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https://www.courtlistener.com/api/rest/v3/opinions/1523343/
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904 S.W.2d 792 (1995)
Dana Lynn COLLINS, Appellant,
v.
Glenn Samuel COLLINS, III, Appellee.
No. 01-91-00782-CV.
Court of Appeals of Texas, Houston (1st Dist.).
June 29, 1995.
Rehearing Overruled July 27, 1995 and August 31, 1995.
*795 Maurice Bresenhan, Jr., Houston, for appellant.
J. Ken Nunley, Thomas Black, San Antonio, for appellee.
Before the Court en banc.
EN BANC OPINION ON MOTION FOR REHEARING
O'CONNOR, Justice.
Appellee filed a motion requesting this Court to hear this case en banc. On rehearing, the Court sitting en banc grants his motion, withdraws the panel opinion, and issues this in its stead. We reverse and remand for a new trial on the issues of custody, the division of property, the assessment of statutory damages for violations of the federal and state wiretap statutes, and attorney fees. We affirm the granting of the divorce and the tort judgment of $15,000.
*796 Fact Summary
This is an appeal from a final decree of divorce between appellant, Dana Lynn Collins (wife), and appellee, Glenn Samuel Collins (husband). The entire 19-year marriage of this couple was characterized by spousal abuse, affairs by both parties, separations, and reconciliations. The couple married when the wife was 16 years old. She worked while her husband attended college acquiring masters and doctoral degrees. After college, the husband developed a very successful business. They were granted a divorce on December 13, 1990.
In answer to 11 questions, the jury recommended appointment of the husband as sole managing conservator of the minor child; valued a group of businesses at $2,189,482.90, one-half of which was the marital community estate's major asset; found for the wife in a tort cause of action against the husband based on an illegal wiretap of her telephone; found the husband had "intercepted" the wife's telephonic communications; and determined the amount of the wife's attorney fees.
In the judgment, the trial court:
(1) appointed the husband as sole managing conservator of the minor child;
(2) appointed the wife as sole possessory conservator of the minor child;
(3) awarded the wife a $15,000 judgment on her tort claim for spousal abuse;
(4) awarded the wife, for her community interest in a group of businesses, owelty in the sum of $342,000, at six percent interest, to be paid in monthly installments of $4,000, secured by one-half of the husband's shares in CIC Agency, Inc., one of the businesses; and
(5) ordered each party to pay his or her respective attorney fees and court costs.
The wife appeals the jury's valuation of the community property, the custody determination of the couple's minor child, the admission into evidence of tapes from the illegal wiretapping, the denial of statutory damages for illegal wiretapping, the denial of attorney fees, the equitable division of the parties' community estate, the possession order, and the owelty award.
A.
Violation of the Wiretap Statutes[1]
In point of error 3(B)-(F), the wife contends she is entitled to statutory damages because of the illegal wiretaps.
The wife contends that certain tape recordings were obtained by the husband in violation of 18 U.S.C. §§ 2510-2521 ("the federal wiretap statute") and TEX.CIV.PRAC. & REM. CODE §§ 123.001-123.004 ("the state wiretap statute"). The husband argues that spouses are exempt from the wiretap prohibitions in both statutes. He argues he had a right to tape the conversations, and he had the right to use the tapes in the divorce proceeding.
The federal wiretap statute prohibits the interception and use of illegally intercepted communications. 18 U.S.C. §§ 2510-2521. Under section 2520(a), any person whose communication is intercepted, disclosed, or intentionally used in violation of the statute, is entitled to recover in a civil action.
The state wiretap statute prohibits the use of the illegally intercepted communication. Section 123.004 of the Civil Practice and Remedies Code states that a party whose communication is intercepted may obtain an injunction prohibiting the "divulgence or use of information obtained by an interception." The illegal interception of a conversation and the use of the conversation is a second degree felony. TEX.PENAL CODE § 16.02(f).
Two Texas courts of appeals have held that the interception of a telephone conversation by a spouse is illegal. Kent v. State, 809 S.W.2d 664, 668 (Tex.App.Amarillo 1991, pet. ref'd) (defendant violated former Tex.Penal Code § 16.02 by placing a wiretap on the wife's telephone); Turner v. PV Int'l Corp., 765 S.W.2d 455, 469-71 (Tex.App.Dallas *797 1988), writ denied per curiam, 778 S.W.2d 865, 866 (Tex.1989).[2]
Neither the state nor the federal wiretap statutes contain any exception for wiretaps between spouses. See Kent, 809 S.W.2d at 668 (Texas statute); Kempf v. Kempf, 868 F.2d 970, 973 (8th Cir.1989) (federal statute). In United States v. Giordano, 416 U.S. 505, 514, 94 S. Ct. 1820, 1826, 40 L. Ed. 2d 341 (1974), the Court said:
[T]he purpose of the legislation [18 U.S.C. § 2510] was effectively to prohibit ... all interceptions of oral and wire communications, except those specifically provided for in the Act....
(Emphasis added.)
Texas courts have long recognized both a common law and a constitutional right of privacy. State Employees Union v. Dep't of Mental Health, 746 S.W.2d 203, 205 (Tex. 1987) (the right of privacy is implicit in the Texas Constitution); Billings v. Atkinson, 489 S.W.2d 858, 860 (Tex.1973) (a homeowner has a cause of action for illegal wiretap of residence based on the common-law right of privacy). Nothing in the Texas Constitution or our common law suggests that the right of privacy is limited to unmarried individuals.
Only two federal courts of appeals have held the federal wiretap statute exempts spouses from its prohibitions. Anonymous v. Anonymous, 558 F.2d 677, 679 (2d Cir. 1977); Simpson v. Simpson, 490 F.2d 803, 809 (5th Cir.1974). Those opinions have been widely criticized. See, e.g., Platt v. Platt, 951 F.2d 159, 160 (8th Cir.1989); Heggy v. Heggy, 944 F.2d 1537, 1539 (10th Cir. 1991); Kempf, 868 F.2d at 972-73; Pritchard v. Pritchard, 732 F.2d 372, 374 (4th Cir. 1984); United States v. Jones, 542 F.2d 661, 667 (6th Cir.1976); Walker v. Carter, 820 F. Supp. 1095, 1097 (C.D.Ill.1993); Nations v. Nations, 670 F. Supp. 1432, 1434-35 (W.D.Ark.1987); Flynn v. Flynn, 560 F. Supp. 922, 924-25 (N.D.Ohio 1983); Heyman v. Heyman, 548 F. Supp. 1041, 1045-47 (N.D.Ill.1982); Gill v. Willer, 482 F. Supp. 776, 778 (W.D.N.Y.1980); Kratz v. Kratz, 477 F. Supp. 463, 467-72 (E.D.Pa.1979); Comment, Interspousal Electronic Surveillance Immunity, 7 U. of Tol.L.Rev. 185, 185-212 (1975).
A court may consider the legislative history of a statute without making a finding that the statute is ambiguous. Tex.Gov't Code § 311.023. The legislative history of the federal wiretap statute indicates that Congress anticipated it would restrict the use of wiretap evidence in divorce cases. Senator Long, chair of the subcommittee on Administrative Practice and Procedure of the Senate Judiciary Committee, stated that the "three major areas in which private electronic surveillance was widespread were (1) industrial, (2) divorce cases, and (3) politics." Kempf, 868 F.2d at 973. Senator Hruska, a co-sponsor of the bill, commenting on the scope of the statute, noted that "[a] broad prohibition is imposed on private use of electronic surveillance, particularly in domestic relations and industrial espionage situations." S.Rep. No. 1097, 90th Cong., 2d Sess., reprinted in 1968 U.S.Code Cong. & Admin.News 2112, 2274; Kempf, 868 F.2d at 973.
A majority of the full court sitting en banc holds that spouses, as any other persons, have rights of privacy under both wiretap statutes. We sustain point of error 3(B)-(F).
B.
The Wiretap Evidence at Trial
In point of error 2(A), the wife contends the court erred in refusing to grant her motion in limine made to exclude the illegally obtained tape recordings. In point of error 2(B), the wife contends the court erred in making the custody determination based on illegally obtained wiretap evidence.
Three separate instances of wiretap recordings were considered at trial. The first, referred to as the "Van Brocklin tape," involved one conversation between the wife and Van Brocklin, her paramour. The evidence *798 shows that the husband installed a tape-recording device in the Collins' home in October of 1987 to record the wife's telephone conversations.
The second instance, referred to as the "post-order tapes," involved a conversation taped after March 22, 1990, when the husband was appointed sole temporary managing conservator of their minor child. In the "post-order" tapes, the husband recorded telephone conversations between the wife and the minor child. The husband used these recordings to impeach the wife during the trial on the issue of custody. The husband also gave the tapes to Dr. Hughes, the expert for the ad litem who testified that the husband should get custody of their child.
The third instance involved an allegation by the wife that the husband listened to her telephone calls with her lawyers. She decided he had listened to conversations with her lawyer because the husband preempted her filing of the divorce. At trial, the husband attempted to explain how he knew she was talking to a lawyerthat he saw the telephone bill. The calls to the lawyer were local, however, not long-distance calls, and the telephone bills showed only long-distance numbers.
1. WaiverVan Brocklin Tape
The husband contends the wife waived her objections to the husband's testimony about the contents of the Van Brocklin tape because she only made a motion in limine to exclude it. The Court agrees. The trial court's ruling on a motion in limine does not preserve error. If the evidence is offered at trial, the party who wants to exclude it must object when it is offered. Hartford Accident & Indem. Co. v. McCardell, 369 S.W.2d 331, 335 (Tex.1963); Sims v. State, 816 S.W.2d 502, 504 (Tex.App.Houston [1st Dist.] 1991, writ denied).
We hold the wife waived error regarding the husband's testimony about the Van Brocklin tape.
We overrule point of error 2(A).
2. WaiverPost-Order Tapes
When the husband offered the post-order tapes (the wife's conversations with her son) into evidence to impeach the wife, the wife's attorney objected. The court overruled the objections and permitted the jury to hear a transcript of the tapes. Later, when Dr. Hughes began to testify about the tapes, the wife's attorney again objected, arguing that the taped evidence could not be considered for any purpose. The court again overruled the objection. We hold the wife preserved her objection to the admission of the post-order tapes.
On appeal, the husband argues that because the wife suspected he might tape her conversations with their child, she waived her objections. We disagree. The state wiretap statute makes it illegal to tape a conversation "without the consent" of the person being recorded. TEX.CIV.PRAC. & REM.CODE § 123.001(2). The wife, who had the right to talk with their child, did not consent to be taped by speaking with the child over the telephone.[3] Her only option was not to talk with their child over the telephone. This Hobson's choice was not a waiver of objections or a consent to recording. In a case similar to this, a husband sued his former wife for recording his conversations with their child. Platt, 951 F.2d at 160. The wife argued that because she was the guardian of the child, she could tape the child's telephone conversations with the child's father. The Eighth Circuit held the wife was not immune from suit for the recording under the federal wiretap statute. Id. at 161.
We hold the wife did not waive her objections to the post-order taping of her conversations with their child.
3. Post-Order Tapes and Custody
Even though the post-order tapes were illegally obtained under the state and federal wiretap statutes, we must still determine if they were admissible at trial on the issue of custody.
*799 Illegally obtained evidence has been held admissible in civil lawsuits. See e.g., State v. Taylor, 721 S.W.2d 541, 551 (Tex. App.Tyler 1986, writ ref'd n.r.e.). In Allison v. American Sur. Co., 248 S.W. 829, 832 (Tex.App.Galveston 1923, no writ), we stated:
The courts do not concern themselves with the method by which a party to a civil suit secures evidence pertinent and material to the issues involved ... and hence evidence which is otherwise admissible may not be excluded because it has been illegally and wrongfully obtained.
See also Sims v. Cosden Oil & Chem. Co., 663 S.W.2d 70, 73 (Tex.App.Eastland 1983, writ ref'd n.r.e.).
The admissibility of evidence illegally obtained is tempered by Tex.R.Civ.Evid. 402, which provides, in part, that "[a]ll relevant evidence is admissible, except as otherwise provided ... by statute." Consequently, before the tapes can be held to be inadmissible, the wife must show their exclusion was required under either the federal or state statute.
Section 2511(1) of the federal wiretap statute prohibits the use or disclosure of communications by any person except as provided by statute. Gelbard v. United States, 408 U.S. 41, 51-52, 92 S. Ct. 2357, 2363, 33 L. Ed. 2d 179 (1972) (witness could not be forced to disclose testimony from illegal wiretap to grand jury). Section 123.002 of the state wiretap statute states that a party has a cause of action against any person who "divulges information" that was obtained by an illegal wiretap. TEX.CIV.PRAC. & REM.CODE § 123.002. Section 123.004 states that a party whose communication is intercepted may ask the court for an injunction prohibiting the "divulgence or use of information obtained by an interception." TEX. CIV.PRAC. & REM.CODE § 123.004. Although the Texas wiretap statute does not specifically provide for the exclusion of illegally obtained "communications," the provisions for a cause of action for divulging wiretap information and the injunctive remedies provided in section 123.004 are sufficient to rebut the presumption of admissibility under rule 402. Because the tapes were illegally obtained under the federal and state statutes, the trial court should not have admitted them into evidence on the issue of custody.
The tape-recorded conversations were not admissible because the criminal statute dealing with the use of the intercepted communications criminalizes their dissemination, and the civil statute provides a method to prevent dissemination. To permit such evidence to be introduced at trial when it is illegal to disseminate it would make the court a partner to the illegal conduct the statute seeks to proscribe. Gelbard, 408 U.S. at 51, 92 S.Ct. at 2362-63; Turner, 765 S.W.2d at 470.
We hold the illegally obtained tapes were not admissible and should not have been given to the expert for her to use in forming her opinion on the issue of custody.
We sustain point of error 2(B), and reverse and remand the issue of custody for retrial.
C.
Exclusion of Valuation Testimony[4]
In point of error 1(A)-(B), the wife argues that the trial court erred in permitting the husband and his partner, David Hickson, to testify as experts about the value of the corporation because they were not designated as experts and the substance of their testimony was not produced before trial.
The wife filed a motion in limine to prevent her husband from testifying as an expert in determining the value of the corporations. The court granted the motion, but when the husband began to testify about value, the court permitted him to testify, over the wife's objections. The wife argues that the trial court erred in permitting the husband and Hickson to testify about the value of CIC and Warantek.
When a party is asked for information about expert witnesses who will testify at trial (names and substance of testimony), the information must be disclosed. TEX. R.CIV.P. 166b(2)(e)(1); Exxon Corp. v. West Texas Gathering Co., 868 S.W.2d 299, 304 *800 (Tex.1993). If not disclosed, the expert cannot testify; the sanction is automatic. TEX. R.CIV.P. 215(5); Alvarado v. Farah Mfg. Co., 830 S.W.2d 911, 914 (Tex.1992); Morrow v. H.E.B., Inc., 714 S.W.2d 297, 297 (Tex.1986). Although the husband and Hickson were listed as fact witnesses, they were not listed as expert witnesses. Hence, the trial court has no discretion to admit testimony of the undesignated witness. Alvarado, 830 S.W.2d at 914.
The only exception to the automatic exclusion of the undesignated expert witnesses is if the party proves "good cause" for failing to designate. Henry S. Miller Co. v. Bynum, 836 S.W.2d 160, 162 (Tex.1992). The trial court has the discretion to determine whether the offering party met its burden of showing good cause. Aluminum Co. of Am. v. Bullock, 870 S.W.2d 2, 3 (Tex.1994). The question before us is whether the trial court's implied finding of good cause was made without reference to any guiding rules or principles, and was an abuse of discretion. See Morrow, 714 S.W.2d at 298. To establish a clear abuse of discretion, the complaining party must show the trial court's action was arbitrary or unreasonable in light of all the circumstances of the particular case. Smithson v. Cessna Aircraft Co., 665 S.W.2d 439, 443 (Tex.1984).
When the husband attempted to testify about value of the corporation, the wife objected on the ground that neither the husband nor Hickson had been designated as expert witnesses in answers to interrogatories, and the husband did not produce any information about the substance of their testimony on value. The wife also objected because she had asked both the husband and Hickson during their depositions if they planned to testify about value, and both had said they would not. The husband's lawyer even assured the wife's lawyer that the husband would not testify about value, and if he changed his mind, he would inform them ahead of time.[5] In response to her objection at trial, the husband argued that he and Hickson should be permitted to testify as lay witnesses about value; that it was not necessary for either of them to be listed as experts or to produce the substance of their testimony before trial.[6] Without stating any reason, the trial court overruled the wife's objection and permitted the husband and Hickson to express their opinions about value of the corporations. The husband's evidence regarding value of the corporations indicated a much lower value than that offered by the wife's experts.
One of the most important issues in this divorce, as in many divorces, was the value of the community property. The major assets of this community estate were two corporations which were completely controlled by the husband and his partner. The discovery rules would mean nothing if, in the middle of trial, a party could formulate an opinion on value when he earlier said he had no such opinion.
Rule 166b(2)(e) requires the disclosure of the identity of a party's trial experts and the substance of their testimony. Aluminum Co., 870 S.W.2d at 4. When a response to discovery is misleading, even though it was initially correct, rule 166b(6)(a)(2)[7] requires the party to supplement *801 its responses at least 30 days before trial. When an expert changes his or her opinion about a material issue after being deposed, rule 166b(6)(b)[8] requires the party to supplement its response to discovery and inform the other party about the change. Aluminum Co., 870 S.W.2d at 4; Exxon Corp., 868 S.W.2d at 304. A last minute, material alteration in the expert's testimony is just as damaging as the complete failure to list an expert. Exxon Corp., 868 S.W.2d at 305.
In Aluminum Company, the plaintiff's expert testified on deposition that Alcoa was not consciously indifferent to its employee's safety. At trial, the same expert testified that Alcoa was grossly negligent. Aluminum Co., 870 S.W.2d at 3. The expert said she reached this conclusion after reviewing additional material following her deposition. The Texas Supreme Court held the plaintiff had a duty, imposed by rule 166b(2)(e), to supplement her responses to discovery when her expert changed her opinion about Alcoa's negligence. Id. at 4; see also Farm Serv., Inc. v. Gonzales, 756 S.W.2d 747, 750 (Tex. App.Corpus Christi 1988, writ denied) (witness who changed opinion after deposition should have been excluded).
In Exxon Corporation, the Supreme Court held that a party who has disclosed the substance of its expert's testimony is not required in a supplement to discovery to disclose a minor refinement of the expert's testimony. Exxon Corp., 868 S.W.2d at 304. The court noted that the purpose of the rule requiring disclosure of the substance of the expert's testimony is to give the opposing party sufficient information about the expert's opinion to permit the party to prepare for cross-examination of the expert and prepare rebuttal evidence from their own expert. Id.
Here, the husband and Hickson testified under oath at their depositions that neither had an opinion about the value of the corporations and neither would offer an opinion at trial.[9] The husband's attorney assured the wife's attorney that he would notify him if the husband and Hickson changed their mind. They did not notify the wife's attorney of any change. The wife's attorney had no opportunity to prepare for the cross-examination of the husband and Hickson on the issue of valuation, or to prepare rebuttal testimony from the wife's expert.
Although some courts have permitted a party to testify even though the party was not designated as a witness, in none of those cases did the court permit the party to give expert testimony. For example, in Henry S. Miller, 836 S.W.2d at 161, the trial court permitted Bynum, who was not designated as a witness, to testify as a fact witness but not as an expert.[10]
The husband claims he did not give expert testimony, but that he only gave lay *802 testimony about the value of his own company. The wife's attorney asked the husband in his deposition if he planned to provide any evidence regarding value, either personal opinion or expert opinion. He said he did not. The husband did not show good cause for failing to inform the wife before trial that he and Hickson would testify about value of the corporations.[11]
If the trial court admits testimony of an undesignated witness without a showing of good cause, to obtain reversal, the party objecting to the evidence must show harm. Alvarado, 830 S.W.2d at 917. If the undesignated witness testified about a material, disputed allegation, the appellate court will reverse. Boothe v. Hausler, 766 S.W.2d 788, 789 (Tex.1989). If the undesignated witness testified about matters that were merely cumulative of other evidence, the appellate court will affirm, holding the error was harmless. Id.
The husband and Hickson testified that the value of the corporations was 2.2 million dollars; the wife's experts testified the value was between $17 and $18 million; the jury found the value was $2,189,482.90. We find the husband and Hickson testified about a material, disputed allegation, and the evidence was not merely cumulative.[12]
A majority of the court sitting en banc sustains the wife's point of error one and reverses and remands the case to the trial court for a new trial on the value of the property and the division of the community estate.
We sustain point of error 1(A)-(B).
D.
Jury instruction
In point of error 1(C), the wife argues that the italicized language in the instruction below *803 destroyed the value of the three non-competition agreements. In question three, inquiring as to the value of CIC and Warantek, the jury was instructed:
The "present value" of an asset is its market value unless it has no market value.
"Market value" is the price the asset will bring when it is offered for sale by one who desires to sell, but is not obligated to sell and is bought by one who desires to buy, but is under no obligation of buying.
If an asset has no market value, its present value is the value of its ownership as determined from the evidence.
You are to determine the present value of the ownership interest in the business as if the party participating in it will no longer continue to do so and will be free to compete directly with it.
(Emphasis added.) This instruction was taken from 5 Tex.Pattern Jury Charges, PJC 203 (1989).
The wife contends the three non-competition agreements were assets of CIC and the husband argues they were not. The first non-competition agreement is found in the "Agreement to Incorporate Partnership," executed when the husband and Hickson formed CIC. Parts of that agreement are reproduced below:
The parties hereto have caused the corporation to be formed.
....
Immediately upon incorporation, the parties hereto, as copartners, shall sell and transfer to the corporation all assets and business of Creative Insurance Concepts, their partnership, including [list of assets, including leasehold interest] and shall join in execution of appropriate legal documents to accomplish the sale and transfer.
....
The parties hereto shall cause the corporation to assume all the liabilities of their partnership....
....
Each of the parties hereto agrees that for a period of two (2) years after he ceases to be an officer or director of the corporation he will not engage in the same or any similar kind of business in Brazos County or within a distance of fifty (50) miles of the boundaries thereof.
The agreement was signed by both the husband and Hickson. By this agreement, the husband and Hickson transferred all their partnership assets and debt to the newly formed corporation. One of the assets they transferred was their promise not to compete with the corporation. The agreement forming CIC was a corporate asset. The value of this agreement, as all other assets they transferred to the newly formed corporation, attached to CIC. By their agreement to incorporate, the husband and Hickson agreed not to compete with the corporation.
The second non-competition agreement was an unexecuted "Non-Competition and Confidentiality Agreement" in the corporate minutes of CIC. CIC's minutes state that the form of the agreement was reviewed, approved and was to be signed by all but two producers. The unexecuted agreement and the minutes confirm that both the husband and Hickson were required to execute the non-competition agreement.
The third non-competition agreement was the "Exclusive Producer Agreement" between CIC and its underwriter, AIG, which set up a five-year (1989-1994), exclusive relationship between the two entities. This agreement bound CIC and its employees to deal exclusively with AIG. This agreement did not limit the husband, except as an employee of CIC in its relationship to AIG. This agreement was not relevant to the jury issue.
Because CIC had an enforceable non-competition agreement signed by both the husband and Hickson, the jury should not have been instructed to disregard it as having no value to CIC. The trial court erred in its instructions to jury question number three.
We sustain point of error 1(C).
*804 E.
Statute of limitations[13]
In point of error 3(A), the wife contends the state wiretap statute, which does not contain a statute of limitations, is governed by the residual limitations provision in TEX. CIV.PRAC. & REM.CODE § 16.051, which is four years.[14]
Because the state wiretap statute has no stated statute of limitations, we must look to other authority to determine which to use. The wife argues that the general residual limitations period contained in section 16.051 of the Civil Practice and Remedies Code governs. That section provides "[e]very action for which there is no express limitations period, except an action for the recovery of real property, must be brought not later than four years after the day the cause of action accrues." TEX.CIV.PRAC. & REM.CODE § 16.051.
We disagree with the wife. An action under the state wiretap statute sounds in tort and is controlled by a two-year statute of limitations. This Court has held that "[i]nvasion of privacy is governed also by the two-year statute of limitations." Stevenson v. Koutzarov, 795 S.W.2d 313, 319 (Tex. App.Houston [1st Dist.] 1990, writ denied). Violation of the state wiretap statute is clearly an invasion of privacy.
A majority of the court sitting en banc overrules point of error 3(A).
F.
The Terms of the Judgment
In point of error 6(A)-(C), the wife contends the trial court's judgment is erroneous for three reasons: (A) the judgment does not equitably divide the parties' community estate; (B) the possession order in the judgment does not conform to the Texas Family Code and the trial court refused to file findings of fact and conclusions of law; (C) the judgment does not properly secure her owelty award because it is not a judgment, it is not enforceable as a judgment, and it does not bear the proper rate of interest.
We now address point of error 6(C), the wife's arguments regarding the owelty award. The wife argues the trial court abused its discretion in setting an interest rate of six percent for the payout period. She argues that under Tex.Rev.Civ.Stat. art. 5069-1.05 §§ 2, 3, the court must set an interest rate of at least 10 percent per year. We agree. In the event the trial court sets a payout schedule, we direct the court to set an interest rate of not less than 10 percent per year, compounded annually, as required by article 5069-1.05 §§ 2, 3. See El Universal, Compania Periodistica Nacional v. Phoenician Imports, Inc., 802 S.W.2d 799, 804 (Tex. App.Corpus Christi 1990, writ denied) (appellate court reformed the judgment to include post-judgment interest in accordance with the statute).
The wife argues that the payout period in the judgment of almost 12 years is unjust. In Hanson v. Hanson, 672 S.W.2d 274, 279 (Tex.App.Houston [14th Dist.] 1984, writ dism'd), the court held the trial court abused its discretion by establishing a payout schedule of six years. Id. The husband should be directed to pay the judgment within the shortest period in which he is capable so that the wife is not deprived of the right to control her full share of the estate. Id. On this record, there is no evidence to support the need for a 12-year pay-out or the husband's capacity for paying in a shorter period of time. We assume, after the retrial of this case, the court will sign a judgment that will make appropriate provisions that are supported by the record.
The wife also argues that the money judgment for her share of community property is only secured by corporate stock of CIC. The wife argues that if the husband defaults in the payment of her award, she will be forced to file another lawsuit to collect her community *805 property. In Hanson, the court said that a money judgment can be used to equalize an award when partition of the community estate would result in no value to the wife. Hanson, 672 S.W.2d at 278. In that case, the court noted it was not possible to partition the husband's medical practice or his retirement fund, and the couple's home was heavily mortgaged. Id. Here, we do not know if the court could have granted the wife a mortgage on the house awarded to the husband or if the court could have awarded the wife some of her share of community property from the husband's retirement accounts. On remand we assume those issues will be fully developed.
We overrule point of error 6(C).
G.
Other Issues
Because we remand this cause to the trial court, we decline to address the remaining issues.
DUGGAN[15] and HEDGES, JJ., sitting on panel submission.
HEDGES, J., joined by COHEN, J., filed a dissenting and concurring opinion from part C of the opinion. On panel submission, DUGGAN, J., voted in favor of the position espoused in Justice HEDGES' dissent.
HUTSON-DUNN, J., joined by OLIVER-PARROTT, C.J., filed a concurring opinion from part E of the opinion.
MIRABAL, J., voted against the en banc consideration of the rehearing, dissents (without opinion) from part A of this opinion relating to the wiretap statutes, and does not participate in the other issues considered by the court en banc.
HUTSON-DUNN, Justice, concurring to the en banc opinion on motion for rehearing.
Although I agree with the majority of the court on all other issues, I write separately on the issue of the statute of limitations because I disagree with Section E of the opinion.
In points of error three and four, the wife contends that the state wiretap statute, which does not set out a statute of limitations, is governed by the residual limitations provision in Tex.Civ.Prac. & Rem.Code § 16.051 (Vernon 1986), which is four years.
Section 16.051, "Residual Limitations Period," provides:
Every action for which there is no express limitations period, except an action for the recovery of real property, must be brought not later than four years after the day the cause of action accrues.
(Emphasis added.)
If no provision in any of the limitations statutes expressly applies to a cause of action for wiretap, the cause of action is governed by section 16.051. Williams v. Khalaf, 802 S.W.2d 651, 658 (Tex.1990) (because there was a provision for fraud, it was governed by four-year statute). For example, when a party brings a suit that is a statutory cause of action, even if the suit could be analogized to a common law cause of action, because it is not expressly listed in § 16.051, the four-year residual statute applies. Wider v. First City Bank of Dallas, 804 S.W.2d 160, 162 (Tex. App.Dallas 1990) (suit against bank for refusal to honor checks was not a suit for debt, it was suit for violation of the UCC, and the limitations was governed by the residual statute).
There is no limitations statute that expressly applies to a wiretap cause of action. In amending the residual limitation provision in 1979, the legislature was charged with knowledge of the holdings of the courts. Williams, 802 S.W.2d at 657. Just as the adoption of section 16.051 changed the period of limitations for fraud from two to four years, that section changed all other periods of limitations for which there is no express limitations period. Nothing in the wiretap statute or in the statutes relating to limitations provides for a limitation period for this type of suit.
*806 I would sustain the wife's points of error three and four and remand to the trial court the issue of damages for violations of the wiretap statute.
OLIVER-PARROTT, C.J., joins HUTSON-DUNN, J., in this concurring opinion.
HEDGES, Justice, dissenting in part and concurring in part.
I dissent from the decision to hear this case en banc. I join the majority in reversing the judgment and remanding the case for a new trial. However, I note that there is much that is wrong with Section C of the majority opinion, entitled "Exclusion of Valuation Testimony." In Section C, the majority first applies the wrong law, and then, when traversing the most difficult ground of its analysis, errs once more. The majority should have held that the husband and his partner, Hickson, as owners of the corporation, could testify as lay witnesses to the value of the corporation.
The majority intensively examines the subjects of disclosure of expert witnesses, "good cause" for failing to designate expert witnesses, supplementing discovery responses that concern the opinions of expert witnesses, etc. Absolutely none of this discussion is relevant, because the testimony admitted on valuation at trial was not expert testimony. The statement of facts shows that when the husband tried to introduce testimony on valuation, the wife's attorney objected. After hearing argument from both attorneys on the issue of admissibility, the trial court stated:
The Court having reviewed the cases cited to the Court and heard the arguments of counsel is going to allow lay opinion testimony only by Collins and Hickson.
(Emphasis added.) Could it be any more clear that the issue here is whether lay testimony on valuation was admissible, not whether expert testimony on valuation was admissible?
The husband argues that the trial court was correct in admitting the testimony on valuation because he and Hickson could properly testify on the issue as lay witnesses. He is absolutely right: an owner or anyone with personal knowledge can assist the fact finder by expressing a lay opinion on the value of real or personal property. See Laprade v. Laprade, 784 S.W.2d 490, 492 (Tex. App.Fort Worth 1990, writ denied) (value of corporation); Bavarian Autohaus, Inc. v. Holland, 570 S.W.2d 110, 115 (Tex.Civ. App.Houston [1st Dist.] 1978, no writ); TEX.R.CIV.EVID. 701. The admission of such testimony should not be disturbed on appeal unless the admission was an abuse of discretion. Laprade, 784 S.W.2d at 492; Hochheim Prairie Farm Mut. Ins. Ass'n v. Burnett, 698 S.W.2d 271, 276 (Tex.App.Fort Worth 1985, no writ). The holdings in cases like Laprade and Bavarian Autohaus show that the trial court's admission of the indisputably lay testimony was permissible. The authorities cited by the majority that define a party's duty in designating an expert and in disclosing and supplementing an expert's opinion are completely inapplicable for the very reason that they concern expert opinion, which, again, is not at issue here.[1]
The majority goes on to state that because the husband and his attorney said at the husband's deposition that the husband would not provide any testimony regarding valuation, which necessarily includes expert and lay testimony, the husband should have supplemented his response to discovery and informed the wife before trial that he intended to give evidence on valuation at trial after all. The majority concludes that the testimony was inadmissible because the husband failed to show good cause for not supplementing his response.
*807 There is no statute, no case, no authority whatsoever for the proposition that a party who says in a deposition that he will not testify on a matter at trial must "supplement" his deposition answers if he changes his mind and does decide to testify on the matter. In fact, one court of appeals has correctly stated as recently as last year that "[t]here are no Texas cases that specifically require a deponent to supplement his deposition testimony." Navistar Int'l Transp. Corp. v. Crim Truck & Tractor Co., 883 S.W.2d 687, 691 (Tex.App.Texarkana 1994, writ denied) (emphasis added). The same court also noted that "[n]or is there a procedural rule that requires a nonparty deponent"like Hickson here"to supplement his deposition testimony." Id.
The fact that there is no authority requiring a party who says in a deposition that he will not testify on a matter at trial to "supplement" his deposition answers if he changes his mind and does decide to testify is critical. In fact, it is not just critical; it is dispositive. As noted above, the standard of review for the admission of the valuation testimony is abuse of discretion. See Laprade, 784 S.W.2d at 492; Hochheim Prairie Farm, 698 S.W.2d at 276. An abuse of discretion in the admission of evidence occurs when the trial court acts contrary to guiding rules or principles. Reichhold Chems., Inc. v. Puremco Mfg. Co., 854 S.W.2d 240, 247 (Tex.App.Waco 1993, writ denied). If, as the Navistar court correctly noted, there is no case that specifically requires a deponent, party or non-party, to supplement his deposition testimony, how can the trial court have acted contrary to any guiding rules or principles in allowing the valuation testimony? Put another way, how could the trial court have acted "contrary to any guiding rules or principles" when there are no specific guiding rules or principles? The answer, of course, is that the trial court did not abuse its discretion.
Because there is no authority that required the husband to "supplement" the deposition testimony on valuation, Texas Rule of Civil Procedure 215(5), which penalizes a party for failing to supplement when the party was "under a duty" to supplement, does not apply here. The majority's conclusion that the husband failed to show good cause for not supplementing is based on an erroneous assumption; the husband did not have to show "good cause" under rule 215 for not supplementing because there was no authority requiring him to supplement in the first place.
Even though the valuation testimony was admissible, the wife was not left without a response to it. She had at her disposal a very potent antidote to the testimony: impeachment. This is precisely what we said in Ramsey v. Lucky Stores, Inc., 853 S.W.2d 623 (Tex.App.Houston [1st Dist.] 1993, writ denied). In that case, we disagreed with the appellants that a Fort Worth opinion[2] "imposes a general duty on a deponent to supplement his deposition testimony." Id. at 630 n. 9. We expressly declined to decide whether Texas Rule of Civil Procedure 166b(6)(a) requires a deponent to supplement his deposition testimony. Id. at 630. In our discussion, however, we stated that "[w]e do note in general that any witness who testifies at trial differently from his deposition is subject to impeachment with the deposition testimony." Id. at 630 n. 9. The wife could have debilitated or even abolished the credibility of the husband and Hickson with deft use of their earlier statements that they would have no opinion to offer the jury on the very subject on which they were now asking the jury to accept their word.
The effect of the majority's holding on this issue is to transform what the witnesses and the husband's attorney said at the depositions into an imitation rule 11 agreement. The majority seeks to hold the witnesses and the husband's attorney to what they agreed to on the recordan inviting idea until one considers that the agreement, because it was not "in writing, signed and filed with the papers as part of the record" or "made in open court and entered of record" was completely unenforceable. Tex.R.Civ.P. 11. Rule 11 mandates that "[u]nless otherwise provided in these rules, no agreement between attorneys or parties touching any suit pending will be enforced unless it be in writing, signed and filed with the papers as part *808 of the record, or unless it be made in open court and entered of record." Id. (emphasis added).
The agreement made by the witnesses and the husband's attorney does not comply with rule 11. How, then, can it be enforced at trial? The answer is that it can't.
For all of these reasons, I disagree with Section C of the "Combined En Banc and Panel Opinion on Motion for Rehearing." That section presents an analysis gone badly awry and, as a consequence, a holding that is very wide of the mark.
COHEN, J., joins HEDGES, J., in this opinion. DUGGAN, J., joins HEDGES, J., on the panel submissions of this issue.
NOTES
[1] Justice Mirabal dissents from this part of the opinion without opinion.
[2] We recognize the Texas Supreme Court, in denying writ, noted that the denial was not to be construed as approving the holding of the court of appeals on the admissibility of the tape recorded telephone conversations. PV Int'l Corp. v. Turner, 778 S.W.2d 865, 866 (Tex.1989).
[3] On one of the post-order tapes, the wife asked the son if the conversation was being recorded; he answered that it was not.
[4] Justice Hedges, joined by Justice Cohen, dissents from this part of the opinion.
[5] During the husband's deposition, he was asked if he was planning on expressing an opinion at trial about CIC stock. He said "no." His lawyer volunteered the following: "Let me answer that. I don't anticipate him expressing an opinion. He has done no analysis. I have asked him to do no analysis. He has not talked to all of the people I have talked to. If that changes in any way I will notify you in ample time to re-ask him. But, at this point I do not anticipate asking him that."
[6] The husband's position at trial, that he was not an expert and could testify without notifying the wife before trial, is at odds with his lawyer's statement during deposition, reproduced above.
[7] Rule 166b(6) provides in part:
6. Duty to Supplement. A party who has responded to a request for discovery that was correct and complete when made is under no duty to supplement his response to include information thereafter acquired, except the following shall be supplemented not less than thirty days prior to the beginning of trial unless the court finds that a good cause exists for permitting or requiring later supplementation.
a. A party is under a duty to reasonably supplement his response if he obtains information upon the basis of which:
....
(2) he knows that the response though correct and complete when made is no longer true and complete and the circumstances are such that failure to amend the answer is in substance misleading; or
b. If the party expects to call an expert witness when the identity or the subject matter of such expert witness' testimony has not been previously disclosed in response to an appropriate inquiry directly addressed to these matters, such response must be supplemented to include the name, address and telephone number of the expert witness and the substance of the testimony concerning which the expert witness is expected to testify, as soon as is practical, but in no event less than thirty (30) days prior to the beginning of trial except on leave of court.
(Emphasis added.)
[8] See footnote 7, above.
[9] The wife sent the husband interrogatories requesting information about experts. Additionally, at the depositions of the husband and Hickson, the wife's attorney made another "appropriate inquiry" regarding supplementation of the information regarding possible expert witnesses and their testimony. Rule 166b(6)(b) states that a party is under a duty to supplement information not previously disclosed in response to an "appropriate inquiry." It was appropriate for the wife's attorney to quiz the husband and Hickson at deposition whether they would offer expert opinions at trial. See Foster v. Cunningham, 825 S.W.2d 806, 808 (Tex.App.Fort Worth 1992, writ denied) (a party may make an appropriate inquiry during deposition for information about witnesses).
[10] The dissent insists that the husband and the partner could testify, even though not properly listed as witnesses, because they were the owners of the corporation. The dissent confuses the substantive law that governs the testimony of experts (who has the ability to testify as an expert) with the procedural law that controls the trial procedure (who was properly identified as a witness). If we followed the dissent's logic, any person who had an ownership interest in property could testify about value of property, generally a matter left to an expert, even though not designated in response to a question asking for the names of experts who were going to testify. The dissent insists that the husband and the partner could testify as lay witnesses about valuation, even though they were directly asked if they were going to give any opinion about value (even a personal one), and they said no.
[11] The dissent professes to know of no authority that would require the husband to supplement the deposition testimony that he and Hickson gave during their depositions that misled the wife. Rule 166b(6)(b) is the authority. It provides that a party has a duty to supplement information given "in response to an appropriate inquiry directly addressed to these matters." In this case, on deposition, the husband, Hickson, and the husband's lawyer stated, in response to an "appropriate inquiry," that they would not testify about value at trial.
The dissent's position, that a party is not required to supplement deposition testimony, would cause havoc at triala witness could give one opinion on deposition, change his or her mind before trial, and testify at trial to the reverse. The Texas Supreme Court has addressed this very issue in Aluminum Company, where it said, "When Laux's [the deposed expert] opinion concerning Alcoa's negligence changed due to the review of additional facts, the Bullocks then had a duty to supplement their discovery responses to disclose the material change." 870 S.W.2d at 4. When the husband and Hickson testified at trial they had an opinion on value, it was a material change from their testimony on deposition when they said did not have an opinion on value, would not offer such an opinion at trial, and if they changed their mind, they would let the wife know. See also Foster, 825 S.W.2d at 808 (party could make request for witness list during a deposition); Farm Serv., Inc., 756 S.W.2d at 750 (witness, who changed opinion after deposition, should have been excluded at trial).
[12] The dissent argues that the wife's remedy was to cross-examine and to impeach the husband and Hickson. Contrary to the dissent's argument, the ability to cross-examine and possibly impeach the witness who was not identified is not "good cause" for permitting the witness to testify. This is the holding of E.F. Hutton & Co. v. Youngblood, 741 S.W.2d 363, 364 (Tex.1987). The purpose of requiring disclosure of the expert's testimony before trial is to give the opposing party sufficient information about the expert's opinion to permit the party to prepare to cross-examine the expert and prepare rebuttal evidence from another expert. Exxon Corp., 868 S.W.2d at 304. The purpose of the rule would be subverted if the only remedy for a violation was to attempt to cross-examine or impeach without the benefit of preparation and to present the case without rebuttal evidence. We recognize that in dicta in Ramsey v. Lucky Stores, Inc., 853 S.W.2d 623, 630 n. 9 (Tex.App.Houston [1st Dist.] 1993, writ denied), we said a witness who testifies differently at trial is subject to impeachment. We did not mean to suggest that impeachment was a remedy for failure to exclude a witness, as is suggested by the dissent. That would be contrary to the Supreme Court's holding in E.F. Hutton, one of the early cases involving the failure to identify a witness. 741 S.W.2d at 364.
[13] Justice Hutson-Dunn, joined by Chief Justice Oliver-Parrott, dissents from this part of the opinion.
[14] Section 16.051, "Residual Limitations Period," provides:
Every action for which there is no express limitations period, except an action for the recovery of real property, must be brought not later than four years after the day the cause of action accrues.
(Emphasis added.)
[15] Justice Duggan, who retired on December 31, 1994, continues to sit by assignment for the disposition of this case, which was submitted before his retirement.
[1] One such inapplicable authority is Aluminum Co. of Am. v. Bullock, 870 S.W.2d 2 (Tex.1994), relied on in several areas by the majority. The issue in that case, in the words of the court that decided it, was "whether good cause under Rule 215(5) exists to allow the testimony of expert witnesses who were not previously designated by the party calling them." Id. at 3 (emphasis added). This case, on the other hand, does not concern expert testimony, as the record explicitly demonstrates. Nor does this case have anything to do with the question of good cause; as is discussed below, the husband did not have to show good cause for not supplementing because he was not required to supplement.
[2] Foster v. Cunningham, 825 S.W.2d 806 (Tex. App.Fort Worth 1992, writ denied).
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648 A.2d 652 (1994)
In re B.W., Juvenile.
No. 93-263.
Supreme Court of Vermont.
July 1, 1994.
*653 Jeffrey L. Amestoy, Atty. Gen., Montpelier, and Harrison B. Lebowitz, Asst. Atty. Gen., Waterbury, for appellee Dept. of Social and Rehabilitation Services.
Robert M. Paolini of Martin & Paolini, P.C., Barre, for appellant R.W.
Before ALLEN, C.J., and GIBSON, DOOLEY and JOHNSON, JJ.
GIBSON, Justice.
Father appeals from an order of the Windham Family Court terminating his parental rights and responsibilities with respect to his daughter, B.W. We affirm.
B.W., born in 1982, came into the custody of the Commissioner of Social and Rehabilitation Services (SRS) in August 1990, when the court issued first an emergency detention order, then a decision finding her to be a child in need of care and supervision (CHINS). She has remained in SRS's custody ever since. The court found that B.W. had been sexually abused, starting at age 7, by her brothers, then ages 13 and 9, and that the father had failed to protect his daughter because he was abusing drugs to such a degree that he was either unaware of the sexual misconduct or just did not care.
Disposition proceedings did not immediately follow the CHINS determination, due in part to father's admission to the Vermont State Hospital (VSH) after taking a drug overdose. Following hearings on disposition, the family court transferred legal custody and guardianship of B.W. to the Commissioner of SRS on April 2, 1991, and adopted a plan of services for her.
On May 28, 1992, SRS filed a petition to terminate residual parental rights (TPR). During discovery, father opposed the production of records from VSH regarding his therapy and from a youth services agency that had assisted the family. Following a hearing, the court ordered release of the records. The TPR hearing was conducted thereafter over a four-day period in January and February 1993.
The case plan originally approved by the court contemplated reunification of B.W. and her father, who throughout her placement with SRS adamantly rejected counseling, treatment and services offered to him and other members of the family, maintaining that he did not need to change, nor did his sons, and that B.W.'s victimization was really her own fault. At the TPR hearing, the court found, based on the testimony of a number of expert witnesses, that father would be unable to resume parenting within a reasonable period of time. The court found further that, since coming into SRS's custody, B.W. had improved both academically and socially, had grown in self-confidence, and was a happier child. The court also found that her behavior deteriorated following visits with her father, but improved considerably after contact with her father ceased altogether.
The court found troubling the fact that B.W. still felt the sexual abuse while in the family household was her own fault and that there was nothing to prevent her from being revictimized in father's home.
*654 There was abundant evidence of father's unyielding refusal to comply with the case plan. A few months before the disposition hearing, he entered therapy, one of the plan's recommended services, but progress was slow. The court found that even if father came into total compliance with the case plan, it would take two to three years before visits could be resumed because of his entrenched attitudes about B.W.'s victimization. The court concluded that father's two years of opposition to services made "the likelihood of therapeutic resolution [of the sexual abuse issue] either uncertain or so far in the future as to be against the permanency and best interests" of B.W.
The court granted the TPR petition, concluding that the evidence supporting termination was "completely overwhelming." The court also terminated parental rights as to B.W.'s mother, but only the father has appealed the court's order.
I. Release of Records
Father argues first that the court erred in ordering release of his therapy and medical records, contending that the court erroneously relied on the implied waiver of physician-patient privilege set forth in In re M.M., 153 Vt. 102, 105, 569 A.2d 463, 465 (1989), cert. denied, 494 U.S. 1059, 110 S. Ct. 1532, 108 L. Ed. 2d 771 (1990). Father is correct that following this Court's decision in In re M.M. subsection (7) was added to V.R.E. 503(d) to "overrule the implied waiver analysis" of that case. Reporter's Notes, V.R.E. 503(d)(7). But his suggestion that the court relied on In re M.M., rather than the rule, in releasing the records is erroneous. The court fully addressed the procedural and substantive requirements of V.R.E. 503(d)(7), 42 U.S.C. §§ 290dd-3 (confidentiality of alcohol-abuse patient records), 290ee-3 (confidentiality of drug-abuse patient records), and 42 C.F.R. §§ 2.51-2.64 (disclosure of substance-abuse patient records without patient consent or under court order),[*] finding that the requirements of both V.R.E. 503(d)(7) and the federal law had been met.
Father also contends that the records were more than one year old at the time of hearing and that their prejudicial impact outweighed any probative value. It is clear that the court knew the records were a year old, and took due account of that fact. In any event, the evidence supporting the court's TPR decision was overwhelming, apart from the therapy and medical records. The central focus of the court was the pervasive abuse of B.W. over a lengthy period of time and father's unyielding resistance to any plan proposed to meet B.W.'s needs and to enhance his own personal development and parenting capabilities. The expert evidence evaluating the total family, separate and apart from father's medical and therapy records, was substantial and clear. The father's own records provided corroboration, but were not essential to the court's determination.
II. Change of Circumstances
Father argues next that the trial court erred in concluding that there had been a substantial change in material circumstances, since there had not been sufficient evidence of "stagnation" on the part of father. As we have often stated, when termination of parental rights is sought, 33 V.S.A. § 5532(a) requires the court to conduct a two-step analysis: First, the court must find that there has been a substantial change in material circumstances; second, the court must find that the best interests of the juvenile require termination of parental rights. In re J.R., 153 Vt. 85, 99-100, 570 A.2d 154, 161 (1989). Such findings must be supported by clear and convincing evidence and will withstand review in this Court unless they are clearly erroneous. In re S.R., 157 Vt. 417, 421, 599 A.2d 364, 367 (1991).
The first step in the analysis, a substantial change in material circumstances, is "most often found when the parent's ability to care properly for the child has either stagnated or deteriorated over the passage of *655 time." In re H.A., 153 Vt. 504, 515, 572 A.2d 884, 890, cert. denied, 498 U.S. 861, 111 S. Ct. 166, 112 L. Ed. 2d 131 (1990). Stagnation may be shown "by the passage of time with no improvement in parental capacity to care properly for the child." In re J.R., 153 Vt. at 99, 570 A.2d at 161. But as we stated in In re A.F., 160 Vt. 175, 181, 624 A.2d 867, 871 (1993), "the mere fact that a parent has shown some progress in some aspects of his or her life does not preclude a finding of changed circumstances warranting modification of a previous disposition order." Accord In re M.M., 159 Vt. 517, 522-23, 621 A.2d 1276, 1279-80 (1993); In re J.J., 143 Vt. 1, 5-6, 458 A.2d 1129, 1131-32 (1983).
In the present case, the trial court concluded that there had been a substantial change of material circumstances, as evidenced by the passage of two and one-half years of SRS custody and no improvement in father's parental abilities. The court found that father was not ready to take responsibility for parenting and protecting B.W. and that "it will take too long for him to recover his parenting skills to resume his relationship with his daughter." The court's findings were amply supported by clear and convincing evidence.
III. Best Interests of the Child
Finally, father contends that SRS did not present clear and convincing evidence that termination of parental rights was in B.W.'s best interest, pursuant to the factors enumerated in 33 V.S.A. § 5540. He maintains that he will be able to resume his parental duties within a reasonable time. This second prong of the test, like the first, must be supported by clear and convincing evidence. See In re S.R., 157 Vt. at 421, 599 A.2d at 367. That standard was met in the present case.
Against voluminous evidence that father has not begun to fathom the trauma visited on his daughter, he points to limited evidence that some supervised visits were appropriate for consideration under 33 V.S.A. § 5540(1). Such evidence, however, relates to visits occurring early in SRS's custody. Unmentioned are incidents of unpermitted contacts and inappropriate behavior by him that traumatized B.W., reactivated symptoms of victimization, caused her to act out inappropriately, and put her at renewed risk. He also omits mention of his daughter's request that contacts with him end. The evidence strongly supports the court's conclusion that "[B.W.'s] interaction and relationship with her father has been overtly destructive" and that termination of father's parental rights is in her best interest. Under the most optimistic scenario, involving a level of cooperation not to be assumed from the evidence, reunification with B.W. is years away, if it can be accomplished at all. The evidence was clear and convincing evidence that termination of parental rights is in the best interest of B.W.
Affirmed.
NOTES
[*] Federal law was implicated because of the issue of whether either of the two record-keeping institutions was a substance-abuse treatment center receiving federal funds, which would bring them under federal confidentiality rules. 42 U.S.C. §§ 290dd-3 and 290ee-3 have recently been consolidated at 42 U.S.C. § 290dd-2 (Supp.1994).
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812 S.W.2d 713 (1991)
Patricia Carol DRURY the Continental Insurance Company, Movants,
v.
Judy A. SPALDING, Kentucky Farm Bureau Insurance Co., Mayra Ballina and State Farm Mutual Automobile Insurance Co., Respondents.
No. 90-SC-315-DG.
Supreme Court of Kentucky.
July 3, 1991.
*714 William P. O'Brien, Jeffrey C. Swann, Louisville, for movant, Drury.
James M. Auser, Louisville, for movant, Continental Ins.
Henry V. Sanders, Mark R. Dobiesz, Louisville, for respondents, Spalding and Ky. Farm Bureau.
Lee E. Sitlinger, Sitlinger, McGlincy, Steiner & Theiler, Louisville, for respondents, Ballina and State Farm.
LEIBSON, Justice.
Movant, Patricia Carol Drury, was a passenger in an automobile involved in a three car collision with vehicles operated by respondents, Mayra Ballina and Judy Spalding. The case was tried over five days, and a substantial portion of the time was consumed with evidence and argument regarding the nature and extent of lower back injuries Ms. Drury claimed she had sustained as a result of the collision. There was proof, inter alia, that Ms. Drury had a congenital condition which predisposed her to further injury at the level where she ultimately developed a herniated disc.
Following the accident Ms. Drury incurred expenses for medical treatment in the sum of $12,505.67. There was no question as to whether the amount of these expenses was reasonable. The issue was the causal relationship between the collision for which the respondents were allegedly responsible and the back conditions for which Ms. Drury was treated following the accident.
At the conclusion of the evidence Ms. Drury asked for, and was refused, instructions to the effect that she was entitled to recover damages for preexisting conditions to the extent that such were activated or aggravated by the accident. Instead, the instruction on damages was limited to telling the jury in Instruction IV to:
". . . award to her such a sum of money as will fairly and reasonably compensate her for such of the following damages and losses as you believe from the evidence she has sustained directly by reason of the accident of August 25, 1985, if any there be."
Additionally, because of the threshold requirements of the no-fault law, as specified in KRS 304.39-060(2)(b), in Instruction I the trial court directed the jury to decide whether Ms. Drury "incurred charges in excess of $1,000.00 for reasonably needed medical care and treatment as a result of the collision of August 25, 1985," and stated further, if the jury answered this question "No," it should "go no further."[1] And, finally, insofar as a proof of $12,505.67 in medical expenses is concerned, in Instruction V the court stated:
"While the jury has heard evidence relative to the total medical expenses alleged incurred, such evidence was introduced to you to allow you to form a determination as to the severity and duration, or lack thereof, of the injury claimed. Under the law of this particular case the plaintiff is not entitled to obtain recovery for the first $10,000.00 of such expenses. If you find for the Plaintiff, you are therefore to make an *715 award on account of such expenses only to the extent that such expenses may exceed the sum of $10,000.00, nor are you to include in any award for pain and suffering or impairment of her power to labor to earn money if you make such awards, any of the first $10,000.00 found as to medical expenses alleged incurred." [Emphasis added].
The jury returned a majority verdict, nine of twelve jurors signing on, answering "No" to the question in Instruction I as to whether the plaintiff "incurred charges in excess of $1,000.00 for reasonably needed medical care and treatment as a result of the collision of August 25, 1985." The trial court entered judgment for respondents. The movant appealed claiming the trial court erred:
1) In failing to instruct the jury that she was entitled to recover for preexisting conditions to the extent activated or aggravated by the accident; and
2) This error was compounded by Instruction V advising the jury "the Plaintiff is not entitled to obtain recovery for the first $10,000.00 of such expenses."
The Court of Appeals affirmed, holding the instructions expressing the so-called no-fault threshold as set out in the Motor Vehicle Reparations Act, KRS 304.39-060(2) supra, were as specified in Thompson v. Piasta, Ky.App., 662 S.W.2d 223 (1983), and that since the jurors answered the "threshold questions in the negative, they were not required or permitted to address any other issues." There is verbiage in the Court of Appeals' Opinion suggesting it was of the opinion that none of the trial court's instructions were necessarily prejudicially erroneous, but the main thrust of the Court of Appeals' Opinion was that a negative answer to the threshold questions made further complaints irrelevant. We have accepted discretionary review, and reverse.
It has long been the law that "one may recover for injury which aggravates an existing one, or develops a latent one so as to increase the pain and suffering or result in permanent impairment of the injured person." Louisville & N.R. Co. v. Kerrick, 178 Ky. 486, 199 S.W. 44, 46 (1917). "Defendant must respond in damages for such part of the diseased condition as his negligence has caused." Id., citing Ruling Case Law. Recently, in Wemyss v. Coleman, Ky., 729 S.W.2d 174, 178 (1987), we restated the:
". . . basic legal premise that the tortfeasor takes the claimant as he finds him and is entitled to neither credit nor setoff against the amount of the claimant's damages because of preexisting physical conditions which make the claimant more susceptible to injury, or to greater injury, than would have been the case with better health."
For many years, defendants have routinely asked for and received instructions from the trial court that the jury is "not to award damages for any pre-existing condition except to the extent it was aggravated." Ford Motor Co. v. Zipper, Ky., 502 S.W.2d 74, 79 (1973).
Historically, it has been defendants who have needed and sought the protection of an instruction providing further explanation to the language found in Instruction IV expressing causal relationship as "sustained directly by reason of the accident." As illustrated by this case, the advent of the no-fault thresholds has turned this situation around. The term "sustained directly by reason of the accident," without further explanation, is potentially misleading because the term "directly" suggests "exclusively," which is not the case when there is an aggravation or activation of a preexisting condition. And in this light the words used in Instruction I to express the no-fault threshold, "for reasonably needed medical care and treatment as a result of the collision of August 25, 1985," can be misunderstood as meaning such "care and treatment" must be needed solely "as the result of the collision," excluding underlying conditions.
The principle that a claimant is entitled to compensation for damages for a preexisting injury to the extent "activated or aggravated" by the negligent act of the defendants, as stated in the appellant's tendered *716 Instructions IV and V, applies to the no-fault threshold as well as to other instructions on damages. These instructions would have led the jury to the correct factual issue. Here the instructions left the parties in the position of needing to argue to the jury the meaning of the phrases used by the trial court to express causal relationship in Instructions I and IV, whereas the movant was entitled to have such meaning explained beyond the point of debate. In Thompson v. Piasta, supra, and Bolin v. Grider, Ky., 580 S.W.2d 490 (1979), cited by the respondents, the issue now before us was neither raised nor decided. In the circumstances of this case, respondent was entitled to an instruction stating, in the affirmative, that she should be compensated for losses causally related to a preexisting condition to the extent, if any, such condition was activated or aggravated by the collision of August 25, 1985.
The problem here was compounded by Instruction V, set out earlier in this Opinion, advising the jury "the Plaintiff is not entitled to obtain recovery for the first $10,000.00 of such [`medical'] expenses." On the contrary, if the jury found activation or aggravation of a preexisting condition in this accident, as a matter of law the jury was required to consider all medical expenses related to the accident, not just those that exceed "the first $10,000.00," in deciding whether plaintiff had crossed the $1,000 medical expense threshold. In considering Instruction I with Instruction V in mind, the jury may well have been misled to believe that plaintiff did not have expenses exceeding the no-fault threshold unless the expenses which could be attributed to the accident exceeded $11,000, rather than $1,000.
Instruction V was an explanation the trial court deemed appropriate because basic reparations benefits, rather than a tort claim, are the exclusive remedy for the first $10,000 in medical expense and work loss sustained by a no-fault plaintiff. See KRS 304.39-020(2), and the various definitions of "basic reparation benefits," "loss," "medical expense," and "work loss," in KRS 304.39-020. Here it was undisputed that movant was entitled to, and did, receive $10,000 in no-fault benefits from her reparations obligor, Continental Insurance Co. Continental was a party to the case for the purpose of being repaid if the movant should succeed in establishing her claim and is a party to this appeal.
There was never any question that if movant established medical expenses causally connected to the accident in question, Continental was entitled to reimbursement for the first $10,000 of medical expenses, which it had advanced. None of the parties, movant or respondents, requested Instruction V, and while it was substantially correct as an abstract proposition, it did not address the issues that the jury needed to decide. Without explanation as to why the plaintiff was not entitled to obtain recovery for this first $10,000 of expenses, it was potentially misleading and confusing. Two previous appellate decisions, Thompson v. Piasta, supra, and Beckner v. Palmore, Ky.App., 719 S.W.2d 288 (1986), have instructed trial courts to take care of this matter by giving the plaintiff's reparation obligor "credit" in the judgment. As stated in Beckner, "the proper procedure is to reduce the amount of judgment at the conclusion of the trial to the extent that its award would provide a double recovery." Id. at 289.
Nevertheless, here the Court of Appeals responded to the movants' argument that "giving the instruction created an unnecessary probability that the jury would be influenced by it and therefore ignore the first $10,000 of her medical expenses when determining whether the $1,000 threshold had been met," by stating:
"We agree that it would be the better practice in the future for the court to simply reduce any jury award as necessary at the conclusion of the trial, rather than instructing the jury on the $10,000 credit. See Beckner v. Palmore, Ky. App., 719 S.W.2d 288 (1986). However, we are of the opinion that the court's error, if any, was not prejudicial to appellant in the particular circumstances of this case."
*717 The "particular circumstances" to which the Court of Appeals' Opinion refers is that court's belief that the jury never reached this misleading Instruction V because it never got beyond the threshold questions in Instruction I. But all of the instructions were read to the jury before closing arguments, and copies of the instructions were given to each juror to take with them and consider in their deliberations. The jury deliberated some three hours before returning a verdict in this case, and, because this was a nine out of twelve verdict, the jury necessarily read through the instructions to the explanation about majority verdicts in Instruction VIII. Under normal circumstances there is no reason to assume that a jury does not consider all instructions in seeking to render a true verdict; given the situation as represented by this record, it is highly unlikely the jury did not try to understand and utilize Instruction V in the course of its deliberations about Instruction I.
As stated in Robinson v. Murlin Phillips & MFA Insurance Co., Ky., 557 S.W.2d 202 (1977), the instructions as to the legal effect of the jury's decision should not be presented to the jury. There was no valid reason for the jury to be told the movant was not entitled to recover a portion of her medical expenses.
Both sides cite Ballback's Adm'r v. Boland-Maloney Lumber Co., 306 Ky. 647, 208 S.W.2d 940 (1948), to the effect that instructions which are "substantially correct" should not be "condemned as prejudicial unless they are calculated to mislead the jury." We agree, but here there is a substantial likelihood the jury was confused and mislead by the instructions. As stated by Judge Porter Sims in Prichard v. Kitchen, Ky., 242 S.W.2d 988, 992 (1951):
"The rule is that generally an erroneous instruction is presumed to be prejudicial to appellant, and the burden is upon appellee to show affirmatively from the record that no prejudice resulted; and when the appellate court cannot determine from the record that the verdict was not influenced by the erroneous instruction, the judgment will be reversed."
There are two substantial errors regarding instructions, as we have discussed, in this case, and we "cannot determine from the record that the verdict was not influenced by" these instructions. Therefore, the judgment will be reversed. We remand to the trial court for further proceedings consistent with this Opinion.
STEPHENS, C.J., and COMBS, LAMBERT and LEIBSON, JJ., concur.
WINTERSHEIMER, J., dissents by separate opinion in which REYNOLDS and SPAIN, JJ., join.
WINTERSHEIMER, Justice, dissenting.
I must respectfully dissent from the majority opinion because the error, if any, in regard to the instructions was nonprejudicial and when considered as a whole, the instructions were not improper.
Drury was injured as a passenger in an automobile involved in a three-vehicle chain-reaction collision. After a five-day trial, nine persons on the jury decided that the Drury medical expenses did not meet the threshold to overcome the bar against her bringing a court action and she was denied any recovery.
The instruction given by the trial judge followed the language of Bolin v. Grider, Ky., 580 S.W.2d 490 (1979). Drury argues that the failure of the trial court to give instructions which she tendered was prejudicial error. The failure of the trial court to give the instructions requested by Drury was nonprejudicial error because the jury never reached the portions of the instructions where Drury's instructions would have appeared. If this situation is considered from a practical perspective of a jury, rather than through a strict technical legal analysis, it appears that Instruction I, did not prejudice Drury.
The trial judge correctly instructed the jury to award Drury only those damages sustained directly by reason of the accident notwithstanding her requested "aggravation" language.
The negative response of the jury to the critical "no-fault threshold" questions in *718 Instruction No. I barred Drury from any recovery due to the no-fault acts litigation restrictions in K.R.S. 304.39-060. The Instructions IV and V were not erroneous and did not prejudice Drury; at the most, they were harmless error, if error, at all.
The instructions of the trial judge in regard to the first $10,000 was not improper or unduly prejudicial when considered as a whole.
There was sufficient evidence for the jury to answer the interrogatory in the negative and thereby obviate the necessity for the jury to consider other instructions pertaining to liability and compensation.
I find no reason to reverse the decision of the Court of Appeals or to say that the jury was confused by the $10,000 instruction, or that any other prejudice resulted from it. Accordingly, I would affirm the decision of the Court of Appeals in all respects.
REYNOLDS and SPAIN, JJ., join in this dissent.
NOTES
[1] There was a similar question covering the "permanent injury" threshold in the Motor Vehicle Reparations Act, but this is not in issue.
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97 N.H. 176 (1951)
MINNIE MONIER
v.
ERNEST BELZIL.
No. 4046.
Supreme Court of New Hampshire.
November 6, 1951.
*177 Robert J. Doyle and Bolic A. Degasis (Mr. Doyle orally), for the plaintiff.
Paul E. Nourie (by brief and orally), for the defendant.
BLANDIN, J.
The main issue argued before us is whether a land owner is under a duty to use reasonable care to make his premises reasonably safe for an invitee, or whether he must use reasonable care to make his premises absolutely safe. The defendant claims and the plaintiff concedes that the rule laid down in such cases as Lynch v. Sprague, 95 N. H. 485, 487; Jakel v. Brockelman, 91 N. H. 453, and Cable v. Donahue, 85 N. H. 258, is that the owner is under a duty only to use reasonable care to make his premises reasonably safe. See also, Blackman v. Rowe, 96 N. H. 207; Holmes v. Stores, 95 N. H. 478, 480; Roy v. Amoskeag Fabrics, 93 N. H. 324; Cartier v. Shoe Corporation, 92 N. H. 263. This view we believe represents the overwhelming weight of authority in this country. Restatement, Torts, s. 343; Id., (c) (i); anno. 162 A. L. R. 950; 38 Am. Jur. 754.
However, the plaintiff cites Frear v. Company, 83 N. H. 64, as the basis for his claim that the owner must use reasonable care to make his premises absolutely safe for invitees. But there it must be noted that while the court did say that the defendants were under "a duty to use due care to have the place safe" (p. 68) the opinion went on to quote approvingly as follows: (pp. 70-71) "`One who invites others to come upon his premises for business or pleasure must exercise reasonable care to have and keep the premises reasonably safe for such visitors. . . . It was the duty of the defendant to use reasonable care to keep . . . the grounds to which he had invited the plaintiff in a reasonably safe condition . . .' Turgeon v. Company, 84 Conn. 538, 541." (Emphasis supplied.) Later, the same Justice who wrote the opinion in the Frear case (Peaslee, C. J.) also wrote the opinion in Cable v. Donahue, 85 N. H. 258, and therein impliedly approved those portions of the charge given in the Superior Court wherein the jury were repeatedly told that the owner's duty was to make its premises "reasonably safe." We believe when the court said in the Frear case that an owner must have his premises "safe," it meant "reasonably safe," the word "reasonably" being clearly implied. This is consistent with the main current of our law and with authorities elsewhere which have refused *178 to make the owner to a substantial degree an insurer. Jager v. First Nat. Bank, 125 Conn. 670.
This conclusion makes it unnecessary to consider the merits of other claims of the defendant and the order is
Judgment on the verdict.
LAMPRON, J., did not sit: the others concurred.
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812 S.W.2d 178 (1991)
Norma ELMORE, Appellant,
v.
WAL-MART STORES, INC., Respondent.
No. 58864.
Missouri Court of Appeals, Eastern District, Division Two.
May 21, 1991.
Motion for Rehearing and/or Transfer Denied June 19, 1991.
*179 Patrick Daniel Billington, Union, for appellant.
Lisa Green, Stefan J. Glynias, St. Louis, for respondent.
Motion for Rehearing and/or Transfer to Supreme Court Denied June 19, 1991.
GARY M. GAERTNER, Presiding Judge.
Appellant, Norma Elmore, appeals from a summary judgment entered in favor of respondent, Wal-Mart Stores, Inc., on both counts of appellant's two-count petition. When reviewing the grant of a motion for summary judgment, we scrutinize the record below in the light most favorable to the party against whom summary judgment was granted and accord that party the benefit of every doubt. Spuhl v. Shiley, Inc., 795 S.W.2d 573, 574 (Mo.App., E.D.1990). The facts in our case, when viewed most favorably to appellant, reveal the following.
On June 5, 1988, appellant went shopping at the Pacific, Missouri Wal-Mart retail store. Appellant was shopping in the fabric department of the store. The fabric department often has an employee working at a counter in the department or nearby. As appellant was shopping, she stepped on a partially opened pack of breath mints which were on the floor. Nothing in the record suggests that any employees were within sight of appellant or the area at the time of her fall. Appellant claims to have sustained personal injuries as a result of this incident.
Approximately one week later, appellant contacted respondent's home office to inquire whether respondent would pay for the medical bills she incurred as a result of her fall. Appellant was told by two different representatives of respondent that her medical bills would be paid for.[1] When no payment was forthcoming, appellant filed her petition against respondent on May 19, 1989.
Linda Moss, an employee of respondent, stated in an affidavit in support of respondent's motion for summary judgment that she was working in the fabric department of respondent's store while appellant was shopping. She further stated that she had cleaned and straightened the area near and around the "remnants table" located in the fabric department, prior to taking a break that evening. She also said that she inspected the area surrounding this table just prior to leaving for her break and the area was clear of all debris or articles.
Appellant fell in the area that Linda Moss had cleaned and straightened about five minutes after Linda Moss left to go on break. There is absolutely no evidence in the record with which to infer how the partially opened breath mints came to rest on the floor.
Appellant's petition contains two counts. Count one is based on negligence and alleges that respondent failed to use reasonable care to remove the breath mints or to warn of the presence of the breath mints which, it is alleged, respondent should have known were on the floor. Count two is a breach of contract claim which alleges that respondent breached its promise to pay for appellant's medical bills.
On May 7, 1990, respondent filed its motion for summary judgment. After both parties filed suggestions and affidavits in support of their respective positions, the court, on July 12, 1990, granted respondent's motion for summary judgment regarding both counts of appellant's petition. We will address each count separately.
In regard to count one, the trial court concluded that it was not "reasonably foreseeable," as a matter of law, that a partially opened pack of breath mints would be lying in the fabric department of respondent's store, a mere five minutes after the area had been inspected. A store keeper is not liable to a business invitee for injury resulting from a dangerous or unsafe condition of the premises, absent evidence *180 that the storekeeper had actual or constructive knowledge of the condition in time to have remedied the condition prior to the injury. Grant v. National Super Markets, Inc., 611 S.W.2d 357, 359 (Mo.App., E.D.1980). In order to establish constructive notice, the condition must have existed for a sufficient length of time or the facts must be such that the defendant should have reasonably known of its presence. Vinson v. National Super Markets, Inc., 621 S.W.2d 373, 375 (Mo.App., E.D.1981).
Past cases have placed great emphasis on the length of time the dangerous condition, in our case the mints, had been present prior to the accident. In Grant, the plaintiff slipped and fell on five or six dark grapes which had been laying in an aisle for approximately twenty minutes. This court held that this twenty minute period, absent proof of other circumstances, was insufficient constructive notice as a matter of law. Grant, 611 S.W.2d at 359. Indeed, in Carraway v. National Super Markets, Inc., 741 S.W.2d 895 (Mo. App., E.D.1987), this court found that a piece of candy, upon which plaintiff slipped one-half hour after the aisle had been checked by a store manager, did not present a submissible question of constructive notice. Carraway, 741 S.W.2d at 896.
However, the importance of time has recently been greatly diminished by the Missouri Supreme Court. In Sheil v. T.G. & Y. Stores Company, 781 S.W.2d 778 (Mo. banc 1989), the plaintiff entered the defendant's retail store in order to purchase a gasoline additive for his truck. While searching the aisles for the additive, the plaintiff tripped over a small box of motor oil which was in the aisle away from a floor display which consisted of a stack of similar boxes. Sheil, 781 S.W.2d at 779. Our court reversed a verdict in plaintiff's favor, finding that there was no evidentiary basis for an inference that the box had been in the aisle for a sufficient length of time to constitute constructive notice to the store owner. Id.
The Missouri Supreme Court reversed the appellate decision and established a less restrictive test in cases involving the "self service" type store which is typical in modern retail merchandising. Id. at 780. The court explained the rationale behind relaxing the facts necessary to present a submissible jury question of constructive notice and explained its new test as follows:
The customers are invited to traverse the aisles and to handle the merchandise. The storeowner necessarily knows that customers may take merchandise into their hands and may then lay articles that no longer interest them down in the aisle.... The storeowner, therefore, must anticipate and must exercise due care to guard against dangers from articles left in the aisle.
Past cases have placed great emphasis on the length of time the dangerous item has been in the area in which the injury occurs.... By our holding, the precise time will not be so important a factor. More important will be the method of merchandising and the nature of the article causing the injury.
Here it is reasonable to infer that the box contained merchandise that the store held for sale in the area in which the plaintiff fell. The testimony of the manager and the assistant manager arguably indicates some recognition that an employee of the store may have placed the box in a place where it should not have been, but our conclusion does not depend on this precise finding. The jury might just as well infer that a customer picked up the box and then, having lost interest in making a purchase, set it on the floor. Customers who are invited to handle merchandise assume part of the work previously performed by store employees and present an additional danger. The box in the aisle was a dangerous, foreseeable condition, and the store had the duty to use due care to protect customers against dangers of this kind. The jury could find from the evidence that the defendant had breached this duty.
Id. at 780-81.
The Supreme Court went on to quote approvingly from a case out of the Court of Appeals of Washington.
*181 It is common knowledge that the modern merchandising method of self-service poses a considerably different situation than the older method of individual clerk assistance. It is much more likely that items for sale and other foreign substances will fall to the floor. Clerks replenish supplies by carrying them through the area the customer is required to traverse when selecting items. Customers are naturally not as careful in handling the merchandise as clerks would be. They may pick up and put back several items before ultimately selecting one. Not unreasonably they are concentrating on the items displayed, which are usually arranged specifically to attract their attention. Such conditions are equally typical of self-service restaurants and the most common self-service operation, the modern supermarket.
An owner of a self-service operation has actual notice of these problems. In choosing a self-service method of providing items, he is charged with the knowledge of the foreseeable risks inherent in such a mode of operation.
Ciminski v. Finn Corp., 13 Wash.App. 815, 537 P.2d 850, 853 (1975).
In Moss v. National Super Markets, Inc., 781 S.W.2d 784 (Mo. banc 1989), which was decided concurrently with Sheil, the plaintiff slipped and fell on green liquid which was on the parking lot, just outside of the store. The store had been open for at least one hour. The Missouri Supreme Court noted that Moss, unlike Sheil, involved an incident occurring outside a self-service store and involved a substance which was not merchandise of a type handled by the store. Moss, 781 S.W.2d at 785. The plaintiff argued that a submissible case was made on the question of constructive notice since there were footprints, other than the plaintiff's, in the green liquid.
The Supreme Court stated that under the prior cases which relied heavily on the length of time the dangerous condition had existed, the facts of the Moss case were insufficient to show constructive notice to the store owner. Id. However, the court further noted that under Sheil, the time periods "may not be so important as they once were, especially if the evidence shows that employees of the store were regularly in the area in which the accident occurred." Id. at 785-86. Since in Moss there was no evidence with which to determine whether employees were regularly in the area, the Supreme Court remanded the case for a new trial to allow the plaintiff to develop such evidence. Id.
Armed with these considerations, we will now address the propriety of the court's grant of summary judgment regarding count one of appellant's petition. Our review requires that we determine whether there exists a genuine issue of material fact and, if not, whether the prevailing party was entitled to a judgment as a matter of law. Spuhl, 795 S.W.2d at 577. Our question centers on the issue of constructive notice.
While the holdings of Sheil and Moss apply to the case at bar, the facts of these two cases are materially different. In Sheil, the box which caused the plaintiff's fall contained merchandise normally sold by the store which was in the area of the store where these particular items were offered for sale. These circumstances convinced the court that the store owner could foresee that one of the boxes could be moved into harms way, whether by the actions of an employee or a customer.
In Moss, the court held that a submissible case could, conceptually, be made even though the dangerous condition involved a non-merchandise item outside of the premises. The court determined, however, that in order to do so, evidence was needed showing the store's method of operation, indicating whether or not employees were "regularly in the area where the accident occurred." Moss, 781 S.W.2d at 786.
In our case, the breath mints involved were not regularly merchandised either partially opened nor in the fabric department. The foreseeability present in Sheil regarding the box of motor oil cannot be said to be present here. Therefore, Moss is more close on point since the spill in Moss, though outside of the store, was not an *182 item regularly merchandised by the store. Moss, 781 S.W.2d at 785.
Our facts do not present a genuine issue of material fact. While Sheil and Moss greatly contracted the role of time in determining whether constructive notice exists, they did not eliminate time as a factor. Appellant does not dispute the fact that the breath mints were on the floor for merely five minutes, nor is it disputed that respondent assigns an employee to the fabric department. It is also clear that the employee inspected the area in question just five minutes before the accident and stated by affidavit that the area was free from debris.
In Moss, the method of operation was not presented. In our case, the method was undisputed and fatal to appellant's cause. Considering the nature of the article involved, its location in an area of the store which did not regularly sell such items, the modus operandi of the store in which an employee inspected and cleaned the area five minutes before the accident and considering the fact that the accident occurred a mere five minutes after this employee had inspected the area and found it to be clear, we find that the respondent cannot, as a matter of law, be found to have constructive notice of the existence of the dangerous condition. The grant of summary judgment regarding count one is affirmed.
Turning our attention to the grant of summary judgment on count two, we also affirm the trial court's judgment. Appellant's petition claims that respondent breached its contract to reimburse her for medical expenses. Appellant's claim is premised solely upon the fact that, according to appellant, two of respondent's claims representatives told appellant that respondent would cover appellant's medical expenses.
Appellant, in her brief to this court and in her suggestions in opposition to respondent's motion for summary judgment, argues that the consideration for the alleged contract was appellant's forbearance of filing a lawsuit for her injuries. A benefit to a promisor or detriment to a promisee is sufficient to constitute consideration. Marshall v. Edlin, 690 S.W.2d 477, 480 (Mo.App., W.D.1985). Moreover, the compromise of a doubtful claim is good consideration for a contract. Hauk v. First National Bank of St. Charles, 680 S.W.2d 771, 775 (Mo.App., E.D.1984).
However, in the case at bar, appellant's petition does not contain an averment that any consideration flowed between her and respondent. The portion of appellant's deposition which was provided to our court, indicates that the only request appellant made of respondent's representatives was that they pay her expenses. Nowhere does appellant state that she offered to forego her lawsuit.
A party confronted with a motion for summary judgment which is supported by affidavits, as in our case, must set forth specific facts showing that there is a genuine issue of fact for the jury. Spuhl, 795 S.W.2d at 577. In response to the motion for summary judgment and its supporting affidavits, appellant submitted an affidavit in which appellant stated that Ms. Pendergass and Ms. Rose, respondent's representatives, told her that respondent would pay for her medical bills and lost wages. Appellant did not present facts in response to respondent's summary judgment motion or affidavits which presented a genuine issue regarding the existence of consideration. The trial court properly so held in granting summary judgment on count two.
Affirmed.
CRIST and AHRENS, JJ., concur.
NOTES
[1] Our review mandates that we afford appellant the benefit of respondent's agents' promise to pay. However, we note that both of these representatives stated in affidavits that they promised only to review her records in order to determine whether appellant would be reimbursed. The representatives denied promising appellant payment of her medical bills.
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812 S.W.2d 356 (1991)
In the Matter of the ESTATE OF Louise KIDD.
No. 07-90-0193-CV.
Court of Appeals of Texas, Amarillo.
May 31, 1991.
Rehearing Overruled August 13, 1991.
*357 Joel B. Mitchell, Austin, for appellant.
Barnett, Ward, Freels & Cook, Gary A. Ward and Clinton W. Cook, Lubbock, for appellee.
Before REYNOLDS, C.J., and BOYD and POFF, JJ.
BOYD, Justice.
This is an appeal from the trial court's imposition of discovery sanctions in a will contest. The parties to the appeal are appellant Joel B. Mitchell, independent executor of the estate of Louise Kidd, and Joel's *358 daughter, appellee Terri Mitchell, a beneficiary of the estate. As father and daughter, the parties share the same last name. Without intending any indecorous familiarity, we will refer to the parties by their first names for purposes of clarity.
In six points of error, Joel contends the trial court erred by (1) imposing $2,757.50 in attorney's fees as sanctions for discovery abuse without legally or factually sufficient evidence; (2) dismissing Joel's counterclaim for declaratory judgment; and (3) refusing to grant Joel's request for attorney's fees under the Uniform Declaratory Judgments Act. In her supplemental brief, Terri requests imposition of damages against Joel under Rule 84 of the Texas Rules of Appellate Procedure for perfecting the appeal for delay and without sufficient cause. Although we decline to impose damages under Rule 84, we will overrule each of Joel's points of error and affirm the judgment of the trial court.
The procedural history of this lawsuit is somewhat complex; however, a review of that history is necessary to appreciate the context in which sanctions were imposed and to understand the basis for Joel's fifth and sixth points of error. Joel was appointed independent executor of the estate of Louise Kidd (Joel's mother and Terri's grandmother) by will dated June 7, 1972. Following Mrs. Kidd's death in 1984, the will was admitted to probate. Joel duly qualified as independent executor and was issued letters testamentary.
Terri filed a motion to remove Joel as independent executor under section 149C(a) of the Texas Probate Code Annotated (Vernon 1980), alleging failure to file an inventory, appraisement, and list of claims. She later filed a will contest under section 93 of the Probate Code, alleging fraud, undue influence, and lack of testamentary capacity. In addition, she sought admission to probate of a prior will. Joel counterclaimed for a declaratory judgment on the same issues raised in the will contest, i.e., that he was entitled to remain as independent executor and that the will executed in 1972 was properly admitted to probate. In addition, he sought recovery of attorney's fees under section 37.009 of the Uniform Declaratory Judgments Act, Tex.Civ.Prac. 37.009 (Vernon 1986).
During the course of discovery, Terri filed a motion to compel production of documents, seeking copies of all estate tax returns filed by Joel on behalf of the estate. The motion was granted and $250 in attorney's fees was assessed against Joel. His motion for leave to file petition for writ of mandamus was overruled by this Court in an unpublished opinion, and by the Supreme Court. Thereafter, Joel produced the cover page of an estate tax return. Terri then moved for additional sanctions under Rule 215 of the Texas Rules of Civil Procedure, and was awarded $2,757.50 in attorney's fees, bringing total sanctions against Joel to $3,007.50.
Several weeks before trial, Joel filed a plea in abatement asking to suspend the lawsuit until all beneficiaries and unknown heirs had been joined as parties, and until he had been sued in his capacity as independent executor of the estate. Joel also moved to be dismissed from the lawsuit as an individual, contending that, if liable, he was liable only as independent executor. Terri then moved for nonsuit, and her motion was granted by the trial court. Several months later, Terri filed a special exception and moved to dismiss the counterclaim on the grounds that it raised the same issues that had been pending in the will contest. The trial court dismissed Joel's counterclaim, denied his request for attorney's fees, and rendered judgment awarding Terri $3,007.50 in attorney's fees as sanctions for Joel's abuse of the discovery process.
In his first through fourth points of error, Joel attacks the legal and factual sufficiency of the evidence to support $2,757.50 of the sanctions imposed against him. He contends the trial court abused its discretion by imposing that part of the sanctions, and argues that his constitutional due process rights were violated by imposition of sanctions without sufficient evidence. In this connection, it is important to note that Joel had notice of the hearing on sanctions and appeared through counsel. *359 The record of the hearing consists entirely of a colloquy between counsel and the court. Despite his apparent dissatisfaction with the amount of sanctions imposed, Joel did not offer any argument or evidence controverting the unsworn representations of Terri's lawyer concerning reasonable attorney's fees. On appeal, however, the essence of Joel's complaint is that no testimony was adduced by Terri to support the award of $2,757.50.
Under section 38.004(2) of the Texas Civil Practice and Remedies Code Annotated (Vernon 1986), the trial court was entitled to take judicial notice of usual and customary attorney's fees attributable to the discovery dispute. A rebuttable presumption exists that usual and customary attorney's fees are reasonable. Id. § 38.-003. Although neither party requested the trial court to take judicial notice of usual and customary attorney's fees, we may presume that it did so when it awarded attorney's fees to Terri in the absence of any other evidence to support that amount. Ho v. Wolfe, 688 S.W.2d 693, 697-98 (Tex. App.Amarillo 1985, no writ); Holsworth v. Czeschin, 632 S.W.2d 643, 645 (Tex. App.Corpus Christi 1982, no writ). Because the trial court's imposition of sanctions was presumptively based on judicial notice of reasonable attorney's fees, the sanctions were supported by sufficient evidence and no abuse of discretion has been shown. In addition, because Joel was furnished notice and an opportunity for hearing, no due process violation has been shown. Joel's first through fourth points of error are overruled.
In his fifth point, Joel contends that the trial court erred in dismissing his counterclaim for declaratory judgment. He argues that, following nonsuit of the will contest, he had the right to be heard on his counterclaim because it constituted a pending claim for affirmative relief under Rule 162 of the Texas Rules of Civil Procedure. Rule 162 gives the plaintiff an absolute right to take a nonsuit upon timely motion, so long as the defendant has not made a claim for affirmative relief. Greenberg v. Brookshire, 640 S.W.2d 870, 871 (Tex. 1982). Explicating upon that rule, the Supreme Court has recently stated:
To qualify as a claim for affirmative relief, a defensive pleading must allege that the defendant has a cause of action, independent of the plaintiffs claim, on which he could recover benefits, compensation or relief, even though the plaintiff may abandon his cause of action or fail to establish it.... If a defendant does nothing more than resist plaintiffs right to recover, the plaintiff has an absolute right to the nonsuit.
General Land Office v. OXY U.S.A., Inc., 789 S.W.2d 569, 570 (Tex.1990) (emphasis added, citations omitted).
The proposition has long been settled that an action for declaratory judgment may not be entertained if there is pending, at the time it is filed, another action between the parties in which the same issues may be adjudicated. Texas Liquor Control Board v. Canyon Creek Land Corp., 456 S.W.2d 891, 895 (Tex. 1970). A counterclaim presenting no new controversies, but brought solely to pave the way for recovery of attorney's fees, is improper. John Chezik Buick Co. v. Friendly Chevrolet Co., 749 S.W.2d 591, 594-95 (Tex.AppDallas 1988, writ denied). The counterclaim in this case did nothing more than duplicate the controlling issues in the will contest and resist Terri's right to relief. It did not constitute a claim for affirmative relief under Rule 162. We conclude, therefore, that the trial court properly dismissed Joel's counterclaim. Joel's fifth point of error is overruled.
In reaching this conclusion, we are not unmindful of the holding urged by Joel in Hawkins v. Texas Oil and Gas Corp., 724 S.W.2d 878, 891 (Tex.App.Waco 1987, writ ref'd n.r.e.). In that case, the plaintiffs sought a declaratory judgment construing a deed. The defendants counterclaimed for a declaratory judgment construing the same instrument. The Waco Court of Appeals held that the doctrine of Texas Liquor Control Board v. Canyon Creek Land Corp., 456 S.W.2d at 895, applied only when a "completely separate proceeding, administrative or legal, was pending *360 between the same parties in another cause or forum." 724 S.W.2d at 891. Because the duplicative counterclaim was filed in the same lawsuit, not in a "completely separate proceeding," the Hawkins court permitted the counterclaim to stand and held that attorney's fees had been properly awarded to the defendants. We decline to follow Hawkins.
The holding in Hawkins was based on the rationale that the defendants were entitled to their counterclaim because to hold otherwise "would be tantamount to holding that only one party in a suit can receive attorney's fees in connection with a declaratory judgment and that is the party who first requests it [sic]." Id. We disagree with that interpretation. Section 37.009 of the Uniform Declaratory Judgments Act provides that "[i]n any proceeding under this chapter, the court may award costs and reasonable and necessary attorney's fees as are equitable and just." Such an award is not limited to the prevailing party. Ritchie v. City of Fort Worth, 730 S.W.2d 448, 451 (Tex.App.Fort Worth 1987, writ ref'd n.r.e.); District Judges of Collin County v. Commissioners Court of Collin County, 677 S.W.2d 743, 746 (Tex.App. Dallas 1984, writ ref'd n.r.e.). Because section 37.009 permits an award of attorney's fees to either party once the Uniform Declaratory Judgments Act has been invoked, the reasoning of Hawkins is not persuasive, and we disagree with its limitation of the doctrine set forth in Texas Liquor Control Board v. Canyon Creek Land Corp., 456 S.W.2d at 895.
In his sixth point, Joel claims the trial court erred in refusing to award him attorney's fees under the Uniform Declaratory Judgments Act. As discussed above, the trial court properly dismissed Joel's counterclaim. Terri nonsuited her action for declaratory judgment. The trial court's judgment was rendered solely on the discovery sanctions awarded against Joel. No action existed at the time judgment was rendered to support an award of attorney's fees under the Uniform Declaratory Judgments Act. If, for the sake of argument, we assume that a claim for attorney's fees under the act was supportable, we find no abuse of discretion in the trial court's refusal to award attorney's fees to Joel. Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241-42 (Tex.1985). Joel's sixth point of error is overruled.
In her supplemental brief, Terri requests imposition of damages against Joel under Rule 84 of the Texas Rules of Appellate Procedure for perfecting this appeal for delay and without sufficient cause. Before an appellate court may assess damages under Rule 84, it must make two findings, i.e., that the appeal was taken for delay and that there was no sufficient cause for the appeal. In making such findings, the court must review the record from the standpoint of the advocate and determine whether he or she had reasonable grounds to believe the judgment should be reversed. Mid-Continent Casualty Co. v. Whatley, 742 S.W.2d 475, 479 (Tex.App.Dallas 1987, no writ). The right to appeal is a most sacred and valuable one and unless the record justifies the conclusion that the appellant, at the time the appeal was perfected, had no reasonable grounds to believe the judgment should be reversed, he or she should not be penalized for exercising the right of appeal. United General Insurance Exchange v. Brown, 628 S.W.2d 505, 511 (Tex.App. Amarillo 1982, no writ), citing Trinity Universal Insurance Co. v. Farley, 408 S.W.2d 776, 780 (Tex.Civ.App.Tyler 1966, no writ).
Viewed as a whole, the record does not show that at the time Joel perfected this appeal, he had no reasonable hope of reversal. Accordingly, Terri's request for imposition of damages under Rule 84 is overruled.
In summary, each of Joel's points of error is overruled. Terri's request for damages under Rule 84 is overruled. The judgment of the trial court is affirmed.
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83 A.2d 327 (1951)
CHESAPEAKE & OHIO RY. CO.
v.
GILBERT.
No. 1091.
Municipal Court of Appeals for the District of Columbia.
Argued August 13, 1951.
Decided September 19, 1951.
John L. Hamilton, Washington, D. C., for appellant.
James B. Gilbert, pro se.
Before CAYTON, Chief Judge, and HOOD and CLAGETT, Associate Judges.
CAYTON, Chief Judge.
Involved on this appeal is the liability of a carrier for alleged improper protection of frozen meat entrusted to it for transportation. Plaintiff delivered to defendant 290 frozen veal sides for shipment from Washington, D. C. to Naval Supply Depot at Sewall's Point, Virginia. On arrival the shipment was rejected by Government officials on the ground that the meat was *328 unsound. Plaintiff alleged that this condition was caused by insufficient refrigeration by defendant carrier, and brought his action for damages. The case was tried to a jury which awarded him $2,090.26, the amount stipulated to be the measure of his recovery. Defendant had moved for a directed verdict at the close of plaintiff's case and at the close of all the evidence. It also moved for a judgment non obstante veredicto and alternatively for a new trial. All these motions were overruled, and the defendant carrier brings the case here for review.
The important parts of plaintiff's evidence were these: The Government having accepted his bid for the meat in question, he had slaughtered, wrapped, and frozen the 290 veal sides for ultimate overseas shipment. It was first to be shipped to the Naval Operations Base at Sewall's Point, Virginia. Plaintiff discussed with defendant's agent the better procedure for shipping frozen veal sides and as a result of his conversation ordered a low-temperature car to be pre-iced the day before shipment to receive the load of veal on Friday, September 5, 1947. He said he was advised to ship it that day for delivery at Sewall's Point on Monday, September 8. He presented the testimony of two food inspectors of the U. S. Army that they had examined the veal when it was in a fresh state, that it was wrapped and transferred to a frozen storage locker immediately after slaughter and inspection, and that it was again examined by them before it was loaded on defendant's car. He offered in evidence the bill of lading which had been issued to him by the carrier, and in which he instructed the carrier to "Re-ice at all stations and at destination if delay in delivery." Thirty per cent salt was specified, the proportion recommended for maximum refrigeration. Plaintiff said, "I told them to ice at all stations and I told them on the bill of lading to ice at the destination if delay in delivery. I expected the car to arrive at Newport News prior to the time that it could be taken in at Norfolk, sometime over the weekend. I, therefore, ordered them to re-ice at destination, because I didn't want the car sitting there without being re-iced." Plaintiff also testified that he himself procured a quantity of dry ice and had it hung in the car while it was being loaded to further assure a low temperature. The car arrived at Newport News, Virginia on Sunday, September 7, and was not shipped to the Naval Station until the following day (the Naval Station being closed on Saturdays and Sundays). Plaintiff, however, had nothing to do with the car from its loading until he was notified by the authorities at Sewall's Point on September 8 that the load was rejected because thirty-five per cent of the veal sides inspected were found to be "sticky," on the verge of thawing, and the degree of unsoundness ranged from slight to pronounced.
A Government inspector who had inspected the veal and recommended its rejection testified that after the inspection the temperature in the car was recorded at 47 degrees Fahrenheit.
After the rejection, plaintiff ordered the entire car re-iced and it was shipped back to him in Washington, where it was unloaded directly into a freezing locker. There the Army inspectors separated the soft sides from the hard frozen sides. Plaintiff prepared 76 new sides to replace those which had been set aside. He had another car prepared the same as the first and the load of original veal, including the replaced sides, was shipped and this time accepted by the Government.
We think plaintiff's evidence made out a prima facie case against the railroad. By proving that the meat was inspected and approved in a fresh state, hard frozen to an extent approved by the Government officials, and that the portion of the meat that remained hard frozen throughout the shipments back and forth was ultimately accepted by the Government, plaintiff established that the meat was in good condition when shipped. And it was even more clear that part of the meat was unsound upon arrival, and rejected by the Government for that reason. This was sufficient to put defendant to its proof. Delphi Frosted Foods Corp. v. Illinois Cent. R. Co., 6 Cir., 188 F.2d 343, affirming Delphi *329 Frosted Foods Corp. v. Illinois Cent. R. Co., D.C.W.D.Ky., 89 F. Supp. 55; Akerly v. Railway Express Agency, 96 N.H. 396, 77 A.2d 856; Sugar v. National Transit Corporation, 82 Ohio App. 439, 81 N.E.2d 609; 13 C.J.S., Carriers, § 254, page 546.
Defendant, however, contends that the evidence it offered rebutted any possible inference of negligence and that it established complete freedom of liability as a matter of law. Defendant relies on Protective Tariff Regulations promulgated under the authority of the Interstate Commerce Commission.
Concededly this action, involving interstate commerce, is governed by the applicable Federal statute and decisions. Likewise we must consider the bill of lading, applicable tariffs and classifications officially on file with the Interstate Commerce Commission, for all these taken together constitute the contract between these parties. Standard Hotel Supply Co. v. Pennsylvania R. Co., D.C.S.D.N.Y., 65 F. Supp. 439; Red River Cotton Oil Co. v. Texas & P. Ry. Co., 216 La. 519, 44 So. 2d 101, certiorari denied 339 U.S. 953, 70 S. Ct. 841, 94 L. Ed. 1366; Texas & N. O. R. Co. v. Wolfson, Tex.Civ.App., 23 S.W.2d 455. Defendant offered in evidence certain rules on which it relied, and which we set out in full in the margin below.[1]
Defendant cites us to Atlantic Coast Line R. Co. v. Georgia Packing Co., 5 Cir., 164 F.2d 1, 3, rehearing denied 165 F.2d 169, wherein it was said, "It is apparent that these rules limit the liability of a carrier transporting perishable goods to liability for negligent failure reasonably to carry out instructions given by the shipper." In that case the court found as a matter of law that the carrier had carried out the instructions of the shipper and was consequently not liable for any deterioration of the product. In other words the court found that the shipper had failed to prove his charge of negligence. Undoubtedly, when that happens, a shipper is out of court. Also it is true that after a shipper has made out a prima facie case of negligence, the carrier may overcome it by evidence. Sutton v. Minneapolis & St. Louis Ry. Co., 222 Minn. 233, 23 N.W.2d 561; Southern Pac. Co. v. Itule, 51 Ariz. 25, 74 P.2d 38, and annotation 115 A.L.R. 1274; Standard Hotel Supply Company v. Pennsylvania R. Co., D.C.S.D.N.Y., 65 F. Supp. 439; Texas & N. O. R. Co v. Wolfson, Tex.Civ.App., 23 S.W.2d 455; Sugar v. National Transit Corporation, 82 Ohio App. 439, 81 N.E.2d 609; Delphi Frosted Foods Corp. v. Illinois Cent. R. Co., 6 Cir., 188 F.2d 343, affirming Delphi Frosted Foods Corp. v. Illinois Cent. R. Co., D. C.W.D.Ky., 89 F. Supp. 55.
Thus we come to the ultimate question on this appeal: Was the carrier's showing such as to entitle it to a favorable ruling as a matter of law, or was the trial judge correct in submitting the case for jury decision? The appellant carrier argues that the provision in the bill of lading, "Re-ice at all stations and at destination if delay in delivery 30% salt," was not in strict compliance with Rule No. 405, Supplement *330 27, Protective Tariff No. 14. That tariff involves instructions the shipper must make in the shipping order and bill of lading. It provides that a similar notice must be endorsed by carrier's agent on the waybill. The basis of this argument seems to be that though there was a possible choice of some 20 instructions, plaintiff's instruction did not comply verbatim with any of those listed. Consequently, defendant says that instead of following the exact notation placed on the bill of lading, it was entitled to endorse the waybill, "Re-ice at all regular stations," and "That, when instructions are received on Bills of Lading `Re-ice at all stations,' as a matter of practice, the railroad writes on the Way Bill the legend `Re-ice at all regular stations.'" This, appellant claims, is pursuant to Section D of Rule No. 405, Supp. No. 27, which reads: "If shipper fails to specify in shipping order and/or bill of lading one of the instructions provided in paragraphs B or C, carriers will reice at all regular icing stations (if ice has previously been used), using salt if same has previously been used, and charges for such services will be as provided in this Section."
Appellant also offered in evidence Supp. No. 5 to Circular No. 5-H, issued by the National Perishable Freight Committee, which it says was accessible to plaintiff, to show that the only regular icing station between Washington, D. C. and Sewall's Point, Virginia was Potomac Yards, Virginia. (In that circular emergency icing stations were listed at Newport News, Virginia and Richmond, Virginia.)
Then defendant showed by introducing the records of its icing contractor at Potomac Yards that the car was iced there at 12:45 p. m. on September 6. Defendant also offered a witness who had examined the bunkers of the car containing plaintiff's shipment at Newport News and found them to be ¾ full of ice. Its refrigeration expert testified that a car whose bunkers were ¾ full of ice was adequately refrigerated for a delivery of the car the following morning. Defendant argues that this testimony is uncontroverted and fully complies with Rule No. 406 of the same Tariff No. 14, which reads: "(A) When shipment, except when billed `Do not reice,' is held at any intermediate point between point of origin and final destination on orders of or awaiting reconsigning or other instructions from shipper, owner or consignee, or after arrival in the terminal train yard serving the destination and up to the time it is in process of unloading on team tracks or until placed on private track * * *, carrier will examine bunkers or tanks daily and unless written instructions (instructions given orally or by telephone must be confirmed in writing) from shipper, owner or consignee are received to the contrary when car requires additional ice or ice and salt during such period it will be reiced * * *."
We first examine Protective Tariff No. 14, Rule 405, Supplement 27, referred to above and which defendant says makes it mandatory that a shipper specify one of the twenty instructions, and that plaintiff had specified none of them. For example, under that rule, instruction (B) (9) reads: "Ice at (specify regular icing stations) with..lbs. (crushed, course or chunk) ice, and oftener if delayed." It is true that none of the listed instructions were copied verbatim by the shipper, but carrier cites us to no decision holding that such exact copying is required. In this connection it is important to consider the following facts: Defendant offered in evidence Supplement No. 5 to Circular 5-H, published by the same Protective Tariff Committee. Though defendant says that this circular, setting forth the regular and emergency icing stations along the route, was available to plaintiff and he should have had knowledge thereof, defendant's own evidence showed that the circular was not on file with the Interstate Commerce Commission and there was nothing to show plaintiff had actual knowledge of its contents. Plaintiff denied all knowledge thereof. Here again the carrier cites us to no decision which would charge plaintiff with notice of the contents of such a circular or holding that despite such lack of knowledge he failed to comply with the tariff provisions demanding a specification of "regular icing stations" when in the bill of lading he specified "all" icing stations.
*331 Even if we could assume that the carrier was justified in changing plaintiff's icing orders to read, "Reice at all regular icing stations and at destination if delay in delivery," we could not rule as a matter of law that the carrier reasonably and without negligence complied with even these terms. The evidence we recite as to the details of the icing in Potomac Yards does not compel such a finding. Defendant showed that the car arrived at Potomac Yards at 10:30 p. m. on September 5 and left at 9:30 p. m., September 6. While there it was necessary to make some repairs on the car which were completed by 6:20 p. m. on September 6. (The nature and extent of the repairs were not explained.) According to the records of the carrier's icing contractor, the car was re-iced at 12:45 p. m., September 6. Thus it appears that the car was allowed to remain for a period of over fourteen hours without icing service. Further, there is nothing to show that the car was inspected or found in satisfactory condition to withstand the waiting period. In the face of this evidence coming from defendant's own witnesses it would be wrong to rule as a matter of law that defendant gave the meat in the car a "reasonable protective service" and was free of negligence. This, it seems to us, was a typical jury question.
Regarding the instruction to re-ice at destination if delayed in delivery, defendant says that plaintiff himself was responsible for the lack of further refrigeration at Newport News, an emergency icing station, because of his failure to arrange for special icing of the car there. But as we said above, there is nothing to show plaintiff had actual notice of the nature of the station or was bound by the explanatory information in Supplement 5 to Circular 5-H, not on file with the Interstate Commerce Commission. Nor were there any other circumstances showing that the shipper should have known that special arrangements were necessary for icing at Newport News, since he had designated icing at "all stations." Aside from that, we think the evidence leaves a question as to defendant's due care in checking the car for ice at Newport News under provision 406 of the Protective Tariff heretofore mentioned. A witness offered by defendant as an expert testified (on cross-examination) that under the applicable tariffs the railroad was required to inspect the bunkers at Newport News, and to re-ice the car if necessary. Another of defendant's witnesses testified that they examined the bunkers of ice after its arrival about 3:50 a. m., September 7, at Newport News and found them ¾ full. Still another refrigeration expert said that if the bunkers were ¾ full, it was safe in his opinion to leave the car as it was for delivery the next morning. But another witness for defendant testified that he examined the bunkers at 9:15 a. m., September 8, at Sewall's Point, and found the bunkers still ¾ full of ice. We note also that none of defendant's witnesses testified as to the outside temperature at that time. Viewing defendant's own evidence as a whole, with the various estimates, opinions and conclusions it presented, we think it was such that reasonable men might differ as to its effect, as well as to the inferences to be drawn therefrom. When this evidence is examined along with the plaintiff's evidence, which contradicted it in several important particulars, we think there can be no doubt at all that the decision should have been, as it was, left to the jury.
There is no help for appellant in Delphi Frosted Foods Corp. v. Illinois Cent. R. Co., D.C.W.D.Ky., 89 F. Supp. 55, on which it relies. There, in holding for the carrier, the court found that aside from the evidence rebutting the prima facie case of negligence, the defendant introduced considerable testimony to the effect that the damage was the result of the shipper's improper processing, packing and loading, and the inherently perishable nature of the product. In affirming, Delphi Frosted Foods Corp. v. Illinois Cent. R. Co., 6 Cir., 188 F.2d 343, the circuit court held not only that the railroad had shown it complied with the shipper's instructions, but that the evidence sustained the lower court's finding that the fruit was not in sound condition when shipped. Such was not the evidence in this case. Nor is this case governed by Atlantic Coast Line R. Co. v. Georgia *332 Packing Co., 5 Cir., 164 F.2d 1, 4, to which we have referred above. There the court held that proof by the carrier of compliance with shipper's instructions is a complete defense to an allegation of negligence, and that the carrier "incontrovertibly showed more than full compliance with plaintiff's instructions." The showing of the carrier in this case was very far from being incontrovertible. We would only be repeating ourselves if we attempted again to summarize the evidence from which the jury could have found failure to comply with shipper's instructions.
Defendant also makes the point that it should be absolved of liability if the damage to the shipment resulted from an inherent vice or defect in the perishable property shipped. Such of course is the law. Shapiro v. Pennsylvania R. Co., 65 App. D.C. 324, 83 F.2d 581; Railway Express Agency v. H. Rouw Co., 198 Ark. 423, 128 S.W.2d 989; W. E. Roche Fruit Co. v. Northern Pac. Ry. Co., 184 Wash. 695, 52 P.2d 325. That is just another way of saying that if the meat was unsound or spoiled when delivered to the carrier, the shipper has no claim. But the evidence we have recited above established, or so the jury could have found, that such was not the fact.
We find nothing in any of the cases cited to us which would indicate that on the evidence as here presented the case should have been taken from the jury.
Affirmed.
NOTES
[1] "Rule No. 130: Condition of Perishable Goods Not Guaranteed By Carriers. Carriers furnishing protective service as provided herein do not undertake to overcome the inherent tendency of perishable goods to deteriorate or decay, but merely to retard such deterioration or decay insofar as may be accomplished by reasonable protective service, of the kind and extent requested by the shipper, performed without negligence."
"Rule No. 135: Liability of Carriers. Property accepted for shipment under the terms and conditions of this tariff will be received and transported subject to such directions, only, and to such election by the shipper respecting the character and incidents of the protective service as are provided for herein. The duty of the carriers is to furnish without negligence reasonable protective service of the kind and extent so directed or elected by the shipper and carriers are not liable for any loss or damage that may occur because of the acts of the shipper or because the directions of the shipper were incomplete, inadequate, or ill-conceived." (From the National Perishable Freight Committee, Perishable Protective Tariff No. 14, J. J. Quinn, Agent, Interstate Commerce Commission No. 25, issued March 5, 1946.)
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844 F. Supp. 1065 (1994)
Robert N. COHEN, Plaintiff,
v.
Manuel B. OASIN, Defendant.
No. 93-CV-6301.
United States District Court, E.D. Pennsylvania.
March 4, 1994.
*1066 Dennis L. Friedman, Philadelphia, PA, for plaintiff.
David R. Hoffman, James G. Sheehan, U.S. Atty.'s Office, Philadelphia, PA, for defendant.
MEMORANDUM AND ORDER
JOYNER, District Judge.
This matter involves plaintiff's motion to disqualify the Office of the United States Attorney (OUSA) as prospective legal counsel of defendant. Plaintiff seeks to have OUSA disqualified from representing defendant due to an alleged nonwaivable conflict of interest. Plaintiff contends that the conflict stems from the representation by OUSA of General Services Administration (GSA), which is a defendant in another action pending before this Court (Cohen v. Austin, 826 F. Supp. 922) (E.D.Pa.1993) and which was instituted by plaintiff.
In Austin, plaintiff filed suit against GSA alleging claims of religious discrimination and reprisal, as well as appealing the administrative agency's decision to terminate plaintiff from its employ and to deny him a within-grade increase. Plaintiff has now instituted the present action against defendant alleging that he engaged in fraudulent conduct and destruction or concealment of government records while acting as regional counsel for GSA during the previous administrative trial in the Austin case. Plaintiff asserts that because defendant was engaged in fraudulent behavior, he was acting outside the scope of his discretionary authority, and therefore, has not been sued in his official capacity.
In his motion, plaintiff contends that disqualification is necessary due to the inherent conflict of interest in having OUSA represent both defendants in these cases. Essentially, plaintiff argues that Austin, as administrator of GSA, is responsible for upholding the laws and regulations of GSA. He asserts that one of the regulations requires Austin to take disciplinary action against persons who violate GSA's standards of conduct. Two of such violations are engaging in immoral conduct and removing, destroying, concealing or falsifying government records. Plaintiff asserts that if OUSA represents defendant in this case, it will face a conflict of interest because it will acquire confidential information from defendant which will show that he acted contrary to GSA's standards. As a result, OUSA will be unable to faithfully carry out its representation of GSA in Austin.
In considering a motion to disqualify, the Third Circuit has stated that the court should determine if disqualification is the appropriate means to enforce the rule of professional conduct, the ends that the rule was designed to serve and any other countervailing policies such as permitting a party to *1067 retain counsel of his choice. Commonwealth Ins. Co. v. Graphix Hot Line, Inc., 808 F. Supp. 1200, 1203 (E.D.Pa.1992) (quoting United States v. Miller, 624 F.2d 1198, 1201 (3rd Cir.1980)). The party seeking to disqualify opposing counsel bears the burden of clearly showing that continued representation would be impermissible. Commercial Credit Bus. Loans, Inc. v. Martin, 590 F. Supp. 328, 335-36 (E.D.Pa.1984). Vague and unsupported allegations are not sufficient to meet this standard. Id. Generally, motions to disqualify opposing counsel are not favored. Commonwealth Ins., 808 F.Supp. at 1203 (citing Hamilton v. Merrill Lynch, 645 F. Supp. 60, 61 (E.D.Pa.1986)).
Rule 1.7 of the Pennsylvania Rules of Professional Conduct states:
(a) A lawyer shall not represent a client if the representation of that client will be directly adverse to another client, unless:
1) the lawyer reasonably believes the representation will not adversely affect the relationship with the other client; and
2) each client consents after consultation.
(b) A lawyer shall not represent a client if the representation of that client may be materially limited by the lawyer's responsibilities to another client or to a third person, or by the lawyer's own interests, unless:
1) the lawyer reasonably believes the representation will not be adversely affected; and
2) the client consents after full disclosure and consultation. When representation of multiple clients in a single matter is undertaken, the consultation shall include explanation of the implications of the common representation and the advantages and risks involved.
Pa.Rules of Professional Conduct Rule 1.7 (1993).
The comments state that loyalty to a client is the purpose behind this rule.
A possible conflict does not itself preclude the representation. The critical questions are the likelihood that a conflict will eventuate, and, if it does, whether it will materially interfere with the lawyer's independent professional judgment in considering alternatives or foreclose courses of action that reasonably should be pursued on behalf of the client. Consideration should be given to whether the client wishes to accommodate the other interest involved.
Pa.Rules of Professional Conduct Rule 1.7 cmt. (1993).
Additionally, the regulations concerning when the Department of Justice will undertake representation of a federal employee provide that representation will occur when the employee is sued in his individual capacity, the matter arises from the scope of his employment or when it is otherwise in the interest of the United States. 28 C.F.R. §§ 50.15(a); 50.15(12)(b)(1)-(2) (1993). The regulations further provide that in the case of a conflict of interest between employees in the same case, separate representation within OUSA may be provided to the employees. 28 C.F.R. § 50.15(10) (1993). Finally, the rules regarding attorney-client privilege and confidentiality are equally applicable to attorneys employed by the Department of Justice. 28 C.F.R. § 50.15(3) (1993).
Although there do not appear to be any cases on point, we do not believe that disqualification of OUSA is appropriate in this case. In Aetna Casualty & Surety Co. v. United States, 570 F.2d 1197 (4th Cir.1978), cert. denied, 439 U.S. 821, 99 S. Ct. 87, 58 L. Ed. 2d 113 (1978), the Fourth Circuit reversed the district court's decision to disqualify OUSA from representing four air traffic controllers who had been sued for negligence while acting within the scope of their employment. The Fourth Circuit reasoned that there was nothing in the record from which the court could determine that an actual conflict existed. Although the district court had surmised that representation of the multiple defendants could create a conflict of interest because each of the defendants might assert a defense which cast blame on the other defendants, the Fourth Circuit rejected this as mere conjecture by the district court. The Fourth Circuit also reversed because the parties had consented to being represented by OUSA, however, the district court ignored this evidence.
*1068 Likewise, in Kerry Coal Co. v. United Mine Workers of America, 470 F. Supp. 1032 (W.D.Pa.1979), aff'd, 637 F.2d 957 (3rd Cir. 1981), the district court refused to disqualify a law firm representing multiple defendants in a civil case. The court noted that the evidence and plaintiff's arguments did not demonstrate the existence of an actual conflict. It also noted that while the fact that defense counsel planned to present consistent defenses for all of its clients was not dispositive of the issue, given defense counsel's assurances that no conflict existed, it was adequate protection for defense counsel to inform its clients of the possible advantage of retaining separate counsel and to let them determine the question for themselves.
While the above cases dealt with situations involving representation of multiple defendants in the same case, the principles involved are relevant to this case. As in the above cases, there is no proof of an actual conflict of interest in the present case. Plaintiff's argument that OUSA will be faced with a conflict when it receives confidential information from defendant that he acted contrary to GSA's standards amounts to mere conjecture. Simply because plaintiff alleges that defendant acted adversely to the standards of GSA does not mean that this is necessarily true and that a conflict of interest exists. Plaintiff, however, states that the Merit Systems Protection Board granted plaintiff sanctions because government evidence was withheld by GSA during the proceedings in Austin. However, even if this is true, there is still insufficient evidence for us to conclude that a conflict of interest exists. Moreover, given that this case has not progressed beyond the filing of the complaint, there is nothing in the record to indicate that a conflict exists.
On the other hand, OUSA asserts that the positions of Mr. Oasin and GSA are not adverse. OUSA asserts that Mr. Oasin was acting within the scope of his employment, and that the charges of tampering are untrue. Indeed, as demonstrated by the regulations above, OUSA would not have agreed to represent Mr. Oasin if, after investigation, it decided he was acting outside his official capacity, his scope of employment or that it was outside the government's interest to represent him. See 28 C.F.R. §§ 50.15(a); 50.15(12)(b)(1)-(2) (1993). OUSA also notes that it does not appear that any criminal charges will be brought against Mr. Oasin. Moreover, the regulations provide that representation by OUSA will be denied where an employee is the subject of a federal criminal investigation, and seeks representation by OUSA in the federal criminal proceeding or any related civil proceeding. 28 C.F.R. § 50.15(7) (1993) (emphasis added). Further, OUSA's position with respect to GSA is that no discrimination occurred. Thus, with regard to the lawsuits, the positions of defendants are not adverse to one another.
Nor does it appear that OUSA cannot adequately represent both clients. "Representation of diverse interests is not uncommon to prominent members of the bar and it cannot serve as a predicate for the disqualification of counsel in this or any other court." Ciaffoni v. Supreme Court of Pennsylvania, 550 F. Supp. 1246, 1249 (E.D.Pa.1982), aff'd, 723 F.2d 896 (3rd Cir.1983). Moreover, the policies regarding disqualification of counsel have been found not to apply to OUSA by one court because OUSA represents only one clientthe United States government. See Grand Jury Subpoena of Ford v. United States, 756 F.2d 249, 254 (2nd Cir.1985).
Finally, we note that other protections exist should it be found that a conflict exists. As demonstrated by the regulations, OUSA would not be precluded from representing defendant if a different Assistant U.S. Attorney, other than the one representing GSA, was assigned to represent defendant. Thus, should that situation arise, a "Chinese Wall" could be erected whereby two different Assistant U.S. Attorneys would represent each defendant and they would not speak to one another about their respective cases. See e.g. Grand Jury, 756 F.2d at 251. Moreover, Rule 1.7 does not preclude representation in this situation if both parties consent. Thus, should it become apparent that a conflict existed, OUSA would then need to obtain the consent of Mr. Oasin and GSA before representation could continue.
However, given that there is no evidence of a conflict of interest in this case, and *1069 because OUSA assures this Court that no conflict exists and that the defenses of the parties are consistent, we find that plaintiff has not met his burden to have OUSA disqualified.
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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/1523087/
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162 B.R. 276 (1993)
In re Cathy Lee CROSBY, Debtor.
Bankruptcy No. 92-38042 AG.
United States Bankruptcy Court, C.D. California.
November 1, 1993.
*277 *278 Joseph A. Eisenberg and Victoria S. Kaufman of Levene & Eisenberg, a Professional Corp., Los Angeles, CA, for debtor.
David Weinstein, Los Angeles, CA, for trustee.
MEMORANDUM OF DECISION
ARTHUR M. GREENWALD, Bankruptcy Judge.
NATURE OF PROCEEDINGS
The Debtor, Cathy Lee Crosby (Ms. Crosby), filed a Chapter 7 Petition on July 20, 1993. Shortly thereafter, she filed certain schedules and statements as required by Rule 1007(b), Fed.R.Bankr.P., including schedules listing her personal property (Schedule B) and property claimed as exempt (Schedule C). These schedules were amended on two occasions.
The first meeting of creditors was held on August 26, 1992 and was continued to December 17, 1992 by agreement.
The Trustee filed objections to the following exemptions claimed by Ms. Crosby which remain at issue.
(1) Ms. Crosby's interest in CAT Productions, Inc.'s Profit Sharing Plan And Trust Agreement.
(2) Ms. Crosby's Individual Retirement Account (IRA) holding $6,000.
(3) Certain items of personal property which Ms. Crosby claims as exempt under California Code of Civil Procedure (C.C.P. Section 704.020.)
On May 3, 1993 and May 21, 1993, this court held hearings regarding the Trustee's objections, as well as his motion for the turnover of certain items of personal property listed by Ms. Crosby on her schedules. During the course of these proceedings, the Trustee and Ms. Crosby agreed that as to Ms. Crosby's 1980 Jeep vehicle, she was entitled to claim a twelve hundred dollar ($1,200) exemption. Also, the parties agreed that Ms. Crosby is entitled to claim a fifty thousand dollar ($50,000) homestead exemption.
STATEMENT OF FACTS
Ms. Crosby, as President of CAT Productions and its successor, Incredible, Inc. (CAT), is its only employee. She is the trustee and sole beneficiary of the corporation's Profit Sharing Plan And Trust Agreement (Plan). The Plan was adopted by CAT on November 8, 1988. The Internal Revenue Service issued on May 27, 1992 a determination letter qualifying the corporation and Ms. Crosby for certain tax benefits as prescribed under the Internal Revenue Code (I.R.C.).
The Plan provides that the Trust Fund is to receive contributions from the Pension Plan. With respect to the Trustee's authority, the Plan provides, in pertinent part, that:
generally to do all such acts, execute all such instruments, take all such proceedings and exercise all such rights and privileges with relation to property constituting the Trust Fund as if the Trustee were the absolute owner, thereof, without regard to investments that might otherwise be deemed proper for a trust (ref., Trust Indenture, Art. II, ¶ 2.3 mm).
The Trust Indenture also contains a Spendthrift Provision which states as follows:
5.2 Spendthrift Provision. No person entitled to any benefits under this Agreement shall have any right to assign, transfer, hypothecate, encumber, commute or anticipate his interest in any benefits under this Trust, and such benefits shall not, in any way, be subject to any legal process or levy of execution upon, or attachment or garnishment proceedings against, the same for the payment of any claim against any such person; provided, however, that the Committee may permit the voluntary revocable assignment of up to ten percent (10%) of any benefit payment by any Participant who is receiving benefits under the Plan if such assignment or alienation is not made for purposes of defraying administrative costs of the Plan.
Retirement age under the Plan is fifty-five or ten years after an individual first participated in the Plan.
The following summarizes transactions involving loans and distributions from the Plan to Ms. Crosby and the repayment of these *279 loans during the period 1989 through September 30, 1992.
a. 1989: A total of $509,948 was withdrawn by Ms. Crosby and reported on Form 1099. Of this sum, $364,948 was placed into an IRA account, and $145,000 treated as a distribution to Ms. Crosby.
b. 1990: On or about March 1, 1990, Ms. Crosby borrowed $50,000 from the Plan. On December 31, 1990, Ms. Crosby repaid $19,500. In August of 1991, she repaid $30,640.
c. 1991: On or about April 15, 1991, the Plan loaned $150,000 to her aunt and uncle, Eugene F. Crowell and Jean F. Crowell (Crowells), as evidenced by a promissory note and secured by a deed of trust. Thereafter, the Crowells loaned the same amount as evidenced by two promissory notes, one in the amount of $100,000 and the second in the amount of $50,000. Both notes essentially had the same terms as contained in the promissory note executed by the Crowells in favor of the Plan. As of December 31, 1992, approximately $149,000 of the $150,000 loan to Ms. Crosby remained outstanding, though the Crowells have made all their payments due on their loan.
On or about August 15, 1991, Ms. Crosby withdrew $240,105 from the Plan. Of this amount $150,000 was treated as a distribution and reported on Ms. Crosby's 1991 income tax return, the balance of $90,100 constituting a loan to her. A portion of the August 15, 1991 withdrawal was used to repay $30,640 of the March 1990 loan.
d. 1992: Ms. Crosby borrowed the sum of $49,000 from the Plan consisting of the sum of $14,000 on May 31, 1992 and $35,000 on September 30, 1992.
Schedule Of Loans And Distributions From The Plan During 1989-1992
Description of Transaction
Date Amount Loan Repayment Distribution
1989 $509,948
364,948[*]
_______
$145,000 $145,000
1990
3/1 $ 50,000 $ 50,000
12/31 $ 19,500
1991
8/15 $240,105 $ 90,000 $150,005
8/15 $ 30,640
8/15 90,100
1992
5/92 $ 14,000 $ 14,000
9/ 35,000 35,000
________ ________ ________
Totals $343,865 $189,100 $295,005
Currently, the Plan's assets consist of (1) approximately $60,000 cash; (2) a 50% interest in Angel Acres II partnership, which owns raw land on St. Croix; (3) a promissory note in the approximate amount of $150,000 payable by Eugene and Jean Crowell, secured *280 by a second deed of trust on the Crowell's home; (4) a promissory note in the amount of $14,000 payable by Ms. Crosby; (5) a promissory note in the amount of $35,000 payable by Ms. Crosby, and (6) an unspecified number of bonds and shares of stock in Southern Equities Corporation, Ltd.
DECISION
Ms. Crosby's Interest In The Plan
1. This court concludes that Ms. Crosby's interest in the Plan is not excluded from the estate pursuant to 11 U.S.C. § 541(c)(2). Ms. Crosby has failed to establish that the Plan's anti-alienation provision is enforceable under applicable nonbankruptcy law.
2. The Trustee's objection to Ms. Crosby's claimed exemption of her interest in the Plan pursuant to C.C.P. § 704.115(a)(2) is overruled. The Trustee has failed to establish that the Plan is not designed and used by Ms. Crosby for retirement purposes.
Ms. Crosby's IRA Account
The Trustee's objection to Ms. Crosby's claimed exemption of her IRA Account, pursuant to C.C.P. § 704.115(a)(3), is overruled. The Trustee has failed to establish that the Account is not reasonably necessary for her retirement.
Ms. Crosby's Claimed Exemption Of Certain Personal Property
The Trustee's objection to Ms. Crosby's claimed exemption of certain listed personal property pursuant to C.C.P. §§ 704.020 is overruled.
Trustee's Request For Turnover Of Certain Exempt Property
The Trustee's request for the turnover of certain exempt property is denied.
Ms. Crosby's Claimed Homestead Exemption And Vehicle Exemption
Pursuant to an agreement reached by the Trustee and Ms. Crosby, this court approves Ms. Crosby claimed exemption of $1,200 applicable to the Jeep automobile and her claimed $50,000 homestead exemption.
DISCUSSION
Ms. Crosby's Interest In The CAT Plan Is Not Excluded From The Bankruptcy Estate Under 11 U.S.C. § 541(c)(2) As Its Anti-Alienation Provision Is Not Enforceable Under The Internal Revenue Code
Ms. Crosby contends that her interest in the Plan is not property of the estate pursuant to 11 U.S.C. § 541(c)(2),[1] as the Plan contains an anti-alienation provision that is enforceable under applicable nonbankruptcy law. Ms. Crosby cites the United States Supreme Court case of Patterson v. Schumate, ___ U.S. ___, 112 S. Ct. 2242, 119 L. Ed. 2d 519 (1992) in support of her position, and asserts that under I.R.C. § 7476(a)[2] the restriction contained in the Plan is enforceable. Therefore, her interest in the Plan is excludable under § 541(c)(2).
In the Patterson case, the Supreme Court stated as follows regarding the statutory phrase "enforceable under nonbankruptcy law":
"The natural reading of this provision entitles a debtor to exclude from property of the estate any interest in a plan or trust *281 that contains a transfer restriction enforceable under any relevant nonbankruptcy law. Nothing in § 541 suggests that the Phrase `applicable nonbankruptcy law' refers, as petitioner contends, exclusively to state law. The text contains no limitation on `applicable nonbankruptcy law' relating to the source of the law. . . . Plainly read, the provision encompasses any relevant nonbankruptcy law, including federal law such as ERISA. We must enforce the statute according to its terms."
The court then went on to hold that ERISA qualified plans were excluded from the estate, as the required transfer restrictions fell within the requirements of 541(c)(2).
In the case of In re Witwer, 148 B.R. 930 (Bankr.C.D.Cal.1992), the court determined that the debtor's pension plan was not excludable under I.R.C. § 401(a)(13), as a reading of the statute established that it did not create any substantive rights that a beneficiary or participant of a qualified retirement trust could enforce. Therefore, the Plan did not fall within § 541(c)(2) and accordingly, was not excluded from the estate. In this regard, the court stated, in pertinent part:
The provisions of I.R.C. § 401(a) relate solely to the criteria for tax qualification under the Internal Revenue Code. Although a transfer in violation of the required anti-alienation provision could result in adverse tax consequences I.R.C. § 401(a) does not appear to create any substantive rights that a beneficiary or participant of a qualified retirement trust can enforce. Nolan v. Meyer, 520 F.2d 1276, 1280 (2d Cir.1975), cert. denied, 423 U.S. 1034, 96 S. Ct. 567, 46 L. Ed. 2d 408 (1975); Cowan v. Keystone Employees' Profit Sharing Fund, 586 F.2d 888, 890 (1st Cir. 1978); Reklau v. Merchants National Corporation, 808 F.2d 628 (7th Cir. 1986). Furthermore, absent the most compelling evidence of affirmative Congressional intent a federal court should not infer a private cause of action under I.R.C. § 401(a). Cf. Touche Ross & Company v. Reddington, 442 U.S. 560, 99 S. Ct. 2479, 61 L. Ed. 2d 82 (1979) (As the terms of § 17(a) did not confer a private right of action, the Supreme Court refused to infer such a right under the Securities Exchange Act of 1934). As I.R.C. § 401(a) by its literal terms grants no private right of action, this Court finds that the Debtor lacks standing to enforce his Plan's anti-alienation provision. Since this Court does not adopt the Debtor's expansive reading of Patterson, the Debtor's right to retain any of the funds in his Plan is dependent upon applicable state spendthrift trust law or state exemption law.
Section 7476 grants to the United States Tax Court jurisdiction to enter declaratory judgments with respect to the initial or continuing qualification of a retirement plan. The statute provides a remedy whereby the court's jurisdiction may be invoked where there exists a case of actual controversy involving a determination by the Secretary of the Treasury regarding plan qualification or a failure by the Secretary to make a determination regarding either the initial or continuing qualification.
As is the case under I.R.C. § 401(a)(13), Section 7476(a) does not create any substantive rights that a beneficiary or participant of a qualified plan can enforce, nor does it provide for a private right of action enforcing the anti-alienation provision of the Plan. A plain reading of the statute indicates that the statute is limited exclusively to controversies involving determinations, or lack thereof, by the Secretary of the Treasury regarding plan qualification under the I.R.C. Accordingly, Section 7476(a) does not fall within the purview of § 541(c)(2). Therefore, Ms. Crosby's interest in the Plan is not excludable from her estate under § 541(c)(2).
Ms. Crosby's Plan Is Not Excluded From The Estate Under § 541(c)(2) As Its Anti-Alienation Provision Is Not Enforceable Under California Spendthrift Law
Under Bankruptcy Code § 541(c)(2), the corpus of a trust is excluded from the bankruptcy estate if the trust contains an anti-alienation provision enforceable under state spendthrift law. In re Kincaid, 917 F.2d 1162, 1166-69 (9th Cir.1990); In re Witwer, 148 B.R. 930, 937, (Bkrtcy.C.D.Cal. 1992). Although California law generally recognizes the validity of spendthrift trusts, a *282 spendthrift trust is not enforceable if the trust's settlor and beneficiary are the same. Cal.Prob.Code (CPC) § 15304(a). This restriction is intended to prevent an individual from enjoying the use and benefits of property while putting the property beyond the reach of creditors. Witwer, 148 B.R. at 937.
In the instant case, Ms. Crosby is both the trustee and beneficiary of the Plan. Additionally, Ms. Crosby is the president and only employee of the settlor, CAT. Although a corporation is a separate legal entity under California law, courts have disregarded this legal fiction when analyzing the validity of spendthrift trusts settled by a one-person corporation for the benefit of the same individual. In re Reed, 951 F.2d 1046 (9th Cir. 1991); In re Kaplan, 97 B.R. 572 (9th Cir. BAP 1989); In re Lichstrahl, 750 F.2d 1488 (11th Cir.1985); In re Goff, 706 F.2d 574 (5th Cir.1983). A spendthrift trust of this type should not be enforced under California law if a beneficiary has excessive control over the trust. In re Witwer, 148 B.R. at 937; In re Reid, 139 B.R. 19, 21 (Bkrtcy.S.D.Cal.1992).
The court in Witwer concluded that the anti-alienation provision contained in the debtor's trust was not enforceable under California law because the debtor had "unbridled control over the plan and his immediate access to the plan assets." Id. 148 B.R. at 938. Because the debtor, at his sole discretion, could (1) authorize a distribution under the plan; or (2) terminate the plan, the court concluded that the anti-alienation provision was not enforceable. As a result, the debtor's plan was not excluded from the bankruptcy estate pursuant to § 541(c)(2).
Ms. Crosby is the Plan's Trustee. As was the case in Witwer, Ms. Crosby, as Trustee, has unbridled control over the Plan and access to its assets. She has unqualified discretion regarding the making of loans and the disposition of assets. Ms. Crosby, as a beneficiary, is entitled to demand a complete distribution of the corpus at any time, since her interest in the Plan is fully vested and she has exceeded the required retirement age, as defined under the Plan.[3] For these reasons, this court finds that the Trust's anti-alienation provision is unenforceable under California spendthrift law. Therefore, on these grounds, as well, Ms. Crosby's interest in the Plan is not excluded from the estate under Bankruptcy Code § 541(c)(2).
The Debtor's Pension Plan Is Exempt From The Bankruptcy Estate Under California Code Of Civil Procedure Section 704.115(b)
Under the Bankruptcy Code, an individual debtor is entitled to exempt certain assets from the estate. A debtor may exempt either those assets delineated in the Bankruptcy Code or those assets exempted by the law in the debtor's state. 11 U.S.C. § 522(b)(2)(A).[4]
C.C.P. § 704.115(b)[5] permits a debtor to exempt all amounts held, controlled, or in *283 process of distribution by a private retirement plan, for the payment of benefits as an annuity, pension, retirement allowance, disability payment, or death benefit from a private retirement plan. A profit sharing plan constitutes a private retirement plan if it is designed and used for retirement purposes. C.C.P. § 704.115(a)(2).[5] The purpose of this exemption is to safeguard a stream of income for pensioners at the expense of bankruptcy creditors. In re Witwer, 148 B.R. at 941.
Ms. Crosby contends that the Plan was designed and used for retirement purposes. Accordingly, she claims that her interest in the Plan is exempt pursuant to C.C.P. 704.115(b).
The Trustee objects to Ms. Crosby's claimed exemption on the grounds that she designed and used the Plan for present use rather than for retirement purposes. Under Rule 4003(c), Fed.R.Bankr.P.[6] the Trustee has the burden of proving that Ms. Crosby's interest in the Plan is not properly claimed as an exemption under C.C.P. § 704.115(b).
Initially, the Trustee argues that the claimed exemption should be denied because Ms. Crosby used the Plan for tax avoidance purposes rather than for retirement purposes. The Trustee makes reference to the $150,000 loan made to the Crowells and the Crowells subsequent loan of a similar amount to Ms. Crosby.
The Trustee's accountant contends that Ms. Crosby would have incurred a tax liability in the approximate amount of $80,000 had she simply withdrawn $150,000 from the Plan. The Trustee's accountant also claims that Ms. Crosby avoided reporting $90,000 of income for the year of 1991 by withdrawing $240,000 from the Plan, depositing it in a Nuveen tax-flavored bond fund, and making anonymous withdrawals from the bond fund for the next two months. He acknowledges that she reported as income on her 1991 tax return $150,000 of the $240,000.
The accountant's contentions suggest that the herein described loans and withdrawals were instituted to avoid taxes and that the Plan was used for tax avoidance purposes. This court declines to make a finding of tax avoidance premised exclusively upon the opinion of the Trustee's accountant. No determination has been made by the taxing authorities as to the taxability of these transactions. In addition, the Trustee has failed to present sufficient facts independent of his accountant's contentions to establish that the Plan was used as a device for tax avoidance rather than for retirement purposes. The court concludes that the Trustee has failed to establish that Ms. Crosby's interest in the Plan is not exempt under C.C.P. § 704.115(b) because she allegedly used the Plan for tax avoidance purposes rather than for retirement purposes.
The Trustee also contends that Ms. Crosby's interest does not qualify for exemption under C.C.P. § 704.115(b) because the Plan's assets were not invested in a manner consistent with retirement purposes. Referring to the Plan's assets, the Trustee argues that Ms. Crosby would have made investments in more appropriate assets such as corporate bonds, utility stocks and Treasury notes had she intended to use the Plan as a means of providing for her retirement.
The Ninth Circuit has rejected a similar argument in the case of In re Bloom, 839 F.2d 1376 (9th Cir.1988). In Bloom, the Ninth Circuit considered the issue of whether a plan was designed and used for retirement purposes pursuant to C.C.P. § 704.115. The court determined that it was inappropriate *284 to examine the plan under a prudent investor test in determining whether it was used for retirement purpose, since even an imprudently invested plan may be designed and used for retirement purposes. In re Bloom, 839 F.2d at 1379.
The court, in Witwer, 148 B.R. at 940, followed the Bloom case and rejected the prudent investor test in determining whether a plan is used for retirement purposes. In this regard, the court stated, in pertinent part, as follows:
The key requirement to determine if the Debtor's Plan is exempt from the estate, is that the Plan must be used for retirement purposes. In re Bloom, 839 F.2d 1376, 1379 (9th Cir.1988). It is, however, inappropriate to hold the Debtor to a prudent investor test since even an imprudently invested plan may still be used for retirement purposes. Id.
In Witwer, the debtor's plan made large loans to the debtor and his friends. On the petition date, two of the three outstanding loans were in default. The court declined to consider in hindsight the prudence of each investment when determining whether the plan was being used for retirement purposes. Id. The court addressed the question of whether the plan was so abused that it lost its retirement purpose and concluded that despite numerous loans, the debtor did not cease to treat the plan as a retirement plan. In this regard, the court stated in pertinent part:
In In re Bloom, the Ninth Circuit Court of Appeals held that although the debtor had loaned more than half of the funds in her retirement plan to herself without taking a security interest, her actions did not constitute such an abuse of the plan to cause it to lose its retirement purpose and exemption under California law. Id. Of particular importance was the fact that the debtor followed trust agreement procedures for obtaining loans, charged a reasonable rate of interest on the loans, regularly made interest payments, and there was no indication that she used the plan to hide otherwise ineligible assets from bankruptcy administration. Id.
Similarly, in this case, the Debtor followed trust agreement procedures in obtaining loans for himself and others. Promissory notes were obtained for all transactions. All loan agreements provided commercially reasonable interest rates which ranged from a low of 9.5% to a high of 14%. The Debtor has repaid all the money he has borrowed except the one loan with a maturity date of July 10, 1995. The fact that two of the loans made to others are in default is insufficient to find that the Plan was not designed and used for retirement purposes. As the Bloom Court has noted, this Court cannot, in hindsight, determine the investment prudence of each individual investment.
Further, although numerous loans were made by the Plan, the Plan invested extensively in investments other than loans to individuals. Also, the Debtor has not made any contributions to the Plan within the last six years. Therefore, unlike the debtor in Daniel, it cannot be said that this Debtor attempted to hide otherwise ineligible assets from bankruptcy administration nor can it be said that this Debtor's transactions were not in furtherance of legitimate long-term retirement purposes. Daniel, 771 F.2d at 1358. In sum, this Court finds that the Debtor did not cease to treat his Plan as a retirement plan. As the Debtor's Plan was designed and used for retirement purposes the Plan corpus may be entirely exempt under C.C.P. § 704.115.
Id. 148 B.R. at 940.
The Court of Appeals in the case of In re Daniels, 771 F.2d 1352, (9th Cir.1985), considered the issue of whether a debtor abused a retirement plan to the extent that it no longer had a retirement purpose. In Daniels, the court determined that the debtor abused his retirement plan by using it for current needs since (1) the loans from the plan to the debtor resembled withdrawals; and (2) the debtor utilized the plan to hide otherwise non-exempt assets from creditors. Id. at 1357. The Court of Appeals determined that the plan's loan to the debtor were tantamount to a withdrawal for present needs, since the loan amount was substantially *285 equal to the debtor's interest in the plan. Additionally, the debtor had renewed the entire debt when it became due. Id.
Applying the factors considered by the Court of Appeals in the Bloom and Daniels cases, the Plan's loans to Ms. Crosby and the Crowells are not withdrawals constituting an abuse of the Plan. The record fails to disclose that the Plan loaned money to Ms. Crosby in an amount substantially equal to her entire interest in the Plan, or that Ms. Crosby engaged in loan renewals equal to her entire interest in the Plan. In addition, the record fails to disclose that the procedures set out in the Trust Agreement regarding loans were not followed. The Crowells have made timely and continuous payments to the Trust. Prior to filing for bankruptcy, Ms. Crosby borrowed $189,000 from the Plan, the sum of $140,000 having been repaid. As to the balance of $49,000, she has paid all of the principal and interest payments due on the $35,000 loan of September 30, 1992 and all interest due on the $14,000 loan of May 31, 1992. As trustee, Ms. Crosby has broad authority to make loans from the Plan. The record before the court fails to disclose the existence of any conditions as to the manner in which the loan proceeds were to be expended. Consistent with the criteria set forth in Bloom and Daniels cases, the court finds that the loans made to Ms. Crosby and the Crowells did not constitute an abuse of the Plan.
The Trustee also contends that Ms. Crosby utilized the Plan for the purpose of hiding otherwise ineligible cash and property from her creditors. In this regard, the Trustee asserts that the Crowells' loan and the Plan's acquisition of the St. Croix property in 1988, plus the Plan cash on hand, reflect this purpose. The court rejects these contentions, as the Trustee has failed to present evidence establishing that the Plan's assets were acquired in an attempt to hide assets from CAT's or Ms. Crosby's creditors.
The Trustee has failed to meet its burden of establishing that the Plan was not designed or used for retirement purposes. The Trustee's objection is overruled.
The Debtor's IRA Is Exempt From The Estate Pursuant To California Code Of Civil Procedure § 704.115(a)(3)
On the petition date Ms. Crosby maintained an IRA account which contained six thousand dollars ($6,000). The Trustee has objected to her claimed exemption pursuant to C.C.P. § 704.115(a)(3).
Under C.C.P. § 704.115(a)(3), IRA funds are exempt only to the extent necessary to provide for the support of the debtor and his or her family when the debtor retires. In re Dalaimo, 88 B.R. 268, 272-273 (Bankr.S.D.Cal.1988). In the Dalaimo case, the court stated the following regarding the application of C.C.P. 704.115(a)(3):
The "reasonably necessary" standard has been given varied applications. However, two common themes surface in nearly every analysis of "reasonably necessary," (1) the debtors present need for the money and (2) the ability to rebuild the retirement fund if purged.
Id. at 272.
In Dalaimo, the court made the following analysis in deciding that the Debtor's government pension and IRA were exempt under C.C.P. 704.115:
This court finds that the claimed IRA exemptions must be sustained under the `reasonably necessary' standard. The amount of $11,706.00 is relatively modes. The budget submitted by the [debtors] is reasonable. While there is sufficient current income to meet current expenses, there is no contingency allowance built in. Such contingencies are inevitable, given the age of the [debtors] and the inevitable forces of inflation and obsolescence. . . . Although this court cannot prognosticate the debtors unforeseen future liabilities, it must anticipate likely problems and probable consequences, such as ill health and the cost of health care, inter alia. . . . This court finds the $11,706.00 IRA security blanket to be reasonably necessary, regardless of the lack of a present need to meet current expenses.
Id. at 272-73.
In the case of In re Fisher, 63 B.R. 649 (Bankr.W.D.Ky.1986), the court stated as follows *286 regarding the reasonably necessary test:
to determine if the reasonably necessary test is met, the court must examine all of the facts and circumstances including the debtor's age, earning capacity, present and future financial needs, ability to ensure against future disruptions in earning capacity, and his ability to reestablish a retirement fund.
Id. at 651. The court further explained that:
Our task is to attempt to interpret the purpose of the exemption statute, which we believe is to afford certain protection to debtors upon their retirement or disability. The purpose of exemptions is `. . . to provide sufficient assets to enable the debtor to make a fresh start in accumulating post-bankruptcy wealth for future support.'
Id. at 652 (citations omitted).
In the instant case, the Trustee has failed to establish that Ms. Crosby's six thousand dollar fund is not reasonably necessary for her retirement. Ms. Crosby's scheduled monthly expense budget indicates that these expenses cannot be satisfied out of her estimated monthly earnings. If she does not obtain work in the near future, she will not have sufficient money on which to live. As this court found when converting this case to chapter 7 from chapter 11, the prospects for Ms. Crosby's generating future revenues are not good. It is questionable whether Ms. Crosby can rebuild her retirement account, were the court to purge her IRA account.
Accordingly, the Trustee's objection to the Ms. Crosby's claimed exemption under § 704.115(a)(3) is overruled.
The Debtor's Personal Property And Works Of Art Are exempt Under California Code Of Civil Procedure Sections 704.020 and 704.040
The Trustee initially objected to Ms. Crosby's claimed exemption of household goods asserted pursuant to C.C.P. § 704.020.[7] The Trustee took the position that the claimed items were not ordinarily and reasonably necessary for use by Ms. Crosby at her residence, as required by the statute. The Trustee subsequently withdrew his objection, but took the position that the following items were exempt only to the extent allowed by C.C.P. § 704.040:[8]
Item Description
No.
1. Libby Berry lithograph
2. Disney movie cell
3. Egyptian battle scene painting
4. Jerry DaSilva water color portrait
5. Salvador Dali lithograph
6. L. Mariane etching
7. Watercolor painting of an Egyptian
Pharoah
8. Cambodian temple rubbing
9. Ralph Knie lithograph
10. Chinese wood horse
11. Georges Carpentier brass sculpture
12. South American breastplate
13. South American terra cotta whistle
14. Oak frame mirror
15. Frosted glass vase
16. Blown glass bowl
17. Drum
18. Wood secretary desk
19. Silver hunting knife
20. Silver fan
21. Cotton and wool rug
22. Kelim weaving
23. Stamp collection
24. Rolex watch
25. Longines watch
26. Lynx fur coat
Section 704.040 permits a debtor to claim as exempt jewelry, heirlooms, and works of art. However, the debtor may only claim these items to the extent that their aggregate equity does not exceed $2,500. In contrast, C.C.P. § 704.020 contains no limitation on the total value of household furnishings *287 and personal effects which a debtor may claim as exempt under this section.
Ms. Crosby and the Trustee do not dispute that the following items are exempt pursuant to C.C.P. § 704.040 (Undisputed Property), though Ms. Crosby contends that these items also qualify for exemption under § 704.020.
Item
No. Description Value & Equity
2. Disney movie cell $ 150.00
3. Egyptian battle scene painting 10.00
5. Salvador Dali lithograph 250.00
7. Water color painting of an Egyptian pharaoh 10.00
8. Cambodian temple rubbing 100.00
9. Ralph Knie lithograph 10.00
10. Chinese wood horse 250.00
20. Silver fan 362.50
24. Rolex watch 800.00
25. Longines watch 600.00
________
Total $2,492.50
As there is no dispute that these items can be claimed as exempt under C.C.P. § 704.040, the court need not consider whether they fall under the purview of C.C.P. § 704.020.
The following items of personal property, however, remain at issue (Contested Property):
Item Description
No.
1. Libby Berry lithograph
4. Jerry DaSilva water color portrait
6. L. Mariane etching of street scene
11. Georges Carpentier brass sculpture
12. South American breastplate
13. South American terra cotta whistle
14. Oak frame mirror
15. Frosted glass vase
16. Blown glass bowl
17. Drum
18. Wood secretary desk
19. Silver hunting knife
21. Cotton and wool rug
22. Kelim weaving
23. Stamp collection
26. Lynx Fur coat
Ms. Crosby contends that the Contested Property is exempt under C.C.P. § 704.020 because they are ordinarily and reasonably necessary for her use at her principal place of residence. The Trustee argues that the Contested Property falls within the purview of § 704.040, as they constitute works of art. As such, they cannot be claimed as exempt because their aggregate value and equity exceed $2,500, the Undisputed Property claimed under the statute having a value and equity of $2,492.50.
The Trustee's case is predicated on the description of the Contested Property set forth by Ms. Crosby in her schedules initially filed with the court, asserting that these descriptions constitute admissions that meet the requirements of § 704.040. No evidence, independent of these descriptions, however, was presented by the Trustee.
Ms. Crosby correctly points out that subsequently she amended her initial schedules describing these items as household goods and furnishings. Having filed a voluntary petition, Ms. Crosby is permitted to amend her schedules as a matter of course at any time prior to the closing of the case. Rule 1009(a), Fed.R.Bankr.[9]
The court finds that the Trustee's reliance upon the bare description of the items, as set forth in Ms. Crosby's initial schedules, without further evidence, does not satisfy the Trustee's burden of establishing that the *288 items in question do not qualify for exemption under § 704.020. Nor has the Trustee presented evidence which would persuade the court that the items in question fall within the provision of § 704.040.[10]
Ms. Crosby Is Not Required To Turn Over To The Trustee For Sale Items Found To Qualify For Exemption Under C.C.P. § 704.040
The Trustee has requested an order requiring Ms. Crosby to turn over all property which qualifies for exemption under § 704.040 in order that he may sell it. The Trustee argues that he is entitled to take possession and sell such exempt property, Ms. Crosby being entitled only to the monetary sum of $2,500.00 upon its sale.
The Trustee's request is denied. Initially, as a practical matter, there is no reason to require a turnover and sale, as the only property that qualifies for exemption under § 704.040 is the Stipulated Property amounting to $2,450.50. A sale of this property would not produce any monetary sum that would be available for distribution to unsecured creditors.
However, more fundamentally, the Trustee's request is unsupported by any statutory or case authority. A plain reading of Section 704.040 reflect that the turnover and sale procedures advocated by the Trustee are absent from the statute, it being limited to the following language:
§ 704.040. Jewelry, heirlooms, and works of art
Jewelry, heirlooms, and works of art are exempt to the extent that the aggregate equity therein does not exceed two thousand five hundred dollars ($2,500).
In support of his request, the Trustee erroneously analogizes to the California Homestead Exemption. The Ninth Circuit in the case of In re Reed, 940 F.2d 1317, 1321 (1991), described the California Homestead Exemption as follows:
California does not permit a debtor to exempt his entire interest in a homestead, but specifically limits the dollar amount up to which a homestead exemption can be claimed. Cal.Civ.Proc.Code § 704.730(a). The language of the relevant statutes makes it clear that the "homestead exemption" in California is merely a debtor's right to retain a certain sum of money when the court orders sale of a homestead in order to enforce a money judgment; it is not an absolute right to retain the homestead itself. See, e.g., Cal. Civ.Proc.Code § 704.720(b), which states, "If a homestead is sold under this division . . . the proceeds of sale . . . are exempt in the amount of the homestead exemption provided in Section 704.730".
See also In re Hyman, 967 F.2d 1316, 1318 (9th Cir.1992).
Unlike the relevant statutes relating to the California Homestead Exemption, the exemption described in C.C.P. § 704.040 makes no reference to proceeds of sale being exempt, nor any turnover and sale procedures.
The contents of this Memorandum shall constitute this court's Findings of Fact and Conclusions of Law.
NOTES
[*] Deposited into IRA Account.
[1] § 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.
[2] § 7476(a) provides:
(a) Creation of remedy.
In a case of actual controversy involving
(1) a determination by the Secretary with respect to the initial qualification or continuing qualification of a retirement plan under subchapter D of chapter 1, or
(2) a failure by the Secretary to make a determination with respect to
(A) such initial qualification, or
(B) such continuing qualification if the controversy arises from a plan amendment or plan termination,
upon the filing of an appropriate pleading, the Tax Court may make a declaration with respect to such initial qualification or continuing qualification. Any such declaration shall have the force and effect of a decision of the Tax Court and shall be reviewable as such. For purposes of this section, a determination with respect to a continuing qualification includes any revocation of or other change in a qualification.
[3] Retirement age according to the adoption agreement is age 55, or ten years after the anniversary of the date the participant first commenced participation in the Plan. The Profit Sharing Plan and Trust was adopted in 1991. However, Ms. Crosby initially participated in predecessor Plans in 1980. Therefore, it appears as though she is eligible for retirement.
[4] 11 U.S.C. § 522(b)(2)(A) provides, in pertinent 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.
. . . .
(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 . . .
[5] C.C.P. § 704.115 provides, in pertinent part:
(a) As used in this section, "private retirement plan" means:
(1) Private retirement plans, including, but not limited to, union retirement plans.
(2) Profit-sharing plans designed and used for retirement purposes.
(3) Self-employed retirement plans and individual retirement annuities or accounts provided for in the Internal Revenue Code of 1954 as amended, to the extent the amount held in the plans, annuities, or accounts do not exceed the maximum amounts exempt from federal income taxation under that code.
(b) All amounts held, controlled, or in process of distribution by a private retirement plan, for the payment of benefits as an annuity, pension, retirement allowance, disability payment, or death benefit from a private retirement plan are exempt.
. . . . .
(e) Notwithstanding subdivisions (b) and (d), except as provided in subdivision (5), the amounts described in paragraph (3) of subdivision (a) are exempt only to the extent necessary to provide for the support of the judgment debtor when the judgment debtor retires and for the support of the spouse and dependents of the judgment debtor, taking into account all resources that are likely to be available for the support of the judgment debtor when the judgment debtor retires . . .
[6] Rule 4003(c), Fed.R.Bank.P. provides, in pertinent part:
(c) Burden of Proof. In any hearing under this rule, the objecting party has the burden of proving that the exemptions are not properly claimed. After hearing on notice, the court shall determine the issues presented by the objections.
[7] C.C.P. § 704.020 provides in pertinent part:
(a) Household furnishings, appliances, provisions, wearing apparel, and other personal effects are exempt in the following cases:
(1) If ordinarily and reasonably necessary to, and personally used or procured for use by, the judgment debtor and members of the judgment debtor's family at the judgment debtor's principal place of residence.
[8] C.C.P. § 704.040 provides in pertinent part:
Jewelry, heirlooms, and works of art are exempt to the extent that the aggregate equity therein does not exceed two thousand five hundred dollars ($2,500).
[9] Rule 1009(a), F.R.Bankr.P. provides in pertinent part:
(a) General Right to Amend. A voluntary petition, list, schedule, or statement may be amended by the debtor as a matter of course at any time before the case is closed.
[10] On the basis of description alone, it would appear that such items as Oak Frame Mirror; Frosted Glass Vase; Drum; Wood Secretary Desk; Cotton and Wool Rug; Blown Glass Bowl; and Lynx Fur Coat do not qualify as "jewelry, heirlooms and works of art."
See also In re Lucas, 62 B.R. 949, 951-952 (Bankr.S.D.Cal.1986) where the court found that hanging pictures, drawings and paintings are included as household furniture under C.C.P. § 704.020,
"not because they are suitable for physical use, but because they contribute to the pleasure and comfort of the owner and perhaps to his pride of ownership. In the eyes of the law, they are no less necessary than a chair or rug."
The court also determined that figurines were exempt under § 704.020, being common pieces of household art.
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156 B.R. 537 (1993)
In re Daniel L. KOPPERSMITH, Ginger N. Koppersmith, Debtors.
Daniel L. KOPPERSMITH, Ginger N. Koppersmith, Plaintiffs,
v.
UNITED STATES of America, Defendant.
Bankruptcy No. 92-46974-H5-7, Adv. No. 92-4727.
United States Bankruptcy Court, S.D. Texas, Houston Division.
July 22, 1993.
Nelson T. Hensley, Houston, TX, for debtors/plaintiffs.
Portia N. Rose, Dist. Counsel, I.R.S., Houston, TX, for defendant.
MEMORANDUM OPINION GRANTING MOTION FOR SUMMARY JUDGMENT
KAREN KENNEDY BROWN, Bankruptcy Judge.
Before the Court is the motion of the United States of America, Internal Revenue Service ("Defendant") for Summary Judgment, and responses thereto. This adversary proceeding was instituted by plaintiffs seeking to determine the extent of the IRS lien against the homestead and judgment discharging a portion of the tax lien pursuant to 11 U.S.C. §§ 506(a), 506(d), and 507(a)(7)(A)(i). This Court has jurisdiction of this proceeding pursuant to 28 U.S.C. §§ 1334 and 157(a). This case is a core proceeding under 28 U.S.C. § 157(b)(2)(K). The Court, having considered the motion, the reply, the response thereto, and the *538 relevant case law, makes the following findings of fact and conclusions of law:
Findings of Fact
1. Plaintiffs purchased the real property known as 2121 Colquitt, Houston, Harris County, Texas 77098. On November 16, 1988, which was more than three years before the date of filing of the Chapter 7 petition, the plaintiffs filed their 1987 joint federal income tax return. The tax deficiency, plus related penalties and interest, for the 1987 taxable year, were assessed on February 2, 1989, which date is more than 240 days before the plaintiffs filed their Chapter 7 petition.
2. On May 12, 1989, the Internal Revenue Service (IRS) properly filed a notice of federal tax lien in the office of the clerk of Harris County, Texas, pursuant to I.R.C. §§ 6321 and 6323, which reflected a lien against all of the plaintiffs' property and right to property, for their unpaid 1987 income tax, penalties, and interest in the total amount of $106,703.51.
3. On August 14, 1992, the plaintiffs filed a voluntary petition for relief under Chapter 7 of the Bankruptcy Code. The case is a "no-asset" Chapter 7 case. The plaintiffs have elected to claim exemptions in their bankruptcy case pursuant to the provisions of the Texas Property Code. They have claimed their homestead located at 2121 Colquitt as an exempt asset.
4. On or about October 2, 1992, a Notice to Creditors and Other Parties in Interest of the Need to File Claim was mailed allowing creditors ninety (90) days to file claims.
5. The IRS did not file a proof of claim pursuant to section 502(c) and Bankruptcy Rule 3004 (in liquidation the trustee or debtor may file a proof of claim if the creditor does not timely file).
6. On or about October 29, 1992, the plaintiffs filed an Amended Complaint to Determine Extent of Lien on Debtors' Homestead and Discharge Tax Liability. The plaintiffs requested this Court to determine the extent of the IRS' lien against the homestead and enter a judgment discharging the government's federal tax lien to the extent the lien exceeds the value of the property pursuant to 11 U.S.C. § 506 and 28 U.S.C. § 157(b)(2)(K).
7. The IRS contends that the plaintiffs have not indicated that they are disposing of the property, nor have they indicated that they are prepared to pay in full any amount determined to be due to the IRS as a result of a value placed on the IRS' valid lien.
8. The parties agree that the debtors are relieved of personal liability for income tax, interest, and penalties, for the 1987 taxable year.
9. The IRS further contends that debtors' exempt property remains subject to the valid federal tax lien pursuant to 26 U.S.C. § 6321 and 11 U.S.C. § 522(c).
10. Plaintiffs oppose defendant's motion for summary judgment, arguing that genuine issues of material fact, requiring trial, exist as to the value of the debtors' interest in the property, and the extent to which the IRS lien is secured and unsecured.
Conclusions of Law
1. Prior to the U.S. Supreme Court ruling in Dewsnup v. Timm, ___ U.S. ___, 112 S.Ct. 773, 116 L.Ed.2d 903 (1992), a split in the circuits existed on the issue of whether 11 U.S.C. § 506(d) permits a lien to be "stripped down" to the value of the collateral determined in accordance with section 506(a). In Hargrove v. Edwards Co., Inc., 133 B.R. 765, 767 (Bankr.E.D.Va. 1991), the court analyzed this split between the circuits and found that:
the majority of courts that have ruled on the issue, represented by the Third Circuit in Gaglia v. First Federal Savings & Loan Ass'n, 889 F.2d 1304 (3d Cir. 1989), have held that § 506(d) allows avoidance of the portion of the lien that exceeds the value of the property, whether or not the property has been abandoned by the trustee.
Alternatively, the Hargrove court found that a "strong minority of courts ruling on the issue, represented by the Tenth Circuit in In re Dewsnup, 908 F.2d 588 (10th Cir. 1990), cert. granted, Dewsnup v. Timm, 498 U.S. 1081, 111 S.Ct. 949, 112 L.Ed.2d *539 1038 (1991), have held that § 506(d) cannot be used to avoid liens on abandoned property to the extent the liens are undersecured." Hargrove, 133 B.R. at 767.
The Supreme Court resolved the issue finding that although the text of section 506(d) was ambiguous as to its meaning, Congress did not intend to depart from the pre-Bankruptcy Code rules that liens pass through bankruptcy unaffected. Dewsnup, ___ U.S. at ___, 112 S.Ct. at 778-779. Consequently, section 506(d) allows a debtor to avoid a lien only if the underlying claim is disallowed, and not if a portion of the claim is deemed unsecured by operation of section 506(a). Dewsnup, ___ U.S. at ___, 112 S.Ct. at 777; see also In re Warner, 146 B.R. 253 (N.D.Cal.1992) (holding that where IRS had a secured claim which was not disallowed, the IRS lien against debtor's property could not be "stripped down" to the value of the debtor's equity at the time of filing the bankruptcy petition because liens on real property pass through bankruptcy unaffected).
2. Plaintiffs, primarily relying on In re Zlogar, 101 B.R. 1 (Bankr.N.D.Ill.1989), to resolve the issue of whether a debtor can use section 506(d) to strip down liens on property, contend that Dewsnup is not on point because the creditor's claim in that case was fully allowed, whereas in the instant case, the IRS' claim is not allowed under 11 U.S.C. § 502 because the IRS failed to file a proof of claim.
Although a minority view requires that a proof of claim be filed prior to lien avoidance under § 506(d), most courts do not impose this requirement. The Bankruptcy Amendments and Federal Judgeship Act of 1984, Pub.L. No. 98-353 (1984), changed section 506(d) to make clear that a lien would survive notwithstanding the failure of the holder to file a proof of claim. 3 Collier on Bankruptcy, ¶ 506.07 at p. 506-73 (15th ed. 1991). Although the issue remained unresolved following the amendments, since Zlogar was decided prior to the U.S. Supreme Court decision, it is not applicable. Furthermore, in liquidation, the debtor or trustee may file a proof of claim pursuant to 11 U.S.C. § 501(c) if the holder of the claim has not timely filed.
3. A fundamental premise of section 506(a) is that a claim is subject to reduction in security only when the estate has an interest in the property. Dewsnup, ___ U.S. at ___, 112 S.Ct. at 776 (citing In re Dewsnup, 908 F.2d 588, 590-591 (10th Cir.1990)). Based on the legislative history, "property ceases to be property of the estate, such as by sale, abandonment, or exemption." See H.R.Rep. No. 95-595, 95th Cong., 1st Sess., 5, reprinted in 1978 U.S.Code Cong. & Admin.News 5787, 6299. Therefore, section 506(a) does not apply to homestead property claimed as exempt. Since plaintiffs have claimed their homestead as an exempt asset, section 506(a) is not applicable and, consequently, the IRS lien may not be stripped down to the value of the property.
4. Properly filed tax liens continue against exempt property unaffected by the bankruptcy under 11 U.S.C. § 522(c)(2)(B). See In re Verma, 91 B.R. 17 (Bankr. W.D.Pa.1987) (holding that "debtors could not avoid statutory tax lien which had attached to property by claiming property exempt as their residence, as statute specifically excepts statutory tax lien debts from discharge and exemption"); In re Rench, 129 B.R. 649, 651 (Bankr.D.Kan.1991), citing In re Gerulis, 56 B.R. 283 (Bankr. D.Minn.1985), (holding that "§ 522(c)(2)(B) prevents avoidance of a lien for tax penalties, where the IRS has properly filed notice of tax lien").
The legislative history clearly demonstrates Congress' intent to except tax liens and to adhere to the rule of Long v. Bullard, 117 U.S. 617, 6 S.Ct. 917, 29 L.Ed. 1004 (1886), which is accepted with respect to the enforcement of valid liens on nonexempt property as well as on exempt property. See H.R.Rep. No. 95-595, 95th Cong., 1st Sess., 5, reprinted in 1978 U.S.Code Cong. & Admin.News 5787, 5862. In In re Rouse, 141 B.R. 218, 221 (Bankr. W.D.Okla.1992) the court expresses the view that:
the Congress, in the clear and unequivocal language of § 522(c)(2)(B), intended to preserve the validity of a properly perfected pre-petition tax lien, against *540 exempt property of the debtor, whether or not the underlying tax obligation is dischargeable or has been discharged, just as would be the case with a properly perfected pre-petition mortgage lien. Only the personal liability of the debtor for the obligation would be discharged.
5. The dischargeability of pre-petition tax liabilities was considered by the court in In re Millsaps, 133 B.R. 547 (Bankr. M.D.Fla.1991). The court found that the Bankruptcy Code, under section 523(a)(1)(A), provides that a discharge under section 727 does not discharge individual debtors from taxes of the kind and for the periods specified in section 507(a)(7). "Conversely, unless the tax obligations fall into one of the § 507(a) categories, they are discharged as personal obligations." Regardless of whether the personal pre-petition tax obligations are discharged, however, exempt real property remains subject to any properly filed tax liens, pursuant to section 522(c)(2)(B). Millsaps, 133 B.R. at 550.
After reviewing the pleadings and the relevant case authority, it is the conclusion of this Court that the defendant's motion for summary judgment should be GRANTED.
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541 A.2d 165 (1988)
In re HOPE H.
Supreme Judicial Court of Maine.
Argued March 7, 1988.
Decided May 6, 1988.
Gerard P. Conley, Jr. (orally), Cloutier, Barrett, Cloutier & Conley, Portland, for appellant.
Kristina Joyce (orally), CascoLegal Clinic, Portland, for appellee.
Thomas Peter, Peters & Randlett, Lewiston, for guardian ad litem.
Before McKUSICK, C.J., and NICHOLS, ROBERTS, GLASSMAN, SCOLNIK and CLIFFORD, JJ.
NICHOLS, Justice.
The Respondent-father appeals from the judgment of the Cumberland County Probate Court upon the petition of the mother, terminating his parental rights to his eight-year-old daughter, Hope. He urges that on this record there is (1) insufficient evidence of his unwillingness or inability to take responsibility for the child within a time reasonably calculated to meet the child's needs, and (2) insufficient evidence that the termination is in the child's best interests, 22 M.R.S.A. § 4055(1)(B)(2)(a) and (1)(B)(2)(b)(ii) (Supp.1987).
Because we conclude that the mother has not sustained her burden on the second requirement, of establishing by clear and convincing evidence that termination of the natural father's parental rights is in the child's best interests, we vacate the judgment below.
The couple was married in November, 1979. Thirteen months after the birth of this, their only child, in May, 1980, the couple was divorced. The divorce judgment granted custody of Hope to the mother with reasonable visitation rights to the father. Two days after the mother remarried in July, 1986, she and her new husband filed a petition for him to adopt Hope. To make possible that adoption, the mother *166 commenced this action in December, 1986, to terminate the parental rights of Hope's natural father.
We apply a two-prong test. A probate court may order termination of parental rights if, as here, an adoption petition has been filed pursuant to 19 M.R.S.A. § 533-A (Supp.1987), and by clear and convincing evidence the probate court finds (1) that termination is in the child's best interests, and (2) that the parent has been unwilling or unable to take responsibility for the child within a time reasonably calculated to meet the child's needs. 22 M.R.S.A. § 4055(1)(A)(2), (1)(B)(2)(a), and (1)(B)(2)(b)(ii) (Supp.1987). A probate court's finding that the evidence was clear and convincing shall not be set aside unless the factfinder could not reasonably have been persuaded that the required factual findings were proved to be highly probable. In re Christopher J., 505 A.2d 795, 797 (Me.1986); Taylor v. Commissioner of Mental Health, 481 A.2d 139, 153-54 (Me. 1984).
Our statute requires proof to a high probability that a parent is unwilling to assume parental responsibilities and that termination serves the child's best interests. 22 M.R.S.A. § 4055(1)(B)(2)(a) and (1)(B)(2)(b)(ii) (Supp.1987). Both the statute and our case law make clear that unwillingness and best interests are two distinct elements that must be proved independently. Id. at § 4055(1)(B)(2)(a); In re Cassandra B., 531 A.2d 1274, 1275 (Me.1987); In re Daniel C., 480 A.2d 766, 770 (Me.1984); In re Shannon R., 461 A.2d 707, 712, 714, fn. 11 (Me.1983).
As regards the proof of the father's unwillingness, in the case before us we cannot say that the Cumberland County Probate Court clearly erred in determining that he lacked the disposition or inclination necessary to meet reasonably his daughter's needs. See In re John Joseph V., 500 A.2d 628, 630 (Me.1985) (defining unwillingness in dicta).
We move on to the second requirement. There the mother's proof falls short. In determining whether a termination of parental right is in the child's best interests, our statute requires a court to consider "the needs of the child, including the child's age, attachment to relative persons, periods of attachment and separation, the child's ability to integrate into a substitute placement or back into his parents' home, and the child's physical and emotional needs." 22 M.R.S.A. § 4055(2) (Supp.1987).[1] Here the Cumberland County Probate Court decided that termination was in Hope's best interests because it foresaw that the change would insure stability in her life and allow an adoption and bonding of Hope with a new family unit.
Here the evidence indicated that Hope was an emotionally stable and normal child who enjoyed her time with "daddy Bob," as she called her natural father. The only evidence to the contrary was a single incident that had occurred when the little girl was five years old, indicating that she was uncertain as to which man was her father. That one incident of uncertainty does not clearly and convincingly establish the child's present need for a single father figure in her life. Although the stability in, and bonding with, a new family unit her step-father, mother, and an expected siblingmay seem desirable, there is no clear and convincing evidence that Hope's current relationship with her own father in any way impedes that development.[2]Cf. In re Joseph P., 532 A.2d 1031, 1034-34 (Me.1987) (substantial evidence of disruption in child's life). The mother presented no evidence whatsoever that the natural father causes an emotional disruption in Hope or poses any physical threat to her. Cf. In re Misty Lee H., 529 A.2d 331, 333 (Me.1987) (evidence of parental violence and emotional harm); In re Dean A., 491 *167 A.2d 572, 574 (Me.1985) (child clearly suffered physical and emotional trauma). Nor was there any evidence that Hope has problems symptomatic of such a disruption, such as anxiety, depression, aggression or withdrawal. Cf. In re Maria C., 527 A.2d 318, 318-19 (Me.1987) (evidence of emotional jeopardy, severe anxiety and stress); In re Randy Scott B., 511 A.2d 450, 455 (Me. 1986) (evidence of severe emotional distress); 22 M.R.S.A. § 4002(10)(B) (Supp. 1987) (symptoms evidencing jeopardy). She completely failed to establish that the father's contacts with their daughter were interrupting or impeding Hope's development.[3]
From the evidence of a parent's shortcomings in meeting a child's needs it cannot be inferred that termination is necessarily in that child's best interests. Compare In re Randy Scott B., 511 A.2d at 455; In re Daniel C., 480 A.2d at 768-69 (both cases reject inferring willful abandonment from incarceration). Beyond violating the statute's clear dictate for distinct proof, such an inference is, as the United States Supreme Court has found, "hazardous." Santosky v. Kramer, 455 U.S. at 765, fn. 15, 102 S.Ct. at 1401, fn. 15. This is because the child may benefit from preserving a limited relationship with her own father despite his inadequacies.[4] This benefit may be realized without damage to the child's bonding with her step-father.
In any event, a petitioner has the burden to show clearly and convincingly that the child does not and cannot so benefit. Here the mother has not met this burden. Accord In re John J.V., 500 A.2d at 630 (insufficient evidence of inability to assume parental responsibilities); In re Merton R., 466 A.2d 1268, 1270 (Me.1983) (insufficient evidence of willful refusal to assume parental responsibilities); In re Shannon R., 461 A.2d at 715 (insufficient evidence of, inter alia, abandonment).[5]
Our conclusion is buttressed by the Probate Court's negative approach in concluding that termination is appropriate because the mother proved that it will have "no significant negative impact on the child or her present limited relationship" with her natural father. Mere proof that termination would not harm the child falls dramatically short of establishing that termination is affirmatively in the best interest of the child. Indeed, such a shortcoming only evinces the insufficiency of the mother's proof that termination was in the little girl's best interests.[6]
In sum, it is a two-prong test and this Petitioner has not met more than one of the statute's two requirements.
The entry is:
Judgment vacated.
Remanded for entry of judgment denying petition for termination of the father's parental rights.
All concurring.
NOTES
[1] See generally Note, In re Misty Lee H.: Application of the Best Interests Standard in Parental Rights Terminations, 40 Me.L.Rev. 157 (1988).
[2] Indeed, the father seeks only to retain the visitation rights to, and not custody of, his daughter. Therefore, unlike Santosky v. Kramer, 455 U.S. 745, 102 S.Ct. 1388, 71 L.Ed.2d 599 (1982), we need not determine whether the natural parent can and will provide a normal family home. 455 U.S. at 767, 102 S.Ct. at 1402. The narrower question here is whether the father's limited visitations will jeopardize that homelife.
[3] By recognizing this failure we do not detract in any way from the deference that we are disposed to accord a trial court's determination of a child's "best" interests. In re Cassandra B., 531 A.2d 1274, 1275 (Me.1987). The result here only reaffirms the requirement that the two-prong test must be satisfied by clear and convincing evidence before the trial court has an area within which to exercise its discretion.
[4] Because the father's shortcomings in this case clearly do not rise to the level of jeopardy, the mother cannot argue that those shortcomings, ipso facto, threaten the child's best interests.
[5] Simply put, the present case is a reversal of the problem in In re John J.V., 500 A.2d 628 (Me.1985). There, we vacated a decision to terminate because the evidence was directed solely towards the best interests criterion, which is the other prong of the statutory test, with none of the evidence directed towards the parent's unwillingness or inability to take responsibility. Id. at 630. That case illustrates the need for close appellate scrutiny of unwillingness and best interests as separate elements.
[6] Accord Alsager v. District Court, 406 F.Supp. 10, 23-24 (S.D.Iowa 1975), aff'd, 545 F.2d 1137 (8th Cir.1976), where a federal district court found in a state-initiated parental rights termination proceedings that the state not only failed to prove by clear and convincing evidence that the children would be harmed by a continuing relationship with their mother, it failed to demonstrate that the consequences of continuation of the parent-child relationship would be more harmful to the children than its termination.
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https://www.courtlistener.com/api/rest/v3/opinions/1523513/
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648 A.2d 843 (1994)
Linda Lee HUNT
v.
Eugene Earl HUNT.
No. 93-424.
Supreme Court of Vermont.
August 5, 1994.
*846 Jeffrey L. Martin, Waterbury, for appellee Office of Child Support, Agency of Human Services.
Jean A. Swantko, Island Pond, for defendant-appellant.
Before ALLEN, C.J., and GIBSON, DOOLEY, MORSE and JOHNSON, JJ.
ALLEN, Chief Justice.
Defendant Eugene Hunt was found in contempt of court for failure to comply with an order to pay child support. He appeals both the finding of contempt and the underlying support order, alleging that their imposition violates his right to free exercise of religion, as guaranteed by the First Amendment to the United States Constitution and Chapter I, Article 3 of the Vermont Constitution. We affirm the order of support, but vacate the judgment of contempt.
