pittsburgh Milk standard. Id. at 1225.
As stated in the Stipulation of Facts, Roberson, Sr. rebated premiums out of his own commission income or that of his son. Thus, as in Alex, “the situation is three-cornered, and no price was adjusted by any seller.” Id at 1224. Since Roberson Sr.’s rebate of premiums to insureds were not the acts of a seller adjusting price, such rebates do not qualify as an exclusion from gross income. See id.
As further support for their position, the debtors cited the Tenth Circuit’s decision in Worden v. Commissioner, 2 F.3d 359 (10th Cir.1993). In this case, the agent discounted life insurance policies by contracting away his right to receive commissions. Id. at 362. When the insured purchased a policy, the insured would only pay the net first year premium, i.e. the gross first year premium less the commission to the agent. Id. at 360.
Consequently, the agent reported no commission income from these transactions. Id. When the IRS asserted a deficiency, the Worden court held that the commission was excluded from gross income because the agent had contracted away his right to receive the income. Id. at 362.
Like Max Sobel, however, this case is also distinguishable from the Alex case. In Alex, unlike Worden, the agent never contracted away his right to receive a commission. Instead, the agent actually received commission income from the insurance company and, in a separate transaction, rebated it to the insured. As such, the court finds the holding in Alex applicable to the facts in this case and concludes that rebated commissions cannot be excluded from gross income under I.R.C. § 61(a)(1).
Regarding the issue of whether rebated commissions are deductible from gross income as ordinary and necessary trade or business expenses under I.R.C. § 162(a), the court agrees with the IRS’s application of I.R.C. § 162(c)(2). § 162(c)(2) provides that no deductions under § 162(a) shall be allowed for any payment that is illegal under state law, provided that such state law is “generally enforced” and “subjects the payor to a criminal penalty or the loss of license or privilege to engage in a trade or business.”
Tennessee has a state anti-rebate law pertaining to insurance policies at Tenn.Code Ann. § 56-8-104(7)(A) (1989 & Supp.1993). Under this law, the rebating of insurance premiums to clients as an inducement to purchase a life insurance contract is an unfair trade practice. Id. The Commissioner of Insurance has the power to examine and investigate possible violations of this law. Tenn.Code Ann. § 56-8-107 (1989). Upon finding a violation, the Commissioner may issue a cease and desist order. Tenn.Code Ann. § 56-8-109 (1989). An agent’s further violation of the cease and desist order may, at the Commissioner’s discretion, lead to civil fines, suspension or revocation of the agent’s license, or other appropriate relief. Tenn. Code Ann. § 56-8-112 (1989).
In order for § 162(c)(2) to apply, this Tennessee law must be “generally enforced.” The term “generally enforced” as used in § 162(e)(2) is defined in Treas.Reg. § 1.162-18(b)(8) as follows,
[A] state law shall be considered to be generally enforced unless it is never enforced or the only persons normally charged with violations thereof in the State ... enacting the law are infamous or those whose violations are extraordinarily flagrant. For example, a criminal statute of a state shall be considered to be generally enforced unless violations of the statute which are brought to the attention of appropriate enforcement authorities do not result in any enforcement action in the absence of unusual circumstances.
*625See Custis v. Commissioner, 43 T.C.M. (CCH) 1511, 1982 WL 10594 (1982). The IRS has the burden of establishing by clear and convincing evidence whether the state law at issue is “generally enforced.” I.R.C. § 162(c)(2); Custis 43 T.C.M. at 1511.
At trial, Jennifer Loyd, Assistant Chief Counsel for the Insurance Division of the Tennessee Department of Commerce and Insurance, testified as to whether the Tennessee anti-rebate statute is “generally enforced.” She stated that while enforcement of this law is not a top priority of the department, investigation and prosecution for violations are fairly common. She estimated approximately ten investigations and prosecutions over a five-year period. She also testified that an agent’s license was revoked in 1992 for violation of the state’s anti-rebate statute.
On the basis of this testimony, the court concludes that clear and convincing evidence exists that the Tennessee anti-rebate law is “generally enforced” pursuant to I.R.C. § 162(c)(2). As Treas.Reg. § 1.162-18(b)(3) quoted above provides, the debtor will prevail on this issue only if Tennessee’s anti-rebate statute is never enforced when brought to the attention of state officials. Ms. Lloyd’s testimony clearly demonstrated that this is not the ease. See also Custis, 43 T.C.M. at 1511 (held Ohio’s anti-rebate statute is not “generally enforced” when no formal prosecutions or license revocations were present during the period in question); Boucher v. Commissioner, 77 T.C. 214, 218, 1981 WL 11275 (1981) (held Washington’s anti-rebate statute is “generally enforced” even though no aggressive policy of detecting violations existed). Accordingly, the court finds that Roberson, Sr.’s rebated premiums are not deductible as ordinary and necessary trade or business expenses under § 162(a) because they were paid in violation of a “generally enforced” state law pursuant to § 162(e)(2).
At trial and in their trial brief, the debtors argued that Tennessee’s anti-rebate law was unconstitutional. The debtors pointed out that the Florida Supreme Court held a Florida law similar to Tennessee’s anti-rebate law unconstitutional. This court, however, is reluctant to question the constitutionality of a state law passed by the state legislature and generally enforced by a state agency. This is an issue better addressed by the state supreme court or the state legislature.
III. CONCLUSION:
For the foregoing reasons, the court denies the debtors’ Motion to Determine Tax Liability and Objection to Claim of IRS. The IRS may assess the debtor for deficiencies in unreported commission income for tax years 1982, 1983, and 1984. Furthermore, the IRS may disallow the debtors attempt to exclude the rebated premiums from gross income for these years or to deduct them from gross income as ordinary and necessary trade or business expenses.
IT IS SO ORDERED. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492271/ | ORDER DENYING SUMMARY JUDGMENT
JULIE A. ROBINSON, Bankruptcy Judge.
Defendant Sagaz Industries, Inc. (Sagaz) filed a motion for summary judgment to which plaintiff American Freight System, Inc. (AFS) objected. In this adversary proceeding, AFS seeks to recover from Sagaz, more than $70,000 on 337 shipments of freight in 1986 and 1987. Sagaz characterizes AFS’s claim as one for “undercharges.” AFS calls its claim one for “undercharges” as well as “original unpaid accounts receivable” and “bills originally short paid.” Sagaz contends that it is exempt from liability for these charges, pursuant to § 10701(f)(9) of the Negotiated Rates Act of 1993 (NRA), which exempts certain shippers from liability. AFS contends that Sagaz has failed to make the requisite preliminary showings under the NRA that would establish that the NRA applies to AFS’s claims and further that Sagaz has failed to show that it qualifies for an exemption. The Court agrees with AFS that Sagaz has failed to show that the NRA *455applies to this action, and denies the motion for summary judgment on that basis.1
FACTS
There are few facts material to the Court’s inquiry into the sufficiency of Sagaz’s preliminary showing regarding the applicability of the NRA. The uncontroverted material facts on this issue are as follows.
1. Sagaz contracted with AFS to ship freight in 1986 and 1987.
2. There are 337 disputed freight bills, 328 of which are bills for which the original bill was paid in full.
3. The remaining seven disputed freight bills are in the total amount of $1208.61. For the purpose of this Motion for Summary Judgment only, Sagaz concedes that AFS is entitled to recover the amount of these seven bills.
JURISDICTION
The Court has jurisdiction over this proceeding. 28 U.S.C. § 1334. This is a core proceeding. 28 U.S.C. § 157(b)(2)(A) and (0). The Negotiated Rates Act of 1993 also confers jurisdiction on this Court. 49 U.S.C. § 10701(f)(1).
STANDARDS FOR SUMMARY JUDGMENT
Rule 66 of the Federal Rules of Civil Procedure governs summary judgments, and is made applicable to bankruptcy adversary proceedings by Rule 7056 of the Federal Rules of Bankruptcy Procedure. Rule.56, in articulating the standard of review for summary judgment motions, provides that judgment shall be rendered if all pleadings, depositions, answers to interrogatories, and admissions and affidavits on file show that there are no genuine issues 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 Court must construe the record liberally in favor of the party opposing the summary judgment. McKibben v. Chubb, 840 F.2d 1525, 1528 (10th Cir.1988) (citations omitted). However, the opposing party’s conclusive allegations are not sufficient to establish an issue of fact and defeat the motion. Id.
THE NEGOTIATED RATES ACT
On December 1, 1993, the NRA (Pub.L. No. 103-180, 107 Stat. 2044) became effective. It modified the Interstate Com-’ merce Act by, inter alia, allowing shipper-defendants in undercharge actions to (1) settle certain undercharge claims through prescribed settlement formulas; (2) be relieved from all liability above the charges originally billed and paid if the shipper qualifies as a “small-business concern” or a tax-exempt organization, or if the cargo involved in the claim is recyclable materials; or (3) for transportation provided before September 30, 1990, to be free from undercharges the collection of which the ICC determines to be an unreasonable practice. See Section 2(a)-(d) of the NRA, codified as 49 U.S.C. § 10701(f).
Section 2 of the NRA adds a new subsection (f) to § 10701, which is entitled “Procedures for resolving claims involving unfiled, negotiated transportation rates” and provides:
(1) In general. — When a claim is made by a motor carrier of property (other than a household goods carrier) providing transportation subject to the jurisdiction of the Commission under subehapter II of chapter 105 of this title, by a freight forwarder (other than a household goods freight forwarder), or by a party representing such a carrier or freight forwarder regarding the collection of rates or charges for such transportation in addition to those originally billed and collected by the carrier or freight forwarder for such transportation, the person against whom the claim is made may elect to satisfy the claim under the provisions of paragraph (2), (3), or (4) of this subsection, upon showing that—
(A) the carrier or freight forwarder is no longer transporting property or is transporting property for the purpose of avoiding application of this subsection; and
*456(B) with respect to the claim—
(i) the person was offered a transportation rate by the carrier ... other than that legally on file with the [ICC] for the transportation service;
(ii) the person tendered freight to the carrier ... in reasonable reliance upon the offered transportation rate;
(in) the carrier ... did not properly or timely file with the [ICC] a tariff providing for such transportation rate or failed to enter into an agreement for contract carriage;
(iv) such transportation rate was billed and collected by the carrier ...; and
(v) the carrier ... demands additional payment of a higher rate filed in a tariff.
49 U.S.C. § 10701(f)(1).
Subsection (f) further provides:
(9) Claims involving small business concerns, charitable organizations, and recyclable materials. — Notwithstanding paragraphs (2), (3), and (4), a person from whom the additional legally applicable and effective tariff rate or charges are sought shall not be liable for the difference between the carrier’s applicable and effective tariff rate and the rate originally billed and paid—
(A) if such person qualifies as a small business concern ...,
(B) if such person is [a charitable organization described in certain provisions of the Internal Revenue Code], or
(C) if the cargo involved in the claim is recyclable materials ...
DISCUSSION
Sagaz contends that it is a small business concern under the provisions of the Small Business Act, 15 U.S.C. §§ 631 et seq., and that it is not liable for these additional amounts, which represent the difference between the rates originally billed and paid and AFS’s alleged applicable and effective tariff rate. AFS argues that Sagaz has failed to show that the NRA applies to the claims at issue and has further failed to show that it is a small business concern within the meaning of § 10701(f)(9). AFS contends that Sagaz must first show, pursuant to § 10701(f)(1)(A), that AFS is “no longer transporting property” and pursuant to § 10701(f)(1)(B) that AFS’s claim is an undercharge as therein defined.2
Most courts have rejected the position advanced by AFS and held that a shipper who claims an exemption under § 10701(f)(9) need not show the status of the operating carrier nor show that the carrier’s claim meets the test in § 10701(f)(1)(B). See, e.g., Jones Truck Lines v. Whittier Wood Products (In re Jones Truck Lines), 57 F.3d 642, 647-49 (8th Cir.1995); De’Medici v. FDSI Management Group (In re Lifschultz Fast Freight Corp.), 174 B.R. 271, 273-74 (N.D.Ill.1994), aff'd 63 F.3d 621 (7th Cir.1995); North Penn Transfer v. Polykote Corp., 170 B.R. 565, 567-68 (E.D.Pa.1994); Hoarty v. Midwest Carriers (In re Best Refrigerated Express), 168 B.R. 978, 984-85 (Bankr.D.Neb.1994). One court has, however, held that a shipper must first make the § 10701(f)(1) showings before the court need determine whether the shipper is entitled to an exemption under § 10701(f)(9). See American Freight System, Inc. v. Valiant Products Corp. (In re American Freight System, Inc.), 185 B.R. 345 (Bankr.D.Kan.1995) [J. Pusa-teri]. This Court thinks the reasoning in that decision is sound and adopts its rationale.
The majority of courts, which have reached the opposite conclusion, have improperly applied the plain meaning jurisprudence of statutory construction and reached a clearly unsound result. In brief, these other courts conclude that a shipper entitled to an exemption under § 10701(f)(9) need not make the showings under § 10701(f)(1) because § 10701(f)(1) specifically references claims that may be satisfied under the election provisions of §§ (f)(2), (3) and (4), but does not reference claims of shippers who may be *457exempt under § 10701(f)(9). Thus, a shipper who seeks to satisfy liability by compromise under §§ (f)(2), (3) or (4), must show that the liability is for an undercharge as defined in § 10701(f)(1)(B), and that the carrier is no longer operating, as stated in § 10701(f)(1)(A). Yet, a shipper who seeks an exemption from liability need not show that the liability is for an undercharge or that the carrier is no longer operating.
This absurd result was reached by distilling the “plain meaning” of § 10701(f)(9) in a vacuum. Yet plain meaning jurisprudence does not displace other methods of statutory construction. It is axiomatic that all text has context. Sections of a statute should be read in pari materia. And, in determining the meaning of language in a text, one should not ignore the title of the text. In rushing to discern the plain meaning of § 10701(f)(9), these courts ignore the title of § 10701(f), “Procedures for resolving claims involving unfiled, negotiated transportation rates.” The title evidences that this statute concerns undercharge claims. Thus, the “claims” referenced in § 10701(f)(9), as well as the “claims” referenced in § 10701(f)(1), (2), (3) and (4), must be claims involving unfiled, negotiated transportation rates, as the title to § 10701(f) states.
Surely it is proper to question why § (f)(9) is not mentioned in § 10701(f)(1), as these other courts do. However, it is not proper to cease inquiry when faced with the ambiguity that this raises. Perhaps there is some significance in § (f)(9) not being referenced in § 10701(f)(1). Perhaps claim or liability has a different meaning in § 10701(f)(9) than in § 10701(f)(1)(B). In § 10701(f)(1)(B), claim is defined as a demand for additional payment of a higher rate filed in a tariff, and not the rate agreed to by the parties. In § 10701(f)(9), certain persons are exempt from “the additional legally applicable and effective tariff rate or charges sought” and “shall not be liable for the difference between the carrier’s applicable and effective tariff rate and the rate originally billed and paid.” This is arguably a shorthand definition of the undercharge as defined in § 10701(f)(1)(B). However, there is one notable difference between the definitions in these two sections. In § 10701(f)(9) there is no indication that the rate “originally billed and paid” was a negotiated rate. If the carrier had mistakenly under billed a shipper and later filed suit to recover the difference between the mistaken billing and the filed rate, § 10701(f)(9) would arguably exempt the shipper from liability based on this mistake. But, that interpretation gives rise to ambiguity, because the statute is the “Negotiated Rates Act” and § 10701 is entitled “Procedures for resolving claims involving unfiled, negotiated transportation rates.” If small businesses are entitled to exempt themselves from liability for all claims, why would such an expansive amnesty be buried in a statute concerning negotiated rates. And, if the literal meaning of (f)(9) is to provide relief to shippers from claims other than those based on negotiated rates, despite being a small passage in a remedial statute called “The Negotiated Rates Act,” then that gives rise to ambiguity which requires further inquiry. One must look beyond such ambiguous language and use canons of statutory construction and/or legislative history to glean its true meaning. The legislative history provides ample evidence of what liabilities are pardoned under § 10701(f)(9). For example, in introducing S.412, the' following statements were made:
Small businesses, charitable organizations, and reeyclers (which includes recyclers of rubber) would be exempt from applicable undercharge claims.
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This bill establishes settlement formulas for a variety of situations. Different approaches are taken with respect to truckload and less than truckload shipments, since carriers usually give shippers larger discounts on truckload shipments.
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Furthermore, the legislation makes a distinction on the basis of the size of the shipper, totally exempting small shippers from undercharge claims.
139 Cong.Rec. S16183-01 (daily ed. November 18, 1993) (statements of Sen. Hollings and Sen. Danforth) (emphasis added).
The House and Senate Reports similarly indicate that the exemption provisions apply *458to undercharge claims otherwise applicable under the NRA. They provide that:
The legislation as reported would treat separately small shippers (defined as entities meeting Small Business Administration (SBA) guidelines) and charitable organizations (defined as organizations exempt from taxation under section 503(e)(3) of the Internal Revenue Code of 1986 (IRC)), by absolving them of all undercharge liability for claims meeting the threshold standard established.
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Assuming that the undercharge claim meets the above criteria for application of the resolution provisions, the legislation as reported provides that, if the person or entity against whom the claim is made is a small business concern (as defined by the SBA) or a charitable organization (defined as a person or entity exempt from taxation pursuant to section 503(c)(3) of the IRC), that person or entity shall be exempt from all further undercharge liability.
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Small businesses and charitable organizations are not required to pay undercharge claims and all claims against these concerns are considered satisfied. The Committee believes that special treatment for small business and charitable concerns is justified because these entities are less likely to be able to defray the costs of settling undercharge claims.
S.Rep. No. 79, 103rd Cong., 1st Sess. (1993) (emphasis added). The House Report provides that:
H.R.2121 approaches the problems arising from undercharge claims in two ways. First, it provides three alternatives on how to resolve undercharge claims and second it provides a variety of regulatory changes which should abate further problems and quiet some of the controversy caused by the prosecution of some of these claims.
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First, shippers may assert the defense of unreasonable practice ... Second, shippers can elect to avail themselves of the settlement procedures in the bill where additional charges are sought provided certain conditions prevail.
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In addition, the bill declares amnesty for claims involving small shippers, charitable organizations, and recyclers. The Committee believed that these groups should not be held liable for any of the undercharge claims pending against them.
H.R.Rep. No. 359, 103rd Cong., 1st Sess. (1993), reprinted in 1993 U.S.C.C.A.N. 2534, 2536.
The legislative history of the NRA demonstrates that despite no mention of “negotiated rate” in the subtext of § 10701(f)(9), this exemption provision was intended to apply to claims based on the same type of undercharges defined in § 10701(f)(1), that is the difference between the filed rate and a lower negotiated rate previously billed and paid. The legislative history demonstrates that the claims and undercharges treated in the NRA are those based on the difference between filed and negotiated rates and that the title of § 10701(f) is not to be disregarded or ignored when considering the scope of the exemptions in § 10701(f)(9). There was no intent to create within § 10701(f)(9) amnesty from liability arising out of something other than a carrier’s effort to recover the filed rather than the negotiated rate. Thus, it is imperative for one seeking an exemption from liability, as well as a compromise of liability, to establish in the first instance that the carrier is seeking to recover an undercharge, as more fully defined in § 10701(f)(1).
IT IS THEREFORE ORDERED BY THE COURT that Defendant’s motion for summary judgment is DENIED.
IT IS SO ORDERED.
. Therefore the Court need not reach the second issue of whether Sagaz has demonstrated that it qualifies for a "small business concern” exemption under § 10701(f)(9) of the NRA.
. This Court has already determined that AFS is "no longer transporting property,” therefore, the issue is moot to that extent. Thus, the Court’s holding is limited to the necessity of showing that the claim involves an undercharge as a requirement precedent to obtaining an exemption under § 10701(f)(9). | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492273/ | ORDER ON MOTION FOR REMAND
ALEXANDER L. PASKAY, Chief Judge.
THIS IS a confirmed Chapter 11 case and the matter under consideration is a Motion for Remand filed by Palmer Realty Group, Inc. (Palmer). The Motion is directed to a civil suit filed by Palmer in the Circuit Court for Pinellas County, Florida against Taylor Woodrow Communities, a Florida General Partnership (Taylor). Palmer in its suit claims damages it allegedly suffered as the result of a tortious interference with a pre-petition contract it claimed it had with Southampton Development Corporation (Debtor) involving the sale of the major if not one and only asset of the Debtor. According to Palmer it had the right to market the Debt- or’s real estate holdings and earn brokerage commission when the property was sold and when the property was sold to Taylor it was deprived of its right to earn commission due to the tortious conduct of Taylor. In the state court action Palmer sought money damages and a money judgment based on the theory of unjust enrichment. Taylor filed its answer in due course to the complaint, but also filed a third-party complaint against the Debtor based on the theory that if it is held liable to Palmer in the prime suit filed against it by Palmer it has a right to be indemnified by the Debtor in the amount of the recovery, if occurs by Palmer against it.
In order to place the Motion for Remand under consideration in proper context, a brief recap of the events which occurred in connection with the sale of the Debtor’s property would be helpful.
The Debtor filed its Voluntary Petition for Relief under Chapter 11 of the Bankruptcy Code on July 8, 1994. At the time of the commencement of the case, the Debtor was the owner of a large tract of land to be developed which was basically its only asset. On September 7, 1994, the Debtor filed its Disclosure Statement and Plan of Reorganization. On August 2,1994, the Debtor filed a Motion to Sell Property Free and Clear of Liens and to Approve a Contract for Sale outside of the ordinary course of business. The sale involved 314.5 acres of property, the one and only real estate holding of the Debt- or. After a properly noticed hearing to all parties of interest, on September 21, 1994 this Court approved the sale of the property to Taylor. After the Disclosure Statement was amended several times, on January 20, 1995 this Court entered an Order confirming the amended Plan of Reorganization filed by the Debtor. This Plan of Reorganization provided for utilization of the proceeds already obtained from the sale to pay all allowed claims pursuant to the terms set forth in the confirmed Plan of Reorganization. On *473May 8, 1995, the Debtor filed its Final Report and accounting stating that the Plan had been fully consummated, that with the exception of certain housekeeping items the final decree should be entered closing the case.
The adversary proceeding under consideration which was removed from the state court was filed in the state court in June of 1995 and the summons were issued June 15, 1995 or after the Debtor filed on May 8, 1995; thus it is evident that the administration of the estate of this Debtor has been completed and the plan has been fully consummated.
This is the procedural background against which this Court is called upon to consider the Motion to remand the complaint filed by Palmer against Taylor in the state court which was removed by Taylor to this Court. It is obvious and is without dispute that the suit filed in the state court and removed to this Court is an action by a non-debtor against a non-debtor. While it is true that Taylor filed a third-party complaint against the Debtor, the chose of action which is the basis of the prime complaint is based on pure state law and has nothing to do with the Bankruptcy Code; thus it is clear that the controversy presented by a non-debtor, Palmer, against a non-debtor, Taylor, is not a “core” proceeding and is equally not a civil proceeding “arising in or arising under” a case under Title 11. It is contended by Taylor, without conceding that the controversy is not a core proceeding, that it at least relates to a ease under Title 11, that is the chapter 11 case of the Debtor. The issue of whether or not a suit filed by a non-debtor against a non-debtor may be entertained by the Bankruptcy Court has been litigated repeatedly. The vast majority of the courts who have considered the issue of jurisdiction concluded that unless the controversy is related and incident to the administration of the estate or involves or might impact, albeit indirectly, properties of the estate, the Bankruptcy Court has no jurisdiction and if the matter is removed, the same should be remanded to the court where the suit was originally filed. In re Pettibone Corporation, 135 B.R. 847 (Bkrtcy.N.D.Ill.1992). A civil proceeding in order to be related to a bankruptcy case thus within the jurisdiction of the Bankruptcy Court must affect the amount of property available for distribution or allocation of property among creditors. Remand is proper when the resolution of a removed claim has no bearing on the property of the Debtor’s estate and although the claim does not need to be directly against the Debtor in order to be related to the bankruptcy case the removal still must be supported by articulation of a plausible way the claim can have an impact on the estate as distinguished from a possible impact only on the debtor. In re Emerald Acquisition Corp., 170 B.R. 632 (Bkrtcy.N.D.Ill.1994).
The same Court in the matter of In re Spaulding & Co., 131 B.R. 84 (N.D.Ill.1990), involving the identical issue involved here, held that the bankruptcy court’s arising under jurisdiction includes only those proceedings that involve causes of action created or determined by the Bankruptcy Code. In order to accept jurisdiction on the basis that the controversy is related, it must appear on the face of the complaint that it has an affect on the estate of the Debtor and the Court in Spaulding concluded that if the only possible affect on the estate would be as a third-party claim it is insufficient to establish jurisdiction based on the nexus with the bankruptcy case. It is recognized that the jurisdiction based on the fact that the controversy is related must be viewed narrowly and disputes between third parties which do not implicate the Debtor’s property is not related to a case under Title 11 and the Bankruptcy Court has no jurisdiction over such controversies. In re Edwards, III, C.P., 100 B.R. 973 (E.D.Tenn.1989).
Applying the foregoing to the facts which are without dispute in this case it is evident: that the claim asserted by Palmer against Taylor is not a claim arising in, arising under nor related to a case under Title 11; is based on pure state law; and in light of the status of this Chapter 11 ease, is clearly not within the jurisdiction of this Court and the Motion for Remand is well taken for the following reasons:
The administration of the Debtor’s Chapter 11 case is concluded, the Plan has been *474confirmed, the Plan has been fully consummated and with the exception of some housekeeping matters such as entering orders on matters which already have been resolved, nothing remains to be done except to enter the final decree closing the estate. In light of the foregoing, it is evident that the litigation removed from the state court to this Court cannot possibly have any impact on the administration since there is no longer any administration remaining and does not involve properties of the estate even if ultimately Taylor obtains a judgment based on indemnification that would have no impact on the Chapter 11 case proper since the Plan is now fully consummated.
Based on the foregoing, it is
ORDERED, ADJUDGED AND DECREED that the Motion for Remand be, and the same is hereby, granted and the above-captioned adversary proceeding be, and the same is hereby, remanded to the Circuit Court of Sarasota County, Florida.
DONE AND ORDERED. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492274/ | ORDER DENYING PLAINTIFF’S MOTION FOR JUDGMENT BY DEFAULT
C. TIMOTHY CORCORAN, III, Bankruptcy Judge.
This adversary proceeding came on for consideration of the plaintiffs motion for judgment by default. The file reflects that the plaintiff filed this adversary proceeding on July 14, 1995. The proceeding seeks a determination that a credit card indebtedness be excepted from the Chapter 7 debtor’s discharge pursuant to the provisions of Section 523(a)(2)(A) of the Bankruptcy Code. The clerk entered a default against the debt- or/defendant on December 8,1995, for failure to plead or otherwise defend.
The plaintiff has filed in support of its motion for judgment by default an affidavit *475as required by Local Rule 2.09.1 Although the affidavit is replete with assertions about the defendant’s fraud and misrepresentations in connection with obtaining and using the credit card, all of these assertions contained in the affidavit are eonclusory and the affiant obviously has no basis upon which to make those assertions. Instead, the only admissible evidence that is relevant contained in the affidavit is the following:
a. The debtor/defendant opened a credit card account with the plaintiff bank on May 23, 1994. The debtor/defendant’s credit limit on the card was $3,000.
b. The debtor/defendant used the credit card from July 15, 1994, through August 9, 1994, and ran up a balance of approximately $3,700.
c. The debtor/defendant never made a payment on the credit card.
d. The debtor/defendant filed this Chapter 7 bankruptcy case on April 14, 1995. In the debtor’s schedules, the debtor reflected a then current monthly income of $1,504 while her then current monthly expenses, not including her unsecured debt, was $1,516 and her unsecured debt was $34,293.46.
Although the clerk has entered a default against the debtor/defendant, the entry of a judgment by default is within the court’s sound discretion. 6 J. Moore, Moore’s Federal Practice ¶55.05[2] at 55-28 (2d ed. 1995). Among the factors that the court may consider in exercising this discretion is the merits of the plaintiffs substantive claim. Id. at 55-29, 30.
In this case, the admissible evidence clearly fails to support the plaintiffs claim of non-dischargeability pursuant to the provisions of Section 523(a)(2)(A). First National Bank of Mobile v. Roddenberry, 701 F.2d 927 (11th Cir.1983), stands for the proposition that the bankruptcy court must examine the transactions individually to determine whether the credit cardholder used the card with an intentional concealment of insolvency at the time of use. Thus, the court held, debts incurred before unconditional revocation of a credit cardholder’s right to use and possess that card may be dischargeable, while debts incurred after the unconditional revocation are to be excepted from the discharge. Id. Similarly, American Express Travel Related Services Co. v. Diaz (In re Diaz), 185 B.R. 867 (Bankr.M.D.Fla.1994), stands for the proposition that debts incurred by a credit cardholder after the cardholder has already decided to file bankruptcy are to be excepted from the discharge.
The plaintiff here has demonstrated nothing of the kind of fraudulent credit card use that these and other authorities suggest is required to support a determination of non-dischargeability. The plaintiff only alleges that the debtor/defendant used the credit card some eight to nine months before the debtor/defendant filed her Chapter 7 bankruptcy case. The plaintiff would require the court to make major leaps to conclude that the debtor’s use of the card was fraudulent at the time of use. The plaintiff has done nothing to link that use to the debtor/defendant’s then financial condition and the like that might lead to an inference of fraudulent use.
For these reasons, the plaintiff has failed to make out a prima facie case of the non-dischargeability of this indebtedness. Accordingly, the court denies the motion for judgment by default.
DONE and ORDERED.
. The “affidavit” is in fact not an affidavit. In an affidavit, of course, the affiant makes an oath or affirmation as to the truth of the facts stated in the affidavit. Cf F.R.Evid. 603. If a notary public administers the oath, the notary's jurat or certificate of administration of the oath must be in correct form. See, e.g., § 117.05(16)(a), Fla. Stat. A notary public’s certificate of acknowledgment of execution in lieu of an oath is insufficient. § 117.03, Fla.Stat. (A certificate of acknowledgment of execution is a requirement for recording an instrument in the public records; it has nothing to do with a witness swearing to the truth of the facts stated. §§ 695.03 and 695.25, Fla.Stat. See, also, % 117.05(16)(b)-(c).) In this case, the affidavit contains a certificate of acknowledgment only. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492275/ | ORDER DENYING SECOND MORTGAGEE’S MOTION TO DISMISS CASE OR, ALTERNATIVELY, FOR RELIEF FROM THE AUTOMATIC STAY
PAUL HYMAN, Jr., Bankruptcy Judge.
THIS CAUSE came before the Court on June 12, 1995, upon the Second Mortgagee’s Motion to Dismiss Case Or, Alternatively, For Relief From the Automatic Stay (“the Motion”). The Court, having considered the arguments of counsel, having reviewed the post-hearing submissions by the respective parties and being otherwise fully advised in the premises, hereby makes the following findings of fact and conclusions of law.
FINDINGS OF FACT
The parties agree that facts in this case are not in dispute. Hershel Pearl (“Pearl”) is the holder of a second mortgage in the approximate amount of $18,000.00 on the Debtors’ primary residence (the “Residence”), in Broward County, Florida. Pearl’s note and mortgage fully matured pursuant to its terms on November 3, 1993. The first mortgage holder, Metmor Financial, Inc. (“Metmor”), who has a lien in the approximate amount of $33,000.00, filed a foreclosure suit against the Debtors and Pearl (as second Mortgagee), and the Circuit Court of Broward County entered a final judgment of foreclosure on April 6, 1995. One day before the foreclosure sale, the Debtors filed a petition under Chapter 13 of the bankruptcy code. Other than Metmor and Pearl, the Debtors do not have any significant creditors. Metmor’s mortgage did not mature on its own terms prior to the filing of the Debtor’s bankruptcy petition. The Debtors value the Residence at $80,-000.00 in their schedules. The Debtors have proposed a plan that will result in payment of Metmor’s arrearages and all of principal and interest due on Pearl’s debt as of the petition date over the five year term of the Debtors’ plan. The Debtors’ plan does not appear to pay Pearl any postpetition interest on Pearl’s prepetition debt.
CONCLUSIONS OF LAW
Pearl filed the Motion, alleging that, since the mortgage debt matured on its own terms pre-petition, it could not be cured or brought current under any circumstances without payment in full. Pearl contends that the Debtors’ plan to cure the default on his mortgage constitutes a modification of his secured claim which is not permitted pursuant to Section 1322(b)(2). As separate grounds for dismissal or, alternatively, for relief from the automatic stay, Pearl argues that the instant bankruptcy ease is a bad faith filing since the Debtors’ plan is incapable of being confirmed. Pearl asserts that this Court should follow the Ninth Circuit decision, In re Seidel, 752 F.2d 1382 (9th Cir.1985), which held that a debtor could not cure a fully matured mortgage because such a cure would be a modification prohibited by Section 1322(b)(2).
The Bankruptcy Reform Act of 1994 (“1994 Act”), which applies to all bankruptcy cases *489filed on or after October 22, 1994,1 created a new provision which directly impacts on the instant case. Specifically, the pertinent new language is found at Section 1322(c):
Notwithstanding subsection (b)(2) and applicable nonbankruptcy law—
(2) in a ease in which the last payment on the original payment schedule for a claim secured only by a security interest in real property that is the debtor’s principal residence is due before the date on which the final payment under the plan is due, the plan may provide for the payment of the claim as modified pursuant to section 1325(a)(5) of this title (emphasis added).
The plain language of Section 1322(c) clearly and explicitly overrules In re Seidel, supra, and removes the protection against the modification of certain mortgages, including those that have matured pre-petition. Therefore, the court finds that a chapter 13 debtor can modify and pay off a mortgage during the term of the Debtors’ plan which fully matured prepetition.
As to whether Pearl is entitled to postpetition interest, Pearl, as an overse-cured creditor, is entitled to payment of post-petition interest on its prepetition debt. Pursuant to 11 U.S.C. § 506(b), oversecured creditors are entitled postpetition interest on their allowed secured claims. Donald Neal Rake, et al. v. William J. Wade, 508 U.S. 464, -, 113 S.Ct. 2187, 2188, 124 L.Ed.2d 424 (1993); Orix Credit Alliance, Inc. v. Delta Resources, Inc. (In re Delta Resources, Inc.), 54 F.3d 722, 727 (11th Cir.1995). There is no dispute that Pearl is an overse-cured creditor. Therefore, Pearl is entitled to postpetition interest. At the hearing on the motion, the Debtors expressed a desire to amend their plan if the court ruled that Pearl is entitled to postpetition interest. Therefore, the court will grant Debtors the right to amend their plan and will require the Debtors to file an amended plan on or before September 5,1995.
ORDERED AND ADJUDGED that:
1. The Second Mortgagee’s Motion to Dismiss case Or, Alternatively, for Relief from the Automatic Stay is denied. The Chapter 13 Trustee is directed to schedule a confirmation hearing for the instant case at the next Chapter 13 calendar in Broward.
2. Pearl is entitled to postpetition interest on the arrearages to be paid under the Debtor’s plan.
3. This Order is not a determination as to any objection as to whether the Debtors’ proposed plan is feasible or confirmable other then as stated herein.
DONE AND ORDERED.
. The instant case is governed by the 1994 Act, as it was filed on April 5, 1995. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492276/ | MEMORANDUM OPINION
JAMES D. WALKER, Jr., Bankruptcy Judge.
This matter comes before the Court on motion of Empire Financial Services and Thomas & Howard Company (collectively “Movants”) to hold Murray and Judy Williams (collectively “Debtors”) in contempt for failure to comply with a Cash *499Collateral Order and for violating 11 U.S.C. § 363(c). This is a core matter within the meaning of 28 U.S.C. §§ 157(b)(2)(A) and (M). A hearing was held on notice to all parties on October 24, 1995. After considering the evidence from the hearing, as well as supplemental briefs and memoranda, the Court enters the following findings of fact and conclusions of law. Fed.R.Bankr.P. 7052.
FINDINGS OF FACT
Debtors owned and operated a grocery store partnership known as Little River Red & White located at Riverside Plaza in Baldwin County, Georgia. Debtors purchased their interest in the grocery store from Tom Myers on July 28,1994. The property purchased included real estate and the inventory and equipment located in the grocery store. The real property purchased by Debtors included leased premises containing a pharmacy and beauty salon, from which Debtors derived rental income. The monthly rental income from the pharmacy and beauty salon was $1,500.00 and $350.00, respectively.
As part of the purchase agreement, Debtors assumed the seller’s debt to Empire which holds a security interest in the real estate and the inventory, equipment, rental income and accounts receivable of the grocery store. In 1994, Debtors entered into a security agreement with Thomas & Howard Company (“T & H”), granting T & H a security interest in all inventory, equipment, proceeds and accounts receivable of the grocery store. Debtors contend that Movants do not have properly perfected security interests because the financing statements were not filed in the county where Debtors reside.
The debt to Empire is evidenced by two promissory notes, one in the principal amount of $766,000.00, and the other in the principal amount of $204,000.00. When Debtors assumed the indebtedness, the outstanding balances on the notes were $724,-572.20, and $162,095.20, respectively. While the record does not reveal the basis for the indebtedness to T & H, that evidence is not necessary to the resolution of this motion.
Debtors filed their petition under Chapter 11 of the Bankruptcy Code on February 15, 1995. At the time of the filing, Debtors reported $87,537.45 in inventory on their schedules. Debtors later realized that the scheduled value of the inventory was based on retail value rather than at cost, as stated in the schedules. The actual cost of the inventory at that time was estimated by Debtor to be between $60,000.00 and $65,-000.00. Debtors never notified Movants of this discovery.
Between the date of filing and May 9, 1995, Debtors used the proceeds from the sale of the grocery store inventory and rents from tenants to finance the store’s operation without the permission of the Court or Mov-ants. There was an “understanding” between Movants and Debtors as to how the inventory and cash collateral could be used, although nothing was reduced to writing until May 9,1995.
Debtors testified that they hoped to find a buyer for the grocery store and needed to maintain the appearance that the store was a thriving business. To this end, Debtors used cash collateral and inventory to pay employees as well as various vendors and suppliers. Additionally, Debtors made several cash payments to individuals. In this manner Debtors dispersed Movants’ cash collateral until, on April 25, 1995, the balance in the rental account was $696.05, the operating account contained $3,353.97, and the remaining inventory had a value of $29,984.88.
On May 9, 1995, the Court entered a consent order (“Cash Collateral Order”) regarding Debtors’ use of Movants’ cash collateral consisting of proceeds from the sale of Debtors’ inventory as well as rents collected by Debtors from the pharmacy and beauty salon. Movants’ witnesses testified that the parties’ previous “understanding” was reflected in the Court’s Cash Collateral Order. The order contained the following requirements:
(1) Debtors were to maintain a balance in the grocery store’s operating account and inventory in the amount of $87,537.45, matching the amount of inventory in the store on hand at the time of filing;
*500(2) Debtors were to notify Movants immediately in the event that the balance in the operating account and inventory dropped below $87,537.45;
(3) Debtors were to serve copies of the monthly operating reports on counsel for Movants, including copies of the check register and bank statements for the operating account on or before the 20th of every month;
(4) Debtors were to maintain a separate, segregated deposit account for the rental income received from the pharmacy and beauty salon which could not be used without further order of the Court;
(5) Debtors were to provide Movants with a monthly bank statement for the segregated account on or before the 20th of every month.
Debtors violated all of the above provisions. While Debtors opened a bank account for the purpose of segregating rental income, Debtors failed to make the required deposits and, further, withdrew deposits in order to fund the day to day operation of the grocery store. Debtors failed to obtain the permission of the Court or Movants prior to withdrawing the segregated rental fund deposits. Debtors’ inventory suffered a similar fate. The entry of the Cash Collateral Order did not alter Debtors’ unauthorized use of Mov-ants’ collateral, and Debtors do not dispute that they failed to comply with the requirements of the Cash Collateral Order.
The Court heard further testimony from James Mashburn, an employee of Debtors, that he observed Debtors removing inventory from the store’s premises on the night of June 11, 1995. While the Court accepts that Mr. Mashburn saw Debtors removing items from the store, it was not possible for Mr. Mashburn to conclusively identify the objects removed from the store by Debtors. However, Mr. Mashburn testified that the next working day he could identify missing items as a dozen bags of potatoes, two cases of bananas, a case of New York strip steaks, a ribeye loin and firewood. Debtors admitted to taking steaks, firewood, personal possessions and business records. The Court finds that the value of the misappropriated inventory was $300.
On June 6, 1995, counsel for Debtors sent Movants the first financial reports required by the Cash Collateral Order. Movants requested an inventory, and one was scheduled for June 12, 1995. After Debtors did not appear at the scheduled inventory, Movants filed a motion for relief from the automatic stay. On June 13, 1995, with the consent of Debtors, the Court authorized Movants to take possession of the premises, and the business was closed. Thereafter, Empire took an inventory of all goods, perishable and nonperishable, which reflected $46,305.86 in sellable goods.
Debtors converted the ease to Chapter 7 on September 14, 1995. After conversion, Movants foreclosed on the collateral, receiving $11,586.87 as proceeds for inventory and $43,600.00 for equipment.
CONCLUSIONS OF LAW
There is an adversary proceeding pending in this case to determine the secured status of Movants’ claims against Debtors. While Movants urge the Court to find Debtors in violation of 11 U.S.C. § 363, governing the use of a creditor’s collateral by a debtor, the Court declines to decide that question until the pending adversary proceeding is resolved. As a practical matter, the Court cannot find Debtors in violation of section 363 until the Court first finds that Movants hold secured claims. However, the Cash Collateral Order constitutes a valid order of the Court which Debtors admittedly violated. Therefore, the scope of this order is limited by the terms of that Order.
Should the pending adversary proceeding result in a finding that Movants possess secured claims, the Court will then entertain a motion for sanctions for violation of section 363 if Movants choose to bring such a motion. The relevant dates for the Court’s review are between the entry of the Cash Collateral Order (May 9, 1995) and Movants’ repossession of the collateral (June 11, 1995). The scope of this opinion will be limited to events and losses occurring between those dates.
The Eleventh Circuit Court of Appeals discussed the inherent power of the Court to sanction contempt in the case of Glatter v. *501Mroz (In re Mroz), 65 F.3d 1567 (11th Cir.1995). The court summarized the inherent power of the judiciary as follows:
In Chambers v. Nasco [NASCO], Inc., 501 U.S. 32, 111 S.Ct. 2123, 115 L.Ed.2d 27 (1991), the Supreme Court addressed the nature and scope of a federal court’s inherent power to control the proceedings and the conduct of the parties involved. The Court acknowledged that “ ‘certain implied powers must necessarily result to our Courts of justice from the nature of their institution,’ powers “which cannot be dispensed with in a Court, because they are necessary to the exercise of all others.’” [citations omitted]. These powers are necessarily vested in courts to manage their affairs to “achieve the orderly and expeditious disposition of cases.” Id. These inherent powers, which are incidental to a federal court, include the power to control and discipline attorneys appearing before it. [citations omitted].
However, because of their potent nature, “inherent powers must be exercised with restraint and discretion.” [citations omitted]. “A primary aspect of that discretion is the ability to fashion an appropriate sanction for conduct which abuses the judicial process.” Id. For example, circumstances which may dictate the exercise of inherent power to assess attorney’s fees against counsel, include those where a party has acted in “bad faith, vexatiously, wantonly, or for oppressive reasons.” Id. (citations omitted). The imposition of sanctions in that circumstance “transcends a court’s equitable power concerning relations between the parties and reaches a court’s inherent power to police itself, thus serving the dual purpose of ‘vindicating] judicial authority without resort to the more drastic sanctions available for contempt of court and mak[ing] the prevailing party whole for expenses caused by his opponents obstinacy.’ ” [citations omitted].
Id., 65 F.3d at 1574-1575.
The inherent power of the Court is not a new concept, but has been reinvigorated as of late as a source of authority to effectuate the judicial mandate contained in the United States Constitution. See e.g. Whitaker v. Belt Concepts of America, Inc., 189 B.R. 846 (Bankr.M.D.Fla.1995). The court in Mroz recognized that the inherent power of the judiciary may be invoked to punish contempt. Mroz, 65 F.3d at 1575, n. 9. A predicate to the use of the Court’s inherent power is that the party to be sanctioned must be found to have acted in bad faith. Id. at 1575. In addition:
The court must afford the sanctioned party due process, both in determining that the requisite bad faith exists and in assessing fees. Id. Due process requires that the attorney (or party) be given fair notice that his conduct may warrant sanctions and the reasons why. [citation omitted]. Notice can come from the party seeking sanctions, from the court, or both, [citation omitted]. In addition, the accused must be given an opportunity to respond, orally or in writing, to the invocation of such sanctions and to justify his actions, [citation omitted].
Id., 65 F.3d at 1575.
As a practical matter, compliance with the notice requirements of Fed. R.Bankr.P. 90201 satisfies the due process *502concerns of the Mroz court. Although the Mroz court identified the inherent power of the court as not relying upon any statutory construct or basis, due process nevertheless requires that adequate notice be given.
The terms of Rule 9020 provide a benchmark against which to measure á respondent’s due process rights. This does not mean, however, that parties must comply with Rule 9020 in order to invoke the Court’s inherent power. A party’s due process rights in the face of sanctions under the Court’s inherent power are spelled out in the Mroz decision. Compliance with Rule 9020 will ensure that due process is satisfied, but it is not a predicate to providing due process of law.2
Debtors were on notice as to the purpose and substance of the Court’s hearing on this matter. Debtors knew that Movants sought sanctions against them, and were properly advised as to the basis for Movants’ request. Debtors have had the opportunity to respond to Movants’ allegations, and have done so both at the hearing and in the form of legal memoranda filed with the Court. In all respects, Debtors have been afforded due process of law consistent with the Mroz decision as well as the dictates of Federal Rule of Bankruptcy Procedure 9020. Due process has been satisfied. Mroz at 1575.
Upon review of the facts of this case, the Court finds that Movants have carried their burden of showing that Debtors acted in bad faith in violating this Court’s order. Commodity Futures Trading Commission v. Wellington Precious Metals, Inc., 950 F.2d 1525 (11th Cir.1992).
Debtors failed to notify Movants that the cash collateral had been reduced below the minimum level established by the Court in its order. Debtors continued to use the cash collateral despite the fact that the Cash Collateral Order prohibited such use. Debtors failed to provide Movants with the required financial statements, and neglected to maintain the segregated accounts called for in the Cash Collateral Order. At the time Debtors realized they could not use cash collateral and still comply with this Court’s order, they had a choice of defying the order in hopes of obtaining a purchaser for the grocery store or adhering to the order and ceasing the store’s operations pending further order of the Court. Debtors opted to defy the order, and must now face the consequences.
Debtors disregarded the fundamental duty of a debtor-in-possession in failing to adhere to an order of the Court. Debtors disbursed Movants’ cash collateral in clear defiance of this Court’s order. The Court heard further evidence that Debtors disbursed Movants’ collateral by paying off certain other creditors and keeping the business open while Debtors sought a purchaser. Debtors also converted Movants’ collateral to their own use by admittingly removing steaks and firewood subject to Movants’ security interest, albeit in relatively small amounts. Considering the totality of the circumstances, Debtors acted in bad faith by knowingly defying the terms of the Cash Collateral Order.
The fact that Debtors would benefit personally from the sale of the business has not escaped the Court’s attention. Debtors may not cause creditor’s rights to be deferred while imposing their own distribution schemes in defiance of the protections afford*503ed by law to creditors in bankruptcy. Creditors can expect that the Court will enforce its orders, particularly when the creditors’ state law rights are deferred in favor of encouraging a debtor’s successful reorganization.
When a debtor abuses the system, as these Debtors have, it is the duty of the Court to provide redress for the grievance and to try to restore creditor confidence that the Court will protect those rights which Congress has provided. To this end, the Court finds Debtors in contempt, and enters the following sanctions:
(1) Debtors shall be required to pay the full amount of misappropriated rental payments received between the entry of the Cash Collateral Order and the date Mov-ants took possession of the collateral. The Court finds this amount to be $1,850.
(2) Debtors shall be required to account for the decline in inventory between the entry of the Cash Collateral Order and the date Movants took possession of the collateral. The Court finds this amount to be $5,000. In making this award, the Court notes that Movants bear some of the responsibility for their loss. When Movants saw that Debtors were not complying with the Cash Collateral Order, they should have notified the Court. Since Movants stood to gain from the sale of the grocery store, that motive may have contributed to Movants’ inaction. However, while this does serve as a mitigating factor, it does not excuse Debtors’ conduct.
(3) Debtors shall be required to pay $2,500 to each of the moving creditors as punitive sanctions for the bad faith defiance of this Court’s order. This amount would be more substantial but for the fact that the Court believes other liabilities imposed on Debtors by this order will have a significant and sufficient punitive impact upon Debtors.
(4) Debtors shall be required to pay Mov-ants’ attorneys’ fees incurred in bringing this action for contempt. If Debtors cannot agree with Movants as to the amount of the fees reasonably incurred, the matter will be set for a hearing, and the Court will determine the amount of the award.
(5) Debtors shall be required to make the payments required in (3) and (4) above in monthly installments of $500 without interest, $250 to be paid monthly to each Mov-ant until the balance due is paid in full. Payments are to begin on February 1, 1996. The Court has heard testimony that Debtors are now both gainfully employed. This monthly payment should be within their means.
(6) The amount required to be paid by (1) and (2) above are to be paid to the party determined by the Court to be the holder of the first lien on the rents and inventory. In the event neither Movant can establish such a claim, the money will be paid to the Chapter 7 Trustee. Payments pursuant to this paragraph are to be made in the amount of $500 per month, without interest, to begin following the completion of payments pursuant to paragraph (5) above.
There is no indication that Debtors diverted any significant amount of Movants’ collateral to their own use. The fact that Debtors used the collateral in an effort which could possibly have been beneficial to Movants, points to the conclusion that the conduct was not so reprehensible as to justify incarceration as requested by Movants.
. Rule 9020 provides:
(a) Contempt Committed in Presence of Bankruptcy Judge. Contempt committed in the presence of a bankruptcy judge may be determined summarily by a bankruptcy judge. The order of contempt shall recite the facts and shall be signed by the bankruptcy judge and entered of record.
(b) Other Contempt. Contempt committed in a case or proceeding pending before a bankruptcy judge, except when determined as provided in subdivision (a) of this rule, may be determined by the bankruptcy judge only after a hearing on notice. The notice shall be in writing, shall state the essential facts constituting the contempt charged and describe the contempt as criminal or civil and shall state the time and place of hearing, allowing a reasonable time for the preparation of the defense. The notice may be given on the court’s own initiative or on application of the United States attorney or by an attorney appointed by the court for that purpose. If the contempt charged involves disrespect to or criticism of a bankruptcy judge, that judge is disqualified from presiding at the hearing except with the consent of the person charged.
(c)Service and Effective Date of Order; Review. The clerk shall serve forthwith a copy of *502the order of contempt on the entity named therein. The order shall be effective 10 days after service of the order and shall have the same force and effect as an order of contempt entered by the district court unless, within the 10 day period, the entity named therein serves and files objections prepared in the manner provided in Rule 9033(b). If timely objections are filed, the order shall be reviewed as provided in Rule 9033.
(d) Right to Jury Trial. Nothing in this rule shall be construed to impair the right to jury trial whenever it otherwise exists.
Fed.R.Bankr.P. 9020 (West 1995).
. The primary distinction between Rule 9020 and the Court's inherent power is the opportunity for district review prior to the time the order takes effect. This would be significant if incarceration were an issue. In this case, the sanctions are limited to a monetary recovery. The order entered in accordance with this opinion will be a final order, appealable to the District Court. The provisions of the order will pose no immediate jeopardy to Debtors. While Rule 9020 operates as an automatic supersedeas for an order entered in accordance with its provisions, Debtors are free to apply to the District Court for a superse-deas in this case if an appeal is sought. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492277/ | CARL L. BUCKI, Bankruptcy Judge.
The Chapter 7 trustee commenced this adversary proceeding to recover an allegedly preferential payment which a customer of the debtor made to the defendant from monies that would otherwise have become owed to the debtor. Contending that the payor was jointly liable for the underlying obligation, the defendant argues that that joint liability precludes a demonstration of the requirements for a preference as set forth in 11 U.S.C. § 547(b).
Prior to the filing of its bankruptcy petition on December 16, 1993, Alumni Enterprises Incorporated (“Alumni”) had regularly engaged Reo Distributing Services, Inc. (“Reo”), to transport plastic product to Lerio Corporation of Mobile, Alabama (“Lerio”). Unfortunately, financial circumstances caused Alumni to become delinquent in the payment of transportation charges. By September of 1993, at a time less than 90 days prior to the debtor’s bankruptcy filing, Alumni owed Reo on nine outstanding invoices. Alumni did pay the oldest of these invoices in the amount of $650 on September 20, but was unable to satisfy the remaining eight obligations. Although Reo had initially issued its invoices to Alumni, this carrier began sometime in October to seek collection from Lerio. In particular, the trustee has represented, upon information and belief, that Reo refused to deliver a shipment of product unless Lerio paid the delinquent bills that had been rendered to the Debtor. This pressure apparently caused Lerio to contact Alumni, which then authorized Lerio to deduct the delinquent shipping charges from the balance that Lerio would owe for the product whose delivery had been withheld. Based upon this authorization, Lerio paid $5,725 to Reo on November 5. In this preference action, Alumni’s trustee seeks to recover both the debtor’s direct payment on September 20, and the payment which Lerio made pursuant to the debtor’s instruction. Asserting the absence of any material issues of fact, Alumni and Reo have filed cross motions for summary judgment.
Reo now acknowledges the preferential character of the first transfer of $650. Rather, the focus of controversy is the second payment from Lerio Corporation. The trustee contends that this second payment is preferential because it represented a transfer from the debtor’s assets, in this instance by reason of a deduction from an account receivable. Reo responds that its shipping bill was a joint liability of both Alumni as consignor and Lerio as consignee. Because the payment satisfied an obligation for which Lerio was itself fully liable, Reo would conclude that the transfer was not of the debtor’s property, that payment was on account of an antecedent debt of Lerio rather than the *556debtor, and that the payment did not enable Reo to obtain more than it would have received through a Chapter 7 liquidation. Both parties concede that the Interstate Commerce Act applies to the transactions now in dispute.1
At common law, the consignor assumes primary liability for shipping charges. A/S Dampskibsselskabet Torm v. Beaumont Oil Ltd., 927 F.2d 713 (2nd Cir.1991). Then, upon acceptance of delivery, the consignee becomes an additional obligor for payment of those expenses. New York Cent R.R. v. Warren Ross Lumber Co., 234 N.Y. 261, 265, 137 N.E. 324 (1922) These rules are subject, however, to modification either by statute or agreement. One such statutory exception is the Interstate Commerce Act, which Con gress enacted in 1887 “to secure equality of rates to all and to destroy favoritism.” In re Penn-Dixie Steel Corp., 6 B.R. 817, 820 (Bankr.S.D.N.Y.1980), aff'd 10 B.R. 878 (S.D.N.Y.1981). Under its provisions, the liabilities of consignor and consignee are generally extended not only to billed charges, but to the full rate that is set forth in any filed tariffs. Pittsburgh, C., C. & St. L. Ry. v. Fink, 250 U.S. 577, 581-82, 40 S.Ct. 27, 27-28, 63 L.Ed. 1151 (1919). In this way, Congress sought to assure that each interstate carrier would accord uniform and nondiscriminatory treatment to its customers. The liability of a consignee is not absolute, however. In the absence of discriminatory intent, the parties may allocate their respective liabilities by agreement. It is “where parties fail to agree, or where discriminatory practices are present, [that] the Interstate Commerce Act will bind the consignee to pay freight charges to the carrier on goods he accepts, this obligation being independent of the consignor’s own obligations.” In re Roll Form, Products, Inc., 662 F.2d 150, 154 (2nd Cir.1981).
Designed to assure rate equality, the Interstate Commerce Act was never a guaranty of collection. Published tariffs “did not provide when or by whom the payment should be made. As to these matters [the parties] were left free to contract, subject to the rule which prohibits discrimination.” Louisville & Nashville R.R. v. Central Iron & Coal Co., 265 U.S. 59, 66, 44 S.Ct. 441, 442, 68 L.Ed. 900 (1924). The concern for rate equality is not implicated, however, when the consignor agrees with the carrier to assume responsibility for the full and proper charge. In that event, consignee liability would serve not to assure application of the tariff, but to effect collection of a bad debt.
The parties acknowledge that in the absence of agreement between Alumni as consignor and Reo as carrier, Lerio as consignee became liable for shipping charges upon acceptance of delivery. The central issue is whether this outcome changes by reason of some agreement. The trustee references no specific written instrument, but asserts that the Court may imply an agreement from the conduct of the parties. Although such an inference may be drawn in certain circumstances, the present facts fail to demonstrate an intent to modify the customary rule of consignee liability.
The trustee urges reliance upon In re Penn-Dixie Steel Corp., 6 B.R. 817 (Bankr.S.D.N.Y.1980), aff'd, 10 B.R. 878 (S.D.N.Y.1981) and In re Chateaugay Corp., 78 B.R. 713 (Bankr.S.D.N.Y.1987). In both cases, Judge Lifland inferred the existence of an agreement to waive consignee liability from ten factors.2 On the present motion for sum*557mary judgment, the Court has received minimal or equivocal evidence regarding most of these criteria. However, it is clear that the present circumstances fail to satisfy at least two of the factors. In contradiction to these precedents, Alumni did not pay Reo from its general account in all instances, and the bills of lading were never marked as “prepaid” to indicate the consignor’s exclusive liability.3 These distinctions are critical, for they demonstrate the absence of a consistent practice to rely exclusively upon Alumni for payment of freight charges.
