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https://www.courtlistener.com/api/rest/v3/opinions/1520791/
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767 F. Supp. 1269 (1991)
HARRIS TRUST & SAVINGS BANK, as Trustee of the Sperry Master Retirement Trust No. 2, Plaintiff,
v.
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY, Defendant.
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY, Third-Party Plaintiff,
v.
CHASE MANHATTAN BANK, N.A., Counterclaim Defendant,
and
Sperry Corporation and the Retirement Committee of Sperry Corporation, Third-Party Defendants.
No. 83 Civ. 5401 (RPP).
United States District Court, S.D. New York.
July 12, 1991.
As Amended August 6, 1991.
*1270 *1271 Anderson Kill Olick and Oshinsky, P.C., New York City by Lawrence A. Kill, for plaintiff Harris Trust and Sav. Bank.
Reboul, MacMurray, Hewitt, Maynard and Kristol, New York City by Howard G. Kristol, for defendant and third-party plaintiff John Hancock Mut. Life Ins. Co.
*1272 OPINION AND ORDER
ROBERT P. PATTERSON, Jr., District Judge.
Defendant John Hancock Mutual Life Insurance Company ("Hancock") moves pursuant to Rule 56 of the Federal Rules of Civil Procedure and the Agreed Statement of Facts stipulated by the parties on November 23, 1988 (hereinafter "A.S.F. ¶ ") to dismiss the remaining claims of plaintiff's amended complaint. By its opinion and order dated September 26, 1989, this Court dismissed plaintiff's claim asserted under the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001, et seq. ("ERISA"). This motion relates to plaintiff's contract and common law claims.
The claims in this action arise out of or relate to Group Annuity Contract No. 50 ("GAC 50"), which was first entered into in 1941 by the defendant and Sperry Corporation ("Sperry") and covered non-bargaining unit employees of Sperry Gyroscope, Sperry Division.[1] A.S.F. ¶ 5; Hirschberg Tr. 18. Pursuant to GAC 50's original terms, Sperry purchased on an annual installment payments basis deferred annuities from Hancock payable for life to Sperry employees or their beneficiaries to the extent that the employees and beneficiaries would be entitled to such a payment upon the employees' retirement, according to the terms of Sperry's retirement plan. A.S.F. ¶ 6. In other words, once a covered employee's benefits vested under the plan, Hancock would guarantee those benefits. Id. ¶ 10. By agreement between the parties, GAC 50 has undergone substantial changes since 1941. Most relevant to this motion are those that occurred in 1968 and 1977.[2]
Effective January 1, 1968 GAC 50 was converted by amendment from a deferred annuity form of participating contract under which Sperry purchased deferred annuities from Hancock on an annual basis for the non-bargaining unit of the Sperry Gyroscope Division to a Retrospective Immediate Participation Guarantee form ("Retro-IPG") under which it guaranteed benefits for each eligible employee under GAC 50 for that employee who was also eligible under the terms of the Sperry Rand Retirement Trust No. 2 (the "Plan" or the "Sperry Trust"). A.S.F. ¶ 23.
Hancock IPG contracts are participating contracts in that the purchaser shares in the aggregate of the contract's mortality, expense and investment experience to the extent that that experience is more favorable than the experience assumed in the contract's purchase rates. Id. ¶ 11. Net investment income from Hancock's General Account allocated to an IPG contract is directly credited on an annual basis to that contract's Pension Administration Fund ("PAF").[3] The amount of the PAF depends in part on the investment performance of Hancock's General Account and the allocation of that performance to the IPG.[4]
Pursuant to the 1968 amendment, annuities purchased for certain employees up to December 31, 1967 were "cancelled," but Hancock continued to guarantee benefits to those employees and their beneficiaries. A.S.F. ¶ 32. The 1968 amendment also established a method for the provision of additional guaranteed benefits to be payable *1273 for the period after December 31, 1967 as more fully described in this Court's earlier opinion. In essence, if GAC 50's PAF exceeded its Minimum Operating Level ("MOL"), which was equal to 105% of the Liabilities of the Fund ("LOF"), Hancock would guarantee the payment of the additional guaranteed retirement benefits to those employees.[5]Id. ¶ 39.
Effective August 1, 1977 GAC 50 was converted to a Retrospective Immediate Participation Guarantee/Prospective Deferred Liability form of contract ("Retro-IPG-PDL") under which the employees retiring thereafter received some benefits guaranteed by Hancock and relied on Plan assets for the remainder. Under the 1977 amendment GAC 50's LOF would not be increased automatically upon the subsequent retirement of any employee and new retirement benefits would not be guaranteed automatically by Hancock. A.S.F. ¶ 80. The Sperry Retirement Committee ("SRC") could request that Hancock establish guaranteed benefits in addition to the benefits already guaranteed, but it did not do so. Id. ¶ 81. The 1977 amendment also permitted Sperry to designate employees eligible for non-guaranteed benefits and provided for the payment of such benefits by Hancock from the PAF or its Contingency Account within Hancock's General Account. Although the Sperry Retirement Committee did not request Hancock to pay any new guaranteed benefits subsequent to the effective date of the 1977 amendments, the Committee did designate that monthly payments of non-guaranteed benefits be paid to certain employees in 1977 and Hancock paid such non-guaranteed benefits through June 1982, when it gave Sperry 31 days notice in writing that it would no longer pay non-guaranteed benefits.
Hancock contends that it at all times fully performed its obligations under GAC 50 and its amendments and is entitled to summary judgment dismissing plaintiff's breach of contract claims. It further claims that plaintiff's claims for breach of fiduciary duty and for breach of an implied covenant of good faith and fair dealing must also be dismissed since all obligations of Hancock to the plaintiff arise solely from and are defined by the provisions of GAC 50.[6]
I. Contract Claims
Where the language of a contract is unambiguous the question of interpretation is one of law to be answered by the court without reference to extrinsic evidence. See Rothenberg v. Lincoln Farm Camp, Inc., 755 F.2d 1017, 1019 (2d Cir. 1985). If the language of a contract is otherwise plain, the parties cannot create a genuine issue of material fact simply by urging different interpretations. See Hunt Ltd. v. Lifschultz Fast Freight, Inc., 889 F.2d 1274, 1277 (2d Cir.1989).
1. Did Hancock Improperly Retain Excess Funds Allocated to GAC 50?
In or about May 1982 Hancock denied a request from the Sperry Retirement Committee for a transfer of assets under what the parties had come to refer to as a "rollover procedure." Hearing Exh. 2.
It is necessary to refer to the history of GAC 50 to understand the reason for the dispute.
Prior to 1968, the Sperry Retirement Committee did not manage pension funds for its employees. At the time of the 1968 Amendment, the Committee took on a number *1274 of investment managers to manage various funds for the Plan to provide retirement benefits for its employees upon retirement. (Hirschberg Tr. 13-14) Starting in 1968, Hancock, in addition to providing guaranteed benefits under GAC 50 and similar annuity contracts, received responsibility from Sperry to manage for the Plan a smaller separate account, an equity investment account. (Hirschberg Tr. 14) Funds in the separate account, like the funds distributed to other investment managers retained by the Retirement Committee, did not provide guaranteed benefits and were assets of the Plan. (Id.) By 1977 it became evident to Hirschberg that the other fund managers were providing the Retirement Fund with a better rate of return than Hancock's General Account and he determined that the cost of the benefits guarantee provided by Hancock was excessive. Accordingly, Sperry's Retirement Committee desired to remove funds from Hancock's General Account and place them in other funds over which it could exercise more investment control. (Hirschberg Tr. 11, 15).
By the 1977 amendment, an employee who retired after 1977 had those benefits which had accrued prior to 1968 guaranteed by Hancock and those non-guaranteed benefits which accrued thereafter were funded only by the Plan's assets.[7] The Committee wanted to move so-called "excess funds" out of Hancock's General Account. It was in this context that Hirschberg explored ways with Hancock as to how a removal of excess funds might be achieved without incurring the contract's Asset Liquidation Adjustment ("ALA"). As an example, in 1977 the GAC 50 had an excess of funds in the General Account, whereas the GAC-1150, another Sperry guaranteed benefit contract, required a transfer of funds into its pension administration fund in the General Account to satisfy its annuity funding requirements. The Committee did not want to liquidate its equity portfolios in the separate accounts at Hancock to meet GAC-1150's shortfall. (Id. at 19) To meet this problem, so-called "excess funds" in GAC 50 were transferred by agreement of the parties to the separate accounts and then to GAC-1150 for its pension administration fund in the General Account. Hearing Exhs. L, T.[8] The net effect was to leave the balance of the General Account unchanged and no asset liquidation charge was imposed.
Hirschberg continued at meetings between representatives of both companies to press for the reduction of funds in GAC 50's General Account. Thereafter in 1979 and 1981 Hancock permitted the Committee pursuant to so-called "rollover arrangements" to withdraw certain amounts of "excess" funds from the PAF without the ALA required under GAC 50. Hearing Exhs. 4, 5, 11; Jefferson Tr. 46; Hirschberg Tr. 50. Hancock acknowledges it had a "rollover" policy which it offered to General Account customers whose balance of funds in that account exceeded liabilities by 20 percent and some other criteria, whereby the excess of cash inflow over cash outflow, plus 4% of the beginning fund balance of a PAF, could be transferred out of the General Account.[9] A.S.F. ¶ 77. In 1979 a rollover was offered to Hirschberg and accepted. In 1980 Hancock altered its policy and eliminated rollovers, except for "grandfathered" customers. (Penney Tr. 137) In 1981 Sperry asked for a rollover for 1980 and received it. Subsequently in *1275 1981 Hancock eliminated rollovers for all customers. (Id. at 139)
Plaintiff maintains that these rollover withdrawals were by contract amendment pursuant to oral agreement of the parties and that it had a contractual right to such rollovers for every subsequent year. As evidence of that agreement plaintiff relies not on language of the contract or any formal written amendment thereto but on oral understandings which all witnesses for the defendant deny. To support its claim, plaintiff relies on two Hancock internal memoranda, Exhibits 10 and 12, a memorandum dated March 28, 1977 and a memorandum dated December 31, 1981, respectively. Exhs. 10 & 12, Plaintiff's Exhibit Binder Submitted in Opposition to Defendant's Motion to Dismiss filed Mar. 23, 1990 (hereinafter "Pl.Exh. Binder").
Although both these memoranda make reference to rollover arrangements and plaintiff's participation in them, they do not constitute amendments to the contract requiring a continuation of such rollovers.
In the first place, it is highly unlikely that any officer of either company expected a contract of this complexity and involving the amounts in question to be amended orally. Other amendments were made in writing. Furthermore, there are no references to amending the contract in either exhibit. Without such references and without an indication that Hancock was seeking to be bound contractually to permit future rollovers, the Statute of Frauds is not satisfied.
Neither exhibit contains expressly or by reasonable implication all the material terms of the agreement. Nor is there any indication of a continuing obligation with respect to "rollovers."[10] Under these circumstances the exhibits are insufficient proof of an agreement to be bound in future under the Statute of Frauds. See Fort Howard Paper Co. v. William D. Witter, Inc., 787 F.2d 784, 791 (2d Cir.1986); Scheck v. Francis, 26 N.Y.2d 466, 472, 260 N.E.2d 493, 311 N.Y.S.2d 841 (1970); Morris Cohon & Co. v. Russell, 23 N.Y.2d 569, 575, 245 N.E.2d 712, 297 N.Y.S.2d 947 (1969).
Plaintiff argues that partial performance removes the agreement from the Statute of Frauds. Plaintiff points to the 1979 and 1981 "rollovers" as evidence of partial performance of the continuing obligation to provide rollover as satisfaction of Hancock's Statute of Frauds defense. "The doctrine of part performance may be invoked only if plaintiff's actions can be characterized as `unequivocally referable' to the agreement alleged." Anostario v. Vicinanzo, 59 N.Y.2d 662, 663, 450 N.E.2d 215, 463 N.Y.S.2d 409 (1983). See Tribune Printing Co. v. 263 Ninth Ave. Realty, Inc., 88 A.D.2d 877, 878-79, 452 N.Y.S.2d 590 (App.Div. 1st Dep't), aff'd, 57 N.Y.2d 1038, 444 N.E.2d 35, 457 N.Y.S.2d 785 (1982). Here plaintiff's requests for withdrawals are explainable as a response to Hancock's alleged notification in August 1979 of the existence of the rollover as a generalized procedure. Pl.Mem. in Opp. at 35. They are not "unequivocally referable" to an amendment of the contract.
The Court also notes that New York Jurisprudence 2nd states that for the doctrine of partial performance to apply, "[t]he acts of part performance must have been done by the person insisting upon the contract." 61 N.Y.Jur.2d Statute of Frauds § 254 at 396 (1987). Here the claimed acts of part performance are by Hancock who disavows any such modification of the contract.
As for plaintiff's argument that promissory estoppel applies, that claim does not lie because plaintiff alleges no acts that were taken by it in reliance on the alleged oral promises of Hancock. See Republic Nat'l Bank of New York v. Sabet, 512 F. Supp. 416, 426 (S.D.N.Y.1980), aff'd, *1276 681 F.2d 802 (2d Cir.1981), cert. denied, 456 U.S. 976, 102 S. Ct. 2241, 72 L. Ed. 2d 850 (1982). Accordingly, the Court finds as a matter of law that the Statute of Frauds bars plaintiff's claim to a right to rollover for the years subsequent to 1980.
2. Termination of Non-Guaranteed Benefits
This dispute between the parties centers on the meaning of the 1968 and 1977 amendments and actions relating thereto. Plaintiff claims the failure of Hancock to continue to pay non-guaranteed benefits after June 1982 constitutes a breach of contract.[11]
A significant event which preceded Hancock's alleged breach occurred in May 1982 when Hancock was notified by the Committee that the Committee had amended the Sperry Plan by expanding it to include retired employees of Sperry's Univac Division within the category of employees entitled to receive non-guaranteed benefits under GAC 50 and was requesting payment of non-guaranteed benefits to such employees.[12] A.S.F. ¶ 84. Hancock at first took the position that the Sperry Plan only contemplated payment of non-guaranteed benefits, such as cost-of-living adjustments, to employees already covered by the Plan. (Hirschberg Tr. 41). When Sperry demurred, Hancock took the position that it was entitled to discontinue unilaterally payments of all non-guaranteed benefits under the terms of Article IV, Section 9, paragraph (c) of GAC 50 and gave the Committee 31 days notice in writing that it would terminate all such payments. Exh. 4, Pl. Exh. Binder.
Plaintiff maintains that Hancock was only entitled to give notice of termination of such payments if the amount of the Pension Administration Fund became insufficient to support the making of "Non-Guaranteed Benefit" payments.
The provision relied on by Hancock reads as follows:
SECTION 9. Payment of Non-guaranteed Benefits
Non-guaranteed Benefit payments shall be payable to a payee, provided the Pension Administration Fund is sufficient for the purpose, upon written notice from the Sperry Rand Retirement Committee to the Company. Such notice shall specify the payee's Benefit Commencement Date and the amount, form and manner of such Non-guaranteed Benefit payments. Non-guaranteed Benefit payments shall continue until
(a) the date of death of the payee,
*1277 (b) the date as of which the Retirement Committee notifies the Company, in accordance with the next paragraph, that such Non-guaranteed Benefit payments are to be canceled, suspended, or adjusted,
(c) the date as of which the Company, by written notice filed with the Retirement Committee at least thirty-one days prior thereto, declares its intention to cease such payments,
(d) the date the Pension Administration Fund ceases to exist.
The Retirement Committee shall have the right to notify the Company that Non-guaranteed Benefits provided under this Contract shall be canceled, suspended or adjusted on and after the date specified by the Retirement Committee. Such notice must be in writing and be received by the Company at its Home Office prior to the date of cancellation, suspension or adjustment. On and after the date of cancellation or suspension specified in such notice, no further payments shall be made by the Company with respect to the Non-guaranteed Benefits provided for payees included in any cancellation notice or during the period of suspension for payees included in any suspension notice, and the Company shall have no responsibility with respect to any Non-guaranteed Benefits which may be canceled, or if Non-guaranteed Benefits are suspended, during the period of suspension. On and after the date of the adjustment specified in such notice, the liability of the Company with respect to the Non-guaranteed Benefits provided for payees included in such notice shall be equal only to the liability for the adjusted Non-guaranteed Benefits provided in such notice for such payees.
GAC 50, 1977 Amendment, Article IV, Section 9.
The Court's reading of the plain meaning of this Section is that, provided the PAF is sufficient for the purpose, Hancock shall initiate non-guaranteed payments to employees designated upon notice from the Committee and shall continue making such payments until (a), (b), (c) or (d) occurs.
Plaintiff argues that the PAF Fund was sufficient to make the payment of the non-guaranteed benefits to the Univac employees at the time of Hancock's termination and that until such date as the PAF was insufficient for that additional purpose, Hancock had an obligation to provide non-guaranteed benefits to the Univac employees. It bases its argument primarily on Article II, Section 3, which reads as follows:
Section 3. Non-Guaranteed Benefits
The Retirement Committee shall notify the Company in writing of the Benefit Commencement Date of an employee in advance of such date, and shall furnish such other information with respect to the employee or his designated survivor as is necessary to provide the Non-guaranteed Benefit.
The monthly amount of Non-guaranteed Benefit to be provided hereunder for an employee shall be the amount to which he is entitled on such date in accordance with the Plan as determined by the Retirement Committee. The determination of eligibility for and the amount of such Non-guaranteed Benefit shall be made solely by the Retirement Committee and the Company shall have no responsibility for such determination.
On and after the Benefit Commencement Date of an employee, the Non-guaranteed Benefit for such an employee or his designated survivor shall be payable hereunder in accordance with the Plan until the earliest of the date of his death, the date the Retirement Committee notifies the Company in accordance with Section 9 of Article IV that said Non-guaranteed Benefit payments are to be canceled, suspended or adjusted, or the date the Pension Administration Fund is not sufficient to provide the Non-guaranteed Benefits for the payee.
GAC 50, 1977 Amendment, Article II, Section 3.
Plaintiff also bases its argument on the following language added to Article III, Section 2, by the 1977 Amendment:
*1278 Section 2. Pension Administration Fund
a. The following heading is inserted immediately following the Section title:
"A. Applicable to Guaranteed Benefits"
b. The following paragraph and succeeding heading are added immediately following the second paragraph of this Section:
"B. Applicable to Non-guaranteed Benefits
On the Benefit Commencement Date of an employee and on each date thereafter on which a Non-guaranteed Benefit is due with respect to an employee on or before the date of termination of the Fund, a Non-guaranteed Benefit shall be provided hereunder with respect to each employee entitled thereto. The Company shall be liable for any amount of Non-guaranteed Benefit expressed to be payable only to the extent to which the Fund is sufficient to provide such amount.
C. Applicable to Guaranteed and Non-guaranteed Benefits"
GAC 50, 1977 Amendment, Article III, Section 2(B).
Article III is entitled "Contributions" and relates to the method of computing how contributions from Sperry to the Plan were to be calculated. Accordingly, it does not appear to be relevant to Hancock's right to terminate non-guaranteed benefits.
Plaintiff argues that Article II, Section 3, Article III, Section 2, and Article IV, Section 9, can only be read in harmony if they are read as plaintiff suggests, and that where two terms of a contract irreconcilably conflict, the first term, i.e., Article II, Section 3, governs. It has also asked the Court to look to extrinsic evidence in the form of an affidavit of its former Vice President, Thomas Hirschberg, who was ultimately responsible for managing the Plan, stating that he believed Hancock had no right to terminate such payments. Reference to such extrinsic evidence is unnecessary because the structure of the contract as testified to by witnesses for both parties makes the meaning of the contractual language clear.
At a hearing held on dates in December 1990 and January 1991 to determine whether there existed a genuine issue of fact on this issue and the rollover issue, it became evident that the history of the GAC 50 contract had a bearing on the constructions the parties were asking the Court to make. In the words of Kenneth Crafts, Sperry's retired employee, who had immediate responsibility for a lengthy period of time for the administration of GAC 50, Article II had originally actually been Sperry's group annuity plan for the covered employees and the retirement benefits to be available for these employees were designated thereunder. In this form, GAC 50 existed as the guaranteed benefit deferred annuity benefit plan for the employees until 1968. (Crafts Tr. 40-41)
Crafts stated that Article II was "the description of how benefits accrue for an employee." (Id. 41) Crafts stated Article IV, on the other hand, "defines how the benefits will be paid to the employee by Hancock, various forms of annuities, the date they start and the date they end, and the forms of annuity that he can have." (Id. 42) Hirschberg testified similarly that Article II "is restricted to the date of coverage and the definition of the retirement annuity," whereas Article IV covers "retirement annuity provisions, the mode of payment." (Hirschberg Tr. 30) This testimony was consistent with that of Judy Bennett, a former executive of Hancock, who drafted the 1977 amendment and made clear that Article IV, Section 9, paragraph (c) was drafted to protect Hancock. (Bennett Tr. 108, 125-26) The Court notes that by the 1977 Amendment the title of Article IV was changed to clarify its content to "Provisions Pertaining to the Payment of Benefits."
Since the alleged conflict in language between Article IV, Section 9, and Article II, Section 3, relied on by plaintiff is resolved by the underlying structure of the contract itself, as to which there is no genuine issue of material fact, plaintiff's position is rejected. Accordingly, Hancock's termination of non-guaranteed benefits in 1982 did not constitute a breach of contract.
*1279 3. Revaluation of the Rate Tables
The plaintiff next argues that Hancock breached GAC 50 by not revaluing GAC 50 rate tables (interest assumptions) with respect to pre-1968 annuities.
The provision of GAC 50 key to a determination of this issue is the second paragraph of Article III, Considerations, Section 2, Pension Administration Fund, which in pertinent part reads as follows:
The Company shall re-determine on each Valuation Date on or before the date of termination of the Fund the Liabilities of the Fund, using on account of an employee, Contingent Annuitant and beneficiary to whom Retirement Annuity payments are then being made, the same rate basis and Table in Article VI as was applicable on the date an Annuity first became payable to the employee, Contingent Annuitant or beneficiary, whichever is applicable; provided, however, that with respect to any amount of annuity which was cancelled on January 1, 1968, in accordance with Section 1 of this Article, the rate basis and Tables in Article VI which were applicable on January 1, 1968 shall be used unless otherwise agreed upon between the Employer and the Company.
GAC 50, Article III, Section 2.
Plaintiff argues that the language shows the parties contemplated a revaluation of the rate and valuation tables and that Hancock had a duty to renegotiate in good faith the application of the rate valuation tables.
The language of Article III, Section 2, is that the rate basis and tables in Article IV applicable on January 1, 1968 "shall be used unless otherwise agreed upon."
Such language is at most an agreement to try to agree. As such, it is not enforceable. See Joseph Martin, Jr., Delicatessen, Inc. v. Schumacher, 52 N.Y.2d 105, 417 N.E.2d 541, 436 N.Y.S.2d 247, 249 (1981). Accordingly, this claim of plaintiff is dismissed.
4. Assessment of Risk Charges
The plaintiff disputes Hancock's assessing a risk charge of 1% of the GAC 50 Pension Administration Fund's and the Contingency Account's share of net interest earned on Hancock's General Account. This claim rises and falls on the Court's determination of whether Hancock had an obligation to reduce excess funds by payment of non-guaranteed benefits and by permitting rollover. Since the Court has already determined Hancock's acts in connection with those two issues were permitted by the contract, this claim also fails. The 1% risk charge was permitted by the 1968 Amendment to Article III, Section 3.[13]
5. The Asset Liquidation Adjustment
Next, the plaintiff argues that the defendant breached GAC 50 by misapplying and miscalculating the Asset Liquidation Adjustment ("ALA"). An ALA is applied when the contractholder requests a transfer or withdrawal from defendant's General Account. The ALA is applied to adjust the transferable balance (the excess of PAF over LOF) to reflect the current market value of the assets underlying Hancock's guarantee of benefits. Debits and credits to the PAF are charged or credited to that account in dollar amounts at book value. The underlying assets, those in Hancock's General Account, however, fluctuate in market value. As interest rates vary such fluctuations can be large since the investments are overwhelmingly long-term investments. In the event a contractholder requests a transfer of the Transferable Balance (the amount by which the PAF exceeds the LOF), a formula applicable to all contracts of the same class invested in the General Account is applied to determine the Transferable Balance in order to reflect the current market value of its share of the underlying assets. This adjustment is the ALA. GAC 50, Article III, Section 9. A market value adjustment *1280 may be positive or negative. If interest rates are higher at time of transfer than on purchase of the investments, the market value adjustment is negative. See D. McGill, Fundamentals of Private Pensions 535 (5th ed. 1984). The Court takes judicial notice of the high interest rates prevailing in the late 1970's and early 1980's over those in previous years.
Plaintiff claims Hancock breached GAC 50 by "arbitrarily and improperly imposing and calculating an assets liquidation adjustment." Pretrial Order, Plaintiff's Contentions of Law ¶ 23(e). Plaintiff acknowledges that no transfer under the contract was ever formally demanded and that no ALA was ever imposed. Instead it relies on the doctrine of anticipatory breach, citing estimates of ALAs provided by Hancock. Plaintiff claims these estimates would have been misapplied or miscalculated by defendant in the event transfer was ordered by plaintiff.[14] Here the plaintiff relies on an analysis by Dr. Roger Ibbotson of the Yale University School of Management which takes issue with defendant's method of calculating the ALA. The Court finds it unnecessary to assess these conflicting methodologies because plaintiff's doctrine of anticipatory breach is flawed. Plaintiff continued to treat the contract as valid and subsisting after the estimates of ALA were made by Hancock. Where a party continues to treat a contract as valid and subsisting after the alleged repudiation, it may not rely on the anticipatory breach doctrine. Strasbourger v. Leerburger, 233 N.Y. 55, 59, 134 N.E. 834 (1922); North Country Rocky Point, Inc. v. Lewyt-Patchogue Co., 60 A.D.2d 866, 401 N.Y.S.2d 258 (App.Div.), appeal denied, 44 N.Y.2d 643, 376 N.E.2d 936, 405 N.Y.S.2d 1027 (1978). See Marvel Entertainment Group, Inc. v. ARP Films, Inc., 684 F. Supp. 818, 820-21 (S.D.N.Y.1988).
6. Failure to Pay Dividends
The plaintiff's claim that Hancock breached GAC 50 by failing to pay any dividends from 1971-1981 is based on Article V, Section 7, which reads as follows:
This contract is a participating Contract. The Company shall annually ascertain and apportion any divisible surplus accruing under the contracts of this class.
The parties have stipulated that:
Hancock's Board of Directors annually votes, in its "dividend vote," to apportion and pay or allow a distribution of surplus with respect to eligible group annuity contracts and votes therein to adopt formulas for determining the distribution of such surplus.
A.S.F. ¶ 16.
As required by state insurance law, Hancock, as a mutual life company, annually establishes dividend formulas and determines the amount of any dividend to be paid under its participating contracts and policies, including GAC 50. A.S.F. ¶ 28.
In general, courts give directors broad discretion as to the determination of dividends and relief will only be given in the event of willful neglect or bad faith. See Rhine v. New York Life Ins. Co., 273 N.Y. 1, 6 N.E.2d 74 (1936); Kern v. John Hancock Mut. Life Ins. Co., 8 A.D.2d 256, 186 N.Y.S.2d 992 (App.Div. 1st Dep't 1959), aff'd, 8 N.Y.2d 833, 168 N.E.2d 532, 203 N.Y.S.2d 92 (1960).
Exhibits 14-22 contained in Plaintiff's Exhibit Binder filed Mar. 23, 1990, the resolutions of the directors in the years in question, are evidence of no willful neglect. Defendant contends that its calculations came out against a dividend for the GAC 50 class of contractholders because the Contingency Account was not deemed to be large enough in relation to the risks under the liabilities of the contract. Winslow Aff. dated May 7, 1990 ¶¶ 2-5. Plaintiff's *1281 conclusory assertion that dividends should have been paid because the "surplus funds were wholly unnecessary for Hancock's security," Pl.Mem. of Law in Opp. at 55, is insufficient to raise a genuine issue of material fact. See Delaware & Hudson Ry. Co. v. Consolidated Rail Corp, 902 F.2d 174, 178 (2d Cir.1990), cert. denied, ___ U.S. ___, 111 S. Ct. 2041, 114 L. Ed. 2d 125 (1991). Despite extended discovery there are no counter affidavits showing bad faith or neglect.
Under New York law "prima facie the apportionment of the divisible surplus by a mutual life insurance company must be deemed equitable," Barnett v. Metropolitan Life Ins. Co., 258 A.D. 241, 245, 16 N.Y.S.2d 198, 202 (App.Div. 1st Dep't 1939), aff'd, 285 N.Y. 627, 33 N.E.2d 554 (1941), and plaintiff has a heavy burden to carry. See Fidelity & Casualty Co. of New York v. Metropolitan Life Ins. Co., 42 Misc. 2d 616, 248 N.Y.S.2d 559, 568 (N.Y.Sup.Ct.1963). Because the non-division of surplus affected all contracts of GAC 50's class and did not benefit Hancock (a mutual company); because the severe increase in interest rates in the late 1970's would have meant a significant diminution in the market value of GAC 50 funds in the General Account carried at book value, of which the Court takes judicial notice; and because plaintiff offers no evidence of neglect or bad faith, plaintiff has failed to demonstrate that a genuine issue of material fact exists as to this claim. Accordingly, defendant's motion for summary judgment is granted.
II. Common Law Claims
1. Implied Covenant of Good Faith and Fair Dealing
Plaintiff argues that the totality of the circumstances surrounding Hancock's performance under GAC 50 demonstrates that Hancock has breached its covenant of good faith and fair dealing. Plaintiff's Mem. in Opp. at 57. Specifically, plaintiff objects to Hancock's termination of non-guaranteed benefits, failure to revalue rate tables for the pre-1968 annuities, refusal to permit rollover, assessment of risk charges, calculation of the ALA and failure to pay dividends, all of which relate to provisions of the GAC 50.
A covenant of good faith, however, cannot expand contract rights beyond the terms of the contract nor can a party violate that covenant when exercising its rights under the contract. See VTR, Inc. v. Goodyear Tire & Rubber Co., 303 F. Supp. 773, 777-78 (S.D.N.Y.1969). See also Keene Corp. v. Bogan, No. 88 Civ. 0217, slip op. at 14, 1990 WL 1864 (S.D.N.Y. Jan. 11, 1990) (WESTLAW, Allfeds database) (citing VTR, Inc.). Good faith or lack thereof is a matter for the Court to decide. Richard Short Oil Co. v. Texaco, Inc., 799 F.2d 415, 422 (8th Cir. 1986); Corbin on Contracts, § 654B at 924 (Supp.1989) The acts of defendant alleged by plaintiff since they are consonant with the contract's terms do not appear to amount to a breach of the implied duty of good faith. Plaintiff has not provided any facts showing defendant's acts were directed against plaintiff as opposed to acts carried out as ordinary corporate action.[15] Accordingly, summary judgment is granted on this issue.
There remain other bad faith claims of plaintiff relating to company-wide practices of Hancock which must be considered: Hancock's investment of General Account funds in its home office building; Hancock's segmentation of assets in its General Account in 1982; and Hancock's policy of imputing bond and mortgage yields to newly-acquired common stock holdings in allocating income in the early 1970's.
*1282 Hancock's General Account into which Article I, Section 15 of GAC 50 required all Sperry's contributions be placed constituted the general corporate funds of Hancock. Absent some factual showing that a corporate investment decision regarding General Account funds was not made in a disinterested manner for the benefit of the company as a whole, which plaintiff's supporting papers do not make, plaintiff cannot challenge investments in corporate headquarters.[16] Accordingly, summary judgment is also granted on this issue.
As for segmentation, the parties have stipulated that in 1982 Hancock divided assets in its General Account into subaccounts, each having its own investment policy. A.S.F. ¶ 88. Thereafter, contracts in the subaccount including GAC 50 received investment income from assets in the so-called "Pension Participating Segment" but received no income from assets assigned to other lines of business such as guaranteed investment contracts in the "Pension Non-Participating Segment." Plaintiff claims that because in 1982 relatively more high-yield investments were assigned to the Pension Non-Participating Segment, GAC 50 was wrongfully deprived of investment income it would have received absent segmentation.
Finally, plaintiff objects to Hancock's policy from 1971-1977 of imputing to common stock investments made in a particular year the yields on Hancock's bond and mortgage investments made for that year in the first two years of the life of those common stock investments. A.S.F. ¶¶ 60, 63. This policy raised the "new money" rate for the General Account. Id. ¶ 61. Plaintiff claims that this policy penalized "old" contracts such as GAC 50 heavily weighted with older assets because the rate of return credited to these accounts was reduced in order to offset the additional investment income being imputed to the "new money" investments. McCarthy Aff. ¶ 9.
Relevant to both of these claims is the following stipulation by the parties:
With respect to Hancock's General Account, Hancock has sole authority and discretion, in accordance with and as limited by applicable laws and regulations, to establish and execute investment policy and to allocate investment income, capital gains and losses and investment expenses to particular lines of business, classes of contracts and particular contracts.
A.S.F. ¶ 12. Plaintiff has not demonstrated any violation of this authority and discretion and thus has no grounds for objecting to Hancock's segmentation or imputation policies unless some applicable law or regulation was violated. Plaintiff argues that these policies resulted in GAC 50 being treated in a discriminatory fashion and thus violated New York Insurance Law § 4224(a)(1). Plaintiff's Mem. in Opp. at 65. That section provides:
(a) No insurance company doing business in this state and no savings and insurance bank shall:
(1) make or permit any unfair discrimination between individuals of the same class and of equal expectation of life, in the amount or payment or return of premiums, or rates charged for policies of life insurance or annuity contracts, or in the dividends or other benefits payable thereon, or in any of the terms and conditions thereof;
N.Y.Ins.Law § 4224(a)(1) (McKinney 1985) (emphasis added). This section, like its counterpart pertaining to health insurance, § 4224(b), plainly applies to discrimination among individual insureds. See, e.g., Health Ins. Ass'n of Am. v. Corcoran, 154 A.D.2d 61, 551 N.Y.S.2d 615 (App.Div.) (challenging determination by State Superintendent of Insurance that use of HIV test results in screening applicants for health insurance violated § 4224), aff'd, 76 N.Y.2d 995, 565 N.E.2d 1264, 564 N.Y.S.2d 713 (1990); Silver v. Equitable Life Assurance Soc'y, 563 N.Y.S.2d 78 (App.Div.1990) (alleging that exclusionary rider discriminated *1283 against individual with congenital mental retardation). There is no allegation that Hancock unfairly discriminated among individual Sperry retirees and thus the segmentation and imputation policies were within Hancock's "sole discretion" by agreement of the parties.
2. Breach of Fiduciary Duty
Plaintiff asserts a claim for common law breach of fiduciary duty relating to Hancock's administration of GAC 50's General Account funds. Hancock argues that this claim is preempted by ERISA. ERISA's preemption provision, 29 U.S.C. § 1144, provides that ERISA "shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan." The Second Circuit has observed:
[L]aws that have been ruled preempted are those that provide an alternative cause of action to employees to collect benefits protected by ERISA, refer specifically to ERISA plans and apply solely to them, or interfere with the calculation of benefits owed to an employee. Those that have not been preempted are laws of general applicationoften traditional exercises of state power or regulatory authoritywhose effect on ERISA plans is incidental.
See Aetna Life Ins. Co. v. Borges, 869 F.2d 142, 146 (2d Cir.) (Connecticut escheat law not preempted), cert. denied, ___ U.S. ___, 110 S. Ct. 57, 107 L. Ed. 2d 25 (1989). The Court ruled in its prior opinion that Hancock, as an insurer and issuer of a "guaranteed benefit policy" based on its General Account assets did not have a fiduciary duty under ERISA with respect to assets held in its General Account for GAC 50 and dismissed plaintiff's ERISA claim. See Harris Trust & Sav. Bank v. John Hancock Mut. Life Ins. Co., 722 F. Supp. 998 (S.D.N.Y.1989) (applying 29 U.S.C. § 1101(b)(2)(B)). Permitting plaintiff to assert a common law breach of fiduciary duty claim against Hancock in this context poses no danger of creating a "patchwork scheme of regulation," Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 11, 107 S. Ct. 2211, 2217, 96 L. Ed. 2d 1 (1987), for employee benefit plans. See Ventimiglia v. Gruntal & Co., No. 88 Civ. 1675, 1989 WL 251402 (S.D.N.Y. Nov. 1, 1989) (refusing to dismiss common law breach of fiduciary duty claim pleaded in the alternative to ERISA count but acknowledging that claim would fail if ERISA were later held to apply to the case). Such a claim is not preempted and may lie if there is evidence of a breach of fiduciary duty to the appropriate party.[17]
Plaintiff claims as a matter of case law that Hancock owed plaintiff a fiduciary duty, citing Hartford Accident & Indem. Co. v. Michigan Mut. Ins. Co., 93 A.D.2d 337, 462 N.Y.S.2d 175 (App.Div. 1st Dep't 1983), aff'd, 61 N.Y.2d 569, 463 N.E.2d 608, 475 N.Y.S.2d 267 (1984). However, Hartford Accident refers to the fiduciary duty that exists "between an insurer and its assured." Id., 462 N.Y.S.2d at 178. Because, as stipulated, what Hancock guaranteed was the payment of an annuity to covered employees for life (at least for any employees retiring prior to the 1977 amendment), it is clear that Sperry retirees are Hancock's only "assureds." A.S.F. ¶¶ 10, 32, 39, 80.[18] There is no showing that Hancock has violated a fiduciary duty to those employees or to any employees who retired thereafter insofar as those employees were guaranteed benefits. To the extent retirees under the Plan were required to look to the Plan assets and not to Hancock for payment of benefits, they were not Hancock's assureds. Plaintiff as trustee of the Sperry Plan is not an "assured" as to whom a common law fiduciary duty was owed by Hancock and there is no evidence *1284 showing the non-assured beneficiaries were damaged. Accordingly, this claim of plaintiff is dismissed.
3. Unjust Enrichment
Plaintiff also asserts a claim for unjust enrichment. Insofar as this claim is based on the failure to permit rollover and the assessment of risk charges on funds accumulated by reason of Hancock's termination of non-guaranteed benefits, refusal to permit rollover and its refusal to revalue rate tables for pre-1968 annuities, the claim is controlled by the express terms of the contract. Bargained-for benefits cannot be deemed to unjustly enrich a contracting party. Cf. City of Yonkers v. Otis Elevator Co., 844 F.2d 42, 48 (2d Cir.1988) (quasi-contractual relief unavailable where an express contract covers the subject matter). Accordingly, plaintiff's claim for unjust enrichment is denied and defendant's motion for summary judgment dismissing that claim is granted.
CONCLUSION
Defendant's motion for summary judgment dismissing plaintiff's contract and common law claims is granted. Plaintiff's complaint now having been dismissed in its entirety, Hancock's counterclaims and its third-party complaint are dismissed as moot. This case is hereby ordered closed.
IT IS SO ORDERED.
NOTES
[1] The factual background of this litigation is contained in large part in this Court's opinion of September 26, 1989, 722 F. Supp. 998. GAC-1150 covered the bargaining unit employees of the Sperry Gyroscope, Sperry Division.
[2] In 1968 Sperry determined to modify its method of funding employee pensions so that future retirees would not be provided guaranteed pension benefits from an insurance company but would look to investments of the Sperry retirement account to pay pension benefits. (Hirschberg Tr. 16, 78, 94)
[3] The deferred annuity form of contract had ultimately distributed such net experience to the contract holder as dividends. A.S.F. ¶¶ 17, 19. For purposes of this opinion "PAF" shall also include the Contingency Account which was part of the General Account (GAC 50, Article I, Section 18) since the parties' arguments do not rely on any distinction of consequence between the Contingency Account and the PAF.
[4] Under the 1968 amendment, Hancock guarantees that the PAF on any date will not be less than it otherwise would have been if the sum of the net interest earned and capital gains and losses apportioned to the PAF had always been zero from January 1, 1968. A.S.F. ¶ 27.
[5] If GAC 50's PAF balance fell below the amount of the LOF (or the amount of the PAF and Sperry's supplemental fund balances together fell below the amount of the MOL), Hancock could ask Sperry for a contribution. If the PAF balance was not at least equal to the LOF or if the GAC 50's PAF and supplemental fund were not equal to the MOL, the PAF would terminate and the contract would function thereafter as a deferred annuity contract pursuant to which Hancock had to provide annuities for all guaranteed benefits. A.S.F. ¶¶ 36, 40, 42.
[6] On July 29, 1988, the parties submitted a proposed joint pretrial order to Judge Cedarbaum in which plaintiff's claims were identified as ERISA claims and common law claims. At a conference on September 16, 1988, Judge Cedarbaum authorized bifurcated motions for summary judgment along those lines. The ERISA motion has been decided. This motion is intended to dispose of the action.
[7] An employee covered by GAC-50 who retired prior to 1977 had all his or her benefits guaranteed by Hancock. One of the Committee's purposes in effecting the change was to stop the growth of guaranteed benefits (Hirschberg Tr. 17) and increase the funds under the investment control of the Committee.
The 1977 amendment required Hancock to issue newly-worded certificates to retiring employees. Jefferson Tr. at 22.
[8] The excess funds were evidently transferred by Hancock's waiver of one of the requirements of the rollover transfer for direct-rated participating IPG contracts. Exh. 10, Pl.Exh. Binder.
[9] Due to the guarantee provisions and state insurance laws or regulations, investments carried in the General Account were generally long-term investments, in very large part fixed income securities. After 1959 each year's investments were part of a "cell" carried at book value. A.S.F. ¶ 20. However, although the investments were long term, certain liquidations would occur during a year and those funds less offsets were utilized for rollovers.
[10] It is true that Hancock's Philip Jefferson, in seeking approval by Hirschberg of a proposal to revalue the LOF, indicated that rollover would not be discontinued if the proposal were adopted (Exh. 12 at 3, Pl.Exh. Binder), but this implies that Hirschberg realized at the time there was no right to rollovers under the contract and the writing does not constitute a commitment to continuation of rollovers.
[11] Because a "guaranteed benefit policy" is exempt from ERISA only "to the extent that such policy or contract provides for benefits the amount of which is guaranteed by the insurer," 29 U.S.C. § 1101(b)(2)(B), it could be argued that funds in GAC 50's PAF devoted to non-guaranteed benefits are subject to ERISA even though they are held in Hancock's General Account. Under 29 U.S.C. § 1101(b)(2)(B):
(2) In the case of a plan to which a guaranteed benefit policy is issued by an insurer, the assets of such plan shall be deemed to include such policy, but shall not, solely by reason of the issuance of such policy, be deemed to include any assets of such insurer. For purposes of this paragraph:
....
(B) The term "guaranteed benefit policy" means an insurance policy or contract to the extent that such policy or contract provides for benefits the amount of which is guaranteed by the insurer. Such term includes any surplus in a separate account, but excludes any other portion of a separate account.
Non-guaranteed benefits were paid not from segregated assets or a separate account but from surplus or so-called "excess funds" in GAC 50's PAF. Under the second sentence of subdivision (B), surplus held by an insurer in a separate account is not subject to ERISA because it falls within the "guaranteed benefit policy" exception. There is no reason to deny similar exemption to so-called "excess funds" under GAC 50 even though they are held in Hancock's General Account rather than in a separate account. "ERISA was designed to prevent a fiduciary `from being put in a position where he has dual loyalties, and, therefore, he cannot act exclusively for the benefit of a plan's participants and beneficiaries.'" Levy v. Lewis, 635 F.2d 960, 968 (2d Cir.1980) (citation omitted). If Congress had intended ERISA's fiduciary requirements to apply to surplus held in an insurer's general account, it would have made its intention clear. See Mack Boring & Parts v. Meeker Sharkey Moffitt, 930 F.2d 267, 275 n. 17 (3d Cir.1991).
[12] The Univac Division manufactured Sperry's large computers and its employees had not been covered by GAC-50.
[13] Article III, Section 3, reads as follows:
The Company shall add to the Fund, as of each December 31st subsequent to January 1, 1968, the Fund's share and the Contingency Account's share of the net interest earned and apportioned to the Group Annuity Branch of the Company for the calendar year ending on such December 31st, less 1% of such share.
[14] The ALA adjustment under Article III, Section 9, was only to be made in the event an actual transfer of assets occurred (the rationale for such adjustment being that a transfer of assets would require a liquidation of long-term investments in the General Account). This provision defines the method of calculation of an ALA, not when it may or may not be calculable. Cf. Police Pension Comm'n v. John Hancock Mut. Life Ins. Co., No. 84-3815 (E.D.Pa. July 8, 1985); Kaye Dep. at 83-89; McCarthy Dep. at 35-36; Raskin Dep. at 384.
[15] For over six years before the filing of this suit, Sperry received actual notice of the various components of the annual determinations made by Hancock including the directors' failure to declare any dividends, A.S.F. ¶¶ 31, 34, 49-52, Plaintiff's Admissions ¶¶ 119, 124, 129. There is no evidence of any complaint by plaintiff to the annual determinations. Under these circumstances, the doctrine of laches bars any claims against Hancock on those grounds and indeed the six-year Statute of Limitations bars such claims. Sperry's argument that these annual determinations were of a summary nature is not an adequate excuse. If the determinations were summary, plaintiff could have asked for explanations.
[16] Massachusetts law permits an insurance company to invest its General Account assets in home office properties. Mass.Gen.L. ch. 175, § 66B (1987 & Supp.1991).
[17] Hancock would have fiduciary duties under ERISA with respect to funds not held in its General Account but held in its separate account which did not guarantee benefits but that claim is not made in this litigation.
[18] Article V, Section 1 of GAC 50 provides:
The Company shall issue to the Retirement Committee, for delivery to each employee covered hereunder, an individual Certificate containing in substance a statement of the benefits to which the employee is entitled under this Contract and stating the name of the beneficiary to whom any death benefit shall be payable.
(emphasis added). These certificates are in the nature of guarantees.
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767 F.Supp. 919 (1991)
EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, Plaintiff,
v.
HARRIS CHERNIN, INC., Defendant.
Donald ROSENTHAL, Plaintiff,
v.
HARRIS CHERNIN, INC., Defendant.
No. 88 C 9266.
United States District Court, N.D. Illinois, E.D.
July 15, 1991.
*920 Jean Powers Kamp, U.S. E.E.O.C., Chicago, Ill., Jeanette Goss, U.S. E.E.O.C., Milwaukee, Wis., and Karen A. Berres, Chicago, Ill., for plaintiffs.
Martin K. Denis, Shayle P. Fox, and Joel W. Rice, Fox and Grove, Chartered, Chicago, Ill., for defendant.
ORDER
NORGLE, District Judge.
Before the court are the objections of plaintiff Equal Employment Opportunity Commission ("EEOC") and defendant Harris Chernin ("Chernin") to Magistrate Judge Edward A. Bobrick's report and recommendation that this court grant in part and deny in part Chernin's summary judgment motion against EEOC. For the reasons *921 discussed below, Chernin's objections are sustained and the EEOC's objections are overruled.
FACTS
These consolidated cases challenge the July 1986 discharge of plaintiff Donald Rosenthal ("Rosenthal"), by defendant Chernin from his job as manager of Chernin's Mail Order and Customer Service ("MOCS"). Rosenthal, who had worked his way up in the Chernin business since being hired as a shoe salesman in 1962, was fifty five years old when he was discharged. Chernin replaced Rosenthal with a series of women in their early twenties, none of whom remained long at the job. Ultimately, Rosenthal's former position was filled by Mr. Mike Raftenburg, aged in his late sixties.
On December 1, 1986, Rosenthal filed a charge against Chernin with the EEOC, alleging age and sex discrimination. On June 29, 1988, after investigating Rosenthal's claim, the EEOC issued a Letter of Determination finding both age and sex discrimination. On July 1, 1988, Rosenthal filed a pro se complaint against Chernin in the Cook County Circuit Court, challenging his termination. Rosenthal then retained counsel who, on October 31, 1988, amended his complaint to allege age and sex discrimination. Also on October 31, 1988, the EEOC filed a complaint in federal district court alleging that Chernin had violated Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq., and the Age Discrimination in Employment Act ("ADEA"), 29 U.S.C. § 621 et seq. The amended complaint in Rosenthal's private action against Chernin was removed to federal court on November 7, 1988, and on March 20, 1989, was consolidated with the EEOC action.
On August 2, 1990, this court granted Chernin's motion for summary judgment on Rosenthal's ADEA claim on the grounds that Rosenthal's first amended complaint, filed October 31, 1988, was barred by ADEA's two year statute of limitations and did not relate back to the filing date of Rosenthal's original pro se complaint.
On September 24, 1990, Chernin filed the present motion for summary judgment on EEOC's ADEA and Title VII claims. In its motion, Chernin argues that this court's summary judgment in favor of Chernin on Rosenthal's ADEA claim precludes the EEOC from maintaining its ADEA claim, by the doctrine of res judicata. Chernin also argues that once an employee has filed a private Title VII action against his employer, the EEOC is not authorized to maintain an independent Title VII action against that employer, but may only intervene in the private action. The parties briefed the motion before Magistrate Judge Edward A. Bobrick to whom this case had been assigned for disposition of all pre-trial motions.
On December 12, 1990, the Magistrate Judge submitted to this court his report and recommendation to grant in part and deny in part Chernin's motion. The Magistrate Judge's recommendation held that EEOC's ADEA claim was not barred by principles of res judicata, because "the EEOC's claim is not technically identical to Mr. Rosenthal's and ... the EEOC was not a party, or in privity with a party, in Mr. Rosenthal's claim." December 12, 1990, Report and Recommendation ("Recommendation"), p. 5. The Magistrate Judge reasoned that because the EEOC is charged with protecting the public, its interests are broader than those asserted by individual victims of discrimination. He nevertheless held that because Rosenthal's private claim for damages (as opposed to injunctive relief) under ADEA had previously been dismissed, the EEOC was barred from obtaining such a damage recovery on Rosenthal's behalf.
The Magistrate Judge also held that the sex discrimination claim in Rosenthal's first amended complaint (filed in state court) barred the EEOC from filing a separate Title VII claim. He concluded that summary judgment should be entered against the EEOC on its Title VII claim, and that the EEOC should be granted leave to intervene in Rosenthal's Title VII action.
*922 DISCUSSION
Upon the submission of a magistrate judge's report and recommendation on a motion for summary judgment, the district judge shall make a de novo determination upon the record and may accept, reject or modify the recommended decision. Fed.R.Civ.P. 72(b); 28 U.S.C. § 636(b)(1). In making this determination, the judge must look at all the evidence contained in the record and retains final authority over determination of the dispositive motion. Delgado v. Bowen, 782 F.2d 79 (7th Cir. 1986).
Rule 56(c) of the Federal Rules of Civil Procedure provides that summary judgment:
shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.
A dispute about a material fact is "genuine" 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, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). In determining whether a genuine issue of material fact exists, the court must view the non-moving party's evidence as true and draw all justifiable inferences in that party's favor. Id. at 255, 106 S.Ct. at 2513; see Santiago v. Lane, 894 F.2d 218, 221 (7th Cir.1990).
1. Res Judicata
Because the ADEA claims asserted by Rosenthal and by the EEOC are both federal law claims brought in federal court, the federal rule of res judicata determines whether the summary judgment on Rosenthal's claim bars the EEOC from maintaining its ADEA claim. See Barnett v. Stern, 909 F.2d 973, 977 (7th Cir.1990); In re Energy Coop., Inc., 814 F.2d 1226, 1230 (7th Cir.1987). The doctrine of res judicata contains three essential elements:
1) a final judgment on the merits in an earlier action;
2) an identity of the cause of action in both the earlier and later suit; and
3) an identity of parties or privies in the two suits.
La Preferida, Inc. v. Cerveceria Modelo, S.A. de C.V., 914 F.2d 900, 907 (7th Cir. 1990). The dismissal of Rosenthal's ADEA claim unquestionably satisfies the "final judgment on the merits" strand of the res judicata analysis. As the EEOC concedes in its submissions, the Seventh Circuit has unambiguously held that statute of limitations dismissals are "on the merits" for the purposes of res judicata. See Am. Nat'l Bank & Trust Co. v. City of Chicago, 826 F.2d 1547, 1553 (7th Cir.1987) ("A decision may be `on the merits' for purposes of preclusion even though the court did not resolve the merits.... The decision is on the merits (and hence not jurisdictional) for the purposes of preclusion when the litigant had an opportunity to receive an adjudication from that court. That he bollixed his opportunity by starting the suit too late ... does not justify exposing the defendant to another round" [emphasis in original]).
Whether Chernin has satisfied the "identity of claim" strand of the res judicata test is somewhat more problematic. Magistrate Judge Bobrick's report and recommendation merely states: "it appears that the EEOC's claim is not technically identical to Mr. Rosenthal's...." Recommendation, p. 5. Magistrate Judge Bobrick apparently reasoned that the two claims differed in the nature of the relief sought; whereas Rosenthal sought damages in the form of lost wages and benefits, and emotional and physical distress, the EEOC seeks primarily equitable relief e.g., to enjoin Chernin from further discrimination, to require it to adopt certain non-discriminatory policies, and to require it to reinstate Rosenthal. However, the test for determining whether two claims are identical for the purposes of res judicata does not consider the nature of the relief sought. Smith v. City of Chicago, 820 F.2d 916, 918 (7th Cir.1987), (quoting Lee v. City of Peoria, 685 F.2d 196, 200 (7th Cir.1982)) ("[e]ven though one group of facts may give rise to different claims for relief *923 upon different theories of recovery, there remains a single cause of action" [emphasis added]). Rather, the federal "identity of claim" test addresses only whether the two claims "arose out of the same core of operative facts." Energy Coop., 814 F.2d at 1231; see Smith, 820 F.2d at 918. This "identity of claim" test is known as the "transaction approach." See Pirela v. Village of North Aurora, 935 F.2d 909, 913 (7th Cir.1991); Schlangen v. Resolution Trust Corp., 934 F.2d 143, 147 (7th Cir. 1991).
It is evident from the parties' respective complaints, that EEOC's ADEA claim and Rosenthal's ADEA claim arise from the same core of operative facts i.e., Chernin's discharge of Rosenthal. See Prochotsky v. Baker & McKenzie, No. 90 C 4478, slip op. at 6, 1991 WL 9007 (N.D.Ill. January 18, 1991) (plaintiff's Title VII claim barred by doctrine of res judicata where plaintiff previously litigated an ERISA claim which also arose from the termination of her employment). Thus, although the ADEA claims of Rosenthal and the EEOC are not literally "identical" causes of action, they nevertheless satisfy the "identity of claim" strand of the res judicata test.
Perhaps the most difficult issue in this analysis is whether the EEOC is sufficiently identified with Rosenthal to satisfy the "identity of parties or privies" strand of the res judicata analysis. Clearly Rosenthal and the EEOC are not identical parties, and they arguably are not "privies" in the technical sense of the term. Nevertheless, the EEOC's interest in its ADEA claim may be sufficiently aligned with Rosenthal's interest in his ADEA claim for the two parties to be deemed "in privity" for the purposes of the res judicata analysis. See Colby v. J.C. Penney Co., 811 F.2d 1119, 1125 (7th Cir.1987) ("even if a party to the second suit ... was not a party to the first suit ... or in privity with that party (e.g., an assignee), still if the party to the first suit was an adequate representative of the other's interests, the other may be barred by the judgment in that suit"); see also Pearson v. Hafnia Holdings, Inc., No. 90 C 991, slip op. at 6, 1991 WL 18421 (N.D.Ill. February 7, 1991); Maguire v. Selcke, No. 90 C 21, slip op. at 9, 1990 WL 70451 (N.D.Ill. May 4, 1990). The principle which permits the "privity" strand of the res judicata test to be satisfied in this manner is known as the doctrine of "virtual representation." Colby, 811 F.2d at 1125; Maguire, slip op. at 9. As noted by the court in Maguire, "[t]he doctrine of `virtual representation,' while not of recent vintage, has been applied with more frequency and to a broader range of circumstances in recent years" and constitutes a "recent trend ... to loosen `the traditional and sometimes artificial limitations on the application of res judicata....'" Maguire, slip op. at 9 (quoting Diaz v. City of Chicago, 601 F.Supp. 1251, 1253 (N.D.Ill.1984)). The doctrine is based upon the general principle that privity, for res judicata purposes, may be found where "the interests of the two parties are so closely aligned that one is the virtual representative of the other." Id. at 9-10. Although no specific test has been established for applying the virtual representation doctrine, courts have recognized two factors which may aid in this analysis. "First, the cases look to the nature of the cause of action and where the operative facts are identical, the court is more likely to find the second party adequately represented in the first action." Maguire, slip op. at 10. Second, some cases look to the nature of the connection between the parties. Id. at 12. "A finding of virtual representation may be based on an express or implied legal relationship." Id.
In holding that the "identity of parties or privies" strand was not met, the Magistrate Judge cited cases supporting the proposition that the EEOC "is not merely a proxy for victims of discrimination," but "acts also to vindicate the public interest in preventing employment discrimination." Recommendation, p. 5 (quoting General Telephone Co. v. EEOC, 446 U.S. 318, 326, 100 S.Ct. 1698, 1704, 64 L.Ed.2d 319 (1980). In addition to the General Telephone case, the Magistrate Judge cited similar cases from the Tenth, Ninth, Sixth, and Third Circuits, and one case from the Western *924 District of Pennsylvania, all of which concur in the proposition that the adjudication of a private employee discharge action does not, under the doctrine of res judicata, bar the EEOC from suing the same employer. Significantly, virtually all of these cases were decided in the context of Title VII claims in which the private plaintiffs had received prior adverse judgments.[1] The only cited case to hold that the EEOC was not barred by res judicata from maintaining an ADEA action, despite a private party's adverse prior judgment, is EEOC v. U.S. Steel Corp., 728 F.Supp. 1167, 1170 (W.D.Pa.1989). Significantly, at approximately the same time that the Magistrate Judge issued his Recommendation, the Third Circuit reversed this aspect of the U.S. Steel case. EEOC v. U.S. Steel Corp., 921 F.2d 489 (3rd Cir.1990).
In U.S. Steel, the Third Circuit directly addressed the issue of whether the EEOC would be deemed to be in privity with private plaintiffs, for the purposes of res judicata, in a claim brought under ADEA. The court's analysis begins with the observation that the term "privity":
is merely a word used to say that the relationship between one who is a party on the record and another is close enough to include that other with the res judicata. One relationship long held to fall within the concept of privity is that between a nonparty and party who acts as the nonparty's representative.
U.S. Steel, 921 F.2d at 493 (citations omitted). Then, referring to 29 U.S.C. § 626(c)(1),[2] the court held that the "distinctive enforcement scheme of the ADEA shows unmistakenly [sic] that the EEOC has representative responsibilities when it initiates litigation to enforce an employee's rights." Id. at 494. The court noted that "[t]he enforcement scheme of Title VII of the Civil Rights Act of 1964, from which the framers of the ADEA consciously departed (see Burns v. Equitable Life Assurance Society, 696 F.2d 21, 24 n. 2 (2d Cir.1982)), has no similar feature." Id. at 494, n. 4. The court expressly concluded that "individuals who fully litigated their own claims under the ADEA are precluded by res judicata from obtaining individual relief in a subsequent EEOC action based on the same claims." Id. at 496-497. This court finds the opinion in U.S. Steel to be well reasoned and it adopts the Third Circuit's position on this issue.
The court also recognizes that in some instances, the EEOC's interest in pursuing an ADEA claim may be broader than that of an individual for whose benefit the EEOC initiated its ADEA investigation. Notably, when the EEOC seeks to enjoin discrimination against an entire class, its interest in an ADEA claim may exceed that of any single class member. In such cases, the existence of a prior judgment on a private suit brought by an individual member of the class will not bar the EEOC's action on the grounds of res judicata. See U.S. Steel, 921 F.2d at 496. However, in this case, it is not clear that the EEOC has alleged sufficient facts to state a claim on behalf of such a class. Here, the factual underpinning of the EEOC's ADEA claim appears to be based solely on Rosenthal's discharge. In other words, although the EEOC requests broad injunctive relief to enjoin Chernin from discriminatory practices generally and to force it to institute equal opportunity employment practices for "males and for individuals who are age 40 or older" (EEOC complaint, p. 4), the EEOC fails to allege a single incident of discrimination against any employee other than Rosenthal. Having held that the EEOC is barred by the doctrine of res judicata from seeking any relief under ADEA for Rosenthal, the court shall not permit the EEOC to continue to litigate an *925 ADEA claim against Chernin on behalf of a group of unnamed and unidentified grievants whose existence has not even been alleged. Having failed to allege that Chernin has discriminated against any employee other than Rosenthal, the EEOC has failed to state a claim against a broader class of similarly situated males aged 40 or older.
2. Title VII
Chernin argues that it is entitled to summary judgment on the EEOC's Title VII claim on the grounds that the EEOC may not institute its of action under Title VII once a private party files suit. The Magistrate Judge agrees with Chernin's position that the EEOC may not maintain a separate Title VII action, but points out that rather than granting summary judgment, the court should dismiss this claim and grant the EEOC leave to intervene in Rosenthal's Title VII action. See Recommendation, pp. 8-11. After a de novo review of the authorities, this court accepts the Magistrate Judge's recommendation on this issue. As the parties acknowledge, the Seventh Circuit has not addressed the issue of whether the filing of a Title VII action by a private plaintiff precludes the EEOC from subsequently filing an independent Title VII action based upon the same facts. The Eighth and Tenth Circuits have addressed the issue, and have interpreted the relevant language in Title VII, 42 U.S.C. § 2000e-5(f), to preclude the EEOC from so filing. See EEOC v. Missouri Pac. R.R., 493 F.2d 71 (8th Cir.1974); EEOC v. Continental Oil Co., 548 F.2d 884 (10th Cir.1977). The Third Circuit, on the other hand, has taken the contrary position. EEOC v. North Hills Passavant Hospital, 544 F.2d 664 (3rd Cir.1976).
For the reasons stated in Magistrate Judge Bobrick's Report and Recommendations, this court concurs with the analysis and rationale of the Eighth and Tenth Circuits. As the Magistrate Judge stated:
the clear language of the statute proscribes a one-hundred-eighty-day limit on the EEOC's right to sue; after that, the EEOC may reenter the fray only upon the court's discretion to allow intervention in the charging party's suit. If the EEOC were allowed to sue at any time, this discretionary intervention provision would be superfluous.
Recommendation at pp. 9-10. Well settled principles of statutory construction establish that courts should avoid construing a statute in such a way as to render meaningless any statutory language. See, e.g., Thurner Heat Treating Corp. v. NLRB, 839 F.2d 1256, 1259 (7th Cir.1988) ("It is a basic rule of statutory construction that, if possible, effect is to be given to each and every word, clause and sentence in a statute, and a construction that results in any portion of a statute being superfluous should be avoided"). This court finds Magistrate Judge Bobrick's report and recommendation on this issue well-reasoned, and it accepts that recommendation in full.
CONCLUSION
For the reasons stated above, Chernin's objections to the Report and Recommendation of the Magistrate Judge are sustained to the extent that this court holds that the EEOC's ADEA claim is barred in its entirety by the doctrine of res judicata. The EEOC's objections to the Report and Recommendation are overruled. The EEOC's Title VII claim against Chernin is dismissed and the EEOC is granted leave to intervene in plaintiff Rosenthal's Title VII claim.
IT IS SO ORDERED.
NOTES
[1] Notably, the Seventh Circuit has also expressly held that "`virtual representation,' whatever its vitality elsewhere, does not apply to Title VII." Colby, 811 F.2d at 1125.
[2] This provision states: "Any person aggrieved may bring a civil action in any court of competent jurisdiction for such legal or equitable relief as will effectuate the purposes of this chapter: Provided, That the right of any person to bring such action shall terminate upon the commencement of an action by the Equal Employment Opportunity Commission to enforce the right of such employee under this chapter" (emphasis in original).
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436 A.2d 888 (1981)
Lawrence PARENT, et al., Trustees of the Fabrique du Paroisse de Notre Dame de Mont Carmel
v.
ROMAN CATHOLIC BISHOP OF PORTLAND et al.
Supreme Judicial Court of Maine.
Argued March 16, 1981.
Decided November 4, 1981.
William J. Smith, VanBuren (orally), Joel R. LeBlanc, Madawaska, for plaintiffs.
Robinson & Kriger, Robert C. Robinson (orally), Portland, Solman, Page & Hunter, P. A., Richard N. Solman, Caribou, for Roman Catholic Bishop of Portland.
Before McKUSICK, C. J., GODFREY, NICHOLS, GLASSMAN,[*] and CARTER, JJ., and DUFRESNE, A. R. J.
GODFREY, Justice.
Plaintiffs, Lawrence Parent and others, trustees of a religious association in the Roman Catholic parish of Lille, appeal from a summary judgment for the Roman Catholic bishop of Portland entered by the Superior Court. The bishop is a party to this action in his capacity as head and pastor of the Roman Catholic diocese of Portland, which includes the parish of Lille, and as a corporation sole created by special act of the Maine Legislature, Me.Priv. & Spec.L. 1887, ch. 151. Appellants allege the Superior Court erred in entering summary judgment because they were entitled to equitable relief in the form of a constructive trust to prevent the sale of church property of the Lille parish or to recover church property already sold. We deny the appeal and affirm the judgment below.
The village of Lille was settled in the last century by French Catholics. On March 31, 1876, Cyrille Thibodeau executed and delivered a warranty deed for land to the Right Reverend James Augustine Healy, bishop of the Diocese of Portland, and his successors. The consideration for this conveyance was paid by the parish. The deed conveyed an estate in fee simple absolute and contained no restrictions. In the years that followed, several Catholic churches were built on the land, thus providing the parishioners and their descendants with a place of worship.
On September 18, 1977, Bishop O'Leary, ninth bishop of Portland, announced that the church and rectory in Lille would be closed and the parish merged with a nearby parish. Thereafter the bishop sold some of the land and transferred other church assets in the parish. Appellants resisted. Appellants claimed that the parishioners had contributed money, time, property, and *889 labor to the Lille parish over the years in reliance upon the promise of the church to provide religious services in Lille. That claim is at the heart of the appellants' challenge to the bishop's disposition of the church property in Lille.
On January 5, 1979, the appellants filed a complaint against the bishop and the grantees who held title to certain property in Lille conveyed by the bishop. The complaint alleged that a confidential relationship existed between the bishop and the Lille parishioners based on the bishop's position in the church, his promises to provide religious services, and their reliance upon those promises. It further alleged that the bishop had abused that relationship by closing the church, selling portions of the realty, and transferring other property, all without the approval of the parishioners. For relief, the complaint requested the Superior Court to impose a constructive trust on the bishop with respect to all property and assets given to the church by the parish, to enjoin the bishop from transferring any property given to the church by the parish, order grantees to reconvey the realty sold by the bishop, and award judgment for $70,000 in damages against the bishop.
On January 19, 1979, the bishop filed a motion to dismiss. In response to the bishop's argument that the court lacked subject-matter jurisdiction over the property dispute before it on First Amendment grounds, the court observed that "the usual prohibition [of the First Amendment] does not apply where the controversy can be resolved by the application of neutral principles of law developed for use in all property disputes." Because the motion to dismiss was based only on the legal sufficiency of the pleadings, the court denied the bishop's motion so that plaintiffs might have an opportunity to adduce evidence of an express trust, with respect to which the court could apply neutral principles of law in resolving the dispute.
After answering interrogatories propounded by the appellants, the bishop filed a motion for summary judgment on March 3, 1980. Accompanying this motion was an affidavit of the bishop and a photocopy of the 1876 deed. The bishop's answers to appellants' interrogatories showed that the proceeds derived from the sale of church property in the Lille parish had been deposited in general church bank accounts and not in trust for Lille parishioners. The bishop denied that he or any of his predecessors ever told the Lille parishioners that their contributions would be used exclusively for their parish. The answers fully described the transfer and location of other church property from the parish. Both the answers and the bishop's affidavit stated that canons of the Catholic church placed full authority for the disposition of church property in the bishop, and that no evidence of any trust agreement, express or implied, concerning any church property in the Lille parish could be found or was known to the bishop. On its face, the 1876 deed conveyed an estate in fee simple absolute without restriction. Finally, the bishop's answers also alluded to the fact that the special act of the Maine Legislature conferring the legal status of corporation sole on the bishop, expressly recognized the power of the bishop to dispose of property according to the discipline and government of the Roman Catholic Church.
In response to the bishop's affidavit and answers to interrogatories, the appellants filed the affidavit of Lawrence Parent. In substance, Parent's affidavit stated only that the Lille parishioners relied upon and respected the bishop; that they contributed to the parish because its priests and the bishop himself orally promised to maintain religious services there; and, finally, that before answering the interrogatories the bishop had never claimed an ultimate prerogative to dispose of church property. The affidavit made no reference to a written agreement of any type, and no such written agreement was ever produced for the court's consideration.
With the evidence summarized above before it, the Superior Court granted the bishop's motion for summary judgment. Noting that the plaintiffs had failed to adduce evidence of an express trust that the court *890 could recognize and enforce without becoming "entangled in matters involving church policy or practices," the court concluded that it lacked subject-matter jurisdiction to resolve the dispute between the parties and dismissed the complaint.
The appellants contend that the Superior Court erred in ruling that it lacked jurisdiction over the case because the First Amendment as applied through the Fourteenth does not bar the application of neutral principles of law to church property disputes and such principles include the law of constructive trusts. In response, the bishop appears to be arguing that judicial resolution of this particular case would abridge the guarantee of separation of church and state, since, absent a finding of an express trust, the Superior Court in applying the law of constructive trusts would be required to evaluate the allocation of power and religious doctrines of the Catholic church.
The United States Supreme Court has clearly held that neutral principles of law can be applied by state courts to resolve church property disputes. Jones v. Wolf, 443 U.S. 595, 99 S.Ct. 3020, 61 L.Ed.2d 775 (1979); Presbyterian Church v. Mary Elizabeth Blue Hull Memorial Presbyterian Church, 393 U.S. 440, 89 S.Ct. 601, 21 L.Ed.2d 658 (1969). In so doing, however, it has reaffirmed the fundamental constitutional principle that civil courts must avoid passing on questions of religious doctrine or becoming entangled in matters of religious controversy. Jones v. Wolf, supra, 443 U.S. at 602, 99 S.Ct. at 3024-25; Serbian Orthodox Diocese v. Milivojevich, 426 U.S. 696, 710, 96 S.Ct. 2372, 2381, 49 L.Ed.2d 151 (1976); Presbyterian Church, supra, 393 U.S. at 449, 89 S.Ct. at 606. In Milivojevich, supra, 426 U.S. at 710, 96 S.Ct. at 2381, the Court amplified the principle when it explained that this limitation on the authority of civil courts "applies with equal force to church disputes over church polity and church administration." Thus, we must determine from the pleadings, interrogatories, and affidavits before the Superior Court whether any relevant aspect of the law of trusts could have been applied to the material facts of this property dispute without "extensive inquiry by [the Superior Court] into religious law and polity." Presbyterian Church, supra, 393 U.S. at 449, 89 S.Ct. at 606. See Smart v. Indiana Yearly Conference, 257 Ind. 17, 271 N.E.2d 713 (1971).
The record before the Superior Court plainly revealed that the plaintiffs had no legal title to the property in question. Unopposed by plaintiff's proof, the bishop's answers to interrogatories, his affidavit, and the warranty deed by which the bishop acquired the realty clearly established that unrestricted title to the church property was in the bishop as ultimate church authority for the Portland Catholic diocese and as a corporation sole under Maine law. The record further indicates that plaintiffs failed to rebut evidence of the hierarchical structure of the Roman Catholic Church and the bishop's pre-eminent authority to administer church affairs throughout the diocese. Accordingly, absent evidence of some collateral legal obligation existing between the bishop and plaintiffs which could have been identified without entanglement in religious doctrine or polity, the Superior Court had no authority to review the bishop's actions with respect to the church property in Lille. See Marich v. Kragulac, 175 Ind.App. 538, 415 N.E.2d 91 (1981). If it is assumed, as plaintiffs alleged, that a confidential relationship existed between the bishop and plaintiffs, the First Amendment prohibited the Superior Court from deciding whether the bishop abused that relationship so as to justify the imposition of a constructive trust. Such a decision would have required the court to assess the scope of the bishop's authority under canon law and the propriety of his exercise of that authority in this case, matters over which the courts of this State have no jurisdiction. Galich v. Catholic Bishop of Chicago, 75 Ill.App.3d 538, 31 Ill.Dec. 370, 376-77, 394 N.E.2d 572, 578-79 (1979), cert. denied, 445 U.S. 916, 100 S.Ct. 1277, 63 L.Ed.2d 600 (1980).
In the proceeding below, the Superior Court gave plaintiffs the opportunity to furnish the court with evidence of a collateral legal obligation when it denied the *891 bishop's first motion to dismiss. In response to the bishop's subsequent motion for summary judgment, no written instrument evidencing the existence of a simple contract or trust agreement of any kind was produced by the plaintiffs. Instead, plaintiffs filed the single affidavit of a Lille parishioner, who merely restated the allegations of the complaint that the parishioners had placed their trust in the bishop and contributed to the Lille church in reliance on the promises of the bishop to provide church services in Lille. In contrast to Parent's understanding, the bishop denied ever stating to the Lille parishioners that their contributions were to be used exclusively for the Lille parish and suggested that his actions and the actions of his predecessors in regard to the Lille property had been guided only by concern and responsibility for the "well-being of the spiritual life of the Catholics in Lille."
Without the aid of a writing plainly evidencing conditions or restrictions on the bishop's use of the Lille property and thus some basis for a legal or equitable right in the plaintiffs, it is obvious that the Superior Court could not have resolved the dispute before it without passing on the doctrines and practices of the Roman Catholic Church. Ascertaining the content of any such parol agreement or trust express or implied would have required the court to determine the understanding of the parties concerning the meaning of any oral assurances the bishop may have made. It would have required the court to draw inferences from the conduct of both parties over the years in giving and receiving contributions to the church. Such inquiries would have embroiled the court in extensive consideration of religious doctrine, polity and administration. The Superior Court did not err in granting the bishop's motion for summary judgment since plaintiffs had failed to show the basis for any legal obligation on the bishop that would have restricted disposition of the church property in Lille and warranted imposition of a constructive trust.
The entry is:
Appeal denied.
Judgment affirmed.
All concurring.
NOTES
[*] Glassman, J., sat at oral argument and in the initial conference but died prior to adoption of this opinion.
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767 F.Supp. 1045 (1991)
BUD MAHAS CONSTRUCTION, INC., Plaintiff,
v.
CLARK COUNTY SCHOOL DISTRICT, et al., Defendants.
No. CV-S-91-389-PMP (LRL).
United States District Court, D. Nevada.
July 2, 1991.
H. Roger McPike, Paul A. Acker, Beckley, Singleton, De Lanoy, Jemison & List, Chtd., Las Vegas, Nev., for Bud Mahas Const., Inc.
Donald H. Haight, Clark County School Dist., Las Vegas, Nev., for School Dist.
*1046 Johnnie B. Rawlinson, Chief Deputy Dist. Atty., Las Vegas, Nev., for Bd. of Trustees.
Bill Curran, Stanley W. Parry, Offices of K. Michael Leavitt, Las Vegas, Nev., for Sletten.
ORDER
PRO, District Judge.
I. FACTS
Earlier this year, the Clark County School District solicited bids for the construction of the Thurman White Junior High School. When the bids were opened on April 23, 1991, Plaintiff Bud Mahas Construction ("Mahas") was shown to be the low bidder on the project with a total bid of $11,511,000. Sletten Construction of Nevada ("Sletten") submitted a bid of $11,644,000, which is $133,000 higher than Mahas' bid.
Mahas and Sletten both sought qualification under the Nevada Bid Preference Statute, Nev.Rev.Stat. § 338.147.[1] That statute gives a 5% bid preference to a responsible bidder who has paid "the state and local taxes" in Nevada for 5 consecutive years before submitting the bid. The School District staff sought further documentation from Mahas as to its asserted qualification under the Nevada Bid Preference Statute. On May 10, 1991, counsel for the District notified Mahas that it intended to award the contract to Sletten, and invited Mahas representatives to attend the May 14, 1991 meeting of the District's Board of Trustees.
Prior to the meeting, the District staff prepared a memo to members of the Board of Trustees regarding the award of the contract. This memo notes both that the staff did not believe Mahas qualified for the bid preference under Section 338.147 and that the bid was considered nonresponsive because there were irregularities on Mahas' listing of who would be doing which work on the project. At the May 14 meeting, Mahas and its counsel attended and tried to convince the Trustees that Mahas qualified for the bid preference. After lengthy discussion as to this issue, the nonresponsiveness issue was raised and briefly discussed. The problem noted was that Mahas had listed itself as doing certain earthwork and drainage work which its Class B General Contractor's license did not authorize it to do. Following this discussion, the Board of Trustees followed its counsel's advice and awarded the contract to Sletten.
On May 24, 1991, Mahas filed a Complaint for Declaratory Relief and Injunctive Relief (# 1) against Clark County School District, Clark County School District Board of Trustees (both collectively the "District"), and Sletten Construction of Nevada. The Complaint seeks a declaration that the contract should have been awarded to Mahas, and an injunction to prevent Sletten from going forward with construction and to award the contract to Mahas. On May 29, 1991, Mahas filed an Amended Motion for Preliminary Injunction (# 8). The District filed an Opposition (# 16) on June 14, 1991, as did Sletten (# 17). Mahas filed a Reply (# 27) on June 21, 1991. On June 27, 1991, the Court conducted a hearing to consider arguments in support of and in opposition to Mahas' Amended Motion for Preliminary Injunction.
Mahas argues that the taxes it has paid over the last 5 years qualify it for the bid preference under the statute. Further, it argues that its license authorized it to do the on-site portion of the listed work, and that the off-site portion constituted only a "minuscule" portion of the work. Mahas claims that it had hired a qualified subcontractor *1047 to do this portion, and the District staff would have been so informed if they had asked. Mahas asserts that this issue should have been thoroughly discussed with its representatives before the award of the bid, just as the District did request further information as to the bid preference. Finally, Mahas argues that Sletten should not qualify for the bid preference because it was not incorporated or licensed until less than 5 years ago. However, Sletten responds that its parent company has done business in Nevada since 1963, and that the current corporation is a successor thereof, entitled to benefit from the prior activity of its parent.
II. PRELIMINARY INJUNCTION
In Los Angeles Memorial Coliseum Comm'n v. National Football League, 634 F.2d 1197, 1200-01 (9th Cir.1980), the Ninth Circuit stated the standard for granting a preliminary injunction as follows:
(1) a strong likelihood of success on the merits, (2) the possibility of irreparable injury to plaintiff if the preliminary relief is not granted, (3) a balance of hardships favoring the plaintiff, and (4) advancement of the public interest (in certain cases).... In this circuit the moving party may meet its burden by demonstrating either (1) a combination of probable success on the merits and the possibility of irreparable injury or (2) that serious questions are raised and the balance of hardships tips sharply in its favor.... These are not separate tests, but the outer reaches "of a single continuum."
(Citations omitted). In order to prevail ultimately on the merits, Mahas must persuade this Court that 1) the Board's decision that Mahas' bid was unresponsive should be reversed, and 2) that either Mahas does qualify for the bid preference or Sletten does not so qualify. Because this Court finds no likelihood of success on the merits as to the responsiveness issue, the Court must deny the preliminary injunction and need not address the preference issues.
Several Nevada statutes provide the School Board with a great deal of discretion in awarding contracts. Nev.Rev.Stat. § 332.065 provides:
When a governing body or its authorized representative has advertised for or requested bids in letting a contract, the award shall be made to the lowest responsive and responsible bidder. The lowest responsive and responsible bidder will be judged on the basis of price, conformance to specifications, bidders' qualifications including such bidders' past performance in such matters, quality and utility of services, supplies, materials or equipment offered and their adaptability to the required purpose and in the best interest of the public, each of such factors being considered.
Further, § 332.075 provides:
Any or all bids received in response to a request for bids may be rejected by the governing body or its authorized representative if such governing body or its authorized representative determines that any such bidder is not responsive or responsible or that the quality of the services, supplies, materials, equipment or labor offered does not conform to requirements or if the public interest would be served by such a rejection.
In statutes relating more specifically to licensing requirements, the statutes provide stricter standards. For example, Section 332.085 provides:
In determining the responsibility of any bidder, the governing body or its authorized representative shall consider the possession of and limit on any required license and may consider the financial responsibility, experience, adequacy of equipment and ability of the bidder to complete performance.
(Emphasis added). Finally, Section 338.145 provides in part:
1. A public body awarding a contract for a public work shall not award the contract to any person who, at the time of the bid, is not licensed under the provisions of chapter 624 of NRS or if the contract would exceed the limit of his license.
(Emphasis added).
In circumstances where public boards and officials have discretion to determine *1048 the lowest responsible bidder, a reviewing Court must look only at the evidence that was before that body in making its decision, and the Court's inquiry is limited to an examination of "whether, upon such information, that body acted arbitrarily, capriciously, and abused its discretion." Urban Renewal Agency v. Iacometti, 79 Nev. 113, 118, 379 P.2d 466, 468 (1963); see also State Purchasing Div. v. George's Equip., 105 Nev. 798, 805, 783 P.2d 949, 954 (1989); Douglas County Bd. of County Comm'rs v. Pederson, 78 Nev. 106, 108, 369 P.2d 669, 671 (1962); see generally 64 Am.Jur.2d Public Works and Contracts § 68, at 925 (1972). Thus, this Court may not reverse the decision of the School Board merely because it would have decided differently.
Mahas correctly points out that minor variations from the specifications are not a basis to reject the bid, and that variations are only substantial if they give a bidder a substantial advantage or benefit not enjoyed by other bidders. Farmer Constr. v. State of Washington, 98 Wash.2d 600, 656 P.2d 1086, 1088 (1983); Taylor v. County Bd. of Arlington County, 189 Va. 472, 53 S.E.2d 34, 41 (1949); Coller v. City of Saint Paul, 223 Minn. 376, 26 N.W.2d 835 (1947). However, Mahas did not merely have a variation from the specifications in the request for bids. Rather, the face of its bid package indicated that it intended to do some work for which it was not properly licensed. Though it might have been a very small portion, the statutes above regarding licensing requirements are of a mandatory nature, and "[s]tatutory or regulatory mandatory requirements with respect to bidding on public contracts cannot be waived." 64 Am.Jur.2d Public Works and Contracts § 62, at 916 (1972).
Mahas now claims that it had hired a properly licensed subcontractor to do the portion of the work for which it was not qualified. However, the Board was not informed of this fact, and it therefore may not be considered by this Court. Finally, Mahas argues that the nonresponsiveness issue was "badly handled" because the concern of the School Board staff regarding this issue was not raised with Mahas prior to awarding the contract so that it could be resolved. Mahas goes on to say, "Given the advice received by it from the District staff, the Board's action is understandable, but on the facts as they are now known, clearly in error, a situation this Court can rectify." Mahas Reply (# 27), at 18. Mahas, however, has misapprehended the role of this Court in reviewing the Board's decision. As noted above, this Court may only reverse for fraud or abuse of discretion, not merely because the nonresponsiveness issue was badly handled or we now can see the concern was unfounded. A review of the briefs filed as well as exhibits, which include correspondence and the minutes of the Board meeting, indicate that Mahas cannot make the requisite showing of arbitrary action, and there is thus little likelihood of success on the merits. Regardless of whether Mahas or Sletten qualify under the bid preference statute, Mahas cannot prevail unless it can succeed in getting a reversal as to the nonresponsiveness issue. Thus, the preliminary injunction will be denied.
IT IS THEREFORE ORDERED that Mahas' Amended Motion for Preliminary Injunction (# 8) is denied.
NOTES
[1] Section 338.147 provides in pertinent part:
2. [F]or the purposes of this section, a contractor who has:
(a) Been found to be a responsible contractor by the public body; and
(b) Paid the state and local taxes within this state for 5 successive years before submitting the bid, shall be deemed to have submitted a better bid than a competing contractor who has not paid the taxes if the amount of his bid is not more than 5 percent higher than the amount bid by the competing contractor and the bid does not exceed the amount budgeted for the work or the engineer's estimate of the cost of the work, whichever is less.
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286 S.W.2d 571 (1955)
Solomon N. SHANNON and the State of Tennessee on relation of Solomon N. Shannon
v.
BOARD OF EDUCATION OF KINGSPORT, Tennessee, etc., et al.
Supreme Court of Tennessee.
December 9, 1955.
Rehearing Denied February 3, 1956.
*572 Z. Alexander Looby, and Avon N. Williams, Jr., Nashville, and Carl A. Cowan, of Knoxville, for appellants.
H. Marvin Parsons and Wilson & Worley, Kingsport, for appellees.
NEIL, Chief Justice.
The complainant, Solomon N. Shannon, on relation of the State of Tennessee, filed his original bill in the Chancery Court of Sullivan County against the Board of Education of the City of Kingsport, seeking to enforce certain rights as a teacher in the public schools pursuant to the provisions of Chapter 76 of the Public Acts of 1951, Code, § 2345.1 et seq., known as the "Teacher Tenure Act."
The bill charges that complainant Shannon was a resident citizen of Kingsport and had been employed as a regular teacher for six consecutive school years next preceding the school year, 1953-1954, by the Board of Education of said city.
The complainant holds the A.B. degree from an approved four year college; the M.A. degree from Fisk University; and two "Specialist in Education degrees" awarded by Columbia University Teachers College, New York City, and New York University, respectively. It also appears in the bill that he holds a "valid professional certificate based on four years' college training covering the subjects of grades taught by him."
It is next charged in the bill that on April 30, 1954, he received written notice from the defendant Board of Education advising him of his dismissal as a teacher; that said notice did not state any reason for his dismissal; that no charges had been preferred against him and hence no opportunity given him for a hearing upon any charges.
On May 2, 1954, the complainant wrote a letter to each member of the Board of Education protesting the action of the Board in dismissing him and expressed a desire to be heard upon any charges preferred against him; it is further charged that interested citizens of the community signed a petition addressed to the Board requesting that the complainant be granted a hearing and that the Board reconsider its action in dismissing the complainant. To all of these requests the complainant received no reply.
Paragraph (5) of the bill contains the following averments:
"That the complainant has made teaching his life work, having taught for twelve years, including seven years in the Kingsport City Schools as aforesaid. That the custom and policy of the defendant Board of Education is and has been for many years, that upon completion of three years as a regular teacher in the City Schools of Kingsport a teacher becomes a permanent teacher; and that, in reliance upon said well-known custom and policy the complainant some time ago purchased a home in the City of Kingsport, on which a large indebtedness remains unpaid. The FHA loan which complainant obtained for the purchase of said home was conditional in part *573 upon a statement given by the defendant Robinson to the Moore-Walker Insurance Agency in Kingsport, to the effect that complainant's work as a teacher was quite satisfactory and that said defendant Robinson saw no reason why complainant would not be retained in the future as a teacher in the City Schools of Kingsport."
Complainant charges that the Board's action in dismissing him was void because he was not furnished a copy of any charges against him or advised as to his legal duties and rights.
The bill prays for a declaratory judgment, and that a decree be pronounced requiring the defendant Board to recognize him and reinstate him as a teacher in the School System of Kingsport, Tennessee. There is a prayer in the alternative that a writ of mandamus issue to require the Board to reinstate the complainant, etc. The bill prayed for general relief.
The defendants demurred to the bill upon the following grounds:
"1. There is no equity on the face of the bill.
"2. The bill shows on its face that its object is to review an action of the Board of Education of the City of Kingsport in failing or refusing to re-elect complainant as a teacher in its public schools, and a proceeding in Mandamus or for Declaratory Judgment does not lie for that purpose.
"3. Because Sect. 17, Ch. 76, Acts 1951 (Code Sect. 2345.17) prescribes the exclusive method of judicial review in the event of alleged denial of rights conferred thereunder.
"4. Because the bill shows on its face that this complainant's cause of action, if any he has, is asserted here too late, and is barred by the limitation prescribed in Sect. 17, Chap. 76, Acts 1951 (Code Sect. 2345.17).
"5. Because the bill shows on its face that complainant failed of reelection as a teacher before having acquired either `permanent' or `limited' tenure under the law, and that, therefore, the provisions of law relating to dismissal of teachers having acquired tenure are inapplicable as to him.
"6. Because the bill shows on its face that complainant has not acquired either `permanent' or `limited' tenure as a teacher under the law, and that he is therefore not entitled to judicial review of the action of the Board of Education in his failure of reelection.
"7. To paragraph IV of the bill, in that a `custom and policy' of the Board of Education of the City of Kingsport with regard to reemployment of teachers if it had existed, could create no right in complainant to reemployment entitled to protection in law or equity."
The demurrer was coupled with an answer by the Board, the contents of which is not material in deciding the legal question raised by the original bill and the demurrer thereto.
The Chancellor sustained the demurrer and granted an appeal to this Court.
The following assignments of error are before the Court for consideration:
(1) The Chancellor erred in holding that the "Teacher Tenure Act" (Chapter 76, Public Acts of 1951) must be construed prospectively as to probationary service, and that consequently complainant had not acquired permanent tenure status under said Act.
(2) The substance of this assignment is that the Chancellor erred in holding that the Board of Education could terminate complainant's teaching contract during the probationary period without preferring written charges and affording him a hearing as required by the "Teacher Tenure Act."
(3) Contention is made that the attempted dismissal was illegal and void because of defendant's failure to furnish the notice referred to in the foregoing assignment.
*574 (4) "The Chancellor erred in holding that defendant Board of Education was not bound by its well-known custom and policy to the effect that upon completion of three years as a regular teacher in the City Schools of Kingsport, a teacher becomes a permanent teacher."
(5) "The Chancellor erred in holding that complainant was precluded from judicial review by reason of failure to comply with the thirty-day period of limitations prescribed in the Teacher Tenure Act (Pub. Acts 1951, Ch. 76, Sec. 17; Code Sec. 2345.17)."
The case before us involves the rights of principals and teachers, etc., who are employed in the public schools of this State as provided by Code Section 2336 et seq., Article 6 (School Teachers), Section 2340.1, Acts of 1943, c. 147, and Article 6A (System of Tenure in Schools), Code Section 2345.1 et seq., 1952 Cumulative Pocket Supplement.
It will be noted that under Section 2340 of the Code, "All teachers must make a written contract with the county board of education at a fixed salary per month before entering upon their duties in any public elementary or high school." Both teachers and county boards are subject to a fine of $25 for a failure to do so.
Section 2340.1 reads as follows:
"Teachers in service and under contract in the public elementary and high schools of Tennessee shall continue in such service until they have received written notice, from their board of education, of their dismissal or failure of reelection at least thirty days prior to the close of the school term; provided the board of education may transfer any teacher from one position to another at its option; provided that nothing contained in this section of this act shall affect any rights that may have accrued, or may hereafter accrue, in behalf of any teachers or principals in any county under any act providing a tenure of office for said teachers and principals."
The foregoing Section of the Code is often referred to by counsel as a teacher's "Continuing Service Contract." The sharply controverted issue in this case is whether or not the complainant had acquired tenure rights at the time the defendant Board of Education declined to renew his teaching contract.
The contention of the complainant is that certain tenure rights accrued to him pursuant to the provisions of Chapter 76, Acts of 1951, known as the "Teacher Tenure Act." This Act was approved on March 1, 1951, and became effective on July 1, 1951. The complainant's bill shows that his contract of employment terminated by written notice in April 30, 1954, effective at the end of the current school year. He was not dismissed or discharged by the Board. The Board simply declined to reemploy him for the year, 1954-1955. It is urged upon us by complainant's counsel that this is equivalent to a dismissal and the Court should so declare.
The defendant Board by demurrer says: "It is apparent on the face of the bill that complainant has not had the requisite service for `tenure' after the effective date of the Act, and could not be held to have acquired `tenure' except by giving the Act a retroactive construction."
The Chancellor held that the Act was prospective only and that the entire period of probationary service must have been served following the effective date of the law in order to confer tenure. This brings us to a consideration of the first assignment of error.
Until the passage of the Teacher Tenure Act the law was silent on the question of tenure of teachers. The 1943 Act, Code Section 2340.1, providing for continuation of service under an implied contract, in the absence of a written notice delivered thirty (30) days before the "close of the school term," refers to any tenure rights that may have accrued, or may hereafter accrue in behalf of teachers or principals. But this statute cannot be construed to confer rights which at that time were unknown *575 to the law. A fair and reasonable construction of the language "now or hereafter to be accrued" must refer to such tenure rights as subsequent statutes may expressly define and confer. In other words, the teacher, principal, or other employee must comply with the provisions of the tenure act. They had no tenure status prior to the Act of 1951, other than contract rights.
Now the statute, Code Section 2345.1 et seq., defines tenure, such as "Permanent tenure," "Limited tenure," and "Probationary" which need not be quoted inasmuch as the demurrer admits that the complainant had served continuously for more than seven years prior to the termination of his teaching contract, and possessed all other statutory requirements. But he had not acquired a tenure, permanent or otherwise, until he had served a probationary period of three years, and the school board had been given an opportunity to consider the question of his status as a permanent teacher. A liberal construction of the Tenure Act does not require the Court to hold that the legislative intent was to automatically confer tenure status upon all teachers and principals of schools with as much as three years' service prior to the effective date of the Act, and without full knowledge of the said boards of education.
We are furthermore of opinion that it was never the intention of the Legislature to deprive local school boards of their right, as well as responsibility, to determine the fitness of a teacher for tenure status. We are sustained in this statement by Code Section 2345.1, subsection (6), which reads as follows:
"`Probation' is a condition and period of trial during which a teacher is under observation to determine his fitness for tenure status."
The opinion of the Chancellor that the Tenure Act is not retroactive, but prospective only, is sustained by the following authorities.
In Sutherland on Statutory Construction, 3rd Ed., Section 2201, it is said: "Retrospective operation is not favored by the courts, however, and a law will not be construed as retroactive unless the act clearly, by express language or necessary implication, indicates that the legislature intended a retroactive application."
In 78 C.J.S., Schools and School Districts, § 180, p. 1013, the rule is thus stated: "Unless an intention to the contrary on the part of the legislature clearly appears, a tenure statute will be given a prospective effect only and not a retrospective effect".
In Montgomery v. Board of Education of Los Angeles, 137 Cal. App. 668, 31 P. 2d 243, it was held that a teacher did not acquire any rights as a permanent teacher by reason of service prior to the adopting of the tenure law. To the same effect is Board of Education of City of Las Vagas v. Boarman, 52 N.M. 382, 199 P. 2d 998; Nichols v. Board of Education of Jersey City, 9 N.J. 241, 87 A. 2d 894, and Carter v. Kalamejski, 255 App. Div. 694, 8 N.Y.S. 2d 926, affirmed 280 N.Y. 803, 21 N.E. 2d 692. In the foregoing cases dealing with tenure it is held immaterial that the statute is remedial.
The tenure statute contains no expression to indicate that it was to have a retroactive effect. Had the Legislature so intended it would have said so. In Molloy v. City of Chattanooga, 191 Tenn. 173, 232 S.W. 2d 24, 27, 404, opinion by Tomlinson, Justice, it was held:
"A statute will not be given retroactive effect in the absence of such express declaration or necessary implication, nor `unless that intention has been manifested by the most clear and unequivocal expression.'"
Other cases to the same effect are Jennings v. Jennings, 165 Tenn. 295, 54 S.W. 2d 961; King v. Vestal Lumber & Mfg. Co., 158 Tenn. 12, 11 S.W. 2d 852.
The cases cited by appellant, State ex rel. Grandstaff v. Gore, 182 Tenn. 94, 184 S.W. 2d 366, 368, and Dowlen v. Fitch, 196 Tenn. 206, 264 S.W. 2d 824, 41 A.L.R. 2d 791, to sustain a retroactive construction, deal with procedural changes as to *576 certain existing rights. Thus in State ex rel. Grandstaff v. Gore the application of the habitual criminal statute was under consideration. It was held: "If the Legislature had intended to relieve those previously convicted of a higher grade of larceny of the consequences of their crime" it would have said so. Speaking further it was held in language applicable to the case at bar:
"Laws should never be considered as applicable to cases which arose before their passage, unless Legislature clearly declares such intention."
"An act is construed so as to give it positive, not retroactive, force, unless, retroactive purpose is plainly expressed or necessarily implied." (The word, positive, is apparently a misprint. The writer evidently intended to use the word, prospective.)
Dowlen v. Fitch, supra, deals with the question of venue in tort cases and is not controlling here. Also State ex rel. Timothy v. Howse, 132 Tenn. 452, 178 S.W. 1110, is an "ouster" suit to remove a city official as provided by Chapter 11, Acts of 1915, and is not applicable to this case.
Complaint, appellant's next contention (assignments two and three), is made that if he had not acquired tenure when the Board refused to renew his contract that as a probationary teacher he was entitled to reemployment as a matter of right unless he was discharged after due notice of written charges, etc. Code Section 2345.15 and 2345.16. In other words his insistence is that his standing as a probation teacher was, as a matter of law, the same as if the Board had discharged him under a written contract before the end of the school year, Code Section 2340.1, Acts of 1943. If the position of the complainant is sound the Legislature did an idle thing in making provision for a trial period as set out in 2345.1 (6) of the Code, Section 49-1401, subsection (6), T.C.A., "to determine his fitness for tenure". We are not permitted, even under a liberal construction of the Act, to hold that the Legislature intended to make no distinction between probationary teachers and permanent tenure teachers.
The exact question now before us was considered by the Court of Appeals in Brown v. Newman, 282 S.W. 2d 677, appealed from the Chancery Court of Sumner County, wherein it was held (this Court denied certiorari) that the Teacher Tenure Act should be construed prospectively only. The facts, which gave rise to this case, are identical with the case at bar. It seems that prior to the effective date of the Tenure Act Brown "had been employed by the School Board and had taught school in Sumner County for seventeen (17) years prior to the termination of his contract." He was given written notice of the fact by letter from the County Superintendent more than 30 days before the close of the school year. He was thus not reemployed by the Board. The Court of Appeals affirmed the Chancellor's decree that the said tenure statute of 1951 was prospective, and that Brown had not acquired tenure status under the Act.
We find no merit in the appellant's fourth assignment of error complaining that he had acquired a permanent status as a teacher in the City Schools of Kingsport as a result of a custom and policy of the Board to the effect that upon completion of three years as a regular teacher he thus was recognized as having a permanent contract. It is argued that this was admitted by the demurrer, and hence his contract could not be terminated in the absence of written notice as required by statute. The counsel cite no authority to support this contention. Custom and policy of the Board cannot in any circumstances supersede the plain provisions of the statute which make it mandatory that all teachers' contracts be in writing and a failure to execute such a contract is a misdemeanor.
Contention is made under the fifth assignment that the Chancellor erred in denying the complainant a judicial review of the action of the Board in that no written notice was given him of his "dismissal" as prescribed in the "Teacher Tenure Act". *577 The counsel seek to bring the complainant within the purview of the law which provides for judicial review of "dismissal" of regular teachers prior to the termination of their written contract. Code Section 2325 (10). We hold that there is a wide difference between "dismissal" and failure of reemployment by the Board. Thus in 47 Am. Jur. page 387 (cited by the Chancellor), it is said: "failure to renew a teacher's contract does not constitute dismissal of the teacher so as to come within the purview of statutes prescribing the cause and manner of dismissal."
Where a teacher has not acquired tenure status his right to a judicial review of any action of the Board in not reemploying him is not authorized by law. He is not entitled to reelection as a matter of right beyond a contract period. As pointed out by the Chancellor, all of the cases involving dismissal under Code Section 2325 (10) have been those teachers who were discharged during the contract period. In Morley v. Power, 73 Tenn. 691, Morley was discharged without notice prior to the expiration of his contract. See also to the same effect Butcher v. Charles, 95 Tenn. 532, 32 S.W. 631; Thompson v. Gibbs, 97 Tenn. 489, 37 S.W. 277, 34 L.R.A. 548; Little v. Carter County Board of Education, 24 Tenn. App. 465, 146 S.W. 2d 144; Hayslip v. Bondurant, 194 Tenn. 175, 250 S.W. 2d 63. We have been cited to no case holding that a teacher who has failed of reemployment for another school year is entitled to notice and the right to a judicial review.
The case of McSherry v. City of St. Paul, 202 Minn. 102, 277 N.W. 541, relied on by appellant, is not in point because under the Minnesota statute, M.S.A. § 130.22 et seq. it is expressly provided that probationary teachers shall receive written notice of the cause for discharge. The same is true of Donahoo v. Board of Education, 413 Ill. 422, 109 N.E. 2d 787, 789, wherein the court held: "Teachers' rights were preserved by the Tenure Law both in their probationary stage and after they had passed from it into more permanent status."
Conceding as we do that the primary purpose of the Teachers Tenure Act was to protect teachers from "unjust dismissal" by arbitrary action of boards of education, we cannot, under the guise of giving the Act a liberal construction, provide for a form of judicial review where the teacher has not acquired tenure status, and is not under contract for a definite period.
We are not unmindful of the opportunity of principals of public schools and boards of education to abuse their authority and in many instances deal unjustly with those who are subject to their authority. It may have happened in the instant case. But the courts are not privileged to intrude upon the legislative prerogative in an attempt to correct alleged abuses by way of a liberal construction of a statute. We have dealt with every issue raised by the complainant's counsel with an unprejudiced mind. In fact we have had a sympathetic attitude toward his cause of action because of the plight in which he finds himself, and for which he is apparently blameless. However, if the Legislature has not granted him protection from an injustice, the courts cannot do so.
The assignments of error are overruled, and the decree of the Chancellor is affirmed.
On Petition to Rehear.
Counsel for the relator have filed an exhaustive petition to rehear, complaining of numerous errors in the Court's opinion, as well as misapprehension as to petitioner's contentions.
With due regard to the insistence of petitioner, we did not misconstrue Code Section 2340.1 as applicable to the primary issue involved. Our construction of the words "now or hereafter employed", appearing in Code Section 2345.3 is made the subject of further argument by petitioner that the Tenure Act shold be given a retroactive effect. We concede that the issue is debatable but cannot agree that our conclusion was incorrect in the light of what we consider controlling authority, and more *578 especially Brown v. Newman, Tenn. App., 282 S.W. 2d 677.
Another alleged ground for rehearing is that the Court was in error in citing cases as relied on by petitioner, to wit, State ex rel. Grandstaff v. Gore, 182 Tenn. 94, 184 S.W. 2d 366, and Dowlen v. Fitch, 196 Tenn. 206, 264 S.W. 2d 824, 41 A.L.R. 2d 791, such cases being cited by the defendant Board of Education. While the opinion erroneously recites that the foregoing cases were "cited by appellant" (petitioner here), it is manifestly an error in dictation. They clearly support the view of the respondent Board of Education that the Act should be given a prospective rather than a retroactive construction. This error consists of using the wrong word in dictating the opinion, which clearly appears by a cursory examination of the text.
It is insisted that we should not follow our decision in State ex rel. Grandstaff v. Gore, supra, because "the statute was intended to cover a class of teachers entitled to the benefits conferred by the Act." In support of the contention, which is a reargument of the determinative legal question, counsel again rely upon cases from foreign jurisdictions, and especially that of Andrews v. Union Parish School Board, La. App. 1938, 184 So. 574. The petitioner's counsel then proceed to discuss certain cases, which were cited in the original opinion as supporting a prospective construction of an alleged Tenure Act, Montgomery v. Board of Education of Los Angeles, 137 Cal. App. 668, 31 P. 2d 243, and others, and attempts to distinguish them from the Tenure Act of this State. It is true there is a diversity of opinion in these cases but we are dealing with our own statute as determining the legislative intent; and, as observed, if the Legislature had intended the Act to cover specific cases, such as the one now before us and Brown v. Newman, supra, it would have said so and not left the issue open to judicial construction.
It is next insisted that, "The Supreme Court is not bound to decide this case against appellant (petitioner here) by reason of its denial of certiorari in Brown v. Newman," citing and relying on Bryan v. Ætna Life Ins. Co., 174 Tenn. 602, 130 S.W. 2d 85, and Lingner v. Lingner, 165 Tenn. 525, 56 S.W. 2d 749.
We have not ruled the legal question "against appellant" solely upon the authority of Brown v. Newman. The case, however, is directly in point and, needless to say, this Court gave it careful consideration on petition for certiorari and declined to grant the writ without filing a written opinion. From a purely technical point of view we are not bound by the opinions of the Court of Appeals. But these opinions are viewed with the greatest respect and will not be lightly overruled; and certainly not when the views expressed by that court are in full accord with sound reason as well as the weight of authority. For this reason we denied certiorari in Brown v. Newman.
In Bryan v. Ætna Life Ins. Co., supra, the court used this language [174 Tenn. 602, 130 S.W. 2d 88]:
"We have repeatedly pointed out that a mere denial by this court of a writ of certiorari to the Court of Appeals does not commit us to all the views expressed in a particular opinion. We are primarily concerned on such application with the result reached." (Emphasis supplied.)
In the Lingner case, supra, it was held:
"The Supreme Court will no more hesitate to investigate again a question of practice decided by the Court of Appeals in a case in which the writ of certiorari was denied than it would hesitate so to do in a case disposed of on direct appeal."
Where, as in the instant case, the Court of Appeals has given a sound interpretation of a statute and construed it according to the manifest intention of the Legislature, we are not disposed to give it a different construction.
The last error complained of relates to the question of petitioner's right to a judicial review and for the writ of mandamus *579 to reinstate him as a teacher in the public schools of Kingsport. This question was fully dealt with in the original opinion and, feeling that it was correctly decided, there is no reason to again review it.
The petition to rehear is denied.
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767 F.Supp. 423 (1991)
Edward DelSIGNORE, Plaintiff,
v.
Joseph DiCENZO, in his capacity as Acting Chief of Police of North Providence, et al., Defendants.
Civ. A. No. 89-0403 P.
United States District Court, D. Rhode Island.
July 1, 1991.
*424 Donald R. Lembo, North Providence, R.I., for plaintiff.
Mary June Ciresi, North Providence, R.I., for defendants.
OPINION
PETTINE, Senior District Judge.
In December, 1986, the plaintiff in this case, Edward DelSignore, was promoted to the position of sergeant in the North Providence Police Department. Approximately two years later, he was, without notice, demoted to his previous rank of patrolman. He now brings this Section 1983 action against police and town officials alleging that he was denied procedural due process in violation of the Fourteenth Amendment. By stipulation of the parties, the case was submitted to this Court on an agreed statement of facts and trial was waived. After reviewing the facts and the applicable law, I find that because the defendants provided no pre-demotion notice and opportunity to be heard, plaintiff was denied due process.
I. STIPULATED FACTS
DelSignore was hired by the Town of North Providence as a patrolman on May 1, 1978; after completing his probationary period of one year he became a permanent member of the police department pursuant to Section II, 2.1(D) of the collective bargaining agreement between the police and the Town. DelSignore was promoted to sergeant on December 27, 1986 and successfully completed his six-month probationary period for that rank. From then through February 8, 1989, DelSignore held the rank of sergeant continuously and without interruption. No grievance from any source was filed concerning his promotion.
In 1987, the Fraternal Order of Police, Lodge No. 13 filed a grievance concerning the promotion of another officer, namely, James Taylor, to the rank of sergeant. An arbitration hearing was conducted with respect to that grievance. DelSignore was not a party, directly or indirectly, in that action (but his promotion was addressed, see infra note 1). On December 31, 1987, the arbitrator made an award rescinding Taylor's promotion and ordering the promotion of Officers Griffith and Rekrut. Thereafter, on or about April 1, 1988, the Lodge filed an unfair labor practice claim with the State Labor Relations Board which alleged that the Town of North Providence had failed to implement the arbitrator's award. The Board concluded that the Town was guilty of an unfair labor practice due to its failure to implement the arbitrator's award. A decision and order to that effect was issued by the Board on October 19, 1988. DelSignore was not a party or a participant in that case nor was his status as sergeant ever addressed by the October 19, 1988 compliance order. DelSignore continued in his rank of sergeant throughout both proceedings and, indeed, subsequent to the date of the Board's decision and order and through February 8, 1989.
On February 9, 1989, Joseph DiCenzo, acting chief of police, notified DelSignore in writing that effective immediately, his rank would be reduced from that of sergeant to that of patrolman first class and that said reduction was predicated upon an order issued by the State of Rhode Island Labor Relations Board.
Immediately upon being notified of his reduction in rank, DelSignore attempted to file a grievance with Lodge No. 13, but the grievance was not acted upon by the Lodge. Following DelSignore's demotion, the Town immediately complied with the Board's order of October 19, 1988 by rescinding Taylor's promotion and by promoting Officers Griffith and Rekrut.
*425 As a result of DelSignore's reduction in rank, he sustained lost wages in the sum of $6,077.11 as of March 29, 1991 and continues to lose $67.13 per week for as long as the reduction in rank is in effect.
II. DISCUSSION
The Fourteenth Amendment prohibits the government from depriving individuals of "life, liberty or property" without due process of law. Thus, the threshold inquiry is whether DelSignore had a property interest in the continued rank of sergeant. See Cleveland Board of Education v. Loudermill, 470 U.S. 532, 538, 105 S.Ct. 1487, 1491, 84 L.Ed.2d 494 (1985). Such "[p]roperty interests are not created by the Constitution, [rather] `they are created and their dimensions are defined by existing rules or understandings that stem from an independent source such as state law....'" Id. (quoting Board of Regents v. Roth, 408 U.S. 564, 577, 92 S.Ct. 2701, 2709, 33 L.Ed.2d 548 (1972)).
The parties have implied that this Court may discern from the collective bargaining agreement whether such a right exists. Whether an employee has a property right or not depends upon whether he has "a legitimate claim of entitlement to it." Roth, 408 U.S. at 577, 92 S.Ct. at 2709. Such a claim can be established by showing that the employee is not an "at will" employee, but rather an employee that can only be fired for "just cause." See Loudermill, 470 U.S. at 538-39, 105 S.Ct. at 1491-92. The collective bargaining agreement, while addressing tenure on the force and promotion procedures, does not address the grounds for demotion or termination. I must, therefore, look to local law, the charter and ordinances of the Town of North Providence, to determine whether DelSignore has a protected property interest.
Article 8, Chapter 2 of the Charter states that all police "shall hold their respective position[s] during good behavior" (emphasis added). This is repeated in Article I, Section 26-4 of the town ordinances. Specifically regarding demotion, Section 26-8 states "[t]he Director of Public Safety may return a promoted Police officer to the position held by such Police officer at the time of such promotion, when said Police officer fails to demonstrate the ability to perform the duties required of the new position ..." (emphasis added). Finally, the Civil Service Ordinance, Chapter XI, Section 4, which applies to police officers, states that "[a] permanent employee may be dismissed or demoted whenever in the judgement of the appointing authority the employee's work performance or misconduct so warrants" (emphasis added). As these laws plainly indicate, police officers can be demoted or fired only for cause. DelSignore, therefore, had a protected property interest in the rank of sergeant. See supra, Loudermill, 470 U.S. at 538-39, 105 S.Ct. at 1491-92.
Even assuming arguendo that under "normal" circumstances, DelSignore would have a protected interest in his rank, the defendants contend that in this case, the plaintiff cannot be deprived of such because he was never legitimately promoted. In other words, they argue that he cannot be "deprived" of something that he was never entitled to. This argument stems from the arbitration proceedings. Although DelSignore was not a party to the arbitration hearing and the order did not specifically address his status, the arbitrator did decide that DelSignore was improperly promoted.[1] Defendants' argument, *426 however, was addressed by the Loudermill Court. 470 U.S. at 539 n. 5, 105 S.Ct. at 1491 n. 5. The defendants in Loudermill had argued that Loudermill had no property right in his employment because he lied on his job application and would not have been hired had he answered truthfully. Id. In rejecting this argument, the Court stated that "the argument relies on a retrospective fiction inconsistent with the undisputed fact that [plaintiff] was hired and did hold the ... job. The [defendant] cannot escape its constitutional obligations by rephrasing the basis for termination as a reason why [plaintiff] should not have been hired in the first place." Id. I find this language squarely on point.
The First Circuit Court of Appeals has carved out a limited exception to this aspect of Loudermill. Rosario-Torres v. Hernandez-Colon, 889 F.2d 314, 319 (1st Cir.1989). That exception, however, only applies when under the applicable local law the conduct in question renders "null and void any property rights associated" with the position. Kauffman v. Puerto Rico Telephone Co., 841 F.2d 1169, 1175 (1st Cir.1988).
In Kauffman, career employees of the Puerto Rico telephone company, a quasi public corporation, brought a civil rights action against the company claiming they were discharged for their political affiliations and without notice or pretermination hearing. The circuit court affirmed the district court's grant of summary judgment for the defendants holding that the district court was correct in its finding that "the plaintiffs had failed to generate a genuine issue of material fact regarding their claim that their discharges were politically motivated," id. at 1172, and also correct in "conclud[ing] that under Puerto Rico law any property right associated with a career position is rendered null and void if a violation of the Personnel Act attends the filling of such a position." Id. at 1173. The Kauffman court reviewed the applicable Puerto Rican personnel laws and then specifically addressed and distinguished Loudermill.
Finally, and most importantly, in Loudermill there is no indication that under [the applicable state] law, a false statement on an application form for a civil service position could render null and void any property rights associated with attaining such a position.... In [Kauffman], on the other hand, ... the district court reasonably concluded that under Puerto Rico law, failure to hire in compliance with regulation 8.4 [, a regulation adopted to provide, among other things, a preference for internal candidates,] rendered null and void the property rights associated with the plaintiffs' positions. Id. at 1175.
The circuit court explained the derivation of the applicable Puerto law as follows:
[T]he [telephone company] promulgated regulation[s] ... under order of the Puerto Rico Supreme Court to comply with policies underlying the Personnel Act; that court has, in turn, held that such regulation furthers the purposes of that Act; the court has also held that acts contrary to laws and regulations furthering the underlying values of the Personnel Act are void. Thus, to the extent that the plaintiffs were hired in violation of [the] regulation[s], they obtained their career positions `on the basis of standards foreign to that category,' and, therefore, could not, upon termination, benefit from the `property' status of such positions. Id. at 1174 (citations omitted) (emphasis added).
In the instant case, I have found nothing in the collective bargaining agreement, the town ordinances, or any Rhode Island State Court decisions indicating that a technically deficient promotion voids a public employee's property right. I, therefore, find that the Kauffman exception does not apply and Loudermill governs.
Having decided the threshold issue whether DelSignore had a protected property interest in his rank" `the question remains what process is due.'" Loudermill, 470 U.S. at 541, 105 S.Ct. at 1493 (quoting Morrissey v. Brewer, 408 U.S. 471, 481, 92 S.Ct. 2593, 2600, 33 L.Ed.2d 484 (1972)). This answer, unlike the answer to the threshold question discussed supra, is derived from the Constitution, *427 not local law. Id., 470 U.S. at 541-42, 105 S.Ct. at 1492-93. As an initial matter, defendants argue that no process is due because DelSignore did not exhaust his administrative remedies. "The Supreme Court, however, has held expressly that section 1983 claimants need not avail themselves of state judicial and administrative remedies before going to federal court." Kercado-Melendez v. Aponte-Roque, 829 F.2d 255, 259 (1st Cir.1987) cert. denied, 486 U.S. 1044, 108 S.Ct. 2037, 100 L.Ed.2d 621 (1988) (citing Patsy v. Florida Board of Regents, 457 U.S. 496, 102 S.Ct. 2557, 73 L.Ed.2d 172 (1982); Steffel v. Thompson, 415 U.S. 452, 472-73, 94 S.Ct. 1209, 1222-23, 39 L.Ed.2d 505 (1974)). Defendants' reliance on Parratt v. Taylor, 451 U.S. 527, 101 S.Ct. 1908, 68 L.Ed.2d 420 (1981) (overruled on other grounds by Daniels v. Williams, 474 U.S. 327, 106 S.Ct. 662, 88 L.Ed.2d 662 (1986)) is misplaced. In Parratt, a state prisoner alleged that he was deprived of property without due process when hobby materials that he ordered were lost as a result of the prison's failure to follow its usual procedures for receipt of mail packages. Id. at 529, 101 S.Ct. at 1909. The Court determined that a state tort action would be the appropriate remedy; there was no constitutional violation. Id. at 544, 101 S.Ct. at 1917. Thus, the Parratt Court did not address the issue before this Court today.
Moreover, the defendants reference to the union grievance procedure and the state post-termination hearing process is not dispositive; these are all after-the-fact procedures. The Due Process Clause "requires `some kind of hearing' prior to the discharge of an employee who has a constitutionally protected property interest in his employment." Loudermill, 470 U.S. at 542, 105 S.Ct. at 1493 (emphasis added). In Loudermill, the Supreme Court determined that "[t]he tenured[2] public employee is entitled to oral or written notice of the charges against him, an explanation of the employer's evidence, and an opportunity to present his side of the story" prior to the adverse action even when post-action procedures are available. Id. at 546, 105 S.Ct. at 1495.
The specific "timing and content of the [pre-action] notice and the nature of the hearing [in each case] depend[s] on the appropriate accommodation of the competing governmental and private interests involved." Click v. Board of Police Com'rs, 609 F.Supp. 1199, 1205 (W.D.Mo.1985); see Loudermill, 470 U.S. at 542, 105 S.Ct. at 1493; Mathews v. Eldridge, 424 U.S. 319, 335, 96 S.Ct. 893, 903, 47 L.Ed.2d 18 (1976). In the context of public employment, the interests "are the private interests in retaining employment, the governmental interest in the expeditious removal of unsatisfactory employees and the avoidance of administrative burdens, and the risk of erroneous termination." Loudermill, 470 U.S. at 542-43, 105 S.Ct. at 1493-94. I must, therefore, balance these factors and decide whether the Loudermill formulation is appropriate in this case.
Regarding the private interest involved, DelSignore's interest in retaining his rank is not as compelling as the interest of the an employee who is actually fired, as in Loudermill. See Williams v. Seattle, 607 F.Supp. 714, 720 (W.D.Wash.1985); Sewell v. Jefferson County Fiscal Court, 1987 WL 109699 at 3-4, 1987 U.S.Dist. LEXIS 14637 at 8-9 (W.D.Ky., Feb. 4, 1987). It is not, however, an insignificant interest. Loss of rank entails a reduction in pay and benefits. See Williams, 607 F.Supp. at 720.
As to the risk of an erroneous personnel action, there can be no doubt that the opportunity for the employee to present his side of the story prior to termination may significantly reduce the risk of such erroneous action. Loudermill, 470 U.S. at 543, 105 S.Ct. at 1493. "[T]he right to [such] a hearing does not depend on a demonstration of certain success." Id. at 544, 105 S.Ct. at 1494. Moreover, "`[n]o better instrument has been devised for arriving at *428 truth than to give a person in jeopardy of serious loss notice of the case against him and opportunity to meet it.'" Click, 609 F.Supp. at 1206 (quoting Goss v. Lopez, 419 U.S. 565, 580, 95 S.Ct. 729, 739, 42 L.Ed.2d 725 (1975)). In this case, the risk of erroneous determination was no more or less serious than it was in Loudermill.
Although the risk of erroneous determination is the same, the other factors in the instant case are somewhat at variance from those in Loudermill. The government's interest in removing an unsatisfactory employee or in easing administrative burdens, however, still does not out outweigh the other interests. The government's interest in this case is not as compelling as in a situation where the employee is actually charged with wrongdoing. See Loudermill, 470 U.S. at 544, 105 S.Ct. at 1494. DelSignore presented no danger or threat; there is every indication that he had performed his job satisfactorily for two years. As the Loudermill Court noted, even "in those situations where the employer perceives a significant hazard in keeping the employee on the job, it can avoid the problem by suspending with pay" until the hearing. Id. at 544-45, 105 S.Ct. at 1494-95. I, therefore, find that even though DelSignore's interest in his rank is less compelling than that of a terminated employee, this is balanced by the government's weaker interest in immediate action. DelSignore was thus entitled to the same pre-demotion process afforded the plaintiffs in Loudermill: notice of the charges and the evidence against him as well as an opportunity to respond.[3] DelSignore did not receive any of these safeguards. Defendants merely notified him that his demotion was effective immediately, thereby violating DelSignore's right to procedural due process.
III. RELIEF
The 1978 Supreme Court case of Carey v. Piphus, 435 U.S. 247, 98 S.Ct. 1042, 55 L.Ed.2d 252, is one of the leading cases discussing damages in Section 1983 actions. In that case, students who were suspended without procedural due process were not entitled to compensatory damages unless they could prove that they would not have been suspended if they had been afforded a proper hearing. Id. at 260, 98 S.Ct. at 1050. In dicta, the Court indicated disapproval of lower court cases in which damages were awarded to public employees who were fired with cause but without procedural due process. Id. at 260 n. 15, 98 S.Ct. at 1050 n. 15. After Loudermill, a split in the circuits developed with regard to the effect of the Loudermill decision on the availability of equitable relief absent a showing that the employment action was unjustified. Compare Patkus v. Sangamon-Cass Consortium, 769 F.2d 1251 (7th Cir.1985) (employee justifiably terminated but without due process was entitled to only nominal damages) with Brewer v. Parkman, 918 F.2d 1336 (8th Cir.1990) (under Loudermill, court may order hearing with ancillary relief of back pay and reinstatement without showing unjustifiable action by employer). To my knowledge, the First Circuit Court of Appeals has never addressed the effect of Loudermill on the Carey principles. After reviewing the existing cases, I am persuaded *429 by the courts that have allowed ancillary equitable relief.
In Loudermill, the Court directed public employers to "suspend an employee who posed a threat to the workplace, with pay, prior to the time the pretermination hearing is held." Irizarry v. Cleveland Public Library, 727 F.Supp. 357, 364 (N.D. Ohio 1989) (citing Loudermill, 470 U.S. at 544-45, 105 S.Ct. at 1494-95). "Based on Loudermill, this Court finds that the proper remedy is to place the defendant in the position that the Constitution mandates he be in prior to a pre[-demotion] hearing awaiting said hearing while receiving pay." Id. at 364. This remedy, a hearing with ancillary reinstatement and back pay until the pre-demotion hearing, maintains the status quo. Brewer, 918 F.2d at 1341-42. Even beyond the words of Loudermill, there are compelling policy reasons for adopting this approach.
"[It] ... serve[s] three purposes: first, it ... vindicate[s] the due process interest in a fair hearing; second, it ... keep[s] the federal court out of the state law decision-making process by allowing the state tribunal to decide whether the planned action ... is appropriate;[4] third, it ... give[s] parties with no actual damages under a tort compensation scheme [as outlined in Carey] an incentive to vindicate their federal rightsthe prospect of the hearing, back pay, and the attorneys' fees award predicated on the injunction ... make[s] the litigation worthwhile."
Id., at 1342 (quoting Beermann, Government Official Torts and the Takings Clause: Federalism and State Sovereign Immunity, 68 B.U.L.Rev. 277, 322 n. 185 (1988)).
Finally, this Court finds untenable the proposition that an employer may, with impunity, violate an employee's constitutional rights and do so without fear of being held monetarily accountable for his or her actions. Although this Court does find it somewhat regrettable that funds must come from the public treasury to compensate an employee whose rights were violated, the basis of the Court's regret is that the employee's rights were violated. The instant case is an example of a complete lack, by the defendants, of any attempt to give the plaintiff his constitutional right of notice and an opportunity to respond.
Irizarry, 727 F.Supp. at 364.
IV. CONCLUSION
The plaintiff, DelSignore, had a constitutionally protected property interest in the rank of sergeant. When he was demoted without any prior notice or opportunity to respond, his due process rights were violated. For this violation, I order that he be given a pre-demotion hearing in accordance with this opinion and that, ancillary to that relief, he be awarded back pay from the time of the demotion and be reinstated to the rank of retired sergeant until the time of such hearing.[5]
SO ORDERED.
NOTES
[1] The collective bargaining agreement and the town civil service ordinances provide that promotions of police will be made, in part, on the basis of a competitive test. Applicants are graded and listed in order of their scores. At the time that Taylor and DelSignore were promoted, three sergeant positions were available. Neither DelSignore nor Taylor were originally listed among the top three candidates. The timing of the filling of the positions was such that DelSignore and Taylor were promoted ahead of the officers in the second and third slots on the list. The arbitrator found that DelSignore and Taylor were promoted improperly and that this violated the collective bargaining agreement. He ordered that the "skipped over" officers be promoted and that Taylor be demoted. The arbitrator noted, however, "[i]t is not for the arbitrator to address the issue of the status of Edward DelSignore. It is for the town to determine."
[2] DelSignore was "tenured" to the extent that under the collective bargaining agreement he had achieved "permanent" status as a sergeant because he had successfully completed his probationary period for that position and could only be demoted for cause. See, supra, discussion of Section II, 2.1(D) of the collective bargaining agreement.
[3] Affording such limited pre-demotion process is predicated on the availability of a full post-demotion hearing. Williams, 607 F.Supp. at 720; see Loudermill, 470 U.S. at 546, 105 S.Ct. at 1495. In this case, the town's civil service ordinance, chapter XI, section 4 provides: "When the appointing authority decides [to dismiss or demote an employee], he shall file with the employee and the personnel board a written notification containing a statement of the substantial reasons for the action. The employee shall be notified on or before the effective date of the action. The notice shall inform the employee that he shall be allowed ten calendar days from the effective date of the action to file a reply with the appointing authority and personnel board and to request a hearing before the personnel board." The hearing is informal and the employee is entitled to be represented by counsel. Id. at section 6. North Providence does, therefore, provide a procedure for a post-termination/post-demotion hearing. I would note, however, that DelSignore was not notified of the availability of a hearing, as required by the ordinance. Because I find that DelSignore's procedural due process rights were violated by the lack of predemotion process, I need not decide what effect the lack of notification might have on this case.
[4] Under the strict construction of Carey, this Court would have to determine whether DelSignore would have been demoted had be received the required pre-termination hearing.
[5] The back pay and the effect of reinstating DelSignore to the rank of retired sergeant is as stipulated by the parties in the Agreed Statement of Facts, supra.
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144 B.R. 346 (1992)
In re Walter M. CRAWFORD, Jr., Debtor.
Walter M. CRAWFORD, Jr., Plaintiff,
v.
UNITED STATES of America, INTERNAL REVENUE SERVICE, Defendant.
Bankruptcy No. 89-10942-LK, Adv. No. 91-1190-LK.
United States Bankruptcy Court, W.D. Texas, Austin Division.
May 1, 1992.
John H. Polk, Houston, Tex., for plaintiff.
William R. Leighton, U.S. Atty., Austin, Tex., for defendant.
MEMORANDUM OPINION ON COMPLAINT TO DETERMINE DISCHARGEABILITY OF DEBT FOR FEDERAL INCOME TAXES
LARRY E. KELLY, Chief Judge.
The trial was held on January 29, 1992 on the Debtor's Complaint to Determine Dischargeability of Debt for Federal Income Taxes. Based on the evidence and arguments of counsel, the court finds that the taxes at issue are not dischargeable in this bankruptcy case.
The court has jurisdiction over this core proceeding pursuant to 28 U.S.C. § 157(b)(2)(I) and 11 U.S.C. § 505(a). The court's findings of fact and conclusions of law are contained in the Memorandum Opinion and the court's judgment will be evidenced by a separate order of even date herewith.
FACTUAL BACKGROUND
The Plaintiff/Debtor filed an adversary proceeding to determine the dischargeability of his federal income tax liabilities for the calendar years 1980, 1981, 1982, and 1983. The Defendant admitted in its Answer that the federal income tax liabilities for the years 1980, 1981, and 1982 were dischargeable. Therefore, only the dischargeability of the claim for unpaid 1983 federal income taxes is at issue. The Debtor does not contest the correctness of the amount due for the purpose of this proceeding.
The remaining facts are not disputed by the parties. Plaintiff/Debtor and his wife filed their joint 1983 federal income tax return on October 16, 1984, which was not timely. On their 1983 federal income tax return, the Plaintiff and his wife claimed deductions and credits derived from their investment in a partnership named Valley Cable. The partnership return for Valley Cable for the taxable year 1983 was filed April 16, 1984.
The Internal Revenue Service subsequently examined the 1983 partnership return for Valley Cable, and on March 16, 1987, issued a Notice of Final Partnership Administrative Adjustments (FPAA) to it wherein various deductions and credits were disallowed. On June 12, 1987, a petition was filed in the United States Tax Court on behalf of Valley Cable to contest the determinations set forth in the FPAA. That case is still pending.
*347 Plaintiff filed for relief under Chapter 7 of the Bankruptcy Code on April 3, 1989. Plaintiff's wife separately filed for relief under Chapter 7 on May 4, 1989. The Internal Revenue Service issued a notice of deficiency to the Plaintiff and his wife on March 29, 1990 with respect to the flow-through adjustments from Valley Cable related to the taxable year 1983. The Plaintiff and his wife filed a petition in the United States Tax Court on June 27, 1990, contesting the determinations with respect to the Valley Cable flow-through adjustments related to the taxable year 1983. That case is also still pending. Plaintiff herein received his discharge on August 15, 1989.
ISSUE
The Debtor asks this court to find that his liability for an unpaid 1983 tax claim is a general unsecured claim which has been discharged. The IRS contends that the deficiency in the Plaintiff's 1983 federal income tax liability, derived from the partnership adjustments, is entitled to priority status under 11 U.S.C. § 507(a)(7)(A)(iii), as such liability was still assessable, by operation of law, upon the filing of the bankruptcy petition. Accordingly, it argues that the debt is excepted from discharge pursuant to 11 U.S.C. § 523(a)(1)(A).[1]
DISCUSSION
Section 727(a) of the Bankruptcy Code provides authority for the Bankruptcy Court to grant a debtor a discharge in bankruptcy. Section 523 provides a list of debts that are excepted from that discharge. Section 523(a)(1)(A) excepts from discharge taxes of the kind set out in § 507(a)(7). Section 507 of the Bankruptcy Code specifies which claims have priority in payment in a bankruptcy case. The IRS relies on section 507(a)(7)(A)(iii) which provides a priority for:
. . . a tax on or measured by income or gross receipts (iii) other than a tax of a kind specified in section 523(a)(1)(B) or 523(a)(1)(C) of this title, not assessed before, but assessable, under applicable law or by agreement, after, the commencement of the case; (emphasis added)
The parties agree that the tax liability at issue is a tax on or measured by income or gross receipts. They also agree that this is a tax other than a tax of a kind specified in section 523(a)(1)(B) or 523(a)(1)(C) of this title. Although initially disputed, the Debtor now acknowledges that this tax was still assessable after the commencement of the case and is still assessable. The dispute lies in the interpretation of this clause in light of two separate Bankruptcy Court cases, which addressed the issue in factually similar situations, yet reached opposite conclusions in their rulings.
The case relied upon by the Plaintiff is In re Doss, a bankruptcy court opinion from the Eastern District of Arkansas.[2] The plaintiffs in that case were debtors in a Chapter 7 proceeding which was filed on July 7, 1982. The Internal Revenue Service filed a proof of claim, among others, for years 1976 through 1979, for income taxes which had not been assessed at the time the Chapter 7 petition was filed and which had still not been assessed at the time of the writing of the Court's opinion. The bankruptcy court interpreted Bankr. Code § 507(a)(6)(A)(iii) [now section 507(a)(7)(A)(iii)] such that the clauses following the first comma modify and relate to the first clause. The court then concluded that the unassessed taxes were not entitled to priority status.
It is difficult to read Doss and understand the interpretation of the relevant Code section. However, the Bankruptcy Court for the Northern District of Ohio explained it best when it stated,
*348 "the Doss court held that Section 507(a)(6)(A) contained its own exclusions; namely, taxes of a kind specified in Section 523(a)(1)(B), and that merely because a tax was still `assessable' as of the date of the filing of the Title 11 petition did not mean that a tax excluded from the nondischargeability provision of Section 523(a)(1)(B)(ii) was, nonetheless, nondischargeable under Section 507(a)(6)(A)(iii)."
Matter of Longley, 66 B.R. 237, 241 (Bankr.N.D.Ohio 1986)
In the Longley case, the Ohio bankruptcy court found that its facts were distinguishable from the facts in Doss, and held that if the taxes in question were still assessable after commencement of the case, then they were entitled to priority under Section 507(a)(7)(A)(iii) and therefore were nondischargeable under Section 523(a)(1)(A). In researching the issue, this court has found no cases that follow the court's holding in Doss.
On the other hand, several cases follow the the holding of Longley.[3]In re Crist, a well-reasoned opinion from the Bankruptcy Court for the Northern District of Iowa, held that the debtors' taxes at issue in this case were not within the exceptions of section 507(a)(7)(A)(iii). In re Crist, 85 B.R. 807 (Bankr.N.D.Iowa 1988) Therefore, if the taxes were still assessable, they were nondischargeable.
The Crists filed their petition in bankruptcy on June 16, 1986. A discharge was entered October 7, 1986 and the final decree was entered December 10, 1987. By certified letter dated December 19, 1986, the Internal Revenue Service informed the Crists that the IRS had determined deficiencies for tax years 1975, 1976, 1978, 1979, 1981 and 1982. The Debtors filed a complaint to determine dischargeability of the IRS claims.
The Crists urged the court to follow the holding of the Doss case. However, the court rejected the Doss court's interpretation of § 507(a)(7)(A)(iii) and stated:
The better interpretation of section 507(a)(7)(A)(iii) is that sections 523(a)(1)(B) and 523(a)(1)(C) are exceptions to subdivision (iii) only. If the exceptions do not apply and the tax is still assessable, the tax would be entitled to priority under section 507(a)(7)(A)(iii). [citations omitted] Further, if a tax meets one of the exceptions, it would be nondischargeable but it would not be entitled to priority under section 507(a)(6). [citation omitted]
In re Crist, 85 B.R. at 812.
It is this court's determination that the holding of the Crist case is correct. Sections 523(a)(1)(B) and 523(a)(1)(C) are the only exceptions to section 507(a)(7)(A)(iii). The parties in this case have conceded that those exceptions do not apply on these facts. Furthermore, the parties conceded that the 1983 taxes were still assessable at the time of the filing of the bankruptcy petition and are still assessable. Therefore, the 1983 taxes have priority status pursuant to section 507(a)(7)(A)(iii). Because the taxes are taxes of the kind specified in section 507(a)(7), they are also nondischargeable pursuant to section 523(a)(1)(A).
The Plaintiff's 1983 tax liability is not dischargeable in this bankruptcy proceeding. A separate judgment of even date herewith shall be entered evidencing this court's ruling in favor of the Defendant.
NOTES
[1] 11 U.S.C. § 523(a)(1)(A) provides:
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 (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)(7) of this title, whether or not a claim for such tax was filed or allowed; . . .
[2] 42 B.R. 749 (Bankr.E.D.Ark.1984)
[3] In re Massoni, 20 B.R. 416 (Bankr.D.Kan.1982) ("At the time the bankruptcy petition was filed on April 25, 1980 the tax in question was still `assessable.' Therefore, the tax is entitled to priority treatment under 11 U.S.C. § 507(a)(6)(A)(iii) [now Section 507(a)(7)(A)(iii)] and is excepted from discharge under 11 U.S.C. § 523(a)(1)."). See also In re Treister, 52 B.R. 735 (Bankr.S.D.N.Y.1985)
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767 F.Supp. 1158 (1990)
Holly SHEPARD, Individually and as Administratrix of the Estate of Timothy Shepard, Plaintiff,
v.
Gary F. EGAN, James M. Canty, Brian Daley, Earl D. Harrington, Charles B. Gilmore, John M. Richardson, Francis S. Kozaczka, James Imelio, Gary M. Maroni, Richard C. Cadran, Francis P. Hughes, Thomas Nartowicz, Commonwealth of Massachusetts, Massachusetts Department of Public Safety, and Massachusetts Criminal Justice Training Council, Defendants.
Civ. A. No. 90-30020-F.
United States District Court, D. Massachusetts.
April 24, 1990.
On Motion to Dismiss with Prejudice August 13, 1990.
*1159 Camille F. Sarrouf, Sarrouf, Tarricone & Flemming, Boston, Mass., Michael D. Hashim, Jr., Hashim & Spinola, Pittsfield, Mass., for plaintiff.
Jordan Ring, Philipp G. Grefe, Rachel D. Spitz, Ring, Rudnick & Grefe, Frederick W. Riley, Randi Levine, DiCara, Selig, Sawyer & Holt, Albert G. Tierney, Boston, Mass., Jack F. St. Clair, Murphy, McCoubrey, Murphy, Gelinas, Stocks & Auth, Chicopee, Mass., Timothy M. Burke, Joseph P. Kittredge, Daniel J. O'Connell, III, Law Office of Daniel J. O'Connell III, Richard E. Brody, Morrison, Mahoney & Miller, Boston, Mass., Edward Martin Pikula, Matroni, Dimauro, Fitzgerald & Liebel, Springfield, Mass., Carol S. Ball, Murphy & O'Connell, Mark Newman, Francis G. Chase, Hale, Sanderson, Byrnes & Morton, Boston, Mass., for defendants.
MEMORANDUM AND ORDER
FREEDMAN, Chief Judge.
I. INTRODUCTION
Timothy Shepard of Pittsfield, Massachusetts, was employed by the City of Pittsfield as a full-time police officer. On September 19, 1988, Mr. Shepard began police training at the Massachusetts Criminal Justice Training Council ("Academy"), as required for his employment. He suffered *1160 injuries on that day while training at the Academy, and was hospitalized. On November 2, 1988, Mr. Shepard died of the injuries he had incurred.
On December 19, 1989, plaintiff Holly Shepard, wife of Timothy Shepard, commenced an action in Massachusetts Superior Court, County of Berkshire, against the Commonwealth of Massachusetts, two agencies of the Commonwealth, and the twelve named individuals ("officers"). The twelve individuals were all employed as directors, instructors, or state police officers at the Academy. Her complaint, containing fourteen separate counts, alleges that defendants are each responsible to some degree for Timothy Shepard's injuries and death. Plaintiff seeks damages for violations of civil rights protected under federal and state law. Her complaint also includes counts for wrongful death, emotional distress, loss of consortium, and other alleged losses. Of the fourteen counts, twelve involve questions of Massachusetts law, and two arise under laws of the United States. Of the twelve state law counts, six allege that the Commonwealth or its agencies are liable, and six allege that the officers are liable.
On January 23, 1990, the officers filed a motion with this Court to remove plaintiff's action to federal court. Plaintiff, however, has filed a motion to remand the action to the Superior Court. Defendants Academy, Commonwealth of Massachusetts ("Commonwealth"), and the Massachusetts Department of Public Safety join plaintiff in seeking remand.[1] The question for the Court, then, is whether the officers may remove this action, or any portion of it, to federal court. The Court, for the reasons stated below, remands to the Superior Court twelve of the fourteen counts in plaintiff's complaint, that is, all of plaintiff's claims based on Massachusetts law. The Court will not remand the two civil rights claims brought pursuant to 42 U.S.C. §§ 1983, 1988.[2] Rather, the Court will stay the section 1983 and section 1988 claims pending final disposition of the matter in state court.
II. DISCUSSION
A. Law of Removal
Title 28 U.S.C. § 1441 reads in relevant part as follows:
(a) Except as otherwise expressly provided by Act of Congress, any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or defendants, to the district court of the United States for the district and division embracing the place where such action is pending.
(b) Any civil action of which the district courts have original jurisdiction founded on a claim or right arising under the Constitution, treaties, or laws of the United States shall be removable without regard to the citizenship or residence of the parties. Any other such action shall be removable only if none of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought.
These portions of the statute clearly provide that a cause of action may be removed to federal court only where the federal court would have had original jurisdiction over the action had it been brought in federal court initially. Grubbs v. General Electric Credit Corp., 405 U.S. 699, 702, 92 S.Ct. 1344, 1347, 31 L.Ed.2d 612 (1972); Cochran v. Montgomery County, 199 U.S. 260, 272-73, 26 S.Ct. 58, 62, 50 L.Ed. 182, 188 (1905). Removal statutes exist to limit a plaintiff's choice of forum; Congress has determined that defendants may choose the federal forum whenever the claim asserted by plaintiff states a cause of action over which original federal jurisdiction exists. *1161 "Congress has made it plain that the right of removal is to stand absent an express provision to the contrary...." Cosme Nieves v. Deshler, 786 F.2d 445, 451 (1st Cir.1986); Mercy Hospital Association v. Miccio, 604 F.Supp. 1177, 1179 (E.D.N.Y.1985). In short, this Court is without discretion with regard to the removal of claims from the state courts, where this Court would have had original jurisdiction over the claims had plaintiff brought suit here initially. The choice of forum under these circumstances belongs to the defendant, not to the plaintiff or the Court. Thermtron Products, Inc. v. Hermansdorfer, 423 U.S. 336, 344, 96 S.Ct. 584, 589, 46 L.Ed.2d 542 (1976); see also Herman Schamisso, PVBA v. Menelli, Inc., 657 F.Supp. 63, 65 (S.D.Fla.1986).
In this case, the officers have agreed to seek removal of the entire case to federal court. The Commonwealth defendants, however, seek remand to Superior Court, as does plaintiff. The general rule for removal requires that all defendants must join in the petition to remove before a federal court may grant removal. Hill v. City of Boston, 706 F.Supp. 966, 968 (D.Mass.1989); Garside by Garside v. Osco Drug, Inc., 702 F.Supp. 19, 21 (D.Mass. 1988). However, exceptions to this rule exist. For example, those defendants who could not have removed the case themselves if they had been the sole defendants in the action, need not join the removal petition.[3] The Court can grant the petition to remove in the absence of such defendants' consent.
Here, the Commonwealth defendants could not have removed the case from Superior Court because this Court would not have had original jurisdiction over the matter had plaintiff brought the action here initially. As will be discussed infra, the eleventh amendment prohibits a federal court from exercising jurisdiction over a case against a state by its citizen. Therefore, the Commonwealth defendants need not join the petition in order for this Court to grant removal.
The officers have properly removed the two federal civil rights counts from the Superior Court. Federal courts have original jurisdiction over claims arising under the Civil Rights Act, and all necessary defendants have joined the petition. Under the removal statutes, defendants may choose the federal or state forum where the complaint states a federal cause of action on its face. The Court acknowledges that it must accept jurisdiction over the two federal civil rights counts.
However, the Court cannot grant the removal petition as to the counts against the Commonwealth defendants. Existing case law under the eleventh amendment establishes unequivocally that a federal court is without jurisdiction to decide a claim brought against a state by its citizen, unless a state statute provides to the contrary. Edelman v. Jordan, 415 U.S. 651, 662-63, 94 S.Ct. 1347, 1355-56, 39 L.Ed.2d 662 (1974). The Supreme Judicial Court decided in Irwin v. Commissioner of Department of Youth Services, 388 Mass. 810, 448 N.E.2d 721, 727 (1983), that the Commonwealth of Massachusetts had not consented to suit in federal courts. These cases lead to the unmistakable conclusion that the eleventh amendment precludes claims of any nature against the Commonwealth or its agencies in federal court.[4]
In the present case, plaintiff's complaint asserts claims against the Commonwealth defendants in six separate counts. As this Court has no jurisdiction over such claims for eleventh amendment reasons, the Court *1162 hereby remands those six counts to the Superior Court. Plaintiff's complaint also brings two counts against the officers under the Civil Rights Act. The officers have fulfilled the statutory prerequisites under 28 U.S.C. § 1441(a) and (b). Therefore, the officers have properly removed the civil rights counts to this Court.
B. Six Remaining Claims against the Officers
Six counts remain, all of them alleging wrongdoing by the officers, and all based on theories of Massachusetts law.
1. Pendent Jurisdiction
The federal courts have no original jurisdiction with regard to claims arising under state law and absent diversity of citizenship. Where a federal court would not have had original jurisdiction over claims had plaintiff brought suit there initially, the federal court has discretion, under the doctrine of pendent jurisdiction, to decide whether or not to determine those claims. United Mine Workers v. Gibbs, 383 U.S. 715, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966); Carnegie-Mellon University v. Cohill, 484 U.S. 343, 349, 108 S.Ct. 614, 618, 98 L.Ed.2d 720 (1988).
Principles of pendant jurisdiction apply to cases removed to federal court from state court. Charles D. Bonanno Linen Service, Inc. v. McCarthy, 708 F.2d 1, 11 (1st Cir.1983); Neptune v. McCarthy, 706 F.Supp. 958, 961-62 (D.Mass.1989). Therefore, claims lacking an independent basis of federal jurisdiction may properly be removed to federal court along with related claims having a "common nucleus of operative fact" where the related claims arise under the Constitution or laws of the United States. Gibbs, 383 U.S. at 725, 86 S.Ct. at 1138; Pueblo International, Inc. v. De Cardona, 725 F.2d 823, 825 (1st Cir.1984).
It is well-settled, however, that federal courts have no obligation to consider pendent state claims. Gibbs, 383 U.S. at 726, 86 S.Ct. at 1139. Rather, a federal court may decide pendent state claims if in the discretion of the court it is proper to do so. "[P]endent jurisdiction is a doctrine of discretion, not of plaintiff's right." Id. "The exercise of discretion to hear the state claim ... is governed by `considerations of judicial economy, convenience, and fairness to litigants.'" Bonanno, 708 F.2d at 6, citing Mayor of Philadelphia v. Educational Equality League, 415 U.S. 605, 627, 94 S.Ct. 1323, 1336, 39 L.Ed.2d 630 (1974). In sum, this Court will exert pendent jurisdiction over state claims where related claims with independent jurisdictional bases are before the Court, and where pendent jurisdiction will further the goal of efficient and orderly disposition of the entire matter. Carnegie-Mellon University, 484 U.S. at 350-51, 108 S.Ct. at 618-19.
The Supreme Court has offered insight into which factors a lower court should consider when deciding whether to assert pendent jurisdiction over state law claims. The Supreme Court has held that "a federal court has jurisdiction over an entire action, including state law claims, whenever the federal-law claims and state-law claims in the case `derive from a common nucleus of operative fact' and are `such that [a plaintiff] would ordinarily be expected to try them all in one judicial proceeding.'" Id. at 349, 108 S.Ct. at 618, citing Gibbs, 383 U.S. at 725, 86 S.Ct. at 1138. Pendent jurisdiction is "a doctrine of flexibility, designed to allow courts to deal with cases involving pendent claims in the manner that most sensibly accommodates a range of concerns and values." Carnegie-Mellon University, 484 U.S. at 350, 108 S.Ct. at 619. When deciding whether to invoke pendent jurisdiction, "a federal court should consider and weigh in each case, and at every stage of the litigation, the values of judicial economy, convenience, fairness, and comity...." Id. Because the eleventh amendment prevents this Court from exercising jurisdiction over plaintiff's claims against the state defendants, and the Court has an "unflagging obligation" to exercise jurisdiction over the civil rights claims, there will be separate state and federal proceedings. As noted above, however, the federal proceeding, if *1163 it eventually goes forward at all, has been stayed pending final disposition of the matter in state court. Therefore, the Court must now decide whether to exercise pendent jurisdiction over the six state claims against the officers, or whether these claims should be remanded, along with the other state claims against the Commonwealth defendants, to the Superior Court.
Upon consideration of the appropriate factors, the Court in its discretion decides that the six counts against the officers would best be resolved in Superior Court together with the counts against the Commonwealth defendants. The reasons discussed infra at pp. 1163-64 in the abstention portion of this Memorandum and Order support this decision and are fully applicable to the instant discussion regarding pendant jurisdiction over state law claims. Accordingly, the Court refuses to assert pendent jurisdiction over the counts against the officers based on state law, and instead remands those counts to Superior Court.
2. Abstention
As decided above, see p. 1161, supra, the Court has jurisdiction over plaintiff's federal civil rights claims. The fact that a claim has been properly removed to federal court does not, however, mean that the Court must immediately proceed to a resolution on the merits. Under the doctrine of abstention, the Court may refuse or delay its decision on a legal issue, thereby leaving the plaintiff to seek remedy in state court. Bath Memorial Hospital v. Maine Health Care Finance Commission, 853 F.2d 1007, 1012 (1st Cir.1988).
The doctrine of abstention, under which a District Court may decline to exercise or postpone the exercise of its jurisdiction, is an extraordinary and narrow exception to the duty of a District Court to adjudicate a controversy properly before it. Abdication of the obligation to decide cases can be justified under this doctrine only in the exceptional circumstances where the order to the parties to repair to the State court would clearly serve an important countervailing interest.
County of Allegheny v. Frank Mashuda Co., 360 U.S. 185, 188-89, 79 S.Ct. 1060, 1063, 3 L.Ed.2d 1163 (1959). The Supreme Court has explicitly recognized four distinct situations in which abstention is appropriate. Colorado River Water Conservation District v. United States, 424 U.S. 800, 814-19, 96 S.Ct. 1236, 1244-47, 47 L.Ed.2d 483 (1976); see Neptune v. McCarthy, 706 F.Supp. 958, 963 n. 7 (D.Mass. 1989). The fourth and newest basis for abstaining from jurisdiction, that is, judicial economy and convenience to the parties, was recognized in Colorado River, supra. Lower federal courts have relied on this doctrine to eliminate duplicative state and federal litigation, ease docket crowding, and avoid piecemeal litigation. See 17A C. Wright, A. Miller, and E. Cooper, Federal Practice and Procedure: Jurisdiction 2d § 4247 (1988) (collecting cases); see generally Report of the Committee on Federal Courts of the New York State Bar Association, The Abstention Doctrine: The Consequences of Federal Court Deference to State Court Proceedings, 122 F.R.D. 89 (1988). While the cases clearly indicate that federal courts should abstain only under "exceptional" circumstances, Colorado River, 424 U.S. at 818, 96 S.Ct. at 1246, and that federal courts have an "unflagging obligation ... to exercise the jurisdiction given them," Colorado River, 424 U.S. at 817, 96 S.Ct. at 1246, this Court may properly abstain where a balance of the factors weighs in that direction.[5]
The Court finds that exceptional circumstances exist in this case, and that abstention is appropriate for at least three reasons. *1164 First, the Court wishes to discourage piecemeal litigation, especially where the matter involves a question arising from the same factual background. Due to the factual nature of this case, lengthy evidentiary hearings will certainly be necessary. The parties' discovery burdens would be twofold in the event of dual proceedings. The prospect of discovery in two courts for the same matter would certainly impede the orderly and efficient disposition of the entire matter. In sum, piecemeal litigation will prove costly and troublesome to the parties.
Second, state law provides the rule of decision for twelve of the fourteen counts in the complaint. As noted above, only two counts set forth federal questions, and these questions are both similar to the state civil rights questions and reliant on the same proof.
Third, notions of efficiency and judicial economy demand that lawsuits with identical factual basis involving identical parties be tried and disposed of together. In light of the fact that six of the fourteen counts must under the eleventh amendment be remanded to the Superior Court, see pp. 1161-62, supra, an additional federal litigation involving the same facts, parties, and proof would waste this Court's resources, further crowd the docket, and otherwise create an unnecessary burden.
The Court's decision to abstain from exercising its jurisdiction over the civil rights claims does not mean that the Court will sua sponte dismiss the claims. Rather, the Court will stay any further action on those claims pending final resolution of the matter in the state courts. "[I]n exceptional circumstances, a federal district court may stay or dismiss an action solely because of the pendency of similar litigation in state court." Gulfstream Aerospace Corp. v. Mayacamas Corporation, 485 U.S. 271, 273, 108 S.Ct. 1133, 1135, 99 L.Ed.2d 296 (1988), citing Colorado River, 424 U.S. at 818, 96 S.Ct. at 1246; see Neptune, 706 F.Supp. at 963-65. Once the state courts have finally resolved the matter, this Court will lift the stay and proceed with the action here if plaintiff chooses to do so.
The Court also notes that the officers may move to remand the federal claims to Superior Court. The Superior Court possesses concurrent jurisdiction over claims brought under federal laws or the United States Constitution. Hathorn v. Lovorn, 457 U.S. 255, 266, 102 S.Ct. 2421, 2429, 72 L.Ed.2d 824 (1982); Green v. Truman, 459 F.Supp. 342, 345 (D.Mass.1978) (section 1983). Such a motion would serve the interests of all the parties in disposing of the entire matter in one proceeding, and would certainly prove cost-efficient as well.
The Clerk is hereby ordered to stay the case pending plaintiff's motion to lift the stay. Such motion to continue proceedings in this Court may be brought at any time within ninety days of final resolution of the state court proceedings.
III. CONCLUSION
The Court hereby REMANDS to the Superior Court, County of Berkshire, those claims contained in Counts 3 through 14 of plaintiff's complaint. The Court GRANTS the petition to remove the action as to Counts 1 and 2 of plaintiff's complaint. The Court further STAYS the proceedings on Counts 1 and 2 pending a final resolution of the matter in courts of the Commonwealth of Massachusetts.
It is So Ordered.
ON MOTION TO DISMISS WITH PREJUDICE
I. INTRODUCTION
Now before the Court is plaintiff Holly Shepard's motion to dismiss with prejudice the civil rights action she brings on behalf of the estate of her deceased husband. Plaintiff seeks dismissal apparently because she has reached a satisfactory settlement with all but one of the defendants. The lone holdout, defendant Gary F. Egan, opposes the instant motion.
II. PROCEDURAL BACKGROUND
Plaintiff is the widow of Pittsfield police officer Timothy Shepard. On December *1165 19, 1989, she filed suit in Massachusetts Superior Court, alleging that the Commonwealth of Massachusetts, some of its agencies, and various police officers were responsible for the death of Officer Shepard during his police training. Thereafter, upon petition of the defendants, this Court granted removal as to the civil rights claims, 42 U.S.C. §§ 1983 and 1988, but remanded the remaining twelve counts to the Superior Court. See page 1159. The Court stayed further proceedings on the federal claims pending resolution of the matter in Superior Court.
On July 16, 1990, the parties filed with this Court a stipulation stating that "[i]t is hereby stipulated that this action be dismissed with prejudice and without costs." All necessary parties signed the stipulation except defendant Gary F. Egan. Egan's refusal to sign the stipulation foreclosed any voluntary dismissal by stipulation. See Fed.R.Civ.P. 41(a)(1). Therefore, plaintiff sought an order of the Court, via the instant motion, to dismiss the action with prejudice as to all defendants. Defendant Egan opposes the motion. Thus, the Court must now decide whether to dismiss plaintiff's federal action. For the reasons stated below, the Court grants plaintiff's motion, and therefore dismisses with prejudice plaintiff's action.
III. DISCUSSION
Federal Rule of Civil Procedure 41(a) reads in relevant part as follows:
(2) By Order of Court. Except as provided in paragraph (1) [allowing for dismissal by stipulation] ..., an action shall not be dismissed at the plaintiff's instance save upon order of the court and upon such terms and conditions as the court deems proper.... Unless otherwise specified in the order, a dismissal under this paragraph is without prejudice.
Rule 41(a)(2) allows the Court to dismiss with or without prejudice, with the most important consideration being the interests of the defendant. Schwarz v. Folloder, 767 F.2d 125, 129 (5th Cir.1985). Of course, "[t]he decision to dismiss an action rests within the sound discretion of the trial court...." Id.
In this case, plaintiff has moved to dismiss her own claim with prejudice. At least one court has held that under these circumstances, the court is without discretion, and must grant the motion. Smoot v. Fox, 340 F.2d 301, 303 (6th Cir.1964); see also 9 C. Wright & A. Miller, Federal Practice and Procedure § 2367 (1971). The Court finds this position highly persuasive, because "when a dismissal with prejudice is granted, it does not harm the defendant: The defendant receives all that he would have received had the case been completed." Schwarz, 767 F.2d at 129. "Dismissal of an action with prejudice is a complete adjudication of the issues presented by the pleadings and is a bar to a further action between the parties." Smoot, 340 F.2d at 303.
Further, it is difficult, both practically and logistically, to imagine a court denying a plaintiff's motion to dismiss her own action with prejudice. Could the Court force the plaintiff to continue discovery, or offer evidence? Can or should the Court require plaintiff to litigate a claim when plaintiff herself has attempted to dismiss it? Though these questions prove vexatious, the Court need not ponder them at length. Suffice it to say that the Court will not compel plaintiff to pursue a claim that she wishes to dismiss with prejudice.
Defendant Egan, however, argues that dismissal of the case at this juncture would be prejudicial to him. Egan notes that the Superior Court has appointed a guardian ad litem for Timothy Shepard Jr., the child of Timothy and Holly Shepard.[1] The guardian ad litem, Attorney Francis X. Spina, has not released the child's rights to pursue additional claims against Egan upon attaining majority. Egan fears that the settlement reached between Holly Shepard and the defendants does not foreclose any actions by Timothy Jr. on his own behalf. By opposing the instant motion, Egan hopes (1) to force Mr. Spina to join the *1166 settlement, on behalf of the child, as a party-plaintiff, and (2) to gain approval of the settlement agreement by the Probate Court or the Supreme Judicial Court pursuant to Mass.Gen.Laws ch. 204, § 14.[2] By so doing, Egan hopes to prevent the child from bringing claims of any sort against Egan with regard to this matter in the future. Failure to require the guardian ad litem to join in a court-approved settlement, Egan contends, would permit Timothy Jr. to bring additional claims, and thus expose Egan to further potential liability.
Egan also avers that he has never seen the settlement agreement, and cannot therefore decide whether it is fair and reasonable as to him. Egan points out that the settlement refers to Holly Shepard as the prevailing party. He further states that the settlement may implicate him as responsible for the civil rights violations, and he steadfastly denies any such responsibility.
The Court, while understanding Egan's concerns, finds his arguments misdirected. The only claims now before the Court, and thus subject to dismissal with prejudice, are two civil rights claims brought on behalf of the estate of Timothy Shepard by his widow. These claims, once dismissed with prejudice, are forever barred. Due to principles of res judicata, neither Holly Shepard nor any of her privies may revive the civil rights claims on behalf of the estate again. See Schwarz, 767 F.2d at 129; 9 C. Wright & A. Miller, supra § 2367 at 185-86 (note 36).
Further, it is settled law that a person may generally sue only for deprivation of his own civil rights, and may not sue for deprivation of another's civil rights. United States v. Raines, 362 U.S. 17, 22, 80 S.Ct. 519, 523, 4 L.Ed.2d 524 (1960) ("[A] litigant may only assert his own constitutional rights or immunities...."); Anaya Serbia v. Lausell, 646 F.Supp. 1236, 1244 (D.P.R.1986) ("[O]ne person may not sue, nor recover damages, for the deprivation of another person's civil rights."). Thus, regardless of who joins the settlement, the law clearly prevents any person, including Timothy Jr., from ever bringing claims under the Civil Rights Act against Egan with regard to this unfortunate matter.
Egan should direct his arguments to the Massachusetts courts, where the bulk of the litigation lies, because Egan's arguments concern potential state law claims. If the settlement does not include Timothy Jr. as a party, the child may in fact be able to assert state law claims (e.g., wrongful death, loss of consortium, etc.) against Egan in the future. While this possibility may prove worrisome for Egan, the problem of whether Timothy Jr. can or might assert a claim against Egan in the future is not before the Court.
IV. CONCLUSION
For the foregoing reasons, the Court GRANTS plaintiff's motion to dismiss with prejudice her claims under 42 U.S.C. §§ 1983 and 1988.
It is So Ordered.
NOTES
[1] Defendants Criminal Justice Training Center and Department of Public Safety are agencies of the Commonwealth. For purposes of the instant motions, therefore, the Court will refer to the agencies and the Commonwealth as "Commonwealth defendants."
[2] Because the Court decides to remand the lion's share of this action to Superior Court, the Court will not presently act on defendants' motion to transfer the action to Boston. Of course, the Court expresses no opinion as to its merit.
[3] Courts also recognize exceptions to the general rule where the non-consenting defendants are nominal, unknown, or have been fraudulently joined to the action in an effort to defeat removal. See 14A C. Wright, A. Miller, and E. Cooper, Federal Practice and Procedure: Jurisdiction 2d § 3731 at 504-510 (1985).
[4] Agencies of the Commonwealth are likewise immune from suit in federal court due to the broad reading of the eleventh amendment by the Supreme Court. "[T]he rule has evolved that a suit by private parties seeking to impose a liability which must be paid from public funds in the state treasury is barred by the Eleventh Amendment." Edelman, 415 U.S. at 663, 94 S.Ct. at 1356; Ezratty v. Commonwealth of Puerto Rico, 648 F.2d 770, 776 (1st Cir.1981).
[5] The Supreme Court has identified numerous factors that a district court must consider when deciding whether to abstain from jurisdiction. These include the obligation of federal courts to exercise their jurisdiction, the inconvenience of the federal forum, the desirability of avoiding piecemeal litigation, and the order in which jurisdiction was obtained in the concurrent forums. Colorado River, 424 U.S. at 817-19, 96 S.Ct. at 1246-47. A later Supreme Court decision added another factor: whether state or federal law provides the rule of decision. Moses H. Cone Hospital v. Mercury Construction Corporation, 460 U.S. 1, 23, 103 S.Ct. 927, 941, 74 L.Ed.2d 765 (1983).
[1] Timothy Jr. was a child en ventre sa mere at the time of his father's death.
[2] Simply put, section 14 of the General Laws allows the Probate Court or Supreme Judicial Court to appoint an agent or administrator to compromise competing claims in will or trust proceedings. The compromise, if approved by the court, would "be valid and binding" as to all parties to the agreement. All parties interested in the estate must partake of the agreement for it to be valid and binding.
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292 Pa. Superior Ct. 79 (1981)
436 A.2d 1014
COMMONWEALTH of Pennsylvania,
v.
Richard NASH, Appellant.
Superior Court of Pennsylvania.
Argued June 9, 1980.
Filed October 30, 1981.
Petition for Allowance of Appeal Denied January 29, 1982.
*82 Albert C. Oehrle, Norristown, for appellant.
David M. McGlaughlin, Assistant District Attorney, Norristown, for Commonwealth, appellee.
Before HESTER, CAVANAUGH and VAN der VOORT, JJ.
VAN der VOORT, Judge:
Appellant was convicted in a nonjury trial of involuntary deviate sexual intercourse, two counts of burglary, and loitering and prowling at night time. Post verdict motions were denied and appellant was sentenced. A timely appeal was filed with this court. Prior to argument, appellant petitioned this court to remand for an evidentiary hearing concerning his contention involving Rule 1100, Pa.R.Crim.P. This court granted such petition. The lower court held an evidentiary hearing and filed a supplemental opinion. The case then proceeded along the normal appellate path.
Since appellant's complaints are basically procedural in nature, an abbreviated factual account of the case is all that is needed. Two female residents of the Kingswood Apartments *83 in King of Prussia, Upper Merion Township, Montgomery County were burglarized on consecutive Tuesdays. The intruder either attempted to or actually succeeded in sexually abusing the two residents. Both incidents occurred in the early morning hours, one at approximately 3:30 a.m., the other at approximately 4:00 a.m. The police established a surveillance of the apartment complex. On the following Tuesday, appellant was observed at approximately 3:40 a.m. walking along a line of trees in the rear of one of the apartment buildings. As appellant approached a location where a police officer was located, the officer revealed and identified himself and then began to question the appellant. The appellant admitted that he did not live in the apartments. He claimed he was looking for a place to relieve himself and that he became lost and was unable to locate his car. Mr. Nash was placed under arrest for loitering and prowling. He was advised of his rights, and transported to the police station.
Appellant signed, with counsel present, two written postponement requests, both requests were accompanied by a "Rule 1100 Waiver"; both were granted. The three cases came up for trial on March 13, 1979. Argument on pretrial motions were held after which, the court denied appellant's application to dismiss under Rule 1100 and denied his motion to suppress his statement. Appellant was tried before the same judge sitting without a jury and found guilty.
Appellant raises four issues on this appeal which we will discuss seriatim.
1. Did probable cause exist to arrest appellant?
Appellant recites that there are four elements to the crime of loitering and prowling, the conduct: must occur at night; around a dwelling house; consisting of either loitering or prowling; with, evidence of malice. Appellant claims that he was not "around a dwelling house"; that he was not loitering or prowling nor did he act with malice.
Appellant's argument contains one major flaw, which he overlooks. When questioning the probable cause *84 of an arrest, we are not concerned with establishing guilt beyond a reasonable doubt; nor are we to determine if a prima facie case exists; "we look to whether the police officers reasonably could have believed that crime was afoot." Commonwealth v. Dennis, 236 Pa.Super. 348, 350, 344 A.2d 713, 715 (1975). This case is dissimilar to the cases like Commonwealth v. Dial, 445 Pa. 251, 285 A.2d 125 (1971) where the defendants were standing on the sidewalk of a major thoroughfare in front of a supermarket. Here, appellant was observed in the early morning hours walking around an apartment complex to which he was not a tenant. See Commonwealth v. Duncan, 456 Pa. 495, 321 A.2d 917 (1974). We find appellant's conduct sufficient to justify the police in believing crime was afoot.[1]
Probable cause did exist for appellant's arrest for loitering and prowling.
2. Should appellant's inculpatory statements have been suppressed?
Appellant presents two arguments on this point. First, he argues that since probable cause did not exist for the arrest that such statements were the fruits of the unlawful arrest. As we find probable cause did exist we need not address such claim. Secondly, appellant contends that the unnecessary pre-arraignment delay tainted his statements. He argues that the delay was a factor in coercing his statement in that after repeated requests to talk to an attorney he succumbed to the pressures of the situation.
In Commonwealth v. Davenport, 471 Pa. 278, 370 A.2d 301 (1977) the Supreme Court fashioned what has commonly become known as the "six hour rule." "If the accused is arraigned within six hours of arrest, pre-arraignment delay shall not be grounds for suppression of such statements except as the delay may be relevant to constitutional standards *85 of admissibility. See Commonwealth v. Eiland, 450 Pa. 566, 301 A.2d 651 (1973); Commonwealth ex rel. Butler v. Rundle, 429 Pa. 141, 239 A.2d 926 (1968), "Id. at 286-87. Therefore, appellant's claim that a delay of 5 hours and 47 minutes requires his statements to be suppressed is without merit, though such a delay may be considered in determining the voluntariness of such statements.
"In reviewing this (suppression) ruling our initial task is to determine whether the factual findings are supported by the record. `In making this determination, we are to consider only the evidence of the prosecution's witnesses and so much evidence of the defense as, fairly read in the context of the record as a whole, remains uncontradicted.' Commonwealth v. Goodwin, 460 Pa. 516, 522, 333 A.2d 892, 895 (1975). If, when so viewed, the evidence supports the factual findings we are bound by such findings; we may only reverse if the legal conclusions drawn therefrom are in error." Commonwealth v. Johnson, 467 Pa. 146, 354 A.2d 886 (1976).
Commonwealth v. Cooke, 260 Pa.Super. 528, 394 A.2d 1271 (1978).
Appellant complains that upon being arrested he was thrown up against a police car; his face pushed against the car. He alleges that the police threatened to allow a police dog to attack him. He claims racial slurs were directed towards him. During questioning he felt intimidated when he observed a service revolver readily accessible. He saw a number of police officers with their hands on their gun. One officer is alleged to have threatened him with a nightstick.
Our review of the notes of testimony taken of the suppression hearing supports appellant's contention in part. The Commonwealth did not present evidence to contradict appellant as to the police behavior at the scene of arrest. However, we find that the prosecution did adequately contradict appellant's version of the police behavior at the police station, where the first statement was given. In rebuttal, the officer accused of threatening appellant clearly *86 denied having done so. There was testimony that the police must have ready access to weapons when questioning suspect and that the police had not gone beyond their normal procedure in dealing with appellant. The lower court placed great weight on one factor the appellant has chosen to overlook. Appellant's argument is premised upon his claim that he was only able to relate the incidents to his interrogators because the police in questioning him had frequently referred to portions of the victims' statements. The Commonwealth rebutted this claim with testimony that such statements had not been reduced to paper as of the time of appellant's statement. Nor had the interviewing detective been present when such statements were tape recorded. The lower court found appellant's statements were voluntary; we agree.
Appellant further claims that he had on at least five occasions prior to giving his inculpatory statements requested to talk to a lawyer. The Commonwealth offered testimony that the appellant had been advised of his Miranda rights on four occasions. On two occasions after receiving his rights appellant somewhat equivocally stated that he felt that he should not talk with the police without first consulting an attorney. On both such occasions the detective offered to call an attorney for appellant but appellant declined the offer. Approximately, a half hour after the second offer, appellant broke down crying and admitted his involvement in the two sexual assaults. The lower court chose to believe the Commonwealth's account. We must respect such finding of the suppression court. Commonwealth v. Hughes, 477 Pa. 180, 383 A.2d 882 (1978). We find that under the circumstances appellant was not denied his right to the assistance of counsel. See: Commonwealth v. Weaver, 274 Pa.Super. 593, 418 A.2d 565 (1980).
3. Were the lower court proceedings in violation of Rule 1100? Was counsel ineffective in delaying the trial?
The complaints in this case were filed on June 13, 1978. The 180 day period required by Pa.R.Crim.P. R. 1100, would have expired on December 10, 1978. On November 14, 1978, *87 appellant signed a motion to postpone trial as counsel was awaiting a transcript of proceedings in a sister county, which he hoped to be of help in the present cases. Accompanying such motion was a waiver of Rule 1100 for 120 days. The motion was presented to the court on December 4, 1978; it was granted. A second similar postponement was granted on January 26, 1979. Trial commenced on March 13, 1979.
Appellant puts forth alternate arguments. First, he relies on Rule 1100(d)(2), which reads:
(d) In determining the period for commencement of trial, there shall be excluded therefrom such period of delay at any stage of the proceedings as results from:
(1) the unavailability of the defendant or his attorney;
(2) any continuance in excess of thirty (30) days granted at the request of the defendant or his attorney, provided that only the period beyond the thirtieth (30th) day shall be so excluded;
[Emphasis added]
He contends that the first thirty (30) days of the continuances are not excludable. Had the waiver not accompanied the continuance appellant's position would be correct; for if a postponement was granted for 120 days the first thirty days would not be excludable. However here appellant signed a valid waiver for 120 days.[2] See Commonwealth v. Manley, 491 Pa. 461, 421 A.2d 636 (1980); Commonwealth v. Scott, 272 Pa.Super. 236, 414 A.2d 1095 (1979). Appellant effectively waived his right to be tried within the original 180 days, and further agreed to be tried within 120 days from the granting of the continuance.
Appellant next argues that counsel was ineffective in having the appellant sign the above waiver. Appellant reasons that since counsel received the awaited transcripts and had sufficiently reviewed them by the end of December, counsel was ineffective in seeking the continuance for 120 days.
*88 "[T]he only inquiry is whether counsel made an informed choice, which at the time the decision was made reasonably could have been considered as advancing and protecting the appellant's interest." Commonwealth v. Roundtree, 469 Pa. 241, 249, 364 A.2d 1359 (1976). Here, the record demonstrates that counsel sought a continuance for the purpose of obtaining a transcript of proceedings in a neighboring county which appellant had led counsel to believe would be helpful in the current case. We find counsel's action was reasonable.
However, appellant argues that it was not reasonable to continue the case for 120 days and that a date certain should have been set. We disagree for three reasons. First, the record indicates that counsel was uncertain as to when the transcript would be available.[3] Second, the court has within its discretion to grant or deny a postponement. We find no abuse of discretion in continuing a case for a maximum of 120 days conditioned on the waiver of Rule 1100 for that period. See: Commonwealth v. Austin, 224 Pa.Super. 230, 302 A.2d 413 (1973). Nor was the continuance for a date uncertain as condemned in Commonwealth v. Coleman, 477 Pa. 400, 383 A.2d 1268 (1978), as appellant was to be tried within 120 days. Finally, we take note as described on the record, of the administrative procedures of Montgomery County. Judicial delay may justify the granting of an extension of time. Commonwealth v. Shelton, 469 Pa. 8, 364 A.2d 694 (1976). Similarly, we hold here that a court in granting a continuance may consider administrative delays in relisting the case.
4. Was trial counsel ineffective in not seeking the suppression judge to recuse himself?
Appellant bases his argument on several facts which were brought to the court's attention during the hearing on the *89 pretrial motions. The court became aware that charges were pending against Mr. Nash in Bucks County. Furthermore, appellant claims he was prejudiced when the court "was advised in detail concerning the substance of the confession". He claims several prejudicial details were brought out wherein it was made apparent that the appellant had confessed. Appellant continues that he was denied the right to challenge the voluntariness of the confession before an impartial fact finder.
This current appeal is almost identical to Commonwealth v. Corbin, 447 Pa. 463, 291 A.2d 307 (1972). Here as in Corbin, the decision to proceed before the suppression judge was freely and knowingly made. The lower court on several occasions asked appellant how he wished to proceed. The record clearly indicates the counsel fully advised appellant of the various options and his opinion of the advantages, disadvantages and the chance of success of each. Corbin holds that in such situation it is not improper for the suppression judge, who denies the motion to suppress to preside in a non-jury trial. We hold likewise here.
Nor does the current appeal involve the situation that was present in Commonwealth v. Jones, 259 Pa.Super. 103, 393 A.2d 737 (1978). In Jones, the pre-trial motion judge heard evidence of a defendant's prior conviction. Prior to trial defendant requested the judge to disqualify himself. The judge refused and this Court reversed and ordered a new trial. In the current appeal, appellant did not request the trial judge to recuse himself. And as previously discussed above, appellant freely chose to proceed before such judge. Accordingly, trial counsel cannot be found ineffective when he fully advises his client of the choices in respect to proceeding before the suppression judge. Counsel cannot be held to be ineffective when his client makes a voluntary informed decision to proceed before a judge who may have heard information adverse to appellant.
Judgment affirmed.
CAVANAUGH, J., concurs in the result.
NOTES
[1] Appellant's argument sounds more like a challenge to the sufficiency of the evidence, however appellant later gave a statement in which he admitted peering into the apartment windows on the night of his arrest. Therefore, we need not address the issue as to whether malicious conduct existed.
[2] Since we find that the first waiver was valid; we need not discuss whether the second postponement and waiver were likewise valid as the actual trial date fell within the time frame of the first waiver.
[3] Counsel had prepared the postponement form some three weeks prior to presenting it. He had hoped that the transcript would be available prior to the time the case was to be called for trial, and then the postponement would not be necessary.
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292 Pa. Super. 192 (1981)
436 A.2d 1217
COMMONWEALTH of Pennsylvania,
v.
Robert HARPER, Appellant.
Superior Court of Pennsylvania.
Submitted December 5, 1980.
Filed November 13, 1981.
*195 Brian S. Quinn, Havertown, for appellant.
Frank T. Hazel, District Attorney, Media, for Commonwealth, appellee.
Before BROSKY, JOHNSON and POPOVICH, JJ.
POPOVICH, Judge:
This is an appeal from an order of the Court of Common Pleas, Delaware County, denying relief on a counseled Post Conviction Hearing Act[1] (PCHA) petition filed by appellant, Robert Harper.
On April 14, 1978, after trial before a jury, appellant was convicted of several counts of forgery, attempted forgery, and receiving stolen property. At trial, appellant was represented by a member of the public defender's office (first counsel). No post-verdict motions were filed,[2] and, following a hearing on appellant's petition to file post-verdict motions nunc pro tunc, the petition was denied. New, private counsel (second counsel), aided appellant both in the preparation of the petition and at the hearing. At sentencing, appellant, again represented by another private attorney (third counsel/post-trial counsel), was sentenced to serve a term of imprisonment of six to twelve years. No direct appeal was taken.
*196 On February 8, 1979, appellant filed a pro se PCHA petition. An amended petition was filed by new, private counsel (fourth counsel) on May 24, 1979.[3] A hearing was held and the petition was denied on August 6, 1979. This appeal followed. On appeal, appellant is represented by fifth counsel, who is a private attorney.
Instantly, appellant argues that: (1) trial counsel was ineffective for failing to object to the admission of evidence that had been ordered suppressed; and for abandoning him at the post-verdict motions stage; (2) the lower court erred in denying appellant's petition to file post-verdict motions nunc pro tunc thereby denying his right to appeal; and (3) appellant was denied the right to be provided with free transcripts.
For the following reasons, we affirm the order of the lower court.
It is well settled that a criminal defendant who deliberately and knowingly chooses to bypass orderly state procedures afforded for challenging his conviction is bound by the consequences of that decision. Commonwealth v. Myers, 427 Pa. 104, 233 A.2d 220 (1967); Commonwealth v. Mika, 277 Pa.Super. 339, 419 A.2d 1172 (1980). In Pennsylvania, our Post Conviction Hearing Act precludes one from *197 obtaining collateral relief where the issues raised either have been waived or finally litigated. Commonwealth v. Jumper, 494 Pa. 451, 431 A.2d 941 (1981). An issue is waived when:
(1) the petitioner knowingly and understandingly failed to raise it and it could have been raised before the trial, at the trial, on appeal, in a habeas corpus proceeding or any other proceeding actually conducted, or in a prior proceeding actually initiated under this act; and
(2) the petitioner is unable to prove the existence of extraordinary circumstances to justify his failure to raise the issue. 19 Pa.C.S.A. § 1180-4(b) (Supp. Pamphlet 1965-1980).
Moreover,
There is a rebuttable presumption that a failure to appeal a ruling or to raise an issue is a knowing and understanding failure. Id. § 1180-4(c) (emphasis added).
Instantly, appellant failed to take a direct appeal from the judgment of sentence. Hence, his failure to appeal constitutes a waiver[4] since the issues appellant raises before us were cognizable at that stage.[5]See Commonwealth v. Fox, 476 Pa. 475, 383 A.2d 199 (1978); Commonwealth v. Lochman, 265 Pa.Super. 429, 402 A.2d 513 (1979).
*198 In certain situations, the ineffectiveness of counsel has been held to be an "extraordinary circumstance" excusing one's failure to raise the claim at the first opportunity. Commonwealth v. Klaric, 263 Pa.Super. 286, 397 A.2d 1212 (1979). Here, however, this court is not confronted with such an issue because trial counsel's ineffectiveness could have been raised by a different attorney, post-trial counsel, on direct appeal. See Commonwealth v. Lochman, 265 Pa. Super. 429, 434, 402 A.2d 513, 516 (1979). Moreover, we have said that:
[w]here an appellant is represented by different post-trial counsel, and said appellant either fails to take a direct appeal or fails to raise his claims of trial counsel's ineffectiveness on direct appeal, such a failure will constitute a waiver of these issues as to post-conviction proceedings, excepting only those claims which fit under one or more of the four categories listed in Dancer.* Commonwealth v. Glasco, 241 Pa.Super. 484, 497, 362 A.2d 420, 427 (1976).
* "Our Post Conviction Hearing Act and the principles of judgment finality mandate that claims of ineffectiveness of counsel may only be raised in PCHA proceedings 1) where petitioner is represented on appeal by his trial counsel, for it is unrealistic to expect trial counsel on direct appeal to argue his own ineffectiveness, 2) where the petitioner is represented on appeal by new counsel, but the grounds upon which the claim of ineffective assistance are based do not appear in the trial record, 3) where the petitioner is able to prove the existence of other `extraordinary circumstances' justifying his failure to raise the issue, Post Conviction Hearing Act § 4(b)(2), 19 P.S. § 118-4(b)(2) (Supp. 1974) or 4) where the petitioner rebuts the presumption of `knowing and understanding failure.' Post Conviction Hearing Act § 4(c), 19 P.S. § 1180-4(c) (Supp. 1974)." Commonwealth v. Dancer, 460 Pa. 95, 100, 331 A.2d 435, 438 (1975).
Appellant does attempt to set forth in his brief and extraordinary circumstance excusing his failure to file an appeal. He frames the issue as follows:
"[i]t cannot be assumed that the failure of counsel to preserve issues for appeal or to file post verdict motions in this case constituted a `knowing and intelligent' waiver of Appellant's right to appeal." (Supplemental Brief for Appellant In Forma Pauperis at 8).
*199 Again, however, appellant's claim is waived because "the earliest stage in the proceedings at which the counsel whose ineffectiveness is being challenged no longer represente[d] the [appellant]" was at the post-trial stage. As a result,
"[i]t follows then that when newly appointed post-trial counsel fails to assign the ineffectiveness of trial counsel as a ground for post-trial relief, the issue of trial counsel's ineffectiveness is not properly preserved for appellate review." Commonwealth v. Hubbard, 472 Pa. 259, 276 n. 6, 372 A.2d 687, 695 n. 6 (1977).
Thus, in the case before us, there does not exist any other "extraordinary circumstances" which could have justified his failure to raise the issue of trial counsel's competency. See Commonwealth v. Fox, 476 Pa. 475, 383 A.2d 199 (1978); Commonwealth v. Klaric, supra. Accordingly, appellant is not entitled to relief.
While the claims in question have been waived, we nevertheless have examined, in the interests of judicial economy, appellant's contentions and find them utterly devoid of merit.
First, appellant inartfully argues that trial counsel was ineffective for failing to object to the witness's reference when he described the perpetrator of the crimes as a male. According to appellant, this reference "had the effect of identification . . . of [appellant] as the person who committed the alleged crimes" and therefore was an impermissible reference to the identification testimony which had been ordered suppressed. (Supplemental Brief for Appellant In Forma Pauperis at 7). This contention is totally unfounded.
The trial transcript directly contradicts appellant's allegation. Trial counsel did object to the prosecution witness's reference to the perpetrator of the crimes as male. When the objection was overruled, trial counsel requested and obtained a side-bar where he again objected to any characterization that the alleged forgerer was "male, female, or in any other way." (N.T. 4/12/78, pp. 50-51).
*200 Second, appellant contends that trial counsel was ineffective for failing to file post-verdict motions because counsel had not "notified his client, [obtained] leave from the Court, or compl[ied] with the `constitutionally mandated procedure for withdrawal.'" (Supplemental Brief for Appellant In Forma Pauperis at 7-8, citing Commonwealth v. Greer, 455 Pa. 106, 314 A.2d 513 (1974)). This contention is ludicrous. The trial court determined and the record reveals that appellant "was afforded counsel for the purpose of assisting him in the filing of post-trial motions and he chose to refuse to cooperate with counsel." (Memorandum Opinion and Order on Petition to File Post-Verdict Motions Nunc Pro Tunc at 3, Record No. 18) (emphasis added). We now will not permit appellant to attack the stewardship of counsel when appellant "refuse[d] to cooperate" with counsel and so stated on the record that he did not intend to use counsel on appeal. (N.T. 4/14/78, p. 195).
Third, appellant argues that the lower court erred in dismissing his petition to file post-verdict motions nunc pro tunc. He contends that because he "[did] not `knowingly and intelligently' waive his post-verdict and appellate rights, [the motions] must be heard nunc pro tunc if necessary." Supplemental Brief for Appellant In Forma Pauperis at 9). We disagree. While it is well-settled that an accused has an absolute right to appeal, Pa.Const.Art. V, § 9, and that issues not included in post-verdict motions are waived, Pa.R. Crim.P. 1123(b), it is equally settled that a defendant may waive his right to file post-verdict motions, Commonwealth v. Olsen, 247 Pa.Super. 513, 372 A.2d 1207 (1977). The record clearly indicates that appellant was fully apprised of his right to file post-verdict motions, his right to counsel, and of the need to strictly comply with the requirements of Pa.R.Crim.P. 1123. Nevertheless, appellant chose to take matters under his own advisement by filing a pro se PCHA petition, which was dismissed as being premature.[6] Appellant *201 now would have us find that he was entitled, as a matter of right, to file post-verdict motions nunc pro tunc. This we will not do. The record establishes that the trial court complied with Rule 1123. Therefore, a "deliberate waiver of the right to file post-verdict motions is deemed to have been made." Commonwealth v. Ramsey, 259 Pa.Super. 240, 252, 393 A.2d 806, 813 (1978). Moreover, the transcript of the hearing on appellant's petition to file post-verdict motions nunc pro tunc amply supports the hearing court's conclusion "[that] the arguments raised by [appellant] as a basis for motions for a new trial . . . are patently without merit." (Memorandum Opinion and Order on Petition to File Post Verdict Motions Nunc Pro Tunc at 3, Record No. 18). The lower court, therefore, did not err in denying appellant's petition.
Finally, appellant contends that he was denied his right to be provided with free transcripts, thereby precluding him from effectively challenging the judgment of sentence. Although we agree that an indigent defendant does have a right to be provided with free transcripts, Commonwealth v. Homsher, 264 Pa.Super. 271, 399 A.2d 772 (1979), appellant's failure to obtain a transcript does not entitle him to relief in the instant appeal. First, appellant knowingly and voluntarily waived his rights to direct appeal. Second, we note that appellant did not request the documents nor present this issue before the post conviction hearing court. Appellant, therefore, may be deemed to have waived his right to be provided with free transcripts and his right to raise this issue in the instant appeal. See e.g. Commonwealth v. Mitchell, 474 Pa. 274, 383 A.2d 930 (1978).
The order of the PCHA court dismissing appellant's petition is affirmed.
JOHNSON, J., concurs in the result of this opinion.
NOTES
[1] Act of January 25, 1966, P.L. (1965) 1580, § 1 et seq., 19 P.S. § 1180-1 et seq.
[2] On the tenth day following the verdict, appellant filed a pro se PCHA petition alleging, inter alia, that he was denied effective assistance of counsel. The trial court dismissed the petition as being premature, appointed new, private counsel to represent appellant, and granted appellant ten days to petition for leave to file post-verdict motions nunc pro tunc.
[3] The petition, with amendments, raised the following claims: (1) ineffective assistance of pre-trial and trial counsel for failing to procure the services of an expert witness; (2) ineffective assistance of trial counsel for failing to object to indirect in-court identification of appellant by Commonwealth witnesses, in disregard of a suppression order with respect to all identification of appellant; (3) the right to court appointed counsel independent of the public defender's office because of hostility between appellant and members of that office; (4) ineffective assistance of counsel in failing to adequately consult with and prepare appellant for trial; (5) the unconstitutional use of suppressed evidence at trial; (6) recording of an incorrect sentence by the Department of Justice, Bureau of Correction; (7) denial of the right to counsel at the preliminary hearing; (8) denial of the right to raise the issue of ineffective assistance of counsel at the appellate level because of sentencing counsel's failure to appeal the judgment of sentence.
We will not now consider any of the above contentions that appellant has failed to address in his brief before this court. Pa.R. App.P. 2116.
[4] While the question of waiver has not been raised by either party, this court may raise it sua sponte. Commonwealth v. Triplett, 476 Pa. 83, 381 A.2d 877 (1977); Commonwealth v. Klaric, 263 Pa.Super. 286, 397 A.2d 1212 (1979).
[5] In one of several pro se briefs filed in the instant appeal, appellant also contends, for the first time, that the informations were invalid because they contained a rubber stamp facsimile of the signature of the District Attorney. While we note that the use of a rubber stamp facsimile has been held not to meet the requirement that an information be "signed by the attorney for the Commonwealth," see Commonwealth v. Emanuel, 285 Pa.Super. 594, 428 A.2d 204 (1981); under the state of the present law, appellant's failure to file a pretrial motion to quash the information constitutes a waiver of his right to assert this impropriety in any subsequent proceeding. Pa.R.Crim.P. 306(e). See Commonwealth v. Williams, 252 Pa.Super. 587, 384 A.2d 935 (1978). In any event, appellant did not raise this issue in his Post Conviction Hearing Act petition, or in his amended petition thereto, and therefore, it is not preserved for review. See Commonwealth v. Carrier, 494 Pa. 305, 431 A.2d 271 (1981). See generally Commonwealth v. Blair, 460 Pa. 31, 331 A.2d 213 (1975).
[6] We note that the trial court could have treated this pro se PCHA petition as being timely filed post-verdict motions. See Commonwealth v. Gravely, 486 Pa. 194, 196, 404 A.2d 1296, 1297 (1979). In any event, our examination of the claims raised therein reveals that they are devoid of merit.
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181 Conn. 610 (1980)
CAROLYN MILLER
v.
ROBERT E. MILLER
Supreme Court of Connecticut.
Argued June 5, 1980.
Decision released July 29, 1980.
COTTER, C. J., BOGDANSKI, PETERS, HEALEY and PARSKEY, JS.
Joel M. Ellis, with whom were Donald J. Cantor and Edward S. Hyman, for the appellant (defendant).
Jean S. Ferlazzo, for the appellee (plaintiff).
PER CURIAM.
The plaintiff, Carolyn Miller, instituted the present action to dissolve her twenty-five year marriage to the defendant, Robert E. Miller. The court rendered judgment dissolving the marriage and issued several ancillary orders. In addition to ordering the sale of the parties' jointly owned home with the net proceeds therefrom to be paid to the plaintiff and the distribution of their furnishings and personal possessions, the court awarded her periodic alimony in the amount of *611 $285 per week[1] secured by a $50,000 life insurance policy on the life of the defendant, maintained by him, with the plaintiff as the designated beneficiary, and an allowance for counsel fees. The court also determined that the defendant was in arrears in the payment of temporary unallocated alimony and child support which the trial court ordered him to pay. The defendant appeals from those orders claiming that the awards are excessive and are an abuse of discretion insofar as the trial court relied on the defendant's earning capacity rather than his actual earned income as the basis for determining the appropriate alimony award, property distribution and award of counsel fees.
In view of the court's distinct advantage in handling domestic relations matters, awards of financial settlement ancillary to a marital dissolution are within the sound discretion of the trial court acting in accordance with the standards and guidelines provided in the General Statutes. Murphy v. Murphy, 180 Conn. 376, 429 A.2d 897; Fucci v. Fucci, 179 Conn. 174, 425 A.2d 592; Ridolfi v. Ridolfi, 178 Conn. 377, 423 A.2d 85; Jacobsen v. Jacobsen, 177 Conn. 259, 413 A.2d 854. "In determining whether the trial court abused its discretion `the ultimate issue is whether the court could reasonably conclude as it did.'" Grinold v. Grinold, 172 Conn. 192, 194, 374 A.2d 172; Corbin v. Corbin, 179 Conn. 622, 427 A.2d 432.
It is well established, and the defendant does not dispute, that under appropriate circumstances, the trial court may, in a marital dissolution proceeding, base financial awards on the earning capacity rather *612 than the actual earned income of the parties. Schmidt v. Schmidt, 180 Conn. 184, 189, 429 A.2d 470; McKay v. McKay, 174 Conn. 1, 2, 381 A.2d 527; Whitney v. Whitney, 171 Conn. 23, 28, 368 A.2d 96; Tobey v. Tobey, 165 Conn. 742, 749, 345 A.2d 21; Yates v. Yates, 155 Conn. 544, 548-49, 235 A.2d 656. The defendant contends, rather, that there was insufficient evidence to support the court's reliance on his earning capacity. His contention that there was insufficient evidence regarding his potential salary is without merit in view of his testimony that, with the exception of a fourteen-month period of unemployment between 1975 and 1977, he had been employed for more than twenty years and that at the time the present action was commenced he was employed at the Savin Corporation at an annual salary of $43,000. Evidence of this kind forms a sufficient basis for utilizing the defendant's earning capacity in determining the appropriate financial awards. See Schmidt v. Schmidt, supra; McKay v. McKay, supra. Nor do we agree with the defendant's contention that reliance on earning capacity is improper in the absence of a finding that the defendant wilfully depleted his earnings with a view toward denying or limiting the alimony to be paid to his wife. Our cases indicate that it is permissible to utilize a party's earning potential in making financial awards where, as here, the earnings of that party are voluntarily depleted so as to deprive the spouse of financial support. Schmidt v. Schmidt, supra; McKay v. McKay, supra; Whitney v. Whitney, supra. In the present case, the defendant testified that he voluntarily and unilaterally left his employment at the Savin Corporation several months after the plaintiff had commenced the present action. This *613 resulted in a reduction in his salary. On the basis of the evidence presented by the parties, we conclude that the financial awards challenged by the defendant did not constitute an abuse of the court's discretion.
The defendant also claims error in the court's order that he pay $3048.44 representing the arrearage in the payment of alimony and child support pendente lite previously ordered by the court. On November 9, 1978, the court ordered the defendant to pay $285 per week as unallocated temporary alimony and child support. The order was payable when entered and terminated upon the rendition of the final judgment. Saunders v. Saunders, 140 Conn. 140, 146, 98 A.2d 815. In its memorandum of decision, the court determined that as of February 8, 1979, the defendant was obligated to make fourteen payments, for a total sum of $3990, in accordance with the November 9, 1978 order. The court found, however, that the defendant had paid only $941.56 in temporary alimony and child support. Subtracting the latter amount from the amount due, the trial court determined that the defendant was $3048.44 in arrears and ordered him to pay that amount.
The defendant claims that since his youngest child reached the age of majority on January 9, 1979, the order for temporary unallocated alimony and child support became ineffectual because from that point in time it was outside the court's jurisdiction to issue such an order. In Broaca v. Broaca, 181 Conn. 463, 435 A.2d 1016, we held that an order requiring the defendant husband to maintain certain insurance policies on his life with his two minor children irrevocably named as beneficiaries *614 was beyond the subject matter jurisdiction of the trial court inasmuch as the order purported to require the defendant to support his children after they reached the age of majority. In Broaca we relied on Kennedy v. Kennedy, 177 Conn. 47, 411 A.2d 25, where we held that an order requiring the payment of child support beyond the time that the child reaches the age of majority "is of no force and effect as a court order." Id., 52. Thus, to the extent that the judgment of the court requires the payment of support for the defendant's child after January 9, 1979, it is in excess of the court's jurisdiction. Accordingly, the case must be remanded to determine what portion, if any, of the temporary unallocated alimony and child support required to be paid after January 9, 1979, constituted child support, and to deduct that amount from the arrearage due the plaintiff.
There is error, the judgment is set aside and the case is remanded for further proceedings in accordance with this opinion.
NOTES
[1] The weekly alimony would be reduced to $175 following the sale of the parties' home.
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[EDITOR'S NOTE: This case is unpublished as indicated by the issuing court.]
MEMORANDUM OF DECISION ON MOTION TO STRIKE
The complaint in this action alleges that by promissory note (the Note) dated September 16, 1988, the defendant as maker promised to pay to the order of the plaintiff the principal sum of $225,000. The note provided that a default in payment of any installment when due would render the whole of said Note immediately due and payable at the option of the holder. To secure the Note the defendant mortgaged to the plaintiff's predecessor the property located at 163 Girard Avenue, Hartford, Connecticut. The complaint further alleges that on July 1, 1992 and every month thereafter, the defendant failed to pay principal and interest due under the terms of the Note. In his answer the plaintiff has interposed the following special defenses:
First Special Defense — The plaintiff agreed to extend additional time for the defendant to make payments providing that the defendant provided certain financial information and listed the property for sale with a real estate agent which the defendant has done.
Second Special Defense — The defendant offered to convey the property to the plaintiff by deed in lieu of foreclosure. The plaintiff was unwilling to accept the proposal and for that reason the defendant should not be liable for additional interest which is accruing. CT Page 6711-AA
Practice Book Section 164 provides in relevant part:
No facts may be proved on either a general or special denial except as show that the plaintiffs' statements of fact are untrue. Facts which are consistent with such statements but show, notwithstanding, that he has no cause of action, must be specially alleged.
The function of a motion to strike is to test the legal sufficiency of a pleading. Practice Book 152; Ferryman v. Groton,212 Conn. 138, 142, 561 A.2d 432 (1989); Mingachos v. CBS,196 Conn. 91, 491 A.2d 368 (1985). A motion to strike admits facts well pleaded but does not admit the truth or accuracy of opinions or legal conclusion stated in the pleadings. Mingachos v. CBS, supra, 108. In ruling on a motion to strike the court is limited to the facts alleged in the complaint, and those facts must be construed in the manner most favorable to the plaintiff. Gordon v. Bridgeport Housing Authority, 208 Conn. 161, 170,544 A.2d 1185 (1988); Meredith v. Police Commission, 182 Conn. 138,140, 438 A.2d 27 (1980). When construed in manner most favorable to the defendant the first special defense may be read as alleging a modification of the terms of the Note whereby time for payment under the Note would be extended if the defendant did certain acts which he claims to have done. A promissory note may be modified by an oral agreement between the parties. Dinado v. Gelormino, 2 Conn. App. 275, 277, 477 A.2d 694 (1984); Pearl v. Case, 3 Conn. App. 111, 114, 485 A.2d 1331 (1985). Therefore, the Motion to Strike the First Special Defense must be denied.
In Bank of Boston Connecticut v. Platz, 41 Conn. Super. Ct. 587
(1981) (Satter, J.) the court considered a motion to strike a special defense which alleged that the mortgagors had tendered a quit claim deed which was refused by the mortgagee. The court granted the motion to strike and held that the tender by the mortgagors of the deed to the property being foreclosed did not state a valid defense to the mortgagee's action to recover interest, cost, and attorneys' fees accruing after tender.
The court in Platz reasoned that "the general rule is that both payment of, and tender of payment of the debt must be in money, unless the parties agree otherwise, or the obligee consents to accept some other medium of payment. 60 Am.Jur.2d, Payment 32. Tender has been defined by the Supreme Court as `an offer CT Page 6711-BB to pay a debt . . . [and] the offer to pay involves, as a general rule, the actual production of the money and the placing of it in the power of the person entitled to receive it.'" Id. 32, citing Mayron's Bake Shop, Inc. v. Arrow Stores, Inc., 149 Conn. 149, 155-156,176 A.2d 574 (1961); Hall v. Appel, 67 Conn. 585,135 A. 524 (1896). The court in Platz also noted that the offer of a deed is not tender of full because of the potential questions of the validity of conveyed by the deed. The offer of a deed in lieu of foreclosure may present a myriad of problems to a lender which the lender does not encounter if it obtains a judgment of foreclosure. One such problem is the adequacy of the consideration from the mortgagee to the mortgagor for a deed of the equity of redemption. The court in Cohn v. Bridgeport Plumbing Supply Co. Inc., 96 Conn. 696, 706,115 A. 328 (1929) stated that the mortgagor may release the equity of redemption to the mortgagee for a good and valuable consideration when done voluntarily without fraud and when no undue influence has been brought to bear upon him by the creditor.
Another problem a lender faces in accepting a deed in lieu of foreclosure is that of merger. The general rule is that where a mortgagee acquires the equity of redemption in mortgaged premises and there is no intermediate estate so that the whole title becomes vested in him, merger of the mortgage interest into the fee occurs in the absence of evidence of a contrary intention or prejudice resulting to the mortgagee. Glotzer v. Keyes, 125 Conn. 227, 235,5 A.2d 1 (1939). A merger of the legal and equitable interest in the property can occasionally place the lender in worse position that if it had foreclosed. The most common and notable example of this situation occurs when there are subsequent encumbrances. Since the mortgage has been extinguished, the lender has no mechanism for foreclosing out the subsequent creditors. The tender of a deed in lieu of foreclosure is not equivalent to payment of the underlying mortgage debt and the mortgagee's refusal to accept such a deed does not defeat its right to foreclose the mortgage.
For the foregoing reason the Motion to Strike the Second Special Defense is granted.
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767 F. Supp. 231 (1990)
The UNITED STATES of America, Plaintiff,
v.
MPM CONTRACTORS, INC. and W.A. Michaelis, Defendants.
Civ. A. No. 89-2371-O.
United States District Court, D. Kansas.
October 2, 1990.
On Motion For Reconsideration December 4, 1990.
Janice M. Karlin, U.S. Attorney's Office; Henry F. Rompage, U.S. E.P.A., Kansas City, Kan.; Richard B. Stewart, Beverlee J. Destein, Environment and Natural Resources Div., U.S. Dept. of Justice; and Clarence Featherson, U.S. E.P.A., Washington, D.C., for the U.S.
John S. Seeber, Adams, Jones, Robinson & Malone; Gerald N. Capps, Jr., Richard D. Greene, Morris, Laing, Evans, Brock & *232 Kennedy, Wichita, Kan.; and Frederick K. Starrett, Lathrop, Norquist & Miller, Overland Park, Kan., for MPM Contractors, Inc., W.A. Michaelis, Michael P. McGill, and Asbestos Removal Contractors, Inc.
MEMORANDUM AND ORDER
EARL E. O'CONNOR, Chief Judge.
Plaintiff, the United States of America, filed this action on August 22, 1989, pursuant to section 113(b) of the Clean Air Act (hereinafter "the Act"), 42 U.S.C. § 7413(b). Plaintiff alleges that defendant MPM Contractors, Inc., (hereinafter "MPM") violated the National Emissions Standards for Hazardous Air Pollutants (hereinafter "NESHAP") for asbestos, promulgated under sections 112 and 114 of the Act, 42 U.S.C. §§ 7412 and 7414, while removing asbestos. More specifically, the government contends that MPM did not adequately wet friable asbestos or ensure that such materials remained wet during and after renovation and removal operations at three sites.
On May 30, 1990, the court denied the summary judgment motions of plaintiff and defendant MPM because neither party presented evidence as to whether "defendant either did cause or, but for the corrective action ordered by the [Kansas Department of Health and Environment] inspectors, would have caused particulate asbestos material to be emitted to the outside air during removal." United States v. MPM Contractors, Inc., 1990 WL 81062, No. 89-2371-O, slip op. at 6 (D.Kan. May 30, 1990). This matter now comes before the court on the motions of plaintiff and defendant for reconsideration of that memorandum and order. Appropriate circumstances for a motion to reconsider are where the court has obviously misapprehended a party's position, the facts or the law, or the court has mistakenly decided issues outside of those the parties presented for determination. Anderson v. United Auto Workers, 738 F. Supp. 441, 442 (D.Kan.1990). Having carefully considered the arguments and authorities presented by the parties, we will grant the plaintiff's motion for reconsideration.
In order to show liability under the NESHAP, the United States must make a mere two-fold showing. First, plaintiff must show that the minimal threshold requirements of NESHAP have been met. United States v. Sealtite Corp., 739 F. Supp. 464, 468 (E.D.Ark.1990). The minimal requirements applicable in this action are contained in 40 C.F.R. § 61.145(d).[1] Second, the government must establish that the work practices requirements of the NESHAP have not been satisfied. Sealtite, 739 F.Supp. at 468. In the instant case, the parties agree and stipulate that the three MPM projects were of sufficient magnitude to be covered by 40 C.F.R. § 61.145(d). Thus, the minimal threshold requirements of the NESHAP have been met as to these operations. The only remaining question is whether MPM satisfied the work practices requirements of the NESHAP.
Under the work practices applicable to the case at bar, MPM was required to adequately wet "friable asbestos materials when they [were] stripped from facility components before the members [were] removed from the facility ..." 40 C.F.R. § 61.147(c).[2] MPM was also responsible for ensuring that friable asbestos materials removed or stripped from the three facilities remained adequately wet until they were collected for disposal. 40 C.F.R. § 61.147(e)(1). Failure to follow these work practices requirements automatically *233 results in liability. United States v. Sealtite Corp., 739 F.Supp. at 468-69.
The term "adequately wetted" means "sufficiently mixed or coated with water or an aqueous solution to prevent dust emissions." 40 C.F.R. § 61.140. Defendant argues that asbestos must be considered "adequately wetted" unless the government can establish that there were "dust emissions." A similar argument was presented in United States v. Ben's Truck & Equip., 1986 WL 15402, No. 84-1672, slip op. at 2 (E.D.Cal. May 12, 1986). The district court held that the government need not establish that emissions of asbestos occurred in order to prove a violation. Id.
Defendant has not identified and we are not aware of any other court which has held dust emissions a prerequisite to finding that friable asbestos materials were inadequately wetted. In cases involving alleged violations of the NESHAP for asbestos, courts have routinely relied on the observations of inspectors to determine whether asbestos was adequately wetted. See, e.g., United States v. Sealtite Corp., 739 F. Supp. 464, 467 (E.D.Ark.1990); United States v. Tzavah Urban Renewal Corp., 696 F. Supp. 1013, 1022 (D.N.J.1988); United States v. Ben's Truck & Equip., 1986 WL 15402, No. 84-1672 (E.D.Cal. May 12, 1986). The Sealtite court, for example, did not require the government to prove that there were emissions, but only that the asbestos was not adequately wet. State inspectors' observations that asbestos containing waste materials had not been adequately wetted was enough to hold defendant liable as a matter of law. United States v. Sealtite, 739 F.Supp. at 469.
In the case at bar, dry asbestos was discovered at three of defendant's renovation projects. Inspectors Russell Brichacek and David Branscum observed dry asbestos materials on pipe surfaces and the floor in Chandler Hall of Pittsburg State University (hereinafter "Chandler") on June 27, 1988. On August 3, 1988, Inspector Brichacek found dry friable asbestos on the bleachers in the gymnasium of Quivera Heights Junior High School (hereinafter "Quivera"). Inspector Branscum saw dry asbestos debris on the sixth floor of the Wolcott Building (hereinafter "Wolcott") in Hutchinson, Kansas, on September 21, 1988. Samples taken from all three sites contained well over the required one percent asbestos. Applying these facts to the applicable law, the court finds that defendant violated the provisions of the NESHAP for asbestos at its removal operations in Wolcott, Quivera, and Chandler. The government's motion for reconsideration will be granted.
IT IS THEREFORE ORDERED that the motion of plaintiff for reconsideration (Doc. No. 56) is granted and plaintiff's cross-motion for summary judgment (Doc. No. 35) is granted. Having established the liability of the defendant, the court will schedule a hearing on the penalties and injunctive relief to be imposed. Counsel should contact the Courtroom Deputy for a hearing date.
ON MOTION FOR RECONSIDERATION
This matter comes before the court on the motion of defendant MPM Contractors, Inc. (hereinafter "MPM"), for reconsideration of an order entered by the court on October 2, 1990, reconsidering and granting plaintiff's cross-motion for summary judgment against MPM. In the alternative, defendant seeks an order under 28 U.S.C. § 1292(b) and Rule 5(a) of the Federal Rules of Appellate Procedure to permit an immediate appeal from the court's memorandum and order of October 2, 1990. Plaintiff, the United States, opposes defendant's motions and requests that each be denied. For the reasons stated below, we will deny MPM's motion for reconsideration, and its alternative request for an interlocutory appeal.
The decision of whether to grant or deny a motion for reconsideration is committed to the court's discretion. See Hancock v. City of Oklahoma City, 857 F.2d 1394, 1395 (10th Cir.1988). It is well established that a motion for reconsideration is the opportunity for the court to correct manifest errors of law or fact and to review newly discovered evidence or *234 when there has been a change in the law. Harsco Corp. v. Zlotnicki, 779 F.2d 906, 909 (3d Cir.1985), cert. denied, 476 U.S. 1171, 106 S. Ct. 2895, 90 L. Ed. 2d 982 (1986). Appropriate circumstances for a motion to reconsider are where the court has obviously misapprehended a party's position or the facts of the law, or the court has mistakenly decided issues outside of those the parties presented for determination. Anderson v. United Auto Workers, 738 F. Supp. 441, 442 (D.Kan.1990); Refrigeration Sales Co. v. Mitchell-Jackson, Inc., 605 F. Supp. 6, 7 (N.D.Ill.1983). A party's failure to present its strongest case in the first instance does not entitle it to a second chance in the form of a motion to reconsider. Paramount Pictures Corp. v. Video Broadcasting Sys., Inc., No. 89-1412-C, slip op. at 2, 1989 WL 159369 (D.Kan., unpublished, Dec. 15, 1989).
Defendant MPM is simply seeking another chance to assert a stronger case. Defendant again insists that dust emissions are necessary to find a party liable under the National Emissions Standards for Hazardous Air Pollutants (hereinafter "NESHAP") for failing to adequately wet friable asbestos. In ruling on the previous motion for reconsideration, the court stated:
Defendant has not identified and we are not aware of any other court which has held dust emissions a prerequisite to finding that friable asbestos materials were inadequately wetted. In cases involving alleged violations of the NESHAP for asbestos, courts have routinely relied on the observations of inspectors to determine whether asbestos was adequately wetted. See, e.g., United States v. Sealtite Corp., 739 F. Supp. 464, 467 (E.D.Ark.1990); United States v. Tzavah Urban Renewal Corp., 696 F. Supp. 1013, 1022 (D.N.J.1988); United States v. Ben's Truck & Equip., 1986 WL 15402, No. 84-1672 (E.D.Cal. May 12, 1986). The Sealtite court, for example, did not require the government to prove that there were emissions, but only that the asbestos was not adequately wet. State inspectors' observations that asbestos containing waste materials had not been adequately wetted was enough to hold defendant liable as a matter of law. United States v. Sealtite, 739 F.Supp. at 469.
United States v. MPM Contractors, Inc., No. 89-2371-O, slip op. at 4, 1990 WL 302176 (D.Kan. Oct. 2, 1990). Each of the cases cited in the memorandum and order entered by the court on October 2 interpret the same sections of the NESHAP and all are in agreement. MPM's motion for reconsideration will be denied.
In the alternative, defendant requests that the court permit MPM an immediate appeal of the October 2 ruling to the Tenth Circuit Court of Appeals pursuant to 28 U.S.C. § 1292(b) because said order involves "a controlling question of law as to which there is substantial grounds for difference of opinion." We believe that an appeal at this stage of the proceedings would only serve to delay this case. All courts are in accord as to the proper interpretation of the asbestos NESHAP. No ground exists for disagreement. Only defendant has a difference of opinion.
IT IS THEREFORE ORDERED that the motion of defendant for reconsideration (Doc. No. 73) is hereby denied. Having again established the liability of the defendant, the court will schedule a hearing on the penalties and injunctive relief to be imposed. Counsel are directed to contact the Courtroom Deputy for a hearing date.
IT IS FURTHER ORDERED that defendant's motion in the alternative for an immediate appeal to the Tenth Circuit Court of Appeals (Doc. No. 73) is denied.
NOTES
[1] Section 61.145(d) provides that the requirements of §§ 61.146 and 61.147 apply to the owner or operator of a demolition or renovation operation that involves at least 80 linear meters (260 linear feet) of friable asbestos materials on pipes or at least 15 square meters (160 square feet) of friable asbestos materials on other facility components which are stripped or removed at a facility being renovated.
[2] The asbestos NESHAP defines friable asbestos as follows: "Friable asbestos material means any material containing more than 1 percent asbestos by weight that hand pressure can crumble, pulverize, or reduce to powder when dry." 40 C.F.R. § 61.141. In common usage, "friable" is defined as "easily crumbled or pulverized." The American College Dictionary 487 (1983).
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144 B.R. 96 (1992)
In re Seth W. YERRINGTON, Debtor.
Luba YERRINGTON, Appellant,
v.
Seth YERRINGTON, Appellee.
BAP Nos. AK-91-1584-JVAs, AK-91-1603-JVAs, Bankruptcy No. A90-00789-DMD, Adv. No. A90-00789-001.