Defendant belongs to the Northeast Kingdom Community Church in Island Pond. In keeping with their faith in an "everlasting covenant" with God, described in Christian scriptures, members of the church lead an ascetic, communal existence. Members eschew all personal possessions and work for the benefit of the community, often in one of the various church-run business enterprises that offer goods to the public and provide income to the church. A recognized nonprofit corporation, the church pays taxes and meets all other obligations to the state. Defendant files tax returns reporting dividend income from the church, but has no access to the funds themselves, which apparently are retained in the church treasury. In return, the church provides for each member's housing and living necessities. The church does not believe in no-fault divorce, and forbids a member to support an estranged spouse or children who live outside the community.
Defendant has been a member of the church for the past fourteen years. Except for a brief period, defendant and his family lived in the church community at Island Pond. Plaintiff left the community with their children sometime in 1989, but defendant remained. Plaintiff began receiving Aid to Needy Families with Children (ANFC) benefits, and assigned all rights of child support to the Vermont Department of Social Welfare. Defendant refused to enter into a voluntary agreement to make periodic support payments in an amount satisfactory to the Commissioner of Social Welfare. Defendant maintained, and has continued to maintain, that he cannot sanction his wife's choice to leave him without just cause in the eyes of the church, and therefore cannot support his children outside the community. Further, defendant contends that because he himself owns nothing and cannot, consistent with his faith, work outside the community, he cannot earn money to meet a support obligation. Nevertheless, he expresses concern for his children and his desire to care for them, which he asserts is possible only if they reside in the community with him. He has provided the children with shoes from the community cobbler shop where he works.
In early 1990, the Department of Social Welfare sought an order fixing a monthly child support payment amount and appropriate arrearages. A hearing was held before the Human Services officer, at which defendant represented himself. On April 18, 1990, the Human Services officer ordered defendant to pay fifty dollars per month for the support of his children, and to pay past *847 amounts due for ANFC benefits already received.[1]
Plaintiff filed for divorce in August 1990, and the Office of Child Support (OCS) intervened on the issue of child support. Defendant appeared and testified at the hearings, but did not contest the divorce. In the final decree, plaintiff was given full parental rights and responsibilities for the minor children. On July 3, 1991, the family court, which assumed the former appellate jurisdiction of the Human Services Board, "affirmed" the decision of the Human Services officer. The court ordered a fifty-dollar-per-month child support obligation, and liability for amounts past due. After nearly a year with no payments, OCS filed a petition in August 1992 to find defendant in contempt of the family court's order. On April 20, 1993, at a conference before the family court concerning the contempt petition, defendant contended that he never had a proper opportunity to appeal the Human Service officer's finding that he had the ability to make child support payments. The family court granted defendant a de novo hearing on the issue of his ability to pay child support, as part of the hearing on the OCS contempt petition.
At the contempt hearing, the court took testimony from plaintiff, defendant, and an official of the church. The court found, as the Human Services officer had, that defendant has a ninth-grade education and no physical or mental infirmities that would prevent him from earning enough to meet the monthly support obligation. The court acknowledged defendant's claim that the church does not sanction no-fault divorce and that working outside the community would constitute a breach of faith, and found that his beliefs were sincerely held. The court further found that defendant had given up all his worldly possessions. For the purposes of its analysis, the trial court accepted "at full face value" the proposition that defendant's faith does not permit church members to earn an independent income. Nevertheless, the court concluded that defendant is an otherwise able-bodied individual, whose claim of incapacity arises from a conscious, controllable choice to adhere to certain religious tenets. Therefore, the court concluded, defendant has the ability to pay child support as "a matter of law." It also noted that "[m]atters of religious belief, as a matter of law, do not furnish an exemption from that ability [to pay]."
The court went on to find that the monthly support and arrearages were valid and enforceable obligations, and that defendant had the present ability to comply with the order. Defendant was held in contempt for his willful failure to comply with the order. On September 9, 1993, defendant was committed to the custody of the Commissioner of Corrections pending payment of $640, approximately one-quarter of his total obligation as of April 30, 1993. Defendant was released pending this appeal.
Defendant makes two interrelated claims, alleging violations of his right to free exercise of religion under the United States and Vermont constitutions. First, he contends that the support order is invalid because the hearing officer and the family court erred in finding that he has the ability to pay child support in any amount whatsoever. Second, defendant contends that the family court should have considered alternatives to contempt and incarceration to enforce the support order.
I.
We begin with defendant's claim regarding the validity of the support order itself.
A.
The State of Vermont recognizes the general duty of child support on the part of a parent: "The legislature ... finds and declares as public policy that parents have the responsibility to provide child support...." 15 V.S.A. § 650. To promote this policy, the family court must order "either or both parents... to pay an amount for the support of *848 the child," id. § 658(a), which is allocated between the parents in proportion to their respective incomes, id. § 656(a). However, in the case of the noncustodial parent, the family court may depart from the presumed total support obligation, as determined under the support guideline adopted under § 654.
If the noncustodial parent's available income is less than the lowest income figure in the support guideline ... or is less than the self-support reserve, the court shall use its discretion to determine support using the factors in section 659 of this title and shall require payment of a nominal support amount.
Id. § 656(b) (emphasis added). This Court has noted in construing these provisions that "it is clear that the Legislature ... intended to require at least a nominal child support award in all cases." Viskup v. Viskup, 150 Vt. 208, 210, 552 A.2d 400, 402 (1988).
In determining defendant's support obligation, the hearing officer calculated a monthly gross income of $480 in accordance with the relevant guidelines of 15 V.S.A. § 653(5):
"Gross income" means actual gross income of a parent. Gross income shall include:
....
(B) expense reimbursements or in-kind payments received by a parent in the course of employment or self-employment or operation of a business if they reduce personal living expenses;
(C) in its discretion, the court may consider as gross income the difference between the amount a parent is earning and the amount a parent has earned in cases where the parent voluntarily becomes unemployed or underemployed, unless the parent is physically or mentally incapacitated.
15 V.S.A. § 653(5)(B), (C) (1989).[2] Of the $480, $180 was attributed to § 653(5)(B) inkind payments, which must be included in gross income. The hearing officer exercised discretion under § 653(5)(C) to include the remaining $300 that defendant "could be receiving either through wages, worker's compensation or disability payments."
Defendant contends that imputing the $300 as gross income was an abuse of discretion, because his religious beliefs, not personal choice, bar him from accepting state benefits or wages from employment outside the community. Had this amount not been included, however, the mandatory inclusion of in-kind payments still would have resulted in a monthly gross income, for purposes of § 653, of $180. Since the hearing officer determined that the $480 monthly income amount was less than the self-support reserve defendant was entitled to under § 653(7), an income of $180 would also fall below this minimum maintenance level. In either case, defendant has a gross income greater than zero but less than the self-support reserve, which requires the court to exercise discretion, considering the factors of § 659, in figuring a monthly support obligation. See 15 V.S.A. § 656(b). Therefore, if the hearing officer erred in not exercising discretion to exclude the income described in § 653(5)(C), the error is harmless.
Defendant also asserts that § 659 may be construed to exempt him from the legal obligation to support his children. When defendant's child support obligation was first computed, § 659(a) read, in relevant part:
The total support obligation shall be presumed to be the amount of child support needed. If the court finds that a child support order based on the support guidelines would be inequitable, the court shall establish support after considering all relevant factors, including but not limited to:
(1) the guidelines for child support established under section 654 of this title;
(2) the financial resources of the child;
(3) the financial resources of the custodial parent;
(4) the standard of living the child would have enjoyed had the marital relationship not been discontinued;
(5) the physical and emotional condition of the child;
(6) the educational needs of the child;
*849 (7) the financial resources and needs of the noncustodial parent; and
(8) inflation with relation to the cost of living.
15 V.S.A. § 659(a) (1989) (emphasis added).[3]
Defendant argues that the language "all relevant factors, including but not limited to," permits consideration of his ability to provide support in light of his religious beliefs, and gives the family court discretionary powers to relieve him of any support responsibility. We agree that the plain language of the statute ensures flexibility in situations in which a parent cannot meet the support amount suggested in the child support guideline, and that the nonexclusive list of relevant factors would not rule out consideration of religious beliefs in fixing the support amount. Nevertheless, the plain language of the statutory scheme mandates at least a nominal payment, notwithstanding the court's conclusions drawn from evidence regarding the ability to meet a regular support obligation. See 15 V.S.A. § 656(b).
Defendant does not contest the amount of the support award, but the fact that any payment at all was ordered. As a matter of fairness, the family court may depart from the presumed child support obligation in cases of hardship, but the Legislature has clearly required that some payment must be made. Cf. Ainsworth v. Ainsworth, 154 Vt. 103, 109-12, 574 A.2d 772, 775-78 (1990) (court has narrow discretion under § 659 to depart from guideline presumption). We cannot agree with defendant that the family court has the discretion not to order any support obligation if, as in this case, the parent has gross income as defined in § 653. Therefore, the order must stand unless it impermissibly infringes upon defendant's constitutional right to free exercise of religion.
B.
The First Amendment to the United States Constitution mandates that "Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof...." U.S. Const. amend. I. This provision binds the states through the Due Process Clause of the Fourteenth Amendment. Cantwell v. Connecticut, 310 U.S. 296, 303, 60 S.Ct. 900, 903, 84 L.Ed. 1213 (1940). The Free Exercise Clause precludes all "governmental regulation of beliefs as such." Sherbert v. Verner, 374 U.S. 398, 402, 83 S.Ct. 1790, 1793, 10 L.Ed.2d 965 (1963). Government may, however, under certain circumstances, impinge on an individual's actions in accordance with those beliefs in exercising the power to prescribe or proscribe conduct. See, e.g., Employment Div., Dep't of Human Resources v. Smith, 494 U.S. 872, 890, 110 S.Ct. 1595, 1606, 108 L.Ed.2d 876 (1990) (members of Native American Religion who smoked peyote as part of ritual ceremony not exempt from general criminal ban on the substance); United States v. Lee, 455 U.S. 252, 261, 102 S.Ct. 1051, 1057, 71 L.Ed.2d 127 (1982) (Amish employer must pay Social Security taxes despite religious prohibition against participation in governmental support programs); Reynolds v. United States, 98 U.S. 145, 166-67, 25 L.Ed. 244 (1878) (no exemption for *850 adherents of Mormon faith from laws prohibiting polygamy).
Before Smith, no clear standard existed for determining whether governmental interference with free exercise was legitimate. See Smith, 494 U.S. at 876-89, 110 S.Ct. at 1598-1606 (discussing inconsistent use of strict scrutiny standard promulgated in Sherbert v. Verner and other approaches to free exercise cases); cf. Note, Smith and the Religious Freedom Restoration Act: An Iconoclastic Assessment, 78 Va.L.Rev. 1407 (1992) (agreeing that no standard consistently employed, but differing with some of Smith's conclusions). The Supreme Court attempted to forge a uniform standard in Smith, holding "that a law that is neutral and of general applicability need not be justified by a compelling governmental interest even if the law has the incidental effect of burdening a particular religious practice." Church of the Lukumi Babalu Aye, Inc. v. City of Hialeah,___ U.S. ___, ___, 113 S.Ct. 2217, 2226, 124 L.Ed.2d 472 (1993).
In response to Smith's "virtual elimination" of the mandate that government justify burdening religious practice through neutral laws, the United States Congress passed the Religious Freedom Restoration Act of 1993, P.L. 103-141, 107 Stat. 1488 (codified at 5 U.S.C. § 504; 42 U.S.C. §§ 1988, 2000bb, 2000bb-1 to -4), explicitly overruling Smith. The Act's stated purpose is "to restore the compelling interest test as set forth in Sherbert v. Verner, 374 U.S. 398, 83 S.Ct. 1790, 10 L.Ed.2d 965 (1963) and Wisconsin v. Yoder, 406 U.S. 205, 92 S.Ct. 1526, 32 L.Ed.2d 15 (1972) and to guarantee its application in all cases where free exercise of religion is substantially burdened." 42 U.S.C. § 2000bb(b)(1). The Act provides that government "shall not substantially burden a person's exercise of religion even if the burden results from a rule of general applicability," unless the government demonstrates that burdening the person (1) furthers a compelling governmental interest, and (2) advances that interest in the least restrictive means possible. Id. § 2000bb-1(a),(b). In short, the Act demands that all governmental action that substantially interferes with the free exercise of religion be justified under a traditional strict scrutiny analysis.[4]
The fact that the Act was passed in November 1993, after the entry of the support and contempt orders at issue, does not prevent its application in this case.[5] Section 6, entitled "Applicability," states that the Act "applies to all Federal and State law, and the implementation of that law, whether statutory or otherwise, and whether adopted before or after the enactment of th[e] Act." Id. § 2000bb-3(a) (emphasis added). The statutory language evinces clear congressional intent that the law apply retroactively. Thus, we conclude that the Religious Freedom Restoration Act controls our analysis of defendant's free exercise claim under the federal constitution. See Kaiser Aluminum & Chem. Corp. v. Bonjorno, 494 U.S. 827, 837, 110 S.Ct. 1570, 1576-77, 108 L.Ed.2d 842 (1990) (act must be retroactively applied if congressional intent clear).
To assess the validity of the child support order, we must first make the threshold determination of whether it substantially burdens defendant's sincerely held beliefs. If so, we proceed to scrutinize the nature of the State's interest and the means used to further that interest. Defendant must show the burden on his religious practice. Abington Sch. Dist. v. Schempp, 374 U.S. 203, 223, 83 S.Ct. 1560, 1572, 10 L.Ed.2d 844 (1963). The State has the burden of proving its actions are the least restrictive *851 means of advancing a compelling interest. 42 U.S.C. §§ 2000bb-1(b), 2000bb-2(3).
At the contempt hearing, in which the court considered de novo the question of ability to pay, defendant produced uncontested evidence of the nature of his religious beliefs and life in the community. We emphasize that matters of faith "need not be acceptable, logical, consistent, or comprehensible to others in order to merit First Amendment protection." Thomas v. Review Bd. of Ind. Empl. Sec. Div., 450 U.S. 707, 714, 101 S.Ct. 1425, 1430, 67 L.Ed.2d 624 (1981). It follows that the court must accept at face value the asserted impact of government action on an individual's free exercise of religion, provided the beliefs are sincerely held. Lee, 455 U.S. at 257, 102 S.Ct. at 1055. In this case, the trial court found that defendant is sincere in his religious devotion. The court acknowledged defendant's claim that he cannot support his wife and family in their lives outside the community, and that seeking employment outside the community to meet a support obligation would be completely contrary to his faith.
Nevertheless, the court concluded that a support obligation would burden defendant only incidentally. Neither the evidence offered nor the court's findings, however, support this conclusion. See V.R.C.P. 52(a); Nickerson v. Nickerson, 158 Vt. 85, 88-89, 605 A.2d 1331, 1333 (1992) ("Findings of fact, from which conclusions of law flow, will not be set aside unless clearly erroneous."). A state-imposed obligation that indirectly compels defendant to risk significant penalties if he chooses to adhere to his faith creates a substantial free exercise burden. Cf. Yoder, 406 U.S. at 218, 92 S.Ct. at 1534 (impact of compulsory school attendance law on Amish religion "severe and inescapable" because of threat of criminal sanction). In this case, to conclude otherwise unjustly denigrates the importance of defendant's religious beliefs.
We proceed to consider the nature of the State's interest and the means used to advance that interest. Unquestionably, the State has a significant interest in promoting the health and welfare of children, which includes ensuring that parents who have separated bear responsibility for support. See 15 V.S.A. § 650. The support obligation seeks to provide the children with stability by maintaining their accustomed standard of living, and to lessen the drain on public resources caused by public assistance programs. As a matter of social policy, the support obligation also fosters responsibility in parents for their children. We conclude that parental support of children is a compelling state interest.
The child support order is valid if the order to pay support is the least restrictive means to further the state interest. 42 U.S.C. § 2000bb-1(b)(2). The evidence is undisputed that the State requested that defendant voluntarily assume his portion of the total support responsibility, and that defendant refused for the same religious reasons he contends render him unable to meet any payment obligations. Leaving aside the question of arrearages, defendant's lack of custody of his son[6] prevents defendant from providing for him in the future in accordance with the tenets of his faith. Vermont has no other established means for the state to require parents to meet their support obligations. Lacking any other practical means to impose the support obligation, a court order is the least restrictive means to establish such an obligation to further the state's interest in child support.
We conclude, then, that the order was legitimately imposed, despite the fact that it burdens defendant's free exercise of religion by saddling him with a legally enforceable obligation to support his children outside of marriage and the church community. The order represents the least restrictive means for the state to further a paramount interest in having parents recognize their obligation to provide material support for their children. Therefore, the order does not offend defendant's right to free exercise under the *852 First Amendment to the United States Constitution.
C.
This does not end our scrutiny of the order, however, because defendant also claims that its imposition violates his rights under Chapter I, Article 3 of the Vermont Constitution. In relevant part, Article 3 establishes:
That all men have a natural and unalienable right, to worship Almighty God, according to the dictates of their own consciences and understandings, as in their opinion shall be regulated by the word of God; ... and that no authority can, or ought to be vested in, or assumed by, any power whatever, that shall in any case interfere with, or in any manner control the rights of conscience, in the free exercise of religious worship.
Vt. Const., ch. I, art. 3. We bear in mind that First Amendment restrictions on the state preclude a construction of Article 3 that would afford an individual less protection of the right to free exercise of religion than that guaranteed under the federal constitution. See In re E.T.C., 141 Vt. 375, 378, 449 A.2d 937, 939 (1982). Of course, the state constitution may afford greater protections to this right. See State v. Badger, 141 Vt. 430, 449, 450 A.2d 336, 347 (1982). But in light of the Religious Freedom Restoration Act, greater protection under the state charter would require even greater obstacles to state action than those raised by the strict scrutiny test.
Though this Court has had few opportunities to construe the Article 3 guarantee, we find one of the more recent cases, State v. DeLaBruere, 154 Vt. 237, 577 A.2d 254 (1990), particularly instructive for its comprehensive analysis of Vermont's free exercise provision. DeLaBruere concerned a free exercise challenge under the state and federal constitutions to the state's compulsory education law. The defendants had supported their claim for greater state constitutional protection with a variety of interpretational approaches: historical analysis, examination of the text, other states' interpretations of similar provisions in their own constitutions, and sociological materials. Id. at 262-63, 577 A.2d at 268. We concluded "that at least with respect to the claims made in this case, we can find no basis for the argument that the Vermont Constitution affords additional protection to defendants." Id. at 265, 577 A.2d at 270. Though DeLaBruere was decided before the promulgation of the Religious Freedom Restoration Act, this conclusion endures, because the First Amendment analysis in that case essentially duplicates the strict scrutiny standard now mandated under the Act for free exercise claims. See id. at 249, 577 A.2d at 261.
Based on DeLaBruere, we see no principled basis to say that the Vermont Constitution offers greater protection for a free exercise claim such as defendant's than the strict scrutiny standard at issue. An examination of the relevant case law revealed Article 3 to be more an anti-discrimination provision, adopted by a people whose "`militant sense of freedom ... was somewhat reserved in expression of religious liberty.'" Id. at 264, 577 A.2d at 269 (quoting Swart v. South Burlington Town Sch. Dist., 122 Vt. 177, 182, 167 A.2d 514, 517, cert. denied, 366 U.S. 925, 81 S.Ct. 1349, 6 L.Ed.2d 384 (1961)). In addition, an examination of relevant decisions from other states' constructions of their own free exercise provisions revealed that, almost without exception, none offered more protection to religious practice than that required by strict scrutiny. See id. at 266-69, 577 A.2d at 270-72.
Defendant fails to offer, and we have not discovered, reason to construe Article 3 to provide any greater protection than that afforded by strict scrutiny. See Varnum v. Varnum, 155 Vt. 376, 381-87, 586 A.2d 1107, 1110-13 (1990) (post-DeLaBruere case with no analysis, separate and distinct from First Amendment, of Article 3 claim that family court violated mother's free exercise rights by factoring religious beliefs and practices into child custody determination). As evidence that Article 3 guarantees greater deference to religious liberty, defendant points to Beauregard v. City of St. Albans, in which this Court found "mere interference" with free exercise sufficient to invalidate a will provision that restricted the religious affiliation of members of a public school board. *853 141 Vt. 624, 632, 450 A.2d 1148, 1152 (1982). But in DeLaBruere we scrutinized Beauregard and concluded that despite its broad pronouncement, the decision lacked real analysis and "fell squarely within the anti-discrimination construction of Article 3." DeLaBruere, 154 Vt. at 265, 577 A.2d at 270.
Therefore, in the context of a free exercise challenge founded on an order to pay child support, we hold that Chapter I, Article 3 of the Vermont Constitution protects religious liberty to the same extent that the Religious Freedom Restoration Act restricts governmental interference with free exercise under the United States Constitution. As a result, the court order to pay child support, valid under the First Amendment, also withstands scrutiny under the Vermont Constitution.
II.
In contrast to the support order, the contempt order does not stand up to scrutiny under either the federal or state constitution, because the order has not been shown to be the least restrictive means of furthering the state's interest in parents supporting their children.
Under 15 V.S.A. § 603, "[a] person who disobeys a lawful order or decree of a court or judge ... may be proceeded against for contempt...." Upon determining that the subject of a valid, enforceable order is capable of complying but refuses to do so, the family court may exercise its discretion to impose sanctions for contempt. See Andrews v. Andrews, 134 Vt. 47, 49, 349 A.2d 239, 241 (1975). In cases of noncompliance due to a claimed financial inability, the court must find a present ability to pay before the defendant may be found in contempt. Steele v. Steele, 142 Vt. 112, 114, 453 A.2d 400, 401 (1982). Ordinarily, use of the contempt power is subject to review only for an abuse of discretion. Brown v. Brown, 140 Vt. 56, 58, 435 A.2d 949, 951 (1981).
In this case, defendant contends he failed to comply with the support order because of financial inabilitythat his religious beliefs preclude him from personal ownership of property or employment outside the community. As part of the contempt proceeding, the trial court conducted a de novo hearing on defendant's ability to meet the child support obligation, both at the time of the contempt hearing and at the time the original support order was entered. Conceding the sincerity of defendant's religious beliefs, the court found that nothing other than those beliefs prevented him from earning enough, either at the time the order was originally imposed or at the time of the contempt hearing, to meet a support obligation. Concluding that defendant, capable of compliance, had willfully failed to comply with a valid court order, the court found him in contempt and ordered incarceration.
Defendant contends that the contempt order and subsequent incarceration violated his free exercise rights. To assess the merit of his claim under the First Amendment, we again employ the framework of the Religious Freedom Restoration Act: the state may substantially burden defendant's religious liberty only after demonstrating that its actions with regard to defendant are the least restrictive means of advancing a compelling state interest. 42 U.S.C. § 2000bb-1(b).
The argument regarding enforcement differs from that regarding imposition of the original support obligation. Defendant's objection to the support obligation, which is distinct from how that obligation is enforced, proceeds from the church's proscription of no-fault divorce. There is no evidence that the obligation per se offends any other tenet of his faith. The state's manner of enforcement, however, compelled defendant to choose between jail time and violation of another religious belief: that he not earn an independent income outside the church community. Either option would result in defendant's separation from the community. Therefore, the order and possibility of incarceration substantially burdened defendant's free exercise of religion.
Enforcement of child support orders furthers the same policies promoted by imposition of the original obligation. As noted above, the state has a compelling interest in securing support for children from parents no longer sharing the same household. Contempt and incarceration represent means of *854 furthering that interest, but the Religious Freedom Restoration Act puts the burden upon the State to show that they are the means least restrictive of defendant's religious freedom.
In the contempt hearing, the State offered no evidence that it was pursuing the least restrictive alternative. Essentially, the State sought a harsh sanction in a case of imputed income. At oral argument before this Court, counsel for OCS acknowledged that his office exercises considerable discretion in pursuing delinquent obligors. OCS generally follows up on cases with a "reasonable possibility" of successful collection generally, not delinquent obligors without assets or employment. The State has failed to establish that contempt and jail are the least restrictive means to further the state's compelling interest in enforcing the child support obligation. Contempt and incarceration are not, per se, impermissible infringements on free exercise, and may be imposed provided the State makes the requisite showing as mandated by the Religious Freedom Restoration Act. In this case, however, the State has failed to make this showing, and therefore the contempt order impermissibly burdens defendant's free exercise rights as guaranteed by the federal constitution.
III.
In summary, we hold that the child support order, though a substantial burden on defendant's rights to free exercise of religion under the United States and Vermont Constitutions, is the least restrictive means of furthering a compelling governmental interest. The contempt order, however, must be vacated because the State has not demonstrated that contempt and incarceration are the means to enforce the support order least restrictive of defendant's free exercise rights under the United States Constitution.
The order of the Human Services officer imposing a monthly support obligation and requiring payment of arrearages is affirmed. The order of the family court finding defendant in contempt is vacated and the matter is remanded for a hearing as to the least restrictive means to enforce defendant's support obligation.
MORSE, Justice, concurring and dissenting.
In my view this case does not necessarily present a clash between the free exercise of defendant's religion and a child's right to support. I would therefore reverse on a narrower ground and not remand.
Defendant's inability to pay child support is no different had he worked for any employer who for any reason paid compensation other than with money. I agree with the dissent of Justice Dooley that "[i]n an economic sense, the church is defendant's employer" and that the burden should be on the State to collect child support in cases like this from the custodian of the money held for defendant's benefit. I believe the State could proceed directly against the church under garnishment, given the broad definition of "wages" in 15 V.S.A. § 780(9), or trustee process. The sanction of imprisonment for contempt is the most drastic remedy, and its imposition is an abuse of discretion if alternative effective remedies are reasonably available. See Spallone v. United States, 493 U.S. 265, 276, 110 S.Ct. 625, 632, 107 L.Ed.2d 644 (1990) (in selecting civil contempt sanctions, court must use least possible power to achieve desired end). The challenge based on free exercise of religion is premature at this point.
I would reverse the order of contempt, which would leave the State free to pursue, if it wishes, alternative remedies.
DOOLEY, Justice, dissenting.
I do not believe that the order to pay child support in this case can stand consistent with the First Amendment as interpreted by the Religious Freedom Restoration Act of 1993. Two factors are critical to my view.
First, the real source of the controversy is the communal living arrangement required by the Northeast Kingdom Community Church. Defendant works as a cobbler and salesman in the church cobbler shop. All income from his work effort goes directly to the church and, in turn, all of his needs are met by the church. Defendant has no individual *855 income or assets. This communal living arrangement is commanded by church doctrine; defendant cannot be a church member without residing in the church community and participating in its economy.
Second, the issue is whether defendant can be required to pay a nominal amount of child support even though the guideline calculation would otherwise exempt him. Under our guideline system, an obligor spouse is assigned a "self-support reserve," which is "an amount sufficient to provide a reasonable subsistence compatible with decency and health." 15 V.S.A. § 653(7). The point of the self-support reserve is that it represents an income floor beneath which the obligor should not be taken in order to pay child support. Thus, when the obligor's income is above the self-support reserve, but a support order calculated under the guidelines would leave the obligor with income below the self-support reserve, the support amount is presumed to be the difference between the obligor's income and the self-support reserve. See id. § 656(c). This rule leaves the obligor the amount of the reserve to meet his or her own needs. When the obligor's income starts out below the self-support reserve, the policy is essentially the same except that the court must "require payment of a nominal support amount." Id. § 656(b).
Although the requirement of at least a nominal payment is understandable, it has the perverse effect of leaving the lowest income obligor with a smaller income than that retained by an obligor with an income slightly above the guidelines. In this case, it also creates a constitutional conflict. Defendant has no cash income, so he is well below the self-support reserve. The trial courts imputed income to defendant because he has the employment history and current skills that would allow him to work and support his children outside the church. They also noted that defendant's individual income tax returns reflected income of $2,300 per year, which represented that portion of total church income assigned by the church to defendant. Even after income imputation, however, defendant's income falls below the self-support reserve.
As the majority recognizes, the purpose of the Religious Freedom Restoration Act was to restore the compelling interest test as set forth in Sherbert v. Verner, 374 U.S. 398, 403, 83 S.Ct. 1790, 1973-94, 10 L.Ed.2d 965 (1963), and Wisconsin v. Yoder, 406 U.S. 205, 214, 92 S.Ct. 1526, 1532-33, 32 L.Ed.2d 15 (1972). Sherbert noted that "a rational relationship to some colorable state interest" is insufficient; instead, "`[o]nly the gravest abuses, endangering paramount interests, give occasion for permissible limitation.'" Sherbert, 374 U.S. at 406, 83 S.Ct. at 1795 (quoting Thomas v. Collins, 323 U.S. 516, 530, 65 S.Ct. 315, 323, 89 L.Ed. 430 (1945)). Yoder explained that "only those interests of the highest order and those not otherwise served can overbalance legitimate claims to the free exercise of religion." Yoder, 406 U.S. at 215, 92 S.Ct. at 1533.
I emphatically agree with the majority about the importance of child support obligations and requiring that parents honor them. Therefore, I would ordinarily find that child support laws further a compelling governmental interest. In this case, however, we have a clash of principles with virtually no economic or social substance. The sole policy in issue requires every parent with a child support obligation, no matter how low his or her income, to pay at least a small amount of child support to maintain that sense of obligation. I support that policy, but I can not accept that it involves a "paramount" state interest or an interest "of the highest order." The very nature of First Amendment balancing requires us to be discerning about the interests involved and the methods employed. See Yoder, 406 U.S. at 221, 92 S.Ct. at 1536 (when Amish refused to send children to public school beyond the eighth grade, Court could not accept "sweeping claim" of compelling interest in compulsory education; Court must "searchingly examine" state interest in policy in dispute). The symbolism of a "nominal" child support order does not rise to the level of state interest necessary to substantially burden a parent's free exercise of religion.
In evaluating the state interest involved here, it is instructive how the issue of nominal payment is handled in the federal child *856 support enforcement scheme and in the other states, which like Vermont have adopted child support guidelines. Pursuant to the Family Support Act of 1988, states are required to adopt child support guidelines and adopt a rebuttable presumption that in each individual case the amount of child support ordered will be based on the guidelines. See 42 U.S.C. § 667 (1988); 45 C.F.R. § 302.56 (1993). There is no requirement in federal law that courts order at least a nominal amount of support in every case, no matter how low the income and resources of the obligor parent. Although I do not have an exact count, the reported decisions suggest that unlike Vermont, most states do not require very low income obligors to pay child support. See Hannah v. Hannah, 582 So.2d 1125, 1126 (Ala.Civ.App.1991) (when noncustodial parent has no ability to pay, it is improper to order parent to pay child support); Schneider v. Schneider, 473 N.W.2d 329, 332 (Minn.Ct.App.1991) (absent finding of bad faith, trial court can not order child support against parent unable to pay because of unemployment); State ex rel. Wilcox v. Strand, 442 N.W.2d 256, 258 (S.D.1989) (upholding refusal of trial court to order child support against parent because of parent's limited ability to pay); Glenn v. Glenn, 848 P.2d 819, 822 (Wyo.1993) (incarcerated parent without income or assets not subject to child support order). The different attitudes on obtaining support orders in every case is demonstrated by Wilcox, in which an attempt by the state to obtain an order against a parent because she was capable of working but was voluntarily unemployed brought a hostile reaction from the court: "[t]he burden on the judicial caseload enhanced by this sort of action and appeal is not appreciated." Wilcox, 442 N.W.2d at 258.
Although the parties have not raised this point, there is a serious question whether Vermont's requirement for a support order from every non-custodial parent is consistent with the federal requirement that guidelines take into consideration the income of the absent parent and operate as rebuttable presumptions. See 42 U.S.C. § 667(b)(2). The issue was litigated in New York, which by statute requires an award of at least $25 per month per child, and the New York Court of Appeals struck down the nominal amount requirement as inconsistent with federal law. See Rose v. Moody, 83 N.Y.2d 65, 629 N.E.2d 378, 381, 607 N.Y.S.2d 906, 909 (1993), cert. denied, ___ U.S. ___, 114 S.Ct. 1837, 128 L.Ed.2d 464 (1994). The court reasoned: "For a judicial decree to declare that [the parent] ... owes what she cannot realistically or legally pay is not only unjust and inappropriate, it is a legal pretense." Id. Thus, the nominal-amount provision violated the federal requirement that the obligor be able to rebut the guideline amount when he or she can show that application of the guidelines would be "unjust or inappropriate" in a particular case. Id.
I think it ironic that a policy the New York Court of Appeals found not to be legally sustainable is found by this Court to involve a compelling state interest that overrides a claim of religious liberty. Whether the New York court is right or wrong, it is clear that we can reach the majority's result only by accepting that virtually any state interest is sufficient to trump a religious liberty claim under the Sherbert and Yoder decisions. The Religious Freedom Restoration Act plainly demands more than this lip-service tribute to the free exercise of religion.
Even if I agreed that a child support order in this case advanced a compelling state interest, I cannot agree that it advances the "interest in the least restrictive means possible." Whatever income is earned from defendant's labor is retained by the church. In an economic sense, the church is defendant's employer. By requiring wage withholding in most child support cases involving employed obligors, 15 V.S.A. § 781(a), the state has found that employers have an obligation to help create a workable system of child support enforcement. I see no reason why the state could not legislate that the income that flows to the church from defendant's labor is encumbered by defendant's obligation of support. Thus, the payment obligation would be placed on the church, which has the income and assets from which collection is achievable. This obligation is no different from those placed on the church by taxation or Social Security laws with which it must comply. See, e.g., Jimmy Swaggart Ministries *857 v. Board of Equalization, 493 U.S. 378, 392, 110 S.Ct. 688, 697, 107 L.Ed.2d 796 (1990).
Although the majority is remanding to determine whether there is a less restrictive alternative than contempt, there is no indication of an alternative under present law. Thus, it is highly likely, if not inevitable, that we will again imprison defendant in an attempt to make him pay what he does not have. The real dispute here is between the State and the church, and I do not believe that we are justified in holding a church member hostage to this dispute. If the State is correct that its interests are so fundamental that they must be enforced in these circumstances, this Court should insist that they be enforced directly against the church that retains the income in issue.
For the above reasons I would hold that the nominal support payment order can not be enforced against defendant consistent with his right to free exercise of religion. I dissent.
NOTES
[1] In May 1990, defendant filed a notice of appeal from the hearing officer's decision with the Human Services Board, but no further action was taken because plaintiff had filed for divorce. In the interim, the Board was divested of jurisdiction in support cases. See 4 V.S.A. § 454(1) (family court has exclusive jurisdiction over support proceedings for all cases filed or pending on or after October 1, 1990).
[2] Section 653(5) was substantially amended, effective October 1, 1990.
[3] Section 659(a) was amended, effective October 1, 1990:
The total support obligation shall be presumed to be the amount of child support needed. Upon request of a party, the court shall consider the following factors in respect to both parents. If, after consideration of these factors, the court finds that application of the guidelines is unfair to the child or to any of the parties, the court may adjust the amount of child support:
(1) The financial resources of the child.
(2) The financial resources of the custodial parent.
(3) The standard of living the child would have enjoyed had the marital relationship not been discontinued.
(4) The physical and emotional condition of the child.
(5) The educational needs of the child.
(6) The financial resources and needs of the noncustodial parent.
(7) Inflation.
(8) The costs of meeting the educational needs of either parent, if the costs are incurred for the purpose of increasing the earning capacity of the parent.
(9) Extraordinary travel expenses incurred in exercising the right to periods of visitation or parent-child contact.
(10) Any other factors the court finds relevant.
[4] In overruling Smith and reestablishing the strict scrutiny standard as the touchstone for permissible governmental interference with free exercise rights, Congress has construed the Free Exercise Clause of the United States Constitution. Thus, though a federal law guides our analysis, because the Act defines the meaning of the federal constitution our resolution of this case rests on a constitutional as well as statutory basis. We express no opinion on the constitutionality of the Act.
[5] The effect of the Religious Freedom Restoration Act was not addressed in the briefs, because it became law after they were submitted to this Court. The parties were given the opportunity to review their positions in light of its requirements. Defendant agrees with the retroactive applicability of the Act; the State contends, contrary to our conclusion, that the Act may be applied only prospectively.
[6] Of the three children, only the youngest is still a minor. The court may not order support payments after a child has attained the age of majority or has terminated secondary education, whichever is later. 15 V.S.A. § 658(c).
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162 B.R. 630 (1993)
In re James F. McGUIRL and Marlene C. McGuirl, Debtors.
William Douglas WHITE, Trustee, Plaintiff,
v.
Stella LUNDBY, et al., Defendants.
Bankruptcy Nos. 90-00141, 90-00142. Civ. A. No. 92-2458 (JLG).
United States District Court, District of Columbia.
August 23, 1993.
Memorandum on Reconsideration November 24, 1993.
William Douglas White, Kevin R. McCarthy, Lepon, McCarthy, Jutkowitz & Holzworth, Washington, DC, for plaintiff.
John J. Cullen, Cullen & Wood, San Francisco, CA, for Stella Lundby.
Courts Oulahan, Washington, DC, for James F. McGuirl.
Nelson Kline, Washington, DC.
MEMORANDUM
JUNE L. GREEN, District Judge.
This matter comes before the Court upon the Trustee William D. White's motion for summary judgment filed May 28, 1993. The *631 defendants Stella Lundby and James McGuirl separately oppose the motion and request that the Court strike the exhibits appended to the Trustee's motion under Rule 56(e).
I. Defendants' Motions to Strike Exhibits
The defendants ask the Court to strike plaintiff's summary judgment motion exhibits A through G and exhibit K. They argue that the affidavits in Exhibit K must be stricken pursuant to Rule 56(e) because they were not made on personal knowledge and do not show that the affiants are competent to testify to the matters stated in the affidavits. The Court does not see any merit to this challenge. The affiants state that they have personal knowledge of the matters to which they testify and in the Court's opinion are competent for the testimony provided. Moreover, defendants have presented no evidence to the contrary.
The Court is also not persuaded by the defendants' contentions that the documents presented in exhibits A through G are inadmissible for lack of authenticity. Plaintiff has presented business records declarations to substantiate the authenticity of the documents contained in the exhibits which meet the requirements of Rule 901 of the Federal Rules of Evidence. Accordingly the Court shall deny the defendants' motions to strike.
II. Plaintiff's Motion 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." Once the moving party presents evidence which, if uncontroverted, would entitle the movant to summary judgment, the burden shifts to the nonmoving party to come forward with specific material facts demonstrating that there is a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-249, 106 S.Ct. 2505, 2509, 2511, 91 L.Ed.2d 202 (1986).
The Supreme Court in Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) explained the meaning of "genuine issues of material fact" which would preclude the entry of summary judgment:
By its very terms, [the Rule 56] 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. (Emphasis in original).
As to materiality, the 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.... [S]ummary judgment will not lie if the dispute about a material fact is "genuine," that is, if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.
Anderson v. Liberty Lobby, Inc., supra at 247-248, 106 S.Ct. at 2510.
In deciding a motion for summary judgment, the material before the Court "must be viewed in the light most favorable to the [nonmoving] party." Adickes v. S.H. Kress and Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 1608, 26 L.Ed.2d 142 (1970). Finally, summary judgment is not a disfavored procedural shortcut, but an important part of the Federal Rules "designed `to secure the just, speedy and inexpensive determination of every action.' Fed.R.Civ.P. 1." Celotex Corporation v. Catrett, 477 U.S. 317, 327, 106 S.Ct. 2548, 2555, 91 L.Ed.2d 265 (1986).
FACTS
For purposes of this motion the Court finds the following uncontroverted facts:
1. The debtor, James McGuirl and his mother, Mrs. Lundby, during most of the 1980's held the following property in their joint names:
(a) certificates of deposit and savings account with Bank of America, Imperial *632 Federal Savings Association, and Great Western Bank;
(b) shares of stock in Pacific Gas & Electric held by Dean Witter Reynolds;
(c) mutual fund shares in Dean Witter Reynolds U.S. Government Trust Fund; and
(d) mutual fund shares in Putnam High Income Government Trust held by Dean Witter Reynolds.
These investments and funds shall be referred to collectively as the "Property."
2. With the agreement of Mrs. Lundby and at her direction, Mr. McGuirl reported all of the interest and dividends from the Property on his tax returns.
3. When asked by the Internal Revenue Service why income from the Property had not been reported on her tax returns, Mrs. Lundby informed the IRS that her son, Mr. McGuirl had reported it on his tax returns.
4. During 1989, Mr. McGuirl either borrowed or renewed credit from numerous financial institutions, including borrowing $100,000 from Mellon Bank (MD); $100,000 from Bank 2000; $150,000 from Columbia Bank, and $50,000 from First American Bank, N.A.
5. In order to obtain the loans, Mr. McGuirl presented the financial institutions with his personal financial statements which listed the Property together with all of his other assets. He also submitted his tax returns listing interest and dividends from the Property.
6. The lenders relied upon the truth of the financial statements and tax returns in extending credit to Mr. McGuirl. Officers of several of the institutions which loaned money to Mr. McGuirl[1] averred that they would not have made the loans had they known that Mr. McGuirl would later disavow his ownership of the Property.
7. In the latter part of 1989 and early 1990, Mr. McGuirl was in serious financial difficulty with many of his creditors demanding full payment on their loans. During this period of time Mr. McGuirl and Mrs. Lundby removed Mr. McGuirl's name from all of the Property so that the Property was held in Mrs. Lundby's name only.
8. On March 2, 1990, an involuntary bankruptcy petition was filed against Mr. McGuirl and his wife, Marlene McGuirl, resulting in the entry of an Order for Relief on March 27, 1990.
DISCUSSION
Section 548(a) of Title 11 of the United States Code provides that the bankruptcy trustee may "avoid any transfer of an interest of the debtor in property" that was made within one year previous to the filing of the bankruptcy petition if the debtor
made such transfer ... with actual intent to hinder, delay or defraud any entity to which the debtor was or became [indebted] on or after the date that such transfer was made....
11 U.S.C. 548(a)(1).
The defendants argue that summary judgment must be denied on the issue of whether Mr. McGuirl fraudulently transferred the Property to Mrs. Lundby because the Court cannot determine as a matter of law that Mr. McGuirl owned any "interest" in the Property, or that he transferred such property with "actual intent" to defraud his creditors.
With regard to Mr. McGuirl's ownership interest in the Property, the defendants argue variously that (1) the fact that Mr. McGuirl's name appeared on the Property accounts is not conclusive of his ownership; (2) Mrs. Lundby never legally made a gift of the Property to Mr. McGuirl; and (3) Mrs. Lundby and Mr. McGuirl orally agreed at the time that Mr. McGuirl's name and social security numbers were placed on the accounts that he would not hold any interest in the Property or the ability to use it for his own purposes.
These arguments are immaterial to the equitable basis upon which Mr. McGuirl may be found to own the Property and the basis upon which Mrs. Lundby is precluded from denying such ownership. The uncontroverted facts demonstrate that Mr. McGuirl held himself out to the Internal Revenue Service *633 and to his creditors as the owner of the Property and that Mrs. Lundby knowingly and intentionally supported and facilitated these actions. She regularly instructed him to report the income from the Property on his tax returns.
The doctrine of estoppel provides that where the owner of property has allowed another to appear as the owner, or as having full power to dispose of the property so that an innocent person is led into dealing with the apparent owner, the true owner is estopped to deny that the apparent owner did not have title to the property. In re Pubs, Inc. Of Champaign, 618 F.2d 432, 439 (7th Cir.1980).
The Court finds that Mrs. Lundby is estopped to deny Mr. McGuirl's ownership of the Property given the undisputed facts presented here. Mrs. Lundby instructed Mr. McGuirl to report the income and dividends from the Property on his tax returns. This was done for the self evident purpose of obtaining more favorable tax treatment of the Property. There can be no other reason. She intended to derive benefits from having Mr. McGuirl claim the Property as his own.[2] Yet, Mrs. Lundby now claims that there was a clear understanding between her and her son that the Property belonged to her. This amounts to a false representation, or at least conduct which is calculated to convey the impression that the facts are otherwise than, and inconsistent with, those which she now attempts to assert. Parker v. Sager, 174 F.2d 657, 661 (1949). Mrs. Lundby is thus estopped, as a matter of law, from denying Mr. McGuirl's ownership of the Property.
As to the parties claiming the estoppel,[3] Mr. McGuirl's creditors, including the IRS, justifiably relied upon the truth of the representations made upon his tax returns and in his personal financial statements. The defendants argue that the lenders' reliance on the financial statements was not reasonable because the Property constituted less than five percent (5%) of the assets reported on those statements. The defendants further argue that it is incredible that the lenders could have been prejudiced by a 5% error in Mr. McGuirl's statement of assets. The Trustee responds that although the Property was only about five percent of Mr. McGuirl's total assets, it represented nearly half of his liquidity.
Notwithstanding these arguments, the Court must evaluate the question of reliance based upon the "pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits" to determine issues of material fact. The Trustee's motion contains the affidavits of bank officers from three financial institutions which loaned the debtor money. Each officer states that the officer relied upon the debtor's financial statements and would not have extended credit but for the presence of the Property amongst the other assets listed on the statements. Defendant McGuirl disputes the reasonableness of their reliance. However, in Paragraph 16 of his affidavit, dated June 20, 1993, Mr. McGuirl concedes the following:
During the 1980's I was aware that I had an ownership interest in the subject matter property. I assumed literally that I was a joint tenant, whatever that term would mean based upon proper legal interpretation. I listed these properties on my personal financial statements with all other properties in which I had an interest.
Thus, there was nothing on his personal financial statements to distinguish the Property from all other properties in which he had an interest. He states, however, that he would tell any lender who asked him about the Property that Mrs. Lundby "controlled" it:
Whenever, asked by one extending credit, I would advise that the property was under the control of my mother and could not be used as collateral or moved from California *634 to the east in order to establish a deposit account here. This always proved to be a satisfactory answer, and if a credit relationship was to be established, such relationship had to be established without any involvement with this property.
Declaration of James F. McGuirl, supra, at ¶ 16. At oral argument, when questioned by the Court on these averments, Mr. McGuirl could recall only one instance in which a bank officer asked him specifically about the Property accounts.[4] Even taking these representations as true for the purposes of this motion, they do not controvert the affidavit representations made by the officers from First Liberty National Bank, Columbia Bank, and Bank 2000 that they relied upon Mr. McGuirl's financial statements and tax returns in extending him credit. Thus, the Court accepts the representations of the bank officers as uncontroverted.
With regard to the "intent" element of the Trustee's claim, the defendants mistakenly assert that fraudulent intent is always a question for the trier of fact and that summary judgment must be denied on this basis. Where the facts material to the question of intent are not in dispute, the Court may determine the issue of fraudulent intent as a matter of law. Jackson v. Star Sprinkler Corp., 575 F.2d 1223, 1231 (8th Cir. 1978).
In the case at bar, the material undisputed facts compel the conclusion that the transfer was made with fraudulent intent. Mr. McGuirl was in desperate financial circumstances during the time the transfers were made. He was receiving demand letters from his creditors to pay his loans in full. For example, in November 1989, almost contemporaneous with the first transfers of property from Mr. McGuirl to Mrs. Lundby, the Bank of New York demanded by letter payment in full of the outstanding loan principal of $300,000 plus fifteen thousand dollars of interest. At a time when Mr. McGuirl clearly needed funds to satisfy his debts he was nevertheless transferring funds to his mother.
Fraudulent intent is rarely proved by direct evidence and this case contains many of the so-called circumstantial badges of fraud: a transfer between members of a family, for no consideration, at or near the time of the debtor's insolvency. Eyler v. Commissioner, 760 F.2d 1129, 1132 (11th Cir.1985); In re Warner, 87 B.R. 199 (Bankr.M.D.Fla.1988). Moreover, Mr. McGuirl concedes in his July 1, 1993 Affidavit that it was concern over his financial difficulties which precipitated the removal of his name by his mother from the Property accounts.[5]
The defendants have argued in their papers and at the motion hearing held on August 16, 1993 that the facts demonstrate that the Property was owned by Mrs. Lundby alone and that Mr. McGuirl held bare legal title. His name, they argue, was put on the accounts for "convenience" only, to enable him to have access to the funds in the event of Mrs. Lundby's incapacity or death. However, as the Court has already shown, those facts, even if true, are immaterial to the fact that others relied upon tax returns and financial statements. The tax returns enabled Mr. McGuirl to credibly represent upon his financial statements that he owned the Property. Mrs. Lundby intentionally facilitated these events and must bear the equitable consequences of her actions.
For these reasons, the Trustee's motion for summary judgment is GRANTED. An appropriate Order accompanies this Memorandum.
ORDER
Upon consideration of the Plaintiff's Motion for Summary Judgment filed on May 28, *635 1993, as well as the defendants' motions to strike plaintiff's summary judgment exhibits; all memoranda and exhibits filed in support and opposition thereto, the arguments of counsel at the hearing held on August 16, 1993, the entire record of the case, and for the reasons stated in the accompanying Memorandum, it is by the Court this 23d day of August 1993
ORDERED that defendants' motions to strike plaintiff's summary judgment exhibits are DENIED; it is further
ORDERED that Plaintiff's Motion for Summary Judgment filed on May 28, 1993 is GRANTED as further provided; it is further
ORDERED that the transfers identified in Counts 1 through 7 of the Complaint be set aside and that the property identified in Counts 1 through 7 of the Complaint and any proceeds or income therefrom (collectively the "Property") be, and hereby are, the property of the Trustee in bankruptcy; it is further
ORDERED that the defendants deliver the Property forthwith to the Trustee.
MEMORANDUM ON RECONSIDERATION
Before the Court are two motions filed by the defendants: a motion to reconsider the Court's ruling on August 23, 1993 granting the Trustee's motion for summary judgment and a motion to stay proceedings to enforce the judgment pending resolution of the motion to reconsider or any further appeal.[1] For the reasons set forth here, the Court shall deny the defendants' motion to reconsider and grant, in part, the defendants' motion to stay.
Motion To Reconsider
The defendants Stella Lundby and James McGuirl ask the Court to reconsider its August 23, 1993 Order granting summary judgment to the Trustee and ordering that the funds alleged in the Complaint to have been fraudulently conveyed be turned over forthwith to the Trustee. In the instant motion the defendants argue for the second time that no estoppel arose to prevent Mrs. Lundby from denying that Mr. McGuirl owned an interest in the subject Property. Citing California law, they set forth the following requirements for finding an estoppel:
[T]here must be (a) a representation or concealment of material facts (b) made with knowledge, actual or virtual, of the facts (c) to a party ignorant, actually and permissibly, of the truth (d) with the intention, actual or virtual, that the latter act upon it; and (e) the party must have been induced to act upon it.
Def.'s Mem., p. 4, quoting from 11 Witkin, Summary of California Law 9th ed., Equity, Section 177, p. 859. Based upon this standard, defendants reassert that Mrs. Lundby made no representation or concealment of a material fact to any of Mr. McGuirl's creditors and that none of his creditors relied upon any statement or conduct of Mrs. Lundby.
This assertion is invalid. It is undisputed that Mrs. Lundby directed Mr. McGuirl to claim the Property on his tax returns. See Memorandum and Order, August 23, 1993, p. 4. These directions constitute conduct upon which the IRS relied. Furthermore, Mrs. Lundby admits that she did not claim the Property on her own tax returns. When questioned by the IRS as to why such Property was not reported by her she indicated that it was because her son was reporting it. Id. These statements and conduct had no other effect than to lead the IRS to believe that Mr. McGuirl owned the Property. Mrs. Lundby cannot now assert the contrary.[2]
*636 Motion To Stay
On September 30, 1993 the Court heard argument on the defendants' motion to stay and without ruling on the motion ordered the parties to provide the Court with further information relating to Mrs. Lundby's financial status, as well as the extent to which the Trustee has recovered the Property fraudulently transferred. The parties have submitted reports pursuant to the Court's Order. Based upon the Court's review of the reports, the Court shall grant a limited stay in the enforcement of the August 23, 1993 judgment.
Some of the funds covered by the Court's summary judgment ruling have been withheld by financial institutions apparently unsure as to whether they must release such funds to the Trustee. Thus, Dean Witter has withheld funds amounting to approximately $57,318.00 in a U.S. Government Trust account. The Court finds that Dean Witter has no basis upon which to withhold such funds from the Trustee.
In addition, Great Western Bank has placed a hold on funds amounting to $90,352.87 contained in account # XXX-XXXXXX-X.
As a result of the hold on the Great Western account, as well as the transfer of other funds to the Trustee pursuant to the summary judgment ruling, Mrs. Lundby's financial resources have been greatly constrained. The Court is informed that she has had difficulty paying the bill at the nursing home that is caring for her. Additionally, a temporary conservator has been appointed for Mrs. Lundby.
The Court finds that Great Western Bank account # XXX-XXXXXX-X was opened on June 30, 1992 with separate deposits of $20,000.00 and $84,352.87. These amounts came from different sources. The $20,000 deposit originated from Great Western Bank account # XXX-XXXXXX-X. Account # XXX-XXXXXX-X was opened on December 14, 1991, with funds that came from account # XXX-XXXXXX-X, closed on the same date. This latter account contained the funds fraudulently transferred by Defendant McGuirl to Defendant Lundby. Thus, the Court finds that the Trustee shall be entitled to recover $20,000 from account # XXX-XXXXXX-X.
The remaining funds in account # XXX-XXXXXX-X, approximately $70,352.87, originate from the deposit of $84,352.87 representing the proceeds of the sale of Mrs. Lundby's home in 1992. These funds were not fraudulently transferred by the defendant McGuirl and are not described in the Complaint. A substantial issue is raised as to whether the Trustee would be entitled to recover any portion of this amount should the Trustee not recover all the funds described in the Complaint and covered by the Court's August 23, 1993 summary judgment ruling. In addition, the Court finds that Mrs. Lundby will suffer irreparable and serious harm at this time if she is not able to continue her care at the nursing home. Without access to the funds at Great Western Bank, Mrs. Lundby's ability to maintain the level of care she has been receiving is questionable.
Accordingly, the Court shall grant a limited stay in the enforcement of the August 23, 1993 summary judgment ruling only to permit Mrs. Lundby's conservator access to account # XXX-XXXXXX-X and to funds amounting to the sum of $70,352.87. The Court shall restrict any use of such funds to the purpose of Mrs. Lundby's care at the nursing home. These funds may also be put to the costs of setting up the conservatorship, but shall not be used to pay any other legal fees incurred by Mrs. Lundby. The stay granted by the Court shall remain in effect pending the outcome of the defendants' intended appeal of this Court's summary judgment ruling. In all other respects, the defendants' motion for a stay is denied.
An appropriate Order accompanies this Memorandum.
ORDER
Upon consideration of the defendants' motion to reconsider filed September 3, 1993, the defendants' motions to stay filed on September 24, 1993, all memoranda filed in support and in opposition, the reports submitted to the Court pursuant to its October 7, 1993 Order, the arguments of counsel at the hearing on September 30, 1993, the entire record of the case and for the reasons set forth in *637 the accompanying Memorandum of this date, it is by the Court this 24th day of November 1993
ORDERED that the defendants' motion to reconsider is DENIED; it is further
ORDERED that the defendants' motion to stay is GRANTED IN PART and DENIED IN PART as further provided; it is further
ORDERED that the Court grants a limited stay in the enforcement of the August 23, 1993 summary judgment ruling only to permit Mrs. Lundby's conservator to gain access to Great Western Bank account # XXX-XXXXXX-X and to the funds contained therein to the extent of the sum of $70,352.87. The Court restricts the use of such funds to the purpose of Mrs. Lundby's care at the nursing home. The funds may also be put to the costs of establishing the conservatorship, but shall not be used to pay any other legal fees incurred by Mrs. Lundby; it is further
ORDERED that the limited stay granted herein by the Court shall remain in effect pending the outcome of the defendants' intended appeal of this Court's summary judgment ruling and that the defendants' motion for a stay is DENIED in all other respects; it is further
ORDERED that Dean Witter shall transfer to the Trustee the funds contained in Mrs. Lundby's U.S. Government Trust account; it is further
ORDERED that the Trustee shall recover from Great Western Bank account # XXX-XXXXXX-X the sum of $20,000.00.
NOTES
[1] First Liberty National Bank, Columbia Bank, and Bank 2000.
[2] This is also reflected in Mr. McGuirl's affidavit, dated July 1, 1993, in which he states: "That during the 1980's my mother was concerned about the tax burdens on her and whether or not she would have enough money on which to survive and I agreed to include the income and dividends on my tax returns."
[3] The trustee stands in the shoes of the Internal Revenue Service and the creditors for the purposes of this adversary proceeding. 11 U.S.C. § 544.
[4] This instance is also recounted in ¶ 16 of Mr. McGuirl's June 20, 1993 affidavit, as follows: "The most vivid recollection of discussions of this property with a lender was with Mr. Allen Disman, Second, Vice President, Private Banking, Bank Leumi Trust Co. of New York. Mr. Disman suggested that perhaps monies represented by certificates of deposit in California could be moved to Bank Leumi in New York. The situation was explained to him and he agreed that this was not possible."
[5] "In 1989, I mentioned to my mother that I was having some financial problems but never mentioned to her the specifics of the financial problems. It was her idea to remove my name from her accounts." Declaration of James McGuirl, dated July 1, 1993, at page 3.
[1] The defendants' "Petition For Reconsideration" was filed on September 3, 1993. On September 24, 1993, the defendants filed separate motions for a stay.
[2] Defendants did not directly address in their argument the reliance upon Mrs. Lundby's conduct and statements by the IRS. They instead focused upon the many banks which loaned money to Mr. McGuirl and argued that such creditors could not have relied upon Mrs. Lundby's conduct or statements because they had no contact with her. It is enough, however, that the Property was fraudulently transferred as to one creditor, the IRS, for such Property to be recovered for the benefit of all the creditors in the Bankruptcy estate. Moore v. Bay, 284 U.S. 4, 4-5, 52 S.Ct. 3, 3, 76 L.Ed. 133 (1931).
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162 B.R. 618 (1994)
In re Beulah MORITZ, Debtor.
Bankruptcy No. 91-03677-9P7.
United States Bankruptcy Court, M.D. Florida, Tampa Division.
January 10, 1994.
Raymond C. Farfante, Jr., Tampa, FL, for debtor.
R. John Cole, II, Sarasota, FL, for movant.
Stephen Meininger, Tampa, FL, Trustee.
Rodger B. King, for U.S. Trustee.
*619 ORDER ON OBJECTION TO REPORT AND NOTICE OF INTENT TO SELL PROPERTY OF THE ESTATE "AS IS, IN ITS PRESENT CONDITION"
ALEXANDER L. PASKAY, Chief Judge.
THIS IS a Chapter 7 case and the matter under consideration is an Objection to the Report and Notice of Intent to Sell Property of the Estate, filed by Stephen Meininger (Trustee), the trustee in charge of administration of this case. The Objection was filed by Appliance Refinishing, Inc., Richard Blessinger, and Charles Merkley, unsecured creditors of Beulah Moritz (Debtor). The Objection is based on the contention that the Trustee is attempting to sell property of the estate, a Promissory Note (Note), for an insufficient amount. The Objection is also a request for permission for the above unsecured creditors to offset their claims against the estate in exchange for the Note. The facts as they were established at the duly noticed hearing are as follows:
On March 25, 1991, the Debtor filed her Petition for Relief under Chapter 7 of the Bankruptcy Code. In his pursuit to liquidate the Debtor's nonexempt assets, the Trustee filed a Report and Notice of Intention to Sell on August 25, 1993. The proposed sale involved a Promissory Note dated March 29, 1986 payable to the Debtor by J & M Screening, the maker of the note.
In the Notice, the Trustee stated that he had received an offer to purchase the Note from Roger King in the amount of $20,100.00. The Notice also provided that the Trustee would entertain any Objections to the proposed sale or any higher bids within 20 days of the Notice and that bids must be "accompanied by a deposit of 100% of the proposed higher purchase price." The balance remaining on the Note is $85,000.00, and the payments are being timely made.
On September 7, 1993, Appliance Refinishing, Inc., Richard Blessinger, and Charles Merkley, (unsecured group) whose claims together comprise most of the unsecured claims in this Chapter 7 case, filed an Objection to the Notice. In the Objection, the unsecured group contends that the offer proposed by King is in an insufficient amount and seeks permission of the Court to "bid" their respective claims in lieu of paying in cash for the purchase of the Note. Their bid in the amount of $25,000.00 is actually an attempt for the unsecured group to acquire the Note in exchange for partial satisfaction of their claims.
It is clear, that while a secured creditor may setoff its allowed secured claims against the purchase price of a property of the estate to be sold by the Trustee pursuant to § 363(k), there is no comparable provision which would permit unsecured creditors to offset their claims. Based on the foregoing, this Court is satisfied that the Objection is not well taken, and the Objection is overruled.
Accordingly, it is
ORDERED, ADJUDGED AND DECREED that the Objection be, and the same is hereby, overruled, and that any bids or objections must be filed within 10 days of the entry of this Order and must comply with the requirements provided in the Notice.
DONE AND ORDERED.
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167 Pa. Commw. 451 (1994)
648 A.2d 591
SOUTHEASTERN PENNSYLVANIA TRANSPORTATION AUTHORITY, Appellant,
v.
Carolyn SIMPKINS.
Commonwealth Court of Pennsylvania.
Argued May 10, 1994.
Decided September 16, 1994.
*453 Joan A. Zubras, for appellant.
Aloysius J. Staud, for appellee.
Before DOYLE and COLINS, JJ., and DELLA PORTA, Senior Judge.
DELLA PORTA, Senior Judge.
Southeastern Pennsylvania Transportation Authority (SEPTA) appeals from an order of the Court of Common Pleas of Philadelphia County which denied SEPTA's motion for summary judgment.
Carolyn Simpkins was injured on August 16, 1991, when she slipped and fell while alighting from a SEPTA bus. Simpkins filed a complaint against SEPTA alleging that her injuries were the result of SEPTA's negligence in failing to maintain, repair, clean and inspect the steps of the bus; in allowing the steps to exist in a defective condition; in allowing substances to accumulate on the steps; and, in failing to warn her of the danger.
SEPTA filed an Answer and New Matter in which it raised the defense of sovereign immunity. Thereafter, SEPTA filed a Motion for Summary Judgment arguing that Simpkins' cause of action did not lie within the motor vehicle exception *454 to sovereign immunity. Attached to SEPTA's motion were portions of Simpkins' deposition in which she stated that the step of the bus was wet and sticky. Simpkins was asked how the accident occurred and she testified as follows: "I got off the bus and I went to step down. I just made one step and it was a top of a cup or something, and I slipped and I fell." Deposition of Carolyn Simpkins, p. 12.
Simpkins filed an Answer in opposition to the Motion for Summary Judgment and included as New Matter an allegation that her cause of action fell under the "care, custody or control of personal property" exception. The trial court denied SEPTA's motion stating that SEPTA failed to prove that Simpkins' cause of action did not come within the vehicle exception or the personal property exception to sovereign immunity. The trial court, in determining that SEPTA had failed to prove that Simpkins' cause of action did not come within the vehicle exception, stated "Simpkins was injured while alighting from a bus, owned and operated by SEPTA, which had come to a stop. However, we find nothing in the record before us to indicate that the SEPTA bus' engine was not in running [sic] or that the bus was actually parked at the time of the accident." Trial court opinion, p. 5.
SEPTA filed a Motion for Certification to appeal the interlocutory order which was denied by the trial court. SEPTA then petitioned this Court for review of the interlocutory order, which petition was granted.[1]
Our scope of review of trial court order denying summary judgment is limited to determining whether the trial court committed an error of law or abused its discretion. Altoona Area School District v. Campbell, 152 Pa.Commonwealth Ct. 131, 618 A.2d 1129 (1992), petition for allowance of appeal denied, 535 Pa. 639, 631 A.2d 1010 (1993). A trial court may properly grant summary judgment when the moving party has established that no genuine issue of material fact *455 exists and that it is entitled to judgment as a matter of law. Bruce v. Department of Transportation, 138 Pa.Commonwealth Ct. 187, 588 A.2d 974 (1991), petition for allowance of appeal denied, 533 Pa. 626, 620 A.2d 492 (1993).
Pursuant to Section 8521 of the Judicial Code (Code), 42 Pa.C.S. § 8521, Commonwealth parties are immune from suit except in those instances itemized in Section 8522 of the Code, 42 Pa.C.S. § 8522. The two exceptions implicated in this appeal are the vehicle liability exception, 42 Pa.C.S. § 8522(b)(1),[2] and the personal property exception, 42 Pa.C.S. § 8522(b)(3).[3] SEPTA argues that Simpkins' cause of action does not fall within either of these exceptions.
SEPTA argues that the case sub judice is indistinguishable from Miller v. Erie Metropolitan Transit Authority, 152 Pa.Commonwealth Ct. 64, 618 A.2d 1095 (1992). In Miller, a passenger slipped on the steps of a bus owned by the transit authority and fell into the street while exiting the bus. She filed a complaint against the transit authority alleging that her injuries were the result of the transit authority's negligent maintenance of the aisles and steps of the bus, which were worn as well as wet and slippery due to an accumulation of water from the rainfall earlier that day.
This Court concluded that Miller was neither injured by the actual movement of the bus or by a moving part of the bus when she slipped on the steps and fell into the street. "Because the definition of `operation' does not include situations other than those where the injury is the result of the vehicle moving or a moving part of the vehicle, [the transit authority] *456 is exempt from liability because Miller has no cause of action against [the transit authority]." Id. at 69, 618 A.2d at 1097.
In the case before us, Simpkins does not allege that her injuries were caused by the movement of the vehicle or by the movement of any part of the vehicle. Thus, as in Miller, Simpkins' cause of action would not fall within the vehicle exception to sovereign immunity.[4]
Simpkins makes no argument that her cause of action falls within the vehicle exception. Rather, she argues that because the personal property of SEPTA, the bus, was involved in the chain of causation, the personal property exception applies. Simpkins argues that SEPTA does not cite any statutory authority or caselaw which would prevent her from asserting the personal property exception.
We have reviewed the cases decided under both the personal property exception to sovereign immunity and governmental immunity, 42 Pa.C.S. § 8542(b)(2), and have found no case which construes a motor vehicle to be the "personal property" of the governmental unit. On the other hand, numerous cases involving motor vehicles have been decided under the vehicle exception, both to sovereign immunity and governmental immunity, 42 Pa.C.S. § 8542(b)(1).[5]
*457 Included in both vehicle exceptions is a definition of motor vehicle, "any vehicle which is self-propelled and any attachment thereto, including vehicles operated by rail, through water or in the air." The bus involved in Simpkins' fall fits squarely within this definition. To conclude that a bus is not a motor vehicle but personal property is to ignore the plain language of the vehicle exception. Further, such an interpretation would render the vehicle exception a nullity and we may not presume that the Legislature intended any of its statutory language to be mere surplusage. Masland v. Bachman, 473 Pa. 280, 374 A.2d 517 (1977). And, we are also mindful that the exceptions to sovereign immunity must be narrowly interpreted given the expressed legislative intent to insulate the Commonwealth and its political subdivisions from tort liability. Snyder v. Harmon, 522 Pa. 424, 562 A.2d 307 (1989); Mascaro v. Youth Study Center, 514 Pa. 351, 523 A.2d 1118 (1987).
Moreover, even were we to conclude that Simpkins' cause of action falls within the personal property exception, she would not be able to prevail. Under the personal property exception, the property itself must be in some manner responsible for the injury. Nicholson v. M & S Detective Agency, 94 Pa.Commonwealth Ct. 521, 503 A.2d 1106 (1986). In her deposition, Simpkins testified that she slipped and fell on the top of a cup which had been on the step of the bus. Because the bus itself did not cause Simpkins' injuries, the personal property exception does not apply.
Because Simpkins could not prevail under either the vehicle exception or the personal property exception, we conclude that the trial court erred in denying SEPTA's motion for summary judgment. Therefore, we will reverse the trial court's order and remand the case for the entry of summary judgment in favor of SEPTA.
ORDER
AND NOW, this 16th day of September, 1994, the order of the Court of Common Pleas of Philadelphia County in the *458 above-captioned matter is reversed and the case is remanded for further proceedings.
Jurisdiction relinquished.
NOTES
[1] The Official Note to Pa.R.A.P. 1311 provides that the proper mode of challenging the lower tribunal's refusal to permit an interlocutory appeal is a petition for review under Pa.R.A.P. 1501-1561 of an unappealable order of denial.
[2] The vehicle liability exception provides that liability may be imposed on a Commonwealth party for injuries caused by "[t]he operation of any motor vehicle in the possession or control of a Commonwealth party."
[3] The personal property exception provides that liability may be imposed on a Commonwealth party for damages caused by "[t]he care custody or control of personal property in the possession or control of Commonwealth parties, including Commonwealth-owned personal property and property of persons held by a Commonwealth agency. . . ."
[4] In Love v. City of Philadelphia, 518 Pa. 370, 543 A.2d 531 (1988), our Supreme Court interpreted the word "operate" to mean that a vehicle must actually be in motion for the vehicle exception to apply. A vehicle is not in "operation" for purposes of the vehicle exception merely because the engine of the vehicle is running or because the vehicle was not parked at the time of the injury.
[5] In First National Bank of Pa. v. Department of Transportation, 148 Pa.Commonwealth Ct. 158, 609 A.2d 911 (1992), a motorist was injured and her passenger killed when their car collided with a Department of Transportation (DOT) vehicle which was parked on or near the right-hand berm of the road. DOT filed a motion for summary judgment contending that the allegations of the complaint failed to present cognizable claims with the motor vehicle exception or the real estate exception, 42 Pa.C.S. § 8522(b)(4). On appeal, this Court held that the DOT vehicle was not in operation for purposes of the motor vehicle exception. The Court further held that the real estate exception was not applicable because the vehicle was merely a condition on the roadway, not a dangerous condition of the highway.
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538 Pa. 361 (1994)
648 A.2d 767
MACHIPONGO LAND AND COAL COMPANY, INC., the Victor E. Erickson Trust and Joseph Naughton, Appellants,
v.
COMMONWEALTH of Pennsylvania, DEPARTMENT OF ENVIRONMENTAL RESOURCES, the Environmental Quality Board, and Arthur A. Davis, Secretary of Environmental Resources, Appellees.
Supreme Court of Pennsylvania.
Argued January 27, 1994.
Decided October 11, 1994.
*362 *363 Carl A. Belin, Jr., Clearfield, Andrew H. Cline, Joel R. Burcat, Robert L. Byer, Kirkpatrick & Lockhart, Harrisburg, for Machipongo Land & Coal Co., Inc.
Joseph G. Pizarchik, Richard P. Mather, Harrisburg, for Com., D.E.R.
Before NIX, C.J., and ZAPPALA, PAPADAKOS, CAPPY, CASTILLE and MONTEMURO, JJ.
OPINION OF THE COURT
CASTILLE, Justice.
This case raises several questions of jurisdiction over pre-enforcement challenges to regulations promulgated by the Environmental Quality Board (the "EQB") constituting a regulatory taking of real property. For the reasons set forth below, we reverse the order of the Commonwealth Court and remand the case for further proceedings in accordance with the Eminent Domain Code, 26 P.S. § 1-101 et seq.; 53 P.S. § 1081 et seq.
In the Commonwealth Court, Appellants sought review of an EQB regulation designating a portion of their land as unsuitable for surface mining pursuant to 52 P.S. *364 § 1396.4e(b).[1] Appellees filed preliminary objections, demurring to Appellants' cause of action and claiming that the Commonwealth Court was without jurisdiction to hear the case. The Commonwealth Court sustained Appellees' preliminary objections but concluded that the administrative remedies available to Appellants inadequately addressed the particular takings claim issue in this case. Accordingly, the Commonwealth Court transferred the case to the Environmental Hearing Board (the "EHB") after finding that the EHB was more technically competent in surface mining taking claims and that the EHB possessed the jurisdiction and expertise to rule on the validity of such claims, 155 Pa.Cmwlth. 72, 624 A.2d 742.
Both Appellants and Appellees contend that the Commonwealth Court's transfer of the case to the EHB was in error. Appellants assert that because the Commonwealth Court ruled that the prescribed administrative procedures inadequately provided for redress of their claim, it was irrational for the Court to then require Appellants to pursue such inadequate remedies. They maintain that their takings claim is properly justiciable in the courts. Appellees agree with Appellants that because the EHB's review jurisdiction is statutorily limited to challenges of Department of Environmental Resources ("DER") enforcement actions, the Commonwealth Court's transfer of this matter to the EHB improperly expanded the EHB's jurisdiction beyond that granted by the *365 legislature. Appellees maintain that Appellants' takings claim is properly addressed by the DER, not the judiciary.
The first issue before this Court is whether the Commonwealth Court acted properly in relieving Appellants of the general requirement that a party must exhaust available administrative remedies prior to submitting a constitutional takings claim for judicial resolution. Appellees rely upon Gardner v. Commonwealth of Pennsylvania, Department of Environmental Resources, 145 Pa.Commw. 345, 603 A.2d 279 (1992), for the proposition that the mere existence of statutory and regulatory remedies compels Appellants to first avail themselves of those mechanisms before proceeding to a judicial forum. However, this is too broad a reading of Gardner. Rather, in Gardner, the Commonwealth Court held only that the trial court properly ruled that there appeared to be a reasonable administrative remedy still available, and that, therefore, the injured party must first exhaust those remedies before challenging the matter in court. Here, a specific finding was made by the Commonwealth Court that there were no reasonable administrative remedies available; thus, Gardner is inapplicable.
The issues before us are simply (1) whether the Commonwealth Court correctly found that no administrative remedies were available and that it therefore had jurisdiction; and (2) whether the Commonwealth Court properly transferred the matter to the EHB. Absent an abuse of discretion or error of law by the Commonwealth Court, this Court should not disturb the ruling below. Frye Const., Inc. v. City of Monongahela, 526 Pa. 170, 176, 584 A.2d 946, 948-49 (1991) (citation omitted). Here, the Commonwealth Court's waiver of the exhaustion requirement was a sound exercise of its discretion. The Commonwealth Court applied the Gardner principle and found that Appellant's takings claim was not sufficiently redressed by the prescribed administrative procedures.[2] Since there is no evidence or assertion by either party *366 that these conclusions are inherently unreasonable or that they constituted an abuse of discretion, this Court should not disturb the conclusion of the Commonwealth Court. Accordingly, we affirm the Commonwealth Court's ruling that Appellants lacked a reasonably sufficient administrative remedy for their claim and that they need not, in this instance, further pursue administrative relief.
The second issue on appeal is whether the Commonwealth Court had the authority to vest the EHB with jurisdiction over this pre-enforcement challenge to an EQB regulation pursuant to the primary jurisdiction doctrine.[3] Both parties to this action agree that the Commonwealth Court exceeded its authority in vesting the EHB with jurisdiction in this case.[4] The Court transferred the case to the EHB based on its reading of Arsenal Coal Co. v. DER, 505 Pa. 198, 477 A.2d 1333 (1984), finding that the EHB possessed ancillary jurisdiction to rule on a challenge to the validity of EQB regulations. However, the Commonwealth Court's reliance on Arsenal Coal was misplaced. Arsenal Coal stands for the proposition that the EHB has ancillary jurisdiction to rule on the validity of EQB regulations only after the DER has undertaken a regulatory *367 enforcement action.[5]
Furthermore, the primary jurisdiction doctrine does not allow a court to refer a case to an agency which lacks the express statutory jurisdiction to hear the matter in the first instance.[6] The legislature has expressly limited EHB's jurisdiction over EQB regulations to post-enforcement review. 52 P.S. § 1396.4(b).[7]
Accordingly, we find that the Commonwealth Court improperly attempted to expand the EHB's jurisdiction in this pre-enforcement challenge. Here, DER never took any steps to enforce the EQB regulation designating a portion of Appellants' land as unsuitable for mining. Therefore, absent any DER enforcement action, the EHB is without any legislatively-conferred jurisdiction over this matter. See id. In turn, the Commonwealth Court's attempt to transfer the case to the EHB was in error because the judiciary does not possess the power to expand the legislatively-defined jurisdiction of administrative agencies. Accordingly, we reverse that portion of the Commonwealth Court's order transferring this matter to the EHB.
Given our conclusion that the transfer to the EHB was in error, we must now determine whether this case must be brought before the judiciary or before DER. Appellees ask this Court to refer this case to DER for further adjudication in the event that we find that the EHB lacks jurisdiction over this matter. Appellees contend that the administrative remedies in this case are substantively adequate and that DER is *368 the forum in which EQB regulations are challenged. As previously stated, however, we have agreed with the Commonwealth Court's ruling that Appellants lack adequate administrative remedies in this case. Accordingly, this Court will not order that the parties proceed where the administrative remedies are inadequate.
The issue then becomes whether the Commonwealth Court is the appropriate court in which Appellants should proceed with this claim. Generally speaking, pre-enforcement/non-administrative challenges to EQB regulations may normally be brought in the Commonwealth Court. See National Solid Wastes Management Ass'n v. Casey, 135 Pa. Commw. 134, 580 A.2d 893 (1990) (Commonwealth Court adjudication is proper where DER remedies are inadequate). However, the Commonwealth Court does not have original jurisdiction over eminent domain takings claims. 42 Pa.C.S.A. § 761(a)(1)(ii) ("[t]he Commonwealth Court shall have original jurisdiction of all civil actions or proceedings: [a]gainst the Commonwealth government, . . . except [in the case of] eminent domain proceedings. . . ."). Takings claims are properly adjudicated in the first instance by the court of common pleas of the county in which the property is located. 26 P.S. § 1-401. Thus, the court of common pleas has the requisite jurisdiction over this case, not the Commonwealth Court.[8]
Accordingly, the order of the Commonwealth Court is reversed and the matter is referred to the Clearfield County Court of Common Pleas for further proceedings pursuant to the Eminent Domain Code, 26 P.S. § 1-101 et seq.; 53 P.S. § 1081 et seq.
*369 FLAHERTY, J., did not participate in the consideration or decision of this case.
MONTEMURO, J., is sitting by designation.
NOTES
[1] Section 1396.4e(b) provides that real property may be designated as unsuitable for all or certain types of surface mining operations if such operations will:
(1) be incompatible with existing State or local land use plans or programs;
(2) affect fragile or historic lands in which such operations could result in significant damage to important historic, cultural, scientific and aesthetic values and natural systems;
(3) affect renewable resources lands in which such operations could result in a substantial loss or reduction of long-range productivity of water supply or of food or fiber products and such lands to include aquifers and aquifer recharge areas; or
(4) affect natural hazard lands in which such operations could substantially endanger life and property, such lands to include areas subject to frequent flooding and areas of unstable geology.
[2] Specifically, the Commonwealth Court found (1) that although a party with considerable surface mining commitments on designated land may nonetheless acquire a mining permit, nothing in Appellant's pleadings suggested that Appellants were in a position to claim the exemption (interpreting this exception found at 52 P.S. § 1396.4e(e)); (2) that although the EQB could redesignate the land as suitable for mining, it was pointless for Appellants to petition the very agency which had just designated the property as unsuitable (interpreting this procedure found at 52 P.S. § 1396.4e(f)); and (3) that because the structures necessary to deep mine the land were not permitted in areas designated as unsuitable for surface mining, Appellants could not seek a permit to deep mine the land (interpreting the deep mine permit process at 52 P.S. § 1406.5 and 35 P.S. § 691.315 and the designated land restrictions at 25 Pa.Code §§ 86.101, 86.121).
[3] The primary jurisdiction doctrine allows a court to refer cases to those administrative agencies possessing greater subject matter expertise and experience. Elkin v. Bell of PA, 491 Pa. 123, 420 A.2d 371 (1980).
[4] Brief for Appellants at 13-16; Brief for Appellees at 25-28. Both parties ask this Court to divest the EHB of jurisdiction over this case. Appellants maintain that their takings claim should be heard by the judiciary. Appellees maintain that Appellants' claim may be properly addressed by a hearing before the DER.
[5] Arsenal Coal, supra, 505 Pa. at 208-09, 477 A.2d at 1338-39 ("it is only within the context of an appeal from [DER] action upon the application of the allegedly illegal regulation . . . that the [EHB] enjoys an ancillary power to rule on the validity of regulations[.]") (citation omitted).
[6] Commonwealth of Pennsylvania, DER v. Butler County Mushroom Farm, 499 Pa. 509, 454 A.2d 1 (1982) ("the power and authority to be exercised by administrative agencies must be [expressly] conferred by the legislature.") (citation omitted).
[7] This jurisdiction provision is reflected in the Environmental Hearing Board Act of 1988 at 35 P.S. § 7514(a), (c). Accord Arsenal Coal, supra, 505 Pa. at 208-09, 477 A.2d at 1339.
[8] Further, the substance of a takings claim, not its form, determines the court with requisite jurisdiction. See Princeton Sportswear Corp. v. Redevelopment Authority of the City of Philadelphia, 460 Pa. 274, 333 A.2d 473 (1975) (condemnee's complaint in mandamus was a proceeding in substance if not in form which arose under the Eminent Domain Code). In form, this action was brought as a pre-enforcement challenge of an EQB regulation. In substance, though, it is the challenge of a regulatory taking by the designation of land as unsuitable for surface mining.
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648 A.2d 370 (1994)
NEW ENGLAND NATURIST ASSOCIATION, INC.
v.
Ernest GEORGE et at.
NEW ENGLAND NATURIST ASSOCIATION, INC.
v.
TOWN OF SOUTH KINGSTOWN.
Nos. 94-345-M.P., 94-348-M.P.
Supreme Court of Rhode Island.
September 30, 1994.
Louis A. Serio, Bristol, for plaintiff.
Karen R. Ellsworth, South Kingstown, Vincent J. Naccarato, Westerly, Terrence G. Simpson, Providence, Kelly Fracassa, Westerly, for defendants.
OPINION
PER CURIAM.
This matter came before the Supreme Court for oral argument on September 20, 1994, pursuant to an order that directed the parties to show cause why the issues raised by the petitioners should not be summarily decided. The defendants, the town of South Kingstown (town) and intervenor Donna Maltempo, challenged a Superior Court judgment that reversed a decision of the South Kingstown zoning board. The zoning board had determined that the New England Naturist Association, Inc. (NENA, plaintiff), requires a special exception in order to utilize its beachfront property.
After reviewing the memoranda submitted by the parties and after hearing the arguments of counsel for the parties during oral argument, we are of the opinion that cause has not been shown, and the issues will be summarily decided.
The plaintiff, since its purchase of a beachfront lot in South Kingstown on June 21, 1993, has used the property as a sunbathing beach on which members are allowed to sunbathe, clothing or lack of clothing optional. On three boundary lines with abutting property, fifty-four-inch nontransparent windscreens have been erected. Clothing is worn when members swim or leave the perimeters of the organization's property.
On July 8, 1993, a South Kingstown building official issued a zoning-violation notice to NENA, alleging that NENA was using the property for nonprofit outdoor recreation without having been granted a special exception for such use, in violation of Use Code 879 of the South Kingstown Zoning Ordinance. On NENA's appeal, the town's zoning board of review upheld the building official's determination, and NENA appealed that decision to the Superior Court. The Superior Court reversed and entered judgment for NENA, holding that because NENA had not built a structure on its land, the zoning ordinance was inapplicable to NENA's use of its property. The defendants' petitions for writs of certiorari were granted by this court on June 10, 1994.
*371 The town argued that its zoning regulations do not regulate the forms of ownership of land but, rather, the uses of vacant land. The town further argued that the impact of significant activity on the land and on the community can and should be reasonably regulated in order to promote public health, safety, morals, or welfare, citing Town of Burlington v. Dunn, 318 Mass. 216, 220, 61 N.E.2d 243, 245 (1945). The town further alleged that NENA would not be prohibited from using its beachfront property as a recreational facility provided it obtained a special exception before doing so.
The plaintiff has alleged that it does not need a special exception in order to use lot No. 13 as a "sunbathing beach" because "the same or similar use has been in existence since before zoning was adopted in the town of South Kingstown." Thus, plaintiff argued, its activities represent a legal nonconforming use of its property. The net effect of plaintiff's activity, however, has been the circumvention of the use codes established by the zoning ordinance that recognizes and attempts to accommodate the widely differing uses of waterfront property.
The trial justice appropriately addressed the constitutionally based right of the citizenry to have access to the shoreline, and she acknowledged the need to regulate such fragile beachfront property as plaintiff's lot, which lies within a high-flood danger zone.
We are of the opinion, however, that the trial justice's ruling that Use Code 879 was inapplicable to plaintiff was in error. In so ruling, we conclude that land use is subject to zoning rules under which concerns for type and density of land use, as well as environmental and economic impact, can be addressed. We hold that plaintiff should proceed by seeking a special exception under the provisions of the zoning code.
We conclude further that, in reviewing the decision of the zoning board of review, the trial justice substituted her judgment for that of the board. It is well established that a reviewing court merely examines the record below to determine whether competent evidence exists to support the tribunal's findings. Town of Narragansett v. International Association of Fire Fighters, AFL-CIO, Local 1589, 119 R.I. 506, 380 A.2d 521 (1977).
Consequently, we grant the petitions for certiorari and quash the judgment of the Superior Court. We return the papers in the case to that court without prejudice to the plaintiff's right to petition for a special exception to use its property as a bathing beach for the benefit of its members.
WEISBERGER, Acting C.J., did not participate.
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844 F. Supp. 770 (1993)
CLEARY, GOTTLIEB, STEEN & HAMILTON, Plaintiff,
v.
DEPARTMENT OF HEALTH AND HUMAN SERVICES, et al., Defendants.
Civ. A. No. 92-2192 (CRR).
United States District Court, District of Columbia.
November 26, 1993.
*771 *772 *773 Charles F. Lettow, Michael R. Lazerwitz, and Michael A. Mazzuchi, Richard W. Hulbert, Evan A. Davis, Stephanie Cotsirilos, and Paolo de Kock of Cleary, Gottlieb, Steen & Hamilton, Washington, DC, for plaintiff.
Susan A. Nellor, Asst. U.S. Atty. together with Jay B. Stephens, U.S. Atty., and John D. Bates, Asst. U.S. Atty. (Mary Mitchell Armstrong, Office of the General Counsel, Dept. of Health and Human Services, of counsel), for defendants.
MEMORANDUM OPINION
CHARLES R. RICHEY, District Judge.
On September 25, 1992, plaintiff Cleary, Gottlieb, Steen & Hamilton filed suit against defendants Department of Health and Human Services ("HHS"), Centers for Disease Control ("CDC"), National Institutes of Health ("NIH"), Food and Drug Administration *774 ("FDA"), James O. Mason, M.D., Assistant Secretary for Health, and David A. Kessler, M.D., Commissioner of Food and Drugs. Seeking declaratory and injunctive relief under the Freedom of Information Act, 5 U.S.C. § 552 ("FOIA"), the Administrative Procedure Act, 5 U.S.C. § 701(a) ("APA"), and the Fifth Amendment of the Constitution, the plaintiff alleges that the defendants have (1) inadequately responded to the plaintiff's FOIA requests, and (2) improperly denied the plaintiff's requests that certain agency employees be permitted to give testimony in underlying lawsuits against plaintiff's clients Showa Denko K.K. ("SDK") and Show Denko America, Inc. ("SDA").
Before the Court are cross-motions for summary judgment.[1] In light of the papers filed by the parties, the underlying law, and the record herein, the Court shall grant in part and deny in part the parties' cross-motions for summary judgment.
BACKGROUND
The plaintiff represents SDK, a manufacturer of the amino acid L-tryptophan, and its subsidiary, SDA, in a massive product liability litigation pending throughout the United States in both federal and state courts. SDK manufactured L-tryptophan from 1982 through November 1989, and SDA distributed it as a dietary supplement to wholesalers and retailers nationwide. In November 1989, the FDA, CDC, and other health authorities reported a possible link between the ingestion of L-tryptophan and a rare syndrome that has only recently been identified as eosinophilia-myalgia syndrome ("EMS").[2] Consequently, SDK immediately ceased production of L-tryptophan and voluntarily recalled products in which it was the sole or major component. Subsequent to its identification in 1989, researchers from the CDC, FDA, NIH, the Mayo Clinic, and SDK started an intensive analysis of products containing L-tryptophan to determine whether these products contain a contaminant causing EMS.
Since the identification of EMS in 1989, individual plaintiffs have filed over 1000 product liability actions in the United States against SDK, SDA, and other firms involved in the chain of L-tryptophan distribution. Pending in both state and federal courts throughout the country, these actions allege a causal link between L-tryptophan and EMS and seek hundreds of millions of dollars in compensatory and punitive damages. Approximately 700 cases against SDK and SDA have been consolidated in a multi-district litigation in Federal District Court in South Carolina entitled In re: L-Tryptophan Litigation, MDL-865 (D.S.C.) ("MDL"). Many plaintiffs contend that SDK and SDA violated the Federal Food, Drug, and Cosmetic Act, 21 U.S.C. §§ 301 et seq., by illegally importing L-tryptophan into the United States. Further, certain claimants allege that SDK failed to cooperate with government investigators, including those investigators who visited SDK's plant in Oita, Japan, in May, 1990.
Because of these allegations, SDK and SDA have sought information from the FDA regarding that agency's regulatory history of L-tryptophan, as well as information indicating the degree of cooperation between the firms and the federal investigators. Similarly, plaintiff has requested CDC records relating to and including underlying data for the national surveillance system instituted by the CDC. The plaintiff has made several FOIA requests at various times to the CDC, FDA, and NIH, seeking the release of various forms of information, including computer searches, statistical analyses, printouts, and software. In response, the CDC has released well over 25,000 pages of documents. Declaration of Laura W. Leathers, ¶ 33 ("Leathers Dec."). The plaintiff has also requested *775 permission to depose certain agency employees. Deeming the information from the requested records and testimony to be essential to the litigation defense of SDK and SDA, the plaintiff asserts that the FDA and CDC have improperly withheld information and illegitimately restricted its experts from being deposed.
The parties filed cross-motions for summary judgment on March 1, 1993. Due to the sheer volume of factual and legal issues involved in this case, as well as resolution of certain issues during the course of litigation, the Court has twice directed the parties to clarify the outstanding claims. See, Joint Status Report Regarding Current Status of Case and the FOIA Claims That Remain to Be Resolved of July 8, 1993 ("Joint Report"); Joint Memorandum Setting Forth Each Party's Position Regarding Issues and Claims That Remain to Be Resolved and Supporting Arguments, filed September 29, 1993 ("Joint Memorandum"). Nevertheless, the parties still disagree over the records that remain in dispute, as well as the legal issues before the Court.
DISCUSSION
A party may obtain summary judgment by showing "that there is no genuine issue as to any material fact and that [it] is entitled to judgment as a matter of law." Federal Rules of Civil Procedure 56(c). Because there are many sets of records in dispute that implicate a variety of legal concerns, the Court shall set out each legal issue and address the disputed records in turn.
I. FOIA
To meet the burden of summary judgment in a FOIA context, "the defending agency must prove that each document that falls within the class requested either has been produced, is unidentifiable, or is wholly exempt from [FOIA's] inspection requirements." Goland v. Central Intelligence Agency, 607 F.2d 339, 352 (D.C.Cir.1978), cert. denied, 445 U.S. 927, 100 S. Ct. 1312, 63 L. Ed. 2d 759 (1980) (quoting National Cable Television Ass'n v. Federal Communications Comm'n, 479 F.2d 183, 186 (D.C.Cir.1973)).
A. The defendants have adequately responded to all FOIA requests for documents pertaining to the published Kamb Study and the Miller Study, but must turn over the electronic version of the Swygert database to the plaintiff.
The plaintiff contends that the defendants have failed to respond lawfully to its FOIA requests. At the heart of this claim, the plaintiff seeks access to the underlying documentation for certain critical studies performed by the government, information concerning the analysis and investigation of a possible causative link between L-tryptophan and EMS. Despite a series of requests and administrative responses, the plaintiff asserts that defendants have improperly applied exemptions and have failed to produce records which they are mandated to disclose under FOIA.
The parties are in agreement regarding the administrative proceedings subsequent to the plaintiff's FOIA requests of January 31, 1991, April 19, 1991, and January 22, 1992. Joint Statement of Material Facts, ¶¶ 44-59 ("Joint Statement").
In filing its January 31, 1991, FOIA request with the CDC, the plaintiff sought access to agency records relating to the CDC's investigation of EMS and its association with L-tryptophan. Joint Statement ¶ 44. On February 19, 1991, CDC released redacted correspondence on L-tryptophan in response, stating that it had deleted certain information in this correspondence under FOIA Exemption 6. Id. ¶ 45. On April 23, 1991, the CDC further released a set of microfilmed documents produced between August 1990 and January 1991, informing the plaintiff that CDC withheld documents under FOIA Exemptions 4, 5, and 6, 5 U.S.C. § 552(b)(4), (5) and (6). Joint Statement ¶ 46.
The plaintiff appealed the CDC's decision, but limited its appeal to challenging the withholding of "predecisional internal communications" under Exemption 5. Id. ¶ 47. Assistant Secretary Mason denied plaintiff's appeal in part, noting that information was being processed for release of certain studies, *776 including Source of L-Tryptophan Associated with Eosinophilia-Myalgia Syndrome, conducted and reported by Lynn Miller, et al. ("Miller Study"), and Eosinophilia-Myalgia Syndrome Among a Cohort of L-Tryptophan-Exposed Patients in a South Carolina Psychiatric Practice, conducted and reported by Mary L. Kamb, et al. ("Kamb Study"). However, Dr. Mason stated that only a presentation of a different study, Tryptophan Contaminants Associated with Eosinophilia-Myalgia Syndrome, conducted and reported by Rossanne M. Philen, et al. ("Philen Study"), would be released, and that plaintiff's access to all other documents pertaining to the Philen Study would be denied under FOIA Exemption 5. Joint Statement ¶ 48.
On January 22, 1992, the plaintiff filed an additional FOIA request with the CDC, requesting records, questionnaires, computer tapes or disks, and other materials relating to a CDC study entitled Eosinophilia Myalgia Syndrome: Results of National Surveillance, JAMA, 1990-264: 1698-1703 ("Swygert Study"). Joint Statement ¶ 54. CDC responded by releasing on microfilm certain records generated from May through August, 1991, by informing the plaintiff that it was withholding certain documents under FOIA Exemptions 4, 5, and 6, and by notifying the plaintiff that the Public Health Service ("PHS") would be in contact regarding the availability of the Swygert Study. ¶ 55. Soon after, the PHS wrote a letter to the plaintiff informing it that FDA had no information regarding this study, that CDC has no additional records, and that "we believe that an adequate search of appropriate files was conducted." Complaint, Exhibit F.
Questioning the adequacy of the search, the plaintiff appealed the PHS response to the Swygert Study. More specifically, the plaintiff challenged the lack of agency records concerning cases dropped from the Swygert study, and requested that CDC officials query the coauthors of the study remaining with the CDC, the records custodian, and others, for information regarding the location of responsive records. Joint Statement ¶ 58; Complaint, Exh. G. The plaintiff also referred to a different case in which Dr. Leslie Swygert, formerly of the CDC, gave sworn testimony that the CDC kept "backup" documentation for the Swygert Study.[3] On June 25, 1992, Assistant Secretary Mason wrote to the plaintiff, denying its appeal by explaining that the CDC search was adequate.
With regard to the adequacy of defendants' responses to plaintiff's FOIA requests, three sets of materials are in issue. First, the plaintiff asserts that defendants have failed to disclose seven sets of documents and records relating to the Kamb Study, arguing that the plaintiff has identified missing documents and records, the plaintiff has not specifically searched for these materials, and that plaintiff's affidavits establish their nonproduction. The plaintiff also contends that defendants are unlawfully withholding 13 sets of documents and records relating to the unpublished Miller Study, in that the Philen Study relied upon such documents and records to reach its conclusions. Joint Memorandum, pp. 1-7. Furthermore, the plaintiff argues that the Swygert database exists, is segregable, and should be disclosed.
1. The Kamb Study
In regard to the documents relating to the Kamb Study, plaintiffs are misguided in seeking an order for the defendants to disclose the underlying documentation. The issue is not whether the plaintiff has received all relevant materials within contemplation, but whether an agency has reasonably searched its record system. "The adequacy of an agency's search is measured by a `standard of reasonableness,' and is `dependent upon the circumstances of the case.'" Truitt v. Department of State, 897 F.2d 540, 542 (D.C.Cir.1990), quoting Weisberg v. Department of Justice, 705 F.2d 1344, 1351 (D.C.Cir.1983). Defendants claim that their searches for records were adequate under FOIA, and the Court finds in this case that there is no issue of material fact relating *777 to this contention. By conducting three separate searches for records relating to the Kamb Study, the CDC has satisfied the required standard of reasonableness and adequacy.
After undergoing its original search, CDC released a microfilm of Kamb documents to plaintiff. Leathers Dec. ¶ 14. Next, as a result of its agreement to perform a further search for "missing" Kamb documents, CDC again searched in response to each of nine categories of documents requested by plaintiff; for each category, the CDC either provided the relevant documents, stated that no such document existed, or stated that no such document could be located. See Letter of June 21, 1993, from Mary Mitchell Armstrong, Joint Report, Exhibit 2. Moreover, after plaintiff's counsel again requested documents related to the Kamb Study, Agency counsel once again contacted Dr. Kamb, but failed to obtain any additional information. See Letter of July 2, 1993, from Mary Mitchell Armstrong, Joint Report, Exhibit 6.
The Court finds that CDC's efforts entitle it to summary judgment regarding the adequacy of its search for the Kamb records. "In order to obtain summary judgment the agency must show that it has made a good faith effort to conduct a search for the requested records, using methods which can be reasonably expected to produce the information requested." Oglesby v. Department of the Army, 920 F.2d 57, 68 (D.C.Cir.1990). Oglesby ruled that genuine issues of material fact existed concerning the adequacy of a search where the Department of State only searched the record system most likely to produce responsive documents, and failed to explain in its affidavit why no other record system was likely to produce responsive documents. Id. In contrast, as the letters indicate, the CDC's multiple inquiries for the requested documents such as computer printouts and telephone questionnaires involved frequent contact with Dr. Mary Kamb herself as well as searches in her files. The plaintiff presents no affidavit or argument that the CDC acted in bad faith or executed a search that was not "reasonably calculated to uncover all relevant documents."[4]Id.
2. The Miller Study
With regard to the Miller Study, at issue is whether the CDC disclosed all records in response to plaintiff's January 31, 1991, FOIA request and its subsequent July 28, 1992 FOIA request (which is not at issue in this litigation).[5] Because the defendants adequately responded to these requests as they pertain to the Miller Study, the Court shall grant their motion for summary judgment on this issue.
The plaintiff argues that the only document it received was the draft study, and none others. Paola M.G. De Kock, the Cleary, Gottlieb attorney in charge of maintaining the FOIA records received from the CDC, swears that no other records on this subject were included in the released materials. Affidavit of Paola M.G. De Kock. According to the plaintiff, the "Philen Study makes explicit that it relied upon documents and records relating to the Miller study in order to reach its conclusions." Joint Memorandum at 8. Further, Cleary Gottlieb charges that defendants have not identified which records it released, nor at what time.
The Court concludes that the CDC's response to the plaintiff's FOIA request for *778 records pertaining to the Miller Study was adequate. Defendants released records concerning the Miller Study in response to an appeal to the January 31, 1991 FOIA request. To the best of the knowledge of Lawrence Posey, the deputy chief in charge of collecting and compiling CDC's records concerning EMS and L-tryptophan in response to FOIA requests, "all records underlying [the Miller Study] in the possession of CDC have been produced." Declaration of Lawrence Posey ("Posey Dec.") ¶ 5.
Significantly, there is no evidence that the plaintiff appealed the completeness of the records released. Although defendants cannot cite the date nor content of released documents, counsel for both parties admitted at the motions hearing of October 8, 1993, that they did not know of any duty to maintain such a record of disclosure. While Ms. De Kock has sworn that she did not receive the requested documents, that does not alter the reality that there is no genuine issue of material fact to indicate that defendants did not respond adequately to the FOIA request. The legal tests used in challenging a response to a FOIA request are means-based rather than result oriented, and defendants touched all the necessary bases they made a reasonable search for records connected with the Miller Study, and made a good-faith production of them. Regardless of whether the plaintiff in fact received the requested records, this Court emphasizes that federal district court is not the appropriate forum for an initial complaint of incompleteness.
3. The Swygert Database
The plaintiff points to four factual bases for its argument that Dr. Swygert's database exists, is identifiable and segregable, and should be disclosed: (1) that researchers used her data after Dr. Swygert completed her work; (2) that defendants recently generated a "second" Swygert database; (3) that defendants have specifically acknowledged a copy of the surveillance database that is presently in use; and (4) that CDC maintains a surveillance database which includes Dr. Swygert's dataset.[6] Joint Memorandum at 5-6. Furthermore, the plaintiff asserts that defendants cannot evade FOIA merely by adding more data to the database.
Defendants counter that their response was reasonable, and that there is no basis to create a triable issue of fact regarding the thoroughness of their search. Defendants contend that their search for records pertaining to the Swygert Study were reasonably calculated to locate responsive records, and that the Swygert database has been sufficiently disclosed.
The plaintiff has carried its burden for summary judgment on this issue, but is only entitled to a copy of the Swygert database in electronic format. The plaintiff correctly argues that defendants must release the "second" Swygert database as it exists today. According to the defendants, the CDC has already turned over to the plaintiff the one existing database used by Dr. Swygert; all other programs have already been erased. See Leathers Dec. ¶ 32. There is no factual question on this point.[7] However, there is a second "existing" Swygert database, albeit a modified version of the database already released by the defendants to the plaintiff. See Posey Dec. ¶ 2. While the plaintiff is not entitled to receive updated materials in this context without filing additional requests, see Mandel Grunfeld & Herrick v. Customs Serv., 709 F.2d 41, 43 (11th Cir.1983) ("Nothing in the FOIA can be construed as requiring an agency to set up a mailing list to automatically disseminate agency records or information."), the electronic database existed at the time of the original FOIA request and is responsive to it.
*779 Apart from the electronic database, the defendants have sufficiently responded to the plaintiff's FOIA request, and need not separate out any data. Defendants' search for records was thorough and reasonable. The CDC originally released Swygert Study records on microfilm. In response to plaintiff's appeal, CDC employees searched for additional records in the division where she used to work, checked the CDC's mainframe computer, and contacted Dr. Swygert for a copy of her database. In addition, CDC's FOIA officer contacted the study's co-authors, and the study's custodian. None of the individuals that were contacted knew of any existing responsive records that had not been released. Defendants did release a database from the mainframe that was used at some point by Ms. Swygert. Therefore, according to the letters describing the agencies' efforts, the scope of the search meets the "reasonably calculated" standard articulated in Oglesby.
Not only have the defendants taken all the necessary steps in their search, but have also complied with their duty to segregate and release requested non-exempt materials. See 5 U.S.C. § 552(b) ("Any reasonably segregable portion of a record shall be provided to any person requesting such record after deletion of the portions which are exempt under this subsection."). Plaintiff's argument that the CDC has unlawfully failed to separate out and re-create the original Swygert database does not comport with our Circuit's guidance on this issue:
It is well settled that an agency is not required by FOIA to create a document that does not exist in order to satisfy a request. A requester is entitled only to records that an agency has in fact chosen to create and retain. Thus, although an agency is entitled to possess a record, it need not obtain or regain possession of a record in order to satisfy a FOIA request.
Yeager v. Drug Enforcement Admin., 678 F.2d 315, 321 (D.C.Cir.1982) (citations omitted). The defendants have released the hardcopy of an identifiable database that Dr. Swygert used which is still in existence, and shall release the existing electronic one; they have no further duty.
The plaintiff reveals an apparent misunderstanding of FOIA's duty to segregate and the underlying policy behind it. Dissatisfied with the case report forms disclosed by the defendants because they "do not contain all of the data cited and used in the Swygert study," the plaintiff complains that it "cannot reconstruct the Swygert database using the case report forms." Joint Memorandum at 6. Any attempt to burden defendants with the reconstruction of a record is unfounded. While defendants were obliged to sort through and release mountains of paper, FOIA imposes no further duty to tailor additional records to plaintiff's specifications. As the Yeager court concluded after analyzing FOIA's legislative history and jurisprudence, "[a] requester must take the agency records as he finds them."[8]Id. at 323.
B. The plaintiff may not raise the issues of completeness and intelligibility of CDC records before this Court, because the plaintiff has not appealed their unintelligibility to the CDC and therefore has failed to exhaust its administrative remedies.
The plaintiff argues that the CDC's microfiche and microfilm production of records, in response to plaintiff's requests of May 3, 1990, January 31, 1991, and April 19, 1991, is largely unintelligible. Citing instances of illegible photocopying, missing documents, and absent appendices, among other flaws, it seeks a complete set of properly indexed documents.
Without question, a FOIA respondent has a duty to release legible, complete records. See Mead Data Central, Inc. v. Department of the Air Force, 566 F.2d 242, 260 (D.C.Cir.1977) ("The focus of the FOIA is information, not documents"); Grove v. Department of Justice, 802 F. Supp. 506, 579 *780 (D.D.C.1992) (a FOIA requester is "entitled to receive legible copies of documents that are responsive to his request and are not exempt"). While the Court is aware that the vast scope of the information released by the government may lead to problems of intelligibility, the Court again stresses that federal district court is not the forum for an initial assertion of non-compliance on these grounds. As our Circuit has stated:
Exhaustion of administrative remedies is generally required before filing suit in federal court so that the agency has an opportunity to exercise its discretion and expertise on the matter and to make a factual record to support its decision. The exhaustion requirement also allows the top managers of an agency to correct mistakes made at lower levels and thereby obviates unnecessary judicial review.
Oglesby, 920 F.2d at 61. FOIA specifically sets out an administrative appeal process subsequent to an agency's denial of a FOIA request. 5 U.S.C. § 552(a)(6)(A)(i), (ii). Caselaw requires a requester to exhaust this appeal process prior to filing a lawsuit. See Oglesby at 61; Dettmann v. Department of Justice, 802 F.2d 1472, 1477 (D.C.Cir.1986).
Based on the affidavits submitted, there is no dispute that the CDC has made a prompt, good-faith effort to correct or replace all incomplete or unintelligible documents brought to its attention.[9] The plaintiff did not file an appeal with the CDC's disclosures to Plaintiff's requests of May 3 and April 19, Leathers Dec. ¶ 24. The plaintiff did administratively appeal CDC's response to its January 31, 1991, request, but restricted its appeal to CDC's assertion of FOIA Exemption 5. Id., ¶ 13. The plaintiff never filed an appeal (nor even informed the CDC) regarding the issues of completeness or sequence of the released documents. Id. ¶¶ 8, 24.
The statutory scheme directs the plaintiff first to appeal to the CDC before raising issues of intelligibility in this Court. See Oglesby at 65 ("We therefore interpret 5 U.S.C. §§ 552(a)(6)(A) and (C) as requiring the completion of the administrative appeal process before courts become involved, if the agency has responded to the request before suit is filed"). In addition, the facts in this case implicate the policy reasons behind the rule mandating the exhaustion of administrative remedies. As the CDC's documentation shows, expertise, uniformity, fairness and conservation of judicial resources would best be served by appealing questions of intelligibility directly to the agency that has handled over 200 FOIA requests for L-tryptophan documentation and has an institutional framework established to respond to them. Therefore, no issues of completeness or legibility are properly before this Court.
The plaintiff also argues that CDC must release documents responsive to its April 19, 1991 request in the orderly indexed and tabbed format that CDC had released to Congressmen Ted Weiss. Citing Department of Justice v. Reporters Comm. for Freedom of the Press, 489 U.S. 749, 771, 109 S. Ct. 1468, 1481, 103 L. Ed. 2d 774 (1989), the plaintiff argues for identical documentation, as "the identity of the requesting party has no bearing on the merits of his or her FOIA request." This claim has no merit, because (1) Congressman Weiss did not receive the documents as a result of a FOIA request, but rather in his role to review the federal governments's regulation of L-tryptophan, and (2) the index disclosed to him was not a FOIA index. See Plaintiff's Memo, Exhibit D; Salisbury v. United States, 690 F.2d 966, *781 971 (D.C.Cir.1982) ("The fact of disclosure of a similar type of information in a different case does not mean that the agency must make its disclosure in every case.").
C. Although the software programs created by Dr. Rossanne Philen are agency "records" under FOIA, these programs and related records prepared by Dr. Philen and her collaborators fall within the deliberative process privilege of FOIA Exemption 5, and therefore were properly withheld by the CDC.
At this stage of the litigation, the disagreement over the release of the remaining information underlying the Philen Study is purely a legal question. There is no dispute that the Philen Study is a statistical analysis of impurities in L-tryptophan associated with EMS, nor is there any dispute that the CDC continues to withhold, under FOIA Exemption 5, the following information, all of which existed on October 18, 1991, when Dr. Mason responded to plaintiff's appeal of its January 31, 1991 FOIA request: the databases and special database files created for the study, their indices, printouts of statistical results, handwritten notes, an analysis of one database and an initial draft of the manuscript. Joint Statement ¶ 50. At issue are (1) whether the software programs created by Dr. Philen in conjunction with the Philen Study are agency "records" under FOIA; and (2) whether an initial draft of a manuscript of the study and the software programs (in the event the Court finds them to be agency "records") prepared by Dr. Philen and her collaborators in conjunction with the Philen Study were properly withheld by CDC under FOIA Exemption 5 as deliberative process records.[10]
As the defendants note, the question of whether a computer program is considered to be an "agency record" under FOIA is unresolved in the courts. The plaintiff asserts that the software programs are "records" under the APA, 5 U.S.C. § 552(a)(4)(B), and that the plaintiff is shirking its duty to disclose by withholding information because it is stored in electronic form. The plaintiff points to a recommendation to agencies subject to FOIA made by the Administrative Conference of the United States, which stated that "[i]n interpreting the Freedom of Information Act, agencies should recognize that `record' includes information maintained in electronic form." 1 C.F.R. § 305.8-10, at 227. For the purposes of complying with FOIA's mandate to segregate information stored on computers, our Circuit has ruled that FOIA does not distinguish "between records maintained in manual and computer storage systems." Yeager v. Drug Enforcement Admin., 678 F.2d 315, 321 (D.C.Cir.1982).
The defendants claim that the software are not records, relying on the statements of the program's creator that each program is merely a list of instructions for a computer to manipulate a database. Declaration of Rossanne M. Philen, M.D. ("Philen Dec.") ¶ 8. Defendants cite general case law to assert the general proposition that a "record" is a medium to record and preserve information. See, e.g., Diviaio v. Kelley, 571 F.2d 538, 542 (10th Cir.1978) (defining a record as "that which is written or transcribed to perpetuate knowledge or events"). Reasoning that the sequence of instructions in dispute, as software, is distinguishable from the underlying and separable sets of data, the defendants *782 arrive at the conclusion that the computer program is not an agency record.[11]
In light of FOIA's well-known purpose to encourage access, the applicable caselaw, and specific facts before it, the Court concludes that these programs are records for the purposes of this litigation. Recognizing that Congress has not defined agency records under FOIA, the Supreme Court has looked to the Records Disposal Act as influential to judicial interpretation, and noted that it includes "machine readable materials ... regardless of physical form or characteristics." Forsham v. Harris, 445 U.S. 169, 183, 100 S. Ct. 977, 985-86, 63 L. Ed. 2d 293 (1980) (quoting the Disposal of Records Act, 44 U.S.C. § 3301). HHS's own regulations provide that agency records include "magnetic tapes, cards or discs." 45 C.F.R. § 5.5.
More importantly, the computer software is an agency record under the common-sense definition in DiViaio, which the defendants endorsed. Unlike generic word processing or prefabricated software, Dr. Philen's programs are uniquely suited to its underlying database. As a consequence of this tailoring, the software's design and ability to manipulate the data reflect the Philen Study. These programs preserve information and "perpetuate knowledge" that are responsive to plaintiff's FOIA request because of their relation to the Philen Study.
Next, the Court looks to whether the computer software programs and draft manuscript should be exempt from mandatory disclosure under the deliberative process privilege. The standard for this privilege is well-established in this Circuit. To qualify under this exemption, information must be both "predecisional" and "deliberative." This exemptions covers work-product which indicates the author's personal opinion rather than the agency's. Coastal States Gas Corp. v. Department of Energy, 617 F.2d 854, 866-69 (D.C.Cir.1980); see Jordan v. Department of Justice, 591 F.2d 753, 772 (1978) (declaring that the deliberative process privilege "attaches to all inter- and intra-agency communications that are part of the deliberative process preceding the adoption and promulgation of an agency policy").
Although there is no touchstone in applying this privilege, opinion is generally protected, in contrast to factual information. See Environmental Protection Agency v. Mink, 410 U.S. 73, 87-91, 93 S. Ct. 827, 836-38, 35 L. Ed. 2d 119 (1973). However, this distinction between fact and opinion may not be conclusive, as "the disclosure of even purely factual material may so expose the deliberative process within an agency" to warrant the application of the privilege to that material. Mead Data Central, Inc. v. Department of Air Force, 566 F.2d 242, 256 (D.C.Cir.1977). This privilege furthers three policy bases, in that it (1) promotes broad consideration of alternatives and improves the quality of decisions; (2) prevents premature disclosure of ongoing discussions that might confuse the public; and (3) protects the integrity of the decision-making process, by making sure officials are judged on what they decide, not what they consider. Jordan 591 F.2d at 772-73.
The Court concludes that under the deliberative process privilege, the CDC properly withheld the draft of the manuscript prepared by Dr. Philen for review by her collaborators. This draft is pre-decisional inherently, and deliberative because it was created for the candid review and discussion among Dr. Philen and her research colleagues. Further, because the final manuscript was published, releasing the draft manuscript would not disclose any new data. From a policy perspective, as outlined in Jordan, supra, the disclosure of such draft documents would undercut the openness of decision-making embodied by Exemption 5.
The Court also concludes that the computer software programs are also privileged under this exemption. Dr Philen's work involved frequent evaluation and analysis of her data:
*783 The process of epidemiological study involves continuous changes in the selection and examination of data....
Throughout this study I continued to modify my programs and to produce revised printout files as I formulated and then reformulated my hypotheses based on my analyses of previous printout files and my discussions with my collaborators.
Philen Dec., ¶ 17. These programs were designed to manipulate a set of data in a certain way, so the scientific deliberations and opinions are "inextricably intertwined" with the underlying facts.
More to the point, the computer software involved with the Philen Study is within the protected sphere of the deliberative process privilege, because these the privilege encompasses the decision-making process behind the culling and selection of relevant facts. Our Circuit recently decided a similar issue in Mapother v. Department of Justice, 3 F.3d 1533 (D.C.Cir.1993), which shielded the Office of Special Investigations' compilation of source materials relating to Kurt Waldheim's activities, which was prepared in order to determine whether Mr. Waldheim should be allowed to enter the United States. That court stated that
selection of the facts thought to be relevant clearly involves "the formulation or exercise of ... policy-oriented judgment" or "the process by which policy is formulated," Petroleum Info. Corp. [v. United States Department of Interior], 976 F.2d [1429] at 1435 [(D.C.Cir.1992)] (emphasis in original), in the sense that it requires "exercise of discretion and judgment calls." Id. at 1438. Such tasks are not "essentially technical" in nature, Id. at 1437-38; rather they are part of processes with which "[t]he deliberative process privilege is .. centrally concerned."
Mapother, 3 F.3d at 1539. Mapother concluded that the government properly withheld the Waldheim Report, and the bulk of that Report's "factual material was assembled through an exercise of judgment in extracting pertinent material from a vast number of documents for the benefit of an official called upon to take discretionary action." Id. at 1539.
This Court holds that the computer programs reflect their creator's mental processes, and therefore fall under Exemption 5. "The work of ... assistants in separating the wheat from the chaff is surely just as much part of the deliberative process as is the later milling by running the grist through the mind of the administrator." Montrose Chemical Corp. v. Train, 491 F.2d 63, 70 (D.C.Cir.1974), quoted in Mapother, 3 F.3d at 1538. The software programs merely memorialize this separation magnetically, translating the culling process envisioned by the creators into a language that the computer can follow.
II. APA
The plaintiff also challenges the government's refusal to permit four employee doctors to testify in the MDL proceedings. The same standard of law applies to the decisions to deny plaintiff's request for testimony from each researcher. Under the APA, judicial review is limited to determining if agency decisions were "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. § 706. The party alleging irregularity carries the burden of proof. Schweiker v. McClure, 456 U.S. 188, 102 S. Ct. 1665, 72 L. Ed. 2d 1 (1982).
In applying the "arbitrary and capricious" standard, a district court should undergo a "thorough, probing, in-depth review" of the agency's actions to ensure that they were based on reasoned decisionmaking, but should not substitute its own judgment. Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 415-16, 91 S. Ct. 814, 823-24, 28 L. Ed. 2d 136 (1971). This standard should be applied with regard to the nature and context of the challenged action, ITT World Communications, Inc. v. FCC, 699 F.2d 1219, 1245 (D.C.Cir.1983), rev'd on other grounds, 466 U.S. 463, 104 S. Ct. 1936, 80 L. Ed. 2d 480 (1984), and no action should be set aside if the action is rational, based on relevant factors, and within the agency's statutory authority. Overton Park, 401 U.S. at 416, 91 S.Ct. at 823-24. The HHS' and FDA's denial of permission for Drs. Crofford Love, Archer, and Page to testify in the MDL proceedings were not arbitrary, capricious, *784 an abuse of discretion, nor otherwise contrary to law, because the government had a rational basis due to the potential to compromise the appearance of impartiality in related litigation, the existence of other experts who could provide the necessary information, and the disruption of the official duties of the agency.
A. Based on the administrative record before it, the HHS's decision not to allow Dr. Crofford and Love to testify in the MDL proceedings was not arbitrary, capricious, an abuse of discretion nor otherwise not in accordance with law.
The factual background of the plaintiff's request for NIH testimony is undisputed. See Joint Statement ¶¶ 32-40. In November 1990, Dr. Leslie Crofford and other researchers from CDC, NIH, and FDA published L-Tryptophan Implicated in Human Eosinophilia-myalgia Syndrome Causes Fascitis and Perimyositis in the Lewis Rat, 86 J. Clinical Investigation 1757 ("Lewis Rat I"), which reported specific inflammatory changes in the rats after exposure to L-tryptophan. Joint Statement ¶ 32. Lewis Rat I is often cited as a model for human EMS. Dr. Lori Love and other researchers from the CDC, NIH, and FDA presented a scientific poster entitled "L-Tryptophan and 1,1' Ethylidenebis (Tryptophan), A Contaminant in Eosinophilia Myalgia Syndrome, Cause Myofascial Thickening and Pancreatic Fibrosis in Lewis Rats" ("Lewis Rat II"), in November 1991. Joint Statement ¶ 33. The data regarding the contrasting results between the two studies are unavailable in the Lewis Rat I article, the Lewis Rat II poster or literature put out by the CDC, FDA or NIH. Joint Statement ¶ 34.
In its letter of July 31, 1992, the plaintiff requested that Dr. James O. Mason, Assistant Secretary for Health, permit Drs. Crofford and Love of NIH to testify in depositions in MDL proceedings regarding their research and development of an animal model for human EMS. Joint Statement ¶ 34. That letter states that their testimony would be pertinent on the causation issue of litigation and therefore would advance public health, that the information it seeks is not available to the public, and that the plaintiff will take all steps possible to conserve agency resources and avoid the appearance of impartiality. Joint Statement ¶ 36-37. Before HHS responded, the Chief Counsel for the Public Health Service wrote in a letter that "[p]ermitting Dr. Love to testify ... conceivably could compromise or complicate FDA's defenses to [those] suits," and that "Drs. Love and Crofford have indicated that there are other experts who could provide information related to EMS and L-tryptophan." Joint Statement ¶ 39. Dr. Mason denied plaintiff's request in his letter of September 18, 1992, citing a general policy against such testimony for reasons of impartiality and minimizing disruption. Further, Dr. Mason stated that no exception to this policy was warranted, because the "agency receives numerous requests for testimony in litigation and cannot accommodate all such requests and still conduct its business." Joint Statement ¶ 40.
The plaintiff demands relief on the basis that Dr. Mason lacked a rational basis to make this determination. More specifically, the plaintiff claims that Dr. Mason's denial violated HHS's own regulations, which state that an applicant for employee testimony must "state the nature of the requested testimony, why the information sought is unavailable by any other means, and the reasons why the testimony would be in the interests of [HHS]." 45 C.F.R. § 2.4(a). The plaintiff further alleges that Dr. Mason's stated grounds for his denial are unsubstantiated and insufficient.
The Court concludes that Dr. Mason acted rationally, considered all relevant factors, and did not exceed the scope of his authority. Unfortunately for the plaintiff, meeting the requirements of Section 2.4(a) does not automatically trigger the approval of the requested testimony, but merely indicates that an applicant has reached a minimal threshold for agency determination. As HHS regulations state:
No [HHS] employee may provide testimony ... concerning information acquired in the course of performing official duties ... unless authorized by the Agency head pursuant *785 to this part based on a determination by the Agency head, after consultation with the Office of the General Counsel, that compliance with the request would promote the objectives of the [HHS].
45 C.F.R. § 2.3 (emphasis added). Dr. Mason duly consulted with the Office of the General Counsel, and he is well within his discretion to conclude that permitting Drs. Love and Crofford to testify would compromise the impartiality of HHS and disrupt the agency's official duties.
None of plaintiff's attacks on Dr. Mason's grounds for denial hold water. First, the plaintiff claims that HHS's decision was based on legal error and should not be upheld, because Chief Counsel's letter was legally incorrect in stating that plaintiff's request "appears to be an attempt to circumvent the denial of information under the Freedom of Information Act and to obtain expert testimony." Riseberg Memo. The plaintiff contends that HHS improperly denied the request, because "an abuse of discretion may be found if ... the decision is based on an improper understanding of the law". Animal Legal Defense Fund v. Yeutter, 760 F. Supp. 923, 928 (D.D.C.1991). However, the fact that an extensive administrative record happens to include a questionable, or even erroneous, legal speculation does not signify that Dr. Mason relied on this fact to the point of legal error, nor does it show that his decision stemmed from an "improper understanding of the law."
Second, the plaintiff asserts that HHS's concern over Dr. Love's testimony in FDA lawsuits is "spurious," because HHS has insufficiently explained this supposed conflict regarding impartiality. The Court dismisses this charge because this piece of information is not a dispositive factor, in that Dr. Mason denied the request for Dr. Crofford's testimony, about which no conflict with FDA litigation was alleged. Speculative misstatements of law in the administrative record are insufficient to establish a taint in the record, absent a showing of reliance by the decision-maker.
Finally, the plaintiff challenges Dr. Mason's statement that "there are other experts who could provide information related to EMS and L-tryptophan," because while this statement is true, it misses the point that Drs. Crofford and Love are uniquely qualified to evaluate the link between EMS and L-tryptophan. The Court rejects this argument because under § 2.3, Dr. Mason has a broader mandate to promote the objectives of the HHS. The information before him when he made the determination indicated that there was no iron-clad safeguard to prevent further requests for testimony if he granted the request; that other experts were available to provide relevant information regarding L-tryptophan and EMS; and that permitting his top researchers to be deposed would disrupt the advancement of public health and compromise at least the appearance of impartiality. Therefore, he acted rationally in denying the request.
B. Dr. Chesemore had a rational basis in denying plaintiff's request to depose Drs. Douglas Archer and Samuel Page.
The parties are in agreement regarding the essential facts surrounding the FDA's denial of plaintiff's request for deposition testimony from FDA Drs. Douglas Archer and Sam Page. Joint Statement ¶¶ 7-31. The requests arise from two sets of circumstances. An FDA-CDC scientific expert panel, including Drs. Archer and Page, visited Oita, Japan in May 1990 to investigate L-tryptophan manufacture. On May 30, 1990, one member sent a telex stating that the "companies [including SDK] ... provided good cooperation."
On July 18, 1991, Dr. Archer appeared before the House Committee on Government Operations, Subcommittee on Intergovernmental Relations and Human Resources to present on overview of the 1989 incident, FDA's regulation of L-tryptophan, its actions in response to the onset of EMS, and scientific research to date. Reading from a prepared statement, Dr. Archer testified that "it is not yet clear whether [EMS] is associated with a contaminant, L-tryptophan itself, or even due to individual abnormalities in L-tryptophan metabolism." Regarding pending litigation, he stated that FDA believed *786 that courts were likely to find that L-tryptophan was in fact Generally Recognized as Safe ("GRAS") before the 1989 incidences of EMS.
In a letter dated June 9, 1992, the plaintiff requested Commissioner David Kessler's permission to allow Drs. Archer and Page to testify in depositions for the pending MDL proceedings, pursuant to 21 C.F.R. § 20.1. More specifically, the plaintiff sought their testimony regarding Dr. Archer's statement to the Subcommittee and Dr. Page's telex, respectively. This letter stated that these doctors were the sole source of information contained in their statements, that direct examination would not go beyond the specifically cited areas of concern, and that the plaintiff
will take all steps possible to assure that these witnesses are not subjected to repetitive discovery by cross noticing the depositions of Drs. Archer and Page in all cases that are not part of the MDL proceeding, and will videotape the depositions to avoid the need for the witnesses to appear at any trial.
The plaintiff also stated that allowing these doctors to testify would advance the public interest because the record to be built is of major importance, and the public has an interest in a clear and complete record.
Associate Commissioner for Regulatory Affairs Ronald G. Chesemore responded to plaintiff's requests in his letter dated July 10, 1992:
FDA receives numerous requests for its employees to participate in litigation to which FDA is not a party. It is the policy of the Agency to decline to authorize our employees to testify in their official capacities unless their are compelling circumstances.
Such circumstances include cases in which an FDA employee is the only source of the factual information requested, cases in which official records are not available to certify for admission in court, or cases in which there is an overriding public health interest important enough to justify interrupting the duties of personnel ...
This policy had been established to protect the public health by ensuring that FDA employees spend their time pursuing their official duties and not serving as witnesses in private lawsuits. Our policy is also intended to avoid creating the impression that FDA or one of its employees is taking a partisan position in litigation to which the Agency is not a party. Even when FDA determines that testimony will be in the public interest and would promote the statutory mission of the Agency, our regulations do not require the Commissioner to grant a request for testimony. Rather, the Commissioner is simply authorized to grant such a request as an exercise of his discretion.
In this case, you have provided no convincing argument that the public interest would be served by Drs. Archer and Page taking government time to testify on behalf of the manufacturer of a product of uncertain safety. Accordingly, pursuant to 21 CFR 20.1, your request for their testimony is denied.
(emphasis added). The relevant regulations lay out FDA's policy regarding employee testimony:
No officer or employee of the Food and Drug Administration or of any other office or establishment in the Department of Health and Human Services, except as authorized by the Commissioner of Food and Drugs pursuant to this section or in the discharge of his official duties under the laws administered by the Food and Drug Administration, shall give any testimony before any tribunal pertaining to any function of the Food and Drug Administration or with respect to any information acquired in the discharge of his official duties.
21 C.F.R. § 20.1(a).
Associate Commissioner Chesemore's determination was neither arbitrary, capricious, an abuse of discretion, nor contrary to law. On the record before him, he had a rational basis to conclude that the circumstances were insufficiently "compelling" to interrupt his employees from their important work. Dr. Archer had informed Mr. Chesemore's assistant, Irene Kelly, that experts outside FDA could testify for SDK *787 and SDA, and that he lacked personal knowledge of the matters to which he testified before Congress.
Moreover, Associate Commissioner Chesemore was well within his discretion to determine that plaintiff's arguments did not overcome the regulatory presumption against employee testimony in private litigation. The plaintiff's disagreement with Mr. Chesemore's evaluation of the circumstances is insufficient to overturn an agency's determination. See Stone v. Heckler, 715 F.2d 179, 182 (5th Cir.1983) (citing Udall v. Tallman, 380 U.S. 1, 16, 85 S. Ct. 792, 801, 13 L. Ed. 2d 616 (1965)) (stating that courts should defer to an agency's construction of an administrative regulation). The plaintiff argues that the FDA reflexively dismissed plaintiff's request and that Dr. Archer has unique testimony relevant to the plaintiff's litigation, but the regulations recognize and encourage the ability of FDA policymakers to take a broad view and act for the public interest. Mr. Chesemore acted rationally in reasoning that public health would be furthered more by allowing his researchers to do their work than by disrupting their research so they could allow a private litigant to prepare a defense that, according to the documents before Mr. Chesemore, could be prepared through other deponents. See Moore v. Armour Pharmaceutical Co., 129 F.R.D. 551, 555 (N.D.Ga.1990), aff'd, 927 F.2d 1194 (11th Cir.1991) ("[Plaintiff's] interest in getting the deposition simply cannot compare to the government's interest in maximizing the use of its limited resources in dealing with a national health crisis").
Similarly, Dr. Chesemore had a rational basis to conclude that there were no "compelling circumstances" that would mandate granting plaintiff's request to depose Dr. Page. The plaintiff argues that Dr. Page's testimony regarding the cooperation of its clients would advance a substantial public interest, "namely, the judicial system's access to testimony from governmental officials." Plaintiff's Motion for Summary Judgment, pp. 40-41. Even if Dr. Page is the author of the telex,[12] Mr. Chesemore was not acting arbitrarily or capriciously in determining that the public's interest in access to testimony would be outweighed by (1) the inference of impartiality that would arise from allowing Dr. Page to testify for SDK and SDA, combined with (2) the interference of lengthy or numerous depositions on FDA's research and regulatory functions.
Even taken at face value, plaintiff's own statement in its request that the admissibility at trial of Dr. Archer's congressional testimony and the FDA/CDC telex was merely "uncertain," and not necessarily excluded, is consistent with Mr. Chesemore's determination that no "compelling circumstances" existed. Likewise, the agencies may rationally have doubted plaintiff's statement that it will take "all steps possible" to prevent repetitive discovery of the doctors, because the plaintiff failed to address fully how to handle the cross-examination of 700 plaintiffs in the MDL proceedings, as well as the effect of the proposed deposition on the 300 state court cases.
III. DUE PROCESS
The constitutional claim at issue is whether defendants' withholding documentary and testimonial evidence violates the Due Process Clause of the Fifth Amendment to the United States Constitution. The plaintiff claims that this withholding prevents its clients from mounting an adequate defense in the various L-tryptophan litigations. It cites American Sur. Co. v. Baldwin, 287 U.S. 156, 168, 53 S. Ct. 98, 102, 77 L. Ed. 231 (1932), for the well-established proposition that "[d]ue process requires that there be an opportunity to present every available defense." More specifically, the plaintiff contends that denial of access to the requested records and testimony contravenes the Due Process Clause, because the withheld evidence relate to "critical and decisive allegations" going to the heart of plaintiff's claim. See Complaint of Bankers Trust Co., 752 F.2d 874, 890 (3rd Cir.1984); McClelland v. Andrus, 606 F.2d 1278, 1286 (D.C.Cir.1979).
*788 The Court does not agree. Unlike cases such as American Sur. Co., in which a party did not have an opportunity to enter any defense on a bond issue before the entry of judgment, the plaintiff here is attempting to assert a right to specific documents or testimony as part of a broader defense. This right to present specific evidence is not constitutionally protected. See, e.g., Premex, Inc. v. Commodity Futures Trading Comm'n, 785 F.2d 1403, 1408 (9th Cir.1986). The plaintiff will have a full opportunity to defend SDK and SDA in the pending liability litigation, despite the lack of documents withheld under FOIA and testimony withheld under the APA.[13] FOIA, HHS regulations, the Federal Rules of Procedure and the Federal Rules of Evidence will all limit the information that the plaintiff can access before trial, as well as the evidence it can admit at trial. Were this Court to accept plaintiff's Due Process argument, it would essentially invalidate these laws and the plaintiff has not shown that any of them violate the Constitution.
CONCLUSION
Seeking evidentiary support for the product liability defense of its client in litigation throughout the country, the plaintiff challenges the government's denial of its requests for records and testimony. Apart from an electronic version of the Swygert database, the plaintiff is not entitled to any additional information from the government because the defendants have complied with their duty. Similarly, plaintiff may not take the testimony of Drs. Love, Crofford, Page, or Archer, because the defendants had a rational basis to deny the plaintiff's request to depose them. The defendants' response to these requests do not prevent plaintiff's clients from presenting an adequate defense in lawsuits brought against them, in accordance with the Due Process Clause of the Fifth Amendment. The Court shall enter an Order of even date herewith in accordance with this Memorandum Opinion.
ORDER
The parties in the above-captioned case have resolved many of the issues originally raised by the plaintiff in its Complaint. After reviewing the Vaughn Index filed by the FDA, the plaintiff dismissed its FOIA claims against FDA contained in Count III of the Complaint. Subsequently, following publication of Pathological and Immunological Effects of Ingesting L-Tryptophan and 1,1'-Ethylidenebis (L-Tryptophan) in Lewis Rats, 91 J. of Clinical Investigation 804 (1993) ("Lewis Rat II Study"), NIH voluntarily released to plaintiff the underlying data for the Lewis Rat II Study which had been withheld, and plaintiff dismissed its FOIA claims against NIH in Count II of its Complaint. Since the recent publication of Tryptophan Contaminants Associated with Eosinophilia-Myalgia Syndrome, 138 American J. Epidemiology 154 ("Philen Study"), the CDC is processing the underlying data for the Philen Study, except Dr. Philen's computer software programs and a draft of the manuscript of the article, and will release to plaintiff within the next six weeks records responsive to plaintiff's FOIA request to the CDC for records pertaining to the parties' cross motions for summary judgment which address plaintiff's remaining FOIA claims against the CDC (Complaint, Counts I and IV), plaintiff's request for review of the FDA's and NIH's denials of its requests for testimony (Id., Counts V and VI) and plaintiff's Fifth Amendment due process claim (Id., Count VII).
Upon consideration of extensive written record before this Court, including defendants' Vaughn Index and the Administrative Record submitted by the defendants in conjunction with plaintiff's APA claims, the arguments presented by counsel at hearings before the Court on May 25, 1993, and October 8, 1993 and the entire record herein, the applicable law, for the reasons articulated in this Court's Memorandum Opinion of even date herewith, and given the absence of a genuine issue of material fact, it is, by the Court, this 26th day of November, 1993,
*789 ORDERED that upon the Court's finding that in response to plaintiff's January 31, 1991, FOIA request for records on the "Kamb" and "Miller" study, defendant CDC conducted reasonable searches for responsive records and released these records and plaintiff did not file administrative appeals contesting these searches or releases, defendants' motion for summary judgment on the Kamb and Miller studies (Complaint, Count I) shall be and hereby is GRANTED; and it is
FURTHER ORDERED that upon the Court's finding that plaintiff exhausted its administrative remedies with respect to its January 22, 1992, FOIA request for records pertaining to the Swygert study, including the Swygert database, plaintiff's motion for summary judgment shall be and hereby is GRANTED, and defendant CDC shall provide plaintiff with a copy of the Swygert database in electronic format (Id., Count I); and it is
FURTHER ORDERED that upon the Court's finding that Dr. Philen's computer programs are agency records for the purposes of FOIA but that the CDC properly withheld these programs and the draft manuscript of Dr. Philen's study under the deliberative process privilege of Exemption 5, defendants' motion for summary judgment on the computer programs and the draft manuscript for the Philen Study (Id., Count I) shall be and hereby is GRANTED; and it is
FURTHER ORDERED that upon the Court's finding that plaintiff failed to exhaust its administrative remedies for its claims as to the unintelligibility of the CDC's responses to its May 3, 1990, January 31, 1991, and April 19, 1991, FOIA requests, defendants' motion for summary judgment on Count IV of the Complaint shall be and hereby is GRANTED; and it is
FURTHER ORDERED that upon the Court's finding that Ronald Chesemore, Associate Commissioner for Regulatory Affairs, FDA, engaged in reasoned decisionmaking in denying, pursuant to 21 C.F.R. § 20.1, plaintiff's request for Dr. Douglas Archer and Dr. Samuel Page to testify at depositions in the multi-district L-tryptophan litigation, and that his denial was neither arbitrary, capricious, an abuse of discretion nor not otherwise in accordance with law, defendants' motion for summary judgment on Count V of the Complaint shall be and hereby is GRANTED; and it is
FURTHER ORDERED that upon the Court's finding that Dr. James Mason, Assistant Secretary for Health, HHS, engaged in reasoned decisionmaking in denying, pursuant to 45 C.F.R. Part 2, plaintiff's request for Dr. Lori Love and Dr. Leslie Crofford to testify at depositions in the multi-district L-tryptophan litigation, and that his denial was neither arbitrary, capricious, an abuse of discretion nor not otherwise in accordance with law, defendants' motion for summary judgment on Count VI of the Complaint shall be and hereby is GRANTED; and it is
FURTHER ORDERED that defendants' motion for summary judgment on plaintiff's constitutional due process claim in Count VII shall be and hereby is GRANTED;
FURTHER ORDERED that defendant CDC, which is currently processing the underlying data for the Philen Study, with the exception of Dr. Philen's computer software programs and a draft of the manuscript of the article, shall release to the plaintiff all records responsive to plaintiff's FOIA request to CDC for records pertaining to the Philen Study on or before 4:00 p.m. on December 17, 1993; and it is
FURTHER ORDERED that the above-captioned case shall be, and hereby is, DISMISSED from the dockets of this Court; and it is
FURTHER ORDERED that all other outstanding motions are hereby rendered and declared MOOT.
NOTES
[1] The defendants filed a Motion to Dismiss, in part, and Motion for Summary Judgment. The defendants moved to dismiss certain FOIA claims under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). Due to the extensive volume of papers filed by both parties, the Court shall address these arguments through the defendants' summary judgment motion.
[2] The CDC defined EMS symptoms as (1) an eosinophil count greater than or equal to 1000 cells per cubic millimeter of blood, (2) muscle pain sufficiently severe to interfere with daily activities, and (3) absence of infections or disease to explain the first two symptoms. See CDC, 38 Morbidity & Mortality Weekly Rep. 758, 787 (Nov. 24, 1989).
[3] Complaint, Exh. H; see Pawlonek v. Showa Denko K.K., Civil Action No. CV90-6900 (Dist. Ct., Swahoe Cty., Nev.)
[4] In fact, plaintiff never even addresses the issue of reasonableness head-on. Plaintiff focuses on the non-production of documents rather than the adequacy of the search. See Joint Memorandum at 4 ("Despite repeated requests, defendants have failed to provide the missing documents and records.... Moreover, the affidavits submitted by plaintiff establish that defendants have not produced those missing documents and records."). However, a mere deductive inference that a record "must" exist, without proof, does not raise a material issue of fact regarding the adequacy of an agency's search. This Circuit has definitively stated that "[a] search is not unreasonable if it fails to produce all relevant material," looking to the method of search rather than sheer results. Meeropol v. Meese, 790 F.2d 942, 952-53 (D.C.Cir.1986).
[5] The parties are in sharp disagreement over the issues before the Court. Plaintiff contends that although the Miller study itself has been released, at issue is whether the defendants must disclose the documents and records relating to the Miller study. In light of the statutes and cases governing FOIA, the Court chooses to analyzes this dispute by tracing the administrative history of each request.
[6] Plaintiff claims that the Posey Dec. supports their contention that a segregable Swygert dataset must be disclosed:
CDC maintains a surveillance database of cases involving EMS ..., the case surveillance database. Included within this surveillance database is the dataset which Dr. Leslie Swygert used for her case surveillance study.... Since Dr. Swygert completed her study, the case surveillance database has changed as more data has been added.
Posey Dec. ¶ 2.
[7] Plaintiff's insistence that some other relevant, unreleased database exists is factually without basis.
[8] The Court wishes to emphasize that the plaintiff is entitled to the electronic database solely because this existing record is responsive to its FOIA request. Whether this release actually leads to a reconstruction of the database underlying the Swygert Study is irrelevant to this litigation.
[9] "As plaintiffs acknowledge, CDC released over 25,000 pages in response to plaintiffs' FOIA requests. In November, 1991, plaintiffs did contact this office to complain about the quality of the microfilm reels that CDC had sent to it on April 23, 1991, and on May 30, 1991. A member of my staff, Lynn Armstrong, sent plaintiffs another set of the same microfilm reels. When plaintiffs again complained about the microfilm, it was Ms. Armstrong's understanding that plaintiffs were complaining about the clarity of this set of microfilm. She therefore sent plaintiffs a master copy of the microfilm set. It was not until plaintiffs' counsels met with the government's counsels on January 21, 1993, that CDC learned that plaintiffs were contending that the pages of documents were missing or microfilmed in such a way as to be unintelligible. My staff and I have responded to over 200 requests for the agency's L-tryptophan records by releasing the L-tryptophan records on microfilm or microfiche. We have not received any other complaints that the microfilmed documents are unintelligible." Leathers Dec. ¶ 26 (emphasis added).
[10] Plaintiff asserts that an additional issue is whether database files, printout files (hard copy and those stored on computer), handwritten notes, and an analysis of the database prepared by researchers in conjunction with the Philen Study were properly withheld by the CDC under FOIA Exemption 5. The CDC is currently processing the underlying data for the Philen Study (apart from the computer programs and the manuscript draft), and will soon release to plaintiff records responsive to plaintiff's FOIA request to the CDC.
As far as the Court can make out, all other materials are those of the Miller Study, and the defendants have disclosed all such materials that are in their possession. As discussed supra, defendants have not been able to locate any other Miller Study records.
The Court also takes notice of the fact that defendants are no longer asserting the confidential research privilege under FOIA Exemption 5.
[11] The Court is aware that Laura W. Leathers, the FOIA Coordinator at HHS, and Dr. Philen herself, have stated their belief that the computer programs were not agency records within the meaning of FOIA. Leathers Dec., ¶ 17; Philen Dec., ¶ 8. Dr. Philen stated that the programs she created are not intended to record information. The Court is not persuaded by their legal conclusions.
[12] Defendants dispute the authorship of the telex from Japan. They concede only what the document states, that the "telegram has been cleared by the fda/cdc team leaders, dr. sam page (fda) and dr. eric sampson (cdc)."
[13] Plaintiff did receive a staggering amount of information as a result of its requests (over 35,000 pages of records), has engaged other experts to testify in its litigation, and its clients do not lack the resources to put forward a comprehensive defense.
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436 Pa. Super. 576 (1994)
648 A.2d 559
In re ESTATE OF Mark T. STEVENSON, Deceased.
Appeal of Elizabeth STEVENSON, Respondent.
Superior Court of Pennsylvania.
Argued February 16, 1994.
Filed September 30, 1994.
Gerald T. Ormand, Glassport, for appellant.
Ralph D. Conrad, Greensburg, for appellee.
Before CAVANAUGH, HUDOCK, and FORD ELLIOTT, JJ.
FORD ELLIOTT, Judge:
Appellant comes before us challenging the Decree of the Orphans' Court Division of the Court of Common Pleas of Westmoreland County. The Decree, dated September 3, 1993, and entered September 7, 1993, dismissed appellant's exceptions *577 to an earlier Opinion and Decree Nisi. The earlier Opinion and Decree Nisi was dated July 1, 1993, and was entered July 2, 1993. The Decree of September 1993 fully incorporated by reference the Decree Nisi of July 1993. The Decree Nisi of July 1993 held that the corpus of a tentative trust of which appellant was the beneficiary was liable to pay those estate expenses that exceeded the estate assets. We affirm.
The factual background is neither complex nor contested. Mark T. Stevenson died intestate August 11, 1991, survived by his wife and administratrix, Karen M. Stevenson, and by his mother, Elizabeth Stevenson, appellant herein. During his lifetime the decedent created several trust bank accounts naming appellant as beneficiary. The sum of these accounts totalled approximately $70,000. Upon the decedent's death, appellant closed these trust accounts, taking the funds. Appellant filed Pennsylvania Inheritance Tax returns and paid the sums owed.
On October 1, 1992, the administratrix petitioned the court, pursuant to which the court ordered appellant to show cause why the trust accounts should not be made available for the payment of estate expenses. The court eventually issued the decrees now before us ordering that the trust accounts be made available.
Appellant raises a single issue for our review:
Are the proceeds of a settlor decedent's `in trust for' accounts liable for the payment of the decedent's estate's administrative expenses to the extent that they exceed estate assets?
Preliminarily, we must dispose of an issue raised by appellee that the orders appealed from are not final and appealable. Appellee's theory here is that the lower court's orders were not sufficiently explicit in stating which estate expenses, and in what amounts, could be charged against the trust accounts. Thus, appellee argues, if we uphold the decrees, the case may again be appealed on the issues of whether certain expenses *578 and amounts were properly charged against the trust accounts. We disagree.
Contrary to appellee's assertion, the record below indicates to us which expenses may be charged against the trust accounts. Appellee's Petition for Citation, at paragraph 6, specifically referenced the estate expenses involved here as being those listed on Schedule H of the Pennsylvania Inheritance Tax Return as filed. We note that Schedule H lists aggregate expenses of $17,357.30. These, then, are the expenses that the court allowed to be charged against the trust accounts. The decrees clearly indicate also that these expenses are to be charged to their full amount, to the extent that $17,357.30 exceeds the other assets of the estate. We see no uncertainty as to what expenses or in what amounts may be charged against the trust accounts. We now proceed with our analysis of the main issue presented.
Initially, we note our standard of review:
Our standard of review from a final order of the Orphans' Court Division requires that we accord the findings of an Orphans' Court, sitting without a jury, the same weight and effect as the verdict of a jury; we will not disturb those findings absent manifest error; as an appellate court we can modify an Orphans' Court decree only if the findings upon which the decree rests are not supported by competent or adequate evidence or if there has been an error of law, an abuse of discretion, or a capricious disbelief of competent evidence. Estate of Keefauver, 359 Pa.Super. 336, 518 A.2d 1263 (1986); Estate of Kovalchick, 345 Pa.Super. 229, 498 A.2d 374 (1985); Estate of Gilbert, 343 [342] Pa.Super. 82, 492 A.2d 401 (1985).
In Re Benson, 419 Pa.Super. 582, 584, 615 A.2d 792, 793 (1992). Presently, appellant is not challenging findings of facts, but rather only conclusions of law. In particular, appellant objects to the trial court's application of § 58 Restatement of Trusts, Second, comment (d) to the instant case. Appellant also argues that the statutory scheme enacted by the legislature to regulate trust accounts, 20 Pa.C.S.A. § 6301 et seq., applies certain aspects of § 58 of the Restatement, but *579 not the matter covered by comment (d), implying that the legislature has rejected comment (d) in so doing.
Since the Restatement of Trusts is so much at issue here, we should iterate the pertinent section, especially as it provides us with a definition of a tentative trust:
[§] 58. TENTATIVE TRUST OF SAVINGS DEPOSIT
Where a person makes a deposit in a savings account in a bank or other savings organization in his own name as trustee for another person intending to reserve a power to withdraw the whole or any part of the deposit at any time during his lifetime and to use as his own whatever he may withdraw, or otherwise to revoke the trust, the intended trust is enforceable by the beneficiary upon the death of the depositor as to any part remaining on deposit on his death if he has not revoked the trust.
d. Creditors of depositor. Although creditors of the settlor cannot reach the trust property merely because he has reserved a power of revocation (see § 330, Comment o), creditors of a person who makes a savings deposit upon a tentative trust can reach his interest, since he has such extensive powers over the deposit as to justify treating him as in substance the unrestricted owner of the deposit. So also, on the death of the depositor if the deposit is needed for the payment of his debts, his creditors can reach it. So also, if it is needed it can be applied to the payment of his funeral expenses and the expenses of the administration of his estate, if he has not sufficient other property which can be applied for these purposes.
Restatement of the Law, Second, Trusts, § 58 and comment (d) (emphasis added).
Initially, we disagree with appellant's statement at page 11 of her brief that no appellate court in this Commonwealth has ever adopted § 58 of the Restatement of Trusts, Second, as the law of this Commonwealth. Our appellate courts have recognized § 58 as controlling in the Commonwealth on numerous occasions. Our cases generally trace the adoption of *580 the principle enunciated in § 58 to Scanlon's Estate, 313 Pa. 424, 169 A. 106 (1933). Scanlon's Estate does not specifically mention § 58, but rather embraces the concept of the tentative trust as espoused by the seminal case, In re Totten, 179 N.Y. 112, 71 N.E. 748 (1904). The earliest recitation to § 58 as authority which we have found occurred in Banca D'Italia & Trust Company v. Giordano, 154 Pa.Super. 452, 36 A.2d 242 (1944). We have observed numerous instances since then where our appellate courts have employed § 58 as authority; see In Re Estate of McFetridge, 472 Pa. 546, 372 A.2d 823 (1977); In Re Pavlinko's Estate, 399 Pa. 536, 160 A.2d 554 (1960); In Re Rodgers' Estate, 374 Pa. 246, 97 A.2d 789 (1953); In Re Estate of Agostini, 311 Pa.Super. 233, 457 A.2d 861 (1983); Estate of Vittorio, 290 Pa.Super. 329, 434 A.2d 777 (1981); Krewson Estate, 154 Pa.Super. 509, 36 A.2d 250 (1944).[1] Although not binding upon us, we also observe that courts in other states, in addition to common pleas courts in our own state, have employed § 58 to reach the result whereby tentative trust accounts may be used to satisfy estate expenses that exceed estate assets. See In Re Aybar's Estate, 203 Misc. 372, 116 N.Y.S.2d 720 (1952); Rodgers Estate, 79 Mont.Co.L.R. 240 (1961);[2] and Currier Estate, 73 Mont.Co. L.R. 250 (1957).[3]
We will allow that we are unable to find any instance in which comment (d) was specifically adopted. However, we note that there is case law precedent that employs the concept of reaching the assets of tentative trust accounts to meet unpaid estate expenses. See In Re Rodgers' Estate, 374 Pa. *581 246, 97 A.2d 789 (1953). Although this case preceded the Multiple-Party Accounts legislation which appellant asserts has now prohibited the reaching of such assets, we mention it to belie appellant's assertion that no Pennsylvania appellate court has ever adopted § 58 of the Restatement of Trusts, Second. Furthermore, we also note that there is at least significant obiter dicta subsequent to the Multiple-Party Accounts legislation that suggests that the concepts employed in In Re Rodgers' Estate, 374 Pa. 246, 97 A.2d 789 (1953), still hold sway. In Estate of Vittorio, supra, the court wrote,
A tentative trust can be revoked by the depositor at any time prior to death by any clear manifestation of an intention to do so. No particular formalities are necessary to effect a revocation. Restatement of Trusts 2d, § 58, comment c. It may be revoked by a transfer of the deposit; by the terms of the depositor's will; by the depositor's unequivocal act or declaration of disaffirmance; or by facts and circumstances resulting in inadequacy of the estate assets to satisfy the testamentary gifts, funeral and administration expenses, taxes and other charges. Rodgers Estate, 374 Pa. 246, 249-50, 97 A.2d 789, 790-91 (1953).
Estate of Vittorio, 290 Pa.Super. at 331-33, 434 A.2d at 779 (emphasis added).[4]
Appellant argues that because the statutory scheme adopted by the legislature to regulate trust accounts makes no provision for the use of such funds to defray estate expenses in the event the assets of the estate are insufficient, then such funds are not available. However, the mere fact that the legislature did not specifically codify comment (d) is not reason to presume that the opposite result was intended. We find nothing in the Multiple-Party Accounts legislation that would prohibit this court from adopting the conceptual framework of comment (d) to allow the reaching of tentative trust assets to satisfy estate expenses that exceed estate assets. This is a *582 view that is shared by at least one other source. In analyzing the then recently enacted Multiple-Party Accounts legislation, the periodical, Fiduciary Review, stated:
The underlying assumption of this section[[5]] is that anyone using a joint or trust account wants the survivor or survivors to have all balances at death. It permits the continued employment of such an account as an informal will. As recognized in subsection (c) it is possible to negate the rights of survivorship. Like a will, it does not defeat the rights of a creditor to collect if assets of the decedent-depositor's estate are insufficient to pay his claim. Also it may be available for death taxes, administration expenses and statutory claims of a surviving spouse. The omission of Section 6-107 of the Uniform Probate Code[[6]] in Chapter 63 should not be construed as an intention to reach contrary results.
Fiduciary Review, September 1976 at 2-3.
In framing her argument, appellant calls our attention to *583 certain sections[7] of the statutory law governing multiple-party accounts to refute the potential application of comment (d). However, the purpose of these statutes is not to prohibit the estate from reaching these assets to defray debts and costs, but rather to ensure that trust accounts are given full effect as testamentary devises without being subjected to the full rigors by which wills are validated.[8] What the statutes do make clear is that a tentative trust account may substitute for a will in effecting the transfer of property upon the death of the depositor. Such a transfer is still subject to inheritance taxes. Similarly, the estate should be able to petition the court to reach these funds to defray expenses once other assets have been exhausted. Although such funds will not pass through the estate, they can be made available to it. To hold otherwise would allow wholesale avoidance of the just debts of a decedent by depositor-testators who could maintain the bulk *584 of their estates in the form of tentative trust accounts. This was not the purpose of the Multiple-Party Accounts legislation. Rather, this legislation was enacted to aid banks and other financial institutions in the determination of how, when, and to whom to pay out tentative trust accounts and to determine the property rights among the various parties to multiple-party accounts.
We believe that where the other assets of the estate are insufficient to meet the debts of the decedent's estate as well as administrative costs, the amounts contained in tentative trusts may be reached for satisfaction of these claims as in accordance with comment (d) of the Restatement of Trusts, Second, § 58.
Before concluding, we note that while we are affirming the decree below, we are remanding because appellee's brief admits that the attorney's and personal representative's fees were miscalculated. On remand the court should amend its decree to reflect the correct amounts as it ascertains them.
Accordingly, the decree below is hereby affirmed, and the case is remanded for amendment as herein described. Jurisdiction relinquished.
NOTES
[1] Our listing is not exhaustive but is intended only as a sampling.
[2] We alert the reader to the fact that this opinion recites to two opinions captioned "Rodgers' Estate." They arise from two wholly separate cases.
[3] Rodgers Estate and Currier Estate are perhaps flawed examples. While Rodgers does, in fact, rule that tentative trust accounts may be used to satisfy administration expenses to the extent that the expenses exceed estate assets, it so rules on the basis of Currier as precedent. Currier, however, contains language that seems to indicate that its ruling may be based on a finding by the court that the depositor clearly expressed a desire that his account be used to satisfy burial expenses. See Currier, 73 Mont.Co.L.R. at 252.
[4] We note to the extent that Estate of Vittorio, relying upon pre-1976 authority, sets forth that a tentative trust may be revoked by will, its reasoning is inconsistent with 20 Pa.C.S.A. § 6304(d), which was enacted in 1976.
[5] 20 Pa.C.S.A. § 6304.
[6] § 6-107. [Rights of Creditors].
No multiple-party account will be effective against an estate of a deceased party to transfer to a survivor sums needed to pay debts, taxes, and expenses of administration, including statutory allowances to the surviving spouse, minor children and dependent children, if other assets of the estate are insufficient. A surviving party, P.O.D. payee, or beneficiary who receives payment from a multiple-party account after the death of a deceased party shall be liable to account to his personal representative for amounts the decedent owned beneficially immediately before his death to the extent necessary to discharge the claims and charges mentioned above remaining unpaid after application of the decedent's estate. No proceeding to assert this liability shall be commenced unless the personal representative has received a written demand by a surviving spouse, a creditor or one acting for a minor or dependent child of the decedent, and no proceeding shall be commenced later than two years following the death of the decedent. Sums recovered by the personal representative shall be administered as part of the decedent's estate. This section shall not affect the right of a financial institution to make payment on multiple-party accounts according to the terms thereof, or make it liable to the estate of a deceased party unless before payment the institution has been served with process in a proceeding by the personal representative.
[7] Trust account. At the death of the trustee or the survivor of two or more trustees, any sum remaining on deposit belongs to the person or persons named as beneficiaries, if surviving, or to the survivor or survivors of them if one or more die before the trustee or last surviving trustee, unless there is clear and convincing evidence of a contrary intent; if two or more beneficiaries survive, there is no right of survivorship in event of death of any beneficiary thereafter unless the terms of the account or deposit agreement expressly provide for survivorship between them.
. . . .
(d) Change by will prohibited. A right of survivorship arising from the express terms of an account or under this section, or a beneficiary designation in a trust account cannot be changed by will.
20 Pa.C.S.A. § 6304(b) and (d).
§ 6306. Accounts and transfers nontestamentary
No transfer resulting from the application of section 6304 (relating to right of survivorship) shall be considered as testamentary or subject to Chapter 21 (relating to intestate succession) or Chapter 25 (relating to wills).
20 Pa.C.S.A. § 6306.
[8] Note the official commentary to 20 Pa.C.S.A. § 6306:
This section is derived from Section 6-106 of the Uniform Probate Code. The Commissioners' comment to that section states, in part, that:
The purpose of classifying the transactions contemplated by [this chapter] as nontestamentary is to bolster the explicit statement that their validity as effective modes of transfers at death is not be [sic] determined by the requirements for wills. The section is consistent with [existing law].
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167 Pa. Commw. 32 (1994)
648 A.2d 580
COMMONWEALTH of Pennsylvania Acting by Attorney General Ernest D. Preate, Jr., Plaintiff,
v.
RIVERVIEW LEASING, INC., and C. H. Leasing of Virginia, Inc. d/b/a Rent America, Defendants.
Commonwealth Court of Pennsylvania.
Heard August 5, 1994.
Decided August 22, 1994.
Publication Ordered September 22, 1994.
*36 Daniel R. Goodemote and Renardo L. Hicks, for plaintiff.
J. Samuel Choate, Jr. and Lane Fisher, for defendants.
NARICK, Senior Judge.
On August 6, 1993, the Commonwealth of Pennsylvania, acting by Attorney General Ernest D. Preate, Jr. (Commonwealth) brought a complaint in equity against Riverview Leasing, Inc. and C. H. Leasing of Virginia, Inc., d/b/a Rent America (Riverview) alleging Riverview's violations of the Goods and Services Installment Sales Act, Act of October 28, 1966, Special Sess. No. 1, P.L. 55, as amended, 69 P.S. § 1103 (GSISA) and the Unfair Trade Practices and Consumer Protection Law (Consumer Law), Act of December 17, 1968, P.L. 1224, No. 387, § 1, as amended, 73 P.S. §§ 201-1, -209-6. Subsequently, on February 1, 1994, Riverview filed a motion for judgment on the pleadings as to Count I. Thereafter, on March 9, 1994, the Commonwealth filed a motion for judgment on the pleadings as to Counts I and II and a motion for summary judgment as to Counts I, II and III and Riverview's counterclaim.
For reasons hereinafter discussed, this Court denies Riverview's motion for judgment on the pleadings as to Count I and grants the Commonwealth's motion for summary judgment as to Count I and Riverview's counterclaim. Also, we deny the Commonwealth's motion for summary judgment as to Counts II and III and the Commonwealth's motion for judgment on the pleadings as to Counts I and II and Riverview's counterclaim for the reasons set forth below.
FACTUAL HISTORY
On August 6, 1993, the Commonwealth filed a complaint in equity against Riverview and thereafter filed an amended *37 complaint in equity on August 20, 1993. This complaint consisted of three counts. In the first count, the Commonwealth alleges that Riverview's business practices violate the GSISA. The second count posits that these GSISA violations constitute per se violations of the Consumer Law. The third count asserts that Riverview's actions violate the Consumer Law.
On January 10, 1994, Riverview filed an answer to the Commonwealth's amended complaint as well as asserting a new matter which includes a counterclaim and three affirmative defenses.[1] The Commonwealth moved for preliminary injunction on August 6, 1993, and, following a hearing, this Court denied the motion for preliminary injunction on August 26, 1993. On August 18, 1993, Riverview filed preliminary objections to the Commonwealth's complaint. These were overruled by this Court on December 7, 1993.
Thereafter, on February 1, 1994, Riverview filed a motion for judgment on the pleadings as to Count I and on March 9, 1994, the Commonwealth filed a motion for judgment on the pleadings as to Counts I and II and, in the alternative, a motion for summary judgment as to Counts I, II and III and on Riverview's counterclaim. The parties argued these motions before this Court on August 5, 1994.
DISCUSSION
JUDGMENT ON THE PLEADINGS COUNT I
Riverview requests this Court to grant it judgment on the pleadings as to Count I. Riverview asserts, essentially, *38 that the GSISA is inapplicable to the way in which it conducts its business.
Judgment on the pleadings[2] can only be granted in cases where, based upon the pleadings alone and any documents properly attached to them, there exist no material issues of fact to be resolved by the court and to proceed to trial would create a fruitless endeavor. Bensalem Township School District v. Commonwealth, 518 Pa. 581, 544 A.2d 1318 (1988).[3]
For reasons hereinafter discussed, we find that the GSISA does encompass Riverview's business practices. Therefore, Riverview's motion for judgment on the pleadings will be denied.
MOTION FOR SUMMARY JUDGMENT COUNT I[4]
The Commonwealth, in its amended complaint in equity, alleges Riverview's business conduct violates the GSISA, while Riverview's position is that its business conduct falls outside of the realm of the GSISA. Therefore, the true issue, which is dispositive of this case, is whether or not the GSISA applies to Riverview's business conduct.
Riverview is an out-of-state corporation which, through fourteen retail outlets throughout the Commonwealth of Pennsylvania, "are in the business of advertising and renting-to-own new and used goods primarily for personal, family or household purposes. Typical goods include appliances, televisions, *39 video cassette recorders, stereo systems, microwave ovens and furniture."[5]
The threshold inquiry to be made is whether Riverview's "rental agreement" is essentially a "retail installment contract" as defined in Section 1201(6) of the GSISA. If it is, then Riverview's business conduct would fall within the GSISA. In order to answer this inquiry, this Court must carefully scrutinize Riverview's "rental agreement" and determine whether it is a "retail installment contract" as defined by the GSISA.[6]
Riverview advances one primary argument as to the inapplicability of the GSISA. Riverview asserts that the GSISA applies only if a consumer is obligated to fulfill a particular act prior to owning the product. Riverview contends that, if one can own the property through, "fulfilling his or her obligations,"[7] not by exercising an option, as Riverview requires in its lease, then the GSISA applies. However, Riverview argues, if a customer can do something they are not obligated to do, such as exercise an option to own, then the GSISA does not apply. We disagree.
Section 1201(6) states, in pertinent part:
When taken or given in connection with the retail sale, the term includes but is not limited to a security agreement and a contract for the bailment or leasing of goods by which the bailee or lessee contracts to pay as compensation for *40 their use a sum substantially equivalent to or in excess of their value and by which it is agreed that the bailee or lessee is bound to become, or has the option of becoming, the owner of the goods upon full compliance with the terms of the contract. (Emphasis added.)
The statute clearly does not apply only to contracts in which a rentor is obligated to perform a particular act. This is exemplified by the words "or has the option of becoming." The key word in this phrase is "option." If a word or phrase is not defined in the statute, we are mandated to construe the word or phrase according to the rules of grammar and according to their common and approved usage. 1 Pa.C.S. § 1903(a); Hileman v. Morelli, 413 Pa.Superior Ct. 316, 605 A.2d 377 (1992). The term "option" is defined by Webster's 9th New Collegiate Dictionary (1987) as "the power or right to choose." It is clear, then, by the word "option" that the Legislature does not refer to contracts that obligate one to purchase, but rather to contracts that both obligate or give an option, i.e. a consumer the right to choose whether or not to become the owner of the goods.
Riverview gives their customers the option of purchasing the product at the end of the rental term.[8] Riverview's assertion that the statute applies only to contracts where one is "obligated" to purchase the product, is erroneous.
The statute clearly applies to contracts, such as Riverview's, where one can become or has the option to become, the owner of the goods when they have fulfilled the terms of the contract. In this case, once an individual has paid a predetermined number of weeks for rent on the product, they can, at *41 their option, become the owner of that product once they have fulfilled the terms of the contract, i. e. pay the then fair market value for the rental for the rented product.
Additionally, we agree with the Commonwealth's argument that this section of the GSISA is not concerned with how ownership passes, but rather if ownership can or has the opportunity of passing at all. The language in the section stated above clearly indicates that a contract is a "retail installment contract" if the consumer receives or can receive ownership under the contract.
This Court finds additional support for the Commonwealth's assertion of applicability in the following portion of Section 1201(6) of the GSISA:
The term also includes any contract, obligation or agreement in the form of bailment or lease if the bailee or lessee has the option to renew the contract by making the payments specified in the contract, the contract obligates the bailor or lessor to transfer ownership of the property to the bailee or lessee upon full compliance by the bailee or lessee with his obligations under the contract, including any obligation incurred with respect to the exercise of an option by the bailee or lessee to renew the contract, and the payments contracted for by bailee or lessee, including those payments pursuant to the exercise of an option by the bailee or lessee to renew the contract, are substantially equivalent to or in excess of the aggregate value of the property and services involved. (Emphasis added.)
The statute clearly intends to include the type of agreement that Riverview utilizes in its business transactions. The statute states that the term "retail installment contract" includes any contract that allows for renewal by making payments.[9]*42 Riverview's rental agreement clearly meets this condition of the GSISA.
The GSISA additionally requires that payments under the contract are essentially equivalent to, or in excess of, the value of the property and the services involved. As subsequently discussed, the evidence in the pleadings clearly show that Riverview charges its customers certainly the value of, or in excess of, the value of the product in question.
In essence, the Legislature, in enacting the GSISA, has reclassified certain rental agreements, including the type used by Riverview, as a de facto[10] sales contract. The Legislature, through a clear definition of the term "retail installment contract," has sought to control these types of contracts and the amount of revenue a seller can profit from a transaction entered into via a "retail installment contract." As previously discussed, Riverview's "rental agreements" clearly fall within the Legislature's definition of "retail installment contract" and, as such, must conform its business practices as mandated by the GSISA.
The next question is whether Riverview's business practices indeed violate the GSISA and whether this Court can properly grant the Commonwealth's motion for summary judgment as to this issue.
Summary judgment may be granted in situations where there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Pa.R.C.P. No. 1035(b). See also Professional and Public Service Employees' Union Local 1300 v. Trinisewski, 94 Pa.Commonwealth Ct. 462, 504 A.2d 391 (1986). Additionally, this Court, when considering a motion for summary judgment, must view the record in the light most favorable to the non-moving party, in this case, Riverview. Pennsylvania State University v. County of Centre, 532 Pa. 142, 615 A.2d 303 (1992).
*43 The Commonwealth alleges that Riverview has committed seven separate violations of the GSISA. As a result, we must determine each of these violations separately and analyze whether summary judgment is appropriate as to each of these alleged violations.
The first violation concerns Riverview's failure to put the words, "security agreement" or "lien contract" and "retail installment contract," into its "rental agreement," in violation of Section 1302(b) of the GSISA. Riverview, in its answer to the Commonwealth's amended complaint, admits that it does not use these terms anywhere on their rental agreement.[11] Because this alleged violation is admitted to by Riverview in the pleadings before this Court, there is no genuine issue as to a material fact and this violation is properly disposed of in favor of the Commonwealth on its motion for summary judgment.
The second violation concerns Riverview's failure to include a notice[12] in its "rental agreement" in violation of Section 1302(c) of the GSISA. Our review of Riverview's "rental agreement" reveals an absence of the statutorily mandated notice.[13] As the document speaks for itself, and further, since Riverview has repeatedly admitted its use of its "rental agreement" in all transactions, there is no material issue of fact. The Commonwealth is entitled to summary judgment as a matter of law concerning this violation.
The third violation concerns Riverview's failure to include the required contract terms and disclosures as mandated *44 by Section 1303, subsections: (b), (c), (d), (g), (h), (i), (j) and (k) of the GSISA. Our review of Riverview's "rental agreement" again reveals an absence of the statutorily mandated contract terms and disclosures. The Commonwealth, therefore, is entitled to summary judgment as a matter of law, as to this violation.
The fourth violation involves Section 1306 of the GSISA, which dictates the permitted confines of delinquency charges, specifically, in what situations they may be assessed and the limits as to how much can be charged when they are properly assessed. The Commonwealth views that Riverview's "reinstatement fee"[14] operates as a "delinquency charge" and requests this Court to rule as such.
Upon review of Section 1306 of the GSISA and Riverview's "rental agreement," this Court rules, as a matter of law, that Riverview's "reinstatement fee," in essence, acts as a "delinquency charge" as covered by the GSISA. Section 1306 refers to a "delinquency charge" as that which a consumer pays when he or she has failed to pay an installment as defined by the contract. Riverview's "reinstatement fee" operates under the same principle. Riverview's contract states that this fee is to be paid when one has failed to exercise their "option to renew." Elsewhere in Riverview's contract, an "option to renew" takes place when a consumer merely continues to pay the weekly charge for renting the product. As a result, Riverview's "reinstatement fee" is merely a "delinquency charge" for an individual who does not continue to pay the weekly sum for the product, and additionally does not return the product to Riverview. Therefore, as this determination is strictly a matter of law and not one of fact, summary judgment on this violation is hereby granted in favor of the Commonwealth.
The fifth violation concerns the same "reinstatement fee" as previously discussed. However, the Commonwealth argues, in *45 the alternative, that Riverview's assessment of a "reinstatement fee" violates Section 1504 of the GSISA[15] which prohibits the assessment of any fees, expenses or other charges not otherwise provided for in the GSISA. As we have previously addressed this "reinstatement fee" and have ruled that it operates, in essence, as a "delinquency charge" under the Act, ruling that this "reinstatement fee" is an unauthorized charge under the Act would be inappropriate. Therefore, we will give this matter no further consideration.
The sixth violation concerns Riverview's violation of Section 1501(a) of the GSISA, which forbids the assessment of a "service charge" which is in excess of 18% interest per annum. The Commonwealth asserts that Riverview's "rental agreement" with consumers results in a service charge which is in excess of this 18% per annum interest. The Commonwealth arrives at this conclusion by adding up the total number of weekly payments required under a typical Riverview contract, and comparing that total price with the actual manufacturer's suggested retail price of the product. In all of the documented rentals submitted by the Commonwealth, the amount paid in excess of the manufacturer's suggested retail price greatly exceeds the allowable 18% interest under the GSISA. The Commonwealth asserts that this excess amount be termed a "service charge" as defined in the Act by 1201(10) of the GSISA. We agree.
As we have previously discussed, we view Riverview's "rental contract" as a de facto contract subject to the provisions of the GSISA. Therefore, the amount Riverview charges in excess of the manufacturer's suggested retail price can only be termed as a "service charge." Our review of the record indicates that the Commonwealth has sufficiently proven that Riverview continually charges a "service charge" which greatly *46 exceeds the allowable 18%.[16]
As Riverview has neither opposed the Commonwealth's exhibits and submissions nor has submitted their own which would refute the former, we find that there exists no material issue as to Riverview's violation of this section of the GSISA. We therefore grant the Commonwealth's motion for summary judgment in its favor as to this violation.
The last violation concerns Riverview's alleged improper assessment of the following fees: a liability waiver fee, a processing fee upon delivery and an in-home collection fee. The Commonwealth alleges that, since these fees are not specifically authorized by the GSISA, they are therefore prohibited under the aforementioned Section 1504.
As Riverview, in its answer to the Commonwealth's amended complaint, admitted that these three fees are not specifically covered under the GSISA, we find that there is no genuine issue as to a material fact and that this violation is properly disposed of in favor of the Commonwealth on its motion for summary judgment.
As previously discussed, we grant summary judgment in favor of the Commonwealth as to Count I. However, we render this motion to the Commonwealth on the issue of liability alone. We find that there is still a genuine issue as to material fact as to the amount of damages Riverview Leasing must be subjected to pay.[17] Therefore, we will hold an evidentiary hearing to determine the amount of damages, costs, fees, etc. which Riverview owes, at a later date. We, however, at that time, will receive evidence as to damages only, as the issue of liability has been decided.
*47 MOTION FOR SUMMARY JUDGMENT COUNT II[18]
The Commonwealth, in its amended complaint in equity, alleges that Riverview's violations of the GSISA constitute per se violations of the Consumer Law and requests this Court to grant a motion for summary judgment or a judgment on the pleadings as to this count. The Commonwealth supports its position by asserting that Pennsylvania courts have repeatedly held that violations of one statute can also be found to be violations of the Consumer Law.
We are unwilling to make such a ruling at the preliminary stage of this litigation as it applies to Counts II and III. As we will subsequently discuss, we cannot grant summary judgment on Count III as there exists material issues of fact. As it would be improper to grant summary judgment on Count III, it would equally be improper for us to grant summary judgment in favor of the Commonwealth on this second count as well.