The needs of commerce demand clear standards. One such standard is the imposition of consignee liability upon acceptance of goods. A waiver of that liability requires either a written understanding or some unequivocal substitute. At best, Alumni’s conduct was ambiguous as to the question of intent to rely solely upon the consignor’s credit. Indeed, without a “prepaid” notation, the bill of lading was indicative of consignee responsibility for this indebtedness. The Court must assume, therefore, that Lerio shared joint liability with Alumni for payment of Reo’s freight charges.
Section 547(b) of the Bankruptcy Code sets forth the basic requirements for a preference recovery. Before reciting five specific conditions, the statute states that the trustee’s avoidance power applies fundamentally to “any transfer of an interest of the debtor in property.” The trustee contends that Lerio’s payment represented an advance from the debtor’s interest in an account receivable. At the time of payment, however, Reo was refusing to complete delivery unless its outstanding invoices were satisfied. Until the goods were delivered, Lerio would have no obligation to pay Alumni. Indeed, Lerio might have possessed a claim against Alumni by reason of the failure to fulfill a purchase order. Accordingly, before Lerio’s payment to Reo, Alumni owned no receivable against which to credit an offset. Reo’s collection efforts are more accurately characterized as an attempt to secure recovery from a joint obligor, and not as an attempt to obtain a piece of what Lerio owed to Alumni.
In contrast to proceedings under Chapter 13,4 creditors of a Chapter 11 debtor may freely seek recovery from any joint obligor which has not itself obtained protection under the Bankruptcy Code. So long as it derives from sources other than a property interest of the debtor, the payment is not a preference as defined in 11 U.S.C. § 547. Though designed to induce collection, Reo’s actions did not compel any particular path to this result. Its pressure might alternatively have caused Lerio to satisfy the claim or to pressure Alumni into a direct preferential payment of the obligation. Exposed to liability for the freight charges that Alumni had agreed to assume, Lerio chose a middle course: to arrange recoupment of the payment from Alumni. As between Alumni and Lerio, the offset arrangement was a contemporaneous transfer to resolve a contractual breach which threatened Lerio’s receipt of product and, for Alumni, the completion of a sale and the generation of a new receivable. Without this settlement, Alumni would have retained title to undelivered merchandise having an uncertain value upon liquidation from a carrier’s warehouse and after satisfaction of the carrier’s lien. That Reo was a *558beneficiary of this arrangement cannot change the fact that it involved no transfer of estate assets other than for contemporaneous value.
The Trustee’s motion for summary judgment is granted, with costs, to the extent that the complaint seeks to recover the debt- or’s direct payment to Reo in the amount of $650, together with interest from April 1, 1994. In all other respects, the trustee’s motion is denied. The defendant’s motion for summary judgment is granted with respect to that portion of the trustee’s complaint which seeks to avoid Lerio’s payment of $5,725. The clerk is directed to enter judgment in accord with this decision.
So ordered.
. Subsequent to the transactions at issue, Congress enacted substantial amendments to the Interstate Commerce Act. ICC Termination Act of 1995, P.L. 104-88, 109 Stat. 803 (December 29, 1995). The new statutory framework has, however, retained the provisions that are of relevance to this decision. Compare 49 U.S.C.A. § 10743(a) (West Supp.1995) with P.L. 104-88 § 103, 109 Stat. 873 (1995) (to be codified as 49 U.S.C. § 13707).
. These ten factors are as follows: "1) The carrier historically looked solely to the consignor for payment. 2) This was the understanding of the parties as evidenced by every facet of their business relationship. 3) The consignor alone contracted with the carrier for shipping services. 4) Direct billing was effected from carrier to consignor, and that direct billing took place after delivery. 5) The consignor paid freight charges from its general funds. 6) Customer-consignees were billed by the consignors on a unitary basis (i.e. one net amount for delivered materials inclusive of freight) and they paid this single amount directly to the consignor. 7) The consignor deposited the sum received from the cus*557tomer-consignees into its general accounts. 8) There was no request by, or agreement with, the carrier to segregate any portion of the funds received from customer-consignees, and none took place. 9) The two billing processes (i.e. [carrier] to Debtors and Debtors to consignees) were not synchronized so as to give an impression that the Debtors were mere conduits between carrier and consignee. 10) Bills of lading and deliveiy tickets were marked 'prepaid' to indicate consignor's liability, and were signed by the carrier's agents without objection.” In re Chateaugay Corp., 78 B.R. at 723-724.
. In this context, "prepaid” is a term of art used to denote that the consignor has assumed responsibility for payment. The trustee has provided copies of 13 bills of lading, only one of which is marked as "prepaid”. However, this one bill of lading appears to relate to different accounts, as there is nothing on it to indicate that it has a relation to any of the nine shipments to Lerio.
. Section 1301 of the Bankruptcy Code imposes a co-debtor stay with respect to actions to collect most consumer obligations of a debtor in Chapter 13. No parallel provision exists in either Chapter 7 or Chapter 11. Even in Chapter 13, the co-debtor stay expressly excludes debts arising in the ordinary course of business activity. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492278/ | MEMORANDUM OPINION
H. CLYDE PEARSON, Bankruptcy Judge.
The Court having heretofore entered its Order finding that the educational loan, which is the subject matter of this Adversary Proceeding, falls within the category of those loans where repayment would work an undue hardship upon the Debtor to pay and, therefore, adjudged that the said loan was dis-chargeable. To supplement the said Order, the Court makes the following additional findings and conclusions.
*659The Debtors are husband and wife. This Adversary Proceeding deals only with the obligation of Shonda Thomas Dillon who incurred the debt in question as an educational loan for furthering her educational interests and seeks a discharge herein.
This young couple’s only possessions are their household goods and personal items as well as two automobiles: one 1979 Oldsmobile, which is 14 years old, and a 1983 Mercury which is 11 years old. They rent their home with rental charges running from $350.00 to $500.00 per month. The husband is employed, although not full time, with gross earnings of approximately $992.00 per month. They have two small children; and the wife, Plaintiff herein, works and earns $5.35 per hour and, to do so, is required to place the children in day care at a rate of $35.00 per week. In addition they have expenses for food of $350.00 per month; furniture payments, $100.00 per month; dry cleaning, $20.00; cable, $35.00; and medical and other expenses in excess of $200.00 to $300.00 per month. The evidence shows that both Debtors’ employment is not with a substantial income nor with a permanent basis. They maintain their home and the support of the two children upon such incomes which they presently earn. There is no evidence that their future earnings will substantially increase.
As an initial matter, the Court notes that the Bankruptcy Code generally is to be liberally construed in favor of the debtor. See Williams v. USF & G, 236 U.S. 549, 35 S.Ct. 289, 59 L.Ed. 713 (1915); Roberts v. W.P. Ford & Son, 169 F.2d 151, 152 (4th Cir.1948) (citing Johnston v. Johnston, 63 F.2d 24, 26 (4th Cir.1933) and Lockhart v. Edel, 23 F.2d 912, 913 (4th Cir.1928)). This universally recognized purpose serves to “relieve the honest debtor from the weight of oppressive indebtedness and permit him to start afresh.” Local Loan v. Hunt, 292 U.S. 234, 244, 54 S.Ct. 695, 699, 78 L.Ed. 1230 (1934) (citations omitted). This same “honest but unfortunate debtor” is thus provided with “a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt.” Grogan v. Garner, 498 U.S. 279, 286, 287, 111 S.Ct. 654, 659, 659, 112 L.Ed.2d 755, 764, 765 (1991); Perez v. Campbell, 402 U.S. 637, 648, 91 S.Ct. 1704, 1710, 29 L.Ed.2d 233, 241 (1971); Local Loan v. Hunt, 292 U.S., at 244, 54 S.Ct., at 699; Johnston v. Johnston, 63 F.2d, at 26; Royal Indemnity Co. v. Cooper, 26 F.2d 585, 587 (4th Cir.1928).
This Court, upon trial of this matter, heard the evidence including the testimony of the witnesses. It observed the candor, demean- or, truthfulness, and forthright testimony of the witnesses as well as their credibility and makes the findings and conclusions herein.
The Court, having reviewed all the evidence, finds and concludes that it would work an undue hardship on this Debtor and her family under 11 U.S.C. § 523(a)(8)(B) if the repayment of the said loan should be ordered by this Court. Therefore, the loan will be adjudged dischargeable. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492280/ | MEMORANDUM OPINION1
SUSAN PIERSON SONDERBY, Bankruptcy Judge.
BACKGROUND
On July 27, 1994, David R. Ransom, Jr. d/b/a D & R Press (“Debtor”) filed a voluntary petition for relief pursuant to Chapter 11 of the Bankruptcy Code. D & R Press is a small commercial printing company in Chicago, Illinois. The Debtor is current with the monthly operating reports and with the quarterly fees payable to the United States Trustee. Since the bankruptcy filing, the Debtor’s operating profits are approximately $25,000. Debtor’s property is fully encumbered by consensual liens and the tax liens of the Internal Revenue Service (“IRS”). The IRS filed a proof of claim in the amount of $361,140.22. The Debtor has not objected to the IRS’ claim.
On May 9, 1995, the Debtor filed a plan of reorganization providing that the Debtor will file an Offer of Settlement of his debt with the IRS. The plan provides that “the compromised amount or the actual amount shall be paid, in deferred monthly cash payments, over a period of seventy-two (72) months after [sic] the date of assessment of such claim, of a value, as of the [sic] Effective Date of the Plan.” On March 22, 1995, the IRS filed a motion to convert or dismiss the Debtor’s case pursuant to 11 U.S.C. § 1112(b)(2) of the Bankruptcy Code.2 Subsequently, the Debtor filed a response and the IRS filed a reply. On May 9, 1995, the Court held an evidentiary hearing.
ANALYSIS
Section 1112(b)(2)' states that a court may dismiss a case or convert a case to Chapter 7 for cause, including the “inability to effectuate a plan.” 11 U.S.C. § 1112(b)(2). *722The Seventh Circuit has directed lower courts to dismiss or convert a ease pursuant to § 1112(b)(2), “‘if the court determines that it is unreasonable to expect that a plan can be confirmed.’ ” In re Woodbrook Assoc., 19 F.3d 312, 316 (7th Cir.1994) (citing 5 Conrad K. Cyr et ah, Collier on Bankruptcy ¶ 1112.03[2][d3[ii], at 1112-19 to 1112-20 (15th ed. 1993)). Where there is a reasonable prospect of successful rehabilitation, a motion under § 1112(b) must be denied. In re Garland Corp., 6 B.R. 456, 460 (1st Cir. BAP 1980). The burden is on the movant to establish by a preponderance of the evidence the cause for dismissal. Woodbrook, 19 F.3d at 317.
Pursuant to § 1141(d)(2), the confirmation of a plan does not discharge an individual debtor from any debt excepted from discharge under § 523. The IRS contends that since the Debtor cannot bind the IRS to his plan, the Debtor will be unable to effectuate a plan of reorganization. The IRS’ argument fails because the IRS has not proven that it has any nondisehargeable tax claims. Not all claims for taxes are nondisehargeable. See 11 U.S.C. § 523(a). The Federal Rules of Bankruptcy Procedure mandate that an adversary proceeding must be filed in order to determine the dischargeability of a debt. Fed.R.Bankr.P. 7001(6). Simply because this is a Chapter 11 proceeding does not obviate the need for a determination that the IRS’ claim is nondisehargeable. In a Chapter 11 case “a debt deemed to be non-disehargeable under 11 U.S.C. § 523(a) will not be discharged. 11 U.S.C. § 1141(d)(2). In this regard, a complaint needs to be filed, just as in a Chapter 7.” 2 Thomas J. Salerno et al., Advanced Chapter 11 Bankruptcy Practice § 13.5, at 13-6 (1994); see also Matter of C & P Gray Farms, Inc., 70 B.R. 704, 711 (Bankr.W.D.Mo.1987) (noting that the court has routinely heard and determined nondischargeability actions in Chapter 11 cases).
The IRS cites numerous cases for the proposition that creditors cannot be bound by a Chapter 11 plan which prevented the creditor from executing or collecting on the nondisehargeable debts. De Paolo v. U.S. (In re DePaolo), 45 F.3d 373 (10th Cir.1995); In re Amigoni, 109 B.R. 341 (Bankr.N.D.Ill.1989); In re Howell, 84 B.R. 834 (Bankr. M.D.Fla.1988). The Court does not disagree with that proposition. However, the status of the debts as being nondisehargeable was clear in all those cases. In Howell, the Debt- or sought to cram down its plan which precluded a creditor holding a nondisehargeable claim from pursuing the claim post-confirmation. 84 B.R. at 835. In that case, the creditor initiated an adversary proceeding pursuant to § 523 to determine whether the debt was nondisehargeable. Id. After a trial on the merits, the Court entered a judgment finding that the debts were nondis-chargeable. Id. In Amigoni the Chapter 11 debtors proposed plans which sought to restrict the rights of parties who were holding nondisehargeable claims. 109 B.R. at 342-43. However, the debtors specifically conceded that the debt in question was non-disehargeable. Id. at 344. Similarly, in De-Paolo, the parties did not dispute that the taxes were nondisehargeable. 45 F.3d at 375. See also Fein v. U.S. (In re Fein), 22 F.3d 631 (5th Cir.1994) (debtor instituted an adversary proceeding to determine whether income tax deficiencies had been discharged).
In this case, unlike Howell, Amigoni or DePaolo, there is a question as to whether the IRS’ claim is nondisehargeable. The court cannot determine from the papers filed and the testimony given which tax claims are nondisehargeable. Looking at the evidence presented at the hearing, the IRS has not proven by a preponderance of the evidence that the debts are nondisehargeable. The Debtor did not concede that the debts were nondisehargeable, nor is the Court convinced of that fact. A separate adversary proceeding must be instituted so that the Debtor can specifically admit or deny which tax claims it considers nondisehargeable.
The Tenth Circuit did not require the filing of an adversary complaint to determine that the IRS’ claim was nondisehargeable. Grynberg v. U.S. (In re Grynberg), 986 F.2d 367 (10th Cir.), cert. denied, — U.S.-, 114 S.Ct. 57, 126 L.Ed.2d 27 (1993). However, in Grynberg, the taxes at issue were gift taxes which the Court found easily fit into the nondisehargeable category. Id. at 369. That is not so in this case. In this case, the IRS’ claim consisted of withholding taxes since 1989, federal unemployment taxes since 1989, income taxes since 1987, and employ*723ment taxes since 1987, as well as respective interest and penalty assessments for some of those taxes.
The IRS contends that the Debtor has not objected to its claim. Pursuant to § 502, a proof of claim is allowed unless a party-in-interest objects. At this point in time, the IRS’ claim is allowable. However, simply because a claim is allowed does not make it nondischargeable. Obtaining a discharge in a Chapter 11 case, is one of the primary purposes for a debtor to file for bankruptcy. Consequently, which claims of the IRS are deemed nondischargeable is sufficiently serious, and in the case of tax debt, sufficiently complex, to warrant the filing of a complaint. Once the question is answered as to which debts are nondischargeable, the Court can assess the arguments of the IRS as to whether the Debtor can successfully rehabilitate.
Next, the IRS contends that the Debtor’s operating profits are insufficient to pay the IRS prior to the time period required under § 1129(a)(9)(C). Section 1129(a)(9)(C) requires the payment of a § 507(a)(8) tax claim on a deferred basis over a period not exceeding six years after the date of assessment of such claim. The IRS argues that the Debtor will be unable to make certain priority tax assessments which will reach their sixth anniversary in August and September 1995. Consequently, the IRS argues that the Debtor’s inability to effectuate a plan is grounds for conversion or dismissal under § 1112(b)(2). That argument is purely speculative.
At the evidentiary hearing, the Court received testimony from David Ransom, the owner of D & R Press, and Darrell Ransom, the manager of D & R Press. The Court found the testimony of the two brothers to be forthright and sincere. From the testimony given, it is clear to this Court that the Debt- or’s business is in the process of successfully reorganizing. The Debtor has obtained numerous new accounts including Montgomery Ward, FNMA, and MCI which have already brought the Debtor substantial profits. The Debtor’s landlord has recently remodeled the business premises of D & R Press which will further entice new clients. The Debtor has also changed his way of doing business by requiring a down payment from clients requesting printing services.
The Debtor has also made fundamental changes in the way he runs his business. More productive workers have been hired, and less productive workers have been terminated. These changes have been successful. In February and March, the Debtor’s operating profits were in excess of $9,000 each month, the debtor in possession account contained $31,000, and the firm accounts receivable were in excess of $68,000. The profits, as projected by Darrell Ransom, show a substantial likelihood of continuing. Further, the Court is impressed with Darrell Ransom’s enthusiastic attitude and drive to see D & R Press succeed. Both the owner and manager of D & R Press “appear to have the business acumen and sufficient resilience to rebound and breathe life into the [company].” In re Burnside, Lee & Harris Diamond Co., 17 B.R. 104, 106 (Bankr.D.Fla.1981).
The purpose of Chapter 11 is to give a struggling business like D & R Press a chance to rehabilitate and work through its debt problems. From the testimony presented, the Court believes that the Debtor will have the resources to pay the IRS the payments which are due in August and September of 1995 in the amounts of $10,917 and $39,489 respectively. At this point in the Debtor’s case, the Court finds that it is not unreasonable to expect that a plan will be confirmed.
Further, the IRS is not unduly prejudiced by the Court’s ruling. The Debtor and Darrell Ransom have testified that due to the ascending spiral of the profitability of their printing business, they will be able to make the required payments to the IRS in August and September. The total of these two amounts is $50,406. The IRS admits that the most it will recover by forcing a liquidation of Debtor’s business is $50,758. By allowing the Debtor to stay in business, the Debtor will be able to generate income so that it can pay the IRS beyond the amount it would have received in a liquidation case.
CONCLUSION
The Court finds that the IRS has not sustained its burden of proof in proving that the Debtor has an inability to effectuate a plan of reorganization. However, the Court *724is concerned that the Debtor has not made his 1995 estimated tax payments. In the Debtor’s Proposed Findings of Fact and Conclusions of Law, the Debtor stated that his personal estimated quarterly payments for the first quarter of 1995 had not been paid but would be paid within 24 hours. Consequently, the Court’s denial of the Motion to Convert or Dismiss is contingent on the Debtor paying his estimated payment for the first quarter of 1995 to the IRS within 24 hours of the docketing of this order.
Turning to the Plan of Reorganization on file, the Court agrees with the U.S. Trustee that further evidence of financial information is needed. The Court must see a liquidation analysis, a projected cash flow and budget, and consolidated annual financial statements covering at least one fiscal year prior to the bankruptcy filing. This information must be incorporated into the Debtor’s Plan by June 16, 1995. Further, the Debtor must file a disclosure statement with this information as well as the other requirements of Local Bankruptcy Rule 1100 by June 16, 1995. The Court’s ruling incorporates the Court’s findings of facts and conclusions of law pursuant to Fed.R.Bankr.P. 7052.
. Edited after issuance for purposes of publication.
. All statutory citations are to the Bankruptcy Code, 11 U.S.C. §§ 101-1330. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484007/ | FILED
November 15, 2022
released at 3:00 p.m.
EDYTHE NASH GAISER, CLERK
SUPREME COURT OF APPEALSOF
WEST VIRGINIA
No. 22-0293, Equitrans, L.P. v. Public Service Commission of West Virginia, Ronald
Hall, Ashton Hall, and Hope Gas, Inc., dba Dominion Energy West Virginia
ARMSTEAD, Justice, concurring in the result:
The present case involves a rather straightforward question of whether the
Public Service Commission (“PSC”) has jurisdiction over Equitrans’ decisions of whether
to provide or discontinue providing natural gas to individuals through taps, commonly
referred to as “farm taps,” on its gathering line facilities located in West Virginia. I believe
the answer to that question is that the PSC does, in fact, retain such jurisdiction, but I reach
that conclusion in different manner that would avoid the potential for widespread and
unintended consequences I fear will result from the majority’s reasoning. The majority’s
finding that the gathering line in question is not “solely dedicated to … gathering … of
natural gas,” because it is a “mixed-use” line has the potential to place the majority of
pipelines in this State under the PSC’s jurisdiction. 1 Further, to reach its conclusion, the
majority opinion has utilized an inapplicable definition to endow the PSC with jurisdiction
in this case. In sum, the majority opinion is simply a bridge too far. Therefore, while I
concur in the ultimate disposition reached by the Court that the PSC has jurisdiction over
1
Lucas Manfield, West Virginia Is Awash in Natural Gas, But Rural
Communities Are Losing Service, https://mountainstatespotlight.org/2020/09/21/rural-
residents-face-loss-of-natural-gas-service/ (last visited Nov. 13, 2022) (“Over 25,000 gas
customers in West Virginia receive their gas directly from local wells through what are
known as field taps.”).
1
the provision of natural gas service to tap consumers from the gathering line in question, I
reach such decision for different reasons than those cited by the majority.
The majority opinion relies heavily upon the provisions of West Virginia
Code § 24-3-3a (1983) and our prior holding in Syllabus Point 3 of Boggs v. Public Service
Commission, 154 W. Va. 146, 174 S.E.2d 331 (1970), to reach its conclusion that the PSC
has jurisdiction over Equitrans’ gathering lines. This argument fails for two reasons. First,
West Virginia Code § 24-3-3a on its face is inapplicable to this matter. That section
provides: “For reasons of safety, deliverability or operational efficiency the commission
may, in its discretion, by rule or order, exclude from the requirements of this section any
part of any pipeline solely dedicated to storage, or gathering, or low pressure distribution
of natural gas.” W. Va. Code § 24-3-3a(c). (emphasis added). The majority opinion
emphasizes the word “solely” but fails to consider that the language of the statute applies
only to the designated “section” contained within the statute. Indeed, to determine the
applicability of this statutory provision, one must first ascertain “the requirements of this
section.” Section 3a(b) answers that question:
(b) The commission may by rule or order, authorize and require
the transportation of natural gas in intrastate commerce by
intrastate pipelines, by interstate pipelines with unused or
excess capacity not needed to meet interstate commerce
demands or by local distribution companies for any person for
one or more uses, as defined by rule, by the commission in the
case of:
2
(1) Natural gas sold by a producer, pipeline or other seller to
such person; or
(2) Natural gas produced by such person.
W. Va. Code § 24-3-3a(b). Plainly, Section 3a only applies in specific situations. The first
such situation is found when an intrastate pipeline 2 is used to transport natural gas in
intrastate commerce. 3 The second instance in which the statute applies is when an
interstate pipeline 4 has excess capacity and is being used to transport 5 gas in intrastate
commerce. The record in this case does not indicate that the Equitrans gathering facilities
at issue fall within either of these two scenarios.
2
“‘Intrastate pipeline’ means (i) any utility or (ii) any other person, firm or
corporation engaged in natural gas transportation in intrastate commerce to or for another
person, firm or corporation for compensation.” W. Va. Code § 24-3-3a(a)(1).
3
“‘Intrastate commerce’ includes the production, gathering, treatment,
processing, transportation and delivery of natural gas entirely within this State.” W. Va.
Code § 24-3-3a(a)(4).
4
“‘Interstate pipeline’ means any person, firm or corporation engaged in
natural gas transportation subject to the jurisdiction of the FERC under the Natural Gas
Act or the Natural Gas Policy Act of 1978.” W. Va. Code § 24-3-3a(a)(1).
5
“‘Transportation’ includes exchange, backhaul, displacement or other
means of transportation.” W. Va. Code § 24-3-3a(a)(5).
3
Section 3a also applies when a local distribution company 6 transports natural
gas for any person “for one or more uses” as “natural gas sold by a producer, pipeline, or
other seller to such person” or “natural gas produced by such person.” Critically, the
majority opinion itself makes specific factual findings recognizing that Equitrans does not
provide gas distribution services:
Of note, Equitrans does not own the gas transported through its
lines, but it collects a fee for said transportation. Moreover,
Equitrans does not provide utility gas distribution services, but
other public utilities like Hope Gas and Mountaineer Gas tap
into Equitrans’ gathering lines, buy the gas, and distribute it
to their customers. The particular line at issue in this appeal, L.
No. H-13087, is used by Hope Gas to distribute natural gas to
rural consumers via main line farm taps.
(Emphasis added). The facts of this case do not convert Equitrans into a “local distribution
company.” Equitrans clearly does not sell “natural gas for ultimate consumption.” Instead,
it is such entities as Hope Gas and Mountaineer Gas, each of which meet the statutory
definition of a “local distribution company,” (“LDC”), that provide such service. Allowing
local distribution companies to provide gas to customers from taps located on the Equitrans
gathering line does not convert Equitrans into a “local distribution company.”
6
“‘Local distribution company’ means any person, other than any interstate
pipeline or any intrastate pipeline, engaged in transportation or local distribution of natural
gas and the sale of natural gas for ultimate consumption.” W. Va. Code § 24-3-3a(a)(3).
4
This Court is required to apply the plain language of the statute. “[A] statute
that is clear and unambiguous will be applied and not construed.” Syl. Pt. 1, in part, State
v. Elder, 152 W. Va. 571, 165 S.E.2d 108 (1968). “Where the language of a statute is free
from ambiguity, its plain meaning is to be accepted and applied without resort to
interpretation.” Syl. Pt. 2, Crockett v. Andrews, 153 W. Va. 714, 172 S.E.2d 384 (1970).
“We look first to the statute’s language. If the text, given its plain meaning, answers the
interpretive question, the language must prevail and further inquiry is foreclosed.”
Appalachian Power Co. v. State Tax Dep’t of West Virginia, 195 W.Va. 573, 587, 466
S.E.2d 424, 438 (1995).
The majority opinion fails to apply the clear meaning of the statutory
provisions governing PSC jurisdiction, but instead misinterprets the statutory provisions
governing the applicability of Section 3a. The majority incorrectly asserts that West
Virginia Code 24-3-3a(c) applies to Equitrans by finding that the gathering line is not
“solely dedicated to … gathering … of natural gas.” The mere allowance of farm taps on
a pipeline is insufficient to convert the line to a “mixed-use” line. As acknowledged by
the majority, it is actually a separate and distinct LDC, in this case Hope Gas, that serves
the natural gas customer in this case. Such LDCs clearly fall within the jurisdiction of the
PSC. Equitrans does not assume dual roles as a gathering line and an LDC simply because
it permits taps on a line which clearly serves as a gathering line. If such were the case, any
5
natural gas pipeline in West Virginia, regardless of its function, would suddenly fall within
the jurisdiction of the PSC as a “mixed-use” or service line simply by allowing a single tap
on such line. This is simply a misreading of the term “sole” contained in West Virginia
Code § 24-3-3a. Such term refers to the purpose of the line, i.e. transmission, storage,
gathering or distribution, and not whether the line contains incidental farm taps.
Secondly, the majority opinion incorrectly applies this Court’s prior holding
in Boggs. In that case, the “transmission line of a public utility” was historically used to
provide natural gas to customers, resulting in our holding that:
Where the transmission line of a public utility has been used
directly to serve retail rural consumers over a long period of
time, such use constitutes a dedication of that line to the public
service and such facility will continue to be so dedicated and
the owner thereof will continue to operate as a public utility
unless and until permission is obtained from the Public Service
Commission to terminate such status.
Syl. Pt. 3, Boggs. Here, we do not have a transmission line and Equitrans is not a public
utility. Thus, the majority opinion improperly relies on Boggs to reach the conclusion that
the PSC has jurisdiction over the gathering line’s provision of service to the tap customers
at issue. While I believe the majority’s reasoning is flawed, I nonetheless believe there is
a proper means by which the PSC legitimately has jurisdiction in this case.
6
The record in this case is replete with references to a prior PSC action in
which Equitrans and its related companies were allowed to reorganize. The record shows
that on January 4, 2007, Equitable Resources, Inc. (“Equitable Resources”), made
application to the PSC pursuant to the provisions of West Virginia Code § 24-2-12 (1984),7
“to modify its current corporate structure through the establishment of a holding company
with Equitable Gas operated through subsidiary ownership form.” That application further
stated that:
Equitable Gas ratepayers will continue to be subject to
the same regulatory jurisdiction of the Commission as to rates,
service, accounting and other general matters of utility
operations, as it is today.
....
After the merger, Equitable Resources will transfer
certain assets and liabilities to NewHoldCo that are more
appropriately held by the parent holding company. The assets
and liabilities to be distributed to NewHoldCo will not be the
regulated assets and liabilities of Equitable Gas.
NewHoldCo will also form a subsidiary, referred herein
to GasCoSub, LLC…, a Pennsylvania limited liability
company. Immediately following the transfer [noted above]
Equitable Resources will engage in a second merger, whereby
it will merge out of existence into GasCoSub…. The result of
the second merger is that the business of the Equitable Gas
Company division of Equitable Resources, Inc. will be
operated out of, and be the sole business of, GasCoSub.
….
7
This Code section will be discussed below.
7
No customers of Equitable Gas will be adversely
affected by the proposed reorganization.
(Emphasis added).
Following the application and a hearing, the PSC issued its order granting
the proposed reorganization, with conditions. Notably, the PSC order cites to two specific
provisions of West Virginia Code § 24-2-12 in its decision approving the reorganization:
The commission may grant its consent in advance or
exempt from the requirements of this section all assignments,
transfers, leases, sales or other disposition of the whole or any
part of the franchises, licenses, permits, plants, equipment,
business or other property of any public utility, or any merger
or consolidation thereof and every contract, purchase of stocks,
arrangement, transfer or acquisition of control, or other
transaction referred to in this section, upon proper showing that
the terms and conditions thereof are reasonable and that neither
party thereto is given an undue advantage over the other, and
do not adversely affect the public in this state.
....
Every assignment, transfer, lease, sale or other
disposition of the whole or any part of the franchises, licenses,
permits, plant, equipment, business or other property of any
public utility, or any merger or consolidation thereof and every
contract, purchase of stock, arrangement, transfer or
acquisition of control or other transaction referred to in this
section made otherwise than as hereinbefore provided shall be
void to the extent that the interests of the public in this state are
adversely affected, but this shall not be construed to relieve any
utility from any duty required by this section.
(Emphasis added).
8
From this language, two important facts are clear. First, there was no
question at the time that the application was filed in 2007 that the company that is now
Equitrans, and its affiliates seeking reorganization were properly before the PSC.
Secondly, the PSC’s jurisdiction over the merger/reorganization, as outlined in West
Virginia Code § 24-2-12, extended to ensuring that any such merger or reorganization, as
proposed by Equitrans’ predecessors and affiliates, was authorized by the PSC only to the
extent that it did “not adversely affect the public in this state” and was “void to the extent
that the interests of the public are adversely affected.” W. Va. Code § 24-2-12. Therefore,
to ensure that its customers would not be adversely affected by the merger and to obviate
PSC concerns about its customers, Randall Crawford, Equitable Resources’ senior vice
president and president of midstream, tendered an affidavit to the PSC which, as noted in
the majority opinion, stated in pertinent part:
Acceptance of the consent and approval granted in the Order
shall constitute an agreement by Equitable Resources, Inc.,
Equitable Gas Company . . . and any Equitable Resources
affiliates that neither they nor their successors shall discontinue
service to any distribution system customer served on any of
the isolated sections of the Equitable utility distribution system
in West Virginia, that are not connected to the interconnected
main system in Taylor, Marion and Harrison Counties, without
first obtaining the authority of the Public Service Commission
of West Virginia, and that they shall make service available to
all future applicants who would be entitled to natural gas or
transportation service from such isolated distribution facilities
under the statutes and applicable regulations to the same extent
as if a separation of properties had not taken place[.]
9
The affidavit of Mr. Crawford, thus, was considered by the PSC while
exercising its jurisdiction as conferred under the provisions of West Virginia Code § 24-2-
12. Equitrans is likely correct in its assertion that the parties may not, by agreement, confer
jurisdiction on the PSC. The powers and authority of the PSC are granted by statute.
However, it is not the affidavit agreeing to jurisdiction that vests jurisdiction within the
PSC. The PSC was empowered, by West Virginia Code § 24-2-12, to approve or reject
the proposed reorganization involving Equitrans and its affiliates. The PSC opted to
approve the reorganization, but clearly did so conditioned upon the representations made
in the Crawford Affidavit. The affidavit was designed to ensure that the
merger/reorganization would be approved by the PSC, which had stated concerns about the
proposal. Almost immediately after the affidavit was tendered, the PSC approved the
reorganization. The PSC exercised its statutory jurisdiction over Equitable Resources
Equitable Gas, its “affiliates,” and “successors” and approved the reorganization to the
extent that utility customers would not be “adversely affected” by the reorganization. A
company or its affiliates cannot simply make representations to the PSC in order to gain
the PSC’s approval of a proposed reorganization that was within the PSC’s authority to
approve or deny, and then deny any obligation to comply with such assurances under the
guise that the PSC has, as a result of the reorganization, lost jurisdiction. Indeed, the
question of whether a utility customer was “adversely affected” was squarely placed before
10
the PSC by a customer who complained to the PSC that he was refused a tap on the
gathering line at issue.
Although, for the reasons outlined herein, I find the majority’s specific
reliance on Boggs is misplaced, Syllabus Point 1 of Boggs, stands for the general
proposition that PSC jurisdiction is continuing in nature and, when read in conjunction
with West Virginia Code § 24-2-12, appears persuasive in this matter:
Jurisdiction of the Public Service Commission over a public
utility will not be considered to be terminated unless the action
of the Commission and the circumstances surrounding the case
demonstrate clearly and unequivocally its intent to relinquish
such jurisdiction.
Syl. Pt. 1, Boggs v. Pub. Serv. Comm'n, 154 W. Va. 146, 174 S.E.2d 331 (1970). The
PSC’s approval of the reorganization of Equitable Resources pursuant to West Virginia
Code § 24-2-12, included the continued jurisdiction to enforce the conditions imposed by
the PSC as part of such reorganization. The PSC has jurisdiction in this case because it
was endowed with jurisdiction by West Virginia Code § 24-2-12 and never lost such
jurisdiction.
Accordingly, I concur in the majority’s finding that the PSC has jurisdiction
over the provision or denial of service to tap customers from the gathering line at issue but
11
would reach this conclusion on the alternate basis set forth herein and believe the reasoning
of the majority may have wide-ranging, unintended consequences.
12 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484008/ | FILED
Nov 15, 2022
02:21 PM(CT)
TENNESSEE
WORKERS' COMPENSATION
APPEALS BOARD
TENNESSEE BUREAU OF WORKERS’ COMPENSATION
WORKERS’ COMPENSATION APPEALS BOARD
Reazkallah Abdelshahaed ) Docket No. 2021-05-0273
)
v. ) State File Nos. 800173-2021
) 30144-2021
Taylor Fresh Foods, Inc., et al. )
)
)
Appeal from the Court of Workers’ )
Compensation Claims )
Dale A. Tipps, Judge )
Affirmed and Certified as Final
In this appeal, the employee questions the trial court’s conclusion that he is not entitled to
workers’ compensation benefits for his alleged knee injury. The employee claims he
injured his knee after a supervisor pushed him, causing him to fall. Following a
compensation hearing, the trial court concluded the employee offered no evidence that he
suffered an injury arising primarily from his employment and, thus, denied the
employee’s claim for workers’ compensation benefits. The employee has appealed. We
affirm the trial court’s decision, conclude the employee’s appeal is frivolous, and certify
the trial court’s compensation order as final.
Judge Pele I. Godkin delivered the opinion of the Appeals Board in which Presiding
Judge Timothy W. Conner and Judge Meredith B. Weaver joined.
Reazkallah Abdelshahaed, LaVergne, Tennessee, employee-appellant, pro se
Peter S. Rosen, Nashville, Tennessee, for the employer-appellee, Taylor Fresh Foods,
Inc.
Memorandum Opinion 1
A recitation of the full history of the litigation is not necessary to address the
present appeal, but we have, for context, set out portions of the factual and procedural
1
“The appeals board may, in an effort to secure a just and speedy determination of matters on appeal and
with the concurrence of all judges, decide an appeal by an abbreviated order or by memorandum opinion,
whichever the appeals board deems appropriate, in cases that are not legally and/or factually novel or
complex.” Tenn. Comp. R. & Regs. 0800-02-22-.03(1) (2020).
1
background from our earlier opinion following the employee’s appeal of a November 29,
2021 expedited hearing order of the Court of Workers’ Compensation Claims.
Reazkallah Abdelshahaed (“Employee”) alleges he was assaulted by
a supervisor on October 16, 2020, while in the course and scope of his
employment with Taylor Fresh Foods, Inc. (“Employer”). Specifically,
Employee alleges a supervisor told him to go home and pushed him,
resulting in his falling and injuring his knee.
Following the alleged incident, Employee called the police. Officer
M.W. Richert with the Smyrna Police Department completed an incident
report detailing a conversation with Employee and Employee’s son, who
translated for Employee. The incident report noted that Employee claimed
his supervisor “shoved him while telling him to go home and [made] him
cry.” Officer Richert was unable to speak with Employee’s supervisor,
Carmin Colon, as she had already left work for the evening. However, the
officer obtained additional statements from two witnesses who observed the
incident, Hayder Alhashemi and Ahmed Hussain. According to Officer
Richert, both witnesses stated Ms. Colon “never touched [Employee] or
pushed him in any way . . . [and] anytime anyone upsets [Employee] for
any reason he makes a complaint to their human resources office.” Before
releasing Employee from the scene, Officer Richert explained the process
for Employee to attempt to seek warrants against Ms. Colon for the alleged
assault, but there is no indication in the record that Employee ever followed
up in this regard.
Employer terminated Employee on November 9, 2020, citing his
alleged “[v]iolation of company policies including failure to follow valid
work instructions, engaging in emotional outbursts and creating disruption
to the workplace, unsafe behaviors, and unprofessional conduct towards
staff.” Approximately four months later, Employee filed a petition for
workers’ compensation benefits, and, following an unsuccessful mediation,
a dispute certification notice was issued in June 2021. Thereafter,
Employee filed a request for hearing in which he indicated he was not
seeking an in-person evidentiary hearing pursuant to Tenn. Comp. R. and
Regs. 0800-02-21-.15(1)(e). Employer filed a response, stating it would
prefer an in-person hearing with witnesses; however, the trial court
determined Employer’s objection was insufficient to support a denial of
Employee’s request. As a result, the trial court considered this case on the
record without an evidentiary hearing.
The trial court identified the materials it considered in its review,
including Employee’s Rule 72 declaration and four “work status reports”
2
submitted by Employee, the earliest of which was dated August 6, 2020,
approximately two months prior to the date of Employee’s alleged injury.
Two of the reports noted a preliminary diagnosis of “right knee strain,” and
the remaining two identified “bilateral knee” as the preliminary diagnosis.
The court also considered four written statements of Employee’s co-
workers and Officer Richert’s report.
The trial court noted that Employee’s version of events was
“contradicted by several written statements, as well as the police report.”
In addition, the court determined that the medical records filed by
Employee failed to support his assertion that he suffered an injury on
October 16, 2020. As a result, the trial court denied Employee’s request for
medical and temporary disability benefits.
Abdelshahaed v. Taylor Fresh Foods, Inc., No. 2021-05-0273, 2022 TN Wrk. Comp.
App. Bd. LEXIS 8, at *1-4 (Tenn. Workers’ Comp. App. Bd. Feb. 16, 2022) (footnote
omitted).
In that earlier appeal, we affirmed the trial court and remanded the case. Id. at *6.
Following our remand, the parties entered an agreed scheduling order, and, after an
unsuccessful mediation, a dispute certification notice was filed in August 2022.
Thereafter, the trial court held a compensation hearing to determine whether Employee
was entitled to medical and disability benefits. Employee did not appear for the
compensation hearing, request a continuance, or advise the trial court of a conflict with
the date of the compensation hearing; as a result, the trial court conducted the hearing
without him. On August 31, 2022, the court issued an order denying benefits after
concluding Employee submitted no medical proof that his injury arose primarily out of
his employment. In its order, the court noted that Employee did not file a witness list,
exhibit list, or expert deposition prior to the hearing. Further, Employee did not testify at
the hearing and neither party offered any medical proof at trial.
Employee is self-represented in this appeal, as he was in the trial court and
previous appeal. Parties who decide to represent themselves are entitled to fair and equal
treatment by the courts. Whitaker v. Whirlpool Corp., 32 S.W.3d 222, 227 (Tenn. Ct.
App. 2000). However, as explained by the Court of Appeals,
courts must also be mindful of the boundary between fairness to a pro se
litigant and unfairness to the pro se litigant’s adversary. Thus, the courts
must not excuse pro se litigants from complying with the same substantive
and procedural rules that represented parties are expected to
observe. . . . Pro se litigants should not be permitted to shift the burden of
the litigation to the courts or to their adversaries.
3
Hessmer v. Hessmer, 138 S.W.3d 901, 903-04 (Tenn. Ct. App. 2003) (citations omitted).
In his notice of appeal, Employee asserts that he was assaulted by a supervisor. It
is also his position that the witness statements submitted by Employer were from
witnesses who were not present at the alleged incident and who were hostile to him
because of different religious ideologies. Employee also claims that the investigating
police officer failed to communicate with Employee’s supervisor and did not request
video of the incident. In addition, Employee references a previous alleged assault, his
termination from employment, and treatment for an arthritic condition he believes was
due to work duties, all without citing to any evidence in the record. In short, Employee
has not identified any appealable issues in his notice of appeal, has not filed a brief, and
has not explained how he believes the trial court erred. As such, we are unable to discern
any factual or legal issues for review. As stated by the Tennessee Supreme Court, “[i]t is
not the role of the courts, trial or appellate, to research or construct a litigant’s case or
arguments for him or her.” Sneed v. Bd. of Prof’l Responsibility of the Sup. Ct. of Tenn.,
301 S.W.3d 603, 615 (Tenn. 2010). Indeed, were we to search the record for possible
errors and raise issues and arguments for Employee, we would be acting as his counsel,
which the law clearly prohibits. See Webb v. Sherrell, No. E2013-02724-COA-R3-CV,
2015 Tenn. App. LEXIS 645, at *5 (Tenn. Ct. App. Aug. 12, 2015). As mandated by
Tennessee Code Annotated section 50-6-239(c)(7), we must presume the trial court’s
factual findings are correct, unless the preponderance of the evidence is otherwise.
Moreover, Employee did not file a transcript or a statement of the evidence. Thus,
“the totality of the evidence introduced in the trial court is unknown, and we decline to
speculate as to the nature and extent of the proof presented to the trial court.” Meier v.
Lowe’s Home Centers, Inc., No. 2015-02-0179, 2016 TN Wrk. Comp. App. Bd. LEXIS
30, at *3 (Tenn. Workers’ Comp. App. Bd. July 27, 2016). Consistent with established
Tennessee law, we must presume that the trial court’s rulings were supported by
sufficient evidence. See Leek v. Powell, 884 S.W.2d 118, 121 (Tenn. Ct. App. 1994) (“In
the absence of a transcript or a statement of the evidence, we must conclusively presume
that every fact admissible under the pleadings was found or should have been found
favorably to the appellee.”).
Lastly, in its brief on appeal, Employer asks that we find Employee’s appeal to be
frivolous. A frivolous appeal is one that is devoid of merit, Combustion Eng’g, Inc. v.
Kennedy, 562 S.W.2d 202, 205 (Tenn. 1978); one that has no reasonable chance of
succeeding, Davis v. Gulf Ins. Grp., 546 S.W.2d 583, 586 (Tenn. 1977); or one that is
brought solely for delay, Yarbrough v. Protective Servs. Company, Inc., No. 2015-08-
0574, 2016 TN Wrk. Comp. App. Bd. LEXIS 25, at *14-15 (Tenn. Workers’ Comp. App.
Bd. May 27, 2016). See also Tenn. Comp. R. & Regs. 0800-02-22-.09(4) (2020). As the
Tennessee Supreme Court noted in Davis, a frivolous appeal is “recognizable on its face
as devoid of merit” if the appeal “presents no justiciable questions.” Davis, 546 S.W.2d
at 586. Employee’s appeal presents no justiciable questions, as he has failed to raise any
4
reviewable issues on appeal, cite to any evidence in the record in support of his position,
or provide us with any legal argument. Thus, we conclude the appeal is frivolous.
However, we exercise our discretion not to award attorneys’ fees or other expenses for
Employee’s frivolous appeal. See Tenn. Comp. R. & Regs. 0800-02-22-.09(4) (2020).
For the foregoing reasons, we affirm the decision of the trial court and certify it as
final. Costs on appeal are taxed to Employee.
5
TENNESSEE BUREAU OF WORKERS’ COMPENSATION
WORKERS’ COMPENSATION APPEALS BOARD
Reazkallah Abdelshahaed ) Docket No. 2021-05-0273
)
v. ) State File Nos. 800173-2021
) 30144-2021
Taylor Fresh Foods, Inc., et al. )
)
)
Appeal from the Court of Workers’ )
Compensation Claims )
Dale A. Tipps, Judge )
CERTIFICATE OF SERVICE
I hereby certify that a true and correct copy of the Appeals Board’s decision in the referenced
case was sent to the following recipients by the following methods of service on this the 15th day
of November, 2022.
Name Certified First Class Via Via Sent to:
Mail Mail Fax Email
Reazkallah Abdelshahaed X X X reazkallahabdelshahaed@yahoo.com
456 Cedar Park Circle
Lavergne, TN, 37086
Peter S. Rosen X prosen@vkbarlaw.com
Dale A. Tipps, Judge X Via Electronic Mail
Kenneth M. Switzer, Chief Judge X Via Electronic Mail
Penny Shrum, Clerk, Court of X penny.patterson-shrum@tn.gov
Workers’ Compensation Claims
Olivia Yearwood
Clerk, Workers’ Compensation Appeals Board
220 French Landing Dr., Ste. 1-B
Nashville, TN 37243
Telephone: 615-253-1606
Electronic Mail: WCAppeals.Clerk@tn.gov | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484021/ | Filed 11/15/22 P. v. Ayala CA1/2
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or
ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION TWO
THE PEOPLE,
Plaintiff and Respondent,
A163778
v.
HERBERTH NOEL AYALA, (San Mateo County Super.
Ct. No. SC068457A)
Defendant and Appellant.
In 2009, defendant Herberth Ayala, a citizen of El Salvador, entered a
plea of no contest to one count of assault with a deadly weapon and was
sentenced to three years of probation. Ayala was later deported, reentered
the United States without permission, and was charged with illegal reentry
in federal court. In 2021, Ayala filed a motion to withdraw his 2009 plea
under Penal Code section 1473.7,1 arguing that he did not understand his
plea’s immigration consequence and would not have entered it if he had. In
particular, he alleged that he had been unable to obtain a U-Visa because of
his 2009 conviction and that his sentence had been enhanced in his federal
reentry case on the basis of that conviction. The trial court denied the
motion, concluding that it was untimely, and that Ayala had failed to
establish either that he did not understand the immigration consequences of
1 Further undesignated statutory references are to the Penal Code.
1
his plea or that had he understood those consequences, he would not have
entered the plea. We affirm.
BACKGROUND
Ayala entered the United States in 1994 and was granted asylum in
1995. However, because of misdemeanor convictions he suffered in 1997 and
2005, his asylum status was rescinded and he was ordered removed by an
immigration judge on February 5, 2007. He appealed that removal order to
the Board of Immigration Appeals, which upheld it on April 18, 2008. Ayala
appealed that decision to the Ninth Circuit Court of Appeals.
On December 20, 2008, while his Ninth Circuit appeal was pending,
Ayala was involved in a fight outside a bar, during which he picked up a
brick and threw it, striking one victim in the face and another in the
shoulder. When Ayala was subsequently arrested, he was found in
possession of 0.20 grams of cocaine.
On April 24, 2009, the San Mateo County District Attorney filed an
information charging Ayala with two counts of assault with a deadly
weapon—a brick—and/or by means of force likely to produce great bodily
injury (§ 245, subd. (a)(1)) (counts 1 and 2) and one count of possession of
cocaine (Health & Saf. Code, § 11350, subd. (a)) (count 3). The information
further alleged that counts 1 and 2 were serious felonies within the meaning
of section 1192.7, subdivision (c)(23).
On June 29, Ayala entered a plea of no contest to count 2 and admitted
that it constituted a serious felony in exchange for the dismissal of the
remaining counts and a maximum custody term of six months in county jail.
Ayala signed a Spanish version of a standard plea form, the English version
of which stated: “I understand that if I am not a citizen, conviction of the
offense for which I have been charged will have the consequences of
2
deportation, exclusion from admission to the United States or a denial of
naturalization.”2 The form also contained a certification by Ayala’s plea
counsel that he “personally read and explained the contents of the above
declaration to the defendant [and] personally observed the defendant fill in
date and sign said declaration [and] after having investigated this case and
the possible defenses thereto, concurs in the defendant’s plea of guilty or nolo
contendere to the charge as set forth by the defendant in the above
declaration and stipulates there is a factual basis for the plea(s).”
On July 29, the trial court sentenced Ayala to time served, suspended
imposition of sentence, and placed Ayala on three years’ supervised probation
with various terms and conditions.
Ayala was deported in February of 2010, and returned to the United
States without permission in May of 2010. The Ninth Circuit Court of
Appeals upheld his removal order a year later, on May 19, 2011. (See
Ayala v. Holder (9th Cir. 2011) 640 F.3d 1095, 1098.)
On July 7, 2021, Ayala filed a motion to vacate his 2009 plea under
section 1473.7, which became effective in 2017 and provides that the court
shall vacate a conviction or sentence upon a showing, by a preponderance of
the evidence, of “prejudicial error damaging the moving party’s ability to
meaningfully understand, defend against, or knowingly accept the actual or
potential adverse immigration consequences of a plea of guilty or nolo
2 Only the Spanish version of the plea form is in the record, which
provides: “Entiendo que si soy ciudando Estados Unidos, la condena por el
delito del que se me acusa tendra como resultado que me deporten, y en que
se me prohiba la entrada a los Estados Unidos, y me nieguen la
naturalizacion.” The English version of the form can be found at
https://www.sanmateocourt.org/documents/forms_and_filing/cr-6.pdf.
3
contendere.” (Former § 1473.7, subd. (a)(1).) The motion attached a two-page
declaration signed by Ayala, which included the following allegations:
“2. At the time of pleading guilty, I was not informed by my attorney
about the clear immigration consequences of my plea. I was never informed
by my attorney that a violation of Penal Code Section 245(A)(1) would make
me deportable and inadmissible from the United States.
“3. In addition, I was never informed by my attorney that a conviction
under section 245(A)(1) is a crime of violence and crime involving moral
turpitude. I did not have any knowledge that my conviction would affect my
ability to adjust my status or my U-Visa application.
“4. At no other time was I informed by my attorney, in writing or
verbally, of the true and actual immigration consequences of my guilty plea.
I did not have any independent knowledge of any immigration consequences.
“5. My attorney did not advise me of the negative immigration
consequences that would result from my plea. He did not speak with me
about other alternative pleas or sentences that could have protected me from
being deportable and inadmissible, or protected me from being placed in
removal proceedings. I met my criminal defense attorney two times
but we only spoke for a short period. We met one time in the interview room
and the other time in court. I never discussed immigration consequences
with him.
“6. After pleading guilty, l continued to live without knowledge of any
immigration consequences. It was [not] until I was placed into removal
proceedings in 2012 that I became aware that my conviction had statutory
immigration and discretionary consequences, which placed me at risk of
deportation and prevented me from obtaining a U-Visa. In 2012, I was
picked up by Immigration authorities when they were looking for my uncle at
4
my uncle’s house. I ended up in removal proceedings and was unable to
defend my deportation because of this conviction. I was subsequently
charged for reentry after deportation. This assault conviction greatly
increased the sentence in my reentry case.
“7. I recently applied for a U-Visa and was denied because of this
conviction. [¶] . . . [¶]
“11. I would have not pled guilty in this case if I would have had
knowledge that my conviction would make me mandatorily deportable and
permanently inadmissible. I, in fact, would have sought, through my
attorney, to obtain an alternative disposition without any immigration
consequences or would have sought a trial by jury. I had a strong case to go
take to trial.”
Ayala’s motion also attached a presentence investigation report from
his federal case, indicating that Ayala was arrested on June 28, 2012 and
pleaded guilty to re-entry of a removed alien (8 U.S.C. § 1326) on July 9,
2013. Ayala’s 2009 assault conviction resulted in a 16-point enhancement to
his offense level under the federal sentencing guidelines.
The motion came on for hearing on September 24, 2021. After hearing
argument, the trial court denied the motion, on two bases. The first was that
the motion was untimely, since section 1473.7 became effective in 2017 but
the motion was not filed until 2021.
The trial court further found that Ayala had not demonstrated that he
was unaware of the immigration consequences of his plea, because the
advisement on the plea stated that those consequences “will” occur, and there
was no credible evidence to the contrary, relying on People v. Olvera (2018)
24 Cal.App.5th 1112 (Olvera).
5
The trial court also found that Ayala had not demonstrated that he
would not have entered the plea if he had been properly advised, in part
because the charge “was [an assault] with a brick, so it doesn’t appear to me
as if it was a weak case where the defendant had some significant negotiating
leverage back at the time.”
The trial court went on to conclude that Ayala’s declaration was not
“persuasive or entirely credible; mainly because it is uncorroborated, and
obviously there is a significant motive for the defendant to claim that he
didn’t understand what was going on at the time of his plea,” and detailed
certain inconsistencies in the declaration.
Ayala filed a notice of appeal.
DISCUSSION
Standard of Review and Applicable Law
At the time of the hearing in this case, section 1473.7 provided that “[a]
person who is no longer in criminal custody may file a motion to vacate a
conviction or sentence” where the “conviction or sentence is legally invalid
due to prejudicial error damaging the moving party’s ability to meaningfully
understand, defend against, or knowingly accept the actual or potential
adverse immigration consequences of a plea of guilty or nolo contendere. A
finding of legal invalidity may, but need not, include a finding of ineffective
assistance of counsel.”3 (Former § 1473.7, subd. (a)(1).)
3 Effective January 1, 2022, section 1473.7 subdivision (a)(1) has been
reworded without substantive change to provide: “The conviction or sentence
is legally invalid due to prejudicial error damaging the moving party’s ability
to meaningfully understand, defend against, or knowingly accept the actual
or potential adverse immigration consequences of a conviction or sentence. A
finding of legal invalidity may, but need not, include a finding of ineffective
assistance of counsel.” (See Stats. 2021, ch. 420, § 1, eff. Jan. 1, 2022.)
6
“[S]howing prejudicial error under section 1473.7, subdivision (a)(1)
means demonstrating a reasonable probability that the defendant would have
rejected the plea if the defendant had correctly understood its actual or
potential immigration consequences. When courts assess whether a
petitioner has shown that reasonable probability, they consider the totality of
the circumstances. [Citation.] Factors particularly relevant to this inquiry
include the defendant’s ties to the United States, the importance the
defendant placed on avoiding deportation, the defendant’s priorities in
seeking a plea bargain, and whether the defendant had reason to believe an
immigration-neutral negotiated disposition was possible. [Citations.]”
(People v. Vivar (2021) 11 Cal.5th 510, 529–530 (Vivar).)
In the trial court, the defendant has the burden of proving prejudicial
error “by a preponderance of the evidence.” (§ 1473.7, subd. (e)(1).) However,
“movants under section 1473.7 must provide evidence corroborating their
assertions.” (People v. Rodriguez (2021) 68 Cal.App.5th 301, 322; see In re
Resendiz (2001) 25 Cal.4th 230, 253 [“petitioner’s assertion he would not have
pled guilty if given competent advice ‘must be corroborated independently by
objective evidence’ ”]; People v. Abdelsalam (2022) 73 Cal.App.5th 654, 664
(Abdelsalam) [“A defendant seeking to set aside a plea must do more than
simply claim he did not understand the immigration consequences of the
plea. The claim must be corroborated by evidence beyond the defendant’s
self-serving statements”].)
On appeal, a trial court’s denial of a section 1473.7 motion is subject to
independent review. (Vivar, supra, 11 Cal.5th at pp. 525–528.) “ ‘[U]nder
independent review, an appellate court exercises its independent judgment to
determine whether the facts satisfy the rule of law.’ [Citation.] When courts
engage in independent review, they should be mindful that ‘ “[i]ndependent
7
review is not the equivalent of de novo review . . . .” ’ [Citation.] An appellate
court may not simply second-guess factual findings that are based on the trial
court’s own observations. [Citations.]” (Id. at p. 527.) “Where, as here, the
facts derive entirely from written declarations and other documents,
however, there is no reason to conclude the trial court has the same special
purchase on the question at issue; as a practical matter, ‘[t]he trial court and
this court are in the same position in interpreting written declarations’ when
reviewing a cold record in a section 1473.7 proceeding. [Citation.] Ultimately
it is for the appellate court to decide, based on its independent judgment,
whether the facts establish prejudice under section 1473.7.” (Id. at p. 528.)
Ayala Failed to Establish That He Did Not Understand the
Immigration Consequences of his Plea
Ayala argues plea counsel failed to advise him of the potential adverse
immigration consequences of his plea, and that he did not meaningfully
understand those consequences. The record does not support this contention.
As noted, Ayala’s plea form stated: “I understand that if I am not a
citizen, conviction of the offense for which I have been charged will have the
consequences of deportation, exclusion from admission to the United States
or a denial of naturalization.” Ayala’s plea counsel indicated he had
“personally read and explained the contents of the above declaration to the
defendant [and] personally observed the defendant fill in date and sign said
declaration.”