United States Bankruptcy Appellate Panel Ninth Circuit.
Argued and Submitted on June 23, 1992.
Decided September 4, 1992.
*97 J. Mitchell Joyner, Anchorage, Alaska, for Luba Yerrington.
M. Gregory Oczkus, Anchorage, Alaska, for Seth W. Yerrington.
Before: JONES, VOLINN and ASHLAND, Bankruptcy Judges
JONES, Bankruptcy Judge:
The state divorce court dissolved a marriage relation giving the marital home to the husband and a judicial lien against the home to the wife. The husband filed for bankruptcy, and the bankruptcy court avoided the wife's judicial lien. The wife appeals.
BACKGROUND
The Yerringtons, Seth and Luba, were married in 1977. Thereafter they built a residence on unimproved land already owned by Seth in Homer, Alaska ("the Homer residence," or "the Property"). Title was held by Seth.
Seth and Luba were divorced in 1990. A final decree was not entered until August 23, 1990, after the bankruptcy petition date. On July 16, 1990, the divorce court orally awarded the residence to Seth, stating:
Secondly, the house and property the Homer property should be awarded to the husband. This is marital property. He shall execute a note and deed of trust to secure said note in the amount $27,500.00 payable one year from the date of the decree bearing interest from the date of the decree at the legal rate for judgment. He shall not further encumber nor sell the property or any interest in the property until such deed of trust is recorded.
Luba's attorney, fearing that this language did not protect Luba in the event of bankruptcy, asked the court to grant Luba an equitable interest in the property, whereupon *98 the judge stated: "I'm granting her an equitable interest at this time in the property."
Seth never executed the note and deed of trust which were intended to protect Luba's interest in the Homer residence. On August 9, 1990, Seth filed his Chapter 7 bankruptcy petition. Seth listed the Homer residence and claimed a $54,000.00 statutory exemption, naming Luba as an unsecured creditor owed $27,500.00.
On August 23, 1990, the divorce court entered findings and conclusions prepared by Luba:
The husband is awarded the house and furnishings located in Homer. The court finds that the plaintiff has an equitable ownership interest in this property and that the defendant shall pay to the plaintiff $27,500 for her portion of the equity. The terms of this payment shall be that the principal and interest is due one year from the date the decree is signed by the court. The note shall bear interest at a rate of 10.5% per annum. The plaintiff's ownership interest in the property shall not be considered terminated until full payment of $27,500 has been made.
Luba filed an adversary complaint objecting to the classification of her claim as unsecured and objecting to its discharge. The bankruptcy court found that the debt to Luba was a judicial lien avoidable pursuant to § 522(f)(1). Luba appeals. We REVERSE and REMAND.
ISSUES AND STANDARDS OF REVIEW
Whether Luba's post-dissolution interest in the property was a judicial lien is a question of bankruptcy law which we review de novo. E.g., In re Ehring, 900 F.2d 184, 187 (9th Cir.1990). Whether Luba's judicial lien was avoidable pursuant to § 522(f)(1) is a question of bankruptcy law which we review de novo. See In re Wade, 115 B.R. 222, 225 (9th Cir.BAP 1990), aff'd, 948 F.2d 1122 (9th Cir.1991).
DISCUSSION
1. Equitable Interest vs. Judicial Lien
Luba argues that the divorce court granted her an "equitable ownership interest" in the property. Luba further argues that because property interests are determined by state law,[1] and because the divorce court made that determination,[2] the bankruptcy court should have given collateral estoppel effect to the divorce court determination.
Luba is arguing, in essence, that the divorce court granted her an ownership interest and not a judicial lien. However, the federal definition of "judicial lien" must control the determination of whether Luba's interest is a judicial lien for bankruptcy purposes, since the Code provides a definition. See McKenzie v. Irving Trust Co., 323 U.S. 365, 369-70, 65 S. Ct. 405, 407-08, 89 L. Ed. 305 (1945); Ehring, 900 F.2d at 187. If state law were allowed to vary what would otherwise be a judicial lien by merely calling it an equitable ownership interest, havoc would result. See Boyd v. Robinson, 741 F.2d 1112, 1115 (8th Cir.1984) (Ross, J., dissenting), majority opinion disapproved by Farrey v. Sanderfoot, ___ U.S. ___, 111 S. Ct. 1825, 114 L. Ed. 2d 337 (1991).
Section 101(37) of the Bankruptcy Code[3] defines a lien as a "charge against or interest in property to secure payment of a debt or performance of an obligation." Section 101(36) defines a judicial lien as a "lien obtained by judgment, levy, sequestration, or other legal or equitable process or proceeding." In the instant appeal, the state court granted Luba a lien against the house to secure performance of Seth's obligation to pay her $27,500.00. The bankruptcy court held:
[Luba] had a "judicial lien" within the meaning of [§ 101(36)] as her interest *99 was a lien obtained by judgment, levy, sequestration, or other legal or equitable process or proceeding. The purpose of her "equitable interest" was solely to secure payment of a $27,500.00 property settlement obligation.
Luba's lien fits precisely within the Code's definition of a "judicial lien." See Boyd dissent, 741 F.2d at 1115. The state court's dissolution decree gave the Property outright to Seth, subject to Luba's lien. Prior to the order, Luba had some interest in the Property determined by state law. At the time of the decree, this prior interest was extinguished and replaced by a debt of $27,500.00 enforceable by a judicial lien on the Property. See id.
2. Timing of Seth's Interest
In Sanderfoot the Supreme Court held:
[Section] 522(f)(1) of the Bankruptcy Code requires a debtor to have possessed an interest to which a lien attached, before it attached, to avoid the fixing of the lien on that interest.
___ U.S. at ___, 111 S.Ct. at 1831.
In Sanderfoot a husband and wife had jointly acquired marital property during the marriage. Applying Wisconsin law, the Sanderfoot Court held that the dissolution decree simultaneously extinguished pre-dissolution interests and created new ones. Consequently, the Sanderfoot debtor could not be said to possess an interest to which a lien attached, before it attached, since his interest arose at the same time as his spouse's lien.
In the instant case Seth owned the property before his marriage to Luba. The bankruptcy court apparently believed that this fact distinguished the instant case from Sanderfoot.[4] We disagree.
The extent of Seth's interest in the Property when Luba's lien attached is a question of state law. See at ___, 111 S.Ct. at 1830. The Alaska Supreme Court has held:
Where one spouse has made contributions to the marital community, whether of a pecuniary or of a more intangible nature, and where these contributions have benefitted in any manner the separate property of the other spouse acquired before the marriage, we believe that the trial court may determine that all or a portion of that property should be included with the property acquired after marriage in effecting a just and equitable division of property.
Vanover v. Vanover, 496 P.2d 644, 648 (Alaska 1972). In the instant case the state court held that the Homer residence was "marital" property and that Luba had an equitable interest therein. What the state court apparently meant was that Luba had a pre-dissolution interest in the Property's accumulated equity. See Burgess v. Burgess, 710 P.2d 417, 420 (Alaska 1985) (value of equity accumulated during marriage is a marital asset); Wanberg v. Wanberg, 664 P.2d 568 (Alaska 1983) (invasion of separate property of one spouse may be required as a matter of law when spouses have treated separate property as joint holdings during marriage).[5]
In summary, Alaska law provides that the divorce court has the power to reorder the pre-dissolution interests of the parties as required for an equitable result, even if this requires the court to invade the pre-marital property of one spouse for the benefit of the other. Wanberg, 664 P.2d at 572-73. This means that the divorce court could just as easily have awarded the Property to Luba and the judicial lien to Seth, instead of the other way around.[6] Thus, the dissolution decree destroyed the previous interests of the parties and created new ones, just as in Sanderfoot under Wisconsin *100 law.[7] The fact that Seth had an interest in the property both before and after the dissolution decree is not determinative; Luba also had an interest which was transferred to Seth and against which the lien could unavoidably attach.
CONCLUSION
Although we agree that Luba's post-dissolution interest must be defined as a judicial lien, we find that Seth did not possess an interest to which a lien attached, before it attached, under Alaska law as required by § 522(f)(1). Accordingly, we REVERSE and REMAND.
NOTES
[1] In re N.S. Garrott & Sons, 772 F.2d 462 (8th Cir.1985); see also 11 U.S.C. § 541(a).
[2] Klondike Indus. Corp. v. Gibson, 741 P.2d 1161 (Alaska 1987) (court may impose equitable remedy such as a constructive trust).
[3] Unless otherwise indicated, all code citations refer to the Bankruptcy Code, 11 U.S.C. §§ 101-1330 (1991).
[4] Sanderfoot was decided before the bankruptcy court entered its decision in the instant case.
[5] The bankruptcy court found that "Mr. Yerrington agreed that his wife was entitled to some of the equity in the house that had developed over the course of the marriage."
[6] "Since the Wisconsin Family Court had the power to strip the husband of his interest altogether, it can be reasoned that the court granted him the entire property on the condition that his prior interest would terminate and that a lien would attach to a new interest in the whole." ___ U.S. at ___, 111 S.Ct. at 1832 (Kennedy, J., concurring).
[7] Even if Alaska law were different than Wisconsin law, the Sanderfoot decision is probably broad enough to cover it. Sanderfoot states that "[t]he same result follows even if the divorce decree did not extinguish the couple's pre-existing interest but instead merely reordered them." Sanderfoot, at ___, 111 S.Ct. at 1831.
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767 F. Supp. 249 (1990)
Ray E. VINTILLA & Carla M. Vintilla, Plaintiffs,
v.
UNITED STATES of America, Defendant.
No. 87-1107-CIV-ORL-18.
United States District Court, M.D. Florida, Orlando Division.
May 11, 1990.
*250 John R. Vintilla, Cleveland, Ohio, for plaintiffs.
Mark Stier, Trial Atty., Tax Div., U.S. Dept. of Justice, Washington, D.C., Kendell W. Wherry, Asst. U.S. Atty., Orlando, Fla., for defendant.
ORDER
G. KENDALL SHARP, District Judge.
Plaintiffs' motion for summary judgment and defendant's cross-motion for summary judgment are before the court for reconsideration. After reviewing the case file and the pertinent law, the court denies plaintiffs' motion and grants defendant's cross-motion.
I. Facts
Plaintiff Ray E. Vintilla is a former management employee of Orinoco Mining Company, a Venezuelan subsidiary of the United States Steel Corporation. After Orinoco Mining terminated Mr. Vintilla's employment, United States Steel paid him a severance benefit known as "cesantia" and "antiguedades" (C & A), which Venezuelan law required to be paid as part of an employee's compensation package. United States Steel paid Mr. Vintilla the C & A severance benefit in one installment. United States Steel treated the C & A money as an advance payment of Mr. Vintilla's retirement benefit. United States Steel recouped the C & A money on a monthly basis by withholding an amount equal to Mr. Vintilla's monthly pension benefits. After recovering the full amount of the C & A payment, United States Steel would begin paying Mr. Vintilla his regular pension benefits.
Dissatisfied with United States Steel's payment scheme, Mr. Vintilla and twenty-four other management employees of Orinoco Mining challenged United States Steel's right to recover the C & A benefits. Mr. Vintilla and the others sued in a federal district court to have United States Steel enjoined from deducting the C & A money from their pension benefits. The district court ruled in favor of United States Steel and its policy of withholding pension benefits until it completely recovered the C & A payments. The Third Circuit Court of Appeals affirmed the district court's order, and the United States Supreme Court denied both the petition for a writ of certiorari and the petition for a rehearing. Vintilla v. United States Steel, 606 F. Supp. 640 (W.D.Penn.1985), aff'd, 782 F.2d 1033 (3d Cir.), cert. denied, 475 U.S. 1141, 106 S. Ct. 1791, 90 L. Ed. 2d 337 (1986). During the course of Mr. Vintilla's pension litigation, the Internal Revenue Service (IRS) determined that he and his wife had failed to declare the 1978 C & A payment as income for that year. Thus, the IRS assessed a deficiency against plaintiffs in the amount of $95,062.95, including interest and penalties. Plaintiffs paid the amount on January 5, 1983.
In July 1987, soon after the Supreme Court had denied Mr. Vintilla's petitions in the pension litigation, plaintiffs claimed a refund from the IRS for the assessment, interest, and penalties paid. Because the IRS did not respond to plaintiffs' claim, they filed suit in this court in December 1987. In their complaint, plaintiffs allege "that defendant erroneously treated the C & A benefit as taxable income despite the factual reality judicially established that the lump-sum payment of C & A has been and is being properly recouped by the payor." Instead of being taxed all at once for the C & A payment, plaintiffs claim they should have been taxed only on the monthly pension benefits United States Steel withheld and credited toward the recovery of the C & A payment. On these grounds, plaintiffs move for summary judgment. Defendant also moves for summary judgment and maintains that this court lacks subject matter jurisdiction over the action because plaintiffs did not file their suit in accordance with the pertinent statutes.
II. Legal Analysis
A. Standard for Summary Judgment
Summary judgment is authorized 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 *251 judgment as a matter of law." Fed.R. Civ.P. 56(c); accord Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S. Ct. 2505, 2511, 91 L. Ed. 2d 202 (1986). Summary judgment is appropriate only in circumstances where "the evidence is such that a reasonable jury could not return a verdict for the nonmoving party." Id. at 248, 106 S.Ct. at 2510; accord Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S. Ct. 2548, 2552-53, 91 L. Ed. 2d 265 (1986).
The moving party bears the burden of proving that no genuine issue of material fact exists. See Anderson, 477 U.S. at 248-50, 106 S.Ct. at 2510-11; Celotex, 477 U.S. at 324-25, 106 S.Ct. at 2553-54. "[T]he substantive law will identify which facts are material. Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted." Anderson, 477 U.S. at 248, 106 S.Ct. at 2510. In determining whether the moving party has satisfied the burden, all inferences drawn from the underlying facts are considered in a light most favorable to the party opposing the motion, and all reasonable doubts are resolved against the moving party. Id. at 255, 106 S.Ct. at 2513-14; see Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587-88, 106 S. Ct. 1348, 89 L. Ed. 2d 538 (1986).
As the United States Supreme Court has stated, "at the summary judgment stage the judge's function is not himself to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Anderson, 477 U.S. at 249, 106 S.Ct. at 2511. In order for a triable issue to surface, enough evidence must appear in the favor of the non-moving party to cause a jury to return a verdict for that party. Id. at 249-50, 106 S.Ct. at 2510-11. Summary judgment is mandated "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.... The moving party is[, therefore,] `entitled to a judgment as a matter of law'...." Celotex, 477 U.S. at 322-23, 106 S.Ct. at 2552.
B. Jurisdiction
The issue before this court is whether it has jurisdiction under 28 U.S.C. § 1346(a)(1) (1988) to try this civil action for the recovery of the taxes plaintiffs claim have been erroneously or illegally assessed and collected. To invoke this court's jurisdiction, plaintiffs had to fulfill three procedural requirements. First, plaintiffs had to file an administrative refund claim with the Secretary of the Treasury before suing in this court. 26 U.S.C. § 7422(a) (1988). Second, plaintiffs had to file their refund claim either within three years after the return was filed or within two years after the tax was paid. Id. § 6511(a) (1988). Third, plaintiffs had to commence this refund suit either within two years from the time the IRS rejected their refund claim or after six months from the time the refund claim was filed. Id. § 6532(a)(1) (1988).
Plaintiffs did not comply with the statutory requirements. They paid the assessed income tax deficiency in January 1983. The two-year statutory period gave them until January 1985 to file an administrative refund claim with the IRS. They did not file their administrative claim until July 1987, more than two years after the period of limitations had expired. Owing to plaintiffs' failure to satisfy the statutory time requirements, this court is without jurisdiction to hear their suit for the recovery of their taxes. See United States v. Dalm, 494 U.S. 596, ___, 110 S. Ct. 1361, 1365, 108 L. Ed. 2d 548 (1990); King v. United States, 789 F.2d 883, 884 (11th Cir.1986) (per curiam). As such, this court grants defendant's cross-motion for summary judgment. Because this court lacks jurisdiction, it cannot reach the issues presented in plaintiffs' motion for summary judgment and must, therefore, deny that motion. "The very purpose of statutes of limitation in the tax context is to bar the assertion of a refund claim after a certain period of time has passed, without regard to whether the claim would otherwise be meritorious." *252 Dalm, 494 U.S. at ___, 110 S.Ct. at 1369 n. 7.
C. Plaintiffs' Arguments Against Summary Judgment
1. Reasonableness of Delay.
Plaintiffs suggest that this court construe the subject income tax statutes flexibly by considering the reasons for their delay in filing. Plaintiffs argue that they did not file an administrative refund claim during the pension litigation, because the tax status of the C & A was unknown at the time. Consequently, they filed their refund claim immediately after the pension litigation concluded.
In spite of plaintiffs' reasons for not filing, they were still required to file their refund claim within the two-year statutory period to toll the statute of limitations. See Kreiger v. United States, 539 F.2d 317, 320-22 (3d Cir.1976); Starkey v. United States, 635 F. Supp. 1007, 1009 (W.D.Ark 1986); 26 U.S.C. §§ 6511(a)-(b), 7422(a). Plaintiffs could have tolled the statute of limitations by filing either a formal or an informal refund claim within the time period to notify the IRS that they thought their taxes had been erroneously assessed and that they planned to seek a refund of those taxes depending on the outcome of the pension litigation. See, e.g., United States v. Kales, 314 U.S. 186, 194, 62 S. Ct. 214, 218, 86 L. Ed. 132 (1941); Estate of Hale v. United States, 876 F.2d 1258, 1262-64 (6th Cir.1989); Swietlik v. United States, 779 F.2d 1306, 1307 (7th Cir.1985); O'Brien v. United States, 766 F.2d 1038, 1041 n. 3 (7th Cir.1985). Absent a filed refund claim, the statute of limitations kept running throughout Mr. Vintilla's pension litigation.
2. Equitable Factors.
Plaintiffs also suggest that this court construe the statutes loosely in light of the equitable factors involved in this lawsuit. Unlike the other Orinoco Mining employees, plaintiffs were taxed in one lump sum for the C & A payment. As a result, they paid the IRS close to $100,000.00 in taxes, penalties, and interest. Plaintiffs allege that the others who received the C & A benefit were not taxed on that money in like manner; they were taxed only on their monthly pension benefits that United States Steel withheld and applied toward the recovery of the entire C & A payment.
Yet, even though the equitable considerations weigh heavily in plaintiffs' favor, the law and the facts are against them. Courts strictly enforce the statute of limitations dealing with taxation. See Bruno v. United States, 547 F.2d 71, 73-74 (8th Cir.1976). The general principles of equity do not supersede the statutory requirements for the timely filing of an administrative refund claim. Republic Petro. Corp. v. United States, 613 F.2d 518, 527 (5th Cir.1980). For example, courts have not waived the statutory period in cases of mental incompetency, Stepka v. United States, 196 F. Supp. 184 (E.D.N.Y.1961), and in cases of imprisonment. Williams v. United States, 715 F. Supp. 272 (W.D.Mo. 1988).
Because jurisdiction under the statutes in question waives the United States sovereign immunity, this court must strictly observe the limitations and conditions of those statutes. Soriano v. United States, 352 U.S. 270, 275-76, 77 S. Ct. 269, 272-73, 1 L. Ed. 2d 306 (1957); United States v. Michel, 282 U.S. 656, 659-60, 51 S. Ct. 284, 285-86, 75 L. Ed. 598 (1931). Exceptions to the limitations and conditions of the statutes are not to be implied. Soriano, 352 U.S. at 276, 77 S.Ct. at 273. Congress is "entitled to assume that the limitation period it prescribed meant just that period and no more." Id. The statutes clearly set forth the period of limitations and neither this court nor the taxpayer may enlarge that period beyond what Congress has prescribed. First Nat'l Bank v. United States, 226 F. Supp. 166, 168 (S.D.Fla.1963), aff'd, 341 F.2d 737 (5th Cir.1965). "Unlike general statutes of limitation which govern independently existing causes of action between private parties, the timeliness requirement at issue here is not procedural, or `remedial,' but jurisdictional." Kreiger, 539 F.2d at 321. The jurisdictional requirement cannot be waived. United States v. *253 Rochelle, 363 F.2d 225, 231 (5th Cir.1966). Although plaintiffs' failure to satisfy the statute of limitations has probably brought them hardship, "the alleviation of that hardship is a matter of policy for the Congress." Kaltreider Constr., Inc. v. United States, 303 F.2d 366, 368-69 (3d Cir.), cert. denied, 371 U.S. 877, 83 S. Ct. 148, 9 L. Ed. 2d 114 (1962). It is not a matter for this court.
III. Conclusion
Defendant has shown that the undisputed facts and the reasonable inferences drawn therefrom do not establish a genuine issue of material fact that would warrant bringing this lawsuit to trial. Because plaintiffs did not file an administrative refund claim in accordance with 26 U.S.C. §§ 6511(a), 7422(a), this court is without jurisdiction and is barred from hearing the merits of the case. Therefore, as a matter of law, this court DENIES plaintiffs' motion for summary judgment and GRANTS defendant's cross-motion for summary judgment.
It is SO ORDERED.
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746 S.W.2d 352 (1988)
Salvador OTERO-MIRANDA, Appellant,
v.
The STATE of Texas, Appellee.
No. 07-87-0192-CR.
Court of Appeals of Texas, Amarillo.
February 26, 1988.
Floyd D. Holder, Jr., Lubbock, for appellant.
Ramon Gallegos, Asst. Co. Atty., Brownfield, for appellee.
Before DODSON, COUNTISS and BOYD, JJ.
COUNTISS, Justice.
A jury convicted appellant of aggravated kidnapping, Texas Penal Code Annotated § 20.04 (Vernon 1974) and assessed his *353 punishment at forty (40) years confinement in the penitentiary. By three points of error he contends the trial court erroneously excluded from evidence the former testimony of two witnesses from another trial of appellant (1) upon the basis announced by the court; (2) because the former testimony was admissible under the applicable evidentiary rule; and (3) in violation of his constitutional right to present a defense. We affirm.
Darryl Vandivere, a resident of rural Terry County near Brownfield, was reported missing on November 6, 1984. More than a year later, on November 25, 1985, his remains were discovered by hunters at a remote location in Gaines County. Appellant, and his cousin Eraclio Otero, were implicated in Darryl's abduction and death by circumstantial evidence that included their possession of Darryl's pickup truck, their cashing in El Paso of a forged check on Darryl's business account, and the recovery from Eraclio of an inscription indicating that Darryl was dead.[1]
Prior to appellant's trial for aggravated kidnapping, he was tried in Gaines County for capital murder.[2] At that trial, Ramon Perez-Cardena and Leonel Rodriguez-Gonzales, both Mexican nationals residing in Mexico, testified for appellant. The essence of their testimony was that appellant was in jail in Mexico when the crime occurred.[3] The jury by its verdict rejected the alibi defense.
In his defense to the instant prosecution, appellant proffered the testimony of Perez and Rodriguez from the capital murder trial on the basis that the witnesses were unavailable to personally testify because they were beyond the court's jurisdiction. To establish their unavailability, appellant's counsel presented the testimony of appellant's father, Antonio Otero, who had maintained contact with the witnesses. However, contrary to counsel's voiced understanding, Antonio related that the witnesses were willing to come to Brownfield to testify if they were needed. Antonio testified that, although he had known of the trial setting for more than a month, he had neither asked them to attend nor notified them of the trial date. He also said that he had not talked with appellant's counsel about securing the witnesses.
Counsel represented to the court that he had caused subpoenas for the witnesses to be issued. The subpoenas would be served at the international border when the witnesses entered the United States. He acknowledged however, that he had done nothing else to secure their attendance.[4] It was his position that the witnesses' nonamenability to process so long as they remained in Mexico established their "unavailability", permitting the admission of their former testimony under the exception to the hearsay rule provided by Rule 804(b)(1) of the Texas Rules of Criminal Evidence. Referring to that same evidentiary rule, the trial court excluded the former testimony because "the State's attorney in this case has not had an opportunity or a similar motive to develop the testimony by direct, cross, or redirect examination, [and] ... a different charge is pending in this case from the one that the testimony was previously offered."
Thus, it is apparent that this appeal will be resolved by our interpretation of the pertinent portions of Rule 804 of the Texas *354 Rules of Criminal Evidence. Paragraph (b)(1) of that Rule states that the following hearsay is not excluded if the declarant is "unavailable" as a witness:
(1) Former testimony. Testimony given as a witness at another hearing of the same or a different proceeding, if the party against whom the testimony is now offered, had an opportunity and similar motive to develop the testimony by direct, cross, or redirect examination.
Under subpart (a)(5) of Rule 804, the "unavailability of a witness" can occur when the witness ... "is absent from the hearing and the proponent of his statement has been unable to procure his attendance or testimony by process or other reasonable means."[5]
Appellant's initial complaint is that the trial court's stated reason for excluding the former testimony was erroneous. That argument gains nothing for appellant, however, because we have concluded that the court's exclusion was correct for other reasons. Miles v. State, 488 S.W.2d 790, 792 (Tex.Crim.App.1972). Accordingly, the first point of error is overruled.
The pivotal issue in this appeal is framed by appellant's second point of error. Anticipating that the trial court's exclusion will be measured against the "unavailability" requirement of Rule 804, appellant argues that the former testimony was admissible because proof of the witnesses' foreign residency and nationality conclusively established their "unavailability." Thus, the ultimate issue is whether proof that a witness cannot be subpoenaed is sufficient, standing alone, to establish the witness' unavailability under the Rule.
The "unavailability" aspect of our Rule 804 has not been addressed by a Texas court so far as we can determine. However, because the new Texas rule mirrors Federal Rule 804, we can find some illumination in the federal cases. Certainly, as those cases illustrate, the law does not require the doing of a futile act. Ohio v. Roberts, 448 U.S. 56, 74, 100 S. Ct. 2531, 2543, 65 L. Ed. 2d 597 (1980). Specifically, Federal Rule 804(a)(5) does not require the proponent "to butt his head against a wall just to see how much it hurts." United States v. Kehm, 799 F.2d 354, 360 (7th Cir.1986). However, the strong regard for available live testimony embodied in Rule 804 and in the confrontation clause,[6] is incompatible with appellant's view that inability to subpoena the witnesses alone absolved him from making any other effort to secure their attendance.
Recognizing the demeanor value of live testimony, Mattox v. United States, 156 U.S. 237, 242-43, 15 S. Ct. 337, 339-40, 39 L. Ed. 409 (1895); see Government of the Canal Zone v. P (Pinto), 590 F.2d 1344, 1348 (5th Cir.1979), and in furtherance of common law tradition, the draftsman of the Federal Rules of Evidence deliberately placed former testimony in the category of exceptions to the hearsay rule, conditioned on unavailability of the declarant. Government of the Canal Zone v. P (Pinto), 590 F.2d at 1348. The federal rule draftsmen intended that the confrontation clause standard set forth in Barber v. Page, 390 U.S. 719, 88 S. Ct. 1318, 20 L. Ed. 2d 255 (1968), also be used to measure the "unavailability" requirement of Rule 804(a)(5). United States v. Kehm, 799 F.2d at 360. Under that standard, a witness is not "unavailable" unless the proponent has made a good faith effort to obtain the witness' presence at trial. Barber v. Page, 390 U.S. at 724-25, 88 S.Ct. at 1321-22. Where the witness' attendance is discretionary with a party other than the proponent, a good faith effort still includes a request for such attendance, because "the possibility of a refusal is not the equivalent of asking and receiving a rebuff." 390 U.S. at 724, 88 S.Ct. at 1322. The Supreme Court reaffirmed the principle in Ohio v. Roberts *355 with the added note that "if there is a possibility, albeit remote, that affirmative measures might produce the declarant, the obligation of good faith may demand their effectuation." 448 U.S. at 74, 100 S.Ct. at 2543.
Appellant relies on Mancusi v. Stubbs, 408 U.S. 204, 92 S. Ct. 2308, 33 L. Ed. 2d 293 (1972) for his premise that the witnesses' foreign residency alone established their "unavailability." Though language in Mancusi lends surface support to appellant's position, the factual situation is substantially different, and we are not persuaded that the holding is applicable to this case. Among other things, Mancusi was tried twice and the status of the missing witness changed from United States resident to nonresident in the years between trials. Here, the witnesses, who testified at the first trial, were then and remain permanent residents of Mexico, no more "unavailable" at the second trial than at the first. Also, they were willing to again come to Texas and testify if asked to do so.
Because we find the Barber v. Page view persuasive, and compatible with Texas law,[7] we hold that Rule 804(a)(5) of the Texas Rules of Criminal Evidence requires the proponent of the former testimony of a witness who cannot be subpoenaed to show that the witness is unavailable despite good faith efforts undertaken prior to trial to locate and present that witness. See Ohio v. Roberts, 448 U.S. at 74, 100 S.Ct. at 2543. The determination of whether the effort is sufficient is, of course, a matter within the trial court's discretion, the exercise of which should be reviewed by the appellate court only for an abuse of discretion. See Mancusi v. Stubbs, 408 U.S. at 212-13, 92 S.Ct. at 2312-13; United States v. Amaya, 533 F.2d 188, 191 (5th Cir.1976), cert. denied 429 U.S. 1101, 97 S. Ct. 1125, 51 L. Ed. 2d 551 (1977).
In this case, beyond issuing unserved subpoenas, appellant pursued no "other reasonable means" to obtain the witnesses' attendance. Thus, their unavailability under Rule 804 was not conclusively established. It follows that the trial court did not abuse its discretion when it excluded the former testimony. The second point of error is overruled.
By his third point, appellant contends that, even if a technical application of Rule 804(a)(5) would exclude the former testimony, the trial court, in obedience to the holdings in Chambers v. Mississippi, 410 U.S. 284, 93 S. Ct. 1038, 35 L. Ed. 2d 297 (1973) and lower federal court decisions, should have admitted the testimony in order to assure him a fair trial. He argues that due process considerations forbid the mechanistic application of procedural rules that operate to deprive an accused of a defense.
We cannot accept appellant's argument. This is not, as in Chambers v. Mississippi, a case where an accused was hamstrung in presenting a defense by the invocation of an evidentiary principle that elevated form over substance. No bar was here created that prevented the presentation of appellant's defense, for, as indicated, he could have presented the witnesses in person to testify. See Boyd v. State, 643 S.W.2d at 709. The fourteenth amendment guarantee of the right to present a defense does not protect an accused against his own failure to procure available witnesses. The third point of error is overruled.
The judgment is affirmed.
DODSON, J., not participating.
NOTES
[1] A handwritten note in Eraclio's wallet listed Darryl's name and the phrase (in Spanish) "six feet under."
[2] Appellant was convicted and sentenced to life imprisonment.
[3] Perez was unspecific about dates in his testimony, and nothing in it tends to disprove the State's evidence that appellant was in the Brownfield area on the date of the offense. The primary defensive worth appears to be in Rodriguez' testimony.
[4] As discussed infra, the disposition of this appeal ultimately turns on appellant's failure to show diligence in procuring the attendance of his witnesses. Nothing in this opinion, however, should be read to imply any censure of court-appointed counsel's defensive effort. Counsel, who does not speak Spanish, and Antonio, who does not speak English, apparently communicated by telephone through Antonio's bilingual son who lives in Minnesota. Despite that and other practical and logistical difficulties, counsel represented appellant with competence and vigor.
[5] The pertinent provisions of Texas Rule 804 are almost identical to the corresponding parts of Rule 804 of the Federal Rules of Evidence.
[6] The evidentiary hearsay rules and the confrontation clause of the sixth amendment to the United States Constitution are designed to protect similar values. California v. Green, 399 U.S. 149, 155-56, 90 S. Ct. 1930, 1933-34, 26 L. Ed. 2d 489 (1970). Consequently, the confrontation clause cases are also pertinent to our resolution of this issue.
[7] The Texas decisions which pre-date the Texas Rules of Criminal Evidence are consistent with the federal court holdings. See e.g. Boyd v. State, 643 S.W.2d 708, 709 (Tex.Crim.App.1982); Raley v. State, 548 S.W.2d 33, 36 (Tex.Crim.App. 1977); Silguero v. State, 654 S.W.2d 492, 495 (Tex.App.Corpus Christi 1983, pet. ref'd).
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746 S.W.2d 762 (1988)
Ex parte Jack Fenner ELLIOTT.
No. 69964.
Court of Criminal Appeals of Texas.
February 24, 1988.
*763 Melvyn Carson Bruder, Dallas, for appellant.
John B. Holmes, Jr., Dist. Atty., Deborah S. Williams & Calvin A. Hartmann, Asst. Dist. Attys., Houston, Robert Huttash, State's Atty., Austin, for the State.
OPINION
W.C. DAVIS, Judge.
This is an application for a writ of habeas corpus pursuant to Art. 11.07, V.A. C.C.P. Applicant was convicted of the offense of gambling promotion, V.T.C.A., Penal Code, § 47.03(a)(2), and sentenced to a seven-year term of confinement in the Texas Department of Corrections with a five-thousand dollar fine. Applicant has since been released on parole after serving a part of his sentence but remains "in custody" for purposes of this application.[1]
Applicant asserts that the indictment in cause number 349,395-B was fundamentally defective as it did not allege that applicant received or recorded "a bet or offer to bet." See § 47.03(a)(2), supra. We agree and grant the requested relief.
Initially, we note that if the indictment in the case at bar is fundamentally defective, so as not to charge an offense against the laws of Texas, such indictment may be challenged in a post-conviction writ of habeas corpus. Ex parte Bartmess, 739 S.W.2d 51 (Tex.Cr.App.1987); Standley v. State, 517 S.W.2d 538 (Tex.Cr.App.1975); Ex parte Roberts, 522 S.W.2d 461 (Tex.Cr. App.1975). The indictment in the present case states in pertinent part that applicant did:
intentionally and knowingly receive and record and offer to bet, over the telephone, on a sporting event, to-wit: a football game played between the Pittsburg (sic) Steelers and Cleveland Browns on November 22, 1981, from a person known only to the Grand Jury as Player 77.
It is further presented that in Harris County, Texas, JACK FENNER ELLIOTT, hereafter styled the Defendant, heretofore on or about NOVEMBER 22, 1981, did then and there unlawfully intentionally and knowingly receive and record and offer to bet, in person, on a sporting event, to-wit: a football game played between Pittsburg (sic) Steelers *764 and Cleveland Browns on November 22, 1981, from a person known only to the Grand Jury as Player 77.
To be valid, an indictment must charge each essential element of the offense sought to be charged. See Chance v. State, 563 S.W.2d 812 (Tex.Cr.App.1978); Ex parte Cannon, 546 S.W.2d 266 (Tex.Cr. App.1976); Ex parte Jones, 542 S.W.2d 179 (Tex.Cr.App.1976); Standley, supra. It is obvious that the above-mentioned indictment fails to allege that applicant received or recorded "a bet or offer to bet." Instead of alleging applicant received or recorded an offer to bet, the indictment alleged that he did "receive and record and offer to bet ... on a sporting event."[2] The indictment in the case at bar, when read in its logical order, alleges that applicant "received and recorded and offered to bet on a sporting event." Read in this logical fashion, the indictment does not allege that the applicant "received and recorded a bet or offer to bet," which would be necessary to allege gambling promotion under § 47.03(a)(2), supra. See Adley v. State, 675 S.W.2d 240 (Tex.App.1984), Odom v. State, 628 S.W.2d 804 (Tex.Cr. App.1982); Rush v. State, 576 S.W.2d 628 (Tex.Cr.App.1978). The bet or offer to bet is an essential element of the offense of gambling promotion and therefore must be pled and proved. See Smith v. State, 658 S.W.2d 172 (Tex.Cr.App.1983); Jeffers v. State, 646 S.W.2d 185 (Tex.Cr.App.1983); Adley, supra; Odom, supra; Rush, supra. The post-action phrase, "... on a sporting event, to-wit: a football game played between the Pittsburg (sic) Steelers and the Cleveland Browns on November 22, 1981, from a person known only to the Grand Jury as Player 77," does not furnish the fatal omission. The act of receiving or recording a sporting event or football game is simply not a violation of the gambling promotion law. Section 47.03(a)(2).
A bet, as defined by V.T.C.A., Penal Code, § 47.01(1) is an agreement that, depending on chance, one stands to win or lose something of value. In the instant case, absent an allegation in the indictment that the applicant received a bet or offer to bet, or that he recorded a bet or offer to bet, the indictment fails to state a violation of the gambling promotion laws. Therefore, it is fundamentally defective.
The application for writ of habeas corpus is granted, and the prosecution under the indictment in trial court cause number 349,395-B is hereby dismissed. A copy of this opinion shall be sent to the Board of Pardons and Paroles.
MILLER, J. concurs in the result.
TEAGUE, Judge, dissenting.
I respectfully dissent for several reasons, namely, this Court's majority opinion does not subscribe to what a majority of this Court recently expressly stated and held in Ex parte Renier, 734 S.W.2d 349 (Tex.Cr. App.1987); does not expressly overrule Ex parte Renier, supra; and erroneously grants Jack Fenner Elliott, hereinafter applicant, relief on the wrong theory.
This is an application for the post-conviction writ of habeas corpus that was filed on behalf of applicant by counsel. In order to invoke this Court's jurisdiction pursuant to the provisions of Art. 11.07, V.A.C.C.P., all that counsel asserts is that "The Applicant is currently restained of his liberty and is in the constructive custody of O.L. Mc Cotter [sic], Director of the Texas Department of Corrections, having been released on parole after serving a part of a seven (7) year sentence assessed after his conviction for gambling promotion in [trial court] Cause No. 349,395. Additionally, the Petitioner is suffering disabilities as a result of such conviction and sentence." Applicant, however, never specifically informs us of what kind of "parole" he is presently on or the terms and conditions of that parole, and does not specifically inform us of what "disabilities" he might be presently suffering. Literally read, as this Court's majority opinion of Ex parte Renier, supra, states is the way that it must be read, the provisions of Art. 11.07, supra, are not concerned with whether a defendant is suffering *765 from adverse collateral legal consequences or adverse legal disabilities as a result of a felony conviction that he might have sustained, the validity of which he challenges; that statute, literaly read, expressly limits itself to whether a defendant, who is then in "custody", and has suffered or sustained a final conviction, is entitled to be released from "custody" because his conviction is void for some legal reason.
Although the record is clear that applicant is not actually or physically confined or restrained, as those terms are customarily and normally understood, because he has been released from "confinement" to parole, the majority opinion nevertheless grants him relief. Given what this Court expressly stated not once but several times in its majority opinion of Ex parte Renier, supra, regarding the requirement that a defendant may not attack a prior felony conviction pursuant to the provisions of Art. 11.07, supra, unless he is "confined", why is applicant entitled to use the provisions of Art. 11.07, supra, to invoke this Court's jurisdiction to obtain relief?
I believe that the bench and bar of this State are entitled to more than an inapplicable footnote explanation, (inapplicable, inter alia, because of what a majority of this Court expressly stated and held in Ex parte Renier, supra,), why this applicant, who is not "confined", is entitled to relief, and why the applicant Renier, who also was not "confined," was not entitled to relief pursuant to Art. 11.07, supra, as a majority of this Court so held in Ex parte Renier, supra.
A majority of this Court expressly stated in Ex parte Renier, supra, that before one might seek relief from a prior void felony conviction from this Court, pursuant to Art. 11.07, supra, he must both be "finally convicted" and "confined." If the individual satisfies those two pre-requisites, he must further establish that this Court has the authority to "order his release from custody." Applicant has not alleged that he is in the "actual custody" of anyone, nor has this Court ordered that he will be released from any and all adverse legal collateral consequences of the void conviction that he attacks. This Court orders his indictment dismissed and the Clerk of this Court to send a copy of this opinion to the Board of Pardons and Paroles. The Board, which is not a party to this lawsuit, is, understandably, not ordered to do anything. What is the Board supposed to do when it receives a copy of this Court's opinion? The majority opinion does not order the Board to terminate applicant's parole. Legally, what must it do when it receives a copy of this Court's opinion?
In Ex parte Renier, supra, a majority of this Court expressly stated the following: "Article 11.07 is reserved for an applicant in `confinement,' which by definition is a harsher condition than `restraint.'" (353). The majority opinion did not allow for any exceptions to its statement. Thus, under Ex parte Renier, supra, if applicant is not "confined", and is merely under some form of "restraint", he cannot seek relief from his alleged void felony conviction pursuant to Art. 11.07, supra, in this Court. He must seek relief in another forum.
There is no question that applicant is "restrained", as that word is defined in Art. 11.22, V.A.C.C.P. "By `restraint' is meant the kind of control which one person exercises over another, not to confine him within certain limits, but to subject him to the general authority and power of the person claiming such right." However, is applicant "confined"? The word "confined" is not defined in Chapter 11 of the Code of Criminal Procedure, nor any other place in the Code, nor in the Penal Code for that matter. Although Art. 11.21, V.A.C. C.P., states that "The words `confined', `imprisoned', `in custody', `confinement', `imprisonment', refer not only to the actual, corporeal and forcible detention of a person, but likewise to any coerceive measures by threats, menaces or the fear of injury, whereby one person exercises a control over the person of another, and detains him within certain limits", I find nothing in this record that might reflect or indicate that applicant is being subjective to "any coercive measures of threats, menaces or the fear of injury."
*766 Art. 11.07, supra, as literally read and construed by the majority opinion in Ex parte Renier, supra, mandates that before the provisions of that statute might be invoked in order to give this Court jurisdiction, the individual must be suffering from a "final conviction" and must also be "in confinement", or, if not in actual confinement, he must be subject to "coercive measures by threats, menaces or the fear of injury." As the terms "confined" and "constructive custody" are defined, applicant's status, as set forth in his application, does not meet either definition.
Without any explanation, the majority opinion, in a footnote, advises us that applicant is "`in custody' and `confined' in terms of statutory construction." (Fn. 1, p. 763). It then advises us to "See Art. 11.21, V.A.C.C.P." Art. 11.21, supra, however, is of no help because applicant is not by the terms of that statute "in custody". The majority, in the same footnote, then tells us to "See also Ex parte Henderson, 645 S.W.2d 469 (Tex.Cr.App. 1983); and Ex parte Peel, 626 S.W.2d 767 (Tex.Cr.App.1982)." I have "seen" those two opinions, but find they are also of no help. In Ex parte Henderson, supra, the defendant was released from the penitentiary on mandatory supervision, which was subsequently revoked. By the provisions of Art. 42.12, § 2(d), V.A.C.C.P., a convict released from the penitentiary on "Mandatory Supervision" is not released from the legal custody of the State. He still remains within the legal custody of the State. The defendant Henderson sought to have his sentence credited with the "good conduct time" he had accrued prior to his release on mandatory supervision. This Court merely looked to the provisions of Art. 6181-1, Sec. 4, V.A.C.S., and concluded that "Under this provision, when an inmate is released on mandatory supervision and he thereafter violates the express conditions of such release, upon subsequent revocation of mandatory supervision the convict loses all previously accrued good conduct time." (472). Although the defendant's contention was brought pursuant to Art. 11.07, supra, there is not one single word of discussion relating to the fact that even if this Court had agreed with applicant he would have been entitled to release from confinement. Of course, at that time this Court had not given birth in its "Laboratory of Horrors" to the twisted creature Ex parte Renier, supra. I have also "seen" Ex parte Peel, supra, but find it is also of no help. There, the defendant, who was then incarcerated in a Federal Correctional Institution, and who still owed the State of Texas "time", asserted that he was entitled to consideration for the grant of additional good conduct credit on his Texas sentence while incarcerated in the Federal Correctional Institution. For reasons stated in its opinion, this Court correctly denied applicant any relief. The defendant Peel also sought relief pursuant to Art. 11.07, supra, and this Court considered his application pursuant to that statute. However, there is nothing in the opinion that discusses the fact that even had this Court agreed with the defendant it would have ordered him released from any confinement that he might be suffering. Again, the monster creature Ex parte Renier, supra, had not then been given birth by this Court. The majority opinion lastly in its footnote advises us to "See and compare Ex parte Renier, [supra]."
Under Ex parte Renier, supra, if this Court finds that applicant meets the above pre-requisites, and also finds there is no need for a hearing, and further finds in applicant's favor, "the court shall enter its judgment ... ordering his release, as the law and facts may justify." Although a present majority of this Court believes that Art. 11.07, supra, should be read as though it is in a vaccuum, in this cause it doesn't even adhere to what it believes when it merely sets aside applicant's indictment. Although the majority has agreed with applicant that his prior felony conviction is void, it does not order him released from custody, which is understandable because he is not in custody. Is he still on parole? The majority opinion does not order his parole terminated, does not order him released from parole supervision, and does not set aside whatever the Board of Pardons and Paroles has done or is now doing! *767 What is the Board of Pardons and Paroles, which entity is not a party to this law suit, supposed to do when it receives a copy of this Court's majority opinion?
Given what this Court expressly stated and held in Ex parte Renier, supra, it appears to me that this defendant is in the wrong courthouse. He might be entitled to seek relief in another courthouse, but under Ex parte Renier, supra, the doors to this courthouse are not open to him.
However, is the majority opinion now convinced, sub silentio, that it erred in what it expressly stated and held in Ex parte Renier, supra, and is now ready to put the post-conviction writ of habeas corpus train back on the track that it was on? If so, it should not just simply sub silentio overrule Ex parte Renier, supra, in a footnote; it should do so in large print in the body of the opinion.
If one carefully reads Ex parte Renier, supra, and what this Court has previously written in cases that were brought pursuant to Art. 11.07, supra, I believe he will find as I have that Ex parte Renier, supra, turns the application for the writ of habeas corpus (post-conviction) on its head in the manner in which it interprets Art. 11.07, supra.
I will not repeat here all of what I stated in the dissenting opinion that I filed in Ex parte Renier, supra. However, I will repeat here the statement that "Our habeas corpus law has maintained [its] basic structure for at least 130 years. Nevertheless, the distinction between original and appellate jurisdiction has often become blurred, due in no small measure to the enactment in 1943 of what is now Art. 11.07, Sec. 2, V.A.C.C.P." (358). I believe it is sufficient to state that given the history of habeas corpus in this State, and this Court's decisions decided pursuant to Art. 11.07, supra, it should be apparent to almost anyone that the Legislature of this State has given this Court exclusive jurisdiction to resolve any claim that a prior felony conviction is void, and for that matter any other post-conviction claim for relief. In Ex parte Renier, supra, this Court relinquished that authority. After Ex parte Renier, supra, I predict that we will see a return to the days of State v. Briggs, 171 Tex. Crim. 479, 351 S.W.2d 892 (1961), when it became necessary for this Court, in order to protect its "turf", to give the law a meaning never before imagined by mortal man. I will pose a very simple question: Assuming that this Court has granted a petition for discretionary review and affirms the judgment of the trial court, and the defendant, who is then on bail and not in custody nor subject to deprivation of his freedom at that time, thereafter files an original application for writ of habeas corpus with the trial judge or some other district court judge, under Ex parte Renier, supra, what is to prevent that judge from granting the applicant relief, without any review by this Court? By this Court relinquishing in Ex parte Renier, supra, its position as "King of the Mountain" when it comes to post-conviction claims, I predict that we will also see a return to another kind of era.
In Case v. Nebraska, 381 U.S. 336, 85 S. Ct. 1486, 14 L. Ed. 2d 422 (1965), the Supreme Court of the United States held that the Fourteenth Amendment requires that the States must afford state prisoners some adequate corrective process for the hearing and determination of claims of violation of federal constitutional guarantees. In the concurring opinion that he filed, Justice Clark expressed his pleasure in learning that so many States of the Union had at that time provided a procedure for testing federal claims in the state courts and "thus relieving the federal courts of this ever-increasing burden."
In 1949 Illinois enacted the Illinois Post-Conviction Hearing Act and became the first state to upgrade its judicial machinery by creating a new, modern postconviction remedy. By 1965, twelve more states had created a new and principal postconviction remedy by the enactment of a statute or promulgation of a rule of court. Texas became one of those states when Art. 11.07, supra, became effective on January 1, 1966. This Court's decision of Ex parte Young, 418 S.W.2d 824 (Tex.Cr.App.1967), laid the groundwork that it would be this Court, and no other court, that would ultimately *768 decide post-conviction claims. Ex parte Renier, supra, however, changed all of that.
There should be no question that in very recent times this Court has "tightened up" when it comes to deciding post-conviction claims for relief. Although without precedent, this Court in Ex parte Holt, 736 S.W.2d 133 (Tex.Cr.App.1987), held that even though it was obvious that the defendant was confined in the Department of Corrections, his application was nevertheless dismissed because he failed to expressly and specifically allege therein that he was "confined" and failed to expressly and specifically allege that he was suffering adverse legal consequences. Also see Ex parte Cacopardo, 738 S.W.2d 289 (Tex.Cr. App.1987), another unpublished opinion by this Court. Thus, given Ex parte Renier, supra, and what this Court has been doing, and the facts of this cause, why does this Court entertain applicant's petition? Why does this Court continue to entertain applications for the writ of habeas corpus (post-conviction) pursuant to Art. 11.07, supra, when it does not and cannot grant the defendant outright release, even when it sustains his contention?
In his attack upon his conviction, applicant asserts that (1) "Under the charge of the trial court, the general verdict of the jury may have rested upon an unconstitutional ground" and (2) "The indictment fails to state an offense against the laws of the State of Texas." The majority opinion holds that "the indictment does not allege that the applicant `received and recorded a bet or offer to bet,' which would be necessary to allege gambling promotion under § 47.03(a)(2), supra," and that under Adley v. State, 718 S.W.2d 682 (Tex.Cr.App.1986), which held that § 47.03(a)(2), which proscribed receiving a bet was unconstitutionally vague and unenforceable as a penal sanction, applicant is entitled to relief.
Applicant was charged by indictment with, inter alia, "receiving and recording and [sic] offer to bet." The jury, however, was instructed, inter alia, that it could find applicant guilty if it found that he "did then and there intentionally or knowingly receive or record or offer to bet." The jury's verdict reflects the following: "We, the jury, find the defendant, Jack Fenner Elliott, guilty of gambling promotion as charged in the indictment."
The majority opinion asserts that when the indictment is "read in its logical order, [it] alleges that applicant `received and recorded and offered to bet' on a sporting event." (At page 765.).
Over 100 years ago, this Court's predecessor, the Texas Court of Appeals, stated the following in Martin v. State, 40 Tex. Rep. 19 (1874):
First, it is objected that the use of the conjunction `and' before the word `assault' [defendant was charged with committing "and assault"], instead of the article `an,' destroys the sense of the charge and vitiates it. But that this is a mere clerical mistake seems apparent, and the sound of the two words is so nearly the same that in reading it could scarcely be misunderstood. Moreover, such a defect, if deemed important, should have been specifically pointed out in the exceptions, which was not done. (21).
So much for reading the indictment "in its illogical order".
Therefore, when read in its "logical order", without the clerical error, the indictment alleges in pertinent part that applicant "receive[d] and record[ed] an offer to bet." One of the ways that § 47.03(a)(2) might be violated is if a person intentionally or knowingly "receives or records an offer to bet." Adley, supra, held that the "receiving" part of the statute was unconstitutional.
This Court has held for so long that there is no error in pleading the offense in the conjunctive and instructing the jury in the disjunctive that citation of authority is not necessary for what is now a very elementary principle of law. However, it is this principle of law that obviously caused the trial court to erroneously instruct the jury, because wherever the word "and" appeared in the indictment, he used the disjunctive "or" instead, thus permitting the jury to convict applicant of making an *769 offer to bet, which is no crime in our Penal Code. Unquestionably, if the trial judge, in his charge to the jury, had stated "received or recorded an offer to bet" he would have correctly instructed the jury on what basis they could have found applicant guilty.
In this instance, the jury was instructed in the "application" paragraph of the charge that "Now if you find from the evidence beyond a reasonable doubt that on or about the 22nd day of November, 1981 in Harris County, Texas, the defendant, Jack Fenner Elliott, did then and there intentionally or knowingly receive[d] or record[ed] or offer to bet, over the telephone, on a sporting event, to wit: a football game played between the Pittsburg [sic] Steelers and Cleveland Browns on November 22, 1981, from a person known only to the Grand Jury as Player 77, as alleged in the indictment, then you will find the defendant guilty." The jury found applicant guilty, "as alleged in the indictment."
As easily seen, there is no object for the words "received" and "recorded" in the charge to the jury, and making an "offer to bet" over the telephone is no crime under § 47.03(a)(3) because it is only when a person receives or records an offer to bet or forwards the offer to bet that a crime has been committed under the statute. Thus, if the jury followed the trial court's instruction, and we must presume it did, under this charge the only thing the jury could have found applicant guilty of committing was offering to bet over the telephone on the alleged game, which is no crime.
The majority opinion grants applicant relief pursuant to this Court's decision of Adley v. State, supra. Adley, supra, however, is inapplicable to the error in the court's charge.
What is applicable to this cause is the following: An individual who has been convicted pursuant to a fundamentally defective jury charge, which is so egregious as to rise to the level of a constitutional violation or is so prejudicial as to render the trial itself fundamentally unfair, is entitled to be granted federal habeas corpus relief. In that instance, there is no need for an objection to the charge. See, for example, Tarpley v. Estelle, 703 F.2d 157 (5th 1983), Plunkett v. Estelle, 709 F.2d 1004 (5th Cir.1983), and Tyler v. Phelps, 643 F.2d 1095, 1100 (5th Cir.1981). Also Ex parte Maldonado, 688 S.W.2d 114 (Tex.Cr.App. 1985).
A jury instruction that allows the jury to convict an accused for committing something which is not a crime is so ailing that it causes any resulting conviction to violate due process of law. The effect of the "application" paragraph in this charge permitted the jury to find applicant guilty of committing something which was not a crime, and thus so infected applicant's trial as to render it fundamentally unfair. Given the "application" paragraph of the charge, and the jury's verdict, the conclusion is inescapable that the jury's verdict may have rested upon an unconstitutional basis. Applicant's conviction should be set aside.
However, notwithstanding that as a matter of federal constitutional law applicant's prior felony conviction is void, applicant is at this time, for the reasons stated, in the wrong courthouse. His application should be dismissed without prejudice to pursue his claim for relief in the proper courthouse.
For all of the above and foregoing reasons, I respectfully dissent.
NOTES
[1] Art. 42.18, § 2(a) V.A.C.C.P., Vernon (1988) statutorily defines parole as a release of a prisoner from imprisonment, but not from the legal custody of the State. In addition, Art. 42.18, § 8(a), V.A.C.C.P., which went into effect September 1, 1987 and effectively replaced a similar provision in repealed Art. 42.12, § 15(f)(3), states in pertinent part:
Every prisoner while on parole shall remain in the legal custody of the State and shall be amenable to conditions of supervision ordered by the board.
Moreover, the fact that applicant is no longer actually confined in the penitentiary is not dispositive of his standing before us, since during his term of parole he is "in custody" and "confined" in terms of statutory construction. See Art. 11.21, V.A.C.C.P. See also Ex parte Henderson, 645 S.W.2d 469 (Tex.Cr.App.1983); and Ex parte Peel, 626 S.W.2d 767 (Tex.Cr.App. 1982). See and compare Ex parte Renier, 734 S.W.2d 349 (Tex.Cr.App.1987).
[2] The act of "offering to bet" is not an offense denounced by § 47.03(a)(2).
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144 B.R. 69 (1992)
In re EAGLE-PICHER INDUSTRIES, INC., et al., Debtors.
No. 1-91-00100.
United States Bankruptcy Court, S.D. Ohio, W.D.
June 8, 1992.
Stephen Karotkin, Weil, Gotshal & Manges, New York City, for debtor.
Carolyn J. Buller, Squires, Sanders & Dempsey, Cleveland, Ohio, for Unsecured Creditors' Committee.
Kevin E. Irwin, Keating, Muething & Klekamp, Cincinnati, Ohio, for Injury Claimants' Committee.
Claude D. Montgomery, Varet Marcus & Fink, P.C., New York City, for Equity Sec. Holders' Committee.
James McMonagle, Chagrin Falls, Ohio, Future Claimants' Representative.
DECISION ON MOTION OF FUTURE CLAIMANTS' REPRESENTATIVE FOR CLARIFICATION
BURTON PERLMAN, Chief Judge.
James J. McMonagle is the legal representative appointed by the Court in these cases to represent the interests of future personal injury and property damage claimants. We will refer to him hereafter as the FCR.
On October 31, 1991, we entered an order appointing the FCR. On November 25, 1991, we entered a further order defining who comprised the class of future claimants for purposes of these cases. In that order, we defined that class as follows:
Those persons or entities who have been exposed to or in the future will be exposed to asbestos or asbestos containing products mined, fabricated, manufactured, supplied or sold by debtors, who have been exposed to or in the future will be exposed to lead containing chemicals manufactured or supplied by debtors, or who have been exposed or in the future will be exposed to products containing silica manufactured or supplied by debtors, who as of the filing date of these bankruptcy cases, January 7, 1991, did not yet have a right to payment from debtors on account of such exposure, but had or will have such right thereafter.
Subsequently, on January 14, 1992, we entered Decision and Order on Motion to Set Bar Date holding that a bar date would be established for present asbestos claimants. Movant here calls into question certain language employed by the court in that decision:
This controversy deals with the rights of present asbestos claimants. In a prior writing, Order Defining Future Claimants entered November 25, 1991, we defined future claimants for purposes of fixing the constituency of the future *70 claims representative. Future claimants, of course, would not be affected by a bar date, for they are as a class inherently unknown and unknowable. Utilizing the same basis here to define the class of present asbestos claimants, the definition of claim to be found at 11 U.S.C. § 101(5), that we did in the said prior order, we hold that class to be:
Those persons or entities who have been exposed to asbestos or asbestos containing products, mined, fabricated, supplied or sold by debtors who as of the filing date of these bankruptcy cases, January 7, 1991, had a right to payment from debtors on account of such exposure.
In a later order (Order on Motion of Future Claims Representative for Employment of Burke Rosen & Associates and objection thereto) entered March 4, 1992, we employed certain language which movant finds disturbing, that is, our reference to present claimants as those having "claims arising prior to the filing date", and future claimants as those whose "claims arise subsequent to the filing date."
It is the position of the FCR that the definition of future claimants which we have employed is unworkable. The reason that it is unworkable, says the FCR, is that it depends on the phrase "right to payment" which is a term intentionally left undefined in the Bankruptcy Code, though employed in 11 U.S.C. § 101(5)(A). It "will therefore be necessary to inquire for each claimant into the various state and federal tort rules which determine when the right to payment exists."
In addition to the just stated basis for the present motion, the FCR presents an additional basis. This is to be found in language of an opinion to his client employed by counsel for the FCR who has favored us with a copy of that opinion. Counsel said:
Based upon our examinations, we believe that the formulation contained in the Order does not sufficiently define that class so as to allow a concrete determination of its members. It is impossible to ascertain exactly who are your potential clients.
The FCR proposes to replace the formulation which we have employed with the following:
All persons or entities, as those terms are defined in the Bankruptcy Code, who have been or in the future will be exposed to or damaged by asbestos or asbestos-containing products mined, fabricated, manufactured, supplied or sold by Debtors, lead or lead-containing products mined, fabricated, manufactured, supplied or sold by Debtors, or silica or silica-containing products mined, fabricated, manufactured, supplied or sold by Debtors who have not asserted a claim against Debtors prior to the filing date of these bankruptcy cases, January 7, 1991.
A claim shall be deemed to have been asserted in the context of all litigation or other appropriate legal action commenced in any administration or judicial forum, and any written demand against Debtors, including the delivery of any written response to questionnaires, requests or other informal claim forms delivered to Debtors, their agents or a court.
The assertion of a claim, as defined above, shall not constitute a proof of claim, either formal or informal, under 11 U.S.C. § 501 and shall not be construed to constitute a consent to jurisdiction over such claim by the Bankruptcy Court or constitute a waiver of the claimants' rights to a jury trial.
In brief, the FCR proposes to replace our statute-based formulation defining the class he represents (which necessarily requires as well, a redefinition of the class of present claimants) with his entirely arbitrary formulation, the core of which is defining the future claimants class as consisting of those who have "asserted" a "claim," that is, in some fashion identified themselves. The FCR's grounds are that this will make for certainty, while our formulation will be difficult to work with because of its uncertainty.
*71 The initiative of the FCR in this regard is ill-conceived. The FCR is not free, and the court is not free, to define the classes in these bankruptcy cases on the sole criterion of certainty. We see no point in making a definition of a bankruptcy class in a Chapter 11 case simply because it is convenient. There has to be some purpose from the point of view of bankruptcy for the definition of a class of creditors.
In the present cases, it was necessary to make an express statement of those comprising the class represented by the Injury Claimants' Committee ("ICC"). The members of this class will vote on the plan, and are subject to a bar date. We are told by the statute who is entitled to vote on the plan. Our definition was crafted on that basis.
In mass tort cases, in order to have a meaningful reorganization from which a viable entity emerges, it has come to be accepted that someone serve as a guardian, a representative of future claimants. That is the role of the FCR in this case. His constituency, as we have defined it, is those holding claims arising after the cutoff date for present claims, which we have stated to be the filing date of these bankruptcy cases, January 7, 1991.
We reiterate that the class represented by the FCR is unknown and unknowable, because he represents all of those people who at some time after the filing date of these bankruptcy cases will manifest an illness giving rise to a liability. It is true that some of the members of the class will, with the passage of time, become known, because we understand that new cases of illness deriving from asbestos occur every day and every year. In the main, however, future claimants are unknown, for they are those whose claims will arise in the future. If the FCR believes that he can only be effective if he knows the identity of the persons he represents, he misconceives his mission.
The FCR requests that we "clarify" the Bar Date Order by "explicitly rescinding that portion which states that Future Claimants are `inherently unknown and unknowable'." We reject this request. There is nothing confusing about the language which we employed. We said that future claimants "are as a class inherently unknown and unknowable". Only if one does what the FCR has done, add the words "members of" before the words "the class", does the possibility of confusion arise.
We note finally that this untimely motion of the FCR has led to a difference of opinion between him and the ICC as to which of them represents those claimants whose identity has become known since January 7, 1991. The present formulation by the court moots this argument, for the date when claimants' identities becomes known does not determine whether they are present claimants. Though they may become known only after the filing date, they may still be present claimants, for their claim may have arisen prior to January 7, 1991.
Though we deny the present motion of the FCR, the discussion in connection with the motion does persuade us that our existing formulation of both present and future claimants should be amended. Particularly does the amendment have to do with making it clearer that we incorporate the statutory definition of claim into our definition. We thus replace "right to payment" with "having a claim as defined at 11 U.S.C. § 101(5)(A)." In addition, we delete the word "had" from the future claimants class definition. These respective classes will now be defined. In what follows deleted words are in parentheses, while added words are underlined:
Present Claimants:
Those persons or entities who have been exposed to asbestos or asbestos containing products, mined, fabricated, supplied or sold by debtors who as of the filing date of these bankruptcy cases, January 7, 1991, had a (right to payment from) claim as defined at 11 U.S.C. § 101(5)(A) against debtors on account of such exposure.
Future Claimants:
Those persons or entities who have been exposed to or in the future will be exposed to asbestos or asbestos containing *72 products mined, fabricated, manufactured, supplied or sold by debtors, who have been exposed to or in the future will be exposed to lead containing chemicals manufactured or supplied by debtors, or who have been exposed or in the future will be exposed to products containing silica manufactured or supplied by debtors, who as of the filing date of these bankruptcy cases, January 7, 1991, did not yet have a (right to payment from) claim as defined at 11 U.S.C. § 101(5)(A) against debtors on account of such exposure, but (had or) will have such right thereafter.
SO ORDERED.
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746 S.W.2d 732 (1987)
STATE of Tennessee, Appellee,
v.
Jorge RUBIO, Appellant.
Court of Criminal Appeals of Tennessee, at Nashville.
December 8, 1987.
Permission to Appeal Denied March 14, 1988.
Karl F. Dean, Asst. Public Defender, (at trial and on appeal), Richard Kaiser, Asst. Public Defender, (at trial only), Nashville, for appellant.
W.J. Michael Cody, Atty. Gen., Charles E. Bush, Asst. Atty. Gen., Thomas H. Shriver, Dist. Atty. Gen., Weakley E. Barnard, Roe Ellen Coleman, Asst. Dist. Attys. Gen., Nashville, for appellee.
Permission to Appeal Denied by Supreme Court March 14, 1988.
OPINION
SCOTT, Judge.
The appellant was convicted of murder in the first degree and was sentenced to life imprisonment. On appeal he has presented one issue, questioning whether the trial judge erred by overruling defense counsel's motion to be relieved.
The appellant, a Cuban, was indicted at the September 1985 term of the Davidson County Grand Jury. At his arraignment on October 25, 1985, the Davidson County Public Defender was appointed as his counsel. Richard L. Kaiser, an Assistant Public Defender, was assigned to represent him and was listed as his counsel of record in the minute entries which followed. He *733 filed a motion to suppress the statement given by the appellant and otherwise undertook to represent him. Contemporaneously with the filing of the motion to suppress, he also filed a motion to be relieved. The appellant had sent the court a letter indicating his dissatisfaction with his counsel. The motion was heard on February 19, 1986, at which time the appellant was represented by Mr. Kaiser and Karl F. Dean, another Assistant Public Defender. At the hearing the trial judge inquired as to why he wanted his counsel relieved and the following transpired:
THE COURT: Mr. Rubio, do you want to tell me why that you want Mr. Kaiser in the Public Defender's Office to be relieved of representation of you?
MR. RUBIO: Because I mean, filing some motions of discovery to try to find out something about the case. And he wanted me to plead guilty for twenty-five years. I told him I couldn't plead guilty for twenty-five years.
THE COURT: And that's why you want him to be relieved?
MR. RUBIO: Uh-huh (yes).
THE COURT: Do you have any reason to believe that he wouldn't adequately and properly prepare for your trial, you having made the decision to go to trial?
MR. RUBIO: Yes. I told him I got a decision to go to a trial.
THE COURT: That's right. Do you have any reason to believe that he wouldn't properly represent you at the trial?
MR. RUBIO: What I've been thinking about is what he told me, pleading guilty for the twenty-five years, and I told him I wanted to go to a trial.
THE COURT: That still doesn't answer my question. Because he advised you one way he obviously has to respect your decision to go to trial. Do you have any reason to tell me to believe that he wouldn't adequately and properly represent you at the trial; some witness he hasn't talked to, some issue he hasn't raised, some matter he hasn't looked into that you wanted looked into?
MR. RUBIO: No. Well, that's the reason, like I said.
THE COURT: You want him to be relieved because he recommended to you that you plead guilty?
MR. RUBIO: Yes.
THE COURT: And that's the only reason?
MR. RUBIO: Well, I mean, after he didn't file a motion a motion, you know, to find out about the case. I haven't received a notice
THE COURT: He hasn't filed a motion to find out about the case?
MR. RUBIO: Well, no. (Speaking Spanish) I told him about filing a motion for discovery about discovery and I cannot explain to you.
THE COURT: Mr. Rubio, it looks like Mr. Kaiser has filed a number of motions in this case. Mr. Kaiser, anything you'd like to say?
MR. KAISER: Your Honor, I a motion for discovery was filed on the day we met Mr. Rubio. He's been told that. A response to discovery has been received. Some things that were not received, we filed a motion to compel. We have talked to every single witness who was listed on the indictment who would talk to us. We've talked to every single witness Mr. Rubio has asked us to talk to.
Just to sum this up, Mr. Rubio called me the other day and asked me why I haven't filed a motion for discovery, and I explained that I did. I've been receiving calls from the jail from somebody else who claims to represent Mr. Rubio's interest, asking me various other questions about the case, and I've refused to talk to him. I don't know who the person is. He won't tell me who it is. I have an idea who it is. And I think Mr. Rubio is somewhat concerned that I wouldn't talk to that individual, but I would not do that. I wouldn't talk about Mr. Rubio's case with that person, not knowing whether he was acting in Mr. Rubio's best interest *734 or not. I think the letter that was written, was written by the same individual.
And I did recommend that Mr. Rubio enter plea negotiations. It was not at twenty-five years. It was at some years less than that. I did recommend that he accept that. I thought it was a fair offer based on the evidence. And I don't have any further statements to make about Mr. Rubio's complaints.
After asking the Assistant District Attorney General if she had any comments, and receiving none, he then asked the appellant if he had anything further he would like to say, to which the appellant replied that he did not. The trial judge then overruled the motion, making the following statements:
Mr. Kaiser, I know that this puts you in somewhat of an awkward position, but I'm going to overrule this motion to be relieved. Mr. Rubio, I know Mr. Kaiser to be an excellent attorney. From my understanding of this case, he's done everything to protect your rights and to see that you get a fair trial and effective representation at the trial. And there's absolutely nothing wrong with Mr. Kaiser making a recommendation to you. You have obviously decided to go to trial, which is your absolute right, and there's no indication here that Mr. Kaiser should be relieved or is not fully protecting your rights and providing you with effective representation. The motion to relieve Mr. Kaiser is overruled.
The motion to suppress was heard several days later and granted in part. At some time in these proceedings, the case was tried before a jury and a mistrial resulted. However, just when that occurred is unclear from the record.
On May 8, 1986, the case was heard upon a motion to dismiss and another motion of counsel to withdraw. At that hearing Mr. Kaiser presented the appellant's motion to dismiss the charges because a new trial date had not been set within thirty days from the date of the mistrial. Defense counsel explained to the court that he had informed the appellant that the law of Tennessee does not provide for dismissal in that circumstance, but the appellant would not believe him and wanted the motion to dismiss presented to the court. The trial judge summarily overruled that motion. Counsel went on to move for a speedy trial. After discussion between the court and counsel as to an early trial date, June 30 was chosen. Then the appellant, speaking through his interpreter, complained that Mr. Kaiser, without any authority from his client, called the Immigration and Naturalization Service to see if there was any possibility that the appellant could be deported. The appellant wanted to be deported, but contended that he could get himself deported without any help from his counsel. The appellant then cited a section of the Tennessee Code in reference to a speedy trial, to which the court responded:
If Mr. Rubio would pay more attention to Mr. Kaiser and less attention to his jail house lawyer, he'd been in better shape.
In response to further discussion about that point, the trial judge inquired, "Do I take it from all this that Mr. Rubio wants another lawyer?" Through his interpreter he replied, "Maybe it might be better."
Mr. Kaiser explained that the reason that he contacted the INS was to clear up the appellant's misunderstanding that "it didn't matter if he got a day or a life sentence" that he could be deported and "walk away from" his prison sentence. It was clear to defense counsel that this was the reason that the appellant had refused to engage in any plea bargaining. Therefore, he had asked the appellant if he could contact INS to verify their advice to him. Counsel asked the appellant whether an explanation by INS that it was impossible for him to walk away from a life sentence would make any difference to him, to which the appellant replied, "It might."
Counsel went on to join in the appellant's motion to be relieved. The trial judge told the appellant that his counsel "has done an excellent job in representing you" and that it was to the appellant's detriment that he didn't recognize that. He denied the motion to be relieved.
*735 On the morning of trial the appellant again requested that his counsel be relieved and the motion was again denied. His counsel explained how the appellant had adamantly refused to cooperate with them in preparing for trial and that he had taken the position that he was simply "not going to participate in this trial." The appellant then took the stand and testified partly in English and partly in Spanish through his interpreter. He told of his difficulties with his counsel. His complaints about his counsel included his anger at having been falsely accused of having a jail house lawyer helping with his case; denial of a complete transcript of his prior trial; refusal of his counsel to subpoena two witnesses he wanted called (one of whom testified for the prosecution at both trials, the other was the victim's girlfriend); lack of cooperation with the appellant; refusal to "do what I ask him to do for my case;" refusal to ask the questions he wanted asked at the former trial; and refusal to file "a motion for habeas corpus."
At this pretrial session the appellant, contrary to his counsel's advice, refused to don street clothes for the trial, choosing instead to wear the orange jumpsuit worn by Davidson County Jail inmates. He also accused two detectives of bringing him drugs while he was in jail.
This issue was again raised in counsel's motion for a new trial and in a pro se motion filed by the appellant on the day of argument of the motion for a new trial. The trial judge overruled both the motion that counsel be relieved and the motion for a new trial. The co-counsel still represents the appellant in this Court.
In Morris v. Slappy, 461 U.S. 1, 103 S. Ct. 1610, 1617, 75 L. Ed. 2d 610 (1983), the United States Supreme Court was faced with a similar situation. In that case Mr. Slappy was charged with five serious felonies and the San Francisco Public Defender was appointed to represent him. The Deputy Public Defender who was assigned to his case represented him at the preliminary hearing and supervised an extensive investigation. Shortly before the trial was to begin that Deputy Public Defender was hospitalized for emergency surgery. Six days before the scheduled trial date a senior trial attorney in the Public Defender's Office was assigned to represent Mr. Slappy. Throughout the trial Mr. Slappy claimed that he did not want the substitute counsel representing him. The substance of his complaint was that, in his opinion, the new counsel was unprepared. When the court refused to dismiss his counsel, Mr. Slappy "announced that he would not cooperate at all in the trial and asked to be returned to his cell." The court urged him to cooperate with his counsel, but he refused, contending that he had no counsel, since he did not have the attorney he wanted. 103 S.Ct. at 1614. Mr. Slappy refused to take the stand to testify, although his counsel had advised him that he should. Ultimately, the jury returned a verdict of guilty of three of the charges, but was unable to reach a verdict on the other two. A week later the unresolved charges were tried. The substitute counsel again appeared for the appellant and this time Mr. Slappy refused to cooperate with or even speak to his counsel. At that trial the jury returned a guilty verdict on the remaining counts. 103 S.Ct. at 1615.
On appeal his convictions were affirmed by the California Court of Appeal and the California Supreme Court denied review. He then sought habeas corpus relief in the United States District Court, which was denied. The United States Court of Appeals for the Ninth Circuit reversed, holding that the Sixth Amendment right to counsel includes "the right to a meaningful attorney-client relationship." Slappy v. Morris, 649 F.2d 718, 720 (9th Cir.1981).
The United States Supreme Court held that the conclusion of the Court of Appeals that the Sixth Amendment right to counsel includes "the right to a meaningful attorney-client relationship" "is without basis in the law." 103 S.Ct. at 1617. The court noted that the intermediate court's holding resulted from a misreading of the record and a misreading of the controlling law. Accordingly, the Court of Appeals announced a new constitutional standard that was "unsupported by any authority." 103 S.Ct. at 1616. From their reading of the *736 record, the members of the United States Supreme Court found that it could reasonably be concluded that Slappy's requests were not in good faith, but were a "transparent ploy for delay." 103 S.Ct. at 1617.
It is worthy of note that the entire Supreme Court concurred in the result in Slappy. Justice Brennan filed an opinion concurring in the result, in which Justice Marshall joined. Justice Blackmun concurred in the judgment and Justice Stevens joined in his opinion.
There have been numerous decisions concerning the relief of counsel both before Slappy and since. In the post-Slappy case of Wilson v. Mintzes, 761 F.2d 275, 281 (6th Cir.1985), the United States Court of Appeals for the Sixth Circuit examined a case in which the habeas corpus petitioner expressed dissatisfaction with his retained counsel. The court held that unreasonable or arbitrary interference with an accused's right to counsel of choice ordinarily mandates reversal without a showing of prejudice. The court went on to cite the oft-quoted rule that motions for a continuance in order to obtain new counsel are directed to the sound discretion of the trial judge and will be reversed only for an abuse of that discretion. The court cited Faretta v. California, 422 U.S. 806, 95 S. Ct. 2525, 2534, 45 L. Ed. 2d 562 (1974), where the United States Supreme Court earlier explained that:
An unwanted counsel "represents" the defendant only through a tenuous and unacceptable legal fiction. Unless the accused has acquiesced in such representation, the defense presented is not the defense guaranteed him by the Constitution, for, in a very real sense, it is not his defense. (emphasis in original). 761 F.2d at 279, fn. 6.
This Court has previously held that the fact that a defendant chose not to cooperate with competent appointed counsel does not entitle him to the appointment of other counsel. It was noted that the "willful refusal of a defendant to cooperate with his attorney is not imputable to either the State or defense counsel." The state's constitutional obligation has been fulfilled by the appointment of counsel, and there is no constitutional requirement that the court continue to appoint additional counsel "until one is appointed with whom the defendant might elect to cooperate." State v. McClennon, 669 S.W.2d 705, 707 (Tenn.Cr. App. 1984). To hold otherwise would allow the criminal defendant to control the court's docket and effectively prevent the trial from ever taking place.
Apparently the appellant was upset because his counsel told him of a plea bargain offer. However, counsel was required to promptly communicate the offer to him. ABA Standards Relating to the Administration of Criminal Justice, The Defense Function, § 6.2(a), adopted as guidance to Tennessee courts in Baxter v. Rose, 523 S.W.2d 930, 936 (Tenn. 1975).
The appellant was also concerned that his counsel had contacted the Immigration & Naturalization Service in order to clear up the misunderstanding that the appellant had concerning the fact that he was subject to deportation in lieu of incarceration. Again, counsel was carrying out his duty to investigate "the circumstances of the case" and was attempting to "explore all avenues leading to facts relevant to ... (the) penalty." Id. at § 4.1.
Other than these tenuous complaints and the obvious difficulties that counsel had in communicating with their client due to the language barrier, there is nothing in the record to indicate that counsel was anything but effective in presenting the case for their client. Defense counsel obtained good results for their client in spite of the appellant's lack of cooperation. The first trial resulted in a mistrial. The retrial was a hard fought case which lasted four days. Sixteen witnesses were called by the state. The proof revealed the appellant's guilt and the jury found in accordance with the evidence. Counsel cannot be faulted for the result, only for their derelictions, none being shown by the record.
When the trial judge found that the counsel should not be relieved, he exercised his discretion to require the very able Assistant Public Defenders to continue representing *737 the appellant. The trial judge found that the appellant was not acting in good faith. On the morning of trial the judge remarked that he was having "a hard time finding anything (the appellant said) at (that) point to be credible."
Where the trial judge has wide discretion, as he does in matters regarding the appointment and relief of counsel, his action will not be set aside on appeal unless it is shown that there was a plain abuse of that discretion. State v. Fowler, 213 Tenn. 239, 373 S.W.2d 460, 466 (1963). In order for a reviewing court to find an abuse of discretion, the court must find that there was no substantial evidence to support the conclusion of the trial judge. State v. Ford, 643 S.W.2d 913, 916 (Tenn.Cr.App. 1982).
In this case there was no evidence to support any other conclusion than the one reached by the trial judge. The appellant had very effective counsel and for some reason chose not to cooperate with them. He is entitled to neither a reversal of his conviction nor an opportunity to pick and choose his appointed counsel.
The judgment is affirmed.
DUNCAN, J., and LLOYD TATUM, Special Judge, concur.
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746 S.W.2d 401 (1988)
Gorden William SEE, Appellant,
v.
COMMONWEALTH of Kentucky, Appellee.
No. 85-SC-878-MR.
Supreme Court of Kentucky.
March 3, 1988.
*402 Larry D. Simon, Louisville, for appellant.
David Armstrong, Atty. Gen., Rickie Pearson, Asst. Atty. Gen., Frankfort, for appellee.
OPINION OF THE COURT
Gorden William See was convicted in Jefferson Circuit Court of two counts of first-degree sodomy committed upon his two sons, and one count each of second-degree rape and second-degree sodomy committed upon his daughter. He was sentenced to life and twenty years' imprisonment on the first-degree sodomy charges, and ten years' imprisonment on the second-degree rape and second-degree sodomy charges. These sentences were ordered to be served consecutively. We affirm in part, reverse in part, and remand.
Appellant's primary contention concerns the in-chambers hearing to determine the competency of his twelve-year-old daughter to testify. Although appellant objected, the trial court specifically excluded him, allowing only the child, the prosecutor, and defense counsel to be present. Appellant maintains that this exclusion was a violation of his rights under Section 11 of the Kentucky Constitution.
The right to confront one's accusers in a criminal trial is a right guaranteed by the 6th Amendment to the United States Constitution and also by Section 11 of the Kentucky Constitution. The United States Constitution grants the accused the right "to be confronted with the witnesses against him." The Kentucky Constitution grants the accused the right "to meet the witnesses face to face." The difference in language is not significant and both amendments are simply designed to require that a defendant in a criminal case is entitled to a confrontation with his accusers.
The specific question here is whether an accused person may be excluded from a hearing to determine the competency of a minor to testify against him. In Stincer v. Commonwealth, Ky., 712 S.W.2d 939 (1986), this precise question was decided by this court in the same manner as the appellant now urges upon us. On appeal, the United States Supreme Court reversed this court's decision and held that the exclusion of the accused from the competency hearing did not violate the right of the accused to confront the witnesses against him. Kentucky v. Stincer, 482 U.S. ____, 107 S. Ct. 2658, 96 L. Ed. 2d 631 (1987).
Unless we elect solely as a matter of state law, to interpret the language of Section 11 of the Kentucky Constitution more broadly than the virtually identical language of the 6th Amendment of the United States Constitution has been interpreted by the United States Supreme Court, the decision in Kentucky v. Stincer, supra, is controlling.
The majority of this court is not convinced that the exclusion of a defendant from a hearing to determine the competency of a witness is so violative of a basic right guaranteed by the Kentucky Constitution that we should place ourselves in direct opposition to an opinion of the United States Supreme Court, even though we *403 may have the right to do so as a matter of state law.
Appellant also contends that the trial court erred in admitting evidence of the paternity test results. Appellant argues that the paternity test used to determine the father of Charlotte See's infant son was without an adequate scientific foundation. Further, appellant maintains that the prejudicial impact of the test results far outweighed any probative value. To prove that her father had indeed had sexual intercourse with her, and was the father of her child, the Commonwealth introduced evidence of the HLA genetic marker test. This indicated that there was a 99.45 percent chance that appellant was the father. Other evidence presented at trial indicated that appellant was the only person who had access to Charlotte during the period she conceived her child. Therefore, considering all the evidence presented, the paternity test was a reliable indicator, and certainly compelling evidence of rape. We find no error in its admission.
Appellant next contends the Commonwealth failed to investigate its case and make timely disclosure of exculpatory evidence, thus depriving him of a fair trial. Appellant argues that since the Commonwealth responded to defendant's discovery request with no information regarding the charges of sodomy against his sons or the sexual encounters of Charlotte with her brothers and cousins until only a few days prior to trial, he was deprived of an opportunity to prepare an effective defense and was unfairly prejudiced thereby. Appellant claimed that the information that Charlotte See had engaged in sexual intercourse was exculpatory, and therefore prejudicial error resulted from its nondisclosure.
We disagree. This information regarding Charlotte's other sexual encounters was revealed in plenty of time for appellant to request an HLA genetic marker test for them as well. Moreover, the evidence regarding appellant's acts of sodomy with his sons and the acts he made them perform with Charlotte were hardly exculpatory. The information was not withheld from the defense, and appellant could have requested a continuance if the time for preparation was insufficient. There was no error.
Appellant argues that the Commonwealth was allowed to introduce improper rebuttal evidence, and he was denied the right to receive a copy of the grand jury testimony of his indictment upon request, thus denying him a right to a fair trial. He claims the evidence regarding the date of Charlotte's delivery went to an essential question when her baby was conceived and thus properly was the subject of the prosecution's case-in-chief, not rebuttal. We disagree. The medical records to which appellant objected had already been introduced in the prosecution's case-in-chief and were certainly no surprise to the defense. Furthermore, in Gilbert v. Commonwealth, Ky., 633 S.W.2d 69 (1982), we held that, although a trial judge does not have unlimited discretion to determine whether substantive evidence should be allowed in rebuttal, the restraints placed upon this discretion are designed to protect defendants from prosecutors withholding important evidence until the end of the trial. This was not the case here. In the case at hand, the evidence had already been revealed to the jury and defense counsel. There was no error.
Nor was there error in the fact that appellant received no copy of the grand jury proceedings. The trial judge granted appellant's motion for the grand jury information; however, appellant refused to accept a copy of the grand jury proceedings. Moreover, the trial court offered appellant a thirty-day continuance to review the transcript. The offer was refused. Thus, appellant was not denied his right to a fair trial.
Finally, appellant contends that the trial court erred in ordering consecutive sentences. We agree. KRS 532.110(1)(c) provides:
"The aggregate of consecutive indeterminate terms shall not exceed in maximum length the longest extended term which would be authorized by KRS 532.080 for the highest class of crime for which any of the sentences is imposed."
See was sentenced to life imprisonment; thus the other sentences, in accordance *404 with the statute, must not run consecutively with the life sentence. The Commonwealth concedes error in this request.
The judgments are affirmed in all respects except as to the imposition of sentence, and the case is remanded with direction that the sentences for a term of years shall run consecutively with each other, but concurrently with the life sentence.
GANT, LAMBERT, STEPHENSON, VANCE and WINTERSHEIMER, JJ., concur.
STEPHENS, C.J., dissents by separate dissenting opinion in which LEIBSON, J., joins.
STEPHENS, Chief Justice, dissenting.
I respectfully dissent. Although the majority holds that the issue of whether appellant's constitutional rights were violated by his exclusion from the in-chambers hearing to determine his daughter's competence to testify in court, was resolved by the United States Supreme Court in Kentucky v. Stincer, 482 U.S. ____, 107 S. Ct. 2658, 96 L. Ed. 2d 631 (1987), I strongly disagree. The resolution of this case requires an analysis of appellant's rights under the Kentucky constitution, particularly section eleven. The eleventh section of the Bill of Rights of the Kentucky Constitution guarantees the accused in a criminal prosecution the right to be heard by himself and counsel and the right to confront witnesses face to face. "In all criminal prosecutions the accused has the right to be heard by himself and counsel; to demand the nature and cause of the accusation against him; to meet the witnesses face to face, and to have compulsory process for obtaining witnesses in his favor." Ky. Const. § 11. This ensures the defendant's right to cross-examine witnesses at trial.
It is clear that the competency hearing was crucial to the prosecution, and that appellant had the absolute right to be present and represented by counsel. Powell v. Commonwealth, Ky., 346 S.W.2d 731 (1961). Appellant voiced his objection to his exclusion from the competency hearing wherein he could have aided his counsel with cross-examination of the prosecuting witnesses. Appellant clearly asserted and was denied his Kentucky Constitutional right to meet the witness face to face.
Section eleven of the Kentucky Constitution differs in one crucial respect from the sixth amendment, its counterpart in the United States Constitution. By state law, a criminal defendant is granted the right, not merely to confront his or her accusers, but to confront them face to face. The drafters of our state constitution did not add the phrase "face to face" to its protections afforded an accused merely to have its meaning erased in an attempt to reconcile an irreconcilable difference.
I recognize the problems and pressures encountered when dealing with child witnesses, and understand a child's reluctance to speak when his or her alleged abuser is nearby. Nevertheless, when a defendant is on trial for a serious criminal offense, and faces a lengthy jail term as a possible penalty, as in all criminal prosecutions, he or she has the right to be present and to assist his counsel at hearings to determine the competence of witnesses against him.
Furthermore, the competency hearings should be held in open court before the jury. It is "the duty of the trial court to carefully examine the witness to ascertain whether she (or he) is sufficiently intelligent to observe, recollect and narrate the facts and has a moral sense of obligation to speak the truth". Moore v. Commonwealth, Ky., 384 S.W.2d 498, 500 (1964). This inquiry, however, is important to the jury in evaluating the child's testimony.
If the hearing to determine whether the child is a competent witness is held in open court in the presence of the jury, it will (1) assist the jury in evaluating the child's truthfulness and (2) avoid the potential for intimidation that results from the intimacy inherent in an in-chambers procedure.
Therefore, I would reverse the convictions for second-degree rape and second-degree sodomy of Charlotte See, and remand.
LEIBSON, J., joins in dissent.
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746 S.W.2d 510 (1988)
Michael RUSSELL and Wife, Kathy Russell, Individually and As Next Friend of Melani Russell, A Minor, and H.O. Russell and Wife, Ima Russell, Appellants,
v.
The TEXAS DEPARTMENT OF HUMAN RESOURCES, Yvonne Fellers, and Suzanne WomackAppellees.
No. 9525.
Court of Appeals of Texas, Texarkana.
February 9, 1988.
Rehearing Denied March 22, 1988.
*511 Thomas Newman, Texarkana, for appellants.
Edwin N. Horne, Asst. Atty. Gen., Austin, for appellees.
CORNELIUS, Chief Justice.
Appellants brought this action against the Department of Human Resources (DHR) and two of its child protection services specialists, Yvonne Fellers and Suzanne Womack, for damages caused by allegedly negligent acts committed in an investigation of possible sexual abuse involving Melani Russell, a minor. The appellants are the parents and grandparents of Melani. The district court rendered summary judgment against appellants on the basis that their pleadings showed an insurmountable *512 obstacle to recovery because the appellees were shielded from liability by official immunity and the action did not come within the Tort Claims Act's limited waiver of immunity. We will affirm the judgment.
DHR received a report that Melani Russell was acting and speaking at school in ways that indicated she might have been sexually abused. In response, Suzanne Womack went to the school to investigate. She interviewed Melani in the presence of the principal and Melani's grandmother, Ima Russell, a teacher at the school. Melani denied that she had been sexually abused or that she had engaged in any kind of sexual talk or activity at school. In view of this denial, Womack told the principal and Ima Russell that she was closing the case, but was not doing so on the ground that it lacked merit. Thereafter, Womack refused to discuss the case with Melani's mother, except to tell her that Melani had symptoms of child abuse and that the abuser in such cases was usually the child's father or grandfather.
Womack refused to reveal the source of her information, but the principal apparently learned that two children at the school had made the report. The two children, who were known to have been sexually abused themselves, stated that they had "made up" the story about Melani while being questioned by their mother as to whether they knew of other students who might be victims of sexual abuse. The principal advised Womack by telephone of this development, and two days later Womack came to the school and spoke to the principal and Ima Russell. Appellants alleged that Womack accused the principal and Ima Russell of having violated the civil rights of the two children who claimed to have made up the story, and of attempting to cover up the true facts about Melani. They also alleged that Womack threatened to file criminal charges of harassment against the principal and Ima Russell, and to file a complaint against both with the school board and the Texas Education Agency. Appellants further alleged that Yvonne Fellers wrote a letter to the school board president accusing the principal and Ima Russell of hurting the arms of the two children, apparently so as to make them speak to them, and of emotionally abusing the children during questioning.
In summary, appellants pleaded that appellees were negligent and grossly negligent in (1) failing to provide or follow a reasonable procedure for screening reports of sexual abuse; (2) acting upon a report in an unreasonable manner without first verifying it; (3) making libelous and slanderous accusations of criminal conduct against appellants, and threatening criminal charges without reasonable basis; (4) having a predisposed attitude toward the guilt of appellants and refusing to cooperate in ascertaining the truth; and (5) refusing to close Melani's file and purge it of all accusations of guilt.
Appellants' initial pleading was brought under the Tort Claims Act.[1] After appellees filed special exceptions alleging the failure to state a claim under the Act, appellants amended their petition to allege claims under the Tort Claims Act, the common law, the Texas Constitution, and "other statutes of the state." After the petition was amended, appellees moved for summary judgment on the basis that the pleadings still failed to state a cause of action, and the court granted the motion.
Appellants contend that summary judgment was improper because appellees' motion did not demonstrate an insurmountable obstacle to recovery; immunity had been waived by the State's consent to the suit; and that genuine issues of fact were raised regarding their rights to recover under the Constitution and the common law.
PROPRIETY OF SUMMARY JUDGMENT ON THE PLEADINGS
Normally, whether pleadings fail to state a cause of action may not be resolved by summary judgment. Massey v. Armco Steel Co., 652 S.W.2d 932 (Tex. 1983). However, when a party has been *513 given an opportunity to amend after special exceptions have been sustained, the case may be dismissed for failure to state a cause of action. Id.; see also, Texas Department of Corrections v. Herring, 513 S.W.2d 6 (Tex.1974); Hidalgo v. Surety Savings and Loan Association, 462 S.W.2d 540, 543 n. 1 (Tex.1971). After the plaintiff has been informed of the failure to state a cause of action and has been allowed to amend his pleadings, if the pleadings still fail to state a cause of action a motion for summary judgment may properly be granted. Texas Department of Corrections v. Herring, supra.
Here, appellees did file special exceptions pointing out the failure to state a cause of action under the Texas Tort Claims Act and that no cause of action would lie under the common law because of official immunity. Appellants did amend their pleading, but the factual allegations were identical to the original except for references to the Constitution and other statutes and a claim that legislative consent to sue had been obtained. Appellees then filed a motion for summary judgment based on the amended pleadings, specifically claiming the affirmative defense of official immunity. At that stage, if the uncontroverted summary judgment proof, together with appellants' pleadings, established that the pleaded action was not within the Texas Tort Claims Act and was barred by official immunity, summary judgment was proper.
DID APPELLANTS STATE A CASE?
The Tort Claims Act
The Tort Claims Act provides that a governmental unit such as DHR may be liable for personal injuries caused by the negligence of an employee in the scope of employment if the injuries are caused by a condition or use of tangible property where the governmental unit would, if it were a private person, be personally liable under Texas law. Tex.Civ.Prac. & Rem.Code Ann. § 101.021 (Vernon 1986). Neither appellants' original nor their amended pleading alleged that their injuries were caused by a condition or use of tangible property. They contend, however, that because their allegations implied the use of tangible property, such as telephones, computers and the report forms used in acting on child abuse reports, they stated a claim under the Act. We disagree. While it may be assumed that such property was used by appellees in the investigation, mere usage does not meet the statutory requirement for causation. See Bryant v. Metropolitan Transit Authority, 722 S.W.2d 738 (Tex.App.-Houston [14th Dist.] 1986, no writ); Pierson v. Houston Independent School District, 698 S.W.2d 377 (Tex.App.-Houston [14th Dist.] 1985, writ ref'd n.r.e.); see also, Lowe v. Texas Tech University, 540 S.W.2d 297 (Tex.1976) (Greenhill, C.J., concurring). There is no allegation that the use of property caused any injuries. Appellants thus failed to state a cause of action under the Texas Tort Claims Act.
Immunity
The State is immune from liability for the torts of its officers and agents unless some constitutional or statutory provision allows such liability. Duhart v. State, 610 S.W.2d 740 (Tex.1980); State v. Terrell, 588 S.W.2d 784 (Tex.1979); Lowe v. Texas Tech University, supra; State v. Dickerson, 141 Tex. 475, 174 S.W.2d 244 (1943); State v. Hale, 136 Tex. 29, 146 S.W.2d 731 (1941). No constitutional or statutory provision imposing such liability is applicable to the allegations in this case.
Likewise, State employees whose status or actions may be classified as quasi-judicial are immune from personal tort liability, however erroneous or negligent their actions may be, as long as they act within the scope of their authority and in good faith. Austin v. Hale, 711 S.W.2d 64 (Tex.App.-Waco 1986, no writ); Augustine by Augustine v. Nusom, 671 S.W.2d 112 (Tex.App.-Houston [14th Dist.] 1984, writ ref'd n.r.e.); Baker v. Story, 621 S.W.2d 639 (Tex.Civ.App.-San Antonio 1981, writ ref'd n.r.e.); Richardson v. Thompson, 390 S.W.2d 830 (Tex.Civ.App.-Dallas 1965, writ ref'd n.r.e.); Torres v. Owens, 380 S.W.2d 30 (Tex.Civ.App.-Corpus Christi 1964, writ ref'd n.r.e.). Answers to interrogatories on file and copies of statutes and policies governing *514 the DHR's duties show that appellees Fellers and Womack occupied quasi-judicial positions and were acting within the scope of their authority in conducting the investigation which forms the basis of appellants' suit. Austin v. Hale, supra. In fact, appellants pleaded that they were acting in the scope of their authority. There is no allegation that Fellers and Womack acted in bad faith; only that they were negligent. There is one statement in the pleading that appellees' negligence was intentional and malicious, but it is made in support of and as a part of an allegation of gross negligence and not as an allegation of bad faith. At best, the statement about intentional and malicious conduct is a conclusion. There are no facts alleged which would constitute any evidence of intent to harm or of malicious conduct. Conclusory statements do not constitute effective summary judgment proof. Mercer v. Daoran Corp., 676 S.W.2d 580 (Tex.1984); Brownlee v. Brownlee, 665 S.W.2d 111 (Tex.1984); Crain v. Davis, 417 S.W.2d 53 (Tex.1967); Wilkes v. Mason, 529 S.W.2d 255 (Tex.Civ. App.-Amarillo 1975); S.K.Y. Investment Corp. v. H.E. Butt Grocery Co., 440 S.W.2d 885 (Tex.Civ.App.-Corpus Christi 1969, no writ).
Thus, the record and appellants' pleadings conclusively demonstrated that DHR and Fuller and Womack are immune from the liability claims asserted against them. Austin v. Hale, supra; Augustine by Augustine v. Nusom, supra.
Waiver
Appellants assert, however, that the State has waived its immunity by House Concurrent Resolution 133 which granted permission to bring the suit. We disagree. Consent of the State to be sued does not admit liability or waive the State's immunity to liability. State v. Isbell, 94 S.W.2d 423 (Tex.Comm'n App.1936, opinion adopted); Onoray Davis Truck Co. v. Ford Motor Credit, 690 S.W.2d 40 (Tex. App.-Houston [14th Dist.] 1985, no writ); Fonseca v. State, 297 S.W.2d 199 (Tex.Civ. App.-Waco 1956, no writ). Indeed, the consent to sue in this case expressly provides that it does not amount to such a waiver.
Constitutional Claims
Appellants also argue that they have stated a cause of action because appellees' negligence deprived them of due process and constituted an unlawful invasion of their privacy in violation of the United States Constitution.[2]
The due process clause is not implicated by an official's negligent act which causes an unintended loss of or injury to life, liberty or property. Daniels v. Williams, 474 U.S. 327, 106 S. Ct. 662, 88 L. Ed. 2d 662 (1986); Dent v. City of Dallas, 729 S.W.2d 114 (Tex.App.-Dallas 1986, writ ref'd n.r.e.).
Neither appellants' pleadings nor their response to the motion for summary judgment raises a cause of action for invasion of privacy. Appellees had a legal duty to investigate the sexual abuse report under Tex.Fam.Code Ann. § 34.05 (Vernon 1986 & Supp.1988). There is no constitutionally mandated right to privacy which would prohibit such an inquiry.
CONCLUSION
Because after amendment appellants' own pleadings established an insurmountable obstacle to their recovery, summary judgment was proper.
The judgment of the trial court is affirmed.
NOTES
[1] Tex.Civ.Prac. & Rem.Code Ann. §§ 101.001, et seq. (Vernon 1986 & Supp.1988).
[2] Appellants did not plead a violation of rights under the United States Constitution, but did raise it in their response to the motion for summary judgment.
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144 B.R. 121 (1992)
In re S & D FOODS, INC., formerly known as Consolidated Pet Foods, Inc., a/k/a Consolidated Pet Food, Inc., North American Trading Co., Debtor.
Larry A. LARSEN, Plaintiff,
v.
CONSOLIDATED PET FOODS, INC., a/k/a Consolidated Pet Food, Inc., North American Trading Company, Donald A. Kunkel, Susan L. Kunkel, FBS Business Finance Corporation, United Protein, Inc., Marks and Clare, Escrow Agents, and City of Dodge City, Kansas, Defendants.
Bankruptcy No. 89 B 06041 J, Adv. No. 89 C 0533.
United States Bankruptcy Court, D. Colorado.
August 7, 1992.
*122 *123 *124 *125 *126 *127 *128 *129 G. Appel and M. Guyerson, of Rothgerber, Appel, Powers & Johnson, Denver, Colo., for United Protein, Inc. (Protein).
I. Kaiser and K. Kramer, of Berenbaum & Weinshienk, P.C., Denver, Colo., for Donald and Susan Kunkel (Kunkel).
L. Knowles and J. Powers, of McGrath, North, Mullin & Kratz, P.C., Omaha, Neb., for Larry A. Larsen (Larsen).
J. Logan, of Minor & Brown, P.C., Denver, Colo., for Consol. Pet Foods, Inc. (Debtor/Pet).
MEMORANDUM OF DECISION ON ADVERSARY PROCEEDING COMPLAINT AND COUNTERCLAIM[1],[2]
FRANCIS G. CONRAD, Bankruptcy Judge.[*]
TABLE OF CONTENTS
Page
PROCEDURAL POSTURE ............................................................. 131
FACTS .......................................................................... 131
I. The Parties ............................................................... 131
(a) Larry A. Larsen ....................................................... 131
*130
Page
(b) Consolidated Pet Foods, Inc. ................................................ 131
(c) Donald Kunkel ............................................................... 132
(d) Susan Kunkel ................................................................ 132
(e) United Protein, Inc. ........................................................ 132
II. The Witnesses ................................................................... 132
(a) L. Mulherin ................................................................. 132
(b) N. Minor .................................................................... 132
(c) C. Miller ................................................................... 132
(d) J. Sixta .................................................................... 132
(e) D. Cribari .................................................................. 132
(f) T. Dolfay ................................................................... 132
III. The Background .................................................................. 132
(a) The Pet Food Industry ....................................................... 132
(b) Larsen and Pet within the Industry .......................................... 133
IV. Current Events .................................................................. 133
(a) Preliminary Discussions and Negotiations .................................... 133
(b) The Confidentiality Agreement ............................................... 134
(c) The Merger Agreement ........................................................ 135
(d) Documenting ................................................................. 136
(e) The Merger Announcement ..................................................... 137
(f) The Merger of Operations .................................................... 139
(g) Sharing ..................................................................... 141
(h) The Grant Application ....................................................... 144
(i) Financing the Deal .......................................................... 145
(j) Inventory Buildup ........................................................... 150
(k) Termination of the Venture .................................................. 151
CLAIMS OF THE PARTIES ................................................................ 154
DISCUSSION ........................................................................... 155
I. Standing to Bring Certain Causes of Action ...................................... 155
(a) Pet and Protein ............................................................. 155
(b) Donald Kunkel ............................................................... 155
II. The Major Issues of Contract .................................................... 156
(a) Was there a Contract? ....................................................... 156
(b) Did the agreement to merge result in a Partnership/Joint Venture
Agreement or merely a loan? ............................................... 158
(c) Was there a fiduciary or confidential relationship under Colorado law? ...... 160
(d) Was there a Confidentiality Agreement? ...................................... 161
(e) Was there a breach of the Joint Venture Contract, and of the Confidentiality
Agreement? ................................................................. 161
(f) Was there a breach of fiduciary duty? ....................................... 162
(g) Was there a breach of the Partnership or Joint Venture relationship? ........ 162
(h) Is Pet entitled to contribution from Larsen for debts paid before and
during the pendency of Pet's bankruptcy? ................................. 163
III. Issues Pertaining to Interference with Contract and Prospective Economic
Advantage ..................................................................... 163
IV. Fraud, Misrepresentation, Nondisclosure and other Torts ......................... 165
(a) Fraud, Misrepresentation, and Nondisclosure ................................. 165
(b) Civil Conspiracy ............................................................ 167
(c) Breach of Uniform Trade Secrets Act ......................................... 168
V. Damages â Pet ............................................................. 168
VI. Kunkel's Claims ................................................................. 169
(a) Fraud in the Inducement and Execution ....................................... 169
(b) Civil Conspiracy to Acquire Kunkel's Interest in Pet ........................ 169
(c) Outrageous Conduct .......................................................... 169
(d) Interference with Dodge City Lease .......................................... 170
(e) Interference with York Lease ................................................ 170
(f) Affirmative Defenses ........................................................ 170
CONCLUSION ........................................................................... 170
*131 The present dispute[3] centers upon a monetary contribution in calendar year 1988, claimed by Larsen to be a loan, but by the various defendants to be a capital contribution. Larsen claims the loans are collateralized. The defendants counter with fraud and other causes of action. We hold that Larsen loses his suit for the numerous and various reasons stated in this Memorandum of Decision.
PROCEDURAL POSTURE
Pet filed for bankruptcy protection under 11 U.S.C. §§ 101, et seq. on May 5, 1989. This adversary proceeding was commenced by Larsen through the filing of an original complaint on May 18, 1989 seeking declaratory judgment and other relief. The original complaint has been amended on two separate occasions and a "Second Amended Verified Complaint" naming Protein (formerly Consolidated Acquisitions, Inc.), the acquirer of Pet, and other defendants was filed and served on or about July 10, 1989. The amended complaint served the purpose of having all parties to this action, and two previously initiated State Court actions, in one forum. On August 14, 1989, Protein filed its "Answer and Counterclaims" and shortly thereafter, under Court Order entered on September 25, 1989, Protein and others filed their amended answers and amended counterclaims. Kunkel, on the eve of the trial, added an amended affirmative defense under 15 U.S.C. §§ 1691, et seq.
The present dispute centers around a merger between Pet and Larsen, and upon an alleged capital contribution or loan made by Larsen to Pet during late calendar year 1988. The capital contribution or loans are allegedly collateralized by certain assets of Pet that have been acquired by Protein in the bankruptcy or are encumbered by the liens of FBS Business Finance Corporation (FBS), whose claims have also been acquired by Protein.
FACTS
The facts in this adversary proceeding are uncomplicated but voluminous.
I. The Parties.
(a) Larry A. Larsen.
Plaintiff Larsen is a businessperson who resides in Omaha, Nebraska. He is engaged primarily in freezer storage and warehouse related services (T.17)[4] through corporations and entities Larsen owns. His principal business, Millard Refrigerated Services (Millard), formerly L & B Corporation, d/b/a Millard Warehouse, is also located in Omaha, Nebraska (T.21). Millard is the corporate parent of several separate corporations and partnerships, and provides management, accounting, planning, and legal services for Larsen, as well as other entities owned and controlled by Larsen. One of the services provided by Larsen, via his entities, is the processing of pet foods. Larsen has done this for approximately 15-20 years (T.20).
(b) Consolidated Pet Foods, Inc.
Pet was also involved in the pet food business (T.22), producing and purchasing products from the slaughter industry. Pet upgraded the product it purchased for sale to pet food canners (T.595). It has been in the pet food business for at least four years. It was a single entity company with operations and plants in several states. It is a Chapter 11 debtor under Title 11, U.S.Code.
*132 (c) Donald Kunkel.
Kunkel was the President, Chief Executive Officer, and sole shareholder of Pet (T.594). He is Susan Kunkel's first spouse. He and Susan Kunkel have one child by their marriage.
(d) Susan Kunkel.
She is Donald Kunkel's second spouse.
(e) United Protein, Inc.
Protein purchased substantially all of the assets of Pet at a Bankruptcy Court approved sale on July 28, 1989 (CAI.100, 102). Included in the sale was all of Pet's personal property, including
[a]ll claims, actions, lawsuits, choses in action, and other rights of the Debtor, whether fixed, contingent, matured, unmatured, liquidated or unliquidated, and whether arising pursuant to agreement or in law or equity, and including all claims or rights of the Debtor, pursuant to §§ 544 through 549 of the Bankruptcy Code.
(CAI.102). Thus, Protein is the real party in interest for some causes of action, but not for all of Pet's claims in this proceeding.
II. The Witnesses.
In addition to Larsen and Kunkel, each party called several witnesses, either in person or by deposition, to support their respective positions. We tally only the major witnesses here, but will interlineate our findings with minor players as the facts are processed.
(a) L. Mulherin.
Mulherin, an attorney, is Vice-President and General Counsel of Millard, and personal counsel and financial advisor to Larsen, whose agent he was. Mulherin was an active participant in the events of this adversary proceeding. Mulherin's credibility is one of the keys to the outcome of this matter (T.300-301).
(b) N. Minor.
Minor, an attorney, was personal counsel to Donald Kunkel, and counsel to Pet for over ten years. Minor was an active participant at some points in this matter, and at other junctures he was left out in cold storage. Credibility is not an issue with this witness.
(c) C. Miller.
Miller is a former Vice-President of FBS Business Finance Corporation. FBS, the successor of Columbia Savings and Loan Association (Columbia), was a named defendant in this matter. Miller's knowledge pertains to Pet's financial position before, and during, the events that took place in this adversary proceeding.
(d) J. Sixta.
Sixta, a present employee of Protein, is the former Group Vice-President of Pet. Sixta has substantial knowledge regarding the matters raised in the complaint, the defenses, and counterclaims. Sixta was especially privy to the sales and procurement activities of Pet (T.90).
(e) D. Cribari.
Cribari was Pet's and Kunkel's Certified Public Accountant.
(f) T. Dolfay.
Dolfay is a Millard Vice-President. Although to some extent a minor player, Dolfay's performance during the events which led to the signing of the promissory notes at issue here, and his courtroom testimony and demeanor, make him, like Mulherin, a cornerstone to our findings.
III. The Background.
(a) The Pet Food Industry.
Both Kunkel and Larsen agree that the pet food industry in which they operated is very small and close knit. It contained approximately five or six canners who controlled more than 70% of the pet food market. Some names that we all recognize are Carnation, Gerber, and StarKist. Without business from the top canners, a company has no market for its product (T.142). As Larsen explained, word of insolvency or *133 bad credit can be disastrous to a company in the pet food industry (T.141-142, 691), i.e., "canners won't do business with you" (T.36). Because the number of participants in the pet food business is so small, many deals are made verbally. For instance, both Larsen and Kunkel completed transactions, excluding the matter at hand, without having written contracts. The overall testimony and evidence leads us to conclude that both Larsen and Kunkel were businesspersons who made their own deals, and let their attorneys and accountants work out the details and paperwork later.
(b) Larsen and Pet within the Industry.
In August 1988, just prior to the major events in this adversary proceeding, Pet's position within the pet food industry involved the procuring and purchasing of products from the slaughter industry and upgrading that product for sale to pet canners.
From 1984 to 1988, Pet showed a steady and substantial rise in its sales calculated in pounds. The 1984 sales were 9-10 million pounds; 1987 sales were 18-19 million pounds; and 1988 was up to 29-30 million pounds (T.912).
In August 1988, Pet's payables were current (T.803). Its two largest customers included Carnation and its two largest suppliers were Excel and Monfort (T.911-12).
According to Miller, Vice-President of FBS (Pet's primary pre-petition lender), Pet was believed to be a viable company in spite of operating losses sustained in 1988 from a shipment of contaminated beef (T.886-887).
FBS, via its predecessor, Columbia, had provided Pet with a $2.6 million dollar revolving line of credit (later increased to $3 million in 1988), secured by accounts receivable, inventory, and equipment. In lending industry terminology, it was an asset-based loan, with a good rating for that type of loan. When FBS took over Columbia in November, 1988, the rating was lowered but not to a substandard classification. As will be discussed later, FBS would not finance the money Larsen put into Pet, not because Pet was a risk, but because FBS lent asset-based money, not term money; and term money is what Pet needed to pay off Larsen.
During 1988, Pet was erecting a facility at Des Moines, Iowa. FBS provided no term construction financing for this facility, but intended to finance the receivables, inventory, and equipment once Des Moines came on line (T.902-903). In fact, Pet essentially internally financed the construction in Des Moines (T.596). Pet also had facilities in Amarillo, Texas and Dodge City, Kansas.
Larsen, via his entities, had a facility in Friona, Texas (it was near Amarillo, by Texas geographical standards), Dodge City, Kansas, and Des Moines, Iowa. Additionally, there were plants in Iowa City, Iowa, Sioux City, Iowa (Iowa/Nebraska) and Lincoln, Nebraska (T. 100-101). Bernie Hurley, Kunkel's ex-father-in-law, is the president of Iowa/Nebraska.
One of the key differences between Larsen's operation and Pet's operation was Larsen didn't own product. His entities processed it (T.22), whereas Pet actually purchased the product and resold it (T.23). Nevertheless, both parties competed for the same raw materials (T.913). The overall testimony from all witnesses shows that Larsen and Pet were competitors. In fact, competition between the two was extremely fierce at the Texas and Kansas facilities (T.913). There is no doubt from the overall testimony that Pet's Dodge City plant was to be a new competitor for Iowa/Nebraska (T.595, 917-18) when it came on line.
IV. Current Events.
(a) Preliminary Discussions and Negotiations.
Prior to, or during, August, 1988, Pet was not for sale; was not looking for a partner or an investor in its business; was not attempting to sell any specific plants; and, was not attempting to obtain long term financing for any of its facilities (T.595). Further, there was no industry rumor in August, 1988 that Pet was interested in selling any of its facilities (T.172-73).
*134 Nevertheless, on August 15, 1988, Larsen instructed T. Jackes, one of his employees, to call Kunkel and inquire whether Pet was interested in selling its Dodge City plant (T.21). At the time, Larsen was in need of upgrading, expanding, and diversifying the Dodge City facility to accommodate the needs of his customers (T.596-99, 76). It made more sense to Larsen to acquire Pet's plant rather than both Pet and Larsen having pet food plants in the Dodge City area (T.76). The purpose of Jackes' inquiry was to see if opportunities existed through Pet prior to Larsen expanding his Dodge City facility (T.160).
Although Kunkel told Jackes that Pet had no interest in selling its Dodge City facility, Jackes asked if he and Larsen could visit Kunkel for further discussion of the matter (T.598). Kunkel apparently acquiesced because shortly thereafter Larsen and Jackes traveled to Denver to discuss the matter with Kunkel (T.21).
On August 18, 1988, Larsen and Jackes met Kunkel and Sixta in Denver (T.599-600). While in Denver they proposed that Pet and Larsen start a relationship, not just at Dodge City, but at all their respective locations (T.23). To this end, Larsen proposed that he and Kunkel tour their respective plants (T.601-602). These discussions continued by phone over the next few days (T.24).
On August 24 and 25, 1988, Kunkel and Larsen, accompanied by Cribari, toured their respective facilities, including Pet's Des Moines, Dodge City, Amarillo, and York facilities, and Larsen's Dodge City, Friona, Texas, Omaha, and Des Moines facilities (T.602-603, 76, 78, 24). Larsen and Kunkel travelled in Larsen's private airplane (T.145).
During the tour, Larsen and Kunkel discussed their respective operations (T.25). Additionally, Cribari discussed with Larsen basic concepts for combining his and Pet's operations (T.968). Kunkel also disclosed to Larsen certain financial problems Pet had experienced in prior years, including a loss of approximately $900,000 during fiscal 1987 related to a product quality problem shipped to Spillers in the United Kingdom (T.28), and that Pet had lost approximately $500,000 from February 28, 1988 through August, 1988 (T.28). Larsen told Kunkel his pet food operations had lost approximately $300,000 for the year and that the obvious reason was he and Pet had competed for the same raw materials, thus driving up the cost of those materials (T.605-606).
Larsen was able to estimate the value of Pet's plants because of his experience in the construction business (T.75). Based on this valuation; a financial statement for Pet for the year ended February 28, 1988; and conversations with Cribari and Kunkel, Larsen concluded that Pet was a viable operation and had an approximate net book value of $1 million (T.29-30). At the conclusion of the August 24 tour, Larsen, Kunkel, and Cribari met with Mulherin in Omaha (T.301). At this meeting, Larsen told Kunkel that he wanted to do a deal with Pet (T.606). Larsen outlined a deal where Pet would contribute its assets to a new entity, Larsen would loan Kunkel $1 million that Kunkel could infuse into the new entity, and Larsen would contribute an additional $2 million in cash to the new entity (T.303). It was Cribari's understanding that the transaction would result in both Larsen and Kunkel being 50% owners of Pet (T.968); however, no final agreement was reached at that time (T.606).
Larsen and Kunkel met again on August 30 or August 31, 1988 (T. 607). During this meeting, they had more discussions about combining their pet food operations (T.608), and further discussed Pet's net book value (T.29). Mulherin was later assigned by Larsen to follow up on the Pet transaction on a day-to-day basis (T.85); although at this date(s), we cannot find a "deal" had been made.
(b) The Confidentiality Agreement.
Mulherin was asked to prepare a Confidentiality Agreement (T.302, 354) because most of Pet's business information that Larsen wanted to review as part of the merger was proprietary and confidential (T.358). Minor first became aware of the proposed deal between Larsen and Pet in *135 August, 1988 when Kunkel asked him to review the Confidentiality Agreement (T.569-70). Minor revised the Confidentiality Agreement proposed by Mulherin prior to its execution (T.570; CAI.6). Although Minor was sent a copy of the Confidentiality Agreement, on August 31, 1988, by Mulherin's secretary, Mulherin testified that he did not know at this time who Minor was (T.355). On several occasions during the trial we had problems with Mulherin's memory. In our view, it was a selective memory. This Court has heard many times the defense "my secretary (or employee) sent it, but I didn't know about it" in any number of adversary proceedings. But, who is ultimately responsible for work performed by an employee â the superior or the employee? We think the superior. In Mulherin's case, he may have been too busy to worry about who received, what was in his view, an "insignificant" confidentiality agreement, but we are not. We find that Mulherin knew as of August, 1988 that Minor was Pet's and Kunkel's counsel. Moreover, the attorney-client relationship between Minor, Pet, and Kunkel was a continuing one; Mulherin could not reasonably conclude otherwise because he had no knowledge to the contrary despite his assumptions and conclusions in later testimony.
On September 1, 1988, Larsen executed the Confidentiality Agreement, acknowledging that both he and Kunkel would be touring and discussing each other's facilities; would be reviewing confidential business information; and, that all information obtained would be held in confidence (T.83). The Confidentiality Agreement was intended to protect all proprietary information including customer lists (T.1231-32). The Confidentiality Agreement provides in part:
Each party agrees and acknowledges that any proprietary information which it receives from the other party must be maintained in the strictest confidence and used solely and only for the purpose of evaluating the desirability of proceeding with the Acquisition.
(CAI.6) Kunkel received and executed the Confidentiality Agreement in the first or the middle part of September, 1988 (T.704). Although the Confidentiality Agreement names Millard and Pet as parties (T.302-303), it would bind not only the corporate entities but also their agents and employees. The relationship that the Confidentiality Agreement created between Larsen and Pet, and their agents, is difficult to compartmentalize. While it is clear there was a euphoria of trust prior to the executions of the Confidentiality Agreement, its execution paved the way for an exchange of information (mostly flowing from Pet and Kunkel to Larsen), which, if revealed, would place the other at a competitive disadvantage not only between themselves, but also within their industry.
(c) The Merger Agreement.
Although the general terms of the deal between Pet and Larsen were outlined on August 24 (T.490), it was not until September 10, 1988, at a meeting between Kunkel and Larsen in Omaha (T.609), that Larsen proposed that the two entities merge as 50/50 partners. Larsen offered to infuse $2 million of capital into the new entity (T.609). Kunkel countered that from the deal he wanted $2 million for himself personally (T.610). Kunkel accepted Larsen's offer and Larsen and Kunkel shook hands on the deal (T.611). Thus, as of September 11, 1988, Larsen and Pet (via Kunkel) had an agreement to merge. Larsen made it clear to Kunkel at this time that they had cut a deal and that they should leave all the legal and accounting work up to the appropriate professionals (T.616). Larsen told Kunkel that Mulherin would handle all of his legal and accounting responsibilities. Kunkel likewise informed Larsen that Cribari and Minor would be handling Pet's legal and accounting affairs (T.614). Thus, the deal between Larsen and Pet was substantially similar to a prior deal between Larsen and Iowa/Nebraska, i.e., based on a handshake, with legal and accounting personnel to follow-up (Depo. of Hurley, pp. 10, 11).
There is no doubt Larsen intended to bind himself with Kunkel and Pet to a merger of some sort. A deal was struck, with the details to be ironed out later. *136 There was no reservation on either side. We make this finding not only from the direct evidence submitted by the parties, but also from watching both Kunkel and Larsen testify. Although Kunkel appeared to be a beaten man due to the financial difficulties that were a direct result of this transaction, we find him to be honest and forthright. And, although Larsen appeared to have ice-water in his veins, we find him no less straightforward. What we have here are two businesspersons, one less sophisticated than the other, who made a deal and left it for their employees (Mulherin and Minor, as examples) and agents to work out the details. What the deal was is subject to dispute. Kunkel looked at it as a partnership, and the evidence shows he had good reason to believe it was a partnership.
Immediately thereafter, Larsen introduced Kunkel to both Mulherin and Dolfay as his "new partner" (T.613). Larsen and Kunkel then flew in Larsen's private jet to Larsen's facility in Batavia, Illinois. Again, Larsen introduced Kunkel to Batavia's general manager as his "new partner" (T.16). Upon returning from the trip to Batavia, Kunkel announced to his spouse that "the deal is done, we've merged" (T.1067), and that, thereafter, he would be responsible for managing 10 to 12 plants and would be traveling extensively because of the deal (T.1068).
There was, however, no written partnership agreement between Pet and Larsen (T.725). There was only an oral agreement and a handshake (T.721-22), with an intent to later document the terms of the deal (T.723).
(d) Documenting.
Mulherin started to document the deal between Larsen and Pet just after September 11. This is reflected by a draft Letter of Intent, dated September 14, 1988, and an accompanying Asset Purchase Agreement (T.31-32, 75, 304; L.4, 6, 7) and supplement to the September 14 Letter of Intent which incorporated Larsen's agreement to pay Kunkel $500,000 blue sky (T.32).
On September 19, Mulherin and Minor met with Cribari, B. Wells of Minor and Brown, and Dolfay and J. Marr, both employees of Larsen, to discuss the September 14 Letter of Intent (T.483). At this meeting, Mulherin insisted the merger be based on book value so that the debits and credits of the deal added up. As we recall from the testimony, Mulherin wanted to determine Pet's book value so that: (1) the loan amount from Larsen to Kunkel could be determined, and (2) a determination could be made about whether Kunkel would need to contribute Pet's Dodge City facility, worth approximately $500,000, which Kunkel owned individually, to make up any shortfall in Pet's book value (T.981-83).
Based in part on Cribari's and Minor's difficulty in receiving responses and revisions from Mulherin (T.969-71), the Letter of Intent was not finalized until December 1, 1988. In fact, Mulherin had not commenced revising the Letter of Intent until the morning of November 28 (T.439). Mulherin prepared the December 1 Letter of Intent (T.375-76) and dealt directly with Minor regarding its terms (T.467). According to Mulherin, prior to obtaining Kunkel's signature on the December 1 Letter of Intent, Mulherin apprised Minor that he would be doing so. Mulherin, however, did not send Minor a copy of the final Letter of Intent (T. 376); an inaction on Mulherin's part which we find inexcusable.
The written details, as documented in the December 1 Letter of Intent, made only one major change to the September 11 agreement (T.721, 733). It reflected a reduction in Pet's net book value from $1 million to $500,000 (T.84-85, 69-70). This change had been agreed to previously on November 2. The change reflects our view that a deal had been made back in September because it was an area that the parties had agreed was flexible; otherwise, all other terms remained the same from September.
Larsen and Kunkel admit that the December 1 Letter of Intent summarized the deal between the parties (T.69, 283, 480, 664-65; L.43). The December 1 Letter of *137 Intent was signed by both Kunkel and Mulherin, on Larsen's behalf (T.69, 48; L.23). Although the December 1 Letter of Intent (CAI.18) was addressed to Kunkel as President of Pet, and was signed by Kunkel individually, it was intended to, and did, bind both Pet and Kunkel individually (T.519).
(e) The Merger Announcement.
Prior to the signing of the December 1 Letter of Intent, we look back to September 15, 1988. At that time (four days after agreeing to merge), Kunkel and Larsen mailed and telexed a written announcement to their customers and suppliers in the pet food industry, including Spiller, Acacia Foods, Carnation, Kal-Kan, Quaker Oats, Ralston, Excel, Monfort, and Iowa Beef Products, announcing the amalgamation of their businesses (T.85-88, 183-4; CAI.15).
Sixta drafted the announcement (T. 914; CAI. 15). But prior to sending it, he faxed a copy to Larsen for his approval and changes, if any. Larsen in fact made changes to the announcement to clearly identify himself as Chairman of the Board of the combined companies. Larsen also approved the final version of the announcement before it was sent to customers and suppliers (T.916-17). Because the announcement is important to an understanding of the parties' agreement, we recite it in full:
I would like to take this opportunity to inform you of the merger between Consolidated Pet Foods and Millard Refrigerated Services pet foods operations. The merger will result in one company which will be Consolidated Pet Foods, Inc. The result will be a much larger and healthier company.
The management of the company will be as follows:
Larry Larsen â Chairman of the Board
Don Kunkel â President and C.E.O.
Gene Bedford â Executive Vice-President
Joe Sixta â Group Vice-President Sales
Ron Schmehr â Vice-President Operations
Joe Leamen â Vice-President Transportation/Quality Control
Consolidated Pet Foods, Inc. will now be able to service the pet food industry in many areas and intends to continue to be an asset to both the packing industry and pet food industry. The direction of Consolidated is to service the industry and add value, not cost.
Today, truly we are a "consolidated" pet food company servicing what we feel is the future of this business. The "new" Consolidated will allow us to better address the needs of both suppliers and customers.
Thank you for your continued support, Don Kunkel
President & C.E.O.
It was the general consensus in the industry that the merger between Larsen and Pet would be beneficial to both entities. G. Merrick of Hereford Bi-Products in Texas recalls a visit by Larsen in the fall of 1988, at which time Larsen explained what was going on between him and Pet (Depo. of Merrick, pp. 15-16). Merrick was not surprised by the news of the merger because Larsen and Pet competed geographically, and, looking at a map, it made sense that they would try to work together (Depo. of Merrick, p. 18). Likewise, B. Stanley, Larsen's pet food operations manager, believed the merger between Pet and Larsen was a good business decision because they were competing against one another for product, and by merging, the competition would be eliminated (Depo. of Stanley, pp. 78-79). R. Sutter, the manager of Larsen's Friona operation, also agreed that the merger between the companies was a good business decision because they had previously competed in the same cities (Depo. of Sutter, pp. 42-43). An additional benefit of the merger was that larger volumes of product could be run through fewer plants (T.821).
Both Kunkel and Larsen announced the merger to their respective employees. Kunkel announced to both Sixta and G. Bedford, Pet's chief financial officer, that *138 Pet and Larsen would be combining their operations (T.951), and that they should consider Larsen's personnel part of Pet's organization and should share all information with them (T.951).
Kunkel announced the merger to C. Miller of FBS (formerly Columbia Savings) on September 15 (T.861-2). He told Miller that Larsen and Pet had reached an agreement to merge and that Larsen would be contributing $3 million in capital into Pet (T.862). Kunkel told Miller that the deal with Larsen was a handshake deal, but that documentation would be created in due course (T.892-3). Miller was insistent that Kunkel used the term "capital" to describe the infusion of cash. To do otherwise would violate the loan agreement Pet had with FBS.
Also on September 15, Larsen met with his plant managers (T.89) and announced the deal with Pet (Depo. of Stanley, pp. 18-19). According to Don Sutter's contemporaneous notes taken at the September 15 managers' meeting, Larsen announced that Millard was a growing company and cited his involvement with Pet as an example of growth. Specifically, Larsen stated that with the purchase of Iowa/Nebraska, his employees had increased from 550 to 700, and that with his involvement in Pet, there were now 1,000 employees and a total of 19 plants. Additionally, Larsen announced there were now four company presidents; one for his warehouse group; one for the Pet group, being Kunkel;[5] one for Millard Processing Systems, a bacon processing facility; and one for Iowa/Nebraska pet foods, being Hurley (Depo. of Sutter, pp. 35-38). Larsen's announcement at the September 15 plant managers' meeting verifies that he believed he and Pet had a deal; if not as of September 11, certainly four days later at the managers' meeting.
A glimpse of Larsen's motives in associating with Pet may be seen by considering statements he made at the September 15 managers' meeting. At that meeting, according to Sutter, Larsen announced that he was considering buying a cold storage freezer in York, Nebraska and Des Moines Cold Storage. Both of these freezer facilities were doing business with Pet. If Larsen could get control of Pet, and pull Pet's business out of those two freezers, it would hurt their (Pet's) business such that Larsen would be capable of purchasing them (Pet) (Depo. of Sutter, pp. 38-39). This would increase Larsen's cold storage and warehousing capabilities.
Further, according to Sutter, Larsen announced on September 15 that his Omaha pet food operations were to be transferred to Pet's Des Moines facility; his Friona operations to Pet's Amarillo facility; his Dodge City operations to Pet's Dodge City facility; and his Lincoln operations to Pet's York facility (Depo. of Sutter, pp. 39-40). After transferring his pet food operations to Pet, Pet would then store its product in his warehouses, again increasing Larsen's warehousing business (Depo. of Sutter, p. 40). Admittedly, these operations were not a substantial part of the various facilities' capacities; nevertheless, it is evidence of the fact a deal was made.
After the September 15 plant managers' meeting, Larsen and Kunkel made joint sales calls to some of their respective customers, including Carnation, StarKist, Kal-Kan, and Gerber, to discuss additional services that the combined company would offer, including buying, selling, and processing meat products (T.89-92). Larsen believed these trips were a good opportunity to show customers the possibilities of the new company (T.186). Moreover, September is a critical month in the pet food industry because contracts for the last quarter are negotiated during that month (T.254).
Larsen and Kunkel also visited with many of their suppliers and customers in the industry to announce the merger. On September 19, Larsen and Kunkel visited Carnation in Los Angeles, the canner of Friskies pet foods (T.617), to announce the merger of Pet's and Larsen's pet food operations. *139 Carnation was purchasing approximately 25 million pounds of mechanically deboned beef (MDB) and 50 million pounds of red meat from Pet each year. Around August, 1988, Pet's annual volume was approximately 150 to 170 million pounds (T.617-19). Carnation was an important customer to Pet. R. Layton, Senior Vice President in charge of purchasing, distribution, and administration at Carnation, and C. Regan, also of Carnation, recall that at the September 19 visit, the merger announcement (CAI.15) was distributed, and Larsen said he would be investing in Pet (Depo. of Layton, pp. 6, 10, 11, 14, 21-24) (Depo. of Regan, p. 11; T.620, 90-91).
Larsen and Kunkel also met with Kal-Kan on September 19, and had basically the same discussions (T.626). J. Jurczak, purchasing manager of meats for Kal-Kan Foods, recalls that at the September 19 meeting, Larsen and Pet announced they had put their businesses together and tried to solicit business from Kal-Kan. Jurczak also remembers the announcement (Depo. of Jurczak, pp. 6, 10-13).
Larsen later arranged a meeting with Gerber, one of his customers. Gerber and Pet were competitors (T.944). Larsen controlled this meeting and informed Gerber that he and Pet were rolling up their pet food operations and that as part of that effort, Larsen would be discontinuing its freezer operation in Dodge City. This would have an adverse impact on Gerber (T.93-95, 629; CAI.94). Gerber cut short the meeting because while Larsen was soliciting Gerber's business, Pet's people were trying to woo Gerber's customers. Kunkel and Larsen met with G. Clain, the Chairman of Gerber (Depo. of Clain, pp. 5-6). Clain recalls that, at the meeting, Larsen disclosed that his pet food operations had merged with Pet's, and that the pet food freezing services previously provided by Larsen would henceforth be provided by Pet (Depo. of Clain, pp. 9-11). Larsen admits that he told people in the last quarter of 1988 that he and Pet had a new company (T.279). Larsen further explained to Clain that he would no longer have any function in the pet food business but that all of his pet food business would be channeled through Pet (Depo. of Clain, pp. 11-14). It appeared to Clain that Larsen and Kunkel had already reached an agreement when they made the joint presentation (Depo. of Clain, pp. 14-15). Gerber had previously received a copy of the announcement.
Thereafter, on October 10, Kunkel and Larsen met with J. Bierce of StarKist in Los Angeles, again announcing the merger (T.187, 630). Approximately two weeks later, Kunkel and Bierce took a tour of both Pet's and Larsen's facilities (T.630-31).
During the fall of 1988, Kunkel often used Larsen's private plane, with Larsen's authorization, for their mutual purposes, including taking representatives from Kal-Kan and StarKist on a tour of Pet's facilities (T.184-85, 749). The primary objective of the tour with Kal-Kan was to market Pet and attempt to convince Kal-Kan to buy product from Pet (T.873).
In late 1988, Larsen also arranged a meeting between himself, Kunkel, and T. Dittner, a partner in Cactus Feeders Company, to open the door for Pet to purchase dead animals from Cactus Feeders (T.113-115).
In October, 1988, Sixta, Kunkel, Larsen's accountants, and Mulherin also met with representatives of Polish Ocean Liners, who provided the transportation function to Pet for export business. They discussed the merger between Pet and Larsen and how it would benefit Polish Ocean by increasing the amount of containers Pet shipped overseas (T.431, 922-24). Although documentation had not been completed at the time of the Polish Ocean meeting, according to Sixta and Larsen's people he dealt with, the merger had been completed (T.954).
(f) The Merger of Operations.
Kunkel's duties with Pet were primarily in operations, although he was its Chief Executive Officer. After September 11, and the merger, his duties changed. He reorganized and phased-out operations of both Pet and Larsen. Kunkel traveled extensively as part of this phase-out process (T.633). During the last quarter of 1988, *140 Kunkel managed and controlled both Pet's and Larsen's facilities (T.795-96). Although Larsen disputes that Kunkel was running his pet food operations (T.1213, 1215), the deposition testimony of B. Stanley, whom Larsen admits was a loyal and truthful employee, is to the contrary.
Stanley was the manager of Larsen's pet food operations. His duties included monitoring product quality, new product acquisition, new tonnage acquisition, customer service for all of Larsen's plants (Depo. of Stanley, p. 7), and overseeing the daily operations of the individual plant managers at each location (Depo. of Stanley, pp. 9-10). Stanley's employment was terminated on December 31, 1988 (Depo. of Stanley, p. 7), by Mulherin, who said that because Larsen was no longer processing pet food products at his plants, but rather at Pet's plants, Stanley was no longer needed (Depo. of Stanley, pp. 12-13). Larsen told Stanley that after he was terminated, Kunkel would run all the pet food operations (Depo. of Stanley, p. 64). This is consistent with Kunkel's testimony that, as of September, 1988, he was in charge of both Larsen's and Pet's pet food operations.
In early November, Larsen prepared and provided to Kunkel an organizational chart outlining the new entity's relationship with Millard. (T.821; CAI.2). Kunkel objected to the chart because it did not reflect Larsen and Kunkel as full partners (T.676); but rather, reflected Pet as one of Larsen's wholly-owned entities. Kunkel discussed his objections with Larsen (T.852-53, 855). Based on his observations of Larsen and Kunkel, Miller likewise believed that Kunkel and Larsen were partners (T.883-84). The organizational objection raised by Kunkel seemed to go nowhere with Larsen. But Kunkel did not adequately explain it to us either. Nevertheless, we are still left with the firm conviction that the objection did not sour the "done deal."
Additional organizational changes were made from an accounting standpoint; specifically, Larsen's own accounting records. Millard's general ledgers contain intercompany accounts set up for companies owned or controlled by Larsen (T.550). During October 1988, Larsen created an intercompany account and an investment account for Pet (T.551-553; CAI.129). This treatment is in accordance with a belief that an investment had been made.
Kunkel and Larsen evaluated all of their respective geographical areas to decide whether to close a facility. During weekly conference calls with managers, Larsen would set target dates for transferring his closed operations to Pet (Depo. of Sutter, pp. 83-84).
Kunkel and Larsen jointly decided to close Larsen's Omaha and Des Moines facilities, and move Larsen's equipment into Pet's operations (T.750). J. Leaman, Pet's Vice President of operations (Depo. of Leaman, pp. 7, 12), understood that Larsen was discontinuing his pet food operations in Lincoln, Dodge City, Omaha, and Des Moines, and that all of that product would be processed at Pet's facilities. Larsen did close these plants and product was transferred (Depo. of Leaman, pp. 60-61, 30).
Steps to phase-out Larsen's Omaha and Des Moines operations commenced in September, 1988 (Depo. of Stanley, p. 27). Leaman discussed with Stanley, around September 28, in Omaha, discontinuing Larsen's operation in Omaha and processing that product in Pet's Des Moines plant (Depo. of Leaman, p. 47). Larsen's pet food operation in Des Moines was shutdown at the same time Pet's Des Moines facility came on line. The Larsen Des Moines shut-down created more product volume for Pet to run through its facility. Larsen also stopped pet food processing at Iowa/Nebraska and shifted all product to Pet's Des Moines facility (Depo. of Hurley, p. 18). By closing his plants, Larsen provided much of the start-up product for Pet's Des Moines facility (T.259-60).
Prior to the Des Moines start-up, Stanley put Leaman in touch with Levich, a Larsen employee in Omaha, to make arrangements for Pet's trucks to transport Larsen's product from Omaha to Des Moines (Depo. of Leaman, pp. 66-67). Thereafter, Leaman worked closely with Levich in getting product from Sioux City to Des Moines for the *141 start-up of the Des Moines operations (Depo. of Leaman, p. 68).
In the latter part of December, 1988, Larsen and Kunkel also jointly decided to sell Pet's Greyhound Division, shut down Pet's Amarillo plant, and expand Larsen's Friona operation (T.635). In August of 1988, Kunkel did not intend to close Pet's Amarillo plant (T.635), but had made the decision to diversify the facility (T.735-35). But, there was also testimony that the Amarillo plant was constantly being evaluated for profitability prior to August, 1988. After the merger, Kunkel thought the Amarillo facility could become profitable by rolling it together with Larsen's Friona operation, thus increasing volume (T.738-39). Larsen, however, demanded that the Amarillo plant be closed (Depo. of Leaman, pp. 27-28, 82). Amarillo was closed the week of January 10, 1989 (T.636-37, 987-88; Depo. of Sutter, p. 88). Larsen announced the closure of Amarillo to the staff (Depo. of Stanley, pp. 44-46). This control by Larsen supports many of Pet's and Kunkel's affirmative defenses and counterclaims.
Kunkel believed that the Greyhound Division was a growing industry. He was optimistic about its potential (T.637-38, 842). Although Kunkel wanted to keep the operation going, Larsen disagreed, emphasizing his interest in enhancing the Friona operation (T.638-39). The Greyhound Division was sold in the latter part of December, 1988 (T.639).
After September, 1988, there were daily discussions in Pet's offices in Denver regarding merging operations. Leaman met frequently with Levich, Stanley, and B. Smola (a Larsen employee) to discuss how the plants would operate after the merger (Depo. of Leaman, p. 40). Leaman also discussed with Mulherin, in September of 1988, and with D. Miller, Larsen's employee in charge of bacon processing, on October 21, 1988, joint transportation opportunities between Larsen and Pet (Depo. of Leaman, pp. 44-45, 64).
Prior to September, 1988, Pet did not store product in Larsen's warehouses because they were competitors. After September, 1988, however, Pet started storing product in Larsen's warehouses (T.106-107). Pet became a customer of Larsen only because of Larsen's 50% interest in Pet (Depo. of Sutter, pp. 22-23). According to Larsen, Pet was going to utilize his cold storage warehouse in every location where Pet had a facility (Depo. of Sutter, p. 31). Pet's storage of products at Larsen's facilities benefitted both parties because Larsen had extra warehouse space and Pet had product (Depo. of Sutter, pp. 33-34).
Pet started storing product in Larsen's warehouses in September, 1988. Larsen requested that Pet move its inventory into his warehouses to keep all warehousing costs "in the family" (T.690). To avoid third-party storage costs, Pet went so far as to transport product from Dodge City, Kansas all the way to Larsen's Friona, Texas facility. Although additional freight costs and in-and-out charges were incurred, Larsen wanted to keep all product within the organization (T.690). Pet also transported product from its Amarillo facility to Friona. This seemed ridiculous to Sutter because there was freezer space available in Amarillo and Pet did not have to incur the added cost of transportation (Depo. of Sutter, pp. 21-22).
(g) Sharing.
Larsen and Kunkel also discussed personnel, including hiring and firing of employees (T.639). Larsen was not impressed with Bedford, Pet's Vice President in charge of finance, and did not think Bedford had a place in the new entity. Larsen suggested that Kunkel fire Bedford, and Kunkel reluctantly did so in the latter part of December, 1988 (T.640-41, 819). Kunkel had never planned to fire Bedford before that time, and without Larsen's suggestion, would not have done so (T.641). In early November, Kunkel received a position description of a Senior Vice President, Legal and Financial (T.675; CAI.2) that showed Mulherin as the Senior Vice President, Legal and Financial. This position was similar to that which Bedford held at Pet, and which Mulherin had told Miller and Kunkel *142 he was taking over (T.820). Kunkel was shown as the President of Pet.
In addition to firing Bedford, other personnel changes were made. Stanley, Larsen's manager in charge of all pet food operations, was directed to report directly to Sixta and Kunkel on a day-to-day basis (T.634, 810). Levich, of Iowa/Nebraska, also reported to Kunkel (T.811). Additionally, employees of Iowa/Nebraska were put on Pet's Des Moines payroll (T.724-725). Further, Kunkel and Larsen agreed that Leaman would be the Vice President for the mid-west division of the new entity, in charge of pet food operations in Iowa City, Sioux City (Iowa/Nebraska), Des Moines, and York. Also, Pet would be taking over the management of Larsen's pet food operations. Larsen provided Pet with a list (Leaman's Depo. Exhibit 52) of employees whom Larsen recommended Pet hire or were available for hire if Pet needed them. Pet did hire various Larsen employees at its operations (Depo. of Leaman, pp. 29-34, 41).
As part of the combination of their operations, Pet and Larsen also shared their manufacturing equipment. In late 1988, Kunkel provided Leaman with a complete list of equipment belonging to Larsen, which was to be delivered to Pet (Depo. of Leaman, pp. 31-32; Leaman's Depo. Exhibit 52; CAI.58). Additionally, Stanley was instructed by Larsen to transfer equipment to Pet's plants (Depo. of Stanley, p. 23). Significant amounts of Larsen's equipment were transferred to various Pet facilities during September and October (T.109-110; Depo. of Leaman, pp. 33, 53). The equipment included nearly all of Larsen's pet food equipment and anything else that Pet requested (Depo. of Stanley, p. 23), including certain plate freezers owned by Larsen, which were transferred to Pet's York, Nebraska facility (Depo. of Leaman, p. 31). Larsen no longer needed the equipment because he would no longer be processing pet foods at his plant (Depo. of Leaman, p. 34).
Larsen specifically instructed Stanley to transfer all of the pet food equipment at his Omaha and Des Moines facilities to Pet's facilities because Larsen's product was to be processed at Pet's plants. Stanley was instructed by Larsen to work with Kunkel on this matter (Depo. of Stanley, pp. 24-25). Stanley met with Pet employees Leaman, I. Clark, and R. Mueller, on September 28, 1988, in Omaha, to discuss the equipment transfer and when Pet would start servicing Larsen's Omaha accounts (Depo. of Stanley, pp. 31-33). There was no written agreement or lease concerning the equipment transfer (T.110).
Prior to September, 1988, Larsen had never lent any equipment to Pet because they were competitors (T.111-13). Larsen admits that he made the joint sales calls with Kunkel, loaned equipment to Pet, and advanced money to Pet to "get the new company started and financed" (T.264-65).
Pet also shared its financial, banking, and customer information with Larsen. On November 1, 2, and 3, R. Ferdig, a CPA who performed accounting services for both Larsen individually, and the Millard companies since 1969, looked at Pet's books and records to determine their credibility and to determine Pet's September 30 book value, as contemplated by the September 11 agreement (T.33, 521-25, 316).
The book value determination was necessary because it would drive the amount Kunkel would contribute to the new company (T.492). Larsen had told Kunkel that when his accountants were through making adjustments to Pet's books, Larsen and Kunkel would make whatever adjustments were necessary in their deal (T.753). Larsen thought the book value amount was Kunkel's responsibility; and in our view, it was why he didn't originally verify it when he "sealed" the deal with Kunkel.
Ferdig's analysis began with Pet's balance sheet, dated August 31, 1988, which reflected a net book value of $999,449.46 (T.525; L.9) Ferdig was provided access to, and looked at, Pet's general ledger. Specifically, he looked at the accounts receivable, accounts payable, and bank reconciliations (T.527, 532-33; L.14, 15). Ferdig and Mulherin were also provided access to Cribari's working papers (T.960-61). Ferdig *143 was not denied access to any documents that he requested to see (T.548).
On November 1, Ferdig determined that Pet's net book value was overstated by at least $457,000 and was actually closer to $500,000 than the $1 million originally estimated by Kunkel (T.40, 528). Additionally, Ferdig suspected other problems with Pet's books, as reflected in notes made during his examination (L.14, 15). Based on this information, Kunkel volunteered to contribute the $500,000 of blue sky he was to receive from Larsen to the new entity to make up the shortfall (T.40-41, 320-1; L.6).
Ferdig again examined Pet's books the week of November 14 (T.531). During this trip, Ferdig prepared a September 30 trial balance from Pet's general ledger, and prepared working papers documenting each of Pet's asset and liability accounts (T.532; CAI. 65). When he left, Ferdig took a three foot high pile of papers with him to Omaha, including copies of all Pet's general ledgers (T.532). All the information used by Ferdig in his analysis was obtained from Pet and not from any outside sources (T.536-7).
Dolfay, Larsen's person in charge of marketing and business planning, was sent to Denver in October, 1988, by Larsen, to direct and assist Pet in organizing a marketing program and formulating a business plan (T.1177). Prior to September, 1988, Larsen had not sent any of his personnel to assist Pet because he and Pet were competitors (T.107, 1177).
Dolfay spent September 19 and 20, 1988, and two days before Thanksgiving, at Pet's offices (T.1166) directing and assisting Sixta in preparing a written sales and marketing plan (T.924-25; CAI.59). Dolfay was shown Pet's sales strategy and forecasts, including both the actuals for 1988 and the projections for 1989, by plant, by customer, and by target customers for 1989. This information included plans to increase sales to various customers and product development. Sixta provided this information to Dolfay in mid-December, 1988. Sixta testified he was reluctant to put this information on paper because he had no control over where it was going, and because this information was confidential and proprietary (T.925-26). The information would never have been shared with Dolfay, Larsen, or Millard prior to August, 1988 (T.926-8; CAI.41, 42, 45, 46, 47, 50, 59). Sixta's last involvement with Dolfay was about December 12, 1988 (T.931). Dolfay, however, signed two purchase orders on behalf of Pet during January, 1989 (T.1167-68), after Larsen had decided Kunkel was not to be part of the deal.
In the fall of 1988, Dolfay also prepared a business plan for Millard (T.249; CPF. 45). The business plan refers to Millard and Pet as sister companies (T.251) and discusses Pet throughout (Depo. of Sutter, pp. 71-72).
Pet disclosed other information in addition to that shared with Dolfay. In September, 1988, Sixta and Levich discussed merging their operations, the fact that they would be working very closely together, and the sharing of scheduling and procurement information (T.918). During these conversations with Levich, Sixta disclosed Pet's customer base, who it was selling to, the types of products it was selling, and the prices it was receiving for various product. Again, this information had not been previously disclosed because Pet and Iowa/Nebraska were competitors (T.918-19).
At the September, 1988 Las Vegas American Meat Institute convention, Kunkel and Sixta met with Levich and Hurley and again shared purchasing information, sales information, contract information, production information, and marketing information (T.920). From September, 1988 to February, 1989, Sixta was in daily contact with Levich discussing sales, pricing, customers, combining transportation, and other business information (T.951-52).
Larsen was also provided access to Pet's profit sharing plans, worker compensation or insurance claims, financial statements, certified audits, interim financial statements, employment agreements, vendor agreements, and service agreements (T.307-309, 961, 311, 315, 374-75).
During Leaman's meetings with Larsen's representatives, he provided information to *144 them about Pet's operations and allowed them to tour Pet's facilities and watch production procedures, and on November 14, Leaman showed Levich how to wash tripe for export (Depo. of Leaman, pp. 68-69), all of which Leaman considered confidential information. Likewise, Leaman disclosed Pet's pricing structure and customer lists (Depo. of Leaman, pp. 55-57).
Some of Larsen's customer contracts were transferred to Pet for handling, including Excel, which was transferred at Larsen's instruction. Stanley informed Kunkel of the Excel contract transfer on December 19, 1988. Stanley did not have to explain to Excel why the contract was being transferred because it was well known in the industry that Pet and Larsen had merged. Also, after Larsen ceased his Omaha pet food operations, his customers, including Beef Nebraska, South Omaha Packing Company, and Shannon Packing Company were serviced by Pet. Likewise, in October or November of 1988, when Larsen shut down his Des Moines and Dodge City operations, equipment and customers, including Kal-Kan, were transferred to Pet (Depo. of Stanley, pp. 25-41).
Miller first met Mulherin on September 27, 1988. Miller understood that Mulherin was Larsen's point man who would be overseeing Larsen's investment in Pet, reviewing Pet's operations, and generally providing financial and administrative input. Mulherin told Miller that he was to be the chief financial officer of the new entity and the person in charge of the entity's banking activities (T.371, 479, 863-64).
On September 27, Miller discussed Pet's banking relationships with Mulherin. Miller reviewed the audited financial statements of Millard and Larsen that were provided by Mulherin. Mulherin requested that Miller keep the financial information discreet and not talk about it with anyone from Pet because it was confidential information (T. 866-67). Prior to discussing Pet's banking relationships with Mulherin, Miller had never discussed Pet's banking relationships with any other company Pet had done business with because it was privileged and confidential information. Miller disclosed the information to Mulherin only because he was authorized to do so by Kunkel (T.867-68). In late October, Kunkel also sent Mulherin copies of Pet's promissory notes due Columbia Savings (T.479-80).
Miller also discussed with Mulherin the Columbia letter agreement that had increased Pet's operating line to $3 million. It included a summary of the terms and conditions of Pet's credit facility (T.868; CAI.96). The letter agreement sets forth restrictions on borrowing by Pet that specifically prohibited any borrowing other than normal trade debt without Columbia's approval. Mulherin reviewed the letter agreement (T.868-69). We find from our opportunity to observe Mulherin that he had the financial sophistication to understand the significance of the letter agreement re: debt restriction.
(h) The Grant Application.
On behalf of the new entity created by the merger between Larsen's and Pet's pet food operations, a grant application was filed with the State of Nebraska. J. Marr, a Larsen employee, began working on the grant application as early as September 19, 1988 (T.418-19). The purpose of the grant application was to obtain an interest buy-down from the City of York for the purchase of plate freezers for Larsen's and Pet's York, Nebraska plant (T.121). The City of York, however, would not advance the funds until a new corporation was formed to apply for the grant. The corporation formed was CPF-MRS Acquisitions, Inc.[6] Larsen was an officer and director of CPF-MRS Acquisitions, Inc. (T.116-17, 420-21).
Minor's firm assisted in preparing the articles of incorporation for CPF-MRS Acquisitions, Inc. (T.572, 417). On November 7, 1988, Minor's associate, B. Wells, forwarded drafts of the articles, bylaws, original *145 minutes, stock certificates, and instructions to Mulherin for his review (T.574; CAI.27). After they were finalized, they were filed, on November 28, 1988, with the Colorado Secretary of State, and recorded copies were faxed to Mulherin on December 2, 1988 (T.573-74).
After he and Marr prepared the grant application, Mulherin submitted it to the City of York in December, 1988. Larsen signed the application in his capacity as Chairman of the Board of CPF-MRS Acquisitions, Inc. Larsen did not read the grant application before signing it; but rather, relied on the representations of Mulherin regarding its contents (T.120-21, 118; CAI.29). It is significant that Larsen, like Kunkel, relied heavily on his advisors. Both Larsen and Kunkel are individuals who look at the big picture and use their staffs to implement and cover the details. This type of behavior is not unusual for these two people.
By letter dated December 12, 1988, Mulherin informed the City of York that Larsen would be incurring $2 million in costs associated with the start-up of the new entity (T.496-7; CAI.28).
In describing the parent-subsidiary relationships of CPF-MRS Acquisitions, Inc., the grant application stated:
CPF-MRS Acquisitions, Inc. is a Colorado corporation formed in November of 1988 to acquire the assets of [Pet]. The company has no parent or subsidiary relationship; however, Larry Larsen, who holds a 50 percent ownership interest in the company, is also the majority stockholder of Millard Refrigerated Services, Inc., of Omaha.
Hearings on the grant application were held in York in December, 1988 (T.485).
Although information from a spreadsheet that K. Teichmeier, Millard's Vice President of Accounting and Treasury, had prepared while at Pet on November 1, 1988 was used in preparing the grant application (CAI.31; T.393-94, 397-99), Kunkel was not aware of the grant application until mid-December, 1988 (T.642). After discovering the grant application had been submitted, Kunkel talked with Larsen, who told him not to worry about it, that he was just raising funds for the merged entity (T.642-43). Kunkel apparently acquiesced to this, and we find his acquiescence not unusual. It is evident from the testimony as a whole that Larsen had the financial finesse, and Kunkel the management finesse. Kunkel was willing to rely on that financial finesse for the mutual benefit of all parties.
(i) Financing the Deal.
As part of his obligations under the September 11 merger agreement, Larsen was to contribute $2 million in capital to Pet. Larsen met this obligation through four cash transfers.
During September, October, and November, Kunkel and Larsen talked on the phone almost daily (T.632). During September, they had discussed, a minimum of a dozen times, Pet's cash flow problems (T.643-44). The overall evidence leads us to conclude that Larsen knew the causes of Pet's cash needs, and that he could not, or should not, have been surprised by them. On October 6, 1988, after Columbia notified Pet that it was going to return Pet's checks unpaid because of a $500,000 overdraft, Kunkel called Larsen and requested funds. Larsen agreed that he would infuse $500,000 of the capital contribution required by the merger deal with Pet (T. 644-45). Larsen knew that if Pet's checks were returned unpaid, Pet would no longer be a viable business (T.36, 713).
On October 6, 1988, Larsen caused Millard to wire transfer $500,000 to Pet's Columbia Savings account (T.37; CAI.19). Although taken from Millard's account, the $500,000 advance to Pet on October 6 was made with Larsen's individual funds (T.59).
According to Larsen, after wiring the $500,000 on October 6, 1988, he and Kunkel discussed Pet's future financial needs (T.35-36, 404-405, 494-95). Kunkel indicated that Pet needed $1 million to get its accounts payable current (T.36).
On October 26, M. Ellis, Pet's controller, called Kunkel in Omaha and told him that Columbia was again going to return checks *146 and that Pet needed $250,000. On October 26, 1988, Larsen advanced an additional $250,000 to Pet from Millard's FirsTier account (T.38, 125, 645-46; L.11).
When Larsen infused the $250,000 on October 26, the word "lien" was never used and Kunkel did not understand that Larsen was "loaning" (sic) money to Pet (T.647-48). In fact, Kunkel had never discussed with Larsen or Mulherin the need for a promissory note for the money that Larsen was putting into Pet (T.648).
By October 26, 1988, Pet's cash flow problems were intensifying because it was incurring $50,000 to $200,000 in inventory buildup per week (T.646) due to the merger. Larsen was aware of the continued inventory buildup and the negative cash flow because he had talked with Kunkel about this problem on many occasions (T.647).
The third transfer was advanced on November 2, 1988. Larsen advanced an additional $250,000 to Pet by a check drawn on Millard's FirsTier account (T.39; L.12). Larsen and Kunkel had prearranged the November 2 contribution when Kunkel was in Omaha on October 26. Larsen had agreed to infuse the additional funds based on discussions he had with Kunkel about Pet's continued inventory buildup, negative cash flow, past due accounts payable, and substantial overdrafts (T.649, 652).
Minor met with Mulherin on November 1, 1988, representing both Pet and Kunkel as counsel (T.572). Upon Mulherin's request and based on information provided by Mulherin, Minor prepared the original $1 million dollar promissory note and guaranty. Kunkel was not present at the meeting when Mulherin asked Minor to prepare the note. Mulherin delivered the $250,000 check. In return, Mulherin received the promissory note from Pet and a personal guaranty from Kunkel for all funds previously advanced. (T.589, 591, 321-22; L.13).
Kunkel was not aware that Larsen wanted documentation on the $1 million dollar capital contribution until Mulherin presented him with the promissory note on November 2 (T.650, 823). Mulherin, however, described the promissory note as merely a "track" for the $1 million (T.650-51). Therefore, Kunkel did not understand that it would have to be repaid; but rather, thought it was necessary for Larsen's accounting purposes (T.651). Kunkel understood Mulherin's use of the word "track" to mean only that Larsen needed some documentation to account for the $1 million (T.824-25).
Although the November 2 promissory note (Exhibit L. 13) does not name a payee, the evidence and testimony clearly indicate that Larsen was the intended payee. Larsen advanced the funds (T.409-410), and Teichmeier testified that the intended payee on the $1 million dollar promissory note was Larsen (Depo. of Teichmeier, p. 69).
It is also clear to this Court that all funds advanced by Larsen to Pet through November 2, 1988 were intended to be capital contributions and not loans. The evidence in support of this finding is compelling. The best indicator, Larsen's own notes, reflect that as of November 3, 1988, he considered the $1 million as capital (T.132, 60-62; CAI.115), and that he understood the difference between capital and a loan. Larsen's understanding of "capital," in conjunction with his contemporaneous notes, clearly indicates that Larsen intended the $1 million dollar advance to Pet to be part of his capital contribution to the "merged entity."
Likewise, Kunkel understood that the $1 million in funds was part of Larsen's capital contribution to the merger. To Kunkel, capital meant cash that is infused into a company and does not need to be repaid (T.648, 727, 789).
Additionally, prior to the October 6, 1988 advance, Miller spoke with Mulherin and was assured that the overdrafts were going to be covered and that the $500,000 was a capital injection (T.870-71). Larsen admits that the call to Miller was made prior to funding the $500,000 (T.124-25). Miller asked Mulherin for a copy of the Letter of Intent or asset purchase agreement because he was skeptical that the money was capital. Mulherin responded that the deal so far had been a handshake agreement *147 and that the $500,000 in capital was an indicator of Larsen's good faith (T.865-66).
After November 3, Kunkel and Larsen continued to discuss, approximately ten times in November alone, Pet's inventory buildup and Pet's need for additional cash (T.652-53, 741-42). During the week of November 21, Larsen requested that Kunkel determine the amount of money needed by Pet. Based on discussions with Pet personnel, Kunkel determined the need was approximately $1.5 million. Larsen said he would not contribute $1.5 million, but that he would infuse the last $1 million of his $2 million obligation under the merger deal.
Although Larsen believed that the merger would be concluded in a short period of time, on either November 22 or 23, he told Kunkel that he wanted some protection for the funds he was placing into Pet because Kunkel was traveling so much and there was always the possibility that something would happen to Kunkel. They discussed "protection" on both Pet's Dodge City and Des Moines facilities. According to Larsen, this protection was merely a stop-gap measure pending completion of the merger. Larsen informed Kunkel that Mulherin would be preparing some interim documents in case Kunkel should "drop out of the sky." Larsen and Kunkel again discussed this matter on Friday, November 25, the day after Thanksgiving (T.654-660, 351). Neither Mulherin nor Minor were parties to these conversations.
On November 24, Thanksgiving Day, Larsen asked Mulherin to prepare loan documents for the $2 million, security documents for Pet's assets in Dodge City and Des Moines, and personal guaranties for Kunkel and his spouse (T.326). Mulherin and an associate spent the weekend of November 25, 26, and 27, 1988 preparing the loan and security documents (T.43-44, 345). Mulherin did not mention the loan documents to Minor although he talked with Minor on November 25 with regard to revising the Letter of Intent (T.451-52, 588, 577, 345). Mulherin did not tell Minor he was sending the documents to Kunkel to be signed, nor did he ask Minor's approval or consent to send documents directly to Minor's client (T.578, 465). After the documents were signed, Mulherin did not inform Minor that Kunkel had signed them (T.359). Minor was unaware that Kunkel had signed the documents on November 28, 1988. Upon learning in February, 1989 that Mulherin had prepared the loan documents and sent them to his client, Minor testified he was shocked and stunned (T.580).
Mulherin says Kunkel never told him Pet would be using Minor's legal services (T.462). This is, at best, self serving, and, from our view, a blatant lie. It is clear to us that Mulherin at all times knew Minor represented both Kunkel and Pet. Mulherin testified he met with Minor on September 19, 1988 and November 1 or 2, 1988, and had conversations with Minor on November 15 or 16 and November 24 or 25 (T.438).
Minor had clearly disclosed his representation of Pet to Mulherin on September 19. It is also clear from the evidence that Mulherin intentionally withheld the loan documents from Minor's perusal and consultation. We discount entirely Mulherin's deposition testimony at p. 220 that he assumed Kunkel's attorney would review them. He contradicted this statement when, in his deposition at p. 76, he said it never occurred to him to contact Kunkel's attorney. The fact that Kunkel wanted the money in a hurry doesn't wash the fact that Minor never got to look at the documents.
On Monday, November 28, Dolfay carried the loan and security documents (Exhibit L.16) by plane to Denver for Kunkel's signature (T.45). Mulherin had called Kunkel earlier that morning and informed him that he was sending documents for his and his spouse's signatures. Mulherin told Kunkel not to worry about the documents, that they were merely stop-gap measures. During his conversation with Mulherin, Kunkel assumed the documents were merely some sort of protection to ensure that there was adequate insurance on him should he die before completion of the *148 merger documentation.[7] Mulherin also told Kunkel that he was faxing all documents to Minor (T.656-68). Kunkel did not call his lawyer because of that representation (T.772). Kunkel called his spouse and said he was bringing Bedford and Dolfay to the house for her to sign documents (T.1070-1071).
Dolfay arrived in Denver at approximately 2:00 p.m. MST. The exact time is unknown. After arriving, Dolfay and Bedford entered Kunkel's car to travel to Kunkel's house. Bedford was driving. Bedford's attendance had been requested by Mulherin (T.765). Bedford was necessary because he was Pet's corporate secretary. Dolfay sat in the rear right side of the car behind Kunkel, who was the front seat passenger. Before reaching the house, Dolfay handed Kunkel a packet containing the documents (T.659-660). The documents were in a sealed manilla envelope (T.829). Dolfay testified that he saw Kunkel reading the documents in the car. But, from Dolfay's, and Kunkel's, position in the car, Dolfay could not possibly see if Kunkel was reading the documents. We find it is more plausible that Kunkel "flipped" through them, as he testified, but highly unlikely he would have had time to read them because the trip from the airfield to Kunkel's house was of short duration. (T.660, 830). To our knowledge, Bedford never testified about what Kunkel did during this car ride.
It is important to understand the scene at which the documents were signed. After a short ride from the airport, all parties arrived at Kunkel's personal residence. Susan Kunkel was there with the Kunkel's ill child. The child was apparently feverish and irritable. Pleasantries were exchanged. Dolfay told us that at one point Kunkel was holding the baby. After Kunkel saw the first document he excused himself and immediately called Mulherin. This was at approximately 2:02 p.m. MST (T.660-661, 647, 448; CAI.7, 17). Kunkel again asked Mulherin what the documents were about. He was informed by Mulherin that they were merely stop-gap measures and that Kunkel should not worry about them. Mulherin laughed at Kunkel's anxiety and reassured him that they merely interim documents pending final documentation of the merger (T.661-62, 793).
Kunkel then started signing the documents (T.662). Kunkel did not read the documents, but merely flipped through them to where they had been pre-marked with signature stickers (T.770, 1077, 1181). Kunkel signed the documents because Mulherin said he wanted them that day, and because Mulherin had assured him of what their nature was (T.771). Susan Kunkel was unable to see any of the face pages of the instruments she was signing because they were opened only to the signature pages (T.1080-81). The entire process took about 10 minutes (T.1080). It had taken Mulherin, an attorney, 1― hours to review the documents prior to sending them to Kunkel (T.445).
What also concerns us is Dolfay's behavior during the signing. Susan Kunkel testified that Dolfay seemed nervous, and was sweating in a cold environment. Dolfay was also nervous during his testimony, particularly when he looked at his employer, Larsen, which he did often. We think he had reason to be nervous because he was aware of the importance of the documents. At trial, he told us he didn't know the content of the documents. But in his deposition, at p. 26, he said Mulherin told him about the contents. Our review of other documentary evidence prepared by Dolfay depicts an individual with enough business refinement that he had to have known what was happening at Kunkel's residence on November 28. Alternatively, his testimony of ignorance is outright reckless disregard of the facts as presented. We don't believe he was a knight in some grand scheme to hurt the Kunkels, but certainly he was a pawn with knowledge â knowledge that he tried to keep from this Court during the trial.
*149 After signing the documents, Kunkel again felt uneasy about the lack of opportunity to review the documents (T.771) and called Mulherin a second time, a half-hour later, to ensure that Mulherin in fact sent copies of the documents to Minor. Mulherin again laughed at Kunkel's concern and reassured him there was absolutely nothing to worry about (T.662-663, 837; CAI. 71, 72). Mulherin also said he would inform Miller about the documents (T.777). Kunkel did not have Minor review the November 28 documents because Mulherin had assured him that Minor had already been contacted and that Mulherin was keeping Minor abreast of things (T.839).
From the time Dolfay, Bedford, and Kunkel arrived at the house to the time they left was about 45 minutes (T.1072). After signing the documents, Kunkel flew to Amarillo to meet with Larsen (T.663-64). Kunkel left the documents with Bedford, who had been instructed by Mulherin to mail them by Federal Express for immediate recording (T.662, 837; CAI.75). No copies were provided to Pet or to the Kunkels. Susan Kunkel testified she never learned the contents of the documents until March of 1989, when she received Court papers. She learned in May or June, 1989 what a guaranty was.
On November 28, 1988, Kunkel thought the documents contained the necessary protection for Larsen in case something happened to him so that Larsen could proceed with the merger because they had already rolled the physical operations of their businesses together (T.792). Kunkel was not aware that there was a promissory note in the stack of documents (T.792). Kunkel's expectation was that Larsen was going to contribute his last million dollars into the company. He was not anticipating a loan (T.762). Further, when discussing the need for protection, Kunkel and Larsen did not discuss a personal guaranty (T.764). At the time Kunkel signed the documents, he did not know that he was signing a personal guaranty (T.776). The November 28 promissory note supports Kunkel's understanding that it was protection in case he died; it provides that it becomes "automatically due and payable . . . should the undersigned [Kunkel] die" (L.16A).
Prior to funding the $2 million required by the November 28 documents, Larsen demanded that Pet pay off the $1 million promissory note, dated November 2, 1988, with interest (T.43, 133). As an additional prerequisite to funding the $2 million, Mulherin required that all of the security documents be recorded (T.343-44).
On December 7, 1988, various transactions by which Larsen funded the $2 million and Pet paid back the original $1 million plus interest transpired (T.127). Initially, Larsen transferred $1 million to Pet out of Millard's account at FirsTier. Next, Miller transferred $1,012,356.16 to Larsen, in payment of the November 2 promissory note with interest. Larsen then transferred an additional $1 million to Pet (T.46-47, 878-79; CAI.74; L.22). Thus, there was only a net contribution to Pet of $987,643.84.
In Larsen's words, the net effect of the transaction was that Pet "paid off the note, and we had the mortgage for $2 million" (T.47). Kunkel was not aware that the $1 million dollar note was repaid in this fashion because he did not handle or have personal knowledge of the fund transfers (T.815).
Prior to the transfers, Mulherin had requested that Miller provide him with wire instructions to help facilitate that transaction. Miller did so. All instructions as to how the wire transfers were to be made were obtained from Mulherin (T.874-79; CAI.72). To induce Miller to issue the wire transfer instructions, Mulherin told Miller that Millard had not documented the initial $1 million correctly from an accounting standpoint, and that the $1 million in, $1,012,356.16 out, and then $1 million back in again was designed to balance their books (T.877). The second $1 million in was always characterized by Mulherin as capital (T.874-75). It is clear that Mulherin controlled and directed the entire transaction. And there is no doubt that that was what he was supposed to do. He had the financial wherewithal, and Kunkel relied on this.
*150 Although all transfers on December 7 were made to or from Millard's account, the advances were made with Larsen's personal funds. We had some problems with this evidence; however, Larsen does not dispute this finding. In fact, during June of 1989, after Pet filed for bankruptcy, an audit adjustment transferred the funds from Millard's books to Larsen's books (T.470, 539-545; L.36, 37, 39).
As with the first $1 million contribution, we also conclude that the second $1 million advance on December 7 was intended to be capital and not a loan. Not only does the total advance fit squarely within the terms of the December 1 Letter of Intent, which had just been executed, but Miller testified that Mulherin continually characterized the second $1 million as capital and part of the merger deal (T.874-77). Additionally, when the loan was first entered on Millard's books, it was treated as capital. Ironically, Pet treated it as a loan. The various uninformed staff employees of Pet treated the transaction based on what they understood the transaction to be, or what the documents purported it to be. In Millard's case the money was clearly capital. In Pet's case, and with no further information, the accounting people read the documents to conclude it was a loan. The irony here is that, in Court, Larsen wants it treated as a loan and Kunkel wants it treated as capital.
On December 6, D. Hoganson, head of the FBS business credit for First Bank System, met Larsen in Omaha, who was represented to be Kunkel's new partner (Depo. of Hoganson, p. 9). During the meetings with Mulherin, Larsen, and Kunkel, Hoganson was informed that Larsen was injecting $3 million in capital into Pet. There was no mention of any loans by Larsen to Pet (Depo. of Hoganson, pp. 13-14).
Kunkel also thought the overall purpose of the $2 million was Larsen's investment, as they agreed to, as part of the merger (Depo. of E. Muelhaupt (President, Des Moines Cold Storage Co.), pp. 15-16). Leaman likewise understood that the money was infused by Larsen to Pet as part of the merger (Depo. of Leaman, p. 42).
By December 7, 1988, Larsen had contributed his $2 million (T.665) required by the agreement to merge. Moreover, Larsen was obligated to lend Kunkel $1.5 million for his contribution. Larsen never lent the $1.5 million (T.105-106, 665). Pet was otherwise ready, willing, and able to perform under the parties' agreement, including the December 1 Letter of Intent (T.666). Pet was willing and able to contribute the assets but did not do so because Larsen withdrew from the merger (T.666). Additionally, Kunkel was willing to infuse $1.5 million into the new venture but did not do so because he never received the money from Larsen (T.667). Kunkel did not otherwise have the ability to put that money into a new entity (T.667), nor did he have the financial wherewithal to pay back the Larsen loan.
The overwhelming evidence shows the $2 million to be a capital investment.
(j) Inventory Buildup.
While the financing transactions were going on, there was an inventory build-up at Pet. Within ten days of the September 19 meeting, Carnation canceled its negotiated contract with Pet (T.621). We are not sure if the contract was firm, but a finding to that effect is not necessary to our decision. The Carnation contract was an annual contract for MDB (mechanically deboned beef) (T.745-46). Carnation accounted for one-third of Pet's MDB sales volume (T.819). The cancellation was serious. Kunkel immediately called Larsen about the cancellation because Pet had already committed to purchase the raw materials for the Carnation contract. Kunkel discussed with Larsen his concern that the cancellation would create an inventory build-up of MDB. Larsen told Kunkel not to worry because some negative reaction to the merger could be anticipated. Pet subsequently experienced an inventory buildup of approximately 17 million pounds (T.624-25).
*151 (k) Termination of the Venture.
On December 15, 1988, Larsen and Hurley met with Carnation (T.142-43). Kunkel was aware that Larsen was making this trip, but was not concerned about it. Kunkel believed that Larsen was his partner and that he worked in their mutual best interests. Moreover, Larsen had informed Kunkel that he was going to try and restructure or eliminate the problem Pet was having with Carnation. Kunkel explicitly trusted Larsen to do that. From August through December, 1988, Kunkel trusted and respected Larsen, and was always confident that Larsen would work in their joint interests (T.666-669).
On December 15, prior to Larsen's meeting with Carnation, Sixta met with Larsen and Hurley in Denver (T.932). Hurley told Sixta that the purpose of the Carnation visit was for Hurley, who had been doing business with Carnation for some years, to introduce Carnation to Larsen. It was an attempt to get the Carnation people to trust Larsen (T.933). Larsen told Sixta he was going to visit Carnation to help alleviate the problems or rectify the discontinuation of Carnation's contract with Pet. Larsen had feared that the discontinuation was due to the proposed merger and a threat Carnation might have perceived by the size of the new entity (T.933-934). Larsen was extremely concerned about losing Carnation's business (T.144).
On December 15, Hurley told Sixta that no one in the industry, including Hurley and Larsen, trusted Kunkel and that Kunkel's tenure in the new organization was going to be very short. This came as a surprise to Sixta (T.934-35).
Larsen's representations to Sixta and Kunkel regarding the purpose of the Carnation meeting were false. In fact, at the December 15 meeting with Carnation, Larsen told Carnation that the deal with Pet was not going to fly (Depo. of Hurley, p. 62). It was Hurley's impression that the deal started to unravel around the first of December, 1988 (Depo. of Hurley, pp. 64-5).
When the December 1 Letter of Intent was executed, Larsen's accountant, Ferdig, had not yet determined Pet's September 30, 1988 book value (T.49). Ferdig completed his review and reconciliation of Pet's books on January 14, 1989 (T.535). At that time, Ferdig's conclusions and recommended adjustments to Pet's books were set forth in a memo[8] to Larsen (T.535-36, 49-50; L.24). Ferdig concluded that approximately $900,000 in adjustments needed to be made to Pet's balance sheet (T.50) to accurately reflect fair value. Larsen was shocked. On November 1 or 2, 1988, however, Larsen had been aware that $500,000 of those adjustments needed to be made (T.70-71).
On January 17, 1989, Larsen and Mulherin flew to Denver to discuss Ferdig's adjustments with Kunkel, Cribari, and Ellis (T.50-51, 508). The parties also discussed Pet's practice of adding a five cent per pound processing charge on inventories (T.51). Sixta and Larsen had previously discussed this practice on December 15, 1988 (T.935-37). The processing charge added to inventory is an accepted accounting practice known as the absorption cost method. It allocates operational and administrative costs to the cost of inventory (T.846) to avoid misstating revenues and expenses between fiscal years (T.984). Because during the relevant time period Pet had increased inventory by approximately 17 million pounds, the inventory write-up, at least in Larsen's mind, overstated Pet's inventory by $800,000 to $900,000 (T.51) over and above Ferdig's adjustments (T.71, 1223-1224).
Larsen also testified that he was shocked by Ferdig's conclusions that some accounts receivable were very old, some in excess of a year. Likewise, this also was discussed at the January 17 meeting (T.51). Larsen knew in early December, 1988, however, that one of the largest receivables on Pet's books was Amarillo Byproducts, that Amarillo Byproducts was in bankruptcy, *152 and that the receivable was quite old (T.72-73).
Based on Ferdig's analysis, Larsen concluded that "there wasn't any or very little book value to" Pet (T.520). Thus, Larsen informed Kunkel that he was backing out of the deal (T.52). Mulherin then said to Kunkel, "Mr. Kunkel, my advice to you is to file bankruptcy, personal bankruptcy, and assign the assets over to us, and we'll find a way to slip you $300,000 or $400,000, and tell the unsecured creditors to go take a flying leap" (T.672, 962-63, 1087). Mulherin told Kunkel that what he proposed was in his best interests (T.673). When Larsen left on January 17, he told Kunkel he would get back to him. Approximately ten days later, Larsen did call Kunkel and expounded on the bankruptcy idea; reiterating that he could slip some funds to Kunkel to live on (T.677). Larsen, with the opportunity to rebut this testimony, never denied it was said. We are not surprised by this testimony, but find it quite compelling.
At trial, Larsen was adamant that he was unaware of Pet's financial condition for the last quarter of 1988. He testified he had repeatedly requested copies of the profit and loss statements (P & L's), but they had not been provided (T.1221, 1226-27). Larsen testified that between November 1, 1988 and January 15, 1989, he discussed Pet's financial condition and books and records with Ferdig and Mulherin (T.138). During this time period, Larsen said he conferred with his accounting and financial advisors, and he was certain that they did not receive any P & L's (T.1227). Dolfay, however, had received a balance sheet and preliminary report for Pet for the period ended September 30, 1988 (CAI.32), which included a P & L for the period ended September 30, 1988 (T.1263). A copy of the September 30, 1988 P. & L was maintained in Dolfay's files at Millard (T.1260-64). Additionally, during the fall of 1988, Dolfay, Mulherin, Ferdig, and others continually met with representatives of Pet, reviewed Pet's books and records, and Cribari's files, and reported back to Larsen (T.256). Specifically, when preparing Pet's business plan, Dolfay identified Pet's strengths and weaknesses, and advised Larsen of his findings (T.251-52). Ferdig reported Pet's financial condition to Larsen at least once in November, 1988 and twice in January, 1989 (T.257, 270). Ferdig reported to Mulherin more frequently because Pet was Mulherin's project (T.257-58).
Larsen called Kunkel again in early February and told him he was withdrawing from the merger because he had to look out for his best interests and the merger was not in his best interests (T.678). The alliance between Larsen's and Pet's businesses was unilaterally discontinued by Larsen in February, 1989 (T.789). Larsen started pulling product from Pet (T.849) and Kunkel stopped managing Larsen's plants (T.796). Pet also stopped processing Larsen's product (Depo. of Leaman, p. 62).
Subsequently, Larsen instructed Mulherin to draft and send notices of default to both Pet and Kunkel (T.52). Notices of default were sent on February 15, 1989 (T.53; L.31, 32; T.679-680). Although Mulherin knew that Minor represented Pet, the notices of default were not sent to Minor (T.578-79).
No interest payment had been made on the $2 million note in December, 1988, and thus the note was in default in December (T.64). Likewise, no interest payment was made in January, 1989. Although the note was in default in both December, 1988 and January, 1989, Larsen did not demand payment at that time (T.64).
Larsen never expected that Pet would generate enough cash from its operations between November 28, 1988 and February, 1989 to pay back the note. He believed, however, there was sufficient equity in Pet's Dodge City and Des Moines plants to adequately secure the $2 million (T.135-38).
Three weeks after declaring a default on the $2 million loan, Larsen commenced a lawsuit in the District Court for Polk County, Iowa to collect on the note, and for the appointment of a receiver for Pet's assets in Des Moines. The same actions were taken in the District Court for Ford County, *153 Kansas for the Dodge City facility (T. 1157-58).
In early March, Larsen claimed a warehouse lien in the amount of $155,886.78 on all of Pet's product then in his warehouses, and demanded immediate payment of that amount (CAI.90). Pet later paid the lien amount to Larsen (CAI.91, 92).
The financial condition of Pet in January, 1989 through the middle of February, 1989 was showing signs of improvement as Pet was starting to move inventory and sales were increasing (T.683). Quaker Oats contracted for 12 million pounds of MDB product, and Ralston-Purina came out with a new product that required MDB. The 17 million pounds of inventory that had built-up during the last quarter of 1988 started to move (T.683-84). During January, February, and early March of 1989, Pet was successful in moving its MDB inventory, including that which had been previously rejected (T.955). Customers of Pet, including Spillers in England, Quaker Oats, and Ralston-Purina, were also assisting Pet's cash flow by speeding up their remittance process. Others were ordering substantial quantities from Pet over and above their normal procurement requirements to help Pet (T.907-908).
In mid-February, 1989, Larsen called his major customers and informed them that he was no longer a part of Pet and that he was going to resume his own pet food operations. Among the customers he called were Monfort, Excel Beef, and Beef America. Both Monfort and Excel were also suppliers to Pet. He explained to them that the new company was not going forward and that he would resume doing business as he had in the past (T.140-141).
Shortly after Larsen's calls, Kunkel started receiving numerous phone calls from suppliers and customers including Iowa Beef, Excel, Monfort, Iowa Packers, Carnation, and StarKist (T.680) expressing concern over Pet's financial viability. Additionally, Kunkel heard from C. Muelhaupt, the President of Des Moines Cold Storage (T.680), and lessor to Pet.
Muelhaupt testified that, in February, 1989, Larsen contacted him and told him that although he had merged with Pet and had invested $2 million in Pet, Pet was on the "brink of bankruptcy and it was his intention to try and reclaim the investment that he made" (Depo. of Muelhaupt, pp. 9-11). As part of reclaiming his investment, Larsen said that he was going to take over Pet's Des Moines operation and get possession of Pet's equipment at Des Moines (Depo. of Muelhaupt, pp. 18-19). Larsen also told Muelhaupt that the financial statements of Pet were $1 million off (Depo. of Muelhaupt, p. 21).
Other customers and suppliers who called Pet typically demanded that Pet bring its trade payables current, increase the limits of letters of credit, or requested that Pet go on a COD basis (T.680-83). Excel and Monfort, Pet's two largest suppliers, and Iowa Beef restricted trade credit in this manner (T.939). Smaller suppliers put Pet on wire transfer so that Pet had to prepay for products. All of this occurred in February or March of 1989 (T.940).
On Saturday, March 11, 1989, Kunkel met with Larsen in Omaha (T. 685-86, 73-74). Larsen had heard Pet was having a lot of problems and thus proposed buying the assets and facilities of Pet on which he had a mortgage (T.55). Larsen also told Kunkel that he had made phone calls to Pet's suppliers and customers, including Muelhaupt (Des Moines Cold Storage Co.), Carnation, and StarKist. Kunkel requested that Larsen stop spreading word of Pet's demise. Larsen, however, said he had to protect his own interests (T.686-688).
At the March 11, 1989 meeting in Omaha, Kunkel disclosed and discussed with Larsen that Pet was completing negotiations with Iowa Beef to process all of their pet food. Within a week after conveying this information to Larsen, Iowa Beef canceled their contract (T.799-800). Likewise, during the same conversation, Kunkel disclosed Pet's business dealings with Excel to Larsen. Again, shortly thereafter, Pet lost its contract with Excel (T.799-800).
As a result of the trade credit restriction, Pet required additional funds to keep current, and was able to operate only through *154 March and April of 1989 (T.684). On May 5, 1989, Pet filed bankruptcy (T.685). Larsen filed proofs of claims in Pet's bankruptcy proceeding in the amounts of $2,115,616.44; $18,735.20; and $7,423.86.
Although there was no direct evidence that Larsen's telephone calls to the industry and his disclosure of Pet's purported financial condition caused Pet's customers to restrict trade credit, cancel contracts, or otherwise not do business with Pet, it is an extraordinary coincidence that every time Larsen called a customer or supplier, they terminated their relationship with Pet. Moreover, Larsen knew that rumor of insolvency would be disastrous to Pet's business. We must therefore infer a direct casual relationship between Larsen's admitted phone calls and the customer/supplier's termination of business with Pet.
CLAIMS OF THE PARTIES
Larsen sues to obtain a declaratory judgment that a promissory note, related security agreement, guaranty, and other loan documents from various defendants are valid and enforceable. Larsen also seeks a determination about the priority of liens on certain assets of Pet.
All of the party defendants have answered with denials, and raised numerous counterclaims and affirmative defenses. Each has joined in the others' counterclaims and defenses, and each has asserted some counterclaim unique to themselves.
Pet and Protein generally denied Larsen's allegations and affirmatively raised the following:
(a) failure to join indispensable parties;[9]
(b) defendants' signatures on various loan documents was fraudulently induced by Larsen's misrepresentations and omissions;
(c) funds advanced by Larsen represented a capital contribution; not a loan;
(d) fraud;
(e) bad faith;
(f) material misrepresentations;
(g) duress;
(h) acts of omission that induced defendants to sign loan guaranty;
(i) Larsen knew the defendants could not repay the loan;
(j) offset; and
(k) the claims are frivolous and groundless.
In addition to the above joint affirmative defenses, Protein also raised the following affirmative defenses:
(a) latches, estoppel, and waiver;
(b) unclean hands;
(c) failure to mitigate;
(d) unconscionable behavior; and
(e) plaintiff's negligence.
Pet and Protein have asserted the following counterclaims:
(a) breach of fiduciary duty;
(b) intentional interference with contract;
(c) interference with prospective economic advantage;
(d) breach of duty of good faith and fair dealing;
(e) fraud;
(f) civil conspiracy;
(g) breach of contract;
(h) breach of Uniform Trade Secrets Act;
(i) breach of confidentiality agreement;
(j) declaratory judgment;
(k) contribution;
(l) 11 USC § 547(b) preference;
(m) 11 USC § 544(a) lien avoidance;
(n) 11 USC § 548 fraudulent conveyance; and
(o) 11 USC § 510(c) equitable subordination.
The Kunkels have asserted all of the state-based and bankruptcy claims that Pet and Protein have raised, and in addition, Susan Kunkel raised the affirmative defense that her guaranty on the promissory note, dated November 28, 1988, and all other security agreements signed by her relative to her guaranty of that date, are null and void under 15 U.S.C. § 1691.
*155 Larsen has generally denied all the counterclaims and asserted defenses of fraudulent misrepresentation and omission pertaining to the Letter of Intent; impossibility of performance; fraud and unclean hands; estoppel; and, lack of consideration.
There is no easy way to dissect the many failures in this adversary proceeding. Larsen feels he should be vindicated because Kunkel and Kunkel's corporation did not turn out to be what he expected. Kunkel and Pet, in the throes of business expansion, undercapitalized but surviving, pursued by Larsen, felt the failure of bankruptcy. Susan Kunkel saw both her marriage and her home trashed on the rocks of financial failure, and her husband's despair.
The issues are complex. To wind our way through what would be a law professor's dream hypothetical final examination; but what is very real to the parties, we divide our discussion into parts. First, we address the standing of some of the parties to raise certain counterclaims. Second, we discuss the issues, apply the law to the facts, and come to conclusions. Third, we assess the damages.
DISCUSSION
I. Standing to Bring Certain Causes of Action.
(a) Pet and Protein.
Both Pet and Protein have asserted bankruptcy claims against Larsen under 11 U.S.C. §§ 547(b), 544(a), 548, and 510(c). Pet claims its standing to assert these claims arises from its position as debtor-inpossession. Protein asserts its standing derives from an August 14, 1989 order that approved an assignment of contract rights and intangibles including:
all rights of debtor exercisable pursuant to any statute, rule or regulation, choses in action, things in action, claims, demands, defenses to claims (both in law and in equity). The foregoing shall include but shall not be limited to claims for payment or voiding of liens of the Debtor which, as of the date hereof, arising under any section of the Bankruptcy Code, 11 USC §§ 544, 545, 547, 548, 549.
Assignment of Contracts and Intangibles, dated August 14, 1989.
Bankruptcy Judge Brumbaugh, in a related adversary proceeding, Consolidated Pet Foods, Inc. v. Millard Refrigerated Services, Inc. (In re S & D Foods, Inc.), 110 B.R. 34 (Bkrtcy.D.Colo.1990), addressed the standing issue of Pet and Protein to bring Title 11 counterclaims. We adopt Judge Brumbaugh's excellent discussion, and hold that Pet and Protein do not have standing to bring Title 11 counterclaims. Accordingly, the counterclaims of Pet and Protein alleging causes of action under 11 U.S.C. §§ 547(b), 544(a), 548, and 510(c) will be dismissed.
(b) Donald Kunkel.
Kunkel has asserted several counterclaims against Larsen. Larsen claims Kunkel is without standing to pursue the majority of his counterclaims because Kunkel is seeking to recover on claims, which, if they exist, belong to Pet or Protein, not to Kunkel. The Colorado Supreme Court has adopted the standing requirements outlined by the United States Supreme Court in Association of Data Processing Service Organizations, Inc. v. Camp, 397 U.S. 150, 90 S. Ct. 827, 25 L. Ed. 2d 184 (1970); Wimberly v. Ettenberg, 194 Colo. 163, 570 P.2d 535 (1977). In Data Processing, the Supreme Court held that two requirements must be satisfied before a party has standing. First, the plaintiff must allege that the challenged action has caused injury in fact and, second, the interest sought to be protected must arguably be within the zone of interest to be protected or regulated by the statute in question. Id., 397 U.S. at 152-53, 90 S.Ct. at 829. Consequently, to pursue a cause of action in Colorado, a plaintiff must suffer an actual injury to a legally protected interest. See, Wimberly, supra, 570 P.2d at 539.
It is well settled that an individual cannot maintain an action on its own behalf based on shareholder status in a corporation for alleged wrongs against the corporation *156 without a showing of injury in some capacity apart from the shareholder status. See, Green v. Victor Talking Machine Co., 24 F.2d 378, 381, 59 A.L.R. 1091 (2d Cir. 1928); ITT Diversified Credit Corp. v. Kimmel, 508 F. Supp. 140, 144 (N.D.Ill. 1981); Box v. Roberts, 112 Colo. 234, 148 P.2d 810, 811 (1944);. See also, Artic Contractors, Inc. v. State of Alaska, 573 P.2d 1385, 1386 (Alaska 1978) (a shareholder has no personal right of action against third parties for acts producing injury to a corporation.). Nor does Donald Kunkel have any greater right to raise Title 11 claims than does Pet or Protein.
As to Kunkel's counterclaims that purport to arise from wrongdoings against Pet, whether based on state law or Title 11, Donald Kunkel has no legally protected interest to support his counterclaims. Accordingly, those counterclaims that allege breach of fiduciary duty, intentional interference with contract and prospective economic advantage, breach of duty of good faith (as this relates to Kunkel's interest in Pet), breach of contract (as this relates to Kunkel's interest in Pet), breach of Uniform Trade Secrets Act, breach of confidentiality agreement, declaratory judgment, and contribution will be dismissed. Our holding does not apply to any claims or defenses arising out of the York, Nebraska; Des Moines, Iowa; or Dodge City, Kansas plants, nor to the claim of civil conspiracy, declaratory judgment, outrageous conduct, or violation of the Equal Credit Opportunity Act.
II. The Major Issues of Contract.
(a) Was there a Contract?
This is the classic case of the reluctant lover pursued by a relentless suitor, who with the passage of time rethinks the pursuit; such rethinking causing the business deal to fail, placing the marriage of two of the principals on the shoals of divorce, and pushing a closely held corporation into bankruptcy.
The proper place to start is to first determine whether there was an agreement between Larsen and Pet, and if there was, what kind of agreement did they have?
As stated in Denver Truck Exchange v. Perryman, 134 Colo. 586, 307 P.2d 805, 810 (1957), "(a) contract is an agreement which creates an obligation. Its essentials are competent parties, [legal] subject matter, . . . legal consideration, mutuality of agreement, and mutuality of obligation." Contracts should be construed to give effect to the intent of the parties, Fort Lyon Canal Co. v. Catlin Canal Co., 642 P.2d 501, 506 (Colo.1982), and must be construed as a whole. Effect must be given to every provision if possible. See, Water Rights v. No. Colo. Water Conservancy District, 677 P.2d 320, 326 (Colo.1984), citing, Gandy v. Park National Bank, 200 Colo. 298, 615 P.2d 20, 22 (1980). Courts, however, possess no authority to rewrite contracts, whether oral or written; but rather, must enforce unambiguous contracts in accordance with their terms. See, Radiology Professional Corp. v. Trinidad Area Health Association, Inc., 195 Colo. 253, 577 P.2d 748, 751 (1978) (en banc); Yamin v. Levine, 120 Colo. 35, 206 P.2d 596, 597 (1949).
These same rules apply to an oral contract as to one that is partially oral and partially written. The threshold question about whether parties to an oral agreement become bound prior to the drafting and execution of a contemplated formal writing is largely a question of intent on the part of the parties. Mohler v. Park County School District RE-2, 32 Colo. App. 388, 515 P.2d 112, 114 (1973), reh'g denied, Sep. 5, 1973, cert. denied, Nov. 12, 1973. The intent to be bound can be inferred from the parties' actions. See, Coulter v. Anderson, 144 Colo. 402, 357 P.2d 76, 79 (1960). Among the factors to be considered are whether there has been an express reservation not to be bound in the absence of a writing,[10] partial performance, agreement to all terms, and whether the agreement is one usually committed to *157 writing. Winston v. Mediafare Entertainment Corporation, 777 F.2d 78, 80 (2d Cir.1986).
I.M.A., Inc. v. Rocky Mountain Airways, Inc., 713 P.2d 882 (Colo.1986) (en banc), reh'g denied Jan. 31, 1986, is a factually similar case to the matter sub judice. I.M.A., Inc. (IMA) brought suit against Rocky Mountain Airway, Inc. (Rocky) alleging breach of contract between the parties. Unlike Pet, here, IMA was experiencing grave financial difficulties to the extent that it had ceased operations when Rocky expressed interest in acquiring it. The respective company presidents signed a letter of intent (the letter), which stated purpose was to "confirm [the parties'] recent understandings as to the acquisition of the assets of [IMA] by [Rocky]." Id., 713 P.2d at 885. In the letter, IMA represented the value of its assets and liabilities, and updated its accounting records for Rocky's inspection. The parties made no provision for the possibility that the accounting update might show IMA's assets or liabilities to be different from the approximate amounts represented. The letter also stated that the agreement was preliminary in nature. The letter also listed several requirements upon which the transfer was contingent. They included: 1) approval of the transfer by the Public Utility Commission (PUC) and the Civil Aeronautics Board; 2) approval by the respective boards and shareholders; 3) suitable renegotiation of an airport lease, including a list of specified changes; and, 4) ability of Rocky to carry forward IMA's net operating loss.
Subsequent to the signing, an amended letter was executed and several other significant events occurred. IMA leased its PUC certificate of Public Convenience and Necessity to Rocky. The lease included a provision by IMA to assist Rocky in obtaining PUC approval of the lease. Temporary approval was obtained and Rocky began servicing the Denver to Durango air route.
IMA also obtained its shareholders' certification in concept, and its president traveled to Durango, Colorado to build public support for the acquisition. The parties also moved IMA's furniture and office equipment to Rocky's hanger at Denver's Stapleton Airport.
After IMA's books were updated, it was discovered that IMA's liabilities were greater than originally estimated. IMA's president offered to adjust the allocation of the purchase price. But, Rocky decided not to go ahead with the acquisition primarily based on the accounting discovery. Rocky also expressed that market conditions, the existence of two other carriers, and the prospect of deregulation were additional reasons that Rocky had no further interest in the acquisition.
IMA promptly sued, inter alia, for breach of contract. A jury verdict was returned in favor of IMA, reversed by the Court of Appeals, which decision was in turn reversed by the Colorado Supreme Court. The Supreme Court held that "when the existence of a contract is in issue, and the evidence is conflicting or admits of more than one inference, it is for the jury to decide whether a contract in fact exists." I.M.A., Inc., supra, 713 P.2d at 887. After deciding who should determine whether a contract is formed, i.e., the Court or a jury, the Supreme Court went on to hold, citing, Coulter, supra, 357 P.2d at 80, that the mere intention to reduce an oral or informal agreement to writing is not itself sufficient to show that the parties intended that once such formal writing was executed, the parol or informal contract should be without binding force. I.M.A. Inc., supra, 713 P.2d at 888. Whether the parties to an oral agreement become bound prior to the drafting and execution of a contemplated formal writing is a question of intent on their part. The intent can be inferred from their actions. Mohler, supra, 515 P.2d at 113, citing, Coulter, supra, 357 P.2d at 80. See also, Winston, supra, 777 F.2d at 80 (to decide intent, a Court must look to the words and deeds of the parties).
Winston articulates several factors that help determine whether parties intended to be bound in the absence of an executed document. A Court should consider: (1) whether there has been an express reservation *158 of the right not to be bound in the absence of a writing; (2) whether there has been partial performance of the contract; (3) whether all of the terms of the alleged contract have been agreed upon; and, (4) whether the agreement at issue is the type of contract that is usually committed to writing. Winston, supra, 777 F.2d at 80.
Based on the facts of the matter before us, we find that the parties intended to be bound without a formal writing, and that even if that was not their intent, their actions after September 10, 1988 indicate a contract to merge the respective businesses was formed. Thus, we find an oral merger agreement existed as of September 11, 1988, as reflected in the December 1, 1988 Letter of Intent.
We summarize only the major indicia of contract formation. The record is replete with findings to show the parties intended a contract and behaved as if the merger was a fait accompli.
First, there was no express reservation. Second, there was substantial performance of all the major provisions. Job responsibilities in the merged entities were redefined. Employees were hired and fired. Plants were closed and sold. Systems and operations were merged. The merger was announced to the world, competitors, and employees. Third, all the major provisions were agreed upon. The detail was to be documented. Even the amount of capital contribution was left fluid. It was an uncertainty as to the amount, but not a condition that would bar the deal. The facts here certainly satisfy most of the Winston factors.
One Winston factor not completely satisfied is whether this is the type of contract or agreement that is usually committed to a writing. Although our experience as a trier of fact tells us this is the type of contract that is usually committed to a writing, neither party introduced any evidence to either prove or disprove this Winston factor. Accordingly, we make no finding in reference to it. Our lack of a finding on this single factor does not bar a finding that a contract was formed. It is clear that enough of the Winston factors are present to warrant our holding that a contract was formed either in fact or by estoppel.
Having found that an agreement was formed either in fact or by estoppel, we now discuss its style.
(b) Did the agreement to merge result in a Partnership/Joint Venture Agreement or merely a loan?
Larsen has characterized the events that took place here as a failed merger, and the money lent to Pet and related documents as a loan. Pet says there was a partnership or joint venture, and that the money given to Pet was in the nature of capital.
The determination of whether the underlying events sub judice result in a partnership is determined by State law. See, Butner v. United States, 440 U.S. 48, 54-55, 99 S. Ct. 914, 917-19, 59 L. Ed. 2d 136, 141-42 (1979); In re Black, 787 F.2d 503, 506 (10th Cir.1986). In Colorado, a joint venture differs from a partnership, but the substantive law of partnership applies. Beebe v. Schwenn (In re Schwenn), 126 B.R. 351, 353 (D.Colo.1991); Hooper v. Yoder, 737 P.2d 852, 857-858, fn. 4 (Colo.1987) (en banc). The major events in the matter at bar took place in Colorado. Accordingly, we apply Colorado partnership law to resolve the question.[11]
In Colorado, a partnership is "an association for two or more persons to carry on, as co-owners, a business for profit." C.R.S. § 7-60-106. It is also defined as an express or implied contract between two or more persons to place their money, skill, effects or labor into a business, and to share the profit and losses. No express agreement is necessary. Grau v. Mitchell, 156 Colo. 111, 397 P.2d 488, 489 (1964). A partnership may be formed by the conduct of the parties. Stratman v. Dietrich, 765 P.2d 603, 605 (Colo.Ct.App.1988), reh'g denied, *159 July 14, 1988, cert. denied, Dec. 19, 1988; Yoder v. Hooper, 695 P.2d 1182, 1187 (Colo.Ct.App.1984). It is not required for a partnership to exist that every partner participate in the day to day management of the partnership business. The management and control of the partnership business may be delegated by agreement, express or implied. See, Johnson v. Chilcott, 599 F. Supp. 224, 226-27 (D.Colo.1984). See also, Peterson v. Massey, 155 Neb. 829, 53 N.W.2d 912, 916 (1952) (In a joint venture, one party may entrust performance to another.). Finally, if the parties have placed themselves in a relationship that constitutes a partnership, it is not determinative that they call, or do not call, themselves a partnership. Johnson, supra, 599 F.Supp. at 227. Rather, whether or not a particular contract or transaction or series of transactions constitutes a partnership must be ascertained by the intention of the parties with reference to the entire transaction, Dowdy v. Henry (In re Washington Communications Group, Inc.), 18 B.R. 437, 442 (Bkrtcy.D.C.1982), and not by isolated events. Substance and not name determine the legal relationship. Seaboard Surety Co. v. H & R Construction Corp., 153 F. Supp. 641, 646 (D.Minn.1957), mod. on other grounds, H.C. Nelson v. Seaboard Surety Co., 269 F.2d 882 (8th Cir. 1959). Additionally, a party is estopped to deny the existence of a partnership where that party has executed documents on behalf of the partnership. Roberts v. Roberts, 113 Colo. 128, 155 P.2d 155, 157 (1945). But, a financing arrangement does not make a partnership. Dennis v. Bradbury, 236 F. Supp. 683, 688 (D.Colo.1964). See also, U.P.A. § 7, which sets forth criteria for the consideration of whether or not a partnership has in fact been formed (no inference of a partnership shall be drawn if interest on a loan varies with profits).
We conclude that the relationship between Larsen and Pet is either a partnership or joint venture. Our conclusion is mandated by the overwhelming weight of the evidence.
Specifically, we look at the oral agreement to merge. Although it is not clear what the ultimate entity would be (a merged entity, a partnership, a subsidiary of Millard), there was an agreement. But more importantly, we have the express representations of Larsen about a partnership, the later sharing of equipment, employees, and product, joint discussions usually arrived at in consultation but always based upon the utmost trust and confidence, joint sales calls, public announcements about the merger (and later, Larsen's unilateral announcement that the deal was over). These facts show a de facto partnership or certainly one by estoppel. Finally, we have Larsen's own testimony that the pet food operations had merged.
In spite of this evidence, Larsen tried to sway our view about the $2 million given to Pet. There is no doubt an isolated view of the notes, guarantees, and loan documents would lead a fact finder to conclude a loan and not a capital investment was had between the parties. The Parol Evidence Rule normally prevents the introduction of evidence about what appears to be integrated and complete agreements. See, Sherman v. Sprentall, 709 P.2d 602, 603 (Colo.Ct.App.1985). See also, Restatement of Contracts, Second, § 213. But the exceptions to the Parol Evidence Rule are many and as varied as the rule itself. See, e.g., Burenheide v. Wall, 131 Colo. 371, 281 P.2d 1000, 1002 (1955) (en banc); Metro National Bank v. Roe, 675 P.2d 331, 332 (Colo.Ct.App.1983); Simpson v. Milne, 677 P.2d 365, 368 (Colo.Ct.App.1983), reh'g denied August 25, 1983, cert. denied, Feb. 6, 1984; Restatement of Contracts, Second, § 214. Specifically, and as here, where the question raised as to the purpose of the promissory note is between the maker and the payee and its substantive effect, the rule must give way.
The evidence presented on the views of the parties about what the $2 million represents, when first examined, appears hopelessly contradictory. But deboning the facts shows the $2 million was meant to be a capital infusion.
Larsen's employees thought it was a capital transaction. In spite of the clear import of the documents, the transaction was *160 booked in Millard's accounting records as an investment and not a loan. Larsen's later accounting treatment of the $2 million as a loan does not metamorphically transform the transaction. In fact, the accounting "reclassification" struck us as a rather self-serving admission. Neither Larsen nor his agents did a credit check to see if Kunkel or Pet could repay the loan. This was a strange omission on the part of a person who in our view is a savvy business person. Mulherin assured Kunkel the loan was only to protect Larsen in case something happened to Kunkel â an audit trail, so to speak. Larsen knew Pet couldn't repay the money lent in 90 days. Larsen knew Kunkel had expressed concern about repaying the money, but possibly didn't know for certain that Kunkel couldn't repay. Most compelling is that Miller of Columbia Savings and Loan understood from Mulherin that the money was capital. Equally compelling is that Mulherin knew various loan documents that Pet had with Columbia restricted new borrowing, and that a loan would put Pet in default with Columbia. Kunkel's later efforts to repay the $2 million does not prove the money was a loan. Rather, it showed the integrity of the man. Nor does the fact that Pet's accounting personnel treated the $2 million as a loan sway us from the overall conclusion that the money was capital. They apparently did not receive any instruction from Kunkel on how to book the transaction. They took it at face value. Unlike Larsen's personnel, who appeared to be fully informed, Pet's personnel, without more information, could not have handled it differently.
Lastly, it is no coincidence that the $2 million is equal to the amount of funds Larsen had agreed to invest in the merger. It logically follows from our finding that the $2 million represents a capital investment and not a loan; that the promissory notes, security documents and interest, related agreements, assignments, and mortgage are null and void ab initio. Accordingly, we resolve Larsen's request for declaratory judgment by ruling against him, and declaring the $2 million to be a capital infusion and not a loan.
(c) Was there a fiduciary or confidential relationship under Colorado law?
Having found that a partnership or joint venture existed, we also find that a fiduciary or confidential relationship existed by virtue of the partnership or joint venture.
The fiduciary duties owed by partners and joint ventures include the duties of loyalty, honesty and candor, good faith and fair dealing, and lack of self-dealing. See, Brunner v. Horton, 702 P.2d 283, 284 (Colo.Ct.App.1985); C.J.I.2d, ķ 31:16. Compare, Kincaid v. Miller, 129 Colo. 552, 272 P.2d 276, 281 (1954) (en banc), reh'g denied, July 19, 1954. The same can be said for parties to any of the above mentioned relationships of trust and confidence to each other. All parties to such relationships are bound by the highest standards of good conduct and fair dealing. Thus, without the consent of the other parties, no party to a fiduciary or confidential relationship may pursue his own personal interest in a way that is hostile to the interest of another party so long as the relationship continues. See, Kincaid, supra, 272 P.2d at 281. Moreover, a fiduciary duty can form during the negotiations that precede the formal execution of a written agreement. Lucas v. Abbott, 198 Colo. 477, 601 P.2d 1376, 1379 (1979) (en banc). See also, Fitz-Gerald v. Hull, 150 Tex. 39, 237 S.W.2d 256, 264-65 (1951). Thus, during negotiations, each party to a future or potential fiduciary relationship has a duty to make full disclosure to the other parties concerning matters that have induced them to enter into the relationship. See, Lucas, supra, 601 P.2d at 1379, citing, Taylor v. Jackson, 267 Or. 33, 514 P.2d 548 (1973). Finally, fiduciary obligations continue after dissolution of a partnership or joint venture and until all partnership or joint venture affairs are completely wound-up. See, Hooper v. Yoder, supra, 737 P.2d at 859. See also, Steeby v. Fial, 765 P.2d 1081, 1084 (Colo.Ct.App. 1988). We hold that this same rule of law applies to confidential relationships. Thus, a partner, joint venturer, or one in a dissolving confidential relationship, which still has loose ends dangling, *161 cannot cut-off the rights of the other partner in the dissolved relationship by the tactic of entering into a "new" contract to complete such business. Id.; Rosenfeld, Meyer & Susman v. Cohen, 194 Cal. Rptr. 180, 190, 146 Cal. App. 3d 200, 218 (1983), hrg denied Nov. 9, 1983. Nor may a party in a fiduciary or confidential relationship interfere with current or prospective contracts or business relations of the other parties to the relationship.
(d) Was there a Confidentiality Agreement?
No party disputes that there was a confidentiality agreement between the parties. That agreement created a confidential relationship between the parties, and is thus a distinct basis upon which to find such a relationship, even apart from the partnership/joint venture.
Having found there was a contract, a confidentiality agreement, a partnership or joint venture, and a confidential relationship, we now discuss if there was a breach of any or all of them.
(e) Was there a breach of the Joint Venture Contract and of the Confidentiality Agreement?
The elements of a breach of contract cause of action are:
a) the existence of a contract;
b) the failure of performance that was promised; and,
(c) damages.
We conclude without reservation that Larsen breached the oral merger agreement of September 11, 1988, as reflected in the December 1, 1988 Letter of Intent.
As we have previously found, the oral merger agreement, as documented in the Letter of Intent is an enforceable contract. The oral merger agreement and the December 1, 1988 Letter of Intent are unambiguous. They must be enforced according to their terms. Radiology Prof. Corp. v. Trinidad Area Health Assn, Inc., 195 Colo. 253, 577 P.2d 748, 751 (1978) (en banc). Thus, Larsen was obligated to infuse $2 million of capital into Pet, rather than lend, as Larsen claims. Additionally, Larsen was required to lend Kunkel $1.5 million to contribute to the new entity. Kunkel and Pet were at all times ready, willing, and able to perform their obligations to the new entity. Larsen, by his failure to lend the $1.5 million to Kunkel, as well as his numerous other breaches, prevented the performance of Kunkel and Pet. Under Colorado law, if one party's performance under a contract is prevented by another party to the contract, the party prevented from discharging the required obligation is to be treated as though the party performed. See, American Industrial Leasing Co. v. Costello, 160 Colo. 588, 418 P.2d 881, 886 (1966) (en banc); Smith v. Roe, 7 Colo. 95, 1 P. 909, 911 (1883). Stated another way, when one party is prevented from fully performing a contract by the fault of the other party, the latter cannot be allowed to take advantage of the wrong and escape liability under the contract.
Thus, Pet must be treated as having performed. Larsen's request for declaratory judgment must be denied. Damages from Larsen's breach of the two contracts will be discussed later.
We also find that Larsen breached the Confidentiality Agreement. Under it, Larsen promised not to disclose certain confidential or proprietary information of Pet, including customer lists, pricing information, and other business information. Larsen and his agents and employees obtained this information through their review of Pet's books and records, conducted as a result of the Confidentiality Agreement and the confidential relationship we have found between all the parties.
The evidence is clear that in February and March of 1989, Larsen made numerous contacts via telephone and in person to Pet's customers and suppliers, and disclosed confidential information obtained as a result of the Confidentiality Agreement and the confidential relationship. Specifically, Larsen informed all customers and suppliers of Pet that Pet was in financial trouble, its accounting records were not *162 accurate, its inventory was overstated, Kunkel could not be trusted, and that Pet was on the brink of bankruptcy. The evidence shows this was done willfully and wantonly, with the intent to ensure Larsen ended up with Pet's assets.
(f) Was there a breach of fiduciary duty?
To recover for breach of fiduciary duty in Colorado, a party plaintiff must show:
(1) The defendant and plaintiff were in a fiduciary relationship;
(2) The defendant breached a fiduciary duty owed to the plaintiff;
(3) The plaintiff incurred damages or losses; and,
(4) The defendant's breach of fiduciary duty was a cause of the plaintiff's damage.
See, C.J.I.2d, ķ 26.1.
We find that Pet has proven all the elements for breach of fiduciary duty under Colorado law. We also hold that such breach gives rise to constructive fraud under Colorado law. See, Security National Bank v. Peters, Writer and Christensen, Inc., 39 Colo. App. 344, 569 P.2d 875, 880-881 (1977), reh'g denied, June 30, 1977, cert. denied, Sept. 12, 1977 (Constructive fraud is "a breach of duty, which, irrespective of moral guilt, the law declares fraudulent because of its tendency to deceive [and] violate confidence. . . . Neither actual dishonesty nor intent to deceive is an essential element of constructive fraud."). A fiduciary duty creates fiduciary obligations as a matter of law. See, Alexander Co. v. Packard, 754 P.2d 780, 782 (Colo.Ct.App.1988). The Confidentiality Agreement, as a matter of law, also created a fiduciary or confidential relationship between Larsen and Pet. The evidence is ample to show that as a result of the fiduciary and confidential relationship, Pet reposed trust and confidence in Larsen. After signing the confidentiality agreement, Pet disclosed confidential information and production mechanisms, and provided full and complete access to Pet's books and records, access to Cribari's working papers, and access to bank contracts and records. Kunkel clearly reposed trust in Larsen and his agents showing a fiduciary and/or confidential relationship.
(g) Was there a breach of the Partnership or Joint Venture relationship?
There is ample evidence to support a conclusion that Larsen breached the fiduciary duties owed Pet and Kunkel under their agreement. Specifically, we find:
(1) Larsen disclosed confidential information.