MOTION FOR SUMMARY JUDGMENT COUNT III
The Commonwealth, in its amended complaint in equity, alleges in Count III that Riverview's business conduct is in violation of the Consumer Law. The Commonwealth requests this Court to grant summary judgment as a matter of law based upon a number of allegations that they assert are indisputable.[19]
We find, in the pleadings, a number of allegations which cannot be determined by this Court on a motion for summary judgment. In fact, the Consumer Law is based on the premise that one who violates the statute intentionally engages in *48 "unfair or deceptive acts or practices."[20] Whether Riverview is guilty of intentionally defrauding citizens of the Commonwealth is a genuine issue of material fact that, based upon all evidence currently before this Court, cannot be decided. Therefore, it would be improper for this Court to grant the Commonwealth's motion for summary judgment as to this issue.[21]
We, therefore, deny the Commonwealth's motion for summary judgment as it relates to Count III.
RIVERVIEW'S COUNTERCLAIM
Riverview, in its answer, filed on January 10, 1994, asserted a counterclaim and three affirmative defenses.[22] The Commonwealth requests this Court to grant summary judgment in its favor as to Riverview's counterclaim.
Riverview's counterclaim requests this Court, if it is the prevailing party under Count I, to grant it attorney's fees as outlined in the GSISA. As previously discussed, we have found that the Commonwealth, as a matter of law, is the prevailing party as to Count I. Therefore, we grant summary judgment as to Riverview's counterclaim in favor of the Commonwealth.
ORDER
AND NOW, this 22nd day of August, 1994, it is hereby ORDERED that:
*49 (1) Riverview's motion for judgment on the pleadings as to Count I is denied, for the reasons previously discussed;
(2) the Commonwealth's motion for judgment on the pleadings as to Counts I and II are denied for the reasons previously discussed;
(3) the Commonwealth's motion for summary judgment as to Count I is granted, for the reasons previously discussed and Riverview is hereby permanently enjoined from violating the GSISA, as specifically discussed in the preceding opinion;
(4) the Commonwealth's motion for summary judgment as to Counts II and III is denied, for the reasons previously discussed;
(5) the Commonwealth's motion for summary judgment as to Riverview's counterclaim is granted, for the reasons previously discussed;
(6) a discovery schedule as to the remaining Counts II and III of this litigation is hereby set forth as follows: both parties shall have forty-five days from the date of this order to conduct interrogatories, after which, the parties will be given an additional forty-five days to conduct depositions;
(7) it is hereby ORDERED that a pre-trial conference will commence on Tuesday, December 27, 1994, at 1:00 p. m. in Room 502A of the South Office Building, Harrisburg, PA. The purpose of this conference is to further discuss the matters as decided and discussed herein, define any additional legal issues in this litigation, review the current status of the parties' discovery and set down a date certain for a full trial of this litigation;
(8) a hearing to ascertain the damages Riverview is to be assessed as to Count I will immediately precede the trial of Counts II and III of this litigation.
NOTES
[1] Riverview filed this pleading as two separate parts. The first was the answer of Defendant Riverview Leasing, Inc. and the second was the answer of Defendant C. H. Leasing of Virginia, Inc. These pleadings were virtually identical except for the first affirmative defense alleged in the new matter. In the answer of Defendant C. H. Leasing of Virginia, Inc., its first affirmative defense in its new matter alleges that C. H. Leasing of Virginia, Inc. is no longer doing business in the Commonwealth. Whereas, in the answer of Defendant Riverview Leasing, Inc., its first affirmative defense in its new matters asserts that the GSISA does not apply to its business practices.
[2] A motion for judgment on the pleadings is defined by Pa.R.C.P. No. 1034 which states:
(a) After the pleadings are closed, but within such time as not to delay the trial, any party may move for judgment on the pleadings. (b) The court shall enter such judgment or order as shall be proper on the pleadings.
[3] See also Goodrich Amram 2d, Procedural Rules Service With Forms, § 1034(b):2 (1991).
[4] The Commonwealth filed a motion for judgment on the pleadings as to Counts I and II as well as, alternatively, a motion for summary judgment as to Counts I, II and III and to Riverview's counterclaim. As we find that summary judgment is a more appropriate vehicle to dispose of this case, we will simply deny the Commonwealth's motion for judgment on the pleadings as to Counts I and II without any further discussion.
[5] This, in pertinent part, is from the Commonwealth's amended complaint in equity averment number 8, filed on August 20, 1993 and was admitted to by Riverview in its answer filed on January 10, 1994.
[6] The Commonwealth and Riverview both agree that this determination is a question of law, since Riverview has admitted that its "rental agreement" is used in each and every transaction that it conducts. See the Commonwealth's Brief in Support of Plaintiff's Motion for Summary Judgment on the Pleadings and Summary Judgment and in Opposition to Defendant's Motion, filed on March 28, 1994, at page 3 and Riverview's Memorandum of Law in Support of Defendant Riverview Leasing, Inc.'s Motion for Judgment on the Pleadings as to Count I, filed on March 1, 1994, at page 3.
[7] Page 11 of Riverview's memorandum of law in support of Defendant Riverview Leasing, Inc.'s motion for judgment on the pleadings as to Count I, filed March 1, 1994.
[8] Rent America, in its rental agreement, states the following in its Option to Own section:
The owner will transfer ownership of the property to you, the renter(s), if you, at your sole election, renew this agreement for ___ successive weekly rental terms or for ___ successive monthly terms and then exercise an option to purchase the property by payment of the property's then fair market value.... You have not agreed to purchase this property, but you may choose to purchase in the future if you meet the conditions of this option. (Emphasis added.) Appendix A in Commonwealth's motion for preliminary injunction filed on August 8, 1993.
[9] In the Renter's Right to Renew section of Riverview's rental agreement, it states that:
The renter, at his or her option, may renew this agreement for an additional term at the conclusion of each term or rental period, by the payment to the owner of the rental payment. Payment by the renter of an additional rental payment, on or before the last day of each rental term shall renew this agreement for an additional term.
Motion for preliminary injunction, Appendix A, filed August 6, 1993.
[10] The term "de facto" means literally in fact, or actually, or in reality. Balsbaugh v. Rowland, 447 Pa. 423, 290 A.2d 85 (1972).
[11] However, as previously mentioned, Riverview's contention is that its business practices do not apply to the GSISA.
[12] This notice, as set forth in Section 1302(c), must contain the following:
"Notice to buyer: (1) Do not sign this agreement before you read it or if it contains any blank space. (2) You are entitled to a completely filled in copy of this agreement. (3) Under the law, you have the right to pay off in advance the full amount due and under certain conditions to obtain a partial refund of the service charge."
[13] A copy of this agreement appears in the Commonwealth's motion for preliminary injunction at Appendix A.
[14] This fee is outlined in Riverview's "rental agreement" as a fee which the "owner" of the property (Riverview) may charge the "renter" (consumer) to renew their rental term after they have failed to exercise their option to renew.
[15] The Commonwealth, in its amended complaint and this motion, incorrectly cited the number of the section as 1304. However, as 1504 is correctly quoted in the Commonwealth's amended complaint as well as Riverview's answer, this Court will adjudicate this alleged violation as if the correct section was quoted in the complaint.
[16] This Court has made this determination based upon the following appendixes and exhibits which were properly attached to the Commonwealth's motion for preliminary injunction which was filed in this Court on August 6, 1993: Appendix F with its accompanying Exhibits 1 through 4, Appendix H with its accompanying Exhibit 4, Appendix K with its accompanying Exhibit 1, and Appendix L with its accompanying Exhibits 1, 2 and 6 through 8.
[17] Pa.R.C.P. No. 1035(b) specifically allows this Court to render summary judgment on the issue of liability alone and to dispose of, at a later time, the issue as to damages.
[18] The Commonwealth filed, in the alternative, a motion for judgment on the pleadings as to this count. We will discuss, and deny, the motion for summary judgment. However, the analysis would seemingly be identical to that of a judgment on the pleadings.
[19] The Commonwealth does concede, however, the existence of a number of allegations in the Commonwealth's amended complaint which Riverview disputes, and that these allegations cannot be determined on the basis of a summary judgment motion alone.
[20] See generally Packel v. Ziomek, 145 Pa.Commonwealth Ct. 675, 352 A.2d 235 (1976) and Pirozzi v. Penske Olds-Cadillac-GMC, Inc., 413 Pa.Superior Ct. 308, 605 A.2d 373 (1992).
[21] The Commonwealth asserts four allegations which, they argue, are indisputable and that this Court should grant summary judgment on these four allegations alone. However, upon reviewing these four allegations, we rule that summary judgment is inappropriate as to these four allegations as well as all of the allegations that are asserted in the Commonwealth's amended complaint.
[22] Riverview filed two separate answers, one for Riverview Leasing, Inc. and one for C. H. Leasing of Virginia, Inc. These pleadings were identical except for the first affirmative defense alleged in the new matter. See also footnote 1.
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162 B.R. 382 (1993)
In re Jane M. CRECCO, Debtor.
Bankruptcy No. 92-15741-JNF.
United States Bankruptcy Court, D. Massachusetts.
September 22, 1993.
Mary T. Cummings.
David Woods.
MEMORANDUM
JOAN N. FEENEY, Bankruptcy Judge.
I. INTRODUCTION
The matter before the Court is the "Debtor's Objection to Proof of Claim of Commonwealth of Massachusetts Department of Revenue." The Court conducted a hearing on the Debtor's objection on July 9, 1993. At the conclusion of the hearing, the Court ordered the parties, Jane M. Crecco (the "Debtor") and the Massachusetts Department of Revenue (the "DOR"), to file an Agreed Statement of Facts and briefs by August 27, 1993. The parties have complied with the Court's bench order.
II. AGREED STATEMENT OF FACTS
The parties submitted the following Agreed Statement of Facts.
1. A Massachusetts corporation by the name of LeGourmet, Inc. operated a business for the years 1989 to 1991, in which it was required to withhold meals tax and withholding taxes and pay them over to the Department of Revenue.
2. The amounts set forth in the Department of Revenue's claim reflect these taxes.
3. On April 10, 1992, the Department of Revenue indicated its intention to hold the debtor responsible for the payment of these taxes.
4. On May 15, 1992, at a hearing held in Hyannis, MA, the debtor conceded she was the person responsible, and a finding was so made.
5. On June 2, 1992, the debtor filed the instant Chapter 13 petition.
6. The Department of Revenue's claim breaks down to three separate items:
(a) Meals and withholding tax withheld but not turned over to the Department of Revenue ($11,626.73);
(b) The penalty for failure to turn over those funds ($2,791.03);
(c) Interest in the amount of $5,251.95, calculated at the rate of 18% on item (a).
*383 III. ISSUE
The only issue in dispute is whether the DOR's claim for prepetition interest is entitled to the same priority as the underlying tax from the date of assessment against the corporation, as the DOR contends, or whether it is merely an unsecured claim, as the Debtor contends.
IV. DISCUSSION
Section 1322(a) of the Bankruptcy Code requires a Chapter 13 Plan to provide for "the full payment, in deferred cash payments, of all claims entitled to priority under section 507 . . . unless the holder of a particular claim agrees to a different treatment of such claim." 11 U.S.C. § 1322(a)(2). Section 507, in turn, provides in pertinent part:
(a) The following expenses and claims have priority in the following order: . . .
(7) Seventh, allowed unsecured claims of governmental units, only to the extent that such claims are for
(C) a tax required to be collected or withheld and for which the debtor is liable in whatever capacity; . . .
(G) a penalty related to a claim of a kind specified in this paragraph and in compensation for actual pecuniary loss. . . .
11 U.S.C. § 507(a)(7)(C), (G).
In support of her argument that pre-petition interest on the DOR's tax claim is not entitled to priority, the Debtor contends that interest is in fact a penalty because the statutory rate exceeds the amount of reasonable compensation for pecuniary loss. Moreover, the Debtor asserts that interest may accrue only from the date that her personal liability was assessed.
The DOR maintains that pre-petition interest is entitled to priority from the time LeGourmet, Inc. was assessed in 1990 and 1991, not at the later point in time when the Debtor's personal liability was determined.[1] The DOR relies upon Berenson v. Commissioner of Revenue, 413 Mass. 831, 604 N.E.2d 704 (1992), a case in which the Supreme Judicial Court determined that the personal liability of a corporate officer for pre-petition interest and penalties ran from the date of assessment against the corporation.
This Court has not been presented with and cannot find any legitimate basis for departing from the statutory scheme and the overwhelming weight of authority. The Court concludes that, whether pre-petition interest on unpaid taxes is considered part of the underlying claim or a penalty intended to compensate the government for the loss of the use of tax money, it is entitled to the same priority treatment under section 507(a)(7)(C) or (G). In In re Garcia, 955 F.2d 16 (5th Cir.1992), the Court of Appeals for the Fifth Circuit stated:
Virtually every court that has considered the issue . . . has held that pre-petition interest shares equal priority with the underlying tax debt, although the various courts have based their decision upon differing rationales.
Id. at 19. The Garcia court ruled that ". . . prepetition interest on the tax liability seems to fit snugly within section 507(a)(7)(G)." Id. at 18. The Court of Appeals for the Seventh Circuit in In re Larson, 862 F.2d 112, 119 (7th Cir.1988), observed that since prepetition interest is part of the underlying tax claim, it is entitled to the same priority status.
With respect to the issue of when interest begins to accrue, the Court finds no reason to depart from the holding in Berenson that the personal liability of a corporate officer is determined as of the date of assessment against the corporation. Accordingly, *384 interest accrues from the original assessment date against LeGourmet, Inc.
V. CONCLUSION
The Debtor has the burden of persuasion with respect to her objection to the DOR's claim. She has failed to meet that burden. Accordingly, the Court overrules her objection and allows the DOR's claim in the amount of $5,251.95 for pre-petition interest as an unsecured priority claim.
ORDER
In accordance with the Memorandum dated September 22, 1993, the Court hereby overrules the Debtor's objection to the Proof of Claim filed by the Massachusetts Department of Revenue and allows the Department of Revenue's claim for pre-petition interest in the amount of $5,251.95 as an unsecured priority claim.
NOTES
[1] Mass.Gen.Laws Ann. ch. 62C, § 31A provides:
If a person fails to pay to the commissioner any required tax of a corporation or partnership and such person is personally and individually liable therefor to the commonwealth under section five of chapter sixty-two B, section seven B of chapter sixty-four G, section sixteen of chapter sixty-four H or section seventeen of chapter sixty-four I, the commissioner shall so notify such person in writing at any time during the period of time that such assessment against the corporation or partnership remains in existence and unpaid, . . . such person shall be personally and individually liable for the tax of the corporation or partnership, which shall be deemed to be assessed against such person.
Mass.Gen.Laws Ann. ch. 62C, § 31A (West 1988).
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826 F. Supp. 1234 (1993)
Dok Sin MOSES, a Married Woman, Plaintiff,
v.
PHELPS DODGE CORPORATION, a Foreign Corporation, et al., Defendants.
No. Civ. 92-143-TUC-JFB (WDB).
United States District Court, D. Arizona.
June 21, 1993.
*1235 Chris J. Kimminau, Tucson, AZ, for plaintiff.
Nathan R. Niemuth and Michael D. Moberly, Phoenix, AZ, for defendants.
MEMORANDUM & ORDER
BATTIN, Senior District Judge.
Pending before Court is Defendants' Petition for Award of Attorney's Fees. For the reasons stated below, the Petition is granted, in the amount set forth below.
Plaintiff filed this case contending that she was wrongfully terminated from her job in breach of her employment contract and in violation of both Arizona state law and Title VII of the Civil Rights Act of 1964. On March 4, 1993, the Court granted summary judgment in favor of Defendant, based upon a finding that most of Plaintiff's claims were barred by the applicable statutes of limitation, and that Plaintiff had failed to establish duress sufficient to equitably toll the running of the statutes. 818 F. Supp. 1287. The Court also found that Plaintiff's breach of contract claim was precluded by her failure to exhaust the grievance mechanisms set forth in the Employee Handbook governing her employment. See Mem. and Ord. of March 4, 1993. Thus, Defendant was the prevailing party in this litigation, and as such seeks an award of attorney's fees in the amount of $24,120.50.
First, Defendant seeks an award of attorney's fees under 42 U.S.C. § 2000e-5(k), which provides for a discretionary award of attorney's fees to a prevailing party in an action under Title VII, and under A.R.S. § 41-1481.J, which provides for an award of fees to a prevailing party in an action under the Arizona Civil Rights Act.
It is well established that an award of fees to a prevailing defendant under § 2000e-5(k) is appropriate only upon a finding that the action was "frivolous, unreasonable, or without foundation, even though not brought in subjective bad faith." Thomas v. Bible, 983 F.2d 152, 155 (9th Cir.1993) (quoting Christiansburg Garment Co. v. EEOC, 434 U.S. 412, 421, 98 S. Ct. 694, 700, 54 L. Ed. 2d 648 (1978)). The federal policy disfavoring fee awards to prevailing defendants under Title VII applies equally to an award of fees under A.R.S. § 41-1481.J. See Sees v. KTUC, Inc., 148 Ariz. 366, 714 P.2d 859, 862 (App.1985). In this case, the Court finds that Plaintiff's action was not "frivolous, unreasonable or without foundation". Defendant is therefore not entitled to an award of fees under either the federal or state civil rights statutory scheme.
*1236 Next, Defendant seeks an award of attorney's fees pursuant to A.R.S. § 12-341.01.A, which provides for a discretionary award of attorney's fees to the successful party in "any contested action arising out of a contract...." Plaintiff argues that the Christiansburg standard (limiting an award of fees to a prevailing defendant to those cases where the action was "frivolous, unreasonable, or without foundation") applies to a request for fees under A.R.S. § 12-341.01, in the employment context, and that Defendant's request for fees under that section should be denied as well. Defendant disagrees. Both parties rely upon the same case, Mullins v. Southern Pacific Transportation Co., ___ Ariz. ___, ___, 851 P.2d 839, 842 (App.1992), in support of their respective positions.
After a careful reading of Mullins and of Sees, the Court concludes that the federal policies limiting an award of fees under § 2000e-(5)(k) and A.R.S. § 41-1481.J do not apply to an award of fees to a prevailing defendant under § 12-341.01.A. Nothing in the factual background or language of those cases compels that conclusion. To the contrary, "A.R.S. § 12-341.01.A is remedial in nature and such relief is equally available to those who successfully defend an action as to those who successfully seek affirmative relief." Schwartz v. Farmers Ins. Co. of Arizona, 166 Ariz. 33, 800 P.2d 20 (App. 1990). Thus, to the extent that a claim in an employment case arises out of a contract and not out of federal or state civil rights law, it should be treated as any other contract claim, and attorney fees thereunder awarded pursuant to the standards generally applicable to such discretionary determinations.
In Associated Indem. Corp. v. Warner, 143 Ariz. 567, 694 P.2d 1181 (1985), the Arizona Supreme Court set forth the factors to be considered in determining whether attorney's fees should be awarded under § 12-341.01. Those factors include:
1. the merits of the claim or defense presented by the unsuccessful party;
2. whether the litigation could have been avoided or settled and the successful party's efforts were completely superfluous in achieving the result;
3. whether assessing fees against the unsuccessful party would cause an extreme hardship;
4. whether the successful party prevailed with respect to all of the relief sought;
5. the novelty of the legal question presented, and whether the claim or defense had previously been adjudicated in this jurisdiction;
6. whether the award in that particular case would discourage other parties with tenable claims or defenses from litigating or defending legitimate contract issues for fear of incurring liability for substantial amounts of attorney's fees.
Id. at 570, 694 P.2d at 1184.
Applying those standards to this case, the Court first notes that of the eight causes of action asserted by Plaintiff, only Count IV arose out of contract. The legal question presented by the contract claim was not particularly complex or novel, and Defendant prevailed under existing Arizona case law which indicated that the handbook provisions in question were contractual in nature, and that Plaintiff was bound by her consent to follow the exclusive remedies afforded under the handbook. See e.g. Chambers v. Valley Nat. Bank of Arizona, 721 F. Supp. 1128, 1131-32 (D.Ariz.1988); Thomas v. Garrett Corp., 744 F. Supp. 199, 203 (D.Ariz.1989).
However, even though the merits of the contract claim were not particularly strong, it is unlikely that litigation on that claim could have been completely avoided or settled, given the existence of the numerous noncontractual claims whose outcome was not at all certain. Those claims were both factually and legally well supported, and Defendant prevailed on summary judgment only because of the untimeliness of the claims. Even the statute of limitation question was not clear, since the validity of that defense depended upon the availability of equitable tolling, which in turn implicated other factual and legal issues requiring judicial resolution. It is unlikely that Defendant could have avoided litigating the contract claim as long as those other claims were outstanding.
*1237 The Court has no basis for determining whether awarding attorney's fees in this case "would discourage other parties with tenable claims or defenses from litigating or defending legitimate contract issues for fear of incurring liability for substantial amounts of attorney's fees", but suspects that an award would neither encourage nor discourage future contract-based litigation. Likewise, there is no evidence before the Court from which it may determine whether an award of fees would cause extreme hardship upon Plaintiff.
After consideration of the relevant factors, the Court finds that an award of fees is properly made under § 12-341.01.A. However, the Court must be particularly careful not to award any fees which may also have been associated with the defense of the federal and/or state discrimination claims, since to do so might have a tendency to chill such litigation, contrary to the clear "Congressional intent that discrimination be eradicated." Sees, 148 Ariz. at 369, 714 P.2d at 862.
Review of the record in this case reveals that most of the time claimed would likely have been spent in defense of the seven noncontractual claims, even in the absence of the one contractual claim. The greater part of the defense effort appears to have been directed towards the statute of limitations and equitable tolling issues, which pertained solely to the noncontractual claims (including the federal and state discrimination claims), and is therefore not recoverable. Any time which applies to both contractual claims and noncontractual claims is not properly recoverable by Defendant.
The Court has been unable to precisely determine which time was necessarily spent only in defense of the contract claim. In many instances, the billing entries were either insufficiently detailed to allow the Court to determine whether the time incurred was spent in relation to the contractual or noncontractual claims, or contained time spent on both contractual and noncontractual matters, with no basis for the Court to allocate the time between the two.
After review of the documentation in light of the Court's above-stated concern about the overlap in time between contractual and noncontractual claims, particularly where those noncontractual claims involve alleged civil rights violations, and given the other circumstances of this case set forth above, the Court finds that an award of attorney's fees in the amount of $1,500.00 is reasonable and appropriate.
Based on the foregoing,
IT IS ORDERED that Defendants' Petition for Award of Attorney's Fees is granted in the amount of $1,500.00. The Clerk is directed to enter a final judgment in accordance with this ruling, and in accordance with the Court's ruling of March 4, 1993, granting summary judgment in favor of Defendant.
The Clerk is directed to forthwith notify counsel of record of the making of this Order.
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715 S.W.2d 910 (1986)
STATE of Missouri, Respondent,
v.
Anthony LYTLE, Appellant.
No. 68042.
Supreme Court of Missouri, En Banc.
September 16, 1986.
*911 L. Patrick O'Brien, Kansas City, for appellant.
William L. Webster, Atty. Gen., Christine M. Szaj, Asst. Atty. Gen., Jefferson City, for respondent.
RENDLEN, Judge.
Defendant appeals his convictions for the first degree murder (felony murder), § 565.003,[1] of Pauline Chambers, armed criminal action, § 571.015, and robbery in the first degree, § 569.020, committed during a burglary. Error is asserted in the admitting of defendant's confession which he contends was coerced, involuntary, and taken in violation of U.S. Const. amends. V and XIV.
Defendant was charged by a six-count indictment: Count I, first degree murder of Earl Chambers, § 565.003; Count II, armed criminal action, § 571.015; Count III, first degree murder of Pauline Chambers, § 565.003; Count IV, armed criminal action, § 571.015; Count V, robbery in the first degree, § 569.020; and Count VI, burglary in the first degree, § 569.160. The jury acquitted defendant on Count II and though they found him guilty of manslaughter and burglary in the second degree on Counts I and VI, respectively, the trial judge "dismissed" those counts. Defendant was sentenced to consecutive life sentences on Counts III and IV and to a concurrent twenty-five-year sentence on Count V.
The Court of Appeals, Western District, reversed because of the alleged improper admission of defendant's videotaped confession and remanded for new trial. The cause comes to us on certification of a dissenting judge. Mo. Const. art. V, § 10.
I.
On the morning of November 27, 1983, police officers found Pauline and Earl Chambers lying dead from stab wounds on the bedroom floor of their Kansas City home. The front door of the home had been kicked in, the house ransacked and a bloody eleven-inch butcher knife was found in one of the bedrooms. One of the shoe prints found on the blood-stained floor matched tennis shoes recovered from Donald "Bug" Dixon. Blood stains were found on shoes recovered from Jon Keith Smith and one of the Chambers' television sets was found at the Smith residence bearing Jon Keith's palm print. A second television, with Earl Chambers' social security number, was found under the front porch at James Bowman's residence.
Shortly after the murders, police officers interrogated defendant, on November 30 and again on December 2. Evidence presented by the state at a pretrial suppression hearing and at trial demonstrates the following:
On November 30, 1983, defendant was taken into custody for questioning and after *912 waiving his Miranda[2] rights was interrogated at police headquarters from 1:26 p.m. until 4 p.m. by Detectives Floyd Williams and Bennie White. Sometime after 1:26 p.m. defendant was allowed to talk to his mother. Detective Williams was "very hard" on defendant during this round of interrogation and used this "technique" to "shock the young man into reality, into telling the truth." He told defendant that "if he went to the penitentiary, he would definitely not survive because he was too small, he couldn't protect himself" and "if he would prefer to remain in Jeff City, that he wouldn't survive because of his size, age, and looks," but Williams did not "threaten" defendant that if he did not tell the truth he would go to jail. Despite this "hard-line" technique Detective Williams had trouble getting defendant to talk to him and believed he was holding back information. At some point during this round of interrogation, defendant was examined by polygraph and at the conclusion of that examination he again waived his Miranda rights. Defendant was then interrogated by Detectives Edward Glynn and Earl Craven from 5:30 p.m. until 10:45 p.m.[3]
Initially, on November 30, defendant denied all knowledge of the Chambers homicides but later admitted[4] being at the residence the night of the crime. He stated that he and Jon Keith Smith were at the home of a friend, Marcell Small, when Donald "Bug" Dixon and Eddie Bowman came by to get Small to go "stealing" with them. Although Small declined, defendant and Smith decided to accompany Dixon and Bowman. They proceeded to the Chambers' residence which Smith remembered was the home of some elderly white persons and upon arrival then discovered two other men already in the process of burglarizing the home. Defendant first stated he did not go into the house but learned from someone else there were two dead persons inside. Defendant then changed his account by stating he did enter the residence, rummaged through some drawers and stood watch at the front door. He went to a hallway from which he saw the blood-covered body of a dead person lying on a bedroom floor and then, taking a number of items from the home with them, the two groups of men left separately. At the conclusion of the November 30 interrogation defendant was released to return home to his family.
On December 2, 1983, while at his workplace defendant was arrested, handcuffed, placed in a "paddy" wagon, and once more informed of his Miranda rights. He was taken to police headquarters and processed in approximately forty-five minutes and after again waiving his Miranda rights was interrogated from 7:06 p.m. until 10:15 p.m. by Detectives Glynn and Craven.
These detectives used a "quiet" or "soft-spoken" interrogation technique, talking to defendant in a normal tone of voice and in a father-son fashion. Glynn told defendant that he knew defendant was holding back information and that if he did not tell them everything then he would keep it inside him the rest of his life and it would eat him up. For approximately the first hour defendant repeated his statement that the Chambers already were dead when he arrived. Detective Glynn told defendant that if he knew something then he should tell the detectives, and that "[h]e could only help himself by doing this." But at some point he became tense, began to cry, his lips quivered and he was "on the brink of losing control." Detective Glynn then began to talk to defendant about other matters not related to the investigation such as his personal life, his church life, and whether he was a Christian. On Glynn's suggestion defendant walked around and took some breaths *913 and for ten or fifteen minutes said nothing. At this point he became more relaxed and began to talk more openly with the detectives. He then told Glynn and Craven that "Eddie did it," a reference to Eddie Bowman. He stated that while in the house he heard grunts and groans from one of the bedrooms and then saw Bowman stab someone whom he later learned was Pauline Chambers. After the officers reviewed the sequence of events surrounding the Chambers murders, they videotaped defendant's confession. The videotaping did not begin until about one hour after the questioning had ceased.
In the videotaped confession, defendant described the events of the night of November 26, 1983, and early morning of November 27, 1983. Among those details were the following: Smith, Dixon, Bowman, and defendant drove around in Bowman's car looking for houses to burglarize. After knocking on several doors to determine whether anyone might be present, the four men proceeded to the Chambers' house and upon arrival they discovered that two other men were at that time burglarizing the house. Defendant, Smith, Dixon and Bowman joined the burglary in progress. Defendant kept watch for a while then rummaged through drawers while others carried items out of the house. Defendant could hear one of the other men talking in a bedroom, and defendant assumed he was talking to the residents. Bowman went into the bedroom and defendant heard a scuffle, then heard someone cry out "No, no, no" and "sounds of pain." Defendant ran to the bedroom where he saw Bowman stab someone he thought was a man "one last time" and then Bowman put a long-bladed knife in his pocket. The burglars completed their escapade, stealing wallets, coin purses, televisions, a microwave, a fur coat, and a jewelry box. After defendant helped load a television into the car, the two groups of burglars departed separately. Defendant initially drove the car though Bowman, who threw a number of items out of the car including wallets, a coin purse and a screwdriver, later took over. Eventually the four men arrived at Dixon's house where they took a television to see if it worked. They then drove to Smith's house and left a microwave and a television set and thereafter the others drove defendant home.
II.
Prior to trial, defendant filed a motion to suppress the videotaped statement as involuntary, coerced, and the product of physical and psychological pressure so great as to overcome his will. A suppression hearing was held, at the conclusion of which the trial judge determined that "the statements of the defendant were voluntarily and freely given, and the motion to suppress the statements is overruled." The suppression hearing evidence, which for the most part also was introduced at trial, included the following in addition to the facts recited above.
Detectives Glynn and Craven testified they did not strike defendant, made no threats or promises, and exerted no psychological pressure. Craven testified that defendant's reactions during the interrogation"the tearing, the quivering, and the nervousness"were those expected from a witness to a vicious crime. Detective Williams, also a state's witness, testifying at the suppression hearing stated that on December 2 he questioned defendant for approximately 1½ minutes in order to clear up a certain detail. From Detective Williams' trial testimony, it is clear that he was alone with defendant during this brief interview on December 2 and it occurred after defendant had told Detectives Glynn and Craven that "Eddie did it." Williams testified concerning his observations of defendant at that time, stating at the suppression hearing that defendant was "too relaxed" and that "[a]t the time when I was talking to him, Mr. Lytle, my opinion was that he would have said anything to get rid of me." He further testified on cross-examination:
Q. And do you recall making the statement, "If I had asked himreferring to Tony Lytleif they had been shot *914 with a cannon, he would have said, `Yes'"?
A. Yes.[5]
Detective Williams had no contact with defendant after his original hardline questioning in the early afternoon of November 30, except possible minimal contact during that evening and except the brief moments on the evening of December 2. It was during these brief moments on December 2 that Williams formed his opinion that defendant was "too relaxed." It is important to note that defendant at that point had confessed to the "soft-line" detectives and was understandably relaxed. Moreover, given Williams' admitted use of the hard-line technique on November 30, it is most reasonable to assume that defendant felt uncomfortable or pressured by his presence and wanted him out of the interrogation room if possible. But most important, during those brief moments defendant told Williams nothing of significance and to the extent Williams' presence was threatening it cannot be said this produced an involuntary confession or that his opinion of defendant's condition altered the facts.
Defendant testified that when processed through the jail on December 2, he was held in a cell for twenty or thirty minutes (it was his first time in a cell), thereafter was fingerprinted and then completed an information sheet. He testified that he changed his statement because Detective Glynn struck him on the face with his fist. At the suppression hearing and at trial a mug shot of defendant taken after the videotaping was introduced into evidence, which purportedly showed bruises on his face. Defendant's mother testified at the suppression hearing and at trial that on December 3, 1983, defendant had swollen, discolored bruises on his face, as shown in the photograph, bruises which he did not have on December 2, 1983, before he went to work. At the suppression hearing she testified that she asked defendant what happened to his face and he said the detective hit him. At trial defendant's work supervisor testified that defendant looked no different in the photograph than he did when he left work on December 2, 1983, with the police officers. Defendant further testified that prior to changing his statement Detective Glynn told him "he was going to let me go to jail and get butt fucked." He testified, as he did at trial, that the truth was that he did not see anyone kill the Chambers, and that they were already dead. He placed the blame on Bowman because the detectives had shown him a piece of paper with this name on it and told him Bowman was "a sick person." Defendant felt that the detectives would believe him if he said Bowman did it and if he added more details to his statement.
Defense witness Dr. Jan B. Roosa, a clinical psychologist, testified that defendant is very suggestible, thinks in terms of what others want, and has difficulty sticking with his own thinking. He testified that where defendant tells the truth, yet is told that it is a lie, any response made by him could best be considered unreliable.
At trial, evidence was again adduced regarding the voluntariness of the videotaped statement, defendant's renewed objection was overruled and the tape played for the jury. The jury was instructed to disregard any statements made by defendant, not freely and voluntarily made.
III.
In support of his contention that the videotaped statement was coerced, involuntary, and taken from him in violation of U.S. Const. amends. V and XIV, defendant argues that under the totality of circumstancesespecially his age, his extremely impressionable nature, and the relentless questioninghis additional statement "Eddie did it" and its subsequent embellishment were involuntary, that true to his nature as described by Dr. Roosa, he in the end gave the interrogators what they wanted *915 to hear, rather than the truth, in order to satisfy them and to end the interrogation. He places heavy reliance upon the testimony of Detective Williams and asserts the record cannot support a finding that the state sustained its burden of proving voluntariness absent the trial court's express finding that it disbelieved Detective Williams' testimony.
A defendant is denied due process if his conviction is founded, in whole or in part, upon an involuntary confession. Jackson v. Denno, 378 U.S. 368, 376, 84 S. Ct. 1774, 1780, 12 L. Ed. 2d 908 (1964). It matters not whether defendant in fact spoke the truth in the challenged confession. Rogers v. Richmond, 365 U.S. 534, 540-41, 543-44, 81 S. Ct. 735, 740-41, 5 L. Ed. 2d 760 (1961). Once defendant objects to a confession's admission, there must be, prior to its admission into evidence, a clearcut determination that the confession was in fact voluntary. Jackson v. Denno, 378 U.S. at 377-91, 84 S.Ct. at 1781-89; State v. Mitchell, 611 S.W.2d 211, 214 (Mo. banc 1981). "Although the judge need not make formal findings of fact or write an opinion, his conclusion that the confession is voluntary must appear from the record with unmistakable clarity." Sims v. Georgia, 385 U.S. 538, 544, 87 S. Ct. 639, 643, 17 L. Ed. 2d 593 (1967). While the burden of proving a confession's voluntariness is upon the state, it need be proved only by a preponderance of the evidence. Lego v. Twomey, 404 U.S. 477, 489, 92 S. Ct. 619, 626-27, 30 L. Ed. 2d 618 (1972); State v. Olds, 569 S.W.2d 745, 751 (Mo. banc 1978).
The test for "voluntariness" is whether under the totality of the circumstances defendant was deprived 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 (Mo. banc 1979), appeal dismissed, 446 U.S. 902, 100 S. Ct. 1825, 64 L. Ed. 2d 254 (1980). When considering the totality of circumstances, no single fact is dispositive, State v. Flenoid, 642 S.W.2d 631, 634 (Mo. banc 1982), and in determining whether a confession was obtained by mental coercion, factors to consider include age, experience, intelligence, gender, lack of education, infirmity, and unusual susceptibility to coercion. Id.; State v. Flowers, 592 S.W.2d 167, 169 (Mo. banc 1979).
On appeal, we are faced with the question of whether the evidence was sufficient to sustain the trial court's finding that the statement was voluntarily given. State v. Hughes, 596 S.W.2d 723, 727 (Mo. banc 1980). Conflicts in the evidence were for the trial court to resolve and we defer to the trial court's superior position from which to determine credibility. State v. Buckles, 636 S.W.2d 914, 924 (Mo. banc 1982); Higgins, 592 S.W.2d at 158; State v. Sherrill, 657 S.W.2d 731, 739 (Mo.App. 1983).
Here defendant was repeatedly advised of his Miranda rights and on each occasion voluntarily waived those rights. While such is not dispositive of the voluntariness issue, it is an important consideration. State v. Craig, 642 S.W.2d 98, 100 (Mo. banc 1982); Higgins, 592 S.W.2d at 158. Furthermore, Detectives Glynn and Craven testified that they did not strike defendant, made no promises or threats, and applied no psychological pressure. They utilized a "quiet technique" of interrogation. When defendant grew tense and began to cry, the detectives attempted to calm him down; when defendant requested cigarettes, they were provided for him. Detective Craven testified that defendant's reactions during the interrogation were normal for a witness to a vicious crime.
We have reviewed the record on appeal and have viewed the challenged videotaped statement. Considering the entire record, we hold that there is sufficient evidence to sustain the trial court's finding that the statement was voluntarily made and it cannot be said it was unreasonable for the trial court to conclude from the totality of circumstances that defendant's confession was voluntary. The fact that there is evidence from which the trial court *916 could have arrived at a contrary conclusion is immaterial. Lyons v. Oklahoma, 322 U.S. 596, 603, 64 S. Ct. 1208, 1212-13, 88 L. Ed. 1481 (1944).
In affirming the trial court's finding of voluntariness, we are not unmindful of certain undisputed evidence, e.g., defendant was eighteen years old, the detectives in essence employed the "Mutt and Jeff" routine, see, e.g., Miranda v. Arizona, 384 U.S. 436, 452, 86 S. Ct. 1602, 1616, 16 L. Ed. 2d 694 (1966), and defendant was subjected to an extensive interrogation on November 30, during which Detective Williams told defendant that "if he went to the penitentiary, he would definitely not survive." But it is noteworthy that defendant was a high school graduate and in fact attended computer programming classes after graduating. Moreover, we observe that after being interrogated on November 30 he was released and went home for almost two days. During that two-day respite he was free to consult with family friends and anyone he chose. It was only after that two-day interval that he was again picked up and reinterrogated.[6] Defendant waived his rights to counsel and to remain silent, and he never thereafter asked that the questioning cease, which he could have done. Under all the circumstances, the trial court certainly was free to disbelieve defendant's testimony that his confession resulted from any violence or fear of violence.
In this, as in all cases where it is asserted that a confession was unconstitutionally obtained, "we are forced to resolve a conflict between two fundamental interests of society; its interest in prompt and efficient law enforcement, and its interest in preventing the rights of its individual members from being abridged by unconstitutional methods of law enforcement." Spano v. New York, 360 U.S. 315, 315, 79 S. Ct. 1202, 1203, 3 L. Ed. 2d 1265 (1959).
We of course are limited to the appellate role, and from that perspective conclude the record here supports a finding that the state sustained its burden of proving voluntariness. Deferring to the trial court's determination of credibility and resolution of conflicts in evidence, the record does not command reversal.
We reject the proposition that, absent the trial judge's explicit finding that he disbelieved or in some way discredited Detective Williams' testimony, the record cannot support the trial court's finding that the state sustained its burden of proving voluntariness.
First, the testimony of Detective Williams, even if credited, is not fatal to the finding of voluntariness. Defendant made his challenged statement to Detectives Glynn and Craven, and Williams' testimony does not necessarily establish that defendant would have told them anything to stop the questioning; rather the trial court might have construed Williams' testimony narrowly and believed only that defendant would have told Williams, the "Mutt," anything to stop his questioning.
Second, the trial court might have disbelieved or discredited the opinion testimony, based upon a two-minute observation, and it need not so expressly find. "Although the judge need not make formal findings of fact or write an opinion, his conclusion that the confession is voluntary must appear from the record with unmistakable clarity." Sims v. Georgia, 385 U.S. at 544, 87 S.Ct. at 643. Here, the trial judge's conclusion that that confession is voluntary does appear from the record with unmistakable clarity, as he expressly stated that "the statements of the defendant were voluntarily and freely given." As for the trial court's findings on essential factual issues, upon which the ultimate conclusion of voluntariness is based, they must also be ascertainable from the record, but it is enough that they be clearly implied. *917 Olds, 569 S.W.2d at 750; State v. Monteer, 467 S.W.2d 48, 53-54 (Mo. banc 1971); State v. Garrett, 595 S.W.2d 422, 429-30 (Mo.App.1980). Here it is clearly implied by the trial judge's ruling that Williams' testimony was disbelieved or narrowly construed, and either of these implications supports the court's ruling of voluntariness.
We do not read Olds, 569 S.W.2d 745, as requiring reversal here. In Olds, the state offered no evidence to refute defendant's affirmative testimony that the interrogators ignored his requests to remain silent and his request for an attorney. Id. at 748-52. Despite this unrefuted testimony the trial court ruled that "Motion to Suppress will be overruled," making no findings of fact. Id. at 750. We reversed and remanded holding that "in the absence of the trial court's finding that it disbelieved defendant's testimony regarding requests for an attorney and to remain silent, we cannot find that the record supports the finding that the waiver and subsequent statements were voluntary." Id. at 751. The present case is clearly distinguishable from Olds, because here there is abundant testimony demonstrating voluntariness which refutes in detail defendant's contrary assertions and stands in conflict with defendant's evidence. Simply put, in Olds there was no evidence to refute defendant's testimony and no finding to fill this gap, but here such is not the case.
IV.
We hold that the trial court did not err in admitting the challenged confession, the issue certified to us by the dissenting judge. The cause is retransferred to the Court of Appeals for consideration of defendant's remaining contentions of error.
HIGGINS, C.J., BILLINGS, DONNELLY and WELLIVER, JJ., and KELLY, Special Judge, concur.
BLACKMAR, J., concurs in separate opinion filed.
ROBERTSON, J., not sitting.
BLACKMAR, Judge, concurring.
With some hesitation, I concur.
Officer Williams is to be commended only for his frankness.[1] If he did not threaten the defendant, he certainly tried to scare him by such statements as "if he went to the penitentiary, he would definitely not survive because he was too small, he couldn't protect himself" and "if he would prefer to remain in Jeff City, that he wouldn't survive because of his size, age, and looks." Even in the absence of an express threat or express promise, the defendant well might get the idea that, somehow, he might avoid the penitentiary if he would implicate his companion.
Had the defendant's incriminating statements followed Williams' interrogation, it might have been necessary to exclude them as products of coercion. After studying the transcript, however, I am of the opinion that the possibility of taint presents a pure question of fact, and that the trial judge's findings are permissible under the circumstances. The defendant had at his command two magic phrases as follows: "I want a lawyer" or "I don't want to answer any more questions." With either of these he could have stopped all interrogation. The police are entitled to advise him of his rights and to leave it to him to claim these rights. They have no duty to counsel him as to the course of action which is wisest from his own standpoint. Nor is it of any significance that the defendant may be easily influenced or is of passive disposition, if he is properly informed of his rights and is capable of understanding them.
Officer Glynn also stepped close to the line when (by Craven's testimony) he told the defendant that, if he knew something, he should tell the officers, and that he could only help himself by doing this, and when he told him: "If you're involved in *918 this thing, you need to get it off your chest; you need to tell us about it." The trial judge well might have found a promise of leniency in these words, but such a finding is not inevitable in the language used, and again we should defer to the finding of the trier of the fact.
The rules for interrogation are simple and should be followed. The officers of the law should not skirt the edges. But I am persuaded that the evidence supports the trial judge's denial of the motion to suppress, and so concur in the order of retransfer.
NOTES
[1] All statutory references are to RSMo 1978 unless otherwise indicated. Section 565.003 was repealed effective October 1, 1984, and felony murder now falls within § 565.021, RSMo Cum.Supp.1984.
[2] Miranda v. Arizona, 384 U.S. 436, 86 S. Ct. 1602, 16 L. Ed. 2d 694 (1966).
[3] There is some confusion as to which detectives participated in this round of questioning, but from the evidence it seems most probable that Glynn and Craven conducted this interrogation.
[4] Again there is some confusion whether this admission occurred during the first or second round of questioning.
[5] At trial, Detective Williams, in addition to repeating his suppression hearing testimony, also testified that defendant appeared "mentally drained and physically strained," and that in Williams' opinion defendant "didn't want to be questioned by them at that time."
[6] Defendant testified at trial that on December 1, 1983, he was taken to police headquarters where the officers left him in a cold interrogation room but did not interrogate him. Even if true such fact would not alter our holding and the trial court was free to disbelieve the testimony.
[1] I am repelled by the State's suggestion that the trial judge did not have to believe the officer's testimony. Where constitutional duties are involved, the State should normally be bound by the testimony of its own officials responsible in the premises.
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214 Md. 287 (1957)
134 A.2d 284
LEONARDO ET AL.
v.
BOARD OF COUNTY COMMISSIONERS OF ST. MARY'S COUNTY ET AL. (Two Appeals in One Record)
[No. 230, October Term, 1956.]
Court of Appeals of Maryland.
Decided July 30, 1957.
Motion for rehearing filed August 14, 1957.
Denied September 24, 1957.
The cause was argued before BRUNE, C.J., and COLLINS, HENDERSON, HAMMOND and PRESCOTT, JJ.
Hyman Ginsberg, with whom were George T. Burroughs, Wm. Aleck Loker and Ginsberg & Ginsberg on the brief, for the appellants and cross-appellees.
H. Warren Buckler, Jr., and William O.E. Sterling for the appellees and cross-appellants.
Denied September 24, 1957. Certiorari denied, 355 U.S. 906, rehearing denied, 355 U.S. 967.
*295 PRESCOTT, J., delivered the opinion of the Court.
In this case, there are cross appeals from a decree of the Circuit Court for St. Mary's County. The decree enjoined the appellees and cross-appellants (hereafter called "appellees") from collecting a front foot benefit tax assessed and levied against two lots belonging to Ercole Leonardo, and wife, two of the appellants and cross-appellees (all of the appellants and cross-appellees are hereafter called "appellants"). It also authorized the appellees to collect ad valorem taxes assessed and levied against the said two lots, and front foot benefit taxes and ad valorem taxes assessed and levied against all the other lots in a separate taxing and assessment district; provided and upon the condition that two additional lots be included in the separate taxing and assessment district and that front foot benefit and ad valorem taxes be assessed and levied against these two lots. The appellants attack the constitutionality of the legislation by which the taxation was authorized and the manner of performance of a contract for the construction of erosion prevention works, which construction was the cause of the taxation as authorized. The appellees appeal from that part of the decree which concerns the collection of the front foot benefit tax on the Leonardos' lots, and the requirement that two additional lots be included in the taxing district.
Chapter 66, Acts of 1950 of the General Assembly authorized the County Commissioners of the State to set up special taxing districts for erosion prevention work in every subdivision of land in any county subdivided for residential and business uses, and abutting or bordering upon the Chesapeake Bay and tributaries, or upon any other stream or body of water in the State, as shown in plats recorded among the land records in the county. The act further provided that the erosion prevention works were authorized after written application of 75 per cent of the property owners in the district. To finance the project, the County Commissioners, acting as a District Council, were authorized to issue notes, certificates of indebtedness or bonds maturing serially, payable in fifteen years and guaranteed as to principal and interest by the county.
*296 The act required a hearing to be held in connection with the plans and specifications and the award of a contract to the lowest responsible bidder, after the customary advertising. After construction of the erosion prevention works, the owners were to be subject to a benefit charge on each lot in the district according to the benefits received by each lot, as determined by the Commissioners after a public hearing. In addition, the act authorized an ad valorem tax against all the property in the district to meet payments of interest and principal on the county obligations and to pay for the maintenance and repair of the erosion prevention works. It further provided that the County Commissioners could reimburse themselves for expenses incurred in the administration of the project in an amount not to exceed two hundred dollars each, annually.
"Tall Timbers on the Potomac" is a residential subdivision abutting and bordering on the Potomac River in St. Mary's County. In 1951, the required 75 per cent of the lot owners petitioned the County Commissioners to have erosion prevention works constructed in their district. After a public hearing with respect to the plans and specifications, the county advertised for bids, and, on August 28, 1951, the county entered into a contract with the lowest responsible bidder, Neil MacDonald, whereby the contractor agreed to (a) construct approximately 2,150 linear feet of timber seawall at $23.00 per linear foot measured in place; (b) construct timber jetties spaced 30 feet on centers at $10.00 per linear foot, and (c) to place earth back-fill in place from the existing earth banks to the new seawall for $1.50 per cubic yard measured in place. According to the record, the surveying of the projects began in the early part of 1951, and the construction of the erosion prevention project was completed in February, 1953, and was duly accepted and paid for.
While the construction was in progress, approximately 150 feet of the seawall was damaged by storms. The plans and specifications called for a "free standing" wall. The County asked for a bid from the contractor for "tieing" the seawall to the shore and for straightening the seawall damaged by the storms. The bid was $3,000.00 for the extra work *297 which the County Commissioners concluded was reasonable and which bid they accepted on June 6, 1952. The authority for an award in extras was contained in the contract.
By reason of two decisions of this Court in February, 1951, with respect to the type of legislation which may be enacted at a "short session" of the General Assembly, serious doubt was cast upon the constitutionality of Chapter 66, Acts of 1950. Accordingly, that act was introduced in substantially the same form at the next regular session of the General Assembly following these Court decisions and was enacted as Chapter 277, Acts of 1953. All actions taken under the 1950 Act by any Board of County Commissioners were validated and confirmed by the provisions of this later act. At the time of the effective date of this later act on June 1, 1953, the erosion prevention works contract had been fully completed. Thereafter, the County Commissioners by resolution of August 11, 1953, authorized the issuance of serial bonds of the county in the principal amount of $100,000 to pay for the entire expense of the construction of the said project. The bonds were subsequently sold at a public sale. As disclosed by the record, the total cost of the project, including legal services, printing of the bonds and newspaper advertising, amounted to $97,160.31.
On October 13, 1953, the County Commissioners, acting as District Council for the Taxing and Assessment District of Tall Timbers on the Potomac, adopted a resolution in which they designated the territory within said district to bear the special taxation authorized by Chapter 277, Acts of 1953, by reason of the benefits accruing to certain lots within the said district. That resolution found that the waterfront lots had been benefited by the project in a ratio of two to one to the benefit of the non-waterfront properties in the district. A front foot benefit tax assessed on the said basis and an ad valorem tax of $2.50 per $100 of the assessable basis were levied on all the lots in the district.
Bills for the special taxation for the year 1954 were mailed to all of the lot owners in the district, and appellants, Leonardos, objected to the special levy on their lots Nos. 43 and 44. On July 6, 1954, the Leonardos filed a bill of complaint *298 in the Circuit Court for St. Mary's County, seeking an injunction to declare Chapter 66, Acts of 1950, and Chapter 277, Acts of 1953, unconstitutional. Thereafter, on October 5, 1954, eight of the residents of the District moved the court for permission to join as parties complainants in the Leonardo suit, and they were duly joined in the proceedings. These eight additional complainants were among those who petitioned the County Commissioners to have constructed the erosion prevention works in Tall Timbers on the Potomac. After a hearing in open court, the Chancellor passed a decree as above noted, and the respective appeals were noted.
I
The appellants first contend that the title of Chapter 277 of the Acts of 1953 is invalid under Article 3, section 29, of the Constitution of Maryland. Said section reads, in part, as follows: "* * * and every law enacted by the General Assembly shall embrace but one subject, and that shall be described in its title; * * *."
The appellants claim that the title is defective because: (a) the body of the act (sec. 161 (c)) requires a levy of ad valorem taxes upon all the assessable property in the county should the "benefit" and "district" taxes prove insufficient to meet the obligations upon the bonds issued; (b) said section 161 (c) contains certain penal provisions; (c) the body of the act provides for the allowance of personal expenses incurred by the County Commissioners because of erosion projects; (d) section 158 (b) provides a different method of selling bonds from the provisions of article 31, secs. 34, 35 and 36 (Code 1939); and none of these items is specifically mentioned in the title.
Section 29 of Article 3 of the Constitution has been involved in cases before this Court on numerous occasions. It has been included in the last three Constitutions of this State, and its purposes are to prevent the combination in one act of several distinct and incongruous subjects, and to inform the members of the legislature of the nature of the bills introduced, which are usually read to them by their titles only, and to permit the citizens of the State to know of proposed legislation. *299 The general rule of its construction is that every presumption favors the validity of the statute, and reasonable doubt is enough to sustain it. The appellants here assert no claim that the statute embraces more than one subject. The cases arising under this section of the Constitution relating specifically to the requirement that the subject be described in the title may be generally divided into those in which it is contended the title is not sufficiently descriptive, and those where it is claimed the title is misleading. This Court has consistently held that the Constitution is complied with if the title of the legislation fairly advises the legislature and the public of the real nature and subject matter of the legislation sought to be enacted. Shipley v. State, 201 Md. 96, 102, 93 A.2d 67. In order to do this, it is unnecessary that the title be an abstract of the text of the proposed statute, nor need mention be made of the means and the methods by which its purpose is to be accomplished. Bond v. Mayor and C.C., 116 Md. 683, 688, 82 A. 978; Painter v. Mattfeldt, 119 Md. 466, 87 A. 413.
Having these principles in mind and the above mentioned objections, we shall now examine the title to Chapter 277. It provides for seven new sections to Article 25 of the Code and then states in part:
"* * * said new sections * * * to be under the new sub-title `Erosion', authorizing the County Commissioners of this State to set up Special Taxing Districts for erosion prevention work and specifying their powers and duties for these purposes; * * *."
We think this title is sufficiently comprehensive to fairly advise the legislature and the public of the real nature and subject matter of the statute, and that it is not misleading. (a) The fact that it fails to mention the ad valorem tax is neither deceptive nor misleading. This is a detail incident and germane to the subject-matter of the act. (b) And the same applies to the penal provision, which is limited to those persons handling funds of the erosion projects, and to (c) the provision for the payment to the County Commissioners for expenses incurred in inspecting the projects. (d) We *300 also do not consider that the failure to mention the method of selling bonds in the title rendered it defective or misleading. Section 33 of Article 31 provides for the method of sale of bonds sold by "public bodies", unless the enabling act authorizing their issuance shall specifically exempt said bonds from the provisions of said section, or provides a different method for the sale of the bonds. Section 158 (b) does both. We think the method of the sale of the bonds was germane to "erosion prevention work" and was one of the "powers and duties" of the County Commissioners specified in the title as above noted. We fail to discover anything deceptive or misleading here.
The appellants also contend that the title is misleading in that it refers to "erosion prevention work", yet the body of the act names "residential and business properties abutting or bordering on rivers and streams in recorded subdivisions". The only reason assigned by the appellants that this is misleading is, "(t)he indication is that the act refers to erosion in the whole State of Maryland". We find no merit in this contention. The title refers to "erosion prevention work". The body of the act limits its application to business and residential subdivisions abutting or bordering on certain waters in the State. This does not present the situation of the body of a statute attempting to enlarge upon a specific limitation in its title as was the case in Buck Glass Co. v. Gordy, 170 Md. 685, 688, 185 A. 886, but the converse; so the appellants fail to sustain their argument that the title is misleading under this point.
The appellants make their final attack under this first heading by saying that Chapter 277 of the Acts of 1953 repealed sections 167 to 173 of Article 25, (the same being Ch. 66 of the Acts of 1950), and added seven new sections known as sections 156 to 162 to follow immediately after section 155 of the Code, 1951; that the 1951 Code numbered the provisions of Chapter 66 of the Acts of 1950 as sections 149 to 155, inclusive; and that the effect of the repeal of Chapter 66 of the Acts of 1950 by Chapter 277 of the Acts of 1953 was to remove sections 149 to 155 from the 1951 Code. They claim this results in a change in the numerical *301 sequence of the sections of the Code and contravenes that portion of section 29 of Article 3 of the Constitution that reads:
"* * * And whenever the General Assembly shall enact any Public General Law, not amendatory of any section or article in the said Code, it shall be the duty of the General Assembly to enact the same, in articles and sections, in the same manner as the Code is arranged, * * *."
In passing Chapter 277, the legislature enacted the same under a new sub-title by article and in sections in the same manner as the Code is arranged. We think this fully complied with the constitutional requirement, and the fact that there are presently no sections 149 to 155, inclusive, in the 1951 Code does not violate this section of the Maryland Constitution.
II
The appellants next contend that Chapter 66 of the Acts of 1950 was unconstitutional and it was not rendered valid by Chapter 277 of the Acts of 1953. They claim that a very substantial part of the work of the erosion project had been completed when Chapter 277 was enacted and it was "illegal" for the legislature "to attempt to make good a project which had already been substantially completed", as it amounted to the taking of property without due process of law.
We see no necessity to pass upon the constitutionality of Chapter 66. Between the passage of the two acts, the Commissioners had begun work on the erosion project. Surveying began in 1951 and by December of 1952, a substantial part of the construction had been completed. At the time Chapter 277 was passed, the Commissioners had contracted for the work to be done, but had not issued the bonds nor levied the taxes. If we assume, without deciding, that Chapter 66 were unconstitutional, this action of the Commissioners would be without authorization and ultra vires. However as pointed out above, Chapter 277 specifically ratified and confirmed any action taken and things done by the Commissioners under the purported authority of Chapter 66. *302 There can be no question that a contract for this kind of construction is one that the legislature would have the power to sanction and authorize; and there was no disturbance of, or interference with, vested rights. In a situation of this kind, there can be no question that the legislature possesses the power to pass a retrospective law to make valid an ultra vires contract. In O'Brian v. County Commissioners, 51 Md. 15 (1879), this Court had before it a situation where work had been partially completed for street paving pursuant to a statute which, while the work was in progress, was declared unconstitutional. Curative legislation was passed, but the objection was raised that the ultra vires contract could not be made valid. At page 24 of the opinion this language appears:
"If the Legislature possess the power to authorize one act to be done, it can by a retrospective Act, cure the evils which existed because the power thus conferred has been irregularly executed. Thomson v. Lee County, 2 Wall. 327; People v. Mitchell, 35 N.Y. 551.
"In the same manner it has been decided in numerous cases, that the Legislature may render valid a contract made by a municipal corporation, though ultra vires at the time it was made, if the contract is one which the Legislature might originally have authorized. Cooley, 379-381, and notes.
"This principle applies with peculiar force to the case of a contract relating to a work in which the public is interested, and for the public benefit, after it has been executed; provided it be a contract which the Legislature had the power to permit or sanction in advance."
See also C. and P. Tel. Co. v. Balto. City, 89 Md. 689, 714, 43 A. 784, 44 A. 1033; Water Co. v. Havre de Grace, 150 Md. 241, 253, 132 A. 768. We therefore conclude that Chapter 277 rendered valid the contracts for the construction of the erosion project made by the Commissioners, and there was no taking of property without due process of law.
*303 III
The appellants further claim that Chapter 277 violates section 54 of Article 3 of the Maryland Constitution. This section reads as follows:
"No County of this State shall contract any debt, or obligation, in the construction of any Railroad, Canal, or other Work of Internal Improvement nor give, or loan its credit to or in aid of any association, or corporation, unless authorized by an Act of the General Assembly, which shall be published for two months before the next election for members of the House of Delegates in the newspapers published in such County, and shall also be approved by a majority of all the members elected to each House of the General Assembly, at its next session after said election."
The appellants do not suggest that the erosion project was a "Work of Internal Improvement". Cf. Bonsal v. Yellott, 100 Md. 481, 60 A. 593; Welch v. Coglan, 126 Md. 1, 94 A. 384; Baltimore and D.P. Railroad Co. v. Pumphrey, 74 Md. 86, 21 A. 559. They limit their argument of this point to a claim that the project benefited only private interests, namely, the waterfront property privately owned; and, as Chapter 277 was not published as provided in said section 54, it is invalid. Again, if we assume, without deciding, that if a project of the nature of that under consideration benefited only private interests it would come within the purview of section 54, appellants cannot be successful in this line of attack, because the erosion prevention works at Tall Timbers on the Potomac were undoubtedly constructed in the public interest and welfare. Cf. Dinneen v. Rider, 152 Md. 343, 365, 136 A. 754. The fact that privately owned properties may benefit from the project does not bring Chapter 277 within the provisions of section 54. The Counties as well as the State have a special interest in seeing their boundaries maintained and not eroded away. Among the many public benefits to be derived from a project of this nature is the fact that it will preserve real estate and improvements thereon *304 for future taxation by public authority. We are, therefore, unable to discover any merit in this contention.
IV
The appellants make the further claim that Chapter 277 is arbitrary, and in violation of the equal protection and due process clauses of the Fourteenth Amendment to the Federal Constitution. They say that section 158 (a) of Chapter 277 provides that a petition of seventy-five per cent of the property owners of the subdivision is required before the Commissioners can begin an erosion prevention project. They argue that if a subdivision were composed of eighty improved lots owned by twenty people, and twenty unimproved lots owned by twenty other people, the twenty people owning the unimproved lots could prevent a proposed project. They contend this renders the statute arbitrary and discriminatory on its face and is a denial of the equal protection of the law. Assuming the premise of this argument, we are unable to agree. The Equal Protection Clause guarantees that equal protection shall be given to all persons under like circumstances in the enjoyment of their civil and personal rights. But it does not preclude the States from resorting to reasonable classification for the purposes of legislation. Tatlebaum v. Pantex Mfg. Corp., 204 Md. 360, 369, 370, 104 A.2d 813. Without unduly prolonging this opinion, which, because of the many points raised, must be lengthy, we say that we are unable to discover anything arbitrary, unreasonable or discriminatory in the classification made, and hold the legislature had the power and authority to require a petition from seventy-five per cent of the property owners before an erosion prevention work should start, without violating the Equal Protection Clause of the Federal Constitution. Fallbrook Irrigation Dist. v. Bradley, 164 U.S. 112, 116; Wampler v. Lecompte, 282 U.S. 172; U.S. Mortgage Co. v. Matthews, 293 U.S. 232.
The appellants say further that Chapter 277 is "uncertain in meaning"; that it uses the language "territory abutting or bordering, etc."; and "(a) Statute uncertain in meaning is unconstitutional because it amounts to a taking of property *305 without due process of law." We have difficulty in discerning just what the appellants mean in assigning this rather unusual reason for attacking a statute as taking property without due process, but have set forth all they say upon the subject. As suggested in the appellee's brief, only a lifelong resident of the Sahara Desert could be confused by the meaning of a subdivision "abutting or bordering" on a body of water. We find no merit in this contention of the appellants.
V
The appellants advance as another contention: "(a)s the benefit charges and the erosion tax were not levied on the entire subdivision, seventy-five per cent of the property owners in the entire district did not make a request to erect the erosion work." It will be unnecessary to consider this as it is in direct conflict with a stipulation made in the court below (R.E. 98).
VI
The appellants next contend that the contract for the construction of the project was not awarded to the lowest responsible bidder. The contract was awarded to Neil MacDonald as a whole, and the appellants claim there were lower bids for a "severable part of the project". They claim the county paid MacDonald for 15,600 cubic yards of back-fill at the price he bid of $1.50 per cubic yard, while a Mr. Mattingly had bid $1.25 per cubic yard for the same. The short and simple answer to this is that it was stipulated below that the Mattingly bid was not considered because it was not in proper form and unaccompanied by a deposit as required (R.E. 96).
The appellants also contend that $3,000 was paid to MacDonald for extra work in straightening and tieing back the seawall, and this was not permitted by the contract. This is at complete variance with the facts. Article 5 of the contract authorized a charge for extra work when ordered in writing by the district council at a stated price. This extra work at the price named was ordered in writing by the council on June 6, 1952.
The appellants further claim that the extra work mentioned *306 just above was necessitated by MacDonald's negligence, and that MacDonald failed to furnish a bond as called for in the bids and the awarding of the contract. However, neither of these claims is sustained by the record.
VII
Under this heading, the appellants complain that the contract awarded for the project was not properly carried out and performed. They list some five or six alleged variations from the plans and specifications. It seems unnecessary to name them separately as the ones supported by the record seem to be trifling in nature. The chancellor states: "In this case it is apparent that there were variations in the contract but with the explanation given, they would appear to be minor and with a valid reason existing therefor." With this finding, we agree. The inspector for the commissioners was informed of all proposed changes and a report thereof was made to the commissioners, who, after the completion of the project, accepted and paid for it. Here, there is no allegation of fraud which may vitiate a public contract after the work performed has been accepted. It is well settled that it is no defense to an assessment that the contractor did not carry out the contract for the work strictly according to its terms. The proper authorities must decide upon this, and if they accept the work, the acceptance, in the absence of fraud, is conclusive. Baltimore v. Raymo, 68 Md. 569, 577, 578, 13 A. 383.
VIII
The appellants state as an additional assignment of error that the "benefit charges" and "erosion taxes" have not been properly and fairly assessed. They assert that all lots in the "front section" were "put on the same basis", and all lots in the "rear section" were "put on the same basis", without regard to value. (It may be well to note here that the entire special taxing district is composed of two sets of lots, both roughly perpendicular to the waterfront, with one of the sets abutting the water and the other set lying immediately to the rear. Each lot has the same width, and the same depth excepting some contiguous to the water where the water-line *307 meanders.) The appellants argue this made the assessments completely arbitrary as they were not made "on true evaluation". They claim this is a violation of due process and equal protection and the requirement of uniformity under Article 15 of the Maryland Declaration of Rights. This contention is limited to the "benefit" tax, as the ad valorem tax was based on the assessed value of the different lots. The argument, in effect, is that the levy of a special or local assessment must be based upon the value of the land from which the assessment is exacted. However, it loses sight of the fundamental theory of the basis for special or local assessments for benefits. They stand upon widely different grounds from general taxes. Brooks v. Baltimore, 48 Md. 265, 268. Special assessments are in the nature of a tax upon property levied according to benefits conferred on the property. The whole theory of a special assessment is based on the doctrine that the property against which it is levied derives some special benefit from the improvement. The justice of demanding the special contribution is supposed to be evident in the fact that the persons who are to make it, while they are made to bear the cost of a public work, are at the same time to suffer no substantial pecuniary loss thereby; their property being increased in value by the expenditure to an amount substantially equal to the sum they are required to pay. 14 McQuillen, Municipal Corporations, secs. 38.01, 38.31, (3rd Ed.). This Court has recognized the validity of such assessments on many occasions. The mode of assessment is a legislative question, subject to constitutional limitations. The mode may be committed to municipal authorities and the general rule is that the exercise of their discretion therein, if made according to a definite and just plan, will not be reviewed by the courts where neither fraud nor mistake appears. McQuillen, op. cit., sec. 38.111. In some jurisdictions ad valorem assessments have been upheld, but they are certainly not required. Dinneen v. Rider, supra.
In the suit at bar, the enabling act placed discretion in the commissioners to make an assessment on the basis of benefits received, not on that of property value. The appellants neither assert nor attempt to prove that the benefits received *308 were not substantially in accord with their assessments. Since all the waterfront properties have equal widths, it was proper and reasonable to assume that control of erosion by waters of the Potomac River would benefit all the waterfront property in the district in an equal degree. Similarly, the non-waterfront lots, equal in width with all of the other lots, benefited, because without the erosion prevention work such properties in time could easily become waterfront lots and thereafter part of the bed of the river. The commissioners concluded that the waterfront properties had benefited in a ratio of two-to-one to the benefit of the non-waterfront lots, and placed the assessment on a front foot basis. Under a grant of power to assess property benefited by an improvement, municipal authorities are not confined to abutting property in making the assessment. McQuillen, op. cit., sec. 38.72. It will be noted that the rate of assessment was uniform and equal upon each class of property benefited. Even if Article 15 of our Declaration of Rights applies to special assessments (which we do not hold), there has been no violation thereof.
It will also be noted that the enabling act provides that each property owner shall be notified before the assessment is made and granted a hearing thereon; and, of course, there is always a further right to apply to the courts to relieve arbitrary or capricious action. When these occur, one cannot be said to have been deprived of his property without due process of law; and whenever the law, as in this case, operates alike on all persons and property, similarly situated, equal protection cannot be said to be denied. Walston v. Nevin, 128 U.S. 578.
The appellants make a further claim that certain of the lots in the subdivision were not included in the taxing district, which resulted in an increased burden on the remaining lots. They neither assert nor attempt to prove that the lots not so included received special benefits from the improvement. Unless property receives a benefit from the improvement, no special assessment may be lawfully levied against it. United R. and E. Co. v. M. and C.C. of Balto., 127 Md. 660, 670, 96 A. 880; McQuillen, op. cit., sec. 38.31. In the establishment *309 of improvement districts, within the restrictions of the applicable law, broad discretion is vested in the municipal authorities, and this discretion is conclusive in the absence of evidence that its exercise was procured by fraud or that it is manifestly arbitrary or unreasonable, or that the assessment is palpably unjust and oppressive. McQuillen, op. cit., secs. 38.55, 38.56. The record fails to disclose any reason why the commissioners were not justified in eliminating the lots they did from the taxing district.
IX
Appellants make the further contention that the separate taxing and assessment district created by the Commissioners in this instance was not authorized and is illegal. The claim the enabling act, section 156, required that all property within the subdivision known as "Tall Timbers on the Potomac" must be included within the taxing district; and, as the Commissioners had failed to include several lots of said subdivision within the taxing district, the taxing district is illegal. We think a reading of the act refutes this argument. The title states the commissioners are authorized to "set up" special taxing districts; section 156 provides that territory within every recorded subdivision of land in this State, subdivided for residential or business uses, and abutting or bordering upon any stream or other body of water is created into separate taxing and assessment districts, each district to bear the name of the subdivision out of which it is created; section 157 authorizes the county commissioners to act as the district council for each taxing district and empowers them to acquire property, either by condemnation or otherwise, to prevent erosion; section 158 provides for the construction of erosion prevention works and the issuance of bonds to pay for them; section 159 requires notice to the property owners and a hearing after the plans and specifications have been completed and the procedure for the letting of contracts; and sections 160 and 161 provide that after the completion of an erosion prevention project and notice to the landowners the commissioners, acting as the district council, shall fix and levy a benefit charge upon all real estate in said district benefited *310 by "erosion prevention work", and an ad valorem tax against "all the assessable property in each district so improved." We think a reading of these sections together clearly shows a legislative intention to authorize the county commissioners to create taxing and assessment districts for erosion prevention works from territory within recorded residential or business subdivisions abutting or bordering on the Chesapeake Bay and its tributaries or any other stream or body of water in this State. There are many subdivisions throughout the State that abut on water, with comparatively few of the lots actually bordering on the water. It is possible that some lots included in a subdivision might not receive any special benefit from an erosion prevention project, although many (as in the present case), in addition to those abutting on the water, would receive such benefits. Under our ruling made above, those lots which received no such benefits could not be assessed. However, if appellants' version be correct, all of the lots of the subdivision must be included in the taxing district; consequently, the assessment would be void as to any lot not specially benefited. We are unable to conclude that the legislature intended such an absurd result.
We are, therefore, of the opinion that the benefit assessment levied by the commissioners in this case is valid, with the exception of that levied on the two lots belonging to Ercole Leonardo and wife; and the ad valorem tax levied by the commissioners is valid against all of the lots in the taxing district as created by the commissioners. Dinneen v. Rider, supra.
X
We come now to the cross-appeal. As the Leonardos had previously constructed a private seawall in front of their lots, the appellees concede the chancellor was correct in decreeing the two lots owned by the Leonardos were not properly subject to the benefit tax. However, they request that the decree be modified to the extent that if the commissioners acquire an easement in, or ownership of, the private seawall of the Leonardos, the commissioners thereafter could collect the *311 benefit tax from the Leonardos or the subsequent owners of the two lots. We think the decree should be so modified. As the decree now reads, the commissioners are perpetually enjoined from collecting the benefit tax on these two lots. If, in the future, the commissioners acquire an easement in, or ownership of, the seawall, there is no just reason why they should be prevented from then collecting the assessment.
As stated at the beginning, the chancellor conditioned the collection of the assessments upon the commissioners bringing into the taxing district two additional lots that they had not so included. These two lots are at the extreme southern edge of the subdivision and at the time of the creation of the taxing district they were protected by seawalls considered by the county surveyor in 1951 as adequate. We pointed out above that in creating the improvement districts a broad discretion is vested in the commissioners, and stated the rule as to when their determinations will be reviewed. No fraud is alleged, and we are unable to say their action excluding these two lots was manifestly arbitrary or unreasonable. We therefore, conclude the chancellor was in error in conditioning his decree upon the requirement that these two lots be brought into the taxing district, and the decree should be so modified. In all other respects than the two modifications mentioned, the decree is affirmed.
Decree affirmed in part and modified in part, and the cause remanded for modification of the decree in accordance with this opinion. The appellants to pay the costs.
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46 N.J. Super. 363 (1957)
134 A.2d 781
ROSE SCAGLIONE, PLAINTIFF-RESPONDENT,
v.
ST. PAUL-MERCURY INDEMNITY COMPANY, A CORPORATION AUTHORIZED TO DO BUSINESS IN NEW JERSEY, DEFENDANT-APPELLANT.
Superior Court of New Jersey, Appellate Division.
Argued August 12, 1957.
Decided September 24, 1957.
*364 Before Judges GOLDMANN, KNIGHT and WAESCHE.
Mr. Harvey G. Stevenson argued the cause for the appellant (Messrs. Stevenson, Willette & McDermitt, attorneys).
Mr. Archibald Kreiger argued the cause for the respondent (Messrs. Bornstein, Kohlreiter & Rubinson, attorneys; Mr. Newton M. Roemer, on the brief).
The opinion of the court was delivered by WAESCHE, J.S.C. (temporarily assigned).
The plaintiff obtained a judgment in the Superior Court, Law Division, against the defendant, a compensation insurance carrier, for the amount of an award assessed against the plaintiff's employer in the Division of Workmen's Compensation. The defendant appealed. It is stipulated and agreed between the parties to this action that the plaintiff's employer is insolvent, and that the defendant was the compensation insurance carrier of the plaintiff's employer at the time the plaintiff *365 was injured. The statute provides that, upon the insolvency of an employer, the employer's insurance carrier shall become directly liable for all compensation payments due to an injured employee by virtue of an award in the Division of Workmen's Compensation. R.S. 34:15-86.
At no time, has the defendant challenged the right of the plaintiff to bring and maintain an action in the Superior Court, Law Division, based on an award made in the Division of Workmen's Compensation. That defense, if available to the defendant, was not raised in the defendant's answer, nor in the pretrial order; and it was not argued in the brief filed in this appeal, nor orally before this court. Therefore, in determining this appeal, we are not adjudicating the right of the plaintiff to bring this suit.
In 1951 Joseph Pable, Benjamin Borowski, and Joseph Deanin entered into a business partnership, and, as such partners, conducted a ladies coat shop at 24 1/2 Van Houten Street, Paterson, N.J., trading as George Coat Company. The partnership, as tenants, occupied the fifth floor of the premises at the above address. They continued the business at said address until June 1953, when they dissolved the partnership. Mr. Pable, one of the partners, testified that the partnership was dissolved on June 1, 1953, because they could not make a go of the business; that the business was so bad they could not pay their bills. He said that they decided to give it up before going into debt. Mr. Borowski, another partner, testified that the partnership gave up the business in June, 1953, because the business was not good, and that they had no money to continue it. Mr. Deanin, the remaining partner, testified that in June 1953, the partners decided to dissolve the partnership and go out of business because they were losing money.
On June 23, 1953 the three partners conveyed to the George Coat Company, Inc., a New Jersey corporation formed May 27 preceding, all the machinery, equipment, goods, chattels, and effects which the partnership owned and used in carrying on its business. At or about the same time the said partners, individually and as partners, assigned to the *366 said corporation the lease for the fifth floor of the premises at 24 1/2 Van Houten Street, where their partnership business had been conducted. The corporation assumed all of the debts of the partnership. It continued the business at the same address.
The partnership had no other assets of any kind, and no other equipment with which to carry on the business. None of the partners owned any stock in the George Coat Company, Inc., nor held any office in said corporation, but they were employees of the corporation.
A partnership may be dissolved at any time by the express will of all the partners, and the partnership will thereafter terminate upon the winding up of the partnership affairs. R.S. 42:1-30, 31; Peardon v. Chapman, 169 F.2d 909 (3d Cir. 1948); 68 C.J.S. Partnership § 334, p. 846; 40 Am. Jur. 292, sec. 235. In Brand v. Erisman, 172 F.2d 28 (D.C. Cir. 1948), the court said that a partnership is dissolved by an act of all the partners intended to dissolve it, and that the sale of all the property of the partnership was such an act. See, also, Thompson v. Bowman, 6 Wall. 316, 18 L.Ed. 736 (1867). In Schneider v. Schneider, 347 Mo. 102, 146 S.W.2d 584 (Sup. Ct. 1940), the court said, "Where all of the assets of a partnership are lawfully transferred to a corporation created by the partners, the partnership becomes functus officio and ceases to exist." See, also, Parry v. Parry, 92 Misc. 490, 155 N.Y.S. 1072 (Sup. Ct. 1915); 68 C.J.S. Partnership § 344, p. 851; and 40 Am. Jur. 299, sec. 243.
Sidney Kosloy was an agent of the partnership until its dissolution in June 1953. He was not in the employ of the partnership after June 1953. He performed no services for the partnership, and was not its agent after that date. Kosloy became the secretary and treasurer of the corporation upon its organization in May of 1953, and took active part in the management of the business conducted by the corporation.
On December 31, 1953 the plaintiff filed with the Division of Workmen's Compensation a petition for compensation in *367 which she named, as respondent, George Coat Co. She alleged, in the petition, that on April 10, 1953, she was accidentally injured while in the employ of George Coat Co., whose address was 24 1/2 Van Houten Street, Paterson, N.J. On January 22, 1954 Sidney Kosloy was served with a copy of the said petition as the secretary of George Coat Co. On September 9, 1954, the plaintiff filed with the Division of Workmen's Compensation an amended petition for compensation in which she named, as respondents, Joseph Pable, Benjamin Borowski and Joseph Deanin, trading as George Coat Co. In all other respects, the amended petition was the same as the original petition. On October 14, 1954 a copy of said amended petition was served on Sidney Kosloy as manager of the respondents named in the amended petition. The compensation award to Mrs. Scaglione was made April 22, 1955, no one appearing for the respondents.
R.S. 34:15-52 provides that a copy of a compensation petition shall be served upon the employer by a process server of the Division of Workmen's Compensation in the manner provided by law for the service of summons. R.R. 4:4-4(e) provides that a summons may be served on a partnership by serving a managing or general agent of the partnership. The plaintiff contends that on January 22, 1954, and also on October 14, 1954, Sidney Kosloy still continued to function as the managing agent of the partnership. She further contends that the partnership was not terminated prior to either of those dates because the partnership had not wound up its affairs: it owed the Government money, and there was this claim of the plaintiff's against the partnership for an accidental injury of which the partnership had knowledge.
We think that the evidence conclusively shows that the partnership was dissolved in June 1953 by agreement of the partners, and that the partnership business was wound up several months prior to January 22, 1954. We have also concluded that Sidney Kosloy was not a managing or general agent of the partnership after June 1953, because the partnership was dissolved and the partnership business *368 was terminated in June 1953. He had nothing to do with the partnership after that date.
R.S. 34:15-51 requires a claimant for workmen's compensation, whose claim has not been settled, to file with the secretary of the Division of Workmen's Compensation a petition, in duplicate, within two years after the date on which the accident occurred. R.S. 34:15-52 requires the secretary of the Division of Workmen's Compensation to cause a copy of the claimant's petition to be served upon the employer. It has been determined in New Jersey that the filing of the petition within the time prescribed by R.S. 34:15-51 is necessary in order to give the Division of Workmen's Compensation jurisdiction to hear the petition. Valentine v. Walter Kidde & Co., 136 N.J.L. 292 (Sup. Ct. 1947); Schwarz v. Federal Shipbuilding and Dry Dock Co., 16 N.J. 243 (1954). In La Duke v. Consumers Power Co., 299 Mich. 625, 1 N.W.2d 16, 19 (Sup. Ct. 1941), the court said that:
"It is mandatory that a claim for compensation must be made upon the employer. A claim filed with the department of labor and industry and not served upon the employer does not satisfy the requirements of the statute."
See, also, Skeels v. Paul Smith's Hotel Co., 195 App. Div. 39, 185 N.Y.S. 665 (App. Div. 1921).
The Division of Workmen's Compensation is an administrative agency, created by statute to exercise a delegated legislative power. Where there is reasonable doubt of the existence of the power to act, it is denied. Nagy v. Ford Motor Co., 6 N.J. 341 (1951). Therefore, unless a copy of plaintiff's petition was served on the respondents, or on one of them, as required by R.S. 34:15-52, the Division of Workmen's Compensation had no jurisdiction to hear the petition.
In Kurilla v. Roth, 132 N.J.L. 213 (Sup. Ct. 1944), the court said that
"The general rule in regard to the service of process, established by centuries of precedent, is that process must be served personally, *369 within the jurisdiction of the court, upon the person to be affected thereby. Substituted or constructive service, when provided by statute, is in derogation of the general rule, and so the statutory directions must be strictly construed and fully carried out to confer jurisdiction."
See, also, Maglo v. Weaver, 11 N.J. Super. 32 (1950).
We do not think that the service of the petition made on Sidney Kosloy on January 22, 1954, or that the service of the amended petition made on him on October 14, 1954, complied with the requirements of the statute, because he was not on either of those dates an agent of the partnership. Since none of the respondents waived due and legal service of the petition, the Division of Workmen's Compensation was without jurisdiction to hear the petition and to make an award thereon.
For the above reasons, the judgment here under review must be reversed.
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276 N.J. Super. 489 (1994)
648 A.2d 269
LINDA PAGANO, ADMINISTRATRIX OF THE ESTATE OF ROSE GUARINO, PLAINTIFF-RESPONDENT,
v.
UNITED JERSEY BANK (FORMERLY PEOPLES TRUST OF NEW JERSEY), DEFENDANT-APPELLANT.
Superior Court of New Jersey, Appellate Division.
Submitted September 13, 1994.
Decided October 11, 1994.
*492 Before Judges PRESSLER, CONLEY and NEWMAN.
Marian B. Copeland, attorney for appellant.
Louis Mangano, attorney for respondent (Martin N. Crevina of Buckalew, Frizzell & Crevina, on the brief).
The opinion of the court was delivered by PRESSLER, P.J.A.D.
This appeal requires us to consider whether a presumption of payment applies to a savings account deposit evidenced by an uncancelled passbook where the bank has no record of the account and the passbook is presented with a demand for payment by the depositor's heir twenty years and two months after the last transaction recorded in the passbook. In the circumstances here, we are satisfied that the bank is not entitled to such a presumption. Accordingly we affirm the judgment appealed from.
Rose Guarino, a lifelong resident of Lodi, New Jersey, died in June 1990 survived by her only child, plaintiff Linda Pagano. Mrs. Guarino had lived by herself after her husband's death in 1976, and in her later years supported herself exclusively by means of social security payments and a federal rent subsidy. Her estate consisted only of her personal effects. Several months after Mrs. Guarino's death, plaintiff, who later qualified as her administratrix, found the passbook which is the subject of this *493 action in her mother's bureau drawer. The passbook showed that on July 10, 1970, Mrs. Guarino had deposited $4,400 in a pyramid savings account at a branch of Peoples Trust of New Jersey, a state-chartered commercial bank which later changed its name to United Jersey Bank (UJB). That was the only transaction noted in the passbook, which bore no stamp or other marking showing that the account had been closed or the book canceled. Nor was there any posting in the book of any interest paid by the bank on the account. Plaintiff, who had had no prior knowledge of the account despite her close relationship with her mother, presented the passbook at the branch office of UJB in August or September 1990. She demanded payment. Payment was refused.
This action ensued against defendant UJB. UJB, which had been unable to find any internal record corroborating the existence of the account, assumed that it must have been long since closed by the depositor and the proceeds paid to her. It therefore asserted the affirmative defense of payment, claiming its entitlement to a common-law presumption of payment of a debt after a lapse of twenty years. The trial judge held that no such presumption applied in the circumstances here and submitted the cause to the jury, which returned a verdict in plaintiff's favor in the amount of the deposit. The judge ordered that interest be added at the bank's passbook account rates. The gravamen of defendant's appeal is the court's rejection of its asserted right to a rebuttable presumption of payment as well its rejection of its asserted limitations defense.
According to defendant's proofs, a bank-wide search of its retained records, undertaken after plaintiff's presentation of the passbook, failed to disclose any indication of the account's existence. More specifically, defendant's employees testified that there was no extant record of any kind demonstrating that there was either an active or a closed account in Mrs. Guarino's name or identified by her social security number. Based on records still in existence, the bank determined that there was no record of an active account at least since 1983, no record of an escheat of the *494 account at least since 1980, no record of a publication of notice of the account as inactive at least since 1975, and no indication of an interest notice sent by the bank to the depositor by way of a 1099 form at least since 1983. With respect to the uncancelled passbook in plaintiff's possession, bank personnel explained that ordinarily a depositor must fill out a withdrawal order and present the passbook for appropriate notation when either all or part of a passbook savings account is withdrawn. A depositor who claims to have lost the passbook is required to execute an affidavit of lost passbook and is accorded access to the funds thirty days later. Thus funds may not be withdrawn from a passbook savings account without both a withdrawal order and either presentation of the book for appropriate marking or execution of the affidavit. The bank did not, however, retain such affidavits executed prior to 1980, and its search of its file of affidavits executed thereafter did not turn up one by Mrs. Guarino.[1] Defendant's speculation, therefore, was that Mrs. Guarino had either withdrawn the deposit some time prior to 1980 by executing a lost-passbook affidavit or that she had withdrawn it by presenting the passbook which the teller neglected to stamp.
The only other proofs consisted of expert testimony offered by both parties describing applicable state and federal regulation and internal bank policy regarding record retention. The substance of the testimony, not in the end particularly helpful, was that state regulation of minimum retention periods for various types of bank records applies only to state-chartered savings and loan associations, see N.J.S.A. 17:12B-48(21) implemented by *495 N.J.A.C. 3:26-1.1(a), and that federal regulation of retention periods applies only to nationally-chartered banks, 12 U.S.C.A. 1829b implemented by 31 C.F.R. §§ 103.34(b), 103.38(d). Thus there is no prescribed regulatory period for retention by state-chartered commercial banks, which, however, generally choose as a matter of individual policy to follow the recommendation of the New Jersey State Bankers Association that federal regulation be complied with. In respect of savings and loan associations, the originally prescribed retention period of twenty years for withdrawal slips was reduced in December 1990 to ten years; the retention period for lost-passbook affidavits is seven years. In respect of national banks, the regulatory prescription is five years for all records required to be retained. The judge denied defendant's application to strike the evidence regarding the savings and loan periods, charging the jury that the time periods for both state savings and loans and nationally chartered banks were to be viewed by it as only illustrative of banking practice, there being no concomitant regulation applicable to defendant bank.
We first address defendant's claim of applicability of the six-year statute of limitations, N.J.S.A. 2A:14-1. We have no doubt that the transaction is indeed subject to that limitations period. The question is when the statutory period starts to run. We think it plain that the triggering event is hardly the making of the deposit itself. It is, rather, the depositor's demand for payment. Compare N.J.S.A. 12A:3-122(2), which states that "[a] cause of action against the obligor of a demand or time certificate of deposit accrues upon demand...." As explained by Uniform Commercial Code Comment 1 on N.J.S.A. 12A:3-122
An exception [to the rule that the cause accrues on a demand note on the date of issue] is made in the case of certificates of deposit for the reason that banking custom and expectation is that demand will be made before any liability is incurred by the bank, and the additional reason that such certificates are issued with the understanding that they will be held for a considerable length of time, which in many instances exceeds the period of the statute of limitations.
And as further amplified by New Jersey Study Comment 1:
The certificate of deposit is a negotiable instrument, usually taking the form of a demand note, issued by a bank to a depositor upon receipt of his deposit. While *496 these instruments are in the form of a demand note, they resemble a pass book, and depositors inveterately think of them as mere receipts for money deposited in a savings account. Of course, a demand and refusal are conditions precedent to the right of a depositor to sue a bank upon a deposit account, and consequently, the statute of limitations does not start to run against a depositor until a demand has been made by him. Theoretically, however, the certificate of deposit is different. It is a demand note, and the statute of limitations starts to run the moment it is issued. Where this theory has been put into practice, it has had the unfortunate effect of barring a depositor's rights to his "savings account" simply because he did not withdraw it within six years. Nothing in the N.I.L. [Negotiable Instruments Law] dictates a contrary result.
Consequently, the statute of limitations did not start to run until plaintiff's demand for payment was made and refused. Her action was commenced shortly thereafter. There is consequently no bar to this action in limitations law.
The primary issue is, rather, defendant's claim of entitlement to a presumption of payment. To begin with, it is clear that the relationship between the depositor and bank is that of creditor and debtor and that the passbook constitutes both the instrument of obligation and prima facie evidence thereof. See, e.g., Bruno v. Collective Fed. Sav. and Loan Ass'n, 147 N.J. Super. 115, 121, 370 A.2d 874 (App.Div. 1977); Forbes v. First Camden Nat'l Bank & Trust Co., 25 N.J. Super. 17, 21, 95 A.2d 416 (App.Div. 1953). It is also well-settled that the creditor's possession of an uncancelled instrument of obligation shifts the burden of going forward as well as the burden of persuasion to the debtor to prove the affirmative defense of payment. See, e.g., Guerin v. Cassidy, 38 N.J. Super. 454, 460, 119 A.2d 780 (App.Div. 1955); Kushinsky v. Samuelson, 142 N.J. Eq. 729, 731, 61 A.2d 287 (E. & A. 1948); Conlon v. Hornstra, 82 N.J.L. 355, 357, 83 A. 183 (Sup.Ct. 1912). Clearly then, it was the bank's burden to prove that it had paid the proceeds of the account to Mrs. Guarino. The bank was unable to produce any documentary proof of payment or circumstantial proof from which the fact of payment could have been inferred. It therefore sought to rely on the asserted common-law principle that a lapse of twenty years from the date of accrual of the debt raises a rebuttable presumption of its payment. We are satisfied that despite whatever viability such a presumption may have, it *497 does not apply to savings accounts and hence that the judge correctly rejected it.
We note at the outset that this jurisdiction, from earliest times, has recognized a rebuttable common-law presumption of payment based on the lapse of twenty years. See, e.g., Ex'rs of Wanmaker v. Van Buskirk, 1 N.J. Eq. 685, 692 (Ch. 1832); Mease, Executor of Hease v. Stevens, 1 N.J.L. 495 (Nisi Prius 1793). Nevertheless, insofar as we have been able to determine, that presumption, with a few exceptions going back to the last century,[2] has been applied only to debts secured by mortgage. Moreover, as we read the cases dealing with the presumption in those transactions, it is not the common-law presumption, although acknowledged, that is ordinarily the ratio decidendi for the preclusion of the creditor's claim, but rather the limitations provision of N.J.S.A. 2A:14-6 and its predecessor R.S. 2:24-12, which bars entry into real estate twenty years after the right or title of entry accrues. See, e.g., Lake Waterloo Corp. v. Kestenbaum, 10 N.J. 525, 92 A.2d 478 (1952); Wilson v. Stevens, 105 N.J. Eq. 377, 148 A. 392 (Ch. 1929). See also Ryan v. Estes, 105 N.J.L. 201, 143 A. 431 (E. & A. 1928). In sum, then, there appears to be no New Jersey case in which the presumption was either asserted in or applied to a commercial transaction in general or to a depositor's claim against the bank in particular, a fact probably attributable to the applicability in most instances of a limitations period less than the twenty years on which the presumption is based.
*498 We are aware that at least nine other states have considered the issue now before us and have concluded that while it may be circumstantially overcome, the common-law presumption is nevertheless applicable to a bank account. See Owens v. Bank of Brewton, 53 Ala.App. 529, 302 So.2d 114 (1974); Hicks v. Exchange Bank & Trust Co., 252 Ark. 61, 478 S.W.2d 54 (1972); In re Estate of Fantozzi, 183 Ill. App.3d 732, 132 Ill.Dec. 30, 539 N.E.2d 340 (Ct. 1989); Long v. Straus, 124 Ind. 84, 24 N.E. 664 (1890); Morse v. National Cent. Bank, 150 Md. 142, 132 A. 598 (1926); Boscowitz v. Chase Nat'l Bank, 202 Misc. 1016, 111 N.Y.S.2d 147 (1952); Second Nat'l Bank v. Thompson, 44 Pa.Super. 200 (Dis.Ct. 1910); Commerce Union Bank v. Horton, 225 Tenn. 679, 475 S.W.2d 660 (1972); Blackstone v. First Nat'l Bank of Cody, 64 Wyo. 318, 192 P.2d 411 (1948). And see Dag E. Ytreberg, Annotation, Presumption of Payment As Applicable to Bank Deposit, 69 A.L.R.3d 1311 (1976) and later case service. Since we disagree with those out-of-state holdings that are based on apposite factual patterns, we decline to follow their lead.
First, we are satisfied that application of the common-law presumption in this state has always been conditioned upon the existence of circumstances that fail, prima facie, to explain, justify or provide good cause for the creditor's delay in making demand. See, e.g., Peacock v. Ex'rs of Newbold, 5 N.J. Eq. 535 (E. & A. 1845). That condition is not present here. We are of the view that the depositor of funds into a bank savings account is ordinarily entitled to believe, and does in fact expect, that the deposit is entirely safe, that the funds will be indefinitely available, and that no demand need be made and no action need be taken to protect the right to obtain those funds at any time the passbook is presented. See the New Jersey Study Comment quoted supra. We do not believe that ordinary savings account depositors are chargeable with knowledge of the escheat statute presumption of abandonment ten years after activity in the account has ceased. See N.J.S.A. 2A:37-30(b)(1). Consequently, the failure of a depositor to demand payment for an extended period of time is perfectly *499 consistent with the depositor's understanding of what a passbook savings account is all about. It is therefore not a failure supporting a presumption that payment has not been sooner demanded for the reason that the debt has already been paid.
We are also of the view that at least in respect of passbook accounts, the bank can easily assure itself of the means of proving payment. As we have pointed out, the proofs here offered by defendant were that funds can be withdrawn from a passbook account in only one of two ways: by presentation of the passbook, which is then properly stamped or marked by the teller, or by execution of a lost-passbook affidavit. All the bank need do is retain either the original affidavit, a microfilm of the affidavit, or even a list of affidavits on the basis of which funds have been paid. One would assume, moreover, consistent with the usual course of human experience, that lost objects may reasonably be anticipated one day to be found. Thus one would also assume that in its own interest, banks would resort to the simple expedient of long-term retention of some sort of lost-passbook affidavit record without regard to any more permissive governmental regulation or internal policy. In short, we are persuaded that there is nothing unusual about the discovery of an uncancelled passbook among the personal effects of a decedent nor anything unusual about the heir expecting it to be honored by the bank which received and has apparently not repaid the funds shown to be on deposit. We thus conclude that from the perspective of both the bank and the depositor, the essential nature of a passbook savings account is itself a circumstance contradicting the empirical assumptions on which the presumption of payment is based in the first instance.
We also conclude that there is nothing in regulatory retention periods that affords the bank a defense to this claim. Those periods are indeed just that regulatory. They do not affect the direct relationship between bank and depositor nor define their obligations to each other. Nor were they intended to. Indeed the enabling legislation for the federal adoption of retention periods expressly describes the regulatory purpose as based *500 on the determination by the Secretary of the Treasury "that the maintenance of appropriate types of records and other evidence ... has a high degree of usefulness in criminal, tax, or regulatory investigations or proceedings...." 12 U.S.C.A. § 1829b(b)(1). We thus regard the proofs respecting the retention periods and the questions with respect thereto raised on appeal by defendant as essentially irrelevant.
In sum, plaintiff proved a debtor-creditor relationship between her decedent and the bank. The burden shifted to the bank to prove its affirmative defense of payment. Under the circumstances, the bank was not entitled to satisfy its consequent burden of going forward by way of a presumption of payment. Nor did it adduce any other proofs rebutting plaintiff's prima facie case. Plaintiff was entitled to judgment.
We also think it plain that plaintiff was entitled to interest at bank rates from the date of the deposit. Obviously, the passbook account represented a contract between the bank and the depositor. See Forbes v. First Camden Nat'l Bank & Trust Co., supra, 25 N.J. Super. at 21, 95 A.2d 416. One of the terms of that contract was the payment by the bank of periodic interest at its prevailing rates. There is no question that on the bank's breach of the contractual obligation of payment, interest as provided by the contract was recoverable. See, e.g., Jacobs v. Great Pacific Century Corp., 204 N.J. Super. 605 (App.Div. 1985), aff'd, 104 N.J. 580, 518 A.2d 223 (1986).
The judgment appealed from is affirmed.
NOTES
[1] Intriguingly, there was also testimony by a UJB employee that in 1983, the bank converted all its passbook accounts to statement accounts. The subject was not pursued either in direct or cross-examination, and there was no evidence presented as to whether existing passbook accounts were so converted and, if so, if passbook depositors were then required to surrender their books or execute a lost-book affidavit. During its deliberations, the jury asked "at changeover from passbooks to statements did customers have to return the old passbook for cancellation?" The judge correctly responded that that information was not in evidence and could not then be supplied.
[2] In Peacock v. Black, 5 N.J. Eq. 535 (E. & A. 1845), the presumption was applied to bar the claim of a legatee made 31 years after the testator's death, 24 years after settlement of the estate, and 17 years after the executor's death where no good cause was shown for the delay. Evidently, in modern terms, the claim would have been barred by the doctrine of laches if no statute of limitations were applicable. Compare Betts v. Van Dyke, 40 N.J. Eq. 149 (Ch. 1885), in which the court refused to apply the presumption to bar payment of a late claim by a legatee for the balance of the legacy. See also Mathews v. Kelly, 70 N.J. Eq. 796, 67 A. 1075 (E. & A. 1906), applying the presumption in the absence of any evidence to the contrary to a guardian's disposition of his ward's funds where twenty years have passed from the date of the final accounting.
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373 Pa. Superior Ct. 434 (1988)
541 A.2d 749
William W. MACKOWICK, Jr. and Margaret Mackowick, His Wife, Appellants,
v.
WESTINGHOUSE ELECTRIC CORPORATION.
Supreme Court of Pennsylvania.
Argued February 17, 1988.
Filed April 29, 1988.
*436 Maureen D. Harvey, Pittsburgh, for appellants.
Frederick N. Egler, Jr., Pittsburgh, for appellee.
Before BROSKY, WIEAND, McEWEN, OLSZEWSKI, BECK, TAMILIA, KELLY, POPOVICH and JOHNSON, JJ.
TAMILIA, Judge:
This is an appeal from a judgment of the Court of Common Pleas of Allegheny County in favor of the defendant, Westinghouse Electric Corporation, in a products liability action.
Appellants, William and Margaret Mackowick, are husband and wife. In December, 1982, William, a skilled electrician was installing additional capacitors in the switchgear room at Western Pennsylvania hospital. The room has high voltage warnings on its doors and is unlocked only for authorized persons. The capacitors already in use at the time were manufactured by Westinghouse and were enclosed in boxlike covers with cautionary warnings on their lids which were held on by screws.
During the installation, one of William's co-workers, Thomas McIntyre, removed the cover from a Westinghouse capacitor. On the removed lid was a warning to users that they should disconnect the breaker, wait five minutes, short the terminals and attach the terminals to the ground before handling. The top of the capacitor was approximately the height of William's waist.
*437 At trial, McIntyre testified he had removed the lid of the energized capacitor to look into it to check the proper installation technique for the new capacitors. At that point, William came over with a screwdriver in his hand which he pointed into the capacitor box resulting in an explosive electrical flash, burning William. He brought this action, claiming Westinghouse's capacitor box was defective because it should have had a lockout system so that it would be de-energized whenever it was opened. His wife filed a derivative claim for loss of consortium.
Westinghouse's expert testified that flashover, or arcing as it is called in the trade, will not occur unless an object is within 40/1000's of an inch of the fuse. The trial court instructed the jury on assumption of risk though it refused to give the instruction requested by the plaintiffs. The jury returned a verdict for Westinghouse. William and his wife appealed to this Court.
Appellants present three issues for our review: (1) whether the trial court's instruction on assumption of risk was erroneous; (2) whether the court's instruction on liability was in error; and (3) whether the court erred in refusing to permit the introduction into evidence of models of alternative capacitor designs and whether the court erred in precluding certain cross-examination of Westinghouse's expert.
In the instant case, the court's jury charge provided in pertinent part:
For you to find that a plaintiff assumed the risk of his injury, you must find that the plaintiff was aware of the danger presented by defendant's product and voluntarily proceeded to encounter the danger. The plaintiff must have realized the danger, but not necessarily the specific defect itself, just the danger.
The jury charge was adequate for the purposes of this case and precisely defines the ambit of risk of the plaintiff in relation to exposing himself to a dangerous condition.
The mandate of this Court is to view the facts in the light most favorable to the defendant as verdict winner and not reverse the trial court's Order absent an abuse of discretion *438 or error of law which controlled the outcome of the case. Martin v. Johns-Manville Corp., 508 Pa. 154, 494 A.2d 1088 (1985); Binder v. Jones & Laughlin Steel Corp., 360 Pa.Super. 390, 520 A.2d 863 (1987); Bryant v. Girard Bank, 358 Pa.Super. 335, 517 A.2d 968 (1986); Fannin v. Cratty, 331 Pa.Super. 326, 480 A.2d 1056 (1984).
A careful reading of the testimony elicited at trial showed clearly that the appellant, an experienced electrician of more than thirty years, fully understood the nature of arcing (flashover). The jury obviously found the testimony of Thomas McIntyre, his co-worker, (that appellant had used a screwdriver to point down into the capacitor) to be the facts of this case, contrary to appellant's testimony that he pointed with his finger. The jury also found, necessarily, that the expert called by Westinghouse was correct in asserting that arcing would occur if one approached within forty one-thousandths of an inch to the capacitor, which was so close as to be indistinguishable from "touching" it. He estimated that distance to be equivalent to the lead of a thick lead pencil or the gap of a spark plug. It is inconceivable that an electrician with the training and experience of the appellant would not realize that arcing can occur under exactly the circumstances involved in this case.
Assumption of the risk frequently occurs with persons who have extensive experience and training and, therefore, take greater chances than persons who are either laymen or not so experienced. The jurors obviously, in light of their own exposure with modern technology, could have concluded that danger of electric shock existed to anyone putting a screwdriver into a fuse box or any other electrical connection in the home, and from their own experience would be reasonably able to infer that a condition with such obvious potential for injury or death, as contained in the switchgear room, was such that an experienced electrician should not have been so reckless as to expose himself to likelihood of injury. Additionally, any person on the jury could conclude from experience with automobiles, once reference was made to a spark plug, that arcing occurs when a test is made to *439 determine if current is passing from the distributor to the spark plug by holding the cable a short distance from the plug to create an arc. These common experiences would belie in the jurors' minds the lack of subjective knowledge of an experienced electrician of a similar consequence under the facts of this case.
The appellant makes much of the fact that he would have had to know not only of the danger but was required to understand what specific danger existed. The problem with the rationale of the appellant is that he attempts to isolate the danger from the objective and subjective knowledge he had about the nature of the electrical equipment in the switchgear room. It is uncontested that the appellant had removed the lid to one of the Westinghouse capacitors several weeks prior to his accident when he and the foreman were in the switch gear room reviewing the upcoming installation job. In doing so, he had to unfasten two bolts between which was the following warning: "THIS CAPACITOR CONTAINS BUILT-IN DISCHARGE RESISTERS. CAUTION: WAIT FIVE MINUTES AFTER DISCONNECTING. THEN SHORT CIRCUIT THE TERMINALS AND GROUND THE CAPACITOR BEFORE HANDLING." The testimony in the record establishes that not only did the appellant know of the specific danger, but the reason he went over to the box on the day of his accident was to point out to co-worker McIntyre the high voltage and extreme danger in going into the capacitor box. He testified he knew the capacitor was there and that it contained four thousand volts and that he could get killed. His testimony was that he was concerned McIntyre might touch something or drop the lid inside and he was concerned that the capacitor was open. By his own testimony, appellant established he knew of the specific danger and, with the subjective knowledge that a person of his experience would have, it is inescapable that in pointing into the box with the screwdriver (or his finger), he subjected himself to the probability that arcing would occur and he would be injured. Even if he believed it was necessary to touch the fuse or capacitor to produce flashover, the uncontested expert testimony *440 that arcing would occur within forty one-thousandths of an inch of the fuse, means that he approached the fuse so closely with the screwdriver that it was indistinguishable from touching and no reasonable person would have done so.
This is not the type of product liability case in which a defect exists, unknown to the victim, upon which strict liability may be posited. Here, the product was not mechanically defective and the only manufacturing defect that could be alleged is inadequate warning as to the danger inherent in the product if not properly used. The warning contained on the lid of the capacitor box was designed to alert those professional persons, who had a reasonable basis for going into the box, of the specific steps necessary to discharge the capacitor before it could be touched. This warning was designed for electricians and was adequate to alert electricians to the specific danger that is, the capacitor stored electricity and could not be handled safely even after the electricity was shut off until the necessary steps were taken to drain it of its charge. Under these conditions, with the current flowing, for an electrician to stick a screwdriver into the box, so close to the fuse that it would arc, can only be classified as an assumption of the risk.
Whether or not he knew of the specific danger and assumed the risk or acted as a reasonable person under the facts of this case was a jury question. The charge given to the jury to aid them in this determination, as well as all of the other instructions given to them by the trial judge, was more than adequate for this purpose. The charge as a whole, including that portion which refers to abnormal use, gave the jury appropriate direction and alternatives to guide them in their determination and provides no basis for reversal. Boyle v. Pennsylvania Railroad Company, 403 Pa. 614, 170 A.2d 865 (1961); Geyer v. Steinbronn, 351 Pa.Super. 536, 506 A.2d 901 (1986); McGowan v. Devonshire Hall Apartments, 278 Pa.Super. 229, 420 A.2d 514 (1980); also see Commonwealth v. Rodriguez, 343 Pa.Super. 486, 495 A.2d 569 (1985).
*441 The trial court's charge covered the situation adequately and gave the jury the correct and legal basis upon which it could draw its conclusions in relation to the facts presented at trial. It is inconceivable that adding to the charge the final sentence requested by the appellant, "if you find that such warnings or instructions were not given, the defendant is liable for all harm caused thereby", would have changed the result or is substantially beyond that which was actually charged by the court so as to warrant a new trial. Appellant's primary contention as to refusal by the trial judge to give the charge was that it was included in the Standard Jury Instructions. These instructions are guides only and the trial judge is free to deviate from them or ignore them entirely. What is important is whether the charge as a whole provides a sufficient and correct legal basis to guide the jury in its deliberations. Boyle, supra; Geyer, supra; Bell v. City of Philadelphia, 341 Pa.Super. 534, 491 A.2d 1386 (1985).
Having resolved the first issue, assumption of the risk, in favor of the appellee, as to the following issues, whether the court's instruction on liability was in error, whether the court erred in refusing to permit the introduction into evidence the models of an alternative capacitor design, and whether the court erred in restricting certain cross-examination of the Westinghouse expert, we also find in favor of the appellee and accordingly affirm the jury verdict.
As to the refusal of the trial court to permit the use of a model by appellant's counsel to illustrate a possible alternative design which might have prevented this accident, it was properly denied by the trial judge as within his discretion on the basis that this was the introduction "of a specific design that this witness invents to show that he could make a better product than Westinghouse made." (T.T. 1/14-17/86, p. 158.) That was not the issue before the jury; the issue was whether the design in question was or was not defective.
The appellee's expert, while precluded from introducing the model, testified extensively as to all the information *442 contained in the model. It is evident from the record that all relevant exhibits, including a capacitor, warning, name plate, diagram and photographs, to mention a few, were introduced to aid the jury in its understanding of the case. These, with the accompanying explanation from the two experts, were more than adequate to present both appellant's and appellee's points of view.
In a similar vein, appellant attempted to show, through cross-examination of appellee's expert, that a cutoff switch was employed in a switchgear room to prevent anyone from going in until the switchgear was turned off and that a similar application should have been contained in the product design of the capacitor box. In refusing to permit this line of cross-examination of appellee's expert, the court properly limited exploration of a different product, designed for a different purpose, as not being relevant to the issue of the adequacy of the design of the capacitor system. We see no error in this holding.
Other issues may be construed as a battle between experts Dr. Robert J. Cunitz, a psychologist in the field of human factors, and Robert T. Innis, a Westinghouse design engineer, who, among other things, designed capacitors. Conflicting testimony was given as to the adequacy of warnings, design and construction of the equipment in question. The jury heard them all and, within their perogative as jurors, selected the data that carried the greatest weight and credibility to them. Thompson v. Motch & Merryweather Machinery, 358 Pa.Super. 149, 516 A.2d 1226 (1986); Mattox v. City of Philadelphia, 308 Pa.Super. 111, 454 A.2d 46 (1982); see also Heiney Will, 455 Pa. 574, 318 A.2d 700 (1974). In addition, the expert for appellant testified that the warning and lockout system he would design as safe in 1986 was available in 1962, when the product was installed. The appellee's expert, on the other hand, testified the design suggested by appellant's expert was not desirable and, in some respects, was more likely to produce harm and that he was unaware that this product introduced in 1922, with more than 75,000 units in use, had ever had a failure attributable to a design defect.
*443 This was an extremely well tried case and in all respects the legal issues were clearly presented to the jury and their function was to apply the law to facts that were easily understood and related to their common knowledge and experience. The issues raised on appeal were either matters of law, properly ruled on by the trial court, or jury questions on which we should not substitute our judgment for that of the jury.
Judgment affirmed.
KELLY, J., concurs in the result.
BROSKY, J., files a dissenting opinion.
BROSKY, Judge, dissenting:
I must respectfully dissent. I concur in appellant's claim that the trial court's jury instruction on assumption of the risk misstated the law, and constitutes reversible error.
A trial judge has wide latitude in charging a jury, as long as the language used adequately and fully conveys the law applicable to the case. Seewagen v. Vanderkluet, 338 Pa.Super. 534, 545, 488 A.2d 21, 26 (1985). Not every misstatement of the law is grounds for reversal. The appellate court must consider the charge in its entirety and determine whether the error was prejudicial to the complaining party. Reilly By Reilly v. Southeastern Pa. Transp. Authority, 507 Pa. 204, 489 A.2d 1291, 1305 (1985).
In Bascelli v. Randy, Inc., 339 Pa.Super. 254, 488 A.2d 1110 (1985), this Court explained the doctrine of implied assumption of the risk. If a person knows that a product is defective and voluntarily proceeds to use the product, his actions constitute a defense to an action for strict products liability. Id, 339 Pa.Superior Ct. at 264, 488 A.2d at p. 1115.
Moreover, our courts have consistently stated that the plaintiff must have known of "the specific defect" which caused his injury. Walasavage v. Marinelli, 334 Pa.Super. 396, 408, 483 A.2d 509, 515 (1984). See also Berkebile v. Brantly Helicopter Corp., 462 Pa. 83, 337 A.2d 893, 901 (1975) (plaintiff precluded from recovery only if he knows of *444 specific defect); Ferraro v. Ford Motor Co., 423 Pa. 324, 223 A.2d 746, 748 (1966) (plaintiff unaware of specific defect so elements of defense not present); Davis v. Dwyer Ind., Inc., 548 F.Supp. 667, 670 (E.D.Pa. 1982) (plaintiff precluded from recovery if he knows of the specific defect).
However, use of the term "defect", with its mechanical and technological connotations, has caused much confusion among members of the bench and bar. Some have argued that a plaintiff is aware of a specific defect only if he understands the mechanical process which causes the item to be dangerous. This interpretation is an overly technical misstatement of the law. For assumption of the risk to apply, a plaintiff needn't understand the mechanical process, but must be subjectively aware of the nature, character, and extent of the danger posed by the specific attribute which is allegedly defective; this requires more than a general awareness by the plaintiff that the product is somehow dangerous. Ferraro, supra; Crance v. Sohanic, 344 Pa.Super. 526, 530, 496 A.2d 1230, 1232 (1985).
For example, in Crance, a visitor to a home was attacked and bitten by a dog belonging to another visitor. The injured party had been warned to be careful around the dog, but had not been told of its propensity to bite. Our Court ruled that an instruction on assumption of the risk was unwarranted. The plaintiff had had a general awareness that the dog might be dangerous, but had not known of the specific danger of biting posed by the animal. Id., 344 Pa.Superior Ct. at 530, 496 A.2d at 1232.
Similarly, in Ferraro, the plaintiff's truck had had problems with locking wheels, as well as with a dislodging of the accelerator pedal. However, he had continued to use the vehicle until the two malfunctions occurred simultaneously, causing an accident in which he was injured. The Supreme Court found that assumption of the risk was inapplicable. The plaintiff had not been specifically aware of the danger that the two problems might occur at the same time. Ferraro, supra, 223 A.2d at p. 748.
Finally, in Davis, the plaintiff sued the manufacturer of a plastic material used to form a strip curtain in a car wash, *445 for injuries he had suffered when someone had driven through the curtain. The plaintiff had been standing behind the curtain. He claimed that the product was defective because it was opaque and thus, the other driver had not been able to see him. The court held that the plaintiff had assumed the risk of standing behind the curtain. He had been aware of the specific defect which had caused his injury, i.e. that a person could not see through the curtain. Therefore, he had known of the specific danger caused by the specific defect at issue. The court explained that the plaintiff need not have known "the technological cause of the defect." Davis, supra.
In the instant case, the court's jury charge provided in pertinent part:
For you to find that a plaintiff assumed the risk of his injury, you must find that the plaintiff was aware of the danger presented by defendant's product and voluntarily proceeded to encounter the danger. The plaintiff must have realized the danger, but not necessarily the specific defect itself, just the danger. (Emphasis supplied.)
This charge misstates the law and, based upon the facts of this case, constitutes prejudicial error. Appellant's claim was that the capacitor in question was defective due to the failure of the fuses to automatically deactivate upon opening of the lid, and that the specific danger posed by this defect was the danger of electrical flashover. Thus, for appellant to have assumed the risk in this case, he would have had to have known of the specific danger of flashover. The above charge, however, would have left the jury with the impression that appellant need only have had a general awareness that the live fuses were dangerous if touched, to have assumed the risk of injury. This impression was misleading. If appellant thought he was safe from danger unless he actually touched a fuse, he was unaware of the specific danger presented.
This is not to say that appellant need have understood the mechanical process by which electricity "arcs", or the variables involved in "arcing", such as humidity, atmospheric *446 pressure, insulation of the electrical source, the shape of the approaching object, or even the precise distance at which an "arc" can occur, in order to have assumed the risk. He need only have known that the possibility of "arcing" was presented by his situation.
This Court has previously recognized that the dangers presented by actually touching a live electrical source, and by coming close enough to an electrical source so as to permit flashover or "arcing", are two distinct dangers, which present distinct theories of causation.
In Books v. Pennsylvania Power and Light Co., 362 Pa.Super. 100, 523 A.2d 794 (1987), the plaintiff filed a trespass action against PPL for injuries he had sustained when the dump trailer he had been operating either came into contact with, or came too close to, some overhead power lines owned by PPL, thereby electrocuting him. PPL then joined Mack Trucks and Hill Manufacturing Co., alleging that Mack and Hill had failed to affix a warning on their products indicating the danger of raising the dump trailer "in the vicinity of overhead electrical transmission lines." Id., 523 A.2d at p. 795. The trial court denied PPL's motion for summary judgment, but entered summary judgment in favor of Mack and Hill on the basis that the plaintiff had admitted, in deposition testimony, that he had known of the danger of electrocution presented by contact with the lines. In reversing, our Court noted the following:
From the inception of the case, plaintiff advanced alternate theories of how the accident occurred: either the equipment came into contact with the power lines, or the equipment was somehow electrified by the lines. PPL advanced the same alternate theories when, in its complaint joining Mack and Hill to the action, it alleged that Mack and Hill should have placed warnings on their products of the danger of operating the equipment in the vicinity of power lines. The trial court recognized the importance of the alternate theories when it agreed that plaintiff assumed the risk of contact, but denied PPL's motion for summary judgment because the accident could have occurred when electrical current arced *447 from the power lines to the equipment. This theory would not require the equipment to come in contact with the power lines. However, the trial court disregarded this possibility when it found that a warning would have been limited to the danger of contact with the power lines. The trial court was unduly restrictive when it created such a warning since PPL alleged that the warning should have been broader and included the danger of working near the power lines.
There is evidence in the record before us from which a jury could find the plaintiff raised the dump trailer near power lines. Whether the electrical charge that injured plaintiff was the result of the trailer coming into contact with the power lines or was the result of the phenomenon known as arcing is a material fact that is yet to be determined. The trial court recognized this when in its opinion, it noted that, "electricity may have somehow `arced' from the power lines to the truck bed as the dumping trailer approached the lines." Trial court's op. at 4. Although plaintiff testified that he was aware of the danger from contact between the trailer and the power lines, there is no evidence in the record to suggest that he was aware of the danger in allowing the trailer to be operated near the power lines. Because there is no evidence to suggest that plaintiff was aware of the danger of operating the dump trailer near the power lines, a genuine issue of material fact exists as to whether the type of warning suggested by PPL would have caused plaintiff to act differently.
Id., 523 A.2d at pp. 798-99. (Emphasis supplied.)
While the Books holding pertains to the erroneous entry of summary judgment on the "failure to warn" question, it cannot be overlooked that the holding is premised upon the fact that distinct theories of causation are presented by the contact theory, and the flashover or "arcing" theory. As I find the reasoning of Books persuasive, I would find, as did the Books panel in dicta, that the theories are distinct for purposes of assumption of the risk in the current context as well.
*448 The majority, of course, makes much of the fact that appellant would have had to have come so close to the fuses for flashover to occur so as to be virtually touching them anyway, which would not have been reasonable behavior on the part of a skilled electrician with thirty years of experience and a general knowledge of "arcing". This, however, is not the issue in assumption of the risk. If appellant should have realized the danger, but did not, he did not assume the risk, but was contributorily negligent. Carrender v. Fitterer, 310 Pa.Super. 433, 456 A.2d 1013, 1015 (1983), rev'd on other grounds, 503 Pa. 178, 469 A.2d 120 (1983). To assume the risk, a person must actually know of its existence, and not merely possess general knowledge from which he should have reasonably ascertained the danger presented. Id.
As the trial court's instruction on assumption of the risk would have permitted the jury to conclude that appellant had assumed the risk, even if unaware of the specific danger of flashover, I find prejudicial error. I would reverse and remand for a new trial.
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134 A.2d 191 (1957)
John D. LATCHIS, Sporo D. Latchis and John D. Latchis, d/b/a Latchis Hotel,
v.
STATE HIGHWAY BOARD.
No. 1133.
Supreme Court of Vermont. Windham.
July 7, 1957.
*193 Fitts & Olson, Brattleboro, for plaintiffs.
John S. Burgess, Brattleboro, and John D. Paterson, Montpelier, for defendant.
Before CLEARY, ADAMS, HULBURD and HOLDEN, JJ., and SYLVESTER, Superior Judge.
HULBURD, Justice.
The State Highway Board is seeking, under V.S.1947, § 4971 et seq., the condemnation of the appellant's land. The matter comes before this Court upon the appellant-landowner's exceptions to the county court's order accepting the report of the commissioners as amended. The appellant asserts that the order for the taking of his lands is unsupported by the evidence, both as to the necessity for the taking and as to compensation awarded therefor. The report shows that the proposed taking is for the purpose of a limited-access, divided, four-lane highway or throughway (with connected interchanges, etc.) which will ultimately run from Hartford, Connecticut to White River Junction, Vermont, from which point it will proceed in two forks, to the Canadian border, one by way of Burlington, and the other by way of northeastern Vermont.
A survey of the proposed highway shows it reaching the land of the appellant at Brattleboro, Vermont. The proposed taking consists of approximately 24.62 acres, cutting diagonally across the northeast portion of the appellant's premises which consist, in all, of approximately 135 acres of land in Brattleboro lying westerly of the present U. S. Route 5 (called Canal Street at that point) and southerly of Fairview Avenue. Of this total acreage only about 8 acres is flat land, so-called; the remainder is hilly and wooded terrain which has been partially cleared for skiing purposes, although not used in that connection for the past two or three years. No portion of the appellant's flat land is included in the proposed taking.
We turn first to the matter of necessity; for the statute provides that condemnation of land for highway purposes may be had only when "the interest of the state shall so require" and there is a "necessity" for taking "for such purposes". V.S. 1947, §§ 4971-4975. Before dealing with any specific exception of the appellant's relating to this subject, it is essential that we have a proper understanding of the terms employed by the statute. The appellant has seized upon the words "imperative necessity" found in the case of Lorenz v. Campbell, 110 Vt. 200, 202, 3 A.2d 548, which quotes them from Farnsworth v. Goodhue, 48 Vt. 209, 211, wherein the expression first appears. Farnsworth v. Goodhue, supra, was not a condemnation case involving a highway but was an action of trespass against a defendant who was constructing an aqueduct and in doing so went onto the plaintiff's land, not for the purpose of laying the aqueduct, but to escape the miry condition of the road adjacent to the construction. This Court properly held that the aqueduct company, although enjoying by statute rights of eminent domain, could not justify its entry on the land of the plaintiff on this ground, especially as it had not proceeded to go through condemnation proceedings and duly ascertained the damage before using the plaintiff's land. The court in its opinion said in the nature of a dictum, at page 211: "No doubt there might have been land that the aqueduct would not itself actually touch, and still have been so situated that it would have been necessary to enter upon it, and if so probably the statute would cover such a case of actual necessity. But such statutes are strongly derogatory to common right, and no case can be brought within them except such as come duly within their terms with imperative necessity."
*194 It is against this background that we must view the words "imperative necessity". When this is done, the expression, although appropriate enough to the case in which it was used, is seen as one not to be adopted as a general test, nor has it ever been applied in condemnations for highways. To do so would be to adopt a strict and rigid necessity never intended by the statute. As Mr. Justice Holmes reminds us, "A word is not a crystal, transparent and unchanged, it is the skin of a living thought and may vary greatly in color and content according to the circumstances and the time in which it is used." Towne v. Eisner, 245 U.S. 418, 425, 38 S. Ct. 158, 159, 62 L. Ed. 372. The necessity specified by the statute for the condemnation of land for highways does not mean an imperative or indispensable or absolute necessity but only that the taking provided for be reasonably necessary for the accomplishment of the end in view under the particular circumstances. Cases to this effect include: Wilton v. St. Johns County, 98 Fla. 26, 123 So. 527, 65 A.L.R. 488; Solether v. Ohio Turnpike Comm., 99 Ohio App. 228, 133 N.E.2d 148, 151; Town of West Hartford v. Talcott, 138 Conn. 82, 91, 82 A.2d 351; Komposh v. Powers, 75 Mont. 493, 244 P. 298, 303; State ex rel. Department of Highways v. Pinson, 66 Nev. 227, 207 P.2d 1105.
Now the end in view has been determined by the legislature itself by No. 270 of the Acts of 1955. Its very first section reads: "The General Assembly of the State of Vermont hereby finds, determines, and declares that this act is necessary for the immediate preservation of the public peace, health, and safety, and for the promotion of the general welfare." This is a declaration of policy under the very act which was enacted that highways like the one in question might be constructed. By its section 6 the state highway board is authorized to acquire land by condemnation for the purposes of the act under existing statutes or any that may be hereafter enacted. We are not confronted, therefore, with the situation which existed in Lorenz v. Campbell, 110 Vt. 200, 3 A.2d 548, supra, where the legislature's purpose was held not to be clear enough to support the taking for the project in question.
Although a declaration by the legislature that a use is public might not make it so; (see Tyler v. Beecher, 44 Vt. 648, 651) primarily, the right to declare what shall be deemed a public use is vested in the legislature and if the use is one that the legislature might reasonably have considered to be public, the determination by the legislature will be upheld in the courts. Public highways were the earliest objects of the exercise of eminent domain, and it has never been doubted that land taken for a public highway, necessary and convenient to the public, is taken for a public use. 18 Am.Jur., p. 684; Williams v. School District, 33 Vt. 271, 276. In the present case the end in view is clear and the authority has been delegated to the State Highway board to take such land as may be necessary to reach that end. In granting this power, however, the legislature has set up certain requirements to be met and a procedure for appeal from the decision of the State Highway Board. As this matter comes to us, the over-all necessity has been recognized and established by legislative enactment and there remains only the question of whether the taking of the particular land in question is reasonably necessary for the accomplishment of the ends envisioned by the legislature.
The argument that "the state doesn't need to take my land" merely because some one else's land might be taken has no validity. After all, if there is to be a road, it of necessity has to go somewhere, some one's property has to be taken. If imperative or absolute necessity were the test, there would be no practical way in which the crooked road could be made straight. It could always be said "The state already has a road." To justify a taking, the interests of the State must require it, and it must be so shown, but only to the extent that it is reasonably necessary to accomplish the end in view after weighing *195 all the circumstances which bear on any given situation. In determining whether a reasonable necessity exists with respect to highways, public safety has become the critical element. Where the volume and nature of traffic is such that public safety requires under the circumstances that the road be constructed; or reconstructed at a given location, a reasonable necessity exists, and a taking of land is justified, if reasonable in the light of all the concurring circumstances. Under our statute a broad discretion has been vested in the state highway board in determining what land it deems necessary for the particular location and route to be followed, and, as a safeguard, the appeal to county court with a provision for a hearing before an independent board of commissioners is provided. A determination made agreeably to the statute will not be interfered with by the courts if it is made in good faith and is not capricious or wantonly injurious. See 29 C.J.S. Eminent Domain § 91, p. 886; Williams v. School District, 33 Vt. 271, 279. The function of this Court on appeal is not to weigh the evidence nor to review its sufficiency further than to determine whether the findings below are supported by any competent or substantial evidence. Petition of Citizens Utilities Co., 117 Vt. 285, 287, 91 A.2d 687; 30 C.J.S. Eminent Domain § 364, p. 52.
We now turn to the appellant's specific exceptions, dealing first with those which relate to necessity. Appellant moved to strike the findings of the commissioners numbered 10 through 15, in their report. These findings related to the conditions existing with respect to a two-mile section of the present U. S. Route 5and its need for replacementas it approaches the appellant's premises from the south. They bring out its inadequacy for traffic capacity, stopping-sight distances, roadbed width, and passing-sight distances. Due to all these factors and its overly-steep grades this particular section is found to be third from the lowest in rating of the 179 highway sections in the State of Vermont under the generally accepted minimum highway standards which pertain to structural condition, safety and service. The appellant conceded on oral argument that these findings are well supported by the evidence and that a good case was made out for taking land for the proposed new highway for the two miles just southerly of the appellant's premises, but this they argue has "no materiality with respect to showing of necessity for the proposed taking of land of the appellant" and so, they say, the motion to strike should have been granted. There was no error in refusing to strike the findings in question. They showed how and why the proposed highway leads up to the appellant's premises. Having of necessity arrived at that point, in order to fulfil its function as a throughway, the road had to proceed northward over some route, and as we shall see later, the commission found the "proposed route through appellant's land is the most satisfactory from the standpoint of safety, grade, acquisition and engineering costs, engineering and other sound bases."
The appellant excepted to finding #17 in which the commissioners found that the proposed interstate highway is necessary for National Defense purposes. There was testimony that the proposed interstate highway was related to National Defense. We think that the finding of the commissioners was a proper inference from the evidence before them. Even if it were not, the legislative pronouncement as to the necessity of the proposed highway made the finding unessential and so not ground for reversal. Shaw v. Shaw, 99 Vt. 356, 358, 133 A. 248.
The appellant excepted to commissioners' finding No. 22 which reads as follows:
"Appellee's engineers have properly discarded as impracticable from safety, engineering, cost of acquisition and other standpoints after due consideration thereof the two alternative throughway routes alluded to by Appellant's counsel in cross-examination of Appellee's witnesses: over *196 the top of Appellant's ridge southerly of the proposed taking and easterly of the proposed taking and thence along the Connecticut River and around the Town of Brattleboro." The ground of the appellant's exception is, that "the above finding contains a characterization: `properly' which it is not within the power of the commissioners to determine, nor have they shown themselves competent to so determine". The ground briefed, however, is not that of the exception as taken, but goes only to the competency of the appellee's engineer. A claim not made below, but made here for the first time is not for consideration. Vermont Salvage Corp. v. Northern Oil Co., 118 Vt. 337, 339, 109 A.2d 267. Moreover, where a witness testifies, without objection being made as to his competency, this matter can not be raised later on appeal. Hathaway's Adm'r v. National Life Ins. Co., 48 Vt. 335, 350; Parker v. McKannon Bros. & Co., 76 Vt. 96, 103, 56 A. 536.
Finding No. 23, to which the appellant excepted, reads as follows:
"The Appellee's engineers have considered various routes for the proposed interstate limited access throughway and have properly found that the present proposed route through Appellant's land is the most satisfactory from the standpoint of safety, grade, acquisition and engineering costs, engineering and other sound bases."
To this finding the appellant excepted on the same ground as to finding No. 22 and "on the further ground of employment of unidentified criteria by reference to `other sound bases'". What we have said in connection with the preceding exception disposes of the first grounds of this exception. As to the added ground, no error appears in the use of the words "and other sound bases" where the major and sufficient reasons have first been stated. Doubtless the "other sound bases" appear in the following finding (No. 24) which we quote shortly. In any event, since the added reasons are stated to be "other sound bases", we will so presume on appeal in the absence of a showing to the contrary. Martin v. Town of Wells, 43 Vt. 428, 433. Even if we should assume that the added words were improper, which we do not, they are not of such import as should be allowed to avoid the proceedings. Compare Eddy v. Sprague, 10 Vt. 216, 219.
The foregoing finding is followed by finding No. 24 which reads as follows:
"The proposed interstate throughway leading through Appellant's property is highly necessary and convenient to the public and to individuals in that among other things it gives an interchange to Brattleboro at the southerly end of the town and in that owing to topographical features, the location of the H. Margolin Company plant and the Austine School and the residential area of Brattleboro it is the most feasible route through a small valley with a minimum destruction of property."
This finding is excepted to because "it contains indefinite characterizations, `highly' and `feasible' which are not equivalent to the required clear, concise finding as to necessity". The case of State ex rel. Department of Highways v. Pinson, 66 Nev. 227, 207 P.2d 1105, is much in point. We quote from the opinion in that case at page 230 of 66 Nev., at page 1107 of 207 P.2d: "Appellants contend that the condemnation of the route through their property grows out of `convenience,' `feasibility,' `economy of construction and maintenance' and not out of `necessity.' It is true that we find these and similar expressions constantly in the mouths of the state and federal engineers who testified, and it is likewise true that none of these witnesses used the terms `necessary' or `necessity' in their testimony. We do find however ample testimony that the alternative route suggested by appellants (the only alternate brought into the case) failed of approval by the state and federal authorities on account of its *197 lack of `highway safety.' The condemned route `offers greater safety to the traveling public.' The proposed alternate route had `excessive grades' * * * `sharper curvatures' * * * permitted `poorer vision' and would have been `extra hazardous' * * * except at greatly restricted speeds. * * * The foregoing examples of the testimony of the state's expert witnesses are sufficient to indicate that the trial court was justified in its finding that the taking was necessary."
In the case at hand, the commissioners have specifically found not only many of the matters mentioned in the quotation but have also found that the proposed taking is "highly necessary". Certainly the appellant can not complain on account of the use of the word "highly" in connection with the word "necessary". The greater includes the less. The appellant's exception to this finding is without merit.
In connection with the testimony of Herbert Farrington, highway engineer and witness for the state, the appellant moved that the question of necessity be stricken from the case. If we assume the appellant's claim, namely, that Farrington's testimony was to the effect that there was no necessity with respect to that portion of the highway which would run through the appellant's land, there still would be no error in denying the appellant's motion to strike the question of necessity from the case. There was ample evidence from other sources, notably, engineer Marsett, tending to show the required necessity. A party is not concluded by the testimony of his own witness, where there is other testimony in the case which supplies the required evidence. Patton v. Ballam & Knights, 115 Vt. 308, 312, 58 A.2d 817. We might add, however, that a full consideration of Farrington's testimony does not restrict its effect as to necessity entirely to portions of the proposed highway other than on the appellant's property as claimed by the appellant.
What we have said is sufficient to indicate that the commissioners' conclusion No. 2 that "the necessity and convenience of individuals and the State of Vermont requires the proposed taking of appellant's land and rights therein," was supported by legal and proper findings in conformity with the statute and the appellant's exceptions thereto are without merit.
We now give our attention to those exceptions briefed by the appellant bearing on the compensation allowed him for the land to be taken in this proceeding. In addition to the appellant, himself, three witnesses testified on this subject. Much of the testimony is based on a taking of 27 acres. In the course of the proceedings the acreage to be taken was reduced by the state, it being considered that the state could forgo its requirement to that extent and thereby preserve intact a ski-jump for young skiers. There was a wide variation in the opinion of the various witnesses as to the value of the land in question and the loss which would result from the proposed taking. Witness Tennien testified that the land to be taken was worth $400 an acre, and that by reason of the taking, 14 acres west of the land to be taken and 7 acres north of the land to be taken would be reduced in value by reason of loss of accessibility and traffic noise so that its potential value for residential purposes would be destroyed. This loss would amount to $6,985 on the 14-acre and 7-acre pieces. As a result on a 27-acre basis Tennien put appellant's total loss at $17,695.
Witness Ratti's figures were slightly higher and amounted to $22,390 figured on a 27-acre basis at $500 per acre. The appellant himself was higher yet with a total figure on a 27-acre basis of $34,000.
As opposed to all this, the State introduced its witness, Bittner. His testimony was to the effect that the value of the land proposed to be taken was $3,600. He further testified that although some of the *198 appellant's remaining land would be reduced in value, the proposed taking would be beneficial in the overall effect. With this evidence before them, the commissioners fixed the compensation to which the appellant would be entitled as follows: $7,500 for the proposed taking of 24.62 acres; $2,000 by reason of disturbance of access to the remaining land; $500 for diminution in value of the appellant's remaining land, the commissioners finding that the land westerly of the proposed taking would be depreciated by that amount by the proposed taking. The total award, therefore, for all compensation amounted to $10,000.
The appellant's first exception is to finding No. 38 which fixes the allowance at $500 for depreciation as just stated. The ground of the exception is that the finding is unsupported by the evidence. This is to ignore the testimony of Bittner who stated the overall effect resulted in no loss to the appellant but rather was beneficial. It is apparent that the commissioners opposed this testimony with that of the other witnesses, weighing all the reasons advanced by each, accepting some, rejecting others, and arriving at an allowance of $500 based on all the evidence. The appellant's theory seems to be that they are entitled to all or nothing on this score. It was for the commissioners to say on all the evidence, aided as it was by a view of the premises, what the appellant was fairly entitled to receive in this regard. It was a matter which called for the commissioners' good sense and sound judgment, and it has not been made to appear that they failed to reach a just and fair result. Compare G. & H. Holding Co. v. Dutton, 118 Vt. 406, 412, 110 A.2d 724.
The appellant excepted to a finding of the commissioners (No. 9) which in substance stated that a portion of the appellant's land was suitable for real estate development purposes, but that none had been offered for sale nor had it been developed in any way. It is obvious that the extent of the development, if any, was a proper factor to be considered in arriving at what would be the appellant's loss and damages. It was not immaterial on the question of damages as claimed by the appellant.
The appellant moved that the testimony of State's witness, Bittner, be stricken for that the witness himself stated that if he owned the land sought to be taken, upon which he had placed a value of $3,600, he would hesitate to sell the land for such sum. As was said in Leblanc v. Deslandes, 117 Vt. 248, 252, 90 A.2d 802, 805, "It is sufficient to say here, that the motion could not have been granted if any part of the testimony was admissible." Bittner's testimony included much more than a damage figure. The motion, if well founded, was too broad.
During the course of witness Tennien's testimony, he referred to the Appraiser's Journal. When witness Bittner took the stand, he did not agree with Tennien's testimony as to the effect of a throughway on the sale of adjacent property. Bittner in turn referred to a specific article in the Appraiser's Journal which he claimed tended to support his opinion and not Tennien's. The appellant moved that the testimony of Bittner be stricken "for the reason that his testimony was tainted by the introduction of inadmissible Appraiser's Journal to which exception was taken." This motion was denied and exception allowed. The transcript discloses that Tennien said he arrived at his opinion from the study of the Journal. Bittner's testimony pertaining thereto was offered for rebuttal purposes only. It had a tendency to prove that the authority for Tennien's testimony was not to the effect that he claimed. It was proper for this purpose. Moreover, as in the preceding exception, the appellant's motion was too broad and its denial was proper for that reason alone.
*199 The appellant excepted to the commissioners' finding No. 30 as unsupported by the evidence. The finding was that the proposed taking is in close proximity to industrial and commercial enterprises and that by reason of that fact is worth less than the $400 or $500 per acre testified to by the appellant's witness. Since it appears that the H. Margolin & Co. plant is located in the immediate area, the transcript supports the finding with its resultant effect, on the value of lots for residential purposes.
In the hearing in County Court on the commissioners' report, appellant's exceptions to findings 35, 36 and 37 were sustained. These findings gave some of the reasons why in finding #38 the figure of $500 was fixed upon to cover depreciation on the land remaining to the appellant. The appellant's exception is actually directed at finding #38 which, as we have already stated, was on the ground that it is not supported by the evidence. As briefed, however, the appellants make the claim at this point that finding #38 can not stand without findings 35, 36 and 37 which were struck on the appellant's motion in County Court. The scope of the appellant's exception does not reach the ground he is now seeking to advance. The exception is not sustained. LaPlante v. Eastman, 118 Vt. 220, 225, 105 A.2d 265.
Appellant's exception to conclusion 4 is made to hinge on our disposition of his exception to finding #38. No further consideration therefore, need be given to his exception to conclusion 4.
The appellant excepted to finding #34 which allowed him the sum of $2,000 by reason of the disturbance of his access to the remainder of his land. The commissioners found that new access roads substantially equivalent to the existing roads could be built for that amount. The exception is that the finding is "wholly unsupported by and inconsistent with all the evidence." The evidence before the commissioners from appellant's witness was that roads which would be slightly better than the existing roads could be constructed for $5,467.50. A witness for the State testified that the slightly-better-road could be constructed for $2,844.40. The appellant did not put before the commissioners any figure as to what substantially equivalent roads would cost to construct, and this, of course, is all that the appellant was entitled to. The commissioners were forced to adopt the figures before them by the exercise of judgment aided by a view of the premises. We cannot say that the amount arrived at was not just and reasonable in the light of the evidence. The exception to the finding is not sustained.
Finding 31 merely states that the fair market value of the 24.62 acres proposed to be taken is $7,500. This finding was excepted to as being entirely unsupported by the evidence and "that it is a conjecture or estimate by the commissioners outside of and beyond their authority and competency and without any legal basis to support the same." What we have said earlier is sufficient to make clear that the finding of a figure of $7,500 was entirely consistent with the evidence. It was within a range placed before the commissioners by the various opinions of the witnesses, from which it was the commissioners' duty to arrive at a determination in the light of all the evidence in case, aided by a view of the premises. Commissioners have been held to have a great degree of freedom in handling opinion evidence bearing on the value of real estate. Shoemaker v. U. S., 147 U.S. 282, 306, 13 S. Ct. 361, 37 L. Ed. 170.
Finding 32 was to the effect that adequate access would be available to the appellant's land lying westerly of the proposed taking by reaching it by a way as therein stated. This finding was excepted to as unsupported by the evidence. As *200 briefed, the whole argument of the appellant is based on the fact that at the hearing in county court on the commissioners' report, counsel for the State stated that it would have "no objection to the court striking the word `adequate' from the finding so it would just say `access will be had'". Whether the word "adequate" was struck by the court is not clear. In any event, "access", standing by itself must be understood as meaning "reasonable access". As such, in the circumstances, it is indistinguishable from "adequate access". To say that there is error here would be to predicate it on a quibble of words.
The appellant moved to recommit the report for the purpose of putting in newly discovered evidence relative to the qualifications of his expert witnesses. He excepted to the county court's refusal to recommit for this purpose. Such a motion was addressed to the discretion of the county court and its action is not reviewable in the absence of abuse of discretion. May v. State, 77 Vt. 330, 333, 60 A. 1. No abuse of discretion has been made to appear. The exception is not sustained.
What we have said disposes of all of the appellant's exception in need of separate attention. The findings of the commissioners were proper and sufficient and the order of the County Court based thereon accepting the same is without error and judgment is affirmed. Cause remanded.
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528 S.W.2d 578 (1974)
Karl F. ABERCROMBIE, Appellant,
v.
The STATE of Texas, Appellee.
Dennis G. DEAN, Appellant,
v.
STATE of Texas, Appellee.
Nos. 48334, 48335.
Court of Criminal Appeals of Texas.
July 24, 1974.
Rehearing Denied November 5, 1975.
Opinion in Rehearing October 15, 1975.
*580 Joe Slator Petsch, Del Rio, for Abercrombie.
Arturo C. Gonzalez, Del Rio, for Dean.
John F. Pettit, Dist. Atty., Edwin E. Springer, Asst. Dist. Atty., Del Rio, Jim D. Vollers, State's Atty., and David S. McAngus, Asst. State's Atty., Austin, for the State.
OPINION
DAVIS, Commissioner.
Appeals are taken from convictions for possession of marihuana. After verdicts of guilty were returned by the jury, punishment was assessed at seven years for appellant Dean and three years for appellant Abercrombie.
Appellants contend that "the search warrant issued by the magistrate was not based upon probable cause because the reliability, if any, of the undisclosed informant was not established in the affidavit."
The record reflects that officers, armed with a search warrant, conducted a search in a residence located at 208½ East Broadway Street in Del Rio on November 25, 1972. Approximately one pound of marihuana was found in the four-room dwelling. In addition, a quantity of marihuana was found in a commode in the bathroom. Officer Gardner testified he saw Abercrombie run in the bathroom with something in his hand and reappear seconds later with his hands empty. Evidence of marihuana was found throughout the dwelling. Particles of marihuana were found in clothing and various containers and vessels. Abercrombie and one Jerry Wayne Davis were present in the apartment when the search was conducted. Dean, a lessee of the residence, was arrested shortly thereafter while driving a vehicle belonging to Abercrombie.
A hearing was held on appellants' motion to suppress evidence seized in the search and the court's action in overruling same gives rise to appellants' contention.
Appellants urge that the allegations of the affidavit made to support the search warrant are insufficient to meet the second prong of the requirements of Aguilar v. Texas, 378 U.S. 108, 84 S. Ct. 1509, 12 L. Ed. 2d 723, requiring that the affidavit state circumstances from which it may be determined that the unnamed informer was credible and reliable.
The pertinent portion of the affidavit of Officer Gardner reads:
"MY BELIEF OF THE AFORESAID STATEMENT IS BASED ON THE FOLLOWING FACTS:
"A reliable and credible person, hereinafter sometimes called informant, the identity of such reliable and credible person and such informant I wish not to disclose, has stated to me on this date 25 November 1972, he found two plastic bags of green plant substance believed by him to be marijuana in his yard adjacent to 208½ East Broadway at approximately 3:00 AM 24 November 1972. He kept the two plastic bags of green plant substance in his possession until approximately 9:00 AM the same date and at which time he went to 208½ East Broadway and asked one white male approximately 20 to 25 years of age, tall and heavy build and having dark hair and a dark bushy beard, later identified by a photograph as a suspected narcotic user being one Dennis G. Dean. At such time the informant asked the said Dennis G. Dean if he had lost something and Dean's reply was yes. The dogs found it and drug (sic) it out into the yard and at this time the informant returned the two plastic bags of *581 green plant substance to the said Dennis G. Dean and he did then and there carry the two plastic bags of green plant substance into the house at 208½ East Broadway. The informant states that in the past he had handled and smoked marijuana and he further states the contents of the two plastic bags to be of the same substance that he handled and smoked in the past being marijuana. It is believed at this time the green plant substance is concealed in the house at 208½ East Broadway Street."
The State cites Adair v. State, 482 S.W.2d 247, Tex.Cr.App. for the proposition that an allegation of prior reliability is not necessary if the underlying circumstances reflect reliability. See United States v. Harris, 403 U.S. 573, 91 S. Ct. 2075, 29 L. Ed. 2d 73. It should be noted, however, that the affidavit in Adair v. State, supra, went further than merely stating that informer was "credible and reliable" and recited that the informer lacked a criminal record, had a favorable reputation in the neighborhood and was well thought of by associates.[1]
It appears that the State is urging that the unnamed informant's credibility was confirmed by verifying the information he furnished. In Gonzales v. Beto, 425 F.2d 963 (5th Cir. 1970), it was stated that an informer's tip can be significantly buttressed if "independent observations by the affiant corroborate sufficient details of the tip (whether suspicious or not) to negate the possibility that the informer `fabricat[ed] his report out of the whole cloth.'" See Polanco v. State, 475 S.W.2d 763, Tex. Cr.App. and cases cited therein. If such corroboration occurred in the instant case the affidavit fails to recite such verification of the informer's tips by affiant. In determining the sufficiency of a hearsay affidavit to reflect probable cause for the issuance of a search warrant, we are bound by the four corners thereof. Adair v. State, supra; Polanco v. State, supra; Kemp v. State, 464 S.W.2d 141, 147.
The State cites United States v. Harris, supra, for the proposition that the informant's declaration against penal interest would tend to prove the reliability and credibility of the informant. The affidavit in the instant case recites: "The informant states that in the past he had handled and smoked marijuana and he further states the contents of the two plastic bags to be of the same substance that he had handled and smoked in the past." In Harris, the Supreme Court said, "Concededly, admissions of crime do not always lend credibility to contemporaneous or later accusations of another." The affidavit in Harris recites "that the informant had purchased illicit whiskey from the residence described, for a period exceeding two years, most recently within two weeks." The Supreme Court noted this "was plainly a declaration against interest since it could readily warrant a prosecution and could sustain a conviction against the informant himself." In the instant case the affidavit reflects that informant stated "in the past he had handled and smoked marijuana" without divulging when or where same may have occurred. It is highly questionable if such statement tended to prove the credibility of the informant. Clearly such statement, itself and without more, does not furnish sufficient underlying circumstances to warrant a finding that the unnamed informer was credible and reliable.
We are mindful that affidavits for search warrants are normally drafted in the midst and haste of a criminal investigation, and adhere to the teachings of the United States Supreme Court in United States v. Ventresca, 380 U.S. 102, 85 S. Ct. 741, 13 L. Ed. 2d 684, that they must be interpreted "in a commonsense and realistic fashion." See Cummins v. State, 478 S.W.2d 452, Tex. *582 Cr.App. Nonetheless, in our efforts to avoid technical and strict interpretation, we must be ever mindful that we stay within the boundaries of constitutional requirements. See Bridger v. State, 503 S.W.2d 801, Tex.Cr.App.
We conclude that the affidavit based upon hearsay information did not meet the second requirement of Aguilar concerning the credibility of the informer and the reliability of his information.
The judgments are reversed and the causes remanded.
Opinion approved by the Court.
MORRISON, Judge (dissenting).
From the four corners of the affidavit we learn the following:
The informant admitted that in the past he had handled and smoked marihuana. The affidavit also states that the informant stated that he had found marihuana in his yard and took the same into his possession. Such possession was unlawful. Article 725b, Sec. 2(a), V.A.P.C. The informant also stated that he later delivered the marihuana to the appellant Dean. Therefore, the affiant had sworn that the informant admitted to him that he possessed and then delivered the marihuana in question. This is clearly a declaration against penal interest and satisfies the requirements of U. S. v. Harris, supra. See also Aranda v. State, 506 S.W.2d 221, Tex.Cr.App.
It is also important that the affidavit reflects that the informer gave affiant a specific physical description of the appellant Dean, who was, according to the affidavit, "... identified as a suspected narcotic user ..." This affiant has thus sworn to facts which are tantamount to "a policeman's knowledge of a suspect's reputation", in Harris, supra.
I am also of the opinion that Adair v. State, 482 S.W.2d 247, Tex.Cr.App. is authority supporting this search warrant.
DOUGLAS, J., joins.
OPINION ON STATE'S MOTION FOR REHEARING
ONION, Presiding Judge.
On the State's motion for rehearing we have carefully reconsidered the contention of the appellants that "the search warrant issued by the magistrate was not based upon probable cause because the reliability, if any, of the undisclosed informant was not established in the affidavit."
Appellants urge the court erred in overruling their motion to suppress since the affidavit in support of the search warrant was insufficient to meet the second prong of the requirements of Aguilar v. Texas, 378 U.S. 108, 84 S. Ct. 1509, 12 L. Ed. 2d 723 (1964).
In Aguilar, the Supreme Court wrote:
"Although an affidavit may be based on hearsay information and need not reflect the direct personal observations of the affiant, Jones v. United States, 362 U.S. 257, 80 S. Ct. 725, 4 L. Ed. 2d 697, the magistrate must be informed of some of the underlying circumstances from which the informant concluded that the narcotics were where he claimed they were, and some of the underlying circumstances from which the officer concluded that the informant, whose identity need not be disclosed, see Rugendorf v. United States, 376 U.S. 528, 84 S. Ct. 825 [11 L. Ed. 2d 887], was `credible' or his information `reliable.'" (Emphasis Supplied) 378 U.S. at 114-115, 84 S.Ct. at 1514.
With this in mind, we consider the pertinent portion of the affidavit of Officer Gardner:
"MY BELIEF OF THE AFORESAID STATEMENT IS BASED ON THE FOLLOWING FACTS:
"A reliable and credible person, hereinafter sometimes called informant, the identity of such reliable and credible person and such informant I wish not to disclose, has stated to me on this date 25 November 1972, he found two plastic *583 bags of green plant substance believed by him to be marijuana in his yard adjacent to 208½ East Broadway at approximately 3:00 AM 24 November 1972. He kept the two plastic bags of green plant substance in his possession until approximately 9:00 AM the same date and at which time he went to 208½ East Broadway and asked one white male approximately 20 to 25 years of age, tall and heavy build and having dark hair and a dark bushy beard, later identified by a photograph as a suspected narcotic user being one Dennis G. Dean. At such time the informant asked the said Dennis G. Dean if he had lost something and Dean's reply was yes. The dogs found it and drug (sic) it out into the yard and at this time the informant returned the two plastic bags of green plant substance into the house at 208½ East Broadway. The informant states that in the past he had handled and smoked marijuana and he further states the contents of the two plastic bags to be of the same substance that he handled and smoked in the past being marijuana. It is believed at this time the green plant substance is concealed in the house at 208½ East Broadway Street."
In determining the sufficiency of such affidavit to reflect probable cause for the issuance of the search warrant, we are bound by the four corners thereof. Article I, Sec. 9, Tex.Const., Vernon's Ann.St.; Article 18.01, Vernon's Ann.C.C.P.; McLennan v. State, 109 Tex. Crim. 83, 3 S.W.2d 447, 448 (1928); Hall v. State, 394 S.W.2d 659 (Tex. Cr.App.1965); Gaston v. State, 440 S.W.2d 297 (Tex.Cr.App.1969) (Concurring Opinion); Ruiz v. State, 457 S.W.2d 894 (Tex.Cr. App.1970) (Concurring Opinion at p. 896).
The affidavit in question reveals that it is sufficient to satisfy the first prong of the Aguilar test. The unnamed informer declared he had personally observed the green plant substance which he knew to be marihuana and had actually delivered the same to Dennis Dean at a stated address. These underlying circumstances are full enough to meet the first prong of the Aguilar test. We do not understand the appellants to contend otherwise, it being their contention that it is the second prong of the Aguilar test which is not satisfied by the affidavit, particularly since the unidentified informer is not shown to be of known or tested reliability.
It is true that many cases dealing with a search warrant affidavit based solely upon hearsay involve an unidentified informer who is described as one of proven reliability by having previously given true and correct information leading to the discovery of narcotics, arrests, convictions, etc. These allegations or type of description of the usual police informer undoubtedly stemmed from Jones v. United States, 362 U.S. 257, 80 S. Ct. 725, 4 L. Ed. 2d 697, 78 A.L.R. 2d 233 (1960).
The absence of an allegation of prior reliability, as in the instant case, is not ipso facto a fatal defect in the affidavit. Adair v. State, 482 S.W.2d 247, 250 (Tex.Cr.App. 1972).[1]
Although the affidavit in the instant case does not contain an allegation of prior reliability, we must determine if there are other factors present sufficient to satisfy the second prong of Aguilar.
It appears from the affidavit that the officer-affiant was confronted with a first-time informer or a citizen informer whom he described in the affidavit only as "a reliable and credible person," which conclusory statement is not sufficient standing alone. Aguilar v. Texas, supra; Adair v. State, supra; Stoddard v. State, 475 S.W.2d 744 (Tex.Cr.App.1972). The officer-affiant *584 did not elaborate upon such conclusory statement or offer the magistrate in the affidavit other factors bearing on a first-time informer's reliability and credibility often found in affidavits involving first-time informers such as the presence or absence of a criminal record, reputation in the community, reputation with associates, position in community. See, i. e., Adair v. State, supra; Yantis v. State, 476 S.W.2d 24 (Tex.Cr.App.1972); Wetherby v. State, 482 S.W.2d 852 (Tex.Cr.App.1972); Cook v. State, 497 S.W.2d 295 (Tex.Cr.App.1973).
Therefore, we must look elsewhere in the affidavit to determine if the conclusory statement is supported.
In the affidavit we do find a declaration against penal interest. The informer had stated that based on his past experience he knew that the substance he found was marihuana and he kept it in his possession for some six hours. Such possession was unlawful and in violation of Article 725b, Sec. 2(a), Vernon's Ann.P.C., then in effect. He later talked to Dean and delivered the marihuana to Dean's house. There is a second possible declaration against penal interest in the affidavit wherein the informer stated he had in the past handled and smoked marihuana. While this statement certainly lends great strength to other portions of the affidavit, it cannot be considered as a second declaration against penal interest in that there is no showing when or where the same occurred. Nevertheless, we do have one declaration against penal interest to consider.
One of the ambiguities arising from United States v. Harris, 403 U.S. 573, 91 S. Ct. 2075, 29 L. Ed. 2d 723 (1971), is whether a declaration against penal interest by the informer is alone sufficient to support a finding that the informer is credible. The affidavit in Harris, as in the instant case, did not aver the previous reliability of the informer as a basis for the affiant's conclusion that the informer was credible. Five Justices agreed on the ultimate proposition that the affidavit in Harris was sufficient. The opinion of the court, however, was divided into three parts. Part I discussed the aggregation of facts which made the affidavit sufficient. Part II discussed the value of using affiant's personal knowledge of the suspect's background to corroborate the informer's tip. Part III discussed the declaration against penal interest as "an additional reason for credibility of the informant's tip." Three Justices in the majority emphasized all three parts as the basis for their holding. One Justice agreed only with Part I, and another Justice agreed only with Part III and a consideration of the affidavit "as a whole." Four Justices dissented, deeming the affidavit insufficient. Harris thus seems to stand only for the proposition that the affidavit in the case was sufficient, as no more than four Justices would agree that a declaration against penal interest is sufficient. From an examination of federal and State cases decided since Harris, the prevailing view appears to be that such declarations against penal interest are indeed sufficient, but this conclusion is not made without some difficulty because in many instances the courts have not been faced with deciding the conclusiveness of declarations against penal interest alone.[2]
*585 Likewise, in the instant case we need not decide whether a declaration against penal interest, standing alone or just what nature of a declaration against penal interest standing alone, is sufficient to support the reliability and credibility of the informer. This is so because there are other factors bearing on probable cause.
In United States v. Squella-Avendano, 447 F.2d 575 (5th Cir. 1971), the court in applying a three tier method for testing whether the Aguilar requirements have been met said in part:
"... First, if the information provided is in such `detail' and `minute particularity' that `a magistrate, when confronted with such detail, could reasonably infer that the informant has gained his information in a reliable way,' then the report, if sufficiently incriminating, may, without more, be grounds for finding probable cause...." See and cf. Adair v. State, supra.
In light of the above, an examination of the search warrant affidavit reveals that the informer, though unnamed, stated that "in his yard adjacent to 208½ East Broadway" he had on November 24, 1972, found green plant substance in two plastic bags which he knew was marihuana from his past experience with it, that he kept it for six hours and then took it to 208½ East Broadway where a white male, described in detail, took the marihuana, claiming he lost it, and took the same into the house. From the description given, Dennis Dean was identified as the white male involved.
It would be difficult to imagine a case where the information provided was with such detail and minute particularity.
In the instant case the magistrate was confronted with an affidavit in such detail that it could reasonably be inferred the informer had gained his information in a reliable way and was sufficiently incriminating, plus the fact that the informer made a declaration against penal interest, and further was a citizen informer who came forward with the information, and, although his name was not revealed, the location of his residence was in effect revealed. We conclude that when the affidavit is considered as a whole in the common sense and realistic way recommended in United States v. Ventresca, 380 U.S. 102, 85 S. Ct. 741, 13 L. Ed. 2d 684 (1965), the second prong of the Aguilar test was met. We need not therefore discuss whether the affidavit also could be construed as reflecting the officer-affiant's personal knowledge of Dean's reputation as a suspected narcotic user.
Both appellants challenge the sufficiency of the evidence to show the offense of possession of marijuana as to each of them.
The record reflects that on November 25, 1972, peace officers, armed with a search warrant, conducted a search at a house at 208½ East Broadway in Del Rio. Deputy sheriff Joe Gardner testified that as he approached the house he saw appellant Abercrombie through the screen door sitting in a chair who got up with a bundle in his hand and began "running, moving fast" in an easterly direction. When he entered the house, Abercrombie was coming out of the bathroom, where in the commode there *586 were approximately 30 rolled cigarettes with one plastic bag containing a green plant substance, which was all shown to be marihuana. Gardner testified that "there was marihuana, marihuana paraphernalia, narcotics paraphernalia, lying around different places of the room (living room), couch, end table, coffee table, the dining table, in the kitchen. It was just everywhere." In the kitchen oven were found a plastic dishpan and a cake-type pan with raw stems of marihuana. Traces of marihuana were found on the stove, and in the kitchen was a large quantity of plastic baggies. In the hot water heater closet another box of marihuana was discovered. One baggie of seeds was taken from the living room couch, traces from an ash tray. There were also found an incense lamp, scales, pipes, roach holders and an alligator-type clip. On the table was found another plastic baggie with marihuana in it. A number of items of clothing found in one of the two bedrooms had traces of marihuana on them or in the pockets.
Jerry Wayne Davis was the only person other than Abercrombie in the house when the officers conducted the search. Mrs. Mildred Stewart testified she owned the house in question and had rented it to appellant Dennis Dean, who paid the rent with the understanding that he and one Wesley Daniels would live there, and she testified they did. James Marston testified he lived at 204½ East Broadway, adjacent to the house in question, and also rented from Mrs. Stewart. He related that he knew Dennis Dean by sight as they by-passed each other going into their respective houses. In the early morning hours of November 24, 1972, he found a green grassy substance scattered over the yard between the two houses in plastic bags which he knew from his own use of it to be marihuana. He testified he took the substance into his house and put it in paper bags as the plastic bags had been chewed by some animal, and kept the marihuana some six hours and then went to Dean's house at 9 or 9:30 in the morning and had a conversation with Dean. When asked if he lost something during the night, Dean replied in the affirmative and asked Marston if he knew where it was. Marston said, "Yes ... I have got it over at my house. I will go get it." Marston walked 15 to 20 feet, reached in his door and picked up the bags, and within 10 or 15 seconds was again knocking on Dean's door. When it opened, a hand came out and took the bags. Marston never did see Dean leave the house during the interval. Mrs. Stewart saw Dean there that morning and he was observed passing a football in the street in front of the house about 1 p. m. before the search which occurred about 5 p. m. Dean was not at the house at the time of the search, but was arrested at 6:45 p. m. in Abercrombie's car.
Abercrombie argues that he did not live at the dwelling in question, that no marihuana was shown to have been found on his person, that the officers did not testify as to any marihuana smoke or odor when they entered the house. Dean, likewise, argues no marihuana was found on his person when arrested, and he was not present when the search was conducted.
The court charged the jury on the law of circumstantial evidence.
In proving possession in narcotics cases, it is not necessary to prove that the accused had exclusive possession of the narcotics in question. Adair v. State, 482 S.W.2d 247 (Tex.Cr.App.1972), and cases there cited; Harvey v. State, 487 S.W.2d 75 (Tex.Cr.App.1972); Buntion v. State, 476 S.W.2d 317 (Tex.Cr.App.1972); Shortnacy v. State, 474 S.W.2d 713 (Tex.Cr.App.1972); Ellis v. State, 456 S.W.2d 398 (Tex.Cr.App. 1970).
Various facts and circumstances may be shown to prove that the accused and another person or persons acted together in jointly possessing a narcotic. Adair v. State, supra; Harvey v. State, supra; Ochoa v. State, 444 S.W.2d 763 (Tex.Cr.App. 1969); Perry v. State, 164 Tex. Crim. 122, 297 S.W.2d 187 (1957).
*587 Where there is an absence of direct evidence that an accused was in exclusive possession of a narcotic, then possession, if any, must be proved by circumstantial evidence. Collini v. State, 487 S.W.2d 132, 136 (Tex.Cr.App.1972).
The evidence presented by the State must affirmatively link the person accused of possession to the narcotic which he is alleged to have possession. Haynes v. State, 475 S.W.2d 739 (Tex.Cr.App.1972); Hausman v. State, 480 S.W.2d 721 (Tex.Cr. App.1972); Payne v. State, 480 S.W.2d 732 (Tex.Cr.App.1972); Harvey v. State, supra. This affirmative link is established by showing additional independent facts and circumstances which may indicate the accused's knowledge of the narcotic, as well as his control over such. See Adair v. State, supra; Harvey v. State, supra; Collini v. State, supra.
In the instant case the appellant Abercrombie was seen running with a bundle in his hand as the officers approached the house in question. As they entered he was seen coming from the bathroom where the officers immediately found a plastic bag of marihuana, as well as marihuana cigarettes in the commode. Marihuana or traces of the same were literally found everywhere in the house. Early on the morning of the search Marston found plastic bags of marihuana in his yard adjacent to the house rented by appellant Dean. When six hours later he talked to Dean, he admitted he had lost "something" and asked Marston if he had it. When Marston returned within 10 to 15 seconds with the marihuana, a hand reached out the door and took the same. Marston never did see Dean leave the house during that time. There was also evidence Dean was passing a football in the street near his rented house. While Dean was not present at the time of the search, the house was under his control, marihuana was literally everywhere, and he or someone in the house had accepted the marihuana brought by Marston after Dean's conversation with him. We conclude the evidence was sufficient to support the verdict of guilty as to both Dean and Abercrombie.
Appellant Abercrombie also complains in one ground of error of the court's failure to respond to his three objections to the court's charge. The ground of error is multifarious under Article 40.09, Vernon's Ann.C.C.P. Further, we have examined the contentions and find that the court's charge in essence gave the same instructions the appellant sought, and that error or errors, if any, were not calculated to injure the rights of the appellant Abercrombie or deprive him of a fair and impartial trial. See Article 36.19, Vernon's Ann.C.C.P.
Appellee's motion for rehearing is granted, the judgments of reversal are set aside, and the judgments are affirmed.
ROBERTS and ODOM, JJ., dissent for the reasons stated in the opinion on original submission.
NOTES
[1] It should be noted that the following comment regarding the affidavit in Adair appeared in footnote 2 therein: "The affidavit nevertheless is not a model and should not be used as such in future cases, as is often done in cases where this court has upheld the sufficiency of a certain affidavit."
[1] As Chief Justice Burger said, speaking for himself and three other Justices, "... this Court in Jones never suggested that an averment of previous reliability was necessary." United States v. Harris, 403 U.S. 573, 91 S. Ct. 2075, 2081, 29 L. Ed. 2d 723 (1971). He noted that inquiry in determining probable cause should be whether the informer's present information is truthful and reliable.
[2] In United States v. Barfield, 507 F.2d 53 (5th Cir. 1975), the only item mentioned supporting the credibility of the informant was the fact that the statement made in the affidavit was against his penal interest. Similarly, in United States v. Neal, 500 F.2d 305 (10th Cir. 1974), a statement against penal interest was the sole support for the second prong of Aguilar, and the affidavit was upheld. Other cases so holding are numerous; Quigg v. Estelle, 492 F.2d 343 (9th Cir. 1974); Armour v. Salisbury, 492 F.2d 1032 (6th Cir. 1974) (declarations against penal interest are "sometimes conclusive"); United States v. Carmichael, 489 F.2d 983, 986-7 (7th Cir. 1973) (en banc) (declaration sufficient); Agnellino v. New Jersey, 493 F.2d 714 (3d Cir. 1974) (sufficient); State v. LaBarre, 292 Minn. 228, 195 N.W.2d 435, 441 (1972) (sufficient); People v. Bolender, 24 Ill.App.3d 804, 322 N.E.2d 624, 627 (1975) (sufficient); People v. Barcia, 37 A.D.2d 612, 323 N.Y.S.2d 517 (1971) (sufficient); Wright v. State, 309 So. 2d 557 (Fla.App.1975) (sufficient); Manley v. Commonwealth, 211 Va. 146, 176 S.E.2d 309 (1970), cert. den. 403 U.S. 936, 91 S. Ct. 2245, 29 L. Ed. 2d 716 (1971) (sufficient). Those cases definitely stating that a statement against penal interest is insufficient are few: Commonwealth v. Fleurant, 311 N.E.2d 86 (Mass.App.Ct.1974).
Despite the several cases stating that a declaration against penal interest alone may be sufficient, most of the discovered cases involved statements far more inculpatory than the one present in the instant case: admissions of participation in robbery, obstruction of justice, drug sales, etc. Often the informant was an accomplice and therefore at least as culpable in the crime in issue as was the defendant. In many other cases a statement against penal interest was present, but there were also many other factors which led to the courts' conclusions. See, e. g., State v. Hayward, 523 P.2d 1278 (Or.App.1974); State v. Everett, 214 N.W.2d 214 (Iowa 1974); United States v. Mackin, 163 U.S.App.D.C. 427, 502 F.2d 429 (1974).
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826 F. Supp. 952 (1993)
Ronald K.M. WILLIAMS, Plaintiff,
v.
PHILADELPHIA HOUSING AUTHORITY, et al., Defendants.
Civ. A. No. 93-CV-0629.
United States District Court, E.D. Pennsylvania.
July 16, 1993.
*953 Frederick C. Timm, Philadelphia, PA, for plaintiff.
Sara M. Staman, Philadelphia, PA, for defendant.
MEMORANDUM AND ORDER
JOYNER, District Judge.
Plaintiff filed suit against the Pennsylvania Housing Authority (PHA) alleging that his termination as counsel to PHA deprived him of a property interest, violated his First Amendment right to privacy and association, and constituted a state common law claim for wrongful discharge and breach of contract. In an already protracted case, Plaintiff now seeks leave to amend his complaint the day after the discovery period's termination to include a wholly distinct claim. Plaintiff seeks to add the following to the complaint:
During plaintiff's leave of absence, defendant Roxanne Galeota acting in her official capacity removed from plaintiff's work desk a computer disk owned by plaintiff without plaintiff's consent and reviewed same.
Despite repeated due demands, defendants Galeota and PHA refused to return Plaintiff's disk to him.
Defendant's seizure and retention of the computer disk violates plaintiff's rights under the Fourth Amendment to be free of unreasonable search and seizure and under the Fourteenth Amendment to be free of deprivation of property without due process.
As a matter of clarification, it seems that Defendants had requested that Plaintiff remove his personal belongings from the desk before he went on leave. It was after this and during Plaintiff's leave that Defendant Galeota discovered the computer disk. The disk contained both official PHA legal documents authored by Plaintiff as well as a few personal items. Plaintiff claimed the disk as his own and requested its return. PHA refused although they did offer to provide a copy of the disk at Plaintiff's expense. For unknown reasons, Plaintiff found the offer unacceptable and initiated this motion to amend.
Though leave to amend should be freely given in the interest of justice, Fed. R.Civ.P. 15(a), the motion is committed to the district court's sound discretion. Massarsky v. General Motors Corp., 706 F.2d 111, 125 (3d Cir.1983). The court may deny leave to amend, among other reasons, on the basis of the futility of the amendment. See Foman v. Davis, 371 U.S. 178, 182, 83 S. Ct. 227, 230, 9 L. Ed. 2d 222 (1962) (other reasons include undue delay, bad faith or dilatory motive, and undue prejudice to opposing party); Averbach v. Rival Manufacturing Co., 879 F.2d 1196, 1203 (3d Cir.1989). An *954 amendment is futile if the amended complaint cannot withstand a motion to dismiss. Massarsky, 706 F.2d at 125; Jablonski v. Pan American World Airways, Inc., 863 F.2d 289, 292 (3d Cir.1988). Thus, we must consider the proposed amendment's merits before determining whether to grant leave to amend. Ross v. Zavarella, 732 F. Supp. 1306, 1309 (M.D.Pa.1990); see also Kiser v. General Electric Corp., 831 F.2d 423, 427 (3d Cir. 1987).
For reasons that follow, we find that the proposed amendment fails to state a claim and is, as a result, futile. We must, therefore, deny Plaintiff's request for leave to amend.
Plaintiff's basis for leave to amend the complaint to include a Fourth Amendment claim is futile because it fails to allege facts sufficient to state a claim under the standard established in O'Connor v. Ortega, 480 U.S. 709, 107 S. Ct. 1492, 94 L. Ed. 2d 714 (1987). There, the Supreme Court outlined the standard for searches and seizures within the workplace.[1] The Court held that the reasonableness standard rather than the probable cause measure normally associated with law enforcement should govern searches and seizures in the workplace. Id. at 726, 107 S.Ct. at 1502. It found that employers most often enter their employees' work area for work-related reasons and not for reasons related to misconduct. Id. at 722, 107 S.Ct. at 1500. For example, an employer may need to retrieve a file or report from the office of an employee who is away from the office in order to complete a task. Id. Thus, in order to maintain efficiency and productivity, the Court has granted employers wide latitude to enter employers' offices for work-related, non-investigative reasons. Id. at 724, 107 S.Ct. at 1501.
In order to successfully state a claim under the O'Connor standard, Plaintiff must allege sufficient facts to raise issue, first as to whether the search was justified at its inception and, second, whether the search's scope was reasonably related to the circumstances that initiated the search. See Id. Here, however, Plaintiff fails to meet that standard.
Notwithstanding the question of ownership over the disk, Plaintiff does not allege facts that the search at its inception was unreasonable nor does he assert that the search was associated with misconduct. Plaintiff himself acknowledges in his proposed complaint that Galeota acted in her official capacity in retrieving the disk. Galeota merely exercised her discretion in maintaining efficiency and productivity in the workplace. Galeota reasonably located the disk in order to distribute the vacated workload to the remaining attorneys. Additionally, the fact that the Plaintiff was supposed to clear the office of his personal property lends credence to the propriety of Galeota's search, that is, she could only have initiated the search to locate work related material.
Secondly, Plaintiff fatally fails to allege in his proposed amendment that the scope of the search was unreasonable. Even so, the disk contained both PHA and personal documents it is reasonable that Galeota would have viewed Plaintiff's personal material in search of official PHA documents.
Since Plaintiff fails to allege facts sufficient to state a claim under the O'Connor standard, a Fourth Amendment claim in support of his proposed amended complaint is futile.
Likewise, Plaintiff's reliance on the Fourteenth Amendment is also futile. Where an adequate state tort law remedy exists for an isolated instance of deprivation of personal property, Plaintiff is barred from bringing a Fourteenth Amendment claim. Hudson v. Palmer, 468 U.S. 517, 534-37, 104 S. Ct. 3194, 3202-05, 82 L. Ed. 2d 393 (1984).
For the above stated reasons, we find that the proposed amendment fails to state a colorable claim. Plaintiff failed to allege sufficient facts under the Fourth Amendment to withstand a subsequent motion to dismiss, and he is barred from bringing a Fourteenth *955 Amendment claim. We, therefore, find the proposed amendment to be futile and are compelled to deny the Plaintiff's request for leave to amend.