Olvera, supra, 24 Cal.App.5th 1112, is instructive. There, the
defendant signed a plea form that contained the following: “ ‘I hereby
expressly assume that my plea . . . will, now or later, result in my
deportation, exclusion from admission or readmission,’ ” and “ ‘denial of
naturalization and citizenship.’ ” (Id. at p. 1115.) Olvera moved to withdraw
8
his plea based on his Sixth Amendment right to the effective assistance of
counsel, which he argued was violated when his trial counsel did not advise
him of the immigration consequences of his plea, and later supplemented his
motion to invoke section 1473.7 when it became operative in January of 2017.
(Id. at pp. 1115–1116.) The Court of Appeal concluded that “even if Olvera’s
counsel had an affirmative duty to advise him on the immigration
consequences of his plea, he satisfied it. The admonition was boilerplate, but
it was unequivocal and accurate. As the trial court observed, the written
admonition on the plea form was ‘pretty straightforward, especially for
2005.’ ” (Id. at p. 1117.) The admonition here was equally unequivocal and
straightforward.
Despite the fact that the trial court expressly relied on Olvera, Ayala
does not cite or discuss that case in his opening brief. Ayala did not file a
reply brief.
The Attorney General also relies on Abdelsalam, supra, 73 Cal.App.5th
654, which Ayala likewise does not cite or discuss. There, the defendant
initialed an advisement on his plea form stating “ ‘I understand that if I am
not a citizen of the United States, I must expect my plea of guilty or no
contest will result in my deportation, exclusion from admission or reentry to
the United States, and denial of naturalization and amnesty,’ ” and initialed
next to statements indicating he had read each paragraph and discussed
them with his attorney. (Id. at p. 662.) At the plea hearing, defendant and
his counsel confirmed that they had discussed the immigration
consequences.4 (Id. at p. 660.) The Court of Appeal rejected defendant’s
4The record in this case does not contain a transcript of Ayala’s plea
hearing; thus, we are unable to determine whether the immigration
consequences advisement was specifically discussed.
9
argument that he had not been advised of the immigration consequences of
his plea for the purposes of section 1473.7, despite statements in his
declaration to the contrary:
“A defendant seeking to set aside a plea must do more than simply
claim he did not understand the immigration consequences of the plea. The
claim must be corroborated by evidence beyond the defendant’s self-serving
statements. For example, in [People v.] Camacho [(2019) 32 Cal.App.5th
998], the court found ‘defendant’s claims of error were supported by his
former attorney’s undisputed testimony . . . that he misunderstood the
potential immigration consequences . . . and he did not explore possible
alternatives to pleading to an aggravated felony.’ (Camacho, supra,
32 Cal.App.5th at p. 1009.) In Vivar, the Supreme Court noted that
defendant presented counsel’s e-mail correspondence and handwritten notes
to establish that she did not ‘advise him as to the actual immigration
consequences of a plea to the drug charge or any other plea.’ (Vivar, supra,
11 Cal.5th at p. 519.) Our Supreme Court has stated that a defendant’s claim
that ‘he would not have pled guilty if given competent advice “must be
corroborated independently by objective evidence.” ’ [Citations.] ‘It is up to
the trial court to determine whether the defendant’s assertion is credible, and
the court may reject an assertion that is not supported by an explanation or
other corroborating circumstances.’ (People v. Martinez (2013) 57 Cal.4th
555, 565 (Martinez).)
“Here, appellant offered no contemporaneous evidence such as an
affidavit and/or testimony by trial counsel, or counsel’s files, notes, or email
correspondence. This is a case unlike Vivar, where the written advisal
informed defendant he ‘may’ be subject to deportation, and counsel stated
‘possible’ deportation was discussed with defendant. (Vivar, supra,
10
11 Cal.5th at p. 519.) Appellant has presented no independent evidence that
he was told anything other than that he would be deported.” (Abdelsalam,
supra, 73 Cal.App.5th at p. 664.) So too here.
In addition, other aspects of the record indicate that—as the trial court
put it—Ayala was no “babe in the woods” with respect to the immigration
consequences of his plea. At the time of the plea in 2009, Ayala had had his
asylum status rescinded based on previous misdemeanor convictions, had
appealed that decision to the Board of Immigration Appeals, and had a
pending appeal of that decision before the Ninth Circuit. His probation
report lists four prior offenses between 1997 and 2007, convictions that
presumably came with their own warnings about potential immigration
consequences. In short, we agree with the trial court that Ayala failed to
establish that he was not informed of the immigration consequences of his
plea.
Ayala Failed to Establish That He Would Not Have Entered the
Plea Had He Been Correctly Advised of the Immigration
Consequences
We also agree with the trial court that Ayala has failed to demonstrate
a reasonable probability that he would have rejected the plea if he had
correctly understood its actual or potential immigration consequences. As
noted, “[f]actors particularly relevant to this inquiry include the defendant’s
ties to the United States, the importance the defendant placed on avoiding
deportation, the defendant’s priorities in seeking a plea bargain, and whether
the defendant had reason to believe an immigration-neutral negotiated
disposition was possible. [Citations.]” (Vivar, supra, 11 Cal.5th at pp. 529–
530.)
11
In 2009, Ayala had been in the United States some 15 years, after
coming to the United States at 21 years old. He was unmarried, but had a
girlfriend of two years, and shared custody of a 3-year old son with his ex-
girlfriend. Beyond this, there is no independent evidence in the record to
suggest that at the time of his 2009 plea, Ayala placed any importance on
avoiding deportation—indeed, he had already lost his asylum status and been
ordered deported on the basis of his previous convictions—or that his
priorities in seeking a plea bargain included avoiding immigration
consequences.
There is also no indication that Ayala “had reason to believe an
immigration-neutral negotiated disposition was possible.” (Vivar, supra,
11 Cal.5th at p. 530.) His declaration asserts in general terms that his
attorney “did not speak with me about other alternative pleas or sentences
that could have protected me from being deportable and inadmissible, or
protected me from being placed in removal proceedings,” and that had he
known of the immigration consequences of his plea, he “would have sought,
through my attorney, to obtain an alternative disposition without any
immigration consequences or would have sought a trial by jury.” But there is
no evidence that any such alternative disposition was available at the time of
Ayala’s plea. (See Olvera, supra, 24 Cal.App.5th at p. 1118 [“Olvera declares
his counsel never advised him of a ‘lesser’ immigration-neutral offense to
which he might have pled. But he does not identify any immigration-neutral
disposition to which the prosecutor was reasonably likely to agree”];
Abdelsalam, supra, 73 Cal.App.5th at pp. 665–666 [no prejudice where
defendant “did not offer an expert declaration opining that alternative,
nondeportable dispositions would have been available and acceptable to the
prosecutor” but merely “engages in speculation that he could have pled to
12
burglary, without any citation from the record indicating that disposition
would have been entertained by the prosecutor”].)
Ayala’s opening brief asserts that “alternative immigration-safe plea[s]
existed such as Penal Code section 136.1(b)(1) [dissuading a witness], 243(e)
[spousal battery], 236 [false imprisonment], 237 [false imprisonment by
violence, menace, fraud, or deceit], or 459 [burglary].” But Ayala does not
explain how the facts of his offense—throwing a brick that struck two victims
and being subsequently arrested in possession of 0.2 grams of cocaine—would
have provided any factual basis for a plea to any of these offenses. And even
if such pleas were available, he identifies no evidence in the record that they
would have been entertained by the prosecution. (See Olvera, supra,
24 Cal.App.5th at p. 1118; Abdelsalam, supra, 73 Cal.App.5th at pp. 665–
666.)
Finally, we reject Ayala’s claim of prejudice based on his argument that
had he been properly advised he would have gone to trial, based on the
unexplained assertion in his declaration that “I had a strong case to go take
to trial.” As the trial court noted, Ayala struck two victims with a brick on a
public street, and it is thus unclear why he would have had a strong case at
trial. (See Abdelsalam, supra, 73 Cal.App.5th at p. 666 [“if appellant had
rejected the plea and insisted on a trial, although he ‘would for a period have
retained a theoretical possibility of evading the conviction that rendered him
deportable and excludable, it is equally true that a conviction following trial
would have subjected him to the same immigration consequences.’ (In re
Resendiz, supra, 25 Cal.4th at p. 254)”].)5
Because we conclude that the trial court properly denied Ayala’s
5
motion on the merits, we need not reach of the issue of whether the motion
was timely.
13
DISPOSITION
The order denying Ayala’s section 1473.7 motion is affirmed.
14
_________________________
Richman, Acting P. J.
We concur:
_________________________
Stewart, J.
_________________________
Van Aken, J. *
People v. Ayala (A163778)
*Judge of the San Francisco Superior Court, Judge Christine Van Aken,
sitting as assigned by the Chief Justice pursuant to article VI, section 6 of the
California Constitution.
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UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 20-1967
MENGYANG LI,
Plaintiff - Appellant,
v.
SHEPHERD UNIVERSITY,
Defendant - Appellee.
Appeal from the United States District Court for the Northern District of West Virginia, at
Martinsburg. Gina M. Groh, District Judge. (3:19-cv-00216-GMG-RWT)
Submitted: August 18, 2022 Decided: November 14, 2022
Before KING and HEYTENS, Circuit Judges, and TRAXLER, Senior Circuit Judge.
Affirmed in part, vacated in part, and remanded by unpublished per curiam opinion.
Mengyang Li, Appellant Pro Se. Tracey Brown Eberling, STEPTOE & JOHNSON PLLC,
Martinsburg, West Virginia, for Appellee.
Unpublished opinions are not binding precedent in this circuit.
USCA4 Appeal: 20-1967 Doc: 11 Filed: 11/14/2022 Pg: 2 of 8
PER CURIAM:
Mengyang Li filed a civil action against his employer, Shepherd University
(“Shepherd”) alleging claims for perjury and violations of Title VII of the Civil Rights Act
of 1964, as amended, 42 U.S.C. §§ 2000e to 2000e-17 (Title VII), and the Age
Discrimination in Employment Act, 29 U.S.C. §§ 621-634 (ADEA). The district court
granted Shepherd’s motion to dismiss the action pursuant to Fed. R. Civ. P. 12(b)(1) and
(6). On appeal, Li challenges the district court’s conclusions that his ADEA claims were
barred by sovereign immunity and that his Title VII claims were subject to dismissal for
failure to exhaust administrative remedies. 1 We affirm in part, vacate in part, and remand
for further proceedings.
We review de novo a district court’s dismissal for lack of subject matter jurisdiction.
Balfour Beatty Infrastructure, Inc. v. Mayor & City Council of Balt., 855 F.3d 247, 251
(4th Cir. 2017). Dismissal is appropriate under Rule 12(b)(1) “if the material jurisdictional
facts are not in dispute and the moving party is entitled to prevail as a matter of law.” Id.
(internal quotation marks omitted). In evaluating the existence of subject matter
jurisdiction, the district court must “regard the pleadings as mere evidence on the issue,
and may consider evidence outside the pleadings without converting the proceedings to
one for summary judgment.” Episcopal Church in S.C. v. Church Ins. Co. of Vt., 997 F.3d
149, 155 n.6 (4th Cir. 2021) (internal quotation marks omitted).
1
Although Li addresses the district court’s ruling on his perjury claims in his reply
brief, that issue is not properly before us. See Grayson O Co. v. Agadir Int’l LLC, 856 F.3d
307, 316 (4th Cir. 2017) (deeming issues raised for first time in reply waived).
2
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We also review de novo the district court’s ruling on a motion to dismiss for failure
to state a claim, “viewing the facts in the light most favorable to the plaintiff.” Sheppard
v. Visitors of Va. State Univ., 993 F.3d 230, 234 (4th Cir. 2021). To survive a Rule 12(b)(6)
motion, the plaintiff must allege “sufficient factual matter, accepted as true, to state a claim
to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal
quotation marks omitted). In making this determination, we may “consider documents that
are explicitly incorporated into the complaint by reference” or “attached to the complaint
as exhibits,” as well as “document[s] submitted by the movant” that are “integral to the
complaint” and of undisputed authenticity. Goines v. Valley Cmty. Servs. Bd., 822 F.3d
159, 166 (4th Cir. 2016). We also “may properly take judicial notice of matters of public
record.” Philips v. Pitt Cnty. Mem’l Hosp., 572 F.3d 176, 180 (4th Cir. 2009).
With respect to Li’s age discrimination claims, we have reviewed the record and
find no reversible error in the district court’s conclusion that Eleventh Amendment
immunity barred relief under the ADEA. See Kimel v. Fla. Bd. of Regents, 528 U.S. 62,
91 (2000) (holding that Congress has not abrogated Eleventh Amendment immunity for
ADEA claims); Lee-Thomas v. Prince George’s Cnty. Pub. Schs., 666 F.3d 244, 249 (4th
Cir. 2012) (describing exceptions to Eleventh Amendment immunity). Additionally,
insofar as Li challenges the district court’s refusal to recognize age discrimination claims
under the Fourteenth Amendment and the West Virginia Constitution, we conclude that the
district court committed no reversible error in declining to consider those claims. See ACA
Fin. Guar. Corp. v. City of Buena Vista, Va., 917 F.3d 206, 218 (4th Cir. 2019) (“[A]
district court does not abuse its discretion by declining to grant a request to amend when it
3
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is not properly made as a motion.”); Save Our Sound OBX, Inc. v. N.C. Dep’t of Transp.,
914 F.3d 213, 228 (4th Cir. 2019) (observing that “[c]ourts may deny leave to amend a
pleading if the amendment would have been futile” because proposed amendment “would
not survive a motion to dismiss”); S. Walk at Broadlands Homeowner’s Ass’n, Inc. v.
OpenBand at Broadlands, LLC, 713 F.3d 175, 184 (4th Cir. 2013) (stating “well-
established” rule “that parties cannot amend their complaints through briefing”); see also
Zombro v. Balt. City Police Dep’t, 868 F.2d 1364, 1367-69 (4th Cir. 1989) (holding that
ADEA provides exclusive judicial remedy for age discrimination in employment).
Turning to Li’s Title VII claims, 2 we are unpersuaded by Li’s arguments that, as a
matter of state law, he fully exhausted his administrative remedies with respect to
proceedings he initiated before the West Virginia Public Employees Grievance Board
(PEGB). See Li v. Shepherd Univ. President’s Office, No. 20-0393, 2021 WL 2580734, at
*4 (W. Va. June 23, 2021), cert. denied, 142 S. Ct. 1209 (2022); Subramani v. W. Va. Univ.
Bd. of Governors, No. 14-0924, 2015 WL 7628720, at *5 (W. Va. Nov. 20, 2015).
However, construing Li’s complaint liberally, see Erickson v. Pardus, 551 U.S. 89, 94
(2007) (per curiam), Li also argues that he was not required to exhaust the state-law PEGB
2
Although the district court dismissed the Title VII claims for lack of jurisdiction,
Title VII’s exhaustion requirement is a nonjurisdictional claim-processing rule. See Fort
Bend Cnty, Tex. v. Davis, 139 S. Ct. 1843, 1850-51 (2019); Walton v. Harker, 33 F.4th
165, 175 (4th Cir. 2022). Nevertheless, we address the propriety of dismissal pursuant to
Rule 12(b)(6). See Hawes v. Network Sols., Inc., 337 F.3d 377, 383 (4th Cir. 2003); see
also Goines, 822 F.3d at 166 (discussing materials appropriately considered); Philips, 572
F.3d at 180 (same).
4
USCA4 Appeal: 20-1967 Doc: 11 Filed: 11/14/2022 Pg: 5 of 8
procedures as a prerequisite to filing employment discrimination claims under Title VII in
federal court. We agree.
“Prior to pursuing a Title VII claim in federal court, a plaintiff must exhaust her
administrative remedies by filing a charge of discrimination with the [Equal Employment
Opportunity Commission (EEOC)].” Hentosh v. Old Dominion Univ., 767 F.3d 413, 416
(4th Cir. 2014); see 42 U.S.C. § 2000e-5(b), (e)(1), (f)(1). Where the plaintiff challenges
an employment practice occurring in a state that has both a “law prohibiting the unlawful
employment practice alleged,” 42 U.S.C. § 2000e-5(c), and “a fair employment agency of
its own empowered ‘to grant or seek relief,’ Title VII instructs the complainant to file her
charge first with the state or local agency,” Fort Bend Cnty, Tex. v. Davis, 139 S. Ct. 1843,
1846 (2019) (quoting 42 U.S.C. § 2000e-5(c)). If the state has a work sharing agreement
with the EEOC, the plaintiff typically “need not file separately with federal and state
agencies,” but instead “may file her charge with one agency, [which] will then relay the
charge to the other.” Id.; see 29 C.F.R. § 1601.13 (2022); Davis v. N.C. Dep’t of Corr., 48
F.3d 134, 137 (4th Cir. 1995).
Upon receipt of the charge, the EEOC conducts an investigation and, if it declines
to bring a civil action against the employer, dismisses the charge and notifies the
complainant of her right to sue. Davis, 139 S. Ct. at 1846-47. “Whether or not the EEOC
acts on the charge, a complainant is entitled to a ‘right-to-sue’ notice 180 days after the
charge is filed.” Id. at 1846; see 42 U.S.C. § 2000e-5(f)(1); 29 C.F.R. § 1601.28 (2022).
“And within 90 days following such notice, the complainant may commence a civil action
against the allegedly offending employer.” Davis, 139 S. Ct. at 1846; see 42 U.S.C.
5
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§ 2000e-5(f)(1). The receipt of, or at least entitlement to, the statutory right-to-sue letter
is a prerequisite to suit in federal court. See Davis, 48 F.3d at 140.
West Virginia has sought to provide relief for employment discrimination based on
characteristics such as race and national origin by enacting the West Virginia Human
Rights Act, see W. Va. Code Ann. §§ 5-11-1 to 5-11-20 (“WVHRA”), which is enforced
through the West Virginia Human Rights Commission (“HRC”), see W. Va. Code § 5-11-
8(c), (d). The HRC is a designated fair employment agency operating under a work sharing
agreement with the EEOC. See 29 C.F.R. § 1601.74(a) (2022); Petrelle v. Weirton Steel
Corp., 953 F.2d 148, 151 (4th Cir. 1991). In contrast, the PEGB is not identified as a
designated fair employment agency. See 29 C.F.R. § 1601.74(a). Nor is the PEGB
authorized to determine liability under the WVHRA, although it may remedy
discrimination that also would violate the WVHRA. Weimer v. Sanders, 752 S.E.2d 398,
407 (W. Va. 2013); Vest v. Bd. of Educ. of Cnty. of Nicholas, 455 S.E.2d 781, 785 (W. Va.
1995).
The “procedures employed by the [PEGB] are not substantially similar to those
employed by either a court of law or the [HRC],” lacking such meaningful protections for
claimants as an independent investigation, attorney representation, and discovery. Weimer,
752 S.E.2d at 408. As a result, a claimant is not required to exhaust remedies under the
PEGB to pursue claims for violations of the WVHRA, even where the PEGB and WVHRA
claims arise out of the same facts or circumstances. Id. at 409.
As Li asserts, the timeline of his protracted PEGB proceedings conflicted materially
with the statutory time limitations applicable to his Title VII claims. See 42 U.S.C.
6
USCA4 Appeal: 20-1967 Doc: 11 Filed: 11/14/2022 Pg: 7 of 8
§ 2000e-5(e)(1), (f)(1). And, applying Weimer and Vest to the analogous Title VII context,
the PEGB is not a state authority capable of affording substantial relief to an aggrieved
employee for violations of Title VII, as would require exhaustion under 42 U.S.C. § 2000e-
5(c). See Davis, 139 S. Ct. at 1846; see also Knotts v. Grafton City Hosp., 786 S.E.2d 188,
197 (W. Va. 2016) (acknowledging overlap between Title VII and WVHRA). Thus, we
conclude that federal law did not require Li to comply with the PEGB procedures as a
prerequisite to suit under Title VII.
We are unpersuaded by Shepherd’s apparent assertion that the West Virginia
legislature established an independent state-law exhaustion requirement for West
Virginia’s public employees under the PEGB procedures as a precondition to filing federal
employment discrimination claims in federal court. As Li observes, he satisfied Title VII’s
exhaustion requirement of filing a charge with the EEOC and obtaining a right-to-sue letter
before filing suit. See Davis, 48 F.3d at 137. And, Shepherd has not argued that Li was
required to comply with any other state administrative remedies prior to filing suit under
Title VII. We therefore conclude that the district court erred in dismissing Li’s Title VII
claims for failure to exhaust administrative remedies.
Accordingly, we vacate the district court’s dismissal of Li’s Title VII claims, affirm
the district court’s order in all remaining respects, and remand for further proceedings in
accordance with this opinion. We deny Li’s requests to reassign the action to a different
district judge, see United States v. McCall, 934 F.3d 380, 384 (4th Cir. 2019), and to strike
Shepherd’s response brief. We dispense with oral argument because the facts and legal
7
USCA4 Appeal: 20-1967 Doc: 11 Filed: 11/14/2022 Pg: 8 of 8
contentions are adequately presented in the materials before this court and argument would
not aid the decisional process.
AFFIRMED IN PART,
VACATED IN PART,
AND REMANDED
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https://www.courtlistener.com/api/rest/v3/opinions/8484019/ | Filed 11/15/22 P. v. Franco CA4/1
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.
COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
THE PEOPLE, D079397
Plaintiff and Appellant,
v. (Super. Ct. No. SCD220281)
ABRAN FRANCO,
Defendant and Appellant.
APPEALS from a judgment of the Superior Court of San Diego County,
Joan P. Weber, Judge. Affirmed in part, reversed in part, and remanded with
directions.
Cynthia M. Jones, under appointment by the Court of Appeal, for
Defendant and Appellant.
Rob Bonta, Attorney General, Lance E. Winters, Chief Assistant
Attorney General, Charles C. Ragland, Assistant Attorney General,
A. Natasha Cortina, Alan L. Amann and Lynne G. McGinnis, Deputy
Attorneys General, for Plaintiff and Respondent.
In a prior appeal, we affirmed Abran Franco’s convictions for two
counts of second-degree murder (Pen. Code,1 § 187, subd. (a)) based on two
separate shooting incidents, along with true findings on vicarious firearm
and gang enhancements (§§ 186.22, subd. (b)(1), 12022.53, subds. (d) and
(e)(1)). (People v. Franco (Dec. 10, 2012, D060354) [nonpub. opn.].)
In 2020, Franco filed a petition to vacate his convictions and for
resentencing pursuant to amended section 1170.95 (now section 1172.6).2
After appointing counsel, finding that Franco had established a prima facie
case of entitlement to relief, and issuing an order to show cause, the trial
court held a hearing on the petition based on the evidentiary record of the
original trial. The trial court ultimately denied Franco’s petition as to one of
the second-degree murder convictions (count 2), but vacated his other second-
degree murder conviction (original count 1) and redesignated the offense as
assault (new count 1) and disturbing the peace (count 3).
At Franco’s resentencing hearing, the court imposed upper-term
sentences for each of the new assault and disturbing the peace counts,3
applying the gang enhancement under section 186.22, subdivision (d) to each.
The court also sentenced Franco to 15 years to life for the second-degree
1 All further statutory references are to the Penal Code.
2 Franco brought his petition under former section 1170.95, which was
amended effective January 1, 2022, and then renumbered as section 1172.6
without substantive change on June 30, 2022. (See Stats. 2022, ch. 58, § 10,
(Assem. Bill No. 200).) We refer to the subject statute by its current number
throughout this opinion.
3 The trial court stayed the three-year sentence for disturbing the peace
pursuant to section 654, which prohibits punishing the same act or omission
under more than one provision. (See § 654, subd. (a).)
2
murder in count 2, and imposed but stayed the gang enhancement under
section 186.22, subdivision (b)(5).4 The court struck the penalty for the
vicarious firearm enhancement, but did not strike the enhancement in its
entirety.5
Franco contends on appeal: (1) that the trial court erred in denying his
section 1172.6 petition as to count 2, (2) that the gang enhancements must be
vacated as to all three counts due to amendments to section 186.22, and
(3) that the case must be remanded for resentencing on redesignated counts 1
and 3 due to amendments to section 1170, which altered the court’s discretion
in selecting a determinate sentence.
The People cross-appeal, claiming that the trial court erred in:
(1) granting Franco’s section 1172.6 petition as to his original conviction for
4 Although the abstract of judgment and related minute order indicate
that the 15-year minimum parole eligibility enhancement (§ 186.22, subd.
(b)(5)) was not stayed, the court stated at the resentencing hearing that it
would impose and stay that enhancement. We rely on the trial court’s
statements at the hearing because “[w]here there is a discrepancy between
the oral pronouncement of judgment and the minute order or the abstract of
judgment, the oral pronouncement controls.” (People v. Zackery (2007) 147
Cal.App.4th 380, 385 (Zackery).)
5 The court stated at the resentencing hearing that it would strike the
25-year-to-life penalty under the firearm enhancement, but not the
enhancement in its entirety. As noted ante, the court’s oral pronouncements
control. (See Zackery, supra, 147 Cal.App.4th at p. 385.)
3
second-degree murder in count 1, and (2) striking any portion6 of the
vicarious firearm enhancement accompanying count 2. The People concede,
however, that remand is required for resentencing on counts 1 and 3 in light
of amendments to section 1170 and that the gang enhancements should also
be vacated, but not as to count 2.
We conclude that substantial evidence supports the trial court’s denial
of Franco’s 1172.6 petition for count 2, and that substantial evidence also
supports the granting of the petition as to count 1. Accordingly, we affirm
those aspects of the judgment. However, we accept the People’s concessions:
(1) that remand is required for resentencing on counts 1 and 3 pursuant to
amended section 1170, and (2) that we must reverse the jury’s true findings
on the gang enhancements as to those counts in light of intervening changes
in the law.
We further conclude that the gang enhancement for count 2 and the
jury’s vicarious firearm enhancement true findings must also be vacated, and
we remand the matter to permit the People to retry those gang-related
enhancements if they so choose. If the People do retry the enhancements
(including the vicarious firearm enhancement) and they are found true, the
court may consider whether to exercise its discretion to impose a lesser-
included firearm enhancement at resentencing, subject to the limitations
prescribed in section 12022.53, subdivision (e)(2).
6 Both parties assume in their briefing that the trial court struck the
vicarious firearm enhancement entirely, but because the record shows the
court only struck the 25-year-to-life penalty, we construe the parties’
arguments accordingly. (See §§ 12022.53, subd. (h) [court may strike or
dismiss an enhancement pursuant to section 1385] and 1385, subd. (b)(1) [if
court has authority to strike or dismiss an enhancement, “the court may
instead strike the additional punishment for that enhancement in the
furtherance of justice . . . .”].)
4
FACTUAL AND PROCEDURAL BACKGROUND
A. Evidence from Underlying Proceedings
1. Killing of Javier Quiroz
One evening in August 2007, 14-year-old Javier Quiroz and two friends
were talking outside an apartment complex where Quiroz lived. Quiroz was
not known to be a member of any criminal gang. At one point that night,
Quiroz left his friends to meet a girl at nearby Colina Park. After some time
passed and it was getting late, his friends tried to call Quiroz but there was
no answer. Then they heard gunshots nearby, and shortly thereafter they
received a call from Quiroz’s phone. But when they answered the call, they
could only hear someone struggling to breathe on the other end of the line.
More gunshots rang out through the phone line and in the air. Quiroz’s
friends ran to the park and found him crawling near some bushes, bleeding
profusely. He died soon afterwards from a gunshot wound through the chest.
During a subsequent interview with law enforcement, Franco said he
and other members of his gang, the Southeast Locos, drove to Colina Park
that night because a rival gang had challenged them to a fight there.
Franco’s gang believed it could be a setup, and he drove to the park with
other Southeast Locos members Reynaldo Torres and Anthony Zendejas to
“scope out the area[.]” Torres did not tell his cohorts he was carrying a gun at
the time, but Franco was not surprised Torres was armed.
According to Franco, he saw Quiroz when they approached the park in
Franco’s car, and he pulled up to Quiroz so that Torres could ask him “where
you from,” a common way gang members confront potential rivals. Quiroz
did not answer, and instead took off running. Torres got out of the car and
began shooting at Quiroz, missing him at first. But Torres chased Quiroz,
found him behind a tree, and shot him multiple times. Torres then returned
5
to Franco’s parked car and they left the scene. Franco found out the next day
that Quiroz died from his wounds.
2. Killing of Angel Hernandez
Eight months later, in April 2008, Angel Hernandez, a member of the
Trust No Souls (TNS) gang, walked into a market with two other men to buy
soda and batteries. The market was in Southeast Locos territory, but that
part of the neighborhood had been the subject of a dispute between the
Southeast Locos and TNS.
According to law enforcement interviews and recorded conversations
with an informant, earlier that night, Franco, Zendejas, and Edwin Rendon,
another Southeast Locos member, discussed the fact that there had recently
been “a lot of tagging” or graffiti by rivals in their neighborhood, which they
saw as a sign of disrespect. They decided to drive around the neighborhood
in Franco’s car and look for rival gang members to confront. Although Franco
did not carry a weapon himself, he admitted he knew that Zendejas was
armed with a gun that night.
When Franco drove past the market, he saw Hernandez and his
companions wearing gang attire. Franco turned the car around and pulled
into the market parking lot to confront them. When Zendejas asked “where
you from,” Hernandez’s group responded “TNS gang.” Zendejas challenged
them to a fight and started to exit the vehicle, but according to Franco,
Hernandez or someone in his group began throwing rocks at Zendejas and
the car. Zendejas responded by firing his gun at Hernandez from the
passenger seat. Franco then drove away with Zendejas and Rendon still in
the vehicle. Later that night, Franco learned of Hernandez’s death from
watching the news.
6
3. Gang Evidence
Franco and the People stipulated at his trial that Franco, Zendejas,
Torres, Rendon, and others were members of the Southeast Locos, a criminal
street gang as the term was then defined by section 186.22. The parties also
stipulated that Hernandez was a member of TNS, a criminal street gang.
The People’s gang expert testified about the significance of tagging in
gang rivalries and described what typically happens when gang members
challenge rival members. The expert stated that when a gang member asks,
“where you from,” the question usually invites a physical confrontation that
can escalate from fistfights to shootings. He further testified that guns were
Southeast Locos’ weapon of choice when challenging rivals. The expert
opined that gang members challenging rivals in their own home territory
would benefit their gang by, among other things, discouraging encroachment
on their turf.
B. Convictions and Sentence
The People charged Franco by information 7 with the murder of Quiroz
in violation of section 187, subdivision (a), alleging that he committed the
murder “for the benefit of, at the direction of, and in association with a
criminal street gang with the specific intent to promote, further and assist in
criminal conduct by gang members within the meaning of [section]
186.22(b)(1).” The People further alleged that at least one principal in the
offense personally used a firearm and “proximately caused great bodily injury
and death” to a non-accomplice within the meaning of section 12022.53,
7 According to the People’s briefing on Franco’s 1172.6 petition, Zendejas
was charged in the information as Franco’s codefendant. Zendejas pled guilty
to first-degree murder for Quiroz’s death and second-degree murder with
personal use of a firearm in Hernandez’s death. He was sentenced to a
stipulated term of 44 years to life.
7
subdivisions (d) and (e)(1). In a separate count, the People charged Franco
with Hernandez’s murder in violation of section 187, subdivision (a), alleging
the same gang- and firearm-related allegations.
In April 2011, a jury convicted Franco of second-degree murder for
Quiroz’s killing and second-degree murder for Hernandez’s killing. (§ 187,
subd. (a).) The jury also made true findings on the enhancement allegations
that Franco acted to benefit a gang in both murders, and that at least one
principal in each offense personally used a firearm proximately causing great
bodily injury and death. (§§ 186.22, subd. (b)(1), 12022.53, subds. (d) and
(e)(1).)
In July 2011, the trial court sentenced Franco to an indeterminate term
of 80 years to life in prison, consisting of 15 years to life for each of the
second-degree murder counts, plus 25 years to life for each attendant firearm
enhancement.
C. Prior Appeal
Franco appealed his conviction, contending that mistakes in the
abstract of judgment should be corrected and that the trial court erred in
refusing to instruct the jury on voluntary manslaughter based on imperfect
self-defense in connection with Hernandez’s murder. In December 2012 we
ordered that the abstract of judgment be corrected, but otherwise affirmed.
(People v. Franco, supra, D060354.)
D. Petition for Resentencing
In January 2020, Franco filed a petition for resentencing under former
section 1170.95 (current section 1172.6). The court appointed counsel for
8
Franco, found that he had established a prima facie case of entitlement to
relief, and issued an order to show cause.
In response to the order to show cause, the parties jointly submitted an
electronic copy of all the original trial transcripts to the court. After holding
a hearing, the trial court denied Franco’s petition as to count 2 for
Hernandez’s murder, but vacated his second-degree murder conviction for
Quiroz’s death and redesignated the offense as assault (§ 240 [new count 1])
and disturbing the peace (§ 415 [count 3]). At the hearing, the court noted
that leading up to Quiroz’s murder, the evidence did not show Franco was
aware that Torres had a gun, or that Franco knew or expected Torres would
shoot someone like Quiroz, who was not a rival gang member. The court
observed that there was no evidence that Franco encouraged Torres to shoot,
or that Franco supplied the gun, or that Franco knew Torres or Zendejas
might escalate the confrontation from brawling to killing, or that Franco had
ever been with the gang before when it committed an armed shooting, or that
he knew the gang was going to kill an “innocent kid.” Accordingly, the court
found insufficient evidence of implied malice in connection with Quiroz’s
murder, and it granted his petition as to that count.
In contrast, the court stated that Franco’s culpability in Hernandez’s
death was supported by the fact that Franco knew, from the prior encounter
with Quiroz, that such confrontations could end in death. The court also
found it significant that Franco went out with his friends that night and
agreed to drive the car specifically to confront rivals to protect their turf,
knowing Zendejas was armed with a gun. The court therefore denied
Franco’s petition as to aiding and abetting the murder of Hernandez.
At Franco’s resentencing hearing, the court imposed upper term
sentences of three years each for the redesignated assault and disturbing the
9
peace counts arising from Quiroz’s death, pursuant to the gang enhancement
under section 186.22, subdivision (d), which authorizes the court to elevate a
misdemeanor offense into one punishable as a felony and provides for three
possible terms of imprisonment: one, two, or three years. (§ 186.22, subd.
(d); see Robert L. v. Superior Court (2003) 30 Cal.4th 894, 906–907; People v.
Sweeney (2016) 4 Cal.App.5th 295, 301.) The court stayed Franco’s three-
year sentence for disturbing the peace pursuant to section 654.
The court again imposed a sentence of 15 years to life for Hernandez’s
murder, and the court imposed and stayed a gang enhancement under section
186.22, subdivision (b)(5), which would require that Franco serve a minimum
of 15 years before he is eligible for parole. Both parties argued that the court
only had discretion to either strike or impose the vicarious firearm
enhancement, and the court remarked that it was unfortunate it could not
choose one of the lesser enhancements. Ultimately the court did not strike
the firearm enhancement entirely, but in light of Franco’s limited
involvement with the actual use of a firearm, the court decided to strike the
25-year-to-life penalty under section 12022.53, subdivisions (d) and (e)(1).
Franco and the People both timely appealed the judgment.
DISCUSSION
I
Franco first argues that the trial court erred in denying his section
1172.6 petition as to his conviction for the Hernandez murder. In their cross-
appeal, the People contend that the court erred in granting Franco’s petition
as to his conviction for second-degree murder in connection with Quiroz’s
death. We conclude there was no reversible error in the trial court’s rulings
with respect to either of the two convictions.
10
A. Governing Law
Effective January 1, 2019, Senate Bill No. 1437 significantly limited
the scope of the felony-murder rule and eliminated liability for murder under
the natural and probable consequences doctrine through two key provisions.
(Stats. 2018, ch. 1015, § 1, subd. (f); see People v. Strong (2022) 13 Cal.5th
698, 707-708 (Strong).) First, Senate Bill No. 1437 amended section 189 so
that “[d]efendants who were neither actual killers nor acted with the intent
to kill can be held liable for murder only if they were ‘major participant[s] in
the underlying felony and acted with reckless indifference to human life[.]’ ”
(Strong, at p. 708, citing § 189, subd. (e)(3).) Second, it amended section 188
to provide that, when the felony-murder rule does not apply, a principal in
the crime of murder can only be convicted where they acted “with malice
aforethought,” and “[m]alice shall not be imputed to a person based solely on
his or her participation in a crime.” (§ 188, subd. (a)(3); see People v.
Gentile (2020) 10 Cal.5th 830, 842–843 (Gentile).)
Senate Bill No. 1437 also established a new procedure to allow
defendants who could not have been convicted under the new law to petition
the sentencing court to vacate their murder conviction and resentence them
on any remaining counts. (See § 1172.6, subd. (a); Strong, supra, 13 Cal.5th
at p. 708.) After receiving a petition containing the required information,
“the court must evaluate the petition ‘to determine whether the petitioner
has made a prima facie case for relief.’ ” (Strong, at p. 708, citing § 1172.6,
subd. (c).) If the defendant makes a prima facie showing of entitlement to
relief, the court must issue an order to show cause and hold an evidentiary
hearing. (§ 1172.6, subds. (c), (d)(3).)
Effective January 1, 2022, Senate Bill No. 775 (2020–2021 Reg. Sess.)
(Senate Bill No. 775) amended section 1172.6 to clarify certain aspects of the
11
law, including that (1) the burden of proof at a resentencing hearing under
this section is “on the prosecution to prove, beyond a reasonable doubt, that
the petitioner is guilty of murder” under California law as amended by
Senate Bill No. 1437 and (2) “[a] finding that there is substantial evidence to
support a conviction for murder . . . is insufficient to prove, beyond a
reasonable doubt, that the petitioner is ineligible for resentencing.”
(§ 1172.6, subd. (d)(3); see also Stats. 2021, ch. 551, § 1, subd. (c).) Senate
Bill No. 775 clarified that the trial court’s role in a section 1172.6 proceeding
is to act as an independent fact finder and determine, in the first instance,
whether the petitioner committed murder under the law as amended by
Senate Bill No. 1437. (People v. Clements (2022) 75 Cal.App.5th 276, 294,
297 (Clements); see also People v. Garrison (2021) 73 Cal.App.5th 735, 745,
fn. omitted [the trial court acts as “an independent fact finder, to determine
beyond a reasonable doubt whether defendant is guilty of murder under a
valid theory of murder”].)
“Though [Senate Bill No. 1437] abolished the natural and probable
consequences doctrine, it maintained the viability of murder convictions
based on implied malice, and the definition of implied malice remains
unchanged. (§ 188.)” (Clements, supra, 75 Cal.App.5th at p. 298.) “[S]econd
degree murder . . . is ‘the unlawful killing of a human being with malice
aforethought but without the additional elements, such as willfulness,
premeditation, and deliberation, that would support a conviction of first
degree murder.’ [Citation.] . . . ‘Malice is implied when the killing is
proximately caused by “ ‘an act, the natural consequences of which are
dangerous to life, which act was deliberately performed by a person who
knows that his conduct endangers the life of another and who acts with
conscious disregard for life.’ ” [Citation.] In short, implied malice requires a
12
defendant’s awareness of engaging in conduct that endangers the life of
another . . . .’ ” (People v. Cravens (2012) 53 Cal.4th 500, 507.)
B. Standard of Review
We review the trial court’s factual findings for substantial evidence.
(Clements, supra, 75 Cal.App.5th at p. 298.) “Our job on review is different
from the trial judge’s job in deciding the petition. While the trial judge must
review all the relevant evidence, evaluate and resolve contradictions, and
make determinations as to credibility, all under the reasonable doubt
standard, our job is to determine whether there is any substantial evidence,
contradicted or uncontradicted, to support a rational fact finder’s findings
beyond a reasonable doubt.” (Ibid.) We will not reverse unless there is no
hypothesis upon which sufficient substantial evidence exists to support the
trial court’s decision. (People v. Bolin (1998) 18 Cal.4th 297, 331.) We must
“presume in support of the judgment the existence of every fact the trier
could reasonably deduce from the evidence.” (People v. Jones (1990) 51
Cal.3d 294, 314.) “The same standard applies when the conviction rests
primarily on circumstantial evidence.” (People v. Kraft (2000) 23 Cal.4th 978,
1053.) “An appellate court must accept logical inferences that the [trier of
fact] might have drawn from the circumstantial evidence.” (People v.
Maury (2003) 30 Cal.4th 342, 396.)
C. Analysis
1. Hernandez Murder Conviction
Franco contends that the trial court erred in denying his section 1172.6
petition as to count 2 for Hernandez’s murder. Specifically, Franco argues
13
there was insufficient evidence to support the trial court’s finding that he
acted with implied malice. We disagree.
As noted, one harbors implied malice when committing an act that is
dangerous to life, knowing that it endangers the life of another, and does so
with a conscious disregard for life. (People v. Nieto Benitez (1992) 4 Cal.4th
91, 106–107.) In this case, Franco agreed to drive Zendejas and other gang
members around their neighborhood specifically to look for rivals. Franco
knew that Zendejas was armed with a gun. When Franco drove past the
market and saw Hernandez and his companions wearing gang attire, he
turned the car around and drove into the parking lot to confront them. When
asked post-arrest whether he knew that the odds of a shooting happening
that night were “pretty good”, Franco said “yes, it’s true.”
Moreover, the People’s gang expert testified that when a gang member
instigates a physical confrontation with a rival, the altercation can quickly
escalate from fighting with fists to shooting. Franco also knew this to be true
because, just eight months earlier, when he and Zendejas were driving
together with Torres looking for rival gang members, the outing ended with
Quiroz being shot to death without any provocation.
The trial court could reasonably infer that Franco acted with actual
knowledge of and conscious disregard for the danger to human life when he
again agreed to drive fellow gang members to seek out and confront rival
gang members—and did so knowing that one of his fellow gang members was
again armed with a firearm. Franco intentionally aided Zendejas by driving
him to confront Hernandez knowing that Zendejas was armed, and Franco
even said in his post-arrest interview that he was the one who spotted
Hernandez in the first place. Even if Franco did not specifically intend to aid
Zendejas in committing a shooting, “an aider and abettor who does not
14
expressly intend to aid a killing can still be convicted of second degree
murder if the person knows that his or her conduct endangers the life of
another and acts with conscious disregard for life.” (Gentile, supra, 10
Cal.5th at p. 850.) Substantial evidence supports such a finding on this
record.
Franco argues that this theory of implied malice “is just another way of
attempting to revive the defunct natural and probable consequences
doctrine . . . .” We disagree. Courts have rejected similar arguments in other
cases. (See, e.g., People v. Glukhoy (2022) 77 Cal.App.5th 576, 590 (Glukhoy);
People v. Superior Court (Valenzuela) (2021) 73 Cal.App.5th 485, 503–504;
People v. Powell (2021) 63 Cal.App.5th 689, 711–713.) “[U]nder the natural
and probable consequences doctrine, the prosecution was not required to
prove the mental state required for implied malice: the aider and abettor was
subjectively aware of the risk of death and acted in conscious disregard
thereof. On the other hand, the prosecution must prove those elements to
establish direct aiding and abetting liability.” (Glukhoy, at p. 590.) Thus,
Franco’s liability for directly aiding and abetting implied malice murder
required a higher degree of culpability (subjective awareness and conscious
disregard of the risk of death) than the now-invalid natural and probable
consequences theory of aiding and abetting murder.
Franco’s conviction in count 2 for directly aiding and abetting an
implied malice murder is also supported by other evidence. “It is well-settled
that the presence at the scene of the crime and failure to prevent it,
companionship and conduct before and after the offense, including flight, are
relevant to determining whether a defendant aided and abetted in the
commission of the crime.” (Glukhoy, supra, 77 Cal.App.5th at p. 599.)
15
“Motive is another circumstance to be considered in determining aiding and
abetting liability.” (Id. at pp. 599–600.)
Here, Franco was not only present at the scene, his companionship
with Zendejas extended back to at least Quiroz’s murder, Franco plotted with
his cohorts beforehand to retaliate against rivals for perceived disrespect, he
identified Hernandez as a target, and he provided Zendejas with the means
to flee the scene. These facts all support the court’s finding that Franco aided
and abetted an implied malice murder. (See also People v. Schell (2022) 84
Cal.App.5th 437, 442–443.) We therefore conclude that the trial court did not
err in denying Franco’s section 1172.6 petition as to Hernandez’s murder.
2. Quiroz Murder Conviction
The People argue that the trial court’s granting of Franco’s petition as
to the Quiroz murder was erroneous because it rested on the fact that Quiroz
was not a gang member. Regardless of whether the evidence might have
supported a contrary finding, however, there was ample evidentiary support
for the trial court’s finding that the prosecution failed to establish Franco
acted with implied malice beyond a reasonable doubt. As we have noted, the
trial court sits as the fact-finder in a section 1172.6 hearing (Clements, supra,
75 Cal.App.5th at p. 295), and our job on review is limited to determining
whether there is substantial evidence to support the trial court’s finding. (Id.
at p. 298.) We decline the People’s invitation to second-guess the trial court’s
factual finding on implied malice.
As the trial court noted, in contrast to the circumstances surrounding
Hernandez’s murder, there was no evidence with respect to the Quiroz
murder that Franco was aware Torres had a gun or that Franco had
previously participated in a gang shooting. For the Hernandez murder,
moreover, Franco’s group encountered Hernandez after setting out with the
16
specific purpose of seeking confrontation. But when Franco’s group
encountered Quiroz, Franco said they only intended to “scope out the area”
and look for signs of a setup. For the Quiroz murder, there was also
substantial evidence supporting the trial court’s finding that Franco had no
reason to know Torres would suddenly chase after and shoot someone who
was not a rival gang member.
Viewing the totality of the evidence in a light most favorable to the
judgment, we conclude that substantial evidence supports the trial court’s
conclusion that the prosecution failed to prove beyond a reasonable doubt
that Franco acted with implied malice in connection with the Quiroz
shooting. While contrary evidence may exist to support a different finding,
our task is not to reweigh the evidence. (See Clements, supra, 75 Cal.App.5th
at p. 298; People v. Stanley (1995) 10 Cal.4th 764, 793 [“ ‘If the circumstances
reasonably justify the trier of fact’s findings, the opinion of the reviewing
court that the circumstances might also reasonably be reconciled with a
contrary finding does not warrant a reversal of the judgment.’ ”].) It would be
extraordinary for us to substitute our judgment for that of the fact-finder and
conclude that the record establishes as a matter of law that Franco acted
with implied malice beyond a reasonable doubt. We therefore find no
reversible error in the trial court’s decision to vacate and redesignate
Franco’s conviction relating to Quiroz’s murder.
II
Franco asserts, and the People concede, that the case should be
remanded for resentencing given ameliorative changes to section 1170, which
governs determinate sentencing. We accept the People’s concession and
17
agree that due to Franco’s youth8 at the time of the offenses, remand for
resentencing is appropriate under section 1170 with respect to his upper term
sentences for redesignated counts 1 and 3.
Assembly Bill No. 124 (Stats. 2021, ch. 695, § 5 (Assembly Bill
No. 124)) and Senate Bill No. 567 (Stats. 2021, ch. 731, § 1.3), both effective
January 1, 2022, amended section 1170 to require that in situations where
three possible terms of imprisonment may be imposed for a crime, the trial
court must impose the lower term if the defendant’s youth was a contributing
factor in the commission of the offense, “unless the court finds that the
aggravating circumstances outweigh the mitigating circumstances [and] that
imposition of the lower term would be contrary to the interests of justice[.]”
(§ 1170, subds. (b)(1) and (b)(6).) Accordingly, section 1170 now contains “a
presumption in favor of a low prison term when a defendant is under 26
years of age at the time of the offense.” (People v. Flores (2022) 73
Cal.App.5th 1032, 1038 (Flores).)
We agree with the parties that Assembly Bill No. 124’s amendments
apply retroactively to Franco’s convictions for counts 1 and 3, which were not
final at the time the amendments became effective. (See People v.
Gerson (2022) 80 Cal.App.5th 1067, 1095; Flores, supra, 73 Cal.App.5th at
p. 1039.) Because Franco was 20 years old at the time of the offenses, the
trial court is now required to examine whether his age “was a contributing
factor” that would require imposing the lower term. (§ 1170, subd. (b)(6).) It
must also exercise its discretion as to aggravating and mitigating
circumstances to decide whether imposing the lower term would be contrary
8 Section 1016.7 defines youth as anyone “under 26 years of age on the
date the offense was committed.” (§ 1016.7, subd. (b); Assem. Bill No. 124
(2021-2022 Reg. Sess.) § 4.)
18
to the interests of justice. (Ibid.) The People do not contend (and we see no
basis for concluding) that the record clearly indicates the trial court would
not have imposed low-term sentences if it had been fully aware of its
discretion under newly enacted subdivision (b)(6) of section 1170.
Accordingly, we remand the case for resentencing on Franco’s redesignated
counts 1 and 3 for assault and disturbing the peace.
III
Franco also asserts that the gang enhancements imposed by the trial
court under section 186.22, subdivisions (b)(5) and (d), must be reversed due
to a retroactive change in the statutory scheme governing gang
enhancements. (See Stats. 2021, ch. 699, § 3, eff. Jan. 1, 2022 (Assembly Bill
No. 333).)9 We agree.
Section 186.22, subdivision (b)(1) generally provides for a sentencing
enhancement for any “person who is convicted of a felony committed for the
benefit of, at the direction of, or in association with a criminal street gang,
with the specific intent to promote, further, or assist in criminal conduct by
gang members.”
9 Franco does not challenge the jury’s true finding, as part of the
vicarious firearm enhancement, that he was a principal in a crime where at
least one principal caused death to a non-accomplice by personally and
intentionally discharging a firearm pursuant to section 12022.53,
subdivisions (d) and (e)(1). As discussed post, we note that section 12022.53,
subdivision (e)(1), also requires a true finding that Franco violated section
186.22, subdivision (b), in order for the vicarious firearm enhancement to
apply.
Furthermore, as we discuss post, section 12022.53, subdivision (e)(2),
provides that a gang enhancement under section 186.22 cannot be imposed
“in addition to an enhancement imposed pursuant to [section 12022.53,
subdivision (e)], unless the person personally used or personally discharged a
firearm in the commission of the offense.”
19
Effective January 1, 2022, Assembly Bill No. 333 amended section
186.22 to require proof of additional elements to establish a gang
enhancement. (People v. Lopez (2021) 73 Cal.App.5th 327, 343 (Lopez).)
When Franco was tried, he stipulated that he was a member of the Southeast
Locos, a criminal street gang within the meaning of section 186.22. At that
time, section 186.22 defined a “ ‘criminal street gang’ ” as “any ongoing
organization, association, or group of three or more persons . . . whose
members individually or collectively engage in, or have engaged in, a pattern
of criminal gang activity.” (Former § 186.22, subd. (f), italics added.)
Assembly Bill No. 333 narrowed the definition to “an ongoing, organized
association or group of three or more persons . . . whose members collectively
engage in, or have engaged in, a pattern of criminal gang activity.” (§ 186.22,
subd. (f), italics added.) This change requires that the People “prove that two
or more gang members committed each predicate offense.” (People v. Delgado
(2022) 74 Cal.App.5th 1067, 1072; accord, Lopez, at pp. 344–345.)
Assembly Bill No. 333 also narrowed the definition of “pattern of
criminal gang activity,” such that the predicate offenses must have been
committed by two or more members of the gang (as opposed to any persons)
and must have “commonly benefited a criminal street gang” in a manner
“more than reputational[.]” (§ 186.22, subd. (e)(1), italics added.)
Additionally, at least one of the predicate offenses must have occurred after
the effective date of the chapter, and the last of those offenses must have
occurred within three years of the prior offense and the alleged current
offense. (Ibid.) Assembly Bill No. 333 precluded the current offense from
counting as a predicate offense, and also reduced the number of qualifying
offenses that can be used to establish a pattern of criminal gang activity.
(§ 186.22, subds. (e)(2) and (e)(1)(A)-(Z).)
20
The People concede, and we accept their concession, that the
misdemeanor-to-felony gang enhancement under section 186.22, subdivision
(d), should be reversed as to counts 1 and 3 because Assembly Bill No. 333’s
changes are retroactive and no evidence was introduced regarding predicate
offenses. Franco “has a constitutional right to a jury trial on every element of
the charged enhancement.” (Lopez, supra, 73 Cal.App.5th at p. 346.)
Furthermore, reversal is necessary because the People concede, and we agree,
that the absence of this proof was not harmless beyond a reasonable doubt.
(See People v. Sek (2022) 74 Cal.App.5th 657, 668 (Sek).)
We also agree with the People’s assertion, which Franco does not
dispute, that the People may retry the gang enhancement allegations on
remand if they so choose. (See Sek, supra, 74 Cal.App.5th at p. 669 [allowing
the People to retry gang enhancements on remand because reversal was not
“based on the insufficiency of the evidence required to prove a violation of the
statute as it read at the time of trial,” so “the double jeopardy clause of the
Constitution will not bar a retrial.”]; People v. Shirley (1982) 31 Cal.3d 18, 71
[retrial permitted where posttrial change in law invalidates certain evidence
because prosecution proved its “case under the law as it then stood” having
“had little or no reason to produce other evidence of guilt.”].)
However, we reject the People’s argument that the parole eligibility
gang enhancement under section 186.22, subdivision (b)(5), should remain
intact as to count 2 because the denial of Franco’s section 1172.6 petition as
to that count made his conviction “final” for retroactivity purposes. Under
section 1172.6, a defendant who succeeds on a resentencing petition is
entitled to vacatur of the murder conviction “and to recall [of] the sentence
and resentenc[ing] . . . on any remaining counts in the same manner as if the
petitioner had not previously been sentenced, provided that the new sentence,
21
if any, is not greater than the initial sentence.” (§ 1172.6, subd. (d)(1), italics
added; see also id., subd. (d)(3) [“If the prosecution fails to sustain its burden
of proof, the prior conviction, and any allegations and enhancements attached
to the conviction, shall be vacated and the petitioner shall be resentenced on
the remaining charges.”].) Because the trial court granted Franco’s petition
as to the murder conviction in count 1, section 1172.6 required a recall of the
entire sentence and resentencing on the remaining counts. As a result,
Franco’s conviction on count 2 was no longer final for retroactivity purposes.
(See People v. Keel (2022) 84 Cal.App.5th 546, 564–565.)
Furthermore, under the “full resentencing” rule, “when part of a
sentence is stricken on review, on remand for resentencing ‘a full
resentencing as to all counts is appropriate, so the trial court can exercise
its sentencing discretion in light of the changed circumstances.’ [Citation.]”
(People v. Buycks (2018) 5 Cal.5th 857, 893.) Resentencing is not limited to
“just the portion [of the sentence] subjected to recall” as the People suggest.
(See ibid.) Rather, the full resentencing rule allows a court to revisit all prior
sentencing decisions when resentencing a defendant. (People v. Valenzuela
(2019) 7 Cal.5th 415, 424–425.)
The People cite People v. Padilla (2022) 13 Cal.5th 152 (Padilla), but
that case does not support their assertion that count 2’s gang enhancement
cannot be disturbed. In Padilla, the Supreme Court stated that a case is
final “when ‘the criminal proceeding as a whole’ has ended[,]” and when a
sentence is vacated, the judgment becomes nonfinal and the trial court
“regain[s] the jurisdiction and duty to consider” what punishment is
appropriate. (Padilla, at pp. 161–162, italics added.) Thus, Padilla supports
our conclusion.
22
Accordingly, we conclude that all of the gang enhancements under
section 186.22 imposed by the trial court must be vacated, but the People
may re-try the enhancements if they so choose.
IV
Although neither party raised this issue, because we are vacating the
jury’s true findings on the gang enhancement allegations, we must also
reverse its true findings as to the gang-related vicarious firearm
enhancements. (See § 12022.53, subds. (d) and (e)(1).) A vicarious firearm
enhancement under section 12022.53, subdivision (e)(1), is dependent on a
true finding that the defendant “violated subdivision (b) of Section 186.22.”
(§ 12022.53, subd. (e)(1)(A).) Accordingly, vacating the gang enhancement
true findings in this case means the jury’s vicarious firearm enhancement
true findings must be vacated as well.
Since we are vacating the firearm enhancement and the case is being
remanded for resentencing on other grounds, we need not decide whether the
trial court was aware of its discretion to impose a lesser firearm
enhancement, or whether the People forfeited the issue. As stated above, the
People may retry some or all of the vacated gang-related enhancement
allegations, including the vicarious firearm enhancement, if they so choose.
We also note that section 12022.53, subdivision (e)(2), provides that a
gang enhancement pursuant to section 186.22 “shall not be imposed on a
person in addition to an enhancement imposed pursuant to [section 12022.53,
subdivision (e)], unless the person personally used or personally discharged a
firearm in the commission of the offense.” (Italics added.) There was no true
finding, and the evidence does not show, that Franco personally used or
discharged a firearm in the commission of the charged offenses. Therefore, if
the People retry the vacated enhancement allegations and they are found
23
true, the court should not impose both the section 186.22 enhancements and
the vicarious firearm enhancements available under section 12022.53,
subdivision (e).
Lastly, if imposing a vicarious firearm enhancement, the court may
consider whether to exercise its discretion to impose a lesser firearm
enhancement, but we express no opinion as to how the court should exercise
its discretion on remand. (People v. Tirado (2022) 12 Cal.5th 688, 692.)