(2) Larsen engaged in self-dealing by associating with Kunkel and Pet to increase his own warehouse business by taking over the York and Des Moines storage facilities.
(3) Larsen's actual (discussed in Section IV. below) and constructive fraud constituted a breach of fiduciary duty.
(4) Mulherin's actions and representations concerning the November 28, 1988 documents, all of which may be imputed to Larsen because Mulherin was Larsen's agent, breach duties of honesty, good faith, loyalty, and fair dealing.
(5) By sending default letters, and instituting lawsuits for appointments of a receiver at Pet's Des Moines and Dodge City facilities, Larsen breached a fiduciary obligation.
(6) The disclosure to Carnation on December 15, 1988 about the deal between Larsen and Pet being off, without disclosure to Pet, was a breach of candor.
(7) Suddenly withdrawing from the joint venture or partnership on pretextual grounds was a breach.
(8) The imposition of the warehouse lien on Pet's products, and the acceptance of payment for same was a flagrant action in Larsen's self-dealing, in violation of his fiduciary duties.
(9) Suggesting that Pet file bankruptcy and that Larsen would "slip" money *163 to Kunkel violated a duty of fair dealing.
(10) Larsen's February and March, 1989 telephone calls to Pet's customers and suppliers about Pet's financial condition was a breach of fiduciary duty and one of the principal reasons for Pet's bankruptcy.
Proof of harm from a breach of fiduciary duty entitles an injured party to whom the duty was owed to damages that:
(a) place the injured party in the same position it would have been in but for the fiduciary breach;
(b) place the non-breaching party in the position the party was in before the breach; and,
(c) equal any profit the breaching fiduciary made as a result of committing the breach.
See, Restatement of Trusts, Second, § 2205, Comment A, at p. 458 (1957); Hudson v. American Founders Life Ins. Co., 151 Colo. 54, 377 P.2d 391, 395 (1962) and § 15-1-103(2), (3), C.R.S. (1987); Kane v. McNally, 470 P.2d 73, 76 (Colo.Ct.App. 1970), reh'g denied, Feb. 19, 1970, cert. denied, May 12, 1970; Ramsay v. Meade, 37 Colo. 465, 86 P. 1018, 1020 (1906).
As a result of Larsen's numerous and varied breaches of his fiduciary duty, and his complete lack of candor and deceptive conduct, both individually and through his corporate agents and employees, Pet suffered damages consisting of (1) the $155,886.78 paid on the warehouse lien, (2) the execution of the November 28 loan and security agreement to its detriment, and (3) the ultimate demise of Pet's business.[12] The $155,886.78 must be repaid. The loan and security agreements are of no effect. They are not what they purport to be. See, Damrell v. Creagar, 42 Colo. App. 281, 599 P.2d 262, 264 (1979), reh'g denied, May 10, 1979, cert. denied, Aug. 20, 1979 (validity of a lien must be ascertained in light of a plaintiff's status as a partner.).
We also conclude that Larsen's conduct was willful, wanton, and intentional vis a vis his fiduciary duties.
(h) Is Pet entitled to contribution from Larsen for debts paid both before and during the pendency of Pet's bankruptcy?
All parties are liable, jointly and severally, for everything chargeable to the partnership under §§ 7-60-113 and 7-60-114 (C.R.S.), and are jointly and severally liable for all other debts of the partnership. C.R.S. § 7-60-115 (1990); Article 60, Uniform Partnership Law.
A claim for contribution is predicated on the existence of a partnership or joint venture. We have found such a relationship exists, by whatever name, between Larsen and Pet.
Ordinarily, a partner is not entitled to contribution until after a settlement showing the respective equities of the parties. Goff v. Bergerman, 97 Colo. 363, 50 P.2d 59, 61 (1935), reh'g denied, Oct. 21, 1935. Contributions may be allowed without a previous settlement of firm accounts when the item has been separated from partnership affairs. Keefer v. Valentine, 199 Iowa 1337, 203 N.W. 787 (1925). Colorado has allowed a contribution action without a formal accounting. Boner v. L.C. Fulenwider, Inc., 32 Colo. App. 440, 513 P.2d 730, 732 (1973). See also, 68 C.J.S. Partnership, § 116 (1950); C.R.S. 7-60-134; 1 Colorado Methods of Practice, § 149 (Rev.3d Ed.1989).
Here, United Protein, as part of the agreement to purchase Pet's assets, has agreed to pay 50% of the unsecured unpaid trade debt of Pet, not to exceed $2.5 million. Larsen, as Pet's partner or joint venturer, is obligated to pay 50% of $1.25 million as his contribution share.
III. Issues Pertaining to Interference with Contract and Prospective Economic Advantage.
All the defendants have raised counterclaims of interference with contract and *164 with prospective advantage.[13] These torts have been recognized only recently, with the tort of interference with contract recognized in the leading modern case of Lumley v. Gye, 2 El. & Bl. 216, 118 Eng. Rep. 743 (Q.B.1853). A further extension of the tort of interference with a present economic right to that of interference with prospective economic gain was first reported in Temperton v. Russell, 1 Q.B. 715 (1893). Both torts protect relational interests. We discuss them together because they are close cousins in the law.
Colorado requires five specific elements before it will recognize the tort of intentional interference with the performance of an existing contract with a third person. They are:
(1) existence of a valid contract between plaintiff and a third party;
(2) knowledge by the defendant of this contract, or knowledge of facts that should lead (a party) to inquire as to the existence of the contract;
(3) intent by the defendant to induce a breach of contract by the third party;
(4) action by the defendant that induces a breach of contract; and,
(5) damages to the plaintiff.
Control, Inc. v. Mountain States Telephone and Telegraph Company, 32 Colo. App. 384, 513 P.2d 1082, 1084 (1973). See also, Restatement of Torts, Second, § 766; Memorial Gardens, Inc. v. Olympian Sales and Management Consultants, Inc., 690 P.2d 207, 210 (Colo.1984) (en banc), reh'g denied, Nov. 26, 1984 (citing, the Restatement with approval).
The first element of the tort of intentional interference with a contract with a third person is the existence of a valid contract between a plaintiff and a third party. The basic importance of this element was recognized in William v. Burns, 540 F. Supp. 1243, 1251 (D.Colo.1982). There, a defendant's motion for summary judgment was granted because the plaintiff failed to allege or present any evidence of an existing contract. Id., at 1251.
The second element of the tort is that the defendant had knowledge of a contract or knowledge of facts that lead the defendant to inquire as to the existence of a contract.
The third element of the tort is intent. It is a difficult issue to prove. Rare is the defendant who will directly admit intent. Thus, this element, essentially a factual one, may be proven by circumstantial evidence.
The fourth and final element besides damages is that the defendant must act in such a way that induces or causes nonperformance of the contract. Restatement of Torts, Second, states the tort requires that the defendant's action be intentional and that it improperly interferes with the performance of a contract.
Specifically,
[i]n determining whether an actor's conduct is intentionally interfering with a contract or a prospective contractual relation of another is improper or not, consideration is given to the following factors:
(a) the nature of the actor's conduct;
(b) the actor's motive;
(c) the interest of the other with which the actor's conduct interferes;
(d) the interest sought to be advanced by the actor;
(e) social interest in protecting the freedom of actions of the actor and the contractual interest of the other;
(f) proximity or remoteness of the actor's conduct to the interference; and,
(g) the relations between the parties.
Restatement of Torts, Second, § 767 (1979).
The tort of interference with prospective[14] advantage is different from interference with contract because the former looks to protect future valuable expectancies, *165 while the latter is to protect what has already been acquired. The difficulty with the tort is the burden of proving damages. While prospective damages is a familiar element in a breach of contract case, nevertheless, it is a burden that is difficult to prove.
A breach of confidence committed or induced in obtaining or using a trade secret has been a frequent ground for relief. § 130, "Interference with Prospective Advantage," Prosser and Keeton on the Law of Torts (5th ed. 1984).
The tort has been recognized in Colorado in the case of Montgomery Ward & Co., Inc. v. Andrews, 736 P.2d 40, 47 (Colo.Ct. App.1987), reh'g denied, Mar. 19, 1987 (quoting, Restatement of Torts, Second, § 766(B)). Andrews states the elements of the tort to be:
(a) inducing or otherwise causing a third person not to enter into or continue a prospective relation; or,
(b) preventing the other from acquiring or continuing the relation.
Id. at 47. See also, Dolton v. Capitol Federal Savings and Loan Association, 642 P.2d 21, 23 (Colo.Ct.App.1981) reh'g denied, Oct. 8, 1981, cert. denied, Mar. 8, 1982.
To prove the tort, it is not necessary to prove an underlying contract. It is sufficient to show intentional and improper interference preventing formation of a contract. Dolton, supra, 642 P.2d at 23, citing, Restatement of Torts, Second, § 766(B). Finally, and although not clearly articulated in Dolton, it would appear that Colorado accepts that a breach of fiduciary relationship can give rise to the tort, because the nature of the relationship, business or confidential, may impel or induce a party to relax the care and vigilance a person would and should have ordinarily exercised in dealing with a stranger. Id., at 23. It is patently clear that Colorado requires improper conduct before it will recognize the tort.
We find that Larsen has committed both torts claimed by Pet. In mid-February, 1989, Larsen called his and Pet's major customers and informed them that the deal with Pet was not going through. Shortly after Larsen's calls, Kunkel began receiving calls about Pet's financial viability. Other customers started demanding COD payments. Others restricted credit. The record is replete with constructive, if not actual, interferences with current and prospective customers. The coincidence of Larsen's contacts with the direct results obtained is too extraordinary for us not to reach a conclusion the torts have been committed. Moreover, there was clearly a revelation by Larsen to others about Pet's financial condition. This is the revelation of a trade secret, and is actionable under the tort of interference with prospective advantage. Finally, it appears that Larsen used his newly found trade secrets to get Iowa Beef to cancel its negotiations with Pet in March of 1988.
What are the damages Pet suffered? Clearly, the cancellations of business and tightened credit contributed to Pet's slide into bankruptcy. No exact amount can be determined to this specific tort; however, the commission of these torts caused overall harm to Pet. Thus, we will have more to say about damages when we reach that part of our discussion.
IV. Fraud, Misrepresentation, Nondisclosure, and other Torts.
(a) Fraud, Misrepresentation, and Non-disclosure.
Pet claims that Larsen committed actual fraud upon Pet and is liable for damages. Pet has also raised affirmative defenses of material misrepresentation and acts of omission.
The elements of common law deceit have been well established for over 50 years in Colorado since the case of Morrison v. Goodspeed, 100 Colo. 470, 68 P.2d 458 (1937). The elements are:
(1) false representation of a material fact;
(2) knowledge on the part of the one making the representation that it is false;
*166 (3) ignorance on the part of the one to whom the representation is made of the facts of the representation;
(4) representation made with the intention that it be acted upon; and,
(5) action on the representation resulting in damage.
Id. 68 P.2d at 462. One remedy for fraud or deceit is rescission and restitution. The contract or matter involved is voidable.
The law of misrepresentation is considerably broader than the separate tort action for fraud. The law of misrepresentation seems to first appear in the early English case of Pasley v. Freeman, 3 Term Rep. 51, 100 Eng.Rep. 450 (1789).[15]
Misrepresentation arises when it is fixed as a defense to an action; as here, when Pet claims it was induced by false statements to sign a promissory note, security agreements, and guarantees. In earlier law, it was known as fraud in the factum. In modern law, we have broken it down into fraud in the inducement, and fraud in the execution. U.S. District Judge Kane, now Senior Judge, has succinctly described the difference between the two subsets of misrepresentation in Colorado Plasterers' Pension Fund v. Plasterers' Unlimited, Inc., 655 F. Supp. 1184 (D.Colo.1987).
Fraud in the inducement consists of inducing one by some fraudulent representation or pretense to execute the very contract to be executed. An agreement based on such an inducement is voidable. Fraud in the inducement has three requirements: first, the misrepresentation must have been either fraudulent or material; second, the misrepresentation must have induced the recipient to make the contract; third, the recipient must have been justified in relying on the misrepresentation. If each of these elements is met, the contract is voidable. Fraud in the execution, on the other hand, occurs if a "misrepresentation as to the character or essential terms of a proposed contract induces conduct that appears to be a manifestation of assent by one who neither knows nor has a reasonable opportunity to know of the character or essential terms of the proposed contract." If the elements of the defense of fraud in the execution are met, the contract is not merely voidable, it is void ab initio.
Id. at 1186. (Citations omitted).
That there is deceit and misrepresentation involved in this case is beyond peradventure of a doubt. When it began, however, and what type of misrepresentation occurred, is not easily ascertained.
Pet and the other defendants would like us to find that Larsen had the scienter from day one to take over Pet, and that Larsen never disclosed this intent. The evidence belies this. Larsen is a savvy and smart businessman. The record clearly reflects the synergistic results a combination of Larsen and Pet's businesses would bring. Although the form of the deal would probably leave the CPF-MRF corporation a related entity within Larsen's family of corporations, and Kunkel, a soldier within the family, this result is not necessarily a fraudulent one. Here, we give Larsen the benefit of the doubt. But, sometime between August and November, 1988, this benefit of the doubt changes. Somewhere within this period of time, the precise moment being unknowable, Larsen assumed an intent to bolster his own warehouse business to the detriment of Pet, and to force Pet to sell its competing cold storage facilities in York and Des Moines to Larsen at a distressed sales price. This intent was clearly visible when, on November 28, 1988, Larsen failed to disclose his intent to consider the $2 million given to Pet as a loan, and that he (Larsen) would enforce the security documents and call a default on the loan when it became due. Moreover, it is patently clear that Mulherin, Larsen's agent, affirmatively misled Donald Kunkel, Pet's agent, about the import of the documents. Additionally, Mulherin affirmatively misled Kunkel about Attorney Minor's involvement (or lack of involvement), and did the same to *167 Minor. We also find that Dolfay quietly understood what was happening on November 28, 1988, in that he knew the import of the documents. Thus, all of the elements of Goodspeed, supra, 68 P.2d at 462, are satisfied.
In addition, we find that there was fraud in the inducement when Kunkel signed the documents because Larsen, via his agent Mulherin, knew Kunkel trusted him and that Kunkel placed the utmost confidence in him when he signed the documents. Even after Kunkel questioned the documents, he was twice mislead by Mulherin. This behavior was especially outrageous and egregious because Mulherin knew Kunkel would rely on him (to Pet's detriment).
Finally, we find there was also fraud in the execution. Mulherin, an attorney, prevented Kunkel from consulting with Pet's attorney, whose existence Mulherin was aware of; and at the signing, Mulherin prevented an effective review by Kunkel of the documents. Although we find Kunkel should have reviewed the documents more carefully, the fiduciary and confidential relationship between the parties justifies his behavior and vilifies Larsen's.
Because common law fraud and misrepresentation has been shown,[16] Pet is entitled to recover all actual, incidental, or consequential damages that are the natural and proximate result of Larsen's fraudulent conduct. Pet is also entitled to rescind the $2 million promissory note, security agreements, and loan guarantees. Finally, because Larsen's conduct was willful and wanton, and exercised business decorum we cannot condone, Pet is entitled to exemplary or punitive damages. C.R.S. § 13-21-102. Damages are discussed below.
(b) Civil Conspiracy.
Pet has alleged the existence of a civil conspiracy against it by Millard and Larsen, specifically that Larsen conspired to acquire the control of Kunkel's interest in Pet.
The tort of civil conspiracy can be defined as "an intentional tort that requires proof of a combination between two or more persons to accomplish an unlawful goal or a permitted goal unlawfully." Hawkinson v. A.H. Robbins Co., Inc., 595 F. Supp. 1290, 1314 (D.Colo.1984). See also, Mulei v. Jet Courier Service, Inc., 739 P.2d 889, 894 (Colo.Ct.App.1987), rev'd on other grounds, 771 P.2d 486 (Colo.1989) ("{A} party cannot be held liable merely for doing in a proper manner that which it had a lawful right to do.").
Civil conspiracy requires a showing, by a preponderance, of five elements:
1) two or more persons;
2) with an object to be accomplished;
3) with a meeting of the minds on the object or course of action to be accomplished;
4) with one or more unlawful overt acts (i.e., an unlawful purpose or a lawful purpose accomplished by unlawful means); and,
5) damages as a proximate result thereof.
Contract Maintenance Co. v. Local No. 105, Building Service Employees Int'l Union, 160 Colo. 190, 415 P.2d 855, 856 (1966) (en banc); Spears Free Clinic and Hospital v. Denver Area Better Business Bureau, 135 Colo. 464, 312 P.2d 110, 112 (1957) (en banc). See also, Lockwood Grader Corp. v. Bockhaus, 129 Colo. 339, 270 P.2d 193, 196 (1954) (en banc) (Proof needed for a conspiracy.).
A conspiracy is difficult to prove with direct evidence because it is rare that parties to a conspiracy will testify to it. We hold that the actions must fail because missing here is the requisite second party. Not one defendant here has named any other party to this suit as a co-conspirator.
*168 (c) Breach of Uniform Trade Secrets Act.
Pet claims that Larsen breached the Uniform Trade Secrets Act, C.R.S. §§ 7-74-101, et seq. Misappropriation of a trade secret occurs if:
1) a trade secret is disclosed;
2) without the express or implied consent of the owner;
3) by a person who knew or had reason to know that the knowledge obtained was a trade secret;
4) the knowledge obtained was acquired under circumstances that give rise to a duty to maintain secrecy or limit its use; and,
5) the use or disclosure of the trade secret must be detrimental to the party whose secret is revealed.
See, C.R.S. § 7-74-108.
There is no Colorado law interpreting the statute. Trade secrets include "confidential business or financial information," that the owner has "taken measures to prevent the secret from becoming available to persons other than those selected by the owner to have access." C.R.S. § 7-74-102(4). What constitutes a trade secret is generally a question of fact. An agreement not to disclose confidential information is an acknowledgement that the information is a trade secret. Kodekey Electronics, Inc. v. Mechanex Corporation, 486 F.2d 449, 455 (10th Cir.1973).
Another element of a trade secret is its secrecy and value. To succeed on a violation of the Trade Secrets Act, a party must show that a prospective competitor would have been required to expend money and time to produce a comparable process or develop comparable information.
Another element of a trade secret is that it is not generally known. Matters that are generally known, or which are commonly known, in a trade or business cannot be considered trade secrets. See, Surgidev Corp. v. Eye Technology, Inc., 648 F. Supp. 661, 681 (D.Minn.1986), aff'd, 828 F.2d 452 (1987).
It is clear that Larsen disclosed trade secrets of Pet to suppliers, customers, and canneries in the pet food industry, thus violating the Uniform Trade Secrets Act. Specifically, Larsen disclosed Pet's financial condition, and announced that Pet was on the brink of bankruptcy. While it is true that this information may have been generally known, the knowledge may have been as a result of Larsen's disclosure. Most compelling, is that Larsen knew he had acquired Pet's secret and confidential business information under circumstances that implied a duty on Larsen to maintain their secrecy. The evidence is inconclusive, however, as to whether Larsen revealed trade secrets about Pet freezer processes. Finally, Pet is entitled to recover attorney's fees, costs, and exemplary damages, because we find that Larsen's revelations to others about Pet's trade secrets were so malicious and wanton. C.R.S. § 7-74-104(2); § 7-74-105. Exemplary damages are determined to be ten (10%) percent of Pet's entire recovery herein.
V. Damages â Pet.
During the trial, we heard the testimony of defendants' experts, Pattern and Banbury, with reference to the value of Pet at the time of the subject transaction.
Banbury put a mid-range value on the stock of Pet at $21 million. Banbury also had a high and low value that was $15 million and $31 million respectively (T.1142). Deducted from these amounts was the corporate debt of $9.6 million (CAI.119), as well as the contingent debt upon which we can make no finding due to lack of evidence.
In taking into account all the evidence, we do not have to embrace every bit of evidence that an expert provides. What rings clear from both the experts and the parties themselves is that both Larsen and Kunkel were looking to the long-term benefit of their business marriage and not a short-term gain. We find Banbury's midrange value for Pet to be the most persuasive value. Thus, the damages for Pet's losses are $11,400,000 ($21,000,000 *169 minus $9,600,000), and not the $4 million the parties agreed was the entry price. The latter being a short-term price.
VI. Kunkel's Claims.
(a) Fraud in the Inducement and Execution.
In addition to our previous findings, supra, we find that Larsen, by himself, and his agents,[17] fraudulently obtained the signatures of Susan L. Kunkel and Donald A. Kunkel upon a $2 million promissory note and certain security agreements.
The signatures were obtained by misrepresentation about the nature of the documents, and the fact that the loan was never one that was meant to be a legally enforceable debt. McCaffrey v. Mitchell, 98 Colo. 467, 56 P.2d 926, 929 (1936). Moreover, the physical circumstances under which the documents were signed support rescission on the grounds of fraud in the execution. Additionally, punitive and exemplary damages are appropriate. Our holding here also supports a finding in reference to Kunkel's request for declaratory judgment.
(b) Civil Conspiracy to Acquire Kunkel's Interest in Pet.
This claim cannot stand for the same reason stated in our discussion about Pet's cause of action on this issue.
(c) Outrageous Conduct.
To recover upon a claim of outrageous conduct, a party must show by a preponderance of the evidence:
1) extreme and outrageous conduct;
2) conduct recklessly, or with the intent of, causing severe emotional distress; and,
3) conduct resulting in severe emotional distress.
Rugg v. McCarty, 173 Colo. 170, 476 P.2d 753 (1970).
Extreme and outrageous conduct has been defined as conduct
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. Generally, the case is one in which the recitation of the facts to an average member of the community would arouse his resentment against the actor, and lead him to exclaim, "Outrageous!"
Restatement of Torts, Second, § 46 (1965).
Having examined the evidence in this proceeding, and in particular the actions of Mulherin, Larsen's agent, and Larsen's actions in conjunction with Mulherin, we find that while it was represented to the Kunkels that the promissory note and supporting documents were to be "stop-gap" measures with no intention to enforce them, these representations were contrary to Larsen's intentions. We find these representations induced Kunkel to induce his spouse to sign the documents. In reviewing Mulherin's conduct misleading Kunkel and Minor, we find Mulherin's actions beyond any possible pale of decency and ethical responsibility imposed on an attorney in his position. Moreover, Mulherin's conduct in not forwarding any of the documentation to Kunkel's attorney for review, both prior to and after the closing, was not only unwarranted, but also outrageous.
Mulherin's representation to Kunkel, when Kunkel became apprehensive about signing the documents, were deliberately calculated to take advantage of the position of faith and trust that Kunkel had in Larsen and Mulherin. Further, Mulherin's lie to Kunkel that he had spoken to Minor went beyond any boundary of decency. If there was to be something other than an *170 enforceable obligation, Mulherin should have obtained Minor's clearance. To buttress our findings, it is clear the later lawsuits show the promissory note was not what Larsen represented it to be.
Further enforcing our findings was the timing of the signing of the documents, and five days later, the Letter of Intent. The total disregard by Larsen of his obligations under the Letter of Intent shows Larsen did not intend to make an equity investment in Pet, but, rather, wanted to gain control of Pet and Kunkel's assets.
The conduct of Larsen, and his agents, was reckless and with intent to cause severe harm. The harm is evidenced by the loss of a lifetime's work and the damage to Kunkel's marriage. That Susan and Donald Kunkel suffered severe emotional distress is evident during the course of the trial. We had ample opportunity to observe their demeanor with regard to this claim. We also heard evidence from a Kunkel family friend, and their minister, and learned how they departed from a gregarious couple, active in many community affairs, to virtual hermits, literally divorcing themselves from social intercourse as a result of their emotional distress (T.1107-1130). We found this uncontradicted evidence convincing and truthful.
Finally, we heard the testimony of how Susan Kunkel, a spouse, homemaker, and mother, lived in fear of losing her home because of documents she had never really understood, until this trial, and of which she had never received copies.
Based upon the foregoing, this Court finds Susan Kunkel suffered $500,000 in damages, and Donald, $250,000. The damages will also include an award of attorney's fees and costs for both the Kunkels.
(d) Interference with Dodge City Lease.
Kunkel was the owner of improved real property in Dodge City, Kansas, which was leased to Pet (T.665). Based upon prior stated findings of fact, it is clear that Larsen interfered with the lease between Kunkel and Pet with an intent to take the facilities from Kunkel. The only evidence being in the record as to damages coming from Banbury, we find Kunkel's damages to be the equity in the lease, namely $497,000.
(e) Interference with York Lease.
Kunkel was a partner in a partnership known as DGJ Properties (T.665-66) that owned property in York, Nebraska with improvements. The property was leased to Pet. Based upon the evidence adduced in the matter, it is clear that Larsen interfered with this lease, and caused, based on uncontradicted testimony, damages to Kunkel in the amount of $123,000 (equity of $205,000 Ũ 60% ownership interest).
(f) Affirmative Defenses.
Based upon our findings and holdings, it is not necessary to address the affirmative defenses.
CONCLUSION
Counselors for Pet and Kunkel are to settle an Order based upon this Memorandum of Decision.
NOTES
[1] FBS Business Finance Corporation was voluntarily dismissed from the proceeding.
[2] Marks and Clare, Escrow Agents, and City of Dodge City, Kansas did not defend the complaint at trial. The Order emanating from this Decision will provide appropriately for them.
[*] Sitting by special designation.
[3] We have jurisdiction to hear this matter under 28 U.S.C. § 1334(b) and the general reference to this Court by the United States District Court for the District of Colorado, General Procedural Order No. 1984-3. The appearing and defending parties consent to an entry of final judgment in all matters that arise in this adversary proceeding. This Memorandum of Decision constitutes findings of fact and conclusions of law under F.R.Civ.P. 52, as made applicable by F.R.Bkrtcy.P. 7052.
[4] References are to the transcript pages. Exhibits, for purposes of this Memorandum Decision, are designated "L" for Larsen; "CAI" for Protein; "CPF" for Pet; and, "K" for Kunkel.
[5] As will be shown later, see, page 140, infra, it is not clear if Kunkel understood this particular structure under the deal.
[6] "CPF" was derived from Consolidated Pet Foods, and "MRS" from Millard Refrigerated Services.
[7] Interestingly, Mulherin had previously performed a title search and UCC search on Pet and Kunkel in September, 1988 (T.330).
[8] We do not necessarily agree with Ferdig's adjustments, but consider their effect on Larsen and this transaction.
[9] This defense was resolved pre-trial.
[10] If it is found that the parties intended to be bound, and some provisions were in writing and some oral, the statute of frauds is not applicable. Coulter, supra, 357 P.2d at 81.
[11] In the event this holding is incorrect, there is ample similar case law in Nebraska and Texas that supports the conclusions we reach.
[12] We will discuss damages in Section V. below.
[13] We indicated, supra, at pp. 155-56 that the Kunkels have no standing to bring this counterclaim.
[14] For those versed in New York law, the tort is often referred to as a "prima facie" tort. See, Rager v. McCloskey, 305 N.Y. 75, 111 N.E.2d 214, 217 (Ct.App.1953). See also, Restatement of Torts, Second, § 766(B).
[15] This is not to say it didn't exist earlier in our common law heritage. See, 1 Street, Foundations of Legal Liability, at 376 (1906) (Writ of deceit known to exist as early as 1201 A.D.).
[16] This burden of proof has been carried by clear and convincing evidence. We are aware that the burden in Colorado is by a preponderance of the evidence. C.R.S. § 13-25-127 (1987).
[17] The conduct of Mulherin, Larsen's agent, in this transaction was particularly reprehensible, improper, and unethical. Attorneys are prohibited from having direct contact with an opposing party who is represented by counsel. See, Disciplinary Rule 7-104(A)(1), ABA Model Code of Professional Responsibility. Minor, Kunkel's attorney, never gave Larsen or Mulherin permission to talk with Kunkel. In fact, Mulherin took affirmative action to prevent Kunkel from speaking to Minor when the $2 million promissory note was signed. On this ground alone, the loan security documents and guarantees must be rescinded and declared null and void.
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144 B.R. 223 (1992)
In re Enos GAUDET, Debtor.
Bankruptcy No. 85-00794.
United States Bankruptcy Court, D. Rhode Island.
September 2, 1992.
Enos Gaudet, pro se.
John Boyajian, Boyajian, Harrington & Richardson, Providence, R.I., for Trustee.
Office of the United States Trustee, Stephen Woodbury, Boston, Mass.
DECISION AND ORDER
ARTHUR N. VOTOLATO, Jr., Bankruptcy Judge.
Heard on December 17, 1991 on the attorney for the Trustee's Interim Fee Application, and the Trustee's request for the imposition of sanctions against the Debtor, Enos Gaudet. The Debtor objects, of course, to both requests. Since the hearing, we have awarded Trustee's counsel $15,103 in fees and expenses, on account (on his $39,812.50 application), and reserved decision as to the balance until the disposition of the within motion.
On the issue of sanctions, we agree with and adopt the position taken by the United States Trustee, which states in part:
Given the conduct demonstrated by the Debtor during the pendency of this proceeding, and the resulting expense to the estate, the United States Trustee supports the trustee's request for an award of sanctions against the Debtor individually in an amount commensurate with that portion of counsel's fee request which is found to be directly attributable to the Debtor's conduct. The United States Trustee would suggest that the trustee be directed to identify that portion of the fees and expenses requested which concern action taken due directly to the improper conduct of the Debtor.
Response of United States Trustee at 1 (November 15, 1991). We took the suggestion of the United States Trustee, made such a request of Mr. Boyajian, and he has complied.
We have previously found that Mr. Gaudet's conduct throughout this case calls for the imposition of sanctions. See In re Gaudet, 75 B.R. 92, 94 (Bankr.D.R.I.1987) ("sanctions, long overdue, are in order, given this debtor's hyperactivity and groundless *224 litigiousness"), but postponed setting the amount of any award "until the conclusion of the case, when the totality of Mr. Gaudet's frivolous behavior can be fully and accurately assessed, after notice and hearing." Id.
The First Circuit has three times echoed our concern with this Debtor's propensity to litigate. On September 10, 1991, the Court of Appeals declined to order sanctions, but "warn[ed] appellant that we will do so in the future if further frivolous matters are pressed." In re Gaudet, No. 90-1328, slip op. at 2 (1st Cir. September 10, 1991). More recently, the Court denied Gaudet's Petition for Rehearing En Banc, saying that
[t]his petition is frivolous. It is the third request seeking permission to file a petition for rehearing en banc. Our prior order of January 9, 1992 warned that such filings were sanctionable. Our September 10, 1991 order was to the same effect. . . . The clerk of court is directed not to accept any additional filings in this case from the petitioner.
In re Gaudet, No. 90-1329, slip op. at 1 (1st Cir. February 25, 1992).
Ironically, Mr. Gaudet's incessant litigiousness over a period of seven years is the sole reason for all of the legal expense to which he now objects. Nevertheless, his conduct has been, and continues to be obstructionist, unjustified, and clearly sanctionable, and the time for determining the amount of sanctions is now at hand.
Unsecured creditors' claims in this case total $37,488.35. Prior to the interim allowance awarded to Mr. Boyajian, the assets in this 1985 case were $20,596.06. At this point, if the remaining funds are paid to creditors, $5,841.20 would be distributed, for a 16% dividend. The problem with this is that innocent creditors would be subsidizing Mr. Gaudet's frivolous behavior. We think it more just and equitable to assess the legal time directly associated with Gaudet's self-indulgence (calculated by the Trustee to be 160.1 hours) where it belongs, in accordance with the United States Trustee's recommendation. After a detailed review of the entries submitted, we find that 160 hours is the amount of unnecessary legal time generated by Gaudet in these proceedings,[1] and at an average rate of $175/hour,[2] this translates into $28,000.
Accordingly, we ORDER Enos Gaudet to pay the Trustee $28,000 for the legal services attributable to his frivolous litigation during the course of this bankruptcy case.
In accordance with our specific intention not to see creditors financially harmed by Gaudet's conduct, we make the following additional rulings:
1. Of the $39,812.50 requested by the Trustee's counsel, $28,000 is the responsibility of Mr. Gaudet. Therefore $11,812.50 should be paid by the estate for legal services.
2. Because the Trustee has already received $15,103.10, he should reimburse the estate $3,290.50. That sum, added to the $5,841.20 remaining in the Trustee's account, results in a total asset base of $9,131.70 for distribution to creditors. With total claims of $37,488.35, this will produce a dividend of 24%. That, we estimate, is what creditors would have received in this bankruptcy case, absent Gaudet's misconduct.
Enter Judgment consistent with this opinion.
NOTES
[1] By illustration, the record in Mr. Gaudet's cases in this Court (not including Mrs. Gaudet's Chapter 13 case) consists of approximately 2,600 pages of pleadings, rulings and assorted other documents, most of which fall into the category frivolous. We will not even speculate as to what this translates into vis-a-vis wasted court time.
[2] Although the Trustee has calculated his legal fee at the constant rate of $175/hour, which obviously includes some services performed in prior years when his rate probably was lower, we do not adjust downward for that, because of the elapsed time and delay in payment factor.
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674 F. Supp. 944 (1987)
Rose SZLOSEK and Kathleen Starkey, Plaintiffs,
v.
SECRETARY OF HEALTH AND HUMAN SERVICES, Defendant.
Civ. A. No. 85-0318-F.
United States District Court, D. Massachusetts.
November 19, 1987.
*945 Peter Benjamin, Western Mass. Legal Services, Springfield, for plaintiffs.
Mary E. Carmody, Asst. U.S. Atty., for defendant.
MEMORANDUM AND ORDER
FREEDMAN, Chief Judge.
Rose Szlosek and Kathleen Starkey, recipients of Social Security Title II benefits, challenge the validity of 20 C.F.R. § 416.1123(b) (1986), which deems money withheld to recoup overpayments under Title II of the Social Security Act ("Title II"), 42 U.S.C. §§ 401-433, as income for the purposes of calculating Supplemental Security Income ("SSI") benefits under Title XVI of the Act, 42 U.S.C. §§ 1381-1383c.
This action is before the Court on plaintiffs' motion for summary judgment and class certification. Defendant counters with a cross motion for summary judgment. Plaintiffs have exhausted their administrative remedies and are properly in this Court pursuant to 42 U.S.C. § 405(g). There are no material factual disputes. Plaintiffs claim that 20 C.F.R. § 416.1123(b) implementing 42 U.S.C. § 1382(a)(2)(B) of the Act is not a reasonable interpretation of that statutory provision. Plaintiffs argue that 1) the Secretary misinterprets the plain language of the statute, 2) the regulation contravenes congressional intent, 3) it constitutes impermissible cross program recovery, and 4) it violates the Equal Protection Clause.
I. FACTS
Plaintiffs are both elderly widows. Each is in the process of repaying overpayments under Title II of the Social Security Act. Both have been adjudged to be "not without fault" in receiving the overpayments pursuant to 42 U.S.C. § 404(b). Therefore, the Social Security Administration ("SSA") is in the process of recovering these overpayments from their Title II benefits.
*946 Rose Szlosek is 69 years old. As a widow, she is entitled to gross Title II benefits of $501 per month. Of that amount, $100 is withheld per month to recoup a prior Title II overpayment. Thus, her net Title II benefit is $401 per month. Kathleen Starkey is 79 years old. She is entitled to $405 under Title II. The sum of $92 per month is withheld to recoup an overpayment. Thus, her net Title II benefit is $313. Both plaintiffs claim they would be eligible for more SSI benefits if their net Title II benefits were considered as their income. For example, Rose Szlosek receives no SSI benefits. However, were her income of $401 considered for the purposes of determining SSI needs, then she would be eligible for $83.82 per month in SSI benefits. Kathleen Starkey already receives $82 per month in SSI benefits but, if her net income of $313 were considered, she would be entitled to $171.82 in SSI benefits per month.
II. STATUTORY AND REGULATORY SETTING
This action involves two federal entitlement programs: Supplemental Security Income, Pub.L. 92-603, 42 U.S.C. §§ 1381-1383c, and Title II of the Social Security Act, 42 U.S.C. § 401-433. SSI and Title II are separate programs, each operating pursuant to different statutory authority and receiving funding from separate sources. Title II is funded by employee and employer Federal Insurance Contributions Act ("FICA") contributions. SSI is funded by general revenues collected through personal, corporate and other taxes. The regulation in dispute concerns the calculation of income for the purposes of assessing SSI needs. Specifically, 20 C.F.R. § 416.1123(b) includes money withheld from Title II benefits to recoup a prior Title II overpayment in determining whether an individual qualifies for SSI benefits.
A. The SSI Program
Congress established the SSI program as "a national program to provide supplemental security income to individuals who have attained age 65 or are blind or disabled." 42 U.S.C. § 1381. The legislation was "designed to provide a positive assurance that the Nation's aged, blind and disabled people would no longer have to subsist on below-poverty level incomes ... by providing an assured total monthly income." Robinson v. Bowen, 828 F.2d 71, 73 (2d Cir.1987) (Oakes, J., dissenting) (citing S.Rep. No. 1230 at 384).[1] It is a program of last resort for people with no other source of income. Because SSI is a supplemental program, SSI beneficiaries must apply for every other source of income to which they are entitled. 42 U.S.C. § 1382(e)(2). Income received from other sources is then deducted from the amount received in SSI benefits. The SSI program determines the amount of assistance granted by comparing the beneficiary's earned and unearned income against a standard. 42 U.S.C. § 1382(b). The standard for determining unearned income is statutorily defined as:
Any payments received as an annuity, pension, retirement, or disability benefit, including veterans' compensation and pensions, workmen's compensation payments, old age, survivors, and disability insurance benefits, railroad retirement annuities and pensions, and unemployment insurance benefits.
42 U.S.C. § 1382(a)(2)(B). SSI thus provides subsistence level income for the recipients of many different benefit programs.
B. Overpayments
The Social Security Act and the regulations promulgated pursuant to it provide that "whenever the Secretary finds that more or less than the correct amount of payment has been made to any person under this title, proper adjustment or recovery shall be made, under regulation prescribed *947 by the Secretary." 42 U.S.C. § 404(a)(1). The Social Security Administration often waives overpayments when they are received through no fault of the beneficiary. When, however, an overpayment is made because the beneficiary has not provided the Secretary with current information, that beneficiary is found to be "not without fault" and is required to return the amount overpayed. 20 C.F.R. § 410.561(g). Plaintiffs do not dispute the Secretary's decision that they were "not without fault" and are obligated to refund their overpayment. The facts surrounding their incurrence of an overpayment are not relevant.
The issue in this case is a change in the regulations governing the categorization of unearned income deducted for overpayments. When SSI was enacted, the Secretary's predecessor promulgated a regulation stating that eligibility for SSI could only be calculated according to the income actually possessed by an applicant. 20 C.F. R. § 416.1120 (1977). This regulation was explained further in 1979 by an amendment defining income as "anything an individual receives in cash or in kind that can be used to meet his or her needs for food, clothing, and shelter." 44 Fed.Reg. 6430 (Feb. 1, 1979). The result of these regulations was that Title II benefits withheld to recoup a Title II overpayment were not counted as income when calculating an SSI recipient's income.
In 1982, however, a different Secretary decided, essentially, to make a policy reversal by including as income benefits withheld to recoup a Title II overpayment. In promulgating 20 C.F.R. § 416.1123(b)(1), the Secretary provided SSI applicants with the following notice:
Amount considered as income. We may include more or less of your unearned income than you actually received. (1) We include more than you actually receive where another benefit payment (such as a social security incurrence benefit) ... has been reduced to recover a previous overpayment....
20 C.F.R. § 416.1123(b)(1). By replacing 20 C.F.R. § 416.1120 with 20 C.F.R. § 416.1123(b)(1), the Secretary announced her intention to consider the amount of money to which beneficiaries were entitled rather than the amount they received as income. Therefore, under the new regulation, a Title II beneficiary's income for the purpose of determining SSI eligibility includes the amount being withheld to recoup the prior Title II overpayments. This is a major policy reversal unaccompanied by any change in the underlying SSI statute. The current Secretary, in his arguments before this Court, justifies the change with two arguments: 1) recipients are benefitted by the withheld funds in that they are repaying a legal debt; and 2) the regulation is necessary to stem the flow of funds from one benefit program to another.
III. ANALYSIS
The question before this Court, then, is whether the new regulation, 20 C.F.R. § 416.1123(b)(1), is valid and consistent with recent amendments to the Social Security Act and does not violate the Equal Protection Clause of the United States. Although similar cases have been decided by other district and circuit courts, the issue is one of first impression in this circuit; thus, this Court is not bound by precedent. When presented with both statutory and constitutional grounds for review, a court should consider the statutory claim before the constitutional one. Califano v. Yamasaki, 442 U.S. 682, 692, 99 S. Ct. 2545, 2553, 61 L. Ed. 2d 176 (1979); United States v. C.I.O., 335 U.S. 106, 110, 68 S. Ct. 1349, 1351, 92 L. Ed. 1849 (1948); Ashwander v. TVA, 297 U.S. 288, 347, 56 S. Ct. 466, 483, 80 L. Ed. 688 (1936) (concurring opinion). Therefore, this Court will consider the statutory claims before considering plaintiffs' equal protection argument.
A. Statutory Language: The Word "Received"
Plaintiffs and defendant argue differing interpretations of the word "received" in 42 U.S.C. § 1382a(a)(2)(B). The statute defines unearned income as
[A]ny payments received as an annuity, pension, retirement, or disability benefit, including veterans' compensation and *948 pensions, workmen's compensation payments, old age, survivors, and disability insurance benefits, railroad retirement annuities and pensions, and unemployment insurance benefits.
Plaintiffs argue that the legislature intended "received" to mean the actual receipt of money in hand rather than constructive receipt. The interpretation of individual words in a statute is a difficult task. This Court is guided by the Supreme Court's rule of interpretation which is that "[i]n matters of statutory construction the duty of this Court is to give effect to the intent of Congress, and in doing so our first reference is of course to the literal meaning of the words employed." United States v. New England Coal and Coke Company, 318 F.2d 138, 142 (1st Cir.1963) (quoting Flora v. United States, 357 U.S. 63, 65, 78 S. Ct. 1079, 1081, 2 L. Ed. 2d 1165 (1958)).
The Secretary argues that this Court need not engage in statutory interpretation but rather should defer to the Secretary's analysis. Such a standard must be rejected as inappropriate in this situation. This Court is never obliged to "rubber stamp" the Secretary's interpretation of a regulation. Mayburg v. Secretary of Health and Human Services, 740 F.2d 100 (1st Cir.1984) (citing American Ship Building Co. v. NLRB, 380 U.S. 300, 318, 85 S. Ct. 955, 967, 13 L. Ed. 2d 855 (1964)); see also Bureau of Alcohol, Tobacco, and Firearms v. Federal Labor Relations Authority, 464 U.S. 89, 104 S. Ct. 439, 78 L. Ed. 2d 195 (1983) (court reviewing agency interpretation of law should not "slip into judicial inertia"). Contrary to the Secretary's contention that this Court is bound to uphold his action regardless of its merits, the length of time between the statute and the regulation's promulgation results in a low level of deference. General Electric Co. v. Gilbert, 429 U.S. 125, 143, 97 S. Ct. 401, 411, 50 L. Ed. 2d 343 (1976) (administrative interpretation of a statute many years after enactment and contradictory to its previous interpretation is entitled to little weight).
The Secretary's proposed standard is especially inappropriate when the Secretary's regulation reverses a regulation promulgated at the time the statute was enacted. Udall v. Tallman, 380 U.S. 1, 16, 85 S. Ct. 792, 801, 13 L. Ed. 2d 616 (1964) ("Department's current interpretation, being in conflict with its initial position, is entitled to considerably less deference").
Given the present situation, the First Circuit in Mayburg provides this Court with a framework for analyzing an administrative interpretation. Judge Breyer noted in Mayburg that a court "may still infer from the particular statutory circumstance an implicit congressional instruction about the degree of respect or deference they owe the agency on a question of law.... They might do so by asking what a sensible legislator would have expected given the statutory circumstances." Mayburg, 740 F.2d at 106 (citing Chevron v. National Resources Defense Council, Inc., 467 U.S. 837, 104 S. Ct. 2778, 81 L. Ed. 2d 694 (1984).
Applying a Mayburg -type "sensible legislature" standard, the Second and Fifth Circuits, in ruling on essentially identical cases, rejected arguments that the word "received" in section 1382a(a)(2)(B) should be interpreted to invalidate 20 C.F. R. § 416.1123(b). Robinson v. Bowen, 828 F.2d at 71; Lyon v. Bowen, 802 F.2d 794 (5th Cir.1986). The Lyon court noted that the word "received" is used only in subsection (a)(2)(B) and not in other subsections where income might as likely be constructively, but not actually, received by the beneficiary. For example, section 1382a(a)(2)(E) includes "gifts (cash or otherwise), support and alimony payments, and inheritances" as income without using the word "received." Judge Weinfeld writing for the district court in Robinson concluded that:
[it was] not logical to infer that Congress' use of the term `received' in subsection (a)(2)(B) was intended to insure that those particular payments would not be included in the calculation of `earned income' unless they were actually received in hand by an individual in the literal sense of the word.
Robinson, 650 F.Supp. at 1495, aff'd, Robinson v. Bowen, 828 F.2d 71 (2d Cir.1987). *949 This Court agrees with the district court in Robinson: there is strong evidence that the word "receive" is not to be given a meaning which would make the subsections inconsistent.
Further, this is not a case, as plaintiffs claim, in which the Secretary is considering funds actually available for plaintiffs' use. The amount withheld is being used to repay plaintiffs' overpayment. Plaintiffs do not dispute the Secretary's judgment that they were "not without fault" in receiving overpayments. Therefore, they are obligated to repay the overpayment. Nor is the Secretary arguing that their income is increased because of the earlier overpayment. Such an argument would impermissibly impute money received in the past as current income. Summy v. Schweiker, 688 F.2d 1233 (9th Cir.1982) (reimbursement for prior medical expenses not countable as income). Rather, the Secretary considers the amount withheld as overpayment to be income used to pay back a debt, which is explicitly permitted by statute. The Secretary is not acting wrongly by counting overpayments as income.
Thus, plaintiffs' analogy to cases in which courts considered income unavailable to beneficiaries in assessing their need for SSI purposes is irrelevant. McDermott v. Schweiker, 612 F. Supp. 202 (W.D.N.Y. 1985); Usher v. Schweiker, 666 F.2d 652 (1st Cir.1981); Usher v. Secretary of Health & Human Services, 721 F.2d 854 (1st Cir.1983). In McDermott, a case cited by the plaintiffs, the court found that the Secretary could not consider the garnished income of a child's stepfather in determining the child's eligibility for SSI benefits because the garnished income was not available for the child's use. The court held that, while deeming the stepfather's income was permissible, the portion of that income being garnished could not be counted as income available to the child. The court further held that because the garnished funds were not available to provide for food, clothing, or sheltering for the child, they could not be counted as income. Plaintiffs' situation is different. Unlike the child in McDermott, the reduction in their income was a direct result of their being "not without fault" in receiving an overpayment. The child in McDermott had no control over the circumstances relating to the garnishment. Further, plaintiffs' withheld funds are being used to their benefit in that the funds are repaying a debt to Title II incurred by the plaintiffs. The two situations are thus different.
Finally, plaintiffs misinterpret the holding of Usher in stating that only income available for actual use can be considered in determining SSI benefits. In Usher, the First Circuit held that housing provided to the elderly by their children could be counted as imputed income. Usher does not help the plaintiffs. Its holding only strengthens the Secretary's argument in that it encourages this Court to see plaintiffs as benefitting from their withheld income. The Usher court wrote that income in kind, such as food, clothing, or shelter, is "actually available" even though it "cannot readily be converted into cash." The First Circuit stated that "when one receives [income in kind] one receives an actual benefit whether or not there is a market in which one might sell that benefit." Usher, 666 F.2d at 656. Applying the Usher doctrine, the portion of the plaintiffs' Title II benefits which are being withheld may be considered as an actual benefit to them, in that it is being used to pay a legal debt, "whether or not there is a market in which [they] might sell that benefit." Id. at 656.
B. Congressional Intent: Competing Goals
Plaintiffs make two arguments that the regulation is inconsistent with Congressional intent. First, they claim that section 416.1123(b)(1) conflicts with legislative intent to the extent that it reduces SSI recipient incomes below the poverty line. The second, related claim, is that legislation recently enacted by Congress, 42 U.S.C. § 1383(b)(1)(B), limiting the amount of SSI overpayments deducted from SSI benefits to no more than 10% below the minimum subsistence level, applies equally to Title II overpayments. Both of these arguments were presented to, and rejected by, the *950 Robinson and Lyon courts. See Robinson, 828 F.2d 71; Lyon, 802 F.2d 794.
a) Conflicting Intent
Plaintiffs argue that Congress' intent in enacting the SSI program was to provide an income for the aged, blind and handicapped. This is indisputable. The provision of benefits, however, cannot be the exclusive goal of a benefit-dispensing statute. The Lyon court noted that it was also Congress' intent to "prevent the dissipation of the SSI resources through neglect, abuse, or fraud." Lyon, 802 F.2d at 797. The Secretary's changing the method of calculating income was pursuant to this second goal of maintaining the integrity of the program. No aid can be distributed if the program's assets are dissipated through fraud and waste. The Secretary contends that not counting withheld Title II overpayments as income constitutes waste. Had Congress intended for the Secretary to distribute funds without consideration for the integrity of the program, it would certainly have included such language in the statute. Absent such language, this Court cannot infer such a destructive intent.
b) The 10% Rule
Plaintiffs' second argument invoking Congressional intent is that 42 U.S.C. § 1383(b)(1)(B) should be inferred as applying to Title II as well as SSI. 42 U.S.C. § 1383(b)(1)(B) governs the withholding of SSI overpayments from SSI benefits. In 1984, Congress amended section 1382(b)(1) by limiting overpayments recouped from SSI beneficiaries to amounts which do not exceed the lesser of "(I) the amount of his or their benefit under this title ... for that month or (II) an amount equal to 10 percent of his or their income for that month...." 42 U.S.C. § 1383(b)(1)(B) (Section 2612 of the Deficit Reduction Act of 1984) (Supp. III 1985). The result of this was to establish an income floor for SSI recipients repaying an SSI overpayment. The statute makes no mention of repayments to Title II or any other benefit program. If any meaning is to be drawn from section 1383(b)(1)(B), it is that had Congress wished to regulate the recoupment of Title II overpayments, it could have done so. This Court cannot consider legislation regulating one program as applicable to another, albeit related, program unless so directed by Congress.
C. Cross Program Recovery
Plaintiffs argue that section 416.1123(b)(c) violates an overriding prohibition against cross program recovery. In its simplest form, cross program recovery is the withholding of income under one benefit program to recoup an overpayment from a different benefit program. The Congress protected SSI benefits from being assigned to pay debts to other programs or to private individuals or organizations by incorporating the anti-assignment provisions of the Title II program, 42 U.S. C. § 407, into the SSI program. 42 U.S.C. § 1383(d)(1). The anti-assignment provision states:
The right of any person to any future payment under this title shall not be transferable or assignable, at law or in equity, and none of the moneys paid or payable or rights existing under this title shall be subject to execution, levy, attachment, garnishment, or other legal process, or to the operation of any bankruptcy or insolvency law.
In other words, SSI and Title II benefits are protected from seizure to pay debts.
Plaintiffs claim that 20 C.F.R. § 416.1123(b) results in Title II overpayments being deducted impermissibly from SSI benefits. They argue that by counting their gross rather than net incomes for the purposes of calculating their eligibility for SSI benefits, the Secretary is actually recouping their Title II debt by granting them less in SSI benefits. This is the converse of the Secretary's argument that considering only their gross income would result in SSI paying their Title II overpayments.
Confronted by the same "cross program recovery argument," the Lyon court distinguished the recoupment of overpayments from unlawful cross program recovery. Lyon, 802 F.2d at 799. It did so *951 by comparing section 416.1125(b) to an unrelated but analogous statutory provision, 42 U.S.C. § 1320a-6, regarding recapture of windfalls. That statute states in the case of a delay in providing Title II benefits, any resulting increase in SSI benefits may be deducted from Title II benefits when these benefits resume. This is to prevent the claimant from being paid twice by the same program. The court wrote "what is relevant about section 1320a-6 for our purposes is that, like 20 C.F.R. § 416.1123(b), it does not authorize cross program recovery per se but achieves the same results by permitting an integrated method of accounting." Lyon, 802 F.2d at 800 (emphasis in original). The integrated method of accounting used by section 416.1123(b) is less intrusive than that in section 1320a-6. Rather than actually deducting Title II overpayments from SSI benefits, the Secretary merely considers the total amount of benefits received by an applicant in assessing the amount of his SSI benefits. This Court agrees with the Fifth Circuit's analysis that this does not constitute cross program recovery, but rather is an acceptable administrative measure to prevent waste like the one authorized by section 1320a-6. It is not enough to conclude, as did the District Court in Healea v. Bowen, No. 86-3060, slip op. (C.D.Ill. May 4, 1987), on appeal, No. 87-2300 (7th Cir.1987), when interpreting 20 C.F.R. § 416.1123(b) that "[i]ncreasing plaintiff's SSI payments will have no effect on her obligation to the Title II trust account. It will not waive the recovery of the prior overpayment." Healea, slip op. at 9. The Secretary is empowered specifically to recoup the overpayments through withholding current benefits. He need not rely on the beneficiary's sense of obligation to the program.
By agreeing that the Secretary is authorized to implement a regulation which considers income unavailable to SSI beneficiaries in calculating the amount of benefits they are eligible to receive, this Court does not ignore the human dimensions of the situation. This Court would find it difficult to choose between what the Lyon court identified as the two competing aims of the SSI program, "the maintenance of the aged and disabled or the enforcement of program regulations." Id. at 798. The unmitigated effect of the regulation under consideration can be harsh. The effects of the regulation are softened though by the provisions of 20 C.F.R. § 404.502(c) which provide that at the Secretary's discretion the amount of overpayments recouped can be reduced even if the recipient is not without fault. The Secretary may consider the beneficiary's ability to pay and the extent to which "the recipient has sufficient funds to meet her ordinary and necessary living expenses." Robinson, 650 F.Supp. at 1501. The recoupment can be lowered to as little as $10 per month. The effect of section 404.502(c) is to mitigate any over-harsh result of the application of the regulation.
D. Equal Protection
Plaintiffs' final argument is a constitutional claim that the regulation is violative of Equal Protection in that it creates two classes of SSI recipients. Both classes, they claim, consist of persons who receive benefits under both the SSI program and at least one of the programs described in 42 U.S.C. § 1382a(a)(2)(B). Persons in the first class are those who received an SSI overpayment. Persons in the second class are those who received an overpayment from another benefits program. Plaintiffs contend that while persons in the first category are guaranteed a monthly income not less than 10% below SSI standards, persons in the second class have no guaranteed minimum income. In reviewing an equal protection challenge to a statute, this Court is bound to consider the United States Supreme Court's injunction that:
[T]he equal protection obligation imposed by the Due Process Clause of the Fifth Amendment is not an obligation to provide the best government possible.... Unless a statute employs a classification that is inherently invidious or that impinges on fundamental rights, areas in which the judiciary has a duty to intervene in the democratic process, this Court properly exercises only a limited review power over Congress, the appropriate representative body through which *952 the public makes democratic choices among alternative solutions to social and economic problems.... At the minimum level, this Court consistently has required that legislation classify the persons it affects in a manner rationally related to legitimate governmental objectives.
Usher v. Schweiker, 666 F.2d at 658 (citing Schweiker v. Wilson, 450 U.S. 221, 230, 101 S. Ct. 1074, 1080-81, 67 L. Ed. 2d 186 (1981)).
Confronted with an equal protection challenge to section 1416.1123(b), Judge Weinfeld in Robinson rejected the claim in a clear, scholarly and detailed fashion. Robinson, 650 F.Supp. at 1501, aff'd, Robinson v. Bowen, 828 F.2d 71 (2d Cir.1987). This Court agrees with his analysis. In sum, Judge Weinfeld noted that section 1416.1123(b) meets the requirements of Equal Protection in that the classification advances a legitimate goal in a rational fashion. 20 C.F.R. § 416.1123(b) was designed to prevent one benefit program from subsidizing another. It was promulgated in 1982, two years before Congress instituted 42 U.S.C. § 1383(b)(1)(B) limiting the recoupment of SSI payments from SSI beneficiaries to 10% of the beneficiary's income. Unlike section 416.1123(b) which regulates inter-program income allocation, section 1383(b)(1)(B) is free from the problems of cross program subsidization that section 416.1123(b) was designed to prevent.
It is perfectly rational, then, for the two to coexist. Each serves a different function. While it would be possible for Congress to create a 10% limit for those receiving benefits from two different programs, the fact that they have not done so does not indicate a breach of the Equal Protection Doctrine:
[R]eform may take one step at a time, addressing itself to the phase of the problem which seems most acute to the legislative mind. The legislature may select one phase of one field and apply a remedy there, neglecting the others. The prohibition of the Equal Protection Clause goes no further than the invidious discrimination.
Williamson v. Lee Optical Co., 348 U.S. 483, 489, 75 S. Ct. 461, 465, 99 L. Ed. 563 (1955) (citations omitted).
Thus, although section 1383(b)(1)(B) and 20 C.F.R. § 416.1123(b) may appear to result in disparate treatment of Title II beneficiaries, the result is actually a rational allocation of governmental resources achieved without invidious discrimination. This Court believes it is rational for Congress to have established an income floor for those repaying SSI overpayments but not those, like the plaintiffs, repaying Title II overpayments. Congress need not treat every group identically in order to comply with the Equal Protection Doctrine.
IV. CONCLUSIONS
The Secretary's action is consistent with Congressional intent expressed in the Social Security Act. For the reasons stated above, plaintiffs' motion for summary judgment is DENIED. Defendant's motion for summary judgment upholding the validity of 20 C.F.R. § 416.1123(b) and denying plaintiffs' injunctive relief and recalculation of their SSI eligibility, is ALLOWED. Consequently, plaintiffs' motion for class certification is rendered moot.
IT IS SO ORDERED.
NOTES
[1] In upholding the Secretary's promulgation of 20 C.F.R. § 416.1123(b), the Second Circuit stated that "we affirm the judgment of the district court, substantially for the reasons set out in Judge Weinfeld's opinion below, Robinson v. Bowen, 650 F. Supp. 1495 (S.D.N.Y.1987)." Robinson v. Bowen, 828 F.2d 71, 72 (2nd Cir.1987). Therefore, this Court will cite both from the Second Circuit and the district court opinions.
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436 A.2d 339 (1981)
Michael K. SMITH and Stephen E. Granville, Appellants,
v.
Noble A. WHITEHEAD and Jo Ann Haltiwanger, Appellees.
No. 79-526.
District of Columbia Court of Appeals.
Argued February 27, 1980.
Decided September 10, 1981.
Rehearing En Banc Granted and Opinion Vacated January 5, 1982.
*341 Edward E. Schwab, Asst. Corp. Counsel, Washington, D. C., with whom Judith W. Rogers, Corp. Counsel, and Richard W. Barton, Deputy Corp. Counsel, Washington, D. C., at the time the briefs were filed, were on the briefs, for appellants.
Chris Marder, Rockville, Md., with whom John G. Gill, Rockville, Md., was on the brief, for appellees.
Before NEWMAN, Chief Judge, and KELLY and HARRIS, Associate Judges.
NEWMAN, Chief Judge:
Appellants are police officers who, while engaged with other officers in a valid search of appellees' apartment for evidence of narcotics possession and dispensation, *342 also participated in the seizure of several items of consumer goods from the apartment. The property was turned over to the District Property Clerk, who refused to return it to appellees. This action for conversion against the appellant officers followed. A jury found appellants liable to appellees for compensatory and punitive damages of $2,700.
Appellants contend that the seizure of the goods was lawful, and thus that an action for conversion should not have been allowed. Even if the seizure was not lawful, appellants argue that they should not have been held personally liable for the conversion because: (1) they were following the orders of a superior when they participated in the seizures; (2) they had a reasonable good faith belief in the legality of their actions; (3) they did not personally benefit from the seizures; and (4) given the availability of alternative remedies for the return of the property, an action for conversion was inappropriate. Finally, appellants dispute the award of punitive damages.
In Part I we outline the facts of the case. In Part II we find that the seizure was neither within the scope of the warrant nor justified under the plain view exception to the warrant requirement. In Parts III and IV we conclude that there was no legal bar to a finding either that appellants had converted appellees' property or that they were liable for punitive as well as compensatory damages. Appellants' liability depended on questions of fact, which were properly submitted to the jury. The jury's verdict is supported by adequate evidence. We affirm.
I
During the week of March 18, 1973, appellant Officers Stephen E. Granville and Michael K. Smith of the District of Columbia Metropolitan Police Department received information from a reliable informant that appellee Noble Whitehead was selling narcotics from his residence at 5055A Benning Road, Southeast. To ascertain the validity of this information, appellants, through their informant, made at least two controlled heroin purchases from Whitehead before obtaining a warrant for a search of the entire Benning Road premises. Appellants later asserted that they had also learned from their informant that Whitehead accepted payment for narcotics in movable property as well as money, but that they had refrained from including this information in the affidavit in order to conceal the identity of, and thus protect, their informant. The search warrant and affidavit in support thereof made no mention of such a trade in movables, but stated only that drug-related property was sought including: "heroin, capsules, envelopes, syringes, tourniquets, cookers and paraphernalia used in the preparation of heroin for distribution or use and any other instrumentalities or evidence of illegal possession or dispensation of heroin or of any other narcotic drugs illegally held."
At approximately six o'clock on the morning of March 30, 1973, appellants, under the supervision of Sergeant Clinton Stone and in the company of several other police officers, executed the warrant. They knocked, announced their presence, authority, and purpose, and, receiving no reply, forced open the back door of the apartment with a battering ram. Whitehead was at the time in the bathroom, and appellee Jo Ann Haltiwanger, with whom Whitehead resided, was asleep in the bedroom.
Officer Smith found a packet of heroin on the floor by the toilet, and a loaded revolver, later identified as a stolen firearm, was found in the bathtub. Narcotics and narcotics paraphernalia, as well as cutting materials used to dilute the strength of heroin, were also found scattered in the dining room, the living room, and in the linen closet. Whitehead admitted ownership of the narcotics, and, in response to a question, answered that the police officers had seized all the narcotics in the apartment.
According to appellees' testimony, the officers then proceeded to search the apartment in a reckless and destructive manner. One officer searched each of Whitehead's and Haltiwanger's school books individually, and, as he completed his search, threw *343 the books on the floor. In the kitchen the officers, as they searched, dumped trash, as well as flour, coffee, cereal, sugar, and other foodstuffs, on the stove and floor. In the bedroom, as the officers inspected clothes in the closet and dressers, they dropped the clothes to the floor and walked on them. They emptied bottles of perfume and, after searching under the rug, left it upside down. In the living room the police, having first probed the couch and having found no evidence of drugs, ripped apart its frame and upholstery. Record jackets were opened; the records were left scattered on the floor, where officers walked on and broke some of them. Haltiwanger testified that when she protested the manner of the search, Officer Smith pushed and struck her.
The officers also found in the apartment items of personal property, which Sergeant Stone testified, he suspected appellees had received in exchange for narcotics. These included two televisions (one color, one black and white), a component stereo set, two cameras, a tripod, a movie camera, two projectors, a cassette tape recorder, a tape deck and a tape case, and a sewing machine. The bases for Sergeant Stone's suspicion, he stated, were first, information he had received from an informant that Whitehead traded narcotics for property, and second, Whitehead's inability to substantiate with sales receipts or cancelled checks his ownership of the property. Appellants also assert as a further basis for their suspicion that "many of the items were not usually found in homes in that area of the city and were duplicative of other property in that apartment...."
Whitehead testified that he explained to the police officers why he and Haltiwanger possessed two television sets and two stereo sets. While Whitehead and Haltiwanger were detained in the Benning Road premises, Sergeant Stone telephoned the Police Department and gave descriptions and serial numbers for each of the items of personal property in question. None of the items was listed on the police "hot sheet" of stolen goods. Sergeant Stone nevertheless ordered that fourteen items be seized. Computer checks done at the station house later the same day showed the same negative result as the "hot sheet." The property was nonetheless turned over to the Police Department Property Clerk, who still holds it.
Whitehead was convicted of possession of narcotics with intent to distribute and of receiving stolen property (the revolver). Following his conviction, the United States Attorney's Office notified the Property Clerk that it would not need the seized items as evidence in future prosecutions. When, however, Whitehead attempted to recover the property upon his release from prison, the Property Clerk declined to return it in the absence of "satisfactory evidence" of legal ownership. See D.C. Code 1973, § 4-156(a).[1]
Whitehead and Haltiwanger thereafter brought the instant suit against Officers Smith and Granville for conversion of the items in question. At trial, Whitehead and Haltiwanger testified as to how they had acquired the property, and as to its condition at the time of the seizure. Whitehead presented a receipt for one movie projector. A friend of Whitehead's testified that he had given appellee a camera and a tripod, and Haltiwanger's mother testified that she gave the sewing machine to Haltiwanger. An appraiser assessed the value of the items seized at $600 as of March 30, 1973, the date of the seizure.
The jury returned a verdict holding appellants jointly and severally liable for $500 compensatory damages and $1300 punitive damages for Whitehead, and $100 compensatory damages and $800 punitive damages *344 for Haltiwanger. The trial court denied appellants' motion for judgment notwithstanding the verdict or in the alternative for a new trial. This appeal followed.
II
The elements of conversion are: (1) an unlawful exercise, (2) of ownership, dominion, and control, (3) over the personalty of another, (4) in denial or repudiation of his right to such property. Blanken v. Harris, Upham & Co., D.C.App., 359 A.2d 281, 283 (1976). Appellants contend that the seizure of appellees' personal property was lawful, and that, as an essential element of the tort of conversion was lacking, appellees' claim that the items were converted was unfounded. We address first the legality of the seizure.
Appellants made the seizure in the execution of a valid search warrant of the entire premises on Benning Road. They had, however, intentionally omitted mention of transactions in personal property for narcotics and of any items of personalty subject to seizure in the affidavit they submitted in support of the warrant. The purpose of this omission was, according to both Officers Smith and Granville, to conceal the identity of and so protect their informant. Appellants rely on language of the warrant authorizing the seizure of "any other instrumentalities or evidence of illegal possession or dispensation of heroin ..." as encompassing the personal property seized within the scope of the warrant, and argue in the alternative that the seizure was legal under the "plain view" doctrine of Coolidge v. New Hampshire, 403 U.S. 443, 91 S. Ct. 2022, 29 L. Ed. 2d 564 (1971).[2]
A. The Scope of the Warrant
"The Fourth Amendment provides that `no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.'" Stanford v. Texas, 379 U.S. 476, 481, 85 S. Ct. 506, 509, 13 L. Ed. 2d 431 (1965) (emphasis in original). "[This] requirement... makes general searches ... impossible and prevents the seizure of one thing under a warrant describing another. As to what is to be taken, nothing is left to the discretion of the officer executing the warrant." Id. at 485, 85 S.Ct. at 512 (quoting Marron v. United States, 275 U.S. 192, 196, 48 S. Ct. 74, 76, 72 L. Ed. 231 (1927)). The historic purpose of this prohibition was to assure "that the people of this new Nation should forever `be secure in their persons, house, papers, and effects' from intrusion and seizure by officers acting under the unbridled authority of a general warrant." Id. 379 U.S. at 481, 85 S.Ct. at 509-10. To achieve this purpose, the authority to issue warrants and determine their scope is strictly confined to judicial officers:
Any assumption that evidence sufficient to support a magistrate's disinterested determination to issue a warrant will justify the officers in making a search without a warrant would reduce the Amendment to a nullity and leave the people's homes secure only in the discretion of police officers.... When the right of privacy must reasonably yield to the right of search is, as a rule, to be decided by a *345 judicial officer, not by a policeman or government enforcement agent. [Coolidge v. New Hampshire, supra [403 U.S.] at 449 [91 S.Ct. at 2029] (quoting Johnson v. United States, 333 U.S. 10, 14 [68 S. Ct. 367, 369, 92 L. Ed. 436] (1948)).]
In Andresen v. Maryland, 427 U.S. 463, 479, 96 S. Ct. 2737, 2748, 49 L. Ed. 2d 627 (1976), the Supreme Court, confronted with the question of the validity of a warrant containing a general phrase, concluded that the challenged phrase"together with other fruits, instrumentalities and evidence of crime at this [time] unknown" (adaptation in original)must be read in context. So read, the Court found that the warrant authorized the search and seizure of only a narrow, well-defined category of evidence: that relating to "the crime of false pretenses with respect to Lot 13T"i. e., the crime specifically described in the warrant. Id. at 480-81, 96 S.Ct. at 2748-49. More recently, the Court has stated:
When an official search is properly authorized... the scope of the search is limited by the terms of its authorization. Consent to search a garage would not implicitly authorize a search of an adjoining house; a warrant to search for a stolen refrigerator would not authorize the opening of desk drawers. Because "indiscriminate searches and seizures conducted under the authority of `general warrants' were the immediate evils that motivated the framing and adoption of the Fourth Amendment," Payton v. New York, 445 U.S. 573, 583 [100 S. Ct. 1371, 1378, 63 L. Ed. 2d 639] (1980), that Amendment requires that the scope of every authorized search be particularly described. [Walter v. United States, 447 U.S. 649, 656-57 [100 S. Ct. 2395, 2401-02, 65 L. Ed. 2d 410] (1980) (footnotes omitted) (emphasis added).]
Lower courts, construing the scope of general phrases, have closely confined their reach to evidence of crimes described with particularity in the warrant or its accompanying affidavit; where the warrant and affidavit have not supported such a construction, courts have held that such phrases rendered warrants impermissibly general under the Fourth Amendment. Thus in In re Search Warrant Dated July 4, 1977, For Premises at 2125 S Street, Northwest Washington, D.C., 187 U.S.App.D.C. 297, 572 F.2d 321 (1977), cert. denied, 435 U.S. 925, 98 S. Ct. 1491, 55 L. Ed. 2d 519 (1978), the circuit court for the District of Columbia held that a warrant authorizing agents to seize "any evidence of conspiracies to steal government property and obstruct justice," id. at 300, 572 F.2d at 324 (emphasis in original) authorized only the search for and seizure of evidence of conspiracies that were specifically described in an accompanying thirty-three page affidavit. Cf. United States v. Roche, 614 F.2d 6 (1st Cir. 1980) (a warrant authorizing the seizure of a broad category of documents, which were "evidence, fruits and instrumentalities" of the violation of 18 U.S.C. § 1341 (1976), was held invalid because the government's failure to limit the objects of the search and seizure to documents more specifically pertaining to the alleged violation "impermissibly broadened the scope of the search beyond the foundation of probable cause." Id. at 7 (footnote omitted).)
The Fourth Amendment thus requires that the general phrase contained in the warrant authorizing a search of appellees' residence be construed narrowly, to authorize seizure only of evidence of the narcotics possession and transactions described in the search warrant and its accompanying affidavit. These documents, though, contained only descriptions of two instances in which the informant had purchased narcotics from appellee Whitehead with Police Department money. They made no reference to the tip Officers Smith and Granville later testified they had received from their informant that Whitehead accepted personal property as well as money in exchange for drugs. The terms of the warrant and affidavit thus limited the scope of the search to evidence of narcotics possession and money sales. Evidence of exchanges of personal property for *346 narcotics fell outside the scope of the warrant.[3]
B. Legality of the Seizure under the Plain View Doctrine
Appellants contend in the alternative that the seizure of movable personal property was justified under the "plain view" exception to the warrant requirement.
It is a well established principle of criminal procedure that any search or seizure conducted without a warrant [or exceeding the scope of an authorized search] is "per se unreasonable under the Fourth Amendmentsubject only to a few well-delineated exceptions." One of the judicially recognized exceptions to the warrant requirement is the plain view doctrine. This doctrine, however, will justify a warrantless search only when three requirements are met: the police officer must be lawfully present at the situs of the search and seizure, his discovery of the evidence must be inadvertent, and the items seized must be immediately recognizable as evidence. [Jackson v. United States, D.C.App., 404 A.2d 911, 918 (1979) (citations omitted).]
It is undisputed that the officers in this case were lawfully present at the situs of the seizure. Despite the tip they had previously received that items of personal property in the apartment were contraband, appellants argue that the discovery of the items of property they seized was "inadvertent":
[Sergeant] Stone did not rely exclusively upon information obtained prior to the search in reaching his determination that probable cause existed for the seizures.... [Sergeant] Stone cased his determination upon the following: (1) statements received prior to the search from an informant ... that Whitehead was accepting property, like the seized, in exchange for narcotics, (2) knowledge that prior to the search other police officers had witnessed controlled purchases of narcotics from Whitehead by an informant, (3) discussions with Whitehead about each item seized at the time of seizure, during which Whitehead was unable to give [Sergeant] Stone satisfactory proof of ownership or to otherwise make a satisfactory showing of lawful ownership, and (4) observations by [Sergeant] Stone during the search that the items seized were duplicated by other similar property in the household that are not often found in houses in that neighborhood.... [Reply Brief for Appellants at 3-4.]
*347 The officers' prior expectation, that they would find at the Benning Road address movable property had been received in exchange for drugs, did not alone necessarily preclude seizure of the property under the inadvertence requirement of the plain view exception. This court has applied a "primary purpose" test in interpreting the inadvertence requirement of the plain view doctrine: "[s]atisfaction of the inadvertency criterion would require the discovery of the [challenged evidence] to have been a subordinate aspect of the arrest itself, or the result of some justifying purpose other than merely gathering evidence." Vance v. United States, D.C.App., 399 A.2d 52, 59 (1979) (quoting Brooks v. United States, D.C.App., 367 A.2d 1297, 1307 (1976)). See also Brooks v. United States, supra at 1307 n.15 ("If ... the primary purpose of the initial intrusion, or that of a further intrusion subsequent to the arrest, is the gathering of evidence, the inadvertency requirement cannot be satisfied.")
Here, the search warrant and accompanying affidavit reveal that the primary purpose of the police entry into the Benning Road residence was to gather evidence of narcotics possession and dispensation. Also, Officers Smith and Granville, in obtaining the warrant, had intentionally failed to disclose to the issuing judicial officer their belief that there were at appellees' residence consumer goods which were evidence of narcotics dispensation. Furthermore, the officers acquired no additional information during the search, besides that which they possessed when they sought the warrant, which would justify an unauthorized seizure.
If the initial intrusion is bottomed upon a warrant that fails to mention a particular object, though the police know its location and intend to seize it, then there is a violation of the express constitutional requirement of "Warrants ... particularly describing ... [the] things to be seized." ... [T]o extend the scope of such an intrusion to the seizure of objectsnot contraband nor stolen nor dangerous in themselveswhich the police know in advance they will find in plain view and intend to seize, would fly in the face of the basic rule that no amount of probable cause can justify a warrantless seizure. [Coolidge v. New Hampshire, supra [403 U.S.] at 471 [91 S.Ct. at 2040] (footnote omitted).]
Under these circumstances, where the seizing officers had failed to disclose to the judicial officer issuing the warrant their expectation that they would find a specific variety of incriminating evidence, and where the subsequent search failed to reveal other material information upon which a probable cause determination could be based, the seizure was not justifiable under the "inadvertence" requirement of the plain view doctrine.
Under the plain view doctrine, moreover, items not named in the search warrant must also be immediately recognizable as evidence, id. at 468, 91 S.Ct. at 2039, under the "totality of circumstances surrounding the seizure" of such items. United States v. Lee, 427 F. Supp. 318, 323 (E.D. Ky.1977), rev'd on other grounds, 581 F.2d 1173 (6th Cir.), cert. denied, 439 U.S. 1048, 99 S. Ct. 725, 58 L. Ed. 2d 707 (1978). "The plain view exception is not one which allows the seizure of an item on mere suspicion.... [T]here must at least be probable cause to believe that [an article seized outside the authorization of a warrant] is incriminating evidence." Bynum v. United States, D.C.App., 386 A.2d 684, 687-88 (1978). Courts have previously found adequately incriminating to justify seizure under this test, for example, a sawed-off shotgun, shotgun shell, army-green raincoat, and a cloth money bag all of which were partially concealed under a bed, where the seizing officer entered the apartment in hot pursuit of robbery suspects, and one robber had been described as wearing an army-green raincoat and carrying a sawed-off shotgun, Vance v. United States, supra at 56, 59; a bent coat hanger, a screw driver, wirecutters, and two citizens' band radios and a tape player seized from an automobile, where cut wires protruded from both *348 radios and the tape player, Childress v. United States, D.C.App., 381 A.2d 614, 616 (1977); a bag holding $14,000 cash found in the works of a toilet into which other inculpatory evidence had just been flushed, United States v. Diaz, 577 F.2d 821, 824 (2d Cir. 1978); a large quantity of silverware and other silver items valued at over $39,000 and bearing twenty-six different sets of initials, found in plain view in a laundry room and seized only after police officers ascertained that the apparent owner of some of the silver had lost some silver in a robbery two days earlier, United States v. Lee, supra at 321, 323; an attache case containing $9,000 cash still in the wrappers from a St. Louis bank, and a gun found when, pursuant to a valid warrant, officers searched the defendant's room. United States v. Golay, 502 F.2d 182, 183 (8th Cir. 1974).
The instant case stands in marked contrast to the above cases. The items seized were common consumer goods situated in ordinary places in appellees' residence, and bore no suspicious markings. A check prior to the seizure showed that they were not listed on the Police Department "hot sheet" of stolen goods. We have previously stated, "[a] television set is far from being obvious contraband ...." United States v. Pannell, D.C.App., 383 A.2d 1078, 1080 (1978). This applies equally to other ordinary consumer items. Thus there was nothing inherently incriminating about the goods justifying a determination that they were evidence of the dispensation of narcotic drugs.
The government bears the burden of justifying seizures not within the scope of a valid warrant. United States v. Golay, supra at 184. In light of the non-incriminating nature of the goods in question, Sergeant Stone's attempt effectively to shift this burden, by demanding that Whitehead demonstrate proof of lawful ownership, was impermissible. The other factor contributing to Sergeant Stone's "probable cause" determinationthe informant's statementsconstituted information that the seizing officers had at the time they sought the warrant.
The items seized, we conclude, failed two essential requirements of the plain view exception: discovery of the items was not "inadvertent," and the items were not immediately recognizable as evidence. As the seizure of appellees' personal property was neither authorized by the warrant, nor justified under the plain view exception to the warrant requirement, we find that it was illegal under the Fourth Amendment of the Constitution.[4]
III
Appellants further argue that, even if the seizure of the goods was wrongful, they should not have been held personally liable for the conversion of appellees' property because: (1) they acted under Sergeant Stone's supervision when they participated in the removal of the property from appellees' residence; (2) they had a good faith belief in the lawfulness of their actions, which, under the qualified immunity due police officers, excused them from liability; (3) the "dominion or control" they exercised over the chattels was very limited in both extent and duration; and (4) due to the availability of alternative remedies, a damages action for conversion was inappropriate. The trial court, they claim, therefore erred in denying their motions for a directed verdict or for judgment notwithstanding the verdict. We disagree.
A. Action Pursuant to Orders
The trial court instructed the jury in part that "a police officer is not relieved of responsibility, merely because he acts at the order of a superior officer. An employee [who,] acting at a command of an *349 employer or superior[,] has converted or assisted in converting the property of another[,] is liable to that person." This instruction accurately reflects the common law rule that a legally responsible person is liable for his torts. 86 C.J.S. Torts § 32 (1954). The employment relationship may, under the doctrine of respondeat superior, extend liability for torts committed by an employee within the scope of his employment to the employer, but does not relieve the employee of individual responsibility for his acts. See W. Prosser, The Law of Torts § 52, at 315 (4th ed. 1971).
Nor did appellants' employment as law enforcement officers shield them from liability for their tortious acts. "[A] government officer, like any other person, is liable at common law for his torts, even if they are committed within the scope of his employment." Carter v. Carlson, 144 U.S. App.D.C. 388, 391, 447 F.2d 358, 361 (1971), rev'd in part on other grounds sub nom. District of Columbia v. Carter, 409 U.S. 418, 93 S. Ct. 602, 34 L. Ed. 2d 613 (1973). In Bivens v. Six Unknown Named Agents of the Federal Bureau of Narcotics, 403 U.S. 388, 91 S. Ct. 1999, 29 L. Ed. 2d 619 (1971), where federal agents acting under color of their authority had allegedly violated the petitioner's Fourth Amendment rights by entering his apartment, searching, and arresting him without a warrant, the Court held that petitioner had stated a valid claim for money damages.
That damages may be obtained for injuries consequent upon a violation of the Fourth Amendment by federal officials should hardly seem a surprising proposition. Historically, damages have been regarded as the ordinary remedy for an invasion of personal interests in liberty.... Having concluded that petitioner's complaint states a cause of action under the Fourth Amendment, ... we hold that petitioner is entitled to recover money damages for any injuries he has suffered as a result of the agents' violation of the Amendment. [Id. at 395, 397, 91 S.Ct. at 2004, 2005.]
Appellees in the instant case likewise stated a cause of action in tort stemming from a violation of their Fourth Amendment rights by the appellant officers. The fact that they seized appellees' property while acting within the scope of their employment does not exonerate them from liability. Money damages were accordingly an appropriate remedy upon finding that appellees' rights had been violated.
"It is a first principle that liability in tort is several, not joint, however many participate in inflicting the wrong and whether they act separately or in conjunction." McKenna v. Austin, 77 U.S.App.D.C. 228, 231, 134 F.2d 659, 662 (1943) (footnote omitted); accord, W. Prosser, supra, § 46, at 291-92, and § 47, at 296; 2 S. Williston, Law of Contracts § 338A, at 714-16 (3d ed. W. Jaeger 1959); 86 C.J.S. Torts § 34, at 949 (1954). Although other officers besides appellants participated in the seizure of appellees' property, appellees were not compelled to make the other officers parties to the action. "[E]ach tortfeasor may be sued severally, and held responsible for the damages he is found to have caused, although other wrongdoers have contributed to it. He cannot compel the plaintiff to make the other [tortfeasors] parties to the action, or complain because they have not been joined...." W. Prosser, supra, § 47, at 296-97 (footnote omitted). Thus the fact that Sergeant Stone and the other officers were not parties to the action was no bar to recovery from appellants. There was, in short, no error in the trial court's instruction that appellants were not relieved of responsibility merely because they acted as police officers following the order of a superior when they committed the contested acts.
B. Belief in the Lawfulness of their Actions
Police officers acting in the scope of their employment are protected by a qualified immunity. In Wade v. District of Columbia, D.C.App., 310 A.2d 857, 863 (1973) (en banc), we stated: "when sued [for civil wrongs] the individual police officer has a defense of good faith and reasonable belief in the validity of [his challenged acts] ...." The analysis for determination of an officer's civil liability, we indicated, is two-tiered: "The standard governing police *350 conduct is composed of two elements[;] the first is subjective and the second is objective. Thus the officer must allege and prove not only that he believed, in good faith, that his conduct was lawful, but also that his belief was reasonable." Id. at 862 (quoting Bivens v. Six Unknown Named Agents of the Federal Bureau of Narcotics, 456 F.2d 1339, 1348 (2d Cir. 1972) (on remand)); accord Woodward v. District of Columbia, D.C.App., 387 A.2d 726, 727 (1978). Here the trial court correctly instructed the jury on the standard to apply in judging appellants' conduct.[5] The jury had substantial evidence, including testimony as to the officers' deportment and reckless behavior in appellees' residence and demeanor evidence, upon which to base a judgment that appellants had either lacked the good faith belief that their behavior was lawful, or that such belief was, in the totality of the circumstances, unreasonable. We cannot say, on the evidence adduced in this case, that a reasonable juror could not so find.[6]
C. Limited "Dominion or Control"
Appellants argue that because they made no personal use of the property and had no authority to return it after it was seized, they should not have been held liable for conversion of the items.[7]
*351 "[T]he gist of a claim of unlawful seizure or impoundment is conversion or trespass to chattels, which relates the inquiry to the moment of the taking .... `The conversion is complete when the defendant takes, detains or disposes of the chattel.'" DeKine v. District of Columbia, D.C.App., 422 A.2d 981, 986 (1980) (quoting W. Prosser, supra § 15, at 97) (emphasis added). Prosser states, "Perhaps the most common way in which conversion is committed is by an unauthorized transfer or disposal of the goods to one who is not entitled to them." W. Prosser, supra § 15, at 87. It is not a necessary element of the tort that the convertor benefit from his act. Harrell v. Anderson, 294 F. Supp. 405, 407 (S.D.Ga.1968); W. Prosser, supra § 15, at 84 n.16; 89 C.J.S. Trover and Conversion § 3 (1955); cf. Pan American Petroleum Corp. v. Long, 340 F.2d 211, 220 (5th Cir. 1964), cert. denied, 381 U.S. 926, 85 S. Ct. 1562, 14 L. Ed. 2d 684 (1965) ("The convertor may either have actual or constructive possession of the property.") (Emphasis added; footnote omitted.)
The trial court instructed the jurors that, if they found that appellants had unjustifiably seized the property, "the fact that the property in question may now be held by a person, other than the individuals who are before the Court, does not relieve [appellants] of responsibility. They bear the responsibility for placing it where [appellees] could not obtain it ...." There was no error, we conclude, in this instruction, which fairly indicated that it is the removal of personalty from its rightful possessor, rather than personal benefit by the wrongdoer, which is essential to the tort of conversion.
D. Appropriateness of an Action for Conversion
Appellants argue that, as remedies were available to appellees for the return of their property, an action for conversion should not have been allowed. The availability of remedies for obtaining a return of property is not, however, a bar to an action for conversion. First, an action for conversion lies as an alternative to, rather than a substitute for, a suit for the replevin of property. "The essence of conversion is an interference with another's property that is so substantial as to justify treatment as a forced sale of the property." Horne v. Francis I. duPont & Co., 428 F. Supp. 1271, 1275 (D.D.C.1977). A conversion may occur either where a defendant with rightful possession of plaintiff's property wrongfully refuses to surrender it, id., or where, as here, even the defendant's initial possession of the property is wrongful. See DeKine v. District of Columbia, supra at 986; W. Prosser, supra § 15, at 83-84. Where possession is wrongful ab initio, the conversion is complete when the defendant takes, detains, or disposes of the goods, see DeKine v. District of Columbia, supra at 986, "and the tort is complete without any demand for the return of the goods." W. Prosser, supra § 15, at 84 (footnote omitted).
Second, money damages, which appellees would not have obtained through an action for the return of their property, constitute a well-established remedy for Fourth Amendment violations.
Of course, the Fourth Amendment does not in so many words provide for its enforcement by an award of money damages for the consequences of its violation. But "it is ... well settled that where legal rights have been invaded, and a federal statute provides for a general right to sue for such invasion, federal courts may use any available remedy to make good the wrong done." [Bivens v. Six Unknown Named Agents of the Federal Bureau of Narcotics, 403 U.S. at 396 [91 S.Ct. at 2004] (quoting Bell v. Hood, 327 U.S. 678, 684 [66 S. Ct. 773, 777, 90 L. Ed. 939] (1964) (footnote omitted)).]
In Bivens, the Supreme Court held that in the absence of an explicit congressional declaration confining them to a particular remedy, petitioners who had been injured by a violation of their Fourth Amendment rights could sue in tort for money damages. Id. at 397, 91 S.Ct. at 2005. There is no such statutory limitation on actions for conversion in the District of Columbia. Thus appellees were not required to pursue remedies for the return of their property instead *352 of or prior to bringing this action for conversion.
IV
Finally, appellants assert that even if they are liable for compensatory damages for the conversion of appellees' property, punitive damages should not have been awarded. Appellants were following the orders of their superior and, they claim, believe that they were legally compelled to obey their superior's orders.
Punitive damages may properly be awarded "where the act of the defendant is accompanied with fraud, ill will, recklessness, wantonness, oppressiveness, willful disregard of the plaintiff's rights, or other circumstances tending to aggravate the injury." Franklin Investment Co. v. Homburg, D.C.App., 252 A.2d 95, 98 (1969) (quoting McClung-Logan Equipment Co. v. Thomas, 226 Md. 136, 147, 172 A.2d 494, 500 (1961)); accord, Franklin Investment Co. v. Smith, D.C.App., 383 A.2d 355, 358 (1978); W. Prosser, supra § 2, at 9-10. Proof of these elements "may be inferred from the acts of the defendant and circumstantial evidence. Such intent is seldom admitted and need not be proved by direct evidence." Franklin Investment Co. v. Homburg, supra at 98 (citation omitted); accord, Franklin Investment Co. v. Smith, supra at 359.
Indirect evidence of malice in the instant case included appellant Smith's physical abuse of Haltiwanger, as testified to by both Haltiwanger and Whitehead; and appellees' testimony that both appellants participated in the search in which officers dumped and tracked food and garbage on the floor, threw clothes, books, and records recklessly from their storage places, and ripped apart a couch. "The award of punitive damages is a matter for the trier of facts." Franklin Investment Co. v. Homburg, supra at 98 (footnote omitted). We cannot say on this record that there was insufficient evidence to justify such an award.[8]
Affirmed.
HARRIS, Associate Judge, dissenting:
If this case were a sports event, the lead paragraph describing it might read as follows:
The criminal element today scored a startling victory over a law enforcement team. Juries now are free to decide whether police officers executing search warrants committed the tort of conversion by taking items of property into official custody, and assess judgments including punitive damagesif they don't approve of what the officers did.
The reporting of sports, of course, is but a form of history. The majority's opinion, however, establishes precedent. That precedent, in my view, is ominous. In dissenting from an opinion which I consider to be wrong in many respects, I echo the frustration expressed by Justice BRENNAN in his dissenting opinion in McGautha v. California, 402 U.S. 183, 249, 91 S. Ct. 1454, 1488, 28 L. Ed. 2d 711 (1971), in which he stated: "In my view the Court errs at all points from its premises to its conclusions." That statement, as strong as it is, is inadequate for this case. At the very least, appellate judges out to be willing to set forth the relevant facts with objectivity. Even that modest goal is not met here.
I
The majority opinion's statement of the facts is notable for its omissions, making it necessary to fill in the gaps. The majority correctly states that appellants Smith and *353 Granville are police officers who received information from a reliable informant that appellee Whitehead was dealing in heroin in his apartment, and that the informant had personal knowledge that Whitehead would exchange heroin for either cash or valuable items of personal property.[1] However, the majority omits the fact that the informant identified for the officers specific types of property that Whitehead would accept in exchange for drugs, namely, televisions, radios, stereo equipment, "or anything that would be movable property." This omission allows the majority to draw its conclusion that the officers had no reason to believe that the items seized were evidence of criminal activity. In fact, there was "a logical nexus ... between the items in question and [Whitehead's] criminal behavior." United States v. Williams, 623 F.2d 535, 536 (8th Cir.), cert. denied, 449 U.S. 954, 101 S. Ct. 359, 66 L. Ed. 2d 218 (1980).
Moreover, based on what they had been told by the informant, the officers carefully evaluated which items to seize and which to leave behind. Illustratively, a vacuum cleanerwhich appellee Haltiwanger claimed to ownwas not seized. Detective Burke, who was at the scene, discussed taking it with Sergeant Clinton Stone, who directed the search. They determined that it was a common household item. Additionally, "[t]he reason the property was not taken, partially, was that we felt that it was probably not the type of property someone would use to pawn for the purchase of drugs." In contrast, Burke observed that a sewing machine is the type of item that someone might pawn.[2]
In its description of the search, the majority correctly notes that the officers, upon entering the apartment found Whitehead standing in the bathroom. A packet of heroin lay near the toilet, and a loaded gun was found in the bathtub. The majority also mentionsas though a heroin dealer's response to such a question should be binding on the policethat at that point Whitehead told the officers that they had recovered all the narcotics. The majority fails to state that Sergeant Stone then ordered a thorough search of the premises, and that the further search turned up additional heroin and related narcotics paraphernalia.[3]
The majority stays faithful to appellees' self-serving version of the incident throughout, including their testimony as to the manner in which the search supposedly was conducted. The opinion completely ignores the testimony of every officer on the scene which disputed appellees' characterization of the events. Moreover, the majority makes no reference to the severe impeachment *354 of appellees. Whitehead was impeached with prior convictions of false pretenses and narcotics violations; Haltiwanger was impeached with prior convictions of narcotics possession, unlawful entry, possession of implements of a crime, possession of stolen mail, uttering, and violation of probation.
It is clear that the majority thinks little of the officers' reasons for seizing the particular items which they did in the course of the search. The opinion is quite one-sided on the facts. A number of factors led Sergeant Stone to believe that the property should be seized as likely evidence of narcotics dealing, particularly: (1) the informant's notification that Whitehead was accepting such items of personal property in exchange for heroin; (2) Whitehead's inability to give Stone a satisfactory explanation or proof of lawful ownership of the goods at the time of the search and seizure;[4] (3) the ready observation by Stone that some of the items seized were duplicative of other items found in the apartment; and (4) an apparent incongruity between the nature and abundance of the items seized and the relative overall modesty of most other aspects of appellees' living quarters. Based upon his seasoned appraisal of these factors (he had ten years' police experience), Sergeant Stone ordered the times to be taken down to the police truck. It is unclear which officers actually carried the property downstairs (Detective Burke was listed on police records as the seizing officer at the scene); appellant Smith acknowledges having helped carry some of it. The items were taken directly to the Sixth District headquarters, and later were turned over to the Metropolitan Police Department's property clerk, who still retains possession thereof.
Appellee Whitehead was convicted of possession of narcotics with intent to distribute and receiving stolen property (the gun). He was sentenced to one year's imprisonment. After his release, he sought to have the property clerk return the seized property to him. A hearing was conducted at Whitehead's request. The property clerk, however, refused to return the property to Whitehead absent "satisfactory evidence" of lawful ownership. See D.C. Code 1973, § 4-156(a). When Whitehead was unable to provide such evidence, the property clerk continued the hearing to permit Whitehead to secure proof of ownership.[5] At the second hearing, Whitehead again failed to produce proof of ownership of any of the items.[6] Consequently, the property clerk retained custody over the items. Whitehead and appellee Haltiwanger then initiated *355 a civil suit against the two appellant police officers for conversion.[7]
II
In its lengthy effort to justify its conclusion that the actions of appellants constituted actionable conversion, the majority acknowledges but attaches no significance to one substantial error committed by the trial court (see ante at p. 348 n.4) and overlooks another error of law which the trial court committed.[8] It submitted to the jury as questions of fact the issues of (1) whether appellants lawfully had seized the various items of property, and (2) whether actionable conversion had taken place. The trial court in this case should have concluded that the officers' conduct in seizing items from appellees' apartment in the course of a search pursuant to a valid warrant was not conversion as a matter of law. The issue never should have gone to the jury.
In order to establish the tort of conversion, a plaintiff must show an unlawful exercise of ownership, dominion, or control over the plaintiff's personal property in denial or repudiation of the plaintiff's right to such property. See Blanken v. Harris, Upham & Co., D.C.App., 359 A.2d 281, 283 (1976); Shea v. Fridley, D.C.Mun.App., 123 A.2d 358, 361 (1956). Such an interference must be so substantial as to justify treatment as, in effect, a forced judicial sale of the property to the converter. See Horne v. Francis I. duPont & Co., 428 F. Supp. 1271, 1275 (D.D.C.1977); W. Prosser, The Law of Torts § 15, at 80-81 (4th ed. 1971). Thus an interference with the property of another cannot amount to a conversion unless that interference is unlawful.
I need not deal with the issue of whether the seizures in this case were constitutionally permissible when measured against the customary Fourth Amendment standards.[9] Even assuming arguendo that they were beyond the scope of the warrant, what took place was not conversion as a matter of law. At no time did appellants exercise ownership or dominion and control for their own benefit of the property seized from appellees. As officers seizing items pursuant to a search warrant, they acted on behalf of *356 the court which authorized the warrant. "The seizing officer claims no right in or to the property, or in or to its possession, save and except as the court may find use for it." Wilson v. United States, D.C.App., 424 A.2d 130, 134 (1980), quoting People v. Superior Court, 28 Cal. App. 3d 600, 609, 104 Cal. Rptr. 876, 883 (1972), quoting in turn Gershenhorn v. Superior Court, 227 Cal. App. 2d 361, 366, 38 Cal. Rptr. 576, 579 (1964). Accordingly, it is totally inappropriate to impose the legal fiction of a "forced judicial sale" on appellants whose control, if any, over the property was momentary and who never retained it for any purpose.[10] Nor did appellants ever have the requisite intent to support a finding of conversion, that is, the intent to exercise ownership, dominion, or control over the property. See Prosser, supra, at 83. Rather, they intended merely to seize evidence on behalf of the court for possible use in a criminal prosecution. That intent supplies the legal justification which takes their actions outside the scope of tortious conversion.[11] Since it is the trial court's function as a preliminary matter to determine whether the facts are sufficient in a given case to permit the jury to conclude that a defendant's conduct constituted an act of conversion, Mustola v. Toddy, 253 Or. 658, 662, 456 P.2d 1004, 1006 (1969), the trial court's failure in this instance to conclude that conversion had not occurred as a matter of law was erroneous.
III
With respect to the lawfulness of the seizure, the trial court instructed the jury, in pertinent part, as follows:
As a matter of law, a police officer is privileged to seize all of the property which is covered by the language of a duly authorized search warrant. A police officer is also entitled to seize other property which is discovered during a lawful search, if the property is evidence which has a connection or nexus to criminal behavior as an instrumentality of the crime, the fruit of crime such as stolen goods, a weapon by which escape could be affected, and if the property is inadvertently discovered.
* * * * * *
If you find that the seizure was not lawful, the plaintiff has proved by a preponderance of the evidence that it was not lawful, you must go on to determine whether the officers, the defendants in this case, have proved by a preponderance of the evidence that they acted in good faith with the reasonable belief that their conduct was lawful, either under the warrant or under circumstances in which they inadvertently discovered evidence during the execution of the warrant.
* * * * * *
If you find these officers inadvertently discovered evidence with a nexus to criminal activity during the execution of a valid search warrant, your duty would be at an end and you would return a verdict for each of the defendants.
If, however, you find that the plaintiff has proved by a preponderance of the evidence that the seizure was not unlawful, you would go on to consider whether the officers acted in good faith with a reasonable belief that their conduct was lawful.
The trial court thus correctly perceived that a determination of appellants' potential liability necessitated a two-tiered analysis: (1) whether the seizure of the items *357 was lawful and (2) if not, whether the officers acted in good faith with a reasonable belief that the seizure was lawful. The court also correctly noted that if the officers' conduct were determined to be lawful, then that would end the matter. The trial judge's misstep was her failure to recognize that the threshold determinationwhether appellants acted lawfully in executing the warrantwas for her to make.
In the absence of any factual dispute of significance between the parties, the validity of the searchthat is, whether the items properly were seized pursuant to the search warrant or whether there was probable cause to seize them in any eventwas a question of law for the court and not for the jury to determine. See Prieto v. May Department Stores Co., D.C.App., 216 A.2d 577, 578 (1966); State v. Miller, 112 Ariz. 95, 537 P.2d 965, 967-68 (1975) (en banc); State v. Spillars, 280 N.C. 341, 351, 185 S.E.2d 881, 888 (1972); State v. Williams, 157 Conn. 114, 117, 249 A.2d 245, 247 (1968), cert. denied, 395 U.S. 927, 89 S. Ct. 1783, 23 L. Ed. 2d 244 (1969); People v. Sherman, 251 Cal. App. 2d 849, 852, 60 Cal. Rptr. 198, 200 (1967).[12]
The trial court erred in this case, therefore, in allowing the jury to determine whether appellants' actions in seizing the goods during the execution of the search warrant were constitutionally impermissible. That determination was a legal one to have been made by the trial court, and only if it were resolved against the officers should the issues of good faith and reasonableness have been submitted to the jury as questions of fact. As I have noted, my colleagues in the majority share this view (see ante, at 348 n.4), but they cavalierly substitute their judgment on the seizure issue for the one which erroneously was submitted to and made by the jury. The majority then treats the rest of the case as intact and unaffected by the error, notwithstanding the fact that the jury's improper consideration of the narrow legal issue undoubtedly was tainted by the inflammatory testimony of appelleesall of which was irrelevant to the legal questionas to the manner in which they claimed the search was conducted. I cannot share in that reasoning.
IV
Finally, I am troubled by the majority opinion's mixing of the quite different concepts of the suppression of evidence and an act of conversion. The majority opinion reads in major part as though this were an exclusionary rule case rather than a conversion case. With its heavy reliance on suppression cases, the majority opinion portends the ominous result that when a motion to suppress evidence is granted on the ground that a search was conducted unlawfully, that search could give rise to an action in conversion against the officers who conducted it.[13] That result could have a devastating impact on the abilityand even the willingnessof officers to function effectively.
For all of the foregoing reasons, I dissent from the majority opinion, which if permitted to stand could have a devastating impact on law enforcement in this jurisdiction. Because the facts in this case do not support a finding that conversion occurred as a matter of law, I would reverse and remand with instructions to enter judgment in favor of appellants.
Before: NEWMAN, Chief Judge; KELLY, KERN, NEBEKER, HARRIS, MACK, FERREN, PRYOR, and BELSON, Associate Judges.
ORDER
On consideration of appellants' petition for rehearing and/or rehearing en banc and of appellees' opposition filed with respect thereto, it is
ORDERED that appellants' petition for rehearing is denied; it appearing that the majority of the judges of this Court has *358 voted to grant appellants' petition for rehearing en banc, it is
FURTHER ORDERED that the aforesaid petition for rehearing en banc be granted and that the opinions and judgment of September 10, 1981, be vacated. It is
FURTHER ORDERED that the Clerk shall schedule this matter for argument before the Court sitting en banc as soon as the business of the Court permits. Counsel are hereby directed to provide ten copies of the briefs heretofore filed to the Clerk on or before Monday, February 1, 1982.
PER CURIAM.
NOTES
[1] Property Clerk Douglas Cissel held hearings on October 1, 1976 and October 18, 1976 pursuant to D.C. Code 1973, § 4-156, where Whitehead was given an opportunity to establish ownership of the seized property. (Haltiwanger was incarcerated at the time and requested that Whitehead seek return of her property also.) At the hearing, a tape of which was played to the jury in the instant case, Whitehead testified that all his purchase records had been misplaced during his incarceration. He stated that he had received other items as gifts, and likewise had no proof of ownership of these goods.
[2] Appellants also cite D.C. Code 1973, § 23-524(e) as authorizing the search. Section 23-524(e) provides in part:
An officer or agent executing a search warrant may seize any property discovered in the course of the lawful execution of such warrant if he has probable cause to believe that such property is subject to seizure under section 23-521(d), even if the property is not enumerated in the warrant or the application therefor, and no additional warrant shall be required to authorize such seizure, if the property is fully set forth in the return.
D.C. Code 1973, § 23-521(d), referred to in § 23-524(e), provides in part:
(d) Property is subject to seizure pursuant to a search warrant if there is probable cause to believe that it
(1) is stolen or embezzled;
* * * * * *
(3) has been used or is possessed for the purpose of being used, or is designed or intended to be used, to commit or conceal the commission of a criminal offense....
Section 23-524(e) merely codifies the plain view doctrine; it manifestly cannot expand upon a Fourth Amendment limitation.
[3] That the personal property might have been evidence of another crime than that for which the search was specifically authorized cannot alone bring its seizure within the scope of the warrant. Such a conclusion would be contrary to the policy of the Fourth Amendment to restrict decisions as to the authorization of warrants to judicial officers.
In United States v. Rettig, 589 F.2d 418 (9th Cir. 1978), the Ninth Circuit addressed a situation which has some bearing on the instant case. After having been denied authority by a federal magistrate to search appellant's residence for evidence of cocaine possession and distribution, Drug Enforcement Administration agents the next day applied to a state judge for a warrant to discover and seize evidence of marijuana from appellant's home. The agents entered appellant's house pursuant to the state warrant, and seized extensive evidence of cocaine possession and distribution.
The evidence of cocaine trafficking was suppressed as falling outside the scope of the warrant. The court said:
By failing to advise the judge of all the material facts, including the purpose of the search and its intended scope, the officers deprived him of the opportunity to exercise meaningful supervision over their conduct and to define the proper limits of the warrant....
... The question is whether or not the search that was conducted was confined to the authorization given by the magistrate. In determining whether or not a search is confined to its lawful scope, it is proper to consider both the purpose disclosed in the application for a warrant's issuance and the manner of its execution.... A judicial officer cannot perform the function of issuing a warrant particularly describing the places to be searched and the things to be seized, ... where the police fail to disclose an intent to conduct a search the purposes and dimensions of which are beyond that set forth in the affidavits. [Id. at 422-23 (emphasis added).]
[4] We agree with appellants that it was improper for the trial court to submit to the jury the issue of the lawfulness of the seizure, where, as here, the evidentiary facts relevant thereto were undisputed. In such a situation, the issue is a question of law to be decided by the court. We need not remand on this point, however, for we owe no deference to the trial court on questions of law. See D.C.Code 1973, § 17-305(a).
[5] court instructed the jury, in part, that a police officer is not responsible in a civil action for conversion of property seized in the course of his duty, if he acted in good faith with a reasonable belief in the validity of the search. The question is whether the officer had a good faith belief that his conduct was lawful and whether that belief was reasonable.
* * * * * *
With regard to their good faith and reasonable belief, they bear the burden of proof by a preponderance of the evidence and you must first judge subjective matters. Was the officer acting in good faith[?] To determine a person's good faith from all of the surrounding circumstances, we can't look into a person's mind to determine what his or her intent might be. But, you may consider any act or omission, which indicates a person's state of mind. As to each individual, you must determine if that individual had a good faith belief that he acted lawfully.
You must then determine objective matters. Was the belief a reasonable one[?] A reasonable belief does not require absolute certainty that the articles fell within categories that might be lawfully seized by an officer. In making a seizure, the officer must have such belief as would cause officers of ordinary prudence and caution to believe that the articles could be lawfully seized.
In other words, did the officers demonstrate circumstances which would justify a failure to mention the goods and cause them to believe that it was lawful to seize those goods, either under the language of the warrant or under the special circumstances, inadvertent discovery[?]
[6] Appellants cite Mustola v. Toddy, 253 Or. 658, 667-68, 456 P.2d 1004, 1009 (1969), as authority for the proposition that for policy reasons, "the tort of conversion [should be confined in scope] to its narrowest possible limits when a police officer in an emergency situation exercises control over the arrestee's property." Thus here, appellants, argue, it was accordingly inappropriate to question their good faith, as they were following the orders of a superior when they participated in the seizure of the goods.
Mustola v. Toddy is inapposite. In Mustola, a police officer arrested the plaintiff for driving while intoxicated. The officer questioned the plaintiff about his relationship to a passenger whom the officer had determined to be the most sober person in the car. The plaintiff answered the officer ambiguously, and the officer entrusted the car to the passenger. Unknown to the officer until afterwards, the passenger wasapparentlya hitchhiker, whose identity was unknown to the plaintiff. He drove away and, along with the car, was never found. The plaintiff sued the police officer for conversion, and a jury verdict for plaintiff was reversed.
Whereas in Mustola the officer was faced with an immediate problemwhat to do with the carhere there was no such exigency. Also, in Mustola, the facts surrounding the transfer of the car were undisputed. The court stated, "When the facts are undisputed it is the court's function to determine as a preliminary matter whether such facts are sufficient to permit the jury to conclude that the defendant's conduct constitutes a conversion." Id. at 662, 456 P.2d at 1006 (emphasis added). In this case the facts surrounding the seizure especially with respect to the officers' good faith and reasonableness, were disputed. We find the rationale of Mustola unpersuasive, particularly as applied to the facts of this case.
[7] Appellants also contend that they should not have been found liable for conversion because they did not participate in the seizures of the property. There was, however, adequate testimony from which the jury could reasonably conclude that appellants had participated in the seizures. The contention is thus without merit.
[8] Appellants rely on the case of Mendes v. Johnson, D.C.App., 389 A.2d 781 (1978) (en banc), as justification for their assertion that because they "clearly believe that they were legally compelled to obey their superior's orders," an award of punitive damages was not justified. In Mendes, an award of punitive damages was not permitted for a self-help eviction where a landlord "might have assumed, on the basis of prior case law, that his conduct was permissible." Id. at 793. In Mendes, we found lacking in the record sufficient evidence of malice to outweigh the landlord's good-faith reliance on prior case law. Here, appellants did not rely on prior law in acting; moreover, there is adequate evidence to support a finding of malicious and willfully wrongful behavior.
[1] As noted, the affidavit in support of the search warrant did not include the informant's tip that appellee Whitehead would accept personal property in return for heroin. The officers decided not to include this information in their affidavit in order to protect the identity of the informant. The officers testified that the omission of such information from an affidavit is not uncommon as long as the affidavit otherwise supports a determination of probable cause. Officer Granville stated that if the affidavit had included that information, "it would tend to pin the informant down. Like, for instance, if there was only one person taking property to the premises, then, naturally, if it was incorporated into the affidavit and the person read the affidavit, then that would be known." It long has been recognized that an informant is entitled to the protection of anonymity so long as the magistrate issuing the warrant is satisfied that probable cause exists. See McCray v. Illinois, 386 U.S. 300, 311, 87 S. Ct. 1056, 1062, 18 L. Ed. 2d 62 (1967); United States v. Ventresca, 380 U.S. 102, 108, 85 S. Ct. 741, 745, 13 L. Ed. 2d 684 (1965); Aguilar v. Texas, 378 U.S. 108, 114, 84 S. Ct. 1509, 1513, 12 L. Ed. 2d 723 (1964).
The very existence of the search warrant distinguishes this case from cases such as Bivens v. Six Unknown Named Agents of the Federal Bureau of Narcotics, 403 U.S. 388, 91 S. Ct. 1999, 29 L. Ed. 2d 619 (1971), upon which the majority places such reliance.
[2] In this connection, I find it peculiar that the majority places emphasis on the fact that none of the items seized was listed on the police "hot sheet" of stolen goods. This isolated fact has virtually no significance, since the police were looking not for stolen goods but for evidence of narcotics transactions.
[3] Since the items sought (narcotics and paraphernalia) were small, the search was no more intrusive then necessary. "[T]hey might have been hidden in any area of the residence where the items that were in fact seized were found." Vorhauer v. United States, 426 F. Supp. 839, 842 (E.D.Pa.1976).
[4] For example, Stone stated: "I asked Mr. Whitehead who the movie projector belonged to in the living room, and he informed me that a guy brought it there and dropped it off for him to hold. I asked him who the man was and he said he didn't know. I asked him where the man lived, he said he didn't know. I asked him who the television belonged to in the living room, he said he didn't know."
[5] Property Clerk Douglas Cissel suggested a number of ways in which Whitehead could establish ownership, such as providing cancelled checks, microfilmed bank records, receipts, or other verification from stores where he had purchased the items. As to items which Whitehead claimed that he had received as gifts, Cissel stated that he would accept notarized statements from persons indicating that they had given the items to him as gifts. "It doesn't have to say the serial numbers, but such and such a date during such and such a period in the year June 1972 or '73 or '71. `I gave Noble Whitehead one color t.v. model number, make Zenith, for his birthday.'" At trial, Cissel emphasized that his requirements for proof of ownership are not stringent. "When something is taken as suspected proceeds of a crime, all I require is some type of common sense proof. If they say a friend gave it to them, all I want is that friend to say, `Yes, I gave it to him,' that's all."
[6] Sometime between the property clerk hearings and the trial on appellees' conversion complaint, Whitehead located a receipt for one of the movie projectors, which he produced at trial. He stated, however, that he had not requested another hearing before the property clerk in order to produce the receipt and recover the projector. Additionally, Rozinni Russel, a friend of Whitehead's, testified at trial that he had given Whitehead a 35-millimeter camera and a tripod. Whitehead had not asked Russel to testify to that effect before the property clerk at the time of those hearings. Asked if he had a receipt for the purchase of those items, Russel stated that he once had a receipt but that he had torn it up about a week before the trial.
[7] Neither appellee aggressively pursued the customary remedies for obtaining the return of seized property. Appellee Haltiwanger never applied to the property clerk for the return of her claimed property. She testified that she had expected Whitehead to take care of this for her since she was incarcerated on charges of possession of stolen mail, uttering, and violation of probation at the time Whitehead instituted his proceedings before the property clerk. Although entitled to de novo review by the trial court of the property clerk's determination with respect to the property, see Carroll v. E. Heidenheimer, Inc., D.C.Mun.App., 44 A.2d 71 (1945), appellee Whitehead eschewed such a remedy in favor of suing Officers Smith and Granville.
[8] There is yet another ground for reversal in this case which the majority ignores. While I do not deal with the issue of the propriety of punitive damages as awarded by the jury upon finding appellants to be liable, I do not consider malice to be a relevant factor in reviewing the actions of police officers acting within the scope of their official duty in any event. Rather, I agree with the jurist who noted in another context: "[T]he law regards the doing of the duty and not the motives from or under which it is done .... Does an action lie against a man for maliciously doing his duty? I am of the opinion that it does not." Spalding v. Vilas, 161 U.S. 483, 496, 16 S. Ct. 631, 636, 40 L. Ed. 780 (1896), quoting Dawkins v. Lord Paulet, L.R. 5 Q.B. 94, 114. In any event, the evidence admitted by the court principally to prove malicethat is, the testimony by appellee Haltiwanger that she was propositioned by appellant Smith on occasions subsequent to the searchwas totally immaterial with respect to motive at the time of the search. At no time did the trial court weigh the probative value of the evidence (obviously none) against its clearly prejudicial nature. See Punch v. United States, D.C.App., 377 A.2d 1353, 1358 (1977), cert. denied, 435 U.S. 955, 98 S. Ct. 1586, 55 L. Ed. 2d 806 (1978). The admission of the testimony, over repeated objection, was therefore an abuse of discretion which calls for reversal.
[9] I do note, however, that as best I can determine from the record on appeal, the validity of the search has not been challenged successfully. Cf. Curley v. Bryan, 362 F. Supp. 48, 51-52 (D.S.C.1973) (where alleged illegal search had never been found to be illegal by any court, and the only court which had ruled on the issue at least inferentially found the search to be proper, and where prisoners' convictions stood undisturbed, the prisoners were not entitled to recover monetary damages from the officers who conducted the search).
[10] The seized items were turned over immediately to the property clerk of the Metropolitan Police Department, who is insulated by law from liability in damages for his actions with respect thereto. See D.C. Code 1973, § 4-156(c). As noted, appellees failed to exhaust their civil remedies for securing the return of the property. See note 7, supra.
[11] I agree with the court in Mustola v. Toddy, 253 Or. 658, 668, 456 P.2d 1004, 1009 (1969), that the scope of the tort of conversion should be confined to its narrowest possible limits when a police officer in an emergency situation exercises control over an arrestee's property. An emergency situation exists whenever, as a practical matter, there is a danger that suspected evidence of a crime may be moved or destroyed (a very real possibility where, as here, not all of the parties at the scene of the crime are arrested) or where investigation permissibly leads officers to evidence in plain view. See Hoopes, The Proposed Good Faith Test for Fourth Amendment Exclusion Compared to the § 1983 Good Faith Defense: Problems and Prospects, 20 Ariz.L.Rev. 915, 937 (1978).
[12] The pertinent facts in this case are not in dispute. The only factual discrepancy regarding the alleged conversion involves the question of whether both appellants actually took part in carrying the property out of the apartment to the police vehicle. This issue has no bearing on the lawfulness of the seizure.
[13] Even that urgent concern may be unduly optimistic, since it does not appear that a motion to suppress was granted in this case (and I see no conceivable basis for such a ruling).
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496 Pa. 210 (1981)
436 A.2d 618
COMMONWEALTH of Pennsylvania, Appellant,
v.
Chris PINHAS.
Supreme Court of Pennsylvania.
Submitted September 14, 1981.
Decided November 5, 1981.
*211 Robert E. Colville, Dist. Atty., Robert L. Eberhardt, Deputy Dist. Atty., Pittsburgh, for appellant.
*212 David O'Hanesian, Pittsburgh, for appellee.
Before O'BRIEN, C.J., and ROBERTS, NIX, LARSEN, FLAHERTY, KAUFFMAN and WILKINSON, JJ.
OPINION OF THE COURT
WILKINSON, Justice.
Appellee, the manager of the Cavalier Health Spa, was arrested and charged with conspiracy[1] and promoting prostitution[2] on September 30, 1977 by a detective assigned to the Allegheny County Vice Squad. The arrest was made following an incident in which one of the female employes of the spa attempted to perform an act of deviate sexual activity upon the detective during a one-half hour massage for which the detective had paid $20. Appellee was tried with two codefendants, masseuses from the same spa, who had been charged with prostitution[3] as a result of the same incident. All were represented by the same attorney during the preliminary hearing and trial.[4]
Appellee was convicted of the crimes charged following a jury trial in which one masseuse was the only defense witness called to testify.[5] Sentence was suspended on the condition that appellee pay costs of prosecution and serve a probationary period of one year. On direct appeal, the Superior Court reversed the judgment of sentence and remanded the cause for a new trial on the basis that the appellee had been denied his Sixth Amendment right to effective assistance of counsel by his attorney's representation of all three defendants.
*213 The Commonwealth successfully petitioned for allowance of appeal. The Commonwealth contends that counsel's multiple representation of all defendants did not impair the appellee's right to effective assistance of counsel, and that this issue was raised in an untimely fashion, i.e., following the empaneling of the jury.
Judge Lipez's opinion for the Superior Court, 282 Pa.Super. 341, 422 A.2d 1147, ably discusses the law on this subject[6] and properly disposes of this case. We granted the petition for allowance of an appeal to consider the record in light of the Supreme Court of the United States' decision in Cyler v. Sullivan, 446 U.S. 335, 100 S. Ct. 1709, 64 L. Ed. 2d 333 (1980) where it was held that defendant's constitutionally protected right to effective assistance of counsel was violated and a new trial dictated in a case of multiple representation only where the actual existence of a conflict is shown.
We have examined the record and find, as Judge Lipez found, that it will not support the trial court's finding of no conflict of interest. On the contrary, it establishes that a conflict of interest did exist. Indeed, it is conceded that a plea bargain was negotiated by the only counsel for the three defendants on condition it be accepted by all three. It was acceptable to two but not to the third. What could be more conclusive evidence of a conflict of interest and this was known to all parties and the court before the jury was picked. Further, on trial, only one defendant testified and her testimony was inconsistent with the innocent plea of one of the other defendants.
One other point need be discussed. The trial court, quite properly, sua sponte, raised the question of conflict of interest. Counsel for defendants agreed there was a conflict and requested a continuance while two of the defendants obtained other counsel. He expressed concern that in addition to the plea bargain conflict, others would develop during trial. Indeed this concern ripened into reality as the one *214 witness testified, implicating another. Of course it would have been most appropriate if the conflict could have been reported sooner and more timely. Indeed the trial court indicates that counsel may have delayed deliberately. Procedures are available for taking counsel to task for such conduct if it is determined to exist but it cannot deprive the defendant of his constitutional right to effective representation.
Affirmed.
ROBERTS, J., joins in the majority opinion and files a concurring opinion.
NIX, J., filed a concurring opinion.
LARSEN, J., dissents.
ROBERTS, Justice, concurring.
I join the majority opinion. Pursuant to relevant American Bar Association Standards, the trial court correctly "inquire[d] into potential conflicts which may jeopardize the right of each defendant to the fidelity of his counsel." Standards Relating to the Function of the Trial Judge § 3.4(b) (Approved Draft, 1972). Because this record establishes actual harm in violation of the conflict-of-interest standard set forth in Cuyler v. Sullivan, 446 U.S. 335, 100 S. Ct. 1709, 64 L. Ed. 2d 333 (1980), a fortiori the record establishes potential harm in violation of the standard of Pennsylvania. See, e.g., Commonwealth v. Westbrook, 484 Pa. 534, 400 A.2d 160 (1979); Commonwealth v. Breaker, 456 Pa. 341, 318 A.2d 354 (1974); Commonwealth v. Wheeler, 444 Pa. 164, 281 A.2d 846 (1971); Commonwealth ex rel. Whitling v. Russell, 406 Pa. 45, 176 A.2d 641 (1962).
NIX, Justice, concurring.
Although I join the majority opinion, I would like to stress that in cases of multiple representation, a criminal defendant is only denied his Sixth Amendment right to effective assistance of counsel where the actual existence of a conflict is shown. Cuyler v. Sullivan, 446 U.S. 335, 100 S. Ct. 1709, 64 *215 L.Ed.2d 333 (1980). The acceptance of any lesser standard would require this Court to engage in speculation in its efforts to assure effective representation and would result in overturning otherwise valid convictions solely because of dual representation.
"The duty of the courts to assure full enjoyment of constitutional rights should not be confused with the conjuring of imaginary demons which serve only to impede law enforcement and frustrate justice." Commonwealth v. Breaker, 456 Pa. 341, 352, 318 A.2d 354, 359-360 (1974) (Nix, J. dissenting).
NOTES
[1] Section 903 of the Crimes Code, 18 Pa.C.S. § 903.
[2] Section 5902(b) of the Crimes Code, 18 Pa.C.S. § 5902(b).
[3] Section 5902(a) of the Crimes Code, 18 Pa.C.S. § 5902(a).
[4] A plea bargain offered on the condition that it be accepted by all three defendants was withdrawn when only two defendants indicated a willingness to accept it.
[5] The codefendants were convicted of prostitution.
[6] See, Annotation in 64 L. Ed. 2d 907 (1980) on multiple representation of defendants in criminal cases as a violation of Sixth Amendment right to counsel.
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144 B.R. 85 (1992)
In re Mary Leasure UNROE, Debtor.
Mary Leasure UNROE, Plaintiff,
v.
UNITED STATES of America, By and Through its DEPARTMENT OF TREASURY, INTERNAL REVENUE SERVICE, Defendant.
Bankruptcy No. 86-4221-RWV-13, Adv. No. 90-244.
United States Bankruptcy Court, S.D. Indiana, Indianapolis Division.
March 31, 1992.
*86 Lynn Butcher, UAW-GM Legal Services Plan, Anderson, Ind., Judith E. Seubert, Louis Rosenberg, UAW-GM Legal Services Plan, Indianapolis, Ind., for debtor.
Steven E. Cole, Trial Atty., Tax Div., U.S. Dept. of Justice, Washington, D.C., Diane Worland, I.R.S., and Robert A. Brothers, Indianapolis, Ind., for defendant.
ORDER GRANTING MOTION TO DISMISS AND ORDER OF DISMISSAL
RICHARD W. VANDIVIER, Bankruptcy Judge.
This matter comes before the Court on the Motion to Dismiss filed on November 15, 1990, by the United States. The Court now grants the motion and dismissed this case for the reasons below.
The Debtor filed for relief under Chapter 13 of the Bankruptcy Code on July 18, 1986, and after litigation over the Debtor's federal tax liabilities, a plan was confirmed on April 30, 1989. This Court's entry of January 23, 1989, reflects that the Debtor's 1982 and 1983 tax liabilities were paid in full through the plan, and the United States admits that the these liabilities have been satisfied. (The case remained open because the appeal of the tax liability decision wasn't decided until 1991. See In re Unroe, 937 F.2d 346 (7th Cir.1991).)
On June 8, 1990, the Debtor filed a Verified Complaint for Preliminary and Permanent Injunction, Contempt of Court, Turnover, Sanctions, and Declaratory Relief ("the Complaint") against the United States, by and through the IRS. The Debtor asserted that despite full payment of her 1983 taxes through her Chapter 13 plan, on June 4, 1990, in violation of the automatic stay, the IRS notified the Debtor of its intent to levy on her property for nonpayment of the 1983 taxes, and that on May 7, 1990, the IRS intercepted the Debtor's $199.58 refund for overpayment of taxes for the year 1989. In a subsequent filing, the Debtor asserts that refunds for the years 1986, 1987 and 1988 were also intercepted in violation of the automatic stay, and were released only after many letters and phone calls.
The Debtor seeks both injunctive and monetary relief. On the injunctive side, the Debtor seeks a preliminary order enjoining the IRS from further attempts to collect the 1982 and 1983 taxes, a permanent order enjoining the IRS from collecting tax debts against the Debtor or her property without first seeking modification of the automatic stay, and an order that the IRS release the "bankruptcy freeze code" on the Debtor's name and social security number. For monetary relief, the Debtor seeks turnover the overpayment of 1989 taxes, actual and punitive damages, costs and reasonable attorney fees.
The IRS seeks dismissal on the grounds of mootness and sovereign immunity. In its brief in support, the IRS does not defend its actions, but attributes them to a *87 "computer problem". The IRS contends that upon being informed of the problem, it took immediate steps to correct it and promptly returned the 1989 tax overpayment, with interest, thus mooting the Debtor's claim for injunctive relief, and that the United States has not waived its sovereign immunity with respect to the Debtor's claims for monetary relief.
Sovereign Immunity from Monetary Claims under the Bankruptcy Code
Although no specific statutory basis for monetary relief is cited in the Debtor's complaint, the relief requested (aside from the request for turnover of the refund, which had been accomplished) tracks the language of 11 U.S.C. section 362(h), which provides that "[a]n individual injured by any willful violation of a stay provided for in this section shall recover actual damages, including costs and attorney's fees, and, in appropriate circumstances, may recover punitive damages." This section would be applicable against the government, however, only with its consent, i.e. if it has waived its sovereign immunity to suit under this section.
Under the Bankruptcy Code:
(a) A governmental unit is deemed to have waived sovereign immunity with respect to any claim against such governmental unit that is property of the estate and that arose out of the same transaction or occurrence out of which such governmental unit's claim arose.
(b) There shall be offset against an allowed claim or interest of a governmental unit any claim against such governmental unit that is property of the estate.
(c) Except as provided in subsections (a) and (b) of this section and notwithstanding any assertion of sovereign immunity
(1) a provision of this title that contains "creditor", "entity", or "governmental unit" applies to governmental units; and
(2) a determination by the court of an issue arising under such a provision binds governmental units.
11 U.S.C. section 106.
The Debtor argues that the United States has waived its sovereign immunity under all three subsections of this provision. The Supreme Court recently declared that waivers of sovereign immunity are generally strictly construed in favor of the sovereign, and decided that Section 106(c) was not a waiver of the government's sovereign immunity from actions seeking money damages. See United States v. Nordic Village, Inc., ___ U.S. ___, 112 S. Ct. 1011, 117 L. Ed. 2d 181 (1992). Therefore, if the Debtor's claims for monetary relief under Section 362(h) are to survive dismissal, they must fall under subsections (a) or (b) of section 106.
Subsection (a) applies only if the Debtor's claim is a compulsory counterclaim to the government's claim. The Debtor cites In re Bulson, 117 B.R. 537 (9th Cir.BAP 1990), and In re Price, 103 B.R. 989 (N.D.Ill.1989), aff'd, 130 B.R. 259 (N.D.Ill.1991), to support her contention that her monetary claims against the United States are indeed such claims. Both cases found that a debtor's claim against the IRS for violating the automatic stay by its postpetition collection efforts arose from the same transaction or occurrence as the government's claim for the taxes it was attempting to collect. In Price, the collection effort occurred shortly after a Chapter 13 plan was confirmed, so the taxes had not been paid at the time the debtors sought damages.
In Bulson, as in this case, it appears that the collection attempt was made after the debtor had successfully completed her plan, which paid in full all prepetition taxes. See 117 B.R. at 538. Finding that the government's claim for taxes and the debtors' claim for improper actions to collect those taxes arose from the same aggregate core of facts regarding the debtor's unpaid taxes, the court held that the waiver of Section 106(a) applied. Id. at 541. There is, however, a gap in this logic. At the time of the collection effort, the government no longer had any claim against the debtor, as it had been paid in full. Throughout the time the government had a claim against the debtor, the debtor had no counterclaim against the government. Only after the government's *88 claim had been extinguished by payment in full did the debtor's claim for violation of the stay arise. It is conceptually impossible for the debtor to have any counter claim against the government, let alone a compulsory one, when the government has no claim against the debtor. See In re Cowart, 128 B.R. 492, 497 (Bankr.S.D.Ga. 1990). Thus, even if Price is correct on its facts (and there is contrary authority, see e.g. In re Davis, 136 B.R. 414 (E.D.Va. 1992); In re Academy Answering Service, Inc., 100 B.R. 327 (N.D.Ohio 1989)), the Court declines to apply it to the factual situation of Bulson.
Section 106(b), allowing offsets, does not require that a debtor's claim against the government be a compulsory counterclaim, but it does, like section 106(a), contemplate that the government have some claim against the debtor against which the setoff can be made. See United States v. McPeck, 910 F.2d 509 (8th Cir. 1990) (comparing and contrasting the subsections); Cowart, 128 B.R. at 497; c.f. In re Davis, supra (allowing offset, but not affirmative recovery, when plan was still pending). In this case, the United States' claim against the Debtor was paid in full before the Debtor's claim arose. There remains no claim by the IRS against which the Debtor can offset. Any monetary judgment would not translate into a reduction in what the Debtor owes, but would have to come as affirmative recovery from the United States treasury. Thus, Section 106(b), like 106(a), does not waive the government's sovereign immunity to the Debtor's action for monetary relief under the Code.
The Court must therefore conclude that the Debtor's claims for monetary relief under Section 362(h) against the United States are barred by sovereign immunity.
Recovery of Litigation Costs under the Internal Revenue Code
There is, however, another potentially applicable waiver of sovereign immunity, which allows an award of attorney fees and other litigation costs to aggrieved taxpayers. This provision, found in the Internal Revenue Code, provides:
(a) In general.In any administrative or court proceeding which is brought by or against the United States in connection with the determination, collection, or refund of any tax, interest, or penalty under this title, the prevailing party may be awarded a judgment or a settlement for
(1) reasonable administrative costs incurred in connection with such administrative proceeding within the Internal Revenue Service, and
(2) reasonable litigation costs incurred in connection with such court proceeding.
26 U.S.C. section 7430. Reasonable litigation costs are defined to include court costs and "reasonable fees paid or incurred for the services of attorneys in connection with the court proceeding," (with a general $75 per hour cap). Section 7430(c)(1). To be eligible for an award under this section, the party must exhaust its administrative remedies within the Internal Revenue Service, must establish the position of the United States in the proceeding was not substantially justified, and must substantially prevail with respect to the most significant issues or set of issues presented. Section 7430(b)(1) and (c)(4)(A).
There is dispute over whether it is within a bankruptcy court's core jurisdiction to make an award under this provision, see In re Brickell Investment Corp., 922 F.2d 696 (11th Cir.1991) (no); In re Chambers, 131 B.R. 818 (Bankr.N.D.Ill.1991) (yes), and there are several factual issues which might prevent the Debtor from recovering under this provision, such as whether the Debtor exhausted her administrative remedies before bringing suit, and whether the Debtor (whose counsel appears to be provided through a union sponsored program) has "paid or incurred" any litigation costs, c.f. United States v. McPherson, 840 F.2d 244 (4th Cir.1988) (attorney appearing pro se not entitled to attorney fee award). (Indeed, the complaint as it stands may not state a claim under this provision, but the Court assumes, for the purpose of this order, that with leave to amend, the Debtor could state a claim). The Court, however, *89 need not reach these issues, because the Court concludes that the "position of the United States", as defined in this provision, is limited to its position taken in this litigation, which has been substantially justified.
There has been disagreement among the circuits on the question of whether the focus under this section is limited to the government's position after litigation is commenced, or if the government's prelitigation position may also be considered. See Harrison v. C.I.R., 854 F.2d 263, 265 n. 3 (7th Cir.1988), cert. denied, 489 U.S. 1053, 109 S. Ct. 1313, 103 L. Ed. 2d 582 (1989) (noting split in authorities, but not taking position). In an apparent attempt to clarify matters, the section was amended in 1986 to add a definition of "position of the United States", which included administrative action or inaction only after the District Counsel became involved. See Sher v. C.I.R., 861 F.2d 131, 134 (5th Cir.1988) (quoting and interpreting definition). The definition was amended in 1988 to read:
(A) the position taken by the United States in a judicial proceeding to which subsection (a) applies, and
(B) the position taken in an administrative proceeding to which subsection (a) applies as of the earlier of
(i) the date of the receipt by the taxpayer of the notice of the decision of the Internal Revenue Service Office of Appeals, or
(ii) the date of the notice of deficiency.
26 U.S.C. section 7430(c)(7). "If neither [of the dates of subsection (B)] is applicable, the position of the United States is that taken in the litigation." See H.R.Conf.Rep. No. 100-1104 at 226, 100th Cong.2d Sess. (1988), reprinted in 1988 U.S.C.C.A.N. 4515, 5048, 5286; 34 Am.Jur.2d, Federal Taxation, para. 9234. "Administrative proceeding" is defined as "any procedure or action before the Internal Revenue Service." Section 7430(c)(5).
Thus, subsection (B) sets points in the administrative process to determine or collect tax liabilities after which the IRS is held accountable for ensuring that its positions are substantially justified. Both the 1986 and 1988 formulations contemplate that in earlier phases, errors might be made that result in positions without substantial justification, but by the time the proceeding progresses to a certain point, someone within the IRS with sufficient authority is expected to assess the case and correct such errors. Thus, Congress clearly evidenced its intent not to hold the IRS liable for an unjustified position held only in the early stages of a controversy before this point in reached.
In this case, the Debtor's liability to the IRS for 1983 taxes had been determined by this Court (subject to downward modification if the Debtor's appeal had succeeded), and had been paid in full through her Chapter 13 plan. The computer error initiated a new action for which the two dates of 7430(c)(7)(B) either did not apply or had not occurred (and if they did apply but had not occurred, that would suggest that the Debtor had not exhausted her administrative remedies before coming to court). From the time this litigation was commenced, the government has admitted its errors, promptly returned the withheld refund with interest, corrected its computer error, and ceased any further collection efforts. Because the government's position in this litigation has been entirely reasonable, and thus "substantially justified", the Debtor is not entitled to an award under 26 U.S.C. section 7430.
The IRS's seeming inability to control its computers, demonstrated by this case and too many other cases presenting similar scenarios, cannot be excused, but neither can it be sanctioned through monetary relief under 11 U.S.C. section 362(h) in the absence of a waiver of sovereign immunity. Because the government's litigation conduct has been reasonable and justified, the Debtor cannot recover litigation costs under 26 U.S.C. 7430. The Court therefore finds that the government is entitled to dismissal of the Debtor's monetary claims.
Injunctive Relief
The Court agrees with the government that the need for injunctive relief has been mooted by the IRS's return of the *90 refund, its correction of its computer error, and its ceasing all further collection attempts. The IRS remains bound by the automatic stay, 11 U.S.C. section 362(a), until discharge is entered, at which time the discharge injunction, 11 U.S.C. section 524(a), will apply. Adding additional injunctive relief at this point and under these circumstances would serve no purpose. The Court will therefore dismiss the Debtor's injunctive claims as moot.
Conclusion
Because the Court concludes that both the Debtor's monetary and litigation costs, claims are barred by sovereign immunity and her injunctive claims are moot, the government is entitled to dismissal of this case.
The Court therefore GRANTS the United States' Motion to Dismiss and ORDERS this case dismissed.
SO ORDERED.
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291 Md. 688 (1981)
436 A.2d 900
PAUL EUGENE HAWKINS, JR.
v.
STATE OF MARYLAND
[No. 104, September Term, 1980.]
Court of Appeals of Maryland.
Decided November 4, 1981.
*689 The cause was argued before MURPHY, C.J., and SMITH, DIGGES, ELDRIDGE, COLE, DAVIDSON and RODOWSKY, JJ.
Arthur A. DeLano, Jr., Assistant Public Defender, with whom was Alan H. Murrell, Public Defender, on the brief, for appellant.
Maureen O'Ferrall, Assistant Attorney General, with whom was Stephen H. Sachs, Attorney General, on the brief, for appellee.
ELDRIDGE, J., delivered the opinion of the Court. MURPHY, C.J., and RODOWSKY, J., concur in part and dissent in part. RODOWSKY, J., filed a concurring and dissenting opinion at page 696 infra, in which MURPHY, C.J. concurs.
We granted the defendant's petition for a writ of certiorari in this criminal case primarily to resolve the question of whether a defendant, charged with one offense, may be convicted of a lesser included offense even though the lesser included offense was not mentioned in the charging document. This issue has been a recurring one in Maryland, but this Court has not yet had an occasion to decide it.[1]See the discussion in Grimes v. State, 290 Md. 236, 240, 429 A.2d 228 (1981). Unfortunately, for reasons stated later, we shall be unable to decide the issue in the present case. However, we shall reverse the defendant's conviction and order a new trial on a second ground presented in the petition for a writ of certiorari, namely that the trial court improperly restricted defense counsel's closing argument to the jury.
The relevant facts of the case can be briefly stated. The defendant, Paul Eugene Hawkins, Jr., was charged in the Circuit Court for Montgomery County with the felony of daytime housebreaking in violation of Maryland Code (1957, *690 1976 Repl. Vol.), Art. 27, § 30 (b). The indictment contained only one count, presenting that the defendant "in the daytime, unlawfully did break and enter the dwelling house, the premises of Jorge Silva, ... with intent to steal, take or carry away personal property of Jorge Silva, in violation of Article 27, Section 30 (b)...."
At the trial, the State's evidence indicated the following. The defendant and an alleged accomplice were observed by two police officers knocking on the front door of a single family house in Montgomery County. After knocking for a few minutes, the defendant and his companion walked around to the rear of the house. When the police officers approached the house, they heard the sound of breaking glass and then noticed someone moving inside. The house was placed under surveillance; a canine unit arrived on the scene; and the police then entered the house, finding the defendant and his confederate hiding in the attic. The police observed that several items had been disturbed in the master bedroom and that the nightstand drawer was open. The owner of the house testified that this drawer had not been open when he had left the house. The police concluded that entry to the house had been gained by breaking a glass pane in the back door.
The defendant presented no evidence on his own behalf. At the conclusion of the State's case, the defendant's attorney requested a jury instruction that the indictment also covered the "lesser included" offense of breaking and entering a dwelling house under Art. 27, § 31A, which does not require proof of an intent to steal and which is a misdemeanor. Defense counsel asked the court to inform the jury that it could convict the defendant of the lesser offense under § 31A, even though that offense was not expressly alleged in the indictment. This request for a jury instruction was refused by the trial court.
In addition, defense counsel informed the trial court that in closing argument to the jury, counsel intended to refer to Art. 27, § 31A, pointing out to the jury that the State may have established the defendant's guilt with respect to this *691 lesser offense, but that the State failed to prove the defendant guilty of daytime housebreaking with intent to steal in violation of Art. 27, § 30 (b). The trial court decided that any reference to § 31A was "immaterial and irrelevant," and that the defendant could not mention this section in his closing argument.
The defendant was convicted of daytime housebreaking in violation of Art. 27, § 30 (b), and sentenced to seven years imprisonment. The Court of Special Appeals affirmed in an unreported opinion. This Court then granted the defendant's petition for a writ of certiorari, which raised two questions. The first was: "Did the trial judge err in refusing to instruct the jury on a lesser offense necessarily included in the indictment?" The second question was whether the trial judge erred in not permitting the defendant to refer to Art. 27, § 31A, in his closing jury argument.
(1)
We have concluded that the first issue raised in the certiorari petition cannot be decided in this case because Art. 27, § 31A, is not a lesser included offense of Art. 27, § 30 (b). We have on many occasions pointed out that the test for determining whether one offense is included in another, is the so-called "same evidence" or "required evidence" test set forth in Blockburger v. United States, 284 U.S. 299, 304, 52 S. Ct. 180, 76 L. Ed. 306 (1932). Under this standard, if each offense "requires proof of a different element" (Blockburger, 284 U.S. at 304), then one is not a lesser included offense of the other. See Simms v. State, 288 Md. 712, 726, 421 A.2d 957 (1980); Whack v. State, 288 Md. 137, 142, 416 A.2d 265, appeal dismissed and cert. denied, 450 U.S. 990, 101 S. Ct. 1688, 68 L. Ed. 2d 189 (1981), and cases there cited. Section 31A cannot be a lesser included offense of § 30 (b), as each requires proof of an element not required by the other.
Art. 27, § 30 (b), referred to as the "daytime housebreaking statute," is as follows:
*692 "Any person, his aiders, abettors and counsellors, who shall be convicted of the crime of breaking a dwelling house in the daytime with intent to commit murder or felony therein, or with intent to steal, take or carry away the personal goods of another of any value therefrom, shall be guilty of a felony, and upon conviction thereof, shall be sentenced to the penitentiary for not more than ten years."
Art. 27, § 31A, provides:
"Any person who breaks and enters the dwelling house of another is guilty of a misdemeanor and, upon conviction thereof, shall be sentenced to imprisonment for a term of not more than three (3) years or a fine of not more than five hundred dollars ($500.00) or both."
Under § 30 (b), the State is required to prove that the breaking was with the intent to commit murder or a felony or to steal, take or carry away the personal goods of another. No such intent is required under § 31A. Section 31A, on the other hand, expressly requires that there be an entry. Under § 30 (b), however, merely a breaking is required rather than a breaking and entering. Reagan v. State, 4 Md. App. 590, 594, 244 A.2d 623 (1967); Reagan v. State, 2 Md. App. 262, 267, 234 A.2d 278 (1967). In not containing the element of an entry, § 30 (b) is like the storehouse breaking statute, Art. 27, § 32. See Grimes v. State, supra, 290 Md. at 243, n. 4; Sample v. State, 33 Md. App. 398, 401-403, 365 A.2d 773 (1976).
As the two statutes each contain a distinctive element, § 31A is not a lesser included offense of § 30 (b). Whatever may be the rule in Maryland with regard to lesser included offenses, it is clear that if a crime is not included within the offense charged, one may not be convicted of that crime. Grimes v. State, supra, 290 Md. at 244. Consequently, the trial judge correctly denied the defendant's requested instruction.
*693 (2)
Although the jury could not have convicted the defendant of violating Art. 27, § 31A, we believe that defense counsel should have been permitted to refer to that statute in connection with his closing argument designed to persuade the jury that the State had failed to establish a violation of Art. 27, § 30 (b).
In his opening statement to the jury, the defense counsel told the jury the following:
"Now, ladies and gentlemen, as I said the State has chosen the crime with which to charge the Defendant, and they bear the burden of proving that particular crime. It may be that you will hear other evidence in this case of what you might consider to be a crime in itself, but His Honor, the Court will instruct you that in order for you to convict, it has to be of a particular crime charged by the State, and I would submit if you'd listen carefully to the evidence, you will find that the State has fallen short in its burden of proving each element beyond a reasonable doubt.
Quite simply, ladies and gentlemen, I believe the State has charged the Defendant with the wrong crime."
The defense counsel in closing argument desired to make essentially the same statement, adding the factor that it was § 31A which, in light of the evidence, the State should have charged.
As Judge Digges pointed out for the Court in Dorsey Bros., Inc. v. Anderson, 264 Md. 446, 454, 287 A.2d 270 (1972), "[w]e have long held that counsel has great latitude in the presentation of closing argument...." And in Wilhelm v. State, 272 Md. 404, 412, 326 A.2d 707, 714 (1974), the Court in an opinion by Judge O'Donnell observed: "Generally, counsel has the right to make any comment or argument that is warranted by the evidence proved or inferences therefrom...." The closing argument which defense *694 counsel desired to make in the instant case was "warranted by the evidence" and, therefore, counsel has a "right" to make it.
Although it is clear, as the dissent points out, that the arguments of counsel should be confined to the issues in the case, the reference to Art. 27, § 31A, did relate to the issues in the case. It was not "immaterial and irrelevant" as held by the trial court. As the State has the burden of proving every element of the crime, the defendant's attorney, in closing argument, is entitled to contend that the State's proof was deficient in one respect or another. See Eley v. State, 288 Md. 548, 553, 419 A.2d 384 (1980). As the crime charged required proof by the State of an intent to steal, and as § 31A contains no such element, the reference to § 31A was part of the defendant's argument that the State failed to establish the requisite intent.
Defense counsel, in wishing to mention § 31A in his closing statement, merely wished to frankly admit, consistent with the State's overwhelming evidence of a breaking, that the defendant was guilty of the offense prohibited by § 31A, which necessitates no proof of a felonious intent. He desired to point out that the State had failed to charge a violation of § 31A, that the State decided to charge under the statute requiring proof of an intent to steal, and that, in this respect, the State had failed to prove its case. The reference to § 31A, and the frank admission of culpability thereunder were in effect trial tactics designed to highlight the contention of the defense counsel that while the State may have proved the elements of § 31A, that was not sufficient evidence on which to base a guilty verdict under the statute which was charged.
Other courts which have considered the matter approve the tactic of counsel admitting culpability to one crime not charged in order to emphasize the contention of innocence of the crime charged. In United States v. Roberts, 583 F.2d 1173 (10th Cir.1978), cert. denied, 439 U.S. 1080, 99 S. Ct. 862, 59 L. Ed. 2d 49 (1979), for example, the defendants had been convicted of importing heroin and conspiracy to import. On appeal one defendant, Freeman, argued, inter alia, that *695 his conviction should be overturned because portions of his co-defendant's counsel's closing arguments were unduly prejudicial. Specifically, the co-defendant's counsel "had argued [that] the evidence showed, if anything, distribution, possession or use of heroin by the defendants, but certainly not importation." Id. at 1177. The court found that this comment had not unduly prejudiced Freeman, but in fact, was merely the exercise of a common trial tactic. The court stated: "Although Freeman may have elected a different defensive tack, this was simply the application of a frequently used and sometimes effective tactic." Ibid. Finally, the United States Court of Appeals concluded:
"The comments of codefendants' counsel concerning [the uncharged offenses of] distribution, possession and use found support in the evidence and fell within the permissible range of comment by counsel."
Ibid., citing Turberville v. United States, 112 U.S. App. D.C. 400, 303 F.2d 411 (D.C. Cir.), cert. denied 370 U.S. 946, 82 S. Ct. 1596, 8 L. Ed. 2d 813 (1962).[2]
The closing argument which petitioner's counsel desired to make in the present case is a normal and legitimate type of closing argument for defense counsel to make in a criminal case. It was error not to have allowed it.
Judgment of the Court of Special Appeals reversed, and case remanded to that court with instructions to reverse the judgment of the Circuit Court for Montgomery County and remand the case for a new trial.
Costs to be paid by Montgomery County.
*696 Rodowsky, J., concurring in part and dissenting in part.
I concur in Part (1) of the opinion of the Court, but respectfully dissent from Part (2).
In order to put the issue, as I see it, in perspective, some additional facts should be stated. In the discussion between court and counsel of requested instructions, defense counsel asked that he be allowed to argue to the jury that the indictment included two offenses, those set forth in Md. Code (1957, 1976 Repl. Vol.), Art. 27, § 30 (b) and § 31A. This foundation for the proposed argument has been rejected. Defense counsel then contended that the defendant "has a right to any reasonable instruction which reasonably encompasses the facts of the case as proven; and, your Honor, I would combine that argument both that I be allowed to tell the jury about this other crime and § 31A and also that the instruction be given." When the State argued that § 31A was not charged, that its injection into the case would be confusing, and that it would be improper to introduce penalties and severity levels of the different crimes, defense counsel stated that he proposed to "stop reading where [§ 31A] says a misdemeanor or felony." Thus, when the trial court denied defense counsel's request, it in effect would not permit defense counsel to read from the Maryland Code the following: "Any person who breaks and enters the dwelling house of another is guilty of a [crime]."
In its instructions to the jury the trial court included the following passage:
The fact that the Defendant has been accused is no proof or is no evidence that he is in any way guilty of the crime with which he has been charged, and even if you should find from the facts that he may be guilty of some other crime than that with which he is charged or for which he is indicted, that *697 is not to be evidence of guilt in this matter. [Emphasis supplied.]
Defense counsel, in his summation, just prior to concluding with a final reference to the reasonable doubt burden of proof, argued:
Now, the State has elected to charge the Defendant with this particular offense, and it has the elements that the State has shown you, and by their election to charge the Defendant with this particular crime, they have the burden of proving every element in this crime.
It may be that you feel that some other crime was committed, but, ladies and gentlemen, you can't convict Mr. Hawkins of the crime of daytime housebreaking as charged because you feel there may have been other criminal acts he committed. You have to find that he committed this particular crime chosen by the State.
Where the trial judge is said to have erred was in excluding from the foregoing argument a reading of the elements of the crime set forth in § 31A. The test for error by a trial court in restricting final argument of defense counsel is whether there has been an abuse of discretion. Eley v. State, 288 Md. 548, 556, 419 A.2d 384, 388 (1980). In my view, the facts here fall far short of meeting that standard. I fail to see how prohibiting the reading of the law of a crime which is not charged constitutes an abuse by the trial judge of the discretion vested in him to control the arguments of counsel. While "[t]here are no hard and fast limitations within which the argument of earnest counsel must be confined" and counsel are allowed "liberal freedom of speech," the "arguments of counsel are required to be confined to the issues in the cases on trial...." Wilhelm v. State, 272 Md. 404, 413, 326 A.2d 707, 714 (1974).
I have no quarrel with the proposition illustrated by cases like United States v. Roberts, 583 F.2d 1173 (10th Cir.1978), *698 cert. denied, 439 U.S. 1080, 99 S. Ct. 862, 59 L. Ed. 2d 49 (1979) and Turberville v. United States, 303 F.2d 411 (D.C. Cir.), cert. denied 370 U.S. 946, 82 S. Ct. 1596, 8 L. Ed. 2d 813 (1962). In those cases one defendant sought a new trial claiming prejudice resulting from the argument of counsel for a co-defendant. It was held to be proper for the co-defendant to have argued that the evidence established, or may have established, a lesser offense than the more serious offense which the co-defendant contended had not been proved. In the instant matter, defense counsel made such an argument. But here, counsel also sought to read the law of the lesser crime to the jury. In this respect People v. Flanders, 183 Colo. 268, 516 P.2d 418 (1973), is in point.
Flanders was an appeal from a conviction for attempting the statutory crime of burglary of a coin telephone. The defendant had been apprehended inside the telephone booth with a hammer and pry bar. There was debris on the floor of the booth and the telephone was damaged. Its coin box contained $2.10. As his defense the defendant asserted that he had not formed the intent to break into the coin box until he was inside of the booth and consequently was not guilty of attempted burglary as charged, but only of attempted theft. Requests for instructions on the distinction between felony and misdemeanor theft, and for permission to argue this distinction in closing argument, were denied. The Colorado Supreme Court found no error in this ruling because "[t]he degree of theft was not material to the charge of attempted burglary." 183 Colo. at 269-70, 516 P.2d at 419. In the instant matter the Court has taken pains to demonstrate that Article 27, §§ 30 (b) and 31A constitute separate crimes. The elements of § 31A are not material to a charge of violating § 30 (b).
The role of a jury in a criminal trial in Maryland, as the judge of the law under Article 23 of the Declaration of Rights, does not make the trial court's ruling in this case an abuse of discretion. In Stevenson v. State, 289 Md. 167, 179, 423 A.2d 558, 564 (1980), we said:
*699 In fact, viewed affirmatively, the past decisions of this Court make it quite evident that the jury's role in judging the law under Article 23 is confined "to resolv[ing] conflicting interpretations of the law [of the crime] and to decid[ing] whether th[at] law should be applied in dubious factual situations," and nothing more. Dillon v. State, 277 Md. 571, 581, 357 A.2d 360, 367 (1976).... [Emphasis in original.]
The "law of the crime" is the law of the crime charged and not that of some other crime which is not charged.
The issue in the case at bar was whether the State had established beyond a reasonable doubt every element of a violation of § 30 (b), including, here, the intent to steal. It was not whether the defendant had violated § 31A. There is no contention that argument attacking the sufficiency of the proof of intent was restricted. When defense counsel sought to expand his argument from one of fact to one of law, concerning the elements of another crime, and the State objected, the trial judge had to rule on relevancy. In considering the relevancy of the proffered legal argument, the trial court made its judgment of the scope of the legal issues presented concerning the elements of crime by standing on the bedrock of the charging document. The Court today has unfortunately eroded that foundation and, more remarkably, has implicitly labeled reliance on that foundation an abuse of discretion. I see no abuse of discretion in a trial judge restricting legal arguments to the jury about the elements comprising one or more crimes to the elements of the crimes charged. Indeed, I am at a loss to determine what other standard the trial court should have applied here.
Chief Judge Murphy has authorized me to state that he joins in the views expressed in this concurring and dissenting opinion.
NOTES
[1] With respect to a few offenses, the Legislature has resolved the matter by statute. See Maryland Code (1957, 1976 Repl. Vol., 1980 Cum. Supp.), Art. 27, § 616.
[2] The Turberville court found it proper for a defense counsel in that case to argue in his closing presentation, that one of the several defendants should be convicted of a lesser offense than that charged. Turberville, supra at 404, 303 F.2d at 411. Compare Roberts, supra, and Turberville with People v. Flanders, 183 Colo. 268, 516 P.2d 418 (1973) (holding, but offering no authority for the position, that the defense counsel could neither argue nor receive an instruction distinguishing the crime charged from a lesser-unincluded offense not charged).
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144 B.R. 206 (1992)
In re Harvey E. GREIF, Debtor.
Bankruptcy No. 91-18673-JNG.
United States Bankruptcy Court, D. Massachusetts.
August 27, 1992.
Gary W. Cruickshank, Boston, Mass., for debtor.
John O. Desmond, Framingham, Mass., Chapter 7 Trustee.
Paul S. Samson, Reimer & Braunstein, Boston, Mass., for First Nat. Bank of Boston.
MEMORANDUM AND ORDER
JAMES A. GOODMAN, Chief Judge.
On October 16, 1991, the Debtor, Harvey E. Greif ("Debtor"), filed a voluntary petition for relief under Chapter 7 of the Bankruptcy Code. The Debtor filed his schedules and statement of financial affairs on November 15, 1991. In his schedules, the Debtor claimed that the following interests were excluded from his bankruptcy estate: 1) his interest in the approximate amount of $550,000.00 in the Greif & Litwak, P.C., Profit Sharing Trust, a profit sharing plan *207 established by the Debtor's employer, 2) his interest in the amount of $16,449.34 in a Keogh Plan held by Fidelity Investments (collectively the "Plans"), and 3) his interest in an Individual Retirement Account ("IRA") in the amount of $2,390.28. The Debtor asserted that these interests were property that is excluded from the bankruptcy estate pursuant to section 541(c)(2)[1] or, alternatively, property that is exempt pursuant to 11 U.S.C. § 522(b)(2)(A).[2]
On December 16, 1991, the First National Bank of Boston (the "Bank") filed an objection to the Debtor's claim of exclusion or alternative claim of exemption. On January 13, 1992, John O. Desmond, the Chapter 7 Trustee (the "Trustee"), filed his objection to the claimed exclusions.[3]
Greif & Litwak, P.C. ("G & L") intervened as an interested party and filed a response to the Bank's objection on January 14, 1992. The Debtor filed his own response to the Bank's objection on January 15, 1992.
At a hearing on January 17, 1992, the Court took the issue of the claimed exclusions under advisement. The Court ordered the parties to submit an Agreed Statement of Facts within two weeks and to articulate the legal issues. The Court allowed the parties thirty days to submit briefs and an additional two weeks for reply briefs.
On February 4, 1992, the Debtor and the Bank submitted their Agreed Statement of Facts, Issues of Fact and Law, and Issues of Law, as well as a proposed pre-trial order. The Court entered the pre-trial order on February 7, 1992, which required the parties to complete discovery by March 6, 1992. The Court ordered briefs to be submitted by April 6, 1992, with reply briefs due by April 20, 1992.
On March 6, 1992, the Debtor and the Bank jointly submitted a Revised Statement of Agreed Facts, Issues of Fact and Law, and Issues of Law (the "Revised Statement"). On the same day, they submitted a joint motion to modify the Court's February 7th order. The Court allowed that motion. Approximately one month later, the parties filed a Joint Motion to Suspend Modified Pre-Trial Scheduling Order. In that motion, the parties reported that they had reached an agreement relating to the Bank's and the Trustee's objections and were in the process of documenting the settlement. They requested that the Court suspend its order of February 7, 1992 for thirty days, stating that if they did not present their settlement to the Court by May 6, 1992, they would submit a revised scheduling order. On April 8, 1992, the Court allowed the Joint Motion to Suspend.
As of the date of this Memorandum, the parties have failed to file either settlement papers or a revised scheduling order.
In the Revised Statement the parties jointly presented the following legal questions:
1. May all or any portion of the Debtor's interest in the Plans be excluded from his bankruptcy estate under 11 U.S.C. § 541(c)(2)?
2. If the Debtor has the power to alter, amend, or revoke the Plans, is the Debtor's power property of the estate under 11 U.S.C. § 541(c)(2)?
3. If the Debtor's power is property of the estate, may the trustee exercise the Debtor's power to alter, amend, or revoke the Plans?
*208 4. Is ERISA "Federal Law, other than subsection (d) of this section," for the purposes of Section 522(b)(2)(A) of the Bankruptcy Code, such that the Plans are exempt assets and beyond the reach of the Debtor's trustee and his creditors?
The parties presented the following five additional questions regarding the operation of Mass.Gen.Laws Ann. ch. 235, § 34A (West Supp.1992)[4], the state exemption statute:
1. Is G.L. c. 235, § 34A pre-empted by the operation of ERISA?
2. Is G.L. c. 235, § 34A pre-empted by the Bankruptcy Code?
3. Does G.L. c. 235, § 34A create enforceable exemption under Massachusetts law such that the Debtor's interests in the Plans are exempt from his estate and beyond the reach of his Trustee and creditors pursuant to 11 U.S.C. § 522(b)(2)(A)?
4. If yes, does G.L. c. 235, § 34A extend to all funds deposited into the Debtor's retirement accounts as of the effective date of said statute and to deposits into the Debtor's retirement accounts made after the effective date of said statute?
5. If G.L. c. 235, § 34A creates and enforceable exemption under Massachusetts law, does it protect the Debtor's interest in his IRA from the reach of the Trustee and creditors?
A recent ruling by the U.S. Supreme Court, Patterson v. Shumate, ___ U.S. ___, 112 S.Ct. 2242, 119 L.Ed.2d 519 (1992), directly addresses several of the issues raised by the parties. For example, Patterson directs this Court to answer the parties' very first question in the affirmative, to the extent that the plans are ERISA-qualified plans. The Supreme Court is clear on this issue:
The natural reading of the provision [§ 541(c)(2)] entitles a debtor to exclude from property of the estate any interest in a plan or trust that contains a transfer restriction enforceable under any relevant nonbankruptcy law. . . .
* * * * * *
The anti-alienation provision required for ERISA qualification and contained in the Plan at issue in this case thus constitutes an enforceable transfer restriction for purposes of § 541(c)(2)'s exclusion of property from the bankruptcy estate.
___ U.S. at ___, 112 S.Ct. at 2246. The parties have agreed, in the Revised Statement, that each of the plans contains a provision that assets of the plans may not be assigned or alienated, thus satisfying ERISA's anti-alienation requirement. 29 U.S.C. § 1056(d).
The remaining issue on this question, then, is whether the plans do qualify in all other respects as ERISA plans. With respect to this and all other remaining issues, the parties shall either file settlement papers by September 15, 1992 or a Final Revised Statement, containing the agreed and disputed facts, as well as a final statement of the outstanding legal issues. If there are remaining factual issues in dispute, the Court will promptly schedule an evidentiary hearing. If there are no material facts in dispute, the parties shall file briefs no later than September 25, 1992. Reply briefs shall be due no later than September 30, 1992. No further continuations, modifications or suspensions of these scheduled dates shall be allowed.
NOTES
[1] Section 541(c)(2) provides: "A restriction on the transfer of a beneficial interest of the debtor in a trust that is enforceable under applicable nonbankruptcy law is enforceable in a case under this title." 11 U.S.C. § 541(c)(2).
[2] Section 522(b)(2)(A) provides in relevant part:
(b) Notwithstanding section 541 of this title, an individual debtor may exempt from property of the estate the property listed in either paragraph (1) or, in the alternative, paragraph (2) of this subsection. . . . Such property is
(2)(A) any property that is exempt under Federal law, other than subsection (d) of this section, or State or local law that is applicable on the date of the filing of the petition. . . .
11 U.S.C. § 522(b)(2)(A).
[3] Both the Bank and the Trustee also objected to the Debtor's attempt to claim "all household goods, furniture, books, art, collections, bank accounts, motor vehicles, and other assets which he owns as a joint tenant with his spouse." This memorandum does not address these particular objections.
[4] Mass.Gen.Laws Ann. ch. 235, § 34A provides: "The right or interest of any person in an annuity, pension, profit sharing or other retirement plan maintained in accordance with the federal Employee Retirement Income Security Act of 1974 . . . shall be exempt from the operation of any law relating to insolvency and shall not be attached or taken as execution or other process to satisfy any debt or liability of such person. . . ."
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436 A.2d 379 (1981)
STATE of Maine
v.
John MYRICK.
Supreme Judicial Court of Maine.
Argued September 11, 1981.
Decided October 26, 1981.
*380 David M. Cox, Dist. Atty., Gary F. Thorne, Asst. Dist. Atty. (orally), Bangor, for plaintiff.
Anderson & Norton, Peter Adams Anderson (orally), Bangor, for defendant.
Before McKUSICK, C. J., and GODFREY, NICHOLS, ROBERTS, CARTER, VIOLETTE, and WATHEN, JJ.
CARTER, Justice.
After a bench trial in the Superior Court, Penobscot County, the defendant, John Myrick, was found guilty of violating 15 M.R.S.A. § 393 (1980),[1] a class C crime, which prohibits a person who has been convicted of a crime punishable by one year or more imprisonment from owning or having in his possession or under his control any firearm. On appeal, he contends that the indictment was insufficient, that the court's findings of fact did not establish that he had engaged in criminal conduct, and that § 393 as applied to him constitutes an ex post facto law and a bill of attainder. We affirm the conviction.
On April 22, 1975, the defendant was convicted on his plea of guilty in the Superior Court of cheating by false pretenses and was sentenced to a period of incarceration of one and a half to three years. At the time of that underlying conviction, 15 M.R.S.A. § 393 (1965)[2] made illegal the possession by convicted felons of concealable firearms. That statute was repealed by P.L. 1977, ch. 225 § 2, which enacted that part of the current § 393 prohibiting the ownership, possession, or control of "any firearm." Pursuant to § 393(7), "firearm" is defined by 17-A M.R.S.A. § 2(12-A) (Supp.1980) to include non-concealable weapons. See State v. Gwinn, Me., 390 A.2d 479, 481 n.2 (1978). The defendant was charged by indictment and convicted for having possessed illegally a shotgun on August 30, 1980.
I. Sufficiency of the Indictment
The defendant first claims that the indictment charging the violation of § 393 was fatally deficient because it failed to allege that he wilfully or knowingly violated the statute.[3] In construing the superseded *381 § 393, this Court ruled in State v. Heald, Me., 382 A.2d 290 (1978), that a willingness or wilfulness to violate the statute is not an element of the offense. Id. at 297. P.L. 1977, ch. 225, § 2 expanded the scope of illegality to include the ownership and control as well as the possession of a firearm. This modification, however, did not constitute an express rejection of the construction imposed by Heald. The 1977 legislation purported only to make illegal the two additional proprietary capacities and to include non-concealable firearms within the statute's proscriptions. Additionally, we note that the purpose underlying both the current and superseded statutes is "... to prohibit the possession of firearms by persons who have been convicted of violent or serious crimes." L.D. 450, 108th Leg. at 2 (1977)[4]; Heald, 382 A.2d at 295. See discussion infra at 383. Our ruling in Heald thus retains its conceptual vitality and governs our examination of the current § 393.
We therefore conclude that a violation of the current § 393, as with the superseded statute, is not predicated on willingness or willfulness. It is established that "an indictment is insufficient when it fails to allege every material fact that forms an essential element of the crime charged." State v. Allison, Me., 427 A.2d 471, 473 (1981). Because a wilful or willing violation is not an element of a violation of § 393, it need not be alleged in the indictment. See Ellis v. State, Me., 276 A.2d 438, 439 (1971); M.R.Crim.P. 7(c).
In Heald we held, however, that a possession to be within the scope of the superseded § 393 does include "... the knowledge of the presence of the firearm and its character as such." 382 A.2d at 297. Because the instant indictment did not allege that the defendant possessed the firearm with this knowledge, some question may be raised as to the instrument's sufficiency. We note that the defendant did not assert this particular argument either below or during the course of this appeal. Yet, because the failure of an indictment to charge a criminal offense does constitute a jurisdictional defect, this Court may notice the issue even when not properly saved. State v. Scott, Me., 317 A.2d 3, 5 (1974).
The offense underlying the decision in Heald occurred in 1970, and thus no effect was given to 17-A M.R.S.A. § 51, which became effective in 1976. In pertinent part, this section now provides, as it did in 1976, that:
1. [a] person commits a crime only if he engages involuntary conduct, including a voluntary act, or the voluntary omission to perform an act of which he is physically capable.
. . . . .
3. Possession is voluntary conduct only if the possessor knowingly procured or received the thing possessed or was aware of his control thereof for a sufficient period to have been able to terminate his possession.
17-A M.R.S.A. §§ 51(1), (3) (Supp.1980). This statute embodies the substance of Heald on the point that knowledge of the fact of possession inheres in the concept of "possession" itself; it thus codifies the holding in Heald as it relates to § 393. See State v. Flaherty, Me., 400 A.2d 363, 366-67 (1979).
The indictment need not allege that the underlying and allegedly criminal behavior was voluntary. The indictment is designed "to protect the defendant from further jeopardy, to avoid unfair surprise at trial, [and] to aid defendant in preparation of a defense by providing adequate notice to the charge...." State v. Damon, Me., 395 A.2d 121, 122 (1978), quoting State v. Nappi, Me., 369 A.2d 230, 232 (1977). See also State v. Wing, Me., 426 A.2d 1375, 1376, 1377 (1981). Here, § 51(3) operates merely to elaborate on the Legislature's concept of the possession prohibited by § 393. The *382 term "possession," as used in § 393 and, in this case, in the indictment itself, thus carries with it the notion of an awareness of the fact of possession. An explicit allegation of voluntary conduct in the form of conscious possession would not promote the purposes of the indictment. Notice to the defendant of the nature of the charge as well as the alleviation of unfair surprise at trial are accomplished by the mere existence of § 51. Further, the defendant is protected against a subsequent indictment for the same conduct, should the occasion arise, because reference to § 51 can be made to determine the specific conduct underlying the present action.[5] The validity of this indictment therefore must be upheld.
II. Sufficiency of the Court's Findings
The defendant next argues that because the trial court failed to find that he possessed the firearm in knowing violation of the law, the conduct in which he was found to have engaged did not reach the level of criminality. The presiding justice predicated guilt on findings that "Mr. Myrick did own or have in his possession or under his control a firearm and at that time he was a convicted felon."[6]
As we have noted, Heald ruled that a violation of § 393 is not premised on the defendant's willingness or wilfulness to violate the law. 382 A.2d at 297. Further, we now hold, supra at 381, that a willingness or wilfulness to violate the current § 393 is not an ingredient of the offense. Therefore, any such findings would be superfluous, and the trial court's failure to make them is of no consequence.
Because, however, the possession made unlawful by § 393 must be a conscious and knowing one pursuant to § 51(3), guilt, if based on possession, must rest on proof of that fact. The lower court did not include an express finding that the defendant knowingly or consciously possessed the shotgun. Consequently, an implicit factual finding is attributed to it. See State v. Michael Z., Me., 427 A.2d 476, 478 (1981). Because we have not been provided with a record[7] that would enable us to determine whether this implicit findings is unsupported by credible evidence, this court is unable to consider such a challenge. State v. Meyer, Me., 423 A.2d 955, 956-57 (1980); State v. Christianson, Me., 404 A.2d 999, 1005-06 (1979).
III. Ex Post Facto
Ex post facto laws, proscribed by Me. Const. art. I, § 11 and U.S.Const. art. I, § 10, include those which either inflict "a punishment more severe than was prescribed at the time the crime was perpetrated" or, "in effect if not in purpose, [deprive] him of some protection to which he has become entitled." In re Stanley, 133 Me. 91, 93-94, 174 A. 93, 95 (1934), aff'd sub *383 nom. Stanley v. Public Utilities Commission, 295 U.S. 76, 55 S.Ct. 628, 79 L.Ed. 1311 (1935), quoted in Watson v. State Commissioner of Banking, Me., 223 A.2d 834, 837 (1966). Here, the defendant claims that the 1977 expansion of § 393 to include within its prohibition the possession of non-concealable firearms breaches his guarantee to be free form ex post facto laws in these two forms.
The constitutional prohibition against ex post facto legislation is limited to statutes which are designed to impose further punishment. In re Stanley, 133 Me. at 93, 174 A. at 94; Trop v. Dulles, 356 U.S. 86, 95-96, 78 S.Ct. 590, 595-596, 2 L.Ed.2d 630, 639-40 (1957). In Cases v. United States, 131 F.2d 916 (1st Cir. 1942), the defendant appealed from a conviction under a similar possession statute which had been enacted in 1938; the underlying conviction occurred in 1922. In determining whether the possession statute was penal in nature and thus whether the ex post facto restriction applied, the court stated:
... if the past conduct which is made the test of the right to engage in some activity in the future is not the kind of conduct which indicates unfitness in the activity, it will be assumed, as it must be, that the purpose of the statute is to impose an additional penalty for the past conduct. If, however, the past conduct can reasonably be said to indicate unfitness to engage in the future activity the assumption will be otherwise.
Id. at 921. The Cases court concluded that the statute was designed to prevent the possession of firearms by those who had "demonstrated their unfitness to be entrusted with dangerous instrumentalities...." Id. Because there existed a sufficiently rational connection between the defendant's past activity and the legislative purpose to protect the public, the law did not implicate the ex post facto prohibition. Accord, United States v. Three Winchester 30-30 Caliber Lever Action Carbines, 504 F.2d 1288, 1290 n.5 (7th Cir. 1974); Cody v. United States, 460 F.2d 34, 37 (8th Cir.), cert. denied 409 U.S. 1010, 93 S.Ct. 454, 34 L.Ed.2d 303 (1972); United States v. McCreary, 455 F.2d 647, 648 (6th Cir. 1972); United States v. Donofrio, 450 F.2d 1054, 1056 (5th Cir. 1971); United States v. Karnes, 437 F.2d 284, 289-90 (9th Cir.), cert. denied 402 U.S. 1008, 91 S.Ct. 2189, 29 L.Ed.2d 430 (1971).
This Court has similarly held that 15 M.R. S.A. § 393 (1965) was enacted to lessen "a high potential of danger to the public" and to reduce the "probability that the convicted individual would continue his criminal activity. The Legislature could justifiably conclude there was a need for gun control legislation in the case of convicted criminals. . . ." Heald, 382 A.2d at 295. This purpose is also evident in the current version of § 393 under which the defendant was convicted. See L.D. 450, 108th Leg. at 2 (1977), quoted supra at 3. The disability created by section 393 thus operates to protect members of the public; therefore, the statute furthers a legitimate governmental interest. Because there is not additional punishment for the underlying offense within the meaning of the constitutional provision, § 393 as applied to the defendant does not violate his guarantee to be free from both the infliction of an increased punishment and the deprivation of a protection to which he claims to have become entitled.
IV. Bill of Attainder
Also prohibited by Me. Const. art. I, § 11 and U.S.Const. art. I, § 10 are bills of attainder, which "apply to named individuals or to easily ascertainable members of a group in such a way as to inflict punishment on them without a judicial trial...." United States v. Lovett, 328 U.S. 303, 315, 66 S.Ct. 1073, 1078, 90 L.Ed. 1252, 1259 (1946). Here, the defendant claims that the deprivation of his firearm amounted to a seizure without judicial proceedings.
As with ex post facto laws, a bill of attainder is penal in nature. Nixon v. Administrator of General Services, 433 U.S. 425, 472-73, 97 S.Ct. 2777, 2805, 53 L.Ed.2d 867, 909-10 (1977); Trop, 356 U.S. at 95-96, 78 S.Ct. at 595-596, 2 L.Ed.2d at 639-40; Lovett, 328 U.S. at 315, 66 S.Ct. at 1078, 90 L.Ed. at 1259. As we have stated, supra, *384 section 393 does not impose an additional penalty for the underlying felony; rather, it embodies a legitimate governmental purpose to protect the public from those the Legislature has justifiably deemed to have shown their unfitness to possess dangerous weapons by creating a distinct offense. Accordingly, section 393 as applied to the defendant does not constitute a bill of attainder. Winchester; Cody; Donofrio.
The entry is:
Judgment affirmed.
All concurring.
NOTES
[1] The section provides in pertinent part:
1. Possession prohibited. No person who has been convicted of any crime, under the laws of the United States, the State of Maine or any other state, which is punishable by one year or more imprisonment or any other crime which was committed with the use of a dangerous weapon or of a firearm against a person, except for a violation of Title 12, chapter 319, subchapter III, shall own, have in his possession or under his control any firearm, unless such a person has obtained a permit under this section. For the purposes of this subsection, a person shall be deemed to have been convicted upon the acceptance of a plea of guilty or nolo contendere or a verdict or finding of guilty by a court of competent jurisdiction.
[2] 15 M.R.S.A. § 393 (1965) provided:
It shall be unlawful for any person who has been convicted of a felony under the laws of the United States or of the State of Maine, or of any other state, to have in his possession any pistol, revolver or any other firearm capable of being concealed upon the person. Anyone violating any of the provisions of this chapter shall be guilty of a felony, and upon conviction thereof, shall be punished by imprisonment for not less than one nor more than 5 years.
[3] The indictment tracked the language of § 393, see note 1 supra, and charged:
That on or about the 30th day of August, 1980, in the County of Penobscot, State of Maine, JOHN MYRICK did, having been convicted on April 22, 1975, of a crime under the laws of the State of Maine, which was punishable by one year or more imprisonment, to wit, Cheating By False Pretenses, did own or have in his possession or under his control a firearm.
[4] Other portions of the bill not relevant here were revised by L.D. 1761, 108th Leg. (1978).
[5] This is not a case in which the indictment fails to identify the purportedly criminal act. In State v. King, Me., 371 A.2d 640 (1977), the Court found insufficient an indictment which alleged that the defendant forged the name of another "on an absentee ballot." Because "absentee ballot" could refer to either the ballot, itself, or the return envelope, the indictment did not adequately inform the defendant of the nature of the crime. Further, because the "exact crime" for which he was convicted remained unclear, his conviction would not preclude this being placed in jeopardy again for the same offense. Id. at 644. Similarly, State v. Good, Me., 308 A.2d 576 (1973) held invalid an indictment which tracked the statutory language and alleged that the defendant created "a breach of the peace" by using "language so vile and obsceneit [sic] would offend common decency to describe it in this complaint and being disorderly. . . ." Because the instrument did not identify either the disorderly acts or the offensive language, the defendant could not adequately prepare his defense. Id. at 578-79.
In the case at hand, the interrelation of §§ 51 and 393 leaves no doubt as to the nature of the act alleged in the indictment. Consequently, the defendant was informed of the charge sufficiently to prepare a defense, and the basis for a future claim of double jeopardy is secured.
[6] We take this characterization of "felon" to mean one, such as the present defendant, who ". . . has been convicted of any crime . . . which is punishable by one year or more imprisonment.. . ." 15 M.R.S.A. § 393(1).
[7] Pursuant to M.R.Crim.P. 39(b), defendant's counsel requested the deletion from the standard transcript of "[a]ll testimony of witnesses and statements of counsel."
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286 S.W.2d 671 (1956)
Walter JOHNSON, Appellant,
v.
Margaret BRADEN, Appellee.
No. 12919.
Court of Civil Appeals of Texas, San Antonio.
February 1, 1956.
Lewright, Dyer, Sorrell & Redford, James W. Wray, Jr., Corpus Christi, B. H. Kirk, Robstown, for appellant.
Butler, Williams & Stone, Robstown, for appellee.
POPE, Justice.
This is a suit to recover a money judgment for the partnership interest of G. C. Braden, deceased. Braden and Walter Johnson were equal partners in the lumber business. Braden died on January 1, 1954. His wife, as executrix of his estate, filed suit to recover Braden's share of the partnership assets and also to set aside a sale of the partnership assets by Johnson, the survivor, to himself. The court granted plaintiff a judgment in the sum of $4,808.73, and Johnson has appealed.
After Braden's death, Johnson continued to operate the lumber business, and on September 1, 1954, he executed a bill of sale to himself of all the company assets. The trial court set aside the bill of sale and no exception to that action is preserved. However, the trial court found as a fact that the partnership had assets in the value of $56,592.34. Using that valuation as a base, the court then undertook to determine the respective rights that Braden *672 and Johnson had in the assets of the partnership. The plaintiff introduced an audit which reflected that Johnson held promissory notes for advances to the partnership in the total amount of $30,131.25. There were current debts to third persons which amounted to $3,592.92, and both partners had certain credits to a capital account by reason of their failure to withdraw their share of profits and salaries. On the basis of the audit, the court determined that the company had acquired assets and profits over and above all debts, and that Braden's share of the net profits, since the formation of the partnership, was $9,876. Of that amount, he had not withdrawn $4,808.73, and the court gave plaintiff judgment for that amount.
The judgment must be reversed. Market values of the company assets are wholly absent from the record, and Johnson, on cross-examination, demonstrated that the plaintiff's audit was based on book values. It should have been based on market value. Rayburn v. Giles, Tex.Civ.App., 182 S.W.2d 9; Bradford v. Bradford, Tex. Civ.App., 172 S.W.2d 365; Caplen v. Cox, 42 Tex.Civ.App. 297, 92 S.W. 1048; 32 Tex.Jur., Partnership, § 221. The trial court arrived at its judgment against Johnson by computing the debts and charges against the company assets, which assets were estimated at book value, and then determined that Johnson should keep all the company assets and the Braden Estate should have a judgment against Johnson. The judgment does not expressly determine that the rest of the assets shall belong to Johnson, nor cancel his notes evidencing large advances to the partnership; but, by implication, that is probably the import of the judgment. If the assets of the partnership have a market value which is less than the book value, there may be no profits at all. There may not be sufficient assets to repay Johnson the value of his notes. The judgment, therefore, orders Johnson to pay profits, when there may be losses, all of which would be borne by Johnson, in addition to the burden of paying the judgment.
In an action for partnership accounting and dissolution, ordinarily the entire property of the firm is converted into cash, unless there is an agreement for the distribution of the assets in specie or it is clear that others will not be injuriously affected. Newman v. Newman, 145 Tex. 433, 198 S.W.2d 91, 92; Leyhe v. McNamara, Tex.Com.App., 243 S.W. 1074, 1077; First Nat. Bank v. Rush, Tex.Com.App., 210 S.W. 521, 527; Moore v. Steele, 67 Tex. 435, 3 S.W. 448; Collins v. Naylor, Tex.Civ.App., 192 S.W.2d 332, 333; Watson v. Williamson, Tex.Civ.App., 76 S.W. 793; 32 Tex.Jur., Partnership, §§ 201, 204; 68 C.J.S., Partnership, §§ 328, 438; 47 C.J., Partnership, §§ 988, 998.
The assets of the partnership should have been liquidated and used to discharge debts, advances and charges, and the surplus, if any, should then have been divided. In any event, the market value of the firm assets should have been used in computing values.
The judgment is reversed and the cause remanded.
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50 Md. App. 93 (1981)
436 A.2d 490
PRESTON AYARS, JR.
v.
JEAN R. AYARS.
No. 99, September Term, 1981.
Court of Special Appeals of Maryland.
Decided November 4, 1981.
*94 The cause was argued before LOWE, COUCH and WEANT, JJ.
Richard Eli Jackson for appellant.
No brief or appearance by appellee.
WEANT, J., delivered the opinion of the Court.
The court action in this dustup commenced on 2 October 1979 when Jean R. Ayars, appellee, filed a bill of complaint for divorce a vinculo matrimonii and other relief against Preston R. Ayars, Jr., appellant. A decree of divorce dated 15 December 1980 was filed on 16 December 1980 in the Circuit Court for Cecil County. In addition to granting the divorce to Jean R. Ayars as requested, the decree held that the real property of the parties is marital property directing that it be sold at public sale and that the proceeds be divided 75% to Jean R. Ayars and 25% to Preston R. Ayars, Jr. It is from this decree that this appeal was taken.
Although the appellee has filed no brief the appellant has set forth what is titled an "Agreed Statement of Facts." Since we have heard nothing to the contrary from the appellee, we assume that the facts contained therein are correct. They are reproduced below.
The parties were married on July 30, 1954; they separated on June 24, 1978 and executed a marital separation and settlement agreement on June 27, 1978. Among other assets, they jointly own an approximately 1 acre parcel of real property, located near Elkton, Maryland and improved by a dwelling. Paragraph 4 of the separation agreement conferred upon Appellant the right to reside in the real property until "the parties agree on a disposition of same or until the house is sold." (E-5) The parties have never agreed on a disposition of the real property nor has it been sold.
The said real property was inherited, during the marriage of the parties, by Appellant Mr. Ayars *95 and his sister, as co-tenants. Later, during the marriage and before the separation, Appellee Mrs. Ayars purchased the one-half share of Appellant's sister for $11,607.00, which sum Appellee raised by selling stocks which she had inherited. Mr. and Mrs. Ayars then took title as tenants by the entireties and have held the property as tenants by the entireties at all times since.
After the parties took title as tenants by the entireties, and prior to their separation, they expended a total of $42,360.00 on renovations to the dwelling on the real property, which they occupied as their home. This amount was raised by way of bank loans evidenced by notes signed by both parties. During the marriage and prior to the separation, Mrs. Ayars applied $27,813.00 from the sale of her inherited stocks to reduction of the renovation loans. As of the date of separation the loan balance was $2,862.34; as of the date of trial and of the Decree the loan balance was $1,862.34.
It is argued by the appellant that the circuit court erred in apportioning to the appellee 75% of the proceeds from the judicial sale of the jointly owned real property of the parties. We agree.
During the marriage the approximate 1 acre of land in question was inherited by the appellant and his sister as co-tenants. Thereafter, before the separation, the appellee purchased the sister's one-half share for $11,607.00 from money which she raised by selling stock which she also had inherited.
At this point the property was directly traceable to inheritance by both parties and was not marital property by reason of subtitle 6A of the Courts and Judicial Proceedings article of the Annotated Code of Maryland, subsection 3-6A-01 (e) which defines marital property as "all property, however titled, acquired by either or both spouses during their marriage. It does not include property acquired prior to the marriage, property acquired by inheritance or gift from a third *96 party, or property excluded by valid agreement or property directly traceable to any of these sources." (Emphasis added). However, they then took title as tenants by the entireties and have held the property in that manner ever since. With this act the property became marital property by reason of a gift, each to the other. After the acquisition of the realty as entirety property and prior to the separation, the parties spent a total of $42,360.00 on renovations to the residence situated on the 1 acre. They raised this amount by means of bank loans. The appellee applied $27,813.00 to the reduction of the loan, having acquired this money by way of sale of her inherited stocks.
The question now arises as to the comparative interests in the real property of the parties. It has long been held in the State of Maryland that payments during the marriage by one spouse toward the purchase or improvement of real property owned as tenants by the entireties are presumed to be gifts to the other spouse. Klavans v. Klavans, 275 Md. 423, 427, 341 A.2d 411, 416 (1975); McCally v. McCally, 250 Md. 541, 545, 243 A.2d 538, 541 (1968); Anderson v. Anderson, 215 Md. 483, 488-89, 138 A.2d 880, 883 (1958); Brell v. Brell, 143 Md. 443, 450, 122 A. 635, 637 (1923); Reed v. Reed, 109 Md. 690, 692-93, 72 A. 414, 415 (1909); Young v. Young, 37 Md. App. 211, 220, 376 A.2d 1151, 1157 (1977); DiTommasi v. DiTommasi, 27 Md. App. 241, 255, 340 A.2d 341, 349 (1975); Klavans v. Klavans, 23 Md. App. 144, 146, 326 A.2d 26, 27 (1974). In this record we find nothing to rebut this presumption and hence the moneys put into the property towards purchase and renovations by the appellee should be considered as gifts to the appellant. In fact we are told that the parties do not dispute that each owns an undivided one-half interest in the property. Consequently, we arrive at the determination that the trial court erred in its division of the real property of the parties, which we assume was done pursuant to subsection 3-6A-04. We conclude that each owns an undivided one-half interest as tenants in common.
Had the chancellor wanted to take into consideration the contributions of the parties, as is apparent in his 75-25% award of the proceeds of the sale of the property, he could *97 have done so by a monetary award under 3-6A-05 (b). This, however, requires the determination of the value of the marital property and the grant of a specific amount. While it is not inconceivable that this might have ultimately forced the sale of the real property to satisfy the monetary award, the circumstances of this case do not accommodate the accomplishment under 3-6A-04 of the court's manifest goal of adjusting the equities and rights of the parties.
Although the court was correct in its holding that the property in question should be classified as marital property under our class dialect, his determination of the ownership interest was incorrect and we shall remand for disposition under Courts and Judicial Proceedings Article of the Annotated Code of Maryland, Section 3-6A-04 in accordance with this opinion.
Reversed and remanded.
Costs to be paid by the appellee.
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286 S.W.2d 194 (1956)
A. A. WEHMEYER, Appellant,
v.
Louis DOMINGUES, Appellee.
No. 12906.
Court of Civil Appeals of Texas, San Antonio.
January 18, 1956.
*195 L. W. Pollard, Kerrville, W. W. Palmer, San Antonio, for appellant.
Robert I. Wilson, A. P. Allison, Kerrville, for appellee.
W. O. MURRAY, Chief Justice.
On or about July 10, 1954, appellee, Louis Domingues, was the holder of a promissory vendor's and deed of trust lien note, signed by A. A. Wehmeyer and wife, dated December 15, 1950, for the principal sum of $5,000, payable in quarterly installments of $150 each, including interest, providing for 10% attorney's fees if placed in the hands of an attorney for collection, and secured by liens on a parcel of land described as the southwest 25 feet of Lot 10, and the northeast 40 feet of Lot 11, in Block 5 of the A. L. Lewis 3rd Addition to the City of Kerrville, in Kerr County, Texas.
On July 10, 1954, Joe Burkett, Jr., Esq., as substitute trustee, posted notices to sell the land, under the power of sale contained in the deed of trust, for the full amount of unpaid principal, interest and attorney's fees as provided for in the note. Copies of this notice were mailed on July 11, 1954, to appellant, A. A. Wehmeyer, Alamo Construction Company, which had assumed the payment of the note, and George Scruggs, president of such company.
On July 31, 1954, A. A. Wehmeyer filed Cause No. 4118 against Louis Domingues and the substitute trustee, seeking a temporary injunction restraining the substitute trustee from selling the property because of an alleged oral agreement of extension of the time of payment of the note until July 15, 1954. This temporary injunction was granted.
On August 16, 1954, Louis Domingues instituted Cause No. 4127 in the District Court of Kerr County, seeking judgment on the note for the full amount of principal and interest due, together with attorney's fees, and for foreclosure of the vendor's lien and deed of trust lien. The two causes were consolidated and tried together and this appeal is from the final judgment in the consolidated cases.
The trial was to a jury but, upon motion, judgment was rendered for Louis Domingues, non obstante veredicto, for the full amount of principal, interest and attorney's fees provided for in said note and foreclosure of the vendor's and deed of trust lien upon the above described property. A. A. Wehmeyer has prosecuted this appeal.
Appellant's first contention is that appellee, Louis Domingues, the holder of the note and beneficiary of the deed of trust, had failed to give appellant, A. A. Wehmeyer, the maker of the note and grantor in the deed of trust, or the Alamo Construction Company, which had assumed the payment of the note, any notice that he had exercised the option contained in the note to accelerate the maturity of the note, and that in the absence of such notice he was unauthorized to accelerate the maturity of the entire principal of the note. We overrule this contention. The record shows that on July 10, 1954, the substitute trustee had posted notices that the property would be sold under the power of sale contained in the deed of trust to satisfy the entire principal, interest and attorney's fees provided for in the note and that copies of this notice had been mailed not only to A. A. Wehmeyer, the original maker of the note, but also to the Alamo Construction Company, which had assumed the payment of the note, and George Scruggs, the president of such company. The suit to foreclose *196 was not filed by appellee until August 16, 1954. These copies of the notice of the sale were sufficient to put appellant on notice that appellee had accelerated the date of the maturity of the principal of the note and was demanding payment of the entire principal, interest and attorney's fees provided for in the note. Amuny v. Seaboard Bank & Trust Co., Tex.Com.App., 23 S.W.2d 287; Iden v. Lippard, Tex.Civ. App., 166 S.W.2d 185.
Appellant next contends that the court erred in disregarding the findings of the jury and rendering judgment in appellee's favor because the jury found that appellee entered into an unconditional and unqualified agreement to extent the time of payment of the note until July 15, 1954. There is no evidence to sustain this jury finding. The oral agreement, if any, was negotiated between appellee and George Scruggs as agent for appellant. The testimony of Scruggs shows that the agreement was conditional. Scruggs plainly stated that if he did not settle his differences with appellant he would make the note current by July 15, 1954. The promise to pay was conditional and therefore not a valid extension agreement. 6 Tex.Jur. 826, § 186; G. M. & J. W. Magill v. Young, Tex.Civ. App., 153 S.W. 184; City Loan & Trust Co. v. Sterner, 57 Tex.Civ.App. 517, 124 S.W. 207. The alleged agreement was not that he would pay the note on July 15, 1954, but by that date, which is equivalent to an agreement to pay on or before. Such extension agreements are held to be without consideration and therefore null and void. Austin Real Estate & Abstract Co. v. Bahn, 87 Tex. 582, 30 S.W. 430; Universal Credit Co. v. Cole, Tex.Civ.App., 146 S.W.2d 222; Phoenix Furniture Co. v. McCracken, Tex.Civ.App., 3 S.W.2d 545.
There is another reason why this alleged extension agreement is of no avail to appellant. According to the testimony offered by appellant the extension was granted upon the condition that the note be made current by July 15, 1954, which was admittedly not done. Appellant, having admittedly violated the agreement, is not now in any position to claim the benefits of such agreements. Appellant attempts to justify his breach by saying that appellee breached the agreement first, by posting notices of sale on July 10, 1954. If this be true, it might justify appellant in disregarding the agreement, but if he expects to insist upon performance of the contract he must not breach it himself. He must perform his obligations under the agreement before he can insist upon performance by appellee. 10 Tex.Jur., Sec. 262, p. 451; Wellington Railroad Committee v. Crawford, Tex. Com.App., 216 S.W. 151.
Appellant on July 31, 1954, tendered to appellee the sum of $4,457.02. This amount admittedly did not cover the attorney's fees contended for by appellee. The evidence shows that, prior to the negotiations for an extension of time of payment, on July 8, 1954, certain installments on the note were past due and unpaid, and appellee had already placed the note in the hands of his attorney for collection and so informed Scruggs at the time. The exact provision in the note as to attorney's fees is as follows:
"In the event of default and this note is placed in the hands of an attorney for collection, * * * then we promise to pay Ten (10) percent of the amount of the principal and interest then due thereon as attorney's fees."
Thus, all that is required for attorney's fees to become due is that default be made and the note thereafter placed in the hands of an attorney for collection. It appears that, even before the negotiations for an extension of time of payment had begun, the attorney's fees had already become due and payable, therefore the tender made on July 31, 1954, was insufficient to pay the amount of principal, interest and attorney's fees due at that time on the note.
There is a further contention that the amount tendered lacked $58 of being sufficient to cover the amount of principal and interest due, but as appellant may have been unintentionally misled by appellee as to the exact amount of principal and interest *197 due we do not regard this shortage of $58 in the tender as significant, but base our holding that the tender was insufficient upon the failure of appellant to tender a sum sufficient to cover attorney's fees then due on the note. It is apparent that appellant intentionally did not tender any sum to cover attorney's fees.
Accordingly, the judgment of the trial court is affirmed.
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767 F.Supp. 72 (1991)
Vincent F. COSTELLO, Plaintiff,
v.
Thomas A. McENERY, in his official and individual capacities; Lucius J. Riccio, in his official capacity as Commissioner of the Department of Transportation of the City of New York; The Parking Violations Bureau of the City of New York; The Department of Transportation of the City of New York; and the City of New York, Defendants.
No. 91 Civ. 3475 (PKL).
United States District Court, S.D. New York.
July 16, 1991.
*73 Nicholas J. Pappas, New York City, for plaintiff.
Victor A. Kovner, Corp. Counsel for City of New York, New York City (Rebecca Northey, of counsel), for defendants.
ORDER AND OPINION
LEISURE, District Judge:
This is an action brought pursuant to 42 U.S.C. § 1983 asserting, in essence, that plaintiff was transferred from one job to another in retaliation for public and private comments plaintiff made regarding purportedly unethical and illegal practices at the New York City Parking Violations Bureau. Plaintiff claims that his rights under the first amendment of the United States Constitution have thereby been violated. Plaintiff has now moved for a preliminary injunction, seeking the following interim relief:[1]
1) reinstatement of plaintiff to his former position as Director of Operations at the Parking Violations Bureau;
2) discontinuance of adverse personnel actions against plaintiff, including refusing or failing to assign plaintiff job duties commensurate with his seniority and managerial rank;
3) continued payment to plaintiff of his present salary, and maintenance of plaintiff's present managerial rank; and
4) a bar on defendants' reporting adverse personnel actions to any potential future employer of plaintiff.
For the reasons set forth below, plaintiff's motion for a preliminary injunction is denied.[2]
*74 Background
Plaintiff Vincent F. Costello was employed by the City of New York as Director of the Operations Division of the Parking Violations Bureau ("PVB"), beginning in June 1980. The function of the Operations Division of the PVB is to process parking violation summonses, including, inter alia, the resolution of public inquiries and complaints, the correction of electronic and manual files, and the processing of refund claims. Plaintiff was responsible for management of the Operations Division.
Defendant Thomas A. McEnery ("McEnery") was at all relevant times Deputy Commissioner of the New York City Department of Transportation ("DOT"), and Director of the PVB, a bureau of DOT. Defendant Lucius J. Riccio was at all relevant time Commissioner of DOT. The remaining defendants are the PVB, DOT, and the City of New York.
In early 1988, plaintiff began voicing numerous criticisms of what he claimed to be unethical or illegal PVB policies and operating methods. Specifically, plaintiff objected to: the reprogramming of the PVB computer in such a manner as to cause the computer inaccurately to record parking violations; PVB's failure to make a warranty claim with respect to the inadequate performance of a computer PVB had purchased; PVB's failure to notify citizens of overpayments of fines and interest, and to refund such overpayments; certain improper practices involving city marshals' collection of judgments; PVB's "false threats" of debt collection actions against parking violators with small outstanding judgments; PVB's instructions to administrative law judges to find persons guilty of parking violations in cases in which the PVB could not establish a prima facie case; and PVB's use of an inadequate number of private collection agencies. These criticisms were addressed to defendant McEnery, as well as to others within the PVB, from early 1988 through April 1990.
On May 14, 1990, plaintiff and McEnery attended a dinner given by the association of PVB's administrative law judges, at which plaintiff was presented with an award as "Administrator of the Year." In his acceptance speech, plaintiff restated some of his prior criticisms of PVB policies and practices. At a meeting on May 24, 1991, McEnery informed plaintiff that he was transferring plaintiff to the recently-created position of Director of Quality Control and Project Implementation, and that plaintiff would remain at the same level of seniority and salary. Plaintiff refused to accept the new position.
Defendants claim that plaintiff was transferred because he was disruptive and had difficulties cooperating with his peers and supervisors, had become rigid and isolated as Director of the Operations Division, and because McEnery believes that managers tend to become "stale" if they remain in one job for too long. McEnery also asserts that the new position had been created prior to plaintiff's May 14 speech, and that his transfer of plaintiff was in no way in retaliation for the criticisms of the PVB plaintiff made either in that speech or prior thereto.
Plaintiff, in contrast, claims that McEnery refusedand continues to refuseto describe plaintiff's new responsibilities, or the size of his staff. He also asserts that McEnery's stated reasons for the transfer are merely pretextual, and that McEnery's true reason for removing him from the position of Director of Operations was to retaliate against plaintiff for his criticisms of the PVB. Finally, plaintiff claims that no PVB manager has been removed in the past ten years merely for the sake of change.
On May 25, 1991, McEnery asked plaintiff to reconsider his refusal to accept the new position, and informed plaintiff that he would remove plaintiff from his existing position regardless of whether plaintiff took the new position. Plaintiff did not accept the new position, and, effective June 1, 1990, he was removed from the Director of Operations position, and shortly thereafter assigned to DOT's Legal Affairs Division at the same level of pay. Plaintiff claims that his duties in the Legal Affairs Division have been generally undefined, and that to the extent he has done work it *75 has been of a menial nature. McEnery, however, states that the assignment to the Legal Affairs Division was meant to be temporary until another position could be located, that plaintiff has been encouraged to apply for several other managerial positions, and that plaintiff has refused to consider any of them.[3] Plaintiff disputes this, asserting that he has merely requested more information regarding the positions.
On or about May 30, 1990, plaintiff reported his transfer to New York City Council President Andrew Stein. By letter dated June 26, 1990, Mr. Stein requested that the New York City Department of Investigation ("DOI") conduct an investigation of the transfer to determine whether it violated the so-called "whistleblower" law, Local Law of the City of New York 1984, No. 10. DOI thereafter carried out a lengthy investigation of plaintiff's transfer, and, on June 11, 1991, issued a thorough report, finding that plaintiff was reassigned not because of "whistleblowing" activities, but because he could no longer work constructively with PVB management.
Plaintiff commenced this § 1983 action on May 22, 1991, nearly one year after his transfer, and shortly thereafter moved for preliminary injunctive relief. Plaintiff claims that his transfer was in fact in retaliation for his speaking out on matters of public concern, and thus defendants have violated, and continue to violate, his rights under the first amendment. In addition, plaintiff claims that by reassigning him, defendants have damaged his honor, integrity and reputation, and caused him pain and suffering. Finally, plaintiff asserts that other PVB employees have informed him that they are now fearful of reporting any unethical or illegal conduct at PVB because they believe PVB officials will retaliate against them. Plaintiff thus seeks injunctive relief on the additional ground that the first amendment rights of those other PVB employees are also being infringed.[4] On July 11, 1991, an evidentiary hearing was held on plaintiff's motion for a preliminary injunction. That motion is now before the Court.
Discussion
"[A] preliminary injunction is an extraordinary remedy that should not be granted as a routine matter." JSG Trading Corp. v. Tray-Wrap, Inc., 917 F.2d 75, 80 (2d Cir.1990); see also Patton v. Dole, 806 F.2d 24, 28 (2d Cir.1986). "A party seeking a preliminary injunction must demonstrate that it is likely to suffer possible irreparable harm if the requested relief is not granted and `either (1) a likelihood of success on the merits of its case or (2) sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly in its favor.'" Citibank, N.A. v. Nyland (CF8) Ltd., 839 F.2d 93, 97 (2d Cir.1988) (quoting Coca-Cola Co. v. Tropicana Products, Inc., 690 F.2d 312, 314-15 (2d Cir.1982)). Indeed, where, as here, the relief sought is in part mandatory, and not merely prohibitive, a "substantial" likelihood of success on the merits has been required. See Securities and Exchange Commission v. Unifund SAL, 910 F.2d 1028, 1039 (2d Cir.1990); Abdul Wali v. Coughlin, 754 F.2d 1015, 1026 (2d Cir. 1985).[5]
*76 The Second Circuit has repeatedly stressed the importance of a showing of irreparable harm by the movant. "An applicant for a preliminary injunction `must show that it is likely to suffer irreparable harm if equitable relief is denied.' Thus, a mere possibility of irreparable harm is insufficient to justify the drastic remedy of a preliminary injunction." Borey v. National Union Fire Insurance Company of Pittsburgh, 934 F.2d 30, 33-34 (2d Cir. 1991) (quoting JSG Trading Corp., supra, 917 F.2d at 79) (emphasis in original). "[I]nequitable conduct alone cannot justify the entry of a preliminary injunction. The linchpin of such interim relief is that threatened irreparable harm will be prevented by that injunction." Buckingham Corp. v. Karp, 762 F.2d 257, 262 (2d Cir. 1985). "`Perhaps the single most important prerequisite for the issuance of a preliminary injunction is a demonstration that if it is not granted the applicant is likely to suffer irreparable harm before a decision on the merits can be rendered.'" Citibank, N.A. v. Citytrust, 756 F.2d 273, 275 (2d Cir.1985) (quoting Bell & Howell: Mamiya Co. v. Masel Supply Corp., 719 F.2d 42, 45 (2d Cir.1983)); Mulligan, Forward, Preliminary Injunction in the Second Circuit, 43 Brooklyn L. Rev. 831, 833 (1977) (showing of irreparable harm is fundamental and traditional requirement in any action where preliminary injunctive relief is sought).
In two recent cases similar to the case at bar, the Second Circuit has reversed the district court's granting of preliminary injunctive relief. In American Postal Workers Union v. United States Postal Service, 766 F.2d 715 (2d Cir.1985), cert. denied, 475 U.S. 1046, 106 S.Ct. 1262, 89 L.Ed.2d 572 (1986), a postal workers union local president had written a letter to a major customer of the New London Connecticut Post Office, stating that recent personnel cuts at the post office had resulted in serious delays in mail delivery. The Postal Service conducted an investigation and found that the president's letter constituted "conduct prejudicial to the interest of the Postal Service," and thereafter informed the presidentwho was also a postal employee that he would be fired in thirty days. The president, as well as his union, then moved for a preliminary injunction barring his discharge pending the outcome of a grievance procedure. The district court granted the injunction, holding that the potentially chilling effect on the first amendment rights of the president and others in the union constituted irreparable harm sufficient to warrant injunctive relief.
On appeal, the Second Circuit reversed, finding that irreparable harm had not been shown. American Postal Workers, supra, 766 F.2d at 722. The Court noted first that "[w]ith regard to irreparable harm, in Sampson v. Murray, 415 U.S. 61, 91-92, 94 S.Ct. 937, 953-54, 39 L.Ed.2d 166 (1974), the Supreme Court articulated a particularly stringent standard for irreparable injury in government personnel cases.... According to the Sampson Court, except in a `genuinely extraordinary situation,' irreparable harm is not shown in employee discharge cases simply by a showing of financial distress or difficulties in obtaining other employment." American Postal Workers, supra, 766 F.2d at 721 (quoting Sampson, supra, 415 U.S. at 92 n. 68, 94 S.Ct. at 953 n. 68).[6]
The Second Circuit then turned to the issue of the chilling of first amendment rights, noting that such chilling would constitute irreparable injury, American Postal Workers, supra, 766 F.2d at 721, and finding that the president's letter implicated first amendment rights because it addressed a matter of public concern. American Postal Workers, supra, 766 F.2d at 721-22. However, the Court held, irreparable harm had not in fact been demonstrated, stating that "appellees herein have *77 failed to allege a clearcut infringement of first amendment rights which, absent preliminary injunctive relief, either has occurred or will occur in the future." American Postal Workers, supra, 766 F.2d at 722. "More importantly," the Court went on to explain,
we fail to understand how a chilling of the right to speak or associate could logically be thawed by the entry of an interim injunction, since the theoretical chilling of protected speech and union activities stems not from the interim discharge, but from the threat of permanent discharge, which is not vitiated by an interim injunction.
American Postal Workers, supra, 766 F.2d at 722.
The Second Circuit reaffirmed this holding in Savage v. Gorski, 850 F.2d 64 (2d Cir.1988), where the Court reversed the district court's granting of a preliminary injunction that barred the discharge of public employees on the basis of their political beliefs. Citing and quoting American Postal Workers at length, the Second Circuit reiterated that
[s]ince the source of the `chill' is the permanent loss of appellees' jobs, retaining those positions pending resolution of the case will do nothing to abate that effect.... Since reinstatement and money damages could make appellees whole for any loss suffered during this period, their injury is plainly reparable and appellees have not demonstrated the type of harm entitling them to injunctive relief.
Savage, supra, 850 F.2d at 67-68; see also Rao v. New York Health and Hospitals Corp., 1990 WL 201662, 1990 U.S. Dist. LEXIS 16455 (S.D.N.Y. Dec. 6, 1990) (Leval, J.), motion for reargument denied, 1991 WL 64455, 1991 U.S. Dist. LEXIS 4865 (S.D.N.Y. April 12, 1991) (denying preliminary injunction in retaliatory discharge case alleging infringement of first amendment rights, noting that "the Second Circuit has held that a preliminary injunction would not cure any irreparable harm.") (citing Savage, supra, 850 F.2d at 67-68, and American Postal Workers, supra, 766 F.2d at 722).
The logic underlying the holdings in Savage and American Postal Workers is equally applicable in the case at bar, and requires denial of plaintiff's motion for preliminary injunctive relief. First, plaintiff repeatedly admits that his speech has not been chilled, see Memorandum of Law in Support of Plaintiff's Motion for a Preliminary Injunction at 16; Reply Memorandum in Support of Plaintiff's Motion for a Preliminary Injunction at 9, and the evidence of chilling of other PVB employees is unpersuasive and of little or no relevance.[7] Moreover, because the source of any "chill" on the first amendment rights of either plaintiff or other PVB employees is the permanent loss of plaintiff's job, the interim injunctive relief plaintiff seeks in his instant motion will do nothing to thaw that chill. See Savage, supra, 850 F.2d at 67-68; American Postal Workers, supra, 766 F.2d at 722; Rao, supra, 1991 WL 64455, 1991 U.S. Dist LEXIS 4865.[8]
Plaintiff attempts to distinguish the instant case from Savage and American Postal Workers by arguing that those cases involved the indirect infringement of first amendment rights, whereas in the present action plaintiff's right to freedom of speech is being directly violated. Plaintiff then asks this Court to presume irreparable harm. However, plaintiff is incorrect when he claims that the alleged restriction on his first amendment rights is a direct one. Plaintiff isas he has conceded free to speak on issues of concern to him. The Second Circuit cases cited by plaintiff *78 involved direct infringement of first amendment rights, such as the denial of permits to religious organizations for use of school premises, Deeper Life Christian Fellowship, Inc. v. Board of Education of the City of New York, 852 F.2d 676, 679 (2d Cir.1988), an ordinance prohibiting topless dancing, Salem Inn, Inc. v. Frank, 501 F.2d 18, 21 (2d Cir.1974), aff'd in part, rev'd in part, 422 U.S. 922, 95 S.Ct. 2561, 45 L.Ed.2d 648 (1975), and a rule prohibiting the solicitation of funds in schools, Katz v. McAulay, 438 F.2d 1058, 1060 n. 3 (2d Cir.1971), cert. denied, 405 U.S. 933, 92 S.Ct. 930, 30 L.Ed.2d 809 (1972). These cases are, therefore, clearly inapposite to the case at bar.[9]
Finally, a related consideration is plaintiff's considerable delay in seeking injunctive relief. The Second Circuit has observed that "[p]reliminary injunctions are generally granted under the theory that there is an urgent need for speedy action to protect the plaintiffs' rights. Delay in seeking enforcement of those rights, however, tends to indicate at least a reduced need for such drastic, speedy action.... Although a particular period of delay may not rise to the level of laches and thereby bar a permanent injunction, it may still indicate an absence of the kind of irreparable harm required to support a preliminary injunction." Citibank, N.A., supra, 756 F.2d at 276. Shortly after its decision in Citibank, N.A., the Second Circuit further held in Majorica, S.A. v. R.H. Macy & Co., Inc., 762 F.2d 7, 8 (2d Cir.1985), that "[l]ack of diligence, standing alone, may ... preclude the granting of preliminary injunctive relief, because it goes primarily to the issue of irreparable harm...." See also Borey, supra, 934 F.2d at 35 (delay in seeking preliminary injunction belies claim of irreparable harm); Abish v. Northwestern National Insurance Co., 924 F.2d 448, 454 (2d Cir.1991) (same); Railroad P.B.A. of the State of New York, Inc. v. Metro-North Commuter Railroad, 699 F.Supp. 40, 43 (S.D.N.Y.1988) (delay in seeking enforcement of rights undercuts argument that injunctive relief is necessary); Manhattan State Citizens' Group, Inc. v. Bass, 524 F.Supp. 1270, 1275 (S.D.N.Y.1981) (delay in seeking preliminary injunction "militates against the claim of irreparable injury and may be ground for barring injunctive relief."). These conclusions are consistent with the ancient maxim that "equity aids the vigilant, not those who slumber on their rights." 11 Wright & Miller, Federal Practice and Procedure § 2946 at 417 (1973).
In the instant case, plaintiff was informed of his discharge on May 24, 1990, and that discharge was made effective June 1, 1990. Plaintiff did not commence this action, however, until May 22, 1991, almost one year later. This delay in seeking relief bolsters the Court's conclusion that there has been an insufficient showing of irreparable harm to justify issuance of a preliminary injunction.[10]
In the absence of irreparable harm, "which constitutes an absolute requirement for an award of injunctive relief," American Postal Workers, supra, 766 F.2d at 723, the Court need not consider the further requirements for the granting of a preliminary injunction.
Conclusion
For the reasons stated above, plaintiff's motion for a preliminary injunction is denied.
SO ORDERED.
NOTES
[1] Plaintiff did not seek a temporary restraining order before moving for a preliminary injunction.
[2] This Order and Opinion shall constitute the Court's findings of facts and conclusions of law, as required by Fed.R.Civ.P. 52(a) and 65(d). These findings are based solely on the evidence now before the Court, and are only controlling with respect to decision of the instant motion.
[3] The New York City Department of Personnel ("DOP"), in response to a letter from plaintiff's counsel, conducted an investigation of plaintiff's reassignment. In September 1990, DOP concluded that because plaintiff's transfer was a lateral managerial move, the reassignment could not be viewed as a disciplinary action.
[4] In support of this final claim, plaintiff's counsel has provided a declaration purporting to summarize affidavits of eight other PVB employeesnone of whom is a plaintiff in this actionwho allegedly fall into this category. According to the declaration, the affiants do not want their identities revealed, for fear of retaliation. However, the alleged chilling effect on persons who are neither plaintiffs in the instant case nor represented in any way by the person who is the plaintiff, has tenuous relevance at best to plaintiff's motion. Moreover, even if the facts contained in plaintiff's counsel's declaration are assumed to be true, they would not support granting the injunctive relief plaintiff seeks, for the reasons stated herein.