An appropriate order follows.
ORDER
AND NOW, this 16th day of July, 1993, upon consideration of Plaintiff's Motion for Leave to Amend Complaint, and Defendants' opposition thereto, and because the proposed amendment would be futile, it is hereby ORDERED that the Motion for Leave to Amend Complaint is denied.
NOTES
[1] Defendant Galeota found the disk next to the computer keyboard in Plaintiff's former office at PHA. The workplace includes those areas and items that are related to work and generally within the employer's control. O'Connor v. Ortega, 480 U.S. 709, 717, 107 S. Ct. 1492, 1496-97, 94 L. Ed. 2d 714 (1987). For example, offices, desks and file cabinets, even though it contains personal items such as a photograph, are considered the workplace. Id.
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528 S.W.2d 617 (1975)
Charles Ray GREEN, Appellant,
v.
The STATE of Texas, Appellee.
No. 50784.
Court of Criminal Appeals of Texas.
October 22, 1975.
*618 Kenneth J. Vitucci, Houston, for appellant.
Carol S. Vance, Dist. Atty., Phyllis Bell and Gerard Guerinot, Asst. Dist. Attys., Houston, Jim D. Vollers, State's Atty., and David S. McAngus, Asst. State's Atty., Austin, for the State.
OPINION
DAVIS, Commissioner.
Appeal is taken from an order revoking probation. Appellant entered a plea of guilty before the court to the offense of forgery of a credit card on June 12, 1973. Punishment was assessed at seven years probated.
The State filed a motion on February 12, 1974, alleging that appellant violated a condition of his probation in that on January 17, 1974, appellant "committed the offense of aggravated robbery in Harris County, Texas...."
The record reflects that after a hearing on October 4, 1974, the court entered an order revoking appellant's probation finding that appellant had violated the terms of his probation "in that on the 17th of January, A. D. 1974, he did commit the offense of aggravated robbery in Harris County, Texas."
Appellant contends the court abused its discretion in revoking probation in that the evidence is insufficient to support the court's finding that appellant committed a violation of the law.
After the State offered a certified copy of the judgment in the primary offense and appellant was identified as the person named in the judgment, the State then offered:
"... all of that evidence which this Court heard at the date of trial of this cause, the State of Texas versus Charles Ray Green in Cause No. 209,070, styled The State of Texas versus Charles Ray Green, said charge being that of aggravated robbery."
The court then noted that Cause No. 209,070 was tried on September 5, 1974, before a jury "in this Court." It was further established that the judge presiding at the hearing on the motion to revoke was the same judge who presided at the trial of Cause No. 209,070.
The appellant objected to the proffer of evidence from Cause No. 209,070 for the reasons that appellant "is thereby not allowed to confrontation of witnesses in this cause" and "this is hearsay evidence." The overruling of appellant's objections by the court forms the basis of this contention.
The identical question was before this Court in Barrientez v. State, Tex.Cr.App., 500 S.W.2d 474. In that case, this Court found Hilton v. State, Tex.Cr.App., 443 S.W.2d 844, to be in point, stating:
*619 "As in Hilton, the present appellant was before the same judge in the same court in both the case where the probation was granted as well as the trial of the offense which was made the basis of revoking his probation."
This Court went on to say that the State should not be forced to reproduce the same witnesses before the same judge and held that the judge could take judicial notice of the evidence introduced in the prior proceeding. See Stephenson v. State, Tex.Cr. App., 500 S.W.2d 855. The holding in Barrientez dictates that the court did not abuse its discretion in finding that appellant had violated the conditions of his probation by committing the offense of aggravated robbery.
Appellant contends the court erred in revoking his probation in that the conviction for the subsequent offense which formed the basis for revocation was on appeal and therefore not a final conviction.
We find appellant's reliance on Prince v. State, Tex.Cr.App., 503 S.W.2d 777, to be misplaced. In Prince, this Court held that probation could not be revoked on the ground that defendant had subsequently been convicted of committing an offense where such conviction was not final. In the instant case, the State did not rely upon the conviction as the basis for its motion to revoke probation. Both the motion to revoke and the order revoking probation were worded to the effect that appellant committed the offense of aggravated robbery. The State alleged and sought to prove the commission, not the conviction, of the offense of aggravated robbery. See Barrientez v. State, supra.
No abuse of discretion is shown in the revocation of appellant's probation.
The judgment is affirmed.
DOUGLAS, J., not participating.
Opinion approved by the Court.
ROBERTS, Judge (concurring).
I concur in the result reached in this case. Although it does not appear from the record that counsel at the revocation hearing was the same as counsel at the trial of the aggravated robbery charge, such fact was admitted by the parties at oral argument. The requirements of Barrientez v. State, 500 S.W.2d 474 (Tex.Cr.App.1973), for the introduction of this testimony are thus satisfied.
ONION, Presiding Judge (dissenting).
This case is almost Barrientez v. State, 500 S.W.2d 474 (Tex.Cr.App.1973), all over again. The question presented is whether in a probation revocation proceeding a trial judge, over objection, may take judicial notice given in a prior trial and use the same as the basis of the revocation where such testimony is not in any way incorporated in the record.
In Barrientez the majority held that the court could take such judicial notice where the trial judge was the same and where the probationer was represented at the prior trial and the revocation hearing by the same attorney. To such improper and erroneous use of judicial notice this writer dissented. See Barrientez v. State, supra, dissenting opinion.
In the instant case the appellant was identified as the person on probation. Then, relying upon Barrientez, the State offered by inference all of the evidence heard in Cause No. 209070 where the State concluded that the appellant was found guilty of aggravated robbery and assessed a punishment of fifty (50) years. There was no sworn testimony identifying this appellant as the accused in such trial, no showing as to when such trial took place, or any showing that the offense there involved occurred while the appellant was on probation. Further, no predicate was laid in compliance with Article 39.01, Vernon's Ann.C.C.P., so as to authorize the use of testimony from the prior case, and no transcription of the court reporter's notes or *620 any other part of the prior record appears in this appellate record. There is no way that this court can, from this record, pass upon the sufficiency of the evidence and any abuse of discretion. For the same reasons set forth in the dissenting opinions in Barrientez v. State, supra, and Stephenson v. State, 500 S.W.2d 855 (Tex.Cr.App.1973), I dissent to the affirmance of this conviction. Further, I would point out again that the Barrientez decision turned upon the fact that the judge was the same and the defense lawyer was the same. In today's opinion, the majority refers to the fact only that the same judge presided at both the prior trial and the revocation hearing. I hope that the majority is not attempting to extend the rule of Barrientez in a case where the record reflects that the judge and the defense counsel were the same at both proceedings.
For the reasons stated, I dissent.
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106 B.R. 207 (1989)
In re Grace Fujino KAM, aka Grace Fujimo Kam, Debtor.
Bankruptcy No. 86-00266.
United States Bankruptcy Court, D. Hawaii.
October 5, 1989.
*208 Wesley H. Ikeda, Honolulu, Hawaii, for petitioner.
Susan Tius, Honolulu, Hawaii, for respondent.
MEMORANDUM DECISION AND ORDER RE: APPLICATION FOR INTERIM ALLOWANCE OF COMPENSATION AND REIMBURSEMENT OF EXPENSES BY ATTORNEYS FOR PETITIONER
JON J. CHINEN, Bankruptcy Judge.
On June 30, 1989, Petitioning Creditor Edsung, Inc. dba Edsung Foodservice Company ("Petitioning Creditor") filed an Application for Interim Allowance of Compensation and Reimbursement of Expenses by Attorney for Petitioner ("Application for Compensation"), requesting total fees of $1,727.00, including Hawaii excise tax of $69.08, plus costs incurred of $331.55 for a total of $2,127.63. These fees and costs were incurred by the Petitioning Creditor and are for services performed in this involuntary chapter 7. The petition was filed on May 8, 1986 and the Order for Relief was entered on June 30, 1986.
A hearing was held on July 28, 1989, at which time the Court took the matter under advisement. The Court being advised in the premises, now renders this memorandum decision and order.
These fees and costs are claimed by the Petitioning Creditor for filing this involuntary petition. As noted in 3 Collier on Bankruptcy, 15th ed. § 503.04, petitioning creditors are entitled to attorney's fees and costs under 11 U.S.C. § 503(b)(3) and (b)(4) only up to the time that the Order for Relief is entered in a chapter 7 case. See also In re Rockwood Computer Corp., 61 B.R. 961 (Bankr.Ohio 1986).
11 U.S.C. § 503 provides in part that, after notice and a hearing, there shall be allowed administrative expenses, including:
(3) the actual, necessary expenses, other than compensation and reimbursement specified in paragraph (4) of this subsection, incurred by
(A) a creditor that files a petition under section 303 of this title;
(B) a creditor that recovers, after the court's approval, for the benefit of the estate any property transferred or concealed by the debtor;
. . . .
(D) a creditor, an indenture trustee, an equity security holder, or a committee representing creditors or equity security holders other than a committee appointed under section 1102 of this title, in making a substantial contribution in a case under chapter 9 or 11 of this title; or
. . . .
(4) reasonable compensation for professional services rendered by an attorney or an accountant of an entity whose expense is allowable under paragraph (3) of this subsection, based on the time, the nature, the extent, and the value of such services, and the cost of comparable services other than in a case under this title, and reimbursement for actual, necessary *209 expenses incurred by such attorney or accountant; (emphasis added.)
Petitioning Creditor cites the case of In re Richton International Corp., 15 B.R. 854 (Bankr.N.Y.1981), for the proposition that it is entitled to its fees and costs in making a substantial contribution to the case. That case, however, was a chapter 11 proceeding, with a successful plan of reorganization. As Collier on Bankruptcy notes, petitioning creditors in chapter 11 cases are allowed their fees and costs incurred up to the time that a plan is confirmed. Petitioning Creditor also cites In Re Rumpza, 54 B.R. 107 (Bankr.Pa.1985) and In Re Johnson, 72 B.R. 115 (Bankr.N. C.1987) for the proposition that attorney's fees incurred after the Order for Relief in an Involuntary chapter 7 are allowable as an administrative expense. However, In Re Rumpza has been criticized in In re Monahan, 73 B.R. 544 (Bankr.Fla.1987) and In Re Johnson has not been cited by any other court. In any event, in those two cases, cited by the Petitioning Creditor, there was a clear benefit to the estate in that the petitioning creditors recovered substantial amounts of monies for the benefit of the estate. The court in In Re Johnson recognized that only in extraordinary circumstances should attorneys for creditors be allowed fees and costs incurred after the Order for Relief, especially when the court has not authorized their retention to act on behalf of the estate.
When there is no prior approval of the court, even though there has been clear benefit to the estate, courts have disallowed fees. See e.g. In re Spencer, 35 B.R. 280 (Bankr.Ga.1983).
In this case, there was no substantial contribution to this case. Most of the services listed were for the benefit of the Petitioning Creditor and did not result in a benefit to the estate. Most of the services incurred after the Order for Relief involved correspondence with the Trustee and the attorney for the Trustee regarding various motions to sell property of the estate, appearances in Court, etc. The Court therefore finds no substantial benefit to the estate.
Based on the above,
IT IS HEREBY ORDERED that the Trustee shall pay all attorney's fees and costs incurred by the Petitioning Creditor prior to the entrance of the order of relief herein on June 30, 1986.
IT IS FURTHER ORDERED that all fees and costs incurred after June 30, 1986, be and the same are, hereby denied.
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826 F.Supp. 1081 (1993)
MICHIGAN SUPERVISORS' UNION; Office & Professional Employees International Union; William T. Gannon, on behalf of himself and all other similarly situated supervisory security personnel employed by Defendant; and Travis Jones, on behalf of himself and all other similarly situated civilian employees of Defendant, Plaintiffs,
v.
STATE OF MICHIGAN; Department of Corrections; and Department of Civil Service, Defendants.
No. 5:91:CV:47.
United States District Court, W.D. Michigan.
March 4, 1993.
Michael D. Sanders, Jeffrey L. Nyquist, Foster, Swift, Collins & Smith, PC, Lansing, MI, for plaintiffs.
Linda M. Olivieri, Lamont M. Walton, Asst. Attys. Gen., Frank J. Kelley, Atty. Gen., Lansing, MI, for defendant Michigan Dept. of Corrections.
OPINION
ENSLEN, District Judge.
This case is before the Court on the parties' cross-motions for partial summary judgment under Federal Rule of Civil Procedure *1082 56. Specifically, each side believes that it is entitled to judgment on counts I & II of plaintiffs' second amended complaint. The underlying dispute is an action for recovery of unpaid overtime compensation pursuant to the Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 201 et seq. This case is brought as a class action under section 16 of the FLSA, 29 U.S.C. § 216.
Facts
Plaintiffs are employees of the Michigan Department of Corrections. There are two classes of employees in this action. Specifically, one class consists of supervisors of security personnel in correctional institutions ("Supervisors"). The other class consists of civilian employees of the Department of Corrections ("Civilians"). The plaintiffs are divided into two classes because, as alleged, they are entitled to overtime pay at different rates. That is, it is alleged that civilians may receive overtime pay at a rate of one-and-one-half times their regular hourly rate in excess of forty in a work week. Supervisors can only receive overtime pay for hours worked in excess of eighty-six (86) in a fourteen day pay period. 29 U.S.C. § 207(k).
Plaintiffs argue that they are entitled to judgment as a matter of law on counts I & II of their complaint because they are not exempt from FLSA protection. As the parties concede, whether plaintiffs are exempt from FLSA protection is the threshold question in this motion. If I find that plaintiffs are exempt under the FLSA, then, as a matter of law, defendants will be granted judgment as to counts I & II. If, on the other hand, I find that plaintiffs are not exempt, then, the next question I must examine is whether defendants "willfully" violated the FLSA (and whether I can make a decision on this question as a matter of law).
Standard
In reviewing a motion for summary judgment pursuant to Rule 56, this Court should only consider the narrow questions of whether there are "genuine issues as to any material fact and [whether] the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). On a Rule 56 motion, the Court cannot resolve issues of fact, but is empowered to determine only whether there are issues in dispute to be decided in a trial on the merits. Gutierrez v. Lynch, 826 F.2d 1534, 1536 (6th Cir.1987); In re Atlas Concrete Pipe, Inc., 668 F.2d 905, 908 (6th Cir. 1982). The crux of the motion is "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52, 106 S.Ct. 2505, 2512, 91 L.Ed.2d 202 (1986); Booker v. Brown & Williamson Tobacco Co., Inc., 879 F.2d 1304, 1310 (6th Cir.1989).
A motion for summary judgment requires this Court to view "`inferences to be drawn from the underlying facts ... in the light most favorable to the party opposing the motion.'" Matsushita Electric Ind. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986) (quoting United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 993, 8 L.Ed.2d 176 (1962)), quoted in Historic Preservation Guild v. Burnley, 896 F.2d 985, 993 (6th Cir.1989). On the other hand, the opponent has the burden to show that a "rational trier of fact [could] find for the non-moving party [or] that there is a `genuine issue for trial.'" Historic Preservation, 896 F.2d at 993 (quoting Matsushita, 475 U.S. at 587, 106 S.Ct. at 1356).
As the Sixth Circuit has recognized and consistently emphasized, recent Supreme Court decisions encourage the granting of summary judgments where there are no material facts in dispute. Historic Preservation, 896 F.2d at 993 (citing Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)). The courts have noted that the summary judgment motion may be an "appropriate avenue for the `just, speedy and inexpensive determination' of a matter." Cloverdale Equipment Co. v. Simon Aerials, Inc., 869 F.2d 934, 937 (6th Cir.1989) (quoting Celotex, 477 U.S. at 327, 106 S.Ct. at 2555). Consistent with the concern for judicial economy, "the mere existence of a scintilla of evidence in support of the [non-moving *1083 party's] positions will be insufficient." Anderson, 477 U.S. at 252, 106 S.Ct. at 2512. "Mere allegations do not suffice." Cloverdale, 869 F.2d at 937. "[T]he party with the burden of proof at trial is obligated to provide concrete evidence supporting its claims and establishing the existence of a genuine issue of fact." Id.
Discussion
As discussed above, the threshold issue here is whether plaintiffs are exempt from protection under the FLSA. As the parties state, the answer to this question in this case turns on whether plaintiffs are paid "on a salary basis" as defined under 29 C.F.R. § 541.118(a). "Salary basis" is defined under this section as:
An employee will be considered to be paid "on a salary basis" within the meaning of the regulations if under his employment agreement he regularly receives each pay period on a weekly or less frequent basis, a predetermined amount constituting all or part of his compensation, which amount is not subject to reduction because of variations in the quality or quantity of his work performed.
Id.
Plaintiffs allege that they are not paid "on a salary basis" because (1) their pay is subject to reductions for absences of less than one day's duration; and (2) they are subject to rigid attendance and timekeeping requirements indicative of non-salaried status.
Defendants respond plaintiffs are paid on a salary basis because any reduction in pay for absences of less than one day's duration is "only theoretical." Defendants' Brief at 9. That is, defendants assert that plaintiffs' pay has never been reduced because of absences of less than a day. Plaintiffs do not dispute this fact.
As both parties point out, exemptions to the FLSA are to be narrowly construed in order to further Congress' goal of providing broad federal employment protection. Mitchell v. Lublin, McGaughy & Assoc., 358 U.S. 207, 211, 79 S.Ct. 260, 263, 3 L.Ed.2d 243 (1959). Employers who claim that an exemption applies to their employees not only have the burden of proof, Corning Glass Works v. Brennan, 417 U.S. 188, 196-97, 94 S.Ct. 2223, 2229, 41 L.Ed.2d 1 (1974), buy they must show that the employees fit "plainly and unmistakenly within [the exemption's] terms." Arnold v. Ben Kanowsky, Inc., 361 U.S. 388, 392, 80 S.Ct. 453, 456, 4 L.Ed.2d 393 (1960).
The issue in this motion boils down to the following: does a public employee have to show that his/her pay was reduced because of absences of less than a day in order to be considered a non-salary employee under the FLSA (and federal regulations promulgated thereunder) or is it enough for the public employee to show that there is a theoretical chance that he/she could be subject to pay reduction for absences of less than one day? A number of courts have addressed this issue with varying outcomes. For instance, in Abshire v. County of Kern, 908 F.2d 483 (9th Cir.1990), the Ninth Circuit held that plaintiffs were not paid "on a salary basis" because their pay was subject to reduction for absences of less than one day even though no such deductions had ever been made. Id. at 487; see also Martin v. Malcom Pirnie, Inc., 949 F.2d 611, 616-17 (2d Cir.1991); Banks v. City of North Little Rock, 708 F.Supp. 1023, 1024 (E.D.Ark.1988); Hawks v. City of Newport News, 707 F.Supp. 212, 215 (E.D.Va. 1988); Knecht v. City of Redwood City, 683 F.Supp. 1307, 1311 (N.D.Cal.1987).
On the other hand, in Atlanta Professional Firefighters v. Atlanta, 920 F.2d 800 (11th Cir.1991), a city ordinance required that all employees' compensation be decreased for arriving late or for violating other bureau regulations. Notwithstanding this unambiguous language, the Eleventh Circuit held that because captains of the fire department had never in fact suffered a reduction in pay due to the lost time of less than a full day, they are paid on a "salary basis." Id. at 805; see also Harris v. District of Columbia, 709 F.Supp. 238, 241 (D.D.C.1989); D.C. Nurses Ass'n v. District of Columbia, 29 Wage & Hour Cas. (BNA) 868, 1988 WL 156191 (D.D.C.1988); Michigan Ass'n of Governmental Employees v. Michigan Dept. of Corrections, No. 5:91-CV-70, 1992 WL 226915 (W.D.Mich.1992) (Judge Bell) (hereinafter "M.A.G.E.").
The Sixth Circuit has not addressed this issue. However, Judge Bell, my colleague in the Western District of Michigan, has held in *1084 accord with the Atlanta Firefighters line of cases cited, supra. Judge Bell distinguished Abshire by noting that there was "clear policy language and the consensus that the employees would be subject to a reduction in pay for less than a day's absence (in Abshire)." In other words, unlike M.A.G.E., the reduction in pay for less than a day's absence was not theoretical in Abshire.
Interestingly, in M.A.G.E., Judge Bell examined a large part of the evidence that is before this Court.[1] Specifically, Judge Bell considered the Michigan Civil Service Compensation Manual and an affidavit of Jan Miller, Director of Labor Relations for the Michigan Department of Corrections, in rendering his decision that reduction in pay was only theoretical for the M.A.G.E. plaintiffs.
In the case before the Court, the parties have also submitted for my consideration the Michigan Civil Service Compensation Manual and an affidavit of Jan Miller. Plaintiffs here have submitted additional information that Judge Bell probably did not have before him, including affidavits of Travis Jones (civilian employee with the Department of Corrections) and William Gannon (supervisor with the Department of Corrections); an Employee Handbook for the Department of Corrections; a policy directive and memo. Plaintiffs suggest that all of this information goes to the proposition that they were not salaried employees.
After reviewing this material, the Court finds that plaintiffs still have not shown, in Judge Bell's words, that "their compensation has never in fact been reduced for a partial day's absence. Their concern is merely a theoretical argument based upon the ambiguous state policy manual that they would have been subject to pay reductions for absences of less than 8 hours if they had used up their annual leave."[2]M.A.G.E. at *2. Accordingly, I find that plaintiffs in this case are "salaried" as defined under 29 C.F.R. § 541.118(a). Thus, they are exempt under the FLSA. Defendants' motion for summary judgment as to counts I & II is granted.[3]
NOTES
[1] The parties in M.A.G.E. were nearly identical to the parties in the case before this Court: Department of Corrections employees (plaintiffs) and the Michigan Department of Corrections (defendant).
[2] I find Judge Bell's opinion persuasive. Although judges within the same district are not bound by each other's opinions as a matter of law, departure from an intra-district precedent is not to be taken lightly. I, therefore, see no reason to accept plaintiffs' invitation to create an intra-district conflict.
[3] I note that the parties have brought to the Court's attention a relatively recent Department of Labor regulation adopted on September 6, 1991. See 29 C.F.R. § 541.5d. This rule provides that public employees who otherwise qualify as "salary basis" employees and are exempt from the overtime provisions of the FLSA will not be disqualified from their exemption solely because they are subject to a pay reduction for lost time of less than a day's duration. Plaintiffs argue that at least two district courts have held this rule to be in violation of the Administrative Procedures Act, 5 U.S.C. § 553(b) & (c). See, e.g., Service Employees Int'l Union, Local 102 v. County of San Diego, 784 F.Supp. 1503 (S.D.Cal. 1992). Plaintiffs here have not explicitly argued (or presented evidence) that this regulation is invalid. Because the parties have not briefed the question whether this regulation is valid, I will not rule on this issue. Additionally, because I have ruled against plaintiffs under 29 C.F.R. § 541.118(a), I need not reach this issue.
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226 B.R. 433 (1998)
In re Frederick J. BELMORE, II, and Vicki L. Belmore, f/d/b/a Highland Construction, and f/d/b/a Cascade Construction, Debtors.
Earl V. ALDRICH and Bettina H. Aldrich, husband and wife, Plaintiffs,
v.
Frederick J. BELMORE, II, and Vicki L. Belmore, f/d/b/a Highland Construction, and f/d/b/a Cascade Construction, Defendants.
Bankruptcy No. 96-20574, Adversary No. 96-6214.
United States Bankruptcy Court, D. Idaho.
October 23, 1998.
*434 James L. Westberg, Landeck Westberg Judge & Graham, Moscow, Idaho, for Plaintiffs.
Clinton J. Henderson, Clarkston, Washington, for Defendants.
SUMMARY ORDER DENYING MOTION FOR RECONSIDERATION
TERRY L. MYERS, Bankruptcy Judge.
Plaintiffs asserted that their claim against the Defendants should be excepted from discharge under § 523(a)(6)[1] as a "willful and malicious injury." Following trial, Bankruptcy Judge Alfred C. Hagan entered a Memorandum of Decision agreeing that the requirements of § 523(a)(6) had been met. That decision was entered on December 17, 1997. The then-current standard for such matters was Impulsora Del Territorio Sur v. Cecchini (In re Cecchini), 780 F.2d 1440, 1443 (9th Cir.1986). Judge Hagan expressly applied that test to the evidence presented at trial. Memorandum of Decision, at 3-4.
For some reason not clear from the record, judgment was not entered upon the decision until March 3, 1998. It so happens that, on that same date, the Supreme Court issued its opinion in Kawaauhau v. Geiger, ___ U.S. ___, 118 S.Ct. 974, 140 L.Ed.2d 90 (1998).
On June 29, 1998, Defendants moved the Court to reopen the underlying chapter 7 case under § 350, to reopen this adversary proceeding, and for relief from the judgment under Rule 9024.[2] They urge no basis other than the issuance of Geiger for their motion.
The Supreme Court, in Geiger, unanimously announced a standard for § 523(a)(6) actions requiring an act which was done with the intent to cause injury,[3] as opposed to an act done intentionally and which leads to injury, but not necessarily done with the *435 intent to injure. The latter characterization was, in effect, the Cecchini test.[4]
Geiger implicitly reversed Cecchini. The Supreme Court noted the test used by the Eighth Circuit in Geiger diverged from those of the Sixth and Tenth Circuits, but it did not mention the Ninth Circuit position, Cecchini or any other Ninth Circuit case. There is, however, no way to square the Supreme Court's interpretation of § 523(a)(6) in Geiger with Cecchini, and it has generally been observed that the Ninth Circuit test was effectively overruled. In re Thomason, 225 B.R. 751, 752-53 (Bankr.D.Idaho 1998); In re Banks, 225 B.R. 738, 746-47 (Bankr. C.D.Cal.1998).
Defendants argue that this pronouncement of the Supreme Court justifies the Court's reconsideration, under either Rule 60(b)(5) or 60(b)(6), of the judgment filed that same day. In opposition, Plaintiffs urge that case law and respect for the principle of finality mandate denial of the motion.
There is no time limit, other than reasonableness, for seeking relief under these provisions. The Court finds that the delay of approximately four months between entry of judgment and Defendants' filing of the present motion after discovery of the Supreme Court's decision is not per se unreasonable.
Rule 60(b)(5)[5] provides that the Court may order relief from a judgment if, among other things, "a prior judgment upon which it is based has been reversed or otherwise vacated." The Court finds, however, that the reference in this rule to reversal of a "prior judgment" concerns earlier judgments in the same or a related case or a judgment which in some similar way formed the predicate for the later court ruling, not reversals of relevant or controlling decisional law. Tomlin v. McDaniel, 865 F.2d 209, 210-11 (9th Cir.1989); Bailey v. Ryan Stevedoring Co., Inc., 894 F.2d 157, 160 (5th Cir.), cert. denied 498 U.S. 829, 111 S.Ct. 89, 112 L.Ed.2d 61 (1990).
Rule 60(b)(6)[6] is a facially broad grant of power for the Court to authorize relief from a judgment for "any other reason." Case law, however, circumscribes the grant, and instructs that it is to be used only in "extraordinary circumstances." Backlund v. Barnhart, 778 F.2d 1386, 1388 (9th Cir. 1985) (citation omitted).
Does the coincidental announcement of Geiger on the day judgment was entered qualify? First of all, it should be noted that we are not here dealing with an "intervening"[7] change of controlling law. The Supreme Court did not rule before Judge Hagan's decision was entered. The judgment of March 3, 1998, is final. No motion to amend the judgment was made or appeal taken within 10 days of its entry. The precedential evolution was "subsequent" rather than "intervening" as it did not occur while the Court still had the case under consideration.
In the Court's view, Ninth Circuit case law does not contemplate that a subsequent change in the law constitutes an "extraordinary circumstance" sufficient for Rule 60(b)(6) relief. Clifton v. Attorney General of the State of Cal., 997 F.2d 660, 664-65 (9th Cir.1993); Tomlin, supra; Title v. United *436 States, 263 F.2d 28, 31 (9th Cir.), cert. denied, 359 U.S. 989, 79 S.Ct. 1118, 3 L.Ed.2d 978, rehearing denied 360 U.S. 914, 79 S.Ct. 1292, 3 L.Ed.2d 1263 (1959); Accord, Bailey, supra. As stated in Clifton:
Both parties acknowledge that, as a general principle, "the res judicata consequences of a final, unappealed judgment on the merits [are not] altered by the fact that the judgment may have been wrong or rested on a legal principle subsequently overruled in another case." Federated Dep't Stores, Inc. v. Moitie, 452 U.S. 394, 398, 101 S.Ct. 2424, 2428, 69 L.Ed.2d 103 (1981) (Moitie); see also Ellingson v. Burlington Northern, Inc., 653 F.2d 1327, 1331 (9th Cir.1981) ("Ellingson did not appeal the trial court's decision, so a subsequent change in law can have no effect on the conclusiveness of the earlier case. Otherwise, no judgment would ever be final.").
997 F.2d at 663 (alteration in original) (footnote omitted) (emphasis supplied).
The Supreme Court has held that new rules announced in civil cases apply "retroactively" only so long as the targeted case is on direct review or is not yet final. Harper v. Virginia Dep't of Taxation, 509 U.S. 86, 97, 113 S.Ct. 2510, 2517, 125 L.Ed.2d 74, 86 (1993) (subsequent history omitted). See also, United States v. Real Property Located at 20832 Big Rock Drive, Malibu, Cal. 90265, 51 F.3d 1402, 1405-06 (9th Cir.1995); Clifton, supra.
As stated in Wasserman v. Municipal Court of Alhambra Judicial Dist.:
"So long as the case is sub judice, a federal court must apply a new and supervening rule of federal law when applicable to the issues in the case."
543 F.2d 723, 725 (9th Cir.1976) (emphasis supplied).
The Court has evaluated all the authorities provided by counsel for the parties, and has engaged in extensive research on its own, and has yet to discover support for the concept that a change in a legal standard announced simultaneously with or subsequent to a final trial court decision, which was proper and supported by the law when issued, justifies setting that decision aside.
For the foregoing reasons, the Defendant's motion for reconsideration under Rule 60(b) is DENIED.
NOTES
[1] Unless otherwise indicated, all references to "code," "title," "chapter" and "section" are to the Bankruptcy Code, 11 U.S.C. §§ 101-1330, and all references to "rule" are to the Federal Rules of Bankruptcy Procedure ("Fed.R.Bankr. P.") XXXX-XXXX, which make applicable certain Federal Rules of Civil Procedure ("Fed.R.Civ. P.").
Section 523(a)(6) 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
. . .
(6) for willful and malicious injury by the debtor to another entity or to the property of another entity; . . .
[2] Rule 9024 provides:
Rule 60 Fed.R.Civ.P. applies in cases under the Code except that (1) a motion to reopen a case under the Code or for the reconsideration of an order allowing or disallowing a claim against the estate entered without a contest is not subject to the one year limitation prescribed in Rule 60(b), (2) a complaint to revoke a discharge in a chapter 7 liquidation case may be filed only within the time allowed by § 727(e) of the Code, and (3) a complaint to revoke an order confirming a plan may be filed only within the time allowed by § 1144, § 1230, or § 1330.
Specifically, the Defendants seek relief under Rules 60(b)(5) and (6) Fed.R.Civ.P.
[3] Geiger, ___ U.S. at ___, 118 S.Ct. at 977.
[4] Cecchini, 780 F.2d at 1443.
[5] Rule 60(b)(5) Fed.R.Civ.P. provides:
On motion and upon such terms as are just, the court may relieve a part or a party's legal representative from a final judgment, order, or proceeding for the following reasons: . . . (5) the judgment has been satisfied, released, or discharged, or a prior judgment upon which it is based has been reversed or otherwise vacated, or it is no longer equitable that the judgment should have prospective application.
[6] Rule 60(b)(6) Fed.R.Civ.P. provides:
On motion and upon such terms as are just, the court may relieve a part or a party's legal representative from a final judgment, order, or proceeding for the following reasons: . . . (6) any other reason justifying relief from the operation of the judgment.
[7] Compare American Economy Ins. Co. v. Reboans, Inc., 900 F.Supp. 1246, 1250-51 (N.D.Cal. 1994). There, the change in controlling authority came nearly four months after partial summary judgment was entered. But the court had not yet entered a final, appealable judgment. Id. The court upon reconsideration applied the reasoning of the new decisional law to the accepted facts established during the prior summary judgment litigation. The change of law was, in essence, an "intervening" change.
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226 B.R. 614 (1998)
In re ENCAPSULATION INTERNATIONAL, LLC, Debtor.
Bankruptcy No. 96-31762-B.
United States Bankruptcy Court, W.D. Tennessee.
October 26, 1998.
*615 David A. Velander, Memphis, TN.
Madalyn S. Greenwood, Memphis, TN, Assistant United States Trustee.
Benjamin S. Dempsey, Huntingdon, TN, for Debtor.
Henry C. Shelton, III, Memphis, TN, for DAM Investments, Ltd.
C. William Denton, Memphis, TN, for Zanaki, LLC.
MEMORANDUM OPINION AND ORDER DENYING DAVID A. VELANDER'S APPLICATION FOR ALLOWANCE OF ADMINISTRATIVE EXPENSE
WILLIAM H. BROWN, Bankruptcy Judge.
This contested matter is before the Court on the application of David A. Velander, former attorney for the debtor, seeking the Court's approval of payment of Mr. Velander's attorney's fees and expenses associated with the debtor's chapter 11 case from the estate's assets as an administrative expense pursuant to 11 U.S.C. § 503(b)(1) and FED. R.BANKR.P. 2016(a). Mr. Velander's application is met with opposition from the United States Trustee, who asserts that Mr. Velander should not be allowed to claim his legal fees as an administrative expense under § 503(b)(1) because his employment as counsel for the debtor was not authorized nor approved by the Court pursuant to the provisions of 11 U.S.C. § 327(a).
The issue presented to the Court is whether Mr. Velander can claim his legal fees as an administrative expense of the estate, when he was not approved by the Court as counsel for the debtor due to his inability to meet the "disinterestedness" requirement of § 327(a). Based on Mr. Velander's failure to meet the qualification requirements for employment as debtor's counsel under § 327(a), the Court concludes that Mr. Velander's legal fees and expenses incurred in this case cannot be claimed as an administrative expense of the debtor's estate. Therefore, Mr. Velander's application is DENIED. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(B). This opinion and order contains findings of fact and conclusions of law pursuant to FED. R.BANKR.P. 7052.
*616 FACTUAL SUMMARY
Mr. Velander was counsel for the debtor and commenced this case by filing the debtor's chapter 11 petition on September 13, 1996. Pursuant to the mandate of § 327(a) of the Bankruptcy Code, the debtor subsequently filed an application for employment of Mr. Velander as counsel for the debtor on October 30, 1996. As the United States Trustee points out, however, Mr. Velander's affidavit in support of the application for employment stated, "although I am not a disinterested person as defined in 11 U.S.C. § 101(14), I do not actively represent an interest adverse to the Debtor-In-Possession. . . ." The United States Trustee and the debtor's two primary creditors voiced opposition to Mr. Velander's employment, based on the fact that Mr. Velander was a prepetition creditor, that his wife and minor children hold title to Mr. Velander's ownership interest in the debtor company, that he held the position of manager of the debtor until his postpetition resignation, and that he owed more than $70,000.00 in legal services to the debtor pursuant to the terms of his prebankruptcy employment agreement, thus rendering Mr. Velander a debtor of the debtor company. His application for employment by the bankruptcy estate was subsequently withdrawn, and substitute counsel, Mr. Dempsey, was retained with this Court's approval.
Mr. Velander has now filed his application seeking compensation as a § 503(b)(1) administrative expense of the estate for legal fees and expenses totaling $14,326.00 incurred during the time of his representation as counsel of record for the debtor. The United States Trustee again has objected to Mr. Velander's application, alleging that because Mr. Velander failed to meet the "disinterestedness" requirement for employment and compensation of the debtor's counsel under § 327(a), he should not now be permitted to come through the "back door" of § 503(b)(1) and collect his legal fees as an administrative expense of the debtor's estate.
ANALYSIS AND CONCLUSIONS OF LAW
The Court must look to the provisions of the Bankruptcy Code in order to determine whether to award compensation from the bankruptcy estate to professionals acting for the benefit of the debtor. Bankruptcy Code § 327(a) governs the employment of professionals by the trustee or, in this case, the chapter 11 debtor in possession.[1] Section 327(a) states:
(a) Except as otherwise provided in this section, the trustee, with the court's approval, may employ one or more attorneys . . . or other professional persons, that do not hold or represent an interest adverse to the estate, and that are disinterested persons, to represent or assist the trustee in carrying out the trustee's duties under this title.
It is "axiomatic that attorney's fees are not recoverable unless the applicant has obtained court approval." In re Marshall, 211 B.R. 662, 664 (Bankr.D.Minn.1997) (citing Lavender v. Wood Law Firm, 785 F.2d 247, 248 (8th Cir.1986), and In re Mork, 19 B.R. 947, 948 (Bankr.D.Minn.1982)). The Marshall Court went on to note that "if the bankruptcy court denies an application for an attorney's employment, any outlay of services by the attorney will be regarded as strictly gratuitous. Work, regardless of its industriousness or resulting benefit, will go uncompensated when performed in the face of a court order denying employment." Id. In addition, the Marshall Court observed:
A court which has approved an attorney's employment pursuant to § 327(a), may subsequently deny compensation upon discovering that attorney holds or represents an interest adverse to the estate. . . . If a court can deny compensation to an attorney with a conflict of interest who has received court approval for the attorney's employment, surely a court can deny compensation to an attorney whose employment was denied because of a conflict. Id. at 665-666.
*617 In this case, there is no court order denying Mr. Velander's employment only because the application for employment was withdrawn prior to a hearing on the application. Mr. Velander admits that he does not meet the requirements of § 327(a) due to his lack of disinterestedness in this case, and the Court therefore concludes that the application for employment and compensation of Mr. Velander would have been denied on that basis if brought before the Court.
Because Mr. Velander cannot recover his legal fees and expenses pursuant to § 327(a), he now asserts that his legal fees are compensable as an administrative expense under § 503(b) of the Bankruptcy Code. Section 503(b)(1)(A) states:
(b) After notice and a hearing, there shall be allowed administrative expenses, other than claims allowed under section 502(f) of this title, including
(1)(A) the actual, necessary costs and expenses of preserving the estate, including wages, salaries, or commissions for services rendered after the commencement of the case.
As the Marshall Court noted, authority for allowing administrative expenses under § 503(b)(1)(A) may not be divorced from § 503(b)(2), which permits "compensation and reimbursement awarded under section 330(a). . . ." Id. at 665. Section 330(a) provides, in pertinent part:
(a)(1) After notice to the parties in interest and the United States Trustee and a hearing . . . the court may award to a trustee, an examiner, a professional person employed under section 327 or 1103
(A) reasonable compensation for actual, necessary services rendered by the trustee, examiner, professional person, or attorney and by any paraprofessional employed by any such person. . . . (Emphasis added.)
Section 330(a) allows compensation to the debtor in possession's attorney only if the attorney has been employed with the court's approval pursuant to § 327 or § 1103.
Furthermore, § 503(b)(1) does not authorize compensation to any attorney whose compensation may not be allowed under § 503(b)(2). Id. at 665 (citing In re Weibel, 161 B.R. 479, 484 (Bankr.N.D.Cal. 1993)). Any other interpretation of § 503(b)(1) renders § 503(b)(2) and § 327 "nugatory." McCutchen, Doyle, Brown & Enersen v. Official Comm. Of Unsecured Creditors (In re Weibel), 176 B.R. 209, 213 (9th Cir. BAP 1994) (citing F/S Airlease II, Inc. v. Simon, 844 F.2d 99, 109 (3rd Cir. 1988)). Mr. Velander should not be permitted to thwart the clear and express intentions of § 327(a) by attempting to recover his fees from the bankruptcy estate as an administrative expense pursuant to § 503(b)(1).
In addition, although Mr. Velander has not raised a quantum meruit or unjust enrichment theory to recover his attorney's fees, any compensation award to Mr. Velander must be based on provisions of the Bankruptcy Code, and the Code does not provide for allowance of professional fees based on such state law theories when they conflict with the Code's clear provisions. Id. at 212.
Mr. Velander was aware or should have been aware of his interest in the debtor's case and his inability to act as counsel for the debtor before he undertook representation, yet he proceeded to act on behalf of the debtor, apparently even after substitute counsel for the debtor was approved by the Court. The Court concludes that, because Mr. Velander was not approved as counsel for the debtor pursuant to § 327(a), he cannot circumvent the requirements of that section to be compensated under the guise of a claim for § 503(b) administrative expenses. Therefore, Mr. Velander's application for the allowance of compensation as an administrative expense is DENIED.
NOTES
[1] Section 1107(a) of the Bankruptcy Code gives a debtor in possession the rights, powers, functions and duties of a chapter 11 bankruptcy trustee.
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106 B.R. 727 (1989)
In re Donald L. BRYANT and Mary Alice Bryant, Debtors.
In re Vincent Martin PARTSCH and Dorothy Annete Partsch, Debtors.
Bankruptcy Nos. 89-1366-6X7, 89-1229-6X7.
United States Bankruptcy Court, M.D. Florida, Orlando Division.
October 10, 1989.
*728 Robert H. Pflueger, Altamonte Springs, Fla., for debtors.
Frank Wolff, Trustee, Maitland, Fla.
ORDER ON TRUSTEE'S OBJECTION TO DEBTORS' EXEMPTIONS
ALEXANDER L. PASKAY, Chief Judge.
In each of the above-captioned Chapter 7 cases, the matter under consideration is an objection by the Trustee to each of the Debtors' claims that funds held in a Martin-Marietta 401K retirement fund are exempt from administration of the bankruptcy estate pursuant to Fla.Stat. 222.21. The following undisputed facts which are relevant to the matters under consideration are as follows:
Donald L. Bryant and Mary Alice Bryant filed their voluntary Petition for Relief under Chapter 7 of the Bankruptcy Code on March 21, 1989, and claimed funds held in a Martin-Marietta 401K plan with a value of $45,876.00 as exempt. Vincent Martin Partsch and Dorothy Annette Partsch filed their voluntary Petition for Relief under Chapter 7 of the Bankruptcy Code on March 14, 1989, and claimed as exempt funds held in the Plan valued at $1,000.
It is the Trustee's contention in both cases that the funds currently held on behalf of the Debtors in the employees' 401K plan are properties of the estate and subject to the administration, notwithstanding the amendment by the legislature of this State that the exemption statute Fla.Stat. 222.21 which now purports to exempt from claim of creditors funds in ERISA type accounts. In opposition, both Debtors contend first that the funds or the stock held in the plan on their behalf are not property of the estate to begin with because they, in fact, qualify as spendthrift trusts, but in any event, they are exempt by virtue of Fla.Stat. 222.21.
The Martin-Marietta 401K Retirement Plan provides its employees with an opportunity to contribute funds through payroll deductions in order to set aside and save money. The company makes matching contributions which vary according to the amount that the employee contributes to the Plan. The primary objective of the Plan is to help the employee accumulate savings over a long period. The employee is eligible to receive the benefits from the Plan either upon retirement, death or upon the reaching of age seventy. However, if the employment terminates, the employee is only entitled to the value of his vested interest in the Plan. Basically, these are the facts that are relevant to the matters under consideration. The threshold question is whether or not the funds held in the ERISA accounts are actually an ERISA Plan and, therefore, property of the bankruptcy estate.
11 U.S.C. § 541 governs the determination of property of the estate and provides that
. . . except as provided in subsections (b) and (c)(2) of this section, all legal or equitable interest of the debtor in property as of the commencement of the case are properties of the estate.
An exception to this idea is found in § 541(c)(2) which provides that a restriction on the transfer of the beneficial interest of the Debtor in a trust that is enforceable under applicable nonbankruptcy law is enforceable in a case under this title. It is clear that the majority of the courts which have considered the applicability of the exception to § 541(a) of the Bankruptcy Code hold that funds held in an ERISA plan are properties of the estate inasmuch as they do not fall under the definition of a spendthrift trust under state law. See In re *729 Goff, 706 F.2d 574 (5th Cir. C.A.1983); Regan v. Ross, 691 F.2d 81 (2nd C.A.1982); In re Graham, 726 F.2d 1268 (8th Cir. C.A. 1984). It appears that these types of funds have been held to be properties of the estate because the debtor does have the ability to reach the proceeds even if to do so would mean to terminate the plan and that the debtor has the ability to manipulate the funds. Further, courts have considered the fact that the beneficiary of the plan can borrow against the funds, at least to the extent that the employee's interest has become vested and that he can withdraw his contributions to the plan in addition to his right to withdraw his vested interest upon termination of the employment. From all this, it follows that the funds in the ERISA account set up by the Debtors are properties of the estate, thus, subject to administration by the Trustee unless the claim of exemption by the Debtors can be recognized.
In Florida, a debtor's right to exemption is based on § 522(b)(1) of the Bankruptcy Code, which permits states to opt out of the specific federal bankruptcy exemptions set forth in § 522(d). Fla. Statute § 222.20 entitled, "Nonavailability of federal bankruptcy exemptions" provides as follows:
In accordance with the provision of § 522(b) of the Bankruptcy Code of 1978 (11 U.S.C. § 522(b), residents of this state shall not be entitled to the federal exemptions provided in § 522(d) of the Bankruptcy Code of 1978 (11 U.S.C. § 522(d)) Nothing herein shall affect the exemptions given to residents of this state by the state constitution in the Florida Statutes.
Prior to 1987, there was no provision in the constitution or the statutes of this State which dealt with ERISA plans and whether or not they could be claimed as exempt.
Fla.Stat. 222.21 entitled, "Exemption of Pension Money and Retirement" or profit-sharing benefits from legal processes provides in pertinent part:
(2)(a) Except as provided in Paragraph (b) any money or other assets payable to a participant or beneficiary from, or any interest of any participant or beneficiary in a retirement or profit-sharing plan that is qualified under § 401(a), § 403(a), § 403(b), § 408, or § 409 of the Internal Revenue Code of 1986, as amended, is exempt from all claims of creditors of the beneficiary or the participant.
It is clear that the Florida legislature intended to provide an exemption for ERISA plans. The Trustee contends, however, that to the extent that the Debtors' claim of exemption is based on Fla.Stat. 222.21, the subject matter dealing with ERISA plans has been pre-empted by the federal legislation and, therefore, any statute dealing with the subject matter is invalid and unenforceable. The Supreme Court recently had occasion to consider this matter in the case of Mackey v. Lanier Collections Agency and Service, Inc., 486 U.S. 825, 108 S. Ct. 2182, 100 L. Ed. 2d 836 (1988) which dealt with a Georgia statute which exempted an employee welfare benefit plan from garnishment. Ironically, the Georgia Statute was actually promoting Congressional intent by furthering the purposes of ERISA. It should be noted that the Florida statute, like the Georgia Statute, is intended to help effectuate ERISA's underlying purpose. The Mackey court stated that legislative good intentions do not save a state law within the broad preemptive scope of § 514(a) and, therefore, the Georgia law had to fail. The court noted that even though the Georgia law did not specifically identify the plan as an ERISA, it made a reference to an ERISA Plan and, therefore, under Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 103 S. Ct. 2890, 77 L. Ed. 2d 490 (1983), even laws which made reference to the ERISA Plan or which that relate to ERISA Plans within the meaning of § 514(a), were pre-empted. In holding that the Georgia statute was pre-empted by ERISA, and, therefore, the exemption created by the Georgia statute could not be enforced, the court looked to the language of ERISA, § 514(a), which provides
(a) Except as provided in subsection (b) of this section, the provisions of this sub-chapter and sub-chapter 3 of this chapter shall supersede any and all state laws insofar as they may now or hereafter relate to any employee benefit plan described in § 1003(a) of this title and not exempt under § 1003(d) of this *730 title. 29 U.S.C.A. § 1144(a) (West 1985). (emphasis added)
The bankruptcy court for the Western District of Texas in In re Komet, 93 B.R. 498, 19 C.B.C.2d 1231 (W.D.Tex.1988), held that ERISA pre-empted a Texas statute which exempted most types of qualified retirement plans from attachment, execution and seizure for the satisfaction of debts. The bankruptcy court stated that the burden was upon Congress to amend ERISA if it wished to place exemption statutes like Texas' beyond ERISA's pre-emptive reach. Congress no doubt had the opportunity, if it desired to do so, to exempt or provide across-the-board exemptions for funds in ERISA plans and failed to do so. It is up to Congress and not this Court to make this change, if such change is, in fact, desired. As to the current state of the law, any reference to an ERISA account contained within a state law is pre-empted and it is up to Congress to exempt ERISA legislation from pre-emption, if it so desires. Therefore, the Trustee's objection to the Debtors' claim of exemptions in each case must be sustained, and the funds held in the Martin-Marietta Plan should be administered as property of the estate.
Accordingly, it is
ORDERED, ADJUDGED AND DECREED that the Trustee's Objection to Donald L. Bryant and Mary Alice Bryant's Claim of Exemptions be, and the same is hereby, sustained and that the funds held in the Martin-Marietta Plan in each case shall be administered by the Trustee as property of the estate. It is further
ORDERED, ADJUDGED AND DECREED that the Trustee's Objection to Vincent Martin Partsch and Dorothy Annette Partsch's Claim of Exemptions be, and the same is hereby, sustained and that the funds held in the Martin-Marietta Plan in each case shall be administered by the Trustee as property of the estate.
DONE AND ORDERED.
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106 B.R. 367 (1989)
HATZEL & BUEHLER, INC., Plaintiff,
v.
CENTRAL HUDSON GAS & ELECTRIC CORPORATION, Defendant.
Civ. A. No. 89-194-JRR.
United States District Court, D. Delaware.
November 3, 1989.
*368 Laura Davis Jones, of Young, Conaway, Stargatt, & Taylor, Wilmington, Del., for debtor and debtor-in-possession, Hatzel & Buehler, Inc.
Peter J. Walsh, of Bayard, Handelman & Murdoch, Wilmington, Del. (Robert E. Pedersen, and Patricia M. Fruehling, of Gould & Wilkie, New York City, of counsel), for Central Hudson Gas & Elec. Corp.
OPINION
ROTH, District Judge.
This is an adversary proceeding in bankruptcy. Jurisdiction is proper under 28 U.S.C. §§ 1334 and 157(d). Defendant has moved to withdraw reference of this adversary proceeding from the bankruptcy court. For the reasons stated below, the Court concludes that the defendant has not shown sufficient "cause" to merit withdrawal in this case. Alternatively, defendant's motion is premature, because the bankruptcy court has not yet determined whether this is a "core" or a "non-core" proceeding. Defendant's motion will be denied.
FACTS
On October 26, 1987 Hatzel & Buehler, Inc. ("H & B") filed a petition for reorganization under Chapter 11 of title 11, United States Code ("the Bankruptcy Code"), in the United States District Court for the District of Delaware. H & B is a New York corporation that does electrical contracting work. The case presently before the Court is an adversary proceeding commenced by H & B on November 17, 1988, against Central Hudson Gas and Electric Corp. ("Central Hudson"). In this adversary proceeding H & B alleges state law breach of contract claims against Central Hudson. H & B claims that Central Hudson did not pay for electrical work H & B did at a plant owned by Central Hudson. H & B's complaint alleges that the bankruptcy court has jurisdiction under 28 U.S.C. §§ 1334 and 157(a), and that this is a core proceeding under 28 U.S.C. § 157(b). Central Hudson answered the complaint by denying that the bankruptcy court has subject matter jurisdiction, denying that this is a core proceeding, and counterclaiming *369 against H & B under the contract. Neither party has asked the bankruptcy judge to determine whether this is a core proceeding as they are permitted to do under 28 U.S.C. § 157(b)(3). Central Hudson moves the Court for an order withdrawing the reference of this proceeding from the bankruptcy court pursuant to 28 U.S.C. § 157(d).
DISCUSSION
The Bankruptcy Reform Act of 1978 granted bankruptcy courts "original but not exclusive" jurisdiction over three types of cases: (1) cases arising under title 11; (2) proceedings arising under title 11; and (3) proceedings related to cases under title 11. 28 U.S.C. § 1471(a), (b) (repealed). This jurisdictional grant was intended to expand the jurisdiction of bankruptcy courts without offending the Constitution. See One-Eighty Investments, Ltd. v. First Int'l Bank of San Antonio, N.A. (In re One-Eighty Investments, Ltd.), 72 B.R. 35, 35-36 (N.D.Ill.1987). However, in Northern Pipeline Construction Co. v. Marathon Pipeline Co., 458 U.S. 50, 84-87, 102 S. Ct. 2858, 2878-2880, 73 L. Ed. 2d 598 (1981), the Supreme Court held that this jurisdictional grant was unconstitutional because, insofar as the "related to" jurisdiction allowed bankruptcy courts to determine purely state law created claims, it conveyed the essential attributes of Article III judicial power to bankruptcy judges, without the concomitant protections of lifetime tenure and guaranteed salary.
Congress sought to remedy this problem by enacting a revised jurisdictional scheme in 1984, now codified at 28 U.S.C. sections 157 and 1334. The new jurisdictional scheme mentions four types of cases: (1) cases under title 11; (2) proceedings arising under title 11; (3) proceedings arising in a case under title 11; and (4) proceedings related to a case under title 11. 28 U.S.C. § 157(a). Section 157(a) authorizes the district courts to refer all four types of cases to the bankruptcy judges for the district.[1] However the bankruptcy court's jurisdiction to hear and make a final determination is limited to "core" proceedings arising under title 11 or arising in a case under title 11. 28 U.S.C. § 157(b). With respect to "non-core" proceedings, the bankruptcy court may hear and submit proposed findings of fact and conclusions of law to the district court, but cannot make a final determination. The district court enters a final order or judgment in non-core proceedings after reviewing de novo matters that are objected to by either party. 28 U.S.C. § 157(c)(1).
The procedure of de novo review in non-core proceedings is intended to bring the grant of jurisdiction to the bankruptcy courts into compliance with Marathon by requiring the district court to exercise final adjudicative authority when state law created claims are at issue. In non-core proceedings, which include proceedings "related to" a case under title 11, the bankruptcy court serves much the same function as a United States Magistrate; in fact the de novo review procedure of section 157(c)(1) is modeled on the United States Magistrates Act, 28 U.S.C. § 636(b)(1), which was held constitutional in United States v. Raddatz, 447 U.S. 667, 683-84, 100 S. Ct. 2406, 2416-17, 65 L. Ed. 2d 424 (1980) (cited with approval in Marathon, 458 U.S. at 79, 102 S. Ct. at 2875).
A. Central Hudson's Motion Is Premature
Obviously, whether a proceeding is deemed to be "core" or "non-core" is crucial to bankruptcy litigants because the bankruptcy court's proposed findings in a non-core proceeding will be subject to de novo review by the district court, whereas the bankruptcy court makes a final determination in core proceedings. In this case, the parties have expended a great deal of effort attempting to convince the Court that the instant proceeding is either core or non-core on the assumption that non-core proceedings are more easily withdrawn than core proceedings. However, whether *370 this proceeding is core or non-core is a determination which may appropriately be made, in the first instance, by the bankruptcy court, not the district court. Section 157(b)(3) provides:
The bankruptcy judge shall determine, on the judge's own motion or on timely motion of a party, whether a proceeding is a core proceeding under this subsection or is a proceeding that is otherwise related to a case under Title 11.
Neither party has asked the bankruptcy judge to determine whether this is a core or a non-core proceeding.
Central Hudson's sole argument in favor of its motion for withdrawal of reference is that this is a non-core proceeding. According to Central Hudson, if a proceeding is non-core, then there is "cause" to withdraw the reference to the bankruptcy court. However, even if "cause" for withdrawal exists in all non-core proceedings, Central Hudson must look first to the bankruptcy court to make this determination. Otherwise section 157(b)(3) would be circumvented. See Pied Piper Casuals, Inc. v. Insurance Co. of the State of Pennsylvania (In re Pied Piper Casuals, Inc.), 48 B.R. 294, 294-95 (S.D.N.Y.1985) (When the sole reason stated in favor of withdrawal is the non-core status of a proceeding, the bankruptcy court must make the determination.). Moreover, it is doubtful whether Central Hudson's premise that cause exists in all non-core proceedings is correct. See, e.g., In re Ramex International, Inc., 91 B.R. 313 (E.D.Pa.1988).
B. Central Hudson Has Not Shown Cause for Withdrawal
28 U.S.C. section 157(d) provides:
The district court may withdraw, in whole or in part, any case or proceeding referred under this section, on its own motion or on timely motion of any party, for cause shown. The district court shall, on timely motion of a party, so withdraw a proceeding if the court determines that resolution of the proceeding requires consideration of both title 11 and other laws of the United States regulating organizations or activities affecting interstate commerce.
Thus, there are two types of withdrawal under section 157(d): discretionary withdrawal "for cause shown," and mandatory withdrawal where United States laws other than title 11 are at issue. The parties agree that this case falls into the "discretionary" withdrawal category provided for in the first sentence of section 157(d).[2] Therefore, it is up to the movant to show cause why the case should be withdrawn from the bankruptcy court. Central Hudson has failed to make a showing of cause.
Section 157(d) does not explain what is meant by "for cause shown." Central Hudson argues that there is cause for withdrawal in this case because this is a non-core proceeding. H & B disputes that this is a non-core proceeding. These arguments are not entirely apposite to the pending motion to withdraw, because whether a proceeding is labelled "core" or "non-core" does not necessarily determine whether cause exists for withdrawal.
Although section 157(d) is a relatively new statute, there is an emerging consensus that the nature of a proceeding (i.e., core or non-core), is not sufficient cause for withdrawal. Research has disclosed only one case that found cause for withdrawal solely because the proceeding was non-core. See Eastern Electric Sales Co. v. General Electric Co., 94 B.R. 348, 349 (E.D.Pa.1989). The Eastern Electric court did not cite any authority or give any reasons for its conclusion. Other courts have held that the nature of the proceeding is only one factor to be weighed in determining *371 whether to withdraw reference. See, e.g., Acolyte Electric Corp. v. City of New York, 69 B.R. 155, 165-66 (Bankr.E.D.N.Y. 1986) (the nature of the proceeding and judicial economy are factors that can justify withdrawal for cause); Judge v. Ridley & Schweigert (In re Leedy Mortgage Co., Inc.), 62 B.R. 303, 306 (E.D.Pa.1986) (non-core status of proceeding is one factor in favor of withdrawal). Still other courts have suggested a number of factors to be considered, without mentioning the nature of the proceeding. See Holland America Insurance Co. v. Succession of Roy, 777 F.2d 992, 998-99 (5th Cir.1985); One-Eighty Investments, 72 B.R. at 37; Wedtech Corp. v. Banco Popular De Puerto Rico (In re Wedtech Corp.), 94 B.R. 293, 296-97 (S.D.N.Y.1988); Allard v. Benjamin (In re DeLorean Motor Co.), 49 B.R. 900, 912 (Bankr.E.D.Mich.1985).
In Holland America, the Fifth Circuit enumerated factors to be considered by the district court in determining whether to withdraw reference to the bankruptcy court. These factors include whether withdrawal would promote uniformity of bankruptcy administration; reduce forum shopping and confusion; conserve debtor and creditor resources; expedite the bankruptcy process; and whether the parties have requested a jury trial. Accord Wedtech, 94 B.R. at 297; Levy v. Butler, Payne and Griffin (In re Landbank Equity Corp.), 77 B.R. 44, 49 (E.D.Va.1987). These factors strike an appropriate balance between Congress' desire to promote judicial economy and the constitutional limitations pointed out in Marathon. Applied to the case at bar these factors counsel against removal. Uniformity of bankruptcy administration will be enhanced by trying this case in the bankruptcy court; forum shopping and confusion will be reduced; it is possible that debtor and creditor resources will be conserved in the bankruptcy court; the bankruptcy process will likely be expedited; and neither party has requested a jury trial.
Central Hudson's argument that cause exists because this is a non-core proceeding reads language into section 157(d) that is not there, making withdrawal non-discretionary when the proceeding is non-core. Congress demonstrated an ability to make withdrawal non-discretionary in the second sentence of section 157(d), and there is no reason to believe Congress could not have done the same with respect to non-core proceedings. Cf. 1 Collier on Bankruptcy ¶ 3.01[2][e] at p. 3-64 (15th ed 1989) ("By using the permissive `may,' Congress has made it clear that withdrawal is discretionary."). Central Hudson's proposed interpretation of section 157(d) is also inconsistent with the rest of section 157. Congress gave the district courts power to refer both core and non-core proceedings to the bankruptcy court. In non-core proceedings the bankruptcy court is given the power to submit proposed findings of fact and conclusions of law to the district court. 28 U.S.C. § 157(c). The bankruptcy court may also enter a final judgment in non-core proceedings when directed to do so by the district court and agreed to by the parties. 28 U.S.C. § 157(c)(2). The discretionary withdrawal provided for in section 157(d) should be read to harmonize with the explicit grants of authority contained elsewhere in section 157.
Proceedings should not be withdrawn for the sole reason that they are non-core. The "cause shown" requirement in section 157(d) creates a "presumption that Congress intended to have bankruptcy proceedings adjudicated in bankruptcy court unless rebutted by a contravening policy." DeLorean, 49 B.R. at 912; accord One-Eighty Investments, 72 B.R. at 37. This observation makes sense in light of the fact that one of the functions of section 157(d) is to insulate the grant of jurisdiction to the bankruptcy courts from successful constitutional attack. See 1 Collier on Bankruptcy ¶ 3.01[2][e], at 3-62 (15th ed 1989). Presumably Marathon is satisfied if the district court exercises its power of de novo review in non-core proceedings. See 28 U.S.C. § 157(c)(1); cf. Raddatz, 447 U.S. at 683, 100 S. Ct. at 2416 (upholding Magistrates Act). This is not an appropriate case for discretionary withdrawal under section 157(d).
*372 CONCLUSION
Central Hudson's motion to withdraw the reference to the bankruptcy court will be denied. An appropriate Order will issue contemporaneously with this Opinion.
NOTES
[1] This district entered an omnibus order on July 23, 1984, referring all bankruptcy cases to the bankruptcy court for the district of Delaware.
[2] The Court notes the recent decision in Hatzel & Buehler v. Orange and Rockland Utilities, Inc., 107 B.R. 34 (D.Del. 1989), in which the court ordered withdrawal under section 157(d). That case required the court to interpret the Occupational Safety and Health Act and E.P.A. regulations, and the court's decision to withdraw the reference to the bankruptcy court was based in part on the "mandatory" withdrawal provided for in the second sentence of section 157(d). See Id., at 39. By contrast, this case involves solely issues of state law and this Court's decision is based entirely on the "discretionary" withdrawal provided for in the first sentence of section 157(d).
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106 B.R. 405 (1989)
In re Jean I. ARMSTEAD, Debtor.
Jean I. ARMSTEAD, Plaintiff,
v.
UNITED STATES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, Samuel R. Pierce, Jr., Secretary of the U.S. Department of HUD; Joseph Russell, Chief Loan Management Branch, Philadelphia Area Office; and Comm. of PA School Employees Retirement Fund, Defendants.
Bankruptcy No. 88-11390S, Adv. No. 88-2113S.
United States Bankruptcy Court, E.D. Pennsylvania.
October 20, 1989.
*406 *407 Virginia R. Powel, Asst. U.S. Atty., Peter M. Campanella, Regional Counsel, Region III, U.S. Dept. of Housing and Urban Development, Philadelphia, Pa., for Federal defendants.
Roger V. Ashodian, Delaware County Legal Assistance, Chester, Pa., for plaintiff/debtor.
Patricia Jenkins, Media, Pa., for defendant-mortgagee.
Edward Sparkman, Philadelphia, Pa., Standing Chapter 13 Trustee.
OPINION
DAVID A. SCHOLL, Bankruptcy Judge.
A. INTRODUCTION
The present contested matter is, hopefully, the final chapter in a sequence of two actions instituted by JEAN I. ARMSTEAD, a mortgagor and later the Debtor in the above-captioned bankruptcy case (hereinafter "the Debtor"), to review a series of denials of her application for an assignment of her federally-insured home mortgage to the Defendant, the UNITED STATES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT (hereinafter this Defendant and several of its employees, also named as Defendants, are referred to collectively as "HUD").[1] Presented here are several unusual issues arising out of the Debtor's Application for attorneys' fees in the amount of $19,947.44[2] under the Equal Access to Justice Act, 28 U.S.C. § 2412 (hereinafter referred to as "the EAJA"). We conclude that the Debtor's Application is timely; that she is a prevailing party; that her counsel is entitled to compensation for services performed in the HUD administrative process subsequent to our remand Order; that HUD's position in this matter was not "substantially justified" and that her counsel is entitled to the hourly rate of compensation originally sought. However, we also conclude that this court lacks jurisdiction to consider compensation for services performed prior to the filing of the instant proceeding in this court, including services performed in a previous separate federal case challenging the initial denial of her Application, and that the Debtor's attempt to obtain compensation for services performed in her main bankruptcy case is also improper. Therefore, noting no objection to the hours of services for which compensation is sought nor the description of services provided in the Application, we shall award her $10,366.00.
B. PROCEDURAL AND FACTUAL BACKGROUND
The tortuous procedural history and factual background of the Debtor's efforts to *408 review the denial of her assignment Application are recited in detail in our previous Opinion of March 21, 1989, and will not be repeated in toto here. See In re Armstead, 97 B.R. 798, 799-803 (Bankr.E.D.Pa. 1989). There, we remanded HUD's denial of the Debtor's Application for an assignment back to that agency. It bears repeating, however, that the Debtor's Application for an assignment, which was filed almost five years ago in January, 1985, was originally summarily dismissed by HUD because the Debtor allegedly failed to timely take action necessary to effect a further appeal. This decision was reversed in a sharply-worded Opinion of the Third Circuit Court of Appeals (hereinafter "the 3rd Circuit") in Armstead v. United States Dep't of HUD, 815 F.2d 278 (3d Cir.1987). Thereafter, on remand, HUD denied the Application on its merits in a letter of February 29, 1989. 97 B.R. at 799. In order to prevent the loss of her home, the Debtor apparently filed the instant bankruptcy case on April 25, 1988, and, on October 4, 1988, filed the adversary proceeding in issue to review HUD's denial of her Application. Id. The result was our decision of March 21, 1989. Id.
Ultimately, on May 22, 1989, HUD granted the Debtor's Application for an assignment. The instant motion was filed thereafter in this court on June 22, 1989.[3] In that Application, the Debtor sought compensation for all services by her counsel at Delaware County Legal Assistance Association (hereinafter "DCLAA") from the time of her initial consultation with DCLAA on August 10, 1985, through the litigation of the case ultimately decided by the 3rd Circuit, and through the preparation of the instant Application. We note that, on October 3, 1988, the 3rd Circuit denied, without explanation, a motion to reconsider its previous denial of an EAJA Application filed by the Debtor directly with that court. No further review of this Order was sought.
On August 11, 1989, HUD filed a lengthy Response in the form of a Brief to the Debtor's instant motion. The parties came before us on August 22, 1989, to argue the motion, after which we entered an Order of August 23, 1989, requesting the parties to submit additional Briefs on or before September 18, 1989 (the Debtor), and October 2, 1989 (HUD), addressing the following issues:
(1) whether fees may be awarded for services in the parties' original action; (2) whether fees may be awarded for services in administrative proceedings; (3) how the hourly rate for reimbursement of counsel should be established; and (4) whether the Defendants were "substantially justified" in defending this proceeding.
. . . . .
The Debtor's counsel, in a fashion we consider improperly casual,[4] belatedly filed the Debtor's Brief on September 22, 1989. HUD then requested an extension of time to reply, and we allowed it an extension until October 10, 1989. We note that HUD has persisted in asserting issues other than those recited above, i.e., that the Debtor's motion was untimely filed and that she was not a "prevailing party," despite our indications that we perceived no merit in its positions on these issues.
C. LEGAL CONCLUSIONS/DISCUSSION
1. This Matter Involves Interpretation of the EAJA.
The instant matter concerns strictly issues of interpretation of the EAJA. That statute provides, in pertinent part, as follows, at 28 U.S.C. §§ 2412(b), (d)(1), (d)(2)(A):
(b) Unless expressly prohibited by statute, a court may award reasonable *409 fees and expenses of attorneys, in addition to the costs which may be awarded pursuant to subsection (a), to the prevailing party in any civil action brought by or against the United States or any agency or any official of the United States acting in his or her official capacity in any court having jurisdiction of such action. The United States shall be liable for such fees and expenses to the same extent that any other party would be liable under the common law or under the terms of any statute which specifically provides for such an award.
. . . . .
(d)(1)(A) Except as otherwise specifically provided by statute, a court shall award to a prevailing party other than the United States fees and other expenses, in addition to any costs awarded pursuant to subsection (a), incurred by that party in any civil action (other than cases sounding in tort), including proceedings for judicial review of agency action, brought by or against the United States in any court having jurisdiction of that action, unless the court finds that the position of the United States was substantially justified or that special circumstances make an award unjust.
(B) A party seeking an award of fees and other expenses shall, within thirty days of final judgment in the action, submit to the court an application for fees and other expenses which shows that the party is a prevailing party and is eligible to receive an award under this subsection, and the amount sought, including an itemized statement from any attorney or expert witness representing or appearing in behalf of the party stating the actual time expended and the rate at which fees and other expenses are computed. The party shall also allege that the position of the United States was not substantially justified. Whether or not the position of the United States was substantially justified shall be determined on the basis of the record (including the record with respect to the action or failure to act by the agency upon which the civil action is based) which is made in the civil action for which fees and other expenses are sought.
(C) The court, in its discretion, may reduce the amount to be awarded pursuant to this subsection, or deny an award, to the extent that the prevailing party during the course of the proceedings engaged in conduct which unduly and unreasonably protracted the final resolution of the matter in controversy.
(2) For the purposes of this subsection
(A) "fee and other expenses" includes the reasonable expenses of expert witnesses, the reasonable cost of any study, analysis, engineering report, test, or project which is found by the court to be necessary for the preparation of the party's case, and reasonable attorney fees (The amount of fees awarded under this subsection shall be based upon prevailing market rates for the kind and quality of the services furnished, except that (i) no expert witness shall be compensated at a rate in excess of the highest rate of compensation for expert witnesses paid by the United States; and (ii) attorney fees shall not be awarded in excess of $75 per hour unless the court determines that an increase in the cost of living or a special factor, such as the limited availability of qualified attorneys for the proceedings involved, justifies a higher fee) (emphasis added); . . .
2. The Debtor's Motion was Timely Filed Within Thirty (30) Days of the Final Agency Action.
This issue involves consideration of 28 U.S.C. § 2412(d)(1)(B). The Debtor filed the instant application for attorneys' fees on June 22, 1989. HUD contends that the application is not timely because this court's Order dated March 21, 1989 (which HUD mistakenly identifies as March 29, 1989), which remanded this matter to HUD, should be considered to be the date of final judgment from which the thirty-day period should run.
*410 However, we believe that it is more significant that the Debtor filed this motion within thirty days from the date that HUD advised the Debtor by letter that it would accept her mortgage assignment. HUD's letter was dated and sent on May 22, 1989. Federal Rule of Civil Procedure 6 provides that
[i]n computing any period of time prescribed or allowed by . . . any applicable statute, the day of the act, event, or default from which the designated period of time begins to run shall not be included.
If HUD's acceptance of the Debtor's mortgage assignment was the "final judgment," the thirty-day period as provided for by the EAJA would begin to run on May 23, 1989. Further, if this assertion is correct, the Debtor did timely file her application by filing on June 22, 1989, the thirtieth day after May 23, 1989.
In considering what date constitutes the "final judgment" of Plaintiff's action, we have recent guidance from the Supreme Court's decision in Sullivan v. Hudson, ___ U.S. ___, 109 S. Ct. 2248, 104 L. Ed. 2d 941 (1989). In Hudson, the plaintiff filed for disability benefits (SSA) and supplemental security income (SSI) under the Social Security Act. Id. 109 S.Ct. at 2251. She requested and received a hearing before an Administrative Law Judge (hereinafter "ALJ"), where the plaintiff was represented by a legal services corporation. Id. After the plaintiff's hearing, the ALJ rendered her decision, finding that the plaintiff was not disabled. Id. at 2251-52. The ALJ's decision was approved by the Social Security Appeals Council (hereinafter "SSAC"), and thus became the final decision of the Secretary of Health and Human Services (hereinafter "the Secretary"). Id. at 2252. Thereafter, the plaintiff sought review of the SSAC's decision in district court. Id. On the Plaintiff's appeal from an adverse district court ruling, the Court of Appeals for the Eleventh Circuit (hereinafter "the 11th Circuit") reversed, vacated the Secretary's decision, and instructed the district court to remand the case to the Secretary for reconsideration. Hudson v. Heckler, 755 F.2d 781 (11th Cir.1985). Id.
On remand, the ALJ found that the plaintiff was, in fact, disabled. Thereafter, the SSAC adopted the ALJ's new recommended decision and instructed the Social Security Administration to pay the plaintiff SSA and SSI benefits. Id.
The plaintiff then filed a petition for attorney's fees under the EAJA. Id. The district court denied the plaintiff's petition, finding that the position taken by the Secretary was "substantially justified." Id. The Court of Appeals reversed, holding that the Secretary's defense of the denial of benefits to the plaintiff was contrary to her own regulations and hence was not "substantially justified." Id. 109 S.Ct. at 2252-53.
In its Opinion, per Justice O'Connor, the Court recited the time-strictures set forth in § 2412(d)(1)(B). Id. at 2255. The Court then stated that, in those cases where a plaintiff had initially sought a remedy before an administrative agency, "there will often be no final judgment in a claimant's civil action for judicial review until the administrative proceedings are complete." Id. The Court further stated, at id., as follows:
Thus, for purposes of the EAJA, the Social Security claimant's status as a prevailing party and the final judgment in her "civil action . . . for review of agency action" are often completely dependent on the successful completion of the remand proceedings before the Secretary. Moreover, the remanding court continues to retain jurisdiction over the action within the meaning of the EAJA, and may exercise that jurisdiction to determine its legal instructions on remand have been followed by the Secretary. Our past decisions interpreting other fee-shifting provisions made clear that where administrative pleadings are intimately tied to the resolution of the judicial action and necessary to the attainment of the results Congress sought to promote by providing for fees, they should be considered part and parcel of the action for which fees may be awarded.
*411 This passage suggests to us that, for purposes of EAJA, a claimant may never attain a status as a "prevailing party" or achieve a "final judgment" until the "successful completion of the remand proceedings" before a particular administrative agency. Similarly, we find that, in the present case, the Debtor did not become a "prevailing party" by virtue of a "final judgment" until, as the Court indicated, "the successful completion of the remand proceedings." Hence, a final judgment on the Debtor's claim, for purposes of the EAJA, was not rendered until May 22, 1989, the date of the letter by HUD advising her that it accepted her application for mortgage assignment. As such, her motion for an award of attorneys' fees which was filed on June 22, 1989, was, in fact, timely.
3. The Debtor was Clearly a "Prevailing Party" in the Proceeding.
The issue of whether the Debtor was a "prevailing party," involves interpretation of that phrase as it appears in 28 U.S.C. §§ 2412(b) and (d)(1)(A). This issue is rather easily resolved by review of the same passages in Sullivan v. Hudson which we considered at pages 410-11 supra. While the Court, in Hudson, concluded that a plaintiff seeking judicial review cannot be said to have "prevailed" by merely achieving a remand of an adverse agency determination to the agency for reconsideration, 109 S. Ct. at 2255, the Court also concluded that such a plaintiff is deemed to have prevailed "upon the successful completion of the remand proceedings." Id.
It is clear to us that the Debtor has achieved not only some, but arguably all, of the benefit which she sought in this litigation. Therefore, it is equally clear that she must be considered to be a "prevailing party" herein. See also Texas State Teachers Ass'n v. Garland Independent School Dist., ___ U.S. ___, 109 S. Ct. 1486, 1493, 103 L. Ed. 2d 866 (1989).
Hence, we have no difficulty in concluding that the Debtor has cleared this threshold for recovery of an award pursuant to the EAJA.
4. Although We Have Jurisdiction to Award Attorneys' Fees for Services Performed in the Administrative Process After Our Decision of Remand, We Do Not Have Jurisdiction to Award Fees for Services Performed in Any Forum Prior to the Filing of this Proceeding or not Performed in the Course of This Proceeding, and We Therefore Decline to Award Such Fees for any Services Performed in the Previous Federal Action, or in the Litigation of the Debtor's Main Bankruptcy Case.
The Court's decision in Sullivan v. Hudson expressly addresses the issue of when an EAJA fee application can include compensation for services performed not only in the judicial forum in an agency-review process, but also those performed in the administrative process which the judicial process seeks to review. It is apparent from the foregoing references to Hudson in discussing the timeliness and the "prevailing party" issues what services in the administrative-review process the Court is willing to consider compensable under the EAJA.
Thus, in discussing the Social Security review process, the Court states that the "`remand power places the courts, . . . virtually as co-participants,'" in the agency-review process, 109 S. Ct. at 2254, quoting J. Mashow, et al., Social Security Hearings and Appeals 138 (1978). The Court states, at id., as follows:
Where a court finds that the Secretary has committed a legal or factual error in evaluating a particular claim, the district court's remand order will often include detailed instructions concerning the scope of the remand, the evidence to be adduced, and the legal or factual issues to be addressed. . . . Deviation from the court's remand order in the subsequent administrative proceedings is itself legal error, subject to reversal on further judicial review. . . . In many remand situations, the court will retain jurisdiction *412 over the action pending the Secretary's decision and its filing with the court. . . .
Therefore, the Court, in Hudson, id. at 2255, stated that
[o]ur past decisions interpreting other fee-shifting provisions make clear that where administrative proceedings are intimately tied to the resolution of the judicial action and necessary to the attainment of the results Congress sought to promote by providing for fees, they should be considered part and parcel of the action for which fees may be awarded.
The Hudson Opinion then goes on to clearly indicate that fees for services performed in administrative proceedings after a judicial action has been instituted by a plaintiff seeking positive administrative relief can be awarded under the EAJA. In so holding, the Court cited to its previous decisions in Pennsylvania v. Delaware Valley Citizens' Council, 478 U.S. 546, 106 S. Ct. 3088, 92 L. Ed. 2d 439 (1986); and New York Gas Light Club, Inc. v. Carey, 447 U.S. 54, 100 S. Ct. 2024, 64 L. Ed. 2d 723 (1980). In Delaware Valley, the court had held that the word "action" in the fee-shifting provision of the Clean Air Act should not be read so narrowly as to exclude all proceedings which were "non-judicial." In that case, the court stated, 478 U.S. at 558, 106 S.Ct. at 3094, as follows:
[a]lthough it is true that the proceedings [at issue] were not "judicial" in the sense that they did not occur in a courtroom, or involve "traditional" legal work such as examination of witnesses or selection of jurors for trial, the work done by counsel in these two phases was as necessary to the attainment of adequate relief for their client as was all of their earlier work in the courtroom which secured Delaware Valley's initial success in obtaining the consent decree.
Similarly, in Carey, supra, 447 U.S. at 70-71, 100 S. Ct. at 2034, the Court held that, under the fee-shifting provision of Title VII, 42 U.S.C. § 2000e-5(k), a federal court could award attorney's fees for services performed in state administrative and judicial enforcement proceedings.
Relying on the principles enunciated in Delaware Valley and Carey, the Court, in Hudson, held that the administrative proceedings on remand were "`crucial to the vindication of [respondent's] rights.'" 109 S. Ct. at 2256, quoting Delaware Valley, supra, 478 U.S. at 561, 106 S. Ct. at 3096. The Court then stated, 109 S. Ct. at 2256-57, as follows:
No fee award at all would have been available to respondent absent successful conclusion of the remand proceedings, and the services of an attorney may be necessary both to ensure compliance with the district court's order in the administrative proceedings themselves, and to prepare for any further proceedings before the district court to verify such compliance. . . . Given the "mandatory" nature of the administrative proceedings here, and their close relation in law and fact to the issues before the district court on judicial review, we find it difficult to ascribe to Congress an intent to throw the claimant a lifeline that it knew was a foot short. . . . Since the judicial review provisions of the Social Security Act contemplate an ongoing civil action of which the remand proceedings are but a part, and § 2412(d)(1)(A) of the EAJA allows "any court having jurisdiction of that action" to award fees, we think the statute, read in light of its purpose "to diminish the deterrent effect of seeking review of, or defending against, governmental action," 94 Stat. 2325, permits a court to award fees for services performed on remand before the Social Security Administration.
Although Hudson dealt specifically with Social Security proceedings, rather than HUD's administrative proceedings in reviewing a request for a mortgage assignment, we believe that Hudson stands for the principle that a claimant seeking attorney's fees under the EAJA in an agency-review proceeding can generally recover fees for services performed subsequent to the court's remand at the administrative level. Therefore, we have no difficulty in concluding that the Debtor's requests for compensation under the EAJA for services performed *413 in the administrative process subsequent to our remand were proper.
However, this same analysis does not hold true as to services performed before this proceeding was filed in this court. Nor does it apply to litigation in this court which was not connected to the proceeding to effect agency review of HUD's decision. The "remand power" as to such services, having been performed before that power attached, could not possibly have been invoked as of the time that pre-litigation services were performed. This court's oversight of the administrative process cannot be said to have been in place as to pre-litigation services. It therefore appears to us that granting an award of fees to the Debtor for services performed prior to the filing of the Complaint in this proceeding on October 4, 1988, and services performed in the Debtor's main bankruptcy case which were unrelated to this proceeding would be inappropriate.
There are, moreover, added reasons to pause from rendering an award here which includes services performed in the district court and in the 3rd Circuit in the previous, separate action which preceded the filing of the proceeding here. Firstly, the 3rd Circuit issued a final Order of October 3, 1988, refusing reconsideration of its earlier denial of an application for attorneys' fees which was presented directly to it by the Debtor in that prior action. Secondly, our review of the services in that case would place us, an Article I bankruptcy court which is a unit of the Article III district court, in the posture of ruling on matters which were before not only the district court itself, but also the 3rd Circuit.
The Debtor's position on this point, as articulated in its Brief, features the following arguments: (1) It would be wasteful of judicial resources to have this court, the district court, and the 3rd Circuit all rule on attorneys' fees allowable in the course of the Debtor's efforts to review HUD's denial of her application for an assignment; (2) There was allegedly confusion among the district court, the 3rd Circuit, and, presumably, the Debtor's counsel as to which court should hear the application for fees in the prior action. The Debtor suggests that this dilemma can be resolved by presenting the application to yet a third court, i.e., this bankruptcy court; and (3) Since the previous case was closed in the district court, the Debtor may be left with "nowhere to go" to obtain the fees to which she believes that she is entitled from the first action.
HUD, perhaps unintentionally, assists the Debtor in extricating itself from the res judicata effect of the 3rd Circuit's Order of October 3, 1988, by suggesting that this Order emanated solely from the principle that "it is the district court, and not this [3rd Circuit] court, which possesses the authority to exercise fee setting discretion," Ursic v. Bethlehem Mines, 719 F.2d 670, 674 (3d Cir.1983), rather than a decision on the merits of the Debtor's fee made directly to that court. However, it is clear to us that the dilemma in which the Debtor finds herself could have been resolved by her simultaneously filing the motion requesting fees in the first case in the district court and the 3rd Circuit, as well as in this court. In light of the Hudson decision, and its establishment of the principle that the remanding court continues to exercise control over subsequent actions in a remanded administrative proceeding, it seems to us that, if any court could be the proper depository of this entire Application, it would be the district court. This would have resolved the problem of bringing separate Applications to diverse courts. As to the "confusion" between these courts as to which should address this issue, but see, Ursic, supra, it is quite likely that the recent Hudson decision would have dispelled it.
In any event, while we read Hudson as opening the door to requests for compensation for services performed by the Debtor's counsel litigating this proceeding and the proceeding in the administrative forum subsequent to March 21, 1989, we also read it as closing the door on our consideration of requests for compensation for services performed prior to the preparation and filing of this Complaint and the services unrelated to this proceeding which counsel *414 performed in the Debtor's main bankruptcy case.
5. The Position of HUD in this Proceeding was not "Substantially Justified."
The final hotly-contested issue between the parties is whether HUD's actions in this matter were "substantially justified," as provided in 28 U.S.C. §§ 2412(d)(1)(A), (d)(1)(B), a finding which would exonerate HUD from EAJA liability. We take particular note of § 2412(d)(1)(B), which allows us to examine the entire record, presumably that made here in this court, as well as those made in the prior federal action and in the previous and subsequent administrative proceedings, in making this determination.
In Pierce v. Underwood, 487 U.S. 552, 108 S. Ct. 2541, 101 L. Ed. 2d 490 (1988), the Supreme Court discussed at length the application of the "substantially justified" standard in determining the propriety of an award of attorneys' fees under the EAJA. In defining what constitutes "substantial justification," the Court stated there that
[w]e are of the view, therefore, that as between the two commonly used connotations of the word "substantially," the one most naturally conveyed by the phrase before us here is not "justified to a high degree" but rather "justified in substance or in the main" that is justified to a degree that could satisfy a reasonable person. That is no different from the "reasonable basis both in law and fact" formulation adopted by the Ninth Circuit and the vast majority of other Courts of Appeals that have addressed this issue. To be "substantially justified" means, of course, more than merely undeserving of sanctions for frivolousness; that is assuredly not the standard for Government litigation of which a reasonable person would approve.
108 S.Ct. at 2550 (citations omitted).
In a footnote, the court added that [o]ur analysis does not convert the statutory term "substantially justified," into "reasonable justified: . . . But a position can be justified even though it is not correct, and we believe it can be substantially (i.e., for the most part) justified if a reasonable person could think it correct, that is, if it has a reasonable basis in law and fact."
Id. n. 2 (emphasis added).
This court recently reviewed the "substantial justification" issue in an unreported decision issued under the identical standards set forth in 26 U.S.C. § 7430 of the Internal Revenue Code in In re Owens, Bankr. No. 85-00882S, 1989 WL 33583 (Bankr.E.D.Pa. April 7, 1989). In Owens, we acknowledged that the controlling authority in determining the issue of "substantial justification" was Underwood, supra. We noted that Underwood held that the proper meaning of "substantially justified" is that the government's action must have had a reasonable basis in both fact and law. We further observed that, in In re Woods, 69 B.R. 999 (Bankr.E.D.Pa.1987), this court also had enunciated the applicable standards established in the 3rd Circuit for determining whether positions taken by governmental agencies were "substantially justified" under the EAJA in construing similar language in 11 U.S.C. § 523(d) thusly:
Since the Third Circuit Court of Appeals has spoken many times on the subject of the applicable standards under the EAJA, it will obviously be helpful to look at these cases. See, e.g., Brinker v. Guiffrida, 798 F.2d 661 (3d Cir.1986); Washington v. Heckler, 756 F.2d 959 (3d Cir.1985); Dennis v. Heckler, 756 F.2d 971 (3d Cir.1985); Tressler v. Heckler, 748 F.2d 146 (3d Cir.1984); Dougherty v. Lehman, 711 F.2d 555 (3d Cir.1983); and National Resources Defense Council, Inc. v. EPA, 703 F.2d 700 (3d Cir.1983). It is well-established in this Circuit that "substantial justification `constitute[s] a middle ground between an automatic award of fees to a prevailing party and an award made only when the government's position was frivolous.' Dougherty, 711 F.2d at 563. See also Natural Resources Defense Council, 703 F.2d at 711 (opinion announcing the judgment of the court); id. at 714-15 (concurring *415 opinion); id. at 719 (concurring and dissenting opinion)." Washington, 756 F.2d at 961. Moreover, the burden of proving substantial justification is on the government. Brinker, 798 F.2d at 664, Washington, 756 F.2d at 961; and Dougherty, 711 F.2d at 561. In order for the government to meet its burden, it must prove all of the following elements: (1) a reasonable basis in truth for the facts alleged; (2) a reasonable basis in law for the theory it propounds; and (3) a reasonable connection between the facts alleged and the legal theory advanced. Brinker, 798 F.2d at 664; Washington, 756 F.2d at 961; Tressler, 748 F.2d at 149-150; and Dougherty, 711 F.2d at 564. The government must make a strong showing on each of the foregoing elements to meet its burden; and the burden is not met merely because the government adduced "`some evidence' in support of its position." Washington, 756 F.2d at 961; Tressler, 748 F.2d at 150. . . .
69 B.R. at 1001 (emphasis added) (footnote omitted). We noted, in Owens, that this synthesis of applicable Third Circuit case-law was consistent with the standards set forth in Underwood.
We therefore conclude that the burden was on the government here to prove its actions were substantially justified. It must do so by proving that there is both a reasonable basis in truth for the facts alleged by it and a reasonable basis in law for the theories it propounded. Furthermore, as this court noted in Woods, "the government must make a strong showing on each of the foregoing elements to meet its burden," 69 B.R. at 1001, and the government will not meet it burden if it merely adduced "some evidence in support of its position." Id.
We recognize that the fact that, merely because the 3rd Circuit, this court, and ultimately, HUD itself did not support HUD's earlier refusal to grant the Debtor an assignment of her mortgage to HUD does not in and of itself indicate that the government's position was not "substantially justified." As the Court stated in Underwood:
Obviously, the fact that one other court agreed or disagreed with the government does not establish whether its position was substantially justified. Conceivably, the government could take a position that is not substantially justified, yet win; even more likely, it could take a position that is substantially justified, yet lose. Nevertheless, a string of losses can be indicative; and even more so a string of successes.
108 S.Ct. at 2552.
In applying these controlling principles to the present case, we believe that we must examine the merits of HUD's litigating position, which it presents at length in its initial Response to the instant motion, at all stages in the Debtor's Application process, from January, 1985, to May 22, 1989. Certainly, HUD has experienced a string of losses in the court review of its dealings with the Debtor. At the outset, HUD declined the Debtor's initial request to accept an assignment of her mortgage, but told her in a letter that, if she telephoned for an appointment, she could have a face-to-face conference with an agency official at which time she could attempt to provide further information to HUD in order to establish eligibility to the mortgage assignment program pursuant to 24 C.F.R. § 203.652(b).
The parties differ in what next transpired. See 815 F.2d at 280; and 97 B.R. at 799. However, suffice it to say that the Third Circuit strongly chastised HUD for the "inexcusable waste of resources by the governmental agency" in denying the debtor the face-to-face conference which it believed that she had sought and been discouraged from pursuing, 815 F.2d at 283, making it clear that Court implicitly believed the Debtor's contention that she had made a call requesting such a conference in contrast to HUD's contention that no such contact was made because its records failed to reflect same. The Court specifically took HUD to task for its administration of the HUD assignment program here, reciting that this program was instituted by Congress as a remedial statute to help, not *416 hinder, citizens who find themselves in the position of the Debtor. Id. Specific reference was made to HUD's failure to apply the spirit of the Constitution in its administration of this matter and of its dereliction of its duty to serve its less-wealthy citizens. Id.
Nevertheless, after the remand, HUD again denied the Debtor's assignment application on February 29, 1988.
In our Opinion, we found that, contrary to HUD's contention, the Debtor's counsel had attempted to fully cooperate with HUD in gathering information in the initial postremand administrative process. 97 B.R. at 802. Nevertheless, changing completely the course of its earlier position that the Debtor's Application should be denied because she had not established that her mortgage-payment default was caused by circumstances beyond her control, HUD denied the Application solely because the Debtor had allegedly not established a reasonable prospect of an ability to resume full payments subsequent to the post-assignment payment moratorium. Id. In making this decision, HUD miscalculated the Debtor's income, made unjustified assumptions about her expenses, and failed to consider her prospects for additional income and her previous spending patterns. Id. at 804-06. It also failed to consider recasting the Debtor's mortgage. Id. at 806-07. Only because we were confident that HUD would grant an assignment on remand did we refrain from simply directing HUD to mend this configuration of errors by processing the assignment. Id. at 807. Compare In re Huderson, 96 B.R. 541, 553-54 (Bankr.E.D.Pa.1989), aff'd, C.A. No. 89-2152 (E.D.Pa. August 9, 1989).
In it Response, HUD contends that the justification of its position was vindicated after the remand, seemingly a strange contention when it agreed, at that point, to grant the assignment to the Debtor which it had resisted over the past four and a half years. It also relies heavily upon the denial of attorneys' fees in another case of a HUD assignment which was granted after a judicial remand in a proceeding emanating from the bankruptcy court in In re Hall, 59 B.R. 1017 (E.D.Pa.1986).
Apparently, it was developed, in the administrative proceedings subsequent to our Order of March 21, 1989, directing a remand, that the Debtor's health had improved and her ability to work and her daughter's commitment to assisting her were both strengthened. It was also developed that the Debtor had moved out of the premises for some period of time and that she had paid some utility bills by placing them in a third party's name. These facts supposedly vindicated HUD's conclusions, as of February 29, 1988, that the Debtor's actual expenses, as compared to her income, would have rendered her incapable of resuming her full mortgage payments.
We disagree. Had HUD, as would have been logical, focused upon the Debtor's financial capacity to resume payments during the administrative process, the facts of her additional income prospects may well have been developed earlier. HUD's February 29, 1988, decision of denial smacked of last-minute introduction of an issue thought not to be in contest and an attempt to simply somehow justify its earlier stubborn refusal to grant the Debtor a face-to-face conference.
The Hall decision is clearly distinguishable. There, HUD denied the debtor's application for an assignment because his financial picture, which included huge medical bills not covered by insurance, seemed certain to render him unable to resume future mortgage payments. 59 B.R. at 1019. The Debtor then filed bankruptcy, discharging these bills. Id. The court held, in affect, that HUD could not have reasonably been expected to have foreseen that the bankruptcy would intervene to brighten the Debtor's cloudy financial picture. Id.
In this case, the Debtor's bankruptcy filing was not a supervening event which, as in Hall, remedied the Debtor's otherwise hopeless financial situation. Rather, here, HUD simply made numerous erroneous calculations and assumptions and gave the Debtor no opportunity to rebut them.
*417 We therefore conclude that HUD's position in this litigation was extremely weak. It consistently refused to recognize the Debtor's stance as a middle-aged widow, in poor health, who was faced with potential loss of a home in which she had substantial equity. Its decision-making process included numerous errors. It improperly applied its own Regulations. Hence, HUD had neither a reasonable basis in fact, nor in law, nor in law applied to fact for the rendering of its February 29, 1988, decision. The Debtor's counsel is to be commended and rewarded, at least in part, for efforts on her behalf in the face of stiff governmental intransigence.
We therefore conclude, without hesitation, that HUD's defense of this proceeding was not "substantially justified."
6. The Debtor's Counsel is Entitled to the Inflation-Adjusted Hourly Rate Sought and the Entire Sum of $10,366 Sought in the Motion for Only Those Services Performed in Connection with This Proceeding and in Subsequent Administrative Actions.
In the instant motion, the Debtor requested that the rate of compensation for the services of her counsel be measured at $98.07 per hour. The EAJA provides that attorney's fees "shall be based upon prevailing market rates for the kind and quality of the services furnished" but "shall not be awarded in excess of $75 per hour unless the court determines that an increase in the cost of living or a special factor, such as the limited availability of qualified attorneys for the proceedings involved, justifies a higher fee." 28 U.S.C. § 2412(d)(2)(A)(ii).
In Underwood, the court restrictively defined those "special factors" justifying a rate higher than $75 per hour plus increases for the standard of living. 108 S. Ct. at 2554. However, the Debtor here is not seeking the rate of $98.07 per hour due to any "special factors," but solely because of an alleged increase in the $75 figure due to the rising cost of living.
In Natural Resources Defense Council v. United States Environmental Protection Agency, 703 F.2d 700 (3d Cir.1983), the successful plaintiff in a Clear Air Act case petitioned the court for an award of counsel fees under the EAJA at a rate of $77.86 an hour because of the increased cost of living which had transpired since the effective date of the Act on October 1, 1981. The 3rd Circuit expressly ruled that the Consumer Price Index (hereafter "CPI") could be used in determining and allowing cost of living adjustments under the EAJA. In so holding, the court stated as follows:
The Act plainly delegates to the court authority to make such an adjustment, [based on the cost of living increase] although with little guidance as to when it is appropriate. The purpose of the statute was to encourage challenges to agency action, and the cost of living adjustment provision seems designed to provide a disincentive to agencies to prolong the litigation process. The required adjustment should therefore be made.
703 F.2d at 713.
A cost of living increase was likewise allowed to the hourly rate in Garcia v. Schweiker, 829 F.2d 396 (3d Cir.1987). In Garcia, a prevailing Social Security disability claimant moved for attorney's fees under the EAJA. The claimant was represented by a legal services attorney, who requested the statutory fee rate of $75 per hour, adjusted for the cost of living, thus resulting in a requested rate of $88.56 per hour. In Garcia, the 3rd Circuit stated that the issue was "simply whether the cost of living has increased sufficiently to warrant making the adjustment." 829 F.2d at 401. In Garcia, counsel had calculated that the cost of living had increased eighteen (18%) percent from the time the statutory rate was fixed in 1981 until the time the claimant became a "prevailing party" under the EAJA in October, 1986. On the other hand, the Secretary contended that the cost of living increase should not be measured from the date the statute was enacted in 1981, but rather from the date the EAJA was re-enacted in August, 1985.
The 3rd Circuit held for the Garcia claimant, finding that the cost of living *418 adjustment was to be measured from 1981. In so holding, the court relied upon Allen v. Bowen, 821 F.2d 963 (3d Cir.1987), in which the 3rd Circuit had earlier held that the statute which re-enacted the EAJA was "intend[ed] to have the cost of living adjustment to the $75 an hour rate measured from 1981." Garcia, supra, 829 F.2d at 401, quoting Allen, supra, 821 F.2d at 967. In light of these findings and the failure of the Secretary to object to the claimant's proffered cost of living increase rate, the court, in Garcia, granted the claimant attorney's fees in the amount of $88.56 per hour.
In the present case, the Debtor produced calculations tending to show that the CPI increased by 32.55 percent nationally and 34.49 percent in Philadelphia between October, 1981, and May, 1989. This increase would justify a current EAJA hourly rate, factored for an increase in the cost of living, at $99.41 and $100.86 per hour, respectively. Hence, the $98.07 rate requested was said to be, if anything, overly conservative. In fact, the Debtor attempted to argue that we should utilize the adjusted hourly rate of $100.86 and increase his fee request to $20,514.92. In light of the Debtor's failure to amend her motion herself to request this amount, we shall continue to measure the hourly rate of the Debtor's counsel at $98.07.
Despite the numerous aspects of its opposition to the Debtor's EAJA motion, HUD did not contest the hourly rate requested. Nor has HUD opposed any of the requests for time expended on the adversary proceeding or the administrative services provided thereafter by the Debtor's counsel. We calculate this time as totalling 105.7 hours. At the rate of $98.07 per hour, the Debtor would therefore be entitled to an award of $10,366.00.
Unless a fee award will be paid from the proceeds of a debtor's estate or a similar fund-in-court, compare In re National Paragon Corp., 87 B.R. 11, 13 (E.D. Pa.1988); and In re J.A. & L.C. Brown Co., 75 B.R. 539, 539-40 (E.D.Pa.1987), "a court may not sua sponte reduce the amount of the award when the defendant has not specifically taken issue with the amount of time spent or the billing rate," Bell v. United Princeton Properties, Inc., 884 F.2d 713, 720 (3d Cir.1989), unless the reductions are necessary due to factors which are within the court's own knowledge. Id. at 719. The Application includes several instances of gross lumping, e.g., 32 hours for researching and drafting the summary judgment motion on the merits in this proceeding, which would not comport with the standards of In re Meade Land & Development Co., Inc., 527 F.2d 280, 283-84 (3d Cir.1975). However, the Debtor's motion was not preceded by any directive that the Application comply with the standards of Meade Land.[5] We shall therefore not reduce the hourly rate nor the hours of services requested for the services deemed compensable, which seem quite reasonable.
D. CONCLUSION
The Debtor's motion will be granted in part in the amount of $10,366.00.
NOTES
[1] Also named as a Defendant in this proceeding is the Debtor's mortgagee. However, this party has had no role in this case, nor was it a target of the instant motion.
[2] In her Brief, the Debtor upped her demand to $20,514.92. Since she had not attempted to amend her motion, we conclude that she is bound to the $19,947.44 figure. See pages 417-18 infra.
[3] We also note that, on June 8, 1989, on a praecipe of the Debtor, we converted the Debtor's main case from what had been a Chapter 13 case to a Chapter 7 case.
[4] We must warn counsel, the filing of whose Brief, in the course of our consideration of the merits of this proceeding, was also delayed, that deviations from our briefing orders are not favored and may result in monetary sanctions in the future. Compare In re Frascatore, 98 B.R. 710, 714, 725 (Bankr.E.D.Pa.1989).
[5] Compare In re Fleet, Fleet v. U.S. Consumer Council, Inc., Bankr. No. 81-04969S, Adv. No. 83-0880S (Bankr.E.D.Pa., Sept. 19, 1989) (fee application reduced slightly, despite no opposition from opposing party, because of a gross failure of the movant to comply with the standards of Meade Land in the face of a court order requiring same and where counsel requested rates of compensation considerably above those requested for the same attorneys in other cases in the same relevant time-frame).
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406 B.R. 756 (2009)
In re Fahkri JABER and Majdah Sulieman, Debtors.
No. 09-10097.
United States Bankruptcy Court, N.D. Ohio, Eastern Division.
May 22, 2009.
*758 MEMORANDUM OF OPINION
PAT E. MORGENSTERN-CLARREN, Bankruptcy Judge.
The debtors Fakhri Jaber and Majdah Sulieman[1] seek to avoid the judicial hen of State Farm Mutual Insurance Company and Tina Rose which encumbers the debtors' residence. The creditors oppose the motion. For the reasons stated below, the debtors' motion is denied.
I. JURISDICTION
Jurisdiction exists under 28 U.S.C. § 1334 and General Order No. 84 entered by the United States District Court for the Northern District of Ohio. This is a core proceeding under 28 U.S.C. § 157(b)(2)(A), (K), and (0).
II. FACTS AND PROCEDURAL BACKGROUND
The debtors filed an amended motion to avoid the judicial lien of State Farm Mutual Insurance Company.[2] State Farm and Tina Rose (collectively, creditors), through attorney Robert Olender, responded to *759 that motion.[3] The parties submitted the dispute on these stipulated facts:
1. This case was commenced by the filing on January 8, 2009 of a voluntary petition for relief under Chapter 13 of the Bankruptcy Code, Case No. 09-10097.
2. This Court has jurisdiction pursuant to 28 U.S.C. §§ 157 and 1334.
3. Fakhri Jaber acquired title to the property at 1485 Robinwood Drive, Lakewood, Ohio by general warranty deed filed for record on December 15, 1998 and recorded as Instrument No. 199812151541. Said property is described as follows:
SITUATED IN THE CITY OF LAKEWOOD, COUNTY OF CUYAHOGA, STATE OF OHIO
ALSO BEING KNOWN AS SUBLOT 20, IN WALTON BROTHERS LAKEWOOD HEIGHTS ALLOTMENT, OF PART OF ORIGINAL ROCKPORT TOWNSHIP SECTION22, AS SHOWN BY THE RECORDER'S PLAT VOLUME 25. OF MAPS, PAGE 14 OF CUYAHOGA COUNTY RECORDS, AND BEING 40 FEET FRONT ON THE EASTERLY SIDE OF ROBINWOOD AVE., AND EXTENDING BACK OF EQUAL WIDTH 150 FEET AS APPEARS BY SAID PLAT, BE THE SAME MORE OR LESS, BUT SUBJECT TO ALL LEGAL HIGHWAYS
4. State Farm Mutual Automobile Insurance Company and Tina Rose obtained a judgment against Fakhri Jaber in the Cuyahoga County Common Pleas Court on June 9, 2003 in the amount of $24,865.25 plus interest at 10% per annum and costs.
5. A judgment was filed by State Farm and Tina Rose against Jaber's interest in the subject property on October 9, 2003 and recorded as JL03-208550.
6. State Farm and Rose re-filed its judgment lien against Jaber on July 15, 2008 and said lien is identified as JL08-337189.
7. On March 28, 2006, Defendant Jaber transferred by quit-claim deed to Debtor Sulieman, the subject property and said quit-claim deed is recorded as Instrument No. 200603280549 in the Cuyahoga County Recorder's Office.
8. No payments have been made by Fakhri Jaber to State Farm Mutual Automobile Insurance Company and Rose on the judgment that it holds against Jaber and as of January 8, 2009, the date upon which debtors' Chapter Thirteen bankruptcy was filed, there is due and owing on said judgment, including interest and court costs, the sum of $38,435.61.
9. The value of the real estate at 1485 Robinwood Drive, Lakewood, Ohio 44107 on the date of debtors' bankruptcy filing is $85,000.00 and the first mortgage balance of Geauga Savings Bank as of the bankruptcy filing date is $77,293.00.
10. The subject real estate upon which Creditor's lien attaches is used by the Debtors as their primary residence since December 15, 1998, the date upon which Debtor Jaber took title to the property.
11. Debtors Jaber and Sulieman are husband and wife and have remained continuously married since Debtor Jaber acquired title to the property on December 15, 1998.
12. On May 2, 2008, State Farm Mutual Automobile Insurance Company and Tina Rose filed a foreclosure action *760 against the subject real estate in the Cuyahoga County Common Pleas Court under Case No. CV 08 658516.
13. Debtor Jaber's date of birth is July 22, 1961.
III. POSITIONS OF THE PARTIES[4]
The debtors contend that the creditors' judgment hen can be avoided under 11 U.S.C. § 522(f) because it impairs Sulieman's $20,200.00 homestead exemption claimed under Ohio Revised Code § 2329.66(A)(1)(b).[5] Because the property is worth $85,000.00 and is encumbered by a first mortgage to Geauga Savings Bank (the bank) in the amount of $77,293.00, the debtors argue that the creditors' lien impairs Sulieman's exemption. As a result, the debtors state that there is no equity to which the creditors' lien can attach, which means that the lien can be avoided in its entirety.
The creditors counter that the motion should be denied because (1) the judgment lien is held by both State Farm and Tina Rose, but Tina Rose was not named in the motion; (2) Sulieman cannot avoid the creditors' hen because the judgment on which the lien is based was obtained against Jaber, and Sulieman took the property from Jaber subject to the lien; and (3) the extent of Jaber's interest in the property is limited to his dower interest, which cannot exceed $5,000.00, the amount of the homestead exemption available to a debtor at the time the creditors filed their state court lawsuit.
IV. DISCUSSION
A. Personal Jurisdiction and Due Process
For a court to obtain personal jurisdiction over a litigant, a movant must comply with the applicable rules for service of process and must satisfy due process concerns. LSJ Inv. Co., Inc. v. O.L.D., Inc., 167 F.3d 320, 323 (6th Cir. 1999). Due process requires notice to be "reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections." Id. (citations omitted). Under the bankruptcy rules, a proceeding by a debtor to avoid a lien under § 522(f) is to be made by motion under rule 9014. FED. R. BANKR.P. 4003(d). Rule 9014, in turn, states that the hen holder must be given reasonable notice and opportunity for a hearing. FED. R. BANKR.P. 9014(a). That notice is to be provided by serving the motion in the manner set forth in rule 7004. FED. R. BANKR.P. 9014(b).
The undisputed facts show that the debtors did not name Ms. Rose in the motion and did not serve her with the motion. Nevertheless, through attorney Olender, Ms. Rose filed a notice of appearance in the case, responded to the motion, and objected to confirmation of the debtors' plan.[6] The situation, therefore, is that service was defective, but Ms. Rose had actual knowledge of the motion and acted on that knowledge to protect her interests.
*761 A party with actual knowledge of an action may waive any defects in service. See Neirbo Co. v. Bethlehem Shipbuilding Corp., 308 U.S. 165, 168, 60 S. Ct. 153, 84 L. Ed. 167 (1939) (stating venue is a privilege that can be lost by "failure to assert it seasonably, by formal submission in a cause, or by submission through conduct."). Several courts have extended the waiver doctrine set forth in Neirbo to personal jurisdiction. See, e.g. Chambers v. Mukasey, 520 F.3d 445, 449-50 (5th Cir. 2008) (waiver of defective service by appearing before a court and permitting it to adjudicate the party's rights); see also Blachy v. Butcher, 221 F.3d 896, 911 (6th Cir.2000), cert. denied, 532 U.S. 994, 121 S. Ct. 1653, 149 L. Ed. 2d 636 (2001), (citing Trustees of Cent. Laborers' Welfare Fund v. Lowery, 924 F.2d 731, 732 (7th Cir. 1991)) (waiver by responding to motions); Precision Etchings & Findings, Inc. v. LGP Gem, Ltd., 953 F.2d 21, 25 (1st Cir. 1992) (waiver by participation in hearings, seeking affirmative relief, or failing to act); Datskow v. Teledyne, Inc., 899 F.2d 1298, 1303 (2nd Cir.1990), cert. denied, Teledyne, Inc. v. Datskow, 498 U.S. 854, 111 S. Ct. 149, 112 L. Ed. 2d 116 (1990) (waiver by participation in motion practice); U.S. v. Eastern Metal Prods, and Fabricators, Inc., 112 F.R.D. 685, 687 (M.D.N.C.1986) (collecting cases).
Here, Ms. Rose, through attorney Olender, has appeared in the bankruptcy case, participated in hearings and motion practice, and seeks a declaration that her judgment lien cannot be avoided by the debtors. As a result, the court finds that Tina Rose has waived the service defects and has submitted her person to this court's jurisdiction. Accordingly, the court turns to the merits of the motion.
B. The Debtors' Interests in the Property
A debtor's rights in property are determined by state law, in this case, Ohio's. Florida Dept. of Revenue v. Piccadilly Cafeterias, Inc., ___ U.S. ____, ____, 128 S. Ct. 2326, 2339, 171 L. Ed. 2d 203 (2008) (citing Travelers Casualty and Sur. Co. of America v. Pacific Gas & Elec. Co., 549 U.S. 443, 127 S. Ct. 1199, 167 L. Ed. 2d 178 (2007)). Under Ohio law, a mortgagor in possession of real property is the owner of the legal and equitable interests in the property. In re Rosario, 402 B.R. 223, 229 (Bankr.N.D.Ohio 2009) (citations omitted). In addition, "whenever a married person buys real estate in Ohio, the married person's spouse automatically receives a dower interest." Standard Fed. Bank v. Staff, 168 Ohio App. 3d 14, 20, 857 N.E.2d 1245, 1249-50 (Ohio Ct.App.2006); see also OHIO REV.CODE § 2103.02. A debtor's interest in his or her residence is property of the bankruptcy estate. 11 U.S.C § 541(a)(1). See Menninger v. Mortgage Elec. Registration Sys., Inc. (In re Bowling), 314 B.R. 127, 131 (Bankr.S.D.Ohio 2004).
In this case, Jaber purchased the property in 1998 by borrowing money from the bank, which loan was evidenced by a note and secured by a mortgage.[7] As a result of that purchase, Sulieman obtained an inchoate dower right in the property under Ohio Revised Code § 2103.02. She subordinated her dower right to the bank's lien, however, when she also signed the mortgage. See Stand Energy Corp. v. Epler, 163 Ohio App. 3d 354, 358, 837 N.E.2d 1229, 1232 (2005) (non-title holding spouse subordinates dower right by signing mortgage). Therefore, at that time, Jaber had a fee simple interest in the property and Sulieman had a dower right *762 in the property, both of which were subordinated to the bank's mortgage lien. Those interests existed on October 9, 2003, when the creditors converted their certificate of judgment into a lien on the property under Ohio Revised Code § 2329.02.[8]
In 2006, Jaber transferred his fee simple interest in the property to Sulieman. Sulieman held this same interest on the petition date.
C. The Applicable Exemption Statute
A debtor is permitted to exempt certain property interests from the bankruptcy estate. 11 U.S.C. § 522. "An exemption is an interest withdrawn from the estate (and hence from the creditors) for the benefit of the debtor." Owen v. Owen, 500 U.S. 305, 308, 111 S. Ct. 1833, 114 L. Ed. 2d 350 (1991). Bankruptcy code § 522(d) lists federal exemptions, but Ohio has elected to opt-out of them. OHIO REV. CODE § 2329.662. As a result, Ohio residents who wish to exempt property must do so under Ohio Revised Code § 2329.66. See 11 U.S.C. § 522(b)(3)(A).
On June 1, 2008, the Ohio legislature passed Senate Bill 281, amending the amount of property a debtor may hold as exempt under Ohio Revised Code § 2329.66. Effective on September 30, 2008, the bill increased the amount of a debtor's homestead exemption from $5,000.00 to $20,200.00. Section 522(b)(3)(A) provides that a debtor may either exempt property under "Federal law ... or State or local law that is applicable on the date of the filing of the petition...." 11 U.S.C. § 522(b)(3)(A); see also Myers v. Motley, 318 U.S. 622, 628, 63 S. Ct. 780, 87 L. Ed. 1043 (1943) citing White v. Stump, 266 U.S. 310, 313, 45 S. Ct. 103, 69 L. Ed. 301 (1924). Because the law became effective in September 2008, and the debtors filed their petition on January 8, 2009, the current version of Ohio Revised Code § 2329.66 applies to these debtors.[9] Under Ohio Revised Code § 2329.66(D)(1), the property interests in which a debtor may claim an exemption are also determined as of the petition date. On the petition date, Sulieman owned the property and used it as a residence; therefore, under § 2329.66(A)(1)(b) and (D)(1), she is entitled to claim an exemption in it. Whether the creditors' lien impairs that exemption is another matter entirely.
D. 11 U.S.C. § 522(f)
A debtor may avoid the fixing of a judicial lien that impairs an exemption to which the debtor would have been entitled but for the lien. 11 U.S.C. § 522(f)(1)(A). The extent to which a lien impairs a debtor's exemption is calculated by the statutory formula in 11 U.S.C. § 522(f)(2)(A). In Farrey v. Sanderfoot, 500 U.S. 291, 111 S. Ct. 1825, 114 L. Ed. 2d 337 (1991), the Supreme Court of the United States held that 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." Thus, if the creditors' lien attached to Jaber's fee simple interest before he transferred it to Sulieman, Sulieman *763 cannot avoid the hen.[10]
E. Judgment Liens under Ohio Law
Judgment liens in Ohio are governed by Ohio Revised Code § 2329.02, which provides, in relevant part:
Any judgment or decree rendered by any court of general jurisdiction, including district courts of the United States, within this state shall be a lien upon lands and tenements of each judgment debtor within any county of this state from the time there is filed in the office of the clerk of the court of common pleas of such county a certificate of such judgment....
(Emphasis added). Stated somewhat differently, "a judgment lien is specific and attaches at the time the certificate of judgment is filed within a county to all real estate owned by the judgment debtor within that county." Verba v. Ohio Cos. Ins. Co., 851 F.2d 811, 814 (6th Cir.1988); Feinstein v. Rogers, 2 Ohio App. 3d 96, 98, 440 N.E.2d 1207, 1210 (1981). The lien remains attached to the real property until it is satisfied or released. Kremer v. Keating, 72 N.E.2d 596, 600 (Ohio Com.Pl. 1947). A lien continues uninterrupted so long as it is timely renewed. See OHIO REV.CODE § 2329.07.
In October 2003, the creditors filed their certificate of judgment evidencing the judgment that they held against Jaber. This filing created a lien that attached to Jaber's real property, in this case, the residence. The lien was timely renewed and was not satisfied or released; thus, it remained attached to the property. Accordingly, when Jaber transferred the property to Sulieman in 2006, she took the property encumbered by the creditors' lien. Therefore, the creditors did nothing that "fixed" a lien on Sulieman's interest. Because no hen was fixed on Sulieman's fee simple interest, obtained after the fixing of the creditors' judgment lien, Sulieman cannot avoid the creditors' lien.
V. CONCLUSION
For the reasons stated, the debtors' motion to avoid the lien of State Farm Mutual Insurance Company is denied. A separate order consistent with this opinion will be entered.
ORDER DENYING DEBTORS' AMENDED MOTION AVOIDING JUDICIAL LIENS UNDER 11 U.S.C. § 522(f)(1)
For the reasons stated in the memorandum of opinion entered this same date, the debtors' amended motion to avoid the lien of State Farm Mutual Insurance Company is denied. (Docket 16).
IT IS SO ORDERED.
NOTES
[1] To avoid confusion, the debtors will be referred to by their last names.
[2] Docket 1, 8, 16.
[3] Docket 32.
[4] The plan was confirmed over the creditors' objection, and no appeal was taken from that order. Docket 63. Given that status, the court asked the parties to clarify whether this issue is still disputed. Docket 66. The parties filed a joint report stating that they ask the court to rule on the motion because they have agreed that the debtors, if necessary, will move to modify their plan to conform to the decision. Docket 68.
[5] Sulieman claims an exemption in the property, but Jaber does not. See Sch. C. The court will, therefore, address the impairment issue only as it relates to Sulieman.
[6] See docket 18, 32, 59.
[7] Claim number 3-1 on the claims register.
[8] The creditors timely renewed their judgment lien.
[9] The creditors' argument that the earlier version of the statute should apply cites In re Colston, 213 B.R. 704, 707 (Bankr.S.D.Ohio 1997) for the proposition that the Ohio exemptions only apply if there is a judicial sale or involuntary execution. Colston, however, relies on Ford Motor Credit Corp. v. Dixon (In re Dixon), 885 F.2d 327, 330 (6th Cir. 1989), which the Sixth Circuit overruled in Holland v. Star Bank, N.A. (In re Holland), 151 F.3d 547, 550 (6th Cir.1998), based on the 1994 amendments to the bankruptcy code.
[10] The court respectfully disagrees with the statement in In re Mangold, 244 B.R. 901, 905 (Bankr.S.D.Ohio 2000), cited by the creditors, that "a debtor must have an interest in the parcel of property at the time a judgment lien attaches in order to be eligible for the exemption." The attachment of a judgment lien does not define whether or not a debtor is eligible for an exemption; rather, eligibility is defined by a debtor's property interest.
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226 B.R. 131 (1998)
In re COIN PHONES, INC., Debtor.
James M. LEMONEDES, Plaintiff/Appellant,
v.
Barbara BALABER-STRAUSS, Trustee, et al., Defendants/Appellees.
Nos. 98 Civ. 1968 CLB, 89 B 20451 ASH.
United States District Court, S.D. New York.
October 19, 1998.
Siegel, Sommers & Schwartz, LLP, New York City, by Ronald R. Sussman, Eric Haber, James M. Lemonedes, for appellant.
Barbara Balaber-Strauss, White Plains, NY, by Barbara Balaber-Strauss, for Barbara Balaber-Strauss, Trustee.
Angel & Frankel, P.C., New York City, by Joshua J. Angel, Leonard H. Gerson, for Kazlow & Kazlow.
Davis, Polk & Wardwell, New York City, by John J. Clarke, Jr., for New York Telephone.
MEMORANDUM & ORDER
BRIEANT, District Judge.
By an appeal heard and fully submitted on June 5, 1998, James M. Lemonedes, Esq., a lawyer, seeks to review a final order of the Bankruptcy Court (Adlai S. Hardin, Jr., Bankruptcy Judge) dated February 9, 1998, which denied a motion by Appellant Attorney Lemonedes for a nunc pro tunc Order of Retention as an attorney in behalf of the Chapter 7 Debtor and an application for an award of legal fees from the Estate for services already concluded. He also appealed from an order by the Bankruptcy Judge dated January 28, 1998 which fixed and awarded the compensation and reimbursement of expenses of the law firm of Kazlow & Kazlow (the Kazlow firm), and a further order denying reargument. All three orders appealed from are final orders and this district *132 court has subject matter jurisdiction over the appeal.
The issues presented are whether the Bankruptcy Judge abused his discretion in denying the application for a nunc pro tunc retention in this Chapter 7 case; whether the Bankruptcy Court decided correctly that it did not have subject matter jurisdiction over an underlying fee sharing dispute between Attorney Lemonedes and the Kazlow firm, which was not a core proceeding as defined by 28 U.S.C. § 157(b) and whether, assuming non-core jurisdiction the Bankruptcy Court properly abstained from exercising jurisdiction over the underlying dispute between Lemonedes and the Kazlow firm.
The necessary facts are set forth in the oral decisions of Judge Hardin and the orders issued thereon. Briefly explained, the debtor in this case, Coin Phone, Inc., was in the business of leasing and selling private telephone equipment, including customer-owned coin-operated telephones. A Chapter 11 proceeding was converted to a case under Chapter 7, and Barbara Balaber-Strauss became the Chapter 7 Trustee.
Ms. Balaber-Strauss thereafter retained the law firm of Kazlow & Kazlow as special litigation attorneys to represent the interests of the Trustee in adversary proceedings. A timely order for the retention of the Kazlow firm was issued by the Bankruptcy Court on June 14, 1991.
It is claimed and we assume for purposes of the appeal that attorney Lemonedes was an independent private practitioner who worked with the Kazlow firm on a case by case basis in the status of "of counsel" when requested. The Kazlow firm was one of several with which attorney Lemonedes had similar relationships. These single case retainers were always accomplished separately by agreement and Mr. Lemonedes was never an associate, partner or employee of the Kazlow firm. He may have been designated by Kazlow as "of counsel," a generally honorary title, the origin of which is lost in antiquity but which is a title not consistent with being an associate, partner or employee of a law firm. The record shows that in a five year period ending in 1996 attorney Lemonedes was retained by the Kazlow firm to handle more than 25 cases.
Little authority is found in New York law concerning the status of lawyers serving as "of counsel" to law firms. We know that typically members of law firms who choose to phase down their level of professional work looking toward retirement, are often listed as "of counsel" and yet continue to owe to the firm the partner's fiduciary loyalty "which distinguishes partnerships (including law partnerships) from bazaars." Graubard, Mollen Dannett & Horowitz v. Moskovitz, 86 N.Y.2d 112, 120, 629 N.Y.S.2d 1009, 653 N.E.2d 1179 (1995). Yet, lawyers listed as "of counsel" to a firm are not regarded as general agents of the partners, nor liable for the debts of the firm. They are not treated as mere employees. Methods of compensation vary, but more often than not represent ad hoc arrangements for the handling of specific cases. Such arrangements differ from those between attorneys who merely share an office suite, without more, but choose to act together in certain cases. cf. In re Matis, 73 B.R. 228, 232-33 (Bankr. N.D.N.Y.1987). A lawyer who is acting "of counsel" for a law firm and is held out to the public will be regarded as a "member" within 11 U.S.C. § 504, so as to be free from statutory limitations on fee sharing arrangements. Id. at 234 cf. In re Maller Restaurant Corp., 57 B.R. 72 (Bankr.E.D.N.Y.1985).
No contemporaneous approval was sought from the court to retain Mr. Lemonedes in behalf of the debtor's estate. The application to the Court for the retention of the Kazlow firm does not mention Mr. Lemonedes in any way, and the only contemporaneous authority which Mr. Lemonedes had to permit him to act in the matter was through whatever private arrangement he had in his capacity as of counsel for the Kazlow firm. Judge Hardin found that Mr. Lemonedes "was held out by Kazlow & Kazlow, and he held himself out as a person acting in behalf of and affiliated in some manner with the Kazlow firm."
The Trustee, represented by the Kazlow firm and through the efforts of attorney Lemonedes conducted a number of separate adversary proceedings which were either settled or litigated to a conclusion in a manner *133 highly satisfactory to the estate. Indeed, in one single litigation against the New York Telephone Company, the attorneys recovered in excess of $11 million dollars.
An issue arose early in 1996 as to whether the Kazlow firm was conflicted by reason of a separate representation of two Nynex subsidiaries. The Trustee sought leave to retain new counsel to represent the interests of the estate in a pending appeal to the district court in the New York Telephone litigation and at about the same time learned that Mr. Lemonedes had severed his professional relationship with the Kazlow firm due in part to the conflict situation, and apparently also due in part to a dispute concerning his share of the fees in this case.
At oral argument, Mr. Lemonedes explained his position to the Court. (Record 964)
I don't mean to be confusing to Your Honor. My position is ultimately that Your Honor has grounds to grant me a nunc pro tunc fee application and to grant me compensation thereunder. Your Honor also has grounds to determine that I was a member, and therefore grant me compensation under the Kazlow & Kazlow fee application. . . . I had a reasonable belief at the time that the services were provided [of the Kazlow law firm], then the determination needs to be whether in fact under the law I was a member. If I was a member, I would still be
The Court: By a member, do you mean a partner?
Mr. Lemonedes: No, specifically not a partner. In fact if you look at the rules the rules specifically address that an order of retention is not required by a partner, associate or member of the firm. Clearly, I was not a partner; I was not an associate of Kazlow & Kazlow, but I believe that I was a member, based on my relationship which is set out in my papers.
In his oral decision, the Bankruptcy Judge adopted by reference two arguments made by the attorney for the principal creditor, namely that the application was untimely and that its untimeliness did not result from any of the usual excuses for nunc pro tunc retention orders, including that the Trustee misled the professional seeking nunc pro tunc authorization, and furthermore that attorney Lemonedes was not entitled to nunc pro tunc retention because his situation was that of "an independent contractor who subcontracted with the person [Kazlow] who was in fact retained with court approval." As additional grounds the Bankruptcy Judge relied upon his perception that the Kazlow firm had undertaken the retainer initially at considerable financial risk to itself and incurred substantial out of pocket expenses, including payments to Mr. Lemonedes for his efforts on the case, and did so without any assurance that there would be any recovery for the estate, or any money in the estate from which to seek a fee award.
The Bankruptcy Court perceived correctly that the status of Mr. Lemonedes "was not as the attorney with the professional responsibility retained by order of the Court to represent the estate, but rather as an associate or a person associated in some manner with and responsible to the Kazlow firm." The Bankruptcy Judge pointed out that "Mr. Lemonedes was not held out by Kazlow & Kazlow, nor did he hold himself out as an independent person warranting or requiring an independent or separate order of this Court. He was held out by Kazlow & Kazlow, and he held himself out as a person acting on behalf of and affiliated in some manner with the Kazlow firm. It was on that basis that Mr. Lemonedes acted in this litigation." (Record 1011-1012). This fact is not disputed.
It was readily apparent to the Bankruptcy Judge and also is apparent to this Court that the sole reason for making the nunc pro tunc application was to seek a retroactive participation in the retainer because the "of counsel arrangements," or whatever other association in fact Lemonedes had with the Kazlow firm, had come to an end under circumstances which imply that there occurred a dispute over money. We agree with the Bankruptcy Judge that if Mr. Lemonedes is entitled to additional compensation beyond that previously paid to him by the Kazlow firm or due to be paid, the source to which he must look is not the estate, but rather the Kazlow firm. And this is so whether his *134 status be that of partner or associate, or the more ambiguous status "of counsel," or a subcontractor for the purpose of performing legal services in particular matters pursuant to separate financial arrangements for each matter.
In short, the Bankruptcy Judge did not abuse his discretion by relying on the reasons which he articulated in deciding not to issue a nunc pro tunc order. We are not concerned with the situation which could have been presented, had the court at the inception of the matter been asked to authorize the retention both of the Kazlow firm and the individual lawyer, Lemonedes, each to be separately compensated directly from the estate. Hindsight suggests that this might have been done, and perhaps should have been done, but it was not done. It did not have to be done, and the Bankruptcy Judge was on solid ground declining to allow it to be done retrospectively.
This then brings us to the question of whether the Bankruptcy Judge had jurisdiction to resolve the fee sharing dispute issue between Lemonedes and the Kazlow firm. By a supplemental decision, the Bankruptcy Judge found that there was no jurisdiction to resolve "a dispute as to how the fee to be payable pursuant to Judge Schwartzberg's order is to be divided between Mr. Lemonedes and the Kazlow firm." This Court is not so certain that there is no jurisdiction. It is possible to hypothesize that such a dispute might delay or affect adversely the administration of the estate, and therefore could well be within the non-core jurisdiction of the bankruptcy court.
However, it certainly is not an abuse of discretion in the context of this case to refuse to adjudicate that dispute, and it is clear from the entire record that Judge Hardin concluded that had jurisdiction existed, he would have abstained in favor of the state court. The state court provides an adequate forum and appropriate remedies both in equity and at law, for the general run of disputes between law partners, joint venturers and persons in similar relationships. A person serving "of counsel" to a law firm or sharing fees with a lawyer with respect to whom he is neither an employee nor a partner, is not in an unusual relationship. Disputes of the sort here presented are frequent and foreseeable. The regular work of a bankruptcy court could be compromised seriously should it hold itself out as the arbiter of disputes between law partners or between lawyers who have become joint venturers as to a single matter.
It was appropriate for the Bankruptcy Court to approve the fee application of the Kazlow law firm which was duly authorized when the services began, and to include in that authorized compensation the reasonable value of the work actually done by Mr. Lemonedes for the account of the Kazlow firm, and it appears to have done so.
The orders appealed from are affirmed.
SO ORDERED.
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826 F. Supp. 20 (1993)
Eva RUSSELL, as the Personal Representative of the Estate of Kevin W. Brochu, Plaintiff,
v.
KNOX COUNTY, et al., Defendants.
Civ. No. 92-172-P-C.
United States District Court, D. Maine.
June 21, 1993.
Stuart Tisdale, Portland, ME, for plaintiff.
William Fisher, Monaghan, Leahy, Hochadel & Libby, Portland, ME, for defendants.
BENCH RULING
GENE CARTER, Chief Judge.
(Ruling of the Court after motion for judgment as a matter of law made before Honorable Gene Carter in the United States District Court, Portland, Maine, on the 14th day of May, 1993, beginning at 1:32 p.m., as follows:)
THE COURT: The matter is before the Court on a motion for judgment as a matter of law at the conclusion of Plaintiff's case.
*21 In ruling on that motion, the Court is required to take the evidence in the light that is most favorable to the nonmoving party, here the Plaintiff, and to indulge all reasonable inferences to be drawn from the evidence so viewed as are in favor of the nonmoving party.
This is a section 1983 civil rights action, and in order to establish a claim, it must be established that there was deliberate indifference to a clearly established constitutional right.
The case of Gordon v. Kidd, 971 F.2d 1087 (4th Cir.1992), at 1097, has the following to say about that:
Estelle v. Gamble, 429 U.S. 97 [97 S. Ct. 285, 50 L. Ed. 2d 251 (1976)]; Partridge [v. Two Unknown Police Officers of Houston, 791 F.2d 1182 (5th Cir.1986)] and our opinions in Bowering v. Godwin, 551 F.2d 44 [(4th Cir. 1977)] and Lee v. Downs, 641 F.2d 1117, 1121 (4th Cir.1981), which were all decided prior to 1988, clearly establish the constitutional duty of a jailer to take reasonable measures to protect a prisoner from self-destruction when a jailer knows that the prisoner has suicidal tendencies.
That statement in Gordon v. Kidd was elicited by a reference to the conclusion to the contrary reached in Gagne v. City of Galveston, 805 F.2d 558 (5th Cir.1986). The comment I have just read from the Gordon case was intended to respond to the conclusion in Gagne that there was no clearly established constitutional right of an involuntarily confined inmate to a reasonably safe place of confinement.
Several circuits have since followed the lead of the Gordon case and, as I have previously indicated in discussions with counsel, one of those cases is Bowen v. City of Manchester, 966 F.2d 13 (1st Cir.1992), in which the Court of Appeals for the First Circuit observes, "[b]y 1986 it was clearly established that police officers violate the fourteenth amendment due process right of a detainee if they display a `deliberate indifference' to the unusually strong risk that a detainee will commit suicide."
That is a 1992 case; it refers to that right being established at least by 1986, which is prior to 1991, the date of Kevin Brochu's suicide in this case.
So, I am satisfied that there is a constitutional right clearly established as of August 12, 1991, of an inmate, involuntarily detained, to a reasonably safe place of confinement, at least to the extent that it requires that there not be deliberate indifference to an unusually strong risk that the detainee will commit suicide.
With respect to the individual Defendants here, it must be established that they acted with "deliberate indifference" to a known right.
The First Circuit has said that such conduct must encompass "`acts or omissions so dangerous (in respect to health and safety) that a defendant's knowledge of a large risk can be inferred.'" Elliott v. Cheshire County, New Hampshire, 940 F.2d 7, 10 (1st Cir.1991). The United States Supreme Court has said that the purpose of a qualified immunity doctrine which is implemented by the deliberate indifference standard is to "protect all but the plainly incompetent or those who knowingly violate the law."
And, the Court also refers to the Manarite case where the Court noted: "[n]o case finds a supervisor `deliberately indifferent' (or the like) simply because he does not react when he learns of a significantly increased suicide attempt rate. Courts, including this one, have found supervisors to be deliberately indifferent only where a much fuller record than we have before us shows significantly more culpable behavior (or omissions)." Manarite v. City of Springfield, 957 F.2d 953, 958 (1st Cir.1992).
And the conclusion in Manarite, on the facts there, makes it clear that this standard of deliberate indifference is intended to be a high standard of misconduct, that it has a very significant bite to it in protecting officers from the need to have their discretionary judgments become a basis for litigation and ultimate liability.
The factual circumstances of that case, as the Court has noted in colloquy with counsel, are significantly different from this case, but nonetheless indicate that the Court of Appeals *22 at least takes a very strong stand in favor of a high level protection for officers in the performance of such functions.
With respect to the County, in this case the Plaintiff must prove the existence of a policy, which is the moving force in producing the injury, namely the death of Kevin Brochu. Taking all of those rules of law into account, the Court will grant the motion as to the Defendant County of Knox, the Defendant Davey, and the Defendant Cooley. The Court's reasoning is as follows.
With respect to the County of Knox, it is clear that there must be a policy in place on behalf of the County, or a policy-making mechanism, which is the moving force in producing the injury.
Here, the undisputed evidence is that on April 20th, or some time thereabouts, when Mr. Brochu was first admitted, on the occasion of his incarceration leading to his death, or some time thereafter, his laces were taken away from him. The contention of the Plaintiff here is that it was the availability of the laces to the deceased that constituted the deliberate indifference violation.
It is clear to the Court that with the taking away of the laces, the policy established by the evidence of letting all inmates in the Knox County Jail keep their laces ceased to be a moving force, and that the availability of the laces came about as a moving causative force in bringing about Kevin Brochu's death only because of the independent, one-time decision by the Defendant Voyer. Accordingly, it is clear to this Court that the County is not liable and may not be subjected to liability on the basis of an asserted claim that a policy of the County brought about the death of Kevin Brochu.
With respect to the Defendant Davey, it is clear and undisputed on the evidence that he did not do any act, make any judgment, or omit to act in any way directly with respect to the circumstances of confinement of Kevin Brochu. Absent that, as conceded by Plaintiff's counsel, the only basis for him to be found liable is on the basis that he made or implemented a policy that resulted, as a moving force, in the death of Kevin Brochu. By reason of the prior determination, and by reason of the fact that the evidence reflects the only policy that he was at all involved in that could have had such an effect was the policy that permitted all inmates to retain their shoe laces when incarcerated in Knox County Jail. He cannot be held liable on that basis because, as the Court has already determined, the intervening decision to take away the laces, in which he did not participate, on the undisputed evidence, and the also intervening independent decision of Major Voyer to return the laces, completely cuts off the causative effect of that policy. Accordingly, the motion is GRANTED as to Defendant Davey.
With respect to the Defendant Cooley, the issue is in some respects somewhat more narrowly drawn, but I am satisfied that there is no basis on this evidence for him to ultimately be found liable, on this record, for the death of Kevin Brochu.
The evidence reflects, undisputedly, that Officer Cooley was a line corrections officer in the Knox County Jail. It reflects that he had no role whatever in making policy in respect to conditions of confinement of inmates, no role, so far as the record reflects, in amending or abrogating policies in place. It reflects that the decision to return the laces was made by Major Voyer. The record reflects, by inferences if not directly, that Officer Cooley was required to follow the directions and orders of his superiors, including Major Voyer, and the record reflects that he did so.
The record further reflects, by undisputed evidence, that with a single possible exception, he made checks upon Kevin Brochu while he was on duty; that he, Cooley, was on duty during the period that Brochu was incarcerated from April to August of 1991, that he made the checks regularly at 15-minute intervals. There is no real dispute about that, and that he did so pursuant to a policy placed in force by his superiors, the County, and through Major Voyer. He fully observed that policy. The only question that could be raised on this record about that is raised by the testimony of William Brown.
The Court has considered that testimony and its implications with great care in light of *23 Officer Cooley's clear testimony that he checked Kevin Brochu at 23:15 on the night of the suicide, before he went downstairs for a period of four minutes to go to the bathroom. The testimony of William Brown is very nonspecific in particulars. The Court does not undertake to resolve, as it cannot on this motion, any question about the credibility of William Brown. Carefully considering the testimony, its vagueness, and the fact that he recanted on cross-examination much of the testimony that he had given on direct examination, the Court concludes that his testimony does not directly contradict, confute, or otherwise impeach the testimony of Officer Cooley that he did check Kevin Brochu at 23:15 before he went downstairs and that he did that in the day room.
The record will reflect that the Court is well aware of the layout of the jail and has observed that it was thoroughly possible for Officer Cooley to progress from William Brown's cell, if the conversation Brown testified to did occur in close proximity to the time of 23:15, check the Defendant in the day room hastily, and go down the stairs for the four-minute period that he required to relieve himself.
With that in mind, the Court has a clear conclusion that he cannot be found liable, on this record, that he did everything that was within his authority to do in carrying out the policies of the jail in respect to the safety of Kevin Brochu, and that there is no basis upon which he can be found liable.
The Court will go further and say, in view of the strictness, as articulated by the Court of Appeals for the First Circuit (as well as by opinions from other circuits), particularly with respect to the deliberate indifference standard, that even if the Court were convinced that William Brown's testimony did contradict Officer Cooley's testimony, leading the Court to the conclusion that he did not check, as he testified, Kevin Brochu at 23:15 before going downstairs, that in all the circumstances disclosed by the evidentiary record in this case, such conduct would not constitute "deliberate indifference" to a known elevated risk of suicide on the part of Kevin Brochu. There was compelling need for him to take that absence, he had never been told anything by Kevin Brochu that would indicate that he intended to commit suicide. He had a long, continued exposure to Kevin Brochu. Cooley said that he was surprised that Brochu committed suicide. That means that his state of mind was that he did not have any concerns for self-destruction on the part of Kevin Brochu. On this record, that appears without evidentiary dispute to be reasonable.
And the fact that Brochu was on a suicide watch, even a serious suicide watch, does not render a four-minute absence for the purpose in question, under all of the circumstances, conduct that is so seriously in breach of his obligations as a correction officer at the Knox County Jail as to approach wantonness, recklessness, or careless indifference to the well-being of Kevin Brochu because of a known suicide risk.
With respect to Major Voyer, the Court reserves decision pending the completion of all of the evidence in the case. The Court has concern, as I have perhaps indicated in colloquy with counsel, that it is his decision that becomes the moving force. I should say that that decision does not bind the County as a matter of fact or policy because it is a single, independent decision, not intended to relate to anything other than the single instant of determining whether a single inmate, namely, Kevin Brochu, should have his shoe laces. The fact that Officer Voyer has made a decision does not necessarily mean that it is a policy decision, and I find that it was not a policy decision and, for that reason, it does not implicate the County or Sheriff Davey.
But it is clear that that decision, made at the behest of Lieutenant Sproul, is the moving cause to Kevin Brochu having his shoe laces available to him in a cell with a coat hook under circumstances such that he could use the laces to take his own life. That decision was made in the face of an expert psychiatric diagnosis to the effect that Kevin Brochu was a "suicide risk." As of August 2, it is clear, from this record and the note made in the "Pass-On" book, that Major Voyer knew that it was a serious suicide risk because he put in place what he characterized as "a serious suicide watch" and instructed *24 the line staff "to keep a close eye" on Kevin Brochu.
Now, I recognize that there is much in this record that may conflict with the doctor's diagnosis. Kevin Brochu may have dissembled about what his plans with respect to suicide were, he may have kept information from the line staff officers as to what he did intend and if he did intend suicide. He may have said things to his mother that were inconsistent with an intent to commit suicide. But this case has in it that single fact of an expert psychiatric diagnosis, sought by the jail staff through its leadership, for the specific purpose of determining how Brochu should be treated, and that makes it different from any other case that I have reviewed. I have concern that giving this inmate his shoe laces, in the face of that diagnosis and in the face of everything that was known about this inmate, and in the face of the fact that this diagnosis had been accepted at least to the extent of imposing a suicide watch, ultimately characterized as "a serious suicide watch," may well constitute a level of deficient performance in the duties of the jail administrator sufficient to qualify as recklessness or a wanton disregard of, or a callous indifference to, the known risk that Kevin Brochu would commit suicide.
I am going to hear the rest of the evidence before I resolve that issue and, therefore, the motion will be taken under advisement. Decision is RESERVED, and the case will go forward only as to Major Voyer on Monday morning at 8:30.
Anything further from counsel at this time?
MR. TISDALE: No, Your Honor.
THE COURT: I'll see counsel briefly in chambers. The Court will be briefly in recess.
[The case was settled before trial recommenced.]
[The Bench Ruling was edited by the Court for style, grammar, punctuation, and accuracy of citation.]
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715 S.W.2d 218 (1986)
18 Ark.App. 284
Henry William ANDERSON, Appellant,
v.
Kathryn Suzanne ANDERSON, Appellee.
No. CA 86-67.
Court of Appeals of Arkansas, Division II.
September 10, 1986.
*219 Wilson, Engstom, Corum & Dudley by Wm. R. Wilson, Jr., Little Rock, for appellant.
David Rees, Jonesboro, for appellee.
CORBIN, Judge.
Appellant, Henry William Anderson, Jr., appeals a decision of the Craighead County Chancery Court refusing to grant his petition for a change of custody of his minor son from appellee, Kathryn Suzanne Anderson (Beightol), to appellant. We affirm.
Custody of the minor son, Will Anderson, then age 5, was awarded to appellee upon the entry of a decree of divorce in April 1982, subject to appellant's right to visitation. Appellant filed his petition for change of custody on March 13, 1985, and the matter was heard by the chancellor on July 2, July 30, and August 16, 1985. On November 13, 1985, an order was entered denying appellant's request for a change of custody.
Appellant first contends that the trial court erred in failing to give adequate consideration to the minor son's preference to live with his father.
While a child's preference is not binding upon the court, Malone v. Malone, 4 Ark. App. 366, 631 S.W.2d 318 (1982), it is certainly to be considered along with all other factors when the court makes a custody determination. Watson v. Watson, 271 Ark. 294, 608 S.W.2d 44 (Ark.App.1980). We stated in Watson, supra, that the supreme court had approved the practice of considering the wishes of children, some of them quite young, with respect to custodial preference. However, we noted there that we had found no case denying the chancellor the discretion to decline to give weight to such testimony. Contrary to appellant's argument, it is evident that the chancellor *220 in the instant case carefully considered the evidence presented on behalf of the parties. It is even more clear that the chancellor gave due consideration to the minor son's preference to live with appellant as reflected by the chancellor's letter exhibit of November 13, 1985, to wit:
Having given a great deal of thought to all the facts and circumstances which weigh on the court's decision as to what would be in the best interest of the nine year old boy whose custody is the issue in this case, I have concluded that Will should remain in the care and custody of his mother. In arriving at this conclusion, I attempted, as best I could, to look at every plus and minus on both sides, and in effect, considered and decided the matter as though it was an original award, as well as whether there had been a significant change in circumstances which would dictate a change in custody. I obviously reached the same result in both instances.
. . . .
... As indicated by the testimony, it will be a difficult and trying time for Will, in view of his testimony as to where he wanted to live. I gave Will's expressed preference much thought, weighing the relative effect that a denial of his wishes might have on his mental well-being. Fortunately, Will has an existing family unit, and a sound relationship with Kayla, both of which were very important, not only to Will but to the Court. With the continued attention to the potential problem indicated, I have no doubt but that Will will continue the steady improvement he has shown. I might also make a note that there was also testimony regarding potential problems if custody of Will was changed and he had new adjustments to make.
We cannot conclude the chancellor did not accord the son's preference proper weight and, therefore, find no merit to this contention.
Appellant's next three arguments for reversal concern findings by the chancellor which appellant contends are clearly erroneous or clearly against the preponderance of the evidence. He alleges that appellee's meretricious relationship constituted a sufficient change of circumstances justifying a change of custody and that appellee's subsequent marriage did not temper her reprehensible conduct. Appellant also alleges error in the trial court's finding that it was in the best interest of Will to remain with appellee.
The principles governing the modification of custodial orders are well settled and require no citation. In all such cases the primary consideration is the best interest and welfare of the child and all other considerations are secondary. Custody awards are not made or changed to gratify the desires of either parent, or to reward or punish either of them. In determining matters of child custody, a chancellor has broad discretion, which will not be disturbed unless manifestly abused. The burden of proving a subsequent material change of circumstances justifying a change of custody is on the party seeking the modification. Sweat v. Sweat, 9 Ark. App. 326, 659 S.W.2d 516 (1983).
It is also well settled that, although this court reviews chancery cases de novo on the record, the findings of a chancellor will not be disturbed unless clearly against a preponderance of the evidence. Since the question of preponderance of the evidence turns largely on the credibility of the witnesses, we defer to the superior position of the chancellor. ARCP Rule 52(a); Callaway v. Callaway, 8 Ark.App. 129, 648 S.W.2d 520 (1983). This deference to the chancellor is even greater in cases involving child custody. In those cases a heavier burden is placed on the chancellor to utilize to the fullest extent all of his powers of perception in evaluating the witnesses, their testimony, and the child's best interest. We have often stated that we know of no cases in which the superior position, ability, and opportunity of the chancellor to observe the parties carry as great a weight as those involving minor children. Calhoun v. Calhoun, 3 Ark.App. 270, 625 S.W.2d 545 (1981).
*221 The evidence adduced established that in November of 1984, appellee allowed Rick Beightol to move into the home shared by her with her minor son Will and her fifteen-year old daughter by a previous marriage, Kayla. This living arrangement existed until March of 1985 when appellee and Rick Beightol were married. Appellant alleged in his petition for change of primary custody which was filed in March of 1985 that this living arrangement as well as appellee's disparaging remarks about appellant in the presence of the parties' child constituted a material change of circumstances justifying a change of custody.
The chancellor in the instant case stated in his letter opinion as follows:
The conduct of Mrs. Beightol in permitting her now-husband to share her bed in the children's home, reprehensible as it may have been, was certainly tempered by their subsequent marriage. Mr. Beightol, from the testimony, was shown to be an active participant in rearing both Kayla and Will, and both expressed their love for him.
The supreme court and this court have never condoned a parent's promiscuous conduct or lifestyle when such conduct has been in the presence of the child. Ketron v. Ketron, 15 Ark.App. 325, 692 S.W.2d 261 (1985). Although our courts have never condoned such conduct, we have always recognized a distinction between human weakness leading to isolated acts of indiscretion, which do not necessarily adversely affect the interest of a child, and that moral breakdown leading to promiscuity and depravity, which render one unfit to have custody of a minor. Watts v. Watts, 17 Ark.App. 253, 707 S.W.2d 777 (1986), citing Harris v. Gillihan, 226 Ark. 19, 287 S.W.2d 569 (1956), and Blain v. Blain, 205 Ark. 346, 168 S.W.2d 807 (1943).
Appellee testified that she discussed the matter of Rick Beightol moving into the home with her children prior to Thanksgiving and that she felt at that time it was a good decision. Appellee's daughter told appellee that she loved and respected Rick and Will told appellee that he hoped they would marry because he thought Rick would make a good stepfather and that he wanted to be a "Beightol." Appellee further testified that her children's feelings in this regard as well as their concern over another failure in marriage led her to make the decision to allow Rick to move in. Appellee stated that she and Rick had already planned to marry when appellant filed his petition for change of custody. However, appellee testified that she would never do anything to jeopardize her custody of Will and admitted that "I might not have made the right choice."
Based upon our de novo review of the evidence, we cannot say the chancellor was clearly erroneous in finding that appellee's relationship with Rick Beightol did not constitute a sufficient change of circumstances justifying a change of custody or that appellee's subsequent marriage to Rick tempered her reprehensible conduct. In so holding, we note that the chancellor was in a superior position to assess the sincerity of appellee's atonement for allowing Rick Beightol to move into the home without benefit of marriage, her subsequent marriage to Rick and the effect of this transgression on the welfare of Will.
We also find no error in the chancellor's determination that it was in the best interest of Will to remain with appellee. Appellant contends that this finding is in error because: (1) appellee's concern for Will was sporadic; (2) appellee's living arrangement with Rick Beightol was against Will's best interest; (3) appellee had been untruthful in her testimony regarding her business in Dallas; and (4) appellee's insistence that she be allowed to remain in the courtroom while her son testified was against his best interest.
A summary of the evidence shows that Will was initially preoccupied with thoughts of self-destruction after his move to Dallas and as stated by Dr. Joan E. Berger, who examined Will shortly upon his arrival in Dallas, his "experience of life is like that of a war ravaged child trying to pick up the pieces of his life after a bomb *222 shelling. The events of the last three years have left him tormented by confused feelings, guilt, and fear." The record reflects that all of the psychological reports concluded that one of the primary causes of Will's psychological problems was the lengthy and traumatic divorce his parents had experienced. There was also evidence of Will's learning disabilities as well as his lack of self-esteem and immaturity. Lay testimony from teachers and friends, however, was significant in showing the progress which Will had recently made in overcoming his problems and that testimony was unrebutted.
Contrary to appellant's argument, the evidence established that appellee was a good mother to Will. It is also important to note the chancellor's conclusion that appellant was an exemplary father to Will. However, the issue here is not which party is the better parent. The primary consideration is the best interest and welfare of Will and all other considerations are secondary. In concluding that Will should remain in the care and custody of appellee, the chancellor noted that Will had a sound relationship with his sister, an existing family unit in Dallas and also considered both expert and lay testimony to the effect that there would be potential problems if custody was changed and Will was faced with making new adjustments.
Appellant focuses again on appellee's relationship with Rick Beightol prior to their marriage as being against Will's best interest. As we have previously stated, the chancellor determined that her subsequent marriage tempered appellee's conduct in permitting Rick Beightol to share her bed in the children's home. In Ketron v. Ketron, 15 Ark.App. 325, 692 S.W.2d 261 (1985), we distinguished the courts' decisions in Digby v. Digby, 263 Ark. 813, 567 S.W.2d 290 (1978), Scherm v. Scherm, 12 Ark.App. 207, 671 S.W.2d 224 (1984), and Bone v. Bone, 12 Ark.App. 163, 671 S.W.2d 217 (1984). Those cases concerned changes of custody where there was evidence of illicit relationships and we noted in Ketron that those decisions relied upon facts which indicated that the parent denied custody had failed to care properly for the children. Appellee's isolated act of indiscretion associated with allowing Rick Beightol to move into her children's home was unquestionably poor judgment on her part but was not sufficient in and of itself to constitute a material change of circumstances justifying a change of custody to appellant. In addition, the uncontradicted testimony of the witnesses established that Rick Beightol had been an extremely solid and stable addition to the family, that he had been an active participant in rearing both of the children, and the children had each expressed their love for him.
Appellee testified in regard to her business in Dallas which she described as doing extremely well. She was questioned by appellant about her tax returns and the costs of her living accommodations in Dallas. Her 1984 corporate income tax return reflected a net loss, however, and her personal income tax return reflected that she was not required to pay any income tax in 1984. Appellant argues that appellee was untruthful and that this testimony further established that it was not in the best interest of Will for custody to remain with appellee. We are of the opinion that this testimony went to the credibility of the witness and giving due deference to the chancellor's superior position, we cannot conclude his finding is against a clear preponderance of the evidence.
The record reflects that the parties had a discussion with the chancellor regarding the propriety of allowing Will Anderson to testify. Appellant suggested that Will should be interviewed in chambers by the court or interviewed in court without the parents present. Appellee contended that Will should not be permitted to testify and based this contention on Will's emotional instability and put on proof to that effect. She insisted that she be allowed to remain in the courtroom, however, if Will was permitted to testify. The chancellor subsequently determined that Will should be permitted to testify in court, and counsel for appellant noted that he objected *223 to the parties being present for the testimony, but if one party was, he thought both parties should be present.
Appellant contends on appeal that Will's best interest was not considered in view of the above position taken by appellee. We disagree. Appellee attempted to prevent Will from testifying in view of his emotional instability and appellant insisted that he be permitted to testify. We cannot conclude that this justified a determination on the chancellor's part that it was in Will's best interest that custody be changed to appellant.
Finally, appellant contends that the trial court erred in refusing to allow appellant to supplement and correct the record regarding the closing arguments of counsel. In his brief appellant merely states that the chancellor's denial of his motion constitutes error but has not provided the court with any authority for this proposition or shown how he was prejudiced. Where an assignment of error is unsupported by either convincing argument or citation of legal authority, this court does not consider it on appeal unless it is apparent without further research that it is well taken. Hill v. Farmers Union Mutual Insurance Co., 15 Ark.App. 222, 691 S.W.2d 196 (1985). The record reflects that in the order denying appellant's motion, the chancellor stated that a court reporter was available and appellant should have asked that closing arguments be recorded, and that argument of counsel did not rise to the level of admissible evidence. We find no error in the chancellor's denial of appellant's motion, and his decision is affirmed in all respects.
Affirmed.
CLONINGER and COOPER, JJ., agree.
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226 B.R. 426 (1998)
In the Matter of Suzanne D. ACCOMAZZO, Debtor.
Adrianne KALYNA, United States Trustee for the District of Arizona, Appellant,
v.
Stanley M. SWAINE, Appellee.
No. Civ. 95-0876-PHX-BMV, Bankruptcy No. 90-06385-PHX-RTB, BAP No. AZ-95-1385.
United States District Court, D. Arizona.
October 27, 1998.
*427 *428 Michael W. Carmel, Phoenix, AZ, Paul Allen Randolph, U.S. Trustee's Office, Phoenix, AZ, for Adrianne Kalyna, United States Trustee.
Howard C. Meyers, Phoenix, AZ, for debtor.
Amended Memorandum and Order
VAN SICKLE, District Judge.
This appeal concerns a bankruptcy trustee's potential liability for negligent acts or omissions while administrating a bankruptcy estate. This Court must decide whether the bankruptcy court may impose liability upon a trustee where the court finds that the trustee negligently failed to maximize the property of a bankruptcy estate in performance of the trustee's discretionary duties.
Suzanne D. Accomazzo (the "Debtor") filed her voluntary petition under Chapter 7 of the Bankruptcy Code ("Code") on June 18, 1990. Stanley M. Swaine ("Swaine") served as the appointed trustee for the case.
Swaine, through counsel, filed his Application for Order Approving and Authorizing First Interim Payment of Trustee's Fees ("Application") on February 13, 1995. Swaine's Application requested fees in the amount of $7,182.42 calculated pursuant to 11 U.S.C. § 326. Pursuant to 28 U.S.C. section 586(a)(3)(A)(I)-(ii), the United States Trustee is charged with reviewing and, when appropriate, objecting to applications for compensation submitted by a trustee under the United States Trustee's Office's supervision. In this case, the United States Trustee timely filed her objection to the Swaine's Application for Interim Fees and Motion to Surcharge ("Objection") as a combined pleading on March 9, 1995. The Objection requested the Bankruptcy Court to surcharge Swaine and reduce the fees requested in the Application by $853.45.
The United States Trustee's Objection asserted that Swaine received and deposited a lump sum amount of $19,000.00 on October 24, 1990 in the checking account for the estate of Debtor. From October 24, 1990, until August 22, 1991, the checking account balance consistently exceeded $19,000.00. On August 22, 1991, a disbursement was made by Swaine which decreased the balance to $16,350.78. On June 15, 1992, Swaine transferred $10,631.78 to a savings account, leaving a balance of $1,000.00 in the checking account. The United States Trustee requested the Bankruptcy Court to surcharge Swaine and deny the Application, in part, by reducing the compensation requested by the Trustee by $853.45, the estimated proceeds lost as a result of Swaine's noninvestment over the period from April 24, 1991, through June 15, 1992.
Apparently, Swaine's failure to deposit estate funds in an interest bearing account in the present case is not unique. The Office of the Inspector General cited Swaine's failure to invest funds as a deficiency in one of its reviews and the United States Trustee asserts that it has identified at least ten other cases wherein Swaine neglected to invest funds over a significant period of time.
The bankruptcy court's Order overruled the Objection and approved the Application on March 22, 1995. At the hearing on the issue, the bankruptcy court relied on 11 U.S.C. § 345(a) in holding that the permissive language found in the statute precluded the bankruptcy court from surcharging Swaine. In other words, Swaine did not have a statutory duty or obligation to invest estate funds. The bankruptcy court did indicate that if it thought the court had the discretion, it would conclude that Swaine should have invested the funds.
This Court reviews de novo the bankruptcy court's legal conclusions and mixed questions of law and fact. In re Lee, 179 B.R. 149, 155 (9th Cir. BAP 1995). Factual determinations should not be disturbed *429 unless they are "clearly erroneous." In re Itule, 114 B.R. 206, 209 (9th Cir. BAP 1990). The bankruptcy court's decision was based upon its interpretation of 11 U.S.C. § 345(a). Therefore, this Court reviews the bankruptcy court's legal conclusions and decision de novo.
The issue before this Court is: does the permissive language of 11 U.S.C. § 345(a) preclude a bankruptcy court from surcharging a negligent trustee for failing to maximize the bankruptcy estate for the benefit of the creditors by investing estate funds?
Section 704 states that a
1) trustee shall collect and reduce to money the property of the estate for which such trustee serves, and close such estate as expeditiously as is compatible with the best interests of parties in interest; [and] 2) be accountable for all property received.
11 U.S.C. § 704(1) & (2) (emphasis added). Whereas section 345 merely states that
[a] trustee in a case under this title may make such deposit or investment of the money of the estate for which such trustee serves as will yield the maximum reasonable net return on such money, taking into account the safety of such deposit or investment.
11 U.S.C. § 345(a) (emphasis added). Thus, neither the mandatory nor the permissive provisions of the Code are dispositive as to whether a bankruptcy court is precluded from surcharging a trustee for negligently failing to invest estate funds. Since the Code does not provide direct guidance, this Court turns to consider the role played by a bankruptcy trustee in an effort to determine the extent of a trustee's fiduciary obligations. Butner v. United States, 440 U.S. 48, 55, 99 S. Ct. 914, 59 L. Ed. 2d 136 (1979).
Bankruptcy trustees are representatives of the bankruptcy estate. 11 U.S.C. § 323(a). As representatives of the estate, a bankruptcy trustee owes a fiduciary duty to creditors of, and parties-in-interest to, a bankruptcy estate. In re Cochise College Park, Inc., 703 F.2d 1339, 1357 (9th Cir. 1983). Part of the bankruptcy trustee's fiduciary duty is to conserve assets of the estate and maximize distributions to creditors. In re Rigden, 795 F.2d 727, 730 (9th Cir.1986) (citations omitted). In exercising these duties, a trustee must exercise:
that measure of care and diligence that an ordinarily prudent person under similar circumstances would exercise. Although a trustee is not liable in any manner for mistakes in judgment where discretion is allowed, he [or she] is subject to personal liability for not only intentional but also negligent violations of duties imposed upon him by law.
In re Cochise College Park, Inc., 703 F.2d at 1357 (citations omitted); see also In re Rollins, 175 B.R. 69, 74 (Bankr.E.D.Cal.1994) (stating that even if a duty is discretionary, liability will attach if the trustee is negligent in the exercise of that discretion). Therefore, a bankruptcy court may surcharge a negligent trustee.
In light of the standard of care placed upon a bankruptcy trustee in exercising his or her duties, the question must be asked: what would a prudent person making investment decisions regarding his or her own money do with funds that will lay idle for a significant period of time or surplus funds which are not required to administer to his or her short term needs? While it may seem anomalous to deposit surplus funds in a non-interest bearing account, even when administration of the estate is to be of a short time period, the duty to invest any funds arises when the administration of the estate is of sufficient duration so as to make investment practical. See In re Consupak, Inc., 87 B.R. 529 (Bankr.N.D.Ill.1988). The scope of the trustee's duty to invest funds, and whether or not that duty was breached, is not subject to a mechanical calculation. Rather, the practical considerations involved in defining a trustee's duty to maximize the return on the bankruptcy estate's funds are: 1) the sum of funds subject to investment, 2) the duration of the trustee's administration of the estate, 3) the time required by the trustee to manage the transfer of funds, and 4) the frequency with which a trustee needs to access those funds. When the practical considerations weigh in favor of investing the funds, absent other compelling justifications, *430 a trustee may be found negligent for failing to do so.
In the instant case, the bankruptcy judge did not make factual findings as to the Swaine's negligence. Rather, the court merely stated that "if it was something of discretion I would say the trustee in my view ought to be investing these funds, but based on the way I read the code, I don't think he has an obligation or statutory duty to do that." (Transcript at 3, lines 9-13.) The United States Trustee asserts that the bankruptcy judge's failure to issue findings of fact was due in part to the undisputed nature of the facts. Conversely, Swaine asserts that the bankruptcy court made the factual conclusion that Swaine was not negligent. After review of the transcript, it is clear that the bankruptcy judge did not conclude that Swaine was or was not negligent, rather, the bankruptcy court's order was based on the judge's legal determination that "the statute controls and I have no discretion." (Transcript at 9, lines 9-12.) Similarly, the bankruptcy court's Order, dated March 22, 1995, merely states that "[t]he Court finds and concludes that the services rendered by the Trustee as set out in the Application were reasonable, appropriate and necessary for the administration of the estate, of adversary matters and controversies arising throughout the case." This Court finds that the bankruptcy court has neither entered factual findings nor determined whether Swaine was negligent in failing to invest the bankruptcy estate's funds.
THEREFORE IT IS ORDERED that the bankruptcy court's Order Approving And Authorizing First Interim Payment of Trustee's Fees, dated March 22, 1995, is VACATED. The case is REMANDED for a determination by the bankruptcy court as to whether Swaine was negligent in failing to invest the bankruptcy estate's funds in a manner consistent with the law as set forth above.
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715 S.W.2d 761 (1986)
Ted McWILLIAMS, Appellant/Cross-Appellee,
v.
Adrian GILBERT and Technomag Corp., Appellees/Cross-Appellants.
No. 01-85-0799-CV.
Court of Appeals of Texas, Houston (1st Dist.).
July 24, 1986.
Rehearing Denied August 7, 1986.
*762 Bruce H. Beck, Fagan & Rigely, San Antonio, for appellant/cross-appellee.
James H. Pearson, DeLange, Hudspeth, Pitman & Katz, Houston, for appellees/cross-appellants.
Before LEVY, DUNN and DUGGAN, JJ.
OPINION
DUGGAN, Justice.
This is an appeal from a summary judgment awarding the guarantors of a promissory note recovery against its maker under an indemnity agreement.
Ted McWilliams, the appellant, formed a limited partnership, Goose Creek Baytown, Ltd. ("the Partnership"), with Adrian Gilbert and Technomag Corporation, the appellees, for the purpose of building a shopping center in Baytown. Ownership in the Partnership was allocated 49.5 percent to appellant and 50.5 percent to the appellees. Because McWilliams had a previous partnership with Bernard Lifshutz for the same development, it was necessary to purchase Lifshutz's interest in the project for $60,000. McWilliams signed a promissory note dated October 15, 1981, payable to Lifshutz or his order, for the purchase amount. Gilbert and Technomag signed a "guarantee agreement" to secure the note, and McWilliams thereafter signed the indemnity agreement that is the basis of this suit.
After the Partnership paid the Lifshutz note and McWilliams did not reimburse the Partnership in accordance with the appellees' interpretation of the indemnity agreement, Gilbert and Technomag filed suit against McWilliams. McWilliams answered and filed a counterclaim seeking reformation of the promissory note, the "guarantee agreement," and the indemnity agreement to reflect what he contended to be the parties' true agreement. McWilliams also alleged in his counterclaim that the appellees breached their fiduciary duty in their management of the Partnership, and thereby damaged him.
The appellees then moved for severance of appellant's counterclaim and for summary judgment in their action on the indemnity agreement. The trial court granted partial summary judgment in favor of the appellees for $65,132.38, plus interest and attorney's fees. Thereafter, the court severed appellant's counterclaim and made final the summary judgment entered previously.
At the hearing on McWilliams' motion for new trial, the trial court reformed its earlier judgment in order to credit McWilliams' 49.5% interest in the Partnership, reducing the sum awarded to the appellees to $32,891.75 plus interest, but leaving the attorney's fees previously awarded unchanged. McWilliams asserts five points of error. Gilbert and Technomag assert a single counterpoint.
A summary judgment movant has the burden of conclusively proving all the essential elements of his cause of action or defense as a matter of law. See City of Houston v. Clear Creek Basin Authority, 589 S.W.2d 671, 678 (Tex.1979). When deciding if a fact issue exists which precludes summary judgment, the court must assume the evidence favorable to the non-movant to be true, must indulge every reasonable inference in favor of the non-movant, and must resolve any doubts as to existence of a genuine fact issue in favor of the non-movant. See Montgomery v. Kennedy, 669 S.W.2d 309, 310-11 (Tex.1984).
Appellee's motion for summary judgment was supported by Adrian Gilbert's affidavit, which stated that "Technomag Corporation, as general partner of, and on behalf of Goose Creek Baytown, Ltd.," made the payments due under the promissory note; that under the terms of the indemnity agreement, McWilliams was to reimburse Technomag "in its capacity" as general partner; and that the reimbursement had not been made.
McWilliams' controverting affidavit asserted that it was never the parties' intention that the note to Lifshutz be paid by him or by the appellees in their individual capacities, but rather by the Partnership; that the note was never in default, but was *763 paid by the Partnership with Partnership funds "prior to any default" by McWilliams and "in accordance with the agreements between" the parties; and that the appellees never made payments in their individual capacities. The affidavit further recited that the indemnity agreement did not provide that he, McWilliams, was to be personally liable to the appellees, but that "[r]eimbursement, if any, to plaintiffs for monies paid on said Promissory Note was to be made out of the first monies distributed or available to be distributed to [McWilliams] from the Partnership...."
The indemnity agreement, which was offered as an exhibit by both parties, reads in pertinent part:
[Appellant] hereby covenants and agrees to reimburse [Appellees] for all sums paid or to be paid by [Appellees] on or with respect to the indebtedness evidenced by the original note, both principal and interest. Such reimbursement shall be made from and out of the first monies distributed or to be distributed to [Appellant] by or from Goose Creek Baytown, Ltd., a Texas Limited Partnership (hereinafter sometimes referred to as the "Partnership").
(Emphasis added).
McWilliams asserts in his first point of error that the trial court erred in holding as a matter of law that he was personally obligated to reimburse the appellees. He contends that the above-quoted language specifically provides for reimbursement to be made from proceeds distributed or to be distributed to McWilliams' partnership interest, rather than from him personally.
On its face, the above-quoted and emphasized language of the agreement unambiguously restricts the appellees' reimbursement from McWilliams to a designated specific source, i.e., his interest in Partnership distributions, "the first monies distributed or to be distributed to [McWilliams] by or from the Partnership."
In holding McWilliams liable, the trial court apparently construed the agreement to be of no controlling effect, insofar as it purported to restrict the source of reimbursement to appellees by McWilliams.
Appellees urge, and the trial court apparently agreed, that the indemnity agreement is governed by the language of Tex.Bus. & Com.Code Ann. sec. 3.105(a)(6) (Vernon 1968), which reads:
(a) A promise or order otherwise unconditional is not made conditional by the fact that the instrument
* * * * * *
(6) indicates a particular account to be debited or any other fund or source from which reimbursement is expected ...
However, this section of the Business and Commerce Code lists conditions within negotiable instruments which do not impair negotiability. The section is not controlling in the instant case because an indemnity agreement is not a "negotiable instrument," as defined in Tex.Bus. & Com.Code Ann. sec. 3.104 (Vernon 1968).
The cases cited by appellees are likewise inapplicable to our situation. Two of them involved negotiable instruments wherein the restrictive language in the instruments was found not to impair negotiability or the indebted party's obligation to pay. Grant Road Public Utility District v. Coulson, 638 S.W.2d 616, 618 (Tex.App.-Houston [1st Dist.] 1982, no writ) (utility district bond anticipation notes); Morris Plan Insurance Co. v. Wells, 387 S.W.2d 84, 87 (Tex.Civ.App.-Fort Worth 1965, no writ) (insurance company debenture coupons).
Two other cases cited by appellees involve judicial construction of contract clauses. In each instance, a reading of the instrument as a whole showed the intention of the parties that the clause in question was to be interpreted as a covenant and not as a condition precedent, which would bar liability. Hohenberg Brothers Co. v. George E. Gibbons & Co., 537 S.W.2d 1, 3 (Tex.1976); Wisznia v. Wilcox, 438 S.W.2d 874 (Tex.Civ.App.-Corpus Christi 1969, writ ref'd n.r.e.).
The indemnity agreement before us is not a negotiable instrument. Neither does our examination of the "four corners" of *764 the writing compel the conclusion that McWilliams' reimbursement obligation is not restricted to partnership distribution proceeds due him. Appellee's exhibit thus shows on its face a specific restriction in appellant McWilliams' liability on the agreement. Appellant's first point of error is sustained.
In his fifth point of error, appellant asserts that the trial court erred in severing the appellees' original claim from his compulsory counterclaim and in entering a final judgment on appellees' original claim.
Compulsory counterclaims are governed by Tex.R.Civ.P. 97(a) (Vernon 1979):
(a) Compulsory Counterclaims. A pleading shall state as a counterclaim any claim within the jurisdiction of the court, not the subject of a pending action, which at the time of filing the pleading the pleader has against any opposing party, if it arises out of the transaction or occurrence that is the subject matter of the opposing party's claim and does not require for its adjudication the presence of third parties of whom the court cannot acquire jurisdiction....
McWilliams' counterclaim against the appellees is compulsory; i.e., it involves the same parties and arises out of the same transaction that is the subject matter of appellees' claim.
The full agreement underlying the creation of the Partnership resulted in McWilliams' execution of the Lifshutz promissory note, appellees' execution of the "guarantee agreement," and McWilliams' execution of the indemnity agreement. The last of these instruments, McWilliams' guaranty agreement, which in isolation is the basis of appellees' suit, is secured by McWilliams' interest in the Partnership.
McWilliams' counterclaim alleges, among other contentions, mismanagement and self-dealing by the appellees toward the Partnership in breach of the appellees' fiduciary obligation as managing partner. This breach resulted in a loss to the Partnership and to McWilliams' interest. He alleges damages in excess of $60,000, requests an accounting, and asks the court "to reform the documents to reflect the entire agreement of the parties." The indemnity agreement refers to the Partnership and states the restriction upon McWilliams' obligation to reimburse the Partnership (as discussed in point of error one); it thus shows intrinsically that a fuller agreement exists among the partners than is spelled out in the note, "guarantee agreement," and indemnity agreement.
Whether McWilliams is indebted under the indemnity agreement will be inextricably interwoven with the reformed terms of the three instruments, if reformation is granted as appellant's counterclaim seeks. Accordingly, final relief centered on the indemnity agreement alone is premature. The trial court's severance of McWilliams' counterclaim was error. See Bohart v. First National Bank in Dallas, 536 S.W.2d 234, 236 (Tex.Civ.App.-Eastland 1976, writ ref'd n.r.e.). Appellant's fifth point of error is sustained, and the order of severance is vacated.
Because appellant's first and fifth points of error are dispositive of the appeal, it is unnecessary for us to deal with appellant's remaining points of error or cross-appellants' crosspoint. Tex.R.Civ.P. 451.
The summary judgment is reversed, the order of severance is vacated, and the cause is remanded to the trial court.
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226 B.R. 402 (1998)
In re CSC INDUSTRIES, INC. and Copperweld Steel Company, Debtors.
Bankruptcy Nos. 93-41898, 93-41899.
United States Bankruptcy Court, N.D. Ohio.
April 3, 1998.
*403 Joseph F. Hutchinson, Jr., Robert M. Stefancin, Akron, OH, for Copperweld Steel Co.
MEMORANDUM OPINION
WILLIAM T. BODOH, Bankruptcy Judge.
This cause is before the Court on the motion of the United States Trustee ("UST") to either convert or dismiss the confirmed Chapter 11 case of CSC Industries, Inc. and Copperweld Steel Company ("Debtors") or, in the alternative, to compel payment of post-confirmation quarterly fees pursuant to 28 U.S.C. § 1930(a)(6). Kathryn A. Belfance, Trustee of the Copperweld Steel Company Liquidation Trust ("Liquidation Trustee"), filed objections to the UST's motion.