DISPOSITION
Franco’s sentence and the jury’s true findings on the gang-related
enhancement allegations (§ 186.22, subd. (b)), including the vicarious firearm
enhancement (§ 12022.53, subds. (d) and (e)(1)), are vacated.
The matter is remanded to the trial court for further proceedings in
accordance with this opinion. The People shall have 60 days from the date of
the remittitur to file an election to retry Franco on the vacated
enhancements. If the People elect not to retry them, or after any retrial, the
trial court shall resentence Franco accordingly. At resentencing, the trial
court may exercise its sentencing discretion with respect to the vicarious
firearm enhancement under section 12022.53.
Following the conclusion of proceedings on remand, the trial court shall
amend the abstract of judgment as necessary and forward copies of the
24
amended abstract to the appropriate law enforcement and custodial officials.
In all other respects, the judgment is affirmed.
BUCHANAN, J.
WE CONCUR:
MCCONNELL, P. J.
HUFFMAN, J.
25 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484018/ | Filed 11/15/22 P. v. Gomez CA4/1
Opinion following transfer from Supreme Court
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.
OPINION AFTER TRANSFER FROM THE CALIFORNIA SUPREME COURT
COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
THE PEOPLE, D076101
Plaintiff and Respondent,
v. (Super. Ct. No. RIF128455)
JOANNA CHRISTINE GOMEZ,
Defendant and Appellant.
APPEAL from an order of the Superior Court of Riverside County, John
D. Molloy, Judge. Reversed and remanded with directions.
Cynthia Grimm, under appointment by the Court of Appeal, for
Defendant and Appellant.
Xavier Becerra, Rob Bonta, Attorneys General, Lance E. Winters, Julie
L. Garland and Charles Ragland, Assistant Attorneys General, Arlene A.
Sevidal, Lynne McGinnis and Andrew Mestman, Deputy Attorneys General
for Plaintiff and Respondent.
In 2009, a jury convicted Joanna Christine Gomez of first degree
murder (Pen. Code,1 § 187, subd. (a)) and found true special-circumstance
allegations that the murder was committed during a robbery and kidnapping
(§ 190.2, subd. (a)(17)(A), (B)). The trial court sentenced her to life without
the possibility of parole. This court affirmed the convictions and findings in
2011. (People v. Gomez (Dec. 13, 2011, D056959) [nonpub. opn.].) After our
opinion, the California Supreme Court decided People v. Banks (2015) 61
Cal.4th 788 (Banks) and People v. Clark (2016) 63 Cal.4th 522 (Clark), in
which the court set out guidance on factors that must be considered by a jury
in felony-murder special-circumstance sentencing enhancements. Banks
substantially clarified the law as to whether a defendant was a major
participant in the underlying felony. (People v. Strong (2022) 13 Cal.5th 698,
721 (Strong); see Banks, at pp. 797-804.) Thereafter, in Clark, the court
substantially clarified the relevant considerations for determining whether a
defendant acted with reckless indifference to human life. (Strong, at p. 721;
see Clark, at pp. 611-623.)
In 2020, we affirmed the trial court’s summary denial of Gomez’s 2019
petition for resentencing under former section 1170.95 (now section 1172.6.)2
(People v. Gomez (2020) 52 Cal.App.5th 1, disapproved in Strong, supra, 13
Cal.5th at pp. 709-710.) We held Gomez’s record of conviction established as
a matter of law that she was ineligible for section 1172.6 relief; that by
finding the robbery and kidnapping special-circumstance allegations true, the
jury “necessarily found that Gomez either participated in the alleged robbery
1 Undesignated statutory references are to the Penal Code.
2 The Legislature amended section 1170.95 and renumbered it as section
1172.6 without substantive change (Stats. 2022, ch. 58, § 10). We refer to
section 1172.6 in this opinion.
2
and kidnapping with the intent to kill [the victim], or that she was a major
participant in those crimes who acted with reckless indifference to [the
victim’s] life,” allowing Gomez to be convicted of first degree murder
notwithstanding changes made to the felony-murder rule by Senate Bill No.
1437. (People v. Gomez, at p. 376.)
The California Supreme Court granted review and held the matter
pending disposition of a related issue in People v. Lewis (2021) 11 Cal.5th 952
(Lewis). Shortly thereafter, it expanded review to include issues pending in
Strong, supra, 13 Cal.5th 698. In September 2022, the court transferred the
matter back to this court with directions to vacate our decision and
reconsider the cause in light of Lewis and Strong. The parties have filed
supplemental briefs; the People in theirs concede the matter should be
remanded for further proceedings under section 1172.6 in light of both cases.
As we will explain, we agree with this concession, and thus reverse the order
and remand with directions set forth below.
DISCUSSION3
I. The Law
Senate Bill No. 1437, effective January 1, 2019, “amend[ed] the
felony[-]murder rule and the natural and probable consequences doctrine, as
it relates to murder, to ensure that murder liability is not imposed on a
person who is not the actual killer, did not act with the intent to kill, or was
not a major participant in the underlying felony who acted with reckless
3 Our prior opinions recount the facts of the underlying offense. We need
not repeat them here.
3
indifference to human life.” (Stats. 2018, ch. 1015, § 1, subd. (f); see Strong,
supra, 13 Cal.5th at pp. 707-708.)4
Senate Bill No. 1437 also created a procedural mechanism in section
1172.6 for those convicted under the former law to petition the trial court for
retroactive relief under the amended law. (§ 1172.6, subd. (a); Strong, supra,
13 Cal.5th at p. 708.) “[T]he process begins with the filing of a petition
containing a declaration that all requirements for eligibility are met
[citations], including that ‘[t]he petitioner could not presently be convicted of
murder or attempted murder because of changes to . . . [s]ection 188 or 189
made effective January 1, 2019 . . . .” (Strong, at p. 708, fn. omitted.) “When
the trial court receives a petition containing the necessary declaration and
other required information, the court must evaluate the petition ‘to
determine whether the petitioner has made a prima facie case for relief.’
[Citations.] If the petition and record in the case establish conclusively that
the defendant is ineligible for relief, the trial court may dismiss the petition.”
(Ibid.)
4 Section 188, which defines malice, now provides in part: “Except as
stated in subdivision (e) of Section 189, in order to be convicted of murder, a
principal in a crime shall act with malice aforethought. Malice shall not be
imputed to a person based solely on his or her participation in a crime.”
(§ 188, subd. (a)(3); Stats. 2018, ch. 1015, § 2.) Section 189, subdivision (e)
now limits the circumstances under which a person may be convicted of
felony-murder: “A participant in the perpetration or attempted perpetration
of a felony listed in subdivision (a) [defining first degree murder] in which a
death occurs is liable for murder only if one of the following is proven: [¶] (1)
The person was the actual killer. [¶] (2) The person was not the actual killer,
but, with the intent to kill, aided, abetted, counseled, commanded, induced,
solicited, requested, or assisted the actual killer in the commission of murder
in the first degree. [¶] (3) The person was a major participant in the
underlying felony and acted with reckless indifference to human life, as
described in subdivision (d) of Section 190.2.” (Stats. 2018, ch. 1015, § 3.)
4
In Lewis, supra, 11 Cal.5th 952, the California Supreme Court
explained the trial court’s role faced with a section 1172.6 petition:
Petitioners who request counsel “are entitled to the appointment of counsel
upon the filing of a facially sufficient petition . . . .” (Id. at p. 957.) “[O]nly
after the appointment of counsel and the opportunity for briefing may the
superior court consider the record of conviction to determine whether ‘the
petitioner makes a prima facie showing that he or she is entitled to relief.’ ”
(Ibid.; see also id. at p. 966 [“a complying petition is filed; the court appoints
counsel, if requested; the issue is briefed; and then the court makes [its]
prima facie determination”].) The court’s “prima facie inquiry . . . is limited.
. . . ‘ “[T]he court takes petitioner’s factual allegations as true and makes a
preliminary assessment regarding whether the petitioner would be entitled
to relief if his or her factual allegations were proved. If so, the court must
issue an order to show cause.” ’ [Citation.] ‘[A] court should not reject the
petitioner’s factual allegations on credibility grounds without first conducting
an evidentiary hearing.’ ” (Id. at p. 971.) Importantly, “[i]n reviewing any
part of the record of conviction at this preliminary juncture, a trial court
should not engage in ‘factfinding involving the weighing of evidence or the
exercise of discretion.’ ” (Id. at p. 972.) “[T]he ‘prima facie bar was
intentionally and correctly set very low.’ ” (Ibid.)
If a defendant has made a prima facie showing of entitlement to relief,
“ ‘the court shall issue an order to show cause.’ ” (Strong, supra, 13 Cal.5th at
p. 708.) Once the court determines that a defendant has made a prima facie
showing, it “must [then] hold an evidentiary hearing at which the prosecution
bears the burden of proving, ‘beyond a reasonable doubt, that the petitioner is
guilty of murder or attempted murder’ under state law as amended by Senate
Bill [No.] 1437. [Citation.] ‘A finding that there is substantial evidence to
5
support a conviction for murder, attempted murder, or manslaughter is
insufficient to prove, beyond a reasonable doubt, that the petitioner is
ineligible for resentencing.’ [Citation.] ‘If the prosecution fails to sustain its
burden of proof, the prior conviction, and any allegations and enhancements
attached to the conviction, shall be vacated and the petitioner shall be
resentenced on the remaining charges.’ ” (Id. at p. 709.) “Senate Bill [No.]
1437 relief is unavailable if the defendant was either the actual killer, acted
with the intent to kill, or ‘was a major participant in the underlying felony
and acted with reckless indifference to human life . . . .’ ” (Id. at p. 710.)
In Strong, supra, 13 Cal.5th 698, the California Supreme Court held
that given the clarifications in the law, jury special-circumstance findings
issued before Banks and Clark “do not preclude [a defendant] from making
out a prima facie case for resentencing under section 1172.6.” (Strong, at p.
721.) The court explained: “Banks and Clark represent the sort of significant
change that has traditionally been thought to warrant reexamination of an
earlier-litigated issue. Our earlier discussion of habeas corpus petitioners
who have obtained relief from their felony-murder special circumstances in
the wake of Banks and Clark [citation] does much to explain why: There are
many petitioners with pre-Banks and Clark felony-murder special-
circumstance findings who nevertheless could not be convicted of murder
today. . . . A pre-Banks and Clark special-circumstance finding does not
negate [a defendant’s prima facie showing under section 1172.6, subdivision
(a)(3) that they could not presently be convicted of murder or attempted
murder because of changes to section 188 or 189 effective January 1, 2019]
because the finding alone does not establish that the petitioner is in a class of
defendants who would still be viewed as liable for murder under the current
understanding of the major participant and reckless indifference
6
requirements.” (Id. at pp. 717-718.) Nor does a court’s later sufficiency of the
evidence review amount to the determination section 1172.6 requires. (Id. at
p. 720.) Accordingly, such findings do not warrant summary denial of a
section 1172.6 petition, rather, the matter must proceed to an evidentiary
hearing.
II. Strong and Lewis Compel Remand for Resentencing
Gomez contends and, as stated, the People concede that reversal of the
trial court’s summary order is required under both Lewis and Strong. We
agree.
Effective January 1, 2022, the Legislature amended section 1172.6 to
codify the holding in Lewis, supra, 11 Cal.5th 952 regarding the right to
counsel and standard for determining the existence of a prima facie case.
(Legis. Counsel’s Dig., Sen. Bill No. 775, § 1(b), Stats. 2022 ch. 551 (2021-
2022 Reg. Sess.) Summary Dig., p. 94.) Section 1172.6 sets out the timing of
briefing on a section 1172.6 petition and now makes clear the court must
hold its hearing “[a]fter the parties have had an opportunity to submit
briefings . . . .” (§ 1172.6, subd. (c).5)
The People acknowledge Gomez filed a petition making out a prima
facie case, to which they responded. Gomez requested counsel be appointed,
and averred in support of the petition that she believed she qualified for
5 Subdivision (c) of section 1172.6 provides in part, with January 1, 2022
additions in italics: “Within 60 days after service of a petition that meets the
requirements set forth in subdivision (b), the prosecutor shall file and serve a
response. The petitioner may file and serve a reply within 30 days after the
prosecutor’s response is served. These deadlines shall be extended for good
cause. After the parties have had an opportunity to submit briefings, the court
shall hold a hearing to determine whether the petitioner has made a prima
facie case for relief.”
7
resentencing and did not believe she would “be able to be convicted of first or
second degree murder because of changes to section 189 made effective
January 1, 2019.”6 On June 7, 2019, four days after the People filed their
response, the court held the hearing at which it summarily denied Gomez’s
petition. Though Gomez was represented by counsel at that hearing, ten
days later, she filed a reply brief representing herself. At that time, the court
indicated it had read and considered Gomez’s reply papers, but merely stated
the petition had been denied ten days earlier. The court held its June 7, 2019
hearing without giving Gomez an opportunity to submit her reply papers,
and later considered those reply papers without appointing counsel for
Gomez.
Additionally, the jury’s felony-murder special-circumstance findings
were made before the high court decided Banks and Clark. As Gomez
contends and the People properly concede, under Strong, the findings do not
categorically render Gomez ineligible for resentencing. (Strong, supra, 13
Cal.5th at p. 720.) We therefore vacate the court’s order and remand the
6 Gomez argued in her petition: “[T]he murder in this case resulted from
an attempted robbery of [the victim]. Petitioner’s uncharged codefendants
were armed, but she had no basis to believe [the victim] would be killed. . . .
[¶] . . . [¶] Petitioner was charged as an aider and abettor. There was zero
evidence she directly aided and abetted the murder, and it is clear the
prosecution proceeded under a felony[-]murder theory. While the prosecution
inferred the motive was financial gain, it should be noted the jury did not find
that special circumstance true, and the prosecution elected to dismiss it.
Thus, a felony[-]murder theory is the only basis for [p]etitioner’s murder
conviction. . . . Based on . . . [section] 189[, subdivision](e)(3), . . . Banks[,
supra,] 61 Cal.4th 788, . . . Clark[, supra,] 63 Cal.4th 522, and their progeny,
Petitioner did not evince reckless indifference to human life. . . . [M]ere
knowledge a codefendant is armed is insufficient to prove reckless
indifference.”
8
matter for further proceedings consistent with Strong, Lewis and section
1172.6. We express no opinion on whether Gomez is entitled to relief.
DISPOSITION
The order is reversed and the matter remanded with directions for the
trial court to issue an order to show cause under section 1172.6, subdivision
(c) and to hold an evidentiary hearing on Gomez’s petition for resentencing.
O’ROURKE, J.
WE CONCUR:
HUFFMAN, Acting P. J.
IRION, J.
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UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 16-4250
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
v.
HATRATICO GAZZAR BENJAMIN SMITH,
Defendant - Appellant.
Appeal from the United States District Court for the District of Maryland, at Baltimore.
Ellen Lipton Hollander, Senior District Judge. (1:12-cr-00528-ELH-1)
Submitted: October 31, 2022 Decided: November 14, 2022
Before WYNN and RICHARDSON, Circuit Judges, and TRAXLER, Senior Circuit Judge.
Affirmed in part, vacated in part, and remanded by unpublished per curiam opinion.
ON BRIEF: Sicilia C. Englert, LAW OFFICE OF SICILIA C. ENGLERT, LLC,
Alexandria, Virginia, for Appellant. Michael Clayton Hanlon, Assistant United States
Attorney, OFFICE OF THE UNITED STATES ATTORNEY, Baltimore, Maryland, for
Appellee.
Unpublished opinions are not binding precedent in this circuit.
USCA4 Appeal: 16-4250 Doc: 25 Filed: 11/14/2022 Pg: 2 of 6
PER CURIAM:
Hatratico Gazzar Benjamin Smith pled guilty, pursuant to a plea agreement and an
incorporated statement of facts, to conspiracy to commit Hobbs Act robbery, in violation
of 18 U.S.C. § 1951 (count 1), and possessing, brandishing, and discharging a firearm in
furtherance of the crimes of violence of conspiracy to commit Hobbs Act robbery and
Hobbs Act robbery, in violation of 18 U.S.C. §§ 2, 924(c) (count 46). The parties stipulated
in the agreement that a 180-month prison term on count 1 and a consecutive 120-month
prison term on count 46 were the appropriate dispositions in the case, see Fed. R. Crim. P.
11(c)(1)(C), and the district court sentenced Smith to 180 months’ imprisonment on count
1, a consecutive term of 120 months’ imprisonment on count 46, and concurrent supervised
release terms of three and five years.
In this appeal from the initial and amended criminal judgments, Smith’s counsel has
filed a brief pursuant to Anders v. California, 386 U.S. 738 (1967), stating that there are no
meritorious issues for appeal but questioning whether Smith’s conviction on count 46 is
infirm because it is based on the invalid predicate of Hobbs Act conspiracy. Smith was
informed of his right to file a pro se supplemental brief, but he has not done so. The
Government did not file a brief and does not seek to enforce the appeal waiver in Smith’s
plea agreement. 1 We affirm in part, vacate in part, and remand for resentencing.
1
Because the Government fails to assert the waiver as a bar to this appeal, we
consider the issue raised by counsel and conduct an independent review of the record
pursuant to Anders. See United States v. Poindexter, 492 F.3d 263, 271 (4th Cir. 2007).
2
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We review counsel’s challenge to Smith’s conviction for plain error. See United
States v. Lockhart, 947 F.3d 187, 191 (4th Cir. 2020) (en banc). To succeed under plain
error review, Smith must show that (1) an error occurred; (2) the error was plain; and (3)
the error affected his substantial rights. Id. “We retain the discretion to correct such an
error but will do so only if the error seriously affects the fairness, integrity or public
reputation of judicial proceedings.” Id. (internal quotation marks omitted).
Section 924(c) provides that a person who “uses or carries” a firearm “during and
in relation to any crime of violence,” or who “possesses” a firearm “in furtherance of any
such crime,” may be convicted of both the underlying crime of violence and the use,
carrying, or possession of that firearm. 18 U.S.C. § 924(c)(1)(A); see United States v.
Bryant, 949 F.3d 168, 172 (4th Cir. 2020). A “crime of violence” is defined for such
purposes as “an offense that is a felony” and:
(A) has as an element the use, attempted use, or threatened use of physical
force against the person or property of another, or
(B) that by its nature, involves a substantial risk that physical force against
the person or property of another may be used in the course of committing
the offense.
18 U.S.C. § 924(c)(3). “Courts refer to § 924(c)(3)(A) as the force clause and to
§ 924(c)(3)(B) as the (now-invalid) residual clause.” Bryant, 949 F.3d at 172 (internal
quotation marks omitted); see United States v. Davis, 139 S. Ct. 2319, 2336 (2019)
(holding § 924(c) residual clause is unconstitutionally vague following Johnson v. United
States, 576 U.S. 591, 606 (2015) (holding residual clause of Armed Career Criminal Act,
18 U.S.C. § 924(e)(2)(B)(ii), is unconstitutionally vague)).
3
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When Smith pled guilty in 2013, conspiracy to commit Hobbs Act robbery qualified
as a crime of violence under the residual clause at § 924(c)(3)(B). In the wake of the
Supreme Court’s 2015 decision in Johnson and its progeny, this court determined that
conspiracy to commit Hobbs Act robbery-one of the predicates undergirding count 46-is
not categorically a crime of violence and thus cannot serve as a valid predicate for a
§ 924(c) charge. See United States v. Ali, 991 F.3d 561, 573 (4th Cir.), cert. denied,
142 S. Ct. 486 (2021). The other predicate undergirding count 46-substantive Hobbs Act
robbery-continues, however, to qualify as a valid § 924(c) predicate. Id.
In United States v. Crawley – for which this appeal was held in abeyance – this court
held that, if a defendant’s § 924(c) conviction resulting from his guilty plea is “expressly
based on [a] valid and invalid predicate,” then it “remains sound following Johnson and its
progeny.” 2 F.4th 257, 263 (4th Cir. 2021), cert. denied, 142 S. Ct. 819 (2022). In other
words, we will uphold a § 924(c) conviction if it is “expressly predicated” on at least one
offense that categorically qualifies as a crime of violence. Id. To determine which
predicate offenses underlie a § 924(c) conviction obtained by a guilty plea, we look to “the
critical record documents,” id. at 267, which include the indictment, the plea agreement,
the statement of facts, and the plea colloquy, id. at 263-64. At bottom, the inquiry centers
on whether “the conduct to which the defendant admits is in fact an offense under the
statutory provision under which he is pleading guilty,” id. at 265 (internal quotation marks
omitted), and, if so, whether that offense is a valid predicate, id. at 263.
The superseding indictment identified the valid predicate of Hobbs Act robbery and
the now-invalid predicate of conspiracy to commit Hobbs Act robbery as the crimes of
4
USCA4 Appeal: 16-4250 Doc: 25 Filed: 11/14/2022 Pg: 5 of 6
violence undergirding count 46. Smith admitted in the statement of facts that the
Government would prove he committed a gunpoint robbery of a restaurant and confirmed
at the guilty plea hearing he had agreed to the statement of facts and was pleading guilty to
count 46 because he had committed that offense. Based on the critical record documents
in this case, we are satisfied that Smith’s conviction on count 46 was expressly based on a
valid predicate and an invalid predicate. Under Crawley, that is enough to sustain the
conviction. 2
In accordance with Anders, we have reviewed the record in this case and have found
no meritorious issues remaining as to Smith’s convictions. Reviewing the transcript of the
sentencing hearing and the non-mandatory conditions of supervised release appearing in
the written judgments pursuant to Anders, we note that, since the time of Smith’s
sentencing, this court has issued additional guidance as to what is necessary to sentence a
defendant to a non-mandatory condition of supervised release.
“[I]n order to sentence a defendant to a non-mandatory condition of supervised
release, the sentencing court must include that condition in its oral pronouncement of a
defendant’s sentence in open court.” United States v. Singletary, 984 F.3d 341, 345
(4th Cir. 2021) (citing United States v. Rogers, 961 F.3d 291, 296 (4th Cir. 2020)). This
directive applies to “any set of discretionary conditions—even those categorized as
2
We reject as without merit counsel’s assertion that count 46 is infirm because, by
signing the plea agreement, Smith agreed only that, if the case proceeded to a trial, the
Government would prove information set forth in the statement of facts. It is undercut by
Smith’s admissions at the guilty plea hearing and foreclosed by Crawley. See 2 F.4th at
264.
5
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‘standard’ by the [Sentencing] Guidelines.” Rogers, 961 F.3d at 297-98. After reviewing
the record, we conclude that the district court—which did not have the benefit of these
decisions when it sentenced Smith—did not comply with this directive with respect to
non-mandatory conditions of supervision appearing in the judgments. Thus, Smith was
not sentenced to those conditions, and a remand for resentencing is required.
See Singletary, 984 F.3d at 344, 346-47; see also United States v. Jenkins, No. 21-4003,
2022 WL 112069, at *1-2 (4th Cir. Jan. 12, 2022) (concluding that lack of “match” between
oral pronouncement that defendant report to probation officer in district “to which he’s
released” and written direction in judgment that defendant report to probation office in
judicial district where he was “authorized to reside” qualified as “reversible Rogers error”).
We therefore affirm Smith’s convictions, vacate his sentence, and remand for
resentencing. We deny Smith’s motion to place this appeal in abeyance for No. 17-4269,
United States v. Pyos. This court requires that counsel inform Smith, in writing, of the
right to petition the Supreme Court of the United States for further review. If Smith
requests that a petition be filed, but counsel believes that such a petition would be frivolous,
then counsel may move in this court for leave to withdraw from representation. Counsel’s
motion must state that a copy thereof was served on Smith.
We dispense with oral argument because the facts and legal contentions are
adequately presented in the materials before this court and argument would not aid the
decisional process.
AFFIRMED IN PART,
VACATED IN PART,
AND REMANDED
6 | 01-04-2023 | 11-15-2022 |
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UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 20-2052
WESTFIELD INSURANCE COMPANY,
Plaintiff – Appellant,
v.
SISTERSVILLE TANK WORKS, INC.; ROBERT N. EDWARDS; E. JANE
PRICE, INDIVIDUALLY AND AS EXECUTRIX OF THE ESTATE OF
ROBERT G. PRICE, DECEASED; DOUGLAS L. STEELE; CAROL STEELE,
Defendants – Appellees,
and
GARY THOMAS SANDY; PEGGY P. SANDY,
Defendants,
and
REAGLE & PADDEN, INC.; DAVID C. PADDEN,
Third Party Defendants – Appellees.
Appeal from the United States District Court for the Northern District of West Virginia, at
Wheeling. John Preston Bailey, District Judge. (5:18-cv-00100-JPB-JPM)
Argued: October 26, 2022 Decided: November 14, 2022
Before AGEE and WYNN, Circuit Judges, and MOTZ, Senior Circuit Judge.
USCA4 Appeal: 20-2052 Doc: 80-1 Filed: 11/14/2022 Pg: 2 of 8
Question of law certified to the West Virginia Supreme Court of Appeals by unpublished
order.
ARGUED: Brent K. Kesner, KESNER & KESNER, PLLC, Charleston, West Virginia,
for Appellant. Ryan Paul Orth, CASEY & CHAPMAN, PLLC, Wheeling, West Virginia;
Zachary Benjamin Pyers, REMINGER CO., L.P.A., Columbus, Ohio; David Belknap
Lunsford, HARTLEY LAW GROUP, PLLC, Wheeling, West Virginia, for Appellees. ON
BRIEF: Ernest G. Hentschel, II, KESNER & KESNER, PLLC, Charleston, West
Virginia, for Appellant. Patrick S. Casey, Sandra M. Chapman, CASEY & CHAPMAN,
PLLC, Wheeling, West Virginia, for Appellee Sistersville Tank Works, Inc. Kenton H.
Steele, REMINGER CO., L.P.A., Columbus, Ohio, for Appellees Reagle and Padden, Inc.
and David C. Padden.
ORDER
PER CURIAM:
Appellant, Westfield Insurance Company, brought this action under the Declaratory
Judgment Act, 28 U.S.C. § 2201, and W. Va. Code § 55-13-1 et seq. Westfield asked the
district court to determine whether it owes insurance coverage under West Virginia law to
Sistersville Tank Works (STW) for three state tort claims brought against STW. J.A. 28.
The state tort claims at issue were brought by Robert N. Edwards, Deborah S.
Edwards, E. Jane Price, Douglas Steele, and Carol Steele (collectively the “Claimants”).
The Claimants allege that they developed latent illnesses as a result of exposure to
chemicals that leaked from tanks manufactured by STW. Each of their illnesses was
diagnosed between 2014 and 2016, but allegedly caused by hazardous chemical exposure
dating back to the 1960s.
2
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Westfield provided some form of coverage to STW between 1985-2010. The
federal district court ordered summary judgment in favor of STW, finding that Westfield
owed STW coverage under the 1985-1989 policies. Westfield Ins. Co. v. Sistersville Tank
Works, 484 F. Supp. 3d 283, 295-97 (N.D.W. Va. 2020). Because coverage existed under
those policies, the district court held that the issue of coverage under later policies was
moot. Id. at 297.
Westfield challenges the district court’s ruling on appeal. Central to its contentions,
Westfield argues that the district court applied the wrong theory to determine when
insurance coverage was triggered under West Virginia law. Finding no controlling
appellate decision, constitutional provision, or statute of West Virginia resolving the
determinative issue in this matter, we certify the following question of law to the West
Virginia Supreme Court of Appeals pursuant to the Uniform Certification of Questions of
Law Act, W. Va. Code § 51-1A et seq.:
At what point in time does bodily injury occur to trigger insurance coverage
for claims stemming from chemical exposure or other analogous harm that
contributed to development of a latent illness?
This Court acknowledges that the West Virginia Supreme Court of Appeals may
reformulate this question. See W. Va. Code § 51-1A-4. In accordance with the requirement
in W. Va. Code § 51-1A-6, we identify the names and addresses of counsel of record and
unrepresented parties as follows: (1) Counsel of record for Appellant Westfield Insurance
Company is Brent K. Kesner and Ernest Glen Hentschel, II, Kesner & Kesner, PLLC, 112
3
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Capitol Street, Charleston, WV 25329; (2) Counsel of record for Appellee STW is Patrick
Shannon Casey, Sandra Marie Chapman, and Ryan Paul Orth, Casey & Chapman, PLLC,
1140 Chapline Street, Wheeling, WV 26003; (3) Counsel of record for Appellees Reagle
& Padden, Inc. and David C. Padden is Zachary Benjamin Pyers, Reminger Co. LPA, Suite
800, 200 Civic Center Drive, Columbus, OH 43215; and (4) Counsel of Record for
Appellees Robert Edwards, Jane Price, Douglas Steele, and Carol Steele is David Belknap
Lunsford, Hartley Law Group, PLLC, 7 Pine Avenue, 2001 Main Street, Wheeling, WV
26003.
I.
West Virginia law provides that a certification order must contain “the facts relevant
to the question, showing fully the nature of the controversy out of which the question
arose.” W. Va. Code § 51-1A-6. Accordingly, we set forth those facts below.
STW is currently defending itself against three West Virginia state tort claims
alleging that negligence in manufacturing its products contributed to latent illnesses
suffered by the Claimants. Each of the Claimants was diagnosed with their latent illness
between 2014 and 2016. However, they each allege that decades of exposure to hazardous
chemicals in STW-manufactured tanks caused their recently-diagnosed illnesses.
Westfield Insurance Company acknowledges that it insured STW under several
policies from 1989-2010. The district court also found that it provided insurance to STW
from 1985-1989, although Westfield contests that finding. See Westfield Ins. Co., 484 F.
4
USCA4 Appeal: 20-2052 Doc: 80-1 Filed: 11/14/2022 Pg: 5 of 8
Supp. 3d at 295-97. It is uncontested that Westfield did not provide insurance to STW in
2014-2016, the years that the Claimants’ illnesses were diagnosed.
Critical to determination of the question of whether Westfield owes coverage to
STW is when bodily injury occurs under the insurance policies so as to trigger coverage
for a latent bodily injury or illness. The district court and the parties here acknowledge
that this is a question of West Virginia state law that has yet to be addressed by the West
Virginia Supreme Court of Appeals. See Westfield Ins. Co., 484 F. Supp. 3d at 295.
At least four trigger of coverage theories can be employed to determine whether
latent bodily injury or property damage has occurred within an insurance policy period. Id.
at 294. These theories are “(1) exposure trigger, (2) injury-in-fact trigger, (3) manifestation
trigger, and (4) continuous or multiple trigger.” Id. Westfield argues that the manifestation
theory of coverage should apply, while STW argues for application of the continuous
theory of coverage. The West Virginia Supreme Court of Appeals could apply any one of
these theories in the context of latent illness claims.
The district court applied a continuous coverage theory to this case, determining
that any policy in place throughout the alleged period of harm was triggered by these
claims. Westfield Ins. Co., 484 F. Supp. at 295. The court held that Westfield owed
coverage to STW under the 1985-1989 policies. Id. at 296. Finding coverage under those
policies, the court determined that evaluating coverage under the 1989-2010 policies is
now moot. Id. at 297.
5
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Westfield challenges several aspects of the district court judgment. First, Westfield
argues that the district court erred in applying the continuous trigger coverage theory,
instead of the manifestation theory, to find coverage under any of these policies. Westfield
also contends that the district court erred in failing to decide the question of coverage under
the 1989-2010 policies and in considering the 1985-1989 policies, because they were not
properly before the court.
II.
Lower courts applying West Virginia law that have previously considered the first
question—the coverage trigger question—have reached different outcomes.
The district court relied on two West Virginia circuit court opinions to apply the
continuous trigger theory of coverage. See U.S. Silica Co. v. Ace Fire Underwriters Ins.
Co., 2012 LEXIS 4449 (W. Va. Cir. Nov. 27, 2017); Wheeling Pittsburgh Corp. v. Am.
Ins. Co., Civil Action No. 93-C-340, 2003 WL 23652106 (W. Va. Cir. Oct. 18, 2013).
Federal district courts in West Virginia, however, have concluded that West
Virginia law calls for application of the manifestation theory in similar contexts. See State
Auto Prop. & Cas. Ins. Co. v. H. E. Neumann Co., 2016 WL 5380925 (S.D.W. Va. Sept.
23, 2016); Westfield Ins. Co. v. Mitchell, 22 F. Supp. 3d 619 (S.D.W. Va. 2014).
6
USCA4 Appeal: 20-2052 Doc: 80-1 Filed: 11/14/2022 Pg: 7 of 8
III.
Several factors counsel in favor of certification in this case. There is no controlling
West Virginia precedent guiding the choice of trigger of coverage theory. Due to the long
history of West Virginia housing a substantial chemical industry, this question is likely to
be a matter of exceptional importance for the State.
The answer to this question may be determinative of coverage in this case. If the
West Virginia Supreme Court of Appeals holds that the manifestation theory of coverage
is applicable, then there will likely be no coverage under any of Westfield’s policies. If,
on the other hand, the West Virginia Supreme Court of Appeals finds the continuous
coverage theory or some other theory applies, this court may need to determine whether
the district court otherwise erred in finding coverage under the 1985-1989 policies and
whether the district court properly determined that coverage under the 1989-2010 policies
was moot.
IV.
Accordingly, pursuant to the privilege made available by W. Va. Code § 51-1A-3,
we respectfully hereby ORDER: (1) that the question stated above be certified to the West
Virginia Supreme Court of Appeals for answer; (2) that the Clerk of this Court forward to
the West Virginia Supreme Court of Appeals, under the official seal of this Court, a copy
of this Order of Certification, together with the original or copies of the record before this
7
USCA4 Appeal: 20-2052 Doc: 80-1 Filed: 11/14/2022 Pg: 8 of 8
Court to the extent requested by the West Virginia Supreme Court of Appeals; and (3) that
the Clerk of this Court fulfill any request for all or part of the record simply upon
notification from the Clerk of the West Virginia Supreme Court of Appeals.
QUESTION CERTIFIED
FOR THE COURT
/s/ Patricia D. Connor
Clerk
8 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484016/ | Filed 11/15/22 P. v. Keys CA1/2
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or
ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION TWO
THE PEOPLE,
Plaintiff and Respondent,
A162153
v.
LEON LEE KEYS, (Contra Costa County
Super. Ct. No. 5-200773-0)
Defendant and Appellant.
On the morning of April 14, 2020, defendant Leon Lee Keys restrained
Jane Doe in her bedroom, and later that day, while driving her car, he placed
her in a headlock, grabbed her hair, and punched her repeatedly as she tried
to exit the vehicle. Keys was convicted by a jury of attempted kidnapping,
battery, and false imprisonment, and sentenced separately and concurrently
on each count. He argues that because each conviction was based on the
same act and the same criminal intent, Penal Code section 654 1 requires that
sentence on two of the three counts be stayed. We disagree, and we affirm.
BACKGROUND
On October 28, 2020, the Contra Costa County District Attorney filed
an amended information charging Keys with attempted kidnapping (§§ 207,
subd. (a) & 664) (count 1), corporal injury on a person with whom he had a
1 Further undesignated statutory references are to the Penal Code.
1
dating relationship (§ 273.5, subd. (a)) (count 2), false imprisonment by
violence (§§ 236 & 237) (count 3), taking a vehicle without consent
(Veh. Code, § 10851, subd. (a)) (count 4), disobeying a court order (§ 166,
subd. (c)(1)) (count 5), and battery on a person with whom he had a dating
relationship (§ 243, subd. (e)(1)) (count 6).2 Counts 1 through 5 involved
incidents involving Jane Doe that occurred “on or about April 14, 2020.”
Count 6 involved an incident involving Jane Doe that occurred on
December 3, 2019.
Jane Doe testified at trial under subpoena, but refused to meaningfully
answer questions, repeatedly responding “I have nothing to say” and “I don’t
know.” To prove its case, the prosecution relied on Doe’s statement to Officer
Jonathan Ma on April 14, 2020 as recorded by his body camera, and on a
recorded phone interview with Doe on April 16, conducted by Concord Police
Detective Andrew Demott.
Officer Ma testified regarding Doe’s statements about the incident on
the morning of April 14:
“Q. What did she say happened on the morning of April the 14th?
“A. So when she returned home—so she left, as well, on the 13th, and
then when she returned home on the 14th, at approximately 8:00 in the
morning, um, Keys was at her residence waiting for her, and then he did not
allow her to leave her room. Um, and then at times when she tried to leave
her room he would stand in front of her doorway and physically block her
from leaving. And then at one point she told Keys that she wanted to use the
restroom, he gave her a bottle and told her to use that instead.”
2 Because Keys’ arguments on appeal all relate to counts 1, 2, and 3, we
do not describe the factual bases for the remaining counts.
2
Doe also described the incident on the morning of April 14 in her phone
interview with Detective Demott:
“So I left, um, you know, just grabbed some clothes and stuff, um, and
went and got a motel room. And, um, I came back the next morning, um,
hoping he was gone. Didn’t really figure he would have been, but, um, I—I
had nowhere else to go, you know I had to go home. And, so, I came back
home and he was being, you know, nice and, you know, he’s sorry and blah,
blah, blah, same shit as always. And, um, so I was just exhausted. I laid
down and watching a movie and all of a sudden he just like started asking
questions like—like, so who were you with us [sic] night? Where did you go,
you know, and just started being him again. The shitty him that I didn’t
know existed until this started happening. Um, when it was getting to the
point where he didn’t want me to get up and go to the bathroom, like, um, he
at one point peed in a bottle and told me I didn’t have to leave the room to go
to the bathroom. I could do what he just did. And I was like, ‘Oh, no. Like,
what the hell?’ And he would like stand in front of me if I tried to leave the
bedroom. And I was like, ‘Bro, like, you obviously know that if anybody in
the house is worried about me they’re going to call the police because they
don’t really trust you.’ ”
Officer Ma’s interview with Doe also described an incident on the
evening of April 14, in which Keys and Doe were in her car, with Keys
driving, waiting for her brother Robert to visit a friend. When Keys became
impatient for Robert to return, he told Doe that they were leaving and the
two got into an argument. And then:
“[Doe:] Thank you. Um, so—so he’s telling me how he’s gonna kidnap
me and he’s gonna take me and, um, basically it all just happened so fast. I
knew that he was gonna—he was reaching for me so I threw my purse out
3
the window and tried to take off my seat belt and open the door at the same
time, and he just grabbed me by my head and was holding my hair, pulling
my hair, and just punching me on the side of the face and the side of my ear,
and—and I was just trying to get away from him. I was scratching him,
biting him, anything I could do to get him off me, and he just kept punching
and punching and trying to pull my neck back and . . . and some—some guy
ran up—‘cause he was driving the whole time, and I was I was keeping the
door open with my leg and it—I reached down and tried to put it in park
because he was just on the gas, and I got it in park, so the car jerked and
some guy ran up and started banging on the window and was like, ‘Stop.
Leave her alone. Leave her alone. You can’t do that,’ and it distracted him
enough to where I could slip away from him, and he was trying to take off
while I was getting out, and—but I was able to get out, and the guy was just
like, ‘Run. Run,’ and he was banging on the windows again telling him to
stop, and I just fuckin’ ran, and my purse was, you know, I grabbed my purse
off the ground and put everything back in it and I just ran and thankfully
they just opened their door and was like, ‘Come in. Come in.’ ”
Doe described the incident in the car again in her phone interview with
Detective Demott:
“And, um, so I took my purse and as he was putting it in drive I threw
my purse out the window and just tried to unbuckle my seat belt and open
the door as fast as I could to get out. And he grabbed me, um, by my hair
and, like, pulled my head all the way down to where it was like damn near on
his lap. And he just started full force punching me in the side of the head,
um, and anywhere he could make contact he just was with everything he had
punching and punching, punching. And, so I was able to get the door open.
So I was holding the door open with my foot and trying to pull away from
4
him. And he had—he had a pretty tight grip on me. So, I was trying to
scratch by anything I could to get him off me. And—and he just—the more I
tried the harder he hit and pulled and, um, I was able to, um, get the car and
to put the car back in park because the whole time he was driving, like, as
fast as he could. And, like, just so we were spinning around in circles. And I
don’t know if we hit anything or I don’t know how we even—cause it’s not a
big area in there. But he was driving the whole time. And, so, I was trying
to get the car back in the park. I was trying to pull the steering wheel
anything I could and, um, he just kept hitting me and somebody—at some—I
did get the car back in park. So, when I got to in park, somebody came and
was—started pounding on the driver’s side window. And I was screaming as
loud as I could the whole time. Um, so somebody started pounding on the
window and was like—like, ‘Hey, stop. Leave her alone. Stop.’ And, um, I
guess the—me putting it in park and while we’re driving, so, you know, we
jerked. Um, went into the park and then—and then the person slamming on
the window or banging on the window must have distracted him enough to
where he just loosened his grip a little bit. And, so I was able to slide out of
the car halfway, um, but he grabbed me again by my hair and just pulled me
back in. And I just pulled back as hard as I could and, kind of, just threw
myself out of the car and I was able to get out.”
On November 12, a jury found Keys guilty on all counts except for
count 2, on which the jury found him guilty of the lesser included offense of
battery on a person with whom he had a dating relationship (§ 243,
subd. (e)(1)). The trial court then found true enhancements for a prior
serious or violent felony (§§ 667, subds. (d) & (e), & 1170.12, subds. (b) & (c))
and a prior serious felony (§ 667, subd. (a)(1)).
5
On February 26, 2021, the trial court sentenced Keys to five years in
prison—the 30-month midterm for the attempted kidnapping (count 1),
doubled to five years because of the prior strike. The trial court sentenced
Keys to two years each on counts 3 and 4, and one year each on counts 2, 5,
and 6, all to run concurrently to the sentence on count 1. The trial court also
stayed the five-year enhancement under section 667, subdivision (a)(1).
Keys filed a notice of appeal.
DISCUSSION
Keys argues that the same act and intent formed the basis of his
convictions on the attempted kidnapping, battery (count 2), and false
imprisonment counts, so that sentence on two of those counts must be stayed
under section 654. The Attorney General argues that the attempted
kidnapping and battery counts are distinct for the purposes of section 654,
but concedes that if the jury based the false imprisonment conviction on the
events in the car on the evening of April 14, section 654 would apply to that
count. However, the Attorney General argues that the trial court could have
found that the false imprisonment conviction was based on the events of the
morning of April 14, and thus section 654 does not apply. On reply, Keys
argues that the jury necessarily convicted him of false imprisonment based
on the incident in the car, such that section 654 applies to the attempted
kidnapping and false imprisonment counts.
The Trial Court Properly Concluded Section 654 Did Not Apply
to the Attempted Kidnapping and Battery Counts
Applicable Law
We distilled the applicable law in People v. Deegan (2016)
247 Cal.App.4th 532:
6
“ ‘ “In general, a person may be convicted of, although not punished for,
more than one crime arising out of the same act or course of conduct. ‘In
California, a single act or course of conduct by a defendant can lead to
convictions “of any number of the offenses charged.” ’ ” ’ (People v. Correa
(2012) 54 Cal.4th 331, 337; see § 954.) ‘Section 654 bars separate
punishment for multiple offenses arising out of a single, indivisible course of
action.’ (People v. Neely (2009) 176 Cal.App.4th 787, 800.) Its purpose is ‘to
ensure that a defendant’s punishment will be commensurate with his
culpability.’ (Correa, at p. 341.)
“ ‘ “If a course of criminal conduct causes the commission of more than
one offense, each of which can be committed without committing any other,
the applicability of section 654 will depend upon whether a separate and
distinct act can be established as the basis of each conviction, or whether a
single act has been so committed that more than one statute has been
violated. If only a single act is charged as the basis of the multiple
convictions, only one conviction can be affirmed, notwithstanding that the
offenses are not necessarily included offenses. It is the singleness of the act
and not of the offense that is determinative.” (People v. Knowles (1950)
35 Cal.2d 175, 187.) [¶] The “singleness of the act,” however, is no longer the
sole test of the applicability of section 654. “ ‘Section 654 has been applied
not only where there was but one “act” in the ordinary sense . . . but also
where a course of conduct violated more than one statute . . . within the
meaning of section 654.’ [People v. Brown (1958) 49 Cal.2d 577, 591.] [¶]
Whether a course of criminal conduct is divisible and therefore gives rise to
more than one act within the meaning of section 654 depends on the intent
and objective of the actor. If all of the offenses were incident to one objective,
the defendant may be punished for any one of such offenses but not for more
7
than one.” (Neal v. State of California (1960) 55 Cal.2d 11, 19; italics added.)’
(People v. Beamon (1973) 8 Cal.3d 625, 637, fn. omitted, disapproved on other
grounds in People v. Mendoza (2000) 23 Cal.4th 896.)” (People v. Deegan,
supra, 247 Cal.App.4th at pp. 541–542.)
“Whether multiple convictions are based upon a single act is
determined by examining the facts of the case.” (People v. Mesa (2012)
54 Cal.4th 191, 196.) Intent and objective are also “factual questions for the
trial court, which must find evidence to support the existence of a separate
intent and objective for each sentenced offense.” (People v. Jackson (2016)
1 Cal.5th 269, 354.) A trial court’s imposition of multiple sentences must be
sustained on appeal so long as its factual findings, express or implied, of
multiple acts or multiple intents and objectives are supported by substantial
evidence. (People v. Osband (1996) 13 Cal.4th 622, 730−731; People v. Cruz
(2020) 46 Cal.App.5th 715, 737.) Accordingly, we review the trial court’s
imposition of multiple sentences “ ‘in the light most favorable to the
respondent and presume the existence of every fact the trial court could
reasonably deduce from the evidence.’ ” (People v. Ortiz (2012)
208 Cal.App.4th 1354, 1378.)
If the trial court does not stay a sentence pursuant to section 654, and
offers no factual basis for its decision, we presume the court found that the
defendant harbored a separate intent and objective for each offense.
(People v. Jones (2002) 103 Cal.App.4th 1139, 1147.) Here, there was no
discussion at sentencing of section 654. Accordingly, we must affirm the
sentence if an implied finding that section 654 does not apply is supported by
substantial evidence. (See People v. Osband, supra, 13 Cal.4th at pp. 730–
731.)
8
Analysis
Keys argues that the same act—his “forceful struggle to keep Doe in
the car”—forms the basis for his conviction on each of the attempted
kidnapping, battery, and false imprisonment counts.
As noted, the Attorney General concedes that section 654 would apply
to the attempted kidnapping and false imprisonment counts if the false
imprisonment count was based on the incident in the car, but argues that the
trial court could have found the false imprisonment count was based on Keys
restraining Doe in the morning of April 14, an argument we consider in the
next section. We thus first consider whether section 654 applies to the
attempted kidnapping and battery charges, concluding that it does not.
The attempted kidnapping charge required the prosecution to prove, in
relevant part, that Keys “took a direct but ineffective step toward committing
a kidnapping,” which in turn required that Keys “took, held, or detained
another person by using force or by instilling reasonable fear” and “[u]sing
that force or fear . . . moved the other person or made the other person move
a substantial distance,” whereas the battery conviction required that Keys
“willfully touched Jane Doe . . . in a harmful or offensive manner.”3
The trial court could permissibly conclude that separate acts underly
the convictions for attempted kidnapping and battery for the purposes of
section 654. In particular, the trial court could conclude that Keys committed
the attempted kidnapping by putting Doe in a headlock and grabbing her
hair while continuing to drive, and that he committed the battery by
3 The infliction of injury on someone with whom defendant had a dating
relationship charge contained the further requirement that the touching
resulted in a “traumatic condition,” an element the jury apparently concluded
had not been proven beyond a reasonable doubt given its not guilty verdict on
that offense.
9
repeatedly punching her. Indeed, in closing, the prosecutor argued that Keys
detained Doe using force by “put[ting] her in a headlock when she was trying
to jump out of the car,” and committed infliction of injury on someone with
whom he had a dating relationship by repeatedly punching her. Unlike
placing Doe in a headlock or grabbing her hair, repeatedly punching her was
not a means of restraining her in the car. (See People v. Nubla (1999)
74 Cal.App.4th 719, 730–731 [section 654 does not apply to two offenses
where first offense “not done as a means of” accomplishing second offense,
“did not facilitate that offense and was not incidental to that offense”].)
Nor did the evidence compel the conclusion that Keys’ only intent was
to “keep Doe in the car with him against her will.” As noted, while holding
Doe by the hair and placing her in a headlock while driving the car forward
served to restrain Doe in the car, punching her repeatedly did not. The trial
court could permissibly conclude that Keys had a separate criminal intent
with respect to count 2, for example, to frighten Doe or to punish her for
attempting to escape. Substantial evidence thus supports the trial court’s
implied finding that counts 1 and 2 were separate for the purposes of section
654.
People v. Corpening (2016) 2 Cal.5th 307, relied on by Keys, is
inapposite. There, the victim had loaded $70,000 in valuable coins into his
van when the defendant approached pointing a gun and said “ ‘Get out of the
car or I’ll shoot you.’ ” (Id. at p. 309.) The victim got out of the van and the
defendant got in, and they twice struggled for the gun. (Ibid.) The defendant
“quickly threw the vehicle into reverse gear and began pulling away,” and the
victim “grabbed onto the steering wheel [and] was dragged approximately
18 feet down the driveway before he lost his grip and fell to the pavement.”
10
(Ibid.) The defendant was later convicted of both carjacking (§ 215, subd. (a))
and robbery (§ 211). (Id. at p. 310.)
Corpening held that sentence on one of the counts must be stayed,
because the defendant’s “forceful taking of [the victim’s] van was a single
physical act for purposes of section 654 because that act simultaneously
accomplished the actus reus” for the robbery and carjacking, which required
taking another’s personal property (the coins) by force and taking another’s
vehicle by force, respectively. (People v. Corpening, supra, 2 Cal.5th at
pp. 314–315.) But Corpening is plainly distinguishable, because in this case
separate physical acts accomplished the actus reus for the attempted
kidnapping (placing Doe in a headlock and grabbing her hair while causing
the vehicle to accelerate) and the battery (repeatedly punching Doe). Unlike
in Corpening, here these separate acts did “on their own complete[] the actus
reus required for the relevant crimes.” (Id. at p. 315.)
The Trial Court Could Find that the False Imprisonment Count
Was Based on Restraining Doe in Her Bedroom Such That Section
654 Did Not Apply
With respect to the attempted kidnapping and false imprisonment
counts, the Attorney General concedes that if the jury’s false imprisonment
verdict was based on the incident in the car, section 654 applies to the
sentences on these counts and the case must be remanded for resentencing.
However, the Attorney General argues that because the jury’s false
imprisonment verdict could have based on Keys restraining Doe in her
bedroom on the morning of April 14, section 654 does not apply. We agree.
Applicable Law
Again, People v. Deegan, supra, 247 Cal.App.4th 532, is apt and
explains the general rule: “Contrary to [defendant]’s argument that the jury
must make the relevant findings, the courts have held that ‘in the absence of
11
some circumstance “foreclosing” its sentencing discretion . . . , a trial court
may base its decision under section 654 on any of the facts that are in
evidence at trial, without regard to the verdicts.’ (People v. McCoy (2012)
208 Cal.App.4th 1333, 1340.)” (People v. Deegan, supra, 247 Cal.App.4th at
p. 545.) Such a “foreclosing” circumstance has been found where “the
prosecution proceeded on a single factual basis at trial, as reflected in the
charging documents, jury instructions, prosecutor’s arguments, or verdict
forms.” (People v. Carter (2019) 34 Cal.App.5th 831, 842; see People v. Jones
(2012) 54 Cal.4th 350, 359 [finding prosecution proceeded on single factual
basis based on amended information and closing argument].)
Analysis
Contrary to Keys’ argument, the prosecution here did not proceed on a
“single factual basis at trial.” Quite the opposite. The operative information
alleged that Keys committed the crime of false imprisonment “on or about
April 14, 2020,” leaving open the possibility that he committed that crime in
the morning or in the evening. And the verdict form similarly required the
jury to find only that Keys committed false imprisonment “on or about April
14, 2020.” The jury instructions were even more express that the prosecution
was alleging two instances of false imprisonment:
“THE COURT: The defendant is charged with false imprisonment by
violence in Count 3, and disobeying a court order in Count 5.
“The People have presented evidence of more than one act for each
offense to prove that the defendant committed each of these offenses. You
must not find the defendant guilty unless you all agree that the People have
proved that the defendant committed at least one of the acts for each offense
and you all agree on which act he committed for each offense.”
12
Keys’ argument that the prosecution proceeded on a single factual basis
at trial relies on portions of the prosecutor’s closing argument where he
suggested that the jury find Keys guilty of false imprisonment based on his
restraining Doe in the car, including stating that doing so would be “the most
economical way to do it.” But the entire context of the prosecutor’s discussion
of the false imprisonment charge again makes clear that the prosecution’s
theory was that there were two incidents of false imprisonment, and the jury
was free to convict based on either one of them:
“False imprisonment by violence. By violence, Count 3. He did this to
her twice. So he did it to her when he confined her in the room earlier in the
day. Stepping in front of her whenever she wanted to get out, and given what
happened between and before, obviously that was within minutes, with
implied threat of force. There is a reason why she wouldn’t dare push past
him, she knows what he will do. And then later, when he forces her into the
car.
“If you, as a jury, find beyond a reasonable doubt—if you all
unanimously find beyond a reasonable doubt that he’s guilty, that when he
was holding her in the car he was guilty of this crime, then you would find
her guilty, or find him guilty, excuse me. When you are deliberating about
this, just remember, you have to unanimously find regarding the one episode
later, or the episode before. But there is just one charge of false
imprisonment by violence.
“I think the most economical way to do it, that I would suggest,
deliberate however you want, is just think about what happened when he
was forcing her in the car, that’s on video, and he admitted that he puts her
in a headlock as she is trying to get out of the car. He obviously unlawfully
restrains, confines, or detained her, and he made her stay or go somewhere
13
against her will. He made her stay in the car. He made her go as the car was
going. And that’s clearly when you heard her screaming.
“So you don’t have to figure out what happened before they showed up
at that apartment area in Concord. You don’t have to decide one way or the
other whether or not he confined her in the room, or what happened the day
before that. To figure out all of the counts for the April incident, you can get
there just considering what happened as he forced her to stay in the car while
he tried to kidnap her. And I hope that’s good news for you, because while he
did falsely imprison her twice, there’s only one charge. And after you, if you
conclude unanimously that he falsely imprisoned her when he was forcing
her to stay in the car, find him guilty of Count 3 and move on.”
In short, the charging documents, jury instructions, prosecutor’s
arguments, and verdict forms all make clear that the prosecution proceeded
on two factual bases at trial with respect to the false imprisonment charge—
that Keys committed the crime both in the morning and the evening of April
14, 2020. The trial court was thus free to base its sentencing discretion on
any of the facts in evidence at trial, including the evidence supporting the
conclusion that Keys committed false imprisonment in the morning of April
14, and that therefore section 654 did not require staying the sentence on
that count.
DISPOSITION
The judgment is affirmed.
14
_________________________
Richman, Acting P.J.
We concur:
_________________________
Stewart, J.
_________________________
Miller, J.
People v. Keys (A162153)
15 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484014/ | Filed 11/15/22 P. v. Robinson CA3
NOT TO BE PUBLISHED
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
THIRD APPELLATE DISTRICT
(Sacramento)
----
THE PEOPLE, C094766
Plaintiff and Respondent, (Super. Ct. No. 05F03831)
v.
CLARK ROBINSON,
Defendant and Appellant.
A jury convicted defendant Clark Robinson of murder in a home invasion robbery
and found true a robbery-murder special circumstance. (Pen. Code, §§ 187, subd.
(a), 190.2, subds. (a)(17), (d).)1 Defendant petitioned for resentencing under section
1172.6 (former section 1170.95) based on changes to the felony murder rule made by
Senate Bill No. 1437 (2017-2018 Reg. Sess.) (Stats. 2018, ch. 1015, effective Jan. 1,
1 All undesignated statutory references are to the Penal Code.
1
2019; Senate Bill 1437).2 Defendant contends the trial court erred in denying the petition
at the prima facie stage.
After defendant’s conviction, the California Supreme Court issued two decisions
as guidance on the factors that should be considered by a jury in finding true felony-
murder special circumstances enhancements: People v. Banks (2015) 61 Cal.4th 788
(Banks) and People v. Clark (2016) 63 Cal.4th 522 (Clark). Banks set forth factors to be
considered in determining whether a defendant was a “major participant” in the
underlying felony. (Banks, supra, at pp. 797-804.) In Clark, the court set forth factors to
be considered in determining whether a defendant acted with “reckless indifference to
human life.” (Clark, supra, at pp. 611-623.)
We requested supplemental briefing to address whether the trial court erred in
denying defendant’s petition in light of the California Supreme Court’s decision in
People v. Strong (2022) 13 Cal.5th 698 (Strong). The parties agree that the court erred,
as do we. We will reverse the court’s order denying the petition and direct the court to
issue an order to show cause and, if necessary, conduct an evidentiary hearing on
defendant’s petition.
I. BACKGROUND
Given the nature of this appeal, a detailed recitation of the facts is not necessary.
In sum, defendant and two others entered the home of the victim, whom they believed
stored the proceeds from drug sales in his house, by firing a shot gun into the side of the
house and entering through a bedroom window. In exiting the house, one of the intruders
shot the victim with a handgun. Defendant was arrested asleep in a car with a shotgun
between his legs that matched to a shell found in the victim’s house. With defendant was
2Effective June 30, 2022, former section 1170.95 was recodified without substantive
change as 1172.6. (Stats. 2022, ch. 58, § 10.)