[5] The requirement of irreparable harm remains the same, however, whether the relief sought is mandatory or prohibitive. See Abdul Wali, supra, 754 F.2d at 1026. Because plaintiff's motion should be denied on the basis of failure to show irreparable harm, it is, in the final analysis, of no consequence whether the relief sought is deemed to be mandatory or prohibitive.
[6] The Sampson Court also held that, in general, damage to reputation "falls far short of the type of irreparable injury which is a necessary predicate to the issuance of a temporary injunction in this type of case." Sampson, supra, 415 U.S. at 91-92 and n. 68, 94 S.Ct. at 953 and n. 68.
[7] See supra note 4. PVB Administrative Law Judge Harold Berman testified that he was concerned about the possible "negative consequences" for his career at PVB stemming from his appearance at the hearing. However, he never stated that this concern was in any manner connected to plaintiff's transfer; indeed it could just as well be due to the ordinary reluctance of any employee to take an action that he believes might be perceived by his employer as antagonistic to the employer's interests.
[8] This conclusion is, in fact, reinforced by the fact that the eight anonymous PVB employees are unwilling to make their affidavits public.
[9] Plaintiff's reliance on Elrod v. Burns, 427 U.S. 347, 96 S.Ct. 2673, 49 L.Ed.2d 547 (1976) is also misplaced. In that case, a three-justice plurality of the Supreme Court found irreparable harm where "[i]t [was] clear ... that First Amendment interests were either threatened or in fact being impaired at the time relief was sought." Elrod, supra, 427 U.S. at 373, 96 S.Ct. at 2689. Such is not the case in the present action, and for that reason, among others, the Second Circuit distinguished Elrod in both Savage, 850 F.2d at 67, and American Postal Workers, 766 F.2d at 722.
[10] The pendency of the DOI investigation during much of this period is irrelevant to this analysis.
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10-30-2013
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https://www.courtlistener.com/api/rest/v3/opinions/1520970/
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436 A.2d 844 (1981)
STATE of Maine
v.
Leland B. PHILBRICK.
Supreme Judicial Court of Maine.
Argued January 20, 1981.
Decided October 27, 1981.
*847 Charles K. Leadbetter (orally), William R. Stokes, Wayne S. Moss, Asst. Attys. Gen., Augusta, for plaintiff.
Smith & Elliott, P.A., Terrence D. Garmey (orally), Stephen R. Lamson, Karen B. Lovell, Peter W. Schroeter, Saco, Willard, Kellis & Wood, George F. Wood (orally), Sanford, for defendant.
Before WERNICK,[*] GODFREY, NICHOLS, ROBERTS and CARTER, JJ., and DUFRESNE, A.R.J.
DUFRESNE, Active Retired Justice.
Indicted September 8, 1977 on a single count of criminal homicide in the 2nd degree (17-A M.R.S.A. § 202(1)(A) (Supp. 1976),[1] the defendant, Leland Philbrick, was originally tried for and adjudged guilty of that crime by a Superior Court jury in York County in January, 1978. On appeal his conviction was set aside for error of the presiding justice in refusing to give the jury Philbrick's requested instruction that the defendant would be justified in using deadly force to repel a forcible sexual contact, if he reasonably believed that such a contact was about to take place and reasonably believed that the use of deadly force was necessary to repel it. State v. Philbrick, Me., 402 A.2d 59, 61 (1979); see 17-A M.R.S.A. § 108(2)(A)(2).
Tried a second time on the reference indictment in October 1979 before another jury of the Superior Court, York County, Philbrick was again convicted of criminal homicide in the 2nd degree. From the ensuing judgment entered on this jury verdict, the defendant brings his present appeal. We sustain the appeal and vacate the judgment.
Miranda violations
Prior to trial, the defendant presented the court with a motion to suppress all statements that he made to the Saco police officers and to Officers Letarte and Greeley of the Maine State Police, on the ground that all these statements were obtained as the result of custodial interrogation in violation of the principles of Miranda v. Arizona, 384 U.S. 436, 86 S.Ct. 1602, 16 L.Ed.2d 694 (1966). At the suppression hearing, the State produced the testimony of Officer Charles Labonte of the Saco Police Department and Detective Roger Letarte of the Maine State Police. Although full development of the issue would have called for the testimony of Officers Dentico, Demarco and Greeley, the parties waived the same because of its stated repetitious character. We cannot approve such practice, especially in cases of such a serious nature as criminal homicides. At trial, however, counsel's objections to all five officers' testimony respecting Philbrick's particular statements to each of them were explicitly noted by the court, although overruled. In denying the defendant's motion to suppress, the court ruled in general terms that the initial contact between the police and the defendant Philbrick "involved the greater possibility that he [Philbrick] was a victim," that Miranda warnings were timely given and that the existing influences were not so coercive "as to interfere with the Miranda context."
A
The facts leading to the shooting of the deceased, Charles M. Porterfield, sufficiently appear in our previous opinion (State v. *848 Philbrick, supra); we need not repeat them at this point. The record shows that, after the incident, one David Fleming was driving toward the scene of the struggle on Smutty Lane Road in Saco, when he was flagged down by the defendant who told him that he thought he had "just killed somebody." On Fleming's suggestion, they set out for the Saco police station, Philbrick on the way blurting out the story of his encounter with Porterfield. At the station, upon observing the defendant covered with blood, with a knife in his left hand, and holding his injured right hand, Officer Labonte, who was in uniform, invited Philbrick to sit down and asked him what happened. The defendant answered:
"I got into a fight. The guy jumped me and took my knife away from me. I think I shot him."
At trial, counsel for the defendant objected to the admissibility of the rest of the conversation between Labonte and Philbrick, for the reason that no Miranda warnings were given by the officer to the defendant at any time, a fact conceded by the State. Over objection, the following colloquy went to the jury.
[Q.] How many times the gun went off?
[A.] Three or four times. I think I killed him.
[Q.] What kind of gun was involved?
[A.] A Charter Arms .44 Bulldog.
[Q.] Was it a rifle or pistol?
[A.] A pistol.
[Q.] How many people involved?
[A.] One.
[Q.] Describe him.
[A.] Five, six. Twenty-two years old and has brown hair.
Officer Labonte testified that Philbrick was not placed under arrest and the interview lasted no more than ten minutes. We find no error in the ruling below.
Miranda requires that, when an individual is taken into custody or otherwise deprived of his freedom by law enforcement personnel in any significant way and is subjected to questioning, the following procedural safeguards must be employed to protect the individual's privilege against self-incrimination.
"He must be warned prior to any questioning that he has the right to remain silent, that anything he says can be used against him in a court of law, that he has the right to the presence of an attorney, and that if he cannot afford an attorney one will be appointed for him prior to any questioning if he so desires. Opportunity to exercise these rights must be afforded to him throughout the interrogation. After such warnings have been given, and such opportunity afforded him, the individual may knowingly and intelligently waive these rights and agree to answer questions or make a statement. But unless and until such warnings and waiver are demonstrated by the prosecution at trial, no evidence obtained as a result of interrogation can be used against him." Miranda v. Arizona, supra, 384 U.S. at 479, 86 S.Ct. at 1630.
In the absence of such warnings and waiver when required, both exculpatory as well as inculpatory statements are inadmissible against the accused. As stated in Miranda, supra, 384 U.S. at 477, 86 S.Ct. at 1629, statements meant to be exculpatory by the defendant might be used by the prosecution to impeach his testimony at trial or to discredit statements given under interrogation and thus could help prove guilt by implication.
Miranda warnings are mandated only where a suspect is both in custody and subjected to interrogation as these terms are understood under the Miranda doctrine. State v. Cochran, Me., 425 A.2d 999, 1001 (1981); State v. Preston, Me., 411 A.2d 402, 405 (1980). See State v. Bleyl, 435 A.2d 1349, 1357 n.5. In Rhode Island v. Innis, 446 U.S. 291, 299-300, 100 S.Ct. 1682, 1689, 64 L.Ed.2d 297, 306-307 (1980), interrogation in the sense of Miranda was extended to include, besides express questioning by the police, any equivalent indirect questioning or suggesting which the police should know is reasonably likely to elicit an incriminating response by the suspect.
*849 Volunteered statements of any kind, on the other hand, are not within the Miranda rule. Miranda v. Arizona, supra, 384 U.S. at 478, 86 S.Ct. at 1630. And we must distinguish between statements obtained as part of a "general investigation" and those secured in "custodial interrogation." The facts of each particular case must be closely examined to determine whether the line between the two has been crossed. State v. Thurlow, Me., 434 A.2d 1 (1981); State v. Preston, Me., 411 A.2d 402, 406 (1980); State v. Price, Me., 406 A.2d 883, 885 (1979).
There was nothing improper in Officer Labonte's inquiry of the defendant what happened? Such a neutral and impersonal request for information at that initial stage qualified as a general on-the-scene questioning which police officers have a duty to carry on in their conventional investigation of criminal incidents or activities. At the time, Officer Labonte knew nothing about the circumstances under which Philbrick had received his injury, let alone that a possible crime had been committed by him. A noncustodial interrogation setting is not converted into a custodial interrogation situation merely because the questioning took place in a coercive environment such as in a police station or by a police officer. Psychological pressure emanating from an officer's authority or from the police station atmosphere alone is not sufficient under Miranda to create the "inherently coercive" environment triggering the application of the warning alert which the Miranda case has established as necessary for the protection of the constitutional privilege against self-incrimination. State v. Craney, Me., 381 A.2d 630, 632 (1978); State v. Lewis, Me., 373 A.2d 603, 608 (1977).
The follow-up questions by Officer Labonte for the purpose of clarifying the ambiguous situation did not constitute the critical police interrogation which Miranda contemplates. Questions asked in the wake of an event or occurrence which would naturally invite such an inquiry and which are characterized, as in the instant case, by brevity, neutrality and absence of an intent to elicit a confession or admission do not rise to the level of interrogation in the Miranda sense. State v. Simoneau, Me., 402 A.2d 870, 873-74 (1979).
B
With Officer Labonte's information, the Saco police then knew that deadly force had been used in an encounter in which Philbrick and another person had been involved. Philbrick's statement that the gun went off three or four times and that he thought he had killed his alleged assailant suggested in the least that excessive force may have been used and that the defendant may have committed a serious crime. No question of identity remained. Thus, when Officer Dentico of the Saco Police Department questioned the defendant in the ambulance while on the way to the Webber Hospital in Biddeford, the interrogation took a different aspect. Its effect was to elicit the particulars of the commission of a crime by the defendant. Officer Dentico had been ordered to accompany Philbrick to the hospital, because Officer Labonte at the end of his interview with the defendant undoubtedly suspected that a crime had probably been committed by the defendant. The same is true respecting Saco Police Officer Demarco's interview with the defendant in the emergency room of the Maine Medical Center in Portland shortly thereafter. Both officers were in uniform, but neither gave Miranda warnings to Philbrick at any time. See People v. Clark, 84 Ill.App.3d 637, 40 Ill.Dec. 100, 405 N.E.2d 1192 (1980).
Both officers initiated their respective interrogation of the defendant by asking Philbrick the same question which had already caused the defendant to acknowledge to Officer Labonte that in his confrontation with his alleged assailant in a scuffle on Smutty Lane Road three or four shots had been fired and that he thought he had killed him. Philbrick's acknowledgment to Officer Labonte of his use of probably excessive deadly force resulting in the possible death of his assailant changed the situation from one where a police officer prior to that disclosure might reasonably think that he was speaking to a presumably innocent victim *850 anxious to cooperate with the police in the solution of a violent crime to one where the injured person seeks to justify the probable commission of a homicide by making exculpatory statements. At that point the Saco police had sufficient probable cause to detain the defendant for further investigation concerning the defendant's statement that he thought he had killed his attacker. Any further investigation obviously would focus on his conduct involving the shooting. Following the information obtained by Officer Labonte, Miranda warnings should have been given, if the questioning was to continue or be resumed.
The knowledge of Officer Labonte is to be imputed to both Officers Dentico and Demarco who were working in complete and immediate coordination with Officer Labonte in investigating a probable criminal incident which might involve death of the victim. The collective information of the Saco police at the time these officers launched their respective interrogation of Philbrick must be taken into consideration in determining whether the line between a general investigation and a custodial interrogation has been crossed by the police. See State v. Parkinson, Me., 389 A.2d 1, at 8 (1978) (in relation to probable cause to arrest).
But the State contends that, absent police custody of the defendant at the time of interrogation by the Saco police officers, his statements made without benefit of Miranda warnings are admissible. We agree that police custody is a prerequisite of the Miranda doctrine. State v. Cochran, supra; State v. Preston, supra; State v. Bleyl, supra. The ultimate issue, therefore, is whether Philbrick was in police custody when he made his statements to Officers Dentico and Demarco. It is true that neither officer arrested the defendant. But, notwithstanding the absence of a formal arrest, custody occurs if the suspect is physically deprived of his freedom of action in any significant way or is led to believe, as a reasonable person, that he is so deprived.
In State v. Thurlow, supra, this Court adopted the objective reasonable-person-perspective test as the proper standard for determining the question of custody for purposes of the Miranda rule.
In State v. Bleyl, supra, this Court held that the State bears the burden of disproving by the fair preponderance of the evidence the existence of a custodial interrogation situation.
The presiding justice in the instant case denied the defendant's motion to suppress his statements to the police and overruled his objections to their admissibility at trial without making specific findings of fact or conclusions of law. However, there is no dispute that the defendant's statements to Officers Dentico and Demarco were made by reason of and under police interrogation. Thus, we must conclude that the presiding justice's ruling on admissibility of these statements was based on an implied finding that the defendant was not in custody at the time. We hold that the record before us does not provide rational support for a finding by the preponderance of the evidence that Philbrick was not in custody during interrogation by Officers Dentico and Demarco. A reasonable person in the position of Philbrick, who had voluntarily submitted his person to the Saco police, thinking that he had killed a man, and who, after his explanation of the event at the station, was rushed to Webber Hospital with a police officer at his side probing the particulars of the scuffle, followed by questioning from a State police officer at that hospital, to be later transported to the Maine Medical Center, again with a police officer present who once more questioned him in the emergency room of that hospital regarding the details of the fight, would reasonably have felt that he was in custody of the police and that his freedom of action was at that point foreclosed. The presiding justice's implied finding to the contrary was clearly erroneous, manifestly derived from a misperception or misapplication of the law.
Conceding the appraisal of credibility of the testimony to the trial justice and giving substantial deference to his implicit findings of ultimate fact and conclusions of law *851 derived from his implied subsidiary findings, nevertheless, we find no rational support for his ultimate conclusion that Philbrick was not in custody when Officers Dentico and Demarco questioned him without Miranda warnings. The following factors so indicate. Philbrick's voluntary account to Officer Labonte of his encounter with Porterfield focused the investigation thereafter on the defendant's own conduct in the altercation; although the officers did not display aggressive action toward him, their continuing presence after his departure from the police station in the small confines of an ambulance or hospital emergency room would suggest a coercive impact of physical police constraint or in the least have a psychological potential on Philbrick for thinking his freedom of action was gone; the defendant was seriously injured, either attached to an ambulance stretcher or confined to a hospital bed awaiting surgical treatment or recuperative therapy; he was missing his glasses without which he was legally blind; he had no friends or family to boost his morale or to whom he could turn for advice; the defendant's physical condition effectively precluded him from leaving the scene of his interrogation or getting away from the police. Police officers cannot take advantage of a coercive situation which limits an accused's freedom of action and then proceed to interrogate him without proper Miranda admonitions. See Scales v. State, 64 Wis.2d 485, 219 N.W.2d 286, 291 (1974).
Under all the circumstances of this case, a reasonable person would receive the impression that the defendant was being forcibly detained, notwithstanding he was not formally arrested, where the police did absolutely nothing to disabuse his mind of any inner feeling of being in police custody which the totality of the factual situation would naturally generate. The use of Philbrick's statements obtained by Officers Dentico and Demarco without the required Miranda warnings was a violation of his Fifth Amendment privilege against self-incrimination.[2]
C
Detective Letarte of the Maine State Police interviewed the defendant in the emergency room of Webber Hospital at 1:15 a. m. on July 12, 1977, within the hour after Philbrick had appeared at the Saco police station and given his account of the shooting to Officer Labonte. The Saco police had further obtained a rather full recital of the details of the affair through Officer Dentico who had already questioned the defendant while he was being transported in the ambulance from the station to the hospital; at no time had the defendant been advised of his Miranda rights.
When Letarte reached the hospital, both Porterfield and Philbrick were there. The detective had already been informed that two individuals were involved in a shooting episode, that one had been shot three times, twice in the chest and once in the head, and that the other suffered a gunshot wound to his hand. Captain Nason of the Saco Police Department had so informed him. Dr. Morrison identified to Letarte the injured persons and advised him that he could talk to Philbrick, but not to Porterfield who was then undergoing surgery.
Briefed by the doctor on the seriousness of Porterfield's condition (Porterfield died later that morning), the detective, who was in plain clothes, proceeded to have the defendant relate to him a summary description of what had happened, before advising him of his Miranda rights.
After giving proper Miranda warnings, Letarte then read to Philbrick the written statement compiled to that point and asked him if he had told him the truth. The defendant answered in the affirmative. Thereafter, the interview continued to flesh out more details of the fray.
*852 The record discloses that the Saco police and the State police were coordinating their separate investigation of a possible, if not probable, criminal homicide as a team effort with full cooperation from both agencies. Prior to his interrogation of Philbrick, Letarte knew that the defendant had been interviewed by Officer Dentico minutes before he was permitted to see him; he knew the seriousness of Porterfield's condition and, as a reasonable experienced police officer, he was aware that his investigation should concentrate on the particular conduct of the defendant which from all appearances seemed to indicate that the defendant had committed a serious crime, be it aggravated assault or possibly a criminal homicide; he further must have realized that the defendant was practically locked in the emergency room of Webber Hospital, awaiting treatment for a gunshot wound, with Saco police officers in the wings. Detective Letarte should not have taken advantage of the existing coercive situation in which Philbrick as a reasonable person would perceive he was and then proceed to interrogate him and get the full account of the affray with which he was involved without giving him from the beginning proper Miranda admonitions. With due deference to the implicit finding of the justice below, we believe that the evidence falls short of providing rational support for the conclusion that there was no custodial interrogation. Hence, the statements made by Philbrick to Officer Letarte should have been suppressed in whole.[3]
The belated giving of Miranda warnings by Officer Letarte, as was done in this case, after Philbrick had made a full disclosure of his conduct in a custodial interrogation setting, did not purge his subsequent statements of the taint of the previous illegal interrogation. See Commonwealth v. Ware, 438 Pa. 517, 265 A.2d 790 (1970). Having let the cat out of the bag by making inadmissible statements in a custodial interrogation context, an accused's subsequent statements, even if made under proper Miranda warnings, must be viewed as given under the psychological pressures of having already made those incriminating statements and must be considered as the fruit of the first unlawful interrogation, unless the taint of illegality is so attenuated by time, place or other sufficient motivation as to break the link between the two. In the instant case, the circumstances surrounding the first portion of the Letarte interview which served to invalidate Philbrick's statements given without Miranda warnings carried over to make the second portion of the questioning likewise inadmissible. Here, the second group of statements were procured immediately after the illegally obtained first group of statements, there being a pause in the interview for the sole purpose of giving Miranda warnings prior to the repetition of the prior inadmissible statements. The mere recital of the warnings in the circumstances of this case did not break the natural linkage between the two parts of an otherwise continuous custodial interrogation. See People v. Saiz, Colo., 620 P.2d 15, 19-20 (1980). The State failed to sustain its burden to establish that the second set of statements were not the product of the earlier ones which were illegally obtained. See Harrison v. United States, 392 U.S. 219, 88 S.Ct. 2008, 20 L.Ed.2d 1047 (1968); People v. Founds, Colo., 621 P.2d 325 (1981).
D
Detective Letarte later that same morning at 5:30 a. m. at Maine Medical Center *853 interviewed Philbrick a second time for another half hour, when the full story of the incident was again repeated by the defendant at the officer's urging. Miranda warnings were not renewed at that time. Again, the officer revisited Philbrick, in company of Officer Martin Greeley of the Maine State Police, in the early afternoon of the same day. Letarte on this occasion read to the defendant the Miranda warnings line by line and Philbrick repeated for the benefit of Officer Greeley his version of the shooting as he had previously to the detective and the Saco police, amplifying many areas in the sequence of events. Shortly after 5:00 o'clock that same afternoon, Officer Greeley for the second time, with another member of the State police, again questioned the defendant for nearly one hour to clear up, as he informed Philbrick, certain inconsistencies. Proper Miranda warnings preceded that interview. Finally, Officer Greeley paid the defendant a third visit about one hour later, properly advising him of his rights; the purpose of this call was to find out if Philbrick might not have taken Porterfield's ring which was missing.
The Greeley interviews, though conducted following proper Miranda admonitions, were impregnated with the illegal taint which affected the previous Letarte custodial interrogation. Letarte's presence at the first Greeley conversation served to associate that meeting of state police personnel with the previous one. And nothing happened between the interviews that day to dispel the association which a reasonable person in the position of Philbrick would connect with the original inadmissible statements made to Detective Letarte. Although an accused who gives a statement under circumstances violative of his constitutional rights is not perpetually disabled from making subsequent admissible statements (see United States v. Bayer, 331 U.S. 532, 67 S.Ct. 1394, 91 L.Ed. 1654 (1947)), under the circumstances of this case, neither a sufficient amount of time nor truly informed reflection had been permitted the defendant. At no time was the defendant apprised of Porterfield's death. The several state police custodial interrogation sessions from the first to the last were designed and executed to make a case against the defendant as against a mere honest-togoodness investigatory inquiry. We hold under the "cat out of the bag" doctrine that Philbrick's subsequent statements to Officer Greeley were not sufficiently insulated and disassociated from the first inadmissible statements given to Officer Letarte to avoid the original taint of illegality which carried over. The doctrine requires "the exclusion of a statement if, in giving the statement, the defendant was motivated by a belief that, after a prior coerced statement, his effort to withhold further information would be futile and he had nothing to lose by repetition or amplification of the earlier statements." Commonwealth v. Meehan, Mass., 387 N.E.2d 527, 537, cert. dismissed, 445 U.S. 39, 100 S.Ct. 1092, 63 L.Ed.2d 185 (1979). The defendant's statements to Officer Greeley should not have been admitted in evidence.
Violation of Fourth Amendment Rights
When Detective Pinette of the Maine State Police arrived at the Smutty Lane Road for the purpose, in his own words, of investigating a possible homicide, the defendant's bloodied knapsack was at the side of the road with all its compartments buckled shut; the police had secured the area and were allowing no traffic to pass. Pinette had been informed that the victim had been shot at least three times and was badly wounded. He knew from Detective Letarte that the knapsack belonged to Philbrick. Conceding that there was no danger of the knapsack "disappearing or going anywhere" as the whole area was under complete police control, Officer Pinette, intent on locating the firearm involved in the shooting, took possession of the knapsack, removed its contents, photographed and seized them. As he stated, this was something that could easily be done while waiting for daylight to search the surrounding woods.
After hearing, the presiding justice ruled that the knapsack and its contents could be *854 admitted in evidence at trial and denied the defendant's pretrial motion to suppress. Several items discovered in the warrantless search of the knapsack were entered in evidence, such as, among other things, a hexnut, a wooden stick, a box of ammunition, five .44 caliber expended shells, one revolver with two live rounds, one holster, and a blue T-shirt. The court reasoned that the knapsack had been "abandoned" at such a place in the roadway that all who happened to pass by would see it, precluding, so it inferred, any claim of expectation of privacy therein by the owner. In this, there was error.
The Fourth Amendment to the Constitution, which is made applicable to the States through the Fourteenth Amendment, establishes "[t]he right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures." The central thrust of the constitutional guarantee is to protect the privacy interest of individuals against intrusive incursions of agents of government. One's claim of protection under the Fourth Amendment depends not upon a property right in the invaded place or article of personal property but rather upon whether the person has a legitimate expectation of privacy in the invaded place or thing. Katz v. United States, 389 U.S. 347, 353, 88 S.Ct. 507, 512, 19 L.Ed.2d 576 (1967); United States v. White, 401 U.S. 745, 752, 91 S.Ct. 1122, 1126, 28 L.Ed.2d 453 (1971); United States v. Chadwick, 433 U.S. 1, 7, 97 S.Ct. 2476, 2481, 53 L.Ed.2d 538 (1977); State v. Sweatt, Me., 427 A.2d 940, 946 (1981); State v. Richards, Me., 296 A.2d 129, 132 (1972).
Warrantless searches are per se unreasonable, subject to a few specifically established, carefully drawn and much guarded exceptions. Katz v. United States, supra, 389 U.S. at 357, 88 S.Ct. at 514; State v. Hassapelis, Me., 404 A.2d 232, 236 (1979); State v. Dunlap, Me., 395 A.2d 821, 824 (1978). The burden is on the State to prove by the fair preponderance of the evidence underlying facts bringing the case within one of the exceptions. State v. Dunlap, supra, at 824; State v. Heald, Me., 314 A.2d 820, 829 (1973).
Abandoned property is excepted from the Fourth Amendment warrant requirement. City of St. Paul v. Vaughn, 306 Minn. 337, 237 N.W.2d 365 (1975); see generally 1 LaFave, Search and Seizure § 2.6(b) (1978) and cases cited therein. A person who has voluntarily abandoned property cannot complain of its search and seizure. United States v. Jackson, 9th Cir., 544 F.2d 407, 409 (1976).
Abandonment is primarily a question of intent, and intent may be inferred from words spoken, acts done, and other objective facts. All relevant circumstances existing at the time of the alleged abandonment should be considered. United States v. Colbert, 5th Cir., 474 F.2d 174, 176 (1973), and cases cited. Abandonment in the constitutional sense, i. e., in the law of search and seizure, exists only if the defendant has voluntarily discarded the property, left it behind, or otherwise relinquished his interest therein under circumstances indicative of his foregoing any further reasonable expectation of privacy with regard to it at the time of the search. Id. at 176; City of St. Paul v. Vaughn, supra, 237 N.W.2d at 370-71.
As stated previously, it was the State's burden to establish at the suppression hearing, by a preponderance of the evidence, its claimed exception to the warrant requirement under the Fourth-Fourteenth Amendments, here, that Philbrick had abandoned his knapsack in the constitutional sense, i. e. that he had relinquished "any reasonable expectation of privacy in it." State v. Johnson, Me., 413 A.2d 931, 933 (1980); State v. Blais, Me., 416 A.2d 1253, 1256 (1980).
While the court below found as a fact that the mere leaving of the knapsack on the side of Smutty Lane Road constituted an abandonment of the property and a relinquishment of any reasonable expectation of privacy with regard to its contents, such factual conclusion, we believe, was clear error under the "clearly erroneous" standard by which such rulings of fact *855 mixed with law are to be judged on review. The State did not meet its burden of proof by the fair preponderance of the evidence that Philbrick had in fact relinquished all reasonable expectation of privacy in the contents of the knapsack as we will explain later. The justice should have suppressed the evidence produced by the warrantless search.
While it is true that the defendant left his knapsack by the side of a public highway where any curious passer-by might have examined it (cf. United States v. Smith, D.C.App., 293 A.2d 856 (1972)), the knapsack's location is the only fact which, if considered in isolation, might suggest that the defendant abandoned it. The totality of the evidence in this record, however, clearly points to a contrary conclusion: the defendant had replaced his gun in the knapsack after the shooting and rebuckled all the closings so that the contents of the pack were not visible; the defendant was emotionally agitated and suffering from a gunshot wound when he stopped David Fleming's car and accepted a ride to the Saco police station; and, the defendant never disclaimed ownership of the knapsack but rather told the Saco police that it was his, so that police knew that the pack belonged to the defendant rather than to the decedent.[4]
The United States Supreme Court has several times explored the expectation of privacy associated with personal luggage, most recently in United States v. Chadwick, 433 U.S. 1, 97 S.Ct. 2476, 53 L.Ed.2d 538 (1977) and in Arkansas v. Sanders, 442 U.S. 753, 99 S.Ct. 2586, 61 L.Ed.2d 235 (1979). In Sanders the Court noted that a suitcase, even unlocked, possessed a "fundamental character as a repository for personal, private effects" and was inevitably associated with the expectation of privacy. 442 U.S. at 762 n. 9, 99 S.Ct. at 2592 n. 9. See also State v. Blais, supra, at 1257. All compartments of the defendant's pack were securely buckled; the contents of the pack were not visible, nor could they be identified by the outward appearance of the pack. See State v. Blais, supra, at 1257; State v. Hassapelis, supra, at 237. Cf. Arkansas v. Sanders, supra, 442 U.S. at 764 n. 13, 99 S.Ct. at 2593. The defendant had acted purposefully to secure the contents of the knapsack.
Moreover, the defendant's actions in leaving the Smutty Lane Road distinguish his case from that of defendants in the great majority of cases where property has been found to be abandoned in the Fourth Amendment context. The typical abandonment case is one where the defendant purposefully discards weapons or contraband while police are approaching or are in hot pursuit. See 1 LaFave, Search and Seizure, supra at § 2.6(b) and cases cited at nn. 36-43. See also 1 W. Ringel, Searches and Seizures, Arrests and Confessions § 8.5(a) nn. 170-174 (1980). In the instant case, the defendant merely left his property behind him, more or less of necessity, making no attempt, however, to discard it or disassociate it from himself.
The State argues alternatively that the warrantless search of the knapsack was justified under the so-called "homicide scene" exception of the now-discredited case of State v. Chapman, Me., 250 A.2d 203 (1969). See State v. Johnson, Me., 413 A.2d 931, at 934 (1980), where we said: "Although this Court in the past has recognized an exception for homicide scene searches, see State v. Chapman, ..., we conclude that decision has lost its vitality as a result of the ruling of the United States Supreme Court in Mincey v. Arizona, [437 U.S. 385, 98 S.Ct. 2408, 57 L.Ed.2d 290 (1978)] ...." Because Chapman was allegedly in force at the time of the search, the State contends that a good faith warrantless search made by police in reliance on Chapman should not *856 result in suppression of the evidence produced by such a search. The State bases its argument on the Supreme Court's rationale, set forth in United States v. Peltier, 422 U.S. 531, 95 S.Ct. 2313, 45 L.Ed.2d 374 (1975) that, in criminal prosecutions, new constitutional principles unrelated to the truth-finding function should be accorded prospective application only. Thus, expansions of the scope of the exclusionary rule, the primary function of which is not to aid in truth-finding but rather to deter police misconduct, should apply in futuro only. The Court of Criminal Appeals of Texas relied on Peltier to refuse to apply Mincey to a warrantless "homicide scene" search conducted in good faith before Mincey was decided. Pearson v. State, 587 S.W.2d 393, 396 (1979). The State urges a similar approach in the case before us.
The search of Philbrick's knapsack was conducted on July 12, 1977. Our case of State v. Chapman, which pioneered the "homicide scene" exception to the warrantrequirement rule, was decided on January 2, 1969. The defendant's first trial took place in January, 1978. Mincey v. Arizona, supra, decided June 21, 1978, held that the "murder scene" exception created by the Arizona Supreme Court was inconsistent with the Fourth and Fourteenth Amendments and that the warrantless search of Mincey's apartment was not constitutionally permissible merely because a homicide had recently taken place there. The State does concede that the present search and seizure were in violation of the principle announced in Mincey. The defendant's first conviction was set aside in 1979 on other grounds. His second trial and conviction occurred in October of that year. Thus, the instant search and first trial were conducted prior to the Mincey decision, while the second trial came off afterwards. If the facts of this case did involve a "homicide scene" within the meaning of State v. Chapman, supra, then we would be confronted with the question whether the ruling in Mincey v. Arizona should be given retroactive effect or mere prospective application. We believe, however, that the Chapman rule has no applicability to this case, and we need not decide, nor do we intimate any opinion on, the effect of Mincey upon searches conducted prior to the decision of that case.
At the time of the Chapman ruling, the state of the law was such that it was generally recognized under the emergency exception doctrine to the warrant-requirement rule that the Fourth Amendment did not bar police officers from making warrantless entries and searches in private premises when they reasonably believed that a person within the building was in need of immediate aid, i. e. if it reasonably appeared to them that they were confronted with a life or limb threatening situation. Courts stated it was obvious that, if denied entry into homes or apartments under such exigent circumstances, police officers would have the right, if not the duty, to gain entry forcibly. United States v. Barone, 330 F.2d 543, 545 (1964), cert. denied 377 U.S. 1004, 84 S.Ct. 1940, 12 L.Ed.2d 1053; Davis v. State, 236 Md. 389, 204 A.2d 76 (1964); Patrick v. State, 227 A.2d 486, 489 (Del.1967); State v. Gosser, 50 N.J. 438, 448, 236 A.2d 377, 382 (1967). The need to protect or preserve life or avoid serious injury is justification for what would be otherwise illegal, absent an exigency or emergency. Wayne v. United States, 115 U.S.App.D.C. 234, 241, 318 F.2d 205, 212 (1963).
The Chapman Court necessarily would have considered the later articulation of the exigent circumstances exception, to the extent that it went, at least consistent with its own formulation of the homicide scene processing theory, and would have found no reason to object to the statement of this Court in State v. Johnson, supra, at 933:
"The knowledge that there was an apparently dead body on the premises ... created exigent circumstances. There was a compelling need for the law enforcement officers to secure immediate entry to determine whether the apparent victim was alive or dead, whether there were other victims in the house and whether the perpetrator was about the premises and to secure evidence, such as *857 latent fingerprints and bloodstains, which by the passage of time might have become unavailable."
See also Mincey v. Arizona, supra, 437 U.S. at 392, 98 S.Ct. at 2413.
Also, the Chapman Court understood that once the police were lawfully on the premises objects falling in the plain view of an officer "who has a right to be in the position to have that view" are subject to seizure, as it cited for that proposition the case of Harris v. United States, 390 U.S. 234, 236, 88 S.Ct. 992, 993, 19 L.Ed.2d 1067 (1968).
The Chapman Court recognized that the discovery of the crucial bloodied bottle in a trash can in the closed basement garage of the Chapman home was the product of a search and set out to legitimize the search and seizure as not unreasonable in the "totality of circumstances" of the case. The Court considered as controlling in its ultimate formulation of what was later designated as the "homicide or murder scene" exception to the warrant-requirement rule, the following factual and legal conclusions: 1) the initial entry by the police was consensual; 2) the police never abandoned their possession and control of the Chapman premises; 3) the police were faced at once with the death of Mrs. Chapman under circumstances strongly suggestive of the possibility of violent death or homicide; 4) thus, from the very moment of the initial entry in the Chapman home, under the circumstances observed by the officers, there arose the duty on the part of the police to make a thorough investigation to determine whether the decedent was the victim of foul play and if so by whom and by what means; 5) the right of the public to a prompt and diligent police investigation of the Chapman premises to ascertain the cause of the apparently violent death of Mrs. Chapman and to solve any crime committed in the course thereof rose above the interest of the individual defendant in being protected from governmental intrusion upon his rights of privacy of his home; 6) the alleged impossibility of procuring a search warrant, because no officer could describe with any degree of specificity the weapon to be searched for; 7) the delay in seeking a magistrate on a legal holiday for the procurement of a search warrant might well have been costly; 8) there were risks of removal or destruction of the evidence attendant upon delay in proceeding with and completing the investigation.
The Chapman scenario was not present in the instant case. First, we are not dealing with the warrantless entry and search of a home initiated by the exigencies created by an apparently dead body therein with which the Court was faced in Chapman. Here, the potential homicide was committed in a public way, or in the surrounding woods, which the police have a right to enter and search without warrants. Secondly, there were no exigent circumstances calling for the initial warrantless entry and search of private premises as in Chapman, and, therefore, there existed no justification for the warrantless search of Philbrick's knapsack, anymore than the search without a warrant of a parked automobile or an adjacent household that might happen to be on the highway or close to the woods would have been justified. A warrantless search as conceded by the Chapman Court must be "strictly circumscribed by the exigencies which justify its initiation."
"[E]vidence may not be introduced if it was discovered by means of a seizure and search which were not reasonably related in scope to the justification for their initiation." (Emphasis in original).
State v. Chapman, supra, at 209; Mincey v. Arizona, supra, 437 U.S. at 393, 98 S.Ct. at 2413; Terry v. Ohio, 392 U.S. 1, 25-26, 88 S.Ct. 1868, 1882, 20 L.Ed.2d 889. The right to seize and search the defendant's knapsack, without a warrant, must be independently established under ordinary Fourth Amendment standards, where the knapsack was found in plain view at the side of a public way on, or in the vicinity of, which a potential unlawful homicide might have been committed. See State v. Blais, supra, at 1257. Thirdly, the known weapon in this case, a gun, did not present the predicament in Chapman of the alleged impossibility of *858 securing a search warrant. Fourthly, if the police had sought a magistrate to obtain a search warrant of the knapsack, they most probably would have had easy access to one within a reasonable time. Officer Pinette himself testified that his reason for his immediate search of the knapsack was that this could easily be done while waiting for daylight to search the surrounding woods. Fifthly, there were no risks of removal or destruction of the evidence attendant upon delay of the search of Philbrick's knapsack, as the investigation of the surrounding wooded area had to await sunrise.
The case is distinguishable from State v. Chapman and the so-called homicide scene exception to the warrant-requirement rule as evolved in that case was not applicable.
This record clearly shows that Philbrick left the Smutty Lane Road area suffering from a gunshot wound to the hand which required emergency treatment. He left his knapsack on the side of the road in a completely secured condition, although no locking device was attached to it. The totality of the evidence supports, as the only conclusion to be derived therefrom, that Philbrick did not in fact discard his knapsack, but, prior to leaving, buckled it shut to protect his right of privacy as to its contents. Once the knapsack came securely within the control of the police, the mere fact that it was seized at the scene of a possible homicide when no exigent circumstances existed did not in and by itself establish a greater need or justification for a warrantless search, any more than if it had been seized in the course of a lawful search of an automobile. See Robbins v. California, ___ U.S. ___, 101 S.Ct. 2841, 69 L.Ed.2d 744 (1981); but see Criminal Law Reporter, Vol. 30, No. 2, at 1005 on reconsideration.
In Robbins, the United States Supreme Court held that a seized opaquely wrapped and sealed package found in a recessed luggage compartment of a station wagon in the course of a lawful search of the automobile could not be opened without a search warrant. The Court held that the Fourth Amendment protects people and their effects, whether those effects are "personal" or "impersonal," (Id. ___ U.S. at ___, 101 S.Ct. at 2846); that the contents of containers, unless they may be said to be in plain view, are fully protected by the Fourth Amendment, and that, absent circumstances constituting a valid exception to the warrant-requirement rule, the opening of closed containers without a search warrant is in violation of the Fourth and Fourteenth Amendments.
While the police could lawfully seize the bloodied knapsack itself as relevant evidence in a possible homicide case or lesser charge and could have obtained later a warrant to search the same, no circumstances justified the on-the-scene warrantless search of the inside of the pack. The circumstances immediately preceding the search did not establish the existence of any special exigency within the scope of the emergency exception to the general rule requiring a search warrant.[5]
When properly secured, Philbrick's knapsack was a piece of luggage in which he had a constitutionally protected right of privacy. See State v. Hassapelis, Me., 404 A.2d 232, 237 (1979) (a zippered gym bag); United States v. Benson, 8th Cir., 631 F.2d 1336, 1337 (1980) (closed but unlocked leather tote bag); United States v. Meier, 10th Cir., 602 F.2d 253, 255 (1979) (closed but unlocked backpack); United States v. Johnson, 5th Cir., 588 F.2d 147, 151-52 (1979) (closed duffel bag); State v. Filipi, 297 N.W.2d 275 (Minn.1980) (closed duffel bag); United States v. Cleary, 9th Cir., 645 F.2d 740 (1981) (closed canvas bag with broken zipper). Cf. United States v. Goshorn, 1st Cir., 628 F.2d 697 (1980) (paper bag).
Expert Evidence
The defendant objected at trial to the admission of certain demonstrative evidence *859 and to "expert" testimony regarding the sequence of shots fired by him.
Maine State Police Detective James Pinette conducted an in-court demonstration using the front seat and dashboard of Charles Porterfield's car and using mannequins to represent Porterfield and the defendant. Based on his knowledge, through the autopsy report, of the location of Porterfield's wounds, and based on the apparent paths of the three discharged bullets, the location of blood spatters in the interior of the car and a pathologist's opinion that Porterfield's skull wound was the fatal wound, Detective Pinette "reconstructed" for the jury the sequence of the shots fired by the defendant and the relative positions of Porterfield and the defendant as each shot was fired. Pinette used the mannequins to "demonstrate" that the "second" shot was fired while Porterfield had his back to the defendant, raising by this display the strong implication that Porterfield was attempting to leave the car. Pinette then "demonstrated" that the "third" and fatal shot to Porterfield's head was fired while the two men were some distance apart (2 to 3½ feet), implying that the fatal shot was purposeful.
It cannot be disputed that this demonstration had a tremendous impact in the case and helped to a great degree in convicting the defendant. Philbrick, by his own admission to David Fleming and to Saco Police, had caused the death of Charles Porterfield. However, he claimed throughout that his conduct was not punishable as a crime because under the law he was justified to use deadly force, acting, as he contended, under an honest and reasonable belief that Porterfield was about to commit a forcible sex offense against him and an honest and reasonable belief that deadly force was required to repel the attack. The Pinette demonstration, with its clear tendency to show that the defendant acted intentionally when he shot Porterfield, struck at the heart of the defendant's defense.
Detective Pinette's demonstration and testimony raise two primary problems: first, Porterfield's car had been sold and altered during the period between the defendant's two trials and was no longer in the same condition as at the time of the shooting, and, second, Detective Pinette based his opinion regarding the positioning of the bodies in part on the evidence of blood spattering in the car without being qualified formally as an expert in such matters. We will address these two issues in the order in which they arose at trial.
A. The in-court demonstration
At some time after the defendant's first trial, Porterfield's car was sold and adapted for stock-car racing. The windshield, which had been damaged by a bullet, had been replaced; headrests on the front seats had been removed; bloodstains on the dashboard and seat upholstery had been cleaned or had faded after the passage of time. Perhaps most importantly, Detective Pinette did not measure the distance from seat to dashboard until some two weeks before the second trial. Although photographs of the front seat in its original state were available to Pinette, there does not seem to be accurate, verifiable evidence that positions of the dashboard and seat at the time of trial were the same as at the time of the shooting. In addition, the mannequins used in Pinette's demonstration did not purport to replicate the physical characteristics of Porterfield or of the defendant.
The persuasive power on juries of in-court demonstrative evidence is widely conceded. See McCormick on Evidence § 212 (2d ed. 1972) ("seeing is believing"). A trial court should exercise its discretion carefully before permitting such demonstrations because
... even if no essentially emotional response is likely to result, demonstrative evidence may convey an impression of objective reality to the trier. Thus, the courts are frequently sensitive to the objection that the evidence is "misleading" and zealous to insure that there is no misleading differential between objective things offered at trial and the same or different objective things as they existed at the time of the events or occurrences in litigation.
*860 It is clear to us that whatever relevance this demonstration had to prove the defendant's intent or to cast doubt on his credibility, that relevance was greatly outweighed by the highly prejudicial effect of Pinette's rough reconstruction, using techniques of non-verifiable accuracy of events he was not present to see. M.R.Evid. 403.[6] The prejudicial effect of the demonstration was reinforced by Pinette's trial testimony, offered without apparent proper foundation, that he had duplicated the experiment outside of court using "live bodies."
The State's reconstruction of the occurrence through the alleged expertise of Detective Pinette, cast in the context of a posed in-court demonstration, plus his stated out-of-court demonstration with live models, did not portray the Porterfield automobile in substantially the same condition it was in immediately after the shooting: the bullet-shattered windshield had been removed, the bloodstains in the interior of the car were missing and the distance measurements between the seat and the dashboard were not subject to accurate determination. There was no showing of comparative similarity between the mannequins, or the live subjects used in the demonstrations, and the two persons involved in the altercation in respect to weight, height, physical strength or skill and emotional temperament. Such experimental demonstrative evidence in the eyes of jurors, because of its asserted foundation in scientific principle or technique, carried such an inherent objective impact that it could unduly influence the jury in its findings of the underlying necessary facts at issue, without adequate basic facts to sustain a scientific conclusion, plus the absence of adequate opportunity to the defendant in this case to meet such damaging evidence resting in surmise and conjecture. Cf. Poulin v. Bilodeau, 161 Me. 306, 311, 211 A.2d 547, 550 (1965).
It was error for the trial court to permit this demonstration, with its potential for ineradicable prejudice to the defendant's case.
B. Detective Pinette's testimony regarding the evidence of blood spattering
A separate issue, but one intertwined with the issue raised by the in-court demonstration, arises out of Detective Pinette's testimony regarding the blood spatters in Porterfield's car. Detective Pinette had based his opinion regarding the sequence of shots and sequential positions of Porterfield and the defendant in part on his observations of blood spatters in the car. Defense counsel objected on the ground that Pinette had not been properly qualified as an expert.
Pinette testified before the jury that he had received "special training in blood spatters [a three-week course] in New York State under Professor Herbert MacDonald," and the State argued out of the presence of the jury that Pinette had merely analyzed all the information he had, using the "logic and expertise of a crime scene reconstruction." However, the presiding justice conducted no voir-dire to determine the extent of Pinette's qualifications or the state of the science in respect thereto, nor did he ever formally rule on whether Pinette was offering lay or expert opinions.
It seems clear that opinions based on observations of blood spatters and what they show regarding the sequence and directions of gunshots are matters encompassed by Maine Rule of Evidence 702. When a party offers the testimony of a witness as that of an "expert," the presiding justice must exercise his discretion to make two determinations: first, whether testimony on the subject matter calls for "specialized knowledge" that would "assist the trier of fact to understand the evidence" and second, whether the witness is qualified to give the opinion sought. M.R. Evid. 104(a), 401, 702; R. Field and P. Murray, Maine Evidence § 702.1 (1976). See *861 State v. Boutilier, Me., 426 A.2d 876, 878 (1981); Parker v. Hohman, Me., 250 A.2d 698, 702 (1969).
The proffered testimony is also subject to the general relevance requirements of Maine Rules of Evidence 401 and 402 and, even if relevant, may be excluded if its probative value would be outweighed by the countervailing considerations of Rule 403. See State v. Boutilier, supra; State v. Williams, Me., 388 A.2d 500, 504 (1978); see also R. Field and P. Murray, Maine Evidence, supra, at §§ 704.1, 403.1. One of the factors the presiding justice should consider in determining whether proffered testimony will be relevant and helpful to the factfinder is whether the scientific matters involved in the testimony have been generally accepted or conform to a generally accepted scientific theory. State v. Williams, supra, 388 A.2d at 504. "General scientific acceptance" is not a sine qua non of a proposed method of determining facts; however, in order to be admissible the proffered expert testimony must be demonstrated to have sufficient reliability to satisfy the evidentiary requirements of relevance and helpfulness, and of avoidance of prejudice to the defendant or confusion of the factfinder. M.R.Evid. 402, 702 and 403; see State v. Boutilier, supra, 426 A.2d at 879.
We conclude that, because Officer Pinette's opinion about what the blood spattering in the car showed regarding the relative positions of the defendant and the victim at the time of the shooting was the kind of evidence clearly encompassed by Rule 702, it was error for the presiding justice to fail to consider and rule upon the above-enumerated factors. We further conclude that this was not a harmless error within the meaning of Maine Rule of Criminal Procedure 52(a). While Detective Pinette's testimony regarding his short three-week training course at "blood-spatter school" alone might have called into question his qualifications to give the opinion sought by the State, see State v. Boutilier, supra, even more serious questions about the relevance, helpfulness, and potential prejudicial effect of Pinette's proffered opinion were raised by the prior testimony of the pathologist who conducted the autopsy on Porterfield and by defense counsel's argument against the admissibility of Pinette's opinion.
While Pinette "deduced," based on the autopsy information and the pattern of blood spattering in the car, that the three shots fired by the defendant must have come in a certain order, the autopsy pathologist himself was unable to assign a sequence to the wounds. Moreover, defense counsel informed the presiding justice in the absence of the jury that the pathologist had told him that several variables might affect blood velocity and, therefore, the pattern of blood spatters: he also advised the court that "there's no literature on the subject [of using blood spattering as a means of assigning a sequence to gunshots]." While defense counsel's argument was not evidence, it should have alerted the presiding justice to the fact that Pinette's methods may have lacked sufficient scientific reliability to provide the basis for expert opinion testimony. Cf. State v. Boutilier, supra; State v. Williams, supra; Parker v. Hohman, supra. Further inquiry into the state of this "science" was in order; failure to make such an inquiry was error. Furthermore, any relevance Detective Pinette's opinion may have had to prove the sequential order of the defendant's use of deadly force in his encounter with Porterfield was greatly outweighed by the prejudicial possibility that the jury was persuaded to disbelieve the defendant's defense on the basis of "scientific" evidence of doubtful reliability. M.R.Evid. 702, 401, 402, 403; Cf. State v. Boutilier, supra.
The combination of Detective Pinette's in-court demonstration of the shooting incident and his "expert" opinion testimony regarding the positions of the bodies when each shot was fired tainted the trial with reversible error.
Evidentiary Rulings
The defendant's remaining allegations of error center on evidentiary objections he made at trial, one of which we will now discuss.
*862 Brian Tate, who had attended a party in Freeport with Porterfield prior to the latter's trip to Saco, testified that: (1) Porterfield had attended the party reluctantly because he was tired and had to get up for work the next morning at 5:30 a. m.; and, (2) that Porterfield had left the party alone at about 10:30 p. m. after telling Tate he intended to go directly home.
The State contends that Tate's testimony regarding Porterfield's statements was admissible as a hearsay exception pursuant to Maine Rule of Evidence 803(3). The defendant contends that Rule 803(3) did not permit admission of the Tate testimony and that the defendant's Sixth Amendment right to confront the witnesses against him was violated.
Maine Rule of Evidence 803(3)[7] incorporates the common law "present mental state" exception to the hearsay rule of Mutual Life Insurance Company v. Hillmon, 145 U.S. 285, 12 S.Ct. 909, 36 L.Ed. 706 (1892). See State v. Cugliata, Me., 372 A.2d 1019, 1027 (1977); Advisers' Note to M.R. Evid. 803; R. Field and P. Murray, Maine Evidence, supra at § 803(3). Rule 803(3) permits admission of hearsay statements of present intention that are highly relevant and uttered under circumstances indicating a high degree of reliability, in order to show that the declarant acted in conformity therewith. Porterfield had no reason to lie to Tate; his statement that he intended to go directly home satisfied the requirement of reliability. The requirement of relevancy presents a different problem. Porterfield's statement was relevant to show that it was more likely than not that Porterfield indeed set out alone on his way home to Cape Elizabeth. However, the State sought to use the Porterfield statement to impeach or rebut the defendant's story that Porterfield willingly offered to take the defendant on a detour to Saco. The implication raised was that at some point the defendant forced Porterfield to detour.
It seems clear that the Hillmon Rule 803(3) exception to the hearsay rule is broad enough to encompass the admissibility of so much of a declarant's plan to take further action as includes the involvement of other persons in the declarant's plan. See State v. Cugliata, supra, 372 A.2d at 1029. However, it is doubtful that the Hillmon exception can be used to show the actions of persons encountered by chance, like the defendant. Porterfield willingly stopped to pick up a hitchhiker, despite his averred intention to travel home alone. It is at least as likely that Porterfield offered to drive the defendant to Saco as it is that the defendant compelled Porterfield to do so. Thus, Porterfield's statement to Brian Tate does not meet the "high relevance" requirement of the Rule 803(3) hearsay exception and should not have been admitted at trial. While the presiding justice has broad discretion to determine whether a statement falls within an exception to the hearsay rule, (M.R.Evid. 104(a); State v. Williams, Me., 395 A.2d 1158, 1162-63 (1978)), we conclude, as a matter of law, that Porterfield's declaration did not meet the relevancy requirements of Rule 803(3) and that any relevance it did have to show Porterfield's or the defendant's conduct clearly was outweighed by its prejudicial implications. M.R.Evid. 403.
The defendant has raised other issues which he argues mandate the reversal of his conviction. In the light of our resolution of the defendant's other points of appeal in his favor, we need not review his other claims of error which are not likely to recur on a new trial.
The entry is:
Judgment vacated and case remanded to the Superior Court for further proceedings consistent with the opinion herein.
All concurring.
NOTES
[*] WERNICK, J., sat at oral argument and conference, but retired prior to the preparation of the opinion herein.
[1] 17-A M.R.S.A. § 202 (Supp.1976) reads in pertinent part as follows:
1. A person is guilty of a criminal homicide in the 2nd degree if:
A. He causes the death of another intending to cause such death, or knowing that death will almost certainly result from his conduct;
This statute was repealed (P.L. 1977, c. 510, § 38, effective October 24, 1977); its present equivalent is 17-A M.R.S.A. § 201(1)(A) murder.
[2] We express no opinion regarding whether the erroneous admission at trial of the defendant's statements to Officers Dentico and Demarco would, alone, have required vacation of his conviction. Error at trial, even though of constitutional dimensions, will not require reversal, if it was harmless beyond a reasonable doubt. See State v. Hassapelis, Me., 404 A.2d 232, 237 (1979).
[3] We intimate no opinion as to the admissibility vel non of the Philbrick statements to Officer Letarte, if the detective had informed the defendant of his Miranda rights at the beginning of his interrogation. We leave open the question whether knowledge of members of a distinct and separate authority, such as the Saco police, would be chargeable to State police personnel conducting a separate or combined investigation; also, whether previous admissions or statements made to one law enforcement authority without required proper Miranda admonishments, such as the admissions in this case to Officer Dentico, would render subsequent admissions or statements to another authority given after receiving proper Miranda warnings inadmissible as tainted by the prior unlawful interrogation. See People v. Perry, 38 Ill.App.3d 81, 347 N.E.2d 340 (1976); Westover v. United States, 384 U.S. 436, 86 S.Ct. 1602, 16 L.Ed.2d 694 (1966).
[4] While the defendant's property interest in his knapsack alone might not support his standing to object to the warrantless search of his pack and seizure of its contents, it is one factor to be considered in determining whether the defendant's Fourth Amendment rights have been violated. United States v. Salvucci, 448 U.S. 83, 91, 100 S.Ct. 2547, 2553, 65 L.Ed.2d 619, 628 (1980); Rakas v. Illinois, 439 U.S. 128, 144 n. 12, 99 S.Ct. 421, 430 n. 12, 58 L.Ed.2d 387 (1978); see State v. Sweatt, Me., 427 A.2d 940, 945 (1981).
[5] We note that this was not a search incident to a lawful arrest, such as, e. g. in Chimel v. California, 395 U.S. 752, 89 S.Ct. 2034, 23 L.Ed.2d 685, (1969); nor an inventory search, such as e. g. in South Dakota v. Opperman, 428 U.S. 364, 96 S.Ct. 3092, 49 L.Ed.2d 1000 (1976); State v. Hudson, Me., 390 A.2d 509 (1978).
[6] Rule 403, M.R.Evid. provides:
Although relevant, evidence may be excluded if its probative value is substantially outweighed by the danger of unfair prejudice, confusion of issues, or misleading the jury, or by considerations of undue delay, waste of time, or needless presentation of cumulative evidence.
[7] Rule 803(3), M.R.Evid. provides in pertinent part as follows: The following are not excluded by the hearsay rule, even though the declarant is available as a witness:
(3) A statement of the declarant's then existing state of mind, emotion, sensation, or physical condition such as intent, plan, motive, design, mental feeling, pain, and bodily health,....
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234 U.S. 70 (1914)
EX PARTE ROE.
No. 13, Original.
Supreme Court of United States.
Argued April 6, 1914.
Decided May 25, 1914.
PETITION FOR WRIT OF MANDAMUS.
*71 Mr. S.P. Jones for petitioner.
Mr. Joseph W. Bailey and Mr. F.H. Prendergast for respondent.
MR. JUSTICE VAN DEVANTER delivered the opinion of the court.
By an action begun in a state court in Harrison County, Texas, W.L. Roe sought to recover from the Texas & Pacific Railway Company, a Federal corporation, $30,000 as damages for personal injuries sustained through its negligence while he was in its employ as a brakeman and while both were engaged in interstate commerce. In due time and in the accustomed way, the case was removed into the District Court of the United States for that district upon the sole ground that it was one arising under a law of the United States in that the defendant was chartered by an act of Congress. The plaintiff then moved that the case be remanded upon the ground that it also arose under the Federal Employers' Liability Act (April 22, 1908, 35 Stat. 65, c. 149; April 5, 1910, 36 Stat. 291, c. 143) and therefore was not removable. After a hearing, the motion was denied, for reasons assigned in the second branch of the opinion in Van Brimmer v. Texas & Pacific Railway Co., 190 Fed. Rep. 394, 397. The plaintiff then petitioned this court for a writ of mandamus commanding *72 the judge of the District Court to remand the case. A rule to show cause was granted, and the respondent answered that the motion to remand had been denied because, upon consideration, he believed the case was lawfully removed.
As the case arose under a law of the United States, namely, the defendant's Federal charter (see Pacific Removal Cases, 115 U.S. 1; Texas & Pacific Railway Co. v. Cody, 166 U.S. 606), and the requisite amount was in controversy, it is conceded that it was removable unless made otherwise by the fact that it also arose under the Federal Employers' Liability Act. In the sixth section, as amended in 1910, that act declares: "The jurisdiction of the courts of the United States under this Act shall be concurrent with that of the courts of the several States, and no case arising under this Act and brought in any state court of competent jurisdiction shall be removed to any court of the United States." A like restriction upon removals appears in § 28 of the Judicial Code.
The question presented to the District Court by the motion to remand was, whether these provisions were intended to forbid a removal in every case falling within the Employers' Liability Act, regardless of the presence of some independent ground of removal, as in this instance, or only to declare that the fact that a case arises under that act shall not be a ground of removal. Regarding the latter of these alternatives as sustained by the better reasoning, the court denied the motion; and upon this petition for mandamus we are asked to review that ruling, pronounce it erroneous, and direct the respondent to retract it and remand the case.
Whether the ruling was right or wrong, it was a judicial act, done in the exercise of a jurisdiction conferred by law, and, even if erroneous, was not void or open to collateral attack, but only subject to correction in an appropriate appellate proceeding. Chesapeake & Ohio Railway Co. v. *73 McCabe, 213 U.S. 207; In re Metropolitan Trust Co., 218 U.S. 312. Like any other ruling in the progress of the case, it will be regularly subject to appellate review after final judgment, and the authorized mode of obtaining such a review, the action being at law, is by a writ of error. Judicial Code, §§ 128, 238; Missouri Pacific Railway Co. v. Fitzgerald, 160 U.S. 556 582.
The accustomed office of a writ of mandamus, when directed to a judicial officer, is to compel an exercise of existing jurisdiction, but not to control his decision. It does not lie to compel a reversal of a decision, either interlocutory or final, made in the exercise of a lawful jurisdiction, especially where in regular course the decision may be reviewed upon a writ of error or an appeal. Bank of Columbia v. Sweeny, 1 Pet. 567; Life and Fire Insurance Co. v. Adams, 9 Pet. 571, 602; Ex parte Taylor, 14 How. 3, 13; Ex parte Many, Id. 24; Ex parte Newman, 14 Wall. 152, 169; Ex parte Sawyer, 21 Wall. 235; Ex parte Flippin, 94 U.S. 348; Ex parte Loring, Id. 418; Ex parte Railway Co., 103 U.S. 794; Ex parte Baltimore & Ohio Railroad Co., 108 U.S. 566; American Construction Co. v. Jacksonville &c. Co., 148 U.S. 372, 379; In re Atlantic City Railroad, 164 U.S. 633; Ex parte Oklahoma, 220 U.S. 191, 209; Ex parte First National Bank, 228 U.S. 516. And this is true of a decision denying a motion to remand. Ex parte Hoard, 105 U.S. 578; In re Pollitz, 206 U.S. 323; Ex parte Nebraska, 209 U.S. 436; Ex parte Gruetter, 217 U.S. 586; Ex parte Harding, 219 U.S. 363. In the last case the subject was extensively considered and it was held that the writ of mandamus may not be used to correct alleged error in a refusal to remand where, after final judgment, the order may be reviewed upon a writ of error or an appeal. To that view we adhere, and therefore we are not here at liberty to consider the merits of the question involved in the District Court's ruling.
Rule discharged; petition dismissed.
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01-03-2023
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04-28-2010
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https://www.courtlistener.com/api/rest/v3/opinions/1521244/
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746 S.W.2d 945 (1988)
Laura Hodnick SPECTOR, Appellant,
v.
The STATE of Texas, Appellee.
No. 3-87-039-CR.
Court of Appeals of Texas, Austin.
March 16, 1988.
Rehearing Denied April 6, 1988.
Doran Williams, Elgin, for appellant.
Charles Penick, Criminal Dist. Atty., Forrest L. Sanderson, III, Asst. Criminal Dist. Atty., Bastrop, for appellee.
Before SHANNON, C.J., and GAMMAGE and CARROLL, JJ.
GAMMAGE, Justice.
Laura Hodnick Spector appeals from a judgment of conviction for destroying evidence. Tex.Pen.Code Ann. § 37.09(a)(1) (1974). The jury assessed punishment at 30 days in jail and $1000 fine. We will reverse the conviction and reform the judgment to show an acquittal.
Section 37.09 provides in pertinent part:
(a) A person commits an offense if, knowing that an investigation or official proceeding is pending or in progress, he:
(1) alters, destroys, or conceals any... thing with intent to impair its verity, legibility, or availability as evidence... (emphasis added).
The information charges that Spector "did destroy a thing, to wit: marihuana cigarette with intent to impair its availability as evidence." (Emphasis added.) Spector contends the evidence is insufficient to show she destroyed evidence because the contents of the cigarette were used to convict her for both this offense and another for possession of marihuana. The State concedes the contents of the cigarette were recovered, but argues the contents had lost *946 their identity as a cigarette and thus the cigarette was destroyed.
In determining the sufficiency of the evidence to support a criminal conviction, the question is 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 offense beyond a reasonable doubt. Jackson v. Virginia, 443 U.S. 307, 99 S. Ct. 2781, 61 L. Ed. 2d 560 (1974); Carlsen v. State, 654 S.W.2d 444 (Tex.Cr.App.1983) (opinion on State's motion for rehearing).
The evidence viewed in the light most favorable to the prosecution is as follows. Spector was stopped for speeding by DPS trooper Sam Lovelace on September 19, 1986 in Bastrop County. Officer Lovelace approached Spector's car and smelled burnt marihuana. Lovelace asked Spector to step to the rear of her car and place her hands on the trunk. Lovelace then searched the car and found a marihuana cigarette. Lovelace walked to the rear of the car and placed the cigarette on the trunk. Spector then grabbed the cigarette, tore it in two and threw the pieces toward a ditch.
Jay Titlow, a friend of Lovelace's riding with the trooper that day, picked up what he could find of the cigarette and handed it to Lovelace for evidence. The recovered portion of the cigarette was used to convict Spector for possession of marihuana (see our opinion of this date in 746 S.W.2d 946).
We believe something is destroyed within the meaning of Penal Code § 37.09(a)(1) when its evidentiary value is destroyed. Form changes without a loss of evidentiary value are mere attempts to destroy or alterations. Spector was charged, however, not with an attempt to destroy, nor even with altering the evidence, but with destroying the evidence.
Although part of the contents were lost, the State alleged the whole cigarette was destroyed. We believe the only way evidence can be destroyed when part is recovered is when the part recovered has less evidentiary value than the whole. The State does not contend the remaining part of the cigarette was untestable or insufficient to obtain a conviction for possession of the whole. We conclude the evidentiary value of the cigarette was not so lost as to consider it destroyed. The State has failed to prove an essential element of the offense and the judgment of conviction is reversed.
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01-03-2023
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10-30-2013
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https://www.courtlistener.com/api/rest/v3/opinions/1521552/
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524 A.2d 1120 (1987)
STATE
v.
Jose TORRES.
No. 86-205-C.A.
Supreme Court of Rhode Island.
May 5, 1987.
*1121 James E. O'Neil, Atty. Gen., Jane McSoley, Thomas Dickinson, Asst. Attys. Gen., for plaintiff.
William Reilly, Public Defender, Barbara Hurst, Asst. Public Defender, for defendant.
OPINION
WEISBERGER, Justice.
This case comes before us on the defendant's appeal from the denial of his motion to dismiss a criminal complaint charging him with the unlawful possession of a controlled substance. The defendant had moved for dismissal on the ground that *1122 further prosecution of the complaint after a trial justice's sua sponte declaration of a mistrial would place him in jeopardy twice for the same offense. We agree and reverse. The facts surrounding the proceeding to which jeopardy attached are as follows.
On October 22, 1985, defendant, Jose Torres, was brought to trial on a criminal information charging him with possession of cocaine in violation of G.L. 1956 (1982 Reenactment) § 21-28-4.01(C)(1)(a). A jury was impaneled and sworn. To permit counsel to raise matters that required resolution before progressing to opening statements, the trial justice excused the jury from the courtroom immediately after its impaneling.
Upon a defense motion the trial justice ordered the sequestration of witnesses. Subsequently, the prosecutor asked the trial justice to exempt the investigating officer from the order so that he could assist the prosecutor during trial as well as testify. After the trial justice granted the prosecutor's request, defense counsel sought a similar exemption for Torres's wife on the ground that she was needed at counsel table to facilitate communication with Torres, whose command of English, though adequate under normal conditions, would most likely be challenged by the "hushed tones" spoken at the table.
The prosecutor objected, arguing that the defense should utilize an independent interpreter. Defense counsel countered with an offer to stipulate the conditions under which Mrs. Torres would testify in order to ensure that her presence in the courtroom would not influence her testimony. To support his request for Mrs. Torres's assistance, defense counsel explained that he had just discovered that morning that the interpreter normally employed by the public defender's office was unavailable because of a recent death in her family. Admonishing defense counsel for failing to raise the anticipated problem before jury selection, the trial justice found the defense offer insufficient to overcome the prosecutor's objection.
Thereafter, defense counsel waived the right to call Mrs. Torres as a witness and requested permission for her to act as an interpreter. The prosecutor renewed his objection, adding that the marshals preferred an official interpreter since Torres was held for want of bail.[1] Again suggesting that lack of foresight by defense counsel generated the emergent need for an interpreter, the trial justice ordered defense counsel to arrange immediately for an official interpreter or elect to go forward without one. A five-minute recess was called.
When court reconvened, defense counsel reported that although an official interpreter was not immediately available, one would be present in court the following morning. Proposing that trial proceed for the duration of the afternoon, defense counsel again waived the right to call Mrs. Torres as a witness and requested permission for her to act as an interpreter. The trial justice denied the request, expressing a concern that an unofficial interpreter might not be reliable and any ensuing confusion might provide grounds for postconviction relief. Instead of enforcing his previous order to proceed, the trial justice decided to delay trial for the interpreter's arrival so as to avoid any future question concerning Torres's comprehension of the proceeding. In announcing a recess until morning, the trial justice again chided defense counsel for causing a waste of time and money as the jury sat idle. Defense counsel explained that he had assumed that Mrs. Torres could act as an interpreter for the limited purpose of facilitating communication at counsel table. He further noted that Torres would not testify that afternoon and thus would not require the assistance of an interpreter to be understood by the jury. Defense counsel then asserted that, in his view, he was ready to proceed with trial.
At that point the prosecutor informed the trial justice that one of the testifying officers *1123 would not be available to testify in the morning because of a "babysitting problem." Without exploring possible solutions to that problem and without warning, the trial justice declared a mistrial sua sponte on the ground that lack of defense preparation left no alternative. The jury was brought into the courtroom and discharged.
Prior to retrial Torres filed a motion to dismiss on the ground that further prosecution would subject him to double jeopardy. Acknowledging that jeopardy attached as soon as the jury was impaneled and sworn, the motion justice ruled that double-jeopardy prohibitions did not compel the trial justice to continue the trial with concerns that the potential communication problem could threaten the effectiveness of counsel. Accordingly, the motion justice refused to dismiss the information. Thereafter, Torres filed this interlocutory appeal.
The question before us is whether the double-jeopardy clause of the Fifth Amendment to the United States Constitution prohibits retrial. We are constrained to hold that it does.[2]
Among the complex of rights granted by the double-jeopardy clause of the Fifth Amendment is the right to have a trial completed by the particular tribunal initially summoned to sit in judgment. E.g., Oregon v. Kennedy, 456 U.S. 667, 671-72, 102 S. Ct. 2083, 2087, 72 L. Ed. 2d 416, 422 (1982); Arizona v. Washington, 434 U.S. 497, 503, 98 S. Ct. 824, 829, 54 L. Ed. 2d 717, 727 (1978); Wade v. Hunter, 336 U.S. 684, 689, 69 S. Ct. 834, 837, 93 L. Ed. 974, 978 (1949). To protect that right, a defendant is deemed to be in jeopardy for an offense the moment a jury is impaneled and sworn. Crist v. Bretz, 437 U.S. 28, 35-36, 98 S. Ct. 2156, 2161, 57 L. Ed. 2d 24, 31-32 (1978). If the defendant subsequently moves for a mistrial, it is assumed, in the absence of prosecutorial or judicial conduct intended to provoke the motion, that the defendant is deliberately relinquishing the right to proceed before that jury and a bar to retrial will not be raised upon the granting of the motion. Oregon v. Kennedy, 456 U.S. at 675-76, 102 S.Ct. at 2089, 72 L.Ed.2d at 424-25. On the other hand, if the trial justice subsequently declares a mistrial without the defendant's request or consent, the right to retain the chosen jury is implicated and a bar to retrial will be raised unless the mistrial is declared under a strict standard first enunciated by Justice Story in 1824:
"[T]he law has invested Courts of justice with the authority to discharge [without barring retrial] a jury from giving any verdict, whenever, in their opinion, taking all the circumstances into consideration, there is a manifest necessity for the act, or the ends of public justice would otherwise be defeated. They are to exercise a sound discretion on the subject * * *. [T]he power ought to be used with the greatest caution, under urgent circumstances, and for very plain and obvious causes * * *." United States v. Perez, 22 U.S. (9 Wheat.) 579, 580, 6 L. Ed. 165, 165 (1824).
The full thrust of the "manifest-necessity" doctrine did not become apparent for nearly 140 years. In Downum v. United States, 372 U.S. 734, 83 S. Ct. 1033, 10 L. Ed. 2d 100 (1963), the Court indicated for the first time how stringent and uncompromising the application of this doctrine would be.
In Downum a federal district judge had set down twelve cases for trial on relatively short notice. More than 100 witness subpoenas were issued. Downum's case was number 10 on the list, and the prosecution did not believe that it would be reached by Tuesday, the second day of hearings for the week. The prosecutor had learned only one day before the day the case was brought up for trial that one of his witnesses had not been reached. He had been trying another case that morning and was unable to check with the marshal who served the subpoena.[3] After the case was *1124 called for trial, a jury was impaneled, sworn, and instructed to return at 2 p.m. At the commencement of the afternoon session, the prosecution requested that the jury be dismissed because a key witness on two counts of the indictment was not available. Defense counsel moved that these counts be dismissed and that the trial proceed on the remaining counts. The court overruled the defense motion and discharged the jury over the defendant's objection. Two days later a second jury was impaneled, whereupon the defendant pleaded the bar of double jeopardy. This plea was rejected by the trial judge. The rejection was affirmed by the Court of Appeals.
Like a thunderclap a ringing declaration was made for the majority by Justice Douglas. Generally tracking the language of Justice Story in Perez, Justice Douglas stated that the valued right of a defendant to have his trial completed by the particular tribunal summoned to sit in judgment on him may only be subordinated to the public interest when there is an "imperious necessity" to do so.[4] He reiterated that the discretion to discharge a jury is to be exercised only in extraordinary and striking circumstances. Downum, 372 U.S. at 736, 83 S.Ct. at 1034, 10 L.Ed.2d at 102.
Applying this stringent principle to the facts in Downum, Justice Douglas attributed the absence of the witness to failure of the prosecution to ensure his presence. This was insufficient reason to meet the standard of imperious necessity.
Torres contends that the mistrial was improperly declared under the manifest-necessity standard and that as a consequence retrial is barred. In effect, this contention poses two questions for our determination: whether an application of the standard is warranted, and if so, whether the trial justice abused his discretion in applying the standard.
In response to the first question, we hold that under the instant facts the manifest-necessity standard is the proper measure of double-jeopardy protection that must be extended to Torres. Absent a defendant's request or consent, the standard is applicable even though the trial justice, in declaring the mistrial, was motivated by a desire to protect the defendant's rights and was therefore, in effect, conferring a benefit upon the defendant. See United States v. Jorn, 400 U.S. 470, 482-83, 91 S. Ct. 547, 556, 27 L. Ed. 2d 543, 555 (1971) (plurality opinion) (declining to restrict application of manifest-necessity test with appellate assessment of which party trial justice intended to protect and which party in fact benefited from mistrial). In a similar vein, the fact that a mistrial was predicated upon an error committed by the defense does not avoid an application of the standard. See Arizona v. Washington, 434 U.S. at 516, 98 S.Ct. at 835-36, 54 L.Ed.2d at 734-35 (showing of manifest necessity required for mistrial based upon improper comment of defense counsel). Although a formal objection to a declaration of mistrial clearly establishes lack of consent, the failure to object does not foreclose the defendant from raising the standard as a bar to retrial, at least in those cases in which the trial justice acted so precipitately as to preclude an opportunity to object and consent is not otherwise demonstrated. See United States v. Jorn, 400 U.S. at 487, 91 S.Ct. at 558, 27 L.Ed.2d at 558 (failure to object in midst of abrupt declaration of mistrial did not imply consent).
On the record before us, Torres neither expressly requested nor consented to the mistrial. Rather he apparently sought to promote the trial's progression by attempting to resolve the controversy surrounding his request for his wife to assist with communication at counsel table. Within that context his failure to arrange for an interpreter, even if engendering a concern for the effectiveness of counsel and serving as a catalyst for the declaration of mistrial, cannot be construed as a request for or *1125 consent to mistrial. Nor can his failure to object after the trial justice's abrupt and unanticipated declaration of mistrial be viewed as acquiescence in the ruling. Accordingly, the mistrial cannot be said to have been declared at Torres's behest. We turn, therefore, to the question of whether the sua sponte declaration was manifestly necessary.
Although Justice Story formulated the manifest-necessity standard within the context of a mistrial premised upon the jury's inability to reach a verdict, the Supreme Court has applied the standard in a wide variety of factual situations. See, e.g., Arizona v. Washington, 434 U.S. at 516, 98 S.Ct. at 835, 54 L.Ed.2d at 734 (possible juror bias created by improper comment of defense counsel); Illinois v. Somerville, 410 U.S. 458, 468, 93 S. Ct. 1066, 1072, 35 L. Ed. 2d 425, 433 (1973) (defective indictment not curable by amendment under state law); United States v. Jorn, 400 U.S. at 487, 91 S.Ct. at 558, 27 L.Ed.2d at 557-58 (protection of constitutional rights of witnesses); Downum v. United States, 372 U.S. at 736-37, 83 S.Ct. at 1034-35, 10 L.Ed.2d at 102-03 (unavailability of prosecution witness). In so doing, the Court has consistently declined to mold the standard into a mechanical rule that categorizes circumstances permitting or prohibiting retrial, preferring instead to enunciate a general standard to guide trial justices who must render decisions within trial situations that are often elusive and unique. Illinois v. Somerville, 410 U.S. at 462, 93 S.Ct. at 1069, 35 L.Ed.2d at 429.
To ensure that a trial justice's decision to mistry a case is tempered by the defendant's right to complete the trial before the chosen jury, the Court has imposed an obligation upon appellate courts to satisfy themselves that the trial justice scrupulously exercised a sound discretion in declaring the mistrial. Arizona v. Washington, 434 U.S. at 514, 98 S.Ct. at 835, 54 L.Ed.2d at 733. At a minimum an adequate exercise of discretion would require a record that evinces a concern for the consequences of a mistrial unnecessarily declared and that demonstrates that the court has considered viable alternatives to mistrial. Such a record would support the conclusion that the trial justice carefully balanced the defendant's right to proceed before the chosen jury with society's interests in fair trials and criminal-law enforcement. See id. at 515-16, 98 S.Ct. at 835, 54 L.Ed.2d at 734; United States v. Jorn, 400 U.S. at 486-87, 91 S.Ct. at 558, 27 L.Ed.2d at 557.
Although couching the trial justice's decision to grant a mistrial in terms of discretion, the Court's teachings since Downum have so circumscribed the ability to declare a mistrial without the defendant's consent that the act could scarcely be considered discretionary. Only the most compelling circumstances, which have rarely been found by the Court since 1963, can justify a termination of a defendant's right to complete the trial.
Applying the foregoing principles of review, we are of the opinion that the trial justice did not establish an imperious or manifest necessity in discharging the jury. Our reading of the record reveals that the trial justice labored under three concerns before declaring the mistrial: judicial economy, Torres's potential communication problem, and absence of a prosecution witness. In the circumstances of this case, none of these concerns manifestly required the mistrial.
Although the Supreme Court has acknowledged that crowded calendars impose a constant pressure on trial justices to conclude proceedings promptly and thus may add support to a finding of manifest necessity, see Arizona v. Washington, 434 U.S. at 516 n. 35, 98 S.Ct. at 835-36 n. 35, 54 L.Ed.2d at 734-35 n. 35, the potential length of any continuance that might be required to resolve the problems at hand did not warrant the jury's dismissal. The communication problem was resolved with a continuance that merely extended from midpoint in the court's afternoon session to the next morning, a loss of only a few hours. The record is devoid of any indication that the witness problem required a continuance, given that the prosecution had other witnesses to call, or if it did require a *1126 continuance, that the continuance would be lengthy.
Although the trial justice was well within his discretion to determine whether Torres's language difficulty threatened the administration of a fair trial, it is far from clear that Torres's imperfect command of English was of a sufficient magnitude to threaten the effectiveness of counsel, the right to confront witnesses, or Torres's ability to testify free of error. In any event the problem was resolved by delaying trial until the interpreter's arrival in the morning. With the resolution of the communication problem, nothing in the record suggests that the effectiveness of counsel was otherwise threatened.
The problem that precipitated the declaration of mistrial was the unavailability of a prosecution witness. Declining to rule that the absence of a witness could never justify the termination of a trial, the Supreme Court in Downum, 372 U.S. at 737, 83 S.Ct. at 1035, 10 L.Ed.2d at 103, advised that each case must turn on its facts. As previously discussed, the Court found that the facts in Downum did not justify the discharge of the jury and that the second trial of the defendant constituted double jeopardy.
Like the Court in Downum, we find that the facts surrounding the unavailability of the prosecution's witness did not warrant the discharge of the jury. Because the reason for the witness's absence was minor and on its face easily resolvable within a brief period, the trial justice's act of declaring a mistrial without exploring the feasibility of less drastic but viable alternatives is clearly erroneous. As noted before, it is entirely possible that the prosecution could have proceeded in the morning by calling other witnesses, or if not, it is also entirely possible that the absent witness could have been available within a day.
Having determined that the mistrial was improperly declared under the manifest-necessity standard, we hold that further prosecution would violate the imperative ban against double jeopardy.
For the foregoing reasons the defendant's appeal is sustained and the judgment below reversed. The papers in the case may be remanded to the Superior Court.
NOTES
[1] The marshals's objection was based upon the fact that the wife acting as interpreter would sit beside defendant at counsel table, thus posing a security risk.
[2] Our finding that the United States Constitution prohibits retrial disposes of any need to consider Torres's additional assertion that the Rhode Island Constitution prohibits retrial.
[3] The factual details surrounding the unavailability of the prosecution witness are taken in large part from Justice Clark's dissent. These facts were not challenged by the majority, though not set forth in their opinion.
[4] "Manifest necessity" and "imperious necessity" are regarded as synonymous terms. Arizona v. Washington, 434 U.S. 497, 505-06 n. 17, 98 S. Ct. 824, 830 n. 17, 54 L. Ed. 2d 717, 728 n. 17 (1978).
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01-03-2023
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10-30-2013
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https://www.courtlistener.com/api/rest/v3/opinions/8302430/
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Mr. Justice Hall
delivered the opinion of the Court.
The plaintiffs in error, Granville Edmondson and Houston Burse, who will hereinafter be referred to as *215defendants, were indicted in the criminal court of Davidson county. The indictment contained three counts.
The first count charged defendants with unlawfully stealing and carrying away one Ford sedan automobile body, of the value of $375, the property of O. C. Fry.
The second count charged said defendants with unlawfully stealing and carrying away one Ford sedan automobile, of the value of $800, the property of C. C. Fry. The third count charged that said defendants did receive, buy, conceal, and aid in concealing one Ford sedan automobile body, of the value of $375, the property of C. C. Fry.
Defendants were put upon their trial in July, 1923, and the jury found them guilty under the last count of the indictment, and fixed their maximum punishment at confinement for three years and one day in the penitentiary.
Their motion for a new trial having been overruled, and judgment entered in accordance with the verdict of the jury, they appealed to this court, and have assigned for error that the evidence preponderates against the verdict and in favor.of their innocence.
The evidence shows that the Ford sedan automobile of C. C. Fry, including the body described in the indictment, was stolen from a street in Nashville, Tenn., on April 26, 1923.
Four or five days later officers located the body of said automobile at a point near a lane which leads from the Franklin pike to the Nolensville pike, in Davidson county, and near the city of Nashville, concealed in some bushes. The chassis was subsequently located by the officers near *216the Radnor Yards, about two and one-half miles from the place where the body was located.
Mr. Payne, who is engaged in the wreckage business, and deals in secondhand automobile parts and accessories, testified that on Monday, April 30th, the two defendants came to his place of business and stated that they had an automobile body for sale. Mr. Payne says be became suspicious at once, as he had already had some inquiries from the detectives concerning an automobile body. Mr. Payne says that defendants described the body as being a “Ford sedan top,” and that the defendant Edmondson did most of the talking. Payne says that he carried defendants out in one of his ears to the place where defendants said the body was, which was near a lane that leads from the Franklin pike to the Nolensville pike; that the automobile body was concealed in some bushes. Payne says that it was a new Ford sedan automobile body; that he agreed to pay defendants $50 for it, and gave one of them $1 to bind the trade; that he drew up a bill of sale, had defendants sign it, and told them to come back the next morning, and help him load the body; that, in the meantime, he notified the police department of what had transpired between him and defendants, and that, when defendants showed up at the place where the automobile body was concealed on the following morning, they were arrested by two policemen, Mr. McCarver and Mr. Giles.
Mr. Linx, who is presumably a partner or an employee of Mr. Payne, testified that he also talked to defendants concerning the automobile body; that Edmondson did most of the talking, and stated to Linx that he had re*217ceived the car from his uncle in St. Louis; that he was going to put a truck body on the chassis; and that was the reason why he wanted to sell the sedan body.
The two policemen, McCarver and Giles, testified that they received information of the theft of Fry’s sedan automobile and investigated the same; that they received information from Mr. Payne and Mr. Linx which led them to go out to the place where the body was on the morning of May 1st, when and where they arrested defendants. Both McCarver and Giles testified that one or both of defendants first stated to them that the body came from a car which belonged to the uncle of one of them, but later both claimed that they had found same.
R. L. Brock, who testified on behalf of defendants, stated that he was foreman on the farm of Mr. James E. Caldwell, which lies between the Franklin pike and the Nolensville pike; that on the morning of April 30th he quit work for the noon meal, and in returning to his home he had to pass a little schoolhouse, which is situated on the lane that leads from the Franklin pike to the Nolensville pike; that just south of the schoolhouse, in some growing bushes, he discovered a new Ford sedan automobile body; that he went on to his home and got lunch; that about 1:30 p. m. two colored boys, William Wade and John Rucker, who were also working on the Caldwell farm, came by witness’ house to get him and carry him to the place where they were engaged at work, and that the two defendants got in the wagon with them. The witness says that while they were on their way back to work he informed defendants and Wade and Rucker of having found the automobile body on or near the lane *218leading from the Franklin pike to the Nolensville pike only an hour or two before, and told them where the body was. Brock says the two defendants got out of the wagon and went in the direction of Flat Rock, which was east from the place where defendants disembarked from the wagon; the automobile body being' almost due west, and about one mile away.
Defendants testified in their own behalf, and the only controversy of fact appearing in the record is their denial that they made the statement to either Mr. Lins or to the two policemen that the automobile body had been taken from a car which was purchased or received from an uncle of one of the defendants. They do say that they did not steal Fry’s automobile, and did not know of the whereabouts of the body until informed by Brock, after which Edmondson says he and Burse went to see the body. Burse denies they went to see the body, The defendants do not deny that they made an effort to sell the body to Mr. Payne, nor do they deny that they took Mr. Payne to the lane where the body was concealed and showed it to him with a view of selling it to him.
Defendants’ assignments of error are based on the contention that they never had actual and physical possession of the automobile 'body, and therefore were not guilty of unlawfully receiving it.
The statute reads as follows:
“Every person who shall fraudulently receive or buy, conceal, or aid in concealing, any goods over the value of thirty dollars, feloniously taken or stolen from another, or goods obtained by robbery or burglary, knowing the same to have been so obtained, with intent to deprive the *219true owner thereof, shall he imprisoned in the penitentiary not less than three nor more than ten years." Shannon’s Annotated Code, section 6549.
In the case of Alexander, Toliver & Messenger v. State, from Shelby county criminal docket, determined by this court at its December term, 1923, at Nashville, the defendants appealed from a conviction for unlawfully receiving stolen property, and made substantially the same contention as is made in the instant case. The facts in that ease were that a building in Memphis had been burglarized and an iron safe removed from the premises to an alley in the rear of the building. Notice of the burglary having been given to the police department, certain policemen visited the place where the burglary was committed, and were present when the three defendants drove up in an automobile truck, stopped within a few feet of the safe, and gathered about the safe, when they were arrested by the policemen. It was contended that there was no evidence that the plaintiffs in error had acquired actual and physical possession of the safe, and therefore were not guilty of unlawfully having received it. The contention was overruléd and the conviction was affirmed.
Mr. Wharf on, in his work on Criminal Law (11th Ed.), vol. 2, pp. 1453, 1454, states the essential elements of the offense of receiving stolen goods as follows:
“Reception must be substantially proved. Manual possession or touch is unnecessary in order to sustain conviction; it is sufficient if there is a control by the receiver over the goods. A person is said to receive goods improperly obtained as soon as he obtains control over *220them from the person from whom he receives them; and the mere aiding in the secreting or disposal of the goods constitutes the offense.”
In Cyc., vol. 34, p. 517, it is said: “To be convicted of receiving stolen goods defendant must have had such control of the property as amounts to constructive possession, at least; but the possession need not be actual and corporal. It may be through the instrumentality of another person, and the offender need not have seen the goods. The receiving too must have been consummated. It is not sufficient if there was an unexecuted agreement to receive or a mere attempt. The same is true of concealing.”
The evidence in the case under consideration shows that defendants executed a bill of sale for the automobile body to Mr. Payne, and carried him to the place where it was concealed in the bushes; and the.weight of the evi dence is that they made a false statement as to the source of their possession, which was evidently to prevent the officers and the purchaser from ascertaining that it had been stolen.
We think the evidence clearly makes out a case of constructive possession in defendants, and that all essential elements of the offense are established by the proof.
The judgment of the lower court will therefore be affirmed.
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01-03-2023
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10-17-2022
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https://www.courtlistener.com/api/rest/v3/opinions/1644700/
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4 So. 3d 587 (2007)
DEMETRIS DEWAYNE DALTON
v.
STATE.
No. CR-05-1811.
Court of Criminal Appeals of Alabama.
February 23, 2007.
Decision of the alabama court of criminal appeals without opinion. Dismissed.
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746 S.W.2d 25 (1988)
Mrs. A.P. BOYETT and Mrs. Norma Sue Boyett Bankston, Appellants,
v.
A.P. BOEGNER, Appellee.
No. 01-87-00459-CV.
Court of Appeals of Texas, Houston (1st Dist.).
February 4, 1988.
*26 Jay B. Goss, Vance, Bruchez, & Goss, Bryan, for appellants.
Vaughn E. Waters, Bryan, for appellee.
Before WARREN, DUGGAN and LEVY, JJ.
OPINION
WARREN, Justice.
This is an appeal from the trial court's order granting appellee's motion for judgment non obstante veredicto in appellant's suit for breach of lease and conversion. The trial court entered judgment in favor of appellants on stipulated interest and attorney's fees, but granted appellee's motion for judgment n.o.v. on the issues submitted to the jury.
On June 1, 1979, appellants leased property in College Station to Jack Sebastian for the operation of a restaurant. In 1983, Sebastian assigned the lease to appellee, who vacated the premises at the termination of the lease on July 1, 1984.
This dispute surrounds appellee's removal of five air conditioning condensing units and two interior gas heating blowers that Sebastian installed during his tenancy. Appellants contend that these units constituted "improvements" and remained appellants' property under the terms of the lease. Appellee maintains that the units were "trade fixtures" and therefore belonged to appellee and were properly removed by him at the conclusion of the lease.
The court concluded that the units were "trade fixtures" and instructed the jury that:
You must confine your deliberations solely to a determination of whether or not [Appellee] caused damage to the remainder of the air conditioning system when he removed the five (5) air conditioning condensing units and two (2) interior gas heating blowers, and you must not consider the value of the five (5) air conditioning condensing units or the two (2) interior gas heating blowers that were removed, in arriving at your answer.
However, the court submitted special issues, over appellee's objection, that asked what sum of money would restore appellants' building to its condition immediately prior to the removal of the units. Appellants' counsel was allowed to argue to the jury, over appellee's objection, that appellants were entitled to the replacement value of the central air conditioning unit that appellee removed. The jury awarded appellants $5000.
The court granted appellee's motion for judgment n.o.v. based upon an insufficiency of pleadings and evidence to support the verdict.
Appellant brings two points of error, challenging the trial court's finding that the air conditioning units were trade fixtures, *27 and the court's granting of appellee's motion for judgment n.o.v.
We will first address the issue of whether the court correctly characterized the air conditioning units as "trade fixtures."
The term "trade fixture" has been defined many times by the courts. In Granberry v. Texas Public Service Co., 171 S.W.2d 184 (Tex.Civ.App.Amarillo 1943, no writ), the court stated:
It is now well settled that, as between a landlord and his tenant, the term `trade fixtures' refers to and means such articles as may be annexed to the realty by the tenant to enable him properly or efficiently to carry on the trade, profession, or enterprise contemplated by the tenancy contract or in which he is engaged while occupying the premises, and which can be removed without material or permanent injury to the freehold.
Id. at 186; see also Tempo Tamers, Inc. v. Crow-Houston Four, Ltd., 715 S.W.2d 658 (Tex.App.Dallas 1986, writ ref'd n.r.e.).
In Moscowitz v. Calloway, 178 S.W.2d 878 (Tex.Civ.App.Texarkana 1944, writ ref'd w.o.m.), the lessors sought an injunction restraining the lessees from removing an air cooling system from the lessor's building. The air conditioning units were composed of boxes containing fans, motors, and evaporative mediums. The units rested on the ceiling or were screwed to the ceiling, and were connected to the building by electric wires and copper tubing laid on the ceiling joists. No injury other than a screw or nail hole would result to the building by their removal. The court said that the cooling system was installed in order for the tenant to conduct his business more efficiently, and that no material or permanent injury would result to the freehold by the removal of the system. Therefore, the court concluded that the air conditioning system was personalty of the tenant.
In White v. Cadwallader, 299 S.W.2d 189 (Tex.Civ.App.San Antonio 1957, writ ref'd n.r.e.), the court held that an air conditioning unit and a heating unit were removable by the tenant as trade fixtures. The air conditioning unit was a self-contained unit that merely rested on the floor of the building. However, the heating unit was suspended by two pipes screwed or bolted to the ceiling joists and vented through the ceiling and roof. The court noted that great latitude is afforded in favor of a tenant, and that fixtures set up by the tenant for the better enjoyment of trade are retained by him. The court adhered to the trial court's implicit finding that no material damage would result to the building by the removal of the air conditioning and heating units.
The only case cited by appellants as authority for the proposition that the air conditioning units are not trade fixtures is Nine Hundred Main, Inc. v. City of Houston, 150 S.W.2d 468 (Tex.Civ.App.Galveston 1941, writ dism'd judgmt cor.). However, that case is distinguished by both Moscowitz v. Calloway and White v. Cadwallader because the air conditioning system in Nine Hundred Main, Inc. extended throughout five floors and included a 40,000 pound compressor and 11 cooling units weighing up to 10,000 pounds each.
The five air conditioning units in our case were installed outside of the building and were each placed upon a concrete pad. They were attached to the building by one suction line, one discharge line, one thermostat line, and one electrical line. The removal of the air conditioning units required only the disconnection of those lines. George Boyett, appellants' agent, testified that the disconnection of the lines did not damage appellants' building.
Appellants contend that their lease agreement with Sebastian, the original lessee, contemplated that all items added to the existing building would be "improvements."
Paragraph 6 of the lease states, "All improvements to existing improvements shall be constructed by Lessee at his sole cost or expense." Paragraph 18 states, "At the final expiration of this agreement... all improvements constructed by Lessee shall become the sole and exclusive property of the Lessor."
*28 We find that the language of the lease does not support appellants' contention. The lease provisions refer only to "improvements." The provisions are unambiguous; therefore, we must determine the rights of the parties by giving legal effect to the contract as written. Ideal Lease Serv., Inc. v. Amoco Prod. Co., 662 S.W.2d 951, 953 (Tex.1983). "[T]he term `improvements' comprehends all additions to the freehold, except `trade fixtures' which can be removed without injury to the building." Nine Hundred Main, Inc. v. City of Houston, 150 S.W.2d at 472 (cites omitted) (emphasis added). We conclude that the language of the lease does not expressly include "trade fixtures."
Appellants' contention that they and Sebastian contemplated that the air conditioning system would be a permanent improvement is equally unpersuasive. Parol evidence is not admissible to show that the terms of the contract do not agree with the previous understanding of the parties. Caviness Packing Co. v. Corbett, 587 S.W.2d 543, 546 (Tex.Civ.App.Amarillo 1977, writ ref'd n.r.e.).
We hold that the condensing units and gas heating blowers were not permanent improvements to appellants' building. The units were removed without material injury to the building. The terms of the lease do not require a contrary finding; therefore, the trial court did not err in instructing the jury that appellee had a legal right to remove the air conditioning units at the conclusion of the lease. Appellants' second point of error is overruled.
We now address appellants' point of error complaining that the trial court erred in granting appellee's motion for judgment non obstante veredicto.
The court's judgment states that there is no evidence to sustain the verdict, and that the pleadings and evidence do not support the submission of the special issues.
In reviewing the grant of a motion for judgment n.o.v., we must determine whether there is any evidence upon which the jury could have made the finding. We review the record in the light most favorable to the finding, considering only the evidence and inferences that support the finding. Navarette v. Temple Indep. School Dist., 706 S.W.2d 308, 309 (Tex. 1986). There is some evidence, or more than a scintilla, if reasonable minds could differ on the existence of a vital fact. Kindred v. Con/Chem, Inc., 650 S.W.2d 61, 63 (Tex.1983).
Appellee objected to the submission of the special issues on the grounds that the issues were without support in the pleadings. Special Issue No. 1 asked what amount of money would restore appellants' building to its condition prior to the removal of the air conditioning units. Special Issue No. 2 inquired as to the reasonable amount of appellants' attorney's fees incurred in the case.
The submission of the issues was inconsistent with the court's instruction that appellee had a legal right to remove the units. The court's finding that the air conditioning units constituted "trade fixtures" meant that appellants were entitled to damages only for physical injury to the freehold incurred by the removal of the units. The language of Special Issue No. 1 erroneously implies that appellants were entitled to the difference in the value of the building before and after appellee removed the air conditioning units, which the court correctly found to be appellee's personal property.
Appellants' petition fails to plead a cause of action for injury to the freehold. They pleaded only that the air conditioning units were "improvements" and that appellants were entitled to the value of the units, alleged to be $10,000, or, alternatively, to the difference in the value of the property before and after the removal, also alleged to be $10,000.
It is evident that appellants proceeded to trial on the sole theory that the air conditioning units were "improvements" that belonged to them, and that were wrongfully removed by appellee. The court's finding that the units were "trade fixtures" rather than "improvements" repudiated appellants' theory. Clearly, the "injury" to the freehold cannot be the loss of the units *29 themselves, because they were rightfully removed as the tenant's personal property.
Further, we find no evidence to support the jury's answer to Special Issue No. 1. Appellants rely on the testimony of two witnesses. George Boyett testified that the difference in value of a comparable commercial property with air conditioning and without air conditioning was $12,000. Eddie Mize testified that the cost of replacing the air conditioning units would be $5,400. Appellants allege that the testimony of Mr. Boyett and Mr. Mize constitute some evidence to support the jury's finding that the cost of restoring the building to its condition prior to the removal of the units was $5,000. However, the testimony provides no evidence of repair or replacement costs of any damaged property belonging to appellants, i.e., property other than the air conditioning units owned by appellee. The testimony of both Mize and Boyett related only to the value of the air conditioning units belonging to appellee, and was legally insufficient to support a verdict in favor of appellants. We conclude that the trial court properly granted appellee's motion for judgment non obstante veredicto.
Appellants' first point of error is overruled. The judgment of the trial court is affirmed.
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746 S.W.2d 803 (1988)
GULF REGIONAL EDUCATION TELEVISION AFFILIATES, Appellant,
v.
UNIVERSITY OF HOUSTON and Florence M. Monroe, Appellees.
No. B14-86-875-CV.
Court of Appeals of Texas, Houston (14th Dist.).
January 21, 1988.
Rehearing Denied March 17, 1988.
*804 Jay S. Siskind, Houston, for appellant.
Kevin Thomas O'Hanlon, Austin, Susan L. Wheeler, Houston, for appellees.
Before PAUL PRESSLER, MURPHY and ELLIS, JJ.
OPINION
ELLIS, Justice.
Gulf Regional Education Television Affiliates (GRETA) and its director Katherine L. Buck sued the University of Houston (the University) and Florence M. Monroe, seeking damages for conversion of property and for interference with business activities and contractual relationships with third parties. On a Rule 12 Motion to Compel Attorney to Show Authority, the trial court ordered the suit dismissed without prejudice and filed findings of fact and conclusions of law. Ms. Buck's claim for wrongful termination was severed, and GRETA appealed, challenging both the trial court's conclusions of law and the use of Rule 12 to dismiss GRETA's claims. We affirm the order of the trial court.
The parties disagree as to GRETA's inception. GRETA maintains that it is an unincorporated association of Gulf Coast area independent school districts and parochial schools that was established in the 1960's to produce and broadcast instructional television programming to its members. While GRETA purchased broadcast time from KUHT, the public television station owned and operated by the University, GRETA claims it was not obligated to broadcast solely on KUHT. In its brief, GRETA states that it had a constitution and that its business was conducted by a board of directors in accordance with by-laws.
The association derived its income from its member school districts through local taxes and state funds (and private sources in the case of its member parochial schools). The board of directors, which consisted of fourteen representatives elected by the membership, set policy and ran the association, entering into contracts and purchasing facilities and equipment. The University, as fiscal agent, actually issued the checks and also provided security, utilities and accounting.
The University states a slightly different set of facts. It asserts that in the 1960's it formulated a proposal, in conjunction with several Houston area school districts, to make educational programs available to area students through broadcasts on KUHT. To implement the proposal, the *805 University established GRETA as an auxiliary enterprise of the University and hired a director to coordinate the purchase of air time from KUHT. The member school districts elected representatives to a board of directors, whose function was to advise KUHT of the members' wishes regarding programming. The University collected money on a per student basis from the members through GRETA, and the funds were deposited by the GRETA director in a University account from which the KUHT bill was paid.
In 1985, University auditors discovered that, at the direction of the GRETA board, GRETA director Katherine Buck had for several years been depositing the GRETA funds in an account at MBank Pasadena rather than in University accounts. The governing board of each state institution of higher education is directed to designate special depository banks to hold certain receipts of the institution, including those derived from auxiliary enterprises, separate and apart from funds that are deposited in the state treasury. Tex.Educ.Code Ann. § 51.008(a), (b) (Vernon 1987 & Supp. 1988). The University Board of Regents had not so designated MBank Pasadena. Upon this discovery, Florence Monroe, Associate Vice President for Public Service and Telecommunications, dismissed Ms. Buck as director. The University then discontinued GRETA as an auxiliary enterprise and assumed sole responsibility for educational programming at KUHT. The locks on the GRETA facility were changed, equipment seized and employees released.
The president of the GRETA board then contacted several board members by telephone and received authorization to hire an attorney to file a lawsuit against the University and Ms. Monroe. As defendants, the University and Ms. Monroe moved to compel plaintiff's attorney to show his authority to maintain suit on behalf of GRETA. They argued that GRETA is an auxiliary enterprise of the University, that the University is an arm of the State of Texas, and that only the Attorney General of Texas is authorized to bring suit on behalf of an arm of the state. At a hearing on the motion, defendants also questioned whether a quorum of the GRETA board had authorized the suit and whether GRETA is a public body subject to the Open Meetings Act.
The relevant findings of fact and conclusions of law are set forth as follows:
FINDINGS OF FACT
3. GRETA is an auxiliary enterprise of the University of Houston.
6. GRETA has a Board of Directors elected from among the membership.
7. Since June 24, 1985, the GRETA Board has not met in a publicly called open meeting convened under the provisions of Art. 6252-17 V.A.T.S.
8. This suit was filed on February 20, 1986, by Mr. Jay S. Siskind, Attorney at Law on behalf of GRETA.
9. Authorization to bring this suit was made by Mr. Carl (sic) Thomas, Chairman of the GRETA Board, after informal telephone consultation with five GRETA Board members.
10. Six Board members do not constitute a quorum of the GRETA Board. This suit has not been authorized by a quorum of the GRETA Board at an open meeting.
11. Neither The Board of Regents nor the administration of the University of Houston System have authorized the filing of this suit.
12. The Office of the Attorney General of Texas did not authorize the filing of this suit.
CONCLUSIONS OF LAW
1. Gulf Region (sic) Education Television Affiliates (hereinafter GRETA) is an auxiliary enterprise of the University of Houston and subject to governance by the Board of Regents of the University of Houston.
2. A suit brought by or on behalf of an auxiliary enterprise of the University *806 of Houston must be authorized by the Board of Regents of the University of Houston.
3. The GRETA Board is a public body within the meaning of the Texas Open Meetings Act. (V.A.T.S. Art. 6252-17).
4. No public body may take an official action unless it is taken at a public meeting.
5. Since the purported authorization to bring this suit was not taken at a public meeting it was void.
6. Plaintiff GRETA and attorney Jay Siskind were not authorized to file or maintain this suit against the University of Houston.
In its first of seven points of error, GRETA argues that the trial court erred in dismissing the suit because GRETA was an unincorporated association with authority to sue or be sued in its own behalf and was therefore authorized through its attorney of choice to file and maintain this suit. In point of error two, GRETA asserts that the court erred in concluding that GRETA was subject to governance by the University Board of Regents because it was an unincorporated association governed by its own board of directors. GRETA's third point of error is that because of its unincorporated association status, the trial court erred in concluding that GRETA and its attorney were not authorized to bring this suit and that a suit brought by GRETA must be authorized by the University.
Given the wording of the points of error, GRETA apparently does not challenge the trial court's findings of fact but rather challenges the conclusions of law. Thus, it is our duty to review the correctness of the legal conclusions drawn from the facts actually found. Harry Hines Medical Center, Ltd. v. Wilson, 656 S.W.2d 598, 603 (Tex.App.Dallas 1983, no writ).
The principal issue is the nature of GRETA or, rather, that of an auxiliary enterprise. All parties agree that GRETA is an auxiliary enterprise of the University. However, they disagree as to the resulting relationship between the two entitiesspecifically, whether GRETA is actually a part of the University subject to the latter's control. The University defines an auxiliary enterprise as a self-supporting component such as KUHT, the athletic department, the housing and food service programs and the bookstore. GRETA, on the other hand, likens its status to that of an unincorporated association.
Auxiliary enterprises are nowhere defined in the statutes or case law. Our information thus comes from the record, primarily through the testimony of Scott Chafin, University Counsel, and a letter written in 1972 to a GRETA board president by a University vice president. Chafin testified that at the University and at two other state universities at which he was employed, the term auxiliary enterprise has meaning insofar as budgeting and financial records are concerned. State universities derive their funds from a variety of sources (state appropriations, tuition and fees, contracts and grants, gifts and endowments). However, there are certain university operations that are self-supporting and are prohibited by law from being funded through those sources. It is these operations that traditionally have been called auxiliary enterprises.
The University apparently does not have to have direct control over an operation to consider it an auxiliary enterprise. For example, the housing operation is supported by dormitory rentals and is run by the University. The food operation, however, is run by an outside contractor with the University maintaining very close control over it. Both operations are considered auxiliary enterprises. Also, it is not uncommon for an auxiliary enterprise to have a board of trustees, a board of directors or an advisory board. When asked how University control manifests itself over an auxiliary enterprise such as GRETA, Chafin responded that the enterprise is managed by University employees who report through a particular chain of *807 command. GRETA's director, who was considered by the University to be a University employee and who was paid by the University through the University payroll office, reported to the officer who is in charge of telecommunications, Dr. Monroe. Dr. Monroe reports to the vice president for academic affairs, who in turn reports to the president of the University system. The chain of command is no different from that of an academic department or any other office or component of the University.
Chafin also testified that GRETA was subject to audit and financial controls by the University. When asked if the University was supposed to control GRETA's funds, Chafin answered that the University perceived its operation with GRETA as it does any situation in which it receives funds from outside, such as grant money. Once those funds arrive at the University, they are viewed as University funds. He reiterated that, according to section 51.008 of the Texas Education Code, funds from auxiliary enterprises are required to be maintained and controlled by the University subject to its internal financial mechanisms and placed in the University's depository bank.
Finally, Chafin testified that GRETA employees were considered to be University employees subject to the personnel policies and management procedures. The only distinction would be one of financial record keeping, that is, the origin of the funds to pay their salaries.
According to the testimony of Charles Thomas, GRETA board president, GRETA has operated as an auxiliary enterprise as defined in a letter written to the board in 1972. At that time a conflict had arisen over an increase in the fee the University charged GRETA to act as fiscal agent. The board attempted to get GRETA's relationship with the University defined, and Patrick Nicholson, Vice President of Development, responded with the letter. Its relevant sections are as follows:
Auxiliary enterprises are organizations or agencies which carry out various aspects of one or more of the University's three missions: teaching, research and public service. They are outside the normal structure of colleges, divisions, departments and schools of the University, but are part of the University "family".
Most of our auxiliary enterprises are administered by a University official, and simply follow overall University policy; several, however, including GRETA and ACT, have their own board of directors as a policy-making body.
The auxiliary enterprises are usually provided with certain indirect support, including housing, utilities, maintenance and accounting services; they are expected, however, to make their own way financially.
Where a separate directorate is involved, as in the case of GRETA and ACT, we expect that the governing body will make and implement policy. We hope that the University is consulted on matters affecting it, and this has been the case in virtually every instance I can recall involving auxiliary enterprises. We find it necessary for auxiliary enterprises to follow University policy on such details as employee classification systems, fringe benefits, rate of per diem, mileage, etc. Otherwise, there could understandably be varying degrees of difficulty in meshing operations of the auxiliary enterprises into the overall institution.
Because of the complexities of tax returns, record-keeping, fringe benefits, etc., auxiliary enterprise employees are employees of the University. We expect GRETA or similar organizations, nevertheless, to have a major role in the selection of personnel.
Auxiliary enterprises can and do enter directly into contracts, and receive grants and contributions. Large complex grants such as that for the "3, 4, 5 Club," however, are entered into by the University for a number of reasons, including policies and wishes of contracting agencies and companies who look finally and legally to the University for *808 fulfillment of large-scale agreements involving auxiliary enterprises.
GRETA claims that this letter defines the relationship between the two entities and the course of conduct that has evolved over the years. GRETA asserts that it operates outside the normal structure of the University and emphasizes that it is self-supporting, manages its own affairs, is able to enter into contracts and can receive grants and contributions from third parties. The argument is made that GRETA is an unincorporated association functioning as an auxiliary enterprise and is therefore able to sue or be sued. GRETA further argues that it is not an agency of the state as it was not created by specific legislative enactment nor established as a component of the University by the Education Code. Finally, the legislature has impliedly acknowledged that auxiliary enterprises are separate entities by not requiring that their funds be deposited in the state treasury. Those funds thus are not considered public funds belonging to institutions of higher learning. In sum, GRETA argues that as an auxiliary enterprise, it is independent of the University and of University control.
We must resolve this dispute in somewhat of a vacuum as the statutes and cases provide little guidance. However, after examining the record, we affirm the conclusions of law that GRETA is subject to governance by the Board of Regents and that a suit brought by or on its behalf must be authorized by the Board of Regents. While the University apparently allows its auxiliary enterprises to exercise varying degrees of autonomy, it retains ultimate responsibility for and control over those enterprises. This is clear from the testimony of Scott Chafin but is even clearer from the Nicholson letter on which GRETA relies for its assertion of independence.
The letter states that auxiliary enterprises are considered part of the University "family" and speaks of the necessity of following University policy on some matters to facilitate the meshing of their operations into the overall institution. Also, auxiliary enterprise employees are employees of the University. Even the language allowing auxiliary enterprises a major role in the selection of personnel suggests that the University reserves the option to participate. Finally, and most importantly, while auxiliary enterprises can enter directly into contracts, the University recognizes that, particularly in the case of major contracts, the contracting parties ultimately hold the University legally responsible.
We interpret the Nicholson letter as anticipating varying degrees of independence among the auxiliary enterprises at the University; we do not interpret it as relinquishing complete control. Furthermore, the fact that the legislature directs state institutions of higher education to deposit funds from auxiliary enterprise accounts into special depository banks rather than in the state treasury implies that the legislature assigns control over the funds, and consequently over auxiliary enterprises, to those institutions. We conclude that as an auxiliary enterprise, GRETA is part of the University and is therefore subject to governance by the University Board of Regents. The Board of Regents has the power to sue or be sued in the name of the University, Tex.Educ.Code Ann. § 111.33 (Vernon Supp.1988), and did not authorize the filing of this suit. GRETA and its attorney had no authority to bring this suit, and points of error one through three are overruled.
In points of error four and five, GRETA challenges the trial court's conclusions of law that GRETA is a public body within the meaning of the Texas Open Meetings Act, that no public body may take an official action unless it is taken at a public meeting, and that the purported authorization to bring this suit was void because it was not taken at a public meeting. GRETA argues that as an unincorporated association composed of independent school districts and private parochial schools, it does not meet the definition of a public body and is therefore not subject to the Act.
The statute at issue prohibits governmental bodies from holding meetings *809 which are closed to the public. Tex.Rev. Civ.Stat.Ann. art. 6252-17 (Vernon Supp. 1988). Briefly, the Act is applicable if the following five prerequisites are met:
(1) The body must be an entity within the executive or legislative department of the state;
(2) The entity must be under the control of one or more elected or appointed members;
(3) The meeting must involve formal action or deliberation between a quorum of members.
(4) The discussion or action must involve public business or public policy.
(5) The entity must have supervision or control over that public business or policy.
Op.Tex.Att'y Gen. No. H-772 (1976).
Without an exhaustive analysis, we find support for the trial court's conclusions. First, GRETA is an auxiliary enterprise of the University, and the latter, as a state-supported university, is part of the executive branch of the state. See Op.Tex.Att'y Gen. No. H-772 (1976) (general faculty of a state college or university and Texas Tech Athletic Council clearly satisfy the first prerequisite). Second, the member schools elected a board of directors to formulate policy and to run the organization through its officers, general manager and employees. Third, the record suggests that board action required the approval of a quorum (at least one-half) of the board. Fourth, the board's business involved the expenditure of some public funds (the local taxes and state funds from which GRETA derived part of its income) and concerned public education. Fifth, there is no question that the University looked to GRETA to operate educational programming in conjunction with KUHT and chose to exert little control over that particular auxiliary enterprise. Thus, the trial court's conclusions of law were correct, and the GRETA board's action to hire an attorney was void because it was not taken in a public meeting. See Lower Colorado River Authority v. City of San Marcos, 523 S.W.2d 641, 646 (Tex.1975). Points of error four and five are thus overruled.
GRETA next asserts that the trial court erred in failing to find requested additional and amended findings of fact and conclusions of law as those additional findings and conclusions are consistent with the evidence and applicable law herein and dispositive of the question of GRETA's authority to bring this suit. The trial court is not required to make requested additional findings, however, when they are covered by and directly contrary to the original ones filed by the court. Shelby International, Inc. v. Wiener, 563 S.W.2d 324, 328 (Tex.Civ.App.Houston [1st Dist.] 1978, no writ). Furthermore, the requested additional and amended findings of fact and conclusions of law were not dispositive of GRETA's authority to bring this suit and would not have required a different result if made. Id. Point of error six is overruled.
GRETA's final point of error is that the trial court erred in using Tex.R.Civ.P. 12 to dismiss the claim because by its action the court decided the ultimate fact issue and thereby deprived GRETA of its right to a trial on the merits. GRETA argues that the court misapplied Rule 12, which is intended to be used to prevent an attorney from purporting to represent a client when the client has not authorized that representation. The court instead used the rule to determine the nature of GRETA and thus whether GRETA had the authority to hire an attorney.
GRETA's argument is a somewhat narrow interpretation of the rule. Several cases, including one cited by GRETA, illustrate that a Rule 12 motion has been used to question whether a party has the power or authority to hire an attorney. In Angelina County v. McFarland, the respondent sought to dismiss an application for writ of error on the ground that the county and the sheriff, who previously had been represented by the county judge, could not be represented by a private law firm when the *810 county judge had not withdrawn and the commissioners' court had not authorized that representation. 374 S.W.2d 417 (Tex. 1964). The use of the rule would have been proper in that context except that it was the plaintiff who challenged the representation, and the supreme court held that the rule authorized only defendants to do so. Id. at 423. (That limitation was removed in the 1981 changes in the Rules of Civil Procedure.) See also Victory v. State, 138 Tex. 285, 158 S.W.2d 760 (Tex. Comm'n App.1942, opinion adopted) (challenging the authority of an attorney who was not the county attorney to represent the state in a delinquent tax suit); Cook v. City of Booker, 167 S.W.2d 232 (Tex.Civ. App.Amarillo 1942, no writ) (attacking the authority of nonresident attorneys to represent the City of Booker and the Booker Independent School District). Thus, we find no error in the use of Rule 12 to dismiss GRETA's claim, and point of error seven is overruled.
We affirm the trial court's order.
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746 S.W.2d 902 (1988)
Raul GONZALES, Appellant,
v.
The STATE of Texas, Appellee.
No. 13-87-146-CR.
Court of Appeals of Texas, Corpus Christi.
February 25, 1988.
*903 Hector Rene Gonzalez, Corpus Christi, for appellant.
Grant Jones, Dist. Atty., Deanie King, Asst. Dist. Atty., Corpus Christi, for appellee.
Before NYE, C.J., and UTTER and BENAVIDES, JJ.
OPINION
NYE, Chief Justice.
This is an appeal from a plea of guilty to attempted burglary of a habitation. Punishment, enhanced by two prior felony convictions, was assessed at twenty-five years. By three points of error, appellant complains that the trial court failed to properly admonish him of the consequences of his plea, thereby making it involuntary and depriving him of his constitutional right to due process of law. Appellant specifically contends that the trial court's admonishment on the range of punishment was insufficient. We disagree and affirm the judgment of the trial court.
Appellant was charged by indictment with attempted burglary of a habitation. The indictment also alleged that appellant had two previous felony convictions. Appellant pled guilty to the primary offense and "not true" to the enhancement portion of the indictment. Trial was before the court.
Before any admonishments were given, the following transpired:
THE COURT: All right. How do you plead to the indictment, guilty or not guilty?
THE DEFENDANT: Guilty, Your Honor.
THE COURT: Is that guilty to
THE DEFENDANT: To attempted burglary.
THE COURT: the first count, attempted burglary, and not guilty as to the remaining
THE DEFENDANT: Yes, sir.
THE COURT: which contains, I think, reference to two prior convictions?
MR. GONZALEZ (defense counsel): Right. We are entering not true to those enhancements.
The trial judge then admonished appellant on the range of punishment applicable to the offense of attempted burglary of a habitation in the following manner:
THE COURT: All right. Now, one charged with this offense, that is, attempted burglary, may be punished by confinement. This isthis is a second degree, is it?
[DEFENDANT'S ATTORNEY]: Yes, sir.
THE COURT: All right. You may be confined in the Texas Department of Corrections for a period not less than 2, nor more than 20 years, and fined up to $10,000. Do you understand that?
THE DEFENDANT: Yes, Your Honor.
THE COURT: And based on your plea alone, to this charge, that could be the sentence of the Court, 20 years in the penitentiary. Do you understand?
THE DEFENDANT: Yes, Your Honor.
THE COURT: Or up to that amount.... All right. Now, after the explanations concerning the possibility of punishment, do you still wish to plead guilty?
THE DEFENDANT: Yes, Your Honor.
No admonishment on the range of punishment applicable for a repeat offender or habitual felony offender was given. The court accepted the plea of guilty and found appellant guilty.
*904 The State then proved that appellant had previously been finally convicted of two felony offenses. Appellant did not present any evidence to rebut the enhancement allegations. The trial court found the enhancement portion of the indictment to be true and adjudged appellant to be a habitual felony offender. Pursuant to Tex. Penal Code Ann. § 12.42 (Vernon Supp.1987), a habitual felony offender may be punished by confinement in the Texas Department of Corrections for life, or for any term of not more than ninety-nine years or less than twenty-five years.
Tex.Code Crim.Proc.Ann. art. 26.13 (Vernon Pamph.1987) requires a trial court to admonish a defendant on the range of punishment attached to an offense before accepting a plea of guilty. The admonishment must come from the trial court, and it is insufficient if the admonishment comes from counsel. Jackson v. State, 587 S.W.2d 398 (Tex.Crim.App.1979); Murray v. State, 561 S.W.2d 821, 822 (Tex.Crim.App. 1977).
The purpose of this admonishment is to insure that the defendant enters his plea with full knowledge of its consequences. An affirmative showing of such knowledge is constitutionally required. Boykin v. Alabama, 395 U.S. 238, 89 S. Ct. 1709, 23 L. Ed. 2d 274 (1969); Whitten v. State, 587 S.W.2d 156, 158 (Tex.Crim.App. 1979). "Consequences" of a plea has been interpreted to mean the punishment provided by law for the offense and which can be inflicted under the plea. Eubanks v. State, 599 S.W.2d 815, 816 (Tex.Crim.App.1980).
When a defendant pleads guilty to an indictment that alleges prior convictions for enhancement purposes, the accused should be admonished of the full range of punishment available through enhancement. Taylor v. State, 591 S.W.2d 826, 828. (Tex.Crim.App.1979). See also, Ricondo v. State, 634 S.W.2d 837 (Tex.Crim. App.1981). In the instant case, a full admonishment would have informed appellant that the primary offense was punishable by confinement for not less than two or more than twenty years with a possible fine of ten thousand dollars. Tex.Penal Code Ann. § 30.02 (Vernon 1974). In addition, the appellant should have been admonished that in the event the State proved one prior felony conviction, the punishment range would then be five to ninety-nine years or life, and if two prior convictions were proved, the range would then be twenty-five to ninety-nine years or life. Tex.Penal Code Ann. § 12.42 (Vernon Supp.1987).
When a trial court completely fails to admonish a defendant, such failure constitutes reversible error without regard to whether the defendant was harmed. But where the record indicates that the defendant received an admonishment with respect to punishment, although not a complete one, there is a prima facie showing that the plea of guilty was knowingly and voluntarily made. The burden shifts to the defendant to show that he entered the plea without understanding the consequences of his action and was "misled or harmed by the admonishment of the Court." Ex parte Smith, 678 S.W.2d 78, 79 (Tex.Crim. App.1984); Ex parte McAtee, 599 S.W.2d 335, 336 (Tex.Crim.App.1980); article 26.13.
This is not a case, however, where the trial court completely failed to admonish the accused on the range of punishment. Appellant pled guilty only to the primary offense. He pled "not true" to the enhancement allegations and placed the burden upon the State to introduce sufficient evidence to support those allegations.
In addition, the record as it was developed, fails to show that appellant was harmed. During closing arguments at the sentencing hearing, the State recommended that appellant receive a sentence of fifty years for the burglary and the enhancement. Appellant's attorney responded by requesting that the court assess the minimum term (twenty-five years for the burglary and the enhancement). The colloquy between appellant's attorney and the State's attorney before the court clearly *905 shows that appellant was not "misled" by the court's admonishment. Appellant did not object to the trial court's failure to fully admonish him; he did not at any time attempt to withdraw his plea; and he did not file a motion for new trial. Appellant received the sentence he requested: twenty-five years.
While it would have been better practice for the trial court to completely admonish the accused on the punishment possibilities which might occur should the trial court find one or both of the enhancement allegations true, we find that the trial court substantially complied with art. 26.13 by instructing the accused on the punishment range applicable to the primary offense alleged, the only allegation to which he pled guilty. Under these circumstances, the burden shifted to appellant to show that he entered his plea without understanding the consequences of his actions or that he was misled by the trial court.
Where there is no showing that a defendant was prejudiced or injured by the failure of the trial court to fully comply with Article 26.13, that failure to fully comply will not constitute reversible error on appeal. Guster v. State, 522 S.W.2d 494, 495 (Tex.Crim.App.1975). Appellant cannot now complain that he was misled or injured by the trial court's failure to fully comply with Article 26.13.
The record here affirmatively shows that appellant was admonished to the portion of the indictment to which he pled guilty. If it can be argued that appellant was unaware of the plea's consequences or was misled by the trial court, the burden is on the appellant to demonstrate such harm. No harm was shown by this appellant.
Appellant's points of error are overruled and the judgment of the trial court is AFFIRMED.
BENAVIDES, Justice, dissenting.
I respectfully dissent. The appellant was admonished that he would receive no more than twenty years for the offense for which he was convicted. He was assessed punishment at twenty-five years. Under such circumstances, I feel the majority is incorrect in requiring the appellant to show that he was harmed by the improper admonishment, and in not finding that appellant's due process rights were violated.
The majority correctly states that in this case that: (1) a proper admonishment would have informed appellant that the primary offense was punishable by confinement for not less than two or more than twenty years with a possible fine of ten thousand dollars; and, that (2) the appellant should have been admonished that in the event the State proved one prior felony conviction, the punishment range would then be five to ninety-nine years or life, and if two prior convictions were proved, the range would then be twenty-five to ninety-nine years or life. Before the plea of guilty was accepted, the appellant should have been admonished of the full range of punishment available through enhancement. Taylor v. State, 591 S.W.2d 826, 828 (Tex.Crim.App.1979); Ricondo v. State, 634 S.W.2d 837 (Tex.Crim.App.1981).
It is the well-established rule that "a failure of the trial court to admonish the defendant concerning the range of punishment is reversible error without regard to whether the defendant was harmed." Walker v. State, 524 S.W.2d 712 (Tex.Crim. App.1975). In Ex parte McAtee, the Court of Criminal Appeals explained the Walker rule:
The reasoning behind this rule is that where the record indicates that the defendant has received an admonishment with respect to punishment, although not a complete one, there is a prima facie showing of a knowing and voluntary plea of guilty. The burden then shifts to the defendant to show that he entered the plea without understanding the consequences of his action and thus was harmed. Where there is a total failure to admonish concerning punishment, however, there is no prima facie showing; the defendant has received no *906 warning whatsoever as to the punishment that is liable to be assessed. In such a case the danger of the defendant entering an unknowing and involuntary plea is so great that no specific harm need be shown. See Boykin v. Alabama, 395 U.S. 238, 89 S. Ct. 1709, 23 L. Ed. 2d 274 (1969).
Ex parte McAtee, 599 S.W.2d 335 (Tex. Crim.App.1980). (Emphasis mine).
In the instant case, the appellant received no warning whatsoever as to the punishment that could be and was in fact assessed against him. Rather, he was in effect admonished that such a punishment could not be assessed.
Tex.Code Crim.Proc.Ann. art. 26.13 (Vernon Pamph.1987) requires the court to admonish a defendant on the range of punishment before accepting a plea of guilty. It is insufficient if the admonishment comes from counsel. Jackson v. State, 587 S.W.2d 398 (Tex.Crim.App.1979). The statement by the State's attorney does not constitute an admonishment, nor does defense counsel's request for "the minimum sentence" after appellant had been found guilty demonstrate that the appellant entered his plea with the knowledge that a twenty-five year sentence could be assessed.
In Weekley v. State, 594 S.W.2d 96 (Tex. Crim.App.1980), the Court reversed the conviction of an appellant who had been assessed a twenty-five year sentence after being admonished that he could not be assessed a term of more than twenty years. The Court, quoting and approving Tellez v. State, 522 S.W.2d 500 (Tex.Crim.App.1975), referred to the purpose of the punishment admonishment and noted the inapplicability of the "harm issue" as follows:
... the Court observed that the purpose of the punishment admonishment was "to avoid a situation where an accused thought his possible punishment could be a certain number of years and then (after he had entered his plea of guilty) learn that he had been assessed a greater punishment." That observation is still sound today ... We do not consider the issue of harm under the circumstances because we conclude that on the facts of this case the admonishment did not constitute substantial compliance.
Weekley, 595 S.W.2d at 97.
Similarly, in Whitten v. State, 587 S.W.2d 156 (Tex.Crim.App.1979), the Court did not require the appellant to show harm when there was no substantial compliance. The Court reviewed and recognized two circumstances where deficient admonishments are considered to be in substantial compliance with art. 26.13:
[1.] ... where an admonishment was not given but it was immaterial to the plea in that case, such as where the trial court failed to admonish on the non-binding character of prosecutorial recommendations and no prosecutorial recommendations had been made.
[2.] ... where a required admonishment is given, but is given in a different form than that prescribed in the statute yet which effectively satisfied the statutory requirements.
Whitten, 587 S.W.2d at 158.
As to the second circumstance, the Whitten Court explained that "there are two essential elements in these tolerated admonishments that are present in every case. First, the trial court gives the admonishment and, second, it is given directly to the Defendant." Whitten, 587 S.W.2d at 158.
After the plea of guilty had been accepted, and after the trial court had found the two alleged prior offenses to have been committed by the appellant, the State's attorney requested that the accused be assessed a fifty year sentence. In his argument to the trial court, the State's attorney argued that since the court had found the defendant guilty of the two prior offenses the punishment range then "... goes from 25 years to 99 years or life." Defense counsel, in his argument, requested the minimum sentence. The trial court did not give the required admonishment and the *907 prosecutor's argument on the applicable punishment was directed to the court. Since there was no substantial compliance with art. 26.13, no harm need be shown. Whitten, 587 S.W.2d at 158.
The record does not affirmatively show that the appellant was aware of the consequences of his plea when he entered his plea of guilty. On the contrary, the record affirmatively shows that the appellant was made aware that he could be assessed a punishment of no more than twenty years. In effect, the appellant received a false admonishment from the court. I would hold that, such admonishment when combined with the twenty-five year sentence constituted a violation of appellant's right to due process of law under the U.S. Constitution. Boykin v. Alabama, 395 U.S. 238, 89 S. Ct. 1709, 23 L. Ed. 2d 274 (1969).
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https://www.courtlistener.com/api/rest/v3/opinions/1521294/
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436 A.2d 314 (1981)
CHESAPEAKE AND POTOMAC TELEPHONE COMPANY OF MARYLAND, Defendant-Third Party Plaintiff Below, Appellant,
v.
CHESAPEAKE UTILITIES CORPORATION, Plaintiff Below, Appellee.
Supreme Court of Delaware.
Submitted January 12, 1981.
Decided September 10, 1981.
Somers S. Price (argued) of Potter, Anderson & Corroon, Wilmington, for appellant.
Douglas B. Catts (argued) of Schmittinger & Rodriguez, P. A., Dover, for appellee.
Before HERRMANN, C. J., QUILLEN and HORSEY, JJ.
*316 HORSEY, Justice:
This interlocutory appeal primarily concerns the duties, for purposes of tort liability, of an employer of an independent contractor to the latter's employees under Maryland law.
Chesapeake and Potomac Telephone Company of Maryland, a Maryland corporation,[1] contracted with Teal Construction, Inc., a Delaware corporation, for Teal to perform certain underground conduit and manhole construction work along West Isabella Street in Salisbury, Maryland in late 1969. Chesapeake Utilities Corporation, a Delaware corporation,[2] was the owner of an underground four inch gas main that ran down Isabella Street on the other side of the street from Teal's construction work. In March, 1970, while construction was in progress, an explosion occurred in a completed manhole causing injuries to two of Teal's employees, John Hopkins and Joseph Martinowski, Delaware residents. Hopkins *317 and Martinowski[3] filed in Superior Court a personal injury action for negligence against Gas Co. Gas Co. then asserted a third party claim for contribution against Telephone Co. and Teal as alleged joint tortfeasors. Later, Gas Co. abandoned its claim over against Teal.[4]
The appeal solely relates to Gas Co.'s third party claim against C&P Telephone for contribution.[5] The theory of Gas Co.'s claim is that C&P Telephone, as well as Gas Co., was guilty of negligence through breach of certain duties Telephone Co. allegedly owed plaintiffs, and that such negligence (along with Gas Co.'s) was a proximate cause of plaintiffs' injuries.
The questions certified for appeal concern the correctness of (1) Superior Court's denial of Telephone Co.'s motion for a directed verdict made at the close of evidence; and (2) the jury verdict and judgment finding Telephone Co. to be a joint tortfeasor with Gas Co. and liable in negligence to plaintiffs "to the extent of 70 percent of the amount ultimately determined to be their reasonable damages for personal injuries resulting from the gas explosion." This interlocutory appeal, accepted April 21, 1980, is interlocutory only in that there remains to be tried below the issue of the reasonableness of Gas Co.'s settlement with plaintiffs for purposes of determining Telephone Co's contribution to liability and damages.
Telephone Co.'s appeal of the verdict and judgment is limited to alleged legal error in the Trial Court's jury instructions as to Telephone Co.'s duties to plaintiffs under the law of negligence.
Telephone Co.'s motion for a directed verdict contested each of Gas Co.'s numerous allegations as to Telephone Co.'s negligence, including the following key averments:
A. that Telephone Co. failed to provide Teal's employees, including plaintiffs, with a safe place to work;
B. assuming Teal to be an independent contractor (as the jury found), that Telephone Co. was nevertheless liable for Teal's negligence under each of the following Restatement of Torts exceptions to the common law independent contractor rule (exonerating an employer from liability for the negligence of its independent contractor-employee):
B-1. the work contracted to Teal was inherently dangerous or dangerous in the absence of special precaution;
B-2. failure of Telephone Co. to exercise control over matters as to which it had retained some control;
B-3. failure of Telephone Co. to recognize a commonly known danger at the construction site and to take appropriate action;
B-4. failure of Telephone Co. to halt Teal's operations or to remove danger after becoming aware that *318 Teal's workmen were creating a dangerous situation.
C. that Telephone Co. was guilty of negligence through breach of unspecified duties, contractual and assumed.
The Trial Court summarily denied Telephone Co.'s motion for a directed verdict as to all issues raised. In a bench ruling, the Court stated:
"THE COURT: It seems to me that of all the issues raised, the one on special dangers does call for the Court to make a preliminary or threshold decision. In that respect I'm not persuaded that it ends with the notion that a manhole is not inherently dangerous or that there is no special danger about a manhole.
I think we are concerned in this case, as in all cases, with the particular facts of the case. And here we are dealing with a manhole that was one of several along a street in which there were gas mains nearby, and clearly designated, which I suggest could be looked upon as special dangers or inherently dangerous. Therefore, I think it applies in this case.
As to all of the other issues that were raised, some of which, as a trier of fact, might be easily disposed of, others not so easily, it seems to me that none of them present themselves as issues that can be legally determined in advance, and that they lend themselves more appropriately to a decision by the jury. So your motions on all of the various points raised, Mr. Price, are denied."
Following the jury charge, Telephone Co. took exception to all instructions as to its liability based on either its negligence or Teal's conduct.
We find that Telephone Co. was entitled to a directed verdict as to issues B-3 and B-4 above. We also find the Trial Court to have erred in its instruction as to issue C above (charging Telephone Co. with negligence through breach of unspecified assumed duties). Therefore, we must reverse and remand for a new trial.
Rather than taking up only the issues requiring reversal, we discuss seriatim each of the key directed verdict issues.[*] We do so because of their interrelationship and for guidance in the event of a new trial. This, in turn, calls for a more lengthy recital of the facts than in the normal appeal.
I
In a pretrial statement, the parties had stipulated to the following admitted facts: (1) that combustible gas in the manhole, known as manhole H, was "at least one of the proximate causes of the explosion"; (2) that the gas was a natural gas of Gas Co.; (3) that the gas had "leaked" from Gas Co.'s main that lay between 25 and 30 feet away across the street; (4) that the gas had "seeped" into the completed manhole in which plaintiffs were working; (5) that the negligence of Gas Co. was "at least one of the direct and proximate causes of the gas explosion"; (6) that the explosion occurred when Hopkins lit a cigarette while in the manhole with Martinowski and the spark ignited Gas Co.'s natural gas that had seeped into the manhole; (7) that neither plaintiffs, Teal, Telephone Co. nor Gas Co. was aware, before the explosion, that gas was present in the manhole; (8) that had the manhole been tested the presence of natural gas would have been detected; and (9) that although the contract between Telephone Co. and Teal "required both vapor testing and ventilation of the Manhole by someone before it was initially entered for the day by workmen, neither vapor testing nor ventilation was conducted before [plaintiffs] entered the Manhole." (underlining added).
Other facts, largely undisputed,[6] are: that Telephone Co. assigned one employee to the job on a full-time basis, an "inspector", Robert Money. Money's immediate *319 superior was a Telephone Co. construction foreman, Walter Horsman, who made only periodic visits to the construction site. Horsman's superior in Telephone Co., Richard Grubb, project manager, supplied both Money and Horsman with a set of the construction plans but did not provide either of them with a copy of the contract documents. And neither Money nor Horsman was informed of the contract's provisions as to "Safety Practices" relating to the dangers of combustible gas "when working in or around completed manholes."[7] Further, neither money nor Horsman was informed, or aware, of the fact that the contract documents also included the "Bell System Practices" as to precautions to be taken at manholes for combustible gas.[8]
The construction plans (prepared by Telephone Co. for Teal's use) showed the presence of a four inch gas main on the opposite side of West Isabella Street and about 25 to 30 feet from the construction work. The gas main's location in the street bed had also been staked and marked at the site by a Gas Co. representative.
Telephone Co. had provided Money with a gas vapor tester which, according to Horsman, was to be available for Teal's men and "at their disposal." But Money's understanding was that the vapor test was for his personal use and only for Teal's use "if the contractor (Teal) requested it." Money kept the vapor tester in his truck at the job site but conceded that he never told Teal's men that he had a vapor tester in his truck. According to Grubb, Telephone Co.'s gas detection equipment was only to be used by Telephone Co. personnel. Neither Grubb nor Horsman had any discussions with Money about safety practices on the Teal job before the explosion.
Teal had a policy, but no rule, against smoking in manholes. But Teal's job superintendent, William Godwin, didn't think that newly-completed manholes required testing for gas; and Godwin had never seen or used a vapor tester or ventilating equipment in prior manhole construction work. Teal provided Godwin with the construction plans but not the contract. Godwin, like Money, did not know that there were any provisions in the contract that required vapor testing of manholes before entry and ventilation. Teal had no vapor tester or ventilating equipment on the job; and Teal did not know, until after the explosion, that Money had a vapor tester available in his truck daily for use at the job site. Godwin and Money had frequent, almost daily, conversations on the job but never before the explosion discussed manhole safety procedures as to combustible gas.
Money was aware of the danger of gas in manholes; was familiar with Telephone Co.'s manhole safety practices; and had been trained to test for gas in manholes before entry. As a result, Money made it a personal practice of never entering manholes before testing for gas. Further, Money knew that there was a gas main within the bed of West Isabella Street in the work area. And only several days before the explosion, Money had tested manhole H for gas before entering it and had found none. However, on the day of the explosion, Money had not tested manhole H for gas; and when plaintiffs entered manhole H, Money was some 600 feet away at another location on the job site, which covered a distance of two miles.
Money's understanding of his duties as "inspector" was: that his responsibilities were limited to seeing that Teal performed its work according to the construction plans; and that since he had no authority over Teal's employees' work performance, he had no responsibility for their safety.
Grubb confirmed that Money's principal responsibility was to see that Teal's construction was in accordance with the work plans. Nevertheless, Grubb conceded that if Money observed Teal's employees entering a manhole without first testing it for gas, Money should have advised them against it and so informed Teal's foreman. According to Grubb, Money was supposed *320 to be familiar with the Bell System Practices as to manhole testing for gas and ventilation. However, Grubb never specifically instructed Money to see that Teal's employees complied with the Bell System Practices as to manhole safety procedures.
Before the explosion, Money acknowledged seeing Teal's employees entering completed manholes without first testing for gas; and Money noted that Teal's employees never tested for gas before entering manholes. But Money never warned Teal's employees of the danger of gas in manholes; never attempted to prevent Teal's employees from entering the manholes before testing for gas; and never cautioned Teal's employees against lighting cigarettes or smoking in manholes. Money did not do so because, in his words, he "never had any responsibility for the safety of the contractor."
According to Horsman, as well as Grubb, Money was expected to report any manhole safety violations by Teal's employees to Teal's foreman or to Horsman; but Money never did. Had Money done so, Horsman stated that he would have brought Teal's safety violations to the attention of Teal's foreman. Horsman understood his duty with respect to safety procedures not complied with by Teal was to "suggest" compliance. If that failed, Horsman testified that he lacked authority to halt Teal's operations; that he would not have done so without instructions from his superiors; and that he had never faced such a problem before.
Hopkins was on his first construction job and the explosion occurred on his second day at work. Neither Hopkins nor Martinowski had any prior experience in manhole work; and neither had received any instructions concerning manhole safety. Hopkins had smoked half a pack of cigarettes the first day on the job and had not been told either that a gas main was near the manhole or "anything" about a vapor tester or ventilating equipment. Hopkins did not recall speaking to anyone from Telephone Co. about safety.
The contract between Telephone Co. and Teal included a statement of "General Conditions" applicable to "UNDERGROUND CONDUIT AND MANHOLE CONSTRUCTION AND REPAIRING WORK", Article XVII of which was titled, "Safety Practices". Paragraph 1 thereof provided:
"1. CONTRACTOR shall comply with all recognized Safety Practices, particularly when working in or around completed manholes. No manhole shall be entered by any workman without first testing for the presence of combustible gas using an approved Vapor Tester to be furnished by TELEPHONE COMPANY. These tests shall continue at intervals throughout the working period as provided in the Bell System Practices."
The contract documents also included the "Bell System Practices" for "Testing and Ventilating Manholes" intended for the purpose of determining "if combustible gas is present." Paragraphs 2 and 3 thereof, captioned "PRECAUTIONS AT MANHOLES" provided, in part:
"2.01 Never enter a manhole, even momentarily, until it has been tested for combustible gas and then power ventilated for a minimum of 2 minutes with the outlet damper fully open and the blower operating at maximum rated speed.
2.02 No open flame, torch, lighted cigar, cigarette, or pipe shall be brought near an open manhole, into a covering or tent over an open manhole, nor taken into a manhole even though tests indicate the atmosphere is free of combustible gas. Under no circumstances should a cigarette lighter or other item that produces a hot spark be operated in a manhole.
* * * * * *
3.01 Every manhole opened for the first time during the day or reopened after having been closed for any period of time shall be tested to determine whether combustible gas is present. The employee *321 shall assure himself that the gas indicator is in good working order before a test is made. The B Gas Test Kit (Section 081-700-120) shall be used in testing the instrument. The gas indicator should be tested at least once a day while it is being used. Never check the operation of a gas indicator by sampling fumes from a tank or can containing gasoline.
3.02 The initial manhole test shall be made immediately after the manhole cover is removed and before the manhole is ventilated.
Testing Procedure
3.03 A test for combustible gas shall be made as outlined in (1) through (6). * * *
3.04 If the test indicates that the atmosphere is satisfactory, the manhole shall be ventilated before it is entered using a power blower having a capacity of 500 cfm or more for a minimum of 2 minutes. It shall be operated outside the manhole tent or covering at all times. The blower must be kept in operation during the entire time that work is being done in the manhole. During wiping operations, the immediate work area may be shielded from direct air circulation by using a tarpaulin. Place blower intake away from traffic to avoid blowing exhaust fumes from passing cars and trucks into manhole.
3.06 Additional tests shall be made as follows:
* * * * * *
(b) After entering the manhole make tests for gas initially by probing in the area of all duct entrances and then generally throughout the manhole. The gas indicator may be used in the manhole. Before entering the manhole...."
After the explosion, Telephone Co. provided Money with ventilating equipment in addition to the vapor tester. Telephone Co. also instructed Money to adopt a daily practice of checking all manholes for gas vapors every morning and ventilating them, as needed, before entry by Teal's men. However, Money continued the practice of keeping the vapor tester and ventilating equipment under his control at all times. Money would not let Teal's men borrow the equipment to use themselves and Money performed all testing and ventilating of manholes.
II
A
We first take up key averment "A" (see page 4) and Telephone Co.'s assertion that the Trial Court's refusal to direct a verdict in its favor as to whether it met its duty to provide Teal's employees with a safe place to work was contrary to Maryland law and unreasonable in light of the evidence. Telephone Co. argues that by giving Teal notice of the location of the nearby gas main and by contractually requiring Teal to observe certain manhole safety practices, Telephone Co. met, as a matter of law, its safe workplace duty owed Teal's employees, including plaintiffs. We disagree.
Under Maryland law, an employer of an independent contractor generally owes the latter's employees "the same duty [it] would owe the employees of [its] own to furnish them with a safe place to work." LeVonas v. Acme Paper Board Co., Md.Ct. App., 184 Md. 16, 40 A.2d 43, 45 (1944). And an employer's duty to provide its contractor's employees with a safe place to work includes a duty to give notice of any concealed potentially dangerous condition on the job site of which the employer was, or should have been, aware. Id.
However, Telephone Co. reads Maryland law, in particular LeVonas, as affording an employer of an independent contractor an "option" of discharging its safe workplace duty owed a contractor's employees by warning the contractor of any dangerous condition at owner's job site. Telephone Co. further interprets LeVonas and Finkelstein *322 v. Vulcan Rail & Construction Company, Md.Ct.App., 224 Md. 439, 168 A.2d 393 (1961) as establishing Maryland law on warning of a dangerous condition, as applied to the facts of this case, to be: that assuming proper warning of a dangerous condition was once given by Telephone Co., it was not thereafter, as a matter of law, "obligated on a daily basis to inform Teal of every conceivable hazard which might occur from the gas or the main"; and that this is especially true of a construction project where dangers are apt to be of a more transitory nature.
In support of its contention that adequate warning was given by Telephone Co. to Teal that its employees were subject to a risk of combustible gas, Telephone Co. refers to: its notice to Teal of the nearby presence of a natural gas main (conceded to be a dangerous instrumentality); and its work safety procedures contractually required of Teal. Telephone Co. relies upon (a) its designation on the construction plans of the location of the gas main on the far side of West Isabella Street and some 25 to 30 feet from manhole H; and (b) its contractual imposition on Teal of two requirements as to work procedures: (1) before beginning work of carefully reviewing the construction plans and examining the site; and (2) while working of complying with specified "Safety Practices", one of which called for testing and ventilating of completed manholes for combustible gas before entry. (See page 320 above for paragraph 1, Article XVII of the Contract's "General Conditions".)
Under those undisputed facts, Telephone Co. argues that it gave Teal's management "clear warning of the gas presence and location" and, under Maryland law, thereby satisfied, as a matter of law, its optional duty of warning Teal of the existence of a dangerous instrumentality at the job site. As stated, we disagree.
Assuming arguendo Telephone Co.'s interpretation of Maryland law, under the facts of this case, we conclude that both the question of Telephone Co.'s compliance with its own safety requirements (as to detection of combustible gas at the work site) and the adequacy of Telephone Co.'s warning of the presence of combustible gas at the job site were issues of fact properly left by the Trial Judge for the jury to determine.
First, Telephone Co.'s argument assumes that it carried out its contractual duties under its prescribed "Safety Practices" (against the danger of combustible gas in and around completed manholes) and further assumes that Teal did not. Yet, we think that the evidence is arguably, if not demonstratively, to the contrary as to Telephone Co.'s contract compliance. It seems to us that a clear issue of both fact and law existed as to whether Telephone Co. breached its own "Safety Practices" by failing to make known to Teal that a vapor tester was "at [its] disposal" and by failing to instruct Money as to his responsibility under paragraph 1 of Article XVII. For Money claimed to have no knowledge either of the existence of the contract provision or of its incorporation of the "Bell System Practices" as to precautions to be taken at manholes for combustible gas. And, Money never informed Teal's superiors that he had a vapor tester on the job site. (See page 319 above.) Thus, we think that the jury could reasonably conclude from the evidence that without Telephone Co.'s compliance with paragraph 1 of Article XVII of the General Conditions, Teal's performance could not follow.
Second, Telephone Co. assumes that its disclosure to Teal of the existence of a gas transmission line 25 to 30 feet away from the underground conduit site constituted adequate warning as a matter of law to Teal that gas within the main posed an immediate threat to Teal's men engaged in underground work on the other side of the street. In our view of the evidence, Telephone Co.'s notice to Teal's management of the existence of a gas main across the street was at best nebulous, and certainly not a "clear" warning of the existence of a dangerous condition, combustible gas, at the construction site. Hence, we conclude that the Court properly denied Telephone Co.'s motion for a directed verdict based on adequacy of warning.
*323 Third, as we read the Maryland decisional law relied upon by Telephone Co., if Telephone Co., as employer, in the exercise of reasonable care, should have sooner learned of the presence of combustible gas at its construction site, i. e., before the explosion in manhole H, then Telephone Co. had a duty to notify Teal's employees of such concealed dangerous condition. Stated another way, Telephone Co. did not have an "option" of giving notice (assuming its adequacy) to Teal of the possibility of a dangerous condition at the job site if Telephone Co. should have: (a) discovered the condition that combustible gas was collecting in completed manhole H at the job site; and (b) further realized that Teal's employees were not aware of the "condition" within manhole H. Restatement (Second) of Torts § 343 (1965). The following statements in LeVonas appear to support this.
"It is only when there is some concealed peril, known to the owner but not known to the person injured, which he has failed to warn against, that he will be held responsible. Pinehurst Co. v. Phelps, 163 Md. 68, 160 A. 736; Gordon v. Maryland State Fair, 174 Md. 466, 199 A. 519.
* * * * * *
When the risk to which an employee is exposed arises from causes which are concealed, the employer is bound to notify him of them, provided that he himself knows them, or by the exercise of ordinary care ought to have known of them."
40 A.2d at 45.
Fourth, we find Telephone Co.'s reliance on LeVonas as supporting its argument that Telephone Co. was, as a matter of law, "not obligated to inform Teal of every conceivable hazard which might occur from the gas or the main" to be misplaced. In LeVonas, a directed verdict for employer was affirmed on a finding that contractor's employees' own negligence was the cause of their injuries. Their negligence lay in "recklessly" moving a steel cable hoist almost directly under exposed high tension wires. In that factual context, the Maryland Court stated that the employer was not required to "anticipate at his peril every possible fortuitous circumstance under which some person "might come in contact with the wire...." 40 A.2d at 45. Here there is no issue of contributory negligence and the hazard of combustible gas was not exposed so as to be self-evident to plaintiffs.
Finally, Telephone Co. concedes that the question of whether an employer's warning of a dangerous condition transmitted to management of an independent contractor is warning to each of the contractor's employees is undecided under Maryland law. However, Telephone Co. finds the majority rule elsewhere to support such proposition. Levesque v. Fraser Paper Limited, Me.S.J. Ct., 159 Me. 131, 189 A.2d 375 (1963); Schwarz v. General Electric Realty Corp., Ohio Supr., 126 N.E.2d 906 (1955); Pruett v. Precision Plumbing, Inc., Ariz.Ct.App., 27 Ariz.App. 288, 554 P.2d 655 (1976). Therefore, Telephone Co. urges application of the majority rule to the facts of this case as being appropriate under Maryland law. Gas Co. takes the opposite view on notice as to Maryland law. Gas Co. states that whether notice to the contractor is notice to all of its employees depends on various factors: degree of control retained by employer; size of the contractor's work force; and whether notice was effectively given.
Here, Telephone Co's inspector, Money, was assigned to the job on a daily basis and equipped with a gas vapor tester. One could reasonably assume that the vapor tester was furnished in compliance with Telephone Co.'s contract obligations and so that Teal could then comply with the contract's provisions as to safety practices to be followed by its workmen when working in or around completed manholes. However, Money understood that the tester was provided by Telephone Co. primarily for his personal use and only for Teal's use if Teal requested it. On these conflicting facts, we think that neither the question of Telephone Co.'s retained control over safety procedures necessary for detection of the presence of combustible gas nor the adequacy of Telephone Co.'s notice of a dangerous condition at the construction site were proper *324 issues for the Trial Court to resolve as a matter of law.
In summary, under the facts and the law, we find that the Trial Court probably ruled that it was for the jury to determine the safe workplace issue (averment A above), including: (1) whether Telephone Co., as well as Teal, carried out their respective contractual obligations to protect plaintiffs from injury from combustible gas; (2) whether Telephone Co. should have known before the explosion of the actual presence of combustible gas at the work site; and (3) if not, whether Telephone Co. discharged its duty of giving adequate warning to plaintiffs, directly or through Teal, of the possible danger of combustible gas at the job site.
B
We next take up key averment B (pages 317, 318) and the applicability to this case of certain Restatement of Torts exceptions to the independent contractor rule. Telephone Co. contends that, assuming Teal to be an independent contractor (as the jury later found), Telephone Co. was wrongfully denied a directed verdict as to Gas Co.'s averments: (1) that the work contracted to Teal was inherently dangerous or dangerous in the absence of special precautions [averment B-1, page 317]; and (2) that Telephone Co. owed Teal's employees, including plaintiffs, three specified duties that it could not delegate to Teal and each of which it breached [averments B-2 through B-4, pp. 317, 318].
At common law, the general rule was that an employer of an independent contractor was not liable for physical injury to another caused by the contractor's negligence. The employer's freedom from liability was premised on his lack of control over the manner in which the contractor performed his work. However, so many exceptions were later made to the rule that the rule, in the words of the Restatement of Torts, "can now be said to be `general' only in the sense that it is applied where no good reason is found for departing from it." Restatement (Second) of Torts § 409[9] (1965), Comment, page 370. The Restatement refers to the exceptions as falling into three broad categories:
"1. Negligence of the employer in selecting, instructing, or supervising the contractor.
2. Non-delegable duties of the employer, arising out of some relation toward the public or the particular plaintiff.
3. Work which is specially, peculiarly or `inherently' dangerous."
Restatement (Second) of Torts, § 409, Comment, page 371.
The three specified non-delegable duties which Gas Co. attributes to Telephone Co. are: (1) a duty to exercise control as to certain matters (testing and ventilating manholes for gas) over which Telephone Co. retained some control; (2) a duty to recognize a commonly known danger at the construction site and to act accordingly; and (3) a duty to halt Teal's operations, or to remove danger, after becoming aware that Teal's workmen were, by their action or inaction, creating a dangerous situation. In addition, Gas Co. asserts that the work contracted to Teal was dangerous in the absence of special precautions or was inherently dangerous.[10]
Relating Gas Co.'s averments to the Restatement's categorization of exceptions to the general rule (exonerating an employer from liability for the negligence of his contractor), it appears that Gas Co. is relying on all three of the Restatement's categories *325 of exceptions to Rule 409 referred to above.[11]
Telephone Co.'s directed verdict argument based on Teal's independent contractor status is premised on Maryland's recognition of Restatement § 409 and its enumerated exceptions which are found in §§ 410 through 429 of the Restatement. From that premise with which Gas Co. agrees[12] Telephone Co. asserts various reasons why, as a matter of law, none of Gas Co.'s non-delegable duty averments are recognized under the Restatement and Maryland decisional law. Alternatively, Telephone Co. contends that there was no evidence of its breach of such duties to permit a jury charge thereon.
B-1
We first take up Gas Co.'s related § 409 category 3 exception argument (key averment B-1, page ____), namely that the work contracted out by Telephone Co. to Teal was inherently dangerous, within the meaning of Restatement exception § 427[13] or dangerous in the absence of special precautions, under related Restatement exception § 416.[14] Telephone Co.'s response is *326 twofold: (1) assuming the facts to state a § 427 claim, or a related § 416 claim, an employer's liability under those § 409 exceptions is limited under Maryland law, and the great weight of authority, to resultant injury to third parties or the public at large and not to injury to its contractor's employees; and (2) assuming the contrary (that an employer's liability under a § 427 or § 416 scenario extends to its contractor's employees harmed thereby), the facts of the instant case do not support either a § 427 or a § 416 claim against Telephone Co.
The root cause of the controversy over the scope of an employer's liability under § 427 and § 416 for an independent contractor's negligence is the use of the undefined term "others" within each of the sections of the Restatement. Thus, § 427 states, in part:
"One who employs an independent contractor to do work involving a special danger to others which the employer knows or has reason to know to be inherent in or normal to the work, ... is subject to liability for physical harm caused to such others by the contractor's failure to take reasonable precautions against such danger." (emphasis added).
And § 416 similarly states, in part:
"One who employs an independent contractor to do work which the employer should recognize as likely to create during its progress a peculiar risk of physical harm to others unless special precautions are taken, is subject to liability for physical harm caused to them by the failure of the contractor to exercise reasonable care to take such precautions...." (emphasis added).
Nor do the Comments to Restatement § 416 and § 427 define or give explicit meaning to the term "others". However, we note (1) that all of the hypothetical fact illustrations of both § 416 and § 427 refer to harm incurred by third persons or the public at large and none refer to harm or injury to employees of the independent contractor; yet (2) the Restatement's descriptions of category 2 exceptions (controlling § 416 through § 429) is based on "non-delegable duties of the employer, arising out of some relation toward the public or the particular plaintiff." (emphasis added). (See page 324 above.)
The parties disagree as to Maryland decisional law on the question presented. Telephone Co. relies upon State v. City of Baltimore, Md.Ct.App., 86 A.2d 618 (1952) as clear authority that an independent contractor's employees are not within the ambit of an employer's liability for physical harm resulting from a contractor's negligence while engaged in inherently dangerous work. Gas Co. discounts the significance of the City of Baltimore decision and in turn relies upon Cutlip v. Lucky Stores, Inc., supra, as demonstrating Maryland's recognition of the right of employees of an independent contractor to seek damages from an employer for harm resulting from inherently dangerous work.
As will be seen, we find Maryland law to be less than clear by reason of the holdings in the two cited decisions; but we conclude that Maryland recognizes a contractor's employees as being within the scope of an employer's liability for harm resulting from the contractor's negligence *327 in work which is inherently dangerous within the meaning of § 427 or dangerous in the absence of special precautions under § 416 of the Restatement.
In City of Baltimore, claim was made against the City as the employer of an independent contractor for the death of a subcontractor's employee. Employee had fallen from a steel beam which he was riding as the beam was being lowered by a crane, the operator of which allowed the cable to slip. The City's liability was premised on three grounds: (a) alleged breach of its duty as owner to an invitee to use ordinary care for his safety; (b) negligence by the City in its exercise of retained control over the work to be done on its premises; and (c) allowing unsafe methods to be used in work that was inherently dangerous. Each of the three grounds was found insufficient as a matter of law. As to the first ground, the Court related it to an owner's common law duty to invitees to protect them from injury from an abnormally dangerous condition of the premises; but the Court found that employee's injury had resulted not from any condition of the premises but solely from the negligence of a fellow employee. The remaining grounds for liability related to exceptions to Rule 409 of the Restatement of Torts, including Restatement § 414, as to retained control. As to the § 414 claim for employer liability, the Court stated that an owner-employer was "answerable only for personal fault...."[15] 86 A.2d at 621. And the Court affirmed dismissal of the retained control claim for failure of the complaint to allege any neglect of duty by the City. As to the contention that the City was engaged in "inherently dangerous work", the Court noted that the crane had been equipped with a safety pawl which, if used, would have prevented the accident. Therefore, the Court concluded that the accident was due solely to the neglect of the crane operator. The Court then stated:
"We do not suggest, however, that the City in any event owed a non-delegable duty to employees of the subcontractor, as distinguished from members of the general public, to protect them against injuries in the course of work that is inherently dangerous." 86 A.2d at 622.
Telephone Co. relies on this language as clearly demonstrating Maryland's adoption of the view that as to an inherently dangerous work claim, an employer's liability does not extend to the employees of an independent contractor but only to the public at large.
Gas Co. disagrees with this reading of City of Baltimore. Because the Court also recognized an owner's liability to employees of an independent contractor "for injuries arising out of the abnormally dangerous condition of the premises", 86 A.2d at 621, Gas Co. argues that Maryland thereby recognizes and applies the inherently dangerous work exception to the employees of an independent contractor. Alternatively, Gas Co. reads City of Baltimore as not reaching the inherently dangerous work exception of § 427 of the Restatement because of the Court's finding that the injury in question was not caused by the premises' condition.
We think Gas Co. thereby confuses a § 427 claim against an employer based on a non-delegable duty arising from inherently dangerous work with an owner's independent common law duty to protect invitees from dangerous land conditions, which is recognized in Restatement § 343.[16] It is this common law duty of an owner as to *328 dangerous land conditions that gives rise to an owner-employer's safe workplace duty to warn any invitee, including a contractor's employees, of any dangerous condition of which the employees are not, or should not be expected to be, aware.[17],[18] Thus, in our view, the Court's above-quoted statement (see page 327) in City of Baltimore cannot be passed off as dicta related to a § 343 claim, because the statement addressed a non-delegable duty exception based on an implicit § 427 claim.[19]
However, whatever precedential weight City of Baltimore was entitled to appears to us to have been lost by the decision of the Maryland Court of Special Appeals in Cutlip over 20 years later. There, a wrongful death suit was brought on behalf of a deceased employee of an independent contractor against the owner and its architect following collapse of a nearly completed building. The suit followed decedent's survivors' recovery of full workmen's compensation benefits from decedent's employer, a subcontractor; and the Court's further determination that compensation was plaintiffs' exclusive remedy against the project's general contractor. Plaintiffs sought recovery from owner for breach of its common law duty to protect decedent from dangerous conditions thereby asserting a § 343 claim. But plaintiffs also claimed that owner created a peculiar risk or special hazard by authorizing the construction of a building using untested construction techniques thereby invoking a § 416 claim.[20] Disposing of both claims on their merits, the Court affirmed on appeal a directed verdict for owner. The Court found that the proven facts neither stated a § 343 claim as to an abnormally dangerous condition on premises as to which owner retained a measure of control nor a § 416 claim that the work involved a peculiar risk.
The common law basis for imposing owner liability was rejected in Cutlip because *329 the Court found "no evidence of a pre-existing dangerous condition, either concealed or apparent." In the Court's view, the conditions which led to the collapse of the building were not attributable to the acts or omissions of the owner but solely to the general contractor. As to owner's liability based on § 416 of the Restatement, the Cutlip Court found no evidence to support the claim because, "`the [contractor's] negligence, if any, was in the mere detail of the work.'" (citations omitted). 325 A.2d at 440.
Given the close relationship that § 416 bears to § 427 (see footnote 14 above), we conclude that Maryland, through Cutlip, fairly clearly recognizes that a contractor's employees are within the scope of an employer's liability for harm resulting from the contractor's negligence in work either inherently dangerous under § 427 or dangerous in the absence of special precautions within the meaning of § 416 of the Restatement. The failure of the Maryland Court of Special Appeals to even cite City of Baltimore suggests to us its lack of precedential value.
Thus, we conclude that under Maryland law, plaintiffs had standing to assert a § 416 or § 427 claim against Telephone Co. based on its vicarious liability for injuries as to work which was either dangerous in the absence of special precautions within the meaning of § 416 or inherently dangerous under § 427 of the Restatement.
In view of our conclusion as to Maryland law, we need not consider the law in other jurisdictions on the question presented. However, we note that there is a clear split of authority, with the apparent weight of authority against including employees of an independent contractor within the scope of an employer's liability under the exceptions to categories 2 and 3 of the Restatement. (For further discussion of such authority, see pp. 331-332.)
* * *
We next take up Telephone Co.'s alternative contention as to key averment B-1 based on the assumption that plaintiffs are within the scope of Telephone Co.'s liability under the inherently dangerous work exception to the independent contractor rule. Telephone Co. argues that the underground conduit and manhole construction work was not work that was either inherently dangerous under § 427 or dangerous in the absence of special precautions within the meaning of § 416 of the Restatement. The issue being a factual one, and the Trial Court having denied Telephone Co.'s directed verdict motion after the evidence, the question presented is whether, under any reasonable view of the evidence, the jury could justifiably find in favor of plaintiffs and against defendant. Again, we view the evidence in a light most favorable to plaintiffs, the non-moving party. Ebersole v. Lowengrub, Del.Supr., 208 A.2d 495 (1965); and Parks v. Ziegler, Del.Supr., 221 A.2d 510 (1966).
Telephone Co.'s position is: that underground conduit and manhole construction work is not work that is either inherently dangerous under § 427 or work that is dangerous in the absence of special precautions within the meaning of § 416 of the Restatement; and that plaintiffs' injury resulted from Teal's negligence in carrying out the "operative details" of work which Telephone Co. could reasonably assume would have been carried out with proper care. Telephone Co. argues that if Teal had complied with the appropriate manhole safety procedures as stipulated in the contract between the parties, the manholes would have been tested for gas before entry; the gas in manhole H would have been detected; and proper precautions then taken to ventilate the manhole before plaintiffs entered it.
We cannot agree with Telephone Co.'s construction of § 416 and § 427 of the Restatement. Further, viewing the facts in a light most favorable to plaintiffs, we think they were sufficient to support a finding that the underground work came within each of the Restatement exceptions.
First, we note that the jury found Teal was engaged in inherently dangerous work, a finding which Telephone Co. does not *330 contest on appeal. Further, the Trial Court did not rule that underground conduit and manhole construction work was per se inherently dangerous. The Court only found it to be so under the operative facts of this case where the work was required to be undertaken in the bed of a street in which there also lay a gas transmission main. Thus, the Trial Court's ruling was not contrary to current decisional law in other jurisdictions. Persichilli v. Triborough Bridge & Tunnel Authority, N.Y.Ct.App., 262 N.Y. S.2d 476, 16 N.Y.2d 136, 209 N.E.2d 802 (1965); Schaum v. Southwestern Bell Telephone Co., Mo.Supr., 336 Mo. 228, 78 S.W.2d 439 (1934).
Second, the Reporter's Notes to § 427 indicate that while the first Restatement "stated the rule in terms of `work which is inherently dangerous to others', [new § 427] substitutes danger which the employer knows to be inherent in or normal to the work, or which he contemplates or has reason to contemplate when making the contract." (See footnote 13 above.) We think this to be a significant shift in emphasis which the Trial Court implicitly recognized in denying the directed verdict motion. Further, as Comment b to § 427 states, it is not that the work need involve a high degree of risk but only that it involve a risk "recognizable in advance ... or that the employer has special reason to contemplate... under the particular circumstances under which the work is to be done." (See footnote 16 above.)
Here we think the jury could reasonably conclude that Telephone Co. was aware of the risk of combustible gas collecting in the manholes to be constructed by reason of the close proximity of the gas transmission main on the other side of the street. And for that reason, Telephone Co. included in its contract with Teal the provisions as to manhole safety practices and incorporated the Bell System Practices for testing and ventilating manholes for the presence of combustible gas. Also arguably in recognition of the work itself [gas] which [Telephone Co.] ... contemplate[d] at the time of [its] contract."[21] (emphasis added).
Third, we cannot agree that Teal's negligence in failing to protect plaintiffs from injury due to the presence of combustible gas in manhole H was "collateral" in the sense that it arose out of "operative details" of Teal's work involving no peculiar risk, thus allowing Telephone Co. to "reasonably assume [that the work would] be carried out with proper care." Comment d to § 427. A risk of gas in Teal's work and the need to follow the safety practices of the contract between the parties were not only anticipated by Telephone Co. but arguably required its cooperation in providing the necessary equipment. Thus, the "collateral negligence" rule is not, in our view, appropriate for application to the facts of this case. The danger of gas in manholes was either inherent in the work or a special risk which Telephone Co. recognized in advance as requiring special precautions. Since the danger of gas in manholes was a risk "recognizable in advance" by Telephone Co., the danger thereby clearly fell within § 427, Comment b of the Restatement. See Wash. Sub. San. Com'n v. Grady Develop. Corp., Md.Ct.App., 37 Md.App. 303, 377 A.2d 557 (1977).[22]
*331 We conclude that the Trial Judge properly denied Telephone Co.'s motion for a directed verdict based on the contention that the facts were insufficient to support a claim that the work was dangerous in the absence of special precaution under § 416 or inherently dangerous under § 427 of the Restatement (Second) of Torts.
B-2
We next take up Telephone Co.'s contentions that the Trial Court erred in failing to enter a directed verdict, after the evidence, as to each of Gas Co.'s three specified "non-delegable" duties attributed to Telephone Co. We refer to key averments B-2, B-3 and B-4 (see pp. 317, 318), that is, Gas Co.'s averments: B-2, that Telephone Co. failed to exercise control over matters as to which it retained some control, namely, testing and ventilating the completed manholes for gas, in breach of § 414 of the Restatement; B-3, that Telephone Co. failed "to recognize a commonly-known danger, to wit., gas, and failed to act accordingly"; and B-4, that Telephone Co. failed "to halt the operation or otherwise put a stop in the dangerous situation created by [Teal's] workmen" after becoming aware that they were not following prescribed safety practices for working in and around completed manholes.[23] Basically Telephone Co.'s position is: that plaintiffs lack standing to recover under Restatement § 414; and that neither of Gas Co.'s remaining averments B-3 and B-4 state recognizable nondelegable duty exceptions to Restatement § 409. We agree with Telephone Co. as to B-3 and B-4 but not as to B-2.
As to B-2, Telephone Co.'s liability based on retained control in alleged breach of § 414, its argument as to § 414 is essentially the same as was made, and rejected, as to §§ 416 and 427 of the Restatement. That argument is that an independent contractor's employees are not within the intended scope of an employer's liability under the Restatement exception to § 409. We again reject Telephone Co.'s argument that its liability "to others" under § 414[24] refers only to the public at large and not to Teal's employees, including plaintiffs. The argument fails for the reasons stated under B-1 above. It also fails because we think the question is foreclosed by the Court's ruling in State v. City of Baltimore, supra, on a similar § 414 claim by a contractor's injured employee. There, the Court did not dismiss the claim for lack of standing but for failure of the complaint to allege any neglect of duty by the City. (See pages 326, 327 above.)
A further argument for excluding a contractor's employees from the scope of an employer's liability for breach of a non-delegable duty is based on consideration of workmen's compensation principles and benefits. Reference is made to Tentative Draft No. 7 of the American Law Institute for the Restatement (Second) of Torts as reflecting intent of the draftsmen to exclude independent contractors' employees from an employer's liability.[25] The reasoning for excluding contractor's employees is based on the presumption that the contractor passed on to employer his cost of doing business, including the cost of providing workmen's compensation benefits for his employees. Therefore it is argued that the injured employee should be limited to his workmen's compensation remedy against his employer. Further, to subject the contractor's employer to civil liability to an injured employee yet limit the employee's *332 remedy to compensation benefits against his employer is said to create an anomaly. It is also argued that the anomaly is compounded by the fact that the injured employee would have been limited to compensation had he been hired directly by an employer eschewing the assumed protective benefits of employing an independent contractor.
A number of jurisdictions have adopted this reasoning for excluding an independent contractor's employees from the scope of an employer's vicarious liability for breach of non-delegable duties.[26] But other courts have rejected this exclusion based on consideration of workmen's compensation benefits and principles.[27] Reliance on the 1962 Tentative Draft is said to be misplaced because the final adopted version of Restatement (Second) of Torts did not include the Tentative Draft language.
From our reading of reported Maryland decisions, particularly Cutlip v. Lucky Stores, Inc., supra, we conclude that Maryland implicitly adopts the view that workmen's compensation is irrelevant to whether a contractor's employees are excluded from the scope of an employer's liability for vicarious breach of a non-delegable duty. In Cutlip the Court expressly noted that plaintiffs had already recovered workmen's compensation benefits from decedent's employer, a subcontractor; and yet the Court gave no weight to the fact in determining plaintiff's right to recover from the owner of the premises. See also Kreiger v. J. E. Greiner Co., Inc., Md.Ct. App., 282 Md. 50, 382 A.2d 1069 (1978). There, an injured subcontractor's employee who had collected workmen's compensation benefits from his subcontractor's carrier brought suit for his own use and for the use of his employer's compensation carrier against engineering firms responsible for design and supervision of construction of a bridge. Again, the Court gave no consideration to plaintiffs' lack of standing to sue based on their recovery of workmen's compensation benefits.
Applying what we take to be Maryland law, we reject Telephone Co.'s lack of standing argument for dismissal of Gas Co.'s § 414 claim.
* * *
We turn to Telephone Co.'s alternative contention that the facts were insufficient to state a § 414 claim against Telephone Co. based on its retention of any control over Teal's work. Telephone Co. argues that because it retained no control over the manner in which Teal should perform its work, the facts do not sustain a § 414 claim. Telephone Co. relies upon Comment c to § 414, which states in part:
"In order for the rule stated in this Section to apply, the employer must have retained at least some degree of control over the manner in which the work was done. It is not enough that he has merely a general right to order the work stopped or resumed, to inspect its progress or to receive reports.... There must be such a retention of a right of supervision that the contractor is not entirely free to do the work in his own way."
However, Comment a to § 414 also states:
"If the employer of an independent contractor retains control over the operative *333 detail of doing any part of the work, he is subject to liability for the negligence of the employees of the contractor engaged therein...."
Relating this comment to the facts, the contract between Telephone Co. and Teal mandated certain safety practices by Teal when working in or around completed manholes and forbade Teal's workmen from entering any manhole "without first testing for the presence of combustible gas using an approved Vapor tester to be furnished by Telephone Company...." (emphasis added). (See page 320 above.) Telephone Co. then assigned its employee, Money, to the job on a full-time basis and provided him with a vapor tester. A clear inference from the contract and Telephone Co's conduct was that Money was to make the vapor tester available to Teal to permit it to comply with the stipulated safety practices. And Horsman, Money's immediate superior, confirmed that the vapor tester furnished Money was to be made available for Teal's use so as to be "at their disposal." But Money did not have the same understanding. He was of the belief that the vapor tester was for his personal use and only for Teal's use "if [Teal] requested it." Money's further understanding was that he was to keep the vapor tester in his possession at all times. Indeed, even after the explosion, Money would still not let Teal's men borrow the equipment to use themselves and he performed all testing and ventilating of manholes. Horsman's superior, Grubb, also testified that Telephone Co.'s gas detection equipment was only to be used by Telephone Co. personnel. Finally, while Money's primary responsibility was to inspect Teal's work for contract compliance, the jury could infer that Money's subordinate responsibility, whether he realized it or not, was to see that Teal's men complied with Telephone Co.'s safety practices and to report any violation to his superiors.
In our view, the above evidence was clearly sufficient to support a charge against Telephone Co. under § 414 of the Restatement.
B-3
We turn to Gas Co.'s remaining "non-delegable duty" averments allegedly owed by Telephone Co. to Teal's employees assuming Teal to be an independent contractor. Gas Co. asserts that Telephone Co. had a non-delegable duty: to "recognize a commonly known danger" gas at its construction site and "to act accordingly" [key averment B-3, page 317]; and to halt Teal's operation, or remove danger, after becoming aware that Teal's workmen were creating a dangerous situation [key averment B-4, page 317].
Telephone Co. argues that it was entitled to a directed verdict as to both averments on the ground that neither comes within any of the recognized exceptions to § 409 of the Restatement (Second) of Torts. (See footnote 9 above.) Telephone Co.'s position is well taken.
A review of the Restatement exceptions to the general principle stated in § 409 (that "the employer of an independent contractor is not liable for physical harm caused to another by an act or omission of the contractor or his servants") demonstrates that neither of the above averments falls within any of the exceptions stated in §§ 410 through 429 of the Restatement. And the Maryland courts appear to recognize the Restatement exceptions to § 409 as defining the limits of the exceptions to the independent contractor rule. See Cutlip v. Lucky Stores, Inc., supra, and Gardenvillage Realty Corporation v. Russo, Md.Ct.Spec.App., 34 Md.App. 25, 366 A.2d 101 (1976).
Gas Co. makes an oblique response as to the law by arguing that the facts sustain the existence of such alleged non-delegable duties. Gas Co. refers to the testimony of Horsman "and others" (unidentified) as evidencing Telephone Co.'s retention of control over safety practices at the job site. Through this retention of control, Gas Co. *334 argues that Telephone Co. breached a § 414 non-delegable duty exception to § 409.[28]
In our view, reliance on § 414 is clearly inappropriate to support an alleged non-delegable duty "to recognize a commonly known danger." For § 414 concerns exclusively the retention of control by an employer over some portion of work delegated to an independent contractor followed by the employer's failure to exercise such retained control with reasonable care. Gas Co. cites no authority, Maryland or elsewhere, to support its contention that a duty to "recognize a commonly known danger" falls within any of the non-delegable duty exceptions to Restatement § 409.[29]
The purported duty of an employer-owner to employees of an independent contractor to "recognize a commonly-known danger and to act accordingly" states, in our view, nothing more than an owner's common law safe workplace duty to protect invitees from dangerous land conditions. That is a duty which is set forth in § 343 of the Restatement (Second) of Torts and does not constitute a non-delegable duty exception to Restatement § 409. (See II A, pages 327-328, 329; and B-1, pages 321-322, 323.) Further, Gas Co. sought, and was granted, a jury charge as to Telephone Co.'s safe workplace duty to protect plaintiffs from dangerous land conditions.[30]
We conclude that the Trial Court erred in granting Gas Co.'s prayer request for a charge as to "failure to recognize a commonly known danger" under the guise of its being a non-delegable duty exception to § 409. Moreover, the Court committed further error in framing the charge as follows:
"Utilities further alleges that C&P Telephone failed to recognize a commonly known danger; to wit: Gas, and failed to act accordingly.
* * * * * *
If you accept Utilities' contentions as to C&P Telephone's alleged duty to recognize a commonly known danger, and find that C&P Telephone was negligent in a breach of this alleged duty, and that this was a proximate cause of the accident, you may find that C&P Telephone was liable for the negligence and consider this in determining a relative degree of fault by Utilities and C&P." (emphasis added)
In our view, the Court thereby not only erroneously permitted a duplicitous charge (having already given a safe workplace duty charge) but also compounded the error in permitting the jury, in effect, to determine the law as to a purported duty of Telephone Co. "to recognize a commonly known danger."
B-4
As to Telephone Co.'s alleged duty to halt Teal's operation to protect plaintiffs from a dangerous situation, Gas Co. again contends that the facts bring this averment within exception § 414 of the Restatement so as to support a nondelegable duty jury charge. For the reasons stated above, we find § 414 inapplicable to a duty to halt operations; for § 414 concerns retained control, as to which an appropriate charge was warranted and given. (See pages 331-332, 333).
For factual support for the charge, Gas Co. relies entirely upon Horsman's testimony that "[Teal's] operations could be halted" by Telephone Co. for Teal's workmen's continued violation of manhole safety practices. Gas Co. thereby argues that *335 even if Telephone Co. was not contractually required to halt Teal's operations for its breach of safety practices, Telephone Co., through Horsman, assumed the duty to halt Teal's operations upon observing such breaches. In our view, Horsman's testimony was clearly insufficient to sustain a finding that Telephone Co. assumed a duty to halt Teal's operation.[31] Horsman did not testify that he had the right to require Teal to conform to proper safety practices; nor did Horsman testify that he had the authority to stop Teal's work for breach of the safety practices. Indeed, Horsman stated that he would not "take it on my own ... to stop the whole operation." That decision would have to have been made by Horsman's superiors; and Horsman was clearly uncertain as to what they would have done. Thus, the facts were insufficient to sustain a finding that Telephone Co., through Horsman, assumed a duty to halt Teal's work for Teal's failure to comply with proper safety practices.
Could Telephone Co. be found to be negligent based on a contractual duty to halt Teal's work for its non-compliance with proper manhole safety practices? We think not under Krieger v. J. E. Greiner Co., Inc., Md.Ct.App., 282 Md. 50, 382 A.2d 1069 (1978).
Krieger dealt with the liability of consulting engineers, responsible for design and day-to-day supervision of a bridge's construction, to a subcontractor's employee injured as a result of unsafe work practices of his employer. By reason of the engineers' alleged knowledge of ongoing unsafe work practices of the subcontractor, the engineers were claimed to have breached a legal duty to halt the contractor's work until the unsafe conditions were corrected. Ruling that any such duty must arise by contract, by conduct or by law, the Krieger Court affirmed dismissal of the suit for failure to state a claim for breach of either a contractual or a legal duty. However, the Court remanded to permit plaintiff to plead a breach of duty arising by conduct or assumed responsibilities. Here, we have already determined that the evidence is insufficient *336 to support a contention that Telephone Co. assumed a duty to halt Teal's operation for non-compliance with prescribed manhole safety practices.
As to existence of a contractual duty of an employer, or his representative, to halt an independent contractor's unsafe work practices, the Court in Krieger noted "a decided split of authority as to whether an architect or engineer responsible for day-to-day supervision of a construction project is liable to a workman for unsafe working conditions...." 382 A.2d at 1074. The Krieger Court then opted to follow the majority rule that a contract imposing no obligation to supervise construction methods or work for compliance with safety laws and procedures imposes no duty on an employer, or his representative, to enforce a safety code; and hence no duty to halt operations for breach of such code. Day v. National U.S. Radiator Corporation, La., 241 La. 288, 128 So. 2d 660 (1961); Reber v. Chandler High School District # 202, Ariz.Ct.App., 13 Ariz.App. 133, 474 P.2d 852 (1970); Baker v. Pidgeon Thomas Company, 422 F.2d 744 (6th Cir. 1970).[32] In short, Krieger holds that a contract right of inspection or supervision reserved by an employer over an independent contractor does not impose a duty on the employer's representative to stop work for observed unsafe construction practices of the contractor. Accord Reber v. Chandler High School District # 202, supra, (holding that liability of an owner or employer to employees of an independent contractor for the latter's negligence would not attach without the employer's reservation of day-to-day control over the work methods of the contractor).[33]
Applying the rule in Krieger to this case, we conclude that Telephone Co. could not be found to be under any duty to halt Teal's operations based on Telephone Co.'s contractual undertakings as to manhole safety. We say this notwithstanding Telephone Co.'s failure to furnish a vapor tester in accord with the contract's provisions as to "Safety Practices" and their patent ambiguity. (See pp. 319, 320.) The authorities relied upon by Gas Co. on this question are clearly inapplicable in terms of the parties involved. See 57 C.J.S. "Master and Servant", § 591; Samson Construction Company v. Brusowankin, Md.Ct. of Apps., 218 Md. 458, 147 A.2d 430 (1958); and Gallagher's Estate v. Battle, Md.Ct. of Apps., 209 Md. 592, 122 A.2d 93 (1956).
Moreover, even if there were sufficient evidence of control over manhole safety practices undertaken or assumed by Telephone Co. to present a jury question as to its duty to halt Teal's operation, for the sake of the safety of its employees, we find that the Court erred as a matter of law in its jury charge as to Telephone Co.'s duty to halt operations. The Court charged the jury as follows:
"If a person or company that hires a contractor becomes aware that the contractor's workmen are engaged in unnecessarily dangerous practices, it is the duty of the employer of a contractor, here C & P Telephone, to halt the operation or otherwise put a stop in the dangerous situation created by the workmen.
And in addition to the general duty of an employer of a contractor, which I have just described to you, Utilities alleges that C & P Telephone was negligent with respect to safety duties which C & P Telephone undertook in its contract with Teal, or in failing to correct several dangerous *337 conditions that it was aware that Teal's employees were creating, in violation of C & P Telephone's Bell System Practices.
* * * * * *
If you accept the Utilities' contention as to C & P Telephone's alleged duty to halt the operation or remove a danger, and find that C & P Telephone was negligent in a breach of this duty, and that this was a proximate cause of the accident, you may find that C & P Telephone was liable for negligence and consider it in determining the relative degree of fault of Utilities and C & P Telephone." (emphasis added).
In our view, the Court committed legal error by oversimplifying general law and not applying Maryland law as to when an employer may be found to be under a duty to halt an independent contractor's operations for unsafe work practices. Further, the Court permitted the jury to accept Gas Co.'s contention as to Telephone Co.'s duty as being a correct statement of Maryland law, which it is not.
C
Finally, we take up Telephone Co.'s contentions that the Court erred in permitting Telephone Co. to be charged with negligence through breach of unspecified duties, both contractual and assumed. The error is asserted to have occurred first when the Court denied Telephone Co.'s motion for a directed verdict and to have reoccurred in the Court's jury instructions. Gas Co.'s allegations of breach of duty to which Telephone Co. refers were stated as follows in Gas Co.'s request for prayers:
"DUTIES ARISING FROM CONTRACT
The duty of care required by Telephone is not confined to the words of the contract which include the Bell System Practices. However, the contract may create a duty and if you find that Telephone has violated any duties created by the contract, you may find that Telephone contributed to the accident and consider this in its relative degree of fault. 57 Am.Jur.2d, Negligence, § 47."
* * * * * *
"ASSUMPTION OF ADDITIONAL DUTIES
If you find that Telephone assumed additional duties which it may not have originally been obligated to perform, then it is responsible for any assumption of these additional duties opposes a duty on it. [sic] Therefore, if you find that by its conduct, Telephone performed certain duties which were not its original duties, it is still responsible for any violation of those duties. Cutlip v. Lucky Stores, Md. App., 22 Md.App. 673, 325 A.2d 432 (1974)."
The Trial Court included both claims of Gas Co. as to Telephone Co.'s "duties arising from contract" and "assumption of additional duties" in its jury charge, stating:
"Utilities alleges that C & P Telephone has violated one or more of the duties of the contract. The duty of care required by C & P Telephone is not confined to the words of the contract which include the Bell System Practices. However, the contract may create a duty, and if you find that C & P Telephone has violated any of its duties created by the contract and such violation was a proximate cause of the accident, you may find that C & P Telephone contributed to the accident and consider this in its relative degree of fault."
* * * * * *
"If you find that C & P Telephone assumed additional duties which it may not have originally been obligated to perform, then it is responsible for any assumption of these additional duties it is responsible for any assumption of these additional duties which imposes a duty on it. Therefore, if you find that by its conduct, C & P Telephone performed certain duties which were not its original duties, it is responsible for any violation of these duties."
Gas Co. responds: (1) that Telephone Co. did not raise this objection either in its motion for a directed verdict or by objection to the instructions and therefore waived it; (2) that its allegations of negligence based on breach of contractual and assumed *338 duties were stated with particularity; and (3) that there were no jury instructions on unspecified duties. We dispose of Gas Co.'s threshold defense by concluding that the issues now raised were preserved for appeal through Telephone Co.'s objection to the jury instructions, if not by its motion for a directed verdict. That brings us to the merits of the issue.
There is no disagreement that Delaware law requires negligence to be pleaded with particularity. See Superior Court Civil Rule 9(b).[34] Its purpose is fairness: to enable an opponent to be informed of charges so as to be able to prepare a defense to them. Mancino v. Webb, Del.Super., 274 A.2d 711 (1971); Universal Oil Products Co. v. Vickers Petroleum Co. of Delaware, Del. Super., 16 A.2d 795 (1940). The dispute between the parties is not as to the law but its application to the facts.
We find the Court's charge as to Telephone Co.'s alleged negligence based on breach of contractual duties unobjectionable when viewed in the context of the Court's total charge as to breach of contractual duties. The above-quoted portion of the Court's jury charge served as an introduction of Gas Co.'s allegations relating to alleged breach of contractual duties. Immediately following the objected-to statement, the Court took up in particularized fashion Gas Co.'s specific allegations supporting its contention of breach of contract ranging from failure to provide a ventilator on the job to failure to enforce its safety practices concerning manholes. Thus, when read as a whole, we conclude that the charge as to Telephone Co.'s negligence based on breach of contractual duties complied with Delaware law.
However, we reach the contrary conclusion as to the Court's charge relating to Telephone Co.'s assumption of unspecified additional duties. In contrast with its relationship of the general to the particular as to contractual duties, the Court did not follow up its statement of Telephone Co.'s assumption of additional duties with any particularized explanation as to just what additional duties Gas Co. contended that Telephone Co. had assumed. Instead, the Court permitted the jury to speculate as to what duties the Court was referring to and then to assume that any such "duties" were recognized and enforceable under Maryland negligence law. That was patently unfair to Telephone Co. as well as clearly contrary to substantive and procedural law and hence, error.
* * *
We find no merit to Telephone Co.'s remaining ground for reversible error based on the Court's refusal to direct a verdict as to Telephone Co.'s alleged breach of each of several specified duties that were contractually assigned to Teal. The Court expressly found the contract to be ambiguous. Further, since the action sounded in tort, and not contract, the Contract's assignment of specific duties to Teal was not conclusive as to Telephone Co.'s liability in negligence for alleged breach of such duties. Restatement (Second) of Torts, § 416, Comment c.
* * *
We find no merit to Telephone Co.'s contention that the Trial Court abused its discretion in permitting two officers of Gas Co. to give opinion testimony as to the responsible party for testing and ventilating the manholes for gas based on custom in the underground construction industry.
* * *
We decline to rule on Telephone Co.'s several remaining grounds for reversible error which relate to jury instructions not dealt with above. We do not thereby mean to imply approval of such instructions. On retrial, the remaining contested instructions deserve careful review so as to state the applicable law and not simply the contentions of the parties as to the law. (See pages 334, 336, 337 and 338.)
* * *
REVERSED.
NOTES
[1] Chesapeake and Potomac Telephone Company of Maryland is hereafter sometimes referred to as "C&P Telephone" or "Telephone Co."
[2] Chesapeake Utilities Corporation is hereafter sometimes referred to as "Gas Co." or "Utilities Co."
[3] John Hopkins and Joseph Martinowski are sometimes hereafter referred to as "plaintiffs".
[4] For other reported decisions involving the parties and this accident, see Hopkins v. Chesapeake Utilities Corp., Del.Super., 290 A.2d 4 (1972); Chesapeake Utilities Corp. v. Chesapeake & Potomac Telephone Co. of Maryland, Del.Super., 401 A.2d 101 (1979).
[5] Plaintiffs' claims against Gas Co. were severed from Gas Co.'s third party claims for contribution; and the third party claims were then stayed pending disposition of plaintiffs' claims against Gas Co. In 1975 Gas Co., after admitting liability to plaintiffs, settled plaintiffs' claims against Gas Co. for about $150,000, and plaintiffs' suit against Gas Co. was dismissed. In 1976, Gas Co.'s claim over against Telephone Co. and Teal resumed. Gas Co. then dismissed with prejudice its claim over against Teal as controlled by workmen's compensation law that barred plaintiffs from suing their employer, Teal. The Court later ruled that Maryland law controlled the tort aspects of Gas Co.'s claim but that Delaware law governed its contract aspects. The Court also ruled that the reasonableness of Gas Co.'s settlement with plaintiffs would not be presumed and that Gas Co. had the burden of establishing reasonableness. The Court then granted Gas Co.'s motion for separate trials of the issues of Telephone Co.'s liability for contribution and the reasonableness of Gas Co.'s settlement with plaintiffs. Gas Co.'s claim against Telephone Co. then proceeded to trial in February 1980 as to the issue of Telephone Co.'s liability for contribution as a joint tortfeasor and percentage thereof.
[*] Note: The Opinion is subdivided into sections lettered to correspond with each of the lettered key averments.
[6] To the extent we find any conflict in the evidence, and there is little, we resolve the conflict against Telephone Co., the moving party on the directed verdict motion. Ebersole v. Lowengrub, Del.Supr., 208 A.2d 495 (1965).
[7] See page 320 below for the text thereof.
[8] See pages 320, 321 below, for the text thereof.
[9] Restatement (Second) of Torts § 409 provides:
"§ 409. General Principle.
Except as stated in §§ 410-429, the employer of an independent contractor is not liable for physical harm caused to another by an act or omission of the contractor or his servants."
[10] The Court is obliged to adopt Telephone Co.'s summarizations of Gas Co.'s allegations as to non-delegable duties and danger inherent in the work or in the absence of special precautions due to Gas Co.'s failure to state on appeal its trial allegations as to such matters.
[11] The Restatement explains that while category 1 exceptions (which include §§ 410 through 415 of the Restatement) have in common a finding attributing employer's liability to his personal fault, category 2 and 3 exceptions (which include §§ 416 through 429 of the Restatement) are rules of "vicarious liability, making the employer liable for the negligence of the independent contractor, irrespective of whether the employer has himself been at fault." The Restatement continues, "[The latter rules] arise in situations in which, for reasons of policy, the employer is not permitted to shift the responsibilities of the proper conduct of the work to the contractor ... The statement commonly made in such cases is that the employer is under a duty which he is not free to delegate to the contractor. Such a `non-delegable duty' requires the person upon whom it is imposed to answer for it that care is exercised by anyone, even though he be an independent contractor, to whom the performance of the duty is entrusted....
These exceptions have tended to develop in particular types of fact situations which have tended to be repeated, particularly where the duty of the employer relates to the putting or maintaining of land, structures and chattels in such a condition as not to be unreasonably dangerous to others. Few courts have made any attempt to state any general principles as to when the employer's duty cannot be delegated, and it may as yet be impossible to reduce these exceptions to such principles. The various rules stated tend, to a remarkable extent, to overlap ... Frequently, where the Court is unwilling to find the application of a particular exception in the particular case, another is relied on instead. This has made for a great deal of confusion, and some uncertainty as to the law in many jurisdictions." Restatement (Second) of Torts, pages 394, 395.
[12] The parties agree that Cutlip v. Lucky Stores, Inc., Md.Ct.Spec.App., 22 Md.App. 673, 325 A.2d 432 (1974) is authority for Maryland having adopted Rule 409 and its exceptions found in §§ 410 through 429.
[13] Restatement § 427 provides:
"Negligence as to a Danger Inherent in the Work.
One who employs an independent contractor to do work involving a special danger to others which the employer knows or has reason to know to be inherent in or normal to the work or which he contemplates or has reason to contemplate when making the contract, is subject to liability for physical harm caused to such others by the contractor's failure to take reasonable precautions against such danger."
The Reporter's Notes to § 427 state that while the first Restatement, "... stated the rule in terms of `work which is inherently dangerous to others', [t]he new Section substitutes danger which the employer knows to be inherent in or normal to the work, or which he contemplates or has reason to contemplate when making the contract." Restatement (Second) of Torts, Appendix § 427, page 77. As will be seen, this shift in emphasis becomes significant. (See pp. 329-330 below.)
Comment (b) to § 427 explains that for work to be "inherently" dangerous, the work need not "... be of a kind which involves a high degree of risk of such harm, or that the risk be one of very serious harm, such as death or serious bodily injury. It is not necessary that the work call for any special skill or care in doing it. It is sufficient that work of any kind involves a risk, recognizable in advance, of physical harm to others which is inherent in the work itself, or normally to be expected in the ordinary course of the usual or prescribed way of doing it, or that the employer has special reason to contemplate such a risk under the particular circumstances under which the work is to be done." Restatement (Second) of Torts, Comment b, page 416. (Underlining added for emphasis.)
[14] Restatement § 416 provides:
"Work Dangerous in Absence of Special Precautions.
One who employs an independent contractor to do work which the employer should recognize as likely to create during its progress a peculiar risk of physical harm to others unless special precautions are taken, is subject to liability for physical harm caused to them by the failure of the contractor to exercise reasonable care to take such precautions, even though the employer has provided for such precautions in the contract or otherwise."
The Comments to § 416 and § 427 refer to the "close relation" between the two rule exceptions. The Commentary to § 416 states, in part, "The two rules represent different forms of statement of the same general rule, that the employer remains liable for injuries resulting from the dangers which he should contemplate at the time he enters into the contract, and cannot shift to the contractor the responsibility for such dangers, or for taking precautions against them .... The Rule stated in [§ 416] is more commonly stated and applied where the employer should anticipate the need for some specific precaution ... [while] ... § 427 is more commonly applied where the danger involved in the work calls for a number of possible hazards, as in the case of blasting, or repainting carried on upon a scaffold above the highway." Restatement (Second) of Torts, § 416, page 395.
[15] Since § 414 falls within category 1 exceptions of the Restatement commentary, the Court's ruling was consistent with the Restatement. See footnote 11.
[16] Section 343 of Restatement (Second) of Torts states:
"§ 343. Dangerous Conditions Known to or Discoverable by Possessor
A possessor of land is subject to liability for physical harm caused to his invitees by a condition on the land if, but only if, he
(a) knows or by the exercise of reasonable care would discover the condition, and should realize that it involves an unreasonable risk of harm to such invitees, and
(b) should expect that they will not discover or realize the danger, or will fail to protect themselves against it, and
(c) fails to exercise reasonable care to protect them against the danger.
[17] This confusion of these two related but different principles of tort law is apparent in Gas Co.'s statement that the Court in City of Baltimore looked to § 414 of the Restatement "after it had decided that § 427 was not applicable because there was not an inherently dangerous condition." In similar vein, Gas Co. states that the Court's above-quoted statement in City of Baltimore relied upon by Telephone Co. is to be disregarded because the Court had already decided "as a matter of fact that an inherently dangerous condition did not exist." Similarly, here Gas Co. argues that the jury decided that there was an inherently dangerous condition when what the jury, by special interrogatory, found was "that Teal was engaged in inherently dangerous work."
[18] See LeVonas v. Acme Paper Board Co., Md. Ct.App., 184 Md. 16, 40 A.2d 43 (1944) for Maryland's recognition of this duty of an owner to employees of an independent contractor to furnish them a safe place to work and to warn of any concealed or dangerous conditions known to the owner and not known to the person injured or likely to be otherwise discoverable. However, Maryland appears to condition an owner's liability for injuries to an employee of an independent contractor occurring on owner's premises upon the premises remaining under owner's control:
"In other words, liability for injuries to a servant of an independent contractor rests upon the owner when the premises on which the stipulated work is done remain under his control and the injuries arise out of the abnormally dangerous condition of the premises, the owner being chargeable with knowledge of the danger." 40 A.2d at 45.
See also Cutlip v. Lucky Stores, Inc., supra, stating:
"LeVonas espouses no profound doctrine of unique origin. It simply states that an owner may be liable for injuries to an employee of an independent contractor when the premises on which the contracted work is done remain under the owner's control and the injury arises out of an abnormally dangerous condition of the premises, of which condition the owner is chargeable with knowledge. The ground of liability is the owner's superior knowledge of the danger to persons going upon the property. Bohlen v. Glenn L. Martin Co., 193 Md. 454, 460-461, 67 A.2d 251." 325 A.2d at 438.
[19] Indeed, Cutlip, next discussed, recognizes the distinction between a claim based on a dangerous condition of the premises and a § 416 claim based on work likely to create a peculiar risk of harm.
[20] A third contention was also made (and rejected) that owner retained such control over its architect as to be liable under agency law for architect's negligence. The contention was rejected because of the lack of evidence that owner, either by its contract with architect or by its later conduct, controlled the manner in which architect performed his duties.
[21] We thereby paraphrase a portion of Comment d to § 427, stating:
"As in the case of the rule stated in § 416, the rule here stated applies only where the harm results from the negligence of the contractor in failing to take precautions against the danger involved in the work itself, which the employer should contemplate at the time of his contract. It has no application where the negligence of the contractor creates a new risk, not inherent in the work itself or in the ordinary or prescribed way of doing it, and not reasonably to be contemplated by the employer. Likewise, the rule stated here has no application to the `collateral negligence' of the contractor covered in § 426, particularly as to negligence in the operative details of the work which involve no peculiar risk, which the employer may reasonably assume will be carried out with proper care."
[22] In Washington Suburban, the Court similarly stated:
"Where, as here, the risk of such harm is involved in carrying out the work to be done under the contract, ensuing negligence cannot be deemed collateral to its performance. Prosser, supra, at 475. The employer `is bound to anticipate that such injuries may naturally result'...." (citations omitted).
[23] We quote from the Trial Court's jury charge as to averments B-3 and B-4.
[24] Section 414 of the Restatement provides: "One who entrusts work to an independent contractor, but who retains the control of any part of the work, is subject to liability for physical harm caused to others for whose safety the employer owes a duty to exercise reasonable care, which is caused by his failure to exercise his control with reasonable care."
[25] Tentative Draft No. 7 of Restatement (Second) of Torts, 17-18 (1962) stated:
"It is to be expected that the cost of the workmen's compensation insurance will be included by the contractor in his contract price for the work, and so will in any case ultimately be borne by the defendant who hires him."
[26] State v. Morris, Alaska Supr., 555 P.2d 1216 (1976); Welker v. Kennecott Copper Company, Ariz.Ct.App., 1 Ariz.App. 395, 403 P.2d 330 (1965); Hale v. Peabody Coal Company, Ind.Ct. App., 168 Ind.App. 336, 343 N.E.2d 316 (1976); King v. Shelby Rural Electric Cooperative Corp., Ky.Ct.App., 502 S.W.2d 659 (1973); Donch v. Delta Inspection Services, Inc., N.J. Super., 165 N.J.Super. 567, 398 A.2d 925 (1979); Evans v. Whirlpool Corp., Ohio Supr., 10 Ohio 2d 240, 227 N.E.2d 208 (1967); B. L. Humphreys v. Texas Power & Light Company, Tex.Ct.App., 427 S.W.2d 324 (1968); Eutsler v. United States, 376 F.2d 634 (10th Cir. 1967); Hess v. Upper Mississippi Towing Corp., 559 F.2d 1030 (5th Cir. 1977).
[27] Smith v. Inter-Cty. Telephone Co., Mo.Supr., 559 S.W.2d 518 (1977); Snider v. Northern States Power Co., Wisc.Supr., 81 Wis. 2d 224, 260 N.W.2d 260 (1977); Gonzalez v. United States Steel Corp., Pa.Super., 248 Pa.Super. 95, 374 A.2d 1334 (1977); International Harvester v. Sartain, Tenn.Ct.App., 32 Tenn.App. 425, 222 S.W. 854 (1965); Schultz and Lindsay Construction Company v. Erickson, 352 F.2d 425 (8th Cir. 1965); Woolen v. Aerojet General Corporation, Cal.Supr., 57 Cal. 2d 407, 20 Cal. Rptr. 12, 369 P.2d 708 (1962).
[28] Section 414 of the Restatement is stated at footnote 24.
[29] Indeed, the record discloses that Gas Co. submitted to the Trial Court no supporting legal authority whatever for its prayer of "failure to recognize a commonly known danger"; and that Gas Co. submitted no supporting Restatement authority for its prayer as to "failure to halt a dangerous situation."
[30] The Court charged the jury as follows:
"Utilities further alleges that C&P Telephone failed to provide Hopkins and Martinowski with a safe place to work. It was the duty of C&P Telephone to provide a reasonably safe place to work for those working in the manhole or to give an adequate warning of danger.
C&P Telephone owed to Teal's employees the same duty of providing a safe place to work or to give an adequate warning of danger that it owed its own employees relative to its degree of control."
[31] Horsman's testimony upon which Gas Co. presumably relies was as follows:
"Q. Did you have the right to make Teal conform to the proper safety practice?
A. I wouldn't say that I had the right to make them do it. I would suggest it to him, and if he was in violation of the safety practice, he should, after I called it to his attention, he should want to correct it.
Q. Any violation should have been reported to you by Mr. Money. Isn't that right?
A. Any that he observed.
Q. I mean, if he saw people anyone from Teal going into a manhole without testing, he should report it to you, shouldn't he?
A. He would tell me that they were entering these holes before they are being tested.
Q. Now, if Teal didn't comply, couldn't the Telephone Company actually stop the work until the safety violations were ceased?
A. I never had that come up before. I am sure it could be discussed with the entire supervision. I would not take it on my own, if I saw a man go in a hole without testing, to stop the whole operation.
Q. But, if they were continually violating any safety practices, isn't it true that one of your remedies you know was to stop the work until things were straightened out?
A. I would report it to my higher supervision, and if it was our conclusion that the work should be shut down, then I am supposed to be the one that would shut it down, since I am the foreman on the job.
Q. You would shut it down if you had to?
A. I would be the one to go and tell them they would have to stop until things were corrected.
Q. And Mr. Money was there to point out safety violations, among other things, wasn't he?
A. He was there to observe the safety as they were performing the work. That was one of his responsibilities.
Q. It was your understanding the Telephone Company had the right to make Teal conform to safety standards. Isn't that right?
A. I would call it to their attention. I wouldn't say I would make them do it. If they wanted to do this on their own and all, I see no reason why I should make them do it.
Q. You just told me that if they didn't, you could stop the job.
A. I could stop it if the violations were serious enough, if it were the consensus of the higher supervision. I am not going to go out and just say `this is in violation of a certain portion of our safety practices, you have to stop until you correct.'
Q. Don't you consider potential gas explosions of manholes a serious matter?
A. Potential explosions would be a serious matter."
[32] The minority view as expressed in Miller v. DeWitt, Ill.Supr., 37 Ill. 2d 273, 226 N.E.2d 630 (1967) holds that an architect or engineer's contractual right to supervise and inspect work implies a duty to stop unsafe work practices that are observed and are not within accepted usage or contemplation of the parties. In other words, an authority to inspect or supervise confers a right that becomes a duty to stop unsafe construction practices when they are observed.
[33] The Reber Court criticized other jurisdictions that have "disregarded fundamental contractual principles in attempting to parlay general inspection or supervision clauses which give the owner or architect a right to stop observed unsafe construction processes into a duty which is neither consistent with generally accepted usage nor contemplated by the contract or the parties." 474 P.2d at 854, 855. The Krieger Court quotes the foregoing statement from Reber with implied approval. See 382 A.2d at 1074.
[34] Superior Court Civil Rule 9(b) reads, in part, as follows:
"(b) Fraud, Negligence, Mistake, Condition of Mind.
In all averments of ... negligence ... the circumstances constituting ... negligence... shall be stated in particularity."
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https://www.courtlistener.com/api/rest/v3/opinions/1521323/
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746 S.W.2d 544 (1988)
295 Ark. 37
David Allen LAWSON, Appellant,
v.
STATE of Arkansas, Appellee.
No. CR 87-197.
Supreme Court of Arkansas.
March 14, 1988.
Sherman & James, Little Rock, for appellant.
J. Brent Standridge, Asst. Atty. Gen., Little Rock, for appellee.
HAYS, Justice.
The question is whether our DWI enhancement statute can be coupled with our general habitual offender statute for sentencing on the same offense.
Appellant, David Lawson was charged with driving while intoxicated, and on March 18, 1987 was tried by a jury and found guilty. At the time of trial Lawson had at least three prior DWI offenses within three years of the DWI for which he was charged, and at least four prior felony convictions not related to DWI. The exact numbers are not in issue.
The court allowed the jury to set Lawson's sentence by applying both the DWI sentencing enhancement scheme for a fourth offense, Ark.Code Ann. § 5-65-111 (1987) [Ark.Stat.Ann. § 75-2504 (Supp. 1985)] and our general habitual offender enhancement statute, Ark.Code Ann. § 5-4-501 [Ark.Stat.Ann. § 41-1001 (Supp. 1985) ], resulting in a range from eight to twelve years. The jury sentenced Lawson to the maximum.
On appeal Lawson raises the single argument that it was error to sentence him by applying both the DWI enhancement statute and the general habitual offender enhancement statute. We agree.
Our habitual offender statute, Ark.Code Ann. § 5-4-501 (1987) provides:
(b) A defendant who is convicted of a felony committed after June 30, 1983, and who has previously been convicted of four (4) or more felonies, may be sentenced to an extended term of imprisonment as follows:
* * * * * *
(b) For a conviction of an unclassified felony punishable by less than life imprisonment, not less than seven (7) years more than the minimum sentence for the unclassified offense nor more than twice the maximum sentence for the unclassified offense.
Our DWI enhancement statute, Ark.Code Ann. § 5-65-111 (1987) provides:
(b) Any person who pleads guilty, nolo contendere, or is found guilty of violating § 5-65-103 shall be imprisoned:
* * * * * *
(3) For at least one (1) year but not more than six (6) years for the fourth or subsequent offense occurring within three (3) years of the first offense and shall be guilty of a felony.
The first, second and third offenses under the DWI statutory scheme are only misdemeanors, but as can be seen, the fourth offense becomes a felony, and under *545 the general habitual offender statute would be an unclassified felony.
Under the DWI enhancement provision the sentence range for a fourth or subsequent offense is one to six years. But when the DWI provision is joined with the habitual offender provision the range increases to eight to twelve years, as occurred in this case. Thus the issue is whether it is proper for a specific subsequent offense penalty enhancement statute to be stacked upon a general habitual criminal statute in sentencing for a single offense? And more narrowly, is it permissible to stack two such statutes when the conduct currently being punishedthe offense which triggers application of the habitual criminal statuteis a misdemeanor that has been enhanced to a felony statute only by virtue of its repetition?
We have not yet addressed this issue directly. We dealt with another aspect of the problem in Peters v. State, 286 Ark. 421, 692 S.W.2d 243 (1985), but that case is distinguishable. In Peters, the defendant had three prior DWI's, misdemeanors, and was tried for his fourth. The trial court used the procedure for determining prior convictions which is provided for habitual offenders, Ark.Code Ann. § 5-4-502 (1987) [Ark.Stat.Ann. § 41-1005 (Supp.1985)], i.e., after the jury found the defendant guilty, the judge heard evidence in chambers to determine the number of prior convictions and then instructed the jury what the range of sentencing should be. We said the habitual offender statute was inapplicable because that statute provides extended terms for those who have committed more than one but less than four felonies and in that case, the defendant had three previous convictions, all misdemeanors. We also held that the existence of three prior convictions constitutes an element of DWI fourth offense and therefore, that issue must be heard and decided by the jury. Here, unlike Peters, we are not dealing with the habitual offender statute on the basis of prior DWI misdemeanors, but with four felonies unrelated to DWI charges. Moreover, in Peters the application of both the habitual offender statute and the DWI enhancement statute was not the issue.
In surveying other jurisdictions, we find the weight of authority to be against the stacking of enhancement statutes. Goodloe v. Parrath, 605 F.2d 1041 (8th Cir. 1979); State v. Chapman, 205 Neb. 368, 287 N.W.2d 697 (1980); State of New Mexico v. Keith, 102 N.M. 462, 697 P.2d 145 (Ct.App.1985). Of those states that have considered the question, a clear majority have not allowed stacking of enhancement statutes in this case. State v. Chapman, supra; State v. Keith, supra; People v. Vernon 83 Misc. 2d 1025, 373 N.Y.S.2d 314 (N.Y.Sup.Ct.1975); Ex Parte Boatwright, 216 Cal. 677, 15 P.2d 755 (1932); State v. Smith, 12 Ariz.App. 272, 469 P.2d 838 (1970); State v. Sanders, 337 So. 2d 1131 (La.1976). Only two states appear to have allowed it: Commonwealth v. Grimes, 698 S.W.2d 836 (Ky.1985); Woods v. State, 471 N.E.2d 691 (Ind.1984).
While not addressing the issue directly, several states have held that penalty enhancement provisions set forth for subsequent offenses of specific crimes must be used when applicable instead of sentencing under a habitual criminal act, implying that both statutes may not be used for double penalty enhancement in sentencing for one offense. Lloyd v. State, 139 Ga.App. 625, 229 S.E.2d 106 (1976); State v. Loudermilk, 221 Kan. 157, 557 P.2d 1229 (1976); Willeford v. State, 454 S.W.2d 745 (Tex.Cr. App.1970); Broome v. State, 440 P.2d 761 (Okla.Crim.App.1968).
All the state courts that have dealt with the issue have done so through statutory construction. When stacking is disallowed courts have employed various construction rules: statutes authorizing a more severe punishment are deemed highly penal and therefore must be strictly construed, State of New Mexico v. Keith supra; ambiguities in the construction of criminal statutes are resolved in favor of the rule of lenity, Busic v. U.S., 446 U.S. 398, 408, 100 S. Ct. 1747, 1753, 64 L. Ed. 2d 381 (1980); State of New Mexico v. Keith supra; a different meaning of the term "felony" is found in some specific enhancement statute from the same term as used in a general habitual statute, State v. Chapman supra; *546 Goodloe supra; a more specific statute will be given precedence over a more general one, Goodloe, supra; Busic, supra.
In sum, other courts have generally concluded on the basis of legislative intent that stacking a specific and general statute is impermissible. Applying the same rules of construction, we believe our own legislature did not intend the two statutes to be used together.
We have long recognized the familiar principle that where a special act applies to a particular case, it excludes the operation of a general act upon the same subject. Saline County v. Kinkead, 84 Ark. 329, 106 S.W. 581 (1907); Abbott v. Butler, 211 Ark. 681, 201 S.W.2d 1001 (1947). We have also always recognized the principle that penal laws should be strictly construed, State v. Simmons, 117 Ark. 159, 174 S.W. 238 (1915); Burrell v. State, 203 Ark. 1124, 160 S.W.2d 218 (1942); that all doubts in construing a criminal statute must be resolved in favor of the defendant, Stuart v. State, 222 Ark. 102, 257 S.W.2d 372 (1953); Knapp v. State, 283 Ark. 346, 676 S.W.2d 729 (1984); and that courts are not permitted to enlarge the punishment provided by the legislature either directly or by implication. Savage v. Hawkins, 239 Ark. 658, 391 S.W.2d 18 (1965); State v. Simmons, supra.
By applying these rules of construction we are satisfied the legislature did not intend this specific criminal enhancement statute should be coupled with our general criminal enhancement statute for the resulting purpose of creating a greater sentence than if either statute had been applied singly. This is in accord with our decision in Lovell v. State, 283 Ark. 425, 678 S.W.2d 318 (1985), where we were faced with an analogous situation involving the same Omnibus DWI Act at issue in the case before us. We applied the principle of the specific act overriding a general act on the same subject and held that the specific mandatory sentencing requirement under that act, excluded the discretionary probation provided for in our general criminal statutes.