A hearing was held on the matter July 22, 1997. Andrew R. Vara, Esq. appeared on behalf of the UST. Robert M. Stefancin, Esq. appeared on behalf of the Liquidation Trustee. This is a core proceeding and the following constitutes the Court's findings and conclusions pursuant to FED.R.BANKR.P. 7052. For the reasons hereinafter stated, the Court overrules the UST's motion to convert or dismiss the confirmed Chapter 11 case. The Court sustains the UST's motion, in the alternative, to compel payment of the post-confirmation quarterly fees by the Liquidation Trustee.
ISSUES
The UST asserts that because a final decree has not yet been entered, pursuant to 28 U.S.C. § 1930(a)(6), as amended, the Liquidation Trust is liable to pay post-confirmation quarterly fees. The Liquidation Trustee objects to the UST's motion arguing the Bankruptcy Court has not retained jurisdiction over the matter. The Liquidation Trustee also asserts that the payment of post-confirmation fees was not addressed in the confirmed plan. The Liquidation Trustee further argues that the Liquidation Trust is not responsible for such fees since it is not the debtor and the claim should only be enforced directly against Debtors. Finally, the Liquidation Trustee argues that imposition of post-confirmation fees is an unconstitutional modification of the confirmed plan.
*404 DISCUSSION
Prior to the 1996 Amendment, 28 U.S.C. § 1930(a)(6) quarterly fees were to be paid to the United States Trustee until a plan was confirmed or the case was converted or dismissed, whichever occurred first. As amended, § 1930(a)(6) reads, "a quarterly fee shall be paid to the United States trustee, for deposit in the Treasury, in each case under chapter 11 of title 11 for each quarter (including any fraction thereof) until the case is converted or dismissed, whichever occurs first." Because of ambiguity created as to which cases the amendment applied, a clarifying amendment was signed into law on September 30, 1996 which states that "the fees under 28 U.S.C. § 1930(a)(6) shall accrue and be payable from and after January 27, 1996, in all cases (including, without limitation, any cases pending as of that date), regardless of confirmation status of their plans. . . ." Omnibus Consolidated Appropriations Act, 1997, Pub.L. No. 104-208, § 101(a), 110 Stat. 3009 (1996). Many courts have since held that the amendment applies retroactively to cases in which there is a confirmed plan, although plan confirmation occurred prior to the amendment date. See, e.g., United States v. Hudson Oil Co., Inc. (In re Hudson Oil Co., Inc.), 210 B.R. 380 (D.Kan.1997); In re Corporate Business Prods., Inc., 209 B.R. 951 (Bankr.C.D.Cal. 1997); Robiner v. Beechknoll Nursing Homes, Inc. (In re Beechknoll Nursing Homes), 216 B.R. 925, 926-27 (S.D.Ohio 1997); In re Huff, 207 B.R. 539 (Bankr. W.D.Mich.1997); Ostrovsky v. Sedro-Woolley Lumber Co., (In re Precision Autocraft, Inc.), 207 B.R. 692 (W.D.Wash.1997).
The intent of Congress in making the original change to § 1930(a)(6), whereby quarterly fees would be imposed until either dismissal or conversion, was to "provide the resources necessary to ensure adequate post-confirmation oversight and supervision of Chapter 11 cases[,]" due in part to the fact that asset cases often take years to administer, during which time continued involvement of the UST is required. H.R. REP. No. 104-196, at 34 (1995). As stated in the Joint Explanatory Statement of the House of Representatives Conference Report, "the conferees agree to include an extension of post-confirmation quarterly fee payments made under Chapter 11 as proposed in both the House and Senate bills and expect that these fees will apply to all pending Chapter 11 cases with confirmed reorganization plans." H.R. CONF. REP. No. 104-378, at 188 (1995). See also In re Hudson Oil Co., Inc., 210 B.R. at 383. Although not specifically addressed by the Liquidation Trustee in her objections, it is critical to understand that Congress, in amending § 1930(a)(6), intended that quarterly fees be paid post-confirmation, regardless of the confirmation status of the case. This Court holds that based on the following, the Liquidation Trustee is responsible to pay post-confirmation quarterly fees out of the Liquidation Trust since not only did Congress intend such fees be paid by Chapter 11 debtors prior to conversion or dismissal, but also that the Liquidation Trust has essentially stepped into the shoes of the original debtor and is therefore liable for any such fees which may be imposed.
The Liquidation Trustee argues the Bankruptcy Court has not retained jurisdiction over the issue of post-confirmation fees in that neither the plan nor the Liquidation Trust provides for payment of such fees, relying upon In re Gryphon at the Stone Mansion, Inc., 204 B.R. 460 (Bankr. W.D.Pa.1997). The UST asserts jurisdiction has been retained by the Court under the confirmed plan to, among other things, enter orders necessary to consummate plan provisions, resolve any cases or controversies regarding consummation, interpretation or enforcement of plan provisions, determine other matters which may arise in connection with or relating to the plan and oversee the Liquidation Trust, Liquidation Trustee and Trust Assets.
In re Gryphon, in which the bankruptcy court concluded that jurisdiction was limited to enforcing provisions of confirmed plans and that the court lacks jurisdiction when post-confirmation fees are not addressed in the plan, has been reversed. See United States Trustee v. Gryphon at the Stone Mansion, Inc., 216 B.R. 764, 766 (W.D.Pa.1997). The district court analyzed jurisdiction based upon whether payment of post-confirmation *405 fees is related to a bankruptcy case. Gryphon, 216 B.R. at 768-69. Since the collection of post-confirmation fees would
directly affect the distribution of funds under the plan of reorganization [and] an action by the United States Trustee seeking to collect quarterly fees will affect creditors' recovery if the United States Trustee is successful, the matter is sufficiently `related to' the bankruptcy case for the bankruptcy court to hear the matter.
Id. The court also stated that although jurisdiction may be retained by a plan, this alone is not dispositive of the bankruptcy court's jurisdiction. As such, "[a] retention of jurisdiction provision within a confirmed plan does not grant a bankruptcy court jurisdiction [citations omitted]. Similarly, the absence of a provision retaining jurisdiction in a confirmed plan does not deprive a bankruptcy court of jurisdiction." Id.
This Court, adopting the district court's holding in Gryphon, concludes that payment of post-confirmation fees is related to the bankruptcy case. Despite no specific provision in the confirmed plan regarding the retention of jurisdiction, we conclude that the absence of such provision does not preclude this Court's jurisdiction. The Court has jurisdiction to decide the matter regarding the UST's motion for payment of post-confirmation quarterly fees.
The Liquidation Trustee argues, relying upon In re Uncle Bud's Inc., 206 B.R. 889 (Bankr.M.D.Tenn.1997), that because payment of post-confirmation quarterly fees was not addressed in either the plan or the Liquidation Trust, the Trust is not responsible for paying the fees. The In re Uncle Bud's court decided that once a plan is confirmed, the United States Trustee is bound by the provisions contained therein. If no provisions are made regarding payment of post-confirmation quarterly fees in plans with effective dates prior to the 1996 amendment of 28 U.S.C. § 1930(a)(6), "whatever is decided in the confirmed plan is the law of the case[,]" and therefore post-confirmation fees will not be imposed. In re Uncle Bud's, 206 B.R. at 902. The primary reason given by the court was since the United States Trustee and debtors are free to negotiate the terms of a plan, including the payment of post-confirmation fees, the plan, as negotiated, whether it contains such a provision or not, is enforceable. Id.
This Court is reluctant to adopt the In re Uncle Bud's decision since plans confirmed prior to the 1996 amendment of 28 U.S.C. § 1930(a)(6) could not contemplate a congressional act changing the structure of post-confirmation quarterly fee payments. Rather, the Court relies upon In re A.H. Robins Co., Inc., 219 B.R. 145 (Bankr. E.D.Va.1998). In disagreement with In re Uncle Bud's, the In re A.H. Robins' court found "it ludicrous that some courts would allow the payment of UST fees only if the debtor's plan provided for such payments." In re A.H. Robins Co., Inc., 219 B.R. at 148. Debtors' plan in the present case was confirmed on September 28, 1995, well before the amendment was enacted. The In re A.H. Robins' court determined post-confirmation quarterly fees are "an `administrative expense attendant to an open case,' . . . and such fees are no different from taxes arising post confirmation, or any similar post-confirmation expenses not specified in the plan." Id. (citations omitted). This Court agrees and concludes that despite omission from the plan or provisions of the Liquidation Trust, the Trust is responsible for post-confirmation quarterly fee payments to the UST.
The Liquidation Trustee also asserts, under a strict reading of 28 U.S.C. § 1930(a)(6), that the party which commences a case is the one responsible for payment of post-confirmation quarterly fees and pursuing a claim for such fees can be enforced only directly against the debtor, not the confirmed plan. The Court disagrees and concludes that the Liquidation Trust is responsible for payment of post-confirmation fees. The Liquidation Trustee relied upon In re Lancy, 208 B.R. 481 (Bankr.D.Ariz.1997) and In re Gryphon at the Stone Mansion, Inc., 204 B.R. 460 (Bankr.W.D.Pa.1997) for the proposition that a claim for post-confirmation fees must be pursued directly against Debtors. As stated in In re Lancy, regarding the issue of which entity is responsible for payment, "Gryphon avoided that quagmire . . . [and] simply held `the United States Trustee has no remedy in *406 the bankruptcy court for fees sought . . . [c]reditors whose claims arise post-confirmation must pursue redress in other forums.'" In re Lancy, 208 B.R. at 487 (quoting In re Gryphon, 204 B.R. at 469). This Court rejects the Liquidation Trustee's argument particularly in light of the district court's reversal of In re Gryphon and holding that post-confirmation fee issues are matters within the jurisdiction of the bankruptcy courts.
The Liquidation Trustee also argues that since the Liquidation Trust is not the party which commenced the bankruptcy case, it is not responsible for payment of post-confirmation quarterly fees. This issue was addressed in In re Home Centers, Inc., wherein the court found that based upon the language of the trust and the plan, the trust was essentially a "liquidating and disbursing agent for the Debtor, and would have to pay the fees if they applied to the Debtor." In re Home Centers, Inc., Case No. 92-50618, at 6 (Bankr.N.D.Ohio July 8, 1997). The trust language relied upon by the court to impose responsibility for the quarterly fees was that the trustee "will pay all costs and expenses of administering the Trust and the Plan . . . and agrees to undertake obligations created hereunder, including the obligation to make distributions required by the plan." Id. Other courts have held that the party responsible for payment of post-confirmation fees need not be the original debtor. See In re Corporate Business Prods., Inc., 209 B.R. 951 (Bankr.C.D.Cal.1997). A liquidation trust will also be treated as a debtor if so provided in the trust provisions and will therefore be responsible for any fees which may be applicable to the debtor. See United States v. Hudson Oil Co., Inc. (In re Hudson Oil Co., Inc.), 210 B.R. 380, 384 n. 3 (D.Kan. 1997) (quoting In re Hudson Oil Co., Inc., 200 B.R. 52, 53 (Bankr.D.Kan.1996)) (although bankruptcy decision was reversed, issue regarding liquidation trust's liability for payment of post-confirmation fees was not disturbed as no timely appeal was made on that issue).
In the case presently before the Court, according to the plan, the Liquidation Trust is the "successor in interest to and representative of the Estate . . . [and] the Liquidation Trust shall pay the charges incurred on or after the Effective Date for disbursements, expenses or related support services without application to the Bankruptcy Court,. . . ." (Second Amended Joint Plan of Reorganization of CSC Industries, Inc. and Copperweld Steel Company, Art. V ¶ B.3.a.). It would appear that the Liquidation Trust has stepped into the shoes of Debtors as successor in interest. Based on the language requiring the Trust to pay all charges incurred after the effective date for expenses, disbursements and related services, the Court finds that the Liquidation Trustee is responsible for payment of post-confirmation quarterly fees.
The Court finally concludes that requiring the Liquidation Trust to pay post-confirmation quarterly fees to the UST is neither an impermissible modification to the plan nor a violation of the "separation of powers" doctrine, as argued by the Liquidation Trustee. Courts have found that requiring payment of post-confirmation quarterly fees does not amount to a modification of the plan, "but rather is an administrative expense attendant to an open case." In re McLean Square Assocs., G.P., 201 B.R. 436, 441 (Bankr.E.D.Va.1996). See also In re Maruko, Inc., 219 B.R. 567, 570 (S.D.Cal. 1998) (quarterly fee payment is administrative expense); United States Trustee v. CF&I Fabricators of Utah (In re CF&I Fabricators of Utah), 214 B.R. 16 (D.Utah 1997) (quarterly fees are administrative expenses necessary to an open case). Rather than an attempt by the UST to modify an already confirmed plan, a motion for quarterly fees is merely "seeking to collect a post-confirmation obligation of the debtor." In re CF & I, 214 B.R. at 19. The imposition of post-confirmation quarterly fees is also not a violation of the Constitution's separation of powers doctrine, as asserted by the Liquidation Trustee. See Id. at 20; In re Hudson Oil Co., Inc., 210 B.R. at 385. As stated by the In re CF & I court, "[section] 1930(a)(6), as *407 amended, does not constitute an impermissible usurpation of the federal courts' exclusive power to decide cases." In re CF & I, 214 B.R. at 20. The Court therefore finds that imposing post-confirmation quarterly fees upon the Liquidation Trust is neither an attempt to modify the plan nor a violation of separation of powers, but instead such fees are to be considered an administrative expense for which the Liquidation Trust is responsible.
CONCLUSION
Based on the foregoing, the UST's motion to convert or dismiss the confirmed Chapter 11 case of Debtors or, in the alternative, to compel payment of post-confirmation quarterly fees pursuant to 28 U.S.C. § 1930(a)(6) is overruled in as much as the Court will neither dismiss nor convert Debtors' Chapter 11 case. The motion is sustained with regard to payment of post-confirmation fees by the Liquidation Trust. This Court directs the Liquidation Trustee to remit payment of the post-confirmation quarterly fees to the UST accumulated from and after January 27, 1996 to present and continue to remit such payments until Debtors' Chapter 11 case is converted or dismissed, the case is closed or the payments under the plan are completed, whichever occurs first.
An appropriate order shall enter.
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826 F. Supp. 632 (1993)
Thomas VERONE, Plaintiff,
v.
TACONIC TELEPHONE CORP. and Local Union No. 166, Int'l Brotherhood of Electrical Workers, Defendants.
No. 90-CV-641.
United States District Court, N.D. New York.
July 12, 1993.
*633 Thomas A. Verone, pro se.
Paul A. Moore, Rhinebeck, NY, former counsel, for plaintiff.
Ogletree, Deakins, Nash, Smoak & Stewart, Albany, NY (Franklin H. Goldberg, Peter H. Kiefer, of counsel), for defendants.
ORDER
McAVOY, Chief Judge.
Upon the terms of this court's Order in the above captioned case, signed June 5, 1993 (attached), and upon the July 7, 1993 letter of Thomas A. Verone attesting to Paul A. Moore's noncompliance therewith (attached), it is hereby
ORDERED that the United States Marshal for the Northern District of New York shall arrest Paul A. Moore and shall hold him in confinement until such time as Paul A. Moore pays to Thomas A. Verone $6,980.00 and thereby purges himself of his contempt.
IT IS SO ORDERED.
ORDER
McAVOY, Chief Justice.
Plaintiff comes before this court a frustrated man. After bringing a civil action against his employer and having it dismissed as frivolous with sanctions imposed upon himself and his attorney pursuant to Fed.R.Civ.P. 11, plaintiff finds himself in the precarious position of satisfying the entirety of the sanction award. See Order 9/24/92 (amending Order, 11/27/91). He now seeks to have the undersigned judge recuse himself and, apparently in the alternative, to have the court hold his attorney, Paul Moore, in contempt. For the reasons discussed, I find no reason to recuse myself but do find sufficient basis to hold Mr. Moore in contempt.
I. Background
The road to this point is a winding one and there is no need to re-travel it all. Suffice it to say that after assessing Rule 11 sanctions jointly and severally against the plaintiff and his attorney, and after a motion by defendant for contempt when neither Verone nor his attorney (Moore) attempted to satisfy the sanction award, the court Ordered that Verone was to pay to the defendant $400 dollars per month and that his attorney was to pay to the defendant $500 per month until such time as the then-$9,800 sanction was satisfied. Through an apparently voluntary agreement, Verone agreed to have the $400 per month garnished from his wages by the defendant. However, because the sanction was assessed jointly and severally against both Verone and his attorney, the defendant was able to continue deducting Verone's pay until such time as the whole sanction was satisfied.
When Verone realized that Moore was failing in his obligation under the court's 9/24/92 Order (thus leaving Verone to satisfy the entire sanction himself), Verone brought a contempt motion against Moore. In an Order dated 10/23/93, the court found Moore in further contempt and ordered him to pay $5,480.00[1] to Verone within thirty days or be arrested and confined by the United States Marshal until such time as the contempt order was satisfied. However, the October 23, 1993 Order also contained a clause allowing Moore to show good cause why he could not obey the requirements of that Order. Upon this clause, Moore conferred with the court and demonstrated that good cause prevented *634 him from satisfying the terms of the Order namely, that his wife was in treatment for a life threatening illness and that his law practice was in financial straits. In lieu of compliance, Moore offered to enter into a payment plan whereby he pay $500 per month directly to Verone until he satisfied his $5,480.00 debt. Over Verone's objections, the court agreed to such a payment plan but also ordered Moore to pay an additional $500 for each month that he failed to timely remit payment to Verone.
As of the date this motion, Verone attests that Moore has failed to remit payments for the months of February, March, and April of 1993. Moore has submitted no opposition to the instant motion.
II. Discussion
A. Recusal
As too often happens, Verone seeks recusal simply because the rulings in this matter have not been in his favor. He complains that the rulings in this case, especially the court's decision to forgo arrest of Moore in lieu of a monthly payment plan, evidences the court's "prejudice." Surely, through the subjective eye of the unsuccessful litigant, it is difficult to see what is and is not "justice." But the court must remain the final arbiter of this decision and, even when one party disagrees, it must abide by those convictions which objectively serve the interests of justice. Mr. Verone has presented this court with no reason or basis for recusal other than his own subjective displeasure with the rulings in the case. The court assumes that Verone proceeds under 28 U.S.C. §§ 144[2], 455(a) & (b)(1) and the court provides the following in support of its conclusion to deny the motion for recusal.
"In deciding whether to recuse himself, the trial judge must carefully weigh the policy of promoting public confidence in the judiciary against the possibility that those questioning his impartiality might be seeking to avoid the adverse consequences of his presiding over the case. Litigants are entitled to an unbiased judge; not to a judge of their choosing." In re Drexel Burnham Lambert, Inc., 861 F.2d 1307, 1312 (2d Cir.1988), cert. denied, 490 U.S. 1102, 109 S. Ct. 2458, 104 L. Ed. 2d 1012 (1989) (citation omitted); see also United States v. Lovaglia, 954 F.2d 811, 815 (2d Cir.1992); United States v. Terry, 802 F. Supp. 1094 (S.D.N.Y.1992). For this reason, "[a] judge is as much obliged not to recuse himself when it is not called for as he is obliged to when it is." In re Drexel Burnham Lambert, Inc., 861 F.2d at 1312.
"It is well-established that under [28 U.S.C. §§ 455(b)(1) & 144], which employ the same analysis in establishing whether personal bias or prejudice exists, [the court] `looks to extrajudicial conduct as the basis for making such a determination, not conduct which arises in a judicial context.'" Terry, 802 F.Supp. at 1097-98 (quoting Apple v. Jewish Hospital and Medical Center, 829 F.2d 326, 333 (2d Cir.1987)); see also United States v. Grinnell Corp., 384 U.S. 563, 583, 86 S. Ct. 1698, 1710, 16 L. Ed. 2d 778 (1966) (under § 144, "the alleged bias and prejudice to be disqualifying must stem from an extrajudicial source and result in an opinion on the merits on some basis other than what the judge has learned from his participation in the case.")
"The substantive standard for recusal [under §§ 144 & 455(b)(1) ] is whether a reasonable person, knowing all the facts, would conclude that the court's impartiality might reasonably be questioned." Terry, 802 F.Supp. at 1097-98 (quoting Apple v. Jewish Hospital and Medical Center, 829 F.2d at 333. The standard under § 455(a) is "whether an objective, disinterested observer fully informed of the facts underlying the grounds on which recusal was sought would entertain a significant doubt that justice would be done in the case." De Luca v. Long Island Lighting Co., 862 F.2d 427, 429 (2d Cir.1988) ((quoting Pepsico, Inc. v. McMillen, 764 F.2d 458, 460 (7th Cir.1985)); see also McCann v. Communications Design Corp., 775 F. Supp. 1506, 1523 (D.Conn.1991) (The standard under § 455(a) is "whether a reasonable person, knowing and understanding all the relevant facts, would conclude that the judge's impartiality might reasonably be questioned.").
*635 The court finds here that no such conditions exist to warrant recusal. Unfavorable rulings do not in and of themselves indicate a "personal bias or prejudice concerning a party" such to justify disqualification (see 28 U.S.C. § 455(b)(1); see also, 28 U.S.C. § 144) nor do such rulings create an appearance of impropriety. See 28 U.S.C. § 455(a). The rulings in this case best served the interest of justice as judged from an objective, disinterested standpoint. Mr. Verone's subjective feelings are of no moment. Consequently, defendant's motion for recusal is denied.
B. Contempt
"A court's inherent power to hold a party in civil contempt may be exercised only when (1) the order the party allegedly failed to comply with is clear and unambiguous, (2) the proof of noncompliance is clear and convincing, and (3) the party has not diligently attempted in a reasonable manner to comply." New York State NOW v. Terry, 886 F.2d 1339, 1351 (2d Cir.1989). In the instant case, there can be no doubt that the terms of the court's December 29, 1992 Order are clear and unambiguous. The proof of noncompliance is taken from Verone's signed affidavit and the alleged contemnor has submitted no opposition to the allegations contained therein. And finally, there is no evidence that the contemptuous party has made a diligent attempt to comply. That being the case, a further finding of contempt against Moore is warranted.
Contempt sanctions may serve two purposes. "A civil contempt sanction may ... serve either to coerce the contemnor into future compliance with the court's order or to compensate the complainant for losses resulting from the contemnor's past noncompliance." Id at 1352 (citing United States v. United Mine Workers, 330 U.S. 258, 303-04, 67 S. Ct. 677, 701-02, 91 L. Ed. 884 (1947)).
In the instant case, the contempt sanction must serve both functions. To compensate Verone for his losses, the court finds that Moore must pay Verone the entire amount previously owed namely, $5,480.00, plus Moore must pay to Verone the sanctions awarded by the December 29, 1993 Order for non-payment namely $500 per month for three months, or $1,500. Thus, Moore must pay to Verone $6,980.00.
The court also finds that coercive sanctions are warranted. "When imposing coercive sanctions, a court should consider (1) the character and magnitude of the harm threatened by the continued contumacy, (2) the probable effectiveness of the sanction in bringing about compliance, and (3) the contemnor's financial resources and the consequent seriousness of the sanction's burden." Terry, 886 F.2d at 1353.
The character and magnitude of the harm threatened by the continued contumacy is measured by the harm which the federal court will suffer from the willful and unabated disobedience of a court order by a member of the bar. To protect the integrity of the court, it is clear that the terms of the court's previous orders must be upheld.
While the December 29, 1993 Order required only monthly payments, it was clear from the body of that Order that such a device was being used in lieu of arrest. The court once again determines that arrest is warranted if Moore does not satisfy the totality of the sanction within thirty days. From the past experience of this case, it is clear that Moore finds it unnecessary to comply with payment schedules arranged for his benefit. In response to two Orders from this court, Moore has made nothing more than veiled attempts at compliance. Thus, only the threat of conditional arrest appears probably effective to bring about compliance.
And finally, Moore's failure to respond to this motion cannot be used to his benefit with regard to either the "contemnor's financial resources [or] the consequent seriousness of the sanction's burden."
That being the situation, the court finds that Moore must satisfy the full extent of his debt to Verone within thirty (30) days or to be placed under arrest and held until such time as he so satisfies this debt.
III. Conclusion
For the reasons discussed above, it is hereby
*636 ORDERED that plaintiff's motion for recusal is denied; and it is further
ORDERED that Paul A. Moore shall pay to Thomas A. Verone, within thirty days from the execution of this order, $6,980.00; and it is further
ORDERED that if Paul A. Moore fails to make such payment within thirty days, upon adequate proof of noncompliance by the complainant Thomas A. Verone, the United States Marshal for the Northern District of New York shall arrest Mr. Moore and hold him in confinement until such time as he satisfies the dictates of this order.
IT IS SO ORDERED.
Dated at Binghamton, New York
June 5, 1993
JULY 7, 1993
THOMAS A. VERONE
6 LAWRENCE ROAD
HYDE PARK, N.Y. 12538
U.S. DISTRICT COURT
NORTHERN DISTRICT OF NEW YORK
OFFICE OF THE CLERK
15 HENRY STREET
BINGHAMTON, N.Y. 13901
90-CV-641
Filed July 9, 1993
U.S. DISTRICT COURT:
MR. PAUL MOORE HAS NOT COMPLIED WITH THE COURT ORDER OF JUDGE'S MCAVOY OF JUNE 5, 1993. I HAVE NOT HEARD FROM MR. PAUL MOORE NOR HAVE I RECEIVED ANY MONIES FROM MR. PAUL MOORE. I EXPECT TO HEAR THAT MR. PAUL MOORE HAS BEEN ARRESTED AND HELD IN CONFINEMENT PER THE COURT ORDER.
/s/ Thomas A. Verone
THOMAS A. VERONE
_________________
DATED JULY 7, 1993
NOTES
[1] This amount represented his pro rata share of the sanction award plus an additional contempt sanction of $1,000 for his noncompliance with the court's 10/23/93 Order.
[2] Mr. Verone's affidavit is arguably defective under the requirements of 28 U.S.C. § 144. It states neither the "the facts and reasons for the belief that bias or prejudice exists" nor was it accompanied by a certificate of good faith.
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715 S.W.2d 387 (1986)
Martha Dayle WETZEL, Appellant,
v.
John William and Frances WETZEL, Appellees.
No. 05-86-00040-CV.
Court of Appeals of Texas, Dallas.
July 11, 1986.
*388 Garland D. Cardwell, Sherman, for appellant.
Jim Dunn, Sherman, for appellees.
Before AKIN, DEVANY and HOWELL, JJ.
DEVANY, Justice.
This case concerns the involuntary termination of the parent-child relationship between Martha Dayle Wetzel and her three children. The genesis of this case occurred when Martha Wetzel brought suit for contempt and for modification against her ex-husband, John Wetzel, alleging that he was not allowing her access to the children as required by the divorce decree of the parties dated June 24, 1982. John Wetzel answered this suit and, in addition, he and his present wife, Frances Wetzel, brought suit for termination of Martha Wetzel's parental rights and for adoption of the children. After a non-jury trial, the court denied all relief sought by Martha Wetzel and terminated Martha Wetzel's parental rights. In Martha Wetzel's four grounds of error, she contends the evidence is insufficient to support termination of her parental rights. We agree consequently, we reverse in part the judgment of the trial court.
The natural right existing between parents and their children is of constitutional dimensions, and, therefore, involuntary termination of parental rights involves fundamental constitutional rights. Santosky v. Kramer, 455 U.S. 745, 753, 102 S. Ct. 1388, 1394, 71 L. Ed. 2d 599 (1982); Stanley v. Illinois, 405 U.S. 645, 651, 92 S. Ct. 1208, 1212, 31 L. Ed. 2d 551 (1972); Holick v. Smith, 685 S.W.2d 18, 20 (Tex. 1985). Because fundamental constitutional *389 rights are involved, the evidence in support of termination must be clear and convincing before a court may involuntarily terminate a parent's rights. Santosky, 455 U.S. at 769, 102 S.Ct. at 1403; Holick, 685 S.W.2d at 20; Richardson v. Green, 677 S.W.2d 497, 500 (Tex.1984). By clear and convincing evidence, we mean that measure or degree of proof which will produce in the mind of the trier of fact a firm belief or conviction as to the truth of the allegations sought to be established. In re G.M., 596 S.W.2d 846, 847 (Tex.1980); In re McElheney, 705 S.W.2d 161, 164 (Tex.App.-Texarkana 1985, no writ). It is the duty of the appellate court in reviewing the evidence to determine, not whether the trier of fact could reasonably conclude that the existence of a fact is more probable than not, as in ordinary civil cases, but whether the trier of fact could reasonably conclude that the existence of the fact is highly probable. Neiswander v. Bailey, 645 S.W.2d 835, 836 (Tex.App.-Dallas 1982, no writ).
Before parental rights may be terminated, there must be a finding of specific conduct under section 15.02 of the Code[1] as well as a finding that termination is in the best interest of the child. Richardson v. Green, 677 S.W.2d at 499; Wiley v. Sprat-Ian, 543 S.W.2d 349, 351 (Tex.1976). A judgment terminating a parent-child relationship under section 15.02 cannot be based solely upon the trial court's determination of what would be in the best interest of the child. Holley v. Adams, 544 S.W.2d 367, 370 (Tex.1976); Chesser v. Texas Department of Human Resources, 595 S.W.2d 615, 617 (Tex.Civ.App.-Corpus Christi 1980, no writ).
As to making a determination of whether termination is in the best interest of the child, the fact finder may consider a number of factors, including, but not limited to: (A) the desires of the child; (B) the emotional and physical needs of the child now and in the future; (C) the emotional and physical danger to the child now and in the future; (D) the parental abilities of the individuals seeking custody; (E) the programs available to assist in promoting the best interest of the child; (F) the plans for the child by the individuals or agencies seeking custody; (G) the stability of the home or proposed placement; (H) the acts or omissions of the parent which may indicate that the existing parent-child relationship is not a proper one; and (I) any excuse for the acts or omissions of the parent. Holley, 544 S.W.2d at 371-72; McGuire v. Brown, 580 S.W.2d 425, 429 (Tex.Civ.App. -Austin 1979, writ ref'd n.r.e.).
The bases for termination asserted by John and Frances Wetzel, and found to be true by the trial court, were the following portions of section 15.02 of the Code: § 15.02. Involuntary Termination of Parental Rights.
A petition requesting termination of the parent-child relationship with respect to a parent who is not the petitioner may be granted if the court finds that:
(1) the parent has:
* * * * * *
(C) voluntarily left the child alone or in the possession of another without providing adequate support of the child and remained away for a period of at least six months;....
* * * * * *
(E) engaged in conduct or knowingly placed the child with persons who engaged in conduct which endangers the physical or emotional well-being of the child,....
(F) failed to support the child in accordance with his ability during a period of one year ending within six months of the date of the filing of the petition,....
* * * * * *
(2) termination is in the best interest of the child.
As to the finding that Martha Wetzel voluntarily left her children without *390 providing adequate support and remained away at least six months, the record reflects that the original divorce decree provided that custody of the children was awarded to John Wetzel, the person with whom she left the children, and that Martha was not required to contribute to the support of the children. Martha lived in various places but kept in periodic contact with her children and purchased items of clothes and other necessities for the children. Section 15.02(1)(C) requires only that she arrange for the adequate support of her children, not that she personally support her children. Holick, 685 S.W.2d at 21. Furthermore, it can hardly be contended that compliance with a court order may constitute grounds for termination of parental rights. John and Frances Wetzel are providing adequate support for the children. The record before us fails to show sufficient evidence for termination under section 15.02(1)(C). Holick, 685 S.W.2d at 21; Thomson v. Meaux, 429 S.W.2d 668, 669 (Tex.Civ.App.-Amarillo 1968, no writ).
Next, we address the finding that Martha Wetzel engaged in conduct, or knowingly placed the children with persons who engaged in conduct, which endangered the physical or emotional well-being of the children. The record reflects that, for a time preceding the divorce and for a short time thereafter, Martha Wetzel suffered from mental disorders and that during this time she physically abused the children. The evidence reflects that her mental problems have been cured, and there is no evidence that she now abuses the children or might do so in the future. The record reflects evidence that she loves and cares for the children and that, other than the period of time when she was suffering from a mental disorder, she has not continued to abuse her children. There is no evidence that she ever placed the children with persons who endangered the physical or emotional well-being of the children.
We are faced with the question of whether acts done which were at one time sufficient to support termination can still be sufficient to support termination at a proceeding brought four years later. While this question has never been directly addressed by our courts, this court faced a somewhat similar situation in Carter v. Dallas County Child Welfare Unit, 532 S.W.2d 140 (Tex.Civ.App.-Dallas 1975, no writ). In Carter, the mother was diagnosed as a paranoid schizophrenic. Because of her condition, she physically abused her children, failed to feed them regularly, and did not take them to school. The Dallas County Child Welfare Unit brought suit to terminate her parental rights. The mother argued that the evidence was insufficient to support termination because the conduct complained of occurred in the distant past[2] and that she no longer presented a present danger to the children. The court rejected this argument because the evidence in that case, as distinguished from the present case, showed that the mother's schizophrenic condition was likely to manifest itself again and that, in all reasonable medical probability, she would never be completely cured of her illness. There was also expert testimony that the children would not be safe in the presence of their mother and that it was likely that they would be physically and mentally endangered if they remained with her. Unlike Carter, in the present case, Martha Wetzel appears to be cured of her disorder and there is no evidence that she poses a present or future danger to her children.
We note that in child custody cases, although at some time in the distant past a parent was guilty of child neglect or misconduct, he will not be deprived of custody where there is nothing to show that he is not presently a fit and capable parent. Guillott v. Gentle, 467 S.W.2d 521, 524 (Tex.Civ.App.-Eastland 1971, writ ref'd n.r.e.); De Fur v. Speers, 369 S.W.2d 850, 852-53 (Tex.Civ.App.-Dallas 1963, no *391 writ); Pettit v. Engelking, 260 S.W.2d 613, 619 (Tex.Civ.App.-San Antonio 1953, writ ref'd n.r.e.). Suits for conservatorship, possession, and support have different purposes than termination cases. Decrees in those cases may be modified or changed, but the parents continue to enjoy their parental rights. By contrast, a termination decree is complete, final, irrevocable and divests for all time a parent and child of all legal rights, privileges, duties, and powers with respect to each other save the child's right to inherit. It is these differences that demand that termination cases be proved by clear and convincing evidence, as opposed to a mere preponderance of the evidence needed for other suits under the Family Code. These differences are the reason courts should proceed with great caution and scrutiny in termination cases.
Therefore, in a termination suit, acts done in the distant past, without showing a present or future danger to a child, cannot be sufficient to terminate parental rights. This reasoning is reflected in our supreme court's interpretation of the statute which preceded section 15.02 where it said, "These provisions do not contemplate that an adjudication may be based solely upon conditions which existed in the distant past but no longer exist." Hendricks v. Curry, 401 S.W.2d 796, 800 (Tex.1966); see also Johnson v. Jefferson County Child Welfare Unit, 557 S.W.2d 569, 571 (Tex. Civ.App.-Beaumont 1977, no writ); Adams v. Herd, 526 S.W.2d 295, 297 (Tex.Civ. App.-Waco 1975, no writ). We hold, therefore, that misconduct toward a child in the distant past, standing alone, is insufficient to support the termination of parental rights.
Lastly, we examine the finding that Martha Wetzel failed to support the children in accordance with her ability during a period of one year ending within six months of the date John and Frances Wetzel filed their petition for termination. Martha Wetzel worked only sporadically following the divorce; during some of the time she was employed, she made only minimum wages. Martha was not ordered to pay any child support in the divorce decree. Although Martha did not, and was not required to, provide adequate support for her children, she did buy them clothing and gifts upon occasions when she could afford to do so. The evidence in the record is not sufficient to support termination under section 15.02(1)(F). See Holley, 544 S.W.2d at 372; In re Jones, 566 S.W.2d 702, at 705-706 (Tex.Civ.App.-Tyler 1978, writ ref'd n.r.e.).
Because the evidence is insufficient under the facts before us to support termination, we reverse in part the judgment of the trial court terminating Martha Wetzel's parental rights and render judgment that John and Frances Wetzel take nothing by their suit for termination of parental rights and for adoption.
NOTES
[1] Unless otherwise specified, all references are to the TEX.FAM.CODE ANN. § 15.02 (Vernon Supp.1986).
[2] The last incident took place two years prior to the suit but all of Carter's visits with her children since then were closely supervised.
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826 F. Supp. 776 (1993)
LCA LEASING CORP., Plaintiff,
v.
BORVIG CORP. and Gary Schulz, Defendant.
No. 91 Civ. 5545 (JES).
United States District Court, S.D. New York.
July 26, 1993.
*777 Corwin & Solomon, P.C. (Donna Gerber, of counsel), New York City, for plaintiff.
Robert W. Fink, Goshen, NY, for defendant.
MEMORANDUM OPINION AND ORDER
SPRIZZO, District Judge.
This is a diversity action for breach of an agreement to lease two buses. For the reasons that follow, plaintiff's motion for summary judgment against defendants Borvig Corp. and Gary Schulz is granted.
BACKGROUND
Plaintiff LCA Leasing Corp., and its predecessor LSA Leasing Corp. ("LCA" or "LSA")[1], is in the business of, among other things, leasing equipment. Aff. of James J. Ragan dated September 1992 ("Ragan Sept. Aff.") ¶ 5. Defendant Gary Schulz ("Schulz") is President of defendant Borvig Corp. ("Borvig") and non-party Berthoud Pass Ski Corp. ("Berthoud"). Aff. of Gary Schulz dated January 19, 1993 ("Schulz Aff.") ¶ 1. On or about November 31, 1989, LSA agreed to lease two Champion Challenger Model 3241 passenger buses (the "buses") to Borvig and Berthoud (the 1989 lease). Schulz Aff. ¶ 2. On or about April 1, 1990, Borvig and Berthoud defaulted on the 1989 lease. Ragan Sept. Aff. ¶ 10. LSA repossessed the buses on or about June of 1990. Schulz Aff. ¶ 2.
By letter dated November 16, 1990, LSA offered Berthoud, Borvig and Schulz, inter alia, a new lease on the buses. Ragan Dec. Aff. ¶ 12. The letter detailed a monthly payment schedule for a term of sixty-five (65) months:
"Option 2, we will offer you a new lease on these buses structured as follows. The lease would start, 1 December, 1990 and run for 65 months and would entail an initial 1 December, payment of $2,800 followed by 6 monthly payments at $2,800, then 5 payments at $200. In the second through the fifth years, there are in each year seven payments of $3,705.17 followed by five payments of $200. Payments 61 to 65 are $3,705.17 each."
Ragan Dec. Aff. Ex. 1.
Borvig, Berthoud and Schulz accepted LCA's offer by typing onto the bottom of the second page of LCA's letter:
"Option number 2 is hereby agreed to and accepted this 23rd day of November, 1990.
Berthoud Pass Ski Corp. By: Gary Schulz Title: President
Borvig Corporation By: Gary Schulz Title: Chairman/CEO
Gary Schulz Gary Schulz"
Id.
On or about the same date, November 23, 1990, Borvig and Berthoud signed LCA's standard lease form which contained additional *778 terms (the "1990 Lease"). Ragan Dec. Aff. ¶ 13. On or about November 30, 1993, Schulz signed LCA's standard guaranty form in which Schulz promised to pay all sums due under the 1990 Lease upon the default of Borvig or Berthoud. Id. In or about December, 1990, the lessees made a payment of $2,800.00 Schulz Aff. Ex. B. Neither Borvig, Berthoud nor Schulz made any other payment on the lease. Ragan Dec. Aff. ¶ 14.
On or about July 17, 1991, the United States Bankruptcy Court for the District of Colorado granted Berthoud an order authorizing it to reject the unexpired portion of the 1990 lease and to continue in operation as a debtor-in-possession under Chapter 11 of the United States Bankruptcy Code. Id. ¶ 3, 15. LCA commenced this action against Borvig and Schulz by filing a complaint on August 16, 1991. On December 4, 1992, LCA filed an amended complaint. LCA now moves for summary judgment against both Borvig and Schulz.
DISCUSSION
Summary judgment may be granted only where "there is no genuine issue as to any material fact" and a party is "entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). On a motion for summary judgment, this Court is not to weigh evidence and make credibility findings, but rather to determine whether or not there exists a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S. Ct. 2505, 2510, 91 L. Ed. 2d 202 (1986). The standard for granting summary judgment "mirrors the standard for a directed verdict under Federal Rules of Civil Procedure 50(a), which is that the trial judge must direct a verdict if, under the governing law, there can be but one reasonable conclusion as to the verdict." Id. at 250, 106 S.Ct. at 2511. In this case, summary judgment against both Borvig and Schulz is appropriate because there is no issue as to any material fact and, after drawing all reasonable inferences in Borvig's and Schulz's favor, no reasonable trier of fact could find in favor of either defendant.
I. Summary Judgment Against Defendant Borvig Corp.
LCA has established a prima facie case against Borvig by showing that Borvig entered into the 1990 Lease with the signature of its President, Gary Schulz, Pimpinello v. Swift & Co., 253 N.Y. 159, 162-63, 170 N.E. 530 (1930), and that Borvig breached the lease by failing to make any monthly rent payments after December 1990, Plaintiff's Rule 3(g) Statement dated December 18, 1992, ¶ 8. In its answer to the amended complaint, Borvig admitted signing LCA's standard form lease agreement, see Answer to the First Amended Complaint, and failed to raise any defense to LCA's claim against Borvig based on the alleged breach of the 1990 lease. See id. Moreover, Borvig does not dispute that "[t]he lessees made a payment of $2,800.00 in December, 1990 and no payments thereafter." Defendants' Local Civil Rule 3(g) Statement dated August 24, 1992. It follows that LCA is entitled to summary judgment against Borvig as a matter of law.
II. Summary Judgment Against Defendant Gary Schulz
LCA argues that defendant Schulz is personally liable for overdue lease payments both under LCA's November 16, 1990 letter endorsed by Schulz on November 23, 1990, and, as a guarantor of Borvig and Berthoud, under the guaranty form executed by Schulz on November 30, 1990.
There can be no question that, under New York law,[2] the November 16, 1990 letter containing *779 both LCA's offer of a new lease and Schulz's acceptance thereof established a legally binding agreement, as a matter of law. See, e.g., Pharmaceutical Horizons v. Sterling Drug, 127 A.D.2d 514, 512 N.Y.S.2d 30, mot. for lv. dismd., 69 N.Y.2d 984, 516 N.Y.S.2d 1027, 509 N.E.2d 362 (1987); Levin v. Hoffman Fuel Co., 94 A.D.2d 640, 462 N.Y.S.2d 195, aff'd, 60 N.Y.2d 665, 468 N.Y.S.2d 104, 455 N.E.2d 663 (1983). The November 16, 1990 letter unambiguously offered to lease the buses to Berthoud, Borvig and Schulz. Berthoud, Borvig and Schulz explicitly accepted LCA's offer by typing onto the letter words of acceptance, followed by one signature for each offeree. Moreover, the offer and acceptance were supported by consideration, see Liberty Nat'l Bank & Trust Co. v. General Motors Acceptance Corp., 85 A.D.2d 889, 446 N.Y.S.2d 758 (1981), and there is no language in the letter that conditions either the offer or the acceptance.
Nor can there be any question that the intention of the parties was that Schulz himself was to be bound personally and individually. The prefatory address of the November 16, 1990, letter indicates that the offer was specifically directed to each of Berthoud, Borvig and Schulz at their separate addresses, see Mencher v. Weiss, 306 N.Y. 1, 6, 114 N.E.2d 177 (1953), and Schulz unequivocally accepted that offer in his personal capacity. See Ragan Dec. Aff. Ex. 1. Furthermore, no words in the body of the contract indicate an intention of the parties that Schulz should not be bound in his personal capacity. See id. at 5, 114 N.E.2d 177.
There is no merit to Schulz's claim that he did not subjectively intend to be personally bound by the LCA lease. Schulz Aff. ¶ 7. A party's actual or secret intent is immaterial to the formation of a contract. Mencher, 306 N.Y. at 7, 114 N.E.2d 177; Ahern v. South Buffalo Ry., 303 N.Y. 545, 560, 104 N.E.2d 898 (1952), aff'd, 344 U.S. 367, 73 S. Ct. 340, 97 L. Ed. 395 (1953); Porter v. Commercial Casualty Ins. Co., 292 N.Y. 176, 183, 54 N.E.2d 353 (1944), reh'g denied, 292 N.Y. 717, 56 N.E.2d 122 (1944). As Judge Learned Hand wrote in Hotchkiss v. National City Bank of New York, 200 F. 287 (S.D.N.Y.1911), aff'd, 231 U.S. 50, 34 S. Ct. 20, 58 L. Ed. 115 (1913):
"A contract has, strictly speaking, nothing to do with the personal, or individual, intent of the parties. A contract is an obligation attached by mere force of law to certain acts of the parties, usually words, which ordinarily accompany and represent a known intent. If, however, it were proved by twenty bishops that either party, when he used the words, intended something else than the usual meaning which the law imposes upon them, he would still be held, unless there were some mutual mistake, or something else of the sort."
Id. at 293. Therefore, since Schulz conducted himself with "words and deeds which constitute objective signs" manifesting his intent to be personally bound by the lease, R.G. Group, Inc. v. Horn & Hardart Co., 751 F.2d 69, 74 (2d Cir.1984), he is personally liable to LEA on the lease as a matter of law. See Shearson Lehman CMO, Inc. v. TCF Banking & Sav., 710 F. Supp. 67 (S.D.N.Y.1989).
Alternatively, Schulz argues that his personal liability under the letter dated November 16, 1990, was superseded in all respects by the standard form lease agreement executed by Borvig and Berthoud on November 23, 1990. This claim is likewise without merit. Under New York law, the elements of a novation, each of which must be present in order to demonstrate novation, i.e., the superseding of a previously existing contractual obligation and its replacement of a new one, are a previously valid obligation, agreement of all parties to the new contract, extinguishment of the old contract, and a valid new contract. Callanan Indus., Inc. v. Micheli Contracting Corp., 124 A.D.2d 960, 508 N.Y.S.2d 711 (1986); see also Wasserstrom v. Interstate Litho Corp., 114 A.D.2d 952, 495 N.Y.S.2d 217 (1985); Town & Country Linoleum & Carpet Co. v. Welch, 56 A.D.2d 708, 392 N.Y.S.2d 517 (1977). None of these elements are present here. The standard form lease agreement dated November 23, 1990, nowhere provides for the *780 extinguishment of the obligations created by the agreement referred to above resulting from LCA's November 16, 1990 letter. Moreover, that agreement contains no provision releasing Schulz from his personal liability under LCA's letter agreement. Indeed, even the personal guarantee dated November 30, 1990, failed to explicitly extinguish his obligation under the November 16, 1990, letter agreement. Therefore, no rational trier of fact could find a novation on these facts.[3]
CONCLUSION
For the reasons stated above, plaintiff's motion for summary judgment shall be and hereby is granted. The Clerk of the Court is directed to enter judgment for the plaintiff and to close the above-captioned action.
It is SO ORDERED.
NOTES
[1] LCA was known as LSA Leasing Corp. until January 1, 1991, on or about which date LSA Leasing Corp. changed its name to LCA Leasing Corp. Ragan Dec. Aff. ¶ 5.
[2] Under New York's "grouping of contacts" test, which renders applicable the "law of the jurisdiction which, because of its relationship or contact with the occurrence or the parties, has the greatest concern with the specific issue raised in the litigation," Hormel Int'l Corp. v. Arthur Andersen & Co., 55 A.D.2d 905, 390 N.Y.S.2d 457, 458 (1977) (quoting Babcock v. Jackson, 12 N.Y.2d 473, 240 N.Y.S.2d 743, 749, 191 N.E.2d 279, 283 (1963)), a New York court would apply its own substantive law. New York is the forum state of this action, and the defendants do not dispute LCA's allegation in the Amended Complaint that both Borvig and Schulz are domiciled in New York. See Amended Complaint ¶¶ 4, 5. Moreover, although LCA's standard lease and guaranty forms provide for the application of Kentucky law, Ragan Dec. Aff. Ex 2 at 2, LCA's letter dated November 16, 1990, setting forth the offer which Schulz accepted in his personal capacity, does not include any forum selection clause.
[3] In view of the Court's summary judgment for the plaintiff on the grounds set forth in this memorandum opinion and order, the Court need not address the issue of Schulz's liability as a guarantor against Borvig or Berthoud's default.
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528 S.W.2d 438 (1975)
STATE ex rel. GARRISON WAGNER COMPANY, Relator,
v.
Honorable George E. SCHAAF and Honorable Franklin Ferriss, Judges of the Circuit Court of St. Louis County, Missouri, Respondents.
No. 59109.
Supreme Court of Missouri, En Banc.
October 13, 1975.
*439 Smith, Hanke & Batts, St. Louis, for relator.
Robert G. Brady, Michael B. McKinnis, David S. Slavkin, St. Louis, for respondents; Bryan, Cave, McPheeters & McRoberts, St. Louis, of counsel.
HOLMAN, Judge.
This is an original proceeding in prohibition. Upon application of relator, the Missouri Court of Appeals, St. Louis District, issued a preliminary writ in prohibition. As hereinafter more fully detailed the issue involved is one of venue under the third-party practice as provided for in Rule 52.11(a), V.A.M.R. The question caused the court of appeals considerable difficulty (as it has this court) as indicated by the fact that it first adopted an opinion (with one judge dissenting) making the writ permanent and thereafter withdrew that opinion and adopted another which quashed the preliminary writ. Application to transfer pursuant to Art. V, Sec. 10, Mo.Const., V.A. M.S. was sustained and we decide the case here the same as an original proceeding filed in this court. In so doing, we utilize, without quotation marks, some portions of the opinion of the court of appeals.
On July 26, 1968, Novoson Investment Trust, Inc., hereinafter referred to as Novoson, filed suit in the Circuit Court of St. Louis County against Emerson Electric Company. In its petition, Novoson alleged that Emerson Electric had breached the terms of its lease of the premises located at 2018 Washington Avenue in the City of St. Louis, Missouri, presently occupied by relator Garrison Wagner Company for which alleged breach of the terms of the lease Novoson sought damages.
Novoson acquired the building at 2018 Washington Avenue while Emerson Electric was obligated under the terms of a lease of the premises it had entered into with Harry *440 C. Bohn, on July 26, 1943. The lease terms required Emerson Electric to maintain certain items of the buildings. While Emerson was subject to the above terms of the lease, it sublet the premises to relator Garrison Wagner Company on June 18, 1946, which sublease imposed the same or similar maintenance and repair obligations upon relator as were required of Emerson Electric. The lease and sublease both expired in July, 1963, and relator remained in the building as a tenant of Novoson.
On March 30, 1973, Emerson Electric Company filed a third-party petition seeking to join relator Garrison Wagner Company. This petition was duly served on Garrison Wagner at its office in the City of St. Louis. The basis for the third-party petition was an allegation that Garrison Wagner had entered into a sublease with Emerson Electric and now occupied the real estate in question. It was alleged that under the terms of the sublease Garrison Wagner must indemnify Emerson Electric in the event Emerson was found to be liable to Novoson for any failure to maintain the premises. Garrison Wagner appeared specially in the Circuit Court of St. Louis County and sought to quash the service and to dismiss the third-party petition for improper venue and for lack of jurisdiction. On January 4, 1974, the Honorable George E. Schaaf denied this motion. As heretofore indicated, this prohibition proceeding followed shortly thereafter.
Relator Garrison Wagner Company is a corporation organized and existing under the laws of the State of Missouri with its principal place of business in the City of St. Louis, Missouri. Emerson Electric Company is a Missouri corporation with its principal place of business in St. Louis County, Missouri.
As indicated, the issue for decision is whether the venue requirements have been met so that the Circuit Court of St. Louis County, in its discretion, may proceed to determine the issues presented in the third-party petition.
The third-party practice originated in this state as a part of the "Civil Code of Missouri" adopted in 1943. See Section 507.080.[1] The provisions of that section have now been substantially incorporated into and superceded by Rule 52.11(a) which provides, in part, as follows: "At any time after commencement of the action a defending party, as a third-party plaintiff, may cause a summons and petition to be served upon a person not a party to the action who is or may be liable to him for all or part of the plaintiff's claim against him. The third-party plaintiff need not obtain leave to make the service if he files the third-party petition not later than 10 days after he serves his original answer. Otherwise he must obtain leave on motion upon notice to all parties to the action. . . . Any party may move to strike the third-party claim, or for its severance or separate trial." It may be of interest to note that Rule 52.11(a) is the same as Federal Rule 14.
In deciding the question before us, we must also consider two venue statutes. Section 508.010 states, in part, that "Suits instituted by summons shall, except as otherwise provided by law, be brought:
"(1) When the defendant is a resident of the state, either in the county within which the defendant resides, or in the county within which the plaintiff resides, and the defendant may be found;" Section 508.040 provides that "Suits against corporations shall be commenced either in the county where the cause of action accrued, . . or in any county where such corporations shall have or usually keep an office or agent for the transaction of their usual and customary business."
Relator contends that Section 508.010 fixes the venue for the claim in question. Alternatively, however, it asserts that even if Section 508.040 is held to be applicable venue would be in St. Louis City because that is where the cause of action, if any, accrued.
*441 Respondents say that Section 508.040 is applicable and that venue thereunder would be in St. Louis County because the cause of action (indemnity) would accrue in that county at the time Emerson is held liable to Novoson. Alternatively, they contend that in accord with the objectives of the third-party practice this court should adopt the rule that where the third-party claim grows out of the same matter as the principal action it should be considered as ancillary thereto and the venue in the principal action would fix the venue for the third-party claim.
There are two cases in which this court has dealt rather extensively with the foregoing venue statutes. In State ex rel. Baker v. Goodman, 364 Mo. 1202, 274 S.W.2d 293 (1955) the suit (in the underlying case) was filed in Stoddard County by resident plaintiffs against two corporations, neither of which resided in or kept an office or agent in that county. Therein, we considered the provisions of the two venue statutes and concluded that: "In a case where individuals and corporations are sued jointly it is necessary to construe the two sections together for neither expressly fixes the venue in such case, and it is only Section 508.010 that does so by implication. But in the case of two corporations being sued, a different situation exists. When we look to the statutes for the proper venue in such a case we find Section 508.040 designed to cover venue in suits against corporations, which statute can be construed to cover the situation. We believe that such construction should be put on said statute, and that the proper venue in the case at bar is in Stoddard County, where the cause of action, as alleged, accrued." 274 S.W.2d 297.
In State ex rel. Carney v. Higgins, 352 S.W.2d 35 (Mo.1961) the plaintiffs in the case involved had filed suit in Clay County, their residence, against a Jackson County corporation to recover damages done to a house located in Clay County upon which the defendant had done construction work for them. In that posture the venue was clearly in Clay County where the claim accrued. Defendant, however, filed a third-party petition against an individual subcontractor who resided in and was served in Jackson County. The third-party defendant contended that the venue of the claim against him was not in Clay County. The court pointed out that there was no statute or rule which fixed the venue for third-party claims and held that the venue of the third-party action was not in Clay County. The court adopted the view that the third-party indemnity claimant had to show compliance with venue requirements separate from the original action; that to hold otherwise would be legislating an exception to Section 508.010 and the court expressed the fear that such a holding might lead to serious abuses of process.
In deciding this case we will assume that the cause of action in question accrued or will accrue in St. Louis City and hence under the provisions of Section 508.040 and the ruling in Higgins the venue of the third-party claim would not be in St. Louis County. However, in the years that have passed since Higgins was decided there has been a vast increase in litigation and many courts have become more forcibly aware of the value of the third-party practice in contributing to a reduction of the case load. It is in the light of that situation that we have decided that the Higgins decision should be reconsidered.
We note at the outset of our consideration of this question that the weight of authority in other jurisdictions follow the rule that if the third-party claim grows out of the same transaction or occurrence as the original action the third-party claim may rest its venue upon the venue of the main action. In that connection, it is stated in 77 Am.Jur.2d, Sec. 28, p. 868 that: "In the absence of a statute specifically dealing with the venue of a cross action against a codefendant or a third-party defendant, it has been held that where the subject matter of the cross action is the same as that of the main action between the plaintiff and the defendant, . . . the venue of the cross action may properly be laid in the *442 same county as that of the main suit,. . ." We are also told that "In most of the federal cases wherein the question was considered, the view has been taken that a third-party proceeding growing out of the same subject matter involved in the principal action and involving many of the same facts is ancillary to the principal action and its venue rests upon that of the principal action, it not being necessary that the venue requirements of an independent action be met." Anno. 100 A.L.R.2d, p. 708. The court in Goodwin Brothers v. Preferred Risk Mut. Ins. Co., 410 S.W.2d 714, 716 (Ky.1967) stated: "Mindful of the congestion of court dockets and the desirability of minimizing the multiplicity of suits, we conclude that under CR 14.01 a third party may be joined `who is or may be liable to' a defendant `for all or part of' the plaintiff's `claim against' the defendant, regardless of whether the provisions of [the venue statute] are met as to the third party."
At the time the 1943 Civil Code was adopted it was stated in Section 506.010 that "it shall be construed to secure the just, speedy, and inexpensive determination of every action." In an early case construing the third-party statute the court stated that "We reaffirm our adherence to the principle that procedural statutes deserve liberal construction. We are mindful that this Code was the result of an effort on the part of the bar and the legislature, so far as it could be accomplished and the rights of litigants safeguarded, to streamline procedure, abandon the technical and the useless and provide judicial processes which would facilitate the disposition of litigation upon its merits." State ex rel. McClure v. Dinwiddie, 358 Mo. 15, 213 S.W.2d 127, 130 (1948).
We approve the statement that "The purpose of third party practice is to avoid two actions which should be tried together to save the time and cost of a reduplication of evidence to obtain consistent results from identical or similar evidence and to accomplish ultimate justice for all concerned with economy of litigation and without prejudice to the rights of another." State ex rel. Laclede Gas Company v. Godfrey, 468 S.W.2d 693, 698 (Mo.App.1971).
When we consider that procedural statutes are to be liberally construed and that the obvious purpose of the third-party practice is to reduce the number of cases filed and to provide a more prompt, efficient and economical method for disposing of litigation we cannot conclude that the legislature intended to require that third-party claims independently comply with venue requirements. We recognize that in some cases it may not be expedient or efficient to proceed with a third-party petition. And in other cases great inconvenience might be caused to the third-party defendant. But those situations may be avoided by the discretionary power vested in the judge. In that connection we recently stated that "The right to implead is not an absolute right even if the claim asserted is within the scope of Rule 52.11, but is a matter that is discretionary with the court.. . . If the above purposes [economy of litigation without prejudice to the rights of another] would not be served by the adjudication of the third-party claim, it is proper for the trial judge to exercise discretion and dismiss the third-party petition." State ex rel. Green v. Kimberlin, 517 S.W.2d 124, 126 (Mo.1974). See also United States v. Acord, 209 F.2d 709[7] (10th Cir. 1954) and Globig v. Greene & Gust Co., 184 F.Supp. 530[8, 9] (D.C.1960). There is no contention in this case that relator would be substantially inconvenienced by trying this claim in St. Louis County.
We accordingly hold that in third-party practice it need not be shown that venue requirements have been independently complied with but that such may rest on venue properly shown in the original case; that the court, therefore, in its discretion, may permit the filing of a third-party petition or deny a motion to dismiss such a petition even though, if it were a separate action, the venue requirement would not be present.
*443 To the extent that this ruling may be considered contrary to the holding in State ex rel. Carney v. Higgins, supra, said case should no longer be followed.
It follows from the foregoing that the preliminary writ heretofore issued by the court of appeals should be quashed. It is so ordered.
All concur.
NOTES
[1] All statutory references are to RSMo 1969, V.A.M.S.
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528 S.W.2d 223 (1975)
Garry Frank GOBELL, Appellant,
v.
The STATE of Texas, Appellee.
No. 50348.
Court of Criminal Appeals of Texas.
October 8, 1975.
James P. Finstrom, Court-appointed, Dallas, for appellant.
Henry Wade, Dist. Atty., Richard W. Wilhelm, and Phil Dixon, Asst. Dist. Attys., Dallas, Jim D. Vollers, State's Atty., and David S. McAngus, Asst. State's Atty., Austin, for the State.
OPINION
ODOM, Judge.
This is an appeal from an order revoking probation.
Appellant was convicted of theft of a horse. Punishment was assessed at five years. Imposition of punishment was suspended and appellant was placed on probation. Subsequently, probation was revoked, and appellant initiated this appeal.
Appellant first contends that his initial conviction was void because the prosecution was barred by the Saving Provisions of the new Penal Code. Section 6(b) of Acts 1973, 63rd Legislature, ch. 399, provides in part:
"Conduct constituting an offense under existing law that is repealed by this Act and that does not constitute an offense under this Act may not be prosecuted after the effective date of this Act."
The offense was committed in November 1973 and appellant was convicted after January 1, 1974. Indictment was for theft of a horse under Article 1440, V.A.P.C. (1925). Although that article was specifically repealed on January 1, 1974 (Acts 1973, 63rd Leg., ch. 399, Sec. 3), the conduct of appellant *224 that constituted an offense under that article also constitutes an offense under the new Penal Code. See Sec. 31.03(d)(4)(A). Accordingly, the prosecution was not dismissed under Section 6(b), supra. The ground of error is overruled.
Appellant next contends that the indictment is fundamentally defective for failure to allege the value of the horse, thereby failing to reflect jurisdiction in the district court. Article 27.08(4), V.A.C.C.P. An indictment for theft of a horse under Article 1440, V.A.P.C. (1925), need not allege the value of the horse in order to establish jurisdiction in the district court because under that statute theft of a horse, regardless of its value, is a felony. Although tried after the effective date of the new Penal Code, appellant's trial was properly conducted under the following controlling portion of Section 6(a) of the Saving Provisions:
"... a criminal action for an offense committed before this Act's effective date is governed by the law existing before the effective date, which law is continued in effect for this purpose, as if this Act were not in force."
Appellant's second ground of error is overruled.
In his last ground of error, appellant asserts the trial court abused its discretion in revoking his probation. The State in its motion to revoke alleged three violations of the law in violation of the terms of appellant's probation. In revoking probation the court found appellant had violated the condition of his probation that he commit no offense, finding that appellant did unlawfully drive a motor vehicle upon a public street while intoxicated, and did flee a police officer. In his brief, appellant only challenges the finding of the second violation. Since the other finding upon which probation was revoked is unchallenged, appellant's contention, even if correct, would not show an abuse of discretion. The ground of error is overruled.
We observe the judgment and sentence erroneously recite appellant was convicted of theft of personal property over the value of fifty dollars. They are reformed to reflect the true offense for which appellant was convicted, theft of a horse.
The judgment, as reformed, is affirmed.
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528 S.W.2d 605 (1975)
Mary J. CHANCE, Appellant,
v.
The STATE of Texas, Appellee.
No. 50267.
Court of Criminal Appeals of Texas.
October 22, 1975.
*606 Stan Brown, Abilene, for appellant.
Ed Paynter, Dist. Atty., Jim Smart, Asst. Dist. Atty., Abilene, Jim D. Vollers, State's Atty., and David S. McAngus, Asst. State's Atty., Austin, for the State.
OPINION
ODOM, Judge.
This is an appeal from an order revoking probation.
Appellant was convicted of the misdemeanor offense of swindling by check and her punishment was assessed at two years' confinement in the county jail. Imposition of the sentence was suspended and probation granted. Subsequently, probation was revoked upon the findings of the trial court that the appellant had violated the terms of her probation by committing theft by check and by leaving the county without the permission of her probation officer, as alleged in the motion to revoke.
Appellant contends that the trial court abused its discretion in overruling her motion for continuance. The ground for the motion was that she was "physically and mentally unable to go through such hearing at this time and moreover would probably not survive in the event the outcome of such hearing were to go against her."
The trial judge filed "Findings of Fact and Conclusions of Law" detailing the various mental and physical maladies from which the appellant was suffering at the time of the hearing. These included anxiety, depression, hysteria, emphysema, coronary problems, hypertension, numbness in her right side, chest pains, shortness of breath, and obesity. Also enumerated are the types and dosages of her medication.
The findings and conclusions state, in part:
"4. That Defendant showed some signs of improving during the 17-day period of treatment by Mr. Showbarger and Dr. Cooke and would probably continue to improve with such treatment.
"5. That it would be possible, by continuing such treatment, that Defendant would return to a more normal state within a period of two months from the date of the hearing, August 22 and August 23, 1974.
"6. That the average person at the date of this hearing would probably not be in such a state of anxiety as Defendant.
". . .
*607 "13. That due to all of the above and foregoing conditions the Defendant's ability to assist her counsel had been greatly diminished."
There was evidence presented at the hearing on the motion for continuance to support each of the findings. Parts of the testimony of appellant's psychologist substantiated the statements contained in paragraphs 4-6 above, although other parts were ambivalent. Appellant's attorney testified that, "[B]ased upon what I have learned ... I can state for a fact that the defendant is unable to adequately assist me in handling this hearing on this date...." At least one recess was necessitated by appellant's condition.[1]
On the other hand, the appellant attended both the hearing on the motion for continuance and the hearing on the revocation of her probation. She testified at both hearings and withstood cross examination, maintaining throughout a consistent defensive theory. Her testimony was reasonably lucid and coherent. Her attorney developed and argued all relevant issues, called several witnesses, and generally appeared familiar with the case.
It is well established that the disposition of a motion for continuance based upon equitable grounds lies in the sound discretion of the trial court. Ward v. State, Tex.Cr.App., 520 S.W.2d 395; Hernandez v. State, Tex.Cr.App., 492 S.W.2d 466; DeLao v. State, Tex.Cr.App., 486 S.W.2d 613. See Article 29.03, V.A.C.C.P. From the above discussion of the evidence and events at both hearings, it is obvious that if we were confronted only with the bare refusal of the trial court to grant the continuance, we would not disturb the implied findings of fact. The court was in the best position to assess the evidence and had an ample basis for such implied findings. See Compton v. State, Tex.Cr.App., 500 S.W.2d 131; Junior v. State, 165 Tex. Crim. 332, 307 S.W.2d 262; Dix v. State, 142 Tex. Crim. 607, 155 S.W.2d 923; Gunn v. State, 119 Tex. Crim. 248, 44 S.W.2d 699; Tysinger v. State, 112 Tex. Cr.R. 4, 13 S.W.2d 698. For the same reasons, we will not disturb the judge's written findings of fact arrived at after the hearing, when he had the entire record before him and the memory of the proceedings in mind. A finding that the ability of a defendant to assist his counsel has been greatly diminished, in conjunction with findings that improvement in his condition is expected within a reasonable time, entitles a movant to a continuance. Cf. Compton v. State, supra; Mayfield v. State, 153 Tex. Cr.R. 526, 221 S.W.2d 281. Reid v. State, 138 Tex. Crim. 34, 133 S.W.2d 979; Graham v. State, 72 Tex. Crim. 9, 160 S.W. 714; Streight v. State, 62 Tex. Crim. 453, 138 S.W. 742. Hence, an abuse of discretion has been shown.
The judgment is reversed and the cause remanded.
DOUGLAS, J., not participating.
NOTES
[1] The record does not reflect the duration of the recess, but the trial court without request interrupted cross examination of a State's witness and declared: "We will recess for about ten or fifteen minutes to see if you can help Mrs. Chance."
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197 N.J. Super. 239 (1984)
484 A.2d 723
BOARD OF EDUCATION OF THE CITY OF NEWARK, ESSEX COUNTY, RESPONDENT-APPELLANT AND CROSS-RESPONDENT,
v.
RUTH LEVITT AND ESTHER E. SASLOE, PETITIONERS-RESPONDENTS AND CROSS-APPELLANTS.
Superior Court of New Jersey, Appellate Division.
Submitted September 18, 1984.
Decided November 29, 1984.
*241 Before Judges PRESSLER, BRODY and HAVEY.
Louis C. Rosen, attorney for appellant and cross-respondent (Dwayne C. Vaughn, on the brief).
Giblin & Giblin, attorneys for respondents and cross-appellants (Michael P. Kemezis and Kenneth M. Bushell, on the brief).
Irwin I. Kimmelman, Attorney General of New Jersey, filed a Statement in Lieu of Brief on behalf of New Jersey State Board of Education (Regina A. Murray, Deputy Attorney General, on the statement).
PER CURIAM.
The issue on this appeal is whether the Commissioner of Education is empowered to award post-judgment interest to a successful claimant who has been awarded a money judgment. *242 We find that the Commissioner of Education has that power and accordingly reverse that portion of the State Board of Education's determination denying interest. Otherwise we affirm.
In 1971 petitioners Ruth Levitt and Esther E. Sasloe instituted proceedings with the Commissioner of Education (Commissioner) against the respondent Board of Education of the City of Newark (board). Essentially, petitioners argued that their assignment by the board as long-term substitute teachers from 1945 through 1961 improperly prevented them from acquiring tenure protection and also denied them proper placement on the teacher's salary guide, longevity increments, leaves of absence and other fringe benefits which should have accrued to them as regular teaching staff members. They sought compensation for the wages, fringe benefits and credits that they would have received had they been properly assigned. The Commissioner issued his decision on October 5, 1977. He adopted the findings of the hearing examiner, found that petitioners were regular full-time teachers during the years in question and ordered the board to compensate them for the back pay and benefits due to them. Although the board did not appeal from the Commissioner's decision, it failed to make the necessary calculations or to tender payment to petitioners in accordance with the Commissioner's decision. The board's attorney, however, assured petitioners that "payment was in the process," and on September 8, 1978, wrote to petitioners' attorney, advising him that "the sum due your clients respectively is Ruth Levitt $34,186.00 and Esther Sasloe $27,250.00." On April 30, 1979 he sent another letter with computations showing that the board owed $34,186 to Levitt and $26,500 to Sasloe. Despite these statements, the board made no tender of any sum to either petitioner. In view of the board's noncompliance with the Commissioner's order petitioners commenced an action in the Superior Court, Chancery Division to compel compliance. The trial court vacated the Commissioner's decision finding that he had misinterpreted the applicable school laws. Petitioners appealed to this court. We *243 reversed, holding that the trial judge erred in permitting the collateral attack on the Commissioner's order. We also held that although the Commissioner's order of October 5, 1977 was a final order, it required further implementation since the Commissioner had not computed the sums actually due petitioners. We remanded to the Commissioner to make these findings.
On remand, the administrative law judge to whom the contested case was assigned, recommended the grant of summary judgment in favor of the petitioners in the amount of $34,186 to Levitt and $26,550 to Sasloe. The administrative law judge also recommended the award by the Commissioner of post-judgment interest.[1] On February 5, 1983, the Commissioner accepted the findings and determinations of the administrative law judge but reversed the interest award, concluding "... that there is no statutory prescription for such awards...." He nevertheless observed that "... the Commissioner deplores in the strongest possible terms the cavalier treatment by the board of petitioners' claims and his decision herein not to award interest does not preclude petitioners from seeking such relief in the appropriate forum." The State Board of Education affirmed on the board's appeal. Respondent board appeals from the order granting summary judgment, and petitioners cross-appeal the denial of post-judgment interest.
We are satisfied that the board's contention that summary judgment should not have been granted fixing the amounts due petitioners is without merit. The decision by the State Board of Education affirming the summary judgment entered by the Commissioner is supported by sufficient credible evidence on the record as a whole. R. 2:11-3(e)(1)(D).
*244 Petitioners contend on their cross-appeal that they are entitled to post-judgment interest on their award and that the Commissioner was empowered to allow such interest.
In considering petitioners' contentions, we must address two entirely separate issues. The first is whether and under what circumstances interest is allowable against a public body and the second is whether, to the extent it is allowable, it may be awarded by the Commissioner in the absence of express statutory authority.
In considering the susceptibility of a public body to an award of interest against it, a distinction must first be drawn between pre-judgment interest and post-judgment interest. Where private litigants are involved, the allowance of pre-judgment interest in contract and contract-like actions, even where a claim is liquidated, is not a litigant's right but rests rather in the court's discretion, required to be exercised in accordance with equitable principles and considerations. See Bak-A-Lum Corp. v. Alcoa Building Prod., 69 N.J. 123, 131 (1976). Where the debtor is a governmental agency and interest in the cause is not provided for by statute, particular circumspection in the granting of pre-judgment interest is required and a showing of overriding and compelling equitable reasons must be made in order to justify the award. See Consolidated Police, etc., Pension Fund Commn. v. Passaic, 23 N.J. 645 (1957). See also City of East Orange v. Palmer et al., 52 N.J. 329 (1968); Fasolo v. Div. of Pensions, 190 N.J. Super. 573 (App.Div. 1983); Youth & Family Serv. Div. v. Middlesex Cty., 188 N.J. Super. 1 (App.Div. 1982); East Orange v. Bd. of Chosen Freeholders, Essex Cty., 89 N.J. Super. 493 (App.Div. 1965).
An adjudicated liability, however, obviously stands on a completely different footing from an unadjudicated claim of liability. Thus, in the case of private litigants, the grant of post-judgment interest is ordinarily not an equitable matter within the court's discretion but is, as a matter of long-standing *245 practice, routinely allowed. See, e.g., Erie Railway Co. v. Ackerson, 33 N.J.L. 33 (Sup.Ct. 1868); Simon v. N.J. Asphalt & Paving Co., 123 N.J.L. 232 (Sup.Ct. 1939). This practice has been codified by court rule. See R. 4:42-11(a), providing for post-judgment interest on all judgments, awards and orders for the payment of money "except as otherwise ordered by the court and except as otherwise may be provided by law." The rule, by its own terms, applies to all money judgments irrespective of the identity and status of the judgment debtor. Nor is there any general statute prohibiting post-judgment interest against public bodies. They are, as a matter of customary practice, subject to post-judgment interest unless the court for good cause otherwise orders. Thus, it is clear that in a contract or contract-like action the court may, in appropriate circumstances, award pre-judgment interest against a public body and will ordinarily award post-judgment interest against a public agency absent a showing of good cause to the contrary.
The question then is whether in awarding money damages to a petitioner, the Commissioner has the same power with respect to both pre-judgment interest and post-judgment interest as the court has in entering a money judgment. We conclude that although this power has not been expressly accorded to the Commissioner by statute, it is nevertheless an ancillary power which he must be deemed to have in order fully to execute his statutory responsibility to hear and determine all controversies and disputes arising out of the school laws. See N.J.S.A. 18A:6-9.
It is a well-settled principle of administrative law that the statutory powers accorded an agency "should be liberally construed to permit the agency to achieve the task assigned to it, and that such administrative agency has such implied incidental powers as may reasonably be adapted to that end." In re Suspension of Heller, 73 N.J. 292, 303 (1977), quoting In re Com'r of Bank. v. Parkwood Co., 98 N.J. Super. 263, 271-272 (App.Div. 1967). These incidental powers have been extended to *246 the fashioning of remedies, including the award of specific items of compensatory damages not expressly enumerated by statute. See Zahorian v. Russell Fitt Real Estate Agency, 62 N.J. 399 (1973); Jackson v. Concord Company, 54 N.J. 113 (1969). Applying this principle here, we are satisfied that N.J.S.A. 18A:16-9 vests jurisdiction in the Commissioner to award post-judgment interest as incidental to his power to fix money judgments.
The Supreme Court has repeatedly "reaffirmed the great breadth of the Commissioner's powers," recognizing that he has "fundamental and indispensable jurisdiction over all disputes and controversies arising under the school laws. N.J.S.A. 18A:6-9." Hinfey v. Matawan Regional Board of Education, 77 N.J. 514, 525 (1978). His jurisdiction over school litigation encompasses questions regarding tenure rights, N.J.S.A. 18A:28-5, and allows him to fix dollar amounts due for retroactive benefits when a question of the accrual of tenure rights is resolved in a teacher's favor. See Spiewak v. Rutherford Bd. of Ed., 90 N.J. 63, 84 (1982); N.J.S.A. 18A:6-10. In our view, interest on a money award which the Commissioner is authorized to grant is an essential and integral part of the award itself since the purpose of the fixed-sum award is to make petitioner whole. Pre-judgment interest is in contemplation of law "damages" for the illegal detention of a legitimate claim or indebtedness. See Rova Farms Resort v. Investors Ins. Co., 65 N.J. 474, 506 (1974). It therefore serves to "indemnify the claimant for the loss of what the monies due him would presumably have earned if payment had not been delayed." Busik v. Levine, 63 N.J. 351, 358 (1973), app. dism. 414 U.S. 1106, 94 S.Ct. 831, 38 L.Ed.2d 733 (1973); Fasolo v. Div. of Pensions, supra, 190 N.J.Super: at 584. Post-judgment interest is based on the same rationale, enhanced, however, by the dimension of an adjudication of improper withholding. As a result of the adjudication, the debtor's obligation to pay is derived not only from the parties' transactional relationship but from the legal process itself.
*247 As we understand the thrust of the board's argument, it does not primarily urge that it is immune from an interest award but rather that such an award, even in respect of a Commissioner's money order, must be made by a court. It relies for this proposition on Fallon v. Scotch Plains-Fanwood Bd. of Ed., 185 N.J. Super. 142 (Law Div. 1982). There plaintiffs had instituted an action in lieu of prerogative writs to obtain interest from the local board of education on sums which they had expended for transportation and tuition costs for their neurologically impaired child. Plaintiffs had successfully petitioned the Commissioner of Education for this compensatory relief and the Commissioner, classifying plaintiffs' child as neurologically impaired, had ordered defendant to reimburse plaintiffs for these sums. Defendant resisted plaintiffs' claim for interest, asserting that they had failed to exhaust their administrative remedies by not having requested that award from the Commissioner. The trial court rejected defendant's argument, holding that "... plaintiffs' entitlement to interest and costs involve the interpretation of legal questions and the exercise of judicial discretion. The Commissioner of Education is not clothed with the authority to determine plaintiffs' claim presented herein." Id., 185 N.J. Super. at 148.
We overrule this holding of Fallon. In our view, an award of interest, whether pre-judgment or post-judgment, is more appropriately made by the Commissioner as part of his determination of the cause than by a court which could do so only by undertaking a complete review of the entire record of the case. The Fallon holding encourages piecemeal litigation and results in a wholly unjustifiable waste of the resources of both the litigants and the court system. It is clearly more sensible and more economical for the Commissioner to make the determination in the first instance. A party dissatisfied with that determination would have, of course, the same right to seek review thereof as he has with respect to any other administrative *248 determination.[2] We are therefore persuaded that the Commissioner not only has the incidental power to award interest but, furthermore, that the interest of the judicial and administrative process as well of the litigants, would be advanced by his exercise thereof rather than deferring the question to a court for separate adjudication. In considering whether or not to allow interest, and, if so, how much, the Commissioner should, of course, be guided by the same principles respecting the award of pre-judgment interest and post-judgment interest which controls the judicial exercise of this power.[3]
Applying these principles to this case, we are first satisfied that we need not consider the issue of pre-judgment interest at all in view of petitioners' stipulation that they were limiting their request to post-judgment interest for the two years immediately preceding the conclusion of these proceedings. We are constrained nevertheless to comment on the question of when post-judgment interest would otherwise have started to run in view of the Commissioner's 1977 final order which did not fix the precise amount of money to which petitioners were entitled. As we have noted, this court had previously held that that order was a final determination. Nevertheless, we are of the view that post-judgment interest cannot start to run until the precise amount of money damages is fixed. Under all of the circumstances of this case, we regard the money damages to have been fixed on September 8, 1978, when the board conceded the amount of its obligation or, as to petitioner Sasloe, on April 30, 1979, when the board corrected its calculation of the amount due her. This method of fixing *249 the date upon which post-judgment interest would have begun to run is analogous to the procedure followed by the Civil Service Commission where the Commission enters the final order of liability but directs the parties to submit affidavits to resolve the amount of back pay due. N.J.A.C. 4:1-5.5(g)(h).
Ordinarily, we would remand this matter to the Commissioner for his determination as to whether or not post-judgment interest, the only matter here in question, should be awarded. We do not do so, however, because he has already clearly stated his view that in the circumstances of this case petitioners are entitled to that award. We leave to the Commissioner's discretion, however, the question of the rate of interest to be allowed.[4]
The order of the State Board of Education is modified with respect to the interest issue only, and we remand to the Commissioner of Education for further proceedings consistent with this opinion. In all other respects, the order appealed from is affirmed. We do not retain jurisdiction.
NOTES
[1] The petitioners stipulated as part of the pretrial order in this proceeding that "[t]he petitioners lay claim to simple interest on the principal for a period of two years at 12 per cent as of the date of the Commissioner's final decision in this matter." The administrative law judge therefore limited the interest award to two years at 12%.
[2] Note, however, that where an agency, in exercising its quasi-judicial function, denies interest on an award which it itself is obliged to pay, this court's review would be de novo. See Fasolo v. Div. of Pensions, supra, 190 N.J. Super. 573.
[3] In awarding post-judgment interest, we caution that ordinarily a public body should be accorded a reasonable time under the circumstances to make payment of the judgment before post-judgment interest begins to run.
[4] The rates fixed by R. 4:42-11(a) are not necessarily applicable to judgments and orders entered by non-judicial agencies. See also Fasolo v. Div. of Pensions, supra, 190 N.J. Super. 573.
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26 A.3d 1177 (2011)
COM.
v.
JOSEPH.
No. 1167 WDA 2010.
Superior Court of Pennsylvania.
March 2, 2011.
Dismissed.
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528 S.W.2d 637 (1975)
CITY OF AUSTIN et al., Appellants,
v.
TEXAS PUBLIC EMPLOYEES ASSOCIATION et al., Appellees.
No. 12,393.
Court of Civil Appeals of Texas, Austin.
October 17, 1975.
*638 Jack C. Eisenberg, Byrd, Davis, Eisenberg & Clark, Austin, for American Federation of State, County and Municipal Employees, AFL-CIO Local 1624.
Lloyd Doggett, Doggett & Jacks, Austin, for Communication Workers of America, AFL-CIO Local 12175.
Don R. Butler, City Atty., Donald L. Wolf, Asst. City Atty., Austin, for City of Austin.
Charles M. Babb, Stayton, Maloney, Hearne & Babb, Austin, for Texas Public Employees Ass'n.
Irwin R. Salmanson, Salmanson & Smith, Austin, for Bruce Petty.
PER CURIAM.
This is an appeal from an order of temporary injunction entered by the district court of Travis County upon application by appellees, Texas Public Employees Association and Bruce Petty, restraining appellants, among other things, from holding an election among employees of the City of Austin in connection with a payroll deduction program pursuant to Tex.Rev.Civ.Stat.Ann. art. 6252-3a. Appellants are the City of Austin, the Communications Workers of America, AFL-CIO, Local 12175, and American Federation of State, County and Municipal Employees, AFL-CIO, Local 1624. After the submission of the case, this Court entered an order setting aside the order of temporary injunction and remanding the cause to the district court for further proceedings.
Texas Rev.Civ.Stat.Ann. art. 6252-3a(a) provides as follows:
"(a) The governing body of any city of more than 10,000 inhabitants, according to the last preceding federal census, may authorize a program whereby any municipal employee employed in such city may authorize and consent in writing that deduction be made from his monthly salary or wage payment. Such written consent shall so designate and direct the city treasurer or comptroller to transfer such withheld funds to the appointed bona fide employee's association in payment of his membership dues."
On July 31, 1975, the City Council of the City of Austin passed the following resolution:
"1. That effective September 1, 1975, Section 5.18 of the Personnel Policies of the City of Austin be and the same are hereby amended to read as follows:
"5.18. Payroll Deductions.
Upon the execution by an employee of proper forms prescribed by the City Manager, regular deductions shall be made from any such employee's paycheck for savings or payments on loans to the Austin Municipal Federal Credit Union, for City taxes, for approved insurance premiums, for membership dues and fees of the Austin Association of Professional Firefighters Local 975, the Austin Police Association, and the employees' union so designated by the established employees' election and Council action, or for any other purpose approved by the City Manager. Provided, all costs of initiating the system for all of the above deductions for membership dues and fees paid to the named employee associations, plus all operational costs of same, shall be at the expense of the union or association. (Emphasis as appearing in Exhibit)
"2. Notwithstanding the above and foregoing provision, payroll deductions for the above named or described organizations shall not be effective until after the last pay period in August and until completion of necessary arrangements to pay for the cost of initiating the system for each of the above associations and for the cost of services.
*639 "3. The City Attorney is hereby authorized and instructed to establish an election procedure for a vote among the City employees on which labor organization shall receive payroll deduction status as provided in Part 1 above. Such election shall be supervised through the City Attorney's Office."
About the middle of September, 1975, the City Council further resolved:
"That the City Manager and the City Attorney are hereby instructed to make all necessary arrangements for the conduct of an election among the regular City of Austin employees, with certain exceptions, to determine which labor organization, the Communications Workers of America or the American Federation of State, County and Municipal Employees, will receive payroll deduction privileges, for the purpose of paying membership dues of its members; such election to be held on October 17, 1975; and,
"BE IT FURTHER RESOLVED BY THE CITY COUNCIL OF THE CITY OF AUSTIN:
"That the City Manager or the Deputy City Manager be and is hereby authorized to execute on behalf of the City of Austin that certain payroll deduction election agreement further setting out the dates, terms and conditions of said election as this day exhibited to the Council."
On October 10, 1975, counsel for appellee Texas Public Employees Association filed a request to appear before the City Council during the evening of October 16, 1975 to request "authorization for dues deduction from salaries and wages of City employees who are members of TPEA and authorize such deductions." The action so requested by the City Council was, "approval of Resolution approving Texas Public Employees Association for dues checkoff or deduction status."
Pursuant to the resolutions of the Council the office of the City Attorney undertook to establish an election procedure for the City employees to vote upon which labor organization should receive the payroll deduction status. As the result of these efforts a document styled "Payroll Deduction Election Agreement" was signed for the City of Austin by the City Manager and the other appellants on October 6, 1975.
Thereafter, on October 13, 1975, appellee Bruce Petty filed his original petition praying that the appellants be enjoined from holding the October 17, 1975 election. On October 14, 1975, appellee Texas Public Employees Association filed its petition. Likewise, the Texas Public Employees Association sought to enjoin the election scheduled to be held on October 17, 1975. Appellees' lawsuits were consolidated by the court upon motion of appellant City of Austin.
In their petitions, appellees alleged, among other things, that the "Payroll Deduction Election Agreement" was contrary to Tex.Rev.Civ.Stat.Ann. art. 5154c in that the agreement (1) constituted collective bargaining with a labor organization respecting wages, hours, or conditions of employment; (2) constituted recognition of a labor organization as the bargaining agent for a group of public employees; (3) and constituted the recognition of employees' representatives who have publicly proclaimed the right to strike against government. Appellees alleged further that the "Payroll Deduction Election Agreement" and the procedures of the Council were also in violation of Tex.Rev.Civ.Stat.Ann. art. 6252-3a. Appellee Petty alleged also that the resolutions of the Council and the "Payroll Deduction Election Agreement" were, as to him, a violation of the 14th amendment to the Constitution of the United States.
At the hearing on the application for temporary injunction, appellees called as an adverse witness, Richard Tulk, the first assistant City Attorney. After direct examination and before the completion of appellants' cross-examination of Tulk, the district judge announced that he had "heard enough" testimony and was prepared to enter a temporary injunction in all of the respects prayed for in appellees' petitions.
*640 The order entered by the district court enjoined appellants, among other things, from "continuing with the execution of carrying out of any part of the `Payroll Deduction Election Agreement' . . ." and from "holding or attempting to hold the election of [sic] CITY employees as provided for in the `Payroll Deduction Election Agreement'" to be held on October 17, 1975.
Appellants attack the judgment by six points of error. Point of error five claims that the district court abused its discretion in entering the temporary injunction without permitting appellants to complete examination of the first and only witness and to present any evidence in their defense. Because we sustain point of error five, we do not consider and we do not pass upon any of the remaining points of error.
As stated previously, the district court terminated the hearing before appellees rested, and, in fact, during the cross-examination of the first witness. At the time of the termination of the hearing, the appellees had a number of witness available to offer testimony, and appellants represented to the court that they wished to place into evidence testimony of several witnesses. Appellants; counsel excepted to the termination of the hearing and requested the district court to proceed with the hearing of the evidence.
Tex.R.Civ.P. 681 requires that no temporary injunction be issued without notice to the adverse party. The requirement of notice impliedly requires an adequate opportunity to be heard. Gibson v. Shaver, 434 S.W.2d 462 (Tex.Civ.App.1968, no writ), Oertel v. Gulf States Abrasive Manufacturing, Inc., 429 S.W.2d 623 (Tex.Civ.App.1968, no writ), Texas State Board of Medical Examiners v. McKinney, 315 S.W.2d 387 (Tex. Civ.App.1958, no writ), Anderson v. Hidalgo County Water Imp. Dist. No. 6, 251 S.W.2d 761 (Tex.Civ.App.1952, writ ref'd n.r.e.). The trial court is not authorized to enter an order of temporary injunction against a party before that party has had an opportunity to present its defenses and has rested its case. Gibson v. Shaver, supra.
For the reasons stated, the order of the district court granting the temporary injunction is set aside, and the judgment is reversed. The cause is remanded to the district court.
Temporary injunction reversed and remanded.
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528 S.W.2d 129 (1975)
Ex parte David NORVELL and Nathaniel Maxwell.
No. 50959.
Court of Criminal Appeals of Texas.
October 8, 1975.
Ted Redington, Huntsville, for appellant.
Robert O. Smith, Dist. Atty. and Charles D. Craig, Asst. Dist. Atty., Austin, Jim D. Vollers, State's Atty., and David S. McAngus, Asst. State's Atty., Austin, for the State.
OPINION
ROBERTS, Judge.
This is an original application for habeas corpus filed by petitioners David Norvell *130 and Nathaniel Maxwell. Motion for leave to file said application was granted by this Court by order of August 25, 1975.
Petitioner Norvell was convicted of the offense of burglary in a Travis County District Court and sentenced to three years' imprisonment on June 20, 1974. Notice of appeal was duly filed, and his conviction was upheld by this Court in a per curiam order this day handed down. His claim for habeas corpus relief is thus moot. Petitioner Maxwell was convicted of the offense of burglary in a Travis County District Court, and he was sentenced to ten years' imprisonment on February 14, 1975. Petitioner Maxwell also gave timely notice of appeal, and his appeal is currently pending before this Court.
Upon the motion of the district attorney of Travis County under the provisions of Art. 42.09, Sec. 5, V.A.C.C.P., petitioner Maxwell was transferred to the Texas Department of Corrections on August 5, 1975. Section 5 provides as follows:
"If a defendant is convicted of a felony and his sentence is a term of fifteen years or less and he gives notice of appeal, he shall be transferred to the Department of Corrections on a commitment pending a mandate from the Court of Criminal Appeals upon request in open court or upon written request to the sentencing court. Upon a valid transfer to the Department of Corrections under this section, the defendant may not thereafter be released on bail pending his appeal." (Emphasis added).
Petitioner complains that the unilateral action of the Travis County district attorney has had the effect of denying him the opportunity to post bond pending appeal of his sentence, said sentence being less than 15 years. See Art. 44.04(e), V.A.C.C.P. It is his contention that Art. 42.09 allows transfers of inmates to the Texas Department of Corrections pending appeal only upon the request of the inmate himself.
This Court is confronted at the outset with a jurisdictional problem. Petitioner sought his return to Travis County jail in a habeas corpus application originally filed in the trial court. On August 25, 1975, the trial judge dismissed the application for lack of jurisdiction, because petitioner's case was still pending appeal. No notice of appeal from this order was given. Jurisdiction thus does not lie as in an Art. 11.07 post-conviction habeas corpus proceeding, or as in a direct appeal from the denial of a habeas corpus application filed in the trial court to require bail to be set or reduced. Arts. 11.08 and 11.09, V.A.C.C.P. Petitioner's application is in habeas corpus, because of his complaint of an illegal restraint; more specifically, of his complaint of confinement in the wrong institution. Preiser v. Rodriguez, 411 U.S. 475, 93 S. Ct. 1827, 1834, 36 L. Ed. 2d 439 (1973); Leahy v. Estelle, 371 F. Supp. 951 (N.D.Tex.1974), affd., 503 F.2d 1401 (5th Cir. 1974).
This Court has the power, however, to entertain original applications for writs of habeas corpus as part of its original jurisdiction. Art. V, Sec. 5, Vernon's Ann. Const. of Texas. Ex parte McKenzie, 115 Tex. Crim. 315, 29 S.W.2d 771 (1930). See, also, the interpretive commentary following said section and Art. V, Sec. 3, Vernon's Ann.Const. of Texas regarding habeas corpus jurisdiction of the Texas Supreme Court. While possessed of this power of original jurisdiction, however, this Court will only take such jurisdiction in extraordinary cases, as where the proceeding is void and an appeal will not be an adequate remedy, Ex parte Patterson, 42 Tex. Crim. 256, 58 S.W. 1011 (1900); or where the petitioner has been unsuccessful in obtaining relief from the trial judge. Ex parte Fitzpatrick, 167 Tex. Crim. 376, 320 S.W.2d 683 (1959).
Our search for authority to take original jurisdiction in this matter, however, need go no farther than the case of Ashford v. State, 410 S.W.2d 433 (Tex.Cr. App.1967). Ashford, relying on Ex parte Sena, 366 S.W.2d 568 (Tex.Cr.App.1963) and Ex parte Griego, 366 S.W.2d 572 (Tex.Cr. *131 App.1963), held that this Court should have granted relief to a petitioner complaining in an original application for habeas corpus of his erroneous transfer to the Texas Department of Corrections while his case was still pending on appeal. The amendment of Art. 42.09, Sec. 5, V.A.C.C.P. in 1973 does not affect the exercise of this Court's constitutional power of original jurisdiction in such cases.
It remains to consider the problems posed by construction of Art. 42.09, Sec. 5. Admittedly, transfers to the Texas Department of Corrections pending appeal need only be "upon request", but the persons empowered to make such request are not named. If district attorneys are allowed to make such requests, as respondents contend, all inmates in county jails awaiting appeals of convictions resulting in sentences of less than 15 years could conceivably be transferred to the Texas Department of Corrections. In fact, if respondent's contentions are carried to their logical extremes, requests to transfer inmates could be made by sheriffs, county commissioners, complaining witnesses, or anybody.
But to give such effect to Art. 42.09, Sec. 5 would render nugatory a defendant's rights under Art. 44.04(e) to post bond pending appeal in any conviction where the sentence does not exceed 15 years. Invalidation of the last sentence in Art. 42.09, Sec. 5 which prohibits release on appeal bond of inmates incarcerated at the Texas Department of Corrections, can be avoided, however, by construing the statutes together, and harmonizing their provisions, as this Court is required to do when construing arguably inconsistent statutory provisions Code Construction Act, Art. 5429b-2, Sec. 3.06, V.A.C.S. A harmonious construction of the two statutory provisions is possible if the "request" referred to in Art. 42.09, Sec. 5, is interpreted to mean "request of the defendant." This is the meaning obviously intended by the Legislature in the first place. And a defendant's request to be transferred to the Texas Department of Corrections pending appeal could then be viewed as a waiver of his right to post bond under Art. 44.04(e). We hold that this is the proper construction of Art. 42.09, Sec. 5, V.A.C.C.P.
It is therefore ordered that petitioner Maxwell be returned to the Travis County jail pending the disposition of his appeal currently before us, or a validly executed request to be transferred to the Texas Department of Corrections by the petitioner himself. It is further ordered that petitioner Norvell's application, being moot, is hereby dismissed.
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826 F. Supp. 1416 (1993)
Teresa G. SUSSMAN, f/k/a Teresa M. Gaffney, Plaintiff,
v.
SALEM, SAXON AND NIELSEN, P.A., et al., Defendants.
No. 91-776-Civ-T-17(C).
United States District Court, M.D. Florida, Tampa Division.
July 20, 1993.
*1417 Anthony F. Gonzalez, Law Office of Anthony F. Gonzalez, Tampa, FL, Neil Harvey Chonin, Chonin & Sher, P.A., Coral Gables, FL, for plaintiff.
Thomas M. Gonzalez, Mark A. Hanley, Thompson, Sizemore & Gonzalez, Tampa, FL, for defendants.
ORDER ON MOTIONS TO AMEND
KOVACHEVICH, District Judge.
This case is before the Court on Plaintiff's Motion to Amend Order Denying Motion for Stay of Court's March 8, 1993 Order on Motion for Reconsideration of Court's Order on Motions (Docket No. 128); and on Motion to Amend Court's Order (Docket No. 128). In citing Rule 5(a), Federal Rules of Appellate Procedure, Plaintiff's motion (Docket No. 130) requests this Court to amend its March 31, 1993 Order to include a statement required by 28 U.S.C. § 1292(b) for an interlocutory appeal.
STATEMENT OF FACTS
Plaintiff alleges that certain actions of Defendants subjected Plaintiff to a hostile working environment and discrimination on account of her pregnancy, steadily increasing in intensity and culminating in her discharge. Plaintiff further alleges that the conduct of Defendants was done with malice or with reckless indifference to her federally protected rights. Plaintiff also alleges that as a result of Defendants' discriminatory actions and termination, she suffered the loss of salary and fringe benefits.
RELEVANT PROCEDURAL HISTORY
This Court, previously, by order of May 29, 1992, denied Defendant's Motion to Strike Plaintiff's Request for Punitive Damages and Jury Trial filed on July 15, 1991 (Docket No. 3) and granted Plaintiff's Motion to Amend Complaint (Docket No. 19). Defendants then moved to amend the Court's order to add language for an immediate appeal of the non-final order. Defendants based the motion upon the intra-district and intra-circuit conflict on the question of retroactivity of the Civil Rights Act of 1991 ("the Act"). (Docket No. 53). Citing Baynes v. AT & T Technologies, Inc., 976 F.2d 1370 (11th Cir.1992), Defendants also filed a Motion for Reconsideration of the order granting Plaintiff's Motion *1418 to Amend Complaint, to include the Civil Rights Act of 1991 (Docket No. 80).
In Baynes, the circuit court held the Civil Rights Act of 1991 creating right to jury trial and damages remedies did not apply retroactively in cases where judgments were entered before the Act's effective date of November 21, 1991. Later, in Curtis v. Metro Ambulance Serv., Inc., 982 F.2d 472 (11th Cir.1993), the court specifically noted that the Act's provisions were not considered retroactive in cases where the effective date preceded rendition of the district court's judgment in actions which arose before November 1, 1991. In agreement with Curtis this Court, by order of March 8, 1993, denied the Motion to Amend Order on Motions as moot, granted the Motion for Reconsideration, and amended the order of May 29, 1992 so that portions of the Plaintiff's Amended Complaint and Demand for Jury Trial, filed June 8, 1992, (Docket No. 47) that seek compensatory and punitive damages and a jury trial be stricken. The Court's order recognized that under Curtis the question of retroactivity warrants en banc review, but until that time the provisions of the Civil Rights Act are applicable to actions arising after November 21, 1991. On March 31, 1993, this Court denied Plaintiff's Motion for Stay of Court's March 8, 1993 Order (Docket No. 128). Plaintiff filed, on April 12, 1993, a Motion to Amend Order Denying Motion for Stay of Court's March 8, 1993 Order (Docket No. 130) seeking appropriate language for an interlocutory appeal of the denial of the stay under Rule 5(a), Federal Rules of Appellate Procedure, and 28 U.S.C. § 1292(b).
Under 28 U.S.C. § 1292(b), a district court may allow application for interlocutory appeal with the court of appeals if the order involves a controlling question of law as to which there is: 1) substantial ground for difference of opinion and 2) an immediate appeal may materially advance the ultimate termination of the litigation. In light of the procedural history, this Court considers Plaintiff's motion.
ANALYSIS
Section 1292(b) of 28 U.S.C. is designed to be used sparingly and only in exceptional cases where a speedy appeal would avoid protracted litigation. Milbert v. Bison Laboratories, Inc., 260 F.2d 431 (3d Cir. 1958). In assessing whether to certify an order for interlocutory appeal, the court should determine the probability that its decision, of which appeal is sought, is in error as well as the extent to which additional time and expense may be saved by the appeal. Kennard v. United Parcel Service, Inc., 531 F. Supp. 1139 (E.D.Mich.1982).
As this Court noted in its March 9, 1993 order, the Curtis decision is unambiguous. Sussman v. Salem, Saxon, Nielsen, P.A., 815 F. Supp. 1447 (M.D.Fla.1993). With regard to compensatory and punitive damages and a request for jury trial, the Act will be applied prospectively whether or not a judgment by the district court had been rendered before the effective date. Curtis relied upon the Baynes' reasoning and ultimate decision which was consistent with other circuits that had addressed the issue of retroactivity of the Civil Rights Act of 1991.[1] Plaintiffs have not drawn the Court's attention to any divergent authorities. The Court also finds that there is little potential that allowing piecemeal appeals will materially advance termination of the litigation. Rather, it would add a substantial amount of time to an already extended litigation process and would ultimately prolong a resolution. Until an en banc review of Curtis occurs, this Court considers the provisions added by the Civil Rights Act of 1991, unless the Act specifically indicates to the contrary, as applicable only to actions arising after the effective date of the Act. Accordingly, it is
ORDERED, that Plaintiff's Motion to Amend Order Denying Motion for Stay of Court's March 8, 1993 Order on Motion for Reconsideration of Court's Order on Motions; *1419 and on Motion to Amend Court's Order be denied.
DONE AND ORDERED.
NOTES
[1] See Gersman v. Group Health Association, Inc., 975 F.2d 886 (D.C.Cir.1992); Johnson v. Uncle Ben's, Inc., 965 F.2d 1363 (5th Cir.1992); Luddington v. Indiana Bell Telephone Co., 966 F.2d 225 (7th Cir.1992); Fray v. Omaha World Herald Co., 960 F.2d 1370 (8th Cir.1992); Mozee v. American Commercial Marine Service Co., 963 F.2d 929 (7th Cir.1992); Vogel v. City of Cincinnati, 959 F.2d 594 (6th Cir.1992).
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134 A.2d 149 (1957)
STATE
v.
Frank A. PASCALE.
Ex. No. 9640.
Supreme Court of Rhode Island.
July 23, 1957.
*150 William E. Powers, Atty. Gen., John F. O'Connell, Sp. Counsel, Providence, for State.
Aram K. Berberian, Providence, for defendant.
PAOLINO, Justice.
This is a complaint and warrant charging the defendant with a traffic violation in the city of Pawtucket. After a trial in the superior court, he was found guilty by a justice thereof sitting without a jury. Thereafter the defendant duly prosecuted his bill of exceptions to this court.
The bill contains fifteen exceptions, including exceptions to the ruling of the trial justice denying his motion to quash the complaint and warrant, to the ruling denying his motion to strike out certain parts of the evidence, and to the decision finding defendant guilty as charged. The defendant has expressly waived several of his exceptions and has briefed and argued the remaining exceptions. However, his main contention is in substance that both the Pawtucket traffic ordinance, hereafter sometimes called the ordinance, and statute which defendant is charged with violating are unconstitutional and void *151 because they delegate rulemaking power to a police officer without standards, limitations or criteria in contravention of specific provisions of our federal and state constitutions.
On the record before us, we are of the opinion that the case can be decided without passing upon the constitutional questions referred to above. It is well settled that this court will not decide a constitutional question raised on the record when it is clear that the case before it can be decided on another point and that the determination of such question is not indispensably necessary for the disposition of the case. State v. Berberian, 80 R.I. 444, 445, 98 A.2d 270.
The complaint and warrant under which defendant was convicted alleged in substance that at Pawtucket he "Did willfully fail or refuse to comply with a lawful order or direction of a Police Officer invested by law with authority to direct, control or regulate traffic, in violation of Section #3 of Article #21 of Motor Vehicle Code Act as amended. Chap. 2595 of P.L. 1950 & Chap. 650 of City Ordinances of Pawtucket, approved April 6, 1951, Section 57, paragraph 2, on Main Street, a public highway of the City of Pawtucket."
The record thus shows that the complaint charges defendant with violating both the Pawtucket "obedience" ordinance and the state "obedience" statute. The pertinent provision of the Pawtucket traffic ordinance is as follows: "It is ordained by the City Council of the City of Pawtucket, as follows: * * * Sec. 57. * * * The driver of a vehicle shall comply with any lawful order, signal or direction of a police officer * * *." Public Laws 1950, chap. 2595, art. XXI, sec. 3, provides: "Obedience to police officers. No person shall willfully fail or refuse to comply with any lawful order or direction of any police officer invested by law with authority to direct, control, or regulate traffic."
There is no substantial dispute concerning the facts pertinent to the issues raised in this case. On the day and at the time charged defendant was operating his automobile easterly on Main street in the city of Pawtucket. Main street runs east and west. A police officer was directing traffic while standing in a police box at the center of the intersection of Main street and Roosevelt avenue, which runs north from Main street. As the defendant approached the police officer, he signaled for a left turn into Roosevelt avenue. The police officer ordered defendant to proceed straight on Main street. The defendant refused to do so and was thereupon arrested.
The police officer testified in substance that the alleged violation took place at about 5 p.m. and that "The traffic was so heavy at that time that I was allowing no left turns on anything traveling east on Main street and then traveling north on Roosevelt. * * * Conditions were such that I didn't think it warranted it." The record also shows that both Roosevelt avenue and Main Street are two-way streets. It is important to observe at this point that the record fails to disclose the existence of any city ordinance or state law prohibiting or regulating left turns at the intersection or location in question.
On this state of the record defendant contends that the second paragraph of sec. 57 of the traffic ordinance under which defendant was charged and convicted is inconsistent with sec. 3 of the Motor Vehicle Code Act and is therefore void. We agree with this contention. Article XXI, sec. 3, declares unlawful any willful failure or refusal to comply with any lawful order of a police officer. The pertinent provision of sec. 57 of the ordinance, however, makes unlawful any failure or refusal to comply, thus making disobedience a crime whether the noncompliance is willful or not, and consequently extending and broadening the scope of art. XXI, sec. 3.
*152 It is clear that the portion of the ordinance in question is in conflict with art. XXI, sec. 3, and violates sec. 7 of this article which provides in part that "no local authority shall enact or enforce any ordinance, rule, or regulation in conflict with the provisions of this act unless expressly authorized herein." We are of the opinion that the pertinent provision of sec. 57 of such ordinance is void, since it is in conflict with the above-quoted provision of the statute, and that the trial justice erred in failing to quash that portion of the complaint and warrant which charged defendant with violation of such ordinance. Wood v. Peckham, 80 R.I. 479, 98 A.2d 669. On the record before us, therefore, the conviction of defendant for a violation of an alleged offense which does not exist under the law is unlawful. State v. Berberian, supra.
The question remains, however, whether defendant's conviction can be sustained on the ground that he is guilty beyond a reasonable doubt of violating the provisions of P.L.1950, chap. 2595, art. XXI, sec. 3, which the complaint and warrant also charges.
We shall now consider defendant's exception to the decision of the trial justice, which is numbered 15. Section 8 of art. XXI, supra, empowers local authorities, with respect to streets and highways under their jurisdiction and within the reasonable exercise of the police power, to regulate traffic by means of police officers or traffic-control signals. It is clear, therefore, that the legislative body of the city of Pawtucket has the power and authority to enact proper legislation prohibiting or regulating left turns at the location in question and investing police officers with authority to direct, control or regulate traffic in accordance with reasonable standards set forth therein. The instant record fails to disclose the existence of any such ordinance or any specific authority, state or local, empowering the police officer to prohibit a left turn at the location in question.
It is true that sec. 2 of art. XXI, supra, makes it unlawful for any person to do any act forbidden or fail to perform any act required by statute. However, there is nothing in this record showing that a person is forbidden by the provisions of the Motor Vehicle Code Act from making such left turn; nor is there anything in the act which required defendant to drive his motor vehicle in a straight direction along Main street, unless the order of the officer had the force of law. In our opinion such order was not lawful in the circumstances of this case.
Section 3 of art. XXI provides: "No person shall willfully fail or refuse to comply with any lawful order or direction of any police officer invested by law with authority to direct, control, or regulate traffic." (Italics ours) As we have already stated, the instant record fails to reveal the existence of any legislation, state or local, making it unlawful for the defendant to make a left turn at the location in question or requiring him to refrain from so doing; nor is there anything here which shows that the police officer in question had been vested with authority to require him to refrain from doing that which was clearly lawful.
Although the record fails to disclose the existence of a real emergency at the location of the alleged violation, we have no doubt that the action of the police officer was inspired by his devotion to duty and by a desire to expedite traffic as he thought best in the circumstances existing at the time. Therefore, while we do not condemn his motives and although we feel that the defendant, in the circumstances, could have complied with the officer's order with little or no inconvenience to himself in a spirit of civic cooperation, nevertheless, on the record before us, it is our opinion that the officer's order to the defendant did not have the force of law.
A police officer is vested by law with authority to direct, control and regulate *153 traffic only to the extent that he has the duty and responsibility to execute and enforce traffic regulations duly enacted and promulgated by a proper legislative body, state or local. Under our system of government he cannot legislate himself no matter how worthy his motives may be. In our opinion, therefore, the trial justice erred in finding the defendant guilty. In view of this conclusion we deem it unnecessary to consider the defendant's other contentions.
The defendant's fifteenth exception is sustained, and the case is remitted to the superior court with direction to enter an order dismissing the complaint and warrant and discharging the defendant.
FLYNN, C. J., not participating.
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528 S.W.2d 587 (1975)
John Elson BOUIE, Appellant,
v.
The STATE of Texas, Appellee.
No. 50305.
Court of Criminal Appeals of Texas.
July 9, 1975.
Rehearing Denied October 22, 1975.
Second Rehearing Denied November 12, 1975.
*588 Carol S. Vance, Dist. Atty. and Clyde F. DeWitt, III, and Phyllis Bell, Asst. Dist. Attys., Houston, Jim D. Vollers, State's Atty., and David S. McAngus, Asst. State's Atty., Austin, for the State.
No appearance for appellant.
OPINION
ROBERTS, Judge.
This is an appeal from a conviction for robbery by assault under our former code. The court assessed punishment at ten years' confinement.
We are confronted at the outset with a fundamentally defective indictment. As in Lucero v. State, 502 S.W.2d 128 (Tex.Cr. App.1973) (case 1), the indictment here fails to allege "to whom the property allegedly taken belonged." See Lucero, supra, and the authorities there cited.
The judgment is reversed, and the prosecution is ordered dismissed.
OPINION ON STATE'S MOTION FOR REHEARING
ODOM, Judge.
We file this opinion on rehearing because the dissent places such great reliance upon the opinion of this Court in Clark v. State, 527 S.W.2d 527 (1975). That reliance is misplaced.
In Clark, supra, the sufficiency of the indictment to allege robbery by assault was not in issue. The indictment in Clark did allege ownership whereas the indictment in the instant case did not. Therefore, we take issue with the assertion of the dissent that "this Court has held contrary to the present case in Clark v. State," The dissent also asserts, "This Court held [in Clark] that it made no difference who owned the property, but it was the possessor of the property that counted." To the contrary, Clark merely applied the established rule, stated in Article 21.08, V.A.C.C.P., that ownership may be alleged in the possessor, and found the evidence sufficient on the allegations of both possession and ownership. It did not hold that ownership need not be alleged at all.
The State's motion for rehearing is overruled.
DISSENTING OPINION ON STATE'S MOTION FOR REHEARING
DOUGLAS, Judge.
The conviction was reversed because the State did not allege something in the indictment that was not required in the robbery statute under which he was convicted.
The majority requires the State to allege not only who had possession of the property taken in the robbery but also who owned the property. Article 1408, V.A.P.C. (1925), does not have such a requirement. It provides:
"If any person by assault, or violence, or by putting in fear of life or bodily injury, shall fraudulently take from the person or possession of another any property with intent to appropriate the same to his own use, he shall be punished by confinement in the penitentiary ..."
The reversal was based on Lucero v. State, 502 S.W.2d 128 (Tex.Cr.App.1974), which held that ownership as well as possession of property must be alleged in a robbery case. This was no doubt done because the district attorney in that case confessed *589 error. There were some old cases supporting the confession of error. Now that the past mistakes have been called to the court's attention, they should be corrected. The repetition of error does not justify additional error.
The appellant did not file a motion to quash the indictment. He did not urge lack of an allegation of ownership as a ground of error in his appellate brief. There was no claim that possession was alleged in the wrong person. The majority holds that the indictment is fundamentally defective.
Since the opinion was written on original submission, this Court has held contrary to the present case in Clark v. State, 527 S.W.2d 527 (1975). In that case this Court wrote:
"... appellant contends that there is a fatal variance between ownership of the money as alleged in the indictment and as proved at trial. The indictment alleged ownership in Richard Amos. From the foregoing facts, it is clear that at trial the true owner of the property was shown to be Hubert Kidder. In view of our disposition of appellant's second ground of error, this contention is without merit. Art. 21.08, V.A.C.C.P., provides in pertinent part that in any indictment:
"Where one person owns the property, and another person has the possession of the same, the ownership thereof may be alleged to be in either.. . .'
"The evidence was sufficient to sustain the jury's conclusion that Richard Amos had possession of the property at the time of the robbery. Hence, it was proper to allege ownership in his person and no variance is shown. Ford v. State, supra [502 S.W.2d 160]; Michales v. State, 120 Tex. Crim. 553, 49 S.W.2d 444; Guyon v. State, 89 Tex. Crim. 287, 230 S.W. 408.. . ."
In the second ground of error of the Clark case it was contended that the proof did not show possession of the money to have been in Amos. This Court wrote:
"A charge of robbery by assault may be supported by evidence of a taking by placing in fear from the possession of the victim. Art. 1408, V.A.P.C. The concept of possession in the robbery statute is broader than that of the theft statutes, Arts. 1410 et seq., V.A.P.C. Barfield v. State, 137 Tex. Crim. 256, 129 S.W.2d 310; Goodrum v. State, 172 Tex. Crim. 449, 358 S.W.2d 120; Ford v. State, Tex.Cr.App., 502 S.W.2d 160. We have frequently said that any right to possession by the victim superior to that of the defendant is sufficient to support a conviction for robbery. West v. State, Tex.Cr.App., 480 S.W.2d 640; Wright v. State, Tex.Cr.App., 468 S.W.2d 422; Goodrum v. State, supra. It is only where the victim of the assault has no right to possession whatsoever that a charge of robbery may not be sustained. Hence, where the taking has been from a store clerk or after an assault upon a watchman, for example, convictions for robbery have been upheld. E.g., Emerson v. State, Tex.Cr.App., 476 S.W.2d 686; Blankenship v. State, 166 Tex. Crim. 51, 310 S.W.2d 579; Ibeck v. State, 112 Tex. Crim. 288, 16 S.W.2d 232."
We see from the Clark case that the allegation alleged the ownership and possessor of the property to be Amos. The proof showed the owner to be Kidder. This Court held that it made no difference who owned the property, but it was the possessor of the property that counted. If a variance in the indictment as to ownership and proof is immaterial, then it is not necessary to allege ownership, only possession. If ownership does not have to be proved, it does not have to be alleged. If ownership is proved to be in a different person from the one alleged in the indictment and such is not error, then the ownership allegation is surplusage.
If there is a distinguishing feature between the Clark case and the present case, the majority should spell it out. A rule should apply to all cases.
*590 It might be thought by the majority that since Article 1408 is no longer in effect it makes little difference as to the outcome of this case. This is no reason. Even if this were the only case left to be decided, the Clark case should be followed. It is later than the Lucero case, supra. It was decided after the present case. There are at least five other cases pending in this Court in which the indictments allege only the possession of the property. How many more cases that might be pending is not known.
Further, ownership should not be added as an element to the offense of robbery since it is not required by the Legislature. A pleader should be able to rely upon the statute. Even if ownership were required to be alleged by statute in a robbery case, Article 21.08, V.A.C.C.P., provides where ownership is alleged it may be in one who possesses the property.
Under certain circumstances one could be convicted for taking his own property when he does it at gun point. In such a case it would be senseless to allege ownership in a defendant. Where one has had possession of property for some time and another claims it as a true owner, the claimant should not be encouraged by this Court to take the property by force. Disputes of that kind should be settled by the courts and not by guns. See Crawford v. State, 509 S.W.2d 582 (Tex.Cr.App.1974); Fanin v. State, 51 Tex. Crim. 41, 100 S.W. 916 (1907), and Frazier v. State, 170 Tex. Crim. 432, 342 S.W.2d 115 (1961). Other jurisdictions do not countenance violent self help as a defense. See State v. Martin, 15 Or.App. 498, 516 P.2d 753 (1973); People v. Uselding, 107 Ill.App.2d 305, 247 N.E.2d 35 (1969), and Elliott v. State, 2 Tenn.Cr.App. 418, 454 S.W.2d 187 (1970). The older cases upon which the Lucero case was based were decided upon the replaced and outdated theory that one could not be convicted for taking his own property at gun point and they should be expressly overruled.
We should specifically reject the erroneous application of Article 1408, supra, in the original opinion. This in effect was done in the Clark case. We should not encourage use of violent self help to regain property unless he uses reasonable force immediately after the property was taken from him or he was in fresh pursuit of the property as provided for under Section 9.41, V.T.C.A. Penal Code (1974).
The prior reversal should be set aside and the State's motion for rehearing granted and the judgment affirmed.
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134 A.2d 565 (1957)
Ralph B. CAMPBELL, Plaintiff,
v.
LOEW'S Incorporated, a Delaware corporation, Joseph R. Vogel, William A. Parker, George L. Killion and John L. Sullivan, Defendants.
Court of Chancery of Delaware, New Castle.
September 3, 1957.
Henry M. Canby (of Richards, Layton & Finger) and Arthur G. Logan and Aubrey B. Lank (of Logan, Marvel, Boggs & Theisen), Wilmington, and Milton S. Pollack, New York City, for plaintiff.
David F. Anderson (of Berl, Potter & Anderson), Wilmington, and Louis Nizer (of Phillips, Nizer, Benjamin & Krim), New York City, and Benjamin Melniker, New York City, for corporate defendant.
The individual defendants have not yet appeared.
SEITZ, Chancellor.
Plaintiff, a stockholder of Loew's Incorporated ("Loew's" or "corporation"), here sues the corporation and four of its nine encumbent directors. The four constitute the so-called "Vogel faction". The other five directors, there being four vacancies, constitute the so-called "Tomlinson faction". See Tomlinson v. Loew's, Inc., *566 Del., 134 A.2d 518 (appeal pending). The two factions are fighting for control of the corporation.
Plaintiff seeks the following relief:
(a) to require the individual defendants to account for money they have caused the corporation to pay for solicitation of proxies on their behalf in connection with a stockholders' meeting called by Vogel, the president, for September 12.
(b) to restrain the defendants, their officers and agents from using the corporate funds in the solicitation of proxies by two of the individual defendants (Vogel and Killion) and their associates and from using or allowing corporate officials or employees to solicit proxies for the individual defendants or anyone associated with them.
(c) to have the Court enjoin the holding of a stockholders' meeting called for September 12, 1957, on the ground that it was illegally called.
The individual defendants have not yet appeared in this action. A motion to dismiss the complaint was made by the corporation on the ground that the action is derivative in nature and fails to comply with Chancery Rule 23(b) Del.C.Ann. Plaintiff has moved for a preliminary injunction enjoining the holding of the special meeting of stockholders and enjoining the use of proxies solicited pursuant to a letter to stockholders dated August 9, 1957. Alternatively, plaintiff asks that the stockholders' meeting be stayed or adjourned until such time as the Court can decide the preliminary injunction.
I first consider the corporate defendant's motion to dismiss on the ground that it fails to comply with Chancery Court Rule 23(b).
Insofar as pertinent Rule 23(b) provides:
"In an action brought to enforce a secondary right on the part of one or more shareholders * * * because the association refuses to enforce rights which may properly be asserted by it, * * * The Complaint shall also set forth with particularity the efforts of the plaintiff to secure from the managing directors or trustees and, if necessary, from the shareholders such action as he desires, and the reasons for his failure to obtain such action or the reasons for not making such effort."
While I seriously doubt that all aspects of the pending action are derivative in nature, I shall pass over that point. Admittedly the action is derivative insofar as it seeks to recover corporate money already spent for proxy solicitation by at least one of the individual defendants.
The brief filed in support of the motion to dismiss makes no particular attempt to analyze the complaint in relation to the provisions of Rule 23. Thus, the Court must do so.
It is alleged as follows in Paragraph 22 of the Complaint:
"Plaintiff has not requested the Board of Directors, nor stockholders, to make Vogel account, as he will not recognize the authority of the Board of Directors and is now in the process of soliciting stockholders with corporate funds, which the plaintiff is unable to stop. Plaintiff knows of no way through request, Board or stockholder action, that the Vogel group can be stopped from illegally spending the $100,000."
Obviously, plaintiff's allegation is an attempt to justify the fact that no demand was made for an accounting. In other words, in the language of the Rule, plaintiff purports to give the reasons for not making an effort to have the directors or stockholders take the action he has taken.
On a motion to dismiss, the allegations of the complaint must be taken to *567 be true. Do the quoted allegations in combination with the other allegations of the complaint constitute compliance with the pleading requirements of Rule 23(b)?
Clearly, if Vogel will not recognize the board then it is futile to ask the board to act under the circumstances of this strange case. Admittedly, the Vogel faction will not attend board meetings and so no quorum is possible. The result is that the board as a board cannot act. I conclude that plaintiff's complaint shows with sufficient particularity and reason why no demand was made upon the board.
Clearly the stockholders could not act in time to prevent the defendants from spending corporate funds as indicated in the proxy statement. Moreover, absent unanimous approval the stockholders could not ratify the spending of corporate funds for an allegedly invalid purpose. Compare Kerbs v. California Eastern Airways, 33 Del. Ch. 69, 90 A.2d 652, 34 A.L.R. 2d 839.
I therefore conclude from the pleadings that a demand upon the stockholders was not necessary under the facts alleged, but in any event a demand here would have been futile under the circumstances. A demand upon the stockholders implies that legally they can do something about it. Where they cannot, the Rule does not contemplate that such a useless act must nevertheless be performed.
Sohland v. Baker, 15 Del. Ch. 431, 141 A. 277, 58 A.L.R. 693, is relied upon by the defendant. Neither in its statement of law nor its conclusion is it inconsistent with the result here reached. Nor does the recent opinion of the Vice Chancellor in Mayer v. Adams, Del.Ch., 133 A.2d 138, call for a different conclusion. That case involved the "demand on stockholders" requirement of Rule 23(b). First of all, as the pleadings there show, no attempt was made by that plaintiff to comply with Rule 23(b). Here the plaintiff has specifically alleged matters pertinent to the Rule. Second, the language of the Vice Chancellor makes it clear that he did not intend to rule, for instance, that where less than unanimous stockholder action by way of ratification or otherwise would be futile, a stockholder would still have to make demand on the stockholders. And, I add, demand to do what? Other distinguishing factors are evident by a reading of the Vice Chancellor's opinion.
I therefore conclude that plaintiff's complaint, to the extent required, complies with the pleading requirement of Rule 23(b). The corporate defendant's motion to dismiss must therefore be denied.
I turn now to plaintiff's motion for a preliminary injunction or a stay thereof until such time as this Court has an opportunity to decide plaintiff's motion.
This Court recognizes that a court will interfere with the holding of stockholders' meetings only with great reluctance. Nevertheless, I believe that some of the matters relied upon by plaintiff are of such substance that no action other than an adjournment to a fixed future date should be taken at the stockholders' meeting called for September 12. The Court will fix the adjourned date.
The stay will give the Court an opportunity to pass upon the many matters pressed upon the Court upon very short notice. Such a stay will not prejudice the rights of those with the ultimate say the stockholders. It may be noted that in the meantime the executive committee is not prevented from acting despite the factional feud.
A stay to the above effect will be entered upon the plaintiff's posting a bond in the sum of $5,000.
The Court will be happy to discuss the adjourned date with counsel.
Present order on notice.
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528 S.W.2d 598 (1975)
Wilfred Donvin PERKINS, Appellant,
v.
The STATE of Texas, Appellee.
No. 49394.
Court of Criminal Appeals of Texas.
October 22, 1975.
*599 Lavern D. Harris and Ronald R. Winfrey, Kerrville, for appellant.
Glendon Roberts, County Atty., Bandera, Jim D. Vollers, State's Atty., and David S. McAngus, Asst. State's Atty., Austin, for the State.
OPINION
ROBERTS, Judge.
In a unitary trial before a jury, the appellant was convicted, under Article 1149 of our former Penal Code, of aggravated assault with a motor vehicle done "in the performance of an unlawful act ... such as would give justification for civil action for damages." Punishment was assessed at $50.00 and ninety days, probated.
The record reflects that the complainant Cynthia Redman was riding a motorbike on Highway 16 near Bandera. She was passed by two cars and continued on her way, staying approximately five car lengths behind the second car. Presently, the first car, driven by appellant, pulled onto the shoulder of the road and was passed by the second car. As the complainant started to pass appellant's car, the appellant turned his car off the shoulder and across the highway directly into the path of the complainant, who crashed into the car.
In his fifth ground of error appellant contends that the court erred in failing to grant his objection to the court's charge. Specifically, appellant argues that the charge omitted an essential element of the State's case as alleged in the information.
The information alleges:
"... an aggravated assault with a motor vehicle upon the person of Cynthia *600 Redman; and the said Defendant did then and there drive and operate said motor vehicle, to-wit, an automobile, upon a public highway, to-wit, Highway 16 and did then and there commit an aggravated assault with said motor vehicle upon the person of said Cynthia Redman with negligence while being then and there in the performance of an unlawful act, to-wit, making an unlawful turn in said Highway when it was unsafe to do so, such as would give justification for civil action for damages, in that the said Defendant did then and there operate and drive said motor vehicle upon said Highway without then and there exercising proper care and caution in guiding said motor vehicle, that is, such a degree of care and caution in guiding said motor vehicle as a man of ordinary prudence would use under like circumstances, and Defendant did then and there cause said automobile to collide with and cause injury to the person of the said Cynthia Redman and cause injuries less than death to said Cynthia Redman who was then and there on said Highway."
Appellant contends that the main charge of the court failed to require that the jury find that the acts alleged were "such as would give justification for civil action for damages."
The record reflects that the main charge of the court contains no instruction on this issue.[1] The record also reflects that appellant presented for inclusion in the charge six timely requested instructions; all of these were granted by the court. However, these requested charges were not incorporated in the body of the main charge. In sustaining objections to the record, see Art. 40.09(7), Vernon's Ann.C.C.P., the trial court certified that the requested instructions "were attached to said Charge as a part thereof." The record reflects that the court attached them in precisely the form in which they were presented.[2]
The appellant then presented four timely objections to the charge, three of which properly presented the contention now urged; all four objections were denied.
Article 36.15 of our Code of Criminal Procedure provides in part:
"Any special requested charge which is granted shall be incorporated in the main charge and shall be treated as a part thereof, and the jury shall not be advised that it is a special requested charge of either party." (Emphasis added)
In Seefurth v. State, 422 S.W.2d 931, 935 (Tex.Cr.App.1968), this Court held:
"These articles [Arts. 36.14 and 36.15, V.A.C.C.P.] are ones the Legislature had a right to enact, and are statutes which the Courts can neither ignore or emasculate. See Vinson v. State, 77 Tex. Crim. 546, 179 S.W. 574.
"These articles are mandatory and there must be strict compliance with their provisions." (Citations omitted)
We hold that Article 36.15 is mandatory in all respects; it follows that the trial court in this case erred by failing to incorporate the requested charges and, second, by advising the jury that the charges were the requested charges of the appellant. We also hold that the attachments cannot be considered on appeal as part of the court's charge. Art. 36.15, supra; compare Harris v. State, 453 S.W.2d 838, 839 (Tex.Cr.App.1970); Booth v. State, 499 S.W.2d 129, 135 (Tex.Cr.App.1973).
Therefore, we turn to an examination of the ground of error to determine whether the error was calculated to injure the rights of appellant so as to deprive him of a fair and impartial trial. Art. 36.19, V.A.C.C.P.
*601 Appellant was charged under Article 1149 of our former Penal Code. It provides:
"If any driver or operator of a motor vehicle or motorcycle shall wilfully or with negligence, as is defined in the Penal Code of this State in the title and chapter on negligent homicide, collide with or cause injury less than death to any other person he shall be held guilty of aggravated assault . . .."
In the "title and chapter on negligent homicide" of our former Code (Title 15, Chapter 14), Article 1230 provides:
"Homicide by negligence is of two kinds:
1. Such as happens in the performance of a lawful act; and
2. That which occurs in the performance of an unlawful act."
Article 1231 defines "lawful acts" which constitute negligence for purposes of the chapter as follows:
"Whoever in the performance of a lawful act shall be negligence and carelessness cause the death of another is guilty of negligent homicide of the first degree. A lawful act is one not forbidded by the penal law and which would give no just occasion for a civil action."
Article 1240 then describes the two kinds of "unlawful acts" which can constitute negligence within the meaning of the chapter. The first are "[s]uch acts as by the penal law are called misdemeanors." The second are those acts, "not being penal offenses, as would give just occasion for a civil action."[3]
Since there was more than one possible statutory definition of negligence, it was necessary for the State to specify in the information which it would rely upon. Compare Nichols v. State, 136 Tex. Crim. 41, 44, 123 S.W.2d 672, 673 (1939); Seiffert v. State, 501 S.W.2d 124, 126 (Tex.Cr.App. 1973). The appellant was entitled to notice of the "exact nature of the accusation against him so that he might know what the state would attempt to prove and what he would be required to meet upon the trial." Nichols v. State, supra. This was especially true in this narrow area of statutorily-defined negligence of our former Code, with its close and difficult distinctions between "lawful" negligence on the one hand and "unlawful-civil action" negligence on the other.
These definitional problems can best be understood by comparing the information in this case with the lengthy information approved in Kirksey v. State, 136 Tex. Crim. 97, 123 S.W.2d 905 (1939), a negligent homicide case.[4]
A comparison of these two informations reflects that the factual averments which were held to allege negligence done by a lawful act in Kirksey were virtually identical to those used to allege the "unlawful" negligence in this case. If we omit the allegations in each information which describe the extent of the injury to the complainant,[5] it is obvious that the allegations of the two informations are interchangeable, except for the qualifying phrases which allege that the acts were lawful (in Kirksey) and that they were unlawful and would give justification for a civil action (in this case).
Thus, these qualifying phrases are obviously necessary to inform the defendant *602 what proof he will have to meet upon trial. Nichols v. State, supra. Clearly, the information in this case properly alleged that the negligent acts were "such as would give justification for civil action for damages," since this was a necessary element of the State's case.
Our Code of Criminal Procedure provides that the State must prove the accused's guilt beyond a reasonable doubt to the jury, which sits as the exclusive judge of the facts proved and the weight to be given to the testimony. Arts. 38.03, 38.04, Vernon's Ann.C.C.P. See In re Winship, 397 U.S. 358, 364, 90 S. Ct. 1068, 25 L. Ed. 2d 368 (1970). Accordingly, this Court has held that it is fundamentally erroneous for the trial court to instruct the jury to find an accused guilty when he has pleaded not guilty. Castoria v. State, 119 Tex. Crim. 193, 47 S.W.2d 325 (1932); Manning v. State, 66 Tex. Crim. 180, 145 S.W. 938 (1912).
More recently, in Mullaney v. Wilbur, ___ U.S. ___, 95 S. Ct. 1881, 44 L. Ed. 2d 508 (1975), the Supreme Court held unconstitutional Maine's requirement that a defendant charged with murder go forward and "establish by a preponderance of the evidence that he acted in the heat of passion on sudden provocation in order to reduce murder to manslaughter." ___ U.S., at ___, 95 S.Ct., at 1892. Relying heavily on In re Winship, supra, the Court held:
"[T]he Due Process Clause requires the prosecution to prove beyond a reasonable doubt the absence of the heat of passion on sudden provocation when the issue is properly presented in a homicide case." ___ U.S., at ___, 95 S.Ct., at 1892.
The holding in Mullaney v. Wilbur, like that in In re Winship, supra, stands for the same proposition as do Articles 38.03 and 38.04 of our Code of Criminal Procedure: The State must be required to prove every element of its case beyond a reasonable doubt or stand in violation of the Due Process Clause. Yet under the court's charge in this case, the State was not required to prove to the jury the necessary justification for a civil action. What this means is that the appellant was required to go forward on this basic element of the State's case and show, by some unstated standard of proof, that the facts did not in fact give justification for a civil action. Mulaney v. Wilbur, supra, is clear authority to the contrary.
Our own case law anticipated the holding in Mullaney. In Moore v. State, 140 Tex. Cr.R. 482, 148 S.W.2d 887 (1940), this Court held that the court's charge in a criminal case may not place a greater burden upon the defendant than do the pleadings. Cf. Turner v. State, 462 S.W.2d 9, 22 (Tex.Cr. App.1970), dissenting opinion by Judge Onion.
In Moore, the appellant was charged with failing to stop and render aid. Specifically, the indictment alleged that the appellant did not render:
"all necessary assistance to the said Polly in this, to-wit: that the said Andrew Moore did then and there fail to stop and to carry the said Orvelle Polly to a physician and surgeon for medical and surgical treatment required by the said Orvelle Polly by reason of the said injury received as aforesaid . . ."
However, the charge only required that the jury find that the appellant "did then and there unlawfully fail and refuse to stop and render all necessary assistance to the said Orvelle Polly." None of the specific descriptive averments were included in the charge. This Court reversed, holding that the charge enlarged upon the indictment.[6]
Similarly, under the charge in this case[7] the jurors were permitted to find appellant *603 guilty whether they found evidence of "lawful" negligence, as defined in Art. 1231, supra, or "unlawful" negligence, as charged in the information and defined in Art. 1240, supra, since no distinction was made in the charge between the two types of negligence. This was a clear enlargement upon the language of the information.
We conclude that the error was prejudicial and deprived the appellant of a fair and impartial trial. This conclusion is given further support by a record which reveals that after the verdict was announced in open court counsel for appellant examined several of the jurors, at least one of whom stated that she did not find that civil liability had been proved. Clearly, harm was shown.
The judgment is reversed and the cause remanded.
DOUGLAS, Judge (dissenting).
Appellant requested a charge and the court gave it as requested. There was no objection to the court's attaching the requested instruction to the rest of the charge. Absent an objection this should not be reviewed.
Article 36.14, V.A.C.C.P., provides, in part, as follows:
"... Before said charge is read to the jury, the defendant or his counsel shall have a reasonable time to examine the same and he shall present his objections thereto in writing, distinctly specifying each ground of objection. . ."
Appellant did not comply with the statute. He was apparently satisfied with the way the charge was submitted. Rulings of the trial judge should be passed upon when the case is on appeal. The Court should not hunt for, and reverse upon, harmless unobjected to errors.
The judgment should be affirmed.
MORRISON, Judge (dissenting).
I join in my brother DOUGLAS' dissent.
There is no fundamental error in the charge and no objection to the charge as given. No reversal should follow.
I further disassociate myself from my brother Roberts' reasoning that the court's charge enlarged upon the averments in the indictment. As I see it, the requested charge of the appellant complied with all averments contained in the indictment.
I respectfully dissent.
NOTES
[1] See note 7, infra.
[2] The document containing the requested charges bore the style and number of the case and was titled, DEFENDANT'S SPECIAL REQUESTED CHARGES. It contained introductory and closing paragraphs urging that the requests be granted over the signature of appellant's counsel. It also contained the court's order on each of the charges over the signature of the trial judge.
[3] Because of our disposition of this issue, we find it unnecessary to decide whether the enactment of Section 50A of Art. 6701d, V.A.C.S., impliedly repealed subdivision 1 of Art. 1240, supra. See 1972 Op.Atty.Gen., No. M-1150. Compare Lane v. State, 165 Tex. Crim. 222, 305 S.W.2d 595 (1957).
[4] On the surface this may appear to be like a comparison between apples and oranges, since the instant case involves a conviction for aggravated assault. Our concern, however, is with the allegations supporting the varying definitions of negligence, insofar as negligence is an element common to both offenses.
[5] See note 4, supra.
[6] In Moore, as in the instant case, a proper objection to the charge was made in the trial court. Cf. May v. State, 146 Tex. Crim. 115, 171 S.W.2d 488 (1943).
[7] The pertinent portions of the charge are as follows:
"II.
"In this case the information alleges that the Defendant was negligent (a) in making a turn on Highway 16 in Bandera County, Texas, when it was unsafe to do so and (b) in driving his motor vehicle upon said Highway without exercising proper care and caution in guiding said motor vehicle. Making a turn on said Highway when it was unsafe to do so or failure to exercise proper care and caution in driving said motor vehicle on said Highway is negligence. By the terms `proper care and caution', as used herein, is meant the failure to exercise that degree of care and caution which a man of ordinary prudence would use under like circumstances.
"III.
"By the term `negligence', as used herein, is meant the failure to exercise that degree of care and caution which a man of ordinary prudence would use under like circumstances.
"IV.
"Now if you find from the evidence beyond a reasonable doubt that on or about the 22nd day of January, 1973, in the County of Bandera, State of Texas, the Defendant, Wilfred Donovan Perkins, did operate a motor vehicle upon a public road, and did then and there, with negligence, that is, by making a turn in said road when it was unsafe to do so or by driving his said automobile on said road without exercising proper care and caution in guiding said motor vehicle, collide with and cause injury less than death to Cynthia Redman, as alleged in the information, then you will find the Defendant guilty and assess his punishment at a fine of not less than twenty-five dollars nor more than one thousand dollars, or by imprisonment in jail for not less than one month nor more than two years, or by both such fine and imprisonment.
"Unless you find the foregoing facts beyond a reasonable doubt, or if you have a reasonable doubt thereof, you will acquit the Defendant."
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134 A.2d 397 (1957)
MEMORIAL HOSPITAL
v.
Samuel WOOLF et al.
Ex. No. 9795.
Supreme Court of Rhode Island.
August 16, 1957.
*398 David Hassenfeld, Providence, for plaintiff.
Rosenstein & Jacques, Aram K. Berberian, Providence, for defendants.
ANDREWS, Justice.
This is an action of the case in assumpsit on book account and the common counts. It was commenced in the district court of the sixth judicial district where, by agreement of counsel, decision was given for the plaintiff, a foreign corporation, against the defendants Samuel Woolf and Eunice F. Kalver. The defendants then appealed the case to the superior court where it was assigned to the nonjury calendar. Thereafter the plaintiff requested a dedimus to take the deposition of its employee Julian L. Weller. The deposition was taken, but at that time the defendants were not represented.
When the case came on for hearing in the superior court the deposition was read. It appears therefrom that Jeanette Woolf, of the city of Providence in this state, was admitted to the plaintiff hospital on December 1, 1954 where she remained for forty-nine days. The deposition and the hospital records which were introduced show that Samuel Woolf of Providence was the patient's husband and that at the time of his wife's admission Mrs. E.J. Kalver of Providence, who was a daughter of the patient, agreed to pay the hospital charges. The witness Weller testified: "Based on her promise, and the responsibility of Samuel Woolf, the patient's husband, for necessaries furnished to his wife, all the subsequent hospital care and services were rendered to the patient." He also testified to the reasonableness of the charges.
At the end of plaintiff's case defendants' counsel moved for a nonsuit on behalf of defendant Eunice F. Kalver on the ground that there was no specific count or statement *399 in the declaration that "ties in" said defendant. The motion was denied whereupon he said: "We have no defense Your Honor." The court and counsel proceeded to discuss the amount of interest on the principal claim of $814.20. There was some difference between the attorneys as to what the interest was, so the court decided that question and gave decision for the plaintiff against both defendants for $850.66 and costs. No exception was taken at that time although the next day another attorney on behalf of defendants took an exception to the decision. That is the only exception.
The defendants' first point is that there was no testimony to connect defendant Eunice F. Kalver with the Mrs. E.J. Kalver mentioned in the deposition. While we are loath to allow a party, whose counsel has told the trial court that there is no defense, to raise this point for the first time here, we must recognize the right of defendant to claim an exception to the decision within the time allowed by law as was done in this case. It has been the consistent position of this court that an exception to a decision brings before it any error that may inhere in the decision. General Motors Truck Co. v. Shepard Co., 47 R.I. 153, 155, 130 A. 593; Dubee v. Feinstein, 61 R.I. 214, 216, 200 A. 528. Such an error, however, must be prejudicial to warrant reversal.
The defendant Eunice F. Kalver's name on the writ and her name in the deposition and the hospital records are different. Consequently there is lacking that similarity of names which is prima facie proof of identity. In 20 Am. Jur., Evidence, § 204, it is stated at page 204: "There is presumption of identity of persons where the names are the same, but no such presumption prevails as between the Christian name of one and the initials of another, the surnames being the same." There is, therefore, a vital lack in the evidence against defendant Eunice. The same argument is made in behalf of defendant Samuel but inasmuch as the names in the writ and in the evidence are identical we reject that argument.
As a further defense to the decision against defendant Samuel, his attorney argues that there was no allegation or proof that his wife was not living apart from him without good cause. While such conduct defeats a claim for necessaries, no evidence of that kind was offered or disclosed in this case. It was shown that he was the patient's husband. A wife's hospital expenses are necessaries for which a husband is liable, if they are reasonable. Their reasonableness was established in the case at bar. We are, therefore, satisfied that the plaintiff made out a prima facie case against defendant Samuel.
The defendants point out that there is a misjoinder and the plaintiff admits that such is the case. The husband cannot be sued on his common-law liability and the daughter upon her express promise in the same action. There was no joint liability. The question was not raised, however, in the superior court although defendants had ample opportunity to do so. In the cases in this jurisdiction of misjoinder and variance which were cited by defendants the questions were raised in the lower court, and we are of the opinion that the defendants' failure to raise such question there precludes them from raising it in this court, particularly as our statute on parties provides that misjoinder shall not be fatal but that the party misjoined may be dropped. The variance also could be cured. See our recent opinions in Thomas v. Newport Oil Corporation, R.I., 133 A.2d 631, and Carey v. Albro, R.I., 133 A.2d 634. As we have already indicated, defendant Eunice F. Kalver must be dropped as a party, which will leave the decision against Samuel Woolf alone since such misjoinder did not prejudice him.
The exception of the defendant Eunice F. Kalver to the decision is sustained, and the plaintiff may appear before this court on October 7, 1957 to show cause, if any *400 it has, why when this case goes back to the superior court that court should not be directed to enter judgment for Eunice F. Kalver.
The exception of the defendant Samuel Woolf to the decision is overruled, the decision of the superior court against him is sustained, and the case is remitted to that court for entry of judgment on the decision.
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134 A.2d 325 (1957)
FIRST NATIONAL REALTY CORPORATION, a corporation, Appellant,
v.
Joseph G. OLIVER and Armentla Oliver, Appellees.
No. 1975.
Municipal Court of Appeals for the District of Columbia.
Argued May 20, 1957.
Decided July 25, 1957.
*326 Herman Miller, Washington, D. C., for appellant.
Wilbur W. Sewell, Washington, D. C., for appellees.
Before ROVER, Chief Judge, and HOOD and QUINN, Associate Judges.
HOOD, Associate Judge.
Appellant (hereinafter called landlord) leased to appellees (hereinafter called tenants) a dwelling house on a monthly basis commencing on the 10th of the month. The tenants paid the first month's rent in advance and took possession on the 10th. About a week later they vacated without notice. The landlord brought this action for an additional month's rent because of the tenants' failure to give the required thirty days' written notice of their intent to vacate.[1] The tenants denied liability and counterclaimed for the amount of the first month's rent. The trial court denied the landlord's claim and granted the tenants' counterclaim. The landlord appeals.
With respect to the landlord's claim we think the trial court was right. Although the tenants failed to give the required notice, the evidence showed that the landlord re-rented the premises on the 11th day of the following month to another *327 tenant, and consequently the failure to receive notice caused the landlord no loss. While a tenant who fails to give notice may be liable for another month's rent,[2] the purpose of the Code section is not to penalize the tenant but to give the landlord an opportunity to find a new tenant.[3] Where failure to give notice results in no loss to the landlord, a requirement that the tenant nevertheless pay an additional month's rent would penalize the tenant and unjustly enrich the landlord. This was not the intention or purpose of our Code section.
With respect to the tenants' counterclaim for the month's rent paid by them, their claim is apparently based on the theory that they were induced to enter into the lease by misrepresentation and that by reason thereof the lease was voidable at their option. Briefly stated, their claim is that the premises were represented as being inhabitable whereas in fact they were uninhabitable. To support this claim there was testimony that before signing the lease they inquired of the landlord if there were any unpaid gas or water bills and were told there were none; and that upon taking possession they found both the water and gas had been cut off, presumably because of unpaid bills. Two days later the landlord paid the delinquent water bills and water was turned on. The gas was never turned on and after staying in possession "about a week," the tenants vacated.
It may first be observed that the rule in this jurisdiction is that upon the letting of a house there is no implied warranty that the premises are fit for the occupancy intended;[4] and second, that the lease in the instant case required the tenants to pay for their water, gas and electricity. However, the tenants argue that there was an express representation that water and gas had not been discontinued because of unpaid bills, and that this in effect was a warranty that the premises were not uninhabitable because of lack of these services.
With respect to the gas, the testimony of a gas company official was that the tenants could have obtained gas service by either a showing of proper credit or the making of a deposit, and that such service was in no way dependent on payment of unpaid bills of former tenants. It can hardly be claimed that the landlord was required to guarantee the tenants' credit or make a deposit for them. Indeed, in their brief here the tenants appear to have abandoned their claim that they were entitled to void the lease because of lack of gas service.
The tenants, however, argue that lack of water service rendered the house uninhabitable, that the premises lacked water service because of the landlord's failure to pay delinquent water bills, and that the landlord's assurance to them that there were no delinquent water bills constituted a material misrepresentation of the condition of the premises, justifying them in voiding the lease. Whatever merit there may be in this argument, we think the tenants waived any rights they had to insist that lack of water service freed them from liability under the lease. According to their own testimony when they discovered that water service was lacking they nevertheless took possession and water was turned on "several days later." The testimony of the landlord was that the tenants took possession on the 10th, that it did not know the water was cut off, and when on the 12th the tenants notified it there was no water service, it promptly paid the bill and the water was turned on. At *328 any rate, the tenants admitted that the water service was on for several days before they vacated. In view of this, the tenants cannot say they vacated because of lack of water service. Had they refused to take possession because of lack of service or vacated before water was turned on, we would have a different situation.
Our conclusion is that the tenants vacated without right and have no standing to claim refund of the rent.
The judgment denying recovery to the landlord on its claim is affirmed. The judgment allowing recovery to the tenants on their counterclaim is reversed.
NOTES
[1] Code 1951, § 45-902.
[2] See Miller v. Plumley, D.C.Mun.App., 77 A.2d 173; Elliott v. Crawford, D.C.Mun. App., 118 A.2d 518; Williams v. Tencher-Walker, D.C.Mun.App., 125 A.2d 58.
[3] Keuroglian v. Wilkins, D.C.Mun.App., 88 A.2d 581.
[4] Hughes v. Westchester Development Corporation, 64 App.D.C. 292, 77 F.2d 550; Hariston v. Washington Housing Corporation, D.C.Mun.App., 45 A.2d 287.
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528 S.W.2d 255 (1975)
Billy Joe POOL, Appellant,
v.
The STATE of Texas, Appellee.
No. 50168.
Court of Criminal Appeals of Texas.
October 15, 1975.
Gene A. Garcia, Court appointed, Rockport, for appellant.
John H. Flinn, Dist. Atty., Sinton, Jim D. Vollers, State's Atty., and David S. McAngus, Asst. State's Atty., Austin, for the State.
*256 OPINION
DAVIS, Commissioner.
Appeal is taken from a conviction for theft. Punishment enhanced[1] under the provisions of V.T.C.A. Penal Code, Sec. 12.42(d)[2] was assessed at life.
The indictment alleged the primary offense occurred on or about the 2nd day of April, 1974, and the record reflects that trial was in July, 1974.
Appellant challenges the sufficiency of the evidence to support the conviction.
The pertinent portion of the indictment alleging the primary offense recites that appellant
"... did then and there unlawfully exercise control over property, other than real property, to wit, one radar, one radio receiving set and one tape recording player of the value of more than $200.00 and less than $10,000.00 said property having been stolen in Aransas County, Texas the said Billy Joe Pool knowing said property to be stolen, without the effective consent of Robert Coaker, the owner thereof, and with intent to deprive Robert Coaker of said property."[3]
Robert Coaker testified that the items in question were removed from his shrimp boat on April 2, 1974, without his consent.
Sheriff Hewes of Aransas County testified that he took a written confession from one David Hale regarding the offense. A portion of said confession was admitted into evidence reflecting that Hale and one John Peoples entered the Coaker boat during the early morning of April 2, 1974, and took the equipment in question.
Sheriff Hewes further testified that he and Ranger Peters went to Brownsville on April 5, 1974, and recovered a part of a radar set, a light, a stereo, a radio and a transmitter from one Gilbert Cortez and delivered these items to Coaker. Coaker identified the articles as being the equipment stolen from his boat on April 2, 1974.
Gilbert Cortez, operator of the Siesta Lounge in Brownsville, testified that appellant lived next door to his lounge. On April 2, 1974, appellant asked Cortez if he had a place to store some equipment and Cortez allowed appellant to place same in the trunk of Cortez' car. Cortez stated that this was the same equipment he turned over to Sheriff Hewes and Ranger Peters.
An essential element of the offense alleged is knowledge on the part of the accused that the property over which he exercised control was stolen.
The State urges that the evidence showing appellant in unexplained possession of recently stolen property is sufficient to support the conviction.
*257 The offense charged in the instant case is similar to the offense denounced under Art. 1430, V.A.P.C., providing:
"Whoever shall receive or conceal property which has been acquired by another in such manner as that the acquisition comes within the meaning of the term theft, knowing the same to have been so acquired, shall be punished in the same manner as if he had stolen the property. O.C. 745a; Acts 1858, p. 180; Acts 1897, p. 26."
In Bradshaw v. State, Tex.Cr.App., 482 S.W.2d 233, this Court said:
"An essential element of the crime of receiving or the crime of concealing stolen property is knowledge on the part of the accused that the property received or concealed by him is stolen. See 5 Branch's Ann.P.C.2d, Section 2724, page 168.
"In the present case appellant was arrested while possessing without explanation recently stolen property. This alone is not sufficient to show that he knew it was stolen. Hochman v. State, 146 Tex. Cr.R. 23, 170 S.W.2d 756. It is a circumstance which must be coupled with other significant circumstances to justify an inference of knowledge that the property was stolen. Pollan v. State, 157 Tex. Cr.R. 178, 247 S.W.2d 889; Grant v. State, 87 Tex. Crim. 19, 218 S.W. 1062."
Clearly, the quantum of proof in showing knowledge on the part of the accused that the property over which he exercised control was stolen is no less under the offense alleged under V.T.C.A. Penal Code, Sec. 31.03 in the instant case.
We conclude that the State did not sustain its burden in proving an essential element of the offense, knowledge on the part of appellant that the property over which he exercised control was stolen.
In view of our disposition of this case, we do not pass upon appellant's other contentions, including the contention that proof of sequence of prior convictions was not properly proved.
The judgment is reversed and the cause remanded.
Opinion approved by the Court.
NOTES
[1] In the event of retrial, we call attention to that portion of Art. 36.01, V.A.C.C.P. which requires, "When prior convictions are alleged for purposes of enhancement only and are not jurisdictional, that portion of the indictment or information reciting such convictions shall not be read until the hearing on punishment is held as provided in Article 37.07."
[2] V.T.C.A. Penal Code, 12.42(d) provides:
"If it be shown on the trial of any felony offense that the defendant has previously been finally convicted of two felony offenses, and the second previous felony conviction is for an offense that occurred subsequent to the first previous conviction having become final, on conviction he shall be punished by confinement in the Texas Department of Corrections for life."
[3] The indictment is under the following Section of V.T.C.A. Penal Code (effective Jan. 1, 1974):
"Sec. 31.03. Theft
(a) A person commits an offense if, with intent to deprive the owner of property:
(1) he obtains the property unlawfully; or
(2) he exercises control over the property, other than real property, unlawfully.
(b) Obtaining or exercising control over property is unlawful if:
(1) the actor obtains or exercises control over the property without the owner's effective consent; or
(2) The property is stolen and the actor obtains it from another or exercises control over the property obtained by another knowing it was stolen." (Emphasis supplied)
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46 N.J. Super. 152 (1957)
134 A.2d 345
TOWNSHIP OF WASHINGTON, IN THE COUNTY OF BERGEN, ETC., ET ALS., PLAINTIFFS, AND BOROUGH OF HO-HO-KUS, A MUNICIPAL CORPORATION OF THE STATE OF NEW JERSEY, INTERVENING PLAINTIFF,
v.
VILLAGE OF RIDGEWOOD, IN THE COUNTY OF BERGEN, ETC., ET ALS., DEFENDANTS. CHARLES W. GRENZ, ET ALS., PLAINTIFFS,
v.
VILLAGE OF RIDGEWOOD, IN THE COUNTY OF BERGEN, ETC., ET ALS., DEFENDANTS.
Superior Court of New Jersey, Chancery Division.
Decided August 9, 1957.
*153 Mr. Lloyd L. Schroeder, attorney for plaintiffs Township of Washington, et als.
Messrs. Toner, Crowley, Woelper & Vanderbilt, attorneys for plaintiffs Charles W. Grenz, et als.
Mr. Paul A. Vivers, attorney for plaintiff-intervenor Borough of Ho-Ho-Kus.
Mr. James A. Major (Mr. William E. Reinhardt, of counsel), attorney for defendants Village of Ridgewood and Pittsburgh Des Moines Steel Co.
*154 GRIMSHAW, J.S.C.
The Village of Ridgewood operates a municipal water system. In addition to supplying the public water needs of the municipality, Ridgewood sells water to its own inhabitants and those of the neighboring communities of Glen Rock, Midland Park and the greater part of the Township of Wyckoff.
In 1954 the village commissioners determined to increase the capacity of the water system. Accordingly, a consulting engineer, Mr. Alfred Crew, was retained to make a survey and report his findings to the commissioners. Mr. Crew's report was submitted under date of December 31, 1954. Upon receipt of the Crew report the village commissioners referred it for comment to Mr. Charles Capen, another expert in the field. This latter action did not indicate a lack of confidence in Mr. Crew; rather, it was taken because of a laudable desire on the part of the commissioners to exercise caution in view of the size of the project. Mr. Capen's comments on the Crew report were forwarded to the village commissioners on February 15, 1955.
In his report Mr. Crew recommended, among other things, the erection of three elevated tanks for the storage of water. Two of the tanks, known respectively as the Goffle tank, having a capacity of two million gallons, and the Cedarhill tank, having a capacity of one million gallons, were to be located in the Township of Wyckoff. The third, known as the Van Emburgh tank, having a capacity of 500,000 gallons, was to be located on a plot owned by the village on Van Emburgh Avenue. This tract is partly in Ridgewood and partly in the Borough of Ho-Ho-Kus and adjoins the Township of Washington. All of the sites are in the first-class residential zones of the municipalities in which they are respectively located. In addition, the Van Emburgh tract borders on the one-family residential zone of the Township of Washington.
In his comments on the Crew report, Mr. Capen, while generally approving the conclusions reached, had this observation to make:
*155 "In areas where elevated tanks have been established (and particularly where such installation has been made prior to nearby residential developments) repetition of the practice may well be in order. A very serious question is raised, however, in regard to placing an elevated tank in the Goffle area, near Goffle Road. There are a number of substantial residences in the vicinity which will probably be adversely affected in value by such a structure. It is therefore recommended that the entire matter of this storage be carefully reviewed and that an underground or ground level storage tank be substituted. This procedure is not a new trend but has been adopted in various residential communities."
During the final hearing Mr. Capen was examined in connection with the quoted recommendation. He was asked why, in view of the fact that the Van Emburgh locality was of a much higher type than the Cedarhill location, he had not made a similar recommendation with reference to the Van Emburgh site. Mr. Capen's reply was that at the time of his report he had not seen the Van Emburgh area for some years. He agreed that the character of the neighborhood had changed drastically since last he had seen it.
Thereafter, on June 14, 1955, the village commissioners of Ridgewood adopted a resolution appropriating the necessary funds for the new construction and authorizing the issue of bonds to cover the cost. Objections were raised by the Township of Wyckoff to the construction of elevated tanks at the Goffle and Cedarhill sites. In the face of the opposition from Wyckoff, Ridgewood amended its plan, purchased additional property and prepared to construct ground level tanks in the vicinity of the Goffle and Cedarhill sites.
In the meantime Mr. Crew, on behalf of Ridgewood, made an informal application to the municipal authorities of Ho-Ho-Kus for permission to erect a storage on the Van Emburgh site. The request was referred to the Ho-Ho-Kus Board of Adjustment, which met with Mr. Crew. After the meeting the board of adjustment orally recommended the granting of a variance and the building permit was issued.
Work on the foundation of the Van Emburgh tank was started on January 23, 1956. On April 11, 1956 the work on the superstructure was commenced and continued until restrained by this court at the request of the Township of *156 Washington in an action filed on April 23, 1956. On April 24, 1956 the Ho-Ho-Kus borough council revoked the building permit on the ground that the construction of the tank was in violation of the terms of the variance theretofore granted to the Village of Ridgewood. The restraint was dissolved shortly thereafter but work on the tank was not resumed in view of the revocation of the Ho-Ho-Kus building permit.
Testimony at the hearing disclosed a sharp difference of opinion as to what took place at the meeting between Mr. Crew and the Ho-Ho-Kus Board of Adjustment. However, in view of the fact that Ridgewood has admitted that no attempt was made to comply with the provisions of the zoning ordinance of Ridgewood or that of Ho-Ho-Kus, it is unnecessary to attempt to reconcile the conflicting testimony.
The distribution of water by a municipality to its inhabitants and others, for domestic and commercial uses, is a private or proprietary function which in its exercise is subject to the rules applicable to private corporations. Reid Development Corp. v. Parsippany-Troy Hills Township, 10 N.J. 229 (1952). That being so, it follows that the Village of Ridgewood is subject to the zoning ordinance of the Borough of Ho-Ho-Kus and is also subject to the provisions of its own zoning ordinance. See Thornton v. Village of Ridgewood, 17 N.J. 499 (1955).
The defendant Village of Ridgewood claims immunity from compliance with the zoning ordinances of either Ridgewood or Ho-Ho-Kus, citing Aviation Services v. Board of Adjustment of Hanover Township, 20 N.J. 275 (1956). That case, however, does not apply in the situation presented here. In the Aviation case the court had before it the Municipal Airport Act, R.S. 40:8-1 et seq. It decided that the Morristown Municipal Airport was not subject to the zoning ordinance of Hanover Township. In so holding, however, the court expressly limited the effect of its decision:
"Our holding in this case is not to be considered as giving judicial recognition or impetus to a program of wholesale aggrandizement of territory. The authority bestowed upon municipalities to establish *157 and maintain public airport facilities must be reasonably exercised in response to the public need, both present and that fairly to be anticipated. While this court would not condone arbitrary action in the establishment or operation of airport facilities within the domain of another governing power, it is incumbent upon us to lend a liberal construction to the airport legislation, R.S. 40:8-1 et seq., to insure the benefits which were intended to flow to municipalities having the foresight to maintain these facilities."
But even if, as the defendant contends, the operation of the water system is a governmental function, the discretion which the municipality has in carrying out its purposes is not unrestrained. Such action as it undertakes may not be arbitrary and capricious. City of Newark v. N.J. Turnpike Authority, 7 N.J. 377 (1951).
Defendant cites numerous cases in which the courts have considered and refused to overrule the exercise of discretion by various agencies of government. In each of those cases, however, it is made plain that the agency concerned had before it all of the facts respecting the problem there under consideration and acted only after a study of those facts. In the present case the record is clear that as far as the Van Emburgh tract was concerned the village commissioners acted only on the recommendation contained in the Crew report. That recommendation was based solely on engineering considerations. The engineer did not know of nor was he expected to take other elements into consideration.
In authorizing the construction of the Van Emburgh tank the commissioners gave no thought to the character of the neighborhood nor to the effect which the presence of the tank would have on property values. No consideration was given to alternate and less objectionable methods of providing adequate storage facilities. Apparently the fact that Ridgewood owned the Van Emburgh site was what caused the village commissioners to decide to locate the tank on that tract. In my opinion the decision was arbitrary, unreasonable and capricious.
Therefore, for the reasons given above, I am of the opinion that the Van Emburgh tank must be removed.
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528 S.W.2d 67 (1975)
FIREMAN'S FUND AMERICAN INSURANCE COMPANY, Appellant,
v.
PATTERSON & LAMBERTY, INC., et al., Appellees.
No. 837.
Court of Civil Appeals of Texas, Tyler.
July 31, 1975.
First Motion for Rehearing Denied September 11, 1975.
Second Rehearing Denied October 16, 1975.
*68 Touchstone, Bernays & Johnston, W. Richard Bernays, Dallas, for appellant.
Jackson, Walker, Winstead, Cantwell & Miller, D. L. Case, Jack Pew, Jr., Dallas, for appellees.
Appellant's First Motion for Rehearing Denied September 11, 1975.
MOORE, Justice.
This is an appeal from an order granting a summary judgment. Appellant, Fireman's Fund American Insurance Company,[1] brought suit against Patterson & Lamberty, Inc., a Professional Corporation for the practice of law, and attorneys J. Redwine Patterson and Edwin J. Lamberty, Jr., individually, for damages in the amount of $9,093.50 allegedly sustained by Fireman's Fund as a result of legal malpractice on the part of Edwin J. Lamberty. As grounds for a cause of action, Fireman's Fund alleged that on April 14, 1970, it was the insurance carrier for Ramada Inns, Inc. of Irving, Texas, insuring Ramada against loss from fire as well as public liability coverage; that a fire occurred in one of Ramada's motel rooms causing damages to the motel and that as a result of the damage it paid the sum of $3,384.31 in settlement of the claim and took a subrogation agreement authorizing it to recover against those responsible for the fire. Upon investigation, it was determined that the fire was caused by a defective television set manufactured by General Electric Company. Fireman's alleged that it employed appellees for the purpose of prosecuting its subrogation claim against General Electric. Thereafter, a compromise settlement was reached whereby General Electric paid Fireman's the sum of $3,000.00. Fireman's alleged that in consummating the agreement, Edwin J. Lamberty, Jr. exceeded his authority and was guilty of negligence in executing and delivering to General Electric a release which contained an indemnity agreement; that thereafter on September 13, 1971, Sadie Coughlin, a tenant in the room damaged by fire, brought suit against Ramada and General Electric seeking to recover $16,985.61 for clothing and personal effects destroyed by the fire and that as a result of the Coughlin suit judgment was rendered against Ramada and General Electric jointly and severally for $9,000.00, which Fireman's in its capacity as liability carrier for Ramada paid, thereby discharging Ramada and General Electric of liability. Fireman's Fund further alleged that the negligent conduct of appellee, Lamberty, in giving General Electric an indemnity agreement deprived Ramada (and Fireman's as subrogee of Ramada) from recouping from General Electric the sum of $9,093.50 paid by Fireman's in discharging the Coughlin judgment. Appellees answered with a general denial and affirmatively alleged that Fireman's suffered no loss by reason of appellees' alleged malpractice because Fireman's (as subrogee of Ramada) filed a cross-claim in the Coughlin suit and recouped its loss by recovering a judgment over and against General Electric, and having refused to levy execution thereon, Fireman's was not entitled to recover against appellees.
The case came on for hearing before the trial court upon appellees' motion for summary judgment under Rule 166A, Texas Rules of Civil Procedure. As grounds for a summary judgment, appellees alleged that the pleadings, depositions, exhibits and other summary judgment evidence conclusively establishes that despite the indemnity agreement, Fireman's Fund recovered a judgment over and against General Electric in the Coughlin suit, and since Fireman's deliberately refused to levy execution thereon, the evidence conclusively shows that Fireman's suffered no damage as a result of the alleged malpractice. Therefore, appellees alleged that since Fireman's suffered no damages, one of the essential *69 elements of its cause of action was lacking and that appellees were entitled to a judgment as a matter of law. After a hearing, the trial court entered an order granting appellees a summary judgment, from which judgment Fireman's Fund perfected this appeal.
We affirm.
Appellant, Fireman's Fund, seeks a reversal on the ground that the record creates numerous disputed fact issues which can be determined only by the court or jury. In reply, appellees maintain that the judgment may be sustained on the ground that the summary judgment proof establishes as a matter of law that no genuine issue of fact exists upon one of the essential elements of Fireman's cause of action since the proof conclusively shows Fireman's suffered no damages.
The last sentence of paragraph (c) of Rule 166A, Texas Rules of Civil Procedure, providing for summary judgments provides as follows:
"* * * The judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that, except as to the amount of damages, there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law."
In determining the propriety of a summary judgment in favor of a defendant, the question to be determined on appeal is whether the summary judgment proof establishes as a matter of law that there is no genuine issue of fact as to one or more of the essential elements of the plaintiff's cause of action. Gibbs v. General Motors Corporation, 450 S.W.2d 827 (Tex.Sup., 1970).
The ordinary rule that negligence is actionable only where it is the proximate cause of the damages complained of is usually applied in actions against attorneys for malpractice. Lynch v. Munson, 61 S.W. 140 (Tex.Civ.App., 1901); Patterson and Wallace v. Frazer, 79 S.W. 1077 (1904), 45 A.L. R.2d Sec. 5, pp. 19-22. A client claiming negligence on the part of his attorney has the burden of proving that damages resulted. Lynch v. Munson, supra. The specific question to be determined in the instant case is whether the summary proof negates this essential element of Fireman's cause of action.
The facts are not in dispute. They are essentially the same as the facts set forth in the pleading delineated above. In order to properly understand the situation, a detailed discussion of some facets of the case will be necessary.
The record reveals that several months after appellee Lamberty delivered to General Electric the release containing the indemnity agreement, a suit was instituted in the 116th District Court of Dallas County by Sadie Coughlin and Paul Coughlin against Ramada Inns and General Electric. In that suit, the plaintiffs sought judgment against Ramada and General Electric for damages in the amount of $16,985.61 for the loss of clothing and other personal effects caused by the fire in the motel room. Fireman's Fund, being the liability carrier for Ramada and the indemnitor of General Electric by reason of the contract executed by its attorney Lamberty, assumed the defense of the case on behalf of both Ramada and General Electric, being represented by Mr. Richard Bernays, Fireman's attorney in the cause.
Thereafter, Mr. Bernays filed a "First Supplemental Answer" in the Coughlin case, alleging that the General Electric television set was defective and unreasonably dangerous and was the cause of Mrs. Coughlin's damages, so that,
"* * * if any judgment be had against Ramada Inns herein it should recover over and against General Electric Company the full amount thereof for which it prays."
On March 23, 1972, the Coughlin suit came on for trial. What transpired is set out in the judgment, as follows:
*70 "Be it remembered that on the 23 day of March, 1972, came on to be heard the above styled cause, when appeared the plaintiffs, in person and by their attorneys, and the defendants by their attorneys and announced to the Court that they would waive a jury and submit the matters of fact as well as of law to the Court, except that the parties had agreed that the plaintiffs damages should be found to be $9,000.00, and the court having heard and considered the evidence is of the opinion that the law and the facts are in favor of the plaintiff and against the defendant and further that Ramada Inns should have judgment on its prayer over and against General Electric Company and full indemnity from General Electric Company;
"It is accordingly ORDERED, ADJUDGED and DECREED by the Court that the plaintiffs, Sadie Coughlin and her husband Paul Coughlin, recover of and against Ramada Inns and General Electric Company their damages in the sum of $9,000.00, together with costs of court.
"* * * And it further appearing to the Court that this judgment has been paid and satisfied in full, it is ORDERED that no execution issue except for court costs for which execution may issue if necessary." (Emphasis supplied.)
While we have no way of knowing the basis upon which the summary judgment was rendered in favor of appellee, it appears that the trial judge would have been justified in concluding that even if appellees were guilty of malpractice as alleged, the summary judgment proof showed as a matter of law that Fireman's suffered no damage or loss as a result of the malpractice because it had recouped all of its loss in the action over against General Electric in the Coughlin suit. The judgment in the Coughlin suit recites that "this judgment has been paid and satisfied in full." This means that not only had the Coughlin judgment been satisfied, but also that Ramada's (Fireman's) judgment over against General Electric for $9,000.00 and court costs had been fully paid and satisfied. No-where in Fireman's pleadings does it seek to avoid the entry of satisfaction nor was it alleged that such entry fails to speak the truth. On the contrary, Fireman's apparently relies thereon since the entire judgment was incorporated in its pleadings. There is nothing in the summary judgment proof suggesting that the entry of satisfaction was the result of fraud, accident or mistake. Upon the record before us, we are compelled to conclude that Fireman's Fund, as subrogee, having recovered its entire loss from General Electric, suffered no damage or loss as a result of appellees' alleged malpractice. Consequently, since the undisputed proof negates the essential element of damages, appellees were entitled to a summary judgment.
In reaching the foregoing conclusion, we recognize that both parties to this appeal have briefed the case on the assumption that General Electric has never over paid or discharged Ramada's judgment over against it. Nevertheless, the Coughlin judgment, together with the recitals made therein, constitutes a vital part of the summary judgment proof. The entry reciting satisfaction in full stands unchallenged. In these circumstances, we believe the recitation is controlling.
The judgment of the trial court is affirmed.
ON MOTION FOR REHEARING
Appellant asserts on Motion for Rehearing that this Court erred in considering the recitals of the judgment rendered in the case of Coughlin v. Ramada and General Electric because the same was not a certified copy or otherwise properly authenticated copy as required by Rule 166A. We find no merit in this contention. The record reveals that Fireman's incorporated a copy of the judgment in its petition. Since Appellant made the judgment a part of its pleadings, the judgment was properly *71 before the trial court whether authenticated or not. The record further reveals that a copy of the judgment was introduced into evidence in connection with the deposition testimony of Robert M. Blair, Fireman's Claims Supervisor. Since the judgment was introduced as a part of the deposition, we think the lack of authentication was a mere formal deficiency which should have been raised in the trial court and may not be raised for the first time on appeal. Youngstown Sheet & Tube v. Penn, 363 S.W.2d 230 (Tex.1962).
Appellant further asserts that this Court erred in affirming the summary judgment on a "ground" directly contradicted by Appellees' Brief in which Appellees assert: "It is undisputed that the judgment is valid and Could be executed upon, but upon the advice of Mr. Bernays, Fireman's Fund has deliberately withheld execution." (Emphasis added by Appellant.) We overrule the contention.
Our decision affirming the summary judgment was not made on the basis of Appellees' contention that Ramada (Fireman's) could have levied execution on the judgment. Our decision was made to rest upon the uncontradicted recital in the Coughlin judgment showing that it had "been paid and satisfied in full". While Appellees' grounds for summary judgment are somewhat confusing, we think it apparent that Appellees intended to rely upon the judgment as conclusive proof of the fact that Fireman's had not in fact suffered any loss. In any event, where it "affirmatively appears from the pleadings, admissions, depositions and affidavits that there is no issue as to any material fact upon which the outcome of the litigation depends, then summary judgment is the proper remedy even though it be granted upon a ground different from that specified in the motion." In re Price's Estate, 375 S.W.2d 900 (Tex.1964). See also Phil Phillips Ford, Inc. v. St. Paul Fire & Marine Insurance Co., 465 S.W.2d 933 (Tex.1971); Navarro v. Secret Harbor Farms, Inc., 506 S.W.2d 337 (Tex.Civ.App., Houston (1st Dist.) 1974, writ ref'd n. r. e.).
The record before us conclusively shows that the Coughlin judgment had been "paid and satisfied in full". If the recital in the judgment is correct, and we must assume it is, then the record conclusively shows that Ramada recouped its entire loss from General Electric. Consequently, Appellees alleged malpractice did not cause Fireman's to suffer a loss and as a result Fireman's would have no cause of action against Appellees. Appellant's Motion for Rehearing is overruled.
NOTES
[1] Hereinafter referred to as "Fireman's" or "Fireman's Fund."
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46 N.J. Super. 338 (1957)
134 A.2d 730
HENRIETTA V. BRESKIN, APPELLANT,
v.
BOARD OF REVIEW, DIVISION OF EMPLOYMENT SECURITY, DEPARTMENT OF LABOR AND INDUSTRY, STATE OF NEW JERSEY, RESPONDENT.