2
his co-defendant, who had a handgun in his waistband that matched to a shell recovered
at the scene.3
The jury convicted defendant of murder with a robbery-murder special
circumstances finding (§§ 187, subd. (a), 190.2, subd. (a)(17)) and also found true that
defendant personally used a firearm (§ 12022.53, subd. (b)). Defendant was sentenced to
life without the possibility of parole, plus 10 years consecutive for the firearm
enhancement. The trial court stayed defendant’s sentence on a separate conviction for
robbery (§ 211) under section 654. On appeal, we affirmed the judgment (modified to
add a parole revocation fine). (Robinson, supra, C055313.)
On March 7, 2019, the trial court denied defendant’s petition for habeas corpus
rejecting his claim that the evidence was insufficient to support the jury findings and
should be reviewed again under Banks.
On April 29, 2019, defendant filed a petition for writ of habeas corpus in this court
raising the same contention, which we denied.
On February 3, 2020, defendant filed a petition for resentencing under section
1172.6. His declaration stated that he was convicted of murder under the felony-murder
rule or natural and probable consequences doctrine and could not now be convicted of
murder because of the changes to sections 188 and 189. The trial court granted
defendant’s request for appointment of counsel.
On August 14, 2020, the District Attorney filed a motion to dismiss the petition.
On July 14, 2021, defense counsel filed a reply brief.
On August 9, 2021, the trial court issued an order denying the petition. The court
expressed the view that a petition under section 1172.6 was not the proper forum
3 We granted defendant’s request for judicial notice of, and to incorporate by reference,
the record of his direct appeal and our opinion in People v. Robinson (May 28, 2009,
C055313) [nonpub. opn.] (Robinson).
3
determining the sufficiency of the evidence finding in light of Banks and Clark,
especially when defendant had been denied habeas relief after those decisions were
rendered. Even without regard to defendant’s previous habeas review, the trial court said
the evidence summarized in this court’s opinion affirming the judgment was sufficient to
conclude beyond a reasonable doubt that defendant was a major participant in the
robbery, who acted with reckless indifference to human life under Banks and Clark.
Further, in making a true finding of a felony-murder special circumstance based on the
evidence introduced at trial, the jury had determined that defendant was either the actual
killer, acted with intent to kill, or was a major participant in the underlying felony who
acted with reckless indifference to human life. Nonetheless, the trial court opted for a
“halfway solution;” that is, to conduct a review of the sufficiency of the evidence at the
prima facie stage applying the factors set forth in Banks and Clark. The trial court
analyzed each factor and determined the evidence was sufficient for a jury to conclude
beyond a reasonable doubt that defendant was a major participant in the robbery (Banks)
and that, in committing the attempted robbery, defendant acted with reckless indifference
to human life (Clark). The trial court held that as long as defendant remained convicted
of felony-murder special circumstance murder, he was ineligible for section 1172.6 relief.
Defendant filed a timely appeal.
II. DISCUSSION
A. Legal Background
The Legislature enacted Senate Bill 1437 to amend the felony-murder rule and
eliminate the natural and probable consequences doctrine for murder. (People v.
Superior Court (Gooden) (2019) 42 Cal.App.5th 270, 275-277.) To that purpose, Senate
Bill 1437 amended sections 188 and 189 and added former section 1170.95 (now section
1172.6).
Section 188, which defines malice, now provides in part: “Except as stated in
subdivision (e) of Section 189, in order to be convicted of murder, a principal in a crime
4
shall act with malice aforethought. Malice shall not be imputed to a person based solely
on his or her participation in a crime.” (§ 188, subd. (a)(3).) Section 189, subdivision
(e), now limits the circumstances under which a person may be convicted of felony
murder: “A participant in the perpetration or attempted perpetration of a felony listed in
subdivision (a) [defining first degree murder] in which a death occurs is liable for murder
only if one of the following is proven: [¶] (1) The person was the actual killer. [¶] (2)
The person was not the actual killer, but, with the intent to kill, aided, abetted, counseled,
commanded, induced, solicited, requested, or assisted the actual killer in the commission
of murder in the first degree. [¶] (3) The person was a major participant in the
underlying felony and acted with reckless indifference to human life, as described
in subdivision (d) of Section 190.2.” (Stats. 2018, ch. 1015, § 3.)
Section 1172.6 allows those convicted of felony murder or murder under the
natural and probable consequences theory to petition the trial court to vacate and
resentence the defendant. (§ 1172.6, subd. (a).) “If the petitioner makes a prima facie
showing that the petitioner is entitled to relief, the court shall issue an order to show
cause.” (§ 1172.6, subd. (c).)
The prima facie inquiry under section former 1172.6, subdivision (c) is “limited.”
(People v. Lewis (2021) 11 Cal.5th 952, 971.) The court “ ‘ “takes petitioner's factual
allegations as true and makes a preliminary assessment regarding whether the petitioner
would be entitled to relief if his or her factual allegations were proved.” ’ ” (Ibid.)
Although the court may rely on the record of conviction (including a prior appellate court
opinion) in determining whether defendant has made a prima facie showing, the court
“should not engage in ‘factfinding involving the weighing of evidence or the exercise of
discretion.’ ” (Id. at p. 972; see id. at p. 971.)
B. Analysis
Section 190.2 provides that, for the purposes of those special circumstances based
on the enumerated felonies in paragraph (17) of subdivision (a), which include robbery,
5
an aider and abettor must have been a “major participant” and have acted “with reckless
indifference to human life.” (§ 190.2, subd. (d); Banks, supra, 61 Cal.4th at p. 798.) On
its face, a special circumstance finding satisfies the requirements for accomplice murder
liability even after Senate Bill 1437. (§ 189, subd. (e).)
However, resolving a split of authority, our Supreme Court has made clear that
where, as here, a defendant’s case “was tried before Banks and Clark, the special
circumstances findings do not preclude him from making out a prima facie case for
resentencing under section 1172.6.” (Strong, supra, 13 Cal.5th at p. 721.) This is true
even if the trial evidence would have been sufficient to support the finding under Banks
and Clark. (Id. at p. 710.) The Strong court noted that the Banks and Clark cases “both
substantially clarified the law governing findings under . . . section 190.2, subdivision
(d): Banks elucidated what it means to be a major participant and, to a lesser extent, what
it means to act with reckless indifference to human life, while Clark further refined the
reckless indifference inquiry.”
The trial court incorrectly stated that the proper forum for Banks and Clark
challenges was a habeas petition. To be sure, as Strong noted, before Senate Bill 1437,
the effect of these decisions was litigated largely in habeas corpus proceedings
challenging special circumstance findings. (Strong, supra, 13 Cal.5th at pp. 706-707.)
However, our Supreme Court in Strong pointed out that, after Banks and Clark but before
the changes to section 189 wrought by Senate Bill 1437, a defendant seeking habeas
relief could have sought relief to vacate the special circumstance finding but not the
underlying conviction. (Strong, supra, at pp. 711-712.) The court also observed that
nothing in section 1172.6 requires a defendant to challenge a special circumstance
finding by a habeas petition. (Strong, supra, at p. 713.)
Further, the court in Strong rejected the proposition that prior special
circumstances findings foreclose relief under section 1172.6 under principles of issue
6
preclusion, in light of the “well-settled equitable exception” for significant change in the
law, as represented by Banks and Clark. (Strong, supra, 13 Cal.5th at pp. 715-718.)
Lastly, the Strong court also rejected the idea that a trial court may deny a petition
under section 1172.6 at the prima facie stage if it independently examines the evidence
applying Banks and Clark factors. (Strong, supra, 13 Cal.5th at pp. 718-720.) The court
reasoned that Banks and Clark guiding factors would have altered trial proceedings,
including the evidence defense counsel would have sought to introduce, as well as
counsel’s trial strategies and a determination whether to request optional Banks and Clark
instructions to guide the jury, with the possibility of the different outcomes resulting. (Id.
at pp. 719-720.) In addition, an after-the-fact Banks and Clark review would not account
for the fact that prior findings were made beyond a reasonable doubt but under outdated
standards, and any review applying correct legal standards would not involve a
determination beyond a reasonable doubt. (Id. at p. 720.)
Applying the principles articulated in Strong, we conclude the trial court
improperly denied defendant’s petition at the prima facie stage. The jury made its special
circumstance finding long before Banks and Clark. Under Strong, that finding does not
preclude defendant from stating a prima facie case for relief. (Strong, supra, 13 Cal.5th
at p. 721.) Contrary to the trial court’s view, a habeas petition is not the only proper
forum to raise Banks and Clark factors; indeed, habeas cannot provide equivalent relief to
a section 1172.6 petition since habeas only challenges the special circumstance finding
and not the underlying murder conviction. (Strong, supra, at pp. 711-713.) Nor is the
trial court’s review of the evidence applying Banks and Clark factors a proper basis to
deny a petition under section 1172.6. (Strong, supra, at pp. 719-720.)
Defendant’s section 1172.6 petition was facially sufficient and alleged the
essential facts necessary for relief. The record does not contain anything establishing that
defendant is ineligible for relief as a matter of law. Therefore, we must remand the
matter to the trial court to issue an order to show cause, and, as necessary, conduct an
7
evidentiary hearing. (§ 1172.6, subd. (d).) We express no opinion on the ultimate
resolution of the petition.4
III. DISPOSITION
The trial court’s order denying defendant’s section 1172.6 petition is reversed. On
remand, the court is directed to issue an order to show cause, and, to the extent necessary,
hold an evidentiary hearing on the petition.
/S/
RENNER, J.
We concur:
/S/
MAURO, Acting P. J.
/S/
HOCH, J.
4 In light of our conclusion that Strong requires remand, we do not reach defendant’s pre-
Strong contentions on appeal, inter alia, that denial of his prior habeas corpus petition
based on Banks was not a decision on the merits, the trial court improperly relied on the
summary of facts in our prior opinion, and the trial court improperly conducted a review
of the evidence under Banks and Clark.
8 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484004/ | [Cite as In re J.G., 2022-Ohio-4072.]
IN THE COURT OF APPEALS OF OHIO
TENTH APPELLATE DISTRICT
In re: J.G., : No. 22AP-10
(C.P.C. No. 19JU-2735)
[J.R.G., :
(ACCELERATED CALENDAR)
Appellant]. :
D E C I S I O N
Rendered on November 15, 2022
On brief: Sharon K. Carney, for appellee Franklin County
Children Services.
On brief: Yeura Venters, Public Defender, and Robert D.
Essex, for appellant.
APPEAL from the Franklin County Court of Common Pleas,
Division of Domestic Relations, Juvenile Branch.
KLATT, J.
{¶ 1} Appellant, J.R.G. ("mother"), appeals a judgment of the Franklin County
Court of Common Pleas, Division of Domestic Relations, Juvenile Branch, that granted
permanent custody of her son, J.G., to Franklin County Children Services ("FCCS"). For
the following reasons, we affirm that judgment.
{¶ 2} Mother gave birth to J.G. on October 23, 2018. Approximately two months
later, on or about December 19, 2018, mother arrived with J.G. at the Van Buren Center,
the homeless shelter where she and J.G. had been living, after curfew. Even though it was
December, J.G. was only wearing a onesie. Mother told the shelter staff that J.G. had slept
all day because he had been drinking water from the shelter. While speaking with the
shelter staff, mother handled J.G. roughly, flipping him around and placing him on the
ground, only to pick him up again. Emergency medical services were sought for J.G., who
No. 22AP-10 2
was transported to Nationwide Children's Hospital for an evaluation. Mother was
transported to Netcare Access, and she was then hospitalized to receive psychiatric
treatment. Mother later told others that she believed J.G.'s father or the FBI had kidnapped
J.G., and she claimed the Van Buren Center staff and the police were "lying about her."
(Compl. at 2.)
{¶ 3} Due to the incident at the Van Buren Center, on December 19, 2018, FCCS
filed a complaint asserting that J.G. was a dependent child pursuant to R.C. 2151.04(C). In
addition, FCCS claimed in the complaint that J.G. was a dependent child pursuant to R.C.
2151.04(D)(1) and (2). To support this ground for dependency, FCCS alleged that mother
had previously lost custody of each of J.G.'s three siblings because of her failure to remedy
her mental health issues, drug dependency, and lack of stable housing. The trial court had
found each of J.G.'s siblings dependent children. FCCS received permanent custody of two
of the children, and a relative received legal custody of the third child.
{¶ 4} Upon the filing of the complaint, a magistrate immediately granted FCCS an
emergency care order to allow FCCS to provide care for J.G. The next day, December 20,
2018, the magistrate granted FCCS a temporary order of custody of J.G.
{¶ 5} The trial court dismissed the December 19, 2018 complaint because a
dispositional hearing could not occur within 90 days of the filing of the complaint as
required by R.C. 2151.35(B)(1). FCCS refiled the complaint on March 6, 2019. On March 7,
2019, a magistrate again granted FCCS a temporary order of custody of J.G.
{¶ 6} On May 7, 2019, a magistrate held a combined adjudicatory and dispositional
hearing regarding J.G. Mother did not contest any of the allegations in the complaint.
Consequently, in her decision, the magistrate found that J.G. was a dependent child as
defined in R.C. 2151.04(C) and 2151.04(D)(1) and (2). The magistrate also granted FCCS
temporary custody of J.G., and she approved and adopted the case plan. In a judgment
dated June 10, 2019, the trial court adopted the magistrate's decision.
{¶ 7} Among other requirements, the case plan provided that mother had to:
(1) complete a psychological and/or mental health evaluation and follow through with all
recommendations, (2) obtain mental stability, (3) follow all recommendations for her
medical health treatment and medication management, (4) obtain sobriety, (5) complete
random urine screens, (6) complete a substance abuse assessment and follow through with
No. 22AP-10 3
all recommendations, (7) obtain and maintain stable housing, (8) obtain legal income
and/or employment, and (9) complete parenting classes and/or services and follow all
recommendations.
{¶ 8} On October 24, 2019, FCCS moved to extend its temporary custody of J.G.
for six months. FCCS reported to the trial court that mother had completed both parenting
classes and a mental health assessment. She had submitted to 15 out of 26 random urine
screens, with three testing positive for marijuana and two testing positive for alcohol.
Additionally, mother had obtained employment at a temporary employment agency. The
trial court granted FCCS' motion.
{¶ 9} On April 23, 2020, FCCS moved for permanent custody of J.G. FCCS
explained that mother's mental health assessment had resulted in a diagnosis of depression
and schizophrenia, with the recommendation that mother take her prescribed medication,
and abstain from alcohol and other drugs to avoid interactions with the prescribed
medication. Mother, however, did not consistently take her prescribed medication. Also,
mother had not undertaken a substance abuse assessment, nor was she completing random
urine screens. Of 42 random urine screens, mother had completed only 18.
{¶ 10} The trial court held a hearing on FCCS' motion for permanent custody on
November 16, 2021. At the hearing, testimony focused on the extent to which mother
fulfilled the case plan components, as well as J.G.'s wellbeing and his interactions and
relationships with his mother and his foster family.
{¶ 11} Kelli Steele, the FCCS ongoing caseworker assigned to the family, testified
that she had reviewed the case plan with mother and explained to mother what the case
plan required of her. According to Steele, mother understood her obligations under the
case plan.
{¶ 12} Steele stated that mother completed a psychological assessment, and she
receives ongoing mental health treatment at Southeast Healthcare. Mother admitted that
she has been diagnosed with depression, bipolar disorder, and schizophrenia. As part of
mother's mental health treatment, mother was prescribed a monthly injection of Abilify.
Steele testified that mother neither consistently attends her mental health appointments
nor regularly obtains her monthly medication. Mother acknowledged that she has missed
injections of Abilify.
No. 22AP-10 4
{¶ 13} In addition to a psychological assessment, the case plan required mother to
undergo a substance abuse assessment. The case plan mandated a substance abuse
assessment because mother had admitted to prior alcohol, marijuana, and cocaine use.
Mother finally submitted to a substance abuse assessment in June 2020—over one year and
six months after she lost custody of J.G. Linda Granville, an assessment counselor at
Columbus Public Health, conducted the substance abuse assessment and diagnosed
mother with severe alcohol-use disorder, severe cocaine-use disorder, and moderate
marijuana-use disorder. With regard to alcohol use, Granville's report states:
[Mother] reports she first drank at age 15 and by her mid 20's
drank daily, sometimes to the point of passing out.1 [Mother]
reports in her 20's she drank a pint of liquor every day.
[Mother] reports in her mid 30's she slowed her drinking some.
[Mother] describes her drinking patterns as times where she
drank a lot but times where she did not drink as much[ ].
[Mother] reports prior to [Covid-19,] she was clean and sober
for about a year[,] then [she] got depressed because she could
not see her son. [Mother] reports she started to drink 4 glasses
of wine or a pint of Smirnoff "fruity drink" every day. [Mother]
reports, "I like beer when I do a line" of cocaine. [Mother]
denies withdrawal but admits to having a "high tolerance."
(FCCS Ex. 8 at 5.) With regard to marijuana use, Granville's report states:
[Mother] reports she first smoked marijuana at age 12 and by
age 15 smoked daily and this pattern did not stop until
[mother's] case with FCCS was opened almost 2 [years] ago.
[Mother] reports she was clean for about a year until [Covid-
19,] then she relapsed using daily but has tried to slow down
during the last 2 weeks. [Mother] reports developing a
tolerance and reports withdrawal.
Id. Finally, with regard to cocaine use, Granville's report states:
[Mother] reports she first used cocaine at age 15 and by age 18
she was binging 2x/month. [Mother] reports in her 20's she
binged almost daily. [Mother] reports her binges last about 3
days, then she stops for a day or so and starts again. [Mother]
reports in her mid 30's she slowed her use to single use
episodes 3-4x/month. [Mother] reports in the last 30 days she
has used 4-8 times, "a 20" each time and states "I want more
after I use."
1 At the time of the assessment, mother was 37 years old.
No. 22AP-10 5
Id.
{¶ 14} As a result of the substance abuse assessment, Granville recommend dual
diagnosis treatment—for both mother's mental health and substance abuse issues—at
Southeast Healthcare. Mother began substance abuse treatment at Southeast Healthcare,
but she was discharged from the program in February 2021 when she stopped attending.
Mother stated she stopped attending because she "felt like [the program] wasn't enough for
[her]." (Nov. 16, 2021 Tr. at 25.)
{¶ 15} Mother completed a second substance abuse assessment in October 2021.
She began a second substance abuse treatment program at Southeast Healthcare in
November 2021, but she had only attended one treatment session as of the date of the
permanent custody hearing.
{¶ 16} Mother claimed that she was sober at the hearing, and that she had been
sober since August 2021. Through most of the case mother had not consistently completed
urine screens, but she had completed all random screens in August through November
2021. The initial screens were decreasingly positive for marijuana, and the later screens
were negative for all substances. However, at the hearing, mother admitted that,
previously, her longest period of sobriety has only lasted approximately six months.
Mother had also been in substance abuse treatment three times prior to the failed attempt
in early 2021.
{¶ 17} In addition to the psychological and substance abuse assessments, the case
plan required mother to obtain stable housing and employment, and complete parenting
classes. At the hearing, mother testified that she began employment at a Gap Inc.
warehouse in August 2021 and at a Dollar Tree store in June or July 2021. According to
mother, she stays employed and has worked a variety of different jobs. Mother has an
apartment, but she intends to move due to the poor condition of her apartment complex.
Daniel Miller, J.G.'s guardian ad litem, stated that the apartment complex "has been pretty
much labeled a nuisance by the city." Id. at 153. Mother also testified that she completed
parenting classes.
{¶ 18} Apart from the case plan, the testimony at the hearing focused on J.G. When
J.G. first entered FCCS' custody, mother regularly attended one-hour visits with J.G. at the
agency. Due to mother's regular attendance, FCCS increased the visit duration to two
No. 22AP-10 6
hours. Mother, however, asked FCCS to return to one-hour visits. Mother then began to
miss visits and show up late, so FCCS asked her to call an hour before the start of each visit
to confirm her attendance. When mother's attendance problems persisted, FCCS began
requiring mother to appear for visits an hour ahead of the visit start time. Mother blamed
work and transportation issues for her tardiness and failure to appear.
{¶ 19} J.G. cries during visits, which frustrates mother. When J.G. was two years
old, she posted a photograph of a pouting J.G. to her Facebook page and captioned it "[m]y
cry baby." (FCCS Ex. 5.)
{¶ 20} Both Steele, the FCCS caseworker, and Miller, the guardian ad litem, agreed
that J.G. acts differently when with his mother than when he is in his foster home. Miller
testified that J.G. is quiet and subdued with mother, but talkative and energetic in the
presence of his foster family. Steele stated J.G. is "a little more tense" when visiting his
mother. (Tr. at 120.) According to Steele, J.G. previously did not want to interact with
mother, but recently has become more willing to talk and interact. Both Steele and Miller
testified that J.G. is bonded with his foster parents, who have raised J.G. since he was
removed from his mother's custody, and his foster siblings. J.G. calls his foster mother
"mom" or "mommy." The foster parents want to adopt J.G.
{¶ 21} According to Miller, at three years old, J.G. did not have the maturity to
understand the nature of the permanent custody proceedings. Consequently, J.G. could
not express any wish regarding the outcome of the proceedings. Miller recommended that
that the trial court grant FCCS permanent custody of J.G. Although Miller commended
mother on her progress toward completing the requirements of her case plan, he expressed
concern that mother could not handle parenting both J.G. and the baby mother was due to
give birth to in January 2022.
{¶ 22} On December 17, 2021, the trial court entered judgment granting FCCS
permanent custody of J.G. The trial court found by clear and convincing evidence that,
pursuant to R.C. 2151.414(B)(1), J.G. had been in FCCS' custody for 12 months out of a
consecutive 22-month period and awarding FCCS permanent custody was in J.G.'s best
interest.
{¶ 23} Mother now appeals the December 17, 2021 judgment, and she assigns the
following error:
No. 22AP-10 7
The trial court committed reversible error by terminating the
appellant-mother's parental rights when the decision was
against the manifest weight of the evidence.
{¶ 24} An appellate court will not reverse a juvenile court's determination in a
permanent custody case unless it is against the manifest weight of the evidence. In re Andy-
Jones, 10th Dist. No. 03AP-1167, 2004-Ohio-3312, ¶ 28. " 'Weight of the evidence concerns
"the inclination of the greater amount of credible evidence, offered at trial, to support one
side of the issue rather than the other. * * * Weight is not a question of mathematics, but
depends on [the evidence's] effect in inducing belief." ' " (Emphasis omitted.) Eastley v.
Volkman, 132 Ohio St.3d 328, 2012-Ohio-2179, ¶ 12, quoting State v. Thompkins, 78 Ohio
St.3d 380, 387 (1997), quoting Black's Law Dictionary 1594 (6th Ed.1990). Thus, in
reviewing a judgment under the manifest weight standard, an appellate court weighs the
evidence and all reasonable inferences, considers the credibility of witnesses, and
determines whether in resolving the conflicts in the evidence, the trier of fact clearly lost its
way and created such a manifest miscarriage of justice that the judgment must be reversed,
and a new trial ordered. Id. at ¶ 20.
{¶ 25} Additionally, in conducting a manifest weight review, an appellate court must
make every reasonable presumption in favor of the trial court's judgment and findings of
fact. Id. at ¶ 21. If the evidence is susceptible to more than one construction, an appellate
court must interpret it in the manner most consistent with the judgment. Id. Moreover,
" '[t]he discretion which the juvenile court enjoys in determining whether an order of
permanent custody is in the best interest of a child should be accorded the utmost respect,
given the nature of the proceedings and the impact the court's determination will have on
the lives of the parties concerned.' " In re H.H., 10th Dist. No. 19AP-158, 2019-Ohio-4953,
¶ 49, quoting In re W.D., 10th Dist. No. 09AP-589, 2009-Ohio-6903, ¶ 34.
{¶ 26} Mother challenges the trial court's decision to grant FCCS permanent custody
of J.G. under R.C. 2151.414(B)(1). Under that section, a juvenile court may grant
permanent custody of a child to a public children services agency "if the court determines
* * *, by clear and convincing evidence, that it is in the best interest of the child to grant
permanent custody of the child to the agency * * * and that any of the following apply:"
No. 22AP-10 8
(a) * * * [T]he child cannot be placed with either of the child's
parents within a reasonable time or should not be placed with
the child's parents.
(b) The child is abandoned.
(c) The child is orphaned, and there are no relatives of the child
who are able to take permanent custody.
(d) The child has been in the temporary custody of one or more
public children services agencies or private child placing
agencies for twelve or more months of a consecutive twenty-
two-month period * * *.
(e) The child or another child in the custody of the parent or
parents from whose custody the child has been removed has
been adjudicated an abused, neglected, or dependent child on
three separate occasions by any court in this state or another
state.
R.C. 2151.414(B)(1)(a) through (e).
{¶ 27} Once the juvenile court decides that one of the circumstances in R.C.
2151.414(B)(1) applies, the court turns to R.C. 2151.414(D) to decide if a grant of permanent
custody is in the child's best interest. Pursuant to R.C. 2151.414(D)(1), in determining a
child's best interest, the juvenile court "shall consider all relevant factors, including, but not
limited to, the following:"
(a) The interaction and interrelationship of the child with the
child's parents, siblings, relatives, foster caregivers and out-of-
home providers, and any other person who may significantly
affect the child;
(b) The wishes of the child, as expressed directly by the child
or through the child's guardian ad litem, with due regard for
the maturity of the child;
(c) The custodial history of the child, including whether the
child has been in the temporary custody of one or more public
children services agencies or private child placing agencies for
twelve or more months of a consecutive twenty-two-month
period * * *;
(d) The child's need for a legally secure permanent placement
and whether that type of placement can be achieved without a
grant of permanent custody to the agency;
No. 22AP-10 9
(e) Whether any of the factors in divisions (E)(7) to (11) of this
section apply in relation to the parents and child.
R.C. 2151.414(D)(1)(a) through (e).
{¶ 28} In the case at bar, mother did not contest that J.G. had been in FCCS' custody
for 12 or more months of a consecutive 22-month period when FCCS moved for permanent
custody. Accordingly, because the condition set forth in R.C. 2151.414(B)(1)(d) was
established, the trial court was statutorily authorized to grant FCCS permanent custody of
J.G. if clear and convincing evidence existed that it was in J.G.'s best interest to do so. See
In re A.M., 166 Ohio St.3d 127, 2020-Ohio-5102, ¶ 18 (holding that, before granting a
motion for permanent custody, a juvenile court must find by clear and convincing evidence
that (1) one or more of the conditions in R.C. 2151.414(B)(1)(a) through (e) applies, and
(2) a grant of permanent custody is in the child's best interest).
{¶ 29} Under the first best-interest factor, the trial court must consider "[t]he
interaction and interrelationship of the child with the child's parents, siblings, relatives,
foster caregivers and out-of-home providers, and any other person who may significantly
affect the child." R.C. 2151.414(D)(1)(a). Here, the trial court's analysis included the
finding, based on Steele's and Miller's testimony, that J.G. is strongly bonded to his foster
family. J.G.'s foster family is the only family J.G. has ever known, and they are willing to
adopt him. The trial court also recounted the testimony that J.G. is talkative, energetic, and
active in his foster home, but tearful, quiet, and reserved during supervised visits with his
mother.
{¶ 30} Mother first complains that the trial court failed to take into consideration
the natural reserve J.G. would have for someone he spends only one hour a week with, and
she blames FCCS for not allowing her longer visits to develop a deeper bond with J.G. We
acknowledge that building a bond with a baby or toddler within the parameters of
supervised visitation could prove difficult. However, mother ignores that FCCS wanted to
extend her visiting time with J.G., but she refused. Mother then began missing visits and
appearing late. We thus are disinclined to hold FCCS responsible for J.G.'s reticence with
mother. Moreover, regardless of the reasons for J.G.'s behavior with mother, the trial court
had to take that behavior into account when considering J.G.'s interaction with mother.
No. 22AP-10 10
{¶ 31} Mother next faults the trial court for not referencing the alleged recent
improvement in her relationship with J.G. To assert that her relationship with J.G. has
improved, mother relies upon Steele's testimony that "[r]ecently, [J.G. has] been more
willing to talk and interact" with mother during their visits. (Tr. at 120.) Mother infers
from J.G.'s willingness to talk and interact with her that he now feels a closer relationship
to her. However, on cross-examination, Steele explained, "what I'm saying is, [J.G. is] able
to vocalize, since he's able to talk * * * he's able to vocalize more what he wants to do * * *
during visits. When he couldn't talk, * * * there was no real interaction. But now that he is
talking and mom is understanding like what his interest is, it's a little bit easier to interact
with [him] during visits." (Tr. at 132-33.) Therefore, Steele did not testify to an improved
relationship between J.G. and mother, but rather easier interaction between mother and
J.G. now that J.G. has matured enough to talk to mother. The trial court, consequently, did
not err in not including its consideration the alleged improved relationship between mother
and J.G.
{¶ 32} Under the second best-interest factor, the trial court must consider "[t]he
wishes of the child, as expressed directly by the child or through the child's guardian ad
litem, with due regard for the maturity of the child." R.C. 2151.414(D)(1)(b). Here, the trial
court did not consider J.G.'s wishes given the guardian ad litem's testimony that, at three
years old, J.G. was not capable of expressing those wishes. Mother does not contend the
trial court erred in this determination.
{¶ 33} Under the third best-interest factor, the trial court must consider "[t]he
custodial history of the child, including whether the child has been in the temporary custody
of one or more public children services agencies or private child placing agencies for twelve
or more months of a consecutive twenty-two-month period." R.C. 2151.414(D)(1)(c). Here,
the trial court considered that J.G. had been in FCCS' custody for over 12 months of a
consecutive 22-month period. Mother contends that the trial court erred in not expanding
its review to examine the reasons behind J.G.'s custodial history. However, in an analysis
under R.C. 2151.414(D)(1)(c), a trial court has no obligation to consider additional facts
beyond the 12-out-of-22 circumstance. In re N.H., 10th Dist. No. 20AP-158, 2021-Ohio-
2080, ¶ 48; In re J.H., 10th Dist. No. 19AP-517, 2021-Ohio-807, ¶ 45. The trial court,
therefore, did not err in its analysis of the third best-interest factor.
No. 22AP-10 11
{¶ 34} Under the fourth best-interest factor, the trial court must consider "[t]he
child's need for a legally secure permanent placement and whether that type of placement
can be achieved without a grant of permanent custody to the agency." R.C.
2151.414(D)(1)(d). Mother argues that the trial court erred in not considering her as a
potential legally secure permanent placement for J.G. While the trial court analyzed
whether mother could provide J.G. with a permanent home, it conducted that analysis in
its consideration of the fifth best-interest factor instead of the fourth best-interest factor.
Nevertheless, the substance of the trial court's analysis applies to the fourth best-interest
factor, so we will address it now.
{¶ 35} Mother contends that the trial court erred in concluding that she could not
assume permanent custody of J.G. In making that determination, the trial court reviewed
the evidence regarding mother's substance abuse, including testimony that mother was
diagnosed with severe alcohol-use disorder, severe cocaine-use disorder, and moderate
marijuana-use disorder. Mother had more than two years to obtain substance abuse
treatment and demonstrate she could maintain sobriety. However, mother quit one
substance abuse treatment program, and she did not start a second until the month of the
hearing. Mother did not begin to consistently undergo random urine screens until three
months prior to the permanent custody hearing. Previously, mother has abstained from
alcohol and drugs for a period, only to relapse again. The evidence, therefore, did not
establish that mother has obtained sobriety.
{¶ 36} Second, the trial court considered mother's significant mental health
diagnoses, including depression, bipolar disorder, and schizophrenia. Mother
acknowledges her mental health issues. Mother, however, does not consistently attend the
appointments to receive the mood-stabilizing medication necessary to treat her mental
health conditions.
{¶ 37} Finally, the trial court looked to mother's housing. The guardian ad litem
testified that mother's individual apartment is appropriate, but the apartment complex is
not safe for children. According to the guardian ad litem, the apartment complex "has been
pretty much labeled a nuisance by the city." (Tr. at 153.)
{¶ 38} In reviewing this evidence, we also recognize that the record contains
evidence that mother completed some of the goals in the case plan. At the time of the
No. 22AP-10 12
permanent custody hearing, she had obtained employment and attended parenting classes.
However, a finding that a parent has satisfied case plan goals does not necessarily equate
to a finding that the parent has the ability to assume custody of a child. In re T.M., 10th
Dist. No. 18AP-943, 2020-Ohio-815, ¶ 31. That is the problem here. While mother has
complied with some aspects of the case plan, mother has not demonstrated lasting sobriety,
an ability to consistently manage her mental health, or that she has obtained housing
suitable for a child. Thus, the manifest weight of the evidence demonstrates that mother is
still uncapable of giving J.G. a legally secure permanent placement.
{¶ 39} Under the fifth best-interest factor, the trial court must consider "[w]hether
any of the factors in divisions (E)(7) to (11) of this section apply in relation to the parents
and child." R.C. 2151.414(D)(1)(e). In applying the fifth best-interest factor, the trial court
erred. It found that "factors pursuant to R.C. 2151.414(E) (7-11) apply because [m]other
has failed continuously and repeatedly to substantially remedy the conditions that caused
[J.G.'s] removal." (Dec. 17, 2021 Decision & Jgmt. Entry at 8.) Whether a parent has "failed
continuously and repeatedly to substantially remedy the conditions causing the child to be
placed outside the child's home" is a factor for consideration under R.C. 2151.414(E)(1), not
R.C. 2151.414(E)(7) through (11). Nevertheless, the trial court's ensuing analysis is relevant
to the question of whether mother could assume permanent custody of J.G., which, as we
explained above, fits within the consideration of the fourth best-interest factor. Therefore,
the trial court's error is harmless. See Foy v. State of Ohio Atty. Gen., 10th Dist. No. 21AP-
420, 2022-Ohio-62, ¶ 15 (" '[a]bsent any indication of material prejudice, error is harmless
and cannot serve as a basis for reversal' ").
{¶ 40} After weighing all relevant factors, the trial court concluded that a grant of
permanent custody to FCCS was in J.G.'s best interest. We find that the manifest weight of
the evidence supports that conclusion, and we overrule mother's assignment of error.
{¶ 41} For the foregoing reasons, we overrule mother's assignment of error, and we
affirm the judgment of the Franklin County Court of Common Pleas, Division of Domestic
Relations, Juvenile Branch.
Judgment affirmed.
SADLER and MENTEL, JJ., concur. | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484005/ | [Cite as Howard v. Mgt. & Training Corp., 2022-Ohio-4071.]
IN THE COURT OF APPEALS OF OHIO
TENTH APPELLATE DISTRICT
Jeffery L. Howard, :
Plaintiff-Appellant, : No. 21AP-283
v. (C.P.C. No. 20CV-2847)
:
Management & Training Corp. et al., (REGULAR CALENDAR)
:
Defendants-Appellees.
:
D E C I S I O N
Rendered on November 15, 2022
On brief: Jeffery L. Howard, pro se.
On brief: Mansour Gavin, LPA, Edward O. Patton, and
Michael P. Quinlan, for appellees.
APPEAL from the Franklin County Court of Common Pleas
MENTEL, J.
{¶ 1} Jeffery L. Howard appeals from the judgment of the Franklin County Court
of Common Pleas dismissing the civil action he filed against Management & Training Corp.
("MTC") and its employees. The trial court ruled that the affidavit Mr. Howard had filed
disclosing his litigation history did not conform to the requirements of R.C. 2969.25(A),
which applies when an inmate commences litigation against "a government entity or
employee." MTC is a private, for-profit corporation, not a government entity. The trial
court erred by applying the statute, so we reverse and remand.
{¶ 2} On April 21, 2020, Mr. Howard filed a complaint against MTC and ten of its
employees who worked at the Northern Central Correctional Institution ("NCCI"), the
facility owned and operated by MTC where he was incarcerated. Mr. Howard alleged that
MTC's employees had conspired and retaliated against him by writing false negative
No. 21AP-283 2
conduct reports after he filed complaints. He also alleged that employees had committed
fraud, falsified government documents, and violated his equal protection rights.
Mr. Howard sought a declaratory judgment, injunctive relief, and monetary damages. He
also attached an affidavit disclosing six previous lawsuits he had filed in the last five years,
as R.C. 2969.25(A) requires of an inmate commencing "a civil action or appeal against a
government entity or employee * * * in any state or federal court."
{¶ 3} On June 11, 2020, MTC filed a motion to dismiss for failure to state a claim
or, in the alternative, to transfer venue. MTC pointed out that Mr. Howard had voluntarily
dismissed an identical action filed in the Court of Common Pleas of Marion County.
Additionally, MTC argued that Mr. Howard's "bare bones" and "inadequate" affidavit did
not satisfy R.C. 2969.25(A)'s requirement to provide a "brief description of the nature of
his civil actions." (June 11, 2020 Mot. to Dismiss at 4.) Alternatively, MTC sought a motion
to transfer the case to the Court of Common Pleas of Marion County, Ohio.
{¶ 4} In Mr. Howard's response, he accused the Marion County court of being
"incapable of being fair and impartial towards" him and defended refiling the lawsuit in
Franklin County because its "fairer and impartial" court did not lack jurisdiction over his
claims. (July 2, 2020 Req. to Reply at 2-3.) He also argued that MTC was not a
"government entity" or "employee" under R.C. 2969.25(A) and that his affidavit complied
with the descriptive requirements of the statute.
{¶ 5} The trial court granted the motion to dismiss on May 3, 2021, ruling that
Mr. Howard's affidavit did not comply with R.C. 2969.25(A). The trial court found that
Mr. Howard's affidavit had "failed to list the names of each party to the civil action in any
of the six civil actions he initiated within the last five years." (May 3, 2021 Journal Entry at
2.) The trial court also found that "overly general descriptors such as 'Declaratory
Judgment and Injunctive Relief,' " failed to satisfy the R.C. 2969.25(A)(1) requirement to
provide "[a] brief description of the nature of the civil action or appeal."
{¶ 6} Mr. Howard filed a notice of appeal on June 4, 2021, and asserts the following
assignments of error:
[1.] THE TRIAL COURT COMMITTED ERROR DISMISSING
PLAINTIFF'S-APPELLANT'S CASE BASED ON THE OHIO
REVISED CODE (O.R.C.) 2969.25(A)
No. 21AP-283 3
[2.] THE TRIAL COURT COMMITTED PLAIN ERROR BY
DEFINING A PRIVATE FOR PROFIT CORPORATION AS A
"GOVERNMENT ENTITY" OR "EMPLOYEE" UNDER O.R.C.
2969.25(A)
{¶ 7} According to MTC, Mr. Howard's appeal should be dismissed because he
untimely filed the notice of appeal. MTC argues that under App.R. 4, Mr. Howard had thirty
days from May 3, 2021, the date the clerk entered the dismissal entry on the docket, to file
the notice of appeal. Because he did not file the notice of appeal until June 4, 2021, thirty-
two days later, MTC argues that the notice was untimely and we must dismiss Mr. Howard's
appeal. As this argument challenges our jurisdiction, "we must, as a preliminary matter,
address our subject-matter jurisdiction in this appeal." Oakley v. Ohio State Univ. Wexner
Med. Ctr., 10th Dist. No. 18AP-843, 2019-Ohio-3557, ¶ 9.
{¶ 8} "Jurisdiction in the court of appeals is based upon a timely filing of a notice
of appeal." Clermont Cty. Transp. Improvement Dist. v. Gator Milford, L.L.C., 141 Ohio
St.3d 542, 2015-Ohio-241, ¶ 7. "An appeal as of right shall be taken by filing a notice of
appeal with the clerk of the trial court within the time allowed by Rule 4." App.R. 3(A).
Under App.R. 4(A)(1), "a party who wishes to appeal from an order that is final upon its
entry shall file the notice of appeal required by App.R. 3 within 30 days of that entry."
{¶ 9} The procedure for providing "[n]otice of filing" of an entry of judgment is set
forth in Civ.R. 58(B), which states:
When the court signs a judgment, the court shall endorse
thereon a direction to the clerk to serve upon all parties * * *
notice of the judgment and its date of entry upon the journal.
Within three days of entering the judgment upon the journal,
the clerk shall serve the parties in a manner prescribed by
Civ.R. 5(B) and note the service in the appearance docket.
Upon serving the notice and notation of the service in the
appearance docket, the service is complete. The failure of the
clerk to serve notice does not affect the validity of the judgment
or the running of the time for appeal except as provided in
App.R. 4(A).
{¶ 10} In this case, the relevant "manner prescribed by Civ.R. 5(B) " of serving a
judgment on a party referenced in the rule is by "mailing it to the person's last known
address by United States mail, in which event service is complete upon mailing." Civ.R.
No. 21AP-283 4
5(B)(2)(c). The exception to the thirty-day period triggered by "[t]he failure of the clerk to
serve notice" mentioned in Civ.R. 58(B) arises under App.R. 4(A)(3), which tolls the
deadline for filing an appeal: "In a civil case, if the clerk has not completed service of notice
of the judgment within the three-day period prescribed in Civ.R. 58(B), the 30-day periods
referenced in App.R. 4(A)(1) and 4(A)(2) begin to run on the date when the clerk actually
completes service."
{¶ 11} Mr. Howard asserts that he "signed for and received" the May 3, 2021
judgment entry on May 12, 2021, at which time he was "in segregation." (Appellant's Reply
at 6.) He "immediately requested the required forms" to file the appeal from the
institution's librarian, but, because of the librarian's schedule, did not receive them until
"7-9 days later." Id. at 6-7. Nevertheless, he insists, because he placed the notice of appeal
into "staff hands" to be mailed on May 24, 2021, it was "not [his] fault" that the notice of
appeal arrived two days late. Id. at 7-8. Mr. Howard has also attached a number of
documents, including his sworn affidavit, the prison mail log, and the relevant certificates
of services attached to his filings to support his assertions.
{¶ 12} However, there is no " 'actual knowledge' exception to the service
requirement of Civ.R. 58(B) " because the rule "requires that service be made by the clerk
of courts; there is no stated exception." Clermont Cty. Transp. Improvement Dist., 2015-
Ohio-241, ¶ 2, 6. In other words, we are precluded from examining Mr. Howard's affidavit
and accompanying papers to determine whether and when the clerk served him with the
final judgment in this case. "If we open the door to an exception when the parties have
actual knowledge of the judgment, we would be forcing the appellate courts into the murky
area of deciding whether actual knowledge has been established. Appellate courts are not
fact-finders, yet they would be forced into that role" by such an exception. Id. at ¶ 2. Thus,
only the clerk's notation on the docket proves whether a final judgment was served under
Civ.R. 58(B) and whether the thirty-day period for filing an appeal under App.R. 4(A) began
to run. The interplay of these rules implicates "the very foundation for jurisdiction in the
appellate court. It is simply too important to allow for notice in a casual manner. An office
of a clerk of courts exists, if for no other reason, to keep an accurate and easily accessible
record of what has happened in any given case." Id. ¶ 11.
No. 21AP-283 5
{¶ 13} Examining the record created by the clerk, we conclude that the final
judgment was not served on Mr. Howard in accordance with Civ.R. 58(B). The trial court
signed the journal entry granting MTC's motion to dismiss on May 3, 2021, and the clerk
entered the order on the docket the same day with the notation "notice of final appealable
order." On May 5, 2021, the clerk noted "proof of service issued – ordinary mail" upon
Mr. Howard. Under Civ.R. 58(B), "service is complete" if the clerk notes service on the
docket within three days of the entry of judgment. "When the Civil Rules on service are
followed, there is a presumption of proper service." Rogers v. United Presidential Life Ins.
Co., 36 Ohio App.3d 126, 128 (10th Dist.1987). However, on May 28, 2021, the clerk noted
"notice returned – not served" with an accompanying image of the envelope containing the
"final appealable order" returned by the U.S. Postal Service. This "positive statement of the
record that no service was made," which MTC's briefing fails to acknowledge, rebuts the
presumption of proper service of the final judgment. Moore v. Starks, 1 Ohio St. 369, 373
(1853). Notwithstanding Mr. Howard's affidavit and protestation that he received the
judgment on May 12, 2021, we are bound by Clermont County Transp. Improvement Dist.
to rely only upon the clerk's notation, and therefore conclude that the clerk did not complete
service under Civ.R. 58(B).
{¶ 14} Failure to complete service of a final judgment under Civ.R. 58(B) tolls the
thirty-day period for filing a notice of appeal. "In a civil case, if the clerk has not completed
service of notice of the judgment within the three-day period prescribed in Civ.R. 58(B), the
30-day periods referenced in App.R. 4(A)(1) and 4(A)(2) begin to run on the date when the
clerk actually completes service." App.R. 4(A)(3). Mr. Howard's June 4, 2021 notice of
appeal was not untimely because the clerk never "completed service" as required to
commence the thirty-day period for filing a notice of appeal under App.R. 4(A)(1). E.g.,
White v. Cent. Ohio Gaming Ventures, LLC, 10th Dist. No. 18AP-780, 2019-Ohio-1078, ¶ 12
("Because the clerk did not complete service as required by Civ.R. 58(B), [the appellant's]
time to appeal never expired under App.R. 4(A)."). Accordingly, MTC's argument that we
lack jurisdiction to hear Mr. Howard's appeal is without merit.
{¶ 15} Having concluded that we have jurisdiction to hear Mr. Howard's appeal, we
turn to his assignments of error challenging the dismissal of his case for failure to comply
with the affidavit requirement of R.C. 2969.25(A). That statute states: "At the time that an
No. 21AP-283 6
inmate commences a civil action or appeal against a government entity or employee, the
inmate shall file with the court an affidavit that contains a description of each civil action
or appeal of a civil action that the inmate has filed in the previous five years in any state or
federal court." R.C. 2969.25(A). The definition of a "civil action or appeal against a
government entity or employee" in R.C. 2969.25(A) is: "A civil action that an inmate
commences against the state, a political subdivision, or an employee of the state or a
political subdivision in a court of common pleas, court of appeals, county court, or
municipal court." R.C. 2969.21(B)(1)(a). The trial court dismissed Mr. Howard's complaint
after MTC moved to dismiss under Civ.R. 12(B)(6) for failure to state a claim upon which
relief may be granted, so appellate review of the decision is de novo. State ex rel. Person v.
McCarty, 165 Ohio St.3d 42, 2021-Ohio-1207, ¶ 8, citing Alford v. Collins-McGregor
Operating Co., 152 Ohio St.3d 303, 2018-Ohio-8, ¶ 10.
{¶ 16} Because they present similar arguments premised on the same alleged error,
we consider Mr. Howard's assignments of error and arguments supporting them together.
The trial court erred by dismissing his case under R.C. 2969.25(A), he argues, because it
improperly interpreted the statute's reference to "a government entity or employee" to
include MTC, a for-profit operator of a private prison. (Merit Brief at 3-4.) Mr. Howard
cites to various provisions of the Ohio Revised Code, including the subchapter governing
the operation of private correctional facilities, that differentiate state entities from private
contractors. Id. at 4-6 (citing R.C. 1.59(C), R.C. 1.60, and R.C. 9.06). He believes that we
should follow Anthony v. Lake Erie Corr. Inst., 11th Dist. No. 2005-A-0009, 2006-Ohio-
742, which held that R.C. 2969.25(A) does not apply to an inmate filing suit against
employees of a privately owned prison. Id. at 7. In Mr. Howard's view, the trial court's
reading of the statute is overbroad. Id. at 8.
{¶ 17} In response, MTC argues that R.C. 2969.21, the definition section applicable
to R.C. 2969.25, references the definition of "state" under R.C. 2743.01, which "makes no
distinction between privately or publicly operated and managed institutions." (Appellees'
Brief at 12.) Dismissing the Eleventh District's decision in Anthony as an "unpublished
opinion," MTC cites two Supreme Court of Ohio cases, State ex rel. McGrath v. McDonnell,
126 Ohio St.3d 511, 2010-Ohio-4726, and State ex rel. Howard v. Turner, 156 Ohio St.3d
No. 21AP-283 7
285, 2019-Ohio-759, to rebut Mr. Howard's arguments.1 According to MTC, these cases
stand for the proposition that NCCI, the prison it operates for profit, "is a 'government
entity' within the meaning of R.C. 2969.21(B)(1)(a)," the definition section applicable to
R.C. 2969.25. (Appellees' Brief at 14.) MTC asserts also that McGrath held that the R.C.
2969.21(B)(1)(a) definition was "applicable to the civil action filed by McGrath under R.C.
2969.25 against a privately operated and managed institution" and that Lake Erie
Correctional Institution, the private prison where he was incarcerated, was "a 'government
entity.' " Id.
{¶ 18} In McGrath, an inmate filed a complaint for a writ of mandamus in the Eighth
District Court of Appeals but did not attach an affidavit to the complaint that complied with
the requirements of R.C. 2969.25. 2010-Ohio-4726 at ¶ 2. The Supreme Court of Ohio
affirmed the appellate court's dismissal. Despite the inmate's "claims to the contrary, R.C.
2969.25 applies to his mandamus complaint because he is an inmate, and his mandamus
case is a civil case for purposes of R.C. 2969.21(B)(1)(a), which addresses inmate actions
against government entities." Id. at ¶ 3, citing Fuqua v. Williams, 100 Ohio St.3d 211, 2003-
Ohio-5533, and State ex rel. Hawk v. Athens Cty., 106 Ohio St.3d 183, 2005-Ohio-4383.
{¶ 19} In Howard, the Supreme Court of Ohio held that an inmate's complaint for a
writ of mandamus filed in an appellate court was subject to the affidavit requirement of
R.C. 2969.26(A), a statute that also applies to a civil action "against a government entity or
employee," but one arising from a grievance. 2019-Ohio-759 at ¶ 1, 6. As in this case, Mr.
Howard was the inmate resisting the affidavit requirement. However, the only argument
he raised before the Supreme Court of Ohio at that time was that "the statute's requirements
should not apply to him, because he is unable to pay for copies of the required grievance
decisions since he has no funds in his inmate account." Id. at ¶ 5.
{¶ 20} In neither McGrath nor Howard did the Supreme Court of Ohio address the
question of whether an inmate filing a lawsuit against a privately owned, for-profit
correctional facility was subject to the affidavit requirement of R.C. 2969.25(A). "A
1 The distinction MTC highlights is of little to no significance. Rule 3.4 of the Supreme Court Rules for the
Reporting of Opinions states: "All opinions of the courts of appeals issued after May 1, 2002 may be cited as
legal authority and weighted as deemed appropriate by the courts without regard to whether the opinion was
published or in what form it was published."
No. 21AP-283 8
reported decision, although in a case where the question might have been raised, is entitled
to no consideration whatever as settling, by judicial determination, a question not passed
upon or raised at the time of the adjudication." State ex rel. Gordon v. Rhodes, 158 Ohio
St. 129 (1952), paragraph one of the syllabus. Nowhere in McGrath or Howard does the
Supreme Court of Ohio mention the fact that the defendant correctional institutions were
privately owned, for-profit entities or interpret the statutory requirements in light of that
fact. MTC's interpretation of those cases as controlling "construe[s]" the court's "silence
* * * as settling this issue," in contravention of the syllabus law of Gordon. State v. Payne,
114 Ohio St.3d 502, 2007-Ohio-4642, ¶ 11. Accordingly, neither case controls our
resolution of the issue raised by Mr. Howard.
{¶ 21} The issue is straightforward and resolved by simply reading an unambiguous
statute. "When we consider the meaning of a statute, our first step is always to determine
whether the statute is 'plain and unambiguous.' " Jacobson v. Kaforey, 149 Ohio St.3d 398,
2016-Ohio-8434, ¶ 8, quoting State v. Hurd, 89 Ohio St.3d 616, 618 (2000). "If 'the
language of a statute is plain and unambiguous and conveys a clear and definite meaning
there is no occasion for resorting to rules of statutory interpretation,' because 'an
unambiguous statute is to be applied, not interpreted.' " Id., quoting Sears v. Weimer, 143
Ohio St. 312 (1944), paragraph five of the syllabus. When commencing a civil action
"against a government entity or employee," R.C. 2969.25(A), an inmate must file an
affidavit disclosing prior litigation. The phrase "government entity" is plain and admits of
no ambiguity that would include a for-profit corporation. Further supporting this reading
is the specific definition of the phrase "[a] civil action or appeal against a government entity
or employee” applicable to R.C. 2969.25(A): "A civil action that an inmate commences
against the state, a political subdivision, or an employee of the state or a political
subdivision in a court of common pleas, court of appeals, county court, or municipal court."
R.C. 2969.21(B)(1)(a). MTC is not a government entity, a state, or a political subdivision.
As a consequence, no inmate commencing a civil action against it is subject to the
requirement of R.C. 2969.25(A).
{¶ 22} MTC's reference to the definition of "state" under R.C. 2743.01, arrived
through a chain of references in the Ohio Revised Code, does not support its argument. As
stated, the definition of "[a] civil action or appeal against a government entity or employee"
No. 21AP-283 9
applicable to R.C. 2969.25(A) is set forth in R.C. 2969.21(B)(1)(a): "A civil action that an
inmate commences against the state, a political subdivision, or an employee of the state or
a political subdivision in a court of common pleas, court of appeals, county court, or
municipal court." In the foregoing definition, the word "state" is further defined as having
"the same meaning as in section 2743.01 of the Revised Code." R.C. 2969.21(G). In R.C.
2743.01(A), "state" is defined as: "the state of Ohio, including, but not limited to, the general
assembly, the supreme court, the offices of all elected state officers, and all departments,
boards, offices, commissions, agencies, institutions, and other instrumentalities of the
state," but not "political subdivisions." MTC argues that this definition's reference to
"institutions" includes it because the definition "makes no distinction between privately or
publicly operated and managed institutions." (Appellees' Brief at 12.) Not so. MTC's
reading omits "of the state," the final preposition from the definition. MTC cannot plausibly
be described as an "institution * * * of the state." Contrary to MTC's argument, R.C.
2743.01(A) supports our reading of R.C. 2969.25(A), as the latter statute does not reference
a privately-owned correctional institution when referring to a "government entity."
{¶ 23} As Mr. Howard points out, the Eleventh District Court of Appeals in Anthony
v. Lake Erie Corr. Inst., 11th Dist. No. 2005-A-0009, 2006-Ohio-742, reads the statute as
we do. The court rejected the private prison appellee's "broad reading" of the statute,
reasoning that when the Ohio General Assembly:
has chosen to define the meaning of "government entity," it has
always limited itself to the state of Ohio, or a political
subdivision. For example, R.C. 3723.01(E) defines
"government entity" to mean "the state, a state agency as
defined in section 1.60 of the Revised Code, a political
subdivision, or any entity of local government"; R.C.
5528.51(H) defines "local government entity" to mean "any
county, municipal corporation, township, or transportation
improvement district, or any other local government agency
designated by law"; R.C. 1557.01(I) defines "local government
entities" to mean "any county, municipal [**10] corporation,
township, or metropolitan or township park district, soil and
water conservation district, conservancy district, or joint
recreation district"; and R.C. 3717.01(N) defines "government
entity" to mean "this state, a political subdivision of this state,
another state, or a political subdivision or other local
government body of another state." Had the legislature chosen
No. 21AP-283 10
to depart from its traditional definition of "government entity,"
as reflected in the statutes just cited, it would have done so in
more certain terms. It is not logical to believe that the Ohio
General Assembly intended a different meaning to the term
"government entity" when it inserted the phrase into R.C.
2969.25(A) than when it had done so in every other statute it
enacted that contained the same phrase.
Id. at ¶ 23.
{¶ 24} We acknowledge that the Third District Court of Appeals has recently
disagreed with Anthony and held, based on Howard, that an inmate commencing a civil
action against employees of a privately-owned prison must satisfy R.C. 2969.25(A). Israfil
v. Mgt. & Training Corp., 3d Dist. No. 9-21-31, 2022-Ohio-1270. Conceding that the
inmate's argument that the statute should not apply to its lawsuit against the employees of
NCCI was "not entirely unreasonable," the court nevertheless held that it was "constrained"
by the holding of Howard. Id. at ¶ 7 ("Whatever our opinion of the court of appeals's [sic]
reasoning in Anthony or our own interpretation of R.C. 2969.25, we are constrained by the
precedent of the Supreme Court of Ohio.").
{¶ 25} The reasoning in Israfil is unpersuasive for two reasons. First, as discussed,
the status of the defendant as a private corporation was never mentioned or discussed in
Howard. Because we will not read a controlling interpretation of a statute into "a case
where the question might have been raised" but was not, Howard is "entitled to no
consideration whatever as settling, by judicial determination, a question not passed upon
or raised at the time of [its] adjudication." State ex rel. Gordon v. Rhodes, 158 Ohio St. 129
(1952), paragraph one of the syllabus.
{¶ 26} Second, Israfil contains no independent basis for its holding other than citing
Howard. See Israfil at ¶ 7. Anthony, in comparison, provides an extensive discussion of
the statutory text and other thoroughly reasoned explanations for its holding. See Anthony
at ¶ 19-22 (rejecting the argument that a private prison liable under 42 U.S.C. 1983 for
violating a defendant's constitutional rights when acting under color of state law qualified
as a "government entity for purposes of R.C. 2969.25(A)," noting the "markedly different"
reach of the two statutes) and ¶ 24 (including a private, for-profit entity providing prison
services within the meaning of a "government entity" under R.C. 2969.25(A) was
No. 21AP-283 11
inconsistent with R.C. 9.06(B)(15), in which the Ohio General Assembly "took pains to
distance private prisons from 'government entities' " by requiring them to contractually
disavow any entitlement to sovereign immunity). We find the logic and reasoning of
Anthony far more persuasive than Israfil's cursory application of Howard.