We make one further point, noting first that the felony in this case which would have triggered the general habitual offender statute was otherwise only a misdemeanor and became a felony simply by virtue of its repetition. Using a felony of this nature for habitual offender purposes is specifically condemned by the ABA:
This edition also agrees with the prior edition that misdemeanors no matter how frequent, should not be treated as a substitute for one of the [predicate] felony convictions [used for habitual offender statutes]. Experience with habitual offender statutes indicates, above all else, the need for a "bright-line" standard by which to distinguish the dangerous offender from the mere nuisance to society. American Bar Association, Standards for Criminal Justice, Second Edition, Vol. III. (1980) § 18-4.4, p. 290.
For the reasons stated the judgment is reversed and the case is remanded with directions to reduce the sentence to six years, the maximum under the Omnibus DWI Act.
REVERSED and REMANDED.
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181 N.J. Super. 93 (1981)
436 A.2d 580
COVENTRY SQUARE CONDOMINIUM ASSOCIATION, PLAINTIFF,
v.
JEFF HALPERN T/A FIRST WORLD REALTY, CLEARSTREAM UNIFIED EQUITIES, HOWELL EQUITIES & FIRST WORLD INSURANCE CO., DEFENDANTS.
Superior Court of New Jersey, District Court Monmouth County.
August 6, 1981.
*94 Heilbrunn, Finkelstein, Heilbrunn, Garruto & Galex, attorneys for plaintiff (Robert E. Goldstein appearing).
Sharkey and Sacks, attorneys for defendants (Richard K. Sacks appearing).
GEHRICKE, P.J.D.C.
This is a suit by the Condominium Association in which it seeks to collect a $225 security deposit per unit from all unit owners who rent their premises to tenants pursuant to a by-law effective as of November 1, 1977.
Defendants resist this demand for a deposit, asserting that there is no statutory sanction for so doing; that the by-law relied on by plaintiff exceeds the authority of the board of directors of the Association to so act and the deposit required is really a special assessment levied against a specially created class of owner.
There are no reported cases in our State on the issues raised in this case.
This condominium consists of 633 units, of which 80 are occupied by tenants. Forty-two of these rented units are owned by two landlords.
In 1977 the board of directors of the Association, acting on what they perceived to be increased maintenance expenses caused by inadequate watering, excessive glass breakage, more frequent pest control and garbage placement on the wrong days at such tenant-occupied units, passed a regulation effective November 1, 1977 requiring that owners of rented units deposit $225 per unit with the Association as security for such increased costs. Defendants acknowledge that they have not deposited any money with plaintiff pursuant to this regulation.
*95 The regulation was passed by the board after several meetings and much discussion among themselves, but without any special notice of their intention to act at their October 12, 1977 meeting.
Cross-examination by defendants' counsel elicited testimony that plaintiff did not seek to regulate owner-occupants in like fashion because they were easily available and could be easily collected from, and the Association wanted to have the benefit of a part of an owner's security received from the tenant.
Interrogatories propounded by defendants (# 5) reveal that there were no specific records kept of non-owner resident damage.
P-1 in Evidence the Rules and Regulations of Coventry Square Condominiums provide for the following:
Garbage pick-up, placement at wrong times will be at additional expense to the UNIT.
Lawn care, replacement due to neglect will be at additional expense to the UNIT.
Home owners are the responsible party even if they are not residing in their unit. [Emphasis supplied]
The provision of the regulation in question which requires that the Association place deposit money in an interest-bearing escrow account clearly demonstrates that the Association is not acquiring any property right in such funds; the language used shows that the Association is a recipient of the owner's money, which is returnable if no damage occurs to common elements attributable to the tenant of an owner. Assessments are, "In general sense, the process of ascertaining and adjusting the shares respectively to be contributed by several persons toward a common beneficial object according to the benefit received." Black's Law Dictionary (4 ed. 1951). They are collected for the purpose of making a common expenditure in the future and are not refundable. The money required under this regulation is a deposit, not a special assessment.
*96 The provision for payment by nonresident owners does establish a special class of owner and the concomitant duty to make a security deposit by such members of that specially created class.
While these defendants acknowledged that they were subject to the regulations of the Association, this does not mean that they cannot resist compliance when they believe the regulation to be improper. Samuel Johnson said it best when he told Boswell that "one does not have to be a cook to criticize the cooking."
The Association provides in its regulations for the imposition of costs on unit owners for lawn replacement and untimely garbage placement, and places responsibility on unit owners even if not residing in the unit. A nonresident owner is presumably as available as a resident owner. The assertion by plaintiff that they wish to have benefit of part of any deposit an owner may require from his tenant is difficult to uphold; it appears to be a glossing over of a deliberate attempt to interject the Association into a private contractual relationship between a nonresident owner (landlord) and his tenant. This court can justify neither the intent nor the implementation of such conduct. The Association is not a third-party beneficiary of a nonresident's contract with his tenant.
The regulation in question is unreasonable in that it creates a limited class from whom an extraordinary payment of money into escrow is demanded; it is arbitrary in that it seeks to acquire a convenient fund from this limited class arising out of a contractual arrangement between members of this class and their tenants, and it is unnecessary because the provisions already in place for imposition of charges against owners adequately protects the Association against the anticipated damage by tenants.
The court finds that there is no cause for action against defendants, and the complaint is dismissed without costs.
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292 Pa. Super. 11 (1981)
436 A.2d 695
William GILLESPIE, Appellant,
v.
Harry VECENIE and Transport Motor Express, Inc.
Superior Court of Pennsylvania.
Argued November 11, 1980.
Filed October 30, 1981.
*12 Thomas W. Brown, Pittsburgh, for appellant.
Harry Stump, Pittsburgh, for Vecenie, appellee.
Robert G. Simasek, Pittsburgh, for Transport Motor, appellee.
Before HESTER, BROSKY and VAN der VOORT, JJ.
*13 VAN der VOORT, Judge:
This is an action in trespass to recover damages for personal injuries sustained by plaintiff-appellant. Appellant was injured on August 10, 1978 at about 7:00 P.M. in a parking lot allegedly owned by defendant-appellee Transport Motor Express, Inc. (hereafter referred to as Transport). Appellant, an employee of Transport had a few minutes earlier "punched out" on the employer's time clock. The other defendant-appellee, Vecenie, was a dispatcher in the employ of Transport. It is alleged that an altercation occurred between Vecenie and appellant involving the "punching out" procedure; Vecenie followed appellant into the parking lot where he attacked him both verbally and physically.
The appellees filed Preliminary Objections in the nature of a demurrer to the original complaint; the complaint was amended. Preliminary objections were again filed and the Complaint was again amended. A third set of Preliminary Objections was filed, and briefs were submitted, after which Judge Del Sole sustained the objections and dismissed the complaint. The present appeal is from that order dated December 18, 1979.
Judge Del Sole's order is supported by his opinion which states, in effect: (1) that the common-law action in trespass by an employee against a fellow employee and against his employer is barred by the Pennsylvania Workmen's Compensation Act;[1] (2) that, in any event, Vecenie's intentional assault upon the appellant cannot be charged vicariously to the employer; and (3) further, that the employer's liability, if any, to appellant by reason of a failure to provide him a safe place to work, similarly, gives appellant a remedy only under the Workmen's Compensation Act (hereafter referred to as the Act).
The lower court relied on 77 P.S. § 411(1), which provides as follows:
*14 The terms "injury" and "personal injury" as used in this Act, shall be construed to mean an injury to an employee,. . . arising in the course of his employment and related thereto. . . The term "injury arising in the course of his employment" as used in this article shall not include an injury caused by an act of a third person intended to injure the employee because of reasons personal to him, and not directed against him as an employee or because of his employment; but shall include all other injuries sustained while the employee is actually engaged in the furtherance of the business or affairs of the employer, whether upon the employer's premises or elsewhere, and shall include all injuries caused by the condition of the premises or by the operation of the employer's business or affairs thereon, sustained by the employee, who though not so engaged, is injured upon the premises occupied by or under the control of the employer, or upon which the employer's business or affairs are being carried on, the employee's presence thereon being required by the nature of his employment.
(Emphasis added)
The trial court found that the altercation was precipitated by the wash up and punch out procedure; therefore it held that the attack was not motivated by purely personal reasons. Accordingly, the court found that appellant was limited to his remedies under the Act. Dolan v. Linton Lunch, 397 Pa. 114, 152 A.2d 887 (1959). The court additionally reasoned that Transport could not be sued for failure to provide a safe working place because that kind of action was also covered by the Act.
Under the decided cases, particularly Mike v. Borough of Aliquippa, 279 Pa.Super. 382, 421 A.2d 251 (1980), which contains an extensive review of the case law, we find that the averments of the last amended complaint are sufficient, if eventually proven by competent evidence, to permit a common-law recovery in tort against the employer. The complaint, as last amended, avers, among other things, in paragraphs 6-11, that an altercation began about 6:45 P.M. *15 on August 10, 1978, between appellant and Vecenie; and in paragraphs 13-6, that at about 7:00 P.M. (as had occurred on other prior occasions) Vecenie threatened appellant; but unlike previous times, Vecenie, actually attacked appellant in the parking lot because of:
"pure personal hatred toward the plaintiff . . ."; "personal animosity . . . in no way resulted [sic] out of a relationship between an employer and an employee or . . . between two co-employees"; saying ". . . this has nothing to do with the job, this is between us."
We recognize that averments of personal hatred and animosity, and the negative conclusion that the attack "has nothing to do with the job" may be difficult to prove at trial, but we find that the lower court improperly concluded as a matter of law:
"that the injury he sustained . . . were [sic] work related"; that
"the activities precipitating the altercation . . . arose out of the employment between the parties, namely the punching of a time card and washing up"; that
"[t]his was not an attack . . . for purely personal reasons. . . ."
(Opinion pp. 2-3).
"[A] physical attack following a long running feud between two employees has been held to be `personal', even though the initial spark for the animosity was work-related." 279 Pa.Super 382 at 390, 421 A.2d 251 at 255.
We also must reject the conclusion of the court below that Transport cannot be vicariously liable because of the actions of Vecenie since they are alleged to be intentional. Mike, supra, allowed recovery against a municipality for permitting the plaintiff-employee to become the victim of a violent beating; the employer had failed to provide the victim with a safe working place. While the proof at trial may be difficult, we believe that appellant must be given an opportunity to prove, if he can, a basis of liability against *16 Transport as averred in paragraphs 23 and 24 of the amended complaint.[2]
With respect to the claim against Vecenie, the appellant has stated a clear basis of liability, unless a legal action is barred by the Act. The applicable provision is 77 P.S. § 72, which reads:
If disability or death is compensable under this Act, a person shall not be liable to anyone at common law or otherwise on account of such disability or death for any act or omission occurring while such person was in the same employ as the person disabled or killed, except for intentional wrong.
(Emphasis added)
If, as appellant alleges in Paragraph 28 of the Complaint Vecenie's attack upon him was "willful, malicious, vicious, and violent", the underscored exclusion in § 72 would be applicable.
Vecenie argues that the Workmen's Compensation Referee made an adjudication that appellant's injury was "a *17 result of a negligent act", and that appellant is now estopped from establishing an intentional wrong as he failed to appeal such finding. We find no indication on the record that the Referee adjudicated that the injury was "a result of a negligent act." The exhibit attached to Vecenie's Preliminary Objections is the Referee's findings on Transport's petition to terminate the Workmen's Compensation Agreement because appellant's disability had ceased. The Second Finding of Fact recites that "claimant was accidentally injured on August 10, 1978. . . ." Under rules applicable to Workmen's Compensation matters, a set of circumstances may constitute a compensable "accident" as between employer and employee, even though the injury to the employee resulted from the intentional wrongdoing of some third person. See, for example, Repco Products Corp. v. WCAB, 32 Pa.Cmwlth. 554, 379 A.2d 1089 (1977).
Though, we find a cause of action stated against both defendants, we are foreclosed, by the record from giving the lower court definitive guidance. The record is somewhat contradictory and incomplete as to what action was taken pursuant to the Act. Attached as an exhibit to appellant's reply to the first set of preliminary objections is a "Notice of Workmen's Compensation Denial" dated November 13, 1978.[3] Appellees' final preliminary objections are accompanied by copies of a Referee's findings of fact and conclusions of law on a "Termination Petition." The Referee found that a "Compensation Agreement" was entered into by the parties on June 18, 1979. The initial complaint was filed on April 23, 1979. We are unable, from the state of the record, to determine whether Gillespie is barred, by an agreement, from proceeding in tort against Transport. Nor is the record dispositive as to whether appellant and/or Transport have waived rights and/or defenses by their failure to appeal rulings concerning a Workmen's Compensation claim. Nonetheless, we are confident, on the state of the record, that appellant should be permitted the opportunity to prove his case against Vecenie.
*18 When an injury has been compensated under the Act, then the Act, 77 P.S. § 481, would prohibit the claiming against the employer. An employee may sue a third party whose conduct caused an injury; but neither the employee nor the third party may join an employer in such suit. See Atkins v. Urban Redevelopment Auth., 263 Pa.Super. 37, 396 A.2d 1364 (1979).[4]
The order of the lower court is vacated, the complaint is reinstated and the record is remanded to the lower court with directions to proceed not inconsistent with this Opinion.
NOTES
[1] Judge Del Sole's opinion recites that "the Court takes notice of findings of fact and award by the Workmen's Compensation Referee". (Opinion, p. 2).
[2] 23. The injuries and damages sustained by the Plaintiff, WILLIAM GILLESPIE, were the direct and proximate result of the reckless, careless, negligent and wanton misconduct of the Defendant, Transport Motor Express, Inc., a corporation in the following respects:
a. In failing to provide a safe place for Plaintiff to work and for the Plaintiff to leave the premises in a safe manner;
b. In failing to provide adequate protection for the person of Plaintiff while lawfully on the Defendant's premises;
c. In inviting Plaintiff upon its premises and failing to safeguard his rights;
d. In failing to keep the Defendant, Harry Vecenie, from assaulting employees going to or coming from work when the Defendant knew or in the exercise of reasonable care should have known that the said Defendant, Harry Vecenie had a vicious propensity for attacking fellow employees and had in fact been guilty of similar previous assaults upon other employees;
e. In failing to properly police and supervise its premises so that Plaintiff could safely leave the premises without interference or undergo any vicious assaults by their employee, the Defendant, Harry Vecenie.
24. The Defendant, Transport Motor Express, Inc., is not liable under the Doctrine of Respondeat Superior, but as stated above, is liable for its negligence in allowing a vicious Defendant, Harry Vecenie to do the acts complained of in the Complaint.
[3] The claim was denied because the "disability [was] not related to employment".
[4] For a contrary result, prior to the 1974 Amendment to the Act, see Socha v. Metz, 385 Pa. 632, 123 A.2d 837 (1956); and Burke v. Duquesne Light Co., 231 Pa.Super. 412, 332 A.2d 544 (1974).
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746 S.W.2d 642 (1988)
LAKE SAINT LOUIS COMMUNITY ASSOCIATION, Plaintiff-Appellant,
v.
RAVENWOOD PROPERTIES, LTD., et al., Defendants-Respondents.
No. 53224.
Missouri Court of Appeals, Eastern District, Division Three.
March 15, 1988.
*643 Edward Michael Murphy, Shifrin & Treiman, Clayton, for plaintiff-appellant.
Rollin J. Moerschel, Hannegon, Stokes, Moerschel & Weber, St. Charles, for defendants-respondents.
KAROHL, Presiding Judge.
Plaintiff, Lake Saint Louis Community Association (Community Association), a not-for-profit corporation which administers and enforces the Lake Saint Louis Indenture of Covenants and Restrictions (Covenants and Restrictions) for subdivisions in Lake Saint Louis in St. Charles County, appeals from the trial court determination that the land and lots in Raven's Pointe Subdivision[1] are subject to the Lake Saint Louis Indenture of Covenants and Restrictions. The Community Association, by its petition, averred that defendants Ravenwood Properties, Ltd. and fourteen (14) named purchasers of lots in the Raven's Pointe development were not entitled to membership in the Community Association and thus were not entitled to use the amenities until such time as the Covenants and Restrictions had been properly and validly placed upon the property at Raven's Pointe. The trial court rejected this contention and dismissed plaintiff's petition. On appeal, the Community Association maintains that the Raven's Pointe plats are not subject to the Covenants and Restrictions for Lake Saint Louis because the Covenants and Restrictions were never properly placed upon Raven's Pointe. We disagree with plaintiff's contention and affirm the trial court's order.
On June 21, 1967, the then developer and owner of the Lake Saint Louis development, Lake Saint Louis Estates Company, recorded a document entitled "Lake Saint Louis Indenture of Covenants and Restrictions" which placed certain covenants and restrictions on the original development property, Lake Saint Louis Plat No. 2, as recorded on July 7, 1967 with the St. Charles County Recorder of Deeds. The Covenants and Restrictions were designed to preserve the Lake Saint Louis development as a residential community and to enhance its aesthetics and natural beauty. While the Covenants and Restrictions imposed certain obligations upon members[2] of the Community Association, it also granted members a right and easement of enjoyment in and to the common properties, including the lake, golf course, and other amenities.
Thereafter, on March 20, 1974, pursuant to Article II Section 2[3] of the Lake Saint *644 Louis Indenture of Covenants and Restrictions, the owner of the Lake Saint Louis Estates Company, R.T. Crow, added property, including that which is currently in dispute, to the property already subject to the Covenants and Restrictions. At the time of this declaration the appended property remained unplatted and the proposed scheme for development by defendant Ravenwood had not been approved by the Community Association. It is for this reason, namely a contention that only platted lots or living units could be subjected to the Covenants and Restrictions, that plaintiff appeals.
Our review is limited by the dictates of Rule 73.01. The trial court judgment will be upheld unless there is no substantial evidence to support it, unless it is against the weight of the evidence, or unless it erroneously declares or applies the law. Murphy v. Carron, 536 S.W.2d 30, 32 (Mo. banc 1976); Yalem v. Industrial Development Authority, 700 S.W.2d 103, 104 (Mo. App.1985).
We also are mindful of the well-established principles pertaining to the interpretation and construction of restrictive covenants. First, restrictive covenants are narrowly construed and are not extended by implication to include anything not clearly expressed in them. Berkley v. Conway Partnership, 708 S.W.2d 225, 227 (Mo.App.1986). If there is substantial doubt of their meaning, such doubt should be resolved against the restriction and in favor of the free use of property. Blevins v. Barry-Lawrence County Association, 707 S.W.2d 407, 408 (Mo. banc 1986); Greenberg v. Koslow, 475 S.W.2d 434, 436 (Mo.App.1971). As a caveat, however, this principle should never be applied in a manner that would defeat the plain and obvious purpose and intent of the restriction. Greenberg, 475 S.W.2d at 436; Weiss v. Fayant, 606 S.W.2d 440, 442 (Mo.App. 1980).
Second, the rules governing the construction of contracts imposing restrictions on the use of realty are the same as those applicable to any covenant or contract, including the rule that the clear intention of the grantor-convenantor should govern. Newmark v. L. & R. Development Corp., 615 S.W.2d 118, 119 (Mo.App. 1981); Berkley, 708 S.W.2d at 227. Commensurate with this rule is the principle that if the meaning of terms is questioned, then the language used, absent indication that "special or peculiar" meanings were intended, must be given its plain, ordinary and usual meaning. Greenberg, 475 S.W. 2d at 436-37; Brasher v. Grove, 551 S.W.2d 302, 303 (Mo.App.1977).
We now address plaintiff's contention that Raven's Pointe was improperly subjected to the Covenants and Restrictions of the Lake Saint Louis development. A review of the operative document reveals that it was clearly the covenantor-developer's intent to add properties subject to the covenants and restrictions:
WHEREAS, Developer is the owner of the real property described in Article II of this declaration and desires to create thereon a residential community with open spaces and other common facilities; and to this end, desires to subject the real property described in Article II together with such additions as may hereafter be made thereto to the covenants, restrictions, easements, charges and liens....
* * * * * *
NOW, THEREFORE, the Developer declares that the real property described in Article II, and such additions ... as may hereafter be made, is and shall be held ... subject to the [covenants and restrictions] hereinafter set forth. (Our emphasis).
However, the essence of the dispute is not whether land could be added, but rather the manner, type, and characteristics of the land which was or could become bound by and subject to the Covenants and Restrictions. With regard to property additions, the document states that:
*645 [t]he Developer may from time to time add to The Properties such land as is now owned or hereafter owned or approved for addition by the Developer provided that the land so added shall at that time be bound by all of the terms of this Declaration and any future modifications thereof ... (Our emphasis). Article II Section 2.
Plaintiff contends that the Covenants and Restrictions impose a condition precedent to property additions taking effect, to wit: the properties must be subject to all of the terms thereof at the time the land is added. In support of its claim, plaintiff argues that the functions of the Covenants and Restrictions (i.e. developer control of the rate and nature of the project's growth)
"could only be fulfilled if the property were platted at the time the developer placed the Covenants and Restrictions on the property because only then would the developer know: (1) the intended use of the property, i.e., a lot or living unit; (2) the dimensions and layout of each lot; and (3) the density of each subdivision."
Plaintiff concludes its argument by asserting that property could not be "bound" by "all the terms" of the Covenants and Restrictions until it was platted because throughout the document the wording of the covenants and restrictions applies only to "lots" or "living units."
We are not persuaded by plaintiff's narrow reading and interpretation of the Covenants and Restrictions. An examination of the Indenture of Covenants and Restrictions reveals that the concept of real estate is identified and used throughout the document is several different ways. Article I of the Indenture defines "The Properties" subject to the declaration as "all such existing properties, and additions thereto." The existing properties are defined in Article II Section 1 as "real property" subject to the declaration which was recorded on July 7, 1967, as Lake Saint Louis Plat No. 2 with the St. Charles County Recorder of Deeds. "Additions" are discussed in Article II Section 2(a) as being "such land as is now owned or hereafter owned or approved for addition by the Developer." (Our emphasis). No mention is made in the Indenture declaration requiring either "The [existing] [p]roperties" or "additions thereto," to be platted lots.
We note that the initial developer, Lake St. Louis Estates Company, recorded the original Indenture of Covenants and Restrictions and this same developer affixed the additional, but not yet platted, land to the existing properties subject to the Covenants and Restriction. In the context of "additions" we find the covenantor-developer's selection of the word "land" to be of particular significance. This is an undefined term in the Covenants and Restrictions and connotes a much broader concept than a mere platted "lot"[4], or "living unit"[5], or "multi-family structure."[6] Using its "plain, ordinary and usual" meaning, Greenberg, 475 S.W.2d at 437, "land" is defined as "any ground, soil, or earth whatsoever regarded as the subject of ownership and everything annexed to it whether by nature ... or by man (as buildings...) extending indefinitely vertically upwards and downwards." Webster's Third New International Dictionary. (Emphasis added).
The logical inference to be drawn from the declaration is that once property becomes an "addition" to the Lake Saint Louis "Properties", its development character is established and subject to the Indenture. When developed, the added land may be used only after complying with the terms of the residential development as defined in the Indenture of Covenants and Restrictions. At the time of addition, whether such land is platted or unplatted, *646 the developer has required the land to be developed in strict compliance with all of the requirements of the Covenants and Restrictions. Failure to do so subjects the developer to all penalties outlined in the Indenture document.
On the basis of interpretation alone we find substantial evidence in the record to support the trial court's order.
In the alternative, the trial court could have decided this case on the basis of the affirmative defense raised by defendants wherein they claim that plaintiff should be equitably estopped from removing Raven's Pointe from application of the Lake Saint Louis Indenture of Covenants and Restrictions. We are persuaded by defendant's argument for several reasons. First, we note an unusual aspect of this case. Here, we have homeowners and developers who willingly have subjected themselves to the terms of the restrictive covenant declaration. However, it is the body charged with administration and enforcement of those covenants, the Community Association, which seeks to avoid application of the Indenture. Second, the evidence is undisputed that defendants Ravenwood and Raven's Pointe lot owners have complied with all of the terms of the declaration. The Community Association collected fees from defendants Ravenwood and Raven's Pointe lot owners for architectural review and approval of house plans; imposed and collected its required $250 platting fee for each lot in Raven's Pointe Subdivision; required and collected a $345 annual assessment fee for each lot in Raven's Pointe; required Raven's Pointe lot owners to secure Architectural Review Board approval for items such as sea walls, docks, gazebos and tie walls; demanded the removal of a privacy fence being built on a Raven's Pointe lot; and required preliminary layouts of the lots in Raven's Pointe to be submitted for Community Association approval.
The doctrine of equitable estoppel seeks to foreclose one from denying his own expressed or implied admissions which have in good faith and in pursuance of its purpose been accepted and relied upon by another. Miskimen v. Kansas City Star Co., 684 S.W.2d 394, 400 (Mo.App.1984). There are three elements essential to a claim of equitable estoppel: first, there must be an admission, statement, or act by the person to be estopped that is inconsistent with the claim that is later asserted and sued upon; second, there must be action taken by a second party on the faith of such admission, statement, or act; and third, an injury must result to the second party if the first party is permitted to contradict or repudiate his admission, statement, or act. Willman v. Phelps, 631 S.W.2d 63, 67 (Mo.App.1982).
Liberal application of the doctrine of equitable estoppel is not favored. See, Stenger v. Great Southern Savings & Loan Association, 677 S.W.2d 376, 383 [12, 15] (Mo.App.1984). Rather, our courts restrict its use to only those cases in which each element clearly appears, with the burden resting on the party asserting estoppel to establish the essential facts by clear and satisfactory evidence. Willman, 631 S.W.2d at 67.
The particular facts and circumstances of this case furnish ample basis to support a finding that plaintiff, Community Association, is equitably estopped from asserting its position against defendants. First, the Community Association's position that Raven's Pointe is not bound by the Covenants and Restrictions and defendants are not entitled to its benefit is completely inconsistent with its previous conduct concerning Raven's Pointe developers and property owners prior to this litigation. We reiterate that over the past several years the Community Association has assessed and collected a variety of fees from all defendants and has required complete compliance to the Architectural Review Board's decisions. The Community Association's actions in the past are wholly inconsistent with the position asserted here that by reason of any act of the developer Raven's Pointe Subdivision never was, is not now, and could not in the future be bound by the Lake Saint Louis Indenture of Covenants and Restrictions.
Second, the element of reliance is satisfied by examining the actions taken by defendants throughout the development of the Raven's Pointe Subdivision. The developers *647 of Raven's Pointe marketed and sold lots in the development on the basis that the Lake Saint Louis Indenture of Covenants and Restrictions would both benefit and burden the owners and occupants of the development. The developers paid the Community Association's required platting fees, and were forced to submit their development plans to the architectural control committee. Based upon the apparent availability of Lake Saint Louis amenities, the developers were able to sell the Raven's Pointe lots at a higher price than they otherwise could have. Moreover, purchasers paid higher premiums for Raven's Pointe lots on the similar belief that the development was a part of Lake Saint Louis. Thereafter, defendant lot owners were required by the Community Association to submit all building proposals to the Architectural Review Board and pay annual assessment fees. It is obvious that defendants purchased their lots, paid required fees, and complied with all the restrictive covenants in reliance upon the Community Association's representations and acts which seemingly assured defendants that Raven's Pointe was part of the Lake Saint Louis development.
Finally, a definite injury will result to the developer and each Raven's Pointe lot owner if this development is not subject to the Lake Saint Louis Indenture of Covenants and Restrictions. Not only will they not be allowed to enjoy the Lake Saint Louis amenities, but they also will suffer significant financial losses if unable to market and sell Raven's Pointe lots and homes as being part of the Lake Saint Louis development.
For these reasons we hold that the Lake Saint Louis Community Association cannot refuse defendants the application of the Lake Saint Louis Indenture of Covenants and Restrictions. Plaintiff's point is denied.
Judgment affirmed.
SMITH and KELLY, JJ., concur.
NOTES
[1] Specifically, the trial court's order and this appeal are concerned with the land and lots in Raven's Pointe Subdivision as per plats recorded in Plat Book 25, page 65 and Plat Book 25, page 66 to the extent that these lands and lots were formerly a part of the "Spitzer/Rosenbloom tract" described in a deed recorded in Book 1042, page 504 et. seq. in the St. Charles County Recorder's office.
[2] The Covenants and Restrictions state that "every person who is a record owner of a fee or undivided fee interest in any Lot or Living Unit, which is subject by covenants of record to assessment by the Association shall be a Member [of the Community Association]."
[3] II
PROPERTY SUBJECT TO THIS DECLARATION: ADDITIONS THERETO
* * * * * *
Section 2. Additions to Existing Property. Additional lands may become subject to this Declaration in the following manner:
(a) Additions by the Developer. The Developer may from time to time add to The Properties such land as is now owned or hereafter owned or approved for addition by the Developer provided that the land so added shall at that time be bound by all of the terms of this Declaration and any future modifications thereof ....
[4] "Lot", as defined in Article I of the Indenture of Covenants and Restrictions, refers to "any plot of land shown upon any recorded subdivision map of The Properties with the exception of the Common Properties."
[5] "Living Unit" is defined in Article I as "any portion of a building situated upon The Properties designed and intended for use and occupancy as a residence by a single family ...."
[6] "Multi-family Structure", as defined in Article I, refers to "any building containing two or more living units under one roof."
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746 S.W.2d 691 (1988)
PLASTI-LINE, INC., Plaintiff/Appellant,
v.
TENNESSEE HUMAN RIGHTS COMMISSION, et al., Defendants/Appellees.
Supreme Court of Tennessee, at Knoxville.
March 7, 1988.
Frank P. Pinchak, Chattanooga, (L. Caesar Stair, III, Knoxville, of counsel), for plaintiff/appellant.
W.J. Michael Cody, Atty. Gen. and Reporter, Mary Kendall Kallaher, Asst. Atty. Gen., Jerrold L. Becker, Knoxville, for defendants/appellees.
OPINION
HARBISON, Chief Justice.
Appellant brought this action for declaratory judgment and injunctive relief, challenging the validity of portions of T.C.A. §§ 4-21-301 to 307, the enforcement provisions of the statutes creating the Tennessee Human Rights Commission. The Chancellor upheld the validity of the statutes and dismissed the action. We affirm.
All of the challenges to the statutes raised by appellant are made under the provisions of the Tennessee Constitution. It is alleged that the procedural and enforcement provisions of the statutes violate the principle of separation of powers, the constitutional guarantee of the right to trial by jury, and the constitutional provisions pertaining to the election of state judges. We find no merit in these claims.
*692 The case arose under the provisions of T.C.A. § 8-50-103, prohibiting discrimination in the employment of handicapped persons. Portions of that statute provide that aggrieved persons may file with the Tennessee Human Rights Commission a written sworn complaint. Thereafter the Commission shall follow the procedure and exercise the powers and duties provided in T.C.A. §§ 4-21-302 to 311, and the aggrieved claimant shall have all rights provided therein. T.C.A. § 8-50-103(b).
The Tennessee Human Rights Commission was first established by 1978 Tenn. Pub. Acts, Ch. 748. The statutes have been amended on several occasions. Their purposes are to provide for execution within Tennessee of the policies embodied in the Federal Civil Rights Acts of 1964, 1968 and 1972 and the Age Discrimination in Employment Act of 1967 and to prohibit discriminatory practices in employment, public accommodations and housing. The provisions prohibiting discrimination in the hiring of handicapped persons originated in 1976 Tenn. Pub. Acts, Ch. 457, and by subsequent amendments proceedings under this Act were placed under the statutes governing the Tennessee Human Rights Commission.
Appellant is a private employer against which a claim of discrimination was filed by Robert O. Wilks with the Tennessee Human Rights Commission. After investigation the staff of the Commission issued an initial determination finding that reasonable cause existed to believe that discrimination in fact had occurred. Efforts at conciliation were unsuccessful. Subsequently the matter was set for an administrative hearing pursuant to T.C.A. § 4-21-304. Appellant then filed this action in chancery court to enjoin the proceedings. The discrimination claim has never been heard or disposed of on its merits.
Essentially appellant insists that types of relief which the Human Rights Commission may grant include those traditionally awarded by courts, so that in fact the Commission constitutes a judicial body, or court, within the executive branch of state government in violation of the provisions of Tenn. Const. Art. II, §§ 1 and 2, directing the separation of powers of each branch of government. Because the tribunal is said to be a court, appellant insists that either its members or those administrative judges enforcing the statutory remedies must meet the qualifications of state judges under Tenn. Const., Art. VI, § 4. It is also insisted that some of the remedies available under the statutes in question are similar to those generally available in ordinary tort actions with the result that the statutes deny the constitutional guarantee of trial by jury under the Tennessee Const., Art. I, § 6.
Almost identical challenges to similar statutes in Kentucky and Missouri were considered and found to be without merit in the cases of Kentucky Commission on Human Rights v. Fraser, 625 S.W.2d 852 (Ky. 1981) and Percy Kent Bag Co. v. Missouri Commission on Human Rights, 632 S.W.2d 480 (Mo. 1982).
We find the reasoning in those cases persuasive. While the constitutions of those states are not identical to those in Tennessee, they are in most respects similar. The interpretations of the constitutions of those states are also consistent with cases from this Court construing the provisions of the Tennessee Constitution.
The statutes in question provide that after notice and a hearing the Human Rights Commission shall issue an order stating its findings of fact and conclusions of law with respect to whether there has or has not been a discriminatory practice. T.C.A. § 4-21-305.
In the event of a finding that discrimination does exist, the Commission is authorized under T.C.A. § 4-21-306 to order various types of affirmative action. Appellant does not question most of these, but insists that the provisions of Subsection 8 violate the separation of powers in that the Commission may order:
"Payment to the complainant of damages for an injury, including humiliation and embarrassment, caused by the discriminatory practice, and cost, including a reasonable attorney's fee."
*693 Appellant insists that the Tennessee Human Rights Commission is not a licensing or regulatory body but that it is authorized to dispose of private disputes between private litigants. Appellant insists that the latter function is not appropriate for an administrative agency and is exclusively a function of the state judicial department. Appellant insists that no other administrative agency has such authority.
As pointed out by the Kentucky Court of Appeals in the Fraser case, supra, in most jurisdictions of the United States workers' compensation claims are processed through administrative agencies or industrial commissions. Tennessee is one of the few states in which the workers' compensation system is administered through the judicial branch rather than an administrative agency. As pointed out by the Kentucky court, however, workers' compensation cases generally do not involve licensing or regulation but simply are the adjudication of private disputes between private parties. The workers' compensation systems in the United States have almost universally been held constitutional, even though they utilize administrative agencies, do not provide for trials by jury and involve only private disputes.
Beyond question the Tennessee Human Rights Commission administers policies or programs promulgated by the Tennessee General Assembly. Even though there is no licensing feature or strictly regulatory practice as is true with many state administrative agencies, this agency is charged with the administration of public policy in prohibiting unlawful practices in employment, public accommodations and housing. These are state and national policies of great importance.[1] In our opinion, their enforcement may in the first instance be entrusted to an administrative agency.
It is important to note that T.C.A. § 4-21-307 provides for judicial review of any order of the Commission. Further, the Commission itself has no authority or power to enforce its orders. Unless there is voluntary compliance, the Commission must obtain an enforcement order from the chancery court. In the event of an appeal for judicial review or in the event of the filing of an enforcement procedure by the Commission, T.C.A. § 4-21-307(b)(6) provides:
"The court shall have power to grant such temporary relief or restraining order as it deems just and to enter an order enforcing, modifying and enforcing as modified, or setting aside in whole or in part the order of the commission; or remanding the case to the commission for further proceedings."
The Commission itself has no power to enforce its own orders, including any so-called judgments for unliquidated damages. It must seek enforcement through the chancery court and that court must approve the order in all respects. Otherwise the court may modify the order or reverse it entirely. It is true that T.C.A. § 4-21-307(b)(5) provides that findings of fact by the Commission shall be conclusive unless clearly erroneous in view of the probative and substantial evidence on the whole record. In the Fraser case, supra, the Kentucky Court of Appeals construed similar statutory language. It held that this provision requires that there be material and substantial evidence to support factual findings but that the statute does not require courts to enforce arbitrary or capricious findings. While this standard of review is somewhat more restrictive than that provided in the Uniform Administrative Procedures Act, T.C.A. § 4-5-322(h), it is not much more narrow than the standard used in cases involving common law certiorari, T.C.A. § 27-8-101 to 123 and T.C.A. § 27-9-114.
In addition to instituting or appealing an administrative proceeding, a claimant may file a civil action in chancery court to enjoin violations and recover actual damages sustained, together with costs and attorneys' fees. T.C.A. § 4-21-311.
Neither the administrative remedies nor those provided in direct court actions are limited to common law unliquidated damages. In our opinion the fact that a trial *694 by jury is not available under the statutes in question does not render them unconstitutional. The rights sought to be protected are created by statute; and the General Assembly, in our opinion, may provide appropriate remedies for the enforcement of those rights. Cf. National Labor Relations Board v. Jones & Laughlin Steel Corp., 301 U.S. 1, 57 S. Ct. 615, 81 L. Ed. 893 (1937).
In our opinion the administrative agency involved here is not a court, even though the agency may possess judicial characteristics as well as those which are legislative or executive. See In re Cumberland Power Co., 147 Tenn. 504, 249 S.W. 818 (1923). There is ample provision for judicial review of its actions, and court action is necessary before its orders may finally be enforced. The agency is authorized to make appropriate rules and regulations to achieve well-defined legislative goals, policies and objectives. Under these circumstances we do not find that there is any violation of the principle of separation of powers nor any requirement that commission members, administrative judges or other personnel enforcing the statutory provisions must possess the qualifications of and must be selected in the manner provided for state judges.
The judgment of the trial court is affirmed at the cost of appellant. The cause will be remanded to that court for entry of any further orders necessary and collection of costs accrued there.
FONES, COOPER, DROWOTA and O'BRIEN, JJ., concur.
NOTES
[1] Cf. Hoge v. Roy H. Park Broadcasting of Tenn., Inc., 673 S.W.2d 157 (Tenn. App. 1984).
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674 F. Supp. 67 (1986)
Marion WALLACE
v.
TOWN OF STRATFORD BOARD OF EDUCATION.
Civ. No. B-84-658 (TFGD).
United States District Court, D. Connecticut.
July 30, 1986.
*68 Daniel E. Brennan, Jr., Brennan, McNamara & Brennan, Marion Wallace, Bridgeport, Conn., Anthony F. Slez, Jr., Westport, Conn., for plaintiff.
Stephen R. Bells, Lawrence A. Quellette, Jr., McNamara, Clancy & Kenney, Bridgeport, Conn., for defendant.
ORDER
DALY, Chief Judge.
After careful review and over objection, including plaintiff's untimely objection, the Magistrate's recommended ruling is hereby ADOPTED, APPROVED and RATIFIED. The above-captioned matter shall be closed of record and removed from this Court's docket.
RECOMMENDED RULING ON DEFENDANT'S MOTION TO DISMISS AND/OR STRIKE
F. OWEN EAGAN, United States Magistrate.
Plaintiff brought this action claiming that the defendant discriminated against her in her employment because she is handicapped. Her federal claims are asserted pursuant to § 504 of the Rehabilitation Act of 1973, 29 U.S.C. § 794, and 42 U.S.C. § 1983. In addition, plaintiff has raised certain state law claims based upon the same nucleus of facts as the federal claims. Defendant has moved to dismiss this action under F.R.Civ.P. Rule 12(b) on the grounds that plaintiff's claims are barred by the applicable statute of limitations and, as to certain claims, that plaintiff has failed to state a claim upon which relief can be granted.
FACTS
On a motion to dismiss, the court must construe the amended complaint in the light most favorable to the plaintiff and accept the facts alleged as true. Jenkins v. McKeihen, 395 U.S. 411, 89 S. Ct. 1843, 23 L. Ed. 2d 404 (1969). Here, plaintiff has been employed by the Stratford Board of Education for over twenty years, and was a tenured teacher. She alleges a handicap as a result of childhood polio. On January 30, 1981, plaintiff was suspended from duty by defendant. Plaintiff challenged the suspension by filing a complaint with her union and a complaint with the Connecticut Commission on Human Rights and Opportunities (hereinafter CCHRO), claiming that the suspension was discriminatory. *69 On May 29, 1981, plaintiff entered into an agreement with defendants under which she agreed to resign at the end of the 1981-82 school year. Under the agreement, she was to be employed in a professional capacity up until her resignation, was to be given a letter of recommendation by defendant and her personnel file was to be purged of "material which adversely reflected upon her." Defendant agreed to rescind its vote to consider termination of plaintiff and plaintiff agreed to withdraw her application for a hearing before an impartial panel. Plaintiff also agreed to withdraw her complaint with the union and with CCHRO.
On August 17, 1981, plaintiff was assigned to the audio-visual department. She claims she was isolated from colleagues, given responsibilities she was unable to carry out due to her handicap, and was the subject of derogatory remarks by employees of defendant. In addition plaintiff claims that her personnel file was not purged of adverse material, that defendant did not rescind its vote to consider termination, and did not act in good faith when it provided her with a letter of recommendation. Plaintiff claims that defendant's actions were discriminatory, deprived her of her civil rights, and violated state law. She also claims that defendant violated the termination agreement.
DISCUSSION
I. Relation Back of Amended Complaint
Defendant has moved to dismiss this action based on the statute of limitations. Defendant argues that the date of the amended complaint, August 27, 1985, is the proper date from which to calculate the limitations question. Plaintiff argues that the date of the original complaint, October 9, 1984, is the proper date.
Under F.R.Civ.P.Rule 15(c), amendments relate back to the date of the original pleading "[w]henever the claim or defense asserted in the amended pleading arose out of the conduct, transaction, or occurrence set forth or attempted to be set forth in the original pleading." Courts also inquire into "whether the opposing party has been put on notice regarding the claim or defense raised by the amended pleading." C. Wright & A. Miller, 6 Federal Practice and Procedure: Civil § 1497 (1971). In this case, the federal claims in the original complaint were based wholly upon allegations of sex discrimination under Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 20OOe-5 et seq. The federal claims in the amended complaint are allegations of discrimination due to plaintiff's handicap. No allegations of sex discrimination are made in the amended complaint and, conversely, the original complaint contained no allegations of discrimination due to plaintiff's handicap.
In Campbell v. A.C. Petersen Farms, Inc., 69 F.R.D. 457 (D.Conn.1975), the court was faced with a similar situation. In Campbell, the plaintiff's original complaint alleged only race discrimination. He sought to amend the complaint, after the statutory period for filing a complaint had passed, to include claims regarding defendant's grooming policy. Defendant sought to dismiss the amendment on the grounds that the claims were based on sex discrimination which had not been raised in the original complaint and which, therefore, were time-barred. The court noted that it was unable to tell if plaintiff's amendment was based on race or sex discrimination, but went on to state:
The original complaint, which was filed within the statutory period, contained no reference to the defendant's hair regulation and did not allege any other act of sex discrimination; the gravamen of that complaint was exclusively race discrimination. Therefore, this new allegation [if based on sex discrimination] cannot be deemed to arise out of the "conduct ... set forth in the original pleading" and cannot be held to relate back to the date of the filing of the original complaint. Rule 15(c) Fed.R.Civ.P.
Id. at 461. In Rosenberg v. Martin, 478 F.2d 520 (2d Cir.1973), the Second Circuit stated that the test for whether an amendment relates back is not contemporaneity of the facts pleaded, but rather "adequacy of notice. As said by Judge Laramore in Snoqualmie Tribe v. United States, 372 *70 F.2d 951, 960, 178 Ct. Cl. 570 (1967), `the inquiry in a determination of whether a claim should relate back will focus on the notice given by the general fact situation set forth in the original pleadings.'" Id. at 526.
In this case, the discriminatory conduct alleged in the original complaint made no reference to plaintiff's handicap. Therefore, the court cannot conclude that the new allegations arise out of the conduct set forth in the original complaint or that defendant had adequate notice of the newly alleged claims. Accordingly, the amendments do not relate back to the date of the original complaint. The court's determination on the statute of limitations question is based on the date of the amended complaint, August 27, 1985.
II. Federal Claims
Counts 1, 2, 3, 5 and 7 of plaintiff's complaint allege claims based upon the Constitution and/or federal law.
A. Counts 1 and 2
Counts one and two of the complaint are brought under 42 U.S.C. § 1983. Count one of the complaint challenges plaintiff's suspension which occurred on January 30, 1981, and the subsequent actions of the defendant leading up to her agreement to resign at the end of the 1981-82 school year. Plaintiff claims defendant's actions were taken because of her handicap in violation of her right to equal protection of the laws and that they were performed under color of state law. In count two, plaintiff alleges that she was deprived of a property right, her position as a tenured teacher without a hearing, in violation of her right to due process under the fourteenth amendment, and that defendant's actions were performed under color of state law.
As of June 6, 1981, plaintiff had signed the agreement with defendant, in which she agreed to resign at the end of the 1981-82 school year. In Delaware State College v. Ricks, 449 U.S. 250, 101 S. Ct. 498, 66 L. Ed. 2d 431 (1980), the Supreme Court ruled in a case alleging discriminatory denial of tenure, that the statute of limitations begins to run at the time of the discriminatory act, not the point at which the consequences become painful. Id. at 258, 101 S.Ct. at 504. Thus, in Ricks, the statute began to run when the plaintiff was denied tenure and given a one year terminal contract, not on the date his employment terminated. See also Chardon v. Fernandez, 454 U.S. 6, 102 S. Ct. 28, 70 L. Ed. 2d 6 (1981) (per curiam) (statute of limitations begins to run on the date the plaintiff learns he will be terminated). In the case at bar, the plaintiff knew by June 6, 1981, that she would be terminated at the end of the 1981-82 school year. Therefore, the statute of limitations began to run at that time.
There is no statute of limitations contained in 42 U.S.C. § 1983. Therefore, the court must apply the most appropriate state statute of limitations. Board of Regents v. Tomanio, 446 U.S. 478, 100 S. Ct. 1790, 64 L. Ed. 2d 440 (1980). Recently, in Wilson v. Garcia, 471 U.S. 261, 105 S. Ct. 1938, 85 L. Ed. 2d 254 (1985), the Supreme Court ruled that all Section 1983 claims within a state should have a uniform statute of limitations, and that § 1983 claims are most appropriately characterized as personal injury actions. Id. 105 S.Ct. at 1947. Therefore, the state statute of limitations for personal injury actions should be applied in cases brought under § 1983. Id. This decision does not alter the practice of the District Courts in Connecticut, which have been applying Connecticut's three-year statute of limitations for actions sounding in tort, Conn.Gen.Stat. § 52-577, to civil rights actions.[1]See Stone v. Wakely, Civil No. H-82-723 (D.Conn.1983); Sailer v. Wezowicz, Civil No. H-82-1068 (D.Conn.1983) (and cases cited therein).
Applying § 52-577 to the instant case, the latest date that plaintiff could file an action based upon the facts alleged in Counts 1 and 2 of her complaint was June 6, 1984. Since her action was not filed until August 27, 1985, the allegations in *71 Counts 1 and 2 are barred by the statute of limitations and must be dismissed.[2]
B. Count 3
Count three of plaintiff's complaint is brought pursuant to Section 504 of the Rehabilitation Act of 1983, 29 U.S.C. § 794,[3] which prohibits discrimination in employment by recipients of federal financial assistance. Alternatively, plaintiff brings the claim under § 1983. The basis of the claim is that defendant failed to make reasonable accommodations for plaintiff in her work and that defendant's evaluations of her were arbitrary and capricious. Although no dates of specific discriminatory acts are included, it is apparent from the entire complaint that any such acts took place no later than the end of the 1981-82 school year.
Section 504 of the Rehabilitation Act contains no statute of limitations. Where Congress has not adopted a statute of limitations, the court must apply the most appropriate state statute of limitations. Board of Regents v. Tomanio, supra. Since cases involving alleged discrimination based on handicap are akin to other civil rights cases, this court will follow Wilson v. Garcia, supra and apply Connecticut's three-year statute of limitations for personal injury actions, § 52-577. Since the statute of limitations began to run on the last day of 1981-82 school year, plaintiff's complaint, dated August 27, 1985, was filed more than three years after the cause of action accrued and is time-barred. Therefore, count 3 of plaintiff's complaint must be dismissed.
C. Count 5
Count 5 concerns defendant's alleged interference with plaintiff's first amendment rights in September 1981. This claim is also asserted pursuant to 42 U.S.C. § 1983. Under the three-year statute of limitations for § 1983 claims in this District, the latest plaintiff could have filed this claim was September 30, 1984. Since plaintiff did not file her complaint until August 27, 1985, count 5 is time-barred and must be dismissed.
D. Count 7
Count seven contains a claim of negligent supervision. Although it is unclear what plaintiff means by this allegation, the court will construe it broadly to allege a policy of discrimination toward handicapped employees by other employees of the defendant, which was known or reasonably should have been known by defendant and was permitted to continue. Since plaintiff alleges this conduct was under color of state law, the three-year statute of limitations for § 1983 claims applies. As with count 3, the claim is time-barred, since plaintiff's last possible day of work was more than three years before the complaint was filed. Count 7, accordingly, is dismissed.[4]
III. Pendent State Claims
Counts 4, 6 and 8 are claims of state law on which the court could exercise jurisdiction under the doctrine of pendent jurisdiction. See generally, 13B C. Wright & A. Miller, Federal Practice and Procedure: Civil § 3567 et seq. Count four is a claim under a collective bargaining agreement and/or the Teacher Tenure Act, Conn.Gen. Stat. § 10-151(b). Count six alleges a breach of the termination agreement that plaintiff entered into with the defendant. Count eight alleges a violation of a state statute.
*72 In United Mine Workers v. Gibbs, 383 U.S. 715, 86 S. Ct. 1130, 16 L. Ed. 2d 218 (1966), the Supreme Court was faced with the question of what action was appropriate toward pendent state claims in a case in which all federal claims were dismissed prior to trial. The court stated that "if the federal claims are dismissed, even though not insubstantial in a jurisdictional sense, the state claims should be dismissed as well." Id. at 726, 86 S.Ct. at 1139. This is particularly appropriate in the instant case, where the proceedings are at an early stage, that is, defendant has not filed an answer and discovery has been minimal or non-existent. Therefore, plaintiff's pendent state law claims are hereby dismissed.[5]
CONCLUSION
Defendant's motion to dismiss is granted.
As provided by statute and local rules, the parties are entitled to seek timely review by the district judge of the magistrate's recommendation. 28 U.S.C. § 636.
NOTES
[1] This practice met with approval in the Court of Appeals for the Second Circuit. See Williams v. Walsh, 558 F.2d 667, 670 n. 3 (2d Cir.1979).
[2] The court notes that even the original complaint filed on October 9, 1984, would have been time-barred with respect to these claims.
[3] Section 504 of the Rehabilitation Act of 1973 states in part:
No otherwise qualified handicapped individual ... shall, solely by reason of his handicap, be excluded from the participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving Federal financial assistance.
[4] In light of the court's disposition of defendant's motion on statute of limitations grounds, it is unnecessary to address his other arguments relating to the availability of money damages under § 504 of the Rehabilitation Act (but see Consolidated Rail Corp. v. Darrone, 465 U.S. 624, 104 S. Ct. 1248, 79 L. Ed. 2d 568 (1984) in which the Supreme Court held that at least back pay is available under § 504) or defendant's claim with respect to the doctrine of respondeat superior in relation to Count 5 of the complaint.
[5] It is unnecessary to reach defendant's argument regarding the statute of limitations with respect to the state law claims. Dismissal here does not bar plaintiff from litigating the state claims in state court, where the statute of limitations question may be raised by defendant.
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746 S.W.2d 108 (1988)
Cynthia J. BRICKNER, and Candace J. Brickner, a minor, by her next friend Rowell E. Burt, Plaintiffs-Appellants/Cross-Respondents,
v.
NORMANDY OSTEOPATHIC HOSPITAL, INC., Defendant-Respondent/Cross-Appellant.
Nos. 51820, 51842.
Missouri Court of Appeals, Eastern District, Division Five.
January 19, 1988.
Motion for Rehearing and/or Transfer to Denied March 2, 1988.
*110 Mark I. Bronson, Newman & Bronson, St. Louis, plaintiffs-appellants/cross-respondents.
Kenneth C. Brostron, Amy Rehm Hinderer, Tina A. Odo, Lashly, Baer & Hamel, P.C., St. Louis, for defendant-respondent/cross-appellant.
Motion for Rehearing and/or Transfer to Supreme Court Denied March 2, 1988.
CARL R. GAERTNER, Judge.
Upon retrial of a wrongful death claim on the issue of liability only, the jury found in favor of plaintiffs and the trial court entered judgment against defendant in the amount of $340,717.00. Plaintiffs appeal arguing that the trial court erred in failing to allow pre-judgment interest on the damages held in abeyance. Defendant, Normandy Osteopathic Hospital, cross-appeals contending that: (1) the trial court erred in holding the hospital vicariously liable for the alleged negligence of its employee, Dr. Smith, because Smith was the borrowed servant of the attending surgeon at the time of the alleged negligence; (2) the trial court erred in holding the hospital vicariously *111 liable for an error in the medical judgment of a physician/employee; (3) plaintiffs released their claim against the hospital by dismissing their claim against Dr. Smith; (4) the verdict director was improper because it confused and misled the jury on the issue of agency; and (5) the trial court improperly calculated the present value of the outstanding settlements with Doctors Olson and Bean when it entered judgment against the hospital. We affirm.
This is the second appeal from a wrongful death action involving a failure to diagnose testicular cancer. Decedent, James Brickner, at the direction of his family physician, Dr. Bean, entered Normandy Osteopathic Hospital on May 31, 1978. Dr. Bean suspected that Mr. Brickner had testicular cancer. On June 2, 1978, decedent underwent exploratory surgery of his left scrotum. The operation was performed by Dr. Smith, a second year surgical resident, at the hospital. Dr. Smith was supervised during the operation by Dr. Olson, a surgeon with staff privileges at the hospital who participated in its teaching program. After surgery, Dr. Smith informed decedent that he did not have cancer and that it had not been necessary to remove his left testicle during surgery.
On February 23, 1979, after continued pain and swelling, decedent went to the emergency room at Condell Memorial Hospital in Libertyville, Illinois. He again underwent exploratory surgery of his left testicle. During this second operation, the doctors discovered testicular cancer and removed decedent's left testicle. After further examination, doctors discovered that decedent was in an advanced stage of cancer. James Brickner died on December 1, 1980 of metastatic testicular carcinoma.
Decedent's wife and daughter filed suit for wrongful death against Normandy Osteopathic Hospital, David K. Bean, D.O., a family practitioner, J. P. Smith, D.O., a second year surgical resident at Normandy Osteopathic Hospital, and John Olson, D.O., a surgeon and urologist. Plaintiffs alleged that Doctors Smith, Olson, and Bean negligently failed to diagnose decedent's testicular cancer. Specifically, plaintiffs charged that Dr. Smith and Dr. Olson negligently failed to perform a biopsy or remove decedent's testicle during exploratory surgery of decedent's left scrotum.
Prior to trial, Dr. Olson settled with plaintiffs for $200,000.00. Plaintiffs then voluntarily dismissed their claim against Dr. Smith with prejudice before the case was submitted to the jury. Considering only the remaining claims against Dr. Bean and Normandy Osteopathic Hospital, the jury found in favor of the hospital and against Dr. Bean. They assessed plaintiffs' damages at $1,000,000.00. Due to instructional error, however, the trial court granted plaintiffs a new trial as to the hospital. Both the hospital and Dr. Bean appealed the decision in the first trial.
While the first appeal was pending, Dr. Bean and plaintiffs agreed to a structured settlement. Thereafter, we affirmed the trial court's decision to grant plaintiffs a new trial, but limited the new trial to the issue of liability. Brickner v. Normandy Osteopathic Hospital, Inc., 687 S.W.2d 910 (Mo.App.1985). Should the second jury find the hospital liable, we instructed the trial court to enter judgment in the amount of $1,000,000.00 less the present value of the outstanding settlements with doctors Bean and Olson.
Upon re-trial the jury found the hospital liable and the trial court entered judgment in the amount of $340,717.00. The Brickners and the hospital both appeal the decision. We turn first to the hospital's cross-appeal.
APPEAL OF NORMANDY OSTEOPATHIC HOSPITAL
The hospital contends that the trial court erred in denying its motion for judgment notwithstanding the verdict because plaintiffs failed to establish liability on the part of hospital. We note at the outset that plaintiff did not allege any direct negligence against the hospital, but sought only to hold the hospital liable for the acts of its employee, Dr. Smith. The hospital argues that it cannot as a matter of law be vicariously *112 liable for the acts of Dr. Smith because: (1) at the time of the alleged negligence, Dr. Smith was the borrowed servant of the attending surgeon, Dr. Olson; and (2) the alleged negligence involved the exercise of a physician's medical discretion over which the hospital had no control.
In reviewing the issue of liability we look only to the evidence most favorable to the prevailing party below, disregarding all evidence and inferences to the contrary. Norris v. Jones, 687 S.W.2d 280 (Mo.App. 1985).[1] The evidence favoring plaintiffs was as follows: Dr. Smith was a second year resident employed by the hospital in a surgical residency program. As part of its residency program the hospital required Dr. Smith to be present at the hospital from 7:00 a.m. to 7:00 p.m., attend to his assigned patients prior to and after surgery, and either assist in surgery or perform surgery under supervision depending on the type of operation. Dr. Smith was forbidden to accept private patients.
On June 2, 1978, Dr. Smith performed surgery on James Brickner under the supervision of the attending surgeon, Dr. Olson. Under the guidelines established for its residency program, the hospital allowed second year residents to perform scrotal explorations under supervision. The surgery was performed in "teamwork" fashion. Although the supervising surgeon had the "most" decision-making authority, Dr. Smith was required to assist in the patient's diagnosis and could have taken a biopsy of decedent's testicle without an express instruction from Dr. Olson.
Plaintiff's expert, Dr. Milner testified that he believed with a reasonable degree of medical certainty that Dr. Smith failed to adequately examine the testicle while it was exposed during surgery and, therefore missed the cancer diagnosis. Dr. Hendricks, a second expert, testified that the type of surgery performed on decedent was typically done by surgical residents with a surgeon assisting. He stated that in his opinion had Dr. Smith performed a biopsy cancer would have been discovered. The hospital argues that, as a matter of law, Dr. Smith was the borrowed servant of the surgeon, Dr. Olson.
A general employer may use the borrowed servant doctrine as a defense when these elements are present: (a) consent upon the part of the employee to work for the special employer; (b) actual entry by the employee upon the work of the special master pursuant to an express or implied contract to do so; and (c) power of the special employer to control the details of the work to be performed and to determine how the work shall be done and whether it will stop or continue. Ballard v. Leonard Brothers Transport Co., Inc., 506 S.W.2d 346, 350 (Mo.1974); Tractor-Trailer Supply Co. v. Wilbur Waggoner Equipment Rental and Excavating Co., Inc., 539 S.W.2d 465, 467 (Mo.App.1976). Although the evidence in this case supports a finding of each of these elements, our inquiry, does not end with this finding.
Where, as here, the borrowed servant doctrine is asserted by the general employer as a defense to an action by a third party to recover for damages caused by the negligence of the employee in performing the work of the special employer, it is encumbent upon the general employer to prove, in addition to the three elements enumerated above, a total relinquishment of any right of control over the conduct of the employee insofar as the particular work is concerned.
To escape liability the general employer must surrender full control of the employee in the performance of the particular work, it not being sufficient if the servant is partially under the control of a third party. Cases so holding include McFarland v. Dixie Machinery and Equipment Co., 348 Mo. 341, 153 S.W.2d 67; and Wills v. Belger, 357 Mo. 1177, 212 S.W.2d 736. See also Restatement, Second, Agency § 227, with reference to factors to consider.
*113 Koirtyohann v. Washington Plumbing & Heating Co., 471 S.W.2d 217, 219-20 (Mo. 1971).
The factors pertinent to our inquiry set forth in the above-cited section of the Restatement include:
In the absence of evidence to the contrary, there is an inference that the actor remains in his general employment so long as, by the service rendered another, he is performing the business entrusted to him by the general employer. There is no inference that because the general employer has permitted a division of control, he has surrendered it.... [A] continuation of the general employment is indicated by the fact that the general employer can properly substitute another servant at any time, that the time of the new employment is short, and that the lent servant has the skill of a specialist.
* * * * * *
The fact that he obeys the request of the temporary employer as to the act does not necessarily cause him to be the servant of such employer. If, however, the temporary employer exercises such control over the conduct of the employee as would make the employee his servant were it not for his general employment, the employee as to such act becomes a servant of the temporary employer. If the employee does the very act directed by the temporary employer, the latter is responsible for having directed it, and the first employer is responsible as a master if the act is within the scope of his general employment.
Restatement (Second) of Agency § 227 comment b, c (1958). Equally pertinent is section 226 of the Restatement:
A person may be the servant of two masters, not joint employers, at one time as to one act, if the service to one does not involve abandonment of the service to the other.
Thus, the biblical admonition[2] notwithstanding, a man can serve two masters simultaneously, provided the interest of the masters are not so adverse and antagonistic that the intent to serve one necessarily excludes an intent to serve the other.
We have been referred to and independent research has disclosed no Missouri cases which decide the precise issue involved: whether a hospital is vicariously liable for the negligence of an employee who is under the proximate direction and control of an independent physician in charge of a surgical procedure. A majority of other jurisdictions which have addressed the issue, however, conclude that both the surgeon and the hospital may be liable for the negligence of the hospital's employee during surgery.
In Kelley v. Rossi, 395 Mass. 659, 481 N.E.2d 1340, 1342 (1985), the court noted that as a general rule a resident physician is the servant of the hospital and a presumption exists that the resident remains in the employ of the hospital unless evidence is produced to the contrary. In Foster v. Engelwood Hospital Association, 19 Ill.App.3d 1055, 313 N.E.2d 255 (1974), plaintiff sought damages for a nurse's negligence from both the hospital and the attending surgeon. The jury returned a verdict against both defendants, but the trial court granted the surgeon's motion for judgment notwithstanding the verdict. On appeal the court held that both the hospital and the surgeon were liable for the nurse's negligence. 313 N.E.2d at 260. Quoting from an earlier case, Norland v. Poor Sisters of St. Francis, 4 Ill.App.2d 48, 59, 123 N.E.2d 121, 127 (1954), the court rejected application of the borrowed servant doctrine:
It is part of the hospital's business to furnish [physicians with] the use of [employees], and the fact that during the period of the operation an [employee] is subject to the direction of a physician does not change the relationship ... the furnishing of the [employee] necessarily involves the circumstances that the [employee] furnished will carry out the directions of the physician in charge.
*114 Id. 313 N.E.2d at 259-60. The court also concluded that a physician is liable for a hospital employee's negligence if he exercises control and supervision over the employee even though the surgeon retains less than that degree of control necessary to establish a traditional master/servant relationship. Id. 313 N.E.2d at 260. The question of whether the doctor retains control or supervision over the negligent employee is a question of fact for the jury. Id. 313 N.E.2d at 261.
In Pratt v. Stein, 298 Pa.Super. 92, 444 A.2d 674, 702 (1982), the Pennsylvania court wrestled with the borrowed servant problem. The court concluded that the trial court had properly instructed the jury to find in favor of the hospital only if the negligent hospital personnel were under the "sole control" of the surgeon and serving the interests and purposes of only the surgeon at the time of the alleged negligence. Id. 444 A.2d at 703. The trial court instructed the jury that "if a hospital ... lends [its] personnel to someone else, then at that time the personnel can be servants of the borrower, or can still be servants of just the lender, or can be servants of both of them, the lender and the borrower." Id. 444 A.2d at 702.
After noting that "[i]n few other areas where the doctrine of respondeat superior may be potentially applicable is the issue of control as crucial or as difficult to resolve as it is in many doctor-hospital relationships," the court in City of Somerset v. Hart, 549 S.W.2d 814, 816 (Ky.1977), held that the hospital could not escape liability under the borrowed servant doctrine if the acts of the hospital employee were of mutual benefit to both the surgeon and the hospital. The court stated that "[f]requently, if not most often, the nurse or other employee who is temporarily lent to the physician or surgeon, in every realistic sense, continues to carry on [their] hospital duties." Id. at 817. See also Annot., Liability of Hospital or Sanitarium for Negligence of Physician or Surgeon, 51 A.L.R. 4th 235 (1987).
Missouri follows the principle relied on in these cases. In order to escape liability, the general employer must have relinquished all control and authority over the employee to the special employer. Tractor-Trailer Supply Co., 539 S.W.2d at 467. There is no inference that because the general employer permitted a division of control that he surrendered all of his control. Restatement (Second) of Agency § 227 comment b (1958). "The fact that [an employee] obeys the requests of a temporary employer ... does not necessarily cause [the employee] to be the servant of such employer." Restatement (Second) of Agency, supra at 503, cited with approval in Gerfers v. Missouri-Illinois Tractor & Equipment Co., 372 S.W.2d 503, 507 (Mo. App.1963).
Reviewing the record in this case in light of the principles discussed above, we find the evidence supports a conclusion that Dr. Smith remained the servant of the hospital during decedent's operation. The hospital hired Dr. Smith and allowed him to practice his medical skills by performing operations such as the one performed on James Brickner. Smith's employment was controlled by the hospital's "Department of Surgery Resident's Training Program" syllabus, which set forth in detail the duties of a resident physician including those arising during surgery. For example, under these regulations: Dr. Smith was required to devote his full time to residency training; his hours of work were scheduled by the hospital; he was required to keep a log of his surgical experiences; he was told to question the orders of an attending physician if he believed them to be erroneous; and he was required to dictate a report describing any surgery he performed. Failure to satisfactorily perform any of his duties, including the performance of his surgical duties, could result in the hospital terminating his employment.
Although Dr. Olson had supervisory authority and control over Dr. Smith during James Brickner's operation, this fact does not indicate even a temporary suspension or interruption of Smith's employment by or accountability to the hospital. On the contrary, at the time of surgery, Smith was performing the very work for which the *115 hospital had hired and was paying him. In fact, Smith was expected to exercise independent medical judgment in the operating room. He could have performed a biopsy on decedent's testicle without the prior consent of Dr. Olson.
Viewed in the light most supportive of the verdict, the evidence fails to establish that the hospital relinquished or abandoned its right of control over Dr. Smith when he entered the operating room, or that by coming under the temporary supervision of Dr. Olson, Smith abandoned his service to the hospital. We cannot, therefore, as a matter of law, hold that Dr. Smith was solely under the control of and serving only the interest of Dr. Olson during surgery, thereby insulating the hospital from liability under the borrowed servant doctrine. See e.g., Hollant v. North Shore Hospital, Inc., 24 Misc. 2d 892, 206 N.Y.S.2d 177 (1960).
We need not decide under the circumstances of this case whether Dr. Olson was also liable for acts of Dr. Smith during surgery. We have determined that the hospital did not relinquish all control over Dr. Smith, and therefore, remained at least jointly liable for Dr. Smith's negligence. Whether or not the evidence would support a finding that Dr. Smith was also acting as a servant to Dr. Olson, thereby making Olson vicariously liable, is not before us on appeal.
The hospital next argues that it did not have control over the exercise of Dr. Smith's medical judgment while operating on decedent, and therefore, cannot be liable for his failure to diagnosis testicular cancer. Some jurisdictions draw a distinction between medical and administerial acts of hospital employees or resident physicians and interns and refuse to hold the hospital responsible for the negligent medical judgment of an employee. See e.g., Rodriquez v. City and County of Denver, 702 P.2d 1349 (Colo.App.1984); Dickinson v. Mailliard, 175 N.W.2d 588, 595 (Iowa 1970). Missouri has never recognized a distinction between medical and administerial acts with regard to a hospital's liability for an employee's negligence. Indeed, past decisions have recognized that a hospital can be liable for the negligent medical decisions or treatment of a physician employed by the hospital. Gilstrap v. Osteopathic Sanatorium Co., 224 Mo.App. 798, 24 S.W.2d 249, 255 (1929); Eichelberger v. Barnes Hospital, 655 S.W.2d 699 at 708 (Mo.App. 1983).
Furthermore, the hospital's argument overlooks the evidence showing that it exercised control of each step over a resident physician's progress toward surgical certification. Throughout his resident training program, the hospital directed Dr. Smith's activities and authorized him to perform increasingly complex procedures. The hospital reaped the benefit of Dr. Smith's labor during his training period. While it did not and could not dictate Dr. Smith's every move while in surgery, the hospital had supervisory control over his performance as a resident and could at any time dismiss him for poor exercise of his medical judgment. Liability premised on the theory of respondeat superior does not require plaintiff to prove the employer had actual control over its employee's discretionary judgment as long as the employee's conduct is within the scope and course of employment. Bova v. St. Louis Public Service Co., 316 S.W.2d 140 (Mo.App.1958); Carter v. Willert Home Products, Inc., 714 S.W.2d 506, 512 (Mo. banc 1986). Under MAI 13.06 the jury was instructed to find for the plaintiff if they found that Dr. Smith was serving the business of the hospital according to an express or implied agreement and that the hospital controlled or had the right to control the physical conduct of Dr. Smith. There was ample evidence to support the jury's finding for plaintiff on this issue.
In its third point, the hospital argues that plaintiffs failed to establish causation since the uncontradicted testimony established that Dr. Smith had no authority to biopsy or remove decedent's testicle. In support of this claim, the hospital points to testimony of Dr. Olson, who testified that Dr. Smith had no authority to biopsy or remove the testicle. The jury could have disbelieved this testimony. Sunset Acres *116 Motel, Inc. v. Jacobs, 336 S.W.2d 473 (Mo. 1960).
Plaintiffs may establish causation by circumstantial evidence, which includes favorable inferences drawn from all the evidence. Honey v. Barnes Hospital, 708 S.W.2d 686, 694 (Mo.App.1986). Dr. Owen testified that Dr. Smith would not have needed "veto power" over Dr. Olson to take a biopsy of decedent's testicle. Plaintiffs' expert, Dr. Hendricks, testified that normally in operations such as the one performed on the decedent decisions are reached by mutual discussion and an attending surgeon would not have overruled a resident physician who was performing the surgery if the resident thought a biopsy was necessary. Dr. Milner testified that Dr. Smith failed to adequately examine decedent's testicle during surgery, and therefore, Dr. Smith missed the diagnosis. Dr. Milner and Dr. Williams both testified that at the time of surgery decedent's testicular cancer was in stage I and that a person diagnosed with stage I testicular cancer has nearly 100% chance of survival. The hospital's argument is simply not supported by the record.
We find that plaintiffs presented sufficient evidence of causation between the alleged negligence of Dr. Smith and decedent's death to submit the issue to the jury.
The hospital further contends that plaintiffs failed to make a submissible case on the issue of negligence in that plaintiff's experts conflicted in their opinions as to what Dr. Smith should have done under the circumstances of this case. If contradictory statements can be reasonably explained and if from a fair consideration of all the circumstances a jury could reasonably determine what should be accepted as true, then the credibility of the witnesses and the weight to be given their testimony are questions for the jury. Carthen v. Jewish Hospital of St. Louis, 694 S.W.2d 787 (Mo.App.1985). Here, all of plaintiffs' experts testified that the correct surgical standard to diagnose testicular cancer would be either to biopsy the testicle or remove it for pathological examination. Although some experts testified that they would have removed the testicle immediately under the circumstances rather than first performing a biopsy, Dr. Smith failed to do either of these things. Viewing the evidence and the inferences to be drawn therefrom in the light most favorable to plaintiff, we believe the evidence was sufficient to make a submissible case that Dr. Smith's actions caused or contributed to Mr. Brickner's death. Carthen, supra, at page 793; Cignetti v. Camel, 692 S.W.2d 329, 335 (Mo.App.1985).
Normandy Osteopathic Hospital next contends that plaintiffs released their claim against the hospital by voluntarily dismissing their claim against Dr. Smith prior to submitting the case to the jury. Voluntary dismissal with prejudice of a claim against an employee does not prevent plaintiff from proceeding with a claim against the employer. Denny v. Mathieu, 452 S.W.2d 114, 119 (Mo.banc 1970). On similar facts, the Supreme Court held in Denny that the dismissal with prejudice of plaintiff's claim against the employee did not amount to an adjudication on the merits so as to bar plaintiff from proceeding further against the employer. Id. The decision in Denny is controlling in this case. Point denied.
In its sixth point, the hospital contends that it should have been granted a new trial because the verdict director erroneously failed to submit the issue of whether Dr. Smith was "diagnosing cancer" within the scope and course of his employment. The verdict director read as follows:
Your verdict must be for plaintiffs Cynthia Brickner and Candace Brickner, if you believe:
First, plaintiffs were the spouse and the child of James L. Brickner, and
Second, Dr. Smith was performing surgery within the scope and course of his agency for defendant Normandy Osteopathic Hospital, Inc., on June 2, 1978, and
Third, Dr. Smith failed to diagnose testicular cancer, and
Fourth, Dr. Smith was thereby negligent, and
*117 Fifth, such negligence directly caused or directly contributed to cause the death of James L. Brickner.
The hospital argues that the ultimate issue of fact in this case was not whether Dr. Smith was performing the operation on decedent within the course and scope of his employment, but whether he failed to "diagnose cancer" within the course and scope of his agency for the hospital. The hospital contends that it was prejudiced because the jury could more easily find the hospital had a right to control the manner in which a physician-employee performs surgery than the manner in which the physician made a diagnosis. The hospital also argues that the instruction misled the jury into thinking that the performance of surgery was an issue rather than the failure to diagnose.
Whether an instruction is confusing depends upon "how it would be understood by a jury of ordinarily intelligent laymen." Eichelberger v. Barnes, 655 S.W.2d at 706 (citing Breshears v. Union Electric Co., 373 S.W.2d 948, 954 (Mo. 1964)). It is not disputed that the purpose of the surgery on Mr. Brickner was diagnostic: to determine if the swelling of his testicle was a cancerous tumor. Plaintiffs clearly contended throughout the trial that Dr. Smith negligently failed to diagnose plaintiff's cancer during surgery by failing to biopsy or remove decedent's testicle. With equal clarity, the defendant argued that there was no reason to biopsy or remove the testicle during surgery because neither Dr. Smith nor Dr. Olson saw any indication of cancer. There was also testimony presented on both sides as to whether Dr. Smith had the authority or discretion to perform a biopsy or remove the testicle. Given the evidence, we cannot believe that the verdict-director prejudiced defendant in any way. Furthermore, the definitional instruction directed the jury to find that Dr. Smith was acting within "the scope and course of his agency" for the hospital if (1) he was serving the business of defendant according to an express or implied agreement with defendant, and (2) defendant Normandy Osteopathic Hospital either controlled or had the right to control the physical conduct of Dr. Smith. We do not believe the jury was misled or confused by the fact that the verdict-director instructed them to find against defendant if Dr. Smith was "performing surgery" rather than "diagnosing cancer" within the course and scope of his agency. Struemph v. McAuliffe, 661 S.W.2d 559 (Mo.App.1983).
Finally, the hospital alleges the trial court erred in calculating the amount of the judgment. In the first trial the jury found against Dr. Bean only, and assessed plaintiffs' damages at $1,000,000. The trial court, however, granted plaintiffs a new trial as to the hospital. Both Dr. Bean and the hospital appealed. During the pendency of the appeal, plaintiffs and Dr. Bean entered into a structured settlement. We ordered a new trial of plaintiff's claim against the hospital but limited the trial to the issue of liability only. We ordered the $1,000,000 verdict held in abeyance and, in the event the hospital was found liable, we directed the trial court to enter judgment against the hospital in the sum of $1,000,000 less credit for the present value of the settlements with Dr. Bean and Dr. Olson. Following the jury's verdict in favor of plaintiffs, the trial court heard expert testimony from qualified economists presented by both parties. As to the present value of plaintiff's structured settlement with Dr. Bean, the court accepted the testimony of plaintiffs' expert, Dr. Leroy Grossman, and entered judgment against the hospital in the sum of $340,717.00, allowing a credit of $659,283.00 as the present value of the two settlements. The hospital contends that the trial court erred in accepting the testimony of Dr. Grossman and that it should receive a credit in the amount of $774,170.00.
A defendant is entitled to a credit on a judgment equal to the sum a plaintiff has received from other joint tortfeasors as partial compensation for his damages. The consideration plaintiffs received for the dismissal of Dr. Olson was in the form of a lump sum payment of $200,000.00, a fixed and determined value. The consideration plaintiffs received for the dismissal of their claim against Dr. Bean was *118 a lump sum payment of $155,000.00 plus an agreement for the payment of various sums at specified times over a period of years.[3] The hospital is entitled to a credit equal to the value to plaintiffs of the settlement agreement as of the date of the agreement. The fact that funds are invested by the defendant or his insurance company in order to guarantee the future payments, rather than being invested by the plaintiffs themselves, does not alter the value of what was paid and accepted in return for releasing Dr. Bean from liability. Thus, the consideration received by plaintiffs in return for the dismissal of Dr. Bean is measured not by what they will receive in the future, nor by the cost to the defendant of an annuity to guarantee such payments.[4]
The present value of a structured settlement is the amount of money needed today to generate the funds required to meet a schedule of future payments of specified amounts on specified dates. It is the total of future payments discounted by an annual percentage rate of interest superimposed for the time until each payment is due. The hospital does not disagree with this concept but challenges the 11% interest rate used by plaintiffs' expert in calculating the present, i.e. date of settlement, value to the plaintiffs.
In the first jury trial Dr. Grossman testified for plaintiffs that a discount rate of 8.5% should be used to determine the present value of James Brickner's future loss of wages. At the hearing to determine the present value of the structured settlement, he used a discount rate of 11%. The lower the discount rate used, the higher the present value will be. Defendant argues that plaintiffs are improperly taking advantage of this mathematical principle by using a lower discount rate to calculate the present value of future damages and a higher rate to calculate the present value of the structured settlement, thereby reducing the amount of the hospital's credit against the $1,000,000 verdict. Dr. Grossman, applying the 11% rate, computed the present value of two settlements to be $659,283.00. Application of the 8.5% rate would result in a present value of $729,620.00. In effect, defendant's argument is that plaintiffs, having elected to take the benefit of the lower rate in computing damages, should be precluded from using a higher rate in computing the amount to be deducted from the verdict.
We see no inconsistency in the use of different discount rates for different purposes. Dr. Grossman explained that in calculating the present value of future wages during the contemplated work-life of James Brickner, the 8.5% rate was not based upon current interest rates. Rather, it is an assumed figure, based upon his expertise and experience, of the average interest rates available on secure investments over the next 30 years. Present value of future earnings is determined by application of the difference between this assumed discount rate and assumed wage increases, which is a "net real discount rate." See Jones & Laughlin Steel Corp. v. Pfeifer, 462 U.S. 523, 536-51, 103 S. Ct. 2541, 2550-58, 76 L. Ed. 2d 768 (1983). Since there is historically a correlation between the fluctuations of interest rates and of wage increases, *119 the real net discount rate will remain relatively constant regardless of possible error in the assumptions.
On the other hand, the calculation of the present value of a structured settlement, according to Dr. Grossman, is based upon ascertainable fact: the rate of interest payable on a particular type of investment on the date of the settlement. The interest rate on high grade tax-free municipal bonds at the time of the structured settlement in this case was approximately 11%. The trial court as trier of fact was free to accept the testimony of Dr. Grossman. Richard B. Curnow, M.D., Inc. v. Sloan, 625 S.W.2d 605, 607 (Mo. banc 1981).
The defendant also contends the trial court erred in not taking into account the difference in tax consequences between a structured settlement and a lump sum payment equal to the present value of the settlement. Defendant argues that plaintiffs will pay no income tax on the payments under the settlement, but if they invested a lump sum, the income would be subject to taxation of a rate of at least 15%. Therefore, plaintiffs would require a larger sum in order to generate an equal future income. This argument overlooks Dr. Grossman's testimony that he used the lower rate of return on tax-free municipal bonds in order to compute the sum plaintiffs would require to generate future tax-free income. Thus, tax consequences were considered.
The trial court accepted Dr. Grossman's testimony and rejected the opposing theories of defendant's expert. We find no reason to depart from the principle of appellate review which requires us to give deference to the trial court's determination of the weight to be given to credible evidence. Hoffmann v. Hoffmann, 676 S.W.2d 817, 826 (Mo. banc 1984); Milam v. Vestal, 671 S.W.2d 448, 451 (Mo.App.1984).
APPEAL OF CYNTHIA AND CANDACE BRICKNER
Plaintiffs contend that the trial court should have added interest onto the original damage award when it entered the judgment against Normandy Osteopathic Hospital. Plaintiffs argue that under sections 512.160.4 and 408.040, RSMo. 1986, they are entitled to interest on the original judgment from the date the original judgment was rendered. Section 512.160.4 states that:
Upon the affirmance of any judgment or order, or upon the dismissal of any case, the appellate court may award to the respondent such damages not exceeding 10% of the amount of the judgment complained of as may be just, and when such judgment shall be affirmed for part of the sum of which judgment was rendered by the trial court, such part of said judgment shall bear lawful interest from the date of the rendition of the original judgment in the trial court.
Plaintiffs' reliance on this statute is misplaced. The hospital was found not liable on plaintiffs' claim at the first trial. On appeal this court merely affirmed the trial court's decision to grant plaintiffs' motion for new trial, we did not affirm a judgment or part of a judgment against defendant. Plaintiffs have cited several cases for the proposition that the statute applies in situations where the only contested issue upon retrial is the issue of liability. See, Burger v. Wood, 446 S.W.2d 436 (Mo. App.1969); Ohlendorf v. Feinstein, 670 S.W.2d 930 (Mo.App.1984); Nelson v. Travelers Insurance Co., 102 Wis. 2d 159, 306 N.W.2d 71, 77 (1981). In all of the above cases, however, the original judgment rendered in the first trial was in favor of the party who ultimately prevailed on the issue of liability. Likewise, plaintiffs' reliance on § 408.040 is misplaced. Section 408.040 provides that "interest shall be allowed on all money due upon any judgment or order of any court from the date of rendering the same." In the present case, there was no judgment against defendant until April 9, 1986. The statute does not afford a basis for imposition of interest prior to that date. A judgment bears interest only from the date of rendition. Reimers v. Frank B. Connet Lumber Co., 273 S.W.2d 348 (Mo. 1954).
Since there can be but one judgment in any case, the judgment on the *120 $1,000,000 verdict was held in abeyance pursuant to the trial court's order of a new trial and our mandate on the first appeal. Therefore, plaintiffs' claim for interest on the judgment based upon statutes regarding post-judgment interest was inappropriate. Although not articulated by plaintiffs, the better argument is that plaintiffs were entitled to pre-judgment interest from the date of the verdict because the amount of the hospital's liability, if any, became fixed or readily ascertainable by computation at that time. Having posed this argument, we disagree with it.
Pre-judgment interest may be allowed where the amount of damages for which a defendant may be liable is liquidated or readily ascertainable by computation according to a recognized standard. Ohlendorf v. Feinstein, 670 S.W.2d at 935. However, until the amount of damages become certain, no interest is generally allowable. Id. at 936; Herberholt v. DePaul Community Health Center, 648 S.W.2d 160, 162 (Mo.App.1983).
The rationale underlying the rule has been said to be "that where the person liable does not know the amount he owes he should not be considered in default because of failure to pay." Fohn v. Title Insurance Corporation of St. Louis, 529 S.W.2d 1, 5 (Mo. banc 1975).
Obviously, on the date of the original verdict the hospital could not be charged with knowledge of the amount it might have to pay if ultimately held liable. The hospital had been exonerated in the first trial and Dr. Bean alone was held liable. After the structured settlement, the amount of the hospital's potential liability remained uncertain. Although this amount was subject to computation under a mathematical formula, the discount rate was a disputed issue. Our remand of the case for a new trial on the issue of liability only fixed the total amount of plaintiffs' recovery, but not the portion for which the hospital ultimately might be responsible. It is not a case like Senn v. Commerce-Manchester Bank, 603 S.W.2d 551 (Mo. banc 1980) where the case was remanded to the trial court solely for the purpose of entering a modified judgment according to directions. Rather, our mandate required the trial court to conduct hearings in order to determine the present value of the settlement, an uncertain and disputed issue.
Accordingly, the judgment of the trial court is, in all respects, affirmed.
SATZ, C.J., and SIMEONE, Senior Judge, concur.
NOTES
[1] It should be noted that in the first appeal by plaintiffs from the judgment in favor of the hospital, this rule required an opposite view of the evidence.
[2] No man can serve two masters: for either he will hate the one, and love the other; or else he will hold to the one, and despise the other. Ye cannot serve God and Mammon. Matthew 6:24.
[3] Under the agreement plaintiff Cynthia Brickner is guaranteed payments totalling $832,000.00 up to August 1, 2007. Thereafter she is to be paid $3100.00 per month for the remainder of her life. Plaintiff Candace Brickner is to receive guaranteed payments totalling $180,000.00 up to August 1, 2014.
[4] Periodic payments received by a plaintiff in settlement of a damage suit are excludable from gross income under § 104(a)(2) of the Internal Revenue Code, as is the amount of a lump sum settlement. However, if a plaintiff invested the lump sum settlement, or purchased an annuity with the proceeds of a settlement, the income would be subject to taxation. Some authorities have expressed a concern that if information regarding the cost to the defendant of a structured settlement package is provided to the plaintiff, it could amount to a constructive receipt of the funds, thereby altering the tax advantages. See 39 Mo.Bar J. 181, 189 (1983). In addition to tax ramifications, other differences between cost to defendant and value to plaintiff may be found in acquisition and administrative expenses and the ability of an insurer to risk investment in a diverse portfolio including high risk-high yield securities as opposed to the conservative investment required to assure an individual of stable future income.
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746 S.W.2d 747 (1988)
Mario MARROQUIN, Appellant,
v.
The STATE of Texas, Appellee.
No. 308-87.
Court of Criminal Appeals of Texas, En Banc.
February 3, 1988.
B.R. Dossett (court-appointed on appeal), Harlingen, for appellant.
Benjamin Euresti, Jr., Dist. Atty. and Gustavo Ch. Garza, Asst. Dist. Atty., Brownsville, Robert Huttash, State's Atty., Austin, for the State.
Before the court en banc.
OPINION ON APPELLANT'S PETITION FOR DISCRETIONARY REVIEW
ONION, Presiding Judge.
Appellant was convicted as a party to the offense of delivery of more than 50 pounds but less than 200 pounds of marihuana. After the jury's verdict of guilty the court assessed punishment at 15 years' imprisonment.
*748 On appeal the appellant in a single point of error urged that the "District Court erred in denying Marroquin's motion for instructed verdict because the State failed to prove beyond a reasonable doubt that there was a delivery of more than 50 but less than 200 pounds of marihuana as alleged in the indictment and therefore the evidence was insufficient to support the conviction."[1]
The Court of Appeals, viewing the contention as a challenge to the sufficiency of the evidence, noted that appellant argued that evidence of the weight of the marihuana to show that it was more than 50 pounds included the combined weight of the contents of the bags, which also included stems and seeds and the bags themselves.
After viewing the evidence the Court of Appeals wrote:
"The thrust of appellant's argument is that the State had the burden of proving the net amount of useable marihuana as alleged in the indictment, and the evidence presented was of a gross weight, which included the weight of the plastic bags and other materials not included in the definition of marihuana under Tex. Rev.Civ.Stat.Ann. art. 4476-15, Sec. 1.02(22) (Vernon Supp.1986)[2] It is the burden of the appellant to present evidence as to what the proper weight is, excluding stalks, garbage bags, or other excludable material. Elkins v. State, 543 S.W.2d 648 (Tex.Cr.App.1976); Doggett v. State, 530 S.W.2d 552 (Tex.Cr. App.1975)."
The Court of Appeals affirmed the conviction. Marroquin v. State, 724 S.W.2d 877 (Tex.App.-Corpus Christi 1987).
In his petition for discretionary review the appellant, inter alia, set forth a second ground for review reading:
"The Court of Appeals erred in holding that Tex.Rev.Civ.Stat.Ann. art. 4476-15, Sec. 1.02(22) requires that the defendant prove the weight of the garbage bags in which marihuana was found."
We granted appellant's petition for discretionary review to determine the correctness of the Court of Appeals holding as set forth in the above quoted ground of review.
Briefly stated, the facts show that Brownsville Police Officers Michael Hinojosa and Jaime Chavez were acting as undercover agents. Appellant put them in contact with his brother-in-law and others interested in selling large amounts of marihuana. On the date in question Hinojosa and Chavez met the suppliers at a residence for the purpose of purchasing 50 pounds or more of marihuana. When first seen by the undercover agents the contraband was in the trunk of a car. The marihuana in five plastic bags was weighed at the residence. Officers Hinojosa testified that the marihuana weighed 51 pounds, "or 50 and a half pounds ..." or "a little over 50 pounds." Hinojosa testified that there was approximately 20 or 30 pounds of marihuana left over after the weighing of the marihuana in the five plastic garbage bags.
Officer Chavez testified that 50 and ½ pounds of marihuana was delivered that day. Officer Victor Rodriquez testified that he weighed the marihuana at the police station after it had been seized and that its weight was 50 and ½ pounds. He testified the contraband weighed a half a pound higher "than what we were expecting from the violators." He admitted that the marihuana was weighed in the five bags and not separately. When the five bags were introduced and were opened and exhibited to the jury Rodriquez explained the "leaves are all pressed against the stem... you can see the leaves and the seed within each bud...."
*749 Sec. 1.02 of the Controlled Substances Act (Art. 4467-15, supra) in effect at the time of appellant's trial, provides:
"For the purpose of this act:
"* * *
"(22) `Marihuana' means the plant Cannabis sativa L., whether growing or not; the seeds thereof; and every compound, manufacture, salt, derivative, mixture, or preparation of the plant, or its seeds. However, it does not include the resin extracted from any part of such plant or any compound, manufacture, salt, derivative, mixture or preparation of the resin; nor does it include the mature stalks of the plant, fiber produced from the stalks, oil or cake made from the seeds of the plant, any other compound, manufacture, salt, derivative, mixture, or preparation of the mature stalks, fiber, oil, or cake, or the sterilized seed of the plant which is incapable of germination."
Sec. 5.10 of the Controlled Substances Act provides, in part, as follows:
"(a) It is not necessary for the state to negate any exemption or exception set forth in this Act in any complaint, information, indictment, or other pleading or in any trial, hearing, or other proceeding under this Act, and the burden of going forward with the evidence with respect to any exemption or exception shall be upon the person claiming its benefit."
In Doggett v. State, 530 S.W.2d 552, 555 (Tex.Cr.App.1975), this Court stated:
"We hold that the provisions of Sec. 1.02(17)[3] of the Controlled Substances Act which exclude certain materials from the definition of marihuana are in the nature of exceptions and that the burden of going forward with the evidence pertaining thereto rests upon the person claiming their benefit; the burden in the instant case belonged to the appellant...."
In Elkins v. State, 543 S.W.2d 648, 650 (Tex.Cr.App.1976), this Court wrote:
"The holding in Doggett construing Secs. 5.10 and 1.02(17) of the Controlled Substances Act does not have the effect of shifting the burden of proof or burden of persuasion from the State to the accused. The burden of proof does not change simply because the accused has the burden of producing evidence to establish a defensive plea. See Escamilla v. State, Tex.Cr.App., 464 S.W.2d 840 [1971]; V.T.C.A., Penal Code, Secs. 2.03, 2.04; 1 McCormick and Ray, Texas Evidence, Sec. 47 (2nd ed. 1956); 23 Tex. Jur.2d, Evidence, Secs. 116-119 (1961).
"In the instant case, appellant produced no evidence to show that the substance identified as marihuana contained any parts excluded by the statutory definition."
Upon a careful reading we do not find that the Court of Appeals expressly held that Article 4467-15, § 1.02(22), supra, required the appellant to prove the weight of the garbage bags in which the marihuana was "found." What the court did hold was that the appellant had the burden "to present evidence as to what the proper weight is, excluding stalks, garbage bags, or other excludable material," citing Elkins and Doggett, supra. The language used by the Court of Appeals is somewhat misleading. In placing the burden upon the defendant, Elkins and Doggett, supra, were dealing with certain materials excluded from the statutory definition of marihuana. They did not deal with garbage bags nor does the statute. The Court of Appeals was correct in citing Elkins and Doggett, supra, in the instant case, as to the materials excluded by statute from the definition of marihuana, but it was incorrect in holding the appellant had the burden of proof as to excluding the plastic garbage or trash bags. The burden of proof was upon the State to prove each element of the offense alleged beyond a reasonable doubt. See V.T.C.A., Penal Code, § 2.01; Article 38.03, V.A.C.C.P. In the instant case the State was required to prove by direct or circumstantial evidence beyond a reasonable doubt, inter alia, that the amount of marihuana involved was more than 50 pounds in order to sustain a conviction under the second count of the indictment for the delivery *750 of marihuana. The State offered evidence the marihuana when first seen by the undercover officer was in plastic bags in the trunk of a car. It was weighed at the accomplices' residence in the bags, and Officer Hinojosa testified five bags weighed 51 pounds or 50 and ½ pounds. Officer Rodriquez testified he weighed the five bags of marihuana at the police station and the weight was 50 and ½ pounds; that he did not weigh the five plastic garbage bags separately. The five plastic garbage bags with their contents were introduced and exhibited to the jurors who were able to observe the nature of the bags. The State points out that the garbage or trash bags were the kind common to many households. A photograph of the bags and their contents introduced into evidence before the jury supports this conclusion. The trial court did not err in overruling the motion for an instructed verdict. In the charge the court instructed the jurors that before they could convict they had to find, inter alia, from the evidence beyond a reasonable doubt that delivery was of marihuana of "an amount more than 50 pounds but less than 200 pounds." The trial court further instructed the jury:
"Unless you so find beyond a reasonable doubt, or if you have a reasonable doubt thereof, you will acquit the defendant."[4]
Appellant's counsel argued to the jury that the State had failed to sustain its burden as to the weight and that if there were 49 and ¾ pounds this would not be enough to satisfy the requirements of the law, that the State failed to have the marihuana weighed in the presence of the jury or to "have taken the bag off." The jury rejected the argument by its verdict.
It is well settled that the jury is the trier of the facts, the judge of the credibility of the witnesses, and the weight to be given to the testimony.
In reviewing the sufficiency of the evidence the appellate court must view the evidence in the light most favorable to the jury's verdict to determine whether any rational trier of the facts could have found all of the essential elements of the crime beyond a reasonable doubt, Houston v. State, 663 S.W.2d 455 (Tex.Cr.App.1984), and this is true in both direct and circumstantial evidence cases. Houston, at 456. See also Carlsen v. State, 654 S.W.2d 444 (Tex.Cr.App.1983) (Opinion on motion for rehearing); Sutherlin v. State, 682 S.W.2d 546 (Tex.Cr.App.1984). As the Court of Appeals noted, the evidence as to the quantity of marihuana seized was that it was in excess of 50 pounds. The evidence was sufficient to support the verdict.
While the Court of Appeals was in error in holding that the appellant had the burden to present evidence as to the weight of the garbage bags, the State sustained its burden and the evidence was sufficient to support the conviction.
The judgment of the Court of Appeals is affirmed.
NOTES
[1] After the State rested its case-in-chief the appellant moved for an instructed verdict of not guilty. It was overruled and the appellant rested without offering any evidence.
[2] Sec. 1.02(22) of the Controlled Substances Act (Article 4476-15, V.A.C.C.P.) defining marihuana with the exclusion of certain materials therefrom was in effect at the time of appellant's 1986 trial (Acts 1985, 69th Leg., p. 1814, ch. 227, § 1, eff. Sept. 1, 1985). In the original enactment the definition of marihuana was found in § 1.02(17) (Acts 1973, 63rd Leg., p. 1132, ch. 429, eff. Aug. 27, 1973). The definition of marihuana is found in § 1.02(24) (Acts 1987, 70th Leg. 3784, ch. 388, § 1, Sept. 1, 1987).
[3] See footnote #2.
[4] There was no charge given on a lesser included offense. There was no special requested charge nor was there an objection to the charge for failure to include one.
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674 F. Supp. 332 (1987)
Roy E. JAMES, Jr., Plaintiff,
v.
Charles ROWE and Marjorie Rowe, d/b/a Linn County Ambulance Service, Inc., and Dean T. Gettler, M.D., Defendants.
Civ. A. No. 87-2297-S.
United States District Court, D. Kansas.
November 25, 1987.
Thomas R. Hill, Mark Beam-Ward, Couch & Pierce, Chartered, Overland Park, Kan., for plaintiff.
Paul Hasty, Jr., Wallace, Saunders, Austin, Brown and Enochs, Chartered, Overland Park, Kan., for defendants.
MEMORANDUM AND ORDER
SAFFELS, District Judge.
This matter is before the court on defendants Charles Rowe and Marjorie Rowe, d/b/a Linn County Ambulance Service, Inc.'s motion to dismiss for failure to state a claim upon which relief may be granted. This case arises out of an accident that occurred at Tanglewood Lake on March 30, 1986. The plaintiff suffered a head injury, and defendants were called to the scene of the accident to provide emergency care and to transport him to a hospital capable of treating his injuries. Plaintiff claims defendants were negligent in treating him at the scene and in failing to transport him immediately to a facility capable of treating his injuries. Defendants now argue that the Kansas Good Samaritan Law, K.S.A. 65-2891 et seq. exempts them from all liability for ordinary negligence.
The Kansas Good Samaritan Law; K.S.A. 65-2891 et seq. was passed in 1965, and has been amended several times since. It provides that:
(a) Any health care provider who in good faith renders emergency care or assistance at the scene of an emergency or accident ... shall not be liable for any civil damages for acts or omissions other than damages occasioned by gross negligence *333 or by willful or wanton acts or omissions by such person in rendering such emergency care.
To the casual reader, it might appear from the plain language of the statute that this statute abrogates defendants' liability in this case. Generally, when construing a statute a court must give words their ordinary meaning and construe the language in the context of the statute. Jackson v. City of Kansas City, 235 Kan. 278, 319, 680 P.2d 877, 909 (1984). However, we reject the notion that the Kansas Legislature intended to extinguish the law of common law negligence for all health care which might be given in an emergency. Such would be a far-sweeping move which would have consequences not only for ambulance services but for doctors, nurses, insurance carriers, and indeed the entire medical profession. We do not believe that other health care legislation or the legislative history of K.S.A. 65-2891 bears out defendants' misguided conclusion. In interpreting legislative acts, a court must give a statute that construction which is consistent with the intent and purpose of the statute, even if that construction is not within the literal meaning of the statute. Jackson, 235 Kan. at 318, 680 P.2d at 909.
Plaintiff directs the court to two additional statutes that apply to ambulance attendants. K.S.A. 65-4307(b) abrogates the ambulance attendant's ordinary negligence when he or she is acting at the instruction of a doctor or nurse. K.S.A. 65-4337 exempts the ambulance attendant from liability for ordinary negligence when performing manual cardiac defibrillation. K.S.A. 4307(b) was passed in 1974, and K.S.A. 65-4337 was passed in 1985. If the Kansas Legislature intended the Good Samaritan Law to abrogate all ordinary negligence of the ambulance attendant acting in an emergency, then K.S.A. 65-4307(b) and 65-4337 would have been unnecessary and duplicative. There would have been no need to pass the additional statutes specifying certain instances when an ambulance attendant is exempt from liability, because the attendant would already be exempt in all emergency situations under K.S.A. 65-2891.
Certainly, then, the Kansas Legislature must have meant something else when it passed the Good Samaritan Law. Although we have no legislative history from the statute's original passage,[1] records surrounding the passage of amendments since 1965 reveal the Legislature's true purpose behind the Good Samaritan Law.
In 1976, the Legislature added several professions to the list of health care providers covered by the statute, including pharmacists, optometrists, and mobile intensive care technicians. In its support of the bill, the Kansas Department of Health and Environment stated that the benefit of the amendment would be that it would "increase the chances of an accident victim receiving care." This comment indicates an underlying assumption that the bill sought to encourage anyone with medical training to assist a person in a medical emergency. There is certainly no indication that medical personnel in the ordinary course of their duties were refusing to treat patients in emergency situations for fear of later being sued. Such an assumption would border on absurdity. Instead, the Department of Health and Environment went on to state that the purpose of the bill was to reassure those "who now might not stop and help." Again, this language indicates a desire to encourage medically-trained personnel to "stop and help" anyone he or she might happen upon in an emergency situation.
This conclusion is in accord with the purpose behind the Good Samaritan laws now in effect in all fifty states. No Kansas court has before interpreted this state's law. However, those states which have interpreted similar laws have uniformly held that the law is not meant to exempt all medical personnel in every emergency situation, but only those personnel who happen *334 across an emergency outside the normal course of their work and who otherwise have no duty to assist.[2]See, e.g., Lee v. State, 490 P.2d 1206, 1209 (Alaska 1971), overruled on other grounds, 545 P.2d 165 (Alaska 1976), (statute applies to those persons who otherwise have no duty to rescue); Colby v. Schwartz, 78 Cal. App. 3d 885, 144 Cal. Rptr. 624, 628 (1978) (good samaritan law does not excuse physician rendering emergency care in the ordinary course of practice); Lindsey v. Miami, 689 S.W.2d 856, 860 (Tenn.1985) (statute did not abrogate liability of person who otherwise had duty to render aid.)
Finally, the court finds no merit in defendants' argument that the 1987 Kansas Legislature's passage of the Certified First Responder Act, ch. 230, 1987 Kan. Sess.Laws 1305, supports their argument. They assert that by passing that Act, the Legislature meant to reinforce the fact that all health care providers' negligence is abrogated in an emergency situation. The court disagrees. The simple purpose of the Certified First Responder Act was to create a new branch of medical care, by providing certification for firefighters, police officers, and others trained in first aid who are usually the first to arrive on the scene of an accident. The Legislature did not intend to "reinforce" the abrogation of negligence in all emergency situations because that was not the original intent behind the Good Samaritan Law. The court rejects defendants' argument, and their motion will be denied.
IT IS BY THE COURT THEREFORE ORDERED that defendants Charles Rowe and Marjorie Rowe, d/b/a Linn County Ambulance Service, Inc.'s motion to dismiss for failure to state a claim is denied.
NOTES
[1] The Kansas Legislature did not begin keeping records of its committee meetings and other relevant legislative history until 1971.
[2] Even the statute's popular name indicates that the scope of its coverage is limited to those who happen upon an emergency and otherwise have no duty to act. The parable of the Good Samaritan told the story of the man who, during a journey, came upon a victim of a robbery. He treated the man's wounds, then transported him to an inn where he could be cared for. Luke 10: 30-37.
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371 B.R. 83 (2007)
In re CCI CONSTRUCTION CO, INC., a corporation, a/k/a. CCl/Ortenzio Co., Inc., Debtor-In-Possession.
CCI Construction Co. Inc. and The St. Paul Companies, Plaintiffs,
v.
Allfirst Bank, Defendant.
Bankruptcy No.: 1-00-bk-02239. Adversary No.: 1-01-ap-00011.
United States Bankruptcy Court, M.D. Pennsylvania.
April 18, 2007.
*84 *85 Robert E. Chernicoff, Cunningham and Chernicoff PC, Harrisburg, PA, for Debtor-In-Possession.
OPINION[1]
JOHN J. THOMAS, Bankruptcy Judge.
The Debtor-in-Possession, CCI Construction Co., Inc., and The St. Paul Companies,[2] (hereinafter "Plaintiffs") filed a Complaint to set aside several preferential payments by the Debtor to Allfirst Bank (hereinafter "Bank") under the terms of 11 U.S.C. § 547(b) or, in the alternative, for recovery of improper setoff pursuant to 11 U.S.C. § 553. While the parties stipulated[3] the several transfers in question were preferential under § 547(b), the Bank has responded that (1) the transfers are unavoidable because they all fall within the safe harbor provisions created by Congress found in 11 U.S.C. § 547(c)(2), and (2) did not effect a setoff under the dictates of 11 U.S.C. § 553. Based upon the following findings of fact and conclusions of law, the Court concludes the Bank has not met its burden of proving the nonavoidability of the transfers under 11 U.S.C. § 547(c). 11 U.S.C. § 547(g), J.P. Fyfe, *86 Inc. of Florida v. Bradco Supply Corp., 891 F.2d 66, 69 (3d Cir.1989).
This adversary has survived both a Motion to Dismiss and a Motion for Summary Judgment.[4] The parties presented their respective cases during a trial which took the better part of two days. The Court notes that both sides did an excellent job in presenting this case.
The relevant facts are as follows. The Debtor is a general contracting business started approximately in the late 1980s. The Debtor started a borrowing relationship with the Bank's predecessor in the early 1990s. In addition to a certain equipment loan, this banking relationship was evidenced by a succession of unsecured lines of credit. (See Defendant's Exhibit 4A through F.) The line of credit was periodically reaffirmed and, on March 23, 1999, was increased to four million dollars. (See Defendant's Exhibit 11.) This line of credit was coupled with a March 24, 1999 film/cash solutions[5] promissory note (hereinafter "note") which contained the loan terms for the four million dollar line of credit advanced by the Bank to the Debtor. The note contained procedures for the making of loans, the termination of the note, the demand obligations for making immediate payment to the Bank of all sums outstanding under the note including principal and interest, and remedies available to the Bank upon default. Of significance to a resolution of this matter are the specific terms of the note, and, in particular, those concerning the procedures for advancing loans. Paragraph 2 of the note provides in its entirety as follows:
2. PROCEDURES FOR LOANS. All Loans shall be made in the form of a transfer of funds into the Account in accordance with the procedures set forth in this paragraph. Borrower hereby irrevocably authorizes Bank to make Loans in accordance with the procedures set forth herein. At the end of each Business Day, Bank shall calculate the Initial Excess Balance and the aggregate amount of the Presented Items. In the event the Initial Excess Balance is less than the aggregate amount of the Presented Items, Bank shall make a Loan by transferring funds into the Account in an amount equal to the amount, which when added to the Initial Excess Balance, would be equal to the aggregate amount of the Presented Items; provided, however, that: (a) the principal amount of the Loan shall not be less than the Minimum Loan Advance; (b) the principal amount of the Loan must be an integral multiple of the Incremental Advance Amount, and therefore, if it would not otherwise be an integral multiple of the Incremental Advance Amount, the amount of the Loan will be rounded up to the next higher integral multiple of the Incremental Advance Amount unless there is insufficient Line Availability in which case the Loan amount will be the Maximum Advance Amount; and (c) the principal amount of the Loan shall not exceed the Maximum Advance Amount. If at any time the amount of the Initial Excess Balance is less than the amount of the Presented Items by an amount greater than the Maximum Advance Amount, Bank shall: (i) make a Loan by transferring funds into the Account in an amount equal to *87 the Maximum Advance Amount; and (ii) determine, in its sole discretion, which Presented Items will be paid, and which Presented Items will not be paid. In the event the Initial Excess Balance is greater than the amount of the Presented Items, Bank shall post and pay all of the Presented Items. If, following Bank's posting and paying of all of the Presented Items, there remains a balance it the Account in excess of the Target Blance, Bank is hereby irrevocably authorized to debit the Account in an amount up to the portion of the balance in the Account which exceeds the Target Balance, and apply such sums to the outstanding balance of the Loans. Bank agrees to make such debit of the Account to repay sums outstanding under the Loans as of the end of each Business Day; provided, however, that in the event the option labeled "Cash Solutions Protection" is marked on Exhibit A attached hereto, Bank shall not automatically debit the Account to make payments on the Loans, but may do so, in its sole and absolute discretion.(emphasis ours)
This paragraph dictated the business relationship between the Bank, and the Debtor in the day-to-day operation of the Debtor's business. Essentially, the Debtor's customers[6] would periodically wire payments into Debtor's account (No. XXXXX-XXXX-X) at the Bank. In the ordinary course, the Bank would then pay any presented checks either from a positive balance in the account or, if there were insufficient funds, an automatic advance under the note. At the end of each day, the account was "swept" automatically by the Bank's computer system. The funds "swept" would be applied to the Debtor's outstanding balance due on the note. This relationship continued from the early 1990s until February of 2000.
On February 18, 2000, in a meeting between John Ortenzio, his lawyer, and certain representatives of the Bank, Mr. Ortenzio informed the Bank that CCI was experiencing short-term cash flow difficulties. The February 18, 2000 meeting was on a Friday which preceded a Bank holiday the following Monday. On February 22, 2000, $634,066.54 was deposited into the account and the Bank honored all checks presented by the Debtor's customers on that day. At the end of the day, the Bank "swept" the account in the amount of $510,840.84. On February 23, 2000, oral notice was given by the Bank to the Debtor that the Bank was not going to advance any further funds to the Debtor and that the Bank was going to deactivate the automatic sweep procedures established under the note. On February 24, 2000, formal written notice was given by the Bank to the Debtor of the following: the Bank discontinued the loans under the note, demanded payment of all outstanding obligations due the Bank from the Debtor, declared a default under both the equipment loan and the note, accelerated demand for immediate payment of all sums due thereunder, indicated that no further sums would be advanced under the note, and intended to dishonor any checks or other payments items in transit. (See Plaintiff's Exhibit 3.) On February 24, 2000, $638,911.65 was deposited into Debtor's account by its customers. Because the automatic computerized sweep portion had been disabled, the Bank manually entered a debit memo and removed the entire amount of the deposit from the account. Forty-six checks totaling $273,029.23 were posted to the account but were returned by the Bank for non-sufficient *88 funds. On February 25, 2000, $1,167,539.00 was deposited into the account. Once again, the Bank manually entered a debit memo and removed the entire deposit from the account that day. Twenty-one checks totaling $162,562.40 were posted to the account from Debtor's customers, all of which were returned for non-sufficient funds.
The prayer of the Complaint requests the Court find that the three transfers from the account on February 22, 24, and 25, 2000 totaling $2,265,618.66, be declared as preferential transfers or, alternately, as an amount setoff by the Bank. The Complaint asks that the Debtor be awarded pre-judgment and post-judgment interests, costs, and fees in the action.
Having stipulated that the disputed payments were preferential transfers under § 547(b), the burden shifted to the Bank to prove the payments fell within the safe harbor provisions under § 547(c)(2), which Section reads as follows:
(c) The trustee may not avoid under this section a transfer
(2) to the extent that such transfer was
(A) in payment of a debt incurred by the debtor in the ordinary course of business or financial affairs of the debtor and the transferee; and
(B) made in the ordinary course of business or financial affairs of the debtor and the transferee; and
(C) made according to ordinary business terms.
The Court finds, based upon the oral and written evidence submitted at the time of the trial, that the transfers in question fall within the parameters of § 547(c)(2)(A) in that they were made toward satisfaction of a debt incurred by the Debtor in the ordinary course of business or financial affairs of the Debtor and the Bank. The controversy centers around whether the payments in question, and the method upon which the Bank applied those payments on the outstanding amount due and owing under the note, met the requirements of § 547(c)(2)(B) and (C). In other words, it is both the second and third elements found in § 547(c)(2)(B) and (C) that are at issue.
The Third Circuit, in the case of J.P. Fyfe, Inc. of Florida v. Bradco Supply Corporation, 891 F.2d 66 (3rd Cir.1989), addressed whether a disputed payment qualifies as made in the ordinary course of business under 11 U.S.C. § 547(c)(2)(B).
When addressing what was "ordinary course of business" under § 547(c)(2)(B), the Court wrote that the lower court had to analyze only the context of the business relationship between those parties involved in that case.
The Fyfe Court indicates that a "variation from the parties' normal course of doing business is significant." Id. at 70. This Court will follow the direction of the Third Circuit in the Fyfe case and will analyze the history and course of the business relationship of the parties in considering the arguments made as to whether those payments fall within the safe harbor of § 547(c)(2)(B). Specific attention will be directed to the payment history.
Concerning the requirements of § 547(c)(2)(C), we have guidance in the case In re Molded Acoustical Products, Inc., (Fiber Lite Corporation v. Molded Acoustical Products, Inc.), 18 F.3d 217 (3d Cir.1994). In discussing § 547(c), the Third Circuit essentially adopts the approach outlined in the case of Matter of Tolona Pizza Products Corp., 3 F.3d 1029 (7th Cir.1993). The Court writes
The Seventh Circuit, conscious of this difficulty, eschewed a bright line approach, concluding that:
*89 "ordinary business terms" refers to the range of terms that encompasses the practices in which firms similar in some general way to the credit in question engage, and that only dealings so idiosyncratic as to fall outside that broad range should be deemed extraordinary and therefore outside the scope of subsection C.
3 F.3d at 1033 (emphasis in original), quoted in Jones v. United Say. & Loan Ass'n (In re U.S.A. Inns of Eureka Springs, Ark.), 9 F.3d 680, 685 (8th Cir. 1993). Preferring to stay true to what scarce legislative history there is, we substitute the word "unusual" for "idiosyncratic" but otherwise adopt Tolona Pizza's definition.
In re Molded Acoustical Products, Inc., F.3d at 224.
Armed with this guidance, the Court can now analyze the facts as recited above to determine whether the transfers in question fall within the safe harbor provisions of § 547(c). The parties spent considerable time and effort attempting to convince the Court that the facts prove either that the transfers were made within the ordinary course of business between the parties and in the industry or that the transfers fell without. For their part, the Plaintiffs went to exhausting effort to show that the mere use of a debit memo, instead of the automatic computerized sweep element of the note, was a significant showing that the transfers were made outside of the ordinary course of business between the parties. Most of Plaintiffs' case centered around establishing the long-term business relationship between the parties and how that relationship manifested itself in the procedures for advancing loans under the note to tie Debtor and the payment of Debtor's business obligations over the years. On its own behalf, the Bank, called employees and an expert, Mr. Dorsch, to testify the revolving line of asses credit and the cash management facility were administered according to "ordinary or in business terms." The Bank's expert testified that any bank would have taken the actions taken by the Bank under the circumstances presented by the facts. The expert, however, also gave damaging testimony in several respects which the Court will discuss at a later point in this Opinion. The St. Paul Companies' rebuttal expert, Mr. Moro, gave testimony in direct contravention to the testimony of Mr. Dorsch.
Throughout all of the legal arguments, approximately the reading of the approximately 420 pages of testimony, the review of binders of exhibits entered into evidence, and the copious pre and post trial briefs, one comment made by the Debtor seemed to direct the Court's attention back to what it now the determines is the essential fact leading to ed the ultimate resolution of this matter. On page 14 of the Debtor's post trial memorandum, it writes that "at the heart of n_ conducting business in the ordinary course to as between the parties and upon ordinary business terms is conducting the dealings in consistent with the agreements between n the parties."
At various times in its argument and in its post trial brief, the Bank indicated that it "terminated" the note. See, e.g., Bank's Post Trial Brief at 15. The Court revisited Debtor's Exhibit 3, which is the February 24, 2000 letter from the Bank, under signature of its attorney, and notes that nowhere within the four corners of the letter does the Bank indicate that it terminated the note. The Court does find, without hesitation, that the letter indicated that the Debtor was in default under both the equipment loan and the note and that no further sums would be advanced under the note nor would checks or other payment items in transit be honored by the lender.
*90 Termination procedures are found in paragraph 3 of the note, which paragraph reads, as follows:
3. TERMINATION. The procedure for making Loans, and the obligation of Bank to provide Loans, as set forth in this Promissory Note, may be terminated by Borrower upon ten (10) days prior written notice to Bank and may be terminated by Bank upon thirty (30) days prior written notice to Borrower. Upon termination, no further Loans shall be made under this Promissory Note, but all other terms of this Promissory Note (including, but not limited to, the holder's right to demand payment at any time and for any reason) shall remain in full force and effect.
The Court finds that the Bank did not terminate the note pursuant to paragraph 3 of the note. Regardless, even if the Bank could be considered to have terminated the note, the Bank would have violated the terms of the note by not giving the borrower (Debtor) thirty (30) days prior or written notice of the termination. In other words, not honoring "presented items" under ¶ 2 of the note, the Bank would have violated the terms of the note. The Bank did, however, declare a default in that respect, we turn to paragraph 12 which consists of the remedies available to the Bank upon default. Paragraph 12 reads, in its entirety, as follows.
12. REMEDIES. Upon a default, in addition to all other rights and remedies available to the holder of this Promissory Note under any document or agreement between Borrower and Bank or under applicable law, the holder of this Promissory Note, in the holders sole may raise the rate of Interest accruing on the unpaid principal balance outstanding under this Promissory Note by two (2) percentage points above the rate of interest otherwise applicable. The Bank shall have no further obligation to provide any Loans to Borrower following: (a) a demand by Bank for payment hereunder; or (b) a default under this Promissory Note. Borrower agrees that a default under this Promissory Note is a default by Borrower under all other liabilities and obligations of Borrower to the holder, and that the holder shall have the right to declare immediately due an holder payable all liabilities and obligations owed by Borrower to liabilities the and holder of this Promissory Note.
A remedy provided the Bank upon default is that it has no further obligation to provide loans to the borrower (Debtor) following a default and a demand by the Bank. The Court has no hesitation in finding that the Bank exercised this remedy and included all rights available to it in the February 24, 2000 letter found at Debtor's Exhibit 3. Where the Bank fails to abide by its responsibilities under the note is by failing to honor the checks written to the account by the Debtor to pay various suppliers, etc., on the 24th and 25th of February 2000. Nowhere in the note does the event of default give the Bank the right to ignore the procedures for covering checks as referenced in paragraph 2 of the note and, in particular, paying presented items should the excess balance at the end of the day be greater than the amount of the presented items.[7]
Judge Rosenn in the J.P. Fyfe case, infra., reminds us that
The scanty legislative history of this section reveals only that "[t]he purpose of *91 the exception is to leave undisturbed normal financing relations, because it does not detract from the general policy of the preference section to discourage unusual action by either the debtor or his creditors during the debtor's slide into bankruptcy." S.Rep. No. 989, 95th Cong., 1st Sess. 88, reprinted in 1978 U.S.Code Cong. & Admin.News 5787, 5874.
J.P. Fyfe, Inc., 891 F.2d at 70.
By way of additional comment, nothing would prevent a court from finding in the ordinary course, payments that were habitually late under the terms of an agreement between the parties. See Matter of Xonics Imaging, Inc., 837 F.2d 763 (7th Cir.1988). Indeed, in In re Molded Acoustical Products, Inc., Judge Becker instructs that the longer the pre-insolvency relationship between the debtor and the creditor, the more the creditor will be allowed to vary its credit terms from the industry norm and still stay within the safe harbor. This Court agrees with the analysis of both the Seventh and Third Circuits in this regard. But nowhere in the case law, and more importantly, nowhere in the evidence presented to this Court during the trial, can the Court find support in the position that a non-repetitive breach of a contract, by one of the parties, can be considered "ordinary" under either the second or third elements of the safe harbor provisions of § 547(c). To the contrary, the evidence presented by all parties to this dispute indicates that the failure to pay the presented items from the account was an extraordinary breach of the payment arrangements agreed to by the parties. The mere use of debit memos as opposed to the automatic sweep, however, was not a significant variation in the ordinary business between the parties and could well be a "red herring.".
Mr. Schwartz, an expert qualified on behalf of the Bank, testified on the first day of trial that the checks presented on the account on February 24 and 25, 2000 should have been honored. (Transcript of 2/3/2005 at 150-151.) Mr. Dorsch, another expert qualified on behalf of the Bank, testified that his understanding was that the cash management facility remained operative after the termination of the note. (Recall that the Court has determined that the note was not terminated but that a default was declared under the terms of the note.) He did testify that standard banking practices dictated that the note did not provide authority to the Bank to dishonor checks presented to the account for payment if money was actually in the account. (Transcript of 2/4/2005 at 137-138.) Finally, the expert presented on rebuttal, J.F. Moro, testified that, in order to get repaid, it was essential that the Bank follow the loan documents and abide by them. He further testified that banks cannot arbitrarily change the procedures used to process checks unless the document allows for it. (Transcript of 2/4/2005 at 233-235.)
After the meeting on February 18, 2000, the Bank, in order to protect its own interest at the expense of other creditors of the Debtor, breached the terms of the note which was negotiated between the parties at arm's length. As a result, the Bank's position was greatly enhanced by being able to pay down the amount due on the note at the expense of all the creditors whose checks were presented and dishonored even though there were sufficient funds in the account to pay those checks.
The Court determines that the Bank effectuated a preferential transfer by using the funds deposited into the account to pay down the note to the detriment of other creditors whose checks were presented on the account and dishonored. The Court *92 finds the Bank has not carried its burden of proof as required by § 547(g) proving that the transfers on February 24 and 25, 2000 were made in the ordinary course of business or financial affairs of the Debtor and the Defendant under § 547(c)(2)(B) and (C).
As to the transfer of February 22, 2000, the Court finds that, in all regards, the Bank followed the procedures for making loans, sweeping the account, and paying presented checks according to the terms of the note. Therefore, the Court finds that the transfer of February 22, 2000 falls within the safe harbor provisions of § 547(c).
The Court will now turn its attention to that portion of the argument that all three transfers in question effected a setoff under § 553, and therefore, the funds should be returned to the Debtor as an invalid setoff. Initially, I note that the Bank contractually waived their right of setoff[8] Moreover, the Supreme Court in the case of Citizens Bank of Maryland v. Strumpf, 516 U.S. 16, 116 S. Ct. 286, 133 L. Ed. 2d 258 (1995) instructs us of the tripartite test to establish a setoff. There must be (1) a decision to effectuate a setoff; (2) some action accomplishing the setoff; and (3) a recording of the setoff. Strumpf at 19, 116 S. Ct. 286. The Court will not address whether the transfers of February 24 and 25, 2000 effectuated a setoff because it has already determined that those transfers were preferential and not subject to the safe harbor provisions of § 547(c). A finding of setoff in that regard does not further this cause, and the impact would be the same upon both Debtor and the Bank. But, what of the transfer on February 22, 2000? The Court has reviewed the testimony and has determined that the evidence falls short of a finding that there was a decision to effect a setoff of the deposits made that day. Of primary significance to that finding is the fact that on February 22, 2000, the Bank honored checks and swept the account as it had in the past pursuant to the terms of the note. The evidence falls short of proving whether the Bank intended that the sweep would be a setoff.
At the conclusion of the Plaintiffs post trial brief, it sets forth several methods for calculation of damages against the Bank. Two suggestions concern separate methods of calculating damages arising from the transfers of February 22, 24, and 25, 2000. Additionally, a calculation of damages to the extent that checks were bounced not only for those days but for subsequent days was presented. The Court will accept the suggested calculation of damages as the amount of all the dishonored checks presented on February 24 and 25, 2000. Those checks total $435,591.63. This amount represents the total by which the Bank improved its unsecured position.
Finally, the Court will address the Debtor's request for both pre and post judgment interest. Prejudgment interest in preference litigation has been permitted but not mandated since 1904 by the case of Kaufman v. Tredway, 195 U.S. 271, 25 S. Ct. 33, 49 L. Ed. 190 (1904). See, also, Smith v. Mark Twain Nat'l Bank, 805 F.2d 278 (8th Cir.1986); Palmer v. Radio Corp., 453 F.2d 1133 (5th Cir.1971); Salter v. Guaranty Trust Co., 237 F.2d 446 (1st Cir.1956); Waite v. The Second Nat'l Bank, 168 F.2d 984 (7th Cir.1948); Larkin v. Welch, 86 F.2d 442 (7th Cir.1936); and White Co. v. Wells, 42 F.2d 460 (6th Cir. *93 1930). This Court sees no reason to deviate from granting prejudgment interest in a successful preference action. The record is devoid of when demand was initially made in this case, and therefore, the Court will grant prejudgment interest from the date of the filing of the adversary initiating this Complaint.
An Order will follow.
ORDER
For those reasons indicated in the Opinion filed this date, IT IS HEREBY
ORDERED that judgment is entered in favor of the Plaintiff, CCI Construction Co., Inc., a corporation, a/k/a CCl/Ortenzio Co., Inc., and against the Defendant in the amount of 8435,591.63, together with prejudgment interest from the date of the filing of the adversary proceeding.
NOTES
[1] Drafted with the assistance of Richard P. Rogers, Law Clerk.
[2] The St. Paul Companies were permitted to intervene in the above-captioned adversary by Order dated April 17, 2002. The St. Paul Companies hold themselves out as the largest, unsecured creditor in this bankruptcy, and therefore, they claim to have a significant interest in the disposition of this adversary proceeding.
[3] Admittedly, the path taken by the parties entering into the stipulation was not an easy one as reflected by the colloquy of all parties involved during the first day of testimony (see Transcript of 2/3/2005 at 11-21). But, nonetheless, that stipulation guided the parties' presentation throughout the remainder of the trial and was acknowledged by the Bank in its post trial brief at page 1 wherein it indicates that the three payments were preferential transfers under the terms of 11 U.S.C. § 547. See Bank's Brief at 3 (Doc. # 80).
[4] The Motion to Dismiss was denied by Order of Court filed December 14, 2001 (Doc. # 16). The Motion for Summary Judgment was denied by Order of Court filed May 20, 2004 (Doc. # 58).
[5] This odd designation is repeated on the record, but never explained.
[6] Mr. John Ortenzio, president and sole shareholder of CCI, used the generic term "customers" to refer to the Debtor's receivables.
[7] The only reason there was a lack of funds to cover Debtor's checks was the premature "sweep" of funds by the Defendant.
[8] See paragraph 9 of the note. While there was testimony that the striking out of paragraph 9 was not authorized by the Bank, the note, nevertheless, with the strike outs controlled the business relationship between the parties.
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674 F. Supp. 636 (1987)
Sherman FRIED, Plaintiff,
v.
UNITED STATES of America, et al., Defendants.
No. 81 C 5387.
United States District Court, N.D. Illinois, E.D.
November 30, 1987.
James A. Romanyak, Romanyak & Miller, Chicago, Ill., for plaintiff.
Anton R. Valukas, U.S. Atty., William T. Clabault, Asst. U.S. Atty., Russell M. Young, U.S. Dept. of Energy, Richard K. Willard, Acting Asst. Atty. Gen., Civil Div., Ralph H. Johnson, Asst. Dir., Torts Branch, Civil Div., for defendants.
MEMORANDUM AND ORDER
MORAN, District Judge.
The facts and procedural history of this Federal Tort Claims Act ("FTCA") action were detailed in our earlier opinion, Fried v. United States, 579 F. Supp. 1212 (N.D.Ill. 1983). ("Fried I"), and will be briefly noted only to the extent that they bear upon the issues presently before us. In Fried I we held that the United States had sufficient control over the operation of Argonne National Laboratory ("ANL") the nuclear research facility where plaintiff Fried was allegedly injured to subject it to liability under Illinois law, thus bringing the government within the reach of the FTCA. We also held that the United States was not entitled to statutory immunity under the Illinois Workers Compensation law.
The one remaining defendant, the United States, now moves for summary judgment *637 pursuant to Rule 56 of the Federal Rules of Civil Procedure, asserting that plaintiff's claims are barred by the discretionary function exception to the FTCA. 28 U.S.C. § 2680(a). We agree, and therefore grant defendant's motion for summary judgment.
FACTS
The relevant undisputed facts are as follows. The ANL is owned by the United States and is operated by the University of Chicago ("University"). Plaintiff was employed by the University as a radio chemist and worked at ANL.
A contract between the United States, the University, and an association of universities involved in research at ANL controls the direction, operation and management of ANL. Specifically, the contract allows the government to oversee ANL's operational safety through a spot-check appraisal program. The spot-check system was designed and implemented by staff officers of the then Atomic Energy Commission, now designated as the Department of Energy ("government"). These officers visit a select group of ANL buildings annually and conduct on-site evaluations of their operations. Based on their observations, these appraisers make recommendations for safety improvements and draft formal appraisal reports suggesting any changes they feel should be made. The government also establishes and enforces standards for the storage and disposal of special nuclear materials, including plutonium, at ANL.
Plaintiff claims that on September 2, 1980, he was testing and analyzing the contents of a sealed glass ampule containing liquid nuclear waste material (plutonium and americium) prior to its disposal. The contents of the ampule were stored under pressure in an acid solution. Plaintiff alleges that the sealed ampule exploded in his hand, exposing him both internally and externally to poisonous nuclear waste. Plaintiff's FTCA claim asserts defendant negligently allowed the ampule to be stored in an unsafe manner and negligently failed to prevent the ampule from exploding and injuring him.
DISCUSSION
I. Subject Matter Jurisdiction
The FTCA provides exclusive jurisdiction in federal district courts over all tort claims against the United States. 28 U.S.C. § 1346(b). The place "where the act or omission occurred" determines which state's law will apply to a dispute brought under the FTCA. Richards v. United States, 369 U.S. 1, 8-10, 82 S. Ct. 585, 590-91, 7 L. Ed. 2d 492 (1962); Bowen v. United States, 570 F.2d 1311, 1315 (7th Cir.1978). Neither party disputes that plaintiff's alleged injury occurred in Illinois, and this court held in Fried I that plaintiff stated a viable negligence claim under Illinois law. Thus we hold this court may properly consider plaintiff's FTCA claim. See Misany v. United States, 826 F.2d 612, 614 (7th Cir.1987) (per curiam).
II. Federal Tort Claims Act
A. Discretionary Function Exception
The discretionary function exception provides in pertinent part that the United States may not be held liable, despite the general waiver of sovereign immunity embodied in the FTCA, for
[a]ny claim based upon an act or omission of an employee of the Government ... or based upon the exercise or performance or the failure to exercise or perform a discretionary function or duty on the part of a federal agency or an employee of the Government, whether or not the discretion involved be abused.
28 U.S.C. § 2680(a). When this case was filed a number of courts took a rather restricted view of the discretionary function exception. See, e.g., McGarry v. United States, 549 F.2d 587 (9th Cir.1976), cert. denied, 434 U.S. 922, 98 S. Ct. 398, 54 L. Ed. 2d 279 (1977). The development of the law since then, however, has not been kind to plaintiff. In 1984 the parameters of the discretionary function exception were expansively described by the Supreme Court in United States v. S.A. Empresa de Viacao Aerea Rio Grandese, and its companion case, United States v. United Scottish Insurance Co., 467 U.S. 797, 104 S.Ct. *638 2755, 81 L. Ed. 2d 660 (1984) ("Varig Airlines"). These cases involved airplane crashes which the plaintiff attributed to the Federal Aviation Administration's negligence in inspecting and certifying aircraft. In Varig Airlines plaintiffs argued that the FAA's negligence lay in part in its decision to implement and apply the spot-check system of compliance review. In holding the FAA's action exempt under the FTCA's discretionary function exception, the Supreme Court stated:
When an agency determines the extent to which it will supervise the safety procedures of private individuals, it is exercising discretionary regulatory authority of the most basic kind. Decisions as to the manner of enforcing regulations directly affect the feasibility and practicality of the Government's regulatory program; such decisions require the agency to establish priorities for the accomplishment of its policy objectives by balancing the objectives sought to be obtained against such practical considerations as staffing and funding.... Judicial intervention in such decisionmaking through private tort suits would require the courts to "second-guess" the political, social, and economic judgments of an agency exercising its regulatory function. It was precisely this sort of judicial intervention in policymaking that the discretionary function exception was designed to prevent.
Id. at 819-20, 104 S.Ct. at 2767-68, quoted in Cisco v. United States, 768 F.2d 788, 789 (7th Cir.1985). Employees exercising discretion, as well as the government agencies themselves, are immune. Dalehite v. United States, 346 U.S. 15, 33, 73 S. Ct. 956, 966-67, 97 L. Ed. 1427 (1953). Thus, challenges to governmental regulatory or enforcement functions are barred by the discretionary function exception to the FTCA.
As in Varig Airlines, plaintiff Fried challenges the negligent failure of the government staff officers to discover non-compliance with its safety regulations. Plaintiff also maintains the government was negligent in performing its duty to supervise and control the storage and handling of nuclear materials at ANL. Whether the government or its employees were negligent, or even abused their discretion, is irrelevant to the discretionary function analysis. Boruski v. United States, 803 F.2d 1421, 1429 (7th Cir.1986); Cisco, 768 F.2d at 789; Hylin v. United States, 755 F.2d 551, 553 (7th Cir.1985). This court must focus instead on the nature of the challenged governmental activity to determine whether the exception applies. Cisco, 768 F.2d at 789; Hylin, 755 F.2d at 553.
The "discretionary function" concept has been troublesome. In the aftermath of Dalahite some courts distinguished between planning and operational decisions, but that distinction does not appear to survive the Varig Airlines emphasis on the nature of the governmental action rather than the status of the actor. See Mitchell v. United States, 787 F.2d 466 (9th Cir.1986), cert. denied, ___ U.S. ___, 108 S. Ct. 163, 98 L. Ed. 2d 118 (1987); Begay v. United States, 768 F.2d 1059 (9th Cir.1985). But see Aslakson v. United States, 790 F.2d 688 (8th Cir.1986); Pooler v. United States, 787 F.2d 868 (3d Cir.1986), cert. denied, ___ U.S. ___, 107 S. Ct. 175, 93 L. Ed. 2d 111 (1986). Other courts have distinguished between regulations monitoring private action, as in Varig Airlines, and propriety activities by the government. E.g., Aslakson v. United States, supra; McMichael v. United States, 751 F.2d 303 (8th Cir.1985). That distinction is difficult to maintain in view of Dalehite, and other courts have rejected it. E.g., Mitchell v. United States, supra. Other courts have ignored the discretionary exemption, e.g., Henderson v. United States, 784 F.2d 942 (9th Cir.1986); Gardner v. United States, 780 F.2d 835 (9th Cir.1986), perhaps because the defense was not raised. Compare Smith v. Johns-Manville Corp., 795 F.2d 301, 307 & n. 9 (3d Cir.1986), with Merklin v. United States, 788 F.2d 172 (3d Cir.1986) (Smith distinguished a decision in Merklin upholding jurisdiction on a claim on the ground that an immunity defense had not been raised in Merklin). Some have emphasized the failure to warn of a known hazard, e.g., Angel v. United States, 775 *639 F.2d 132 (6th Cir.1985); Baker v. United States, 817 F.2d 560 (9th Cir.1987), while others have considered a decision not to warn to be a discretionary policy judgment, see Berkovitz v. United States, supra, or the failure to warn the negligent implementation of a discretionary policy. See Hylin v. United States, supra. Still others, in finding jurisdiction, have pointed to the highly structured, almost mechanical governmental involvement, see McMichael v. United States, supra, or to a mandatory duty imposed upon the government. See Baker v. United States, supra.
Any decision invariably involves some measure of discretion and may well involve some measurable expense. A driver uses judgment in turning left. An official exercises discretion in deciding that a pothole should be filled, a crossing gate repaired, or a vehicle's brakes relined, and budgetary considerations may be important to his decision. Inadequate warnings may result in governmental liability in some instances, Davis v. United States, 716 F.2d 418 (7th Cir.1983) but not in others, Smith v. Johns-Manville Corp., supra. We may recognize that inadequate posting of warning signs constitutes run-of-the-mill negligence in a heavily used recreational area, Davis v. United States, supra, while we understand that no signs at all is a permissible policy decision in an unspoiled wilderness area. A standard related to the exercise of any discretion would largely eliminate any governmental liability, Aslakson v. United States, supra, and an emphasis on whether a decision has any budgetary implications, a factor in Totten v. United States, 806 F.2d 698 (6th Cir.1986), tends in that direction. The issue, rather, is whether the government action or inaction "is the type of decision that Congress intended to shield from tort liability in order to preserve a zone within which choice by governmental personnel can be exercised without threat of suit under the FTCA," Baker v. United States, supra, at 563, and that is an issue which does not lend itself to resolution by verbal formulations and general standards.
Those difficulties do not, however, help Mr. Fried. The courts have recognized, with virtual unanimity, that the manner in which the government monitors private activity involves the exercise of discretionary judgment which cannot be reviewed through the mechanism of tort liability. That is so whether the monitoring is incident to regulating private activity, as in Varig Airlines, or arises from a decision to delegate an economic activity to a private actor, that private actor having primary responsibility for the proper conduct of that activity while the government retains the authority to monitor that conduct. E.g., Feyers v. United States, 749 F.2d 1222 (6th Cir.1984), cert. denied, 471 U.S. 1125, 105 S. Ct. 2655, 86 L. Ed. 2d 272 (1985).
The governmental program here is of the latter nature. In implementing the spot-check safety appraisal program the government exercised its broad discretionary authority to meet the goal of ensuring safety at ANL. While the government's stated goal is to provide "reasonable assurance" that "adequate provisions" are made for the protection of employees and the public's health and safety (AEC Safety Manual at 3), the means of achieving these ends are entirely within the government's control. Specifically, the government's staff officers, using the spot-check system they had decided was appropriate, select which operations to monitor, determine what procedures to follow in conducting their appraisals, choose the operational activities on which to concentrate, and, on the basis of their assessments, recommend improvements they feel are necessary at ANL.
Thus these government appraisers exercise discretion in fulfilling their inspection and enforcement duties.
Guided by general government standards, government officials also exercise discretion in determining the appropriate means of storing and disposing of nuclear solutions at ANL. They determine which materials to store at ANL and which to ship to other areas of the country to achieve safe disposal of unneeded nuclear materials. They also decide which form these materials take for safe shipping and disposal purposes. Because the government *640 exercises broad discretionary powers to achieve safety at ANL, we hold defendant's action in designing and implementing safety programs exempt under § 2680(a).
B. Summary Judgment
Plaintiff raises factual issues concerning defendant's negligence in storing the ampule that allegedly injured him. However, factual disputes relating to the government's alleged negligence are irrelevant to the central issue of whether the governmental functions performed at ANL were discretionary. Cisco, 768 F.2d at 789; Hylin, 755 F.2d at 553. As these facts are not material to this court's discretionary function analysis, they will not preclude the entry of summary judgment. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S. Ct. 2505, 2510, 91 L. Ed. 2d 202 (1986). See also Cameron v. Frances Slocum Bank & Trust Co., 824 F.2d 570, 574 (7th Cir.1987) (substantive law determines which facts material). Since we find the functions performed by the government and ANL fit within the discretionary function exception of the FTCA, we grant defendant's motion for summary judgment.
CONCLUSION
For the foregoing reasons, defendant's motion for summary judgment is granted.
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496 Pa. 295 (1981)
436 A.2d 1376
COMMONWEALTH of Pennsylvania,
v.
Albert A. SUDLER, Appellant.
Supreme Court of Pennsylvania.
Submitted May 18, 1981.
Decided October 14, 1981.
Reargument Denied November 30, 1981.
*296 *297 *298 John J. Grenko, Reading, for appellant.
George C. Yatron, Dist. Atty., Charles M. Guthrie, Jr., Asst. Dist. Atty., for appellee.
Before O'BRIEN, C.J., and ROBERTS, NIX, LARSEN, FLAHERTY, WILKINSON and KAUFFMAN, JJ.
OPINION OF THE COURT
ROBERTS, Justice.
This is an appeal from a judgment of sentence of the Court of Common Pleas of York County imposed on convictions of murder of the first degree, burglary, and rape. Appellant challenges the sufficiency of the evidence on which the convictions were based, as well as the legality of his arrest, a search of his residence, and a statement which he had given to police. We conclude that the evidence does not support the conviction of rape. However, we also conclude that the record is free of error in all other respects. Accordingly, the judgment of sentence is modified and, as modified, affirmed.
*299 I
The body of the victim, an 80 year old widow, was found on the morning of December 10, 1978, in the bedroom of her apartment where she had lived alone. The victim's throat had been slashed, causing her death. There were also lacerations of the hands, face, and chest. The assailant had entered the victim's apartment through a kitchen window and had ransacked a considerable portion of the apartment, including the bedroom, searching for valuables. Medical examination revealed the presence of sperm in the victim's vagina.
On December 13, three days after the victim's body had been discovered, two acquaintances of appellant gave information to police concerning the crime. In sworn statements, both persons told police that appellant had admitted killing the victim. One of the persons, who saw appellant on the morning that the body had been discovered, stated that appellant had told him that he "used his big knife" to cut the throat of the "lady that lives near the playground," and had taken some whiskey from her apartment. This person stated that he had observed a red substance on appellant's shoes, which appellant had identified as blood. The other person supplied police with substantially the same information, and additionally told police that appellant had shown him a knife which appellant claimed to have used to kill the victim.
Police appeared before a magistrate on the same day they received the sworn statements of appellant's acquaintances, seeking a warrant for appellant's arrest, as well as a warrant to search appellant's residence. In supporting affidavits, police identified one of the acquaintances as Nelson Quinones, "an individual previously used as a witness in a criminal prosecution in Berks County and whose honesty and truthful demeanor has been established in the eyes of the Court. . . ." Police did not include the name of the other supplier of information in the affidavit because of a "fear of retribution . . . ."
The magistrate issued the warrants late that evening and police executed the warrants in the early hours of the *300 following morning, December 14, at approximately 4:00 a. m. As a result of a search of the premises, police recovered items of clothing, a knife with a blade of approximately eighteen inches, and two empty bottles of whiskey. Upon taking appellant into custody, police advised appellant of his Miranda rights and transported him to police headquarters. There he was once again advised of his rights. After questioning, appellant supplied police with a statement, subsequently reduced to writing by police and signed by appellant, in which he admitted breaking into the victim's apartment, killing the victim with his knife, and taking liquor. However, appellant also stated: "I didn't mess with her or anything like that. I don't remember messing with her like that; no, no. I didn't have any sex with her."
In pre-trial motions, appellant challenged the legality of his arrest and the evidence seized pursuant to the search warrant. The Court of Common Pleas of Berks County denied relief, but granted appellant's application for a change of venue. The matter was then tried before a jury in York County. The Commonwealth presented ample evidence in support of its charges of murder of the first degree and burglary. As to the charge of rape, the Commonwealth established that the victim had no male acquaintances and that appellant was the only person who had entered the victim's residence on the night of the killing. Through expert testimony, the Commonwealth also established the presence of sperm in the victim's vagina. On cross-examination, the Commonwealth's expert admitted that he could not tell how long the sperm had been there.
After returning its verdicts of guilty, the jury found the presence of mitigating circumstances. Written post-verdict motions were denied, and a sentence of life imprisonment on the murder conviction was imposed. In addition, sentences of ten to twenty years' imprisonment were imposed on the burglary and rape convictions. These latter sentences were to run concurrent to each other, but consecutive to the sentence imposed on the murder conviction. This appeal followed.
*301 II
Under the statutes in effect at the time this appeal was filed, authority to review appellant's homicide conviction is allocated to this Court, see Historical Note to 42 Pa.C.S.A. § 722 (1981), while authority to review the burglary and rape convictions is allocated to the Superior Court, 42 Pa.C.S. § 742. Although these statutory provisions are phrased in terms of "jurisdiction," another provision relating to our appellate court provides:
"[T]he failure of an appellee to file an objection to the jurisdiction of an appellate court within such time as may be provided by general rule, shall, unless the appellate court otherwise orders, operate to perfect the appellate jurisdiction of such appellate court, notwithstanding any provision of this title, or of any general rule, adopted pursuant to section 503 (relating to reassignment of matters), vesting jurisdiction of such appeal in another appellate court."
42 Pa.C.S. § 704(a). Thus the term "jurisdiction" is used to denote which appellate court has primary responsibility for a particular matter, permitting an appellate court in which a matter is erroneously filed to dispose of the matter in its discretion, absent timely objections.
This Court has on occasion declined to review non-homicide matters more properly presented to the Superior Court, even where the Commonwealth has not raised a jurisdictional objection. See, e.g., Commonwealth v. Hollis, 483 Pa. 427, 397 A.2d 417 (1979); Commonwealth v. O'Bryant, 479 Pa. 534, 388 A.2d 1059 (1978). However, on these occasions, the non-homicide matter had also been appealed to the Superior Court. Thus our decisions not to review the non-homicide matter reflected the judgment that the resources of the Superior Court which had already been utilized to process the appeal should not be wasted and duplicated by this Court.
Here, no such appeal to the Superior Court appears of record, and the Commonwealth has filed no jurisdictional *302 objection. In a similar procedural setting, where the appellee voiced only "belated objection," this Court observed that "judicial economy would be best served by assuming jurisdiction over the entire matter." Commonwealth v. Shain, 493 Pa. 360, 363 n.1, 426 A.2d 589, 590 n.1 (1981). The same concern for judicial economy justifies our consideration of all issues presented here, including those relating to the burglary and rape convictions.
III
In reviewing the sufficiency of the evidence, we are obliged to view all of the evidence presented at trial in the light most favorable to the Commonwealth, the verdict-winner, and to draw all reasonable inferences in the Commonwealth's favor. E.g., Commonwealth v. Moore, 488 Pa. 361, 412 A.2d 549 (1980); Commonwealth v. Kichline, 468 Pa. 265, 361 A.2d 282 (1976). So too, it must be borne in mind that
"it is not this Court's function to disturb the jury's factual determination. `It is a basic tenet of our system of jurisprudence that issues of credibility are properly left to the trier of fact for resolution.' Commonwealth v. Whack, 482 Pa. 137, 140, 393 A.2d 417, 419 (1978). In exercising this prerogative, `[t]he fact-finder is free to believe all, part, or none of the evidence.' Commonwealth v. Rose, 463 Pa. 264, 268, 344 A.2d 824, 826 (1975)."
Commonwealth v. Arms, 489 Pa. 35, 39, 413 A.2d 684, 686 (1980).
Viewed from this perspective, the record beyond question supports the jury's verdicts of guilty of murder of the first degree and burglary. However, the same cannot be said of the guilty verdict on the rape charge.
Our reading of the Crimes Code convinces us that penetration after a victim's death is not within the definition of rape. Rape is defined as follows:
"A person commits a felony of the first degree when he engages in sexual intercourse with another person not his spouse:
*303 (1) by forcible compulsion;
(2) by threat of forcible compulsion that would prevent resistance by a person of reasonable resolution;
(3) who is unconscious; or
(4) who is so mentally deranged or deficient that such person is incapable of consent."
18 Pa.C.S. § 3121. By contrast, under 18 Pa.C.S. § 5510 the Legislature provides:
"Except as authorized by law, a person who treats a corpse in a way that he knows would outrage ordinary sensibilities commits a misdemeanor of the second degree."
The Model Penal Code Comment to the section upon which section 5510 was based states:
"There are occasional legislative provisions penalizing sexual relations with or disrespectful treatment of corpses. The section is included here rather than in the chapter on sexual offenses because there we were concerned primarily with preventing physical aggressions, whereas here we deal with outrage to the feelings of surviving kin, outrage which can be perpetrated as well by mutilation or gross neglect as by sexual abuse."
American Law Institute, Model Penal Code § 250.10 Comment at p. 40 (Tent. Draft No. 13). When the language of the definition of rape is considered in light of this comment, it is clear that the Legislature intended the crime of rape to encompass only indignities to the living.
Here the Commonwealth charged appellant only under the "forcible compulsion" subsection of the rape statute, 18 Pa.C.S. § 3121(1). Although the evidence supports a conclusion that appellant was responsible for the presence of sperm in the victim's vagina, there is no evidence to support a conclusion beyond a reasonable doubt that penetration occurred before the killing. Neither eyewitness testimony nor testimony of the victim could be presented. Nor was there presented any evidence of force, which our cases have *304 viewed as sufficient to suggest "forcible compulsion." See, e.g., Commonwealth v. Perrin, 484 Pa. 188, 398 A.2d 1007 (1979); Commonwealth v. Williams, 476 Pa. 557, 383 A.2d 503 (1978).
Evidence of force is not necessary to support a rape conviction where, for example, a complainant testifies that she did not resist the aggressor because she feared further injury. Here, however, on a record containing no such testimony, or probative physical evidence, the lack of evidence of force is as consistent with the conclusion that penetration occurred after the killing as with the conclusion that the victim was afraid to resist. Thus it cannot be said that the jury could conclude, beyond a reasonable doubt, that rape had been committed.
IV
Appellant's challenges to the legality of his arrest and the search of his residence are based upon the failure of police to include in their affidavits accompanying the arrest and search warrants the name of one of the two persons supplying police with information. Appellant contends that, as a result, police provided no basis for their judgment that the "informant" was either inherently credible or reliable on this occasion, as required by Aguilar v. Texas, 378 U.S. 108, 84 S. Ct. 1509, 12 L. Ed. 2d 723 (1964), and Spinelli v. United States, 393 U.S. 410, 89 S. Ct. 584, 21 L. Ed. 2d 637 (1969).
Initially, it must be pointed out that appellant inappropriately seeks to be discharged because of the allegedly unlawful arrest. The only "fruit" of the allegedly unlawful arrest which appellant has identified is his person. It is well settled that a person convicted cannot avoid the verdict merely by pointing to an illegal arrest. See, e.g., Commonwealth v. Krall, 452 Pa. 215, 304 A.2d 488 (1973). Cf. Commonwealth v. Polsky, 485 Pa. 360, 402 A.2d 1003 (1979) (extradition). As the Supreme Court of the United States has recently reaffirmed, "[a]n illegal arrest, without more, has never been viewed as a bar to subsequent prosecution, nor as a defense to a valid conviction." United States v. Crews, 445 U.S. 463, 474, 100 S. Ct. 1244, 1251, 63 L.Ed.2d *305 537 (1980). Thus we consider the challenge to the veracity of the person supplying police with part of their information only to the extent that it affects the legality of the search warrant and evidence seized.
In focusing his attack on the veracity of the person not named in the affidavit, appellant has failed to demonstrate any infirmity regarding the veracity of the other person supplying police with information, Nelson Quinones, whose identity the police disclosed to the issuing authority in their affidavit.
Although Quinones was an "informant" in the sense that he advised police of appellant's admissions of criminal conduct, he was not an informant in the sense that police became obliged, under Aguilar and Spinelli, to show his veracity to the issuing authority. Unlike in the typical informant case, where there exists the potential that the informant is acting out of self-interest, here there is no basis to conclude that Quinones was motivated by anything other than good citizenship in making his disclosure. Moreover, the affidavit indicates that Quinones had testified, with credibility, in a previous court proceeding.
It has been observed that the Aguilar-Spinelli test "should not be applied in a wooden fashion to cases where the information comes from an alleged victim of or witness to a crime." United States v. Burke, 517 F.2d 377, 380 (2d Cir. 1975). There is no reason to distinguish this case, involving a named citizen who comes forward, from those where a victim or witness is involved. As Professor LaFave has observed, "when an average citizen tenders information to the police, the police should be permitted to assume that they are dealing with a credible person in the absence of special circumstances suggesting that such might not be the case." LaFave, II Search and Seizure § 3.4(a) at 592 (1978). No such "special circumstances" are present here, and it must be concluded that Quinones' veracity has been established.
In a case where two independent sources of information were presented which, "standing alone, arguably [did] *306 not possess a sufficient guarantee of reliability to create the probable cause necessary to issue a search warrant," this Court held:
"When two independent informants both supply the same information about a particular crime to the police, each source tends inherently to bolster the reliability of the other. Although the information supplied by one questionable source may be insufficient, the probability is extremely small that a second independent source would supply identical information if it were not probably accurate."
Commonwealth v. Mamon, 449 Pa. 249, 259, 297 A.2d 471, 477 (1972). It follows that where, as here, police properly have relied upon sufficient information supplied by a named, disinterested citizen who came forward voluntarily, any objection to the warrant based on the lack of veracity of another person cannot prevail.
V
Appellant's remaining contention, a challenge to the legality of the statement which appellant gave to police, relies exclusively upon appellant's own testimony at the suppression hearing, including a statement that he had been using drugs shortly before the time of his arrest. In appellant's view, the "totality of the circumstances," as he described them, should have been believed by the suppression court, and the statement ruled involuntary. Appellant's contention cannot prevail. His version of the "circumstances" directly contradicts the version presented by the officer who had interviewed appellant and accepted his statement. The suppression court's decision to credit the officer's testimony is supported by the record and, thus, must not be disturbed. See, e.g., Commonwealth v. Arms, supra.
Judgment of sentence on the rape conviction reversed. Judgment of sentence on the murder and burglary convictions affirmed.
NIX and LARSEN, JJ., filed concurring and dissenting opinions in which KAUFFMAN, J., joins.
*307 NIX, Justice, concurring and dissenting.
Although I join in that part of the majority opinion affirming appellant's convictions of murder of the first degree and burglary, I strongly dissent from the majority's conclusion that the jury could not find that rape had been committed.
The majority states that "[a]lthough the evidence supports a conclusion that appellant was responsible for the presence of sperm in the eighty year old victim's vagina, there is no evidence to support a conclusion beyond a reasonable doubt that penetration occurred before the killing. . . . Nor was there presented any evidence of force . . . ." At 1380 (emphasis added). However, in the instant case, there can be no doubt that the requirement of "forcible compulsion" for rape, 18 Pa.C.S.A. § 3121(1), cannot be separated from that force which was employed to commit the instant murder.
This Court has consistently decided "that if a homicide occurs in the perpetration of or attempt to perpetrate a robbery or other statutorily enumerated felonies, a conviction of [felony] murder . . . will be sustained regardless of when the design to commit the robbery or other felony was conceived or the felony committed." Commonwealth v. Tomlinson, 446 Pa. 241, 246-47, 284 A.2d 687, 690 (1971) (emphasis added).
While this language is admittedly ambiguous, it is nevertheless based upon sound policy as it recognizes the difficulty in attempting to ascertain when the intent to rob was conceived in a given factual situation. This difficulty was emphasized in Commonwealth v. Hart, [403 Pa. 652, 170 A.2d 850 (1961)] when we noted that "defendant would require a televised stop-watch in every robbery or felony-killing to prove that the felonious intent existed before the attack. It is rare, we repeat, that a criminal telephones or telegraphs his criminal intent and consequently such intent can be properly found by the jury from the facts and circumstances in a particular case." 403 Pa. at 658, 170 A.2d at 853-54. In all probability the rule would be better restated to indicate that if the killing *308 is used to effectuate the robbery then it is immaterial that the intent to kill preceded the intent to rob since the force resulting in death is the force used to accomplish the robbery.
Commonwealth v. Butcher, 451 Pa. 359, 363, 304 A.2d 150, 152 (1973) (emphasis added).
Similarly, the mere fact that penetration may have occurred within moments after a brutal murder rather than immediately prior to the murder does not negate the obvious fact that the force employed to kill is one and the same to that force which is sufficient to constitute "forcible compulsion" under 18 Pa.C.S.A. § 3121.
In addition, the majority admits that on cross-examination, the Commonwealth's expert admitted that he could not tell how long the sperm had been in the victim's vagina. Moreover, the majority's reliance on 18 Pa.C.S.A. § 5510[1] is misplaced. It would be absurd to construe this section as encompassing a situation, such as here, where the killing and the intercourse occurred within such a short span of time and the person responsible for the intercourse was the person who also committed the murder.
While it is true the legislature intended the crime of rape to encompass indignities to the living, the crime of rape may also be committed when the rape and murder are committed during the same criminal episode. Penetration in the instant case was the culmination of the forcible attack and killing of the victim. Whether this occurred immediately prior to or immediately subsequent to the moment of death is irrelevant and the conviction for rape should be affirmed.
KAUFFMAN, J., joins in this opinion.
LARSEN, Justice, concurring and dissenting.
I dissent from the majority's reversal of the judgment of sentence for rape.
*309 There is no question that the eighty year-old victim was alive when appellant began his murderous assault, and that brutal and lethal force was used on her. Further, as the majority correctly notes, "the evidence supports a conclusion that appellant was responsible for the presence of sperm in the victim's vagina." This would certainly seem to justify the jury's finding that appellant engaged in sexual intercourse with the victim by forcible compulsion. See 18 Pa.C.S.A. § 3121.
The majority, however, finds this evidence insufficient because there is no proof that the elderly victim was alive at the time of appellant's penetration of her vagina. In my opinion, it is of absolutely no moment if a victim who is alive at the time a rapist begins his assault breathes her last dying gasp before or after the assailant achieves penetration, and the definition of rape which is contained in section 3121 of the Crimes Code[1] admits of no such requirement. Further, the portion of the Model Penal Code quoted by the majority does not support reading such a requirement into the crime of rape, but rather, militates against it. That portion of the Model Penal Code addresses itself to penal provisions concerning the mistreatment of corpses and provides:
There are occasional legislative provisions penalizing sexual relations with or disrespectful treatment of corpses. The section is included here rather than in the chapter on sexual offenses because there we were concerned primarily with preventing physical aggressions, whereas here we deal with outrage to the feelings of surviving kin, outrage which can be perpetrated as well by mutilation or gross neglect as by sexual abuse. (emphasis supplied).
*310 American Law Institute, Model Penal Code § 250.10 Comment at p. 40 (Tent. Draft No. 13). Certainly the primary interest at stake in the instant situation is that of the victim to be free of appellant's ruthless onslaught of physical aggression, and not that of her surviving kin in having their feelings protected. Accordingly, appellant's conduct should be held to be rape without regard to whether the victim passed away before or after appellant completed his sexual objectives.
Applying Mr. Justice Roberts' view renders it impossible for the Commonwealth to obtain a conviction for the crime of rape or the crime of having intercourse with a corpse whenever either crime has been accompanied by the murder of the victim. If charged with rape the defendant says "prove the victim was still alive during the actual rape"; and if charged with intercourse with a corpse, the defendant says "prove the victim was dead during the sexual act" . . . and, unless there were eyewitnesses during the savagery, the matter is incapable of proof. All of which makes the law absurd.
The judgment of sentence should, therefore, be affirmed.
KAUFFMAN, J., joins in this dissenting opinion.
NOTES
[1] 18 Pa.C.S.A. § 5510 provides:
Except as authorized by law, a person who treats a corpse in a way that he knows would outrage ordinary sensibilities commits a misdemeanor of the second degree.
[1] That section provides:
A person commits a felony of the first degree when he engages in sexual intercourse with another person not his spouse:
(1) by forcible compulsion;
(2) by threat of forcible compulsion that would prevent resistance by a person of reasonable resolution;
(3) who is unconscious; or
(4) who is so mentally deranged or deficient that such person is incapable of consent.
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674 F. Supp. 347 (1987)
Marie T. GASTON, Plaintiff,
v.
SOUTHERN BELL TELEPHONE AND TELEGRAPH COMPANY, Defendant.
Civ. A. No. C86-1393A.
United States District Court, N.D. Georgia, Atlanta Division.
December 7, 1987.
*348 James L. Ford, Ford & Haley, Atlanta, Ga., for Gaston.
Daniel Joseph, Thompson, Jr., Gregory D. Artis and Keith W. Kochler, Atlanta, Ga., for Southern Bell.
ORDER
ROBERT H. HALL, District Judge.
Plaintiff brings this action under the Age Discrimination Act of 1967, 29 U.S.C. §§ 631-634 ("ADEA"), alleging defendant discriminated against plaintiff on account of her age by failing to promote her and provide her with pay and benefits commensurate with the work she performed. Plaintiff also brings a pendent state law claim for intentional infliction of emotional distress alleging defendant's agents and representatives embarrassed and humiliated her. Currently before the court is defendant's motion for summary judgment. For the reasons stated below, the court partially grants and partially denies defendant's motion.
FACTS
Plaintiff is an employee of defendant and has been employed at Southern Bell since 1946. Since 1964 plaintiff has worked in Southern Bell's marketing area and since 1977 she has held the non-management title of Service Consultant.[1] Defendant's Statement of Material Facts as to Which it Contends There is No Genuine Issue, ¶¶ 1-2 ("Defendant's Facts"). Id., ¶ 4. The employment benefits and wages of all Service Consultants, assuming equal time in the title, are the same regardless of age. Id., ¶¶ 5-6. In addition, the job duties of all Service Consultants are comparable, regardless of age. Id., ¶ 7. During the period 1979-1986, over 80 per cent of defendant's employees holding the title to Service Consultant within the Atlanta metropolitan area were younger than 40 years old. Id., ¶ 47.
On September 20, 1985 plaintiff filed a charge of employment discrimination with the Equal Employment Opportunity Commission ("EEOC") alleging defendant denied plaintiff promotion because of her age. Id., ¶¶ 8-9. Plaintiff identified several general management titles into which she sought to be promoted and upon which her discrimination claim is based. Id., ¶¶ 15, 18. Plaintiff alleges that in the 180-day period preceeding the filing of her EEOC charge, defendant promoted employees younger than age 40 into management positions for which she was qualified.
Beginning in 1958 defendant devised a program designed to measure the extent to which non-management employees possess abilities and traits that Southern Bell deems are related to successful performance in general management positions. Affidavit of Tim Barrett ¶ 6 ("Barrett Affidavit"). The program instituted in 1958 was entitled "Personnel Assessment Program" ("PAP") and it was replaced in 1980 with a similar program entitled "Human Resources Assessment" ("HRA"), Id., ¶ 4-5. *349 Under defendant's personnel policy, after July 1, 1980, any employee who did not receive a favorable HRA or PAP score (3 or 4), or after November 1981, did not complete a post-HRA development program, could not be promoted to a general management title unless he or she received an assessment waiver. Defendant's Facts, ¶ 34.
Plaintiff completed a PAP assessment on October 24, 1966 and, pursuant to defendant's system of evaluation, received an overall rating of 1 or "low." Id., ¶ 37. Because plaintiff did not complete a post-HRA development program[2] or receive an assessment waiver, defendant did not deem her eligible for promotion and thus, did not promote her. During the 180-day period preceeding plaintiff's filing of her EEOC charge, defendant promoted seven individuals into management positions sought by plaintiff; six of those individuals allegedly received ratings of 3 or 4 and one received an assessment waiver.[3]Id., ¶¶ 38-42.
In Count I of her complaint, plaintiff claims defendant denied her promotion into management in favor of younger, less qualified employees as a result of discrimination based on age in violation of the ADEA. She seeks back pay and liquidated damages, alleging defendant willfully discriminated against her. In Count II, plaintiff alleges defendant willfully discriminated against her by paying her lower wages and benefits than younger management personnel for performing allegedly the same or substantially similar work. In Count III plaintiff brings a state law claim alleging managing agents and representatives of defendant, with defendant's knowledge, conducted themselves in a manner toward plaintiff so as to naturally humiliate and embarrass her. Further facts will be disclosed as necessary for the discussion.
DISCUSSION
The protections of the ADEA are limited to persons over the age of 40. In order to prevail in an ADEA action, a plaintiff must first prove a prima facie case of discrimination. If she succeeds in establishing a prima facie case, thereby giving rise to a rebuttable presumption of discrimination, the burden shifts to defendant to show a legitimate non-discriminatory reason for its action. Upon such a showing by defendant, the burden shifts back to plaintiff to carry the ultimate burden of proof that she was the victim of intentional age discrimination and that defendant's proferred reasons for its actions were mere pretext for discrimination. Pace v. Southern Railway System, 701 F.2d 1383 (11th Cir.1983).
In order to establish a prima facie case of discrimination, a plaintiff must prove all prongs of a four-part test: (1) that she is a member of the protected group; (2) that adverse employment action was taken against her by defendant; (3) that she was replaced by a person outside the protected group; and (4) that she was qualified for the position for which she was rejected. Id. at 1386. The Eleventh Circuit has "repeatedly cautioned against overly strict application of the [four-part] test," however, and the underlying inquiry is "whether an ordinary person could reasonably infer discrimination from the facts shown if those facts remain unrebutted." Goldstein v. Manhattan Industries, Inc., 758 F.2d 1435 (11th Cir.1985). A determination of whether a prima facie case has been established "turns on whether the plaintiff has presented sufficient evidence to provide a basis for an inference that age was a factor in the employment decision." Pace, supra, 701 F.2d at 1307.
Of course, on a motion for summary judgment, once a movant supports its motion, *350 the adverse party "may not rest upon the mere allegations of [her] pleading," but in response "must set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e). The Supreme Court noted in Celotex Corp. v. Catrett, 477 U.S. 317, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986), that the standard for granting summary judgment mirrors the standard for a directed verdict. The Court held that, after adequate time for discovery, Rule 56(c) "mandates the entry of summary judgment ... against a party who fails to make a showing sufficient to establish the existence of an element ... on which that party will bear the burden of proof at trial." Id. 106 S.Ct at 2552-2553. In Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S. Ct. 2505, 2511, 91 L. Ed. 2d 202 (1986) the Court further clarified that
at the summary judgment stage the judge's function is ... to determine whether there is a genuine issue for trial.... [T]here is no issue for trial unless there is sufficient evidence favoring the nonmoving party for a jury to return a verdict. [cit] If the evidence is merely colorable ... or is not significantly probative, ... summary judgment may be granted.
Applying these summary judgment standards to an ADEA action, the Eleventh Circuit stated, "if on any part of the prima facie case there would be insufficient evidence to require submission of the case to a jury," summary judgment is appropriate. Barnes v. Southwest Forest Industries, Inc., 814 F.2d 607, 609 (11th Cir. 1987).
I. Failure to Promote Claim
The parties do not dispute that plaintiff, who is over 40, is a member of the group protected under the ADEA. The parties also do not dispute that defendant did not promote plaintiff, thereby taking "adverse employment action" against her. Plaintiff alleges that defendant has promoted persons younger than age 40 into management positions and, although defendant does not specifically state that the seven individuals promoted during the period relevant to this action were outside the protected age group, it also does not refute plaintiff's assertion. Thus, the parties appear to agree that plaintiff can prove the first three prongs of the test for establishing a prima facie case of discrimination.
Defendant argues that plaintiff has not shown and, indeed, cannot show that she is or was "eligible" for promotion and therefore fails to prove the fourth prong of the test. Defendant submitted affidavits and other evidence setting forth its "established personnel policies" under which defendant deemed plaintiff ineligible for promotion. See Attachments 4 and 5 to Defendant's Brief in Support of its Motion for Summary Judgment; Affidavit of Virginia T. Reynolds, ¶ 19; Barrett Affidavit. Defendant suggests that because plaintiff was found to be ineligible pursuant to defendant's policies, she was not "qualified" for promotion as that term is contemplated within the ADEA and the fourth prong of the prima facie case test.
Neither party provided the court with a universally accepted definition of "qualified" within the meaning of the four-part test for establishing a prima facie case of age discrimination. In Dorsch v. L.B. Foster Company, 782 F.2d 1421 (7th Cir.1986), the Seventh Circuit recognized that "[t]he meaning given to the term `qualified' depends upon the nature of the employer's business at the time the decision to offer or terminate employment is made." Id. at 1425. In Dorsch the plaintiff, by his own admissions, established that he was not qualified in the manner necessary for the business because he failed to develop new accounts "when the development of new business was part of his duties as a salesman." Id.
In Mistretta v. Sandia Corp., 649 F.2d 1383 (10th Cir.1981), the court recognized that an employer may present subjective reasons for making an employment decision as long as the reasons are not mere cover-ups for discrimination. In Mistretta, however, the court noted that the plaintiffs had not been terminated primarily because of subjective reasons but rather because of their poor performance ratings. The court found that, "[a]lthough performance ratings *351 are basically objective in nature from their very character," the performance ratings at issue were inherently biased against older employees. Id., 649 F.2d at 1389. Therefore the court in Mistretta held that the trial court had erred in finding there was no discrimination.
In the instant action, defendant failed to promote plaintiff allegedly because she did not satisfactorily complete Southern Bell's assessment program or receive an assessment waiver. Defendant submits that assessment ratings are made in accordance with formal guidelines and that the process is "age-neutral." Plaintiff has presented evidence that plaintiff received performance evaluations of satisfactory to more than satisfactory for the last several years, that she was commended for her good work while relieving a supervisor for a week and that between 1979 and 1986, of 202 service consultants defendant promoted to management in the Atlanta area, only 6 were over 40 years old.
Although the determination of qualification for a position turns on the nature of an employer's business, an employer may not carry out employment decisions based on seemingly objective or neutral policies when those policies may reflect inherent discrimination.[4] Given the evidence presented to the court on this motion for summary judgment, the court cannot say as a matter of law that plaintiff either was or was not "qualified" for promotion. Because plaintiff has presented evidence which could support a jury conclusion that she was qualified or that defendant's assessment program was inherently biased, the court DENIES defendant's motion for summary judgment with respect to Count I of plaintiff's Complaint.
II. Lower Pay/Benefits Claim
Plaintiff contends that, in her position as a Service Consultant, she performs the same or substantially similar work as younger management personnel while not receiving pay or benefits equal to those younger managers'. Plaintiff alleges that defendant has thereby discriminated against her in the area of pay and benefits on account of her age. Plaintiff cites deposition testimony of other Southern Bell employees to support her contention that Service Consultants perform substantially similar work as higher paid managers. See, e.g., Lawrence Deposition, pp. 52-65.
Although plaintiff appears to recognize that in order to sustain a claim under ADEA she must present some evidence showing that age was a factor in the employment decision, she fails to do so with regard to her pay/benefits discrimination claim. Evidence that Service Consultants perform substantially similar work as management employees is inapposite to her ADEA claim. Plaintiff failed to refute defendant's evidence that all Service Consultants perform comparable work and receive the same wages and benefits depending upon seniority. Plaintiff also does not dispute that the majority of all Service Consultants are under the age of 40.
In order to make out a prima facie case on her pay/benefits claim, plaintiff must show that age was a factor in Southern Bell's decision to provide her with the salary and benefits she currently receives. Even if Service Consultants perform the same or substantially similar work as management personnel, plaintiff cannot prevail on her ADEA claim unless she can show that only Service Consultants over age 40 perform such work and are paid less. Given the undisputed fact that Southern Bell treats all Service Consultants alike with regard to pay and benefits, that all Service Consultants perform comparable work, and that the majority of all Service Consultants are younger than 40 years old, plaintiff's pay/benefit claim must fail.
*352 At best, plaintiff has shown that defendant made a business decision to require Service Consultants to perform managerial functions at lower pay. Plaintiff has not shown that Southern Bell included age as a factor in arriving at this decision. Indeed, the majority of people adversely affected by this business decision (Service Consultants) are younger than 40 years old. Plaintiff has not submitted any evidence to prove, nor refuted defendant's evidence disproving, the third prong of the prima facie case test. In other words, although she has shown that adverse employment action may have been taken against her with regard to pay and benefits, she has not shown that persons outside the protected group were treated more favorably or immune from the same adverse employment decision. Therefore, the court GRANTS defendant's motion for summary judgment with regard to Count II of plaintiff's complaint.
III. State Law Claim
In Count III of her complaint plaintiff alleges that defendant, through its managers and representatives, conducted themselves in a manner as to naturally humiliation and embarrass her. In her response brief plaintiff argues that defendant misled plaintiff regarding the direction of her career and withheld information from her regarding her PAP assessment and right to engage in the post-HRA assessment program. Plaintiff asserts that "her age was the motivating factor for this deceitful conduct ... [which] may reasonably have caused plaintiff humiliation, embarrassment and degredation." Plaintiff's Brief in Response to Defendant's Motion for Summary Judgment, p. 29.
Under Georgia law, a plaintiff may bring an action for intentional infliction of emotional distress but "[t]he burden which the plaintiff must meet in order to prevail in this cause of action is a stringent one...." Bridges v. Winn-Dixie Atlanta, Inc., 176 Ga.App. 227, 229, 335 S.E.2d 445 (1985). "[R]ecovery for intentional infliction of emotional distress has been authorized only where the defendant's actions were so terrifying or insulting as to naturally humiliate, embarrass or frighten the plaintiff." Crowe v. J.C. Penney, Inc., 177 Ga. App. 586, 588, 340 S.E.2d 192 (1986) (emphasis supplied).
As under the ADEA, the plaintiff in an intentional infliction of emotional distress action must prove four elements of the tort in order to make out a prima facie case: "(1) the conduct must be intentional or reckless; (2) the conduct must be extreme and outrageous; (3) there must be a causal connection between the wrongful conduct and the emotional distress; [and] (4) the emotional distress must be severe." Bridges, supra, 176 Ga.App. at 230, 335 S.E.2d 445 (quoting Womack v. Eldridge, 215 Va. 338, 210 S.E.2d 145, 147 (1974)). All four of the elements must be present in order for an action to lie. Bridges, supra 176 Ga.App. at 230, 335 S.E.2d 445. Georgia courts have granted summary judgment against a plaintiff who fails to present evidence of the existence of any one of the elements. See, e.g., Bridges, supra; Crowe, supra (in both cases the Court of Appeals affirmed the trial court's grant of defendants' motions for summary judgment).
In the instant action, the discovery period was extended for a total of ten months during which time the parties took several depositions and received several sets of interrogatories and requests to produce and admit. This court has reviewed plaintiff's deposition and depositions of physicians who treated plaintiff as well as other evidence submitted by the parties in conjunction with defendant's motion. The evidence elicited by both plaintiff and defendant fails to support plaintiff's claim of intentional infliction of emotional distress.
Although the court in Bridges noted that outrageousness in conduct might be found to exist where a special relationship (such as employer-employee) exists where one person has control over another, it also cited the Restatement for the proposition that "It must be emphasized ... that major outrage in the language or conduct complained of is essential to the tort." Bridges, supra at 230, 335 S.E.2d 445. Indeed, *353 in two cases affirmed by the Georgia Court of Appeals, the trial courts granted defendants' motions for summary judgment where the plaintiffs (employees) had been detained and questioned and given polygraph examinations by their employers. Such conduct, the courts held as a matter of law, was not extreme and outrageous enough to meet the strict test applied in an action for intentional infliction of emotional distress.
Plaintiff must also be able to show that the emotional distress she suffered was extreme and "so severe that no reasonable man could be expected to endure it.... It is for the court to determine whether on the evidence severe emotional distress can be found...." Bridges, supra at 230, 335 S.E.2d 445 (quoting, Restatement (Second) Torts, § 46(1), comment j). In Bridges the Court of Appeals affirmed the lower court's finding that there had been no showing of severe emotional distress suffered beyond conditions typical of multiple sclerosis.
In the instant action, the alleged conduct by defendant of which plaintiff complains (deception based on discriminatory attitudes toward age) is not so extreme and outrageous as to support a claim for intentional infliction of emotional distress. Moreover, plaintiff fails to provide evidence that the distress she has suffered is extreme and severe. While plaintiff notes that she has seen physicians for headaches, exhaustion and high blood pressure, the physicians in each case suggested that her conditions were typical of either menopause or hereditary tendencies.[5] Plaintiff's evidence of defendant's extreme and outrageous conduct and her severe emotional distress is, at best, "merely colorable ... [and] is not significantly probative," Anderson v. Liberty Lobby, supra 106 S.Ct. at 2511. Therefore, the court GRANTS defendant's motion for summary judgment with regard to Count III of plaintiff's complaint.
CONCLUSION
Genuine issues of fact remain for trial on Count I of plaintiff's Complaint. Plaintiff failed, however, to present sufficient evidence to counter defendant's motion for summary judgment on Counts II and III. Therefore, the court DENIES defendant's motion for summary judgment with regard to Count I of plaintiff's Complaint and GRANTS defendant's motion with regard to the remaining counts, hereby DISMISSING Counts II and III from her complaint. The only issue which remains for trial is whether defendant discriminated against plaintiff on the basis of age by failing to promote her into a management position.
NOTES
[1] Plaintiff contends that the positions she held between 1964 and 1977 were identical to the service consultant position although they carried different job titles. See Plaintiff's Response to Defendant's Facts, ¶ 1.
[2] Plaintiff contends defendant failed to advise her of the existence of the post-HRA development program until immediately prior to her filing her charge and failed to present her with the program until two months after she filed her charge.
[3] Defendant did not present evidence of the ages of the individuals promoted. In her response brief plaintiff assumed the individuals were younger than plaintiff and wrote "Southern Bell admits to having advanced younger employees" into management positions. Plaintiff's assertion, however, is not supported by defendant's statement of facts.
[4] This court does not believe that the definition of "qualified" for purposes of proving the fourth prong of the test establishing a prima facie case of age discrimination turns on the employer's determination of eligibility. If this were the case, no plaintiff would be able to establish a prima facie case because even employers who have not created assessment programs or ranking systems would be able to set forth an apparently neutral scheme by which it allegedly determines "eligibility" for an employment position.
[5] Plaintiff argues that she does not need to prove her distress through physician's testimony. She cites Ga. Off'l Code Ann. § 51-12-6 to support this assertion. The Code section she cites, however, does not establish a cause of action for injury to peace, happiness or feelings of the plaintiff. Sanders v. Brown, 178 Ga.App. 447, 448, 343 S.E.2d 722 (1986). Her cause of action can only be for intentional infliction of emotional distress and to prevail she must prove extreme and severe emotional distress.
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674 F. Supp. 288 (1987)
Larry LILE and Clayton Soukup, individually and on behalf of all others similarly situated, Plaintiffs,
v.
The UNIVERSITY OF IOWA HOSPITALS AND CLINICS, John W. Colloton, Director, and the University of Iowa, Defendants.
Civ. No. 86-30-D-1.
United States District Court, S.D. Iowa, C.D.
November 16, 1987.
*289 Janice E. Rutledge and Christine M. Luzzie of Iowa Legal Services Corp. of Iowa, Iowa City, Iowa, for plaintiffs.
Thomas J. Miller, Atty. Gen. of Iowa, Merle Wilna Fleming, Asst. Atty. Gen. of Iowa, for defendants.
ORDER
STUART, District Judge.
The Court has before it defendants' motion to dismiss and plaintiffs' resistance thereto. The Court heard oral arguments by the parties on May 1, 1987 and required the parties to supplement their briefs. The matter is now fully submitted.
I. BACKGROUND
The Hill-Burton Act, 42 U.S.C. § 291 et seq. authorized grants for hospital improvements. Hospitals receiving grants incurred obligations to provide free care to qualified patients for 20 years or until the grant was repaid whichever was the shorter period.
The University of Iowa Hospital claims it repaid its Hill-Burton grant on January 16, 1981. In making that determination it included those patients whose care was paid for by the State of Iowa through the state's "state papers program" (Iowa Code 255) under which state appropriations for treatment of indigent patients are apportioned among the counties according to population. Each county is responsible for distributing the papers among needy residents.
42 C.F.R. 124.502 excludes from uncompensated services "services reimbursed by Medicare, Medicaid or other third party programs, including services for which reimbursement was provided as payment in full and services disallowed pursuant to § 124.513(d)(1)."
The plaintiffs initiated this action in February, 1986, alleging that the University of Iowa Hospitals and Clinics have violated the Hill-Burton Act by failing to provide free care to qualified patients by using care provided by the State of Iowa under the "state papers" program as a means to satisfy Hill-Burton requirements. Plaintiffs allege that violations of the Act are remediable under that Act, as well as under 42 U.S.C. § 1983.
Plaintiffs initially filed an administrative complaint with the Secretary of Health and Human Services, who dismissed plaintiffs' complaint. The secretary found:
that services provided under the Iowa Indigent Patient Care Program are not excluded per se from credit under the Hill-Burton program because the State of Iowa:
1. Owns the hospital and appropriates funds for the hospital to cover expenses for the program; and
*290 2. Does not appropriate funds under this program for use by other facilities.
Therefore, uncompensated services credit may be claimed by the University Hospital to the extent that their accounts meet the credibility requirements of sections 124.506 and 124.508 of the regulations. (Defendant's Exhibit A)
This action thereby became ripe for judicial determination pursuant to 42 U.S.C. § 300s-6 and 42 C.F.R. § 124.511(a)(4).
Plaintiff filed a three count complaint on February 18, 1986, alleging that (I) defendant violated 42 U.S.C. § 291c(e)(2) of the Hill-Burton Act, (II) defendant violated Hill-Burton regulations, 42 C.F.R. § 124.502, and (III) defendant deprived plaintiffs of rights secured by the laws of the United States and the deprivation is remediable under 42 U.S.C. § 1983.
Defendants have moved to dismiss the complaint on Eleventh Amendment grounds and have moved to dismiss the § 1983 count on grounds that the remedial devices provided under Hill-Burton precludes the remedy of suits under § 1983.
II. AVAILABILITY OF A PRIVATE CAUSE OF ACTION
Defendants argue that the count based on 42 U.S.C. § 1983 should be dismissed because the remedial devices provided under Hill-Burton precludes the remedy of suits under § 1983.
The Supreme Court has held that § 1983 encompasses claims based solely on statutory violations of federal law. Maine v. Thiboutot, 448 U.S. 1, 100 S. Ct. 2502, 65 L. Ed. 2d 555 (1980). Following Thiboutot, one district court held that a claim for violation of the Hill-Burton Act may be enforced through 42 U.S.C. § 1983. Gadway v. Blum, 567 F. Supp. 772 (N.D.N.Y. 1983).
The Supreme Court has since recognized an exception to statutory violations of federal law. "When the remedial devices provided in a particular Act are sufficiently comprehensive, they may suffice to demonstrate a congressional intent to preclude the remedy of suits under 42 U.S.C. § 1983." Middlesex County Sewerage Authority v. National Sea Clammers Association, 453 U.S. 1, 20, 101 S. Ct. 2615, 2626, 69 L. Ed. 2d 435 (1981).[1] The Supreme Court has found that the remedial devices provided in the Education for All Handicapped Children Act (EAHCA) are sufficiently comprehensive so as to preclude suits under 42 U.S.C. § 1983. Smith v. Robinson, 468 U.S. 992, 104 S. Ct. 3457, 82 L. Ed. 2d 746 (1984).
The question thus becomes whether the remedial devices provided in the Hill-Burton Act are sufficiently comprehensive to demonstrate a congressional intent to preclude the remedy of suits under 42 U.S.C. § 1983.
The Court believes that the remedial devices provided by Hill-Burton are sufficiently comprehensive. The statute provides for administrative review by the Secretary, as well as subsequent private actions, with applicable rules promulgated thereunder. See 42 U.S.C. § 300s-6. Thus, in light of Sea Clammers, the count based on § 1983 will be dismissed and Gadway v. Blum is distinguished in light of the subsequent caselaw.
This view is supported by the recent Supreme Court decision of Wright v. City of Roanoke, ___ U.S. ___, 107 S. Ct. 766, 93 L. Ed. 2d 781 (1987). In that case the court again stated that where the statute at issue provides for private judicial remedies, that indicates that Congress intended to supplant a § 1983 remedy. Id. 107 S.Ct. at 771. It held in that case that § 1983 was available to plaintiffs because the Housing Act did not provide a private cause of action. Here, the Hill-Burton Act provides for private remedies. Thus, the § 1983 claim will be dismissed.
As the Court has determined that Count III will be dismissed because the Hill-Burton Act provides comprehensive remedical *291 devices including the right to bring a private cause of action, the Court need not consider defendants other grounds for dismissing Count III.
III.
Defendants original motion to dismiss sought dismissal of the Hill-Burton actions Counts I and II for failure to state a claim upon which relief could be granted. During oral argument defendants obtained permission to extend their Eleventh Amendment defense to Counts I and II.
It seems incongrous for the state to argue that plaintiffs have no right of action under § 1983 because the Hill-Burton Act provides a full panoply of remedies and then argue that the lawsuits under that act should be dismissed under the Eleventh Amendment. In any event, at least part of the relief sought is equitable in nature. The Court at this stage of the proceeding need not determine the extent of the relief that may be available to the plaintiffs if they prevail on the merits. Prospective, equitable relief has long been recognized as an exception to Eleventh Amendment immunity. Ex Parte Young, 209 U.S. 123, 28 S. Ct. 441, 52 L. Ed. 714 (1908); Edelman v. Jordan, 415 U.S. 651, 667-68, 94 S. Ct. 1347, 1357-58, 39 L. Ed. 2d 662 (1974); Meiner v. Missouri, 673 F.2d 969, 982 (8th Cir.1982). Such relief may be granted even when attended by fiscal consequences to the state. Edelman, 415 U.S. at 667, 94 S.Ct. at 1357.
Often, as is the case here, the line between prospective and retrospective relief may not be bright. Edelman, at 667, 94 S.Ct. at 1357. Plaintiff seeks a declaratory judgment that defendants have violated the Hill-Burton Act and regulations by counting state papers patients toward their uncompensated care requirement and an injunction ordering defendants to provide uncompensated care to patients for whom no effective request was made.
The Eleventh Amendment is no bar if the relief plaintiff seeks can fairly be characterized as "a necessary consequence of compliance in the future with a substantial federal question determination." Edelman, at 668, 94 S.Ct. at 1358. In this case, a determination that defendants violated the Hill-Burton Act by counting state papers patients toward their uncompensated care requirement would necessarily require defendants to take action to comply with the Act. Injunctive relief is one possible remedy.
IV.
As amended Counts I and II of the complaint are sufficient to withstand a motion to dismiss for failure to state a cause of action upon which relief can be granted.
V. CLASS CERTIFICATION
Plaintiffs have moved for class certification pursuant to Rule 23, Federal Rules of Civil Procedure. At this stage in the litigation, the Court believes that class certification is premature. The Court will deny class certification at this time.
IT IS THEREFORE ORDERED that the section 1983 count against defendants is dismissed.
IT IS FURTHER ORDERED that defendants motion to dismiss is denied.
IT IS FURTHER ORDERED that class certification is denied at this time.
NOTES
[1] A separate constitutional claim outside the scope of the particular act would not bar a suit under 42 U.S.C. § 1983. See, e.g., Rose v. Nebraska, 748 F.2d 1258, 1263 (8th Cir.1984) (EAHCA and due process claims).
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636 S.W.2d 361 (1982)
DIVISION OF EMPLOYMENT SECURITY, Appellant,
v.
LABOR AND INDUSTRIAL RELATIONS COMMISSION, Priscilla McAdoo and Hussmann Refrigerator Company, Respondents.
No. 43511.
Missouri Court of Appeals, Eastern District, Division Three.
June 8, 1982.
*362 Rick V. Morris, Larry R. Ruhmann, Jefferson City, for appellant.
Timothy P. Duggan, Jefferson City, for respondent Labor and Indus. Relations Com'n.
Burton Halpern, Bridgeton, for respondent Hussmann Refrigerator Co.
REINHARD, Presiding Judge.
The Division of Employment Security appeals from a decision of the circuit court affirming the determination of the Labor and Industrial Relations Commission. The Commission found Priscilla McAdoo, claimant, voluntarily left work with good cause attributable to her work or employer, and was not disqualified for employment benefits pursuant to § 288.050 RSMo.1978. We reverse.
Claimant was employed as an assembler by Hussmann Refrigerator Company for almost two years. Her job required her to work on a production line constructing rear shelves and placing gaskets on refrigerator cases. In the summer of 1979, employer experimented with increasing production levels. Production on the line to which claimant was assigned had been 23 refrigerator cases per eight hour day, but was increased to 28 per eight hour day. For the week of August 28 to September 3, 1979, production on claimant's line was 28 cases per dayduring which time she had no assistance.
Production was increased for the first time to 35 cases for a ten hour day on September 5, 1979.[1] Claimant began work at 7:30 a.m., but left the gaskets off the refrigerator cases, a part of her assigned job. According to her testimony, about 10:00 the foreman came to her and asked her why she wasn't putting the gaskets on the cases. She answered, "I didn't have time and it was too much and I was behind." Thereupon, he asked her, "Why didn't you come in here and tell me?" She responded, "I didn't feel like I had to .... You know I didn't have any help." She then told him, "You can take the job."
Foreman's account of the conversation paralleled the claimant's. He testified he "asked Priscilla why wasn't the gasket on...." She then stated that, "she needed help .... I explained to her the job doesn't warrant a helper ... and she says, Why, I can't do it all, and I quit ...." He then said, "Priscilla, let's go talk about it," and she replied, "No, I don't want to talk about it. I quit."
*363 Claimant testified that at the rate of 35 cases per ten hour day, she needed a helper and that one had been furnished to her in the past on occasion. She contended that others who asked for helpers when the rate was increased to 35 cases per day were given them. The foreman testified as to the policy of providing helpers and said their use was dependent on available workers because of vacations and absenteeism.
Claimant testified she knew the company grievance procedure and after she quit, attempted to see the plant ombudsman, but he was on vacation. Claimant stated she did not ask if someone was filling in for the ombudsman because she did not feel it would have done any good. Employer testified a substitute for the ombudsman was available. At the time of the hearing, production was 28 cases per eight hour day.
After claimant filed for unemployment compensation benefits, a deputy of the Division of Employment Security determined that claimant voluntarily quit without good cause and was disqualified for unemployment benefits. Upon the claimant's appeal to the Appeals Tribunal, the deputy's determination was affirmed. The appeals referee found that claimant left work because she was upset with the amount of work, however, she did not show good cause because "she made no complaint to any one in authority before leaving ... [and] ... no effort to protect her position."
The Labor and Industrial Relations Commission reversed the Appeals Tribunal. The Commission found that:
[T]he claimant voluntarily left her work on September 5, 1979, because she was expected to complete a work assignment of 35 cases a day, whereas before, in the normal course of the employer's business, she had been given assistance if she were expected to do more than 28 cases a day. It is found that the employer was aware of the fact that the assignment to the claimant was unreasonable, the employer having made an adjustment in the assignment to that work station after the claimant left so that only 28 cases a day were expected to be completed by one person.
While we review the evidence in the light most favorable to the finding of the Commission, considering all reasonable inferences and decide whether the Commission could reasonably have made its findings upon consideration of the evidence before it, we are not bound by the decision of the Commission as to questions of law. Cardinal Newman College v. Labor and Industrial Relations Commission, 624 S.W.2d 532, 534 (Mo.App.1981).
Here, the claimant had the burden of proof to establish good cause, and whether the favorable evidence established good cause is a question of law. Contractors Supply v. Labor and Industrial Relations Commission, 614 S.W.2d 563, 564 (Mo.App. 1981).
There is little dispute as to the basic facts. The question with which we are confronted is not as the Commission perceived the issue, whether it was reasonable for the employer to expect claimant to produce 35 cases in a ten hour day, but rather whether the claimant's decision to quit the job was reasonable and made in good faith. Central Missouri Paving Co., Inc. v. Labor and Industrial Relations Commission, 575 S.W.2d 889, 892 (Mo.App.1978).
The voluntary termination of employment must be made in good faith and conform to the conduct of the average person who acts with reasonableness. Contractors Supply v. Labor and Industrial Relations Commission, 614 S.W.2d at 564. Good cause is a cause which reasonably would motivate the average able-bodied and qualified worker in a similar situation to terminate his or her employment with its certain wage rewards in order to enter the ranks of the compensated unemployed. Belle State Bank v. Industrial Commission Division of Employment Security, 547 S.W.2d 841, 846 (Mo.App.1977).
In Contractors Supply v. Labor and Industrial Relations Commission, 614 S.W.2d 563 (Mo.App.1981); Central Missouri Paving Co. v. Labor and Industrial Relations Commission, 575 S.W.2d 889 (Mo.App.1978); *364 and Belle State Bank v. Industrial Commission Division of Employment Security, 547 S.W.2d 841 (Mo.App.1977), the courts of appeal in each instance reversed Commission findings that the claimants voluntarily quit with good cause. In Contractors Supply, the court held that claimant's action in failing to attempt to resolve a dispute concerning overtime with his employer before quitting did not constitute good faith, even though his claim may have had merit. Similarly, in Central Missouri Paving, the court held that the claimants' actions in failing to take their pay dispute with their employer to a state agency, prior to quitting, did not constitute good faith, even though their claim may have been justified. In Belle State Bank, the court held that claimant's quitting over proposed temporary changes in benefits and working conditions did not constitute good cause.
In light of these cases, we believe that the evidence presented does not establish good cause. Claimant should have made a greater effort to resolve her dispute with her employer before resorting to the drastic remedy of quitting. There was no evidence of any prior effort by the employer to harass this particular employee.
The employer had every right to attempt to reasonably increase its production levels. There was no evidence that the scheduled production level of 35 cases per ten hour day was a permanent arrangement and the employer had a right to determine whether its employees could maintain that pace. There was no evidence that claimant was in danger of being fired for failing to keep up with production that morning. Claimant attempted to see the plant ombudsman but only after she had quit her position.
Under the circumstances here, claimant's abrupt disseverance from her employment was unreasonable and not made in good faith. Therefore, her voluntary termination was without good cause attributable to the work or the employer and disqualified her from unemployment compensation benefits.
The judgment of the circuit court is reversed and the cause is remanded with directions to remand the cause to the Labor and Industrial Relations Commission with directions to deny the claim.
Judgment reversed.
SNYDER and CRIST, JJ., concur.
NOTES
[1] This was the same rate as the previous week of 3.5 cases per hour, but for two additional hours each day.
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636 S.W.2d 146 (1982)
In re B. G. S., a Minor.
Mary ELMORE, Juvenile Officer, Clay County, Plaintiff-Respondent,
v.
B. J. M., Defendant-Appellant.
No. WD32830.
Missouri Court of Appeals, Western District.
June 22, 1982.
*147 Karen D. Ramsey, Kansas City, for defendant-appellant.
Max Von Erdmannsdorff, Kansas City, for respondent.
William J. Turpin, Liberty, guardian ad litem.
Before SHANGLER, P. J., and PRITCHARD and DIXON, JJ.
DIXON, Judge.
The natural mother appeals an order of the juvenile court making three children, B. G. S., J. L. S., and C. E. S., wards of the juvenile court and placing the children in foster care.
The mother questions the sufficiency of the evidence to support the trial court's determination of neglect and the need for the care and protection of the court. This claim of error is bifurcated: first, that the evidence does not support the finding of neglect by the mother because acts of a third person endangering the children were proven; and second, that the presumption under § 211.011[1] and the case law, that a natural parent is fit to retain custody, was not overcome. The issues presented require a detailed statement of the evidence presented to the juvenile court. Review is pursuant to Murphy v. Carron, 536 S.W.2d 30 (Mo. banc 1976).
C. E. S. is a female child, age 11; J. L. S. is a male child, age 8; and B. G. S. is a female child, age 5. The father's whereabouts are unknown. In 1978, on the mother's request, the children were made wards of the court in Virginia and placed in foster care. The Virginia court has terminated its jurisdiction. The children came to Kansas City in 1980 to live with the natural mother.
School officials discovered bruises on J. L. S. and B. G. S. beginning in early April 1981. The school nurse noticed a number of bruises on B. G. S.'s leg, a large bruise on the inside of her thigh, numerous bruises on her arms and hands, and a bruise on her buttocks close to the spine. The blow to her thigh had raised blood blisters and appeared to have been made by a belt. An examination of J. L. S. revealed bruises across his shoulder, back, and buttocks, and also evidenced the use of a strap. After interviewing the children, a social worker arranged for all three to be taken into protective custody on April 8. The children indicated that their injuries were the result of whippings administered with a leather belt by Jones, the mother's boyfriend, as punishment for picking flowers. According to the children, their mother was aware of prior similar spankings by Jones, and she had asked him not to spank them with a belt.
At the time of the relevant events, the mother and Jones shared a house in Clay County. The mother worked at two jobs, *148 and spent weeknights with a friend in a downtown hotel. Jones, unemployed at the time, was left with responsibility for the care and supervision of the children during the week.
Jones admitted inflicting the bruises found on the two children and described in detail whipping them with a belt. Jones telephoned the mother and announced to her his intention to punish; she acquiesced in the decision. Jones told J. L. S. and B. G. S. to remove their pants and lie across a bed, after which he administered the spankings with a leather belt partially wrapped around his hand. He estimated that he spanked J. L. S. ten or twelve times and B. G. S. six or eight times. Jones claimed that one of the blows accidently struck B. G. S. on her thigh because of her squirming. Jones admitted that the spankings were severe and readily admitted that he had spanked them before with the mother's knowledge. Jones' sister also spanked the children hard enough to leave bruises.
Jones admitted he had been in the county jail as the result of a charge of child abuse. In addition to numerous misdemeanor charges and convictions, he was convicted on two charges of molestation. The mother had on one or two occasions told him not to use a belt when spanking the children. She said she gave him permission for the spanking.
J. L. S. and B. G. S. are afraid of Jones. The court ordered that the children be made wards of the court until 17 years of age and placed them in the custody of the juvenile officer for foster home care.
The mother's first claim is that under the pleadings there was no proof that she had neglected the children. The pleadings followed verbatim the language of § 211.031.1(1)(a) which proscribes parental neglect or neglect by a person having custody by court order. The petition, however, also factually describes the conduct of Jones and the mother. Section 211.031.1(1)(b) proscribes neglect by other persons having custody without court order, which the mother asserts was not pleaded. There are two answers to this contention.
The pleadings are accurately characterized by the mother; but the case was tried, and the evidence presented on the theory that the children had been neglected by the persons having custody by parental placement. A proceeding in the juvenile court is in the nature of a proceeding in equity. § 211.171(6). In a civil case, when the parties have fully explored the issues and the evidence, the pleadings will be considered amended to conform to the proof. In any event, the factual basis of the claim of neglect was pleaded.
Second, in testing the sufficiency of the evidence to support the allegations, the evidence and all the reasonable inferences which may be drawn are considered in the light most favorable to the court's order. L. v. Jackson County Juvenile Court, 544 S.W.2d 330, 332 (Mo.App.1976). The record shows the mother was aware of the previous spankings by Jones and the children's fear of Jones. The mother, despite her knowledge of those facts, took no steps to protect the children, but continued to live apart from the children, leaving them under the total control of Jones. The inference from these facts and the number of bruises discovered by the school officials over a period of several days raises a permissible inference that the mother had neglected her duties in caring for the children.
The second prong of the mother's complaint with respect to sufficiency is based upon the presumption that the natural parent is fit to retain custody. The cases cited by the parties, In Re D. L. W., 530 S.W.2d 388 (Mo.App.1975), and In Re J. L. L., 402 S.W.2d 629 (Mo.App.1966), recognize that the overriding and primary concern of the courts when dealing with child custody is the welfare of the child. The Supreme Court has recently summarized the guiding principle in language which refutes the mother's position:
The general rule that natural parents have a primary right to the custody of their children is controlling when it is consistent with the welfare of those children. This is so because the rule favoring natural parents stems from the presumption that maintaining the natural parent-child relationship is best for the *149 child. When in conflict, however, the rule favoring parental custody is superceded by the concerns of the state for the child's welfare.
In Interest of C. L. M., 625 S.W.2d 613, 617 (Mo. banc 1981). The mother also asserts that her statements of commitment to properly care for the children were not properly considered by the trial court. The consideration of the mother's assertions of willingness to establish a new residence and devote more time to the children were matters well within the province of the trial court on the issue of credibility and weight and will not be disturbed absent a showing that the trial court was clearly wrong. Murphy v. Carron, supra. The mother likewise complains in the argument portion of her brief that the court denied her motion to transfer the case to the juvenile court of Jackson County. Section 211.041 makes the jurisdiction under 211.031 continuing jurisdiction, and at most, the motion was addressed to the discretion of the trial court, and nothing appears to demonstrate an abuse of that discretion.
Judgment affirmed.
All concur.
NOTES
[1] All statutory references are to RSMo 1978.
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674 F.Supp. 952 (1987)
Bessie A. KAUFFMAN, et al., Plaintiffs,
v.
PUERTO RICO TELEPHONE CO., et al., Defendants.
Civ. No. 85-701 HL.
United States District Court, D. Puerto Rico.
January 23, 1987.
*953 *954 Ramón García García, Hato Rey, P.R., for plaintiff Annie Ceide.
José Ramón Pérez Hernández, Héctor Urgell, Pedro Miranda, Old San Juan, P.R., for plaintiffs.
Fiddler, González & Rodríguez, San Juan, P.R., for defendant P.R. Telephone Co.
Saldaña, Rey, Morán & Alvarado, Santurce, P.R., for defendants Lausell, Navarro, Molina & Ramos.
OPINION AND ORDER
LAFFITTE, District Judge.
Plaintiffs, eleven former employees of the Puerto Rico Telephone Co. ("PRTC"), filed this action under 42 U.S.C. sect. 1983 against their former employer PRTC; the Puerto Rico Telephone Authority ("PRTA"); Miguel Lausell, Executive Director of PRTA and President of PRTC[1]; Rafael A. Navarro, Vice President in charge of employee relations at PRTC; Elsa Molina, Personnel Director of PRTC, and Armando Ramos, Recruitment Manager of PRTC. Plaintiffs claim to have been discharged from their jobs because of their political affiliation in violation of the First Amendment and without notice or a pretermination hearing in violation of the Due Process Clause.
Before the Court are cross-motions for Summary Judgment. Plaintiffs base their claim for summary judgment on the undisputed fact that they were discharged by defendants without notice or hearing. Defendants counter that judgment should be granted in their favor because all plaintiffs, with the exception of Annie Ceide had been illegally hired and, as a result, had no property interest in their jobs and no right to due process. Concerning the claim of Annie Ceide, defendants maintain she has no cause of action for violation of due process because she was given notice of her termination and afforded an opportunity to be heard on the charges against her prior to termination. Defendants also assert that plaintiffs have failed to support a First *955 Amendment claim for political discrimination.
Defendants' Motion for Summary Judgment against all plaintiffs except Annie Ceide is GRANTED. Annie Ceide's Motion for Summary Judgment on the claim to due process is GRANTED. Motions for Summary Judgment by defendants and Ceide on her First Amendment claim are DENIED.
FACTS
Plaintiffs worked for PRTC as "career" employees with PRTC until they were dismissed or, in the case of Annie Ceide, permanently suspended, from their jobs on February 22, 1985. Each plaintiff claims to be an active member of the New Progressive Party ("NPP") of Puerto Rico. Defendants are known to be members of the rival political party, the Popular Democratic Party ("PDP").
Following eight years of NPP administration, the PPD won the November, 1984 general election for governor, and took office in January, 1985. Shortly after the change in administration defendant, Miguel Lausell, was appointed Executive Director of PRTA and President of the PRTC. As President and Executive Director, Lausell appointed defendants, Rafael Navarro, Elsa Molina and Armando Ríos to the positions of Vice President in charge of Employee Relations, Personnel Director, and Recruitment Manager respectively.
PRTA is a public corporation created by Law No. 25 of May 6, 1974, 27 L.P.R.A. sect. 401 et seq. PRTC is a private corporation organized under the laws of the state of Delaware. PRTA is the sole shareholder of PRTC. The Governor of Puerto Rico appoints the PRTA governing board and, pursuant to the law, the PRTA Executive Director who also serves as President of PRTC. 27 L.P.R.A. sects. 404, 405.
From its creation in 1974 until 1982 PRTC operated its employment matters as a private corporation without complying with the personnel laws of Puerto Rico. In 1982 the Puerto Rico Supreme Court held that PRTC was a "public-private" corporation operating as an instrumentality of the government and must comply with the laws of Puerto Rico. Torres-Ponce v. Jimenez, 113 D.P.R. 58 (1982). The court ordered PRTC to adopt personnel regulations in compliance with the merit principles and regulations of Puerto Rico's Public Service Personnel Act of 1975, 3 L.P.R.A. sect. 1301 et seq. ("the Personnel Act"). Id.
The Personnel Act was passed in 1975 in response to a deep dissatisfaction with the quality and efficiency of government employees. See Reyes Coreano v. Puerto Rico Ports Authority, 110 D.P.R. 40 (1980). The objective of the Act was to install a government-wide merit system aimed at attracting the most qualified employees to public service, attaining a public administration governed by "uniformity, equity, and justice," and maintaining "harmony and satisfaction" in the work place and "continuity and regularity" of public services. 3 L.P.R.A. sect. 1321.
Following the order of the Puerto Rico Supreme Court, PRTC issued Personnel Regulations for Managerial (non-union) Employees ("the Regulations"), effective April, 1983, consistent with the merit principles and objectives of the Personnel Act. The Regulations govern all aspects of recruitment, hiring, firing, and training of PRTC employees. The salient features of the Regulation's provisions governing recruitment and hiring are the requirements to give priority to internal employees and to publish the job openings publicly in order to attract the most qualified candidates.[2]
Except for Annie Ceide, all plaintiffs were recruited and hired to "career" positions with PRTC subsequent to the April, 1983 effective date of the Regulations.[3]*956 By letter dated February 22, 1985, signed by Rafael Navarro and hand delivered by Armando Ramos and Elsie Molina, these plaintiffs were notified of dismissal. The letter gave the following explanation for their discharge:
After conducting an investigation of the files and records, it has been determined that your recruitment was performed in violation of the PRTC Regulation for Managerial Personnel and the merit principle, this violation renders your appointment illegal.
An investigation of the recruitment process was undertaken by the Employment Relations Division after Rafael Navarro became aware that several complaints alleging illegal recruitment and hiring had been filed with an administrative tribunal handling such matters and that a group of PRTC employees had been formed with the purpose of protesting these violations. The investigation revealed that fifty-two employees, including plaintiffs, had been hired in violation of the Regulations. It was found that plaintiffs had all been recruited from outside PRTC without giving internal employees first consideration for the job vacancies and without ever publishing the job openings, either internally or externally.
Plaintiff Annie Ceide was hired as PRTC Recruitment Manager on January 17, 1983, prior to the April, 1983 effective date of the Regulations. She held this position until January 21, 1985 when she was replaced by Armando Ramos and assigned to another position. On March 2, 1985, she received a letter suspending her from employment without pay effective February 22, 1985. The letter explained that she was being suspended pending an investigation of her involvement as Recruitment Manager of recruitment and hiring in violation of the Regulations.
Following her suspension on April 4, 1985 Ms. Ceide was sent a letter from Mr. Navarro requesting her presence on April 11 for an interview regarding the charges against her of illegal recruitment and hiring. She failed to appear at the meeting. On April 26 she was sent a second letter requesting her presence at a May 2 meeting. Again she failed to appear. Ms. Ceide was officially terminated from employment on May 20, 1985.
On cross-motions for summary judgment the court must decide whether either party is entitled to judgment on the claim presented, in this case plaintiff's claim for violation of the Due Process Clause and the First Amendment. Summary judgment is proper 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 judgment as a matter of law." Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).
PLAINTIFFS HIRED AFTER THE EFFECTIVE DATE OF THE PRTC PERSONNEL REGULATIONS HAD NO PROPERTY INTEREST IN THEIR JOBS AND WERE NOT ENTITLED TO DUE PROCESS.
The Due Process Clause of the Fourteenth Amendment guarantees public employees *957 with a property interest in continued employment the right to an informal hearing prior to being discharged. Cleveland Bd. of Ed. v. Loudermill, 470 U.S. 532, 105 S.Ct. 1487, 84 L.Ed.2d 494 (1985). A property interest is created by "existing rules or understandings that stem from an independent source such as state law." The process due prior to taking the property is, however, a matter of constitutional or federal law. Id. at 1492-1493.
The positions held by plaintiffs in this caseEmployment Assistant, Office Clerk or Interviewer Iare "career" positions as defined by Puerto Rico's Personnel Act, 3 L.P.R.A. sect. 1349.[4] "Career" employees may be removed only upon a showing of "just cause," and after being given notice and hearing. 3 L.P.R.A. sect. 1336(4).[5] Employees with similar statutory protection have been held to have an expectancy in continued employment and a property interest in the employment position. See Loudermill, supra, at 1491; Kerkado v. Aponte-Roque, 64 F.Supp. 1326 (D.P.R.1986).
Whether plaintiffs here had a property interest in continued employment is dependent upon the legality of their appointments. The Supreme Court of Puerto Rico has made it clear that appointment of a public employee in violation of an agency regulation or provision of the Personnel Act is null and void, and carries none of the due process protection normally associated with a "career" appointment. Liliana Laboy v. Ela, 84 JTS 23 (1984); Colon v. Alcalde Municipio Ceiba, 112 D.P.R. 748 (1982); Guerra v. Servicios Sociales, 113 D.P.R. 50 (1982); Ortiz v. Alcalde De Aguadilla, 107 D.P.R. 819 (1978). In Guerra, the Supreme Court stated unequivocably:
The merit system [of Puerto Rico's Public Service Personnel Act] is an integrated system which covers the discharge of the employee and also his or her recruitment, therefore if the employee entered the public service without complying with the requirements of the merit system he or she cannot later claim protection of the system if discharged, except if the discharge is because of political discrimination.
Guerra v. Servicios Sociales, supra, at 53.[6]
In other words, public employees hired illegally to a "career" position have no property interest or expectation of continued employment entitling them to due process prior to termination. Instead, they have the same rights as a "trust" (de confianza) employee who may be terminated at any time for any reason provided the reason for discharge does not contravene the Constitution; for instance, a discharge based on political discrimination in violation of the First Amendment. See Branti v. Finkel, 445 U.S. 507, 100 S.Ct. 1287, 63 L.Ed.2d 574 (1980); Elrod v. Burns, 427 U.S. 347, 96 S.Ct. 2673, 49 L.Ed.2d 547 (1976).
It is undisputed that plaintiffs were hired from outside PRTC without affording internal employees first consideration and without advertising the position openings in any manner. Defendants claim plaintiffs' appointments violated section 8.4(1) of the Regulation requiring PRTC employees to be given priority for job vacancies and section 8.4(1) and (3) requiring all vacancies to be published in order to attract the qualified candidates. N. 2 infra.
*958 In Laboy v. Ela, supra, the Puerto Rico Supreme Court expressed approval for a similar personnel regulation of another Commonwealth agency, the State Insurance Fund. The Court found the regulation, which gave preferential treatment to internal employees, promoted the merit principles outlined in the Personnel Act by encouraging consistency and harmony in the workplace and the retention of experienced employees. Id. It was held that Lilian Laboy's appointment as an outside candidate without first considering qualified internal agency employees violated the State Insurance Fund's personnel regulations and as a result, the appointment was null and void. Id.
In an attempt to refute defendants' claim to summary judgment, plaintiffs argue that a question of fact exists whether they were hired illegally. Their argument is based on an interpretation of the language of the Regulations. They claim the language of sect. 8.4(2)"should there not exist proper internal candidates to cover the vacancy ... or when the Company deems that it is convenient and practical, it shall proceed to external recruitment" (emphasis plaintiffs'), n. 2, inframodifies sect. 8.4(1)'s requirement to afford internal employees first consideration for job openings and authorizes recruitment of outside candidates when convenient. They interpret the language of sect. 8.4(3) as allowing publication of job openings in any manner whatsoever. The section states that all of the following are adequate means of communication: "bulletin boards, publications, daily newspapers, professional magazines, private or public employment agencies and other means that may reach interested parties" (emphasis plaintiffs').
In fact, plaintiffs claim does not raise a question of fact about the legality of their appointmentsbut a legal question concerning the proper interpretation of the Regulation, sects. 8.4(2) and (3).[7] A legal issue is appropriately decided by the court on a motion for summary judgment. We find plaintiffs' interpretation untenable.
If the interpretation proferred by plaintiffs were correct, the Regulations would be completely without effect. PRTC would have the right to recruit and hire from within when it chose, but, when it found it more convenient, by the Company's own standards, it could recruit from outside without ever considering internal candidates. According to plaintiffs' interpretation of the publication requirement, notification of job openings would be proper no matter how it was done. Public notice would be acceptable, but so also would word-of-mouth.