Superior Court of New Jersey, Appellate Division.
Argued August 26, 1957.
Decided September 20, 1957.
*340 Before Judges FREUND, CAFIERO and ARTASERSE.
Henrietta V. Breskin, appellant, pro se.
Mr. Clarence F. McGovern, attorney for respondent (Mr. Edward A. Kaplan, on the brief).
The opinion of the court was delivered by ARTASERSE, J.S.C. (temporarily assigned).
This is an appeal from a decision of the Board of Review, Division of Employment Security, Department of Labor and Industry, State of New Jersey, holding appellant to be ineligible for employment benefits for failure to comply with the provisions of N.J.S.A. 43:21-4(c) which required her to demonstrate that during the period of her unemployment she was "actively seeking work."
Appellant was employed by L. Bamberger & Company as a store detective from September 1953 until June 9, 1956. She worked in the company's department store in Newark until October 1955, when she was directed to divide her time among the company's stores in Newark, Plainfield and Morristown. At first she was required to work only a few days every six weeks at the Plainfield and Morristown stores. Later she was directed to rotate her working time equally *341 among these three stores one week at each. Appellant lived in Elizabeth and when working in the Plainfield and Morristown stores she was paid her transportation for any mileage in excess of that to the Newark store, but had to travel on her own time. According to her testimony, she disliked going to work at the suburban stores and wanted to work only at the Newark store. She further testified that the inactivity of the work in the suburban stores caused her to sustain nervous tension for which she received medical treatment. A letter dated September 13, 1956 from her treating physician discloses that she was under treatment for neurosis attributable to her employment activities, but states that she was capable of working in the future in a less emotional field. However, prior to June 1, 1956, at her doctor's advice, she sought a leave of absence and upon its denial gave notice she would leave her employment on June 30, 1956. She also asked that until such date she be relieved from working in the suburban stores, whereupon her employer suggested that she leave on June 9, 1956, which she did.
She filed an unemployment claim on June 26, 1956, reporting regularly, but no benefits were paid. From the date she terminated her employment until October 2 she had made only six applications for work, each of which was in the capacity of a hotel hostess, at which she had once been employed. Three were at hotels in Asbury Park, the names of which she did not recall; another in a designated hotel in Manasquan; another at a designated restaurant in Elizabeth, and another at a designated hotel in Elizabeth. Upon her request in the latter part of September she was given aptitude tests and counseling. Immediately thereafter she diligently sought factory work as a trainee and secured a job in that capacity starting October 12.
The deputy of the Division of Employment Security found appellant to be disqualified for unemployment benefits for having voluntarily left her employment without good cause. On appeal the Appeal Tribunal modified the deputy's ruling, holding that the appellant had good cause to leave her employment *342 but her subsequent failure to actively seek work rendered her ineligible to receive unemployment benefits. This latter ruling was affirmed by the Board of Review, but benefits were allowed after October 2, 1956, when appellant became active in seeking employment until October 8, 1956, after which date she ceased to report. From the disallowance of unemployment benefits between June 26 and October 2, appellant appeals.
While the objective of the unemployment compensation law is to protect against "involuntary unemployment" R.S. 43:21-2, the mere fact that employment is terminated at the instance of the employee, rather than his employer, does not ipso facto preclude relief under this law. As stated in Krauss v. A. & M. Karagheusian, Inc., 13 N.J. 447, 464 (1953):
"The Legislature contemplated that when an individual voluntarily leaves [his] job under the pressure of circumstances which may reasonably be viewed as having compelled him to do so, the termination of his employment is involuntary for the purposes of the act."
See also Campbell Soup Co. v. Board of Review, Division of Employment Security, 13 N.J. 431, 435 (1953); Board of Review, etc. v. Kearfott Mfg. Corp., 46 N.J. Super. 39, 45 (App. Div. 1957). Both the Appeal Tribunal and the Board of Review found that the state of appellant's health presented circumstances compelling the surrender of her position. See Annotation, 14 A.L.R.2d 1308; and Annotation, 158 A.L.R. 396, supplemented in 165 A.L.R. 1382. This finding is adequately supported by the evidence and, hence, should not be disturbed.
Turning to the more important question of appellant's endeavors to locate work as affecting her eligibility for unemployment benefits, we find that prior to 1948 the act provided that "An individual * * * shall be eligible to receive benefits * * * only if it appears that: * * * (c) He is able to work, is available for work." R.S. 43:21-4(c); Muraski v. Board of Review, 136 N.J.L. 472 (Sup. Ct. 1948). Under this provision this court held that *343 to be "available for work," as contemplated by the statute, one should make some effort to obtain employment by actively seeking it within a reasonable distance of his home. Boyer v. Board of Review, 4 N.J. Super. 143, 146 (App. Div. 1949); see also 81 C.J.S. Social Security and Public Welfare § 197, p. 291. Subsequently, the ruling of the Boyer case was implemented by an amendment to the act which not only requires that a claimant be "able to work" and "available for work" but also that he "has demonstrated that he is actively seeking work." L. 1948, c. 110, p. 598. Merely registering with the State Employment Service for work is not sufficient, Krauss v. A. & M. Karagheusian, Inc., supra; nor is registering plus asking relatives and friends if they know of any opportunities for work, Boyer v. Board of Review, supra. Similarly, reading newspaper want ads and telephoning a few places will not suffice, De Rose v. Board of Review, 6 N.J. Super. 164 (App. Div. 1950); nor will reporting once a month at the local union headquarters, Guidice v. Board of Review, 14 N.J. Super. 335 (App. Div. 1951). The appellant here has not made more than the minimal effort to find employment which has been determined to be insufficient in these cases. Appellant worked for a period of more than three years as a store detective and prior thereto worked for a short time as a hostess in a hotel. With limited working background and training she again sought work as a hostess. She did not seek other employment. According to her testimony, she applied for work as a hostess at six places within a period of about three months. What the availability of such work was the record does not disclose, but appellant urged in her notice of appeal that such "jobs are few and far between."
Did the restriction of appellant's job hunting efforts to hostess work with only six applications over a three-month span constitute compliance with the statutory requirements of availability and an active search? See Muraski, supra, where it was held that restricting one's availability to "an office job" at a minimum rate of $1 per hour failed to meet the test of availability, and Annotation, 25 A.L.R.2d 1077. *344 It is said that the provisions for eligibility and disqualification are designed to preserve the Unemployment Compensation Fund for the payment of benefits to individuals in distress from involuntary unemployment and to protect it against the claims of those who would prefer benefits to suitable jobs. Krauss v. A. & M. Karagheusian, Inc., supra, 13 N.J. at page 455; Ludwigsen v. New Jersey Dept. of Labor & Industry, 12 N.J. 64, 68 (1953). However, our law understandably and properly recognizes that after the termination of employment an interim period may be required to permit a person to inquire as to the employment situation in the craft or trade in which he has experience, before he will be required to tramp from factory to factory for general unskilled work. Guidice v. Board of Review, supra; De Rose v. Board of Review, supra. This salutary rule serves not only to be of help to the unemployed but also is in the interest of the common good, for otherwise a competent working force will not be maintained if a skilled workman must, at the peril of losing unemployment benefits, be compelled unreasonably to accept employment not requiring his skill and experience. Nevertheless, each case must be examined on its own facts and the normal allowance of a reasonable interim period of adjustment is but one factor to consider. Cf. Higgins v. Board of Review, 33 N.J. Super. 535 (App. Div. 1955). Here appellant lived with her mother and 15-year-old son. There was nothing to hold her back from a diligent search for work. Moreover, the record discloses she was indecisive as to what kind of work she wanted or was capable of doing. Indeed, when appellant made an active search for work as a factory trainee after October 2, 1956, employment was procured within two weeks. Under these circumstances, this court ought not disturb the Board's finding that she failed to demonstrate that she actively sought work within the intendment of N.J.S.A. 43:21-4(c). Guidice v. Board of Review, supra.
Affirmed.
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528 S.W.2d 875 (1975)
Jack I. GAITHER et al., Appellants,
v.
Robert L. MOODY et al., Appellees.
No. 1215.
Court of Civil Appeals of Texas, Houston (14th Dist.).
October 8, 1975.
Rehearing Denied October 29, 1975.
*876 George D. Martin, Harris, Martin, Carmona, Cruse, Micks & Dunten, Galveston, Jack I. Gaither, Tulsa, Okl., for appellants.
V. W. McLeod, McLeod, Alexander, Powel & Apffel, Irwin M. Herz, Jr., Phipps, Smith & Herz, Galveston, Will D. Davis, Austin, for appellees.
TUNKS, Chief Justice.
This is an appeal from a summary judgment for the defendant in a fraud case.
The plaintiff in the trial court was Jack I. Gaither, a shareholder in Western Republic Life Insurance Company, a Texas corporation. The defendant in the trial court was Robert L. Moody. Moody was a director and major shareholder of Western Republic. In 1966 Moody was instrumental in the organization of Security National Life Insurance Company, an Alabama Corporation. Moody also was an officer, director and controlling shareholder of Security National.
In 1967 Western Republic was merged into Security National. Gaither's shares in Western Republic were voted in favor of the merger. Before the merger the management of Western Republic solicited proxies from its shareholders for the meeting at which a vote was to be had on the proposed merger. In the proxy statement accompanying such solicitation the assets of Security National were represented to have a value of $7,809,953.00. Of those assets a value of $4,240,977 was attributed to the equity of some land which was owned by the company in Brazoria County, Texas.
There was evidence that Moody had, in 1964, bought the equity in the Brazoria County land for $123,000. It was then subject to an outstanding lien of about $800,000. When Security National was organized Moody conveyed to it the equity in land in payment for all but six of its 200,000 issued shares.
The proxy statement sent to the shareholders of Western Republic did not reveal that Moody had, a few years earlier, acquired for $123,000 the property which was valued in the statement as a $4,000,000 asset of Security National. Section 7.19 of the Texas State Board of Insurance Regulations, effective June 16, provides:
"Sec. 7.19. False or misleading statements. 1. No solicitation subject to this regulation shall be made by means of any proxy statement, form of proxy, notice of meeting, or other communication, written or oral, containing any statement which at the time and in the light of the circumstances under which it is made, is false or misleading with respect to any material fact, or which omits to state any material fact necessary in order to make the statements therein not false or misleading or necessary to correct any statement in any earlier communication with respect to the solicitation of a proxy for the same meeting or subject matter which has become false or misleading." [cf. Act. Sec. 14(a); Reg. 240.14a-9 (FBR Sec. 9)] (Emphasis added)
*877 Tex.Rev.Civ.Stat.Ann. art. 581-33 provides:
A. Any person who
* * * * * *
(2) Offers or sells a security (whether or not the security or transaction is exempt under Section 5 or 6 of this Act)3by means of any untrue statement of a material fact or any omission to state a material fact necessary in order to make the statements made not misleading (when the person buying the security does not know of the untruth or omission, and who in the exercise of reasonable care could not have known of the untruth or omission) is liable to the person buying the security from him, ....
At the time of the merger Moody stood in a fiduciary relationship to both corporations, and, in the solicitation of their proxies, to the minority shareholders of Western Republic. International Bankers Life Ins. Co. v. Holloway, 368 S.W.2d 567 (Tex.Sup.1963). To be entitled to a summary judgment Moody had the burden of proving as a matter of law that there was no fact issue as to one or more of the essential elements of plaintiff's cause of action. Gibbs v. General Motors Corporation, 450 S.W.2d 827 (Tex.Sup.1970). Under those tests we hold that Moody did not discharge his burden of negativing, as a matter of law, fraud on his part. The trial court erred in granting his motion for summary judgment.
Reversed and remanded.
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528 S.W.2d 590 (1975)
Marvin Joel FENTIS, Appellant,
v.
The STATE of Texas, Appellee.
Nos. 49833, 49834.
Court of Criminal Appeals of Texas.
October 8, 1975.
Rehearing Denied November 5, 1975.
*591 Robert M. Jones, Court-appointed, Lewis R. Sifford, Court-appointed, Melvyn Carson Bruder, Court-appointed, Dallas, for appellant.
Jim D. Vollers, State's Atty., and David S. McAngus, Asst. State's Atty., Austin, for the State.
OPINION
ROBERTS, Judge.
These are appeals from convictions under Art. 1160a, V.A.P.C., for assault with intent to murder a peace officer. Trial was before a jury and the jury assessed punishment at life imprisonment in each case. Both the offenses and the trials took place before January 1, 1974, the effective date of the new Penal Code.
The evidence showed that Garland police officers Don M. Ashlock and James Bunch were making a routine investigation around the neighborhood of Laredo Lane and Robin Road in Garland around midnight of March 3-4, 1973. Encountering appellant walking on the side of the road, the officers stopped their vehicle. Appellant turned and advanced on the automobile whereupon the officers alighted from their car and ordered appellant to remove his hands from his pockets. He produced a .45 caliber pistol and a shoot-out ensued.[1] Appellant fled on *592 foot but was apprehended a short time later.
At the trial, appellant's main defenses were self-defense and the fact that he could not tell that Ashlock and Bunch were police officers when they got out of their car. He admitted convictions for assault, petty theft and transporting a stolen vehicle across state lines. On cross-examination, the State attempted to introduce an extraneous offense. Outside the presence of the jury, appellant denied having anything to do with the death of a Houston police officer named Spruill on October 26, 1972. Despite counsel's objections, the court ruled that the question could be asked. When the jury had returned, the prosecutor put the following question to appellant:
"Now, aren't you the same Marvin Joel Fentis who is under indictment in Houston, Texas, for killing a police officer?"
Counsel's objection to the form of this question was sustained and the jury instructed to disregard it. Mistrial was denied. The prosecutor then asked if appellant was the one who had killed a Houston police officer named Spruill on March 26, 1972. Counsel re-urged the objections he had made outside the presence of the jury and they were again overruled. Appellant then answered the question in the negative. No further attempt was made by the State to connect appellant with the commission of this extraneous offense.
In related grounds of error, appellant urges (1) that admission of the extraneous offense was error because it was not admissible on the issue of intent, (2) that admission of the extraneous offense was also error because it was not shown to be connected to appellant, and (3) that the reference to an indictment pending against appellant was prohibited by Art. 38.29, V.A.C.C.P.[2]
With regard to the admissibility of the extraneous offense, it is true that a specific intent to kill can be presumed from appellant's use of a deadly weapon, and thus intent to kill was not really in issue. Rodriguez v. State, 486, S.W.2d 355, 359 (Tex.Cr.App.1972). However, extraneous offenses are also admissible on the element of scienter, or, in this case, appellant's ability to recognize a policeman in uniform at night, or knowledge that he was such. The extraneous offense would be admissible on the question of appellant's knowledge that the victims were police officers, a specific intent element of Art. 1160a, V.A.P.C. Albrecht v. State, 486 S.W.2d 97 (Tex.Cr.App. 1972).
It is elementary that an accused's connection with an extraneous offense must be shown with some degree of certainty before evidence of that offense can come in, assuming it is relevant. Carmean v. State, 163 Tex. Crim. 218, 290 S.W.2d 240 (1956); Tomlinson v. State, 422 S.W.2d 474 (Tex.Cr. App.1968); 23 Tex.Jur.2d Evidence, Sec. 195, p. 302. In Tomlinson, the jury was finally instructed to disregard the evidence of the extraneous offense because of this infirmity, but reversal was still required. In the case at bar, the jury was not told that it could not consider this extraneous offense, but the judge included in his charge the standard instruction that no extraneous offense could be considered unless the appellant were shown to be sufficiently connected with the commission of the offense. This charge cannot cure the error in this case.
The State's response to this ground of error is that appellant's objection at trial[3] was too general to preserve this question *593 for review. In Mission Petroleum Carriers, Inc. v. State, 518 S.W.2d 833 (Tex.Cr. App.1975) a much less specific objection was held sufficient to preserve the identical point on appeal. The rule that an accused must be shown to be connected to an alleged extraneous offense is a requirement for properly bringing in such an offense and appellant's objections thereto were sufficient to preserve this question for review.
The harmfulness of this error needs little discussion. Appellant was on trial for assaulting a peace officer with intent to kill. He admitted three relatively minor offenses and then the State suggested that he had murdered a Houston police officer four months before. The error was compounded by the State's suggestion that a grand jury had already indicted appellant for this extraneous offense. The prejudice thus planted in the minds of the jurors can hardly be doubted.
In the event of a retrial of this case, we deem it appropriate to discuss the related matter of the reference to appellant's indictment for the Houston offense.
The only item of proof remotely connecting appellant with the murder of the Houston police officer was the prosecutor's inquiry concerning the indictment pending against appellant in that case. The State contends that evidence of a pending indictment is admissible to show bias, prejudice, and motive, citing Luna v. Beto, 395 F.2d 35 (5th Cir. 1968), cert. den., 394 U.S. 966, 89 S. Ct. 1310, 22 L. Ed. 2d 568, and Blake v. State, 365 S.W.2d 795 (Tex.Cr.App.1963). These cases deal with the admissibility of charges pending against prosecution witnesses to show bias or interest and have nothing to do with a defendant who is testifying. Art. 38.29 controls in such situations and explicitly prohibits evidence of pending indictments to be used for impeachment purposes as was done here. Ridler v. State, 375 S.W.2d 447 (Tex.Cr. App.1964).
Further with respect to the question concerning the indictment, the State points out that it was never answered and that the jury was instructed to disregard the question. In Salazar v. State, 432 S.W.2d 957 (Tex.Cr.App.1968), the error in asking the defendant if he had been convicted of "exconvict in possession of firearms" was held to be harmless even though the conviction referred to was then on appeal, since the question was withdrawn before the defendant could answer it and since the defendant had previously admitted final convictions for three serious felonies. In the instant case, however, it is clear that the prosecutor was aware that criminal proceedings against appellant in connection with the murder of the Houston police officer had not progressed beyond the indictment stage. The contrast in the seriousness of the crimes admitted by Salazar and appellant in this case and in the seriousness of the crimes offered for impeachment in Salazar and this case also provide a distinction between the two cases. The harmfulness of this error in a trial for assault with intent to murder a peace officer is manifest, and cannot be dismissed as it was in Salazar.
For the reasons discussed, the judgment is reversed and the cause remanded.
DOUGLAS, Judge (dissenting).
The majority reverses these convictions because of an unanswered question and one answered favorably to appellant.
The State was no doubt asking questions of appellant to ascertain if he were the person with the same name who shot and killed an officer in Houston. The record reflects that the questions were asked in good faith. The State was not able to connect the appellant by his testimony with the shooting. Appellant answered that he was not the person who shot the officer in *594 Houston. If the State could have shown that appellant shot the officer in Houston it would have been admissible under previous decisions of this Court. See Albrecht v. State, 486 S.W.2d 97 (Tex.Cr.App.1972).
The intent to defend himself was an issue made by appellant's own testimony. He related that he shot at the men in self-defense not knowing that they were officers. If he, without provocation, shot another officer, proof of such an incident would go to his intent and would be admissible to disprove his theory of self-defense.
In Albrecht v. State, supra, this Court noted several instances where extraneous offenses could be admissible. One of the examples given was that they could be introduced to disprove a defensive issue. See Lolmaugh v. State, 514 S.W.2d 758 (Tex.Cr. App.1974), where evidence of shooting another person was held admissible to disprove the defensive issue of self-defense.
Also, in the present record there was some evidence that appellant was a black muslim. There was an attempt to show that muslims hated police officers. Evidence of the other shooting, if the State could have developed it, would have been admissible to show bias and hatred toward a classpolice officers. See Dillard v. State, 477 S.W.2d 547 (Tex.Cr.App.1971).
The question asked about the indictment was unanswered. The judge instructed the jury not to consider it. This Court rarely reverses a case because of unanswered questions. See Mirowitz v. State, 449 S.W.2d 475 (Tex.Cr.App.1969), and Gleffe v. State, 509 S.W.2d 323 (Tex.Cr.App.1974).
Appellant answered the other question that he was not the person who shot the officer. In the context appellant was not harmed by the questions.
The majority asserts that the court's charge compounded an error. There was no objection to the court's charge. There was evidence before the jury that he had been convicted for other offenses.
No reversible error has been shown. The judgments should be affirmed.
NOTES
[1] Appellant was shot in the chin; Ashlock was wounded in the shin; and Bunch was not injured.
[2] "The fact that a defendant in a criminal case * * * is or has been charged by indictment * * * with the commission of an offense against the criminal laws of this State * * * shall not be admitted in evidence on the trial of any criminal case for the purpose of impeaching any person as a witness unless * * * a final conviction has resulted."
[3] "We object, Your Honor, on the ground, number one, it's not the proper way to bring in an extraneous offense. Number two, it's irrelevant and highly prejudicial to him and constitutes an irrelevant offense, unrelated offense."
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528 S.W.2d 844 (1975)
Charles Ray BRAXTON, Appellant,
v.
The STATE of Texas, Appellee.
No. 50161.
Court of Criminal Appeals of Texas.
October 29, 1975.
*845 Glen Williamson (Court-appointed on appeal), Kermit, for appellant.
Jim D. Vollers, State's Atty., and David S. McAngus, Asst. State's Atty., Austin, for the State.
OPINION
DALLY, Commissioner.
This is an appeal from a conviction for the offense of rape; the jury set punishment at imprisonment for 20 years.
Appellant attacks the statutes under which the conviction was obtained; he also complains of improper jury argument and of the admission of testimony concerning his reputation for being a peaceful and law-abiding citizen.
Appellant asserts that:
"The conviction obtained herein is void because the statute upon which it is based is vague, uncertain and indefinite, and contains no requirement therein of a culpable mental state."
V.T.C.A. Penal Code, Sec. 21.02, provides in pertinent part:
"(a) A person commits an offense if he has sexual intercourse with a female not his wife without the female's consent.
"(b) The intercourse is without the female's consent under one or more of the following circumstances:
"(1) he compels her to submit or participate by force that overcomes such earnest resistance as might reasonably be expected under the circumstances;
". . ."
V.T.C.A. Penal Code, Sec. 6.01(a), provides:
"(a) A person commits an offense only if he voluntarily engages in conduct, including an act, an omission, or possession, in violation of a statute that provides that the conduct is an offense."
V.T.C.A. Penal Code, Sec. 6.02, provides in pertinent part:
"(a) Except as provided in Subsection (b) of this section, a person does not commit *846 an offense unless he intentionally, knowingly, recklessly, or with criminal negligence engages in conduct as the definition of the offense requires.
"(b) If the definition of an offense does not prescribe a culpable mental state, a culpable mental state is nevertheless required unless the definition plainly dispenses with any mental element.
"(c) If the definition of an offense does not prescribe a culpable mental state, but one is nevertheless required under Subsection (b) of this section, intent, knowledge, or recklessness suffices to establish criminal responsibility."
The definition of rape in V.T.C.A. Penal Code, Sec. 21.02, does not plainly dispense with a mental element; therefore, by linking V.T.C.A. Penal Code, Sec. 21.02, with V.T.C.A. Penal Code, Sec. 6.02(c), we find that intent, knowledge or recklessness are the applicable mental states and would suffice to establish criminal responsibility for the offense of rape. The language of the indictment, which the court tracked in instructing the jury, alleges that the appellant did:
"... voluntarily, intentionally, and knowingly by force that overcame such earnest resistance as might reasonably have been expected under the circumstances, compel [the prosecutrix], a female not his wife, to submit to sexual intercourse without her consent." (emphasis ours.)
We conclude that appellant's contention is without merit. This ground of error is overruled.
Complaint is next made of improper jury argument; it is asserted that the State's attorney commented on the appellant's failure to testify.
MR. WESCH [PROSECUTOR]:
"... The Defendant was present at the house for three days prior to the time this happened. Why? Ask yourselves why. Did his employer come up here and tell you he was working those three days?
Was he really working? That's something the defense lawyers could have proven up with the boss."
At the time this argument was made counsel for appellant objected saying that the District Attorney was "trying to shift some of the burden of proof." The appellant has changed his grounds of objection on appeal. The court did not rule on the objection, there was no request that the jury be instructed to disregard the comment, and no motion for mistrial was made. Absent an adverse ruling of the court, nothing is presented for review. Kennedy v. State, 520 S.W.2d 776 (Tex.Cr.App.1975); Garcia v. State, 513 S.W.2d 559 (Tex.Cr.App.1974). We also observe that it is clear the District Attorney was referring to the absence of testimony from the employer of the appellant.
Appellant contends in two grounds of error that the State's attorney made improper and prejudicial statements during voir dire examination and final arguments, that "we don't need one man hanging in there so we will have to try this case again." No objection was made subsequent to the statement during either voir dire or final arguments. Nothing is presented for review. See McBride v. State, 519 S.W.2d 433 (Tex.Cr.App.1974); Wheeler v. State, 496 S.W.2d 85 (Tex.Cr.App.1973). These grounds of error are overruled.
Appellant asserts in three grounds of error that the prosecutor engaged in improper argument, once at the guilt or innocence stage and twice at the punishment stage. Once again, there was no objection made and nothing is presented for review. Johnson v. State, 504 S.W.2d 496 (Tex.Cr.App. 1974); Wheeler v. State, supra.
Appellant's remaining contention is that it was error to admit, during the punishment stage of the trial, testimony of Sheriff Bell concerning the reputation of the appellant for being a peaceful and law-abiding citizen. It is here claimed that Bell was unqualified to testify concerning appellant's *847 reputation because his knowledge of the appellant was limited to the facts of the instant case. It must first be noted that no objection was made to Bell's testimony; further, appellant neither made a motion for mistrial, nor requested that the testimony be stricken. The error was not preserved. The witness testified on cross-examination that he had known the appellant since March, 1974. The offense for which appellant was convicted occurred in March, 1974. There was no showing that the witness had no knowledge of the appellant other than the facts of the instant case or that the witness had not spoken with members of the community concerning appellant's reputation. See Mitchell v. State, 524 S.W.2d 510 (Tex.Cr.App.1975). This ground of error is overruled.
The judgment is affirmed.
Opinion approved by the Court.
DOUGLAS, J., not participating.
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257 P.3d 663 (2011)
171 Wash.2d 1021
STATE
v.
OAKLEY.
No. 85321-5.
Supreme Court of Washington, Department I.
June 7, 2011.
Disposition of Petition for Review Denied.
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528 S.W.2d 687 (1975)
Commonwealth of Kentucky, CITY OF DANVILLE, Appellant,
v.
Minnie Graham DAWSON, Appellee.
Court of Appeals of Kentucky.
May 9, 1975.
*688 Ed W. Hancock, Atty. Gen., Kenneth A. Howe, Jr., Asst. Deputy Atty. Gen., Frankfort, J. Thomas Hensley, Hensley & Smith, Danville, William W. Pollard, Asst. Atty. Gen., for appellant.
James F. Clay, Jr., Clay & Clay, Danville, for appellee.
J. Vincent Aprile, II, Asst. Public Defender, Frankfort, for amicus curiae.
PALMORE, Justice.
Shortly after 1:00 A. M. on February 6, 1974, police officers of the City of Danville observed an automobile being operated in an erratic manner and arrested its driver, Minnie Dawson, for the offense of driving while under the influence of intoxicating beverages, committed in their presence. KRS 189.520. While she was sitting in the police cruiser under arrest the officers called for a wrecker to remove her automobile to a place of storage and, in accordance with a standard policy of the Danville Police Department, proceeded to inventory its contents. In the process they opened the trunk of Mrs. Dawson's car and discovered two cases of beer and a large quantity of whiskey in half-pint bottles. This led to an additional charge against her for illegally transporting alcoholic beverages for purpose of sale in a dry territory. KRS 242.230. Eventually she was convicted on the drunk-driving charge, but the trial court directed a verdict of acquittal on the transporting charge after excluding evidence of the liquor and beer upon the ground that it had been obtained by an illegal search in violation of the Fourth Amendment. The Commonwealth appeals, seeking a certification of the law.
The Commonwealth's contention is that the evidence was admissible under "the rule that evidence of crime found in plain view by law enforcement officers who enter an impounded vehicle without a search warrant for the purpose of inventory and storage of effects is admissible over Fourth Amendment objections," citing Harris v. United States, 390 U.S. 234, 88 S. Ct. 992, 19 L. Ed. 2d 1067 (1968), and Cady v. Dombrowski, 413 U.S. 433, 93 S. Ct. 2523, 37 L. Ed. 2d 706 (1973).
In Harris, the automobile in which the incriminating evidence was found had been lawfully impounded as evidence following the arrest of its owner on a robbery charge. A regulation of the police department required officers to search an impounded vehicle, remove all valuables from it, and leave a property tag listing appropriate information. In the course of executing this procedure at a storage lot to which the automobile had been towed, the arresting officer rolled up the car windows and locked the doors. When he opened the door on the passenger side he discovered an automobile registration card, issued to the victim of the robbery, lying face up on the metal stripping over which the door opened and closed. The decision of the Supreme Court with respect to the admissibility of this evidence was as follows (emphasis added):
"The sole question for our consideration is whether the officer discovered the registration card by means of an illegal search. We hold that he did not. The admissibility of evidence found as a result of a search under the police regulation is not presented *689 by this case. The precise and detailed findings of the District Court, accepted by the Court of Appeals, were to the effect that the discovery of the card was not the result of a search of the car, but of a measure taken to protect the car while it was in police custody. Nothing in the Fourth Amendment requires the police to obtain a warrant in these narrow circumstances.
"Once the door had lawfully been opened, the registration card, with the name of the robbery victim on it, was plainly visible. It has long been settled that 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 and may be introduced in evidence."
In Dombrowski, the automobile in question had been wrecked on the highway and had to be removed at the instance of police officers investigating the accident. The driver was taken to a hospital in a drunken condition. He was an off-duty Chicago policeman, and the local officers believed that he was required to carry his service revolver at all times. In an effort to find such a weapon, in order that it might not fall into unauthorized hands, they searched the automobile at the storage lot to which it had been removed. During the course of the search they discovered incriminating evidence of a homicide committed by the driver. The Supreme Court held this evidence admissible upon the ground that under the circumstances of the particular case the search was not unreasonable:
"Where, as here, the trunk of an automobile, which the officer reasonably believed to contain a gun, was vulnerable to intrusion by vandals, we hold that the search was not `unreasonable' within the meaning of the Fourth and Fourteenth Amendments." 413 U.S. at p. 448, 93 S.Ct. at p. 2531.
Thus far the Supreme Court has not decided whether or under exactly what circumstances an inventory procedure, either ad hoc or conducted pursuant to regulation or custom, is a search. Other courts have deployed to all points of the compass. See annotation at 10 A.L.R.3d (1974 Supp.), p. 8. An objective and well-reasoned analysis is presented in United States v. Lawson, 487 F.2d 468 (8th Cir., 1973), in which, as in this case, there was "no assertion that the search . . . [could] . . . be justified upon any ground other than as an inventory search." 487 F.2d at p. 469.
Lawson and a companion, Fawcett, were arrested on separate charges of passing cold checks. Fawcett's car, which was parked in a motel parking lot with its doors and trunk locked, was impounded and taken to the police station. In accordance with regulations applicable to impounded vehicles it was completely searched for the purpose of preparing an inventory of its contents and placing the valuables in storage. Discovery of a pistol in the trunk led to federal firearms charges, during the trial of which this evidence was excluded. In affirming the judgment the Circuit Court of Appeals observed that "the standard of reasonableness must be evolved in light of the Fourth Amendment, not in light of what our view of reasonable police procedures might be," (487 F.2d at p. 475) and concluded as follows:
"We agree with the District Court that the search of the automobile and seizure of the revolver was unreasonable. It was not justified by a warrant or any exception to the warrant requirement, nor do we wish to create an exception for what might be called `searches incident to police custody and control.' If such an exception is to be created, we feel that it should be done by the Supreme Court. In so holding, we do not formulate a rule that every inventory search is per se unreasonable. However, we do think that the fact such a search is made pursuant to a police regulation should have no bearing in determining whether the search is reasonable under all circumstances."
* * * * * *
*690 "We think the proper approach in this area is to assess the reasonableness of the police conduct in light of all the circumstances of the case, without giving effect to the presence or absence of a police regulation. This approach does not have the surety of a rule declaring all inventory searches to be reasonable or unreasonable, and must to some extent leave law enforcement officials with some uncertainty as to what will be considered reasonable or unreasonable. This, however, appears to be a fact of life when dealing with Fourth Amendment problems in a variety of contexts. When unsure as to the legality of their contemplated conduct, it is always open to the police to attempt to secure a warrant in order to have a prior judicial determination of the reasonableness of their proposed conduct, though in many instances the exigencies of the situation may preclude such a course. We do not believe it possible for this court to settle this area of the law. We do think, however, that it should only be in the atypical case that police officers would find it necessary to conduct a general inventory search of an impounded vehicle. The owner or operator of a vehicle may be able to take reasonable steps to safeguard his property at the time of arrest, thus obviating the necessity of impoundment in that instance, unless, of course, the automobile has been impounded as evidence, or pursuant to a forfeiture statute. If the impounding is done for the stated reason, the protection of the owner's property, it is only reasonable that the owner be allowed to choose whether or not he wishes his car impounded. In cases where the owner or operator cannot make his wishes known, whether because of incapacity, or absence (i.e., a parking violation), in most instances the property would be adequately safeguarded by rolling up the windows and locking the doors, subject, of course, to reasonable steps to safeguard property in plain view within the automobile. We think such a standard procedure would insure as well as an inventory protection against groundless claims for lost property. In the instant case, it is hard to see, when the car was locked and the windows rolled up at the time it was impounded, how the property is better safeguarded by a breaking into the car and locked trunk to inventory. In many cases, the value of the property `safeguarded' by these actions would be less than the damage caused to the automobile by these `protective' measures.
"The case before us is not the atypical case that would support an inventory search. No justification, except police custody of the vehicle, has been advanced or is supportable on the record to validate the warrantless search of the locked trunk of the vehicle. The search was therefore unreasonable."
In the case before us here the arresting officer had more reason to impound the automobile than did the police in Lawson, because the driver was not capable of operating it herself. Nevertheless, the ticket and complaint completed pursuant to the arrest shows that she lived in Danville, which is not a large metropolis, but a city of the third class. KRS 81.010(3). Though we need not pass on the right of the police, vel non, to impound the car, whether it was necessary for them to do so is an element to be considered in determining whether it was reasonable for them to search it. We do not say that police officers must find a custodian for an automobile on a public street after arresting its driver, but ordinarily it should be just as easy to reach some person at his home as it is to call for a wrecker. Moreover, unless it is necessary for the police to impound a vehicle they are no more responsible for its security than they are for the security of the home from which the owner's arrest causes him to remain absent. If it is locked and the keys are given back to him, and if the arrest is valid, it is no fault of the police that the car must remain unguarded until he is able to make arrangements for its removal. Although in this particular instance the driver was not capable of operating her vehicle while under *691 custody, the practice of impounding vehicles following arrests for mere traffic violations is utterly unnecessary and, indeed, is of questionable legality.
The facts of this case do not bring it within the "plain view" principle of Harris or the "reasonableness" test of Dombrowski. Our view is that if it is reasonably necessary either to impound and store a vehicle or to leave it unattended, police officers may close and lock it, and that whatever they observe in plain view during that process may be used as evidence in support of any charge to which it may be relevant, but that the opening of or prying into compartments or containers within the vehicle constitutes a search, which in the absence of a warrant or of special circumstances as exemplified by Dombrowski is in violation of the Fourth Amendment.
The law is so certified.
All concur.
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4 So. 3d 594 (2007)
EX PARTE KIM TIMOTHY KELLEY
No. CR-06-0531.
Court of Criminal Appeals of Alabama.
February 2, 2007.
Decision of the alabama court of criminal appeals without opinion. Mand. pet. dismissed.
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528 S.W.2d 216 (1975)
Mary Helen HALLIBURTON, Appellant,
v.
The STATE of Texas, Appellee.
No. 49457.
Court of Criminal Appeals of Texas.
July 16, 1975.
On Rehearing October 15, 1975.
Roland H. Hill, Jr. and Harry L. Williams, Fort Worth, for appellant.
Tim Curry, Dist. Atty., and Tom E. Hill, William W. Chambers and Travis Young, Asst. Dist. Attys., Fort Worth, Jim D. Vollers, State's Atty., and David S. McAngus, Asst. State's Atty., Austin, for the State.
OPINION
DOUGLAS, Judge.
This is an appeal from a conviction for murder. The jury assessed the punishment at life.
The appellant admitted shooting her common-law husband, Willie Lee Scott, in the front room of their home. No one else was present. She claimed self-defense and no intent to kill.
The sole question for review relates to the proof of her shooting another man.
The State introduced a portion of her confession. Appellant introduced the remainder of the confession and testified that she shot the deceased after he had threatened her with a gun. She related that the deceased had a pistol and while sitting there "parking with his gun in his hand" he had said, "`Bitch, you know I'll kill *217 you.'" She stated that she went and got her pistol and tried to calm him down. He put the pistol back in his pocket and she put hers back under the pillow on the couch. About five minutes later the argument was renewed. According to the appellant, the deceased hit her with his pistol and knocked her down. She reached under the pillow on the couch, got her gun and came up shooting. She said that she was not trying to kill him but only to stop him. He grabbed her, they "tusseled," he hit her on the side of the head again with his pistol and they fell to the floor. While wrestling, she shot him.
After the defense rested the State called Morris Myers who testified that the appellant, in her car, pulled up beside him while he was walking on South Calhoun Street in Fort Worth. She stopped the car and asked him for money that he owed her. He told her that he didn't have any money and then the appellant picked up her pistol, got out of the car and shot him in the side as he ran. This happened some five weeks after the shooting in the present case.
The appellant complains that the court erred in admitting the testimony of Myers.
The issue of self-defense and no intent to kill was raised during appellant's testimony when the following occurred:
"Q. (By defense attorney) ... When you reached up under the couch and got your gun and came up shooting, were you shooting at Scott, trying to kill him?
"A. (Appellant) No, sir, I wasn't shooting at him or trying to kill him.
"Q. What were you trying to do?
"A. I was trying to stop him. I figured if I shot at him he would stop.
"Q.... Now, you were merely trying to stop him when you came up shooting?
"A. Yes, sir, I was."
The above testimony concerned appellant's initial shooting at the deceased and prior to the wrestling on the floor where she killed him. Then she testified as follows:
"Q. Now, Mary, at the time you shot him and at the time you went to the ground there and tusseled him, did he have his gun in his hand?
"A. Yes, sir, he did.
"Q. I'll ask you, Mary, at that time, were you scared that he was going to do you bodily injury or kill you?
"A. Yes, sir, Mr. Williams, I was scared to death.
"Q. All right. Now, let me ask you this, Mary: At all times that this was going on out there, did you want to kill Scott?
"A. No, I loved him.
"Q. You did not want to kill him?
"A. I really did not want to kill him.
"Q. Why did you shoot him when you shot him there the last time?
"A. I was trying to stop him period. It was either him or me. Mr. Williams, that man was going to kill me.
"Q. You actually thought he was going to kill you from what he had done?
"A. I definitely knew he was, Mr. Williams."
On cross-examination the following occurred:
"Q. Isn't it a fact that you were just plain mad at him?
"A. No, it is not.
"Q. You didn't ever intend to kill Scott, did you?
"A. No, sir, I didn't. How can you kill something you love?"
The trial court in its charge to the jury instructed the jury to limit its consideration of the extraneous offense in passing upon the weight given to the appellant's testimony and for on other purpose.
The issue in this case is whether the shooting of Myers was material and relevant to a contested issue on the case.
*218 It has long been the rule in this jurisdiction that one on trial is to be tried for the offense charged and not for remote or disconnected crimes or for being a criminal generally. See 1 Branch's Ann.P.C.2d, Section 188. Albrecht v. State, 486 S.W.2d 97 (Tex.Cr.App.1972), outlines numerous situations in which evidence is admissible even though it tends to show an extraneous offense. The Court noted that an extraneous offense could be introduced "to refute a defensive theory raised by the accused." See Ratcliff v. State, 504 S.W.2d 883 (Tex. Cr.App.1974), and the cases it cites.
The appellant testified to self-defense and that she had no intent to kill. She wanted the jury to believe her testimony. The State was authorized to show that she shot another man some time later to show her intent which tended to disprove her testimony. Appellant cites Lolmaugh v. State, 514 S.W.2d 758 (Tex.Cr.App.1974). Lolmaugh shot and killed his wife's lover. The appellant claimed self-defense. This Court held that a part of his confession in which he admitted to a prior shooting of a man who had been his wife's lover was admissible. When the appellant raised the issue of self-defense, motive became an issue. The prior shooting tended to show Lolmaugh's state of mind at the time he committed the offense for which he was charged.
In Lolmaugh there was the additional fact of the motive of the defendant. The fact that Lolmaugh is a stronger case for the admission of the extraneous offense does not make the testimony in the present case inadmissible.
In Blankenship v. State, 448 S.W.2d 476 (Tex.Cr.App.1969), the defendant there claimed the defenses of alibi and that he had been "framed." Evidence of a subsequent robbery involving the appellant reasonably and logically tended to defeat the defenses urged and, therefore, was admissible.
The record contains no objection to the charge limiting Myers' testimony, and nothing is presented for review.
There being no reversible error, the judgment is affirmed.
ODOM, J., dissents.
ROBERTS, Judge (dissenting).
There is a clear distinction between this case and Lolmaugh v. State, 514 S.W.2d 758 (Tex.Cr.App.1974), upon which the majority so heavily relies.
In Lolmaugh, the appellant was convicted of the murder of his wife's current lover. There the appellant took the stand and by his testimony raised the issue of self-defense, and hence of motive. The State then introduced a portion of appellant's confession in which the appellant admitted shooting another man who had also been his wife's lover. This Court held that the extraneous offense was admissible since:
"[P]roof that [appellant] had shot another of his wife's lovers would tend to prove his motive in the present case. This would tend to show his state of mind toward a class, lovers of his wife, and this state of mind or motive was such that he would shoot members of that class." Lolmaugh v. State, supra, at 759. (Emphasis added)
In Lolmaugh, the Court relied on Dillard v. State, 477 S.W.2d 547, 551 (Tex.Cr.App. 1972), where we said:
"Where the accused has threatened or shown a feeling of ill-will or animosity towards all parties of one class then these threats or offenses may be admitted into evidence even though they show extraneous offenses. (Emphasis added.)"[1]
In the instant case, appellant was convicted for the murder of her common-law husband, Willie Lee Scott. The extraneous *219 offense involved the shooting of Morris Myers some five weeks later. Myers testified that he had known appellant for "about four years."[2] At trial Myers specifically denied having lived with appellant during the five-week period after the death of Scott, although he admitted spending time at her house both before and after the death of Scott. According to Myers's testimony, appellant shot him after he encountered her on the street and refused to pay her the money he owed her. In no way does Myers's testimony reflect that he and the appellant were lovers or that they had any relationship comparable to that of husband and wife, or that any "intimate" relationship between them in any way brought about the extraneous offense.
On these facts, there is simply no "one class" of individuals into which both Scott and Myers fit, unless we consign them to the "class" of male human beings generally. Compare Ford v. State, 484 S.W.2d 727 (Tex.Cr.App.1972).
I would hold as we did on original submission in Alvarez v. State, 511 S.W.2d 493, 495 (Tex.Cr.App.1974), that:
"While the record does indicate that appellant offered some evidence to raise an issue of self defense, proof of an extraneous offense is in no way probative of appellant's state of mind at the time of the killing in the instant case. Cf. Ford v. State, supra; Rodriguez v. State, [486 S.W.2d 355 (Tex.Cr.App.1972)]."
See also Jackel v. State, 506 S.W.2d 229 (Tex.Cr.App.1974).
The effect of the majority opinion is to destroy the well-established rule that "before extraneous offenses may be properly admitted into evidence, there must be some common distinguishing characteristics, or a series of distinguishing characteristics between of the offense charged and the extraneous offense. In the absence of such a rule, remote and completely unrelated offenses might be recited to the court in order to show that defendant is simply a bad character, or a criminal generally." Newman v. State, 485 S.W.2d 576, 577-578 (Tex.Cr.App. 1972). See also Ford v. State, supra.
The judgment should be reversed.
OPINION ON APPELLANT'S MOTION FOR REHEARING
MORRISON, Judge.
It has been suggested that reliance upon Lolmaugh v. State, Tex.Cr.App., 514 S.W.2d 758, was misplaced. Even if this is correct, we remain convinced that the proper result was reached.
The ultimate question is whether the extraneous offense tends to disprove the appellant's explanation of the primary offense. The presence or absence of similarity is not entirely determinative of the admissibility of the extraneous offense. If the extraneous offense is relevant in tending to disprove the defensive theory, it should be admissible. Albrecht v. State, Tex.Cr.App., 486 S.W.2d 97. See People v. Morehouse, 328 Mich. 689, 44 N.W.2d 830, 34 A.L.R. 2d 676.
In the case at bar it should be borne in mind that the State's case showed an unprovoked killing; the appellant stated that she had acted in self defense. Then, in order to refute or disprove this defense which she had injected in the case, it became relevant to prove that on another occasion she shot another man under circumstances which clearly showed that she had not acted in self defense. Once appellant raised the issue, the State could bring forward evidence, not otherwise admissible, that refuted her explanation of the shooting.
Having concluded that evidence of the second shooting was admissible, the appellant's motion for rehearing is overruled.
*220 ROBERTS, Judge (dissenting).
While I adhere completely to my original dissenting opinion in this case, I must again express my disagreement with the position of the majority.
The effect of the court's holding on rehearing is to allow in evidence any extraneous assault in any murder case where the defendant takes the stand and states that she acted in self-defense. Not all such assaults "have a direct tendency to prove guilty knowledge or intent." 23 Tex.Jur.2d 308, Evidence, Sec. 198. Therefore, only those which do have such a "direct tendency" should be considered relevant and admissible. This is why we have previously required extraneous offenses to bear a substantial similarity to the main offense. Newman v. State, 485 S.W.2d 576 (Tex.Cr. App.1972).
Now, however, the rule is changed by simple judicial fiat. The majority states that the presence or absence of similar characteristics is one factor to be considered in determining whether an extraneous offense will be admitted. However, the majority then makes clear that it is, in fact, no factor at all. The majority has created a balancing test with all weights on one side of the scale. Not considered is the right of the accused not to be tried as a criminal generally, Seay v. State, 395 S.W.2d 40 (Tex.Cr.App.1965), or his right to testify in his own behalf, Art. I, Sec. 10, Vernon's Ann.Tex.Const.[1]
As it is, however, the majority is creating a rulewithout guidelines or safeguards which forces an accused to an unconstitutional choice between these two fundamental rights. If a defendant chooses to testify and urge that she acted in self-defense, as did the appellant here, she automatically waives her right to be free of evidence of her general criminal past. The converse is of course equally true: by choosing not to take the stand the accused prevents the State from using such evidence, but is thereby forced to forfeit the important right to put before the jury relevant, and perhaps exculpatory, facts.
I do not propose that an accused should never be forced to choose between these rights. There are many situations which allow the introduction of extraneous offenses. See Albrecht v. State, 486 S.W.2d 97 (Tex.Cr.App.1972).
In all of those situations, however, adequate guidelines and safeguards are present. This is not true in this case, or the ones which will inevitably follow its vague and prejudicial holding. Criminal defendants, clothed with the presumption of innocence, should not be required to make this unconstitutional choice between two fundamental rights. Compare Simmons v. United States, 390 U.S. 377, 88 S. Ct. 967, 19 L. Ed. 2d 1247 (1968).
I would reverse and remand.
ODOM, J., joins in this dissent.
NOTES
[1] The extraneous offense in Dillard was admitted to show appellant's hostility to blacks as a class.
[2] Myers later testified that he had known appellant for "a year or more."
[1] Our former requirement of substantial similarity protects these important and valuable rights. E. g., Newman v. State, supra.
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528 S.W.2d 703 (1975)
Janice EMBS, Appellant,
v.
PEPSI-COLA BOTTLING COMPANY OF LEXINGTON, KENTUCKY, INC., a Kentucky Corporation, et al., Appellees.
Court of Appeals of Kentucky.
May 23, 1975.
Rehearing Denied September 19, 1975.
Charles T. Walters, Winchester, for appellant.
Leslie W. Morris, II, Stoll, Keenon & Park, Lexington, for appellees Pepsi-Cola Bottling Co. of Lexington, Kentucky, Inc. and Pepsi-Cola Bottling Co. of Winchester.
Janet R. White, Winchester, for appellee Stamper's Cash Market, Inc.
*704 Ben L. Kessinger, Jr., Harbison, Kessinger, Lisle & Bush, Lexington, for appellee Arnold Lee Vice.
LUKOWSKY, Justice.
This is an appeal from a judgment entered by the Clark Circuit Court dismissing the claim of plaintiff-appellant pursuant to a directed verdict granted at the completion of her proof. We reverse and remand.
On the afternoon of July 25, 1970 plaintiff-appellant entered the self-service retail store operated by the defendant-appellee, Stamper's Cash Market, Inc., for the purpose of "buying soft drinks for the kids." She went to an upright soft drink cooler, removed five bottles and placed them in a carton. Unnoticed by her, a carton of Seven-Up was sitting on the floor at the edge of the produce counter about one foot from where she was standing. As she turned away from the cooler she heard an explosion that sounded "like a shotgun." When she looked down she saw a gash in her leg, pop on her leg, green pieces of a bottle on the floor and the Seven-Up carton in the midst of the debris. She did not kick or otherwise come into contact with the carton of Seven-Up prior to the explosion. Her son, who was with her, recognized the green pieces of glass as part of a Seven-Up bottle.
She was immediately taken to the hospital by Mrs. Stamper, a managing agent of the store. Mrs. Stamper told her that a Seven-Up bottle had exploded and that several bottles had exploded that week. Before leaving the store Mrs. Stamper instructed one of her children to clean up the mess. Apparently, all of the physical evidence went out with the trash. The location of the Seven-Up carton immediately before the explosion was not a place where such items were ordinarily kept.
The defendant-appellee, Arnold Lee Vice, was the distributor of Seven-Up in the Clark County area. As such, he supplied Stamper's Cash Market, Inc. with its entire stock of Seven-Up. He would deliver it with his truck to the store and place it in the store and the cooler. Employees of the store would also place Seven-Up in the cooler from other locations in the store. His truck was loaded with Seven-Up by the bottler at the plant.
The defendant-appellee, Pepsi-Cola Bottling Co. of Lexington, Kentucky, Inc., was the bottler who produced and supplied Vice with his entire stock of Seven-Up.
The foregoing narrative is a fair summary of the evidence introduced by the plaintiff-appellant in support of her claim for bodily injury. When she rested her case, the defendants-appellees moved for a directed verdict in their favor. The trial court granted the motion on the grounds that the doctrine of strict product liability in tort does not extend beyond users and consumers and that the evidence was insufficient to permit an inference by a reasonably prudent man that the bottle was defective or if it was, when it became so.
In Dealers Transport Co. v. Battery Distributing Co., Ky., 402 S.W.2d 441 (1966) we adopted the view of strict product liability in tort expressed in Section 402 A of the American Law Institute's Restatement of Torts 2d.
"402 A. Special Liability of Seller of Product for Physical Harm to User or Consumer
(1) One who sells any product in a defective condition unreasonably dangerous to the user or to his property is subject to liability for physical harm thereby caused to the ultimate user or consumer, or to his property, if
(a) the seller is engaged in the business of selling such a product, and
(b) it is expected to and does reach the user or consumer without substantial change in the condition in which it was sold.
(2) The rule stated in Subsection (1) applies although
(a) the seller has exercised all possible care in the preparation and sale of his product, and
*705 (b) the user or consumer has not bought the product from or entered into any contractual relation with the seller."
Comment f on that section makes it abundantly clear that this rule applies to any person engaged in the business of supplying products for use or consumption, including any manufacturer of such a product and any wholesale or retail dealer or distributor.
Comment c points out that on whatever theory, the justification for the rule has been said to be that the seller, by marketing his product for use and consumption, has undertaken and assumed a special responsibility toward any member of the consuming public who may be injured by it; that the public has the right to and does expect that reputable sellers will stand behind their goods; that public policy demands that the burden of accidental injuries caused by products intended for consumption be placed upon those who market them, and be treated as a cost of production against which liability insurance can be obtained; and that the consumer of such products is entitled to the maximum of protection at the hands of someone, and the proper persons to afford it are those who market the products.
The caveat to the section provides that the Institute expresses no opinion as to whether the rule may not apply to harm to persons other than users or consumers. Comment on caveat o states the Institute expresses neither approval nor disapproval of expansion of the rule to permit recovery by casual bystanders and others who may come in contact with the product, and admits there may be no essential reason why such plaintiffs should not be brought within the scope of protection afforded, other than they do not have the same reasons for expecting such protection as the consumer who buys a marketed product, and that the social pressure which has been largely responsible for the development of the rule has been a consumer's pressure, and there is not the same demand for the protection of casual strangers.
The caveat articulates the essential point: Once strict liability is accepted, bystander recovery is fait accompli. Strict Products Liability to the Bystander: A Study in Common Law Determinism, 38 Univ. of Chicago L.R. 625, 630. Moreover, with but one exception no jurisdiction which has adopted strict tort liability has rejected the bystanders claim. Id. at 635. That exception is Davidson v. Leadingham, E.D.Ky., 294 F. Supp. 155 (1968). This was a diversity case in which Judge Swinford was required to construe Kentucky law. He cautiously and laudably refrained from extending the rule in the absence of clear indications in our cases of the direction which we would take. Suffice it to say, this is a question of state law and we are not bound by the opinion.
Our expressed public policy will be furthered if we minimize the risk of personal injury and property damage by charging the costs of injuries against the manufacturer who can procure liability insurance and distribute its expense among the public as a cost of doing business; and since the risk of harm from defective products exists for mere bystanders and passersby as well as for the purchaser or user, there is no substantial reason for protecting one class of persons and not the other. The same policy requires us to maximize protection for the injured third party and promote the public interest in discouraging the marketing of products having defects that are a menace to the public by imposing strict liability upon retailers and wholesalers in the distributive chain responsible for marketing the defective product which injures the bystander. The imposition of strict liability places no unreasonable burden upon sellers because they can adjust the cost of insurance protection among themselves in the course of their continuing business relationship. Anno.: Products Liability: Extension of Strict Liability in Tort to Permit Recovery by a Third Person who is Neither *706 a Purchaser Nor User of Product, 33 A.L. R.3d 415, 417.
We must not shirk from extending the rule to the manufacturer for fear that the retailer or middleman will be impaled on the sword of liability without regard to fault. Their liability was already established under Section 402 A of the Restatement of Torts 2d. As a matter of public policy the retailer or middleman as well as the manufacturer should be liable since the loss for injuries resulting from defective products should be placed on those members of the marketing chain best able to pay the loss, who can then distribute such risk among themselves by means of insurance and indemnity agreements. Caruth v. Mariani, 11 Ariz.App. 188, 463 P.2d 83 (1970). Any inclination to relieve the retailer must have in mind the little corner grocery store but in these days the dealer is more likely to be Safeway Stores or some other nationwide enterprise which is the prime mover in marketing the goods and the manufacturer only a small concern which feeds it to order. Prosser, The Fall of the Citadel, 50 Minn. L.R. 791, 816.
The result which we reach does not give the bystander a "free ride." When products and consumers are considered in the aggregate, bystanders, as a class, purchase most of the same products to which they are exposed as bystanders. Thus, as a class, they indirectly subsidize the liability of the manufacturer, middleman and retailer and in this sense do pay for the insurance policy tied to the product.
Public policy is adequately served if parameters are placed upon the extension of the rule so that it is limited to bystanders whose injury from the defect is reasonably foreseeable. Elmore v. American Motors Corp., 70 Cal. 2d 578, 75 Cal. Rptr. 652, 451 P.2d 84 (1969).
For the sake of clarity we restate the extension of the rule. The protection of Section 402 A of the Restatement of Torts 2d extend to bystanders whose injury from the defective product is reasonably foreseeable.
In the administration of the law we must be satisfied with proof which leads to a conclusion with reasonable probability where absolute logical certainty is not possible. We may be constrained to act upon indecisive evidence where complete proof is impossible. Then the logical, probative force of the evidence produced is measured in part by the test of whether it is the best evidence available. Foltis, Inc. v. City of New York, 287 N.Y. 108, 38 N.E.2d 455. The law does not require an injured plaintiff to go about picking up pieces of an exploded bottle while her leg bleeds profusely or the submission of these pieces, which are not obtainable because they have been discarded by the retailer, to an appropriate agency for the purpose of making a scientific inspection and determination as to defects.
It matters not that the evidence be circumstantial for as Thoreau put it "Some circumstantial evidence is very strong, as when you find a trout in the milk." There are some accidents, as where a beverage bottle explodes in the course of normal handling, as to which there is common experience that they do not ordinarily occur without a defect; and this permits the inference of a defect. Prosser on Torts, 4th Ed., 673. This is particularly true when there is evidence in the case of the antecedent explosion of other bottles of the same product. Coca-Cola Bottling Works v. Shelton, 214 Ky. 118, 282 S.W. 778 (1926).
In cases involving multiple defendants the better reasoned view places the onus of tracing the defect on the shoulders of the dealers and the manufacturer as a policy matter, seeking to compensate the plaintiff and to require the defendants to fight out the question of responsibility among themselves. Prosser, The Fall of the Citadel, supra, at 847.
The motions for a directed verdict should have been denied and the defendants-appellees *707 should have been required to come forward with their evidence.
The judgment is reversed and the cause is remanded to the Clark Circuit Court for further proceedings consistent herewith.
All concur except STEPHENSON, J., who dissents.
STEPHENSON, Justice (dissenting).
I respectfully dissent from the majority opinion to the extent that it subjects the seller to liability. Every rule of law in my mind should have a rational basis. I see none here.
Liability of the seller to the user, or consumer, is based upon warranty. Restatement, Second, Torts § 402 A. To extend this liability to injuries suffered by a bystander is to depart from any reasonable basis and impose liability by judicial fiat upon an otherwise innocent defendant. I do not believe that the expression in the majority opinion which justifies this rule for the reason that the seller may procure liability insurance protection is a valid legal basis for imposing liability without fault.
I respectfully dissent.
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528 S.W.2d 742 (1975)
Johnny ANDERSON, a minor, by his mother and next friend, Rosemary Anderson, Plaintiff-Appellant,
v.
David F. CAHILL, d/b/a D. F. Cahill Construction Company, Defendant-Respondent.
No. 58909.
Supreme Court of Missouri, En Banc.
September 8, 1975.
Rehearing Denied October 13, 1975.
*744 Barbieri, Combs & Gotschall, Roger J. Barbieri, Commodore M. Combs, Jr., Kansas City, for plaintiff-appellant.
Shook, Hardy & Bacon, David H. Clark, Robert E. Northrip, Kansas City, for defendant-respondent.
HENLEY, Judge.
This is an action for damages for personal injuries received by a child when he fell into a construction excavation. Verdict and judgment were for defendant and plaintiff appealed to the Court of Appeals, Kansas City district.[1] That court affirmed the judgment and, on application of plaintiff, we ordered the case transferred to this court. It will be finally determined here the same as on original appeal. Mo.Const. Art. V, § 10. We reverse and remand for error in the giving of two instructions.
Plaintiff was four years, ten months of age on the date of his injury. The excavation into which he fell was in a residential area of Independence, Missouri, on the grounds of St. Mary's Church adjoining Liberty street on the east. Located on these grounds were the church building, the rectory south of the church, both of which faced Liberty street or west; the high school and gymnasium buildings behind or east of the church and rectory; and a secondary school building on the north side of the church which extends east from Liberty back toward the gymnasium. Defendant, in the process of building an addition to the back of the church building, excavated an area approximately 10 feet deep for a large basement and then poured the concrete footings and foundation walls for the addition, leaving an open area or hold of approximately two feet between the east side of the excavation and the foundation wall. Plaintiff and his two sisters, ages 6 and 7, were enroute to a neighborhood grocery *745 store for their mother on a Saturday afternoon when they strayed from their errand onto the construction site. Their home was approximately a half-block from the driveway adjoining the south side of the rectory. Plaintiff was seen to fall headfirst into the open area described above at a point a few feet north of the excavation's south edge. The witness, Mr. Virgil Julian, standing some distance farther north looking west, first became aware of the child when he saw him fall; he immediately jumped into the hole and rescued him.
Mrs. Virgil Julian testified that while in the car waiting for her husband to return, she saw two little girls playing in a sand pile inside the large excavation. She saw a little boy join the two girls and watched them play in the sand pile. Later, she saw her husband come out of the area between the concrete foundation wall and the side of the excavation carrying the plaintiff.
Defendant had erected a snow fence as a barrier in all openings leading from the street and the buildings to the construction area, but had failed to bar one avenue of access: a narrow strip (said to be 2-3 feet wide) behind the rectory and between a construction shed and the high school building leading north from an unbarred driveway on the south side of the rectory directly to the construction area and the excavation.
Plaintiff's first point is that the court erred in giving instruction No. 4, defendant's converse of plaintiff's verdict directing instruction No. 3, for the reasons stated below. Instruction No. 3 reads:
"Your verdict must be for the plaintiff if you believe:
First, defendant maintained an open excavated area, and
Second, defendant knew or should have known that young children would be likely to trespass, and
Third, that the open excavated area was a condition that the defendant knew or should have known involved an unreasonable risk of serious bodily harm to such children, and
Fourth, defendant failed to prevent plaintiff from being exposed to such harm, and
Fifth, defendant was thereby negligent, and
Sixth, as a direct result of such negligence plaintiff was damaged.
The term `negligence' as used in these instructions means the failure to use that degree of care that an ordinarily careful and prudent person would use under the same or similar circumstances."
Instruction No. 4 reads:
"Your verdict must be for the defendant unless you believe:
First, defendant knew or should have known that young children would be likely to trespass, and
Second, that the open excavated area was a condition that the defendant knew or should have known involved an unreasonable risk of serious bodily harm to such children, and
Third, defendant was negligent as submitted in Instruction Number 3, and
Fourth, as a direct result of such negligence plaintiff was damaged."
Plaintiff contends that instruction 4 violated both the letter and the spirit of MAI[2] and MAI 33.01 in that (1) it "was not a true converse but constituted two converse instructions within one * * *"; (2) it "deviated from MAI 33.06(6) which did not need modification * * *"; and (3) it "conversed only two elements of Instruction * * * [3], and failed to use any connecting words to identify the two elements upon which the jury could return its verdict for defendant, and hence constituted a roving *746 commission for omission of what ultimate facts constituted negligence."
Instruction 3 submits and requires a finding of the elements of plaintiff's theory of his right to recover in this case based on § 339, Restatement of the Law, Torts, First (1934). Anderson v. Cahill, supra, 485 S.W.2d at 77-78, and cases there cited. There is no applicable instruction in MAI and the numbered paragraphs of this instruction are said to have been patterned after MAI 22.01, the attractive nuisance verdict director, with modifications necessary to conform to § 339, supra.
Instruction 4, said to be patterned after MAI 33.06(6),[3] converses not only the facts on which negligence is predicated, it also converses negligence generally. As we understand plaintiff's position, it is that defendant is entitled to one instruction conversing the facts on which negligence is predicated[4]or one conversing negligence,[5] but not one instruction conversing both.
Plaintiff relies heavily on Murphy v. Land, 420 S.W.2d 505, 507[1] (Mo.1967),[6] a humanitarian negligence case in which two converse instructions were given, one (MAI 29.06(6), first edition; now 33.06(6)) conversing the several elements of the humanitarian submission and the other (MAI 29.04(1), first edition; now 33.04(1)) conversing all negligence generally. The court held that the giving of these two instructions violated both the spirit and positive direction of MAI that only one converse be given for each verdict directing instruction, and was error. From this, plaintiff argues that the giving of one instruction which converses in combination both the "facts on which negligence is predicated" and "negligence" also violates the spirit and direction of MAI that only one converse be given.
In Young v. Grotsky, 459 S.W.2d 306, 308[1, 2] (Mo.1970) the court said: "MAI makes it clear that * * * there may be included in the one permitted converse instruction more than one proposition, provided only that the propositions conversed are submitted in the verdict directing instruction. * * * The reference in `Notes on Use' that a defendant may give `only one converse' for each verdict directing instruction means `only one converse' instruction."
Instruction 3, the verdict directing instruction to which instruction 4 was directed, required a finding of not only the "facts" submitted in paragraphs "First" through "Fourth," but also that defendant was thereby "negligent." The propositions conversed are submitted in the verdict directing instruction and combining them in the one converse instruction does not violate the proscription of MAI that only one converse instruction be given. Compare Brewer v. Swift & Company, 451 S.W.2d 131, 133[1] (Mo. banc 1970), in which the court held that the giving of an instruction conversing negligence was reversible error where the verdict directing instruction given did not require a finding of negligence, because (1) it allowed the jury to return a verdict for defendant upon finding a proposition not submitted by plaintiff, and (2) it did not comply with the requirement that the converse be in substantially the same language as the verdict director.
Plaintiff's argument that the giving of instruction 4 was error because it "deviated from MAI 33.06(6) which did not need modification" is without merit. It did deviate, considerably. But, if it was error to give instruction 4 it was not error for this reason. MAI 33.06(6), upon which instruction 4 is said to have been patterned, is, as *747 previously noted in footnote 3, an instruction to be used in conversing elements of a humanitarian submission. Plaintiff's theory of recovery obviously was not based on the humanitarian doctrine; hence, MAI 33.06(6), if properly used as a pattern, could not have been used without modification. It would have been error to use it as a converse instruction in this case without modification.
Plaintiff's argument that instruction 4 gave the jury "a roving commission" to find for defendant, because it did not converse all but conversed only two of the numbered paragraphs of instruction 3 is also without merit. Defendant was not required to converse in instruction 4 all of the parts of plaintiff's verdict director or any particular part of it. A defendant may converse any one or more of the elements essential to plaintiff's case. Lietz v. Snyder Manufacturing Co., 475 S.W.2d 105, 109[6] (Mo.1972); Rule 70.01(f);[7] MAI 33.01, supra.
However, it is difficult to determine to which elements of plaintiff's case the converse instruction is directed. It appears at first to be directed only at paragraphs "Second" and "Third" of plaintiff's verdict director, but, on another examination, it also appears to be directed at all propositions submitted in the "First" through "Fourth" paragraphs, because the "Third" paragraph of the converse tells the jury it may find for defendant unless it believes defendant was negligent "as submitted in Instruction Number 3," i. e., all elements of negligence submitted in plaintiff's case. In this respect instruction 4 is misleading and confusing. Furthermore, the "Third" paragraph of the instruction does not converse the "Fifth" paragraph of instruction 3 "in substantially the same language" as that of the verdict director as required by MAI 33.01. It thereby violated MAI 33.01 and the court erred in giving the instruction. Defendant has failed to demonstrate to our satisfaction that this error, combined with the misleading and confusing nature of instruction 4, did not have an effect prejudicial to plaintiff.
Because the case is reversed for the giving of instructions 4 and 6, we suggest that if, upon retrial, plaintiff's verdict director is again patterned after MAI 22.01, that defendant should consider using as a pattern for his converse an instruction other than MAI 33.06(6).
Plaintiff also attacks the giving of instruction No. 6, which reads:
"The term `young children' as used in these instructions means children too young to appreciate the danger of falling from a height."
Plaintiff contends that the court erred in giving this instruction, because (1) it attempts to limit or change, contrary to the provisions of § 339, Restatement, supra, the description or definition of "young children" to whom the possessor of land would be liable for bodily harm; and (2) it is misleading. We agree.
Section 339, supra, reads:
"A possessor of land is subject to liability for bodily harm to young children trespassing thereon caused by a structure or other artificial condition which he maintains upon the land, if
(a) the place where the condition is maintained is one upon which the possessor knows or should know that such children are likely to trespass, and
(b) the condition is one of which the possessor knows or should know and which he realizes or should realize as involving an unreasonable risk of death or serious bodily harm to such children, and
(c) the children because of their youth do not discover the condition or realize the risk involved in intermeddling in it or in coming within the area made dangerous by it, and
*748 (d) the utility to the possessor of maintaining the condition is slight as compared to the risk to young children involved therein."
The Restatement's comment on clause (b), supra, reads, in part:
"An artificial condition may be peculiarly dangerous to children because of their tendency to intermeddle with things which are notoriously attractive to them, but this is not the only childish characteristic which may make an artificial condition, which involves no serious risk to an adult, highly dangerous to children. Children are notoriously inattentive to their surroundings, and this characteristic may make it unlikely that children will discover a condition which would be obvious to an adult. The lack of experience and judgment normal to young children may prevent them from realizing that a condition observed by them is dangerous or, although they realize that it is dangerous, may prevent them from appreciating the full extent of the risk."
The young children to whom the possessor of land is liable for bodily harm under § 339, supra, are those who, "* * * because of their youth[,] do not discover the condition or realize the risk involved in intermeddling in it or in coming within the area made dangerous by it * * *"; his liability is not confined to those who are "too young to appreciate the danger of falling from a height." Instruction 6 erroneously limits or restricts the membership of the group or "class" of trespassing children to whom the possessor of land (defendant) may be liable.
Furthermore, the term "young children," used in § 339, supra, and plaintiff's verdict directing instruction, did not require definition. It is common knowledge that a child almost five years of age is prone to explore, is inattentive to his surroundings while doing so, and is unable to comprehend the danger and risk presented in a construction site such as that involved in this case.
Further, the instruction's definition of young children is not applicable to the facts of this case, is misleading, and is erroneous for these reasons. The facts here do not involve a child falling from a "height" to the ground; they involve a child falling from the natural "security" of ground level into a "hole" in the ground, an artificial condition created by defendant which the child may not have discovered or realized the risk involved in coming within the area made dangerous by it.
For the reasons stated, the giving of instruction 6 was error prejudicial to plaintiff.
The last three points briefed by plaintiff are very general claims of error in the admission of evidence relative to the supervision and care given to students attending St. Mary's school and the warnings given them to stay away from the construction site. In connection with this charge of error, plaintiff also contends the court erred "in allowing persistent reference to `unsupervised children.'"
In the first of these three points plaintiff refers only to the admission of "evidence of St. Mary's supervision of their students at street crossings," and, more specifically, to the testimony of Sister Mary Edwina Comboy, principal of the school, that the elementary school children were not permitted to cross the streets unsupervised. Plaintiff's objection to this testimony was sustained and the jury instructed to disregard it. Also, in connection with allowing defendant to refer persistently to "unsupervised" children, plaintiff's objection was sustained in the only instances thereof mentioned in this point of his brief. For obvious reasons, plaintiff is in no position to charge that the court erred in ruling on the admissibility of this evidence.
In the remaining two points of the three plaintiff contends that the court erred in the admission of evidence that the school children were warned to stay away from the construction area and that defendant had no knowledge that young children, students *749 or nonstudents, had gone into any part of the construction area prior to plaintiff's injury. A related point was discussed in the first appeal of this case. 485 S.W.2d at 78[1]. The court said: "These are facts to be considered by a jury in determining whether or not defendant knew or should have known that children were likely to trespass, but the fact that plaintiff's injury was not preceded by a history of known trespass cannot excuse the defendant if he could reasonably have foreseen the likelihood of the presence of children at the construction site." The court did not err in the admission of this evidence.
The judgment is reversed and the cause is remanded.
MORGAN, HOLMAN, BARDGETT and FINCH, JJ., concur.
DONNELLY, J., concurs in separate concurring opinion filed.
SEILER, C. J., concurs and concurs in separate concurring opinion of DONNELLY, J.
DONNELLY, Judge (concurring).
This is another in a line of cases in which we must deal with contributory negligence in terms of "appreciation of risk;" and where the defenses of assumption of risk and contributory negligence do not differ in legal effect. Cf. Turpin v. Shoemaker, 427 S.W.2d 485 (Mo.1968).
I concur in the majority opinion but desire to indicate my view that, when the question is fully presented to us on appeal, we should consider: (1) abrogating contributory negligence, assumption of risk, and the humanitarian doctrine; and (2) adopting the "pure" form of comparative negligence. Cf. Li v. Yellow Cab Company of California, 13 Cal. 3d 804, 119 Cal. Rptr. 858, 532 P.2d 1226 (1975).
There would seem to be no question that contributory negligence (Butterfield v. Forrester, 1809, 11 East 60, 103 Eng.Rep. 926), assumption of risk (Cruden v. Fentham, 1799, 2 Esp. 685, 170 Eng.Rep. 496), and the humanitarian doctrine, are, as general concepts, court-made and not legislative-made. Cf. Abernathy v. Sisters of St. Mary's, 446 S.W.2d 599 (Mo. banc 1969) and O'Dell v. School District of Independence, 521 S.W.2d 403 (Mo. banc 1975). An exception would seem to be actions for wrongful death (§§ 537.080 and 537.085, RSMo 1969).
Therefore, under Abernathy, supra, I do not believe we need defer to the General Assembly in resolving the matter. The doctrines were established by the courts and, if they are to be abrogated or changed, this Court should abrogate or change them.
NOTES
[1] This is the second appeal in this case, the first being to this court from a judgment based on a directed verdict for defendant on the ground plaintiff had failed to make a submissible case. We reversed, holding plaintiff had made a submissible case under § 339, Restatement of the Law, Torts, First (1934). See: Anderson v. Cahill, 485 S.W.2d 76 (Mo.1972).
[2] Missouri Approved Jury Instructions, second edition. References will be to that edition unless otherwise indicated.
[3] A converse of elements of a plaintiff's humanitarian submission.
[4] For example, see MAI 33.06(6).
[5] For example, see MAI 33.03(2).
[6] Plaintiff also cited in support of his first point: Nugent v. Hamilton & Son, Inc., 417 S.W.2d 939, 941[1-3] (Mo.1967); Brown v. St. Louis Public Service Co., 421 S.W.2d 255 (Mo. banc 1967); Gousetis v. Bange, 425 S.W.2d 91, 94-95[4] (Mo.1968); Royal Indemnity Co. v. Schneider, 485 S.W.2d 452 (Mo.App.1972); Wyatt v. Southwestern Bell Telephone Co., 514 S.W.2d 366 (Mo.App.1974).
[7] References to rules are to Supreme Court Rules.
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101 N.H. 111 (1957)
PHILIP DUMAIS
v.
SOMERSWORTH.
No. 4594.
Supreme Court of New Hampshire.
Argued September 4, 1957.
Decided September 30, 1957.
*112 Burns, Calderwood, Bryant & Hinchey (Mr. Hinchey orally), for the plaintiff.
Leo H. Cater, city solicitor (by brief and orally), for the city of Somersworth.
DUNCAN, J.
On August 2, 1956, the building inspector for the city of Somersworth issued to the plaintiff a building permit authorizing him to construct on land adjoining his residence on *113 James Avenue, in a residential district, a three-stall garage 36 x 30 feet in dimension to be used for the storage of "trucks and/or private cars." The plaintiff immediately commenced construction which was virtually completed by August 28, 1956, when an appeal to the zoning board of adjustment from allowance of the permit was taken by Eugene Barry, the owner of a residence on James Avenue approximately opposite the plaintiff's garage. Following a hearing before the board of adjustment at which the plaintiff was represented by counsel, the plaintiff's permit was revoked. Pending the appeal he was authorized by decree of the Court, to install doors and to paint the structure in the interest of preserving it.
The Somersworth zoning ordinance, adopted in 1953 establishes three districts, designated as "Residential," "Business" and "Agricultural." Article III provides: "The Residential District shall enjoy and be subject to the following provisions and restrictions": This is followed by an enumeration of one-family dwellings; "tourists homes"; use of residences for professional offices; and "churches, schools, sanitariums" and "clubs" with certain exceptions. Subsequent provisions of the article contain specific building restrictions not in issue in this case.
The ordinance, which is loosely drawn, contains no provisions or restrictions with respect to garages, or accessory uses in any district. Cf. Sullivan v. Investment Trust Co., 89 N. H. 112. While the ordinance must be interpreted to require that uses established in a residential district shall be primarily residential except as otherwise provided, it discloses no purpose to prohibit the construction and use of private garages and the evidence indicates that such garages are customarily to be found in the district involved in the appeal.
The master ruled that the board committed no error of law because the ordinance "cannot be interpreted as permitting the construction of a three-car, 36'x 30' garage unattached to a dwelling to be used `for the storage of trucks and/or private cars.'" So far as this ruling relates to the use proposed to be made of the structure for the storage of trucks we consider it to be correct.
The right to construct a garage for uses incidental and accessory to residential uses is not to be considered forbidden even though not expressly permitted by the ordinance. Pratt v. Building Inspector of Gloucester, 330 Mass. 344, 346; Needham v. Winslow Nurseries, Inc., 330 Mass. 95, 103. "Incidental uses have always been authorized where they are customary and do no violence to the *114 plain intent of the statute or ordinance." 1 Yokley: Zoning Law and Practice (2nd ed.) 104.
It is equally plain however that the ordinance was intended to prevent uses of a business or commercial nature within the residential district, except as expressly permitted by the ordinance, or incidental to uses so permitted. See Foo v. Manchester, 97 N. H. 346, 350. On the record before us, neither the board nor the master erred in ruling that storage of the plaintiff's two oil trucks in a garage on his residential premises was a violation of the ordinance. People v. Scrafano, 307 Mich. 655; Lowry v. City of Mankato, 231 Minn. 108; Dolan v. DeCapua, 16 N. J. 599. See City of Warwick v. Campbell, 82 Rawle I. 300; anno. 150 A. L. R. 494.
However by ordering revocation of the permit issued to the plaintiff, the board denied his right to build and use the garage for the storage of "private cars." This we believe was error. Such a use made as an incident of a permitted residential use is neither expressly nor impliedly forbidden by the ordinance. If the plaintiff chooses to make this use, he should neither be forbidden to do so, nor required to raze a structure erected in reliance upon a permit in part lawfully granted.
Although the issue is not clearly raised by his exception, the plaintiff has argued that the master was in error in ruling that the appeal of Barry to the zoning board was not barred by a rule previously adopted by the board. Presumably pursuant to RSA 31:68, 69 (see Sundeen v. Rogers, 83 N. H. 253, 261-2), the board at some time adopted rules for the "conduct of public hearings" before it. Rule 2 in its original form stated that "party or parties appealing . . . shall present his case to the Board . . . either in person or by agent or attorney as he may elect." This rule was amended in 1955 by adding: "within the period of ten (10) days, the party or parties appealing shall file his petition to appeal with the Clerk of the Board."
Barry filed no written appeal within ten days of the date when the permit was granted. The board found however that he had protested to the "building inspector" as soon as it became apparent that construction was about to start and that he had not been informed of the date of the permit or of his right to appeal. The building inspector was clerk of the zoning board, and the evidence warranted a finding that Barry made his complaint within ten days of issuance of the permit.
The master considered that the board's amended rule could not *115 bind a party in the absence of notice of the granting of a permit so as to deprive him of his statutory appeal, and confirmed the implied finding by the board that "the Barry appeal was received within a reasonable time." See RSA 31:69, supra. The denial of the motion to dismiss the appeal is sustained.
In further support of his general exception to the decree, the plaintiff argues that revocation of the permit after the plaintiff has expended more than three thousand dollars in reliance upon it would work unnecessary hardship upon him, and that revocation in such a case is permissible only in instances of fraud, of which there is no evidence in this case. See Winn v. Corporation, 100 N. H. 280. While it is true that vested rights may be acquired by the expenditure of substantial sums in reliance upon a permit properly issued before amendment of an ordinance, this rule does not extend to cases where the issuing official exceeded his authority by issuing a permit in violation of an ordinance then in effect. Lowry v. Mankato, 231 Minn. 108, supra; anno. 119 A. L. R. 1509, 1512. In the case before us, so far as the permit issued to the plaintiff purported to authorize construction and use of a garage "for the storage of trucks," it had no warrant in the ordinance. It could confer no greater rights upon the plaintiff than did the ordinance itself. Lowry v. Mankato, supra, 117.
Since the decree of the Superior Court sustained the order of the zoning board of adjustment revoking the plaintiff's permit in toto, it must be set aside. A decree should be entered vacating the order of the zoning board in part (RSA 31:83), to the extent that it revoked the permit to construct and use the building for the storage of private automobiles, but confirming it insofar as the permit purported to authorize use for the storage of trucks.
Decree vacated; remanded.
WHEELER, J., took no part in the consideration or decision of this case; the others concurred.
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389 Pa. 520 (1957)
Dwight Estate.
Supreme Court of Pennsylvania.
Argued April 16, 1957.
June 28, 1957.
*521 Before, JONES, C.J., BELL, CHIDSEY, MUSMANNO, ARNOLD, JONES and COHEN, JJ.
*522 Charles Morris Hamilton, with him William H. Rivoir, Jr., for appellant.
J. Montgomery Forster, with him Clarence L. Walker, for appellees.
OPINION BY MR. JUSTICE BENJAMIN R. JONES, June 28, 1957:
On November 18, 1926 E. Waterman Dwight, then a person of substantial means, executed a will. Under this will he created a primary trust of $300,000 for two relatives and their descendants and then created a secondary trust of which his residuary estate was the corpus and two grandnieces were the principal beneficiaries. Under the latter trust the income was payable to the two grandnieces for life, with succeeding life estates in their issue; the principal was to be distributed to such of their issue as should be living twenty-one years after the death of the survivor of the two grandnieces and/or such of their children as might be living at the time the testator died; in default of lineal descendants, the testator provided for cross remainders and gifts over to the primary trust. Any principal or income which remained undisposed of was given to the University of Pennsylvania.
On October 25, 1928, the testator, by a codicil (hereinafter termed first codicil), modified that paragraph of his will which created the secondary trust (Third Paragraph). In that codicil the testator directed his *523 trustees to "first pay out of the income of my residuary estate the sum of Five Hundred Dollars ($500.) each month after my decease to Helen Elizabeth Barck for and during her natural life and the balance of said income as therein directed".
On the same day the testator by another codicil (hereinafter termed second codicil) further modified the same paragraph of the will. Therein the testator directed that "in addition to the payment out of income of my residuary estate directed in said Codicil, [the first codicil] there shall also be paid to Ethel Heberton Harris the sum of One thousand Dollars ($1,000.) each month after my death, for and during the term of her natural life, and the balance of income only as directed in the Third clause of my said Will."
By two later codicils the testator increased Miss Barck's bequest to $1,000 monthly, revoked the original primary trust and created a new primary trust of $200,000 for the benefit of a niece.
With the exception of the University of Pennsylvania, Miss Barck and Mrs. Harris,[1] every beneficiary under the will and various codicils was a relative of testator.
The testator died March 7, 1934. His net estate after payment of debts, taxes and administration expenses was less than $200,000.[2] The primary trust could not be set up due to the lack of funds until almost four years subsequent to testator's death. Further, as the result of a lack of funds, no substantial payments toward the monthly bequests to Miss Barck and Mrs. Harris could be made until long after the primary trust was established. Miss Barck died on September 20, *524 1951 and at the time of her death she had not received in full the monthly payments directed in the first and third codicils. After Miss Barck's death, the entire net income from the residuary estate was paid to Mrs. Harris until her death on September 8, 1955.
When the trustee filed its fourth account the entire balance in the secondary trust consisted of personalty valued at $88,785.15. At the audit of this account Mrs. Harris' personal representative (hereinafter called appellant) presented a claim in excess of $200,000, representing arrearages in monthly payments due Mrs. Harris under the second codicil. This claim was based upon two contentions: first, that the bequest to Mrs. Harris was a legal "annuity" and, as such, was entitled to be paid, since the income was insufficient to meet the payments under the bequest, out of the corpus of the trust; second, that, in any event, the arrearages must be paid out of income realized and to be realized after Mrs. Harris' death until all of the arrearages have been paid.
Judge BOLGER, the auditing judge, dismissed both these contentions and awarded the principal of the trust to the trustee to pay the income therefrom to decedent's grandniece in accordance with the Third Paragraph of the will as modified. Exceptions having been filed to this adjudication, the exceptions were dismissed[3] and the adjudication was confirmed by Judge SAYLOR, speaking for the court en banc of the Orphan's Court of Philadelphia County. From the final judgment entered by that court this appeal was taken.
Appellant's first position is that Mrs. Harris' bequest was an "annuity" for the payment of which, since the income from the trust was insufficient, the corpus of the trust may be invaded.
*525 The term "annuity" is difficult of definition. The classic definition of an "annuity" is that of Sir Edward Coke: "Coke, whose definition has, substantially, been adopted by all the text writers (2 Blacks. 40; 3 Kent, 460; Addison on Contracts, 982; 2 Williams on Executors, 885; &c., &c., &c.) says (Co. Litt., 144 b.), `an annuity is a yearly payment of a certain sum of money granted to another in fee for life, or years, charging the person of the grantor only'": Bayard's Estate, 7 DR. 279, 281. At common law a yearly sum charged on the person of the grantor was an "annuity"; however, an annual payment charged on land was a "rent charge" and a sum payable annually by trustees was not an "annuity". It must be recalled that the common law "annuity" was created not by will, but rather by deed or by contract: therefore, the classic definition of an "annuity" does not encompass an "annuity" created by a will or trust.
In Commonwealth v. Beisel, 338 Pa. 519, 521, 13 A.2d 419, former Chief Justice STERN very aptly defined an "annuity" as a ". . . term somewhat loosely used in financial and legal nomenclature and is perhaps incapable of exact definition. Generally speaking, it designates a right bequeathed, donated or purchased to receive fixed, periodical payments, either for life or a number of years. Its determining characteristic is that the annuitant has an interest only in the payments themselves and not in any principal fund or source from which they may be derived".
The distinction between income and an "annuity" was described in Ex Parte McComb, 4 Bradf. (N.Y.) 151: "There is a distinction between income and an annuity. The former embraces only the net profits after deducting all necessary expenses and charges (and may be uncertain in amount); the latter is a fixed amount directed to be paid absolutely and without contingency".
*526 One of the difficulties encountered in defining an "annuity" is the fact that the meaning of the word is so often confused with the method or source of its payment. Adopting the definition that an "annuity" is a right "to receive fixed, periodical payments, either for life or a number of years" it does not necessarily follow that every "annuity" is payable out of corpus or income in subsequent years in the event that the income for a particular year or years becomes deficient for payment of the "annuity". There is no magic in the word "annuity", although some courts attach to the definition of an "annuity" the method for or the source of its payment.[4] Whether a particular bequest is an "annuity" or a "gift of income" may be determinative of the quantum of the bequest, yet only a construction and interpretation of the will or the trust will decide the manner of payment of the bequest in the event that the income becomes deficient for the purpose.
The fact that a testator or settlor uses the word "annuity" in a will or trust is of great significance in determining the intention of a testator or settlor and whether a particular bequest was intended to be a "gift of income" or an "annuity": MacMackin Estate, 356 Pa. 189, 192, 193, 51 A.2d 689; Pusey Estate, 370 Pa. 572, 577, 88 A.2d 750; Elmore Estate, 379 Pa. 155, 156, 108 A.2d 803. However, in the face of a contrary expression expressed in the will or trust, the mere use of the word "annuity" should not be controlling in the determination of the source or manner of its payment.
The right of a legatee whether he be an annuitant or the recipient of a gift of income to have an income deficiency made good out of the corpus of a fund does not depend upon any rule of law, but rather upon the intent of the settlor or testator gleaned from the will *527 or trust provisions and his relationship to the objects of his bounty.[5] In In Re West, 1 Ir. 75, it was said: "The question is always a question of intention. Numerous cases have been referred to, and in this great mass of authority scarcely any settled principles have been arrived at. In nearly every case the decision has turned upon the special words used and the connection in which they occur, affording no light whatever in cases where the words used are different or used in a different connection. What few principles are arrived at are subject to exceptions so numerous and so minute as to be scarcely recognizable as principles at all". The solution of the problems presented upon this appeal does not require that we give a "name" to Mrs. Harris' bequest. We simply are called upon to decide whether under the provisions of the will and codicils the testator intended that any deficiency in income to pay her bequest should be made up out of corpus or income accumulated or received in subsequent years.
Appellant's contention that Mrs. Harris' bequest, unpaid to a great extent during her lifetime, must now be paid either by invading the principal of the trust or by utilizing income from the trust realized since her death can only be resolved by an examination of the terms of the will and the codicils. In the course of such examination we must construe the will and the codicils as one instrument (Foster's Estate, 324 Pa. 39, 44, 187 A. 399; Braun Estate, 358 Pa. 271, 275, 276, 56 A.2d 201; Buzby Estate, 386 Pa. 1, 8, 123 A.2d 723), bearing in mind that the purpose of a codicil ordinarily is to modify or add to a will and that it only changes the will to the extent that it might be inconsistent therewith (Buzby Estate, supra; Boyer Estate, 372 Pa. 553, *528 556, 94 A.2d 721). In endeavoring to ascertain what decedent intended in making this bequest to Mrs. Harris, the language of the late Mr. Justice ALLEN STEARNE in Mulert Estate, 360 Pa. 356, 61 A.2d 841, is particularly appropriate: ". . . This intention is to be gathered from the whole will and is not limited to any particular clause: Williamson's Estate, 302 Pa. 462, 153 A. 765; MacMackin Estate, 356 Pa. 189, 51 A.2d 689; March Estate, 357 Pa. 216, 53 A.2d 606; Siple et ux. v. Greumelli, 357 Pa. 237, 53 A.2d 607. Every will is in a sense unique and therefore precedents are of little value; Kirkpatrick's Estate, 280 Pa. 306, 124 A. 474; Brennan's Estate, 324 Pa. 410; 188 A. 160; Jackson's Estate, 337 Pa. 561, 12 A.2d 338. Each will is its own best interpreter, and a construction of one is no certain guide as to the meaning of another: Bechtel v. Fetter, 267 Pa. 173, 111 A. 50; Williamson's Estate, supra; Emmerich Estate, 347 Pa. 307, 32 A.2d 400."
Under the will no provision was made either for Miss Barck or for Mrs. Harris and it was not until two years later that through the medium of the two codicils provisions were made for them. A comparison of the language of the two codicils executed on the same day in 1928 is highly instructive. The first codicil states that the trustees "shall first pay out of the income of my residuary estate the sum of Five Hundred Dollars ($500.) each month . . . to Helen Elizabeth Barck for and during her natural life and the balance of said income as therein directed." Certain of testator's words and phrases in this codicil are significant; by the use of the words "first pay" testator earmarked the primary payment out of the income for Miss Barck; the clause "out of the income of my residuary estate" indicates the source from which testator directed payment to be made; the clause "the balance of said income as therein directed" not only indicates that testator contemplated *529 that the income from the secondary trust would exceed the amount of Miss Barck's bequest but it constitutes a direction that the balance or excess of income is to be distributed in accordance with the Third Paragraph of the will.
After a recitation that it constitutes a further modification of the Third Paragraph of the will, the second codicil directs "that in addition to the payment out of income of my residuary estate directed in said Codicil, there shall also be paid to Ethel Heberton Harris the sum of One thousand Dollars ($1000.) each month . . . for and during the term of her natural life, and the balance of income only as directed in the Third clause of my said Will". Certain words and clauses of the second codicil are also highly significant: the bequest to Mrs. Harris is "in addition to" Miss Barck's bequest; the omission in the second codicil of the word "second" by contrast to the testator's use in the first codicil of the word "first" may be indicative that testator did not intend to rate Mrs. Harris' bequest as secondary although its position clearly indicates that Mrs. Harris' bequest was to be paid after Miss Barck's bequest had been "first" paid; a reading of the clause "there shall also be paid" and the clause "the balance of income only as directed in the Third clause of my said will" clearly evidences that testator contemplated and intended that the primary, at least, source of payment of Mrs. Harris' bequest, was the income from the secondary trust. To paraphrase testator's intent as gleaned from the words employed by him in the second codicil: I (the testator) have already on this day modified my will by another codicil which provides that Miss Barck receive a bequest to be paid out of income from the secondary trust; I now further modify my will by providing that, in addition to Miss Barck's bequest, and after it has been paid out of the income, I direct that Mrs. Harris *530 be paid a monthly sum of One Thousand Dollars ($1000.) out of the income and that whatever income is left after paying these two bequests shall be distributed as I have directed the income to be distributed under the Third Paragraph of my will. In line with the well established rule of construction which requires that we render every word of a will operative (Brennan's Estate, 324 Pa. 410, 415, 188 A. 160) such a construction as we thus place on the second codicil renders operative each word of the second codicil.
Appellant urges that by the testator's employment of the word "only" he negatived any intent that the bequest to Mrs. Harris be paid exclusively out of income. As we read the second codicil the word "only" qualifies the clause "as directed in the Third clause of my said Will" and not the clause "balance of income". Furthermore, the words "annuity" or "annuities" do not appear either in the will or codicils: no mention of "principal" occurs in either codicil; outside of an expressed directtion that Miss Barck's bequest be paid out of income and a clearly implied, if not expressed, direction that Mrs. Harris' bequest be paid out of income, the codicils are eloquently silent on a source of payment other than income. This obviously carefully drawn will and codicil express no intent that the testator intended any invasion of the corpus of the trust to make up the arrearages in the event either or both the bequests were unable to be paid, either partially or fully, from income. The record is barren of any evidence which discloses that Mrs. Harris occupied a status among the objects of testator's bounty in any way superior to that of the relatives expressly provided for under the terms of the trust.
Neither the third nor fourth codicil the former increasing Miss Barck's bequest to $1000 per month and the latter revoking the original $300,000 trust and substituting *531 therefor a new trust of $200,000 for the benefit of only one grandniece adds any illumination on the proper interpretation of the will and the first two codicils.
After a careful examination of the will and codicils it is our opinion that the testator, by the language of the second codicil read in conjunction with the language of the will and first codicil, restricted payment of Mrs. Harris' bequest to income from the trust and that the corpus cannot be invaded or encroached upon for the payment of any deficiency of income to pay her bequest.
Appellant relies primarily on Johnston's Estate, 264 Pa. 71, 107 A. 335 and MacMackin Estate, supra. In the Johnston case both the parties and the court acted upon the assumption that the bequest constituted an "annuity" and the court permitted an invasion of principal to make up an income deficiency not because the bequest was an "annuity" (it was not so called in the will) but rather because the will expressly made the bequest a charge on the realty and the so-called annuitant was the primary object of the testator's bounty. In the MacMackin case an invasion of principal was permitted because of a combination of factors: the bequests were termed "annuities", the testator's intent, gathered from the provisions of his will, was that the payment of the bequests was not restricted to income and the persons receiving the bequests were the principal objects of testator's bounty. Particularly important is the language of Mr. Justice (now Chief Justice) JONES speaking for this court in the MacMackin case: "The appellant . . . stresses and relies wholly upon the fact that, in making the bequests of the annual sums to the individuals named in the will, the testator spoke, in that connection, of payment `from the income' or `out of the income' of the trust estate. If that were the *532 extent of the decedent's testamentary words and intendment with respect to the character of the bequests, it would at once have to be conceded that they carried with them no more than a right to participate pro tanto in distributions of income annually derived from the trust estate and that, therefore, they were not annuities in the strict legal signification of that term". Neither the Johnston nor the MacMackin cases are presently apposite.
In Sell's Estate, 4 W.N.C. 14, the testator directed his trustees to lease his realty, apply the rents to payment of taxes, interest on a mortgage and repairs, and "to pay to my beloved wife $300. a year in quarterly payments (if the same be practicable) . . . to continue during the term of her natural life . . . and to pay the balance of said rents to my beloved parents and the survivor of them during the natural life of such survivor"; the court ruled that it was not the testator's intent that a yearly deficit in the widow's annuity be made up from any other part of his estate. In Brewster's Estate, 7 Sadler 604, 12 A. 470, testatrix gave her estate to her executors in trust to receive the income and pay the sum of $1000 therefrom toward the maintenance of her children, the balance toward the payment of certain encumbrances on her property and, after the payment of the encumbrances, any excess income was to become part of the principal of the estate; an invasion of principal was not permitted to make up the deficiency in income.
In Pusey Estate, supra, where the testator directed his executors and trustees "`to pay the income accruing on said securities'" to certain named persons in certain specified amounts annually and such was the extent of testator's testamentary directions, we held that, in the absence of any other words which would indicate that the testator intended payment of income deficiency *533 to be made up out of principal, an invasion of principal for that purpose could not be justified.
In Elmore Estate, supra, in a Per Curiam opinion, we affirmed, on the opinion of President Judge BOYLE of the Orphan's Court of Allegheny County, that court's refusal to permit an invasion of corpus to pay income arrearages. In that case the testator throughout his will indicated that income was to be the source of payment of the bequests, the words "annuity" or "annuities" did not appear, and, even though the recipients of the bequests were among the primary objects of testator's bounty, that will, as the present will and codicils, contained nothing to indicate any intent on the part of the testator that the bequests be considered as "annuities" carrying with them the right of an invasion of principal for their payment. See also: Horton v. Cook, 10 Watts 124; Higbee Estate, 70 Dall. & C. 209, 213.
In the construction and examination of a will, with or without codicils, or a trust, to determine what the testator or the settlor intended in the event the income proves insufficient to pay bequests, certain factors must be considered by the court: (1) the presence or absence of a provision in the will or codicil for an invasion of or an encroachment upon corpus in the event the income becomes insufficient (Stolfox v. Sugden, 1 Johns V.C. 234, 70 Eng. Reprint. 410; In re McKeogh's Will, 271 N. Y.S. 362, 151 Misc. 327, aff'd. 281 N.Y.S. 1011, 245 A.D. 750); (2) whether the recipient of the bequest is a primary object of the testator's or settlor's bounty (MacMackin Estate, supra); (3) whether the bequest was intended for the maintenance of the annuitant or the recipient of the bequest (In re Anderson's Estate, 256 N.Y.S. 529, 143 Misc. 250); (4) was there a direction in the will or in the trust that the bequest be paid "from income" or "out of income" (Elmore Estate, supra; MacMackin Estate, supra; Pusey Estate, supra; *534 Lynn Safe Deposit & Trust Company v. Martin et al., 308 Mass. 443, 32 N.E.2d 247; Kling v. Van Cleeve et al., 106 N.J. Eq. 302, 150 A. 684); (5) did the testator or settlor make provision for the disposition of the excess or surplus income (Brewster's Estate, supra; Sell's Estate, supra); (6) if the words used indicate that the fund from which the annuity or bequest is to be paid shall be kept intact and then paid over to certain specified beneficiaries such fact is some indication of an intent that the bequest shall not be paid from principal (In re Von Keller's Estate, 59 N.Y.S. 1079, 28 Misc. 600, aff'd. 62 N.Y.S. 1150, 47 A.D. 625); (7) the use of the words "annuity" or "annuities" may be strong indication that testator intended that the annuitant or recipient of the bequest should have the right to encroach upon principal (MacMackin Estate, supra; Pusey Estate, supra); (8) if the will or trust contains no limitation of payment of the bequest from income such a factor may indicate an intent that the principal may be invaded (Johnston's Estate, supra; Singerly's Estate, 16 D.R. 391; Fitzpatrick Estate, 12 D.R. 730).
A careful examination of the present will and codicils leads to the conclusion that the bequest to Mrs. Harris was not intended to be paid out of the corpus of the trust in the event the income became insufficient to pay the monthly amounts of her bequest.
Appellant further urges that, even if payment of the monthly sums to Mrs. Harris were limited to the income, yet such payments were cumulative and hence all arrearages are payable from income currently available until the entire sum due has been distributed.
Mrs. Harris, during her lifetime, received total payments amounting to $27,642.72 and the claim for payments in arrears amounts to over $200,000; even though Mrs. Harris is now dead her estate claims that it is entitled to all the income from the trust until such time *535 as the arrearages which become due in her lifetime have been fully paid. Appellant relies principally upon Reed's Estate, (No. 1), 236 Pa. 572, 577, 85 A. 15, wherein we stated: "We take the general rule to be it is at least one resting on our own and other authorities, Rudolph's App. 10 Pa. 34; Stewart v. Chambers, 2 Sandford Ch. 382, that where the income out of which an annuity is to be paid fails in any year or years the arrearages on the annuity are to be paid out of subsequent accumulations, unless there is a plain intent expressed in the will to the contrary". This language has been followed by our courts in applicable situations: Smith Trust, 385 Pa. 416, 123 A.2d 623; Brock Estate, 156 Pa. Super. 616, 619, 41 A.2d 347; Estate of Burkhardt, 22 Leh. Co. L.J. 126; Wilson's Estate, 31 Del. Co. Rep. 554. However, as was said in Smith Trust, supra, 419, 420: "Whether surplus income from a trust fund may or should be accumulated to meet anticipated future deficiencies or emergencies depends primarily upon whether such was the intention of the creator of the trust as expressed or implied in the trust instrument."
The learned court below has well drawn the distinction between the Reed and Smith cases and the present situation:
"Smith Estate is not similar in facts to the instant case. Here there is no such language as compels the Court to read into the will and codicils an intent of the testator that the monthly payments to Mrs. Harris should be treated as an annuity and be maintained out of income after her death regardless of what happens to the other income beneficiaries. There is no provision that `in any event' she should receive such payments in full without regard to his provisions for benefiting his grandnieces. Testator directed that Mrs. Harris should receive one thousand dollars a month `for and during the term of her *536 natural life'. He did not employ any language whatsoever to indicate an intention that she should receive such amount `in any event' or under all circumstances, nor that she should have any priority in payment over Mrs. Barck. As a matter of fact, Mrs. Barck had priority over Mrs. Harris because the testator in the first codicil directed his trustees to `first pay out of the income' of his residuary estate $500 monthly which was increased to $1,000 in the third codicil. He did not alter that priority despite his having provided for the $1,000 payments to Mrs. Harris in the second codicil.
"Hence, if Reed's Estate were apposite here and under the facts we do not believe it to be it would be necessary in following it to set aside first for Mrs. Barck's heirs income to be accumulated in amount sufficient to make up deficiencies due her and, under exceptant's contention, in turn to her estate. But we do not believe testator had any thought or desire that such a thing would happen. In no language of will or codicil did he reveal any intention on his part that upon the death of either Mrs. Barck or Mrs. Harris their estates were to be paid over the years to come income necessary to make up deficiencies existing when each of them died. He did not intend to direct his trustees to pay, year in and year out, to the heirs of these two strangers to his blood the amounts they failed to receive and enjoy in their lifetimes and thereby deny any income whatsoever not only to testator's grandnieces during their lives but possibly to their issue during theirs. A trust estate presently worth $88,000 could not possibly earn $225,000 in income in less than 73 years. The deficiency due Mrs. Barck's estate, created over a shorter period, would amount to approximately $217,000, which amount it would take another 62 years to accumulate.
"It is beyond comprehension that testator had any thought in mind that `in any event', or what ever happens, or under all possible circumstances, *537 the full $1,000 monthly should be paid to these ladies and their heirs for 135 years, or possibly over a longer period, depending on the continued preservation of values in trust assets.
"Testator set forth in the seventh paragraph of his will provisions of the character of a spendthrift clause and then said: `It is my intention to benefit the persons interested, and not their creditors or alienees.'
"He never intended to benefit those he did not know. And it may be presumed that Mrs. Barck and Mrs. Harris knew this and accepted it."
Appellant's last contention is that the auditing judge erred in refusing to admit into evidence certain parol testimony in aid of the construction of the will and codicils. Such evidence was clearly inadmissible and we affirm that which the auditing judge stated in disposing of this contention:
"It should be pointed out that at the audit counsel for the estate of Ethel Heberton Harris, deceased, insisted upon submitting extrinsic evidence in the matter of the question of construction of the will and codicils. He urged that such evidence was appropriate to show `the relations of the parties' and the `many facts with respect to their own needs and financial status on or around the time the will and codicils were drawn.' Testimony was offered and received, subject to a timely objection, with grant of exception. I now rule that the parol evidence is inadmissible since there is no latent ambiguity in the will and codicils. Moreover, while the testimony was proffered to evince the surrounding circumstances showing testator's relation to the beneficiaries, their condition or necessities, it went far afield of that category by the inclusion of oral declarations of the testator and thus its main import was to impute and contradict the terms of the will. What was said by Mr. Justice ALLEN M. STEARNE, speaking for the Supreme Court in Wahr Estate, 370 Pa. 382, 387, is appropriate *538 here: `We agree with the learned court below that parol evidence is inadmissible to explain, construe or contradict the terms of a will, for which principle no citation of authority is necessary.' As for the documentary evidence records in other estates showing that testator's two grandnieces had come into substantial inheritances of their own this, too, although viewed in the light of surrounding circumstances, gives forth no aid to the claimant who contends that Ethel Heberton Harris was in fact an `annuitant'. Such extrinsic evidence but places one in the `testator's armchair' at the time he executed his will, as well as the codicils of October 25, 1928, including also the codicil of July 4, 1929, if not also up to the time of his death when his will and codicils speak with complete and full realization that, despite any independent financial means of his two grandnieces, testator was content to still benefit his said grandnieces and their descendants, and nowise manifested an intent that Helen Elizabeth Barck and Ethel Heberton Harris should be the sole objects of his bounty."
After a study of the will and the several codicils we are convinced that the bequest to Mrs. Harris was payable solely out of income, that any invasion of the principal or corpus of the trust or any application of income accruing after her death to the payment of income deficiencies which took place during her lifetime would be contrary to the testator's intent and purpose as expressed in the will and codicils.
Judgment affirmed. Costs to be paid by appellant.
NOTES
[1] Miss Barck and Mrs. Harris were friends of testator, the latter being the daughter of a life long friend of the testator.
[2] As a result of the economic depression, testator's estate had greatly diminished in value.
[3] An exception based on a finding of estoppel by the auditing judge was sustained.
[4] Page on Wills (Lifetime Ed.), Secs. 1172 et seq.
[5] 2 Am. Jur., § 19, p. 825; Scott on Trusts (2nd Ed.), Vol. D, § 1287, pp. 953-958; 96 C.J.S. § 902, pp. 351-354.
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484 A.2d 929 (1984)
SHETLAND PROPERTIES, INC.
v.
TOWN OF POULTNEY.
No. 258-81.
Supreme Court of Vermont.
October 26, 1984.
*930 Edward L. Winpenny of DeBonis & Wright, P.C., Poultney, for plaintiff-appellant.
Williams, Williams & Vreeland, P.C., Poultney, for defendant-appellee.
Before BILLINGS, C.J., and HILL, UNDERWOOD, PECK and GIBSON, JJ.
*931 UNDERWOOD, Justice.
On April 1, 1978, the listers appraised plaintiff's 270-acre parcel of undeveloped land, located on State Highway No. 6 in the Town of Poultney, at $111,000. Plaintiff, aggrieved by the listers' appraisal, ultimately appealed it to the Vermont Board of Appraisers (Board), which reduced it to $94,500. When the appraisal of real estate is so fixed, it becomes the basis for the grand list of the taxpayer for the year in which the appeal was taken, and for the two next ensuing years, unless in the ensuing two years the taxpayer's property is materially altered, changed or damaged, or the town in which it is located has undergone a complete revaluation of all taxable real estate. 32 V.S.A. § 4468.[*]
In August of 1979, plaintiff sold off 10.-13 acres for $14,000, thereby reducing the total acreage of the parcel as well as a portion of its highway frontage.
Although the appraised value of plaintiff's real estate was fixed by the Board for the taxable years 1978, 1979 and 1980, the listers reappraised plaintiff's remaining 259.87 acres on April 1, 1980, and increased the appraisal from $94,500 to $107,300. During this interim period the Town had not undergone a complete revaluation, nor had there been any change in plaintiff's property other than the sale of the 10.13 acres.
The plaintiff appealed the listers' appraisal for 1980 to the Poultney Board of Civil Authority, which upheld the listers' appraisal. Plaintiff then appealed to the Vermont State Board of Appraisers, which affirmed the decision of the Poultney Board of Civil Authority. A timely appeal from the Board brings the case before us for review.
The plaintiff contends that (1) the listers improperly reappraised the subject property as there had been no material change, alteration or damage to the property, nor had there been a town-wide revaluation, and that (2) the Board failed to make findings of fact sufficient to support its decision. We agree with the second contention and reverse with instructions for reconsideration, consistent with our comments, on the first issue raised by the plaintiff.
I.
As this Court has previously stated:
The Board is required to make findings of fact supporting its ultimate determination of value. 32 V.S.A. § 4467. It has a duty to sift the evidence and make a clear statement so that the parties and this Court will know what was decided and how the decision was reached.
Chelsea Limited Partnership v. Town of Chelsea, 142 Vt. 538, 540, 458 A.2d 1096, 1097 (1983); Corrette v. Town of St. Johnsbury, 140 Vt. 315, 316, 437 A.2d 1112, 1113 (1981); see also Rutland Country Club, Inc. v. City of Rutland, 140 Vt. 142, 146-47, 436 A.2d 730, 732 (1981).
In view of the fact that the Board had rendered a decision in favor of the plaintiff's appeal of the listers' 1978 appraisal of the subject property, the Board's decision would be applicable for the tax years 1978, 1979 and 1980, unless "the taxpayer's property [was] materially altered, changed, damaged or ... the municipality... in which it is located has undergone a complete revaluation of all taxable real estate." 32 V.S.A. § 4468. Where there has been no town-wide revaluation, there must have been a material alteration, change or damage to taxpayer's property for it to be eligible for reappraisal prior to 1981. In addressing this threshold issue, the Board merely recites certain testimony in the case, and accepts the conclusions of *932 the listers regarding a material change in plaintiff's property.
In making findings of fact the Board has a duty to sift the evidence and make a clear statement so that the parties and this Court will know what was decided and how the decision was reached. A recitation of the testimony is not a finding of fact, and such a recitation will not support a judgment.
Corrette, supra, 140 Vt. at 316, 437 A.2d at 1113-14. "Without findings of fact sufficient to support its conclusions, the Board committed reversible error." Id. at 317, 437 A.2d at 1114.
Furthermore, the Board's findings of fact contain no comparison of the characteristics of the taxpayer's property with those characteristics of properties which it found to be comparable. The Board's failure to make specific findings of fact to support its conclusions concerning comparable property values constitutes reversible error. See id.
The fact that there is no transcript of the hearing before the Board does not affect our decision in this case. Although evidence contained in a hearing transcript may be used to evaluate the accuracy of the Board's findings, the use of such evidence is unnecessary where, as in the present case, the findings of fact and conclusions of law are invalid on their face.
II.
Although the insufficiency of the Board's findings of fact constitutes adequate grounds for reversal, we find it necessary to address the taxpayer's contention concerning the materiality of the change in the subject property since it quite probably will recur on retrial. It is a threshold question upon which the Board, on rehearing, must make specific findings of fact prior to addressing the basis of the listers' reappraisal.
The materiality test should be treated as a two-part test. The first part is whether the appraisal, as established by the Board in a prior appeal, is properly subject to reappraisal by the town within the two year period thereafter. Absent a town-wide revaluation of all real estate, there must be a material alteration, change or damage to the subject property if it is to be eligible for reappraisal within three years of a prior appeal to the Board. In interpreting the intent behind similar legislation in New Jersey (N.J.Rev.Stat. § 54:3-26; § 54:51A-8), the New Jersey Supreme Court has stated "[t]he evil which the `freeze' statute sought to remedy was repeated yearly increases in the assessed value of property, not related to or justified by any changes increasing its market value, and resulting in harassment of the taxpayer, subjecting him to the trouble and expense of annual appeals to the county tax board." Borough of Hasbrouck Heights v. Division of Tax Appeals, 41 N.J. 492, 497, 197 A.2d 553, 555 (1964) (quoting City of Newark v. Fischer, 8 N.J. 191, 199-200, 84 A.2d 547, 551 (1951)). A New Jersey court has found that "changes in value" included changes in the value of land as a result of the development of a shopping center in the vicinity of the subject property. Township of Wayne v. Robbie's Inc., 118 N.J.Super. 129, 133, 286 A.2d 725, 727 (App.Div.), cert. denied, 60 N.J. 351, 289 A.2d 796 (1972). One New Jersey court held that the conversion of rental apartments to condominiums and cooperative apartments would not constitute a basis for a change in value under the statute, Troy Village Realty Co. v. Springfield Township, 191 N.J.Super. 559, 564, 468 A.2d 445, 448 (App.Div.1983), while another court implied that such a conversion could constitute a valid basis for a change in value, Hudson Terrace Apartments v. Borough of Fort Lee, 191 N.J.Super. 489, 467 A.2d 1092 (App.Div.1982). This Court has held that "[w]ords in a statute without definition are to be given their plain and commonly accepted use." Northern Rent-A-Car, Inc. v. Conway, 143 Vt. 220, 222, 464 A.2d 750, 751 (1983) (quoting Eastern Advertising, Inc. v. Cooley, 126 Vt. 221, 223, 227 A.2d 294, 295 (1967)). "In construing *933 the statute, the plain, ordinary meaning of language is presumed to be intended.... When the meaning is plain, the courts must enforce the statute according to its terms." In re Middlebury College Sales & Use Tax, 137 Vt. 28, 31, 400 A.2d 965, 967 (1979) (citing Standard Register Co. v. Commissioner of Taxes, 135 Vt. 271, 273, 376 A.2d 41, 42 (1977); Medlar v. Aetna Insurance Co., 127 Vt. 337, 342, 248 A.2d 740, 744 (1968)). Applying this standard, there is a material alteration or change in a subject property when such alleged alteration or change is relevant and of consequence to the valuation of the property.
If it is determined that an individual reappraisal is warranted, the second part of the materiality test comes into play, concerning its scope. Where the intent of 32 V.S.A. § 4468 is to prevent annual, unwarranted reappraisals and provide a reasonable period of stability following a taxpayer's appeal to the Board, the taxpayer is entitled to protection from the need to relitigate the same issues during the ensuing two years. The elements of a reappraisal should therefore be limited to those which have been affected by the "material alteration, change or damage" which provided the initial basis for undertaking the reappraisal. A change in one element of the previous appraisal, as approved by the Board, would not necessarily provide a valid basis for the reconsideration of all of the factors in the appraisal.
Reversed and remanded for reconsideration consistent with the views expressed herein.
NOTES
[*] 32 V.S.A. § 4468 provides in part:
The appraisal so fixed ... shall become the basis for the grand list of the taxpayer for the year in which the appeal is taken and, if the appraisal relates to real estate, for the two next ensuing years. The appraisal, however, may be changed in the ensuing two years if the taxpayer's property is materially altered, changed, damaged or if the municipality, city or town in which it is located has undergone a complete revaluation of all taxable real estate.
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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/1524304/
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406 B.R. 522 (2009)
In re Larry D. ERICKSON, Jr. and Cindy L. Erickson, Debtors.
No. HG 07-09179.
United States Bankruptcy Court, W.D. Michigan.
May 20, 2009.
*523 Jeff A. Moyer, Esq., Grandville, MI, Chapter 7 Trustee.
Roger G. Cotner, Esq., Grand Haven, MI, attorney for Debtors.
OPINION RE: TRUSTEE'S MAY 19, 2008 OBJECTION TO DEBTORS' EXEMPTIONS
JEFFREY R. HUGHES, Bankruptcy Judge.
Jeff A. Moyer ("Trustee") has objected to the Section 522(d)(5)[1] exemption claimed by Larry and Cindy Erickson (the "Ericksons") in the 2006 and 2007 refunds they received from various taxing authorities. Trustee's objection is sustained.
PROCEDURAL BACKGROUND
When the Ericksons filed their Chapter 7 case on December 10, 2007, they indicated in their schedules that they were not owed any tax refunds for previous years and that they did not expect to receive a refund for the current year. However, five months later the Ericksons amended their schedules to include 2006 and 2007 tax refunds totaling $13,810. They also amended their Schedule C at that time to add the now disclosed refunds to the property they claimed as exempt.
Trustee had not raised an objection up to that point. However, the Ericksons' May 16, 2008 amendment prompted a response. Originally, Trustee objected on the theory that the Ericksons were time-barred as a matter of law from claiming any exemption in the tax refunds because *524 they had not disclosed them at the outset of their case. However, that theory was rejected at a prior hearing.[2] Consequently, Trustee has since proceeded against the Ericksons based upon the alternate theory that their exemption of the refunds should at least be partially disallowed because it exceeded the maximum amount permitted under the applicable statute.[3]
An evidentiary hearing was then held. Larry Erickson was the only witness and the Ericksons' original and amended Schedules B and C were the only exhibits offered.[4]
FACTS
Although the Ericksons did not initially claim their 2006 and 2007 tax refunds as exempt, they did claim exemptions in other items of the estate's property. Specifically, the Ericksons claimed Section 522(d)(5) exemptions in cash and bank accounts and in a vacant parcel of land in Tawas Township, Michigan (the "Tawas property").[5] According to Mr. Erickson, the Tawas property is unencumbered.
The Ericksons' original Schedule C itself discloses these claimed exemptions as follows:
-----------------------------------------------------------------------------------------------------
Current Value of
Specify Law Value of Property Without
Providing Each Claimed Deducting
Description of Property Exemption Exemption Exemptions
-----------------------------------------------------------------------------------------------------
SCHEDULE AREAL PROPERTY 11 USC § 522(d)(5)[6] 12,500.00 12,500.00
Parcel 4 Part of SE 1/4 of SE 1/4 Section 18,
T22N, R7E, Tawas Township
-----------------------------------------------------------------------------------------------------
*525
SCHEDULE BPERSONAL PROPERTY
---------------------------------------------------------------------------
Cash on hand 11 USC § 522(d)(5) 55.00 55.00
---------------------------------------------------------------------------
Lake Michigan CUchecking 11 USC § 522(d)(5) 107.00 107.00
---------------------------------------------------------------------------
Northland Federal CU 11 USC § 522(d)(5) 75.00 75.00
---------------------------------------------------------------------------
Equating the value of the Tawas property with the exemption claimed suggests on its own that the Ericksons wanted to actually keep it as a so-called "in-kind" exemption.[7] Moreover, Mr. Erickson himself confirmed at the ensuing evidentiary hearing that his intention at the outset of the case was in fact to keep the property. But Mr. Erickson also testified that he and his wife had had a change of heart sometime after they had attended the meeting of creditors on January 15, 2008.[8] What had prompted this change was their discovery that the 2006 and 2007 tax refunds would be much larger than what they had originally anticipated. When exactly after the January 15, 2008 meeting the Ericksons learned of their good fortune is unknown. However, it is clear that the Ericksons did not attempt to include the tax refunds among the assets they claimed as Section 522(d)(5) exemptions until they filed their amended Schedule C on May 16, 2008.
The monetary limit imposed by Section 522(d)(5), though, precluded the Ericksons from simply adding these refunds to the Section 522(d)(5) exemptions they had already taken in the cash, the bank accounts, and the Tawas property. Specifically, the $13,810 tax refund, when combined with the values of this other property, totaled $26,547 and Section 522(d)(5) permitted the Ericksons a maximum of only $22,400.
The Ericksons' solution was to reduce the amount they had claimed as their Section 522(d)(5) exemption in the Tawas property from $12,500 to $5,853. In other words, when the Ericksons filed their amended Schedule C on May 16, 2008, their plan was 1) to still use $237 of their available Section 522(d)(5) exemption to keep the cash and bank accounts they had originally reported; and 2) to use another $13,810 of the available exemption to keep all of the 2006 and 2007 tax refunds that they were then disclosing for the first time; but 3) to now abandon what they had previously intended to be an "in-kind" exemption of the entire interest in the Tawas property and instead accept simply the balance of their available Section 522(d)(5) exemption, that being $5,853, from whatever Trustee himself might realize as proceeds from the sale of the same.[9]
Trustee, though, contends that the Tawas property had been already removed from the estate as a $12,500 exemption and, therefore, that the remaining Section 522(d)(5) exemption is not enough to cover the entire tax refund. Trustee asserts instead that the Ericksons can keep only $9,113 of the refund and that the remainder *526 must be turned over for distribution to their creditors.[10]
ISSUE
May the Ericksons claim a Section 522(d)(5) exemption in the entire $13,810 of tax refunds now included in their amended Schedule C?
DISCUSSION
If, as Trustee contends, the estate's interest in the Tawas property was removed by the Ericksons' unopposed exemption of the same in their original Schedule C, then it follows that the Ericksons could not later unwind what has already been done. Certainly, the Ericksons had the right to amend their Schedule C however they wished. FED.R.BANKR.P. 1009(a). Such an amendment, though, is meaningless if the subject property has already been removed from the estate, for the Bankruptcy Code provides no mechanism for a debtor to return already exempted property to the bankruptcy estate short of the trustee's agreement to accept it again, which is clearly not the case in this instance. Simply said, the Ericksons cannot, to use their own metaphor, "put the toothpaste back into the tube." See also, In re Brown, 375 B.R. 362, 376-78 (Bankr.W.D.Mich.2007).[11]
The question, then, turns on whether the Ericksons did in fact remove the Tawas property from the bankruptcy estate when, at the outset of their case, they claimed it as exempt without Trustee's objection. A considerable amount of controversy has erupted in this district, as well as in others, as to whether a debtor may take a so-called "in-kind" exemption of property from the estate and, if so, how is such an exemption accomplished. What often sets off the controversy is a dispute between the debtor and the trustee as to whether the trustee may still sell property on behalf of the estate that the debtor claims is no longer the trustee's to sell because of his already allowed exemption of the same. The instant case, of course, is different, for here it is the Ericksons who are asserting that the previously exempted property is still part of the bankruptcy estate whereas it is Trustee who is asserting that the subject property has been removed and now belongs to the *527 Ericksons. The issues, though, are still the same. Therefore, it is appropriate to consider once again the various approaches the courts have taken. See, In re Cormier, 382 B.R. 377 (Bankr.W.D.Mich.2008),[12]Klein v. Chappell (In re Chappell), 373 B.R. 73 (9th Cir.BAP2007),[13] and In re Anderson (6th Cir. BAP 2007).[14]
A. Cormier
Cormier most favors the Ericksons' position, for it holds that Section 522(d)(5) permits no "in-kind" exemption at all.
Based upon the explicit statutory language and the melange of interpretation principles, this court believes that § 522(d)(5) does not contemplate any "in-kind" exemption.
382 B.R. at 394.
However, with all due respect, Cormier's conclusion is based more upon a variation of Anstotlean logic than statutory construction. That is, Cormier creates categories and then makes deductions from their comparison. Here is Cormier's reasoning:
To discern the importance of § 522(d)(5), it is worthwhile to quickly review § 522(d) in its entirety. Of its twelve subsections, only eight have a reference to a maximum monetary amount. The four other subsections have no monetary limitation. The exemptions without the monetary limitations might appropriately be described as "in-kind" exemptions. For purposes of construing § 522(d)(5), the comparison demonstrates that Congress treated different exemption subsections in different ways.... The language of § 522(d)(5), contrasted with the "in-kind" exemption subsections, encourages a reader to conclude that a difference must exist-the maximum stated amount must mean something. As noted above, the statute says nothing about a debtor's scheduled value begetting an unassailable in-kind exemption.
Id. at 393-94 (footnotes omitted).
But Cormier further observes that a statute's "object and policy" is also relevant to its interpretation. Id. at 395 (quoting from Grogan v. Garner, 498 U.S. 279, 288, 111 S. Ct. 654, 660, n. 13, 112 L. Ed. 2d 755).[15] It is appropriate, then, to ask how well its logic stands up to this standard. Consider, for example, the instant case. The Ericksons, at least at the outset of their case, had without question intended to remove the Tawas property itself from *528 the estate as an in-kind Section 522(d)(5) exemption. Moreover, Trustee had no objection whatsoever to their plan. Yet Cormier instructs that the Tawas property must still remain within the bankruptcy estate. In fact, it would appear that the only way under Cormier that the Ericksons could have ever recovered the Tawas property from the estate prior to close would have been through abandonment under Section 554(a) or (b).[16]
Moreover, Cormier's prohibition would affect more than the Ericksons' exemption of this property, for it is fair to infer that the Ericksons intended their Section 522(d)(5) exemption of the cash and bank accounts to be also in-kind.[17] Indeed, Cormier's prohibition against in-kind exemptions would apparently impair several of the other exemptions the Ericksons have claimed, for the court in Cormier states later in its opinion that "[o]nly in those subsections [of Section 522(d)] that lack a maximum amount does the statute contemplate an `in-kind' or full exemption." Cormier, 382 B.R. at 395. As an example, all of the household goods and wearing apparel the Ericksons had claimed as a Section 522(d)(3) exemption[18] would, according to Cormier, still remain as the estate's property notwithstanding the Ericksons' evident and unopposed intention to remove these incidental items from the estate as their exempt property.
Is this, though, what Congress envisioned when it enacted Section 522? Remember, exempt property never even became part of the estate under the Bankruptcy Act. Liberty State Bank & Trust v. Grosslight (In re Grosslight), 757 F.2d 773, 775 (6th Cir.1985); See also, 5 Collier on Bankruptcy, ¶ 541.LH [1]-[3] (15th Ed. rev.2005). As such, debtors under that former regimen retained unfettered enjoyment of whatever they claimed as exempt until the court, at the trustee's insistence, determined otherwise.
As for the Bankruptcy Code itself, nothing there suggests that Congress has jettisoned the long accepted notion that a debtor's "fresh start" is realized in part through his ability to enjoy without further restraint what he has successfully claimed as his exempt property. Nor is there any indication that his recovery of that property is to take place through any means other than the exemption process now provided under Section 522. The Supreme Court itself has described that process as follows:
An estate in bankruptcy consists of all the interests in property, legal and equitable, *529 possessed by the debtor at the time of filing, as well as those interests recovered or recoverable through transfer and lien avoidance provisions. An exemption is an interest withdrawn from the estate (and hence from the creditors) for the benefit of the debtor. Section 522 determines what property a debtor may exempt.
Owen v. Owen, 500 U.S. 305, 308, 111 S. Ct. 1833, 1835, 114 L. Ed. 2d 350 (1991) (emphasis added).[19]
Moreover, the Court thereafter recognized in Taylor v. Freeland & Kronz that it is Section 522(l) that in fact accomplishes the removal of the exempted asset from the estate. 503 U.S. 638, 112 S. Ct. 1644, 118 L. Ed. 2d 280 (1992).[20] Section *530 522(l) provides that:
The debtor shall file a list of property that the debtor claims as exempt under subsection (b) of this section. If the debtor does not file such a list, a dependent of the debtor may file such a list, or may claim property as exempt from property of the estate on behalf of the debtor. Unless a party in interest objects, the property claimed as exempt on such list is exempt.
(emphasis added).
The difficulty with Cormier is that it prevents Section 522(l) from serving as an efficient vehicle to quickly remove from the bankruptcy estate the numerous personal effects that a debtor would typically wish to exempt under Section 522(d). Put differently, a debtor cannot, according to Cormier, remove from the bankruptcy estate his home and its furnishings, or even the clothes he wears, by simply taking an unchallenged Section 522(d) exemption in the same, instead, Cormier mandates that all of these items remain indefinitely as the estate's property and, as such, subject to the trustee's continued administration.
Granted, Cormier offers abandonment under Section 554 as a way for the debtor to still recover his property from the estate. However, an abandonment at the minimum would require the debtor to incur additional time and expense. Nor is an abandonment guaranteed, since a trustee can always choose to be uncooperative and, as the Sixth Circuit has held, a compelled abandonment under Section 554(b) is "the exception, not the rule." Morgan v. K.C. Machine & Tool Co. (In re K.C. Machine & Tool Co.), 816 F.2d 238, 246 (6th Cir.1987).
Of course, these problems could be simply part and parcel of what a debtor must endure whenever bankruptcy relief is sought. However, there still remains the question of whether it would be prudent for the trustee himself to allow otherwise exempted assets to remain indefinitely as the estate's property until, by chance, the debtor got around to seeking their abandonment. For example, should not the trustee in this instance be concerned about the estate's continuing liability to third persons who might be injured on the Tawas property if, as Cormier holds, the Ericksons' intended in-kind exemption of that property failed to actually remove it from the estate?[21] And should there not be equal concern about the estate's exposure under Michigan's owner liability statute for the Ericksons' ongoing use of the exempted Taurus and Econoline van if, as Cormier suggests, the vehicles continued to be owned by the estate notwithstanding the Ericksons' uncontested Section 522(d)(3) exemption of the same.[22]
*531 A trustee, of course, could rid himself of these risks by taking the initiative to abandon these items under Section 554(a). But the cost associated with noticing abandonments[23] of already exempted property in case after case does beg the question of why such a procedure should even be necessary. After all, Section 522(l) stands ready to otherwise remove the exempted property without anything more were it not for Cormier's absolute prohibition of in-kind exemptions under most of Section 522(d)'s subsections. Therefore, there is certainly reason to challenge Cormier's assertion that the conclusion it has reached is consistent with the "object and policy" of the Bankruptcy Code. 382 B.R. at 395.
Policy concerns, though, are not enough, for among the many rules of statutory construction is one rule that prevails over all othersthat a court's inquiry regarding a statute's meaning must end with the plain language of the statute itself. See, e.g., Lamie v. United States Trustee, 540 U.S. 526, 534, 124 S. Ct. 1023, 1030, 157 L. Ed. 2d 1024 (2004); In re Toti, 24 F.3d 806 (6th Cir.1994). Therefore, Cormier should still be followed if the requisite statutory support is there. But it is the very language of Section 522(d)(5) and similar subsections that actually undercuts the logic Cormier has employed.
Again, Cormier rests upon the distinction it draws between the many Section 522(d) exemptions that are limited to a specific dollar amount and the few remaining subsections of Section 522(d) where no limit is imposed. There is no doubt, as Cormier insists, that the maximums set forth in Section 522(d)(5) and similar subsections "must mean something." Id. at 394. However, Cormier seems to overlook other language in these same subsections. Should not, for example, the reference to "interest" in all but one of these subsections[24] mean something too, for "[i]t is a `settled rule that a statute must, if possible, be construed in such fashion that every word has some operative effect.'" Cormier at 393 (quoting from United States v. Nordic Village, Inc., 503 U.S. 30, 36, 112 S. Ct. 1011, 1015, 117 L. Ed. 2d 181 (1992)).
The Bankruptcy Code does not include "interest" as a defined term. However, "interest" does appear prominently in Section 541(a)'s description of what constitutes the very property from which the Section 522(d) exemptions are to be taken.[25] Specifically, *532 Section 541(a)(1) provides that the estate is to include "all legal or equitable interests of the debtor in property as of the commencement of the case" (emphasis added). There is also no question that "interests" refers to the property itself, as opposed to only its value, as exemplified by the turnover provisions of Section 542. See also, 11 U.S.C. § 541(c) ("[a]n interest of the debtor in property becomes property of the estate under subsection (a)(1),... of this section notwithstanding any provision in an agreement, transfer instrument, or applicable nonbankruptcy law."). In re Graham Square, Inc., 126 F.3d 823, 831 (6th Cir.1997) ("The scope of section 541(a)(1) ... allows the bankruptcy `trustee to regain possession of property in which the debtor had equitable as well as legal title.'") (emphasis added).
But if an "interest" for purposes of creating the bankruptcy estate is to be in-kind, if you will, does it not follow that "interest" is to have the same meaning when the debtor is choosing from that very same estate the property he wishes to exempt? After all, another time-honored rule of statutory construction is that equivalent words are presumed to have the equivalent meaning when repeated in the same statute. Cohen v. de la Cruz, 523 U.S. 213, 220, 118 S. Ct. 1212, 1217, 140 L. Ed. 2d 341 (1998). See also, Ratzlaf v. U.S., 510 U.S. 135, 143, 114 S. Ct. 655, 660, 126 L. Ed. 2d 615 (1994), Sullivan v. Stroop, 496 U.S. 478, 484, 110 S. Ct. 2499, 2504, 110 L. Ed. 2d 438 (1990), Sorenson v. Secretary of Treasury, 475 U.S. 851, 860, 106 S. Ct. 1600, 1606, 89 L. Ed. 2d 855 (1986).
Cormier, of course, relies upon the maximum monetary amounts that limit Section 522(d)(5) and other subsections to justify the different meaning it wants to give to "interest" as it appears therein. 382 B.R. at 393-94. But Cormier reads these monetary limits too broadly. Granted, the $11,200 limit placed upon the so-called catch-all exemption permitted under Section 522(d)(5) impedes the debtor from removing actual interests from the estate as his allowed exemption when the aggregate value of the claimed interests exceeds the prescribed amount. If, though, the aggregate value of the claimed interest is less, then it certainly seems that the same interests that became the estate's property at the outset of the case by operation of Section 541(a)(1) should then be capable of being removed from the estate as well by operation of Sections 522(d)(5) and 522(l). Therefore, with all due respect to Cormier's reasoning, Section 522(d)(5) can permit in-kind exemptions without rendering meaningless the monetary limit that that subsection also imposes.[26]
*533 Nor does the recognition of in-kind exemptions under all of the Section 522(d) exemptions (as opposed to Cormier's few) conflict with the plain meaning of the statutory language used. The language of, for instance, Section 523(d)(2) is certainly clear enough. If the estate includes the debtor's car, he can actually remove it from the estate as an exemption provided that its value, net of liens, does not exceed $3,225. On the other hand, if the car's net value exceeds that amount, it cannot be removed. Indeed, there is nothing remarkable about either of these outcomes, for it is certainly sensible that a debtor should be able to drive away his Chevette, but not his Corvette.[27]
And finally, this court sees no reason to distinguish, for example, Section 522(d)(2) from Section 522(d)(5) because the latter speaks of an "aggregate interest" as opposed to just an "interest." "Aggregate" in this context simply means "collective." See, WEBSTER'S THIRD NEW INTERNATIONAL DICTIONARY (1986). In other words, the addition of "aggregate" to Section 522(d)(5) and other similar subsections[28] represents nothing more than the recognition that a debtor may remove under those subsections more than one interest, whether it be assorted pots and pans under Section 522(d)(3) or bric-a-brac under Section 522(d)(5), so long as the collective values of those interests do not exceed the specified monetary limit.[29]
*534 Therefore, for the reasons stated, this court respectfully disagrees with Cormier that the Ericksons in this instance were incapable of removing the Tawas property itself from the estate when they claimed that interest as a Section 522(d)(5) exemption in their original Schedule C. Section 522(d)(5) clearly permitted them to claim their exemption in-kind, since the uncontroverted value of the Tawas property, when combined with the value of the other Section 522(d)(5) exemptions originally claimed, was well within the maximum permitted under that subsection.[30]
B. Chappell
Chappell,[31] unlike Cormier, does not categorically prohibit a debtor's ability under Section 522(d)(5) or other similar subsections to claim the exempted property in-kind. However, Chappell still favors the Ericksons' position because it permits such an in-kind exemption only in those instances where the debtor's Schedule C itself manifests that intention.[32] Moreover, Chappell appears to limit an in-kind exemption in any event to that exemption's maximum dollar amount if post-petition appreciation is involved.
1. Background
The actual dispute in Chappell was between the Chapter 7 trustee and the debtors as to who between them was entitled to the post-petition appreciation attributable to the debtors' home. The Chappells had identified their home as a Section 522(d)(1) exemption in their Schedule C. That schedule also set the claimed exemption's value at $21,511.25, which was exactly the difference between the $350,000 overall value the Chappells had given their *535 home and the $328,488.75 they had disclosed as encumbrances against the same.
The trustee did not object to the exemption claimed. Indeed, he subsequently stipulated that the home's value at the outset of the case was in fact only $350,000, just as the Chappells' schedules had indicated. However, the trustee maintained two years later that the estate was still entitled to most of what turned out to be a considerable post-petition increase in the home's value on the theory that the Chappells had only exempted the $21,511.25 they had claimed under Section 522(d)(1).
The Chappells, of course, contended that the trustee's failure to make a timely objection to their exemption under Rule 4003(b)[33] had removed the property from the estate at that time. Therefore, it was the Chappells' position that the estate had long ago lost any claim to the post-petition appreciation that had then accrued.
The bankruptcy court found in favor of the Chappells and the trustee appealed.
2. Schedule C Itself Must Manifest The In-Kind Exemption
Chappell, in reversing the lower court, found that the debtors had ignored two important facts in pressing their case. First, it observed that:
[N]othing in the debtors' Schedule C demonstrates an intent to claim an "aggregate" or entire interest. The value of their claimed exemption is stated simply as "$21,511.25," the arithmetic difference between the value of the residence and the consensual liens.
373 B.R. at 77.
And second, it noted that:
[D]ebtors ignore the dollar limit imposed by § 522(d)(1). As the trustee concedes, the maximum exemption available under § 522(d)(1) is $36,900 (plus any available "wild card" amount under § 522(d)(5)). Hence, the debtor's exemption claim did not exceed the maximum amount available to them.
Id. at 77-78 (footnotes omitted).
These ignored facts, Chappell concluded, negated whatever argument the debtors had that the home had been removed from the estate through the exemption process. Chappell did, though, by negative implication acknowledge that the debtors could have removed their home as an exempt asset (i.e., in-kind) at the outset of their case had they properly manifested an intention to do so.
There is no issue as to the debtors' entitlement to the claimed residence exemption amount of $21,511.25, since it is undisputed that the Appellant trustee did not object to the debtors' claimed exemptions. Moreover, the trustee concedes that they jointly were entitled up to $36,900 (plus any available wild card amount). To the extent the debtors claim an exemption in a greater amount, they did not provide sufficient notice of such claim to the trustee and creditors.
Id. at 83 (emphasis added).[34]
Indeed, Chappell distinguished Taylor v. Freeland & Kronz and the similar case of *536 Allen v. Green (In re Green), 31 F.3d 1098 (11th Cir.1994), on the basis that in those instances the debtors had properly expressed their intention to remove the entire asset. Id. at 78.[35]
Thus, both Taylor and Green are factually distinguishable in that in each instance the debtors expressed an intent to claim the entire proceeds of an asset in an undetermined and unspecified amount as exempt. In the present case before this Panel, the debtors exempted a specific amount, $21,511.25, under a colorable basis, and gave no indication of an intent to claim any more than that specific amount.
Id. at 78.
This court agrees with Chappell that a debtor may not take an in-kind exemption from the bankruptcy estate unless the debtor in fact intended the same. For *537 example, had the Ericksons not desired to keep the Tawas property for themselves, but rather had wanted Trustee to sell it and account to them for only their share of the proceeds, then the outcome of this case would be much different. This court, though, disagrees with Chappell's unwarranted restriction of how that intent is to be determined.
Chappell dismisses as elementary the Supreme Court's own observations about the principles underlying the exemption process.[36] Nonetheless, those principles are worth discussing. First, as Chappell agrees, a debtor may take in-kind exemptions from the bankruptcy estate so long as its value does not exceed any statutory limit. Second, as Chappell also agrees, the in-kind removal of an exempted asset is accomplished through Section 522(l). And finally, as Chappell further agrees, the in-kind removal of the exempted asset from the estate will be complete if no timely objection is made.
How, though, does the debtor go about claiming the in-kind exemption as intended? The principles here are equally elementary. Section 522(l) states that the debtor must file a list. Rule 4003(a) in turn identifies that list as being among the schedules the debtor is to file pursuant to Rule 1007.[37] And Rule 1007(b)(1) provides that the requisite list be prepared "as prescribed by the appropriate Official Forms."
Now apply these principles to the instant case. The Ericksons clearly intended at the outset of their case to remove the Tawas property as an in-kind exemption, for that is what Mr. Erickson himself testified at the hearing without contradiction. Moreover, the Ericksons did exactly what was asked of them by the Bankruptcy Code and the attendant rules to accomplish that removalto wit, they identified the Tawas property in the Schedule C they prepared and then provided all of the information about it that that form required. Nor is there even a hint that the Ericksons intended to mislead Trustee as to their intentions. To the contrary, their valuation of the interest at the same amount as the Section 522(d)(5) exemption claimed not only is consistent with what they intended but also consistent with how Trustee interpreted what they had disclosed.
Yet Chappell would still conclude that the Ericksons' attempt to exempt the Tawas property had failed because the Schedule C they had completed did not manifest the requisite intent to remove that vacant land. But therein lies the difficulty, for the Ericksons had done everything the law required of them to take the exemption claimed. Not only, then, does Chappell reject as inadequate the exemption process that Congress itself devised but it also presumes to correct that inadequacy with a rule of its own. This court certainly shares Chappell's concern over the shortcomings of Schedule C's format. However, such concern does not justify Chappell taking the initiative that it did.
This court also disagrees with Chappell's declaration that "[a]ny ambiguity in the schedules is to be construed against the debtor." Id. at 77. As support, Chappell cites only a footnote in a Ninth Circuit case.
Unless there is a timely objection from a party in interest, any property claimed as exempt by a debtor-regardless of *538 whether the claimed exemption is valid-is automatically exempt under section 522(l). See Taylor v. Freeland & Kronz, 503 U.S. 638, 112 S. Ct. 1644, 118 L. Ed. 2d 280 (1992). Because the time to object is relatively short, see Bankr. Rule 4003(b), it is important that trustees and creditors be able to determine precisely whether a listed asset is validly exempt simply by reading a debtor's schedules. Given that the debtor controls the schedules, we construe any ambiguity therein against him.
In re Hyman, 967 F.2d 1316, 1319 n. 6 (9th Cir.1992) (emphasis added).[38]
But is this a good rule under this circumstance? A debtor "controls" the schedules only in the sense that he has control over the accuracy of the information he provides. Accuracy, though, is not the issue here nor was it the issue in Chappell. Trustee has never challenged the Ericksons' valuation of the Tawas property nor did the Chappell trustee question those debtors' valuation of their home. Indeed, the Chappell trustee stipulated that the value that the debtors gave in their Schedule C was accurate.
What is the problem in these cases is the form itself, for an ambiguity is created whenever the debtor lists the value of the subject property and the exemption claimed as the same. In other words, does the debtor, when equating these values, intend to exempt the property in-kind, or instead, does the debtor intend to claim as his own no more of the property than the specific amount stated? If anything, the presumption should be that the exemption claimed was intended to be in-kind, for it is safe to say that most debtors, when they schedule an exemption in this fashion, have in mind keeping the asset itself as opposed to taking whatever is claimed from the proceeds realized from its sale. But, be that as it may, debtors like the Ericksons and the Chappells should have at the very least the opportunity to offer evidence beyond the form itself to clear up what, after all, is an ambiguity that the form itself creates.[39]
Of course, the Bankruptcy Code did not require Chappell to construe those debtors' Schedule C as it did. Rather, the presumption Chappell relied upon was only the product of its own circuit's declaration. Therefore, this court is not bound by Hyman's interpretative constraint, but rather is free to also consider other relevant evidence, such as Mr. Erickson's own testimony, concerning whether an in-kind exemption of the Tawas property was intended or not.
3. Post-Petition Appreciation
Curiously, Chappell goes on to state that:
*539 Debtors' approach is also impermissible under controlling Ninth Circuit authorities. Ninth Circuit precedent requires postpetition appreciation in property of the estate to inure to the benefit of the estate.
373 B.R. at 79.
This court does not dispute the general validity of this conclusion. If, for example, the Tawas property in this instance had not been claimed as exempt and if it had appreciated from $12,500 to $20,000 before Trustee liquidated it, then certainly the estate and its creditors should benefit from that appreciation. Cf. 11 U.S.C. § 541(a)(6).[40]
Why Chappell's conclusion is curious is that the panel itself recognized that the debtors in that instance could have successfully taken an in-kind exemption of their home had they only manifested that intention properly in their schedules. But if that is so, then shouldn't those debtors have been able to also keep all of the post-petition appreciation that had then accrued? After all, the Chappell trustee had agreed that the home's equity at the outset of the case was no more than the Section 522(d)(1) exemption claimed. The panel, though, seems to have concluded that Section 522(l) would not have removed the exempted home from the estate even under that scenario, since the panel clearly determined that under no circumstance should a debtor be entitled to post-petition appreciation associated with his home (other than the $20,200 maximum permitted under Section 522(d)(1)) unless the debtor had secured an abandonment beforehand. Chappell, 373 B.R. at 75.
How Chappell arrived at such a contradictory result can be understood from the logic it employed. Here in fact is the issue that the panel itself believed was presented to it on appeal:
We address whether postpetition appreciation of exempt property is to be treated the same under the federal exemption scheme as under a state's exemption scheme.
373 B.R. at 75.
The panel then resolved the issue posed with a syllogism that can be summarized as follows:
1) The Ninth Circuit does not allow bankrupt debtors who have claimed California's homestead exemption to keep any post-petition appreciation that exceeds the maximum amount permitted under that exemption;[41]
*540 2) The Supreme Court in Owen v. Owen[42] has held that there must be parity between the state and federal exemption schemes offered bankrupt debtors;
3) Therefore, bankrupt debtors who claim a Section 522(d)(1) exemption in their home under the federal scheme should likewise not be able to keep any post-petition appreciation that exceeds the maximum amount permitted under that subsection.
Chappell, 373 B.R. at 75 and 79.[43]
However, Chappell's second premise is overstated. Here is how Chappell itself expressed that premise.
In view of the United States Supreme Court's [i.e. Owens's] accordance of equivalence of treatment to federal and state exemptions, we disagree with the debtors' contention that by claiming a federal residence exemption they were entitled to an "aggregate" interest in the entirety of their residence.
Id. at 79 (emphasis added).
But Owen does not stand for such a broad proposition, as Chappell also acknowledged in the immediately preceding paragraph.
Of particular importance here is the Court's acknowledgment in Owen that, at least for purposes of impairment of exemptions, federal and state exemptions are to be given equivalent treatment.
Id. (emphasis added).
In fact, earlier in its opinion the Chappell BAP had actually used the narrowness of Owens' ruling to dismiss the debtors' own reliance upon that case.
Relying on Owen, a 1991 United States Supreme Court case which preceded Taylor, the debtors posit that the effect of exempting property from the estate is to withdraw that property from the estate and administration by the bankruptcy trustee. Owen, however, is not helpful to the debtors' position. The United States Supreme Court in that case addressed a rather narrow issue of judicial lien avoidance, specifically whether a judicial lien could be avoided when the state (in that case, Florida) defined the exempt property so as specifically *541 to exclude the property encumbered by the judicial lien.
Id. at 78-79 (emphasis added).
Put simply, Owen holds only that enforcement of Section 522(f)'s avoidance powers is to be the same under either exemption scheme provided by the Bankruptcy Code. What Owen does not say, or even suggest, is what Chappell requires in order for its syllogism to be truethat there is to be an overall equivalency between the federal and state exemption schemes permitted by Sections 522(b)(2) and (3).[44]
*542 Indeed, it is difficult to reconcile Chappell's expansive interpretation of Owen with the Supreme Court's own admonition in so many other cases that statutes are to be construed based upon their plain meaning. Lamie v. U.S. Trustee, 540 U.S. 526, 124 S. Ct. 1023, 157 L. Ed. 2d 1024 (2004). Consider again the bankruptcy principle in Owen that Chappell acknowledged earlier as so elementary:
"[A]n `exemption is an interest withdrawn from the estate (and hence from the creditors) for the benefit of the debtor.'"
Chappell, 373 B.R. at 79 (quoting Owen, 500 U.S. at 308, 111 S.Ct. at 1833).
There is no question that the residents of California have available to them a set of exemptions that they may use to accomplish their fresh start under Section 522. It is equally true that Hyman and the other Ninth Circuit cases that Chappell cites were required to look at the language that the California legislature chose in enacting those exemptions to determine what could or could not be removed from the bankruptcy estate should a Californian avail himself of the state exemption scheme permitted by Section 522(b)(3).
However, the so-called federal exemptions permitted under Section 522(b)(2) have nothing to do with whatever California itself has chosen as appropriate exemptions. Rather, the federal scheme set forth in Section 522(d) is solely the product of Congress' own creativity. Should not, then, the exemptions created under Section 522(d) be dictated by the express language that Congress chose for that subsection rather than by how the Ninth Circuit has interpreted an entirely different set of exemptions enacted only by a single state's legislature?[45]
Chappell does attempt to bolster its own reasoning by relying on what it characterizes as two other persuasive cases: In re Heflin, 215 B.R. 530 (Bankr.W.D.Mich. 1997) and In re Bregni, 215 B.R. 850 (Bankr.E.D.Mich.1997). However, even here Chappell's logic seems weak. Granted, Heflin and Bregni also hold that the bankruptcy estate was entitled to an asset's post-petition appreciation even though the debtor had previously claimed it as exempt. But, as Chappell also acknowledges, Heflin and Bregni had depended just as much upon the Ninth Circuit's "Hyman line of cases" as it had.[46] Consequently, Chappell's reliance upon these two cases appears circular. In other words, how could Heflin and Bregni have persuaded Chappell that these Ninth Circuit *543 cases are correct if Heflin and Bregni themselves relied upon these very same cases as their support? Indeed, the fact that Heflin and Bregni addressed exemptions taken under Section 522(d)(1) with at most a passing acknowledgment to what Chappell itself recognized as a crucial limitation of Hyman and its progenythat those cases were interpreting only California's own homestead exemptionmakes the persuasiveness of Heflin and Bregni even more suspect.[47]
Therefore, for the reasons given, this court is not persuaded by Chappell's other limitation on a debtor's ability to exempt property in-kind. Moreover, there has been no suggestion in this case that the value of the Tawas property has risen post-petition and, as such, this aspect of Chappell would appear to be inapplicable in any event.
C. Anderson
Although Chappell distinguishes Anderson on the facts,[48]Cormier rejects it outright, criticizing in particular the reasons offered in this court's prior opinion[49] that the Anderson BAP then affirmed. In Cormier's words:
The bankruptcy court in In re Anderson, without adequate statutory analysis, imposed a judge-invented mechanical formula to determinate [sic] what is "claimed as exempt," relying in part upon a debtor's scheduled values. The judge-made formula goes like this: "if the value (net of liens) in Schedule C given for the property is equal or less than the value of the exemptions claimed, then the trustee must presume that the debtor intends the exemption claimed to be taken in-kind." The flip side of this presumed mechanical formula is that "[i]f the value (net of liens) given for the property is greater than the value of the exemption claimed, the property remains property of the estate." Id.
Cormier, 382 B.R. at 391-92 (emphasis in original) (citations omitted).
*544 However, Cormier has edited the portion of the Anderson bankruptcy opinion it relies upon for its conclusions. The full text of the pertinent paragraphs is as follows:
It is patently unfair to subject the debtor to such a process [i.e., removal of exempted property through a Section 554(b) abandonment]. A debtor is under a duty to honestly prepare at the outset of the case schedules that set forth, among other things, the property of the estate he claims as exempt together with his opinion as to the value of that property. If the value (net of liens) given for the property is greater than the value of the exemption claimed, the property remains property of the estate. No objection by the trustee is necessary. The debtor, by his own admission, has acknowledged that there is value in the property that must be administered by the trustee for the benefit of creditors.
On the other hand, if the value (net of liens) in Schedule C given for the property is equal or less than the value of the exemptions claimed, then the trustee must presume that the debtor intends the exemption claimed to be taken in-kind. If a trustee believes that the debtor has understated the value of the property for purposes of claiming his exemption, then it is incumbent upon the trustee to file an objection or ask for an extension of time so that he can further investigate its value. At the very least, the trustee should confirm with the debtor that the debtor does not intend to keep the described property as an in-kind exemption but instead intends to accept its cash equivalent after the trustee has disposed of the same. The trustee cannot, as Heflin, Bregni, and Einkorn would have it, simply sit back and wait for the debtor to finally force the issue through the abandonment process.
Anderson, 357 B.R. at 471-72 (emphasis added).
What this court speaks of in Anderson, then, is not formulas, but presumptions. Moreover, the presumptions it imposes, if "imposes" is even the correct word, are directed at how the estate is to be administered, or, more specifically, how the trustee himself is to address with due deliberation the exemptions that a debtor wishes to recover from the bankruptcy estate as his own. Put differently, Section 522(/) and Rule 4003(b) already establish the framework within which the trustee must administer claimed exemptions and it is that framework, coupled with the Supreme Court's own observations in Taylor v. Freeland & Kronz,[50] that obligates the trustee to act promptly if an objection is to be made. All that Anderson does is elaborate upon the consequences of delay if an exemption is sought in-kind.
Of course, the problem in this instance, as it was in Cormier, Chappell and Anderson, is that the official form used for claiming exemptions (i.e., Schedule C) does not adequately manifest a debtor's intention to exempt property in-kind even when it is properly completed. That form should be corrected to include a column which, if checked, would unequivocally establish the debtor's desire to actually reclaim the designated property as his own. However, until that correction is made, common sense alone suggests that courts should address the ambiguities that will inevitably continue with the current form's use by examining all of the relevant evidence there may be as to the debtor's intent as opposed to limiting consideration *545 to only that which is within the four corners of the form itself.
This court's approach in Anderson is based upon such common sense. Therefore, it is difficult to understand how it can be characterized as mechanical or formulaic, especially when compared to what Chappell and Cormier espouse as alternatives. Again, Chappell substitutes full inquiry of the facts for a rigid construction of a form over which debtors have no control. As for Cormier, the debtors there claimed over $13,000 in Section 522(d)(5) for corporate stock that they valued at only $1.00. Yet it does not appear that there was any factual inquiry in that case as to why those debtors claimed their exemption in this unusual fashion.[51] Rather, Cormier opted for a narrow interpretation of Section 522(d)(5) and similar subsections that has left no room for in-kind exemptions at all.[52]
This court does agree, though, with Cormier on one important pointthat the Anderson BAP decision is incorrect to the extent that it stands for the proposition that a debtor's valuing of the asset in the same amount as the exemption claimed in his Schedule C is conclusive. This is what the Anderson BAP said:
[W]e are persuaded generally that a debtor's listing of an exemption in an amount sufficient to exempt all of the available (i.e., unencumbered) value in the property indicates his or her intent to exempt the property in full.
Anderson BAP, 377 B.R. at 876 (citing Allen v. Green (In re Green), 31 F.3d 1098, 1100 (11th Cir.1994)).[53] Granted, one is *546 hard-pressed to conclude that an "in-kind" exemption is not intended when, as was the case here, the Ericksons valued both their interest in the Tawas property and their Section 522(d)(5) exemption at $12,500 and the exemption claimed was well within the maximum allowed under Section 522(d)(5). Nonetheless, the Ericksons were certainly entitled to offer testimony and other extrinsic evidence to the contrary if in fact they intended something else.[54]
D. Taylor v. Freeland & Kronz
It is fair to say that there would be no controversy today had Taylor been decided differently. Taylor, though, is quite clear. Its interpretation of Rule 4003(b) unambiguously establishes when the trustee must object if property claimed as exempt is to remain with the estate. Nor is Taylor decided narrowly. The Court clearly took into consideration the fear that the bright line it was drawing would leave bankruptcy estates and their constituent creditors vulnerable to trustee mistake and debtor fraud. Unfortunately for trustees, the Court concluded that the rule did not permit exceptions for those concerns. Taylor, 112 S.Ct. at 1648-49.
This court offers no opinion whether Taylor's interpretation of Rule 4003(b) is correct or not. What matters now is that the Court has spoken. If additional protection is needed to ensure against trustee mistake or debtor fraud, then those protections should be afforded through amendments to the rules.[55] Indeed, one such correction has already been made, for Rule 4003(b) was recently amended to allow a trustee additional time to object if the debtor had fraudulently claimed the exemption. However, until a correction is also made to the official form used for Schedule C, the courts must abide by Taylor and focus instead upon ascertaining the debtor's intent through factual inquiry whenever the debtor's Schedule C itself is ambiguous as to what that intent might have been.[56]
*547 CONCLUSION[57]
For the reasons stated herein, the court sustains Trustee's objection to the Ericksons' claimed $13,810 Section 522(d)(5) exemption of their 2006 and 2007 tax refunds. This court further calculates *548 that the maximum Section 522(d)(5) exemption that the Ericksons may claim in these refunds is $9,113.[58] However, both parties reserve the right to challenge that calculation.
The court will enter a separate order consistent with this opinion.
NOTES
[1] 11 U.S.C. § 522(d)(5). Unless otherwise designated, all further references to "Section ___" shall be to the Bankruptcy Code as currently amended. 11 U.S.C. §§ 101, et seq.
[2] Trustee had also posited a similar theory in ten other cases where the debtors had belatedly claimed exemptions in their tax refunds. This court heard all of those objections together and then disposed of them in a single written opinion. See, In re Thomasma, 399 B.R. 20 (Bankr.W.D.Mich.2008).
[3] Trustee also had the option under the Thomasma decision to contend that the Ericksons' delay in claiming their tax refunds as exempt was in bad faith and in fact Trustee did attempt at the February 10, 2009 evidentiary hearing to offer proofs that the Ericksons had acted in bad faith. However, the scheduling order that had been previously issued did not include bad faith as a triable issue. Consequently, the court did not permit Trustee to offer those proofs.
The specific reasons for that ruling are set forth in the record. However, the court does supplement the record at this time to further clarify that the status conference held on December 4, 2008 was ordered pursuant to 11 U.S.C. § 105 and FED.R.BANKR.P. 9014(a) and that the scheduling order issued as a consequence of that status conference was issued pursuant to FED.R.BANKR.P. 7016 and FED. R.CIV.P. 16(c) and (d).
[4] Jurisdiction to hear this matter is based upon 28 U.S.C. § 1334(b) and W.D. Mich. L.Civ.R. 83.2. This is also a core proceeding under 28 U.S.C. § 157(b)(2)(B) and, therefore, the order to be entered in conjunction with this opinion is a final order that is appealable pursuant to 28 U.S.C. § 158.
The balance of this opinion represents this court's specific findings of fact and its separate conclusions of law as required by FED. R.BANKR.P. 9014 and 7052 and FED.R.CIV.P. 52(a)(1).
[5] The Ericksons in fact owned only an undivided one-half interest in the Tawas property with the other one-half being owned by another couple. Nonetheless, the court will refer to the Ericksons' one-half interest as the "Tawas property."
[6] Section 522(d)(5) is often referred to as the "catch all" or "wild card" exemption. It permits the debtor to exempt from the estate anything the debtor might choose provided that the aggregate value of the property chosen does not exceed a specified amount. At present, the maximum amount can be as much as $11,200.
[7] That is, the Ericksons wanted the Tawas property actually returned to them as opposed to having it sold and receiving the proceeds instead.
[8] Section 343 requires the debtor to attend a scheduled meeting of creditors. See also, 11 U.S.C. § 341. When this meeting was held is important because a party is left with only thirty days from the conclusion of that meeting to object to any exemption claimed unless the court grants an extension. FED.R.BANKR.P. 4003(b).
[9] Indeed, it is quite possible that the Ericksons' revised exemption strategy included the assumption that Trustee would be unable to sell their undivided interest in the Tawas property and that, as a consequence, they would recover that property in any event upon the close of the case. See, 11 U.S.C. § 554(c).
[10] The Ericksons' selection of $5,853 as the amount of their amended Section 522(d)(5) exemption in the vacant lot is puzzling given the total Section 522(d)(5) exemptions claimed in the cash, bank accounts, vacant land and tax refunds as amended adds up to only $19,900 instead of the $22,400 maximum actually allowed. Part of the discrepancy is explained by the Ericksons' decision to redesignate as a Section 522(d)(5) exemption in their amended Schedule C $550 of the $3,500 they had originally claimed as a Section 522(d)(2) exemption in a Ford Econoline van. As for the balance, it appears that the Ericksons were under the mistaken impression at the time they proposed their May 16, 2008 amendment that the maximum Section 522(d)(5) exemption available to them was only $20,450 when in fact the maximum had been increased to $22,400 effective April 1, 2007.
The $9,113 that the court has calculated as the amount the Ericksons can keep assumes that the Ericksons' will continue to take a $500 Section 522(d)(5) exemption in the van and that the Ericksons will commit the remainder of the available Section 522(d)(5) exemption, that being $9,113, to keeping as much of their 2006 and 2007 tax refunds as they can.
[11] An alternative theory that Trustee might have advanced is laches. See, e.g., In re Daniels, 270 B.R. 417, 425-29 (Bankr.E.D.Mich. 2001). However, there is no evidence that Trustee has been prejudiced by the Ericksons' subsequent change of mind concerning their exemptions. In any event, Trustee has not raised this argument nor is it necessary given this court's conclusion that a debtor cannot in any event force the return of property to the bankruptcy estate once it has been removed.
[12] See; also, Lewandowski v. Lim (In re Lewandowski), 386 B.R. 643, 647-48 (E.D.Mich. 2008) and In re Powell, 399 B.R. 190, 195 (Bankr.W.D.Tex.2008).
[13] See also, Barroso-Herrans v. Lugo-Mender (In re Barroso-Herrans), 524 F.3d 341, 344 (1st Cir.2008). Although Barroso-Herrans did not cite Chappell, it at least incorporated some of the reasoning employed in Chappell. This court has chosen to address Chappell as opposed to Barroso-Herrans because Chappell offers a broader spectrum of arguments for the result that both Barroso-Herrans and it ultimately reached.
[14] The Anderson BAP's opinion was prompted by an appeal of this court's own decision concerning this controversy, In re Anderson, 357 B.R. 452 (Bankr.W.D.Mich.2006). Although the Anderson BAP criticized this court for its separate conclusion concerning the approval of settlements under Bankruptcy Rule 9019(a), the Anderson BAP did affirm this court's decision concerning the nature of the exemption the debtors had taken in that instance.
The Anderson BAP's decision has also been adopted in In re Reilly, 534 F.3d 173, 180 (3rd Cir.2008) ("Anderson provides the closest analog to the case before us."). The Supreme Court recently certified Reilly for review. Schwab v. Reilly, ___ U.S. ___, 129 S. Ct. 2049, ___ L.Ed.2d ___.
[15] See also, Cormier, 382 B.R. at 392.
[16] If exempt property cannot be removed from the estate as an in-kind exemption under Section 522(l), it must ultimately be returned to the debtor somehow. The logical alternative, of course, is abandonment either upon close of the case by operation of Section 554(c) or at an earlier time by operation of Section 554(a) or (b). Indeed, the cases that resist the notion of in-kind exemptions often arise when the debtor later attempts to compel the trustee's abandonment of the subject property under Section 554(b). See, e.g., In re Heflin, 215 B.R. 530 (Bankr.W.D.Mich.1997) and In re Bregni, 215 B.R. 850 (Bankr. E.D.Mich.1997).
[17] As already noted, the scheduled values of all three of these assets, which is only $237, is also equal to the amount of the Section 522(d)(5) exemptions claimed in the same. Trustee did not object to these exemptions when the Ericksons claimed them in their original Schedule C or when they claimed them again in their amended Schedule C.
[18] The Ericksons claimed a $5,500 Section 522(d)(3) exemption in their household goods and wearing apparel which they also valued at $5,500. The $5,500 exemption is well below the combined $21,550 maximum the Ericksons are permitted under that subsection.
[19] See also, Barroso-Herrans v. Lugo-Mender (In re Barroso-Herrans), 524 F.3d 341, 344 (1st Cir.2008) ("Absent objection to a claimed exemption ..., the property claimed as exempt belongs to the debtor and not the estate-even if the exemption is improper."); Bell v. Bell (In re Bell), 225 F.3d 203, 215-16 (2nd Cir.2000) (compiling cases and then concluding with "[q]uite simply, property that has been exempted belongs to the debtor."); In re Reilly, 534 F.3d 173, 180 (3rd Cir.2008); Matter of Sherk, 918 F.2d 1170, 1174 (5th Cir. 1990) ("When a claimed exemption is upheld by the bankruptcy court, it is no longer property of the estate.") (citations omitted), abrogated on other grounds, Taylor v. Freeland & Kronz, 503 U.S. 638, 112 S. Ct. 1644, 118 L. Ed. 2d 280 (1992); Matter of Yonikus, 996 F.2d 866, 870 (7th Cir. 1993) ("[T]he Bankruptcy Code permits a debtor to remove from the estate whatever property is deemed exempt from execution under either state or federal law."); Abramowitz v. Palmer, 999 F.2d 1274, 1276-77 (8th Cir. 1993); Seror v. Kahan (In re Kahan), 28 F.3d 79, 81 (9th Cir. 1994) ("The bankruptcy estate includes all of the debtor's interests in property at the commencement of the case, except property that the debtor elects to exempt based on applicable federal or state law."); In re Scrivner, 535 F.3d 1258, 1264 (10th Cir.2008) ("Generally, if the debtor claims property as exempt and "a party in interest" does not object, that property is exempt from property of the estate."); Gamble v. Brown (In re Gamble), 168 F.3d 442, 444 (11th Cir.1999) ("Once the property is removed from the estate [through exemption], the debtor may use it as his own."), citing Hall v. Finance One of Georgia, Inc. (In re Hall), 752 F.2d 582, 584 (11th Cir.1985); In re Gagnard, 17 B.R. 811, 813 (Bankr.D.La.1982); In re Fishman, 241 B.R. 568, 574 (Bankr.N.D.Ill.1999); Braunstein v. Leung (In re Leung), 385 B.R. 489, 494 (Bankr.D.Mass.2008); In re Stinson, 221 B.R. 726, 729 (Bankr.E.D.Mich.1998).
[20] This court disagrees with Cormier's contention that the Supreme Court in Taylor "was not called upon to interpret the exemption statute, including § 522(d), nor did it even discuss it, except perhaps in passing." 382 B.R. at 391. Cormier, of course, is correct that Taylor did not discuss what property may be exempted under that section or "how a debtor may claim an `in-kind' exemption to assert the entire property as exempt." Id. (emphasis in original). However, Taylor most certainly did address Section 522, for the opinion begins with this statement.
Section 522(l) of the Bankruptcy Code requires a debtor to file a list of the property that the debtor claims as statutorily exempt from distribution to creditors. Federal Rule of Bankruptcy Procedure 4003 affords creditors and the bankruptcy trustee 30 days to object to claimed exemptions. We must decide in this case whether the trustee may contest the validity of an exemption after the 30-day period if the debtor had no colorable basis for claiming the exemption.
112 S.Ct. at 1646.
Indeed, the issue in Taylor that prompted the trustee's appeal to the Supreme Court was whether the debtor's law firm, Freeland & Kronz, had received an avoidable post-petition transfer under Section 549 when it accepted from debtor its share of the settlement proceeds that debtor had previously claimed as exempt. See, Taylor v. Freeland & Kronz (In re Davis), 105 B.R. 288 (Bankr.W.D.Pa. 1989). What the Third Circuit had held on appeal was that the settlement proceeds were no longer property of the estate by operation of an unopposed exemption under Section 522(l), See, Taylor v. Freeland & Kronz, 938 F.2d 420, 422 (3rd Cir. 1991), and it was this decision that the Supreme Court then affirmed, 112 S.Ct. at 1648 ("Section 522(l) therefore has made the property exempt.").
[21] Many courts, including the Sixth Circuit, have added to the "actual" and "necessary" requirements for the allowance of a Section 503(b)(1)(A) administrative claim the additional requirement that the expense must have also benefitted the estate. See, e.g., Employee Transfer Corp. v. Grigsby (In re White Motor Corp.), 831 F.2d 106, 110 (6th Cir. 1987). However, even with this gloss there remains an exception for tort claims against the estate based upon the premise that fairness requires all claimants against the estate to be treated equally as opposed to only those who provide appreciable benefit to it. Reading Co. v. Brown, 391 U.S. 471, 477-78, 88 S. Ct. 1759, 1763, 20 L. Ed. 2d 751 (1968); see also, Matter of Al Copeland Enterprises, Inc. v. State of Texas (Matter of Al Copeland Enterprises, Inc.), 991 F.2d 233, 239 (5th Cir.1993) ("The Court's opinion in Reading survived Congress' revisions to the Bankruptcy Code."); and In re Execuair Corp., 125 B.R. 600, 602-3 (Bankr.C.D.Cal.1991).
[22] The owner of a motor vehicle is liable for another's negligent operation of the same so long as its use is with the owner's knowledge or consent, whether express or implied. MICH. COMP. LAWS § 257.401(1).
[23] An abandonment must be noticed to the creditor matrix unless the court directs otherwise. FED.R.BANKR.P. 6007(a).
[24] (d) The following property may be exempted under subsection (b)(2) of this section:
(1) The debtor's aggregate interest, not to exceed $20,200 in value, in real property or personal property that the debtor or a dependent of the debtor uses as a residence,...
(2) The debtor's interest not to exceed $3,225 in value, in one motor vehicle.
(3) The debtor's interest, not to exceed $525 in value in any particular item or $10,775 in aggregate value, in household furnishings, ...
(4) The debtor's aggregate interest, not to exceed $1,350 in value, in jewelry ...
(5) The debtor's aggregate interest in any property, not to exceed in value $1,075 plus up to $10,125 of any unused amount of the exemption provided under paragraph (1) of this subsection.
(6) The debtor's aggregate interest, not to exceed $2,025 in value, in any implements,...
. . .
(8) The debtor's aggregate interest, not to exceed in value $10,775, in any accrued dividend or interest under, or loan value of, any unmatured life insurance contract....
11 U.S.C. § 522(d)(1)-(6) and (8) (emphasis added).
[25] Notwithstanding section 541 of this title, an individual debtor may exempt from property of the estate the property listed in either paragraph (2) [i.e., the Section 522(d) exemptions] or, in the alternative, paragraph 3 of this subsection [i.e., the applicable state and non-bankruptcy federal exemptions].
11 U.S.C. § 522(b)(1) (emphasis added).
[26] Of course, Cormier's hesitation with allowing in-kind exemptions is not with the debtor's removal of exempt property whose value is less than the maximum allowed but with the debtor's removal of exempt property whose value is greater than the maximum allowed. But neither Section 522(d)(5) nor any of the other federal exemptions with value limitations provides a mechanism other than the objection process itself for permitting the former but prohibiting the latter. Consequently, these sections must be read to permit in-kind exemptions without exception. Otherwise, debtors would never be able to remove eligible property from the estate as clearly contemplated under Section 522(d). Indeed, it is not fair to even assume that the debtor has cheated the estate should it later turn out that he had understated the exempted asset's actual value. After all, parties may differ in their opinions as to value so long as they have acted in good faith.
As for those debtors who do choose to cheat, the estate's protection lies not in Section 522(d), but rather with the trustee's and other parties' vigilance. Put simply, a debtor can remove from the estate more than he is allowed under Section 522(d) unless the trustee or another party objects. Lest there by any doubt, consider Taylor more closely, for all of the parties in Taylor agreed that the settlement proceeds the debtor there was able to keep as her exemption far exceeded anything that was allowed under either Section 522(d) or applicable state exemption laws. Taylor, 112 S.Ct. at 1647.
[27] In fact, Section 522(d)(2) could be read to permit the removal of the Chevette but not $3,225 of the proceeds realized from the trustee's ultimate disposition of the Corvette. Put differently, Section 522(d)(2) and the other pertinent exemption provisions of that subsection address only the exemption of interests, not proceeds. However, this court does not believe that the language used in Section 522(d) is so inflexible that the debtor cannot elect instead to receive the proceeds realized from the identified property, especially in those instances where a value limitation would prohibit a particular in-kind exemption from being taken. Rather, this court finds sufficient leeway within Section 522(d) to permit the debtor's share of the proceeds being treated as in fact the exempted interest.
[28] 11 U.S.C. §§ 522(d)(1), (3), (4), (6), and (8).
[29] Cormier correctly points out that it is through a Chapter 13 that a debtor can keep most, if not all, of his pre-petition property and that a Chapter 7 proceeding, in contrast, contemplates the liquidation of the debtor's assets for the benefit of his creditors. Cormier, 382 B.R. at 396-97. However, this distinction does not warrant the further conclusion that Cormier also wants to makethat a debtor is not allowed in a Chapter 7 to remove from the estate his belongings as in-kind exemptions but that he must instead leave them for further administration like everything else. Granted, Section 704(a)(1) charges the Chapter 7 trustee with the duty to "collect and reduce to money the property of the estate...." However, nothing therein suggests that the property that the debtor wishes to keep in-kind as his exemptions should not be removed first.
Cormier also warns that "[c]onstruing chapter 7 to permit a debtor to retain property in excess of the maximum amount permitted by § 522(d)(5) turns the Bankruptcy Code upside down." Id. at 397. However, Anderson mandates no such construction. It simply recognizes that Section 522(d) permits in-kind exemptions and, as such, a Chapter 7 trustee must be appropriately vigilant to prevent a debtor from taking advantage of the same, especially in light of Taylor.
This is not to say that there is no merit to Cormier's fear of "some debtors figuratively and fortuitously sliding down a rainbow to be gifted a pot of unwarranted bankruptcy largesse," Id. at 380. But, the risk posed is neither new nor unusual. Rather, it is the same risk that presents itself whenever a system that is susceptible to debtor fraud depends for its protection upon the trustee's oversight. Indeed, all that Taylor does is underscore even more the inherent risks involved.