{¶ 27} For the foregoing reasons, Mr. Howard was not subject to the requirements
of R.C. 2969.25(A) when he commenced a civil action against MTC and its employees.
Accordingly, we sustain his two assignments of error, reverse the judgment of the trial court
dismissing his action, and remand this cause to the trial court.
Judgment reversed; cause remanded.
LUPER SCHUSTER, P.J. and DORRIAN, J., concur.
_________________ | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484006/ | IN THE SUPREME COURT OF APPEALS OF WEST VIRGINIA
FILED
September 2022 Term
_______________ November 15, 2022
released at 3:00 p.m.
EDYTHE NASH GAISER, CLERK
No. 22-0293 SUPREME COURT OF APPEALS
_______________ OF WEST VIRGINIA
EQUITRANS, L.P.,
Petitioner,
v.
PUBLIC SERVICE COMMISSION OF WEST VIRGINIA, RONALD HALL,
ASHTON HALL, AND HOPE GAS, INC., dba
DOMINION ENERGY WEST VIRGINIA,
Respondents.
____________________________________________________________
Appeal from the Public Service Commission of West Virginia
Case No. 20-0994-G-C
AFFIRMED
____________________________________________________________
Submitted: October 4, 2022
Filed: November 15, 2022
Thomas C. Ryan, Esq. Natalie N. Terry, Esq.
Emily C. Weiss, Esq. Jessica M. Lane, Esq.
K&L Gates LLP Public Service Commission of West
Pittsburgh, Pennsylvania Virginia
and Charleston, West Virginia
Stephen E. Hastings, Esq. Counsel for Respondent Public Service
Hendrickson & Long, PLLC Commission
Charleston, West Virginia
Counsel for Petitioner Ancil G. Ramey, Esq.
Todd M. Swanson, Esq.
Brien J. Fricke, Esq.
Steptoe & Johnson, PLLC
Charleston, West Virginia
Counsel for Respondent Hope Gas, Inc.
d/b/a Dominion Energy West Virginia
Ronald L. Hall
Pine Grove, West Virginia
Pro se
Ashton Hall
Reader, West Virginia
Pro se
John R. Auville, Esq.
Robert F. Williams, Esq.
Charleston, West Virginia
Counsel for Amicus Curiae The Consumer
Advocate Division of the Public Service
Commission of West Virginia
Carte P. Goodwin, Esq.
Mary Claire Davis, Esq.
Frost Brown Todd LLC
Charleston, West Virginia
Counsel for Amici Curiae Diversified
Production LLC and Diversified
Midstream LLC
Robert R. Rodecker, Esq.
John R. McGhee, Jr., Esq.
Cynthia L. Wilson, Esq.
Kay Casto & Chaney PLLC
Charleston, West Virginia
Counsel for Amicus Curiae Peoples Gas
WV LLC
JUSTICE WOOTON delivered the Opinion of the Court.
JUSTICE BUNN, deeming herself disqualified, did not participate in this decision.
JUDGE SADLER sitting by temporary assignment.
JUSTICE ARMSTEAD concurs and reserves the right to file a separate opinion.
SYLLABUS BY THE COURT
1. “‘The detailed standard for our review of an order of the Public
Service Commission contained in Syllabus Point 2 of Monongahela Power Co. v. Public
Service Commission, 166 W.Va. 423, 276 S.E.2d 179 (1981), may be summarized as
follows: (1) whether the Commission exceeded its statutory jurisdiction and powers; (2)
whether there is adequate evidence to support the Commission’s findings; and, (3) whether
the substantive result of the Commission’s order is proper.’ Syl. Pt. 1, Cent. W.Va. Refuse,
Inc. v. Pub. Serv. Comm’n of W.Va., 190 W.Va. 416, 438 S.E.2d 596 (1993).” Syl. Pt. 2,
Sierra Club v. Pub. Serv. Comm’n of W. Va., 241 W. Va. 600, 827 S.E.2d 224 (2019).
2. “The Public Service Commission of West Virginia has no jurisdiction
and no power or authority except as conferred on it by statute and necessary implications
therefrom, and its power is confined to the regulation of public utilities. It has no inherent
power or authority.” Syl. Pt. 2, Wilhite v. Pub. Serv. Comm’n of W. Va., 150 W. Va. 747,
149 S.E.2d 273 (1966).
3. “Whenever any business or enterprise becomes so closely and
intimately related to the public, or to any substantial part of a community, as to make the
welfare of the public, or a substantial part thereof, dependent upon the proper conduct of
such business, it becomes subject for the exercise of regulatory power of the state.” Syl.
Pt. 5, Clarksburg Light & Heat Co. v. Pub. Serv. Comm’n of W. Va., 84 W. Va. 638, 100
S.E. 551 (1919).
i
4. “Where the transmission line of a public utility has been used directly
to serve retail rural consumers over a long period of time, such use constitutes a dedication
of that line to the public service and such facility will continue to be so dedicated and the
owner thereof will continue to operate as a public utility unless and until permission is
obtained from the Public Service Commission to terminate such status.” Syl. Pt. 3, Boggs
v. Pub. Serv. Comm’n of W. Va., 154 W. Va. 146, 174 S.E.2d 331 (1970).
5. “Jurisdiction of the Public Service Commission over a public utility
will not be considered to be terminated unless the action of the Commission and the
circumstances surrounding the case demonstrate clearly and unequivocally its intent to
relinquish such jurisdiction.” Syl. Pt. 1, Boggs v. Pub. Serv. Comm’n of W. Va., 154 W.
Va. 146, 174 S.E.2d 331 (1970).
ii
WOOTON, Justice:
Petitioner Equitrans, LC (“Equitrans”) appeals the March 16, 2022, order of
respondent Public Service Commission of West Virginia (“PSC”) which ordered Equitrans
to permit respondent Hope Gas (“Hope Gas”) to connect a natural gas field tap on the
property of respondents Ronald and Ashton Hall (“the Halls”) to Equitrans’ gathering line.
On appeal, Equitrans argues the PSC lacked subject matter jurisdiction over this action
insofar as the PSC has divested itself of jurisdiction over gathering facilities by legislative
rule. The collective respondents counter—asserting several differing legal theories—that
the PSC properly exercised jurisdiction over Equitrans’ gathering facilities. Because we
agree that the PSC properly exercised jurisdiction in this matter, we affirm the PSC’s
March 16, 2022, order. 1
I. FACTUAL AND PROCEDURAL BACKGROUND
Equitrans is a natural gas interstate pipeline company that owns and operates,
among other things, so-called “gathering lines” — pipelines that transport natural gas from
various wells to a central facility and then to an interstate pipeline. Of note, Equitrans does
not own the gas transported through its lines, but it collects a fee for said transportation.
1
The Court would like to acknowledge the participation in this case of the Consumer
Advocate Division of the Public Service Commission of West Virginia and Peoples Gas
WV LLC, who filed amicus briefs in support of the respondents, as well as Diversified
Production LLC and Diversified Midstream LLC who filed amicus briefs in support of
Equitrans. We have considered the arguments presented by the amici curiae in deciding
this case.
1
Moreover, Equitrans does not provide utility gas distribution services, but other public
utilities like Hope Gas and Mountaineer Gas tap into Equitrans’ gathering lines, buy the
gas, and distribute it to their customers. The particular line at issue in this appeal, L. No.
H-13087, is used by Hope Gas to distribute natural gas to rural consumers via main line
field taps.
In 2019, Equitrans sought to divest itself of its gathering facilities. In so
doing, it applied to the Federal Energy Regulation Commission (“FERC”), which regulates
interstate pipeline companies, to abandon and sell the gathering facilities. FERC approved
that application on June 17, 2022, determining that it did not have any authority to reject it
because it “has no jurisdiction over gathering facilities, whether such facilities are
certificated or noncertificated.” 179 FERC ORD. ¶ 61,204, *30 (2022) (citing 15 U.S.C.
§ 717(b)). More specifically, FERC stated, “as we have explained in this order, the
Commission has no authority to deny the abandonment of the certificated gathering
facilities. Where gathering facilities were never certificated, a pipeline need not even file
an application with the Commission to abandon such non-certificated facilities.” Id. FERC
further stated that “Equitrans does not need [FERC] approval to abandon these facilities.
While the parties argue that a permanent abandonment of the facilities is unnecessary,
[FERC] has no authority to challenge Equitrans’ decision to abandon [them].” Id. at *31.
In light of FERC’s recognition that it has no jurisdiction over gathering facilities, we take
care to note that nothing in FERC’s order intrudes upon the jurisdiction this Court or the
PSC has over such facilities.
2
At the same time the action before FERC was pending, three separate
complaints were filed with the PSC seeking to stop Equitrans from divesting itself of the
gathering facilities and to continue natural gas service to the customers connected to its
gathering lines. In the one subject to this appeal, the Halls asked Hope Gas to establish
natural gas service for their residence located on 8 Mile Ridge Road in Reader, West
Virginia. The property previously had natural gas service and an existing tap on the
premises, 2 therefore service could be restored simply by placing a new gas meter on the
property. Hope Gas denied the Halls’ request for resumption of service, stating that
Equitrans had denied its request to reestablish a service connection to the Halls’ residence.
Thereafter, the Halls filed a complaint with the PSC against Hope Gas.
On March 12, 2021, the PSC added Equitrans as a respondent to the Halls’
complaint. At that time, Equitrans argued that the PSC lacked jurisdiction over its
gathering facilities, 3 connection to which would establish service to the Halls’ residence.
In a recommended decision entered on August 12, 2021, an administrative law judge
(“ALJ”) found that, “[a]lthough Equitrans [owns] an interstate pipeline, the [PSC] has
jurisdiction over Equitrans due to service obligations agreed to by Equitable Resources,
2
It is not clear from the appendix record why natural gas service to the property was
initially stopped.
3
We note that the terms “gathering facilities” and “gathering line” are used
interchangeably throughout the parties’ briefs and the orders below. To the extent this
opinion does the same, those terms are to be construed identically.
3
Equitrans’ former parent company, in Case No. 07-0098-GT-G-PC.” The ALJ reached
this finding by relying on an affidavit (the “Crawford Affidavit”) signed by Equitable
Resources’ senior vice president and president of midstream and distribution, Randall
Crawford, during Equitable Resources’ 2008 proposed corporate reorganization. 4 In
relevant part, the Crawford Affidavit provides:
Acceptance of the consent and approval granted in the Order
shall constitute an agreement by Equitable Resources, Inc.,
Equitable Gas Company . . . and any Equitable Resources
affiliates that neither they nor their successors shall discontinue
service to any distribution system customer served on any of
the isolated sections of the Equitable utility distribution system
in West Virginia, that are not connected to the interconnected
main system in Taylor, Marion and Harrison Counties, without
first obtaining the authority of the Public Service Commission
of West Virginia, and that they shall make service available to
all future applicants who would be entitled to natural gas or
transportation service from such isolated distribution facilities
under the statutes and applicable regulations to the same extent
as if a separation of properties had not taken place[.]
The record clearly shows that Equitrans was an affiliate or subsidiary of Equitable
Resources at the time the Crawford Affidavit was executed.
On August 27, 2021, Equitrans filed exceptions to the ALJ’s recommended
decision, arguing that “it is a natural gas company subject only to regulation by the Federal
Energy Regulatory Commission ([‘]FERC[’])” and that “the [PSC] lacks jurisdiction over
4
Other than the execution of the Crawford Affidavit, the facts surrounding
Equitable Resources’ 2008 corporate reorganization are not pertinent to this appeal.
However, we do note that after the corporate reorganization, Equitrans became an affiliate
or subsidiary of Equitable Resources’ successor-in-interest, NewHoldCo.
4
Equitrans and the gathering system and cannot require Equitrans to allow Hope [Gas]
access to L. No. H-3087 to place a meter on the existing tap.” Despite these exceptions,
the PSC adopted the ALJ’s recommended decision and, in an order dated March 16, 2022,
found that it had jurisdiction over Equitrans’ gathering facilities. In so doing, the PSC
noted that it had previously found in a separate action that it had jurisdiction over
Equitrans’ lines under this Court’s holding in Boggs v. Public Service Commission of West
Virginia, 154 W. Va. 146, 174 S.E.2d 331 (1970), discussed infra in greater detail, because
the line had “served rural field tap customers continuously for decades” such that it was
dedicated to the public service. Equitrans now appeals that order, again arguing that the
PSC lacked jurisdiction over its gathering facilities.
II. STANDARD OF REVIEW
This case is on appeal from an order entered by the PSC. In this regard, this
Court has held that
[t]he detailed standard for our review of an order of the
Public Service Commission contained in Syllabus Point 2 of
Monongahela Power Co. v. Public Service Commission, 166
W.Va. 423, 276 S.E.2d 179 (1981), may be summarized as
follows: (1) whether the Commission exceeded its statutory
jurisdiction and powers; (2) whether there is adequate evidence
to support the Commission’s findings; and, (3) whether the
substantive result of the Commission’s order is proper.” Syl.
Pt. 1, Cent. W.Va. Refuse, Inc. v. Pub. Serv. Comm’n of W.Va.,
190 W.Va. 416, 438 S.E.2d 596 (1993).
Syl. Pt. 2, Sierra Club v. Pub. Serv. Comm’n of W. Va., 241 W. Va. 600, 827 S.E.2d 224
(2019). With this standard in mind, we proceed to address the parties’ arguments.
5
III. DISCUSSION
This appeal presents a single issue of whether the PSC properly exercised
jurisdiction in the matter below. Equitrans contends that it did not because the PSC has
allegedly divested itself of jurisdiction over “gathering facilities” by its promulgation of a
legislative rule that states gathering facilities are not “public utilities or intrastate
pipelines.” See W. Va. C.S.R. § 150-16-2.10. The respondents contend that the PSC
properly exercised jurisdiction below, arguing that: (1) despite the legislative rule,
Equitrans is operating as a public utility under Boggs v. Pub. Serv. Comm’n of W. Va., 154
W. Va. 146, 174 S.E.2d 331 (1970); (2) the gathering line at issue in this case is an
“intrastate pipeline” under West Virginia Code § 24-3-3a (2018); and (3) Equitrans’ parent
company consented to jurisdiction when it executed the Crawford Affidavit in 2007. We
agree with the respondents’ first argument and conclude that the PSC properly exercised
jurisdiction. 5
5
Because we resolve this matter pursuant to our decision in Boggs, we need not
address the respondents’ remaining arguments. That said, in light of the third argument
that the Crawford Affidavit somehow constituted an agreement to jurisdiction, we find it
necessary to reiterate that it is not possible to agree to subject matter jurisdiction. This
Court has held for over a century that
[c]onsent of parties cannot confer upon a court
jurisdiction which the law does not confer, or confers upon
some other court, although the parties may by consent submit
themselves to the jurisdiction of the court. In other words,
consent cannot confer jurisdiction of the subject-matter, but it
may confer jurisdiction of the person.
6
Because this appeal revolves solely around the PSC’s jurisdiction, we begin
our analysis by summarizing the statutes defining the PSC’s jurisdictional parameters.
West Virginia Code section 24-2-1(a) (2018) provides, in relevant part, that “[t]he
jurisdiction of the commission shall extend to all public utilities in this state and shall
include any utility engaged in any of the following public services: . . . transportation of
oil, gas, or water by pipeline[.]” Id. The term “public utility” is defined to “mean and
include any person or persons . . . engaged in any business . . . which is, or shall hereafter
be held to be, a public service.” Id. § 24-1-2 (2018). The term “public service” is not
defined in the statutory scheme or in this Court’s caselaw.
In applying these statutes, this Court has set out several holdings further
explaining the PSC’s jurisdiction. First, we have noted that “[t]he Public Service
Commission of West Virginia has no jurisdiction and no power or authority except as
conferred on it by statute and necessary implications therefrom, and its power is confined
to the regulation of public utilities. It has no inherent power or authority.” Syl. Pt. 2,
Wilhite v. Pub. Serv. Comm’n of W. Va., 150 W. Va. 747, 149 S.E.2d 273 (1966).
Moreover, we have explicitly stated that the PSC “would transcend its statutory
jurisdiction, power and authority if it should undertake to exercise control over business
Syl. Pt. 2, Yates v. Taylor Cnty. Ct., 47 W. Va. 376, 35 S.E. 24 (1900).
7
enterprises not falling within the classification of public utilities.” Eureka Pipe Line Co v.
Pub. Serv. Comm’n of W. Va., 148 W. Va. 674, 683, 137 S.E.2d 200, 205 (1964).
Against this backdrop, Equitrans argues that the PSC has explicitly excluded
gathering facilities like the one at issue in this case from the definition of “public utility”
such that the PSC has divested itself of jurisdiction over gathering facilities on the whole.
As authority for this argument, Equitrans cites to a 1987 legislative rule, West Virginia
Code of State Rules section 150-16-2.10, which states:
The term “gathering facilities” shall include all pipelines and
related facilities used to collect the gas production of one (1)
or more wells for the purpose of moving such production from
the well(s) into the facilities of an interstate pipeline, a utility,
or an intrastate pipeline. For purposes of these rules, gathering
facilities shall not be considered either public utilities or
intrastate pipelines.
Id. (emphasis added.) A cursory reading of this rule out of context could lead to the
conclusion that gathering facilities are simply not public utilities, but it becomes clear that
is not the case when one examines the statutory scheme under which the rule was
promulgated and the order adopting the rule.
The PSC promulgated this rule under the authority granted to it by West
Virginia Code section 24-3-3a, which sets out certain requirements for natural gas
transportation. The authority underpinning this rule is set forth in section 24-3-3a(c), which
states: “For reasons of safety, deliverability or operational efficiency the commission may,
in its discretion, by rule or order, exclude from the requirements of this section any part of
8
any pipeline solely dedicated to storage, or gathering, or low pressure distribution of natural
gas.” Id. (emphasis added.) The express language of this statute does not, as Equitrans
argues, permit the PSC to divest itself of jurisdiction over gathering facilities. Rather, the
statute only permits the PSC to exempt certain facilities — those which are solely dedicated
to gathering, storage, or low pressure distribution — from the requirements of that statute
(and necessarily in its related rules). The parties have not cited to any authority, nor are
we aware of any, which permits the PSC to alter its statutory jurisdiction by promulgating
a legislative rule. Even assuming, arguendo, such authority exists, section 150-16-2.10
would not have operated to exclude the gathering line at issue in this case from the PSC’s
jurisdiction. This is so because the PSC can only exempt from those requirements facilities
which are “solely dedicated to storage, or gathering, or low pressure distribution of natural
gas”; the statute says nothing of lines that serve mixed purposes. W. Va. Code § 24-3-
3a(c).
Despite Equitrans’ arguments to the contrary, the record is replete with
evidence that this gathering line is a mixed-use line performing both gathering services and
distribution of natural gas to rural consumers via main line field taps. While Equitrans is
not the distributor of the gas — meaning that it is not the utility selling the gas to those
rural consumers — it facilitates that distribution via this gathering line. As discussed
further infra, the record reveals that the line has served this dual purpose for several
decades, including in the years preceding Equitrans’ own existence. Moreover, Equitrans
is obligated to continue facilitating that distribution as evidenced by the Crawford
9
Affidavit, wherein Equitrans’ parent company agreed that “its affiliates and successors
would not ‘discontinue service to any customer served by a main line tap on production,
transmission or gathering line or facility of any Equitable Resources affiliate or subsidiary
or their successors’ without obtaining PSC approval.” Similarly, the Crawford Affidavit
indicates that those affiliates and successors are bound to “make service available to all
future applicants who would be entitled to natural gas or transportation service from such
production, transmission or gathering pipelines or facilities[.]” Given that this line has
been and continues to be a mixed-use line, we readily conclude that West Virginia Code
section 24-3-3a(c) would not have permitted the PSC to exempt it from the requirements
of that section, much less to divest itself of jurisdiction over this line.
We note that the PSC itself was aware of this when it promulgated W. Va.
C.S.R. section 150-16-2.10 in 1987. In its order adopting that rule, the PSC stated
succinctly that it retained “authority to regulate. . .[gathering] facilities on a case-by case
basis.” Pub. Serv. Comm’n, Gen. Ord., No. 228, at *8 (Mar. 8, 1987). The PSC explained:
“As defined, gathering facilities shall not be considered either public utilities or intrastate
pipelines. If subsequent issues arise concerning whether specific facilities are properly
designated as gathering facilities, they will be addressed by the Commission.” Id. at *10.
From that language, we conclude that the PSC anticipated that some facilities proclaiming
to be gathering facilities may, in fact, serve mixed purposes such that the PSC should retain
its oversight of them. Given that the gathering line at issue here not only serves a mixed
purpose, but one which extends to distribution of natural gas directly to consumers, it is
10
reasonable that the PSC would have sought to retain its regulatory authority over that
facility. In fact, not only is it reasonable, but it is also consistent with this Court’s
jurisprudence.
For over a century, this Court has made clear that certain entities which
would not normally come within the PSC’s regulatory jurisdiction may be drawn into such
jurisdiction when that entity becomes vital to the public welfare. Specifically, we held that
[w]henever any business or enterprise becomes so
closely and intimately related to the public, or to any
substantial part of a community, as to make the welfare of the
public, or a substantial part thereof, dependent upon the proper
conduct of such business, it becomes subject for the exercise
of regulatory power of the state.
Syl. Pt. 5, Clarksburg Light & Heat Co. v. Pub. Serv. Comm’n of W. Va., 84 W. Va. 638,
100 S.E. 551 (1919). In this regard, there is no doubt that Equitrans’ business has
“become[] so closely and intimately related to the public” such that a substantial part
thereof is “dependent upon the proper conduct” of its business. Id. This is so because
Equitrans’ lines at issue here are the sole source of natural gas for several thousand rural
West Virginia consumers who would be left with no gas service whatsoever in the absence
of proper operation of those lines. So, clearly, the PSC’s exercise of its regulatory authority
would be appropriate under those circumstances.
We have reiterated this principle several times over the years, and expanded
upon it in with our holding in Boggs that
11
[w]here the transmission line of a public utility has been
used directly to serve retail rural consumers over a long period
of time, such use constitutes a dedication of that line to the
public service and such facility will continue to be so dedicated
and the owner thereof will continue to operate as a public
utility unless and until permission is obtained from the Public
Service Commission to terminate such status.
154 W. Va. at 146, 174 S.E.2d at 332, syl. pt. 3. Like the case at bar, Boggs involved a
natural gas transmission line that was once owned by a public utility, Ohio Valley Gas, and
used to distribute gas to rural consumers. The line was later transferred to private,
nonutility owner, Mr. Boggs. Despite that privatization, the line was still used to distribute
natural gas to rural consumers via main line field taps, much like how Hope Gas distributes
gas via Equitrans’ gathering line. We concluded that because the line had been used to
serve the public for a prolonged period (pre-1935 to at least 1970), the PSC had continuing
jurisdiction over it, and Mr. Boggs, as its owner, would “continue to operate [it] as a public
utility unless he obtain[ed] permission to terminate his status as such.” Id. at 155, 174
S.E.2d at 337. So, by assuming control of the line which had previously been dedicated to
the public service, Mr. Boggs implicitly agreed to operate as a public utility for the limited
purpose of the continued operation of that line. He could only terminate his status in that
regard with the PSC’s approval. See id.
Here, the record readily reveals that the gathering line at issue has been used
to serve rural West Virginia consumers for several decades, including more than twenty-
five years under Equitrans’ ownership, and several decades prior under Equitrans’
predecessors, Equitable Resources and Equitable Gas Company. Because the line was
12
historically (and continues to be) used to serve rural consumers, it is dedicated to public
service under Boggs. As such, the owner thereof continues to operate it as a public utility
until the PSC terminates its public utility status. We have held that “[j]urisdiction of the
Public Service Commission over a public utility will not be considered to be terminated
unless the action of the Commission and the circumstances surrounding the case
demonstrate clearly and unequivocally its intent to relinquish such jurisdiction.” Id. at 146,
174 S.E.2d at 332, syl. pt. 1. To date, there has been no action by the PSC terminating this
jurisdiction, nor have any circumstances “clearly and unequivocally” demonstrated its
intent to relinquish that jurisdiction. See id. Therefore, we conclude that the PSC properly
exercised jurisdiction over this matter under Boggs, and will continue to do so until it
relinquishes such jurisdiction or the line is no longer dedicated to public service.
Having concluded that the PSC properly exercised jurisdiction over the
gathering facility at issue in this matter below, we affirm.
IV. CONCLUSION
For the foregoing reasons, we affirm the PSC’s March 16, 2022, order.
Affirmed.
13 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484022/ | Filed 11/15/22 P. v. Agaton CA4/3
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION THREE
THE PEOPLE,
Plaintiff and Respondent, G060623
v. (Super. Ct. No. 16WF2052)
SALVADOR DIRCEO AGATON, OPI NION
Defendant and Appellant.
Appeal from a judgment of the Superior Court of Orange County, Gregg L.
Prickett, Judge. Affirmed.
Aaron J. Schechter, under appointment by the Court of Appeal, for
Defendant and Appellant.
Rob Bonta, Attorney General, Lance E. Winters, Chief Assistant Attorney
General, Charles C. Ragland and A. Natasha Cortina, Deputy Attorneys General, for
Plaintiff and Respondent.
Salvador Dirceo Agaton appeals from a lengthy life sentence imposed after
a jury convicted him of numerous sex crimes against minors. Appellant contends his
convictions must be reversed because the prosecutor committed prejudicial error when
she misstated the reasonable doubt standard. As discussed below, we conclude appellant
forfeited his claim of prosecutorial error because he did not timely object. Additionally,
we reject his related ineffective assistance of counsel claim because he fails to show trial
counsel was ineffective. Appellant further contends the trial court erred in instructing the
jury it could consider evidence of the charged sex crimes to infer he had a propensity to
commit and did commit other charged sex crimes. This argument has been rejected by
our Supreme Court, and we are bound to follow that precedent. Accordingly, we affirm.
I
FACTUAL AND PROCEDURAL BACKGROUND
Appellant lived in the apartment complex where the five minor victims --
three sisters (E.V., V.V. and D.V.) and their two friends (E.F. and M.R.) –lived. E.F. and
M.R. testified he often grabbed them by their waist or butt, twirled them and throw them
up in the air. On one occasion, when the five minors were playing outside, appellant saw
them from the nearby laundry room and exposed his penis to them while laughing.
On another occasion, appellant molested three victims while they were
playing together. V.V. testified that when she had to stay inside her apartment, she
would play near an open window and interact with her friends who were outside. One
time, V.V., D.V. and E.F were playing inside while appellant was outside by the window
when appellant told E.F. and V.V. to come closer. During this incident, appellant
grabbed E.F. and pulled down E.F.’s pants and underwear and touched her vaginal area.
He told V.V. to come closer and rubbed V.V.’s vaginal area over her underwear with his
hand, before pulling her underwear down and rubbed her vaginal area “skin to skin.” He
also touched D.V. in a similar manner.
2
V.V. testified appellant molested her two other times. The first incident
occurred while they were sitting on a bench in the apartment complex’s hallway.
Appellant reached his hand into her pants and rubbed her vaginal area underneath her
underwear. After pulling his hand out, appellant placed her hand inside his pants and
moved her hand up and down his penis. The second incident occurred in one of the
complex’s garages. Appellant unbuttoned her pants, reached underneath her underwear,
and rubbed her vaginal area.
E.F. also testified appellant touched her vagina while they were in the
garage. In October 2014, E.F. disclosed appellant’s molestation to a school health
assistant and the school’s principal. E.F. told the principal that appellant had “put his
fingers inside of her vagina on three separate occasions.”
At trial, the defense called the mother of the three sisters and E.F.’s mother
as witnesses. They testified they saw appellant playing with the minors, but never saw
anything inappropriate.
Appellant testified on his own behalf. He moved into the apartment
complex in 2014 and lived there for four months. After work, he would hang out in one
of the garages with other adults, and he played soccer with several boys, including the
brothers of E.F. and M.R. Appellant denied exposing himself or molesting the minors.
He denied playing with the minor victims or even speaking with them.
A jury convicted appellant of one count of sexual penetration of a minor 10
years old or younger (Pen Code, § 288.7, subd. (b); count 1); four counts of lewd conduct
upon a minor under age 14 (Pen. Code, § 288, subd. (a); counts 2, 3, 4 & 6); and one
misdemeanor count of annoying or molesting a child under age 18 (Pen. Code, § 647.6,
subd. (a)(1); count 5). As to the lewd conduct counts, the jury found true that appellant
committed lewd acts against more than one victim (Pen. Code, § 667.61, subds. (b) &
(e)(4)) and that each victim was under age 14 (Pen. Code, § 667.61, subds. (j)(2) &
3
(e)(4)). The trial court sentenced appellant to 115 years to life for the felonies, plus an
additional one-year sentence on the misdemeanor, count 5.
II
DISCUSSION
A. Appellant Has Not Shown Any Prosecutorial Error
Appellant contends his convictions must be reversed because of
prosecutorial misconduct or error. (See People v. Potts (2019) 6 Cal.5th 1012, 1036
[noting it is more apt to describe “prosecutorial misconduct” as “prosecutorial error”].)
Specifically, he argues the prosecutor misstated the reasonable d oubt standard in her
rebuttal. (See People v. Fayed (2020) 9 Cal.5th 147, 204 [“It is prosecutorial misconduct
to misstate the law”].) In rebuttal, the prosecutor stated:
“Let’s talk about proof beyond a reasonable doubt. It does, as the law
say[s], mean abiding conviction in the truth of the charge. And it’s my burden to prove
each element, like I said, of each offense beyond a reasonable doubt.
“But guess what, ladies and gentlemen? It is the same standard of proof in
every criminal case in this country. From petty theft to murder. It is not reduced
to percentages. You can’t put it on a chart with all different synonyms and make it
appear to be this unattainable burden. That’s not what it is.
“What it means, ladies and gentlemen, is if you sat in this same case with
the same evidence before the same judge and the same attorneys and you heard the same
evidence, would you make the same decision again? It’s not about life-changing
decisions. It’s not about telling you, it’s not going to be easy back there.” (Italics
added.)
Appellant acknowledges his trial counsel did not object to the prosecutor’s
alleged misstatement. Accordingly, he has forfeited his prosecutorial error claim. (See
People v. Fayed, supra, 9 Cal.5th at p. 204 [“To preserve a claim of prosecutorial
4
misconduct on appeal, ‘“a criminal defendant must make a timely and specific objection
and ask the trial court to admonish the jury to disregard the impropriety. [Citations.]”
[Citation.] The failure to timely object and request an admonition will be excused if
doing either would have been futile, or if an admonition would not have cured the
harm’”].) Nevertheless, “‘[a] defendant whose counsel did not object at trial to alleged
prosecutorial misconduct can argue on appeal that counsel’s inaction violated the
defendant’s constitutional right to the effective assistance of counsel.’ [Citation.]”
(People v. Centeno (2014) 60 Cal.4th 659, 674 (Centeno).) Thus, we address the
1
substance of appellant’s claim of prosecutorial error.
To successfully demonstrate ineffective assistance of counsel, appellant
“bears the burden of showing by a preponderance of the evidence that (1) counsel’s
performance was deficient because it fell below an objective standard of reasonableness
under prevailing professional norms, and (2) counsel’s deficiencies resulted in prejudice.”
(Centeno, supra, 60 Cal.4th at p. 674.) Because his ineffective assistance of counsel
claim is predicated on the failure to object to the prosecutorial error, we first address
whether the prosecutor committed error. (People v. Turner (2004) 34 Cal.4th 406, 431.)
Here, appellant argues the prosecutor’s statement, italicized above, that “the
reasonable doubt standard is satisfied if a juror would make the same decision if s/he
heard the case again” is “incorrect” and “grossly misstates and trivializes the reasonable
doubt standard and the definition of an abiding conviction.” To find prosecutorial error,
we must view the challenged statement in the context of the entire argument and the jury
instructions to determine whether there was a reasonable likelihood the jury understood
or applied the comments in an improper or erroneous manner. (People v. Cortez (2016)
63 Cal.4th 101, 130-131.) “If the challenged comments, viewed in context, ‘would have
been taken by a juror to state or imply nothing harmful, [then] they obviously cannot be
1
Accordingly, we need not address appellant’s other arguments for why we should
address his prosecutorial claim despite forfeiture.
5
deemed objectionable.’” (Id. at p. 130.) “‘[W]e “do not lightly infer” that the jury drew
the most damaging rather than the least damaging meaning from the prosecutor’s
statements.’” (People v. Covarrubias (2016) 1 Cal.5th 838, 894.)
Appellant concludes there was prosecutorial error for three reasons. First,
he claims the prosecutor’s statement “teaches a juror to vote guilty if s/he feels the
defendant is probably guilty and thinks that, if s/he sat through a retrial, s/he would again
feel that the defendant is probably guilty.” The prosecutor, however, never used the term
“probably guilty” or “retrial,” and we decline to infer that the jury understood the
statement to mean a conviction could be reached based on probable guilt.
Second, appellant argues that “an abiding conviction” does not mean “a
juror would reach the same verdict if the case was retried the next day,” but that the
“juror’s faith in the verdict is ‘lasting and permanent.’” (People v. Brigham (1979)
25 Cal.3d 283, 290 [“abiding” connotes the “lasting, permanent nature of the
conviction”].) As the outset, we note that “[t]he beyond a reasonable doubt standard is a
requirement of due process, but the Constitution neither prohibits trial courts from
defining reasonable doubt nor requires them to do so as a matter of course. [Citation.]
Indeed, so long as the court instructs the jury on the necessity that the defendant’s guilt
be proved beyond a reasonable doubt, [citation], the Constitution does not require that
any particular form of words be used in advising the jury of the government’s burden of
proof. [Citation.] Rather, ‘taken as a whole, the instructions [must] correctly conve[y]
the concept of reasonable doubt to the jury.’ [Citation.]” (Victor v. Nebraska (1994)
511 U.S. 1, 5.) While appellant correctly notes that an “abiding conviction” is not
predicated on a juror reaching the same verdict in a retrial, reaching the same verdict
again on the same facts suggests the juror has a lasting, permanent and deeply felt belief
in the truth of the charges. Stated differently, there is no reasonable likelihood that the
prosecutor’s statement led the jury to think that “an abiding conviction” of the truth of the
6
charge was something less than a belief that was “settled and fixed” or “lasting and
permanent” as those phrases are used in the criminal law.
Finally, appellant notes that no case, federal or state, has ever defined the
reasonable doubt in the way the prosecutor did here. But appellant cites no case – and we
have located none – that found similar remarks constituted prosecutorial error. We also
note that just before making the challenged statement, the prosecutor correctly defined
the reasonable doubt standard. Additionally, after rebuttal, the judge correctly instructed
the jury on the reasonable doubt standard, and it further instructed the jury that: “You
must follow the law as I explained it to you, even if you disagree with it. If you believe
that the attorneys’ comments on the law conflict with my instructions, you must follow
my instructions.” In sum, “‘[i]n the context of the whole argument and the [jury]
instructions’” (Centeno, supra, 60 Cal.4th at p. 667), the jury in this case was not
reasonably likely to understand the prosecutor’s statement as diminishing the
prosecution’s burden of proof. There was no prosecutorial error. Thus, defense counsel
was not ineffective for not objecting to the prosecutor’s remarks.
B. The Trial Court Did Not Err In Instructing the Jury With CALCRIM No. 1191B
Appellant also contends the trial court erred in giving CALCRIM No.
1191B, which instructs the jury it could consider evidence of charged sexual offenses that
were proven beyond a reasonable doubt to infer appellant had a propensity to commit and
did commit other charged sexual offenses. As appellant acknowledges, the California
Supreme Court has upheld giving this instruction in People v. Villatoro (2012) 54 Cal.4th
1152 (Villatoro). Appellant explains he has raised this issue on appeal “to preserve his
federal constitutional claim that allowing a jury to use charged offenses to infer that he
committed the other offenses charged in the same case violates his due process right to a
fundamentally fair trial under the Fourteenth Amendment. Appellant must also raise this
issue in the Court of Appeal in order to request the California Supreme Court to
reconsider its decision in Villatoro in light of the dissent of Justice Corrigan, joined by
7
Justice Werdegar, and the dissent of Justice Liu.” Appellant is correct that we are bound
to follow California Supreme Court precedent pursuant to Auto Equity Sales, Inc. v.
Superior Court (1962) 57 Cal.2d 450, 455. Accordingly, based on Villatoro, the trial
court did not err by instructing the jurors they may consider proven similarly charged sex
offenses as evidence of appellant’s propensity to commit other charged offenses. (See
People v. Meneses (2019) 41 Cal.App.5th 63, 67-68 [rejecting similar claim].)
III
DISPOSITION
The judgment is affirmed.
MARKS, J.*
WE CONCUR:
O’LEARY, P. J.
SANCHEZ, J.
*Judge of the Orange County Superior Court, assigned by the Chief Justice pursuant to
article VI, section 6 of the California Constitution.
8 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484015/ | Filed 11/15/22 P. v. Owens CA2/7
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions
not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion
has not been certified for publication or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SEVEN
THE PEOPLE, B318208
Plaintiff and Respondent, (Los Angeles County
Super. Ct. No. BA497687)
v.
MARVIN LAMAR OWENS,
Defendant and Appellant.
APPEAL from a judgment of the Superior Court of
Los Angeles County, Frederick N. Wapner, Judge. Affirmed.
Miriam K. Billington, under appointment by the Court of
Appeal, for Defendant and Appellant.
No appearance for Plaintiff and Respondent.
_______________
Marvin Lamar Owens appeals from the judgment entered
following his conviction after a jury trial of willfully inflicting
corporal injury on a cohabitant or former cohabitant (Pen. Code,
§ 273.5, subd. (a)),1 with a true finding by the jury that Owens
had personally inflicted great bodily injury (§ 12022.7, subd. (e));
battery with serious bodily injury (§ 243, subd. (d)); and contempt
of court (violation of a domestic violence restraining order) (§ 166,
subd. (c)(1)). No arguable issues have been identified following
review of the record by Owens’s appointed appellate counsel. We
also have identified no arguable issues after our own independent
review of the record and analysis of the contentions presented by
Owens in a handwritten supplemental submission. We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
The evidence at trial established that Owens and
Wannetta W. had an on-and-off dating relationship for an
extended period (approximately 16 years). They often lived
together. There were multiple instances of domestic abuse
during their relationship, although Wannetta did not report most
of them because she both cared for Owens and was afraid of him.
On August 9, 2021 Owens and Wannetta lived together on
property owned by Wannetta’s grandmother. Wannetta testified
that, when Owens came home on that day, he asked her why
their neighbor was outside with the police. (Owens had had an
argument with that neighbor several days earlier.) Wannetta,
who was in bed, said she did not know. Owens slapped Wannetta
three times, saying “Bitch, stop playing with me.” Wannetta
walked to the living room to try to end the encounter. Owens
1 Statutory references are to this code unless otherwise
stated.
2
followed and stood over Wannetta as she sat on the couch. When
Owens tried to slap Wannetta again, she bit him. He responded
angrily, punching her hard three times in the face with a closed
fist. Wannetta ran outside and was able to call the 911
emergency number.
Los Angeles Police Officer Felipe Rocha responded to
Wannetta’s call. In his testimony Rocha described Wannetta’s
injuries. During his investigation Rocha determined there was a
valid, outstanding restraining order prohibiting Owens from
making contact with Wannetta.
The day after the incident Wannetta went to the hospital,
told the examining physician she thought her nose was broken
and had X-rays taken. Medical records confirmed the broken
nose. According to Wannetta, it took approximately three weeks
to recover from her injuries.
Two other Los Angeles police officers (Keith Sutliff and
Aldwin Vicencio) testified about their contact with Wannetta
following earlier incidents of domestic violence.
Owens did not testify on his own behalf, and the defense
presented no other witnesses. After being fully advised of his
rights, Owens admitted pursuant to section 273.5, subdivision (f),
that he had been convicted on May 11, 2015 of violating
section 273.5, subdivision (a).
Owens was sentenced to an eight-year state prison term:
the middle term of four years for inflicting corporal injury on a
cohabitant or former cohabitant within seven years of a previous
conviction for violating section 273.5, subdivision (a) (§ 273.5,
subd. (f)), plus the middle term of four years for the domestic-
violence-related great bodily injury enhancement (§ 12022.7,
subd. (e)). The court imposed and stayed pursuant to section 654
3
the middle term of three years for aggravated battery (§ 243,
subd. (d)) and imposed a concurrent term of 364 days in county
jail for violating the domestic violence restraining order (§ 166,
subd. (c)(1)).
Owens filed a timely notice of appeal.
DISCUSSION
We appointed counsel to represent Owens in this appeal.
After reviewing the record, counsel filed a brief raising no issues.
Appointed counsel advised Owens on October 12, 2022 that he
could personally submit any contentions or issues he wanted the
court to consider.
On October 28, 2022 we received nine handwritten pages
from Owens, four of which appear to be a copy of a document sent
by Owens to his appellate counsel suggesting several possible
issues for appeal and the balance of which is Owens’s version of
the incident that resulted in his convictions. Owens’s claims lack
merit.
First, Owens points out that the trial court denied his
request to replace his appointed counsel, suggesting this was
error. It was not.
On the day scheduled for the start of jury selection, the
court held a hearing pursuant to People v. Marsden (1970)
2 Cal.3d 118 to consider Owens’s request for a new attorney.
Asked what it was that his current counsel was doing or not
doing that concerned him, Owens responded that he did not
believe she was a bad lawyer, but thought she was too busy for
his case and, specifically, had not communicated sufficiently with
him while the case was pending. Counsel acknowledged she was
busy, but told the court she and Owens had discussed the case,
his possible defenses, his exposure and possible plea bargains.
4
According to counsel, there was nothing more to discuss other
than the ongoing trial process, which was about to start. And she
observed that, now that trial was beginning, Owens’s case was
the only matter on which she would be working. The court
denied Owens’s request for new counsel, explaining that his
relationship with counsel had not broken down, and there was no
indication counsel could not, or would not, adequately represent
him at trial. This record does not establish even an arguable
abuse of discretion. (See People v. Streeter (2012) 54 Cal.4th 205,
230 [“We review the denial of a Marsden motion for abuse of
discretion. [Citation.] Denial is not an abuse of discretion unless
the defendant has shown that a failure to replace counsel would
substantially impair the defendant’s right to assistance of
counsel,” internal quotation marks omitted].)
Second, Owens contends Officer Rocha was impermissibly
allowed to testify as a medical expert. (He does not identify any
particular testimony he contends should not have been
permitted.) Owens’s counsel objected on that ground when the
prosecutor asked Rocha, who was describing Wannetta’s injuries,
how long it takes for swelling and bruising to develop on a
person. The court sustained the objection. The prosecutor then
asked Rocha, based on his training and 13 years of experience in
responding to domestic violence calls, whether it was true that
some injuries do not develop as fast as others. There was no
objection, and Rocha responded, “Correct.” At that point the
prosecutor returned to questioning Rocha about what he actually
observed when interviewing Wannetta. Absent a further
objection by Owens’s counsel, the court properly permitted Rocha
to answer the question. In any event, in context there is no
reasonable possibility that this single answer could have
5
prejudiced Owens. (See Evid. Code, § 353 [erroneous admission
of evidence is not grounds for reversal unless the error
complained of resulted in a miscarriage of justice].)
Third, Owens questions the sentence imposed for violating
section 273.5, subdivision (a), contending his prior conviction was
more than seven years old and the court had said it was imposing
the middle term pursuant to section 273.5, subdivision (a), which
would be three years, not four years. As discussed, however,
Owens admitted after being fully advised of his rights that he
had been convicted of a prior offense under section 273.5,
subdivision (a), on May 11, 2015, six years three months prior to
the August 9, 2021 aggravated assault. In addition, as part of its
advisal before Owens admitted the prior conviction, the court
explained the sentencing triad for violating section 273.5,
subdivision (a), with a qualifying former conviction pursuant to
section 273.5, subdivision (f), was two, four or five years, rather
than two, three or four years. The court specifically asked Owens
whether he understood the sentencing consequences of admitting
the prior conviction, and Owens confirmed he did.2
Fourth, Owens complains defense counsel should have
cross-examined Wannetta about her motive in reporting the
August 2021 assault and Officer Rocha about purported
inconsistencies between his testimony and details in the police
report he prepared. Owens also suggests Wannetta and Rocha
2 When imposing sentence, the court stated count 1 was for
violating section 273.5, subdivision (a), and then said it was
imposing the middle term, four years. It did not say it was
imposing the middle term of the subdivision (a) triad, rather than
the subdivision (f) triad, which, as had been previously explained
to Owens, was applicable because he had a prior conviction
within seven years.
6
had a personal relationship of some sort and implies Wannetta
and Rocha should have been questioned about that, as well.
To the extent Owens’s comments are construed to be a
claim of ineffective assistance of counsel, the record in this direct
appeal falls far short of supporting that claim. As the Supreme
Court explained in People v. Mickel (2016) 2 Cal.5th 181, 198,
“[C]ertain practical constraints make it more difficult to address
ineffective assistance claims on direct appeal rather than in the
context of a habeas corpus proceeding. [Citations.] The record on
appeal may not explain why counsel chose to act as he or she did.
Under those circumstances, a reviewing court has no basis on
which to determine whether counsel had a legitimate reason for
making a particular decision, or whether counsel’s actions or
failure to take certain actions were objectively unreasonable.
[Citation.] [¶] Moreover, we begin with the presumption that
counsel’s actions fall within the broad range of reasonableness,
and afford ‘great deference to counsel’s tactical decisions.’
[Citation.] Accordingly, we have characterized defendant’s
burden as ‘difficult to carry on direct appeal,’ as a reviewing court
will reverse a conviction based on ineffective assistance of counsel
on direct appeal only if there is affirmative evidence that counsel
had ‘“‘no rational tactical purpose’”’ for an action or omission.”
Finally, because Owens elected not to testify, his four-page
narrative with his version of the August 9, 2021 incident,
including his claim he did not strike Wannetta, does not present
any colorable issue on appeal.
We have examined the record and are satisfied Owens’s
appellate counsel has fully complied with the responsibilities of
counsel and no arguable issues exist. (Smith v. Robbins (2000)
7
528 U.S. 259, 277-284; People v. Kelly (2006) 40 Cal.4th 106, 118-
119; People v. Wende (1979) 25 Cal.3d 436, 441-442.)
DISPOSITION
The judgment is affirmed.
PERLUSS, P. J.
We concur:
SEGAL, J.
HOWARD, J.*
* Judge of the Marin County Superior Court, assigned by the
Chief Justice pursuant to article VI, section 6 of the California
Constitution.
8 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484032/ | NOTICE: This order was filed under Supreme Court Rule 23 and is not precedent except
in the limited circumstances allowed under Rule 23(e)(1).
2022 IL App (3d) 200013-U
Order 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 13th Judicial Circuit,
) La Salle County, Illinois,
Plaintiff-Appellee, )
) Appeal No. 3-20-0013
v. ) Circuit No. 17-CF-178
)
EDDIE STIFF, ) Honorable
) Cynthia M. Raccuglia,
Defendant-Appellant. ) Judge, Presiding.
____________________________________________________________________________
JUSTICE PETERSON delivered the judgment of the court.
Justices McDade and Hauptman concurred in the judgment.
____________________________________________________________________________
ORDER
¶1 Held: The record rebuts postplea counsel’s Illinois Supreme Court Rule 604(d)
certificate.
¶2 Defendant, Eddie Stiff, appeals the La Salle County circuit court’s dismissal of his
motion to withdraw his guilty plea and vacate judgment. Defendant argues the court abused its
discretion in denying his motion since defendant reasonably misunderstood the law based on the
court’s improper admonishments regarding his right to self-representation. Defendant also argues
the record undermines postplea counsel’s Rule 604(d) certificate. We reverse and remand.
¶3 I. BACKGROUND
¶4 A grand jury charged defendant with armed robbery (720 ILCS 5/18-2(a)(2) (West
2016)), aggravated battery (id. § 12-3.05(c)), and unlawful possession of a weapon by a felon (id.
§ 24-1.1). The court appointed the public defender to represent defendant.
¶5 Prior to the start of the jury trial, defendant moved to proceed as a self-represented
litigant. Defendant told the court that defense counsel refused to file motions on defendant’s
behalf, and he needed time to present a defense and strategy. The court determined that
defendant was not prepared to represent himself at trial that day. Defendant requested a
continuance. The court said:
“[A]re you going to make me find that your relationship with the public defender
here is so irretrievable and irreconcilable that I have no alternative but to find that
you have to represent yourself?
***
*** Well, I don’t want to do this but I can’t seem—here is your choice and
I am going to do this. I am going to find it is your choice whether or not you—
strike that. I am finding, unless you cooperate with your lawyers, that your
relationship is irreconcilable and irretrievable and that I have no alternative,
unless you hire a lawyer, that I have you represent yourself.”
Defendant told the court that he asked counsel to seek a continuance last week, and counsel
refused explaining the State would not allow it. Public defender Timothy Cappellini clarified that
he told defendant the State would object, and he had no legal reason to ask for a continuance.
The court continued the case over the State’s objection to see if defendant’s relationship with
2
counsel could be repaired. The court explained to defendant that he was given a continuance to
determine if he was going forward with counsel or as a self-represented litigant.
¶6 At the next court date, the court asked defendant about his decision regarding
representation. Defendant responded that his intention was to hopefully work with counsel. The
parties reset the trial date by agreement to October 15, 2018. The court subsequently continued
the trial date to November 26, 2018.
¶7 On November 26, defendant said “I came in here with the intention of dismissing counsel
and proceeding pro se. But what I’m being told is the things that I need in order to pursue pro se
I won’t be given.” Defendant claimed that he asked counsel to provide a list of all witnesses at
the scene which counsel did not provide. Public defender Douglas Kramarsic responded that
according to the police report no one other than the victim saw the crime. The court asked
defendant if he wanted to represent himself. Defendant responded he was not sure they would be
able to have the trial because defense counsel did not subpoena any witnesses. Defendant named
three witnesses: John Lucas, Terrence Miller, and Lucius Chick Jr. Cappellini informed the court
that the victim had no connection to any of these witnesses. Defendant claimed the victim
fabricated the robbery and that he was framed. The court replied:
“All right. Here we are. We are here with a defense and I have to decide whether
to force you—I’m inclined to force you to go to trial here today with your lawyers
in front of a jury who came in with bad weather. That’s what I’m forced to do.
The consequences are great.
Now if I force you to go to trial as I’m inclined to do with your lawyers,
what is your position in the regard?”
3
Defendant replied that it would be difficult for him to proceed because he and his attorneys had
not discussed a defense. Kramarsic disagreed with defendant stating that on multiple occasions
they discussed defendant’s defense theory with him, and they determined it was “futile to try to
present this in front of a jury [as it] would incense them, even if you were to assume people
would say this happened which isn’t true and that’s not going to happen.” The court determined
that it would not make sense to continue the case and that defendant would proceed to trial with
counsel. The court suggested that defendant take 10 minutes to discuss the case with counsel
before they proceeded to trial.
¶8 After defendant’s discussion with counsel, defendant entered a guilty plea to armed
robbery in exchange for the dismissal of the remaining counts, a 60-year sentencing cap, and no
finding of great bodily harm. The court admonished defendant of the consequences he faced if he
was found guilty by a jury; that the court would still be conducting a sentencing hearing pursuant
to the blind plea; that defendant was waiving his right to a jury trial, right to remain silent, right
to confront the witnesses against him, and to present a defense; and the future consequences
relating to having a conviction on his record. Additionally, the court asked defendant if he was
waiving his rights voluntarily and whether he was satisfied with his counsel’s services.
Defendant confirmed he freely and voluntarily waived his rights. Defendant stated he was
satisfied with counsel’s representation. Defendant also signed a plea of guilty relinquishing his
rights. The court sentenced defendant to 58 years’ imprisonment.
¶9 On March 8, 2019, defendant filed a motion to withdraw guilty plea and vacate judgment
as a self-represented litigant. In the motion, defendant argued he entered the plea under duress,
and defense counsel refused to investigate any of his claims or subpoena witnesses that would
support his claims. According to defendant, “witnesses being called could not only support his
4
claims of being drugged, but [could] also offer [an] alternative theory of [the] actual crime to
provide defendant with an arguable defense.” The court appointed postplea counsel to represent
defendant on his motion.
¶ 10 On April 25, 2019, the court called defendant’s case for status. Postplea counsel said:
“We’re here today on a status. [Defendant] had filed a pro se motion to withdraw
his plea and vacate judgment on March 8th. I have had an opportunity to speak
with [defendant] a little bit today. For today’s purposes, what I would suggest we
do is set the matter for a status perhaps about three, four weeks out. I need to look
at the file a little bit closer. We may need to amend those pleadings.”
The court continued the case to May 30, 2019, for status.
¶ 11 On May 30, postplea counsel said:
“I’ve had an opportunity to review [defendant’s motion] and also review a
transcript of the plea. I talked to [defendant] today. I don’t plan on amending the
motion. I think he pretty much covered all the arguments that he wanted to
present so at this point, Your Honor, we’re just asking to set the matter for
hearing. [Defendant] is asking for a 60 day date if that’s possible.”
The court set the case for hearing on August 15, 2019. The court continued the case twice,
ultimately hearing the motion on January 9, 2020.
¶ 12 On January 9, 2020, postplea counsel filed a certificate pursuant to Illinois Supreme
Court Rule 604(d) (eff. July 1, 2017). Counsel’s certificate reads:
“1. I have consulted with the Defendant in person or by mail to ascertain
the defendant’s contentions of error in the entry of the plea of guilty and in the
sentence;
5
2. I have examined the trial court file and report of proceedings of the plea
of guilty and the sentencing; and
3. I have made any amendments to the motion necessary for the adequate
presentation of any defects in those proceedings.”
Postplea counsel did not file any affidavits and called only defendant as a witness. The State
called defendant’s trial attorneys Cappellini and Kramarsic.
¶ 13 Cappellini testified that defendant’s alternative theories of the crimes had no merit based
on the State’s discovery which included essentially an admission by defendant to committing a
robbery. Additionally, the witnesses that defendant claimed would testify in support of his
conspiracy defense were previously interviewed by the police and all had criminal records. All
the witnesses defendant requested Cappellini investigate were on the State’s witness list except
for an unnamed bouncer at a club. Cappellini indicated that defendant’s alternative theory often
changed and had no merit.
¶ 14 Kramarsic testified that initially defendant did not provide him with witnesses to
investigate until his defense theory evolved into a conspiracy theory. Defendant’s alternative
theory often changed and lacked merit. Except for the unnamed bouncer at a club that had not
been in existence for two years at the time, all the witnesses defendant requested be investigated
were in the State’s discovery.
¶ 15 In closing, postplea counsel argued:
“I would suggest, Your Honor, the testimony supports the idea that Mr.
Cappellini and Mr. Kramarsic failed to investigate possible defense witnesses,
failed to interview potential witnesses. As a result of that lack of investigation,
[defendant] has suffered prejudice. As a result of this deprivation of effective
6
assistance, [defendant] had no other choice on November 26th but to accept this
blind plea.”
The court denied defendant’s motion and defendant appealed.
¶ 16 II. ANALYSIS
¶ 17 Defendant raises two arguments on appeal: (1) the court erred in denying his motion to
withdraw guilty plea, and (2) postplea counsel failed to comply with Illinois Supreme Court Rule
604(d). Because the Rule 604(d) issue would require remand for de novo postplea proceedings,
we begin by determining whether counsel complied with the rule.
¶ 18 Rule 604(d) requires counsel to file a certificate with the circuit court verifying that it has
consulted with defendant to ascertain contentions of error, has examined the trial court file and
both the report of proceedings of the plea and the sentencing hearing, and has made “any
amendments to the motion necessary for adequate presentation of any defects in those
proceedings.” Ill. S. Ct. R. 604(d) (eff. July 1, 2017). Additionally, “[w]hen the motion is based
on facts that do not appear of record it shall be supported by affidavit.” Id.
¶ 19 Rule 604(d) is designed to ensure defendants are provided their due process rights and to
eliminate unnecessary appeals. People v. Shirley, 181 Ill. 2d 359, 362 (1998). Thus, “strict
compliance with Rule 604(d) is required.” People v. Prather, 379 Ill. App. 3d 763, 768 (2008).
Generally, we consider the certificate itself to evaluate compliance with Rule 604(d). People v.
Neal, 403 Ill. App. 3d 757, 760 (2010). Courts may consider the record where it undermines the
certificate filed by counsel. Id. Whether defense counsel complied with Rule 604(d) is reviewed
de novo. People v. Grice, 371 Ill. App. 3d 813, 815 (2007).
¶ 20 From our review, the record undermines postplea counsel’s certificate of compliance with
Rule 604(d). Postplea counsel adopted defendant’s motion to withdraw guilty plea wherein
7
defendant alleged that witness testimony would corroborate his defense theory. Since this
witness testimony is not a part of the record, postplea counsel should have either attached
affidavits of the witness testimony or amended the motion to remove the claim if he believed it
lacked merit. Postplea counsel did neither. Accordingly, the record rebuts postplea counsel’s
Rule 604(d) certificate, and we remand with specific instructions for postplea counsel to either
attach affidavits or amend the motion to remove the claim. As this resolution requires reversal
and remand, we need not address defendant’s argument that the court erred in denying his
motion to withdraw guilty plea.
¶ 21 III. CONCLUSION
¶ 22 The judgment of the circuit court of La Salle County is reversed and remanded with
instructions.