Pursuant to mandate of the Puerto Rico Supreme Court, PRTC was to issue the personnel regulations in compliance with the merit principle of Puerto Rico's Personnel Actto promote consistency and harmony in the workplace and to attract the most qualified candidates. We find the proper interpretation of the PRTC Regulations to be one which is consistent with and promotes these merit principles and objectives.
The plain language of the Regulation sect. 8.4(1) requires PRTC to "consider first internal employees of the company." Then, if no "suitable" internal candidate exists, the company may, under 8.4(2), when it deems it necessary ("for convenience"), recruit and hire externally. This interpretation of the recruitment and hiring provisions of the Regulations is appropriate because it is consistent with the merit objectives of the Personnel Actto promote consistency and harmony in the workplace.
Section 8.4(3) requires employment opportunities to be communicated by the "most proper means" to attract "capable persons." Several suggestions are given as "adequate means" of communication: "bulletin boards, publications daily newspapers ... and other means that may reach persons who may be interested." We do *959 not interpret this last "catch-all" suggestion as a carte blanche to communicate job openings in any manner. The list of suggestions does not specifically mention word-of-mouth and we do not find such means of communication to be acceptable to attract "capable" candidates or to be consistent with the objectives of the merit system.
All plaintiffs, except Annie Ceide, were hired subsequent to the effective date of the Regulations. We find them to have been hired in violation of Sect. 8.4(1) and 8.4(3) making their appointments illegal and null and void. We also note that plaintiffs were made aware of the illegality of their appointments by the group of PRTC employees formed to protest the violation of the Regulations and, therefore, they could not claim to have had an expectation in continued employment.
Even if we were to accept plaintiffs' interpretation of the Regulation, there is no evidence that it was more convenient or practical to recruit outside candidates for the positions at issue. Plaintiffs were hired as "employment assistant," "administrative assistant," "office clerk," "Secretary II," or "Interviewer I." The job requirements for these positions are minimal; they require respectively a high school diploma and one year clerical experience; high school diploma and a secretarial course; high school diploma and three years experience as secretary at the executive level; and two years of college in business administration or liberal arts. It is hard to believe that no internal employees met these requirements and that it would not have been more convenient to promote employees from within.
Because plaintiffs were hired in violation of the PRTC personnel regulation, they have no property interest in their employment and no right to due process prior to termination.
Though plaintiffs are not entitled to the due process protection generally afforded career employees, they do have a right, as do all employees, to be free from employment termination for an unconstitutional reason, such as political discrimination. Plaintiffs claim the real reason for their dismissal is their political affiliation with the NPP. Defendants claim plaintiffs were terminated because they were illegally hired and that political affiliation was not a consideration.
In situations such as this one where dismissal is based on a "mixed motive" the court must expressly find that "but for" the constitutionally protected conduct plaintiffs would not have been discharged. Mt. Healthy City School District Bd. of Ed. v. Doyle, 429 U.S. 274, 97 S.Ct. 568, 50 L.Ed. 2d 471 (1974); Givhan v. Western Line Consolidated School Dist., 439 U.S. 410, 417, 99 S.Ct. 693, 697, 58 L.Ed.2d 419 (1979). Plaintiffs have failed to meet this burden.
In support of their claim to political discrimination plaintiffs merely state that the practice of political discrimination by the PPD administration is well known. Such a general statement is completely inadequate to support their claim. Once the party moving for summary judgment has come forward with a valid argument the opposing party may not rest on mere conclusory statements but must put forth specific facts to refute the argument. Fed.R.Civ.P. 56(c); see Celotex, supra, 106 S.Ct. at 2348. Here, defendant claims plaintiffs were discharged because they had been hired in violation of PRTC Regulations. Plaintiffs have come forward with nothing more than conclusory statements that the real reason for discharge was political affiliation. No specific evidence of any kind was proffered to rebut defendants' claim.
We find, therefore, that plaintiffs have failed to present sufficient evidence to raise a question of fact that "but for" political affiliation they would not have been dismissed from their positions. Defendants' motion for summary judgment against all plaintiffs, except Annie Ceide, is GRANTED.
PLAINTIFF ANNIE CEIDE'S RIGHT TO DUE PROCESS WAS VIOLATED AND THERE EXISTS A QUESTION OF FACT WHETHER SHE WAS TERMINATED IN VIOLATION OF THE FIRST AMENDMENT.
Annie Ceide was hired to a "career" position, Recruitment Manager for PRTC, on *960 January 17, 1983, almost four months before the April 4, 1983 effective date of the Regulations. On February 22, 1985 Annie Ceide was indefinitely suspended from employment without pay. Following her suspension, plaintiff was sent two letters in April requesting her presence at two separate meetings to discuss the charges against her. She failed to appear at either meeting. On May 20, 1985 she was permanently terminated from employment with PRTC.
The issue presented by Anne Ceide's claim is not whether she had a property interest in her job and a due process right to notice and hearing prior to termination. As a "career" employee hired prior to the enactment of the Regulations Annie Ceide's appointment was legal and valid giving her a property interest in her job and the right to due process. See Loudermill, supra, 105 S.Ct. at 1987 (1985). The issue here is instead whether the suspension on February 22, 1985 constituted a deprivation of property entitling Annie Ceide to due process protection.
The Supreme Court has characterized a deprivation of property entitled to due process as any interruption in the flow of the right to continued benefits. See Atkins v. Parker, 472 U.S. 115, 127-29, and n. 31, 105 S.Ct. 2520, 2529 and n. 31, 86 L.Ed.2d 81 (1985); O'Bannon v. Town Court Nursing Center, 447 U.S. 773, 786-787, 100 S.Ct. 2469, 2475-2476, 65 L.Ed.2d 506 (1980); Memphis Light, Gas & Water Division v. Craft, 436 U.S. 1, 20, 98 S.Ct. 1554, 1566, 56 L.Ed.2d 30 (1978); Goldberg v. Kelly, 397 U.S. 254, 266, 90 S.Ct. 1011, 1019, 25 L.Ed.2d 287 (1970). Suspension from a job in which the employee had a property interest has been held to be a deprivation of property entitled to due process protection. Confederation of Police v. City of Chicago, 547 F.2d 375 (7th Cir. 1977); D'Acquisto v. Washington, 640 F.Supp. 594 (N.D.Ill.1986).
Plaintiff here was suspended without pay effective February 22, 1985 and without being given a prior opportunity to contest the charges against her. The suspension constituted a deprivation of her property interest in continued employment.
Though plaintiff was deprived of property, defendants claim they incurred no violation of due process because the Loudermill decision requiring a pretermination hearing was not yet issued at the time of her suspension. Loudermill was decided on March 19, 1985 and plaintiff was suspended on March 2, 1985 effective February 22, 1985. Defendants claim the decision should not be applied retroactively.
In deciding the issue of retroactive application of a civil decision we begin with the principle, as the First Circuit did in Graves v. Smith's Transfer Corp., 736 F.2d 819, 820 (1st Cir.1984), "that a court is to apply the law in effect at the time it renders its decision, unless doing so would result in manifest injustice or there is a statutory direction or legislative history to the contrary." Furthermore, "the retroactive applicability of judicial decisions of the federal court is the rule, not the exception." Simpson v. Director Office of Workers' Compensation Programs, United States Department of Labor, 681 F.2d 81 (1st Cir.1982).
In Gurish v. McFaul, 801 F.2d 225 (6th Cir.1986), the Sixth Circuit held that Loudermill should be given retroactive application. To reach this decision the court followed the law of the circuit "that where, as in Loudermill, the Court applies the announced rule to the case before it and makes no statement as to whether it intends the rule to have retroactive or only prospective effect ..., it will be presumed that the Court intends that the rule be given retroactive application." Id. at 227 [citing Smith v. General Motors Corp., 747 F.2d 372 (6th Cir.1984)]; see also, Welyczko v. U.S. Air, Inc., 733 F.2d 239, 241 (2nd Cir.1986).
It was unnecessary in Gurish to apply the traditional three part test set forth in Chevron Oil Co. v. Huson, 404 U.S. 97, 106-107, 92 S.Ct. 349, 355-56, 30 L.Ed.2d 296 (1976) to determine the retroactivity of a decision in a civil case. The three part test requires the court to ask: 1) whether the decision represents a "clear break" *961 with past law; 2) whether retroactive application would further or retard operation of the new rule; and 3) whether retroactive application could "produce substantial inequitable results." Chevron Oil, supra 92 S.Ct. at 355.
Even applying this test we arrive at the same result as the Sixth Circuit in Gurish v. Loudermill did not establish a new principle of law and in no way represent a "clear break" with past decisions. In fact, the Court set forth the line of prior decisions from which it should have been concluded that Due Process Clause requires a pretermination hearing when the property interest at stake was a matter of employment. Loudermill, supra, 105 S.Ct. at 1493. In addition, the retroactive application would further the purpose of the decision to protect an individual from being wrongfully deprived of his livelihood without being given an opportunity to contest the charges against him. Finally, weighing the equities here no injustice will be committed by applying the rule retroactively.
In conclusion, we find that Loudermill applies to this case and that defendants violated Annie Ceide's due process rights by suspending her without pay and without a hearing prior to suspension. Defendants' attempt to rectify the violation by requesting her attendance at a hearing subsequent to the suspension has no effect. As the Supreme Court taught in Carey v. Piphus, 435 U.S. 247, 258, 267, 98 S.Ct. 1042, 1054, 55 L.Ed.2d 252 (1978), "the right to procedural due process is `absolute' in the sense that it does not depend on the merits of the claimant's substantive assertions, and because of the importance to organized society." Hence, denial of procedural due process is actionable for nominal damages without proof of actual injury.
Like the other plaintiffs, Annie Ceide claims that the real reason for her discharge was her affiliation with the NPP. As explained earlier the applicable standard in a case of political discrimination where discharge is based on a mixed motive is the test established in Mt. Healthy, supra, 429 U.S. 274, 97 S.Ct. 568. Under this test the burden is initially on the plaintiff to show that his or her conduct was constitutionally protected and that this conduct was a substantial or motivating factor in the action taken against him or her. Id. at 287, 97 S.Ct. at 576; Givhan v. Western Line Consol. School Dist., 439 U.S. 410, 417, 99 S.Ct. 693, 697, 58 L.Ed.2d 619 (1979). If this is proven, the burden shifts to defendant to show by a preponderance of the evidence that the plaintiff would have been discharged in any event. Id. In other words, if plaintiff is to recover the trier of fact must expressly find that plaintiff would not have been discharged "but for" the constitutionally protected conduct. Id. at 417, 99 S.Ct. at 697; Cheveras Pacheco v. Rivera Gonzalez, 809 F.2d 125 (1st Cir.1987).
The protected conduct in the present case is plaintiff's membership in the NPP political party. Plaintiff's initial burden is to prove that her political affiliation was a substantial and motivating factor for her dismissal. Because of its subjective nature, motivation of a defendant can rarely be proved with direct evidence seldom will an employer admit to have violated the Constitution. For this reason circumstantial evidence may be used to show discriminatory motive in a patronage dismissal case. Gabriel v. Benitez, 390 F.Supp. 988, 993 (D.P.R.1975), aff'd. Rivera Morales v. Benitez De Rexach, 541 F.2d 882 (1st Cir.1976).
An inference of political discrimination exists when an individual affiliated with one political party is replaced by a member of the other party currently in power. see Colon v. Cruv, 84 JTS 52 (1984); Navedo v. Mayor De Barceloneta, 113 D.P.R. 421 (1982); Baez Cancel v. Mayor of Guaynabo, 100 D.P.R. 980 (1972). Unlike the other plaintiffs in this case, Annie Ceide presented evidence that she was replaced by a member of the PPD, Arnaldo Ramos. We find this evidence sufficient to suggest that a substantial reason for plaintiff's ultimate termination was her political affiliation.
Though defendant has come forward with evidence of a valid reason for plaintiff's dischargethe violations of the Regulation *962 committed in recruitmentwe cannot find as a matter of law that plaintiff would have been terminated if it were not for her political affiliation. This issue raises a question of fact, whether "but for" political discrimination plaintiff would not have been terminated.
PRTC IS NOT ENTITLED TO AN ELEVENTH AMENDMENT IMMUNITY
Defendant PRTC has motioned to be dismissed as a party defendant on the grounds of an Eleventh Amendment immunity. We find that PRTC, as a public-private corporation is not entitled to the immunity. We adopt the holding and reasoning on this issue of Judge Pérez-Giménez in Cruz Martinez v. Lausell, Civ. No. 95-0956, October 1, 1986.
INJUNCTIVE RELIEF
WHEREFORE, defendants' Motion for Summary Judgment against plaintiffs,
Bessie A. Kauffman
Ivonne B. Rivera
Diana Doris Rodríguez
Francisco Javier Acevedo
Olga de Jesús Rodríguez
Ilsa Ramírez García
Angela Meléndez Orlang
María Esther Torres
Cecilia Zamora Lugo
Edwin Ralat Avilés
is GRANTED. The Clerk of the Court is ordered to enter judgment dismissing the complaint of these plaintiffs.
Annie Ceide's Motion for Summary Judgment on her claim of violation of due process is GRANTED.
The Cross-Motions for Summary Judgment by defendants and Annie Ceide on her First Amendment claim are DENIED. A jury trial on the First Amendment claim only will be held on a date to be set by the Court. Plaintiff's relief for the due process violation will be determined by the Court subsequent to the trial.
IT IS SO ORDERED.
APPENDIX I
Section 8.4 of the Regulation governing recruitment and hiring, provides:
1. The PRTC shall have as rule when considering the filling of vacancies that arise to consider first the internal employees of the Company following the rules of publication and free competition for all the employees who comply with the requisites, and provided that the internal candidates are suitable to fill the vacancy. The opportunities are published through a personnel requisition which shall contain the following information: position title, minimum requirements, placement level in the salary structure, time limits to file applications, department and work area and any other information indispensable as the type of competition and testing.
2. Should there not exist internal candidates to cover the vacancy or vacancies, or when the Company deems that it is convenient and practical, shall proceed external recruitment.
3. To attract to the Company the most capable persons by means of external recruiting, the opportunities of employment shall be divulged by the most proper means of communication in each case.
Adequate means shall be considered among others, the following: bulletin boards, publications, daily newspapers, professional magazines, private or public employment agencies and other means that may reach persons who may be interested.
NOTES
[1] Miguel Lausell has been replaced by Pedro Galarza. When an official is replaced pending resolution of the action, the named official is automatically substituted by the successor in office for the purpose of injunctive relief. Fed. R.Civ.P. 25(d)(1); Maria Santiago v. CRUV, 554 F.2d 1210 (1st Cir.1977).
[2] See Appendix I.
[3] Plaintiff Date Hired Position
Bessie A. Kauffman July 5, 1983 Employment Assistant Recruitment Division
Ivonne B. Rivera October 24, 1983 Administrative Office Clerk
Plaintiff Date Hired Position
Diana Doris December 5, 1983 Employment Assistant Recruitment Division
Rodríguez
Francisco Javier January 16, 1984 Interviewer I Recruitment Division
Acevedo
Olga de Jesús July 16, 1984 Employment Assistant Recruitment Division
Rodríguez
Ilsa Ramírez García January 30, 1984 Employment Assistant Recruitment Division
Angela Meléndez July 2, 1984 Employment Assistant Recruitment Division
Orlang
María Esther Torres August 13, 1984 Administrative Office Clerk
Cecilia Zamora Lugo July 5, 1983 Secretary I Recruitment Division
Edwin Ralat Avilés Sept. 15, 1984 Government Affairs Coordinator
[4] 3 L.P.R.A. sect. 1349 provides:
There shall be two categories of employees: career employees and confidential employees.
[5] The Puerto Rico Personnel Act, 13 L.P.R.A. sect. 1336(4) states:
(4) The appointing authority may remove any career employee for good cause and upon previous perferment of charges, in writing and upon prior holding of an administrative hearing if the employee so requests.
[6] This conclusion, that actions of a government agency which fail to comply with the law or self imposed regulations are null and void, is supported by decisions of the United States Supreme Court and federal circuit courts which have held that federal agencies must firmly adhere to agency rules, regulations or procedures. See Accardi v. Schaughnessy, 347 U.S. 260, 74 S.Ct. 499, 98 L.Ed. 681 (1954); Mass Fair Share v. Law Enforcement Assistance, 758 F.2d 708 (D.C.Cir.1985) (cases cited therein).
[7] Given different circumstances, it is possible that a question of fact would exist as to the legality of an appointment to defeat a motion for summary judgment. This case does not present such a factual situation. Another factor, not present herein, would entail the timeliness of the employer's action in relying on the validity of the appointment as ground for dismissal.
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319 B.R. 256 (2004)
In re SIMPSON, David M., Debtor.
The Mirage-Casino Hotel and Treasure Island Corp., Plaintiffs,
v.
David M. Simpson, Defendant.
Bankruptcy No. 6:01-BK-05252-ABB. Adversary No. 6:01-AP-00161-ABB.
United States Bankruptcy Court, M.D. Florida, Orlando Division.
December 31, 2003.
*258 Leigh R. Meininger, Orlando, FL, for Debtor.
*259 Memorandum Opinion
ARTHUR B. BRISKMAN, Bankruptcy Judge.
This cause came on the Complaint to Determine Debts as Non-dischargeable pursuant to 11 U.S.C. § 523(a)(2) filed by Plaintiffs, The Mirage-Casino Hotel ("Mirage") and Treasure Island Corporation ("Treasure Island") (collectively, "Plaintiffs" or "Casinos") against Defendant, David M. Simpson ("Defendant"). The following Findings of Fact and Conclusions of Law are made after reviewing the evidence and arguments of counsel.
FINDINGS OF FACT
Defendant filed chapter 7 on May 30, 2001. The Plaintiffs' filed claims against the Debtor. Mirage filed Claim Number Two (2) for one hundred thousand dollars ($100,000) and Treasure Island filed Claim Number Three (3) for one hundred thousand dollars ($100,000).
Plaintiffs filed this Complaint against Defendant to have their claims declared non-dischargeable pursuant to 11 U.S.C. §§ 523(a)(2)(A), (a)(2)(B) and (a)(2)(C) on August 2, 2001. Defendant filed an answer to the Complaint.
The Plaintiffs are hotel-casinos located in Las Vegas, Nevada and have established credit procedures they followed in determining whether to extend credit to the Defendant. Beginning in 1999 Defendant applied for a twenty thousand dollar ($20,000) line of credit at each Casino. He was required to complete and sign credit applications. The Casinos' obtained information regarding Defendant's bank accounts, including current and average balances maintained. Following this initial credit evaluation, the Casinos' approved Defendant's requests and extended him separate twenty thousand dollar ($20,000) lines of credit.
Defendant gambled using his lines of credit. Each time he drew down on his credit line he was required to sign checks, drawn against his bank account, payable to the Casinos ("Markers"). Defendant was never allowed to draw down on his credit line unless he signed Markers. The Markers represented his express acknowledgement that he owed a debt to the casinos. The Casinos had the right to present the Markers to Defendant's bank if he failed to repurchase the Markers, however, Defendant's gambling status as a Disposition 3 Gambler entitled him to leave the Casinos before satisfying his outstanding Markers and to be invoiced later for any balance.
Defendant requested credit line increases from Plaintiffs between February and November 2000. Plaintiffs' approved his requests based on his bank account balances and gambling debt payment history ("Play and Pay"). He used these additions to his credit lines. Defendant paid off Markers between November 2000 and March 2001, paying sixty thousand dollars ($60,000) to Treasure Island and fifty thousand dollars ($50,000) to Mirage.
Defendant requested an increase in his credit lines to one hundred thousand dollars ($100,000) in March 2001. Before approving the credit line increase the Casinos reviewed Defendant's Pay and Play history and Florida bank account, which had a current balance of seventy ($70.00) to ninety dollars ($90.00) and an average balance of one thousand ($1,000.00) to three thousand dollars ($3,000.00). Plaintiffs' approved and increased his credit lines to one hundred thousand dollars ($100,000) with knowledge that Defendant's residence and banking accounts were both located in Florida.
Defendant returned to Las Vegas, Nevada and gambled at Plaintiffs' casinos using his one hundred thousand dollar ($100,000) credit lines. He executed twenty-two (22) *260 Markers, written on his Florida bank account, to the Plaintiffs, in the aggregate amount of two hundred thousand dollars ($200,000) and received gaming chips of equal value in exchange.
Defendant lost two hundred thousand dollars ($200,000) at the Casinos. Treasure Island presented Defendant's outstanding Markers, executed in its favor, to United Southern Bank, Defendant's Florida bank, but the Markers were dishonored and returned to Treasure Island marked "NSF" due to insufficient funds. Mirage did not present the Markers because it learned of the bankruptcy filing prior to presentment.
When Debtor's credit lines were raised to one hundred thousand dollars ($100,000) neither Casino relied on any representation by the Debtor. The Casinos relied instead on Debtor's Pay and Play history when they raised his credit lines. Debtor's gambling with and loss of two hundred thousand dollars ($200,000) at the Casinos constituted an expenditure on luxury goods and services.
CONCLUSIONS OF LAW
Plaintiffs allege their claims should be excepted from discharge based on three (3) provisions of 11 U.S.C. § 523(a)(2).
1. U.S.C.§ 523(a)(2(A)
Section 523(a)(2)(A) of the Bankruptcy Code provides an exception from discharge for any debt for "money, property, services, or an extension, renewal, or refinancing of credit," [1] to the extent obtained by"false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor's or an insider's financial condition."[2]
To find a debt nondischargeable pursuant to section 523(a)(2)(A), a creditor must establish: (1) the debtor made a false representation to deceive the creditor, (2) the creditor relied on the misrepresentation, (3) the reliance was justified, and (4) the creditor sustained a loss as a result of the misrepresentation.[3] A debt is excepted from discharge where it has been incurred by a debtor who knew at the time that there were neither current nor realistically foreseeable resources for payment.[4]
Fraud, pursuant to section 523(a)(2)(A), does not have to consist of an explicit fraud, but can also exist as a "concealment of a material fact."[5] False representation can be inferred from the record based on the circumstances.[6] Section 523(a)(2)(A) requires justifiable, not reasonable, reliance by the creditor.[7] It is a subjective standard.[8] The court examines the "particular qualities and characteristics of the plaintiff and circumstances of the particular case"[9] when determining if reliance was justified. The plaintiffs conduct must be reasonable and not the cause of the loss.[10]
*261 Plaintiffs did not rely Defendant's representations, but instead relied on Defendant's Pay and Play history. Plaintiffs' claim they also relied on Defendant's bank account information. Defendant's bank accounts, at the time of the credit increase to one hundred thousand dollars ($100,000), had an average balance of one thousand ($1000.00) to three thousand dollars ($3,000.00) and a current balance of seventy ($70.00) to ninety dollars ($90.00). Plaintiffs could not have reasonably relied on Defendant's bank account information. Plaintiffs' reliance instead was on Defendant's Pay and Play history, which they obtained independently of any representation from the Defendant. Plaintiffs did not rely on Defendant's representations and they have failed to establish their claims are non-dischargeable pursuant to section 523(a)(2)(A).
II. 11 U.S.C. § 523(a)(2)(B).
Section 523(a)(2)(B) of the Bankruptcy Code provides that a debtor will not be discharged from any debt for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by:
use of a statement in writing
(i) that is materially false;
(ii) respecting the debtor's or an insider's financial condition;
(iii) on which the creditor to whom the debtor is liable for such money, property, services, or credit reasonably relied; and
(iv) that the debtor caused to be made or published with intent to deceive.[11]
Plaintiffs did not reasonably rely on Defendant's bank account or balance information. Their reliance instead was on Defendant's Pay and Play history, which they obtained independently of any representation from the Defendant. Plaintiffs did not rely on Defendant's representations and they have failed to establish their claims are non-dischargeable pursuant to section 523(a)(2)(B).
III. 11 U.S.C. § 523(a)(2)(C).
Section 523(a)(2)(C) states,
for purposes of subparagraph (a) of this paragraph, consumer debts owed to a single creditor and aggregating more than $1,150* for "luxury goods or services" incurred by an individual debtor on or within 60 days before the order for relief under this title, or cash advances aggregating more than $1,150 that are extensions of consumer credit under an open end credit plan obtained by an individual debtor on or within 60 days before the order for relief under this title, are presumed to be nondischargeable: "luxury goods or services" do not include goods or services reasonably acquired for the support or maintenance of the debtor or a dependent of the debtor; an extension of consumer credit under an open end credit plan is to be defined for purposes of this subparagraph as it is defined in the Consumer Credit Protection Act[12]
There is no precise definition of what constitutes "luxury goods or services."[13] Courts analyzing the phrase have found a purchase to be a luxury when it is not "reasonably acquired for the support or maintenance of the debtor [or his/her dependents]."[14] This factual determination *262 is based on the debtor's circumstances and the character of the purchases.[15]
Defendant's incurred gambling debts of two hundred thousand dollars, denoted through his purchase of gaming chips, constitute a luxury good. The purchased gaming chips were not acquired for the maintenance or support of the Defendant, but were used for gambling activities. Defendant's gambling debts were for "luxury goods or services," incurred within 60 days of the filing of the bankruptcy petition, involved amounts exceeding $1,150, and are presumptively non-dischargeable. Defendant did not present any evidence to rebut the presumption of non-dischargeability. Plaintiffs have established their claims as non-dischargeable pursuant to section 523(a)(2)(C).
IV. Enforceability of gambling debts pursuant to Florida law.
Defendant contended Plaintiffs claims, constituting gambling obligations, were unenforceable pursuant to Florida law. The decisive question is whether the Plaintiffs' claims are enforceable. 11 U.S.C. § 101(5) defines "claim" as a "right to payment." [16] There would be no "right to payment" and the claims would be unenforceable if Florida law precluded enforcement of the Plaintiffs' claims. To determine the enforceability of Plaintiffs' claims a determination must first be made of whether Florida or Nevada law applies.
Federal courts generally apply the law of the state in which they sit when confronted with diversity cases.[17] Florida's choice of law rules are in conformity with this rule.[18] Parties may chose, through contractual language, the applicable law to govern their contracts, despite this general rule. There are several choice of law provisions contained in the contracts between the Plaintiffs and Defendant. The application Defendant signed stated,
In the event legal action is brought to collect any amounts owed, I agree: 1) To submit to the jurisdiction of any state or federal court in Nevada; 2) That said action shall be governed by the laws of the state of Nevada; 3) To pay interest on the amounts due at the rate of 18% per annum; and 4) To payroll costs and attorney's fees incurred by you.[19]
Furthermore, Defendant's Markers, generated by the Plaintiffs stated,
In consideration of our granting you credit you (1) acknowledge that your debt is incurred in Nevada, (2) agree to submit to the jurisdiction of any court, *263 federal or state, in Nevada to enforce this obligation... [20]
Nevada law would be applied under the contractual choice of law provisions.
The choice of law provisions between Plaintiffs and Defendant may have fallen within the narrow public policy exception to the general choice of law rules. In Conflict of Laws, 3rd edition, Professor Eugene F. Scoles, et al., state,
The public policy exception to the enforcement of rights based on foreign law is to be construed narrowly: fundamental policies of the forum must be offended; mere difficulties between the law and the forum and of the foreign jurisdiction are not enough, nor may the denial of access to the local courts discriminate against a foreign cause of action which would be entertained if it had arisen locally. In circumstances when the test is satisfied, for instance with respect to gambling claims... [21]
In deciding when the public policy exception applies,
The classic statement on this issue comes from Judge Cardoza in Loucks v. Standard Oil Co. [internal citation omitted] stating courts should not close their doors, unless application of the foreign law "would violate some fundamental principle of justice, some prevalent conception of good morals, some deep-rooted tradition of the common weal."[22]
The Florida Supreme Court analyzed the public policy exception in Mazzoni Farms, Inc. v. E.I. DuPont De Nemours and Company.[23] The court stated "[generally, Florida enforces choice-of law provisions unless the law of the chosen forum contravenes strong public policy."[24] The court laid out several recent considerations of the public policy exception by Florida's appellate courts. Florida's Fourth Circuit Court of Appeals stated,
Courts... should [proceed with] extreme caution when called upon to declare transactions as contrary to public policy and should refuse to strike down contracts involving private relationships on this ground, unless it is made clearly to appear that there has been some great prejudice to the dominant public interest sufficient to overthrow the fundamental policy of the right to freedom of contract between parties sui juris.[25]
The Florida's Second Circuit Court of Appeals stated,
The fact that the law of the forum state is different than the law of the foreign state does not mean that the foreign state's law necessarily is against the public policy of the forum state. Instead, it is proper for the court to ascertain whether the foreign state's law is harmonious in spirit with the forum state's public policy.[26]
The Florida Supreme Court then stated in Mazzoni,
Although courts have adopted varied formulations the underlying principle remains *264 the same: the countervailing public policy must be sufficiently important that it outweighs the policy protecting freedom of contract.. .routine policy considerations are insufficient to invalidate the choice-of-law provision.[27]
The public policy exception, set out by Florida's Supreme Court, appears to outweigh the choice of law provisions in the contract between the Plaintiffs and Defendant.
Application of Florida law would make the Plaintiffs claims unenforceable. The enforceability of gambling contracts in Florida is governed by Fla. Stat. ch. 849.26.[28] The statute makes gambling contracts, unless expressly authorized by Florida law, "void and of no effect."[29] "In interpreting Section 849.26, Florida courts have consistently held that gambling obligations, even if valid in the state in which they were undertaken, are unenforceable in Florida as contrary to law and public policy."[30]
Florida law would make the Plaintiffs claims unenforceable but, the United States Supreme Court in Vanston Bondholders Protective Committee v. Green[31] stated,
In determining what claims are allowable and how a debtor's assets shall be distributed, a bankruptcy court does not apply the law of the state where it sits... bankruptcy courts must administer and enforce the Bankruptcy Act as interpreted by this Court in accordance with authority granted by Congress to determine how and what claims shall be allowed under equitable principles.[32]
The bankruptcy clause of the United States Constitution delegates to Congress,
[T]he broad power "(T)o establish ... uniform Laws on the subject of Bankruptcies throughout the United States." U.S. Const, art. I, s 8, cl. 4. The Supreme Court has consistently proclaimed that the federal bankruptcy power is unrestricted and paramount, [citation omitted] and that Congress "may embrace within its legislation whatever may be deemed important to a complete and effective bankrupt system." [33]
*265 It, therefore, becomes important to note that the grant of the bankruptcy power in its final form, although related to commerce, was not included in clause 3, which gives to Congress the power 'to regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes.' From that it is fair to infer that the draftsmen did not wish to restrict the bankruptcy grant as they had done the power over commerce. Congress was to have an allinclusive power, through the bankruptcy grant, to enact any legislation reasonably framed and related to the subject of bankruptcies, which in turn is indissolubly linked to commerce and credit.[34]
Congress has used this power to give "claim" a broad meaning. 11 U.S.C. § 101(5) defines claim as,
[The] right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured... [35]
By this broadest possible definition and by the use of the term throughout the title 11, especially in subchapter I of chapter 5, the bill contemplates that all legal obligations of the debtor, no matter how remote or contingent, will be able to be dealt with in the bankruptcy case. It permits the broadest possible relief in the bankruptcy court.[36]
This broad definition of "claim" specified by Congress suggests application of "conflict preemption,"[37] because "compliance with both state and federal law would be impossible, or state law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress." [38]
The term "claim" is given the broadest possible meaning due to the Congressional intent to bring all legal obligations of a debtor within the bankruptcy case. Application of conflict preemption subrogates Florida's statutory provision of non-enforcement of gambling debts to the comprehensive federal bankruptcy scheme crafted by Congress, through the authority of the United States Constitution. Plaintiffs claims for gambling debts, normally unenforceable in Florida are deemed enforceable. Therefore it is,
ORDERED and ADJUDGED that Plaintiffs, The Mirage-Casino Hotel and Treasure Island Corporation's claims against Defendant, David M. Simpson, are excepted from Defendant's discharge pursuant to 11 U.S.C. § 523(a)(2)(c) pursuant to the Order entered contemporaneously.
ORDER
This cause came on the Complaint to Determine Debts as Non-dischargeable pursuant to 11 U.S.C. § 523(a)(2) filed by Plaintiffs, The Mirage-Casino Hotel ("Mirage") and Treasure Island Corporation ("Treasure Island") (collectively, "Plaintiffs" or "Casinos") against Defendant, David M. Simpson ("Defendant"). After reviewing the pleadings and evidence, and hearing live testimony and arguments of counsel, and in conformity with the Memorandum Opinion entered contemporaneously herewith, it is
*266 ORDERED, ADJUDGED and DCREED that JUDGMENT is entered in Favor of Plaintiffs, The Mirage-Casino Hotel and Treasure Island Corporation and Against Defendant, David M. Simpson; it is further,
ORDERED, ADJUDGED and DCREED that Plaintiff, The Mirage-Casino Hotel's claim, in the amount of one hundred thousand dollars ($100,000) is excepted from Defendant, David M. Simpson's discharge pursuant to 11 U.S.C. § 523(a)(2)(c); it is further,
ORDERED, ADJUDGED and DCREED that Plaintiff, Treasure Island Corporation's claim, in the amount of one hundred thousand dollars ($100,000) is excepted from Defendant, David M. Simpson's discharge pursuant to 11 U.S.C. § 523(a)(2)(c).
NOTES
[1] 11 U.S.C. § 523(a)(2)(A).
[2] 11 U.S.C. § 523(a)(2)(A).
[3] Lightner v. Lohn, 274 B.R. 545, 549 (M.D.Fla.2002); In re Hunter, 229 B.R. 851, 858 (Bankr.M.D.Fla.1999).
[4] In re Kahn, 261 B.R. 365, 367 (Bankr. D.Conn.2001); In re Melancon, 223 B.R. 300 (Bankr.M.D.La.1998).
[5] Id. at 368
[6] In re Davis, 134 B.R. 990, 992 (Bankr. M.D.Fla.1991).
[7] In re Vann, 67 F.3d 277, 280 (11th Cir. 1995).
[8] Id.
[9] Lightner, 274 B.R. at 550.
[10] In re Vann, 67 F.3d at 283.
[11] 11 U.S.C. § 523(a)(2)(B).
[12] 11 U.S.C. § 523(a)(2)(C).
[13] Id.
[14] See In re Orecchio, 109 B.R. 285 (Bankr. S.D.Ohio 1989).
[15] See In re Tabar, 220 B.R. 701 (Bankr.M.D.Fla.l998)(finding Persian rugs, antique reproductions and floor coverings were luxury goods); see also In re Hernandez, 208 B.R. 872 (Bankr.W.D.Tex,1997)(finding items purchased to refurbish debtor's home on day before meeting with bankruptcy attorney were luxury items); In re Orecchio, 109 B.R. 285 (Bankr.S.D.Ohio 1989)(finding personal investment strategy tapes were luxury goods since they were not needed for debtor's support); In re Herran, 66 B.R. 323 (Bankr.S.D.Fla.l986)(finding clothing, giftware, cosmetics and fragrances were luxury goods); In re Hussey, 59 B.R. 573 (Bankr.M.D.Ala.l986)(finding three-wheel vehicle is a luxury good).
[16] 11 U.S.C. § 101(5).
[17] See Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938).
[18] See In re Taylor, 260 B.R. 548, 558 (Bankr. M.D.Fla.2000) stating,
In determining which state's law applies, a bankruptcy court applies the choice-of-law rules of the state in which it sits. Hillsborough Holdings Corp. v. Celotex Corp., 166 B.R. 461, 468 (Bankr.M.D.Fla.1994). Therefore, in determining which state's law applies, the Court will look to the choice of law rules in effect in Florida.
Taylor, 260 B.R. at 558.
[19] Adv. No. 01-161, (Doc. 33), Ex. A, App. 1.
[20] Adv. No. 01-161, (Doc. 33), Ex. B.
[21] Eugene Schols, et al.. Conflict of Laws 139-140 (3rd ed., West Group 2000).
[22] Loucks v. Standard Oil Co., 224 N.Y. 99, 111, 120 N.E. 198, 202 (1918).
[23] Mazzoni Farms, Inc. v. E.I. DuPont De Nemours and Company, 761 So.2d 306 (Fla. 2000).
[24] See Punzi v. Shaker Adver. Agency, Inc., 601 So.2d 599 (Fla.2d Dist.Ct.App.1992).
[25] Pizza U.S.A. of Pompano Inc. v. R/S Assocs. of Fla., 665 So.2d 237, 239 (Fla. 4th Dist.Ct. App.1995), quoting Bituminous Casualty Corp. v. Williams, 154 Fla. 191, 17 So.2d 98, 101-02 (1944).
[26] See Punzi, supra nt. 18 at 600.
[27] Mazzoni Farms, Inc. v. E.I. DuPont Nemours and Company, 761 So.2d 306 (Fla.2000).
[28] Fla. Stat. ch. 849.26 (1991) states,
All promises, agreements, notes, bills, bonds, or other contracts, mortgages or other securities, when the whole or part of the consideration if for money or other valuable thing won or lost, laid, staked, betted or wagered in any gambling transaction whatsoever, regardless of its name or nature, whether heretofore prohibited or not, or for the repayment of money lent or advanced at the time of a gambling transaction for the purpose of being laid, betted, staked or wagered, are void and of no effect; provided, that this act shall not apply to wagering on pari-mutuels or any gambling transaction expressly authorized by law.
Fla. Stat. ch. 849.26 (1991).
[29] Id.
[30] Froug v. Carnival Leisure Industries, Ltd., 627 So.2d 538, 539 (Fla. 3rd Dist.Ct.App. 1994); see also Barquin v. Flores, 459 So.2d 436 (Fla. 3rd Dist.Ct.App. 1984); see also Carp v. Florida Real Estate Commission, 211 So.2d 240 (Fla. 3rd Dist.Ct.App. 1968); see also Dorado Beach Hotel Corporation v. Jernigan, 202 So.2d 830 (Fla. 1st Dist.Ct.App. 1967); see also Young v. Sands, 122 So.2d 618 (Fla. 3rd Dist.Ct.App. 1960).
[31] Vanston Bondholders Protective Committee v. Green, 329 U.S. 156, 67 S.Ct. 237, 91 L.Ed. 162 (1946).
[32] Id. at 329 U.S. 156, 162-63, 67 S.Ct. 237, 240, 91 L.Ed. 162 (1946).
[33] In re Nashville White Trucks, Inc., 22 B.R. 578, 582-583 (Bankr.Tenn.1982); see also United States v. Fox, 95 U.S. 670, 672, 24 L.Ed. 538 (1878).
[34] 1 Collier on Bankruptcy P 0.02, at 5 (14th ed.1974).
[35] 11 U.S.C. § 101(5).
[36] Revision Notes and Legislative Reports to 11 U.S.C. § 101(5) at 11 (4) (1978).
[37] Keams v. Tempe Technical Institute, Inc., 39 F.3d 222, 225 (9th Cir.1994).
[38] In re World Auxiliary Power Company, 303 F.3d 1120, 1129 (9th Cir.2002).
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674 F. Supp. 1144 (1987)
UNITED STATES of America
v.
Harry PHILLIPS.
Crim. A. No. 86-428.
United States District Court, E.D. Pennsylvania.
November 24, 1987.
*1145 S. Walter Batty, Jr., Asst. U.S. Atty., Philadelphia, Pa., for plaintiff.
Stephen R. Lacheen, Philadelphia, Pa., for defendant.
MEMORANDUM AND ORDER
HUYETT, District Judge.
Defendant Harry Phillips is charged in a superceding indictment with 5 counts of false declaration before the grand jury on December 12, 1984, in violation of 18 U.S.C. § 1623.[1]
Defendant filed an omnibus pretrial motion. An evidentiary hearing was held August 17, 1987 on two portions of that motion: the motion to suppress identification testimony and the motion to dismiss the indictment or, in the alternative, to suppress the defendant's grand jury testimony. At this hearing, defendant asserted a new theory with regard to the motion to dismiss. Accordingly, the Court allowed the government to submit a supplemental memorandum, to which the defendant responded. The issues having been fully briefed, and the Court having carefully reviewed the grand jury transcripts, this memorandum constitutes my findings of fact and conclusions of law.
I. The Motion to Suppress Identification Testimony
On December 6, 1984, government witnesses Francis Matherly and Benedict LaCorte accompanied FBI Agent David Richter to the auto salvage yard operated by the Phillips brothers. Matherly and LaCorte are cooperating with the government pursuant to plea agreements. Both witnesses claim to have sold stolen goods to the defendant in the 1970's.
Mr. LaCorte directed Agent Richter to the salvage yard. The witnesses were at the salvage yard when the defendant drove into the parking lot. Mr. LaCorte recognized defendant as Harry Phillips, and told Agent Richter "That's Harry." Mr. Matherly also testified that he recognized the defendant as Harry Phillips when he pulled into the parking lot. Matherly and LaCorte both testified that they had met the defendant on a number of prior occasions. Both witnesses were able to identify the defendant in open court.
The grand jury subpoenas which had been prepared by Agent Richter on or about December 6, 1984 bore the names of Sam Phillips and David Phillips, two brothers of the defendant. When he spoke to the defendant on December 6, 1984, Agent Richter learned that David Phillips had died some years before. Agent Richter testified that the decision to go to the Phillips' salvage yard had been a hurried one, and he had been uncertain as to which of the Phillips brothers he would find there. There is no evidence that either LaCorte or Matherly had suggested that the subpoena be issued in the name of David Phillips. The error on the subpoena in no way undermines the reliability of the witnesses' identification of the defendant.
Because I find no reason to doubt the reliability of the identifications, I will deny the motion to suppress.[2]
II. Motion to Dismiss The Indictment
A. "Perjury Trap"
Defendant's motion to dismiss the indictment was originally put forth, at least in *1146 part, in terms of a "perjury trap." Defendant has not pursued this facet of his motion, and I address it only for the sake of thoroughness.
The "perjury trap" theory asserts that prosecutorial conduct designed to trap a witness into perjuring himself before a grand jury is misconduct so severe as to constitute a violation of the witness' due process rights. This theory has received some judicial support. See United States v. Caputo, 633 F. Supp. 1479 (E.D.Pa.1986), rev'd on other grounds sub. nom. United States v. Martino, 825 F.2d 754 (3d Cir. 1987); United States v. Simone, 627 F. Supp. 1264 (D.N.J.1986); United States v. Crisconi, 520 F. Supp. 915 (D.Del.1981). However, an indictment will be dismissed only in the most egregious circumstances. See United States v. Twigg, 588 F.2d 373 (3d Cir.1978).
In the present case, defendant was fully advised of the right to counsel, the right to remain silent, and the nature of the investigation. The record simply does not establish the type of outrageous conduct which must be shown before a due process violation will be found. Therefore, assuming without deciding that a "perjury trap" laid by the government could be grounds for the dismissal of an indictment, that defense has not been established here.
B. Materiality
The heart of defendant's motion is that the grand jury testimony which is alleged to be perjurious was not material to a matter then properly under consideration by the grand jury. Defendant contends that the Assistant United States Attorney incorrectly advised the grand jury that the statute of limitations could not begin to run on the crime of possession (or concealment) of stolen goods as long as the defendant continued in possession of those goods. Defendant argues that this was an incorrect statement of the law, and that the statute of limitations had already expired as to the crime of concealment of stolen goods. He argues that this incorrect statement interfered with the grand jury's ability to exercise its independent judgment as to the materiality of the testimony.
Further, defendant suggests that the grand jury before which he testified was not, at the time of his testimony, investigating the continued concealment of stolen goods or the transportation of stolen goods from Pennsylvania to other states. Therefore, it is argued, even if the statute of limitations had not run as to such crimes, they were not the subject of a grand jury investigation at the time of the defendant's testimony. Defendant concludes that, therefore, the allegedly perjurious testimony was not material to the grand jury's investigation.
Finally, the defendant argues that the grand jury may have based its decision as to the element of materiality on the concept of possession, rather than concealment, since that is the term which was used by the Assistant U.S. Attorney in proposing the original indictment.
The materiality of the allegedly perjurious testimony is a threshold issue to be determined by the Court. United States v. Berardi, 629 F.2d 723, 728 (2d Cir.), cert. denied, 449 U.S. 995, 101 S. Ct. 534, 66 L. Ed. 2d 293 (1980). This issue is properly before this Court at this time.
I must first determine when the statute of limitations begins to run on the crime of concealment or possession of stolen goods. The government contends that concealment and possession are continuing acts, and that the statute does not begin to run until the possession is terminated. This theory was expressed before the grand jury.
The defendant contends that the requirement of an interstate nexus is critical with regard to the statute of limitations. According to the defendant, the interstate nexus, which was created when the stolen goods crossed state lines, eventually evaporates if the goods remain within one state for enough time. Once the interstate nexus disappears, a necessary element of the federal crime is no longer present, and therefore any criminal activity within this Court's jurisdiction has ceased. Defendant contends that, at the outside, the interstate nexus would disappear by the end of the *1147 five year limitations period applicable to the receipt of stolen goods. Defendant concludes that the statute of limitations as to the concealment of stolen goods had expired by December, 1984, when the defendant testified before the grand jury.
There can be no dispute that, at some point, the goods may lose their interstate nexus. United States v. Thies, 569 F.2d 1268, 1272 (3d Cir.1978). But the point at which this occurs cannot be determined by reference to a calendar. Rather, it must be determined by looking at the facts of a particular case to determine whether the goods have reached their final resting place, or have simply paused at one juncture in a scheme of interstate transportation of stolen property. Thies, 569 F.2d at 1273. See United States v. Luman, 624 F.2d 152, 155 (10th Cir.1980); McNally v. Hill, 69 F.2d 38, 40 (3d Cir.1934).
Since the application of the statute of limitations, and the loss of the interstate nexus, involve questions of fact, the grand jury could not have determined whether a prosecutable crime had been committed until it had completed its investigation. There was a reasonable possibility that such a crime had been committed by some or all of the Phillips brothers, and that the statute of limitations had not run.
Therefore, the ultimate question is whether the grand jury was, at the time of defendant's testimony before it, investigating the continued possession or concealment of stolen goods or their transportation out of Pennsylvania. If the only matter being considered by the grand jury was the receipt of stolen goods in the 1970's, crimes on which the statute of limitations had clearly run, then the questions posed to the defendant were not material to a legitimate grand jury investigation. If, however, the scope of the grand jury's investigation included the concealment and resale of those goods and sought to determine when, if ever, that had occurred, then the questions posed to the defendant were material to a legitimate investigation.
I have carefully examined the grand jury transcripts in their entirety, with particular attention to the transcript of defendant's testimony on December 12, 1984 and to the transcript of Agent Richter's testimony on October 8, 1986. The transcripts support the government's description of the scope of the investigation.
Defendant was advised on December 12, 1984 that the grand jury was investigating "interstate theft offenses, more particularly items that have been shipped in interstate commerce after they've been stolen." (Tr. Dec. 12, 1984 at 2). This description is certainly broad enough to include concealment of goods or transportation of goods out of Pennsylvania. Defendant was also asked about his brother's activity in selling antiques. (Id. at 15). He was asked about the storage of antiques on his property. (Id. at 35). Most importantly, he was asked about his brother, Joe Phillips, in New York City. (Id. at 17-18).[3] These questions would have been pointless unless the investigation had, from the outset, included the concealment of stolen goods and their subsequent transportation out of the Commonwealth.
Agent David Richter testified before the indicting grand jury on October 8, 1986. Under oath, he confirmed the accuracy of the Assistant U.S. Attorney's statement that one of the purposes of the investigation "has been to see if there were any stolen goods still with Harry or Sam or had been with them at any point within the past five years such as we would have regular jurisdiction over receiving goods which had been transported in interstate commerce." (Tr. Oct. 8, 1986 at 5-6). He also confirmed that "a second focus of the investigation was to see if there are any stolen goods which went from any of the Phillips Brothers to their fourth brother Joe in New York City." (Id. at 7). I have no reason to question the credibility of Agent Richter, who testified in the hearing before me on August 17, 1987 and was subject to *1148 cross examination by the defendant at that time.
The mere fact that the grand jury's investigation did not reveal any crimes committed within the statute of limitations is not dispositive. Not every grand jury investigation results in an indictment. The grand jury seeks to determine the truth; it exists to investigate possible crimes and to protect the innocent from indictment.
A question asked of a grand jury witness is material if it "is such that a truthful answer could help the inquiry, or a false response hinder it, and these effects are weighed in terms of potentiality rather than probability.... [I]t is only the question, at the time of its asking, which is considered. It is of no consequence that the information sought would be merely cumulative, that the response was believed by the grand jury to be perjurious at the time it was uttered, or that the matters inquired into were collateral to the principal objective of the grand jury." United States v. Berardi, 629 F.2d 723, 728 (2d Cir.), cert. denied, 449 U.S. 995, 101 S. Ct. 534, 66 L. Ed. 2d 293 (1980). Even where the statute of limitations on underlying crimes has run, if truthful answers could have led to a more fruitful investigation of the broader subject matter of the grand jury's inquiry, the perjurious testimony is material. United States v. Devitt, 499 F.2d 135, 140 (7th Cir.1974), cert. denied, 421 U.S. 975, 95 S. Ct. 1974, 44 L. Ed. 2d 466 (1975).
The questions asked of Harry Phillips were material to the grand jury's investigation. His denial of any acquaintance with the persons in question hindered the investigation into his dealings with those persons and, if he purchased stolen goods from them, the later history of those goods.
Finally, defendant makes much of the fact that the original indictment alleged that the investigation concerned the receipt and possession of stolen goods, while the superceding indictment alleges that the investigation concerned the receipt and concealment of such goods. Defendant points out that the word "possession" was not contained in the statute at the time of the defendant's testimony in 1984. Defendant contends that the grand jury may well have made its decision as to the element of materiality based on the use of the word "possession" rather than "concealment," and that this constituted interference with the grand jury's ability to exercise its independent judgment.
The superceding indictment was presented to the grand jury on March 4, 1987. The transcript of the Assistant U.S. Attorney's comments reveals that he was careful to make clear to the grand jurors that one of the changes in the indictment was the use of the word "concealing." The Assistant U.S. Attorney explained:
[t]o conceal means to do any act intended to prevent discovery or identification of the stolen item by its true owner. Mere possession is not enough. Concealing does not require an actual hiding or secreting of the property. But once again, any acts which render its discovery difficult constitutes concealing.
(Tr. Mar. 4, 1987 at 5).
The Assistant U.S. Attorney then explained to the grand jurors that, because of the limited time available on their last day of service, he would not ask the jurors to review the transcripts of the testimony which they had considered five months earlier. But he cautioned them that if any juror did not feel able to recollect the facts of the case, they should not consider the superceding indictment, and the matter would be presented to another grand jury at a later date. (Id. at 6-7). The Assistant U.S. Attorney then left the room to allow the grand jury to deliberate on the question of whether they felt able to vote on the superceding indictment. Following deliberations, the foreman reported that "[w]e discussed the matter and the Jury feels comfortable voting on the superceding indictment." (Id. at 7).
The grand jury clearly felt able to recall the investigation and to exercise its independent judgment in this matter. Since the grand jury specifically took the time to *1149 consider this question, I decline to substitute my judgment for their own.
For all of these reasons, the defendant's motion to dismiss the indictment or, in the alternative, to suppress defendant's grand jury testimony will be denied.
NOTES
[1] The original indictment had charged defendant under 18 U.S.C. § 1621.
[2] Following the close of evidence, the defendant, while calling the out-of-court identifications "suggestive," conceded that there was no evidence to support the theory that, absent the December 6, 1984 identifications, the witnesses would not have been able to identify the defendant in open court. Therefore, the defendant declined to argue his motion to suppress the identification.
My discussion of this portion of the motion is issued in order to complete the record.
[3] The government had inconclusive information that the stolen goods were distributed through Joe Phillips in New York.
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636 S.W.2d 391 (1982)
CAL-VAL CONSTRUCTION CO., INC., a Missouri Corporation, Appellant,
v.
Edward James MAZUR and Linda D. Mazur, his wife, Respondent.
No. 44562.
Missouri Court of Appeals, Eastern District, Division Three.
June 29, 1982.
Thomas J. Briegel, Union, for appellant.
William W. Eckelkamp, Washington, for respondent.
REINHARD, Presiding Judge.
The plaintiff-contractor appeals from the trial court's decree ordering specific performance *392 of a contract for the construction and sale of a home. We affirm.
In this court-tried case, the court held the plaintiff had breached the contract by assessing charges not in accord with those in the contract. The court found that as a result of this breach the defendant-buyers lost a commitment from a lending institution for a home loan with a 9% annual interest rate. Further, the court found that 12% was the most favorable interest rate available to defendants at the time of the trial. The court ordered the parties to specifically perform the contract and allowed them various credits and charges, including a $6100.00 credit to defendants to offset the increased interest rate.
On appeal, plaintiff acknowledges that a court sitting in equity has the discretion to award damages for losses proximately caused by a breach of a contract in addition to ordering specific performance of the contract. Metropolitan St. Louis Sewer District v. Zykan, 495 S.W.2d 643, 657 (Mo. 1973). However, plaintiff argues that the law does not allow recovery of losses caused by the increased cost of a loan and that, in any event, the defendants failed to carry their burden of proving that plaintiff's breach proximately caused them to lose the loan commitment.
The decree of the trial court should be affirmed if it is supported by substantial evidence, is not against the weight of the evidence, and neither erroneously states nor applies the law. Murphy v. Carron, 536 S.W.2d 30, 32 (Mo.banc 1976). Applying this standard, we affirm the trial court's decree.
The rules regarding the measure of damages in contract cases are well settled. The non-breaching party may recover "the amount which will compensate [him] for the loss which a fulfillment of the contract would have prevented or the breach of it has entailed .... [T]he person injured is, as far as is possible to do so by a monetary award, to be placed in the position he would have been in had the contract been performed." Boten v. Brecklein, 452 S.W.2d 86, 93 (Mo.1970) (quoting 25 C.J.S. Damages, § 74). Therefore, if plaintiff's breach proximately caused the defendants to lose the loan commitment, the court had discretion to allow the defendants a credit for the increase in interest rates in order to place them in the position they would have been in had the plaintiff fulfilled the contract.
We believe the law permits a credit for the increased cost of a loan in a case such as this. Apparently, no Missouri court has directly confronted the issue of whether to compensate the non-breaching party for an increase in interest rates in addition to granting specific performance. However, courts in other jurisdictions have considered cases nearly identical to this one and have held losses caused by an increase in interest rates during a breach are compensable. See Godwin v. Lindbert, 101 Mich.App. 754, 300 N.W.2d 514 (1980) (per curiam); Regan v. Lanze, 47 App.Div.2d 378, 366 N.Y.S.2d 512 (1975), rev'd on other grounds, 40 N.Y.2d 475, 387 N.Y.S.2d 79 (1976); Reis v. Sparks, 547 F.2d 236 (4th Cir. 1976).
Further, Missouri courts have permitted the recovery of interest expenses and loan fees as actual damages. Herbert & Brooner Construction Co. v. Golden, 499 S.W.2d 541 (Mo.App.1973), involved a construction contract. Because the builder delayed completion of construction beyond the date set in the contract, the buyer was forced to obtain an extension of his construction loan. Our brethren in the Western District held the buyer could recover the additional loan fees and interest he was required to pay as a result of the contractor's breach. Similarly, in Groppel Company, Inc. v. United States Gypsum Company, 616 S.W.2d 49 (Mo.App.1981), we held the buyer and user of defective fireproofing material could recover from the seller the interest the buyer paid on the loan he was forced to obtain to finance the application of a second coat of the fireproofing material. We said, "[t]he interest expense was an integral and proximate part of plaintiff's damages ...." Id. at 64.
In support of its argument that the loss defendants suffered by reason of the increase in the interest rate is too remote to *393 be compensable, plaintiff cites Dunning v. Alfred H. Mayer Company, 483 S.W.2d 423 (Mo.App.1972). There, the court found the contractor had breached the contract to build and convey a home. Because performance of the contract had become impossible, the court awarded only monetary damages to the buyers. The award included damages for the difference between the interest rate on the loan commitment the buyers had obtained to purchase the house in question and the increased interest rate for mortgages at the time of the trial. This court found that because the buyers had not committed themselves to a loan at the higher rate or even to the purchase of another home, they had suffered no real loss as a result of the increased interest rates. "[T]his item of alleged damages representing the additional costs of financing due to increased interest rates was remote and contingent and should not under the circumstances be awarded." (emphasis supplied). Id. at 429.
Dunning not only does not support plaintiff's position but, in fact, supports defendants'. We did not hold that losses caused by increased interest rates are not recoverable in a suit for specific performance. Rather, we held that because the buyers were in no way committed to taking a loan at the higher interest rate, they would suffer no actual loss as a result of the increased interest rates. In this case the buyers will be required to obtain a loan at the higher interest rate because the trial court has ordered specific performance of the contract, and they will suffer a real loss as a result of the increased interest rates.
Having determined that such a credit is permitted under the law, we now consider whether defendants carried their burden of proving that plaintiff's breach proximately caused them to lose the loan commitment.
The court held that the plaintiff breached the contract by assessing charges not in accord with those in the contract, and plaintiff does not challenge that holding. Both parties testified that a dispute arose regarding the charges and that the dispute delayed completion of the contract. Officers of the savings and loan testified that the savings and loan was committed to making a 9% loan to defendants and that it held that commitment open for almost a year. One of the officers testified that, before it cancelled the loan commitment, the savings and loan inquired of defendants whether they had resolved the dispute regarding the charges. The parties had not resolved the dispute, and the savings and loan cancelled the loan commitment. This constitutes substantial evidence to support the trial court's finding that the plaintiff's breach proximately caused defendants' loss of the 9% loan.
Judgment affirmed.
SNYDER and CRIST, JJ., concur.
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636 S.W.2d 94 (1982)
QUALITY WOOD CHIPS, INC., Appellant,
v.
Larry ADOLPHSEN and A. D. Crawford, Respondents.
No. WD 32508.
Missouri Court of Appeals, Western District.
May 4, 1982.
Motion for Rehearing and/or Transfer Overruled and Denied June 23, 1982.
*95 Weldon W. Perry, Jr., and Jeffrey B. Tonkin, Kansas City, for appellant.
Michael W. Manners and Robert H. Martin, of Paden, Welch, Martin, Albano & Graeff, P.C., Independence, for respondents.
Before CLARK, P. J., and KENNEDY and MANFORD, JJ.
Motion for Rehearing and/or Transfer to Supreme Court Overruled and Denied June 23, 1982.
MANFORD, Judge.
Action in equity for temporary and permanent injunction. The cause was tried to the court and judgment in the form of an order was designated as a final judgment. The judgment is reversed with instructions.
Two points are presented, which in summary allege the trial court erred in (1) refusing to issue the injunctions sought because the evidence established continued irreparable harm to appellant; and (2) applying the doctrine of subrogation.
Appellant is a Missouri corporation, incorporated on February 13, 1979. It manufactures and sells wood chips, which are in turn used in the production of paper products. It has as its president and sole director one Warren Hamilton.
Respondents are stockholders in appellant corporation. Neither respondent has ever held the position of officer or director. Appellant's main asset is a Mobark Wood Chipper with an approximate value of $166,000. Respondents acquired the chipper by purchase and the execution of their promissory note/security agreement with the Blue Ridge Bank and Trust Co. in the *96 sum of $159,352.92 on February 5, 1979. There is no dispute between the parties that the note/security agreement predated appellant's incorporation. Respondents admit that at the time of purchasing the chipper, they contemplated no business relationship with Hamilton. They testified, however, that they intended to incorporate under the name of Quality Wood Chips and the note/security agreement were executed in the name of Quality Wood Chips. The note/security agreement carried a guarantee by respondents which personally obligated them. Respondents acknowledged this personal liability, but emphasized that the equipment orders sent to Mobark were prepared in the name of Quality Wood Chips. Hamilton testified that appellant corporation did not assume the debt incurred by purchase of the chipper by way of any corporate resolution or any act by himself in his capacity as director or officer of appellant corporation.
During the initial months of operation, appellant corporation earned a profit that was distributed to respondents in the form of equal dividend payments totaling approximately $2,250 per month. The treasurer for appellant corporation testified that respondent Adolphsen requested his share of the corporate profits be paid directly to the Blue Ridge Bank and Trust Co. The request was complied with, and payments forwarded to the bank were posted against the loan account of respondents and were never treated as corporate debts owed the bank.
In November, 1980, a dispute between the parties arose, although the record goes wanting for details of the dispute. The result was that respondents secreted the chipper. Hamilton made repeated demands for its return, but was refused. The consequence of the chipper not being returned was the inability of appellant corporation to continue operation and earn a profit since November, 1980. On January 7, 1981, appellant filed its petition for temporary and permanent injunctions, seeking the return of the chipper. The relief sought was denied following an evidentiary hearing.
The standard of review in the instant case is under Rule 73.01, as that rule has been interpreted by Murphy v. Carron, 536 S.W.2d 30 (Mo.banc 1976), and the judgment of the trial court will not be disturbed unless there is no substantial evidence to support the judgment, unless the judgment is against the weight of the evidence, or unless the judgment erroneously declares or applies the law.
In the instant case, the relief sought by appellant is in the nature of a mandatory injunction which is the request for an affirmative act. Appellant could have pursued an action in replevin, but that question has never been presented by the parties and does not come before this court.
The record reveals that the chipper was contributed to appellant corporation by respondents in exchange for equity stock. Hamilton contributed $86,777.00 in additional equipment to the corporation. The record also reveals that it is impossible for appellant corporation to continue in business and make a profit without the chipper.
In defense to appellant corporation's claim, respondents claimed they were subrogated to the rights of the bank creditor when appellant stopped making payments on the chipper. Appellant counters this defense with the claim that the underlying debt was created by respondents prior to appellant's corporate existence and obviously without its authority. Respondents counter that claim by asserting the debt was ratified by appellant corporation by the acts of appellant corporation making payments on the note.
The rule of subrogation has been addressed by our courts. In Kroeker v. State Farm Mutual Automobile Ins. Co., 466 S.W.2d 105, 110 (Mo.App.1971), this court stated:
Subrogation originated as a creature of the common law. Basically, it is classified as either legal or conventional. Legal subrogation arises out of a condition or relationship by operation of law, whereas conventional subrogation arises by act or agreement of the parties. (citation omitted) Subrogation is founded on *97 principles of justice and its operation is governed by principles of equity. It rests on the principle that substantial justice should be attained regardless of form, that is, its basis is the doing of complete, essential and perfect justice between all parties without regard to form. (citations omitted) `As a general rule, any person who, pursuant to a legal obligation to do so, has paid even indirectly, for a loss or injury resulting from the wrong or default of another will be subrogated to the rights of the creditor or injured person against the wrongdoer or defaulter, persons who stand in the shoes of the wrongdoer, or others who, as the payor, are primarily responsible for the wrong or default.' 83 C.J.S. Subrogation § 16.
The right of subrogation is not necessarily limited to those legally bound to make payment, but extends also to persons who pay a debt in self-protection upon the premise they might suffer loss if the obligation is not satisfied or discharged. 73 Am. Jur.2d Subrogation § 25 (1974). In support of taking possession of the chipper, respondents cite Lewis v. Paul Brown Realty & Investment Co., 193 S.W.2d 13, 15 (Mo. 1946), which declared:
`If one secondarily liable pays a debt, he is entitled ... (there being no other facts in the case contra), to be subrogated to all the rights of the creditor, including securities held by him, and this, although there is no express agreement for subrogation; the right arises by operation of law.' Loewenstein v. Queen Ins. Co., 227 Mo. 100, 117, 127 S.W. 72, 76.
Although it is true that subrogation is designed to compel the ultimate discharge of a debt by one, who in justice, equity and good conscience should pay it; subrogation exists only against the principal debtor and not one secondarily liable. Street v. Lincoln National Life Ins. Co., 347 S.W.2d 455 (Mo.App.1961). Subrogation is not a self-help remedy and while characterized as a substantive right, the manner of asserting it is procedural. Giambelluca v. Missouri Pac. Railroad Co., 320 S.W.2d 457 (Mo.1959).
Respondents also assert that appellant corporation ratified the debt to the bank as a corporate obligation. In support of this assertion, respondents emphasize the application and payment of Adolphsen's dividend to the creditor bank. Respondents cite a general principle that ratification will be implied where "in addition to receiving the benefits of the unauthorized transaction, the corporation, with full knowledge of the facts, makes payments on account of such benefits, as where it ... makes payments on a note executed or indorsed on its behalf without authority ..." 19 C.J.S. Corporations § 1020 (1940) and Schmidt v. Morival Farms, 240 S.W.2d 952 (Mo.1951).
The question that must be answered is whether the action of appellant's treasurer in forwarding Adolphsen's dividend payment to the creditor bank was an act sufficient to confer upon appellant the status of principal debtor within Street, supra.
As noted above, respondents admit that at the time the chipper was ordered, they had no business relationship with Hamilton and did not contemplate such relationship. The record also reveals that at that time, appellant corporation had not come into being. Respondents, however, emphasize their intention to incorporate under the name Quality Wood Chips in addition to the fact that equipment orders were prepared under that name.
On the question of ratification, it has long been recognized in Missouri that a corporation is not liable on a contract made prior to its incorporation unless credit was given the corporation to be formed, or unless it ratified or received benefits therefrom. Neosho Motors Co., Inc. v. Smith, 59 S.W.2d 802 (Mo.App.1933). The instant record reveals no pre-incorporation acts of promoters being formally ratified by the appellant corporation or where the agreement was made by a party who was the sole organizer, shareholder, director, and officer of the corporation. See Bader Automotive and Industrial Supply Co. v. Green, 533 S.W.2d 695 (Mo.App.1976) and Austin and Bass Builders, Inc. v. Lewis, 350 S.W.2d 133 (Mo.App.1961).
*98 The mere formulation of a contract by individuals who subsequently form a corporation is not sufficient to bind the corporation. Newsrack Supply, Inc. v. Heinle, 127 Ga.App. 843, 195 S.E.2d 193 (1973). Stated another way, where a corporation was the contemplated result and not the proposed beneficiary of a contract, it has been held that individual liability was intended. Geving v. Fitzpatrick, 56 Ill.App.3d 206, 14 Ill. Dec. 175, 371 N.E.2d 1228 (1978).
Respondents' attempt to invoke the doctrine or rule of subrogation is not supported by the record. The record is devoid of any formal action taken by appellant corporation in authorizing, assuming or ratifying, or in any other manner, approving the debt to the creditor bank so as, in any manner, to make itself primarily liable for a default in payments. Without question, the record shows that Hamilton, as president and board member, did nothing to ratify the debt, and it is axiomatic that an effective ratification must be made by one having the power to do the act for himself. Grafeman Dairy Co. v. Northwestern Bank, et al., 290 Mo. 311,235 S.W. 435 (banc 1921). The mere forwarding of Adolphsen's dividend payment to meet his personal debt to the creditor bank does not constitute ratification by the appellant corporation. It is clear from the evidence that payment of the dividend to the creditor bank was a convenience and benefit for Adolphsen and not appellant corporation.
The record does not demonstrate that appellant corporation refused to make dividend payments to respondents. Thus, respondents could meet their obligation to the creditor bank until such time as they secreted the chipper. It appears that the trial court assumed appellant's right to possession of the chipper was synonymous with a corporate debt obligation to pay for the chipper. This assumption is not supported by the evidence upon this record. It is shown that the debt was incurred, and appellant corporation was then created. The evidence further reveals that the documents evincing the indebtedness, accompanied by the personal guarantee by respondents, predated the incorporation of appellant. Appellant was then incorporated and respondents obtained an equity stock interest in appellant corporation by contributing the chipper as capital. There was no ratification of the debt, and appellant corporation, upon its books of record, never acknowledged such debt as a corporate debt. The payment by appellant corporation of Adolphsen's dividend payment directly to the creditor bank inured to his benefit and not to appellant corporation. There is nothing in this record that reveals appellant corporation assumed the primary responsibility on the indebtedness. Street, supra. The contract giving rise to the indebtedness arose prior to the incorporation of appellant corporation and there is no evidence upon this record to support a finding that appellant was given credit, that it ratified the contract creating the indebtedness, or received a benefit from the contract creating the indebtedness.
The chipper became an item of capital belonging to appellant corporation in exchange for which respondents received an equivalent value in stock equity. The original indebtedness of respondents to the creditor bank, under the facts and circumstances, remained their personal obligation. There is nothing upon this record to support respondents' allegations that ratification should be implied, Schmidt, supra, because in order for implied ratification to be applicable, there must be a showing that the corporation, in receiving the benefits of the authorized transaction, makes payments, with full knowledge of the facts, on the accounts of such benefits as where it makes payment on a note executed or endorsed on its behalf without authority. The indebtedness herein did not originate to the benefit of appellant corporation, nor was the indebtedness, as evidenced by the note and security agreement, made on appellant's behalf without its authority. There is no evidence that appellant corporation ever made payment on its own behalf or as a corporate debt upon the note. This payment was authorized and directed by Adolphsen and inured to his benefit, not appellant's.
*99 One remaining argument is offered by respondents. They argue that injunctive relief should be denied because appellant's refusal to make further payments to the creditor bank creates an inference of "unclean hands" sufficient to deny equitable relief. There is nothing upon this record to support respondents' contention. In fact, the trial court addressed this point when it declared, "I have nothing to do ... with the ethics of the matter." It is clear from the record, both in an evidentiary sense and from the awareness of the issue by the trial court, that there is no substance to respondents' claimed inference of unclean hands.
The trial court erroneously applied the law of subrogation when it ruled that the same was applicable in this case. In addition, the trial court erred in its finding against appellant's petition seeking injunctive relief, since the evidence supports a finding for such relief, thus the judgment is erroneous as against the weight of the evidence. Murphy v. Carron, supra.
The parties have submitted their evidence upon the issues, making retrial of this cause neither necessary nor warranted. The judgment, for the reasons set forth herein, is reversed and the trial court is instructed to enter judgment in accordance with this opinion to the favor of appellant by the entry of a proper judgment requiring respondents to return to appellant the Mobark Chip Harvester Model 22, and to permanently enjoin respondents from further conversion of the Mobark Chip Harvester Model 22 and from interference with appellant in the pursuit of its business interests in use of the Mobark Chip Harvester Model 22.
All concur.
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371 B.R. 392 (2006)
In re Artur Zbigniew GOLCZEWSKI, Debtor.
Artur Zbigniew Golczewski, Plaintiff,
v.
University Accounting Service, ACS, American Education Services, Iowa Student Loan Liquidity, Direct Loans, University of Iowa, and U.S. Department of Education, Defendants.
Bankruptcy No. 04-03119 W. Adversary No. 05-09052 W.
United States Bankruptcy Court, N.D. Iowa.
July 14, 2006.
*393 *394 Michael C. Dunbar, Dunbar & Dunbar, Waterloo, IA, for Plaintiff.
U.S. Attorney, Cedar Rapids, IA, Iowa Attorney General, Regents & Human Services Division, August B. Landis, Jonathan E. Kramer, Des Moines, IA, for Defendants.
ORDER RE: DETERMINATION OF DISCHARGEABILITY OF STUDENT LOAN DEBT
PAUL J. KILBURG, Chief Judge.
This matter came before the undersigned on June 15, 2006 for trial on Debtor's Complaint to Determine Dischargeability of Debt. Michael Dunbar appeared for Debtor Artur Zbigniew Golczewski. Lawrence Kudej appeared for Defendant U.S. Department of Education ("DOE"). George Carroll appeared for Defendant University of Iowa. Christopher Foy appeared for Intervenor Educational Credit Management Corporation ("ECM"). Marty Rowlet appeared for Intervenor Texas Guaranteed Student Loan Corporation ("TGSL"). After the presentation of evidence and argument, the Court took the matter under advisement. The time for filing briefs has now passed, and this matter is ready for resolution. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(I).
STATEMENT OF THE CASE
Debtor seeks to discharge his student loans of approximately $161,000 on the grounds of undue hardship pursuant to 11 U.S.C. § 523(a)(8). Defendants and Intervenors challenge Debtor's claim of undue hardship. The U.S. Department of Education appears for itself and for Direct Loans, a program of the Department. The University of Iowa appears for itself and for University Accounting Service, which manages loans on behalf of the University, but does not itself own any of Debtor's loans. Educational Credit Management Corporation intervened due to its status as successor in interest to American Education Services and Iowa Student Loan Liquidity. Texas Guaranteed Student Loan Corporation intervened due to its status as successor in interest to ACS.
Debtor reached a settlement with the University of Iowa. Debtor agreed that excepting the loans held by the University of Iowa from discharge would not be an undue hardship. Debtor agreed to pay $25 per month towards the loan obligation of $1,200. The University of Iowa agreed to waive interest charges.
FINDINGS OF FACT
Debtor Artur Golczewski is 46 years old, married with two children, and in good health. His daughter is twelve years old and lives in North Carolina with his former wife. His two-year-old son lives with him and his current wife. Debtor attended *395 the University of Dallas from August 1987 to May 1990, earning a Bachelor's Degree in Art History. (TGSL's Ex. EE at 2.) He attended Virginia Commonwealth University from August 1990 to December 1993, earning a Master's Degree in Art History. (Id.) Debtor attended the University of Iowa from August 1995 to December 2001, earning a Ph.D. in Art History. (Id.) He began working as an assistant professor at Wichita State University in Fall 2000 while continuing to complete work on his dissertation, which he defended in Fall 2001. He left Wichita State University in 2003 to take a position at the University of Northern Iowa as an Assistant Professor of Art History, where he is currently employed.
Mr. Golczewski's position at the University of Northern Iowa ("UNI") is a sixyear tenure track. At this time, he is on probationary status, meaning he has not yet been granted tenure. His most recent evaluation from the Department of Art indicates that he will be employed through the next academic year. (Debtor's Ex. 1 at 3.) It lists several areas where he must improve in order to continue on tenure track. (Debtor's Ex. 2 at 5.) Mr. Golczewski testified that he believed his potential to remain at L NI is "tenuous." He testified that art history jobs are not plentiful. His supervisor expressed concerns about his ability to "make the necessary adjustments to be awarded tenure." (Id.) His supervisor then went on to outline a series of expectations that Mr. Golczewski needs to make to continue on the tenure track. (Id.) These expectations appear reasonable and include items well within the control of Debtor such as simply using a wireless microphone when teaching in a large classroom, particula-ly when microphone usage "has been suggested time and again." (Id. at 2.) The performance evaluation outlined the many steps the Department of Art had made to guide Lnd mentor Mr. Golczewski. (Id. at 5.) While his supervisor expressed concerns about his willingness to take the necessary steps to improve his job performance, Debtor testified that he intended to do everything he could to remain employed at UNI. Based on Mr. Golczewski's performance, his supervisor recommended his "continued probation with difficulties." (Id.)
In the process of completing his thirteen years of higher education, Mr. Golczewski borrowed $113,180 from Defendants or their predecessors. (ECM's Ex. JJ at 1; DOE's Ex. A at 1-4; TGSL's Ex. W at 1-7.) Debtor testified to having made no voluntary payments on these loans in the past six years during which he has worked as a professor. From the Record, it appears Debtor also made no payments during the 19 months when he was out of school between finishing his Master's Degree and entering the doctoral program at the University of Iowa. For some undetermined portion of Debtor's repayment period, some or all of his loans have been granted hardship forbearance. Some of his tax refunds have been garnished by student loan creditors.
Because Debtor has made no voluntary payments on these loans, the accumulated debt has increased by nearly $50,000 over the years. His accumulated student loan debt has grown to approximately $161,000. He owes Educational Credit Management Corporation more than $81,000. (ECM's Ex. JJ at 2.) He owes Direct Loans/U.S. Department of Education more than $66,000. (DOE's Ex. F at 1-22.) He owes Texas Guaranteed Student Loan Corporation more than $14,000. (TGSL's Ex. Z at 1-3.)
Mr. Golczewski currently earns a gross monthly salary of $3,758.89. (DOE's Ex. P at 3.) He is paid on a twelve-month basis for his nine months of work during the *396 regular school year. (Id.) this amount excludes any compensation for summer employment. (Debtor's Dep. 44:23, Oct. 13, 2005.) He was employed over the summer at UNI in 2005, for which he was paid an additional 54,888. (DOE's Ex. P at 1.) Mr. Golczewski testified that he will not have summer employment income from UNI in 2006. His prospects for summer employment from UNI in future years are unknown.
Debtor lists his monthly expenses, including all taxes and payroll deductions, as 83,674.83 on Interrogatory 13. (DOE's Ex. I at 1.) He testified as to the general accuracy of his expenses listed in his responses to Interrogatory 13 and in Schedule J of his petition filing, with exceptions noted in the discussion to follow. Because the list of Debtor's expenses in DOE's Interrogatory 13 is more recent than his Schedule J listing of expenses provided at the time of petition filing, the Court will rely upon this list of expenses as accurate unless other elements of the record conflict. (See DOE's Ex. I.) These expenses include $46.86 for federal income taxes. In 2005, Debtor had zero federal income tax liability and received $344 through a refundable additional child tax credit (DOE's Ex. J at 2.) Mr. Golczewski may only claim his daughter as a dependent in odd-numbered years. (Debtor's Ex. 3 at 3.) He claimed education credits for 2005 that should reasonably continue into 2006 and possibly beyond until his wife completes her education. (DOE's Ex. J at 2.) Thus, Debtor's federal income tax expenses appear reasonable for tax year 2006 with the loss of his ability to claim his daughter as a dependent, but may be overstated for 2007 when he can once again claim her.
Mr. Golczewski pays $294 each month for health and dental insurance coverage for his family. He pays $177 per month towards TIAA-CREF retirement savings. He testified that he was unsure whether his payments towards retirement were mandatory or optional.
Mr. Golczewski's child support obligation is currently $475 per month. (Debtor's Ex. 3 at 3.) His North Carolina child support decree is silent on the termination date for this obligation. Id. The North Carolina decree gave full faith and credit to a previous order for child support from Johnson County, Iowa. Id. The Johnson County order was not submitted into evidence. Debtor testified that he did not "know the termination date for his child support obligation, but assumed that it ended either with his daughter turning eighteen years old or with completion of her higher education. Under either alternative, his support obligation will terminate within approximately 10 years.
Mr. Golczewski's housing and utility costs total $747 per month. (DOE's Ex. I at 1.) Although not binding upon the Court in this particular case, the U.S. Trustee Program's local housing and utilities allowable expense for Debtor's county of residence, Black Hawk County, is $595 per month for a family of three with a mortgage. (DOE's Ex. N at 14 (the expense schedule specifically applies to cases filed on or after February 13, 2006).) In response to DOE's interrogatory, Debtor stated that his house payment was $537. (DOE's Ex. I at 1.) At trial, Debtor testified that his house payment had recently risen to $580 per month. He did not know the cause of the increase. He testified that the payment included homeowner's insurance. Mr. Golczewski's housing contract calls for monthly payments of $436.13. (Debtor's Ex. 4 at 1.) This unverified $43 increase in his housing payments raises issues concerning the accuracy of this expense item.
*397 Debtor purchased his current home on contract. He has an option to purchase the home in December 2006. (Debtor's Ex. 4 at 1.) The home is assessed at $59,600. (DOE's Ex. 0 at 1.) Debtor testified that he believed his home was not worth the assessed value, but he has never challenged the assessment. Since purchasing the home, Debtor improved his home by replacing the existing windows at a cost of nearly $2,000. (Debtor's Dep. 26:13, Oct. 13, 2005.) Debtor also improved his home by fixing the roof twice and completing "interior work." (Id. 25:22-25.) Debtor testified that there was nothing in his house contract that prevented him from selling the house. (See Debtor's Ex. 4.) Debtor testified that he believed the equity in his home to be around $5,000, including the improvements he has made. According to Debtor's home purchase contract, the minimum monthly payments are $436.13. (Id.) If Debtor only made the minimum monthly payments, his principal balance at the end of three years would be slightly more than $42,000. If he made payments of $537 per month for three years, his principal balance would be slightly more than $38,000. Thus, if Mr. Golczewski chose to sell his home for the assessed value, he might realize from $17,000 to $21,000 or more. While the exact amount is indeterminate, it appears that Debtor possesses an asset worth substantially more than he claims.
Mr. Golczewski lists grocery costs of $600 plus an additional $100 for "meals outside." (DOE's Ex. I at 1.) Debtor's bank statements for the months of December 2005 and January 2006 show ninetythree (93) separate debit card charges at various restaurants for a total of $623.04 in that two-month period. (DOE's Ex. R at 1-15.) He testified that his bank records were typical of his expense patterns. The IRS National Standards for Allowable Living Expenses lists an allowance of $513 for food for a family of three with Debtor's gross income. (DOE's Ex. N at 7.)
Mr. Golczewski's transportation expenses are listed in response to DOE's interrogatory at $200 per month for "car," $65 for car insurance and $80 for gas. (DOE's Ex. I at 1.) At deposition, Debtor could not recall specifically what went into the $200 calculation for "car." (Debtor's Dep. 45:14-47:7, Oct. 13, 2005.) He does not have a monthly car payment. (Id. 45:3.) Debtor stated, "maintenance would not amount to [$]200 a month." (Id. 46:24-25.) He testified at trial that the amount included the purchase of tires and payment for maintenance, but these are not recurring monthly expenses.
At deposition, Debtor disputed his gas expense, stating that $80 "wouldn't even cover two weeks." (Id. 46:9.) Debtor pays for gas using his debit card. (Id. 50:15.) Debtor generally buys gas at the same place. (Id. 50:25.) Debtor's own bank records indicate approximately $20 per week for gas, with six charges at A & S Petroleum and two charges at Lanternpark Handimart. (DOE's Ex. R at 1-15.) These charges occurred at intervals of seven to nine days each, with one exception where the interval was four days. (Id.) The combination of Debtor's answer to the interrogatory plus his bank records are persuasive evidence of his actual expenses for gas at $80 per month, though the Court recognizes an increase because of the increase in gasoline costs.
Mr. Golczewski listed child care expenses of $160 per month in response to DOE's interrogatory. Under deposition, he stated that the child care expenses had doubled. (Debtor's Dep. 23:13, Oct. 13, 2005.) Debtor stated that, "The last check we paid a few days ago was $330." (Id. 23:13-14.) His son attends day care from 8:30 am to 1 p.m. five days per week. (Id. *398 23:20-22.) The record does not explain the cause of the child care fees rising onehundred percent between the time Debtor answered his interrogatory and his deposition. Furthermore, child care expenses for Debtor's two-year-old son should decrease significantly in three years when his son becomes school age. Mr. Golczewski is responsible for half the cost of his daughter's medical expenses, which to this point appear to be primarily for glasses and dental care. (Id. 21:12-17.) The record does not reflect the amount of this expense. (Id. 23:10; see also DOE's Ex. I at 1.) Debtor also lists $80 per month for recreation (or $960 per year) and $45 per month for cable TV. (DOE's Ex. I at 1.)
At trial, Debtor testified to additional expenses. He stated that he sees his daughter twice per year and is court-ordered to pay for her travel expenses. He testified that he spent $2,000 per year for his daughter's travel expenses because each trip costs $1,000. At deposition, Mr. Golczewski stated that his daughter's airline ticket for a December 2005 trip cost 8460 plus a $60 fee because his minor daughter was traveling alone. (Debtor's Dep. 22:20-23:3, Oct. 13, 2005.) His deposition testimony based on the actual, specific cost of an airline ticket is the more credible estimation of his daughter's airfare. Thus, Debtor incurs approximately $1,000 per year, or $83.33 per month, for his daughter's airfare to visit him twice each year. He also pays for his daughter's music lessons at $200 per semester. (Id. 21:8.) Mr. Golczewski testified that he voluntarily paid for his daughter's music and tennis lessons. (See also Debtor's Ex. 3 (child support decree not listing music or tennis lessons as compulsory payments).)
As a professor at UNI, Mr. Golczewski has the opportunity to see significant increases in his income in the coming years. He testified that he expected only increases in his salary tied to inflation. His highest paid colleague in the Art Department who has not yet received tenure is paid a salary of $50,871, more than $6,000 above Debtor's salary of $44,584. (DOE's Ex. S at 1.) His tenured colleagues earn salaries ranging from $54,404 to $79,785. (Id.) Debtor testified that, in the event he lost his job at UNI, his employment prospects would be jobs that paid similar to or less than his current salary.
Mr. Golczewski also expects his household income to increase in the future. His wife is currently pursuing a Master's Degree in Accounting from the University of Northern Iowa and anticipates graduating in either 2007 or 2008. Debtor testified that she might not enter the workforce until 2009 in order to study for a period of six months to one year for a C.P.A. license. Thus, in one to three years, Debtor's wife expects to enter the workforce as an accountant. Mr. Golczewski testified that his wife could earn at least $30,000 per year in an entry level accounting position, but she will have student loans of her own to repay. Debtor also testified that his wife speaks English and Russian in addition to her native Lithuanian, but disputed the idea that she could have greater earning potential by utilizing her language skills in combination with her accounting degree. Debtor testified that his wife's income will improve after several years as an accountant.
Although his wife's student loan resources will not be considered in the analysis of Mr. Golczewski's undue hardship complaint, the Court will note that Debtor and his wife utilize student loan proceeds to pay expenses in addition to Debtor's salary. Debtor testified that he and his wife pooled their resources so that his wife's student loan proceeds also paid some of the household expenses. The amount of his wife's contribution is in dispute. *399 Debtor testified at one point that his wife contributed approximately $1,000 from her student loan proceeds after paying for tuition and books. At another point in the hearing, it was suggested that Debtor's wife had testified under deposition to be taking out approximately $10,000 in student loans. Based on their 2005 tax return indicating $4,325 in education expenses, the Golczewski's may have student loan proceeds of approximately $5,700 per year to use towards household expenses. (DOE's Ex. J at 4.) The record does not contain Mrs. Golczewski's deposition testimony or other evidence of her student loan amounts or actual education expenses.
UNDUE HARDSHIP AND STUDENT LOAN DISCHARGE
The Bankruptcy Code excludes most student loans from the list of debt eligible for discharge "unless excepting such debt from discharge under the paragraph will impose an undue hardship on the debtor and the debtor's dependents." 11 U.S.C. § 523(a)(8). The debtor must prove the existence of undue hardship by a preponderance of the evidence. In re Cheney, 280 B.R.648, 659 (N.D.Iowa 2002).
Courts have struggled to define "undue hardship" in the absence of a statutory definition. In re Long, 322 F.3d 549, 554 (8th Cir.2003). The Eighth Circuit standard for examining undue hardship in the context of discharging student loans is the "totality of the circumstances" test. In re Reynolds, 425 F.3d 526, 532 (8th Cir.2005). The test has three factors:
1. the debtor's past, present, and reasonably reliable future financial resources;
2. a calculation of the debtor's and her dependent's reasonable necessary living expenses; and
3. any other relevant facts and circumstances surrounding each particular bankruptcy case.
Id.
The first factor, concerning debtor's financial resources, "will require a special consideration of the debtor's present employment and financial situation-including assets, expenses, and earnings-along with the prospect of future changes-positive or adverse-in the debtor's financial position." Id.
Mr. Golczewski is currently employed as a full-time assistant professor with a monthly gross income of $3,758.89. He will continue his employment into the next academic year, presumably with an increase in salary. Mr. Golczewski has the prospect of summer employment, which would boost his income in future years. Whether Debtor continues into a tenured professorship at UNI or moves on to a position in another institution, his academic credentials and extensive education are reasonably likely to lead to increases in his income in the years to come. Further, Debtor holds a significant asset in the accrued equity in his home. Once his wife completes her education and moves into the workforce, Debtor's household is likely to see a very significant increase in income. Although Mr. Golczewski asserts that his wife will have her own student loan debts, she will not devote the entirety of her after-tax income to the repayment of her student loans in perpetuity. Thus, she is likely to have disposable income of her own which can be devoted to paying a portion of the household expenses now paid entirely from Mr. Golczewski's salary. Once these household expenses are shared between the two incomes, Debtor will have more disposable income which he can devote to retirement of his student loan debts. Further, Debtor's child support obligation will end in the next six to ten *400 years, freeing up additional funds which may be devoted to paying off his student loans.
For purposes of analyzing Debtor's current financial circumstances, the Court declines to consider Mrs. Golczewski's student loan proceeds because they do not represent actual income into the household. Instead, the student loan proceeds are treated no differently than the flow of funds which may come into a household via credit cards or other credit sources.
The second factor, concerning debtor's living expenses, requires a determination of what expenses are "reasonable and necessary." In re Long, 292 B.R. 635, 638 (8th Cir. BAP 2003). In this context, "reasonable and necessary" means that such expenses are "modest and commensurate with the debtor's resources." In re Balm, 333 B.R. 443, 448 (Bankr.N.D.Iowa 2005). However, so long as expenses are minimal, "debtor is not expected or required to implement every conceivable cost-saving measure." In re Schulstaclt, 322 B.R. 863, 867 (Bankr.N.D.Iowa 2005).
In his response to Interrogatory 13, Mr. Golczewski claimed that his monthly expenses totaled $3,674.83, including taxes and child support. (DOE's Ex. I at 1.) Debtor needs to establish that his living expenses are "reasonable and necessary" by a preponderance of the evidence. His current housing and utilities expenses currently exceed the U.S. Trustee's standard by more than $150 per month. This excess is unreasonable in light of Debtor's outstanding student loan debt and other obligations. The IRS allowance for food costs of $513 is considered reasonable for two healthy adults and a two-year-old toddler. In this context, Debtor's stated food costs of $700 per month are unreasonable and unnecessary, particularly in light of his more than $300 per month expenditures for food outside the home. Mr. Golczewski claimed $200 per month for car expenses without being able to substantiate where those expenses came from. Although Mr. Golczewski will one day have to replace his current car, he will likely have an increased salary and lower expenses at the time of the car's replacement.
Debtor's $80 per month in recreation and $45 per month for cable TV are not unreasonable per se, but do not fall within the category of necessary expenses. Further, his voluntary payments for his daughter's music and tennis lessons might be reasonable, but they do not qualify as necessary. The music and tennis lessons were not listed on his response to DOE's interrogatory regarding expenses.
Mr. Golczewski's expenses for airfare for his daughter at $1,000 per year is reasonable and necessary for his continued relationship with her. He did not list this expenses on his `response to DOE's interrogatory regarding expenses. While Debtor's payments under his decree for his daughter's medical expenses are presumably reasonable and necessary, the lack of an evidentiary record of those expenses remove them from further consideration.
To sum up the Court's findings of Debtor's reasonable and necessary living expenses, the Court begins with Debtor's response to DOE's interrogatory which listed expenses totaling $3,674.83. The Court then subtracts $152 for excess housing costs, $187 for excess food costs, $200 for excess "car" expenses, and $125 for excess recreation and cable TV costs, leaving reasonable and necessary expenses of $3,010.83. The Court then adds back in the unlisted, but reasonable and necessary, cost of airfare for his daughter's twiceyearly trips at $1,000 per year, or $83.33 per month, increasing the reasonable and *401 necessary expenses to $3,144.16 per month. With gross monthly income of $3,758.89, Debtor has disposable income of approximately $614 per month at present. His disposable income will see a significant increase in the next six to ten years, once his child sup port obligation terminates. Based on the Court's findings, Mr. Golczewski is likely to see substantial increases in his disposable income in the coming years, which will provide him with still greater resources for paying off his student loan obligations.
The third factor, concerning relevant facts and circumstances, allows flexibility for the Court to consider a number of factors. These factors include:
1. the debtor's good faith effort to repay the loan, or a debtor's bad faith in non-repayment,
2. whether the debtor has made a good faith effort to obtain employment, maximize income, and minimize expenses, and
3. whether the debtor is suffering truly severe, even uniquely difficult financial circumstances, not merely severe financial difficulty
In re Schulsladt, 322 B.R. at 867. "A good faith inquiry may include whether the Debtors caused their own financial condition." Id.
Since Mr. Golczewski has never made a voluntary payment on his student loan debt, the Court cannot conclude that he has made a good faith effort to repay his loans. Debtor's employment record indicates a good faith effort to gain employment and maximize employment. However, his expenses are excessive, particularly in light of his extensive student loan obligations. He has a sufficiently high income that the gap between his income and expenses should be greater than it has been thus far. His financial situation is not truly severe. Mr. Golczewski has disposable income now that he could be devoting to payment of his student loans. His disposable income available to pay off his debts is highly likely to increase in the years to come both from his salary raises and from his wife's entry into the labor force as an accountant.
In considering whether Debtor caused his own financial condition, the Court can look to a number of factors. Debtor failed to make any payments on his student loans in 2005, when his gross income was nearly $5,000 more than his anticipated 2006 income. He has a significant disposable income currently; his 2005 disposable income was even greater when he earned nearly $5,000 extra for summer teaching. Rather than making payments on his student loan obligations, he elected to allow the interest to continue accumulating. If Debtor had chosen to make even modest payments towards his student loans in the six years of full-time employment since he began teaching, his student loan debts would not be as large as they are. Debtor elected to forgo even modest, income-sensitive payments on his student loans. In summary, Debtor allowed the outstanding balance on his student loans to increase by nearly $50,000 because he chose not to make even token voluntary payments on these loans.
The Reynolds court summarized application of the totality of the circumstances test as follows: "Simply put, if the debtor's reasonable future financial resources will sufficiently cover payment of the student loan debt-while still allowing for a minimal standard of living-then the debt should not be discharged." 425 F.3d at 532. Applying this standard, since Mr. Golczewski has sufficient current and future financial resources while maintaining a minimal standard of living, his student loan obligations can not be discharged.
*402 CONCLUSION
The Court finds Debtor has not meet his burden of proof by a preponderance of the evidence to demonstrate that he would suffer an undue hardship in repaying his student loans. The Court finds that he has sufficient current monthly disposable income to repay the loans and is likely to continue that trend into the future. His lack of good faith effort to repay his student loans further precludes a finding of undue hardship.
WHEREFORE, Debtor's Complaint to Determine Dischargeability of Debt is DENIED.
FURTHER, a written settlement agreement between Debtor and the University of Iowa is due August 4, 2006.
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674 F. Supp. 438 (1987)
KING WORLD PRODUCTIONS, INC. and Camelot Entertainment Sales, Inc., Plaintiffs,
v.
FINANCIAL NEWS NETWORK, INC. and Elio Betty, Defendants.
No. 85 Civ. 10036 (EW).
United States District Court, S.D. New York.
June 4, 1987.
*439 Roberts & Moelis, New York City, for plaintiffs; Kenneth G. Roberts, of counsel.
Friedman, Leeds, Shorenstein & Armenakis, New York City, for defendants; Paul H. Appel, of counsel.
OPINION
EDWARD WEINFELD, District Judge.
The plaintiffs move that the Court make additional findings of fact on elements of damages and that the judgment be amended accordingly. The motion is granted to the extent hereafter indicated.
(1) Brokerage fees. It is clear that in order to mitigate damages plaintiffs were required to take action to secure a substitute tenant. Plaintiffs did so and in order to obtain (Perfumer) as a sub-tenant in place of defendant, enlisted the services of a real estate broker who plaintiffs represent has been or is about to be paid the brokerage fee of $8,067.85. Accordingly, brokerage fees are allowed in that amount.
Plaintiffs also seek counsel fees and disbursements incurred in the prosecution of this action based upon a provision in the agreement that plaintiffs are entitled to recover "any expenditures ... including but not limited to attorney's fees, in instituting, prosecuting or defending any action" in connection with "any default" by FNN. Another provision of the FNN sublease specifies King World is entitled to recover "attorneys' fees and expenses and court costs ... incurred in connection with *440 or arising from (i) any default" by FNN. The defendants seek to overcome the force of this express obligation upon a plea that the second amended complaint did not specify any contractual provision which provided for such fees and failed to make a demand therefor. But the agreement under which defendants were obligated to pay the fees was before the Court; the second amended complaint, in addition to a general claim of damages in the amount of $80,000, also requested such other and further relief as the Court deems proper; and finally plaintiffs' proposed findings of fact and conclusions of law expressly requested, "in addition to the damages occasioned by defendants' breach of the agreement ... the costs and expenses, including attorneys' fees of the action."
Plaintiffs seek a total allowance of such fees in the sum of $41,237.59. The Court regards this sum grossly excessive. Plaintiffs are entitled only to the fair and reasonable value of legal fees and disbursements necessarily incurred in prosecuting their claims against the defendants. The case, a simple breach of contract, presented no unusual or difficult legal problems. The trial proper took less than one day. "While parties to a litigation may fashion it according to their purse and indulge themselves and their attorneys ... they may not foist their extravagances upon their unsuccessful adversaries." Farmer v. Arabian American Oil Company, 31 F.R.D. 191, 193 (S.D.N.Y.1963). Based upon the Court's knowledge and familiarity with the case, from its inception to conclusion, the legal issues and other pertinent matters, the Court deems a fee of $12,500 fair and reasonable.
The motion to amend the Court's findings of fact and conclusions of law is granted as indicated above and judgment may be entered accordingly, which shall also include a provision dismissing plaintiffs' claim against the defendant Elio Betty.
So ordered.
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636 S.W.2d 914 (1982)
STATE of Missouri, Respondent,
v.
Gurney Edward BUCKLES, Appellant.
No. 63808.
Supreme Court of Missouri, En Banc.
August 23, 1982.
*916 Amy Johnson Davis, Bloomington, Ill., for appellant.
Hon. John Ashcroft, Atty. Gen., Neil MacFarlane, Asst. Atty. Gen., Jefferson City, for respondent.
PER CURIAM:
Gurney Edward Buckles was convicted of second degree murder and sentenced to forty years in prison for the killing of Donald Stewart. An expanded panel of the Court of Appeals, Western District, affirmed the judgment; the case was certified to this Court by a dissenting judge in belief that the majority's decision on one of several points on appeal was in conflict with State v. Oldham, 618 S.W.2d 647 (Mo. banc 1981). The case is determined as an original appeal, Mo.Const. art. V, § 10; the judgment will be affirmed in an opinion which incorporates much of the majority opinion of Swofford, Senior Judge.
The statement of facts in appellant's brief is accepted by the state and upon comparison with the transcript and record is deemed to be in full compliance with the rule governing such statement.
On January 13, 1978, Gurney Edward Buckles was hitchhiking north on Interstate Highway 29 in north Missouri when he was picked up by Donald Stewart, the eventual victim of this homicide. Stewart told Buckles he was on his way to Sanborn, Minnesota, to purchase a newspaper operation, and asked Buckles to accompany him in case of automobile trouble. Buckles agreed, and over the course of the next two days, he and Stewart traveled to Sanborn and then returned to Buckles's "home territory" around Forest City, Missouri, on January 15, 1978. During the course of this journey involving two overnight motel stays, Stewart asked Buckles to participate in homosexual acts, which Buckles refused on two separate occasions.
Upon arriving at the trailer of Buckles's friend, Jim Book, located eight miles south of Forest City, Missouri, Buckles opened his door, reached around to the back seat to retrieve his backpack, and turned around to find Stewart with a knife in his hand; Stewart insisted Buckles perform sodomy. After orally refusing but still encountering Stewart's insistence, Buckles swung his backpack around striking Stewart's arm. In the ensuing struggle, Buckles obtained the knife and stabbed Stewart a couple of times in the front, then jumped out of the car, pulled Stewart out, and stabbed him some more. Buckles testified he was scared, mad, and a little shocked at the time.
Following this stabbing, Buckles placed Stewart's body in the rear seat of the car, drove down to the bank of the Missouri *917 River, which in January contained ice chunks, and put the body in the water. Buckles removed Stewart's identification and took $10.00 from his coat. He had considered rolling the entire car into the river, but decided to utilize it to rob "something" to enable him to leave that part of the country. He didn't call the authorities because he had long hair and a beard, the victim was a teacher, and therefore he felt he would not be believed. He drove the car to Oregon, Missouri and parked it across the block from Earl Nash's house, where he had been staying. On cross-examination, Buckles testified he hadn't discontinued the trip with Stewart after the homosexual advances because of the winter weather.
The next day, Buckles used Stewart's car in a robbery of the Farmers State Bank in Rosendale, Missouri. He fled to the state of California, where he was apprehended and was later returned to the Jackson County Jail on federal bank robbery charges.
On May 3, 1978, a body was discovered floating in the Missouri River on the Kansas side near St. Joseph, Missouri. This body was identified as that of Donald Stewart by means of dental records. An autopsy was performed in Kansas and the surgeon performing the same testified that he found "many knife wounds" on both the front and back of the body and lacerations of the palms of both hands. The surgeon stated his opinion that death was caused "by a laceration of the aorta caused by a sharp instrument" and that Stewart "was already dead when he was placed in the water."
On February 3, 1978, while incarcerated at the Jackson County, Missouri jail on the federal bank robbery charge, Buckles was visited by FBI Agent Joseph Holtslag; Missouri Highway Patrol Sergeant Robert Anderson; Holt County Sheriff Melvin Hayzlett; and Andrew County Sheriff Reed Miller. After introductions and Buckles's indication he would see what the officers wanted, an interview took place. Buckles informed these officers he had been advised by his federal defense counsel not to talk with law enforcement officers. The officers then asked: "about the bank robbery?", to which Buckles responded "Yes." The officers then said they were there concerning the whereabouts of Donald Stewart, and then furnished and read aloud a printed Miranda warning and waiver of rights, which Buckles refused to sign. Buckles said he did not know any Donald Stewart. Upon his request to see a picture of Stewart, Buckles was shown a photograph of Stewart and was informed the Minnesota trip had been traced. Buckles became emotional and tearful and asked, "Can we make a deal?" When told "No," he signed the Miranda waiver and then confessed his relations with Stewart and the homicide.
On February 4, 1978, the Holt County prosecutor filed a felony complaint charging Buckles with murder. On February 21, Buckles wrote a letter to the magistrate judge informing him of his indigency and requesting appointed counsel. On April 25 of the same year, Buckles pleaded guilty to the federal bank robbery charge, was sentenced to fifteen years imprisonment, and his federal defense attorney sent a letter on this date to the state prosecuting authorities requesting a speedy trial of the state charge. Thereafter, Buckles was incarcerated in a federal penitentiary in El Reno, Oklahoma, and an initial detainer was lodged in Washington, D. C. with the attorney general's office on May 5, 1978. On December 29,1978, Buckles was returned to Holt County for the homicide proceedings and counsel was appointed. On that day motions to suppress evidence and to dismiss were filed.
On February 14, 1979, the motions to suppress and to dismiss were overruled after a preliminary hearing, and the case was ordered to the circuit court for trial. On March 5, 1979, an information charging Buckles with capital murder was filed. He was arraigned and counsel was appointed on March 7, 1978. He filed an application for prohibition, a motion to remand to the magistrate court for a new preliminary hearing and a motion to dismiss. On March *918 26, 1978, motions to suppress confession and any police testimony in relation thereto, and to dismiss on constitutional grounds were filed.
On April 6, 1979, a hearing was held on the various motions and they and the application for prohibition were overruled; the motion to suppress evidence was taken under advisement.
On April 25, 1979, further motions were filed to remand, dismiss, quash, force disclosure, and suppress evidence, which after hearing were overruled except for the motion to suppress any evidence of the bank robbery which was taken under advisement.
On April 26,1979, a jury panel was called and during voir dire discharged on the motion of defendant. A second jury panel was summoned and exhausted on challenges for cause. A mistrial was declared and the cause reset. On May 7, 1979, defendant filed an application for change of venue and the case was transferred to Grundy County. The trial commenced in Grundy County on June 13, 1979, resulting in the verdict and judgment.
I
Appellant charges the court erred in submitting any first degree murder instruction (No. 7), asserting there was insufficient evidence to support such submission because it was not shown that the killing occurred during the commission of another felony, and that the court erred in rereading the instruction to the jury after a correction of wording.
The record shows that this case was submitted to the jury under instructions on capital murder, murder in the first degree, murder in the second degree and manslaughter. As noted, the jury found defendant guilty of murder in the second degree and, under the present procedure of bifurcated trials, assessed his punishment at forty years imprisonment, upon which verdict the judgment was entered.
During the reading of the instructions to the jury the court discovered that Instruction No. 7 on first degree murder, through clerical or typing error, omitted the required finding, "If you find and believe from the evidence beyond a reasonable doubt," etc. before the first paragraph of the instruction. The court amended the instruction so as to include this language and reread it to the jury.
By the verdict and judgment these contentions became moot. In this state of the record the appellant is in no position to complain of the giving of an instruction on a certain degree of murder when he was not convicted of that offense. State v. McQueen, 399 S.W.2d 3, 6, [3] (Mo.1966), cert. denied 384 U.S. 977, 86 S.Ct. 1873, 16 L.Ed.2d 687; State v. Eldridge, 564 S.W.2d 603, 605[6] (Mo.App.1978), and cases cited. Similarly, the correction of the error in Instruction No. 7 by the court and rereading it to the jury so that it could be properly instructed with respect to first degree murder is moot.
II
Appellant charges error to admission of evidence relating to the bank robbery on the day after the homicide. Evidence of an independent and unconnected crime is inadmissible to prove the crime charged, unless it tends to establish motive, intent, absence of mistake or accident, common scheme or plan embracing the commission of multiple related crimes, or the identity of the person charged. State v. Reese, 457 S.W.2d 713 (Mo. banc 1970). The test of admissibility is whether the logical relevancy of the separate crime to a particular exception tends to prove a material fact in issue, a judicial question. If this requisite degree of relevancy cannot be clearly perceived, the accused should enjoy the benefit of the doubt and the evidence of a separate crime rejected. State v. Tillman, 454 S.W.2d 923, 926[5] (Mo.1970); State v. Frazier, 550 S.W.2d 590, 596-97[5-6] (Mo.App. 1977).
The record shows the following which supports the admission of the evidence in question.
*919 Prior to the homicide, defendant told friends he was going to rob a bank, although it is not clear whether the Rosendale Bank was specified; he had no automobile available; he would need transportation to and from Rosendale because it was approximately 20 miles from where he lived or usually stayed; he killed Stewart by means of multiple stab wounds and robbed the bank the next day using the Stewart car, having parked it the night of the homicide in the vicinity of the bank for use as a "getaway" car; he exhibited the car keys to his friends prior to the robbery and stated to them that he was too far into the robbery plans to get out; and, using the money obtained in the robbery he proceeded by air to flee to California. This evidence is competent to prove a "related crime" and was also evidence from which a reasonable inference could be drawn as to intent, motive or premeditation to dispose of Stewart in order to obtain his car to carry out the planned bank robbery.
III
Appellant asserts his constitutional right to a speedy trial was not accorded him and that his right to due process and counsel under both the United States and the Missouri constitutional provisions were violated.
A
The record shows that defendant's trial occurred approximately fifteen months after the filing of the original complaint in the magistrate court. This alone, however, does not support the charge that the trial court erred in failing to dismiss the proceedings. Each case where this constitutional point is raised must be viewed against its record.
The courts have established well-defined guidelines for the initial consideration by the trial court and review by appellate courts.
In Barker v. Wingo, 407 U.S. 514, 92 S.Ct. 2182, 33 L.Ed.2d 101 (1972), the court set forth the basic considerations to be employed and balanced in such situation: (1) the length of delay; (2) the reason for the delay; (3) the defendant's assertion of his right to a speedy trial; and (4) resulting prejudice to the defendant. These guidelines have been followed and applied in Missouri in cases where it is claimed a violation of defendant's rights to a speedy trial occurred. State v. Haddix, 566 S.W.2d 266, 274[9] (Mo.App.1978). See also State v. Hollis, 584 S.W.2d 137 (Mo.App.1979). As to the matter of resulting prejudice to the defendant, the court in State v. Haddix, supra, declared that the principal factors to be considered are: (1) prevention of undue or oppressive incarceration; (2) minimization of anxiety; and (3) limitation of defendant's ability to defend himself.
Appellant claims that after he had demanded a speedy trial of the state charge a period of 15 months elapsed until he was first brought to trial. The record discloses that he directed a letter dated February 21, 1978, to the magistrate before whom the original complaint was filed requesting that counsel be appointed to represent him. On April 25, 1978, after guilty plea and sentence on the bank robbery charge, the assistant federal public defender who had represented defendant in the federal case wrote the then prosecuting attorney of Holt County and asked that in view of the lengthy federal sentence that dismissal of the state charge be considered and, if dismissal was declined, that defendant be given a speedy trial. Respondent argues that the defendant at no time asked for or demanded a speedy trial, and the federal public defender was not representing the defendant in the state court action and had no authority to act in his behalf.
While this argument is interesting and somewhat ingenious, it, by no means, is decisive of the appellant's contention. The passage of 15 months between the charge and trial is not ipso facto an inordinate or unconstitutional delay. Longer lapses of time have been held not a denial of the constitutional right to a speedy trial. See for example Barker v. Wingo, supra, (61 months); and State v. Hollis, supra, (21 months).
*920 A search of this record in an attempt to fix the reason or fault for this 15-month delay, leaves some unanswered questions. Accepting the federal public defender's letter of April 25,1978, as an adequate request for a speedy trial, the only part of the 15-month delay that can be directly charged to actions of the state arose from unusual circumstances. On May 5, 1978, the then Holt County prosecuting attorney attempted to file a request for temporary custody of the defendant under the Uniform Mandatory Disposition of Detainers Law, § 222.080, et seq., RSMo, who was then in the custody of the authorities at the federal penitentiary at El Reno, Oklahoma. Such request was improperly sent to the office of the Attorney General of the United States. The prosecutor left office and on October 22, 1978, a newly appointed prosecuting attorney of Holt County mailed a proper request to the federal authorities at El Reno. Defendant was returned to Holt County on December 29, 1978, counsel was appointed by the magistrate judge, and motions were filed on defendant's behalf. On February 14,1979, his motions were overruled, he was granted a preliminary hearing and was bound over to the circuit court. An information charging capital murder was filed March 5, 1979, and defendant was formally arraigned on March 7, 1979. After the filing of various motions, they were heard and disposed of, and his first trial, resulting in a mistrial, commenced April 25, 1979.
Thus it appears that of the 15 months, six months, May 5,1978, to October 22, 1978, was the result of the inadvertent and mistaken filing of the proper detainer papers with the wrong authorities. Under such circumstances, the first three tests or guidelines in Barker v. Wingo, supra, did not require the dismissal of this prosecution. The last or fourth factor in Barker v. Wingo, supra, prejudice to the defendant as further refined in State v. Haddix, supra, (1) prevention of undue and oppressive incarceration; (2) minimization of anxiety; and (3) limitation of defendant's ability to defend himself, must be reviewed in the light of the record.
The transfer of defendant from El Reno, Oklahoma, to Missouri under proper request in May, 1978, rather than October, 1978, would have in no degree prevented his incarceration in Missouri, since he was already serving a 15-year sentence, or in any way minimized his "anxiety."
Did the trial delay work to the prejudice of defendant (consideration 4 in Barker v. Wingo, supra) in that his ability to defend himself was thereby limited (consideration 3 in State v. Haddix, supra)?
The resulting prejudice to require reversal must be actual prejudice apparent on the record or by reasonable inferencenot speculative or possible prejudice. United States v. Marion, 404 U.S. 307, 324, 92 S.Ct. 455, 465, 30 L.Ed.2d 468 (1971). Because defendant was the only witness to the facts and circumstances surrounding the death of the victim, he had confessed guilt prior to trial and was urging self-defense, and because he testified in substantial accordance with his prior confession, speculation must be employed to conclude that he was prejudiced by his incarceration in El Reno, Oklahoma, during the 6-month period involved instead of in Holt County, Missouri.
Further, defendant was represented by appointed counsel from December 29, 1978, the date when he personally appeared before the magistrate court in Missouri, to the present date. He was ably represented, both in the early proceedings, the trial, and on this appeal. His counsel displayed not only energy and ingenuity, but also afforded defendant every legal defense permissible under the law.
B
Appellant charges the court erred in overruling his motion to dismiss because of the failure of the state to bring him to trial within the time limits required by Section 222.160 RSMo, which provides that whenever a detainer is lodged against a defendant imprisoned in a sister (party) state, he must be brought to trial within 180 days of the date of his request for final disposition of *921 the case delivered to the appropriate prosecuting officer and the court. Appellant asserts further that he complied substantially with the terms of that law and that the state failed to bring him to trial within the time specified by the statute.
He asserts further error in overruling his motion to dismiss as a deprivation of his federal and state constitutional right to counsel at every critical stage of the prosecution, because counsel was not appointed for him until (12/29/78) eleven months after his written request for appointed counsel (letter dated 2/21/78).
Involved here is the procedure to be followed under the Uniform Mandatory Disposition of Detainers Law, Section 222.080, et seq., RSMo 1978. Section 222.160 thereof invokes the 180-day trial rule if triggered by a proper request followed by the proper procedures.
The request must: be caused to be delivered to the prosecuting officer and appropriate court where trial is sought; seek a final disposition of the charges; and, be accompanied by a certificate of the official having custody of the prisoner together with all pertinent information concerning his incarceration. The Act clearly provides that the petitioner deliver such notice and request to the official "having custody of him" who in turn is charged with the duty to forward the request, together with the supporting documents required, to the appropriate prosecuting official and court by registered or certified mail, return receipt requested. Section 222.160, Article III. Further, the Act specifically provides that these procedures are appropriate and effective to commence the running of the 180-day limit for trial only when "a detainer has been lodged against the prisoner." Section 220.160, Article III (1).
These procedures are reasonable and proper requirement in the interest of orderly jurisdictional and custodial process. State v. Patterson, 508 S.W.2d 304, 306[2] (Mo.App.1974); State v. Savage, 522 S.W.2d 144, 147[2, 3] (Mo.App.1975); State v. Soloway, 603 S.W.2d 688, 690[2, 3] (Mo.App. 1980).
As shown by the record, the letters of February 21, 1978 (defendant's request that counsel be appointed) and the letter of April 25, 1978, (assistant federal public defender's advice of defendant's plea and sentence on federal charge, request for dismissal of state charge or for speedy trial) did not constitute compliance with the procedural requirements of the Act. This is apparent because the defendant on those dates was not in the custody of the El Reno, Oklahoma federal authorities nor, of course, had any detainer been filed against him by the state.
Appellant's contention is that his attempt at compliance by the letter of April 25 should be viewed as substantial compliance triggering the 180-day time period, especially because he was without state appointed counsel at the time of the request and during his incarceration up until December 29, 1978. He relies on State ex rel. Saxton v. Moore, 598 S.W.2d 586 (Mo.App.1980), clearly distinguishable and not authoritative here. Saxton was imprisoned with a detainer lodged at the time of his letter request for final disposition. The prosecution responded with a letter containing the appropriate forms for him to fill in. These were filled out and returned to the prosecution, but no copy was sent to the appropriate court. The prosecution then accepted temporary custody which was ineffective and caused delay because no offer of temporary custody had been issued by the prison officials. The court stated, l. c. 590, that good faith substantial compliance, omitting "nothing essential to the Agreement's operation," was sufficient to trigger the Act. The failure to notify the appropriate court was held waived by the prosecution's acceptance of custody and stated intention therein to bring defendant to trial within the time specified by the Agreement. The preliminary writ of prohibition, a trial not being had within 180 days of the acceptance of temporary custody and waiver of notice to the appropriate court, properly was made absolute.
C
Appellant asserts in support of his alleged unconstitutional denial of the right to *922 counsel at critical stages of prosecution, prejudice from the failure to locate potential witnesses, failure to obtain a second pathological opinion as to the nature of the knife used in the killing and to locate certain witnesses in Arizona who were not later available or could not be located.
The general rule of law is that the defendant is entitled to assistance of counsel at all critical stages of prosecution, and this right attached at the pleading stage. Powell v. Alabama, 287 U.S. 45, 53 S.Ct. 55, 77 L.Ed. 158 (1932); Gideon v. Wainwright, 372 U.S. 335, 83 S.Ct. 792, 9 L.Ed.2d 799 (1963); Coleman v. Alabama, 399 U.S. 1, 90 S.Ct. 1999, 26 L.Ed.2d 387 (1970); United States v. Wade, 388 U.S. 218, 87 S.Ct. 1926, 18 L.Ed.2d 1149 (1967); Gilbert v. California, 388 U.S. 263, 87 S.Ct. 1951, 18 L.Ed.2d 1178 (1967); State v. Quinn, 594 S.W.2d 599, 604[10] (Mo. banc 1980); State v. Alberts, 519 S.W.2d 562, 565[3] (Mo.App.1975).
Appellant's claim is not persuasive. The purpose of the right to counsel is to ensure a fair trial. The transcript shows two appointed counsel who made extensive preparation, filed pretrial motions, took depositions, gave effective trial representation and effective post trial work. The prejudice charged by appellant to the temporary lack of counsel at any critical stage of the proceedings is speculative at most. That an additional pathological opinion or interviews with the unfound witnesses may have benefitted defendant, is not real prejudice, and to order a new trial on speculation that earlier-appointed counsel could have provided these benefits is unwarranted.
IV
Appellant urges this Court to abandon the rule in homicide cases involving an issue of self-defense which limits a homicide victim's character evidence to that which shows a reputation for known turbulence and violence as unduly restrictive.
More specifically, he asserts that the state "opened up" the matter of the victim's "character" when the victim's dentist testified he had seen the victim in church and that, therefore, the court erred in sustaining the state's motion to limit testimony to the long-established rule in homicide-self-defense cases to known turbulent and violent reputation of the victim, which rule he characterizes as unduly and "unreasonably restrictive" and one that "should be abandoned." He asserts that under this rule the trial court precluded him from presenting evidence that the victim was "insane" at the time he was killed which corroborated the defendant's theory of self-defense and was admissible rebuttal evidence to the "state's evidence of victim's good character." On the issue of self-defense there can be no doubt of the rule that evidence of the deceased's reputation for turbulence and violence is admissible as relevant to show who was the aggressor and whether a reasonable apprehension of danger existed; but such evidence must be proved by general reputation testimony, not specific acts of violence, and defendant must show he knew of such reputation when the issue is reasonable apprehension. State v. Maggitt, 517 S.W.2d 105, 107[1] (Mo. banc 1974); State v. Robinson, 556 S.W.2d 73, 74[1, 2] (Mo.App.1977); and State v. Howard, 564 S.W.2d 71, 76[7] (Mo. App.1978).
Appellant contends the present rule operated to deprive him unfairly of corroborative evidence as to who was the aggressor in this homicide. In closing argument the state emphasized that self-defense was not plausible in view of defendant's larger physical stature, and further argued this was a planned killing. Appellant contends that his offer of proof, which included fellow schoolteachers' statements and a hospital record indicating the victim's instability and sometimes odd behavioral patterns, all of which offers dated back several years, deprived the jury of information making the defense of the victim's initial aggression more believable in light of the evidence already adduced as to his being seen at church. Appellant further asserts, that because the victim's mental state was not clearly pictured, defendant was unable to *923 present a complete, coherent, and reasonable defense.
Appellant cites authorities for the proposition that in homicide cases involving self-defense, the rule should be expanded to allow evidence of the decedent's mental illness on the issue of who was the aggressor. In Evans v. United States, 277 F.2d 354[1-3] (D.C.Cir.1960), a conviction was reversed and remanded for exclusion of evidence of deceased's mental insanity known by the deceased's wife. This is one of a line of cases admitting specific acts of violence as well as general reputation evidence; however, the specific grounds of the reversal are that the testimony would show the deceased was aggressive when drunk. In State v. Shahane, 56 N.D. 642, 219 N.W. 132, 134[5] (1928), it was held that evidence that deceased was insane and dangerous when insane was similar to evidence of aggressiveness when intoxicated, and should similarly be admitted. Both of these cases involve the element of violence of the deceased, which does not directly appear in this record. Appellant's contention fails because none of the tendered offers of proof fit the requirement that the evidence be of deceased's tendency to be violent and turbulent. The present rule, based on relevancy, is well founded and generally accepted, and should not be abandoned.
V
This is the certified question. Appellant contends the admission of his confession was erroneous as, under the totality of the circumstances, he did not voluntarily, knowingly, and intelligently waive his right to be silent or consult with an attorney before making the confession. The facts and sequence of defendant's interview by police officials on February 3,1978, at the Jackson County Jail have been noted above and need not be repeated.
Once the admissibility of a statement or confession has been challenged, the burden of proving its voluntariness falls upon the state, which must show voluntariness by a preponderance of the evidence. State v. Olds, 569 S.W.2d 745, 751[4] (Mo. banc 1978). The test for voluntariness is whether the totality of the circumstances deprived defendant of a free choice to admit, to deny, or to refuse to answer, and whether physical or psychological coercion was of such a degree that defendant's will was overborne at the time he confessed. State v. Higgins, 592 S.W.2d 151, 158[8] (Mo. banc 1979).
In the totality of circumstances in this case, it is established that defendant was counselled not to talk about the bank robbery charge, and this was respected by the officers. It is equally established that Buckles subsequently and voluntarily engaged in a discussion of Donald Stewart, distinct from the robbery charge. He asked to see a photograph of Stewart, became emotional, asked to make a "deal," and confessed to Stewart's murder, after which he executed a waiver of his rights against interrogation without presence of counsel.[1] It was not improper for the officers to continue the interrogation of defendant *924 with respect to homicide after clarifying they were not interested in the bank robbery. See United States v. Johnson, 529 F.2d 581, 584 (8th Cir. 1975). This record provides a basis for the trial court's ruling in satisfaction of and free of conflict with State v. Oldham, supra. Conflicts, if any, in the evidence were for the trial court to resolve, and this Court defers to the trial court's superior position in which to determine credibility. Mo.Dig., Crim.Law, Key Nos. 414, 532(2) and 1153(1).
VI
Appellant argues that his confession was obtained in violation of Disciplinary Rule 7-104(a)(1), Rule 4, Code of Professional Responsibility; that the resulting evidence was illegally obtained, and therefore not properly available for use by the prosecution. Professional responsibility of attorneys is a factor to be considered in evaluating the admissibility of confessions, but once waiver is shown, the Code of Professional Responsibility has no role in admissibility. State v. McConnell, 529 S.W.2d 185, 189[4] (Mo.App.1975). Appellant's argument is that it was the trial court's duty under the Code to prohibit the state from using any evidence obtained from the statement obtained in violation of this rule.
Appellant applied for a writ of prohibition against the use of this statement and the evidence obtained on the same grounds. The motion was quashed; appeal taken to the Supreme Court and transfer to the Court of Appeals where order was entered sustaining the trial court's quashing of the motion without an opinion (State ex rel. Gurney Edward Buckles v. Wilson, WD 30, 873). Assuming presence of some disciplinary rule violation, no precedent is cited or found incorporating this type "fruit of the poisonous tree" approach to excluding the obtained evidence. The McConnell rationale excluding disciplinary rule considerations from admissibility questions where waiver and voluntariness appear is applicable.
VII
Appellant's contention that the trial court erroneously failed to sustain the motion for directed verdict of acquittal of capital murder for failure to prove premeditation is without merit. Under the prosecution's theory, the evidence clearly supported the inference that Buckles planned to kill, rob, and use the car of Stewart in the "planned" bank robbery. See State v. Smart, 485 S.W.2d 90, 93[2] (Mo.1972) for the proposition that premeditation for any duration, however brief, is sufficient. As pointed out in I, supra, error, if any, would not be prejudicial regarding this submission because defendant was not convicted of capital murder.
VIII
Appellant contends the state failed to meet its burden of proof regarding self-defense and second degree murder. Once a prima facie showing of self-defense is made, the burden is on the state to rebut by showing the killing was not justifiable. State v. Ford, 491 S.W.2d 540, 542[3] (Mo. 1973). The state met this burden. Under the evidence favorable to the verdict, defendant was bigger and stronger than the victim, warned him he would take the knife away and use it on him, was not wounded by the victim, and after taking the knife defendant no longer experienced any fear. Nevertheless, he did not try to utilize any available avenue of escape or avoidance, ignored the victim's plea with defensively raised hands to stop, stabbed him repeatedly both in and out of the car, placed the victim's body in the river, and fled.
Similarly, the state met its burden of providing evidence that appellant did not kill out of fear, anger, or agitation suddenly provoked by the victim's unexpected acts. State v. Holt, 592 S.W.2d 759, 764[2] (Mo. banc 1980). The previously discussed evidence on lack of self-defense and premeditation is sufficient to support these submissions and orders overruling defendant's motions for acquittal.
The judgment below is affirmed.
*925 DONNELLY, C. J., and RENDLEN, WELLIVER, MORGAN and HIGGINS, JJ., concur.
SEILER, J., dissents in separate dissenting opinion filed.
BARDGETT, J., dissents and concurs in separate dissenting opinion of SEILER, J.
SEILER, Judge, dissenting.
I respectfully dissent. Appellant's confession should have been suppressed. It was obtained in violation of Miranda v. Arizona, 384 U.S. 436, 86 S.Ct. 1602, 16 L.Ed.2d 694 (1966), Edwards v. Arizona, 451 U.S. 477, 101 S.Ct. 1880, 68 L.Ed.2d 378 (1981), and State v. Oldham, 618 S.W.2d 647 (Mo. banc 1981).
Appellant had been arrested in Las Vegas, Nevada, on January 20,1978, by agents of the Federal Bureau of Investigation for robbery of the Farmers State Bank in Rosendale, Missouri, which occurred on January 16, 1978. A federal bank robbery indictment was returned in Kansas City on January 18, 1978. Also pending against appellant was a three count felony complaint in Holt County, Missouri, filed January 21,1978, wherein appellant was charged with stealing $4,200 from the Farmers State Bank, as well as with armed criminal action and tampering with Stewart's automobile.
Upon his arrest in Las Vegas, appellant was given his Miranda warnings, declined to give a statement, and requested an attorney. He was returned to Kansas City where, on February 2, 1978, he was arraigned by the federal authorities on the bank robbery charge, and appointed a federal public defender. Defendant talked with his lawyer that same day. At this point, under Edwards v. Arizona, supra, and State v. Oldham, supra, defendant was not subject to further interrogation by the police unless defendant himself initiated contact with the police. The following day, February 3,1978, Sergeant Anderson of the Missouri Highway Patrol, Agent Holtslag of the Federal Bureau of Investigation, and two county sheriffs went to the Jackson County jail where appellant was being held to interrogate him. This contact was initiated by the officers, not appellant, and "Buckles' indication [that] he would see what the officers wanted" cannot be taken as an initiation by defendant of exchanges with the officers.
Agent Holtslag, who was the chief investigating officer in regard to the bank robbery, was present for possible additional federal violations and to assist in questioning appellant, because, as he put it, he had "the most well-rounded knowledge of the events" prior to the bank robbery. Sergeant Anderson was there to investigate the bank robbery and what he believed to be a possible murder. One Donald Stewart, a resident of Columbia, Missouri, had not been seen since January 13,1978, and Stewart's car, a Chevrolet Nova, had been used in the bank robbery getaway and then abandoned. Each of the four officers was a veteran officer, their combined experience totaling 40 to 50 years in law enforcement work. The Federal Bureau of Investigation had solved the bank robbery (which the agent said was not well planned or professionally executed) in less than forty-eight hours and, as said, within four days had located and arrested appellant.[1] It was the theory of the state that appellant had killed Stewart to obtain the automobile to use in the bank robbery, so the officers, while professing no further interest in the bank robbery, were in fact desirous of connecting the two (which the state did at trial to prove intent, motive and premeditation. See part II of principal opinion). The officers, either singly or in combination, were aware of the foregoing as they embarked upon the interrogation of appellant.
Sergeant Anderson, who conducted the interrogation, knew before going to the jail that Buckles was represented by counsel, but made no effort to contact appellant's *926 lawyer before the interview. It is unclear from the record whether the other law enforcement officers also knew this prior to the first few minutes of the interview, but it is undisputed that appellant before making any statements whatsoever told all four investigators at the outset that he was represented by counsel who had advised him "not to talk to any law enforcement officers." One of the officers then asked, "[A]bout the bank robbery?" to which Buckles replied, "Yes."[2] Buckles was again given his Miranda warnings, asked to sign a waiver of his rights and refused to do so. After further questioning, he made incriminating statements concerning the murder of Stewart and then signed the waiver. At his trial, over objection and motion to suppress, his statements were introduced against him.
On appeal, appellant claims the trial court erred in overruling his motion to suppress his February 3 statement and admitting same in evidence, because taken in violation of his fifth, sixth, and fourteenth amendments right to counsel. "[O]nce a defendant has challenged the admissibility of a statement or confession made while in police custody, the burden is on the state to demonstrate its elicitation comported with controlling constitutional requirements and that the statement was voluntarily made." State v. Higgins, 592 S.W.2d 151, 158 (Mo. banc 1979).
Miranda held "that an individual held for interrogation must be clearly informed that he has the right to consult with a lawyer and to have the lawyer with him during interrogation under the system for protecting the [fifth amendment] privilege ...." Miranda v. Arizona, 384 U.S. 436, 471, 86 S.Ct. 1602,1626,16 L.Ed.2d 694 (1966). The fifth amendment right to counsel depends on in-custody interrogation, not on a charge or charges having been filed. The Supreme Court in Edwards v. Arizona, 451 U.S. 477, 101 S.Ct. 1880, 68 L.Ed.2d 378 (1981), pointed out that the Arizona Supreme Court in concentrating on the voluntariness of the defendant's confession, determined by the totality of the circumstances, misunderstood, as does the principal opinion herein in its reliance on the totality of the circumstances, "the requirement for finding a valid waiver of the right to counsel, once invoked." That depends, instead, upon a showing that defendant "understood his right to counsel and knowingly and intelligently relinquished it." Id. at 484,101 S.Ct. at 1884. Edwards established an objective means of determining whether the right to counsel, once invoked, has been honored by the interrogating officers. The Court stated that, once a suspect has requested counsel, he cannot be subject to further interrogation without counsel, unless he initiates the contact. Id. at 484-85, 101 S.Ct. at 1884-85. Establishment of this easy-to-follow rule gives lower courts guidelines to follow and eliminates the need for a case-by-case analysis which results in "inconsistent results based on virtually indistinguishable facts." Note, Edwards v. Arizona: The Burger Court Breathes New Life into Miranda, 69 Cal.L.Rev. 1734, 1744 (1980-81). This court in State v. Oldham, 618 S.W.2d 647 (Mo. banc 1981) applied Edwards for the first time, stating:
Resolution by this Court of the issue presented has been simplified by the guidance now found in the very recent case of Edwards v. Arizona, 451 U.S. 477 [101 S.Ct. 1880, 68 L.Ed.2d 378] (1981), which was not available to the trial judge, the parties at time of submission nor the Western District at time of transfer.
Id. at 648-49. The Oldham court formulated the following test, which consists of asking two questions, to determine whether a defendant's right to counsel has been violated: "(1) Did the accused, after having expressed a desire for assistance of counsel, initiate further communication? (2) If the *927 answer to one is `yes' did the accused do so voluntarily, knowingly and intelligently?" Id. at 649. Oldham further holds that if the answer to (1) is no the inquiry ends and the confession is inadmissible.
Here, the accused had expressed a desire for assistance of counsel, thereby expressing his inability to act in his own best interests, and was in fact represented by appointed counsel. The fact that there were two sovereigns prosecuting appellant under different charges and that his appointed counsel was for the federal charge does not change this. To make that the determinative factor would be to encourage circumvention of a defendant's constitutional rights. United States v. Downing, 665 F.2d 404, 407 (1st Cir. 1981). It would permit officers to interrogate a defendant about any suspected criminal activity except the specific charge for which counsel had been appointed. Whether his appointed counsel would have defended appellant in court with respect to the state felony charges or not, the federally appointed counsel was the only counsel appellant had at the time.[3] This fact was known to the interrogating officers prior to the questioning that elicited the incriminating responses, as was the fact that there were both state and federal charges pending against appellant. There is no reason why appellant's appointed counsel, at this early stage, would limit his advice not to talk to law enforcement officers to the federal bank robbery charge when various state charges interrelated with the bank robbery and growing out of it were pending, or why the experienced officers would expect otherwise. There is no question that the officers, not the accused, initiated the further communication which took place at the Jackson County jail. Because the officers initiated the interview after appellant had invoked his fifth amendment right to counsel, it is unnecessary to answer the second question set out in Oldham.
Although the principal opinion recognizes that once a defendant is represented by counsel he is not subject to further questioning unless he initiates further communication with his interrogator, Edwards v. Arizona, supra, it avoids application of the rule by taking the position that appellant never invoked his right to counsel for anything other than federal bank robbery charge. This ignores appellant's original request for counsel upon arrest, his subsequent interview with counsel and the blanket advice not to talk to law enforcement officers, and requires that appellant's answer "yes" to the officers' question "About the bank robbery?" be treated as amounting to more than a direct answer to the precise question put; that it be taken, first, as amounting to the officers' being assured by appellant that his lawyer said it was all right to talk to them about any suspected crimes other than the bank robbery (even though the officers were highly suspicious, if not convinced, that the car theft and disappearance of its owner were directly connected to the bank robbery) and, second, a willingness on appellant's part, despite his having earlier requested counsel, now to submit to questioning without advice of counsel as to all else other than the bank robbery.
The facts are that a three count felony complaint had been filed by the Holt County prosecuting attorney on January 21, 1978, and was pending against appellant when counsel was appointed for him by the federal magistrate on February 2, 1978, on which day appellant talked with his lawyer. These facts were known to the law enforcement officers. There is nothing in the record to support the idea that appellant's counsel was not aware of the three count state felony complaint, all counts of which grew out of the same bank robbery, or that counsel limited his advice to advising appellant not to talk about the bank robbery. On the contrary, the record shows that appellant told the officers at the outset of the *928 February 3, 1978, interrogation that his lawyer had advised him not to talk to law enforcement officers.
Why was the question, "About the bank robbery?", put to appellant? It is fair to say the federal and state officers, who were working as a team, knew that appellant had invoked his fifth amendment right to counsel (he told them he had a lawyer) and that his sixth amendment right to counsel had attached (Agent Holtslag, in particular, testified about this), that appellant had been advised in broad terms not to talk, and that they needed a waiver if they were to interrogate defendant further, regardless of whether the questions were as to federal or state suspected crimes. The question put was deft and clever, but it produced only a colorable waiver, far short of meeting the government's burden of showing a knowing, intelligent and voluntary relinquishment or abandonment by appellant of a known right or privilege. Edwards v. Arizona, 451 U.S. at 482, 101 S.Ct. at 1883. The question did not call for a response from appellant as to whether counsel had said it was all right to talk with law enforcement officers about anything but the bank robbery. It does not follow that because counsel said not to talk about the bank robbery that counsel had said it was all right to talk about anything and everything else. That question was never put to appellant. Appellant answered the question put. He did not say he was free or willing to talk about matters other than the bank robbery.
If appointed counsel had done his job (and we cannot assume counsel was substandard or did not give appellant sound advice), appellant would have answered such a question, had it been put to him, in the negative. We all know that his lawyer would not have told him to talk to law enforcement officers as to the whereabouts of the missing man whose automobile he had stolen to commit the bank robbery, if for no other reason that that it might bear on the issues in the bank robbery case.[4] The principal opinion proceeds as if the question put to appellant about not talking to the officers were "Only about the bank robbery?" or "Just about the bank robbery?". But that was not the question asked. Significantly, the officers did not ask appellant whether counsel had said it would be all right for appellant to talk with law enforcement officers as to the whereabouts of Donald Stewart.
Although the principal opinion attempts to distinguish Edwards and Oldham from the instant case, the facts in all three cases are quite similar. The defendants in the three cases were all subjected to custodial interrogation. All three defendants during an earlier interrogation had indicated that they wanted to exercise their fifth amendment right to counsel. Subsequently, law enforcement authorities initiated contact with the defendants-none of whom during the subsequent interrogation requested counseland the contact resulted in incriminating statements which, in Edwards and Oldham on similar facts to those before us, were held inadmissible.
The principal opinion also relies on the fact that appellant signed a waiver. Such reliance is misplaced. In the Oldham case, the defendant also signed a waiver.[5] This did not avail the state, once a violation of the Edwards rule occurred. An express written waiver does not inevitably establish waiver. The question remains whether defendant in fact effectively waived his Miranda rights. North Carolina v. Butler, 441 U.S. 369, 373, 99 S.Ct. 1755,1757, 60 L.Ed.2d 286 (1979). Edwards also holds that "a valid waiver of that right cannot be established by showing only that he responded to further police-initiated custodial interrogation even if he has been advised of his rights." 451 U.S. at 484, 101 S.Ct. at 1884. *929 It is true that appellant after the officers initiated their interrogation of him about the disappearance of the victim, asked to see a photograph of the victim, but this was a response from appellant to the interrogation initiated by the officers and constitutes neither an initiation of further communication by the appellant in the sense of Edwards nor a predicate for finding a subsequent waiver. Nor can Buckles' inquiry as to whether they could "make a deal" constitute a waiver, as it was clearly in response to the police initiated statement that the Minnesota trip of Buckles and the victim had been traced. One of the necessary facts that must be found before the waiver question is even addressed is that "the accused, not the police, reopened the dialogue with the authorities." Id. at 486 n.9, 101 S.Ct. at 1885 n.9. That necessary fact is missing here. Under Edwards, once appellant invoked his right to counsel, as it is conceded he did here, there was no waiver because the subsequent interrogation was police initiated.
Not only is the first test of Oldham not met here, but the second test is not, either. Despite the principal opinion's invocation of "totality of circumstances", there is no evidence that appellant initiated further communication with the officers or that if he did so it was done voluntarily, knowingly and intelligently. Instead, appellant did no more than react to the accusations of the officersthat they were there to talk about Donald Stewart and that they knew about the Minnesota trip taken by the two. Appellant's reactions to this pressure cannot be considered a waiver of his Miranda rights, no matter if the trial court did find otherwise. The principal opinion is in error in saying it is a matter of credibility. On the stated facts, there was no valid waiver of his right to counsel, earlier invoked. There are no facts present showing that appellant intelligently and knowingly relinquished his right to counsel with respect to the homicide under investigation. He was never asked about this specifically or given a chance to refuse counsel before committing himself.
The trial court erred in admitting into evidence, over objection, the incriminating statements obtained in violation of appellant's fifth and fourteenth amendment rights and the judgment should be reversed and the cause remanded for a new trial.
NOTES
[1] Compare
Edwards v. Arizona, 451 U.S. 477, 101 S.Ct. 1880, 68 L.Ed.2d 378 (1981). This Court finds Buckles's case inapposite on the facts surrounding the circumstances incident to the confession of Edwards and in that area not controlling here. A significant finding of the majority in Edwards states:
We further hold that an accused, such as Edwards, having expressed his desire to deal with the police only through counsel, is not subject to further interrogation by the authorities until counsel has been made available to him, unless the accused himself initiates further communications, exchanges, or conversations with the police.
Id. at 484-85, 101 S.Ct. at 1884-85. As set forth in the body of this opinion Buckles's conduct upon the occasion of the interrogation brings him squarely within the exception noted in the above quotation from Edwards.
State v. Oldham, 618 S.W.2d 647 (Mo. banc 1981). In Oldham the Court quoted with approval the above rule and exception in Edwards as the law in Missouri. Oldham refused to make a statement, requested an attorney and did not in any way initiate further communication from which the challenged statement was taken, in which circumstances it was improper to admit the statement.
[1] On April 25, 1978, appellant pleaded guilty in federal court to the bank robbery charge and was sentenced to fifteen years.
[2] One of the attorneys for the state erroneously attempted to argue at the hearing on the motion for new trial that the question put to appellant after he said his lawyers had told him not to talk to any law enforcement officers was "if that was just concerning the bank robbery." However, it is to be noted that the question actually put to appellant was not so limited, a fact not discussed or considered by the principal opinion.
[3] In fact, counsel was not appointed for appellant on the state charge until December 29, 1978. His federal counsel acted on behalf of appellant on the state charges by requesting dismissal of the state charge on April 25, 1978, and asking if that were not done that appellant be given a speedy trial.
[4] "[T]he primary office performed by appointed counsel parallels the office of privately retained counsel.... His principal responsibility is to serve the undivided interests of his client." Ferri v. Ackerman, 444 U.S. 193, 204, 100 S.Ct. 402, 409, 62 L.Ed.2d 355 (1979).
[5] This fact is not set out in the opinion, but it appears in the record from the testimony of the officer who interrogated appellant.
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291 Md. 663 (1981)
436 A.2d 1387
ELMORE GEE
v.
STATE OF MARYLAND
[No. 137, September Term, 1980.]
Court of Appeals of Maryland.
Decided October 29, 1981.
The cause was argued before MURPHY, C.J., and SMITH, DIGGES, ELDRIDGE, COLE, DAVIDSON and RODOWSKY, JJ.
*664 Claudia A. Cortese, Assistant Public Defender, with whom was Alan H. Murrell, Public Defender, on the brief, for appellant.
Deborah K. Handel, Assistant Attorney General, with whom was Stephen H. Sachs, Attorney General, on the brief, for appellee.
RODOWSKY, J., delivered the opinion of the Court.
Appellant Elmore Gee (Gee) was convicted of grand larceny in the Circuit Court for Prince George's County. His conviction was affirmed by the Court of Special Appeals in an unreported opinion (Gee v. State, No. 97, Sept. Term, 1980, decided September 26, 1980). We granted Gee's petition for certiorari to review the question: "Did the court below err in admitting into evidence the products of an illegal search and seizure of petitioner's wallet?" Gee contends that his Fourth Amendment rights were violated: (1) by the initial search of his wallet by officers of the Metropolitan (District of Columbia) Police Department; and (2) by a subsequent examination by an officer of the Prince George's County, Maryland, Police Department of the wallet's contents, while they were in the custody of the D.C. police. We do not accept these contentions for the reasons hereinafter set forth.
On August 1, 1978 Officer Stephen M. Shedeck, of the Metropolitan Police Department, and his partner, Officer William S. Welch, were on duty in plain clothes in an unmarked police car. About noon, at 11th and U Streets, they observed a Thunderbird, and a pursuing Chevrolet, run a red light. The officers activated the siren and flashing grill lights on their vehicle and gave chase. The Chevrolet stopped and the officers were advised by its occupants that they had just been "robbed" by the people in the Thunderbird. The police resumed the chase of the Thunderbird which reached speeds of between 75 and 85 mph before it went out of control and struck a brick wall at 11th and Clifton Streets, Northwest. Officer Shedeck went to *665 the driver's side of the Thunderbird where he observed a wallet lying on the seat of the car between the legs of the driver, who was later identified as the appellant, Elmore Gee. Officer Shedeck took Gee out of the Thunderbird and Officer Welch took care of the passenger. The wallet was left lying on the car seat at this time. Then the persons in the Chevrolet came to the accident scene. One of them told Officer Shedeck that, earlier that morning, Gee and his companion in the Thunderbird had obtained money and food stamps from the complainant by a flim-flam in which Gee had flashed a special policeman's badge in a wallet. Gee and his companion were placed under arrest for grand larceny by trick. Thereupon Officer Shedeck made a search of the Thunderbird and seized a number of items, including the wallet on the front seat. That wallet contained a special policeman's badge and a number of cards. Officer Shedeck, at the scene, went through every card in the wallet, searching for "[n]othing particular." The wallet and its contents were left by Officer Shedeck with Officer Welch while Officer Shedeck took Gee and his companion to the hospital. Several hours later Officer Welch returned custody of the articles to Officer Shedeck, who in turn transferred custody of them to the property custodian of the Metropolitan Police Department.
Previously, on April 28, 1979, Panala Wilson of Prince George's County had been victimized by a film-flam in which she had been shown a special policeman's badge. Mrs. Wilson gave the police a description of the offenders and the license number of the car which they had used. The trail led to the appellant. It is the theft from Mrs. Wilson which is charged in the instant matter.
On August 3, 1978 a Prince George's County policeman went to the office of the property custodian of the Metropolitan Police Department and there examined Gee's wallet and its contents. That wallet, as well as a special policeman's badge, a business card and certain temporary Maryland driver's licenses which it contained, were introduced in evidence in the instant proceedings after appellant's motion to suppress had been denied.
*666 I
Appellant does not challenge the validity of the initial seizure of the wallet by the D.C. police. But it is appellant's position that, once the wallet was in the custody of Officer Shedeck, it could not validly be searched absent a warrant, because Gee enjoyed a reasonable expectation of privacy in his wallet, as a container. Appellant relies on Arkansas v. Sanders, 442 U.S. 753, 99 S. Ct. 2586, 61 L. Ed. 2d 235 (1979) and Liichow v. State, 288 Md. 502, 419 A.2d 1041 (1980). However, we need not decide, under the "container" cases, whether hairs are to be split between holding this claspless wallet in a folded condition and unfolding it to bring the badge in plain view, or between the unfolded wallet and its compartments containing the business card and licenses. This is because the instant case is controlled by New York v. Belton, 453 U.S. 454, 101 S. Ct. 2860, 69 L. Ed. 2d 768 (1981) which was decided after argument in this Court.
Belton involved the police stop of a speeding car on the New York Thruway. The policeman smelled marijuana and observed an envelope marked "Supergold," which he associated with marijuana, on the floor of the car. He ordered its four male occupants out of the car and placed them under arrest for unlawful possession. "He patted down each of the men and `split them up into four separate areas of the Thruway at this time so they would not be in physical touching area of each other.'" Id. at 456, 101 S.Ct. at 2862, 69 L.Ed.2d at 772. Then the policeman searched the passenger compartment of the car. On the back seat he found a leather jacket belonging to Belton. He unzipped one of the pockets of the jacket and discovered cocaine. The Court of Appeals of New York held that the warrantless search of the zippered pockets of the unaccessible jacket violated the Fourth Amendment.[1] The Supreme Court of the United States reversed. It established a "bright line" rule.
In so doing, the Court clarified the application of the rule *667 in Chimel v. California, 395 U.S. 752, 89 S. Ct. 2034, 23 L. Ed. 2d 685 (1969) to the search of the interior and contents of an automobile incident to the lawful custodial arrest of its recent occupant. It said (453 U.S. at 459-61, 101 S.Ct. at 2864, 69 L.Ed.2d at 774-75):
When a person cannot know how a court will apply a settled principle to a recurring factual situation, that person cannot know the scope of his constitutional protection, nor can a policeman know the scope of his authority. While the Chimel case established that a search incident to an arrest may not stray beyond the area within the immediate control of the arrestee, courts have found no workable definition of "the area within the immediate control of the arrestee" when that area arguably includes the interior of an automobile and the arrestee is its recent occupant. Our reading of the cases suggests the generalization that articles inside the relatively narrow compass of the passenger compartment of an automobile are in fact generally, even if not inevitably, within "the area into which an arrestee might reach in order to grab a weapon or evidentiary item." Chimel, supra, at 763 [, 89 S.Ct. at 2040, 23 L.Ed.2d at 694]. In order to establish the workable rule this category of cases requires, we read Chimel's definition of the limits of the area that may be searched in light of that generalization. Accordingly, we hold that when a policeman has made a lawful custodial arrest of the occupant of an automobile, he may, as a contemporaneous incident of that arrest, search the passenger compartment of that automobile.
It follows from this conclusion that the police may also examine the contents of any containers found within the passenger compartment, for if the passenger compartment is within reach of the arrestee, so also will containers in it be within his reach. United States v. Robinson [414 U.S. 218, 94 *668 S.Ct. 467, 38 L. Ed. 2d 427], supra; Draper v. United States, 358 U.S. 307 [, 79 S. Ct. 329, 3 L. Ed. 2d 327 (1959)]. Such a container may, of course, be searched whether it is open or closed, since the justification for the search is not that the arrestee has no privacy interest in the container, but that the lawful custodial arrest justifies the infringement of any privacy interest the arrestee may have. [Footnotes omitted.]
Belton concludes with the following summary (id. at 101 S.Ct. at 2865, 69 L.Ed.2d at 776):
It is not questioned that the respondent was the subject of a lawful custodial arrest on a charge of possessing marihuana. The search of the respondent's jacket followed immediately upon that arrest. The jacket was located inside the passenger compartment of the car in which the respondent had been a passenger just before he was arrested. The jacket was thus within the area which we have concluded was "within the arrestee's immediate control" within the meaning of the Chimel case. The search of the jacket, therefore, was a search incident to a lawful custodial arrest, and it did not violate the Fourth and Fourteenth Amendments. [Footnote omitted.]
In the instant matter it is not even suggested that Gee's custodial arrest was other than lawful. The search of the passenger compartment of Gee's car was contemporaneous with his arrest. There is no distinction of any legal significance between the zippered pocket of Belton's jacket and Gee's wallet. Belton is dispositive.[2] The search of Gee's wallet by the Metropolitan police did not violate the Fourth and Fourteenth Amendments.
*669 II
Appellant next contends that the Prince George's County police should have first obtained a warrant before inspecting Gee's wallet in the District of Columbia while it was in the custody of the Metropolitan Police Department.[3] Gee reasons that the warrant requirement is the general rule and that there has been no exception to it, which has been recognized by the Supreme Court of the United States, for inter-governmental agency searches and seizures of private yet confiscated property.
In this case Officer Shedeck, incident to Gee's custodial arrest, lawfully searched throughout the entire wallet. The unidentified Prince George's County police officer who subsequently inspected the wallet did no more than what Officer Shedeck had already done. Analogous circumstances were presented in Walter v. United States, 447 U.S. 649, 100 S. Ct. 2395, 65 L. Ed. 2d 410 (1980). There reels of eight millimeter obscene film had been misdelivered to a private party in traditional, securely wrapped, plain packages. That party opened each of the packages which contained individual boxes of film. On the boxes were suggestive drawings and explicit descriptions of the contents. The private party opened several of the boxes and held the film up to the light *670 but could not discern the images. After the private party had turned the film over to the FBI, the agents, without a warrant, viewed the films by use of a projector. The judgment in Walter, reached without any opinion of the Court, was that the search was invalid. Justice Stevens, however, whose opinion announcing the judgment was joined by Justice Stewart, wrote that "there was nothing wrongful about the Government's acquisition of the packages or its examination of their contents to the extent that they had already been examined by third parties." Id. at 656, 100 S.Ct. at 2401, 65 L.Ed.2d at 417. The four dissenting Justices agreed with the quoted portion of Justice Stevens' opinion. Id. at 663, 100 S.Ct. at 2405, 65 L.Ed.2d at 422.
The clear majority of United States Courts of Appeal have held there to be no constitutional violation under circumstances similar to those presented in the instant matter. Where New Jersey authorities had arrested the defendant for carrying a concealed weapon, the subsequent inspection by a federal agent of money taken from the defendant and held for safekeeping was determined not to require a warrant in United States v. Jenkins, 496 F.2d 57 (2d Cir.1974), cert. denied, 420 U.S. 925, 95 S. Ct. 1119, 43 L. Ed. 2d 394 (1975). This was so even though the subsequent inspection, which focused on the serial numbers of bills, revealed that it was "bait money" taken in a bank robbery. The court said that "[n]o reasonable expectations of privacy were invaded and no search occurred when the police officers in this case simply looked again at what they had already lawfully seen." Id. at 74. Where the entry by fire marshals onto premises which were the subject of a suspected arson was justified by exigent circumstances, the subsequent removal of physical evidence of arson by Delaware State Police, acting without a warrant, was valid since no greater invasion of privacy resulted. Steigler v. Anderson, 496 F.2d 793 (3d Cir.), cert. denied, 419 U.S. 1002, 95 S. Ct. 320, 42 L. Ed. 2d 277 (1974). In United States v. Grill, 484 F.2d 990 (5th Cir.1973), cert. denied, 416 U.S. 989, 94 S. Ct. 2396, 40 L. Ed. 2d 767 (1974), a federal agent who had no warrant went into the personal belongings of a federal prisoner being *671 held awaiting trial in a county jail in Palm Beach, Florida in order to test whether a key taken from the arrestee would fit the lock on a bag of cocaine which had been seized in the Bahamas. In sustaining the search, the court said that the underpinning of the cases which find no constitutional violation is that "the items in question have been exposed to police view under unobjectionable circumstances, so that no reasonable expectation of privacy is breached by an officer's taking a second look at matter with respect to which expectation of privacy already has been at least partially dissipated." Id. at 991. Accord, United States v. Lewis, 504 F.2d 92 (6th Cir.1974), cert. denied, 421 U.S. 975, 95 S. Ct. 1974, 44 L. Ed. 2d 466 (1975); United States v. Gargotto, 476 F.2d 1009, 1014 (6th Cir.1973), cert. denied, 421 U.S. 987, 95 S. Ct. 1990, 44 L. Ed. 2d 477 (1975) ("Evidence legally obtained by one police agency may be made available to other such agencies without a warrant, even for a use different from that for which it was originally taken."): Gullett v. United States, 387 F.2d 307, 308 n. 1 (8th Cir.1967), cert. denied, 390 U.S. 1044, 88 S. Ct. 1645, 20 L. Ed. 2d 307 (1968); United States v. Romero, 585 F.2d 391, 396 (9th Cir.1978), cert. denied, 440 U.S. 935, 99 S. Ct. 1278, 59 L. Ed. 2d 492 (1979) ("`[E]xamination by another law enforcement agency is not a sufficiently distinct intrusion into the defendants' privacy to trigger the requirements of the Fourth Amendment.'"); Westover v. United States, 394 F.2d 164, 165 (9th Cir.1968) ("[A] search warrant to again look at the money already in police custody does not make sense.").
United States v. Birrell, 470 F.2d 113 (2d Cir.1972), reached a contrary result. There New York City police had seized certain papers of the defendant at a murder scene, the hotel room which had been occupied by the victim. While the defendant's motion for return of the papers was pending, federal authorities reviewed them, sans warrant. This led to the federal conviction of the defendant for perjury which Birrell reversed. Later cases have either distinguished Birrell or declined to follow it. See United States v. FMC Corp., 428 F. Supp. 615, 619 (W.D.N.Y. 1977), aff'd, 572 F.2d 902 (2d Cir.1978) (Birrell limited to its facts; defendant *672 there had strenuously objected to police retention of papers); United States v. Nugent, 389 F. Supp. 817, 820 (W.D. La. 1975) (disapproving Birrell majority's analysis). Cf. United States v. Romero, supra, 585 F.2d at 396.
The state cases seem to be in accord with the general federal rule. For example, in State v. Gonzales, 111 Ariz. 38, 523 P.2d 66 (1974), Glendale, Arizona police had arrested the defendant for public drunkenness. When he was booked at the jail, his clothing was taken from him. Several hours later the Glendale police were advised by the Sheriff's office of Maricopa County, Arizona, that the defendant was a suspect in a murder case in Phoenix. The clothing was impounded, subsequently taken by the Maricopa authorities without a warrant and introduced by the state at the murder trial. The court distinguished Birrell factually. It was held there was no merit to the defendant's contention that the clothing had been illegally seized when it was made available by the law enforcement officers of one subdivision to those of another. See also State v. Williams, 227 So. 2d 331 (Fla. App. 1969); Capps v. State, 505 S.W.2d 727 (Tenn. 1974). Contra, People v. Smith, 103 Cal. App. 3d 840, 163 Cal. Rptr. 322 (1980).
In accordance with the general rule we hold that the inspection by a Prince George's County policeman of the contents of Gee's wallet while it was in police custody did not require a warrant.
Judgment of the Court of Special Appeals affirmed.
Appellant to pay the costs.
NOTES
[1] People v. Belton, 50 N.Y.2d 447, 429 N.Y.S.2d 574, 407 N.E.2d 420 (1980).
[2] Justice Powell, who was with the majority in Belton, gives the following rationale for that decision in his opinion concurring in the judgment in the companion case of Robbins v. California, 453 U.S. 420, 430-32, 101 S. Ct. 2841, 2848-49, 69 L. Ed. 2d 744, 753-54 (1981).
Any "bright line" rule does involve costs. Belton trades marginal privacy of containers within the passenger area of an automobile for protection of the officer and of destructible evidence. The balance of these interests strongly favors the Court's rule. The occupants of an automobile enjoy only a limited expectation of privacy in the interior of the automobile itself. This limited interest is diminished further when the occupants are placed under custodial arrest. Immediately preceding the arrest, the passengers have complete control over the entire interior of the automobile, and can place weapons or contraband into pockets or other containers as the officer approaches. Thus, practically speaking, it is difficult to justify varying degrees of protection for the general interior of the car and for the various containers found within. These considerations do not apply to the trunk of the car, which is not within the control of the passengers either immediately before or during the process of arrest. [Citations omitted.]
[3] The wallet and its contents were brought to the suppression hearing, and the trial which immediately followed, by Officer Shedeck from the property room of the Metropolitan Police Department.
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319 B.R. 192 (2005)
In re Kathleen Thelma STEWART-JOHNSON, Debtor.
Kathleen Thelma Stewart-Johnson, Plaintiff,
v.
Sallie Mae Servicing; Texas Guaranteed Student Loan Corporation, Defendants.
Bankruptcy No. 2-02-20129-RJH. Adversary No. 03-292.
United States Bankruptcy Court, D. Arizona.
January 13, 2005.
*194 Alan M. Levinsky, Anderson, Brody, Levinson, Weiser & Horwitz, P.A., Phoenix, AZ, for TGSLC.
OPINION GRANTING DISCHARGE OF STUDENT LOANS
RANDOLPH J. HAINES, Bankruptcy Judge.
After trial, the Court finds and concludes that the Debtor has demonstrated the requisite undue hardship to discharge her student loan obligations. The Court also concludes that Ninth Circuit law that permits a partial discharge does not require a bankruptcy court to consider it in every case where undue hardship has been established, and that the objecting creditor should have the burden of proving the amount of partial discharge that would not impose an undue hardship, but that in any event any amount of this student loan debt would impose an undue hardship on this debtor.
Facts Established at Trial
Kathleen T. Stewart-Johnson ("Debtor") graduated from Arizona State University in December 1994. She consolidated her student loans in 1995. The Debtor contends the amount then due was $22,042.69, and the Texas Guaranteed Student Loan Corporation ("Texas") contends the amount then due was $27,604.93, but the Court concludes this difference is not material to its decision.
The Debtor made regular payments on her student loan in amounts ranging from $100 to $150 per month. The Debtor contends she never defaulted on any payment until April of 2002, and Texas introduced no evidence to the contrary. Given this admirable repayment history, Texas essentially conceded that the Debtor had established that she had made a good faith effort to repay the loans.
The Debtor filed bankruptcy in December of 2002, was granted her discharge in April of 2003, and that same month filed her complaint seeking discharge of her student loans. The parties also dispute the amount currently owing. Texas contends that the amount due as of December 15, 2004, was $47,783.04, whereas the Debtor introduced an Experian Credit Report reflecting that Texas had claimed the past due amount was $55,401. Again, however, the Court determines the difference is not material to its decision. Moreover, because the Experian Credit Report was not introduced for the truth of the *195 matter asserted and would have constituted hearsay had it been offered for that purpose, the only real evidence of the amount of the debt due as of December 15, 2004, was Texas' evidence that it was $47,783.04.
The education for which the Debtor's student loans paid resulted in the Debtor receiving a bachelor's degree in the social sciences, which enabled her to obtain a job with the State of Arizona Child Protection Services. She has worked there for nine years at a monthly gross pay of $3,010. After withholding, her monthly net pay is approximately $2,260. She testified that state workers have received a raise in only one of the nine years she has worked there, and the Court took judicial notice of the State's budget problems that make future substantial increase in state salaries unlikely. The Debtor also testified that even if she were somehow to find the time and money in order to advance her education, the earning of a masters degree would only increase her salary by $40 per month.
The Debtor's living expenses are extremely frugal. She sold her family home to reduce living expenses and currently resides in a rental home for a rent of $895 per month. All of her regular monthly expenses appear to be frugal, including her car payment, telephone, utilities, basic cable, car insurance, child care expenses, food, clothing, transportation, and vacation and grooming. Texas introduced no evidence to the contrary. In addition, the Court noted that her monthly expenses contained no amounts for contingencies nor for uncovered medical care. At closing argument, the Debtor indicated the amount of $50 to $75 per month that she identified as "vacation/grooming" was also intended to include uncovered medical expenses. The Court also notes there is no amount reserved for internet service, subscriptions or entertainment.
After deducting the budgeted expenses from her net take-home pay, the difference is only approximately $85.
Texas introduced no affirmative evidence that any of these expenses was excessive or not reasonably necessary for a minimal standard of living for the Debtor and her dependents. On cross-examination, Texas did establish that some of the child care costs are sometimes borne by the Debtor's ex-husband, and that she may not regularly owe additional taxes of $1,200 per year in excess of withholding, which the Debtor disputed. Texas also established that some amounts that are withheld from the Debtor's gross pay may not be mandatory, but the Court finds and concludes these amounts are all de minimis and in any event the protections they provide are part of a minimal standard of living.
The Debtor is a single mother raising two children. The daughter, although 20, has only a GED degree and apparently lacks any skills or training with which she could earn a sufficient income to contribute substantially to household expenses. The son is only 11 so it will be many years before he can become self-sufficient. Moreover, he is a good student who probably should obtain a college education. The Debtor hopes he will attend a community college for two years before going to a university, and that he may obtain an athletic scholarship to cover such expenses, but the Court may take judicial notice that students who earn such full athletic scholarship are undoubtedly a very small percentage of the 11 year olds who hope for them. Although both parents may have to contribute to the son's future college education, apparently neither of them has set aside any funds for that purpose; in any *196 event the Debtor's budget does not so provide.
The Brunner Test is Satisfied
The Ninth Circuit has adopted the Brunner test for discharge of student loans.[1] This test requires the debtor to prove: (1) that she cannot maintain, based on current income and expenses, a "minimal" standard of living for herself and her dependents if forced to repay the loans; (2) that additional circumstances exist indicating that this state of affairs is likely to exist for a significant portion of the repayment period of the student loans; and (3) that the debtor has made good faith effort to repay the loans.
As noted above, Texas essentially conceded that the Debtor had demonstrated the third prong, and in any event the Court so finds based upon her admirable repayment record leading up to shortly before the filing for bankruptcy.
Although many cases seem to assume that the second prong requires the showing of either extraordinary expenses or a mental or physical handicap that uniquely depresses the debtor's earning capacity, the Ninth Circuit Bankruptcy Appellate Panel has recently clarified that the second prong merely requires the demonstration of "any circumstances, beyond the mere current inability to pay, that show that the inability to pay is likely to persist for a significant portion of the repayment period."[2] That opinion went on to hold that the second prong could be established, as it was in that case, by "evidence that [the debtor] had 'maxed out' in her career."[3]
Based on the evidence presented at trial, this Court concludes that the Debtor demonstrated she has maxed out her career. She used the education loans to obtain a college degree, and she is efficiently using that education and degree precisely in the field where it is most useful, working for the State Department of Child Protective Services. The Court may take judicial notice that Arizona's Child Protective Services is widely regarded as being in a crisis, largely because the highly trained workers in the field are woefully underpaid and overworked. This does not suggest, however, that there is any alternative field in which this Debtor could earn a greater income, nor that she could utilize her education in any way to earn a higher income. Indeed, Texas presented no evidence, either affirmatively or by cross-examination, suggesting otherwise.
As noted above, the only suggestion Texas made that is relevant to the second prong is that the Debtor's child care obligations might not continue indefinitely, either because the ex-husband might provide greater support or because either child might ultimately gain greater self sufficiency. There is, however, no real evidence that those events are likely to occur. Given the likelihood that the Debtor's son should attend college, it appears to the Court that it is far more likely that the Debtor's child care expenses are likely to include college tuition and living expenses, and are therefore likely to increase substantially over the next ten years. Although Texas' evidence did not establish what is the applicable repayment period, the Court concludes that the preponderance of the evidence demonstrates that the *197 Debtor's existing financial condition is likely to persist for a significant portion of the repayment period of the loans, and there is virtually no evidence that it is likely to improve materially.
Finally, with respect to the first prong, the Court finds and concludes that the Debtor cannot maintain, based on her current income and expenses, a minimal standard of living for herself and her dependents if forced to repay the loans. In particular, the Court finds that the Debtor's current expenditures provide her with only a minimal standard of living for herself and her dependents. At best, this means that there is approximately only $85 per month in available disposable income.
While it is possible Brunner intended to impose a more austere lifestyle than that contemplated by the disposable income test of Code § 1325(b),[4] the Court notes that the amounts the Debtor has budgeted for utilities, clothing and transportation are substantially below what the Arizona Chapter 13 Trustees' Guidelines[5] suggest is appropriate for those categories.[6] The Debtor's rent at $895 per month is less than the Guidelines' 35% of gross income, which would calculate to $1,053 per month. The Debtor's monthly car payment of $330 is less than the Guidelines' suggested $450. The Debtor's food budget of $300 is substantially below the Guidelines' suggested $585 for a single adult with two children. The Debtor's budget of $50$75 for "vacation/grooming" and $40 for basic cable, combined, are substantially below the Trustee Guidelines' suggested $150 for recreation, periodicals and cable combined. The Debtor's budget leaves nothing for uncovered medical and drug expenses, for which the Trustee Guidelines permit up to $50 per month where there is insurance and no unusual medical problems. The net difference between Debtor's budgeted income and expenses is $87, which is less than the $90 the Trustee Guidelines suggest for miscellaneous and contingency expenses, for which the Debtor's budget provides nothing. Such an approximate amount for contingencies has been held to be appropriate for § 1325(b),[7] especially when the balance of the budget is quite austere, as it is here.
The Court therefore finds and concludes that the first Brunner prong has been satisfied.
Saxman Does Not Require Bankruptcy Courts to Consider Partial Discharge
The Ninth Circuit has held that once the debtor has demonstrated the requisite undue hardship by satisfying all *198 three prongs of the Brunner test, the Bankruptcy Court nevertheless has equitable power under Code § 105(a) to discharge only part of the debt.[8] Texas here requests that if the Court finds an undue hardship in repayment of the entire debt, that the Court grant only a partial discharge and find that the Debtor can pay $140 per month toward a reduced loan obligation.
Saxman did not establish that it is the Court's duty to determine whether a partial discharge would alleviate the undue hardship, either in every case or even upon request of the creditor. This is because the Bankruptcy Court in Saxman had indicated that it would have granted only a partial discharge if it were permitted to do so by statute or case law. The Ninth Circuit decision therefore merely established that a bankruptcy court may do so if it finds it appropriate, but does not require a bankruptcy court to do so, even if faced with a request for partial discharge.
If Saxman merely grants to bankruptcy courts the discretion to consider whether a partial discharge would be appropriate, but does not require it, this Court would decline to accept the invitation, at least on these facts.[9] It is one thing for a Court to determine that payment of a certain amount of debt would or would not impose an undue hardship. It is entirely another matter to ask the Court to establish exactly how much debt could be paid without creating an undue hardship. This would put the Court into the position of micromanaging the debtor's lifestyle, determining precisely the amount that should be spent each month on variables such as food, clothing, cable television, recreation, subscriptions, retirement savings and grooming. Indeed, the Court could even become involved in adjusting what might normally be considered fixed expenses, such as by requiring the debtor to move to a less expensive home or drive a less expensive car, or even by requiring a reduction in utility expenses by insisting that the debtor adjust air conditioning to maintain the house at 80 degrees during Arizona's hot summers.
Such determinations would impose on the court a much more intrusive role than the court necessarily plays in resolving disposable income disputes for purposes of § 1325(b). Such disposable income determinations are usually made only when the Chapter 13 trustee objects, and that objection usually identifies precisely which monthly expense the trustee believes to be excessive. The Court is therefore in a position to determine whether a specified amount is excessive or not, rather than determining for itself exactly how much should be spent. This also means that the judgment of how much should be spent for each category comes, at least in the first instance, from the trustee rather than the Court. Chapter 13 trustees have far more experience with family lifestyle spending decisions than do bankruptcy judges, who only resolve the rare disputes that are brought before them. Chapter 13 trustees' disposable income decisions are akin to Chapter 11 trustees exercising reasonable business judgment. In that context, *199 the case law is clear that bankruptcy courts should not supplant the trustees' business judgments, but rather merely should determine whether the trustee has exercised appropriate business judgment.[10] Yet if bankruptcy courts were required to determine how much of a partial discharge should be granted, they have to exercise a kind of family business judgment in an adversary context without even the recommendation of a neutral third party such as a trustee. Such a role would be contrary to one of the principal reforms accomplished by the Bankruptcy Code, which was to remove bankruptcy judges from administrative functions and limit them to the proper judicial role of resolving disputes.[11]
This Court therefore concludes that Saxman does not impose on bankruptcy courts an obligation to determine what amount of partial discharge would not pose an undue hardship.
Creditors Should Propose and Prove the Amount of Partial Discharge that Would Not Impose Undue Hardship
At most, Saxman and the procedural reforms of the Bankruptcy Code mean that if a creditor seeks a partial discharge, it should take a position asserting exactly what amount of debt it contends would not pose an undue hardship, as Texas has done here. The court would then merely need to determine whether the creditor has carried the burden of proof that that amount of debt does not impose an undue hardship.[12] Such a procedure would allow the court to confine itself to resolving discrete disputes rather than deciding administrative matters.
Nevertheless, even if the Court were required to determine whether and what amount of partial discharge is appropriate, and even if the Debtor retained the *200 burden of proof as to partial discharge, on these facts the Court finds and concludes that no amount of partial discharge could alleviate the undue hardship. As noted above, the Court finds that the Debtor's budget would not permit any amount to be paid on the student loans without reducing the Debtor's already minimal lifestyle. Texas has certainly not demonstrated that there would be no undue hardship for the Debtor to pay $140 per month to satisfy the remaining balance due after the partial discharge that Texas suggests.
Conclusion
For the foregoing reasons, the Court finds and concludes that excepting the Texas debt from discharge would impose an undue hardship on this Debtor and her dependents, that the amount of partial discharge proposed by Texas would also impose an undue hardship on the Debtor and her dependents, and that such undue hardship would continue to exist if any portion of the Texas debt were not discharged.
The foregoing constitutes findings of fact and conclusions of law. The Court will enter a separate judgment discharging this Texas student loan debt in its entirety.
NOTES
[1] United Student Aid Funds, Inc. v. Pena (In re Pena), 155 F.3d 1108, 1112 (9th Cir. 1998), citing Brunner v. New York State Higher Educ. Servs. Corp., 831 F.2d 395, 396 (2nd Cir. 1987).
[2] Nys v. Educ. Credit Mgmt. Corp. (In re Nys), 308 B.R. 436, 444 (9th Cir. BAP 2004).
[3] Id.
[4] For purposes of confirming a Chapter 13 plan over the objection of a trustee or creditor, 11 U.S.C. § 1325(b)(2) defines "disposable income" as "income which is received by the debtor and which is not reasonably necessary to be expended . . . for the maintenance or support of the debtor or a dependent of the debtor . ..." Although the Court is not aware of any case law expressly so holding, this definition seems impose a standard essentially identical to the "minimal standard of living" required by Brunner and Pena. The Court is aware that some student loan discharge cases refer to federal poverty standards, but they cite no basis for doing so. Although "undue hardship" is not defined in the Bankruptcy Code, it makes more sense to adopt a standard found elsewhere in the Code, that serves a very similar purpose, rather than one that bears no known relationship to the Code or discharge issues.
[5] Available at http://www.maneyl3trustee. com/trguidelines 11-03.pdf
[6] The Debtor's budget is $235 for utilities, $100 for clothing and $225 for transportation and car insurance. The Arizona Chapter 13 Trustees' Guidelines for those categories are $388, $150 (for a family of three) and $240, respectively.
[7] In re Greer, 60 B.R. 547, 553 (Bankr. C.D.Cal.1986).
[8] In re Saxman v. Educ. Credit Mgmt. Corp. (In re Saxman), 325 F.3d 1168, 1173-75 (9th Cir.2003).
[9] The issue may be different if there is more than one student loan at issue. Here, however, all of the student loans have previously been consolidated. For excellent analyses of the difficulties and ambiguities the partial discharge option can create for bankruptcy courts, either with single or multiple student loans, see Mason v. Help Servs. Group, Inc. (In re Mason), 303 B.R. 459 (Bankr.D.Idaho 2004), aff'd, 315 B.R. 554 (9th Cir. BAP 2004), and Madeleine Wanslee, Ninth Circuit Embraces Partial Discharge of Student Loans, NORTON BANKRX. ADVISER, Aug. 2003, at 6, 8.
[10] Robertson v. Pierce (In re Chi-Feng Huang), 23 B.R. 798 (9th Cir. BAP 1987) (adopting the business judgment rule for court approval of trustee's motion to reject an executory contract). See In re Dalen, 259 B.R. 586 (Bankr. W.D.Mich.2001) (extensive analysis of the role of the court in approving trustees' settlements, including application of the business judgment rule).
[11] This reform was based largely upon the recommendation of the Bankruptcy Commission, which concluded that "making an individual [bankruptcy judge] responsible for conduct of both administrative and judicial aspects of a bankruptcy case is incompatible with the proper performance of the judicial function." Report of the Commission on the Bankruptcy Laws of the United States, Part 1, at 93, H.Doc. #93-137, 93d Cong, First Session (1973). For that reason, "The Commission accordingly recommends that the bankruptcy judges be removed from the administration of bankrupt estates and be restricted to the performance of essentially judicial functions, that is, primarily to the resolution of disputes or issues involving adversary parties and matters appropriate for judicial determination." Id. at 94. Many provisions of the Bankruptcy Code reflect Congress' adoption of that basic principle, and nothing in the language of § 523(a)(8) suggests a departure from that principle. Because the courts, rather than Congress, have created the partial discharge exception to the language of § 523(a)(8), this Court believes that to the maximum extent possible the procedure for applying such exception should be consistent with the principle that bankruptcy courts should decide adversary proceedings simply by ruling in favor of or against a party, rather than by itself determining the appropriate outcome for the situation.
[12] Because the partial discharge is in effect a case-law exception to the undue hardship provision of Code § 523(a)(8) (which is already an exception to an exception), it seems appropriate that the burden of proof should be placed on the party who seeks to demonstrate an exception from statutory language. Saxman, of course, holds that before the partial discharge may even be considered the debtor must first have carried her burden of proof in establishing the undue hardship if required to repay the entire debt.
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319 B.R. 384 (2005)
In re SELHEIMER & CO.
Securities Investor Protection Corporation, Plaintiff,
v.
Edward P. Murphy, III, Defendant,
Edward P. Murphy, III, Third-Party Plaintiff,
v.
Perry Selheimer, Peter Cardamone, Ernest F. Grothe, Preston Heckler, and Edward Suarez, Third-Party Defendants.
Bankruptcy No. 02-0756. Adversary No. 04-0669.
United States Bankruptcy Court, E.D. Pennsylvania.
January 20, 2005.
*387 OPINION
STEPHEN RASLAVICH, Bankruptcy Judge.
Introduction
The Plaintiff has filed a motion to dismiss the Defendant's third-party complaint. The Defendant opposes the motion. Hearing on the matter was held on October 19, 2004. For the reasons set forth below, the motion will be granted.
Factual Background
Plaintiff has filed suit against Edward Murphy III (Murphy) under § 723(a) of the Bankruptcy Code. Under that statute, where the liquidation of a bankrupt partnership will not yield enough to pay creditors in full, the individual partners become liable for the shortfall. See 11 U.S.C. § 723(a). Murphy has filed an Answer to the Complaint as well as a Third-Party Complaint against five other individuals alleged to be partners of the Debtor partnership. SIPC has now filed a motion to dismiss the Third-Party Complaint for lack of subject matter jurisdiction.
Analysis
Federal Rule of Civil Procedure 12(h) provides that "[wjhenever it appears by suggestion of the parties or otherwise that the court lacks jurisdiction of the subject matter, the court shall dismiss the aaction,"F.R.CP. 12(h)(3)(emphasis added[1] This jurisdictional restriction may not be overridden by any procedural rule such as "impledader" As a leading commentator on federal practice has note:
The impledader rule [14] is merely a procedural procision: it cannot affect the and venue.... [T] impledader claim, as ecery claim asserted in federal court, must be supported by federal subject matter jurisdictio.....
3 Moore's Federal Practice, § 14.03[4] (Matthew Bender 3d)And the provisions or rule 14, do not change tha see.B.R 7014, Advisory committee Note (1983) port ot deal with questions of jurisdection)" In bankruptcy cases, teh jurisdic tional scope is defined by 28 U.S.C § 1334, A leading commentator explains;
Adversary proceedings in bankruptcy present therir own peculiar jurisdictional diffeiculties for the analogous use of Rule 7014. The jurisdictional requirement of 28 U.S.C 1334 may prevent a bankuptcy court from hearing an otherwise appropriate thir-party claim that is not at least related to a case under the bankruptce code. As the 1983 adcisory committe Note indicates, Rul 7014 does not purport to deal with questions of jurisdiction."Consequent a part to an adversary proceeding who seeks to implead a third pary under Rule 7014 must be prepared to establish jurisdic tion for the court to hear the third-party claim by showing that the claim is at leat related a case under the bankruptcy Code within the meaning of the jurisdictiaon statute.
10 Collier on Bnkruptcy ¶ 7014.02 (Matthew Bender 15th Ed. Revised). Accordingly, *388 this Court must possess subject matter jurisdiction over the third-party claims if they are to be heard here. Id. As Judge Fox of this district has explained, bankruptcy adversary proceedings can be grouped into three categories for purposes of determining subject matter jurisdiction under 28 U.S.C. § 1334:
First, there are "core" proceedings, which may be heard and resolved by the bankruptcy court via final judgment. See 28 U.S.C. § 157(b)(1). Core proceedings represent those disputes so intertwined with the bankruptcy process that Congress has the power under Article I of the Constitution to direct a nontenured judicial officer (i.e., bankruptcy judge) to render a final determination of their merits. See 1 Norton Bankruptcy Law and Practice 2d, § 4.26 at 4-154 (1999) ("The word `core' was a shorthand word employed to signify issues and actions that traditionally formed part of the functions performed under federal bankruptcy law"). Core proceedings thus represent a subset of "related proceedings" in that they "arise under" or "arise in" the bankruptcy case.
A proceeding is classified as "core" under 28 U.S.C. § 157 "if it invokes a substantive right provided by title 11 or if it is a proceeding that, by its nature, could arise only in the context of a bankruptcy case." [citations omitted]
The second category of proceedings are referred to as "non-core" or "related" proceedings. A bankruptcy court may hear such proceedings but may submit only proposed findings of fact and conclusions to the district court, see U.S.C. § 157(c)(1), unless all parties agree that a final judgment may be entered in bankruptcy court. U.S.C. § 157(c)(2); see, e.g., Halper v. Halper, 164 F.3d 830, 836 (3d Cir.1999). The Court of Appeals has defined a non-core proceeding in the following terms:
Non-core proceedings include the broader universe of all proceedings that are not core proceedings but are nevertheless "related to" a bankruptcy case. See 28 U.S.C. § 157(c)(1). "[T]he test for determining whether a civil proceeding is related to bankruptcy is whether the outcome of that proceeding could conceivably have any effect on the estate being administered in bankruptcy." [citations omitted] "[T]he proceeding need not necessarily be against the debtor or against the debtor's property." [citation omitted]. "`A key word in [this test] is conceivable. Certainty, or even likelihood, is not a requirement. Bankruptcy jurisdiction will exist so long as it is possible that a proceeding may impact on the debtor's rights, liabilities, options, or freedom of action or the handling and administration of the bankrupt estate.' " [citation omitted].
Finally, the third category of proceedings are those which fall outside the definition of "non-core" because their outcome would have no effect upon the bankruptcy case. The outcome of a dispute will not have any effect on the bankruptcy case typically because it will not affect the property to be administered in the bankruptcy case, the total assets to be distributed, nor the total claims to be paid. Over these proceedings a bankruptcy court has no subject matter jurisdiction. See, Pacor, Inc. v. Higgins, 743 F.2d 984 (3d Cir.1984).
Kivitz v. Merchants Express Money Order Company (hi re R & A Associates, Inc.), Memorandum Opinion and Order, 00-0241, pp. 7-8 (Bankr.E.D.Pa.2000) (Fox, Chief J.), December 21, 2000.
It is SIPC's contention that the impleader claims brought by Murphy against the other partners will not "affect the administration of the Debtor's estate." *389 Motion ¶ 5. Murphy's position is that the third-party claims do indeed affect the estate and points to the Debtor's Statement of Financial Affairs which list the third party defendants as other partners. See Answer, ¶ 5. He explains that the other partners are liable to him under principles of indemnity and contribution. Third-Party Complaint, ¶ 3. So while he is not arguing that his third party claims are "core,"[2] he necessarily argues that they are related to this bankruptcy.
A dispute is "related" to a bankruptcy case when its outcome will affect in some manner the property to be administered by the bankruptcy trustee or the amount or priority of claims to be repaid. See Pacor, Inc. v. Higgins, 743 F.2d 984, 994-996 (3d Cir.1984) overruled on other grds Things Remembered, Inc., v. Petrarca, 516 U.S. 124, 116 S. Ct. 494, 133 L. Ed. 2d 461 (1995). Thus, the lawsuit brought by the SIPC against Murphy is clearly "related" to the underlying liquidation. The outcome of that adversary will affect the assets which may be available for distribution to creditors.
But as Judge Fox's decision in Kivitz notes, third-party indemnity and contribution claims by defendants being sued by the chapter 7 trustee typically will be unrelated to the underlying chapter 7 bankruptcy case because the outcome of the indemnity action will have no effect upon the chapter 7 case:
Third-party complaints which involve the debtor or bankruptcy trustee, either as a third-party plaintiff or third-party defendant, will often have an effect upon the administration of a bankruptcy case because the outcome could affect the size of the estate (if the trustee succeeds as a third-party plaintiff) or could affect the amount of claims asserted against the estate (if the trustee does not prevail as a third-party defendant). Such a potential increase in estate property or potential increase in liabilities of the estate is sufficient to confer subject matter jurisdiction over a bankruptcy proceeding, [citations omitted]
Conversely, third-party claims which do not involve the debtor or the bankruptcy trustee as parties will usually not have any impact upon the administration of the underlying bankruptcy case, unless the subject of the dispute is estate property, [citations omitted] Whether or not the third-party plaintiff obtains contribution or indemnity from the third-party defendants (and thereby is made whole) has no effect on the bankruptcy estate.
* * * * * *
This analysis is consistent with that reached by many other courts: that indemnity or contribution claims made by those who are sued by representatives of the bankruptcy estate against third parties generally fall outside the scope of bankruptcy court jurisdiction, [citations omitted]
Kivitz, supra at pp. 9-11 citing In re Foundation for New Era Philanthropy, 201 B.R. 382, 390-91 (Bankr.E.D.Pa.1996). In this case, it does not matter to the bankruptcy estate or to SIPC whether or not defendants, such as Murphy, are successful in obtaining indemnification or contribution. If SIPC is successful in its litigation, it will recover from Murphy. If SIPC is unsuccessful in suing Murphy, it will not recover anything. None of the claims which Murphy seeks to assert in its *390 third-party complaint would benefit SIPC. All are conditioned upon Murphy's liability to SIPC, and any recovery in the thirdparty action would be payable to Murphy only.
Murphy maintains that the interests of economy would be better served by having all of the claims heard by the same tribunal. T-21. Indeed, there may be facts alleged in the complaint which are also material to the impleader claim. Even so, the Third Circuit has made clear that "the mere fact that there may be common issues of fact between a civil proceeding and a controversy involving the bankruptcy estate does not bring the matter within the scope of section [1334]. Judicial economy itself does not justify federal jurisdiction." Pacor, Inc. v. Higgins, 743 F.2d at 994; accord, e.g., In re Guild and Gallery Plus, Inc., 72 F.3d at 1181.
Does the Court have Supplemental Jurisdiction Over the Third-Party Claims?
At the hearing, SIPC addressed the question of whether the Court might exercise supplemental jurisdiction over the third-party claim. Section 1367 of the United States Code provides:
(a) Except as provided in subsections (b) and (c) or as expressly provided otherwise by Federal statute, in any civil action of which the district courts have original jurisdiction, the district courts shall have supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution. Such supplemental jurisdiction shall include claims that involve the joinder or intervention of additional parties. 28 U.S.C. § 1367. However, bankruptcy courts do not possess section 1367 jurisdiction. In re Porter, 295 B.R. 529, 539 n. 6 (Bankr.E.D.Pa.2003); In re Foundation for New Era Philanthropy, 201 B.R. at 398-99 (and cases cited); Matter of Walker, 51 F.3d 562, 572 (5th Cir.1995). Thus, there is no independent basis of jurisdiction for this Court to hear the third-party claims.
But Even Assuming Jurisdiction Existed, Are Murphy's Claims Properly Brought Under Rule 14?
Even had an independent basis of jurisdiction existed for Murphy's contribution claim, are they properly brought by impleader? Federal Rule of Civil Procedure 14 provides:
When Defendant May Bring in Third Party. At any time after commencement of the action a defending party, as a third-party plaintiff, may cause a summons and complaint to be served upon a person not a party to the action who is or may be liable to the third-party plaintiff for all or part of the plaintiffs claim against the third-party plaintiff.
F.R.C.P. 14(a) (emphasis added). A thirdparty claim may be asserted under Rule 14(a) only when the third party's liability is in some way dependent on the outcome of the main claim or when the third party is secondarily liable to defendant. If the claim is separate or independent from the main action, impleader will be denied. FDIC v. Bathgate, 27 F.3d 850, 873 (3d Cir.1994) citing Wright, Miller & Kane, Federal Practice and Procedure, § 1446 (1990). For the third-party claims to be properly brought under this rule, they must be derivative of SIPC's claims against Murphy. Are they?
Again, the third-party claims are against the other five partners of Selheimer & Co. Under Pennsylvania law, general[3]*391 partners are jointly and severally liable for tortious acts of another partner committed within the scope of the partnership's business. 15 P.S. § 8327(1). Each of the other five partners are independently liable to SIPC for any deficiency resulting from the liquidation. SIPC could just as easily have sued any of the other five. Their liability then is not derivative but is direct. So irrespective of jurisdiction, the claims against the other five partners could not have been brought by impleader.
But Does a Different Rule of Procedure Require that the Other Partners Be Made Co-Defendants?
Given that the other five partners are just as liable to SIPC as Murphy, may SIPC limit its claim to him? Rule 19 of the Federal Rules of Civil Procedure[4] provides:
Persons to be Joined if Feasible. A
person who is subject to service of process and whose joinder will not deprive the court of jurisdiction over the subject matter of the action shall be joined as a party in the action if (1) in the person's absence complete relief cannot be accorded among those already parties, or (2) the person claims an interest relating to the subject of the action and is so situated that the disposition of the action in the person's absence may (i) as a practical matter impair or impede the person's ability to protect that interest or (ii) leave any of the persons already parties subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations by reason of the claimed interest. If the person has not been so joined, the court shall order that the person be made a party.
F.R.C.P. 19(a). Although Murphy has not sought joinder of the other partners per se, a leading commentator states that it is within the Court's discretion to consider the question on its own initiative:
The district court may raise compulsory party joinder on its own motion. The court will rarely be in a position to do so, however, because it usually lacks familiarity with the background facts of the dispute and of the parties' relationships. Moreover, the provision intended to inform the court about necessary parties who are not joined, and the reasons they are not joinedthe pleadings of Rule 19(c) provision which ostensibly requires claimants to apprise the court of necessary partiessimply has not served that function in practice. In cases in which the court does become aware of an absentee who may be needed for just adjudication, however, the court may have a duty to avoid prejudice by applying the compulsory party joinder rule. Such action is especially appropriate in cases in which nonjoinder would impair or impede the absentee' *392 interest, since the absentee has no representative urging its cause.
4 Moore's Federal Practice § 19.02[4][a]. The Supreme Court has described this as a duty to act on the appellate court's part. See Provident Tradesmens Bank & Trust Co. v. Patterson, 390 U.S. 102, 111, 88 S. Ct. 733, 738, 19 L. Ed. 2d 936 (1968) (encouraging Courts of Appeals to raise issue of nonjoinder on own motion to protect "the absent party, who of course had no opportunity to plead and prove his interest below."). And the Third Circuit has held that the problem of joinder can be considered sua sponte on appeal. See Finberg v. Sullivan, 634 F.2d 50, 55 (3d Cir.1980) (en banc). See also Link v. Celebrezze, 236 F. Supp. 599, 600 (E.D.Pa.1964) ("Where a necessary party is absent, it is discretionary with the court whether or not it shall proceed.")
This securities proceeding has been before this Court for over 4 years. During that time, the Court has held a trial lasting over several days and has heard a number of other matters pertaining to the liquidation of this company. This history has given the Court an adequate factual background to consider whether joinder of the other partners should occur.
Preliminary Considerations
The rule's threshold requirement is that the Court can exercise personal jurisdiction over the absent party and that it can do so without comprising its jurisdictional competence. Here, all of the other partners reside in the general area[5] so are subject to service of process. And including them does not affect the basis of jurisdiction: federal question. The Court must then analyze whether complete relief can be accorded without the other partners (subdivision (1)), whether the other partners would be prejudiced if they remained non-parties (subdivision (2)(i)), and whether without their joinder, Murphy might be subject to double, multiple or inconsistent liabilities (subdivision (2)(ii)).
Can the Court Grant Complete Relief in the Absence of the Unjoined Partners?
The Court's first inquiry is limited to whether complete relief can be granted to the persons already parties to the action. The effect a decision may have on the absent party is not material. Field v. Volkswagenwerk AG, 626 F.2d 293, 301 (3d Cir.1980). Here, the relief sought by SIPC is judgment in the amount of any partnership deficiency against Murphy. Can the Court grant complete relief in a partnership deficiency action to the partnership and Murphy when five other partners have not been joined as defendants? The answer to this specific question depends on both bankruptcy and partnership law. Bankruptcy Code § 723 provides, in pertinent part:
(a) If there is a deficiency of property of the estate to pay in full all claims which are allowed in a case under this chapter concerning a partnership and with respect to which a general partner of the partnership is personally liable, the trustee shall have a claim against such general partner to the extent that under applicable nonbankruptcy law such general partner is personally liable for such deficiency.
11 U.S.C. § 723(a). This section holds general partners responsible for all unpaid debtor partnership claims for which they were personally liable prepetition. In re Massetti 95 B.R. 360, 365 (Bankr.E.D.Pa. 1989). In other words, to the extent that partnership claims exceed partnership as *393 sets, "each general partner ... is liable to the partnership's trustee for any deficiency...." H.R.Rep. No. 95-595, 95th Cong. 1st Sess. 381 (1977), U.S.Code Cong. & Admin.News 1978, pp. 5963, 6337. The trustee may seek to recover the full amount of any shortfall or deficiency from each general partner in the partnership and the trustee need not allocate liability among the partners or enforce its rights against all general partners. 6 Collier on Bankruptcy, ¶ 723.02[1][a].
Each general partner is liable, however, only to the extent that such general partner was personally liable for the underlying claims against the partnership. Id. The extent to which a general partner is liable for claims against the partnership is determined by state law. Under the Pennsylvania Uniform Partnership Act, all partners are liable:
(1) Jointly and severally for everything chargeable to the partnership under sections 8325 (relating to wrongful act of partner) and 8326 (relating to breach of trust by partner).
(2) Jointly for all other debts and obligations of the partnership but any partner may enter into a separate obligation to perform a partnership contract.
15 P.S. § 8327. Murphy would be individually (severally) liable for any deficiency caused by the conduct of Mr. Selheimer, his partner.[6] Thus, complete relief could be afforded to the parties without the other partners.
Would the Other Partners Be Prejudiced by Non-Joinder?
Subsection (a)(2)(i) of Rule 19 requires the Court to decide whether the determination of the rights of the parties before it would impair or impede an absent party's ability to protect its interest in the subject matter of the litigation. F.R.C.P. 19(a)(2)(i). What interest might the other partners have in SIPC's deficiency claim against Murphy? The Court posited at the hearing that should SIPC fail to collect the full deficiency from Murphy, it had extant claims against the other partners. T-9. Logically, SIPC would then turn to them for recovery. And if that happened, the other partners might ask why Murphya man whom SIPC has described as quite well off financiallywas not good for the whole amount? Does that constitute an interest that can be protected only by joining them as necessary parties?
In an analogous context, the Third Circuit has held that as between coobligors, one co-obligor may be sued without joinder of its co-obligors. Janney Montgomery Scott, Inc. v. Shepard Niles, Inc., 11 F.3d 399, 410 (3d Cir.1993). That holding implicitly supported the proposition that issue preclusion[7] for or against an absent co-obligor is not a consequence of any final decision for or against the coobligor who is present as a party in a contract action. Id. And the same conclusions should be drawn vis-a-vis partners. *394 Like the co-obligors in Janney, the other partners of Selheimer & Co. are jointly and severally liability to SIPC. This allows SIPC to proceed solely against the partner of its choosing, but it does not preclude a partner who has paid from seeking contribution from another. Thus, the other partners' interest here is the right of contribution and indemnity from Murphy; it is not the right to fix Murphy's deficiency liability at a certain amount. For that reason, their joinder is not required under that subdivision.
Would Failure to Join the Other Partners Subject Murphy to Fundamental Unfairness?
The last potential ground for compulsory joinder is that Murphy might be otherwise subject to double, multiple or inconsistent obligations. But the possibility that Murphy may be the only partner required to pay toward the deficiency is not the equivalent of the unfairness that subdivision (a)(2)(h) guards against. It is instead a common result of joint and several liability and should not be equated with prejudice. As the Third Circuit stated in Janney:
Inherent in the concept of joint and several liability is the right of a plaintiff to satisfy its whole judgment by execution against any one of the multiple defendants who are liable to him, thereby forcing the defendant who has paid the whole debtor protect itself by an action for contribution against the other coliable parties.
11 F.3d at 412.
Payment by Murphy to SIPC in this action does not have any legal effect on what ever right of contribution or indemnification Murphy may have against the other partners. Though federal civil practice, in common with other modern Anglo-American procedural systems, permits a party defendant who claims a right of contribution or indemnity from third persons to protect itself from potentially inconsistent verdicts by impleading the absent party under Rule 14, it is not required to do so; and if it does not, its right to bring a separate actions for contribution or indemnity is unaffected. Janney, 11 F.3d at 412. For that reason, the Third Circuit has concluded that "[a] defendant's right to contribution or indemnity from an absent non-diverse party does not render that absentee indispensable pursuant to Rule 19." Bank of America National Trust & Savings Ass'n v. Hotel Rittenhouse Assocs., 844 F.2d 1050, 1054 (3d Cir.1988). The continuation of this case in the absence of the other five partners does not subject Murphy to the type of unfairness addressed by the rule.
Is Permissive Joinder A Possibility?
While Rule 20 allows for the joinder of certain parties,[8] its utility is limited to plaintiffs and defendants raising counter and crossclaims. 4 Moore's § 20.02[2][b][i]; see also Bathgate, supra, 27 F.3d at 872 (allowing permissive joinder of additional defendants by counter-claim plaintiff). Rule 20 is permissive; it simply does not require the plaintiff to structure the case efficiently. Id. § 20.02[6][b]. It therefore is not ordered on the court's own initiative.
Summary
Because this Court lacks jurisdiction over the claims raised in the third-party *395 complaint, it will be dismissed. Equally, the Court may not compel the joinder of the third-party defendants under Rule 19.
An appropriate order follows.
ORDER
AND NOW, upon consideration of SIPC's Motion for Dismissal of the Third-Party Complaint filed by Edward G. Murphy, III, for Lack of Subject Matter Jurisdiction, the Answer of Murphy to the motion, after a hearing held, and for the reasons set forth in the attached Opinion, it is
ORDERED that the Motion is Granted and that the Third-Party Complaint is dismissed.
NOTES
[1] Bankruptcy Rule 7012(b) incorporates thi
[2] Because they involve claims which can be asserted in state court, they clearly would not be core. "If the proceeding does not invoke a substantive right created by the federal bankruptcy law and is one that could exist outside of bankruptcy it is not a core proceeding...." In re Guild and Gallery Plus, Inc., 72 F.3d 1171, 1178 (3d Cir.1996).
[3] The Court deems the other five to be general partners based on its finding in its previous Opinion in Adv. Proc. Nos. 00-670 through 00-675 (April 4, 2002). In that Opinion, this Court found that Selheimer & Co. never filed a Certificate of Limited Partnership as required by applicable Pennsylvania law (15 P.S. § 8511(a)). See Opinion, pp. 18-19. The failure to follow that formality results in Selheimer & Co. Being treated de jure as a general partnership. See Ruth v. Crane, 392 F. Supp. 724, 733 (E.D.Pa.1975), affd 564 F.2d 90 (3d Cir. 1977) (where no proper certificate of limited partnership has been filed, the limited partnership is not formed, and the parties are treated as general partners as to third persons and creditors); accord Komstein v. Taylor, 68 Dall. & C.2d 7, 12 (1974) ("[A]s a matter of law ... the failure of plaintiffs to sign the certificate of limited partnership... renders them general partners as to third persons, including creditors.")
[4] This rule is similarly incorporated by its Bankruptcy Rule counterpart: B.R. 7019.
[5] According the Third-Party Complaint, they reside in Montgomery County. See ThirdParty Complaint, II 3.
[6] A more detailed examination of the nature and extent of Mr. Murphy's liability as a partner in the firm will be undertaken in connection with the Court's disposition of SIPC's pending Motion for Partial Summary Judgment against Mr. Murphy.
[7] In Pennsylvania, a party may be precluded from relitigating an issue if:
(1) the issue decided in the prior adjudication was identical with the one presented in the later action; (2) there was a final judgment on the merits; (3) the party against whom the plea is asserted was a party or in privity with a party to the prior adjudication; and (4) the party against whom it is asserted has had a full and fair opportunity to litigate the issue in question in a prior action. Sanders v. Sanders, 384 Pa.Super. 311, 319, 558 A.2d 556, 560 (1989) (citation omitted), appeal denied, 525 Pa. 635, 578 A.2d 930 (1990).
[8] This rulewhich is incorporated into the bankruptcy rulesprovides that "[a] persons. . . may be joined in one action as defendants if there is asserted against them jointly, severally, or in the alternative, any right to relief in respect of or arising out of the same transaction, occurrence, or series of transactions or occurrences and if any question of law or fact common to all defendants will arise in the action." F.R.C.P. 20(a).
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524 A.2d 575 (1987)
STATE
v.
Louis CARUOLO.
No. 85-533-C.A.
Supreme Court of Rhode Island.
April 23, 1987.
*577 James E. O'Neil, Atty. Gen., Annie Goldberg, Asst. Atty. Gen., for plaintiff.
John F. Cicilline, Providence, for defendant.
OPINION
WEISBERGER, Justice.
This case comes before us on the defendant's appeal from a conviction of first-degree arson entered in the Superior Court after a jury trial. We affirm the conviction. The facts pertinent to the defendant's appeal are as follows.
During the course of their individual patrols on the night of January 13, 1981, two police officers met inadvertently in the parking lot behind Bill Izzi's Big Discount Market. When an exterior light on the building went out, one of the officers noted that it was nine o'clock and commented that the market had probably just closed. Three minutes later, the officers noticed flames flashing behind the window of the market's rear overhead door. While one officer drove to the front of the market and determined that the market was in fact closed and no customers or employees remained in the building, the other officer radioed a fire alarm to the police station and broke a panel in the rear overhead door in an attempt to enter the market to extinguish the flames. Responding quickly, the fire department arrived at the market five minutes after the alarm was sounded.
Despite its early discovery, the fire blazed out of control within ten minutes of its start. Noting at approximately ten o'clock that the intense heat of the rapidly spreading fire had raised the pressure within the building to such a level that a sizable crack was developing in the roof, the deputy fire chief ordered all fire personnel to evacuate the building immediately. Within forty seconds of that order, the roof collapsed in an explosion so forceful that a large chunk of cement debris was propelled 150 feet and struck a passerby, fracturing his skull. Shortly after the explosion, the deputy chief assessed the building as a total loss.
On the night of the fire, defendant, Louis Caruolo, then the market's manager, had been socializing at a local bar with coworkers *578 for approximately twenty minutes when one of the workers received word shortly before nine thirty that the market was on fire. Caruolo and the other workers immediately proceeded to the market. While viewing the fire, Caruolo discussed with the deputy chief the location of equipment, supplies, and stock within the market and agreed to meet the officers who discovered the fire later that night at the police station in order to supply information for their routine report.
Driving himself to and from the police station, Caruolo met the officers just after midnight and left twenty minutes later. During that time he signed a written statement describing activities at the market before its closing earlier that evening. In this brief account of the evening Caruolo stated that he closed and left the market at nine o'clock and did not return until he learned of the fire while at the bar. He further stated that in closing the market, he lit a propane heater used to heat the rear of the market at night, checked all the previously locked back doors, and locked the front door as he left. After describing his activities, Caruolo listed the employees who had worked with him that night, maintained that none of them had left the market before its closing, and denied that any former employee had been fired during the previous thirty days. He also stated that he did notice anyone in the market that evening acting suspiciously and that he was not aware of any other fact of which the police should be informed.
On January 15, 1981, a police officer assigned to interview all persons who had been in the market prior to the fire asked Caruolo to return to the police station for a second statement. Again driving himself to and from the station, Caruolo was interviewed by the officer for no longer than two hours. Although the officer did not ask Caruolo to sign a written statement, he did summarize Caruolo's remarks in a routine police report written within twenty-four hours of the interview. Elaborating the information contained in Caruolo's previous statement, the report noted that before closing the market, Caruolo had not detected any signs of fire or forced entry through the previously locked back doors.
In response to a request given by a deputy fire marshal on January 19, 1981, Caruolo appeared at the division of fire safety on January 21, 1981, to give a sworn statement concerning his activities and the condition of the market on the night of the fire. The fire marshal informed Caruolo upon his arrival that the police and fire officials were viewing the fire as incendiary and that he was a suspect in their arson investigation. At that point the fire marshal advised Caruolo of his constitutional rights. Signing a written waiver of his rights and taking an oath, Caruolo participated in a two-hour interview. At the conclusion of the interview, Caruolo left the division without being detained or arrested.
At trial the state presented Caruolo's statements as evidence that he was alone briefly before closing the market at nine o'clock. In addition, the state presented (1) expert testimony to establish that the fire was not caused by an accidental event such as a defect in the propane heater or in the market's electrical system, but rather was caused by flammable liquid purposefully spread along the aisles of the market; (2) the testimony of the stock clerk who worked the night of the fire to establish that all floors had been mopped clean just before all the other employees left Caruolo alone in the market; and (3) the testimony of the police officers who discovered the fire to establish that there was no forced entry into the building after Caruolo had closed the market and before the discovery of the fire three minutes later. During the presentation of his case, Caruolo testified, denying any connection with the fire. After deliberating for four hours, the jury found Caruolo guilty of first-degree arson.
Before this court, Caruolo argues that the trial justice erred in denying a motion to suppress the two statements elicited without prior Miranda warnings, a motion for judgment of acquittal, and a motion for a new trial and in improperly charging the jury on a number of propositions of law.
*579 I
THE MOTION TO SUPPRESS
Prior to his trial Caruolo filed a motion to suppress the statements given on the night of the fire and on January 15, arguing that both statements were inadmissible because they were made during the course of custodial police interrogation without the benefit of prior Miranda warnings. Finding that the police elicited the statements during routine interviews conducted as part of their general investigation of the fire at a time when Caruolo was neither a suspect nor in custody, the trial justice ruled that Miranda warnings were not required and the statements were thus admissible.
On appeal Caruolo argues that Miranda warnings were required because the police created an overwhelmingly coercive atmosphere within a setting that was custodial in nature. To support his characterization of the interviews as coercive and custodial, Caruolo further argues that the police summoned him to the police station for the purpose of asking questions that were reasonably likely to elicit incriminatory responses at a time when he was clearly the prime suspect in an established arson investigation. Caruolo's argument fails to establish that the interviews constituted custodial interrogation requiring Miranda protection.
Stemming from a concern that the inherently coercive atmosphere of a custodial police interrogation may have weakened a person's will and compelled an involuntary confession in violation of the Fifth Amendment, the Miranda exclusionary rule places all statements elicited during such interrogation beyond the state's reach at trial unless the interrogating officer apprised the person of the rights to remain silent and to be advised by counsel and afforded the person the opportunity to exercise or waive these rights. Miranda v. Arizona, 384 U.S. 436, 467, 476, 86 S.Ct. 1602, 1624, 1629, 16 L.Ed.2d 694, 719, 725 (1966).
By its own terms the rule applies only when interrogation occurs within the coercive atmosphere of police custody. Id. at 444, 86 S.Ct. at 1612, 16 L.Ed.2d at 707; see Minnesota v. Murphy, 465 U.S. 420, 430, 104 S.Ct. 1136, 1144, 79 L.Ed.2d 409, 421 (1984) (Miranda warnings inapplicable to questioning in noncustodial settings); Beckwith v. United States, 425 U.S. 341, 346, 96 S.Ct. 1612, 1616, 48 L.Ed.2d 1, 7 (1976) (custodial nature of interrogation triggers need for Miranda warnings). Although a certain degree of coerciveness inheres in any police interrogation of a person suspected of a crime simply because of the aura of authority surrounding the interrogating officer, custody as contemplated by Miranda does not exist merely because the interrogation occurs at a police station or because the interrogated person is suspected of a crime or is the focus of a police investigation. Oregon v. Mathiason, 429 U.S. 492, 495, 97 S.Ct. 711, 714, 50 L.Ed.2d 714, 719 (1977); Beckwith, 425 U.S. at 347, 96 S.Ct. at 1616, 48 L.Ed.2d at 8. Nor does it necessarily exist when the interrogating officer consciously seeks incriminating evidence. Murphy, 465 U.S. at 428, 431, 104 S.Ct. at 1142, 1144, 79 L.Ed.2d at 419, 422. Rather the decisive test for determining whether a person is in custody for purposes of receiving Miranda warnings is whether the person is formally arrested or whether the person's freedom of movement is restricted to the degree associated with formal arrest. California v. Beheler, 463 U.S. 1121, 1125, 103 S.Ct. 3517, 3519, 77 L.Ed.2d 1275, 1279 (1983). Absent a formal arrest the determination of whether a person is subjected to restraints comparable to those associated with a formal arrest turns on how a reasonable person in the suspect's position would understand the situation. Berkemer v. McCarty, 468 U.S. 420, 442, 104 S.Ct. 3138, 3152, 82 L.Ed.2d 317, 336 (1984).
Applying the foregoing principles to the interviews on the night of the fire and on January 15, we believe that it is clear that Caruolo was never in custody for the purposes of triggering the Miranda prophylactic rule. On both occasions he voluntarily drove to and from the police station without experiencing any interference with his freedom of movement. The record is *580 devoid of any fact that could even vaguely suggest to a reasonable person that he was not free to leave the station at any time during the course of either interview.[1] The record further establishes that at the time of the interviews the police were engaged in the initial stages of a routine investigation of a fire considered suspicious because of its (at that time) unknown origin, speed, and destructiveness. The officers' interest in interviewing Caruolo on those two occasions derived solely from the general information that he could provide as the market's manager and as the last person to observe the interior of the building prior to the fire. But even if the police at that early stage considered Caruolo a suspect, that fact would not transform, as Caruolo argues, a noncustodial setting into a custodial one.[2] Furthermore, although the reasonable likelihood of eliciting incriminatory responses is relevant to a determination that the form of questioning constitutes interrogation, see Rhode Island v. Innis, 446 U.S. 291, 300-01, 100 S.Ct. 1682, 1689-90, 64 L.Ed.2d 297, 308 (1980) (interrogation refers to express questioning and any words or actions that police should know are reasonably likely to elicit incriminatory responses), the likelihood of incrimination would not transform, as Caruolo argues, a noncustodial setting into a custodial one.
Because the prophylactic requirements of Miranda are only triggered when the dual elements of interrogation and custody are both present and because Caruolo was clearly not in custody within the meaning of Miranda, the trial justice properly admitted statements elicited during the two interviews into evidence.
II
MOTION FOR JUDGMENT OF ACQUITTAL
At the close of the state's case and again at the close of his own case, Caruolo filed a motion for judgment of acquittal, arguing that the state's case was grounded solely on circumstantial evidence that merely established his presence at the market shortly before the police discovered the fire without establishing that he, rather than one of a number of people with equal access to the market that night, started the fire. Stating that he reviewed the evidence in the light most favorable to the state, the trial justice ruled that the state presented a prima facie case sufficient to support a jury conviction of first-degree arson.
When presented with a motion for judgment of acquittal, a trial justice must *581 determine whether the evidence offered by the state is capable of generating proof of guilt beyond a reasonable doubt. State v. Gordon, 508 A.2d 1339, 1348 (R.I. 1986); State v. Wheeler, 496 A.2d 1382, 1389 (R.I. 1985). To make this determination, a trial justice, and this court on review, must view the evidence in the light most favorable to the state, without weighing the evidence or assessing the credibility of the witnesses, and must draw therefrom all reasonable inferences consistent with guilt. E.g., State v. Wilshire, 509 A.2d 444, 452 (R.I. 1986); Gordon, 508 A.2d at 1348; Wheeler, 496 A.2d at 1389.
In appealing the trial justice's denial of his acquittal motion, Caruolo argues that the state's evidence is clearly insufficient to prove guilt beyond a reasonable doubt because it is entirely circumstantial. Elaborating the argument presented to the trial justice, he asserts that the fact that he was the last person to leave the market is probative of guilt only if we accept as true the proposition that in all instances the last person known to leave a building before a fire is the person who started the fire. Because other reasonable inferences can be drawn from the fact of leaving a building immediately before a fire, Caruolo concludes that the proposition is false and hence cannot support a secondary inference of guilt beyond a reasonable doubt. Caruolo's argument misconceives the law of this jurisdiction concerning the probative force of circumstantial evidence and focuses on only one facet of the state's case while ignoring other items of evidence.
For a period of time, whenever the state rested its case solely on circumstantial evidence, this jurisdiction followed the "reasonable hypothesis" rule under which a finding of guilt could only be made if the circumstantial evidence was not only consistent with the hypothesis of guilt but also inconsistent with any reasonable hypothesis of innocence. See State v. Jefferson, 116 R.I. 124, 129 n. 1, 353 A.2d 190, 194 n. 1 (1976); State v. Montella, 88 R.I. 469, 476, 149 A.2d 919, 922-23 (1959). In a series of later cases, however, this court clearly rejected the rule and its implication that circumstantial evidence is less probative of guilt than direct evidence. The rule's dismantling began with the holding in State v. Rose, 112 R.I. 402, 407, 311 A.2d 281, 284 (1973), that no valid distinction exists between circumstantial and direct evidence. Then in State v. Roddy, 401 A.2d 23, 35 (R.I. 1979), this court held that in light of Rose, the rule that a trial justice must, in a case resting solely on circumstantial evidence, instruct the jury that it may only render a guilty verdict if the evidence is both consistent with guilt and inconsistent with any reasonable hypothesis of innocence was no longer valid. Finally, all traces of the rule were dispelled in State v. Romano, 456 A.2d 746, 763 (R.I. 1983), when this court clarified Roddy by holding that in rejecting the "reasonable hypothesis" rule as it applied to jury instructions, the court intended to reject the rule as it also applied to standards for testing the sufficiency of the state's evidence in response to relevant motions.