And finally, Cormier warns that Anderson "may result in thousands of otherwise unnecessary objections to exemptions." 382 B.R. at 398 n. 31. Perhaps. However, this court has not perceived any noticeable increase in objections in the cases it has been assigned even though Anderson is now more than two years old. It appears that trustees at most are now being more diligent in assessing whether there is non-exempt value in assets that the debtor has claimed as fully exempt. But, as Taylor points out, diligence is what the Rule 4003(b) deadline is supposed to encourage.
[30] As already noted, the district court in In re Lewandowski, 386 B.R. 643, 646-48 (E.D.Mich.2008) found Cormier compelling when it too concluded that Section 522(d)(5) does not allow for in-kind exemptions. However, Lewandowski also relied upon a case from its own district, In re Gaylor.
"Courts have ... consistently held that the debtor's property remains properly of the estate to the extent its value exceeds the statutory amount which the debtor is permitted to exempt."
Id. at 647-48 (quoting In re Gaylor, 123 B.R. 236, 239 (Bankr.E.D.Mich.1991)).
But, as the court in Gaylor itself acknowledged, the issue was anything but well settled when it issued its opinion. Indeed, in making its decision, the bankruptcy court in Gaylor chose to disregard a contrary decision by another district judge from that same district. See, Seifert v. Selby, 125 B.R. 174 (E.D.Mich. 1989).
Moreover, Lewandowski missed the fact that Gaylor preceded Taylor v. Freeland & Kronz which, if anything, affirmed Seifert and rejected Gaylor. Granted, the debate continues after Taylor as to whether its holding applies to attempted in-kind exemptions under the federal scheme. However, Gaylor certainly is not, as Lewandowski seems to suggest, well settled law even in the Eastern District of Michigan.
[31] 373 B.R. 73 (9th Cir.BAP2007).
[32] See also, In re Heflin, 215 B.R. at 536 ("If a debtor intends to fully exempt a particular piece of property in its entirety, regardless of its value, then the debtor should unambiguously express this intention in his schedules.").
[33] FED.R.BANKR.P. 4003(b). Unless otherwise designated, all further references to "Rule ___" shall be to the Federal Rules of Bankruptcy Procedure. FED.R.BANKR.P. 1001, et seq.
[34] See, also, Barroso-Herrans, 524 F.3d 341. In that case, the debtor contended that he had exempted in-kind two lawsuits related to his defunct business when the Chapter 7 trustee later settled them for much more than the $4,000 value the debtor had given each of them in his Schedule C. However, the bankruptcy court rejected his contention as did the First Circuit on appeal.
The First Circuit concluded that the question of whether an exemption claimed may be taken in-kind or not must ultimately turn on how a trustee would objectively interpret the debtor's intentions. It noted that the inclusion of terms like "`100% [of the property's value],' `unknown,' `to be determined,' `tba' and `$1.00'" in a debtor's Schedule C are "red flags" to trustees and creditors. Id. at 345 (quoting from 1 Collier on Bankruptcy, ¶ 8.06(1)(c)(ii) (15th ed. rev.2007)). However, in its view, equating the exemption claimed with its value was not enough to put the trustee reasonably on notice, at least under the circumstances presented. As the First Circuit observed:
[A] $4,000 valuation for the entire multi-million dollar law suit including the accounts receivable makes no sense; and nothing in the schedules suggests that the $4,000 figures reflected an enormous and improbable discount based on the risk that the suits would be lost.
Id. at 346.
[35] Specifically, Chappell concluded that the debtor in Taylor had sufficiently expressed an intent to claim the entire proceeds of an employment discrimination action by listing its Schedule C value as "unknown" and that the debtor in Green had expressed a similar intent with respect to her personal injury claim by identifying it as "contingent" and assigning it a value of one dollar. These facts, according to Chappell, distinguished Taylor and Green.
There is no question that these distinctions exist. See, also, Barroso-Herrans, 524 F.3d at 345. Moreover, listing an exempted claim on Schedule C as "contingent" or setting its value as "unknown" may be more probative of the debtor's intent to claim it in-kind than listing or valuing it in some other manner. However, Chappell offers no explanation as to why these distinctions warrant an all or nothing approach. In other words, why should the peculiar facts of Taylor and Green be conclusive as to the debtor's intention to take an in-kind exemption but the peculiar facts of Chappell be given no weight at all? Does not the fact that the debtors in Chappell gave identical values to the estate's equity in their home and the Section 522(d)(1) exemption they were claiming permit at least the inference that they too intended to exempt the property in-kind, especially in light of the fact that the trustee in that instance actually agreed with the Chappell debtors that there was no more equity in the home at that time beyond what they were claiming as their exemption?
This court concludes, then, that the distinctions Chappell draws are irrelevant and that it is better to simply accept that the question put in all cases is one that can only be decided by considering all the relevant evidence at hand. Indeed, even the court in Barroso-Herrans did not reject outright the debtors' argument in that case that their equation of the values and the exemptions claimed in the two lawsuits manifested an intention to exempt them in-kind from the estate. Rather, the First Circuit rejected that contention only after it concluded that other factors particular to the case required a different conclusion. Id. at 346.
Nor does Cormier's characterization of the value information in Schedule C as only an "administrative convenience," Cormier, 382 B.R. at 395, alter the probative effect of that information. Whatever its purpose, the fact remains that this so-called "bonus information," Id., offers insight into the debtor's intent. As such, it is as pertinent to the inquiry as any other item of information that appears in that schedule or, for that matter, that arises from any other source.
[36] In explaining elementary bankruptcy principles, the Court [in Owen v. Owen] stated in dicta that an "exemption is an interest withdrawn from the estate (and hence from the creditors) for the benefit of the debtor."
Chappell, at 79.
[37] See, also, 11 U.S.C. § 521(a)(1)(B)(i).
[38] See also, Cormier, 382 B.R. at 397 ("Should not the debtor bear the burden to clarify the ambiguity that he created?") and Barroso-Herrans, 524 F.3d at 345 ("[A]fter Taylor, a failure to object to a claimed exemption has very harsh consequences for the estate, and so it is most fair to place on the debtor the burden of claiming exemptions unambiguously.").
[39] Cormier is not as stringent as Chappell in the application of this rule, for the case law Cormier has cited requires the court to at least attempt to resolve the ambiguity through extrinsic evidence before subjecting the drafter to the rule's adverse presumption. Id. at 397 n. 30 (citing NILAC Int'l. Mktg. Group v. Ameritech Serv., Inc., 362 F.3d 354, 359 (6th Cir.2004) and Klapp v. United Ins. Group Agency, Inc., 468 Mich. 459, 471, 663 N.W.2d 447 (2003)). As for Barroso-Herrans, the court there ultimately did not rely upon this rule of construction, but instead relied upon what the trustee could have reasonably ascertained about the debtors' intentions from the available facts. 524 F.3d at 346 ("It is enough to resolve this case that the trustee's reading of the exemptions as limited to a $4,000 share of the proceeds from each law suit is objectively reasonable ...").
[40] Chappell relies upon Section 541(a)(6) as well to justify the estate's inclusion of post-petition appreciation as its property.
Notwithstanding that Reed, Hyman and Alsberg were decided by the Ninth Circuit in the context of California homestead exemption law, as we noted in Vu, the estate's entitlement to postpetition appreciation is not premised upon the applicable exemption scheme. Rather, it is based upon § 541(a)(6).
373 B.R. at 81 (citing Vu v. Kendall (In re Vu), 245 B.R. 644, 647-48 (9th Cir.BAP2000)).
But Chappell misreads Vu. Vu does address the estate's interest in post-petition appreciation of a debtor's home. However, it did not do so in the context of whether that appreciation would prohibit the debtor from claiming an in-kind exemption of his home through Section 522(d)(1) and Section 522(l); rather, Vu involved the entirely different question of whether the debtor could compel a Section 554(b) abandonment of appreciated property that all of the parties, including debtors, were treating as still being part of the bankruptcy estate. Indeed, all that the Ninth Circuit BAP decided in Vu was that the bankruptcy court had not abused its discretion in denying the debtors' motion to abandon because the debtors had failed to establish by a preponderance of the evidence that the subject property was burdensome or of inconsequential value and benefit to the estate. Vu, 245 B.R. at 650.
[41] The Ninth Circuit authority Chappell cites is a series of cases that include Hyman v. Plotkin (In re Hyman), 967 F.2d 1316 (9th Cir.1992) Alsberg v. Robertson (In re Alsberg), 68 F.3d 312 (9th Cir. 1995), and Schwaber v. Reed (In re Reed), 940 F.2d 1317 (9th Cir. 1991). However, as Chappell itself acknowledges, all three of these cases were decided only "in the context of California homestead law," 373 B.R. at 81, while the debtors before it had claimed the exemption of their home under the federal exemption permitted by Section 522(d)(1).
[42] 500 U.S. 305, 111 S. Ct. 1833, 114 L. Ed. 2d 350 (1991).
[43] This is how the Chappell BAP itself posed the syllogism:
We address whether postpetition appreciation of exempt property is to be treated the same under the federal exemption scheme as under a state's exemption scheme. We conclude that controlling Ninth Circuit authority involving state homestead exemptions, which holds that the bankruptcy estate is entitled to postpetition appreciation in excess of the maximum value permitted to be exempted under the statutory authority invoked by the debtor, applies with equal force to exemptions taken under the federal exemption scheme. The factual differences between existing Ninth Circuit authority regarding state exemptions and the federal exemption now in question constitute a distinction without significant difference as to postpetition appreciation. We thus also conclude that a debtor's entitlement to postpetition appreciation is limited to the maximum value of the exemption permitted under the exemption statute invoked.
373 B.R. at 75.
[44] Cormier apparently agrees with the expansive interpretation of Owen that Chappell relies upon to form the second premise of its syllogism. "This court believes that the Owen Supreme Court language discussing § 522(f) is equally compelling when § 522(d) is interpreted." Cormier, 382 B.R. at 407. However, Cormier offers no more explanation for this belief than does Chappell. Consequently, a closer look at Owen is warranted.
The creditor in Owen had recorded a judgment lien against the debtor in Sarasota County, Florida. That lien had attached to a condominium the debtor owned in that county because Florida at that time did not recognize the debtor's condominium as immune under its then-enacted homestead exemption. However, Florida thereafter amended that exemption such that the debtor's condominium would now be eligible. Unfortunately for debtor, Florida did not make the amendment retroactive and, therefore, the creditor's previously recorded judgment lien continued to attach.
The debtor then attempted to set aside the judgment lien under Section 522(f) in conjunction with his ensuing bankruptcy case. That subsection permits the avoidance of a judgment lien "to the extent that such lien impairs an exemption to which the debtor would have been entitled under [Section 522(b)]...." 500 U.S. al 305, 111 S.Ct. at 1834. The creditor, of course, opposed avoidance on the theory that its lien was valid under Florida's homestead law, even as amended, and, therefore, no exemption was being impaired. Indeed, the creditor maintained that avoidance would actually expand the debtor's exemption under Florida law as opposed to preserving any exemption that Florida in fact recognized.
Nonetheless, the Court permitted the lien to be avoided, although it certainly recognized the appeal of the creditor's argument. What persuaded the Court was how the courts had "widely and uniformly rejected" the same argument when it had previously been made in the context of the "built-in limitations on the federal exemptions." 500 U.S. at 310, 111 S.Ct. at 1836 (emphasis in original). In other words, the Court saw a similarity between the limitation in the Florida homestead exemption (i.e., that the exemption did not encompass judgment liens that had attached prior to its enactment) and the monetary limitations imposed upon the interests claimed as exempt under many of the Section 522(d) subsections. The Court then offered a number of reasons why Section 522(f) would have had to have been construed contrary to how the creditor wanted it interpreted had the subject exemption been one of the "limited" federal exemptions under Section 522(d), In doing so, the Court asked itself "whether a different interpretation [of Section 522(f)] should be adopted for state exemptions." 500 U.S. at 313, 111 S.Ct. at 1838. It answered its question as follows:
We do not see how that could be possible. Nothing in the text of § 522(f) remotely justifies treating the two categories of exemptions differently.
Id.
Lest there be any doubt that the Court was confining its equation of the state and federal exemption schemes to only the Section 522(f) issue presented, it stated this as its conclusion:
On the basis of the analysis we have set forth above with respect to federal exemptions, and in light of the equivalency of treatment accorded to federal and state exemptions by § 522(f), we conclude that Florida's exclusion of certain liens from the scope of its homestead protection does not achieve a similar exclusion from the Bankruptcy Code's lien avoidance provision.
Owen, 500 U.S. at 313-14, 111 S.Ct at 1838 (emphasis added).
It is difficult, then, to understand how either Chappell or Cormier can transform the "equivalency" referenced in this conclusion, as it is so limited, to provide support for the much broader proposition that Chappell found crucial to the syllogism it was making.
[45] Chappell fears that any interpretation of Section 522(d) other than the one it has adopted "would stand the bankruptcy system on its head." 373 B.R. at 79. Why, it wonders would debtors "ever choose their state's exemption scheme, limited as it likely would be to a specific dollar cap" ... "[i]f the federal residence exemption of § 522(d)(1) were construed to exempt the entirety of the residence[.]"? Id.
However, Chappell's concerns are already addressed by Section 522(b)(2). That section, of course, permits every state the right to "opt out" of the federal exemption scheme permitted under Section 522(d). Therefore, if a state such as Washington (the Chappells' state) should ever decide that its bankrupt residents are unduly preferring the federal exemptions over its own, then that state's legislature need only opt out of Section 522(d) to remedy the problem. See, Owen, 500 U.S. at 308, 111 S.Ct. at 1835.
[46] For example, in Heflin, the court states:
This court adopts the reasoning set forth in the Ninth Circuit's decisions in Hyman and Alsberg. Therefore, this court holds a trustee is not legally required to object to a debtor's scheduled value relating to specific property.
Heflin, 215 B.R. at 535. See also, Bregni, 215 B.R. at 854 ("This Court agrees with the reasoning of Hyman and Heflin and, therefore, finds that Bregni is limited to her $15,000 claimed exemption.").
[47] Chappell concludes with the observation that the debtors before it were "in large part the `victims' of their own inaction." 373 B.R. at 82. The debtors could have, it notes, moved for abandonment at any time during the two-year interval between the commencement of their case and the trustee's ultimate declaration that he intended to sell the property. Id.
However, is this fair? After all, even the trustee in that instance agreed that there was no non-exempt equity in the debtors' home at the outset of their case. Indeed, the trustee himself did not learn of the property's enhancement in value until some two years later. Therefore, to chastise those debtors for not seeking an abandonment earlier for what they legitimately had a right to believe had already been returned to them as an uncontested objection is harsh.
Moreover, Chappell's suggestion that abandonment would have been an easy solution for those debtors had they only acted seems gratuitous given the Ninth Circuit BAP's prior acknowledgment of how difficult securing such an abandonment is:
[a]n order compelling abandonment is the exception, not the rule. Abandonment should only be compelled in order to help the creditors by assuring some benefit in the administration of each asset.... Absent an attempt by the trustee to churn property worthless to the estate just to increase fees, abandonment should rarely be ordered.
Vu, 245 B.R. at 647 (quoting Morgan v. K.C. Mach. & Tool Co. (In re K.C. Mach. & Tool Co.), 816 F.2d 238, 246 (6th Cir.1987)).
Would not the prospect of appreciation alone have warranted the trustee's objection to any abandonment sought by the Chappell debtors even had they realized early on that filling out their Schedule C as they did was not itself enough to remove their home from the bankruptcy estate?
[48] Chappell, 373 B.R. at 82 n. 9.
[49] In re Anderson, 357 B.R. 452 (Bankr. W.D.Mich.2006).
[50] 503 U.S. 638, 112 S. Ct. 1644, 118 L. Ed. 2d 280 (1992).
[51] Although Mr. Cormier did testify, the court in Cormier apparently postponed considering whatever he had to say until some later hearing. Cormier, 382 B.R. at 384 n. 12. Moreover, it is not altogether clear that Mr. Cormier's testimony even covered his wife's and his intentions in exempting the stock as they did since Cormier itself suggests that the evidentiary hearing's purpose was only to address "what happened, or did not happen, at the auction sale" that Mr. Cormier was also challenging. Id. at 384.
[52] This court recognizes that Cormier criticized it for not itself conducting an evidentiary hearing in Anderson. However, the issue of whether an in-kind exemption had been taken or not in that instance arose in the rather unusual circumstance of whether a settlement the trustee was proposing with respect to the sale of an exempted hunting cabin should be approved under Rule 9019(a). As a consequence, no evidentiary hearing was needed nor was one even requested. Rather, this court was able in Anderson to consider the merits of the trustee's Rule 9019(a) motion simply upon the inferences that could be drawn from the limited record before it. See, Anderson, 357 B.R. at 473, n. 22. Coincidently, the inference that this court drewthat the debtors had intended their exemption of the hunting cabin to be in-kindis exactly the same inference the Chappell BAP drew when it distinguished Anderson from the case before it. Chappell, 373 B.R. at 82, n. 9.
[53] Cormier takes considerable issue with the Anderson BAP's reliance upon Allen v. Green (In re Green), 31 F.3d 1098 (11th Cir.1994) as justification for its position. Green, of course, is the case that Chappell also distinguished in reaching its conclusion. Cormier argues that the Anderson BAP should not have discounted Stoebner v. Wick (In re Wick), 276 F.3d 412 (8th Cir.2002). Cormier is right.
Wick involved the debtor's attempted exemption of certain stock options under Section 522(d)(5). The debtor had valued both the options and their claimed exemption as "unknown" in her Schedule C and the Rule 4003(b) deadline passed without objection. However, a dispute nonetheless arose as to whether the debtor had exempted all of the stock when it was later sold for substantially more than the remaining $3,925 the debtor had available as her Section 522(d)(5) exemption.
The Eighth Circuit affirmed the bankruptcy court's determination that the debtor had only partially exempted the stock. Of particular import was the Eighth Circuit's own reliance on the trial record to support its affirmance.
We believe the Bankruptcy Court correctly determined that the options were partially exempted. The facts suggest that Ms. Wick, her counsel, and the trustee understood that the options were only partially exempt. The trustee requested a copy of the employment agreement and followed up on whether Ms. Wick's options had vested. These actions were logical only if he believed the estate had an ongoing interest in the options. Then, the trustee took Ms. Wick's assurance that her options were denied at face value. In her response to the trustee, Ms. Wick did not question the trustee's follow-up on the options, which suggests that she too understood that the options were only partially exempt. Further, Ms. Wick's counsel acknowledged in a July 22, 1999, letter to the trustee that the estate had at least some, if a minimal, interest in the options. In re Wick, 249 B.R. at 907. ("[I]t is our position ... that we have claimed the majority of [the options] as exempt.")
276 F.3d at 416.
Wick, then, does reject the Anderson BAP's conclusion that a debtor's equation of the exemption claimed and the asset's value in his Schedule C manifests an irrebuttable presumption that the asset is to be exempted in-kind. But Wick does not, as Chappell and Cormier would have it, require the opposite presumption either. Rather, Wick is quite clear that Schedule C is only probative of the debtor's intention, and, as such, it is appropriate to look elsewhere for other evidence of the debtor's intent, especially when the information within Schedule C is itself ambiguous.
[54] Changing the facts helps illustrate this point. For example, had the property instead been the Ericksons' home, their abandonment of it prior to the commencement of the case would have certainly been probative of their intention to leave it as part of the estate notwithstanding the fact that they may have set the home's value and the exemption claimed as the same in their Schedule C.
[55] See, 28 U.S.C. § 2075.
[56] Barroso-Herrans well illustrates why the needed corrections should be accomplished through the rules as opposed to through the courts. Again, the debtors in that case had claimed as exempt in-kind two lawsuits that they had valued at $4,000 each. However, it is apparent that both the bankruptcy court and the First Circuit had their doubts. As the First Circuit observed:
A problem with such a reading is that the $4,000 sum appears to be an implausible full valuation for law suits seeking to collect a vastly greater amountover $4 million from a government authority for unpaid invoices. Barroso explains away that discrepancy as a function of expected value; at the time of filing, he says, the suits were contingent assets worth only $4,000 apiece. This is a dubious assertion on its face, and even without Barroso's cooperation the suits were settled for $100,000.
Barroso-Herrans, 524 F.3d at 344 (emphasis in original).
Indeed, the bankruptcy court in Barroso-Herrans actually found that the debtors had acted in bad faith. Id. at n. 1.
It is equally evident that the First Circuit struggled with how to remedy the debtors' apparent fraud. Its solution, of course, was to ignore what the debtors clearly intended, as deceitful as it may have been, and to focus instead upon what the trustee could have reasonably perceived. Solving the problem as it did no doubt accomplished the justice sorely needed in that particular case. Unfortunately, it was at the expense of future debtors who, like the Ericksons here, will not have been fortunate enough to have included in their Schedule Cs one or more of the "red flags" alluded to by the First Circuit but who nonetheless will have completed that schedule in good faith and with the honest intention of exempting the targeted asset in-kind.
How much easier and clearer it would have been for the First Circuit, or better, the underlying bankruptcy court, had the current exception for fraud been added earlier to Rule 4003(b). Or, in the alternative, how much easier would it have been had the rules at that time required the debtors in Barroso-Herrans to specifically indicate in their Schedule C whether they intended to claim the two lawsuits as in-kind exemptions or not.
[57] After the close of proofs the Ericksons argued for the first time that the Tawas property had not been removed from the estate because the time within which Trustee could have objected to its exemption had not yet passed. The Ericksons based this new argument upon the fact that Trustee did not report to the court that the first meeting of creditors had been held until April 25, 2008. The Ericksons contend that if that date is treated as the date the first meeting of creditors concluded, then the Tawas property would not have been removed from the estate by operation of Section 522(l) and Rule 4003(b) until May 25, 2008 (i.e., thirty days from the date the first meeting of creditors concluded). Of course, a May 25, 2008 deadline works to the Ericksons' favor because the Ericksons amended their Schedule C to eliminate their in-kind exemption of the Tawas property on May 16, 2008.
Neither party addressed this issue as part of its proofs because of the Ericksons' failure to raise it earlier. Therefore, the pertinent record consists of only Mr. Erickson's testimony that they did in fact attend the January 15, 2008 meeting with Trustee as scheduled (See, Dkt. No. 2) and whatever else the court may recognize as admissible from the court's own records. See, e.g., Federal Rules of Evidence 201.
The docket does show an entry on April 25, 2008 titled "Trustee's Report of Hirst Meeting Held." However, there is no report actually "linked" to that electronic entry nor anything else in the record that offers any explanation as to what that entry is to mean. Similarly, there is nothing else in the court's docketed file that indicates that Trustee either orally adjourned the January 15, 2008 meeting before completing the Ericksons' examination on that day or that he thereafter adjourned that meeting in writing. Cf. FED.R.BANKR.P. 2003(e).
Therefore, this court cannot, as the Ericksons would like, infer from the April 25, 2008 entry alone that the meeting of creditors that Mr. Erickson himself testified took place on January 15, 2008 was not actually concluded on that date but rather was adjourned to some later date in April. Consequently, the court is left with the only inference that can be legitimately drawn from the limited record it has, that being that the Ericksons' first meeting was both held and concluded on January 15, 2008.
[58] See, n. 10, supra.
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https://www.courtlistener.com/api/rest/v3/opinions/1524328/
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528 S.W.2d 99 (1975)
GOODPASTURE, INC., Appellant,
v.
S & J FARMS, INC., Appellee.
No. 6449.
Court of Civil Appeals of Texas, El Paso.
September 17, 1975.
*100 McGowan, McGowan & Hale, Bill McGowan, Brownfield, for appellant.
Paul New, Denver City, for appellee.
OPINION
OSBORN, Justice.
This case results from damage to a peanut crop which allegedly was caused by the improper application of a herbicide. The jury found that the contractor who sold and applied the herbicide made application of an excessive amount of Planavin on Appellee's peanut crop, and that this was negligence and a proximate cause of the damages found by the jury, but the jury found no negligence upon the part of Shell Chemical Company, the manufacturer of the product. Based upon such findings, the trial Court entered judgment against the Appellant. We affirm.
Several years prior to 1971, Shell Chemical Company manufactured and sold a herbicide called Planavin for use in weed control on cotton and soybean farms. In 1971, the product was cleared for use in raising peanuts. Prior to that time, Sam Oliver, as operator of S & J Farms, Inc., had actually used this herbicide on peanut crops by use of his own farm equipment in spraying the herbicide on the farm land while planting his crop.
At a meeting in the spring of 1971, a Shell representative advised West Texas area farmers concerning the use of Planavin and Mr. Oliver was told how to use this herbicide when planting peanuts. He subsequently contacted Appellant, who both sold and applied the product, and requested that they apply one pint per acre on a 55-acre tract where he planned to raise peanuts. The Planavin, together with a liquid fertilizer, was sprayed on the 55-acre tract on April 25, 1971, by Appellant's employees using Appellant's own equipment. Mr. Oliver then started running his harrow over the tract in order to incorporate the herbicide into the soil at the prescribed depth of an inch and a half to two inches. He then put a lister in the field and bedded the land and listed into rows. He planted his peanuts on May 28th with about four *101 inches knocked off the top of the beds and the seed planted below the soil treated with Planavin. He then started to water the field.
During this same planting season, Appellee provided the Texas A & M Extension Service at Stephenville, Texas, with a half acre out of his 55-acre tract for their use in raising peanuts under the same conditions as existed for its own crop. In addition, Appellee also planted another 56 acres of peanuts on a nearby farm where Mr. Oliver applied Planavin himself in the manner which he had previously used with his own equipment. His crop on this 56 acres produced 4700 pounds of peanuts per acre, which sold for $300.00 a ton.
By the end of June, Mr. Oliver concluded that the crop on which Appellant had applied Planavin was so damaged from an excessive application of the herbicide that it would be necessary to replant. He replanted in July and eventually made a crop of 700 pounds of peanuts per acre, which sold for $130.00 a ton less than his other crop. Thus, he concluded that he lost 2 tons per acre in production on the 55-acre tract where he had to replant, and incurred the cost of replanting and that this crop brought less per ton than would have been expected.
The jury found no negligence against Shell Chemical Company, but found appellant made an excessive application of Planavin which was negligence and a proximate cause of the crop damage; that the quantity of Planavin in the soil at the time of the damage was in excess of the one pint per acre recommended, and that this was a proximate cause of the damage but not the sole cause; that Appellant applied more than one pint per acre which was negligence and a proximate cause of the damage, and that Appellee's damages were $33,930.00. The trial Court entered a take-nothing judgment against Shell Chemical Company and no appeal has been taken from that part of the judgment. Appellant appeals from the judgment against it which was based upon the jury verdict.
The first two points of error attack the jury findings that Appellant made an application of an excessive amount of Planavin on Appellee's peanut crop and that it applied more than one pint of Planavin per acre to Appellee's land. Certainly there is evidence contrary to such jury findings, particularly the testimony of L. T. Hawkins that he took only 55 pints of Planavin from Appellant's warehouse for this job and that he only applied 55 pints which was not more than one pint per acre. But in passing on these "no evidence" points of error, this Court must consider only the evidence and inferences tending to support the finding and discregard all evidence and findings to the contrary. Garza v. Alviar, 395 S.W.2d 821 (Tex.1965). Thus, we may not consider any of the testimony of Mr. Hawkins, which Appellant cites in support of its first and second points. In support of the jury findings. there is the testimony of Tommy Barton, an employee of Shell Chemical Company, that his inspection of the crop showed substantial damage and that the results of soil sample test showed up to seven pints per acre of Planavin at the time of its application. Richard Burner, an agronomist, did the soil sample analysis and his tests reflected from six to twelve times too much Planavin in the soil from the surface to a depth of four inches. In addition, Dr. Charles Simpson, from the Texas A. & M. University Experiment Station at Stephenville, concluded that the test crop which he was supervising had suffered herbicide effects when he examined the crop and replanted in July, 1971. We cannot say that there is "no evidence" to support the jury's answers to Special Issues Nos. 2 and 6, and the first two points of error are overruled.
The Third Point of Error contends that the trial Court erred in entering judgment for Appellee because the jury found that the excessive quantity of Planavin in the soil was not the sole proximate cause of the damage to the peanut crop. That issue and answer are as follows:
*102 "ISSUE NO. 3B
"Do you find from a preponderance of the evidence that the excess quantity of Planavin in the soil, if you have so found, was the sole cause of the damage, if any, to the peanut crop?
"Answer `We do' or `We do not'.
"Answer: We do not "
The negative answer is nothing more than a failure of the one having the burden of proof to get an affirmative answer. It is not a finding to the contrary. C. & R. Transport, Inc. v. Campbell, 406 S.W.2d 191 (Tex.1966). This issue was apparently one requested by Shell Chemical Company, which with a favorable answer could have prevented a judgment against Shell, had it been found guilty of negligent conduct. There being no finding of negligence upon the part of Shell, this issue became immaterial, and the negative answer by the jury rendered it immaterial as a matter of law. The third point is overruled.
The fourth point contends that the answer to Special Issue No. 4 is against the great weight and preponderance of the evidence. That issue is as follows:
"SPECIAL ISSUE NO. 4
"Do you find from a preponderance of the evidence that the plaintiff allowed an excessive amount of soil, or other debris to accumulate around the base of the peanut crop thereby causing the plants to rot and deteriorate?
"ANSWER YES OR NO
"ANSWER NO "
In deciding this point, we consider and weigh all the evidence in the record. In re King's Estate, 150 Tex. 662, 244 S.W.2d 660 (1951). Thus, we consider all the evidence that Planavin was the reason for the initial crop damage. In addition, there was testimony from Dr. Robert Berry, a plant pathologist for the Texas Agricultural Extension Service of Texas A. & M. University, that he examined some plants from the Appellee's farm in late June, 1971, and found the plants to be of fair size with good development for five or six-week-old plants. But he also said: "* * * there was above the crown area where the lateral branches come off the plant for an inch or so lesions, rotted, decayed areas around the branches of these specimens, which in my opinion was probably a disease situation brought about by what I judged to be soil movement up over this stem tissue that should have been in the air but it was covered." He admitted that his experience with peanuts was limited and that he ran no tests for herbicide damage. The quoted statement from Dr. Berry being opinion evidence, the jury was not required to accept it even if it was uncontradicted. Sanchez v. Wade, 514 S.W.2d 812 (Tex.Civ.App. El Paso 1974, no writ). While the evidence was conflicting as to the cause of the crop damage, we cannot say that the jury's answer to Special Issue No. 4 is against the great weight and preponderance of the evidence. The jury saw the witnesses, considered all the conflicting theories, and it was their privilege to pass upon the qualifications and credibility of each witness. The Fourth Point of Error is overruled.
The Appellant next makes an insufficient evidence attack upon the answer to Special Issue No. 5 where the jury found that Appellee did incorporate the Planavin into the soil in compliance with directions from Shell Chemical Company. This is an issue upon which Appellant had the burden to obtain a favorable finding in order to obtain an answer to the issues on negligence and proximate cause, which were conditionally submitted. Mr. Oliver was explicit as to the directions given by Mr. Barton, the Shell employee, concerning the application and incorporation of the herbicide. He testified that Mr. Barton's instructions were followed. He gave detailed information as to the harrowing and listing of the field after the Planavin had been sprayed on the tract. He also indicated that by knocking four inches off the top of the beds the seed would be below the treated *103 soil. He said he got the inch and a half to two inches incorporation that was prescribed. This testimony supported the jury finding, and the answer is not against the great weight of the evidence. The Fifth Point of Error is overruled.
The next two points contend that the jury's answers to Special Issues Nos. 2 and 6 are against the great weight of the evidence. In considering all the evidence in the record, we find the testimony of Mr. Hawkins that Appellant only applied 55 pints of Planavin which was the quantity charged on the invoices to Appellee. There is also the testimony of Dr. Berry that he did not find any serious problem from the herbicide, but did find some decay on the stem tissues. But there is also evidence from Mr. Barton of crop damage based upon tests which showed a very extensive use of Planavin. These tests were made by an agronomist, who himself testified to the extensive quantities of Planavin found in the soil which he analyzed. In addition, Mr. Oliver testified as to the comparison of his two crops on nearby tracts and the varying results in the one good crop where he knew the amount of Planavin used, and the other crop where Appellant applied the Planavin and where he had to replant the crop. Based upon the entire record, we conclude that the jury's answers are not against the great weight and preponderance of the evidence, and the Sixth and Seventh Points of Error are overruled.
The next two points of error attack the special issue which submitted the issue of damages. The jury found the difference in the net proceeds from the sale of peanuts based upon what Appellee actually received and what it would have received but for the damage from Planavin. The jury was instructed to consider the market value of the crop, less costs for gathering, preparing and placing the crop on the market, and excluding damage from other causes such as disease. Appellee replanted in an effort to mitigate its damages and the jury properly considered the net market value of the replanted crop in deciding the damage resulting from Planavin to the initial crop. International-Great Northern R. Co. v. Reagan, 36 S.W.2d 564 (Tex.Civ.App.Waco 1931), aff'd, 121 Tex. 233, 49 S.W.2d 414 (1932). The Einghth and Ninth Points of Error are overruled.
Appellant next complains of the refusal of the trial Court to submit an issue as to whether or not Appellee assumed the risk of loss of production from the land by plowing up the first crop and replanting in July, 1971. The doctrine of assumed risk until recently rejected has dealt with personal injuries in a master-servant relationship which is not applicable in this case. Even if applicable, the issue as proposed did not include all the elements of such a defensive issue. J. & W. Corporation v. Ball, 414 S.W.2d 143 (Tex.1967); Adam Dante Corporation v. Sharpe, 483 S.W.2d 452 (Tex.1972); Greenhill, Assumed Risk, 20 Sw.L.J. 1 (1966). The Tenth Point of Error is overruled.
Appellant next complains of the trial Court's refusal to submit a series of issues which inquired whether Appellee's conduct in replanting in July, 1971, was negligence and, if so, whether such negligence was a proximate cause of its damages. Being under a duty to mitigate its damage, it appears that Appellee properly replanted its crop even though it was late in the season to begin a new crop. But regardless, any contributory negligence at that time would not be a defense to the cause of action for damages resulting from earlier conduct upon the part of the Appellant at the time of the first planting. In Kerby v. Abilene Christian College, 503 S.W.2d 526 (Tex. 1973), the Court said:
"We draw a sharp distinction between negligence contributing to the accident and negligence contributing to the damages sustained. Contributory negligence must have the causal connection with the accident that but for the conduct the accident would not have happened. Negligence that merely increases or adds to *104 the extent of the loss or injury occasioned by another's negligence is not such contributory neli gence as will defeat recovery."
The Eleventh Point of Error is overruled.
Appellant next complains of the trial Court's failure to submit its requested special issues which inquired whether the method used for preparing the land for planting caused an undue concentration of excessive amounts of Planavin in the seedbed and, if so, whether such conduct was negligence. There was no error in refusing such issues. And an affirmative finding on both issues would not be a defense without a further finding that such negligence was a proximate cause of Appellee's damage, and there was no request for a proximate cause issue. Thus, the issues as requested were not proper. Masterson, Preparation and Submission of Special Issues in Texas, 6 Sw.L.J. 163 (1952). In addition, such request was duplicitous in view of Special Issue No. 5, which inquired if the Planavin was incorporated into the soil in compliance with directions given by Shell Chemical Company. The Twelfth Point of Error is overruled.
The next point of error complains of the error of the trial Court in failing to enter judgment for Appellant based upon its defense of Laches and State Demands. Appellee sued Shell Chemical Company on August 28, 1972. The amended petition making Appellant a party was not filed until March 29, 1973. During the summer of 1971, Mr. Oliver advised Appellant of his problems with the initial peanut crop, and in fact its representatives went out and inspected the field where the peanuts were planted. This suit for damages from negligence having been filed within the limitations period, it was not barred by Laches or stale demands. The defense was not established as a matter of law, and there being no jury finding to support such defense, the Thirteenth Point of Error is overruled.
The last point of error contends that the trial Court erred in the manner of submitting the case to the jury because the charge constituted a comment on the weight of the evidence, because of a double submission of Special Issues Nos. 2 and 6, and because of the refusal to submit requested defensive issues. We find nothing in the Appellant's objections to the Court's charge concerning a comment on the weight of the evidence. Assignment of error number 10 in the motion for new trial, which is germane to this point of error, contains no complaint as to a double submission of the same issue. We have previously passed upon the complaints concerning failure to submit certain requested defensive issues. The last point of error is overruled.
The judgment of the trial Court is affirmed.
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197 N.J. Super. 277 (1984)
484 A.2d 1259
STATE OF NEW JERSEY, PLAINTIFF-RESPONDENT,
v.
PHILIP LORE, DEFENDANT-APPELLANT.
Superior Court of New Jersey, Appellate Division.
Submitted October 23, 1984.
Decided November 1, 1984.
*280 Before Judges ANTELL, J.H. COLEMAN and SIMPSON.
Samuel R. DeLuca, attorney for appellant.
Irwin I. Kimmelman, Attorney General of New Jersey, attorney for respondent (Steven Kaflowitz, Deputy Attorney General, of counsel and on the letter brief).
PER CURIAM.
Defendant, a Jersey City police officer, was tried to a jury on three counts of aggravated assault, contrary to N.J.S.A. 2C:12-1 and one count of official misconduct, contrary to N.J.S.A. 2C:30-2. He was acquitted on each of the aggravated assault charges. He was, however, found guilty of a lesser included offense of simple assault upon Jack Molowitz under Count Three of the indictment. On the official misconduct conviction, defendant was sentenced to a two year term of probation and fined $500. His office as a police officer in Jersey City was ordered forfeited pursuant to N.J.S.A. 2C:51-2a(1). The trial judge denied his motion for a new trial but stayed the forfeiture of office pending this appeal. Defendant now appeals contending:
1. THE OFFENSE OF MISCONDUCT IN OFFICE IS AN IMPROPER CHARGE AND HIS CONVICTION MUST THEREFORE BE REVERSED.
*281 2. THE INSTRUCTIONS TO THE JURY WERE DEFECTIVE AND THE CONVICTION MUST THEREFORE BE REVERSED (PLAIN ERROR).
3. THE JUDGMENT OF CONVICTION IS INCONSISTENT AND MUST THEREFORE BE REVERSED.
The trial evidence was in sharp conflict. The record reveals that on July 28, 1981, shortly after leaving a tavern in Jersey City, Gerard Caicedo, Kathleen Pongrac and Jack Molowitz came upon Jack Dressler and his wife on a public street in Jersey City. The Dresslers lived next door to the home of Caicedo's mother. There was apparently some longstanding antagonistic feelings between Dressler and Caicedo's mother. After a heated exchange of words, Molowitz knocked Dressler to the ground. As Caicedo grabbed Molowitz to pull him off of Dressler, Police Officer Lore and his partner came upon the scene in a squad car.
With the arrival of police officers on the scene, Molowitz apparently became frightened and ran away. Defendant fired a shot at Molowitz, barely missing an innocent bystander. Molowitz testified that the bullet went through his hair and he immediately fell to the ground. He further testified that defendant came to him while he was on the ground and stepped on his hands, struck him in the back with his night stick and dragged him by his hair back to the scene of the fight. Caicedo and Pongrac were also allegedly injured by defendant. Caicedo, Pongrac and Molowitz were taken to the Jersey City Medical Center where they received medical treatment.
Defendant's first contention is essentially that his conviction for simple assault does not constitute official misconduct in office. The statute under which defendant was convicted, in pertinent part reads:
A public servant is guilty of official misconduct when, with purpose to obtain a benefit for himself or another or to injure or deprive another of a benefit:
(a) He commits an act relating to his office but constituting an unauthorized exercise of his official functions, knowing that such act is unauthorized or he is committing such act in an unauthorized manner; or.... [N.J.S.A. 2C:30-2]
Under the facts of this case, N.J.S.A. 2C:30-2 can be parsed to read, "A public servant is guilty of official misconduct when, *282 with purpose to ... injure ... another ... he commits an act relating to his office but constituting an unauthorized exercise of his official functions, knowing that such act is unauthorized or he is committing such act in an unauthorized manner...." The essence of the charge against defendant is that he committed an unauthorized act when he assaulted Molowitz while performing his duties as a police officer, or that the use of excessive force while arresting Molowitz was an official function that was conducted in an unauthorized manner.
It is undisputed that defendant came upon the scene of a fight or scuffle and attempted to arrest Molowitz. The duties of a public servant, such as a police officer, are those which are cast by law upon that public servant or those which are inherent in and naturally arise from the nature of the office. See State v. Cohen, 32 N.J. 1, 6 (1960); State v. Weleck, 10 N.J. 355, 365 (1952). It is also clear that a police officer has the responsibility of investigating and arresting suspected violators of the law. He is permitted, however, to use only such force as may be reasonably necessary to effectuate the arrest. See State v. Mulvihill, 57 N.J. 151, 156 (1970); State v. Montague, 55 N.J. 387, 404 (1970); State v. Williams, 29 N.J. 27, 36-39 (1959). We, therefore, have no doubt that defendant was engaged in an official function of his office as a police officer when he arrested Molowitz. The jury found that in the course of effectuating that arrest, defendant used excessive force injuring Molowitz which constituted a simple assault upon Molowitz. The assault therefore became "an act relating to his office" which was committed "with purpose ... to injure" Molowitz and that assault constituted "an unauthorized exercise of his official functions." The use of excessive force while arresting Molowitz also means that defendant performed an official function in "an unauthorized manner."
Defendant next contends that the court improperly instructed the jury on official misconduct. We find this contention is unpersuasive. When the instruction to the jury is read *283 as a whole, it becomes apparent that the court informed the jury as to all of the elements of the crime of official misconduct in office. See State v. Wilbely, 63 N.J. 420, 422 (1973). The court properly informed the jury that if defendant used excessive force upon Molowitz while arresting him that would constitute the unauthorized act which injured Molowitz in violation of N.J.S.A. 2C:30-2. It was unnecessary to inform the jury of all the functions and duties of a police officer. There was never any question as to whether arresting a suspected violator of the law was one of his functions.
Defendant's final argument is essentially that a conviction for simple assault, a disorderly persons offense, cannot invoke any penalties or sanctions contained in N.J.S.A. 2C:51-1 and N.J.S.A. 2C:51-2. Defendant relies upon N.J.S.A. 2C:1-4b to support his argument. That subsection provides that a conviction for disorderly persons offenses and petty disorderly persons offenses "shall not give rise to any disability or legal disadvantage based on conviction of a crime." The first sentence in N.J.S.A. 2C:51-1 and 2 makes clear that the disabilities therein enumerated can be invoked based upon a conviction for "an offense." Clearly, a conviction for a crime is not required. Moreover, the forfeiture of defendant's official position pursuant to N.J.S.A. 2C:51-2a(1) was directed based upon his conviction for the second degree crime of official misconduct, rather than the simple assault offense. See State v. Phelps, 187 N.J. Super. 364, 373 (App.Div. 1983), aff'd 96 N.J. 500 (1984). Hence, the provisions of N.J.S.A. 2C:1-4b do not preclude the forfeiture. The conviction for simple assault was only one of the ingredients or elements necessary to establish official misconduct.
Although defendant has not argued that the official misconduct and assault should merge, he has argued the two are inconsistent without saying why. While we find the verdicts are not inconsistent, we are nonetheless satisfied that the assault should merge with the official misconduct. The two *284 offenses occurred at the same time and place. The State relied upon the simple assault to establish the official misconduct in office that defendant injured Molowitz while arresting him. In these circumstances, the simple assault becomes a necessary ingredient to a conviction for official misconduct in office; it was an integral part of the greater crime of official misconduct in office. Under State v. Mirault, 92 N.J. 492, 501 (1983); State v. Best, 70 N.J. 56 (1976), and State v. Davis, 68 N.J. 69, 81 (1975), the simple assault must merge with the official misconduct in office. Otherwise, defendant will be punished twice for one offense.
As modified, the judgment of conviction is accordingly affirmed.
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335 Pa. Super. 457 (1984)
484 A.2d 793
COMMONWEALTH of Pennsylvania
v.
John SWARTZ, Appellant.
Supreme Court of Pennsylvania.
Submitted February 24, 1984.
Filed November 16, 1984.
Petition for Allowance of Appeal Denied May 7, 1985.
*459 H. Stanley Rebert, York, for appellant.
Floyd P. Jones, Assistant District Attorney, York, for Commonwealth, appellee.
Before SPAETH, President Judge, and CIRILLO and CERCONE, JJ.
CERCONE, Judge:
This is an appeal from the judgment of sentence imposed upon appellant's non-jury conviction for robbery and theft. Appellant raises three contentions on appeal: 1) was the verdict contrary to the evidence, weight of the evidence and to the law; 2) did the court err in refusing to hear his proffered evidence as to diminished capacity; and 3) was the sentence excessive? We affirm.
We must first dispose of appellant's sufficiency claim, since if the evidence was insufficient as a matter of law then he would be entitled to be discharged.[1]See Commonwealth v. Poindexter, 484 Pa. 472, 399 A.2d 390 (1979). The uncontested and unimpeached evidence established the following facts. Appellant walked into a branch office of York Bank and Trust. He was wearing reflective sun glasses. Appellant went up to a teller, handed her a paper bag, and said "Fill the bag." He further said "Quick" and when the teller did so slowly, he told her "Faster." After an amount of money had been placed in the bag, appellant grabbed the bag and then departed. The teller stated she was "very scared" and frightened. Appellant never claimed to be armed, never expressly threatened the teller, and was not observed with a weapon or even his hand in his pocket.
*460 At trial appellant agreed with the above recitation but indicated he had not intended to frighten the teller. Furthermore, had she refused to give him the money, he claimed he would have left the bank without incident. Appellant's defense consisted of admitting the theft, but denying that he had threatened or intentionally placed the teller in fear of immediate bodily injury.
Appellant was convicted under 18 Pa.C.S.A. § 3701(a)(1)(iv), which reads:
(a) Offense defined.
(1) A person is guilty of robbery if, in the course of committing a theft, he:
* * * * * *
(iv) inflicts bodily injury upon another or threatens another with or intentionally puts him in fear of immediate bodily injury; . . . .
In the current case we must determine whether appellant's intent was adequately demonstrated when there was no actual threat or display of force but only a demand for money. While this precise issue has not been addressed before, similar situations have arisen under § 3701(a)(1)(ii).[2]
In Commonwealth v. Hurd, 268 Pa.Superior Ct. 24, 407 A.2d 418 (1979) this court held that an actor's request to open a drawer, which was repeated in the following manner: "Bitch, open the drawer," while the actor appeared to have his hand, on an object in his pocket was sufficient to show that the actor intended to place the victim in fear of "immediate serious bodily injury." Hurd may appear to be a stronger case than the one currently before us, as there the defendant's action suggested he had a gun. However, more similar to the current controversy is Commonwealth v. Davis, 313 Pa.Superior Ct. 355, 459 A.2d 1267 (1983). The defendant in Davis was convicted under § 3701(a)(1)(ii) of robbing a pipe store which was open all night. He was observed entering the shop through a small window *461 through which business was transacted. The defendant told an employee of the shop to: "Get back, Get back." This court held that Davis' "mode of entry and his warnings. . . certainly were aggressive actions which implicitly carried with them a threat of imminent bodily harm . . . ." When applied to the facts at hand, Davis requires that we find that the current evidence showed beyond a reasonable doubt that appellant, contrary to his claim, intended to put the teller in fear. A sun-glassed individual, who approaches a bank teller with a paper bag and commands that the bag be filled with currency and exhibits extreme impatience with a teller creating an atmosphere of extreme tension, can be reasonably presumed to intend to inflict fear into the mind of the teller within the meaning of § 3701(a)(1)(iv).[3]
In his second contention, appellant argues that the trial court erred in prohibiting him from presenting a diminished capacity defense to negate the specific intent required for his conviction of robbery. The trial court held that such defense was only available in first degree murder prosecutions. The trial court, acknowledging the novelty of the problem relied upon the Subcommittee Note to Pennsylvania's Suggested Standard Jury Instruction 5.01B[4] to support its position.
*462 All of the Supreme Court's past pronouncements on the doctrine of diminished capacity have been made in the context of premeditated murder cases. However, general language in Commonwealth v. Walzack, 468 Pa. 210, 221, 360 A.2d 914, 919 (1976), where the court said: "The thrust of the doctrine is to challenge the capacity of the actor to possess a particular state of mind required by the legislative for the commission of a certain degree of the crime charged", seems to imply the defense is available to other crimes. Similarly, in Commonwealth v. Brantner, 486 Pa. 518, 523, 406 A.2d 1011, 1014 (1979), the court stated: "Appellant is correct in noting that this jurisdiction recognizes diminished mental capacity as a defense to a charge requiring a specific intent." As the court in both of the above cases did not limit it's language to homicide situations, it would appear to be a reasonable inference that diminished capacity may be applicable to other crimes.
Additional support for the above conclusion can be gathered from the historical development of the defense of intoxication. In Commonwealth v. Santiago, 489 Pa. 527, 414 A.2d 1016 (1980); and Commonwealth v. Graves, 461 Pa. 118, 334 A.2d 661 (1975)[5], our Supreme Court held that evidence of intoxication could be used to negate the specific intent required to commit other specific intent crimes and in particular the crime of robbery. But for the intervention of the legislature in enacting a statutory prohibition as to the use of voluntary intoxication as a defense to crimes other than murder of the first degree, such a defense would be available in robbery prosecutions. See 18 Pa.C.S.A. § 308[6], *463 at least until the recent Supreme Court's decision in Commonwealth v. Garcia, 505 Pa. 304, 479 A.2d 473 (1984). As the legislature has not expressed its disapproval of the use of the diminished capacity in contrast to involuntary intoxication defense in situations other than premeditated murder, it could be argued that such defense is not so limited.
Our Supreme Court was faced in Commonwealth v. Garcia, with the specific issue of whether diminished capacity may be applied to crimes other than murder of the first degree. There the defendant raised diminished capacity as a defense to both felony murder and robbery. He argued that he was incapable of forming the intent to steal from the victim and hence he could not be held liable for robbery and similarly, could not be culpable of felony murder. Mr. Justice Hutchinson, writing for the majority, noted that the doctrine of diminished capacity has "to date" only been applied to first degree murder. See Commonwealth v. Terry, 501 Pa. 626, 462 A.2d 676 (1983); Commonwealth v. Weinstein, 499 Pa. 106, 451 A.2d 1344 (1982); Commonwealth v. Walzack, 468 Pa. 210, 360 A.2d 914 (1976). He then went on to hold that:
Proper psychiatric testimony is admissible only to negate the specific intent required to establish first degree murder. See Commonwealth v. Weinstein, supra. Therefore, the determination of whether Garcia ever formed an intent to rob, and if so, when he formed such intent, was required to be made on the basis of the factual circumstances surrounding the criminal episode as developed by demonstrative evidence and testimony other than psychiatric expert testimony.
505 Pa. at 311, 479 A.2d at 477 (footnote omitted but discussed infra.)
Had the court concluded its discussion with the above holding, there would have been little reason here for us to discuss the issue further. However, in footnote three, (on 505 Pa. page 311, 479 A.2d page 477) the court acknowledges that the issue of whether "diminished capacity" is applicable to robbery was not open to Garcia since he *464 admitted the theft, thereby admitting "precisely the same `specific' intent" required for robbery. Therefore, it would appear that the court's holding, as it pertains to the current controversy, is advisory.
Unlike the Supreme Court in Garcia, we must address appellant's claim. In light of Garcia any of the inferences which are suggested above by Walzack, Brantner, Santiago and Graves,[7] appear to be contrary to the reasoning of the Garcia majority. Accordingly, even though the discussion of diminished capacity may have been unnecessary to the resolution of Garcia, it clearly expresses the majority's view and therefore should be followed. Hence, in the current appeal we can not find error in the trial court's refusal to hear and consider appellant's proffered psychiatric evidence.
Judgment of sentence affirmed.[8]
SPAETH, President Judge, concurs in the result.
NOTES
[1] Should a court find that a verdict is against the weight of the evidence then a new trial may be awarded. Commonwealth v. Laing, 310 Pa.Superior Ct. 105, 456 A.2d 204 (1983).
[2] That section reads:
(ii) threatens another with or intentionally puts him in fear of immediate serious bodily injury; . . . .
[3] We see little need to address the challenge to the weight of the evidence. The only area of contention was appellant's intent. Clearly, the trial court discounted appellant's testimony. We can not find that such finding was so contrary to the evidence as to shock one's sense of justice. See Laing, supra.
[4] That comment reads:
The instruction recommended above implements Commonwealth v. Walzack, 468 Pa. 210, 360 A.2d 914 (1976). Walzack held that psychiatric evidence is admissible to negate the element of specific intent required for first degree murder. The court expressly overruled the contrary holdings of a line of prior cases including Commonwealth v. Weinstein, 442 Pa. 70, 274 A.2d 182 (1971) and Commonwealth v. Ahearn, 421 Pa. 311, 218 A.2d 561 (1966). The court labelled the doctrine which it recognized in Walzack "diminished capacity" since it relates to the accused's ability to perform a specific cognitive process, see Walzack, supra at n.6.
The court left open the question of whether the doctrine of diminished capacity should apply to other specific mens rea crimes. In the opinion of the subcommittee it should not. First degree murder is unique both in terms of the severity of the penalty and the quality and intensity of the intent required by the legislative definition. Compare, for example, the "intent to deprive" required for theft under Crimes Code § 3921 with the willful, deliberate and premeditated intent to kill required for first degree murder. A person who could not form an "intent to deprive" would probably qualify for the complete insanity defense and would have no need for the diminished capacity doctrine. Applying the type of analysis used in Walzack it would appear that when the crime charged is not first degree murder, the probative value of psychiatric evidence of diminished capacity would be outweighed by dangers of unduly complicating the issues, confusing the jury and prolonging the trial.
[5] Affirmed after remand at 484 Pa. 29, 398 A.2d 644 (1979).
[6] Santiago was tried prior to the effective date.
[7] The Garcia majority would interpret the same historical analysis concerning the intoxication defense as indicating the legislature would disprove extending diminished capacity beyond first degree murder. See 505 Pa. at 311 n. 3, 479 A.2d at 477 n. 3.
[8] Appellant was sentenced to a term of incarceration of 6 to 23 months and his petition for reconsideration was denied. On appeal appellant argues in light of his mental state the sentence was excessive. After reviewing the record we find no relief to be warranted in this respect.
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197 N.J. Super. 339 (1984)
484 A.2d 1292
BARBARA CORPORATION, A NEW JERSEY CORPORATION, PLAINTIFF-RESPONDENT,
v.
BOB MANEELY INSURANCE AGENCY AND STOCKWELL-KNIGHT COMPANY, DEFENDANTS-RESPONDENTS, AND CONTINENTAL CASUALTY COMPANY, DEFENDANT-APPELLANT.
Superior Court of New Jersey, Appellate Division.
Argued November 7, 1984.
Decided December 12, 1984.
*340 Before Judges ANTELL, J.H. COLEMAN and SIMPSON.
Mark Soifer argued the cause for appellant (Horn, Kaplan, Goldberg, Gorny & Daniels, attorneys; Mark Soifer on the brief).
*341 Warren W. Faulk argued the cause for respondent Bob Maneely Insurance Agency (Brown, Connery, Kulp, Wille, Purnell & Greene, attorneys; Warren W. Faulk on the brief).
Paul F. Gilligan, Jr. argued the cause for respondent Stockwell-Knight Company (Montano, Summers, Mullen, Manuel & Ownes, attorneys; Paul F. Gilligan on the brief).
Lee A. Solomon argued the cause for respondent Barbara Corporation (D. Vincent Lazzaro, attorney, and on the brief).
The opinion of the court was delivered by COLEMAN, J.H., J.A.D.
The question raised by this appeal is whether an insurance company is obligated to advise an insured of the expiration of a fire insurance policy. The trial judge granted the insured summary judgment holding that the company is so obligated. The insurance company has appealed. We now affirm for the reasons which follow.
The facts in this case are undisputed. On January 26, 1979 plaintiff, Barbara Corporation, purchased a policy of fire insurance from defendant Continental insuring a car wash owned by plaintiff, located in Gloucester Township, N.J. The policy was obtained through defendant Maneely who was acting pursuant to a "Solicitor's Agreement" with defendant Stockwell. Stockwell issued the policy pursuant to a "Preferred Agency Agreement" with Continental.
Upon expiration of the initial policy's one year term, Stockwell forwarded a new policy and an invoice for premium to Maneely on January 15, 1980 who then forwarded a premium bill to plaintiff. Plaintiff paid the premium on January 23, 1980 thereby renewing the policy for an additional year. At the end of the second year, however, no demand for premium or notice in any other form was forwarded to plaintiff advising that the policy would expire on January 26, 1981. A $95,000 fire loss occurred at the premises on June 13, 1981. Plaintiff requested payment under the policy and Continental disclaimed, contending *342 the policy expired January 26, 1981. All parties agree that the fire damage would have been covered by the policy had it been renewed.
Plaintiff filed a complaint in the Law Division for breach of contract of insurance. Defendants cross-claimed for contribution and indemnification. Cross motions for summary judgments were filed. R. 4:46. The Law Division granted summary judgment to plaintiff, Maneely and Stockwell.
In this appeal Continental argues that N.J.A.C. 11:1-5.5 is inapplicable to this case. The enabling legislation for the foregoing regulation is N.J.S.A. 17:29C-1 which grants the Commissioner of Insurance the authority to promulgate a rule or regulation to require insurance companies doing business in this State to include a provision in the policy requiring the insurer to give 30 days written notice to the insured of an intent not to renew a fire insurance policy. The statute provides:
17:29C-1. Policy provision; written notice
In addition to the powers conferred upon him by any other law, the Commissioner of Banking and Insurance is hereby authorized and empowered to direct, by rule or regulation as hereinafter provided, that insurance companies organized under the laws of this State or organized to do business in this State, shall include provisions in policies of insurance written by any such company in this State, whereby 30 days' written notice shall be given; (1) to the insured, of the cancellation of any such policy; and, (2) to any designated mortgagee not named therein as the insured of the cancellation of any interest in such policy; and, (3) to the insured, of intent not to renew any such policy.
The Commissioner promulgated such a regulation requiring 30 days notice of cancellation or an intent not to renew fire and certain casualty insurance coverage. That regulation, known as N.J.A.C. 11:1-5.5, as here pertinent, provides:
11:1-5.5 Notice of cancellation and nonrenewal of fire and casualty coverage
(a) All fire and casualty policies of insurance, except accident and health policies, shall provide for the issuing company to give:
1. Thirty days' written notice to the assured of the cancellation of any policy;
2. Thirty days' written notice of cancellation of any policy to any mortgagee mentioned in said policy; and
*343 3. Thirty days' written notice to the assured of said company's intent not to renew any policy.
(b) Provisions of policies to be effective on or after July 1, 1977, which are issued by any company doing business in New Jersey and provide for less than 30 days' notice of cancellation and nonrenewal shall be null and void, with the following exceptions: ....
Continental argues that Citta v. Camden Fire Insurance Assoc., Inc., 152 N.J. Super. 76 (App.Div. 1977) precludes application of N.J.A.C. 11:1-5.5(a)3 to this case. We disagree. The question presented in Citta was identical to the question posited here is the carrier obligated to notify the insured of the expiration of an insurance policy. We note that although N.J.A.C. 11:1-5.5 was promulgated between the time Citta was argued and decided, see 9 N.J.R. 282(b) (reported on June 9, 1977), it did not come to the attention of the Court. N.J.A.C. 11:1-5.5 became effective July 1, 1977 and Citta was decided on August 4, 1977. Even if the court had been aware of the regulation, it would have had no impact on the results there because the regulation did not apply to policies issued before July 1, 1977. See N.J.A.C. 11:1-5.5(b). Since Citta was argued on March 28, 1977 it seems reasonable to assume that the policy there involved was issued before July 1, 1977. Hence, Citta does not require a reversal. On the contrary, the decision in Citta was based on the absence of a regulation such as N.J.A.C. 11:1-5.5 covering policies issued before July 1, 1977. We read Citta as strongly suggesting that had there been a regulation, the end result would have been different.
In our endeavor to determine the scope of N.J.A.C. 11:1-5.5, we observe that the regulation uses the words of the enabling legislation. The question we must therefore answer is what did the legislature mean by an "intent not to renew any policy." To determine the legislatively intended meaning, the sense of the statute should be "collected from its object and the nature of the subject matter, the contextual setting, and the statutes in pari materia; and the import of a particular word or phrase is controlled accordingly." Giles v. Gassert, 23 N.J. 22, 33-34 (1956). The object and nature of the enabling legislation *344 which permitted promulgation of the regulation here involved was stated in the title or preamble to L. 1968, c. 131 that created N.J.S.A. 17:29C-1. That title or preamble describes the enactment as "an act granting certain emergency powers to the Commissioner of Banking and Insurance relating to the cancellation and renewal of insurance policies." (Emphasis supplied). Similarly, N.J.S.A. 17:29C-6 was enacted by the same session of the Legislature to deal with cancellations and nonrenewal of other casualty insurance policies. The title or preamble to L. 1968, c. 158 which created N.J.S.A. 17:29C-6 describes that enactment as "an act concerning cancellation and nonrenewal of automobile liability, physical damage or collision insurance policies." (Emphasis supplied).
N.J.S.A. 17:29C-1 and N.J.S.A. 17:29C-6 were enacted to establish minimum time periods for notice of renewal, nonrenewal and cancellation of certain casualty and fire insurance policies. We find the two statutes are in pari materia. The legislative definition of "renew" in N.J.S.A. 17:29C-6(E) should also control the meaning of "renew" in N.J.S.A. 17:29C-1 and N.J.A.C. 11:1-5.5. As here pertinent, N.J.S.A. 17:29C-6(E) states:
"Renewal" or "to renew" means the issuance and delivery by an insurer of a policy replacing at the end of the policy period a policy previously issued and delivered by the same insurer, or the issuance and delivery of a certificate or notice extending the term of a policy beyond its policy period or term; ....
The fact that the Legislature chose to vest the Commissioner of Insurance with the discretion of whether to require the notice pursuant to N.J.S.A. 17:29C-1 rather than legislatively mandating the notice requirement as it did for automobile policies is not material to our analysis. What is material is the legislative desire to avoid lapses in coverage for want of notice.
Having established that "renew" within the contemplation of N.J.A.C. 11:1-5.5(a)3 means the issuance and delivery of a policy replacing an expiring policy at the end of its term by the same insurance company, we must now decide what the legislature meant by an intent not to renew a policy. As previously *345 noted, the title or preamble to the enabling legislation states that the legislature intended to vest in the Commissioner of Insurance emergency powers to deal with renewals and cancellations of fire and nonautomobile casualty insurance policies. This was remedial legislation designed to minimize lapses in coverage regardless of whether the cancellation or nonrenewal was caused by underwriting factors or oversight by the insured. This remedial legislation should be construed to give the words used the most extensive meaning to which they are reasonably susceptible. Global American Ins. Managers v. Perera Co., Inc., 137 N.J. Super. 377, 386 (Ch.Div. 1975). Statutory provisions regulating insurance should be construed to accord the insured the broadest range of protection. Purdy v. Nationwide Mut. Ins. Co., 184 N.J. Super. 123, 128 (App.Div. 1982).
Application of the foregoing principles governing statutory construction and the plain meaning of the statute persuade us to conclude that N.J.A.C. 11:1-5.5(a)(3) not only required the insurer to give notice of its intention not to renew based on underwriting considerations, but also required the insurer to give notice to the insured 30 days prior to the expiration of the policy of its intention not to renew should the renewal premium not be paid on or before the expiration date. We read the requirement for notification to apply whether the intent not to renew is absolute, such as for underwriting reasons, or only conditional, depending, as appears to be the case here, upon the insured's failure to pay the premium. Once the insured receives notice that the carrier has either an absolute or conditional intent not to renew, the insured is then on notice to obtain other coverage or satisfy the preconditions in order to obtain a replacement policy. This construction of N.J.S.A. 17:29C-1 and N.J.A.C. 11:1-5.5(a)(3) is necessary to effectuate fully the legislative intent the prevention of lapse in coverage.
Even though Continental argues that it intended to renew the policy, it is clear that this intent was conditioned *346 upon payment of premium. The fire loss occurred approximately six months past the renewal date and Continental had done nothing to evidence an intent not to renew. The effect of this silence, misleading plaintiff into believing it was insured, is one of the mischiefs sought to be suppressed by the regulation. Surely the legislature would not undertake to prevent lapses in coverage while at the same time permit lapses by allowing the insurer to remain silent as to when the next premium is due. We are fully satisfied that the legislature intended to place the burden on the insurer to notify the insured that his policy will soon expire unless the next premium is paid. We do not regard this as a heavy burden on the insurer given the widespread use of computer technology in the insurance industry. The obligation has been placed on the carrier by the regulation to give the required notice. Failure to do so requires automatic renewal regardless of the conduct of brokers or agents.
Finally, Continental argues the trial judge erred by granting summary judgment dismissing its cross claim against Maneely and Stockwell. The court reasoned that the damages suffered by Continental are exactly the same as they would have been if Continental had renewed the policy. We agree with the trial court. Continental's failure to comply with N.J.A.C. 11:1-5.5 created a continuation of the policy. Continental freely admits that it would have renewed the policy if the renewal had been properly processed. The regulation, however, places the notice obligation on the insurer, not the broker or agent. Since plaintiff's fire loss damages are limited to the terms of the insurance contract, the alleged negligence of Maneely and Stockwell could not proximately contribute to the contractual loss payable by Continental.
The order granting summary judgment is affirmed.
SIMPSON, J.A.D., dissenting.
I respectfully dissent from the majority affirmance of the summary judgments granted in favor of all parties against *347 Continental Casualty Company. In my view N.J.A.C. 11:1-5.5(a) and (b) cannot be construed to require issuing companies to give notice of expiration of fire and casualty policies of insurance.
N.J.S.A. 17:29C-1 enables the Commissioner of Insurance to require all insurers to provide in all policies that 30 days written notice shall be given of "cancellation" or "intent not to renew" any policy. This authority has been exercised by the Commissioner in the cited regulation as to "all fire and casualty policies." Underwriting risk considerations are obviously involved in a decision to cancel an existing policy or not to renew an expiring policy, and the 30 days notice requirement provides time for an insured to seek other coverage. Nothing in the statute or regulations requires notice of expiration of a fire or casualty policy. Generally, courts cannot disregard a plain, unambiguous statement in a policy as to the expiration date. 12A Appleman, Insurance Law and Practice, § 7175 at 19 (1981). And since an insured is charged with knowledge of a stated expiration date, it is generally held that neither an insurer nor its agent has a legal duty to give notice of the expiration of a policy or to renew it automatically. 13A Appleman, Insurance Law and Practice, § 7642 at 410 (1976). In this case, it is undisputed that Continental would have renewed the policy had the premium been paid. Since no notice of intent not to renew had been given, plaintiff had a right to renew provided it paid the premium. It may be that Stockwell and/or Maneely is liable to plaintiff for failure to renew the policy and forward the premium bill as had been done in the prior year but nothing in the statute, regulations, or prior course of conduct required Continental to send a reminder notice of the policy expiration date.
Citta v. Camden Fire Ins. Assoc., Inc., 152 N.J. Super. 76 (App.Div. 1977), is inapposite because the Commissioner had not yet issued N.J.A.C. 11:1-5.5. In subsequently implementing the statute the Commissioner chose to limit the notice requirement *348 to "cancellation" or "intent not to renew" and not to require "notice of expiration." Nor has the Commissioner amended the regulation since the Citta decision. This strongly indicates a determination that such a requirement is contra-indicated. The majority notes the availability of computer technology as limiting the burden of a notice of expiration requirement, but there is a cost factor involved that must otherwise be borne by all policyholders. Presumably a cost/benefit analysis has been made by the Commissioner and he has not seen fit to implement such a requirement. Computers are also available to insureds and insurance agents and in this case it appears that all were negligent except Continental. Under the circumstances, it is not for the judiciary to transfer the resultant costs to all other policyholders by creating a notice of expiration obligation on the part of the insurer.
The definition of "Renewal" or "to renew" in N.J.S.A. 17:29C-6 relates only to automobile policies. Although the same session of the Legislature passed both N.J.S.A. 17:29C-1 and N.J.S.A. 17:29C-6, the former was part of chapter 131 of the Laws of 1968 while the latter was part of chapter 158. Automobile insurance has always been treated differently than other types, probably because of the interests of innocent members of the public who are non-contracting parties but are often the victims of the negligent operation of covered or uninsured vehicles. Thus, N.J.A.C. 11:3-8.2 requires, as to an automobile policy, an offer to renew (which is similar in effect to a notice of expiration) unless a valid notice of non-renewal has been sent by the insurer to the insured. No similar requirement appears to be mandated for any other type of insurance coverage.
Since plaintiff has claims against both agents, and the agents in turn have crossclaims against each other and Continental, I would reverse the summary judgments and remand for trial on all other issues.
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528 S.W.2d 545 (1975)
STATE of Tennessee ex rel. Willie GILLARD et al., Appellants,
v.
Howard G. COOK et al., Appellees.
Supreme Court of Tennessee.
September 29, 1975.
*546 G. Gordon Bonnyman, Jr., Legal Services of Nashville, Inc., Nashville, Adrienne E. Volenik, St. Louis, Mo., for appellants.
R.A. Ashley, Jr., Atty. Gen., David L. Raybin, Asst. Atty. Gen., Nashville, for appellees.
OPINION
FONES, Chief Justice.
This case presents two (2) issues: (1) Whether a juvenile is entitled to counsel at every probation revocation hearing; (2) Whether the standard of proof in juvenile probation revocation hearings should be "beyond a reasonable doubt" or by a "preponderance of the evidence."
Willie Gillard, the Petitioner below, was found delinquent by a juvenile court on a date uncertain but no later than January, 1973, and was committed to a juvenile institution. He was then released on home placement status[1] (commonly called "after-care" under prior law[2]) in April, 1973.
*547 On May 9, 1974, this home placement status was terminated without a hearing by an ex parte order of the Juvenile Court of Shelby County, and the Petitioner was returned to a juvenile institution. The named Petitioner filed a writ of habeas corpus and class action on September 24, 1974, challenging the revocation procedures. The State conceded that Petitioner's revocation of home placement without a hearing was unconstitutional in view of the recent decisions in Morrissey v. Brewer, 408 U.S. 471, 92 S. Ct. 2593, 33 L. Ed. 2d 484 (1972) and Gagnon v. Scarpelli, 411 U.S. 778, 93 S. Ct. 1756, 36 L. Ed. 2d 656 (1973). As the law at that time was silent as to the procedure to be followed in the revocation of juvenile probation, the Chancellor, in his order of February 20, 1975, approved procedures to be followed in revocation proceedings as stipulated between Petitioner and State. Subsequent to that order the Tennessee Legislature amended T.C.A. § 37-237 and set by statute the juvenile probation revocation procedures to be followed in this State. Public Acts 1975, ch. 326, § 3. It should be noted that even though the procedures followed in the juvenile court system were revised by Public Acts 1975, ch. 326, §§ 1-7, the two issues presented in this appeal are not affected by that revision.
The learned Chancellor held that a juvenile has a right to counsel at all home placement revocation hearings, and that the proper standard of proof to determine whether Petitioner violated the conditions of his home placement status is "preponderance of the evidence", rather than "beyond a reasonable doubt."
Petitioner and State appeal from the Chancellor's decree.
I.
In his argument that the right to counsel is required in every home placement revocation hearing, Petitioner's main thesis is that the revocation of home placement is merely a continuation of the original proceeding against the juvenile defendant which led to a finding of delinquency and subsequent imprisonment. This is so, the argument continues, because juveniles are not sentenced to a definite period of imprisonment in months or years; thus, when the juvenile is released on home placement, he no longer owes the state any remaining time on the original sentence. Consequently, any future re-imprisonment would constitute an imposition of a new sentence of imprisonment rather than the re-instatement of a previously assessed, but temporarily suspended, sentence. Therefore, Petitioner strongly argues that the holding of Mempa v. Rhay, 389 U.S. 128, 88 S. Ct. 254, 19 L. Ed. 2d 336 (1967)[3] is controlling, and that the right to counsel attaches at every home placement revocation hearing.
We disagree.
The hybrid and somewhat peculiar functions of our juvenile court system require that a juvenile not be sentenced to a set number of years imprisonment; rather, the juvenile is sentenced to an indefinite term so that he may be released on home placement *548 as soon as he is rehabilitated. Thus, the minimum sentence is an indefinite one. T.C.A. §§ 37-237, 37-437.
The maximum sentence for a juvenile, however, is a definite term of years; that is, the juvenile court may not sentence a juvenile under its jurisdiction to a term of imprisonment which would extend beyond his twenty-first (21st) birthday. T.C.A. §§ 37-203(c), 37-437. This juvenile sentencing structure is comparable to the Tennessee Indeterminate Sentence Act, T.C.A. § 40-2707, which has been in effect in this state since 1913. Public Acts, 1913, ch. 8, § 1.
We reject the idea that a juvenile released on home placement status no longer owes the state any remaining time on the original sentence just as we would reject that proposition if raised on behalf of an adult sentenced under T.C.A. § 40-2707. It is true that the juvenile does not owe the state any more time in institutional custody if he complies with the terms of his home placement, but he still owes the state time in his home placement status. A revocation of home placement is not in any sense a new finding of delinquency with a new and indefinite commitment; rather, it is merely a finding of a violation of the conditions of his home placement with a return to imprisonment under the original sentence.
This situation is governed by the holding of Gagnon v. Scarpelli, supra, where the adult defendant was first found guilty, sentenced, and then placed on probation. His probation was later revoked at a revocation hearing, and he was returned to prison to serve the remainder of his sentence. In that case the Court extended the right of counsel to alleged probation violators appearing before a probation revocation board if the probationer makes a request for counsel:
"... based on a timely and colorable claim (i) that he has not committed the alleged violation of the conditions upon which he is at liberty; or (ii) that, even if the violation is a matter of public record or is uncontested, there are substantial reasons which justified or mitigated the violation and make revocation inappropriate, and that the reasons are complex or otherwise difficult to develop or present."
411 U.S. at 790, 93 S.Ct. at 1764
Additionally the Court noted that in doubtful cases it should also be considered ". . whether the probationer appears to be capable of speaking effectively for himself." 411 U.S. at 791, 93 S.Ct. at 1764. We find this to be especially applicable to juveniles because of the age, maturity, and level of articulative development of children faced with proceedings in juvenile court.
The critical distinction between Mempa and Gagnon is that in Mempa, the revocation process was interwoven with the deferred sentencing process, while in Gagnon only the post-adjudicatory probation revocation was at issue.
In the situation presented by the case sub judice, the sentencing process has been completed and is not involved in a subsequent administrative hearing to determine whether to revoke home placement. Thus, the presence of counsel is not mandated at every hearing at which home placement could be terminated. The juvenile judge must consider each case on its merits, utilizing the criteria specified in Gagnon v. Scarpelli, supra, 411 U.S. at 790, 791, 93 S. Ct. 1756 to determine whether the appointment of counsel is required. As a general rule, counsel should be provided, and, as mandated under Gagnon, any doubt should be resolved in favor of appointment of counsel.
II.
The Chancellor below correctly held that the standard of proof in a proceeding in juvenile court to revoke home placement is the "preponderance of the evidence" standard. Petitioner attacks this holding, maintaining that the alleged act or acts *549 which constitute grounds for revocation of home placement should be proved beyond a "reasonable doubt." He bases this contention upon the proposition that a juvenile who has his home placement revoked is faced with the imposition of a new sentence. We reject this contention for the same reasons advanced in the preceding discussion: revocation of home placement does not constitute imposition of a new sentence; it is a recommitment under the previously imposed sentence.
Petitioner also argues that, even though adult parolees and probationers need not have parole violations established beyond a reasonable doubt, Davenport v. State, 214 Tenn. 468, 381 S.W.2d 276 (1964), the structure of the juvenile system requires a higher level of due process for juveniles than adults, and proof beyond a reasonable doubt is necessary for the protection of juveniles. As authority for this proposition, Petitioner cites several cases. An analysis of these cases indicates that while revocation of probation was at issue, all of the proceedings were filed as original delinquency petitions, and most relied on In Re Winship, 397 U.S. 358, 90 S. Ct. 1068, 25 L. Ed. 2d 368 (1970)[4] for the proposition that "beyond a reasonable doubt" is the applicable standard in adjudicating delinquency. In Re Z, 10 Cal. App. 3d 565, 89 Cal. Rptr. 246 (1970) (Adjudicatory stage of juvenile court proceedings), In Re Taylor, 268 A.2d 522 (D.C.App. 1970) (Also adjudicatory stage). In Re Walker, 282 N.C. 28, 191 S.E.2d 702 (1972) involved an adjudication of delinquency based on probation violations. The court there felt Winship was not applicable "... and is not authority for the argument that the findings here must be made upon proof beyond a reasonable doubt." 191 S.E.2d at 711.
The Supreme Court of Arizona in In Re Maricopa Juvenile Action, 111 Ariz. 135, 524 P.2d 1310 (1974) considered the issue of the applicable standard of proof in juvenile probation revocation proceedings and determined that the standard should be the same for juveniles as for adults: "Due process does not require that a higher standard be established for the revocation of the probation of a juvenile." 524 P.2d at 1311.
To require the state to prove beyond a reasonable doubt that the juvenile offender committed the act charged, be it a technical violation or a new criminal offense, would unduly burden the state in the supervision of juveniles put in home placement. This would have the effect of requiring the state to begin anew an adversary criminal proceeding each time home placement was sought to be revoked.
The juvenile is certainly entitled to the same standard of proof as an adult, but we do not feel that due process accords him a higher standard.
The decree of the Chancery Court that the juvenile has a right to counsel at all home placement revocation hearings is modified as herein provided, and affirmed as to the standard of proof applicable at said hearings.
COOPER, HENRY, BROCK and HARBISON, JJ., concur.
NOTES
[1] "Home placement", as defined in T.C.A. § 37-302(13), Public Acts 1975, ch. 326, § 1, in the juvenile court system is a release of the juvenile from institutional custody which is analogous to administrative parole in the adult criminal courts. Contrast home placement with "probation," T.C.A. § 37-203, in the juvenile court system which is generally considered analogous to judicial probation in the adult criminal courts. A juvenile placed on probation is not required to serve any time in the custody of the Department of Corrections prior to being released to the custody of a parent or guardian.
[2] Public Acts 1963, ch. 208, § 2, codified in T.C.A. § 37-1102, and amended by Public Acts 1975, ch. 326, § 6.
[3] Petitioner, Jerry Douglas Mempa, was convicted of a criminal offense and placed on probation for two (2) years. The imposition of a sentence was deferred under a Washington state statute. Petitioner's probation was subsequently revoked at a hearing at which he was not represented by counsel, and he was then sentenced to the maximum sentence of ten (10) years, which was required by law, with a recommendation to the parole board that he serve only one (1) year. The Supreme Court held that representation by counsel was essential because the imposition of sentence at the probation revocation hearing rendered that hearing a "critical stage" of the criminal process.
[4] The Court in Winship held that during the adjudicatory stage of a delinquency proceeding, the Constitution mandated that the fact of delinquency be proved beyond a reasonable doubt.
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826 F. Supp. 487 (1993)
J. Alvin WATSON, Individually and Mary Ann Watson, Individually, and as Administrators of the Estate of Mark O. Watson, Deceased, Plaintiffs,
v.
RAIL LINK, INC., a Virginia Corporation, and ITT Rayonier, Inc., A Delaware Corporation, Defendants.
Civ. A. No. CV292-252.
United States District Court, S.D. Georgia, Brunswick Division.
July 6, 1993.
*488 Billy N. Jones, Jones, Osteen, Jones & Arnold, Hinesville, GA, for J. Alvin Watson and Mary Ann Watson.
Randall A. Jordan, Jordan & O'Donnell, Rita C. Spalding, Brunswick, GA, for Rail Link, Inc.
James Benjamin Durham, Beth Barwick Mason-Oneal, Fendig, McLemore, Taylor & Whitworth, Brunswick, GA, for ITT Rayonier, Inc.
John Bofinger Miller, Robert Alvin Lewallen, Jr., Miller, Simpson & Tatum, Savannah, GA, for Norfolk Southern.
ORDER
ALAIMO, District Judge.
On October 16, 1992, Plaintiffs, J. Alvin Watson and Mary Ann Watson ("the Watsons"), instituted this diversity action, alleging negligence by Defendants in both the operation of a freight train over a public crossing and the maintenance of the railroad crossing. The Watsons claim that Defendants' negligence resulted in the fatal collision between a freight train and a vehicle operated by their minor son, Mark O. Watson. This action is presently before the Court on a motion for partial summary judgment by Defendant, Rail Link, Inc. ("Rail Link"), pursuant to Rule 56 of the Federal Rules of Civil Procedure. Specifically, Rail Link contends that the Watsons' state law claim, that Rail Link's locomotive was traveling at an excessive speed, is preempted by federal law. In addition, Rail Link argues that the Watsons' claim, that the crossing was not maintained adequately, must fail because the railroad crossing is owned and maintained by Defendant ITT Rayonier, Inc. ("ITT"). For the foregoing reasons, Rail Link's motion for partial summary judgment will be GRANTED in part and DENIED in part.
FACTS
On November 8, 1990, Mark O. Watson was fatally injured in an accident at a railroad crossing in Jesup, Georgia, when his vehicle was struck by a train owned and operated by Rail Link. As a result of the accident, decedent's parents, the Watsons, brought this instant action, claiming that the train was traveling at an excessive speed, among other allegations of negligence. (Compl. at ¶ 8). In addition, the Watsons claim that Defendants negligently maintained the public crossing where the accident occurred by: (1) allowing trees and undergrowth to grow in the right-of-way; (2) failing to maintain efficient warning signs; and, (3) failing to provide proper signals at the crossing. Id. at ¶ 9 & 10.
In its present motion for partial summary judgment, Rail Link contends that the Watson's state law negligence claim, premised upon allegations of excessive speed by the locomotive, is preempted by the Federal Railroad Safety Act of 1970 ("the FRSA"), 45 U.S.C. §§ 421-447 (1988 & Supp. II 1990), and the regulations related to train speed of the Federal Railway Administration ("FRA"). See 49 C.F.R. § 213.9 (1992). In addition, Rail Link argues that: (1) it is merely an independent contractor providing "switching services" for ITT; (2) its duties with regard to the track and crossing are controlled by a "Switching Agreement" (the "Agreement") between Rail Link and ITT, see Pl.'s Mot. for Partial Summ. J. at Ex. B; and, (3) the Agreement between Rail Link *489 and ITT places the responsibility upon ITT to maintain and repair the track on which Rail Link operates. Rail Link, therefore, asserts that it is entitled to summary judgment on these claims.
DISCUSSION
I. Standard for Summary Judgment
Summary judgment requires the movant to establish the absence of genuine issues of material fact, such that the movant is entitled to judgment as a matter of law. Fed. R.Civ.P. 56(c); Adickes v. S.H. Kress & Co., 398 U.S. 144, 153, 90 S. Ct. 1598, 1606, 26 L. Ed. 2d 142 (1970). Summary judgment is also proper "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." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S. Ct. 2548, 2552, 91 L. Ed. 2d 265 (1986). The non-moving party to a summary judgment motion need make this showing only after the moving party has satisfied its burden. Clark v. Coats & Clark, Inc., 929 F.2d 604, 608 (11th Cir.1991). The court should consider the pleadings, depositions and affidavits in the case before reaching its decision, Fed. R.Civ.P. 56(c), and all reasonable inferences will be made in favor of the non-movant. Adickes, 398 U.S. at 158-59, 90 S.Ct. at 1608.
II. Excessive Speed Claim
In CSX Transp., Inc. v. Easterwood, ___ U.S. ___, 113 S. Ct. 1732, 123 L. Ed. 2d 387 (1993), the Supreme Court recently addressed a similar challenge to a claim alleging negligence related to an automobile and train collision at a railroad crossing. In Easterwood, the plaintiff's husband was killed when his truck was hit by a train, owned and operated by defendant, at a railroad crossing in Cartersville, Georgia. Id. at ___, 113 S.Ct. at 1735, 123 L.Ed.2d at 394. Plaintiff, Easterwood, brought a diversity action, claiming that defendant was negligent in failing to maintain adequate warning devices at the crossing and for operating the train at an excessive speed. The District Court for the Northern District of Georgia granted summary judgment for defendant on the grounds that both claims were preempted by the FRSA. Easterwood v. CSX Transp., Inc., 742 F. Supp. 676, 679 (N.D.Ga. 1990). Upon appeal, the Eleventh Circuit reversed the district court, in part, holding that the claim, premised upon allegations of inadequate warning systems, was not preempted; the court, however, affirmed the district court's finding that plaintiff's claim of negligence, based upon excessive speed, was preempted by the FRSA. Easterwood v. CSX Transp., Inc., 933 F.2d 1548, 1560 (11th Cir.1991). Upon the filings of petitions for writs of certiorari by both parties, the Supreme Court granted review. CSX Transp. v. Easterwood, ___ U.S. ___, 112 S. Ct. 3024, 120 L. Ed. 2d 896 (1992).
The Supreme Court first presented the background of the FRSA and its preemptive effect by noting that the:
FRSA was enacted in 1970 "to promote safety in all areas of railroad operations and to reduce railroad-related accidents, and to reduce deaths and injuries to persons...." 45 USC § 421. To aid in the achievement of these goals, the Act specifically directs the Secretary of Transportation to study and develop solutions to safety problems posed by grade crossings. § 433. In addition, the Secretary is given broad powers to "prescribe, as necessary, appropriate rules, regulations, orders, and standards for all areas of railroad safety...." § 431(a). The pre-emptive effect of these regulations is governed by § 434, which contains express saving and preemption clauses. [footnote omitted]. Thus, the States are permitted to "adopt or continue in force any law, rule, regulation, order, or standard relating to railroad safety until such time as the Secretary has adopted a rule, regulation, order, or standard covering the subject matter of such State requirement." Even after federal standards have been promulgated, the States may adopt more stringent safety requirements "when necessary to eliminate or reduce an essentially local safety hazard," if those standards are "not incompatible with" federal laws or regulations and not an undue burden on interstate commerce. *490 Easterwood, ___ U.S. at ___, 113 S.Ct. at 1736-37, 123 L.Ed.2d at 395.
With this background, the Court noted that the Secretary of Transportation issued federal regulations which "set maximum allowable operating speeds for all freight and passenger trains for each class of track on which they travel." Id., at ___, 113 S.Ct. at 1742, 123 L.Ed.2d at 402 (citing 49 C.F.R. § 213.9 (1992)). In addition, the Court stated that under the regulations, "different classes of track are in turn defined by, inter alia, their gage, alinement, curvature, surface uniformity, and by the number of crossties per length of track." Id. (citing 49 C.F.R. §§ 213.51-213.143 (1992)). In Easterwood, the plaintiff conceded that the train was traveling under the maximum speed allowed by the regulations at the railroad crossing in question. Id. Nevertheless, she argued that, even though the defendant operated the train at below the speed authorized by federal law, defendant still "breached its common-law duty to operate its train at a moderate and safe rate of speed." Id.
The Supreme Court rejected the plaintiff's argument, stating that:
[o]n their face, the provisions of [49 C.F.R.] § 213.9(a) address only the maximum speeds at which trains are permitted to travel given the nature of the track on which they operate. Nevertheless, related safety regulations adopted by the Secretary reveal that the limits were adopted only after the hazards posed by track conditions were taken into account. Understood in the context of the overall structure of the regulations, the speed limits must be read as not only establishing a ceiling, but also precluding additional state regulation of the sort which [Easterwood] seeks to impose.... Read against this background, [49 C.F.R.] § 213.9(a) should be understood as covering the subject matter of train speed with respect to track conditions, including the conditions posed by grade crossings.
Id., at ___-___, 113 S.Ct. at 1742-43, 123 L.Ed.2d at 402-03. As such, the Court found that the plaintiff's "excessive speed claim cannot stand in light of the Secretary's adoption of the regulations in [49 C.F.R.] § 213.9." Id., at ___, 113 S.Ct. at 1743, 123 L.Ed.2d at 404.
In the present action, the speed limit, based upon the federal regulations, was twenty-five miles per hour at the railroad crossing. (Cook Aff. at 2). Rail Link has presented the uncontroverted testimony of James Russell Highsmith, the engineer operating the train at the time of the accident, stating that the train was traveling at under fifteen miles per hour at all times prior to the collision with Mark O. Watson. (Highsmith Aff. at 2). The speed of the train was in compliance with the federal regulations and, under the Easterwood holding, any common law claim that the train was traveling in excess of a safe rate of speed is preempted by federal law, under the FRSA. Accordingly, summary judgment will be granted to Rail Link on the excessive speed claim.[1]
III. Adequacy of Warning Devices and Maintenance of Crossing
In Easterwood, the Supreme Court also affirmed the Eleventh Circuit's holding that the plaintiff's claim of negligence, based on the absence of proper warning devices, was not preempted by the FRSA. Easterwood, ___ U.S. at ___, 113 S.Ct. at 1736-37, 123 L.Ed.2d at 395. The Court noted that a claim premised on the adequacy of warning devices at a crossing may be preempted in certain circumstances, in particular where federal funds participate in the installation of the warning devices. Id., at ___, 113 S.Ct. *491 at 1741, 123 L.Ed.2d at 401 ("In short, for projects in which federal funds participate in the installation of warning devices, the Secretary has determined the devices to be installed and the means by which railroads are to participate in their selection. The Secretary's regulations therefore cover the subject matter of state law which, like the tort law on which [Easterwood] relies, seeks to impose an independent duty on a railroad to identify and/or repair dangerous crossings."). See 23 C.F.R. §§ 646.214(b)(3) & (4) (1992). Nevertheless, the Court found that the facts did not show that federal funds participated in the installation of the warning devices at the applicable crossing. The plaintiff's claim was, therefore, not preempted, and she was permitted to pursue her action under applicable state negligence laws.
In the present action, Rail Link presents no argument that the Watsons' inadequate warning and maintenance claim is preempted by federal law. Instead, Rail Link contends that Defendant, ITT, owns the railroad track and the right-of-way where the collision occurred. Rail Link, therefore, claims that it is merely an independent contractor providing switching services for ITT. In addition, Rail Link claims that its duties with regard to the track and crossing are controlled by the Agreement, see Pl.'s Mot. for Partial Summ.J. at Ex. B, between Rail Link and ITT which places the responsibility upon ITT to maintain and repair the track on which Rail Link operates. Accordingly, Rail Link argues that it is the exclusive responsibility of ITT to ensure the maintenance of the crossing and the adequacy of the warning devices.
The Agreement upon which Rail Link relies is a contractual relationship entered into between Rail Link and ITT on March 19, 1988. Although it is clear that ITT owns the tracks and the right-of-way where the accident occurred, the Agreement requires Rail Link to provide switching services to ITT.[2] The Agreement contains the following provision:
MAINTENANCE AND REPAIRS. ITT, shall keep its Tracks clear and passable at all times, and it shall maintain all its tracks and switches in a satisfactory and safe condition. Rail Link shall not operate over any track which fails to meet FRA Class 1 standards; however, in no event shall Rail Link operate over any track which in its opinion is deemed unsafe or unfit for the intended operation. Rail Link shall promptly advise ITT in writing of any track maintenance and repairs which Rail Link believes are necessary to the safe and efficient performance of its services hereunder.
(Pl.'s Mot. for Partial Summ.J. at Ex. B, ¶ 5). Rail Link contends that this provision places the responsibility for repairs and maintenance upon ITT and, therefore, a claim against Rail Link cannot stand.
Rail Link's argument must be rejected. The Agreement does not absolve Rail Link of all responsibility for ensuring the safety of the crossing but, in fact, places responsibility upon Rail Link to not operate on any track that "in its opinion is deemed unsafe or unfit." Id. Moreover, Rail Link is given the responsibility to "advise ITT in writing of any track maintenance and repairs which Rail Link believes are necessary to the safe and efficient performance of its services...." Id. This Court, therefore, concurs with the Watsons' assertion that the Agreement makes railway crossing safety the responsibility of both Defendants and clearly does not absolve Rail Link of all responsibility. Accordingly, Rail Link's motion for summary judgment will be denied with regard to the negligence claim for inadequate warning and maintenance.
CONCLUSION
For the foregoing reasons, summary judgment is hereby GRANTED to Rail Link as to the Watsons' excessive speed claim. Summary *492 judgment is hereby DENIED to Rail Link as to the Watsons' inadequate warnings and maintenance claim.
SO ORDERED.
NOTES
[1] The Watsons note that in the Easterwood appeal to the Eleventh Circuit, the court stated that "[w]hile the plaintiff's claim of negligence based on excessive speed is pre-empted, evidence of speed is relevant to the issue of the adequacy of the warning system." Easterwood v. CSX Transp., Inc., 933 F.2d 1548, 1558 n. 9 (11th Cir.1991). The Watsons, thus, contend that the factor of the speed of the train is relevant to the negligence claim for inadequate warning at the crossing. This Court finds that the Supreme Court's Easterwood holding, which affirmed the court of appeal's opinion, in no way alters this finding of the Eleventh Circuit. Accordingly, the Watsons are correct that the preemption of the excessive speed claim notwithstanding, evidence of the train's speed is relevant to any claim premised upon the adequacy of the warning system at the railroad crossing.
[2] Under the Agreement, "Switching Services" means "the movement and relocation of Rail Cars in order to facilitate loading and unloading of such Rail Cars at the Mill and shall include the provision of all Switching Equipment and Switching Personnel." (Pl.'s Mot. for Partial Summ.J. at Ex. B, ¶ 1.8). The Agreement, therefore, provides for Rail Link to move its trains over ITT's tracks and allow for the movement of raw materials and finished products over ITT's paper mill facilities in Jesup, Georgia.
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826 F. Supp. 336 (1993)
Sandra DEASE, d/b/a the Wounded Knee Saloon, Plaintiff,
v.
CITY OF ANAHEIM, Defendant.
No. CV-93-1712 RG (SX).
United States District Court, C.D. California.
July 8, 1993.
*337 G. Randall Garrou, Weston, Sarno, Garrou & DeWitt, Beverly Hills, CA, for plaintiff.
Mark S. Gordon, Office of City Atty., Anaheim, CA, for defendant.
MEMORANDUM DECISION & JUDGMENT
GADBOIS, District Judge.
Having considered all of the evidence submitted, the trial briefs, and all other moving and opposition papers and arguments of counsel, the Court makes the following findings of fact and rulings of law:
I. Factual Background
Plaintiff Sandra Dease and her husband have owned and operated the Wounded Knee Saloon ("the Wounded Knee"), located at 815 Brookhurst Street in the city of Anaheim ("the City"), since June 1991. Prior to the Plaintiff's purchase of the Wounded Knee, it operated at this location for several years, at times featuring "wet t-shirt contests" and bikini-clad females engaged in "whippedcream wrestling contests." Prior to the initiation of this lawsuit, entertainment at the Wounded Knee allegedly consisted of exotic/erotic dancing by bikini-clad (non-nude) dancers.
*338 The Plaintiff states that when she purchased the Wounded Knee, she planned to feature topless dancing and hold occasional wet t-shirt contests and bikini-whipped-cream-wrestling events. However, in a meeting held on July 25, 1991, City officials allegedly told the Plaintiff that if she featured any of these forms of entertainment at the Wounded Knee, they would "close her up." Dease Declaration at ¶ 7. On September 24, 1991, the Plaintiff received a letter from the City stating that her application for an entertainment permit had been denied to the extent that she sought permission to conduct whipped-cream wrestling, wet t-shirt contests, and bikini clad dancing and/or waitressing at the Wounded Knee. Dease Declaration, Exhibit A. After negotiations with the Plaintiff's attorney, the City modified its ruling on the Plaintiff's application for an entertainment permit on October 11, 1991, allowing her to exhibit "bikini dancers" at the Wounded Knee.[1] Dease Declaration, Exhibit B. The City's approval of bikini dancing specifically prohibits such dancers from exposing any "specified anatomical areas" as defined in § 18.89.020.030 of the Anaheim Municipal Code ("A.M.C.").
The Plaintiff claims that the City's restrictions on entertainment at the Wounded Knee have caused her business to decline precipitously. At the time the Plaintiff filed her Complaint, the Wounded Knee had ceased operations during daytime hours, and several employees had quit, due to lack of income from tips. The Plaintiff states that she would have closed the Wounded Knee pending the district court's ruling on her motion for a preliminary injunction, had her attorney not advised against it.[2] Supplemental Dease Declaration at ¶¶ 8-9. Based on the Plaintiff's experience in the erotic dancing industry and the feedback she has received from her customers, the Plaintiff believes that business would increase at the Wounded Knee if it were allowed to feature nude[3] or topless dancing, or dancing in G-strings and pasties. However, if the Plaintiff's employees perform in this manner, the Wounded Knee will be subject to prosecution for operating as an Adult Entertainment Business ("AEB") without a Conditional Use Permit ("CUP"), as specified in A.M.C. § 18.89.030.010. The Plaintiff has never applied for a CUP.
II. Procedural History
On March 19, 1993, the Plaintiff filed a Complaint against the City. The Complaint alleges that the Anaheim CUP ordinance suffers from two constitutional infirmities: (1) facial invalidity, on the grounds that it constitutes an impermissible prior restraint on free speech in violation of the First and Fourteenth Amendments to the United States Constitution and Article 1, § 2 of the California Constitution; and (2) as applied invalidity under these same constitutional provisions, due to the imposition of zoning restrictions that allegedly deprive the AEB owners of a reasonable opportunity to find a viable site for their businesses in Anaheim.
On March 29, 1993, the Plaintiff made an ex parte application for a temporary restraining order ("t.r.o.") and a preliminary injunction to enjoin enforcement of the CUP ordinance. This motion was solely based on the facial constitutional challenge. The district court denied the Plaintiff's request for a t.r.o. but granted the motion for a preliminary injunction. See Order entered April 21, 1993. Pursuant to Fed.R.Civ.P. 42(b) and 65(a)(2)[4], the parties agreed to an expedited *339 non-jury trial on the merits of the Plaintiff's facial invalidity claim. See Order entered April 19, 1993. The parties submitted supplemental evidence and briefing to the court, and this judgment reflects the court's ruling on the issue of whether the Anaheim CUP ordinance is facially unconstitutional.
III. The Anaheim CUP Ordinance
If the Wounded Knee were to feature nude or semi-nude dancing, it would be classified as a "cabaret" under A.M.C. § 18.89.020(H)[5], the portion of the Anaheim Municipal Code defining AEB's. A.M.C. § 18.89.030 specifies that all AEB's must meet the following CUP requirements:
.010 [N]o person shall establish, conduct, operate, or maintain any `adult entertainment business' ... on any property in the City of Anaheim without having first obtained a conditional use permit therefor pursuant to the provisions of Chapter 18.03 of this title.
.020 [N]o conditional use permit shall be granted by the City of Anaheim for any such "adult entertainment business" if the premises upon which such business is proposed to be located is:
A. Within 400 feet of any lot zoned for residential use; or
B. Within 1000 feet of any lot upon which there is located a church, or educational institution utilized by minors; or
C. Within 1000 feet of any lot upon which there is located any other Adult Entertainment Business as defined in Section 18.89.020 of this chapter.
An AEB located in an area that satisfies the distance requirements set forth in A.M.C. § 18.89.030.020 does not automatically qualify for a CUP. The decision to grant or deny the issuance of a CUP is left in the hands of Anaheim Planning Commission, whose decision-making is guided by the following criteria, as set forth in A.M.C. § 18.03.030.020:
The Planning Commission, as an administrative act, may grant conditional use permits for any use hereinafter provided for, if the conditions and standards set forth herein are satisfied. In granting any such conditional use permit the Planning Commission may establish such conditions as it may determine to be reasonably necessary to safeguard and protect the public health and safety and promote the general welfare and to insure the development of any use authorized in accordance with approved plans.
(emphasis added).
This section further specifies that, before the Planning Commission can issue a CUP, it must find that the proposed use will not (1) "adversely affect the adjoining land uses and the growth and development of the area" (subsection .032); (2) be detrimental to the "peace, health, safety, and general welfare" of the area (subsection .033); (3) create an undue burden by generating excess traffic (subsection .034); or (4) "be detrimental to the peace, health, safety, and general welfare of the citizens of the City of Anaheim" (subsection .035). The Plaintiff claims that this ordinance is unconstitutional in that it grants excessive substantive discretion to city officials in deciding whether to grant or deny a CUP.
On December 15, 1992, the City amended the CUP ordinance, stating that "a court action has been brought against the City alleging constitutional invalidity of portions of Chapter 18.03 as applied to AEB's and seeking a preliminary and a final injunction against its enforcement." Ordinance No. 5346 § 6(1).[6] To protect the CUP ordinance *340 from being found constitutionally invalid, the City added the following provisions to A.M.C. § 18.03.030:
.037 [A] conditional use permit shall be granted by the City Council or Planning Commission ... for any use which consists essentially of dissemination of information or other speech or expression protected by the First Amendment to the United States Constitution, unless the information submitted by the applicant and/or presented at the public hearing substantiates one or more of the following findings:
.03701 that the requested use at the proposed location will adversely affect the use of a church, temple, or other place used exclusively for religious worship, school, park, or playground ...; or
.03702 that the requested use ... is insufficiently buffered in relation to residentially zoned areas within the immediate vicinity ...;
.03703 that the exterior appearance of the structure will be inconsistent with the external appearance of commercial structures already constructed or under construction ... so as to cause blight or deterioration, or substantially to diminish or impair property values within the neighborhood;
.03704 that any one or more of the requirements of subsections .031 through .034 of this Section are not met.
The uses to which this subsection applies include, but are not necessarily limited to, sale or rental of books, periodicals, audiotapes or videotapes, and live or recorded theatrical or musical performances such as motion pictures, speaking, pantomime, singing or dancing, or any combination thereof, before an audience.
(emphasis added).
IV. Legal Analysis
A. Standing
The Plaintiff has never applied for a CUP permit; hence she is challenging the constitutionality of the law on its face. Facial challenges to legislation are generally disfavored. However, the Supreme Court has recognized that "[i]n the area of freedom of expression it is well established that one has standing to challenge a statute on the ground that it delegates broad licensing discretion to an administrative office, whether or not [her] conduct could be proscribed by a properly drawn statute, and whether or not [she] applied for a license." Lakewood v. Plain Dealer Co., 486 U.S. 750, 756, 108 S. Ct. 2138, 2143, 100 L. Ed. 2d 771 (1988) (quoting Freedman v. Maryland, 380 U.S. 51, 56, 85 S. Ct. 734, 737, 13 L. Ed. 2d 649 (1965)); see also Forsyth County v. Nationalist Movement, ___ U.S. ___, ___, 112 S. Ct. 2395, 2400, 120 L. Ed. 2d 101, 110 (1992); FW/PBS, Inc. v. City of Dallas, 493 U.S. 215, 223, 110 S. Ct. 596, 603, 107 L. Ed. 2d 603 (1990); Gaudiya Vaishnava Soc'y v. City of San Francisco, 952 F.2d 1059, 1062 (9th Cir.1990), cert. denied, ___ U.S. ___, 112 S. Ct. 1951, 118 L. Ed. 2d 555 (1992). Therefore, the Plaintiff has standing to challenge the ordinance, regardless of whether she has applied for or would qualify for the CUP.
B. Constitutional Limitations on Zoning
The Supreme Court has recognized that local governments have a broad range of authority within which to regulate the growth and development of their communities through zoning. However, the Court has also held that, like any other law, a zoning ordinance cannot exceed the boundaries of the Constitution:
The power of local government to zone and control land use is undoubtedly broad and its proper exercise is an essential aspect of achieving a satisfactory quality of life in both urban and rural communities. But the zoning power is not infinite and unchallengeable; it must be exercised within constitutional limits. Schad v. Borough of Mount Ephraim, 452 U.S. 61, 68, 101 S. Ct. 2176, 2182, 68 L. Ed. 2d 671 (1981).
1. Nude or Semi-Nude Dance as Erotic Speech under the First Amendment
The Plaintiff has stated that, were she unrestrained by the Anaheim CUP ordinance, she would present nude or semi-nude (topless dancing or dancing in g-strings and *341 pasties) dancing as a form of entertainment at the Wounded Knee. Although it can be argued that these types of activities are not entitled to the same level of protection as political or "pure" speech, the Supreme Court has recognized that nude or semi-nude dance is a form of expression that falls within the parameters of the First Amendment[7]:
Entertainment, as well as political and ideological speech, is protected; motion pictures, programs broadcast by radio and television, and live entertainment, such as musical and dramatic works, fall within the First Amendment guarantee. Nor may an entertainment program be prohibited solely because it displays the nude human figure. Nudity alone does not place otherwise protected material outside the mantel of the First Amendment. Furthermore, ... nude dancing is not without its First Amendment protections from official regulation.
Schad, 452 U.S. at 65-66, 101 S.Ct. at 2181 (on grounds of overbreadth, striking down zoning ordinance prohibiting live entertainment, including nude dancing); see also Doran v. Salem Inn, Inc., 422 U.S. 922, 932, 95 S. Ct. 2561, 2568, 45 L. Ed. 2d 648 (1975) (on grounds of overbreadth, striking down local ordinance barring waitresses, barmaids, and entertainers from appearing topless); BSA, Inc. v. King County, 804 F.2d 1104, 1107 (9th Cir.1986) (ordinance banning "common barroom nude dancing" violates First Amendment); Chase v. Davelaar, 645 F.2d 735 (9th Cir.1981) (on grounds of overbreadth, striking down ordinance prohibiting topless entertainment in all nontheatrical establishments selling food or beverages); cf. Barnes v. Glen Theatre, Inc., 501 U.S. ___, ___, 111 S. Ct. 2456, 2460, 115 L. Ed. 2d 504, 511 (1991) (plurality opinion) ("[N]ude dancing ... is expressive conduct within the outer perimeters of the First Amendment, though we view it as only marginally so."). The California Supreme Court has also held that laws banning nude dancing violate the First Amendment. See Morris v. Municipal Court, 32 Cal. 3d 553, 652 P.2d 51, 186 Cal. Rptr. 494 (1982).
2. Content-Based Restrictions on Speech
Because nude/semi-nude dance is a form of expression protected by the First Amendment, the government cannot regulate the speech element of this activity on the basis of its content. The Constitution prohibits content-based regulation so that the "government may not grant the use of a forum to people whose views it finds acceptable, but deny use to those wishing to express less favored or more controversial views." City of Renton v. Playtime Theatres, Inc., 475 U.S. 41, 48-49, 106 S. Ct. 925, 929, 89 L. Ed. 2d 29 (1986). Therefore, if a "time, place, and manner" restriction on speech is based solely on the content of that speech, it presumptively violates the First Amendment. Id. at 46-47, 106 S.Ct. at 928; see also Carey v. Brown, 447 U.S. 455, 462-63 & note 7, 100 S. Ct. 2286, 2191 & note 7, 65 L. Ed. 2d 263 (1980). However, content-neutral time, place, and manner restrictions "are acceptable so long as they are designed to serve a substantial government interest and do not unreasonably limit alternative avenues of communication." Renton, 475 U.S. at 47, 106 S.Ct. at 928; see also City Council of Los Angeles v. Taxpayers for Vincent, 466 U.S. 789, 104 S. Ct. 2118, 80 L. Ed. 2d 772 (1984); Clark v. Comm. for Creative Non-Violence, 468 U.S. 288, 104 S. Ct. 3065, 82 L. Ed. 2d 221 (1984).[8]
3. Content-Neutral Time, Place, and Manner Restrictions
In Renton, the Supreme Court upheld a zoning ordinance that prohibited "adult" *342 movie theatres from locating within 1000 feet of any residential zone, single or multiple family dwelling, a church, a park, or a school. The Court found that the ordinance was not aimed at the content of the films, but rather at the secondary effects of such theaters. See also Young v. American Mini Theatres, Inc., 427 U.S. 50, 96 S. Ct. 2440, 49 L. Ed. 2d 310 (1976) (upholding similar ordinance).
Applying a similar analysis, the Supreme Court in Barnes held that "when speech and nonspeech elements are combined in the same course of conduct, a sufficiently important governmental interest in regulating the nonspeech elements can justify incidental limitations of First Amendment freedoms." 501 U.S. at ___, 111 S.Ct. at 2461, 115 L.Ed.2d at 512. The Court upheld an Indiana "public indecency statute" banning public nudity, even though the ordinance had the effect of prohibiting all nude dancing.[9] In Barnes, the Court reasoned that, while nude dancing may embody some element of "speech" by conveying an erotic message, other aspects of the performance were subject to governmental regulation. The Court found that the Indiana law was intended to further a "substantial government interest in protecting order and morality," an interest unrelated to the suppression of free expression. Id. 501 U.S. at ___, 111 S.Ct. at 2462, 115 L.Ed.2d at 513.
In analyzing the Indiana law, the Supreme Court applied the test first articulated in United States v. O'Brien, 391 U.S. 367, 88 S. Ct. 1673, 20 L. Ed. 2d 672 (1968) (applying First Amendment analysis to burning of draft card). Under this test, government regulation of an activity combining speech and nonspeech elements is "sufficiently justified" if the following four conditions are met:
(1) it is within the constitutional power of the government;
(2) it furthers an important or substantial governmental interest;
(3) the governmental interest is unrelated to the suppression of free expression; and
(4) the incidental restriction on alleged First Amendment freedoms is no greater than is essential to the furtherance of the government interest.
O'Brien, 391 U.S. at 376-77, 88 S.Ct. at 1679; see also Barnes, 501 U.S. at ___, 111 S.Ct. at 2461, 115 L.Ed.2d at 512.
It is clear that the City has the constitutional power to enforce zoning regulations, so long as they are designed to further a "substantial government interest"[10] that is "unrelated to the suppression of freedom of expression." If an ordinance infringes upon a protected liberty (in this case, freedom of speech), the incidental restriction must be "no greater than is essential to the furtherance of the government interest."
4. Prior Restraints
In determining the constitutionality of the Anaheim CUP ordinance, the court must engage in a second level of analysis beyond the O'Brien test and deal with the issue of prior restraints. Unlike the statute at issue in Barnes, which simply bans public nudity, the Anaheim CUP ordinance acts as a "prior restraint" on speech. The Anaheim permit scheme qualifies as a prior restraint, because it essentially requires the permittee to obtain the government's permission or approval before engaging in an act of speech. The key issue in this case is whether the Anaheim CUP ordinance constitutes a "content-neutral, time, place, and manner restriction aimed at secondary effects arising out of the sexually oriented businesses," or whether it is more properly characterized as an unconstitutional prior restraint on free speech. FW/PBS, 493 U.S. at 223, 110 S.Ct. at 603.
Although prior restraints are not unconstitutional per se, "any system of prior restraint ... [bears] a heavy presumption against its constitutional validity." FW/PBS, 493 U.S. at 225, 110 S.Ct. at 604. The Plaintiff *343 argues that the Anaheim CUP ordinance is an unconstitutional prior restraint, because (1) it confers excessive substantive discretion on city officials to decide whether to grant or deny a CUP, and (2) it does not provide adequate procedural safeguards, due to the fact that the process for obtaining a CUP may extend for over one hundred days.
Because the court concludes that the Anaheim CUP ordinance places an unconstitutional level of substantive discretion in the hands of city officials, the court does not reach the issue of whether the CUP ordinance lacks adequate procedural safeguards. The Supreme Court has identified the dangers of an "unbridled licensing scheme" as (1) self-censorship by the potential permittee, undertaken to avoid being denied a license to speak; and (2) the difficulty of "effectively detecting, reviewing, and correcting content-based censorship `as applied' without standards by which to measure the censor's action." Lakewood, 486 U.S. at 759, 108 S.Ct. at 2145. In other words, a system that endows a government official with "unbridled discretion" to determine "who may speak and who may not" implicitly vests that government official with the power to regulate speech on the basis of its content and/or the viewpoint of the speaker. Id., 486 U.S. at 763, 108 S.Ct. at 2147. For this reason, the Supreme Court has repeatedly held that an ordinance "which ... makes the peaceful enjoyment of freedoms which the Constitution guarantees contingent upon the uncontrolled will of an official as by requiring a permit or license which may be granted or withheld in the discretion of such official is an unconstitutional censorship or prior restraint upon the enjoyment of those freedoms." FW/PBS, 493 U.S. at 226, 110 S.Ct. at 605 (citing Shuttlesworth v. Birmingham, 394 U.S. 147, 151, 89 S. Ct. 935, 938, 22 L. Ed. 2d 162 (1969)). Addressing the constitutionality of a parade permit requirement, Shuttlesworth held that "a law subjecting the exercise of First Amendment freedoms to the prior restraint of a license, without narrow, objective, and definite standards to guide the licensing authority, is unconstitutional." 394 U.S. at 150-151, 89 S.Ct. at 938; see also Forsyth County, supra (regulating fee for parade permits); Freedman, supra (censorship of motion pictures); Staub v. City of Baxley, 355 U.S. 313, 78 S. Ct. 277, 2 L. Ed. 2d 302 (1958) (labor activity; permit required to solicit members for organization requiring payment of dues).
Before the Anaheim Planning Commission may grant a CUP, it must find that the proposed use will not be detrimental to the "peace, health, safety, and general welfare" of the area. A.M.C. § 18.03.030.033. Additionally, the ordinance provides that the Planning Commission may establish "such conditions as it may determine to be reasonably necessary to safeguard and protect the public health and safety and promote the general welfare" to regulate the issuance of CUP's. A.M.C. § 18.03.030.020. For uses designated by the Planning Commission to be protected by the First Amendment, the ordinance states that the CUP shall be granted unless the Planning Commission determines that it will "adversely affect" the use of a church, school, park or playground; is "insufficiently buffered" in relation to residential areas; or its exterior appearance is "inconsistent" with the appearance of external structures in the neighborhood. A.M.C. § 18.03.030.037.
The City argues that zoning requirements must be somewhat vague. For example, the City contends that "it is quite possible that an adult business might meet the minimum locational criteria of Chapter 18.89 but still be inappropriate in a particular location." Opposition to Motion for Preliminary Injunction at 14. For this reason, the City claims that it cannot rely on objective standards in its decision to grant or deny a CUP.
In Staub, the Supreme Court struck down a law which predicated the issuance of a permit on whether the mayor and the city council determined that the proposed use would adversely affect the "general welfare" of the citizenry. 355 U.S. at 322, 78 S.Ct. at 282. Similarly, in Shuttlesworth the relevant statute provided that the government official would refuse to issue the permit if the proposed use threatened "the public welfare, peace, safety, health, decency, good order, morals, or convenience" of the community. 394 U.S. at 149, 89 S.Ct. at 938. The Court found that this ordinance vested "virtually *344 unbridled and absolute power" in the City Commission, and consequently held that it was unconstitutional. Id. at 150, 89 S.Ct. at 938.
The Anaheim CUP ordinance vests the Planning Commission with the power to decide who may or may not obtain a CUP. Because the Commission's decision-making is not guided by definite and objective standards, the CUP ordinance infringes the First Amendment rights of the permittee. The Commission's ability to make decisions based on ambiguous criteria such as the "general welfare" of the community effectively gives the Commission the power to make decisions on any basis at all, including an impermissible basis, such as content-based regulation of speech. Judging the ordinance as it is now written, this court cannot conclude that the Anaheim ordinance "serves a substantial government interest unrelated to the suppression of freedom of expression." BSA, Inc., 804 F.2d at 1107 (emphasis added); see also Barnes, 501 U.S. at ___, 111 S.Ct. at 2461, 115 L.Ed.2d at 512.
The "First Amendment" section of the Anaheim ordinance does not cure its constitutional infirmities. The ambiguity of this subsection also gives the Planning Commission an unconstitutional amount of discretion in deciding whether to grant or deny the CUP, leaving open the possibility of content-based discrimination.[11] The Planning Commission may refuse to issue a CUP, based on vaguely-worded criteria such as the following: (1) no First Amendment activity may occur in an area that may "adversely affect" a school or church, or (2) no First Amendment activity may take place in an area that is "insufficiently buffered" in relation to a residential zone. While this court respects the City's good faith attempt to protect First Amendment interests, as a matter of law the City has failed to do so.
5. Void for Vagueness
In addition to challenging the Anaheim CUP ordinance as a prior restraint, the Plaintiff also claims that part of this ordinance is void for vagueness. A.M.C. § 18.89.030.020 specifies that no CUP shall be granted to an AEB located within 400 feet of a lot zoned for residential use, or within 1000 feet of another AEB as defined in A.M.C. § 18.89.020. The Plaintiff argues that this portion of the CUP ordinance is unconstitutionally vague, on the following grounds: (1) it does not specify whether an AEB may be located within 400 feet of a residential area outside the city limits of Anaheim; and (2) it does not specify whether the term "AEB" only applies to businesses currently possessing a CUP.
The void for vagueness doctrine demands that laws be written so that they "give the person of ordinary intelligence a reasonable opportunity to know what is prohibited, so that he may act accordingly." Grayned v. City of Rockford, 408 U.S. 104, 108, 92 S. Ct. 2294, 2298-99, 33 L. Ed. 2d 222 (1972). In this case, the Anaheim CUP ordinance can be interpreted by the plain meaning of its words. The term "any lot zoned for residential use" necessarily includes all residential areas, regardless of whether they are located within the city of Anaheim. See A.M.C. § 18.89.030.020(A). Likewise, "any other Adult Entertainment Business as defined in Section 18.89.020 of this chapter" only includes those AEB's that are licensed as such by the city of Anaheim. See A.M.C. *345 § 18.89.030.020(C). The court concludes that this portion of the CUP ordinance is not unconstitutionally vague.
C. Severability
"The standard for determining the severability of an unconstitutional provision is well established: Unless it is evident that the Legislature would not have enacted those provisions which are within its power, independently of that which is not, the invalid part may be dropped if what is left is fully operative as a law." Alaska Airlines, Inc. v. Brock, 480 U.S. 678, 684, 107 S. Ct. 1476, 1480, 94 L. Ed. 2d 661 (1987); see also Regan v. Time, Inc., 468 U.S. 641, 653, 104 S. Ct. 3262, 3269, 82 L. Ed. 2d 487 (1984) (plurality opinion). A constitutionally flawed provision cannot be severed "if the balance of the legislation is incapable of functioning independently." Alaska Airlines, 480 U.S. at 684, 107 S.Ct. at 1480.
In the instant case, the court has found that the conditions for obtaining a CUP under A.M.C. § 18.89.030 are unconstitutional. Consequently, all other statutory references to the CUP ordinance are effectively rendered moot. For example, even though A.M.C. § 18.89.030.020[12] is not unconstitutionally vague, it cannot stand on its own if the conditions for obtaining the CUP itself are unconstitutional. Because the unconstitutional aspects of the Anaheim CUP ordinance are inherent in the scheme itself, they cannot be severed. Therefore, all references to the Anaheim CUP licensing requirement must be stricken from the Anaheim Municipal Code.
V. Conclusion
The Constitution permits the City of Anaheim to protect its communities from the secondary effects associated with adult entertainment businesses, such as the one owned by the Plaintiff in this case. The City may also use zoning as a means to accomplish this end. However, the Constitution does not allow the City to regulate these types of businesses on the basis of the content of their speech i.e., the City cannot deny a CUP application for an establishment exhibiting nude dancing on the grounds that the City finds nude dancing to be offensive and of little value.
When a zoning ordinance requires the issuance of a license or a permit before the applicant can engage in an act of speech, the licensing authority must be guided by objective and definite standards. Otherwise, the possibility of content-based censorship is inherent in the statute. Because the Anaheim CUP ordinance does not adequately control the licensor's discretion, it violates the First Amendment to the United States Constitution.
IT IS SO ORDERED.
NOTES
[1] Dease attests that she has received notice from the City (dated February 19, 1993) that her application to renew her entertainment permit (dated July 13, 1992) would be denied. Dease is currently pursuing an administrative appeal of this decision. Dease Declaration at ¶ 29.
[2] Randall Garrou, the Plaintiff's attorney, advised her that, if the Wounded Knee shut down completely, the City might revoke its permit(s) due to an alleged discontinuance of a lawful nonconforming use.
[3] If the Wounded Knee featured nude dancing, rather than topless dancing or dancing in g-strings and pasties, it could not serve alcohol to its customers. Cal.Admin.Code § 143.3. This law was upheld by the United States Supreme Court in California v. La Rue, 409 U.S. 109, 93 S. Ct. 390, 34 L. Ed. 2d 342 (1972).
[4] Fed.R.Civ.P. 42(b) provides, inter alia, that the court "may order a separate trial of any claim ... or of any separate issue," if doing so will further convenience, avoid prejudice, or will be conducive to expedition and economy.
Fed.R.Civ.P. 65(a)(2) allows for consolidation of a preliminary injunction hearing with a trial on the merits. Rule 65(a)(2) further specifies that, at trial, "any evidence received upon an application for a preliminary injunction which would be admissible upon the trial on the merits" automatically becomes part of the trial record and need not be repeated.
[5] A "cabaret" is defined as a "nightclub, theater or other establishment which features live performances by topless and/or bottomless dancers, `go-go' dancers, exotic dancers, strippers, or similar entertainers, where such performances are distinguished or characterized by an emphasis on `specified sexual activities' or `specified anatomical areas.'"
[6] At the hearing on the t.r.o., both parties indicated that this litigation has been resolved.
[7] The City of Anaheim has not alleged that the nude or semi-nude dancing at issue in this case constitutes material that is legally "obscene." Obscenity is not protected by the First Amendment. Miller v. California, 413 U.S. 15, 93 S. Ct. 2607, 37 L. Ed. 2d 419 (1973). Nudity alone is insufficient to make entertainment legally obscene. See Jenkins v. Georgia, 418 U.S. 153, 161, 94 S. Ct. 2750, 41 L. Ed. 2d 642 (1974).
[8] Although the "time, place, and manner" test was developed to evaluate restrictions on expression taking place in a public forum (e.g., a sidewalk), the Supreme Court has also applied this test to conduct occurring on private property. See Barnes, 501 U.S. at ___-___, 111 S.Ct. at 2460-61, 115 L.Ed.2d at 511-12; Renton, 475 U.S. at 62, 106 S.Ct. at 936.
[9] Semi-nude dancing is allowed under the Indiana law.
[10] Local governments have a "substantial government interest" in controlling land use through zoning. However, in the instant case the City has presented no specific evidence demonstrating that harmful effects are associated with AEB's. Likewise, the City has produced no evidence linking illegal activity (other than alleged violation of the CUP zoning laws) with the Wounded Knee Saloon.
[11] Although this portion of the CUP ordinance identifies several activities to which it applies, it also covers uses "which consist[ ] essentially of dissemination of information or other speech or expression protected by the First Amendment." The list of activities includes the following: sale or rental of books, periodicals, audiotapes or videotapes, and live or recorded theatrical or musical performances such as motion pictures, speaking, pantomime, singing or dancing. It appears that the First Amendment section of the ordinance directly applies to AEB applicants for a CUP (including the Plaintiff). However, the City has also argued that the "speech" embodied in erotic dance is entitled to only the most minimal First Amendment protection.
By leaving the determination of what constitutes a "First Amendment use" in the hands of the Planning Commission, the ordinance may (1) fail to give some permit applicants proper notice of whether they fit into this category, and (2) give the Planning Commission an unconstitutional realm of discretion within which to make this decision. See City of Cincinnati v. Discovery Network, Inc., 507 U.S. ___, ___ n. 19, 113 S. Ct. 1505, 1513 n. 19, 123 L. Ed. 2d 99, 112 n. 19 (1993).
[12] A.M.C. § 18.89.030.020 mandates that no CUP will be issued to an AEB located within 400 feet of a residential area, 1000 feet of a church or school, or within 1000 feet of another AEB.
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406 B.R. 821 (2009)
In re David Michael LARSEN, Debtor(s).
No. 09-22963-MDM.
United States Bankruptcy Court, E.D. Wisconsin.
June 24, 2009.
*822 David Michael Larsen, pro se.
MEMORANDUM DECISION DENYING DEBTOR'S MOTION FOR THE APPOINTMENT OF COUNSEL
MARGARET DEE McGARITY, Chief Bankruptcy Judge.
The Debtor has filed a Motion for the Appointment of Counsel pursuant to 18 U.S.C. § 3006A and 28 U.S.C. § 1915(e)(1). For the reasons stated below, his motion is denied.
BACKGROUND
Mr. Larsen is presently in the custody of the Wisconsin prison system. This is *823 his second pro se bankruptcy case, the first having been dismissed for failure to request or obtain a bankruptcy briefing from an approved credit counseling agency before filing. See Case No. 08-33993-mdm-7. He did subsequently obtain the required counseling, and filed the present case, also pro se.
Although the debtor claims to have substantial funds in retirement accounts, which he now values at approximately $150,000, neither he nor his attorney-in-fact have access to these funds to obtain bankruptcy counsel. According to Mr. Larsen, this is because the funds are under the control of a receiver appointed by the Circuit Court of Racine County, and they are being used to fund his child support obligations. He lists other assets in his schedules, also unavailable to him. According to his Statement of Financial Affairs, the receiver has been making child support payments from what he claims are exempt retirement funds for well over a year, so presumably the order appointing the receiver and the transfer of the assets pursuant to that order are also over a year old.
Mr. Larsen alleges numerous legal and constitutional defects in the proceeding that parted him from control over his funds, and his stated purpose in filing both of these cases is to remove the receiver and recover control over his exempt retirement funds and other assets. Since he does not have such control, he cannot afford an attorney to help him do so, and he asks this Court to appoint counsel in the bankruptcy case to represent him in this effort.
DISCUSSION
In support of his motion to appoint counsel, Mr. Larsen cites two statutes: 18 U.S.C. § 3006A and 28 U.S.C. § 1915(e)(1). The first relates to appointments under the criminal code, which has no application in the bankruptcy court. The second, found in the Judicial Code, provides: "The court may request an attorney to represent any person unable to afford counsel." 28 U.S.C. § 1915(e)(1).
The power of a court to appoint counsel under this statute is discretionary, not mandatory. Appointment of counsel in a civil case is not a constitutional right, Pruitt v. Mote, 503 F.3d 647, 649, 656-58 (7th Cir.2007), and all bankruptcy jurisdiction is civil. There is a presumption that the right to appointed counsel "exist[s] only where the litigant may lose his physical liberty if he loses the litigation," Lassiter v. Dep't of Social Services, 452 U.S. 18, 25, 101 S. Ct. 2153, 68 L. Ed. 2d 640 (1981), or assistance of counsel is warranted by exceptional circumstances. Fowler v. Jones, 899 F.2d 1088, 1096 (11th Cir. 1990). Obviously, Mr. Larsen cannot lose his liberty in connection with this civil bankruptcy proceeding as he already lost it pursuant to other state court criminal proceedings.
Exceptional circumstances are those "where the facts and legal issues are so novel and complex as to require the assistance of a trained practitioner." Id. Several bankruptcy courts have denied the appointment of counsel to represent debtors in bankruptcy cases. See., e.g., In re Ennis, 178 B.R. 192, 197-98 (Bankr. W.D.Mo.1995); In re Fitzgerald, 167 B.R. 689, 691 (Bankr.N.D.Ga.1994). While a court may have the discretion to appoint counsel for indigent parties under 28 U.S.C. § 1915(e)(1), there is some question as to whether section 1915 applies to bankruptcy cases. Cf. Fitzgerald, 167 B.R. at 691. Even if 28 U.S.C. § 1915(e)(1) applies in bankruptcy court, the section does not authorize expenditure of federal funds to appoint counsel, Dep't Banking & Finance, *824 State of Nebraska v. Copple, 84 B.R. 163, 164 (Bankr.D.Neb.1988).
This Court is familiar with the legal issues propounded by the debtor and with what he wishes to accomplish with this bankruptcy case. He is clearly familiar with the standards under Title 28 for appointing counsel. He is aware he must attempt to obtain counsel on his own, and his motion has attached five letters from attorneys declining representation pro bono. He stated he contacted a total often, all without success. As for novel issues and complexity, he quotes the chapter 7 trustee as saying he had never seen such a case. He believes he needs counsel to serve subpoenas, conduct legal research, investigate, collect data/evidence, and locate persons of interest. Despite his assertions of lack of training, legal talent, and skill, he cites Jackson v. County of McLean, 953 F.2d 1070, 1072 (7th Cir. 1992), for the standards for appointment of counsel in a civil case. His motion states, "If the petitioner establishes that he has made such efforts, the court may then consider the following factors: (1) The merits of the indigent's claim of relief; (2) The ability of the indigent to investigate crucial facts unaided by counsel; (3) Whether the nature of the evidence indicates that the truth will more likely be exposed where both sides are represented by counsel; (4) The capability of the indigent to present the case; and (5)[T]he complexity of the legal issues raised in the complaint." (Debtor's Motion for Appointment of Counsel, dated June 10, 2009, § 5). This is an excellent recitation of what this Court must consider.
Mr. Larsen's request for court appointment of counsel fails on the first consideration, the merits. In a decision in the debtor's previous case, and again in the earlier order in this case denying Mr. Larsen's "Motion to Allow Access to Funds," I stated:
Under the well settled Rooker-Feldman doctrine, a federal court cannot act as an appellate court to a state court, see Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280, 284, 125 S. Ct. 1517, 161 L. Ed. 2d 454 (2005); a disappointed party who believes the state court acted in error must proceed through the state court appellate process.
(Order Denying Debtor's Motion to Allow Access to Funds, Case No. 09-22963, dated May 22, 2009, p. 1, citing Memorandum Decision Denying Debtor's Motion for Exemption for Credit Counseling, Case No. 08-33993, dated January 9, 2009, p. 2-3).
Despite this repetition, Mr. Larsen continues to press the same goal, directly by his previous Motion for Access to Funds and indirectly now through a request for appointment of counsel. Again I must stateas clearly as I know howno matter how defective, wrong, or unfair the state court order might have been (and I have never seen it so I have no opinion of its merits), there is nothing this court can do to change it. The only way to change such an order is to appeal it through the state court system, and the time to do that passed long ago. Mr. Larsen does not say if he did appeal or how an appeal was decided (my own search of state court records came up empty), but either way, the order appointing the receiver was final long ago and is obviously still in effect. He argues that he should not have to go back to the very court that ordered the "illegal wholesale seizure" of his assets and denied him due process, but any remedy he might have simply cannot lie in collateral attack in the bankruptcy court. It is final, not reversed or appealable, and binding on this Court.
Moreover, from just the allegations stated by Mr. Larsen, it appears that the state *825 court was acting pursuant to Wisconsin law in appointing a receiver or trustee to secure payment of child support. This is authorized by Wis. Stat. § 767.511(2). Retirement funds, while exempt from recovery by other creditors and for bankruptcy purposes, are available for the payment of child support. Wis. Stat. § 815.18(3)(j)5. There is nothing novel or complex about these issues.
The bankruptcy estate succeeds to any interest the debtor had in property, and it has no greater property interest than the debtor had. 11 U.S.C. § 541. If there are any assets available for the debtor's estate, either nonexempt or partially exempt, they will be recovered and administered by the trustee, not the debtor. If Mr. Larsen had a cause of action resulting from damage to his interests on account of improper transfers, negligent investments, or other malfeasance caused by the receiver, as he alleges, this belongs to the trustee. The trustee would be the one to investigate facts, issue subpoenas and conduct research, not the debtor. He or she can uncover whatever evidence is necessary to conduct appropriate litigation for the recovery of property of the estate. Chapter 7 trustees may have attorneys, either themselves or others, appointed to resolve matters incident to the bankruptcy case, and I am confident whoever is appointed will be competent to deal with any complexities. It would be redundant to appoint counsel for the debtor in estate matters because only the trustee is authorized to deal with them. On the other hand, there is no reason for the trustee to administer exempt assets, because this would be of no benefit to creditors. There would be no bankruptcy jurisdiction over matters relating to recovery of exempt assets as this would not relate to the administration of the estate. See 28 U.S.C. § 1334(b), (c). It would not be appropriate for a bankruptcy court to appoint an attorney to represent a debtor in matters that have no bankruptcy purpose.
The other reasons stated by the debtor for seeking the appointment of counsel no formal legal training and the lack of available funds to pay an attorneyapply to many debtors. Moreover, as demonstrated by the quality of the debtor's written pleadings, it is clear he is capable of representing himself adequately in this matter. There are no exceptional circumstances in this case to justify the appointment of counsel. This Court, therefore, finds there is no cause to appoint an attorney to represent the debtor pro bono publico.
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814 S.W.2d 114 (1991)
Jeffrey GOMEZ and M.A.P.A., Inc., Appellants,
v.
Humberto ZAMORA, Individually, Texas Aries Medical Social Services, Appellee.
No. 13-90-469-CV.
Court of Appeals of Texas, Corpus Christi.
June 18, 1991.
Rehearing Overruled August 29, 1991.
*115 David K. Watsky, Dallas, for appellants.
Hector J. Villarreal, Edinburg, Roger W. Hughes, Adams & Graham, Brendan Hall, Hall, Deane & McGowan, Harlingen, for appellee.
Before HINOJOSA, SEERDEN and DORSEY, JJ.
OPINION
HINOJOSA, Justice.
This is an appeal from a temporary injunction prohibiting appellants, Medical Assistance Program Advisors (MAPA) and Jeffrey Gomez (Gomez) from competing with appellee, Texas Aries Medical Social Services (TAMSS) and Humberto Zamora. The basis for the injunction was a noncompetition clause in an employment contract appellant Gomez signed. We reverse and dissolve the injunction.
Appellee, TAMSS, is in the business of assisting hospitals in recovering money for medical services provided to indigent patients.[1] The money is granted by governmental entities and other sources for this specific purpose. The services TAMSS furnishes are highly technical because each funding source needs specific information on each patient and the type of services provided, and difficult and time consuming administrative procedures must be carried out before funding is granted. In this connection, over the course of several years TAMSS developed computer software, expertise and unique forms providing funding agencies with the information needed. These methods and procedures furnished TAMSS with significant advantages over other competitors. TAMSS does not charge indigent clients for its services; rather, it receives a percentage (15%) of the money recovered from the funding sources that is paid to the hospitals.
One of the difficulties inherent in the business is the fact that its forms and procedures, once developed, are readily transferable to anyone wishing to utilize them to compete against TAMSS. Moreover, the market is so large that TAMSS can not properly service all customers. Thus, TAMSS is quite vulnerable to employees willing to steal trade secrets and use their training to start competing businesses. See e.g. Gonzales v. Zamora, 791 S.W.2d 258, 260-61 (Tex.App. Corpus Christi 1990, no writ). After this vulnerability became apparent through the Gonzales litigation, TAMSS required all employees to sign a non-competition agreement.
When Gomez began working for TAMSS he received a straight commission for marketing the company's services to doctors *116 throughout the Valley. Over time, Gomez became proficient at the business, and he was given more responsibility. After working in the Valley, Gomez was transferred to Midland, to San Antonio, and then to Dallas. His duties included soliciting hospitals to become customers for TAMSS.
On March 6, 1988 Gomez signed a new employment contract which included a noncompetition covenant (reproduced in the appendix). The contract provided new terms of employment, including added responsibilities and increased pay.
Gomez was terminated on July 6, 1989, allegedly because of problems with his performance and Zamora's discovery of his plan to create a competing business. On July 12, 1989, Gomez started MAPA, which began providing the same services as TAMSS. MAPA employed several former TAMSS employees and allegedly used the forms and techniques developed by TAMSS. In October 1989, MAPA entered into a contract providing the same services as TAMSS with Harris Methodist Southwest Hospital and Harris Methodist HEB. Subsequently, MAPA contracted with six other hospitals, including two which were former customers of TAMSS.
This litigation commenced on October 12, 1989, when appellee filed suit seeking a temporary restraining order in the 103rd District Court in Cameron County enjoining appellants from violating the terms of the non-competition covenant. After a hearing, the TRO was granted. After an additional hearing, proceedings involving the same parties were consolidated and the court entered a temporary injunction on November 1, 1990. The injunction provided:
IT IS THEREFORE ORDERED, that Jeffrey Gomez, and M.A.P.A. Inc., its officers, and employees, Defendants herein, be, and they hereby are, commanded forthwith to desist and refrain from:
1. Directly or indirectly entering into or engaging generally in direct competition with the Plaintiffs in the business of providing medical third party resource assistance for medically needy indigent clients on behalf of any hospital and/or health care provider with which the Defendant Jeffrey Gomez has had business dealings with on behalf of Plaintiff while in the Plaintiffs employment, any hospital and/or health care provider with which Plaintiffs had any existing contract at the time of Defendant Jeffrey Gomez's termination of employment, being July 6, 1989, with Plaintiffs, and/or any hospital or health care provider before which Plaintiff had any pending proposals at the time of the Defendant Jeffrey Gomez's termination of employment with Plaintiffs;
2. From continuing to employ Plaintiffs' former supervisors, specifically Betty Gomez, Paul Gomez, and Daniel Tapia, and from call on, soliciting, selling to, serving, or otherwise doing business with, personally or through his employees, any customers or former customers and/or Plaintiffs' clients;
3. From directly or indirectly; a. Interfering with and/or soliciting customers currently being served by Plaintiffs; b. Disparaging Plaintiffs' reputation and business for the purpose of interfering with the Plaintiffs' contractual relationship with its present, pending, and future customers; c. Conveying, selling, encumbering, or liquidating any assets of M.A.P.A. Inc., until judgment in this cause is entered by this Court.
By a sole point of error, appellant complains that the trial court erred in granting the temporary injunction. In subpoints E and H of appellant's point of error, appellants assert that the temporary injunction was improperly granted because TAMSS did not request an appropriate injunction. They argue that appellee failed to offer evidence:
a) concerning the hospitals with which Gomez had business dealings on behalf of Texas Aries while in Texas Aries employ; and
b) of the hospitals which were under contract with Texas Aries at the time of Gomez' termination or the hospitals with *117 which Texas Aries had any pending proposal at the time of Gomez' termination.
The essence of this subpoint is that the evidence admitted at the hearing did not support the district court's granting of the temporary injunction.
The trial court is cloaked with great discretion in granting or denying a temporary injunction, and its action will not be disturbed on appeal unless a clear abuse of discretion is shown. Valenzuela v. Aquino, 763 S.W.2d 43, 44 (Tex.App. Corpus Christi 1988, no writ); Garza v. City of Mission, 684 S.W.2d 148, 153 (Tex.App. Corpus Christi 1984, writ dism'd). The question before the trial court during a hearing for a temporary injunction is whether the applicant is entitled to preservation of the status quo pending trial on the merits. Garza, 684 S.W.2d at 153.
On appeal, this court views the evidence in the light most favorable to the trial court's judgment. Valenzuela, 763 S.W.2d at 44; Garza, 684 S.W.2d at 154. However, when no evidence supports the issuance of the injunction, this court must reverse the trial court's ruling and dissolve the injunction.
In 1989, the Texas Legislature enacted legislation establishing the enforceability of a covenant not to compete when such a covenant:
"(1) is ancillary to an otherwise enforceable agreement but, if the covenant not to compete is executed on a date other than the date on which the underlined agreement is executed, such covenant must be supported by independent valuable considerations; and
(2) contains reasonable limitations as to time, geographical area, and scope of activity to be restrained that do not impose a greater restraint than is necessary to protect the goodwill or other business interest of the promisee."
Tex.Bus 15.50(2) (Vernon supp.1990)
Section 15.51(b) further provides that:
[i]f the primary purpose of the agreement to which the covenant is ancillary is to obligate the promisor to render personal services, the promisee has the burden of establishing that the covenant meets the criteria specified by Subdivision (2) of section 15.50 of this code. If the agreement has a different primary purpose, the promisor has the burden of establishing that the covenant does not meet those criteria. For the purposes of this subsection, "burden of establishing a fact" means the burden of persuading the triers of fact that the existence of the fact is more probable than its nonexistence.
Initially, we must determine whether the primary purpose of the employment agreement obligated Gomez to render personal services. The employment contract provides that Gomez was employed as a "Financial Eligibility Worker". This term is not defined in the employment contract. The evidence shows that at the time of the execution of the agreement Gomez was hired to solicit and provide services to hospitals in San Antonio and other cities in Texas. After providing the services in San Antonio, he was transferred to Dallas to perform the same services. This required Gomez to: 1) directly contact hospitals that were not already under contract with TAMSS in order to solicit their business; and 2) provide services to hospitals under contract. These activities, like sales, are in the nature of personal services. See Daytona Group of Texas, Inc. v. Smith, 800 S.W.2d 285, 289. (Tex.App. Corpus Christi 1990) Therefore, TAMSS had the burden of proving that the covenant contained reasonable limitations regarding time and geographical area. § 15.51(b). In addition, TAMSS had to prove that the scope of activity to be restrained did not impose a greater restraint than necessary to protect its goodwill or other business interest.[2]Id.
The covenant barred appellant from competing in an "existing marketing area" and a "future marketing area of the employer begun during employment". Attachment *118 A, which described the "Future Marketing Area Of Employer" listed thirty seven Texas cities, including all major metropolitan areas and several minor cities. Thus, the geographic area covered by the covenant encompasses the thirty seven cities listed in "Attachment A," as well as the "existing marketing area."
Except for the attachment to the covenant not to compete, TAMSS at no time offered evidence clearly defining its existing or future marketing area. At the temporary injunction hearing TAMSS only offered evidence that it was servicing approximately 36 hospitals, but it never specified which hospitals. Zamora testified that TAMSS had lost contracts with hospitals as a result of Gomez's "breach of fiduciary trust," however, he did not state which hospitals, if any, were lost as a direct or indirect result of MAPA competition.
Zamora further testified that solicitations by Gomez to hospitals under contract with TAMSS caused a loss of $300,000 to $400,000 in revenues. The evidence also showed that Gomez had done marketing for TAMSS in many of the areas where it was established or was marketing itself. At the time that Gomez was terminated, Texas had over 540 hospitals located in over 300 cities and TAMSS had contracts or had marketed itself in about 225 hospitals and only 50 cities. TAMSS further offered evidence that Gomez had contracted with 7 of 9 hospitals formerly served by TAMSS; each of those contracts had been supervised by Gomez or former TAMSS employees who had been employed by Gomez.
After reviewing the evidence, we hold that TAMSS failed to establish that the covenant not to compete contained reasonable limitations on geographic area because the record does not reflect the geographic area intended to be covered by the covenant. Moreover, the covenant as written fails to accurately specify the geographic scope covered by covenant. Indefinite descriptions of the area covered by a non-competition covenant render them unenforceable as written. See Weatherford Oil Tool Co. v. Campbell, 161 Tex. 310, 340 S.W.2d 950, 951-52 (1960) (geographic scope described as "any area where Weatherford Oil Tool Company, Inc., may be operating or carrying on business" held overbroad); Hice v. Cole, 295 S.W.2d 661, 664-65 (Tex.Civ.App. Beaumont 1956, no writ) ("trade territory heretofore served by him... which might lie on the borders of Orange County" held indefinite). Thus, we conclude that the covenant is unenforceable not only because no evidence defined the geographic scope of the agreement, but also because it was indefinite as written. Thus, the covenant is incapable of supporting injunctive relief without reformation. Weatherford, 340 S.W.2d at 951-52; Hice, 295 S.W.2d at 664-65; Tex.R.Civ.P. 683.
Moreover, if we look only to those cities listed on Attachment A, the covenant not to compete would cover virtually every major metropolitan area in the State of Texas. Non-competition covenants with such a broad geographic scope have generally been held unenforceable, particularly when no evidence establishes that the employee actually worked in all areas covered by the covenant. Diversified Human Resources Group, Inc. v. Levinson-Polakoff 752 S.W.2d 8, 12 (Tex.App. Dallas 1988, no writ); Martin v. Linen Systems for Hosp., Inc., 671 S.W.2d 706, 709 (Tex.App. Houston [1st Dist] 1984, no writ).
Appellee requests reformation of the injunction in the event that we find the injunction overbroad, however, we cannot do so. Section 15.51(c) specifies the procedure for enforcement of overbroad non-competition covenants. First, the promisee must request that the trial court reform the covenant. Second, the trial court shall reform the covenant so that it is reasonable as set forth in § 15.50(2). Then, the promisee may seek enforcement through injunction. We have previously stated that the failure to request reformation in the trial court operates as a waiver of the right of reformation. See Daytona, 800 S.W.2d at 290; see also Peat, Marwick, Mitchell & Co. v. Sharp, 585 S.W.2d 905, 908 (Tex.Civ. App. Amarillo 1979, writ ref'd n.r.e.) (failure to request reformation of covenant in trial court waived common law right to reformation).
*119 There is nothing in the record reflecting that TAMSS requested the trial court to reform the covenant. Appellee's statutory right to reformation is therefore waived. Daytona, 800 S.W.2d at 290. The fact that the temporary injunction entered by the trial court was geographically narrower in scope than the covenant not to compete is irrelevant since appellee failed to request reformation of the covenant in the trial court.[3]
In light of the specific language in section 15.51(c) requiring the promisee of a covenant not to compete to request reformation, and our prior ruling in Daytona, we hold that merely requesting injunctive relief narrower in scope than the non-competition covenant, without reformation of the covenant, is not sufficient to meet the requirements of § 15.51(c).
Without specific language in the covenant or evidence defining the geographic area the covenant covered, the trial court abused its discretion in granting the temporary injunction. We therefore sustain appellant's first point of error. The injunction is hereby DISSOLVED, and the cause REMANDED to the trial court.
NOTES
[1] A detailed rendition of the facts underlying the genesis of appellee, Texas Aries Medical Social Services (TAMSS), is found in an earlier opinion by this court, Gonzales v. Zamora, 791 S.W.2d 258 (Tex.App. Corpus Christi 1990, no writ). In the interests of judicial economy, we will only set forth the facts most relevant to this appeal.
[2] Appellee repeatedly stated at the temporary injunction hearing that it was not requesting relief based on use of trade secrets. Thus, we need not determine whether appellant's use or threatened use of trade secrets is a business interest worthy of protection.
[3] We note that the injunction suffers from many of the same defects found in the covenant.
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814 S.W.2d 773 (1991)
Francisco VASQUEZ, Appellant,
v.
The STATE of Texas, Appellee.
No. C14-90-738-CR.
Court of Appeals of Texas, Houston (14th Dist.).
July 18, 1991.
Discretionary Review Refused October 30, 1991.
*774 Nick Barrera, Brian W. Wice, Houston, for appellant.
J. Harvey Hudson, Houston, for appellee.
Before ROBERTSON, SEARS and DRAUGHN, JJ.
OPINION
DRAUGHN, Justice.
This is an appeal from a conviction for felony murder. In four points of error, appellant argues that the trial court erred by: (1) overruling his motion for instructed verdict; (2) permitting an assistant medical examiner to testify concerning the autopsy report prepared by another assistant medical examiner; (3) allowing testimony as to extraneous offenses; and (4) overruling appellant's request for a jury instruction on the lesser included offense of negligent homicide. We affirm.
During the early evening of December 12, 1989, appellant was seen driving a blue automobile in the parking lot of a Wal-Mart store in Pasadena, Texas. There was another male, a Mr. Green, in the front passenger seat. A customer, Patricia Bethume, was walking through the parking lot and appellant's car passed very close to her. Green reached out and grabbed her purse. Ms. Bethume struggled with the man momentarily, but the car was dragging her along next to it and she almost fell beneath the wheels. After the passenger told her to let go of the purse, she complied. Several other customers witnessed the incident, some of whom were forced to move their children to safety as the car accelerated rapidly out of the parking lot. Other customers memorized the car's license plate to give to the police.
Several blocks from the store, Officer R. R. Rice, of the Pasadena Police Department, and his partner were writing a report when a blue automobile passed them at a high rate of speed. Immediately they took up pursuit and were informed by the police dispatcher that the car had been involved in a purse snatching. In the chase that followed, they reached speeds as high as 115 miles per hour. Numerous patrol cars were involved in the chase and police officers were forced to stop traffic at controlled intersections along the way to avoid collisions as appellant sped through red traffic lights. Officer Carolyn Denton, of the Friendswood Police Department, had stopped traffic at the intersection of Fairmont Parkway and Beltway 8 while appellant sped through and made a turn on two wheels. After appellant's car had passed the intersection, Officer Denton noticed a purse laying on the side of the road which she retrieved. It was later identified as *775 belonging to Ms. Bethume. Appellant continued south on Beltway 8, making a Uturn at the next intersection, and sped north on the Beltway with Officer Rice in pursuit. Another patrolman attempted to stop traffic at the intersection of Beltway 8 and Fairmont Parkway by pulling his car across the intersection. Appellant's car, traveling at an estimated 80 miles per hour, swerved to avoid hitting the cars stopped for the red light, jumped the curb, and collided with a pickup truck proceeding through the intersection on a green light. The pickup was thrown 85 feet from the point of impact and the driver was thrown from the vehicle and landed 120 feet from the point of impact. Appellant managed to crawl from his vehicle and was arrested immediately. The passenger, Green, was pinned between the dashboard and the seat. The driver of the pickup died at Hermann Hospital following a Life Flight. Appellant was subsequently convicted of felony murder.
In his first point of error, appellant argues that the trial court erred in overruling his motion for instructed verdict because the evidence was insufficient to prove that appellant committed the underlying offense of theft. Specifically, appellant asserts what might be described as the "innocent chauffer" defense: that he was only driving the car and had nothing to do with the theft of the purse. He says that the record is devoid of any affirmative act involving him in the purse snatching, other than the fact that he fled the scene, increasing his speed and driving recklessly after police pursuit commenced. He contends that the State failed to prove any agreement between Green and appellant to commit the underlying crime of theft. Under the facts, we have no difficulty in finding sufficient evidence to sustain appellant's conviction.
In reviewing challenges to the sufficiency of the evidence, this court must view the evidence in the light most favorable to the verdict to determine if a rational trier of fact could find all elements of the crime beyond a reasonable doubt. Butler v. State, 769 S.W.2d 234, 239 (Tex.Crim. App.1989). Appellant was tried under the law of parties. The Penal Code provides that a person is criminally responsible for an offense committed by another if "acting with intent to promote or assist the commission of the offense, he solicits, encourages, directs, aids, or attempts to aid the other person to commit the offense...." Tex.Penal Code Ann. § 7.02(a)(2) (Vernon 1974). Appellant's mere presence at the scene, in and of itself, would be insufficient to sustain the conviction for the underlying felony. Beardsley v. State, 738 S.W.2d 681, 684 (Tex.Crim.App.1987); Lacy v. State, 782 S.W.2d 556, 558 (Tex.App. Houston [14th Dist.] 1989, no pet.). In determining if a person is a party to an offense and bears criminal responsibility, the court should look to the events before, during, and after the commission of the offense. Beardsley, 738 S.W.2d at 684; Freeman v. State, 736 S.W.2d 154, 156 (Tex.App.Houston [14th Dist.] 1987, no pet.).
There was testimony that both appellant and Green were watching the customers in the parking lot in a suspicious manner as the two defendants cruised through the lot. As the car approached Ms. Bethume, with its lights off, appellant steered the car so that it passed within reach of Ms. Bethume's arm enabling Green to reach out and grab her purse. Appellant then immediately turned on the car's lights and accelerated rapidly from the parking lot with the customers hearing the sound of Green's laughter. It seems inconceivable to us that a rational trier of fact could find anything but a premeditated plan to snatch the purse. We overrule appellant's first point of error.
In his second point of error, appellant argues that the trial court erred in permitting an assistant medical examiner to testify concerning an autopsy report authored by another doctor. Appellant asserts reversible error because of the hearsay nature of the testimony under Tex. R.Crim.Evid. 803(6) and 803(8)(B). Appellant also relies on the court of criminal appeals' opinion holding that when the DPS chemist who actually performed the chemical *776 analysis is absent, testimony by other chemists is inadmissible as a hearsay exception under Tex.R.Crim.Evid. 803(8)(B). See Cole v. State, No. 1179-87 (Tex.Crim. App. November 14, 1990) (not yet reported).[1] We find no error in allowing an assistant medical examiner to testify as to autopsy results when he did not perform the autopsy.
The prosecutor laid a proper predicate under Rule 803(6), records of regularly conducted activity or the business records exception. Norton v. State, 771 S.W.2d 160, 163 (Tex.App.Texarkana 1989, pet. ref'd). The court of criminal appeals, in Cole, held that Rule 803(6) should not be used to circumvent the prohibition found in Rule 803(8)(B), which provides that the following is not excluded by the hearsay rule: "Records, reports, statements, or data compilations, in any form, of public offices or agencies setting forth ... (B) matters observed pursuant to duty imposed by law as to matters there was a duty to report, excluding, however, matters observed by police officers and other law enforcement personnel...." Tex.R.Crim.Evid. 803(8)(B) (emphasis added). We find that Rule 803(8)(B) is inapplicable in the instant case, because an assistant medical examiner is not a police officer or any other type of law enforcement personnel. See Tex. Code Crim.Proc.Ann. art. 49.25 (Vernon 1979). Consequently, we find the autopsy report admissible as a business record and overrule appellant's second point of error.
In his third point of error, appellant argues that the trial court erred in allowing a police officer to testify concerning appellant's extraneous offenses. On cross-examination, Officer Denton testified that, in her opinion, a collision was likely because of the speed at which appellant's car was traveling. Defense counsel was attempting to establish that the ensuing collision was not appellant's fault, but, rather, that of Officer Rice who was pursuing the car. On re-direct, she testified that the vehicle being pursued seemed familiar and, when she saw the purse discarded from appellant's car, she realized that a bulletin had been issued that a similar vehicle had been involved in numerous purse snatchings in the weeks prior to the incident. Appellant contends that reversible error occurred in admitting evidence of unrelated thefts and robberies. We disagree.
The Rules of Criminal Evidence provide that evidence of other crimes, wrongs, or acts may "be admissible for other purposes, such as proof of motive, opportunity, intent, preparation, plan, knowledge, identity, or absence of mistake or accident...." Tex.R.Crim.Evid. 404(b). Extraneous offense evidence that logically serves any of these purposes is relevant "beyond its tendency `to prove the character of a person to show that he acted in conformity therewith.'" Montgomery v. State, 810 S.W.2d 372, 377 (Tex.Crim.App.1991) (quoting Tex.R.Crim.Evid. 404(b)) (emphasis in original). Such evidence is admissible subject only to the trial court's discretion to exclude it if the danger of unfair prejudice substantially outweighs its probative value. Id.; Tex.R.Crim.Evid. 403. Rule 403 favors admissibility of relevant evidence with the presumption "that relevant evidence will be more probative than prejudicial." Montgomery, at 389. We find Officer Denton's testimony to be more probative than prejudicial.
Initially, we note that defense counsel initiated the inquiry at issue through his attempt to prove that the cause of the complainant's death was not due to appellant's excessive speed, but rather the officer's pursuit. Officer Denton stated that, in her opinion, a collision was imminent. This is a reasonable conclusion based on the fact that appellant was traveling on Beltway 8 and running red lights at speeds in excess of 80 miles per hour. Her reference to the previously issued bulletin concerning a similar blue vehicle involved in *777 other purse snatchings was relevant and probative to establish identity and plan and was admissible under the rules of evidence. Tex.R.Crim.Evid. 404(b).
Further, extraneous offenses are admissible in rebuttal to a defensive theory. Albrecht v. State, 486 S.W.2d 97, 101 (Tex.Crim.App.1972). The situations where other crimes, wrongs, or acts listed in Rule 404(b) may be utilized by the prosecution are "neither mutually exclusive nor collectively exhaustive." Montgomery, at 377. Appellant's attempt to lay the blame for the collision and the resulting death of the complainant at the feet of the pursuing police officer opened the door for the State to rebut his defensive theory. This was done through Officer Denton's testimony that a similar vehicle had been reported to be involved in similar crimes. We find that the evidence was properly admitted and we overrule appellant's third point of error.
In his fourth point of error, appellant argues that the trial court erred in not instructing the jury on the lesser included offense of negligent homicide. At the close of evidence, appellant requested jury instructions on the lesser included offenses of involuntary manslaughter and criminally negligent homicide. The trial court included an instruction on involuntary manslaughter in the charge. Appellant contends it was reversible error not to charge the jury on both lesser included offenses. We disagree.
There is a two-pronged test for determining if a jury is entitled to be charged on a lesser included offense:
First, the lesser included offense must be included within the proof necessary to establish the offense charged. Second, there must be some evidence in the record that if the defendant is guilty, he is guilty of only the lesser offense.
Moreno v. State, 702 S.W.2d 636, 640 (Tex. Crim.App.1986); see also Royster v. State, 622 S.W.2d 442, 446 (Tex.Crim.App.1981) (op. on reh'g); Johnson v. State, 681 S.W.2d 648, 651 (Tex.App.Houston [14th Dist.] 1984, pet. ref'd). Appellant requests this court to disregard established precedent and, instead of applying the above test, utilize the federal standard.[2] This we decline to do.
Involuntary manslaughter is, by definition, a lesser included offense of murder and criminally negligent homicide is a lesser included offense of involuntary manslaughter. Lugo v. State, 667 S.W.2d 144, 147 (Tex.Crim.App.1984). The only distinction between involuntary manslaughter and criminally negligent homicide is the required culpability. Graham v. State, 657 S.W.2d 99, 104 (Tex.Crim.App.1983). "A person commits an offense if he causes the death of an individual by criminal negligence." TexPenal Code Ann. § 19.07(a) (Vernon 1989). A person is criminally negligent if:
[W]ith respect to the circumstances surrounding his conduct or the result of his conduct when he ought to be aware of a substantial and unjustifiable risk that the circumstances exist or the result will occur.
Id. § 6.03(d) (Vernon 1974). A person commits involuntary manslaughter if "he recklessly causes the death of an individual...." Id. § 19.05(a)(1) (Vernon 1989). Recklessness entails a conscious disregard for a substantial and unjustified risk. Id. § 6.03(c) (Vernon 1974).
Therefore, to be entitled to the instruction on the lesser included offense of criminally negligent homicide, there must be some evidence that appellant merely should have been aware of the substantial risk associated with his excessive speed, as opposed to consciously disregarding that risk. There was testimony that appellant was aware of the fact that Officer Rice was following him almost from the moment the officer activated his emergency lights. Appellant then accelerated and a chase ensued *778 with speeds reaching 115 miles per hour on congested roads. Appellant ran two red lights at a high rate of speed, the last resulting in a collision and the fatality leading to his felony murder indictment. We hold that there is no evidence in the record that appellant merely acted negligently. Rather, the evidence reflects that appellant made a concerted effort to elude police pursuit that ended with the tragic death of an innocent person. We overrule appellant's fourth point of error.
Accordingly, we affirm the judgment of the trial court.
NOTES
[1] Cole is pending on motion for rehearing and is not final or part of the jurisprudence of this state. See Yeager v. State, 727 S.W.2d 280, 281 n. 1 (Tex.Crim.App.1987). We are, therefore, not constrained to follow Cole and, in any event, find it inapplicable to the facts of this case. See also Brown v. State, 807 S.W.2d 615, 616-17 (Tex.App.Houston [14th Dist.] 1991, no pet.).
[2] Appellant requests us to require an instruction on a lesser included offense "if the evidence would permit a jury rationally to find [a defendant] guilty of the lesser offense and acquit him of the greater." Cordova v. Lynaugh, 838 F.2d 764, 767 (5th Cir.1988), cert, denied, 486 U.S. 1061, 108 S. Ct. 2832, 100 L. Ed. 2d 932 (1988). It is not our place, as an intermediate appellate court, to ignore Texas jurisprudence through the adoption of a new constitutional standard.
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814 S.W.2d 643 (1991)
UNION ELECTRIC COMPANY, Plaintiff/Appellant,
v.
PLATTE-CLAY ELECTRIC COOPERATIVE, INC., Defendant/Respondent.
No. WD 43559.
Missouri Court of Appeals, Western District.
August 13, 1991.
*644 Edward R. Spalty, Armstrong, Teasdale, Schlafly, Davis & Dicus, Kansas City, for plaintiff-appellant.
Eugene J. Feldhausen, Kansas City, for defendant-respondent.
Before TURNAGE, P.J., LOWENSTEIN, C.J., and BRECKENRIDGE, J.
BRECKENRIDGE, Judge.
Appellant Union Electric Company appeals from the trial court's order dismissing its petition seeking injunctive relief against Respondent Platte-Clay Electric Cooperative. Union Electric Company's petition was dismissed for lack of subject matter jurisdiction. Union Electric Company sought to declare its exclusive right to provide electric service to "new structures" built on certain property within its franchise area.
The pertinent facts are as follows:
Union Electric Company (hereinafter "Union Electric") is an investor-owned utility and electrical corporation within the meaning of Chapters 386 and 393, RSMo. 1986.[1] Union Electric is engaged in providing electric service within the City of Excelsior Springs, Missouri.
Platte-Clay Electric Cooperative, Inc. (hereinafter "Cooperative") is a rural electric cooperative existing under and subject to Chapter 394. Cooperative sells and distributes electric energy in rural areas of Clay County, Missouri. Pursuant to § 394.080(4), Cooperative is entitled to provide retail electric service in "rural areas" which, as defined by § 394.020(3), includes "any area ... not included within the boundaries of any city, town or village having a population in excess of fifteen hundred inhabitants...." Excelsior Springs is a city having at all times in question a population exceeding fifteen hundred (1,500). Excelsior Springs is not a "rural area" as defined by § 394.020(3).
The property in question, known as the Bartlett property, was annexed into the City of Excelsior Springs on April 3, 1989. Prior to that date, the Bartlett property was located in a rural area outside Excelsior Springs. At the time of annexation, the only existing structure on the property was a barn. The Bartlett property received electric service from the Cooperative through a metering device located adjacent to the barn. The barn was razed prior to July 17, 1989. From July 17, 1989 through November 15, 1989, no structure existed on the Bartlett property within the meaning of §§ 393.106 and 394.315.
Starting approximately November 23, 1989, Cooperative provided electric service to the Bartlett property in order to facilitate the construction of two new structures. The new structures did not exist on the property prior to April 3, 1989, the date the Bartlett property was annexed into Excelsior Springs, nor prior to August 13, 1986, the effective date of the amendments *645 to §§ 393.106 and 394.315[2]. Cooperative continues to supply electrical services to the Bartlett property.
Union Electric filed a petition with the Circuit Court of Clay County seeking injunctive relief against Cooperative. Union Electric sought the issuance of an injunction restraining the Cooperative from providing permanent electric service to the new structures on the property and a declaration that Cooperative's act of providing temporary electric service for the construction of the two new structures is an unlawful act, pursuant to §§ 393.106 and 394.315. Union Electric alleges, that under the 1986 amendments to these statutes, it is the sole entity able to lawfully supply electric energy to the Bartlett property.
The circuit court entered judgment dismissing the petition for lack of subject matter jurisdiction without articulating specific grounds for said holding. This timely appeal followed.
Appellant Union Electric contends the trial court erred in dismissing its petition for lack of subject matter jurisdiction because the petition seeks a judicial declaration that respondent has no lawful authority under §§ 394.080(4)[3] and 394.315 to supply electric service to new structures in a non-rural area and determination of that legal issue rests with the Clay County Circuit Court, not the Public Service Commission (hereinafter "PSC"), as the Cooperative contends.
The standard of review for this court when the trial court dismisses an action based solely on the pleadings is that this court must accept as true all facts pleaded and all reasonable inferences arising therefrom. Detling v. Edelbrock, 671 S.W.2d 265, 267 (Mo. banc 1984).
The question raised by Union Electric is whether, under §§ 393.106, 394.080 and 394.315, jurisdiction to decide this matter in the first instance rests with PSC or the circuit court. Pursuant to Article V, Section 14 of the Missouri Constitution and § 478.070 RSMo, the circuit courts "have original jurisdiction over all cases and matters, civil and criminal." Sections 527.010, 527.020 and 527.040 grant the circuit court jurisdiction over actions for declaratory judgment, including the power to construe statutes and determine the rights and status of the parties affected by the statutes. Chapter 526 vests the circuit court with the power to hear and determine actions requesting injunctive relief.
Cooperative's Motion to Dismiss for Lack of Jurisdiction Over the Subject Matter contended that the trial court lacked subject matter jurisdiction based on the language of §§ 393.106 and 394.315. These statutes are generically called "flip-flop" statutes because the provisions are identical other than the appropriate referral to either an electrical corporation or a rural electric cooperative. In its motion, Cooperative correctly states the law that "[m]atters within the jurisdiction of the Public Service Commission must first be determined by it ... before the courts have jurisdiction to make judgments in the controversy." DeMaranville v. Fee Fee Trunk Sewer, Inc., 573 S.W.2d 674 (Mo. App.1978). The question then is whether Cooperative's interpretation of the statutes to grant PSC jurisdiction is correct. A *646 review of the evolution of the applicable statutes and the cases interpreting said statutes proves beneficial.
The conflict between a utility operating in a municipality and a cooperative which had previously provided electric service to a formerly rural area, recently annexed into a municipality, was first addressed by the Missouri Supreme Court in Missouri Public Service Co. v. Platte-Clay Elec. Coop. 407 S.W.2d 883 (Mo.1966) ("MoPub I"). The court in MoPub I held § 394.080(4) RSMo.1959 provided that the rural electric cooperative would be "grandfathered in" to provide electric service to those areas where it had been transmitting, distributing, selling, supplying or disposing of electric energy until the municipality or holder of the franchise to furnish energy in the municipality shall purchase the cooperative's physical property within the municipality.
Sections 393.106 and 394.315, adopted in 1982, as applied in Missouri Public Service Company v. Platte-Clay Electric Cooperative, Inc. 700 S.W.2d 838 (Mo. banc 1985) ("MoPub IV"), further limited the "grandfather" exception in § 394.080(4). In MoPub IV, the Supreme Court of Missouri stated that the new law changed the right of a cooperative to continue service to property after change from a rural to non-rural area. Such right of a cooperative was restricted to serving the same persons at the same "metering points" and "locations" as were being served by the cooperative on August 13, 1982, the effective date of original § 394.315. MoPub IV, 700 S.W.2d at 841-42.
Sections 393.106 and 394.315 were then amended in 1986 to their present form[4]. August 13, 1986 is now the effective date, rather than August 13, 1982. The statutes in their present form entitle a continuation of service by a rural electric cooperative to the same "structures" as were being served on the effective date, instead of the same "metering points" and "locations" as previously required as a condition for the right of continuance.
Other appellate decisions follow the analysis adopted by the Supreme Court in MoPub IV to restrict the "grandfather" exception to persons at specific locations, now "structures", being served by the cooperative at the relevant effective date of the statutes. See Union Elec. Co. v. Cuivre River Elec., 726 S.W.2d 415 (Mo. App.1987); State of Missouri ex rel. Union Electric Company v. Public Service Commission of Missouri, 765 S.W.2d 626 (Mo. App.1988).
In Union Elec. Co. v. Cuivre River Elec., supra, the Eastern District held that the question of whether a rural electric cooperative has the statutory right and authority to continue to provide service in a particular case depends upon whether or not the electrical suppliers have concomitant rights to supply the electric energy. The court stated, "under [394.315 RSMo. 1982] the [PSC] is vested with jurisdiction over electric cooperatives only in those limited circumstances where both the cooperative and an electric corporation have concomitant rights to serve the same area." Id. at 417.
After the court construed the statutes as giving the cooperative the legal authority to provide service in the particular circumstances of that case, the petition was dismissed. The only relief then available to the plaintiff was within the express jurisdiction of PSC with PSC to determine if the rural electric cooperative was to continue service or if a change of legal supplier was in the public interest. Id. at 418.
To determine, in the case at bar, if Union Electric and Cooperative have concomitant rights to supply these new structures on the Bartlett property with electric energy, this court turns to the applicable statute, § 394.315. The present provisions of § 394.315 are as follows:
1. As used in this section, the following terms mean:
*647 (1) "Person" or "persons", a natural person, cooperative or private corporation, association, firm, partnership, receiver, trustee, agency, or business trust; (2) "Structure" or "structures", an agricultural, residential, commercial, industrial or other building or a mechanical installation, machinery or apparatus at which retail electric energy is being delivered through a metering device which is located on or adjacent to the structure and connected to the lines of an electrical supplier. Such terms shall include any contiguous or adjacent additions to or expansions of a particular structure which was in existence on August 13, 1986, but shall not include or be construed to apply to noncontiguous additions to or expansions of new structures upon which construction is commenced after August 13, 1986, or to confer any right on a rural electric cooperative to serve new structures on a particular tract of land because it was serving an existing structure on that tract prior to August 13, 1986. 2. Every rural electric cooperative shall be entitled to continue to supply retail electric energy to persons at structures at which service is being provided on August 13, 1986. Notwithstanding any other provision of law to the contrary, no rural electric cooperative shall be permitted or required to supply retail electric energy to any person at a structure where said person is receiving, or has within the last sixty days received, retail electric energy from another supplier of electric energy. Provided, however, that the public service commission may order otherwise after a finding that a change of suppliers is in the public interest for a reason other than a rate differential, and the commission is hereby given jurisdiction over rural electric cooperatives to accomplish the purpose of this section. Except as provided herein, nothing in this section shall be construed as otherwise conferring upon the commission jurisdiction over the service, rates, financing, accounting or management of any such cooperative, and except as provided in this section, nothing contained herein shall affect the rights, privileges or duties of existing cooperatives pursuant to this chapter. (emphasis added)[5]
The definition of "structure" in the statute clearly draws a distinction as to that which is considered a "structure" and that which is considered a "new structure" and, thus, this court construes this language as even further limiting Cooperative's "grandfather rights". This court does not find Cooperative's interpretation of the language of 394.315.2 persuasive, because its interpretation is that Subsection 2 deals solely with "structures" as defined by the statute, and not "new structures".
Cooperative argues that since it has supplied electric energy to the Bartlett property prior to the annexation of this property, and further because it would have supplied service to the Bartlett property within the last sixty days, it is entitled to continue that service pursuant to §§ 394.080(4) and 394.315.2. Such reasoning, however, ignores the general rules of statutory construction and the plain, unambiguous meaning of § 394.315, when read in its entirety.
The primary rule of statutory construction is to ascertain the legislative intent of the statute from the language used, to give effect to that intent whenever possible, and to consider the words as defined by their plain and ordinary meaning, unless otherwise defined by statute. Wolff Shoe Company v. Director of Revenue, 762 S.W.2d 29, 31 (Mo. banc 1988). When the terms used in the statute are plain and clear to a person of ordinary intelligence, they are deemed clear and unambiguous. Id.
The meaning of the language of § 394.315.1 is plain and clear. The statute prohibits a rural electric cooperative, such as Cooperative, from providing electrical energy to new structures on a particular *648 tract of land even though it was serving an existing structure on that tract prior to August 13, 1986. (That date being the date when § 394.315 came into effect, as amended). As stated previously, section 394.315 was adopted in 1982 and amended in 1986. A statute as amended should be construed on the theory that lawmakers intended the amendment to have some effect. O'Neil v. State, 662 S.W.2d 260, 262 (Mo. banc 1983); Holt v. Burlington Northern R. Co., 685 S.W.2d 851, 857 (Mo.App.1984). Following the tenets of statutory construction, this court finds that the legislature intended these changes to have effect. These amendments clearly limit the "grandfather" exception of § 394.080. In its 1986 amendment to § 394.315, the legislature clearly sets forth that a rural electric cooperative, such as Cooperative, is not authorized to supply service to a new structure built on property which has ceased to be in a rural area, pursuant to § 394.080, after August 13, 1986.
Cooperative's argument that jurisdiction over this matter rests, in the first instance, with the PSC is based on its conclusion that it is irrelevant whether a rural electric cooperative is legally or illegally providing service to a formerly rural area recently annexed into a municipality. It claims the determining factor in the grant of jurisdiction over this matter to PSC is that the Bartlett property is already being supplied electric energy by Cooperative. The statutory authority cited by Cooperative is contained in Subsection 2 of §§ 393.106 and 394.315 as follows:
Notwithstanding any other provision of law to the contrary, no electrical corporation or joint municipal utility commission [rural electric cooperative] shall be permitted or required to supply retail electric energy to any person at a structure where said person is receiving, or has within the last sixty days received, retail electric energy from another supplier of electric energy. Provided, however, that the commission may order otherwise after a finding that a change of suppliers is in the public interest.... (language of § 394.315 designated by brackets).
Cooperative further cites Utilicorp United v. Platte-Clay Elec., 799 S.W.2d 108 (Mo. App.1990) ("MoPub V") in support of this proposition. Cooperative's contention is without merit. It is illogical to conclude that the provision "notwithstanding any other provisions of law to the contrary" in §§ 393.106.2 and 394.315.2 means that the remaining provisions of that section should be construed without regard to the definition of "structure" contained in Subsection 1 of the same statute. This interpretation is particularly unreasonable when such definition is limited to use within the section.