¶ 23 Reversed and remanded.
8 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484020/ | Filed 11/15/22 P. v. Badue CA1/3
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or
ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION THREE
THE PEOPLE,
Plaintiff and Respondent,
A162813
v.
STEVE BADUE, (San Mateo County
Super. Ct. No. 20-SF-010783-A)
Defendant and Appellant.
Defendant Steve Badue appeals from a judgment entered after the trial
court found him guilty of a number of offenses related to public intoxication
and resisting peace officers.1 He contends he did not make a valid waiver of
his right to a jury trial. We shall affirm the judgment.
FACTUAL AND PROCEDURAL BACKGROUND
The details of defendant’s offenses are not germane to the issue before
us on appeal. Suffice it to say that on September 20, 2020, while intoxicated
in public, defendant failed to comply with a police officer’s directions;
struggled against officers trying to take him into custody, causing one of
In conjunction with this appeal, appellant filed two petitions for writ
1
of habeas corpus, In re Steve Badue, A164311, and In re Steve Badue,
A164323. We have denied these petitions by separate orders filed this date.
1
them to stumble, strike a light pole with her head, and suffer injuries; and
spat on an officer’s pants and boot.
Defendant represented himself at trial, and he waived his right to a
jury trial and elected to be tried by the court. The trial court found him
guilty on February 16, 2021 of misdemeanor public intoxication (Pen. Code,
§ 647, subd. (f));2 felony delaying or resisting an officer (§ 148, subd. (a)(1));
misdemeanor battery on a peace officer (§ 243, subd. (b)); two counts of
resisting an executive officer in the performance of the officer’s duties (§ 69),
with a great bodily injury enhancement as to one count (§§ 1203 subd. (e)(3),
12022.7, subd. (a)); and resisting and causing serious bodily injury to a peace
officer (§ 148.10).
The trial court declared a doubt as to defendant’s competency and
suspended criminal proceedings on March 10, 2021. (§ 1368.) It appointed a
psychologist and a psychiatrist to examine him. Both of them concluded
defendant was competent, and the court so found. The trial court sentenced
defendant to the low term of two years for violation of section 148.10, causing
serious injury to a peace officer, with the other terms either concurrent or
stayed.
DISCUSSION
Defendant contends his waiver of his right to a jury trial was not
knowing, voluntary, and intelligent. A criminal defendant has a right to trial
by jury under both the federal and state constitutions. (People v. Weaver
(2012) 53 Cal.4th 1056, 1071; U.S. Const., amend. VI; Cal. Const., art. I,
§ 16.) This right, however, may be waived by consent of both parties.
(Weaver, at p. 1071.) To be valid, a defendant’s waiver must be “ ‘knowing
and intelligent, that is, “ ‘ “made with a full awareness both of the nature of
2 All statutory references are to the Penal Code.
2
the right being abandoned and the consequences of the decision to abandon
it,” ’ ” as well as voluntary “ ‘ “in the sense that it was the product of a free
and deliberate choice rather than intimidation, coercion, and deception.” ’ ” ’ ”
(Id. at pp. 1071–1072, quoting People v. Collins (2001) 26 Cal.4th 297, 305.)
Defendant contends these standards are not met here because the trial court
did not advise him of the mechanics of a jury trial, he did not have the advice
of counsel, and he was unable to grasp relevant facts and basic legal concepts,
as shown by his meritless motions and the competency evaluations. 3
The entirely of the colloquy in which defendant waived his right to a
jury is as follows: “[The court]: Mr. Badue, you indicated that you wanted to
waive jury trial and have a court trial; is that correct? [¶] Mr. Badue: Yes,
Your Honor. [¶] The court: Okay. So you know you do have the right to
have a jury trial where 12 members of the public hear the evidence and rule
on it? Is that your understanding? [¶] Mr. Badue: Yes, Your Honor. [¶]
The court: And you wish to waive and give up your right to a jury trial? [¶]
Mr. Badue: You’re the judge and jury, Your Honor. You decide. [¶] The
court: You want me to hear the evidence and not a jury; is that correct? [¶]
Mr. Badue: Yes, Your Honor. You are a judge and jury. You will suffice, yes.
[¶] The court: Me as judge and jury? Thank you. [¶] And do the People
waive their right to a jury trial? [¶] [The prosecutor]: We do, Your Honor.”
(Block capitalization omitted.)
Defendant contends this advisement was inadequate. Our high court
has made clear that there is no specific method to determine whether a
defendant has made a knowing and intelligent waiver of a jury trial, and that
3Although defendant recites that his jury trial waiver was not
voluntary, he makes no effort to show it was based on intimidation, coercion,
or deception.
3
in reviewing a waiver, we should look at the totality of the circumstances.
(People v. Sivongxxay (2017) 3 Cal.5th 151, 167 (Sivongxxay).) In Sivongxxay,
the trial court advised the defendant he had a right to a jury of 12 people,
that he could participate in their selection, and that in a bench trial, although
the burden of proof would remain the same, the judge alone would evaluate
the evidence and decide defendant’s guilt. (Id. at p. 165.) The defendant
argued this advisement was inadequate, pointing out that he was a Laotian
refugee with no formal education and a limited command of English. And, he
contended, he could not have understood what a jury trial entailed unless he
received more explanation, such as that the jury must be impartial, that its
verdict must be unanimous, or that the trial court must declare a mistrial if
there is no verdict. (Id. at pp. 166-167.) Our high court rejected this
argument, explaining that despite these facts, the defendant was represented
by counsel and assisted by a translator; that the defense initiated the request
for a court trial; that, after being advised, the defendant said he wanted to
give up his right to a jury trial; and that he had prior experience in the
criminal justice system, having pleaded guilty to two prior offenses and
having signed a waiver in connection with one of those pleas saying he fully
understood his right to a jury trial. (Id. at p. 167.) And, the court
emphasized, “we have never insisted that a jury waiver colloquy invariably
must discuss juror impartiality, the unanimity requirement, or both for an
ensuing waiver to be knowing and intelligent.” (Id. at p. 168.) As the court
explained, there is no requirement of “any rigid formula or particular form of
words that a trial court must use in taking a jury waiver.” (Id. at p. 169.)
Nevertheless, the court emphasized “the value of a robust oral colloquy
in evincing” a valid waiver of a jury trial. (Sivongxxay, supra, 3 Cal.5th at
p. 169.) To this end, the court offered “general guidance” to ensure a jury
4
trial waiver is knowing and intelligent and to assist in appellate review: it
recommended that trial courts “advise a defendant of the basic mechanics of
a jury trial in a waiver colloquy, including but not necessarily limited to the
facts that (1) a jury is made up of 12 members of the community; (2) a
defendant through his or her counsel may participate in jury selection; (3) all
12 jurors must unanimously agree in order to render a verdict; and (4) if a
defendant waives the right to a jury trial, a judge alone will decide his or her
guilt or innocence.” (Ibid.) The court also recommended that trial courts
take additional steps to ensure the defendant understands what the right to
a jury trial entails, such as asking whether the defendant consulted with
counsel and received an adequate explanation, or by asking the defendant
directly if he or she understands the right or has any questions. (Id. at
pp. 169-170.) But, the court emphasized, this guidance is advisory and
departing from it will not necessarily render a jury waiver invalid. (Id. at
p. 170.)
Very recently, our high court again emphasized “ ‘the value of a robust
oral colloquy,’ ” but found a colloquy that omitted some of the elements
mentioned in Sivongxxay to be adequate in the circumstances. (People v.
Morelos (2022) 13 Cal.5th 722, 753-754.) The trial court there told the
defendant he had an absolute constitutional right to a jury trial, which meant
“ ‘12 individuals to make the factual determination . . . as to your guilt,” and
that the defendant said “[t]hat’s been explained” and he repeatedly said he
understood the right he was giving up. (Id. at pp. 751-752, 754.) Moreover,
before the waiver hearing, there were discussions about jury selection and
voir dire. (Id. at p. 755.) Although the defendant was self-represented and
therefore lacked the advice of counsel, “ ‘a self-represented defendant may
validly waive a jury trial without the guiding hand of counsel,’ ” and the
5
defendant showed some legal knowledge and had discussed waiving a jury
with his attorney during the pretrial period when he was represented. (Id. at
p. 756.) Although the defendant was not advised he could participate in jury
selection, that the jury must be unanimous, and that a judge alone would
decide his guilt and the appropriate penalty, the court concluded the waiver
was not constitutionally infirm in the totality of the circumstances. (Id. at
p. 759.)
The jury waiver here could likewise have been more robust. The trial
court told defendant neither that he could participate in selecting a jury nor
that the jury would have to reach its decision unanimously. But it did tell
him he had a right to a jury, that the jury would consist of 12 members of the
public, which would hear the evidence and rule on it, and that if he waived
this right, the court would hear the evidence. When asked if he understood,
defendant replied in the affirmative, and he said twice that the court would
be the “judge and jury.”
Although this discussion did not include all the elements mentioned in
Sivongxxay, supra, 3 Cal.5th at p. 169, the surrounding circumstances show
that the waiver was knowing and intelligent. It appears that defendant
himself initiated the jury trial waiver. And he was no stranger to the
criminal justice system, having suffered 20 prior convictions between 1992
and 2020. (Compare People v. Blancett (2017) 15 Cal.App.5th 1200, 1206 [in
“barebones colloquy,” mentally disordered offender (MDO) not told he had a
right to jury trial at initial MDO commitment hearing]; People v. Jones (2018)
26 Cal.App.5th 420, 436-437 [no indication defendant knew jury was
comprised of members of community, and defendant had no experience with
criminal justice system].) While the record does not affirmatively show what
previous advisements defendant may have received, his extensive criminal
6
justice history, which includes both felony and misdemeanor convictions,
suggests he was familiar with the mechanics of a criminal prosecution.
Defendant also points out that he represented himself at trial and that
he filed multiple motions betraying a lack of understanding of relevant facts
and legal concepts. For instance, he argued that protections against double
jeopardy barred enhancement allegations based on prior offenses, and he
characterized a hearing inaccurately as an arraignment. But his lack of
understanding of sophisticated legal concepts or the details of criminal
procedure is hardly surprising in a layperson, and it does not suggest he did
not understand the role of a jury. Indeed, whatever their legal merits, his
motions show he was able to carry out basic legal research.
Defendant also points to the fact that the court later declared a doubt
as to his competence to stand trial and to statements in the psychological
evaluations, which were carried out after he waived his right to a jury trial.
But, to the extent these later events are relevant to our analysis, it is
noteworthy that defendant was evaluated by two mental health professionals
after the court questioned his competence, one reporting that defendant had
a good understanding of the legal process, and the other that he had an
accurate appraisal of the functions of courtroom participants and an
adequate understanding of court procedures.
Based on the colloquy and the totality of the circumstances of this case,
we reject defendant’s contention that his waiver of his right to a jury trial
was not knowing, voluntary, and intelligent.
DISPOSITION
The judgment is affirmed.
7
TUCHER, P.J.
WE CONCUR:
FUJISAKI, J.
RODRÍGUEZ, J.
People v. Badue (A162813)
8 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484030/ | Filed 11/15/22 In re Anirah G. CA2/7
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions
not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has
not been certified for publication or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SEVEN
In re ANIRAH G., a Person B320169
Coming Under the Juvenile (Los Angeles County Super.
Court Law. Ct. No. 20CCJP00476)
LOS ANGELES COUNTY
DEPARTMENT OF CHILDREN
AND FAMILY SERVICES,
Plaintiff and Respondent,
v.
VIVIAN G. et al.,
Defendants and
Appellants.
APPEAL from an order of the Superior Court of Los
Angeles County, D. Zeke Zeidler, Judge. Conditionally affirmed
and remanded with directions.
Megan Turkat Schirn, under appointment by the Court of
Appeal, for Defendant and Appellant Vivian G.
Linda Rehm, under appointment by the Court of Appeal,
for Defendant and Appellant Arthur J.
Dawyn R. Harrison, Acting County Counsel, Kim Nemoy,
Assistant County Counsel, and Navid Nakhjavani, Deputy
County Counsel, for Plaintiff and Respondent.
__________________________
Vivian G. (Mother) and Arthur J. (Father) appeal from the
juvenile court’s order terminating their parental rights over two-
year-old Anirah G. pursuant to Welfare and Institutions Code
section 366.26.1 Mother’s and Father’s sole contention on appeal
is that the Los Angeles County Department of Children and
Family Services (the Department) and the juvenile court failed to
comply with the inquiry and notice provisions of the Indian Child
Welfare Act of 1978 (25 U.S.C. § 1901 et seq.; ICWA) and related
California law.
Mother and Father contend the Department failed to
inquire of maternal and paternal extended family members about
Anirah’s possible Indian ancestry. The Department responds
that the appeals are now moot because while the appeals were
pending, a social worker interviewed three extended family
members who denied Indian ancestry, and the juvenile court
found ICWA did not apply based on that information. The
postjudgment evidence of the Department’s belated ICWA
inquiry does not moot the appeals. We conditionally affirm and
1 Further undesignated statutory references are to the
Welfare and Institutions Code.
2
remand for the juvenile court and the Department to comply with
the inquiry and notice provisions of ICWA and California law.
FACTUAL AND PROCEDURAL BACKGROUND
A. The Dependency Proceedings
Shortly after Anirah’s birth, the Department filed a
dependency petition in January 2020 alleging Mother’s mental
and emotional problems, including diagnoses of bipolar disorder,
major depressive disorder, and an unspecified mood disorder,
rendered her incapable of providing regular care and supervision
of Anirah. Anirah was detained and placed with an unrelated
extended family member. On March 11, 2020 Mother pleaded no
contest to the allegations in the petition, and the juvenile court
sustained an amended petition under section 300, subdivision
(b)(1). The court declared Anirah a dependent of the court and
removed her from Mother’s physical custody. The court found
Father was the alleged father of Anirah, and it ordered the
Department to locate and provide notice to Father. On June 23,
2020 Father made his first appearance at an arraignment
hearing and requested paternity testing. Father told the social
worker he had frequent contact with paternal great-aunt Diane
D. and he could receive mail at her home. On December 8, 2020
the court found Father was Anirah’s biological father.
At the 18-month review hearing on July 22, 2021, the
juvenile court found Mother was in substantial compliance with
her case plan and released Anirah to her. On September 17 the
Department filed a subsequent petition (§ 342) and a
supplemental petition (§ 387) alleging Mother allowed her
boyfriend Clarence T., who abused marijuana, to have unlimited
3
access to Anirah; Mother and Clarence engaged in domestic
violence; and Mother failed to comply with court-ordered mental
health counseling. On December 1, 2021 the juvenile court
sustained the subsequent and supplemental petitions and
removed Anirah from Mother’s physical custody. The court
terminated reunification services and set a selection and
implementation hearing (§ 366.26) for April 26, 2022.
At the April 26, 2022 selection and implementation
hearing, the juvenile court found by clear and convincing
evidence Anirah was adoptable and no exception to termination
of parental rights applied. The court rejected Mother’s and
Father’s arguments that the beneficial parental relationship
exception (§ 366.26, subd. (c)(1)(B)(i)) applied. The court
terminated Mother’s and Father’s parental rights.
Father filed his notice of appeal on April 26, 2022. Mother
filed her notice of appeal on May 17, 2022.
B. ICWA Inquiry and Findings
At the January 28, 2020 detention hearing, Mother filed a
parental notification of Indian status form (Judicial Council form
ICWA-020) on which she checked the box stating, “I have no
Indian ancestry as far as I know.” The juvenile court asked the
maternal aunt and maternal cousin, who were both present at
the hearing, whether their family had Indian ancestry. Both
responded “no.” The court then stated, “The court does not have
reason to know or believe the child is an Indian child as defined
by the Indian Child Welfare Act. The Indian Child Welfare Act
does not apply. The court will inquire further of the father if and
when he appears.” On August 16, 2021 Mother again denied she
or Anirah had Indian ancestry.
4
On June 23, 2020 Father’s counsel filed a parental
notification of Indian status form on Father’s behalf on which he
checked the box stating, “None of the above apply,” referring to
boxes indicating, among other things, the parent or child “is or
may be” a member of or eligible for membership in a federally
recognized Indian tribe, and one or more of the parent’s
grandparents, great-grandparents, “or other lineal ancestors is or
was a member of a federally recognized tribe.” On February 7,
2022 Father again denied any knowledge of Indian ancestry.
The Department did not interview any maternal or
paternal relatives with respect to Anirah’s possible Indian
ancestry prior to the selection and implementation hearing. Nor
did the court make a finding with respect to whether ICWA
applied as to Father. Further, the court did not make a finding
on ICWA as to either parent at the selection and implementation
hearing.
C. Post-appeal ICWA Inquiry
As discussed, in April and May 2022 Mother and Father
appealed the juvenile court’s April 26, 2022 order terminating
parental rights. According to the July 11, 2022 last minute
information for the court, on June 7 a social worker contacted the
maternal great-grandmother, Shirley B., who denied Indian
ancestry, stating, “‘I’m a black woman, and I speak English.’” On
July 6 the social worker contacted paternal grandmother Ms. S.
and maternal great-aunt Monique B., both of whom denied any
Indian ancestry. Ms. S. also reported the paternal grandfather
had died in 2018, and Ms. S. did not know of any Indian ancestry
on his side of the family. The July 22, 2022 minute order
indicates the juvenile court considered the July 11, 2022 last
5
minute information report and found ICWA inquiry was
complete, the court did not have a reason to know Anirah was an
Indian child, and ICWA did not apply.
On September 16, 2022 the Department moved for judicial
notice under Evidence Code sections 452 and 459 of the July 11,
2022 last minute information for the court and the juvenile
court’s July 22, 2022 order finding ICWA did not apply. The
Department also requested we consider the additional evidence
under Code of Civil Procedure section 909.
DISCUSSION
A. Inquiry and Notice Requirements under ICWA and
California Law
ICWA provides as to dependency proceedings, “where the
court knows or has reason to know that an Indian child is
involved, the party seeking . . . termination of parental rights
to . . . an Indian child shall notify the parent or Indian custodian
and the Indian child’s tribe, by registered mail with return
receipt requested, of the pending proceedings and of their right of
intervention.” (25 U.S.C. § 1912(a); see In re Isaiah W. (2016)
1 Cal.5th 1, 5; In re Antonio R. (2022) 76 Cal.App.5th 421, 428
(Antonio R.); In re T.G. (2020) 58 Cal.App.5th 275, 288.)
California law also requires notice to the Indian tribe and the
parent, legal guardian, or Indian custodian if the court or the
Department “knows or has reason to know” the proceeding
concerns an Indian child. (§ 224.3, subd. (a); see Antonio R., at
p. 429; In re T.G., at p. 288; Cal. Rules of Court, rule 5.481(c)(1)
[notice is required “[i]f it is known or there is reason to know an
Indian child is involved in a proceeding listed in rule 5.480,”
6
which includes dependency cases filed under section 300].) The
notice requirement is at the heart of ICWA because it “enables a
tribe to determine whether the child is an Indian child and, if so,
whether to intervene in or exercise jurisdiction over the
proceeding.” (In re Isaiah W., at p. 5; accord, Antonio R., at
p. 428; In re T.G., at p. 288; see 25 U.S.C. § 1912(a); Welf. & Inst.
Code, § 224.3, subd. (d).)
The juvenile court and the Department “have an
affirmative and continuing duty to inquire whether a child for
whom a petition under Section 300 . . . may be or has been filed,
is or may be an Indian child.” (§ 224.2, subd. (a); see In re Isaiah
W., supra, 1 Cal.5th at p. 9; In re H.V. (2022) 75 Cal.App.5th 433,
437.) “The duty to inquire begins with initial contact (§ 224.2,
subd. (a)) and obligates the juvenile court and child protective
agencies to ask all relevant involved individuals whether the
child may be an Indian child. (§ 224.2, subds. (a)-(c)).” (In re
T.G., supra, 58 Cal.App.5th at p. 290; accord, In re J.C. (2022)
77 Cal.App.5th 70, 77; In re H.V., at p. 437.)
Section 224.2, subdivision (b), effective January 1, 2019,
imposes on the Department a duty to inquire whether a child in
the Department’s temporary custody is an Indian child, which
“[i]nquiry includes, but is not limited to, asking the child,
parents, legal guardian, Indian custodian, extended family
members, others who have an interest in the child, and the party
reporting child abuse or neglect, whether the child is, or may be,
an Indian child . . . .” (See Cal. Rules of Court, rule 5.481(a)(1)
[the Department “must ask . . . extended family members . . .
whether the child is or may be an Indian child”]; In re D.F. (2020)
55 Cal.App.5th 558, 566; In re Y.W. (2021) 70 Cal.App.5th 542,
551-552.) Under ICWA, the term “extended family member” is
7
“defined by the law or custom of the Indian child’s tribe or, in the
absence of such law or custom, shall be a person who has reached
the age of eighteen and who is the Indian child’s grandparent,
aunt or uncle, brother or sister, brother-in-law or sister-in-law,
niece or nephew, first or second cousin or stepparent.” (25 U.S.C.
§ 1903(2); see Welf. & Inst. Code, § 224.1, subd. (c) [“As used in
connection with an Indian child custody proceeding, the terms
‘extended family member’ and ‘parent’ shall be defined as
provided in Section 1903 of the federal Indian Child Welfare
Act.”].)
“The duty to develop information concerning whether a
child is an Indian child rests with the court and the Department,
not the parents or members of the parents’ families.” (Antonio R.,
supra, 76 Cal.App.5th at p. 430; see In re K.R. (2018)
20 Cal.App.5th 701, 706 [“The court and the agency must act
upon information received from any source, not just the parent
[citations], and the parent’s failure to object in the juvenile court
to deficiencies in the investigation or noticing does not preclude
the parent from raising the issue for the first time on
appeal . . . .”].)
“In addition, section 224.2, subdivision (e), imposes a duty
of further inquiry regarding the possible Indian status of the
child ‘[i]f the court, social worker, or probation officer has reason
to believe that an Indian child is involved in a proceeding, but
does not have sufficient information to determine there is reason
to know that the child is an Indian child.’” (In re Rylei S. (2022)
81 Cal.App.5th 309, 316-317; accord, In re J.C., supra,
77 Cal.App.5th at p. 78, see Cal. Rules of Court, rule 5.481(a)(4).)
Further inquiry includes, but is not limited to, “interviewing, as
soon as practicable, extended family members to gather the
8
biographical information required by section 224.3,
subdivision (a)(5), to be included in ICWA notices, contacting the
Bureau of Indian Affairs and contacting ‘the tribe or tribes and
any other person that may reasonably be expected to have
information regarding the child’s membership, citizenship status,
or eligibility.’” (Rylei S., at p. 317, quoting § 224.2, subd. (e)(2).)
B. The Post-appeal Evidence Does Not Moot Mother’s and
Father’s Appeals
The Department argues in its respondent’s brief that we
should consider its post-appeal efforts to comply with ICWA and
the juvenile court’s finding that ICWA does not apply, which
moot the current appeals. We grant the Department’s motion for
judicial notice of the July 11, 2022 last minute information report
and July 22, 2022 minute order as to the existence of the
documents, but not their contents. (In re Vicks (2013) 56 Cal.4th
274, 314 [“‘while courts are free to take judicial notice of the
existence of each document in a court file, including the truth of
results reached, they may not take judicial notice of the truth of
hearsay statements in decisions and court files’”]; In re M.B.
(2022) 80 Cal.App.5th 617, 626-627 (M.B.); In re K.M. (2015)
242 Cal.App.4th 450, 456 (K.M.) [“judicial notice may be taken of
the existence of court documents but not the truth of factual
findings made in other court rulings”].)
However, under Code of Civil Procedure section 909, an
appellate court may take additional evidence and make factual
9
determinations on appeal.2 In appropriate cases, postjudgment
evidence may “be considered to determine whether an issue on
appeal is moot.” (M.B., supra, 80 Cal.App.5th at p. 627; accord,
In re Josiah Z. (2005) 36 Cal.4th 664, 676 [postjudgment evidence
may be considered in motions to dismiss an appeal because “the
beneficial consequence of motions to dismiss, where granted, will
be to ‘expedit[e] the proceedings and promot[e] the finality of the
juvenile court’s orders and judgment’”]; K.M., supra,
242 Cal.App.4th at p. 456 [granting motion to take additional
evidence under Code of Civil Procedure section 909 of
postjudgment minute orders regarding ICWA].)
Even if we consider the contents of the July 11 and July 22
documents under Code of Civil Procedure section 909, the
postjudgment evidence does not moot Mother’s and Father’s
appeals. As we explained in M.B., section 366.26,
subdivision (i)(1),3 “expressly deprives the juvenile court of
2 Code of Civil Procedure section 909 provides, “In all cases
where trial by jury is not a matter of right . . . , the reviewing
court may make factual determinations contrary to or in addition
to those made by the trial court. . . . The reviewing court may for
the purpose of making the factual determinations or for any other
purpose in the interests of justice, take additional evidence of or
concerning facts occurring at any time prior to the decision of the
appeal.”
3 As applicable here, section 366.26, subdivision (i)(1),
provides, “Any order of the court permanently terminating
parental rights under this section shall be conclusive and
binding . . . . After making the order, the juvenile court shall
have no power to set aside, change, or modify it.”
10
jurisdiction to modify or revoke an order terminating parental
rights once it is final as to that court.” (M.B., supra,
80 Cal.App.5th at p. 627; accord, In re Ricky R. (2022)
82 Cal.App.5th 671, 683 [postjudgment declarations from social
worker regarding additional ICWA investigation did not render
appeal moot because section 366.26, subdivision (i)(1), deprives
juvenile court of jurisdiction to modify or revoke order
terminating parental rights]; K.M., supra, 242 Cal.App.4th at
p. 458 [“[T]he juvenile court lacked jurisdiction to consider [the
social services agency’s] belated remedial ICWA efforts because it
was in substance a collateral attack on the termination order.”].)
Thus, the Department “cannot remedy a defective ICWA
investigation by conducting further interviews while the
termination order is being reviewed on appeal.” (M.B., at
pp. 627-628; accord, K.M., at p. 458; but see In re Allison B.
(2022) 79 Cal.App.5th 214, 219-220 [dismissing mother’s appeal
as moot based on ICWA inquiry of maternal grandparents and
paternal grandmother three months after mother appealed].)
Here, as in M.B., the Department conducted interviews of
three maternal and paternal relatives to correct its earlier
inadequate ICWA investigation. (See M.B., supra, 80 Cal.5th at
p. 629.) In M.B., we rejected the Department’s argument that the
belated ICWA inquiry rendered the appeal moot, concluding the
juvenile court lacked jurisdiction to vacate its order terminating
parental rights if further ICWA compliance was required. (M.B.,
at p. 629.) The Department attempts to distinguish M.B. on the
basis the mother there stated she had Indian ancestry and
therefore the Department’s deficient inquiry could have resulted
in inadequate notice to the Indian tribe that needed to be
corrected, whereas here both parents and the two maternal
11
relatives who were present at the detention hearing denied any
Indian ancestry. The Department’s argument misses the point.
Although Mother and Father and the two maternal relatives
denied Indian ancestry, the requirement that the Department
inquire of extended family members, who may have greater
knowledge of Anirah’s possible Indian ancestry, is designed to
elicit information that could still uncover that the child is an
Indian child. (See Antonio R., supra, 76 Cal.App.5th at p. 432
[“parents may lack knowledge of a child’s Indian ancestry even
where the child’s extended family members possess strong
evidence of the child’s possible Indian ancestry”].) We now know
from the postjudgment evidence that there were at least two
additional maternal relatives and one paternal relative (and
possibly more) that had not been interviewed as to Anirah’s
possible Indian ancestry. Had the additional ICWA inquiry
yielded information that caused the juvenile court to have a
reason to believe Anirah was an Indian child, the court would
have lacked jurisdiction to modify the order terminating parental
rights. (M.B., supra, 80 Cal.App.5th at p. 627; § 366.26,
subd. (i)(1).)
As we observed in M.B., “Rather than attempt to moot [the
parent’s] appeal by belatedly conducting the investigation
required by section 224.2, the Department’s proper course of
action was to stipulate to a conditional reversal with directions
for full compliance with the inquiry and notice provisions of
ICWA and related California law—a procedure the Department
has used in many ICWA appeals pending before us.” (M.B.,
supra, 80 Cal.App.5th at p. 629.) The Department here as well
opted to attempt to moot the appeals instead of stipulating to a
12
conditional reversal, which would have more expeditiously
addressed the ICWA deficiencies.
C. The Juvenile Court Failed To Ensure the Department
Satisfied Its Duty of Inquiry
By conducting additional interviews of three of Anirah’s
extended family members after Mother and Father appealed, the
Department implicitly acknowledges it failed to conduct an
adequate inquiry into Anirah’s possible Indian ancestry before
the juvenile court terminated Mother’s and Father’s parental
rights. (See M.B., supra, 80 Cal.App.5th at p. 629.) Indeed, the
Department does not contend in its respondent’s brief that its
initial ICWA investigation was adequate. Moreover, even the
Department’s postjudgment attempt to remedy its failure to
comply with its ICWA obligations fell short. For example, the
Department did not inquire of paternal great-aunt Diane T., with
whom Father had contact. And at no time did the Department or
juvenile court ensure that inquiry was made of all ascertainable
extended family members.
The juvenile court therefore erred in finding ICWA did not
apply to the proceedings without ensuring the Department
satisfied its duty of inquiry under section 224.2, subdivision (b).
(In re J.C., supra, 77 Cal.App.5th at p. 74 [the court’s finding
ICWA did not apply was not supported by substantial evidence
where the court “failed to ensure the Department fulfilled its
duty of inquiry under section 224.2, subdivision (b)”]; Antonio R.,
supra, 76 Cal.App.5th at p. 432 [court’s finding ICWA did not
apply was erroneous where Department failed to inquire of
child’s extended family members about possible Indian ancestry,
13
and court failed to ensure Department satisfied its duty of initial
inquiry].)
DISPOSITION
The April 26, 2022 order terminating Mother’s and Father’s
parental rights is conditionally affirmed. We remand to the
juvenile court for the Department and the court to comply with
the inquiry and notice provisions of ICWA and related California
law.
FEUER, J.
We concur:
PERLUSS, P. J.
SEGAL, J.
14 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484017/ | Filed 11/15/22 P. v. Gonsalves CA1/2
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified
for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for
publication or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION TWO
THE PEOPLE,
Plaintiff and Respondent, A164048
v.
TODD WILLIAM GONSALVES, (Humboldt County
Defendant and Appellant. Super. Ct. No. CR2101527)
Defendant Todd William Gonsalves was convicted after jury trial
of attempting to make a criminal threat against his girlfriend K.B. and
of unlawfully possessing a firearm.1 He challenges on appeal his
conviction and sentence, contending that (i) the trial court should have
granted a mistrial after his ex-girlfriend D.B. volunteered the
statement that he had threatened her “so many” times in the past;
(ii) his admission to two prior strike convictions was invalid because he
did not expressly waive his constitutional rights to trial by jury and
confrontation, and his privilege not to incriminate himself; (iii) Penal
Gonsalves was also convicted of a misdemeanor violation of
1
Penal Code section 273.6, subdivision (a), as count three. At trial, he
conceded his liability on this count, and he raises no issue with his
conviction or sentence as to this count on appeal. Accordingly, we do
not further discuss this count or the evidence concerning it.
1
Code section 654,2 prohibiting multiple punishments for the same act
or course of conduct, was violated when the trial court sentenced him
concurrently for the attempted threat and unlawful gun possession
convictions, rather than imposing one sentence and staying the other;
and (iv) if he was in fact sentenced in violation of section 654, this court
should remand the case to the trial court so that it can exercise its
discretion to consider which sentence to impose and which to stay
pursuant to a newly enacted statute, Assembly Bill No. 518.
The Attorney General concedes, and we agree, that Gonsalves
should have been advised of his constitutional rights before the trial
court accepted his admission to the two prior strike convictions. We
vacate the judgment and remand for correction of that conceded error,
but for the reasons discussed below we reject Gonsalves’s other claims
of error.
BACKGROUND
This case arises factually out of a confrontation between
Gonsalves and his girlfriend, K.B., in the parking lot of a post office in
Humboldt on May 20, 2021. We summarize the facts briefly here and
relate them in more detail as they are relevant to Gonsalves’s legal
arguments in our discussion of those arguments.
K.B. was accompanying her ex-sister-in-law, S.W., in running
errands the afternoon of May 20, 2021, when she saw Gonsalves. She
knew that Gonsalves did not get along with S.W. and did not like it
when K.B. spent time with S.W. According to a statement K.B. made
to a police officer that afternoon, she was waiting in her car for S.W. at
2All subsequent statutory references are to the Penal Code
except as otherwise noted.
2
the post office when Gonsalves approached her and flashed a gun in his
waistband by lifting his shirt. Gonsalves told K.B. that because she
was hanging out with S.W., she had a half-hour to give him $200 that
he claimed she owed him or Gonsalves would shoot K.B., S.W., and
K.B.’s children. K.B. also showed the police officer a text stating that
Gonsalves had a Glock; she said Gonsalves sent it before he walked up
to her. K.B. later e-mailed the police officer a copy of the text, which
stated, “Don’t answer and I[’m] grabbing the Glock and coming.” K.B.
told the officer that she was scared when Gonsalves threatened her,
S.W., and the children.
Gonsalves was tried on an information accusing him of criminal
threats in violation of section 422 (count one), with an enhancing
allegation that he personally used a firearm in committing that crime,
and accusing him of possessing a firearm while prohibited from doing
so by reason of a prior felony conviction in violation of section 29800,
subdivision (a)(1) (count two).
At trial, K.B. offered a significantly different account of her
encounter with Gonsalves on May 20. She testified that Gonsalves
confronted her in the post office parking lot about spending time with
S.W., but he did not have a gun and did not threaten to kill her.
Instead, when he lifted his shirt, K.B. saw his belt buckle, not a gun,
and the only threat he made was to end their relationship if she
continued to hang out with S.W. K.B. denied ever telling an officer that
Gonsalves had threatened her or that Gonsalves had a gun; in fact,
K.B. denied speaking with the police officer in person at all. She also
denied that she was placed in fear by anything Gonsalves said to her
that day.
3
In light of K.B.’s recantation, the prosecution called the officer
who took her statement on May 20. Excerpts of the officer’s body
camera were played for the jury showing K.B.’s May 20 statement
detailing the threats. And the jury heard jail call recordings where
Gonsalves pleaded with K.B. to recant her May 20 statement and
offered her $1,000 to tell the police she was lying.
S.W. did not testify at trial but the jury saw body camera
excerpts of a statement she made that she saw the outline of a gun in
Gonsalves’s waistband as he approached K.B.’s car, although she did
not hear the threats themselves. The jury also heard that no gun was
ever located on Gonsalves’s person, in his car, or in his home.
Prior to trial, the trial court issued an in limine ruling permitting
some evidence to be introduced pursuant to Evidence Code section
1109, subdivision (a)(1). This provision allows the prosecution in a
domestic violence case to present evidence of prior acts of domestic
violence to show propensity, subject to the trial court’s power to exclude
the evidence where its probative value is substantially outweighed by
its prejudicial effect or undue consumption of time pursuant to
Evidence Code section 352. In Gonsalves’s trial, the jury heard
testimony from D.B., a prior girlfriend of Gonsalves’s, that in 2016,
Gonsalves threatened to kill her and her children. D.B. also
volunteered that Gonsalves had threatened her “so many” times in
2016; this statement was the subject of a mistrial motion and we
describe it in further detail in our discussion of Gonsalves’s claim of
error in connection with this motion.
The jury acquitted Gonsalves of count one, making a criminal
threat in violation of section 422, but it convicted him of the lesser
4
included charge of attempting to make a criminal threat. It found not
true the use of a firearm allegation in the lesser included charge to
count one, but it convicted him of count two, possessing a firearm while
prohibited by a prior felony conviction.
Following the verdict, Gonsalves admitted that he had suffered
two prior strikes, but before he made the admission he was not advised
of his privilege against self-incrimination, his right to a jury trial, or his
right to confront witnesses against him, and he did not expressly waive
those rights and privileges.
At sentencing, the trial court dismissed one prior strike
allegation. It sentenced Gonsalves to four years in state prison: the
mid-term of two years on the felon-in-possession conviction, doubled for
the prior strike, and a concurrent upper term of 18 months on the
attempted threat conviction, doubled for the prior strike. This appeal
followed.
DISCUSSION
I. Mistrial Motion
Gonsalves contends that the trial court erred in refusing his
request for a mistrial after D.B. told the jury that “there [were] so
many” threats during her relationship with him. We see no abuse of
discretion here.
A trial court should grant a mistrial “only when a ‘ “party’s
chances of receiving a fair trial have been irreparably damaged.” ’ ”
(People v. Ayala (2000) 23 Cal.4th 225, 282.) Where a trial court is
apprised of prejudice to a party that is “incurable by admonition or
instruction,” a mistrial is proper. (People v. Haskett (1982) 30 Cal.3d
841, 854.) But “ ‘[w]hether a particular incident is incurably prejudicial
5
is by its nature a speculative matter[.]’ ” (People v. Ledesma (2006)
39 Cal.4th 641, 683.) The trial court is best positioned to assess the
impact of the prejudicial testimony and the curative effect of
instruction in light of all the evidence; accordingly, “ ‘the trial court is
vested with considerable discretion in ruling on mistrial motions.’ ”
(Ibid.)
Here, the trial court issued an in limine order permitting the
prosecution to elicit testimony from D.B. “regarding any criminal
threats that were made by [Gonsalves] to her” while they were dating,
but excluding testimony about “physical altercations” between
Gonsalves and D.B. It appears that the prosecution and defense were
aware of only one incident in 2016 where Gonsalves threatened D.B.
and her children, which D.B. reported to law enforcement. The
prosecutor admonished D.B. before her testimony that “we are only
talking about one instance,” “the 2016 incident regarding threats.”
D.B. “did seem a little confused,” according to the prosecutor, about
what she would be testifying about, but the prosecutor “didn’t want to
tell [D.B.] her testimony” and did not offer further clarification.
When D.B. was on the witness stand, the prosecutor asked her
whether Gonsalves had threatened her in 2016, and D.B. affirmed that
he had. When asked where the “threats” took place, D.B. responded
that “there [were] so many that I’m not sure exactly which threats
you’re talking about.” The defense objected and asked to approach.
After sidebar, the trial court struck D.B.’s answer as nonresponsive.
The prosecutor continued the examination by asking a more specific
question: “did you speak with a deputy regarding . . . an instance
where Mr. Gonsalves made a threat to you?” After D.B. reviewed an
6
incident report to refresh her recollection, she related to the jury that
Gonsalves threatened to kill her and her children in 2016, and she
believed him and reported it to the sheriff’s department that evening.
The prosecution elicited no further details, and the defense did not
cross-examine D.B.
After testimony concluded that day, the defense moved for a
mistrial on the grounds that D.B.’s statement about “so many” threats
left the jury with an impression of “an almost indeterminate number of
terroristic threats” by Gonsalves, resulting in incurable prejudice. The
trial court denied the mistrial motion, noting it had struck the
statement and offering to consider any additional jury instructions or
curative efforts the parties proposed. No party requested a pinpoint
instruction. After the evidence closed, the trial court gave the jury the
pattern instruction concerning evidence, CALCRIM No. 222, which
instructed them to disregard and not consider for any purpose
testimony that the court ordered stricken from the record.
The trial court did not abuse its discretion in refusing to order a
mistrial because it is not reasonably probable that D.B.’s fleeting and
ambiguous statement had a prejudicial effect.3 While every case must
be evaluated on its own unique facts, prior cases teach that witnesses’
3 Gonsalves contends that D.B.’s volunteered statement exceeded
the scope of the trial court’s in limine order, which contemplated D.B.
would testify only to threats she reported to law enforcement in 2016.
The Attorney General does not concede this point, but we agree with
Gonsalves that this statement should not have been presented to the
jury. Before evidence of prior uncharged acts of domestic violence may
be admitted, the prosecution must disclose the evidence to the
defendant (Evid. Code, § 1109, subd. (b)), and that did not happen here,
apparently because the prosecution was unaware of other threats
Gonsalves allegedly made to D.B.
7
brief references to defendants’ criminal history or incarceration
typically will not render a trial irreparably unfair. (See People v.
Collins (2010) 49 Cal.4th 175, 198–199 [no mistrial where witness
volunteered testimony that defendant was “in Susanville” and “got out”
shortly before events in the case]; People v. Valdez (2004) 32 Cal.4th 73,
124–125 [no mistrial where witness mentioned defendant’s time at
“Chino Institute”]; People v. Bolden (2002) 29 Cal.4th 515, 555 [no
mistrial where witness said he obtained defendant’s address from the
“parole office”]; People v. Franklin (2016) 248 Cal.App.4th 938, 954–955
[no mistrial where three isolated references to probation or prior
criminal history; trial court gave curative instruction].) That is
especially true where the trial court acts quickly to address any
potentially prejudicial testimony. “[I]t is only in the ‘exceptional case’
that any prejudice from an improperly volunteered statement cannot be
cured by appropriate admonition to the jury.” (Id. at p. 955.) Here, the
trial court immediately struck the statement and later instructed the
jury to disregard any testimony struck from the record. We presume
the jury followed that instruction. (People v. Yeoman (2003) 31 Cal.4th
93, 139.)
Gonsalves argues that the presumption should not control here
because D.B.’s emotional testimony was so powerful that the jury could
not reasonably be expected to disregard it. The record does reflect that
D.B. was tearful, but it does not suggest there was anything indelible
or even especially striking about her volunteered statement. To the
contrary, her reference to “many” threats was immediately followed by
the trial court’s order striking the testimony, and her subsequent
8
testimony describing the 2016 reported threat was unembellished and
brief.
This case is thus dissimilar to the two cases Gonsalves primarily
relies on in arguing he was incurably prejudiced. In People v. Disa
(2016) 1 Cal.App.5th 654 (Disa), we concluded that the trial court erred
in admitting under Evidence Code section 1109 extensive evidence
about the nature of a defendant’s prior attack on his ex-girlfriend, and
in particular that he planned the attack and lay in wait to carry it out.
(Disa, at pp. 673–674.) We concluded that the fact of the attack itself
was probative and admissible concerning the defendant’s propensity to
commit domestic violence (id. at p. 672), but the “vivid” details the jury
heard of planning and ambush in that prior attack were inflammatory
and irrelevant to the purpose for which the evidence was ostensibly
admitted, i.e. propensity to commit domestic violence (id. at pp. 674–
675). Because a limiting instruction concerning the purpose of that
evidence “could not erase” the details of the prior attack from jurors’
minds, we concluded there was prejudice and reversed the judgment.
(Id. at p. 675.) In People v. Turner (2021) 73 Cal.App.5th 117 (Turner),
a sister division concluded that the jury in a homicide case could not
reasonably be expected to disregard evidence of a different charged
murder, where the latter charge was initially at issue in the trial but
was severed at the close of evidence. (Id. at pp. 128–129.) The jury in
Turner heard about the different charged murder during opening
statements and throughout the trial, but when the different charged
murder was severed, they were instructed to disregard the evidence of
it. (Id. at p. 129.) Turner concluded that it was simply unrealistic to
expect jurors to follow an instruction to disregard this “shocking”
9
evidence that had been in their minds for a week. (Id. at pp. 129–130.)
Disa and Turner are unhelpful to Gonsalves’s argument here because
they are both cases where the jury heard extensive inflammatory and
irrelevant evidence, unlike this case where the putatively prejudicial
testimony was brief and immediately stricken.4
We also note that D.B.’s statement—Gonsalves made “so many”
threats—was ambiguous in that it did not specify that he made
criminal or violent threats. As used by a lay witness, the word
“threats” in interpersonal relationships can encompass many kinds of
conduct and speech, such as the “threat” that K.B. testified Gonsalves
made to break up with her if she continued to spend time with S.W.
Even setting aside the presumption that the jury disregarded D.B.’s
statement about “so many” threats, the statement is still not so striking
that it is likely to have influenced the jury. Moreover, Gonsalves raises
no claim of error in the admission of statements from K.B. on the body
camera footage that Gonsalves sent her “so many texts” containing
threats, and that he sent threatening texts to her “[e]very time [she
left] his sight.” D.B.’s volunteered statement is not reasonably probable
to have had any effect on the jury beyond the impression they already
had from these similar statements by K.B. for which no error is
claimed.
4 As the Attorney General points out, Disa is not a mistrial case,
and the inflammatory and irrelevant testimony the jury heard in that
case was never stricken. We understand Gonsalves’s point in relying
on Disa to be that the jury cannot always be presumed to follow a
curative or limiting instruction, but the facts of this case are very
different from Disa.
10
II. Required Advisements and Waivers
After the jury returned its verdict, Gonsalves admitted that he
had suffered prior strike convictions in 2009 and 1999. As a
“prophylactic measure,” prior to accepting a guilty plea or an admission
to a prior conviction allegation that enhances punishment, a trial court
“must inform the defendant of three constitutional rights—the privilege
against compulsory self-incrimination, the right to trial by jury, and the
right to confront one’s accusers—and solicit a personal waiver of each.”
(People v. Cross (2015) 61 Cal.4th 164, 170.) The record here does not
reflect that Gonsalves received what is commonly known as the Boykin-
Tahl advisement5 before admitting prior strikes, nor did he expressly
waive these rights.
Gonsalves contends, and the Attorney General concedes, that the
Boykin-Tahl advisements and waivers apply to his admission of the
prior strike convictions, and that reversal is required here. We agree.
The record is silent as to whether Gonsalves understood the rights he
waived by admitting the prior strike allegations; we therefore cannot
say the record “affirmatively shows” that Gonsalves’s admission was
voluntary and intelligent, as we must to find this error harmless.
(People v. Cross, supra, 61 Cal.4th at pp. 179–180.) We thus vacate the
judgment and sentence, which was based on his admission, and remand
for further proceedings. On remand, Gonsalves should be advised of
his rights and given the choice either to exercise or waive them.
5The appellation comes from Boykin v Alabama (1969) 395 U.S.
238, 243–244, and In re Tahl (1969) 1 Cal.3d 122, 130–133.
11
III. Section 654
The trial court sentenced Gonsalves to four years on the violation
of section 29800, subdivision (a)(1) (the second count) and to three
years concurrent on the attempted violation of section 422. Gonsalves
contends in committing both crimes he was engaged in one indivisible
course of conduct with a single purpose: threatening K.B. He therefore
argues that the trial court was obliged to stay one of these concurrent
terms to avoid punishing him doubly for the same conduct. We reject
this argument, concluding the trial court’s implied finding that the
crimes had different objects was supported by substantial evidence.
Section 654, subdivision (a), provides in relevant part that “[a]n
act or omission that is punishable in different ways by different
provisions of law may be punished under either of such provisions, but
in no case shall the act or omission be punished under more than one
provision.” Thus, “ ‘[i]f only a single act is charged as the basis of the
multiple convictions, only one conviction can be affirmed[.]’ ” (Neal v.
State of California (1960) 55 Cal.2d 11, 19 (Neal), overruled in part on
other grounds by People v. Correa (2012) 54 Cal.4th 331.) Where more
than a single act is charged, section 654 may still apply if multiple acts
form a single course of criminal conduct that is incident to one
objective. (People v. Corpening (2016) 2 Cal.5th 307, 311.) Whether
multiple acts form a single course of criminal conduct is a factual
determination, and depends on the intent and objective of the actor.
(Neal, at p. 19.) If the trial court imposes concurrent terms without
discussing section 654, it has made an implied factual finding that the
defendant had more than one criminal intent or objective (People v.
Osband (1996) 13 Cal.4th 622, 730), and we review that factual finding
12
for substantial evidence in the light most favorable to the judgment.
(People v. Jones (2002) 103 Cal.App.4th 1139, 1143 (Jones).)
When a defendant is punished for a crime that involves using a
gun, and for the separate crime of possessing the gun, the application of
section 654 “ ‘depends upon the facts and evidence of each individual
case.’ ” (People v. Bradford (1976) 17 Cal.3d 8, 22 (Bradford).) Where
the facts show that a defendant possesses a firearm “ ‘only in
conjunction with the primary offense,’ ” multiple punishments offend
section 654. (Bradford, at p. 22.) This is illustrated by Bradford:
when the defendant was stopped by a police officer after robbing a
bank, he wrested the officer’s gun away from the officer and then shot
at the officer. (Id. at p. 13.) Because the evidence showed that the
defendant took possession of the gun only for the purpose of committing
an assault with it, separate punishments for gun possession and
assault could not lie. (Id. at pp. 22–23; accord People v. Venegas (1970)
10 Cal.App.3d 814, 819, 821–822 [defendant who grabbed a gun in a
struggle and then shot someone with it could not be punished both for
possession and the shooting].) By contrast, evidence showing that the
defendant was already in possession of a gun before committing
another crime with the gun tends to demonstrate multiple criminal
objectives supporting separate sentences. (See, e.g., People v. Ortiz
(2012) 208 Cal.App.4th 1354, 1378–1379 (Ortiz) [defendant who arrived
at the scene of a kidnapping already in possession of firearm was
properly subject to separate punishments]; Jones, supra, 103
Cal.App.4th at pp. 1147–1148 [defendant who drove to ex-girlfriend’s
13
home in possession of gun and then shot into the home 15 minutes later
was properly subject to separate punishments].)6
In this case, evidence showed that K.B. and S.W. saw Gonsalves
while they were sitting in traffic on their way to the post office. Then
they went straight to the post office, and K.B. saw Gonsalves turn his
car into the post office parking lot as well. After S.W. got out of K.B.’s
car to run an errand inside the post office, Gonsalves approached K.B.
with the gun. This evidence supports a reasonable inference that
Gonsalves was already in possession of the gun for some purpose before
he encountered K.B. and S.W. sitting in traffic, and he
opportunistically used the gun to threaten K.B. rather than acquiring
and possessing the gun solely in order to threaten K.B. Viewing this
evidence in the light most favorable to the judgment, we conclude that
the trial court’s implicit determination that Gonsalves had separate
objectives in possessing the gun and threatening K.B. was supported by
substantial evidence. It therefore did not violate section 654 for the
trial court to impose concurrent sentences for these two crimes.
6 Our sister Courts of Appeal have sometimes articulated the rule
that “section 654 is inapplicable when the evidence shows that the
defendant arrived at the scene of his or her primary crime already in
possession of the firearm.” (Jones, supra, 103 Cal.App.4th at p. 1145;
see also Ortiz, supra, 208 Cal.App.4th at p. 1379.) Gonsalves takes
issue with this rule, contending that it is at odds with our Supreme
Court’s holding that a case involving multiple acts must always be
analyzed for section 654 violations using the single objective test that
Neal articulated. We have no occasion today to decide whether the
Jones-Ortiz rule controls in all cases. Rather, we follow Bradford’s
instruction to apply section 654 to the facts and evidence of this case.
14
IV. Assembly Bill No. 518’s Amendment to Section 654
Assembly Bill No. 518, which became effective January 1, 2022,
amended section 654, subdivision (a). Prior to the amendment, where a
trial court stayed a sentence under section 654, it was required to give
effect to the longest sentence and to stay shorter sentences. Under the
amendment, the trial court may select which sentence to stay. (Legis.
Counsel’s Dig., Assem. Bill No. 518 (2021–2022 Reg. Sess.).) Gonsalves
argues that, because one of his sentences should be stayed, we should
on remand direct the trial court to exercise its newly granted discretion
as to which sentence to stay. Because we have concluded that the trial
court’s decision not to stay either sentence was supported by
substantial evidence, we reject this argument.
DISPOSITION
The judgment and sentence are vacated and the matter is
remanded for further proceedings in accordance with this opinion.
15
_________________________
Van Aken, J.*
We concur:
_________________________
Stewart, Acting P.J.
_________________________
Miller, J.
People v. Gonsalves (A164048)
* Judge of the San Francisco Superior Court, assigned by the Chief
Justice pursuant to article VI, section 6 of the California Constitution.
16 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484040/ | IN THE SUPREME COURT OF PENNSYLVANIA
MIDDLE DISTRICT
COMMONWEALTH OF PENNSYLVANIA, : No. 272 MAL 2022
:
Respondent :
: Petition for Allowance of Appeal
: from the Order of the Superior Court
v. :
:
:
ERIC SCOTT POPEJOY, :
:
Petitioner :
COMMONWEALTH OF PENNSYLVANIA, : No. 273 MAL 2022
:
Respondent :
: Petition for Allowance of Appeal
: from the Order of the Superior Court
v. :
:
:
ERIC SCOTT POPEJOY, :
:
Petitioner :
ORDER
PER CURIAM
AND NOW, this 15th day of November, 2022, the Petition for Allowance of Appeal
is DENIED. | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484036/ | 2022 IL App (1st) 210628-U
SECOND DIVISION
November 15, 2022
No. 1-21-0628
NOTICE: This order was filed under Supreme Court Rule 23 and is not precedent except in the
limited circumstances allowed under Rule 23(e)(1).
IN THE
APPELLATE COURT OF ILLINOIS
FIRST JUDICIAL DISTRICT
ERIE INSURANCE EXCHANGE, )
) Appeal from the
Plaintiff-Appellee, ) Circuit Court of
) Cook County.
v. )
) No. 19 CH 12138
DRAGANA PETROVIC, )
) Honorable
Defendant-Appellant. ) Moshe Jacobius,
) Judge Presiding.
)
PRESIDING JUSTICE FITZGERALD SMITH delivered the judgment of the court.
Justices Ellis and Cobbs concurred in the judgement.
ORDER
¶1 Held: The circuit court properly granted summary judgment in favor of the insurer
declaring that it had no duty to indemnify or defend the insureds because the
underlying accident occurred while the insured was operating his personal vehicle
during the scope of employment, triggering the “auto exclusion” provision of the
policy.
¶2 This cause arises from a declaratory judgment action (735 ILCS 5/2-701 (West 2020)) filed
by the plaintiff-appellee, Erie Insurance Exchange (Erie) against the defendants, Aral Construction
No. 1-21-0628
Company (Aral) and Arunas Alasevicius (Alasevicius) and the defendant-appellant, Dragana
Petrovic (Petrovic), seeking a declaration that Erie was not obligated to defend or indemnify Aral
or Alasevicius in the underlying negligence claim brought by Petrovic. In that underlying
negligence claim, 1 Petrovic alleged that she sustained personal injuries and property damage when
a truck driven by Alasevicius struck her open car door as she was exiting her parked car and
knocked her unconscious. Petrovic further alleged that Aral owned or operated the truck that struck
her and that Alasevicius was acting in the scope of his employment with Aral at the time of the
accident. Both Aral and Alasevicius were insured under a commercial general liability policy with
Erie (the insurance policy) at that time. After receiving notice of the underlying negligence claim,
Erie filed the instant declaratory judgment action seeking a declaration that it was not obligated to
indemnify or defend Aral or Alasevicius. Specifically, Erie claimed that: (1) Alasevicius failed to
provide it with proper notice of the accident; and (2) that coverage was barred under the “auto
exclusion” provision of the insurance policy.
¶3 After discovery, Petrovic and Erie filed cross-motions for summary judgment seeking a
declaration regarding Erie’s duty to defend Aral and Alasevicius. The circuit court entered
judgment in favor of Erie and against Petrovic. On appeal, Petrovic seeks reversal of the circuit
court’s order arguing that: (1) Alasevicius provided Erie with sufficient notice of the accident; and
(2) the “auto exclusion” provision of the insurance policy did not bar coverage since, at the time
of the accident, Alasevicius was not acting as an employee of Aral but rather as its executive. For
the following reasons, we affirm.
¶4 I. BACKGROUND
¶5 The record below reveals the following undisputed facts and procedural history. The motor
1
At the time this appeal was filed, the underlying negligence action was still pending in the circuit court.
2
No. 1-21-0628
vehicle accident at the heart of the underlying negligence claim occurred on October 25, 2017, at
5706 North Richmond Street in Chicago. Alasevicius was driving a truck when he struck the open
car door of Petrovic’s parked car, as she was attempting to exit it, rendering Petrovic unconscious.
Alasevicius stopped the truck and exited, but when Petrovic regained consciousness, he left.
¶6 On December 13, 2018, Petrovic filed a negligence claim against Alasevicius. On August
28, 2019, she amended her complaint to include Aral. According to that amended complaint,
numerous negligent acts, and omissions by Alasevicius, including, inter alia, his failure to keep a
proper and sufficient lookout, to decrease his speed to avoid a collision, and to keep his truck under
proper control proximately resulted in Petrovic’s bodily injuries and damage to her car.
Specifically, the amended complaint alleged that Petrovic suffered a closed head injury with brain
damage including numerous side effects, such as vision impairment and headaches. Petrovic
incurred $300,000 in medical bills, $75,000 in lost income, and $2085.80 in damage to her car.
¶7 In addition, the amended complaint alleged that Aral owned and/or operated the truck
driven by Alasevicius and that Alasevicius was driving to a job site as part of his employment with
Aral when he struck Petrovic.
¶8 At the time of the accident, Alasevicius was personally insured by State Farm Insurance
(State Farm), while Aral was insured under the insurance policy with Erie.
¶9 The Erie policy titled “Fivestar Contractors Policy No. Q26-1820846” is a commercial
general liability policy and was issued to Aral for the effective dates of February 18, 2017, to
February 18, 2018, with a limit of $1 million. The policy provides liability coverage for bodily
injury and property damage arising from Aral’s business. As the policy states:
“We will pay those sums that the insured becomes legally obligated to pay as damages,
including punitive or exemplary damages, but only for vicarious liability to the extent
3
No. 1-21-0628
allowed by law because of ‘bodily injury’ or ‘property damage’ to which this insurance
applies. We have the right and duty to defend the insured against any ‘suit’ seeking those
damages. However, we will have no duty to defend the insured against any ‘suit’ seeking
damages for ‘bodily injury’ or ‘property damage’ to which this insurance does not apply.”