It is now the law of this jurisdiction that the state may rest its case entirely upon circumstantial evidence without disproving every possible speculation or inference of innocence as long as the totality of the circumstantial evidence offered constitutes proof of guilt beyond a reasonable doubt. In re Derek, 448 A.2d 765, 768 (R.I. 1982); State v. DaRocha, 121 R.I. 182, 187, 397 A.2d 500, 503 (1979). Therefore, when measuring the sufficiency of the state's evidence, no distinction is to be drawn between circumstantial and direct evidence and the only standard for ruling the evidence insufficient is a reasonable doubt of guilt. Wilshire, 509 A.2d at 452; Romano, 456 A.2d at 763; State v. Collazo, 446 A.2d 1006, 1011 n. 4 (R.I. 1982); State v. Proulx, 419 A.2d 835, 841 n. 4 (R.I. 1980). The pivotal question in determining whether circumstantial evidence is sufficient to prove guilt beyond a reasonable doubt is whether the evidence in its entirety constitutes proof beyond a reasonable doubt or is of such a nature that it merely raises a suspicion or conjecture of guilt. Under this test, it is possible for the state to prove guilt by a process of logical deduction, reasoning from an established *582 circumstantial fact through a series of inferences to the ultimate conclusion of guilt. The pyramiding of inferences during this process of deduction becomes speculative, however, and thus insufficient to prove guilt beyond a reasonable doubt when the initial inference in the pyramid rests upon an ambiguous fact that is equally capable of supporting other reasonable inferences clearly inconsistent with guilt. State v. Alexander, 471 A.2d 216, 218 (R.I. 1984); In re Derek, 448 A.2d at 768.
In light of the foregoing discussion it is clear that Caruolo's argument in support of his motion for judgment of acquittal fails. First, Caruolo's attempt to minimize the probative force of the state's evidence because it is circumstantial fails since circumstantial and direct evidence are equally probative of guilt. Second, Caruolo's suggestion that the state must prove that others with equal access to the market did not start the fire in order to prove circumstantially that he started the fire also fails since the state is not required to disprove every reasonable hypothesis of innocence as long as the totality of circumstantial evidence offered constitutes proof beyond a reasonable doubt. Finally, Caruolo's contention that the state's case is insufficient to prove guilt beyond a reasonable doubt because it rested solely upon the faulty proposition that as the last person to leave the market he must have started the fire also fails. If, as Caruolo argues, the state had attempted to infer guilt solely from that proposition, it would not have met its burden of proof because the inference of guilt would have flowed from an ambiguous fact susceptible of other reasonable inferences inconsistent with guilt. But contrary to Caruolo's characterization, the state did not rest its case solely on Caruolo's presence in the market immediately before the fire. In opposing Caruolo's motion, the state argued and the trial justice specifically ruled that in addition to the fact that Caruolo was the last person to leave the market, proof (1) that the fire was caused by flammable liquid purposefully spread along the market's aisles, (2) that the floors were mopped clean just before all the other employees left Caruolo alone in the market, (3) that the fire was discovered within three minutes of Caruolo's departure, and finally (4) that there were no signs of forced entry after Caruolo's departure is sufficient to establish beyond a reasonable doubt that Caruolo had started the fire. Thus, rather than deducing guilt from an ambiguous circumstantial fact, the state established a pattern of corroborating circumstances. We are of the opinion that the trial justice did not err in finding this pattern sufficient to prove guilt beyond a reasonable doubt, and accordingly we affirm the trial justice's denial of Caruolo's motion for judgment of acquittal.
III
JURY INSTRUCTIONS
Before the jury retired to consider its verdict, Caruolo raised a number of objections to the trial justice's charge. Of those objections, he now asserts three as grounds for reversal: the justice's definition of the concept "proof beyond a reasonable doubt," the justice's instruction that direct and circumstantial evidence are equally probative, and the justice's refusal to instruct that the absence of motive is a strong circumstance favoring innocence.
Caruolo argues that the trial justice erroneously defined the concept "proof beyond a reasonable doubt" by using the phrases "abiding conviction or moral certainty" and "actual doubt." We disagree.
When specific portions of a trial justice's charge are challenged, this court must examine the challenged portions within the context of the entire charge and evaluate possible interpretations from the viewpoint of a reasonable juror. E.g., State v. Gordon, 508 A.2d at 1349; State v. Long, 488 A.2d 427, 434-35 (R.I. 1985); State v. Lambert, 463 A.2d 1333, 1338 (R.I. 1983). If the charge, so examined and evaluated, mandates neither a lessening nor a shifting of the burden of proof, it will be upheld. Gordon, 508 A.2d at 1349; Long, 488 A.2d at 434; Lambert, 463 A.2d at 1338.
*583 Bearing these standards in mind, we carefully reviewed the text of the trial justice's instructions. He began his charge with a clear statement that Caruolo was at that moment, as he had been throughout the trial, presumed innocent and that he could only be stripped of that presumption if the jury concluded that the state proved beyond a reasonable doubt that he was guilty of the crime as charged. He emphasized, not only then but also later when he enumerated the elements of first-degree arson, that in order to meet its burden of proof the state was required to introduce credible evidence on each element of arson. He further emphasized that the burden of proof remained on the state throughout the trial and never shifted to Caruolo, who enjoyed the presumption of innocence at all times. After instructing the jury on the state's burden of proof and Caruolo's presumption of innocence, the trial justice defined the concept "beyond reasonable doubt" as follows:
"[B]eyond reasonable doubt * * * does not mean beyond all doubt. * * * [A] reasonable doubt is a doubt that is based on evidence, or the lack of evidence. It is not a fanciful doubt. It is not just a possible doubt. It is not a speculative doubt. It must be reasonable. * * * You could say that proof beyond a reasonable doubt exists after thoroughly and conscientiously examining and considering all of the evidence in the case, your mind is left in such a condition that you feel an abiding conviction, or moral certainty, of the correctness of the state's claim that the defendant is guilty of the charge. * * * Reasonable doubt requires actual doubt which remains in your minds after fairly and impartially and thoroughly weighing the evidence and testimony you have heard in the court."
Read in the context of the entire charge, the challenged portions mandate neither a lessening nor a shifting of the state's burden of proving each element of first-degree arson beyond a reasonable doubt. As long as the phrase "abiding conviction" refers, as it did here, to the correctness of the state's claim, it is an appropriate phrase to delineate the state's heavy burden of proof. Gordon, 508 A.2d at 1349-50; State v. Thorpe, 429 A.2d 785, 789-90 (R.I. 1981). As used, the phrase not only correctly requires a juror to have an "abiding conviction" of the defendant's guilt before rendering a guilty verdict but also is not susceptible of an interpretation that impermissibly requires a juror to have an "abiding conviction" of the defendant's innocence before rendering a not-guilty verdict. Thorpe, 429 A.2d at 790. Likewise, by clearly referring to the state's claim, the phrase cannot be interpreted as inappropriately burdening the defendant with proof of a reasonable doubt of guilt in order to retain the presumption of innocence. Gordon, 508 A.2d at 1350. Furthermore, equating "abiding conviction" with "moral certainty" does not constitute error, provided both terms and the charge as a whole properly apprise the jurors, as this charge did, of the correct standard of proof. Id.; cf. Long, 488 A.2d at 435 (no defect in reasonable-doubt instruction that included phrase "abiding conviction, or moral certainty of the state's claim"). Finally, defining a "reasonable doubt" as an "actual doubt" does not, within the context of the entire charge, lessen the state's burden of proof. Although the phrase "actual or substantial doubt" has been clearly rejected by this court as lessening the state's burden, see State v. Ballard, 439 A.2d 1375, 1387 (R.I. 1982); Thorpe, 429 A.2d at 790 n. 4, the phrase "actual doubt," as used here without the offensive word "substantial," merely emphasizes in an acceptable manner previous statements establishing that a "reasonable doubt" is not a "fanciful" or "speculative" doubt. Accordingly, we are of the opinion that upon hearing the entire charge, a juror of ordinary intelligence would not have misconceived the gravity of the state's burden or looked to Caruolo to prove his innocence, and we thus conclude that the trial justice did not err in defining reasonable doubt with the challenged phrases.
Caruolo next argues that instead of instructing the jury that circumstantial and direct evidence "are" equally probative of *584 guilt, the trial justice should have cautioned the jury that circumstantial evidence "may be" as probative of guilt as direct evidence. We disagree.
As fully discussed in part II, it is the settled law of this jurisdiction that no valid distinction exists between the probative force of circumstantial and of direct evidence. Whether the evidence is circumstantial or direct, the task for the jury is "to weigh the chances that the evidence correctly points to guilt against the possibility of inaccuracy or ambiguous inference." Holland v. United States, 348 U.S. 121, 140, 75 S.Ct. 127, 137-38, 99 L.Ed. 150, 166-67 (1954). Thus as long as a jury is properly instructed on the standard of reasonable doubt, an additional instruction on the probative force of circumstantial evidence is unnecessary, confusing, and incorrect. Id. at 139, 75 S.Ct. at 137, 99 L.Ed. at 166; Roddy, 401 A.2d at 35.
In the instant case, the trial justice contrasted circumstantial and direct evidence and stated that the two types of evidence were equally probative of guilt. Woven throughout the trial justice's discussion of evidence were statements describing the jury's role as factfinders and its power to accept or reject any item of evidence as credible and to afford the accepted evidence any weight it chose. The trial justice concluded his remarks on evidence by charging the jury that its ultimate function was to determine if the evidence that it deemed credible, whether circumstantial or direct, is sufficient, when viewed in its entirety, to establish guilt beyond a reasonable doubt. These remarks in combination with his previous statements properly defining reasonable doubt correctly stated the law on the probative force of circumstantial evidence.
Caruolo finally argues that the trial justice erred in refusing to instruct the jury that the absence of proof of motive is a strong circumstance favoring innocence. Instead of the requested instruction, the trial justice charged that proof of motive, although permitted, is not required to prove guilt and that the jury is not compelled to search for a motive during its deliberations. We find no error in the trial justice's refusal nor in his charge.
To ensure a fair trial, the trial justice must instruct the jury on the propositions of law relevant to the defendant's theory of the case, but is not required to accept proffered instructions blindly without considering their nature and relationship to the evidence presented at trial. State v. Bowden, 473 A.2d 275, 278 (R.I. 1984). The defendant is only entitled to an instruction that explains those propositions of law that relate to the material issues of fact the evidence tends to support. E.g., State v. Durand, 465 A.2d 762, 766 (R.I. 1983); State v. Botelho, 459 A.2d 947, 950 (R.I. 1983); State v. Souza, 456 A.2d 775, 778 (R.I. 1983). Under that standard we conclude that the presence or absence of motive is not a material fact requiring the requested instruction.
Conviction of crime never requires proof of motive, and the absence of motive, by itself, does not raise a reasonable doubt of guilt. State v. Bahre, 456 A.2d 860, 868 (Me. 1983); LaFave & Scott, Criminal Law, § 3.6(a) at 227, § 3.6(b) at 231 (2d. ed. 1986). Evidence of motive, however, may be at times probative and relevant and thus is admissible at trial provided it does not cause the jury to speculate or focus on collateral matters. State v. Gazerro, 420 A.2d 816, 825 (R.I. 1980). If admitted under those limitations, motive is an item of circumstantial evidence that the jury may weigh in light of other facts and circumstances in evidence. Just as it is possible that a jury may properly find the presence of an overwhelming motive to be, in light of all the evidence, not probative of guilt, it is also possible that a jury may properly find the absence of any discernible motive to be, in light of all the evidence, consistent with guilt. Bahre, 456 A.2d at 868. The weight to be assigned to evidence or lack of evidence of motive is entirely within the province of the jury.
Because a trial justice may only comment upon evidence in an impartial manner, State v. Fenner, 503 A.2d 518, 525 (R.I. 1986), and because the weight of evidence relating to motive may vary depending *585 upon the facts and circumstances of each case, jury instructions that assign a particular weight to the presence or the absence of motive should be avoided. Within the bounds of avoiding a peremptory instruction, a trial justice may nevertheless instruct the jury that although motive is not essential to proof of guilt, its presence or absence is a circumstance that may be considered in conjunction with other evidence.[3] In restricting the trial justice to this impartial instruction, we note that counsel have ample opportunity to argue before the jury the significance of evidence or lack of evidence of motive. See Fenner, 503 A.2d at 525 (trial justice should not act as advocate when instructing on accomplice testimony but counsel have adequate opportunity to argue credibility of specific witnesses); see also Bahre, 456 A.2d at 868 (motive is proper matter not for judge's charge, but for counsel's argument before jury).
The proffered instruction requested the trial justice to assign a heavy weight to the lack of evidence of motive and thus was properly rejected. Because motive is not an element of the crime charged, the trial justice was not required to instruct the jury that it must consider motive. His charge that the jury need not search for motive emphasized that evidence of motive was not necessary for proof of guilt. The emphasis did not preclude the jury from considering motive, nor did it even suggest that the jury should not do so. Accordingly, we find no error in the trial justice's instructions on the absence of proof of motive.
IV
MOTION FOR NEW TRIAL
After the jury found Caruolo guilty of first-degree arson, he filed a motion for a new trial essentially reiterating his argument in support of his motion for judgment of acquittal. Specifically Caruolo argued that in the absence of direct evidence establishing that he started the fire and in light of his testimony denying guilt, the state's evidence is merely circumstantial and clearly insufficient to prove guilt beyond a reasonable doubt. Stating that he considered all evidence and assessed the credibility of all witnesses as if he were a thirteenth juror, the trial justice denied the motion.
When presented with a motion for a new trial, a trial justice must determine whether the evidence adduced at trial was sufficient to support the jury's verdict of guilt beyond a reasonable doubt. State v. Caprio, 477 A.2d 67, 73 (R.I. 1984); State v. Breton, 459 A.2d 485, 488 (R.I. 1983). To make this determination, a trial justice must consider all the evidence in the light of the charge given to the jury and then must independently appraise the weight of the evidence and the credibility of the witnesses. E.g., Caprio, 477 A.2d at 73; State v. Tarvis, 465 A.2d 164, 174 (R.I. 1983); Breton, 459 A.2d at 487-88; State v. Romano, 456 A.2d at 762. In effect the trial justice acts as a thirteenth juror. State v. Jefferson, 116 R.I. at 134, 353 A.2d at 196.
In reviewing a denial of a new-trial motion, this court will not disturb a trial justice's ruling unless the trial justice overlooked or misconceived material evidence relating to a critical issue or was otherwise clearly wrong. Tarvis, 465 A.2d at 174; Breton, 459 A.2d at 488; Romano, 456 A.2d at 762. In light of this standard for review it is crucial for the trial justice to articulate the facts upon which the ruling is based. Tarvis, 465 A.2d at 174; Breton, 459 A.2d at 488; Romano, 456 A.2d at 762.
In appealing the trial justice's denial of his new-trial motion, Caruolo argues that the trial justice was clearly wrong in his appraisal of both the weight of the evidence *586 and the credibility of the witnesses. We are not persuaded by Caruolo's argument.
A review of the record reveals that the trial justice carefully applied the standards for considering a motion for new trial. In considering the evidence, he properly discounted a distinction between the probative force of circumstantial and direct evidence and then clearly enumerated those items of evidence that, when taken together, established Caruolo's guilt beyond a reasonable doubt. In assessing the witnesses, he specifically stated that he found Caruolo lacking in credibility but, on the other hand, found all of the state's witnesses highly credible. Accordingly, the trial justice ruled that the jury, drawing reasonable inferences from the testimony deemed credible, was correct in finding Caruolo guilty of first-degree arson beyond a reasonable doubt. We are of the opinion that, in so ruling, the trial justice did not overlook or misconceive any material evidence, nor was he otherwise clearly wrong. We thus affirm the trial justice's denial of Caruolo's motion for a new trial.
For the reasons stated, the defendant's appeal is denied and dismissed and the judgment of conviction is affirmed. The papers in the case may be remanded to the Superior Court.
NOTES
[1] In a supplemental brief, Caruolo argues that our recent holding in State v. Mattatall, 510 A.2d 947, vacated on other grounds, ___ U.S. ___, 107 S.Ct. 265, 93 L.Ed.2d 243 (1986), supports his contention that the interviews were custodial in nature. Easily distinguishable from the instant case, Mattatall involved a defendant who was transported for the purpose of an investigative interview, without the option of declining, to the police station in a police van by officers acting upon the order of a detective in charge of investigating the death of a person not yet considered a homicide. Holding that the defendant had been detained in violation of the Fourth Amendment, we identified three factors for determining whether police actions unaccompanied by formal words of arrest constitute an arrest nevertheless: (1) the degree to which the person's freedom of movement is curtailed and the degree of force used by the police to effect this curtailment; (2) the possibility that a reasonable innocent person would believe that freedom of movement was curtailed; and (3) the existence of an option of refusing to go with the police. Id. at 951. In light of these factors, it is clear that Caruolo was not subjected to any police action associated with formal arrest or its functional equivalent.
[2] In this respect Caruolo's argument is essentially identical to that of the defendant in Oregon v. Mathiason, 429 U.S. 492, 97 S.Ct. 711, 50 L.Ed.2d 714 (1977), and is thus meritless. In Mathiason a parolee who had been named by the victim of a burglary as a possible suspect voluntarily responded to a telephone request of an investigating officer to come to the police station to "discuss something." Interrogated while retaining his freedom of movement, the parolee confessed to the burglary. Holding the confession admissible without prior Miranda warnings, the Court stated that Miranda is applicable only when the interrogating officer restricts the interrogated person's freedom of movement thereby creating a custodial setting, and that in the absence of any restriction upon the person's freedom, a police station is not a custodial setting nor is it converted into one merely because the interrogated person is suspected of a crime or is the focus of an investigation. 429 U.S. at 495, 97 S.Ct. at 714, 50 L.Ed.2d at 719.
[3] We are mindful that in State v. Cohen, 93 R.I. 215, 219, 172 A.2d 737, 740 (1961), this court affirmed an instruction that absence of proof of motive is a strong circumstance favoring the defendant's innocence. To the extent that Cohen may be construed to require a trial justice to assign a weight to the absence of evidence of motive, it has been eroded by more recent cases and is no longer controlling. To the extent that Cohen permits a trial justice to instruct a jury that it may consider motive or lack of motive as circumstantial evidence, it is consistent with our holding today.
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636 S.W.2d 722 (1982)
ENCORE BUILDERS, Appellant,
v.
Tim J. WELLS and Linda Wells, Appellees.
No. 1945 cv.
Court of Appeals of Texas, Corpus Christi.
May 27, 1982.
Virgil Howard, Corpus Christi, for appellant.
Gaston M. Broyles, Jr., Douglas E. Chaves, Kleberg, Dyer, Redford & Weil, Corpus Christi, for appellees.
Before BISSETT, UTTER and KENNEDY, JJ.
OPINION
UTTER, Justice.
This is an appeal from an entry of default judgment. Appellees sued appellant and Scottey's Roofing for damages sustained by their house during a heavy rainstorm totaling $7,159.75. Appellees alleged in their original petition that appellant had built the home and had subcontracted the roof to Scottey's Roofing. Appellees further alleged that appellant was "a business located at 5794 Weber Road, Corpus Christi, Nueces County, Texas, whose agent for service of *723 process is Mike Catero..." Appellees had no address for Scottey's Roofing. Following the filing of the original petition service was thereafter had on Mike Catero as agent for appellant. Appellant did not answer the lawsuit and an interlocutory default judgment was taken by appellee. The trial court thereafter granted appellees' motion to non-suit Scottey's Roofing and finalized the judgment as it pertained to appellant. In one of his two points of error on appeal, appellant questions the sufficiency of the service of process. We agree with appellant that the record does not show service of process sufficiently to sustain the default judgment entered against appellant.
Appellant has herein directly attacked the judgment of the trial court by writ of error. In contrast, to the usual rule that all presumptions including service of process will be made in support of a judgment, no such presumptions are made in a direct attack upon a default judgment. McKanna v. Edgar, 388 S.W.2d 927 (Tex. 1965). The relevant question is whether the trial court had jurisdiction to enter the default judgment. Crook v. Teitler, 584 S.W.2d 356 (Tex.Civ.App. Tyler 1979, no writ). Jurisdiction of the defendant's person must affirmatively appear by either a showing of an appearance by the defendant or a showing of due service of citation independent of the recitals in the judgment. h. L. McRae Co. v. Hooker Construction Co., 579 S.W.2d 62 (Tex.Civ.App. Austin 1979, no writ). In order to show due service of citation, the plaintiff must show compliance with the Rules of Civil Procedure in the issuance of citation, the manner and mode of service and the return of service. Mega v. Anglo Iron & Metal Co. of Harlingen, 601 S.W.2d 501 (Tex.Civ.App. Corpus Christi 1980, no writ); Hanover Modular Homes of Taft v. Corpus Christi B & T, 476 S.W.2d 97 (Tex.Civ.App. Corpus Christi 1972, no writ). If service is made on an agent, this entails an affirmative showing that the person served was in fact the agent for service of process. Hanover Modular Homes of Taft, Inc. v. Corpus Christi Bank & Trust, supra; Bankers Life & Casualty Company v. Watson, 436 S.W.2d 404 (Tex. Civ.App. Tyler 1968, writ ref'd n. r. e.).
In the instant case appellees allege in their petition only that appellant was a business and that Mike Catero was appellant's agent for service of process. Nowhere in the pleadings or in the record does appellee even so much as intimate what type of business entity appellant is or what authority Mike Catero possesses to act as agent for service of process. The pleadings and the record are not supportive of any affirmative showing that Mike Catero was in fact the agent for service of process for appellant. A naked allegation of agency alone will not support rendition of a default judgment. [White Motor Co. v. Loden, 373 S.W.2d 863 (Tex.Civ.App. Dallas 1963, no writ).] The trial court erred in granting appellee's motion for interlocutory default judgment against appellant.
This problem will not arise on remand since appellant's appearance in pursuing this writ of error will suffice for appellant's having entered an appearance at the trial court level for all further proceedings. Mega v. Anglo Iron & Metal Co., supra; Hanover Modular Homes of Taft, Inc. v. Corpus Christi Bank & Trust, supra.
Judgment of the trial court is REVERSED and the cause is REMANDED.
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636 S.W.2d 687 (1982)
Howard C. OHLENDORF, Plaintiff-Appellant,
v.
Bernard FEINSTEIN and Fred Whaley, Defendants-Respondents.
No. 42613.
Missouri Court of Appeals, Eastern District, Division Four.
July 13, 1982.
*688 Jack H. Ross, Harold P. Heitmann, Clayton, for plaintiff-appellant.
Jerome A. Gross, Irl Baris, St. Louis, for defendants-respondents.
PUDLOWSKI, Judge.
Plaintiff, Howard C. Ohlendorf, is appealing a judgment against him in a court tried case on a cross-claim to wind up a partnership in which the plaintiff and the defendants, Bernard Feinstein and Fred Whaley, were partners. The facts are as follows:
On May 23, 1974, the Missouri State Highway Commission offered seven tracts of land in Jefferson County for sale at auction. Defendant Feinstein submitted the highest bid for all seven tracts. This bid of $568,703.25 was subsequently accepted by the State Highway Commission. *689 Feinstein signed a sales agreement on May 23, and delivered a check for ten percent of the purchase price ($56,870.32) to the State Highway Commission. Immediately after the bidding, Ohlendorf, Feinstein and Whaley discussed the formation of a partnership. On May 25, 1974, all three parties executed a notice of assignment documenting the partnership agreement. Ohlendorf subsequently recorded this assignment. Pursuant to the formation of the partnership Ohlendorf and Whaley each transferred $18,956.77 to Feinstein. The purpose of the partnership was to obtain purchasers (including themselves) for the seven tracts, so that when the purchase from the State Highway Department was closed, the partnership could immediately resell the tracts for a profit. The three partners were to share equally in the expenses and profits of the partnership.
The parties endeavored to find individual buyers for the tracts. Ohlendorf undertook to purchase tract 3 himself, for $150,000. Prior to August, 1974, the parties were partially successful at finding buyers for the other tracts. In August, however, there was a falling out among the parties. Ohlendorf informed the other parties that the partnership was dead as far as he was concerned. Ohlendorf stated that he had no intention of purchasing tract 3. He subsequently notified the State Highway Commission that the partnership would not complete the purchase of the seven tracts. There is no doubt that Ohlendorf wrongfully breached the partnership agreement causing a dissolution of the partnership.
Ohlendorf filed suit against Feinstein and Whaley seeking recovery of the $18,956.77 he transferred to Feinstein at the inception of the partnership. Defendants filed a cross-claim to wind up the joint venture pursuant to § 358.370, RSMo (1969). Defendants sought damages in the form of lost profits for Ohlendorf's wrongful breach of the partnership agreement. § 358.380 RSMo (1969). The trial judge dissolved the partnership under § 358.320 RSMo (1969). Judgment was entered in favor of Feinstein against Ohlendorf in the amount of $50,932.25, and in favor of Whaley against Ohlendorf in the same amount. This appeal followed.
In his first point on appeal plaintiff contends that the defendants failed to prove that the lost profits were a direct and proximate result of plaintiff's breach of the partnership agreement. This position is based upon the assertion that the defendants would not have suffered any damages if they had proceeded with the purchase and sale of the seven tracts on their own account. We find plaintiff's position unpersuasive.
Dissolution of a partnership results when any partner ceases to be associated with the carrying on of the partnership business. § 358.290 RSMo (1969). In this case, dissolution was recognized by decree of the trial court upon its finding that the plaintiff willfully breached the partnership agreement. § 358.320 RSMo (1969). Dissolution, however, is not a termination of the partnership business. The partnership business continues until the winding up of the partnership affairs is complete. § 358.300 RSMo (1969). The partners who have not wrongfully dissolved the partnership have the right to wind up the partnership business. § 358.370 RSMo (1969). The partners, however, are not required to exercise their right to wind up the business. "The Uniform Partnership Law contemplates that dissolved partnerships may continue in business for a short, long or indefinite period of time, ... so long as none of the partners insist on a winding up and final termination of the partnership business." Schoeller v. Schoeller, 497 S.W.2d 860, 867 (Mo.App.1973). Thus, when a dissolution is caused by the wrongful act of a partner, the innocent partner(s) have an election of remedies. They may: wind up the partnership business, and seek damages from the wrongful partner; continue the business in the same name, either by themselves or jointly with others, or, continue the business and seek damages. § 358.380 RSMo (1969).
This review of the law clearly demonstrates that when a partnership is dissolved *690 due to the wrongful conduct of a partner, the innocent partner(s) have the option of winding up the partnership business or continuing it. By statute, the right to terminate the business and seek damages is unconditional. § 358.370 RSMo (1969). Plaintiff's position here is really a backhanded attempt to impose a limitation upon the defendants' right to wind up the partnership. Plaintiff asserts that the defendants' damages are not a proximate result of his wrongful conduct, because the defendants would have obtained their profits if they had continued the business. The practical effect of adopting this position would be to impose a duty upon the defendants to continue the partnership business if there is a reasonable certainty that it will be profitable. We refuse to impose a duty which is clearly contrary to the provisions of the Uniform Partnership Law. Thus, the defendants' damages in this case become a direct and proximate consequence of the plaintiff's wrongful conduct, once the defendants elected to wind up the partnership business.
In his next point on appeal plaintiff contends that the testimony of Feinstein and Whaley regarding alleged oral offers to purchase tracts 1, 2, 6 and 7 was inadmissible because the testimony is hearsay. Therefore, the trial judge erred when he relied upon this testimony in making his award of damages. Furthermore, plaintiff asserts that the evidence at trial was too speculative and conjectural to establish damages within the required degree of reasonable certainty.
The trial court found that the partnership was in a position to sell tract 7 to Ozark Realty Company for $2,500. This finding was based upon Feinstein's testimony that he received an oral offer from Ozark Realty Company in the amount of $2,500 for tract 7. In Missouri no claim of error may be considered by an appellate court in civil appeals unless it was presented to and decided by the trial court. Villaume v. Villaume, 564 S.W.2d 290, 297 (Mo.App.1978). The record shows that the plaintiff did not object at trial to Feinstein's testimony on tract 7. Thus, the alleged error with respect to tract 7 is not preserved for review by this court.
The trial court found that the partnership was in a position to sell tract 1 to Lee Sutterfield for $51,500, tract 2 to Carl Williams for $52,000 and tract 6 to Howard Morgan for $65,500. This finding was based on testimony by both Whaley and Feinstein that: they informed Ohlendorf of the prices discussed with Sutterfield, Williams and Morgan, and; Ohlendorf rejected the prices as too low.
Hearsay is defined as evidence of an out of court statement made by a person other than the witness, which is offered by the witness to prove the truth of the matter asserted. Mash v. Mo. Pac. R. Co., 341 S.W.2d 822, 827 (Mo.1960). On its face, the testimony of both defendants is clearly hearsay, since it was offered to prove that Sutterfield, Williams and Morgan were willing and able buyers for the three tracts at the aforementioned prices. Nonetheless, the defendants contend that their testimony is admissible because it fits within a hearsay exceptionadmission by a party opponent.
At issue in this case with respect to lost profits is whether there was a market comprised of willing and able buyers for the three tracts in question at the prices testified to by the defendants. The utterance which constitutes the admission is Ohlendorf's oral rejection of the alleged oral offers related to him by the defendants. The record demonstrates that Ohlendorf had no personal knowledge of the alleged offers. In fact Ohlendorf's awareness of the offers was based solely upon the hearsay statements made to him by the defendants. In Missouri it is not required for an admission against interest, that the admitted fact come within the personal knowledge of the admitting party. Sparr v. Wellman, 11 Mo. 230, 234 (Mo.1847); Scherffius v. Orr, 442 S.W.2d 120, 125 (Mo.App.1969). Thus, Ohlendorf's oral statement is competent as an admission that there was a market for the property in question at the specified prices. The question, however, is *691 whether this admission alone is sufficient to establish the defendants' lost profits within a reasonable degree of certainty. We hold that it is not.
Expected profits are uncertain and remote, and contingent upon changing circumstances; and can be recovered only when made reasonably certain by proof of actual facts which present data for a rational estimate of their worth. The damages may not be left to mere speculation or conjecture. Riddle v. Dean Machinery Co., 564 S.W.2d 238, 257 (Mo.App.1978). The only evidence on the lost profits for tract 1, 2 and 6 is Ohlendorf's admission with respect to the hearsay assertions of the defendants. An admission against interest which is not based on the personal knowledge of the declarant is evidence of a very unsatisfactory character, depending altogether on the circumstances under which it is made. Sparr v. Wellman, supra at 234. The lack of knowledge clearly affects the weight of such evidence. Leibow v. Jones Store Co., 303 S.W.2d 660, 664 (Mo.1957). Furthermore, verbal admissions against interest are the weakest and most unsatisfactory kind of evidence ... for the reason that this class of evidence is subject to error, imperfection and mistake. O'Neil v. Claypool, 341 S.W.2d 129, 134 (Mo.1960). Thus, Ohlendorf's admissions against interest based upon the hearsay statements of the defendants are competent and have some probative value. These oral admissions standing alone, however, are not sufficient to establish within a reasonable degree of certainty the lost profits for tracts 1, 2 and 6.
Ohlendorf had no personal knowledge of the alleged oral offers. His awareness of the alleged offers was based solely upon the hearsay statements of the defendants. Ohlendorf's oral statement that the alleged offers were not enough is at best a tacit admission of the existence of those offers, for the statement indicates that he was primarily concerned with the sales price for the tracts. Thus, Ohlendorf's admission is of little evidentiary weight, and the nature of this evidence is far too conjectural and uncertain to support the trial court's findings of fact on lost profits. Defendants, in order to carry their burden of proof on the damages issue, must produce other evidence of actual facts which establish the existence of a market for the property at a specific price.
The trial court's findings of fact and award of damages for tracts 1, 2 and 6 is reversed and remanded for further proceedings to determine the lost profits, if any, for those tracts. In all other respects the decision of the trial court is affirmed.
SMITH, P. J., and SATZ, J., concur.
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319 B.R. 134 (2004)
In re Wallace G. WILKINSON, Debtor.
Charles J. Lisle, as Trustee of the Trust established under the Amended Liquidating Plan of Reorganization of the Official Committee of Unsecured Creditors for the Debtor, Wallace G. Wilkinson, Plaintiff,
v.
John Wiley & Sons, Inc., Defendant.
Bankruptcy No. 01-50281. Adversary No. 03-5039.
United States Bankruptcy Court, E.D. Kentucky, Lexington Division.
June 15, 2004.
*135 Richard Boydston, Cincinnati, OH, for plaintiff Trustee.
*136 James W. Gardner, Lexington, KY, for defendant.
MEMORANDUM OPINION
1. Introduction and procedural background
This matter is before the court on the Defendant's Motion for Summary Judgment filed herein on March 26, 2004, and on the Plaintiff's Motion for Summary Judgment and Motion for an Order Excluding the Testimony of Donald J. Mullineaux, Ph.D., filed on April 1, 2004. The Plaintiff's Amended Complaint filed on February 2, 2003 asserts claims under Sections 547, 548, and 550 of the Bankruptcy Code, and under KRS 378.020. The Defendant filed its Answer to Amended Complaint with jury demand on April 30, 2003. The Defendant did not consent to this court's conducting a jury trial, and filed a Motion to Withdraw the Reference on May 8, 2003. By order entered on September 11, 2003, the United States District Court for the Eastern District of Kentucky granted the motion and a jury trial is currently set for September 1, 2004. The Defendant filed its Expert Witness Report of Dr. Donald J. Mullineaux on December 29, 2003. The Plaintiff also filed various expert witness reports. All preliminary matters including hearings on dispositive motions are to be heard by this court.
A hearing on the motions for summary judgment and for an order excluding Dr. Mullineaux's testimony was held on May 19, 2004. The Plaintiff announced that he would not pursue his preference claim, and argument was heard only on the claim of fraudulent transfer and on the question of exclusion of Dr. Mullineaux's testimony. At the conclusion of the hearing the court took the matter under submission, and it is now ripe for decision.
2. Factual background
The record in this case indicates that it was commenced by the filing of an involuntary petition by nine of the Debtor's creditors on February 5, 2001. The Debtor then filed a voluntary Chapter 11 petition on February 12, 2001, and on December 14, 2002, the court confirmed the Amended Liquidating Plan of Reorganization of the Official Committee of Unsecured Creditors ("the Wilkinson Plan"). The Plaintiff is the trustee of the trust established under the Wilkinson Plan and is authorized to pursue claims for the benefit of the estate.
The Debtor was the majority shareholder of Wallace's Bookstores, Inc. ("WBI"). WBI, through its subsidiaries and in conjunction with Wallace's Book Company, Inc. ("WBC"), was one of the largest integrated college and university textbook management operations in the United States. On February 28, 2001, WBI and WBC and 60 subsidiaries filed voluntary Chapter 11 petitions in the U.S. Bankruptcy Court for the District of Delaware (seven more were added later). Those cases were transferred to this court on March 2, 2001 and ordered to be jointly administered. The Revised Second Amended Joint Consolidation Plan of Liquidation of Wallace's Bookstores, Inc., Its Subsidiaries and Wallace's Book Company, Inc. was confirmed by order entered on May 20, 2002.
The Defendant was one of the six members of the single official committee of unsecured creditors appointed in the WBI case. The Defendant, a book publisher, alleges that it had a long-standing relationship with WBI. In the period before the transfer at issue in this proceeding, WBI placed orders for books, but the Defendant refused to ship because WBI had an outstanding balance in the approximate amount of $2.4 million. On January 4, 2001, the Debtor transferred $1 million to *137 the Defendant from his personal account, and the shipment of books ordered was released. The pending orders totaled $1.2 million for WBI and $500,000 for another of the Debtor's entities, eCampus.com (now finis.com). The Defendant also released another $500,000 in orders to WBI. The entire $1 million transfer was applied to the WBI account. Both the Debtor and WBI showed the transfer on their respective books as a reduction in the amount the Debtor owed WBI.
3. The summary judgment standard
Federal Rule of Civil Procedure 56(c), made applicable in bankruptcy by Bankruptcy Rule 7056, provides that summary judgment is appropriate and "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." The Supreme Court has observed that
this standard provides that the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact.
As to materiality, the substantive law will identify which facts are material. Only disputes over facts which might affect the outcome of the suit under governing law will properly preclude the entry of summary judgment.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986)(emphasis in original).
The summary judgment standard is set out in Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986):
[T]he plain language of Rule 56(c) mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, on which that party will bear the burden of proof at trial. In such a situation, there can be "no genuine issue as to any material fact," since a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial.
The Sixth Circuit has opined that "[r]ead together, Liberty Lobby and Celotex stand for the proposition that a party may move for summary judgment asserting that the opposing party will not be able to produce sufficient evidence at trial to withstand a directed verdict motion." Street v. J.C Bradford & Co., 886 F.2d 1472, 1478 (6th Cir.1989).
4. The claim of fraudulent transfer pursuant to 11 U.S.C. § 548
The Defendant's Motion for Summary Judgment addresses the issue of whether the transfer was fraudulent pursuant to 11 U.S.C. § 548(a)(1)(B) which provides:
The trustee may avoid any transfer of an interest of the debtor in property, or any obligation incurred by the debtor that was made or incurred on or within one year before the date of the filing of the petition, if the debtor voluntarily or involuntarily
....
(B)(1) received less than reasonably equivalent value in exchange for such transfer or obligation; and
(ii)(I) was insolvent on the date that such transfer was made or such obligation was incurred, or became insolvent *138 as a result of such transfer or obligation;
(II) was engaged in business or a transaction, or was about to engage in business or a transaction, for which any property remaining with the debtor was unreasonably small capital; or
(III) intended to incur, or believed that the debtor would incur, debts that would be beyond the debtor's ability to pay as such debts matured.
The trustee must prove by a preponderance of the evidence that the requirements set out in § 548(a)(1)(B) have been met. Wessinger v. Spivey, et al. (In re Galbreath), 286 B.R. 185, 197 (Bankr.S.D.Ga. 2002). The Defendant contends that the Plaintiff cannot prove that the Debtor received less than reasonably equivalent value in exchange for the transfer; it apparently does not dispute that the $1 million was property of the Debtor or that he was insolvent at the time of the transfer.
The Bankruptcy Code does not define "reasonably equivalent value," but defines "value" for the purpose of determining whether a transfer is fraudulent as "property, or satisfaction or securing of a present or antecedent debt of the debtor." 11 U.S.C. § 548(d)(2). Determination of reasonably equivalent value is a question of fact. See, e.g., Texas Truck Ins. Agency, Inc. v. Cure (In re Dunham), 110 F.3d 286, 289 (5th Cir.1997). Analysis of the exchange for which reasonably equivalent value is alleged is conducted on the basis of the facts and circumstances of each case, rather than a fixed mathematical formula. Mellon Bank, N.A. v. Official Comm. of Unsecured Creditors of R.M.L., Inc. (In re R.M.L., Inc.), 92 F.3d 139, 148-49 (3rd Cir.1996); Rubin v. Mfrs. Hanover Trust Co., 661 F.2d 979, 994 (2nd Cir. 1981). Value has been defined as that which provides an economic benefit, either direct or indirect, to the debtor. Baumgart v. Bedlyn, Inc. (In re Empire Interiors, Inc.), 248 B.R. 305, 308 (Bankr. N.D.Ohio 2000); Harker v. Center Motors, Inc. (In re Gerdes), 246 B.R. 311, 313 (Bankr.S.D.Ohio 2000).
The Defendant contends that the Debtor received both direct and indirect benefit as a result of the transfer. In regard to direct benefit, it argues that the credit which the Debtor received from WBI constitutes a direct benefit in the amount of $1 million. The Defendant points to WBFs proofs of claim (claim numbers 76 and 77)filed along with attached exhibits in this case on September 13, 2001, as showing that the Debtor received a dollar-for-dollar reduction in his indebtedness to WBI as a result of the transfer. In support of its contention that the Debtor's debt reduction was a direct benefit, the Defendant cites Marshack v. Wells Fargo Bank (In re Walters), 163 B.R. 575 (Bankr.C.D.Cal.1994). There the debtor was personally liable under a guaranty of partnership debt, and his payments on that guaranty constituted reasonably equivalent value since they resulted in a dollar-for-dollar reduction in his liability thereunder. Id. at 581. The Defendant maintains that the situation here is analogous.
The Plaintiff's response to the contention of direct benefit is to challenge the value of the transfer. According to the Plaintiffs expert, Jane Ciancanelli,
As a result of the Transfer to John Wiley, Mr. Wilkinson reduced the book value of the amount he owed WBI by $1,000,000. In the event the Court determines that the reduction in the debt owed to WBI constitutes value received from John Wiley in exchange for Mr. Wilkinson's Transfer of $1,000,000, I have estimated the value that Mr. Wilkinson received from the reduction in his debt to be no more than $61,003. Consequently, *139 even if the reduction in debt owed to WBI were to be considered value received from John Wiley in exchange for the transfer of $1,000,000, Mr. Wilkinson did not receive reasonably equivalent value for the transfer.... WBI filed a claim against Mr. Wilkinson's estate in the amount of $60.1 million.... Through negotiations between the Trustee and WBI, the $60 million claim of WBI was reduced to $31 million, 52% of the original value, reflecting a settlement between the two parties. In addition to the reduction in value of the WBI claim resulting from the settlement, the value of the WBI claim is significantly less than $31 million given the deep insolvency of Mr. Wilkinson. It is my understanding that the Trustee currently estimates that creditors will be paid less than 3% on their claims.... [T]he estimated value of $15,474 received by Mr. Wilkinson from the reduction in debt owed to WBI reflects] the settlement and the Trustee's current estimate of payments to creditors.... I have also considered the results of my valuation analysis in determining the value of the reduction in the debt owed to WBI.... [M]y valuation analysis estimates the value of Mr. Wilkinson's assets to be $41 million or 12% of the value of Mr. Wilkinson's liabilities of $349 million at the Valuation Date. For the reasons discussed above and because my analysis does not reflect liquidation values, the results of my analysis provide a maximum estimate of the value associated with a claim against the Wilkinson bankruptcy estate.... [T]he value Mr. Wilkinson received from the reduction in the debt owed to WBI was no more than $61,003.
(Ciancanelli Report, 12/29/03, pp. 21-22). The Plaintiff states in his response that the purpose of Ms. Ciancanelli's valuation is to "quantify the difference in the fanvalue and the book value of the alleged Wilkinson debt to WBI and any reduction in that value by reason of the Transfer." The comparison of fair value and book value and whether a transfer reduces value is a means of determining the debtor's solvency. See, e.g., WRT Creditors Liquidation Trust v. WRT Bankr.Litig. Master File Defendants (In re WRT Energy Corp.), 282 B.R. 343 (Bankr.W.D.La.2001).
The court also notes that cases cited by the Plaintiff in support of the contention that the Ciancanelli Report properly considered subsequent events in analyzing whether the Debtor received a direct benefit by reason of WBI's debt reduction address the issue of solvency in preference actions. In any event, this court is not faced with the task of valuing the Debtor's assets for the purpose of determining whether he was insolvent at the time of the transfer; all agree that he was. Further, even in determining solvency, the appropriate valuation date for avoidance purposes is the date of the subject transfer. In re WRT Energy Corp., 282 B.R. at 368.
The Defendant cites Cooper v. Ashley Communications, Inc. (In re Morris Communications NC, Inc.), 914 F.2d 458 (4th Cir.1990) in support of the proposition that a transfer must be valued at the time it is made. There the court stated: "The sole issue between the parties thus is whether the debtor-transferor received in exchange the reasonably 'fair equivalent value' of the transferred property. The date for defining such reasonable equivalence is the date of transfer...." Id, at 466. See also Butler Aviation Int'l, Inc. v. Whyte (In re Fairchild Aircraft Corp.), 6 F.3d 1119, 1126 (5th Cir.1993). Further, "[subsequent appreciation or depreciation should not, and does not, transform a transfer for reasonably equivalent value *140 into a fraudulent transfer." Krommenhoek v. Natural Resources Recovery, Inc. (In re Treasure Valley Opportunities, Inc.), 166 B.R. 701, 704 (Bankr.D.Idaho 1994). The Plaintiff argues that the "byproducts" of the Debtor's insolvency (the settlement and the claims process referred to in the Ciancanelli Report) are valid bases for determining reasonably equivalent value, and that they are not future events, but he cites no authority to support this proposition. All of the foregoing does, however, support the Defendant's contention that the Debtor received reasonably equivalent value from the WBI debt reduction. This court therefore finds that the Defendant has borne its burden of proof on that issue, that there is no genuine issue as to any material fact, and that the Defendant should have summary judgment on the Plaintiffs claim of a fraudulent transfer pursuant to § 548(a)(1)(B).
5. The claim of fraudulent transfer pursuant to KRS 378.020
The Defendant maintains that since the Plaintiff cannot demonstrate that a constructively fraudulent transfer occurred pursuant to the Bankruptcy Code, his state law claim must fail as well. The Defendant does not separately address the requirement of "valuable consideration" under KRS 378.020. That statute provides in pertinent part that "[ejvery gift, conveyance, assignment, transfer or charge made by a debtor, of or upon any of his estate without valuable consideration therefor, shall be void as to all his then existing creditors...." The Plaintiff responds that the Defendant is not entitled to summary judgment on this issue, stating that the Defendant never directly transferred anything to the Debtor and characterizing the reduction of the Debtor's "alleged" debt to WBI as an "indirect benefit," apparently now equating "benefit" with "transfer." He cites two Kentucky cases, Kitchen v. Fischer, 293 Ky. 787, 170 S.W.2d 592 (1943) and Pope v. Cawood, 293 Ky. 389, 168 S.W.2d 985 (1943), which deal with transfers of real estate and stock, respectively. These cases hold that a transfer for less than "a fair and reasonable price" is void.
The Plaintiff then returns to his valuation argument to maintain that the debt reduction by WBI was not worth $1 million, and that therefore the Debtor could not have received valuable consideration in return for his transfer of that amount to the Defendant. If this court accepts the premise that the Debtor received a direct benefit by way of the debt reduction, the Plaintiffs arguments are ineffectual in the state law context as well as in the bankruptcy context. Further, Kentucky courts have recognized that "a benefit to accrue to a third person is a valuable consideration." Burnett's Adm'x v. Farmers' Nat'l Bank, 243 Ky. 760, 49 S.W.2d 1033, 1034 (1932). This court therefore also finds that the Defendant should have summary judgment on the Plaintiffs claim of a fraudulent transfer pursuant to KRS 373.020.
6. Conclusion
The Plaintiff has abandoned his claim of a preferential transfer pursuant to § 547(b), and that claim is therefore not before the court. The Defendant has demonstrated that there is no genuine issue as to any material fact and that it is entitled to judgment as a matter of law that the Debtor's transfer to it of $1 million was not constructively fraudulent, either under the Bankruptcy Code or Kentucky state law. As a result of this determination, the Plaintiffs claim that any avoided transfer should be recovered for the benefit of the estate is now moot. Further, since the court has determined that the Debtor received a direct benefit from the transfer, the question of exclusion of Dr. Mullineaux's *141 testimony is also moot as his testimony went to the issue of indirect benefit. Summary judgment will therefore be entered for the Defendant on all counts of the Plaintiff's Amended Complaint.
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636 S.W.2d 430 (1982)
STATE of Tennessee, ex rel. SCA CHEMICAL WASTE SERVICES, INC., Plaintiff-Appellant,
v.
Charles KONIGSBERG, Jr., M.D., Mph, Director and Health Officer, Memphis and Shelby County Health Department and Christ T. Sanidas, Chief Building Official, Shelby County, Tennessee, Defendants-Appellees, and
Delta Tool and Die, Inc.; Ralph Adams; George Cook; People of Woodstock and Board of Commissioners of Shelby County, Tennessee, Intervenors-Appellees.
Supreme Court of Tennessee, at Jackson.
June 28, 1982.
*432 William M. Walsh, Memphis, for plaintiff-appellant.
Carroll C. Johnson, J. Minor Tait, Jr., Asst. Shelby County Attys., Memphis, for defendants-appellees.
OPINION
BROCK, Justice.
This is a mandamus action. The relator, SCA Chemical Waste Services, Inc., sued defendant Charles Konigsberg, Jr., as the Director and Chief Medical Officer of the Memphis and Shelby County Health Department, to require him to issue to relator a "clean air permit" in connection with the relator's proposed construction of a chemical waste treatment plant in Shelby County. Later, relator amended the action by adding defendant Christ T. Sanidas, the Chief Building Officer of Shelby County, seeking a writ against him to require the issuance of a building permit for the proposed chemical waste treatment plant. Following a hearing on the merits, the Chancellor found the issues in favor of the defendants and dismissed the complaint; relator has appealed to this Court seeking a reversal and a judgment requiring that the two permits be issued.
While the appeal was pending in this Court the relator-appellant filed a motion for consideration of post-judgment facts pursuant to Rule 14, Rules of Appellate Procedure. Most of the alleged post-judgment facts sought to be considered are pleadings and other matters concerning a subsequent suit between the same parties that is now pending in the trial court in Shelby County and are not relevant to this action, but one post-judgment fact sought to be considered is that the "clean air permit" which was the subject of the instant litigation was actually issued by the Shelby County Health Department on January 15, 1981. Rule 14 provides, in part:
"While neither controlling nor fully measuring the court's discretion, consideration generally will extend only to those facts, capable of ready demonstration, affecting the positions of the parties or the subject matter of the action such as mootness, bankruptcy, divorce, death, other judgments or proceedings, relief from the judgment requested or granted in the trial court, and other similar matters."
In our discretion we grant the motion insofar as it disclosed that the "clean air permit" has been issued after the appeal in this case was perfected; in all other things the motion to consider post-judgment facts is denied. We deem it quite inappropriate to consider upon this appeal matters pertaining to subsequent litigation now pending in the trial court in Shelby County.
Since the "clean air permit" has now been issued, we consider that this action, insofar as it sought the issuance of that permit, is now moot. However, for the sake of clarity, it will be necessary to mention the clean air permit and the proceedings in Shelby County with relation to it in the course of this opinion.
SCA Chemical Waste Services, Inc., is engaged in the business of disposing of hazardous wastes in Shelby County and proposes to construct a new facility to process such wastes. On September 4, 1980, it applied to the Memphis and Shelby County Health Department for the issuance of a clean air permit in connection with the proposed construction.
On October 6, 1980, the Council of the City of Memphis and the Board of Commissioners for Shelby County, in joint session, enacted a comprehensive new zoning ordinance to become effective on January 1, 1981. This new ordinance contained a category covering "refuse processing, treatment and storage" and required that a special permit be obtained from both the City Council and the County Commission when authorization for refuse processing, treatment and storage was sought. Prior to the *433 enactment of this new ordinance the area which contained the site of the relator's proposed treatment plant was zoned "heavy industrial" and no special permit was required for a use such as that proposed by the relator. On October 8, 1980, the relator and Illinois Central Railroad entered into a contract which would permit SCA to purchase approximately 30 acres of property located on Fite Road in Shelby County which was to be the site of relator's new waste treatment plant. At that time the zoning governing this piece of property was "heavy industrial" and would have permitted use of the property as intended by the relator for treatment of hazardous wastes.
On October 9, 1980, the relator applied for a grading and building permit from defendant, Sanidas, Chief Building Officer of Shelby County.
On October 22, 1980, the Board of Commissioners for Shelby County conducted a hearing with respect to the issuance of permits which would allow the relator to construct its hazardous waste treatment plant. At this hearing considerable anxiety was expressed indicating fear that the public welfare and safety of the residents of the county would be adversely affected by the construction of relator's plant and the hearing resulted in the adoption by the Commission of a resolution directing all county agencies not to issue any permits to relator for the construction of its hazardous waste treatment plant until January 15, 1981, and provided, further, that relator should meet all applicable standards in effect on January 15, 1981.
On October 27, 1980, SCA, the relator, filed the original complaint in this action against the defendant, Charles Konigsberg, Jr., M.D., Director, Memphis and Shelby County Health Department, seeking a writ mandating him to issue the requested clean air permit.
On November 3, 1980, the Shelby County Commission amended its resolution dated October 22, 1980, making it apply specifically to any proposed plant for hazardous waste treatment. Because of the importance of this resolution to the merits of this litigation, we quote it in full:
"Whereas, great public concern has been shown regarding the location of a chemical hazardous waste treatment plant in Shelby County; and
"Whereas, the Shelby County Commission by joint ordinance/resolution with the City of Memphis adopted a new zoning code on October 6, 1980, with its effective date being January 1, 1981; and whereas, this new zoning code allows for legislative review and safeguards to be placed upon any such plant via the special permit route; and
"Whereas, additional federal EPA guidelines and standards will become effective on November, 1980; and
"Whereas, pursuant to the health, welfare and safety of the citizens of Shelby County, this Commission deems it necessary for the aforementioned new zoning and EPA guidelines to be in effect when any permits are issued to this new industry.
"Now, therefore, be it resolved by the Board of County Commissioners of Shelby County, Tennessee, that the county administration, acting by and through any of the departments, boards, authorities, commissions or any other entity under its jurisdiction pursuant to Chapter 260 of the Private Acts of 1974 or any other applicable state or federal law, is directed not to issue any permits regard [sic] any proposed plant for hazardous waste treatment until January 15, 1981, provided that these plants meet all eligible standards of rules and regulations then in effect for the issuance of permits.
"Be it further resolved, that the aforementioned permits shall not be issued on or after January 15, 1981, until and unless the SCA Corporation submits an equal opportunity compliance statement to the appropriate office of the Shelby County Administration.
"Be it further resolved, that no permits of any nature shall be issued to anyone in Shelby County, who intends to construct a plant to process hazardous waste, until the complete system is tied into the *434 North Waste Treatment Plant is adequate to accept and treat the additional sewage."
Thereafter, on November 13, 1980, relator amended its complaint by adding defendant Christ T. Sanidas, Chief Building Officer of Shelby County, as a party defendant, seeking a mandate requiring him to issue a preliminary grading permit.
Following a trial on the merits, the trial court concluded that the County Board of Commissioners had not acted arbitrarily, capriciously, illegally, unlawfully or beyond its jurisdiction in adopting the resolutions of October 22, 1980, and November 3, 1980; that these resolutions were in all things valid and binding upon the defendants, Konigsberg and Sanidas, and, therefore, that these defendants were under no duty to issue the clean air permit and the building permit as sought by the complaint. Accordingly, the Chancellor dismissed the relator's action.
The first question presented for our decision is whether mandamus may be properly employed to determine the constitutional validity of a statute, ordinance or other legal directive that on its face requires that the defendant official shall not perform the act sought to be required of him by the relator. Defendants, of course, assert that mandamus may not be so used, but relator insists that such a use is proper. We decide this issue in favor of the relator. We have found no reported case deciding the question in this State; authorities from other jurisdictions are divided on the subject. Some courts have held that mandamus lies only to enforce a plain ministerial duty and since a plain ministerial duty cannot exist which is made to appear only by declaring a statute unconstitutional, the writ will not issue if it is necessary to declare unconstitutional a statute in conflict with the alleged duty sought to be enforced. See, 52 Am.Jur.2d Mandamus § 95 (1970) and cases there cited. Other decisions hold that if the right to the issuance of the writ is dependent on the unconstitutionality of a statute or ordinance the court has the power to pass upon the question of its validity and the court may, therefore, grant or refuse the writ depending upon whether or not it holds the statute or ordinance to be unconstitutional or valid. We adopt the latter view as the one more consonant with our continued effort to determine litigation on the merits rather than on procedural technicalities; moreover, it represents the definite trend of the more recent decisions of other courts. See, People ex rel. Durham Realty Corporation v. La Fetra, 186 N.Y.S. 63, 195 A.D. 280 (1920), aff'd 130 N.E. 601, 230 N.Y. 429, 16 A.L.R. 152 (1921); Figari v. New York Telephone Co., 303 N.Y.S.2d 245, 32 A.D.2d 434 (1969); Los Angeles Free Press, Inc. v. City of Los Angeles, 88 Cal. Rptr. 605, 9 Cal. App. 3d 448 (1970); Bal Harbour Village v. State ex rel. Giblin, Fla. App., 299 So. 2d 611 (1974); Hering v. City of Royal Oak, 326 Mich. 232, 40 N.W.2d 133 (1949); People ex rel. Scott v. Kerner, 32 Ill. 2d 539, 208 N.E.2d 561 (1965); Murray v. Curlett, 228 Md. 239, 179 A.2d 698 (1962); 52 Am.Jur.2d Mandamus § 95 (1970). If the duty of the defendant official to perform an act is nondiscretionary, mandamus is a proper remedy even though the existence of that duty must be determined and adjudicated by the court in the mandamus suit.
We consider now the validity of the resolutions of the Shelby County Commission adopted on October 22, 1980, and November 3, 1980; these resolutions will be hereinafter treated together and referred to as one since they dealt with the single subject matter of preventing the issuance of building permits or other permits permitting the construction of hazardous waste treatment plants in Shelby County until January 15, 1981.
Resolutions or ordinances of the type here considered have been referred to in cases from other jurisdictions as "stopgap" ordinances, "interim" ordinances, and as "emergency" ordinances because of their function and purpose to preserve temporarily the status quo of the municipality or section thereof to which they apply until a pending permanent zoning regulation could be finally adopted. As was noted by the *435 California Supreme Court, courts may take judicial notice of the fact that it takes much time to work out the details of a comprehensive zoning plan and it would be destructive of the plan if, during the period of its incubation and consideration, persons seeking to evade its operation should be permitted to enter upon a course of construction that would progress so far as to defeat, in whole or in part, the ultimate execution of the plan. See Miller v. Board of Public Works, 195 Cal. 477, 234 P. 381, 38 A.L.R. 1479 (1925), error dismissed 273 U.S. 781, 47 S. Ct. 460, 71 L. Ed. 889 (1927). Assuming that the municipality has the legislative authority to adopt such ordinances, and assuming that such an ordinance or resolution is of limited duration for a period of time that is reasonable under the circumstances and has been enacted in good faith and without discrimination, such ordinances have generally been upheld, especially by the later cases, so long as the purpose is to study and to develop a comprehensive zoning plan which does in fact proceed promptly, culminating in the expeditious adoption of appropriate zoning ordinances when the study is completed. Almquist v. Marshan, 308 Minn. 52, 245 N.W.2d 819 (1976); Sherman v. Reavis, 273 S.C. 542, 257 S.E.2d 735 (1979); Taylor v. City of Little Rock, 266 Ark. 384, 583 S.W.2d 72 (1979); A. Copeland Enterprises, Inc. v. City of New Orleans, La. App., 372 So. 2d 764 (1979); CEEED v. California Coastal Zone Conservation Commission, 43 Cal. App. 3d 306, 118 Cal. Rptr. 315 (1974); Anderson v. Pima County, 27 Ariz. App. 786, 558 P.2d 981 (1976); Frisco Land & Min. Co. v. State, 74 Cal. App. 3d 736, 141 Cal. Rptr. 820 (1977); McCurley v. El Reno, 138 Okl. 92, 280 P. 467 (1929).
In our opinion authority for the County Commission to adopt the subject resolutions is found in Section 2.01 of Chapter 260 of the Private Acts of 1974 which provides:
"The legislative power of the county is vested in the Board of County Commissioners of Shelby County, hereinafter called the Legislative Branch. The legislative power includes all lawful authority to adopt resolutions governing the operation of government or regulating the conduct and affairs of the residents of the county, to fix the county tax rate, to adopt the county budget, to make appropriations of county funds for all legislative purposes and to exercise all other power of a legislative nature which is vested in the county by the constitution, general statutes, or special, local or private acts of the general assembly. The Legislative Branch may adopt any resolution which is not in conflict with the constitution of the State of Tennessee or this chapter."
We note, further, that it is provided in Section 1.01 of the same Act that "... the grants of power to county government shall be liberally construed."
Pertinent here is the decision of this Court in McKelley v. City of Murfreesboro, 162 Tenn. 304, 36 S.W.2d 99 (1931). Before the court in that case was an ordinance which had been passed prohibiting filling stations in certain portions of the City of Murfreesboro and the trial court had held that the city had no power to pass such an ordinance under its charter. This Court reversed, holding that the broad powers conferred upon the city by the charter allowed it to pass such an ordinance as part of its "police" power to promote the general safety and welfare of the city. The Court noted:
"While applying strictly to all ordinances the limitation to reasonableness, the extent of the powers delegated by general provisions may be construed liberally. Specific enumeration is not essential when the intention of the legislature to confer broad powers is manifest. Unquestionably the modern tendency is toward the enlargement of the scope of the delegation to local subdivisions, or arms, of the state of powers of local government." 36 S.W.2d at 101.
Thus, although specific authority to enact an interim zoning ordinance or regulation of the type here in issue, is not specifically mentioned in Section 2.01 of Chapter 260, Private Acts of 1974, above quoted, we have no hesitation in concluding that it *436 was intended to be included within the broad sweep of the legislative power granted by that section. See, Draper v. Haynes, Tenn., 567 S.W.2d 462 (1978).
It is our further conclusion that the Shelby County Commission complied with the procedure for the adoption of resolutions found in Article II, Section 2.03 of Chapter 260, Private Acts of 1974, which, in pertinent part, provides:
"1. The Legislative Branch shall exercise its legislative authority by resolution except as otherwise specifically provided by this chapter. Every resolution of the county commission shall be submitted to the county mayor. If the county mayor signs it, the resolution shall become effective immediately or at a later date if the resolution so provides. If the county mayor vetoes the resolution, he shall return it to the county commission for action on his veto, in which case it shall become effective only upon subsequent passage by a majority of all the members comprising the county commission, which passage must take place within thirty (30) days of receiving the county mayor's message of veto. If the county mayor fails either to sign or veto a resolution and to report his action to the county commission within ten (10) days after the resolution is submitted to him, he shall have no further power to veto the resolution and it shall become effective without his signature upon the expiration of the ten (10) day period or at a later date if the resolution so provides."
We consider now the reasonableness of the instant resolutions. At this point it must be kept in mind that it was on October 6, 1980, that the Council of the City of Memphis and the Board of Commissioners for Shelby County enacted the comprehensive new zoning ordinance to become effective on January 1, 1981, under the terms of which a special permit would be required from both the City Council and the County Commission before permits could be issued for the construction of a plant to be used for processing, treatment and storage of hazardous wastes. It was three days later, October 9, 1980, that the relator applied for a grading and building permit from the defendant Sanidas, the Chief Building Officer of Shelby County. It was on October 8, 1980, that the relator and the Illinois Central Railroad entered into a contract which would permit relator to purchase approximately 30 acres of property for the proposed site of its new waste treatment plant. Clearly then, these facts bring this case within the "pending ordinance" or "interim ordinance" doctrine hereinabove mentioned. In a case involving facts closely approximating those in the instant case, the South Carolina court, in Sherman v. Reavis, supra, stated:
"We hold that a municipality may properly refuse a building permit for a land use in a newly annexed area when such use is repugnant to a pending and later enacted zoning ordinance.
"This holding, which is followed by numerous jurisdictions, is supported by sound reasoning. See, generally, Annot., 50 A.L.R. 3d 596, 623-32 (1973). As stated in Chicago Title & Trust Company v. Village of Palatine, 22 Ill. App. 2d 264, 160 N.E.2d 697, 700 (1959):
`It would be utterly illogical to hold that, after a zoning commission had prepared a comprehensive zoning ordinance or an amendment thereto, which was on file and open to public inspection and upon which public hearings had been held, and while the ordinance was under consideration, any person could by merely filing an application compel the municipality to issue a permit which would allow him to establish a use which he either knew or could have known would be forbidden by the proposed ordinance, and by so doing nullify the entire work of the municipality in endeavoring to carry out the purpose for which the zoning law was enacted.'" 257 S.E.2d at 737.
We approve the quoted statement from the Sherman opinion. It is obvious that in the case before us the relator, SCA Chemical Waste Services, Inc., was engaged in a race to avoid the more stringent zoning *437 and permit requirements for the operation of hazardous waste treatment plants which were contained in the new ordinance to become effective on January 1, 1981. We hold that the county acted properly and had authority to suspend the issuance of permits for such construction pending the effective date of its new joint ordinance resolution.
Moreover, the relator is in no position to claim an estoppel or otherwise insist upon a vested right in the zoning regulations existing at the time it applied for the permit here sought; it had not begun construction nor even purchased the land upon which it proposed to build its plant. It is well settled that rights under an existing ordinance do not vest until substantial construction or substantial liabilities are incurred relating directly to construction. Phillips Petroleum Co. v. City of Park Ridge, 16 Ill. App. 2d 555, 149 N.E.2d 344 (1958). See, 82 Am.Jur.2d Zoning and Planning § 240 (1976) and cases there cited.
Finally, we find no merit in the relator's contention that it has been the victim of discrimination. It is true that the resolution adopted on October 22, 1980, made specific reference to relator and did not mention other chemical waste facilities but no one else proposed to erect such a facility and this was corrected in the amended resolution adopted on November 3, 1980, which by its terms applied to "any proposed plant for hazardous waste treatment... ." Legislative classification in a zoning law, ordinance or resolution is valid if any possible reason can be conceived to justify it. Davidson County v. Rogers, 184 Tenn. 327, 198 S.W.2d 812 (1947). Reasons for dealing specifically and particularly with the subject of the handling, storage, transportation, treatment and disposal of hazardous chemical and other wastes may easily be found in the grave danger to society posed by such wastes in our environment today.
We conclude that the Special Chancellor was correct in upholding the validity of the resolutions of October 22, 1980, and November 3, 1980, adopted by the Board of Commissioners for Shelby County, imposing a moratorium upon the issuance of permits for the construction of hazardous waste treatment facilities in Shelby County until January 15, 1981, and, therefore, that defendant, Sanidas, was under no duty to issue the permit requested and, indeed, had no authority to issue the same. We affirm the decree of the Chancellor dismissing this action. Costs incurred upon appeal will be taxed against the relator-appellant.
HARBISON, C.J., and FONES, COOPER and DROWOTA, JJ., concur.
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362 Pa. Super. 432 (1987)
524 A.2d 954
Hugh CARROLL, Justice Ad Litem for the Estate of Rita Carroll, Deceased, on Behalf of All Persons Entitled To Share In Damages, Appellant,
v.
Murray H. KIMMEL, M.D., Appellee.
Supreme Court of Pennsylvania.
Argued January 29, 1987.
Filed April 23, 1987.
*433 Neil E. Jokelson, Philadelphia, for appellant.
John H. McKeon, Jr., Philadelphia, for appellee.
Before CAVANAUGH, OLSZEWSKI and MONTEMURO, JJ.
*434 OLSZEWSKI, Judge:
This is an appeal from the entry of a judgment of non pros[1] against appellant Hugh Carroll as trustee ad litem for the estate of Rita Carroll. Appellant claims the trial court erred in granting a judgment of non pros in favor of appellee, Dr. Murray H. Kimmel. We disagree with appellant and consequently affirm the judgment.
The following chronology is drawn from the record and the uncontested facts in the briefs:
February 27, 1978 Rita Carroll dies.
February 28, 1980 Plaintiff-trustee files a notice complaint with the arbitration panels for health care claiming appellee, Dr. Kimmell, "has committed torts causing injury and death to Rita Carroll, resulting from the furnishing of medical services which were or should have been provided." (R.R. 1a).
April 1, 1980 Counsel for appellee enters an appearance.
April 9, 1980 Appellee files a rule to file a complaint.
April 23, 1980, and May 19, 1980 Appellee grants two twenty-day extensions in which appellant is to file a complaint.
July 3, 1980; August 8, 1980; August 11, 1980; October 30, 1980 Courtesy letters exchanged between counsel focusing on appellant's failure/inability to review the case.
October 27, 1980 Appellee files an election of jurisdiction pursuant to Pa.R.Civ.P. 213(f) to transfer the case from arbitration to the Court of Common Pleas of Philadelphia County.
November 11, 1980 Appellant sends a courtesy letter stating he will "promptly advise" appellee of his intent to proceed.
November 28, 1980 The case is transferred to the Court of Common Pleas of Philadelphia County.
*435 December 17, 1980 Appellant sends letter to appellee explaining that he had not yet received and reviewed the hospital records.
February 18, 1981 Appellee requests a reply within ten days regarding appellant's intentions.[2]
November 7, 1983 Appellant receives notice that the case has been dismissed by the Court of Common Pleas for failure to file a certificate of readiness.
November 25, 1983 Appellant files a motion to file a certificate of readiness nunc pro tunc.
December 29, 1983 Court grants appellant's motion and certificate of readiness is filed.
December 27, 1984 Parties are called to a pre-trial conference.
January 7, 1985 appellant's complaint is filed and service is made. In that complaint, appellant alleges that Dr. Kimmell failed to remove kidney stones during surgery performed on Mrs. Carroll in 1975 and, thereafter, did not provide proper follow-up care. Appellant claims that the doctor's treatment or lack of treatment contributed to Mrs. Carroll's death due to a massive myocardial infarction.
On January 25, 1985, appellee filed preliminary objections in the nature of a motion for judgment of non pros pursuant to Pa.R.Civ.R. 1037(c), which provides:
(c) In all cases, the court, on motion of a party, may enter an appropriate judgment against a party upon default or admission.
The trial court granted the motion and entered an order on May 8, 1986, which stated in full:
AND NOW, this eighth day of May, 1986, upon consideration of Defendant's Motion to Determine Preliminary Objections in the nature of a Motion for Judgment of Non Pros and Plaintiff's Answer thereto, it appearing that:
*436 1. Plaintiff has shown lack of due diligence in the prosecution of this case by delaying FIFTY-EIGHT months before filing complaint, after having filed and served a Notice Complaint;
2. Plaintiff has advanced no compelling reason which would excuse or justify his failure to proceed;
3. Destruction of certain medical records by the hospitals in their regular course of business has prejudically impaired the ability of Defendant to defend this lawsuit, Goldsborough v. City of Philadelphia, 309 Pa.Super. 347, 455 A.2d 643 (1982);
it is hereby ORDERED and DECREED that said Preliminary Objections are GRANTED and Judgment of Non Pros is entered against Plaintiff.
Order, May 8, 1986, reproduced in appellant's brief at 2.
In this appeal, appellant claims: (1) the record is devoid of evidence that he failed to pursue the case with diligence; (2) that any delay is not attributable to him; and (3) that appellee has not suffered prejudice by the alleged delay. We cannot agree with appellant's contentions.
Twenty years ago, our Supreme Court authorized the entry of a judgment of non pros pursuant to Pa.R.Civ.P. 1037(c) in a case procedurally similar to the one at hand. In Gallagher v. Jewish Hospital Assoc., 425 Pa. 112, 228 A.2d 732 (1967), plaintiffs commenced an action in 1946 but took no further steps until 1965 when a complaint was filed. Shortly thereafter, defendants filed a motion for entry of a judgment of non pros. Gallagher, 425 Pa. at 113, 228 A.2d at 733. In affirming the grant of a non pros, the Court relied upon two grounds: the inherent power of the court to grant a non pros for an unreasonable delay and Pa.R.Civ.P. 1037(c). Id., 425 Pa. at 116-117, 228 A.2d at 734-735. In reviewing the propriety of the entry of a non pros, the Gallagher Court stated:
It is well settled law that the question of granting a non pros because of the failure of the plaintiff to prosecute his action within a reasonable time rests within the discretion of the lower Court and the exercise of such *437 discretion will not be disturbed on appeal unless there is proof of a manifest abuse thereof.
425 Pa. at 113, 228 A.2d at 733 (citations omitted).
The standards for determining whether the trial court abused its discretion in granting a non pros are also well settled:
A Court may properly enter a judgment of non pros when a party to the proceeding has shown a want of due diligence in failing to proceed with reasonable promptitude, and there has been no compelling reason for the delay, and the delay has caused some prejudice to the adverse party, such as the death of or unexplained absence of material witnesses.
Moore v. George Heebner, Inc., 321 Pa.Super. 226, 229, 467 A.2d 1336, 1337 (1983), quoting, James Brothers Lumber Co. v. Union Banking & Trust Co. of DuBois, 432 Pa. 129, 132, 247 A.2d 587, 589 (1968). In view of these standards, we conclude the trial court acted well within its discretion in granting a judgment of non pros.
Diligence Element
Appellant delayed almost five years in pursuing this case. "A delay as long or longer than the applicable period of limitations is generally considered sufficient to warrant a judgment of non pros if the other tests are met." Kennedy v. Bulletin Co., 237 Pa.Super. 66, 346 A.2d 343, 345 (1975) (footnote omitted) (delay of five and one-half years in bringing tort action justified a judgment of non pros). The delay here continued for a period of time far longer than the two-year statute of limitations governing appellant's claims of negligence. Consequently, the court's finding that appellant failed to act diligently is confirmed.
Appellant argues, however, that the onus was on appellee to take action forcing appellant to file a complaint. We disagree. "The duty, therefore, is clearly on the appellant to proceed with his cause of action and he, not the appellee, should bear the risk of not acting within a reasonable time." Kennedy, 237 Pa.Super. at 71-72, 346 A.2d at 346.
*438 In view of the long delay and appellant's failure to actively pursue this case, the trial court correctly found that this requirement was met.
Reason for the Delay Element
As we noted above, case law requires us to determine whether a "compelling reason" for the delay was advanced. Nowhere in the record or briefs does appellant offer a "compelling reason" for the lengthy hiatus in this case. Appellant's only explanation is by way of argument in brief wherein he states that the delay was by "joint agreement of the parties." Appellant's brief at 13. Appellant's argument is belief, however, by the record; the uncontested documentary evidence demonstrates that the only "joint agreement" to delay the case was made in 1980 when counsel for appellee agreed to two twenty-day time extensions. Appellant fails to offer a compelling reason for the other fifty-seven months' delay before filing the complaint.
Appellant continues in this regard by summarily arguing that a non pros may not be entered where the delay was caused by counsel's excusable neglect. See, generally, Moore, 321 Pa.Super. at 229, 467 A.2d at 1338-1339 (neglect of counsel may be a "compelling reason" for delay if counsel offers a reasonable explanation for the neglect). Appellant's counsel does not pursue this argument and fails to offer a reasonable explanation for any conceivable mistake, oversight, or neglect on his part. We refuse to speculate as to either the cause or the reason for the delay.
Prejudice Element
We also find that this final element has been satisfied. In support of its motion for non pros, appellee submitted an affidavit stating that every diagnostic x-ray, film, and report pertaining to the decedent's urological problems and surgery have been destroyed as a matter of routine and regular housekeeping practice. Affidavit of Denise M. Barger, exhibit G of appellee's motion for non pros. The type of prejudice necessary to support a non pros is not "limited *439 to the death or absence of a material witness or the disappearance of a record" but "includes any substantial diminution of (the) ability to present factual information in the event of trial which has been brought about by plaintiff's delay." American Bank and Trust Co. v. Ritter, Todd and Haayen, 274 Pa.Super. 285, 289, 418 A.2d 408, 410 (1980).
Given the allegations in appellant's complaint, supra, such evidence undoubtedly would have been crucial to an effective defense and, perhaps, to the presentation of appellant's own case. For example, appellant averred that during a March 1975 operation to remove ureteral stones, appellee failed to remove a "mass of other stones then present within the left kidney of the plaintiff's decedent." (R. 24a, par. 4.) Appellee's ability to refute that claim has been seriously prejudiced by the destruction of a post-operative film of the abdomen which, according to appellee, "showed no evidence of remaining stones." (R. 53a.) There can be no dispute that the post-operative film, together with the subsequent films documenting the decedent's urological condition, would not have tended "to make a fact at issue more or less probable" and therefore have constituted material evidence under Pennsylvania law. Martin v. Soblotney, 502 Pa. 418, 422, 466 A.2d 1022, 1024 (1983). Further, appellant's claim that appellee failed to provide proper follow-up care to the decedent would be jeopardized given that the post-operative reports have been destroyed.
We are convinced that the destruction of such material evidence, coupled with the inevitable fading of memory and diminution of appellee's ability to produce evidence, firmly supports the trial court's finding of prejudice.
Finally, we reject appellant's claim that appellee has waived the right to file for a judgment of non pros. Such a waiver would occur where the movant "indicates through his conduct a willingness to try the case on the merits notwithstanding the delay." De Siato v. Shahboz, 277 Pa.Super. 333, 336-337, 419 A.2d 798, 800 (1980). After a careful examination of the record, we can find no action by *440 appellee indicating a waiver had occurred. Appellee's grant of two time extensions to appellant was a mere courtesy and occurred early in the proceedings. Nor do we believe that appellant's filing of a certificate of readiness after three years of inactivity prevents the entry of a judgment of non pros. As in Kennedy, supra, a judgment of non pros may be granted despite the filing of a certificate of readiness. Furthermore, as we noted above, it was incumbent upon appellant to advance his cause of action; appellee cannot be held to have waived the opportunity for a non pros by failing to make such a request at an earlier time.
In sum, we are convinced that the requirements for a non pros have been adequately demonstrated. Finding no abuse of discretion, we affirm the order and judgment.
NOTES
[1] A direct appeal may be filed from a judgment of non pros. See Erie Human Relations Commission v. Erie Insurance Exchange, 304 Pa.Super. 172, 450 A.2d 157 (1982).
[2] The reproduced record contains a letter dated June 16, 1981, addressed to appellant stating that a motion to dismiss will be filed within five days. Because counsel for appellant claims that his letter is not in his files, we will not consider it.
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636 S.W.2d 244 (1982)
Bobby W. POPE, Appellant,
v.
CITY OF DALLAS, Appellee.
No. 08-81-00120-CV.
Court of Appeals of Texas, El Paso.
June 16, 1982.
*245 Bader & Cox, Bert Bader, Dallas, for appellant.
Gary E. Keane, Asst. City Atty., Dallas, for appellee.
*246 Before WARD, OSBORN and SCHULTE, JJ.
OPINION
SCHULTE, Justice.
This is an appeal from an order of dismissal granted by the court below in favor of the City of Dallas, Appellee, based on Appellee's plea to the jurisdiction over the subject matter. We affirm.
Appellant, Bobby W. Pope, was the Assistant Chief of Police for the City of Dallas. On September 26, 1979, by letter from the Chief of Police, Pope was demoted from Assistant Chief to Captain for reasons therein stated. On September 27, 1979, Pope gave written notice of appeal to the City Manager, denying the grounds alleged for demotion. By letter dated October 1, 1979, Pope resigned effective October 2, 1979, stating therein that he would make application for his pension upon reaching age 50. The City's letter, dated October 24, 1979, advised Pope that his requested appeal had been set for October 15, 1979, but that Pope's resignation arrived prior to letter notice of the setting being sent to Pope. It further advised him that his resignation constituted a final disposition with regard to his employment, and relinquished his right to an appeal.
On October 31, 1979, Pope's attorney wrote the City Trial Board requesting a hearing before the Board relative to the demotion, citing the City Manager's refusal to hear the appeal. In response to that letter, on November 27, 1979, the City advised Pope's attorney that it had been determined that Pope relinquished his right to appeal his demotion when he resigned. On January 8, 1980, Pope brought suit against the City seeking restoration to the rank of Assistant Chief of Police, and its accompanying benefits. He also prayed he be found not guilty of any dereliction or incompetence. By amendment to his prayer, prior to the order of dismissal of the suit, Pope asked additionally that the court find there was no substantial evidence to support the administrative decision.
On December 1, 1980, the court sustained the City's plea to the jurisdiction, being of the opinion that the court had no jurisdiction over the cause of action pled, nor to pass on the merits of Pope's demotion, unless and until said merits had been finally considered by a trial board pursuant to Chapter XVI, section 12, of the Charter of the City of Dallas. This appeal followed.
By three points of error, Appellant urges the court erred in dismissing, first, because Appellant had exhausted all his administrative remedies; second, because being deprived of both administrative and judicial hearings he has been denied due process; and last, because his demotion had direct and collateral consequences, that the doctrine of mootness did not apply, and therefore Appellant did not relinquish his right to appeal by his resignation (retirement).
For reasons that will become apparent, we consider, first, Appellant's Point No. II relating to due process.
To come under the protection of due process, the right adversely affected by the action of the administrative body must be a vested property right. A person does not have a vested property right in the rank of Assistant Chief of Police, or any other particular rank. City of Amarillo v. Hancock, 150 Tex. 231, 239 S.W.2d 788 (1951).
Being a police officer is a privilege involving no constitutional right. In matters of privilege, as distinguished from property rights, an administrative determination may be final and conclusive without the right to judicial review. Fuller v. Mitchell, 269 S.W.2d 517 (Tex.Civ.App. Dallas 1954, writ ref'd n. r. e.).
Pope's argument encompasses, as well, an assertion of deprivation of "liberty," the same being his "good name, reputation, honor, and community standing." However, Appellant's pleadings below nowhere contain an assertion that any charges were made public. To raise a liberty interest, it must be shown that the charges were made public. Liberty is not infringed by derogatory information in confidential personnel files. Kaprelian v. Texas Women's *247 University, 509 F.2d 133 (5th Cir. 1975). Point of Error No. II is overruled.
Turning to Point No. III, Appellant asserts the dismissal was in error in that the demotion had direct and collateral consequences and the doctrine of mootness did not apply, and, therefore, Pope did not relinquish his right to appeal by his resignation.
A case becomes moot when it appears that one seeks to obtain relief upon some alleged controversy when in reality none exists, or upon some matter which, when granted, cannot have any practical legal effect upon a then existing controversy. Kolsti v. Guest, 576 S.W.2d 892 (Tex. Civ.App. Tyler 1979, no writ).
When Pope began his appeal, he was an employee and was therefore entitled to an appeal. However, he chose to resign. The Trial Board was only following the authority granted it under the City Charter which is to hear appeals from officers and employees. When Pope requested appeal to the Trial Board, he was not an employee, and by his resignation he voluntarily forfeited his right of appeal before the Trial Board.
Appellant cites cases involving involuntary commitments to mental hospitals and instances of juvenile appeals to demonstrate circumstances where the mootness doctrine does not apply, and the collateral consequences doctrine does apply. In those cases, State v. Lodge, 608 S.W.2d 910 (Tex. 1980), and Carrillo v. State, 480 S.W.2d 612 (Tex.1972), the courts wrote that the ability to exonerate oneself was beyond a person's control because the sentence given was short, and that it expired before appellate steps could be completed. Here, Pope did have an avenue of appeal available, but because of his decision to resign, the avenue was no longer available. Point of Error No. III is overruled.
In Appellant's first point, the argument is made that Appellant had exhausted all his administrative remedies, and the court erred in dismissing for lack of jurisdiction of the subject matter, and that Appellant was properly before the court and was entitled to a trial.
Under the Dallas City Charter, Chapter XVI, section 12, a Trial Board exists to hear and determine charges made against any officer or employee of the city. The Charter provides that a judgment or decision of the Board is final unless appealed to the District Court. Appellee contends that since the Trial Board did not hear Pope's appeal, there was no final decision, and Pope did not exhaust his administrative remedies before this appeal. With this, we do not agree.
A final decision is one that leaves nothing open to dispute, and there remains nothing unfinished or inconclusive. Allen v. Crane, 257 S.W.2d 357 (Tex.Civ.App. San Antonio 1953, writ ref'd n. r. e.). In worker's compensation cases, dismissal of a claim and refusal to set a case for hearing have been held to be final orders. Texas State Highway Department v. Fillmon, 236 S.W.2d 635 (Tex.Civ.App. Eastland), aff'd, 150 Tex. 460, 242 S.W.2d 172 (1951), and Nunmon v. Traders & General Ins. Co., 170 S.W.2d 262 (Tex.Civ.App. Beaumont 1943, no writ).
The Trial Board's refusal to allow Pope to appear before the Board is a final decision capable of review by the District Court, and the question for review is the Board's determination that the Board did not have jurisdiction to hear Pope's appeal because he was not an officer or employee. There is no dispute as to the evidence in that regard. Attached to Appellant's petition below are letters showing that Pope had resigned and that he was no longer an officer or employee. Under the substantial evidence rule, the court inquires not whether the trial board actually heard sufficient evidence, but whether the facts that existed at the time of the decision were such as to justify its action. Board of Firemen's Relief & Retirement Fund Trustees of Houston v. Marks, 150 Tex. 433, 242 S.W.2d 181 (1951); Railroad Commission of Texas v. Shell Oil Co., 139 Tex. 66, 161 S.W.2d 1022 (1942); and Kavanagh v. Holcombe, 312 *248 S.W.2d 399 (Tex.Civ.App. Houston 1958, writ ref'd n.r.e.).
Although we believe the court below had jurisdiction and Appellant had exhausted his administrative remedies, an appellate court will not remand a case for trial on the ground that the trial court erred in holding that it had no jurisdiction if the petition itself shows on its face that there are no facts which would entitled the petitioner to relief. Glen Oaks Utilities, Inc. v. City of Houston, 161 Tex. 417, 340 S.W.2d 783 (1960).
If the court below had gone further than an inquiry into the legality and reasonableness of an administrative order, substituting a decree which in its opinion an administrative officer should have entered, such action would be in excess of its constitutional powers. Fire Dept. of City of Fort Worth v. City of Fort Worth, 147 Tex. 505, 217 S.W.2d 664 (1949).
By Appellant's voluntary resignation, he removed himself from the officer-employee category. There are no facts alleged in the petition entitling Pope to the relief sought. It was error for the court below to rule that it had no jurisdiction, and Point of Error No. I is sustained. But because of the reasons heretofore stated, such error did not amount to such a denial of the rights of the Appellant as was reasonably calculated to cause and probably did cause the rendition of an improper judgment. Rule 434, Tex.R.Civ.P.
The judgment is affirmed.
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674 F. Supp. 1418 (1987)
Jimmy NEUSCHAFER, Petitioner,
v.
Harol WHITLEY, et al., Respondents.
No. CV-N-87-419-ECR.
United States District Court, D. Nevada.
December 8, 1987.
*1419 N. Patrick Flanagan, Asst. Federal Public Defender, Reno, Nev., for petitioner.
Brian McKay, Atty. Gen. by David Sarnowski, Deputy Atty. Gen., Carson City, Nev., for respondents.
ORDER
EDWARD C. REED, Jr., District Judge.
The petitioner, Jimmy Neuschafer, has brought this second petition for a writ of federal habeas corpus under 28 U.S.C. § 2254.[1] Initially, the petitioner had decided not to bring the second petition, and the American Civil Liberties Union sought permission to file the petition on his behalf as relator. The Court denied the ACLU's motion to intervene as relator, and declined to issue any stay of execution for the petitioner. Shortly before the scheduled execution, however, the petitioner decided to present his second petition to the Court. In view of the substantial issues presented by that petition, and in view of the short amount of time in which the Court had to consider those issues, the Court stayed the petitioner's imminent execution. This order was upheld by both the Ninth Circuit and the United States Supreme Court.
The respondents have moved to dismiss the 1987 petition on various grounds, including the abuse of writ doctrine. In view of the fact that this is a successive petition, the Court ordered a hearing to determine whether this second petition indeed constituted an abusive writ. See Richmond v. Ricketts, 774 F.2d 957, 961 (9th Cir.1985). After consideration of the pleadings on file and the argument and evidence presented at the hearing, it appears to the Court that this second petition is abusive, and that it should be dismissed on that basis.
THE STATE PROCEEDINGS/1985 PETITION
The petitioner was convicted of the murder of fellow inmate Johnnie Johnson in April, 1983. The jury also imposed the sentence of death upon the petitioner. Several years lapsed before the state supreme court acted on the petitioner's direct appeal. On August 27, 1985, however, that court affirmed the petitioner's conviction and upheld the sentence of death. The petitioner then proceeded in pro se in the state courts, filing a petition for state post-conviction relief soon after the supreme court issued its mandate. The petition apparently argued that Neuschafer's fifth and sixth amendment rights had been violated as a result of his conviction. The state court judge who heard the petition dismissed it for lack of legal particularity, and also denied the petitioner's motions for appointment of counsel and for stay of execution.
By this time, the state public defender, Robert Bork, filed another petition before the same judge on October 28, 1985. The day after, the Attorney General's office moved to dismiss this petition. On the following day, the state court judge held a brief hearing, at which time he appointed the public defender to represent the petitioner, and dismissed the petition. That afternoon, Mr. Bork filed a notice of appeal to the state supreme court. The court dismissed *1420 the appeal and affirmed the judgment of the lower court, thereby clearing the way for the petitioner's execution, then scheduled for November 5, 1985.
THE FEDERAL PROCEEDINGS/1985 PETITION
In view of the petitioner's imminent execution, the federal public defender, N. Patrick Flanagan, filed a petition for writ of habeas corpus and a motion for stay of execution with this Court. A hearing was held in this matter on November 4, 1985. At that time, the Court appointed Mr. Flanagan to represent the petitioner during the proceedings in this Court. The Court also noted that the petitioner had not yet had the opportunity to pursue any of the federal remedies to which he was entitled. In view of this, the Court stayed the petitioner's impending execution, and directed counsel to file an amended petition. The Court also cautioned the petitioner's counsel at that time that all possible grounds should be included in that amended petition, in view of the serious problems raised by subsequent petitions.
The petitioner filed the amended petition. The Court, by its order of March 12, 1986, denied the petition in its entirety. Neuschafer v. Whitley, 630 F. Supp. 897, 902 (D.Nev.1986). The petitioner then appealed that decision to the Ninth Circuit. On January 6, 1987, the circuit remanded the Court's order on the basis that an evidentiary hearing should have been held regarding the petitioner's Miranda/Edwards claim. Neuschafer v. McKay, 807 F.2d 839, 841 (9th Cir.1987). Pursuant to the circuit's order, this Court held an evidentiary hearing on February 18, 1987. At that time, the Court took evidence and testimony regarding whether the petitioner voluntarily initiated his second interview with law enforcement officials which resulted in his confession. The Court determined that the petitioner had indeed initiated the second contact, and that there was therefore no basis for the Miranda/Edwards claim. Neuschafer v. Whitley, 656 F. Supp. 891, 893 (D.Nev.1987). The Ninth Circuit affirmed this ruling. Neuschafer v. Whitley, 816 F.2d 1390, 1392 (9th Cir.1987). The petitioner never sought review by the United States Supreme Court.
THE 1987 PETITION
The petitioner then returned to the state courts, and filed another post-conviction relief petition. The state district judge heard this matter, as well as a motion for stay of execution on August 17, 1987. At that time, the petition was dismissed, and the motion for stay was denied. The notice of appeal was filed, and the state supreme court heard the matter on August 19, 1987. The supreme court then dismissed the appeal, and denied the motion for stay. After initially vacillating as to whether he would himself file a second federal habeas corpus petition, the petitioner then returned to this court with his second habeas petition and motion for stay of execution.
The 1987 petition alleges a variety of claims, none of which was asserted in the 1985 federal habeas petition. It appears to the Court, however, that the petitioner is barred from asserting these claims at this date because of his abuse of the writ.
ABUSE OF THE WRIT
Rule 9(b) of the Rules Governing Cases under 28 U.S.C. § 2254 provides that
[a] second or successive petition may be dismissed if the judge finds that it fails to allege new or different grounds for relief and the prior determination was on the merits or, if new and different grounds are alleged, the judge finds that the failure of the petitioner to assert those grounds in a prior petition constituted an abuse of the writ.
Rule 9(b), Rules Governing Cases under 28 U.S.C. § 2254. The purpose of this rule is to limit the ability of state prisoners to file successive habeas corpus petitions in the federal courts. See Adv.Comm.Note to Rule 9(b), Rules Governing Cases under 28 U.S.C. § 2254.
The Ninth Circuit has had an opportunity to consider the circumstances which constitute an abuse of the writ. In Richmond v. Ricketts, 774 F.2d 957 (9th Cir.1985), the petitioner had brought two petitions for a federal writ of habeas corpus. In the first petition, he successfully challenged the Arizona statute under which he was sentenced *1421 to death. The district court, in granting the petition, ordered that the petitioner be resentenced. At this second sentencing, the petitioner also received the death penalty under the revised statutory scheme. Id., at 959.
The petitioner then filed a second habeas corpus petition, which challenged the constitutionality of his second sentencing. The district court denied the petition and the stay of execution on several grounds. The circuit court affirmed the portion of the district court's order which dismissed the petition for failure to exhaust, but vacated the portion of the order which denied the petition on the merits. The circuit then remanded with instructions to allow the petitioner to return to state court to exhaust his state remedies. Once he had exhausted those remedies, the petitioner returned to federal court with an eighteen count petition. The district court denied the petition, finding that the claims in the second petition could have been brought in the first petition, and therefore constituted an abuse of the writ. Id.
The Ninth Circuit reversed. It found that the district court had erred in holding that the new grounds alleged in the second petition should have been brought in the first petition. Id., at 961. "Previously unadjudicated claims," the court noted, "must be decided on the merits unless the petitioner has made a conscious decision deliberately to withhold them, is pursuing `needless piecemeal litigation' or has raised the claims only to `vex, harass, or delay.'" Id., (citing Sanders v. United States, 373 U.S. 1, 18, 83 S. Ct. 1068, 1078, 10 L. Ed. 2d 148 (1963)).
In this case, the court found that nothing in the record indicated that the petitioner had withheld arguments purposefully in the hope of being granted two hearings instead of only one. Id. In addition, the court noted that the second petition had been filed in response to the resentencing gained as a result of the first petition. The court thus concluded that the petitioner could not be accused of having engaged in piecemeal litigation. Id. Finally, the court noted that the petitioner's purpose in filing the second petition was not to vex, harass or delay, inasmuch as he was challenging in good faith the statute under which he was resentenced to death. On this basis, the court concluded that the district court had wrongly dismissed these claims on abuse of the writ grounds.
In the present case, the petitioner may fairly be accused of abuse of the writ on the basis that he has deliberately withheld claims. As an initial matter, case law makes clear that the petitioner bears the burden of proof on this issue. In Price v. Johnson, 334 U.S. 266, 68 S. Ct. 1049, 92 L. Ed. 1356 (1948), the Court indicated that "[o]nce a particular abuse has been alleged, the prisoner has the burden of answering that allegation and of proving that he has not abused the writ." Id., at 292, 68 S.Ct. at 1063; see also Adv.Comm.Note to Rule 9(b), Rules Governing Cases under 28 U.S. C. § 2254. The Advisory Committee Note and the cases also make clear that the petitioner must be allowed some sort of hearing to explain his alleged abuse, and this Court accorded with that directive. At that hearing, however, the petitioner failed to meet the burden of proof which the rules place on him.
Petitioner's attorney, N. Patrick Flanagan, chose not to call any witnesses or present any documentary evidence. Instead, petitioner's counsel chose to rely on the evidence and testimony presented in the voluminous records of the petitioner's first habeas corpus petition. In so doing, petitioner's counsel hoped to convince the Court that the first habeas petition was filed under extreme circumstances in an effort to avoid the petitioner's then imminent execution. See supra, pgs. 1419-1420. As noted above, the petitioner contends that he was himself unable to prepare a post-conviction brief, and that the state courts were unwilling to appoint counsel for him. The thrust of counsel's argument is that the petitioner was faced in November, 1985 with a Hobson's choice: either file a petition with only the unexhausted claims now and get a stay of execution from federal courts; or return to state courts to exhaust state remedies and *1422 run the risk of not getting a stay there. Because of this difficult decision, the petitioner contends that he cannot be prevented from bringing these new claims (which were unexhausted at the time of the first petition), as he had to resort to the federal courts in order to stay his execution.
The petitioner's argument is unavailing for several reasons. First, and foremost, the petitioner has failed to prove that he or his counsel did not make a conscious decision to withhold deliberately these latter claims from the 1985 petition. Indeed, the argument which the petitioner propounds, if anything, indicates that he did know of these claims, but chose deliberately to withhold them for lack of exhaustion. The Court appreciates that petitioner and his counsel felt that they had to resort to the federal courts for a stay, but petitioner has cited the Court no authority for a "duress" exception to the abuse doctrine. On this basis, it appears that the petitioner has failed to bear his burden of proof.[2]
From the evidence which the respondents presented to the Court, it does appear that counsel and the petitioner made a decision to withhold these claims. Initially, the respondents' evidence proved that the present ineffective assistance of counsel claim was asserted by the petitioner himself in the state post-conviction brief. Although the state courts ultimately dismissed this claim as insufficient, it is evidence that the petitioner was aware of the existence of the claim at the time of the first federal habeas. Also, petitioner's counsel stated at the stay of execution hearing on November 4, 1985, that he was aware of the sixth amendment claims. In addition, the respondents showed that the issue surrounding the disqualification of the trial judge had been fully argued in the state proceedings. Experienced, qualified counsel, such as Mr. Flanagan must be assumed to have read the trial record, and must be charged with that knowledge. Thus, it is fair to state that petitioner and counsel were aware of the disqualification issue as well.
Moreover, at the hearing on the stay of execution conducted by this Court on November 4, 1985, the petitioner and his counsel were cautioned to raise all possible grounds for relief in that petition so as to avoid the problems presented by the successive petitions. The Court further cautioned the petitioner and counsel that subsequent petitions would possibly be subject to dismissal for abuse of the writ. Reporter's Transcript, at pgs. 39-41. Although this evidence is not terribly strong on the issue of the petitioner's conscious decision to withhold issues, it is at least some evidence on this topic.
Finally, the Court notes that the petitioner refused to answer the respondents' questions at the recent abuse of writ hearing relating directly to his state of mind regarding the filing of these claims. The respondents' attorney, Mr. Sarnowski, called the petitioner as his first witness, but petitioner's counsel objected to his taking the stand on fifth amendment grounds. The Court determined that the fifth amendment objection was improperly asserted, as nothing which the petitioner would testify about in that proceeding could tend to incriminate him in a later criminal proceeding. The Court thus allowed Mr. Sarnowski to question the petitioner with respect to his state of mind regarding these claims. The petitioner, however, adamantly refused *1423 to answer any questions from the respondents, despite repeated warnings by the Court. Although the basis for his refusal to answer is not entirely clear, it appears that the petitioner was attempting to rely on the fifth amendment privilege which the Court had found without foundation. Mr. Sarnowski then moved for immediate sanctions in the form of dismissal of the present petition, which motion the Court denied. It does appear, however, that the petitioner's refusal to answer these questions may be used as evidence against him.
The Supreme Court has consistently recognized that silence in the face of an accusation is a relevant fact which is not barred from evidence by the Due Process Clause. See Baxter v. Palmigiano, 425 U.S. 308, 319, 96 S. Ct. 1551, 1558, 47 L. Ed. 2d 810 (1976). The basis for this rule is that "[f]ailure to contest an assertion ... is considered evidence of acquiescence ... if it would have been natural under the circumstances to object to the assertion in question." Id., (citing United States v. Hale, 422 U.S. 171, 176, 95 S. Ct. 2133, 2136, 45 L. Ed. 2d 99 (1975); cf., Wehling v. Columbia Broadcasting System, 611 F.2d 1026, 1027 (5th Cir.1980) (invocation of fifth amendment privilege subject to the drawing of an adverse inference in a civil case by the trier of facts. Later cases have imposed even more severe sanctions for failure to answer properly asked questions. See Baker v. Limber, 647 F.2d 912, 918 (9th Cir.1981) (order dismissing defendants' counterclaims upheld where defendants' assertion of fifth amendment privilege was in bad faith and without foundation). In view of the more severe sanctions which the Court could properly impose upon the petitioner for refusing to answer questions, drawing an adverse inference of fact is an acceptable sanction.
In this case, the refusal of the petitioner to answer the respondents' questions is most telling. Under the circumstances, it would have been natural for any individual to answer the questions propounded in the negative, so as to attempt to establish the fact that there was no conscious decision on his part to withhold these claims. In this case, however, the petitioner simply refused to answer these questions, which can and will be used as evidence that he did make such a decision to withhold these claims.
Although the evidence presented by the respondents is not overwhelming, it is sufficient for the Court to find an abuse of the writ. As noted above, petitioner has not presented the Court with any evidence on this issue. As he bears the burden of proof, the Court must find that he has failed to meet that burden, and that he did make a conscious decision to withhold these latter issues deliberately.
The petitioner nonetheless contends that, as a matter of law, it was impossible to pursue these claims in 1985, in that they were not exhausted in state court at that time. Because of the dictates of Rose v. Lundy, 455 U.S. 509, 102 S. Ct. 1198, 71 L. Ed. 2d 379 (1982), the petitioner contends that he could not have filed the then unexhausted claims, for fear that this Court would then be required to dismiss the entire petition. He thus argues that his decision to withhold these claims cannot now bar him from presenting them at this time.
This exact problem was considered in the Rose case. In her opinion, Justice O'Connor noted that the ruling in that case made it tempting for a petitioner to dismiss the unexhausted portion of the petition, with the hope of returning with those deleted claims once exhausted had been pursued in the state courts. Such a petitioner proceeds at his own risk, the Justice cautioned, as Rule 9(b) indicates that he may well be found under such circumstances to have abused the writ. "Thus," concluded Justice O'Connor, "a prisoner who decides to proceed only with his exhausted claims and deliberately sets aside his unexhausted claims risks dismissal of subsequent federal petitions." Id. at 521, 102 S.Ct. at 1305.
Although this portion of Justice O'Connor's Rose opinion garnered only a plurality of votes, a number of other circuits and district courts have adopted the rule. See Rudolph v. Blackburn, 750 F.2d 302, 305 (5th Cir.1984) (sole fact that petitioner's claim for relief was not exhausted at time *1424 of prior federal writ would not excuse failure to include that claim in the prior petition); Jones v. Estelle, 722 F.2d 159, 169 (5th Cir.1983) (petitioner who persists in the prosecution of federal writ while aware of additional but unexhausted claims faces the burden of disproving abuse of the writ; that the omitted claim was not exhausted at the time of the first petition is not sufficient to avoid the abuse doctrine); Jones v. Hess, 681 F.2d 688, 695 (10th Cir.1982) (petitioner who deletes unexhausted claim risks forfeiture of the future consideration of that claim as a successive petition); Smith v. Atkins, 678 F.2d 883, 884 (10th Cir.1982) (quoting from Justice O'Connor's plurality opinion in Rose); cf., Johnson v. Lynaugh, 821 F.2d 224 (5th Cir.1987) (successive petition would be denied as an abusive writ where petitioner failed to assert in prior petition new grounds raised as basis for habeas relief); Moore v. Blackburn, 774 F.2d 97, 98 (5th Cir.1985) (claims must be included in prior petition if competent attorney should have been aware of them at the time of the prior petition); Urdy v. McCotter, 773 F.2d 652, 655 (5th Cir.1985) (petitioner may assert new claims in second petition so long as they are based upon facts or legal theories of which the petitioner had no knowledge at the time of the first petition); Booker v. Wainwright, 764 F.2d 1371, 1376 (11th Cir.1985) (dismissal for abuse of the writ may be avoided by showing that the petitioner did not realize that such facts would constitute basis for which federal habeas relief could be granted); contra, Powell v. Spaulding, 679 F.2d 163, 166 (9th Cir.1982) (petitioner would be able to refile unexhausted claims in a second petition if he chose to do so) (dictum); United States ex rel. Rivera v. Franzen, 564 F. Supp. 723, 725 (N.D.Ill.1983) (subsequent filing of previously unexhausted claim does not constitute abuse of the writ); Martin v. White, 538 F. Supp. 326, 327 (W.D.Mo.1982) (rejecting the Rose plurality opinion).
The Ninth Circuit has yet to state its position on this issue affirmatively. In Powell v. Spaulding, supra, pg. 1424, the court did indicate that it might follow the courts which have rejected the Rose plurality. In that case, the petitioner had been convicted of murder in the Washington state courts. He then brought a petition for a federal writ of habeas corpus, alleging four grounds for relief. After the state filed its answer, the petitioner sought leave to add another claim to the petition. The federal magistrate found that the claim was unexhausted in the state courts, and recommended that the petitioner be denied leave to add it into the petition. The magistrate then recommended that all of the exhausted claims in the petition be denied on the merits. Id., at 165.
The Ninth Circuit affirmed the magistrate's recommendation. It noted first that the Supreme Court in Rose had adopted the total exhaustion rule developed in the Ninth Circuit. Id. By virtue of this, the court stated further that district courts are required to dismiss petitions containing exhausted and unexhausted claims. Id. In this case, however, the unexhausted claim had never been part of the petition; the petitioner had merely sought leave to add it to the petition. Thus, the court found the magistrate had committed no error in considering the remainder of the petition, inasmuch as the unexhausted claim had never been part of the petition. Id., at 166. In addition, the court added in a footnote, without deciding the issue, that the petitioner might not be barred by the abuse of the writ doctrine if he later sought to assert the unexhausted claim in a second habeas petition. Id., n. 5. Thus, it could be argued that the circuit has rejected the Rose plurality, choosing instead to side with the minority opinion in that case.
This conclusion would be unwarranted, for several reasons. First, and foremost, the court's statement in Powell is dictum. According to the court's own statement in the relevant footnote, it was not deciding the question of whether the second petition would be abusive, in that "[a]ny question regarding Powell's abuse of the writ would [have] to be addressed directly if and when Powell files a second petition...." Id. The court thus reserved decision on the question of whether this conduct constitutes an abuse of the writ. Powell cannot *1425 therefore be taken as authority in this matter. See Webster v. Fall, 266 U.S. 507, 511, 45 S. Ct. 148, 149, 69 L. Ed. 411 (1925); Sethy v. Alameda County Water District, 545 F.2d 1157, 1160 (9th Cir.1976); Mead v. Retail Clerks Int'l Ass'n, 523 F.2d 1371, 1374 (9th Cir.1975). In addition, the Powell court noted that part of the reason for its statement regarding subsequent petitions was the state's inconsistent position with respect to the exhaustion of the claim at issue. Because the state had apparently argued for exhaustion at one point, and then had reversed course and argued against exhaustion on appeal, the court was unsympathetic to the possible abuse argument by the state.
The court's suggestion in Powell regarding subsequent petitions is therefore not binding upon this Court. As noted above, the Rose plurality has much to recommend for itself. For if that rule is not the law, a habeas petitioner would be able to exhaust his state remedies on his available claims one by one, and file a fairly continuous stream of federal habeas corpus petitions. Such a result would make a mockery of the federal habeas system. It is important that a petitioner be able to present his claims to the federal courts, and this Court's order does not prevent that in any way. The Court simply states that where a habeas petitioner is aware at the time of the filing of the first federal habeas petition that he has other claims for relief, but fails to add those claims into the first petition, he is subject to abuse of the writ charges.
The petitioner can always avoid the abuse charge by showing that the latter claims were not reasonably available to him at the time of the first petition. He could argue, for example, that the legal basis for the subsequent claims had not been established at the time of the first petition, as subsequent case law established his claim for relief. See Reed v. Ross, 468 U.S. 1, 104 S. Ct. 2901, 82 L. Ed. 2d 1 (1984). In addition, he could also argue that the factual basis of the subsequent claim was unavailable to him at the time, owing to the discovery of facts after the filing of the first petition. This list is not exclusive, but it is important to note that the simple fact that the petitioner has not exhausted his state court remedies on a claim does not excuse an abusive writ. The proper course of action for the petitioner in such a case is to dismiss the first federal habeas without prejudice, return to the state court, and exhaust all remedies. Once this is accomplished, the petitioner can then refile the federal habeas with all exhausted claims, without fear of abuse of the writ charges. As a matter of law, therefore, the fact that the present claims were unexhausted at the time of the first federal habeas petition does not constitute a defense against abuse of the writ charges.
In this case, the petitioner has abused the writ. The respondents have made a proper allegation of abuse, and the Court has held a hearing at which time the petitioner was afforded an opportunity to explain his alleged abuse. As noted above, the petitioner bore the burden of proof on the issue of his conscious decision to withhold claims, and he failed to meet that burden. The evidence which was presented to the Court tended to indicate that a conscious decision was made to withhold, for fear of dismissal under Rose v. Lundy, among other things. In addition, the petitioner's refusal to answer properly asked questions at the abuse hearing is also evidence that he did make a decision to withhold these claims deliberately. Finally, as noted above, the fact that these claims were unexhausted when the first writ was filed does not constitute an excuse for abuse purposes as a matter of law. The petitioner has failed to demonstrate that his withholding of these claims was anything but deliberate, and his petition is therefore abusive.
IT IS, THEREFORE, HEREBY ORDERED that the respondents' motion to dismiss the petition for writ of habeas corpus on abuse of the writ grounds is granted.
IT IS FURTHER ORDERED that the stay of execution entered in this matter by the Court shall remain in effect for thirty days from the date of this order, so that *1426 the petitioner may seek review of this order in the Ninth Circuit Court of Appeals. If no appeal is pursued, the stay shall expire at the end of that thirty-day period.
NOTES
[1] As set forth fully below, the petitioner pursued his first petition for writ of habeas corpus before this Court in 1985. The Court will refer to this petition as the "1985 petition." This case therefore represents the petitioner's second attempt at federal habeas relief, and will be referred to as the "1987 petition."
[2] The petitioner's argument also requires the court to assume that it would have been impossible for him to have attained a stay in the state courts. The Court has not been presented with any case law or evidence which would tend to indicate that it would have been impossible for the petitioner to have gained a stay. Whereas it is true that the state courts refused to grant a stay on the petition filed in pro per, the reason for that refusal was the legal insufficiency of the petition. Had the petitioner presented the state courts with a proper petition, a stay could well have been achieved in the state courts.
The petitioner's argument also overlooks the fact that he could have amended the first federal habeas petition to include these claims once they were exhausted in the state courts. The petitioner could have even gone so far as to dismiss the first petition voluntarily, without prejudice, thereby allowing him more time to exhaust state remedies on these claims. Once all were exhausted, the petitioner could then return to this court with all of his claims in a single petition. The claim that the petition had to be pursued as it was originally constituted is thus not factually accurate.
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636 S.W.2d 330 (1982)
MAYOR, COUNCILMEN, AND CITIZENS OF the CITY OF LIBERTY, Missouri, a Municipal Corporation, Respondents,
v.
Rodney BEARD, et al., Appellants.
No. 62833.
Supreme Court of Missouri, En Banc.
August 2, 1982.
John C. Dods, Margaret D. Lineberry, Shook, Hardy & Bacon, Kansas City, for appellants.
Don M. Jackson, Lindsay K. McFerrin, Jackson & Sherman, P.C., Kansas City, for respondents.
PER CURIAM.
In 1977, the City of Liberty passed an ordinance for the annexation of 5.4 square miles of land, and initiated a suit pursuant to § 71.015, RSMo 1978 (The Sawyers Act), for a declaratory judgment authorizing the annexation. Appellants were named in the City's petition as a representative class of inhabitants in the area proposed for annexation; several employed present counsel. The trial court authorized the City to proceed with the annexation and denied appellants' motion for allowance of attorneys' fees. The Missouri Court of Appeals, Western District, affirmed the judgment of annexation, *331 Mayor, Councilmen and Citizens of the City of Liberty v. Beard, 613 S.W.2d 642 (Mo.App.1981), but reversed the denial of attorneys' fees and remanded the issue for further consideration by the trial court. This Court transferred the cause on the issue of attorneys' fees and expenses. Mayor, Councilmen and Citizens of the City of Liberty v. Beard, 613 S.W.2d 641 (Mo. banc 1981) (Supreme Court order).
The question is whether defendants in an action for annexation, brought by a city in compliance with § 71.015, RSMo 1978, may be awarded attorneys' fees and expenses. The answer is "no", and the remainder of the trial court's judgment is affirmed.
Appellants contend the trial court is authorized by statute to make a just and equitable award of costs and that such costs can include attorneys' fees.
The rule in Missouri is that absent statutory authorization or contractual agreement, each litigant, with few exceptions, must bear the expense of his own attorneys' fees (American Rule). Arnold v. Edelman, 392 S.W.2d 231, 239 (Mo.1965); Moore v. City of Pacific, 534 S.W.2d 486, 505 (Mo.App.1976); Rook v. John F. Oliver Trucking Co., 505 S.W.2d 157, 161 (Mo.App. 1973); Duncan v. Townsend, 325 S.W.2d 67, 71 (Mo.App.1959). See also Fleischmann Distilling Corp. v. Maier Brewing Co., 386 U.S. 714, 87 S. Ct. 1404, 18 L. Ed. 2d 475 (1967).
Although appellants refer to § 527.100, RSMo 1978, which provides that the court may make an award of costs in a declaratory judgment action, they show no statutory authorization or contractual agreement for an award of attorneys' fees to satisfy the governing rule.
The obvious exception to the rule in Missouri is represented by Bernheimer v. First National Bank of Kansas City, 359 Mo. 1119, 225 S.W.2d 745 (1949). Although it was a declaratory judgment action, it was filed in equity to obtain construction of a testamentary trust insofar as determining whether the minor plaintiff was the lawful issue of the body of his father. The trustees, residuary legatees and potential unborn future issue of the father were parties. In such special circumstances, the court awarded attorneys' fees to all parties for the reason that there was an ambiguity in the phrase "lawful issue" and its resolution and attendant questions were "important to the testamentary trustees in ascertaining the meaning of the will, and in charting a course for the administration of the trust estate." 225 S.W.2d at 755.
Appellants extract the statement from Labor's Educational and Political ClubIndependent v. Danforth, 561 S.W.2d 339, 350 (Mo. banc 1977), that "`costs' has been interpreted to include attorneys' fees." This is attributed to Bernheimer v. First National Bank, distinguished supra, and is not persuasive on the question here.
The judgment in denial of attorneys' fees is affirmed.
DONNELLY, C. J., and RENDLEN, WELLIVER, MORGAN and HIGGINS, JJ., concur.
BARDGETT, J., dissents in separate dissenting opinion filed.
SEILER, J., dissents and concurs in separate dissenting opinion of BARDGETT, J.
BARDGETT, Judge, dissenting.
I respectfully dissent.
Section 71.015, RSMo 1978, requires a suit to be brought under the provisions of chapter 527, RSMo 1978, by the annexing authority (City of Liberty) as a class action against the inhabitants of the unincorporated area under the provisions of § 507.070, RSMo 1978.
Section 527.100 provides the court may make such award of costs as may seem equitable and just. In my opinion this type of suit serves the interest of the public primarily in requiring the annexing authority to demonstrate compliance with the annexation laws. The person named as representative of the defendant class serves in that representative capacity for the purpose of safeguarding the public interest. This *332 being the case, I believe the rule of Bernheimer v. First Nat'l Bank, 359 Mo. 1119, 225 S.W.2d 745 (banc 1949), is applicable and that the attorney's fees of defendants are taxable as costs and may be assessed against the City of Liberty under § 527.100.
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674 F. Supp. 113 (1987)
Sachiko T. BOWER, Plaintiff,
v.
Frederick R. WEISMAN, Frederick Weisman Co., and Rare Properties, Inc., Defendants.
No. 85 Civ. 8916 (RWS).
United States District Court, S.D. New York.
October 30, 1987.
*114 Montclare & Guay, New York City (Paul D. Montclare, of counsel), for plaintiff.
Summit Rovins & Feldesman, New York City (John Amabile, of counsel), for defendants.
OPINION
SWEET, District Judge.
Defendants Frederick R. Weisman ("Weisman"), Frederick Weisman Co. and Rare Properties, Inc. have moved in limine on the eve of trial to preclude the plaintiff, Sachiko Bower ("Bower"), from introducing at trial evidence of (i) certain oral agreements between the parties as barred by the statute of frauds, (ii) future damages, (iii) damages due her daughter, (iv) certain oral agreements modifying written agreements, (v) Weisman's relationships with other women, (vi) Weisman's financial condition, (vii) punitive damages, (viii) a lis pendens recorded by Weisman on property in dispute, and (ix) fraud. For the reasons set forth below, defendant's motion is granted regarding evidence of oral agreements modifying written agreements and of punitive damages, is denied with leave to re-move regarding evidence of damages due Bower's daughter, and is denied in all other respects.
Agreement to Pay Bower $120,000 a Year
Weisman seeks to preclude Bower from offering evidence of an oral agreement to pay her $120,000 a year until Bower remarried or moved away from the United States, an agreement which Bower alleges is codified by the memorandum of July 6, 1985 executed just before the relationship between the parties terminated.
As set forth in Bower v. Weisman, 650 F. Supp. 1415, 1421 (S.D.N.Y.1986) ("Bower II"), under New York law an oral contract is not barred by the statute of frauds if there is any possibility that it can be performed within a year. This contract (assuming that there was a contract) would have been performed in less than one year, *115 if six months after it was made, Bower moved away from the United States.
Although Weisman has urged that Bower's ability effectively to terminate the contract does not withdraw the oral contract from the terms of the statute of frauds, Bower has cited a recent New York Court of Appeals case directly to the contrary: "Where one or both parties have such an explicit option to terminate their agreement within one year, that agreement is, by its own terms, capable of completion within that period and is not governed by the Statute." D & N Boening v. Kirsch Beverages, 63 N.Y.2d 449, 456, 483 N.Y. S.2d 164, 167, 472 N.E.2d 992 (1984). Consequently, Weisman's application to preclude evidence on the oral agreement is denied.
As to the July 6th memo alleged to be sufficient to take the oral agreement out of the statute of frauds, Weisman stands on stronger ground. The note fails to incorporate a material part of the subject matter of the alleged agreement that Bower was to receive $120,000 per year and that the $120,000 was to be over and above what Bower owed on the promissory note. Thus this note does not sufficiently memorialize the agreement to be admitted as a writing within the statute of frauds.
Further, evidence is not barred on Bower's allegations that Weisman orally gave her a rent free tenancy in a townhouse in New York under the same conditions. Under New York General Obligations Law § 5-703(1), leases "for a term not exceeding one year" are specifically exempted from the statute of frauds. Included in this category are leases capable of termination within one year for example where duration of the lease is measured by the tenant's lifetime. See City of New York v. Heller, 127 Misc. 2d 814, 487 N.Y.S.2d 288 (Sup.Ct.N.Y.County 1985), aff'd per curiam, 131 Misc. 2d 485, 503 N.Y.S.2d 995 (App.Term 1st Dep't 1986); Pier v. Margulies, 73 N.Y.S.2d 309 (Sup.Ct.Kings County 1947).
With respect to the other alleged contracts relating to real estate, there are writings sufficient to take them outside the statute, although the authenticity of the writings are still in issue.
Lump Sum Damages
Bower is claiming lump sum damages for Weisman's anticipatory repudiation of his obligation to pay her salary and living expenses until such time as she marries or returns to Japan. Weisman seeks to preclude Bower from offering evidence to this effect on the grounds that future damages are impermissible for anticipatory repudiation of a unilateral contract and that such damages are speculative. This issue is presented by a motion in limine which must be determined on the eve of trial. The need for speedy resolution of a difficult issue weighs against the preclusive motion.
As described in Bower's contentions within the pretrial order, the contract Weisman allegedly anticipatorily repudiated was bilateral in nature. Weisman was to pay Bower a salary and provide for her living expenses in consideration of Bower's guidance on matters of Japanese culture. At the time Weisman repudiated his future obligation to pay, Bower was, according to her, actively fulfilling her contractual duties. If Bower had completed performance when the repudiation came, the contract would have become unilateral in nature as only one party's performance would be owing. However, such was not the case.[1] Consequently, Weisman's reliance on this court's decision in Reprosystem, B.V. v. SCM Corp., 630 F. Supp. 1099 (S.D. N.Y.1986), a case where the repudiation came when only one performance was due, is misplaced. If a party anticipatorily repudiates his duties under a bilateral contract embodying interdependent obligations, damages are available to the injured party. Long Island Rail Road v. Northville Industries, *116 41 N.Y.2d 455, 362 N.E.2d 558, 393 N.Y.S.2d 925 (1977). Therefore, Bower will not be precluded at this time from introducing evidence of future damages on this ground. This issue may be revisited prior to the actual introduction of the evidence.
Nor, moreover, is uncertainty as to the amount of damages for anticipatory repudiation reason to deny Bower the opportunity to present evidence pertaining to future loss. As the Second Circuit has stated:
[U]nder the long-standing New York rule, when the existence of damage is certain, and the only uncertainty is as to its amount, the plaintiff will not be denied a recovery of substantial damages.... Moreover, the burden of uncertainty as to the amount of damage is upon the wrongdoer, ... and the test for admissibility of evidence concerning prospective damages is whether the evidence has any tendency to show their probable amount.... "Such an estimate necessarily requires some improvisation, and the party who has caused the loss may not insist on theoretical perfection." ... "[T]he law will make the best appraisal that it can, summoning to its service whatever aids it can command."
Contemporary Mission, Inc. v. Famous Music Corp., 557 F.2d 918, 926-27 (2d Cir. 1977) (citations omitted) (quoting Entis v. Atlantic Wire & Cable Corp., 335 F.2d 759, 763 (2d Cir.1964) and Sinclair Rfg. Co. v. Jenkins Co., 289 U.S. 689, 697, 53 S. Ct. 736, 738, 77 L. Ed. 1449 (1933)). The certainty of the existence of damage is a question for the jury, however, this Court will not, prospectively, preclude Bower from producing evidence as to amount. Thus, Weisman's motion to preclude evidence pertaining to lump sum damages is denied.
Evidence of Damages for Teru Bower
Bower seeks to offer evidence on whether Weisman breached an agreement to provide Teru Bower with an irrevocable trust. Weisman moves to bar the testimony on the ground that Teru Bower is not a plaintiff here, as well as on the ground of the statute of frauds.
Weisman's application fails to the extent that it is premised on the fact that Teru is not the plaintiff here. Assuming that Bower had a valid contract with Weisman binding Weisman to perform certain acts (such as setting up a trust for another), Bower may sue to enforce the agreement that she made.
With respect to the statute of frauds argument, Weisman was directed by opinion of September 14, 1987, to turn over various documents, some of which may constitute a writing sufficient to satisfy the statute of frauds. These documents were finally produced on October 28, 1987 pursuant to a denial by the Second Circuit of Weisman's motion to stay the order. Based on these writings, this Court denies Weisman's motion at this time, but due to the recency of their production grants leave to renew the motion.
Oral Modifications of the Promissory Note
Weisman seeks to preclude Bower from offering proof of an oral agreement that renders her obligation under the November 1, 1983 promissory note contingent upon increased payments to her under a contemporaneously executed consulting agreement. According to this alleged agreement, all amounts owed by Bower on the note are to be offset by amounts owed to her on the consulting agreement.
Under New York law, parol evidence is inadmissible to vary the terms of a fully integrated agreement. Braten v. Bankers Trust Co., 60 N.Y.2d 155, 456 N.E.2d 802, 468 N.Y.S.2d 861 (1983); Leumi-Financial Corp v. Richter, 17 N.Y.2d 166, 216 N.E.2d 579, 269 N.Y.S.2d 409 (1966). Bower contends that the note is not an integrated document because it "does not set forth any of the terms surrounding the making of the note or the transaction that gave rise to the making of the note."
To determine whether an agreement is integrated the court will, in the absence of a merger clause, read the writing in light of the surrounding circumstances and consider whether the agreement is one that *117 the parties would ordinarily commit to writing. Braten, supra, 468 N.Y.S.2d at 864, 456 N.E.2d at 805; Manufacturers Hanover Trust Co. v. Margolis, 115 A.D.2d 406, 496 N.Y.S.2d 36 (App.Div. 1st Dep't 1985). Repayment terms of a promissory note frequently are committed to writing and were, in fact, so documented in this case. In fact, the agreement explicitly states not only the time for each remittance but the amount of each payment. No mention of the alleged oral agreement, however, is made, nor does the amount due reflect the claimed offset. Moreover, the consulting agreement, which was executed on the same date and to which the oral agreement purportedly pertains, makes no reference to the promissory note. In a case such as this where a note appears on its face to be a completely integrated, unconditional promise to pay, and where the evidence of oral agreement sought to be introduced is at variance with the terms of the obligation, the parol evidence rule applies. See Braten, supra, 468 N.Y.S.2d 861, 456 N.E. 2d at 802; Marine Midland Bank- Southern v. Thurlow, 53 N.Y.2d 381, 425 N.E.2d 805, 442 N.Y.S.2d 417 (1981); see also Federal Deposit Insurance Corp. v. Borne, 599 F. Supp. 891 (E.D.N.Y.1984); cf. Happy Dack Trading Co. v. Agro Industries, 602 F. Supp. 986 (S.D.N.Y.1984). Weisman's motion is therefore granted and Bower will be barred from presenting evidence of an oral agreement at variance with the note.
Weisman's Relationship with Other Women
Weisman has argued that his relationships with other women after the date that his relationship with Bower ended is not relevant to the issues in the action and should be excluded. However, one of Weisman's defenses to this action is that agreements that he entered into and promises that he made were attributable to Bower's irresistible sexual sway over him, which was particularly pronounced because he is considerably older than she. Another of Weisman's defenses is that Bower's forbearance of sexual activities with all other men was a term of the contract between them.
Bower wishes to rebut both defenses by showing that Weisman was engaged in a sexual relationship with a 30 year-old art restorer who resided at Weisman's Carolwood house when Bower was not there. That is, she "intends to prove at trial that ... Weisman, far from being an elderly gentleman begging for sex, is a verile, [sic] powerful individual who prefers the company of much younger women." If Weisman offers evidence to establish either of the defenses, then Bower will be able to present her evidence in rebuttal.
Evidence of Weisman's Wealth
Weisman seeks to foreclose Bower from offering evidence about his wealth until after her right to damages is determined. At argument, parties agreed that the issue is governed by Fed.R.Evid. 403, which requires the court to balance relevance against undue prejudice.
Weisman fears that if the jury learns of his great wealth, it will award Bower damages although she may not be entitled to them legally. This danger of prejudice, he urges, outweighs the relevance to Bower. On the other hand, Bower submits that the enormity of the sums of money are crucial to a fair understanding of the case. In particular, she urges that the only way that it is credible that she would be given license to sign Weisman's name to very large checks is for the jury to understand how small those checks were to a man of Weisman's assets. That is, Weisman allowed Bower to write what appear to be very large checks on his account the same way that a person of more modest means might authorize a close friend to take out $20 on a bank cash card. To a jury of common means, the authorization that Bower alleges she had is inherently unbelievable unless put in perspective by Weisman's other assets.
In addition, Bower submits that the story of the building of Weisman's empire is exactly the story of the development of their relationship. She argues that she was valuable to him over the years because *118 she was able to help him conduct business with the Japanese business people with whom he otherwise would have had a deep cultural gap. It is impossible, she submits, to evaluate the probability that he would promise her so much without understanding what it was that he was gaining in return: the means to build an enormous financial kingdom. Under both these theories, of course, Weisman's wealth is relevant for reasons other than the determination of damages. It is probative on the question of whether Weisman, in fact, made the contracts that Bower has alleged.
On balance, the relevance of the evidence outweighs the danger of undue prejudice, which can be abated in part by a limiting instruction, to which Weisman, of course, is entitled.
Punitive Damages
Evidence that relates to punitive damages will not be permitted until Bower has been found to have a right to them.
Lis Pendens
Bower having produced no California law to the contrary, evidence of the lis pendens placed on the Douglas property in the course of the California action will be precluded.
Evidence of Fraudulent Misrepresentation
Bower has alleged that Weisman defrauded her by entering into contracts with her when, at all times, he had an intention not to perform. As discussed in Bower II, 650 F.Supp. at 1422-23, this makes out an action for fraud under New York law. See generally Channel Master Corp. v. Aluminum Ltd. Sales, Inc., 4 N.Y.2d 403, 176 N.Y.S.2d 259, 151 N.E.2d 833 (1958); see also Cauble v. Mabon Nugent & Co., 594 F. Supp. 985, 993 (S.D.N.Y. 1984). "Proof of such intention, however, must be based on more than a mere showing of nonperformance." Id. Weisman submits that Bower has no evidence of such an intent except for the fact of nonperformance. In addition to nonperformance, Bower will ask the jury to draw an inference of Weisman's intent both from the course of the negotiations leading up to the agreements (which she says demonstrates that she was being continually strung along), as well as from Weisman's deposition testimony in which he denies that the negotiations were supposed to create obligations on his part. This is more than simply nonperformance, and the evidence will be permitted.
Conclusion
For the foregoing reasons, Weisman's motion to preclude evidence pertaining to oral agreements modifying the terms of the promissory note and pertaining to punitive damages is granted; the motion is denied with leave to re-move regarding preclusion of evidence of damages due Teru Bower on statute of frauds grounds, and the motion is denied in all other respects.
Trial will commence on November 4, 1987.
IT IS SO ORDERED.
NOTES
[1] The result here is not inconsistent with this court's statute of frauds determinations both herein and in its prior opinion. Bower v. Weisman, 650 F. Supp. 1415 (S.D.N.Y.1986). Although the court is now persuaded that the agreement between the parties was bilateral, the contract was still capable of being performed in one year in the event that Bower married or migrated thus terminating Weisman's duties.
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https://www.courtlistener.com/api/rest/v3/opinions/1521823/
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674 F. Supp. 1113 (1987)
Richard M. ROSENTHAL, Plaintiff,
v.
Philip KINGSLEY, Defendant.
No. 85 Civ. 0945 (PKL).
United States District Court, S.D. New York.
December 11, 1987.
*1114 Marc Libarle and Leroy Lounibos, Cotati, Cal., for plaintiff.
Frankfurt, Garbus Klein & Selz, P.C., New York City (Richard Kurnit and Maura Wogan, of counsel), for defendant.
OPINION AND ORDER
LEISURE, District Judge:
In this case, plaintiff Richard Rosenthal, an attorney, seeks to enforce the terms of an alleged contract for legal services. Plaintiff claims that from 1976 to 1981, he acted as lawyer and business consultant to defendant Philip Kingsley, a British citizen, in connection with the establishment of defendant's hair care business in the United States. Plaintiff alleges that either orally or in writing, defendant "agreed to compensate Plaintiff for said services at a rate not to exceed 25% of Defendant's gross professional income, whenever said income is received from projects of Defendant initiated during the period of time Plaintiff acted in said capacity." Complaint at 2, 3. Plaintiff further claims that defendant fraudulently misrepresented to plaintiff that such compensation would be provided for plaintiff's services. Plaintiff also seeks an accounting to determine the amount of relevant income earned by defendant, and seeks a declaratory judgment that he is entitled to receive the payments demanded in the complaint.
*1115 Defendant Kingsley has moved, pursuant to Fed.Rule Civ.P. 56, for summary judgment dismissing all counts of the complaint.
STANDARD FOR SUMMARY JUDGMENT
Rule 56(c) of the Federal Rules of Civil Procedure provides 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."
The substantive law governing the case will identify those facts which are material, and "[o]nly disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment.... [i]t is the substantive law's identification of which facts are critical and which facts are irrelevant that governs." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S. Ct. 2505, 2510, 91 L. Ed. 2d 202 (1986). The Court then must determine whether there does indeed exist a genuine issue as to any material fact; "the judge's function is not himself to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Id., 106 S.Ct. at 2511.
The party seeking summary judgment "always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of `the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,' which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 106 S. Ct. 2548, 2553, 91 L. Ed. 2d 265 (1986). However, Rule 56 does not require that the moving party support its motion with affidavits or other similar materials which negate the opponents claim. Rather, "the motion may, and should, be granted so long as whatever is before the district court demonstrates that the standard for the entry of summary judgment, as set forth in Rule 56(c), is satisfied." Id. The burden on the moving party will be "discharged by `showing' that is, pointing out to the District Court that there is an absence of evidence to support the nonmoving party's case." Id. 106 S.Ct. at 2554.
Indeed, once a motion for summary judgment is properly made, the burden then shifts to the non-moving party, which "must set forth specific facts showing that there is a genuine issue for trial." Anderson, supra, 106 S.Ct. at 2511. Because the District Court must determine "whether there is a need for trial whether, in other words, there are any genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party," id. the nonmoving party must produce, at the summary judgment stage, "sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party.... If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted." Id. While the Court "must resolve all ambiguities and draw all reasonable inferences in favor of the party against whom summary judgment is sought," Heyman v. Commerce and Indus. Ins. Co., 524 F.2d 1317, 1320 (2d Cir.1975) (citations omitted), the non-moving party "must do more than simply show that there is some metaphysical doubt as to the material facts," Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 106 S. Ct. 1348, 1356, 89 L. Ed. 2d 538 (1986) (citations omitted).
Ultimately, "[i]n considering the motion, the court's responsibility is not to resolve disputed issues of fact but to assess whether there are any factual issues to be tried, while resolving ambiguities and drawing reasonable inferences against the moving party." Knight v. U.S. Fire Ins. Co., 804 F.2d 9, 11 (2d Cir.1986) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S. Ct. 2505, 2509-11, 91 L. Ed. 2d 202 (1986)), cert. denied, ___ U.S. 762, 107 S. Ct. 1570, 94 L.Ed.2d ___ (1987); see also Eastway Contruction Corp. v. City of New York, 762 F.2d 243, 249 (2d Cir.1985).
*1116 FACTUAL BACKGROUND
The pleadings, depositions, affidavits, and other materials filed by the parties, construed in a light most favorable to the plaintiff, establish the following relevant facts:
Plaintiff Richard M. Rosenthal is an attorney who resides in New York. Defendant Philip Kingsley is a British citizen who also currently resides in New York. Since 1960, defendant has been a professional "trichologist" that is, one who specializes in the analysis and treatment of hair and the scalp. Plaintiff met defendant for the first time in the late summer of 1975, when they were introduced by Joan Maizner (presently defendant's wife), who had been formerly employed by plaintiff as a legal secretary.
During that initial meeting, plaintiff expressed an interest in defendant's trichology business; in the following year, plaintiff and defendant continued to discuss, primarily through written and telephone correspondence, the possible expansion of defendant's business into the United States market. While defendant remained in England, plaintiff researched several aspects of the New York beauty industry, and spoke with several people familiar with that industry.
In August 1976, plaintiff and defendant spent a weekend together at plaintiff's house in Long Island. During that weekend, the parties continued their discussions about the possibility of opening a trichological center in New York. In discussing plaintiff's role as a lawyer and consultant, defendant said he had learned from Ms. Maizner that plaintiff usually receives ten percent of the gross income of clients for whom such services are provided. During that weekend, defendant stated orally that plaintiff would receive ten percent of defendant's gross United States income, along with a fee to be worked out at a later date and a small ownership interest in the trichological center that defendant hoped to open in the United States.
On December 8, 1976, plaintiff sent a letter (Letter 1) to defendant, in which plaintiff discussed some of the ideas emanating from the Long Island meeting, and in which plaintiff proposed that he own five percent of the corporate shares of the anticipated trichological center. This letter included no discussion of plaintiff's interest in defendant's income. On January 31, 1977, defendant responded in a letter (Letter 2), in which defendant stated that plaintiff should receive only three percent of the shares in the new center. Ultimately, the parties agreed that plaintiff would own four and one-half percent of the stock in the new center, and plaintiff currently holds a stock certificate representing that ownership interest.
On September 15, 1977, defendant sent a letter (Letter 3) to plaintiff in which he discussed several personal and business matters. In a handwritten postscript, defendant stated that a woman named Lesley[1], mentioned in the letter, "has too many points of the equity anyway. You [plaintiff] have been doing a lot of the administration which has been beyond her & [sic] I think that you should have more of hers (irrespective of the agreement you & I will make)."
In October 1977, the new Kingsley Trichological Centre opened in New York City. At first, business was slow. Plaintiff arranged with a literary agent to have published a book about defendant's hair and scalp treatments. Defendant received a $10,000 advance from the publisher, of which defendant kept $4500, and plaintiff received ten percent, or $1000. The remaining $4500 was paid to Dotsun Rader, a client of plaintiff who had written an article about defendant and the hair center in New York Magazine, and who had played a role in the publication of the book. Plaintiff paid $500, out of his $1000, to the literary agent with whom he had been working. The book, a tour by defendant to promote the book, and the publication of the New York Magazine article, apparently *1117 substantially increased the number of customers who patronized the New York trichological center. Plaintiff claims that despite this success, however, by the end of 1977, the only payment he received from defendant or defendant's business, other than the royalties and the stock, was a cash disbursement of $3000.
In 1978, defendant's trichological center continued to increase its client base, although the record does not make clear the extent to which that business actually was profitable. Plaintiff continued to serve as attorney and business consultant to defendant and his business. In 1978, plaintiff's total fees related to defendant were $7600 from the Trichological Center, with no money actually being paid by defendant himself.
On July 1, 1978, defendant and Ms. Maizner moved into plaintiff's New York apartment, where defendant then lived for approximately two and one-half years. At this time, plaintiff and his family moved to California.
During the end of 1978 and 1979, plaintiff and defendant began to discuss the possibility of entering into a business relationship with some manufacturer or distributor of hair or beauty products. At that time, the parties were most interested in securing a business partner that could market defendant's hair treatment products. Plaintiff and defendant, both separately and together, had several meetings during this period with executives of at least one beauty product company.
On or about August 30, 1979, defendant met in London with his accountants. Based on that meeting, one of those present, Timothy Elwes, of Timothy Elwes & Partners, wrote a memorandum (Letter 4) which was distributed to those present, and a copy of which was sent to plaintiff by defendant. In discussing the relationship between the shareholders of the Trichological Centre in New York, the memorandum stated that "[t]he situation is further confused by the fact that RR [Richard Rosenthal] in his personal capacity is said to own 10% of PK [Philip Kingsley] and thus of all PK's activities including the sale of products (and processes) invented and marketed by PK."
Soon after, in mid-October 1979, plaintiff and defendant met in Palm Springs as the guests of Clairol, a subsidiary of Bristol-Meyers. While at Palm Springs, plaintiff and defendant discussed further the allocation of profits from any business deal involving the sale of defendant's hair care products, and discussed a possible product deal involving Bristol-Meyers.
Several weeks later, on November 13, 1979, plaintiff sent defendant a letter (Letter 5). Plaintiff wrote to defendant that he had "read, in detail, the notes which you prepared when I was last in New York [in October of 1979]", and plaintiff stated that, "I should like you to consider my comments hereinbelow with an eye toward your responses forming the basis for the general plan which I will then prepare for our rereview and eventual submission to our friends at BM [Bristol-Meyers]." After then discussing several matters relating to such a general plan, plaintiff wrote in the letter:
Subject to our working out the specific details, when the immigration and tax elements have been reconciled, I continue to proceed on the assumption that you are in accord with the proposal I made to you in Palm Springs that our relative interests in the benefits to be derived from the association with Bristol Meyers (or any other major manufacturer/distributor) will be two-thirds ( 2/3 ) to you and one third ( 1/3 ) to me, with each of us making a contribution of points in relation to our respective interests in favor of Joan (for example, if I gave up 1- 1/3 % and you double, or 2- 2/3 %, it would leave you with 64%, me 32%, and Joan with 4%).
On November 26, 1979, defendant, writing in response to plaintiff's letter of November 13, sent a letter (Letter 6) to plaintiff in which he stated:
I would like at this stage to comment on your proposal made in Palm Springs, which until now I have only been thinking about in the vaguest possible way. On giving it very serious thought I feel *1118 that onethird, twothirds [sic] as you suggest is rather unbalanced, although I do agree that Joan should have a participation. I am also somewhat confused as to what the percentages deal with just the product deal or all my income or separate percentages for separate things.
At present I gather you have 4 1/3 (?) [sic] of Trichological Centre, New York and 10% (?) [sic] of me. It seems that 10% to 33% is a rather substantial jump. I realise of course that your contribution to the overall success so far is substantial and I do not wish for one moment to detract from that. You are not only a business associate but a very dear and close friend whose support has been wonderful. The deal with BM (or anyone) is a great opportunity for us and I don't want to appear to be even remotely ungrateful for anything. Quite the contrary, I am sure there is a compromise that would make us all happy. Maybe we can discuss it further either before your trip to New York by phone, or when you are here.
In December 1979, plaintiff and defendant met in New York, and from December 1979 through March 1980, the parties had a number of phone conversations concerning a product deal. Plaintiff's total collected fees related to defendant for 1979 were $8,000.
On March 24, 1980, plaintiff and defendant met with the President of Clairol, Don Shea, and other Clairol executives who outlined their ideas for an affiliation with defendant for a venture involving his hair product line. After certain correspondence with Clairol, plaintiff, on June 13, 1980, prepared a draft of a letter (Letter 7) to defendant a letter which plaintiff concedes was never sent to or reviewed by defendant. Affidavit of Richard M. Rosenthal in Opposition for Summary Judgment ¶ 47 (hereinafter "Rosenthal Aff."). This draft letter refers to a new proposal which plaintiff was to send to Bristol Meyers. Plaintiff wrote, in draft form:
On the reaching of an accord, we would immediately institute the most beneficial legal structure under which the funds payable would be received and distributed in accordance with the understanding reached in March, pursuant to which gross sums receivable from the Bristol Myers deal and any exploitations we develop collaterally thereto are to be divided 75% to you and 25% to me.
It is my intention to prepare the formal agreement reflecting same (a) in conjunction with our entering into the deal with Bristol Myers or an alternate entity, and (b) as soon as we determine the nature of the deal and the best structure to use.
In late June 1980, however, Clairol (Bristol-Meyers) ended its interest in participating in a product deal. Thereafter, plaintiff contacted Cheeseborough Ponds, on behalf of defendant, but that company was in the midst of a corporate restructuring and was not interested in pursuing any new product contracts.
Plaintiff's total fees for 1980 were $8000, apparently paid by the Trichological Centre in New York.
In late January, 1981, plaintiff handled, on defendant's behalf, the purchase of a co-op in New York City, for which defendant had borrowed several hundred thousand dollars. Plaintiff and defendant also engaged Stanley Kohlenberg, a cosmetics industry management consultant, during approximately the same period.
At some time during the early spring of 1981, Joan Maizner informed plaintiff that defendant might be planning a product deal involving a Mr. Bernt Rathaus. From Los Angeles, plaintiff telephoned Mr. Rathaus, who "confirmed that he had been exploring some ideas with [defendant] Kingsley as his friend but that there was nothing concrete to discuss" with plaintiff. Rosenthal Aff. ¶ 54.
On July 1, 1981, plaintiff and his family returned to New York to re-establish residence. Approximately one week thereafter, plaintiff learned that defendant and Rathaus, without the participation of plaintiff, had established a new corporation, Kingsley Products, Inc. Pursuant to a fully executed contract, Rathaus obtained a 49% interest in the new corporation, and *1119 Rathaus provided the company with $100,000 capital. On November 21, 1981, plaintiff attended defendant's marriage to Joan Maizner; at that time, Ms. Maizner told plaintiff that defendant would "do right by you." Rosenthal Aff. ¶ 55. On December 7, 1981, plaintiff and defendant met, at which time plaintiff proposed that he would accept 15% of defendant's profits; defendant said he would consider the proposal. On December 8, 1981, however, plaintiff received a letter from defendant in which defendant indicated he would no longer employ plaintiff as his attorney.
In May, 1984, Kingsley Products, Inc., was sold to Eli Lilly & Company. Pursuant to that sale, Eli Lilly, through its subsidiary Elizabeth Arden, Inc., now owns and distributes defendant's scalp treatment and hair care products.
DISCUSSION
I. CONTRACT CLAIMS
Plaintiff has pleaded in his complaint, in the alternative, that the parties are bound by either a written contract or an oral contract, and that as a result of such contract, plaintiff is entitled to at least 25% of defendant's gross income from all projects initiated during the period plaintiff served as defendant's attorney.
Whether a contract be written or oral, however, it must nonetheless be a contract. Under New York law[2], the parties not only must have intended to be bound by the terms of the alleged contract, but the parties must also have reached agreement as to all material terms of the contract. Thus, as the Second Circuit has explained:
[t]o consummate an enforceable agreement, the parties must not only believe that they have made a contract, they must also have expressed their intent in a manner susceptible of judicial interpretation. If essential terms of an agreement are omitted or are phrased in too indefinite a manner, no legally enforceable contract will result.
Brookhaven Housing Coalition v. Solomon, 583 F.2d 584, 593 (2d Cir.1978) (citations omitted). See also Interocean Shipping Co. v. National Shipping and Trading Corp., 462 F.2d 673, 676 (2d Cir.1972).
Moreover, it is also clearly established under New York law that the parties must themselves provide, with definite and concrete language, all material terms of their contract a court cannot be asked to fill in material terms on which the parties themselves could not reach agreement. Thus, as the New York Court of Appeals has explained:
before the power of law can be invoked to enforce a promise, it must be sufficiently certain and specific so that what was promised can be ascertained. Otherwise, a court, in intervening, would be imposing its own conception of what the parties should or might have undertaken, rather than confining itself to the implementation of a bargain to which they have mutually committed themselves. Thus, definiteness as to material matters is of the very essence in contract law. Impenetrable vagueness and uncertainty will not do.
Joseph Martin, Jr., Delicatessen v. Schumacher, 52 N.Y.2d 105, 109, 417 N.E.2d 541, 543, 436 N.Y.S.2d 247, 249 (1981) (citations omitted) (emphasis added). Where the parties have not themselves provided all material terms of their contract, there is no standard by which a court can determine what constitutes a breach of the agreement. As Judge Weinfeld has observed:
[i]t is well settled that for a contract to be valid, the agreement between the parties must be definite and explicit so their intention may be ascertained to a reasonable degree of certainty. Even if the parties believe they are bound, if the terms of the agreement are so vague and indefinite that there is no basis or standard *1120 for deciding whether the agreement had been kept or broken, or to fashion a remedy, and no means by which such terms may be made certain, then there is no enforceable contract.
Candid Productions v. International Skating Union, 530 F. Supp. 1330, 1333-34 (S.D.N.Y.1982) (Weinfeld, J.). See also Best Brands Beverage, Inc. v. Falstaff Brewing Corporation, No. 87-7279 (2d Cir. November 9, 1987).
In this case, defendant will be bound to compensate plaintiff for his professional services, on the terms plaintiff suggests, only if the parties agreed, either in writing or orally, to all material terms and conditions of such payment. Thus, at the very least, the parties must have clearly and specifically agreed on the services to be paid for and the duration of the payments. See, e.g., Ginsberg Machine Co. v. J. & H. Label Processing Corp., 341 F.2d 825, 828 (2d Cir.1965) (Marshall, J.) (duration of an exclusive right to sell and manufacture is an "essential" term of a contract). Furthermore, where plaintiff claims to be entitled to a percentage of profits, there must be some identification of what "profits" are actually covered by the contract terms. In the present context, this means that summary judgment must be granted for the defendant unless plaintiff can establish that a genuine issue of fact exists as to whether all such material terms were agreed upon, either orally or in writing, by the parties.
A. WRITTEN CONTRACT
The seven letters discussed above, represent the full set of writings which plaintiff claims demonstrate the existence of a written contract between the parties. However, none of these letters, separately or cumulatively, constitutes a valid and enforceable written contract binding defendant to compensate plaintiff at a rate not to exceed 25% of defendant's gross professional income.
Letter 1
The letter of December 8, 1976, written by plaintiff to defendant, discusses some of the ideas raised at the August 1976 meeting between the parties in Long Island. Included in this letter is a proposal by plaintiff that he own five percent of the corporate shares of the new New York trichological center. Clearly, this letter is at most a proposal, not a contract; no acceptance of plaintiff's offer has been made by the defendant. More importantly, plaintiff does not claim that ownership of stock in the New York trichological center is one of the terms of the alleged written contract at issue here.
Letter 2
The letter of January 31, 1977, written by defendant to plaintiff, responds to the proposal made by plaintiff in Letter 1. Defendant, however, does not accept plaintiff's proposal that he own five percent of the stock. Defendant instead writes, "I do feel that 5% for you is rather high. I know that you have put in lots of work but I expect that this will dwindle considerably when we get going. I certainly want you to have a percentage, but about 3% was in mind initially." At best, this language represents a counter offer rather than an acceptance. And again, in any event, plaintiff's stock ownership is not said to be a term of the contract alleged to exist in this case.
Letter 3
This letter of September 15, 1977, written by defendant to plaintiff, discusses plans for the opening of the trichological center; but, with one exception, no mention is made of any agreement between defendant and plaintiff. The one exception is a hand-written postscript to the letter, in which defendant states, "I think that she [Lesley] has too many points of the equity anyway. You have been doing a lot of the administration which has been beyond her & [sic] I think that you should have more of hers (irrespective of the agreement you & I will make)."
However, this discussion of stock ownership in the new trichological center, as in Letters 1 and 2, does not appear relevant to the terms of the alleged contract at issue in this case. Moreover, while it is not clear what "agreement" defendant is discussing *1121 in the last phrase of his postscript, it is clear that such an agreement, that "you and I will make," could only have been entered into after the writing of this letter thus the terms of that future agreement cannot be said to have been included in the letter itself.
Letter 4
This document, dated August 30, 1979, is a memorandum written by one of defendant's accountants, and is based on a meeting of defendant and his accountants held in London on that same date. This memorandum primarily discusses defendant's personal and business assets, as well as the status of the defendant's new trichological business in New York. In reference to the ownership of the New York trichological center and the royalties on any products sold there, the memorandum states that, "[t]he situation is further confused by the fact that RR [plaintiff Richard Rosenthal] in his personal capacity is said to own 10% of PK [defendant Philip Kingsley] and thus of all PK's activities including the sale of products (and processes) invented and marketed by PK."
Given that this memorandum was drafted by an outside accountant, rather than plaintiff or defendant, it cannot be said to represent an agreement between the parties. At best, this memorandum may serve as evidence that some contract may have indeed been entered by the parties at some prior time. However, the memorandum itself also states that "[t]he contractual relationship between TCNY [the trichological center in New York], RR [plaintiff], DSP [Dream Street Productions, a company that, according to the memorandum, may actually hold defendant's interest in the New York center], and PK [defendant] requires further clarification." Since whatever information is embodied in that memorandum "requires further clarification," that memorandum cannot be said to embody the material terms of a contract between the parties in this action.
Letter 5
Letter 5, dated November 13, 1979, was written by plaintiff to defendant. The letter makes reference to "notes which [defendant] prepared when [plaintiff] was last in New York [in October 1979]." Plaintiff states that, "I should like you to consider my comments hereinbelow with an eye toward your responses forming the basis for the general plan which I will then prepare for our rereview and eventual submission to our friends at BM [Bristol-Meyers]." Clearly, any discussion of the "general plan" for a deal with a cosmetics company is merely a proposal; the letter itself contains only preliminary ideas that might, at most, form "the basis" of some final plan to be developed later.
The letter also discusses the respective interests of plaintiff and defendant in any deal with Bristol Meyers or another manufacturer/distributer. Plaintiff writes,
"Subject to our working out the specific details, when the immigration and tax elements have been reconciled, I continue to proceed on the assumption that you are in accord with the proposal I made to you in Palm Springs that our relative interests in the benefits to be derived from the association with Bristol Meyers (or any other major manufacturer/distributor) will be two-thirds ( 2/3 ) to you and one third ( 1/3 ) to me, with each of us making a contribution of points in relation to our respective interests in favor of Joan (for example, if I gave up 1- 1/3 % and you double, or 2- 2/3 %, it would leave you with 64%, me 32%, and Joan with 4%)."
While this letter may indeed embody the general terms of an agreement concerning the relative interests of the parties in a deal with a manufacturer/distributor, plaintiff himself states that the parties still need "[to] work [...] out the specific details", including "immigration and tax elements", and the interest of Joan Maizner. Thus, material matters still needed to be resolved before an agreement would be reached between the parties.
More importantly, this letter cannot be said to represent an agreement between the parties. Rather, plaintiff merely states that he is proceeding on an assumption that defendant "is in accord" with a proposal plaintiff made at Palm Springs; there is no *1122 indication whatsoever that defendant ever actually accepted the terms stated here.
Letter 6
Letter 6, written by defendant to plaintiff on November 26, 1979, in response to Letter 5, makes clear that defendant in fact did not accept the terms stated in Letter 5. Rather, Letter 6 indicates that defendant considered the "proposal" plaintiff made at Palm Springs to be nothing more than that a proposal. Indeed, defendant states that "I would like at this stage to comment on your proposal made in Palm Springs, which until now I have only been thinking about in the vaguest possible way." Not only does defendant explain that he feels the 2/3 - 1/3 split is "rather unbalanced", he also writes that he is "somewhat confused as to what the percentages deal with just the product deal or all my income or separate percentages for separate things." The size of the parties' relative interests, and what aspects of the relationship between the parties would be included in the contract, are clearly material terms. Thus, it is clear that Letter 6 does not include agreements on all material terms of the relationship between the parties with respect to a product deal.
In fact, defendant only states that "I am sure there is a compromise that would make us all happy. Maybe we can discuss it further either before your trip to New York by phone, or when you are here." Defendant states that "[a]t present I gather you have 4 1/3 (?) [sic] of the Trichological Centre, New York and 10% (?) [sic] of me. It seems that 10% to 33% is a rather substantial jump." Again, defendant indicates that any contract regarding the product deal will be worked out later, and certainly the relative interests of the parties in any such product deal were not yet agreed upon at the time Letter 6 was written.
Letter 7
Finally, Letter 7 is also not a written agreement between the parties. Letter 7 does make reference to an "understanding reached in March, pursuant to which gross sums receivable from the Bristol Myers deal and any exploitations we develop collaterally thereto are to be divided 75% to you and 25% to me." However, even if some oral agreement was entered into in March, this letter cannot be said to represent a binding contract between the parties indeed, plaintiff admits that Letter 7 is merely a draft that plaintiff never even sent to defendant in any form. Anything said in Letter 7 cannot be considered a meeting of the minds of the parties.
* * * * * *
Plaintiff has thus made no showing whatsoever that any issue of material fact exists as to whether the parties ever entered a written contract. It is frivolous to suggest that any of the written documents, either alone or together, embodies all of the material terms by which the parties agreed to be bound.
B. ORAL CONTRACT
In this case, plaintiff alleges that the contract he entered into guaranteed him compensation of 25% of defendants gross professional income, whenever said income is received from projects initiated during the period when plaintiff acted as attorney for defendant and defendant's business.
The very terms of plaintiff's allegations suggest that this contract could not be performed within one year. Plaintiff claims to be entitled to compensation for a period extending far more than one year past the date of any alleged oral contract between the parties; plaintiff cannot also claim that performance would occur in a one year period.
The New York Statute of Frauds, New York General Obligations Law § 5-701, provides that all contracts not to be performed within one year must be evidenced by some written document or set of written documents. The statute provides, in pertinent part, that:
Every agreement, promise or undertaking is void, unless it or some note or memorandum thereof be in writing, and subscribed by the party to be charged therewith ... if such agreement, promise or undertaking ... [b]y its terms is not to be performed within one year from the *1123 making thereof or the performance of which is not to be completed before the end of a lifetime.
N.Y.Gen.Oblig.Law § 5-701. Even where performance is subject to some contingency, such as the actual earning of profits, the statute of frauds will still apply to an agreement where performance will not be complete within one year. See, e.g., Grissman v. Union Carbide Corp., 279 F. Supp. 413, 416 (S.D.N.Y.1968) ("[t]he existence of a contingency or condition precedent to the imposition of liability does not remove a contract from the bar of the Statute of Frauds"). See also Nurnberg v. Dwork, 12 A.D.2d 612, 208 N.Y.S.2d 799 (1st Dep't 1960), aff'd mem., 12 N.Y.2d 776, 186 N.E.2d 568, 234 N.Y.S.2d 721 (1962); Martocci v. Greater New York Brewery, 301 N.Y. 57, 63, 92 N.E.2d 887, 889, reh'g denied, 301 N.Y. 662, 93 N.E.2d 926 (1950).
Here, the alleged contract between the parties was not to be performed within one year, and thus any oral contract between the parties is subject to the Statute of Frauds. The New York courts have recognized that the Statute applies in circumstances similar to those of the present case. In Nurnberg v. Dwork, supra, for example, the Statute of Frauds was held to apply to an oral agreement whereby the plaintiff "was to negotiate for the operation of retail outlets [for defendants] in stores of [a third party], and the defendants were to pay to the plaintiff 1% of the gross retail sales of the defendants in said stores * * * if at any future time they establish concessions at [such] stores * * * so long as the concessions are maintained by the defendants." Nurnberg v. Dwork, 12 A.D.2d at 612-613, 208 N.Y.S.2d at 800. As the New York Court of Appeals later explained, in Nurnberg "there was no continuing duty of performance by the plaintiff; in return for a single service, he was to receive a percentage of sales forever. It was this fact present in the prior `service contract' cases which led us to conclude that the agreement was within the Statute of Frauds." North Shore Bottling Co. v. C. Schmidt and Sons, Inc., 22 N.Y.2d 171, 179, 239 N.E.2d 189, 193, 292 N.Y.S.2d 86, 92 (1968) (Fuld, C.J.).
At the summary judgment stage, plaintiff therefore has the burden of showing that some genuine issue of material fact exists as to whether some note or memorandum "thereof" be in writing. The "note or memorandum thereof" is not a contract itself, in that a written contract would eliminate the need to apply the Statute of Frauds. Nonetheless, "[i]n order to satisfy the statute the `memorandum' must, on its face and without the addition of parol evidence, contain the essential terms of the agreement," Ginsberg Machine Co. v. J. & H. Label Processing Corp., 341 F.2d 825, 828 (2d Cir.1965) (Marshall, J.). As the Second Circuit has explained, "[a] term is `essential,' and must thus appear in the `memorandum,' if it seriously affects the rights and obligations of the parties and there is significant evidentiary dispute as to its content." Id. The duration of the right exclusively to manufacture and sell machines would be an example of an "essential term". Id. More recently, the Second Circuit has used even stricter language in discussing the memorandum requirement, indicating that "the statute also requires that `all the material terms of the agreement' be contained either `expressly or by reasonable implication' in the writing." Hawley Fuel Coalmart, Inc. v. Steag Handel GmbH, 796 F.2d 29, 33 (2d Cir.1986) (citing Morris Cohon & Co. v. Russell, 23 N.Y.2d 569, 575, 245 N.E.2d 712, 715, 297 N.Y.S.2d 947, 953 (1969)), cert. denied, ___ U.S. ___, 107 S. Ct. 954, 93 L. Ed. 2d 1002 (1987).
New York law has long held, however, that the memorandum may actually be several writings which, taken together, satisfy the requirements of the Statute of Frauds; indeed, as the Second Circuit explained in Hawley Fuel Coalmart, "[u]nder New York law the writing necessary to satisfy the statute of frauds may be embodied in several documents, only one of which need be signed by the party to be charged." 796 F.2d at 33. See also Crabtree v. Elizabeth Arden Sales Corp., 305 N.Y. 48, 55-56, 110 N.E.2d 551, 554 (1953).
In this case, however, it is clear that none of the writings, alone or together with *1124 any of the other writings, is sufficient to meet the "note or memorandum" requirement of the Statute of Frauds.
Letter 1 and Letter 2, in relevant part, refer only to plaintiff's stock ownership in the new Trichological Center, and make no reference whatsoever to any interest in defendant's revenue or profits.
Letter 3, signed by the defendant, does make reference to "the agreement you & I will make"; however, it is not clear whether this "agreement" concerns stock ownership or some other subject. And the "agreement" in question clearly has not been reached at the time of this writing, and thus this letter cannot contain any essential terms of that agreement.
Letter 4 is a document prepared by defendant's accountant. This memorandum does state that "RR in his personal capacity is said to own 10% of PK and thus of all PK's activities including the sale of products (and processes) invented and marketed by PK." However, while the letter states a percentage interest of 10%, it does not indicate to what that interest attaches or the duration of the interest. Indeed, the memorandum itself states that the information about plaintiff's interest actually makes "the situation" be "further confused". And the memorandum also states that "[t]he contractual relationship between TCNYP, RR, DSP and PK requires further clarification."
Letter 5 merely presents a proposal by plaintiff that the proceeds of any product deal with a manufacturer/distributor be split two-thirds for defendant and one-third for plaintiff, although the letter also indicates that an interest for Joan Maizner would also need to be worked out. And any terms of an agreement proposed in Letter 5 are rejected by defendant in Letter 6. In Letter 6, signed by defendant, defendant not only rejects plaintiffs proposed two-thirds one-third split, but also indicates that the scope of plaintiff's interest in any agreement is unclear. Defendant explicitly states, "I am also somewhat confused as to what the percentages deal with just the product deal or all my income or separate percentages for separate things." And while defendant appears to indicate that some earlier oral agreement affecting plaintiff's interest may have been reached, defendant indicates that he is not even sure of the terms of that agreement by placing a question mark ("?") next to "10%". And finally, defendant states that "I am sure there is a compromise that would make us all happy" indicating that essential terms of an agreement had yet to be resolved.
Finally, Letter 7 cannot rescue plaintiff from the failure of the other letters, alone or together, to state the essentials of an oral agreement between the parties. Letter 7 states new percentages 75% and 25% not discussed in any of the other letters, and makes reference to an "understanding reached in March." Yet Letter 7, like the other letters, does not clearly state the items to which plaintiff's interest would apply, nor does it clearly state the duration of the interest. And in any event, given that Letter 7, by the plaintiff's own admission, is merely a draft never sent to defendant, its credibility as a document reflecting the understanding of the party to be charged the defendant is questionable.
Moreover, Letter 7 indicates that even if the parties had indeed reached some prior oral agreement, it was not a contract that would have bound the parties under New York law. Letter 7 states unequivocably that the interest of plaintiff discussed will be derived from "gross sums receivable from the Bristol Myers deal and any exploitations we develop collaterally thereto"; if this language is not to be treated as creating ambiguity as to the scope of plaintiff's alleged interest, it must be treated as establishing that consummation of a deal with Bristol Myers, or some other entity, was a condition precedent to performance under the alleged oral agreement between the parties. Such a deal with Bristol Myers was in fact never reached, nor was any collateral deal ever developed by the parties. Thus, by its own terms, Letter 7 cannot be deemed to state essential terms of an oral contract binding upon the parties.
* * * * * *
*1125 Thus, because no writing or set of writings contains the essential terms of the alleged oral agreement between the parties, no genuine issue of material fact exists as to whether any oral contract between the parties is void under the Statute of Frauds.
Plaintiff asserts, however, the defendant must be equitably estopped from asserting his statute of frauds defense because plaintiff relied on defendant's promises of compensation, plaintiff took actions which unequivocally refered to their agreement, and plaintiff was substantially injured as a result.
Promissory estoppel, when invoked to excuse compliance with the Statute of Frauds, is distinct from the more common invocation of promissory estoppel to enforce a promise without any agreed consideration. Indeed, while Section 90 of the Restatement of Contracts Second discusses promissory estoppel as a consideration substitute, New York Courts look to Section 217A of the Restatement for the principle that a party can be estopped from asserting a Statute of Frauds defense. Section 217A provides, in relevant part:
A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promissee or a third person and which does induce the action or forebearance is enforceable notwithstanding the Statute of Frauds if injustice can be avoided only by enforcement of the promise. The remedy granted for breach is to be limited as justice requires.
See, Swerdloff v. Mobil Oil Corp., 74 A.D.2d 258, 261, 427 N.Y.S.2d 266, 269 (2d Dept.1980), cited in Esquire Radio & Electronics, Inc. v. Montgomery Ward & Co., Inc., 804 F.2d 787, 794 (2d Cir.1986).
The doctrine of promissory estoppel as a bar to assertion of a Statute of Frauds defense, has been strictly construed to apply only in those rare cases where "`the circumstances [are] such as to render it unconscionable to deny' the oral promise upon which the promisee has relied," Swerdloff, 74 A.D.2d at 263, 427 N.Y.S.2d at 269 (citing 3 Williston, Contracts [3d ed.], § 533A, p. 801). Cf. Murphy v. Gutfreund, 583 F. Supp. 957, 968 (S.D.N.Y. 1984) (Lasker, J.) (more stringent pleading requirements apply when the doctrine of promissory estoppel is invoked as a defense to the Statute of Frauds). Thus, as the Second Circuit has explained:
The strongly held public policy reflected in New York's Statute of Frauds would be severely undermined if a party could be estopped from asserting it every time a court found that some unfairness would otherwise result. For this reason, the doctrine of promissory estoppel is properly reserved for the limited class of cases where "the circumstances are such as to render it unconscionable to deny" the promise upon which the plaintiff has relied.
Philo Smith & Co., Inc. v. USLIFE, 554 F.2d 34, 36 (2d Cir.1977) (emphasis in original) (citation omitted).
Where an alleged contract is made void by the Statute of Frauds, an injury that is solely the result of non-performance of that void agreement is not sufficiently "unconscionable" to allow a party to estop reliance on the Statute of Frauds defense. See Philo Smith & Co., Inc. v. USLIFE, 554 F.2d at 36. In USLIFE, a written finder's fee agreement was in effect between the parties, but had expired by the time defendants reached an agreement with a third party found by the plaintiffs. Plaintiff claimed that the parties had orally agreed to extend the written finder's fee agreement, but such an oral extension was barred by New York's Statute of Frauds. Plaintiff then argued that because it had detrimentally relied upon the defendant's promises to extend the written agreement, defendant should be estopped from asserting the Statute of Frauds defense; the only substantial injury suffered by the plaintiff, however, was the loss of a fee from the defendant. The Court of Appeals explained that "this is not the kind of injury contemplated by New York law, for it is solely a result of the non-performance of a void agreement." Id. Moreover, the Court of Appeals found that plaintiff's relinquishment of the opportunity to seek *1126 another party willing to pay a finder's fee was "hardly ... the sort of irremediable change in position normally associated with the doctrine of promissory estoppel." Id.; see also Woolley v. Stewart, 222 N.Y. 347, 350-51, 118 N.E. 847, 848 (1918) (the acts induced by reliance must be "to such an extent and so substantial in quality as to irremediably alter his situation and make the interposition of the [Statute of Frauds] a fraud.").
The circumstances of the present case are not such as to render it "unconscionable" to deny enforcement of any promise on which plaintiff may have relied. In its complaint, plaintiff has not alleged any injury resulting from reliance on any promise made by defendant. At best, plaintiff has only argued in its summary judgment papers that as a result of reliance on defendant's promisses, it did not collect the fees required under the alleged agreement. But this is merely a loss from nonperformance of a void agreement. Plaintiff took no action that can be said to have irremediably altered his situation; plaintiff has not shown that he invested money or suffered any substantial losses attributable to reliance on any oral promises made by the defendant. Moreover, to the extent that the correspondence between the parties indicates defendant's continued requests for clarification and further negotiation as to the terms of any fee agreement between the parties, defendant in any event did not make a promise upon which plaintiff could reasonably rely.
II. FRAUD CLAIM
Plaintiff's third cause of action alleges that defendant fraudulently induced plaintiff to act as a professional consultant by falsely representing that defendant would compensate plaintiff for those services at a rate not to exceed 25% of defendant's gross professional income. Defendant, relying on England Strohl/Denigris, Inc. v. Weiner, 538 F. Supp. 612, 615 (S.D.N.Y.1982), aff'd, 740 F.2d 954 (1984), claims that summary judgment should be granted because "[i]t is well established that an action for fraudulent misrepresentations made to induce a party to enter a contract, cannot be based upon an oral contract void under the statute of fraud [sic]." Defendant's Memorandum of Law at 30.
Defendant, however, ignores the analysis of the Second Circuit in Fort Howard Paper Co. v. William D. Witter, Inc., 787 F.2d 784 (2d Cir.1986), indicating that "a party barred by the Statute of Frauds from pursuing a breach of contract claim is not necessarily barred from pursuing an action in tort." Id. at 792. While a party may not claim that the "fraud" consisted of a failure to honor an alleged oral promise, a party may properly bring a claim for fraud, even if the alleged contract is barred by the Statute of Frauds, if the fraud consists of false representations that services would indeed be paid for. In other words, plaintiff here must show more than the mere failure to perform a non-fraudulent promise; rather, plaintiff must show that defendant made a promise he had no present intention of performing. See Lehman v. Dow Jones & Co., 783 F.2d 285, 295 (2d Cir.1986), cited in Fort Howard Paper Co., 787 F.2d at 794.
Thus, the Statute of Frauds cannot be used as a shield for wrongdoers. See Imperator Realty Co. v. Tull, 228 N.Y. 447, 457, 127 N.E. 263 (1920) (Cardozo, J. concurring). On the other hand, a fraud claim cannot merely reassert, in another form, a claim for the breach of a contract barred by the Statute of Frauds; any recovery for fraud therefore must be limited to expenses incurred in reliance on the fraud. Fort Howard Paper Co., 787 F.2d at 794. Thus, as the Second Circuit has explained:
[a] careful balance [] must be struck if the legislative intent underlying the Statute of Frauds is not to be subverted. By restricting a fraud claimant to an out-of-pocket recovery, along with any punitive damage award a jury may accept, it is possible to return the claimant to the same position he occupied before the fraud was committed without facing the attendant risk of indirectly enforcing a contract otherwise barred by the Statute of Frauds. "Because an out of pocket recovery is practically and theoretically *1127 different from that obtained by enforcement of the contract, permitting the fraud action does not defeat the policy underlying the Statute of Frauds."
Fort Howard Paper Co., 787 F.2d at 794-95 (citations omitted).
In the present case, plaintiff has made no showing that a genuine issue of fact exists as to whether defendant promised, without intending to perform, that he would compensate plaintiff for his services at a rate not to exceed 25% of defendant's gross professional income. There is no indication whatsoever that in August 1976, the date of the first promise, defendant fraudulently represented that he intended to pay plaintiff a percentage of his gross United States income. Indeed, the correspondence between the parties indicates that at the time of the promise, defendant did plan to compensate plaintiff although defendant did make clear that he himself was uncertain as to the terms of that compensation.
In 1978 and 1979, when the parties discussed a possible product deal with a beauty product distributor or manufacturer, plaintiff sought a larger percentage interest in income from defendant's business. Again, however, even assuming that defendant made an oral promise to give plaintiff 25% of all profits, there is no indication whatsoever that defendant made any fraudulent promise to compensate plaintiff. According to plaintiff, "[w]e argued back and forth ... until some time in New York in late March [1980] when we finally agreed to my getting 25%. This was only a few days before we went to Bristol-Myers with a full-blown proposal which I had personally devised and written up." Rosenthal Aff. ¶ 42.
In the months that followed, the parties continued to pursue the deal with Bristol-Myers. It was not until the Spring of 1981, however, that defendant entered into a separate transaction involving Mr. Rathaus and excluding plaintiff. And it was only at that time not at the time any promise to compensate plaintiff was made that defendant decided to enter that separate transaction. The only explanation plaintiff offers for defendant's decision is that defendant and his wife
implored me to understand that Kingsley was feeling the pressure of a big mortgage, rising overhead, a little baby, and the fact of his turning 51. It was explained that Kingsley was depressed and that he felt the deal with Rathaus was his last shot.... Kingsley and Joan Maizner told me that Kingsley had hidden the deal from me because Rathaus had made it clear to Kingsley that he "would not do the deal with Kingsley" if I had any involvement whatsoever.
Rosenthal Aff. ¶ 24; Rosenthal Deposition, April 29, 1985, at p. 56. According to plaintiff, the new contract between defendant and Rathaus was executed approximately one month before plaintiff became aware of its existence. Thus, it was not until early 1981 that defendant chose to enter a deal that would deny plaintiff any compensation. At that time, over one year had passed since any alleged promise had been made; at most, defendant decided not to perform as he had allegedly promised. If any "fraud" was committed, it was defendant's failure to perform; but this merely reasserts, in another form, plaintiff's claim for breach of a contract barred by the Statute of Frauds. See Fort Howard Paper Co., 787 F.2d at 794.
Thus, while plaintiff has properly pleaded that defendant fraudulently promised to compensate plaintiff, in fact plaintiff has shown nothing more than that defendant did not perform under the terms of the alleged contract. Plaintiff's complaint alone, however, is not sufficient to meet plaintiff's burden in response to the motion for summary judgment. See Fed.R.Civ.P. 56(e) (a party opposing a properly supported motion for summary judgment "may not rest upon the mere allegation or denials of his pleading, but ... must set forth specific facts showing that there is a genuine issue for trial"); see also Anderson v. Liberty Lobby, Inc., 106 S.Ct. at 2510 ("in the face of defendant's properly supported motion for summary judgment, the plaintiff could not rest on his allegations of a conspiracy to get to a jury *1128 without `any significant probative evidence tending to support the complaint.'") (citing First National Bank of Arizona v. Cities Service Co., 391 U.S. 253, 290, 88 S. Ct. 1575, 1593, 20 L. Ed. 2d 569 (1968)).
Thus, as to plaintiff's fraud claim, defendant's motion for summary judgment is also granted.
III. ACCOUNTING AND DECLARATORY JUDGMENT
Because defendant's motion for summary judgment is granted as to plaintiff's contract and fraud claims, plaintiff is not entitled to either an accounting to determine the amount of money owed by defendant, or any declaratory relief. Therefore, defendant's motion for summary judgment is also granted as to defendant's fourth and fifth causes of action, seeking an accounting and declaratory relief.
CONCLUSION
Defendant's motion for summary judgment is thus granted as to all counts of the complaint.[3] Plaintiff's complaint is accordingly dismissed.
SO ORDERED.
NOTES
[1] In his deposition, plaintiff identified this woman more specifically as "Leslie Rolette," whom plaintiff said "was to be manager of the premises [the new trichological center in New York] until she and Mr. Kingsley had a falling out." Rosenthal Deposition, April 29, 1985, at p. 33.
[2] The parties agree, and the Court assumes, that New York law governs the substantive contract and fraud claims herein. Cf. Gelb v. Royal Globe Insurance Company, 798 F.2d 38, 44 n. 5 (2d Cir.1986), cert. denied, ___ U.S. ___, 107 S. Ct. 1608, 94 L. Ed. 2d 794 (1987). Moreover, the alleged contract at issue here was created primarily in New York, and was to be performed primarily in New York. Defendant's alleged promises were also made in New York.
[3] Because summary judgment has been granted on all contract and fraud claims, the Court need not consider whether, as defendant suggests, those claims are barred by reason of plaintiff's breach of a fiduciary duty to defendant.
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105 Pa. Commw. 554 (1987)
524 A.2d 1089
Stanley Kasavage, a Minor by his Parent and Natural Guardian, Agnes Kasavage, Individually and in her own right, Appellants
v.
City of Philadelphia, Appellee.
No. 30 T.D. 1986.
Commonwealth Court of Pennsylvania.
May 1, 1987.
Submitted on briefs, February 26, 1987.
*555 To Judges MACPHAIL and BARRY, and Senior Judge BLATT, sitting as a panel of three.
Susan I. Schulman, Marion, Satzberg & Associates, P.A., for appellant.
Handsel B. Minyard, City Solicitor, with him, Armando A. Pandola, Jr., Chief Deputy in Charge of *556 Claims, Barbara R. Axelrod, Divisional Deputy in Charge of Appeals, Claudia M. Tesoro, Chief Assistant City Solicitor, for appellee.
OPINION BY JUDGE MACPHAIL, May 1, 1987:
Appellants Stanley and Agnes Kasavage appeal an order of the Court of Common Pleas of Philadelphia County granting preliminary objections of Appellee City of Philadelphia (City) and dismissing Appellants' action. We affirm.
Appellants instituted an action against the City for injuries sustained by Stanley Kasavage at the City's Cione Playground and Pool. The complaint alleged that on July 6, 1984, Stanley was injured at the pool, suffering a lacerated and fractured nose, by a group of rowdy juveniles the City failed to control. Appellants complain that the City knew or should have known of the dangerous activities at the pool and that it was negligent in failing to supervise the area, in permitting a dangerous condition to develop and in failing to warn pool patrons of the dangerous conditions.
Appellee responded with preliminary objections to the complaint, asserting that it was immune from suit under Section 8541 of the Judicial Code (Code), 42 Pa. C. S. §8541. The trial court granted the preliminary objections in part and Appellants were allowed to file an amended complaint. An amended complaint was filed, to which the City again objected on the grounds of governmental immunity. By order entered December 18, 1985, the City's preliminary objections were granted and Appellants' action dismissed.
Appellants raise two issues on appeal: 1) whether the City should be immune from suit when it had actual, written notice of prior continuing violent and criminal activity at the park; and 2) whether the City improperly raised the defense of governmental immunity by *557 way of preliminary objections. We note that our scope of review is limited to a determination of whether the trial court abused its discretion or committed an error of law in sustaining the City's preliminary objections. Pennsylvania Department of Environmental Resources Appeal, 91 Pa. Commw. 381, 497 A.2d 284 (1985).
Initially, we reject Appellants' argument that the City waived its right to assert the defense of governmental immunity because the defense was raised in preliminary objections and not in an answer and new matter, pursuant to Pa. R.C.P. No. 1030. While it is true that the defense of immunity from suit is required to be pleaded in new matter and not preliminary objections, this Court has held that immunity may be raised in preliminary objections where the defense is apparent on the face of the pleading being challenged. McCreary v. City of Philadelphia, 95 Pa. Commw. 285, 505 A.2d 385 (1986). Regardless, the proper method of challenging the pleading of such a defense is by filing preliminary objections to the preliminary objections. Id. Appellants did not object to the City's method of pleading until the instant appeal.
The general rule of Section 8541 of the Code, 42 Pa. C. S. §8541, is that local agencies (here, the City) are not liable for any damages for injuries caused by any act of the agency or an employee thereof. There are eight exceptions enumerated in Section 8542 of the Code, 42 Pa. C. S. §8542, and Appellants claim that in this instance the City should be liable under the real property exception in Section 8542(b)(3). That section provides:
(b) Acts which may impose liability.
The following acts by a local agency or any of its employees may result in the imposition of liability on a local agency:
. . . .
*558 (3) Real property. The care, custody or control of real property in the possession of the local agency, except that the local agency shall not be liable for damages on account of any injury sustained by a person intentionally trespassing on real property in the possession of the local agency.
Appellants argue that the City's pool was known to have "dangerous conditions" and therefore involves the City's care, custody or control of the premises within the real property exception. We find this argument to be without merit.
The danger alleged to exist at the pool was the presence of "certain undesirable individuals, groups and/or gangs (who) frequented the aforesaid premises and regularly harassed and often terrorized law-abiding citizens. . . ." of which the City knew or should have known. Amended Complaint, paragraph 6. It is obvious to us that this activity did not involve the City's care, custody or control of the pool itself, but the control of the disruptive juveniles, despite Appellants' argument that their claim is not one for "negligent supervision."
In Fizzano v. Borough of Ridley Park, 94 Pa. Commw. 179, 503 A.2d 57 (1986), a case in which a plaintiff was struck by a hockey puck while ice skating in a public park, we recognized that the "failure to supervise the activities of third parties is not the type of negligence which is covered by the real property exception to governmental immunity." Id. at 181, 503 A.2d at 58. See also Casey v. Geiger, 346 Pa. Super. 279, 499 A.2d 606 (1985). The conduct complained of must be directly related to the condition of the premises, Fizzano, or an injury must result from some defect in the real estate. Ludwin v. Port Authority Transit Corp., 102 Pa. Commw. 36, 517 A.2d 1006 (1986). In the case sub judice, Appellants have made no allegations *559 that Stanley's injuries were caused by a condition or defect of the pool itself. We, accordingly, refuse to conclude that the real property exception applies to Appellants' suit.
Finally, we believe that in this instance it is of no import that, as Appellants claim, the City knew of the violent and criminal nature of the activities at the pool.[1] This Court has held that liability may be imposed under the real property exception for negligence which makes government-owned property unsafe for the activities for which it may be reasonably foreseen to be used. Vann v. Board of Education of the School District of Philadelphia, 76 Pa. Commw. 604, 464 A.2d 684 (1983). Following Vann, we held in Merritt v. Board of Education of the School District of Philadelphia, 99 Pa. Commw. 178, 513 A.2d 504 (1986), that the rape of a student in a ladies room by a trespasser was not a reasonably foreseeable use of school property even though school officials knew of the presence of the trespasser in the neighborhood and had attempted previously to prevent him from entering or loitering around the school. We, likewise, hold that even in light of alleged prior complaints about the rowdy activity at the pool, the violence which caused Stanley's injuries was not a reasonably foreseeable use of the facility.
We, accordingly, affirm the trial court's order granting the City's preliminary objections and dismissing Appellants' complaint.
*560 ORDER
The order of the Court of Common Pleas of Philadelphia County in the above-captioned proceeding is hereby affirmed.
NOTES
[1] Appellants assert that the City had prior, written notice of the rowdiness at the pool. A letter to the City from a local state senator's office is attached as an appendix to Appellants' brief. We, of course, must disregard the letter since it is not included in or attached to the complaint. In ruling upon preliminary objections, both we and the trial court are limited to a consideration of the allegations in the challenged pleading. Wells v. Southeastern Pennsylvania Transportation Authority, 105 Pa. Commw. 115, 523 A.2d 424 (1987).
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524 A.2d 18 (1987)
Kenneth Lee SADLER and Violet Sadler, Plaintiffs,
v.
NEW CASTLE COUNTY, James D. McCarnan, Harry Connor, Eric Cannon, Richard Hegelund, Professional Ambulance Service, Inc., a Delaware corporation, Talleyville Fire Company, a Delaware corporation, the Mayor and Council of Wilmington, Carmen Maiorano, Edward Hojnicki and Ronald Anderson, Defendants.
Superior Court of Delaware, New Castle County.
Submitted: September 23, 1986.
Decided: February 3, 1987.
Morton R. Kimmel, and Paul H. Spiller, of Kimmel, Spiller & Weiss, Wilmington, for plaintiffs.
John G. Mulford, of Theisen, Lank, Mulford & Goldberg, P.A., Wilmington, for defendants New Castle County, et al. and Professional Ambulance Service, Inc.
Wayne N. Elliott, and Michael P. Kelly, of Prickett, Jones, Elliott, Kristol & Schnee, Wilmington, for defendant Talleyville Fire Co.
Jeffrey S. Goddess, of Saul, Ewing, Remick & Saul, Wilmington, for defendants City of Wilmington, et al.
*20 O'HARA, Judge.
Presently before the Court are motions for summary judgment by New Castle County and the named county paramedics ("County"); the Professional Ambulance Service, Inc. ("Professional"); Talleyville Fire Company ("Talleyville"); and the Mayor and Council of Wilmington together with named city fire department officials ("City"). For the reasons set forth herein, summary judgment is granted as to New Castle County, Talleyville Fire Company, the Mayor and Council of Wilmington, and the named city fire department officials. *21 Summary judgment is denied with respect to the named county paramedics.
On July 31, 1983, plaintiff Kenneth Sadler and three friends were floating down the Brandywine River on logs. As they approached the Brandywine falls, they got off the logs in order to wade toward the river bank. Plaintiff, standing near the lip of the falls, slipped and fell headfirst over the falls and struck his head on the rocks six to eight feet below. One of plaintiff's companions jumped over the falls and dragged plaintiff to the shore, where he began to administer CPR.
Defendants James D. McCarnan and Eric Cannon, two of the named county paramedics, arrived at the scene roughly ten minutes after they were notified. McCarnan parked his emergency vehicle on the edge of Alapocas Drive and proceeded to the river, which was approximately ¼ mile away down a rocky embankment. Cannon followed, carrying with him a cardiac box, a long backboard, a cervical collar, and an oxygen unit. He was followed by two or three Talleyville Fire Company personnel.
Upon their arrival, plaintiff was lying on his left side, was breathing on his own, and was demonstrating mild seizure activity. McCarnan and Cannon placed plaintiff in a cervical collar and took his vital signs. At this time the plaintiff was started on an I.V. injection of dextrose and given nasal oxygen.
Plaintiff was then placed on an orthopedic stretcher, which is designed to maintain complete or straight alignment of the body. Plaintiff's head was taped to the stretcher to keep it immobilized. The stretcher was placed in a Stokes basket and secured to the basket with straps. McCarnan radioed Dr. Jay Feldstein, the doctor on call at the emergency room of the Wilmington Medical Center. McCarnan advised Dr. Feldstein that plaintiff was unconscious, that he had dove or fallen into the river, that he had a laceration on his head, that he was unresponsive and demonstrating some movement and seizure-like activity, and that they had applied a cervical collar and performed basic spinal immobilization.
The paramedics and fire company personnel considered several alternatives for removing plaintiff from the scene. Overhanging trees and an inadequate landing area precluded the use of a helicopter. A rubber boat was requested but was unavailable. Finally, they concluded that it would be too dangerous to both the plaintiff and rescue personnel to attempt to haul the plaintiff over the rocky terrain back up to the Alapocas Drive parking area. Consequently the rescuers decided to transport plaintiff across the river below the falls in the Stokes basket. Dr. Feldstein agreed with the decision.
Cannon swam to the far bank to assist the rescue personnel in bringing a 250 foot hemp line across the river. The line was secured by Talleyville on the Alapocas side and by the Wilmington Fire Department on the city side. The Stokes basket was secured to the line with leather belts. Paramedics Cannon and Hegelund, three members of Talleyville, and Hojnicki and Maiorano of the Wilmington Fire Department then proceeded to move plaintiff across the river.
The parties' versions of the trip across the river are in conflict. Plaintiff contends that the rescue party had difficulty maintaining footing on the river bottom and that plaintiff's head and body was submerged several times. Defendants assert that while plaintiff's back and lower body may have become wet, his upper body and head never submerged. All parties agree, however, that upon reaching the city side of the river, the paramedics ascertained that plaintiff had a loss of sensation from the nipple down. Cannon informed the emergency room of the loss of sensation and advised the ambulance driver to drive slowly to the hospital.
Plaintiff, a quadriplegic as a result of the incident, has alleged that the defendants engaged in wanton misconduct in extricating him from the accident scene and that such conduct caused his quadriplegia.
I. COUNTY AND TALLEYVILLE'S MOTIONS FOR SUMMARY JUDGMENT
In support of their motions for summary judgment, New Castle County, the named *22 county paramedics, and the Talleyville Fire Company rely on immunity protections provided under several statutes.
First, the defendants assert the immunity provided by the County and Municipal Tort Claims Act ["Act"], 10 Del.C. §§ 4010-4013.[1] The Act protects all governmental entities and their employees from suit on any and all tort claims in which recovery of damages is sought. See § 4011(a). Employees, but not the governmental entity itself, may be held personally liable for acts or omissions causing property damage, bodily injury, or death where their acts were performed with wanton negligence. See § 4011(c). Governmental entities, but not their employees, may be held liable for negligent acts causing property damage, bodily injury, or death under the circumstances set forth in § 4012.
County and Talleyville also rely on the immunity provided by the emergency care statute found at 16 Del.C. § 6801.[2] This statute protects, among others, certified emergency medical care attendants and technicians rendering emergency medical treatment, unless their acts or omissions amount to gross negligence or wilful or wanton misconduct.
Plaintiff argues in response that the defendants demonstrated wanton misconduct in their attempts to extricate him from the accident scene and that they are therefore not protected by the statutory immunities. Plaintiff offers the affidavit of John E. Hocutt, M.D., who avers that within reasonable medical probability the conduct of the defendants was reckless in choosing to risk further injury to the plaintiff by taking *23 him across the river rather than up the ground path. Dr. Hocutt indicates that a quick examination of the river conditions should have revealed to the rescuers that the Stokes basket containing plaintiff could not have received any significant support from the rescuers or the hemp line. Knowing full well that stability of the head and neck in such cases is of crucial importance, the affiant suggests, the rescuers nonetheless proceeded to transport a patient suffering from a spinal cord injury in a motion-packed, unstable method.
Defendants rely on the affidavit of William Kraut, M.D., who avers that the rescue personnel exercised the appropriate standard of care in the manner and method of immobilizing plaintiff in preparation for transport, in rendering medical treatment at the scene, and in transporting plaintiff from the scene to the emergency room at the Wilmington Medical Center. Dr. Kraut posits that plaintiff's quadriplegia resulted from the dive or fall over the Brandywine falls and not from any action taken by the rescuers.
Wanton conduct occurs when a person, with no intent to cause harm, performs an act so unreasonable and dangerous that he either knows or should know that there is an imminent likelihood of harm which can result. Yankanwich v. Wharton, Del.Supr., 460 A.2d 1326, 1331 (1983). It is manifest in an "I don't care" attitude that demonstrates a conscious indifference to the consequence of one's actions. McHugh v. Brown, Del.Supr., 125 A.2d 583, 586 (1956).
The existence of negligence in any degree is normally a question for the finder of fact. Whether the plaintiff has presented evidence that is legally sufficient to take the issue to the jury, however, is a matter for the Court to decide. Submission is required if there is any evidence, however slight, tending to prove that the defendants acted with the degree of negligence pleaded by the plaintiff. Only when one conclusion can be drawn from undisputed material facts may such questions be determined as a matter of law. Caine v. New Castle County, Del.Supr., 379 A.2d 1112, 1116 (1977).
As is required in summary judgment cases, the Court has examined the facts in a light most favorable to the non-moving party. Oliver B. Cannon & Sons, Inc. v. Dorr-Oliver Incorporated, Del.Super., 312 A.2d 322, 325 (1973). Upon reflection, the Court is not convinced that reasonable minds could not differ with respect to the quality of the defendant's conduct. The Court is particularly impressed in this regard with the affidavit of Dr. Hocutt. The doctor explained that in cases involving spinal cord injury where a patient has been stabilized, it is far more important to ensure complete spinal immobilization than to risk motion in order to save time. Dr. Hocutt indicated that the method of extrication chosen by the rescuers employing a line suspension transport technique over a great distance above a river at a point of significant depth and current presented an obviously greater chance for motion-related injuries to the spinal cord than the trip up the ground path. The doctor additionally noted that the paramedics would have been powerless to render medical assistance in the event the patient's condition worsened during the trip.
In light of Dr. Hocutt's representations, considered together with the defendants' specialized knowledge and training, the Court is satisfied that there is evidence sufficient to take the issue of wanton misconduct to the jury. This holding applies to the named county paramedic defendants only. Under the County and Municipal Tort Claims Act, governmental entities themselves are immune but for the circumstances set forth in 10 Del.C. § 4012. In order to survive a motion for summary judgment as to New Castle County and the Talleyville Fire Company, therefore, plaintiff must show that this case comes within one of the enumerated circumstances.
Plaintiff has in fact so argued. Plaintiff contends that the facts bring this case *24 within the so-called "equipment" exception found at 10 Del.C. § 4012(1).[3]
Plaintiff suggests that the rescue equipment used, namely an orthopedic back board, stretcher, Stokes basket, life line, and other such devices, constitutes special mobile equipment within the meaning of the exception. The defendants insist that the General Assembly did not intend for such items to be included within the definition of equipment.
The question of what constitutes "equipment" under the exception was recently discussed in White v. Crowley, No. 84C-AP-87, Balick, J. (May 8, 1986) [Available on WESTLAW, DE-CS database]. There Judge Balick concluded that in interpreting the provision the Court would more likely carry out the General Assembly's intent by employing the doctrine of ejusdem generis than by relying on the dictionary definition of "equipment." Id., at 8. Accordingly, the Court approached a definition by considering the specific examples listed in the statute. Noting that the terms "motor vehicle", "special mobile equipment", and "trailer" are set forth and defined in the Delaware Code title dealing with motor vehicles, Judge Balick observed:
They all refer to vehicles which may be used to transport people or property on land, including vehicles that are not self-propelled and vehicles whose use in conveying people or things is incidental to the primary use in agriculture. The one exception, aircraft, differs only in that it is used to transport people or property in air instead of on land.
Id., at 6.
While it is true, as plaintiff suggests, that the backboard, stretcher, and Stokes basket were all used to transport the plaintiff, the Court is satisfied that these medical devices were not what the legislature had in mind when it formulated the exception. Motor vehicles, special mobile equipment as defined in Title 21, trailers, and aircraft are instruments which are commonly at the center of tort suits and which, by virtue of their potential to inflict damage and injury when negligently maintained or used, are subject to regulation under our laws. The same cannot be said for the devices here claimed to fall within the exception. Consequently the Court holds that the equipment exception is not applicable on the present facts and will therefore not operate to penetrate the immunity extended to the County and the Talleyville Fire Company.
Plaintiff alternatively argues that Talleyville has waived its immunity under the County and Municipal Tort Claims Act because Talleyville previously purchased liability insurance. This argument conflicts with the expressed statutory language which states that governmental entities shall be immune from suit "[e]xcept as otherwise expressly provided by statute." See 10 Del.C. § 4011(a). That legislative action is necessary in order to waive the protection of the statute was made clear in Fiat Motors of North American, Inc. v. Mayor and City Council of Wilmington, Del.Supr., 498 A.2d 1062 (1985). There the Delaware Supreme Court held that municipalities are without power to waive the immunity and that the purchase of liability insurance therefore did not result in such a waiver. Id., at 1067-68. Plaintiff asks this Court to limit the Fiat Motors holding to instances in which municipalities purchase liability insurance. The Court can find no basis for so holding.
The County and Municipal Tort Claims Act is an extension of the doctrine of sovereign immunity. Sovereign immunity may be waived only by an act of the General Assembly. See Shellhorn & Hill, Inc. v. State, Del.Supr., 187 A.2d 71, 74 (1962). Volunteer fire companies, as well as municipalities, are considered to be government entities under the statute, and, as such, are powerless to effect a waiver on their own. Consequently the existence of liability insurance cannot be construed as a waiver of Talleyville's statutory protections under the Act.
Plaintiff finally seeks to have the Act declared unconstitutional on the ground that it violates the equal protection clause *25 of the federal constitution and Article I, § 9 of the Delaware Constitution.
Plaintiff's equal protection argument is essentially that the Act creates two classes of plaintiffs those suing private tortfeasors and those suing tortfeasors protected by the statutory immunity that receive distinctly different treatment in the courts. No rational basis exists, contends the plaintiff, to support the differing treatment.
The equal protection clause requires that, in the absence of a suspect classification or fundamental right, legislative classification bear a rational relationship to a legitimate state purpose. Cheswold Volunteer Fire Company v. Lambertson Construction Company, Del. Supr., 489 A.2d 413, 415 (1984). A fundamental right has been defined as a right that is guaranteed either explicitly or implicitly by the constitution. San Antonio Independent School District v. Rodriguez, 411 U.S. 1, 33-34, 93 S. Ct. 1278, 1296-1297, 36 L. Ed. 2d 16 (1973). This Court is aware of no constitutional provision, state or federal, guaranteeing the individual's right to sue the State. Consequently the Court will sustain the statute so long as the classification scheme is rationally related to a legitimate legislative objective.
The legislative intent in enacting the County and Municipal Tort Claims Act may be gleaned from the preamble to the statute. There the General Assembly states that the provision of vital local services would be jeopardized were counties and municipalities subject to tort liability, and that the cost of liability insurance, when obtainable, "has reached proportions unanticipated by local governments as a result of the multiplicity of lawsuits filed against local governments in recent years." Act of July 5, 1979, ch. 124, 62 Del. Laws 286, 286 (preamble). The Court is satisfied that the continued provision of local services and the maintenance of fiscal stability are legitimate state interests that support the enactment of an immunizing statute. The Court is also satisfied that the widespread impact tort liability might have were governmental entities subject to suit justifies the legislative classification scheme created by the statute. Accordingly, the Court concludes that the County and Municipal Tort Claims Act does not violate the equal protection guarantee of the federal constitution.
Plaintiff also contends that the Act's immunity provisions deny him a remedy in derogation of Article I, § 9 of the Delaware Constitution.[4] That provision does not, however, absolutely guarantee a remedy for every wrong done an individual. Delaware courts have construed this provision to establish the doctrine of sovereign immunity under which the State is shielded from suit unless the General Assembly by legislative act waives the protection. See Wilmington Housing Authority v. Williamson, Del.Supr., 228 A.2d 782, 786 (1967); Shellhorn & Hill, Inc. v. State, Del.Supr., 187 A.2d 71, 73 (1962). The last phrase in the provision, which states that "[s]uits may be brought against the State, according to such regulations as shall be made by law", indicates that the framers intended to give to the General Assembly the ability to choose the instances in which the State may be held liable for its conduct and the manner in which such suits may be brought. The Act, as a manifestation of that choice, is not inconsistent with the framer's design or the constitutional language. Accordingly, the statute does not violate the provision.
For the foregoing reasons, summary judgment must be granted as to New Castle County and the Talleyville Fire Company, and denied as to the named county paramedics.
*26 II. PROFESSIONAL'S MOTION FOR SUMMARY JUDGMENT
Defendant Professional Ambulance Service, Inc. seeks summary judgment on the ground that plaintiff has failed to set forth specific facts showing that there is a genuine issue for trial.
Under Superior Court Civil Rule 56(e), bare allegations contained in the pleadings that are unsupported by specific facts are insufficient to withstand a summary judgment motion. The rule provides in pertinent part:
When a motion for summary judgment is made and supported as provided in this Rule, an adverse party may not rest upon the mere allegations or denials of his pleading, but his response, by affidavits or as otherwise provided in this Rule, must set forth specific facts showing that there is a genuine issue for trial. If he does not so respond, summary judgment, if appropriate, shall be entered against him.
Consistent with this rule, the Delaware Supreme Court has explained that when a motion for summary judgment is supported by a showing that there are no material issues of fact, the burden shifts to the non-moving party to demonstrate that there are material issues of fact. Moore v. Sizemore, Del.Supr., 405 A.2d 679, 681 (1979). Where the non-moving party fails to carry this burden, summary judgment is appropriate.
The record shows that once plaintiff was transported across the river by the paramedics and fire department personnel, he was placed in Professional's ambulance and taken to the hospital. Notwithstanding his complaint, in which it is alleged that the defendants were negligent and/or guilty of wanton conduct in their rescue efforts in the improper use of the ambulance, plaintiff has set forth no specific facts in support of his allegations against Professional. Plaintiff has therefore failed to carry his burden under Rule 56(e) and Moore v. Sizemore, supra. Accordingly, Professional is entitled to judgment as a matter of law.
III. CITY'S MOTION FOR SUMMARY JUDGMENT
The City defendants assert that they are entitled to summary judgment on the ground that plaintiff failed to comply with the notice requirement set forth in 10 Del.C. § 8124. That statute provides:
No action, suit or proceeding shall be brought or maintained against the Mayor and Council of Wilmington for damages on account of physical injuries, death or injury to property by reason of the negligence of the Mayor and Council of Wilmington or any of its departments, officers, agents or employees thereof, unless the person by or on behalf of whom such claim or demand is asserted shall, within one year from the happening of such injury, notify the Mayor in writing of the time, place, cause and character of the injuries sustained.
Plaintiff concedes that he missed the one year notice deadline, but nevertheless maintains that the section is not applicable to claims based on wanton misconduct, that the statute does not bar plaintiff's suit because the City suffered no prejudice, and that the statute is unconstitutional.
This Court knows of no decision in this State which stands for the proposition that § 8124 is inapplicable where a plaintiff alleges gross negligence or willful or wanton misconduct on the part of city defendants. The intent ascribed to the legislature in enacting this statute belittles the argument. Designed to inform the City of Wilmington of the details of a claim within one year of the "happening" of an injury, see City of Wilmington v. Spencer, Del.Supr., 391 A.2d 199, 203 (1978), the statute has no purpose in distinguishing between degrees of negligence. Indeed the notice requirement could be easily circumvented by parties filing untimely claims were its applicability dependent upon the degree of negligence pleaded by the plaintiff. In light of its purpose, the Court holds that § 8124 applies regardless of the degree of negligence alleged.
Plaintiff's argument that § 8124 is inapplicable absent a showing of prejudice *27 by the City is equally without merit. Neither the statutory language nor its purpose warrant imposition of such a condition, and this Court has been directed to no Delaware decision calling for such an analysis in applying the provision.
Plaintiff next challenges the constitutionality of the notice requirement under the equal protection clause of the federal constitution. The theory behind his challenge is that the provision is essentially a "special" one year statute of limitations applicable only to victims of Wilmington tortfeasors. Section 8124, it is argued, treats victims of Wilmington tortfeasors differently from 10 Del.C. § 8119, which provides for a two year statute of limitations and is applicable to victims of all other tortfeasors. Plaintiff contends that there is no rational basis for this difference in treatment.
The Court has reviewed the appropriate authorities and holds that the minimum scrutiny standard applies to test the constitutionality of the notice provision here at issue. This conclusion has been reached by a majority of the courts considering the issue. See generally McQuillan, Municipal Corporations § 53.152, at 729-35 (3d ed. 1978); Note, Notice of Claim Provisions: An Equal Protection Perspective, 60 Cornell L.Rev. 417, 436-39 (1975). Accordingly the Court will sustain the provision so long as a rational relationship can be shown to exist between the classificatory scheme and the legislature's objectives in enacting the statute.
Plaintiff contends that no rational basis exists for the difference in treatment, and cites several decisions in which similar statutes have been struck down on equal protection grounds.[5] A majority of jurisdictions have reached a contrary conclusion, however, and have sustained the constitutionality of these laws on a variety of legislative purposes.[6] The Delaware Supreme *28 Court has indicated that the statute is designed to notify the City of Wilmington of the details of a claim within one year of an accident causing injury. City of Wilmington v. Spencer, supra, at 203. The Court is satisfied that the differences between governmental and nongovernmental tortfeasors warrants specialized treatment where the City of Wilmington may incur liability for tortious conduct. Requiring prompt notice of a claim against the City facilitates fiscal planning and decreases the chance of a recurring injury by alerting officials to the existence of dangerous conditions. These effects are of citywide importance and are understandably within the concerns of the Delaware Legislature. Accordingly, this Court finds that a rational relationship exists that is sufficient to support the differing treatment accorded victims of Wilmington's torts and that the equal protection clause is therefore not offended.
Finally, plaintiff argues that enforcement of § 8124 constitutes a denial of a remedy in derogation of Article I, § 9 of the Delaware Constitution. For the reasons set forth in Part I of this opinion, the Court finds that § 8124 does not violate the provision.
IV. CONCLUSIONS
For the reasons set forth above, summary judgment is hereby granted to defendants New Castle County, Talleyville Fire Company, and the Mayor and Council of Wilmington, together with the named city fire department personnel. Summary judgment is denied with respect to the named New Castle County paramedics.
IT IS SO ORDERED.
NOTES
[1] The relevant provisions read as follows:
§ 4010. Definitions.
As used in this subchapter, unless the context otherwise indicates, the following words shall have the following meanings:
(1) "Employee" means a person acting on behalf of a governmental entity in any official capacity, whether temporarily or permanently, and whether with or without compensation from local, state or federal funds, including elected or appointed officials, volunteer firefighters and rescue squad members where the rescue squad receives full or partial financial support from political subdivisions or from the State, but the term "employee" shall not mean a person or other legal entity acting in the capacity of an independent contractor under contract to the governmental entity.
(2) "Governmental entity" means any municipality, town, county, administrative entity or instrumentality created pursuant to Chapter 8 of Title 22 or Title 9, any municipality created by a special act of the General Assembly, any housing authority created pursuant to Chapter 43 of Title 31, any parking authority created pursuant to Chapter 5 of Title 22 and all registered volunteer fire companies and volunteer rescue squads.
§ 4011. Immunity from suit.
(a) Except as otherwise expressly provided by statute, all governmental entities and their employees shall be immune from suit on any and all tort claims seeking recovery of damages. That a governmental entity has the power to sue or be sued, whether appearing in its charter or statutory enablement, shall not create or be interpreted as a waiver of the immunity granted in this subchapter.
* * * * * *
(c) An employee may be personally liable for acts or omissions causing property damage, bodily injury or death in instances in which his or her governmental entity is immune under this section, but only for those acts which were not within the scope of employment or which were performed with wanton negligence or willful and malicious intent. § 4012. Exceptions to immunity.
A governmental entity shall be exposed to liability for its negligent acts or omissions causing property damage, bodily injury or death in the following instances:
(1) In its ownership, maintenance or use of any motor vehicle, special mobile equipment, trailer, aircraft or other machinery or equipment, whether mobile or stationary.
* * * * * *
[2] The statute reads in pertinent part as follows:
§ 6801. Persons rendering emergency care exempt from liability; Advanced Life Support Standards Committee.
* * * * * *
(b) Any emergency medical care attendant or technician possessing a valid certificate issued by authority of the State Fire Prevention Commission, or a duly authorized representative thereof, who in good faith and without remuneration from any injured or ill person, renders emergency care or assistance to any injured or ill person, whether at the scene of an accident, fire or any other place, or while transporting such injured or ill person to, from or between any hospital, medical facility, medical clinic, doctors's office or other similar or related medical facility, shall not be liable for any civil damages for acts or omissions resulting from the rendering of such emergency care, treatment or assistance, except acts or omissions amounting to gross negligence or willful or wanton misconduct.
[3] See note 1.
[4] Article I, § 9 provides:
All courts shall be open; and every man for an injury done him in his reputation, person, moveable or immovable possessions, shall have remedy by the due course of law, and justice administered according to the very right of the cause and the law of the land, without sale, denial, or unreasonable delay or expense. Suits may be brought against the State, according to such regulations as shall be made by law.
[5] See Reich v. State Highway Dept., 386 Mich. 617, 194 N.W.2d 700, 702 (1972); Turner v. Staggs, 89 Nev. 230, 510 P.2d 879, 883, cert. denied, 414 U.S. 1079, 94 S. Ct. 598, 38 L. Ed. 2d 486 (1973); Carson v. Maurer, 120 N.H. 925, 424 A.2d 825, 834-35 (1980); Hunter v. North Mason High School, 85 Wash.2d 810, 539 P.2d 845, 850-51 (1975); O'Neil v. City of Parkersburg, 160 W.Va. 694, 237 S.E.2d 504, 508-09 (1977).
[6] See, e.g., Dias v. Eden Township Hosp. Dist., 57 Cal. 2d 502, 20 Cal. Rptr. 630, 631, 370 P.2d 334, 335 (1962) (statute requiring notice prior to claim against hospital not arbitrary or unreasonable because public agencies generally are proper subject for legislative classification); Fritz v. Regents of the Univ. of Colo., 196 Colo. 335, 586 P.2d 23, 25 (1978) (fostering prompt investigation, repair of dangerous conditions, quick settlement of claims, and preparation of fiscal planning are legitimate state interests); Crumbly v. City of Jacksonville, 102 Fla. 408, 138 So. 486, 489 (sufficient distinction between municipal corporations and private parties provides reasonable basis for legislative classification), aff'g on rehearing, 102 Fla. 4080, 135 So. 885 (1931); Newlan v. State, 96 Idaho 711, 535 P.2d 1348, 1351 (opportunity to negotiate amicable accord, timely investigation, and preparation for defense constitute legitimate reasons for notice statute), appeal dismissed, 423 U.S. 993, 96 S. Ct. 419, 46 L. Ed. 2d 367 (1975); King v. Johnson, 47 Ill. 2d 247, 265 N.E.2d 874, 876 (1970) (notice statute reasonably related to legislative purpose of imposing tort liability on all local governmental entities on fair and orderly basis); Batchelder v. Haxby, 167 Ind.App. 82, 337 N.E.2d 887, 889 (1975) (consideration of differences between governmental and nongovernmental tortfeasors, including the source of funds used to compensate injured parties, constitutes reasonable basis for classification); Lunday v. Vogelmann, Iowa Supr., 213 N.W.2d 904, 908 (1973) (provision of method of prompt communication of circumstances for investigation not patently arbitrary and bears rational relationship to classification); Campbell v. City of Lincoln, 195 Neb. 703, 240 N.W.2d 339, 343 (1976) (purpose of affording political subdivisions with prompt notice of accident and injury in order to facilitate prompt investigation and intelligent consideration of claim sufficient justification for classification); Reirdon v. Wilburton Bd. of Educ., Okla.Supr., 611 P.2d 239, 240 (1980) (legitimate state interest rationally furthered by notice statute which fosters prompt investigation while evidence is still fresh, affords opportunity to repair dangerous conditions, encourages settlement, and allows for fiscal planning to meet possible liability); Brown v. Portland School Dist. No. 1, 48 Or.App. 571, 617 P.2d 665, 668 (1980) (prompt investigation of merits, obtaining liability insurance, and adjusting claims are reasonable to support statutory classification), rev'd on other grounds, 291 Or. 77, 628 P.2d 1183 (1981); Budahl v. Gordon & David Assoc., S.D.Supr., 287 N.W.2d 489, 492 (1980) (opportunity to investigate while evidence is fresh, prepare defense, evaluate merits of claim, protect against nuisance claims, facilitate prompt repairs, allow for budgeting of claims, and ensure officials are aware of duty to act are all proper reasons for increased protection); Sears v. Southworth, Utah Supr., 563 P.2d 192, 193 (1977) (opportunity to promptly investigate and remedy defects, avoid unnecessary litigation, and minimize difficulties arising from changes in administration all constitute rational basis for classification); Yotvat v. Roth, 95 Wis. 2d 357, 290 N.W.2d 524, 531 (1980) (notice statute has legitimate objective of protecting public funds from unwarranted disbursement by giving state timely opportunity to investigate).
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820 S.W.2d 267 (1991)
307 Ark. 324
Eloise HONOR, Appellant,
v.
Terry YAMUCHI, Director of the Arkansas Department of Human Services, in his Official Capacity Only, and the Division of Aging and Adult Services, Appellee.
No. 91-40.
Supreme Court of Arkansas.
November 25, 1991.
*268 David J. Manley, Little Rock, Dottie Gray, Monticello, for appellant.
C. Norton Bray, Little Rock, for appellee.
HAYS, Justice.
On August 6, 1990, the Department of Human Services (DHS) filed a petition in the Probate Court of White County pursuant to Ark.Code Ann. § 5-28-101 (1987) for temporary and long-term protective custody of Eloise Honor, an alleged endangered adult suffering from mental and physical ailments which rendered her unable to care for herself. By ex parte order the probate court found probable cause for protective custody, ordered temporary custody and scheduled a hearing on long-term custody for August 20. Ms. Honor was given notice of the hearing and of her right to be present, to effective assistance of counsel, to cross-examine witnesses, and to present evidence in her own behalf.
At the hearing for long-term protective custody Ms. Honor was present but was not represented by counsel. The probate judge found that she lacked the capacity to care for herself, authorized DHS to place her in an appropriate facility, appointed Mr. David Manley as attorney ad litem and ordered judicial review within three months.
Mr. Manley promptly filed a petition in the White County Chancery Court seeking injunction and declaratory relief to return Ms. Honor to her home based on a denial of due process. DHS moved to dismiss on grounds of sovereign immunity, that neither Ark.Code Ann. § 5-28-301 (1987) nor the due process clause of the Fourteenth Amendment required the appointment of counsel and that Ms. Honor had expressly waived counsel.
*269 That matter was heard on November 1 and the chancellor found that Ms. Honor had waived counsel at the August 20 hearing in probate court. Ms. Honor's petition was denied, as was the motion of DHS, however, the chancellor ruled that Ms. Honor revoked her waiver of counsel and ordered her release and the termination of protective custody.