If the above-quoted portion of Subsection 2 is read incorporating the definition of "structure" from Subsection 1, the jurisdiction of the PSC would be limited to determining whether a change of suppliers is in the public interest as between two electrical suppliers with concomitant rights. This interpretation is consistent with the holding in Union Elec. Co. v. Cuivre River Elec., supra. To interpret the statute otherwise would encourage a rural electric cooperative or an electrical corporation to begin providing illegal service to new structures in order to come within exclusive jurisdiction of PSC.
The court's holding in MoPub V is factually distinguishable from the case at bar. In MoPub V, the rural electric cooperative and the owners of Big V Supermarket had agreed that Big V Supermarket would receive electricity from the rural electric cooperative rather than MoPub, who held the municipal franchise to provide service. Service was not yet being provided when MoPub filed its suit to enjoin such service. Therefore, any language concerning jurisdiction of PSC when electric service is already being supplied at the time suit was filed was not essential to the holding in MoPub V.
A judicial opinion should be read in the light of the facts pertinent to that particular case and it is improper to give permanent and controlling effect to casual statements outside the scope of the real inquiry of the case. State v. Miles Laboratories, 282 S.W.2d 564, 573 (Mo. banc 1955).
*649 As such, this court does not follow the dictum set out in MoPub V. Instead this court, in applying the statutes to the facts as pleaded and accepted as true, finds no concomitant rights between the cooperative and the electric corporation and, thus, jurisdiction rests with the Circuit Court of Clay County and not the PSC.
This court finds that Union Electric's Request for Transfer to the Supreme Court Before Opinion, is rendered moot by the ruling of this court and, therefore, is denied.
The circuit court erred in dismissing Union Electric's petition. The judgment is reversed and remanded to the Circuit Court of Clay County for further proceedings on Union Electric's petition.
All concur.
NOTES
[1] All statutory references are to Missouri Revised Statutes, 1986, unless otherwise noted.
[2] These two statutes provide, respectively, for authorization of an electrical corporation, such as Union Electric, or a rural electric cooperative, such as Cooperative to supply electrical energy as delineated by the statutes.
[3] Section 394.080(4) provides, in pertinent part:
A cooperative shall have power:
(4) [W]here a cooperative has been transmitting, distributing, selling, supplying or disposing of electric energy in a rural area which, by reason of increase in its population, its inclusion in a city, town or village, or by reason of any other circumstance ceases to be a rural area, such cooperative shall have the power to continue to transmit, distribute, sell, supply or dispose of electric energy therein until such time as the municipality, or the holder of a franchise to furnish electric energy in such municipality, may purchase the physical property of such cooperative located within the boundaries of the municipality, pursuant to law, or until such time as the municipality may grant a franchise in the manner provided by law to a privately owned public utility to distribute electric power within the municipality and such privately owned public utility shall purchase the physical property of such cooperative located within the boundaries of the municipality.
[4] Statutory provisions pertaining to the competing rights of an electric company and a rural electric cooperative to supply electric energy to a new structure in a formerly rural area, recently annexed into a municipality, were amended in 1991. The effective date of the amendments is August 28, 1991, with an emergency clause applicable to certain sections.
[5] Provisions of the "flip-flop" statute, § 393.106, mirror the language of § 394.315, but apply to electrical corporations such as Union Electric.
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195 F. Supp. 281 (1961)
NORTHWEST OIL & REFINING CO., a Nevada corporation, Plaintiff,
v.
HONOLULU OIL CORPORATION, a corporation, and Hunt Oil Company, a corporation, Defendants.
Civ. No. 313.
United States District Court D. Montana, Billings Division.
July 5, 1961.
*282 Luedke & Packwood, Billings, Mont., for plaintiff.
Coleman, Lamey & Crowley, Billings, Mont., for defendant Honolulu Oil Corp.
Cooke, Moulton, Bellingham & Longo, Billings, Mont., for defendant Hunt Oil Co.
JAMESON, District Judge.
Plaintiff, a Nevada corporation, seeks damages from Honolulu Oil Corporation and Hunt Oil Company, both Delaware corporations, for alleged failure to comply with a crude oil contract dated March 1, 1959, as amended by certain instruments hereinafter described. Both defendants have filed motions for summary judgment. There has been extensive discovery by all parties, particularly through admissions of facts and documents.[1]
The contract in question, between plaintiff and defendant Honolulu, provided for the sale by Honolulu to plaintiff of crude oil from the Fourbear Field in Park County, Wyoming, for the period March 1, 1959, to October 1, 1960, subject to yearly extensions by mutual agreement.[2] The contract provided that it would be of no force or effect until the defendant Hunt executed the consent and joinder appended to the agreement.[3]
It was provided in paragraph 4 of the contract that plaintiff would pay Honolulu the average field price, less a trucking charge of 44¢ a barrel to plaintiff's tanks in Chatham Station, Wyoming, with further provisions for reduction of the trucking charges in the event of certain road improvements and for agreement upon the trucking charges in the event plaintiff should desire to truck the oil to points other than Chatham Station.
The contract was executed by plaintiff and Honolulu and on March 12, 1959, was transmitted to Hunt. After examining the contract the president of Hunt sent a telegram to F. M. Cole of Honolulu which contained the following: "Also, contract does not provide for elimination of trucking charge and change of delivery point in the event we build pipeline". Cole replied on March 18, saying in part:
"As to elimination of trucking charge and change of delivery point, several important questions remain to be settled, such as confirmation of an Oregon Basin connection, confirmation of the maximum delivery rate acceptable to Platte, design of the line, and agreement with co-owners as to apportionment of capital investment and operating costs.
"Future amendment of the March 1, 1959 Northwest contract is contemplated as to trucking charge, delivery point and price, Northwest is ready to install facilities at Oregon Basin in the event of delivery there."
On March 27, 1959, plaintiff wired Hunt:
"In reference to our contract March 1st, 1959, regarding purchasing Fourbear Crude we understand and acknowledge that if and when a pipeline is in operation between Fourbear Field and Platte Pipeline the trucking charges provided in *283 paragraph 4 will terminate and contract is hereby amended accordingly provided however, that Northwest Oil & Refining owns and operates terminal at Platte Pipeline letter of confirmation follows."[4]
On April 3 Hunt wired plaintiff: "Am holding Fourbear Field contract pending receipt your letter of confirmation to wire dated March 27th relative possible pipe line in lieu trucking. Please advise when letter will reach us."
On April 4 plaintiff wrote Mr. Cole of Honolulu "in connection with your phone conversation with this office", quoting plaintiff's telegram to Hunt of March 27. This was accompanied by a hand-written note as follows:
"Mr. Cole
"Our sec'y is not in this morning so please excuse the penned note. The letter of confirmation referred to is enclosed, per your instructions. We did not write to Hunt direct.
"Sincerely,
from the desk of /s/ M.B.F.
_________________
M. B. FitzGerald"
On April 6 Cole wrote the president of Hunt, "We received this morning the attached letter from Northwest Oil & Refining Co., confirming the telegram to you of March 27, 1959 relative to Paragraph 4 of the pending crude oil sales contract of March 1, 1959."
The joinder and consent was executed by Hunt on April 8.[5] On the same date the executed contract was sent to Cole of Honolulu, upon the condition "that before you deliver it to Northwest you will have collected all moneys then due from Northwest under the old contract dated July 15, 1958 * * *." There was no reference in this letter to any modification of paragraph 4 of the contract.
On April 27 Hunt wired Cole: "Confirming your telephone conversation with Mr. Latham, permission is granted to release contract dated March 1, 1959, between us and Northwest Oil & Refining." The contract, executed by Hunt, was then delivered to plaintiff by Honolulu.
During June, July and August, 1959, there were negotiations among plaintiff, Berry Refining Company, and defendants pertaining to a proposed assignment to Berry of plaintiff's interest in the contract. The contract provided that plaintiff "shall not assign this agreement or any rights hereunder without the written consent of Honolulu".
On July 27, 1959, (and while the negotiations for assignment were in progress) the contract was modified with respect to matters not here pertinent, and the letter agreement contained the following paragraphs:
"Honolulu Oil Corporation hereby consents to the assignment of said sales contract to Berry Refining Company subject to our approval of the form of assignment. We shall require that said assignment include an assumption by Berry Refining Company of the obligations of Northwest under said contract including the obligation to furnish us with an appropriate letter of credit.
"It is our understanding that the subject sales contract will be amended at a later date to adapt the same to the changes which will result from the operation of the Fourbear Pipeline."
On August 6 plaintiff executed an assignment of the contract to Berry, assigning "all of its rights, interests and obligations" *284 in and to the crude oil contract dated March 1, 1959, "as amended by that certain letter agreement dated July 27, 1959 * * *".[6] The assignment contained the following paragraphs:
"Assignee agrees, in consideration for the consent hereto by Honolulu Oil Corporation, to amend paragraphs 3 and 4 of said contract in the manner mutually agreed upon by assignee and Honolulu to adapt the same to changes which will result from the operation of the Fourbear Pipeline.
"This assignment shall be effective as of the 1st day of July, 1959."
On August 11 Berry wrote Honolulu, transmitting the assignment for the "purpose of your execution of the approval and assents thereon" and containing the following sentence:
"We expressly have executed it and deliver it on the condition and understanding that our assumption and agreement to be bound and to perform the obligations of the buyer relates only to those obligations accruing on or after July 1, 1959, and that under no circumstance are we assuming obligations, if any, of Northwest Oil & Refining Company incurred prior to the last mentioned date and which may not have been discharged."
Honolulu executed its written consent to the assignment and to the substitution of Berry. This was transmitted to Berry by Honolulu on August 28, 1959, with a letter reading: "Herewith is an executed copy of the Assignment of Crude Oil Contract from Northwest Oil & Refining Company to Berry Refining Company, together with a letter exempting you from obligations of the Northwest Oil & Refining Company incurred prior to July 1, 1959."
Subsequent to the execution of the assignment from plaintiff to Berry, there was no reassignment of any rights thereunder by Berry to plaintiff. On October 22, 1959, plaintiff wrote Honolulu requesting a verification of the status of its account. On November 17, 1959, Honolulu wrote plaintiff "to confirm that Northwest Oil & Refining Company has no balance owing Honolulu Oil Corporation as of this date". There were no further written communications between plaintiff and Honolulu until September 15, 1960, when plaintiff's counsel wrote Honolulu offering "to comply with the terms of the contract relative to the terminal facilities * * *".[7] This action was instituted on December 29, 1960.
The foregoing summarizes the instruments upon which the parties rely in support of their respective contentions.
Plaintiff contends (1) that the contract dated March 1, 1959, was modified by the exchange of telegrams between plaintiff and Hunt on March 27 and April 3, plaintiff's letter to Honolulu dated April 4, and Honolulu's letter to Hunt dated April 6; (2) that by reason of this amendment plaintiff should have been allowed to provide the terminal facilities contemplated in these telegrams and letters; and (3) that the right to own and operate the terminal was not *285 assigned to Berry with the balance of the contract. Plaintiff alleges that it is ready, able and willing to provide the terminal facilities and seeks damages for anticipated profits from the operation of the terminal for a period of twenty years.
Defendant contends (1) that the contract of March 1, 1959, was never modified as claimed by plaintiff; (2) that the terminal facilities were never provided for in any contract or modification thereof and were never in fact constructed or operated by plaintiff or anyone else; (3) that all rights of plaintiff under the contract were assigned to Berry (subject only to accounting by plaintiff for crude oil purchased prior to July 1, 1959, the effective date of the assignment); and (4) that plaintiff is estopped by reason of an account stated.
A motion for summary judgment should be granted only when it is clear from the pleadings, admissions and affidavits on file 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. Rule 56(c), F.R. Civ.P., 28 U.S.C.A. "To warrant its entry the facts conceded by the plaintiff, or demonstrated beyond reasonable question to exist, should show the right of the defendant to a judgment with such clarity as to leave no room for controversy, and they should show affirmatively that the plaintiff would not be entitled to recover under any discernible circumstances." Traylor v. Black, Sivalls & Bryson, Inc., 8 Cir., 1951, 189 F.2d 213, 216.[8]
The parties agree that in the first instance two legal questions are presented: (1) whether there was a modification of the contract by the telegrams and letters; and (2) whether all rights of the plaintiff under the contract (aside from plaintiff's obligation to pay for oil purchased prior to June 30, 1959), and particularly any rights arising under paragraph 4, were assigned to Berry. If either of these questions is determined adversely to plaintiff's position, defendants' motions for summary judgment must be granted. In determining these questions the court must view the evidence in the light most favorable to the plaintiff.
It seems advisable to determine first whether, by reason of the assignment to Berry, plaintiff has any cause of action under the contract, particularly in view of the fact that the assignment itself makes specific reference to paragraph 4 of the contract. If there is any inconsistency, in whole or in part, between the alleged amendment to paragraph 4 and the provisions with respect thereto in the subsequent assignment, the latter controls and abrogates the earlier agreement.[9]
Here the assignment provides: "Assignee (Berry) agrees, in consideration for the consent hereto by Honolulu Oil Corporation, to amend paragraphs 3 and 4 of said contract in the manner mutually agreed upon between assignee and Honolulu to adapt the same to changes which will result from the operation of the Fourbear Pipeline." This provision clearly relates to the same subject matter as the alleged amendment to paragraph 4 where plaintiff acknowledged that "if and when a pipeline is in operation * * the trucking charges provided in paragraph 4 will terminate and contract is hereby amended accordingly; provided, however, that Northwest Oil & Refining Co. owns and operates terminal at Platte Pipeline". Yet the assignment contains no reservation or exception with respect to any right or obligation of plaintiff to build or operate terminal facilities pursuant *286 to the alleged amendment of paragraph 4 and makes no reference thereto. On the contrary, it is expressly recognized in the assignment that paragraph 4 would be amended in the manner agreed upon between Berry and Honolulu.[10]
It is true, as plaintiff contends, that an assignment "may be limited by exceptions, reservations, conditions, or restrictions contained therein" (6 C.J.S. Assignments § 90, p. 1144); and that "the question of what rights or remedies will pass as incidental to the thing assigned is dependent entirely upon the intention of the parties; and the assignee will acquire no right to incidents which it is clear the parties did not intend to pass, or which it would be inequitable to pass because of the resulting injury to the assignor" (6 C.J.S. Assignments § 85, p. 1143). On the other hand, it is well settled that an assignment, in general terms, vests in the assignee all right, title and interest of the assignor, unless there are subsequent restrictions which limit the scope of the assignment (6 C.J.S. Assignments § 84, p. 1140).
An assignment must be interpreted or construed in accordance with the rules of construction governing contracts generally, the primary purpose being to ascertain and carry out the intention of the parties. (6 C.J.S. Assignments § 83, p. 1138). The intention of the parties is to be deduced from the language employed by them, and the terms of the contract, where unambiguous, are conclusive. Moreover, the contract must be construed as a whole, and it is not the province of the court to make a contract for the parties.[11]
Plaintiff argues that the "right to own and operate the terminal was not assigned with the balance of the contract to Berry as it was severable from the March 1, 1959, contract, and it was not intended to be included nor was it included in the assignment". In addition to the assignment itself, plaintiff relies upon Berry's letter to Honolulu dated August 11, 1959, which provides in pertinent part that the assignment was delivered on the condition and with the understanding that Berry's assumption of the obligations of the buyer related "only to those obligations accruing on or after July 1, 1959", and that it did not assume the "obligations, if any" of plaintiff incurred prior to that date "and which may not be discharged".
The assignment prescribes an effective date of July 1, 1959. Honolulu's consent provided that nothing contained in the assignment should relieve plaintiff "of the duty to reimburse Honolulu for all oil delivered * * * prior to the effective date of this assignment". In agreeing to the substitution of Berry for plaintiff, Honolulu agreed to hold plaintiff harmless for "all obligations arising under this contract after the date of June 30, 1959". Plaintiff executed the assignment and received and accepted Honolulu's consent thereto.
It is clear, both from the assignment itself and the letter, that the exception referred to plaintiff's "obligation" to pay *287 for oil purchased prior to July 1, 1959. Plaintiff had not in fact incurred any "obligation" to build any terminal facilities;[12] and it was contemplated by all parties that Honolulu's consent to the assignment was conditioned upon Berry's agreement to amend paragraphs 3 and 4 of the contract "to adapt the same to changes which will result from the operation of the Fourbear Pipeline". Assuming, arguendo, that paragraph 4 of the contract was amended as plaintiff contends, neither the assignment itself nor any other writing provides for any reservation in plaintiff of any rights under paragraph 4 or any other right, title or interest in the contract. The sole exception and reservation relates to the "obligation" of plaintiff to pay for crude oil purchased prior to the effective date of the assignment. Prior to the commencement of this action, there was a final settlement between plaintiff and defendant with respect to this obligation.
Plaintiff, having assigned all of its right, title and interest in the contract, no longer has any interest therein and may not accordingly maintain this action. In both Wyoming and Montana, as well as under the federal rules, an action must be prosecuted by the real party in interest. Where all rights under a contract have been transferred, the assignee is the real party in interest.[13]
Having reached this conclusion, it is unnecessary to determine the effect of the alleged modification of the contract through the exchange of telegrams and letters.
The motions for summary judgment are granted.
NOTES
[1] While defendants do not concede the truth or materiality of certain facts set forth in plaintiff's requests for admissions, they request the court to consider them as true in ruling on their motions for summary judgment.
[2] All deliveries were to be made by Honolulu to plaintiff in Wyoming and title was to pass upon delivery. Payments were to be made to Honolulu at its office in San Francisco, California; and plaintiff was required to maintain a letter of credit in favor of Honolulu in the Midland National Bank of Billings, Montana.
[3] This appears in paragraph 15 of the contract, which contains the only reference to Hunt. This paragraph recites that Hunt owns a portion of the oil to be delivered by Honolulu to plaintiff and provides that payment for all oil delivered, including Hunt's share, may be made by plaintiff to Honolulu.
[4] This is the only reference to any right or obligation on the part of plaintiff to own and operate the terminal. There is no contention that the terminal facilities were ever built by plaintiff or anyone else or that there was any agreement prescribing any terms and conditions with respect to the construction of any terminal.
[5] This consent reads: "Hunt Oil Company does hereby join in and consent to the foregoing agreement as to its interest in the oil to be sold thereunder; warrants title to its share of the crude oil sold and delivered thereunder; and does hereby agree that it will look solely to Honolulu Oil Corporation for distribution of its share of the proceeds thereunder."
[6] While the assignment referred to the letter amendment of July 27, 1959, there was no mention of any amendment to paragraph 4 by virtue of the exchange of telegrams and letters upon which plaintiff now relies.
[7] This letter reads in pertinent part:
"It appears that prior to the acceptance of this contract by Hunt the possibility of setting aside the trucking charges in the event a pipe line was built was raised. In a series of wires and letters, this contingency was covered by acceptance on the part of Northwest Oil & Refining Company of termination of the trucking charges at the time such pipe line should be built conditioned upon Northwest Oil & Refining Company's owning and operating the terminals at Platte Pipe Line.
"Northwest Oil & Refining Company is most anxious to comply with the terms of the contract relative to the terminal facilities in accordance with that agreement. Your cooperation in facilitating the compliance with this agreement is solicited as is your prompt attention to this matter."
[8] See also Hycon Manufacturing Company v. H. Koch & Sons, 9 Cir., 1955, 219 F.2d 353, 355, certiorari denied 349 U.S. 953, 75 S. Ct. 881, 99 L. Ed. 1278; Cameron v. Vancouver Plywood Corporation, 9 Cir., 1959, 266 F.2d 535.
[9] See Hanover Canal Co. v. Wilson, 1914, 22 Wyo. 427, 143 P. 345, and cases there cited.
[10] There is no contention that the pipeline had been constructed at the time of the assignment. In fact, the provisions of paragraph 4 of the contract relating to trucking charges were subsequently amended by agreement between Berry and Honolulu for the period commencing August 16, 1959, and "ending either on the date Honolulu's Fourbear Pipeline is placed in operation or January 1, 1960, whichever date shall first occur". The pipeline was completed and placed in operation in March, 1960.
[11] See 17 C.J.S. Contracts § 296 p. 695; 3 Williston on Contracts, Rev.Ed.1752, § 610; Flora Construction Company v. Bridger Valley, Etc., Wyo.1960, 355 P.2d 884; Barlow v. Makeeff, 1955, 74 Wyo. 171, 284 P.2d 1093; Hein v. Fox, 1953, 126 Mont. 514, 254 P.2d 1076; Leigland v. McGaffick, 1959, 135 Mont. 188, 338 P.2d 1037.
[12] At most plaintiff agreed to a termination of the trucking charges in the event it owned and operated the terminal.
[13] See Rule 17(a), F.R.Civ.P.; Dunham v. Robertson, 10 Cir., 1952, 198 F.2d 316; Gate-Way Inc. v. Hillgren, 9 Cir., 1950, 181 F.2d 1010, affirming D.C., 82 F. Supp. 546; National Reserve Co. of America v. Metropolitan Trust Co., 1941, 17 Cal. 2d 827, 112 P.2d 598; Williard v. Campbell, 1932, 91 Mont. 493, 11 P.2d 782; Davis v. Claxton, 1928, 82 Mont. 574, 268 P. 787.
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814 S.W.2d 531 (1991)
Maria Guadalupe DeLEON, Appellant,
v.
Juan F. HERNANDEZ and Betty Gamez Hernandez, Appellees.
No. C14-90-01008-CV.
Court of Appeals of Texas, Houston (14th Dist.).
August 8, 1991.
*532 Renato Santos, Jr., Houston, for appellant.
Rick Brass, Houston, for appellees.
Before ROBERTSON, SEARS and DRAUGHN, JJ.
OPINION
SEARS, Justice.
Appellant appeals from a motion for summary judgment granted in favor of appellees. In a single point of error, she claims the trial court erred in granting summary judgment because appellees did not prove they were entitled to judgment as a matter of law. Concluding a genuine issue of material fact exists as to appellant's causes of action, we reverse and remand for trial.
Appellant filed an original petition for divorce against Juan Hernandez. Appellant subsequently amended her petition to include causes of action for assault and false imprisonment against Hernandez, and a cause of action for alienation of affection against Betty Gamez. The trial court correctly severed those causes of action from the divorce action. See Chiles v. Chiles, 779 S.W.2d 127 (Tex.App.Houston [14th Dist.] 1989, writ denied).
Appellees moved for summary judgment on the additional causes of action on the grounds that appellant failed to seek medical treatment after the alleged assault and false imprisonment and that she failed to report those offenses to the police. Appellees further claimed the cause of action for alienation of affections has been abolished in Texas.
In response, appellant filed a supporting affidavit stating that Hernandez intentionally struck her in the face and body causing her physical pain and mental anguish and that Hernandez willfully detained her without her consent and without authority of law. Appellant further stated that Gamez, who knew of the marriage, intentionally enticed and persuaded appellant's husband to engage in an extramarital affair causing an alienation of Hernandez' affection and depriving appellant of his consortium.
A summary judgment is not entitled to the same deference given to a judgment following a trial on the merits. When reviewing the grant of a summary judgment, the appellate court does not view the evidence in the light most favorable to the *533 judgment of the trial court. Instead, this court must view the evidence in favor of the nonmovant, resolving all doubts and indulging all reasonable inferences in favor of reversal of the summary judgment. Nixon v. Mr. Property Management, 690 S.W.2d 546, 549 (Tex.1985); Gulbenkian v. Penn, 151 Tex. 412, 252 S.W.2d 929, 931 (1952).
At either the trial or appellate level, the question is not whether the nonmovant raised a material fact issue to defeat the motion, but whether the movants negated each cause of action and proved they were entitled to judgment as a matter of law. If the movant fails in this burden, we must remand the case for a trial on the merits. Gibbs v. General Motors Corp., 450 S.W.2d 827, 828-29 (Tex.1970). The standards that must be applied when reviewing a summary judgment have been clearly mandated by the Texas Supreme Court in Nixon v. Mr. Property Management, 690 S.W.2d at 548:
1. The movant for summary judgment has the burden of showing that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law.
2. In deciding whether there is a disputed material fact issue precluding summary judgment, evidence favorable to the nonmovant will be taken as true.
3. Every reasonable inference must be indulged in favor of the nonmovant and any doubts resolved in its favor.
Further, this court must not consider evidence that favors the movant unless it is uncontroverted. Great American Reserve Co. v. San Antonio Plumbing Supply, 391 S.W.2d 41, 47 (Tex.1965).
A tortious civil assault is committed if a person intentionally, knowingly, or recklessly causes bodily injury to another. Hogenson v. Williams, 542 S.W.2d 456, 458 (Tex.Civ.App.Texarkana 1976, no writ). Appellant stated in her affidavit in response to the motion for summary judgment that Hernandez intentionally, knowingly, and recklessly caused bodily injury to her by hitting her in the face and body with his fist causing her physical pain and mental anguish. Hernandez did not deny the assault, but claimed he was entitled to summary judgment because appellant failed to seek medical treatment and failed to report the offense to the police. Appellant has raised a genuine issue of material fact as to whether Hernandez assaulted her and whether he falsely imprisoned her. The fact that she failed to seek medical treatment or report the offenses to the police does not defeat her causes of action as a matter of law. With regard to those causes of action, summary judgment is improper.
The trial court also granted summary judgment against appellant on the alienation of affection cause of action. Gamez moved for summary judgment on the grounds that the cause of action for alienation of affection had been abolished in Texas and that Hernandez had already had a sexual relationship with another woman before he began his relationship with Gamez.
The statute abolishing a right of action by one spouse against a third party for alienation of affection became effective September 1, 1987. Tex.Fam.Code Ann. § 4.06 (Vernon Supp.1991). Appellant's original petition was filed October 25, 1985. Her first amended original petition asserting a cause of action for alienation of affection was filed March 13, 1986. Section 4.06 of the Family Code specifically states that it does not apply to a suit filed before the effective date of the act. Because appellant's suit was filed before the effective date of the act, appellant's cause of action is not barred by the Family Code.
Gamez also claims that, because Hernandez had a sexual relationship with another woman before he began his relationship with her, she has disproved one or more of the elements of appellant's cause of action. To establish a cause of action for alienation of affection, a plaintiff must prove (1) the defendant intentionally or purposely enticed the spouse, (2) there has been a loss of affection or consortium, and (3) the defendant's conduct was the controlling *534 cause of the loss. McQuarters v. Ducote, 234 S.W.2d 433, 434 (Tex.Civ.App. San Antonio 1950, writ ref'd n.r.e). Hernandez' prior indiscretion does not defeat one or more of those elements.
Appellant, in her affidavit in response to the motion for summary judgment, stated that Gamez, with knowledge of their marriage, intentionally enticed and persuaded appellant's husband to engage in an extramarital affair with her for the purpose of transferring Hernandez' affections and depriving appellant of her husband's consortium. Appellant's affidavit raises a fact issue with regard to her cause of action for alienation of affection. Because appellant has raised genuine issues of material fact on her causes of action for assault, false imprisonment, and alienation of affection, we sustain appellant's sole point of error.
The judgment of the trial court is reversed and remanded for trial on the merits.
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335 Pa. Super. 231 (1984)
484 A.2d 107
Harold B. OWENS and Eloise Mary Owens
v.
Joseph P. HOLZHEID and Anne Holzheid.
Supreme Court of Pennsylvania.
Argued January 10, 1984.
Filed November 2, 1984.
*234 Wayne L. Weismandel, Gettysburg, for appellants.
Robert E. Campbell, Gettysburg, for appellees.
Before WICKERSHAM, DEL SOLE and MONTEMURO, JJ.
DEL SOLE, Judge:
This action was initiated when Appellees (the Holzheids) filed a Complaint In Equity. The Holzheids averred that they owned a right of way across Appellants' (the Owens') land. The Holzheids sought to have the Owens enjoined from interfering with this alleged right of way. The trial court recognized the Holzheids' right-of-way and entered Findings of Fact, Conclusions of Law, and a Decree Nisi, enjoining further interference by the Owens. The Owens timely filed exceptions, which were dismissed. The court, by Order, then made the Decree Nisi absolute.
The Owens raise two issues on appeal: (1) Did the trial court err in finding that a valid easement exists in favor of the Holzheids, and (2) Did the trial court err in finding that the easement extends to the two other tracts of land owned by the Holzheids?
A review of the record reveals the following: In December 1967, the Owens purchased a tract of land (Tract "O"). Tract "O" is bordered by Finkle Hill Road to the south, and *235 to the north by an eight acre tract of land (Tract "A") which is owned by the Holzheids. In 1968 and 1969 two separate but contiguous tracts of land, in addition to Tract "A", were purchased by the Holzheids. These two tracts of land will be termed Tract "B" and Tract "C". Tract "A", which is woodland and which does not front on any public road, is bordered by Tract "O" to the south and Tract "B" to the north. To the north of Tract "B" is located Tract "C". At trial several witnesses were asked to draw the approximate location of the alleged right-of-way onto a diagram. They indicated that the right-of-way extended from Finkel Hill Road northward where it transversed Tract "O", and continued northward through Tracts "A", "B", and "C".
None of the deeds by which the parties to this action acquired title mention the right-of-way. However, a deed dated October 28, 1931, which was duly recorded and appears in the Owens' chain of title (hereinafter "Lerew to Bear deed") contains the following wording:
This is also to certify that there is a certain Right of Way hereby reserved for the use of George Harbolt to get to his wood lot and return. Said right of way being granted by the Ahls when they sold these lots. (Emphasis in original deed)
George Harbolt was the Holzheids' predecessor in title to Tract "A". George Harbolt and his wife, Sue, acquired the tract from his parents, Henry G. and Sarah E. Harbold, on March 21, 1906.
The Holzheids rely on the above language to support their position that the right-of-way was acquired by either an express grant or by implication.
We find that the language in the "Lerew to Bear deed" does not operate as an express grant.
Easements which are created by express grants are to be construed in accordance with the intentions of the parties, as determined from examining the agreement as a whole. Nallin-Jennings Park Co. v. Sterling, 364 Pa. 611, 73 A.2d 390 (1950); Graybill v. Hassel, 167 Pa.Super. 284, *236 74 A.2d 686 (1950). The language in the "Lerew to Bear deed" states that there was "hereby reserved" a right of way for the use of George Harbolt.
This clause appears to indicate that the parties intended to create an express easement by way of reservation. The courts of this state have recognized the rights of a grantor to reserve an easement for his own use over land which he has conveyed. Baptist Church in the Great Valley v. Urquhart, 406 Pa. 620, 178 A.2d 583 (1962). The Owens, however, point out that the courts have been reluctant to recognize as valid, a reservation in a deed created in favor of a person who is a stranger to the deed. See: Pribek v. McGahan, 314 Pa. 529, 172 A. 709 (1934). George Harbolt was not a party to the "Lerew to Bear deed" transaction, nevertheless, this fact does not lead us to the conclusion that an express easement was not created.
The circumstance which is fatal to the Appellee's position that an express easement was created by reservation, is the status of the grantor. It is well settled law in Pennsylvania that an owner of land may arrange it as he pleases. Piper v. Mowris, 466 Pa. 89, 351 A.2d 635 (1976); Lauderbach-Zerby Co. v. Lewis, 283 Pa. 250, 129 A. 83 (1925). However, it seems even more elementary that one must be the owner of land before he has the power to dispose of it by granting an easement. Although the deed states that there is "hereby reserved" an easement, the provision continues: "Said right of way being granted by the Ahls when they sold these lots." The grantor, Mrs. Lerew, expressly recognized in the deed that a previous owner already granted this easement. As Mrs. Lerew owned Tract "O" subject to this already existing easement, she did not have the power and/or capacity to create the easement.
In Ozehoski v. Scranton Spring Brooke Water Service Co., 157 Pa.Super. 437, 43 A.2d 601 (1945); allocatur refused, it was held that a reference in a recital of a deed to an existing right-of-way in favor of a person not a party to *237 the deed, was not a reservation. It was held that the recital recognized a prior grant or agreement. In that case, the defendants' predecessor in title, the Water Company, laid a pipe under the lands of a coal company in 1889. Subsequently, in 1917, the coal company conveyed their tract to Susquehanna Colliers Co. (Colliers Co.). The deed of conveyance contained the following recital: "This conveyance is made subject also to the following easements, rights of way, etc., viz: 7. All rights of way for pipe lines . . . over and across the premises hereby conveyed . . ." The Colliers Co. later conveyed the subject lot to the Everetts. The Everetts, in turn, conveyed to the plaintiffs. Neither the Everetts', nor the plaintiffs' deed referred to the recital of an easement. Defendants/appellants maintained that the language in the deed reserved for their benefit a right-of-way. Our court stated:
Appellants' argument assumes that the recital in the deed to the Colliers Company was, in law, a reservation. It was not. It did not create the easement but, on the contrary, referred to existing rights in the Water Company which had been enjoyed for many years. The fact, therefore, that the Water Company was not a party to that deed cannot be asserted against the existence of the easement. Cf. Lauderbach-Zerby Co. v. Lewis, 283 Pa. 250, 129 A. 83; Pribek et al. v. McGahan et ux., 314 Pa. 529, 172 A. 709.
Ozehoski v. Scranton Spring Brooke Water Service Co., supra, 157 Pa.Super. at 439, 43 A.2d at 602. Likewise, the "Lerew to Bear deed" does not contain an express grant of an easement, but rather it recognizes and confirms an already existing right.
In this case, as in the Ozehoski case, the circumstances of the original creation of the right-of-way do not appear. Neither the Holzheids', nor the Owens' chain of title could be traced back far enough to establish the initial creation of the passageway. The Owens' chain of title could only be traced back to the crucial "Lerew to Bear deed". Holzheids' chain of title to Parcel "A" could be traced back only *238 so far as March 21, 1906. It may well be that the original grantors by express grant created an easement, but never recorded the deed. Alternatively, an implied easement may have been created. However, such cannot be proven at this late date.
Under the traditional test an easement by implication can be established in the following instance:
(W)here an owner of land subjects part of it to an open, visible, permanent and continuous servitude or easement in favor of another part and then aliens either, the purchaser takes subject to the burden or the benefit as the case may be, and this irrespective of whether or not the easement constituted a necessary right-of-way.
Burns Manufacturing Co. v. Boehm, 467 Pa. 307, 314, 356 A.2d 763, 767 (1976) [quoting Tosh v. Witts, 381 Pa. 255 at 261, 113 A.2d 226 at 228 (1955)].
In the instant case, there is some indication that C.W. Ahl was the unitary owner of the lands. However, the date of severance cannot be established. It also cannot be shown that the right-of-way was continuously used prior to the alienment. Our courts have recognized the difficulty of establishing these rights of ancient origin. For that reason a relaxed burden of proof falls upon one claiming such rights. Woodlawn Trustees Inc. v. Michel, 418 Pa. 398, 211 A.2d 454 (1965); Hostetter v. Commonwealth, 367 Pa. 603, 80 A.2d 719.
Under similar circumstances the Ozehoski court stated:
The circumstances under which the first pipe line was laid, however, are not of controlling importance for they imply between the only parties concerned, a then or subsequent grant of the easement, or an agreement, the equivalent of a grant (Horn v. Miller, 136 Pa. 640, 20 A. 706, 9 L.R.A. 810) by the Coal Company to the Water Company in recognition of a prior grant or agreement. This was conceded by the Colliers Company by accepting the deed from the Coal Company and acquiescing in the burden of the easement thereafter.
*239 Ozehoski v. Scranton Spring Brooke Water Service Co., supra, 157 Pa.Super. at 440; 42 A.2d at 602, 603.
We find that the language in the "Lerew to Bear deed", while not a reservation, did operate as a recognition of a prior grant or agreement. Although the circumstances which surrounded these early events, first establishing the right-of-way, are not known, the language in the "Lerew to Bear deed" does give notice of a covenant of easement. The grantee, Bear, by accepting the deed and acquiescing in the burden of the easement, conceded the existence of the easement. The fact that the deed to the Owens, and to their immediate predecessors in title, did not refer to the easement is unimportant. A grantee in a deed must search the chain of title. This is the duty of the purchaser since he takes subject to a restriction or servitude which appears in the line of title although he may have no actual knowledge of its existence. Ozehoski v. Scranton Spring, supra; Finley v. Glenn, 303 Pa. 131, 154 A. 299 (1931).
In this case the Owens had constructive notice of the easement. They are in no position now to question the existence of the easement benefiting parcel "A", and they must submit to its burden under the covenant running with the land.
The Owens' second issue relates to the trial court's determination that the easement extends in favor of Tracts "B" and "C". We must initially note that the Holzheids never claimed that their Tracts "B" and "C" had an easement right-of-way over the Owens' land. Nevertheless, the trial court concluded that there was an easement serving these other tracts of land. As the Holzheids never requested such relief, the trial court's actions were inappropriate. Moreover, there is insufficient evidence to support a finding that an express or implied easement was created.
The evidence relating back to the unitary owner's creation of a right-of-way, and the continued use of such way to benefit Tracts "B" and "C", is scant. With regard to Tract "A", the Holzheids had the advantage of the "Lerew *240 to Bear deed" which firmly established their rights. There is nothing in the record chain of title to Tracts "B" and "C" establishing a similar right-of-way.
It can be reasoned that the easement for the benefit of Tract "A" was created so its owner could get to and from Finkel Hill Road. Extending that easement to benefit Tracts "B" and "C" is contrary to the law of this state. It has long been held that an easement which benefits a particular piece of land cannot be enlarged and extended to other parcels of land to which the right is not attached. Percy A. Brown & Co. v. Raub, 357 Pa. 271, 54 A.2d 35 (1947).
We, thus, reverse the trial court's finding that the easement extends to benefit Tracts "B" and "C". The easement benefiting the Holzheids' Tract "A" and burdening the Owens' land should be strictly limited to access to, and egress from this eight acre tract.
For the reasons above stated, the order of the Court of Common Pleas of Adams County is affirmed in part and reversed in part.
MONTEMURO, J., filed dissenting opinion.
MONTEMURO, Judge, dissenting:
This is an appeal from the entry of a Final Decree in Equity wherein the Honorable Oscar F. Spicer, President Judge of the Court of Common Pleas of Adams County, enjoined the appellants (defendants below) from further interference with appellees' (plaintiffs below) use of a right-of-way across appellants' land.
The land in question is densely wooded, mountainous land in Latimore Township, Adams County. In an effort to prevent the readers of this opinion from getting lost in these woods, I have prepared a diagram of the land in question as substantially taken from appellees' Exhibit Number 2. [Hereinafter referred to as "the diagram"].
*241
On December 1, 1967, Harold B. Owens and his wife, Eloise Mary, moved to Pennsylvania from Chicago, Illinois. They purchased two separate parcels of land totalling 12.98 acres from Mae A. Books, widow. On one of the parcels there was a home which they made their residence. These two parcels of land now shown as one parcel appear as Tract "O" on the diagram.
*242 The appellees, Joseph P. Holzheid and his wife, Anne, were apparently seeking a summer retreat from the urban lifestyle of their permanent residence in Baltimore, Maryland. The secluded, rolling landscape of Latimore Township in Adams County was the area they selected as a peaceful respite from city life. On August 3, 1968, they purchased Tract "C" consisting of four (4) acres, more or less, with a summer cottage erected thereon, from George H. Nelson and his wife, Jeanette. It should be noted here that, as shown on the diagram, appellees purchased Tract "C" subject to a right-of-way easement (not the right-of-way in dispute) for ingress and egress over a private lane from their newly acquired property to Route 94. Clearly if their land acquisitions had stopped with Tract "C" this litigation would not have followed.
However, approximately eight (8) months after their purchase of Tract "C", on April 16, 1969, appellees purchased Tract "B" consisting of seven (7) acres, more or less, from Eugene A. Reynolds and his wife, Thelma. Tract "B" is a densely wooded lot.
Appellees continued their acquisition of land to the south when on August 6, 1969, they purchased Tract "A" consisting of eight (8) acres, more or less, from William H. Harbold. Tract "A", as can be seen from the diagram, is to the north of and contiguous to the land owned by appellants; i.e., Tract "O". When the appellees filed their complaint in equity on February 27, 1980, more than eleven years after their first purchase of Tract "C", they still held all three tracts, "A", "B" and "C" as separate parcels of land. In fact, it would appear that there has never been a deed of consolidation. Tract "A" is also a densely wooded lot.
The land shown on the diagram is, for the most part, mountainous and difficult of passage. The highest point would be where appellees have their summer cottage on Tract "C", and the lowest point, or bottom of the mountain, *243 would be where appellants made their permanent home on Tract "O".
Several of the witnesses were asked to draw the location of the disputed right-of-way on the diagram. As can be seen on the diagram, it was drawn as extending from Fickel Hill Road, thence in a northward direction and traversing the land of appellants (Tract "O") as well as Tracts "A", "B" and even "C". However, whether or not there is a roadway or path through Tracts "A", "B" and "C" is, in my view, irrelevant. Appellees' claim is that they have an easement right of way over the land of appellants for ingress, egress and regress to and from Tract "A", to Fickel Hill Road. Appellees' say that the dominant tenement is Tract "A", and the servient tenement is appellees' Tract "O". It is important to note that appellees never claimed that their Tracts "B" and "C" had an easement right of way over the land of appellants. Nevertheless, as we shall see, the court below and the majority not only agree that appellants' land has the burden of providing ingress and egress to and from Fickel Hill Road to Tract "A", they add to that burden by creating an easement right of way in favor of Tracts "B" and "C" as well.
Appellee, Joseph Holzheid, testified that he became aware of a road going from Tract "C" down to Tract "B" within a year of his purchase of Tract "C" in August of 1968. After he purchased Tract "B" in April of 1969, he said that he drove his vehicle from his summer cottage on Tract "C" all the way down to Tract "A". After he purchased Tract "A", he said that he then used to drive all the way from Tract "C" to Fickel Hill Road. He did this two or three times a year until appellants put up a barricade in June of 1978. He said he always kept the roadway open and would trim it back once a year. Appellee acknowledged that he has access to Route 94 from a private lane or right of way which crosses the front of his Tract "C". Further there seems to be no serious dispute that appellees access to Route 94 from Tract "C" is much easier than their access from Tract "C" to Fickel Hill Road.
*244 Appellant, Harold Owens, testified generally that when he purchased his property in 1967 there was no evidence of any roadway as shown on the diagram. He also testified that from 1967 and up to the time he erected the barricade, he either planted crops, leased it for farming or had it seeded and permitted it to go fallow. He erected the barricade because in Mid-June of 1978 someone had driven through his cover crops. Appellants allege that appellees offered to purchase the disputed right-of-way, but appellees deny any recollection of such an offer.
Appellees say they informed appellants that there was a deed (See Exhibit 11E) in appellants' chain of title from Sara Alice Lerew to Ida A. Bear dated October 28, 1931, and recorded on August 8, 1938, in Deed Book 149, at page 208 [hereinafter "Lerew to Bear deed"], which clearly indicated that there existed a right-of-way over appellants' land (Tract "O") for the use of George Harbold,[1] who was appellants' predecessor in title. The "Lerew to Bear" deed contained the following language:
"This is also to certify that there is a certain right of way hereby reserved for the use of George Harboldt to get to his wood lot and return. Said right of way being granted by the Ahls when they sold these lots." (Emphasis in original deed).
Further, appellees told appellants that the disputed right-of-way had been in use for over forty (40) years. Notwithstanding this, appellants continued in their refusal to either negotiate or remove the barricade; hence, on February 27, 1980, approximately twenty (20) months after the barricade was erected, appellees initiated the instant action in equity.
Following a view of the premises and a non-jury trial on June 10, 1982, which included the receipt into evidence of the depositions of William Harbold and Earl David Bricker, the chancellor on January 27, 1982, entered Findings of Fact, Conclusions of Law and a Decree Nisi enjoining *245 further interference by appellants with appellees' right-of-way.
On October 14, 1982, the chancellor dismissed appellants' exceptions and made the decree nisi absolute.
In their appeal to this court the appellants ask us to consider the following issues as set forth in the "Statement of Questions Involved":
1. Were the requirements of law for the valid creation of an easement either by express grant or by implication (other than by necessity) proved? Answered in the affirmative by the lower court.
2. Can an easement be extended by the owner of the dominant tenement to other land owned by him adjacent to or beyond the land to which it is appurtenant? Answered in the affirmative by the lower court.
In my view, there was no easement created, whether by express grant or by implication, which burdened appellants' Tract "O" and benefitted appellees' Tract "A". This being so, the question of extending the easement to benefit other lands of appellees would be moot.
I agree with the reasoning of the majority that the language in the "Lerew to Bear" deed precluded the creation by the grantor therein of an easement by express grant and, therefore, I shall not write separately on that issue.
Since I cannot agree with the majority that an easement was created by implication, I shall address that issue, and respectfully enter my Dissent.
In determining whether the appellants' land is burdened with an easement, we are guided by certain well established principles.
An easement is an interest in land in the possession of another which (a) entitles the owner of such interest to a limited use or enjoyment of the land in which the interest *246 exists; (b) entitles him to protection as against third persons from interference in such use or enjoyment; (c) is not subject to the will of the possessor of land; (d) is not a normal incident of the possession of any land possessed by the owner of the interest; and (e) is capable of creation by conveyance. RESTATEMENT OF PROPERTY § 450 (1944).
Generally, an easement may be created by (a) express conveyance, (b) implication or (c) prescription. 2 AMERICAN LAW OF PROPERTY §§ 8.17, 8.31, 8.44 (A.J. Casner ed. 1952). In the case sub judice, appellees can prevail only by proof of the creation of an express easement or an implied easement, since they never claimed, nor could they on this record, that there was an easement by prescription.
The law is jealous of a claim to an easement, and the burden is on the party asserting such a claim to prove it clearly. Becker v. Rittenhouse, 297 Pa. 317, 325, 147 A. 51 (1929).
The majority has found that appellants' Tract "O" is burdened with an easement right-of-way by implication; thus disposing of appellants' first assignment of error.
In deciding whether an easement has been created by implication, the Pennsylvania courts have used two different tests, the traditional test and the Restatement test.
The traditional test has been described as follows:
Three things are regarded as essential to create an easement by implication on the severance of the unity of ownership in an estate; first, a separation of title; second, that, before the separation takes place, the use which gives rise to the easement, shall have been so long continued, and so obvious or manifest, as to show that it was meant to be permanent; and third, that the easement shall be necessary to the beneficial enjoyment of the land granted or retained. To these three, another essential element is sometimes added, that the servitude shall be *247 continuous and self-acting, as distinguished from discontinuous and used only from time to time.
Id., 297 Pa. at 345, 147 A. at 53. See also, DePietro v. Triano, 167 Pa.Super. 29, 31-32, 74 A.2d 710, 711 (1950).
The view expressed in the RESTATEMENT OF PROPERTY § 474, and expressly adopted in Pennsylvania in Thomas v. Deliere, 241 Pa.Super. 1, 359 A.2d 398 (1976), "emphasizes a balancing approach designed to ascertain the actual or implied intention of the parties. No single factor under the Restatement approach is dispositive. Thus, the Restatement approach and the more restrictive tests . . . co-exist in Pennsylvania." Id., 241 Pa.Superior Ct. at 5 n. 2, 359 A.2d at 400 n. 2. See also, Lerner v. Poulos, 412 Pa. 388, 194 A.2d 874 (1963); Schwoyer v. Smith, 388 Pa. 637, 131 A.2d 385 (1957); Spaeder v. Tabak, 170 Pa.Super. 392, 85 A.2d 654 (1952).
In the RESTATEMENT OF PROPERTY § 476, the following factors are designated as important in determining whether the circumstances under which a conveyance of land is made can imply an easement:
(a) whether the claimant is the conveyor or the conveyee,
(b) the terms of the conveyance,
(c) the consideration given for it,
(d) whether the claim is made against a simultaneous conveyance,
(e) the extent of necessity of the easement to the claimant,
(f) whether reciprocal benefits result to the conveyor and the conveyee,
(g) the manner on which the land was used prior to its conveyance, and
(h) the extent to which the manner of prior use was or might have been known to the parties.
I agree with both the majority and the trial court that the Restatement test is of little use in determining whether or *248 not an easement by implication benefits appellees' Tract "A" and burdens appellants' Tract "O". The reason, of course, is that there is no deed of conveyance in existence from which the intent of the parties can be determined in ascertaining if an easement was to be implied.
At the same time, I cannot agree with the majority that an easement was created by implication under the traditional test. In my view, the evidence of unitary ownership of the subsequently created dominant and servient tenements is at best anecdotal and at worst, non-existent. More importantly, the second requirement under the traditional test that there be imposed by the unitary owner prior to the severance of an open, visible, permanent and continuous servitude is absolutely not to be found anywhere in this record. The traditional test as enunciated in Becker v. Rittenhouse, supra, 297 Pa. at 345, 147 A. at 53, requires that the servitude, created by the unitary owner prior to severance, be continuous and self-acting as distinguished from discontinuous and used only from time to time. Here the appellees' predecessor in title to Tract "A" was William Harbold who acquired the tract from his mother, Sue Harbold, on April 16, 1960. William's father, George Harbold, and his mother, Sue, had acquired Tract "A" on March 21, 1906 from William's paternal grandparents, Henry G. and Sarah E. Harbold. The "Being" clause on the 1906 deed went back as far as May 2, 1891. The only evidence in this case as to use was that George Harbold for a very brief period of time in the early 1930's had a portable saw mill on Tract "A", which was there about three to four weeks to saw out timber for the frame of a relative's home. Further, there was evidence that George used the disputed right-of-way to get his winter wood. The other evidence as to use was by trespassers and hunters. The evidence as to use of the disputed right-of-way before George acquired title from his parents is either non-existent or contradictory.
The Order entered by the lower court on October 4, 1982 affirming its Order of January 27, 1982 should be reversed.
NOTES
[1] Also referred to as George Harboldt.
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814 S.W.2d 536 (1991)
Juan GONZALEZ, Jr., Appellant,
v.
DOCTORS HOSPITAL-EAST LOOP and Dr. Carlos Ferrari, Appellees.
No. 01-91-00302-CV.
Court of Appeals of Texas, Houston (1st Dist).
August 8, 1991.
Porfirio F. Diaz, Houston, for appellant.
D. Wayne Clawater, James R. Old, Jr., Steven M. Gonzales, Houston, for appellees.
Before TREVATHAN, C.J., and DUGGAN and DUNN, JJ.
OPINION
PER CURIAM.
This is an appeal from summary judgments granted in favor of appellees. Appellees filed a motion to dismiss the appeal for want of jurisdiction.
On December 11, 1989, the trial court granted summary judgment in favor of Dr. Ferrari. On January 10, 1990, appellant filed an original motion for new trial, though the judgment was interlocutory. On June 14, 1990, the trial court granted summary judgment for Doctors Hospital. The judgment became final as to all issues *537 and all parties on this date. The motion for new trial was overruled on June 27, 1990.
Appellant contends that a nunc pro tunc order signed by the trial court on December 4, 1990 commenced the time period for perfecting his appeal. We disagree. The nunc pro tunc order corrected the plaintiffs name from "John Gonzales, Jr." to "Juan Gonzales, Jr." in the caption of the summary judgment granted in favor of Doctors Hospital. It is clear that this was a clerical correction. To be clerical in nature, the error must be one that is not the result of judicial reasoning, evidence, or determination. Andrews v. Koch, 702 S.W.2d 584, 585 (Tex.1986). A nunc pro tunc order does not extend the time for perfecting an appeal. Cavalier Corp. v. Store Enter., Inc., 742 S.W.2d 785, 787 (Tex.AppDallas 1987, writ denied). Rule 5(c) of the Texas Rules of Appellate Procedure provides:
when a corrected judgment has been signed after expiration of the court's plenary power pursuant to Rule 316 or 317 of the Texas Rules of Civil Procedure, the period mentioned ... in the rule shall run from the date of signing the corrected judgment with respect to any complaint that would not be applicable to the original judgment.
If the trial court corrects a mistake by judgment nunc pro tunc after expiration of the court's plenary power, the court of appeals has no authority to hear any complaint that could have been presented in an appeal from the original judgment. Pruet v. Coastal States Trading, Inc., 715 S.W.2d 702, 704 (Tex.App.Houston [1st Dist.] 1986, no writ). Appellant's points of error pertained to the original judgment and could have been presented in an appeal from that judgment. See, e.g., Gonzales v. Rickman, 762 S.W.2d 277, 278 (Tex.App. Austin 1988, no writ).
Under Texas Rule of Appellate Procedure 41(a)(1), appellant had 90 days from the date the judgment was signed to perfect appeal by either filing a cost bond or affidavit of inability to pay costs. This time period began to run on June 14, 1990 and expired on September 12, 1990. Appellant's affidavit of inability to pay costs of appeal was filed on October 25, 1990. Further, appellant failed to seek an extension of time to perfect his appeal, as permitted by Texas Rule of Appellate Procedure 41(a)(2).
The time period for filing a cost bond or affidavit of inability is jurisdictional. Wadkins v. Diversified Contractors, 714 S.W.2d 136, 137 (Tex.App.Houston [1st Dist.] 1986, no writ). This Court does not have authority to entertain an appeal when the appellant has not timely perfected the appeal. McDonald v. Newmyer, 775 S.W.2d 652, 653 (Tex.AppHouston [1st Dist.] 1989, writ denied).
The appeal is dismissed for want of jurisdiction.
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197 N.J. Super. 63 (1984)
484 A.2d 46
PAMELA J. FITZGIBBON, PLAINTIFF,
v.
JAMES R. FITZGIBBON, DEFENDANT.
Superior Court of New Jersey, Chancery Division Ocean County.
Decided September 28, 1984.
*66 Desmond R. Abazia, for plaintiff (Kolibas & Abazia, attorneys).
Ralph E. McKay, for defendant (Ralph E. McKay, P.A., attorney).
COOPER, J.S.C.
The matter comes before the court by way of motion by the husband seeking an order of the court compelling the court-appointed psychological expert to produce test data of both husband and wife, specifically the Minnesota Multiphase Personality Inventory Test, as well as the results of any other testing data utilized by him in rendering his report to the court.
The contemplated use of the report is to aid in the determination of the most appropriate parent to be designated custodian. Previously, a letter had been forwarded from the attorney for the husband, requesting production of this information. No authorization or informed consent of either husband or wife was attached thereto.
In addition, the husband requests the termination of the expert's services, while by the way of cross motion, the wife seeks his retention. The psychological report was presented to the court on the day of hearing and copies have been forwarded to the attorneys for the respective parties. The issue pertaining to the retention of the expert is resolved in favor of the cross complainant. Since the report has already been submitted, the removal of the expert at this point in time would be totally non-productive and only further hinder the resolution of the custody matter and is therefore not in the best interest of the child: See Brotman v. Brotman, 137 N.J. Eq. 514 (E. & A. 1946); D. v. D., 108 N.J. Super. 149 (Ch.Div. 1969); E. v. T., 124 N.J. Super. 535 (Ch.Div. 1973); S. v. H.M., 111 N.J. Super. 553 (App.Div. 1970); DiBiano v. DiBiano, 105 N.J. Super. 415 (App.Div. 1969); Mayer v. Mayer, 150 N.J. Super. 556 (Ch.Div. 1977).
*67 To preserve and protect the child's welfare is the highest calling of the court, E. v. T., supra, 124 N.J. Super. at 540.
There remains for resolution the issue of whether the expert psychologist should be ordered to produce the test data. The expert had refused to do so, claiming the psychologist-patient(s) privilege, which he conceded could be waived, but only by the informed consent of the party should he or she desire. The psychologist-patients privilege was not recognized at common law. It was created by statute.
The confidential relations and communications between and among a licensed practicing psychologist and individuals, couples, families or groups in the course of the practice of psychology are placed on the same basis as those provided between attorney and client, and nothing in this act shall be construed to require any such privileged communications to be disclosed by any such person. N.J.S.A. 45:14B-28, Evid.R. 26A-1.
This privilege has been equated not only with the attorney-clients privilege, as specifically set forth in the statute, but also as analogous to the physician-patients privilege. Rosegay v. Canter, 187 N.J. Super. 652 (Law Div. 1982). However, it does not rise to the level of the marriage-counsellor privilege which is broader in scope, Wichansky v. Wichansky, 126 N.J. Super. 156 (Ch.Div. 1973); Touma v. Touma, 140 N.J. Super. 544 (Ch.Div. 1976). See also N.J.S.A. 45:8B-29, Evid.R. 28A-1.
The overriding principle, the polestar of all decisions, that the best interest of the child must govern in custody actions is axiomatic. See Brotman v. Brotman, supra, 137 N.J. Eq. at 514; D. v. D., supra, 108 N.J. Super. at 149; M. v. K., 186 N.J. Super. 363 (Ch.Div. 1982).
To this ideology, which inherently decrees that when the information sought is relevant evidence which assists in coming to a proper determination of the custody issue, the welfare of the child being the paramount concern, the statutorily created privilege must defer, Callen v. Gill, 7 N.J. 312 (1951); D. v. D., supra, 108 N.J. Super. at 152. In this context, a privilege has been held to be constitutionally infirm, as a matter of due process. See State v. Roma, 140 N.J. Super. 582 (Law Div. *68 1976), where the court in considering the marriage-counsellor's privilege stated, 140 N.J. Super. at 593:
When to sustain the exercise of a privilege, such as that here in issue, would compromise fundamental constitutional rights, judicial recognition of that privilege must be withheld.
See also D. v. D., supra, 108 N.J. Super. at 159, with respect to physician-patient privilege; M. v. K., supra, 186 N.J. Super. at 373, concerning both physician-patient privilege and marriage-counsellor privilege.
The basis or motivation for recognition of a privilege is to encourage freedom of consultation on the part of the patient (client) to protect confidential communications from disclosure.
Their sole warrant is the protection of interests and relationships which, rightly or wrongly, are regarded as of sufficient social importance to justify some incidental sacrifice of sources of facts needed in the administration of justice. McCormick's Handbook on the Law of Evidence (2d, ed., Cleary, 1972), at 152; Ibid 186 N.J. Super. at 371.
However, balanced against this thesis is the fact that it is absolutely essential that parties know all of the relevant elements utilized by the expert in coming to a conclusion if they are to have a reasonable opportunity to contradict or rebut all or a portion of the expert's evaluation.
The court reasoned in M. v. K., supra, 186 N.J. Super. at 371:
Yet it is inconceivable to us that in promulgating this act, and more particularly the privilege, the Legislature took into consideration the best interests and welfare of the children of the marriage, especially as might affect proper, and indeed, safe custodial placement.
To the disclosure of relevant evidence that will be utilized either by the expert or by the court in determining the custody issue, the welfare of the child being paramount, statutorily created privileges must defer.
Thus it is clear that fundamental policy considerations, in this custody matter, supercede the statutorily devised privilege.
That a privilege is that of the individual and not of the expert and accordingly may be waived only by the person to whom it belongs is the applicable law in the State of New *69 Jersey, State v. Roma, supra, 140 N.J. Super. at 582; M. v. K., supra, 186 N.J. Super. at 370; Touma v. Touma, supra, 140 N.J. Super. at 553.
Therefore, this court holds that although there is no specific case found dealing with the precise issue presented, it can be inferred from the language and rationale of those analyzed that there is no privilege with respect to the production of the Minnesota Multiphase Personality Inventory Test or other test data of the husband and wife upon which the psychologist relies upon in coming to his conclusions concerning custody. This information should be made available to the attorneys for both parties upon request with the following proviso: That the test data must be submitted to the court for an in camera evaluation along with a statement by the expert as to whether or not the specific data was utilized by him in coming to his evaluation. The court should then study the data to see whether it will be used in coming to the court's conclusion with reference to the custody issue. After this evaluation, if the court concludes that the data was not used by the psychologist, nor will it be utilized in coming to the court's conclusion and further that the release of such data would not be in the best interest of the child, such data should not be released. If the data information is used by either the psychologist or the court in coming to its conclusions and its release would be in the best interest of the child, such data should be made available to the husband/wife or both upon request therefore.
Assuming arguendo that a prima facie case of privileged communication is established, due process requires that it be held inapplicable in child custody cases, when the best interest of the child dictates that all relevant information utilized by the expert and by the court be available to all parties. The issue of informed consent is made moot by the above determination.
Motion by defendant compelling production of psychologist's testing data after an in camera evaluation by the court as to *70 its relevancy and its release in the best interest of the child is granted.
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406 B.R. 918 (2009)
In re SUNBELT GRAIN WKS, LLC, Debtor.
Steven L. Speth, Trustee, Plaintiff,
v.
Whitham Farms Feedyard, L.P., and Security State Bank, Defendants.
Bankruptcy No. 08-10204. Adversary No. 08-5112.
United States Bankruptcy Court, D. Kansas.
June 18, 2009.
*921 Timothy J. King, Speth & King, Wichita, KS, for Plaintiff.
Bruce J. Woner, Luke P. Sinclair, Woner Glenn Reeder Girard & Riordan, Topeka, KS, Lyndon W. Vix, Fleeson Gooing Coulson & Kitch LLC, Thomas J. Lasater, Wichita, KS, for Defendants.
MEMORANDUM OPINION
ROBERT E. NUGENT, Chief Bankruptcy Judge.
Security State Bank ("SSB") moves for summary judgment on the trustee's complaint against itself and Whitham Farms Feedyard, LP ("Whitham"). The trustee in bankruptcy, Steven Speth, filed an adversary complaint under Fed. R. Bankr.P. 7001(2) seeking a determination of the validity, priority, and extent of defendants' respective interests in certain proceeds from the trustee's sale of debtor Sunbelt Grain WKS, LLC's ("Sunbelt") grain inventory and asserting its 11 U.S.C. § 544 rights as a hypothetical bona fide purchaser. In its answer to that complaint, SSB asserts a perfected security interest in grain inventory that was stored at Sunbelt at the time of commencement of this bankruptcy case and that this interest primes that of Whitham and the trustee. In response, Whitham claims it owned a portion of the corn in the debtor's elevator because it purchased same and prepaid for it. As a buyer in the ordinary course of business, Whitham contends that it prevails over SSB.[1] Whitham also later asserted its priority *922 to the sale proceeds under the doctrine of equitable subordination.[2] The ultimate issues here are (i) whether Whitham has an ownership interest in the corn or is a buyer in the ordinary course of business; and (ii) whether SSB's conduct affords the Court a basis to equitably subordinate its claim below that of Whitham.[3]
Procedural Background
This bankruptcy case was commenced by the filing of an involuntary chapter 7 petition on February 4, 2008. SSB was one of the petitioning creditors. Steven Speth was appointed chapter 7 trustee. After the order for relief was entered on March 5, 2008, the trustee sought and obtained court approval to sell Sunbelt's grain inventory (corn and wheat).[4] Said sale occurred on April 10, 2008. Thereafter, the Court approved the trustee's disbursement of a portion of the sale proceeds to various open storage holders.[5] SSB and Whitham asserted competing claims to the remainder of the corn sale proceeds held by the trustee, approximately $3.3 million.[6] According to the pretrial order, SSB asserts a claim of $3.2 million as Sunbelt's secured lender and Whitham asserts a claim of $2.19 million for 580,000 bushels of prepaid corn of which only 56,000 bushels were delivered and received.[7]
The trustee commenced the instant adversary on May 29, 2008 to determine these parties' interests in the sale proceeds. Following a period of discovery, SSB filed its motion for summary judgment on the trustee's complaint. The trustee does not contest SSB's motion, leaving Whitham and SSB as the sole parties battling over the sale proceeds.[8] It is undisputed that SSB holds a valid and perfected security interest in Sunbelt's grain inventory, accounts and proceeds thereof.[9] Accordingly, the motion for summary judgment centers on Whitham's ability to establish its ownership of a portion of the corn inventory and its status as a buyer in the ordinary course or the doctrine of equitable subordination, in order to overcome SSB's perfected security interest in the grain.
Summary Judgment Standards
This Court's function in reviewing SSB's motion for summary judgment is to first determine whether genuine issues of fact exist for trial. In making this determination the Court may not weigh the evidence nor resolve fact issues.[10] On summary judgment, it is not the Court's function to determine witness credibility, weigh evidence or decide competing inferences.[11]*923 Once the Court determines those facts to which there is no dispute, it must then determine whether those uncontroverted facts establish a sufficient legal basis which entitle the movant to judgment as a matter of law.[12] If different ultimate inferences may properly be drawn from the facts, summary judgment is not appropriate.[13]
Before addressing the specifically numbered paragraphs of the statements of fact, a few general comments are in order regarding Whitham's compliance with summary judgment procedure in purporting to controvert SSB's statement of uncontroverted facts. Whitham's memorandum in opposition to SSB's summary judgment motion contains a three-page "factual narrative."[14] While the narrative may be helpful in placing Whitham's position and the chain of events in context, it is devoid of any references to the record and disregards the requirements of D. Kan. LBR 7056.1(b)(2) and (d). As such, the Court will disregard the narrative in its entirety in deciding whether Whitham has shown the existence of genuine issues of material fact that require a trial.[15] Instead, the Court focuses on Whitham's specific responses to SSB's statement of uncontroverted facts, keeping in mind that the Court disregards those factual disputes that are not material to the outcome[16] and a party's characterization of the facts, whether made by the movant or the non-movant.[17]
Whitham submits the affidavit of its general partner, Stewart Whitham, as the primary means to controvert SSB's statements of fact.[18] Summary judgment affidavits must meet certain requirements.[19] They must be based upon personal knowledge and must contain information admissible at trial.[20] Statements of *924 mere belief are disregarded.[21] An affidavit that purports to testify concerning another party's intent is improper.[22] The affidavit may not be based upon conclusory statements without specific supporting facts.[23]
The Whitham affidavit suffers from each of these defects. Mr. Whitham states that "[a]ll the facts set forth in this affidavit are based upon my personal knowledge; my review of relevant documents; my opinion, based upon my experience and knowledge of the operations of [Whitham and Sunbelt], by virtue of having been one of Sunbelt's majorif not the largestcustomers..."[24] Yet at another point in his affidavit, Mr. Whitham asserts his "good faith belief and understanding" as a basis to conclude that SSB's actions "appear to be a contrivance."[25] Mr. Whitham's affidavit contains several instances of hearsay statements attributed to third parties.[26] It purports to state what Sunbelt or SSB intended or knew, matters as to which Mr. Whitham can claim no personal knowledge.[27] It abounds with conclusory statements regarding course of dealing without providing any underlying specific facts or evidence of that alleged course of dealing.[28] Many of Whitham's conclusory statements are legal conclusions prefaced upon that alleged course of conduct and dealings *925 with Sunbelt. For example, he concludes that title to the corn passed upon payment,[29] that delivery costs were included in the prepayment,[30] that the corn was identified to the contract at the time of payment,[31] and that the parties waived the NGFA rules,[32] all based upon the parties' alleged course of dealing while setting forth no specific facts. Some of Whitham's conclusory statements lack any evidentiary support whatsoever.[33] Finally, some of Whitham's statements in his affidavit are simply not material to the outcome.[34] In summary, very little of the Whitham affidavit is effective to controvert SSB's statement of uncontroverted facts or support Whitham's additional statements of uncontroverted fact because it is made up of largely conclusory statements that lack the necessary supporting facts based upon Stewart Whitham's personal knowledge.[35]
Applying the foregoing standards, the Court finds the following facts are uncontroverted.
Uncontroverted Facts[36]
Sunbelt was established in 2006 as an LLC. Its principals, Jim and Kathy Shafer, have been in the grain business in western Kansas for many years. Sunbelt operated elevators at various locations in western Kansas. It purchased grain (corn and wheat) from local farmers for resale to buyers and also maintained open storage operations for grain owned by the producers. SSB was its lender, holding several notes executed by Sunbelt in 2006 and 2007, and extending a line of credit. Sunbelt's indebtedness was secured by nearly all of its property as collateral and the line of credit required it to submit monthly borrowing base certificates.
Whitham is a Colorado limited partnership and operates a feedyard near Leoti, Kansas. Stewart Whitham is the general partner. For a period of more than one growing season, Whitham bought corn from Sunbelt for its feeder operations.
On April 27, 2007, Sunbelt issued a Merchandising Target Offer (MTO) proposing to sell to Whitham or any other taker seven 100,000 bushel lots of corn at prices to be calculated based upon the futures market at the Chicago Board of Trade (CBOT or Board). Under the rather sparsely-worded terms of the offer, each *926 lot would be sold at a price per bushel equal to a certain price quoted on the Board for future grain, plus a mark-up. As an example, the MTO offered 100,000 bushels of corn for delivery in December of 2007 to be priced at "23 H." This means that corn delivered in that lot would be priced at the Board's May, 2008 futures price plus 23 cents. The MTO set out the months in which each lot would be available for delivery. The parties' understanding was that as Whitham needed grain, it would arrange specific delivery dates within the months specified on the MTO.
Whitham offered to buy five of the seven lots (500,000 bushels) at the offered prices. These purchases were confirmed by Confirmation of Sale and Purchase (CSP) forms executed by Karen Allen on behalf of Sunbelt and transmitted to Whitham. One CSP was executed for each of the five lots and each CSP was dated May 4, 2007.[37] Each CSP specified that the weight and grade of the corn would be determined at its destination and that the purchases would be prepaid on November 1, 2007, prior to delivery to Whitham.[38] Both the MTO and the CSPs provided that "NGFA Rules" would apply, referring to the National Grain and Feed Association Trade Rules. The MTO provides a place for the drafter to circle either "delivered" or "FOB." Neither term is circled on this particular MTO, but the parties agree that these were "delivered" contracts. Factually, this means that Sunbelt was responsible for delivery to Whitham's place of business. As will be discussed in the legal analysis below, the parties differ as to the legal effect of that term.
On November 1, 2007, Whitham prepaid Sunbelt $2,099,750 for the five lots of corn to be delivered in the coming months.[39] The delivery costs were included in the price term and in Whitham's prepayment. Sunbelt deposited Whitham's check in its operating account at SSB which at that time had a balance of $2,727.33. Upon deposit of Whitham's check, SSB swept Sunbelt's account and applied it to pay down Sunbelt's line of credit which had a balance of $1,662,000.[40] The parties disagree whether there was sufficient grain in Sunbelt's facilities to deliver to Whitham on November 1. The Court observes that the exhibits attached in support of SSB's motion reference a "grain position book" among the books and records of Sunbelt.[41] This book would apparently show how much corn was on hand on November 1, 2007 or any other given date. Inexplicably, Sunbelt's grain position book was not submitted by either party with their summary judgment materials.
On November 19, 2007, Whitham agreed to buy an additional 80,000 bushels of corn. Sunbelt confirmed that purchase with two more CSPs, each for 40,000 bushels, one for December 2007 delivery and the other for January 2008 delivery. Whitham prepaid $326,400 for this grain on November 20, 2007. Sunbelt also deposited this *927 check in its operating account at SSB. Whitham received no bills of sale, warehouse receipts or other documents of title in connection with the corn for which it paid.[42] Likewise, Whitham was charged and paid no storage fees to Sunbelt for the corn Sunbelt agreed to sell to Whitham. Sunbelt bore the risk of loss associated with the corn until the corn was delivered to Whitham.[43]
On December 6, 2007, Kathy Shafer contacted James Arnold, president of SSB, and requested a prompt meeting. At that time, she reported to him that Sunbelt had suffered considerable monetary losses because of its hedging practice. This was the first time that Shafer had so advised SSB and Arnold confirms in his affidavit that this was when SSB first learned that Sunbelt was "out of position." Sunbelt had not timely provided its borrowing base certificates to SSB for three months prior. As a result of Shafer's revelation, Sunbelt was in default of the terms and conditions of its loans and SSB closed Sunbelt's line of credit the next day, December 7.
On December 14, 2007, SSB commenced a state court foreclosure proceeding in the District Court of Greeley County, Kansas, asserting a security interest in Sunbelt's grain inventory. On that same date, the state grain inspector conducted an inspection of Sunbelt's grain inventory. The state grain inspector's report is not part of the summary judgment record before the Court. Sunbelt was forced to stop its December deliveries to Whitham after delivering only 57,000 bushels of the 580,000 bushels contracted for.[44] In January 2008, the Kansas Department of Agriculture commenced a state court receivership action against Sunbelt and the state court appointed Terry D. Criss, Esq., as receiver to take control of the assets.
On February 4, 2008, SSB, in concert with two other petitioners, commenced an involuntary bankruptcy petition against Sunbelt, and an order for relief was entered on March 5, 2008, resulting in the appointment of a chapter 7 trustee, Steven Speth, to administer and liquidate Sunbelt's assets, and a stay of the state court cases.
In its opposing memorandum, Whitham set out 41 additional facts, nearly all of which are controverted by SSB. Those facts are largely supported by the same flawed affidavit Whitham used to controvert SSB's facts. Nonetheless, Whitham's additional "facts" may be summarized as follows. Whitham asserts in a conclusory fashion that over a period of 18 to 20 years, it and Sunbelt engaged in a course of dealing pursuant to which Whitham would bid for and buy corn in advance, pay for it, and take title to it immediately upon payment. Sunbelt would hold Whitham's corn after payment as a courtesy to Whitham and deliver it to the feedyards when and as Whitham requested. Whitham asserts that over the 18-20 year period, neither party observed or considered themselves bound by the NGFA rules. Whitham further claims that on December 14, 2007, according to statements attributed to Kathy Shafer and Karen Allen, another Sunbelt employee, after the state grain inspector's "full inspection of all the commodities of Sunbelt," sufficient grain was present in Sunbelt's inventory on December 14, 2007.[45] Unfortunately, Whitham fails to provide the inspector's report *928 to the Court. Thus, this "fact" is not based upon personal knowledge, lacks foundation with respect to the state grain inspector, contains inadmissible hearsay, and contains matter outside the record before this Court. In addition, Whitham's statement does not speak to whether there was sufficient grain on hand in Sunbelt's inventory on the date of Whitham's prepayment November 1, 2007.[46] The Court cannot find as uncontroverted fact that Sunbelt did have sufficient grain on hand as of November 1, 2007 to fulfill Whitham's contract.
Whitham's course of dealing contentions are the sole basis for many of its statement of uncontroverted "facts."[47] These contentions are untenable for several reasons. First, the 18-20 year period referenced by Whitham encompasses an alleged course of dealing with Sunbelt's predecessor, Sunbelt Grain, Inc. Kathy Shafer's father, Vaughn Young, was the principal of Sunbelt Grain. Kathy and Jim Shafer formed the Sunbelt LLC in 2006 after they bought out Sunbelt Grain. The Court is not convinced that Whitham's alleged course of dealing with Sunbelt Grain, a distinct business entity, is material to the transactions between Whitham and Sunbelt.
Second, Whitham's affidavit avers a course of dealing in a generic and conclusory fashion. Whitham does not set forth specific facts demonstrating a course of dealing. Whitham's affidavit does nothing more than express Whitham's personal understanding of the terms of the CSPs and does not set forth any underlying facts that show his understanding was shared by Sunbelt, based upon the parties' repeated conduct.[48] Whitham's affidavit falls far short in supplying the evidentiary predicate for a course of dealing.
Third, and most significant, Whitham seeks to alter or vary the terms of the 2007 CSPs (including the application of the NGFA rules) by introduction of this alleged course of dealing. Because this contract involves the sale of goods, the parol evidence rule as codified in Article 2 of the UCC applies rather than the Kansas common law parol evidence rule.[49] Even applying this more liberal parol evidence rule, course of dealing would only be admissible to explain a contract term, not to contradict, alter or vary the existing term.[50] Here, the CSPs are clearly *929 and expressly made subject to the NGFA rules. Use of an alleged course of dealing to write out the NGFA rules is an attempt to vary or alter this term. Where the course of dealing conflicts with a clear and express term, the express term controls.[51] Finally, the fact that there may be differing interpretations of a contract's provisions does not present issues of fact precluding summary judgment where the contract is complete and unambiguous.[52]
Whitham further asserts that the CSPs were not honored because SSB commenced its legal action, doing so only after it had honored checks written on Sunbelt's account to several farming entities that were indebted to SSB and operated by relatives of Kathy Shafer. The Court considers these facts, and the statement in Whitham's affidavit about what the state court receiver told him to be immaterial. This Court does not question that when the Bank foreclosed on Sunbelt, Sunbelt lost its ability to perform these contracts, and that Whitham was forced to obtain a corn supply from an alternative source. Similarly, when the Bank commenced the involuntary bankruptcy case, Sunbelt acquiesced and converted the case to a voluntary chapter 7 case, resulting in this Court appointing a trustee who, with the assistance of the receiver, took possession and control of the assets and liquidated them in an orderly fashion. The Court concludes that this process prevented Sunbelt from performing Whitham's contracts.
Analysis
The fundamental legal issues here are (1) whether Sunbelt retained title to the grain destined for Whitham's feedyard when Whitham prepaid on November 1 and 20, 2007; and (2) whether SSB's claim is susceptible to equitable subordination because of its conduct. Resolving these issues requires the Court to address some preliminary legal questions. First, the Court must determine the legal effect of the delivery contracts. Second, the Court must determine whether the "gap-fillers" in Article 2 of the Uniform Commercial Code (UCC) or the NGFA Rules, or both, define the rights of the parties here. Third, the Court must decide whether the uncontroverted facts in this record would support a finding of the requisite unfairness or misconduct necessary to subordinate SSB's secured claim to Whitham's unsecured claim.
A. Delivery Contracts
Even though the MTO does not designate whether the contracts are "delivery" or "FOB," the parties agree that Sunbelt was to deliver the grain to Whitham when Whitham directed delivery. Delivery charges were included in the price. The CSPs specify that both weight and grade of the grain were to be determined at destination. As adopted in Kansas, UCC § 2-308, provides that "unless otherwise agreed," the point of delivery is presumed to be at seller's place of business.[53] By contrast, the NGFA Rules provide that "truck grain" shall be "considered to have *930 been delivered at the time and date of unloading as evidenced by a scale ticket or dock receipt issued by the receiving facility."[54] The Court concludes that delivery was to occur at Whitham's facility.
B. NGFA Rules
The contract clearly specifies that NGFA Rules will apply. Whitham's attempt to contradict or vary this term with "course of dealing," as discussed above, is unpersuasive.[55] The written contract clearly expresses application of the rules to the parties' transactions. In any event, the pertinent NGFA rules are not much different from the general provisions of Article 2 governing contracts for the sale of goods.
Article 2 codifies a parol evidence rule that honors the provisions of written agreements and protects them from contradiction by extrinsic evidence of a previous or contemporaneous oral agreement. KAN. STAT. ANN. § 84-2-202 (2008 Supp.) provides that a written agreement may be "explained or supplemented" by course of dealing and by evidence of consistent additional terms unless the court determines the writing to have been intended as a complete and exclusive statement of the agreement's terms. Here, both parties assented to the terms of the MTO and CSPs. Although a Whitham signature is lacking, KAN. STAT. ANN. § 84-2-201(2) (1996) provides that, between merchants, a confirmation that is sufficient against the sender and received is binding on both parties unless the recipient objects ten days after receiving the written confirmation. Thus, the CSPs are binding on the parties. Indeed, Whitham relies on them to support its claim to the grain.
Because both the MTO and the CSPs reference the NGFA rules, the Court concludes that they govern this transaction. Nothing in Whitham's affidavit supports a conclusion otherwise. His largely conclusory statements that, over the years, neither party had reason to reference these rules and that they only became relevant when brought to Kathy Shafer's attention during her deposition in this case, do not reference a course of dealing that "explains" the contract. Rather, these statements directly contradict an otherwise enforceable term of the agreement and the parol evidence rule contained in § 84-2-202 precludes admission of such contradictory extrinsic evidence. On this record, the Court concludes that the NGFA rules do apply.
NGFA Rule 3 provides for a confirmation process similar to that outlined in Article 2, KAN. STAT. ANN. § 84-2-201(2). If one party fails to send the other a written confirmation, the non-confirming party is deemed to have agreed to the terms contained in the most recent confirmation.[56] Thus, under either the UCC or the NGFA, these confirmations, read with the MTO, are binding agreements. These agreements provide for the purchase by Whitham and delivery of the 100,000 lots of grain in various months through the winter of 2007-2008. Each CSP specifies a month for delivery and the parties agree that actual delivery dates were to be determined by Whitham based upon its need for the grain in its operations. That circumstance is a good example of admissible *931 parol evidence that explains the written contract terms.
C. Ownership
The core issue here is when or if Whitham became the owner of the contracted corn. SSB argues that, according to NGFA rules and the contract's terms, Sunbelt retained the risk of loss and, therefore, an ownership interest in the grain until it was delivered. Whitham says that it owned the grain immediately upon prepayment, notwithstanding any rules or other provisions because that was the parties' course of dealing over many years' time. This matters because, if Sunbelt retained ownership of the grain, the after-acquired property clause in SSB's security agreements attached its security interest to the grain, giving it a prior interest to that of Whitham. If Whitham took ownership when it prepaid, it could claim that, as a purchaser in the ordinary course, its interest in the grain trumps SSB's security interest. The Court notes that it is undisputed that Whitham received no bills of sale or warehouse receipts for the corn it agreed to purchase from Sunbelt, that Sunbelt did not charge storage fees to Whitham for the corn it agreed to sell Whitham, and that Sunbelt bore the risk of loss for corn that is the subject of the CSPs until it was delivered to Whitham.[57] In short, no documents of title are before this Court showing Whitham's ownership of any corn under the CSPs at any time.
Deciding this pivotal question of ownership is complicated by the ongoing factual dispute concerning whether there was sufficient grain on hand on the May 4, 2007 and November 19, 2007 contract dates or on the November 1 and 20, 2007 prepayment dates.[58] Whitham relies heavily on the explicit terms of the parties' agreement being subject to interpretation in light of the historical course of dealing between Sunbelt and itself. As noted above, terms in a writing may be explained or supplemented, but not contradicted, by evidence of a course of dealing.[59] The express terms of an agreement and the parties' course of dealing shall be construed as consistent where reasonable, but when they cannot, the express terms of the writing control.[60] Among the express terms of the writing is, as noted above, a specific reference that reads into the CSPs the NGFA Rules.
Keeping these baseline principles in mind, the Court applies the law governing the passage of title under Article 2 to the explicit terms of the contract which, when contradicted by a purported course of dealing, take precedence. The Court cannot conclude as a matter of uncontroverted fact that there was sufficient grain on hand to honor the contracts either in May or November of 2007. The only record support for concluding otherwise is found in Whitham's affidavit and is based essentially on hearsay, Whitham's characterization or interpretation of statements attributed to others, or Whitham's own conclusory understanding. None of the statements in Whitham's affidavit are based on personal knowledge regarding the quantity of corn on hand at Sunbelt's *932 facility available to fulfill the Whitham contracts at the time of prepayment in November 2007.[61]
The only other evidentiary basis concerning the quantity of corn on hand in November of 2007 is the deposition testimony of Sunbelt's Kathy Shafer. SSB cites to her testimony as support for the proposition that Sunbelt did not have a sufficient quantity of corn on hand at Sunbelt's facility to satisfy the CSPs at the time of Whitham's prepayment.[62] Whitham attempts to controvert that fact with other references to Shafer's testimony where she could not state the precise quantity of corn on hand at certain times and with quantities that were on hand on dates other than November 1, 2007.[63] In its additional statements of uncontroverted fact, Whitham again alleges, based solely upon the Whitham affidavit, that a sufficient quantity was on hand at the time of prepayment.[64] This alleged fact is not properly supported by an affidavit made upon personal knowledge. Moreover, Whitham has not come forward with the key piece of evidence to refute Shafer's testimony and to support its factual contention the grain position book maintained by Sunbelt. Shafer testified that the grain position book would identify the quantity on hand in Sunbelt's facilities at any given point in time, including that portion of the grain that was open-storage grain belonging to producers and the portion of grain to fulfill contracts with buyers other than Whitham.[65] Thus, the Court cannot find as uncontroverted fact that there was a sufficient quantity of corn on hand in November when Whitham prepaid for Sunbelt to fulfill the contracts (580,000 bushels) and therefore, Sunbelt's commitment to sell to Whitham related to "future goods" as that term is employed in Article 2.[66]
The status of goods as "existing" or "future" can affect the manner in which title to those goods passes. Section 2-401 provides that Article 2's provisions apply without regard to the title of those goods "except where the provision refers to such title."[67] In situations not covered by the other provisions of the article, and where title becomes material, KAN. STAT. ANN. § 84-2-401 sets out several rules governing its passage. The basic rule, found in § 84-2-401(1), provides that title cannot pass under a contract for sale until the goods are identified to the contract under § 2-501. Unless it is otherwise explicitly agreed, when the goods are identified to the contract, the buyer acquires a "special *933 property."[68] Section 84-2-401(2)(b) states that unless the parties have otherwise explicitly agreed, title passes to the buyer at the time and place where seller completes performance and if that performance requires delivery at destination (as it did here), title passes at the goods' destination.
Was this corn identified to Whitham's contract? Section 84-2-501 provides that the buyer obtains "a special property and an insurable interest" by identifying existing goods in any manner and at any time as the parties explicitly agree.[69] Here, the parties' agreement reads in the NGFA rules and, under NGFA Rule 6, title and the risk of loss as to trucked grain passes when the grain arrives at the buyer's facility.[70] Thus, the CSPs contain an explicit agreement governing title passage that dovetails nicely with § 84-2-401(2). If, as SSB argues, the corn on hand was insufficient to fulfill the contract, § 84-2-501 provides essentially the same result. It states:
In the absence of explicit agreement identification occurs ... (b) if the contract is for the sale of future goods other than those described in paragraph (c) [growing crops or livestock young], when goods are shipped, marked, or otherwise designated by the seller. ...[71]
Here, the contract explicitly treats the passage of title by incorporating NGFA Rule 6 and the Court need not turn to § 2-501(b) to replace that term.[72] If there were insufficient goods to fulfill the contract when Whitham paid in advance on November 1, title in the corn did not pass at that time. As Sunbelt retained title to what corn it had, SSB's security interest attached to it.[73]
KAN. STAT. ANN. § 84-2-105(2) (1996) provides that the goods must be both existing and identified in order for an interest in them to pass. Goods that are not both existing and identified are "future goods." A present sale of those goods "operates as a contract to sell." Thus, the corn contracted by Whitham, but not owned by Sunbelt at the contract or payment date, constituted "future goods" and Sunbelt's agreement to sell it to Whitham was a contract to sell. In the instant that Sunbelt acquired ownership of those goods, SSB's security interest attached to them and would continue to encumber them until the corn was delivered to Whitham.[74]
As to the funds Whitham paid in advance, SSB's security agreement attached all of Sunbelt's accounts receivable *934 and deposit accounts. In short, nothing in the facts or in the law supports Whitham's claim that "course of dealing" somehow passed title to the buyer upon Whitham's prepayment in November. To conclude that, this Court would have to ignore the plain meaning of the writings on which the sale is based and accept Whitham's contradiction of their terms. Doing so would flaunt Article 2's rules of integration and interpretation.
The Court concludes that, as a matter of law, SSB is entitled to judgment that its security interest in Sunbelt's corn and accounts takes priority over Whitham's unsecured claim for corn contracted and not delivered.
D. Equitable Subordination[75]
Drawing all reasonable inferences against SSB, the Court finds for this motion's purposes that SSB had some reason to be aware of Sunbelt's distress before December of 2007. Sunbelt had failed to timely file its borrowing base reports for three months. The Court also finds that SSB swept funds from Sunbelt's accounts on November 1, 2007, immediately after Whitham's prepayment was deposited.[76] SSB's $1.6 million sweep, added to Sunbelt's payment of various producer entities for grain sold to the elevator, totaled approximately $2.07 million, expending near the full amount of Whitham's prepayment ($2,099,750). Other than the familial relationship between Shafer and one of the owners of these entities, nothing in the record suggests that the producers were "related" or "affiliated" with Sunbelt or SSB. There is no evidence in the record suggesting any misconduct or meddling on the part of SSB by which it exerted control over Sunbelt. Indeed, the record suggests nothing more than SSB's apparent exercise of its rights under its loan documents with both Sunbelt and these other producer entities.[77] The Court notes in this connection that no deposition testimony of any *935 lending officer is offered by Whitham and that all of its factual support for this claim comes from the Stewart Whitham affidavit which, as SSB notes, is largely grounded in hearsay, innuendo, and Whitham's characterizations and conclusory statements.
Some finding of wrongdoing or inequitable conduct is a necessary predicate to equitable subordination.[78] The Tenth Circuit looks to a three-part test to determine when subordination is appropriate
(1) The claimant has engaged in inequitable conduct;
(2) The conduct has injured creditors or given an unfair advantage to claimant; and
(3) Subordination is not inconsistent with the Bankruptcy Code.[79]
In short, Whitham needed to produce some basis for a finding that SSB engaged in fraud, breached its fiduciary duty or controlled the debtor.[80] As the Tenth Circuit has stated, a non-insider creditor generally owes no fiduciary duty to the other creditors of a debtor and must be found to have engaged in specific conduct that gave rise to such a duty.[81] The degree of wrongful conduct necessary to predicate an equitable subordination claim has been described as "egregious," "gross misconduct tantamount to fraud, misrepresentation, overreaching or spoliation."[82]
Whitham points to nothing in the record supporting this level (or any level) of wrongdoing on the part of SSB. SSB is entitled to judgment as a matter of law on Whitham's equitable subordination claim.
Conclusion
Consistent with the forgoing, SSB's motion for summary judgment should be granted and judgment entered for SSB on the trustee's adversary complaint, finding that SSB's perfected security interest in Sunbelt's assets entitles it to a priority claim against the grain and its proceeds superior to the unsecured claim of Whitham. A judgment on decision will issue this day.
NOTES
[1] KAN. STAT. ANN. § 84-9-320(a) (2008 Supp.).
[2] Adv. Dkt. 33. See 11 U.S.C. § 510(c).
[3] See Final Pretrial Order, Adv. Dkt. 52.
[4] Dkt. 28 and 47.
[5] Dkt. 63 and 76.
[6] See Dkt. 120.
[7] Sunbelt stopped deliveries of corn to Whitham on or about December 14, 2007 when SSB commenced a state court foreclosure action against Sunbelt. The current principal amount of SSB's claim, after apparently liquidating some of its collateral, is $1,988,733.38 plus accrued interest. SSB contends that it is over secured and entitled to fees and costs. See Adv. Dkt. 52, p. 10.
[8] Adv. Dkt. 49.
[9] See Pretrial Order, Adv. Dkt. 52, Stipulation ¶ s G, H, I, and J.
[10] First Sec. Bank of New Mexico, N.A. v. Pan American Bank, 215 F.3d 1147, 1154 (10th Cir.2000) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986)); Concrete Works of Colo., Inc. v. City and County of Denver, 36 F.3d 1513, 1518 (10th Cir. 1994) (Court may not resolve disputed questions of fact at the summary judgment stage).
[11] Pan American Bank, supra; Masilionis v. Falley's Inc., 904 F. Supp. 1224, 1226 (D.Kan. 1995); Boyer v. Board of County Com'rs of Johnson County, 922 F. Supp. 476, 484 (D.Kan.1996), aff'd 108 F.3d 1388 (10th Cir. 1997).
[12] E.E.O. C. v. Lady Baltimore Foods, Inc., 643 F. Supp. 406, 407 (D.Kan. 1986) (Even if there are no genuine issue of material fact, the movant still has the burden to show it is entitled to judgment as a matter of law.); Reed v. Bennett, 312 F.3d 1190, 1195 (10th Cir.2002).
[13] Security Nat. Bank v. Belleville Livestock Commission Co., 619 F.2d 840, 847 (10th Cir.1979).
[14] See Adv. Dkt. 51, pp. 2-5.
[15] See Bond v. Queen, 71 F. Supp. 2d 1117, 1119 (D.Kan.1999); Joshua W. v. Board of Educ. Of Wichita Public Schools U.S.D. No. 259, 13 F. Supp. 2d 1199, 1205 (D.Kan.1998); Bundren v. Parriott, 245 Fed.Appx. 822, 830 (10th Cir.2007).
[16] See Cease v. Safelite Glass Corp., 911 F. Supp. 477 (D.Kan. 1995) (Only disputes over facts that might affect the outcome under governing law will preclude summary judgment); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986) (Factual disputes that are irrelevant or unnecessary will not be considered); Richards v. City of Topeka, 934 F. Supp. 378 (D.Kan. 1996).
[17] See Patton v. AFG Industries, Inc., 92 F. Supp. 2d 1200, 1202 n. 3 (D.Kan.2000) (Controversion only denied characterization of a fact [a conversation] and therefore the fact is deemed admitted); Stephens v. City of Topeka, Kan., 33 F. Supp. 2d 947 (D.Kan. 1999) (Conclusory terms or characterizations without any concrete facts to support characterizations are afforded no weight by the court); Rogers v. United States, 58 F. Supp. 2d 1235 (D.Kan.1999) (The general characterization of a transaction is a question of law).
[18] It does not appear from the record presented to the Court that Mr. Whitham was deposed.
[19] Fed.R.Civ.P. 56(e)(1); D. Kan. LBR 7056.1(d).
[20] Thomas v. International Business Machines, 48 F.3d 478 (10th Cir. 1995) (Hearsay testimony that would be inadmissible at trial may not be included in an affidavit to defeat summary judgment.); Adams v. Allstate Ins., 723 F. Supp. 111 (E.D.Ark.1989) (Affidavit containing parol evidence to contradict a judicial document [Court Clerk's Report of Judicial Sale] is inadmissible and would not be considered in opposing insurer's summary judgment motion.); Harris v. Siegel, 438 F. Supp. 510 (D.C.Fla.1977) (Parol evidence of an alleged oral side agreement between mortgagees and mortgagors that contradicted terms of note and mortgage would not be considered on summary judgment motion.).
[21] Argo v. Blue Cross Blue Shield of Kansas, Inc., 452 F.3d 1193 (10th Cir.2006); Tavery v. United States, 32 F.3d 1423 (10th Cir.1994).
[22] See Coca-Cola Co. v. Overland, Inc., 692 F.2d 1250 (9th Cir.1982) (Employees of bar and restaurant were not qualified to testify what customers were thinking when using the term "Coke.").
[23] BancOklahoma Mortg. Corp. v. Capital Title Co., Inc., 194 F.3d 1089 (10th Cir. 1999) (Affidavit must set forth facts, not conclusory statements); Jones v. Denver Post Corp., 203 F.3d 748, 756 (10th Cir.2000) (Co-worker affidavits stating that, in their opinion, plaintiff was subjected to disparate treatment by employer were insufficient to defeat employer's summary judgment motion); Fitzgerald v. Corrections Corp. of America, 403 F.3d 1134, 1143 (10th Cir.2005) (Conclusory affidavit without specific supporting facts has no probative value).
[24] Whitham Affidavit, ¶ 2 (emphasis added).
[25] Id. at ¶ 30 (emphasis added).
[26] Id. at ¶ 40 (hearsay statement of state court receiver, Terry Criss); ¶ 33 (hearsay statement of SSB's president, James Arnold); ¶ 35 (hearsay statement of Sunbelt personnel, Kathy Shafer and Karen Allen); ¶ 42 ("The state grain examiner's report confirmed that Whitham's... corn was in Sunbelt's inventory."). The Court makes no determination at this stage of the proceedings whether some of these attributed statements are admissible under one of the hearsay exceptions.
[27] Id. at ¶ 4 ("Sunbelt was aware and fully expected that Whitham ... would prepay"); ¶ 5 ("James Arnold, president of Security State Bank, was well aware of the course of conduct and dealing among Whitham ... and Sunbelt ..."); ¶ 10 ("... the parties intended that the corn be identified ... at the time of payment"); ¶ 13 ("... Whitham ... and Sunbelt waived application of [the NGFA] rules..."); ¶ 30 ("Security State Bank waited until Whitham ... had paid and then acted."); ¶ 31 ("... James Arnold and Security State Bank were aware that Whitham ... would be prepaying in November 2007 ..."); ¶ 37 (SSB "pursued and contacted numerous other local Kansas farmers to sign off on the involuntary petition, none of whom agreed to do so.").
[28] Id. at ¶ s 3, 4, 10, 13.
[29] Id. at ¶ s 3, 4
[30] Id. at ¶ 6.
[31] Id. at ¶ 10
[32] Id. at ¶ 13.
[33] Id. at ¶ 11 ("On November 1 and 20, 2007, there was no question that the corn was on hand at Sunbelt's facilities."); ¶ 42 (stating that state grain examiner's report confirmed that Whitham's corn was in Sunbelt's inventory but not attaching an authenticated copy of the examiner's report to his affidavit).
[34] Id. at ¶ 3 (Whitham's course of dealing with Sunbelt Grain, Inc., as opposed to Sunbelt Grain WKS, LLC); ¶ 5 (Arnold's banking relationship with other parties); ¶ 12 (no previous mention of NGFA rules); ¶ 18 (relationship or connection of Kathy Shafer to other entities); ¶ 37 (SSB's pursuit of petitioning creditors for involuntary petition); ¶ 38 (observations at deposition of Kathy Shafer); ¶ 40 (state court receiver's opinion of Whitham's prospects for winning state court suit).
[35] See Fed.R.Civ.P. 56(e)(1); Wright, Miller & Kane, 10B Fed. Prac. & Proc. Civil 3d § 2738 (2009) ("... Rule 56(e) further limits the matter to be properly included in an affidavit to facts, and the facts introduced must be alleged on personal knowledge. Thus, ultimate or conclusory facts and conclusions of law, as well as statements made on belief ... cannot be utilized on a summary judgment motion.").
[36] The Court notes that some of these uncontroverted facts are derived from the parties' requests for admission and are incorporated as stipulated facts in the final pretrial order. See Adv. Dkt. 52, pp. 10-12.
[37] Sunbelt did not have 500,000 bushels of corn on hand in its facilities on May 4, 2007.
[38] Adv. Dkt. 52, Stipulation ¶ A.
[39] Adv. Dkt. 52, Stipulation ¶ B.
[40] In addition, Sunbelt made several payments, drawn on its account, throughout the month of November to SSB and entities Wheatbelt Farms, Inc., Plains Feeders, Inc., or K & K Farming, Inc., as dual payees. Kathy Shafer's brother, Keith Young, had an ownership interest in each of these entities. These facts are immaterial in the absence of a showing that Kathy Shafer had any interest in these entities. See Whitham's Memorandum in Opposition, Adv. Dkt. 51, pp. 16-17, ¶ s 17, 19-27.
[41] See Shafer Depo., p. 155, 1. 19-23.
[42] Adv. Dkt. 52, Stipulation ¶ s D and E.
[43] Adv. Dkt. 52, Stipulation ¶ F.
[44] Sunbelt did not deliver any corn to Whitham under the CSPs that provided for delivery of corn in January, February, March and April of 2008. Adv. Dkt. 52, Stipulation ¶ C.
[45] Adv. Dkt. 51, p. 19, ¶ 34.
[46] Nor is the alleged fact "[o]n November 1 and 20, 2007, there was no question that the corn was on hand at Sunbelt's facilities," properly supported by Whitham's personal knowledge. Rather, the only support is Whitham's bald affidavit. See Adv. Dkt. 51, p. 15, ¶ 10.
[47] See Adv. Dkt. 51, pp. 13-20.
[48] See KAN. STAT. ANN. § 84-1-303(b) (2008 Supp.) defining course of dealing as "a sequence of conduct concerning previous transactions between the parties to a particular transaction that is fairly to be regarded as establishing a common basis of understanding for interpreting their expressions and other conduct."
[49] KAN. STAT. ANN. § 84-2-202(a) (2008 Supp.); School-Link Technologies v. Applied Resources, 471 F. Supp. 2d 1101, 1111 (D.Kan. 2007).
[50] § 84-2-202(a). See Aero Consulting Corp. v. Cessna Aircraft Co., 867 F. Supp. 1480, 1489-90 (D.Kan.1994). As explained in the Official UCC Comment to § 2-202, the UCC parol evidence rule does not first require a determination that the contract is ambiguous before the extrinsic evidence of course of dealing is admissible. See Barbara Oil Co. v. Kansas Gas Supply Corp., 250 Kan. 438, 452-53, 827 P.2d 24 (1992) (UCC parol evidence rule permits course of dealing evidence to explain or supplement terms even where the written contract is unambiguous). See also, Adams v. Allstate Ins., 723 F. Supp. 111 (E.D.Ark.1989) (Affidavit containing parol evidence to contradict a judicial document [Court Clerk's Report of Judicial Sale] is inadmissible and would not be considered in opposing insurer's summary judgment motion.); Harris v. Siegel, 438 F. Supp. 510 (D.C.Fla.1977) (Parol evidence of an alleged oral side agreement between mortgagees and mortgagors that contradicted terms of note and mortgage would not be considered on summary judgment motion.).
[51] KAN. STAT. ANN. § 84-1-303(e) (2008 Supp.) (express terms control over course of dealing where express terms and course of dealing cannot be reasonably construed as consistent with each other).
[52] Decatur County Feed Yard, Inc. v. Fahey, 266 Kan. 999, 1007, 974 P.2d 569 (1999).
[53] KAN. STAT. ANN. § 84-2-308(a) (1996).
[54] Rule 30(D)(2), NGFA Grain Trade Rules (hereafter "NGFA"), authenticated copy of which is attached as Exhibit H to Adv. Dkt. 40, SSB's Memorandum in Support of Summary Judgment.
[55] See pp. 927-29, supra.
[56] NGFA Rule 3(B) requires the non-confirming party (Whitham) to immediately notify the confirming party (Sunbelt) of any dispute with the terms of the CSPs.
[57] See SSB's Uncontroverted Fact ¶ s 42-45.
[58] The CSPs for the five lots of 100,000 bushels each, were issued May 4, 2007 and were prepaid on November 1, 2007. The CSPs for an additional 80,000 bushels were issued November 19, 2007 and prepaid on November 20, 2007. It is undisputed that Sunbelt did not have 500,000 bushels of corn on hand in its facility at the time the May 4 CSPs were issued. See SSB Uncontroverted Fact ¶ s 25-26; Shafer Depo. pp. 33-34, 44, 51-52.
[59] KAN. STAT. ANN. § 84-2-202(a) (2008 Supp.).
[60] KAN. STAT. ANN. § 84-1-303(e) (2008 Supp.).
[61] See Whitham Affidavit ¶ s 11, 35, 42.
[62] See Adv. Dkt. 40, Fact No. 33, Shafer Depo., p. 155.
[63] See Adv. Dkt. 51, p. 9.
[64] See Adv. Dkt. 51, p. 15, Fact No. 10, stating: "On November 1 and 20, 2007, there was no question that the corn was on hand at Sunbelt's facilities."
[65] See Shafer Depo., pp. 153, 155. The Court is mindful that not all grain at Sunbelt's facilities was available to fulfill the Whitham contracts. For example, some portion of the grain on hand belonged to producers who stored the grain at Sunbelt under an open storage arrangement. The Court received no evidence of what proportion of the grain on hand on the November prepayment dates was open storage grain. Likewise, Sunbelt had grain at its facility to fulfill sales contracts with other buyers. The grain position book of Sunbelt, not made available to the Court, would show the amount of grain on hand on any given day and how much of that was producer-owned grain. See Shafer Depo., pp. 134-39, 161-162.
[66] KAN. STAT. ANN. § 84-2-105(2)(1996) provides that goods which are not both "existing" and "identified" are future goods.
[67] KAN. STAT. ANN. § 84-2-401 (2008 Supp.).
[68] KAN. STAT. ANN. § 84-2-401(1) (2008 Supp.).
[69] KAN. STAT. ANN. § 84-2-501 (1996).
[70] NGFA Rule 6(B)(2).
[71] KAN. STAT. ANN. § 84-2-501 [Emphasis added].
[72] In any event, Kansas law on identification of goods requires an intent to identify particular goods and some overt act manifesting that intent, such as loading the corn on the trucks and sending the trucks to their destination, Whitham. See Reeves v. Pillsbury Co., 229 Kan. 423, 428, 625 P.2d 440 (1981) (identification ordinarily occurs by seller filling an order).
[73] Even if the corn was identified to the contract as Whitham contends, it does not follow that title passed at the moment of identification. As noted in Reeves, supra at 429, 625 P.2d 440; the question of identification of goods to a contract and the passing of title are separate questions. Title does not pass with identification where the seller has not completed delivery.
[74] See KAN. STAT. ANN. § 84-9-203(a) and (b)(2) (2008 Supp.) (Stating that a security interest attaches to collateral when it becomes enforceable against the debtor with respect to the collateral and including among elements for enforceability that debtor has rights in the collateral).
[75] See 11 U.S.C. § 510(c). The Court questions whether Whitham may assert equitable subordination by way of defense to SSB's cross-claim. Fed. R. Bankr.P. 7001(8) requires that an action to subordinate claims be brought as an adversary proceeding, suggesting that it is an affirmative claim for relief that must be pled. In addition, some courts hold that the chapter 7 trustee is the proper party to seek subordination. See Bezanson v. Bayside Enterprises, Inc. (In re Medomak Canning), 922 F.2d 895, 902 (1st Cir.1990) (Trustee is appropriate party to seek equitable subordination on behalf of unsecured creditors; unsecured creditor may assert equitable subordination only when trustee has refused to do so and court grants unsecured creditor leave to assert the claim). Notwithstanding the questionable procedural posture in which Whitham has raised equitable subordination, the Court will consider the merits of Whitham's equitable subordination theory.
[76] After that $1.6 million sweep, however, further advances were made on Sunbelt's line of credit. See Ex. 2 attached to Whitham's summary judgment papers.
[77] Subordination claims against secured lenders such as SSB have generally been rejected when the secured creditor is simply enforcing its rights, even though the exercise of those rights may be detrimental to other creditors. Hon. William L. Norton, Jr. and William L. Norton III, 3 NORTON BANKRUPTCY LAW & PRACTICE § 53:4 (3rd ed, Thomson/West 2008). See United States Abatement Corp. v. Mobil Exploration & Producing U.S., Inc. (In re U.S. Abatement Corp.), 39 F.3d 556 (5th Cir. 1994) (creditor Mobil exercised contractual right to be indemnified by debtor and asserted unsecured claim to recoup sums from debtor it became obligated to pay to debtor's subcontractors; Mobil's claim was not subject to equitable subordination); Smith v. Associates Commercial Corp. (In re Clark Pipe & Supply Co.), 893 F.2d 693 (5th Cir.1990) (Lender's reduction of debtor's revolving line of credit as permitted by the loan agreement was insufficient to invoke equitable subordination).
[78] The doctrine of equitable subordination looks to behavior of the parties involved. In re Hedged-Investments Associates, Inc., 380 F.3d 1292 (10th Cir.2004). The Castletons court called inequitable conduct on the part of the party whose claim is sought to be subordinated as "the critical inquiry." 990 F.2d at 559.
[79] Sloan v. Zions First National Bank (In re Castletons), 990 F.2d 551, 559 (10th Cir. 1993); In re Hedged-Investments Associates, Inc., 380 F.3d 1292, 1300 (10th Cir.2004).
[80] See In re Hedged-Investments Associates, Inc., supra at 1301 (The categories of "inequitable conduct" necessary to support an equitable subordination claim are (1) fraud, illegality and breach of fiduciary duty; (2) undercapitalization; or (3) use of debtor as mere instrumentality or alter ego). Neither the second or third categories is at issue in this case.
[81] Carter-Waters Oklahoma, Inc. v. Bank One Trust Co., N.A. (In re Eufaula Industrial Authority), 266 B.R. 483, 489 (10th Cir. BAP2001).
[82] In re Castletons, supra at 559; In re Hedged-Investments Associates, Inc., supra at 1301-02.
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https://www.courtlistener.com/api/rest/v3/opinions/1524467/
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195 F. Supp. 85 (1961)
GOLD FUEL SERVICE, INC., Plaintiff,
v.
ESSO STANDARD OIL COMPANY, Defendant.
Civ. A. No. 398.
United States District Court D. New Jersey.
June 12, 1961.
Pollis, Williams & Pappas, Elizabeth, N. J., for plaintiff.
Stryker, Tams & Horner, Newark, N. J., for defendant.
WORTENDYKE, District Judge.
This action is for treble damages, brought under 15 U.S.C.A. § 15. There is pending before the Court defendant's motion to dismiss the amended complaint for failure to state a claim upon which relief can be granted, F.R.Civ.P. 12(b), 28 U.S.C.A., and, in the alternative, for summary judgment, F.R.Civ.P. 56(b), upon the asserted ground that there is an absence of any genuine issue of material fact and that the defendant is entitled to judgment as a matter of law. Trial by jury has not been demanded. It is, therefore, waived, F.R.Civ.P. 38(d).
The motion was argued orally before the late Judge Mendon Morrill of this Court on March 28, 1960, upon the briefs previously submitted by the parties. He reserved decision upon the motion which was still pending at the time of his death. *86 The case has now been reassigned to the writer of this opinion.
The complaint was originally in two counts. The second count has been dismissed by a stipulation filed May 6, 1960. There remains a single cause of action in the complaint (after two amendments thereof, and the stipulation referred to), charging violations of sections 1, 2 and 13a of Title 15 of the United States Code. Plaintiff alleges that for 24 years (as a partnership and corporation) it had been purchasing fuel oil from independent suppliers at prices permitting a margin of profit of 3¢ per gallon upon its sales to retailers and consumers in portions of Union and Essex Counties in the State of New Jersey; and that among the customers which it served were Cooper Alloy Corporation (Cooper) and Stainless Engineering and Machine Works (Stainless) (also sometimes herein jointly referred to as Cooper-Stainless). Plaintiff charges that on or about December 13, 1958 the defendant (Esso), a fuel oil supplier, with knowledge of the prices at which plaintiff had been buying its supply, and of the existing customer relationship between Cooper-Stainless and plaintiff (Gold Fuel), induced these customers to terminate their business relationship with plaintiff by offering to sell fuel oil directly to them at a delivered price of 10.2¢ per gallon. Gold Fuel says that this price consisted of the basic posted price of 9.9¢ per gallon, below which the commodity was not available to the plaintiff from any source in the market, plus a haulage charge of .30¢ per gallon, which was .03¢ per gallon less than the lowest price at which Gold Fuel could obtain haulage for delivery to its said customers. Plaintiff therefore charges that, in continuing to sell and deliver fuel oil to these former customers, Esso is violating sections 13a, 1 and 2 of Title 15 of the United States Code, in that Esso's sales and deliveries to these customers at that price (1) are at prices substantially below those at which plaintiff can purchase from any supplier, (2) constitute unfair competition and a malicious interference with the business and profits of plaintiff, (3) lessen or prevent competition between Esso and Gold Fuel, and (4) constitute an attempt by Esso to monopolize a part of interstate commerce in fuel oil. The complaint discloses that Gold Fuel and Cooper-Stainless conduct their respective businesses within an area embracing Union and Essex Counties in New Jersey. It is also alleged that Esso is engaged in interstate commerce because it sells from temporary storage tanks at Linden, New Jersey, which are supplied and replenished by transportation from without the State.
Insofar as the first count of the complaint is concerned (the only count remaining before the Court), Esso's answer denies the critical allegations thereof, and affirmatively pleads as follows:
(1) Esso denies any violation of Title 15.
(2) Gold Fuel is not and never was a customer of Esso, had never purchased defendant's products, and is not on the same competitive level as Cooper-Stainless.
(3) The price quoted by Esso to Cooper-Stainless was made in good faith to meet an equally low price quoted by competitors (of Esso) for supply of the same grade and quantity.
(4) Cooper-Stainless had been purchasing fuel oil from plaintiff at a price approximating 12.7¢ per gallon. Cooper-Stainless, in the latter part of 1958, invited quotations from Esso and other suppliers for delivery of such oil to their storage tanks at Hillside. The price quoted by Esso, and by at least two other suppliers, was approximately 1¢ per gallon less than that bid by Gold Fuel. Cooper-Stainless accepted the bid submitted by Esso because plaintiff was unable to meet that price. Esso's bid was made in good faith in order to meet an equally low price quoted by Esso's competitors.
(5) Plaintiff suffered no recoverable damage and has no standing to bring this suit.
(6) In the transaction complained of Esso was not engaged in interstate commerce.
*87 (7) The allegations of the complaint fail to disclose jurisdiction in this Court, or to set forth a cause of action upon which relief may be granted against Esso.
In support of its motion, Esso presented several affidavits. One affidavit was filed in behalf of Gold Fuel. Upon the oral argument defendant's motion was treated as one for summary judgment only, and as such will be considered in this opinion. F.R.Civ.P. 12(b).
Before proceeding with an analysis of the contents of the moving and counter-affidavits as they relate to the factual allegations of the complaint, I conclude, as a matter of law, that the conduct of Esso of which Gold Fuel complains is not in violation of 15 U.S.C.A. § 13a. Indeed, plaintiff admits in its brief and conceded upon the oral argument that § 13a alone affords no basis for its recovery in this action. This conclusion is fully supported by Nashville Milk Co. v. Carnation Company, 1958, 355 U.S. 373, 78 S. Ct. 352, 2 L. Ed. 2d 340. See also Safeway Stores, Inc. v. Vance, 1958, 355 U.S. 389, 78 S. Ct. 358, 2 L. Ed. 2d 350. Therefore, unless the acts of Esso violate either § 1 or § 2[1] of Title 15 of the United States Code, no relief may be granted to the plaintiff upon its complaint and the defendant would be entitled to summary judgment.
Summary judgment should not be entered unless "the pleadings, * * * and admissions on file, together with the affidavits, * * *, 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." F.R.Civ. P. 56(c). The Third Circuit Court of Appeals has ruled that summary judgments may not be granted when there is a genuine issue as to a material fact presented in an action. Kress, Dunlap & Lane, Ltd. v. Downing, 1960, 286 F.2d 212; Lynn v. Smith, 1960, 281 F.2d 501; Bragen v. Hudson County News Co., Inc., 1960, 278 F.2d 615. The Bragen case cited Hiern v. St. Paul-Mercury Indemnity Co., 5 Cir., 1959, 262 F.2d 526. In Hiern the Court, at page 529, used the following language:
"On a motion for summary judgment, the pleadings of the opposing party must be taken as true, unless by the admissions, depositions or other material introduced it appears beyond controversy otherwise." Citing McCombs v. West, 1946, 5 Cir., 155 F.2d 601.
This accords with the views of the Third Circuit expressed in Frederick Hart & Co., Inc. v. Recordgraph Corp., 1948, 169 F.2d 580. "The Hart case is not authority for the proposition * * * that the conclusory allegations of the (counterclaim), denied by (plaintiff), raise fact issues foreclosing the grant of summary judgment. The Hart case merely broadens the area in which the search for fact issues must be made; it in no way impairs the principle that specific, basic facts must be alleged and controverted before the `genuine' issue contemplated by Rule 56 arises. This requirement is of course not satisfied by * * * generalities contained in the (counterclaim)." Forman, S. J., in Vanity Fair Mills v. Cusick, D.C.N.J.1956, 143 F. Supp. 452, 458.
The first count of the complaint, as last amended, charges that the sales and deliveries of fuel oil by Esso to Cooper-Stainless are (par. 12) "the outgrowth *88 and result of a combination or conspiracy in restraint of interstate commerce by the defendant, Esso Standard Oil Company, with other major suppliers in the fuel oil industry, in violation of Title 15, U.S.C.A. Sec. 1," and (par. 13) "in violation of Title 15, U.S.C.A. Sec. 2, in that they are but some of a series of similar sales and deliveries direct to ultimate consumers at prices lower than those at which wholesalers or distributors can purchase in the fuel oil market in tank-car lots and deliver the same on resale, to ultimate consumers, thus constituting an attempt by the defendant, Esso Standard Oil Company, to monopolize a part of interstate commerce in fuel oil."
Of the six affidavits presented by the defendant in support of its motion, three were made by its employees and the remaining three by employees of Cooper-Stainless. Plaintiff's sole counteraffidavit was that of its vice-president, Deutsch.
Esso's Industrial Sales Manager, Bardsley, deposes that fuel oil is offered for sale by Esso and other suppliers in the market to consumers at prices varying according to the quantity purchased at each delivery. For example, a consumer taking a delivery of at least four thousand gallons is charged a "posted tank transport" basic price, while one who takes a lesser quantity is charged a "posted tank wagon" basic price. At the time of the occurrence of which plaintiff complains the posted tank transport price was 10.05¢ and the posted tank wagon price was 13.7¢. A delivery made by Esso equipment to the consumer carried a haulage charge in addition to the basic posted tank price. On October 23, 1958, at the request of the executive-vice-president of Cooper-Stainless, Bardsley met with him to discuss the fuel oil needs of Cooper-Stainless. Bardsley was advised that Cooper-Stainless was using several hundred thousand gallons of No. 2 fuel oil annually, and that it was desirous of effecting savings in its fuel oil costs. Bardsley undertook to have Esso's sales representative, Sims, visit the Cooper-Stainless plants to make a survey of their requirements, and quote prices. On November 3, 1958, Sims did visit the Cooper-Stainless plants and submitted a price of 10.38¢ per gallon for No. 2 fuel oil, comprising the then posted tank transport price of 10.05¢ plus Esso's normal haulage charge of .33¢. Bardsley denies that the Cooper-Stainless business was ever solicited by Esso, and states that the price which Sims quoted was the standard price for any consumer purchasing in similar quantities from Esso's bulk sales plant at Linden, New Jersey. Bardsley also denies that he ever consulted or arranged with any competitor of Esso to fix the price of fuel oil. Such price on the tank transport basis to consumers was twice revised prior to December 16, 1958, when the first delivery was made to Cooper-Stainless. On November 21, 1958 there was an increase of .5¢ per gallon, resulting in a delivered price of 10.55¢ per gallon, plus a .15¢ delivery charge,[2] and on December 16, 1958 there was a further increase of .3¢ which brought the posted tank transport price to 10.85¢ to which was added the delivery charge of .15¢ making a total of 11¢ per gallon, delivered. On November 6, 1958 Esso's tank transport price at its refinery to resellers such as Gold Fuel was 9.9¢ per gallon. This was increased to 10.4¢ on November 21, and to 10.7¢ on December 16.
The respective affidavits of the vice-president and treasurer, executive vice-president, and purchasing agent of Cooper-Stainless, disclose that the purchases which it made from Gold Fuel, prior to September 1958, were upon an oral undertaking that deliveries would be paid for as made. In the latter month, Zolin, the treasurer of Cooper-Stainless, complained to Gold Fuel that its price was too high, and thus obtained a reduction from 12.7¢ to 12.5¢ per gallon. Meanwhile, *89 Cooper-Stainless invited all the suppliers in the general area, including Esso, to visit the Cooper-Stainless plants, to suggest suitable grades of fuel oil and to submit price bids. Esso submitted a bid which was as low as any other, and because of the high regard in which that supplier was held by Cooper-Stainless, the Esso bid was accepted. Deliveries under the new arrangement were supposed to commence in November 1958, but Cooper-Stainless yielded to the importunity of Gold Fuel to continue purchasing from that company for several weeks longer to permit readjustment of its supply sources to the changed situation. Accordingly, Esso deliveries did not commence until December 16, 1958. At the request of Gold Fuel, Cooper-Stainless wrote a letter, dated December 5, 1958, confirming discontinuance of Gold Fuel's deliveries which states in part: "Although we have found your service to be satisfactory for the many years that we have been doing business, we now find that your recent quotation of 11.4¢ which includes hauling, is not satisfactory and have made other arrangements."
In opposition to the foregoing moving affidavits, that of the vice-president of Gold Fuel states that Esso's references to "tank transport" prices should be to "tank car" prices, to conform with the listings in the Journal of Commerce. He adds that the normal haulage charge from Linden (Esso's wholesale outlet) to Hillside (the Cooper-Stainless plants) is .33¢ per gallon, and that plaintiff had been unable to obtain haulage at any lower figure. When the basic posted price was 9.9¢ in the New York Harbor area, plaintiff could not deliver to Cooper-Stainless for less than 10.23¢ (that is the base price of 9.9¢ plus .33¢ for haulage) and therefore, could not meet the Esso bid to Cooper-Stainless of 10.20¢ per gallon without loss. Likewise, says plaintiff, when the basic posted price was raised to 10.4¢ it could not deliver at less than 10.73¢ (i. e. 10.4¢ plus .33¢) and therefore could not meet Esso's increased price of 10.7¢ without loss; and when the basic posted price rose to 10.7¢ plaintiff could not deliver for less than 11.03¢ (i. e. 10.7¢ plus .33¢), and therefore could not meet Esso's price to Cooper-Stainless of a flat 11¢ per gallon, without loss. Deutsch says that Gold Fuel's final bid to Cooper-Stainless of 11.40¢ was made when the basic posted price was 9.9¢, in an attempt to compete with the major suppliers, including Esso, whose identical final bids were 10.2¢. His affidavit concludes: "Better and more direct evidence of most of the foregoing and of other facts within the superior or exclusive knowledge of the defendant could be produced by the plaintiff with the aid of interrogatories and requests for admissions."
As of March 1, 1960, the date upon which Deutsch's affidavit was sworn to, there remained unanswered interrogatories served upon the defendant on December 21, 1959. Apparently no answers were made to these interrogatories because the parties were then endeavoring to agree upon the "more definite statement" with reference to the proposed amended complaint, as ordered by Judge Morrill on October 7, 1959. This question was resolved at the end of 1959, the amended complaint was filed January 7, 1960, and after obtaining an extension of time to answer or otherwise proceed, the defendant made the present motion on January 26, 1960, which was argued on March 28, 1960. No discovery proceedings are in the official file, although F.R. Civ.P. 5(d) provides that all papers after the complaint served upon adversary party, shall be filed (see subdivision (e) of the same rule). What purports to be a copy of the interrogatories is annexed to the plaintiff's brief on this motion. Plaintiff suggests that it might be able, by way of interrogatories, depositions, and/or requests for admissions, to obtain evidence from which inferences might be drawn that the defendant violated one or both of the two sections (1 and 2) of the statute relied upon. The present motion, however, must be considered according to the provisions of F.R.Civ.P. 56(c) upon the "pleadings, depositions, and admissions *90 on file, * * *." What plaintiff might ultimately have caught through a discovery fishing expedition is irrelevant to the motion presently pending. (In this connection, it may be noted that upon the oral argument counsel for the plaintiff unqualifiedly denied that he had any evidence of a conspiracy, or that he had any specific expectation of finding such evidence.)
Excepting conclusory allegations therein, the complaint as amended, amplified and elaborated by plaintiff's responses to defendant's demands for more definite statement, alleges that Esso, with knowledge of plaintiff's relationship to Cooper-Stainless, and the terms upon which plaintiff had been doing business with the latter, induced that consumer to terminate its relationship with Gold Fuel by selling fuel oil at a delivered price of 10.2¢ per gallon, made up of the basic posted price of 9.9¢ per gallon plus a haulage charge of .30¢ per gallon, which haulage charge was .03¢ below the lowest price at which Gold Fuel could effect delivery to the customer. Assuming as true those allegations of the complaint, do the acts complained of therein constitute violations either of § 2 or of § 1 of Title 15 of the United States Code? Gold Fuel contends, if we correctly understand its brief, that by bidding a price to plaintiff's former customers which was lower than that at which plaintiff was able to purchase and deliver fuel oil as a distributor, Esso attempted to monopolize a part of interstate commerce in violation of § 2, and relies, inter alia, upon Moore v. Mead's Fine Bread Co., 1954, 348 U.S. 115, 75 S. Ct. 148, 99 L. Ed. 145, for support of that contention. That case is inapropos. It was a treble damage suit for violation of section 2(a) of the Clayton Act as amended by the first section of the Robinson-Patman Act (15 U.S.C.A. § 13(a)), and of section 3 of the Robinson-Patman Act (15 U.S.C.A. § 13a). 15 U.S.C.A. § 2, which is section 2 of the Sherman Act, was not there involved.
Plaintiff concedes, in response to defendant's demand for a more definite statement, that the monopoly to which the complaint refers does not "arise out of any combination or conspiracy, but as (sic) an unilateral attempt by Esso to monopolize a part of interstate commerce." The more definite statement adds that plaintiff "does not contend * * * that Esso cannot lawfully compete at the retail level, or that it must offer fuel oil to wholesalers and distributors at prices less than that which Esso's consumer-customers pay. The plaintiff contends that Esso can lawfully compete with wholesalers and distributors, so long as it does not offer fuel oil to consumer-customers of such wholesalers and distributors at such unreasonably low pricesi. e., at less than those at which wholesalers and distributors can buy as to evince the purpose of Esso, and to have the effect, to eliminate competition by wholesalers and distributors with Esso for the custom (sic) of consumer-customers, and to destroy preexisting business relationships by such wholesalers and distributors with their consumer-customers, * * *." This plaint reiterates the charge of unfair competition made in Gold Fuel Service, Inc. v. Esso Standard Oil Company, Chanc.Div. 1959, 59 N.J.Super. 6, 157 A.2d 30, in which the complaint was dismissed. Nashville Milk Co. v. Carnation Company, supra, compels dismissal of this contention. Plaintiff asserts that "competition by Esso at the retail level by unlawful means constitutes in the instant case an attempt to monopolize a part of interstate commerce, whether by sale to the plaintiff's consumer-customers alone at unreasonably low prices, as aforesaid, or by sale to the consumer-customers of wholesalers and distributors other than and in addition to the plaintiff, at unreasonably low prices." These allegations are conclusory and non-factual.
Neither the complaint nor any of the affidavits submitted on the present motion alleges or discloses that Esso enjoys monopoly power, or that such power was used or attempted to be used in an unlawful manner. Section 2 of the Sherman Act proscribes monopolizing, *91 attempts to monopolize and combinations or conspiracies with another to monopolize any part of interstate commerce. Monopoly power, as contemplated by the language of the section, is the power to control prices or exclude competition. United States v. E. I. Du Pont de Nemours & Co., 1956, 351 U.S. 377, 76 S. Ct. 994, 100 L. Ed. 1264. It is only the combination of power with purpose or intent to monopolize which offends the statute. American Tobacco Co. v. United States, 1946, 328 U.S. 781, 66 S. Ct. 1125, 90 L. Ed. 1575. Klor's v. Broadway-Hale Stores, 1959, 359 U.S. 207, is inapposite here. There is presently no group boycott or conspiracy to monopolize. There is no charge in the complaint as made more definite and certain, nor disclosure in the affidavits upon the present motion that Esso, in bidding a price to Cooper-Stainless which was lower than that which Gold Fuel could meet, manifested or was motivated by a purpose or intent to monopolize the sale of fuel oil in plaintiff's territory. The competition of other large suppliers would not permit such a monopoly. Plaintiff concedes that Esso had a right to sell directly to plaintiff's customers. The customer had a right to seek and obtain the lowest price in the market. It invited bids not only from Esso, but also from other suppliers of equal magnitude, and upon receiving comparable bids, selected that of Esso.
Turning to Section 1 of the Sherman Act, upon which plaintiff also relies for its right to recover here. That section proscribes "every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, * * *." I can find among the allegations of the amended complaint as limited or amplified by the more definite statement furnished by the plaintiff, no basis for inferring that defendant has violated section 1 of the Sherman Act. In its response to the defendant's demand that the amended complaint be made more definite and certain, the plaintiff, referring to its charge of combination or conspiracy in restraint of trade, states:
"Basically, the plaintiff's theory is not that it was unable to purchase fuel oil from any supplier at what it regarded as a favorable price. The plaintiff's theory is that it was unable to purchase fuel oil from any supplier at any price less than 10.4, and was thereby unable to compete with Esso Standard Oil Company and the other major supplier bidders for their Cooper-Stainless business."
Plaintiff adds that
"The parallel action of three major suppliers in bidding at 10.4 and 10.2 respectively would inevitably have the effect of eliminating, not merely restraining, the trade of the plaintiff with Cooper-Stainless, and was made possible by the tremendous financial and industrial interstate resources of the three suppliers. At the time that Esso submitted its bid to the consumers Cooper and Stainless at a price lower than that at which the plaintiff distributor was able to purchase for resale to Cooper and Stainless, two other major suppliers, Cities Service Oil Company and Sinclair Refining Company, submitted bids to Cooper and Stainless at prices which were also lower than that at which the plaintiff was able to purchase for resale to Cooper and Stainless."
Plaintiff concludes that the
"[P]arallel actions of Cities Service, Sinclair and Esso purposefully coincided and were the result of prearrangement and understanding by and among Esso, Cities Service and Sinclair, and thus was the result of a combination and conspiracy among them to restrain the trade of the plaintiff with Cooper and Stainless."
As noted above, upon the oral argument counsel for the plaintiff unqualifiedly denied that he had any evidence that there was any evidence of a conspiracy, other than the charged parallelism; and also *92 denied that he had any specific expectation of finding such evidence. Defendant's affidavits squarely deny the conclusory allegations which plaintiff predicates upon the alleged fact that the three bidding corporations submitted prices with which plaintiff could not compete.
In view of the foregoing facts the allegation of parallel business behaviour is insufficient to support an inference of "conscious parallelism" such as would support a charge of conspiracy, for as the Supreme Court in Theatre Enterprises v. Paramount Film Distributing Corp., 1954, 346 U.S. 537, at page 541, 74 S. Ct. 257, at page 259, 98 L. Ed. 273, said "This Court has never held that proof of parallel business behavior * * itself constitutes a Sherman Act offense."
The prices of No. 2 fuel oil in the New York marketing area were published daily in the Journal of Commerce. Throughout the period November 18 through December 22, 1958, consumer prices were 0.15¢ per gallon higher than the price f. o. b. supplier's plant. The bid of Esso to Cooper-Stainless was as low as that of any other supplier, but no lower. As explained in the affidavit of Esso's New Jersey Division manager, Esso's "posted tank wagon and tank transport prices are calculated by evaluating the wholesale commodity market for No. 2 heating oil in cargo lots on the East Coast. To this cargo price is added a differential which is enough to cover our cost of terminalling plus other marketing expenses in order to load tank cars or transport trucks at the rack at our terminals, plus a margin for reasonable return on investment. It would be against the policy of the company for any employee of the company to enter into any combination or agreement with any competitors fixing or relating to prices of its products, and specifically the company did not consult with, agree or combine with any of its competitors to fix the price of fuel oil which was offered to Cooper Alloy Corporation and Stainless Engineering and Machine Works on or about November 6, 1958. * * * Competition in the sale of fuel oil at all levels, including to consumers such as Cooper Alloy Corporation and Stainless Engineering and Machine Works, is very vigorous. Major competitors of the company in the New Jersey area include Gulf Oil Corporation, Texaco, Cities Service, Sinclair, Socony Mobil, Hess and Hartol. In addition, there are a number of distributors and jobbers who buy in cargo or barge quantities, the posted prices of which are lower than the posted tank transport and tank wagon prices due to the larger amounts involved, and these distributors and jobbers are thus able to resell in tank wagon and transport quantities in competition with Esso." This affiant adds that Esso's price to Cooper-Stainless was established as a result of Esso's successful effort to meet the prices of the above named competitors.
"Summary judgments are as applicable to actions under the Sherman Act as they are to any other type of actions, legal or equitable." United States v. Krasnov, D.C.Pa.1956, 143 F. Supp. 184, 197, affirmed 1957, 355 U.S. 5, 78 S. Ct. 34, 2 L. Ed. 2d 21; Associated Press v. United States, 1945, 326 U.S. 1, 65 S. Ct. 1416, 89 L. Ed. 2013. "Rule 56 authorizes summary judgment only where the moving party is entitled to judgment as a matter of law, where it is quite clear what the truth is, that no genuine issue remains for trial, and that the purpose of the rule is not to cut litigants off from their right of trial by jury if they really have issues to try." Sartor v. Arkansas Natural Gas Corp., 1944, 321 U.S. 620, 627, 64 S. Ct. 724, 728, 88 L. Ed. 967.
In deciding the present motion, I am called upon to determine not what the facts are, but whether there is a genuine issue of fact material to the plaintiff's right to judgment. I can find no such issue, but am confronted merely with allegations in the language of the statutory sections, and conclusions therefrom, weakly bolstered by the expression of a hope that by some subsequent discovery means an issue of fact may be created, *93 although the period for discovery had expired when this motion was argued.
Finding no genuine issue of fact, I am impelled to the conclusion that the defendant is entitled to judgment as a matter of law, and an order therefor may be presented.
NOTES
[1] The pertinent parts of §§ 1 and 2 of Title 15, read as follows:
"§ 1. Trusts, etc., in restraint of trade illegal; exception of resale price agreements; penalty.
"Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal: * * *.
* * * * *
"§ 2. Monopolizing trade a misdemeanor; penalty.
"Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a misdemeanor, * *."
[2] Sims deposes that the haulage price of .33¢ per gallon was reduced to .15¢ per gallon to meet the price quoted to Cooper-Stainless by a competing supplier.
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814 S.W.2d 420 (1991)
John Francis CALLAHAN, Appellant,
v.
The STATE of Texas, Appellee.
No. C14-90-576-CR.
Court of Appeals of Texas, Houston (14th Dist.).
July 18, 1991.
*421 Robert R. Durbin, Houston, for appellant.
Lester Blizzard, Houston, for appellee.
Before ROBERTSON, SEARS and DRAUGHN, JJ.
OPINION
SEARS, Justice.
This is an appeal from a conviction for the misdemeanor offense of driving while intoxicated. Appellant pleaded not guilty to the charge. A jury found appellant guilty as charged in the information and the trial court assessed punishment at confinement in the Harris County Jail for 30 days, probated for two years, and a $1,000 fine. In two points of error appellant contends the trial court erred by refusing to submit a requested jury instruction, and that the trial court abused its discretion in ruling on his motion to suppress after the State completed its case in chief and before appellant presented evidence. We affirm.
Deputy Donald R. Womack of the Harris County Sheriff's Department testified that on December 9, 1989, he was called to the Cypresswood substation in Houston to administer an intoxilyzer test. When he arrived, he discovered that the intoxilyzer machine was not working properly because two intoxilyzer tests had been administered to appellant which had produced invalid results. A sergeant asked Deputy Womack to take appellant to the Tomball substation to administer the intoxilyzer test. Deputy Womack testified that he did not recall the exact time he came into contact with appellant but estimated it to be between 00:15 a.m. and 1:00 a.m. He stated that he had been in the squad room at Cypresswood for approximately one minute when he was asked to take appellant to Tomball and that it only took him another minute to prepare to go to Tomball. He also testified that the distance between the Cypresswood and Tomball substations was approximately seven to ten miles and that it took approximately 15 minutes to get to Tomball from Cypresswood. He stated that when he put appellant into his patrol car, appellant was unsteady and his breath smelled of alcohol. Womack testified further that when they arrived at the Tomball substation, he took appellant into the intoxilyzer room and observed appellant for 15 minutes prior to administering the test. He stated that appellant did not consume any fluids, regurgitate, hiccup, or burp during the observation period. He testified that he started the intoxilyzer test at 1:20 a.m. and had been with appellant approximately 30 minutes before he administered the test at Tomball.
*422 Appellant testified on his own behalf at trial. He testified that the intoxilyzer test was administered immediately after he was taken to the Tomball substation and that he was not observed for fifteen minutes prior to the administration of the test.
The record reflects that the State marked the results of the three intoxilyzer tests as exhibits. The two invalid tests conducted at the Cypresswood substation were administered at 00:52 a.m. and 00:55 a.m. The third test, administered at 1:20 a.m. at the Tomball substation, produced results of 0.163 and 0.150.
Before the court submitted the charge to the jury, appellant objected to the trial court's failure to include the following instruction:
If the jury does not find beyond a reasonable doubt that the test was conducted in compliance with DPS regulations, then they are to consider those tests invalid and disregard them.
The court then submitted a general charge to the jury, allowing it to find appellant guilty if he did not have normal use of his mental and physical faculties by reason of the introduction of alcohol into his body, or if he had an alcohol concentration of 0.10 or more.
The Texas Department of Public Safety [DPS] has established breath alcohol testing regulations which require in part:
(a) All breath alcohol testing techniques, methods, and programs to be used for evidentiary purposes must have the approval of and be certified by the scientific director.
* * * * * *
(c) All breath alcohol testing techniques, in order to be approved, shall meet, but not be limited to, the following:
(1) continuous observation of the subject for a minimum period of time as set by the scientific director prior to collection of the breath specimen, during which time the subject must not have ingested alcoholic beverages or other fluids, regurgitated, vomited, eaten, smoked, or introduced any substances into the mouth; ...
Tex. Dept. of Public Safety, 37 Tex.Admin.Code § 19.3 (West January 3, 1989) (Breath Alcohol Testing Regulations).
Officer Womack testified that the policy of the Texas DPS is to observe the subject for fifteen minutes. Other courts have held that the minimum period of continuous observation set by the scientific director is fifteen minutes. Gifford v. State, 793 S.W.2d 48, 49 (Tex.App.Dallas 1990, pet. dism'd) (citing State v. Kost, 785 S.W.2d 936, 939 (Tex.App.San Antonio 1990, pet. ref'd); McGinty v. State, 740 S.W.2d 475, 476 (Tex.App.Houston [1st Dist.] 1987, pet. ref'd)); see also Ray v. State, 749 S.W.2d 939, 944 (Tex.App.San Antonio 1988, pet. ref'd).
In his first point of error, appellant contends that the trial court erred in refusing to submit an instruction to the jury on the issue of whether the intoxilyzer test administered at the Tomball substation was conducted in compliance with the DPS regulations. Specifically, appellant argues that he raised a fact issue regarding whether he was observed for 15 minutes before the third intoxilyzer test was administered and, therefore, was entitled to a jury instruction on the issue.
As support for his allegation that the trial court erred in refusing the requested instruction, appellant cites the court of appeals' opinion in Gifford v. State. In the Gifford case, the court stated that "[b]efore the intoxilyzer results can be considered by the trier of fact, the State must prove that a defendant was continuously observed for a fifteen minute period immediately preceding the administration of the test...." 793 S.W.2d at 49. That court stated further that the question of the test's validity arises only when the defendant raises a fact issue as to whether there has been compliance with DPS rules and procedures. Id. The Gifford court determined that the appellant had presented evidence which raised a fact issue on whether he was observed for fifteen minutes preceding the intoxilyzer test. Id. The court also held that the trial court should have submitted the instruction requested by appellant that the jury could not consider the *423 results of the intoxilyzer results unless it found beyond a reasonable doubt that the appellant was continuously observed for fifteen minutes immediately preceding the administration of the test. Id. at 50. Because the trial court submitted a general charge to the jury permitting it to find the appellant guilty of DWI if the appellant had either an alcohol concentration of 0.10 or more or did not have normal use of his mental and physical faculties by reason of the introduction of alcohol into the body, the court found that it could not determine the theory upon which the jury had convicted the appellant. Id. Thus, the court reversed and remanded the case to the trial court, holding that the alleged error was harmful.
The court of criminal appeals dismissed the State's petition for discretionary review in Gifford, stating that the court of appeals had reached the correct result. Gifford v. State, 810 S.W.2d 225 (Tex.Crim.App.1991) (per curiam). The court declined, however, to comment on the language or reasoning of the lower court. Id. Therefore, the court of criminal appeals has not spoken on this issue.
In Ray v. State, the appellant requested an instruction that the jury disregard the intoxilyzer results unless it first found that the appellant had been continuously observed by the person who administered the test. 749 S.W.2d at 943-44. The trial court refused to submit the requested instruction. The court of appeals overruled the appellant's point of error regarding the trial court's refusal to submit the instruction, holding that "[qjuestions concerning the accuracy or procedure used in administering a scientific test go to the weight given to the test's results, not to its admissibility." Id. at 944. The court also held that the requested instruction would have been an improper comment on the weight of the evidence. Id. We do not, however, reach the question as to which court of appeals' opinion is correct.
When an appellant objects to the omission of an instruction and properly preserves the error, he is entitled to a reversal if he can show "some harm." Almanza v. State, 686 S.W.2d 157, 171 (Tex.Crim.App. 1984). The appellant, however, has the burden of showing the harm suffered. Ray, 749 S.W.2d at 943.
The State argues that appellant has failed to provide this court with a sufficient record to review his first point of error because the record contains only excerpts from trial. The State cites as authority this court's opinion in Salazar v. State, 642 S.W.2d 534, 535 (Tex.App.Houston [14th Dist.] 1982, no pet.) where we stated that "[t]he rule has always been that questions relating to the court's charge or the failure to give requested instructions are not reviewable on appeal without a complete statement of facts." We note that the record in Salazar contained no statement of facts.
The Texas Rules of Appellate Procedure provide that the burden is on the appellant to present a sufficient record to show error requiring reversal. Tex. R.App.P. 50(d). When the record on appeal is not complete, the court of appeals cannot determine if harm has occurred because it lacks all the evidence and testimony that was presented to the jury. Without the opportunity to review a complete record, harm cannot be determined. Accordingly, we overrule appellant's first point of error.
In his second point of error, appellant contends the trial court abused its discretion in ruling on his motion to suppress evidence after the State's case in chief and prior to his presentation of evidence. The Texas Code of Criminal Procedure provides that a trial court "may set any criminal case for a pre-trial hearing before it is set for a trial upon its merits...." TEX.CODE CRIM.PROC.ANN. art. 28.01 § 1 (Vernon 1989). Article 28.01 is not mandatory upon the trial court but is directed to the court's discretion. Calloway v. State, 743 S.W.2d 645, 649 (Tex. Crim.App.1988); Bell v. State, 442 S.W.2d 716, 719 (Tex.Crim.App.1969). The court may elect to determine the merits of the motion at the time when the subject matter of the motion is first brought before the court during trial, rather than at a pre-trial hearing. Calloway, 743 S.W.2d at 649; Bell, 442 S.W.2d at 719. For purposes of a motion to suppress, the trial court is the exclusive finder of fact and may choose to *424 believe or disbelieve any or all of a witness' testimony. Taylor v. State, 604 S.W.2d 175, 177 (Tex.Crim.App. 1980).
Before the present case proceeded to trial the trial judge indicated that he would "carry [the motion to suppress the intoxilyzer results] along with the trial." The court instructed the prosecutor to approach the bench before she introduced any evidence of the intoxilyzer results. Before Deputy Womack was called to the witness stand, appellant's counsel objected to his testimony regarding the intoxilyzer results and the court once again indicated that it would "be hearing the motions to suppress while the jury is hearing the initial evidence." After the State rested its case, the court allowed appellant's counsel and the prosecutor to argue the motions to suppress outside the hearing of the jury. The court subsequently denied appellant's motion to suppress the intoxilyzer results.
We find that the trial court did not abuse its discretion by carrying appellant's motions to suppress with the trial. The court heard arguments from both sides regarding the motion to suppress the intoxilyzer results and determined that the motion should be denied. We cannot say the trial court abused its discretion. We overrule appellant's second point of error.
Accordingly, we affirm the judgment of the trial court.
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814 S.W.2d 124 (1991)
MEDICAL PROTECTIVE COMPANY, Appellant,
v.
GROCE, LOCKE & HEBDON and George F. Evans, Jr., Appellees.
No. 13-90-185-CV.
Court of Appeals of Texas, Corpus Christi.
June 27, 1991.
Rehearing Overruled August 29, 1991.
*125 Michael G. Terry, Corpus Christi, for appellant.
*126 Lewis Plunkett, Cathy J. Sheehan, San Antonio, Richard W. Crews, Corpus Christi, for appellees.
Before DORSEY, KENNEDY and SEERDEN, JJ.
OPINION
DORSEY, Justice.
This is an appeal from a summary judgment granted in favor of the defendant law firm. The plaintiff alleged a cause of action for legal malpractice and indemnity. The trial court ruled that limitations barred the legal malpractice action and that the plaintiff has no cause of action for indemnity. We hold there is a fact issue regarding when the plaintiff discovered or should have discovered the elements of the cause of action and accordingly reverse and remand for trial.
Medical Protective Company, an insurance company writing medical malpractice insurance, sued its former attorneys, Groce, Locke & Hebdon. Medical Protective alleged that the law firm committed acts of malpractice during an action by Medical Protective against a former insured, Dr. Sanford Glanz. This caused Dr. Glanz to file suit against Medical Protective.
The present dispute arose from two prior lawsuits. Initially, a medical malpractice suit was filed by Ligio Tavares against Dr. Sanford Glanz. Medical Protective, Dr. Glanz's malpractice insurer, defended Dr. Glanz. Tavares obtained a judgment for $575,000.00, which was appealed.
MEDICAL PROTECTIVE V. GLANZ
Medical Protective hired the law firm of Groce, Locke & Hebdon to determine if Dr. Glanz breached the clause in his insurance contract requiring that he cooperate fully with his carrier, with the view that Glanz's breach would relieve the company of its obligations under the policy. After an investigation, the law firm then filed a declaratory judgment action for the company, arguing that Glanz had breached the insured's duty of full disclosure under the policy and seeking actual and punitive damages against Dr. Glanz.
Dr. Glanz filed a counterclaim for declaratory relief and for damages alleging various causes of action, including bad faith. These claims for damages were severed from the declaratory judgment action and on January 8,1988, were settled by Medical Protective for $1,500,000.00.
The actions of the law firm during the course of the litigation with Dr. Glanz for a declaratory judgment give rise to Medical Protective's present claim against the law firm for legal malpractice. Dr. Glanz filed two motions requesting sanctions for discovery abuse in July 1985, and sanction orders were entered against the Medical Protective. On August 9, 1985, in response to another motion for sanctions by Dr. Glanz, the pleadings of the company were struck and a default judgment entered against it. The judgment found the carrier obligated under the insurance policy to pay the Tavares judgment rendered against Dr. Glanz and awarded him attorneys fees and costs in excess of twenty eight thousand dollars. Medical Protective paid the Tavares judgment and dismissed that appeal.
The judgment Dr. Glanz took against Medical Protective, still represented by Groce, Locke & Hebdon, was appealed and later affirmed on October 16, 1986. Medical Protective Co. v. Glanz, 721 S.W.2d 382 (Tex.App. Corpus Christi 1986, writ ref'd). That opinion details the discovery violations for which sanctions were imposed. Id. at 384-85. The Supreme Court of Texas refused writ of error on May 13, 1987.
THIS SUIT
On January 7, 1988, Medical Protective filed this suit against its former lawyers for legal malpractice asserting two claims. The first claim was that the declaratory judgment adverse to Medical Protective action was the proximate result of its lawyers' negligence. The other claim was for indemnity. In it, Medical Protective maintained that if it was found liable to Dr. Glanz in his severed counterclaim, such liability is a result of its attorneys' negligence *127 while acting as agents of the company. As the company's liability was vicarious to it from the acts of its agents, the agent, the defendant law firm, should be held to indemnify the principal for the results of the agent's negligent acts.
The alleged negligent acts were certain discovery abuses by the law firm resulting in the default judgment. The action for indemnity sought recovery for any amount the company paid Dr. Glanz.
Groce, Locke, & Hebdon filed a motion for summary judgment. The law firm argued that both actions were barred by limitations, and that Medical Protective had no cause of action for indemnity. The trial court granted the summary judgment and the insurance company appeals.
LIMITATIONS
By its first point of error, Medical Protective argues that the trial court erred in granting appellee's summary judgment on the grounds that limitations barred its action for negligence. We agree.
[1 3] The instant cause of action complains of legal malpractice, which is an action for negligence. Cosgrove v. Grimes, 774 S.W.2d 662, 664 (Tex.1989). The limitations period for attorney negligence is two years from the time the cause of action accrues. Willis v. Maverick, 760 S.W.2d 642, 644 (Tex.1988). In Willis, the Supreme Court of Texas adopted the discovery rule in actions alleging legal malpractice. The court held that a cause of action accrues when facts establishing the elements of the cause of action are discovered, or in the exercise of due diligence should have been discovered. Id. at 646. This statement of the rule is consistent with other decisions from the court establishing the discovery rule for other causes of action. See e.g., Kelley v. Rinkle, 532 S.W.2d 947, 949 (Tex.1976).
The standards for reviewing a summary judgment are well established:
In reviewing a summary judgment record, this Court must determine whether a disputed fact issue exists that would preclude a summary judgment. Bayouth v. Lion Oil Co., 671 S.W.2d 867 (Tex.1984). Every reasonable inference must be indulged in favor of the nonmovants and any doubt resolved in their favor. Id. The question on appeal is not whether the summary judgment proof raises a fact issue with reference to essential elements of plaintiff's cause of action, but whether the summary judgment proof establishes that the movant is entitled to summary judgment as a matter of law. Gibbs v. General Motors Corp., 450 S.W.2d 827, 828 (Tex.1970).
Gonzalez v. Mission Am. Ins. Co., 795 S.W.2d 734, 736 (Tex.1990).
At trial, the defendant must plead and prove the defense of limitations. However, this burden does not apply in a summary judgment context. Here, the burden is on the movant to negate the discovery rule by proving as a matter of law that no issue of material fact exists concerning when the plaintiff discovered or should have discovered the cause of action. Bums v. Thomas, 786 S.W.2d 266, 267 (Tex.1990); Weaver v. Witt, 561 S.W.2d 792, 794 (Tex.1977); Pooley v. Seal, 802 S.W.2d 390, 392 (Tex.App. Corpus Christi 1990, writ denied); See Woods v. William M. Mercer, Inc., 769 S.W.2d 515, 518 (Tex. 1988).
Medical Protective argues that the law firm failed to establish as a matter of law when the cause of action accrued. The law firm, as the movant, had the burden to establish this material fact as a matter of law through competent summary judgment proof establishing that Medical Protective discovered, or in the exercise of reasonable diligence should have discovered, the facts supporting the cause of action more than two years before suit was filed. Burns, 786 S.W.2d at 267; Weaver, 561 S.W.2d at 794.
The law firm's summary judgment evidence presented proof that Medical Protective was aware of the specific acts of malpractice on or about the time they occurred. The summary judgment evidence included a copy of the default judgment. In this judgment, the trial court specifically states that George F. Evans, Jr., and *128 Thomas H. Sharp, Jr., two attorneys from the law firm, abused the discovery process, and for that reason, the default judgment was entered against Medical Protective. In addition, Sharp admitted in an affidavit that he committed certain of the acts upon which the sanction order was based. The affidavit was tendered to the court in a motion to Vacate the Sanction Order. In particular, he stated that the alleged discovery violations were based on his good faith belief that part of the material Glanz sought was privileged. Although the trial court had ruled that the material was discoverable, Sharp and other attorneys at the law firm thought the court's discovery ruling was in error. They planned to mandamus the judge and did not wish for the issue to be waived by production. On that basis, Evans told a witness not to bring certain materials the court had ruled discoverable to the deposition. There is evidence that other discovery violations apparently occurred, including missed deadlines, miscitation of legal authority, and ex parte communications with the court. See generally Medical Protective Co., 721 S.W.2d at 384-85.
There was some evidence that David Brackmeyre, a designated representative of Medical Protective, was aware that the law firm's negligence was a cause of Medical Protective's injury more than two years prior to the date suit was filed. He stated in a memo on September 30, 1985, that:
[I]t has arisen that the work product supplied us by Groce, Locke & Hebdon may have been materially insufficient to suit the purposes for which it was intended. As a result, the judge hearing the matter entered a default judgment, ruling that we take nothing by way of the lawsuit, establish coverage for Dr. Glanz as a matter of law, and entered a judgment against the Company and two lawyers from Groce, Locke & Hebdon for $25,500 in attorney's fees, $3,054 in expenses, and post judgment interest of 10% per annum [sic].
. . . . . .
As previously mentioned, we have developed some optimism because of the affidavit filed by Tom Sharp, and their apparent willingness to admit that their conduct caused a great deal, if not all, of the problems.
In contrast, Medical Protective's summary judgment evidence indicated that after the default judgment was entered Sharp and Evans took the position that judicial error, and not their negligence was the cause of the injury. The summary judgment evidence included Brackmeyre's properly authenticated deposition. See Deerfield Land Joint Venture v. Southern Union Realty Co., 758 S.W.2d 608, 610 (Tex.App. Dallas 1988, writ denied). In his deposition he stated that George F. Evans and Thomas Sharp, explained that the default judgment was based on an erroneous ruling by the trial court and was caused, in part, by favoritism. They recommended an appeal and expressed hope that it would be successful but did not guarantee reversal.
In addition, a Motion to Vacate or Modify Default Judgment and to Vacate or Modify Order Striking Pleadings supported by Sharp's affidavit was filed. In this motion, the law firm argued for a reversal of the sanctions and took the position that the trial court's ruling was in error. When this motion was overruled, the default judgment was appealed. In his deposition Brackmeyre stated that they did not begin to realize that perhaps the judge was correct in his ruling until the judgment had been affirmed by this court and writ refused by the Supreme Court of Texas. These last two events occurred within two years from the date suit was filed.
The issue here is as old as the discovery rule: what must be discovered for the cause of action to accrue. The Supreme Court has been clear on this subject, stating that a cause of action under the discovery rule accrues when the plaintiff discovers or should have discovered facts supporting each element of the cause of action. Willis, 760 S.W.2d at 646.
It is undisputed that Medical Protective discovered its injury when the judgment was signed. The question is when did Medical Protective discover, or when, in the *129 exercise of reasonable diligence, should Medical Protective have discovered that its injury was caused by the law firm's breach of duty. See Id.; Robinson v. Weaver, 550 S.W.2d 18, 19 (Tex.1977); Allen v. Roddis Lumber & Veneer Co., 796 S.W.2d 758, 760-61 (Tex.App. Corpus Christi 1990, writ denied) (injury and cause must be discovered); Corder v. A.H. Robins Co., 692 S.W.2d 194, 196-97 (Tex.App Eastland 1985, no writ); Grady v. Faykus, 530 S.W.2d 151, 153 (Tex.Civ.App. Corpus Christi 1975, writ ref'd n.r.e.). But see Coody v. A.H. Robins, Co., 696 S.W.2d 154, 156 (Tex.App. San Antonio 1985, no writ) (cause of action under the discovery rule accrues when injury is discovered). Medical Protective argues that the cause of action accrued at the time the judgment was entered, which is more than two years before suit was filed. The law firm argues that the cause of action accrued less than two years from the date suit was filed. Specifically, it argues that the cause of action accrued when this court affirmed the judgment, or at a later date.
The first time that Medical Protective could have discovered its injury and its cause was the date the judgment was signed. On or about that date, Medical Protective had two conflicting sources of information concerning the cause of the injury. Abuse of discovery process was stated in the judgment as the cause of the injury. The law firm stated that the ruling was judicial error.
Summary judgment evidence supported each of these theories of causation. For example, the default judgment itself stated that it was entered to sanction Medical Protective's attorneys. The memo of September 30, 1985, indicates that on that date, Medical Protective was aware that the law firm's work product was "materially insufficient." On the other hand, Brackmeyre's deposition indicates that he and others at Medical Protective believed in the law firm's position that judicial error was the cause of the injury until at least the time this court affirmed the judgment. This view is also supported by the Motion to Vacate, and the deposition of Sharp which took the position that judicial error, and not the law firm's negligence, was the cause of the injury.
At a summary judgment hearing, every reasonable inference must be indulged in favor of the non-movant, and any doubt resolved in its favor. Bayouth, 671 S.W.2d at 868. Summary judgment may not be granted if the non-movant's controverting summary judgment evidence raises a question concerning a material fact. See Trapnell v. John Hogan Interests, 809 S.W.2d 606, 611 (Tex.App. Corpus Christi 1991).
The evidence was conflicting on the question whether Medical Protective actually discovered, or should have discovered, that the law firm, rather than an erroneous ruling by the trial court, caused their injuries more than two years before suit was filed. Thus, a question of fact exists concerning whether Medical Protective discovered, or should have discovered, the cause of action for legal malpractice. Reasonable minds could differ regarding the weight to give its attorney's opinion, and the court's opinion. We are aware of the compelling public policy implications of a different result here. To hold that the client could not rely on its lawyer's statements that judicial error caused the injury would diminish the attorney-client relationship, and give a client good reason to lack confidence in an attorney's word. Moreover, it would require the diligent client to hire a second lawyer to second guess the actions of the first at every difficulty. For these reasons the Supreme Court of Texas adopted the discovery rule, and we find their concerns exemplified in the instant case. See Willis, 760 S.W.2d at 645-46. We hold that the law firm failed to establish as a matter of law that Medical Protective actually discovered, or in the exercise of reasonable diligence, should have discovered that the law firm's negligence, if any, was the cause of their injury more than two years before suit was filed. Medical Protective's first point of error is sustained.
INDEMNITY
Appellant argues in its second and fourth points of error that the trial court erred in *130 ruling that it has no cause of action for indemnity from the law firm for the amounts it paid Dr. Glanz in settlement of his severed counterclaim against it. There is neither an express contract for indemnity nor a claimed statutory right of indemnity. See Tex.Civ.Prac. § 32.001-.003 and §§ 33.001-.016 (Vernon 1989). Thus, its action, if any, must be derived from the common law.
The common law right of indemnity is greatly limited in Texas. The Supreme Court has stated: "The only remaining vestiges of common law indemnity involve purely vicarious liability or the innocent product retailer situation." Aviation Office of America, Inc. v. Alexander & Alexander of Texas, Inc., 751 S.W.2d 179, 180 (Tex.1988). Medical Protective asserts a common law right of indemnity under vicarious liability: that of an innocent party who has been held liable through the misconduct of another, such as a master for the conduct of his servant, or a principal for his agent.
For such a right of indemnity to exist, the injured party must have a cause of action against the indemnitor, that is, the one whose action caused the indemnitee to be vicariously liable. Plas-Tex, Inc. v. U.S. Steel Corp., 772 S.W.2d 442, 446 (Tex.1989); City of Houston v. Watson, 376 S.W.2d 23, 33 (Tex.Civ.App. Houston 1964, writ ref'd n.r.e.). In this case, for a right of indemnity to exist, Dr. Glanz must have a cause of action against the law firm for the actions that were attributed to the client, Medical Protective.
Dr. Glanz is barred from suing the law firm because there is no privity of contract between him and the law firm, and no special relationship between them has been shown. Graham v. Turcotte, 628 S.W.2d 182, 184 (Tex.App Corpus Christi 1982, no writ); see also, Dickey v. Jansen, 731 S.W.2d 581, 583 (Tex.App. Houston [1st Dist.] 1987, writ ref'd n.r.e). Because Dr. Glanz has no right of action against Groce, Locke and Hebdon, Medical Protective has no corresponding right of indemnity against the law firm. We overrule appellant's second and fourth points of error.
It is not necessary for us to address appellant's third point of error. The trial court's judgment is AFFIRMED in part and REVERSED in part and REMANDED.
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814 S.W.2d 477 (1991)
Thomas Dale BROWN, Appellant,
v.
The STATE of Texas, Appellee.
No. 05-90-00664-CR.
Court of Appeals of Texas, Dallas.
July 25, 1991.
Rehearing Overruled September 11, 1991.
*478 Blake Withrow, Dallas, for appellant.
Kathleen A. Walsh, Dallas, for appellee.
Before WHITHAM, KINKEADE and WHITTINGTON, JJ.
KINKEADE, Justice.
OPINION
Thomas Dale Brown appeals his conviction for aggravated robbery. After a jury trial, the court assessed punishment at seventy-five years' confinement, enhanced by one prior conviction. In eleven points of error, Brown contends that the trial court erred when it (1) overruled his objections and denied his motion for mistrial based on the State's improper bolstering of its witnesses' testimony, (2) overruled his objections and denied his motions for mistrial based on the State's improper jury arguments, and (3) admitted his book-in photograph into evidence. Because the trial court erred when it denied Brown's motion for mistrial based on the State's improper jury argument, we reverse the trial court's judgment and remand this cause for a new trial.
FACTS
At trial, the jury found Brown guilty of aggravated robbery. Brown claims that during the guilt-innocence stage of trial, the State made an impermissible comment on his failure to testify. Brown complains of the following portion of the State's jury argument:
[State]: ... Well, we don't know what he sounds like when he talks. We know he has a gold tooth. Big deal.
[Defense]: I'm going to have to object, Your Honor. That's a comment on the defendant's failure to testify.
[State]: I'm answering the defense attorney's own closing argument.
The court sustained the objection, admonished the jury to disregard, and denied Brown's motion for mistrial.
*479 JURY ARGUMENT
In his seventh point of error, Brown contends that the trial court erred when it denied his motion for mistrial. Brown argues that the prosecutor impermissibly commented on his failure to testify.
A violation of both our state and federal constitutions occurs when a prosecutor comments on an accused's failure to testify. Jones v. State, 693 S.W.2d 406, 407 (Tex.Crim.App.1985). In addition, article 38.08 of the Texas Code of Criminal Procedure expressly prohibits a prosecutor from alluding to or commenting on an accused's exercise of his right not to testify. Escort v. State, 713 S.W.2d 733, 738 (Tex. App.Corpus Christi 1986, no pet.) (citing Owen v. State, 656 S.W.2d 458, 459 (Tex. Crim.App.1983)); see Tex.Code Crim.Proc. Ann. art. 38.08 (Vernon 1966). The prohibition against commenting on a defendant's silence at trial remains mandatory, and an instruction rarely cures the error. Montoya v. State, 744 S.W.2d 15, 37 (Tex.Crim. App.1987), cert, denied, 487 U.S. 1227, 108 S. Ct. 2887, 101 L. Ed. 2d 921 (1988).
In evaluating a prosecutor's argument to determine if it commented on the accused's failure to testify, we view the language from the standpoint of the jury. Jones, 693 S.W.2d at 407. Comments on the accused's silence are judged first by their clear meaning, rather than their meaning in context. Mason v. State, 668 S.W.2d 726, 727 (Tex.App.Houston [14th Dist.] 1983, pet. ref'd). We evaluate comments that may infringe the accused's right to silence in context only when they are indirect or merely allude to the accused's failure to testify. Id. We must determine whether the language used was manifestly intended or from its character the jury would naturally and necessarily take the statement as a comment on the defendant's failure to testify. Madden v. State, 799 S.W.2d 683, 699 (Tex.Crim.App. 1990). In applying this standard, the facts and circumstances of each case must be analyzed to determine whether the language used was of such character. Id.
This Court must reverse the conviction if the prosecutor makes an impermissible comment on the accused's failure to testify and directs the jury's attention to the absence of evidence that only the defendant could supply. See Gardner v. State, 730 S.W.2d 675, 700 (Tex.Crim.App. 1987), cert, denied, 484 U.S. 905, 108 S. Ct. 248, 98 L. Ed. 2d 206 (1987); Cook v. State, 702 S.W.2d 597, 600 (Tex.Crim.App.1984) (op. on reh'g) (prosecutor's use of "I" when referring to defenses the accused could have raised constituted an impermissible comment on the accused's failure to testify); Thompson v. State, 651 S.W.2d 785, 787 (Tex.Crim.App. 1983) (prosecutor committed reversible error by stating "there is one person we haven't heard from" and gesturing toward the accused); Lee v. State, 628 S.W.2d 70, 71 (Tex.Crim.App. [Panel Op.] 1982) (prosecutor erred in commenting on the accused's failure to explain why he possessed a firearm).
Implied or indirect comments on the accused's failure to testify need not necessarily result in reversal. See Montoya, 744 S.W.2d at 35. A prosecutor's indirect comment concerning the accused's failure to produce testimony from sources other than himself is not reversible error. Nowlin v. State, 507 S.W.2d 534, 536 (Tex.Crim.App. 1974). Further, a prosecutor's indirect comment that directs the jury's attention to the courtroom demeanor of the accused may not require reversal. Good v. State, 723 S.W.2d 734, 737 n. 4 (Tex.Crim.App. 1986).
The prosecutor's comment in this case was clear and direct. See Mercer v. State, 658 S.W.2d 170, 171 (Tex.Crim.App. 1983). The prosecutor's argument necessarily referred to Brown and the absence of Brown's testimony regarding the circumstances of the charged offense. The jury could only interpret the prosecutor's remarks as comments on Brown's choice not to testify at trial. See Mason, 668 S.W.2d at 727. Brown was the only witness capable of revealing to the jury "what he sounds like when he talks" and the prosecutor's remarks improperly called into question Brown's right to remain silent.
*480 We cannot reasonably construe the prosecutor's language as referring to Brown's failure to produce testimony other than his own. See Nowlin, 507 S.W.2d at 536. Further, the prosecutor's language fails to fall within any of the permissible perimeters of jury argument. Our law requires that the State's jury argument must fall into one of four categories (1) summation of the evidence, (2) reasonable deductions from the evidence, (3) response to defendant's argument, and (4) plea for law enforcement. Briddle v. State, 742 S.W.2d 379, 389 (Tex.Crim.App. 1987), cert, denied, 488 U.S. 986, 109 S. Ct. 543, 102 L. Ed. 2d 573 (1988). Here, the prosecutor's argument demonstrates a classic example of prohibited argument, and the court could not cure the argument's prejudicial effect with its instruction to disregard. See Montoya, 744 S.W.2d at 37.
We must now do a harm analysis pursuant to rule 81(b)(2) of the Texas Rules of Appellate Procedure. Madden, 799 S.W.2d 683 at 700. The record reflects that the jury convicted Brown of aggravated robbery under section 29.03(a)(2) of the Texas Penal Code, with punishment enhanced by a prior felony conviction. Brown pled true to the enhancement paragraph of the indictment. Brown elected to have the trial court assess punishment if the jury found him guilty of the charged offense. The jury found Brown guilty and the court assessed his punishment at seventy-five years' confinement.
We must consider whether, in light of the record as a whole, there is a reasonable possibility that the improper prosecutorial argument might have contributed to Brown's conviction or punishment. Orona v. State, 791 S.W.2d 125, 128 (Tex. Crim.App. 1990). In making our determination, we must trace the error's impact on the jury in light of the error's interaction with the other evidence. By isolating the error and all its effects, we consider (1) the source of the error, (2) the nature of the error, (3) whether or to what extent it was emphasized by the State, (4) its probable collateral implications, (5) how much weight a juror would probably place on the error, and (6) whether declaring the error harmless would encourage the State to repeat it with impunity. It is the error's effect and not the existence of overwhelming evidence or the lack thereof that dictates our judgment. Orona, 791 S.W.2d at 130. However, overwhelming evidence of guilt is a variable to be calculated. Id.
Applying these standards to this case, we cannot conclude beyond a reasonable doubt that the improper prosecutorial argument did not contribute to Brown's conviction. The record reflects that the prosecutor tainted the guilt-innocence phase of Brown's trial by improperly commenting on Brown's failure to testify. The prosecutor's remarks improperly directed the jury's attention to Brown's invocation of his right not to testify. The natural and necessary implications of the prosecutor's comments include (1) disrupting the jury's orderly evaluation of the evidence, (2) causing prejudice to the jury's decision-making, and (3) denying Brown's right to a fair and impartial trial.
Further, the other evidence at trial failed to dissipate the tainted effect of the State's improper jury argument on the jury's determination of Brown's guilt or innocence. We conclude that to declare this improper prosecutorial argument harmless would encourage the State to repeat it with impunity. Because the record reflects that the error's impact manifestly harmed the jury's decision-making, we cannot conclude beyond a reasonable doubt that the error did not contribute to Brown's conviction. We sustain Brown's seventh point of error.
Because of our disposition of Brown's seventh point of error, we need not address his remaining points of error.
We reverse the trial court's judgment and remand this cause for a new trial.
WHITTINGTON, J., dissents.
WHITTINGTON, Justice, dissenting.
I respectfully dissent.
In closing argument, defense counsel commented to the jury that the State's proof never disclosed that the robber had a gold tooth:
*481 One other thing, he's got a gold tooth right here....
That's natural to him, now. I mean, if he's talking to someone or whatever, you know that tooth is going to be showing. It's not something where he's going to be talking and saying, yes, we're just here to dive in.... No, he talked to that woman. He was giving orders. Can you imagine, on the other side, if that woman had said the man had a gold tooth, they would have crammed that down our throats so far it would not be funny. Surprise, surprise, guess who's got a gold tooth, Mr. Manasco. Give us the same consideration. He's got a gold tooth and not one person said anything about it. (Emphasis added.)
The State then responded to the defense counsel's rhetorical challenge as follows:
Now, the Defendant Brown, after he jumped over the counter, made some statement, `Show me where the safe is,' `Stop jacking around,' things of that nature, and the Defense wants you to believe that, well, they didn't see a gold tooth. Nobody got up here on the stand and told you that his client, the Defendant Brown, had a gold tooth and, therefore, it must not have been him. Well, we don't know what he sounds like when he talks. We know he has a gold tooth. Big deal.
I view the State's comments in closing argument acknowledging that Brown had a gold tooth and that there was no identification of Brown's voice as reasonable deductions made from the evidence and as appropriate responses to the arguments of opposing counsel. See Whiting v. State, 797 S.W.2d 45, 48 (Tex.Crim.App. 1990); Alejandro v. State, 493 S.W.2d 230, 231 (Tex. Crim.App.1973). Viewing the words from the jury's standpoint, I do not find the language a comment on Brown's failure to testify. See Madden v. State, 799 S.W.2d 683, 699-700 (Tex.Crim.App.1990). "A mere implication or indirect allusion to a defendant's failure to testify will not result in reversible error. Stoker v. State, 788 S.W.2d 1, 17 (Tex.Crim.App.1989) cert, denied, ___ U.S.____, 111 S. Ct. 371, 112 L. Ed. 2d 333 (1990). Additionally, the language did not call the jury's attention to the absence of evidence that only Brown's testimony could supply. See Madden, 799 S.W.2d at 699.
Rather than being a direct comment on Brown's failure to testify, the comment was made in a summation of evidence regarding identity. Brown had a gold tooth that the complainant did not mention when identifying Brown. A gold tooth is a physical characteristic that can be an identifying tool. See McQueen v. State, 627 S.W.2d 757, 758 (Tex.App.Waco 1981, no pet.). I would analogize references to Brown's tooth to a tattoo or a scar. A defendant can even be ordered to uncover a tattoo on his body. DeLeon v. State, 758 S.W.2d 621, 625 (Tex.App.Houston [14th Dist.] 1988, no pet).
"It is well settled that the prosecutor may answer jury argument by opposing counsel so long as the response does not exceed the scope of the invitation." Lopez v. State, 793 S.W.2d 738, 742 (Tex.App. Austin 1990) review dism'd as improvidently granted, 810 S.W.2d 401 (Tex.Crim.App. 1991). The invitation may even properly include a comment on the defendant's failure to testify. Lopez, 793 S.W.2d at 742.
The reference to what Brown "sounds like" was a response to the defense counsel's evidence. Defense counsel had stressed that Brown's gold tooth was an identifying factor. Two defense witnesses, Brown's sister and his mother, testified that Brown was very proud of his gold tooth, which he had received for his sixteenth birthday. After questioning Brown's mother, the defense counsel got permission "to allow my client to stand and open his mouth just so the jury can see that he does, in fact, have a gold tooth." Brown then stood before the jury, opened his mouth, and displayed his gold tooth for all to see.
I do not consider these statements to exceed the scope of the defense counsel's *482 invitation. The State stayed within the record in responding to the defense witnesses' information about Brown's having a gold tooth and the reference to "what he sounds like when he talks" must be considered in that context.
Even if the comments were error, I consider the error to have been harmless under rule 81(b)(2) of the Texas Rules of Appellate Procedure. Tex.R.App.P. 81(b)(2); Madden, 799 S.W.2d at 700. A full review of the record discloses that the State was not intentionally attempting to taint the trial process with improper argument. The State made only a passing reference to what Brown sounded like when he talked. It made the remark in response to testimony presented by Brown's mother and sister regarding the gold tooth and the defense that Brown did not rob the store because the complainant never mentioned that the robber had a gold tooth. Defense counsel himself described Brown's talking to the complainant and asked the jury to consider the fact that Brown's tooth would be showing when he is talking. Defense counsel himself focused the jury's attention on Brown's failure to testify, if such occurred at all.
After the judge sustained the objection to the State's argument, he admonished the jury to disregard the statement. Since the State did not emphasize or reinforce its comment about not knowing how Brown sounded, the statement's impact on the jury was minimal. Harris v. State, 790 S.W.2d 568, 587 (Tex.Crim.App.1989). The general reference did not attempt to call the jury's attention to the absence of evidence that only Brown could supply, because Brown's mother and sister had already supplied evidence that Brown had a gold tooth. The State was focusing not on Brown's failure to testify, but on the circumstance of his having a gold tooth that could have been seen and remembered when he said, "Show me where the safe is, stop jacking around." Affirming the judgment would not encourage the State to repeat its actions with impunity. Harris, 790 S.W.2d at 589. Accordingly, I would affirm the trial court's judgment.
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