¶ 10 The insurance policy defines an “insured” in the following manner:
“SECTION II—WHO IS AN INSURED
1. If you are designated in the Declarations as
***
d. An organization other than a partnership, joint venture, or a limited liability
company, you are an insured. Your ‘executive officers’ and ‘directors’ are insureds,
but only with respect to their duties as your officers or directors. Your stockholders are
also insureds but only with respect to their liability as stockholders.
***
2. Each of the following is also an insured:
a. Your ‘volunteer workers’ only while performing duties related to the conduct of your
business, or your ‘employees,’ other than *** your ‘executive officers’ (if you are an
organization other than a partnership, joint venture or limited liability company) ***
but only for acts within the scope of their employment by you or while performing
duties related to the conduct of your business.”
¶ 11 With respect to the scope of coverage the policy contains numerous exemptions including,
relevant to this appeal, the “auto exclusion” provision, which states that the insurance does not
apply to:
“ ‘Bodily injury’ or ‘property damage’ arising out of the ownership, maintenance, use or
4
No. 1-21-0628
entrustment to others of any *** ‘auto’ *** owned or operated by or rented or loaned to
any insured. Use includes operation and ‘loading and unloading.’ ”
This provision further provides:
“This exclusion applies even if the claims against any insured allege negligence or other
wrongdoing in the supervision, hiring, employment, training or monitoring of others by
that insured, if the ‘occurrence’ which caused the ‘bodily injury’ or ‘property damage’
involved the ownership, maintenance, use or entrustment to others of any *** ‘auto’ ***
that is owned or operated by or rented or loaned to any insured.”
¶ 12 With respect to the timing of a “bodily injury” or “property damage,” the policy provides
that each “will be deemed to have been known to have occurred at the earliest time when” any
insured or any employee authorized by Aral “to give or receive notice of an ‘occurrence’ or claim”:
(1) reports all or part of the injury or property damage to Erie “or any other insurer;” (2) receives
a written or verbal demand or claim for damages based on such an injury or property damage; or
(3) becomes aware by any other means that such an injury or damage has occurred or has begun
to occur.
¶ 13 The insurance policy further contains numerous conditions. Relevant to this appeal, the
condition titled “Duties in the Event of Occurrence, Offense, Claim or Suit” requires the insured
to notify Erie “as soon as practicable of any ‘occurrence’ or an offense which may result in a
claim.” In addition, this provision states that if a claim is made or a suit is brought against an
insured, the insured must “immediately record the specifics” of the claim or suit, as well as “notify”
and provide Erie with written notice of the claim or suit “as soon as practicable.”
¶ 14 Nearly two years after the accident, on September 10, 2019, Alasevicius notified Erie of
the accident and the underlying lawsuit. A month later, on October 21, 2019, Erie filed the instant
5
No. 1-21-0628
declaratory judgement action seeking a declaration that it was not required to defend or indemnify
Alasevicius or Aral under the insurance policy. Only Petrovic participated in the declaratory
judgment action. Neither Aral nor Alasevicius filed any pleadings in the circuit court.
¶ 15 During discovery, Alasevicius was deposed and provided the following undisputed
testimony. Alasevicius is a self-employed carpenter. In 2007 he incorporated his company, Aral.
Alasevicius is the president and sole officer and employee of the company. Unlike subcontractors
for Aral, who receive 1099 forms, as an employee of Aral, Alasevicius receives a salary and a W-
9 form.
¶ 16 At the time of the accident, on October 25, 2017, Alasevicius personally owned the 2010
Toyota Tundra truck that struck Petrovic. He purchased the truck in his own name and with a
personal car loan that he paid off in 2015. The car was insured through his personal insurance with
State Farm with a liability limit of $25,000. Alasevicius paid his car insurance monthly using his
personal credit card. He never rented the truck to Aral, nor placed any markings on it denoting that
it was the property of Aral.
¶ 17 On the date of the incident, Alasevicius was operating his truck for work, driving it between
two construction sites, at Lake Avenue in Wilmette and at Hollywood Avenue in Chicago, where
he intended to check on a delivery of materials. One of his subcontractors, Rafal Majestic, was in
the front passenger seat of the truck, when Alasevicius struck Petrovic.
¶ 18 Alasevicius notified State Farm about the accident on October 25, 2018, twelve days after
Petrovic filed her original negligence complaint against him. He stated that at the time of the
accident, he approached Petrovic to make sure that she was alright, after which they both agreed
not to exchange insurance information since there seemed to be no damage to either vehicle, and
Petrovic appeared to be unharmed. Alasevicius was shocked when, one year later, he received
6
No. 1-21-0628
notice of Petrovic’s negligence complaint against him.
¶ 19 Alasevicius was aware that Erie insured Aral at the time of the accident and that under that
policy he had an obligation to notify Erie of the incident. Alasevicius, however, acknowledged
that he did not notify Erie about the accident until September 10, 2019. He explained that he did
so immediately after he received Petrovic’s amended complaint naming Aral as an additional
defendant in the underlying negligence suit. Prior to this he did not review his insurance policy
with Erie.
¶ 20 On September 9, 2020, Erie filed a motion for summary judgment asserting that it was
entitled to judgment as a matter of law because: (1) Alasevicius breached the notice conditions of
the insurance policy by waiting nearly two years after the accident to notify Erie of what had
occurred; and (2) the “auto exclusion” provision barred coverage of Aral and Alasevicius for the
accident because Alasevicius was operating his own truck when he struck Petrovic.
¶ 21 On September 22, 2020, Petrovic filed her own motion for summary judgment asserting,
inter alia, that she was entitled to judgment as a matter of law because: (1) Alasevicius had met
the notice conditions of Erie’s insurance policy by timely notifying his personal insurer, State
Farm; and (2) the “auto exclusion” provision did not apply.
¶ 22 On January 5, 2021, after extensive arguments, the circuit court entered summary
judgment in favor of Erie and against Petrovic. The court found that because there was no dispute
that the accident arose out of the use of a truck “owned and operated” by Alasevicius the “auto
exclusion” provision in the insurance policy barred coverage. The court further held that because
the “auto exclusion” exception was dispositive, it did not need to reach the late notice issue raised
by Erie.
¶ 23 On February 3, 2021, Petrovic filed a motion to reconsider, arguing that under the plain
7
No. 1-21-0628
language of the insurance policy, because Alasevicius was an executive officer, he was only an
“insured” and therefore could only be excluded from coverage under the “auto exclusion”
provision with respect to the performance of his duties as an executive officer. According to
Petrovic, because Erie failed to establish that Alasevicius was managing the business and affairs
of the corporation, i.e., that he had his “corporate hat” on, at the time of the accident, the “auto
exclusion” provision did not apply.
¶ 24 On March 17, 2021, the circuit court denied Petrovic’s motion to reconsider. The court
found that throughout the proceedings Petrovic had made numerous judicial admissions that
Alasevicius could be both an employee and an executive officer of Aral, and that, when the
accident occurred, Alasevicius was, in fact, acting in his role as an employee, triggering the “auto
exclusion” provision. The court further found that the exception applied regardless of Alasevicius’
status as an executive officer or an employee. In addition, the court held that even if the “auto
exclusion” provision could not be triggered by Alasevicius acting as an executive officer, it
nonetheless applied because it was clear that at the time of the accident, he had loaned the truck to
Aral. Petrovic now appeals.
¶ 25 II. ANALYSIS
¶ 26 On appeal, Petrovic contends that the circuit court improperly held that the “auto
exclusion” provision of the insurance policy applied to Alasevicius and therefore barred coverage
for the accident. She contends that Erie failed to provide any evidence that at the time of the
accident Alasevicius was acting in the scope of his duties as an “executive officer” of Aral, so as
to be considered an “insured” under the “auto exclusion” provision. In response, Erie contends that
under the plain language of the insurance policy, Alasevicius can simultaneously act as an
“employee” and an “executive officer” of Aral and was therefore an “insured” under the “auto
8
No. 1-21-0628
exclusion” provision. In addition, Erie argues that regardless of whether the “auto exclusion”
provision bars coverage, it has no duty to defend Aral or Alasevicius because Alasevicius failed
to notify it of the accident until two years after its occurrence and therefore breached the “notice”
conditions of the policy. For the following reasons, we find that the “auto exclusion” provision
dispositively bars coverage and that the circuit court properly granted summary judgment in favor
of Erie.
¶ 27 At the outset, we note that “the construction of an insurance policy and a determination of
the rights and obligations thereunder are questions of law for the court and appropriate subjects
for disposition by summary judgment.” Konami (America), Inc. v. Hartford Insurance Co. of
Illinois, 326 Ill. App. 3d 874, 877 (2002). Summary judgment is appropriate “if the pleadings,
depositions, and admissions on file, together with the affidavits, if any, show that there is no
genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter
of law.” 735 ILCS 5/2-1005(c) (West 2020); see also Green4all Energy Solutions Inc. v. State
Farm Fire & Casualty Co., 2017 IL App (1st) 162499, ¶ 21; see also Virginia Surety Co. v.
Northern Insurance Co. of New York, 224 Ill. 2d 550, 556 (2007). Where, as here, cross-motions
for summary judgment are filed, the parties acknowledge that there are no material questions of
fact and that the case disposition turns solely on the resolution of legal issues regarding the
construction of the insurance policy. Green4all Energy Solutions, 2017 IL App (1st) 162499, ¶ 21;
see also Founders Insurance Co. v. Munoz, 237 Ill. 2d 424, 432 (2010); American Family Mut.
Ins. Co. v. Fisher Development, Inc., 391 Ill. App. 3d 521, 525 (2009). We review the circuit
court’s decision on cross-motions for summary judgment de novo. Virginia Surety Co., 224 Ill. 2d
at 556; see also A.B.A.T.E. of Illinois, Inc. v. Quinn, 2011 IL 110611, ¶ 22.
¶ 28 Just as with any contract, in interpreting the provisions of an insurance policy, a reviewing
9
No. 1-21-0628
court’s primary objective is to ascertain and give effect to the intention of the parties, as expressed
in the policy language. Valley Forge Insurance Co. v. Swiderski Electronics, Inc., 223 Ill. 2d 352,
362 (2006). Hobbs v. Hartford Insurance Co. of the Midwest, 214 Ill. 2d 11, 17 (2005). To
ascertain the meaning of the policy, the court must construe the policy as a whole, as well as
consider the risks undertaken, the subject matter that is insured, and the purpose of the entire
contract. Outboard Marine Corp. v. Liberty Mut. Ins. Co., 154 Ill. 2d 90, 108 (1992). Where the
words used in the policy, given their plain and ordinary meaning, are unambiguous, they must be
applied as written. Valley Forge Insurance, 223 Ill. 2d at 363. However, if the words in the policy
are susceptible to more than one reasonable interpretation, they will be considered ambiguous and
will be strictly construed in favor of the insured and against the insurer who drafted the policy. Id.
see also Outboard Marine Corp., 154 Ill. 2d at 108.
¶ 29 To determine whether an insurer has a duty to defend an action against the insured, a
reviewing court must compare the allegations of the underlying complaint to the relevant portions
of the insurance policy. Green4all Energy Solutions, 2017 IL App (1st) 162499, ¶ 24; see also
Valley Forge Insurance, 223 Ill. 2d at 363; Outboard Marine Corp., 154 Ill. 2d at 108. The
allegations must be construed liberally in favor of the insured. Valley Forge Insurance, 223 Ill. 2d
at 363. If the underlying complaint alleges facts that fall “within or potentially within” the coverage
of the policy, the insurer is obligated to defend its insured even if the allegations are “groundless,
false, or fraudulent,” and even if only one of several alleged theories of recovery in the complaint
falls within the potential coverage of the policy. Valley Forge Insurance, 223 Ill. 2d at 363; see
also United States Fidelity & Guaranty Co. v. Wilkin Insulation Co., 144 Ill. 2d 64, 73 (1991).
Therefore, an insurer may not justifiably refuse to defend an action against the insured “unless it
is clear from the face of the underlying complaint[] that the allegations fail to state facts which
10
No. 1-21-0628
bring the case within, or potentially within the policy’s coverage.” (Emphasis in original.) Wilkin
Insulation Co., 144 Ill. 2d at 73; see also Aetna Casualty & Surety Co. v. Prestige Casualty Co.,
195 Ill. App. 3d 660, 664 (1990) (“Unless the complaint, on its face, clearly alleges facts which, if
true, would exclude coverage, the potentiality of coverage is present, and the insurer has a duty to
defend.”).
¶ 30 An insurer, however, may refuse to defend when the underlying complaint considered in
light of the entire insurance policy, precludes the possibility of coverage. Illinois Emcasco
Insurance Co. v. Northwestern National Casualty Co., 337 Ill. App. 3d 356, 359-60 (2003). A
court may look beyond the allegations of the underlying complaint if the coverage issue involves
the question of whether the party asserting coverage is a proper insured under the policy.
Transcontinental Insurance Co. v. National Union Fire Insurance Company of Pittsburgh, 278 Ill.
App 3d 357, 368 (1996); see also State Farm Fire & Casualty Co. v. Shelton, 176 Ill. App. 3d 858,
867 (1988); see also Pekin Insurance Co. V. Wilson, 237 Ill. 2d 446, 460 (2010) (holding that the
trial court may look beyond the underlying complaint in determining the duty to defend); see also
American Economy Insurance Co. v. Holabird & Root, 382 Ill. App. 3d 1017, 1024, 1031-32
(2008) (holding that a trial court “need not wear judicial blinders” and may consider evidence
beyond the underlying complaint appropriate to a motion for summary judgment to determine
whether there is a duty to defend); Fidelity & Casualty Co. of New York v. Envirodyne Engineers,
Inc., 122 Ill. App. 3d 301, 304-05 (1983) (holding that an insurer may properly challenge the
existence of a duty to defend “by offering evidence to prove that the insured’s actions fell within
the limitations of one of the policy’s exclusions.”)
¶ 31 In the present case, after reviewing the “auto exclusion” provision in the insurance policy
and comparing it with the allegations in Petrovic’s amended complaint and the pleadings and
11
No. 1-21-0628
exhibits offered by the parties we find that Petrovic failed to state facts which either actually or
potentially bring the case within the policy’s coverage.
¶ 32 The insurance policy to Aral is a commercial general liability policy, which contains an
“auto exclusion” provision, explicitly precluding coverage for “bodily injury” or “property
damage” “arising out of the ownership, maintenance, use or entrustment to others of any *** ‘auto’
*** owned or operated by *** any insured.” The policy defines an “insured” as, inter alia: (1)
Aral; (2) Aral’s “executive officers” and “directors” “but only with respect to their duties as [the
company’s] officers or directors”; and (3) Aral’s “ ‘employees’ other than *** [the company’s]
‘executive officers’ *** but only for acts within the scope of their employment by [Aral] or while
performing duties related to the conduct of [Aral’s] business.”
¶ 33 Here Petrovic’s amended complaint seeks recovery for bodily injury and property damage
“arising out of” “ownership” and “use” of an “auto” “owned and operated” by an insured, namely
Alasevicius. Specifically, Petrovic’s amended complaint alleged that she sustained a closed head
injury, incurred medical bills, and property damage to her vehicle when she was struck by a truck
operated by Alasevicius in the scope of his employment with Aral. The complaint further alleged
that at the time of the accident Alasevicius was driving to one of Aral’s job sites, and that Aral
“owned and/or operated” the truck used in the accident. In his deposition, Alasevicius stated that
he personally paid for and owned the truck that struck Petrovic. In addition, he admitted that he
was both the president and sole employee of Aral and that at the time of the accident he was using
his truck for his work with Aral. Specifically, Alasevicius averred that he was driving from one
job site to another to check on a delivery of materials and that he had a subcontractor inside his
truck.
¶ 34 Accordingly, comparing the plain language of the “auto exclusion” provision to Petrovic’s
12
No. 1-21-0628
amended complaint and the evidence offered by Alasevicius’ deposition, there can be no dispute
that the accident alleged in the underlying complaint arose from the “use” or “operation” of an
“auto” “owned and operated” by an insured, namely Alasevicius, so as to bar coverage and absolve
Erie from defending Aral and Alasevicius in the underlying lawsuit. See e.g., Northbrook Property
& Casualty Co. v. Transportation Joint Agreement, 194 Ill. 2d 96 (2000) (after examining an
identical “auto exclusion” provision in a commercial general liability policy covering a school
district, the court held that the insurer had no duty to defend the school district against its students’
lawsuit arising from a school bus’s collision with a train because the injuries arose out of the “use
or operation” of a motor vehicle—i.e., the school bus); Oakley Transport v. Zurich Insurance Co.,
271 Ill. App. 3d 716, 726 (1995) (after examining an identical “auto exclusion” provision in a
commercial general liability policy covering a trucking company, the court held that the insurer
had no duty to defend the trucking company in a negligence lawsuit arising from an accident
caused by an employee of the trucking company running off the road while operating a semi-truck
during the course of his employment.)
¶ 35 Our conclusion is supported by the impetus for “auto exclusion” provisions in commercial
general liability policies, such as Erie’s. Oakley Transport, 271 Ill. App. 3d at 726. As we have
explained in the past:
“The purpose of [an auto] exclusion [provision] is related to the purpose of business
liability insurance in general. Standard commercial liability policies are issued to cover all
hazards incident to the operation of a business with the exception of certain excluded risks,
including those involved in the ownership maintenance, use or entrustment of an ‘auto.’
The premium charged by the [commercial general liability] insurer reflects the
underwriting objective of placing automobile accidents beyond the scope of coverage.
13
No. 1-21-0628
These latter risks involve unique hazards to which the general business of the insured is
not subject. For that reason, they are generally covered as a special class by an automobile
liability policy[.]” Id.
Accord Mid-Continent Casualty Co. v. Advantage Medical Elecs., LLC, 196 So. 3d 238, 245
(Ala. 2015) (the purpose of an “auto exclusion” in a commercial general liability policy “is to
proscribe coverage for liability that should more properly fall under an automobile-liability
policy”); see also BP America, Inc. v. State Auto Property & Casualty Insurance Co., 2005 OK
65, 15 (refusing to read “auto exclusion” provision so that it would “unilaterally convert a
general liability policy –without motor vehicle coverage—into a[n] automotive liability policy.”)
¶ 36 Nonetheless, on appeal, Petrovic attempts to avoid the effect of the “auto exclusion”
provision by arguing that Alasevicius is not an “insured” under the Erie policy because, as an
“executive officer,” he is covered (and therefore can only be excluded from coverage under the
“auto exclusion” provision) with respect to his duties as an executive officer. Petrovic asserts that
Erie was therefore required to affirmatively establish that Alasevicius was acting as an executive
officer at the time of the accident, i.e., that he was managing the business affairs of the corporation,
if it wished to avoid coverage. For the following, we disagree.
¶ 37 At the outset, we note that Petrovic’s argument contradicts her position in the circuit court.
The record reveals that throughout the trial court proceedings, Petrovic made numerous judicial
admissions that under the insurance policy Alasevicius could be both an executive officer and an
employee, and that at the time of the accident he was in fact performing work as an ordinary
employee of Aral, so as to trigger the “auto exclusion” provision.
¶ 38 A judicial admission is a deliberate, clear, unequivocal statement by a party concerning a
concrete fact within that party’s knowledge. 1550 MP Road, LLC v. Teamsters Local Union No.
14
No. 1-21-0628
700, 2019 IL 123046, ¶ 37. Judicial admissions include admissions in pleadings as well as
admissions in open court. Dremco, Inc. v. Hartz Construction Co., 261 Ill. App. 3d 531, 536
(1994); see also Bank of N.Y. Mellon v. Wojcik, 2019 IL App (1st) 180845, ¶ 31 (An admission in
an unverified pleading signed by an attorney is binding on the party as a judicial admission). The
effect of a judicial admission is to withdraw a fact from issue, making it unnecessary for the
opposing party to introduce evidence in support thereof. Freedberg v. Ohio Nat’l Ins. Co., 2012
IL App (1st) 110938, ¶ 31. Judicial admissions are conclusively binding on a party and, thus, may
not be contradicted in a motion for summary judgment or at trial. 1550 MP Road, 2019 IL 123046,
¶ 37.
¶ 39 In the present case, Petrovic made numerous unequivocal judicial admissions that
Alasevicius was an employee not performing work as an executive officer. In her motion for
summary judgment, she stated that “[a]t the time of the accident, Alasevicius was an employee of
Aral, and was operating a motor vehicle owned by him personally in the furtherance of his
employment with Aral.” Similarly, in her reply brief to her motion for summary judgment, Petrovic
repeatedly argued that Alasevicius was an employee and not an executive officer. Specifically, she
began, “At the time of the accident, Alasevicius was an employee of Aral, and was operating a
motor vehicle owned by him personally in the furtherance of his employment with Aral.” She went
on, “In the accident Alasevicius was an employee of Aral, not an Executive Officer.” (Emphasis
added). Petrovic then explained “Nothing allege[d] in the underlying pleadings, or common sense,
would sustain an argument that a building contractor, an employee, traveling between [two]
jobsites, was in a role as an officer or director of a company. He was just acting as an employee
for a construction company, and there is no evidence otherwise.” (Emphasis added). Petrovic then
concluded that “Alasevicius was an employee of Aral at the time of the accident. That is not in
15
No. 1-21-0628
dispute.”
¶ 40 In addition, during the hearing on the cross-motions for summary judgment, Petrovic’s
counsel admitted with absolute certainty that at the time of the accident, Alasevicius was an
employee and that he was not acting in his capacity as an executive officer. As the record of that
hearing establishes:
“THE COURT: I thought you just agreed that he was acting as director or officer.
[Perovic’s counsel] MR. MARKS: No, I don’t think he was acting as a director at the
time when this—he was acting as the employee, which he is an actual employee of the
company.
THE COURT: Hold on. I’ll let you speak. I just need to understand what you are saying.
I just asked you, I said, do you agree that he was acting as an officer, and what I
understood you to say was, yeah, he was in the construction business. He was the president,
so he was basically carrying on a business as president of this construction company,
overseeing the construction.
Didn’t you just say that?
MR. MARKS: I said he was the president of the company, but as the—he was not acting
as the president of the company. He was an employee of the company at this time going
between job sites, dropping off material, taking a nail out, measuring for whatever a
contractor does. He was an actual employee of Aral. He wasn’t acting as the president. He
wasn’t doing things that would necessitate triggering the errors and omissions issues, which
would be something in which he would be an executive officer doing something. That’s
not what was happening here. Here he was just an employee.
***
16
No. 1-21-0628
THE COURT: All of your employees other than *** your executive officers *** but
only for acts within the scope of their employment by you or while performing these
duties related to the conduct of your business. So, it was not within the scope of his
employment per se to be driving around, was it?
MR. MARKS: Yes, that’s what he does. He has to go to job sites.
THE COURT: Well, okay. As what? As president or --
MR. MARKS: No.
THE COURT: How can he -- he’s either-- he’s either one or the other. You’re saying
he was the president, but he was also an employee.
MR. MARKS: Exactly.
THE COURT: How can he be both?
MR. MARKS: Because he gets a salary. He’s a salaried employee. He gets a W-9.
He’s operating as an employee of a corporation.”
¶ 41 These statements by counsel bind Petrovic to the facts admitted. See Dremco, 261 Ill. App.
3d 531. Accordingly, since by Petrovic’s own admissions Alasevicius was acting as Aral’s
“employee” at the time of the accident, he was an “insured” under the policy and the “auto
exclusion” provision applies to bar coverage of the accident.
¶ 42 What is more, even if, as Petrovic urges us to do, we were to disregard her judicial
admissions before the circuit court and look solely at the plain language of the insurance policy,
we would nonetheless find that whether Alasevicius was an executive officer, or an ordinary
employee is of no consequence, since under either scenario he was an “insured” at the time of the
accident.
¶ 43 By its plain and ordinary terms, the “auto exclusion” provision applies to “any insured,”
17
No. 1-21-0628
and therefore to both Aral’s “executive officers” and “employees.”
¶ 44 Petrovic nonetheless asserts that under the plain language of the policy Alasevicius cannot
qualify as both an “executive officer” and an ordinary “employee.” In support, she points out that
the policy’s definition of an “insured” includes, inter alia, two distinct categories: (1) “executive
officers” performing their executive duties; and (2) “ ‘employees,’ other than *** [Aral’s]
‘executive officers’” “acting within the scope of their employment” or “performing duties related
to the conduct of [Aral’s] business.” (Emphasis added). Relying on the phrase “other than ***
your ‘executive officers’ ” in the second category naming employees as additional insureds,
Petrovic argues that the two categories of insureds are mutually exclusive. We disagree.
¶ 45 Contrary to Petrovic’s position, the plain an ordinary reading of the policy’s different
categories of insureds reveals that the definition of an insured is expansive rather than restrictive.
The policy’s reference to “employees” “other than” “executive officers” does not eliminate
coverage for those “employees” who are also “executive officers.” Rather it provides an additional
classification of an employee who is entitled to coverage as an “insured.” The distinction is made
only to explain that “executive officers” are covered for their duties as executive officers and
“employees” for any acts within the scope of their employment. Nothing in the policy limits a
person to coverage as either an “executive officer” or an “employee.” Nor does Petrovic cite to
any legal authority to support this position.
¶ 46 Her only citation is to Illinois Insurance Guaranty Fund v. Santucci, 384 Ill. App. 3d 927
(2008), which held that a commercial general liability policy did not cover Santucci because he
was not acting in his capacity as an executive officer when he allegedly failed to prevent his horses
from escaping his home and causing an accident. That decision, however, did not involve the
interpretation of an “auto exclusion,” provision, nor did it in any way address the interplay between
18
No. 1-21-0628
an insured’s status as an employee and/or an executive officer of the corporation. Accordingly, it
is completely irrelevant.
¶ 47 While our research has unveiled no Illinois decision directly on point, we find the holding
of the Montana Supreme Court in Brabeck v. Employers Mutual Casualty Co., 2000 MT 468, 16
P.3d 355 (2000) instructive. In that case, an insurer brought a declaratory judgment action seeking
a declaration that it had no duty to defend a corporation against a claim in the underlying lawsuit
that it was vicariously liable for the negligent driving of the daughter of one of its employees. Id.
¶ 1. At the time of the accident, the daughter was driving a car owned by her father, Gerald, who
was both an executive officer and an employee of the corporation. Id. ¶ 3. The underlying
negligence complaint alleged that the daughter was acting on behalf of the corporation by operating
Gerald’s car at his request and for the purpose of business or work to be performed for the benefit
of the corporation. Id. ¶ 11. Gerald owned the vehicle involved in the accident and had it personally
insured. Id. ¶ 3. Gerald was also an insured under a commercial general liability policy of the
corporation. Id. ¶ 3. The language of that policy is undistinguishable from the one in the instant
case. Id. ¶¶ 13-14. It contains an identical “auto exclusion” provision and the same definition of
“insureds.” Id.
¶ 48 In Brabeck, the Montana Supreme Court found Gerald’s “alleged conduct within his
capacity either as an executive officer or an employee, thereby rendering him an insured with
respect to the alleged conduct.” Id. ¶ 17. As the court explained: “Gerald is both an executive
officer and an employee of the corporation. Thus, he qualifies as an insured whether he was
performing duties in his capacity as the corporate secretary or in his capacity as an employee of
the corporation.” Id. ¶ 15. The court therefore found that the “auto exclusion” provision applied to
Gerald and that the insurer was not required to indemnify or defend the corporation, Gerald, or his
19
No. 1-21-0628
daughter for the “bodily injuries” and “property damage” sustained in the automobile accident. Id.
¶ 18.
¶ 49 We agree with Brabeck’s interpretation of the insurance policy and find that just as in that
case, here Alasevicius qualified as an “insured” regardless of whether at the time of the accident,
he was performing in his capacity as the president of Aral or as an ordinary employee. We find
this to be particularly true where Alasevicius runs a carpentry business and is both its sole
executive officer and employee.
¶ 50 Petrovic’s interpretation of the insurance policy to the contrary would lead to an absurd
result. Instead of providing comprehensive coverage to sole proprietors like Alasevicius,
Petrovic’s reading would confine Alasevicius’ coverage to his role as an executive officer, i.e., his
business strategy and decision-making, thereby eliminating any liability coverage for his field
work. Since Alasevicius is the sole employee of his carpentry business, aside from covering the
present automobile accident, Petrovic’s interpretation would eliminate coverage for literally every
other liability claim, thereby rendering his coverage illusory. See Middlesex Mut. Assurance Co.
v. Fish, 738 F. Supp. 2d 124, 135 (D. Me 2010) (refusing to interpret an insurance policy with
identical language to that of Erie’s as eliminating the executive officer from coverage when he
does the work of an ordinary employee because, under such an interpretation, coverage would be
“largely illusory, covering [the insured] only for a minute percentage of the risks;” noting that such
an argument “for practical purposes takes general liability coverage away from the [insured],
insuring only his most momentary and risk-free activity[,]” i.e., providing him coverage “while he
sign[s] the corporate tax returns but not while he ma[k]e[s] and install[s] cabinets”).
¶ 51 We further disagree with Petrovic’s position that the language of the policy is ambiguous
and therefore must be construed in her favor. Our courts have repeatedly held that “although
20
No. 1-21-0628
‘creative possibilities’ may be suggested,” when considering the existence of an ambiguity in an
insurance policy, “only reasonable interpretations will be considered.” Hobbs, 214 Ill. 2d at 17;
see also State Farm Mut. Auto. Ins. Co. v. Murphy, 2019 IL App (2d) 180154, ¶ 26. Moreover, the
court will not adopt an interpretation which rests on “gossamer distinctions” that the average
person, for whom the policy is written, cannot be expected to understand. Founders Ins. Co. v.
Munoz, 237 Ill. 2d 424, 433 (2010).
¶ 52 In the present case, Petrovic’s interpretation of the policy language is neither reasonable,
nor supported by legal authority. Petrovic cites to no decision in which a court has held that the
terms of the “auto exclusion” provision such as the one in the instant case are ambiguous. In
addition, Petrovic is not an insured under the policy. Accordingly, her attempt at sacrificing the
robust coverage provided to Aral and Alasevicius in favor of exceptionally limited coverage,
which would include the instant automobile accident, is at best suspect, and at worst, made
purely for personal gain. Under these circumstances, “we will not strain to find an ambiguity
where none exists.” Hobbs, 214 Ill. 2d at 17.
¶ 53 IV. CONCLUSION
¶ 54 For the aforementioned reasons, we affirm the judgment of the circuit court.
¶ 55 Affirmed.
21 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484035/ | NOTICE: This order was filed under Supreme Court Rule 23 and is not precedent except
in the limited circumstances allowed under Rule 23(e)(1).
2022 IL App (3d) 200515-U
Order 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 21st Judicial Circuit,
) Kankakee County, Illinois,
Plaintiff-Appellee, )
) Appeal Nos. 3-20-0515 and 3-20-0529
v. ) Circuit No. 89-CF-739
)
BERNON L. HOWERY, ) Honorable
) Michael C. Sabol,
Defendant-Appellant. ) Judge, Presiding.
____________________________________________________________________________
JUSTICE DAUGHERITY delivered the judgment of the court.
Justices Holdridge and McDade concurred in the judgment.
____________________________________________________________________________
ORDER
¶1 Held: The court did not err by denying defendant’s motion for leave to file a successive
postconviction petition.
¶2 Defendant, Bernon L. Howery, appeals the Kankakee County circuit court’s denial of his
motion for leave to file a successive postconviction petition. Defendant argues that he stated a
colorable claim of actual innocence based upon new developments relating to the scientific
investigation of fires. We affirm.
¶3 I. BACKGROUND
¶4 The State charged defendant with four counts of first degree murder (Ill. Rev. Stat. 1989,
ch. 38, ¶ 9-1(a)(2)), four counts of felony murder (id. ¶ 9-1(a)(3)), and one count of aggravated
arson (id. ¶ 20-1.1). The charges stemmed from a fire that occurred at Linda Walls’s home in the
early morning hours of December 9, 1989, which killed her four children. Evidence at the bench
trial established that defendant had been in a relationship with Walls that ended in the fall of
1989, and he was the father of three of her children. Defendant had been at Walls’s house late on
December 8 and into the early morning hours of December 9. The fire was discovered at
approximately 1 a.m. on December 9. Defendant asked for and was given a lighter before other
adults that had been present at Walls’s home left. In one of his statements, defendant admitted he
had a lighter that night but stated one of the children gave it to him. Additionally, defendant had
stated that he warned Walls not to leave clothing on the floor of the basement or underneath the
stairs. When asked how he knew the fire originated in clothing, defendant had no explanation.
¶5 Investigators agreed that there were two separate fires in the house with different points
of origin. The more destructive fire began in a storage area underneath the stairs that led from the
first to second floor. A basket with fabric was located in the doorway that led underneath those
stairs. An unrelated fire started in a pile of clothing near the dryer in the basement. Two
witnesses agreed that the pile of clothing in the basement had a peculiar smell. Investigators
agreed that none of the appliances malfunctioned and there were no indications of electrical
problems.
¶6 Expert witness John DeHaan conducted an investigation as to the cause and origin of the
fire. He investigated the scene of the fire and reviewed photographs. He concluded there were
two separate fires that occurred in the house. As to the fire in the basement, he noted that it was
2
confined to an area around the dryer including a burnt pile of clothing. He stated there was no
direct fire damage to the basement ceiling which indicated there was no fire extension from the
fire on the first floor. DeHaan conducted an extensive investigation and ruled out accidental
causes. The lack of accidental causes and the existence of two separate and unrelated fires led
DeHaan to believe the fires were deliberately started. He opined the fires were started by a direct
flame such as a lighter or match. DeHaan noted it was possible the fire could ignite with a lit
cigarette but it would take half an hour to two hours to occur, which was unlikely due to the
timeline of when the adults left the home and when the fire occurred. DeHaan did not have
positive visual evidence that an accelerant was used and could not conclusively determine if one
was used.
¶7 A chemist testified there was a microliter of kerosene and an unidentified amount of
heavy petroleum distillate on defendant’s shoes. Another chemist testified heavy petroleum
distillate was detected on defendant’s pants and aluminum cans and plastic drinking cups
obtained from the scene. There was testimony that while defendant was at Walls’s home prior to
the fire starting he consumed alcoholic beverages.
¶8 Defendant was found guilty on all counts and ultimately sentenced to life in prison. His
convictions were affirmed on appeal. People v. Howery, 178 Ill. 2d 1 (1997). Additionally,
defendant filed various unsuccessful collateral proceedings. See People v. Howery, No. 3-05-
0674 (2007) (unpublished order under Illinois Supreme Court Rule 23); People v. Howery, 2011
IL App (3d) 090650-U; People v. Howery, 2019 IL App (3d) 160603.
¶9 In March 2020, defendant filed a motion for leave to file a successive postconviction
petition alleging actual innocence, which is the subject of the instant appeal. As relevant here,
defendant argued that developments in the scientific investigation of fires constitutes new
3
evidence of actual innocence. Defendant argued that the new developments indicate that his
conviction was based on evidence that was repudiated and that the expert testimony used to
convict him was unreliable. Specifically, he argued that the National Fire Protection Association
(NFPA), in its NFPA 921 Guide for Fire and Explosion Investigations—the relevant portion of
which was attached to the motion—repudiated the negative corpus methodology whereby it is
determined that a fire was deliberately set based upon the elimination of accidental causes. He
further argued that since DeHaan based his opinion that the fire was deliberate on the fact that he
ruled out accidental causes, his opinion was not reliable and may not even be admissible today.
Defendant noted
“that the use of logic and deductive reasoning as an analytical method is still
endorsed by the NFPA in limited circumstances where, for example, the source of
the ignition cannot be identified but can logically be inferred, where alternative
ignition sequences have been considered and eliminated, and where it is
consistent with all the known facts. *** One of the limited circumstances that
lends itself to use of this method is when there are multiple fires.”
Defendant’s motion then acknowledged that DeHaan’s opinion may remain admissible today
because DeHaan opined there were two separate fires but still asserted that because of the
repudiation of the negative corpus methodology the evidence in his case should be reexamined.
¶ 10 In response to the motion, the court advised that it did not have jurisdiction due to a
pending appeal and directed defendant to refile the motion when the appeal was concluded. In
May 2020, defendant filed a supplement to the March 2020 motion for leave to file a successive
petition, which largely contained the same allegations as the March filing. After review of both
4
the March and May filings, the court denied leave. Defendant filed a motion to reconsider, which
the court denied. Defendant appeals.
¶ 11 II. ANALYSIS
¶ 12 Defendant argues that the court erred by denying him leave to file a successive
postconviction petition because his motion stated a colorable claim of actual innocence based
upon the repudiation of the negative corpus methodology which DeHaan based his opinion on.
¶ 13 “[A] defendant must obtain leave of the trial court before he may obtain review of a
second or subsequent postconviction petition on its merits.” People v. Bland, 2020 IL App (3d)
170705, ¶ 9. When a defendant seeks leave to file a successive postconviction petition on the
basis of actual innocence, “leave of court should be denied only where it is clear, from a review
of the successive petition and the documentation provided by the petitioner that, as a matter of
law, the petitioner cannot set forth a colorable claim of actual innocence.” People v. Edwards,
2012 IL 111711, ¶ 24. “Stated differently, leave of court should be granted when the petitioner’s
supporting documentation raises the probability that ‘it is more likely than not that no reasonable
juror would have convicted him in the light of the new evidence.’ ” Id. (quoting Schlup v. Delo,
513 U.S. 298 327 (1995)).
¶ 14 Although DeHaan utilized the negative corpus methodology, his opinion that the fires at
issue in this matter were deliberately set appears to still be valid and admissible under the newer
NFPA standards. This is because those standards, as defendant admits, still allow for the use of
deductive reasoning to determine a fire was deliberately set under limited circumstances, such as
those present here where alternative ignition sequences have been eliminated, it is consistent
with the known facts, and there were multiple fires. In addition, defendant gave a statement
which indicated he had knowledge that the fires were started in clothing for which he had no
5
explanation and chemists found kerosene and a heavy petroleum distillate on articles of
defendant’s clothing. Considering all the information together, we conclude that the repudiation
of the negative corpus methodology does not raise the probability that it is more likely than not
that no reasonable juror would have convicted defendant. Therefore, the court did not err in
denying defendant’s motion for leave to file a successive postconviction petition.
¶ 15 III. CONCLUSION
¶ 16 The judgment of the circuit court of Kankakee County is affirmed.
¶ 17 Affirmed.
6 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484046/ | Filed 11/15/22 Quinn v. Dolgen California CA4/3
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION THREE
LATISHA R. QUINN,
Plaintiff and Respondent, G060015
v. (Super. Ct. No. 30-2018-01015215)
DOLGEN CALIFORNIA, LLC, OPI NION
Defendant and Appellant.
Appeal from an order of the Superior Court of Orange County, Kirk H.
Nakamura, Judge. Reversed and remanded with directions.
McGuire Woods, Matthew C. Kane, Amy E. Beverlin and Sabrina A.
Beldner for Defendant and Appellant.
Robins Kaplan and Glenn A. Danas; James Hawkins, James R. Hawkins,
Gregory Mauro and Michael Calvo for Plaintiff and Respondent.
* * *
INTRODUCTION
Latisha R. Quinn brought a representative action against her former
employer, Dolgen California, LLC (Dolgen) in which she sought the recovery of
penalties under the Private Attorney General Act of 2004 (PAGA) (Labor Code, § 2698
et seq.) for several Labor Code violations allegedly suffered by her and other employees.
Following Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348
(Iskanian) and its progeny, the trial court denied Dolgen’s motion to compel the
arbitration of the “individual” portion of Quinn’s PAGA claim for Labor Code violations
she herself had allegedly suffered. (See Kim v. Reins International California, Inc.
(2020) 9 Cal.5th 73, 88 (Kim) [California “[a]ppellate courts have rejected efforts to split
PAGA claims into individual and representative components”].)
During the pendency of this appeal, the United States Supreme Court
decided Viking River Cruises, Inc. v. Moriana (2022) 596 U.S. __, __ [142 S.Ct. 1906,
1924] (Viking), in which it held that the Federal Arbitration Act (FAA) (9 U.S.C. § 1 et
seq.) preempts the rule of Iskanian “insofar as it precludes division of PAGA actions into
individual and non-individual claims through an agreement to arbitrate.” The Viking
court further held an employer is entitled to enforce an arbitration agreement “insofar as
it mandated arbitration of [the employee]’s individual PAGA claim.” (Viking, supra, at
p. 1925].)
In light of Viking, we reverse the order denying Dolgen’s motion to compel
arbitration and remand with directions to the trial court to enter a new order requiring
Quinn to arbitrate her individual PAGA claim.
2
FACTS AND PROCEDURAL HISTORY
I.
QUINN’S PAGA CLAIM
Quinn filed a lawsuit against Dolgen in which she solely sought the
recovery of penalties under PAGA for alleged Labor Code violations suffered by her and
other employees. In her second amended complaint, Quinn alleged Dolgen violated
various provisions of the Labor Code by failing to pay overtime wages, minimum wages,
wages earned and owned upon separation from employment, and by failing to indemnify
for necessary business expenses. Quinn, as an aggrieved employee, sought “penalties
under Labor Code 2698, et seq. on behalf of the general public as private attorney general
and all other aggrieved employees as well as wages due and owing under Labor Code
§ 558 pursuant to the provision of Labor Code § 2699.5.”
II.
DOLGEN’S MOTION TO COMPEL ARBITRATION
Dolgen filed a motion to compel “individual arbitration of [Quinn]’s claims
and stay proceedings pending ruling on motion and completion of court-ordered
arbitration.” In support of the motion, Dolgen produced evidence that on September 15,
2014, prior to Quinn’s first day of her first term of employment with Dolgen (September
17, 2014 until May 8, 2015), and then again prior to the first day of work of her second
term of employment on December 12, 2016, Quinn electronically signed the Dollar
General Employee Arbitration Agreement (the arbitration agreement) which stated in
part:
“Dolgen California LLC (‘Dollar General’) has a process for resolving
employment related legal disputes with employees that involves binding arbitration. This
Dollar General Employee Arbitration Agreement (‘Agreement’) describes that process
3
and constitutes a mutually binding agreement between you and Dollar General, subject to
opt out rights described at the end of this Agreement.
“You agree that, with the exception of certain excluded claims described
below, any legal claims or disputes that you may have against Dollar General, its parent
and subsidiary corporations, employees, officers and directors arising out of your
employment with Dollar General or termination of employment with Dollar General
(‘Covered Claim’ or ‘Covered Claims’) will be addressed in the manner described in this
Agreement. You also understand that any Covered Claims that Dollar General may have
against you related to your employment will be addressed in the manner described in this
Agreement.
“Class and Collective Action Waiver: You and Dollar General may not
assert any class action, collective action, or representative action claims in any
arbitration pursuant to this Agreement or in any other forum. You and Dollar General
may bring individual claims or multi-plaintiff claims joining together not more than three
plaintiffs, provided that the claims are not asserted as a class, collective or representative
action. Non-representative, multi-plaintiff arbitrations (up to the three-plaintiff limit)
may only be filed if each of the plaintiff’s claims: (1) arises out of the same transaction,
occurrence, or series of transactions or occurrences; (2) arises out of the same work
location; and (3) presents a common question of law or fact. A challenge to a multi-
plaintiff action can be initiated by any party by filing a motion to dismiss or sever one or
more parties. The arbitrator shall rule upon the motion to dismiss or sever based upon the
standards set forth in this Paragraph. NOTE: This waiver does not apply to claims under
the National Labor Relations Act.” (Bold and underlining omitted, italics added.)
The arbitration agreement also contained a severability clause, stated: “If
any parts of this Agreement are found to be invalid, illegal, or unenforceable, the validity,
legality, and/or enforceability of the remaining provisions will not be affected by that
4
decision, and any invalid, illegal or unenforceable provisions shall be modified or
stricken.”
Quinn filed an opposition to Dolgen’s motion, in which she argued that
PAGA claims cannot be subjected to arbitration and that splitting any portion of Quinn’s
PAGA claim would impermissibly split the action into arbitrable and nonarbitrable
claims.
III.
THE TRIAL COURT DENIES THE MOTION TO COMPEL ARBITRATION
The trial court denied Dolgen’s motion to compel arbitration. In its minute
order, the court explained that, although Quinn did not dispute having executed the
arbitration agreements, “California authority indicates a ‘predispute agreement to
arbitrate PAGA claims is not enforceable without the State’s consent.’” Citing Iskanian,
supra, 59 Cal.4th at page 384, the trial court explained the FAA is inapplicable to PAGA
claims “‘because it is not a dispute between an employer and an employee arising out of
their contractual relationship [but] a dispute between an employer and the state,’” and
PAGA waivers are therefore unenforceable. The trial court further stated that an
“‘individual PAGA claim’ does not exist” and “‘[a] single representative PAGA claim
cannot be split into an arbitrable individual claim and a nonarbitrable representative
claim.’”
Dolgen appealed. After the United States Supreme Court issued its
decision in Viking, supra, 142 S.Ct. 1906, we invited the parties to file supplemental
letter briefs addressing the impact of Viking and its progeny on this appeal; both Quinn
and Dolgen filed supplemental letter briefs addressing Viking.
5
DISCUSSION
I.
STANDARD OF REVIEW
“An order denying a motion to compel arbitration is an appealable order.
(Code Civ. Proc., § 1294, subd. (a).) ‘“‘There is no uniform standard of review for
evaluating an order denying a motion to compel arbitration. [Citation.] If the court’s
order is based on a decision of fact, then we adopt a substantial evidence standard.
[Citations.] Alternatively, if the court’s denial rests solely on a decision of law, then a
de novo standard of review is employed.’”’ [Citation.]” (Coughenour v. Del Taco, LLC
(2020) 57 Cal.App.5th 740, 747.)
Here, the relevant facts to our review are undisputed. As pointed out by the
trial court, Quinn acknowledges she signed the arbitration agreements in question. The
court’s order granting the motion to compel was based on the application of the holdings
of Iskanian and its progeny and thus is based on a matter of law which we review
de novo.
II.
PAGA OVERVIEW AND ISKANIAN, SUPRA, 59 CAL.4TH 348
“In September 2003, the Legislature enacted [PAGA]. The Legislature
declared that adequate financing of labor law enforcement was necessary to achieve
maximum compliance with state labor laws, that staffing levels for labor law enforcement
agencies had declined and were unlikely to keep pace with the future growth of the labor
market, and that it was therefore in the public interest to allow aggrieved employees,
acting as private attorneys general, to recover civil penalties for Labor Code violations,
with the understanding that labor law enforcement agencies were to retain primacy over
private enforcement efforts. [Citation.]” (Arias v. Superior Court (2009) 46 Cal.4th 969,
980 (Arias).)
6
“A PAGA claim is legally and conceptually different from an employee’s
own suit for damages and statutory penalties.” (Kim, supra, 9 Cal.5th at p. 81.) “An
aggrieved employee suing under PAGA ‘does so as the proxy or agent of the state’s labor
law enforcement agencies.’ [Citation.] Every PAGA action is ‘a dispute between an
employer and the state.’” (Moniz v. Adecco USA, Inc. (2021) 72 Cal.App.5th 56, 74,
quoting, inter alia, Iskanian, supra, 59 Cal.4th at p. 386.)
In a PAGA action, “the employee plaintiff represents the same legal right
and interest as state labor law enforcement agencies—namely, recovery of civil penalties
that otherwise would have been assessed and collected by [LWDA].” (Arias, supra,
46 Cal.4th at p. 986.) Civil penalties a PAGA plaintiff may recover on the state’s behalf,
therefore, are distinct from the statutory damages or penalties that may be available to
employees suing for individual violations. (Iskanian, supra, 59 Cal.4th at p. 381.) “An
action under PAGA ‘“is fundamentally a law enforcement action”’ and relief is
‘“designed to protect the public and not to benefit private parties.”’ [Citation.] ‘A
PAGA representative action is therefore a type of qui tam action,’ conforming to all
‘traditional criteria, except that a portion of the penalty goes not only to the citizen
bringing the suit but to all employees affected by the Labor Code violation.’ [Citation.]
The ‘government entity on whose behalf the plaintiff files suit is always the real party in
interest.’” (Moniz v. Adecco USA, Inc., supra, 72 Cal.App.5th at p. 74.) “Only an
‘aggrieved employee’ has standing to bring a civil action under PAGA. (Labor Code,
§ 2699, subd. (a).) An ‘aggrieved employee’ is ‘any person who was employed by the
alleged violator and against whom one or more of the alleged violations was committed.’
(Labor Code, § 2699, subd. (c).)” (Ibid.)
In Iskanian, supra, 59 Cal.4th at page 360, the Supreme Court held, inter
alia, “an arbitration agreement requiring an employee as a condition of employment to
give up the right to bring representative PAGA actions in any forum is contrary to public
policy.” The Supreme Court further held “the FAA’s goal of promoting arbitration as a
7
means of private dispute resolution does not preclude our Legislature from deputizing
employees to prosecute Labor Code violations on the state’s behalf. Therefore, the FAA
does not preempt a state law that prohibits waiver of PAGA representative actions in an
employment contract.” (Ibid.)
III.
THE UNITED STATES SUPREME COURT OVERRULES A PORTION OF
ISKANIAN, SUPRA, 59 CAL.4TH 248 IN VIKING, SUPRA, 142 S.CT. 1906
After the trial court denied Dolgen’s motion to compel arbitration, and
while Dolgen’s appeal from the court’s order was pending, the United States Supreme
Court issued its decision in Viking, supra, 142 S.Ct. at page 1913 to address whether the
FAA preempts “a rule of California law that invalidates contractual waivers of the right
to assert representative claims under [PAGA].”
In Viking, the parties had entered into an employment arbitration agreement
containing a waiver provision prohibiting the parties from, inter alia, bringing any dispute
as a representative PAGA action. (Viking, supra, 142 S.Ct. at pp. 1915-1916, 1924.) The
United States Supreme Court noted that under Iskanian, such a provision was invalid if
“construed as a wholesale waiver of PAGA claims,” and concluded that Iskanian’s
holding on that point was not preempted by the FAA. (Id. at p. 1917.)
The Viking court’s analysis continued to address the severability clause in
the parties’ arbitration agreement which provided that, in the event the waiver provision
was invalid in some respect, “any ‘portion’ of the waiver that remains valid must still be
‘enforced in arbitration.’” (Viking, supra, 142 S.Ct. at p. 1924.) The Viking court
explained that, because of the severability provision, the employer was entitled to enforce
the parties’ agreement “insofar as it mandated arbitration of [the employee]’s individual
8
1
PAGA claim,” but the lower courts had “refused to do so based on the rule that PAGA
actions cannot be divided into individual and non-individual claims.” (Id. at p. 1925.)
The court observed California courts followed “a secondary rule” established in Iskanian
that “invalidates agreements to separately arbitrate or litigate ‘individual PAGA claims
for Labor Code violations that an employee suffered,’ on the theory that resolving victim-
specific claims in separate arbitrations does not serve the deterrent purpose of PAGA.”
(Id. at pp. 1916-1917.)
The Viking court reversed the lower court’s order denying the employer’s
motion to compel and explained: “[T]he FAA preempts the rule of Iskanian insofar as it
precludes division of PAGA actions into individual and non-individual claims through an
agreement to arbitrate. This holding compels reversal in this case. . . . Under our
holding, that rule is preempted, so [the employer] is entitled to compel arbitration of [the
employee]’s individual claim.” (Viking, supra, 142 S.Ct. at pp. 1924-1925; id. at
pp 1916-1917.)
1
The Viking court explained its use of the relevant terminology as follows:
“PAGA’s unique features have prompted the development of an entire vocabulary
unique to the statute, but the details, it seems, are still being worked out. An unfortunate
feature of this lexicon is that it tends to use the word ‘representative’ in two distinct
ways, and each of those uses of the term ‘representative’ is connected with one of
Iskanian’s rules governing contractual waiver of PAGA claims.
“In the first sense, PAGA actions are ‘representative’ in that they are brought by
employees acting as representatives—that is, as agents or proxies—of the State. But
PAGA claims are also called ‘representative’ when they are predicated on code violations
sustained by other employees. In the first sense, ‘“every PAGA action is . . .
representative”’ and ‘[t]here is no individual component to a PAGA action,’ [citation],
because every PAGA claim is asserted in a representative capacity. But when the word
‘representative’ is used in the second way, it makes sense to distinguish ‘individual’
PAGA claims, which are premised on Labor Code violations actually sustained by the
plaintiff, from ‘representative’ (or perhaps quasi-representative) PAGA claims arising out
of events involving other employees. For purposes of this opinion, we will use
‘individual PAGA claim’ to refer to claims based on code violations suffered by the
plaintiff. And we will endeavor to be clear about how we are using the term
‘representative.’” (Viking, supra, 142 S.Ct. at p. 1916.)
9
IV.
WE MUST REVERSE THE ORDER DENYING THE MOTION TO COMPEL ARBITRATION IN
LIGHT OF VIKING, SUPRA, 142 S.CT. 1906
Here, there is no dispute the parties entered into an arbitration agreement on
two separate occasions containing the same relevant provisions. Like the parties’
arbitration agreement in Viking, the arbitration agreements in the instant case contain a
provision prohibiting the parties from asserting any representative action claims in any
arbitration or in any other forum. As discussed ante, under both Iskanian and Viking, that
waiver provision is invalid to the extent it is “a wholesale waiver of PAGA claims.”
(Viking, supra, 142 S.Ct. at p. 1925.)
Like the agreement in Viking, the arbitration agreements in the instant case
contain a severability provision. That severability provision provides that if any part of
the arbitration agreement is found to be invalid, illegal, or unenforceable, “the validity,
legality, and/or enforceability of the remaining provisions will not be affected by that
decision, and any invalid, illegal or unenforceable provisions shall be modified or
stricken.”
Contrary to Quinn’s argument in a supplemental letter brief, the language
of the instant severability provision is indistinguishable in its effect from that of the
language contained in the severability provision in Viking. The Viking court described
the severability provision in the arbitration agreement before it as providing “if any
‘portion’ of the waiver [in the parties’ arbitration agreement] remained valid, it would be
‘enforced in arbitration.’” (Viking, supra, 142 S.Ct. at p. 1916.)
Given the invalidity and unenforceability of representative action claim
waivers under Viking and Iskanian, the severability provision in the instant arbitration
agreements applies to strike, as relevant in this appeal, the part of the “Class and
Collective Action Waiver” provision which purports to require Quinn to waive the right
to bring a representative action in arbitration or in any other forum. As so modified, the
10
arbitration agreement requires arbitration, “with the exception of certain excluded claims
described below,” of “any legal claims or disputes . . . arising out of [Quinn’s]
employment with [Dolgen] or termination of employment with [Dolgen].” The modified
arbitration agreement does not identify PAGA claims as excluded claims. As the rule
against splitting PAGA actions into individual and nonindividual claims for purposes of
enforcing arbitration agreements is preempted by the FAA, Dolgen is entitled to enforce
the arbitration agreement to mandate arbitration of Quinn’s individual PAGA claim in
this case. (Viking, supra, 142 S.Ct. at p. 1924.) We therefore reverse the order denying
the motion to compel arbitration of that claim.
In a supplemental letter brief, Dolgen argues that we should dismiss
Quinn’s nonindividual/representative PAGA claim left after her individual PAGA claim
is compelled to arbitration in light of the penultimate paragraph of the Viking majority
opinion, stating: “The remaining question is what the lower courts should have done
with [the employee]’s non-individual claims. Under our holding in this case, those
claims may not be dismissed simply because they are ‘representative.’ Iskanian’s rule
remains valid to that extent. But as we see it, PAGA provides no mechanism to enable a
court to adjudicate nonindividual PAGA claims once an individual claim has been
committed to a separate proceeding. Under PAGA’s standing requirement, a plaintiff can
maintain non-individual PAGA claims in an action only by virtue of also maintaining an
individual claim in that action. [Citation.] When an employee’s own dispute is pared
away from a PAGA action, the employee is no different from a member of the general
public, and PAGA does not allow such persons to maintain suit. See Kim, 9 Cal.5th, at
[p.] 90 (‘PAGA’s standing requirement was meant to be a departure from the “general
public” . . . standing originally allowed’ under other California statutes). As a result, [the
employee] lacks statutory standing to continue to maintain her non-individual claims in
court, and the correct course is to dismiss her remaining claims.” (Viking, supra,
142 S.Ct. at p. 1925.)
11
We do not need to address the fate of Quinn’s nonindividual/representative
PAGA claim because our review in this matter is limited to the trial court’s order denying
Dolgen’s motion to compel arbitration which, for the reasons we have discussed, is
reversed. There was no motion to dismiss the nonindividual/representative PAGA claim
filed in or decided by the trial court, and so that issue is not before this court at this time.
DISPOSITION
The order is reversed and the matter is remanded with directions that the
trial court enter a new order requiring Quinn to arbitrate her individual PAGA claim. In
the interest of justice, no party shall recover costs on appeal.
MARKS, J.*
WE CONCUR:
O’LEARY, P. J.
SANCHEZ, J.
*Judge of the Orange County Superior Court, assigned by the Chief Justice pursuant to
article VI, section 6 of the California Constitution.
12 | 01-04-2023 | 11-15-2022 |
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