Ms. Honor brings the matter to this court on four points of appeal: 1. The chancellor erred in holding that § 5-28-101 does not require the appointment of counsel for her; 2. The chancellor erred in holding that neither art. II, sections 2, 8 and 21 of the Arkansas Constitution nor the due process clause of the Fourteenth Amendment require that Ms. Honor be represented by counsel; 3. The chancellor erred in finding that Ms. Honor waived her right to counsel at the hearing; and 4. The chancellor erred in finding that Ms. Honor was not a prevailing party for purposes of an attorney's fee pursuant to 42 U.S.C. § 1988 (1981 & Supp.1991). By cross appeal DHS argues that the chancellor erred in not granting its motion to dismiss.
Addressing the appellant's points first, we agree that the chancellor erred in holding her right to due process was not violated by the failure to require that she either be represented by counsel, or make an intelligent waiver of that right. Appellant argues that an attorney is required implicitly by the language of the Adult Abuse Act, §§ 5-28-301 to 5-28-305 (1987), and by the Arkansas and United States Constitutions. We will deal with the constitutional requirement first.
DHS does not dispute Ms. Honor's right to an attorney at the long-term care hearing if she so desired. Ms. Honor argues, however, that not only does she have a right to an attorney in theory, but if that right is to be meaningful, more is required of the trial court in the implementation of that right than occurred here. She argues that in connection with a proceeding for long-term care of an abused adult the court must determine whether the individual has the desire and ability to retain counsel, and if indigent, to see that an attorney is appointed, and if no attorney is retained or appointed, the court must be satisfied the subject has knowingly and intelligently waived the right to an attorney. These factors correspond to criminal cases where defendants face the possibility of incarceration. See Ark.R.Crim.P. 8.2 and 8.3. We believe they are equally applicable here, there being no material distinction between procedures aimed at the curtailment of physical liberty whether criminal or civil.
The point is well stated in Project Release v. Prevost, 722 F.2d 960 (2nd Cir. 1983), in its discussion of civil commitment to a mental institution:
Involuntary civil commitment to a mental institution has been recognized as "a massive curtailment of liberty," Vitek v. Jones, 445 U.S. 480, 491-92, 100 S. Ct. 1254, 1262-63, 63 L. Ed. 2d 552 (1980); Humphrey v. Cady, 405 U.S. 504, 509, 92 S. Ct. 1048, 1052, 31 L. Ed. 2d 394 (1972), which, because it may entail indefinite confinement, could be a more intrusive exercise of state power than incarceration following a criminal conviction. See Colyar v. Third Judicial District Court, 469 F. Supp. 424, 429 (D.Utah 1979) (citing Humphrey v. Cady, 405 U.S. at 509, 92 S.Ct. at 1052). Civil commitment for any purpose requires due process protection. See Vitek, 445 U.S. at 491-92, 100 S.Ct. at 1262-63; Addington v. Texas, 441 U.S. 418, 425, 99 S. Ct. 1804, 1808, 60 L. Ed. 2d 323 (1979); O'Connor v. Donaldson, 422 U.S. 563, 580, 95 S. Ct. 2486, 45 L. Ed. 2d 396 (1975) (Burger, C.J., concurring). Indeed, "[tjhere can be no doubt that involuntary commitment to a mental hospital, like involuntary confinement of an individual for any reason, is a deprivation of liberty which the State cannot accomplish without due process of law." O'Connor, 422 U.S. at 580, 95 S.Ct. at 2496 (Burger, C.J., concurring). Whether the state purports to act pursuant to a parens patriae interest in promoting the welfare of the mentally ill, see Rogers v. Okin, 634 F.2d 650, 657-59 (1st Cir. 1980), vacated and remanded sub nom. Mills v. Rogers, 457 U.S. 291, 102 S. Ct. 2442, 2447, 73 L. Ed. 2d 16 (1982), or *270 pursuant to its police power interest in preventing violence and maintaining order, 634 F.2d at 654-57; 102 S.Ct. at 2447, the state, in so acting may not curtail or deny Fourteenth Amendment substantive or procedural due process protections in exercising such powers. See O'Connor, 422 U.S. at 580, 95 S.Ct. at 2496; Specht v. Patterson, 386 U.S. 605, 608, 87 S. Ct. 1209, 1211, 18 L. Ed. 2d 326 (1967). Diminished capacity alone cannot serve to undermine protections afforded the individual's liberty interest in this area.
Project Release, at 971.
The court continued:
Recent cases indicate that a right to counsel exists where an individual's physical liberty is threatened by the state's action. See Lassiter v. Department of Social Services, 452 U.S. 18, 25-27, 101 S. Ct. 2153, 2158-2159, 68 L. Ed. 2d 640 (1981); see also Gagnon v. Scarpelli, 411 U.S. 778, 790, 93 S. Ct. 1756, 1763, 36 L. Ed. 2d 656 (1973) (probation revocation hearings); In re Gault, 387 U.S. 1, 36-37, 87 S. Ct. 1428, 1448, 18 L. Ed. 2d 527 (1967) (juvenile delinquency proceedings); cf. Vitek, 445 U.S. at 495-97,100 S.Ct. at 1264-66 (prisoner challenging attempted transfer to mental institution). Some courts have explicitly recognized a right to counsel in civil commitment proceedings. See, e.g., Heryford v. Parker, 396 F.2d 393, 396 (10th Cir.1968); Dixon v. Attorney General, 325 F. Supp. 966, 974 (M.D.Pa.1971); In re Hop, 29 Cal. 3d 82, 623 P.2d 282, 289, 171 Cal. Rptr. 721, 728 (1981); In re Fisher [68 O.O.2d 43,], 39 Ohio St. 2d 71, 72, 313 N.E.2d 851, 858 (1974); cf. Thornton v. Corcoran, 132 U.S.App.D.C. 232, 407 F.2d 695, 701 (1969) (matter considered in context of mental examination requested when accused raises insanity issue; counsel not required at psychiatric staff conference); United States v. Albright, 388 F.2d 719, 726 (4th Cir.1968) (when mental examination requested by prosecution, counsel not required at psychiatric interview). A right to counsel in civil commitment proceedings may be gleaned from the Supreme Court's recognition that commitment involves a substantial curtailment of liberty and thus requires due process protection. Addington, 441 U.S. at 425-27, 99 S.Ct. at 1808-10.
Project Release, at 976.
However, not only must the right to an attorney be recognized in civil proceedings where physical liberty is in jeopardy, it is necessary that the right be recognized in a meaningful way so that constitutional safeguards are in fact implemented. This is discussed in Heryford v. Parker, 396 F.2d 393 (10th Cir.1968):
Where, as in both proceedings for juveniles and mentally deficient persons, the state undertakes to act in parens patriae, it has the inescapable duty to vouchsafe due process, and this necessarily includes the duty to see that a subject of an involuntary commitment proceeding is afforded the opportunity to the guiding hand of legal counsel at every step of the proceedings, unless effectively waived by one authorized to act in his behalf.
... Nor is it sufficient that the Wyoming statute permissively provides that the proposed patient "may be represented by counsel" Fourteenth Amendment due process requires that the infirm person, or one acting in his behalf, be fully advised of his rights and accorded each of them unless knowingly and understandingly waived. [Our emphasis.]
To the same effect see In re Fisher, 68 0.0.2d 43, 39 Ohio St2d 71, 313 N.E.2d 851 (1974).
The safeguards for right to counsel in criminal cases were outlined recently in Kincade v. State, 303 Ark. 331, 796 S.W.2d 580 (1990):
The Sixth and Fourteenth Amendments to the Constitution of the United States guarantee that any person brought to trial in any state or federal court must be afforded the fundamental right to assistance of counsel before he can be validly convicted and punished by imprisonment. Before an accused manages his own defense he must knowingly and intelligently waive the right to counsel. Every *271 reasonable presumption must be indulged against the waiver of fundamental constitutional rights. The burden is on the government to clearly demonstrate a waiver of counsel. A trial court must inquire of an accused's ability to retain counsel, and if the accused is an indigent, counsel must be appointed for him. [Citations omitted.]
Nothing in this record reflects that these rights were affected. While Ms. Honor was given a notice of the hearing required by § 5-28-304 of the Adult Abuse Act, which included the statement that she had the right to "effective assistance of counsel," nothing else was done with regard to that right. When Ms. Honor attended the hearing she was not notified of her right at that time, nor was any inquiry made as to whether counsel had been retained, was desired, or whether Ms. Honor could afford an attorney. On the strength of what is before us we cannot conclude that an informed waiver occurred at this hearing, nor was Ms. Honor even asked if she chose to waive her right to counsel. The most that could be said of the proceedings is that she showed a passive acquiescence in general, but there is simply no affirmative showing of a waiver of counsel.
Nor can we agree with the chancellor's finding of a waiver of counsel where he also found long-term protective custody to be appropriate, which requires a finding by the trial court that:
1) the person is lacking the capacity to comprehend the nature and consequence of remaining in a situation that presents an imminent danger to his health or safety;
2) the individual is unable to provide for his own protection from abuse or neglect; and
3) the court finds clear and convincing evidence that the individual to be placed is in need of placement as provided in this chapter.
See § 5-28-305. To determine that longterm custody is appropriate because the individual lacks the capacity to comprehend impending dangers, finding at the same time there has been a knowing and intelligent waiver, is patently inconsistent. Accordingly, we agree that the trial court erred in holding that appellant's right to counsel was not violated.
As to the contention of Ms. Honor that the Adult Abuse Act itself requires the safeguards we have just discussed, there is no need to address the issue, in view of our holding they are required on constitutional grounds.[1]
As the appellant is now determined to be the prevailing party in this case, the chancellor should determine the award of attorneys' fees pursuant to 42 U.S.C. § 1988.
CROSS APPEAL
On cross appeal, DHS argues the trial court erred in failing to dismiss the § 1983 action against both the Department of Human Services, and its director, Terry Yamauchi, in his official capacity. Citing to Will v. Michigan Department of State Police, 491 U.S. 58, 109 S. Ct. 2304, 105 L. Ed. 2d 45 (1989), appellees argue that both the state agency and the director are immune from suit.
We agree that neither the state nor a state agency can be sued under § 1983, see Will v. Michigan, supra, and the case against the department should have been dismissed on that basis. However, this is only a matter of form in this case as the director of the agency can be sued in his official capacity where, as here, only injunctive relief is sought.
Of course a state official in his or her official capacity when sued for injunctive relief, would be a person under § 1983 because `official capacity actions for prospective *272 relief are not treated as actions against the state.' [Citations omitted.]
Will v. Michigan, 109 S.Ct. at 2311, n. 10.
Appellees also argue the trial court failed to dismiss the case on the ground of an adequate remedy at law under Ark. R.Crim.P. 60(b) or under a writ of habeas corpus. The appellees however failed to make a motion to transfer which was the proper remedy for this objection. See Home Brothers, Inc. v. Ray Lewis Corp., 292 Ark. 477, 731 S.W.2d 190 (1987); Stolz v. Franklin, 258 Ark. 999, 531 S.W.2d 1 (1976).
Furthermore, appellant's request for relief included future injunctive relief as well as immediate relief, relief not available under the remedies at law.[2] Appellant requested that an injunction issue against the director to prohibit the identical action against her unless constitutional safeguards were in place. Regardless of whether the appellant is entitled to bring an action at law, the mere existence of that right does not deprive the equity court of jurisdiction unless the legal remedy is clear, adequate and complete. Spears v. Rich, 241 Ark. 15, 405 S.W.2d 929 (1966).
Reversed on direct appeal, affirmed on cross appeal.
NOTES
[1] We note that there was no request by appellant to declare the Adult Abuse Act unconstitutional in this case. Rather, her argument is only that although not expressly required by the act, these requirements are implicity recognized. See 16 Am.Jur.2d, Constitutional Law § 225 (1979); and to the same effect see Hardware Mutual Casualty Company v. Maxey, 212 Ark. 161, 205 S.W.2d 29 (1947).
[2] Appellant's original complaint requested injunctive relief for appellant's release but no request for future injunctive relief. However at the hearing on the motion to dismiss, appellant's attorney in discussing this matter in effect, made an amendment to the pleadings, with no objection from appellees at that time. Nelther is there any objection on this point on appeal.
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820 S.W.2d 298 (1991)
36 Ark.App. 202
DEPARTMENT OF HUMAN SERVICES ex rel. Tamara D. DAVIS, Appellant,
v.
Steve SEAMSTER, Appellee.
No. CA 91-107.
Court of Appeals of Arkansas, En Banc.
December 18, 1991.
G. Keith Griffith, Fort Smith, for appellant.
Eddie N. Christian, Fort Smith, for appellee.
DANIELSON, Judge.
This case presents the question of whether a paternity action brought by the Department of Human Services on behalf of a child born out of wedlock is barred by the doctrine of res judicata or collateral estoppel after a previous paternity action brought by the mother, without joining the child as a party, resulted in a finding of non-paternity. We attempted to certify this case to the Arkansas Supreme Court under Supreme Court and Court of Appeals Rule 29(4)(b) as one involving an issue of significant public interest, but certification was refused.
Tamara Davis was born out of wedlock to Pamela Davis on April 12, 1978. Pamela Davis brought an action against Steve Seamster in the Sebastian County Court, alleging that he was Tamara's father. On *299 May 15, 1979, the county judge denied Pamela's complaint and found that she had failed to establish that appellee was the father of the child. From this judgment, which is included in the record in this appeal, it is apparent that Tamara was not a party to the action.
On March 13, 1990, the Department of Human Services, ex rel. Tamara Davis, brought a complaint against appellee, seeking support for Tamara and a declaration that appellee is Tamara's father. In his answer, appellee affirmatively pled res judicata, relying on the 1979 judgment by the Sebastian County Court.
In a letter opinion dated November 6, 1990, the chancellor stated:
It is obvious to me that the issue of whether or not Steve Seamster is the father of Tamara Davis has been litigated, regardless of the parties in the suit. Accordingly, the Court finds that the issue of paternity of Tamara Davis has been adjudicated and that this matter is now res judicata.
An order finding that this issue is res judicata was entered on November 27, 1990. From that order, comes this appeal.
In its brief, DHS argues that res judicata should not bar this action because Tamara and DHS were not parties or in privity with parties to the previous county court action. DHS also argues that Tamara's interests in establishing paternity are not identical with those of her mother. Appellee argues that this case simply raises the same issue litigated before and that the doctrine of res judicata should apply even if the parties are not the same or in privity with the parties in the 1979 action.
Under the doctrine of res judicata, a valid and final judgment rendered on the merits by a court of competent jurisdiction bars another action by the plaintiff or his privies against the defendant or his privies on the same claim or cause of action. Toran v. Provident Life & Accident Ins. Co., 297 Ark. 415, 419, 764 S.W.2d 40, 42 (1989). The doctrine of collateral estoppel or issue preclusion bars the relitigation of issues of law or fact actually litigated by the parties in the first suit. Id.
It has been generally recognized that a husband and wife are estopped from later raising paternity as an issue where there has been a prior paternity determination in a divorce or annulment decree. See Benac v. State, 34 Ark.App. 238, 239, 808 S.W.2d 797, 798-99 (1991). In McCormac v. McCormac, 304 Ark. 89, 90-91, 799 S.W.2d 806, 807 (1990), the supreme court held that a mother could not, following a divorce decree awarding custody of a child, fixing child support, and setting visitation rights, relitigate the issue of paternity. Therefore, there is no question that, in the courts of this state, the parents of the child are bound by the doctrine of res judicata when the issue of paternity has been litigated in a prior action between them. On the other hand, it has been held that a finding in regard to a child's paternity in a divorce or annulment proceeding is not binding on the child in any subsequent action unless the child was a party to the prior proceeding. See Shatford v. Shatford, 214 Ark. 612, 217 S.W.2d 917 (1949).
Arkansas Code Annotated § 9-10-104 (Repl.1991) provides that a petition for establishment of paternity may be filed by (1) a biological mother; (2) a putative father; (3) a person for whom paternity is not presumed or established by court order; or (4) the Arkansas Department of Human Services. This statute, however, was not in effect when Pamela Davis brought the first action against appellee to establish his paternity of Tamara. In that action, Pamela complied with the law then in effect by filing the complaint as provided by Ark. Stat.Ann. § 34-702 (Repl.1962) which required the mother of the child to make the complaint. Under Ark.Stat.Ann. § 34-704 (Repl.1962), the action could be revived in the name of the child if the mother died before the final order. The paternity statutes then in effect did not otherwise provide for the child to be listed as a named plaintiff. Nevertheless, there was no doubt that such an action was brought on behalf of the child:
The statutes recognize only one fundamental reason for a bastardy action, the recovery of support money for the infant. *300 In some instances the mother might not see fit to bring an action at once; she might, for instance, be selfsupporting. But the child is the real party in interest and should not be deprived of needed support by the mother's failure to bring an action.
Dozier v. Veasley, 272 Ark. 210, 211, 613 S.W.2d 93, 94 (1981).
Hence, Pamela brought the original paternity action against appellee in compliance with the statutes then in effect. It is also clear that she brought that action to obtain support for Tamara. We therefore cannot say that the chancellor erred in finding this action, which was also brought to obtain support for Tamara, to be barred by res judicata. See Guziejka v. Desgranges, 571 A.2d 32 (R.I.1990); T.R. v. A.W., 470 N.E.2d 95 (Ind.Ct.App.1984).
We point out, however, that the paternity statutes have been extensively rewritten since 1979 and that the statutes currently in effect specifically provide that paternity actions may be filed by the child as a named party. The current statutes also recognize that, in some instances, the child's rights in such matters may be different from those of the mother. Accordingly, our decision in the case at bar necessarily applies only to paternity determinations made under the statutes in effect when the 1979 decision was rendered.
Affirmed.
MAYFIELD, J., concurs.
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844 S.W.2d 373 (1992)
40 Ark.App. 92
Alishisa OFOCHEBE, Appellant,
v.
STATE of Arkansas, Appellee.
No. CA CR 91-333.
Court of Appeals of Arkansas, Division I.
December 2, 1992.
Terri Harris, Deputy Public Defender, Hot Springs, for appellant.
Gil Dudley, Asst. Atty. Gen., Little Rock, for appellee.
JENNINGS, Judge.
Alishisa Ofochebe was one of three drivers involved in a traffic accident in Garland County which caused two deaths. She was charged with and convicted of two counts of manslaughter and was sentenced to ten years on each count, with the sentences to run consecutively.
Appellant's counsel has now filed a nomerit brief stating that he "has examined the record of these proceedings and found *374 no reversible errors." Counsel's brief then discusses a list of "adverse rulings which could possibly support an appeal."
The procedure for the filing of a no-merit brief is governed by Anders v. California, 386 U.S. 738, 87 S. Ct. 1396, 18 L. Ed. 2d 493 (1967) and Rule 11(h) of the Rules of the Supreme Court. The test is not whether counsel thinks the trial court committed no reversible error, but rather whether the points to be raised on appeal would be "wholly frivolous." Anders, 386 U.S. at 744, 87 S. Ct. at 1400. Under Anders the appellate court is also required to make a determination "after a full examination of all the proceedings," whether the case is wholly frivolous. Similarly, Rule 11(h) permits the filing of a no-merit brief only when "the appeal is wholly without merit."
After examining the record we are not convinced that the appeal is wholly without merit or "so frivolous that it may be decided without an adversary presentation." Penson v. Ohio, 488 U.S. 75, 82, 109 S. Ct. 346, 350, 102 L. Ed. 2d 300 (1988). We need not and do not determine whether error was committed; we hold merely that some of the issues raised are not "wholly frivolous."
By way of example there exists in this case an issue under the United States Supreme Court's holding in Batson v. Kentucky, 476 U.S. 79, 106 S. Ct. 1712, 90 L. Ed. 2d 69 (1986). That issue clearly deserves an adversary presentation. Many of the other adverse rulings received by appellant were on evidentiary matters. Some of the points are wholly without merit. Others, however, are not so frivolous as to obviate the need for a full adversary presentation.
For the reasons stated, and pursuant to Anders v. California, counsel's motion to withdraw is denied, and the case is remanded for rebriefing in adversary form. A new briefing schedule is established to start December 2, 1992.
DANIELSON and ROGERS, JJ., agree.
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IN THE COURT OF APPEALS, THIRD DISTRICT OF TEXAS,
AT AUSTIN
NO. 3-91-236-CR
WINSTON KIRBY,
APPELLANT
vs.
THE STATE OF TEXAS,
APPELLEE
FROM THE DISTRICT COURT OF TRAVIS COUNTY, 331ST JUDICIAL DISTRICT
NO. 99,811, HONORABLE TOM BLACKWELL, JUDGE PRESIDING
This appeal is taken from an order revoking probation. On August 1, 1990, the
appellant entered a plea of not guilty to the offense of aggravated robbery as charged in the
indictment. In a bench trial the appellant was found guilty. Appellant's punishment was assessed
at ten years' imprisonment and a fine of one thousand dollars. The trial court, not having made
any finding as to the use or exhibition of a deadly weapon, suspended the imposition of the
sentence and placed the appellant on probation subject to certain conditions.
On April 8, 1991, after a hearing on the State's motion to revoke probation, the
trial court found at least six violations of the probationary conditions, revoked probation and
sentenced the appellant. Notice of appeal was given.
Appellant advances six points of error. First, appellant contends that the trial court
erred in overruling his "Motion to Suppress Conviction/Writ of Habeas Corpus," denying him the
right to appeal the underlying conviction of aggravated robbery prior to a hearing on the State's
motion to revoke probation. In the next four points of error, appellant attacks the underlying
conviction, claiming that the trial court failed to advise him of his right to appeal the aggravated
robbery conviction; that his trial counsel failed to give notice of appeal, depriving him of the
effective assistance of counsel; and that the evidence was insufficient, in two respects, to support
his conviction for aggravated robbery. In the sixth point of error, appellant argues that the trial
court abused its discretion in revoking probation because there was no showing at the revocation
hearing "that appellant was aware of the conditions of probation." We will affirm the order
revoking probation.
We shall consider the points of error in somewhat reverse order since the sixth
point is the only one dealing directly with the revocation of probation. Appellant's contention that
there was no showing that he was aware of the probationary conditions is raised for the first time
on appeal. No objection was offered at trial on this basis, and nothing is presented for review.
Lejune v. State, 538 S.W.2d 775, 780 (Tex. Crim. App. 1976). Further, the record shows that
the trial judge read to the appellant the conditions of probation at the time appellant was placed
on probation. A probation officer testified she saw appellant sign the conditions of probation, and
that she personally gave appellant a copy of those conditions. Also, at the revocation hearing, the
trial court took judicial notice, with the consent of appellant's counsel, of the court's records in
this cause, including the conditions of probation. That record shows that "Winston Kirby"
acknowledged receipt of a copy of the conditions of probation. The point of error is without
merit.
As a general rule, an appeal from an order revoking probation is limited to the
propriety of the revocation order and does not include a review of the original or underlying
conviction. Whetstone v. State, 786 S.W.2d 361, 363 (Tex. Crim. App. 1990); Hoskins v. State,
435 S.W.2d 825, 827 (Tex. Crim. App. 1967); Trcka v. State, 744 S.W.2d 677, 680 (Tex. App.
1988, pet. ref'd). However, the original or underlying judgment of conviction may be collaterally
attacked on appeal from a revocation order if fundamental error was committed. Dinnery v. State,
592 S.W.2d 343, 350 (Tex. Crim. App. 1980) (op. on reh'g); Huggins v. State, 544 S.W.2d 343,
350 (Tex. Crim. App. 1976); Smola v. State, 736 S.W.2d 265, 266 (Tex. App. 1987, no pet.).
Any complaint concerning the original judgment of conviction that can be raised in a post-conviction habeas corpus proceeding may also be raised on appeal from an order revoking
probation. Ramirez v. State, 486 S.W.2d 373, 374 (Tex. Crim. App. 1972); see also Dinnery,
592 S.W.2d at 350; Puckett v. State, 801 S.W.2d 188, 192 (Tex. App. 1990, pet. ref'd), cert.
denied ___ U.S. ___, 112 S. Ct. 606, 116 L. Ed. 2d 629 (1991). The type of error that may be
collaterally attacked is one that renders the proceedings absolutely void. Nonfundamental errors
are merely voidable; this type of error may require reversal if attacked on direct appeal, but may
not be collaterally attacked in the absence of a showing of harm. See Ex parte Shields, 550
S.W.2d 670, 675-76 (Tex. Crim. App. 1977); Trcka, 744 S.W.2d at 680.
In two points of error, appellant contends that the evidence is insufficient to support
his underlying conviction for aggravated robbery. These complaints cannot be raised for the first
time on appeal from a revocation of probation. The sufficiency of the evidence to sustain the
underlying conviction cannot be collaterally attacked in an appeal from an order revoking
probation. See Vaughn v. State, 608 S.W.2d 237 (Tex. Crim. App. 1980), Taylor v. State, 561
S.W.2d 492, 494 (Tex. Crim. App. 1978); Puckett, 801 S.W.2d at 191. Appellant's fourth and
fifth points of error are overruled.
In his second point of error, appellant urges that at the time he was placed on
probation following his conviction for aggravated assault, the trial judge did not advise him of his
right to appeal. A trial judge has the discretion but not the duty or responsibility to inform a
defendant of his right to appeal. Ex parte Axel, 757 S.W.2d 369, 374 (Tex. Crim. App. 1988).
Appellant does not allege or claim that he had no knowledge of his right of appeal at the time.
Further, the record contains a written waiver of the right of appeal, signed by the appellant and
his counsel and approved by the trial judge. The waiver acknowledges that appellant consulted
with his lawyer concerning his right to appeal, shows the lawyer advised appellant of his right to
appeal, and reflects that the trial judge found that appellant understood the consequences of his
waiver, that he intelligently and voluntarily waived the right of appeal, and that the trial court
accepted the waiver. This is not the type of error, if any error at all, that may be raised
collaterally attacking the original judgment of conviction on an appeal from an order revoking
probation. The second point of error is overruled.
In his third point of error, appellant collaterally attacks the original conviction,
contending that he was deprived of his right to effective assistance of counsel because his counsel
did not timely file a notice of appeal from the original conviction when he was placed on
probation. He claims that he is now entitled to an out-of-time appeal. It is true that claims of
ineffective assistance of counsel may be successfully raised in post-conviction habeas proceedings
under Tex. Code Crim. Proc. Ann. art. 1.07 (1977 & Supp. 1992). If this point can properly be
raised on an appeal from an order revoking probation, we observe that no objection on this basis
was offered in the trial court. In order to preserve error for review there must be a timely and
specific objection. Tex. R. App. P. Ann. 52(a) (Pamph. 1992). In raising this matter for the first
time on appeal from the revocation order, appellant makes no claim that he desired to appeal when
he was placed on probation and his counsel failed to heed his desires. The record in regard to this
contention is simply not developed. Appellant urges, however, our consideration of the
contention, notwithstanding the executed waiver of appeal discussed earlier.
In Ramirez v. State, 486 S.W.2d 373, 374 (Tex. Crim. App. 1972), it was held that
where it is shown that the underlying conviction was the outcome of a trial in which the accused
was denied counsel, the appellate court will review the denial of counsel on appeal from an order
revoking probation. Moreover, the trial court errs when it refuses to allow a defendant to
collaterally attack his underlying conviction at a revocation hearing on the basis of ineffective
assistance of counsel at the time of his conviction. Carter v. State, 61 S.W.2d 557 (Tex. Crim.
App. 1982). Since Carter had made an effort to make a showing of his ineffective assistance
claim, the appeal was abated for a hearing on the claim. Id.; cf. Warren v. State, 744 S.W.2d
614, 615 (Tex. Crim. App. 1988). Here, appellant was not without counsel at the time of the
underlying conviction as in Ramirez, nor did he claim at the time of the revocation hearing or
show or attempt to show ineffective assistance for the failure to give notice of appeal at the time
of his conviction. In addition to no claim or objection on the ground now urged, it must be
remembered that the complaint on appeal must comport with any objection at trial. Sterling v.
State, 800 S.W.2d 513, 521 (Tex. Crim. App. 1990), cert. denied, ___ U.S. ___, 111 S. Ct. 2816
(1991); Rezac v. State, 782 S.W.2d 869, 870 (Tex. Crim. App. 1990). Appellant did not
preserve any contention for review.
If it can be argued otherwise, appellant has not shown how the failure to give notice
of appeal, even putting the written waiver of appeal aside, has rendered trial counsel ineffective
under the two-pronged test of Strickland v. Washington, 466 U.S. 668 (1984). Under the
Strickland test, a defendant must affirmatively show (1) that counsel's performance was deficient
(not "reasonably effective") and (2) that there was prejudice (but for counsel's unprofessional
errors, the result of the proceeding would have been different). An isolated failure to object to
certain procedural mistakes or improper evidence or take certain procedural steps does not in and
of itself constitute ineffective assistance of counsel. See Ingham v. State, 679 S.W.2d 503, 509
(Tex. Crim. App. 1984). Even if the "reasonably effective assistance" test be applied, see Ex
parte Walker, 777 S.W.2d 427 (Tex. Crim. App. 1989), appellant's point of error still fails to
pass muster. The third point of error is overruled.
Lastly, we consider the initial point of error. Appellant contends that the visiting
trial judge, Judge Tom Blackwell, who did not preside at appellant's trial on the merits, erred in
overruling "appellant's motion to suppress conviction/writ of habeas corpus," denying him his
right to appeal the underlying conviction prior to the hearing on a motion to revoke his probation.
The "motion," filed after the motion to revoke probation and prior to the revocation hearing was
limited in its allegations. (1) It alleged only that after appellant's "conviction but before being
sentenced" (2) he involuntarily executed a waiver of appeal, having been coerced by an ultimatum
of waiving appeal in return for "ten years probation" or being sentenced to ten years in prison.
While the "motion" does not so allege, appellant argues that the coercer was the original trial
judge. The "motion's" prayer requested that the waiver of appeal be found to be involuntary, that
the admission of the "conviction, judgment and sentence" be suppressed at the revocation hearing
and appellant be allowed to exercise his right of appeal "in this cause."
Appellant does not explain the nature or office of a "motion to suppress
conviction," nor does he brief the authority of a trial judge to grant an out-of-time appeal under
the circumstances presented. Further, the motion was clearly not an application for writ of habeas
corpus. It was not sworn to nor did it meet the other requisites of an application or petition for
a writ of habeas corpus. (3) See Tex. Code Crim. Proc. Ann. art. 11.22 (1977). Under any
circumstances, the trial court accorded the appellant a hearing on his motion. Cf. Tex. Code
Crim. Proc. Ann. art. 28.01, § 1(6) (1989) (motion to suppress evidence).
At the hearing, appellant testified that after he had been granted probation he was
in the hallway outside the courtroom. He related his attorney approached him and informed him
that Judge Perkins had given him a choice of taking the "ten years probation" with the condition
of a waiver of appeal or ten years in prison. Appellant stated that his counsel told him Judge
Perkins "wanted this now," and that counsel would not let him confer with his father. Appellant
stated that he signed the waiver as he did not want to go to jail. He did not return to the
courtroom for any further proceedings.
Appellant's trial counsel testified that after the penalty stage of the trial, the trial
judge thought the offense was serious and was inclined to a prison term; that in view of the
evidence and the State's recommendation, a request for consideration of probation was made. It
was clear in counsel's mind that the trial court would consider probation if a waiver of appeal was
filed. If not, the punishment would be ten years' imprisonment.
On direct examination, the record reflects:
Q. Was the sentence of ten years probation conditional upon the signing of that
waiver?
A. I don't think there was a direct connection in the sense that, "If you don't then
. . ." but it was clear that the court was leaning towards a ten-year sentence
in T.D.C., but would consider probation if the right to appeal was waived.
That was very clear.
On cross-examination, appellant's counsel was asked:
Q. Was there ever a promise or condition, though, either way, expressly made to
you or anyone that you know of?
A. Not that I remember.
The record of the trial on the merits was introduced before Judge Blackwell.
Nothing therein makes reference to any waiver of appeal. The trial record does show that Judge
Perkins, upon recommendation of both parties, made no affirmative finding as to the use or
exhibition of a deadly weapon in the commission of the offense in order to place the appellant on
probation.
Judge Blackwell was the trier of fact and the judge of the credibility of the
witnesses and the weight to be given to their testimony. He did not abuse his discretion in
overruling the "motion." The first point of error is overruled.
The order revoking probation is affirmed.
John F. Onion, Jr., Justice
[Before Justices Aboussie, Kidd and Onion*]
Affirmed
Filed: September 16, 1992
[Do Not Publish]
* Before John F. Onion, Jr., Presiding Judge (retired), Court of Criminal Appeals, sitting by
assignment. See Tex. Gov't Code Ann. § 74.003(b) (1988).
1. The "motion" did not allege ineffective assistance of counsel.
2. In probation cases the imposition of the sentence is suspended and the defendant placed on
probation subject to certain conditions. Tex. Code Crim. Proc. Ann. art. 42.12, §§ 1, 3 (Supp.
1992). Thus, in the instant case no sentence was imposed at the time appellant was placed on
probation. Cf. Tex. Code Crim. Proc. Ann. art. 42.12, § 8 (Supp. 1992) where suspension of
execution of sentence is suspended in "shock probation" cases.
3. Appellant relates he added "Writ of Habeas Corpus" to the label on the motion at the
suggestion of the trial court. The "motion" in the record does not contain the habeas corpus label.
A habeas corpus proceeding is a separate and distinct proceeding from the criminal cause initiated
by the presentation of an indictment or information. It should be docketed separately and given
its own cause number.
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820 S.W.2d 440 (1991)
307 Ark. 345
W.E. LONG CO.-INDEPENDENT BAKERS' COOPERATIVE, Appellant,
v.
HOLSUM BAKING CO., Appellee.
No. 91-125.
Supreme Court of Arkansas.
November 25, 1991.
Ramsay, Bridgforth, Harrelson & Starling, William S. Roach, Pine Bluff, Robert E. Brown, Juris Kins, Chicago, 111., Phillip A. Raley, Pine Bluff, for appellant.
Rose Law Firm, Hillary Rodham Clinton, Amy Stewart, James H. Druff, Little Rock, for appellee.
GLAZE, Justice.
This case involves a dispute between W.E. Long Co. (Long) and Holsum Baking Co. (Holsum Baking) over the use of the "Holsum" trademark in the marketing of bakery products.[1] The major events leading to the dispute are relevant to a discussion of the issues raised on appeal.
Long first registered the "Holsum" mark on such products in Arkansas in 1929. Long licensed Shipley Baking Co. (Shipley), permitting it to use the "Holsum" mark. Years later, in 1944, Long entered into an agreement granting Holsum Baking a bread formula and the right to use the "Holsum" tradename for advertising purposes in Pine Bluff and in other areas not expressly reserved to other Long customers. In fact, Holsum Baking's geographical market reached outside Pine Bluff and bordered Shipley's territory.[2] Under the *441 1944 agreement, Holsum Baking was to purchase $3,000 or more advertising supplies from Long during the calendar years of 1944, 1945 and 1946. In 1946, Holsum Baking joined Quality Bakers of America (QBA), a cooperative and a Long competitor. Since then, Holsum Baking has continuously displayed both QBA's Sunbeam trademark and the Holsum mark on its packaging. More specifically, Holsum Baking's vice-president, David Jenkins, explained that his company sold its bread during this period under the composite mark of Holsum Sunbeam.
In 1986, however, Holsum Baking added a wheat bread product and marketed it as "Holsum Grains" with no mention of the Sunbeam mark. In this same year, Long's representatives visited Holsum Baking and tried unsuccessfully to persuade Holsum Baking to join the Long cooperative. During this visit and discussions with Holsum Baking officials, the Long representatives inspected the bread section of the two stores where the "Holsum Grains" bread was on display. Holsum Baking subsequently rejected a proposed membership agreement tendered to it by Long.
In February of 1990, Long claimed it had just learned of Holsum Baking's sales of "Holsum Grains" bread and its purchasing of packaging bearing the "Holsum" mark. Long wrote Holsum Baking requesting that it cease any further use of the mark. Holsum Baking did not respond. Long opted to contact its packaging suppliers, Mobil Chemical Co. (Mobil), Princeton Packaging Co. (Princeton) and James River Paper Co. (James River), and advised them not to sell packaging bearing the "Holsum" mark to Holsum Baking because Holsum Baking was not licensed by Long. The three suppliers acceded to Long's request which triggered Holsum Baking's filing this lawsuit. Because of Long's action, Holsum Baking could obtain packaging with only the Sunbeam label.
In its complaint, Holsum Baking alleged that its 1944 agreement with Long had been breached or abandoned by the parties in 1946 and that Holsum Baking had acquired its rights to the "Holsum" mark in the territory it has continuously served over the past forty-four years. Holsum Baking further claimed a valid contractual relationship and business expectancy with its packaging suppliers, Mobil, Princeton and James River, and that Long had intentionally interfered with that relationship by cutting off its packaging and causing a loss in its bread sales. It also alleged that Long was liable for tortious interference with prospective economic advantage, fraud and conversion and prayed that Long and the three suppliers be enjoined from any acts preventing Holsum Baking from obtaining packaging bearing the "Holsum" mark.
The trial court granted Holsum Baking a temporary restraining order and one month later, a preliminary injunction from which Long brings this appeal. Long argues the trial court erred in issuing injunctive relief because Holsum Baking failed to show that it would be irreparably harmed or that it would likely succeed on the merits of its tortious allegations.
In arguing Holsum Baking suffered no irreparable harm, Long claims the trial court was clearly wrong in finding Holsum Baking suffered any damages because Holsum Baking continued selling its bread products under the Sunbeam label at the same price as it did under the Holsum mark. Citing Kreutzer v. Clark, 271 Ark. 243, 607 S.W.2d 670 (1980), Long also argues that, even if Holsum Baking had suffered some damages, the harm could be recouped through money damages and therefore cannot be considered irreparable.
At trial, Holsum Baking did present evidence reflecting monetary loss in the weekly sum of $1,975 due to its inability to sell Holsum Grains bread. In order to market this bread, Holsum Baking had to introduce a Sunbeam Sandwich Wheat, which took several weeks. Other like testimony bearing on money damages was mentioned at trial, but Holsum Baking argues its irreparable harm results from Long's actions in preventing Holsum Baking's use of its common law trademark right in the "Holsum" marka right it acquired over the years since 1946.
*442 Mr. David Allen, a trademark expert, testified that the 1944 agreement between Holsum Baking and Long was invalid, because Long had attempted to grant a license without controlling the quality of the goods sold under the "Holsum" mark. Also, Allen opined the parties' agreement was unenforceable because the agreement was unlawfully tied to Holsum Baking's purchase of advertising materials from Long. In sum, because the parties' agreement was invalid but Holsum Baking continued to use the "Holsum" mark when marketing its products in the territory it served, Allen concluded Holsum Baking established a valid trademark in the "Holsum" label in its market area. Based upon its acquired rights in the "Holsum" mark, Holsum Baking analogizes its situation to the trademark infringement cases where a trademark represents intangible assets such as reputation and goodwill, and a showing of irreparable harm can be satisfied if it appears that the movant for a preliminary injunction can demonstrate a likelihood of consumer confusion. General Mills, Inc. v. Kellogg Co., 824 F.2d 622 (8th Cir.1987). Proof of actual confusion is not essential to demonstrate trademark infringement. Id. Further, the movant's burden at the preliminary injunction stage is slight. International Kennel Club v. Mighty Star, Inc., 846 F.2d 1079 (7th Cir. 1988).
Long counters Holsum Baking's contention, stating the rules in trademark infringement actions are inapplicable because neither Long nor anyone else is advertising or making sales in Holsum Baking's marketing area under a trademark which infringes on any purported trademark rights of Holsum Baking. Stripped of such assertions, Long argues that Holsum Baking's lawsuit is reduced merely to tortious claims that could be satisfied by money damages. Long further argues that, in trademark infringement cases, the likelihood of consumer confusion that leads to the threat of irreparable injury results from the use of a similar mark by another in the same market area thereby damaging the trademark owner's goodwill and reputation. Here, Long asserts that no such confusion was shown nor was it found by the trial court.
When Long claimed knowledge of Holsum Baking's use of the "Holsum" mark, it could have sued Holsum Baking then, claiming it was infringing on Long's trademark. Instead, Long chose to cut off Holsum Baking's packaging supply, by asking Mobil, Princeton and James River not to furnish Holsum Baking any more packaging with the "Holsum" label. Thus, instead of joining issues and differences in a trademark infringement lawsuit, Holsum Baking was forced to obtain other type relief in order for it to avoid losing its asserted right to the "Holsum" mark which it had long used in its service area. If Holsum Baking acceded to Long's and its suppliers' actions, it stood to lose any right it possessed to the "Holsum" mark.
Placed in this position, Holsum Baking, unable to file an infringement action, sought injunctive relief in order to reinstate its packaging source with its "Holsum" mark. Holsum Baking's acquired goodwill and reputation gained over the years through the use of the "Holsum" mark is no less significant or relevant merely because that mark's use is questioned in an action other than one involving trademark infringement.
Contrary to Long's contention, we also believe that, because it was forced to market its bakery products without the "Holsum" label, Holsum Baking showed consumer confusion would likely arise if it was not afforded relief. For instance, since Holsum Grains was removed from the market, the consumer cannot know if the Holsum Grains bread he or she once bought is the same bread as Holsum Baking now shelves as Sunbeam Sandwich Wheat. Also, if Shipley or another Long licensee moves into the Pine Bluff area and markets "Holsum" products, such an event will likely undermine and confuse the association between Holsum Baking's products and the "Holsum" trademark in the mind of the public. The trial court found that Holsum Baking's loss was not only monetary but also included the unredeemable loss of goodwill. From our de novo review, *443 we believe the record supports the trial court's finding of irreparable harm. Thus, we are unable to say that the chancellor abused his discretion in granting a preliminary injunction. Smith v. American Trucking Ass'n, 300 Ark. 594, 781 S.W.2d 3 (1989).
Long next argues that Holsum Baking failed to show that it would likely prevail on the merits of any of its tortious claims. Of course, in order to justify a grant of preliminary injunction relief, a plaintiff must establish that it will likely prevail on the merits at trial. Smith v. American Trucking Ass'n, 300 Ark. 594, 781 S.W.2d 3 (1989). Here, the trial court, in issuing its temporary restraining order and preliminary injunction, found that Holsum Baking will likely prevail in its efforts to establish both that Long and Shipley have impermissibly and fraudulently interfered with Holsum Baking's contractual relations with its suppliers. The court further found that Long and the other defendants had joined in combination to convert Holsum Baking's accumulated goodwill by disrupting Holsum Baking's business expectancy in its dealings with retail consumers.
In alleging that Long committed tortious interference with Holsum Baking's business relationships with its packaging suppliers, Holsum Baking had to show (1) the existence of a valid contractual relationship or a business expectancy, (2) knowledge of the relationship or expectancy on the part of the interferor, (3) intentional interference inducing or causing a breach or termination of the relationship or expectancy and (4) resultant damage to the party whose relationship or expectancy has been disrupted. Mid-South Beverages, Inc. v. Forrest City Grocery Co., 300 Ark. 204, 778 S.W.2d 218 (1989). Clearly, Holsum Baking had a business expectancy with its suppliers, Mobil, Princeton and James River, since it had been doing business with them, especially Mobil, for years. Equally clear is the fact that Long interfered with the relationship between Holsum Baking and these suppliers when Long contacted the suppliers, instructing them to stop selling "Holsum" trademark packaging to Holsum Baking. As previously discussed, Holsum Baking sustained damages as a result of Long's interference. From our review at this stage of the proceedings, we believe the record supports the trial court's finding that Holsum Baking will likely prevail on the merits of this underlying tortious claim.
Long argues that it cannot be sued for tort of interference merely because it attempted to enforce its own contract with Mobil, Princeton and James River. In this regard, Long points to its agreement with these suppliers that reflects they will not sell trademark packaging which is confusingly similar to Long's trademark or is substantially similar to Long's packaging rights. Of course, Long's argument begs the very question and controversy that led to the filing of this lawsuitwhether Long has any claim to the "Holsum" mark in the territory served by Holsum Baking. Based upon the evidence presented below by Holsum Baking, Long has since abandoned such a right, and Holsum Baking has acquired it.
Although briefed, we need not discuss the remaining counts alleged and argued in Holsum Baking's lawsuit since what we have considered is sufficient to uphold the trial court's decision to issue a preliminary injunction. A final hearing in this matter is yet to be held. At this point, Long has offered no witnesses of its own. Additional evidence and argument are sure to follow this interlocutory appeal. Suffice it to say, the trial court's issuance of its temporary restraining order and preliminary injunctive relief is amply supported by the law and the facts at this stage of the proceedings.
For the reasons stated above, we affirm.
NOTES
[1] Holsum Baking was previously known as Arkansas Baking Company.
[2] Shipley's and Holsum Bakery's marketing areas actually overlap in Conway, Arkansas.
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71 Md. App. 152 (1987)
524 A.2d 110
CENTENNIAL INSURANCE COMPANY
v.
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY ET AL.
No. 1196, September Term, 1986.
Court of Special Appeals of Maryland.
April 20, 1987.
Certiorari Denied September 9, 1987.
Rodger D. Robertson (A. Douglas Owens and Keith L. Arnold, on the brief), Baltimore, for appellant.
James A. Sullivan, (McCormick, Sullivan & Talbott, on the brief), Rockville, for appellee, State Farm.
Patricia Wagstaff, on the brief, pro se.
Argued before ALPERT, BLOOM and KARWACKI, JJ.
BLOOM, Judge.
This appeal presents a question not heretofore answered by the Court of Appeals or this Court: What effect may, or must, be given to conflicting "escape" or avoidance of coverage clauses in two liability insurance policies, each of which would provide coverage to the driver of a motor vehicle involved in a collision if no other policy provides coverage but would deny coverage if any other insurance were available?
The facts that give rise to this case are basically undisputed and singularly uncomplicated. Criswell Chevrolet, Inc., an automobile dealer, provided Robert Crampton with one of its cars as a "loaner" for Crampton's temporary use while his automobile was undergoing repairs in Criswell's shop. The "loaner," with Crampton at the wheel, collided with and damaged Patricia Wagstaff's car, and Ms. Wagstaff filed suit against Crampton and Criswell Chevrolet to recover the cost of repairing her vehicle. Appellant, Centennial Insurance Company, which had issued to Criswell Chevrolet a garage liability policy covering all of the insured's motor vehicles, brought this declaratory judgment action in the Circuit Court for Montgomery County against Crampton, Wagstaff and State Farm Mutual Automobile Insurance Company, which had issued a standard automobile liability insurance policy to Crampton, covering the car that was being repaired by Criswell Chevrolet. Centennial sought a declaration that State Farm, and not Centennial, is obligated to defend Crampton in Wagstaff's suit against him and to pay any judgment awarded against Crampton in that suit. Centennial's policy expressly excludes liability coverage for any customer of its insured unless that customer has no other available insurance, primary, excess or contingent, in which case the Centennial policy would insure the customer, but only up to the compulsory or financial responsibility law limits. Therefore, since the customer in this case, Crampton, had coverage under his own policy with State Farm while driving a temporary substitute automobile, Centennial insists that its exclusion applies and State Farm is obligated to defend Crampton in Wagstaff's suit against him and pay any damages awarded in that suit. On the other hand, since State Farm's policy does not cover Crampton while he is driving a temporary substitute car owned by anyone in a car business if the owner has liability insurance which is applicable as primary, excess or contingent coverage, and since Centennial's policy provides at least contingent coverage, State Farm takes the position that Centennial's policy covers the damages sustained by Ms. Wagstaff's vehicle. The circuit court ruled in favor of State Farm, and Centennial promptly noted this appeal. Our interpretation of the policies in question leads us to disagree with the positions taken by both insurers and, consequently, to reverse the circuit court.
After providing generally that its liability coverage extends to the use by an insured of a newly acquired car, a temporary substitute car or a non-owned car, the State Farm policy lists several exceptions and limitations to such coverage. The provisions of the State Farm policy applicable to this case are as follows:
If There is Other Liability Coverage
.....
3. Temporary Substitute Car, Non-Owned Car, Trailer
If a temporary substitute car, a non-owned car or a trailer designed for use with a private passenger car or utility vehicle has other vehicle liability coverage on it, then this coverage is excess. THIS COVERAGE SHALL NOT APPLY:
a. IF THE VEHICLE IS OWNED BY ANY PERSON OR ORGANIZATION IN A CAR BUSINESS: AND
b. IF THE INSURED OR THE OWNER HAS OTHER LIABILITY COVERAGE WHICH APPLIES IN WHOLE OR IN PART AS PRIMARY, EXCESS OR CONTINGENT COVERAGE.
(Emphasis in original.)
There is no dispute that the automobile Crampton was driving was a temporary substitute car and that its owner, Criswell Chevrolet, was in the car business within the meaning of the State Farm policy.
The following provisions in the policy issued by Centennial to Criswell Chevrolet are pertinent to this case:
D. WHO IS AN INSURED.
.....
b. Anyone else is an insured while using with your permission a covered auto except:
.....
3. Your customers, if your business is shown in ITEM ONE of the declarations as an auto dealership. However if a customer of yours:
(a) Has no other available insurance (whether primary, excess or contingent), he or she is an insured but only up to the compulsory or financial responsibility law limits where the covered auto is principally garaged.
(b) Has other available insurance (whether primary, excess or contingent) less than the compulsory or financial responsibility law limits where the covered auto is principally garaged, he or she is an insured only for the amount by which the compulsory or financial responsibility law limits exceed the limits of his or her other insurance.
(Emphasis in original.) The parties do not dispute that Crampton was a customer of Criswell Chevrolet and that Criswell Chevrolet is an auto dealership.
"Other insurance" clauses originated in the field of property insurance as a method of protecting the insurer from the "moral hazard" posed by unscrupulous policyholders who would over-insure, then intentionally destroy property. Note, Automobile Liability Insurance Effect of Double Coverage and "Other Insurance" Clauses, 38 Minn.L.Rev. 838, 840 (1954) (hereinafter "Note"). Of course, that "moral hazard" does not exist in the area of liability insurance, yet such clauses appear commonly in liability policies as a means to reduce or eliminate the insurer's loss in the event of concurrent coverage of the same risk. Comment, Concurrent Coverage in Automobile Liability Insurance, 65 Colum.L.Rev. 319, 320 (1965) (hereinafter "Comment"). As noted by the Court of Appeals, such use of other insurance clauses is neither invalid nor unconscionable and has met with uniform judicial recognition. Consolidated Mutual Insurance Co. v. Bankers Insurance Co., 244 Md. 392, 395, 223 A.2d 594 (1966).
Other insurance clauses come in three varieties: (1) the escape clause, whereby coverage is denied in a double insurance situation; (2) the excess clause, whereby the insurer declares itself liable only for any excess amount of the judgment remaining after the other insurer has paid up to the limit of its policy; (3) the pro rata clause, whereby the insurer obligates itself to pay a ratable portion of the loss in the proportion its policy coverage bears to the total coverage protecting the insured. Given these three types of clauses, there exist six possible combinations of clauses that may come into conflict: escape vs. escape; escape vs. excess; escape vs. pro rata; excess vs. excess; excess vs. pro rata; and pro rata vs. pro rata.
The Court of Appeals has had occasion to consider four of the six possible combinations of "other insurance" clauses. In each instance it has taken the approach of resolving such conflicts by construing the policies in the same manner as it would any other contract, Bond v. Pennsylvania National Mutual Ins. Co., 289 Md. 379, 384, 424 A.2d 765 (1981), and by attempting to reconcile the competing provisions. See e.g., Consolidated Mutual Insurance Co. v. Bankers Insurance Co., supra; Celina Mutual Casualty Co. v. Citizens Casualty Co., 194 Md. 236, 71 A.2d 20 (1950). Cf. National Indemnity Co. v. Continental Insurance Co., 61 Md. App. 575, 487 A.2d 1191 (1985). That process of reconciliation has resulted in four general rules:[1]
1. In Zurich Insurance Co. v. Continental Casualty Co., 239 Md. 421, 212 A.2d 96 (1965), the Court held that an excess clause prevailed over a broadly worded escape clause which excluded coverage "if there is other valid and collectible insurance in force for such person or organization either as an insured under a policy applicable with respect to the automobile or otherwise." But in State Farm Mutual Automobile Insurance Co. v. Universal Underwriters Insurance Co., 270 Md. 591, 312 A.2d 265 (1973), the Court held that an escape clause, which specifically referred to the existence of excess insurance coverage as activating the escape provision, prevailed over the excess clause.
2. An excess clause will prevail over a pro rata clause. Consolidated Mutual Insurance Co. v. Bankers Insurance Co., supra.
3. When both policies provide excess coverage only, liability is shared equally by the insurers. Ryder Truck Rental, Inc. v. Schapiro & Whitehouse, Inc., 259 Md. 354, 364-65, 269 A.2d 826 (1970).
4. A conflict between two pro rata clauses results in proportional sharing of liability without either insurer being considered primary or excess. Celina Mutual Casualty Co. v. Citizens Casualty Co., supra.
In the case sub judice, however, those four rules are of no help because we are presented with an entirely different conflict between other insurance clauses: escape vs. escape.
The two escape clauses are, of course, dissimilar in language and approach. State Farm's policy covered the insured, Crampton, but sought to avoid that coverage if he drove a car furnished him by someone in the "car business" as a temporary substitute for his own automobile. Centennial insured the automobile, but sought to avoid coverage if it were driven by a member of a certain class. Despite the differences between them, however, both policies attempt to deny coverage totally in the event there were other available liability insurance coverage but will provide coverage if there is no other available insurance. If we read State Farm's policy first, Crampton was not covered by it at the time he collided with Ms. Wagstaff's car because the vehicle he was driving as a temporary substitute automobile was owned by a corporation engaged in a car business and there was at least contingent liability insurance on the car. But if we read Centennial's policy first, Crampton, as a customer of the insured, was not covered by that policy because State Farm's policy provided at least contingent coverage for him. There being no logical reason why a court should choose to read either policy before the other, the two escape provisions are simply irreconcilable and totally incompatible.
State Farm would have us resolve the problem by invalidating Centennial's escape clause as violative of the compulsory insurance provisions of Maryland's motor vehicle laws, as set forth in Md. Transp. Code Ann., Title 17 (Vehicle Laws Required Security), §§ 17-101 through 17-301. It argues that the only permitted exclusions from coverage in an automobile liability policy are those enumerated in Md. Code Ann. art. 48A, §§ 240C-1, 541(c)(2), and 545. Those three sections, however, are totally inapposite to this case. The first, § 240C-1, deals only with cancellation or non-renewal because one of two or more covered drivers is a bad risk, and provides for exclusion of coverage for that driver as an alternative to cancellation or non-renewal. The second statute, § 541(c)(2), permits only specified exclusions from required uninsured motorists coverage. And the third, § 545, permits only specific, limited, exclusions from the benefits of the first person, no-fault, personal injury protection mandated by § 539. What confronts us in this case, however, is an exclusion from liability coverage, and State Farm has not directed our attention to any statute or regulation that would require an automobile liability policy to insure everyone who might drive the covered vehicle. Indeed, under regulations promulgated by the Insurance Commissioner, the owner of an automobile which is to be rented for a period in excess of 180 days may satisfy the required security or compulsory insurance requirements of the Transportation Code by requiring the lessee to procure the security, Md. Regs. Code title 11, § 18.04; and one who is exclusively engaged in the temporary substitute vehicle leasing business may satisfy his obligation to provide security by certifying that:
1. He is exclusively engaged in the temporary substitute vehicle leasing business;
2. He leases his vehicles exclusively to insured Maryland vehicle operators whose vehicles are out of use because of breakdown, repair, servicing, loss, or destruction;
3. He has valid excess insurance extending coverage to an owned motor vehicle while temporarily substituting for the insured motor vehicle; and
4. He will assume responsibility for a claim arising from the operation of the vehicle if the insurance carrier for the lessee and his excess carrier deny coverage.
Md. Regs. Code title 11, § 18.04.
These regulations, of course, do not themselves apply to this case, since Criswell Chevrolet is not exclusively engaged in the temporary substitute vehicle leasing business and does carry liability insurance on all of its vehicles as part of its general garage liability coverage. The regulations do make it clear, however, that under certain circumstances the primary responsibility to provide required liability insurance coverage for a motor vehicle may be shifted from the owner of the vehicle to one permitted by the owner to operate it. We see no violation of the compulsory insurance law in the escape clause in Centennial's policy. It merely attempts to shift the responsibility for coverage to Criswell Chevrolet's customer, who would ordinarily be operating a "loaner" car only as a temporary substitute for his own insured car and therefore should be covered by his own policy, while providing the required insurance if there is no other insurance to which the responsibility can be shifted.
We also find no merit to the argument that Jennings v. Government Employees Insurance Co., 302 Md. 352, 488 A.2d 166 (1985), compels invalidation of the Centennial escape language. There, the Court of Appeals held that a "household exclusion" contained in an automobile liability policy violated public policy as evidenced by the required security provisions of § 17-103(b) of the Transportation Article. Excluding a whole class of people from receiving the minimum benefits ($20,000 for any one person/$40,000 for two or more persons/$10,000 property damage) provided by that section is contrary to the intent of the General assembly. In the case sub judice, however, no one is being denied a recovery of benefits; the issue here is who must provide those benefits. Whether State Farm or Centennial (or both) ultimately must defend Crampton in the Wagstaff action and pay a resulting claim, the minimum protection required by § 17-103(b) is available to the injured party. Consequently, there is no violation of legislative policy. For analogous holdings, see Royal-Globe Insurance Co. v. Safeco Insurance Co., 560 S.W.2d 22 (Ky.App. 1977) (compulsory insurance laws exist to protect the public at large, not insurers; thus when the controversy does not concern whether coverage exists, but which insurer should pay, the public policy behind Kentucky's compulsory insurance act is met); State Farm Mutual Automobile Insurance Co. v. Auto-Owner Insurance Co., 331 So. 2d 638, 641 (Ala. 1976) (policy behind Alabama Motor Vehicle Safety Responsibility Act is met when insured party is afforded minimum required coverage and only question is from which carrier he will receive the benefits). Cf. Universal Underwriters Insurance Co. v. Veljkovic, 613 S.W.2d 426 (Ky.App. 1980) (holding that escape clause violated public policy when action is between a member of the public and an insurance company rather than between two insurance companies). But see Tahash v. Flint Dodge Co., 115 Mich. App. 471, 321 N.W.2d 698 (1982) (holding, without analysis, that escape clause excluded broad class of people from coverage, therefore the clause violated Michigan public policy).
Having determined that Centennial's escape provision is not invalid, we must now consider what to do with the competing clauses. The problem posed by conflicting escape clauses is relatively new to this country.[2] As late as 1966 there were no reported American decisions dealing with this matter. Comment, Effect of Conflicting "Other Insurance" Clauses, 41 Wash.L.Rev. 564, 567 (1966). In the few cases that have arisen the courts have found no basis upon which the conflicting clauses can be reconciled. See e.g., State Farm Mutual Automobile Insurance Co. v. Employers Commercial Union Insurance Co., 35 Colo. App. 406, 535 P.2d 266, 268 (1975); World Rent-A-Car, Inc. v. Stauffer, 306 So. 2d 131, 133 (Fla.App.), cert. denied, 321 So. 2d 557 (Fla. 1975); Southern Home Insurance Co. v. Willoughby, 124 Ga. App. 162, 182 S.E.2d 910, 913 (1971); Ohio Casualty Insurance Co. v. State Farm Mutual Automobile Insurance Co., 511 S.W.2d 671, 674 (Ky. 1974); Drude v. Ryals, 216 So. 2d 647, 649 (La. App.), cert. denied, 253 La. 734, 219 So. 2d 513 (1969); Travelers Indemnity Co. v. Chappell, 246 So. 2d 498, 504 (Miss. 1971); State Farm Mutual Automobile Insurance Co. v. Universal Underwriters Insurance Co., 594 S.W.2d 950, 956 (Mo. App. 1980); State Farm Mutual Automobile Insurance Co. v. Mid-Continent Casualty Co., 518 F.2d 292 (10th Cir.1975) (interpreting Oklahoma law). As noted supra, depending upon which policy is read first, the contingent coverage of the other policy activates the non-liability provision in the first read policy, and since we can conceive of no logical or legal basis for reading one policy before the other, we are left with two alternatives: we may give effect to both provisions or to neither. Were we to take the former approach, both insurers would escape payment and Crampton would be left unprotected despite the existence of two policies of insurance otherwise covering his liability. As the Supreme Court of Mississippi noted:
This thesis extended would mean that, although one pays for liability insurance he would also have to pay for ... [the] liability that occurred as a result of an accident simply because it was discovered that some other company also had insurance covering the same accident.
Travelers Indemnity Co. v. Chappell, supra. Such a result is unthinkable. We choose, as did the courts in all of the cases cited above, to find the clauses mutually repugnant and nugatory.
Simply negating both of the competing escape clauses does not dispose of this appeal. We must still determine how to apportion liability between the two insurers, and if possible, we must do so by reference to the remaining policy language.
Elimination of the escape clauses leaves excess clauses in each policy to be considered. Neither of those provisions, however, applies to the facts before us. The Centennial excess provision is effective only when other available insurance is insufficient to meet the requirements of Maryland's financial responsibility statute, which has no applicability to this case. The State Farm excess clause, on the other hand, only applies to those temporary substitute vehicles acquired from one not engaged in the "car business." That provision also is not applicable. Cf. Travelers Indemnity Co. v. Chappell, supra, 246 So.2d at 504-05 (reaching same conclusion with respect to comparable policy language).
Rejection of the escape clauses as irreconcilable and the excess clauses as inapplicable does not exhaust the reservoir of "other insurance" language contained in both policies. The Centennial policy reads:
Part III. Conditions
B. OTHER INSURANCE.
.....
2. When two or more policies cover on the same basis, either excess or primary, we will pay only our share. Our share is the proportion that the limit of our policy bears to the total of the limits of all the policies covering on the same basis.
State Farm's policy contains a similar pro rata provision:
2. Other Liability Coverage Available From Other Sources:
Subject to item 1, if other vehicle liability coverage applies, we are liable only for our share of the damages. Our share is the per cent that the limit of liability of this policy bears to the total of all vehicle liability coverage applicable to the accident.
These provisions in both policies for pro rata sharing in the event of other insurance are compatible and reconcilable. As noted supra, the rule for resolving competing pro rata clauses is to order proportional sharing of liability with neither company being considered the primary or excess insurer. Celina Mutual Casualty Co. v. Citizens Casualty Co., supra. Accordingly, the court erred in not declaring that Centennial and State Farm must share the burden of defending Crampton and satisfying any claim on the basis of their relative liability exposure.
JUDGMENT REVERSED AND CASE REMANDED FOR ENTRY OF A DECLARATORY JUDGMENT CONSISTENT WITH THIS OPINION.
COSTS TO BE PAID ONE-HALF BY EACH PARTY.
NOTES
[1] Several differing approaches have been utilized by other jurisdictions including: the "prior in time" rule, whereby primary coverage is deemed provided by the policy with the earlier effective date; the "primary tort-feasor" approach, which places primary liability on the insurer whose named insured was the primary tort-feasor; and the "specific vs. general" approach, whereby the court distinguishes between the relative specificity of the competing clauses and assigns primary liability to the insurer which offered the more specific protection against the loss. See generally, Note, supra, at 841-47 and cases cited therein; Comment, supra, at 321-22.
[2] Apparently, the first reported case involving two escape clauses was an English case, Weddell v. Road Transp. & Gen. Ins. Co., [1932] 2 K.B. 563 (1931). The Court in that case refused to give effect to either clause and pro-rated the loss.
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820 S.W.2d 900 (1991)
Chris BROWN d/b/a Memorial Executive Suites, Appellant,
v.
HOWETH INVESTMENTS, INC. and AJ. (Jack) Howeth, Appellees.
No. 01-90-00771-CV.
Court of Appeals of Texas, Houston (1st Dist).
November 21, 1991.
Rehearing Denied December 19, 1991.
William F. Harmeyer, Houston, for appellant.
*901 Steven naipm, Houston, ror appellee.
Before TREVATHAN, C.J., and COHEN and O'CONNOR, JJ.
OPINION
O'CONNOR, Justice.
This Court is asked whether a trial court abused its discretion when it refused to reinstate a suit dismissed for want of prosecution. We find that it did, and reverse.
On December 31, 1987, Chris Brown, individually and d/b/a Memorial Executive Suites, the plaintiff, filed a suit against Howeth Investments, Inc. and A.J. (Jack) Howeth, the defendants. In November of 1989, the plaintiff sought new counsel, due to his "extreme disappointment" with his first lawyer's inaction on his suit. On March 5, 1990, the plaintiff filed notice of substitution of counsel. Sometime in the same week, the district clerk's office mailed the plaintiff a notice of intent to dismiss. Although a copy of the notice to dismiss is not in the record, the plaintiff contends that the notice was presumably sent to his first lawyer. On May 3, 1990, the plaintiff's suit was dismissed for want of prosecution. On May 14,1990, the plaintiff learned his case had been dismissed. On May 23, 1990, the plaintiff filed his motion to reinstate on the grounds that he did not receive the notice of intent to dismiss, and he had hired a new lawyer to prosecute the suit. Without oral hearing, the trial court denied the plaintiff's motion on June 5, 1990.
In points of error one and two, the plaintiff contends the trial court erred in denying his motion to reinstate. We must look at this case through two standards: The standard the trial court should have applied when it decided not to reinstate, and the standard we must apply to evaluate the trial court's decision.
1. Activity in the case
The following is a chronology of the events in this case:
12-23-87 Plaintiff filed suit
12-31-87 Plaintiff filed first supplemental petition, requesting injunction
1-5-88 Hearing on the injunction; no ancillary relief granted
5-17-88 Plaintiff's counsel (Crowder) sent letter to defense counsel with notices to take deposition of defendants for 6-2-88
5-23-88 Defense counsel responds that he has filed vacation letter and depositions must be rescheduled
7-7-88 Plaintiff's counsel (Crowder) sent letter and request for production to defense counsel
7-25-88 Plaintiff's counsel (Crowder) sent letter scheduling depositions of plaintiff
NO ACTIVITY IN THE CASE FROM THIS POINT UNTIL CASE TRANSFERED
11-30-89 The plaintiff consulted Harmeyer about hiring him on this suit because his own attorney, Crowder, had not prosecuted the suit, had not proceeded with discovery as he had been requested, and had not responded to plaintiff's attempts to get a status and progress report on the case
11-30-89 Harmeyer attempted to contact Crowder by telephone, but the calls were not returned
12-1-89 Harmeyer wrote to Crowder requesting transfer of files and substitution of counsel
12-11-89 Harmeyer wrote to Crowder, asking him to return telephone call and enclosing a copy of the 12-1-89 letter
1-16-90 Fax transmission of letter from Crowder to Harmeyer stating that files are ready to be picked up when plaintiff makes final payment on the bill; also, enclosing notice of substitution of counsel
1-30-90 Files were transferred from Crowder to Harmeyer
2-13-90 Letter from Harmeyer to Crowder, asking for original of substitution of counsel
3-1-90 Harmeyer receives the original of substitution of counsel from Crowder *902 dismiss to Crowder; neither plaintiff nor Harmeyer receive notice of intent to dismiss
3-2-90 Harmeyer mails original substitution of counsel to the court
3-5 to 3-9-90 District Clerk mails notice of intent to dismiss to original attorney
3-5-90 Court receives substitution of counsel
5-3-90 Court dismisses suit
5-14-90 Harmeyer learns of dismissal
2. The conflicting affidavits
The plaintiff's motion to reinstate, which was verified, stated most of the facts outlined above. In addition, the plaintiff's motion to reinstate relates that when the file was transferred to Harmeyer, he reviewed the pleadings, performed legal research, rendered a five-page opinion letter to the plaintiff, reviewed the documents submitted by the plaintiff, held an extended conference with the plaintiff, and was in the process of preparing a discovery request when he learned that the case had been dismissed.
The defendants opposed the plaintiff's motion to reinstate, alleging the following: the plaintiff and Harmeyer, his new lawyer, did not file the motion to substitute for three months, from December to February 1988; there had been no activity in the case for two years before; the plaintiff intentionally abandoned the suit because he received all the relief he was entitled to in the agreement.
In response to the defendants' opposition, the plaintiff contends that the time from his first lawyer's discovery attempts to the time he contacted his present counsel, as included in the chronological list above, reduces the period of inactivity from two years as claimed by the defendants, to 16 months. The plaintiff also explained why it took three months to file the notice of substitution, as set out above. The plaintiff also denied that he had abandoned his suit.
3. The trial court's standard
The standard the trial court must apply in reviewing motions to reinstate is set out in Tex.R.Civ.P. 165a, which provides
The court shall reinstate the case upon finding after a hearing that the failure of the party or his attorney was not intentional or the result of conscious indifference but was due to an accident or mistake or that the failure has been otherwise reasonably explained.
(Emphasis added.) Rule 165a mandates reinstatement if the court finds that the failure of the party or his attorney was not intentional or the result of conscious indifference. See, e.g., Wyatt v. Texas Oklahoma Express, Inc., 693 S.W.2d 731, 733 (Tex.App.Dallas 1985, no writ). The court's order refusing to reinstate the plaintiff's suit makes no statement regarding fault, but simply states that the court considered the motion to reinstate and denied it.
Nothing in this record suggests the plaintiff intentionally ignored the suit or he intentionally failed to respond to the notice of intent to dismiss. Not even the defendants suggest that the plaintiff intentionally ignored the suit or intentionally failed to respond to the notice of intent to dismiss. The very reason the plaintiff was hiring a new lawyer was that his first lawyer had not prosecuted the suit. The reason the plaintiff did not respond to the notice of intent to dismiss was the plaintiff's substitution of counsel, which arrived at the clerk's office just after the clerk mailed the notice of intent to dismiss to the first lawyer. The period of inactivity was 16 months, not two years, as the defendants claim.
The lack of prosecution of the suit and the failure to respond to the notice of intent to dismiss cannot in this case be attributed to the plaintiff. Having found a new lawyer to prosecute the suit, and responded to the same concern as the trial court, the plaintiff should not be precluded from reaching the merits of his suit because of the unfortunate timing of the notice to substitute.
*903 The defendants argue that the plaintiff intentionally abandoned the suit. The plaintiffs intent to abandon the suit is not the test to determine whether dismissal for want of prosecution was proper; the test was whether plaintiff prosecuted case with due diligence. Phillips v. Welch, 749 S.W.2d 286, 288 (Tex.App.Fort Worth 1988, no writ) (dismissal affirmed because plaintiff offered no explanation for failure to appear at hearing or failure to prosecute); Texas Resources, Inc. v. Diamond Shamrock Corp., 584 S.W.2d 522, 524 (Tex. App.Beaumont 1979, no writ) (dismissal affirmed because defendant not served with citation even though case on file for eight years).
4. The appellate standard
The standard we apply to review the trial court's refusal to reinstate is whether the trial court abused its discretion. Armentrout v. Murdock, 779 S.W.2d 119 (Tex.AppHouston [1st Dist.] 1989, no writ); Mercure Co. v. Rowland, 715 S.W.2d 677, 680 (Tex.App.Houston [1st Dist.] 1986, writ refd n.r.e.). In exercising its discretion, the trial court may consider the entire history of the cause. Armentrout, 779 S.W.2d at 120. That is, we must ask if the trial court properly weighed the considerations of rule 165a: Was the failure to prosecute the suit intentional or the result of conscious indifference, or was it due to an accident or mistake or otherwise reasonably explained. If the trial court did not properly consider that standard, we must find that it abused its discretion.
The plaintiff argues that equity dictates reinstatement and refers us to Wyatt. In Wyatt, the court reversed the trial court's dismissal and refusal to reinstate, holding that the failings of counsel should not be attributed to the client. Wyatt, 693 S.W.2d at 733. The counsel's failure in Wyatt was that plaintiff's counsel arrived about a half hour late on the second day of trial. Id. at 732.
At first blush, the case before us seems distinguishable from Wyatt because the plaintiff's lawsuit in this case was dismissed after 16 months of inactivity, not a mere 30-minute lapse. Yet, if we examine the plaintiff's response to the inactivity in his case, we can hardly blame the plaintiff for his lawyer's default. Here, the plaintiff realized the case was not being prosecuted and took steps to secure another lawyer. The notice of intent to dismiss was sent at that critical time when new counsel was taking on a case and the clerk's office did not have the name and address of the soon-to-be new lawyer.
Both the trial court and the plaintiff had reasons to be unhappy with this case. The trial court did what it could to move the case by notifying the lawyer that the case would be dismissed; the plaintiff did what he could by securing the services of a new lawyer. The trial court should not have penalized the plaintiff by refusing to reinstate when the plaintiff filed a motion to reinstate telling the court that he, too, found the lack of prosecution unacceptable and took steps to cure it. The trial court should have reinstated the case when presented with the plaintiff's motion to reinstate.
We sustain points of error one and two. We do not find it necessary to reach point of error three.
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820 S.W.2d 240 (1991)
Johnny Leon BARNETT, Appellant,
v.
The STATE of Texas, Appellee.
No. 13-91-459-CR.
Court of Appeals of Texas, Corpus Christi.
December 5, 1991.
Rehearing Overruled December 30, 1991.
Gene N. Parrish, Dickinson, for appellant.
Michael J. Guarino, Denise V. Wilkerson, Galveston, for appellee.
Before NYE, C.J., and SEERDEN and BISSETT,[1] JJ.
OPINION
NYE, Chief Justice.
Appellant was convicted by a jury of sexual assault. (Tex. Penal Code Ann. § 22.011 (Vernon 1989). Due to an enhancement provision, the trial court assessed punishment at twenty-five years in prison, plus restitution for court costs and for his court appointed attorney's fees. By one point of error, appellant complains of insufficient evidence to support his conviction, claiming that the record does not show that the act was done without the victim's consent. We affirm the judgment of the trial court.
In reviewing sufficiency of the evidence claims, we view the evidence in the light most favorable to the verdict to determine whether any rational trier of fact could have found all the essential elements of the crime beyond a reasonable doubt. Jackson v. Virginia, 443 U.S. 307, 319, 99 S. Ct. 2781, 2788, 61 L. Ed. 2d 560 (1979); Houston v. State, 663 S.W.2d 455 (Tex.Crim.App. 1984) (en banc); Bannach v. State, 704 S.W.2d 331, 333 (Tex.App.Corpus Christi 1983, no pet).
Appellant, who is a double amputee with two wooden legs, had been out drinking with a friend on the night of the charged incident. His friend, Dale Cheek, the complaining witness's uncle, invited appellant *241 to stay with him and his family that night. Members of Dale's household include his mother, Essie Smothers, and Dale's seventeen-year-old-nephew, Troy Cheek, the complainant. Troy was described as being a small young man, physically weak, and the evidence showed that he has a diminished mental capacity. Although he is not retarded, Troy's I.Q. (74) is very close to the level recognized as retarded (69-70). At the time of this offense, he functioned at the level of an eight-year-old. According to the record, his diminished mental capacity possibly resulted from physical abuse suffered as a child. Nevertheless, Troy testified that on the night in question, appellant came into his room, and, on pretext of being cold, asked if he could get in bed with him. Troy did not deny appellant permission, and so appellant disrobed, removed his legs, and climbed into the bed. Troy testified that appellant asked him if he had ever had any sexual experience, and Troy answered no. With that, appellant began to rub Troy's chest and penis, and then appellant climbed on top of him, straddled him, and forced his penis into Troy's mouth. Troy further testified that appellant's hands were on his head, and appellant was "pulling on [Troy's] head" in order to "jack him[selfj off." While this was going on, Troy stated, "I started to get up, but he [appellant] kind of, not shoved it but kind of put my head back down." The complainant testified on cross-examination that appellant did not "force" him down but he "pushed" his head down. Troy also stated that he was afraid of appellant, but that he could have gotten out of bed when appellant began to fondle him. He also said that his uncle probably would have come to help him if he had called for help, but that he did not cry out because he was scared to death and because the force of the penis in his mouth gagged him.
Ms. Smothers had gotten up during the night and discovered appellant with Troy when she heard "a peculiar noise" coming from Troy's room. She testified that, upon entering the room, she saw "bodies on the bed and under covers." She asked appellant to leave, which he did after gathering his belongings. She testified that she found Troy "wringing wet with sweat, ice cold, and shaking."
The State was required to prove that appellant "did intentionally or knowingly cause penetration of the mouth of Troy Cheek by inserting the penis of [appellant] into the mouth of Troy Cheek without ... consent by compelling Troy Cheek to submit or participate by the use of physical force or violence, and that Troy Cheek was not the spouse of [appellant]." Appellant claims that there is insufficient evidence to convict under this charge because the State failed to show a lack of consent by means of a knowing or intentional use of physical force or violence. Appellant bases his "consent" argument upon the fact that Troy offered virtually no resistance, there were no overt threats, and complainant suffered no injury or bruises.
Sexual assault is without consent if the actor compels the other person to submit or participate by the use of physical force or violence. Hernandez v. State, 804 S.W.2d 168, 169 (Tex.AppHouston [14th Dist.] 1991, pet. ref'd); Texas Penal Code Ann. § 22.011(b)(1) (Vernon 1989). Under this statute, sexual assault victims are no longer required to resist, as the emphasis is now upon the actor's compulsion rather than the victim's resistance. Wisdom v. State, 708 S.W.2d 840, 842-43 (Tex.Crim. App.1986); Bannach, 704 S.W.2d at 332-33. The issue before us, then, is whether sufficient evidence exists to show that appellant compelled Troy's submission by the use of actual force. Garcia v. State, 750 S.W.2d 922 (Tex.App.Corpus Christi 1988, no pet.). From our review of the record, we find sufficient evidence to satisfy this issue. Troy's testimony that appellant straddled his chest, moved Troy's head apparently in a thrusting motion, and pushed Troy's head back down when he attempted to get up, is sufficient to indicate force. Troy further stated, "[H]e didn't force me down; but he pushed my head back on the pillow. And I tried to get up and he forced it down."
Although Troy's testimony was somewhat inconsistent on the use of the *242 word "force," his therapist testified that young people who have suffered abuse as children (as Troy had), often equate the word "force" only with physical beatings. The jury heard this evidence, and they were able to evaluate it in light of Troy's testimony and his demeanor at trial. The victim's diminished mental capacity, along with all of the other evidence, could be considered by the jury in determining the sufficiency of the evidence upon the issue of physical force and consent. Bannach, 704 S.W.2d at 333 (consent is to be determined from the totality of the circumstances); see generally Wootton v. State, 799 S.W.2d 499 (Tex.App.Corpus Christi 1990, pet. ref'd) (expert testimony that retarded individuals are generally trusting and cooperative, and that complainants were incapable of appraising nature of sexual act and resisting it, supported conviction of sexual assault of retarded adults who functioned at the level of six-year-old children). Moreover, inconsistencies in testimony are resolved in favor of the verdict. Goudeau v. State, 788 S.W.2d 431, 434 (Tex.App.Houston [1st Dist.] 1990, no pet.). In Hernandez, the evidence was held to be sufficient to show "physical force or violence" when the complainant resisted by attempting to pull away from her assailant but he forcibly restrained her. Hernandez, 804 S.W.2d at 169-70. The evidence supported a jury finding of submission compelled by force or violence in Bannach in which the victim testified that she faked acquiescence and did exactly what her attacker ordered because she feared for her life and wanted to avoid getting hurt. Bannach, 704 S.W.2d at 333. Neither of these cases required overt threats or beatings to show "physical force or violence."
We find that, in viewing the evidence in the light most favorable to the jury verdict, any rational trier of fact could have found beyond a reasonable doubt that Troy's submission and participation were compelled by appellant's use of actual force and violence. Appellant's sole point of error is overruled.
The judgment of the trial court is AFIRMED.
NOTES
[1] Assigned to this Court by the Chief Justice of the Supreme Court of Texas pursuant to Tex. Gov't Code Ann. § 74.003 (Vernon 1989).
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820 S.W.2d 946 (1991)
Ronnie RHEM, Appellant,
v.
The STATE of Texas, Appellee.
No. 01-91-01288-CR.
Court of Appeals of Texas, Houston (1st Dist).
December 5, 1991.
*947 John C. Kuhn, Austin, for appellant.
John B. Holmes, Harris County Dist. Atty., for appellee.
Before TREVATHAN, C.J., and COHEN and O'CONNOR, JJ.
ORDER
O'CONNOR, Justice.
Appellant, Ronnie Rhem, filed a motion for a remand under Tex.R.App.P. 53(m) and a motion to extend the time to file the statement of facts. The State did not file a response.
On July 22, 1991, appellant pled nolo contendere to possession of a controlled substance with the intent to deliver, and was sentenced to 25 years confinement and a $50,000 fine. On August 9, 1991, appellant asserts he made a timely request to the court reporter to prepare a statement of facts from the plea proceeding as required by Tex.R.App.P. 53(a). In his motion, appellant says the court reporter notified him by telephone that she did not record the plea proceeding. On August 20, 1991, appellant presented a notice of appeal to the district clerk for filing as required by Tex.R.App.P. 40(b)(1). The notice of appeal in the district court's file contains a notation that the clerk received it for filing on August 20, 1991, and that the trial court "refused" to grant appellant an appeal.[1]
Appellant's motions request this Court (1) to place the original notice of appeal on this Court's docket; (2) to remand this case for a hearing to determine the reasons for the trial court's refusal to grant a notice of appeal; (3) to remand this case for a hearing to determine the court reporter's failure or refusal to prepare a statement of facts; (4) to grant appellant such other relief to which he may be entitled; and (5) to grant him an extension of time until November 23, 1991, to file a statement of facts, if any.
The first question we must decide is whether appellant properly perfected his appeal, conferring jurisdiction in this Court over the appeal. In a criminal case where no motion for new trial is filed, an appeal is perfected by filing a notice of appeal within 30 days after the day sentence is imposed or suspended in open court or the day an appealable order is signed by the trial court. Tex.R.App.P. 41(b)(1). Here, appellant perfected his appeal when he presented his timely notice of appeal to the district clerk for filing on August 20, 1991. A document is considered filed when delivered to the clerk for filing. See, e.g., Ex parte Leifeste, 127 Tex. Crim. 445, 77 S.W.2d 675, 676 (App.1934) ("filing" is complete when a paper is delivered to the proper official, whose duty is to file the paper among the records); Young v. State, 28 Tex. Crim. 621, 218 S.W. 754 (App.1920) (delivery of the statement of facts to the clerk of the trial court within the time allowed by law held to constitute a sufficient filing); Tex.R.App.P. 40(b)(1) (requires written notice of appeal to be filed with the clerk of the trial court). We apply the same rule in civil cases. See, e.g., Biffle v. Morton Rubber Ind., Inc., 785 S.W.2d 143, 144 (Tex. 1990) (an instrument is deemed filed at the time it is delivered to the clerk). This Court, therefore, has jurisdiction over the *948 appeal, See Jones v. State, 796 S.W.2d 183, 186 (Tex.Crim.App.1990) (once a notice of appeal has been timely filed in a case, this Court acquires jurisdiction of that case).
The next question we must decide is whether the trial court has any discretion to "refuse" appellant's appeal based on the proviso in rule 40(b)(1). The proviso in rule 40(b)(1) regulates the extent of the grounds that a defendant can raise on appeal; it does not deprive this Court of jurisdiction over the appeal or give the trial court discretion to "refuse" an appeal. See Jones, 796 S.W.2d at 186. If a notice of appeal does not comply with the requirements of rule 40(b)(1), it fails to preserve any nonjurisdictional defects for appeal, but not because this Court lacks jurisdiction over the appeal. See Jones, 796 S.W.2d at 186. Whether appellant's notice of appeal complies with rule 40(b)(1) is a question for this Court to decide, not the trial court. See Whitsitt v. Ramsay, 719 S.W.2d 333, 335 (Tex.Crim.App. 1986, orig. proceeding) (neither the trial court nor the district clerk have any discretion in regard to forwarding the notice of appeal to the appellate court); State v. Kolenda, 756 S.W.2d 39, 40 (Tex. App.Houston [1st Dist.] 1988, orig. proceeding) (whether a notice of appeal is effective is a question for the appellate court, not the trial court). The trial court had no discretion to "refuse" appellant's appeal.
We order the trial court to allow appellant's notice of appeal to be filed, and order the district clerk to file the notice of appeal showing that it was timely filed on August 20, 1991. We find it unnecessary to remand this case to the trial court under rule 53(m) for a hearing to determine the reasons for the trial court's refusal to grant a notice of appeal.
We grant appellant's request to remand this case to the trial court under rule 53(m) for a hearing to determine the reasons for the court reporter's refusal or failure to prepare a statement of facts. The trial court shall also determine whether appellant is indigent. For this purpose, the trial court shall conduct such hearings as may be necessary, make appropriate findings and recommendations, and prepare a record of the proceedings. If appellant is indigent, the trial court shall take such measures as may be necessary to assure the preparation of a statement of facts, if possible. The record so made, including any orders and findings of the trial court, shall be sent to this Court no later that 30 days from the date of this order. If appropriate, the record may include an affidavit rather than a statement of facts.
It is so ORDERED.
NOTES
[1] Apparently, the trial court "refused" appellant's appeal, because appellant's notice of appeal does not comply with rule 40(b)(1) by noting the trial court's permission to appeal. Under rule 40(b)(1), if a conviction is based on a nolo contendere plea pursuant to Tex.Code Crim. P.Ann, art. 1.15 (Vernon 1977), and the punishment assessed does not exceed the punishment recommended by the prosecutor and agreed to by the defendant and his attorney, to prosecute an appeal for a nonjurisdictional defect or error that occurred before entry of the plea, the notice of appeal must state that the trial court granted permission to appeal or specify that those matters were raised by written motion and ruled on before trial.
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319 B.R. 395 (2005)
In re SELHEIMER & CO.
Securities Investor Protection Corporation, Plaintiff,
v.
Edward P. Murphy, III, Defendant,
Edward P. Murphy, III, Third-Party Plaintiff,
v.
Perry Selheimer, Peter Cardamone, Ernest F. Grothe, Preston Heckler, and Edward Suarez, Third-Party Defendants.
Bankruptcy No. 02-0756. Adversary No. 04-0669.
United States Bankruptcy Court, E.D. Pennsylvania.
January 20, 2005.
*397 OPINION
STEPHEN RASLAVICH, Bankruptcy Judge.
Introduction
In this adversary proceeding, the Securities Investor Protection Corporation (SIPC) has filed suit against Edward P. Murphy, III, (Murphy) under § 723(a) of the Bankruptcy Code. SIPC now files this Motion for Partial Summary Judgment and Other Relief (the "Motion"). The motion seeks a finding that Murphy is liable to SIPC for over $250,000 in advances made on certain customer claims as well as future payments on unliquidated claims. It also requests a financial statement from Murphy pursuant to Bankruptcy Rule 1007(g). Murphy opposes the motion. For the reasons set forth below, the motion will be granted.
Standard for Summary Judgment
The instant motion for summary judgment is governed by Rule 56 of the Federal Rules of Civil Procedure ("Fed.R.Civ. P.").[1] Pursuant to Rule 56, summary judgment should be granted when the "pleadings, depositions, answers to interrogatories, and admissions on file, together *398 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." Fed. R.Civ.P. 56(c). For purposes of Rule 56, a fact is material if it might affect the outcome of the case. See Anderson v. Liberty Lobby, Inc., All U.S. 242, 248, 106 S. Ct. 2505, 2510, 91 L. Ed. 2d 202 (1986). The moving party has the burden of demonstrating that no genuine issue of fact exists. Celotex Corp. v. Catrett, All U.S. 317, 323, 106 S. Ct. 2548, 2552, 91 L. Ed. 2d 265 (1986).
The court's role in deciding a motion for summary judgment is not to weigh evidence, but rather to determine whether the evidence presented points to a disagreement that must be decided at trial, or whether the undisputed facts are so one sided that one party must prevail as a matter of law. See Anderson v. Liberty Lobby, Inc., All U.S. at 249-250, 106 S.Ct. at 2511. In making this determination, the court must consider all of the evidence presented, drawing all reasonable inferences therefrom in the light most favorable to the nonmoving party, and against the movant. See United States v. Premises Known as 717 South Woodward Street, 2 F.3d 529, 533 (3rd Cir.1993); J.F. Feeser, Inc. v. Serv-A-Portion, Inc., 909 F.2d 1524, 1531 (3d Cir.1990), cert, denied, 499 U.S. 921, 111 S. Ct. 1313, 113 L. Ed. 2d 246 (1991); Gould, Inc. v. A & M Battery and Tire Service, 950 F. Supp. 653, 656 (M.D.Pa.1997).
To successfully oppose entry of summary judgment, the nonmoving party may not simply rest on its pleadings, but must designate specific factual averments through the use of affidavits or other permissible evidentiary material that demonstrate a triable factual dispute. Celotex Corp. v. Catrett, All U.S. at 324, 106 S.Ct. at 2553; Anderson v. Liberty Lobby, Inc., All U.S. at 248, 106 S.Ct. at 2510. Such evidence must be sufficient to support a jury's factual determination in favor of the nonmoving party. Id. at 249, 106 S.Ct. at 2510. Evidence that merely raises some metaphysical doubt regarding the validity of a material fact is insufficient to satisfy the nonmoving party's burden. Matsushita Electric Industrial Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S. Ct. 1348, 1356, 89 L. Ed. 2d 538 (1986). If the nonmoving party fails to adduce sufficient evidence in connection with an essential element of the case for which it bears the burden of proof at trial, the moving party is entitled to entry of summary judgment in its favor as a matter of law. Celotex Corp. v. Catrett, All U.S. at 322-23, 106 S.Ct. at 2552.
The Factual Record
Debtor, which was formed as a partnership in 1967, was in the business of acting as a securities broker-dealer and providing other financial services until December 7, 1994, when it closed its business because of the presence at the firm of investigators from the Securities and Exchange Commission ("SEC"). Motion at ¶ ¶ 1-2, 5.[2] At all relevant times, Debtor was registered as a securities broker-dealer with the SEC and was a member of SIPC. Id. ¶ 3.
As a result of the SEC's investigation, Selheimer who, at all relevant times, was the managing general partner of the Debtor was charged with various criminal defalcations; he eventually pleaded guilty to *399 mail fraud. Id. ¶ 6. In connection with his guilty plea, Selheimer agreed that: (i "the relevant conduct for the offense of conviction includes [his] sale of the securities and other funds provided to him by" Edwin Fugate, Best, Murphy, his sister, Deborah Stone, and their mother, Jeanne Murphy; and (ii) the offense involved an "abuse of trust." Exhibit G to Motion at ¶ 7(a) & (c). See also Motion ¶ 7; Answer ¶ 7.
On September 8, 1997, pursuant to the requirements of Section 78fff-4(b) of the Securities Investors Protection Act, 15 U.S.C. §§ 78aaa, et seq., SIPC caused notices to be published and mailed of the commencement of a "direct payment procedure" with respect to the Debtor. Motion ¶ 8, Ex. A. On September 26, 1997, in accordance with 15 U.S.C. § 78fff-4, SIPC issued a determination in the "direct payment procedure" allowing the customer claim of the Fugate Estate in the amount of $63,963.12. Id. ¶ 9. SIPC paid the Fugate Estate's claim in the aforementioned amount and received a release and an assignment of any claims that the claimant might have against others. Id. ¶ 10. See also 15 U.S.C. § 78fff-3 ("To the extent moneys are advanced by SIPC ... to pay or otherwise satisfy the claims of customers...., SIPC shall be subrogated to the claims of such customers with the rights and priorities provided in this chapter[.]"). Murphy did not participate in SIPC's determination regarding the Fugate Estate's claim. Answer ¶ 14.
At about the same time, SIPC denied the customer claims of: (i) Best and her son; (ii) Murphy; (iii) his sister; (iv) their mother; and (v) Murphy's employee benefit plans. Motion ¶ 11, Ex. D; ¶ 14, Ex. J. In accordance with 15 U.S.C. § 78fff-4(e), Best commenced a civil action in this Court challenging SIPC's denial of her and her son's claim (the "Best Claim"). Id. ¶ 11, Ex. D. On October 13, 1999, this Court issued an Order/Memorandum granting "in substantial part" SIPC's motion for summary judgment as to the Best Claim. Id ¶ 12, Ex. D. See also Best v. Selheimer, 1999 WL 890930 (Bankr. E.D.Pa.1999). Shortly thereafter, the Best Claim was settled. Motion ¶ 13, Ex. E. SIPC paid $25,000 in full satisfaction of the claim and received a release and an assignment of any claims that the claimant might have against others. Id. Murphy did not participate in SIPC's determination regarding the Best Claim. Answer ¶ 14.
Similarly, on October 3, 2000, Murphy, his sister, their mother and Murphy's employee benefit plans commenced a proceeding (the "First Proceeding") in this Court challenging SIPC's denial of their customer claims in the direct payment procedure. Id. ¶ 14, Ex. J. Following an evidentiary hearing, this Court issued an Opinion ("April 4th Opinion") and Order dated April 4, 2002 ("April 4th Order"), reversing SIPC's determination that Murphy's sister and his mother were ineligible customers under the statute but upholding the SIPC's denial of the customer claims belonging to Murphy and his benefit plans. Id. ¶ 16. See also Exhibit J to Motion. With regard to Murphy, this Court ruled that because a Certificate of Limited Partnership was never filed on behalf of Debtor, Murphy must be treated as a general rather than a limited partner of the firm. Id. at 18-19. Under 15 U.S.C. § 78fff-3, customers who are general partners of a debtor are ineligible for payment of their customer claims. See 15 U.S.C. § 78fff-3(a)(4). On June 13, 2002, this Court subsequently issued an Opinion (the "June 13th Opinion") and Order denying a motion for reconsideration. Motion ¶ 18. See also Exhibit S to Motion at 5. In its June 13th Opinion, this Court observed that Murphy's arrangement with the Debtor "insulated him from participation in the *400 firm's profits and losses." See Exhibit K to Motion at 5. Murphy thereafter appealed to the District Court. Motion 1118.
On June 19, 2002, SIPC commenced a liquidation proceeding in the District Court concerning the Debtor under 15 U.S.C. §§ 78fff-4(f), 78eee(a)(3). Id. ¶ 19. See also Exhibit S to Motion at 5. The District Court appointed SIPC as trustee and transferred the proceeding to this Court. Id.
In mid-August of 2002, Selheimer, as Debtor's general managing partner, verified Debtor's Schedule of Assets which show that the estate has no assets except for the possible claims against Debtor's general partners. Motion ¶ 22, Ex. N. Selheimer also testified at the meeting of creditors which was conducted in the liquidation proceeding that Debtor has no assets except for the possible claims against its general partners. Id. ¶ 23, Ex. O
In September of 2002, SIPC advanced $162,195.00 to Murphy's sister in accordance with its revised determination of her claim. Id. ¶ 24, Ex. P. In exchange, SIPC received a release and an assignment (to the extent of such payment) of all rights that she might have against any other person or entity arising out of or relating to her account with the Debtor. Id.
Thereafter, the District Court affirmed this Court's April 4th Order upholding SIPC's denial of claims but found it unnecessary to address this Court's ruling that Murphy was a general partner of the Debtor. Id. ¶ 26, Ex. R. See also Murphy v. Selheimer & Co. (In re Murphy), 2003 WL 21993955 (E.D.Pa.). On April 6, 2004, the Court of Appeals issued its Opinion and Judgment affirming the District Court. Id. ¶ 27, Ex. S. The Court of Appeals specifically affirmed this Court's ruling that, as to third parties and creditors, Debtor should be considered a general partner of Debtor since no certificate of limited partnership was ever filed for Debtor with the State. Id. at 11-12.
On June 21, 2004, SIPC issued its redetermination of Jeanne Murphy's claim, allowing that claim "in the sum of $840,667 consisting of a claim for cash in the amount of $594,713 and a claim for securities in the amount of $245,954." Motion ¶ 25, Ex. Q; ¶ 29, Ex. T. Currently, there are no funds constituting property of the Debtor's estate; SIPC has advanced all funds distributed to date for the payment of customer claims and administrative expenses. Id. ¶ 30, Ex. U.
SIPC commenced the instant adversary proceeding (the "Second Proceeding") on June 6, 2004 by filing a complaint (the "Complaint"). In the Complaint, SIPC alleges that: (i) Debtor is properly treated as a Pennsylvania general partnership and Murphy as a general partner of the Debtor; (ii) there is a deficiency of property of the estate to pay in full certain claims which have been or may be allowed in the proceeding for the liquidation of the Debtor; and (iii) Murphy is liable for such deficiency under § 723 of the Code and applicable Pennsylvania law. Complaint ¶ ¶ 14-7.
After Murphy filed an answer to the Complaint, SIPC filed its Motion to which Murphy filed his Answer. A hearing on the Motion was held on October 19, 2004. Approximately four days later, Murphy filed a memorandum of law raising a legal argument involving § 8331 of the Pennsylvania Uniform Partnership Act (UPA). See Memorandum of Law in Opposition to Motion of Securities Investor Protection Corporation as Trustee for a Partial Summary Judgment and Other Relief ("Murphy's Additional Memorandum"). The Parties' Positions
SIPC maintains that the record establishes Murphy's liability as a partner of a *401 bankrupt partnership. Over the course of his Answer, Memorandum and Supplemental Memorandum, Murphy offers four reasons why summary judgment is not appropriate:
1. The record does not show that Murphy was a general partner of Selheimer & Co.
2. The record does not support any finding of liability which may be imputed to Murphy as a partner of Selheimer & Co.
3. Murphy's lack of any right to the profits of Selheimer & Co. effectively caps his liability to SIPC at zero.
4. The record does not show that Murphy was a party to the determinations of the Best and Fugate Estate claims; therefore, those claims should not be included in any deficiency charged to him.
The Operative Bankruptcy Code Provision
In filing suit against Murphy, SIPC proceeds under section 723 of the Code:
If there is a deficiency of property of the estate to pay in full all claims which are allowed in a case under this chapter concerning a partnership and with respect to which a general partner of the partnership is personally liable, the trustee shall have a claim against such general partner to the extent that under applicable nonbankruptcy law such general partner is personally liable for such deficiency.
11 U.S.C. § 723(a). The statute's predicate for partner liability is that a deficiency exists. See In re Massetti, 95 B.R. 360, 365 (Bankr.E.D.Pa.1989) (citing legislative history of § 723 which states that to the extent that there is a partnership deficiency, each general partner is liable to the partnership trustee for that shortfall)
Does the Record Demonstrate a Deficiency?
To date, SIPC has advanced over $251,000 to pay customer claims and another $215,000 for administrative claims.[3] On top of that, it has determined the customer claim of Jeanne Murphy at approximately $841,000.[4] Motion, Ex. T. But SIPC has no more than $5000 in cash. Motion, Ex. U. Mr. Selheimer confirmed that the partnership has no assets save the claims against the general partners. Motion, §§ 22,23. The record shows then that the partnership estate will be deficient. Consequently, SIPC has turned to Murphy qua partner to recover the payments already made as well as those anticipated. Issue Preclusion and the Finding that Murphy is a General Partner
Murphy argues first that there is no proof in this proceeding that he was a general partner of the Selheimer & Co. Answer, 2. SIPC contends that the doctrine of issue preclusion operates to prevent Murphy from arguing that the issue remains triable. Transcript 10/19/04 (T-)5.
Issue preclusion, known traditionally as collateral estoppel, "prevents the relitigation of issues that have been decided in a previous action." Hawksbill Sea Turtle v. Federal Emergency Management Agency, 126 F.3d 461, 474 (3d Cir.1997). See Montana v. United States, 440 U.S. 147, 153, 99 S. Ct. 970, 59 L. Ed. 2d 210 (1979) ("Once an issue is actually and necessarily determined by a court of competent jurisdiction, that determination is conclusive in subsequent suits based on a different cause of action involving a party *402 to the prior litigation."). "Issue preclusion is based upon the policy that `a losing litigant deserves no rematch after a defeat fairly suffered, in adversarial proceedings, on an issue identical in substance to the one he subsequently seeks to raise.'" Dici v. Commonwealth of Pennsylvania, 91 F.3d 542, 547 (3d Cir.1996) (quoting Astoria Fed. Sav. & Loan Ass'n v. Solimino, 501 U.S. 104, 107, 111 S. Ct. 2166, 115 L. Ed. 2d 96 (1991)). As the Third Circuit explained "[t]he doctrine of issue preclusion reduces the costs of multiple lawsuits, facilitates judicial consistency, conserves judicial resources, and `encourage[s] reliance on adjudication.'" Did 91 F.3d at 547 {quoting Allen v. McCurry, 449 U.S. 90, 94, 101 S. Ct. 411, 415, 66 L. Ed. 2d 308 (1980)).
The general rule is that issue preclusion applies if the following four factors are met: (1) the issue sought to be precluded is the same as that involved in the prior action; (2) the issue was actually litigated; (3) there was a valid and final judgment; and (4) the determination was essential to the prior judgment. National Railroad Passenger Corp. v. Pennsylvania Pub. Util. Comm'n, 288 F.3d 519, 525 (3d Cir.2002). Murphy does not appear to directly challenge any of the four elements of issue preclusion. This is not surprising as the Court finds all four element to exist here: The issue of whether Murphy was a partner is the same issue raised in the previous proceeding (Motion, Ex. J., Opinion, 17-19); that issue was thoroughly litigated by both parties (id.); there was a valid and final judgment entered (id.); and the finding that Murphy was a partner meant that his "customer" claim would be denied. Id. 18-19.
Murphy is vague as to why he may relitigate the partnership question. He talks of this proceeding being "separate and distinct" from the prior adversary action. Answer, 2. But that is precisely the context in which collateral estoppel is applied. He goes on to maintain that "he should now have the opportunity to litigate whether he was a partner since the issue in these proceedings is not whether he should be entitled to have his claim paid but whether or not he should be liable to SIPC with respect to claims which SIPC paid." Answer, 3.[5] But that, too, has nothing to do with collateral estoppel. Germane to both issuescustomer status under SIPA and partnership deficiency liability under the Bankruptcy Codeis the finding of partner status. So it would not be until the hearing that Murphy would explain his position as being grounded in the equities. Murphy argues that Selheimer has already "victimized" him by embezzling his money. 16. To require him to make up the very deficiency caused by Selheimer without allowing Murphy the opportunity to challenge the premise of that liabilityhis status as a partneris, says Murphy, simply unfair. T-17, 18. And as the Third Circuit has explained, this general notion of fairness matters when a party asserts issue preclusion:
This general rule [of collateral estoppel] is subject to a number of equitable exceptions designed to assure that the doctrine is applied in a manner that will serve the twin goals of fairness and efficient use of private and public litigation resources. The equitable factors to be considered in a particular case depend in part on (1) whether both parties to the subsequent suit were also parties to the first so that there is "mutuality of estoppel," see Blonder-Tongue Labs., Inc. v. University of III. Found., 402 U.S. 313, 328-29, 91 S. Ct. 1434, 28 L. Ed. 2d 788 *403 (1971) and (2) whether the estoppel is being asserted (a) "offensively" by a plaintiff seeking to estop a defendant from relitigating issues which the defendant has previously litigated and lost, or (b) "defensively" by a defendant seeking to estop a plaintiff from relitigating an issue which the plaintiff has previously litigated and lost, [citation omitted].
National Railroad, 288 F.3d at 525. In cases, such as this one, where offensive mutual collateral estoppel is raised, the trial judge should refrain from applying the doctrine if it would be unfair to the defendant. Parklane Hosiery Co., Inc. v. Shore, 439 U.S. 322, 331, 99 S. Ct. 645, 652, 58 L. Ed. 2d 552 (1979).
The relevant equitable factors to be considered in a case of mutual collateral estoppel are summarized in Section 28 of the Restatement of Judgments:
Although an issue is actually litigated and determined by a valid and final judgment, and the determination is essential to the judgment, relitigation of the issue in a subsequent action between the parties is not precluded in the following circumstances:
(1) The party against whom preclusion is sought could not, as a matter of law, have obtained review of the judgment in the initial action; or
(2) The issue is one of law and (a) the two actions involve claims that are substantially unrelated, or (b) a new determination is warranted in order to take account of an intervening change in the applicable legal context or otherwise to avoid inequitable administration of the laws; or
(3) A new determination of the issue is warranted by differences in the quality or extensiveness of the procedures followed in the two courts or by factors relating to the allocation of jurisdiction between them; or
(4) The party against whom preclusion is sought had a significantly heavier burden of persuasion with respect to the issue in the initial action than in the subsequent action; the burden has shifted to his adversary; or the adversary has a significantly heavier burden than he had in the first action; or
(5) There is a clear and convincing need for a new determination of the issue (a) because of the potential adverse impact of the determination on the public interest or the interests of persons not themselves parties in the initial action, (b) because it was not sufficiently foreseeable at the time of the initial action that the issue would arise in the context of a subsequent action, or (c) because the party sought to be precluded, as the result of the conduct of his adversary or other special circumstances, did not have an adequate opportunity or incentive to obtain a full and fair adjudication in the initial action.
Restatement (Second) of Judgments § 28 (1982). See National Railroad, 288 F.3d at 526 (applying § 28 of the Restatement); see also Restatement § 28, Comment g (explaining that the application of this section is for the "rare exception" to the doctrine of issue preclusion). The Court now turns its attention to determine whether any of the exceptions would apply.
Subsection (1) would not apply because review was available to Murphy. Subsection (2) is not applicable because the issue here is factual, and not legal. Subsection (3) is not operative because the procedures in both the prior and present proceedings are the same. Subsections 5(a) and (c) would not apply because, as to (a), neither the public interest nor that of a third party is implicated here, and as to (c), there is no indication that circumstances beyond Murphy's control compromised his case. That leaves subsections (4) and (5)(b). To determine *404 if either apply, further analysis is required.
Absent Preclusion, Would SIPC's Burden of Proof Differ in this Proceeding?
Under subsection (4), an issue adjudicated in a prior proceeding will not be given later preclusive effect if that would relieve the party asserting estoppel from having to meet a higher standard of proof. See O'Shea v. Amoco Oil Co., 886 F.2d 584, 593-94 (3d Cir.1989). Is that the risk posed here?
In the prior proceeding, SIPC did not have to prove that Murphy was a partner of Selheimer & Co. until Murphy had met his threshold burden of proving that he was a "customer" as defined by SIPA. See In re John Dawson & Assoc., Inc., 271 B.R. 561, 565 (Bankr.N.D.Ill.2001) ("A customer seeking a SIPA advance, like a creditor asserting a priority claim bears the burden of proof with respect to thenstatus as a customer.). Murphy was able to meet this burden because the parties stipulated that all of the investments claimed by Murphy were on the books and records of Selheimer & Co. See Motion, Ex. J., Opinion, 3; see also 15 U.S.C. § 78fff-2(b) (providing that customer's claim must be "ascertainable from the books and records of the debtor" or "otherwise established to the satisfaction of the trustee"). That shifted to SIPC the burden of proving that Murphy was, notwithstanding, disqualified from customer status. SIPC would do this by demonstrating that Murphy was a general partner of Selheimer & Co.[6] Motion, Ex. J., Opinion, 17-18. And the standard of proof applied by the Court was the standard applicable to conventional civil litigation: the preponderance of the evidence. See Price Waterhouse v. Hopkins, 490 U.S. 228, 253, 109 S. Ct. 1775, 1792, 104 L. Ed. 2d 268 (1989) (noting that ordinary civil litigation is determined by the preponderance of the evidence standard); see also Sudimak v. Pillus, 881 F. Supp. 152, 158 (E.D.Pa.1995) (noting the same).
In this proceeding, SIPC is required to prove very same thing, except that this time SIPC is the plaintiff. To impute deficiency liability to Murphy, SIPC must prove that he was a partner. And the same standard of evidence, i.e., preponderance, applies. So considering that the same proof would be applied to the same standard, there would be no unfairness in applying the preclusionary doctrine. If the outcome would be the same, then requiring SIPC to try the same issue would be an academic exercise. That leads the Court to conclude that the considerations of subsection (4) are not relevant here. Foreseeability of SIPC's Subsequent Use of the Finding That Murphy Was a Partner
This final exception to the rule of collateral estoppel inquires whether it was not foreseeable that same issue would arise in later litigation. See Restatement (Second) of Judgments § 28(5)(b). Helpful to an understanding of this exception is the following comment:
i. Unforeseeability that issue woidd arise in the context of the second action. As noted in § 27, Comment J., it is not necessary to the application of the rule of preclusion that the issue be one of "ultimate fact" in either the first or the second action. But at the same time, preclusion should not operate to foreclose redetermination of an issue if it was unforeseeable when the first action was litigated that the issue would arise in the context of the second action, and if that lack of foreseeability may have contributed to the losing party's failure *405 to litigate the issue fully. Such instances are rare, but they may arise, for example, between institutional litigants as a result of a change in the governing law. Thus, a determination in an action between the taxing authorities and a corporate taxpayer that a transfer of property has not occurred may become relevant to a wholly different question of liability under an amendment to the tax law passed after the initial judgment was rendered. Another example of a case in which a determination may have unforeseeable consequences is one in which that determination is relevant to a claim involving property acquired after the first judgment has become final.
Restatement (Second) Judgment § 28, Comment i (emphasis added).
As to whether subsequent use of the partnership finding should have been foreseen by Murphy, the Court points out that "[a]dversary proceedings in bankruptcy are not distinct pieces of litigation; they are components of a single bankruptcy case." Cohen v. Bucci, 905 F.2d 1111, 1112 (7th Cir.1990). The two adversary proceedings in this case are components of the larger liquidation which the Bankruptcy Code governs. However, that does not necessarily indicate that Murphy should have anticipated that if he were found to be a partner, then SIPC would sue him for a partnership deficiency. At that point in the insolvency, SIPC had not yet converted the case from a direct payment to a liquidation proceeding.
But even assuming Murphy could not reasonably have anticipated a second suit, the Court does not believe that this affected how he litigated the partner question. The Court can say with certainty that both parties litigated this issue to the fullest degree. And Murphy never states that had he known that the Trustee would later sue him then he would have put on his case differently. He merely asks the Court to look again at the same evidence: the issuance of Schedule K-l's and whether the other partners filed them with their tax returns. But as to the K-l's, the Court found probative Mr. Selheimer's testimony that they were issued to all partners including Murphy. And this was corroborated by the witness Groethe. Add to that the partnership's failure to file a Certificate of Limited Partnership, and the Court was persuaded that Selheimer & Co. was a general partnership under Pennsylvania law and that Murphy was one of its partners. So even if Murphy did not foresee that an adverse result on the partnership question would arise in later litigation, the outcome would have been the same. In short, the record supports SIPC's claim that the earlier finding that he was a partner should be given preclusive effect in this proceeding.
Does the Record Demonstrate Any Liability for Partner Misdeeds?
In a partnership bankruptcy, each general partner is liable only to the extent that such general partner was personally liable for the underlying claims against the partnership. 6 Collier on Bankruptcy § 723.02[1][b] (Matthew Bender 15th Ed. Revised). The determination of whether a general partner is personally liable has been held to be a matter of state law. In re CS Associates, 160 B.R. 899, 907 (Bankr.E.D.Pa.1993); 6 Collier § 723.02[2]. And in Pennsylvania a partner is jointly and severally liable for certain torts chargeable to the partnership:
All partners are liable ...
(1) Jointly and severally for everything chargeable to the partnership under sections 8325 (relating to wrongful act of partner) and 8326 (relating to breach of trust by partner).
15 Pa.CS. § 8327(1)
But Murphy contends that joint and several liability cannot be imposed on him *406 under that provision because the evidence does not reflect that the wrongful acts committed by Selheimer are chargeable to the partnership. In that regard, sections 8325 and 8326 of the UPA provide:
§ 8325. Wrongful act of partner Where, by any wrongful act or omission of any partner acting in the ordinary course of the business of the partnership or with the authority of his copartners, loss or injury is caused to any person, not being a partner in the partnership, or any penalty is incurred, the partnership is liable therefor to the same extent as the partner so acting or omitting to act.
§ 8326 Breach of trust by partner The partnership is bound to make good the loss:
(1) Where one partner, acting within the scope of his apparent authority, receives money or property of a third person and misapplies it.
(2) Where the partnership, in the course of its business, receives money or property of a third person and the money or property so received is misapplied by any partner while it is in the custody of the partnership.
15 Pa.C.S. §§ 8325, 8326. Do either of these sections apply to render Selheimer & Co.and thereby Murphy qua partner liable for the criminal conduct of Perry Selheimer?
Were the Wrongs Committed in the Ordinary Course of Selheimer & Co.'s Business?
Murphy maintains that he is not vicariously liable for Selheimer's acts because the record does not show that such conduct was within the ordinary course of business of the partnership as required by UPA § 8325. See Answer, 3. The term "ordinary course of business" equates to the scope of the firm's purpose. Baxter v. Wunder, 89 Pa.Super. 585, 1926 WL 4468 *2 (1926) ("Each member of a partnership is personally liable for a tort committed by a copartner acting in the scope of the firm business.... The test of the liability is based on a determination of the question whether the wrong was committed in behalf of and within the reasonable scope of the business of the partnership."); Tupper v. Haymond & Lundy, 2001 WL 936650 *9 (E.D.Pa.)(quoting same); see also Treon v. W.A. Shipman & Son, 119 A. 74, 275 Pa. 246, 249 (1922) (holding that if one partner commits a tort in respect to a matter foreign to the firm's business, the other partner is not liable, unless he authorized or adopted the wrongful act). And fraud committed within the apparent furtherance of the firm's business renders all partners liable. See First Nat.Bank of Altoona v. Turchetta, 181 A.2d 285, 287, 407 Pa. 511, 512 (1962) (holding a partnership liable for conversion embezzlement, fraud and deceit, misapplication of money or other wrongful conduct of partner or other agent if committed in actual or apparent scope of business).
The record demonstrates that Selheimer & Co. perpetrated its fraud under the guise of operating a brokerage firm. The partnership was a registered securities broker-dealer that accepted money from clients for investment purposes. Motion, §§ 2,3. Instead, Selheimer embezzled those funds. See Motion, Ex. G., § 7. Selheimer's criminal acts were performed within the normal operation of this partnership's business. Put another way, at the time Selheimer was defrauding clients, it was acting in the ordinary course of the partnership's business. The partnership is therefore liable for those acts of Mr. Selheimer. And if the partnership is liable for those debts, then individual partners, including Murphy, are jointly and severally liable as well. *407 Does the Record Demonstrate A Breach of Trust?
Alternatively, Murphy argues that there is no evidence of partnership liability under section 8326 because there is nothing to indicate that Selheimer was acting within the scope of his apparent authority when defrauding customers. In this Commonwealth, the doctrine of apparent authority has been incorporated into the principles of agency law. See Bolus v. United Perm Bank, 363 Pa.Super. 247, 260, 525 A.2d 1215, 1221 (1987). Apparent authority has been defined as "the power to affect the legal relations of another person by transactions with third persons, professedly as agent for the other, arising from and in accordance with the other's manifestations to third persons." Restatement (Second) of Agency § 8 (1958). The general rule governing the creation of apparent authority is:
Except for the execution of instruments under seal or for the conduct of transactions required by statute to be authorized in a particular way, apparent authority to do an act is created as to a third person by written or spoken words or any other conduct of the principal which, reasonably interpreted, causes the third person to believe that the principal consents to have the act done on his behalf by the person purporting to act for him.
Restatement (Second) of Agency § 27 (1958); Hartley v. United Mine Workers of America, 381 Pa. 430, 113 A.2d 239, 246 (1955). Apparent authority exists when a principal, by words or conduct, leads people with whom the alleged agent deals to believe the principal has granted the agent authority he or she purports to exercise. Turner Hydraidics, Inc. v. Susquehanna Constr. Corp., 414 Pa.Super. 130, 135, 606 A.2d 532, 534 (1992). Apparent authority may result when a principal permits an agent to occupy a position which, "according to the ordinary experience and habits of mankind, it is usual for that occupant to have authority of a particular kind." East Girard Sav. & Loan Ass'n v. Houlihan, 373 Pa. 578, 580, 97 A.2d 23, 24 (1953). The nature and extent of an agent's apparent authority is a question of fact for the fact-finder. Joyner v. Harleysville Insur. Co., 393 Pa.Super. 386, 393, 574 A.2d 664, 668 (1990).
Murphy misinterprets agency law when he argues that Selheimer lacked authority, express or apparent, to defraud clients. His argument operates from the erroneous premise that the record must show that Selheimer & Co., as principal, gave Perry Selheimer, as agent, license to steal. If that were so, then the doctrine of apparent authority would be eviscerated. What matters is whether Selheimer & Co. was authorized to accept client funds for investment. And the record shows that it certainly was: Selheimer & Co. was a broker-dealer registered with the SEC. See Motion, Ex. J. Mr. Selheimer formally admittedpleaded guilty, in factto having committed "an abuse of trust" as to his clients. Id. Ex. F, G, and I. Client confidence would not have been placed in him unless he held himself out as an honest broker-dealer of financial investments; otherwise, clients simply would have taken their business elsewhere. There is thus sufficient proof to support a finding that Selheimer was acting within his apparent authority when defrauding clients. That, in turn, supports a finding of liability as to the partnership which may by assessed against Murphy.
Does Section 8331 of the U P A Effectively Cap Murphy's Liability at Zero?
Murphy contends that he cannot be held liable, as a matter or law, for debts chargeable to Selheimer & Co. because he did not share in the profits of the *408 partnership. He relies in that regard on section 8331 of the UPA which provides, in pertinent part:
The rights and duties of the partners in relation to the partnership shall be determined... by the following rules:
(1) Each partner shall be repaid his contributions, whether by way of capital or advances to the partnership property, and share equally in the profits ... and must contribute toward the losses, whether of capital or otherwise, sustained by the partnership, according to his share in the profits.
15 Pa.C.S. § 8331(1) (emphasis added). Murphy concludes that because he did not share in the profits, he bears no liability to the creditors of Selheimer & Co. The flaw in this argument is correctly identified by SIPC. Murphy has misapplied the provision applicable to partner relations inter se (§ 8331 of Subchapter D"Relations of Partners to One Another") with the liability provisions of partners to third parties (Subchapter C"Relation of Partners to Person Dealing with the Partnership."). Murphy effectively attempts to limit the liability of a general partner to third persons through a contractual provision. Pennsylvania law will not allow this. See Siegel Bros v. Wood, 1894 WL 3509 *4 (1894). And, as SIPC points out, Murphy is not the first partner to make this argument. In In re CS Associates, 160 B.R. 899 (Bankr.E.D.Pa.1993), a general partner of a limited partnership sought to cap his liability to third parties at the 25% percent share of the profits and losses provided for him under the limited partnership agreement. The Bankruptcy Court would reject that argument pointing out that the UPA provision regulating the sharing of profits and losses of the limited partnership applied only to relations of the partners amongst themselves; it had no applicability to liability to third parties. Id. at 908-909. The same conclusion was reached in In re Labrum & Doak, LLP, 237 B.R. 275, 296 (Bankr.E.D.Pa.1999). Nothing in Murphy's relationship with Selheimer & Co. limits his liability to SIPC.
Assuming Murphy is Liable, Must he Reimburse SIPC For The Best and Fugate Estate Claims?
Once SIPC advances funds to pay a customer claim, it becomes subrogated to the claim of that customer. See 15 U.S.C. § 78fff-3(a); Appleton v. First National Bank of Ohio, 62 F.3d 791, 800 (6th Cir. 1995). Murphy does not dispute this but takes issue with having to pay toward the claims of the Fugate Estate and the Bests. See Answer, 4. He explains that because he was not a party to the adjudication of those two claims,[7] any summary judgment for a liquidated deficiency should not include the amount of those claims. T-18, 19. Implicit in this position is a claim of prejudice. Is Murphy entitled to challenge the amount of the Best and Fugate Estate claims at this time or are those determinations entitled to preclusive effect?
SIPC maintains that, as a matter of law, Murphy may not seek redetermination of the Best and Fugate Estate claims. Motion, 8; T-6,7. It relies on the following provision from SIPA:
(f) Discontinuance of direct payment procedures
If, at any time after the institution of a direct payment procedure with respect to a member, SIPC determines, in its discretion, that continuation of such direct *409 payment procedure is not appropriate, SIPC may cease such direct payment procedure and, upon so doing, may seek a protective decree pursuant to section 78eee of this title. To the extent payments of cash, distributions of securities, or determinations with respect to the validity of a customer's claim are made under this section, such payments, distributions, and determinations shall be recognized and given full effect in the event of any subsequent liquidation proceeding ...
15 U.S.C. § 78fff-4(f). Murphy's response to this is that assessing the amount of those two claims against him without opportunity to be heard is simply unfair. 19.
The Court has not come upon case law applying the highlighted language. However, the Court is mindful that "[t]he first step in interpreting a statute is to determine `whether the language at issue has a plain and unambiguous meaning with regard to the particular dispute in the case.'" Valansi v. Ashcroft, 278 F.3d 203, 209 (3d Cir.2002) (quoting Robinson v. Shell Oil Co., 519 U.S. 337, 340, 117 S. Ct. 843, 846, 136 L. Ed. 2d 808 (1997)). If the statutory meaning is clear, the Court's inquiry is at an end. Id; see also Liberty Lincoln-Mercury, Inc. v. Ford Motor Co., 171 F.3d 818, 822 (3d Cir.1999) ("In the absence of a specific statutory definition, the language of the statute should be given its ordinary meaning and construed in a common sense manner to accomplish the legislative purpose.") In this case, the language of the provision is quite clear. It expresses an intent to give preclusive effect to claim determinations made in direct payment proceedings. See Sheila Cheston, Investor Protection Under The SIPA: A Reassessment and Recommendations for Future Change, 19 Colum. J.L. & Soc. Probs. 69, 85 (1985) ("Claims that are wholly or partially satisfied or deemed as valid under the [direct payment proceeding] are recognized as such in the ensuing liquidation proceeding."). The advances to Best and the Fugate Estate were made by SIPC during the direct payment proceeding; they are entitled to full effect in the subsequent liquidation. Murphy, accordingly, is precluded from challenging the amount of those claims.
The Customer Claim of Jeanne Murphy
SIPC also asks the Court to enter summary judgment as to the unliquidated claim of Jeanne Murphy. Is that appropriate at this juncture?
Most cases considering the question have allowed the trustee to proceed under § 723 of the Code in advance of a precise determination of the amount of the deficiency. 6 Collier on Bankruptcy § 723.03[2][b]. A leading commentator explains why this is permitted:
Section 723(a) gives the trustee a claim against general partners of the partnership "if there is a deficiency of property of the estate to pay in full all claims which are allowed" in the partnership's chapter 7 case. While the language implies that the deficiency must first be determined before the trustee can maintain an action under section 723(a), doing so is not feasible for the trustee. It may take years for the trustee to liquidate all assets of the estate, determine the amount of all claims, and arrive at a precise amount for the deficiency. It would be impractical for the trustee to wait until the trustee has completed administration of the partnership's assets before seeking contributions from the general partners.
6 Collier on Bankruptcy § 723.02[3]. The usual threshold is that the trustee is able to prove with a reasonable degree of certainty that a deficiency will exist. Id. at § 723.02[3][b][i]; Marshack v. Mesa Valley *410 Farms, L.P. (In re The Ridge II), 158 B.R. 1016, 1022 (Bankr.C.D.Cal.1993) (summary judgment can be granted to trustee on issue of liability, with exact amount of recovery to be determined at later date); MBank Corpus Christi v. Seikel (In re 37 Gulf L.P.), 48 B.R. 647, 649 (Bankr. S.D.Tex.1985) (noting in dicta that trustee must first determine with reasonable certainty that a deficiency exists); John v. Lamb (In re Lamb), 36 B.R. 184, 189 (Bankr.E.D.Tenn.1983) (granting judgment in favor of trustee against general partner even though precise amount of deficiency not yet determined). But see Mills v. Grotewohl (In re Super 8 Fla. III, Ltd.), 211 B.R. 764, 765 (Bankr. M.D.Fla.1996) (trustee's motion for summary judgment denied because trustee had not demonstrated that there would be a deficiency).
In this case, SIPC has already advanced approximately $561,000 to customer and administrative claimants. Jeanne Murphy's customer claim will likely exceed that amount. With only $5000 in cash on hand, the Selheimer & Co. estate is certainly deficient. So even though there exist claims yet to be liquidated, the insolvency of this estate allows the Court to enter a deficiency judgment against Murphy. The amount of that judgment will be in the amount of the customer claims already advanced plus the allowed amount of the Jeanne Murphy customer claim.[8]
SIPC's Request for A Financial Statement from Murphy
SIPC's last request is that this Court direct Murphy to provide a financial statement as provided under Bankruptcy Rule 1007(g):
Partnership and partners
The general partners of a debtor partnership shall prepare and file the schedules of the assets and liabilities, schedule of current income and expenditures, schedule of executory contracts and unexpired leases, and statement of financial affairs of the partnership. The court may order any general partner to file a statement of personal assets and liabilities within such time as the court may fix.
B.R. 1007(g) (emphasis added). This provision recognizes that general partners are personally liable for the debts of the partnership and their assets may be reached by a chapter 7 trustee of the partnership in order to satisfy claims against the partnership. 9 Collier on Bankruptcy, § 1007.07. Rule 1007(g) leaves to the Bankruptcy Court's discretion whether such a financial disclosure should be required of the general partner. In re Narrows Realty Company, 1994 WL 62177 *1 (Bankr.M.D.Pa.) citing In Re 222 Liberty Associates, 108 B.R. 971, 988 (Bankr. E.D.Pa.1990).[9] Given that there will be a deficiency, Murphy should be required to file a statement of assets and liabilities with the Court.
Summary
The Court finds that summary judgment is appropriate to enter in a liquidated *411 amount for the $251,158.12 in claims advanced by SIPC and an additional $840,667 for the customer claim of Jeanne Murphy. This ruling is based on the finding that Selheimer & Co. is deficient; that Murphy was a partner of Selheimer & Co.; and that he is vicariously liable under Pennsylvania law for the acts of Perry Selheimer which are chargeable to Selheimer & Co. In short, all of the arguments offered by Murphy in opposition to the motion are rejected. Murphy shall be required to provide this Court and SIPC with a statement of his assets and liabilities.
An appropriate order follows.
ORDER
AND NOW upon consideration of the Motion of the Securities Investor Protection Corporation (SIPC) as Trustee for Partial Summary Judgment and Other Relief, the Answer of Defendant Edward P. Murphy, III, the briefs filed by the parties, and after a hearing held won October 19, 2004, it is hereby
ORDERED that summary judgment is entered in favor of SIPC and against Defendant Murphy in the amount of $251,158.12 for customer claims advanced by SIPC and in the amount of an additional $840,667 for the customer claim of Jeanne Murphy which has not yet been paid; and it is
FURTHER ORDERED that within thirty (30) days of the date of entry of this Order, Murphy shall furnish SIPC with a written statement of his assets and liabilities as provided by B.R. 1007(g).
NOTES
[1] Fed.R.Civ.P. 56 is applicable to the instant proceeding pursuant to Rule 7056 of the Federal Rules of Bankruptcy Procedure ("Fed. R.Bankr.P.")
[2] In his answer to the Motion, Murphy admitted the factual allegations. To the extent that it contains anything other than a complete admission, the answer adds to, or qualifies, what are collateral matters. See Answer of Defendant, Edward G. Murphy, III, to Motion of Securities Investor Protection Corporation as Trustee for Partial Summary Judgment and Other Relief ("Answer").
[3] The Securities Investor Protection Act (SIPA) provides for advances for customer claims. See 15 U.S.C. § 78fff-3.
[4] Ms. Murphy has since challenged that determination. Motion, § 29.
[5] At oral argument, Murphy couched his position in terms of general unfairness.
[6] The two statuses are, in this context, mutually exclusive. See 15 U.S.C. § 78fff-3(a)(4).
[7] The Fugate Estate was allowed and paid directly by SIPC in the direct payment proceeding. Motion, Ex. B. The Best claim was first denied by SIPC, litigated in this Court, and then settled. Motion, Ex. D.
[8] In its motion and at the hearing, SIPC explained that it did not seek to recover from Murphy the amount of the administrative claims. Motion, 12; T-2,8.
[9] The reason that the rule is not mandatory is because § 723 does not apply to Chapter 11 cases. However, the general partners of a Chapter 11 Debtor are required to contribute to cover any deficiency in partnership assets if the partnership liquidates. See 9 Collier § 1007.07. Moreover, a financial statement of each partner may be necessary to enable the court to determine whether a chapter 11 plan is in the best interests of creditors, i.e., whether creditors will receive more under the plan than in a chapter 7 liquidation. Id.
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https://www.courtlistener.com/api/rest/v3/opinions/1522135/
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524 A.2d 729 (1987)
Stephen Paul LAMPHIER, et al., Appellants,
v.
WASHINGTON HOSPITAL CENTER, Appellee.
No. 85-182.
District of Columbia Court of Appeals.
Argued February 13, 1986.
Decided April 21, 1987.
William O. Lockwood, Rockville, Md., for appellants.
James P. Schaller, Washington, D.C., for appellee.
*730 Before PRYOR, Chief Judge, and NEBEKER and STEADMAN, Associate Judges.
STEADMAN, Associate Judge:
Maryland resident Stephen Lamphier was seriously injured in a car accident on North Capitol Street in the District of Columbia. Lamphier and his wife (hereinafter Lamphier) accepted a settlement from Ronald Gordon, the other driver involved in the accident, and then sued the Washington Hospital Center (WHC) for negligent treatment of his injuries. The Superior Court granted summary judgment for WHC. Lamphier appeals. The question is whether as a matter of law, the settlement and release between Lamphier and Gordon bars Lamphier from suing WHC for malpractice. We conclude that it does not, and therefore reverse the summary judgment.
I. The Facts
Lamphier's car accident with Gordon occurred on November 10, 1979. Lamphier was rushed to WHC for treatment of his injuries, and remained hospitalized there until November 30, 1979. Lamphier's injuries included a ruptured spleen, broken ribs, and skull fractures. He also developed a permanent blood clot in his right leg, which causes pain and swelling and makes it difficult for him to walk.
In April 1980, Lamphier and his wife sued Gordon in the Circuit Court for Prince George's County, Maryland, seeking damages for Lamphier's injuries and his wife's loss of consortium. The parties decided to settle the claims, and on November 5, 1981, the Lamphiers signed a form release which provided in relevant part:
We, STEPHEN PAUL LAMPHIER AND CAROLYN LAMPHIER ... in consideration for the sum of $27,500 ... hereby remise, release, and forever discharge RONALD LESTER GORDON AND GOVERNMENT EMPLOYEES INSURANCE COMPANY, releasee(s), successors and assigns, and/or his, her or their associates, heirs, executors and administrators, and all other persons, firms or corporations of and from any and every claim, demand, right or cause of action of whatever kind or nature, on account of or in any way growing out of any and all personal injuries and consequences thereof, including, but not limited to, all causes of action preserved by the wrongful death statute applicable, any loss of services and consortium, any injuries which may exist but which at this time are unknown and unanticipated and which may develop at some time in the future, all unforeseen developments arising from known injuries, and any and all property damage resulting or to result from an accident that occurred on or about the 10th day of November 1979, at or near North Capitol Street, Washington, D.C., and especially all liability arising out of said accident including, but not limited to, all liability for contribution and/or indemnity....
Approximately one year after signing the release with Gordon, Lamphier filed suit against WHC in the District of Columbia Superior Court, alleging that WHC caused the permanent blood clot in his leg through negligent treatment of his accident injuries.[1] WHC moved for summary judgment, arguing that the general release executed between Lamphier and Gordon also released WHC from liability for any claims arising out of the November 10 accident. WHC also argued that the malpractice claim was barred because Lamphier had already recovered from Gordon for all of his accident-related injuries (including the permanent blood clot in his leg) and was entitled only to a "single satisfaction" for his damages.
Lamphier argued in opposition to summary judgment that his permanent blood clot was a separate injury independently caused by WHC's negligence, and that the release to Gordon was not intended to release WHC from liability for its malpractice.
*731 The trial court initially declined to grant summary judgment for WHC, noting that there remained a disputed factual issue as to whether Lamphier had suffered a separate malpractice injury during treatment of his accident injuries. WHC moved for reconsideration. WHC conceded that Lamphier's permanent blood clot "clearly resulted" from the treatment he received at WHC, but argued that Lamphier had already "fully recovered" from Gordon for "all injuries, including those separate, subsequent injuries, allegedly suffered at the hands of (WHC)." Upon reconsideration, the trial court granted summary judgment for WHC, concluding that Lamphier's recovery in satisfaction of his Maryland claim against Gordon "must be viewed as the single recovery allowed" for his injuries.
II. Applicable Law
As will become apparent later in this opinion, the law of Maryland and the District of Columbia is not necessarily the same as applied to tortfeasors of the type involved here. To determine whether D.C. or Maryland law should govern the effect of the release on the malpractice claim, we balance the competing interests of the two jurisdictions, and apply the law of the jurisdiction with the more "substantial interest" in resolution of the issue. See, e.g., Kaiser-Georgetown Community Health Plan, Inc. v. Stutsman, 491 A.2d 502, 509 (D.C. 1985); McCrossin v. Hicks Chevrolet, Inc., 248 A.2d 917, 921 (D.C.1969); Myers v. Gaither, 232 A.2d 577, 583 (D.C.1967). We first consider the connection between each jurisdiction and the case at hand, then analyze the relative importance of those contacts in light of the legal issues presented. Myers v. Gaither, supra, 232 A.2d at 583. This analysis requires us to evaluate the governmental policies underlying the conflicting laws to determine which jurisdiction's policy would be most advanced by having its law applied to the case under review. Kaiser-Georgetown, supra, 491 A.2d at 509, citing Williams v. Williams, 390 A.2d 4, 5-6 (D.C.1978).
The release was signed in Maryland between two Maryland residents in settlement of litigation brought in Maryland. However, in the case now before us, the release is raised as an affirmative defense to a malpractice claim made in a District of Columbia court against a District health care corporation for an injury that occurred in the District. "Choice of law involves examination not simply of various state interests generally, but of their interests regarding the various distinct issues to be adjudicated." Estrada v. Potomac Electric Power Co., 488 A.2d 1359, 1361 (D.C. 1985). We must therefore balance the relative interests of Maryland and the District of Columbia in determining whether the release between Lamphier and Gordon is a valid defense to the malpractice claim against WHC.
We conclude that the District of Columbia has the more substantial interest in applying its own law to interpret the release in the context of this case. The District has a strong and recognized interest in determining the liability of District health care corporations for negligence attributable to them that occurs within the District. Kaiser-Georgetown, supra, 491 A.2d at 509-10. By contrast, Maryland has little if any interest in applying its general release rule to limit the liability of a District of Columbia corporation which does not do business in Maryland, or to rights and liabilities of tortfeasors (including rights inter se) where the relevant tortious actions all occurred in the District. Since the public policy interests of Maryland and the District do not truly conflict under the circumstances presented here, and since the District has a substantial interest in applying its own law, we conclude that District law should govern the effect of the release as an affirmative defense to Lamphier's malpractice claim against WHC.
III.
The issue presented here is whether the settlement and release between Lamphier and Gordon with respect to injuries resulting from the car accident bars Lamphier from suing WHC for negligent treatment of those injuries. Summary judgment is appropriate only if there are no material facts at issue and it is clear WHC is entitled to judgment as a matter of law. See, *732 e.g., Nader v. deToledano, 408 A.2d 31, 41-42 (D.C.1979), cert. denied, 444 U.S. 1078, 100 S. Ct. 1028, 62 L. Ed. 2d 761 (1980); Super.Ct.Civ.R. 56(c). WHC's contention, in essence, is that the release as a matter of law is effective with respect not only to Gordon but also to WHC. Its argument is based upon two related propositions: first, that by its terms, the release executed by the Lamphiers covers WHC as well as Gordon and second, that as a matter of law, the "single satisfaction rule" here bars plaintiffs from recovering from WHC after having recovered against Gordon through the settlement.
A. Release of WHC.
"A release is a form of contract and normal rules of contract interpretation apply. The parties' intentions are paramount to construction of the instrument." Bolling Federal Credit Union v. Cumis Insurance Society, Inc., 475 A.2d 382, 385 (D.C.1984) (citations omitted). If the document is facially unambiguous, its language should be relied upon as proving that intent; if the document is ambiguous, extrinsic evidence of the parties' subjective intent may be resorted to. Davis v. Davis, 471 A.2d 1008, 1009 (D.C.1984). Extrinsic evidence may be considered also to determine the circumstances surrounding the making of the agreement, so that it may be ascertained what a reasonable person in the position of the parties would have thought the words meant. 1010 Potomac Assoc. v. Grocery Manufacturers, 485 A.2d 199, 205-06 (D.C.1984) (citations omitted).
We cannot say that the document before us is plain on its face in releasing WHC, particularly when the surrounding circumstances are taken into account. We are not dealing here with a classic case of joint tortfeasors, each of whom is liable for the full amount of the injuries. Rather, as WHC acknowledges, we are dealing with a situation where two distinct injuries are involved, occurring at different times, the second of which clearly was inflicted by an entity other than the settling tortfeasor. Cf. Kyte v. McMillion, 256 Md. 85, 259 A.2d 532 (1969) (auto accident caused plaintiff's broken bones; later, hospital transfuses improper blood).[2] Thus, we do not deal with a release which it is claimed releases not only the named releasees but all others who share identical liability. Cf. Gagnon v. Lakes Region General Hospital, 123 N.H. 760, 465 A.2d 1221 (1983) (release of original tortfeasor and "any and all other persons, firms, and corporations" does not, as matter of law, release maltreating physician, who is not a joint tortfeasor but rather a "successive or independent" wrongdoer).
Turning to the language of the release itself, the phrase describing the entities released reads: the Lamphiers "hereby remise, release, and forever discharge RONALD LESTER GORDON AND GOVERNMENT EMPLOYEES INSURANCE COMPANY releasee(s), successors and assigns, and/or his, her or their associates, heirs, executors and administrators, and all other persons, firms or corporations of and from any claim...." (All the language quoted is printed in the form except for the names of the specific releasees in capital letters, which were typed in.) This lengthy string of specific successors in interest, followed by the phrase "all other *733 persons, firms or corporations," possibly leaves open the question whether the latter phrase is applicable only to successors in interest of an unnamed sort, rather than any and all other persons of whatever description. Second, and more tellingly, beneath the blank space in which were typed the names of Gordon and the insurance company appears this instruction in parentheses: "(Here insert full names of Persons, Corporations, or Partnerships to be released)". This instruction adds credence to the possibility that only successors in interest were intended to be released.[3]
WHC urges us to adopt the rule of construction followed by Maryland courts, whereby a general reference to third parties in a release is broadly read to bar suits against other entities involved in the occurrence. See Ralkey v. Minnesota Mining & Mfg. Co., 63 Md.App. 515, 492 A.2d 1358, 1363 (1985) and cases cited. This broad reading of a general release, it is explained, assures that the settling tortfeasor is not left open to claims for contribution initiated by nonsettling tortfeasors, as is possible under the Maryland statute.[4]See White v. General Motors Corp., 541 F. Supp. 190, 192 (D.Md.1982).
However, our law with respect to contributions among tortfeasors, developed through cases rather than a statute, has taken a different course, to which the Maryland rationale does not easily apply. Briefly put, where contribution would otherwise be called for, a credit is applied against the amount of any judgment against a nonsettling tortfeasor equal to the share of the judgment that should be borne by the settling tortfeasor.[5] Thus, the injured party in settling with one tortfeasor effectively bears the burden that otherwise would fall upon the settling tortfeasor through the obligation to make contribution, and the policy of according protective finality to out-of-court settlements is preserved. Otis Elevator Company v. Henderson, 514 A.2d 784, 786 (D.C.1986); Martello v. Hawley, 112 U.S.App.D.C. 129, 300 F.2d 721 (1962); McKenna v. Austin, 77 U.S.App.D.C. 228, 134 F.2d 659 (1943).[6]
*734 In sum, applying our rules of contract interpretation,[7] we think a contested issue of fact exists as to the meaning and effect of the release, and that the trial court properly refused to enter summary judgment on the basis that the document on its face released WHC.
B. "Single Satisfaction Rule"
WHC's second argument, and the one relied on by the court below, is that plaintiff's settlement with Gordon constituted, in effect, full compensation for all injuries arising out of the accident, including those resulting from subsequent negligence of the hospital, and hence, under what it terms the "single satisfaction rule," plaintiff cannot recover again. In support of this argument, WHC invokes the undisputed proposition that generally an injured party may not recover doubly, in whole or in part, for the same injury; otherwise, he would be unjustly enriched. For example, we are cited to the leading case of McKenna v. Austin, in which the court wrote:
It is no defense for wrongdoers that others aided in causing the harm. Each is responsible for the whole. But that does not mean that the injured person may have more than full satisfaction, except as punitive damages. He has no right to make profit from his harm because several share in causing it. Accordingly, when one makes full reparation for all the loss, the others are discharged from liability to the injured person....
77 U.S.App.D.C. at 233, 134 F.2d at 664.[8]
This same principle is the source of the requirement that in an action by an injured party against one tortfeasor, at the least a credit must normally be given against any judgment in an amount equal to any settlement proceeds received from another joint tortfeasor; otherwise the injured party would be unjustly enriched.[9]
However, the issue still remains whether the $27,500 provided for in the settlement with Gordon is in fact "full satisfaction" within the meaning of the rule. WHC is in substance arguing that in accepting the $27,500,[10] Lamphier did so in full satisfaction of all his injuries. In support, WHC asserts that at the time of the settlement Lamphier was aware of the additional injury caused by WHC's negligence and sought recovery for that injury from Gordon.[11]
*735 But the fact of knowledge cannot be decisive. Settlements will often occur with one joint tortfeasor for far less than the total amount of the claimed injury, with the settling injured party's having full knowledge of the extent of the injuries. The question must be, did the settlement and release with Gordon amount to "full reparation for all the loss," including the injury caused by WHC.[12]
The manner in which this issue is to be resolved was prescribed in McKenna v. Austin:
The difficulty is in how it shall be determined whether full indemnity has been received. This will vary with circumstances. Facts and intentions, rather than presumptions from the mere fact of settlement, should control. When damage to property is measureable with fair accuracy and has reasonable relation to the damage shown, the amount paid may be conclusive. With personal and other injuries less readily reduced to cash value, the difficulty may be greater. Ordinarily, the claimant will not secure complete indemnity from one or less than all, unless the others are judgment proof. Such a settlement usually would not be advantageous to the settling wrongdoer. The presumption of fact therefore generally would be against full satisfaction and discharge. It would seem conclusive when rights against those not released are reserved explicitly or intention otherwise appears to keep these claims alive. Whether the settlement is made and accepted as full satisfaction or merely as the best obtainable compromise for the settler's liability is the crucial issue, and ordinarily one of fact. If however, the agreement's terms leave no room for doubt, the decision should be made as a matter of law.
Id., 77 U.S.App.D.C. at 233, 134 F.2d at 664.
We are thus brought back to the terms of the release. In reality, on the facts presented here, the "single satisfaction" issue is close to the "intent to release unnamed parties" issue in another guise. For essentially the reasons that we previously indicated proscribe any conclusive effect to a release of all parties by the wording of the agreement, we hold that whether the $27,500 was taken in full settlement is here, as "ordinarily," one of disputed fact.
In sum, this case is governed by the doctrines of law that we summarized in a case less than half a decade past:
In McKenna, the court held that the effect of a release of a joint tortfeasor was ordinarily a question of fact dependent on two inquiries: (1) did the plaintiff intend to release all wrongdoers or only the particular party named in the release; and (2) did the amount settled for fully compensate the plaintiff, or was it taken merely as the best obtainable compromise for the settler's liability. Only where the terms of the release leave no room for doubt should these decisions be made as a matter of law.
Hill v. McDonald, 442 A.2d 133, 138-39 (D.C.1982) (citations omitted).
The decision appealed from is reversed and the case remanded for further proceedings not inconsistent with this opinion.
So ordered.
NOTES
[1] Lamphier specifically alleged that WHC caused the permanent blood clot through negligent performance of an arteriogram. For purposes of this appeal, WHC concedes that this was "an altogether separate injury" from those sustained in the automobile accident.
[2] The liability of Gordon for the malpractice of WHC would be based upon the proposition that a tortfeasor is liable for any negligence that may occur in the medical treatment of injuries resulting from the accident, for which there is support in the case law, especially where the malpractice aggravates the original injury. See W. KEETON, PROSSER AND KEETON ON TORTS § 44, at 309-10 (5th ed. 1984); RESTATEMENT (SECOND) OF TORTS § 457 comment a (1977); Annotation, 100 A.L.R. 2d 808 (1965). We need not determine here whether the injuries caused by WHC were sufficiently separate and distinct so as not to render Gordon liable for them. See Kyte v. McMillion, supra, 259 A.2d at 539-41 KEETON, supra, at 310 n. 86. In any event, WHC would not seem to be liable for anything beyond the damages resulting from its own malpractice, unlike the classic joint tortfeasor situation where each is liable for the whole damages. KEETON, supra, at 352; RESTATEMENT (SECOND) OF TORTS § 433A comment c (1977). "[I]t would defy reason to hold the physician liable for injuries caused by the original wrongdoer which were not the consequences of his own carelessness. ..." Kyte v. McMillion, supra, 259 A.2d at 541, quoting from Derby v. Prewitt, 12 N.Y.2d 100, 236 N.Y.S.2d 953, 187 N.E.2d 556 (1962).
[3] Cf. Wells v. Rau, 129 U.S.App.D.C. 253, 256, 393 F.2d 362, 365 (1968) ("broad boilerplate" language of a general release does not bar releasor from suing releasee for unknown injuries not explicitly listed in the release and not consciously bargained for).
[4] Under Maryland's version of the Uniform Contribution Among Tort-Feasors Act, Md.Ann. Code, art. 50, § 20, "a release by the injured person of one joint tort-feasor does not relieve him from liability to make contribution to another joint tort-feasor unless the release is given before the right of the other tort-feasor to secure a money judgment for contribution has accrued, and provides for a reduction, to the extent of the pro rata share of the released tort-feasor, of the injured person's damages recoverable against all other tort-feasors." Cf. id. § 19; Martinez v. Lopez, 300 Md. 91, 476 A.2d 197 (1984). There may also be involved a concern of a settling tortfeasor who pays more than his share to retain a right of contribution from a nonsettling joint tortfeasor, see Md.Ann.Code, art. 50, § 17(c); O'Keefe v. Baltimore Transit Co., 201 Md. 345, 94 A.2d 26 (1953), although this concern may be more theoretical than real. Morrison v. General Motors Corp., 428 F.2d 952, 954 (5th Cir.1970). In the instant case, even this Maryland rationale would not support a broad reading of the release, since presumably WHC would have no right of contribution over against Gordon for damages resulting solely from WHC's negligence the probable maximum exposure of WHC in any event. See note 2, supra; State ex rel. Baldwin v. Gaertner, 613 S.W.2d 638, 641 (Mo.1981) (en banc) ("inconceivable" that original tortfeasor is liable for contribution to treating physician toward damages solely attributable to subsequent medical malpractice).
[5] The liability of the settling tortfeasor to the injured party must be judicially established. Otis Elevator Co. v. Henderson, 514 A.2d 784, 786 (D.C.1986).
[6] RESTATEMENT (SECOND) OF TORTS at § 886A, comment m, notes that there are three possible ways to deal with the problem under discussion. One is to credit the settlement amount against any judgment obtained against the nonsettling tortfeasor, but the right to contribution against the settling tortfeasor continues to exist. This was the solution contained in the 1939 version of the Uniform Contribution Among Tort-Feasors Act; adopted by Maryland. A second solution is to extinguish all rights of contribution against a settling tortfeasor. The 1955 revised version of the Uniform Act adopted this solution. The third solution is that "the money paid extinguishes any claim that the injured party has against the released tortfeasor and also diminishes the claim that the injured party has against the other tortfeasors by the amount of the equitable share of the obligation of the released tortfeasor." Our case law comes closest to this third solution.
[7] We should note that the Maryland rule requires that the words of general release be "plain and unambiguous." Ralkey v. Minnesota Mining & Mfg. Co., supra, 492 A.2d at 1366. The Maryland cases appear to involve releases more unambiguous in language than the release before us. For example, in Ralkey, the release was of "ROLAND CAVANAUGH, M.D., his or their successors and assigns, and all other persons, firms or corporations who are or might be liable," thus omitting any lengthy recitation of various types of successors in interest and containing the additional phrase "who are or might be liable." In our own case of Hodges v. United States Fidelity & Guaranty Co., 91 A.2d 473, 476 (D.C.1952), we were interpreting a Maryland release of the "Payer [released party] and all other persons, firms, and corporations, both known and unknown." None of the other release forms appear to have contained the instruction in parentheses contained the Gordon release form. Thus, it is possible that a Maryland court would find the language of the release form before us not to be conclusive, despite its acknowledged strictness of approach. Cf. Stefan v. Chrysler Corp., 472 F. Supp. 262 (D.Md.1979), aff'd without published opinion, 622 F.2d 587 (4th Cir.1980) (recognizing strictness of Maryland rule in a diversity case).
[8] We have applied this general principle in our case law. See, e.g., Reid v. District of Columbia, 391 A.2d 776, 777 (D.C.1978) ("An injured person may not have more than full satisfaction. He or she has no right to make a profit from the injury. Therefore, evidence is admissible to show that the plaintiff has already been reimbursed, in whole or in part, for the injury. The purpose of the rule is to prevent unjust enrichment.")
[9] Otis Elevator Co. v. Henderson, 514 A.2d 784, 786 (D.C.1986). Whether such a credit must be applied against any recovery Lamphier might obtain against WHC is an issue we do not reach. It is complicated by the fact that WHC is not a classic joint tortfeasor. See note 2, supra.
[10] Lamphier argues that to date, he has not been fully paid the $27,500 and thus there has been no "full satisfaction" even under WHC's theory. We need not reach this issue.
[11] To the extent that WHC is arguing that the release of Gordon amounts in law to a satisfaction of his entire claim, as would be the case if, for example, Lamphier obtained a judgment against Gordon for all his injuries which was fully satisfied, we think it plain that the decision in McKenna v. Austin, in the language quoted below, has foreclosed any such result. Cf. Kyte v. McMillion, supra, and cases cited.
[12] Perhaps more precisely, the issue is whether the $27,500 in fact compensated Lamphier fully for all his injuries and if not, whether nevertheless he received it intending that it serve as full satisfaction. "There is a genuine distinction between a satisfaction and a release. A satisfaction is an acceptance of full compensation for the injury; a release is a surrender of the cause of action, which may be gratuitous, or given for inadequate consideration ... Where there has been such full satisfaction, or where it is agreed that the amount paid under the release is so received, no claim should remain as to any other tortfeasor; but these are questions of fact, and normally to be determined by the jury, where the amount of the claim is unliquidated." W. KEETON, PROSSER AND KEETON ON TORTS § 49, at 332, 335 (5th ed. 1984) (emphasis added).
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524 A.2d 1212 (1987)
DEPARTMENT OF HUMAN SERVICES
v.
Ronald HULIT.
Supreme Judicial Court of Maine.
Argued March 11, 1987.
Decided April 28, 1987.
James E. Tierney, Atty. Gen., Brian T. McNally (orally), Dept. of Human Services, Portland, for plaintiff.
Stanley Greenberg (orally), Greenberg & Greenberg, Portland, for defendant.
Before McKUSICK, C.J., and NICHOLS, ROBERTS, WATHEN, SCOLNIK and CLIFFORD, JJ.
SCOLNIK, Justice.
The defendant, Ronald Hulit (Hulit), appeals from a judgment of the Superior Court (Cumberland County) affirming a District Court judgment determining him to be the natural, biological father of a child (T.), who is the son of his ex-wife, Doris Gough (Gough), and ordering him to pay for T.'s support and care.[1] The plaintiff, *1213 Department of Human Services (DHS), brought this action on behalf of Gough. Hulit challenges the District Court's finding of paternity based on a certain blood test, and contends that he was denied due process of law because the court used a "preponderance of the evidence" standard of proof rather than a "clearly erroneous" standard in determining paternity. He also challenges the court's award of attorney's fees to DHS, and the reimbursement of AFDC monies spent by DHS to support T.
I.
After being married for six years and having one child, Doris Gough and Ronald Hulit were divorced in March, 1976. The following fall, however, they dated and, on one occasion, had sexual intercourse. After that, they did not see each other until April 3, 1977, at which time they engaged in sexual intercourse without contraception. The parties did not see each other after the April 3 encounter until six weeks later, at which time Gough told Hulit that she was 5 to 6 weeks pregnant. She gave birth to a baby boy on January 3, 1978.
The District Court found as a fact that blood tests conducted by the Foundation for Blood Research and introduced at trial demonstrated that "it is likely that Mr. Hulit is the father of [T.]." The court also found that DHS had spent $5,561 in support of T. and that Hulit had the ability to provide $38.00 per week for T.'s support.
The District Court held that (1) Hulit was the natural and legal father of T.; (2) Hulit had a duty to support T. and the ability to pay $38.00 weekly for that support; (3) Hulit was obliged to reimburse $5,561 to DHS for AFDC moneys disbursed by the latter in support of T.; (4) DHS was entitled to attorney's fees from Hulit in the amount of $1,300 and (5) DHS was entitled to $1,570 for blood tests and expert witness fees. Hulit challenges each of these conclusions.
II.
Hulit argues that the District Court erred in finding that he was the father of T. based upon certain blood tests and expert interpretations of those tests. We will reverse that finding only if "(1) there is no competent evidence in the record to support it, or (2) it is based upon a clear misapprehension by the trial court of the meaning of the evidence, or (3) the force and effect of the evidence, taken as a total entity, rationally persuades to a certainty that the finding is so against the great preponderance of the believable evidence that it does not represent the truth and right of the case." Harmon v. Emerson, 425 A.2d 978, 982 (Me.1981).
The District Court found as follows: In September, 1983, the Foundation for Blood Research performed certain tests upon blood samples from the Defendant, Doris J. Gough, and [T.]. The results of the HLA and red blood cell determinations for those individuals indicate a 93.69% probability that the Defendant is the father of [T.]. According to Hummel's verbal predicates,[2] this percentage demonstrates that it is likely that Mr. Hulit is the father of [T.].
Hulit contends that this finding is clearly erroneous because the District Court failed to base its conclusion on other, "more complete and powerful" blood tests admitted at trial and expert testimony interpreting them.
We are unable to conclude, however, that the District Court's finding is clearly erroneous simply because other evidence presented may have supported a different finding. See Blackmer v. Williams, 437 A.2d 858, 862 (Me.1981). The District Court's resolution of potentially conflicting evidence to reach a factual finding is entitled to deference by this Court because the District Court, as a trial court, is in a better position than we are to weigh the evidence and judge the credibility of witnesses whose testimony may differ. See *1214 id. at 863; Qualey v. Fulton, 422 A.2d 773, 775-76 (Me.1981).
Evidence admitted at trial adequately supports the finding of the District Court. The finding is, therefore, not clearly erroneous.
III.
Hulit also contends that the District Court's conclusion that he is the natural and biological father of T. must be set aside because it was based on a "preponderance of the evidence" standard of proof. He contends that the court was required to employ a "clear and convincing evidence" standard.
Hulit concedes that he did not preserve this issue for appellate review. He suggests, however, that we should address the issue because he alleges that the District Court violated his constitutional rights of due process under the Maine and United States constitutions by applying the preponderance of the evidence standard. Although the record fails to disclose the standard of proof that was in fact applied by the court, Hulit contends that the preponderance of the evidence standard must have been applied because "this standard is the one which ordinarily applies in civil cases, and no appellate court has yet directed the District Court to use a higher standard."
We have repeatedly stated that, absent exceptional circumstances not present in this case, issues not raised before trial courts, even if constitutional, will not be heard on appeal. Cyr v. Cyr, 432 A.2d 793, 797-98 (Me.1981); Salamone v. City of Portland, 398 A.2d 49 (Me.1979); Teel v. Colson, 396 A.2d 529 (Me.1979). See also State v. Thornton, 485 A.2d 952, 953 (Me. 1984); State v. Desjardins, 401 A.2d 165, 169 (Me.1979). One of the primary purposes of this rule is to "ensure that the trial court has an opportunity to determine the propriety of the relief requested." Cyr v. Cyr, 432 A.2d at 798. Another reason for the rule is to ensure that an adequate record is developed for a careful and accurate analysis of the issue on appeal. We see no reason to depart from these principles in the case at bar. As a result, we will not set aside the court's conclusion that Ronald Hulit is the father of T.
IV.
Hulit next argues that the District Court abused its discretion in ordering him to pay $38.00 per week for the support of T. pursuant to sections 271 of Maine's Uniform Act on Paternity and section 442 of Maine's Uniform Civil Liability for Support Act.[3] He argues that the District Court was required to consider the earning capacity of Gough and to consider carefully the relative abilities of both parents to support the child before determining the amount of child support the father must pay. Since the District Court failed explicitly to make those determinations in its findings of fact and conclusions of law, he contends that its support order must be vacated. We disagree.
Although it is incumbent upon courts, in determining the proper amount of child support in any particular case, to consider the factors outlined by Hulit, see Shirley v. Shirley, 482 A.2d 845, 848-49 (Me.1984), we cannot conclude on the record before us that those factors were overlooked by the court in this case. Because we find credible evidence in the record upon which to *1215 base the award of child support, we will not overturn that ruling. See id.
V.
Hulit challenges the District Court's order that he reimburse DHS for AFDC monies paid to Gough for the support of T. He contends that the court erred by receiving in evidence, over his attorney's objection, a document containing a summary of those payments. Since that was the only evidence presented at trial concerning the amount of AFDC monies paid by DHS for the support of T., he argues that because it is inadmissible, there is no basis for the court's order. We disagree with his argument that the evidence was inadmissible.
The disputed document was a completed form entitled "Official Record of Public Assistance Paid and Support Contributions Received by the Department of Human Services." It stated that between January 3, 1978 and January 22, 1982, Doris Gough received $5,561 on behalf of T. The document was signed under oath on February 14, 1984 by the legal custodian of financial records for DHS. Attached to the document was a certificate, signed by the Commissioner of DHS, stating that the person who signed the form was, at the time of the signing, the "custodian of the Assistance Payment Records." No question is raised as to the adequacy of the disputed document to prove an official data compilation under M.R.Evid. 1005.
At trial, Hulit's counsel objected to the admission of this document on the ground that it was hearsay and not within the Public Records exception to the hearsay rule, M.R.Evid. 803(8).[4] Hulit repeats the same argument on appeal.
He contends that the document should have been excluded because DHS presented no foundational evidence that this information was regularly recorded or kept "pursuant to duty imposed by law," see M.R.Evid. 803(8)(A), and, in any event, it is expressly excluded under Rule 803(8)(B) of the Maine Rules of Evidence because it was an investigative report prepared by DHS as an answer to an interrogatory propounded by Hulit in preparation for trial and offered "by it in a case in which it is a party." See M.R.Evid. 803(8)(B)(ii). He also argues that it should be excluded because it is "factual findings resulting from [a] special investigation of a particular complaint, case, or incident" and that it is surrounded by circumstances indicating that it lacks trustworthiness. See M.R. Evid. 803(8)(B)(iv), 803(8)(B)(v). We disagree.
The document was a data compilation of a public agency setting forth its regularly conducted and recorded activity. It is explicitly admissible pursuant to M.R.Evid. 803(8)(A) regardless of whether or not the agency was required under law to keep such records. See M.R.Evid. 803(8)(A). It is not excluded by 803(8)(B) because it is not an "investigative report" or "factual findings resulting from special investigation of a particular complaint, case, or incident." Instead, it is simply a compilation of regularly recorded data. The document was not the result of an investigation involving subjective interpretations by public officials that could taint its trustworthiness. *1216 It was a portion of regularly kept data that is inherently trustworthy and, therefore, admissible pursuant to Rule 803(8)(A) of the Maine Rules of Evidence.
VI.
Finally, Hulit challenges the District Court's award of certain costs and attorney's fees to DHS for its prosecution of this action.
He argues that the court abused its discretion in awarding attorney's fees to DHS because the award was not sufficiently supported by evidence in the record before the court. We agree.
The District Court's Judgment and Order of March 25, 1985 contains an Attachment "A," which is an "Itemized Accounting of Attorneys Fees." It lists the different work performed by DHS's counsel and his hourly rate. It is not accompanied by affidavits from DHS or from its attorney attesting to the nature of the fee arrangement between them.
In Brandis v. Brandis, 489 A.2d 1110, 1112 (Me.1985); we said:
It should be clear to the Bar by this time that an award of attorney's fees will not survive a challenge in the absence of at least an affidavit attesting to the defendant's fee arrangement with her lawyer, counsel's customary hourly rate, and other such facts necessary to allow the court to make a valid calculation as to what amounts to reasonable counsel fees. Hebert v. Hebert, 475 A.2d 422, 426 (Me.1984).
We apply those principles here and hold that DHS has failed accurately to establish the basis for its award of attorney's fees. Accordingly, we vacate the award of attorneys fees and remand the case to the District Court for a proper determination of those fees according to the criteria set forth in Brandis.
Hulit also objects to part of the District Court's judgment that orders him to pay $1,570.00 to DHS for blood test and expert witness fees. DHS has abandoned any claim for those fees. As a result, we vacate the portion of the judgment ordering Hulit to pay those fees.
The entry is:
Award of attorneys' fees and costs for expert witnesses and blood tests vacated. Remanded to the Superior Court with instructions to remand to District Court for further proceedings consistent with the opinion herein.
In all other respects, judgment affirmed.
All concurring.
NOTES
[1] In this appeal, we directly review the judgment of the District Court and the record as it was developed before that court. State v. Michael Z., 427 A.2d 476, 477 (Me.1981).
[2] Hummel is a statistician, who has given "verbal predicates," for example "likely" or "unlikely," to these percentages.
[3] Title 19, M.R.S.A., section 271 provides:
§ 271. Obligations of the father
The father of a child which is or may be born out of wedlock is liable to the same extent as the father of a child born in wedlock, whether or not the child is born alive, for the reasonable expense of the mother's pregnancy and confinement and for the education, necessary support and funeral expenses of the child, and reasonable counsel fees for the prosecution of paternity proceedings.
19 M.R.S.A. § 271 (1981).
Section 442 provides:
§ 442. Man's duty of support Every man shall support his wife and his child.
19 M.R.S.A. § 442 (Supp.1986).
Section 443, however, provides in addition:
§ 443. Woman's duty of support
Every woman shall support her child; and her husband when in need.
19 M.R.S.A. § 443 (Supp.1986).
[4] Rule 803 of the Maine Rules of Evidence provides, in pertinent part:
The following are not excluded by the hearsay rule, even though the declarant is available as a witness:
(8) Public Records and Reports.
(A) To the extent not otherwise provided in (B), records, reports, statements, or data compilations in any form of a public office or agency setting forth its regularly conducted and regularly recorded activities, or matters observed pursuant to duty imposed by law and as to which there was a duty to report, or factual findings resulting from an investigation made pursuant to authority granted by law.
(B) The following are not within this exception to the hearsay rule:
(i) investigative reports by police and other law enforcement personnel; (ii) investigative reports prepared by or for a government, a public office or an agency when offered by it in a case in which it is a party; (iii) factual findings offered by the state in criminal cases; (iv) factual findings resulting from special investigation of a particular complaint, case, or incident; (v) any matter as to which the sources of information or other circumstances indicate lack of trustworthiness.
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106 N.J. 529 (1987)
524 A.2d 398
IN THE MATTER OF ARNOLD M. WARHAFTIG, AN ATTORNEY AT LAW.
The Supreme Court of New Jersey.
Argued January 20, 1987.
Decided April 21, 1987.
Robyn M. Hill, Deputy Ethics Counsel, argued the cause on behalf of Office of Attorney Ethics.
Joseph A. Hayden, Jr., argued the cause for respondent (Hayden and Perle, attorneys; Richard F.X. Regan, on the brief).
PER CURIAM.
In this disciplinary proceeding, arising out of a presentment filed by the District XII Ethics Committee, respondent is charged with invading trust account funds by withdrawing anticipated legal fees in advance of real-estate closings. The Disciplinary Review Board (DRB or Board) concluded that respondent had engaged in unethical conduct, but that knowing misappropriation had not been established by clear and convincing evidence. The Board therefore recommended that respondent *530 be publicly reprimanded. Because we conclude that respondent's conduct clearly constituted knowing misappropriation under In re Wilson, 81 N.J. 451 (1979), we decline to adopt the DRB's recommendation, and instead order that respondent be disbarred.
I
The charges filed against respondent were the result of a random compliance audit conducted by the Office of Attorney Ethics pursuant to Rule 1:21-6(c). The audit took place in November and December, 1983, and covered the two-year period ending on October 31st of the same year. The audit findings were summarized in the Board's Decision and Recommendation:
The audit disclosed that respondent
continually issued checks to his own order for fees in pending real estate matters. He would replace the "advance" when the funds were received for the real estate closing [audit report at 3].
In one case, a real estate closing occurred on September 19, 1983. Funds totalling $70,722.33 were deposited into respondent's trust account on September 20, 1983. In another case, a real estate closing took place on October 28, 1983. The funds totalling $150,686.27 were deposited into his trust account on October 31, 1983. However, respondent had issued a check to his order for $910 on June 16, 1983 which represented his fee of $455 for each of these two closings. The audit report revealed other instances where respondent similarly took advance fees. A summary of these instances follows:
Fees Taken In Advance of Closings
Days in
Advance 1-30 30-60 60-90 90-120 120
Number of
Instances 6 9 3 2 2
Total
Withdrawn $2,600 3,935 1,110 910 910
* * * * * * * *
Respondent maintained his own lists of fees taken in advance. This list contained the names of clients and the amounts he anticipated earning from *531 these clients in pending real estate closings. As a closing occurred and the fee was earned, respondent would delete the client's name and fee. When an anticipated closing fell through, respondent would replace the fee he had earlier advanced to himself.
* * * * * * * *
When respondent received notice of the audit, he contacted his accountant who advised him that if his trust account was short he should immediately replace the funds. Respondent borrowed $11,125 from accounts in the names of his two teenage sons and deposited the money into his trust account to cover the withdrawn fees. Respondent made this deposit about five days before the originally scheduled audit date of October 4, 1983.
The auditor was not able to determine which clients' monies respondent had taken because of the size of respondent's real estate practice. Money continually flowed in and out of the trust account. Respondent, at the ethics hearing, maintained that he never failed to make the proper disbursements at the closings and that no one ever lost money as a result of his practice. He discontinued this practice in September 1983 when he received notice of the audit.
At the Ethics Committee hearing, respondent explained that his withdrawal of advance fees from the trust account was necessitated by the "gigantic cash flow burden" he experienced beginning in the early 1980's. Such pressures were the result of a precipitous decline in his real-estate practice. At the same time, an additional strain on respondent's finances was created by his wife's having to undergo treatment for cancer, and by his son's need for extensive psychiatric counseling. According to respondent, only a small portion of these expenses was covered by insurance.
Respondent was also questioned at the hearing as to whether he knew, at the time the advance-fee scheme was implemented, that his conduct constituted an ethical violation. Respondent stated:
I was aware that what I was doing was wrong, and I was also aware that no one was being hurt by what I was doing. And what I was doing, especially by keeping lists like this, was making sure that nobody would get hurt by what I was doing.
* * * * * * * *
My perspective on the taking of the money was it was wrong, it was a violation of the rules. But I was so certain that no one could possibly be hurt by it that I didn't feel that I was stealing, certainly not stealing.
*532 In a presentment filed on June 28, 1985, the Ethics Committee concluded that respondent had failed to comply with the record-keeping provisions of Rule 1:21-6; that several checks he had drawn on business accounts were dishonored for insufficient funds; that he had made false entries in his trust account records, contrary to DR 9-102; and that he had misappropriated clients' funds, also a violation of DR 9-102. Specifically, the presentment stated that "[r]espondent's conduct was clearly unethical in that he did deliberately and repeatedly take funds from his trust account equal to anticipated fees." The panel therefore recommended that respondent be publicly disciplined, but directed the attention of the DRB to several mitigating factors it found to be present in the case.
The DRB adopted these conclusions in its decision. Acknowledging that "[a] knowing act is required before any taking of funds warrants * * * disbarment[,]" the Board observed:
Respondent believed that the funds taken by him were fees that he would invariably receive from real estate transactions. The modest amounts taken were exactly those that he anticipated. Although his business account had frequent overdrafts, there is absolutely no indication in this record that respondent ever used trust funds to cover them.
* * * * * * * *
Respondent while acknowledging that his premature withdrawal of fees was improper, did not perceive it as misappropriation of clients' funds. He advanced to himself only such monies to which he had a colorable interest.
The Board concluded that the record did not support a finding that knowing misappropriation had occurred in this case. The Board, in recommending a public reprimand, also noted the existence of several mitigating factors: respondent's discontinuance of the practice at issue; his cooperation with the Office of Attorney Ethics; the acknowledgment of his wrongdoing; and the fact that no clients were actually injured by respondent's conduct.
A single member of the Board dissented from its recommendation, noting that
[r]espondent withdrew funds from his trust account to pay himself for services rendered and to be rendered to a particular client without necessarily having *533 funds belonging to that particular client in his trust account. In short, he was using funds belonging to client A to pay fees owed and to be owing by client B. Under In re Wilson, 81 N.J. 451 (1979), this "borrowing" of client funds constitutes a misappropriation and warrants disbarment.
II
In recommending public discipline, the DRB recognized that In re Wilson, supra, which requires the disbarment of an attorney who knowingly misappropriates his clients' funds, controls the outcome of this case. However, the Board emphasized a perceived distinction between respondent's conduct, which it characterized as the "premature withdrawal of * * * monies to which he had a colorable interest[,]" and the knowing misappropriation described in Wilson, supra. Apparently, the Board was persuaded by respondent's contention that while he was aware that he was violating a Disciplinary Rule, he "didn't feel that [he] was stealing * * *."
The distinction drawn by the DRB cannot be sustained under the Wilson rule. As we stated in In re Noonan, 102 N.J. 157, 160 (1986), knowing misappropriation under Wilson "consists simply of a lawyer taking a client's money entrusted to him, knowing that it is the client's money and knowing that the client has not authorized the taking." We have consistently maintained that a lawyer's subjective intent, whether it be to "borrow" or to steal, is irrelevant to the determination of the appropriate discipline in a misappropriation case. Ibid.; In re Lennan, 102 N.J. 518, 523 (1986); In re Wilson, supra, 81 N.J. at 455 n. 1. In Wilson, supra, we articulated the reason for this strict approach:
Lawyers who "borrow" may, it is true, be less culpable than those who had no intent to repay, but the difference is negligible in this connection. Banks do not rehire tellers who "borrow" depositors' funds. Our professional standards, if anything, should be higher. Lawyers are more than fiduciaries: they are representatives of a profession and officers of this Court. [81 N.J. at 458.]
It is clear that respondent's conduct constituted knowing misappropriation as contemplated by Wilson. Through the use of the advance-fee mechanism, he took funds from his trust account before he had any legal right to those monies. These *534 "fees" were taken by respondent before he received any deposits in connection with the relevant real-estate closings. Thus, he was effectively borrowing monies from one group of clients in order to compensate himself, in advance, for matters being handled for other clients. Respondent made these withdrawals with full recognition that his actions had not been authorized by his clients, and that he was therefore violating the rules governing attorney conduct. Respondent's unauthorized misappropriation of clients' trust funds for his personal needs cannot be distinguished from the conduct condemned in Wilson, supra. See also In re Lennan, supra, 102 N.J. at 521 (respondent disbarred where audit disclosed "a pattern of taking trust funds held as deposits on real estate closings and replacing them before the closing occurred").
The DRB also based its decision on the existence of several mitigating factors. Our review of the record, in light of the plain language of Wilson and our subsequent decisions, compels the conclusion that these factors should be given little weight. The Board noted the fact that no client was injured by respondent's conduct, and that he replaced the funds he had misappropriated. However, we have emphasized in the past that the absence of client losses is irrelevant in a misappropriation case. See, e.g., In re Lennan, supra, 102 N.J. at 524 ("the fact that no client suffered a loss was fortuitous and therefore irrelevant"); In re Gavel, 22 N.J. 248, 265 (1965) (finding "little merit in the plea by respondent that no one suffered as a result of his wrongful acts"). The Board also pointed to respondent's having been a member of the Bar since 1968, and the evidence of his good character adduced at the ethics hearing. However, as we made clear in Wilson, supra, the prior outstanding record of an attorney cannot diminish the seriousness of misappropriation of client funds:
This offense against common honesty should be clear even to the youngest; and to distinguished practitioners, its grievousness should be even clearer. [81 N.J. at 460.]
The DRB also observed that respondent, in the three years since the audit occurred, had discontinued the practice of taking *535 advance fees, and that recurrence of this practice would be extremely unlikely. Here again, our holding in Wilson, supra, makes consideration of this factor improper. Id. at 460 n. 4; see In re Hein, 104 N.J. 297, 304 (1986). Finally, the Board took note of respondent's cooperation with the investigation, and his acknowledgment of his guilt. While we acknowledge respondent's candor in admitting his wrongful conduct, we cannot accord it any significance as a mitigating factor. See In re Fleischer, 102 N.J. 440, 448 (1986); In re Wilson, supra, 81 N.J. at 459.
In concluding that respondent's mishandling of his clients' trust funds requires that he be disbarred, we again confront the harsh results of the Wilson rule. We note the very real hardship that beset respondent's family and apparently led to his wrongful conduct. It is especially tragic that these unfortunate circumstances contributed to conduct requiring the disbarment of an attorney who, for the better part of his career, has conducted himself in an exemplary fashion.
Yet, we are also mindful that our primary purpose here is not to punish attorneys, but to protect the public. See In re Hein, supra, 104 N.J. at 302. This purpose is so vital to the proper functioning of our profession that we have consistently declined to create exceptions to the Wilson rule, even where the misappropriation was the product of severe personal and financial hardship. See In re Lennan, supra, 102 N.J. at 524. In our view, the overriding need "to preserve the confidence of the public in the integrity and trustworthiness of lawyers[,]" In re Wilson, supra, 81 N.J. at 456, requires that we continue to apply the strictest discipline in misappropriation cases. Anything less would undermine the effectiveness of the Wilson rule and erode public confidence in the integrity of the legal profession.
Finally, while we understand that respondent's conduct was in large part the result of financial pressures caused by serious illness within his family, it appears that respondent had other *536 sources of funds available to him. By his own admission, as soon as he was informed of the audit, respondent restored the deficit in his trust account with $11,125 borrowed from bank accounts in his sons' names. Respondent should have considered the availability of other sources of funds when his financial difficulty first arose. Instead, he misappropriated monies belonging to his clients, despite his knowledge that this practice constituted a violation of the rules governing attorney conduct.
In view of our conclusion that respondent knowingly misappropriated client funds, we order that he be disbarred. Respondent shall reimburse the Ethics Financial Committee for appropriate administrative costs.
For disbarment Chief Justice WILENTZ and Justices CLIFFORD, HANDLER, POLLOCK, O'HERN, GARIBALDI and STEIN 7.
Opposed None.
ORDER
It is ORDERED that ARNOLD M. WARHAFTIG of UNION, who was admitted to the bar of this State in 1968, be disbarred and that his name be stricken from the roll of attorneys of this State, effective immediately; and it is further
ORDERED that ARNOLD M. WARHAFTIG be and hereby is permanently restrained and enjoined from practicing law; and it is further
ORDERED that respondent comply with Administrative Guideline No. 23 of the Office of Attorney Ethics dealing with disbarred attorneys; and it is further
ORDERED that respondent reimburse the Ethics Financial Committee for appropriate administrative costs.
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362 Pa. Super. 477 (1987)
524 A.2d 976
COMMONWEALTH of Pennsylvania
v.
Ralph C. BLANKENBILLER, Appellant.
Supreme Court of Pennsylvania.
Argued January 13, 1987.
Filed April 28, 1987.
*478 Lawrence J. Hracho, Reading, for appellant.
Charles M. Guthrie, Jr., Assistant District Attorney, Reading, for Com., appellee.
*479 Before CIRILLO, President Judge, and ROWLEY and HOFFMAN, JJ.
CIRILLO, President Judge:
This is an appeal from a judgment of sentence of the Court of Common Pleas of Berks County. After a jury trial, appellant, Ralph Blankenbiller was found guilty of "owning, controlling, managing, supervising or otherwise keeping, alone or in association with others, . . . a prostitution business." 18 Pa.C.S. § 5902(b)(1). The defendant was sentenced to a period of incarceration of three to twelve months. We reverse.
On appeal, the appellant presents four issues for our review: (1) whether the evidence presented was sufficient to sustain a verdict of guilty; (2) whether there was sufficient evidence linking the defendant with the alleged prostitution to establish a prima facie case against him in order to deny the writ of habeas corpus; (3) whether the trial court abused its discretion in charging the jury with the lesser included offense of criminal attempt to promote prostitution when neither party had notice of such a charge; and (4) whether the trial court erred in permitting hearsay testimony under the co-conspirator exception to the hearsay rule. Because we find for the appellant on the first issue, we need not review the other issues.
Appellant argues that the evidence was insufficient to sustain a conviction of promoting prostitution. The standard of review for sufficiency of the evidence is whether, viewing the evidence in the light most favorable to the Commonwealth as verdict winner and drawing all proper inferences in their favor, the trier of fact could reasonably have determined all elements of the crime to have been established beyond a reasonable doubt. Commonwealth v. Syre, 507 Pa. 299, 305, 489 A.2d 1340, 1342 (1985).
On June 3, 1984, there was a large party at the recently closed restaurant known as Rasputin's in West Lawn, Berks County, Pennsylvania. The party was for the benefit of Rasputin's softball team. The appellant had paid for the *480 team uniforms several months before the party. The $15 ticket for admission to the party entitled each purchaser to beer, snacks and a go-go dancer show. Two undercover state troopers from the vice squad attended the party after purchasing tickets for the event at the Tenth and Marion Cafe in Reading. The appellant was an officer in corporations that owned both Rasputin's Restaurant and the Tenth and Marion Cafe.
At trial, the state troopers testified that in the course of the afternoon's entertainment there were continuing announcements over the speaker system to the effect that sex was available for money. The appellant was seen in the vicinity of the speaker system during some of the announcements. Two of the nine women who attended the party also testified at the trial. Buffy St. Clair, the woman who ran a booking agency for the go-go dancers, stated that she had hired four women to do the dancing at $150 each and that she was paid $100 for making the arrangements and acting as a hostess. She brought four other women along for purposes of prostitution. The second woman who testified stated that she had turned two "tricks" that afternoon and that she had the responsibility of collecting $5 per trick from each of the other girls. The money was to be used to benefit the softball team. She also testified that she did not give the money to the appellant, nor did she even know who he was.
In order to sustain the conviction for promoting prostitution, this Court must be satisfied that the evidence was sufficient to convince the jury beyond a reasonable doubt that the Commonwealth proved: (1) that there was a prostitution business; and (2) that the accused had a connection with the "running, control, supervision or keeping of the prostitution business." 18 Pa.C.S. § 5902(b). We find that the Commonwealth has met its burden of proving, beyond a reasonable doubt, that there was a prostitution business in progress on the afternoon of June 3, 1984. Our Supreme Court has defined prostitution as "sexual relations for hire." Commonwealth v. Miller, 469 Pa. 24, 28, 364 *481 A.2d 886, 887 (1976). Furthermore, this court has found that a "business" is "a commercial activity engaged in for gain." Commonwealth v. Potts, 314 Pa.Super. 256, 271, 460 A.2d 1127, 1135 (1983) (defendant who agreed to engage in sexual activity and accepted an advance payment of $140 was engaged in prostitution as a business). However, we find that the evidence is not sufficient to prove beyond a reasonable doubt that the appellant had a connection with the "running, control, supervision or keeping" of that business.
Though it is clear that a prostitution business was operating at the date and time in question, the Commonwealth did not prove that the appellant received any income from the business. While a criminal conviction may rest upon wholly circumstantial evidence, it may not be based upon mere surmise or conjecture. Commonwealth v. Stores, 317 Pa. Super. 109, 117, 463 A.2d 1108, 1112 (1983).
Appellant alleges that he was merely present at the scene of the offense. The mere presence of a person at the scene of a crime does not establish that person's guilt. Commonwealth v. Smith, 490 Pa. 374, 377, 416 A.2d 517, 518 (1980). There must be additional facts which point to that individual's active participation in the crime. See, e.g., Commonwealth v. Juliano, 340 Pa.Super. 501, 490 A.2d 891 (1985) (mere presence of appellant in car containing closed satchel of controlled substance, is not strong factor indicative of guilt); Commonwealth v. Carter, 329 Pa.Super. 490, 478 A.2d 1286 (1984) (mere presence at scene of crime is insufficient to support conviction; evidence indicating participation in the crime is required); Commonwealth v. Olds, 322 Pa.Super. 442, 469 A.2d 1072 (1983) (neither mere presence at scene of crime nor mere association with perpetrator is sufficient to infer participation in crime).
The Commonwealth presented the following evidence as proof of the appellant's active participation in the crime: (1) one month before the party the appellant was president and director of the company that owned the property where the party took place; (2) the appellant was president and secretary *482 of the company that owned the Tenth and Marion Cafe in Reading where the party tickets were on sale preceding the event in question; (3) a number of months before the party the appellant had paid for uniforms for the softball team, the organization that benefitted from the proceeds of the event; (4) the appellant was seen taking a roll of money from one of two men who spoke with him in the parking lot; (5) the appellant was seen selling one ticket; (6) the appellant helped two of the girls carry their bags into the building before the party; and (7) the appellant was present when the announcements of girls for hire were made. Even when viewed as a unit, these facts do not support appellant's conviction.
It is unreasonable to infer, from the fact that he either had allowed the party organizers to sell tickets at the restaurant or had allowed the use of the property for the party, that the appellant ran, controlled, supervised, or kept a prostitution business at the party. The Commonwealth did not produce any evidence that appellant told anyone that prostitutes would be available at the event. Nor has it been shown that he personally made any of the "arrangements" with the women in question. The Commonwealth also failed to demonstrate that he took part in any way in the illicit activities on the day of the party. The evidence shows only that the appellant was present while the crimes took place and that he had helped promote the party. These facts do not make him criminally responsible for everything that occurred at the event. As discussed above, mere presence does not establish guilt. Smith, 490 Pa. at 377, 416 A.2d at 518.
The Commonwealth's additional evidence that allegedly links the appellant to the prostitution activities was the testimony by Chief of Police Schlegel of Spring Township. He and one of his officers had watched the entryway to Rasputin's from the first floor of a neighboring house, which was about fifty-five feet away. He stated that with the use of binoculars he had observed the appellant outside the door of Rasputin's from 1:30 to 5:30 p.m., except for a few brief periods when the appellant went inside. On one *483 occasion, Schlegel saw the appellant take a ticket from someone. At 3:45 p.m. he saw the appellant talk to two men in the parking lot, take a roll of bills from one of the men, and place the money in his truck. There was no evidence indicating why this money was given to the appellant nor was there any evidence as to the identity of the two men. The woman who collected the $5 kickbacks from the girls for the softball team testified that she collected the money from the "early afternoon until 5:00." If she turned over the kickback money at 5:00 p.m., it was one hour and fifteen minutes after the troopers saw a man give the roll of money to the defendant. This evidence does not merit the inference that the money received was from the prostitution activities. See Commonwealth v. Robertson, 178 Pa.Super. 281, 288, 116 A.2d 224, 228 (1955) (court found evidence insufficient to prove acceptance of bawd money where girl testified that before she went upstairs to have intercourse with a man she saw him hand some money to defendant). It is at least equally reasonable to infer that the money that was given to the appellant was the proceeds from the ticket sales, a rental fee for the premises, or a reimbursement for food and drink. See Commonwealth v. Key, 342 Pa.Super. 31, 34, 492 A.2d 48, 49 (1985), (A conviction will not stand when the circumstantial evidence is as consistent with innocence as it is with guilt.)
The Commonwealth asserts that the appellant's active involvement in the prostitution business can be inferred from the fact that he helped two of the girls carry their bags from the car into the building and from the fact that he was present during the microphone announcements of "sex for hire." One could reasonably infer that appellant knew that the girls were there for dancing; it is likely that this fact was known by anyone attending the party. This inference, however, does not logically lead to the conclusion that appellant had something to do with the arrangements for the prostitution business. The "hostess," who knew the appellant previously, stated that she had made the party arrangements with Chip Savini, who was the manager of the softball team. Both of the women who testified stated *484 that the girls themselves told the guests that sex was available, that the appellant had not made any of the announcements on the public address system, and that none of the entertainment arrangements, including the prostitution arrangements, had been made with the appellant.
Upon close examination, it is apparent that the Commonwealth's entire case is built upon a fragile house of cards, supported by surmise, conjecture and far-fetched inferences. See Stores, 317 Pa.Super. at 109, 463, 463 A.2d at 1112. This faulty structure is far too weak to provide the basis for a criminal conviction.
Although prostitution clearly occured at the party, there is no evidence of the appellant's participation in a conspiracy to commit that crime, nor is there evidence to show that he was in any way connected with that business. It would appear that the instant conviction is a case of guilt by association. The evidence demonstrates that only appellant was in the wrong place at the wrong time. That does not constitute proof beyond a reasonable doubt that he committed the alleged crime.
Accordingly, the judgment of sentence is vacated. Jurisdiction is relinquished.
ROWLEY, J., notes dissent.
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674 F. Supp. 1074 (1987)
CORNING GLASS WORKS, Plaintiff,
v.
SUMITOMO ELECTRIC U.S.A., INC. and Sumitomo Electric Industries, Ltd., Defendants.
SUMITOMO ELECTRIC RESEARCH TRIANGLE, INC., Plaintiff,
v.
CORNING GLASS WORKS, Defendant.
Nos. 84 Civ. 9155 (WCC), 85 Civ. 3156 (WCC).
United States District Court, S.D. New York.
December 7, 1987.
Fish & Neave, New York City, for Corning Glass Works; Lars I. Kulleseid, W. Edward Bailey, Daniel M. Gantt, Thomas J. Vetter, Alfred L. Michaelsen, K. McNeill Taylor, Jr., Corning Glass Works, Patent Dept., Corning, N.Y., of counsel.
Cushman, Darby & Cushman, Washington, D.C., for Sumitomo Elec., Research *1075 Triangle, Inc., Sumitomo Elec. U.S.A., Inc. and Sumitomo Elec. Industries, Ltd.; George T. Mobille, Chris Comuntzis, Richard P. Bauer, Duane M. Byers, Whitman & Ransom, New York City, Ablondi & Foster, P.C., Italo H. Ablondi, F. David Foster, Sturgis M. Sobin, Peter J. Koenig, Washington, D.C., of counsel.
OPINION AND ORDER
WILLIAM C. CONNER, District Judge:
The Sumitomo parties (defendants in 84 Civ. 9155 and plaintiffs in 85 Civ. 3156 hereafter collectively "Sumitomo") have moved (1) to amend the judgment entered October 1, 1987 to eliminate the finding that Sumitomo's infringement of U.S. Patent 3,659,915 ("the '915 patent") was willful since January 22, 1985; and (2) to stay the injunction against Sumitomo's infringement of the '915 patent and U.S. patent 3,884,550 ("the '550 patent") pending appeal, at least to the extent of permitting fulfillment of certain contracts previously entered into by Sumitomo and its related companies.
For the reasons stated below, both motions are denied, the denial of the motion to amend the judgment being without prejudice to renewal on a proffer of evidence.
The motion to amend
Sumitomo seeks to eliminate from the Court's judgment the finding of willful infringement on the asserted ground that Sumitomo's counsel understood that the determination of this issue was being deferred until the separate trial on damages which would take place in the event any of the patents in suit was ruled valid (as against Sumitomo) and infringed. Sumitomo cites several cases in which the issue of willful infringement was deferred for trial with the issue of damages.
Corning Glass Works ("Corning") cites a larger number of cases, all more recent than those relied on by Sumitomo, in which the issue of willfulness was decided on the main trial, along with the issues of infringement and validity. Corning further points out that in its proposed findings of fact and conclusions of law, served and filed in advance of the main trial, Corning included a number of draft findings and conclusions on the issue of willfulness. At the trial, evidence on this issue was introduced, and on several occasions the Court admitted evidence which it specifically remarked was relevant at least to the issue of willful infringement (Tr. 414-15, 1185). At no time during the trial did Sumitomo's counsel indicate that they understood that the issue of willfulness was not before the Court. Moreover, in its post-trial briefs, Corning argued that Sumitomo's infringement was willful. Although Sumitomo did not discuss this issue in its post-trial briefs, neither did it assert that Corning's argument of the issue was premature.
Corning urges that Sumitomo has therefore had its day in Court on the issue of willfulness and, having lost, now wants a new trial to submit evidence it could have introduced before. That contention is not without significant merit: there obviously must be an end to litigation. However, the Court's primary concern must be justice rather than finality or expediency.
In response to Corning's assertion that there was nothing in the trial record which could conceivably have misled Sumitomo's counsel into believing that the issue of willfulness was being deferred until the separate trial on damages, Sumitomo calls attention to page 75 of the transcript of the first day of trial, where the Court remarked:
Willfulness is something we really don't have to decide in this bifurcated trial on liability. That will relate to damages only, I guess.
The Court recognizes that this comment could reasonably have led Sumitomo's counsel to assume that it need introduce no evidence on the issue of willfulness until the bifurcated damage trial, if such a trial became necessary.
In light of the strong reasons cited in the Court's opinion to support its finding that Sumitomo's infringement was willful, it appears unlikely that any evidence Sumitomo might be able to adduce, such as opinions of counsel, could persuade the Court to the *1076 opposite conclusion. However, Sumitomo should at least have the opportunity to try. Sumitomo's motion to amend the judgment is therefore denied without prejudice to its renewal, supported by a full proffer of the evidence on the issue of willfulness which Sumitomo would adduce if the trial were reopened.
The motion to stay
Sumitomo seeks a stay, pending appeal, of the Court's injunction restraining its continued infringement of the '915 and '550 patents, at least to the extent of permitting it to fulfill the four contracts or purchase orders pursuant to which it or one of its related companies has undertaken to develop and/or supply special types of optical waveguide fibers.
Three of these are purchase orders issued to Alcan-Sumitomo Electric ("ASE"), a joint venture between Alcan and Sumitomo Electric Industries, for composite overhead power ground wire ("OPGW") cables incorporating single-mode optical waveguide fibers. These purchase orders were issued respectively on behalf of Duke Power Company, Philadelphia Electric Company and the City of Lakeland, Florida. ASE in turn has ordered the optical fibers from Sumitomo Electric Fiber Optic Corporation ("SEFOC").
The fourth is a contract between SEFOC and the Boeing Company by which SEFOC has undertaken to develop and supply a high numerical aperture multimode optical waveguide fiber for data communication in the sensing and control systems of Boeing's new 7J7 commercial passenger airplanes. This is a special fiber having unusually large core and cladding diameters of 208 and 250 microns, respectively ("208/250 fiber").
Sumitomo has submitted affidavits to show that the fibers for the OPGW cables are not available from any other source because they have heat resistant silicone coatings which must be applied during drawing of the fibers and that the large diameter 208/250 fibers are likewise unavailable elsewhere. Thus, Sumitomo contends, enforcement of the injunction pending appeal will not benefit Corning or any of its licensees, but will substantially delay important technological advances in public power and transportation with substantial detriment to the public interest. Sumitomo further asserts that the injunction will cause it irreparable harm because it will require laying off many highly-trained production workers in the North Carolina plant of its wholly-owned subsidiary, Sumitomo Electric Research Triangle, Inc. ("SERT") and that it will be impossible to rehire many of these workers if the Court's judgment is reversed on appeal or when the '915 patent expires in early 1989.
In opposition to the motion for stay, Corning has submitted affidavits designed to show:
(1) that Corning's licensee Alcoa Fujikura Ltd. had obtained Philadelphia Electric's approval of a non-silicone coated OPGW cable which it is capable of supplying in Philadelphia Electric's full contract quantities and that it failed to obtain the contract to supply such cable to Philadelphia Electric only because it was underbid by Sumitomo, whose costs did not include a patent royalty to Corning;
(2) that Alcoa Fujikura's silicone-coated fiber was also found by Duke Power to meet the specifications for its OPGW cable and Alcoa Fujikura failed to obtain the contract to supply such fiber only because it was underbid by Sumitomo;
(3) that the Lakeland, Florida contract was awarded without competitive bidding but there is no apparent reason why the Lakeland's performance specifications and volume requirements could not have been satisfied by Alcoa-Fujikura;
(4) that ASE could fulfill the Duke Electric, Philadelphia Electric and Lakeland contracts by buying fiber from Corning or one of its licensees;
(5) that Corning had already given Boeing a waiver of any infringement claim for the acquisition of up to 500 meters of cabled Sumitomo 208/250 fiber for the 7J7 aircraft project, which Boeing has informed Corning has been indefinitely postponed; and
*1077 (6) that Corning's fiber production plant in Wilmington, North Carolina, in which Corning has invested over $90 million since 1984, is operating at only about 40% of capacity, and approximately 340 workers have been laid off since the spring of 1986, due to decreased demand and increased competition, including the infringing competition from Sumitomo.
In S.C. Johnson, Inc. v. Carter-Wallace, Inc., 225 U.S.P.Q. 968, 971 (S.D.N.Y.1985) [Available on WESTLAW, 1985 WL 501], aff'd, 228 U.S.P.Q. 367, 781 F.2d 198 (Fed. Cir.1986), Judge Keenan of this Court enunciated the following standard for determining motions for a stay or injunction pending appeal in patent infringement cases:
Injunctive relief in a patent case is not stayed pending appeal unless the party seeking that relief meets the burden of establishing compelling reasons justifying it. 11 C. Wright & A. Miller, Federal Practice & Procedure § 2904 (1973) summarizes the applicable standards, as follows:
[i]t generally is required that (a) the applicant make a strong showing that he is likely to succeed on the merits of the appeal; (b) the applicant establish that unless a stay is granted he will suffer irreparable injury; (c) no substantial harm will come to other interested parties, and (d) a stay would do no harm to the public interest.
The same test was applied in Hayes v. City University of New York, 503 F. Supp. 946, 962-63 (S.D.N.Y.1980), aff'd, 648 F.2d 110 (2d Cir.1981), which is cited and relied on in Sumitomo's Reply Memorandum.
When these criteria are weighed in the present case, the balance tips decisively in favor of Corning. The likelihood that Sumitomo will succeed on appeal does not appear strong in light of the fact that three separate trial tribunals have ruled against it after considering essentially the same contentions based on essentially the same evidence.
Insofar as concerns comparison of the injury which the injunction would cause Sumitomo with that which Sumitomo's continued infringement would cause Corning, the scale tips slightly in favor of Sumitomo because the injunction will mean shutting down entirely its production of infringing fiber in this country, whereas Sumitomo's continued infringement will mean merely scaling down Corning's production.
Insofar as the public interest is concerned, the scale tips sharply in favor of Corning. The Court is not persuaded by Sumitomo's claim that the consumers served by Duke, Philadelphia and Lakeland will be significantly affected if those utilities are not able to purchase OPGW cable incorporating Sumitomo's infringing fiber. The users surely will not notice any difference in service when the OPGW cable is installed; much less would their service be affected by any difference between the fiber made by SEFOC and that made by Corning or one of its licensees. Moreover, SERT's employee layoffs due to the injunction are substantially matched by Corning's layoffs due to Sumitomo's infringement.
The public has an interest in the enforcement of valid patents. The assumption underlying the constitutional provision for the patent system and the statutes implementing that provision is that research, development and innovation are encouraged by granting to inventors the right to exclude others from the use of their inventions for a limited period of 17 years. This right of exclusion is their reward for the time and expense spent in research and for their public disclosure of the fruits of that research.
Corning's '915 patent has less than a year and a half to run. If Sumitomo's infringement is allowed to continue during the pendency of the appeal, the patent will almost have expired before the appeal is decided, and Corning will have gotten virtually nothing in the way of exclusionary rights in return for its research and its disclosure, not to mention its substantial expenses of litigation.
As the Court of Appeals for the Federal Circuit stated in Smith Intern., Inc. v. Hughes Tool Co., 718 F.2d 1573, 1581 (Fed. Cir.), cert denied, 464 U.S. 996, 104 S. Ct. 493, 78 L. Ed. 2d 687 (1983):
*1078 The very nature of the patent right is the right to exclude others. Once the patentee's patents have been held to be valid and infringed, he should be entitled to the full enjoyment and protection of his patent rights. The infringer should not be allowed to continue his infringement in the face of such a holding.
The arguments for enforcing the injunction pending appeal are particularly strong where, as here, the infringement has been found to be deliberate and willful. As the Court of Appeals for the Federal Circuit stated in Windsurfing International, Inc. v. AMF, Inc., 782 F.2d 995, 1003, n. 12 (Fed.Cir.), cert. denied, ___ U.S. ___, 106 S. Ct. 3275, 91 L. Ed. 2d 565 (1986).
One who elects to build a business on a product found to infringe cannot be heard to complain if an injunction against continuing infringement destroys the business so elected.
Crucible, Inc. v. Stora Kopparbergs Berslags A.B., 226 U.S.P.Q. 842, 845, 846 (W.D.Pa.1985) [Available on WESTLAW, 1985 WL 2872], aff'd, 793 F.2d 1565 (Fed. Cir.1986) involved factual circumstances so strikingly similar to those in the present case that, but for the difference in names, the opinion could have been written for the decision on this motion:
Stora, as in Smith International, was aware of Crucible's patents and, based upon the assumption it was infringing Crucible's patents, chartered a strategy "to check patent validity; contest patent validity; and in the process, to get defendants' products into the United States market." Crucible [, Inc. v. Stora Kopparbergs] 594 F.Supp. [1249] at 1264, 226 USPQ at 48 [(W.D.Pa.1984)]. Stora assumed the risk that its strategy would not succeed, that the patents would be found valid and its business and markets thereafter disrupted. We have found that the patents' validity and continuing infringement clearly have been established; we have, inter alia, found that the patents were "revolutionary," and achieved that which was considered to be incompatible properties in the same product. Consequently, as in Smith International, plaintiff now is entitled to its injunction and Stora, therefore, should not be heard to complain of that which it had every reason to anticipate would be the result if it lost its gamble.
* * * * * *
In a few years the Holtz and Steven patents will expire. It is clear that to further delay Crucible's enjoyment of its exclusive patent rights would be inequitable to it and contrary to the public's interests and that irreparable harm to Crucile would result.
For the reasons indicated, Sumitomo's motion to stay the injunction pending appeal is denied.
SO ORDERED.
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216 N.J. Super. 413 (1987)
524 A.2d 405
I. WILLIAM LANE AND BETTY G. LANE, PLAINTIFFS-RESPONDENTS,
v.
OIL DELIVERY, INC., DEFENDANT-APPELLANT.
Superior Court of New Jersey, Appellate Division.
Submitted November 13, 1986.
Decided January 22, 1987.
*415 Before Judges KING, HAVEY and MUIR, Jr.
Wolff, Helies & Duggan, attorneys for appellant (John Peter Duggan on the brief).
Kraft & Hughes, attorneys for respondents (Mark F. Hughes, Jr., on the brief).
The opinion of the court was delivered by MUIR, Jr., J.A.D.
Defendant appeals and plaintiffs cross appeal from a judgment entered on a jury verdict in favor of plaintiffs which was subsequently molded and corrected by the trial court into a $278,677.20 judgment with interest from September 25, 1983.
On August 10, 1983, plaintiffs, William and Betty Lane, and the American National Fire Insurance Company filed a complaint against defendant, Oil Delivery, Inc. The complaint and its later amendment sought damages for losses incurred by the *416 Lanes in a fire at their home and for the subrogated claim of American for monies paid to the Lanes under a policy of insurance.
The complaint alleged negligence, breach of contract and strict liability in tort as grounds for liability. Defendants answered and asserted a separate defense of negligence on the part of the Lanes.
The jury, finding negligence of both parties as proximate causes of the fire and damage sustained, determined defendant to be 60% negligent and the Lanes to be 40% negligent. It assessed total damages sustained by the plaintiffs at $425,985.
The trial judge denied motions by the defendant for a new trial or remittitur. He further denied plaintiffs' motion for a new trial, judgment notwithstanding the verdict and additur. However, he granted plaintiffs' motion for correction of mathematical error by the jury, adding $38,477 to the amount of the judgment. The court, relying on R. 4:42-11(b), then awarded interest from September 25, 1983, a date six months after the fire.
On appeal, defendant contends:
I. FINDING DEFENDANT SIXTY PERCENT NEGLIGENT WAS AGAINST THE WEIGHT OF THE EVIDENCE.
II. WHERE AMOUNT OF VERDICT IS SO DISPROPORTIONATE WITH PROOFS AS TO DEMONSTRATE MISTAKE, THE CASE MUST BE REMANDED.
III. TRIAL COURT IMPROPERLY ALLOWED PLAINTIFFS TO RENDER TESTIMONY ON ITEMS OF PERSONALTY.
Plaintiffs, on cross appeal, contend that:
I. THE REPAIRMEN SAW NO RISK IN STORING LOGS NEAR AN OIL BURNER, SO A JURY SHOULD NOT FIND A HOMEOWNER NEGLIGENT ON THAT BASIS.
II. SERVICEMEN ARE STRICTLY LIABLE IN TORT, SO THE JURY SHOULD HAVE BEEN INSTRUCTED ON ITS HIGHER STANDARDS OF CONTRIBUTORY NEGLIGENCE.
III. CONTRIBUTORY NEGLIGENCE SHOULD USE THE SAME STANDARDS IN NEGLIGENCE ACTIONS AND IN STRICT LIABILITY ACTIONS.
IV. INSURERS HAVE THE RIGHT TO SUE AND THE JURY SHOULD KNOW THAT PART OF ITS VERDICT WILL GO TO THE INSURER.
*417 V. INTEREST SHOULD RUN FROM THE DATE OF THE FIRE.
VI. OWNERS OF PERSONAL PROPERTY ARE COMPETENT TO TESTIFY AS TO THE VALUE OF THAT PROPERTY.
VII. REPLACEMENT COST IS THE PROPER VALUE FOR DAMAGED PROPERTY.
VIII. THE TRIAL JUDGE PROPERLY CORRECTED HIS ERROR IN SUPPLYING A SUM TO THE JURY AND IN CORRECTING THE VERDICT.
IX. IN THE EVENT OF A RETRIAL, THESE RULINGS SHOULD BE MADE:
A. OWNERS ARE ENTITLED TO DAMAGES FOR THEIR TIME IN BUYING REPLACEMENTS OF THEIR BURNED PERSONAL PROPERTY, FOR LOSS OF USE AND QUALITY OF LIVING AND FRIGHT.
B. THE BOCA CODE CONTROLLED MAINTENANCE, SO IT SHOULD GO INTO EVIDENCE.
C. THE DECORATOR'S TESTIMONY AS TO VALUE WAS ADMISSIBLE.
[We have deleted those portions of our opinion related to issues other than claims regarding nature of proof and measure of damages for personalty losses sustained by the plaintiffs Lanes.]
III.
We now turn to the defendant's challenge to the damage award by the jury which resulted in the molded, corrected judgment amount of $278,677.20.
The jury set the Lanes' damages at $425,985. This figure represented the total losses claimed for house reconstruction, living expenses during reconstruction, loss of jewelry and personalty replacement costs. The Lanes set out the personalty replacement costs in a 31-page list. Prior to their testimony on the value of the personalty, the trial judge ruled the measure of damages should be the market value at the time of the fire.
The value of personalty the jury accepted came from a total of the figures on the 31-page list. On that list, the Lanes set forth each item of personalty and their estimated value or the actual cost of the item. In their testimony, they did not state how they arrived at the value for each item. Instead, they selected an apparent cross section of the items.
As to the value of items specifically covered, Mr. Lane set the value based on his experience in buying the articles in the past, *418 pricing them at stores or in newspaper ads. Mrs. Lane, who testified essentially on her clothing and furniture in the house, based her opinion on her experience as the owner of a retail clothing store and as supervisor of charity flea markets.
The list did not distinguish actual cost from estimated cost. Instead, it listed figures under the heading "approximate cost."
The judge, in his charge to the jury, stated:
Basically what we are taking as the value is that which existed as of the date of the fire. Now, this may require some effort on your part but I think that as intelligent people you can do this. You are going to have the purchase price, you will have some indication of when the item was purchased or some cases received as a gift. You should be able using common sense to make a determination as to whether that [sic] items depreciated in value or appreciated in value between the time of the acquisition and the time of the fire. If it is an item which was salvageable and has been repaired you can consider the cost of the repairs as the damage sum available arriving from that item. Again, I'm speaking not of speculation, but of those claims which have been proved by a preponderance of the evidence. And I would add that in speaking to you about damages and how to calculate them, I'm not suggesting to you that necessarily you should find that the situation requires you to award damages. If you should, I have tried to give you an idea of how it is that you should calculate those figures.
During the course of deliberations, the jury sought the totals on the 31-page list. The judge told the jury totals could be provided. The jury then asked, "Are we to add all moneys and if agreed, that would be item three on questions."[1]
The trial judge sent the following note in response:
The "original cost" column totals $209,615.[2]
The "repair cost" column totals $38,477.
Those two columns together total $248,092.
The judge gave no instruction regarding the use of the note.
All parties agree the jury added the $209,615 for personalty to the $216,370 total of the other three items to arrive at their *419 verdict. The judge, on plaintiffs' motion, added the omitted $38,477 in repair costs to arrive at the judgment figure.
Defendant now contends the jury charge on measure of damage so conflicted with the note from the judge on "original costs" that the damage verdict exceeded the proofs at trial. It further argues the trial judge erred in allowing the Lanes to testify as to their valuations of personalty.
The measure of damages for personalty destroyed by a tortfeasor, when there is a market value, is the market value at the time of the loss. Assoc. Metals, etc., Corp. v. Dixon Chem. & Res., Inc., 68 N.J. Super. 305, 314 (Ch.Div. 1961), vacated in part, 82 N.J. Super. 281 (App.Div. 1964), on remand, 83 N.J. Super. 263 (Ch.Div. 1964), certif. den., 42 N.J. 501 (1964).
When, however, the personalty is household furnishings and wearing apparel and the like, where the market value cannot be ascertained, the better measure of damages and the one we find applicable in this case, is the actual or intrinsic value of the property to the owner, excluding sentimental or fanciful value. Holmes v. Freeman, 1 Conn. Cir. Ct. 336, 185 A.2d 88, 91 (Conn. Cir. Ct.App.Div. 1962); Mullen v. Sinclair Refining Company, 32 A.D.2d 1000, 301 N.Y.S.2d 716, 718 (1969), reargument granted sub. nom., Mullen v. Jacobs, 25 N.Y.2d 735, 255 N.E.2d 569, 307 N.Y.S.2d 1029 (1969); DeSpirito v. Bristol County Water Company, 102 R.I. 50, 227 A.2d 782 (1967); see also King v. United States, 292 F. Supp. 767 (D.Colo. 1968) (market value does not apply to every fact situation).
The rationale for such a rule is consonant with the goal of tort damages to fully compensate the injured party, thereby making it possible to replace the lost property with a comparable substitute. 4 Damages in Tort Actions (MB) § 37.22. The market value of wearing apparel and household furnishings cannot compensate the owner for their loss. While there may be a second-hand market value, other items of equal value are not interchangeable. As noted in 4 Damages in Tort Actions (MB) § 37.22[a]:
*420 The average owner will not replace lost clothing or furniture with second-hand merchandise, but will instead be "forced" to purchase new substitutes. Consequently, the second hand price does not provide adequate compensation for the loss sustained.
That is not to say the plaintiff is entitled to full replacement cost. Mullen v. Sinclair Refining Company, 301 N.Y.S.2d at 718. While the element of original cost is relevant, depreciation, age, wear and tear, condition, cost of replacement and cost of repair are all factors to be considered in assessing the damage sustained. Id.; Saporiti v. Austin A. Chambers Co., 134 Conn. 476, 58 A.2d 387, 388 (1948).
Where an item is brand new, proof of original cost sustains the owner's burden of proof as to value. Jaklitsch v. Finnerty, 96 A.D.2d 690, 466 N.Y.S.2d 774 (3rd Dept. 1983). Further, while the cost of repair may be the sole proof of damages, depreciation of a repaired object, adequately established, may be an additional relevant factor. Fanfarillo v. East End Motor Co., 172 N.J. Super. 309, 313 (App.Div. 1980).
Proof of damages need not be done with exactitude, particularly when dealing with household furnishings and wearing apparel. It is therefore sufficient that the plaintiff prove damages with such certainty as the nature of the case may permit, laying a foundation which will enable the trier of the facts to make a fair and reasonable estimate. Holmes v. Freeman, 185 A.2d at 91.
In providing such evidence, the plaintiff, as owner, may give an opinion of worth although he or she is without expert knowledge. Vaughan v. Spurgeon, 308 A.2d 236, 237 (D.C. 1973); see also Nixon v. Lawhon, 32 N.J. Super. 351, 356 (App.Div. 1954). The basis for arriving at the opinion must, however, not be a matter of speculation and the witness must be required to establish the grounds for any opinion given. It is for the jury, with appropriate instructions from the court, to ascertain the probative value of the opinion. We do not find Evid.R. 19 to be to the contrary.
*421 The trial judge's jury instructions and subsequent conduct relating to the totals set forth on the 31-page list of personalty fell short of an appropriate legal standard for the jury to properly assess tort damages.
We conclude, therefore, that the matter must be remanded to the trial court for a new trial on the issue of damages for personal property destroyed in the fire. A new trial on all issues of damages, as suggested by defendant, is unjustified in light of the fact that defendant raises no issues respecting the damages due for costs of reconstruction, living costs and jewelry lost in the fire, and the fact that the jury method of arriving at that damage award was clearly mechanical and undisputed.
IV.
Plaintiffs' contentions regarding the decorator's testimony may be dealt with by the trial judge on the retrial. Their remaining contentions we find clearly without merit. R. 2:11-3(e)(1)(E).
Judgment affirmed in all aspects except the jury damage award for personal property which is reversed and remanded for retrial in accordance herewith.
NOTES
[1] The word "questions" referred to jury interrogatories.
[2] We note here a confusion as to the meaning of the figures in the 31-page list. The figures, according to the Lanes' testimony, represented estimated costs or, in some instances, actual costs. The trial judge referred to these figures as "original costs."
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01-03-2023
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10-30-2013
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